City gets down to work on PGE
Recent hiring of advisers shows Portland's keen on poor orphan of Enron Corp.
New York investment firm Goldman Sachs Group Inc. has been hired to handle the financing of the city of Portland's proposed acquisition of Portland General Electric, according to city and company officials.
The hiring of Goldman Sachs, an early adviser to another interested bidder, Willamette Valley Power, is an indication that city officials are getting more serious about buying the locally based utility from Enron Corp.
Enron extended its deadline by two weeks for bidders interested in PGE and 11 other companies it is selling off. Enron spokesman John Ambler said that final bids are due later this month and that the company expects to make a decision by the end of January.
Enron could decide to sell PGE or incorporate it into its restructured company, OpCo Energy. Or it could go with a combination of both, Ambler said.
The ongoing investigation of PGE and other utilities by the Federal Energy Regulatory Commission was not a factor, he said.
'Timing is not predicated on any one single business,' he said. 'I'm not aware of it (the regulatory agency) having affected the bidding.'
Celeste Miller, a spokeswoman for the agency, said she doesn't know when the investigation of PGE's alleged role in driving up energy prices in 2000-2001 will end. The agency's trial staff currently is taking depositions from representatives of the city of Tacoma as well as public utility commissions in California and Oregon, among other organizations.
Sources said private buyers are worried about the outcome of the regulatory agency's investigation.
PGE, which admits to dozens of instances in which it mistakenly recorded energy deals, will meet with the agency's counsel today and Wednesday for settlement talks. Company officials have denied knowingly participating in any practice that was deceptive.
The utility faces possible fines and suspension of its ability to buy excess power from other companies on the open market at below cost Ñ referred to in the industry as market-based authority. PGE relies on the open market for 40 percent of its power supply.
PGE associate general counsel Jay Dudley said the principal dispute is over the federal agency's interpretation of utility officials' relationship with Enron Power Marketing Inc.
The agency's trial staff alleges that PGE violated the industry's code of conduct for market-rate tariffs, and at least one staff member is recommending loss of PGE's market-based authority.
'That's an interpretation we disagree with,' Dudley said. 'I can't predict how these discussions will go. We're optimistic that we can have productive discussions. There are not many facts in dispute.'
City leaders, who signed a confidentiality agreement with Enron, would not comment. They hired Goldman Sachs to investigate the financial aspects of buying PGE. It was one of 10 firms that applied for the job; the city interviewed five of them, sources said.
Jeffrey Brown, a partner in Goldman Sachs' San Francisco office, would not comment on the deal with the city.
The utility financing business has been particularly active in the past six months as other investor-owned utilities that are suffering financial difficulties have sold off assets.
Meanwhile, Portland made public an official Web site (www.pge.ci.portland.or.us) on its pursuit of PGE.
The Oregon Public Utility Commission today will consider reducing PGE rates for 2003. Last October, the commission rejected the utility's request for a 1 percent reduction and demanded a 12 percent reduction overall.
Starting in January, utility commission officials are calling for a 2.9 percent decrease in residential rates; 10.2 percent for commercial customers and 13 percent to 18 percent for industrial customers. The change in rates Ñ and a projected reduction in kilowatt sales Ñ is expected to reduce PGE's revenues by $126 million next year.
However, those figures may change when the commission meets again to reach a settlement on PGE's request for recovery of $26 million in excess costs over 4.5 years.
'All along, the amount of (rate) decrease has been in question,' said commission senior economist Maury Galbraith.
PacifiCorp, which operates as Pacific Power, didn't seek a power cost adjustment mechanism for 2002.
PGE and PacifiCorp 'have very different resource portfolios,' Galbraith said. 'PacifiCorp has almost enough resources to meet customers' demand and doesn't have to go to wholesale power; PGE only has about 60 percent of resources and has to go to market for the other 40 percent. This (mechanism) provides more protection for a company that has to go to market.'