Freeport-McMoran Resource Partners v. County of Lake

This case arises from a dispute regarding the property tax assessment of geothermal power plants owned by appellant Freeport-McMoran Resource Partners (Freeport). Appellant contends the county overvalued the property by basing its assessment on capitalization of the income stream of fixed price contracts under which appellant sells electricity to Pacific Gas and Electric Company (PG&E) at rates well above present market rates.

Statement of the Case and Facts

Under the Public Utility Regulatory Policies Act of 1978 (PURPA), 16 United States Code section 796 et seq., and Federal Energy Regulatory Commission (FERC) rules, utilities are required to purchase electricity from “qualifying facilities” (facilities that meet FERC requirements) at a price no greater than the utility’s “avoided cost” (the cost the utility would have incurred by generating the electricity itself). (16 U.S.C. § 824a-3 (1985); 18 C.F.R. § 292.101 (b)(6)(1990).) As a result of PURPA, the California Public Utilities Commission (CPUC) approved “standard offer” contracts to encourage qualifying facilities to sell energy to public utilities on standardized terms. The energy prices in these contracts were…