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The Portland Tribune
March 8, 2002

State fights PGE breakup
If creditors try to chop up utility, attorney general will slap lien on property

The Tribune

It wouldn't be the first time that Oregon has bucked federal law.

The state attorney general's office is prepared to test its mettle against the federal bankruptcy court if Enron Corp. creditors try to tear apart Portland General Electric's lucrative assets to wring the greatest value possible out of the utility.

If the creditors' committee seeking repayment of millions owed by PGE's parent company goes that route, the attorney general's office would slap an equitable lien on PGE's property, Assistant Attorney General Paul Graham said Monday before a crowd of 100 at an Oregon Public Utility Commission hearing in Portland.

The state has that right since Enron is registered as an Oregon corporation, Graham said.

The lien would guarantee that PGE customers get a portion of the proceeds for the power company's assets. For instance, if PGE's hydropower — valued at $2 billion — were sold, the state could demand two-thirds of the proceeds to repay customers via refunds or credits.

“If the utility is divided up and sold separately, customers are entitled to a certain amount of the proceeds,” Graham said.

The maneuver is seen not so much as a method for repaying PGE customers as a deterrent to keep Enron's 700 creditors from pursuing a fire sale of assets that PGE ratepayers helped finance.

“That's the point,” Graham said. “We’re trying to warn them from that route. It's better to keep it intact.”

He outlined the state's assertive role in the Enron Chapter 11 bankruptcy proceeding, including the hiring of a New York attorney to represent the state in U.S. bankruptcy court in Manhattan.

An overwhelming majority of the 30 people who aired their views before the commission this week demanded that the utility commission scrap the sale of PGE to NW Natural and called for public ownership of the electric company.

No smiling allowed At several points, the hearing became a gripefest for age-old grievances against the utilities and the “heartless” way they raise rates on struggling customers. One speaker even asked Graham to wipe the smile from his face because it wasn’t a funny situation.
“I’m not smiling, that's just the way I look,” he said.

The three PUC commissioners were criticized for their oversight of Enron and were lobbied to persuade the Legislature to support public ownership.

“The first line of every corporation is not to serve but to make money,” said James DeRosso, a Portland resident. “We do have an option here to demand action from our government.”

Twice, PUC Chairman Roy Hemmingway responded that the utility commission did not have the power “to ask the Legislature to do anything.”

“Ask them, Roy,” shouted an audience member.

“We don’t have the reputation you have, Mr. Hemmingway,” said Nancy Newell, a Portland resident. “You brought this company (Enron) into our community. We’re going to do our job, but you make sure and do your job.”

A frustrated Hemmingway answered: “If you think this is the appropriate course of action, you should get organized. You can do it.”

Hemmingway reiterated that the PUC can only make a decision on whether NW Natural's proposed $2.9 billion purchase of PGE benefits ratepayers. Though the gas company had hoped for a decision by May 28, he said the PUC was more likely to make a decision in late June or early July.

Though the PUC hearing was supposed to be the last of three, another may be held if the terms of the deal change, Hemmingway said.

Because of its bankruptcy and general corporate disarray, Enron has been slow to submit documents in the PGE sale.

“It's going to take more time,” said PGE spokesman Kregg Arntson. “We’re trying to figure out the strategy for going forward.”

NW Natural may backpedal Enron executives will submit their restructuring plan to the creditors' committee and bankruptcy judge in April or May. The Houston-based corporation seems less interested in shedding PGE since the arrival of Interim Chairman Stephen Cooper.

Spokesman John Ambler said last week that Enron still was pursuing the sale to NW Natural but would not be averse to including PGE in a restructuring plan for Enron's emergence from bankruptcy.

NW Natural is shielding itself from potential collapse of the 4-month-old deal.

In a Securities and Exchange Commission filing March 1, NW Natural stated it has learned that PGE is exposed to additional liabilities from the Enron bankruptcy and, depending on their impact, may choose “not to acquire PGE.”

PGE may be financially liable for Enron's employee benefit and pension plans and taxes assessed to its parent company, according to the federal report.

While the billion-dollar deal chugs along, the Rockwood Water People's Utility District, Tualatin Valley Water District and other far smaller utilities are considering buying the big utility, too.

Both water districts held meetings Tuesday to discuss public interest in buying not just PGE's poles and lines but the whole shebang. Rockwood PUD, at Northeast 196th Avenue in Gresham, has $5 million in the bank, Manager Harvey Barnes said. He said any major purchase would ride on a bond issue.

PGE's Arntson said his company would fight being acquired by a public utility district. PUDs do have some takeover leverage under state law, which allows them to condemn property of a private utility company and operate it.

Contact Kristina Brenneman at kbrenneman@portlandtribune.com.