Failed ailed PGE bids leave future uncertain

In the space of three days, three separate proposals to buy Oregon’s largest utility fell apart.

Interim Enron CEO Stephen Cooper’s intention to issue PGE stock to creditors has proponents of public power reeling. Just months ago, Portland city commissioners and state senators were worried about creating a bidding war. What happened?

Serving 765,000 customers in six counties, Portland General Electric is one of Enron’s last valuable holdings. Since Enron’s bankruptcy in December 2001, groups have tried to convert PGE to a public utility, saying public ownership would safeguard customers from investors more interested in profits than maintaining infrastructure and making rates more affordable.

The city of Portland’s three-year, $2 million effort to purchase PGE formally ended July 21, when Enron announced it would no longer negotiate with Portland leadership. On July 20 and 22, Governor Ted Kulongoski vetoed Senate bills to make the utility public.

Enron now plans to redistribute PGE stock to Enron creditors. That plan, which is contingent on the Oregon Public Utility Commission’s approval, could put all stock in Enron CEO’s new company, Stephen Cooper, LLC.

Portland City Commissioner Erik Sten and Mayor Tom Potter offered $2.65 billion to make PGE a municipal utility. The city’s plan included $3 million generated by bonds.

According to Sten, Enron’s last-minute demand for a non-refundable $50 million deposit broke the deal. Enron stipulated that the deposit would be held for compensation if the deal were terminated for any reason.

Kulongoski favored Portland’s bid over two bills to purchase the utility, but called stock distribution the most stable option. Spending money to buy the utility should not take priority over the basic needs or funding for education, he said.

Senate Bill 671, introduced by Senator Rick Metsger (D-Mt. Hood), would have allowed investors to purchase PGE at a low rate and reorganize it into a customer-owned company.

Senator Ryan Deckert (D-Beaverton) sponsored Senate Bill 1008, by which Governor Ted Kulongoski can create a public corporation to purchase PGE. The bill received wide support in both chambers.

Kulongoski’s vetoes – only the second and third of this session – loom large.

“I continue to believe it is not appropriate for the state to become financially entangled in the purchase of a private utility company,” he said.

Overturning Kulongoski’s vetoes is a dubious option. With adjournment just days away, galvanizing a 2/3 majority in both the House and Senate is even more difficult than in the middle of a session.

Potter noted that the city’s offer is still “on the table.” If anything falls through with the stock issuance, the city may resume negotiations.

Technically, Portland could condemn PGE’s holdings in city boundaries and take control by eminent domain, Sten said in April. According to Sten aide Kathleen Gardipee, rather than pursuing condemnation, city officials plan to weigh in on the Oregon Public Utility Commission’s regulation of the stock redistribution plan and request modifications to protect customers. Key demands include a membership team that will represent Oregon interests and maintain reasonable rates.

The city is still researching what the stock issuance plan will entail.

“We’re still trying to figure out what this means for ratepayers,” Gardipee said. “Some people believe this is worse than the Texas Pacific deal, and others think it’ll sail right through the PUC.”

One thing experts agree on, she said, is that PGE will not return to a small, locally owned company under the stock redistribution plan. “That’s just not going to happen.”