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Steve Duin of The Oregonian

An exercise in inventive democracy

Tuesday, May 17, 2005

At a crucial strategy session designed to remedy an outrageous tax scam involving Oregon's regulated utilities, you're doggone right the Public Utilities Commission wasn't in the room. You don't invite termites to a barn raising. In your quest for a solution, you weed out those who don't understand there's a problem.

Those who did show up Monday at the Capitol, for a rare exercise in inventive democracy, included attorneys for several consumer and business groups, the Department of Justice, legislative counsel, and the hosts, Sens. Rick Metsger, D-Welches, and Vicki Walker, D-Eugene.

Their goal was to finally devise a plan, five months into this aimless session, to stop the utilities from charging taxpayers $180 million each year for state and federal taxes the utilities do not pay.

The novelty of the strategists' approach? They were looking for the right answer, not one of the usual greedy, self-serving or deceptive varieties. And given the money and the chutzpah at issue, they were thoughtful and pragmatic in working their way toward a legislative mandate that will put an end to this scandal.

I would have been more incendiary. I would have fought to require PGE to reimburse ratepayers for the $750 million in phantom taxes it has deposited in Enron's account since 1997. I would be championing a subtle little suggestion by Dan Meek, an attorney who is forever fighting the good fight for ratepayers, to eliminate altogether the state corporate income tax on regulated energy utilities.

"It has a lot of ironic qualities to it," Meek said. "The utilities are using the state income tax as a profit center," charging ratepayers $30 million in state taxes, yet forwarding only $3 million to the state. "If you reduce the state income tax rate to zero, then you've eliminated the scam." Ratepayers would save $30 million annually, the state would almost break even (due to lower energy prices and smaller business deductions for the state's business customers) and the shameless utilities would probably end up lobbying to retain the tax.

But I didn't have a voice, just a pen. Cooler heads in the room generated ideas, anticipated objections and legal challenges, searched for consistency, factored in politics, and foraged for the most precise language.

Jason Eisdorfer (Citizens' Utility Board), Melinda Davison (ICNU), Ann Fisher (BOMA) and Meek found a way around the problem of deferred income taxes and accelerated depreciation. They readied a request for a tax ruling from the IRS. And they prepared a directive that should force upon the PUC commissioners and staff a new understanding of unjust and unreasonable taxes.

That display of diplomatic force is necessary, given that the Public Utilities Commission is, Eisdorfer said, "handicapped by a regulatory history that hasn't served us very well." It operates in a political landscape, Meek argues, where most of the revolving doors lead to utility jobs and the commissioners are appointed by legislators who are terrified of being targeted by the utilities in their next campaign.

And the commission is advised by DOJ lawyers who until Monday, at least, were part of the problem, not part of the solution.

That solution is still being drafted by the legislative counsel's office. Metsger, who has watched his best efforts to date on this tax scam thwarted by utility lobbyists or the typical legislative lethargy, is determined to have a bill ready for committee next week.

The next obstacle will be the Republican-controlled House. It will be fascinating to see how the House deals with a bill that provides lower rates for major industrial users, $180 million in annual savings for Oregon ratepayers and doesn't take a dime away from utilities that they aren't, in effect, stealing.

"This will be a test," Eisdorfer said, "of how powerful the utilities lobby is. This will be a test of who's working in the public interest."

I spent Monday with a dozen pragmatists who pass the latter test. But its perennial failures are set to take the stage.

Steve Duin: 503-221-8597; Steveduin@aol.com; 1320 S.W. Broadway, Portland, OR 97201