Featured Stories

Other Pamplin Media Group sites

Its time for Intel to stop whining

SOAPBOX •ÊLong a favored customer, Intel now wants to dodge high energy bills

As a former financial executive with Intel Corp. in Oregon, I am disappointed to see the company's recent efforts to seek special rate relief from the Oregon Public Utility Commission for the power it consumes from PGE. Everyone is unhappy when expenses go up, but Intel is saying it should not have to pay the higher costs of the energy it consumes.

Intel enjoyed years of low power bills because PGE was buying from the market instead of building expensive new plants. When the energy crisis hit last year, PGE took the responsible step of buying enough energy, even at higher prices, to ensure that Oregon and customers like Intel would not run out. Now that the bill is due, Intel doesn't want to pay it.

Since the financial business is my career, I can't help but compare the numbers using public information for both Intel and PGE. Intel is complaining about a $1 million per month increase in costs. This is a lot of money, but it needs to be put into perspective.

In 2001, Intel had revenues of $26.5 billion and after-tax profits of $3.6 billion. Recently the company reported revenues for the fourth quarter of $7 billion and after-tax profits of $1 billion. In the latest quarter reported by PGE, the utility had revenues of less than $1 billion and recorded a slight loss because of high power costs and low hydro system performance. In other words, Intel's profits during a recession are greater than PGE's revenues.

Furthermore, at current rates, the cost of power is not a determining factor in the cost of semiconductors. By my estimates, Intel's three wafer-fabrication plants in Oregon have a capital cost of about $5 billion. The depreciation cost of these plants alone should be about $50 million per month. When the cost of labor and other materials is included, the company's $2 million monthly power bill is not decisive to its competitive position in Oregon.

By March, because of Oregon's deregulation legislation, Intel will have the opportunity to purchase its power from other suppliers. If the company is convinced that it has been unfairly charged for PGE power costs, it can then choose a new supplier. In the meantime, Intel needs to pay its share of the costs of the energy bill we are collectively responsible for instead of asking for special favors. The public utility commission did what it was required to do by law.

Intel also should stop threatening to leave the state over a temporary cost hike (rates will decrease if power costs continue to stabilize).

Lastly, the company should stop implying that energy costs in Oregon are the highest in the nation. PGE's residential rates after the recent increase are roughly 8 cents per kilowatt-hour, still below the national average of 9 cents, while the rate in Intel's headquarters state, California, is more than 12 cents per kilowatt-hour. Although corporate rates vary based on individual contracts, they generally follow the same pattern as residential rates.

Intel has been a positive force for the Oregon economy and the Portland community for years. I hope it will return to its tradition of working with other interests for the common good.

John Calhoun spent 19 years with Intel Corp. He is now a partner in AVenture Partners LLC.