ScottishPower, PacifiCorp Merger Nears Finish
ScottishPower PLC and PacifiCorp announced they have brokered a
settlement in principle with the staff of the Oregon Public Utility
Commission (OPUC) that essentially clears the way for the first
acquisition by a foreign company of a U.S. power utility.
The settlement, which was reached last Friday, ends months of
"open and frank" negotiations between ScottishPower,
Portland,OR-based PacifiCorp and PUC staff members, who in the end
agreed to recommend conditional approval of the $7 billion
stock-for-stock transaction. Oregon regulators are scheduled to
hold hearings on the merger later this week, and issue their final
decision within 60 days.
Oregon has been the lone state holdout to the merger. The other
five western states served by PacifiCorp - California, Washington
Utah, Idaho and Wyoming - all have either approved the proposed
deal or have recommended it for approval by their respective
commissions. At the federal level, the merger has passed muster at
FERC and the Securities and Exchange Commission, but it still
awaits clearance by the Nuclear Regulatory Commission. With respect
to the latter, no holdup is foreseen since PacifiCorp owns only a
minuscule interest in a nuclear asset.
Officials for both companies anticipate the merger transaction
will be completed by the end of the year. PacifiCorp would operate
as a wholly owned subsidiary of Glasgow, Scotland-based
ScottishPower, the leading power utility in the United Kingdom.
PacifiCorp serves about 1.4 million electric customers, of which
about a third are in Oregon.
Under the settlement, the merged company has agreed to pay
Oregon customers a credit of $12 million annually for three years
and $15 million in the fourth year, beginning one year following
the completion of the transaction. This would equate to a 1.7%
reduction in individual customer bills over the four-year length of
the credit, estimated Rachel Sherrard, a spokeswoman for
ScottishPower in the U.S.
The credit would include Oregon's share of the merger-related
cost savings ($3.4 million), which ScottishPower previously had
committed to pass through to customers in the state. Also,
PacifiCorp would be able to offset $9 million and $12 million of
the credit in years three and four, respectively, through filing a
rate case in which cost savings are demonstrated, the two companies
said in a prepared statement.
The agreement further would give the Oregon PUC the option to
require PacifiCorp to seek a rate reduction by March 1, 2004 in the
event its earnings in the state are shown to be above a "reasonable
Elsewhere in the settlement, a merged ScottishPower-PacifiCorp
utility has said it would pay Oregon customers a maximum of $50 in
cases where it fails to investigate and quickly respond to
complaints as outlined in the agreed-upon customer-service
standards, noted Sherrard. Also it has agreed to seven performance
standards under which it has promised to respond to 80% of customer
calls within 20 seconds in the short term, she said. The required
response time would be shortened to 10 seconds three months after
the merger is completed.
Moreover, ScottishPower and PacifiCorp have committed to
investing in 50 MWs of new renewable energy-generated power over
the next five years. This would be in addition to PacifiCorp's
existing renewable energy portfolio - which includes hydro, wind
and other sources. "With this added commitment, the company will be
generating 5% to 10% of the new renewable energy in the United
States" within five years, Sherrard noted.
ScottishPower also has agreed to triple PacifiCorp's funding for
low-income customers to $400,000 annually over a three-year period,
as well as to invest $6 million annually in conservation measures
over a three-year period and to make a one-time $5 million donation
to the PacifiCorp Foundation for charitable activities. "We believe
that the conditions, coupled with the customer service,
environmental and community commitments we have made [in this
settlement], represent significant benefit for customers in
Oregon," said Alan Richardson of ScottishPower, who has been
designated to become CEO of PacifiCorp when the merger is