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California and the West

Utility Appeals for Tax Break on Remotely Operated Power Plants

Electricity: Eight Northern California counties could lose a total of $3 million a year if PG & E wins exemption for facilities owned by water agencies and controlled by workers at distant sites.


SACRAMENTO — One of the wonders of technology is that a power plant can be turned on with the press of a button from hundreds of miles away.

That's the way it has been at plenty of hydroelectric plants tucked into ravines on Western rivers.

Now Pacific Gas & Electric Co., the biggest utility in California, says it should not have to pay property taxes of at least $3 million a year on five plants that generate electricity for the utility because its workers don't staff them.

With that argument, PG & E wants out from under taxes it has paid since 1984 on power plants, dams and reservoirs in the Sierra Nevada.

PG & E's petition, to be heard and possibly decided by the state Board of Equalization on Tuesday, infuriates officials in eight Northern California counties that stand to lose $3 million in annual revenue.

"You shift the taxes to someone else or you cut the services," said Bill Copren, assessor in Sierra County, home to fewer than 4,000 people. A loss of $88,000 a year in taxes from PG & E, he said, would increase everyone else's property taxes to pay for a hospital, schools and fire equipment.

If PG & E wins, $160 million worth of property will be removed from the tax rolls in Sierra, Placer, Nevada, Yuba, Butte, Plumas, El Dorado and Mariposa counties. In Yuba County, one of the poorest in the state, that amounts to 5% of the tax roll.

What especially irritates the counties is that the tax cut PG & E seeks would come in addition to a $4.5-million loss in taxes delivered by the Board of Equalization in August, when it voted to reduce the value of PG & E's overall property--put at nearly $14 billion in May--by $455 million.

PG & E owns a sprawling network of 68 powerhouses and 174 dams for turning water and gravity into electricity. At issue are five other hydroelectric projects in which public water agencies actually own the dams and powerhouses but PG & E holds contracts to regulate the projects and sell the electricity.

"Our contract is just that--it's a contract to purchase a commodity from them that they generate as a byproduct," said PG & E spokesman Jon Tremayne. "The company believes we shouldn't be paying property taxes on property we don't own."

PG & E argues that its workers must occupy the power plant sites, or have the right to be there, to meet the requirement of what is called "possessory interest"--and thus be held liable for property taxes. PG & E attorneys say they lack authority to keep workers at the plants, an argument the water districts and counties dispute.

County assessors say that PG & E's interpretation of a 1998 rule change conflicts with tax law and the California Constitution. They accuse the utility of being disingenuous by arguing that it has no "use" of powerhouses, when PG & E workers monitor the plants electronically from distant cities and control the turbines.

In PG & E's 50-year deal with the Yuba County Water Agency, for example, the utility pays about $11 million on the maintenance and construction debt of Bullard's Bar Dam, but in return gets all the profits of electricity generated. This year, with market prices for electricity extraordinarily high, that electricity was worth about $80 million, said Yuba County Water Agency manager Donn Wilson.

The staff of the Board of Equalization recommends rejection of PG & E's request. It's not clear how the board will vote.

The board includes former Assembly members Johan Klehs and Dean Andal, property manager Claude Parrish and John Chiang, a former Internal Revenue Service tax specialist. State Controller Kathleen Connell, who seeks to become mayor of Los Angeles, is also a board member.

From 1998 through the first half of this year, Parrish, Andal, Connell and Chiang have accepted a total of $110,000 from a group called Taxpayers Political Action Committee. Major donors to "TaxPac" include PG & E and other big utilities.

Copren said he believes the hundreds of thousands of dollars businesses donate to the election campaigns of board members influence their decisions.

"If somebody walked in here and handed me $100 and I turned around and reduced their assessment, I think I would be in jail," Copren said. "They say, no, what they're doing is legal."

Chiang said that the money TaxPac gave him--state records show he accepted $5,000 in 1999 and $10,000 in 1998--will not influence his vote next week.

Parrish, in a written statement, said he will "make the most thoughtful and accurate decision possible, based on the law and the facts before me."


Power Struggle

Eight Northern California counties, shown in white, say they will suffer if PG&E gets the tax exemption it seeks.

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