Colorado § 39-4-102 - Valuation of public utilities - legislative declaration - definition.

§ 39-4-102. Valuation of public utilities - legislative declaration - definition.

(1) The administrator shall determine the actual value of the operating property and plant of each public utility as a unit, giving consideration to the following factors and assigning such weight to each of such factors as in the administrator's judgment will secure a just value of such public utility as a unit:

(a) The tangible property comprising its plant, whether the same is situated within this state or both within and without this state, exclusive of any tangible property situated without this state which is not directly connected with the business in which such public utility is engaged within this state;

(b) Its intangibles, such as special privileges, franchises, contract rights and obligations, and rights-of-way; except that licenses granted by the federal communications commission to a wireless carrier, as defined in section 29-11-101, C.R.S., shall not be considered, nor shall the value of such licenses be reflected, in the administrator's valuation of the carrier's tangible property;

(c) Its gross and net operating revenues during a reasonable period of time not to exceed the most recent five-year period, capitalized at indicative rates;

(d) The average market value of its outstanding securities during the preceding calendar year, if such market value is determinable;

(e) (I) When determining the actual value of a renewable energy facility that primarily produces more than two megawatts of alternating current electricity, the administrator shall:

(A) Consider the additional incremental cost per kilowatt of the construction of the renewable energy facility, taking into account the nameplate capacity of any energy storage system in addition to generation capacity, over that of the construction cost of a comparable nonrenewable energy facility, inclusive of the cost of all property required to generate and deliver energy to the interconnection meter, that primarily produces alternating current electricity to be an investment cost and shall not include the additional incremental cost in the valuation of the facility; and

(B) Not add value to a renewable energy facility for any renewable energy credits created by the production of alternating current electricity.

(II) For purposes of this paragraph (e), "renewable energy" has the meaning provided in section 40-1-102 (11), C.R.S., but shall not include energy generated from a small or low impact hydroelectric energy facility, a geothermal energy facility, a biomass energy facility, a wind energy facility, or a solar energy facility.

(III) (A) For purposes of determining the actual value of a renewable energy facility as specified in subparagraph (I) of this paragraph (e), an owner or operator of a facility shall provide a copy of the facility's current power purchase agreement to the administrator by April 1 of each assessment year as an attachment to the statement required as specified in section 39-4-103 (1); except that, if a copy of the current power purchase agreement was previously provided either by the owner or operator or by the purchaser of power and there is no material change in the facility's current power purchase agreement, the owner or operator of a facility shall not be required to provide a copy of the agreement.

(B) If the owner or operator of a facility does not provide a copy of the facility's current power purchase agreement as specified in sub-subparagraph (A) of this subparagraph (III), the administrator shall have the authority to request a copy of the current power purchase agreement from the purchaser of power generated at the facility; except that, if a copy of the current power purchase agreement was previously provided either by the owner or operator or by the purchaser of power and there is no material change in the facility's current power purchase agreement, the purchaser of power shall not be required to provide a copy of the agreement.

(C) All power purchase agreements provided to the administrator pursuant to this subparagraph (III) shall be considered private documents and shall be available only to the administrator and the employees of the division of property taxation in the department of local affairs.

(1.5) The administrator shall determine the actual value of a small or low impact hydroelectric energy facility, a geothermal energy facility, a biomass energy facility, a wind energy facility, or a solar energy facility as follows:

(a) The general assembly hereby declares that initial consideration by the administrator of the cost approach and market approach to the appraisal of a wind energy facility or a solar energy facility results in valuations that are neither uniform nor just and equal because of wide variations in the production of energy from wind turbines and solar energy devices, as defined in section 38-32.5-100.3 (2), because of the uncertainty of wind and sunlight available for energy production, and because constructing a wind energy facility or a solar energy facility is significantly more expensive than constructing any other utility production facility. The general assembly further declares that it is also appropriate to initially value small or low impact hydroelectric energy facilities, geothermal energy facilities, and biomass energy facilities, which also have high construction costs relative to their ongoing operational costs, using the income approach. Therefore, in the absence of preponderant evidence shown by the administrator that the use of the cost approach and market approach results in uniform and just and equal valuation, a small or low impact hydroelectric energy facility, a geothermal energy facility, a biomass energy facility, a wind energy facility, or a solar energy facility shall be initially valued based solely upon the income approach.

