*** PUBLIC HEARINGS ***
Enron Sale of PGE to Northwest Natural Gas
The Oregon Public Utility Commission (OPUC) has held three "public hearings" on Northwest Natural Gas Company's application to purchase Portland General Electric (PGE) from the bankrupt Enron Corporation. But the OPUC stopped the Portland hearing before hearing from even half of the people who had signed up to testify.
The last hearing will be:
Here is the OPUC Notice:
Here are reasons we oppose the deal:
The proposed sale of all of PGE stock by Enron to Northwest Natural Gas Co. (NWNG) is another Enron-style deal, devised by some of the same Wall Street firms that designed the financial manipulations that brought down Enron. The deal would perpetuate high rates and the prospect for more financial maneuvers.
1. NWNG has agreed to pay $820 million above book value for PGE.
2. Of the $2.8 billion purchase price, NWNG borrows $1.4 billion and also assumes $1 billion of existing PGE debt. NWNG admits that doing the deal with result in a "junk bond" rating.
3. The deal requires PGE ratepayers to pay rates above the cost of service in order to repay the new debt. The proposal is to "freeze" rates at high levels and also to have "deferred accounting" to include even more costs in rates after the end of the freeze.
4. The deal includes giving Enron a 5% share in both PGE and NWNG and two members on the board of directors of the holding company that will own both of them.
5. The deal requires PGE ratepayers to pay another $188 million in phantom taxes over the next 6 years, according to the experts of PGE's largest industrial customers. PGE ratepayers paid Enron over $357 million for federal income taxes over the past 4 years, and accounts and tax experts are unable to determine whether Enron paid any of that money to IRS (because of Enron's tax shelters in the Cayman Islands and elsewhere).
6. If all this is not bad enough, other "details of the deal, including its impact on customers and the size of the executives' bonuses, are unknown because Enron sealed most of the documents it filed with the utility commission." New York Times, Feb. 2, 2002. It has since come out that PGE executives get untold millions of dollars in bonuses if the deal goes through.
7. The deal was arranged by the same firms (Merrill Lynch and Credit Suisse First Boston) that helped structure the abusive "off-balance sheet special purpose entities" that led to Enron's downfall.
The Utility Reform Project (URP) is calling for:
For much additional information, including the NY Times article of February 2, see www.voters.net/urp.
In 1997, Enron bought PGE, Oregon's largest electric utility (serving over 1 million people), after buying off the support of many local environmental groups with cash grants and the influence of the Natural Resources Defense Council (NRDC). Among the very few opponents, Lloyd Marbet, Dan Meek, and Larry Tuttle, appealed the approval order of the Oregon Public Utility Commission but lost in the courts.
On October 1, 2001 Enron/PGE instituted a 41% rate increase ($400 million per year) caused mainly by manipulation of the West Coast wholesale energy markets by Enron and few other companies. Oregon ratepayers are now 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 already paid for. These assets are worth over $2 billion to Oregon ratepayers.
Enron has also agreed to sell 100% of PGE s stock to Northwest Natural Gas Co. (NWNG). But that sale is contingent both upon approval of the Oregon and Washington public utility commissions and upon approval of the U.S. Bankruptcy Court in New York (where Enron filed for bankruptcy 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 second special session on February 25 to deal with Oregon's budget shortfall. Instead of approving NWNG s application to purchase PGE, The Oregon Public Utility Commission should ask the Legislature to 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 enacted legislation implementing this constitutional provision, so the Authority has not yet come into being. Under the State Power Authority, Oregon could acquire PGE s assets by eminent domain, without U.S. Bankruptcy Court approval.
If Oregon does not do this, Enron's creditors will either accept the huge overpayment by NWNG (to be paid for by PGE ratepayers in rates for many years) or will object to the proposed sale of PGE stock to Northwest Natural Gas and instead ask the U.S. Bankruptcy Court to approve the sale of PGE assets, as part of the bankruptcy proceeding, out from regulation by the Oregon Public Utility Commission. This same strategy is now being pursued by Pacific Gas & Electric Co. in California. Both results are bad: Either we are on the hook to pay for NWNG's mistake in paying far too much for PGE stock, or we lose the valuable hydroelectric and transmission assets we have been paying off for over 40 years.
The good result would be public ownership of PGE, as discussed in other documents on this web site.
Our ancestors fought long and hard to have Oregon s hydroelectric and transmission resources operate in the public interest. These protections have been eroded by deregulation and the concentration of power in the hands of private interests. Its not too late to stand up and let your voice be heard!