ScottishPower PLC and PacifiCorp announced they have brokered asettlement in principle with the staff of the Oregon Public UtilityCommission (OPUC) that essentially clears the way for the firstacquisition by a foreign company of a U.S. power utility.

The settlement, reached July 23, ends months of “open and frank”negotiations between ScottishPower, Portland, OR-based PacifiCorpand PUC staff members, who in the end agreed to recommendconditional approval of the $7 billion stock-for-stock transaction.Oregon regulators held a series of hearings on the merger lastweek, and are expected to issue a final decision within 60 days.

Oregon had been the lone state holdout to the merger. The otherfive western states served by PacifiCorp – California, WashingtonUtah, Idaho and Wyoming – already had either approved the proposeddeal or recommended it for approval by their respectivecommissions. The staff of the Utah Division of Public Utilities andthe Committee of Consumer Services reported they reached a similarsettlement with the merger partners last week, virtuallyguaranteeing approval in that state. At the federal level, themerger has passed muster at FERC and the SEC, but it still awaitsclearance by the NRC. No holdup is foreseen because PacifiCorp ownsonly a minuscule interest in a nuclear asset.

Officials for both companies anticipate the merger transactionwill be completed by the end of the year. PacifiCorp would operateas a wholly-owned subsidiary of Glasgow, Scotland-basedScottishPower, the leading power utility in the United Kingdom.PacifiCorp serves about 1.4 million electric customers, of whichabout a third are in Oregon.

Under the Oregon settlement, the merged company has agreed topay its customers in the state a credit of $12 million annually forthree years and $15 million in the fourth year, beginning one yearfollowing the completion of the transaction. This would equate to a1.7% reduction for individual customers, estimated ScottishPower’sRachel Sherrard.

The credit would include Oregon’s share of the merger-relatedcost savings ($3.4 million), which ScottishPower previously hadcommitted to pass through to customers. Also, PacifiCorp would beable to offset $9 million and $12 million of the credit in yearsthree and four, respectively, through filing a rate case in whichcost savings are demonstrated. The agreement further would give theOregon PUC the option to require PacifiCorp to seek a ratereduction by March 1, 2004 in the event its earnings are above a”reasonable range.”

The merged ScottishPower-PacifiCorp utility has said it wouldpay Oregon customers a maximum of $50 in cases where it fails toinvestigate and quickly respond to complaints. Also it has promisedto respond to 80% of customer calls within 20 seconds in the shortterm. Response time would be shortened to 10 seconds three monthsafter the merger is completed.

Susan Parker

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