Taxation studied for deregulated utilities

Monday, June 8, 1998 | 9:27 a.m.

The state Department of Taxation doesn't expect to alter its formula for taxing electric utilities when the industry is restructured in Nevada to allow competition.

Administrators are studying the impact the arrival of competitors will have on tax revenues and Department of Taxation Executive Director Michael Pitlock told a legislative oversight committee last week that his staff expects to maintain an existing formula for property taxes as its prime means of collecting revenue.

Pitlock said he and his staff are examining the state of Iowa's revamping of tax policy. In that state, tax collectors are switching from a property tax collection system to an excise tax on the product, Pitlock said.

He said his office's top priority is to be fair to existing utilities providing electricity while bringing on a system for the new competitors in the market that would require them to pay their share for state services.

The current property tax formula is based on three indicators to determine value: appraisals of cost, income and stock and debt. Pitlock said depending upon the weight given to each value, the tax assessment could be different.

Pitlock said he believes utilities that have operated under a monopoly system haven't been as concerned about taxes as they will under a competitive system because they've always passed tax expenses along to customers. While they may still pass those expenses on to customers under a competitive system, they may pay more attention to alternatives in an effort to keep ahead of other utilities in the marketplace.

Pitlock's report on tax issues was part of an overview of developments relating to restructuring of the electrical industry in the state, which is scheduled to take place by Dec. 31, 1999. The quarterly update of actions by the Public Utilities Commission of Nevada was conducted in Carson City and teleconferenced in Las Vegas.

Two other elements of restructuring that received the attention of the legislative panel were a status report on the PUC's public information campaign and a presentation from executives of Nevada Power Co. and Sierra Pacific Resources on their proposed merger.

PUC staff members gave the panel an early look at a brochure designed to explain what consumers will experience when the competitive environment begins in 1 1/2 years.

Sen. Randolph Townsend, chairman of the oversight committee, recommended a greater emphasis on the date of the transition -- Dec. 31, 1999 -- in the brochure "like a preview of coming attractions, the best part of going to the movies."

Townsend recommended that the PUC get out among the public and determine just how much people know and understand about utility industry restructuring -- he suspects most are clueless.

"You need to get out and let the public know that this is coming, like 'Godzilla,' " Townsend said.

Another giant that's headed Nevada's way is the Nevada Power-Sierra Pacific merger plan.

Charles Lenzie, Michael Niggli and Malyn Malquist, executives of the two companies, gave a presentation on the planned $2.3 billion merger, first announced in late April.

PUC commissioners and Consumer Advocate Fred Schmidt have reserved comment on the planned merger until it is officially filed with the state. That filing is expected to occur July 3, the legislative panel was told.

Lenzie, Niggli and Malquist are on a statewide campaign to explain the merits of the merger. They reassured Sen. Joe Neal, D-North Las Vegas, that it is not the company's intent to gobble up a collection of rural cooperative companies as part of the merger strategy.

Townsend also told PUC Chairwoman Judy Sheldrew to carefully monitor the progress of the merger, since it will be occurring at about the same time the commission will be drawing regulations regarding utility restructuring and when the PUC submits a budget for the next fiscal year.

He said the PUC may have to evaluate whether it has the staff necessary to accomplish all of those tasks on time.