CUB Filing MidAmerican Comments Today

As you probably know, MidAmerican Energy Holdings Company, owned by Berkshire Hathaway, owned by Warren Buffett, is the latest suitor at the Oregon electric utility debutante ball. MidAmerican wants to purchase PacifiCorp (Pacific Power here in Oregon) and has the enthusiastic approval of current owner ScottishPower. This suitor has brought a substantial bouquet, promising long-term ownership and plenty of capital investment. Still, there are issues that have CUB concerned.

In our comments filed today on the MidAmerican case (UM 1209) with the Oregon Public Utility Commission, CUB addresses the following of those issues:

1) First and foremost, CUB would like to know what effect this purchase, and the large amounts of capital investment proposed, would have on customer rates. Already PacifiCorp is forecasting rate increases of 4% a year, every year into the foreseeable future. We know the Buffett/Berkshire/MidAmerican plans would mean even higher increases, but we don’t know exactly what those would look like. In our comments we state, “there is, without exaggeration, not a single direct reference to the affordability or reasonableness of rates for PacifiCorp customers under MidAmerican ownership” in their application. We applaud MidAmerican’s willingness to invest in the company they wish to purchase, but that must be balanced by a realistic look at how customers’ rates would be impacted.

2) Also, our research shows that MidAmerican has been able to achieve a higher profit, or rate of return, in Iowa, than is allowed under Oregon utility regulations. The regulated system does include opportunities for manipulating larger profit margins that simply aren’t accounted for under the regulations (such as double leveraged holding company structures, and the phantom tax situation we passed SB 408 to rectify). CUB would like to make sure that Oregon customers will not be paying an inflated rate of return to MidAmerican shareholders.

3) CUB is asking the Commission to consider carefully the issue of power shifts: “This application presents two types of loss of local control and input: loss eastward toward Salt Lake City, Des Moines and Omaha, and loss upward to increasingly larger and more distant corporate layers.” Oregon has worked hard to develop what is perhaps the finest renewable and energy efficiency programs in the country. We don’t want to lose them because some executives we never see from Iowa do not believe they are important. Job shifts to Utah are also at issue. And of course, whenever the corporate structure expands, it can become infinitely more difficult to get the information you need, reach the person you need, or have a problem addressed.

4) Finally, the repeal of the Public Utility Holding Company Act of 1935 (rest in peace) leaves utility customers “like a snail out of its shell… now exposed to massive holding companies seeking to increase profit by any means.” Warren Buffett is already a rich man with a large empire. If PacifiCorp should become a part of that empire, and should it expand even further as he seems to have planned, we need the Commission to be setting conditions now to protect customers later. For example, we believe the Commission should set conditions guaranteeing preservation of, and access to, information regarding investments and rate setting. That will not level the playing field between international mega-corporations and Oregon utility customers, but it is a way to keep track of what is really going on with our utility.

This case is really just getting going. We file with the PUC today, and will be interested to see the response to our concerns.

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