THE NUCLEAR OPTION

[September 7th, 2005] The Oregon Supreme Court will hear arguments next week in a case aimed at forcing Portland General Electric to repay more than $500 million to customers.

That repayment would work out to nearly $700 per current customer and represents money PGE charged ratepayers for the Trojan nuclear plant after it closed in 1993.

The Utility Reform Project, a consumer advocacy group, argues PGE improperly tacked such charges onto customer bills from 1995 until 2000, charging for plant operations long after Trojan's nukes went dark.

Right after PGE announced Trojan's permanent closure in 1993, ratepayer advocates including URP lawyer Dan Meek challenged the state Public Utility Commission. The aim: to block PGE from continuing to collect operating costs on the Columbia County plant after it ceased operations.

A Marion County Circuit Court judge ruled for PGE in 1994. The Oregon Court of Appeals overturned that verdict in 1998, siding with ratepayers. But the battle had just begun. Machinations that included a PGE-backed 1999 legislative end-run around the court and a 2000 ballot measure approved by Oregon voters overruling the Legislature followed.

In 2003, a Marion County judge once again ruled in Meek's favor. But the state utility commission declined to make PGE repay the money, contending that it lacked the authority to do so.

Last year, the same court ruled in separate but related suits filed by Meek that current and former ratepayers as a class were due a Trojan-related refund from PGE. The court ordered the PUC to figure out how much the company must pay, through means such as reduced rates.

In hearings in Salem last month, Jim Lazar, a utility consultant appearing for the Reform Project, presented a jaw-dropping estimate of the total amount due ratepayers: as much as $523 million and perhaps more.

That figure is more than double Meek's previous estimate and about eight times PGE's 2004 net income. (See "Enron's $200 Million Problem," WW, May 4, 2005.)

The half-billion includes about $193 million that the utility collected over five and a half years beginning in 1995, plus interest on those amounts since then.

Depending on how the Supreme Court sees things, the Trojan repayment could represent a significant potential liability for PGE's proposed new owners. The utility is currently trying to extricate itself from the ownership of its bankrupt parent, Enron, by issuing stock to Enron's creditors.

As it has for more than a decade, PGE vigorously denies that it owes ratepayers a Trojan-related penny. The company has asked the state Supreme Court to invalidate last December's state court ruling and will make its case on Sept. 13.

Company officials denied to comment on their legal strategy but have consistently argued against what they see as an attempt to set rates retroactively, which would be contrary to standard practice.

Meek disagrees, noting that state law specifically prohibits utilities from charging a return on non-operating facilities. As for the claim of retroactive rate-making, Meek notes that ratepayers first challenged PGE's ability to charge for a shuttered Trojan two years before such charges began.

PGE's SEC filings describe at length the Trojan legal wars, but the company has not set aside any cash for its potential liability. "No reserves have been established by PGE for any amounts related to this issue," the firm states.