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April 29, 2005

Got a Question?

We know that the work we do here at Citizens' Utility Board of Oregon is vitally important to the majority of people who live in Oregon. We know our members appreciate our efforts. But who among the general public could really explain what it is that we do?

We have a new feature on our website, answering Frequently Asked Questions about CUB, our work, and what to do if you need help in a dispute with your utility. Take a moment to check it out, and if you want to add to our list a general question about CUB's activities, send it to us: cub@oregoncub.org.

Posted by Oregon CUB at 03:04 PM | Comments (0)

April 21, 2005

Governor Withdraws from Competing State Bid for PGE

CUB understands Governor Kulongoski's decision not to have the State of Oregon compete with the City of Portland for the public purchase of PGE. We feel that this does not materially change the goal of a publicly-held utility company with low-cost, stable electricity for the almost 800,000 Oregonian customers that PGE currently serves.

A City of Portland-led purchase, with regional governance, or a State-backed regional ownership, or a combination of the two, would result in reaching our goal. According to CUB staff attorney, Jason Eisdorfer, "We have the bones of a good bill in SB 1008. So, we will hope to pass the bill out of committee today and continue to work on the language to make it as clear and tight a proposal for public power as it can be. That way, either the Legislature can act on the bill as a whole or potentially integrate it with the City proposal." [Note: the bill did pass out of the Senate Business & Economic Development Committee on 04/21/05.]

CUB has been encouraging the City and State to work together, and we hope that this decision on the part of the Governor will result in an increased willingness of those at the City and State levels to work cooperatively toward a regional public power utility. The bottom line, however, is that CUB will continue to actively support both proposals in hopes of helping to usher one or the other, or a combination of the two, towards the finish line.

Whether this shift in the politics of the public power proposals will affect other contenders for the future of PGE, such as the purchase proposal by Oregon Mutual Development Inc., is unclear. What it does do is strengthen the bargaining position of the City of Portland in purchase negotiations with Enron, and the City maintains its advantage of having worked on their bid the longest and being able to move forward most quickly in a restricted timeline. The stock distribution option remains a fall-back position that contains significant drawbacks in comparison to a locally owned public utility. (Please see "What about stock distribution for PGE?" for more information about this possibility.)

Posted by Oregon CUB at 03:25 PM | Comments (0)

April 20, 2005

PUHCA fate will influence future of PGE

In "Power Window," an article in today's issue of Willamette Week, author Nigel Jaquiss points out that:

"PGE's fate is being decided 3,000 miles away, in Congress. The U.S. House is considering an energy bill with a provision to repeal current utility restrictions, thus greatly expanding the possible universe of buyers for PGE. Most utility watchers expect the House bill to pass as soon as this week and a Senate version to pass by next fall. The upshot: An out-of-town buyer becomes PGE's most likely next buyer."

We at CUB are happy to see the seeds of a public discussion about the importance of the Public Utility Holding Company Act and what this could mean for Oregon's own utility-in-transition. (See our Take Action opportunity at the top right of this website to urge your Congressional representatives to save PUHCA.)

Bob Jenks, CUB executive director, had this to say about the role of PUHCA in PGE's eventual disposition: "Losing the utility regulation of PUHCA makes it far more unlikely that PGE would clear the hurdles of stock distribution to become a stand-alone, locally-headquartered company again. We have our doubts about whether stock distribution is the best case scenario for PGE residential ratepayers (See What about Stock Distribution for PGE?), but we would find that preferable to purchase by a large investment corporation located in another state or another country. PUHCA has provided important protection to utility customers for 70 years. We would all suffer from greater instability and higher prices should it be repealed."

Posted by Oregon CUB at 11:28 AM | Comments (0)

April 18, 2005

What About Stock Distribution for PGE?

In all the discussion of what will happen with PGE, one of the likely outcomes, stock distribution, has not yet been discussed here on the CUB site. If none of the purchase proposals currently on the table (City of Portland Public Purchase, Oregon Community Power Public Purchase, or Oregon Mutual Utility Purchase) goes through, then it is very likely that Enron will begin the process of distributing PGE stock to their creditors, who then most likely will sell that stock on the stock market, bringing PGE back to its status as a publicly-traded company.

