UNITED STATES OF AMERICA
BEFORE THE
SECURITIES AND EXCHANGE COMMISSION

PETITION FOR REVIEW OF THE PUBLIC UTILITY COMMISSION OF OREGON

Pursuant to Rule 410 of the Commission's Rules of Practice, 17 C.F.R. § 201.410, the Public Utility Commission of Oregon ("OPUC") hereby submits a petition for review of the Initial Decision issued on February, 6, 2003, in the above captioned proceeding ("Initial Decision").

I. INTRODUCTION

The OPUC is a state agency of Oregon that regulates the customer rates and services of Portland General Electric Company ("Portland General"), a subsidiary of Enron. In addition to Portland General, the OPUC also regulates the rates and services of other investor-owned electric utilities, natural gas companies, and certain telephone services and water utilities in Oregon. The OPUC's primary responsibility is to ensure that Oregon customers receive adequate services at fair and reasonable rates, while also providing Oregon regulated companies an opportunity to earn a fair return on their investments. Oregon Revised Statutes ("ORS") 756.040(1).

The OPUC's petition for review is limited to Enron's application for an exemption under Sections 3(a)(1) of Public Utility Holding Company Act of 1935 (the "Act"). The OPUC takes no position on Enron's filing for exemptions under Section 3(a)(3) or Section 3(a)(5) of the Act. The Initial Decision constitutes an exercise of discretion on an important decision of law and policy and should be reviewed.¹

II. DISCUSSION

A. The Initial Decision unnecessarily and incorrectly adopts a policy that will negatively affect Enron, and other exempt holding companies, while increasing the potential for adverse utility behavior.

In determining whether Enron is entitled to a Section 3(a)(1) exemption under the Act, the issue is whether Portland General is predominantly intrastate in character and whether it carries on its business substantially in a single State. The Initial Decision correctly concludes that Commission precedent and Commission policy require a flexible approach to interpreting Section 3(a)(1) of the Act to each particular factual situation, and the "determination of what is appropriate in the public interest necessarily turns on a consideration of the facts and circumstances of each situation." Initial Decision at 21-22 citing Division of Investment Management, Securities and Exchange Commission, The Regulation of Public Utility Holding Companies, 114-14 (1995).

Instead of actually taking a flexible approach to Portland General's particular factual situation and considering what is appropriate in the public interest the Initial Decision establishes a type of bright-line test that relies mainly on the facts that Portland General garners an average of 34.14 percent of its total operating revenues from interstate sales from 1999-2001, and approximately fourteen percent of its owned generation is located out-of-state. Initial Decision at 22.

The Initial Decision denies Enron's application for an 3(a)(1) exemption in spite of the undisputed statements of the OPUC that it has adequate regulation over Portland General to protect its customers. In today's electric industry, the policy of relying so heavily on interstate operating sales and out-of-state generation without sufficient consideration of the underlying facts and circumstances creates the wrong policy of determining whether an electric utility should be granted a 3(a)(1) exemption.

The Initial Decision recognizes that Portland General has strong ties to Oregon. Initial Decision at 22. In fact, all of Portland General's service territory and every one of its retail

customers are located within the State of Oregon. Portland General is a net importer of power (its Oregon retail loads exceed the amount of company-owned generation). In order to prudently manage its load at the least cost to its Oregon retail customers, Portland General purchases and sells power on the wholesale market. For example, Portland General for some seasons often purchases power in excess of expected normal loads of its customers for purposes of covering unexpected plant outages and load changes resulting from weather variation. If Portland General's load management results in excess power needed to serve its retail customers, it will sell that excess power into the wholesale market at the most cost effective trading hubs. See OPUC's Opening Brief.

In addition to the predominate intrastate character of Portland General's load management activity, no party, including the Division of Investment Management, disagreed with OPUC's position that it fully and adequately regulates the activities of Portland General to protect Oregon customers.

Adoption of the Initial Decision would establish a policy that would likely result in adverse utility behavior. Portland General is not the only utility that sells excess power into the wholesale market. In fact, nearly all utilities sell excess power, which often ends up out of the state. If the Initial Decision was adopted, utilities would have an incentive to sell their excess power within the state, often times at lower prices. The Commission should not adopt a policy that creates an incentive for utilities to sell their excess power within the state, which may not be the most effective location for the utility that needs power (or at prices most beneficial to customers), especially in this situation where all the parties agree that the OPUC has adequate regulatory oversight of Portland General to protect Oregon customers. Clearly, creating an incentive for such behavior would negatively affect both the customers who receive the benefit of the excess power sales netted against the utilities' power costs and those customers in areas that have a need for the excess power.

The Initial Decision creates a policy with additional negative implications in relation to Portland General's situation. Portland General's load contains power from thermal resources. When Portland General is given the opportunity to purchase less expensive hydroelectric power, it can then sell that excess thermal power into the wholesale market, resulting in a benefit to Oregon retail customers. If the Commission, however, creates a policy with disincentives for Portland General to sell excess power out-of-state by subjecting it to Commission regulation, Portland General may decide not to purchase the less expensive hydroelectric power and, instead, serve its native load with its higher cost thermal resources. The Commission should not adopt a policy that creates incentives for Portland General and other utilities to pursue behavior adverse to its retail customers, especially when no parties question the OPUC ability to adequately and effectively protect all of Portland General's retail customers.

III. CONCLUSION

The Initial Decision unnecessarily and incorrectly creates a policy that negatively affects Portland General, and other exempt holding companies, while also creating the potential for adverse utility behavior. The Commission should carefully review establishing such a policy, especially when no party to this proceeding questioned that the OPUC adequately and effectively regulates Portland General's activities.

Wherefore, for the foregoing reasons, the OPUC respectfully requests that the Commission grant this petition for review.

DATED this _____ day of February 2003.

Endnote

¹ Rule 411 of the Commission's Rules of Practice, 17 C.F.R. § 201.411, provides that the Commission may grant a petition when upon a reasonable showing that prejudicial error was committed in the conduct of the proceeding, the decision embodies a finding or conclusion of material fact that is clearly erroneous, or a conclusion of law that is clearly erroneous, or an exercise of discretion or decision of law or policy that is important.