PacifiCorp v. Dept. of Rev.

No. 19 	July 17, 2023 	227
IN THE OREGON TAX COURT
REGULAR DIVISION
PACIFICORP,
Plaintiff,
v.
DEPARTMENT OF REVENUE,
State of Oregon,
Defendant.
(TC 5411)
The court held a trial to determine the value of Plaintiff’s centrally assessed
property. The court initially resolved three legal issues. First, the court concluded
that notwithstanding Defendant’s adoption of the Western States Association of
Tax Administrators Appraisal Handbook (WSATA Handbook) as an administra-
tive rule (OAR 150-308-0690), longstanding Oregon case law allows the court
to reject a value determined under the methods and procedures in the WSATA
Handbook if the court finds that a value determined otherwise is correct. Second,
the court determined that Plaintiff had failed to show a “gross distortion” in the
value allocated to Oregon pursuant to the formula in Defendant’s administrative
rule (OAR 150-308-0590). For that reason, the court upheld Defendant’s alloca-
tion of value to Plaintiff’s Oregon-situs property. Third, the court determined the
burden of proof in the Tax Court, under ORS 305.427, as follows: As to changes
to the roll that a taxpayer requests for its benefit, including a valuation lower
than that shown on the roll, the taxpayer seeks affirmative relief and therefore
bears the burden of proof. As to a valuation higher than that shown on the roll,
Defendant seeks affirmative relief and bears the burden of proof. The court then
determined the Real Market Value (RMV) of Plaintiff’s property, concluding
that neither party carried its burden of proving the real market value for which
it advocated. The court assigned no weight to the cost indicator of value or to
the stock and debt approach. The court did not accept either party’s complete
analysis. Relying on portions of the evidence the parties presented under the
income approach, the court determined that the value of Plaintiff’s multistate
valuation unit was $17,241,379,310 as of January 1, 2020.
Trial was held November 15 through 19, 2021, in the
courtroom of the Oregon Tax Court, Salem.
David J. Crapo, Crapo Deeds LLC, Bountiful, UT argued
the cause for Plaintiff.
Marilyn J. Harbur, Senior Assistant Attorney General,
Department 	of 	Justice, 	Salem, 	argued 	the 	cause 	for
Defendant Department of Revenue.
Decision rendered May 24, 2023; upon parties’ motions
for reconsideration, the court issued an Amended Opinion
on July 17, 2023.

228 	PacifiCorp v. Dept. of Rev.
ROBERT T. MANICKE, Judge.
This Amended Opinion reflects changes to the opin-
ion issued May 24, 2023, as determined in the court’s Order
on Cross-Motions for Reconsideration which the court issues
separately today.
I. 	INTRODUCTION
This 	case 	concerns 	the 	real 	market 	value 	of
Plaintiff’s Oregon property as of January 1, 2020. Plaintiff
is a rate-regulated electric utility with operating property in
Oregon, as well as California, Idaho, Utah, Washington, and
Wyoming.1 Because Plaintiff is in the electricity business,
its property is subject to central assessment by Defendant.
See ORS 308.515(1)(k)2 ; see generally DISH Network Corp.
v. Dept. of Rev., 364 Or 254, 257-58, 434 P3d 379 (2019)
(explaining central assessment). One consequence of central
assessment is that Defendant may determine the value of
Plaintiff’s Oregon property by first valuing all of Plaintiff’s
property used in the same business, within and without
Oregon, as a unit and then allocating a share of that “sys-
tem” value to the Oregon property based on a formula. 3 See
ORS 308.555 (authorizing unit valuation); ORS 308.550(2)
(authorizing allocation). Another consequence is that intan-
gible property (subject to exceptions not relevant here) is
included in the definition of Plaintiff’s “property.” See ORS
308.505(14).
On 	May 	22, 	2020, 	Defendant 	issued 	a 	Notice
of Proposed Assessment asserting that the real market
value of Plaintiff’s Oregon centrally assessed property was
$3,180,000,000 on the January 1, 2020, assessment date.
1 Plaintiff is, indirectly, wholly owned by Berkshire Hathaway Energy
Company, which in turn is a consolidated subsidiary of Berkshire Hathaway
Inc., the stock of which is publicly traded. Plaintiff’s financial results are not
reported separately; they are combined with those of several other energy-related
affiliates.
2 Unless otherwise noted, the court’s references to the Oregon Revised
Statutes (ORS) are to the 2019 edition.
3 As is customary, the court refers to “system” value to mean the value of all
property, within and without Oregon, used or held for future use in a business
listed in ORS 308.515(1) and considered as a unit, as allowed by ORS 308.555.
See, e.g., Alaska Airlines, Inc. v. Dept. of Rev., 307 Or 406, 410, 769 P2d 193 (1989)
(describing formulary allocation of taxpayer’s “total system value”).

Cite as 25 OTR 227 (2023) 	229
On June 18, 2020, Plaintiff requested a director’s confer-
ence, as allowed by ORS 308.584; the conference was held
July 23, 2020; and on July 31, 2020, Defendant issued an
opinion and order (O&O) sustaining the real market value of
$3,180,000,000. The O&O showed that the assessment was
based on a value of $19,500,000,000 for the entire system.
Plaintiff timely appealed to the Magistrate Division
from the O&O under ORS 308.584(5) and ORS 305.280(1),
initially claiming only that Defendant had overvalued its
property, including by allocating excessive value to Oregon.
On the motion of both parties, the court specially desig-
nated the case to be heard in the Regular Division. Before
trial, Plaintiff moved for leave to amend its complaint to
add two claims based on a legal issue already before the
court in Delta Airlines, Inc. v. Dept. of Rev., TC 5409, namely,
that taxation of Plaintiff’s intangible property violates the
Oregon Uniformity Clauses. Or Const, Art I, § 32; Or Const
Art IX, § 1. The court allowed the amendment but stayed
proceedings on the Uniformity Clause claims until after
trial on the valuation issues. (See PacifiCorp v. Dept. of Rev.,
TC 5411 (Nov 8, 2021).) The court then held a trial (Nov.
15-19, 2021) and accepted extensive post-trial briefing on
the valuation issues. This opinion addresses only the valua-
tion issues; the court will issue its order on the Uniformity
Clause claims separately.
At trial, both parties presented expert reports and
testimony complying with the requirement to “consider[ ]
three different approaches to valuation: the cost approach,
the comparable sales approach, and the income approach.”
Powell Street I v. Multnomah County Assessor, 365 Or 245,
249, 445 P3d 297 (2019) (“The appraiser is not required to
use all three approaches, but the appraiser must consider
them.”) (Emphasis in original).
II. 	LEGAL ISSUES
Before 	determining 	the 	real 	market 	value 	of
Plaintiff’s property, the court must resolve two issues of law.
First, the parties have different views about the extent to
which the court must defer to two of Defendant’s adminis-
trative rules relating to the determination of value. Second,

230 	PacifiCorp v. Dept. of Rev.
the parties differ as to which party bears the burden of prov-
ing in this court a value above or below the value recorded
on the central assessment roll.
A. 	Court’s Deference to Defendant’s Administrative Rules
The parties disagree over the level of deference the
court should afford to OAR 150-308-0690 and OAR 150-
308-0590. The court addresses these two rules separately.
1. 	OAR 150-308-0690: WSATA Handbook as Authority
for Valuation Under ORS 308.205
OAR 150-308-0690 states in its entirety:
“The 2009 Western States Association of Tax Administrators
Appraisal Handbook: Unit Valuation of Centrally Assessed
Properties is adopted as the official valuation guide for prop-
erty assessed by the Oregon Department of Revenue under
ORS 308.505 to 308.665 for ad valorem tax purposes.”
The “WSATA Handbook” consists of approximately 350
pages of guidance, in varying degrees of depth, about meth-
ods and tools for unit valuation and value allocation with
respect to utility property and other centrally assessed prop-
erty. It “serves as the primary textbook * * * to train state
government appraisers of centrally assessed properties.”
WSATA Handbook at vi. As such it “incorporates WSATA’s
opinion of the current state of academic and appraisal the-
ory” as applicable to centrally assessed property. Id. at I-1.
As will be seen, the authors of the WSATA Handbook iden-
tify strengths and weaknesses in various valuation methods
and theories; they rarely mandate or entirely condemn the
use of a particular method, but they express reasons to pre-
fer some techniques and to reject others. Cf., e.g., Minn R
8100.0300 (prescribing specific procedures for determining
and weighting cost, income and other indicators of value for
“public utility companies”); Minn Stat Ann § 270C.06 (stat-
ing rules “have the force of law.”); Utah Admin Code r R884-
24p-62(4)(b)(iii) (setting forth “preferred valuation methods”
as “rebuttable presumptions”; requiring “any party chal-
lenging a preferred valuation method [to] demonstrate, by
a preponderance of evidence, that the proposed alternative
establishes a more accurate estimate of fair market value”).

Cite as 25 OTR 227 (2023) 	231
Plaintiff argues that the WSATA Handbook does
not “restrict the discretion of this Court or any other party
(including 	the 	Department) 	in 	a 	de 	novo 	proceeding.”
Elsewhere, Plaintiff argues that “this Court is not bound
by the WSATA Handbook.” Defendant, on the other hand,
argues that, because of the WSATA Handbook’s status as an
administrative rule, “this court need not engage in debate
over the theoretical propriety of various of the issues raised in
this case because the administrative rule answers the ques-
tions.” Defendant argues further: “Contrary to PacifiCorp’s
assertions, a de novo appeal to the Tax Court does not give
the taxpayer license to disregard the approaches called for by
law. In this centrally assessed property matter, that means
following the WSATA Handbook.” Defendant concludes:
“Thus, to determine the real market value of PacifiCorp’s
centrally assessed property, the court must apply the ‘meth-
ods and procedures’ found in the WSATA Handbook.”
a. 	Analysis under published sources of statutory
authority for OAR 150-308-0690: ORS 305.100
and ORS 308.655
Any analysis of the level of deference to afford an
administrative rule must begin by identifying the statute
or statutes that are the source of the agency’s authority to
adopt the rule. See Trebesch v. Employment Division, 300 Or
264, 267, 710 P2d 136 (1985) (“We seek to derive the legisla-
ture’s intent from an analysis of the statutes by which a par-
ticular agency operates.”). The Administrative Procedures
Act generally requires agencies to specify that source when
adopting or amending a rule. See ORS 183.335(2)(b)(A), (B).
Although neither party refers to this requirement, it is clear
that courts may look to the statute or statutes referred to in
the published rule when analyzing what level of deference
to apply. See, e.g., Clackamas Cty Assessor v. Village at Main
Street Phase II, 349 Or 330, 336 n 8, 245 P3d 81 (2010) (refer-
ring to published statutory authority (ORS 305.100) in deter-
mining degree of deference to afford to Defendant’s rule). In
this case, a notation included with the officially published
OAR 	150-308-0690 	states: 	“Statutory/Other 	Authority:
ORS 305.100 & 308.655; Statutes/Other Implemented: ORS

232 	PacifiCorp v. Dept. of Rev.
308.655.” Therefore, the court begins its analysis with those
two statutes.
The first statute referred to in the published rule
states in relevant part: “The Department of Revenue shall:
(1) Make such rules and regulations it deems proper to reg-
ulate its own procedure and to effectually carry out the pur-
poses for which it is constituted.” ORS 305.100(1). The sec-
ond statute states in full: “The Department of Revenue may
prescribe directions, rules and regulations to be followed
in answering any requirement of ORS 308.505 to 308.674.”
ORS 308.655. Both provisions originate in the 1909 act that
created Defendant’s predecessor (the Board of State Tax
Commissioners) to supervise the statewide tax system and
to centrally assess the property of utilities and other listed
businesses. See Or Laws 1909, ch 218, § 4(1)(“It shall be the
duty of the said Board of State Tax Commissioners * * * [T]
o make such rules and regulations as the board shall deem
proper, effectually to carry out the purposes for which the
board is constituted, and to regulate its own procedure.”);
id. § 7(14) (“The board is hereby given the power to prescribe
directions, rules and regulations to be followed in answer-
ing any of the requirements of this act.”).
(1) ORS 305.100 does not require court to defer
to OAR 150-308-0690.
As to the first statute, the Oregon Supreme Court
repeatedly has characterized ORS 305.100 as “granting to
department interpretative, but not substantive, rulemaking
authority,” such that, “[t]o the extent that [a rule adopted
under the authority of that statute] is inconsistent with
legislative intent, as determined by this court, the rule is
invalid.” Avis Rent A Car System, Inc. v. Dept. of Rev., 330
Or 35, 41, 995 P2d 1163 (2000); see also Village at Main
Street, 349 Or at 336 n 8 (concluding that Defendant’s rule
150-311.216 was “interpretative, not substantive,” and that
court’s role was to “interpret the [governing] statute inde-
pendently” to decide “whether the department’s rule is con-
sistent with [that] statute”). Based on that case law, this
court concludes that it need not defer to OAR 150-308-0690
to the extent that the source of the rule’s authority is ORS
305.100.

Cite as 25 OTR 227 (2023) 	233
(2) 	ORS 308.655: Application of Springfield
principles to determine level of deference.
As to the second statute, this court has found no
reported decisions analyzing the degree of deference or
weight that applies to rules adopted under ORS 308.655.
The court turns to the analytical framework that the
Oregon Supreme Court has prescribed for judicial review
of administrative agency actions. Under that framework an
administrative rule, or the agency’s application of the rule
or of underlying law, is entitled to deference if the legisla-
ture has delegated to the agency the task of completing the
legislature’s policymaking role, and the rule or action is
within the range of discretion that the delegation confers.
See Springfield Education Assn. v. School Dist., 290 Or 217,
223-230, 621 P2d 547 (1980) (outlining standard of review
for agency implementation of “exact,” “inexact,” and “dele-
gative” statutory terms in both adjudication and rulemak-
ing). More recent decisions have made clear that judicial
deference is required only if the legislature’s intention was
“delegative.” Schleiss v. SAIF, 354 Or 637, 642, 317 P3d 244
(2013) (no deference for agency interpretation of “inexact”
terms). And to determine whether the legislature’s intention
was delegative, the court must analyze the text and context
of the statute, and the court may consider any helpful legis-
lative history, following the steps laid out in State v. Gaines,
346 Or 160, 171-72, 206 P3d 1042 (2009). See OR-OSHA v.
CBI Services, Inc., 356 Or 577, 584-85, 588, 341 P3d 701
(2014). As an aid in deciding whether a statutory term is
delegative under the Gaines framework, the Supreme Court
has identified the following considerations:
“(1) whether the court has concluded that the term, or one
like it, is delegative in another context; (2) whether the
term is defined by statute or, on the other hand, susceptible
to many different interpretations; (3) whether the term is
one that invites a value or policy judgment; and (4) whether
other, related provisions suggest a legislative intent that
the term be considered a delegation.”
Penn v. Board of Parole, 365 Or 607, 628, 451 P3d 589 (2019)
(summarizing OR-OSHA discussion).

234 	PacifiCorp v. Dept. of Rev.
This analytical framework has developed primarily
under Oregon’s Administrative Procedures Act, portions of
which do not apply to Defendant or to this court’s review of
Defendant’s actions. See, e.g., ORS 183.315(1). However, the
court has found no provisions of the Act that would make
the Springfield framework inapplicable to Defendant’s rules.
Furthermore, the Supreme Court has applied Springfield
principles in at least one appeal from this court. See YMCA v.
Dept. of Rev., 308 Or 644, 784 P2d 1086 (1989). There, citing
Springfield, the taxpayer argued that the term “charitable”
in Oregon’s property tax exemption statutes was a delegative
term that required rulemaking to complete the legislature’s
policymaking role. Because Defendant had not promulgated
such a rule before the taxpayer applied for exemption, the
taxpayer claimed that Defendant could not deny the claim.
See id. at 649. The court rejected the taxpayer’s argument
on the grounds that the term had been part of the statute
since before statehood and had been construed by the court
numerous times. See id. at 649-52. The court also implied
that, even if “charitable” was a delegative term, the statute
authorized Defendant to fulfill its obligation to complete the
legislature’s general policy decision by applying it adjudica-
tively to various individual fact situations, rather than by
adopting a definition by rule. The court stated: “Even if there
were no history of construction and use, we would not agree
that the ORS 307.130(1)(a) is an example of delegative legis-
lation requiring an agency to adopt a ‘legislative’ rule to com-
plete its meaning before it may be applied to an individual
case decision.” Id. at 652 (footnote omitted; citing Springfield,
290 Or at 228-30). This court has not found a decision where
the Supreme Court has suggested that a framework other
than the principles of Springfield apply to tax cases.4
4 As in Village at Main Street and Avis, the court in YMCA referred to “leg-
islative” and “interpretive” rules. Id. & n 2. Although those terms have specific
meaning under federal administrative law, this court does not understand the
Oregon Supreme Court to have adopted the federal standard of deference to
Treasury regulations as the standard for review of an Oregon administrative
rule. See generally Boris I. Bittker & Lawrence Lokken, Federal Taxation of
Income, Estates & Gifts ¶ 110.5 (explaining development of standards for defer-
ence to Treasury regulations); Health Net Life Ins. Co. v. Dept. of Rev., 24 OTR
514, 520-21, 537-38 (2021) (applying federal principles of deference to regulations
of federal Department of Health and Human Services); see also West House, Inc.
v. State Tax Com., 228 Or 167, 172, 364 P2d 598 (1961) (rejecting Defendant’s
argument that its regulations adopted pursuant to 1953 version of ORS 308.205

Cite as 25 OTR 227 (2023) 	235
Following the Penn considerations, and applying
the Gaines framework, the court starts by examining the
single sentence comprising the text of ORS 308.655 for any
“delegative” terms. Specifically, the court focuses on whether
the text indicates an intention to delegate to Defendant the
authority to adopt a set of processes that must be followed to
determine the real market value of property assessed under
ORS 308.505 to 308.674. The court observes first that the
text says nothing specifically about determining real mar-
ket value. The first part of the sentence (“The Department
of Revenue may prescribe directions, rules and regula-
tions”) is a simple declarative phrase that briefly authorizes
Defendant to take a broad set of actions. The second part is a
passive phrase with an unidentified actor (“to be followed”).
The last part is a phrase specifying the circumstances in
which the directions are to be followed (“in answering any
requirement” of the central assessment statutes). Overall,
the court interprets the text to mean that, to the extent
the central assessment statutes impose any requirement,
Defendant can direct taxpayers (and its own employees) how
to comply. The central assessment statutes say relatively lit-
tle about how real market value is to be determined, apart
from authorizing Defendant to inspect property, consider
taxpayer’s annual reports and other evidence, and use unit
valuation and formulary allocation to determine the value of
Oregon-situs property. See ORS 308.545 to 308.555. Based
on the text, the court finds it doubtful that the legislature
intended ORS 308.655 to delegate authority to Defendant to
prescribe the specifics of valuation procedures.
The 	statutory 	context, 	including 	other 	cen-
tral 	assessment 	statutes, 	provides 	numerous 	examples
of “requirements” as to which guidance from Defendant
is obviously helpful. Most requirements are imposed on
Defendant itself, such as the procedures for apportioning
Oregon value among the counties, and preparing, finalizing,
and correcting the annual roll. See ORS 308.560 to 308.636.
But, in contrast to the laws governing most locally assessed
property, ORS 308.524 requires each company subject to
central assessment to file an annual tax return, and ORS
“became a legislative rule which must be given judicial recognition unless it can
be said that the regulation is unreasonable”).

236 	PacifiCorp v. Dept. of Rev.
308.525 sets forth 16 items that must be disclosed, the last
of which is “[a]ny other facts or information the Department
of Revenue requires in the form of return prescribed by it.”
ORS 308.525(16). This context tends to confirm the court’s
impression that ORS 308.655 is not delegative, but rather is
an all-purpose authorization of guidance, serving a function
for centrally assessed property that is similar to the func-
tion of ORS 305.100 for all state taxes.
Finally, the court looks to the report commissioned
by the Oregon legislature in 1905 and delivered in 1906 (1906
Oregon Report), which examined Oregon’s property tax sys-
tem and proposed constitutional amendments and a statu-
tory scheme. See Frederick W. Mulkey, E.B. Seabrook, Wm.
J. Lachner, Report of the Board of Commissioners Appointed
Under the Provisions of Chapter 90, Law of 1905, for the
Purpose of Examining and Reporting on Matters of Assessment
and Taxation, Etc. (June 30, 1906) discussed in Jarvill v.
City of Eugene, 289 Or 157, 175-78, 613 P2d 1 (1980); Level 3
Communications LLC III v. Dept. of Rev., 23 OTR 440, 469-71
(2019); aff’d 368 Or 303, 490 P3d 149 (2021). The 1906 Oregon
Report includes a proposed statutory provision that reads:
“The board is hereby given the power to prescribe such
directions, rules, and regulations to be followed in answer-
ing any of the requirements of this section, or as herein
authorized, as in its judgment shall be best calculated to
insure accuracy and uniformity in reporting the facts.”
1906 Report at 121. The writers included this sentence in
an unnumbered portion at the end of section 8 of their pro-
posed statute, which contains provisions materially similar
to the tax return requirements now found in ORS 308.524
and 308.525. Read in that context, the authorization con-
tained in the provision in the 1906 Oregon Report was lim-
ited to guidance regarding tax returns (“this section”) and
to the information to be reported by taxpayers. The 1909
act enacted the first portion of the 1906 provision but broad-
ened the scope from “this section” to “this act,” which if
read literally would have caused it to apply to all state tax
laws, coextensively with what is now ORS 305.100. See Or
Laws, 1909, ch 218, § 7(14) (“The board is hereby given the
power to prescribe directions, rules and regulations to be

Cite as 25 OTR 227 (2023) 	237
followed in answering any of the requirements of this act.”).
However, in the 1953 codification that created the Oregon
Revised Statutes, the legislature narrowed the scope of the
provision from all tax laws to the centrally assessed prop-
erty laws, enacting ORS 308.655 to read: “The State Tax
Commission may prescribe directions, rules and regulations
to be followed in answering any requirement of ORS 308 505
to 308 660.” Former ORS 308.655 (1953); cf. Or Laws 1951,
ch 586, § 4(14) (“The commission hereby is given the power
to prescribe directions, rules and regulations to be followed
in answering any requirement of this Act.”). From this stat-
utory development, the court cannot discern an intention
to delegate rulemaking authority regarding the application
of valuation methods. The court concludes that it need not
defer to OAR 150-308-0690 to the extent that the source of
the rule’s authority is ORS 308.655.
b. Analysis under ORS 308.205
Rather than look to the published sources of stat-
utory authority, both parties frame their arguments on the
assumption that the statutory authority for OAR 150-308-
0690 is ORS 308.205, which provides:
“(1) 	Real market value of all property, real and per-
sonal, means the amount in cash that could reasonably be
expected to be paid by an informed buyer to an informed
seller, each acting without compulsion in an arm’s-length
transaction occurring as of the assessment date for the tax
year.”
“(2) 	Real market value in all cases shall be determined by
methods and procedures in accordance with rules adopted
by the Department of Revenue and in accordance with the
following:
“(a) 	The amount a typical seller would accept or the
amount a typical buyer would offer that could reason-
ably be expected by a seller of property.
“(b) 	An amount in cash shall be considered the equiva-
lent of a financing method that is typical for a property.
“(c) 	If the property has no immediate market value, its
real market value is the amount of money that would
justly compensate the owner for loss of the property.

