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Press Release
PUC Staff Recommends Approval of PGE Sale with Conditions Including $75 Million in Rate Credits
September 22, 2004 (2004-25) (UM 1121)
 
Contacts:  Bryan Conway, PUC Staff Case Manager, 503-378-6200; Bob Valdez, Public Information Officer, 503-378-8962
 
Salem, OR – The Staff of the Oregon Public Utility Commission today made its final testimonial recommendation to the Commission regarding the sale of Portland General Electric (PGE), a subsidiary of Enron, to Oregon Electric Utility Company (OEUC).
 
The Staff is recommending the sale be approved provided a host of conditions are met, including a $75 million rate credit spread out over five years.
 
"We arrived at the $75 million figure based on our ‘big picture’ assessment of the risks, harms, and benefits of this transaction," PUC Staff Case Manager Bryan Conway said. "We continue to see rate credits as necessary to ensure PGE customers will be better off under new ownership than the status quo."
 
Conditions and rate credits recommended by Staff and others involved in the case such as the Citizens’ Utility Board, Industrial Customers of Northwest Utilities and the city of Portland will be explored further in settlement conferences.
 
Staff’s initial recommendation, released July 21, 2004, recommended the Commission reject the sale because it failed to provide net benefits for customers.
 
On August 16 OEUC modified its offer to include a $15 million rate credit.
In reviewing an application like this, the Commission must find that the proposed sale results in net benefits to the utility’s customers, as well as finding that the transaction will not impose a detriment on Oregon citizens as a whole.
 
On March 8, 2004, Oregon Electric Utility Company submitted its application to purchase Portland General Electric. OEUC would be a Limited Liability Company for which Texas Pacific Group (TPG), a private equity firm headquartered in Fort Worth, Texas would provide the bulk of the financial backing.
 
Summary of Staff’s testimony:
  • At this time, Staff recommends the Commission approve OEUC’s application with conditions;
  • Staff recommends a rate credit of $15 million per year for the first five years after closing the transaction;
  • The rate credits offset the net risks and harms present in this transaction and produce net benefits for customers;
  • OEUC must provide access to detailed records of instances in which TPG Applicants withholds its consent to a decision of the PGE Board of Directors;
  • The Applicant must notify the Commission regarding formation of new subsidiaries and provide access to all books and accounts of their affiliated interests;
  • PGE will be treated on a stand-alone basis for determining the costs of utility service (including taxes) and setting rates;
  • Financial ring fencing
  1. PGE’s common equity cannot fall below 48%;
  2. Each PGE distribution to OEUC will be used exclusively to pay direct operating expenses and debt for at least five years.
OEUC will respond to the latest round of comments by October 11, 2004..
At this time settlement conferences are scheduled for September 27 and October 14. The Public Hearing, which will include cross-examination of witnesses, has been reserved for October 19 through the 22.
 
Staff can modify its recommendation based on intervenor and company testimony during the public hearing.
 
A final decision by the three-member Commission is expected by early next year.
 
PGE serves approximately 741,000 customers in Oregon. 
 
Staff’s testimony is available on the PUC Web site at http://apps.puc.state.or.us/edockets/docket.asp?DocketID=11018 (link updated)
 
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