Energy & Environment

Texas Considers Letting Utilities Pass Millions Of ‘Tax Dollars’ From Customers To Investors

The Texas Public Utility Commission argued about a complicated tax scheme. It could allow utility companies to take millions of dollars from electricity customers and give it to investors.

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The three members of the Public Utility Commission of Texas tackled a proposal that's being fought by consumer groups. The AARP, the retirees advocate, says what's at stake is an "unacceptable wealth transfer" from electricity customers to the shareholders of big utility companies.

Commission member Brandy Marquez appeared to agree: "We're not in the business of enriching companies that aren't paying taxes. But what I will say is a REIT is a different animal," Marquez said during the Commissions public meeting.

That animal she's talking about and what's at the center of all this is a REIT, a Real Estate Investment Trust. A utility company in North Texas wants to convert itself into a REIT and Houston's CenterPoint Energy, says it's studying how it might do the same. Why would it want to?

A REIT is a financing strategy that could mean a big utility could collect hundreds of millions of dollars from customers to cover the company's income taxes. But because of the way the REIT is set up, it's tax exempt, so the company would never pay the taxes but instead pass the millions onto its investors, its shareholders.

Commission member Marquez said Texas should be suspicious of such a tax scheme because nationwide she said, "Nobody else is making this move to a REIT.”

But utility companies said there are lots of benefits to them becoming a REIT, like having access to more investment funds. A utility attorney, Richard Noland, said what they would like is: "That the REIT structure is going to be treated as any other utility, I think that would be our preference."

Commission chairman, Donna Nelson, seemed to agree with him: "I would treat them irrespective of the fact they're a REIT. I would treat them the same as we treat other companies."

Even if that means they'd pay no income tax? Nelson said in the end, the shareholders who would profit would still pay income tax.

The Public Utility Commission staff has recommended a rejection of the proposal. Commissioners will take it up again at a meeting March 24th. They indicated they will devise a formula to require that a share of any tax benefit be paid to electricity customers.

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