Brief⁽¹⁾

S.B. 436 would establish a joint committee to study, investigate, and analyze the ramifications to the taxing systems of the state and its political subdivisions arising from restructuring of the electric industry. Such study also would address the relative tax impacts of restructuring on and among electricity providers. The goal of the study would be to recommend a tax policy that allows all electricity providers to be taxed on a fair basis. The bill would require the joint committee to submit a final report of its findings and recommendations to the 1999 Legislature and, if deemed necessary, introduce legislation. The joint committee would be abolished on and after January 11, 1999.

The joint committee would consist of the chairpersons, vice-chairpersons, and ranking minority members of the standing House and Senate Utilities and Taxation committees, or their designees, and all legislators who are members of the Retail Wheeling Task Force. The Chairperson and Vice-Chairperson of the Retail Wheeling Task Force would serve as the chairperson and vice-chairperson of the joint committee. Members of the joint committee would be authorized to meet at any time and place within the state. In addition, they would be authorized to receive compensation, travel expenses, and subsistence expenses. Legislative support staff and staff of the Department of Revenue, Kansas Corporation Commission, and other agencies would be required to provide assistance to the joint committee, as requested.

Background

Recognizing that tax issues related to electric utility restructuring are so complex and wide-reaching, the Retail Wheeling Task Force recommended in its final report and draft legislation the creation of a joint committee of 13 legislators (identical composition as in the Senate version of S.B. 436).

The Retail Wheeling Task Force and the Senate Committee on Utilities were apprised of several tax issues, including, among others: potential inequitable treatment of in-state and out-of-state generation service providers with respect to property tax assessments; differences in state and local taxes paid by Kansas electric utilities relative to other Kansas businesses and out-of-state utilities; sufficient conditions for the establishment of nexus of out-of-state generation service providers for purposes of sales and income tax collections; the ramifications of imposing sales tax on unbundled electric services; the possible need for clarification of certain statutes involving tax exemptions for the sale of electricity and consumption of electricity in production; the implications of restructuring for revenues collected from franchise fees; the implications for city operating budgets if electricity sales of certain municipal generating facilities are reduced; and possible loss of sales tax revenue if stranded cost recovery methods are not subject to sales tax.

Proponents of the bill before the Senate Committee included: staff of the Kansas Corporation Commission; the Director of Rates for Western Resources; a spokesperson for Utilicorp United; an attorney for Kansas City Power & Light; the Director of Government Affairs, Enron Corporation; the Director of Governmental Relations for Kansas Electric Cooperatives, Inc.; and the Vice-President of Member Services and External Affairs, Kansas Electric Power Cooperative, Inc. Written testimony was provided by the Assistant Director of the Public Affairs Division, Kansas Farm Bureau. There were no opponents. Most of the same conferees testified before the House Committee on Utilities.

The Senate Committee's amendment espousing the goal of fair and equitable taxation applied to all electricity providers stems from recommendations of several conferees.

The House Committee amended the bill to:

include all six legislators of the Retail Wheeling Task Force (the Senate's version would include three members);

provide for the Chairperson and Vice-Chairperson of the Retail Wheeling Task Force to serve in the same capacity on the joint committee;

authorize designees of the standing committee leadership positions to serve on the joint committee;

provide a more general definition of the tax policy to result from the study; and

abolish the joint committee on and after January 11, 1999.

The Division of the Budget's fiscal note on the introduced version of the bill indicated that the cost associated with the bill would be uncertain. That fiscal note provided as an example an approximate cost of $33,620 for 13 members to attend six two-day meetings in Topeka during the interim.

1. *Supplemental notes are prepared by the Legislative Research Department and do not express legislative intent. The supplemental note and fiscal note for this bill may be accessed on the Internet at http://www.ink.org/public/legislative/fulltext-bill.html.