CUB argued during the Texas Pacific attempt to purchase TPG that distribution of PGE's stock would be preferable to the business model that Texas Pacific was proposing. This does not mean, however, that stock distribution would be CUB's first choice or that we believe ratepayers would benefit the most from that sort of future for PGE. Here's why:

1) Lengthy Process with an Unknown Completion Date: As part of Enron's bankruptcy proceeding, distribution of PGE's stock would happen in stages over a long period of time. Bankruptcy proceedings can easily take longer than a decade to complete, especially large and complex ones such as the Enron bankruptcy.
2) Control Remains with Enron: During most of the stock distribution process, control of PGE would remain with Enron, its creditors, and the Disputed Claims Reserve (DCR) Overseers. We have no way of knowing who will be appointed by Enron to oversee the PGE distribution process or even to sit on the PGE board during these years.
3) No Guarantees for Public Status: At the end of this long and complex distribution process, PGE could be a publicly traded, stand-alone company still headquartered in Portland. But no one can guarantee this, since Enron officials or those they appoint could decide to sell PGE, either whole or in large percentages of shares, at any point.
4) Takeover Purchase Could Happen Again: If indeed, PGE did make it intact through the long process of stock distribution to become a publicly-traded company again, there is always the possibility that another corporation could manage a takeover purchase, as Enron did in the late '90s, with an equally uncertain outcome.

In addition to these drawbacks of the bankruptcy proceedings themselves, stock distribution would by its very nature lack the advantages of a public power purchase by the City or State: low-cost financing, tax-exempt status, and a board appointed by elected leaders to look out for ratepayers. (Click here for more detailed information on the two Public Power Proposals.)

We therefore say again, that stock distribution, while preferable to purchase by a corporation looking for short-term profits, is not the preferred option for Oregon ratepayers. Given the available options, CUB supports a publicly-owned utility that would provide long-term stability, lower rates, and community-oriented leadership for the future of PGE.

Posted by Oregon CUB at 02:30 PM | Comments (0)

Support Energy Efficiency HB 3363

Don't Let Oregon Fall Behind on Energy Efficiency Standards!

Have you ever been shocked by the amount on your water or
electricity bill? Have you ever wondered how long those utility
bills could continue going up before something gives? Do you
want Oregon to become a dumping ground for inefficient appliances
that keep your bills going up? Well, CUB is here to tell you about
a way to reverse the upward trend. Just call or email your
legislator and tell them to support HB 3363, a bill that would
require a statewide shift to purchasing energy efficient
models of 12 common products.

What are the tangible benefits of the bill?

This proposal would establish Oregon state energy efficiency
standards for twelve products not covered by federal standards.
If adopted, businesses and households will realize a net economic
savings of $253 million after fourteen years. The savings will
reduce monthly electricity, natural gas, water and wastewater
treatment bills throughout Oregon.

The proposed standards will ensure that all energy consumers,
in urban and rural communities alike, have affordable products
that return their added investment within a few years or less
of purchase. Such standards will also benefit every citizen
by reducing the pressures on our energy supplies, energy
transmission and distribution infrastructure, water supplies,
and wastewater treatment capacity. (By 2014, assuming standards
have been in place for only seven years, annual water savings
will reach a billion gallons.) Finally, the standards will
effectively decrease the health and environmental impacts of
energy production by reducing emissions of mercury, nitrogen
oxides, sulfur dioxides and global warming gases.

Don't let Oregon become the dumping ground for inefficient appliances!
The appliance standards proposed in HB 3363 are already adopted
in California. Similar standards are heading toward approval
in Washington State. If Oregon doesn't adopt similar standards,
we stand to be THE West Coast marketplace of last resort for
inefficient appliances.

What products are covered by the bill?

The energy efficient products recommended here for state standards
range from items that are nearly invisible, such as external power
supplies (those humming, non-descript little boxes or chargers
attached to a host of electronic products) to a household item
such as torchiere light fixtures. In the first year, the sale of
these more efficient products in Oregon will save annually more
than 200 million gallons of water, 1.7 million therms of natural
gas, and 75 million kilowatt-hours of electricity.

The entire list of products includes:

Commercial Clothes Washers
Commercial Ice-Makers
Commercial Refrigerators and Freezers
External Power Supplies
Torchiere Lighting Fixtures
Commercial Unit Heaters
Exit Signs
Metal Halide Lamp
Reflector Lamps
Traffic Signals
Pre-Rinse Spray Valves
Digital Television Adapters

This bill would minimize manufacturer production and distribution
costs by adopting consistent standards and, because the standards
are adopted in statute, there is no cost to the state of Oregon
because rulemaking processes are not needed. Most of the standards
are proposed to be effective in January 2007, one year after the
effective date for standards in California.

Manufacturers already produce equipment that meets the proposed
requirements. However, because of market imperfections -- usually
caused by the fact that the purchaser of the subject equipment
doesn't pay the monthly energy bill for using it -- economically
attractive, energy efficient equipment is frequently not specified
or purchased. Ample time has been given for the change to new
purchases of only these more efficient models, and we all stand to benefit!

ACTION ALERT

Please contact your representative in the Oregon Legislature today. Tell them to support HB 3363.

Protect Oregon consumers!

Tell your Representative to Vote Yes on HB 3363!

