Who says natural gas is odorless?

Last week, Dick Reiten struck a blow for parochialism, vowing to rescue our once-local electric company from those damn Texans who stole it a few years back. Reiten, the head of Northwest Natural, announced Friday that his gas company plans to buy Portland General Electric from Houston-based Enron.

Reiten once was a rising star at PGE but was unable to snare the top spot. He left in 1995 and ended up running the little local gas company, while his former colleagues wound up answering to fellows in big hats. Now he's going to round 'em up and bring 'em back, where he can call the shots himself.

After watching a bevy of homegrown companies, such as U.S. Bancorp, Fred Meyer and Sequent Computer, get sold to out-of-state companies, it's nice to think that PGE might come back to the Rose City.

Of course, even this is a bit of a fiction. NW Natural's largest current shareholders are Great Britain's Barclay's Bank, J.P. Morgan and the Mellon Bank. In addition, management and directors at the gas company own less than 1.5 percent of the stock, far less, for example, than their counterparts at Willamette Industries, which is currently threatened with a takeover by Weyerhauser.

On several levels, the acquisition does makes sense. NW Natural employs 1,315 people, PGE 2,781. Lots of those people perform the same functions-- from checking meters to answering phones--in two downtown headquarters less than 10 blocks apart. A new combined company could save some serious money on personnel and office space. Even the folks at the Citizens Utility Board, who rarely miss a chance to question the motives of gas and electric companies, can find some things to like about this merger.

But you gotta admit, in other ways it's a strange deal: kind of like a mouse announcing it's going to eat a cat.

There are a number of ways to look at the difference in the size of the two companies. One is to compare PGE's nearly $3 billion price tag to the $580 million value of all NW Natural's outstanding stock (known as market capitalization). Another is to compare the gas company's revenues, which are one-quarter that of the company it seeks to swallow.

To pull this off, NW Natural is going into hock big time, borrowing $1.55 billion and assuming about $1.1 billion of PGE's existing debt.

Now, with short-term interest rates at low levels, it's a good time to borrow money. But the debt still has to be repaid, and it can only come from two sources: from making the company more efficient or, more likely, says Ron Eachus, from ratepayers.

As chairman of Oregon's Public Utility Commission, Eachus spent a lot of time listening to NW Natural's requests for rate increases. Eachus was booted from the commission earlier this year, so he won't have a say on the proposed deal, but he's convinced that Reiten will have to ask for a rate hike.

"Given NW Natural's past willingness to use political influence to get a higher rate of return," Eachus, "the downside is even more political pressure to get ratepayers...to finance the acquisition."

Which means that, when it comes time to pay the joint gas/ electric bill, we'll get that warm grown-in-Oregon feeling.

WWeek 2015