Regulators say IRS should untangle whether Enron skirted Oregon taxes

Monday's Oregon Public Utility Commission hearing erupted into a shouting match between Chairman Roy Hemmingway and longtime utility activist Dan Meek over whether the commission should investigate if Portland General Electric paid its state and federal taxes in the past five years.

Hemmingway said it was not the responsibility of his panel to find out whether PGE or its bankrupt parent, Enron Corp., paid its state and federal taxes, but that of tax collectors such as the Internal Revenue Service. The other two members of the commission agreed, saying an investigation was not relevant to their rate-making role.

Hemmingway blasted Meek's use of the hearing as a political forum, slamming down his gavel several times when Meek tried to interrupt.

'I'm in charge of this meeting today,' he said, talking over a shouting Meek for several minutes. Meek abruptly stood up from the speaker's table and walked away.

Hemmingway later apologized to the audience for 'losing my temper. We must exercise our duty and not make a political case for other forums.'

Commissioners unanimously voted not to launch an investigation into Enron's payment of taxes, saying it was beyond their authority. Only commissioner Lee Beyer asked for more time to consider Meek's argument.

'This is really a federal tax issue, not a commission issue,' said retiring Commissioner Joan Smith.

The clash between public regulators and Meek, however, was not over yet. In the hallway outside the commission's hearing room, Meek angrily accused assistant attorney general Paul Graham of 'contributing to the coverup' of PGE.

'I'm not covering up anything,' Graham responded. 'We're not a tax-making authority. This is a baloney issue, and you know it.'

Meek said he will file an appeal with the commission's administrative law judge.

Meek, who spearheads the Utility Reform Project, asked for the probe three weeks ago after city officials discovered PGE's parent company, Enron Corp., never paid state and federal taxes even though $445 million had been collected from PGE customers since 1997 for that purpose.

Meek is seeking a refund of millions that ratepayers paid in their electricity bills to cover the utility's taxes. Enron and PGE 'engaged in a pattern of fraud and deceit' with OPUC when it provided proof in rate hearings the taxes had been paid, the project said in a petition to the commission.

'If refunds need to be made, they should be made at the Internal Revenue Service level,' said Ed Busch, an OPUC program manager who recommended the commission not open an investigation. 'The IRS is the one who should be going after those companies. It is not our role to go to Enron and find out what payments they made to the IRS because it does not affect rates paid by Oregon customers. The issue is more, 'Did Enron do things to evade taxes?' '

The state attorney general's office also is looking into a claim in U.S. Bankruptcy Court for Enron's unpaid state taxes at the request of commissioners in Clackamas, Washington and Multnomah counties.

Given the dense thicket of Enron litigation and bankruptcy claims, the city and state likely won't get paid for years. Enron's proposed sale of PGE in an auction process has been delayed more than a year as executives mull which assets to keep in a restructured entity and which to sell. The city of Portland has been seeking to buy the utility. In the delay, law firms are racking up an estimated $1 million a day in legal fees, depleting the available pool of money for Enron's creditors.

The utility commission said it didn't have power over PGE's income tax funds once they were turned over to Enron. The commission merely determined whether PGE's rates were set properly so that the company could pay its tax liabilities, Busch said.

PGE spokesman Scott Sims said OPUC's decision merely confirms what the utility has said all along, that it paid its taxes. Enron, which collected the money and filed consolidated tax returns including PGE's income and expenses, never paid the taxes.

Meek said that's no excuse for PGE's actions.

'I don't care what you paid to Enron,' he said. 'Paying your corporate parent is not paying your taxes. If that were the case I'd pay them to my mother. I don't want to know what they paid each other but a record of what they paid to the state, to Multnomah County, TriMet and the city of Portland.'

Last week, PGE did provide proof that it had paid its parent firm. The company released wire transfer receipts showing it had transferred to Enron $445 million in state, federal and local taxes from 1997 to 2001. OPUC staff then matched those numbers to PGE's financial filings, Busch said.

PGE's annual report, filed with the U.S. Securities and Exchange Commission, shows it paid $17 million in state and local taxes in 2000 and $3 million in 2001. The company reported it has deferred $11 million in state taxes in 2002.

Deferring taxes is a common practice among companies that have yet to resolve what they owe, said Jeff Robertson, a tax attorney at Bullivant Houser Bailey law firm. They have up to a year to pay the taxes, he said.

The amount PGE paid in federal taxes declined, along with its revenue, between 2000 and 2002. The company reported to the SEC that it paid $88 million in 2000 federal taxes, $32 million in 2001 and $5 million in 2002. The numbers differ from those reported to OPUC and the Federal Energy Regulatory Commission, in some cases by many millions. For instance, the FERC form lists 2001 federal taxes of $38 million.

PGE sent its local taxes directly to the county tax assessors' offices from 1997 to 2001.

Meanwhile, in a crackdown on companies that opposed the energy trading market, FERC on Wednesday asked for more proof from PacifiCorp, the Bonneville Power Administration and Idaho Power that they had not illegally manipulated the market during the power crisis of 2001 to 2002.

Idaho Power serves 17,334 customers in Oregon.

'We will once again respond to their request,' said Dave Kvamme, a PacifiCorp spokesman. FERC had issued a similar show-cause order to the Portland-based company, a subsidiary of Scottish Power, in May 2002.

Federal regulators have demanded the same of PGE, which operated its trading room within the same downtown office complex as Enron Power Marketing, although on a different floor. FERC's request means all three investor-owned utilities doing business in Oregon are under investigation by federal energy regulators.

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