PUC Staff Urged to Use Leverage to Enforce the Law

Today Ted Sickinger of the Oregonian printed an excellent story, summarized at end of this post, noting that the public utility commission is "negotiating" to allow institutional investors in PGE to circumvent the law, as indicated by PUC analyst Bryan Conway. This is surprising and perhaps also a sign that the commission is still compromised by Neil Goldschmidt inspired utility interests, further compounded by Warren Buffett and his new considerable political clout via his ownership of Pacific Power. It was Buffett's lieutenant David Sokol who led the effort to repeal the Public Utility Holding Company Act (PUCHA) that previously prevented such ownership positions without adequate disclosure to the SEC.

What the PUC needs to understand is that ownership by hedge funds is very dangerous to PGE's long term stability given that it is not known what other investments they own and how they interact with PGE. For example, have they created derivatives based upon their shares, will they collapse due to subprime or other speculations and cause the stock to plummet, etc.? Or will they exercise board level authority via proxy and force a takeover by a related party.

The PUC has numerous tools, including the ability to punish PGE by pushing through a substantial utility rate reduction, in the event these institutional investors do not comply.

With Neil Goldschmidt back in town, one has to also wonder who is influencing these public utility commissioners, given that he and his former partner, Tom Imeson, anointed them. It is unlikely Goldschmidt is spending his days on the golf course.

Wednesday, September 12, 2007

TED SICKINGER

The Oregonian Staff

Oregon regulators say they're close to settling a dispute with a hedge fund that owns 7.4 percent of Portland General Electric Co. but has refused to comply with a state law requiring the partnership to seek regulatory approval of the investment.

Meanwhile, three more institutional investors have acquired stakes in Oregon's largest utility exceeding the 5 percent threshold that triggers a possible Oregon Public Utility Commission review. Collectively, those four investors own about 30 percent of PGE's stock.

TPG's Attempt to Purchase PGE - Extensive News and Commentary Archive

The following 142 page report chronicles news stories and related commentary surrounding the Texas Pacific Group's bid to acquire Portland General Electric. The purpose of this archive, with dates ranging from August 26, 1998 to October 25, 2005, was to provide material to various parties involved in defeating the proposal. It is especially useful using key word browser searches, for example searching using the term, David Bonderman, CEO of TPG.

Included in the report is extensive commentary regarding Neil Goldschmidt's business practices because Goldschmidt was the point person for TPG. This includes his involvement in Renaissance Capital, a credit card company, for which he was paid $6 million as a board member. During this period interest rate ceilings were lifted in Oregon due to a succesful lobbying effort and what resulted was explosive growth in predatory lending.

Longview Fibre Agrees to Sell

Longview Fibre was a great company with good management and I was squarely against this merger, blocking the first attempt by a Portland based private equity firm, Obsidian Capital. This attempt was blocked by involving the SEC and a proxy rule that prevents special shareholder meetings that do not disclose all material facts surrounding its purpose. This would include the source of financing by Obsidian and it was clear they were unwilling to disclose this. Obsidian had attempted to force the meeting using a Washington State law that requires a meeting if 10 percent of shareholders call for one.

The good news is that the later takeover by a Canadian firm was at roughly a 30 percent higher price for the stock. This article, Fibre agrees to sell, is the last of several in the Longview Daily News that featured my comments regarding this situation.