<TABLE>
<CAPTION>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1993
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Transition period from ________________ to
_______________
<S> <C> <C>
Registrant; State of Incorporation; IRS
Employer
Commission File Number Address; and Telephone Number
Identification No.
1-5532 PORTLAND GENERAL CORPORATION
93-0909442
(an Oregon Corporation)
121 SW Salmon Street
Portland, Oregon 97204
(503) 464-8820
1-5532-99 PORTLAND GENERAL ELECTRIC COMPANY
93-0256820
(an Oregon Corporation)
121 SW Salmon Street
Portland, Oregon 97204
(503) 464-8000
Securities registered pursuant to Section 12(b) of the Act:
Name of
Each Exchange
Title of Each Class on
Which Registered
Portland General Corporation
Common Stock, par value $3.75 per share New York
Stock Exchange
Pacific
Stock Exchange
Portland General Electric Company
First Mortgage Bonds, 9-1/2% Series Due April 1, 2006 New York
Stock Exchange
First Mortgage Bonds, 8-3/4% Series Due June 1, 2007 New York
Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
Portland General Corporation, None
Portland General Electric Company,
Cumulative Preferred Stock, par value $100 per share
</TABLE>
<PAGE> 1
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ X ]
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
The aggregate market value of Portland General Corporation voting
stock held by non-affiliates of the registrant as of January 31,
1994 is $942,776,125.
The number of shares outstanding of the registrants' common
stocks as of January 31, 1994 are:
Portland General Corporation 47,735,500
Portland General Electric Company 40,458,877
(owned by Portland General Corporation)
Document Incorporated by Reference
The information required to be included in Part III hereof is
incorporated by reference from Portland General Corporation's
definitive proxy statement to be filed on or about March 29,
1994.
<PAGE> 2
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C> <C> <C>
Page
Definitions. . . . . . . . . . . . . . . . . . . . . . . . . .
4
PART I
Item 1.
Business . . . . . . . . . . . . . . . . . . . . . . . . . . .
5
Portland General Corporation. . . . . . . . . .
5
Portland General Electric Company . . . . . . .
5
Portland General Holdings, Inc. . . . . . . . .
16
Item 2.
Properties . . . . . . . . . . . . . . . . . . . . . . . . . .
17
Item 3.
Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . .
18
Item 4.
Submission of Matters to a Vote of Security
Holders . . . . . . . . . . . . . . . . . . . . .
22
Executive Officers of the Registrant. . . . . . .
23
PART II
Item 5.
Market for the Registrant's Common Equity and
Related Stockholder Matters . . . . . . . . . . .
24
Item 6.
Selected Financial Data. . . . . . . . . . . . . . . . . . . .
25
Item 7.
Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . .
26
Item 8.
Financial Statements and Supplementary Data. . . . . . . . . .
35
Item 9.
Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure . . . . . . .
58
PART III
Item 10.
Directors and Executive Officers of the Registrant . . . . . .
58
Item 11.
Executive Compensation . . . . . . . . . . . . . . . . . . . .
58
Item 12.
Security Ownership of Certain Beneficial Owners
and Management. . . . . . . . . . . . . . . . . .
58
Item 13.
Certain Relationships and Related Transactions . . . . . . . .
58
PART IV
Item 14.
Exhibits, Financial Statement Schedules and
Reports on Form 8-K . . . . . . . . . . . . . . .
59
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . .
66
Exhibit Index. . . . . . . . . . . . . . . . . . . . . . . . .
69
Appendix - PGE Financial Information . . . . . . . . . . . . .
75
</TABLE>
<PAGE> 3
DEFINITIONS
The following abbreviations or acronyms used in the text and
notes are defined below:
Abbreviations
or Acronyms Term
Beaver Beaver Combustion Turbine Plant
Bethel Bethel Combustion Turbine Plant
Boardman Boardman Coal Plant
Bonneville Pacific Bonneville Pacific Corporation
BPA Bonneville Power Administration
Centralia Centralia Coal Plant
Cornerstone Cornerstone Columbia Development
Company
Colstrip Colstrip Units 3 and 4 Coal
Plant
Coyote Coyote Springs Generation
Project
CWDC Columbia Willamette Development
Company
CWL Columbia Willamette Leasing,
Inc.
DEQ Oregon Department of
Environmental Quality
EPA Environmental Protection Agency
FASB Financial Accounting Standards
Board
FERC Federal Energy Regulatory
Commission
Financial Statements Refers to Financial Statements
of Portland
General included in Part II,
Item 8 of
this report.
Holdings Portland General Holdings, Inc.
