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February 4, 2002

Enron pocketed PGE ratepayer taxes

PORTLAND, ORE. (AP) - Portland General Electric sent Enron more than $357 million in federal tax money collected from its ratepayers during the past four years, but its parent company pocketed the money rather than turn it over to the government, a public interest group said.

Since Enron purchased PGE in 1997, the Houston-based company reported more than $2.68 billion in profits but paid just $17 million in federal income taxes in its first year of ownership and nothing in the three following years, according Citizens for Tax Justice, a group that advocates tighter tax laws.

During that period, PGE sent the company $89.3 million a year on average in tax checks, Portland-based PGE officials said. Enron filed a consolidated return for all of its holdings, they said.

What happened to the money then is Enron's concern, not PGE's, they said.

"We were following the letter of the law," said Scott Simms, PGE spokesman.

Enron did not immediately return calls.

There is apparently nothing illegal about the Enron-PGE tax arrangement, where PGE, as a subsidiary sent its payment for taxes to its Texas parent. As of May 2001, subsidiary utilities no longer pay taxes through their parent companies, Simms said.

Enron was largely able to avoid federal income taxes with big losses elsewhere in its organization and tax-shelter subsidiaries in the Cayman Islands.

Houston-based Enron filed for Chapter 11 bankruptcy on Dec. 2 amid disclosures that the company hid large amounts of debt in a web of off-the-books partnerships.

Thousands of employees, including hundreds in Portland, have been laid off. Others have suffered complete losses to their retirement savings as Enron's stock has crashed.

In the 4½ years Enron has owned PGE, it has received at least $608 million in profits and taxes from the Portland utility.

On Jan. 17, Citizens for Tax Justice released a detailed analysis of Enron's tax payments based on the company's own financial statements. The 23-year-old nonpartisan group's analysis has been widely cited.

The money PGE paid for federal taxes came directly from ratepayers, Simms confirmed. The utility has about 730,000 customers.

In the fall of 2001, PGE raised rates 31.5 percent for residential users and 50 percent for commercial users.

In addition to the tax money, PGE paid $251 million in profits to Enron from 1997 to the third quarter of 2001.

Enron did its best to "pick PGE clean," said Erick Johnson, a Portland lawyer who represents utilities but does not represent PGE or Enron.


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