Oregon Senate Bill 408: The rise and fall of rational law

Steve Duin, The Oregonian
June 26, 2011

Once upon a time, a group of thoughtful and motivated people gathered in the state capitol and conspired to do something good.

They were met with understandable skepticism. Their plan did not cater Oregon's utilities. It did not reward the biggest campaign contributors. It was not carefully scripted by the usual lobbyists.

The lone beneficiaries of this work group? Utility ratepayers.

Between 1998 and 2005, Portland General Electric customers were charged $750 million in state and federal taxes that were never paid to the taxing authorities.

Those millions ended up, instead, in the pocket of Enron, which owned PGE. The scam was incredibly lucrative, and one of the main reasons Texas Pacific employed Neil Goldschmidt and Tom Walsh in its failed attempt to buy the utility.

In 2005, the tax dodge was ended by a group that included Dan Meek, Ann Fisher, Bob Jenks, Melinda Davison and two Democratic state senators, Rick Metsger and Vicki Walker.

They were determined, indignant, inventive. Their solution -- Senate Bill 408 -- ordered utilities to turn over the amount billed as taxes to the government or return that money to the ratepayers.

The fix was so obvious it passed the Legislature on an 84-6 vote. It yielded immediate results.

PGE ratepayers received a $40 million refund. Northwest Natural customers paid $12 million more in taxes because the friendly neighborhood utility earned more than its authorized rate of return. PGE actually began paying state income taxes.

Then your 2011 Legislature came along and blew the plan to hell.    Read more ...

"It's very discouraging," said Ken Lewis, chairman of the state ethics commission. "How can anyone justify repealing a law that says if the utilities charge ratepayers for taxes they did not pay, they have to reimburse ratepayers in the next year?"

One can't. But the rise and fall of 408 reminds us of the rules that govern the self-defeating nature of legislative politics.

Legislators move on; lobbyists don't. When the bills' champions, Metsger and Walker, left the building, no one remained with the courage or stamina to confront the utilities.

State agencies serve the industries they regulate, not the consumers. Oregon's Public Utility Commission fought 408 every step of the way, then sabotaged the result, Meek argues.
"They adopted completely unreasonable rules that no one recommended."

"If agencies aren't supportive of what you're trying to do," Metsger adds, "they have the authority to write regulations that stymie the intent of the legislation."

They exercise it. Gleefully.

Tax law is complicated. "True-ing up taxes on an annual basis is amazingly difficult," adds Jenks, head of the Citizens' Utility Board. When the advocacy group decided its energy was better spent arguing rate cases than
analyzing tax tables, 408 was toast.

Yes, good law has unintended
consequences ... largely because those who profit from manipulating the Legislature and the state agencies are more motivated and better funded than the gatekeepers.

Making sure that doesn't change is the intended consequence of every election.