3.4. SR 04-09-2001 - Laserfiche WebLink

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COALITON OF UTILITY COUNTIES HISTORICAL PROSPECTIVE Historically, all commercial and industrial property in the State of Minnesota had personal property taxes on its machinery. When that was eliminated back in the 1970's, the State chose not to eliminate the personal property taxes on the electrical industry and the pipeline industry. Part of the rationale (which makes the most sense) is that they looked at the cost for removing the personal property taxes on these facilities and determined that the burden to the State would be too great and therefore, as regulated industries, they chose not to eliminate those. In 1978 the Public Utilities Regulatory Act was enacted. Congress subsequently enacted the Energy Policy Act of 1992. These two acts opened generation for a portion of the industry to competition by requiring that utilities that needed capacity needed to entertain bids from alternative suppliers. In 1994, Northern State Power Company informed Goodhue County that they intended to seek tax reductions through a number of methods. Several years later, NSP had instituted a property tax appeal wherein they sought exemption of a significant amount of the personal property taxes. The City, County and Subsequently, the school district had entered into an agreement for resolution of the same. Within six months, NSP had asked that legislation be introduced at the State eliminating the PPT on generation machinery. In 1996, the Federal Energy Regulatory Commission ("FERC") issued Order 888 and 889. These orders opened the wholesale electrical market for power by providing that all transmission line owners offer transmission or "wheeling" to any electrical utility and to any retail customer taking transmission services as part of a state mandated direct access program. Further, on "retail wheeling" a direct access program required utilities to open their lines to any customer. In 1996 the Department of Revenue, Commissioner of Public Service and Public Utility Commission began a study on the impact of taxation on utilities. On January 15, 1997, this proposal was then presented to Senator Pappas' Committee. In the executive summary, it identifies: "Minnesota imposes higher property taxes on utility companies than neighboring states...Much of the higher property tax in Minnesota is attributable to the high class rate imposed on utility property and the personal property assessment on utility machinery, a tax not imposed on other Minnesota business property." The conclusion that is drawn: