Purpose

The strike everything amendment to H.B. 2063, retroactive to January 1, 2002, freezes valuations for existing electric generation properties for tax year 2003 and creates an allocation method to distribute the values to the taxing jurisdictions.

Background

Prior to deregulation, the electric utilities provided customers with a total package of all electric services. Under traditional monopoly regulation, the generation, transmission and distribution of power are all provided by one utility company. Under deregulation, customers can select providers of electricity, while transmission and distribution services will continue to be provided by utilities in a regulated environment.

Electrical generation facilities are defined as facilities that generate electricity and are used by both electric wholesalers and retailers. Electric retailers distribute and transmit electricity through utility properties . Laws 2000, chapter 384 established a property tax valuation schedule for electric generation facilities, basing valuations on gradually increasing percentages of the scheduled depreciated value. Currently, all utilities are classified, for property tax purposes, as class one properties, which are assessed at 25 percent.

A fiscal note has been requested from Joint Legislative Budget Committee staff.

Provisions

1. Provides a method for allocation among the various taxing jurisdictions the generation, transmission and distribution properties of the electric utilities. Specifies that generation values will be combined with distribution values for purposes of allocation.

2. Changes the method of determining voluntary contribution payments for tax year 2003 and 2004. Provides that payments shall be made to prevent any increase in tax rates attributable to the decrease in electric generation property values.

3. Requires existing electrical generation plants or units valued by the Department of Revenue (DOR) in tax year 2002 to valued at the final tax year 2002 full cash value for tax year 2003 and provides for this value to be combined with the value of transmission and distribution property for allocation purposes.

4. Directs all companies owning electric generation property to provide, under oath by July 1, 2002, the information required by this measure to DOR. Assesses a fine of $1000 per day for noncompliance and allows the director to extend the deadline at the director’s discretion and to abate the penalty for reasonable cause.

5. Specifies that plants placed in service between December 31, 2000 and December 31, 2001 shall be valued pursuant to the statutory valuation procedure for electric generation properties.

6. Repeals, on December 31, 2004, the new formula for valuations of existing electrical generation property for the tax year 2003 and the related reporting requirements to DOR.

7. Makes technical and conforming changes.

8. Contains a retroactivity clause of January 1, 2002.

Amendments Adopted by Committee

· The strike everything amendment was adopted.

Senate Action

FIN 4/25/02 DPA/SE 5-0-3-0

DG/jas