238 	PacifiCorp v. Dept. of Rev.
“(d) 	If the property is subject to governmental restric-
tion as to use on the assessment date under applicable
law or regulation, real market value shall not be based
upon sales that reflect for the property a value that the
property would have if the use of the property were not
subject to the restriction unless adjustments in value
are made reflecting the effect of the restrictions.”
(Emphasis added.) The court assumes, without deciding, that
Defendant may rely on the emphasized portion of ORS 308.205
as the source of authority for OAR 150-308-0690 even though
Defendant did not refer to ORS 308.205 when adopting the
rule. Cf. OAR 150-308-0240(2) (specifying “Methods and
Procedures for Determining Real Market Value” and citin-
gORS 308.205 as statutory authority). 5 However, because the
relevant case law spans many decades of statutory change,
the court briefly sets forth its understanding of how the parts
of the statute originated and operate together.
Subsection (1) of ORS 308.205 stems primarily from
a 1991 act comprising 180 pages; most provisions of the
act were devoted to implementing constitutional changes
pursuant to Measure 5, a property tax limitations mea-
sure enacted by citizen initiative in the prior year. See Or
Laws, 1991, ch 459, § 88; Or Const, Art XI, § 11b. Among
other things, Measure 5 introduced the term “real market
value” in lieu of the prior term “true market value.” See Or
Const, Art XI, § 11b(2)(a) (“‘Real market value’ is the min-
imum amount in cash which could reasonably be expected
by an informed seller acting without compulsion, from an
informed buyer acting without compulsion, in an ‘arm’s-
length’ transaction during the period for which the property
is taxed.”). The 1991 act essentially replicated the new con-
stitutional term and its definition in subsection (1) of ORS
308.205, replacing the former short definition that defined
“true market value” as “market value.” See Or Laws, 1991,
ch 459, § 88.6
5 Plaintiff has not challenged the validity of OAR 150-308-0690 on proce-
dural grounds, and the court expresses no view as to whether any procedural
error occurred.
6 The 1997 referendum known as Measure 50 revised the definition of real
market value in ways not relevant to this case, retaining the arm’s-length stan-
dard. See Or Const, Art XI, § 11(11)(a)(A) (“The real market value of property
shall be the amount in cash that could reasonably be expected to be paid by an

Cite as 25 OTR 227 (2023) 	239
Subsection (2) of ORS 308.205 contains a blend of
text added in 1991 and older provisions:
• 	The introductory flush language, relating to rulemak-
ing by the Department of Revenue, dates substantially
to 1953 and 1955. See Or Laws 1953, ch 701, § 1 (“True
cash value of all property, whether real or personal,
shall be held and taken to mean the amount such
property would sell for at a voluntary sale made in the
ordinary course of business, under normal conditions,
in accordance with rules and regulations promulgated
by the State Tax Commission.”) (Emphasis added.); Or
Laws 1955, ch 691, § 1 (“True cash value of all prop-
erty, real and personal, means market value as of the
assessment date. True cash value in all cases shall be
determined by methods and procedures in accordance
with rules and regulations promulgated by the State
Tax Commission.”), § 2 (prescribing effective date of
January 1, 1961) (emphasis added).7
• 	Paragraph (a) relates to a “typical” buyer and seller,
and paragraph (b) refers to a “financing method.”
This text was first added by the 1991 act but does not
appear to correspond to or implement a specific provi-
sion in Measure 5. Paragraph (c) consists substantially
of text first added to ORS 308.205 in 1955. See Or
Laws, 1955, ch 691, § 1 (adding: “With respect to prop-
erty which has no immediate market value, its true
cash value shall be the amount of money that would
justly compensate the owner for loss of the property.”).
Paragraph (d) consists substantially of text first added
to ORS 308.205 in 1977. See Or Laws, 1977, ch 423,
§ 2 (adding: “With respect to property that is subject to
informed buyer to an informed seller, each acting without compulsion in an arm’s
length transaction occurring as of the assessment date for the tax year, as estab-
lished by law.”). The 1997 legislature amended subsection (1) of ORS 308.205 to
conform to the Measure 50 definition, creating the text applicable to this case.
See Or Laws 1997, ch 541, § 152 (“Real market value of all property, real and
personal, means the amount in cash that could reasonably be expected to be paid
by an informed buyer to an informed seller, each acting without compulsion in an
arm’s length transaction occurring as of the assessment date for the tax year.”)
(Omitting text deleted by amendment.)
7 Before the 1953 act, the statute defining “true cash value” did not refer
to rulemaking. See Or Laws 1941, ch 440, § 4 (“True cash value of all property,
whether real or personal, shall be held and taken to mean the amount such
property would sell for at a voluntary sale made in the ordinary course of busi-
ness, taking into consideration its earning power and usefulness under normal
conditions.”).

240 	PacifiCorp v. Dept. of Rev.
governmental restriction as to use on the assessment
date under applicable law or regulation, true cash
value shall not be based upon sales that reflect for
the property a market value that the property would
have if the use of the property were not subject to
the restriction unless adjustments in value are made
reflecting the effect of the restrictions.”).
(1) 	Portland 	Canning 	and 	Other 	Cases
Addressing Rulemaking Under ORS 308.205
In 1965, four years after the text now substantially
found in subsection (2) had become effective, the court con-
strued the statutory reference to rulemaking as follows:
“Clearly the dominant note of the legislation is that, if pos-
sible, value is to be ascertained in accordance with market
value. While the commission has been given power to make
regulations setting forth procedures as to how this may be
done, it cannot vary the mandate of the law under this guise.”
Portland Canning Co. v. Tax Com., 241 Or 109, 113, 404 P2d
236 (1965) (emphasis added). Defendant’s rule in effect for
the tax year at issue in Portland Canning allowed market
value to be determined by using “[a]ny one of” the three
standard methods (the cost approach, the income approach,
or the market approach). Id. at 113 (quoting former Reg Art
8205.1). The court found that a market existed for the major-
ity of the component parts of the taxpayer’s food canning
plants. See id. at 113-14. Without expressly invalidating the
rule’s allowance of a single valuation approach, the court
concluded that defendant erred by ignoring the existence of
a market for the canning equipment in favor of relying solely
on the cost approach. See id. at 113 (“The commission has
no power to permit the evaluation of the property by the
exclusive means of the cost approach to determine the value
to the owner when a market in fact exists.”).8
8 Defendant later added to the rule the requirement that “[r]eal property
shall be valued through the market data approach, cost approach and income
approach,” retaining, however, the provision that “[a]ny one of the three
approaches to value, or all of them, or a combination of approaches, may finally
be used by the appraiser in making an estimate of market value, depending upon
the circumstances.” R308.205-(B) Personal Property Former Rule 308.205-(A)
(1969) (emphasis added); cf. OAR 150-308-0240(2)(a) (2018) (“For the valuation
of real property all three approaches, sales comparison approach, cost approach,
and income approach, must be considered. For a particular property, it may be

Cite as 25 OTR 227 (2023) 	241
Some 20 years later, the Oregon Supreme Court
reached a similar conclusion in Alsea Veneer, Inc. v. Dept. of
Rev., 297 Or 512, 516, 687 P2d 137 (1984). At that time, the
rule provided in part:
“ ‘A “unit of property” is the item, structure, plant or inte-
grated complex as it physically exists on the assessment
date as real or personal property. The market value of a
unit of property is not ascertained from the market price
of its component materials, such as wood, glass, concrete,
pipe, wire, furnaces, elevators, etc., each priced separately
as an item of personal property, without regard to its being
integrated into the total unit. Similarly, in the appraisal of
industrial properties the fixed machinery and equipment
comprise an integral part of a manufacturing plant and as
such is usually real property. The market value test of such
a plant is predicated upon the sales of comparable plants.
No market test of unit property exists when there are no sales
of comparable property at times and places which are rea-
sonably relevant to the appraisal date and subject property
under the existing circumstances.’ ”
Former OAR 150-308.205-(A) (emphases added). In Alsea
Veneer, Defendant argued that the “unit of property” provi-
sion in its rule precluded consideration of the market value
of component parts of the taxpayer’s veneer plant. The court
rejected that argument, pointing out that Defendant had
“used the component parts method” in its own valuation of the
plant. Id. at 517. The court implicitly criticized Defendant for
incorrectly relying on the “unit of property” provision in its
rule to limit the field of comparable sales, concluding that the
point of the rule provision was instead to “assist in the deter-
mination of whether property is personal or real * * *.” Id. As
to the portion of the rule that required sales of “comparable
plants” as a predicate for using the market test, the court
stated: “We cannot agree with the Department that this rule
prevents the Tax Court from considering plaintiff’s method
of evaluating the machinery and equipment * * * based on an
appraisal of the component parts,” which included auction
sales of comparable equipment. Id. However, as in Portland
Canning, the court stopped short of expressly declaring
that not all three approaches are applicable. However, each approach must be
investigated for its merit in each appraisal.”).

242 	PacifiCorp v. Dept. of Rev.
portions of the rule invalid or explaining what level of defer-
ence, if any, the court was required to apply to it. 9
In 1999, the Oregon Supreme Court relied heavily
on Defendant’s administrative rules under ORS 308.205
in determining the real market value of centrally assessed
airline property. Delta Air Lines, Inc. v. Dept. of Rev., 328
Or 596, 984 P2d 836 (1999). By that time, Defendant had
promulgated a rule that adopted by reference an earlier ver-
sion of the WSATA Handbook. See id. at 609-10 (reprint-
ing former OAR 150-308.205(B) (1999)). The same rule also
contained text specifically addressing one of the issues in
the case—whether and how to adjust the value of airline
property to account for the fact that taxpayer was merely
the lessee of some of the aircraft it used. See id. at 609-11.
The Oregon Supreme Court applied both parts of the rule,
stating first that the rule “answer[ed] the question” whether
to make a leased-equipment adjustment by providing that
“ ‘[t]he reconciled unit value estimate shall be adjusted to
include taxable property not included in the unit, i.e., full
value of lessors’ interest in equipment leased from others
or to exclude nontaxable property included in the unit.’ ”
Id. at 609-10 (quoting former OAR 150-308.205-(B)(7)(b)).
As to several other issues, the court described the WSATA
Handbook as “pivotal.” Id. at 611. Citing these references,
Defendant in this case urges this court to simply apply the
WSATA Handbook. However, the court in Delta did not
purport to articulate any particular standard of deference
with respect to the WSATA Handbook. The court did not
9 A Supreme Court opinion from 1986 commented in passing on Defendant’s
rulemaking authority under ORS 308.205, stating: “The department may pre-
scribe a method of valuation by rules, ORS 306.120, ORS 308.205, but in the
absence of a single prescribed method, the proper method is itself a matter to be
resolved by evidence, if it is disputed.” Lewis v. Dept. of Rev., 302 Or 289, 292, 728
P2d 1378 (1986). This court does not read the quoted passage as implying any
required level of judicial deference to Defendant’s rules. Rather, this court reads
the Supreme Court as refuting the taxpayer’s assertion that “ ‘[a]ll three [meth-
ods] must be used’ ” to determine value. Id. at 292. Read together with the rule in
effect at that time, the court’s comment appears to summarize the rule’s require-
ment that all three approaches be considered, while allowing for the possibility
that only one or two approaches may be applied, depending on the facts. See id. at
293 (“What the Department of Revenue’s rule states is not that the ‘market data
approach, cost approach, and income approach’ must all be employed, but that ‘[a]
ny one of the three approaches to value may finally be used * * *.’ ” (quoting former
OAR 150-308.205-(A)(2) (1981)).

Cite as 25 OTR 227 (2023) 	243
need to do so, because “Delta d[id] not challenge the valid-
ity of the administrative rule * * *.” Id. at 610 n 8 (emphasis
added);10 cf. Hewlett-Packard Co. v. Benton County Assessor,
357 Or 598, 600-03, 356 P3d 70 (2015) (taxpayer challenged
application, but not validity, of rules under ORS 308.205(2);
stating that an “appraiser must follow” “complex scheme of
administrative rules outlining the methods and procedures
that the department requires”).
(2) 	Application of Springfield and Portland
Canning assuming authority under ORS
308.205
In summary, none of the decisions the court has
found under ORS 308.205 declares a standard of review of
rules under that section. The court returns to the analytical
framework under Springfield Education Association. Neither
party sought to apply the framework at trial or as part of
extensive post-trial briefing; it therefore falls to the court to
decide which terms to analyze. The court starts with the flush
language in subsection (2), which implicitly directs Defendant
to adopt rules containing “methods and procedures” to “deter-
mine[ ]” “[r]eal market value.” The court finds that these terms
are not in dispute; rather, the parties disagree about the
requirement that real market value be determined “in accor-
dance with” Defendant’s rules. If the court were writing on a
blank slate, its task under Springfield would be to determine
whether the phrase “in accordance with” is delegative, in the
sense of conferring a “range of discretion” upon Defendant,
and if so, whether Defendant’s adoption of the WSATA
Handbook, to the exclusion of any other method of determin-
ing real market value, exceeded that range. As to this point,
however, the court views the decision in Portland Canning as
binding. The court again reprints the key language holding
that Defendant’s procedures are subordinate to the concept of
“market value” (now real market value):
“Clearly the dominant note of the legislation is that, if pos-
sible, value is to be ascertained in accordance with market
value. While [Defendant] has been given power to make
10 The court apparently did not interpret Delta’s challenge to the making of
any leased-equipment adjustment as a challenge to the validity of the rule that
declared that such an adjustment was required.

244 	PacifiCorp v. Dept. of Rev.
regulations setting forth procedures as to how this may
be done, it cannot vary the mandate of the law under this
guise.”
241 Or at 113. No subsequent Supreme Court opinion over-
turns the holding in Portland Canning.
The court concludes that, whatever discretion might
be delegated to Defendant to prescribe valuation meth-
ods and procedures for centrally assessed property, under
Portland Canning that discretion does not include the author-
ity to compel the use of methods and procedures that fail to
result in real market value in a particular case. Stated pos-
itively, a taxpayer remains free to argue that a value deter-
mined in accordance with Defendant’s rules is inconsistent
with the definition of real market value in subsection (1) of
ORS 308.205, and the court is not bound to accept a value
determined under Defendant’s rules if the court finds that
another value, determined under methods or procedures not
in accordance with Defendant’s rules, is correct. The court
concludes that it need not defer to OAR 150-308-0690 with
respect to methods and procedures of determining the real
market value of Plaintiff’s system, to the extent that the
source of the rule’s authority is ORS 308.205(2).11
2. 	OAR 150-308-0590: Defendant’s Allocation Formula
for Electricity Companies
The parties also dispute the degree of deference the
court should afford to Defendant’s separate administrative
11 This conclusion does not render the WSATA Handbook, or any other rules,
meaningless. Importantly for the property tax system as a whole, Defendant’s
rules under ORS 308.205 bind not only Defendant, but also the assessors in all
counties, who are charged, under Defendant’s supervision, with determining value
for all real and personal property other than centrally assessed or large industrial
property. See ORS 308.215(1)(a)(F), (b)(B) (county assessor to record real market
value on roll); ORS 306.115 (1) (Defendant to exercise “general supervision and
control” over property tax system); ORS 306.120 (1) (Defendant to issue regula-
tions to assessors “as to the methods best calculated to secure uniformity accord-
ing to law”). Therefore, a significant result of the flush language of subsection (2)
is to enable Defendant to ensure compliance with the constitutional mandate that
“[a]ll taxes shall be levied and collected under general laws operating uniformly
throughout the State.” Or Const, Art IX, § 1; see also Or Const, Art I, § 32; see
generally C. W. Macy, Some Legal and Administrative Aspects of the Property Tax
in Oregon, 33 Or L Rev 179, 182 (1954) (discussing legislative development of Or
Laws 1953, ch 701 and recounting “gross inequalities in the appraisal of property
for taxation purposes” within and among counties, caused by “lack of a clear-cut
legal method of determining values for taxation purposes”).

Cite as 25 OTR 227 (2023) 	245
rule that prescribes a formula to allocate the system value
used in an electricity business to Oregon. Defendant argues
that this rule, OAR 150-308-0590, “has the full force of law.”
Plaintiff asks the court to apply a different formula, arguing
that the rule is inconsistent with the allocation statute, ORS
308.550. As with OAR 150-308-0690, neither party has pre-
sented the court with an analysis under the Springfield/Penn
framework. And once again, three statutes are in contention
as authority for the rule. The published rule refers to ORS
305.100 and ORS 308.550. It also is conceivable that OAR
150-308-0590 could be considered to prescribe “methods
and procedures” for determining real market value under
ORS 308.205(2), and thus might be covered by the Portland
Canning rule discussed above.12 Ultimately, the court finds
it unnecessary to reach the level of deference to this rule. As
discussed near the end of this opinion, even if Plaintiff were
to show that the rule is entitled to no deference as a mat-
ter of administrative law, the court concludes that Plaintiff
has not shown that Defendant’s allocation results in a “gross
distortion” as required under case law.
B. 	Burden of Proof
Each party argued at trial for an Oregon real mar-
ket value different from the value shown on the central
assessment roll prepared under ORS 308.560 and certified
under ORS 308.610. Cf., e.g., Level 3 Communications LLC
III v. Dept. of Rev, 23 OTR 440, 442-43 (2019) (describing
parties’ positions relative to roll values). The parties present
differing views as to the burden of proof, which is set forth
in ORS 305.427 (2021):
“In all proceedings before the judge or a magistrate of the
tax court and upon appeal therefrom, a preponderance of
12 The court also notes that the formula in OAR 150-308-0590 is materially
identical to a formula for electricity business property set forth in the WSATA
Handbook at page XIV-23, but Defendant apparently does not view the WSATA
Handbook’s version as incorporated by reference under OAR 150-308-0690. This
may be because the formula is not part of the main text of the WSATA Handbook
but is appended as part of a 1960 committee report in which the committee “rec-
ommend[s]” that WSATA member states adopt and use allocation formulas that
the committee developed for various businesses. See WSATA Handbook at XIV-6.
The body of the WSATA Handbook does not specifically endorse any of the for-
mulas in the appendix, but instead states that “[r]ecommended formulas will be
contained in a separate publication.” WSATA Handbook at VIII-1. The parties
have not referred the court to any such separate publication, assuming it exists.

246 	PacifiCorp v. Dept. of Rev.
the evidence shall suffice to sustain the burden of proof.
The burden of proof shall fall upon the party seeking affir-
mative relief and the burden of going forward with the evi-
dence shall shift as in other civil litigation.”
Plaintiff acknowledges that it “seek[s] affirmative
relief” in the form of a reduction of the real market value
shown on the roll, and that it bears the burden of proving
any such reduction. Defendant agrees with that point but
disagrees with Plaintiff’s next assertion, that Defendant
bears the burden of proving any “ ‘increase compared to the
roll RMVs.’ ” Level 3 Communications LLC III, 23 OTR at 443
(2019). Defendant relies on the following passage from a 1989
central assessment opinion by the Oregon Supreme Court:
“Pacific next argues that the Tax Court erred in not
requiring the Department to carry the burden of proving
that its appraisal, which suggested a value significantly
greater than that found by the Director of the Department
of Revenue at an earlier, administrative step in this case,
should be adopted. Pacific cites no binding authority for
this proposition, which contradicts the basic idea that the
burden in an appeal by a taxpayer to the Tax Court is on
the taxpayer. ORS 305.427.”
PP&L v. Dept. of Rev., 308 Or 49, 54-55, 775 P2d 303 (1989).
In quoting this passage, Defendant omitted the remaining
sentences in the paragraph:
“The Tax Court did not err. To the extent that Pacific is
also asking that this court impose such a burden on the
Department in this court, the request is denied. The bur-
den is the same ‘upon appeal’ from the Tax Court. ORS
305.427.”
PP&L, 308 Or at 55. On the other hand, Plaintiff cites the
following passage from another central assessment opinion
decided three years later:
“With respect to the case as it is presented in this court, we
note only that, as to the claims that UP makes that would
require a modification of the decision of the Tax Court, UP
has the burden of proof by a preponderance of the evidence.
We have required UP to meet that burden throughout our
review of its evidence. As to the matters concerning which
the Department asks this court to change the decision of
the Tax Court or as to which it cross-assigns error, it is the

Cite as 25 OTR 227 (2023) 	247
Department that shoulders the burden of proof. See PP&L
v. Dept. of Rev., supra, 308 Or at 54-55, (discussing burden
of proof).”
Union Pacific Railroad v. Dept. of Rev., 315 Or 11, 17, 843
P2d 864 (1992) (referring also to the same passage quoted
above in PP&L).
This court seeks to reconcile the above statements
in PP&L and Union Pacific. Under PP&L, the Supreme
Court concluded that Defendant did not bear the burden
of proof before this court as to an increase above the value
Defendant’s own director had set and from which the tax-
payer appealed. But under Union Pacific, Defendant did bear
the burden of proof, on appeal to the Supreme Court, as to
any value higher than the value determined by this court.13
Yet, as the omitted sentence in PP&L declares, the same law
assigning the burden applied in both courts, as it does today.
See ORS 305.427 (1989) (referring to “all proceedings before
the tax court and on appeal therefrom”) (emphasis added); cf.
ORS 305.427 (2021) (referring to “all proceedings before the
judge or a magistrate of the tax court and on appeal there-
from) (emphasis added).
Because both PP&L and Union Pacific predate the
Supreme Court’s announcement of the current statutory
interpretation framework in State v. Gaines, the court now
applies that framework to ORS 305.427 in an effort to dis-
cern principles that would harmonize the two opinions for
purposes of this case. The statute, enacted in 1965, places
the burden on the “party seeking affirmative relief.” Or
Laws 1965, ch 6, § 5 (SB 4). Because the statute relates to
legal proceedings, the court turns initially to a contempo-
raneous edition of Black’s Law Dictionary for the following
technical legal definition of Affirmative Relief:
“Relief, benefit, or compensation which may be due and
granted to defendant. Garner v. Hannah, 6 Duer (N. Y.)
13 Prior to 1995 the standard of review before the Supreme Court was de novo;
the Supreme Court’s task was to sit as a trier of fact and apply all relevant law,
including ORS 305.427, to the facts based on the record before this court. See
Delta Air Lines, Inc. v. Dept. of Rev., 328 Or 596, 600-03, 984 P2d 836 (1999) (dis-
cussing former standard); Or Laws 1995, ch 650, § 25 (limiting supreme court’s
scope of review to “errors or questions of law or lack of substantial evidence in the
record to support the tax court’s decision or order”).

