Citizens' Utility Board of Oregon: CUB Files Testimony in MidAmerican Case, Finds No Net Benefit for Customers

Yesterday CUB filed its Opening Testimony in the Merger Application Case of MidAmerican Energy Holding Company's (MEHC) proposed purchase of PacifiCorp, known locally as Pacific Power & Light. CUB's position was that "MEHC's proposed acquisition, as proposed, fails to provide customers with a net benefit."

MEHC has offered as the major benefit of this purchase the commitment to invest a large amount of money in PacifiCorp's infrastructure. We are concerned that this "investment exuberance" is not balanced by a concern for the effect on rates; in fact we argue that MEHC has shown in its initial filing an "utter lack of concern either for the operations of PacifiCorp or for the effect of this dynamic on rates." We point out in our testimony that, with 6 of these merger application cases in the past 8 years, we do have a fair amount of experience that would lead us to expect more in the way of concern for the financial impacts on customers.

We also wonder "if PacifiCorp can be adequately protected" without the legal protections of the Public Utility Holding Company Act (PUHCA) which was enacted in 1935 specifically to address the dangers of megacorporate takeovers of utility companies, such as this one. In the early 1930s, many utilities went bankrupt due to complicated corporate structures and carrying debt for riskier businesses. Warren Buffett (the nation's second richest man) owns Berkshire Hathaway which owns MEHC, and was instrumental in repealing PUHCA this year so that he could expand his empire to include utilities. We want to make sure that we really enact the power of the stronger state regulation that was touted as a good reason for doing away with the federal regulatory protections of PUHCA.

Finally, we talk about the fact that "Warren Buffett, Berkshire Hathaway, and MEHC have demonstrated a decided lack of leadership in addressing environmental issues, most notably the looming threat of global warming."

When we crunched the numbers we found that this purchase could lead to a $77 million harm to customers rather than the $200 million benefit that MEHC claims. Interestingly enough, the Public Utility Commission Staff, in their Testimony also found a net financial harm to customers that could result from the purchase rather than the promised net benefit.

The Oregonian published an article today about this filing, "PUC staff recommends against MidAmerican." You can read our Opening Testimony here.

November 22, 2005

CUB Files Testimony in MidAmerican Case, Finds No Net Benefit for Customers

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