(b) (I) For a property tax year that a tax factor applies, the actual value of a small or low impact hydroelectric energy facility, a geothermal energy facility, a biomass energy facility, a wind energy facility, or a solar energy facility is an amount equal to a tax factor times the selling price at the interconnection meter. For a property tax year that a tax factor does not apply, the administrator shall determine the actual value of the facility giving appropriate consideration to the cost, income, and market approaches; except that the actual value shall not exceed the depreciated value floor calculated using the cost basis method of taxation as determined by the administrator for a renewable energy facility pursuant to subsection (1)(e) of this section.

(II) As used in this article, "interconnection meter" means the meter located at the point of delivery of energy to the purchaser.

(III) As used in this paragraph (b), "selling price at the interconnection meter" means the gross taxable revenues realized by the taxpayer from the sale of energy at the interconnection meter.

(IV) As used in this subsection (1.5)(b), "tax factor" means a factor annually established by the administrator. For a facility that begins generating energy before January 1, 2021, the tax factor is a number that when applied to the selling price at the interconnection meter results in approximately the same tax revenue over a twenty-year period on a nominal dollar basis that would have been collected using the cost basis method of taxation as determined by the administrator for a renewable energy facility pursuant to subsection (1)(e) of this section. For a facility that begins generating energy on or after January 1, 2021, the tax factor is a number that, when applied to the selling price at the interconnection meter, results in approximately the same tax revenue over a thirty-year period on a nominal dollar basis that would have been collected using the cost basis method of taxation as determined by the administrator for a renewable energy facility pursuant to subsection (1)(e) of this section. After the first twenty or thirty years of a facility's life, as applicable, a tax factor is not applied. For a renewable energy facility that begins generating energy before January 1, 2012, the administrator shall include only the cost of all property required to generate and deliver renewable energy to the interconnection meter that does not exceed the cost of property required to generate nonrenewable energy. For a renewable energy facility that begins generating energy on or after January 1, 2012, the administrator shall include only the cost of all property required to generate, store, and deliver renewable energy to the interconnection meter that does not exceed the cost of property required to generate and deliver nonrenewable energy to the interconnection meter.

(V) For purposes of calculating the tax factor as required in subparagraph (IV) of this paragraph (b), an owner or operator of a small or low impact hydroelectric energy facility, a geothermal energy facility, a biomass energy facility, a wind energy facility, or a solar energy facility shall provide a copy of the small or low impact hydroelectric energy facility's, geothermal energy facility's, biomass energy facility's, wind energy facility's, or solar energy facility's current power purchase agreement to the administrator by April 1 of each assessment year. The administrator shall also have the authority to request a copy of the current power purchase agreement from the purchaser of power generated at a small or low impact hydroelectric energy facility, a geothermal energy facility, a biomass energy facility, a wind energy facility, or a solar energy facility. All agreements provided to the administrator pursuant to this subparagraph (V) shall be considered private documents and shall be available only to the administrator and the employees of the division of property taxation in the department of local affairs.

(c) The location of a small or low impact hydroelectric energy facility, a geothermal energy facility, a biomass energy facility, a wind energy facility, or a solar energy facility on real property shall not affect the classification of that real property for purposes of determining the actual value of that real property as provided in section 39-1-103.

(d) Pursuant to section 39-3-118.5, no actual value for any personal property used in a small or low impact hydroelectric energy facility, a geothermal energy facility, a biomass energy facility, a wind energy facility, or a solar energy facility shall be assigned until the personal property is first put into use by the facility. If any item of personal property is used in the facility and is subsequently taken out of service so that no small or low impact hydroelectric energy, geothermal energy, biomass energy, wind energy, or solar energy is produced from that facility for the preceding calendar year, no actual value shall be assigned to that item of more than five percent of the installed cost of the item for that assessment year.