248 	PacifiCorp v. Dept. of Rev.
262. Relief for which defendant might maintain an action
independently of plaintiff’s claim and on which he might
proceed to recovery, although plaintiff abandoned his cause
of action or failed to establish it. Southwestern Surety Ins.
Co. v. Walser, 77 Okl 240, 188 P 335, 336.” 14
Black’s Law Dictionary 75 (4th ed 1951). Comcast Corp. v.
Dept. of Rev., 356 Or 282, 296, 337 P3d 768 (2014) (“[W]hen
a term is a legal one, we look to its ‘established legal mean-
ing’ as revealed by * * * legal dictionaries.”). This definition
indicates that a party proceeding as a defendant could be in
a position of seeking affirmative relief, at least if that party
made a counterclaim.
The court proceeds to consider statutory context,
starting with other procedural statutes in place in 1965.
The only contemporaneous use of the full phrase “affirma-
tive relief” in the Oregon Revised Statutes provided:
“If a counterclaim established at the trial exceeds the
plaintiff’s demand so established, judgment for the defen-
dant shall be given for the excess; or if it appears that the
defendant is entitled to any other affirmative relief, judg-
ment shall be given accordingly.”
Former ORS 18.100 (1963) (emphasis added), repealed by Or
Laws 1981, ch 48, § 1. This statute can be read to mean that
affirmative relief included “relief, benefit or compensation”
available to a defendant regardless whether the defendant
made a counterclaim.
Indeed, case law at the time indicated that, depend-
ing on the circumstances, plaintiffs and defendants could
seek affirmative relief, and whichever party did so had
the burden of proof. See, e.g., Chance v. Carter, 81 Or 229,
240, 158 P 947 (1916) (concluding that statute enabled “the
Defendant, upon proving his claim, not only to defeat the
action of the plaintiff, but also to secure affirmative relief”)
(emphasis added); Hanna v. Hope, 86 Or 303, 310, 168 P 618
14 Although the definition describes the party seeking affirmative relief as
the “defendant,” the cases cited do not indicate that affirmative relief is unavail-
able to a plaintiff. Garner v. Hannah, 13 NY Super Ct 262, 273, 6 Duer 262 (1857)
(defining “affirmative relief” in terms of the defendant due to statute case was
brought under); Southwestern Surety Ins. Co. v. Board of Com’rs of Coal County,
77 Okla 137, 187 P 467 (1920) (discussing whether defendant’s reply constituted
“affirmative relief”).

Cite as 25 OTR 227 (2023) 	249
(1917) (“The counterclaim upon which a defendant may have
affirmative relief in an equity suit must contain matters of
equitable cognizance.”); Comegys v. Hendricks, 55 Or 533,
535, 106 P 1016 (1910) (“The plaintiff did not offer any evi-
dence in support of the controverted question, and thereby
failed to substantiate her right to any affirmative relief.”).
A statute perhaps more closely on point was ORS
41.210 (1963),15 which provided:
“The party having the affirmative of the issue shall pro-
duce the evidence to prove it. Therefore, the burden of proof
lies on the party who would be defeated if no evidence were
given on either side.”
Some three months before ORS 305.427 was enacted, this
court applied ORS 41.210 (1963) in its first suit filed by a
county assessor, who sought to increase the value of locally
assessed property. Strawn v. Commission, 1 OTR 98, 120,
149-50 (1963). Following the procedure in place at that time,
the taxpayer initially contested the assessor’s valuation in
an administrative appeal before Defendant’s predecessor, the
State Tax Commission. The Commission reduced the valua-
tion “very substantially.” Id. at 121. The assessor appealed to
this court. The taxpayer counterclaimed for even lower val-
ues than determined by the Commission. The court devoted
some six pages to discussing the burden of proof, conclud-
ing that the assessor had “the affirmative” as to whether the
assessed value should be raised, and the taxpayer had the
affirmative as to any lowering of the assessment. Id. at 155
(“The burden of proof remains fixed with the party, or in this
case, parties, seeking affirmative relief * * *.”).
With this context in mind, the court returns to the
text of ORS 305.427. Notably, the text does not say that
the burden of proof shall fall upon the “plaintiff,” much
less upon the “taxpayer.” By using instead the less specific
phrase “party seeking affirmative relief,” the statute seems
to contemplate the possibility that either party might seek
15 The legislature repealed ORS 41.210 (1963) in 1981, essentially moving
the phrase to ORS 40.115 (OEC 307). See Or Laws 1981, ch 892, § 98 (repealing
ORS 41.210); ORS 40.115 (“The burden of producing evidence as to a particular
issue is on the party against whom a finding on the issue would be required in the
absence of further evidence.”).

250 	PacifiCorp v. Dept. of Rev.
affirmative relief, in line with the discussion in Strawn and
the longstanding non-tax cases cited above.
The court has found nothing in the legislative his-
tory of SB 4 that sheds light on the burden of proof under
ORS 305.427. SB 4 was requested by the Interim Committee
on Taxation and by Senator Ben Musa, a proponent of
the Oregon Tax Court Act enacted four years earlier. See
House and Senate Journal, Regular Session, 1965, S-4 (list-
ing Interim Committee on Taxation and Senator Musa as
requesting bill); Or Laws 1961, ch 533 (creating Oregon Tax
Court). SB 4 amended a half-dozen provisions of the Oregon
Tax Court Act and made conforming amendments referring
to this court in other tax and procedural statutes. At sev-
eral points, legislators or witnesses referred to the text that
became ORS 305.427 as assigning the burden of proof to “the
taxpayer.” For example, the minutes of a Senate Revenue
Committee hearing state that Senator Anthony Yturri sup-
ported the bill’s placement of the “burden on the taxpayer,”
consistent with “civil cases[, in which] it is the plaintiff, the
one who asserts the claim, who has the burden.” Minutes,
Senate Committee on Taxation, Jan 20, 1965 at 2. Carlisle
Roberts, then-counsel to the Commission, “discussed the
importance of the word ‘preponderance’ * * *, which he said
puts more of the burden of proof on the taxpayer.” Minutes,
Senate Committee on Taxation, Jan 18, 1965 at 2; see also
id. (“[Eugene Feltz, of the Oregon State Bar,] thought the
burden of proof is already with the taxpayer in case of an
appeal.”); Minutes, Senate Committee on Taxation, Jan
20, 1965 at 1 (“[Judge Edward Howell, Oregon Tax Court,]
agreed ‘100 percent’ that the burden of proof should be on
the taxpayer, as he is seeking affirmative relief.”). This court
considers these statements as shorthand, reflecting the fact
that taxpayers are plaintiffs in nearly all cases, and that a
taxing authority’s assertion of a value higher than shown on
the roll is a nuance that does not commonly arise or at least
is not commonly discussed in reported cases. The minutes
indicate that the burden of proof provision was not contro-
versial, and that the discussion quickly moved to the next
passage in the bill, a contested provision that would have
imposed a presumption in favor of the initially assessed

Cite as 25 OTR 227 (2023) 	251
value; the Senate Revenue Committee ultimately voted to
reject the statutory presumption.16
Against this backdrop of the text and context of ORS
305.427, this court now returns to the apparently conflicting
passages in PP&L and Union Pacific. The passage in PP&L
describes the value from which the taxpayer appealed to this
court as a value “found by the Director of the Department
of Revenue at an earlier, administrative step in this case.”
308 Or at 54-55. As of the 1989 PP&L opinion, the setting
of the central assessment roll did not have the finality that
exists under current law. This court recently concluded that,
before 2007, Defendant had discretionary authority to cor-
rect a valuation error on a central assessment roll for up to
three years. See ORS 306.115 (2005); D.E. Shaw Renewable
Investments, LLC v. Dept. of Rev., 25 OTR 58 (2022) (appeal
pending) (concluding that ORS 306.115 grants discretionary
authority for department to correct valuation errors, but is
limited by ORS 308.624, enacted in 2007).17 The 2007 leg-
islature curtailed that authority with respect to centrally
assessed property by enacting what is now ORS 308.624(4):
“For purposes of this section, the director may not correct
an error in valuation judgment [on the central assessment
roll] that is an error in the department’s opinion of the value
of property.” Consistent with the breadth of Defendant’s
authority in 1989 to change roll values unilaterally, this
court reads the statement in PP&L to mean that Defendant
was not seeking affirmative relief in this court, even when
16 Subsection (2) of Section 4 of SB 4 as introduced provided:
“The tax court shall recognize a rebuttable presumption of validity and cor-
rectness to have attached to the final determination of tax or assessed value
from which and appeal or other proceeding may be taken to an authority
independent of the authority making such first determination. The presump-
tion shall remain with such first determination until the tax liability at issue
is finally determined.”
This court continued to apply a judicial presumption of assessment validity until
the Oregon Supreme Court abolished it in 1972. See J. R. Widmer, Inc. v. Dept.
of Rev., 261 Or 371, 378, 494 P2d 854 (1972) (“The Tax Court (ORS 305.425(1))
and this court (ORS 305.445) review de novo without any presumption as to the
correctness of the assessor’s valuation.”).
17 By contrast, even before 1989, a local county assessor generally was pro-
hibited from correcting a valuation error on a prior roll. See ORS 311.205 (1)
(1987) (“The officer may not correct an error in valuation judgment. Such errors
are those where the assessor would arrive at a different opinion of value after the
roll has been returned to the assessor by the board.”).

252 	PacifiCorp v. Dept. of Rev.
Defendant sought an increase above the roll value. From
there, it follows that the plaintiff taxpayer in PP&L was
the only party bearing the burden of proof in this court.
Under post-2007 law, however, Defendant may correct a val-
uation error on the central assessment roll only if ordered
by this court or by the Supreme Court on appeal. See ORS
308.624(3)(b). Reading PP&L in light of changes in the pro-
cedural law, this court concludes that the rule articulated in
Union Pacific applies today in valuation disputes before this
court: As to changes to the roll that a taxpayer requests for
its benefit, including a valuation lower than that shown on
the roll, the taxpayer seeks affirmative relief and therefore
bears the burden of proof. As to a valuation higher than that
shown on the roll, Defendant seeks affirmative relief and
bears the burden of proof.
III. 	REAL MARKET VALUE ANALYSIS
The court now seeks to apply the foregoing under-
standing of applicable law to determine the real market
value of Plaintiff’s property, based on the evidence pre-
sented at trial. As discussed above, the court first deter-
mines the real market value of the “system” comprising all
of Plaintiff’s property used in its electricity business, with-
out regard to location, before determining the percentage
of that value to allocate to Oregon. To a great extent, the
issue is fact intensive and involves “competing testimony of
appraisal experts, including the credibility and persuasive-
ness of those experts.” Hewlett-Packard, 357 Or at 609.
A. 	Cost Approach
Each party’s appraiser gave approximately 20 per-
cent weight to his value indicator derived from a cost approach.
Plaintiff’s appraiser, Thomas K. Tegarden, determined a
cost indicator of $15,838,880,747. Defendant’s appraiser,
Brent Eyre, determined a cost indicator of $20,735,886,213.
Tegarden and Eyre each started with the “net book value”
Plaintiff reported on its annual “FERC 1,” a form Plaintiff
filed with the Federal Energy Regulatory Commission
(FERC). Net book value for FERC purposes is not identical
with the locally determined “rate base” on which Plaintiff
is allowed to earn a reasonable return, but local regulators

Cite as 25 OTR 227 (2023) 	253
refer to net book value when setting the rate base. 	See
WSATA Handbook at II-8 to II-9. Net book value for FERC
purposes is based on a variation of the cost approach to val-
uation known as “historical cost less depreciation” (HCLD),
which Defendant uses only for centrally assessed property.
See OAR 150-308-0240(2)(f) (stating, for other property,
cost approach must use “reproduction, replacement or used
equipment technique”); WSATA Handbook at I-4 (stating
HCLD may be a “meaningful” indicator if company is rate
base regulated). The parties agree that net book value is not
likely to be equal to real market value, but they disagree
about the extent of any adjustments that must be made in
order to make the HCLD approach useful as an indicator of
real market value. Each party started with the historical
cost of $28,843,430,112 taken from Plaintiff’s FERC 1 form
for 2019, and each deducted $10,870,776,722 in depreciation,
an entry also taken from the same FERC 1 form.18
1. 	Plaintiff’s 	Method: 	Additional 	Deduction 	for
Economic Obsolescence
Nearly all of the difference between the parties’
cost method indicators arises because Tegarden took an
additional deduction for “obsolescence” in the amount of
$4,428,401,079, while Eyre did not. Plaintiff argues that an
approach that starts with historical cost is valid only if it
allows deduction of all three of the widely recognized forms
of depreciation: physical depreciation, functional obsoles-
cence, and economic obsolescence. Tegarden testified that
the deduction for depreciation on Plaintiff’s FERC filings is
too low because it does not adequately account for a type
of economic obsolescence peculiar to regulated utilities,
namely, the utility’s inability to earn a return on property
acquired or paid for with the following:19
(1) 	Deferred Income Taxes (DIT).
Broadly speaking, DIT is the difference between (1) the
amount that ratemaking authorities consider Plaintiff to
18 Plaintiff started with a net book value of $28,661,071,569, citing a dif-
ferent page and line number of the same FERC 1 cited by Defendant. The court
considers the difference immaterial for purposes of this decision.
19 The parties refer to depreciation allowed for FERC filing purposes as
“accounting” or “regulatory” depreciation.

254 	PacifiCorp v. Dept. of Rev.
owe in income taxes for a particular year and (2) the amount
Plaintiff actually owes for that year. The amount Plaintiff
actually owes typically is less because Congress has repeat-
edly increased the annual amount otherwise allowed as
a deduction from gross income to depreciate or amortize
the cost of acquired property over the property’s useful
life. See generally Bittker & Lokken, ¶¶ 23.1-9 (discuss-
ing “accelerated” depreciation, “bonus” depreciation, and
“expensing” of purchases). By allowing higher depreciation
deductions right away, Congress reduces taxable income,
and thus income tax liability, with the goal of encourag-
ing businesses to use the additional cash to buy machinery,
equipment, and other property, thereby stimulating the
economy. Accelerated depreciation provides additional cash
flow in the early years after property is acquired, but the
tax liability is, in theory, merely “deferred” and is recouped
in later years when the property is fully depreciated and
the taxpayer must cease to claim deductions sooner than it
otherwise would have. Regulatory authorities do not allow
Plaintiff to earn a return on property purchased with the
cash saved through DIT, but the acquired property used
in Plaintiff’s electricity business contributes to the system
value, an apportioned share of which is deemed to be the
real market value of Plaintiff’s property in Oregon.
(2) 	Income Tax Credits (ITC).
As with DIT, property attributable to certain income tax
credits is excluded from the rate base but contributes to
real market value for property tax purposes to the extent
used in Plaintiff’s electricity business.
(3) 	Contributions in Aid of Construction (CIAC).
Money or property contributed by particular utility cus-
tomers (such as large industrial plants) to fund extensions
of electricity infrastructure that primarily benefit those
customers is likewise outside the rate base. However, the
value of the property contributes to the real market value
of Plaintiff’s system to the extent that Plaintiff uses the
property.
See generally PP&L v. Dept. of Rev., 308 Or 49, 52-53, 775
P2d 303 (1989) (describing above categories of property).
Tegarden’s sources included an email exchange with an
economist employed by FERC, who stated that “account-
ing depreciation is a cost allocation process, not a valuation

Cite as 25 OTR 227 (2023) 	255
process. Consequently, the net book value of a plant asset
may differ significantly from its market value.”
2. 	Does Plaintiff’s method fail as a matter of law?
Defendant acknowledges the general point that net
book value equals real market value “ ‘only by coincidence.’ ”
However, Defendant argues that an additional deduction is
unavailable both as a matter of law and as a factual mat-
ter. As to the first point, Defendant argues that a deduc-
tion for economic obsolescence would “violat[e] the WSATA
Handbook guidelines * * *.” 20 However, based on the court’s
reasoning above, violation of the WSATA Handbook
guidelines is not a basis to reject an additional deduction
under the cost approach if the taxpayer can persuade the
court that a value determined pursuant to the WSATA
Handbook is not the real market value of the property.
Plaintiff’s proffered method does not fail as a matter of law.
3. 	Does Plaintiff’s “income shortfall” method have ade-
quate factual support?
The court thus turns to the parties’ factual argu-
ments. Notwithstanding Defendant’s arguments that regu-
latory depreciation adequately accounts for all obsolescence,
the court finds it clear that the historical cost of property
included on the FERC 1 form, less the FERC subtraction for
accounting depreciation, may not accurately reflect the real
market value used in a centrally assessed business. 21 The
20 The WSATA Handbook states:
“HCLD cost indicators are generally not adjusted further to account for
appreciation or depreciation. A deduction from HCLD for obsolescence is just
as inconsistent as adding value to HCLD because some of the utility’s prop-
erty has increased in value since it was acquired, or because the utility’s
earnings are extraordinarily high for some reason (e.g., lax regulatory over-
sight). The practice of not adjusting HCLD for perceived obsolescence does
not mean that obsolescence has not been considered and measured, since as
noted previously, regulatory depreciation should, in theory, reflect all forms
of obsolescence. The degree to which regulatory depreciation reflects an accu-
rate estimate of market depreciation for a particular property is taken into
account when reconciling the value indicators.”
WSATA Handbook at II-12.
21 As an example of the potential mismatch between historical cost less reg-
ulatory depreciation, on the one hand, and the real market value of property
(whether or not paid for with cash savings from DIT, ITC and CIAC) on the other
hand, Plaintiff’s tax director Norman Ross testified that regulatory depreciation

256 	PacifiCorp v. Dept. of Rev.
question, then, is whether Tegarden’s proposed adjustment
accurately translates net book value into real market value.
Tegarden offered an “income shortfall” computation that is
based on capitalizing the “income * * * loss attributable to
the negative influence,” in this case, “governmental regu-
lation * * * [that] affects what you can do with the property,
how much you can earn on it * * *.” 22 Tegarden computed the
shortfall by comparing Plaintiff to similarly situated com-
panies that are not restricted from earning income on DIT,
ITC, and CIAC, concluding that Plaintiff earned a rate of
return 1.65 percent below the return investors required as
of the assessment date. 23
By Tegarden’s own description, an income shortfall
computation requires (1) proof of the existence of a “negative
influence” and (2) proof of a causal relationship between that
influence and diminution of Plaintiff’s income. In this case,
Defendant does not contest that Plaintiff had some amount
of DIT, ITC, and CIAC, and some of Plaintiff’s financial
documents admitted into evidence refer to various items of
DIT, ITC, or CIAC. However, none of Plaintiff’s witnesses
attempted to identify or quantify the relevant amount of any
of those items as of a relevant time; nor did the computa-
tion establish the amount of DIT, ITC, or CIAC of the com-
parator companies. It is true, as the Oregon Supreme Court
has found, that a mere statement of these amounts, without
more, would not likely suffice to support an adjustment to
net book value. 24 On the other hand, without an understand-
of a coal-fired power plant in Utah continued into the tax year at issue (2020-21)
even though the plant was decommissioned, dismantled, and reclaimed in 2017.
22 By “governmental regulation,” Tegarden primarily meant DIT and ITC,
stating in his appraisal, “The primary cause for the lower-than-adequate rate of
return on all property is the regulatory commissions’ specific exclusion of certain
properties from the rate base, i.e. those properties financed by funds provided by
the deferral of federal income taxes. Simply stated, the regulatory agencies will
not allow PacifiCorp to earn a return on those properties which it has purchased
using funds provided by deferring the payment of federal and state income taxes.”
23 At one point in briefing, Plaintiff seems to ask the court to simply subtract
the CIAC amount shown on Eyre’s cost approach calculations ($366,356,390, shown
on Def’s Ex A at 23) from the cost indicator. Yet Plaintiff also purports to account for
CIAC in its income shortfall calculation. To do both would amount to “double dipping”
for Plaintiff. The court assumes for purposes of analyzing the cost approach that
Plaintiff advocates for accounting for CIAC solely in its income shortfall calculation.
24 Although not precedential for its valuation methodology (see Delta Air
Lines, Inc. v. Dept. of Rev., 328 Or 596, 615 n 11, 984 P2d 836 (1999)), the Oregon

Cite as 25 OTR 227 (2023) 	257
ing of those amounts, in relation to Plaintiff’s assets and
in comparison with the data of the comparator companies,
the court finds that Plaintiff’s income shortfall computa-
tion has inadequate evidentiary foundation and becomes an
abstract exercise that lacks important context. 25 The court
finds that the preponderance of the evidence does not sup-
port Plaintiff’s proffered economic obsolescence adjustment
to net book value.
4. 	Defendant’s Cost Analysis
The court turns to Defendant’s analysis applying a
cost approach. Eyre essentially applied the HCLD method
described in the WSATA Handbook, which applies depre-
ciation and other data from the FERC 1 form and resulted
in a value indicator very close to Plaintiff’s FERC net book
value. See WSATA Handbook at II-8. He was satisfied that
the result was not too low because, under a “market-to-book
ratio” study summarized in his appraisal report, the his-
torical sales prices of other regulated companies always
exceeded the company’s net book value. The court finds
Defendant’s HCLD analysis unhelpful in determining real
market value. The WSATA Handbook describes the HCLD
method in equivocal terms, on the one hand characterizing
Supreme Court’s rejection in PP&L of Plaintiff’s attempt to simply subtract DIT
and ITC amounts from its cost indicator of value is persuasive, at least on the
ground that simply subtracting those amounts would amount to “a portion of the
tangible assets of Pacific inappropriately being exempted from taxation.” PP&L,
308 Or at 57. (To the extent that the court in PP&L may have determined that
a subtraction for DIT and ITC is unwarranted because the regulatory restric-
tions on earning disappear in the hands of a new buyer, this court notes that the
authors of Defendant’s study, Ben Johnson Associates, Inc., appear to disagree.
See id. (“[I]t seems clear to us that a willing buyer of the plant and equipment
would be agreeable to paying a figure close to HCLD, because the buyer could
then earn off all that expenditure.”) (emphasis added).
25 Defendant criticizes Plaintiff’s income shortfall approach for other rea-
sons: the WSATA Handbook discourages its use, and the Oregon Supreme Court
rejected it as duplicative of an income approach in Delta Air Lines, Inc. v. Dept. of
Rev., 328 Or 596, 618-619, 984 P2d 836 (1999), and United Telephone Co., Inc. v.
Dept. of Rev., 307 Or 428, 433, 770 P2d 43 (1989). Plaintiff argues that its income
shortfall computation is distinguishable and does not suffer from the infirmities
identified in prior cases. This court declines to reject all variations of an income
shortfall approach per se. The court reiterates that the Supreme Court in Delta
and United Telephone took pains to emphasize that the opinions are not prec-
edential as to value methodology. The court concludes only that it cannot evalu-
ate the viability of Plaintiff’s income shortfall approach without the foundation
described above.

