Brief ⁽¹⁾

SB 177, as amended, would permit independent power producer properties newly constructed and placed in service on or after January 1, 2001, to be classified for property taxation purposes as commercial and industrial properties rather than public utility properties. This would allow these properties to be assessed at the 25.0 percent rate rather than the 33.0 percent public utility rate. Also, the personal property would be appraised using the constitutionally prescribed straight-line depreciation to a 20 percent residual value. Public utility properties are appraised at fair market value under current law.

An independent power producer property, as defined by the bill, would be all or any portion of property used solely in the generation, marketing, and sale of electricity generated by an electric generation facility. Additional generating capacity achieved through efficiency gains by refurbishing or replacing existing equipment at generating facilities placed in service before January 1, 2001, would not qualify such facilities for exclusion from the definition of public utility.

For taxation purposes, personal property would be defined by reference to accounts utilized by the Federal Energy Regulatory Commission.

Such properties also would be exempt from regulation as public utilities.

Background

This bill was requested by and supported by a representative of Utilicorp United, Inc., an independent power producer.

The Committee added the following amendments to:

• require that the facility be newly constructed;
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• apply the provisions to any kind of generation facility (as introduced, the bill applied only to coal and gas fired facilities);
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• permit the provisions to apply to a newly constructed portion of an otherwise regulated facility;
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• define personal property by reference to accounts utilized by the Federal Energy Regulatory Commission; and
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• clarify that capacity achieved through refurbishing or replacing existing equipment at generation facilities currently in service would not make such facilities eligible for exclusion from the definition of a public utility.

Article 11, Section 1 of the Kansas Constitution provides that commercial and industrial real estate is to be assessed at 25 percent of fair market value; commercial and industrial machinery and equipment is to be assessed at 25 percent of its retail cost when new, depreciated; and the real and personal property of state assessed public utilities is to be assessed at 33 percent of fair market value. A final distinction involves inventories. Merchants and manufacturers' inventories are exempt from taxation, but the inventories of public utilities are taxable.

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.cgi