Brief ⁽¹⁾

HB 2266, as amended by Senate Committee, 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 such properties to be assessed at the 25.0 percent rate rather than the 33.0 percent public utility rate. Personal property would be appraised using the constitutionally prescribed straight-line depreciation to a 20 percent residual value. All 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.

Independent power producer properties would be exempt from regulation as public utilities.

Background

The Senate Committee amendments replace the provisions of HB 2266 with the provisions of SB 177 as passed by the Senate.

The change in the taxation and regulatory treatment of new generating capacity was requested and supported by a representative of Utilicorp United, Inc., an independent power producer.

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