The staff of the Oregon Public Utility Commission last Wednesday released its preliminary recommendation opposing the sale of Enron Corp.’s Portland General Electric (PGE) utility subsidiary to a private investment group headed by The Texas Pacific Group as currently proposed. The staff finds no benefits and increased risks from the sale.

“This is an indication of their preliminary recommendation,” a spokesperson for the PUC said. Following rebuttal filings and settlement meetings over the next two months on specific issues, the staff ultimately could join the proposed buyers in supporting the sale, but it would be under different terms and conditions than are currently on the table, the spokesperson said.

“The commission is requiring a two-step assessment — (1) will the proposed sale provide a net benefit to the utility’s customers; and (2) will it impose ‘no harm’ on the public at large,” said Bryan Conway, the PUC staff case manager. The staff report said there were still many unanswered questions “about relevant issues,” preventing it from “fully assessing the downside risk to customers.”

Oregon Electric Utility Co., the holding company that Texas Pacific established in its initial public offer of $2.35 billion for PGE, including assumption of all debt, is expected to respond to the staff report by Aug. 16, and a settlement conference will continue through the end of September with a final PUC decision expected before the end of the year.

Noting it is continuing to analyze the proposal, the PUC staff report made several overriding points regarding why it was not recommending that the commissioners approve the sale: (a) rate credits would be “the clearest method” of offsetting risk; (b) the staff will develop a recommendation on tax treatment, (c) there are concerns the sale can’t be completed without cost-cutting, possible cross-subsidies and “inter-jurisdictional cost shifts”; and (d) additional service quality measures may be needed.

“The staff report is its initial assessment of what Oregon Electric filed back in March,” said the PUC spokesperson, who acknowledged that the staff and the potential PGE buyers could eventually reach agreement and make a joint recommendation to the regulatory panel. “This doesn’t preclude the deal going forward; it just says that at this stage of the negotiations what Oregon Electric has put on the table doesn’t meet the test.

“This is fairly typical of how these transactions sort of transpire. As an applicant, you’re not going to put all your cards on the table at the beginning of the process. You’re going to leave yourself some wiggle room to negotiate to ultimately sweeten the deal to pull it off, if you’re so inclined. It is just human nature.”

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