258 	PacifiCorp v. Dept. of Rev.
the method as “a valid indicator of value” for a rate base-reg-
ulated utility such as Plaintiff, but also stating that “the
market’s perception of value is likely to be at odds with rate
base at any given time.” WSATA Handbook at II-9 to II-10. A
significant reason for the acknowledged mismatch between
net book value and real market value is that mandatory
depreciation methods for regulatory purposes may result in
a net book value that is “vastly different” from the market’s
perception of the value of property. Id. at II-10. 26
As for DIT specifically, the WSATA Handbook states
that “[a] utility’s inability to earn an accounting ‘return
on’ investment acquired with DIT is offset by its ability to
collect revenue for a tax it does not yet owe.” Id. at II-11.
While a conceptual “offset” may justify the regulatory pol-
icy of including DIT, ITC, and CIAC in net book value, the
WSATA handbook does not state that the included amount
accurately corresponds to the value of property a utility may
acquire with the extra cash from its tax savings, or from
CIAC. Just as Plaintiff has been unable to show that its
income shortfall calculation accurately matches the effect
of DIT, ITC, or CIAC on net book value, Defendant’s ignor-
ing of those items is a flaw that renders Defendant’s HCLD
approach unreliable as an indicator of real market value.
Defendant’s market-to-book ratio studies do not
persuade the court that a willing buyer and seller would be
likely to give any particular weight to the result of an HCLD
analysis as of any particular date, nor do they overcome the
loose and tenuous connection that the WSATA Handbook
declares between an HCLD result and fair market value.
First, in post-trial briefing Plaintiff raised evidentiary
issues regarding the comparability of the historical transac-
tions, which Defendant dismissed as “attempts to pick nits.”
But assuming that the parties were to engage in an exhaus-
tive analysis of the historical transactions that would allow
26 The WSATA Handbook states further that “HCLD cannot be considered
either a lower or upper limit of value,” but “rate regulation provides a vague limit
on how far market value will stray from HCLD” because regulators, if attentive,
are supposed to allow utilities an opportunity to earn a “fair return” on “pru-
dently invested” funds and to recover “prudent costs.” Id. at II-10. These terms
stop far short of assuring the court that the result of HCLD, by itself, is a mean-
ingful indicator of real market value.

Cite as 25 OTR 227 (2023) 	259
the court to lay those issues to rest, a larger issue would
remain. Defendant argues that Eyre’s HCLD result, which
he “tested” against the “actual market evidence” of his mar-
ket-to-book ratio study, “would certainly constitute the low-
est price a knowledgeable seller would be willing to accept
for the property.” Yet Defendant’s position is directly con-
trary to the discussion of HCLD in the WSATA Handbook,
which states that “HCLD cannot be considered either a
lower or upper limit of value * * *.” WSATA Handbook at
II-10 (emphases added). Rather, according to the WSATA
Handbook, HCLD is at most an “anchor” that “provides
a vague limit.” Id. In other words, Defendant’s own rule
states that as of any given valuation date real market value
is likely to have drifted above or below HCLD. Id. (“[T]he
market’s perception of value is likely to be at odds with rate
base at any given time * * *.”). Defendant’s evidence, and the
disclamatory statements in the WSATA Handbook, leave
the court without a basis to assign any weight to a cost
approach based on HCLD, with or without Defendant’s mar-
ket-to-book ratio studies.
5. 	Conclusion Under Cost Approach
The WSATA Handbook’s solution to the tenuous
connection between net book value and real market value
is to assign less weight to the HCLD cost indicator than
to other indicators in the reconciliation process. See, e.g.,
WSATA Handbook at II-12 (“The degree to which regulatory
depreciation reflects an accurate estimate of market depre-
ciation for a particular property is taken into account when
reconciling the value indicators.”). In this case, however, the
court finds no factual basis to assign any weight to either
party’s cost indicator of value. 27
B. 	Income Approach
The parties agree that the income approach to val-
uation (1) determines the future expected cash flow from
the property, and (2) divides that cash flow by a rate. The
result is the present value of the future expected cash flow,
which is an indicator of the value of the property. WSATA
27 In light of the court’s conclusions as to each party’s analysis, the court
finds it unnecessary to decide cost approach issues other than those specified.

260 	PacifiCorp v. Dept. of Rev.
Handbook at III3 (cash flow as proper measure of future
“income”); id. at III17 to III20 (rates).) The simple formula
can be expressed as:
Value = Cash Flow Rate
The two main methods under the income approach are
direct capitalization (which uses a single year’s projected
cash flow) and yield capitalization (which uses a projection of
cash flow over future years). See WSATA Handbook at III-8;
Appraisal Institute, Appraisal of Real Estate at 36 (15th ed
2020). The court begins by examining the parties’ analysis
under the yield capitalization method. 28
1. 	Yield Capitalization: Constant Growth Model
Both parties applied a variation of yield capitalization
known as the constant growth yield capitalization model.
The constant growth model assumes that the company’s
future cash flows will grow at a constant rate into perpetu-
ity and determines value by applying the following formula:
Value = Next year’s cash flow ÷ (weighted average cost of
capital – growth rate)
The court now determines each component of the formula
based on the parties’ evidence.
2. 	Yield Capitalization: Cash Flow and Growth Rate
for Constant Growth Model
Each party determined an estimated cash flow
amount for purposes of its yield capitalization method,
with 	markedly 	different 	results. 	Tegarden 	determined
an estimated cash flow of $1.1 billion, Eyre $800 million.
Consistent with the WSATA Handbook, each appraiser used
as his starting point the net operating income that Plaintiff
reported on its FERC 1 form for 2019 ($1,038,196,981). See
WSATA Handbook at III-3 (“accounting income, such as net
operating income * * * should be transformed into cash flow
prior to its use”). The parties agree that, to determine cash
flow, depreciation must be added back to net operating income
because the amount that was deducted for depreciation is an
28 Only Defendant also used the direct capitalization method, which the
court discusses at the end of this section.

Cite as 25 OTR 227 (2023) 	261
accounting construct rather than an actual cash expendi-
ture. The parties also agree that capital expenditures must
be subtracted in determining cash flow.
Tegarden’s estimated cash flow of $1,100,000,000 is
only slightly greater than Plaintiff’s actual 2019 net operat-
ing income, reflecting his “assum[ption] that the amount of
capital reinvestment is equal to the depreciation expense.”
Tegarden took into account net operating income in the
prior three to five years and various statistical measures
of those amounts, including a comparison against net plant
investment. As for assumptions about the future relevant to
growth, Tegarden considered the effect of anticipated posi-
tive and negative rate changes in different service territo-
ries, which he estimated would result in a modest net reduc-
tion ($1,957,538), as well as construction work in progress
expected to be placed in service, which he estimated would
cause a slight immediate increase.
Eyre determined an estimated cash flow of $800
million. Eyre first increased 2019 net operating income
slightly, from $1,038,196,981 to $1,059,000,000 by apply-
ing a two percent growth factor. He created a substantial
net decrease ($270,000,000) when he added back estimated
depreciation and amortization of $1,030,000,000 while sub-
tracting estimated capital expenditures of $1,300,000,000.
Eyre also subtracted $43,000,000 to account for estimated
changes in regulatory assets and liabilities, and made other,
smaller adjustments, resulting in his rounded amount of
$800,000,000. 29
The $300 million difference separating the parties
derives almost entirely from Eyre’s large net subtraction
($270 million) that resulted when Eyre added $1,030,000,000
for 	depreciation 	and 	amortization 	while 	deducting
$1,300,000,000 	for 	capital 	expenditures, 	as 	opposed 	to
Tegarden’s assumption that capital expenditures will equal
depreciation expense. The $300 million difference does not
cut the way one might expect. Counterintuitively, under the
simple formula for value shown above, if one assumes the
same rate, Eyre’s lower cash flow amount in the numerator
29 The smaller adjustments were to subtract $25,000,000 in DIT and
$8,600,000 in working capital.

262 	PacifiCorp v. Dept. of Rev.
would result in a lower value, and Tegarden’s higher cash
flow amount would result in a higher value.
In arguing for their respective cash flow estimates,
the parties refer frequently to their differing expectations of
future growth. For that reason, the court will consider the
issues of cash flow and the growth factor together.
3. 	Plaintiff’s Method
Tegarden’s method generally fits within what the
WSATA Handbook describes, in critical terms, as a “No
Growth Model.” See WSATA Handbook at III-15 to III-16.
According to the WSATA Handbook, this model “assume[s]
that the company has no ‘effective’ future growth potential
which would contribute to value.” WSATA Handbook at III-
15. At this point, the court pauses to consider the meaning of
“growth” as the parties (and the WSATA Handbook) use that
term. Both parties distinguish between “real growth, i.e.,
earning more than the cost of capital” and “nominal growth,
meaning that the overall size of the plant increased, and the
nominal cash flows increased due to the new size, but the
company was still earning its cost of capital.” See WSATA
Handbook at III-16 (stating that an assumption of no future
growth in cash flow means that “future capital expenditures
are only expected to earn their cost of capital.”). 30
Tegarden’s approach to cash flow ignores any addi-
tional capital expenditures in excess of depreciation, while
Defendant points to such excess expenditures in 2018 and
2019, as well as future projections, as a source of “real”
growth in the value of Plaintiff’s property. Plaintiff pre-
sented evidence that, while its investment in its plant has
grown over time, its growth in net operating income has not
kept pace. Plaintiff points to a graph showing that, at least
since 2001, the rate of annual increases (or losses) in net
operating income corresponds closely to the rate of annual
increases in net plant. A more detailed table shows that,
30 Without implying any precedential effect, the court notes that the Oregon
Supreme Court has similarly explained: “Growth in net cash flows will arise
either because the present asset base generates additional income or because
additions to the asset base produce income beyond the cost of the additions them-
selves, including the costs of operating them.” Union Pacific Railroad v. Dept. of
Rev., 315 Or 11, 22, 843 P2d 864 (1992) (analyzing parties’ arguments for and
against growth factor in case involving centrally assessed railroad).

Cite as 25 OTR 227 (2023) 	263
over the years leading up to and including 2019, the his-
torical rate of change in net plant generally has exceeded
the rate of change in net operating income by, on average,
0.9 percent. 31 The court finds that this historical evidence
supports, at least by correlation, Plaintiff’s position that
increases in net operating income require increases in
capital expenditure, rather than happening as a result of
increased usage of existing property or other efficiencies, as
Defendant argues.
Plaintiff 	also 	presented 	officer 	testimony 	and
an exhibit showing that, for the assessment year ended
December 31, 2019, Plaintiff earned a regulatory rate of
return of 7.373 percent, which was less than the allowed reg-
ulatory rate of return (7.60%). In addition, Plaintiff’s man-
aging director of revenue requirement, Steven McDougal,
testified that Plaintiff earned less than its allowed return
on equity for each of the approximately ten years preced-
ing 2020. The WSATA Handbook recognizes this evidence
as a potential predictor of future increases in net operating
income. See WSATA Handbook at III-5 (“Another technique
for predicting net operating income is to evaluate a utility’s
historical performance as compared to the regulatory body’s
allowed rate of return. An analysis of performance ratios can
be used to predict where current earnings on net plant will
fall in relationship to allowed earnings. For example, if it
can be shown statistically that a centrally assessed compa-
ny’s historical earnings have been, for example, 95 percent
of its allowed rate of return on rate base, it may be reason-
able to assume a similar relationship in the future.”). The
court finds that this evidence further supports Plaintiff’s “no
growth” position and enhances the reliability of net operat-
ing income as a proxy for cash flow for yield capitalization
purposes.
4. 	Defendant’s Method
Rather than use a proxy, Eyre attempted to build an
actual cash flow estimate based on prior-year and projected
31 The table shows all date ranges that start with 2019 and end in a prior
year, through 1989. For 24 ranges over those 30 years, the rate of change in net
operating income was less than the rate of change in net plant. For six ranges,
the rate of change in net operating income was greater than the rate of change in
net plant; however, the excess was modest, ranging from 0.2% to 0.9%.

264 	PacifiCorp v. Dept. of Rev.
data. The quality of his estimate depends, therefore, on the
reliability of the data and the logic behind his assumptions,
which the court now explores.
As to prior-year data, Eyre testified that he “nor-
malized” depreciation and capital expenditure data from
2016 through 2019 in arriving at his projections for 2020.
Eyre’s normalization seems to have consisted mainly of
simple arithmetic processes applied without investigation,
as opposed to adjustments designed to account for identi-
fied anomalies, transactions, or other events. Eyre treated
the four-year increase in Plaintiff’s depreciation in 2016
through 2018 as a “trend” and determined his 2020 depre-
ciation amount of $1,030,000,000 by multiplying the 2019
amount by the four-year average percentage increase. On
cross-examination, however, he acknowledged that some of
the increase in the two latter years may have been caused
by changes in federal tax law, rather than by the addition of
new property, and that he did not know whether those law
changes had an effect beyond 2020. 32 Also during 2018 and
2019, capital expenditures increased dramatically, jumping
more than 60 percent in 2018 and more than 70 percent
in 2019. 33 There is no evidence that Eyre investigated the
business reasons for these increases or the likelihood that
they would continue to affect future cash flow. The court
finds this troubling, particularly since capital expenditures
declined approximately 14 percent from 2016 to 2017. Eyre
simply averaged the amounts for all four years without
explanation.
32 Specifically, the 2017 federal Tax Cuts and Jobs Act (TCJA), Pub L 115-97,
131 Stat 2054 (2017).
33 Eyre derived his estimates from the following prior-year data:
2020 Eyre
Est.
2019 	2018 	2017 	2016
Depreciation
(Eyre uses 8%
growth rate)
$1,030,000,000 	$953,983,000 	$979,350,000 	$796,220,000 $770,251,000
Capital Expen-
ditures (Eyre
uses four-year
average of these
amounts)
$1,300,000,000 	$2,247,610,000 $1,291,567,000 	$797,524,000 $930,851,000

Cite as 25 OTR 227 (2023) 	265
In briefing, Defendant argues that the fact that
capital expenditures in 2018 and 2019 exceeded the sum of
depreciation and DIT is evidence of “real growth.” 34 However,
Defendant presents no evidence linking Plaintiff’s capital
expenditures to growth in Plaintiff’s potential for generat-
ing new, additional cash flow, as opposed to, for example,
expenditures needed to replace existing property that can
be expected to generate the same cash flow. Documents in
the record, such as Plaintiff’s 2019 FERC-1 forms and the
discussions of Plaintiff’s activities in the 2019 10-Ks filed
by Plaintiff’s ultimate parent company, do not aid the court
on this point. The filings contain brief discussions of a wide
range of anticipated capital expenditures, but the court has
found no narrative or quantitative summary that would
allow the court to conclude that Plaintiff expected “real”
growth as opposed to “nominal” growth. Plaintiff’s 2019
FERC-1 discussed Plaintiff’s 2019 “integrated resource
plan” filed with state regulators that calls for investment
in additional “renewable capacity,” energy storage capacity
and a new transmission line; id. at 4335 (2019 K-1) (discuss-
ing “repowering” of all of Plaintiff’s wind-powered gener-
ating facilities “by the end of 2020” to requalify them for
income tax credits, “extend the lives” of the facilities, and
“increase[e] the anticipated electrical generation * * * by
approximately 26%.” Without testimony or other evidence
tying together the data, the court cannot accept evidence of
increased capital expenditures as proof of real growth.
As to other prior-year data, for the item “net changes
in regulatory assets and liabilities,” Eyre selected $43 mil-
lion as his estimate for 2020, even though the amount for
2019 was below zero (negative $55,014,000), the amount
declined for the two prior years, and there was an overall
34 The following table is drawn from Eyre’s appraisal report.
2019 	2018 	2017 	2016
Depreciation 	$953,983,000 	$979,350,000 	$796,220,000 	$770,251,000
Deferred In-
come Tax
- $125,091,000 	-$202,299,000 	$75,165,000 	$145,070,000
Total 	$828,892,000 	$777,051,000 	$871,385,000 	$915,321,000
Capital Expen-
ditures
$2,247,610,000 	$1,291,567,000 	$797,524,000 	$930,851,000

266 	PacifiCorp v. Dept. of Rev.
decline from 2016. 35 He acknowledged on cross-examination
that he “ha[d]n’t looked into” why the 2019 amount declined
below zero. This computation further undermines the court’s
confidence in Eyre’s estimate of cash flow.
Turning to Eyre’s data of future projections, Eyre
relied heavily on a “2020 Plan” generated by Plaintiff. The
2020 Plan is a 19-page document, consisting of tables and
narrative, that bears the heading “Version 2 – 11/08/2019.”
The tables are labeled “2020 Plan Summary,” “Income
Statement,” “Balance Sheet,” and “Cash Flow”; each table
contains columns for the years 2020 through 2029, and some
tables also show one or two prior years. Eyre determined
that the 2020 Plan forecasts a compound annual growth
rate in net income of 8.6 percent for the first three years and
5.6 percent over the entire ten-year period. Eyre compared
these rates to a forecasted compound annual growth rate
in property, plant and equipment of only 2.63 percent and
concluded that Plaintiff was itself predicting “real growth.”
Based on this information, and on his observation that
inflation for 2009 through 2019 had an annual average rate
of 1.61 percent, Eyre selected a rate of growth of two per-
cent, which affected two components of the constant growth
model formula set forth above: increasing the 2019 cash flow
by two percent and, separately, setting the growth rate to
subtract from WACC.
The court finds little basis to rely on the 2020 Plan.
Eyre understood the 2020 Plan to be Plaintiff’s “business
plan closest to the end of the year.” Eyre did not speak to
anyone who had prepared it; he surmised, without evidence,
that Plaintiff has “a large group of people that do this on
an annual basis.” He did not ask the purpose for which the
2020 Plan was prepared. He acknowledged that the fore-
casted amounts become “more speculative * * * the farther
you get out from the present days.” Eyre was unaware
whether the 2020 Plan contained any mathematical errors
35 Eyre’s estimate of the net change in regulatory assets and liabilities for
2020 was $43 million. He determined this amount by averaging the following:
2020 Eyre Est. 	2019 	2018 	2017 	2016
$43,000,000 	-$55,014,000 	$87,483,000 	$18,492,000 	$122,115,000

Cite as 25 OTR 227 (2023) 	267
or other errors. Defendant presented no evidence correlating
amounts shown in prior such plans with actual historical
results. Nothing informs the court whether the 2020 Plan
represented a loose corporate aspiration, as opposed to, for
example, a thoroughly developed metric that might be used
to set officer compensation. Plaintiff’s tax director Norman
Ross testified that the 2020 Plan was not released to the
public and that Plaintiff did not intend that it be relied on
by people outside the company. Overall, the court finds little
basis to treat the 2020 Plan as a reliable forecast of future
data. 36
Eyre concluded that the 2020 Plan was a forecast of
“real growth” because the plan predicts net income to grow at
a compound annual growth rate of 5.6 percent (averaged over
the ten years), while the plan predicts that property, plant, and
equipment (PP&E) will grow at a compound annual growth
rate of only 2.63 percent over the same period. However, Ross
testified that Eyre’s computations contain a mismatch that
overstates the difference between the two rates. In deter-
mining the compound annual growth rate in PP&E, Eyre
included assets in each year that constituted “construction
work in progress” (CWIP). Although Ross agreed that PP&E
together with CWIP grew at 2.63 percent, Ross determined
that PP&E without CWIP grew at 4.8 percent. Ross concluded
that CWIP must be subtracted from PP&E because Plaintiff’s
regulators do not allow Plaintiff to earn a return on CWIP,
so CWIP does not contribute to net income. The court finds
no argument from Defendant in response to this point. The
court agrees with Plaintiff: Where the goal is to test for “real
36 Unexplained differences compared to the amounts used in the parties’
appraisal computations also undermine the persuasive value of the 2020 Plan.
First, the “income statement” to which Eyre refers in the 2020 Plan does not show
amounts of “net operating income” (the starting point for Eyre’s cash flow compu-
tation); instead, the 2020 Plan refers to “net income” and to “operating income.”
Using 2018 (the only completed year shown on the 2020 Plan) as a reference, the
court finds that the amount for “operating income” ($1,050,700,000) is similar to,
but not identical with, “net operating income” ($1,041,866,000), but the manner
of computing the two amounts is sufficiently different that the court is not con-
fident that “net operating income” is comparable to “net income.” The court also
notes that the heading of the relevant page of the 2020 Plan is “Income Statement
(PPW Holdings).” Plaintiff’s Form 10-K for 2019 describes PPW Holdings LLC as
Plaintiff’s parent company. The court finds no evidence in the record indicating
whether PPW Holdings LLC has income or operations, apart from its ownership
of Plaintiff’s stock, that might have been combined with projections for Plaintiff.