Visit this official website of the Oregon State Legislature to find your Legislator and get a link to their email and phone numbers. www.leg.state.or.us.findlegsltr

Posted by Oregon CUB at 10:58 AM | Comments (0)

Mutual Utility Proposal

A "hybrid" organization purchase proposal has been under construction by a group calling itself Oregon Mutual Development Company (Mutual Utility). The Mutual Utility would be a privately-run but customer-owned company, similar to a cooperative. Like the two public ownership models, the Mutual Utility would potentially have the advantages that no shareholders would exist to draw profit payments from the utility; and the utility would remain locally owned and managed, potentially with existing employees and executives.

There are, however, some key differences between the hybrid proposal and the two true public ownership models. The Mutual Utility is a group spearheaded by former PacifiCorp employees and includes other business people in the realm of tax policies and finance. It would rely on the securitization of bonds, borrowing against additional future revenue customers would pay on their bills, to finance the deal. Eventually, customers would wind up owning the utility. In addition to having some very high-powered current and former utility execs behind this deal, the Mutual Utility has also hired some very high-powered lobbyists to move their case forward in Salem.

Unfortunately, the public ownership in this deal has fewer advantages than that of the two true public ownership proposals on the table. According to CUB Executive Director Bob Jenks, this deal "does not seem to offer the advantages" such as lower tax-exempt borrowing rates, and avoidance of federal income taxes, that the other two sales would. The Mutual Utility deal would be a purchase of PGE's stock, which includes liabilities, financed by bonds secured by the future payments of PGE customers. The bonds would presumably be held by an investment bank or equity firm, potentially even a firm very much like Texas Pacific Group.

Mutual Utility supporters say that the PUC would continue to regulate the utility. This sounds better than it is, because, without shareholders, customers in this hybrid model would be on the hook to pay all the costs, debts and liabilities. Thus, the PUC could never disallow any costs and would have to pass through all costs, whether prudent or not, to the customer. This leaves us wondering what would be the point of paying for PUC regulation at all.

One of the big questions that arises is who exactly runs the utility. Mutual Utility proponents claim that customers would vote for the Board of Directors, but a first Board has already been chosen, and current Board members will nominate candidates for the future. CUB's position is that within this system the Board could conceivably remain an "inside game" among select business people.

Other questions include: How would new investments in the power production system be financed? How would we ensure that new investments are the best and most prudent ones possible? How would rates be set? Finally, there have been contradictory statements from Mutual Utility proponents about the potential tax liability of the company, and this issue is a matter of millions of dollars for customers.

Obviously, from CUB's perspective, the Mutual Utility model raises more questions than it answers. CUB is looking into these issues and more as they arise in discussions with the parties involved in all aspects of the various proposals.

Posted by Oregon CUB at 10:48 AM | Comments (0)

April 17, 2005

Public Power Proposals

Two viable options are now on the table that would create such a public utility: SB 1008 (introduced by Senator Ryan Deckert, Senator David Nelson, and Senator Vicki Berger) would create a state power authority called Oregon Community Power. OCP has the advantage of a broad geographical and political base, and a host of financial and practical advantages. This proposal is being crafted by customer groups along with others in a workgroup created by the Senate Business & Economic Development Committee.

The same financial and practical advantages also apply to a proposal that the City of Portland, led by City Commissioner Erik Sten and endorsed by Mayor Tom Potter, purchase PGE. The City has an additional advantage in that it can move forward quickly, an important fact in light of the announcement that Enron would like potential buyers to make offers within one year.

Lower Rates

The rates that would be charged by Oregon Community Power can be expected to be lower than rates otherwise would be, because a publicly-owned version of PGE will have lower costs. For example, a public utility would have access to tax-exempt financing, which is only available to government institutions. This means that all new power plants, transmission lines, and distribution facilities could be built at a significantly lower cost than any non-governmental alternative. In addition, a public utility would not be subject to state and federal income taxes. While we know that PGE has not paid taxes in recent years, customers have been charged hundreds of millions of dollars in taxes. With a public utility, customers would no longer be charged for income taxes. (Note: OCP would pay property taxes and franchise fees to local governments.) Finally, a public utility would not have shareholder equity as part of the financing. Therefore, a public utility would not have to pay higher cost interest on equity, but would rely on lower cost debt.

Stability

In the last 8 years, there have been 4 attempts to purchase PGE (Enron, Sierra Pacific, NW Natural and Texas Pacific). During this time, PGE's rates have become among some of the highest in the Pacific Northwest. A public utility would be focused on providing reliable service at the lowest cost, not helping sell itself to the highest bidder.

