The Oregonian

PGE records $4 million loss linked to former energy crisis

The third-quarter loss reflects reserves deducted from earnings to deal with costs tied to the 2000-01 energy markets

11/13/03

GAIL KINSEY HILL

Still dogged by the energy crisis of 2000-01, Portland General Electric recorded a $4 million loss for the third quarter that ended Sept. 30.

The loss, reported Wednesday in a quarterly filing with the Securities and Exchange Commission, reflected reserves of almost $20 million deducted from earnings to deal with costs associated with the tumultuous energy markets of three years ago.

The one-time deductions included $8.5 million to settle a federal investigation into questionable electricity trades with PGE's parent company, Enron, and $11 million in uncollectible bills for wholesale electricity sales to California.

A sluggish economy also contributed to earnings that were below normal levels, said Jim Piro, the utility's chief financial officer.

"This has been a challenging year for us in many respects," Piro said.

Ratepayers, investors and regulators are watching PGE's financial condition closely. Enron, mired in a complex bankruptcy reorganization, considers PGE one of its most valuable assets. The Houston company plans to either sell the utility or distribute newly issued stock to thousands of Enron creditors.

The city of Portland has expressed an interest in buying PGE but so far has been rebuffed.

The third-quarter loss compares with earnings of $8 million for the like period a year ago.

Revenues for the latest quarter totaled $494 million, a 7.9 percent increase from year-ago revenues of $458 million.

Net operating income, recorded before items such as taxes and one-time charges are taken into account, totaled $19 million, compared with $24 million a year ago.

"Operations went well for the quarter," Piro said.

PGE officials say that operations at the utility have not been affected by Enron's bankruptcy, which is almost two years old and far from resolution. But consumer groups say the uncertainties surrounding PGE's future ownership make financial stability difficult.

"The company's drifting," said Bob Jenks, executive director of the Oregon Citizens' Utility Board, a consumer watchdog group. "It needs direction; it needs a management that knows who it's working for."

Gradually, PGE is shaking off the remnants of an energy crisis that took its toll on utilities throughout the West.

All told, California owes PGE $62 million for past energy purchases. PGE has taken $40 million in reserves to account for the unpaid bills, including the third-quarter write-down of $11 million.

Piro said the utility continues to pressure bankrupt California utility Pacific Gas & Electric Co. and a now-defunct power grid operator to repay their debts, "but we don't expect to get paid anytime soon."

The $8.5 million reserve accounts for a settlement agreement reached Sept. 26 between PGE and the trial staff of the Federal Energy Regulatory Commission. The settlement, if approved by the three-member commission, will end an investigation into improper trades between Enron and PGE.

PGE admitted no wrongdoing in its trading practices but said it may have unwittingly aided Enron in manipulating energy markets during the 2000-01 energy crisis.

The sluggish economy has been a drag on earnings for more than a year, Piro noted. But, electricity use by large industrial customers began improving in the third quarter, a sign that Oregon's struggling manufacturing industries may be recovering, he said.

Gail Kinsey Hill: 503-221-8590; gailhill@news.oregonian.com