Watson Cogeneration Co. v. County of Los Angeles

In this case, we conclude it was proper for the Los Angeles County Assessor to consider the actual income stream resulting from an above-market price government-facilitated power purchase agreement in the property tax valuation of an independent power plant developed and operating under that agreement. For this reason, we affirm the judgment in favor of the County of Los Angeles (County).

Factual and Procedural Summary

Appellant is Watson Cogeneration Company, an independent power producer which owns and operates a cogeneration power facility located within Atlantic Richfield Company’s Los Angeles Refinery in Carson. The facility was developed as a “qualifying facility” in accordance with the Public Utility Regulatory Policies Act of 1978 ( 16 U.S.C. § 796 et seq.), a federal legislative scheme intended to encourage the development of cogeneration and small power production facilities. The rules promulgated by the Federal Energy Regulatory Commission as part of this program required utilities to purchase electric energy from a qualifying facility at the utility’s avoided cost. This is the cost the utility would have incurred had it generated the electricity itself—the…