The new year began with an unwanted surprise for Energy West Montana customer Jean Beirley.
She was shocked to see another amount listed under her natural gas charges. “I was like, property tax recovery?” she said. “Why are we paying their property tax?”
While the line item may look new, Energy West Montana officials say customers have been paying for property tax recovery all along.
“As a utility, we are allowed to recover our costs of doing business,” said Energy West President Jed Henthorne. “Property taxes are part of our cost of doing business.”
What is new this year is a change in the taxing methodology used by the Department of Revenue in assessing the company’s properties.
“Historically we have been assessed locally like everyone in their home,” said Henthorne. “And with this change we’re now assessed centrally.”
The switch caused Energy West’s property taxes to increase in turn affecting consumers’ bottom lines. The average increase on an annual basis is about $6.40.
A final order from Public Service Commission members shows nearly $500,000 more in property tax estimates from last year for Energy West Montana. “We’re looking at a significant increase,” said Henthorne.
A state statute, 69-3-308 , allows utilities to implement property tax recovery rates, but also requires utilities to list them as separate line items on the bill.
The rate was previously included in distribution charges; Henthorne says customers will see other amounts decrease on their bills due to the change.
“The basic charge went down from $7.25 for residential customers to $6.50,” he said. “And delivery which is buried in the transportation charge also went down.”
Henthorne says the recent property tax recovery efforts were pro-rated, meaning consumers won’t see the full effect of the tariff until February.
Officials say Energy West Montana was one of the last companies affected by the switch in taxing methodology with utilities like Northwestern Energy having a centrally-assessed system in place for years. “We’re sort of the last ones to do it I think,” said Jed.
Department of Revenue officials say states bordering Montana have the same system in place. They say a three-year assessment audit by the Department of Revenue resulted in the switch for Energy West Montana.
In its final order approving the increase last week, the Public Service Commission ruled that Energy West Montana had no control over the Department of Revenue’s decision.
Customers say utility companies should account for these kinds of changes ahead of time, instead of implementing another tariff. “Shouldn’t they be able to budget for this?” said Beirley.“Then I should be able to claim that on my income tax as property taxes.”
A Department of Revenue spokesperson said residents cannot deduct property taxes paid on behalf of business to the state.
Officials told MTN Investigates that taxpayers may only deduct property taxes they directly owe and pay. A statement continues to say, “Otherwise they would be able to deduct portions of those property taxes related to nearly every purchase they make.”
Department of Revenue officials say property tax recovery costs are factored in to any product consumers buy from a business.
They say utility companies like Energy West are now required to inform consumers how much they are paying in state taxes.
Beirley wonders if Energy West Montana really needs all that money to pay a portion of the company’s property taxes, or if there’s a profit to be made on the taxpayer’s dime.
“I have a budget that I have to live within,” she said. “And every time you increase my bill that cuts out of my food or my gas or my clothing allowance or whatever.”
Energy West Montana is a for profit company; Jed says money is made on infrastructure investment and distribution.
“We do earn a rate of return on our investment,” he said.
Energy Wests Montana’s rate of return on rate base is 6.91%; he says that amount is determined and regulated by the Public Service Commission.
Since money is being made with consumers helping to foot the bill for state taxes, Beirley asks why it’s not clearer where their money is going on statements.
“Are they using it to replace and update their towers or whatever they’re doing-where’s that money going?” she said. “I’d like to see more accountability I guess.”
And she’s not just talking about her monthly natural gas charges.
“Then I took a look at my power bill.”
Consumers also pay for part of Northwestern Energy’s property taxes and other business expenses.
A Public Service Commission hearing in 2017 resulted in restructured statements for Northwestern Energy customers. Consumers can see how much they are paying for services like property tax recovery by looking at the state and local tax amount on monthly statements.
A spokesperson for Northwestern Energy says the bulk of that amount pays for a portion of the utility’s property taxes, including costs of infrastructure.
Still, Beirley would like to see more effort by utilities to touch base with customers about how their money is being used.
The audit results affected Energy West Montana, Energy West Resources, Energy West Propane and Cut Bank Gas Company.
Henthorne says nearly 30,000 customers will now see four sections on their residential natural gas bill- including basic charge, delivery charge, gas supply and property tax recovery. He says these are based on tariffs, which provide more information on how rates are calculated.
Below is a breakdown of what is included in your Energy West Montana natural gas charges:
- PSC/MCC Tax - collects for the tax we pay toward funding the Public Service Commission and the Montana Consumer Counsel
- Gas Supply and Transportation Costs
- Commodity Rate – collects for current gas supply costs
- Transport Rate – collects for the current costs of transporting gas from the point of purchase to the Great Falls city gate
- Commodity Surcharge - a true-up rate to refund/recover gas supply costs (over)/under recovered from the prior year.
- Non-Gas Cost Surcharge - a true up rate to refund/recover transportation costs (over)/under recovered from the prior year.
- Universal Systems Benefit Charge: rate required by state law to collect funds for low income and weatherization assistance programs. The funds collected are applied directly to qualified programs approved by the PSC.
- Tax Tracking Adjustment is the recovery for property taxes and operates as a percentage of the Customer Charge and Distribution Base Rate instead of a fixed rate.
Northwestern energy also lists their tariffs included in state and local taxes -
click here for a complete list