Portland ready to buy PGE, Potter says

Mayor Tom Potter said Monday the city is ready to buy Portland General Electric, the last remaining asset of bankrupt Enron Corp., if state regulators reject a $2.35 billion bid by Texas Pacific Group.

"I think this is the plan that will protect Oregon jobs, and create them as well, while assuring long-term rate stability for both families and employers," Potter said.

Potter, a former police chief who took office as mayor earlier this month, was joined by a number of suburban mayors and their city council members, along with business leaders and Portland City Commissioners Erik Sten and Randy Leonard.

They provided the first detailed look at the city buyout plan, which did not specify a price, although Sten noted it was close to the Texas Pacific bid.

They said the city plan could save ratepayers up to $1 billion by cutting rates 10 percent over the next decade while providing reliable service that could otherwise suffer a decline in quality under Texas Pacific, which has considered trimming the PGE work force to eventually re-sell the utility for a profit.

Potter also said the nearly unanimous opposition to the Texas Pacific deal during hearings last fall by the Oregon Public Utilities Commission – including a recommendation by the PUC staff to reject the Texas Pacific bid – shows the state needs an alternative.

Texas Pacific responded by releasing a survey in November by Portland pollster Tim Hibbitts indicating that more residents of the PGE service area favored the Texas Pacific buyout over a city purchase.

However, the survey was done before the final PUC hearing on the Texas Pacific bid, and before a number of newspaper and broadcast stories about the growing opposition to the deal aired.

Anna Richter Taylor, spokeswoman for Gov. Ted Kulongoski, said it was too early to comment on the city proposal.

"It’s not appropriate for the governor to take a position while a proposal is pending before the PUC," Richter Taylor said.

Owen Blicksilver, Texas Pacific spokesman, referred to the Fort Worth-based private investment firm’s earlier criticism of a potential city bid, noting the financial risk would fall on PGE customers and city taxpayers.

But Sten noted the city offer would be backed by municipal bonds that already have generated competition among investment banks to provide.

John Russell, president of Russell Development Co., a prominent local financial and investment manager, said the low-interest city bonds would save $20 million to $60 million in year in borrowing costs.

Russell said it also would avoid sending corporate headquarters to Texas and restore the local influence on charity and social services provided by Portland General Electric, which was the oldest and largest utility in Oregon before Enron purchased it in 1997.

Russell said he is not opposed to profit by Texas Pacific or any other investor, but he warned against allowing PGE to become a commodity that could be resold again and again during an era of utility deregulation.

"I’m a big fan of profit. I support my family on the profit from my own business," Russell said.

"But in this issue there is a big difference between operating profit and the profit on sale. TPG has made it plain it’s not interested in the long-term operating profit for PGE, it’s interested in making a buck on the sale. I do mind paying for that kind of profit," Russell said.

It was unclear whether rejection of the Texas Pacific bid would force U.S. Bankruptcy Judge Arthur Gonzalez to intervene after he confirmed Enron’s bankruptcy reorganization plan in July 2004.

The plan went into effect last November to cancel Enron public stock and turn it into a private company being held mostly to sell off its remaining assets, now just PGE.

David Skeel, a University of Pennsylvania bankruptcy professor, said Gonzalez could leave it up to the surviving Enron leadership to decide whether to follow through with an option to distribute PGE stock to creditors under the bankruptcy plan or to consider the city offer.

Kregg Arntson, PGE spokesman at the utility’s headquarters in Portland, said it was important to wait until the Oregon PUC has made its decision. "They have had the benefit of a yearlong process of looking at the TPG proposal, and they’re in a good position to make their decision," Arntson said. "From where we sit, we really want that to play out."