Power merger worries state regulators

Thursday, May 4, 2000 | 11:15 a.m.

The Public Utilities Commission of Nevada is concerned that Nevada Power's parent company will attempt to get Nevadans to pay for an acquisition premium in its $3.1 billion merger with an Oregon utility company.

The general counsel's office for the PUC filed a request for investigation to the Federal Energy Regulatory Commission on Sierra Pacific Resource Inc.'s proposed acquisition of Portland General Electric Co.

"The PUCN has serious concerns regarding the merger's effect on Nevada's retail market," said a filing authored by a team of PUC attorneys.

"In particular, the PUCN's concerns include the potential recovery of the $1.1 billion acquisition premium from Nevada's retail ratepayers and the lack of ratepayer protections for retail customers in Nevada," the filing says.

The $1.1 billion merger premium represents the value of goodwill -- an intangible asset -- Sierra Pacific is paying for Portland General.

"The PUCN is concerned that, in the absence of action by FERC, these effects will not be addressed as the PUCN does not have authority under state law to review the proposed merger."

Officials with Sierra Pacific have stated publicly that the acquisition of Portland General Electric, announced last year, won't hurt Nevada ratepayers.

Last month, PUC commissioners voted not to intervene in the case with Oregon regulators, with the majority stating that it was not empowered to under state law.

FERC and the U.S. Department of Justice must authorize the proposed merger. PGE is a wholly owned subsidiary of the Houston-based Enron Corp. and serves 700,000 customers in northwest Oregon.

Sierra Pacific filed with FERC in March after similar filings with the Oregon Public Utilities Commission in January and the Securities and Exchange Commission in February. The company asked FERC for a decision by the end of July and hopes to complete the transaction by the second half of 2000.

In testimony in January, Sierra Pacific officials assured Oregon regulators that Portland General Electric customers would not face rate increases as a result of the transaction. Nevada officials say they want the same types of reassurances for customers of Sierra Pacific in Reno and Nevada Power in the Las Vegas area.