Payments in lieu of taxes (PILOT) made to local and state governments are most often calculated as a percent of gross electric operating revenues, a study by American Public Power Association (APPA) shows. One quarter of all public power utilities use this method. Other methods used to calculate transfers of funds from the utility to government entities include a flat annual fee (17% of utilities use this method), property tax equivalents (14%), charge per kilowatt-hour sold (12%), assessment of utility and city budgets (11%), percentage of net utility plant in service (5%) and percentage of income (3%).
Fourteen percent of public power utilities use other methods, usually a combination of these. The findings are derived from the APPA study “Payments and Contributions by Public Power Distribution Systems to State and Local Governments, 2010 Data.” The survey is conducted biennially.
A new guide published by APPA examines the methods used for setting PILOT payments and counsels public power utilities on the need to account for the economic value of services provided to municipalities.
In many communities, the electric utility crews install lighting or banners for holidays and special events, do metering and billing for other city utility departments, or supply free or discounted electricity to municipal buildings. It is important to document the economic value of these services so customers and utility and city policymakers are aware of the benefits. Documenting these transfers and services is also important to maintaining a good credit rating.
The guide is posted in the members-only section of the APPA website. For more information, call or write Paul Zummo, research analyst, at PZummo@publicpower.org or 202/467-2969