PORTLAND, Ore. -- The Oregon Public Utility Commission will allow PacifiCorp to collect an additional $34.5 million from its customers over the next two years to cover taxes it paid for 2006.

The ruling will raise rates by an average of 3 percent starting June 1.

But Portland General Electric was ordered to refund customers $37.2 million because it collected more taxes in rates than it paid to government. The resulting rate decrease will be between 1 and 2 percent.

The orders announced Friday result from a utility tax law the Oregon Legislature passed in 2005. It requires utilities to match the taxes they collect from ratepayers with what they pay to governments.

Senate Bill 408 was intended to close a loophole that allowed Enron, PGE's former owner, to collect as much as $90 million a year for taxes from Oregon ratepayers but use losses from other operations to erase tax liability and pay the state as little as the $10 minimum tax.

The bill requires utilities to file reports with the utility commission on taxes they actually pay. If a payment turns out to be less than the money collected from customers for taxes, there would be an automatic rate reduction to return the excess collected to ratepayers.

But even with the law, ratepayer advocates are skeptical that utilities are paying as much as they are collecting.

The Industrial Customers of Northwest Utilities, which represents many large energy users in the region, said it planned to appeal the PUC's decision to the Oregon Court of Appeals.

The industry advocacy group says it was unable to adequately study the tax records of PacifiCorp. Moreover, the group says, much of the tax information for its parent company's other affiliates was redacted from the documentation, making it impossible to properly calculate the utility's tax liability.

The industry group further contends the formula the PUC adopted to determine a utility's tax liability is flawed.

"We believe the commission rules do not comply with the Legislature's intent in adopting this law," Michael Early, ICNU's president, told The Oregonian newspaper.

PacifiCorp, which objects to the law, hopes the bump in electricity rates will persuade lawmakers to do away with it.

"Now we know what complying with the law as it was written does," said Paul Vogel, a spokesman.