(e) The administrator shall determine the actual value of an energy storage system or clean energy resource in a manner similar to the method used for a small or low impact hydroelectric energy facility, a wind energy facility, a geothermal energy facility, a biomass energy facility, or a solar energy facility under subsection (1)(e) of this section and this subsection (1.5).

(2) If, in the judgment of the administrator, the books and records of any public utility accurately reflect its tangible property, its intangibles, and its earnings within this state during the most recent five-year period, the administrator may determine from such books and records the actual value of its property and plant within this state and need not determine the entire value of its property and plant both within and without this state.

(3) (a) For property tax years 1982 through 1986, there shall be applied to the actual value of each public utility an equalization factor to adjust the actual value for the current year of assessment as determined by the administrator pursuant to subsections (1) and (2) of this section to the public utility's level of value in 1981.

(b) For property tax years commencing on or after January 1, 1987, there shall be applied to the actual value of each public utility an equalization factor to adjust the actual value for the current year of assessment as determined by the administrator pursuant to subsections (1) and (2) of this section to the public utility's level of value in the appropriate year that is prescribed in section 39-1-104 (10.2) and that is used to determine the actual value of properties that are subject to said applicable subsection.

(c) Appraisal procedures, instructions, and factors utilized by the administrator in carrying out the provisions of this section shall be subject to legislative review, the same as rules and regulations, pursuant to section 24-4-103 (8)(d), C.R.S.

(d) The administrator shall certify to the public utility any difference in valuation resulting from the application of this section. Said certification shall be part of the evidence presented in determining rate structures by any applicable rate-setting body.

Source: L. 64: R&RE, p. 688, § 1. C.R.S. 1963: § 137-4-2. L. 67: p. 948, § 12. L. 70: p. 382, § 15. L. 81: (3) added, p. 1847, § 2, effective January 1, 1982. L. 83: (3)(a) and (3)(b) amended, p. 1496, § 4, effective April 28. L. 84: (3)(a) and (3)(b) amended, p. 989, § 3, effective February 23. L. 91: (3)(b) amended, p. 2005, § 4, effective June 6. L. 95: (3)(b) amended, p. 8, § 3, effective March 9. L. 98: (1)(b) amended, p. 1267, § 1, effective June 1. L. 2001: IP(1) amended and (1)(e) added, p. 1523, § 1, effective August 8. L. 2004: (1)(b) amended, p. 1208, § 87, effective August 4. L. 2006: (1)(e) amended and (1.5) added, p. 890, § 2, effective May 9. L. 2008: (1)(e) and (1.5)(b)(V) amended, p. 1319, § 3, effective May 27; (1)(b) amended, p. 685, § 5, effective August 5. L. 2009: (1)(e)(II), IP(1.5), (1.5)(a), (1.5)(b)(I), (1.5)(b)(IV), (1.5)(b)(V), (1.5)(c), and (1.5)(d) amended, (SB 09-177), ch. 186, p. 813, § 2, effective April 22. L. 2010: (1)(e)(II), IP(1.5), (1.5)(a), (1.5)(b)(I), (1.5)(b)(V), (1.5)(c), and (1.5)(d) amended, (SB 10-019), ch. 382, p. 1786, § 2, effective June 8; (1)(e)(I)(A) and (1.5)(b)(IV) amended, (HB 10-1431), ch. 372, p. 1743, § 1, effective August 11; (1)(e)(II), IP(1.5), (1.5)(a), (1.5)(b)(I), (1.5)(b)(V), (1.5)(c), and (1.5)(d) amended, (SB 10-174), ch. 189, p. 814, § 9, effective August 11; (1)(e)(II), IP(1.5), (1.5)(a), (1.5)(b)(I), (1.5)(b)(V), (1.5)(c), and (1.5)(d) amended, (SB 10-177), ch. 392, p. 1862, § 4, effective August 11. L. 2021: (1)(e)(I)(A), (1.5)(a), (1.5)(b)(I), and (1.5)(b)(IV) amended and (1.5)(e) added, (SB 21-020), ch. 51, p. 216, § 2, effective September 7.

