Oncor keeps millions it collects from ratepayers as 'federal taxes'

Posted Thursday, Apr. 18, 2013  comments  Print Reprints

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Oncor Electric Delivery, the utility operating most of the power grid in North Texas, has collected more than $500 million since 2008 from ratepayers to cover federal income taxes that were never paid, according to a report from a group of Texas cities and municipalities that has been critical of the state's deregulated electricity market.

The Texas Coalition for Affordable Power, which released the study on Wednesday, acknowledges that Oncor's practice is legal, but argues it is nonetheless unfair. TCAP negotiates power purchases for about 160 member cities, including Arlington and several other Tarrant municipalities.

The group also said it is concerned about proposed measures before the Texas Legislature that would remove the power of state regulators to review the tax payments. Under current law, the Public Utility Commission of Texas may consider whether a utility actually used the money to pay taxes when setting rates.

The issue arises because Dallas-based Energy Future Holdings, which owns 80 percent of Oncor, has not had to pay any federal income taxes because it has been losing money. Corporations generally report earnings and calculate income taxes based on the total profits or losses of all their operations, called a consolidated statement.

EFH benefits from the arrangement because Oncor pays dividends to EFH and its other owners based on Oncor's annual earnings.

Oncor spokesman Chris Schein said it has long been established state law that regulated utilities can include anticipated taxes in their rate requests. And every other state allows electric utilities to collect and retain anticipated taxes as part of regulated rates, he said.

"We think that this is good legislation, because it brings Texas in line with the rest of the nation," Schein said of the bills. Sen. Charles Schwertner, R-Georgetown, sponsored SB1364 in the Senate.

Maintaining the certainty that a utility can retain the anticipated taxes makes the utility more attractive to investors, Schein said.

Chris Brewster, an attorney for TCAP in Austin, said other states' practices are irrelevant.

"Since when is Texas ashamed of being one of the only states to get something right?" Brewster said.

TCAP proposes not allowing utilities to collect money from ratepayers that is not actually used to pay taxes. Alternatively, the group argues the PUC should retain its right to consider unpaid taxes when it sets rates.

Although wholesale power generation and retail sales of electricity are deregulated in Texas, the utilities that distribute power to users remain under PUC regulation.

Jim Fuquay, 817-390-7552

Twitter: @jimfuquay

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