268 	PacifiCorp v. Dept. of Rev.
growth” by comparing the rate of growth in Plaintiff’s net
income to the rate of growth in PP&E, the dollar amount of
PP&E must be limited to property capable of generating net
income. Ross’s calculations show that the effect of this cor-
rection is that the 10-year compound annual growth rate in
PP&E rises from the rate Eyre derived (2.63%) to 4.8 percent,
which is much closer to the 2020 Plan’s projection of 5.6 per-
cent growth in net income. 37
The narrative in the 2020 Plan does not, by itself,
support or refute Eyre’s conclusion of real growth. Like
Plaintiff’s public filings on Forms FERC-1 and 10-K, the
narrative in the 2020 Plan mentions many future projects
and prospects, including new renewable energy and storage
projects as well as coal plant retirements. However, the 2020
Plan does not appear to have the purpose of distinguishing
between real growth and nominal growth, and its data are
not organized in a way that informs the court on that point.
The court finds no basis in the 2020 Plan to conclude that
Plaintiff expected real growth.
The court finds no other evidence of future real
growth. 	In 	post-trial 	briefing, 	Defendant 	argues 	that
“PacifiCorp’s customer base has been increasing and is
expected to continue to increase.” Defendant cites no evi-
dence for this assertion. Eyre testified, without reference to
any documentary or other evidence: “A growing company
like PacifiCorp, they’re growing. They’re adding new cus-
tomers every day. So they’re required to add new plant as
they—as they continue to grow, they’ll probably on a normal-
ized basis have more capital expenditure and depreciation
because they’re growing.” Even if these circular assertions
had a basis in evidence, they do not help the court because
they fail to distinguish between real growth and nominal
growth.
37 Ross also testified that the 2020 Plan contained an error in the projection
of income amounts for 2028 and 2029; for each of those years, income was over-
stated by $100 million. According to Ross, correcting that error reduced the com-
pound rate of growth in net income from 5.6% to 4.8%, which matches the post-
CWIP compound rate of growth in PP&E. Defendant objects to Ross’s attempted
correction as untimely and unsubstantiated; Plaintiff argues that the error is
sufficiently obvious that Eyre should have spotted it. The court need not resolve
this point because the court finds the 2020 Plan unreliable for the reasons stated,
especially as to the later years.

Cite as 25 OTR 227 (2023) 	269
5. 	Conclusion as to Cash Flow and Growth Rate
The court is compelled to choose between two
imperfect measures of cash flow. Plaintiff offers net oper-
ating income as a proxy based on its firmly held view that
the fact that it is a regulated utility means, per se, that it
will never experience real growth because regulators will
prevent it from earning more than its cost of capital. To
some extent, Plaintiff relies on this theoretical position
instead of addressing Defendant’s points, notably the fact
that capital expenditures grew substantially in excess of
depreciation and DIT in 2018 and 2019. On the other hand,
Defendant insists just as strongly that all regulated utilities
experience real growth that is not reflected in net operat-
ing income, building up a store of property value ignored
by regulators, with the result that utilities always sell for
more than their net book value. The court need not, and
does not, resolve the parties’ competing theories to deter-
mine cash flow in this case. The court finds too many logical
leaps and unsupported assumptions in Defendant’s build-up
determination of cash flow. Plaintiff’s use of net operating
income as a proxy, despite flaws, is superior because it is bet-
ter supported by historical data. On balance, the court finds
that the preponderance of the evidence supports Plaintiff’s
estimated cash flow of $1,100,000,000.38 For the same rea-
sons, the court finds that the growth rate in the yield capi-
talization formula is zero. 39 In adopting this cash flow and
the growth rate of zero in this case, the court neither vali-
dates nor rejects a generalized theory that the net operating
income of a regulated utility is necessarily an appropriate
38 Consistent with the use of net operating income as a proxy, in lieu of a com-
puted cash flow, the court also accepts Plaintiff’s position that no adjustment for
inflation is appropriate. While the court agrees with Defendant that regulators
may provide for inflation, either in a rate case under ORS 757.259 or through an
automatic adjustment clause under ORS 757.210, the adjustment would affect the
numerator and the denominator of the constant growth formula; inflation would
not represent real growth.
39 Defendant also criticizes Tegarden’s no-growth assumption as inconsis-
tent with his assumptions of positive growth in computing the weighted average
cost of capital. However, only the parties’ Dividend Growth Model (DGM) esti-
mates relied on an assumed rate of future growth. Because of flaws unrelated
to the projection of Plaintiff’s future cash flow stream, the court gives no weight
to either party’s DGM analysis, and the court therefore finds any such inconsis-
tency irrelevant.

270 	PacifiCorp v. Dept. of Rev.
proxy for cash flow consisting of net operating income plus
depreciation and DIT, less capital expenditures.
6. 	Yield Capitalization: Rate (Weighted Average Cost of
Capital)
In a yield capitalization method, the rate by which
cash flow is divided often is referred to as the “weighted
average cost of capital” (WACC). See, e.g., WSATA Handbook
at III-19 to III-20. The rate is composed of two components:
the cost of debt, and the cost of equity. The WACC is the
average of the two, weighted according to the company’s cap-
ital structure, i.e., its relative proportions of equity and debt.
See id. at III-26 to III-30. The court reviews each party’s
proffered capital structure, cost of debt, and cost of equity.
7. 	Capital Structure
In this case, the parties’ determinations of Plaintiff’s
capital structure are very similar, and each is supported by
substantial evidence. Tegarden determined a capital struc-
ture of 35 percent debt and 65 percent equity. Eyre deter-
mined a capital structure of 37 percent debt and 63 percent
equity. The court determines a capital structure of 36 per-
cent debt and 64 percent equity.
8. 	Capitalization Rate: Cost of Debt
Tegarden determined a cost of debt of 4.25 percent;
Eyre determined a cost of debt of 3.73 percent. Both Tegarden
and Eyre based their cost of debt on the actual yield to matu-
rity of bonds issued by utilities they considered comparable.
They agreed on one point: they each looked to bonds that
were assigned the bond rating of BBB+.40 As discussed below,
the parties disagree about whether to use effective rates for
newly issued debt, as opposed to the yield to maturity for
existing debt. They also disagree about the selection of com-
parator companies. Finally, Defendant argues that Plaintiff
failed to select yields as of the relevant date.
40 BBB+ is the Standard & Poor’s rating. The parties sometimes referred
to the equivalent Moody’s rating of Baa. Tegarden arrived at the BBB+ rating
because it was the median bond rating “for the entire electric industry no matter
how it is divided.” Eyre reached the same rating by selecting 10 guideline com-
panies that he considered “reasonably similar” members of the “Electric Utility
segment.” The average rating of those 10 companies was Baa (Mergent).

Cite as 25 OTR 227 (2023) 	271
Tegarden started with “the yields to maturity for
all rated electric utility bonds traded at year end 2019,” as
reported in Mergent Bond Record in January 2020. From
this list of approximately 300 bonds (which the court refers
to as Tegarden’s Master List), Tegarden selected those rated
at BBB+. There were 37 such bonds; the court refers to this
subset as Tegarden’s BBB+ List. The average yield to matu-
rity of the bonds on Tegarden’s BBB+ List as of January
1, 2020, was 4.40 percent. Tegarden also considered the
average yield of all utility bonds with the same BBB+ rat-
ing (3.73%), as reported by Mergent’s Bond Record, as well
as other data points. He concluded that 4.25 percent was
appropriate as his cost of debt.
Eyre reviewed one of the data sources Tegarden
considered, namely, the Mergent data for all utility bonds.
Eyre described this source as “the Mergent Bond Record for
January 2020,” showing “the average yield to maturity for
a public utility bond of [the BBB+] rating issued on 1/1/20
* * *.” Eyre selected that percentage as his cost of debt: 3.73
percent.
a. 	Use of Effective Rates for Newly Issued Debt vs.
Yield to Maturity For Existing Debt
Defendant criticizes Tegarden’s approach on the
grounds that it does not rely on the yield to maturity for
debt issued on or around the assessment date, January 1,
2020. Defendant asserts: “Mr. Eyre’s 3.73% cost of debt was
as of year-end 2019 but Mr. Tegarden’s 4.25% debt rate was
not.” Defendant then qualifies this statement somewhat,
stating that “certain of” Tegarden’s yields “are not year-
end rates.” Eyre distinguished between (1) the effective
rates for bonds actually issued on or about the assessment
date, and (2) the effective rates for bonds issued months or
years before the assessment date but traded on or about the
assessment date.41 At trial, he criticized Tegarden because
“Mr. Tegarden went and used the yields of bonds that have
41 The court makes no finding as to whether Eyre relied solely on yields on
bonds issued at or around January 1, 2020. Eyre’s exhibits include no source doc-
ument that identifies whether the subject bonds are newly issued or pre-existing.
On cross-examination, Eyre was asked whether Mergent’s, the source of his data,
was “looking at all sorts of seasoned bonds and * * * determining what that yield
is based on the current interest rate that is being provided.” Eyre responded: “I

272 	PacifiCorp v. Dept. of Rev.
already been issued. Some of them had been issued years
before the [assessment] date.” In briefing, Defendant takes
the position that “[t]his practice of using existing, or embed-
ded debt, is inconsistent with the determination of real mar-
ket value on the appraisal date * * *.”42 The apparent prem-
ise of this position is that only the effective rates for actual
issuances on or about a particular date are reliable data for
the yield to maturity of comparable bonds as of that date.
The court finds Defendant’s premise unreliable and its posi-
tion overstated.
The WSATA Handbook’s discussion of debt rates
includes the following statement:
“An excellent source of debt money costs is the effective rate
at which new debt issues are sold. The effective rate may
vary from the coupon rate depending upon the market at
the time. Wide publicity is given to the sale of new debt
issues and these issues are very frequently put out to com-
petitive bidding.”
WSATA Handbook at III-28. Thus, the WSATA Handbook
implies that there is an evidentiary reason to prefer rates
for newly issued debt, i.e., that those rates are more likely to
be reliable because they are more likely to be based on bids
from a larger number of potential buyers. The court ques-
tions whether this rationale, first stated more than thirty
years ago, has a basis in fact in today’s bond market.43
Even if it does, the court finds Defendant’s reliance on the
quoted passage misplaced because the WSATA Handbook
elsewhere emphasizes that debt rates are “relatively easy to
determine” and are “usually obtainable from current loan
rates and current ratios of yield to price of bonds.” WSATA
don’t know what procedure they go through to determine that yield. But it is * * *
reported as a yield to maturity for this rated bond.”
42 The court discusses Defendant’s use of the term “embedded debt” below.
43 The quoted sentences originally appeared in the 1989 edition of the
WSATA Handbook and were reprinted verbatim in the most recent edition,
which was published in 2009. Western States Association of Tax Administrators,
Appraisal Handbook: Valuation of Utility & Railroad Property at 50-51 (1989). In
particular, the court is uncertain whether the reference to “[w]ide publicity” for
new debt issues remains valid in light of substantial changes in the delivery of
information since the development of the internet. The WSATA Handbook offers
no further detail, nor does anything in the record in this case substantiate the
sentences.

Cite as 25 OTR 227 (2023) 	273
Handbook at III-28 (emphasis added). At another point, the
WSATA Handbook states that “debt with a low nominal
interest rate will be discounted in the marketplace at an
effective rate equivalent to the current cost of debt.” Id. at
III-29. Reading the WSATA Handbook’s discussion of debt
rate as a whole, the court is left with the impression that the
marketplace can efficiently and accurately determine the
yield to maturity of debt as of an assessment date, even if the
debt was issued earlier.44 The court has found nothing in the
Department’s other exhibits that discusses the relative reli-
ability of effective rates of current vs. prior issuances. The
court finds no evidence that Tegarden’s debt rate is flawed
for failure to rely solely on debt issuances on or around the
January 1, 2020, assessment date. Nor does the court find
any evidence that Eyre’s debt rate is rendered more reliable
because it purports to be based solely on debt issuances on
or around the January 1, 2020, assessment date.45
44 This impression is confirmed by another of Defendant’s administrative
rules, entitled: “Derivation of Capital Structure and Discount Rates for Valuing
Industrial Properties and Department-Assessed Properties.” 	OAR 150-308-
0250(2)(b). That rule states in relevant part:
“The cost of debt is the current market rate for new securities. The embedded
rate on securities previously issued is not a proper measure. In order to deter-
mine the cost of debt the appraiser should:
“(A) Refer to the rates for seasoned bond issues from Moody’s Utility,
Industrial, and Transportation weekly news reports or other rating services
for at least two months immediately prior to the appraisal date. This should
be done by bond rating (Aa, A, Baa, etc.) and industry type.
“(B) Obtain information on new bond issues by industry type and bond rat-
ing from Moody’s Bond Survey or other publications for at least two months
immediately prior to the appraisal date.
“(C) Consider recommendations on debt rates submitted by industry.
“(D) Select rates for each industry group by bond rating after analyzing the
data in the steps above.”
In other words, the rule directs appraisers to both refer to “rates for seasoned
bond issues” (paragraph (A)) and to “[o]btain information on new bond issues”
(paragraph (B)). Nothing directs an appraiser to prefer, or to rely solely on, rates
for new issuances.
45 Eyre’s testimony also suggests that he conflated the use of current yields on
seasoned debt (which, as discussed, is permitted by the WSATA Handbook and by
OAR 150-308-0250(2)(b)) with the use of “embedded” debt rates. (See Transcript
at 445 (“You do not use embedded costs of debt or—or the yields on bonds that
have already been issued sometimes many years prior to the appraisal date. That
is not indicative of market value today.”).) The WSATA Handbook cautions:
“Some appraisers advocate using the actual coupon rates on existing debt
(embedded debt). The logic is that during times of rising interest rates a

274 	PacifiCorp v. Dept. of Rev.
b. Use of Trades Occurring Near January 1, 2020;
Appraisal Date vs. Earlier Dates
Defendant’s second significant criticism is that,
even though the Tegarden BBB+ List may have relied on
yields to maturity for all rated electric utility bonds “traded
at year-end 2019,” those data nevertheless were inaccurate
because they were not yields to maturity “as of” December
31, 2019. Defendant’s expert Dr. Bradford Cornell testified
that Tegarden may well have assembled a list of bonds that
were traded at the end of 2019, but rather than use the yields
attributable to trades of those bonds occurring at the end of
2019, he instead selected yields attributable to trades occur-
ring throughout the year. Defendant presented evidence
that yields on corporate and utility bonds generally declined
significantly during 2019, such that relying on average rates
during 2019 would be inaccurate. In a rebuttal exhibit,
Cornell reprinted the entire Tegarden Master List, then
selected five of the bonds shown on that list—bonds that had
been issued by Plaintiff itself. Cornell presented a series of
five screen shots from Bloomberg, which he described as “the
traders’ internet site that produces actual market results.”
For each of the five bonds, the screen shot showed seven to
12 dates in December 2019 or January 2020 on which the
bond was traded, the volume and number of trades on each
date, and a last yield on each date. On each screen shot the
last yield reported was between approximately one percent
and two percent lower than the yield shown on the Tegarden
Master List. Cornell testified: “I can’t square anything like
Mr. Tegarden’s number with the actual trading data for
PacifiCorp’s bonds.” Defendant argues that this sample of
prospective purchaser would most likely assume the existing debt rather
than refinance. This position lacks merit because, even in the case of an
assumption, debt with a low nominal interest rate will be discounted in the
marketplace at an effective rate equivalent to the current cost of debt. The
use of embedded debt rates in estimating the current cost of capital results
in a capitalized earnings indicator which reflects high or low interest debt
instruments at their face value rather than at their market value. Regardless
of the regulatory practice of using embedded debt rates, their use is contrary
to the market value concept.”
WSATA Handbook at III29. All evidence indicates that Tegarden relied on mar-
ket data for yields to maturity, rather than coupon rates, when estimating the
cost of debt. Therefore, the court sees no factual basis for Defendant’s criticism
that Tegarden relied on “embedded debt,” as defined in the WSATA Handbook.

Cite as 25 OTR 227 (2023) 	275
Plaintiff’s own bond rates undermines the accuracy of the
Tegarden Master List as a data source. In its response brief,
Plaintiff reiterates Tegarden’s statement in his appraisal
report that his Master List showed “the yields to matu-
rity for all rated electric utility bonds traded at year end
2019” and Tegarden’s testimony on cross-examination that
his Master List “represent[s] the cost of debt at year-end
December 31st, 2019.” In rebuttal, Tegarden testified that
he did not know why there might be a difference between the
yields he used and those derived from Cornell’s Bloomberg
screen shot approach, noting that Cornell did not explain
how the Bloomberg yields were calculated. Tegarden also
testified that his BBB+ List was “basically the same data as
Mr. Eyre, I believe, used[:] a summary of BBB rated debt.”
The court finds that the comparison of the Tegarden
Lists with Bloomberg screen shots showing yields of actual
trades near the assessment date raises questions but falls
short as a reason to reject Tegarden’s debt rate. The trades
on Cornell’s screen shots are of five bonds that Tegarden did
not use because they had a rating different from the rating
on which both appraisers agree. The list Tegarden actually
used—his BBB+ List—includes only 37 bonds, but Cornell
made no effort to provide comparable screen shots showing
trades for those bonds. Cornell also made no effort to show
that Tegarden used the wrong set of published data and that
Tegarden should have used a more accurate set of published
data. Rather, Cornell relied on unpublished data, apparently
obtaining the screen shots by contacting “a trader [who] was
nice enough to give [the screen shots] to me from Bloomberg
* * *.” Cornell’s evidence implies that an appraiser seeking data
on actual trades of seasoned bonds during a particular win-
dow of time must resort to a favor from a friend in the indus-
try because the data are unavailable from publishing services
such as Mergent. The court finds this implication implausible.
The court finds the Department’s criticism of Tegarden’s debt
rate inadequately substantiated by the evidence.
c. 	Use 	of 	Electric-Only 	Utilities 	as 	Guideline
Issuers vs. Inclusion of Other Kinds of Utilities
Plaintiff 	criticizes 	Eyre’s 	cost 	of 	debt 	analysis
because Eyre relied exclusively on a data point that includes

276 	PacifiCorp v. Dept. of Rev.
not only electric utilities but also water and gas distribution
utilities. Tegarden stated that data for electric-only utilities
allowed a more precise measurement of Plaintiff’s cost of
debt. Eyre did not refute this point, except to testify that
“[e]lectric utilities dominate the utility bond market * * *
and they would be the major component leading up to that
typical market yield.” Although the evidence on both sides
is thin, the court finds it plausible that other electric utili-
ties are more comparable to Plaintiff than a mix of electric,
water, and gas companies.46 See WSATA Handbook at III-28
(recommending segregating data based on industry type);
III-9 to III-12 (discussing use of “reasonably similar” com-
panies as comparators for capitalization analysis).
d. 	Conclusion as to Cost of Debt
The court finds that the preponderance of the evi-
dence supports Plaintiff’s determination that the cost of
debt was 4.25 percent.
9. 	Capitalization Rate: Cost of Equity
Tegarden determined a cost of equity of nine per-
cent, excluding “flotation costs,” which are discussed below.47
Eyre determined a cost of equity of 6.7 percent. Each expert
used three methods. Both Tegarden and Eyre used the
Dividend Growth Model (DGM), which the court will discuss
first.48 Both also used the historical Capital Asset Pricing
Model (CAPM), as well as variations; the court will discuss
the CAPM second. Finally, Tegarden used the Build-Up
(Risk Premium) Method, which the court discusses third.
a. 	Cost of equity: DGM
Using the DGM, Tegarden determined a cost of
equity of 8.35 percent. Plaintiff’s expert, Dr. Roger A. Morin,
determined a cost of equity of 8.8 percent to 9.4 percent. Eyre
46 Plaintiff claimed in briefing that water and gas utilities have risks and
capital structures different from those of electric utilities, but the court has found
nothing in the record that supports this assertion.
47 Plaintiff argues for the cost of equity that Tegarden determined. However,
Plaintiff also engaged additional expert Dr. Roger A. Morin, who prepared a sep-
arate estimate solely of the cost of equity, which was 9.6%.
48 Other names for the DGM include “discounted cash flow” and the “dis-
counted growth model.”

