PGE: Restoring Local Control
By State Senator Ryan Deckert of Beaverton, Oregon, who is a co-sponsor of Senate Bill 1008.
Texas Pacific Group’s bid to buy PGE confirmed ratepayers didn’t face a very attractive option: An investor with an incentive to keep rates high and trim service in order to maximize value so the utility could be sold at a large profit.
Texas Pacific consultants projected the investor could reap a $1 billion profit in as little as five years. That was great news if you are a Texas Pacific shareholder; not so good news if you are an Oregon manufacturer struggling to keep a plant in operation or a family facing budget pressure.
The fate of PGE is linked to Oregon’s economic future. In fact, ensuring that the ownership of PGE has goals aligned with its customers and communities may be the most important economic development strategy of this decade.
One of the most appealing options to avoid the future churn of PGE’s ownership is converting it into a customer-owned utility, with a structure specifically designed to operate a sophisticated electric utility and provide adequate regional representation to PGE’s service territory and areas where it maintains facilities.
Senate Bill 1008 has been introduced this legislative session to create such a regional customer-owned utility and deserves serious consideration.
Public power is no stranger to the Pacific Northwest. Nearly 70 percent of Washington electricity consumers are served by customer-owned utilities. The issue we face with PGE is not about ideology; it is about options.
The reality is customers, through their rates, pay a utility’s debt service, whether they are the “owners” or not. There are advantages to a stable, locally based, private utility owner. PGE was in such hands once upon a time, but no longer.
Since Enron acquired PGE, tried to sell it and now is selling it off as part of a bankruptcy proceeding, the electric utility is in play. There isn’t much assurance PGE will return to stable, locally based ownership unless customers buy it.
Publicly owned utilities have advantages. They can access capital at lower interest rates. For PGE, which has an existing debt load in excess of $1 billion, that’s not an insignificant advantage.
Another advantage is that customer-owned utilities don’t have to generate a profit for shareholders. The operating profit they achieve is reinvested in electricity generation and distribution systems – and in lower rates.
The debate over converting PGE into a customer-owned utility has centered on proposals by the City of Portland and various drives to establish people’s utility districts within the current PGE service territory. These ideas have generated lots of controversy and opposition. But again, there are other options.
The most appealing option involves creation of a regional customer-owned utility, designed to run a utility such as PGE, much like public corporations that operate the Port of Portland and the Oregon Health and Science University.
As a public corporation, the regional utility would have:
* A governing board reflecting PGE’s 6-county service area, customer base and key stakeholders (including communities with generating and transmission facilities).
* Men and women selected to set policy for the regional utility who are chosen because of their business knowledge and experience with energy services.
* Utility objectives that align with customers and communities.
* Professional management to ensure customers with reliable electricity service at the lowest possible price.
To the greatest extent possible, the regional utility would harness the skill and experience of existing (and past) PGE employees, who perhaps have suffered the most from the Enron fiasco.
What’s important is that these aspirations are possible with a customer-owned regional utility. All the Texas-based investor offered was a board of directors with one or two well-respected Oregonians, who might have had limited control over the ultimate financial destiny of PGE.
This isn’t a question of ideology of private sector versus public sector. This is a question of what’s best for our customers, our communities and our economy. Restoring real local control over PGE’s energy assets makes a lot of sense. If creating a customer-owned regional utility achieves that objective, let’s work to design the utility that delivers the maximum benefit possible. It may be our last best shot at real local control.
|
April 20, 2005
Posted in guest column. |
More Recent Posts | |
Albert Kaufman |
|
Guest Column |
|
Kari Chisholm |
|
Kari Chisholm |
Final pre-census estimate: Oregon's getting a sixth congressional seat |
Albert Kaufman |
Polluted by Money - How corporate cash corrupted one of the greenest states in America |
Guest Column |
|
Albert Kaufman |
Our Democrat Representatives in Action - What's on your wish list? |
Kari Chisholm |
|
Guest Column |
|
Kari Chisholm |
|
connect with blueoregon
Apr 20, '05
Public power is no stranger to the Pacific Northwest.
Truer words were never spoken.
A bit of history: it is named McNary Dam because Sen. McNary was instrumental in passing public power legislation when FDR was president. VP nominee McNary ran with utility executive Willkie, who had so much respect for his running mate he never badmouthed public power when in Oregon or around McNary.
Anyone looking to read local history should read about McNary, incl. the excellent biography by McNary High School grad Steve Neal.
7:34 p.m.
Apr 20, '05
Senate Bill 1008 has been introduced this legislative session to create such a regional customer-owned utility and deserves serious consideration.
Except the Governor announced today that the state will not make a competing bid to the City of Portland's, and backed Portland's proposal.
Apr 20, '05
All of the data support public power. The Enron propaganda machine has had free rein in the last few election cycles because it paid the bucks for TV. If we were still the Oregon of Tom McCall and the 1970's Portland revolution, public power would be a slam dunk. I remain hopeful that Oregonians will see how much they have to gain and seize this moment for the common good.
10:18 p.m.
Apr 20, '05
Bix, I don't fully understand this myself yet - but the extended OPB story seemed to have the governor suggesting that some sort of state action would still be necessary.
10:21 p.m.
Apr 20, '05
Yeah I just noticed that, too.
shrug
Apr 20, '05
Backing Portland now doesn't mean the state (or the "region") won't get involved later. It simply means that the Guv (wisely) is backing the City at this point so it can get on negotiating with Enron without the potential of public power backers bidding against themselves. At least, that's what I think that's what this is about...
Apr 21, '05
B!x,
What do you know about this other investor group that's looking to buy PGE? I saw an article about them appointing board members this week in the Oregonian, but it wasn't entirely clear who they are and what they're trying to do.
