United States

United States

Promised support not forthcoming

Portland General Electric (PGE), the Northwest American utility that is now a subsidiary of Enron, is proposing to give 670,000 of its customers a choice of electricity supplier at retail level. But PGE's plan, submitted to regulators on September 2, falls far short of what 13 environmental and consumer groups say they were promised in return for supporting Enron's takeover of PGE several months ago. The dispute, currently under discussion, goes to the heart of how public service and environmental matters will be funded in a deregulated electricity industry.

The groups -- which include the Oregon Energy Coordinators Association, Community Action Directors of Oregon, Renewable Northwest Project and the nationwide National Resources Defence Council -- say that PGE-Enron promised, in return for their support of the controversial merger, to back a 3% "system benefit charge" for ten years based on their total retail revenues.

The revenue from that charge, which would have been almost $30 million yearly, was to be spent on various regional programmes such as renewables, broad based conservation initiatives, and improving the insulation of poor people's homes. Enron and PGE also agreed to develop renewable resources, including a 24.9 MW wind project at Vansycle, in return for the groups' support. Enron acquired wind expertise when it took over California wind company Zond -- now known as Enron Wind Corp -- in January.

PGE's proposal to the Oregon Public Utility Commission (OPUC) allows all customers to choose their electricity provider. It also suggests how PGE can separate its regulated functions -- transmission and distribution -- from profit making businesses such as the generation and sale of electricity. The plan for customer choice had been floated since before the merger was approved by the OPUC. Yet, as currently proposed, PGE's customer choice plan would spend only two-thirds as much money on renewable energy and conservation measures as had been promised, says an outraged and disappointed Rachel Shimshak of the Renewable Northwest Project, which was co-founded by the American Wind Energy Association (AWEA), Kenetech Windpower and various other groups. "I hope they will come to their senses so we don't have to take further action."

At issue is that the proposed plan bases the 3% surcharge on its regional load instead of on retail revenues -- which means that it would raise only some $21 million a year. "We negotiated in good faith," says Shimshak. "And now we see that this proposal would short us by about $8 million a year." She says the groups intend to fight to regain the original deal.

Indeed, the memorandum of understanding or MOU signed by the groups, and both PGE and Enron, does appear to bind the parties to the December 1996 Comprehensive Review of the Northwest Energy System, which recommends that utilities meet a minimum standard for investment of 3% of regional electric service revenues -- unless they are in a high distribution cost/low density system. And that is where PGE's interpretation of the review differs.

Utility justification

PGE's Karen Lee says, "We feel we have followed the recommendations." But she says that since PGE is a high distribution cost/low density system, it based its calculation on regional load. "We decided it was inequitable and we believe we're on solid ground," she says. Lee also justifies PGE's decision by saying that the $21 million is about twice as much as was allocated for renewables and conservation before the merger. In mid September the groups, including Renewable Northwest and PGE, were still discussing the matter.

The merger had appeared in danger of being disallowed by state regulators when the clean energy, non-profit groups made the agreement with PGE and Enron (Windpower Monthly, February 1997). Then about five months ago, on April 29, Enron and PGE announced they had reached an agreement with state regulators on the proposed merger.

Terms included $141 million worth of guaranteed customer benefits. These included a rate decrease to retail electricity customers, a concession won by the OPUC even after Enron had stated publicly that the amount was unacceptable and that it could only offer $61 million worth of cost savings and rate reductions. Enron, based in Houston, is an increasingly major player in world energy market with some $16 billion in assets.

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