THE SPECIAL OREGON CONNECTION
STATEMENT OF DAN MEEK
January 22, 2002
Enron/PGE instituted a 36% rate increase ($400 million per year) on October 1, 2001, caused mainly by the manipulation of West Coast wholesale energy markets by Enron and other companies. Oregon ratepayers are placed at further risk by the Enron bankruptcy, which could strip PGE of the very valuable hydroelectric and transmission assets, built in the 1950s and 1960s, that Oregon ratepayers have largely paid for. These assets are worth over $2 billion to Oregon ratepayers.
Enron in October 2001 agreed to sell 100% of the stock of PGE to Northwest Natural Gas Co. (NWNG). But that sale is contingent both upon approval of the Oregon and Washington public utility commissions (decision expected by June 2002) and upon approval of the U.S. Bankruptcy Court in New York (where Enron filed on December 2, 2001). Enron's creditors are likely to object to this sale of stock, because the underlying hydroelectric and transmission assets of PGE would bring in far more money if they were sold separately to companies that would not be subject to utility regulation in Oregon.
The Oregon Legislature is scheduled to meet in a special session in February (no specific dates yet set) to deal with a budget shortfall. The Legislature should immediately protect the valuable assets of Oregon ratepayers by activating the State Power Authority, created and placed into the Oregon Constitution (Article XI-D) by voters in 1932 and empowered to "acquire, construct, maintain and/or operate hydroelectric power plants, transmission and distribution lines." The Oregon Legislature never adopted any implementing legislation, so the Authority has not yet come into being.
Federal law is clear that the Bankruptcy Court does not control transactions involving only the assets of non-bankrupt subsidiaries of bankrupt corporations, even if the bankrupt corporation owns 100% of the stock of the non-bankrupt subsidiary. 2 Collier on Bankruptcy (15th ed.) ¶362.04. PGE is a fully operational, non-bankrupt subsidiary of Enron. Thus, the State of Oregon could acquire PGE assets by eminent domain, without U.S. Bankruptcy Court approval.
If the Legislature refuses to act, then the City of Portland and other cities in the PGE service area should seriously consider the municipalization of PGE, in order to preserve these assets.
If Oregon does not do this, then the Enron creditors would likely object to the proposed sale of PGE stock to NWNG and instead ask the U.S. Bankruptcy Court approval to approve an Enron transfer of the PGE stock to the creditors themselves, who would (as the owners of PGE) then seek to sell the PGE hydropower and transmission assets out from under Oregon utility regulation. This strategy of selling regulated assets out from under state regulation is now new; it is now being pursued by Pacific Gas & Electric Co. (PG&E) in California.
Like other Enron employees, many PGE employees lost most of their 401k retirement savings, because the employer contribution consisted of Enron stock which could not be sold by the employee before reaching the age of 50 or during the October 401k lockdown. PGE employees probably lost tens of millions of dollars. We know that two PGE executives alone, however, cashed in over $110 million in Enron stock options during 2000. Former PGE CEO Ken Harrison received $75 million. Former PGE treasurer Joseph Hirko received $35 million. They should donate these gains either to the PGE employees or to a worthy public cause.
Daniel W. Meek