The long-standing “phantom tax” issue that Oregon lawmakers tried to fix this year (Senate Bill 408) prompted a 29-page opinion last Tuesday from state Attorney General Hardy Myers, giving state regulators broad authority to make annual adjustments to keep the tax payment collection component of rates consistent with what each private-sector utility pays for a given year. Consumer groups and utilities are promoting different implementation approaches.

Oregon’s three-member Public Utility Commission received a detailed analysis of the new law, but no “clear cut” advice, according to a report in the Portland Oregonian. The PUC ultimately will have to develop permanent rules for how the new law is applied; last September after SB 408 was signed by the governor, the PUC adopted interim rules.

The PUC previously has indicated it would adopt permanent rules some time early next year, but with the state AG’s ruling, that is unclear. A PUC administrative law judge overseeing the rule-making case is expected to rule “within days” on how to implement the AG’s guidance, the Oregonian reported.

Although the issue applies to others in the state, it was raised to a fever pitch in recent years by the fact that Enron Corp., as the holding company for Portland General Electric (PGE) paid little or no federal or state taxes, while PGE collected more than $90 million in retail utility rates to cover its “tax expenses.” The utility simply transferred those funds to the parent company for use in calculating its consolidated tax return.

The new law mandates that if the difference between the taxes paid and the amount collected is more than $100,000, then rates need to be adjusted annually. The level of the adjustment and how it is made are “discretionary,” according to an Oregon AG Office spokesperson.

PGE will soon be a stand-alone utility again, but others, such as PacifiCorp that remain as part of a holding company, argue for a strict construction point of view on the new law, opposing a “sharing” of tax benefits between the regulated utility and other non-utility subsidiaries. Consumer groups want all of the holding company subsidiaries to fall under PUC review in terms of the annual tax liabilities.

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