SALEM (AP) - An opinion by Attorney General Hardy Myers gives state regulators broad leeway in how to carry out a new law linking income taxes paid by utilities to the rates they charge their customers.

Myers' opinion, issued on Tuesday, came in response to a request by the Oregon Public Utility Commission for help in interpreting key provisions of the new law.

The legislation requires that there be rate adjustments that reflect both income taxes paid by utilities and the amounts collected from customers to cover those expenses.

Collections from ratepayers are based on estimates of a utility's independent tax liability. But a large corporate parent can use losses from elsewhere to reduce actual tax payments.

Enron for years paid little or no federal or Oregon income taxes, even though subsidiary Portland General Electric collected about $90 million annually from ratepayers for tax expenses.

The law's implementation has been made difficult by differences between federal tax codes and state rate-making policies and by conflicts between utilities and consumer groups.

The law requires a rate adjustment if utilities report a tax-and-collection mismatch of $100,000 or more in any year beginning in 2006, said Kevin Neely, a spokesman for the attorney general's office.

“But the level of that adjustment and how it's made are discretionary,” he told The Oregonian.

Central to the arguments is the interpretation of how tax liabilities are “properly attributed” to a regulated utility in Oregon. The phrase appears eight times in the law but never is precisely defined.

Utilities want a rate reduction only if the ultimate payment by the corporate parent is less than the amount collected from ratepayers.

Consumer groups want each corporate subsidiary to come under PUC review, with part of any posted losses worked into the utility's rate adjustment.

The attorney general's opinion said either method could hold up in court and that the Department of Justice would defend either approach against legal attack.

The opinion left open the possibility of other methods.

There are limits to the commission's authority, the opinion noted. Any rate adjustments could not have a “material adverse effect” on consumers, and they could not impede a utility's right to a reasonable rate of return.

“Those are the barriers on both sides,” Neely said. “Apart from that, the PUC essentially has complete authority to make (rate) adjustments.”

An administrative law judge is expected to decide soon how to implement the attorney general's guidance.