I saw that Mike Thorne and Kay Stepp were appointed to this board. Thorne seems OK, but Kay Stepp is on the Providence Health System board, and they're getting sued for anti-trust violations right now. Hardly the person I want setting my electricity bill. I'm already pissed about health care costs.
-Rorobnoxious
Apr 21, '05
They did such a fine job outsourcing the billing software for the Water Bureau, and the Big Pipe project (Bureau of Environmental Services) is going swell. Why not let them outsource the acquisition and operation of an electric utility. What could possibly go wrong?
11:29 a.m.
Apr 21, '05
One reason that the City is an attractive buyer is that they have a solid plan that puts cash in the hands of the creditors. The new Energy Bill in Congress would remove private ownership limitations on utilities, so that the % of creditors ownership stake in PGE would rise, as would the value of their investment.
So from Enron and the creditor's point of view -- do they take cash now or wait through an uncertain period (Energy Bill has not passed yet)and then try to find a buyer for their interest, which would be priced at a much higher value.
In terms of the City/State ownership, it is important to remember that the majority of assets and customers are outside of Portland's boundaries. We need regional ownership as this is a regional project.
Let's let Portland buy it now and then transfer ownership to a regional structure where the rest of the communities could buy-in.
Apr 22, '05
I testified against SB 1008 today primarily because they don't have the votes. We need public ownership. It is long overdue. It's great that the legislature got involved with this issue three weeks ago. The City has been working this issue for three years. The City has the the votes and they are poised to move forward. We have a golden opportunity to create a publicly owned utility. What a shamed if we missed that opportunity because of an inter-governmental squabble. Liz Trojan Oregon Public Power Coalition [email protected]
3:01 a.m.
Apr 22, '05
I certainly appreciate any effort to make what is now PGE a publicly-owned utility, which I have been urging for over 20 years now. I think that the City of Portland is currently the most promising buyer.
The Legislature at this point should be assisting the City in making its bid. If the City somehow abuses the suburbs (as seems to be the fear of suburban public officeholders), then the Legislature can address this problem in 2007. The Legislature will always retain control over what a municipal utility can do, as such utilities are already governed by statutes (such as ORS Chapter 225, which limits municipal utility rates to charges sufficient to pay their costs and make necessary system improvements).
The City of Tacoma has owned its electric utility for years (as has Seattle, Eugene, McMinnville, and over 2000 other cities). Over 44% of Tacoma's electricity customers live in the suburbs that are not part of the City of Tacoma. Those residents and businesses have no official say at all in what Tacoma Power does. Tacoma Power is run by the City of Tacoma, which itself is run by a city council elected by the voters of Tacoma only. Yet, there appear to be no complaints from the disenfranchised. Instead, other suburbs are, I am told, asking Tacoma to expand its system to include them (and remove them from Puget Sound Power & Light Company).
A few other notes about SB 1008:
It forbids the new entity, Oregon Community Power (OCP), from using eminent domain for the purpose of acquiring the PGE assets. The City of Portland retains its eminent domain powers and thus could bargain more effectively with Enron.
It forbids OCP from applying for or receiving federal preference power. Since over 2/3 of that power is now sold by BPA (from the 30 federal hydroelectric dams in the region, along with the WPPSS 2 nuclear plant) to publicly-owned utilities in the state of Washington, this is a costly provision. If you wanted to "hold harmless" the existing publics in Oregon, you could do that at 1/3 the cost by allowing OCP to obtain federal preference power and then simply requiring OCP to the existing Oregon publics them 1/3 of the benefit OCP obtains by buying preference power from BPA (perhaps by contributing more to the public purpose funds for conservation, etc.). Instead, SB 1008 confers a huge benefit on Washington utilities, preserving Washington's economic advantage over Oregon.
It allows any or all non-residential customers to leave the OCP system (bypass) but continue to use OCP distribution and transmission lines to bring in power from any other source, including private utilities. Thus, while the business community hates condemnation (see item 1), they wish to reserve the right to leave the OCP system entirely, thus placing the entire cost of acquisition (at a higher price, due to lack of bargaining power) and operation upon the residential ratepayers, who cannot leave.
So, SB 1008 could be improved.
As time appears to be crucial here, the City should proceed with its bid to buy PGE, with any assistance it may request from the Legislature. Any other entity, such as OCP, created by the Legislature, should not attempt to buy PGE until and unless the City bid fails.
Apr 24, '05
Commioner Sten: I was surfing another website (www.thesocialistparty.org), and found several arguments in favor of public power:
The goal of socialism is to advance humanity beyond its predatory state. We unite with others in working to create the fundamental changes within the existing system that will allow all people to achieve a socialist future -- a future devoid of oppression, of need born from waste, of greed born from corruption and excess, and of violence born of market and media manipulations. The socialist transformation will be complete when these societal ills have been eliminated.
Socialism will establish a new social and economic society in which workers and consumers control production and community residents control their neighborhoods, homes, and schools. The production of society will be used for the benefit of all humanity, not for the private profit of a few. The vast income inequalities that plague a capitalist market system will be eliminated in an economy that protects the resources of the Earth, and that is founded on cooperation and collectivity, not individualistic competition.
Lord knows I'm tired of the "vast income inequalities" I see around Portland. You ought to see what 40 year PERS retirees are making!
The Internationale Arise, ye prisoners of starvation! Arise, ye wretched of the earth! For justice thunders condemnation, A better world's in birth. No more, tradition's chains shall bind us, Arise ye slaves, no more in thrall. The earth shall rise on new foundations, We are not nothing; we are all.
Apr 24, '05
Oh, Gonzo! Now you've cut and pasted Socialist Propaganda. Homeland Security is already putting you on their list for home invastion, in the name of the War on Terrorism and all that. They'll probably take you to a country that advocates terrorism to make you talk. I'll miss you.