Utility’s rebate rejected

Nevada dodged a $70 million financial setback Monday when the state Tax Commission denied Southern California Edison a rebate for using out-of-state coal at its now closed Laughlin power plant.

The eight-member commission voted 6-2 to disallow the refund that it approved in 2005. The commission voided the approval last year after the state Supreme Court ruled that the decision made behind closed doors violated the open meeting law.

Southern California Edison had sought $70.2 million, including $50.8 million in refund money plus $19.4 million in calculated interest.

The $50.8 million was based on Clark County's sales tax rate applied to the company's total monthly coal purchases between March 1998 and March 2005, according to Department of Taxation Director Dino DiCianno.

Had the commission decided in favor of the company, Nevada entities that had used sales tax money from the plant's operation -- including school districts, and state and local governments -- would have had to shoulder the burden of potentially paying both the refund and interest.

Commissioner George Kelesis, who made the motion to deny the refund, said he didn't believe the use of the coal slurry that the company transported from Arizona to the Mohave Generating Station in Laughlin was exempt from Nevada taxes.

"I don't believe it was coal. It was a slurry product," Kelesis said.

Edison's consulting tax adviser Anthony Smith said the company "will most likely be filing an appeal" in District Court.

Commissioners Hank Vogler and John E. Marvel voiced the dissenting votes, siding with the company's interpretation that a coal slurry, which is half water, is really a tax-exempt mineral even though it was produced by Peabody Coal Co., in eastern Arizona and had been purchased by Southern California Edison.

Vogler warned that operators of other coal-fired power plants planned for Nevada will come before the commission with arguments for tax exemptions similar to Edison's.

"We have not divided the baby in half as Solomon suggested. We've made a mess," Vogler said.

Marvel voted against Kelesis' motion, saying, "I think we beat this dead horse well in 2005. I don't see how we can rule any different than we did last time."

Commission Chairman Thomas Sheets voted to deny the refund. "I don't see any reason to change my decision from last time. ... The water mixed with coal was not simply a transportation medium."

Clark County Deputy District Attorney Paul Johnson noted that 1 billion gallons of water per year in the slurry was used in the plant's cooling towers. "They're using it. It's something other than raw coal. It's half coal. It's half water," he said.

Edison's lawyer Norm Azevedo had argued that exemptions solely for minerals mined in Nevada was discriminatory and a violation of the Constitution's interstate commerce clause.

He said the coal consumed at the plant, regardless of what form it was in, was not subject to a use tax.

Chief Deputy Attorney General Gina Session reiterated her position that Nevada doesn't have a coal production industry. As such, any coal being sold in Nevada has to be produced outside the state and is properly being taxed for its use.

Contact reporter Keith Rogers at krogers@reviewjournal.com or 702-383-0308.