Skip to main contentIt's astonishing that this stinker has even gotten this far.
It has had a bad smell from the day it was first proposed. And in the intervening 14 months, the aroma has only gotten fouler.
Despite this, a group of Texas speculators, with no experience running a power company, are one vote away from buying Oregon's largest utility.
In the next few weeks, the three-member Public Utility Commission will decide whether to let Texas Pacific Group purchase Portland General Electric. This is not simply about whether a private equity firm can buy PGE. It's also a referendum on who will control a key piece of this region's economic infrastructure.
From the very beginning, Texas Pacific's intent was transparent. Texas Pacific buys distressed companies, cleans them up and spins them off. That strategy may be appropriate for the private sector, but not for a monopoly utility, which earns a government-guaranteed profit in return for providing reasonable rates and reliable service.
To purchase PGE, Texas Pacific created a local holding company called Oregon Electric. A cynical bit of window dressing, Oregon Electric is little more than a shell company adorned by frontmen who have no experience in the utility business and no real authority. Texas Pacific hoped Oregon Electric would convince Oregonians that PGE would be locally controlled; it also allows the Texans to end-run a federal law that would otherwise prohibit out-of-state financial speculators from buying an Oregon electric monopoly.
Despite the transparency of TPG's motives, the proposed acquisition has a good chance of approval, due to a Public Utility Commission that, at best, is confused and, at worst, has lost sight of its obligations to Oregon ratepayers.
And Gov. Ted Kulongoski? He has stayed in the shadows, preferring not to soil his hands with the most important economic-development decision any state agency will make during his tenure.
This is not the time to analyze the governor's conduct. It is, however, the proper place to recognize just how bad this deal is, a fact underscored by this newspaper's release of Texas Pacific's confidential documents on Jan. 5 (see "The PGE Papers").
Readers of WW (and The New York Times, picking up on the story's national implications) know now that Texas Pacific privately thinks it can fire hundreds of employees, sell the company in five years to another utility and make more than a billion dollars in profit.
Publicly, Texas Pacific was making different claims-including its insistence that profits would be so marginal that the firm could not offer significant rate reductions.
Since the release of the internal documents, Texas Pacific's public-relations machine has insisted that the findings they contain shouldn't be taken seriously. This spin speaks volumes about the lack of respect that firm has for Oregonians' cognitive skills. It reminds one of the World War II propaganda minister's line: "The bigger the lie, the more people will believe it."
In some quarters, the strategy seems to be working.
Just last week, on Jan. 11, The Oregonian weighed in with its third editorial supporting the sale, arguing that those who oppose the TPG deal are really opposed to capitalism.
"The prospect of profit does seem to be what bothers many of the deal's opponents," huffed the state's largest newspaper.
That's a curious observation, given that this state's most successful corporations oppose this deal-including virtually all of PGE's business customers, from Intel to Norpac to Blue Heron Paper.
"Here is the basic problem I have with the Texas Pacific deal," says Mike Siebers, CEO and president of Blue Heron, who employs 250 people at his Oregon City mill. "Venture capitalists are not in the power-plant business, they are in the business of buying and selling companies for the benefit of themselves and their investors."
And Siebers, whose company spends 30 percent of its budget on electricity, notes that Texas Pacific isn't eyeing just any company.
"They are buying a monopoly utility," he says. "They have a guaranteed cu
stomer base, and most of their customers do not have a choice. The PUC guarantees them a fixed rate of return. [Texas Pacific] will garner that profit, plus the value of any cost savings they might be able to achieve, and realize it as profit at their departure. Customers should have the benefit of some of these items in the form of lower rates. But Texas Pacific does not bring any more stability and certainly no more meaningful benefit to customers. Their inevitable exit could add even more burden in the long run.
"I don't see anything good about this."
Neither do we.
-Mark Zusman
WW Editor
Oregonians can express their concerns to Lee Beyer, chairman of the Public Utility Commission, at lee.beyer@state.or.us.
WWeek 2015