Cite as 25 OTR 227 (2023) 	277
determined a cost of equity of 7.60 percent. The parties agree
on the formula for the DGM and agree that the only mate-
rial difference is one component of the formula: the rate of
growth. Under the DGM formula, the cost of equity estimate
is (1) the expected dividend from the company at the end of
the first future year divided by the company’s current stock
price, expressed as a percentage, plus (2) the expected rate of
growth in dividends, also expressed as a percentage: 49
Cost of equity = (Dividend in Year 1 ÷ Stock Price in Year
0) + (Growth Rate)
The relatively uncontroversial fraction in clause (1) of
the foregoing sentence sometimes is referred to as the cur-
rent yield, or the dividend yield. For publicly traded compa-
nies, analyst firms regularly publish the current stock price,
as well as estimated dividends and estimated growth rates.
Because Plaintiff’s stock as a wholly-owned subsidiary is not
publicly traded, the parties’ experts used published data for
a group of investment-grade, dividend-paying electric utili-
ties they selected. Morin concluded a dividend yield of 3.15
percent, and Eyre concluded a dividend yield of 3.10 percent.
Tegarden’s appraisal report does not specify his conclusion
as to a dividend yield, but it lists companies with average or
mean dividend yield percentages ranging from 2.82 percent
to 3.24 percent, and Plaintiff states in briefing: “The only
material difference between Mr. Tegarden’s and Mr. Eyre’s
DGM estimates is their growth estimates.” Accordingly,
the court finds the dividend yield of 3.10 percent, consistent
with Eyre’s conclusion and Plaintiff’s position.
Turning to the growth rate, because the DGM for-
mula adds the growth rate to the dividend yield, the higher
the growth rate, the higher the cost of equity. The parties’
experts differed over which companies’ growth rate esti-
mates they selected and whether they modified those growth
rate estimates. Tegarden and Morin used average estimated
growth rates of selected companies, as published by Value
Line, Standard & Poor’s, and Zacks, without modification,
49 A finance textbook that both parties cite frequently refers to the cost of
equity estimate variously as the “discount rate,” the “market capitalization rate
for the firm’s common stock,” or the “expected rate of return on other securities
of comparable risk.” Richard A. Brealey, et al., Principles of Corporate Finance 87
(13th ed 2020) (Brealey).

278 	PacifiCorp v. Dept. of Rev.
resulting in average growth estimates ranging from 4.75
percent to 5.71 percent (Tegarden) and 5.45 percent to 6.05
percent (Morin). According to Defendant, to rely solely on
the published growth rates is flawed because those rates
are “short term growth rates,” while the object of the DGM
analysis is to estimate “sustainable growth into perpetu-
ity.” Eyre attempted to correct for this deficiency in the pub-
lished data by using a multi-stage model that reduces the
estimated growth rate over time, taking into account the
growth rate for the economy as a whole, for which he used
a federal government estimate of 3.70 percent. Plaintiff
does not appear to contest that the published growth rates
are for the short term, and Plaintiff acknowledges that an
approach that assumes lower growth rates after a period of
years could be reasonable. However, Plaintiff cautions that
a downward adjustment to the growth rate must be coupled
with an upward adjustment to the assumed dividend—
which Eyre’s model lacks. Plaintiff’s expert Morin testified:
“Another way of explaining this is as follows. If growth is
going to decrease, less [of] the earnings will be required to
finance the capital required by growth. So these liberated
earnings, these freed up earnings, they have to go some-
where. Where do they go? Dividends. They can’t go any-
where else. And the big problem here with * * * Mr. Eyre’s
multistage model is that he failed to take into account
that if you lowered the growth you’ve got to beef up the
dividend.”
Plaintiff’s tax director, Norman Ross, testified similarly:
“Mr. Eyre has used a three-stage version of the dividend
growth model and that can, in fact, be a valid model, but it
* * * can only be a valid model when the inputs are correctly
applied, and Mr. Eyre has not correctly applied those. He’s
left the dividend yield, and thus, the payout ratio constant
over time while he’s shrunk the growth rate and that seri-
ously understates the cost of equity estimate.”
The court finds that each party states valid criticisms
about the other’s DGM, but neither party offers a DGM that
incorporates corrections of the flaws identified by the other
party. As to Plaintiff’s use of analyst-published growth rates
to make a long-term forecast, the court finds Defendant’s
criticism warranted. Neither party has submitted evidence

Cite as 25 OTR 227 (2023) 	279
from the publications themselves as to the intended duration
of the published growth rates they used. However, Eyre tes-
tified that the published data are “a short-term growth rate”
for “the next three to five years,” and Plaintiff has not refuted
that evidence. Brealey seems to corroborate Defendant’s posi-
tion, stating: “Analysts are rarely prepared to stick their
necks out by forecasting dividends to kingdom come, but they
often forecast growth rates over the next five years, and these
estimates may provide an indication of the expected long-run
growth path.” Brealey at 88. Cornell testified for Defendant
that a growth rate that outpaces the annual rate of growth
of the economy for an extended period is invalid. On cross-
examination, Plaintiff’s witness Morin agreed with this gen-
eral point but insisted that analyst forecasts nevertheless
correlate with the stock price more than any other variable. 50
Defendant, 	meanwhile, 	proffers 	a 	multi-stage
DGM that reduces the rate of growth over time. Brealey at
90-91. The court finds warranted Plaintiff’s criticism that
Eyre failed to increase the expected dividend amount (the
numerator in clause (1) of the formula). That some increase
is likely, is supported by the testimony quoted above, as well
as by a comment from a nationally recognized expert whose
work is cited by both parties. (Dr. Aswath Damodoran, New
York University: “A model that just changes growth and
leaves discount rates and payout ratios unchanged is funda-
mentally flawed and that is one reason I would reject models
that have 3 stages of growth and hold all else constant or the
H-model, another over used and rigid model, when it comes
to payout ratios.”) Cornell seemed to intend to address this
point in rebuttal testimony regarding “disappearing earn-
ings”; however, the testimony that followed merely reiter-
ated that Plaintiff’s growth rates were too high, and the
court cannot discern a refutation of Plaintiff’s criticism.
Each party has identified significant, credible short-
comings in the other’s DGM analysis. The parties have not
50 Morin acknowledged the general validity of a passage in Brealey caution-
ing entry-level finance students to “resist the temptation to apply the [simple
constant-growth DCF] formula to firms having high current rates of growth.
Such growth can rarely be sustained indefinitely, but the constant-growth DCF
formula assumes it can.” Brealey at 89. On the other hand, Brealey’s hypothetical
high-growth rate is 20%, far above the rate that Plaintiff assumes. See id.

280 	PacifiCorp v. Dept. of Rev.
attempted to present estimates that adjust for these issues,
and the evidence does not leave the court equipped to deter-
mine any such adjustment. The court concludes that neither
party’s DGM estimate is entitled to any weight.
b. 	Cost 	of 	equity: 	CAPM 	(historical, 	ex 	post
formula)
The parties agree that the CAPM is a widely
accepted and widely used method to estimate the cost of
equity. See WSATA Handbook at III-20 (CAPM one of “two
most widely used and recognized methods for estimating
the cost of equity”). Under the standard CAPM formula
(also referred to as the “historical” or “ex post” formula), the
cost of equity estimate is (1) the “risk-free rate” of return
on investment plus (2) the product of (a) the “beta” factor
(a number representing the company’s risk in relation to
that of the average publicly traded company), and (b) the
“market risk premium.” The market risk premium is the
expected return in excess of the risk-free rate that an inves-
tor would demand; in other words, the sum of the risk-free
rate and the market risk premium is the rate of return that
a hypothetical investor could expect to derive by investing
in a well-diversified portfolio of publicly traded stocks. See
Brealey at 186, 205.
Cost of equity = Risk-free rate + (Beta * (market risk
premium))
Market risk premium = market rate of return – risk-free
rate
Each party derived estimates using this basic formula, as
well as variations discussed below.
The parties do not disagree significantly regarding
the beta factor to be applied to Plaintiff. Tegarden deter-
mined an estimated beta of 0.58; Morin and Eyre estimated
0.60. Both estimates are supported by substantial evidence,
and the court finds that the beta of Plaintiff was 0.60 based
on the findings of at least one expert for each party.
Tegarden and Eyre each presented one historical
CAPM estimate that used nearly identical inputs, with
very similar results. For that estimate, Tegarden and Eyre

Cite as 25 OTR 227 (2023) 	281
selected, as the risk-free rate, the long-term Treasury bond
rate of 2.25 percent as of the assessment date. They then
used a historical market risk premium of approximately
7.20 percent, based on readily available published figures.
(Tegarden 7.20% vs. Eyre 7.15%) Not surprisingly, the
resulting estimates of the cost of equity are nearly the same:
Tegarden’s estimated cost of equity based on these inputs is
6.43 percent; Eyre’s is 6.54 percent. There the agreement
ends, however. While Eyre placed one-third reliance on this
result, Tegarden essentially disavowed it. 51, 52
c. 	CAPM: Selection of risk-free rate
One reason Tegarden assigned little to no weight to
his historical CAPM estimate was a concern that the federal
government, as of the assessment date, had long been holding
the Treasury bond rate below the rate that would have been
set by the market. Specifically, Tegarden testified that the
federal government’s practice of quantitative easing, starting
around 2008, which included purchasing great quantities of
its own bonds, “manipulated” the market by driving up the
price, thereby reducing the yield to an artificial level. Thus,
although Tegarden’s CAPM estimate applied the 2.25 per-
cent long-term Treasury bond rate, he essentially rejected
it. Morin shared Tegarden’s view but addressed the issue by
using a risk-free rate of 3.9 percent derived from forecasts of
future long-term Treasury bond yields. Morin gave about 16.7
percent weight to his CAPM estimate based on this higher
risk-free rate (and based as well as on a “forward-looking”
market premium discussed below). 53
Defendant did not refute Plaintiff’s evidence that
government actions resulted in lower actual long-term
Treasury bond rates than otherwise might have occurred.
51 In selecting his final cost of equity of 6.70%, Eyre gave equal weight to (1)
his DGM estimate of 7.60%, (2) his historical CAPM estimate of 6.54%, and (3) his
supply side CAPM estimate of 5.95%.
52 Tegarden gave this result “a whole lot less weight” when reconciling it
with other indicators.
53 Morin derived a cost of equity estimate of 8.9% using CAPM and a cost of
equity estimate of 9.6% using a variation he referred to as an empirical CAPM.
He assigned equal weight to six estimates, including the two foregoing CAPM
estimates, two DGM estimates, and two estimates using electric utility risk pre-
mium data and the yield on long-term US Treasury bonds. Morin’s final cost of
equity estimate of 9.6% is the average of those six estimates.

282 	PacifiCorp v. Dept. of Rev.
However, Cornell disagreed that the government actions
invalidated current actual yields as a proxy for a risk-free
investment. Cornell declared in his rebuttal report: “The
current yield on long-term Treasury bonds as of December
31, 2019, reflects the investors’ required return on long-term
Treasury bonds and investor expectations regarding trea-
sury yields for the future as of that date.” At trial, Cornell
referred to the long-term Treasury bond rate as: “a for-
ward-looking rate. The 2.25 is what investors expect over
the next 20 years. So it’s an average of short-term expecta-
tions rolled over for 20 years.” Cornell further testified: “just
because you have a big buyer, it’s still a market rate * * * the
market is super deep. You can buy it. You can short it. You
can trade derivatives. If I thought that price was wrong, I’d
be in the market.” 54 Cornell, as well as Defendant’s witness,
Dr. Steven Kihm, also testified that a forecast of future
Treasury bond rates is inherently less accurate than the
market-generated actual yield as of the assessment date. 55
Answering this criticism, Morin testified that there should
be consistency; if other components of the valuation model
use forecasted rates, the risk-free rate should be derived by
forecasting as well.
The court finds Defendant’s position as to the risk-
free rate more persuasive. Plaintiff did not dispute that
54 The court notes that Cornell undermined this position to some extent by
referring approvingly in his rebuttal report to analysis by Duff & Phelps that
relied on a risk-free rate derived from forecasts of long-term Treasury note yields
rather than current yields. In rebuttal testimony, Cornell acknowledged the
apparent inconsistency but pointed out that, “in conjunction, [Duff & Phelps]
also used a lower equity risk premium of * * * 5 percent,” which, together with
Plaintiff’s beta of 0.6, would result in an overall cost of equity of 6 percent—lower
even than Eyre’s estimated cost of equity. The court does not understand that
response. Cornell did not explain—and the evidence presented does not inform
the court—why or how a risk-free rate that is invalid as a matter of principle
because it is clouded by potential forecasting error can become acceptable by
adjustment of another factor in the formula. Accordingly, nothing in this opinion
should be read as a finding that a forecasted rate is per se invalid as a proxy for a
risk-free rate under the CAPM.
55 Kihm agreed, writing that “the market knows everything investment pro-
fessionals know about the economy, quantitative easing by the Federal Reserve,
threats of inflation, the impact of the COVID-19 pandemic, tax law revision pos-
sibilities, and everything else that might affect interest rates. While no one can
forecast the future direction of interest rates with a high degree of accuracy, the
evidence is compelling that the market will weigh those factors much more appro-
priately than investment professionals.”

Cite as 25 OTR 227 (2023) 	283
the market for long-term Treasury bonds remained liquid
despite quantitative easing, nor did Plaintiff contend that
the federal government’s participation as a buyer in the
bond market changed the character of federal bonds as
essentially risk free. Rather, Plaintiff argued that the risk-
free rate would have been higher if the government had not
acted in the bond market. However, based on two scholars
frequently cited by the parties, the court understands that
the rationale for using a risk-free rate in the CAPM is to
identify a point of relative certainty premised on market con-
fidence in the United States government’s promise to repay
the borrowed sum plus the amount of interest stated on the
face of the bond. See Brealey at 177 n 18 (“After all, the U.S.
government can always print money to pay off its debts.”).
Defendant in its exhibits quoted Dr. Aswath Damodaran:
“The only securities that have a chance of being risk free
are government securities, not because governments are
better run than corporations, but because they control the
printing of the currency.” Adjusting this actual rate based
on forecasts of future yields introduces uncertainty that will
vary in degree based on the forecaster’s ability to predict
market conditions and future government policies, which is
contrary to the purpose of the risk-free rate.
The court concludes that the most appropriate
risk-free rate is the rate of interest on long-term Treasury
bonds as of the assessment date. The court finds that the
federal government’s practice of purchasing large volumes
of bonds may have lowered the rate but did not make the
market illiquid or the resulting rate other than risk free.
Morin’s proffered forward-looking rate relies on forecaster
judgment and thus adds uncertainty to the rate set by the
market. Therefore, the court finds that the risk-free rate for
purposes of a CAPM analysis in this case was 2.25 percent.
d. 	CAPM: Tendency of historical, ex post method
to understate cost of equity for low-beta stocks
Plaintiff’s expert Morin testified that cost of equity
estimates using the historical CAPM (6.43% by Tegarden;
6.54% by Eyre) are too low because that method (which he
referred to as the “plain vanilla CAPM”) has been shown
to systematically understate the cost of equity for low-beta

284 	PacifiCorp v. Dept. of Rev.
businesses. Morin stated: “[T]he plain vanilla CAPM under-
states the return on low beta securities and overstates the
return on high beta securities.”); See also, Shannon P. Pratt
& Roger J. Grabowski, Cost of Capital: Applications and
Examples 164 (3d ed 2008): “CAPM cost of equity estimates
for high-beta stocks are too high and estimates for low-beta
stocks are too low relative to historical returns.”) Defendant’s
expert Cornell seemed to agree with this general criticism of
the historical CAPM. He stated, “[T]he fact that the security
market line is flatter than the pure theory projects, tends
to be right.” The court finds the evidence compelling on this
point. There is no dispute that Plaintiff, with a beta of .60,
is a “low-beta” business. Accordingly, the court finds that the
historical CAPM estimates of 6.43 percent to 6.54 percent
are likely below Plaintiff’s actual cost of capital. 56
e. 	Morin’s proffered correction (“empirical” CAPM)
Morin sought to correct for the tendency of CAPM
to understate value by applying a variation known as the
“empirical CAPM” or “ECAPM.” In oral testimony he summed
up this variation as follows: “[Y]ou take the risk-free rate
and increase it by 25 percent of the market risk premium
and you eliminate the beta, the slope of the market risk pre-
mium by 0.75 * * *.” 57 Appling the ECAPM formula, while
otherwise using the same inputs, Morin’s ECAPM resulted
in an increase in his estimated cost of capital by approxi-
mately 0.76 percent, compared to his CAPM (ECAPM 9.40%
- CAPM 8.64%). 58 Cornell testified that empirical CAPM is
56 For this reason, the court also rejects Eyre’s alternative CAPM analysis
referred to variously as a “supply side” or “SBBI Yearbook” analysis, which
he employed out of concern that the historical CAPM formula “overstates the
market risk premium,” which necessarily would overstate the cost of equity.
(Transcript at 436 (emphasis added); see also id. at 632.) In his supply-side vari-
ation on CAPM, Eyre used a market risk premium of 6.17% published in the
SBBI Yearbook, in lieu of the historical market risk premium of 7.15% to 7.20%
on which he and Tegarden largely agreed. Changing solely this component of the
CAPM formula, Eyre determined a cost of equity of 5.95% in lieu of 6.54%. (See
Def’s Ex A at 39-40; Transcript at 432-36.) Cornell and Kihm proffered estimated
forward-looking market risk premiums of 5.06% to 5.20%, and 5.8%, respectively.
57 Defendant’s witness Kihm described ECAPM as the CAPM formula, with
some of the factors weighted.
58 Morin’s estimated cost of equity using the CAPM (8.64%) is significantly
higher than those of Tegarden (6.43%) and Eyre (6.54%) because, as discussed
elsewhere, Morin used a risk-free rate of 3.9% (vs. 2.25% for Tegarden and Eyre)
and a market risk premium of 7.90% (vs. 7.20% for Tegarden and 7.15% for Eyre).

Cite as 25 OTR 227 (2023) 	285
“no longer * * * considered as a candidate” to improve the
original CAPM:
“[M]ost courts use the standard model * * * So the idea that
there’s an ECAPM out there that’s used is wrong, and the
fact that the security market line is flatter than the pure
theory projects, tends to be right. But * * * if you were to try
to use that, you would have to update all the analysis using
current data, which I don’t think has been done.” 59
In response to this criticism, Morin testified that
empirical CAPM continues to be discussed as an alterna-
tive to CAPM, referring to excerpts from several treatises.
However, the court finds that the treatises merely support the
fact that economists continue to criticize the “plain vanilla”
CAPM formula as resulting in cost of equity estimates that
are too low for low-beta businesses; the cited treatises do not
refer to ECAPM as a way to correct that shortcoming. Even
assuming that ECAPM has a track record of accurately cor-
recting the disparity between the predicted results under
CAPM and actual observed results over time, the court is
not persuaded that ECAPM’s insertion of seemingly static
weightings into a CAPM formula that otherwise consists of
dynamic components (the risk-free rate, beta, and the mar-
ket risk premium) will result in a reliable estimate of the
cost of equity. Based on a lack of evidence that ECAPM is
widely accepted, the court will assign no weight to Morin’s
ECAPM estimates of the cost of equity.
f. 	CAPM: 	Plaintiff’s 	forward-looking, 	ex 	ante,
method
Tegarden and Morin each presented cost of equity
analyses that used an “ex ante” (forward-looking) market
risk premium in the CAPM formula.60 Tegarden used a for-
ward-looking market risk premium of 10.77 percent, derived
from the “market-weighted average of the cost of equity cap-
ital” (13.02%) less the current long-term Treasury bond rate
of 2.25 percent. For his average of the cost of equity capital,
59 Kihm does not criticize the use of ECAPM per se, but he rejected Morin’s
use of a forecasted risk-free rate and Morin’s 7.90% market risk premium in both
CAPM and ECAPM.
60 Eyre rejected Tegarden’s and Morin’s analyses and used a different for-
ward-looking method, discussed further below.

286 	PacifiCorp v. Dept. of Rev.
Tegarden used as a proxy the cost of equity for each com-
pany in the S&P 500 Index. Weighting the results by mar-
ket value, he determined a weighted average cost of equity
for the S&P 500 companies of 13.02 percent, subtracted
the current long-term Treasury bond rate of 2.25 percent,
and thus derived his market risk premium of 10.77 percent.
Applying the beta, he determined an 8.50 percent cost of
equity estimate. In terms of relative usefulness, Tegarden
assigned the most weight to his DGM cost of equity result
(8.35%), less to his ex ante CAPM result (8.50%) and mini-
mal weight to his historical CAPM result (6.43%).
Morin, too, used a forward-looking market risk pre-
mium, together with his forward-looking risk-free rate dis-
cussed above. Morin’s market risk premium was 7.9 percent,
which is the average of the historical market risk premium
(7.20%) and a prospective market risk premium derived
from the S&P 500 Index (8.6%). Morin derived his prospec-
tive market risk premium by determining an expected mar-
ket return on aggregate S&P 500 equities of 12.5 percent
(lower than Tegarden’s 13.02%) and subtracting his risk-free
rate of 3.9 percent (higher than Tegarden’s 2.25%). Morin
did not provide a rationale for his weighting of his “raw”
forward-looking market-risk premium by averaging it with
the historical market-risk premium. With these inputs,
Morin determined a cost of equity of 8.7 percent, similar to
Tegarden’s 8.5 percent estimate.
Defendant’s witness Cornell criticized both Tegarden
and Morin for using short-term (3- to 5-year) forecasts of the
return on equity of publicly traded, dividend-paying stocks
as their market rate of return. These rates, Cornell testi-
fied, are “mathematically impossible” to sustain when com-
pared to the long-term expected growth rate for the U.S.
economy. Cornell proffered as a more appropriate guidepost
an estimated market risk premium of 5.20 percent con-
tained in a publication by Professor Damodaran.61 Cornell
also used the US Gross Domestic Product (approximately
4%) as a benchmark. Defendant’s expert Dr. Steven Kihm
61 The same Defendant’s exhibit includes “Estimates of ERP as of December
31, 2019” by Duff & Phelps (5.00%) and Fernandez/Appellaniz/Acin (5.60%).

