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Sierra Pacific Moves Closer to PGE Acquisition

Sierra Pacific Moves Closer to PGE Acquisition

Salem, OR-based Sierra Pacific Resources, the Oregon Public Utility Commission, industrial customers and consumer groups reached a tentative settlement last week that allows Sierra Pacific to acquire Portland General Electric. The agreement calls for a six-year freeze on certain electricity prices and a $95 million credit price for PGE customers over the next seven years.

Sierra Pacific last year announced it would acquire PGE, a wholly owned subsidiary of Enron Corp. for $2.1 billion, excluding debt (see NGI, Nov. 15, 1999). PGE provides electricity to more than 700,000 customers in the Portland-Salem area.

In papers filed last week with the OPUC, Sierra Pacific, OPUC staff, the Citizens' Utility Board of Oregon and the Industrial Customers of Northwest Utilities recommended that OPUC adopt the settlement. Terms and conditions of the agreement establish that the approval would be in the public's best interests. OPUC is expected to rule on the agreement within a few weeks. Already, Sierra Pacific has obtained approval from the U.S. Department of Justice and the Federal Trade Commission. It also is awaiting approval from the Federal Energy Regulatory Commission and the Securities and Exchange Commission.

Settlement conferences lasted five months, and at the heart of the agreement are provisions to ensure that Sierra Pacific has an incentive to achieve the "maximum possible efficiencies and savings" from integrating the two companies to benefit all of its customers in Oregon, Nevada and California. The settlement also provides rate credits that offer immediate benefits for PGE customers. Among conditions of approval are the following:

A six-year price freeze on distribution, customer services and transmission services for PGE from Oct. 1, 2001 through Oct. 1, 2007. PGE may adjust prices in response to changing wholesale electricity costs and the amount the company pays for fuel to power its generation plants.

A $96 million acquisition credit on customers' bills that will begin as soon as the transaction is complete and extend through Sept. 30, 2007.

PGE's and Sierra Pacific's agreement to continue a leadership role for Oregon's electric restructuring legislation, Senate Bill 1149.

Sierra Pacific will offer 30 different customer protections to guarantee service quality and reliability.

Carolyn Davis, Houston

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