Texas power company collects $500 million in 'taxes' that don't exist

Friday, May 10, 2013 by: Ethan A. Huff, staff writer
Tags: power companies, Oncor, bogus taxes

(NaturalNews) Millions of people living in the Dallas-Forth Worth Metroplex region of North Texas have basically been getting ripped off on their electric bills since at least 2008, and very few of them are the wiser, according to new reports. A federally-mandated utility tax levied on customers by power company Oncor has ratcheted up hundreds of millions of dollars over the past few years, but none of this cash has been used by the company to pay any actual federal taxes, says a new study.

The Texas Coalition for Affordable Power (TCAP) says Oncor collects about $200 million annually from its customers for "phantom" federal taxes that it ultimately does not have to pay. This, according to the group, is due to the fact that Oncor files its taxes as a subsidiary of Energy Future Holdings, a private hedge fund that is apparently on the brink of bankruptcy, and thus has not had to pay any federal income taxes since at least 2008.

Instead, all this tax money collected by Oncor from its customers is being used by Energy Future Holdings to "fight off creditors," according to Jake Dyer, a policy analyst at TCAP. Even though there is nothing illegal about the practice - Oncor is actually just following the legal precedent set by the Texas Supreme Court several decades ago for utility taxes - it will likely come as a surprise to many people who have been under the false impression that such fees are being used for their claimed purposes.

"Since 2008, [Oncor has] collected $500 million for the purpose of paying taxes on their income ... (but) those taxes that are collected from the consumer never end up getting paid to the federal government," says Randy Moravec, Executive Director of TCAP, as quoted by CBS DFW. "It's an unfair levy on consumers."

Many utility companies across America collect taxes they never pay

Oncor is apparently not alone in its forced exploitation of this lucrative tax loophole. According to a 2006 report by The New York Times (NYT), utility companies in at least 26 states routinely and legally pocket fees collected for tax liabilities, while utilities in another 21 states can also legally do this if they so choose. And in most cases, collecting these phantom fees is actually a requirement by law.

"[I]n recent years many utilities have expanded into unregulated business," writes David Cay Johnston for the NYT. "When those other businesses lose money or create artificial losses through tax planning, those losses can be used to offset income earned by the utilities. As a result, the parent companies owe less in taxes than their electric customers paid. Sometimes these companies owe nothing, or receive large tax refunds."

According to the Dallas Business Journal two bills recently proposed in Texas, House Bill 711 and Senate Bill 1364, could strip the Public Utility Commission (PUC)'s ability to influence the collection of these phantom taxes by utilities like Oncor that are technically a monopoly. According to TCAP, the passage of these bills will only make the situation worse.

Sources for this article include:

http://dfw.cbslocal.com

http://bizbeatblog.dallasnews.com

http://www.bizjournals.com

http://www.nytimes.com/2006/03/15/business/15utility.html