VI. Payments to Nor-Cal members in Lieu of Property Taxes and Franchise Fees

Siskiyou, Modoc and the City of Mt. Shasta, by pleading or by letter, question the representations of the settling parties that Nor-Cal and Jefferson can and will pay their members any property tax revenues lost through the public entities' acquisition of PacifiCorp facilities. They question whether a JPA is exempt from paying local franchise fees or utility fees for use of city services and facilities. They question JPA's authority to contribute to cities and counties amounts equivalent to franchise fees if they are exempt from such fees. These entities are concerned that Nor-Cal may be committing to the unlawful giving of public funds.

Nor-Cal responds to these concerns by stating that its opinion of California law is that the facilities acquired by Nor-Cal or Jefferson will be exempt from property taxation, but the JPA's can reimburse those cities that become members of the JPA's for lost property tax revenue by calling the reimbursements "fees for services."

With respect to payments in lieu of franchise fees, Nor-Cal and Jefferson believe that JPAs are not exempt from local service fees and will pay or reimburse members in full for these fees. Non-members may continue to receive fee payments, but only to the extent of the non-members' actual cost of the service. Actual cost is expected to be substantially less than the amount of fees presently paid to members.

Nor-Cal and Jefferson state:

"If the Commission approves PacifiCorp's pending application in this docket, and if Siskiyou County or any other ratepayer feels that its electric rates are too high because Nor-Cal or Jefferson is making improper payments in lieu of property taxes or franchise fees, it could file suit in California Superior Court asking that those payments be declared illegal. If such an action were successful, the rates for electric service would be even lower than presently projected by Nor-Cal. However, for the reasons described above, Nor-Cal is confident that the courts will uphold its plan to make payments in lieu of property taxes and franchise fees to all Program Participants."

As with the validation issue, Nor-Cal and PacifiCorp anticipate that the Commission will approve this application on the strength of the legal opinion of Nor-Cal's counsel.