PGE, NW Natural and Rockwood Water look for clarification of new 'privilege' tax

Gresham residents: Prepare for your electric and natural gas bills to go up starting Friday, July 1.

As part of the city of Gresham's effort to balance its budget for fiscal year 2011-12, it increased a license fee charged to utility companies from 5 percent to 7 percent.

And due to state utility commission rules, Portland General Electric is required to pass that fee onto ratepayers, said spokesman Steve Corson.

However, PGE is teaming with another local utility - Rockwood Water People's Utility District - as well as NW Natural gas, to fight the utility license fee increase in court.

'We do have some questions as to whether the city's action is permissible … And we will be seeking some clarification from the courts,' Corson said, adding that a lawsuit is in the works.

PGE, NW Natural and Rockwood Water PUD consider the utility license fee a privilege tax, which cities charge utilities for the privilege of using the city's streets. However, the state caps privilege taxes at 5 percent.

Gresham City Attorney Dave Ris said cities can determine for themselves the terms and conditions, including fees and charges, a utility must meet to be allowed use of city streets.

'Gresham does not impose a tax for any privilege held by utilities, but charges a license fee as one of the conditions for utilities to have permission to use the streets,' Ris said.

Corson said it's the first time a city in PGE's service territory has increased a utility license fee beyond the allowable 5 percent. Gresham's City Council approved a resolution increasing the fee - a move approved by Gresham's budget committee in April - on May 17, citing the need to raise $2 million to avoid further general fund budget cuts. A total of 36 City Hall positions, including 15 full-time firefighters and police officers, were eliminated even with the extra revenue from the fee increase

'Certainly we are sympathetic to the city's situation,' Corson said, 'but it seems pretty clear-cut to us under the statute whether this can proceed. This is a difficult time for people to see increases in their utility bills.'

An average residential energy bill in Gresham, with a $90 energy charge, will go up $1.80 a month under the fee increase, Corson said.

As for NW Natural gas customers, they will likely pay an extra $1.35 a month for a bill of 55 therms, which is what the average residential customer in Oregon uses, said Jenna Cooper-Gross, NW Natural spokeswoman.

If PGE, NW Natural and Rockwood Water PUD prevail in court, PGE and NW Natural will refund ratepayers the money collected under the increased utility license fee. Rockwood Water PUD is holding off on increasing rates until the issue is addressed in court, said Harvey Barnes, the PUD's general manager.

The July 1 utility license fee increase also applies to Gresham water, wastewater and stormwater rates, but the city is not increasing rates at this time, said Sharron Monohon, Gresham's budget and financial planning director.

But water bills will go up an average of $3.90 a month for residential customers on Jan. 1, 2012, when stormwater rates jump 7 percent, water rates increase 6 percent and wastewater rates go up 5 percent as part of the operational side of the budget.

Next spring, when Gresham's budget committee considers whether to increase rates for water, wastewater and stormwater service in 2013, the city will determine whether to also pass the utility license fee increase onto ratepayers, Monohon said.

An estimated $2.7 million will be raised through the utility license fee increase in fiscal year 2012-13.

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