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This page contains a single entry from the blog posted on April 20, 2005 7:03 PM. The previous post in this blog was Promise moves on. The next post in this blog is The latest from the PDC. Many more can be found on the main index page or by looking through the archives.



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Wednesday, April 20, 2005

The first thing we do, let's pay all the lawyers

Interesting news in The O this morning about the City of Portland's plan to take over Portland General Electric (PGE). Commissioner "Ready Kilowatt" estimates that the legal bills could run the city around $7.5 million.

If the deal goes through, it will paid by the PGE customers. If the deal doesn't go through, it will be paid out of property taxes.

Wow. Great.

Comments (15)

So that's what they call a "Win-Win" scenario.

"If a deal with Enron to sell PGE can't be reached, City expenses would be capped at $650,000."

April 19, 2005 press release from Comm Sten's office.

In other words, either A: move or B: stop using any and all of the following resources:

  • Electricity

  • Gas

  • Water/Sewer
  • And avoid purchasing the following:

  • Groceries

  • Homes

  • Gasoline

  • Oil
  • Suggestion: move to Texas and become a politicial - run the state into the ground, act like an idiot and make sure all of your friends become very wealthy off of the less fortunate, then run for president. Rinse and repeat.

    No - I'm not bitter at all. Why do you ask?

    Oh! Canada!

    Mr Leonard - You should listen to Mr Sten closer - $650K is the limit for the 1st phase of legal fees. You are really losing credibility.

    You may want to actually read the documents you purport to understand before you call into question anyone’s credibility.

    Randy: Let's not be coy. How is the "cap" supposed to work? The city's already far beyond $650k in expenses on PGE, fairly counted. I would suspect we're already well past $1 million. How do we get the money back if the deal doesn't go down?

    Allow me to play the part of the naiive neighborhood resident for a moment, and ask how Portland is able to come up with 650,000 in legal fees out of thin air, but is unable to come up with a similar amount of money to operate the several high-performing elementary schools we just axed?

    (Yes, I know it's not out of "thin air." Perhaps the better question is why the political will exists to get that money while no political will exists to save local schools?)

    Oh, heck, how about $1.3 million a year for "clean money" elections? Another couple hundred thousand a year for streetcar subsidies? The list goes on and on.

    The clear implication of your piece is that the City will pay $7.5 million in legal fees to the Miami-based law firm who will represent us in our purchase of PGE from Enron. My comment was intended to correct that impression - if we do not reach a deal with Enron to sell PGE, our legal fees to this firm are capped at $650,000.

    Is that "cap" in the retainer agreement with the law firm? I doubt it.

    I did many big deals in my prior life, and I can tell you, they're never final 'til they're closed, particularly where, as here, there are tons of legal and regulatory issues and the parties are somewhat hostile to each other. The city will be past $650,000 with the law firm well before -- well before -- there is any guarantee that the deal will go through. And unless the law firm is going to work on a contingency fee, it's going to get paid its hourly fee even if the deal craters at the last minute.

    You're strolling down the Yellow Brick Road with Erik, buddy. Enjoy.


    The arrangement with the law firm is as I explained it in my earlier post.

    And I can assure you that my support of the City’s plan to purchase PGE was arrived at by my own independent analysis of the pros and cons of public Vs private ownership of PGE. The private sector model that provides the current governance of PGE is a joke…and the punch line is at the expense of every rate payer in its service territory.

    I may not be a lawyer, but even I can figure that out.

    PGE is a regulated (and I would argue poorly) monopoly. They have built into their rate structure nearly $100 million for state and local taxes that PGE does not pay…and they get away with it.

    The only solution, in my opinion, is for the city to do what should have been done 75 years ago. Buy PGE and operate it as a regional utility in the ratepayer’s interests only.

    While Commissioner Sten has promised that the rates will drop 10% if the city acquires PGE, I would support the city purchase of PGE even if it did not reduce the rates immediately. Why? Because, I am convinced ratepayers will continue to be exploited by future so called private sector owners who have absolutely no social conscience. As we learned from the Texas Pacific group, those future owners are driven by one goal and one goal only: Maximum profits. And they will push to improve the bottom line until stopped by a finally fed up public.

    I don’t know about you, but listening to the tapes of the Enron traders operating out of PGE’s office in downtown Portland about raising “little old ladies electric rates” as they laughed about manipulating the energy market to justify increasing PGE’s profits was enough for me to be fed up.

    If the performance of Enron’s virtual pillaging and plundering of PGE and it’s customers has not convinced you that a dramatic change of the governance model for PGE needs fundamental, structural overhaul, then no amount of factual rebuttal by anyone will convince you.

    What's this--the city didn't go back to Ater Wynne?

    Randy>"They have built into their rate structure nearly $100 million for state and local taxes that PGE does not pay…and they get away with it."Randy>"They have built into their rate structure nearly $100 million for state and local taxes that PGE does not pay…and they get away with it."

    It's my understanding that PGE does have the tax burden but in the greater financial structure of Enron the tax is neutralized. If PGE becomes a stand alone private company all of that tax gets paid. Along with property taxes and other local taxes a private PGE will be paying big bucks desperately needed by every basic service.

    Randy, it sounds like you want to throw PGE on the heap with other public entities and developers not paying taxes.
    Are you sure you have thunk this through.
    The Oregonian editorial board seems to think we should have a board like OHSU or our PORT run PGE.
    Who wants PGE run like them?
    That's a recipe for continuing the remnants of the Goldschmidt club. Goldschmidt's partner Tom Imeson is on the OHSU board and the Port board along with other Goldschmidt pals and cronies.
    The hand outs with PDC bucks and tax abatements abound in this city and it's about to get much worse. Why would anyone want to throw PGE into this mess?

    "You may want to actually read the documents you purport to understand before you call into question anyone’s credibility."

    Well, the last press release posted on Comm Sten's website was in December. If the documents aren't readily available to the public, I don't think its fair to beat up on the public for not knowing what's in them.

    Unless I'm reading the Oregonian wrong, sure there's a cap on Phase One. But Phase Two spells out, what, $3.5 million in legaL fees for completing an agreement. Phase THREE, distinct from pase two, brings the payout to $7.5 million if the transaction actually happens.

    There must be some reason that Phase Three is distinct from Phase Two's reaching an agreement. that the "consultants" have proposed including Purchasing into the Revenue Bureau (for no discernible reason) long before PGE's customer service function ends up in the City's Revenue Bureau in a juggernaut of false efficiencies? :-)

    If the performance of Enron’s virtual pillaging and plundering of PGE and it’s customers has not convinced you that a dramatic change of the governance model for PGE needs fundamental, structural overhaul, then no amount of factual rebuttal by anyone will convince you.

    But Randy, what assurance do we have that the private operator that the city is going to hire to run PGE won't do the exact same thing?

    And to get back to the original point, if this deal gets anywhere near the eve of closing, and something goes wrong, and the deal is off, that law firm is going to get way more than $650K. Way.

    The number $650K is like the $15 million original budget for the tram. It's a meaningless number that gets the camel's nose in the tent. Let's be serious.


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