A document recently obtained by WW suggests otherwise.

One of the PUC's functions is setting electric rates. Periodically, it reviews industry conditions and sets rates at a level that allows utilities a reasonable profit. Over the past decade, the PUC allowed PGE to earn returns of between 10.5 percent and 12.5 percent annually.

But the confidential document prepared by Texas Pacific when it was determining whether to purchase PGE shows that during a nine-year period ending in 2000, PGE earned nearly a quarter of a billion dollars more than the "maximum" return the PUC allowed.

PGE Chief Financial Officer Jim Piro takes issue with the way Texas Pacific calculated his company's earnings, but he acknowledges that PGE earned significantly more than allowed during several years in the '90s. (PGE's figures show that it over-earned by about $150 million during the same period.)

PGE's regulatory guru, Pamela Lesh, says over-earning is unlikely to happen again because the PUC now adjusts for variable power costs every year rather than every few years.

In any case, the windfall PGE earned in the '90s contradicts the PUC's claims that if a monopoly utility were earning a higher profit than allowed, the commission would lower electricity rates.

In an earlier interview with WW, the PUC's Beyer scoffed at the notion a utility could slash costs and pocket the savings, as Texas Pacific's own documents suggest it will do. "In theory they can, but if you think that this commission would let them do that, you're smoking the drapes," Beyer said.

Brian Conway, the PUC staffer overseeing the commission's consideration of Texas Pacific's bid for PGE, says he cannot comment on the confidential document because doing so would violate a "protective order."

The PUC has the authority to reset rates at any time if it determines an electric utility is "over-earning." But Conway says he has no knowledge of that happening in the past 15 years.

The document WW obtained, titled "PGE Performance Against Allowed ROE [Return on Equity]," is part of the July 2004 "utility sector overview" produced by Texas Pacific. The document shows that between 1992 and 2000 PGE exceeded its allowed return eight out of nine years. In 1996, for example, when its allowed return was 11.5 percent, the utility earned 18.4 percent before one-time adjustments.

That year, the Citizens Utility Board, a consumer watchdog group, demanded the PUC examine rates. PGE did agree to a $70 million reduction, but the Texas Pacific document shows that even so, the company's returns remained well above the allowed level for the next four years.

Speaking in general terms, Dan Meek, a lawyer with the Utility Reform Project, says PGE's quarter-billion-dollar windfall should make ratepayers nervous. "To me, this just shows that the Public Utility Commission does not follow up the actual effect and outcomes of their orders," Meek says. "If PGE over-earned dramatically for nearly a decade, you'd think the PUC would haul them in to reset rates, but they didn't do it. They just sat there and let them over-earn."

The question of whether Texas Pacific is an appropriate steward of Oregon's largest utility has been complicated by the controversial roles played in the process by former Gov. Neil Goldschmidt and his wife, Diana, as well as the City of Portland's desire to convert PGE to public ownership. But as the PUC completes its 11-month consideration of Texas Pacific's bid, questions about its regulatory powers are increasingly germane.

State Sen. Rick Metsger (D-Welches), who recently held hearings on whether the PUC's authority is sufficient, has not seen the Texas Pacific document but says persistent over-earning would concern him. "It would seem to bolster arguments that the PUC is not fully equipped to manage rates effectively for the benefit of ratepayers," he says.

A spokesman for the PUC says he expects the commission to rule on Texas Pacific's bid by the end of the month.