PacifiCorp to make its case next week on restructuring proposal

By the OGJ Online Staff

HOUSTON, Feb. 1, 2002 — State regulators have set a Feb. 6 meeting with PacifiCorp to consider the company’s request to restructure into six separate electric companies, a generation company, and a service company.

The US unit of the UK’s Scottish Power PLC proposed the restructuring, after concluding the existing structure and cost allocations among the six states is a source of risk and uncertainty that, according to the company, is not in the long-term interests of customers or shareholders.

State commissions in Idaho, Utah, Oregon, Washington, California, and Wyoming must approve the restructuring. Simultaneous meetings will be held in Portland and Salt Lake City. Gene Fadness, a spokesman for the Idaho Public Utilities Commission, said the meeting is the first since PacifiCorp made its proposal.

In its initial regulatory filing, PacifiCorp said the overhaul is necessary because of the “divergent goals of the state commissions that regulate the company,” in addition to fundamental changes in wholesale power markets, industry consolidation, limits to traditional cost-of-service regulation, and the need to provide independent control of the company’s transmission assets.

Under the preliminary plan, the company would form six electric company under PacifiCorp Generation Co. and a service company that performs centralized functions would operate under a newly proposed PacifiCorp Holdings Inc. The company also will retain ownership of its transmission facilities, although operation and control would be turned over to the proposed western regional transmission organization.

Fadness said the company claims the proposed corporate reorganization will have “no impact whatsoever” on customers, but state regulators have yet to hear testimony in the case. Individual state electric companies would buy power to serve electric customers from PacifiCorp Generation Co. and would remain subject to state regulation.

Each individual electric company would be responsible for maintenance of transmission and distribution facilities, customer service, and management and regulatory functions. In Idaho, for example, PacifiCorp proposed transferring Idaho distribution assets into PacifiCorp Idaho in exchange for 1,000 shares of PacifiCorp Idaho’s common stock and a $75 million note.

Under the plan, the generation company would be responsible for generation systems, including plants, trading, and risk management; generation dispatch; scheduling; and power sales contracts. The proposed division of assets would permit each regulatory jurisdiction to pursue policies without affecting customers in other states or causing shareholders to be “unfairly treated,” PacifiCorp said.

Unless there is a permanent allocation of the economic benefits of the company’s existing generation among states, the utility holding company said states are hard pressed to institute direct access without creating adverse consequences in other jurisdictions or on shareholders

Followup regulations are expected to establish rules for building new generation in each state, PacifiCorp said. The company said it would propose to allow each state electricity company to power from a third party or its generation company.

“This ought to provide substantial opportunities and stimulus for a competitive independent power industry,” PacifiCorp said. Once the rules are clarified, it said, “PacifiCorp and independent power producers will be free to make investment decisions that are not unduly burdened by legislative and regulatory uncertainty.”


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