Matsui Seeks to Close Tax Loophole for Utilities

Rep. Robert T. Matsui (D-Sacramento), in a major reversal, introduced a bill Thursday to plug a tax loophole that has allowed utilities to amass $19 billion in unneeded tax money collected from ratepayers.

Matsui accused utilities of “pure greed” for not yet returning the excess money to consumers.

A clause authored by Matsui in the 1986 Tax Reform Act allowed utilities to refund slowly--over a period of 30 years--money they have collected from customers for tax payments that they no longer owed because their corporate tax bills were reduced. The 1986 tax law reduced the corporate tax rate from 46% to 34%.

‘Money Is on Loan’

“I think I really made a mistake,” Matsui said in an interview. “I accept full responsibility.” He also said passage of the corrective legislation represents a top priority for him, but he conceded that his bill faces an uphill struggle against the powerful utility lobby.

Matsui’s bill would allow state regulators to establish a schedule for returning the money in the form of utility rate reductions over a period of three years, beginning in 1991. The bill does not require a rebate.

“That (money) is a loan the consumers of America made to the utilities--tax free,” Matsui said. “Never before in my 11 years in Congress has an issue been as crystal clear as this one. It’s a matter of right vs. wrong, good public policy vs. bad special interests, ethics vs. greed.”

Matsui accused the utility industry of “bribery” by responding to his requests for information on the issue by highlighting its campaign contributions to him. “When you have a tough case, you don’t try to bribe the judge,” he said.

Matsui introduced his bill at a press conference with the support of 21 consumer groups, including the American Assn. of Retired Persons and Citizens for Tax Justice. State utility regulators from New York and Illinois also called for support of the bill.

Matsui’s bill is similar to one introduced in February by Rep. Byron L. Dorgan (D-N.D.), who has been the leader on the issue. Dorgan, speaking at the press conference, said he supports Matsui’s bill as a “reasonable compromise.”

Dorgan said the issue, despite the complexity of tax laws, is very simple. “The many are owed money by the few,” he said.

California ratepayers, topping those in all other states, have given $1.9 billion to utilities to offset expected taxes. California Public Utility Commissioner Stanley W. Hulett predicted that if the bill becomes law, the commission would begin a broad review of utility companies to determine their financial ability to compensate consumers.

Need Money for Investment

Hulett, who brought the issue to Matsui’s attention two years ago, said he could not predict by how much consumers’ utility rates could be reduced, if any, until such a review is complete.

However, a spokesman for Pacific Telesis, parent of Pacific Bell, estimated that the rate cut that would be given its customers under Matsui’s proposal would amount to about 70 cents a month each for three years.

Times staff writer Bruce Keppel in Los Angeles contributed to this story.