The Oregonian

PGE-Portland rancor surges

The utility's president sees defeat of public power as a vote for private ownership, but city officials minimize the election

11/6/03

JONATHAN BRINCKMAN and SCOTT LEARN

Public animosity between Enron-owned Portland General Electric and Portland city officials cranked up the day after Multnomah County voters rejected a public power ballot measure, with PGE's chief executive saying the city's bid for the company doesn't make sense.

With the initiative to form a Multnomah County people's utility district dead, the most likely alternative for public ownership is the city, which has the authority to condemn PGE's assets.

PGE executives have strongly opposed city condemnation of the 114-year-old utility. But they had stifled their concerns over a city purchase of PGE because of bankrupt Enron's fear of alienating potential suitors.

Peggy Fowler, PGE's president and chief executive, broke that silence in an interview Wednesday, saying a city purchase is not a good idea. Fowler took heart from the election results Tuesday, which she interpreted as support for private ownership of the utility.

"When you have a company that has been investor-owned like PGE for so many years, there are benefits to keeping it going like that rather than converting it to a government-owned or city-owned system," Fowler said. "I do believe there are some advantages in keeping a company privately owned."

Portland Commissioner Erik Sten said options other than selling PGE to the city, including redistributing shares of PGE to Enron creditors, would not benefit PGE's customers. He accused Enron of wanting to keep PGE and milk its assets.

Later this month, a bankruptcy court judge in New York is scheduled to consider Enron's reorganization proposal, including plans for PGE. Some creditors and the state of Oregon are among those objecting to the plan.

Enron rejected one roughly $2.2 billion bid by the city to buy PGE, and Sten said Wednesday that he thinks Enron's management is set on redistributing PGE shares to its creditors.

"I think the (stock) redistribution plan is good for Enron management and a select number of Wall Street banks, but it offers nothing for Oregon" he said. "Either Oregon makes money or New York does. It's a zero-sum game."

Sten and Portland Mayor Vera Katz are heading up the city's efforts to explore buying or condemning PGE, then creating a regional consortium to run it. The city has authority under its charter to issue revenue bonds backed by electric rates and buy some PGE assets throughout its Oregon service territory.

Sten and Katz downplayed the election results on the people's utility district. They said a city purchase of PGE would avoid many of the downsides inherent in a PUD. The city would not have to increase property taxes, would not target PacifiCorp, the county's second private utility and would not have to take over PGE's territory in county-by-county chunks, they said.

The mayor's preferences In a statement, Katz said she still wants to see PGE purchased by "a reputable private company with a strong commitment to the region." Another option, she said, is for PGE to be owned by Portland but governed by a regional board. PGE has 750,000 customers in Oregon, including 230,000 in Multnomah County.

In Tuesday's election, the county's voters rejected the creation of a people's utility district 68 percent to 32 percent, according to unofficial final election results.

Voters also rejected a proposed .0003 percent property tax levy that would have raised about $127,000 to pay for an engineer's report on the costs of acquiring the utility.

Members of the Oregon Public Power Coalition, the organization that gathered signatures for the PUD effort, said Wednesday that they will continue their bid to create utility districts in other counties with PGE customers: Clackamas, Marion, Polk, Washington and Yamhill.

John Ambler, a spokesman for Enron, would not comment on the future of PGE. Enron's bankruptcy filings say the utility, which Enron bought in 1997, either should be sold outright or have its shares distributed to Enron creditors.

"I can't acknowledge that there are bids," Ambler said. "A primary objective we have is to maximize value. That means we should look at viable offers for PGE and see if they make sense for the (Enron) estate and any of PGE's stakeholders."

Fowler confirms offer Fowler confirmed that Portland had made an offer for PGE. She said there were reasons beyond price that Enron refused the offer.

"The city came in with a reasonable price," she said. "We were not able to agree on terms and conditions."

Enron would consider another offer from the city, she said. "They always have another opportunity if they can get everything together and tidy up financing," she said. "The city hasn't been able to step up to that."

But Fowler said investors would be better able to bear the risks and costs of raising capital needed by a utility. She added that the city should focus on areas of its traditional responsibility, such as public safety and roads.

"If customers were going to get a huge price decrease because of this, I would be more easily convinced," she said. "But I don't see the advantages."

Sten said Fowler's comments on the city's offer appear to break confidentiality vows insisted upon by Enron that have kept the city from detailing all of its case.

"I'm assuming from Ms. Fowler's comments that the confidentiality agreement no longer applies," he said. "I'm going to confirm that before making more comments. What I will say is, I don't honesty believe Enron wants to sell this company. I think they want to keep pulling money out of it."

Sten said city analysis indicates costs would drop by about 15 percent if the city purchased PGE "at the price Peggy Fowler is saying is reasonable." The public utility would have smaller executive salaries, no profits, lower interest rates on bonds and pay no federal taxes, he said.

PGE has long disputed public power cost savings. It says the public sector is less efficient than private enterprise.

Jonathan Brinckman: 503-221-8190; jbrinckman@news.oregonian.com

Scott Learn: 503-294-7657; scottlearn@news.oregonian.com