Enron stiffed state on PGE taxes

Revelations come as Salem mulls bill to block public takeover of utility

By Kristina Brenneman

The Portland Tribune, Mar 7, 2003, Updated Oct 30, 2009

City officials studying a purchase of Portland General Electric say its parent company, Enron Corp., never paid the utility’s state income taxes, despite collecting more than $35 million from PGE ratepayers over a three-year period.

The city’s chief administrative officer Tim Grewe also is investigating whether Enron ever paid PGE’s property taxes to the city at a time when the energy trader was making $10 billion a year. Grewe said they uncovered the tax information when they were researching the liabilities and taxes that PGE paid Enron as part of a consolidated tax statement. They found the information in Enron’s filings with the U.S. Securities and Exchange Commission for those years.

“We stumbled onto the fact that taxes PGE was collecting were not making their way back to the Oregon treasury,” he said. “Enron never paid taxes to the Oregon treasury. This isn’t about PGE; they paid their taxes. They went to Enron but it never came back. ”

“From PGE’s perspective Enron had other businesses in Portland different than PGE,” said Jim Piro, the utility’s chief financial officer. “They had a broadband business, and they had a trading business. I can only speak to PGE. We pay our property taxes directly to the counties; we send our checks directly to them. We have never paid our property taxes to Enron. If Enron Broadband and Enron Wholesale didn’t pay their property taxes that could be a different issue.”

Piro said the utility followed the standard practice required by the tax code and paid its federal and state income taxes to Enron, but he doesn’t know what happened later.

State revenue officials will not reveal corporate tax information.

Enron officials could not be reached for comment.

Grewe said they are studying other annual filings since 1999 to determine if Enron, which collected PGE’s taxes due to local and state coffers.

At an assessed value of $201 million for its Multnomah County poles, transmission and other property, PGE paid $10 million in property taxes for 2001, or a rate of $20 per $1,000. Grewe said he has no idea if the now-bankrupt Enron actually paid the money. He does know that PGE paid a $100 business license tax, the minimum amount required.

A congressional study in April 2002 revealed that Enron never made the federal tax payments for the years 1997 through 2001.

The revelation comes on the eve of a statehouse hearing on a bill to block the city from buying PGE because of the potential loss of state income taxes.

Rep. Greg Smith, R-Heppner, filed the bill last week as legislators scrambled to fill a $740 million budget shortfall. A hearing is scheduled this morning before the House Business, Labor and Consumer Affairs Committee, chaired by Rep. Betsy Close, R-Albany.

In papers filed with the Federal Energy Regulatory Commission and forwarded to the Oregon Public Utility Commission, PGE reported that in 2001 it paid an estimated $70 million in annual state income tax, property taxes and franchise fees to local and state governments. Of the total, state income taxes made up $9 million. No comparable figures are available yet for 2002.

City Commissioner Erik Sten, who has been spearheading the city’s exploration of a possible purchase of PGE, has said that the proposed public entity managing the utility Ñ although it would not be required to Ñ in all likelihood would continue voluntarily to pay all the local fees and taxes PGE now pays. But he said the state tax component is being studied.

“We are not going to stiff the state on revenues,” said Sten, who added that city officials plan to testify on the PGE bill.

“This is typical Salem behavior,” Sten said. “No one called us about it. I don’t think this is ultimately going to pass. You have a Legislature that is for local control unless Portland is doing something. It’s another example of grandstanding.”

Ater Wynne LLP, the law firm representing the city in the PGE purchase, is now studying the tax implications of converting PGE to a public entity.

“The goal here is to secure the assets in a way that boosts rather than hurts Oregon’s economy,” Sten said. “We’re publicly minded. Our goal is to do the right thing.”

Sten said the city also is trying to clarify what PGE’s position is on the Smith bill. PGE Executive Vice President Fred Miller said the utility has no interest in the legislation. However, the utility at one time supported Oregonians for Jobs and Power, which is fighting a public takeover of PGE.

“It’s not in our interest to have that pass,” Miller said. “We still oppose condemnation, but not purchase by a public entity. (The bill) would limit our options.”

The city is currently in discussions with Enron management about buying the estimated $3 billion utility. Under pressure to speed up its Chapter 11 bankruptcy reorganization, Enron reportedly is seeking a resolution on the PGE purchase by March 15.

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