Cite as 25 OTR 227 (2023) 	287
used a multi-stage estimate of S&P 500 growth that adjusts
downward after five years.62
g. 	Effect of Brealey range
Both Morin and Cornell referred to a range of mar-
ket risk premium rates described in the Brealey treatise.
Morin endorsed the range stated in the 2006 edition of
Brealey:
“In 	their 	authoritative 	corporate 	finance 	textbook,
Professors Brealey, Myers, and Allen conclude from their
review of the fertile literature on the MRP that a range of
5% to 8% is reasonable for the MRP in the United States.
My own survey of the MRP literature, which appears in
Chapter 5 of my latest textbook, The New Regulatory
Finance, is also quite consistent with this range.”
Cornell acknowledged that the Brealey treatise is “a very
respected finance textbook”; he criticized two details relat-
ing to Morin’s reliance on the Brealey range. First, Cornell
claimed that the range should be updated to no more than
7.0 percent or 7.1 percent, as stated in the 2011 edition of
the treatise. The court rejects this criticism because the
2020 edition of Brealey continues to declare as “reasonable”
a range of five percent to eight percent. The 2020 edition
states:
“Many financial economists rely on the evidence of history
and therefore work with a risk premium of about 7%. The
remainder generally use a somewhat lower figure. Brealey,
Myers, and Allen have no official position on the issue, but
we believe that a range of 5% to 8% is reasonable for the
risk premium in the United States.”
62 Like Cornell, Kihm criticized as unsustainable the use of three-year to
five-year forecasted returns on stocks in the S&P 500 index. Kihm proposed that
a “three-stage model * * * fixes the growth rate problem.” Under this model, Kihm
blended (1) the same published growth rates on which Morin relied, (2) the “lim-
iting long-run growth rate” (current GDP, sometimes averaged with the current
inflation rate), and (3) the average of rates (1) and (2). Kihm offered no explana-
tion of important details, such as how he decided weights and averages among
the various components of his formula. Nor did he suggest that this method is
accepted by others. He referred to a Table 6 that purportedly summarizes his
computations, but his written report omits that table. The court assigns no
weight to Kihm’s proffered correction.

288 	PacifiCorp v. Dept. of Rev.
Brealey at 174; see also id. at 171 (using 7.7% average histor-
ical risk premium).
On the other hand, the court finds Cornell’s second
criticism well taken: that Morin failed to account for the fact
that the range for market risk premium in Brealey is calcu-
lated as a percentage above the current rate for short-term
Treasury bills rather than the rate for long-term Treasury
bonds (2.25%) to which all experts in this case have referred
in their CAPM analyses. See Brealey at 169 (calculating
hypothetical 7.7% risk premium on common stocks as 11.5%
rate of return on common stocks minus 3.8% rate of return
on Treasury bills). 	Plaintiff did not refute this criticism.
Cornell testified that “[a]s of December 31, 2019, the yield
on 3-month Treasury bills was 1.52 percent * * *.” By this
logic, the court finds that an apples-to-apples compari-
son requires that the range expressed in Brealey must be
adjusted to refer to the same risk-free rate. When Brealey’s
range is adjusted to use the long-term bond rate (2.25%) as
the risk-free rate, it becomes 4.27 percent to 7.27 percent
(e.g., 5% - (2.25% - 1.52%) = 4.27%)).
Morin’s determined market risk premium of 7.9
percent exceeds Brealey’s adjusted top rate of 7.27 percent,
as does Tegarden’s estimate of 10.77 percent. Cornell’s rec-
ommended rate (5.2%) is near the bottom of the adjusted
Brealey range; the Gross Domestic Product benchmark is
below the bottom of the Brealey range. The court finds that
the Brealey range, as adjusted, is not in dispute, and the
court adopts it as the reasonable range for the market risk
premium in this case.
b. 	CAPM: Findings and conclusions
The court now summarizes its findings regarding
Plaintiff’s estimated cost of equity under the CAPM:
(1) 	The appropriate risk-free rate is 2.25 percent, which is
the yield on long-term Treasury bonds as of the assessment
date.
(2) 	Plaintiff’s beta is 0.60, as determined by Morin and
Eyre. Plaintiff’s beta is “low” because it only slightly
exceeds the midpoint between a risk-free investment and
the level of risk of an average company.

Cite as 25 OTR 227 (2023) 	289
(3) 	The cost of equity indicated by a historical CAPM is
within the range of 6.43 percent to 6.54 percent, as deter-
mined by Tegarden and Eyre, respectively. However, histor-
ical CAPM likely understates the cost of equity for low-beta
companies. Therefore, the court will select a cost of equity
higher than 6.54 percent if supported by the evidence.
(4) 	The market risk premium is not more than 7.27 per-
cent, derived as follows:
a. 	Consistent with the testimony of Morin, and all of
Defendant’s experts, the range of reasonable rates of
market risk premium is as stated in Brealey: five per-
cent to eight percent, using short-term Treasury bills
as the baseline.
b. 	Consistent with Cornell’s and Kihm’s unrefuted tes-
timony, the court finds that Brealey’s published range
must be adjusted by subtracting the difference between
the rate of return on long-term Treasury bonds and the
rate on short-term Treasury bills.
c. 	Consistent with Cornell’s unrefuted testimony, the
court finds that the rate on short-term Treasury bills as
of the assessment date was 1.52 percent.
d. 	The court computes the difference between the rate
of return on long-term Treasury notes and the rate on
short-term Treasury bills as 0.73 percent (2.25% - 1.52%),
and the resulting adjusted range of reasonable rates of
market risk premium as 4.27 percent to 7.27 percent.
(5) 	Within this range, the court determines the actual
market risk premium as follows:
a. 	The court first determines whether the low-beta
understatement effect in finding (3) above requires any
narrowing of the market risk premium range. Applying
the inputs of a risk-free rate of 2.25 percent, a beta of
0.60, and the range of potential market risk premiums
of 4.27 percent to 7.27 percent results in a range of the
cost of equity from 4.81 percent to 6.61 percent. However,
finding (3) above requires the lower end of this range to
be raised to at least 6.54 percent. In turn, the range of
reasonable market risk premiums must be raised to at
least 7.15 percent (2.25% + (0.6 * 7.15%) = 6.54%). The
court thus finds that the range of reasonable estimates of
the market risk premium is 7.15 percent to 7.27 percent.

290 	PacifiCorp v. Dept. of Rev.
b. 	Plaintiff 	presented 	evidence 	supporting 	a 	for-
ward-looking market risk premium of 7.9 percent, based
on returns on publicly traded stocks, which would result
in a cost of equity of 6.99 percent. Defendant criticized
this evidence as relying on excessively high returns
on publicly traded stocks. However, the alternatives
Defendant proffered to the court (market risk premiums
of 4% or 5.2%) would result in respective cost of equity
estimates of 4.65 percent and 5.37 percent, well below
the too-low historical CAPM estimate (6.54%) that is
at the bottom of the court’s narrowed range. Plaintiff’s
evidence results in a cost of equity much closer to the
limited reasonable range of 6.54 percent to 6.61 percent
and is therefore more persuasive than Defendant’s evi-
dence. The court finds that the market risk premium
was 7.27 percent.
(6) 	Plaintiff’s cost of equity under the CAPM was 6.61
percent. (6.61% = 2.25% + (0.6 * 7.27%)
i. 	Cost of equity: “Build-up” or “risk premium”
method
Only Plaintiff’s experts Tegarden and Morin used
a “build-up” method, also called a “risk premium” method,
determining a cost of equity of 9.40 percent (Tegarden) and
10.2 percent (Morin). Under the build-up method, the cost of
equity is equal to the sum of a risk-free rate (which includes
an inflation premium) and a risk premium.
j. 	Build-up: Tegarden’s method
Tegarden determined a risk-free rate of 4.30 per-
cent. He testified that he derived this from the historical
average yields to maturity of Plaintiff’s own traded bonds
(4.30%), after comparing two other categories of corporate
bonds: (1) a “generic” set of corporate bonds issued by elec-
tric companies rated at BBB+ (3.81%), and (2) a second set
of corporate bonds issued by electric companies (4.14%). He
determined a risk premium of 5.70 percent by identifying
the published historical arithmetic mean return since 1926
for large-company stocks (12.1%) and subtracting the long-
term corporate bond total return since 1926 (6.4%), which is
a difference of 5.70 percent. Although the sum of 4.30 per-
cent and 5.70 percent is 10 percent, Tegarden testified that

Cite as 25 OTR 227 (2023) 	291
he made a downward adjustment to 9.40 percent in the exer-
cise of conservative appraisal judgment.
k. 	Build-up: Morin’s method
For his risk-free rate, Morin used the same for-
ward-looking risk-free rate of 3.9 percent as under his
CAPM analysis, derived from forecasts of future long-term
Treasury bond yields rather than the current yield on long-
term Treasury bonds as of December 31, 2019 (2.25%). He
determined a risk premium of 6.3 percent using two meth-
ods. First, he computed the actual realized return on equity
capital for the S&P Utility Index for each year, using the
actual stock prices and dividends of the index, and then sub-
tracting the long-term Treasury bond return (the “income
component of bond yields”) for that year. The result was 6.3
percent. Second, he examined the historical risk premiums
implied in the cost of equity decisions rendered by regula-
tory utility commissions over the 1986-2019 period for which
data were available, relative to the contemporaneous level of
the long-term Treasury bond yield. Although the average
spread was 5.59 percent, he observed an escalating trend
of the risk premium and determined a 6.3 percent risk pre-
mium by statistical analysis of that trend.
l. 	Build-up: Defendant’s criticisms and court’s analysis
As to the risk-free rate component, the court sees no
basis to depart from the 2.25 percent risk-free rate adopted
as part of the CAPM discussed above. Tegarden offered
no explanation for substituting Plaintiff’s own historical
bond rate (4.30%), and Morin’s forward-looking rate of 3.90
percent suffers from the same uncertainty that the court
already has found inconsistent with the purpose of a risk-
free rate.
As to the risk premium, the court finds Morin’s
use of actual realized return on equity for the S&P Utility
Index a reasonable method. Because Morin used utility data
only, his result is more persuasive than Tegarden’s approach
using all large-company stocks and bonds. Defendant’s only
criticism of Morin’s S&P Utility Index method is its reli-
ance on historical data. Kihm in particular testified that
historical earnings on utility stocks neither predict future

292 	PacifiCorp v. Dept. of Rev.
earnings nor inform as to whether actual past earnings
matched investors’ expectations at the time. Although this
criticism has some merit, the court disagrees that Morin’s
approach is entitled to “no weight.” Both parties in this case
refer to historical data in various contexts, recognizing that
past and present data are the only data actually available.
In applying the CAPM, historical market risk premiums
were essential to Eyre’s analysis. And as discussed above,
Defendant’s experts, including Kihm, referred repeatedly
to an entirely backward-looking market-to-book analysis
to rebut Plaintiff’s assertion that regulated utilities should
receive an additional obsolescence deduction and to urge the
court to find evidence of “real growth.”
m. 	Conclusion as to build-up method
Taking into account Defendant’s criticisms, the
court adopts a modification of Morin’s determination.63 The
court finds that the build-up method results in an indicator
of the cost of equity of 8.55 percent, consisting of a risk-free
rate of 2.25 percent and a risk premium of 6.3 percent.
n. 	Yield capitalization: Conclusion as to cost of
equity
The court finds that its analysis and conclusions
discussed above under the CAPM method and the build-up
method are comparable in the quality of supporting data
and logic. The court therefore assigns equal weight to the
indicators under each method. The court finds that the cost
of equity is 7.58 percent, consisting of the average of 6.61
percent (CAPM) and 8.55 percent (build-up).
o. 	Yield capitalization: Flotation costs
Tegarden’s estimate of WACC includes an upward
adjustment of approximately 0.2 percent for “flotation costs,”
defined as legal and underwriting charges a buyer would
incur to actually acquire all of Plaintiff’s property. Eyre’s
appraisal includes no adjustment for flotation costs. The par-
ties do not dispute that these charges exist, and the parties
agree that, as a matter of arithmetic, they can be accounted
63 The court need not address Defendant’s extensive criticism of Morin’s use
of regulatory cost of equity data, as that method resulted in the same risk pre-
mium as his use of S&P Utility Index data (6.30%).

Cite as 25 OTR 227 (2023) 	293
for either as an increase in WACC or as a reduction in cash
flow. Defendant, citing the WSATA Handbook, urges reduc-
ing cash flow. See WSATA Handbook at III-30 to III-31. As
to this point, Plaintiff argues that it is “generally accepted in
the appraisal and finance communities to make a flotation
cost adjustment to the cost of capital * * *.” The court’s own
research, however, suggests that courts have not favored an
adjustment to the cost of capital in property tax cases. The
Minnesota Tax Court has repeatedly refused to increase
the cost of capital for flotation costs. See, e.g., CenterPoint
Energy Res. Corp. v. Comm’r of Revenue, No. 9252-R, 2022
WL 995851, at *14 (Minn Tax Mar 16, 2022) (“We * * * do
not adjust the cost of capital for flotation costs.”); see also
Colorado Interstate Gas Co. v. Property Tax Administrator
Huddleston, 28 P3d 958, 962 (Colo App 2000) (board of
assessment appeals did not abuse its discretion by exclud-
ing flotation costs as “hypothetical”).64 In this case, the court
declines to adjust the WACC for flotation costs. And having
adopted Plaintiff’s cash flow estimate as the better of two
imperfect alternatives, the court declines to further adjust
cash flow for flotation costs.
p. 	Yield capitalization: Conclusion as to WACC
The court applies a weighting of 64 percent to the
cost of equity (7.58%), and the court applies the remaining
36 percent weight to the cost of debt (4.25%). This results in
a weighted average cost of capital of 6.38 percent.65
q. 	Yield capitalization: Constant growth indicator
of value
The court applies the constant growth formula set
forth above, which results in an indicator of a real market
value for Plaintiff’s system of $17,241,379,310:
64 For an overview of regulatory tribunal decisions, see Kansas City Power &
Light Co. v. State Corp. Com’n of State, 52 Kan App 2d 514, 540-42, 371 P3d 923
(2016).
65 The court computes WACC as follows:
Weighted Average Cost of Capital = Cost of Equity weighted at 64% + Cost of
Debt weighted at 36%
Weighted Average Cost of Capital = (7.58% * 64%) + (4.25% * 36%)
Weighted Average Cost of Capital = (4.85%) + (1.53%)
Weighted Average Cost of Capital = 6.38%

294 	PacifiCorp v. Dept. of Rev.
System
Value 	Cash Flow 	WACC
Growth
Rate
$17,241,379,310 	= 	$1,100,000,000 	÷ 	(6.38% 	- 	0%)
r. 	Yield capitalization: Discounted cash flow model
The parties recognize the discounted cash flow
(DCF) method of yield capitalization under the income
approach, which attempts to convert the sum of future years’
cash flows into present value:
Value = Cash Flow Year 1 ÷ (1+ Rate) + CF Y2 ÷ (1+ Rate) +
CF Y3 ÷ (1+ Rate), etc.
The length of the forecast period is a matter of appraiser
judgment; a terminal value may remain after the end of the
forecast period. See WSATA Handbook at III-14 to III-15.
Eyre performed a discounted cash flow analysis, concluding
an indicator of value of $23,500,000,000. Tegarden did not
perform a discounted cash flow analysis; his discussion sug-
gests that he viewed it as unnecessary given his assumption
of zero real growth.
Eyre’s DCF analysis relies entirely on the 2020
Plan as a forecast of future cash flow. His rate is the same
WACC discussed above (5.60%). In the analysis above, the
court has found the 2020 Plan unreliable as a measure of
cash flow, and Eyre offers no new evidence or information in
the context of his DCF. The court also has reached its own
conclusion of WACC at 6.35 percent. For those reasons, the
court gives no weight to Eyre’s DCF analysis.66
10. Direct Capitalization (EBITDA)
Only Eyre used the direct capitalization method,
which determines a single year’s cash flow, then applies a
multiplier, resulting in value:
Value = one year’s cash flow * multiplier
Eyre selected $2,100,000,000 as his cash flow estimate.67
This amount is Plaintiff’s earnings before interest, taxes,
66 Plaintiff alleges other errors specific to Eyre’s DCF analysis, which the
court need not consider.
67 Confusingly, Eyre seems to use the terms “multipliers” and “multiples”
interchangeably. The court understands the product of the equation (“value”) to

Cite as 25 OTR 227 (2023) 	295
depreciation, and amortization (EBITDA) as reported on
Plaintiff’s FERC 1 form, which Eyre “normalized” over the
four years 2016 through 2019 and multiplied by the same
two percent growth factor discussed above.68 Eyre started
with EBITDA rather than reported net income out of con-
cern that federal tax reductions enacted during the four-
year period as part of the TCJA made reported net income
(which is computed after tax) less comparable as between
the earlier and later years of the period.
Eyre selected 11.0 as his multiplier. He derived this
by first determining the enterprise value of ten guideline
companies, using the market value of their debt and equity
securities, less cash accounts. He then estimated each com-
pany’s normalized EBITDA based on EBITDA as reported
on each company’s Form 10K for the year ending December
31, 2019. Next, Eyre multiplied normalized EBITDA by a
percentage published by ValueLine that represents an esti-
mated growth rate for a cash flow that is not EBITDA, but
which Eyre considers to be very close to EBITDA.
Having 	determined 	these 	base 	amounts, 	Eyre
divided each guideline company’s enterprise value by its
normalized and growth-adjusted EBITDA. The result was
a multiplier; for example, the lowest multiplier was that of
Portland General Electric (10.0), and the highest multiplier
was that of PNM Resources (16.3).69 The average multiplier
was 13.3, and the median was 13.0. Eyre selected a lower
multiplier of 11.0 “to eliminate the effects of any non-regu-
lated income that may be affecting the value of the guideline
companies.” The result of Eyre’s cash flow of $2,100,000,000
multiplied by 11 is an indicator of value of $23,100,000,000.
Plaintiff 	responds 	with 	numerous 	arguments,
first, that using EBITDA as a measure of cash flow unre-
alistically ignores the importance of after-tax cash flow to
be the only “multiple,” and the court refers hereafter to “multipliers” to mean
Eyre’s numbers between 10 and 16.3 by which he multiplies one year’s cash flow
to arrive at his value estimate.
68 Eyre’s written narrative under the direct capitalization method states
that he normalized EBITDA over five years, but the exhibit to which he refers
shows only the four years 2016 through 2019.
69 Eyre’s written narrative erroneously states that the highest multiplier
was 15.

296 	PacifiCorp v. Dept. of Rev.
investors. Although Eyre’s intention seems to have been to
enhance comparability of cash flows of any one company as
to pre- and post-TCJA years, Plaintiff argues that the use
of EBITDA reduces the comparability among the companies
Eyre included in his guideline group. On cross-examination,
Eyre 	acknowledged 	that 	corporations 	look 	to 	after-tax
income to determine the amount of dividends they will pay.
Tegarden presented a chart listing the effective tax rates
of Eyre’s guideline companies (based on 10K data), which
showed that those rates ranged from -37.80 percent to 13.80
percent. (Plaintiff’s rate was 7.0%.) The court finds that
Eyre’s use of EBITDA as a measure for comparing cash flow
within a group of guideline companies, without any attempt
to adjust for the consequence of differing effective tax rates,
undermines the reliability of his result.
Plaintiff also argues that Eyre proceeded incorrectly
by using the “market value of the publicly traded debt” when
determining the enterprise value of the guideline compa-
nies. Defendant describes the point of Eyre’s determination
of enterprise value as “determining the market value of the
company to the typical purchaser.” According to Defendant,
“[t]his requires that the debt be valued at market value
* * *.” However, Ross testified that a purchaser acquiring all
the debt and stock of Plaintiff would not buy the debt from
bondholders at market price and retire it, but instead would
assume the debt. This is because “most of the debt held by
companies[ ] such as PacifiCorp[ ] is first mortgage bonds.
And * * * each of those first mortgage bonds are subject to
early redemption provisions called ‘make [whole] calls.’ It’s
financially punitive to retire the debt early.” When assum-
ing the debt, a buyer would become subject to the debt at
its book or par value. Tegarden presented a table showing
that the book value of the debt of each of Eyre’s guideline
companies was below the market value used by Eyre, and
that Eyre’s use of the market value of debt caused the col-
lective enterprise value of the 10 guideline companies to be
overstated by $5,454,000,000, which in turn caused Eyre’s
EBITDA multipliers to be overstated. Defendant argued
that the use of book value of the debt “would be a mismatch,”
but Defendant presented no evidence or reasoning to refute
Tegarden’s evidence that an actual acquirer of a utility such

Cite as 25 OTR 227 (2023) 	297
as Plaintiff or any of the guideline companies would assume
the debt at book value. The court finds that Eyre’s use of the
market value of debt materially undermines the reliability
of his result.
Plaintiff asserts that Eyre miscalculated EBITDA
for five of the ten guideline companies; Tegarden testified
that Eyre incorrectly started with “operating income” and
that the correct approach would have been to start with
“net income.” 70 According to Tegarden, this error caused
Eyre to “not capture the full level of income as the starting
point.” Tegarden presented a table showing that this error
understated EBITDA by between 10 percent and 28 per-
cent for each of the five comparison companies. Defendant
argues that Eyre’s method was an attempt to ensure that
the EBITDA he determined contained only the regulated
operating income of the guideline companies. But Plaintiff
responds that the result is a mismatch between total com-
pany equity value in the denominator and something less
than total company EBITDA in the numerator. Plaintiff also
points out that Eyre selected 11 as his multiplier (a lower
number than the 13.3 average multiplier of his guideline
companies), without providing any computations showing
why he chose 11, rather than 13.3 or some other number.
Eyre’s stated reason for that selection was “to eliminate the
effects of any nonregulated income that may be affecting the
value of the guideline companies.” The court finds that Eyre
either tried to remove nonregulated amounts twice or simply
did not act with transparency or care in computing EBITDA;
this error undermines the reliability of Eyre’s result.
Plaintiff levels other criticisms, some of which over-
lap with arguments in connection with other methods and
computations. The court finds it unnecessary to address
those points here because, for the reasons stated above, the
court finds Eyre’s direct capitalization/EBITDA approach
substantially unreliable for the reasons stated above and
will assign it no weight.
70 Tegarden’s Exhibit 24 is an excerpt from a Form 10-K for one of Eyre’s com-
parator companies, ALLETE, Inc. The consolidated income statement shows that
“operating income” is computed before “net income.” “Net income” includes items
not found in “operating income,” such as (on this sample) “interest expense,”
“equity earnings,” “gain on sale of U.S. Water Services,” and “Other.”