Resource Planning/Economic Development

Oregon's economy has been harmed by having electricity rates soar in recent years. Electric utilities need to plan years ahead in order to ensure the lowest cost and least risk power supply. A utility cannot adequately plan for the next 20 years when it does not know who will own it next year or what their business model will be. Because a public utility would have no other business interests and would not be up for sale, its only business model would be to provide electric power to its customers. This means that it could focus on fueling Oregon's economy by providing low rates.

Oregon Energy Policy

Oregon has one of the most innovative energy policies in the country. PGE is the nation's leader in green power options. Oregon allows industrial customers direct access to the wholesale market. Oregon has a non-profit organization, the Energy Trust, that invests in energy efficiency and renewable programs integrating the programs that were once offered independently by PGE, Pacific Power and NW Natural. A public utility would continue these programs.

Workforce Interests

Everyone understands that, not only does our economy depend on the power that PGE supplies to homes and businesses, but that the thousands of people that PGE employs--comprised of linemen, customer service people, and management--are also crucial to making a good future for the economy and the community that is Oregon. A public utility would value the people who work for the utility and the important economic role those jobs play in the larger economy.

The Community's Interest Is the Utility's Interest

Enron's attempt to manipulate the power market did not reflect Oregon's interests or values. Neither did Texas Pacific's attempt to make a quick billion dollar profit on PGE. A public utility would be an Oregon-run, Oregon-headquartered utility that does operate in our interest and reflect our values. By statute and by inclination, the Board of a public utility would make decisions in the best interest of the customers and community served by the utility.

High Quality Board through Gubernatorial Appointment

A public utility would be led by a Board selected by the Governor based on their credibility, their experience, their creativity and their ability to make decisions in the interests of the customer and the community. This Board would be able to represent the diverse viewpoints of the utility's extended service territory.

Posted by Oregon CUB at 12:46 PM | Comments (0)

April 16, 2005

What's next for PGE?

The question on everyone's lips after the denial of Texas Pacific Group's bid to purchase PGE is, "So now what?" The future of Portland General Electric is of interest to all PGE customers, residential, commercial and industrial, as well as to a range of economic and political leaders around the state.

Options currently being discussed include the sale of PGE to a public entity financed by either the City of Portland or the State of Oregon. CUB supports the development of both the City and State public ownership proposals. The City proposal has been on the table the longest, with Portland City Commissioner Erik Sten having taken an early lead on the issue, and Mayor Tom Potter joining Sten in supporting the proposal. The City has the ability to finance the purchase with low-interest government bonds and can move forward quickly.

The State of Oregon proposal has been a more recent proposal, but the bill that would create the State Power Authority, SB 618 (introduced by Senator Ryan Deckert), has the tentative support of the Governor's office. It has the advantage of a broader geographical base and would avoid the criticism of those who are wary of allowing the City of Portland to own, even in a purely formal way, a regional power utility.

Both of these proposed sales to Oregon governmental entities could present substantial rate savings to customers, based upon the use of tax-exempt financing for utility investments, the exemption of governmental entities from paying federal income tax (a tax which has for years been collected but never paid to government by Enron-owned PGE), and the removal of the need to pay a profit to private investors.

A third sale option has recently received some sizable press coverage, a "hybrid" organization purchase by a group calling itself Oregon Mutual Development Co (Mutual Utility). The hybrid would be a privately-run but customer-owned company, similar to a cooperative. Like the two public ownership models, the Mutual Utility would potentially have the advantages that no shareholders would exist to draw profit payments from the utility; and the utility would remain locally owned and managed, potentially with existing employees and executives.

There are, however, some key differences between the hybrid proposal and the two true public ownership models. To find out more specifics about the Mutual Utility Proposal, click here.

Of course, it's still possible that if none of these three proposals were to pan out, or if Enron were to simply refuse to accept these offers, PGE's stock could be distributed to Enron's creditors through the bankruptcy process. Over time, PGE might then be an independent, publicly-traded company again. Finally, there is a slight possibility that another corporate investment buyer would submit a proposal and be accepted by the PUC and the bankruptcy court. This is an unlikely wild card that has the most unknown variables.

In the meantime, we continue to work on the two public ownership proposals, trying to help craft a future for PGE that really would ensure customers' best interests.

Posted by Oregon CUB at 11:39 AM

April 14, 2005

Texas Pacific abandons PGE bid

From this Oregonian article: "'We have learned a great deal about the regulatory and political processes in the state of Oregon,' Texas Pacific said in a statement issued Wednesday. 'Certainly everyone is now aware that these processes are time consuming and complicated in ways beyond what any of us could have reasonably expected at the start.'"

We did try to tell them.

Go to Current News to link to the article.

To find out about options on the table for PGE's future, go to Public Power Proposals or Mutual Utility Proposal.

Posted by Oregon CUB at 03:28 PM