Activating Oregon's State Power Authority
Ratepayers and consumers up and down the Pacific coast have been severely harmed by the manipulation of wholesale electric power markets by Enron and a few other companies during 2000 and 2001. Recent studies have placed the unjustified cost to ratepayers at over $40 billion. Respected utility analysts, such as Robert McCullough in Portland, have concluded that the massive price spikes had nothing to do with any actual shortage of energy and everything to do with market manipulation.
In addition, Enron, owner of Portland General Electric Co. (PGE), successfully persuaded the Oregon Public Utility Commission (OPUC) to grant to it a $400 million annual rate increase as of October 1, 2001. Business customers got a 50% increase, while residential rates went up only 41% thanks to a credit provided under federal law by the Bonneville Power Administration. This rate increase has caused industries to close, and the Portland area alone has lost 17,000 jobs during September-November 2001.
The 2800 employees of Enron/PGE have also lost tens of millions of dollars from their 401k retirement plans, because Enron's contributions were in the form of Enron stock that could not be sold by the employees prior to age 50 or during the plan lockdown last October. At least two top PGE executives were big winners. Former CEO Ken Harrison and former Treasurer Joe Hirko made $110 million by cashing in their Enron stock options in 2000.
PGE ratepayers stand to lose even more, because the Enron bankruptcy process can seize control of the hydroelectric power plants and the transmission lines that PGE ratepayers have largely paid for over the past 40-50 years. Enron's major creditors (banks and other financiers) may be able to use the federal bankruptcy proceeding to strip PGE of these valuable hydroelectric and transmission assets, built in the 1950s and 1960s, and put them on the auction block to be sold to the highest bidder. If this happens, Oregon would lose control of assets worth over $2 billion.
The fact is that the State of Oregon rightfully owns PGE's hydroelectric plants. When PGE first obtained state licenses to build and operate these hydroelectric dams, it agreed, under state law in effect at that time, to transfer ownership of these facilities to the state, free and clear, after operating them for the equivalent of 50 years at a 6% return on investment. PGE has long since earned this return, but the Governor and the Attorney General have failed to enforce the terms of these state licenses. Oregon is faced with losing ownership of energy resources that were bestowed on us by a previous generation of Oregonians, who believed that the rivers of Oregon, and the hydroelectric installations constructed on them, belonged to the people. How shocking it is to see what is happening to us now.
In October 2001, Enron agreed to sell 100% of the stock of PGE to Northwest Natural Gas Co. (NWNG). But that sale requires the approval of the U.S. Bankruptcy Court in New York, charged with protecting Enron’s creditors who can object to this sale of stock, because the underlying hydroelectric and transmission assets of PGE could bring far more money if they were sold separately to companies not be subject to Oregon utility regulation (because they have no electric distribution systems in Oregon). Or Enron’s creditors could conclude that the huge premium to be paid by NWNG (over $800 million above book value) is sufficient. The deal also includes turning over a 5% ownership share in both PGE and in NWNG to Enron or its creditors.
Oregonians do not have to idly stand by and watch the deck chairs rearranged on the Titanic. The Oregon Legislature is scheduled to meet in a special session to address Oregon’s budget shortfall. It can immediately protect Oregon ratepayer’s valuable assets by activating the State Power Authority, created and placed into the State Constitution (Article XI-D) by Oregon voters in 1932. The Authority is empowered to "acquire, construct, maintain and/or operate hydroelectric power plants, transmission and distribution lines." While the Legislature has never passed the legislation implementing the State Power Authority, it now has very good reasons for doing so. The Authority could receive ownership of PGE's dams (under the terms of the state licenses) and it could obtain all PGE utility assets by eminent domain, without U.S. Bankruptcy Court approval, at a price determined by an Oregon jury in an Oregon court.
If 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.
Our ancestors fought long and hard to have Oregon’s hydroelectric and transmission resources managed 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 defend a legacy intended to benefit us all!
Dan Meek (503) 293-9021 www.voters.net Lloyd Marbet (503) 637-3549
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