With an unambiguous thumbs-up from the Federal Energy Regulatory Commission rendered in a record short time of about three months, Portland, OR-based Northwest Natural Gas Co. is stepping up settlement discussions with key groups of industrial customers, consumers and regulators in Oregon, leading to an expected final state regulatory approval of its proposed merger with Portland General Electric by the end of May.

The company sees FERC’s okay last week (Feb. 13) as a clear support of its contention that the proposed marriage of the state’s two largest private-sector utilities will not hurt competition in the western power markets or adversely impact any of the nearly one million natural gas and electricity customers in Oregon and a small portion of Washington state across the river from Portland. Northwest Natural already has committed to no rate increases for either utility for the next six years as part of its merger application to the Oregon Public Utilities Commission, according to a Portland-based Northwest spokesperson, Steve Sechrist.

A subsidiary of Enron Corp., but not part of its Chapter 11 bankruptcy case, Portland General has been under some consumer pressure following a major rate hike last fall, amounting to a 30% residential increase and up to 50% for some large industrial customers.

Regarding the recent FERC approval, Northwest’s Sechrist said it came quicker than the company expected, and “for a deal like this, it is amazingly quick for FERC to do make its decision in two-and-a-half months, so it was an expeditious decision with really no restrictions that are going to hamper us.”

The Oregon PUC has committed to a six-month timeline, said Sechrist, noting that the main state approval in Oregon is the “next big one” because the other federal agencies — the Securities and Exchange Commission, particularly — wait for states to make their minds up.

In the settlement talks, which are just getting under way, according to Sechrist, separate gas and electric industrial end-user groups are involved, along with the City of Portland, the state and consumer groups, such as the Oregon Citizen Utility Board and the separate Utility Reform Project, the latter advocating that the merger not be approved and PGE be converted into a state-run government utility.

If there is a “commonality” among the various interests in the settlement discussions, Sechrist said, it would be the subject of utility retail rates, since PGE’s “significant” rate hikes last fall. “If there is a common theme, it is around this issue,” he said, noting that the consumer groups already have unsuccessfully tried to get the Oregon regulators to rollback PGE’s rate increases.

As part of its sweetener in filing for the Oregon PUC approval of the merger, Northwest committed to a “rate-give-back” of $31 million spread over a number of years following the merger, avoiding charging ratepayers for any of the merger costs or added borrowing costs for the newly forged company, and a six-year moratorium on any rate increases on the cost-of-service (not commodity) portion of retail bills, Sechrist said.

Neither of the companies has any pending rate cases now.

On a related issue, this spring Oregon is schedule to start a modest, phased approach to electric customer choice, which may dampen a build up in the anti-utility, anti-merger feelings among the consumer and/or governmental sectors.

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