In the midst of more pressing issues about the future ownership of the state’s major private-sector electric utility, the lower House of the Oregon legislature Friday gutted a bill from the Senate (SB 408) that attempted to resolve the long-standing consumer group criticism of how utility income taxes are handled for ratemaking purposes. Portland General Electric (PGE), under Enron Corp.’s consolidated tax structure since 1997, has been a target of criticism.

SB 408 proposed to require that investor-owned utilities like PGE make annual reports to the Oregon Public Utility Commission on the amount of retail rates collected to cover taxes and the actual amounts paid by the utility or on a consolidated tax basis. The lower House, however, rejected this approach and instead instituted limits on what the PUC could do regarding the issue.

The action prompted immediate vocal response from consumer attorney Dan Meek, head of the Utility Reform Project, who blasted the House move as being “worse than doing nothing.” Meek said as it has been amended SB 408 now “actually immunizes the utilities against any change to the current situation of charging ratepayers for income taxes they never pay until at least 2010.”

Meek said the state PUC already has authority to stop what he called an “abusive practice” under its general ratemaking authority. He claimed that 19 other state commissions around the nation have taken action against the issue of so-called “phantom taxes.”

“This outcome in the House committee shows the political power of the utilities,” Meek said. “They have overcome all involved public interest groups, all customer groups and the state’s largest business lobbies.”

In sponsoring SB 408 in the state Senate where it passed in early June, state Sen. Vicki Walker said that in recent years large electric and natural gas utilities regulated by the Oregon PUC have charged “hundreds of million of dollars” in state and federal income taxes that, in fact, have not been paid to government. Walker estimated the current estimate is that the unpaid amounts total about $150 million annually among the major private-sector utilities in the state.

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