298 	PacifiCorp v. Dept. of Rev.
11. 	Conclusion of System Value Under Income Approach
Having rejected other proffered methods under the
income approach, the court adopts its constant growth indi-
cator of value, determined using the CAPM and build-up
(risk premium) methods of determining the cost of equity.
As set forth above, that indicator is a real market value of
$17,241,379,310 for Plaintiff’s system.
C. 	Stock and Debt Approach
The stock and debt approach is a proxy for a sales
comparison approach to value that can be useful when com-
parable sales are not available. See Level 3 Communications v.
Dept. of Rev., 368 Or 303, 320, 490 P3d 149 (2021). Consistent
with OAR 150-308-0240(2)(a), Eyre performed a stock and
debt analysis, concluding an indicator of value in the amount
of $25,863,750,000. However, because Plaintiff’s stock is not
publicly traded, Eyre took an indirect approach that involved
comparing the price and earnings of stock of other utilities.
After that step, he also was required to make adjustments to
remove the value of property not used in Plaintiff’s electric
business. Eyre acknowledged “the subjective nature of the
adjustment process and the equity valuation * * *.” For that
reason, he assigned no weight to his result. Tegarden stated
that he, too, considered the sales comparison approach and
specifically the stock and debt approach, but he found nei-
ther approach useful because Plaintiff’s stock is not publicly
traded. He therefore did not undertake a formal analysis.
The court sees no basis to analyze at length an
approach upon which neither party relies. Accordingly, the
court assigns no weight to Eyre’s indicator under the stock
and debt approach.
D. 	Conclusion as to Value of Plaintiff’s System
Having 	considered 	the 	parties’ 	positions 	under
the cost, income and sales comparison (stock and debt)
approaches, the court concludes that neither party has car-
ried the burden of proving the real market value for which
it advocates. However, the evidence in total provides ample
support for a conclusion of real market value. The court
exercises its authority under ORS 305.412, which states:

Cite as 25 OTR 227 (2023) 	299
“When the determination of real market value * * * is an
issue before the tax court, the court has jurisdiction to
determine the real market value or correct valuation on
the basis of the evidence before the court, without regard to
the values pleaded by the parties.”
As discussed above, in this case the court relies entirely on
the income approach. The court determines that the real
market value of Plaintiff’s system was $17,241,379,310 as of
January 1, 2020.
IV. 	ALLOCATION TO OREGON
The court now considers Plaintiff’s assertion, as
part of its valuation claim, that Defendant erroneously and
improperly used an allocation formula that overestimates
the real market value of Plaintiff’s property sitused in
Oregon. The formula in Defendant’s rule consists of three
factors: a “production” factor, a “generation” factor, and an
“other plant” factor. Each factor relies in large part on the
“original cost” of a portion of the system.71 The rule does not
take into account any measure of depreciation. The first two
factors, however, give some weight to components other than
the cost of property, namely, the property’s capacity to gen-
erate electricity and its actual generation in the prior year
(weightings of 10% and 15%, respectively, in the production
factor) and sales and revenues (weightings of 10% and 40%,
respectively, in the distribution factor).72 Applying this for-
71 The production factor is a percentage based on the sum of (a) the ratio the
Oregon portion of the original cost of the production plant bears to the entire sys-
tem’s production plant, times 75%; (b) the ratio the Oregon portion of the system’s
electricity generation capacity (in kilowatts) bears to the entire system’s gener-
ation capacity, times 10%; and (c) the ratio the Oregon portion of the system’s
energy generation (in megawatt hours) during the prior year bears to the entire
system’s generation, times 15%. See OAR 150-308-0590(1).
The distribution factor is a percentage based on the sum of (a) the ratio the
Oregon portion of the original cost of the distribution plant bears to the entire
system’s distribution plant, times 50%; (b) the ratio the Oregon portion of the
system’s energy production sold in the prior year (in kilowatt hours) bears to the
system’s total such revenue, times 10%; and (c) the ratio the Oregon portion of the
system’s revenue from the sale of energy bears to the system’s total energy sale
revenue, times 40%. See OAR 150-308-0590(2).
The other plant factor is based on the ratio of original cost of the Oregon portion
of the remaining plant to the total original cost of the remaining plant. See OAR
150-308-0590(3).
72 Plaintiff asserts that, in total, the original cost of property accounts for
approximately 85% of the ultimate allocation percentage, while generating capacity,

300 	PacifiCorp v. Dept. of Rev.
mula, Eyre determined an Oregon allocation percentage of
16.4995 percent. If Eyre’s allocation percentage of 16.4995
were applied to the court’s concluded real market value of
Plaintiff’s system ($17,241,379,310), the result would be a
real market value of $2,844,741,379.73
Plaintiff presented uncontested evidence that its
property in Oregon is, on average, older and more heavily
depreciated than Plaintiff’s property system-wide. Tegarden
testified that Plaintiff had made a relatively greater share of
new investment in states other than Oregon in recent years.
He presented a table showing that, in the overall system,
net book value was approximately 65 percent of overall cost,
while the net book value of Oregon property was approxi-
mately 52 percent of original cost.
Plaintiff contends that basing the allocation per-
centage heavily on original cost causes Oregon to “import
value” from other states for taxation. The basis for this
argument is that, “as a regulated utility, [Plaintiff] is only
allowed to earn a return on the net book cost of its assets.”
Therefore, according to Plaintiff, the Oregon property con-
tributes relatively less to earnings than the proportion of
value allocated to it. Plaintiff argues that this violates stat-
utory requirements that the manner of allocation be “fair”
and “just,” and that the allocation determine a “fair propor-
tion” of Plaintiff’s overall property.
Plaintiff quantifies its position by arguing that
application of Defendant’s formula “results in a 28 per-
cent premium being added to the value of unitary property
located [in] Oregon.” Plaintiff’s expert Tegarden derives
this “premium” by dividing the value Eyre allocated to
Oregon under Defendant’s rule ($3,712,400,000) by the
net book value of Plaintiff’s operating property in Oregon
($2,773,846,275), which yields $1.34 of value allocated to
Oregon for every $1 of net book value of property in Oregon.
Tegarden then compares the $1.34 amount to the ratio that
Eyre’s concluded value of the property in states other than
production, and megawatts distributed and sold account for the remaining 15%.
73 Eyre’s percentage is close to the percentage Defendant apparently applied
in its O&O: $3,180,000,000 Oregon real market value ÷ $19,500,000,000 system
value = 16.3077%.

Cite as 25 OTR 227 (2023) 	301
Oregon ($18,787,600,000) bears to the net book value of the
property in states other than Oregon ($17,962,039,938),
which yields $1.05 of value allocated to states other than
Oregon for every $1 of net book value of property outside
Oregon. The premium is the difference between the two
results ($1.34 - $1.05 = $0.29).74
Plaintiff asks the court to apply an alternative allo-
cation formula that consists of the average of two factors: (1)
“gross investment” in Oregon, which consists entirely of the
original cost of property in Oregon ($5,221,374,481) divided
by gross investment in the entire system ($31,138,058,548),
yielding a ratio of 16.7685 percent; and (2) “net invest-
ment” (net book value) in Oregon ($2,692,080,863) divided
by net investment in the entire system ($20,267,281,826),
a ratio of 13.2829 percent. The average of the two factors
is Plaintiff’s proposed allocation percentage of 15.0257 per-
cent. Compared to Eyre’s rule-based percentage of 16.4995
percent, Plaintiff thus asks the court to reduce the alloca-
tion percentage by 1.4738 percent. If Plaintiff’s allocation
percentage of 15.0257 were applied to the court’s concluded
real market value of Plaintiff’s system ($17,241,379,310),
the result would be a real market value of $2,590,637,931,
a reduction of $254,103,448 in the real market value of
Oregon-situs property, or 8.93 percent.
The principal Oregon Supreme Court case con-
struing Oregon’s statutes governing allocation of value for
central assessment purposes is Southern Pacific Trans.
Co. v. Dept. of Rev., 302 Or 582, 732 P2d 18 (1987) (SoPac
II). See also Alaska Airlines, Inc. v. Dept. of Rev., 307 Or
406, 769 P2d 193 (1989) (upholding airline allocation for-
mula that included “flyover” time over Oregon in numera-
tor of time-based factor). The property at issue in SoPac II
was a “bridge” railroad owned by a corporation known as
Cottonbelt that was a 99.7 percent subsidiary of the plain-
tiff Southern Pacific Transportation Company. See Southern
Pacific Transp. Co. v. Dept. of Rev., 295 Or 47, 49, 664 P2d
401 (1983). As a bridge railroad, Cottonbelt connected traffic
74 Tegarden also found that the premium becomes $0.25 if the comparison is
between the $1.34 Oregon-only value per $1 of net book value vs. the ratio that
Eyre’s concluded value for all states ($22,500,000,000) bears to the net book value
of operating property in all states ($20,735,886,213).

302 	PacifiCorp v. Dept. of Rev.
that originated with other railroads, which tends to be a
more profitable business than the terminal and switching
activities conducted by Southern Pacific on its directly held
lines. See id. at 50. The plaintiff argued that Cottonbelt’s
property should be excluded from the system. This court
agreed and went on to determine an allocation percentage
for the system excluding Cottonbelt, based on relative prop-
erty, “line haul,” and “terminal activity.” See Southern Pacific
Transportation v. Dept. of Rev., 9 OTR 481, 498-99 (1982).
Defendant appealed, and the Supreme Court reversed, con-
cluding that Cottonbelt’s property should not be excluded
from the plaintiff’s system. Rather than determine the value
of the plaintiff’s Oregon-situs property outright, however,
the Supreme Court remanded the case to this court to reex-
amine the allocation percentage, given the large amount of
value added to the system pursuant to the appellate deci-
sion. See SoPac II, 302 Or at 590 n 9. On remand, this court
declined to change the allocation percentage, finding as a
factual matter that the property of Cottonbelt was physi-
cally similar to that of Southern Pacific, with no “expensive
terminals or other properties * * * ‘dissimilar’ from the rest
of the unit.” Southern Pacific Trans. Co. v. Dept. of Rev., 10
OTR 80, 84 (1985).
The plaintiff appealed to the Oregon Supreme
Court, seeking an adjustment to the allocation formula on
the grounds that Cottonbelt, as a relatively more profit-
able bridge railroad, made a “disproportionate contribution
to the value of the system.” SoPac II, 302 Or at 587. The
Supreme Court affirmed this court’s adherence to the allo-
cation percentage determined at trial. The court found it a
“fundamental flaw” to seek to determine the profitability of
Cottonbelt as a standalone enterprise because Cottonbelt’s
property was used in a single, unitary business together
with the property of Southern Pacific itself. Id. at 590-91.
Apart from that major issue, the court found that the plain-
tiff had failed to prove that this court’s apportionment for-
mula had produced “an unfair result,” pointing out that the
factors in the formula reflected “investment in, and usage
of, the various parts of the railroad system,” including “[l]
ine-haul tonnage and terminal activity, which Southern

Cite as 25 OTR 227 (2023) 	303
Pacific argues are the primary determinants of profitability
* * *.” Id. at 592.
Plaintiff’s argument in this case has some similar-
ity to that of Southern Pacific, as Plaintiff argues that its
allocated Oregon real market value is disproportionate to
the Oregon net book value on which it is allowed to earn a
return. However, in contrast to SoPac II’s facts, Plaintiff’s
asserted unfairness does have a basis in the physical char-
acteristics of Plaintiff’s Oregon operating property: it is, on
average, older than the property elsewhere. Without deciding
whether this case is factually distinguishable from SoPac II,
the court turns to the standards for apportionment stated
in that case and in the United States Supreme Court deci-
sion on which the Oregon Supreme Court primarily relied,
Norfolk & Western R. Co. v. Missouri Tax Com., 390 US 317,
88 S Ct 995, 19 L Ed 2d 1201 (1968). In SoPac II, the court
equated the Oregon statutory requirements of a “reasonable
method,” and a “proper” or “fair proportion,” with the appli-
cable requirements under the United States Constitution.
302 Or at 588 (“[T]hese rather vague [statutory] directives
* * * are essentially a codification of the limits imposed by
the due process and commerce clauses of the United States
Constitution[, which themselves] are much alike.”). The
court turns, therefore to the United States Supreme Court’s
analysis in Norfolk & Western.
The issue in Norfolk & Western was the validity of a
property tax allocation formula. The plaintiff acquired all of
the rolling stock of Wabash Railroad Company in 1964, pur-
suant to a lease that required the plaintiff to pay applicable
property taxes. See 390 US at 320. Although there was no
material change in the rolling stock or in the extent of its use
in Missouri for the year after the acquisition, the state tax-
ing authority determined an assessed value for the rolling
stock of $19,981,000, more than double the assessed value for
the year before the acquisition ($9,177,683). See id. at 320-22.
The state arrived at this amount by “follow[ing] the literal
command of the statute,” multiplying the determined sys-
tem value by 8.2824 percent, based on miles of track within
the state vs. systemwide. The Court reaffirmed that the
United States Constitution permits a state to determine the

304 	PacifiCorp v. Dept. of Rev.
value of in-state property based on its “ ‘enhanced value * * *
through its organic relation to the system.’ ” Id. at 323 (quot-
ing Pullman Co. v. Richardson, 261 US 330, 338, 43 S Ct 366,
67 L Ed 682). However, the Court described the standards
set by prior cases as nevertheless requiring any allocation
formula to “bear a rational relationship, both on its face and
in its application, to property values connected with the tax-
ing State.” Id. at 325; see also SoPac II, 302 Or at 589. The
Court elaborated on this standard with the following points:
• 	“Considerable latitude.” Because states may consider
“going-concern value,” which is “not susceptible of exact
measurement,” the states “have been permitted consid-
erable latitude” in devising allocation formulas. Norfolk
& Western, 390 US at 324; see also SoPac II, 302 Or at
589 (“wide latitude”).
• 	Value need not be “precise.” “A number of such formulas
have been sustained by the Court, even though it could
not be demonstrated that the results they yielded were
precise evaluations of assets located within the taxing
State.” Norfolk & Western, 390 US at 324. The cases
“do not require any close correspondence” between the
formulary result “and the value of property actually
located in the State * * *.” Norfolk & Western, 390 US
at 327. “We repeat that it is not necessary that a State
demonstrate that its use of the mileage formula has
resulted in an exact measure of value.” Id. at 329. See
also SoPac II, 302 Or at 591 (“Value assessment of the
parts of a unit is necessarily a somewhat arbitrary pro-
cess that must rely upon factors that are quantifiable:
e.g., miles of track, terminal activity, track usage and
property investment).
• 	“Gross distortion” is not permissible. Missouri’s “rigid
application of the mileage formula led to a grossly
distorted result.” Norfolk & Western, 390 US at 326.
“[W]hen a taxpayer comes forward with strong evi-
dence tending to prove that the mileage formula will
yield a grossly distorted result in its particular case,
the State is obliged to counter that evidence or to
make the accommodations necessary to assure that its
taxing power is confined to its constitutional limits.”
Id. at 329; see generally Jerome R. Hellerstein & Walter
Hellerstein, I State Taxation ¶ 8.16[5] (explaining stan-
dard for determining percentage of distortion).

Cite as 25 OTR 227 (2023) 	305
• 	Convenience and wide applicability of a formula do
not justify distortion. “[N]either does the Constitution
tolerate any result, however distorted, just because it
is the product of a convenient mathematical formula
which, in most situations, may produce a tolerable
product.” Norfolk & Western, 390 US at 327.
Applying these standards, the Court concluded that
the plaintiff must prevail, primarily because the increase in
value was large and the evidence supporting it was lacking.
See id. at 328 (“The difference between the assessed value
and the actual value as shown by the evidence to which we
have referred is too great to be explained by the mere asser-
tion, without more, that it is due to an assumed and nonpar-
ticularized increase in intangible value.”).
This court now applies the standards set by Norfolk
& Western and incorporated by SoPac II. The facts regard-
ing the age difference as between Plaintiff’s property within
and without Oregon are uncontested; however, the court
concludes that, as a matter of law, Plaintiff has not shown
a “gross distortion” under Defendant’s formula.75 The differ-
ence in allocated value in this case does not approach the 100
percent increase in Norfolk & Western. See 390 US at 326. As
shown, if the court in this case seeks to isolate the effect of
Plaintiff’s requested allocation formula change, that change
translates to a reduction in the tax base (real market value
75 Plaintiff at times appears to argue for a different standard based on the
emphasized language in the following passage in SoPacII:
“Of course, this court makes a more searching review of the factual bases of
an apportionment formula than does the U.S. Supreme Court. We exercise
de novo review. ORS 19.125(3), 305.445. To prevail, Southern Pacific need only
prove to us by a preponderance of the evidence, ORS 305.427, that the assess-
ment of its Oregon property was ‘unfair,’ i.e., that Oregon has taxed extrater-
ritorial value. In practice, however, Southern Pacific has a difficult burden
of proof because of the difficulty of isolating the value of its Oregon property
from the value of its property in other states. While it need not prove that
the assessed value of its Oregon property bears no ‘rational relationship’ to
its ‘true’ value, the very difficulty of ascertaining that ‘true’ value makes our
analysis in practice not so very different from that that the U.S. Supreme
Court would employ.”
SoPac II, 302 Or at 590 (emphasis added). This court interprets the Oregon
Supreme Court’s reference to taxing “extraterritorial value” as encapsulating
all of the standards in Norfolk & Western, which this court outlines and applies
above. See id. at 589 (citing Norfolk & Western) (“The constitutional requirement
of fair apportionment in property taxation means that a state may not tax extra-
territorial value.”).

306 	PacifiCorp v. Dept. of Rev.
of Oregon-situs property) of approximately nine percent. Cf.,
e.g., Hans Rees’ Sons v. No. Carolina, 283 US 123, 135, 51
S Ct 385, 75 L Ed 879 (1931) (striking down, in an income
tax case, state’s formula as “out of all proportion” to in-state
business; finding more than a mere “negligible criticism[ ]”
where state determined an apportioned tax base 269%
higher than amount reported on taxpayer’s return under
separate accounting by type of income); Moorman Mfg. Co.
v. Bair, 437 US 267, 271 n 4, 98 S Ct 2340, 57 L Ed 2d 197
(1978) (upholding, in an income tax case, state’s apportion-
ment formula based solely on in-state sales despite resulting
increase in tax base of approximately 48%); Container Corp.
v. Franchise Tax Bd, 463 US 159, 174 n 11, 175 n 12, 184, 103
S Ct 2933, 77 L Ed 2d 545 (1983) (upholding, in an income
tax case focusing on foreign commerce, state’s broad-based
formula as “avoid[ing] the sorts of distortions that were
present in Hans Rees’ Sons, Inc.”; taxpayer did not argue dis-
tortion, where increase in tax base averaged approximately
14%); see also General Dynamics Corp. v. Sharp, 919 SW2d
861, 869 (1996) (“The 28% difference [of tax base for Texas’
franchise tax] in this appeal is simply insufficient to show a
grossly distorted result that is out of all proportion with the
percentage actually apportioned.”); but see Mississippi State
Tax Comm’n v. ANR Pipeline Co., 806 So 2d 1081 (Mississippi
2001) (striking down, in a property tax case, state’s alloca-
tion formula based entirely on original cost, allowing plain-
tiff’s alternative formula of 50-50 original cost and depreci-
ated cost, where result reduced tax base by 16.53%).
The Oregon Supreme Court in SoPacII also iden-
tified other weaknesses with the plaintiff’s criticism of
Defendant’s formula. See SoPac II, 302 Or at 592. The court
concluded that Defendant’s formula incorporated compo-
nents (in that case, “line-haul tonnage” and “terminal activ-
ity”) that sought to measure some of the same determinants
of profitability on which the plaintiff based its argument.
Id. Similarly, in this case, Defendant’s formula incorporates
sales and revenue, in addition to giving modest weight to
generation capacity and actual generation. Plaintiff has not
persuaded the court that its proposed reliance on net book
value would produce an allocation fairer than Defendant’s.
This is particularly the case because Plaintiff’s proposed

Cite as 25 OTR 227 (2023) 	307
“net investment” factor is based on “accounting” deprecia-
tion, which Plaintiff itself has criticized as driven by conven-
tions and inconsistent with the facts on the ground.
The court finds that Defendant’s allocation percent-
age of 16.4995 percent applies in this case.
V. 	CONCLUSION
Based on the foregoing, applying the allocation
percentage of 16.4995 percent to Plaintiff’s system value
of $17,241,379,310, the court determines that the real mar-
ket value of Plaintiff’s property sitused in Oregon, as of
January 1, 2020, was $2,844,741,379 prior to adjustments.
Now, therefore,
IT IS THE OPINION OF THIS COURT that the real
market value of Plaintiff’s property sitused in Oregon, as of
January 1, 2020, was $2,844,741,379, prior to adjustments
for licensed vehicles and other locally assessed properties.