ORDER NO. 95-857

ISSUED AUG 14 1995

THIS IS AN ELECTRONIC COPY

BEFORE THE PUBLIC UTILITY COMMISSION

OF OREGON

UM 729

DR 13

DISPOSITION: APPLICATIONS TO AMEND ORDER NO. 91-830 DENIED; PETITION FOR DECLARATORY RULING DENIED

Background

Oregon’s Ballot Measure 5, enacted by voters in 1990, reduced regulated utilities’ property taxes beginning July 1, 1991. On July 1, 1991, the Commission entered Order No. 91-830, authorizing deferred accounts for the anticipated property tax savings. The order adopted a Memorandum of Understanding (MOU) which, among other things, prescribed a method of calculating the amount of property tax savings to be deferred by the energy utilities.

In October, 1991, Northwest Natural Gas Company (NNG) and Cascade Natural Gas Corporation (CNG) received property tax statements which included an estimate of their property tax savings under Ballot Measure 5. The estimate appearing on the tax statements was calculated under a method developed by county tax assessors and the Department of Revenue ("assessors’ method"). The assessors’ method differed from the MOU method and produced different results.

On February 15, 1994, NNG and CNG each filed tariffs to reduce rates by amortizing a portion of their respective deferred accounts authorized by Order No. 91-830. Both companies calculated the amounts to be amortized using the assessors’ method rather than the MOU method of calculation.

NNG’s and CNG’s proposed tariffs were made effective April 15, 1994, subject to an investigation by the Commission into whether the amounts proposed to be amortized were sufficient.

On July 1, 1994, CNG filed an application to amend Order No. 91-830 to adopt the assessors’ method for calculating property tax savings. On July 22, 1994, NNG filed a similar application to amend Order No. 91-830. NNG also filed a petition for declaratory ruling requesting the Commission to declare that the assessors’ method to calculate property tax savings due to Ballot Measure 5 is the "official methodology for calculating such savings."

On September 16, 1994, NNG, CNG, PacifiCorp Electric Operations, and staff filed a joint application to amend Order No. 91-830 to substitute the assessors’ method for calculating property tax savings for energy utilities beginning July 1, 1994. The Commission approved the joint application in Order No. 94-1687 entered November 21, 1994.

The issue presented here is whether to substitute the assessors’ method for the period beginning July 1, 1991, through June 30, 1994, for the applicants. The applications to amend Order No. 91-830 and NNG’s petition for a declaratory ruling were consolidated and a hearing was held in the consolidated docket on April 19, 1994. The parties submitted post-hearing briefs.

DISCUSSION

The MOU method of calculating Ballot Measure 5 property tax savings was the product of diligent settlement negotiations between the Commission’s staff and affected utilities. These negotiations were based on all relevant information available at the time and the resulting MOU established a reasonable method of calculating Ballot Measure 5 property tax savings. The Commission adopted the MOU in Order No. 91-830. Thus, the terms of the MOU became the terms of a Commission deferral order.

When the Commission adopts a Memorandum of Understanding or other settlement agreement, it does so because it finds the agreement to be reasonable and consistent with Commission policy and law. We consider the process by which the Commission’s staff and regulated utilities and other parties enter into a Memorandum of Understanding or stipulated agreement, and the review and adoption of such agreements by the Commission, to be a significant undertaking. In light of this, it is our general policy that only the most compelling circumstances justify retroactive modification of a Commission order adopting a fully negotiated settlement agreement. Such circumstances might include facts constituting mistake, fraud, impossibility, or some other extraordinary basis for modifying an executed agreement.

CNG and NNG request that we retroactively modify Order No. 91-830 based on information not known at the time of the settlement negotiations, i.e. the assessors’ method of calculating property tax savings. We do not agree that new information alone is a sufficiently compelling circumstance to retroactively modify the terms of a fully negotiated agreement. Moreover, the new information presented does not alter our conclusion in Order No. 91-830 that the MOU established a reasonable method of calculating Ballot Measure 5 property tax savings.

For the reasons stated above, the applications of CNG and NNG to amend Order No. 91-830 to adopt the assessors’ method for the period from July 1, 1991, through June 30, 1994, should be denied. Similarly, the petition for declaratory ruling by NNG should also be denied.

These decisions result in larger amounts of Ballot Measure 5 savings to be returned to CNG and NNG customers than the amounts deferred under the assessors’ method and amortized beginning April 15, 1994. CNG and NNG should be required to reserve appropriate additional amounts, plus interest as though amounts had been timely entered, to their existing property tax adjustment accounts. Property tax savings will thus be preserved for refunding to customers.

ORDER

IT IS ORDERED that:

1. The applications of Cascade Natural Gas Corporation and Northwest Natural Gas Company to adopt the assessors’ method for the period from July 1, 1991, through June 30, 1994, is denied;

2. The Petition for Declaratory ruling by Northwest Natural Gas Company is denied.

3. Cascade Natural Gas Corporation and Northwest Natural Gas Company shall restore property tax savings, plus appropriate interest, resulting from Oregon’s November 1990 Ballot Measure 5 as determined by use of the Memorandum of Understanding adopted in Order No. 91-830 to their respective Property Tax Adjustment Accounts.

Made, entered, and effective .

A party may request rehearing or reconsideration of this order pursuant to ORS 756.561. A request for rehearing or reconsideration must be order to a court pursuant to ORS 756.580. The request must be filed with the Commission within 60 days of the date of service of this order.