The Portland Tribune, July 18, 2003

Counties back away from city's PGE bid
Hopes diminish that coalition will be there if new offer goes on table

BY KRISTINA BRENNEMAN
The Tribune

A five-county coalition that had been working with Portland city officials to acquire Portland General Electric is breaking up, citing the rejection last week of the city's bid for the utility.

A briefing next Thursday in Portland may be the last get-together for the Regional Power Study Group, which includes Multnomah County Commissioner Lisa Naito and representatives from Washington, Clackamas, Marion and Polk counties.

"There was only one purpose for us, that Portland would acquire PGE in the bankruptcy court, and that is off the table now," Naito said. "Our mission was to do what was needed to set up a regional structure."

Washington County Commissioner Tom Brian still hopes to save the study group, however.

"We need each other," he said. "Before any of us hang up our spurs, we need to meet and go over this plan. We may see reason to continue for a while. We've always maintained that Portland's effort is better served with all of us involved."

The Tribune reported last week that bankrupt Enron Corp. rejected the city's $2.2 billion bid and at least one other bid for its PGE subsidiary.

But the regional power group began to unravel long before that. Two outlying counties Marion and Clackamas didn't think the city was communicating well enough with them.

The five-county support had given the city's PGE quest more credibility with outlying regions and consumer groups that would be more comfortable with broader, regional governance of a public utility. Currently, only about 20 percent of PGE's electricity customers are in Portland.

City leaders have not decided what their next step will be. Their options, they said, could include making another bid, appealing to the federal bankruptcy court in New York where Enron's reorganization plan was filed last week, or initiating condemnation proceedings to take over the embattled Portland utility.

City officials have the right to condemn PGE but need the counties' help to secure the utility's thermal assets.

Naito said that if the city decides to submit a new offer to buy PGE, the supportive counties would regroup.

"I'd hope we'd come together again," she said.

Last week, PGE executives began making overtures about relocating to Clackamas County should the utility be taken over by the city or a public utility district.

Fred Miller, executive vice president of PGE, scheduled meetings this week with Clackamas County Commissioners Bill Kennemer and Larry Sowa, prompting Sowa to ask his staff to look for a possible site for PGE in Wilsonville.

Miller said he plans to make the rounds of other counties to talk about PGE's future, condemnation and other issues.

"I'm trying to make sure people understand what's happening," he said.

His wooing was enough for the already tentative Clackamas County commissioners to bail on the proposed regional utility that would emerge from a PGE purchase by the city of Portland.

"We were about ready to drop out of the process because it hasn't worked out," Sowa said, owing to what he called "a lack of negotiations with the city."

"It was six months into the process before they involved us," he said. "The proposal is still for a municipal utility, and we want a regional utility. If Portland has its way, it would be city-based."

Marion County Commission Chairwoman Patti Milne said her commission also has reached the point of deciding to suspend involvement with the regional power group. Marion County contributed $50,000 toward studying a PGE purchase. Portland has spent $850,000 so far on legal bills and other costs related to the utility's pursuit.

"We were getting very little information here," Milne said. "It was always a little frustrating. The purpose of the meetings was changing, and I was very uncomfortable with whether it was beneficial to Marion County."

City Commissioner Erik Sten, who has been leading Portland's effort to buy PGE, said the collapse of the regional group is "unfortunate" but would not influence the city's strategy.

"We're still working with all the counties," he said. "This is an opportunity to unify our efforts, rather than a step backward. It's going better than Mr. Sowa would have us believe.

"It's hard to take such criticism seriously from someone who doesn't support public power. We're doing our best, but it's hard. We're trying to come up with a balance that meets the public interest."

Sowa, a former state legislator, is an original member of the anti-PUD group Oregonians for Jobs and Power.

An industry in turmoil

PGE's threat to relocate from Portland to Clackamas County appears to be largely driven by a proposed Multnomah County people's utility district looming on the November ballot, said Gary Conkling, a consultant who represented the five counties.

Petitioners also hope to have a proposed Clackamas County people's utility district on the March ballot.

With the PGE sale also in limbo, "it's a very unsettling time" for everyone, Conkling said.

The energy industry also is bracing for higher natural gas prices this winter up to 20 percent higher, the Oregon Public Utility Commission warned this week. Higher gas prices also can mean higher electricity rates because many utilities need natural gas to generate electricity.

"It's very hard to know what to do," Conkling said. "The possibility of public acquisition is still there. The filing with the bankruptcy court wasn't clear. It could be another six months' delay."

In the bankruptcy reorganization plan it filed last week, Enron said it still intends to sell PGE or, should a sale not pan out, disperse its 42.75 million shares to about 2,000 creditors. The plan is not expected to be voted on by creditors until at least this fall, said Howard Seife, a partner at Chadbourne & Parke who is representing a group of Enron creditors.

"It's fair to say if an appropriate buyer came along willing to pay fair value, that would be favored," Seife said.

Sten, working with commissioners from the five counties, had drawn up an agreement that would have established a regional advisory board and board of directors if the city were to buy PGE.

The board of directors would oversee decisions on rates, investment decisions, and the hiring and firing of staff.

Dan Meek, a local lawyer leading the PUD drive, urged city officials to use its powers to condemn PGE.

"They've given Enron every opportunity to come to an agreement," said Meek, a member of the Utility Reform Project. "They've (the city) offered considerably more than book value for it."

Contact Kristina Brenneman atkbrenneman@portlandtribune.com.

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