Pacific Power will increase its rates to residential customers by 2.4 percent next year while industrial users will see a 4.4 percent jump.
The new rates go into effect in June 2008. They result from a 2005 Oregon law intended to protect consumers from companies like Enron that avoid paying federal and state income taxes.
Power officials say the law is faulty for regional utility companies, such as Pacific Power and its parent company Berkshire Hathaway, that do pay taxes.
T h is month, Pacific Power filed its first tax report under the law. It showed that in 2006 the utility paid about $32 million more in taxes than anticipated and that wasn’t reflected in rates. Therefore, Pacific Power must raise its customers’ rates to recover the difference, plus $5.5 million in interest.
Company president Pat Reiten said Pacific Power proposes to moderate the impact of the increase by limiting the average increase to about 3 percent rather than increasing rates the full amount.
Based on useage
Residential customers will pay less than industrial users because rates are based on usage.
Problems with the 2005 law, SB 408, were magnified for Pacific Power and its customers because the utility had a rate case pending when the law was passed, according to Pacific Power spokesmen.
“Regulators applied the law to the company and were required to assume that Pacific Power, under its then owner Scottish Power, would not pay the full amount of taxes it owed,” the company said in a press release.
However, Pacific Power was purchased in early 2 0 0 6 by Mid American Energy Hold i n g s C o., owned by Berkshire Hathaway, one of the world’s largest tax-paying corporations.
“This well-intentioned law has backfired with serious consequences to our customers,” Reiten said in the release. “We believe the flawed formula will always result in a mismatch between taxes collected and paid, and will continue to produce instability in our customers’ rates.”
Pacific Power officials will encourage state legislators to reconsider the law their next regular session.