The Oregonian

Enron expected to file restructuring proposal

07/11/03

JEFF MANNING

Enron is expected today to present a company restructuring plan that eventually should lead to new ownership of Portland General Electric.

The centerpiece of Enron's long-awaited restructuring plan is the spin-off of PGE, Oregon's largest supplier of electricity, to Enron's creditors. Though no details or specifics are yet available, industry insiders and state regulators expect that Enron's thousands of creditors, which include some of the country's largest banks, would get new PGE stock in amounts proportionate to the debt they are owed by Enron.

The official unveiling of Enron's plan should lay the groundwork for Enron's eventual divorce from PGE and Oregon. It also is likely to amplify an already loud debate about who ultimately should own and operate the utility, which has more than 700,000 customers.

PGE management is thrilled with the proposal, which they feel would restore the utility as a stand-alone, independent company and cut its ties to the disgraced Enron. PGE officials aggressively championed Enron's 1997 acquisition of the local utility. But that tight relationship became a nightmare for local executives after Enron's 2001 collapse into bankruptcy amid widespread accounting irregularities and allegations of fraud.

"The best news in all of this is that we'll be out from under Enron," said Fred Miller, PGE executive vice president.

Others are more dubious about the PGE spin-off plan and its potential impact on ratepayers. Of particular concern is the uncertainty over who will bear responsibility for PGE's legal liabilities. The company has been sued a number of times by consumers and other utilities in disputes related to allegedly fraudulent electricity trades. Consumer advocates and some city leaders want assurances those costs won't fall to ratepayers.

"Enron's interest is getting as much money out of Oregon as possible," said Erik Sten, the Portland city commissioner who led the city's bid to acquire PGE. "We are looking to protect their customers and our economy. We are a long way from convinced that those protections are in place."

Roy Hemmingway, chairman of the Oregon Public Utility Commission, which regulates PGE, said he, too, is concerned about Enron's plans. It's unlikely, he said, that Enron creditors will have any interest in long-term ownership of an Oregon utility. In that case, PGE could well be on the sales block again in a couple years.

"How stable is this arrangement," Hemmingway asked. "I get concerned when there are serial takeovers of Oregon utilities."

It's uncertain whether the PUC will have a say in the matter, which is increasing anxiety levels among customer groups.

Unlike a traditional acquisition or merger, in which the PUC would have full oversight, state law is vague about the PUC's role in a stock swap of the sort Enron is proposing in the PGE spin-off. Paul Graham, lawyer for the Public Utility Commission, has told consumer groups that the PUC's oversight role will likely be extremely limited.

Hemmingway pledged, however, that the PUC will use its "broad investigatory powers" to examine the deal and ensure PGE customers are protected. Hemmingway is set to retire from the PUC in September.

Enron's bankruptcy has now dragged on for more than 20 months and has cost more than $500 million in various expenses, prompting criticism from the Texas attorney general and creditors.

Jeff Manning: 503-294-7606; jmanning@news.oregonian.com