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PacifiCorp Proposes Changes by Gail Kinsey Hill, Oregonian staff The Oregonian, December 5, 2000

Suspicion greets the plan to restructure into six state utilities,
a generation company and a transmission company

Portland-based PacifiCorp wants to rearrange its multistate business into six individual electric utilities, a generation company and a transmission company, arguing that the sweeping changes better suit a deregulated industry.

But state regulators are leery of a plan that could raise rates for some customers while locking in low rates for others in the utility's six-state service territory of Oregon, Utah, Washington, Wyoming, Idaho and California.

In addition, the Citizens Utility Board, Oregon's influential consumer advocacy group, says it has become increasingly distrustful of PacifiCorp's business activities and, therefore, can't support the proposal.

In part, the proposal responds to Oregon's plans to partially deregulate the electric industry, effective Oct. 1, 2001. More generally, it is PacifiCorp's answer to an industry rocked by soaring wholesale electricity prices and uncertain regulatory policies.

The electric, generation and service companies would be owned by a nonoperating U.S. holding company and remain part of ScottishPower, the utility based in Glasgow, Scotland, that completed its purchase of PacifiCorp late last year.

"We're trying to work out a way into the future," said Alan Richardson, PacifiCorp's president and chief executive officer. "It's practical, it's progressive, it protects customers going forward."

Under the proposal, PacifiCorp would divide its power generation and costs among five of the six states in which it operates. PacifiCorp did not include California, which accounts for just 3 percent of its 1.5 million customer base, in the proposal. The company is trying to sell the California operations.

Customers in the five states would be served by an individual electric company, which would negotiate long-term contracts for power with the generation company, also a separate entity, under the proposal. The reorganization would not affect employment levels.

Under a separate filing recently submitted to the Federal Energy Regulatory Commission, PacifiCorp's transmission network would be controlled by a regional transmission organization set up by Western utilities.

Most of the concerns about the Monday proposal focused on the creation of separate state utilities.

Ron Eachus, chairman of the Oregon Public Utility Commission, questioned whether all the states could come to an agreement over how PacifiCorp's power supplies were divvied up.

"On the surface, it seems like a reasonable approach," he said. "But it relies on the assumption that the states will reach an agreement among themselves about how the resources should be allocated."

Part of the problem has to do with the ways in which PacifiCorp generates electricity. Some power, such as that produced by dams in the Northwest, is relatively cheap. Other generating facilities, such as the coal-fired plants in Utah, are more expensive.

"Everyone's going to fight for the low-cost power," Eachus said.

Under Oregon's restructuring plan, which allows some businesses to begin buying power on the wholesale market next fall, utilities are required to define the power resources they own and how those supplies will be apportioned among various customers. PacifiCorp carried the allocation requirement through to other states as well.

"Because we are a multistate utility, we obviously cannot set aside a certain amount of generation for Oregon consumers without considering how our overall resources and costs are affected in other states we serve," Richardson said.

PacifiCorp also could run into resistance from Utah, where most of its customers reside.

"If it ends up costing other jurisdictions more, we wonder why should we put our ratepayers at risk of paying more so Oregon can perform its own deregulation experiment," said Rich Collins, a utility economist for Utah's Public Service Commission. "We don't want to stop them from doing what they want to do, but we don't want to have to pick up the costs if it turns out to be a bad decision."

The three member Public Service Commission must approve the plan, as must the three-member Oregon Public Utility Commission and the regulatory commissions in the other three states.

Jason Eisdorfer, an attorney with the Citizens Utility Board, said he would fight the proposal from the outset.

"We are having serious problems with this company," Eisdorfer said. "Our trust in the management does not allow us to go there right now."

Eisdorfer criticized the company for negotiating agreements with regulators and with the utility board, then changing its position later on.

Richardson was not available to address the criticisms directly, but earlier he emphasized that the restructuring proposal was a clear benefit to customers.

"It's a definite commitment of energy available in a definite way," he said. "It's not about making more profits; it's about more clarity about generation providing low-cost power to our customers."