Editor's note: Amendments to subsection (1)(e)(II), the introductory portion to subsection (1.5), and subsections (1.5)(a), (1.5)(b)(I), (1.5)(b)(V), (1.5)(c), and (1.5)(d) by Senate Bill 10-019, Senate Bill 10-174, and Senate Bill 10-177 were harmonized.

Cross references: For the legislative intent contained in the 2008 act amending subsections (1)(e) and (1.5)(b)(V), see section 9 of chapter 302, Session Laws of Colorado 2008.

ANNOTATION

Different valuation method for public utilities is constitutional. While a public utility may have a different tax burden compared to a competitor that is not a public utility, this difference does not violate the state and federal equal protection clauses or the uniform taxation clause, art. X, § 3(1)(a), of the state constitution. Qwest v. Colo. Div. of Prop. Taxation, 2013 CO 39, 304 P.3d 217.

No statutory conflict. The requirement of this section that a public utility's intangibles be considered when valuing such utility's operating property and plant as a unit does not necessarily conflict with the general exemption for intangible personal property pursuant to § 39-3-101 (1)(i). U.S. Transmission Sys. v. Bd. of Assmt. Appeals, 715 P.2d 1249 (Colo. 1986) (decided under former law).

Board of assessment appeals was not required, as a matter of law, to include financing costs in the valuation of plaintiff's property. The method by which the property tax administrator arrived at her valuation was authorized under this section. Colo. Interstate Gas Co. v. Huddleston, 28 P.3d 958 (Colo. App. 2000).

Public utility not entitled to the intangible property exemption or the cost cap valuation method. Instead, a public utility must be valued under the factors listed in this section. Qwest v. Colo. Div. of Prop. Taxation, 2013 CO 39, 304 P.3d 217.

"Operating property and plant" includes the tangible property comprising the plant and the intangible rights of the utility that directly contribute to the utility's operations. U.S. Transmission Sys. v. Bd. of Assmt. Appeals, 715 P.2d 1249 (Colo. 1986).

Property taxation of a public utility in Colorado is not precluded simply because the only portion of the public utility's operating property and plant found within this state is the intangible rights derived from rental of telephone circuits. U.S. Transmission Sys. v. Bd. of Assmt. Appeals, 715 P.2d 1249 (Colo. 1986).

Telephone circuits leased by petitioner from other telecommunication companies in Colorado constituted intangible rights held by a public utility as part of its operating property and plant and as such were property considered in determining petitioner's property tax assessment. U.S. Transmission Sys. v. Bd. of Assmt. Appeals, 715 P.2d 1249 (Colo. 1986).

Value of the "operating property and plant". The statute reflects the view that the true measure of value of the property of a public utility is its worth as an integrated and operating unit rather than the sum of the values of the various components making up that unit. Therefore, the fact that petitioner's property rights in the circuits leased from other telecommunication companies has no independent market value is not dispositive of such property's assessment value. U.S. Transmission Sys. v. Bd. of Assmt. Appeals, 715 P.2d 1249 (Colo. 1986).

The operating property and plant to be valued as a unit consists of the public utility's property and plant used in carrying on its business. Such valuation also includes intangible rights derived from other property and plant even if owned by a parent company or other subsidiary if they contribute directly to the operation of the public utility as an ongoing concern. United Parcel Serv. of Am., Inc. v. Huddleston, 981 P.2d 223 (Colo. App. 1999).

The general assembly did not intend to equate "actual value" with "market value". Actual value is not the same as market value and the terms cannot be used interchangeably. Colo. Interstate Gas Co. v. Huddleston, 28 P.3d 958 (Colo. App. 2000).

The general assembly's intent is apparent from its use of the term "actual value" when referring to the overall property value, and use of "market value" to refer only to the value of a public utilities outstanding securities during the calendar year preceding valuation. Colo. Interstate Gas Co. v. Huddleston, 28 P.3d 958 (Colo. App. 2000).

Applied in Salt River Project v. Bd. of Assmt. Appeals, 719 P.2d 368 (Colo. App. 1986).