Commentary published in The Oregonian
The PGE deal: the right connection
Here are five reasons the proposed sale of the utility is good for consumers
Forget the nagging worry about a Texas investment group spoiling the "local" in the sale of Portland General Electric. I pay PGE bills, too, and I recently retired after nearly 13 years as a utility regulator. I know very well what can go wrong and what can work for us.
Last week Texas Pacific Group announced the proposed sale, with three Northwesterners, including former Gov. Neil Goldschmidt and Tom Walsh, a Portland developer, as the public faces. The Texas investment company would pay most of the $2.35 billion sales price, rescuing the utility from Enron's ownership and a world of uncertainty.
I have a lot of family in Portland, including two grandchildren. Speaking as a consumer, a ratepayer and a grandmother, here are five reasons why this is a good deal:
1) LOCAL ACCOUNTABILITY:
I've known Neil Goldschmidt and Tom Walsh for 25 years. Time and again they have put their names, energy and resources on the line for Oregon and our quality of life. They know what we expect of our utilities -- efficiency, reliability and fair rates. They know we want the new PGE headquarters to stay in Portland. The board will meet here, be visible and accountable.
I hear a lot of people stewing over where the money comes from -- a Texas investment firm. That concern is provincial and naive. Are we saying only people who live in Oregon can invest in PGE? Or can "outsiders" chip in?
For all of its more than 100-year history PGE has been owned by investors. Many came from Oregon, but the vast majority didn't. The money flowed in from pension and mutual funds, institutions and individuals. The real questions are what kind of a company Texas Pacific Group is, what consumer protections are built in and is the price fair?
What if Texas Pacific Group sells PGE after a few years? In the last decade, the utility industry has seen numerous mergers and acquisitions. Look at PacifiCorp. It merged with Utah Power and was later bought by Scottish Power. Look at Portland-based Northwest Natural Gas. It tried to buy PGE.
Owners have the right to buy and sell. When it's an electric utility, the Public Utility Commission's duty is to protect consumers when a deal is proposed and make sure the next buyer is qualified.
The new owner, Oregon Electric Utility, will be accountable to customers, shareholders and independent regulators. Regulators don't guarantee a profit, but shareholders expect a return on their investment. That gives the utility an extra incentive to operate efficiently. And, if something goes wrong, shareholders bear the risk. Customers like you and me aren't stuck with the entire bill.
Enron lost interest soon after its 1997 purchase of PGE; the utility has been drifting ever since. PGE has been the subject of two visible takeover attempts over the past five years. Any complex business needs an engaged owner and board. Don't forget, the Northwest energy situation is still in upheaval -- with increased federal regulations, a persistent drought, price volatility and fewer electricity sellers.
The shadow of Enron's bankruptcy means sellers view PGE with a wary eye. Oregon's largest utility can't always get the best energy prices, and those higher costs are passed on to consumers.
Under the circumstances, PGE's employees have done a great job just keeping the power on and the system working. But that's not enough. They need relief from limbo as much as we do.
4) NO PUBLIC TAKEOVER:
Earlier this month Multnomah County voters spoke decisively against the need for a public utility district. The city of Portland waited in the wings. But Enron rejected Portland's original offer for PGE; there's little time to make another one. City condemnation would take years, lots of money and much litigation. Is that what we want? More drifting?
And, if the city owns PGE, remember there's no public utility commission oversight. In fact, the PUC can't even review and approve the deal.
Timing isn't the only problem. If the city sticks to providing electricity within Portland's boundaries, would it also own generating resources outside city limits -- there are none in Portland -- or would it have to buy all its electricity? That's very expensive.
What about control? Ultimately, who sets the rates? City commissioners? An appointed group? Portland has said it would hire a day-to-day operator. What will that add to rates? I can assure everyone utility oversight is a full-time job.
Portland takes revenues from its water and sewer funds to cover "overhead." What would it take from the utility? Maybe my worries are unfounded, but I've worked in city government. I can't be confident public condemnation or acquisition is better than shareholders shouldering risks and utilities paying taxes.
The city can have a lot more influence by participating in regulatory proceedings.
5) WE'RE PROTECTED:
Oregon's Public Utility Commission will have jurisdiction over last week's deal and over the new utility. Its commissioners and staff know how to evaluate every detail of a takeover. They know how to set rates, enforce safety and reliability and deal with consumer complaints. The process is fair and open, and subject to court review.
I know them well. As I told Enron years ago, "We did not just fall off the turnip truck."
We don't hear much about how the PUC regulates investor-owned monopolies. Rhetoric often drowns out the careful analysis commissioners do -- and the fact that anyone can challenge their decisions. The PUC must operate according to legal process, Oregon statutes and federal case law.
Let's go back to the original Enron takeover. The PUC built a "fence" of strict conditions around PGE to protect customers from Enron running off with the assets and cash to support its criminal adventures. The fence held -- a fact the rating companies still appreciate. No fence? Who knows how high the rates would be!
Will rates go up or down because of this bid to buy PGE? I think they'll actually go down a bit because the costs of the energy crisis have been worked out of the system. How about the long term? Who can say? Still, I think we'll get more efficiency from an investor-owned PGE and fair rates from the PUC.
And we'll have local accountability again.