Utility Reform Project
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March 10, 2005
CITY OF PORTLAND SHOULD ACQUIRE PGE NOW
In light of today’s order by the Oregon Public Utility Commission (OPUC), denying approval for Texas Pacific Group (TPG) to buy Portland General Electric Co. (PGE), the Utility Reform Project urges the City of Portland to acquire PGE without delay.
“The TPG plan is not yet dead,” said Dan Meek, attorney for Utility Reform Project (URP). “TPG can amend its application to address the concerns expressed by the Commission’s order, which center on the amount of debt that TPG and its local front, Oregon Electric Utility Corp., would be taking on. TPG might be able to relieve those concerns by putting more equity into the deal and relying less on debt financing. TPG is putting up only about $500 million total in equity, while creating over $700 million in new debt, on top of PGE’s existing $1 billion of debt. Considering the low price TPG is getting from Enron, TPG could restructure the deal with far less debt and far more equity and still make about $1 billion in total profit over a 5-year period, culminating with the sale of PGE to others.”
Because the TPG deal is not yet dead, it is all the more important for the City of Portland to proceed immediately with acquisition of PGE. The City has promised an immediate $100 million per year rate reduction to PGE ratepayers. Studies by numerous economists and engineering consulting firms has confirmed that the City could provide this benefit, if it bought PGE at the same price that TPG has agreed to pay.
“The City team should get on a plane for New York City now and deal directly with the Enron bankruptcy creditor’s committee,” said Meek. The committee consists of CitiCorp, Chase Manhattan Bank, and the other big financial firms that comprise Enron’s largest creditors. “Only the City has the financial resources and the fortitude to buy PGE for the public. The City has said it will provide for regional participation in the governance of PGE, and that could later lead the City to transfer the assets to a regional PUD or other entity. But, for now, the City is the institution that needs to act.”