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The Spokesman-Review Newspaper
Spokane, Washington  Est. May 19, 1883

PGE offer has many concerned about plan

Bert Caldwell The Spokesman-Review

Enron Corp., all but extinct elsewhere, lingers on in the Northwest as owner of Portland General Electric. And even near death, the company remains the center of controversy.

Texas Pacific Group has made a $2.35 billion bid for Portland General, the last of Enron’s assets awaiting dispersal in U.S. Bankruptcy Court. The proposed deal has been before the Oregon Public Utility Commission since last March.

Austin-based Texas Pacific, with $13 billion to invest, specializes in buying and restructuring troubled companies, then selling them off at a substantial profit. Some holdings include or have included Continental Airlines, Petco, Burger King and Del Monte Foods.

Enron bought Portland General in 1997 for $2.1 billion. The plan was to make the utility kind of a hub for its energy-trading activities in the West, but running PGE became secondary to the scheming that brought so much grief to the region and, ultimately, Enron itself. The Portland utility became just another asset to be sold off by the Bankruptcy Court.

In November 2003, Texas Pacific announced its interest.

The information filed with regulators in a case like this can be voluminous, not just by the companies involved, but by commission staff, witnesses and intervenors like customer groups. Texas Pacific was granted permission to submit about 400 pages of documents in confidence because their disclosure might compromise critical business information. All parties agreed not to release that information to the public.

For months, none did. But the Portland-based Willamette Weekly on Wednesday published an extensive exposé based on that confidential information. The manure hit the turbines.

Texas Pacific has been representing itself as an owner not necessarily for the long haul, but at least for the semi-long haul, perhaps 12 years into the future. But none of the many plans for restructuring and selling Portland General that were filed in confidence envisioned ownership beyond five years. The most aggressive outlined severe cuts in staffing and network upkeep that would enable Texas Pacific to unload the utility at a $1 billion profit in five years. Add in annual operating profits, and you get annual returns in the 20 percent to 30 percent range.

That’s the kind of fat return that would attract a high-powered investor like Texas Pacific to the conservative utility industry, where regulators keep close rein on profits.

The company and commission spokesmen say the published information takes the filings out of context.

Commission spokesman Bob Valdez says all the scenarios were prepared to help Texas Pacific decide whether to make a bid for Portland General. None represents a preferred plan of operation, according to sworn statements by company witnesses who may have some explaining to do given the new disclosures. Most participants in the case, including the commission staff, are disturbed enough by what they’ve seen and heard to recommend the commissioners themselves reject the Texas Pacific proposal unless changes are made. A decision is expected by the end of the month.

Whatever that outcome may be, Valdez says release of the confidential information could jeopardize future commission access to documents it needs to make an informed judgment on the advisability of mergers or other matters like rate hikes. The administrative law judge handling the Texas Pacific case has already asked for an investigation, and Oregon’s attorney general may get involved. The documents’ leaker could be subject to fines, lawsuits and, if a lawyer, disbarment.

One of the parties to the case asked the judge on Dec. 27 to release the material. A decision is pending. But Valdez said the weekly newspaper has apparently had it for three weeks.

The disclosures have created a furor, with public interest groups accusing Texas Pacific of deception. Gov. Ted Kulongoski and Portland Mayor Tom Potter say they are concerned. Neither are totally disinterested parties.

The city would like to buy the utility. The state, through the Oregon Investment Council, has almost $1 billion invested with Texas Pacific, and stands to be among the beneficiaries if the group turns a profit on the eventual sale. If the deal is rejected, the Bankruptcy Court will probably distribute Portland General stock to Enron creditors.

The whole affair might not be of much interest to Washington residents if not for the likelihood the new Congress will remove a longtime law that bars some types of utility acquisitions. Without that protection, Avista Utilities and others in the region could be acquisition targets. The Texas Pacific/Portland General case could be a preview to more all around the Northwest.

If so, the public would have a lot more confidence in the regulatory review process if all the pertinent information is available, not confidential.