Oregon’s utility regulator Thursday denied buyout firm Texas Pacific Group’s proposed purchase of Enron’s Portland General Electric, the utility the Houston company once used to spearhead its manipulation of the western power markets.
TPG had offered to buy PGE, the state’s largest utility, in November 2003 for $1.25 billion plus the assumption of $1.1 billion in debt, but Oregon regulators said that purchase would not be in the interest of the utility’s 755,000 customers.
Oregon Public Utility Commission Chairman Lee Beyer said the commission was concerned that the high debt could trigger a downgrade in the utility’s credit ratings, pushing up its borrowing costs and forcing it to raise rates on utility customers.
Beyer also acknowledged concern by consumer groups, who feared the investment group could make sharp cuts in capital spending at the utility to boost its short-term returns rather than working to create long-term value.
“We could not dismiss the risk of short term ownership,” Beyer said.
TPG, a Fort Worth, Texas-based buyout firm that manages $13 billion in investments, was not immediately available for comment.
Its planned purchase of PGE had previously been approved by antitrust authorities and Enron’s bankruptcy court.
An independent Oregon consumers group cheered Thursday’s ruling, saying the public would not have been well served by a buyer with little support in the state.
“The future for PGE is uncertain right now but uncertainty is a lot better than Texas Pacific as the owner,” said Jason Eisdorfer, a lawyer for the Citizen’s Utility Board.
The denial of TPG is expected to stir more interest in public ownership of the utility, Eisdorfer said.
The city of Portland is considering a public purchase, he said, and a bill in the Oregon legislature would set up a regional power authority to operate PGE.
Enron hub
Houston-based Enron recently exited bankruptcy, but a New York bankruptcy court is still in the process of liquidating its remaining assets to pay off creditors.
In addition to PGE, Enron owns several overseas assets. It sold its U.S. pipeline interests for $2.11 billion to a joint venture of Southern Union Co. and GE Commercial Finance Energy Services last year.
Enron bought PGE in 1997 to gain a foothold in the newly deregulated electricity markets. However, Oregon regulators imposed special provisions on the deal to prevent Enron from draining PGE of cash -- provisions that kept PGE from being forced into bankruptcy along with Enron.
PGE became the hub of Enron’s western power trading operation that manipulated the market in the region and contributed the power crisis that created rolling brownouts in California in 2000 and 2001.
Enron’s traders squeezed huge profits out of the market using schemes with nicknames such as “Death Star” and “Fat boy” to create false shortages or tie-up power lines.
Those ploys were imitated by several other companies, resulting in numerous criminal indictments and civil lawsuits and prompting California to reassert control of its power market.