Oncor fighting ruling on so-called ‘phantom taxes’

Oncor, Texas’ largest power transmission company, is challenging a recent state appellate court ruling that could could force it to repay customers more than $200 million.

The court filing comes six years into a legal fight with ratepayer groups that contend Oncor violated state law when it charged customers for federal taxes that were never paid.

Last month the 3rd District Court of Appeals agreed, overturning an earlier ruling by the Texas Public Utility Commission. The court ordered the agency to calculate how much Oncor needs to repay its customers.

The fight over “phantom taxes” centers around Oncor’s position as a subsidiary of Energy Future Holdings, the Dallas power giant that also owns Luminant and TXU Energy. EFH filed for bankruptcy in April after years of financial losses, during which it had no federal tax bill.

EFH “ignored the statute requirement. And it caused the ratepayers to pay more than they should have,” said Georgia Crump, an attorney representing the ratepayers group Oncor Cities Steering Committee.

The practice of charging customers for taxes that are never paid is common among utilities nationwide. It is allowed by most state regulators, who continue to set electricity prices across much of the country.

In Texas, regulators control only transmission rates.

Oncor, which has 10 million customers in Texas, maintains it paid money to EFH for taxes as if it were a stand-alone company. The company plans to appeal to the Texas Supreme Court, said Oncor spokesman Chris Schein. What EFH did with the money after that was up to EFH, Schein said.

“EFH’s tax liability is irrelevant,” he said.

The Texas appellate ruling applies only to Oncor bills between 2009 and 2011, when Oncor filed another rate case. Last year, the Legislature changed the law to require the utility commission to consider utilities’ stand-alone tax bills in setting rates.

Follow James Osborne on Twitter at @osborneja.