MICHIGAN declined to take into account the fact that an independent power plant is a “QF” project when assigning a value to it for property tax purposes.

MICHIGAN declined to take into account the fact that an independent power plant is a “QF” project when assigning a value to it for property tax purposes.

September 01, 2006

MICHIGAN declined to take into account the fact that an independent power plant is a “QF” project when assigning a value to it for property tax purposes.

Utilities are required by federal law to buy the electricity from certain power plants called “qualifying facilities.” The city of Midland, where the power plant is located, argued that the plant was assigned too low a value for property tax purposes because the assessor failed to take into account the special regulatory status of the plant. A state appeals court disagreed in a decision in late February. The case is Midland Cogeneration Venture v. City of Midland.

The property tax assessor used the replacement cost method to value the plant. In other words, he looked at what it would cost to build the same plant today, and then adjusted the amount to reflect wear and tear at the plant.

The court said this was a reasonable approach given that there was no guarantee the utility that buys the output from the plant — Consumers Energy — would agree to let any new owner of the plant keep the contract.

Keith Martin