Intertie Pacific Northwest Intertie
transmission line
IOU Investor-Owned Utilities
IRS Internal Revenue Service
ITC Investment Tax Credits
kWh Kilowatt-Hour
MMBtu Million British thermal units
MW Megawatt
MWa Average megawatts
NRC Nuclear Regulatory Commission
PGE Portland General Electric
Company
PGFS Portland General Financial
Services, Inc.
PRP Potentially Responsible Party
PUC Oregon Public Utility Commission
Portland General or PGC Portland General Corporation
PowerLink PowerLink Corporation
Regional Power Act Pacific Northwest Electric Power
Planning and Conservation Act
SFAS Statement of Financial
Accounting
Standards issued by the FASB
Supply System Washington Public Power Supply
System
Trojan Trojan Nuclear Plant
USDOE United States Department of
Energy
WNP-3 Washington Public Power Supply
System
Unit 3 Nuclear Project
WSA WNP-3 Settlement Exchange
Agreement
<PAGE> 4
PART I
Item 1. Business
Portland General Corporation -
Holding Company
Portland General Corporation
(Portland General), an electric
utility holding company, was
organized in December 1985.
Portland General Electric Company
(PGE or the Company), an electric
utility company and Portland
General's principal operating
subsidiary, accounts for
substantially all of Portland
General's assets, revenues and
net income. Portland General is
also the parent company of
Portland General Holdings, Inc.
(Holdings) which is presently
involved in leveraged leasing and
the liquidation of its real
estate investments. Portland
General is exempt from regulation
under the Public Utility Holding
Company Act of 1935, except
Section 9(a)(2) thereof relating
to the acquisition of securities
of other public utility
companies.
As of December 31, 1993, Portland
General and its subsidiaries had
2,618 regular employees compared
to 3,253 and 3,256 at
December 31, 1992 and 1991,
respectively.
Portland General Electric Company -
Electric Utility
General
PGE, incorporated in 1930, is an
electric utility engaged in the
generation, purchase,
transmission, distribution, and
sale of electricity in the State
of Oregon. In addition, PGE
sells energy in the wholesale
market to other utilities,
primarily in the State of
California. Its Oregon service
area is 3,170 square miles,
including 54 incorporated cities
of which Portland and Salem are
the largest, within a
state-approved service area
allocation of 4,070 square miles.
PGE estimates that the population
of its service area at the end of
1993 was approximately
1.3 million, constituting
approximately 45% of the state's
population. At December 31, 1993
PGE served over 620,000
customers.
In early 1993, PGE ceased
commercial operation of the
Trojan Nuclear Plant (Trojan).
PGE determined that the
likelihood of increasing costs
made continued operation not cost
effective.<PAGE> 5
<TABLE>
<CAPTION>
Operating Revenues
PGE's operating revenues from customers peak during the winter
season. The following table summarizes operating revenues and
KWh
sales for the years ended December 31:
<S> <C> <C> <C>
1993 1992 1991
Operating Revenues (thousands)
Residential $340,440 $311,235
$314,313
Commercial 303,804 293,769
281,424
Industrial 147,274 137,901
135,031
Public Street Lighting 11,002 10,998
10,679
Tariff Revenues 802,520 753,903
741,447
Accrued Revenues 55,873 12,030
6,766
Retail 858,393 765,933
748,213
Wholesale 79,035 109,025
131,605
Other 7,103 5,140
5,760
Total Operating Revenues $944,531 $880,098
$885,578
Kilowatt-Hours Sold (millions)
Residential 6,760 6,285
6,471
Commercial 5,885 5,737
5,545
Industrial 3,764 3,615
3,597
Public Street Lighting 98 99
102
Retail 16,507 15,736
15,715
Wholesale 1,599 2,739
3,939
Total KWh Sold 18,106 18,475
19,654
</TABLE>
Retail (including other) revenues increased $94 million in 1993
primarily due to a $49 million increase in accrued revenues
related
to the future recovery of incremental power costs, and the
combination of retail load growth of 2.6% and cooler weather
during
the early months of 1993 which increased sales of electricity 5%.
1992 retail (including other) revenues increased $17 million over
1991 due primarily to revenues related to a temporary price
increase to recover a portion of excess power costs incurred
during
the March 1991 to February 1992 Trojan outage.
Due to replacement of Trojan generation, excess low-cost power
was
not readily available for resale which drove wholesale revenues
down $30 million. 1992 wholesale revenues declined $23 million
due
to poor hydro conditions experienced in the region which reduced
surplus power and limited PGE's ability to make nonfirm resales.
<PAGE> 6
Regulation
PGE is subject to regulation by
the Oregon Public Utility
Commission (PUC), which consists
of a three-member commission
appointed by the Governor. The
PUC approves PGE's retail rates
and establishes conditions of
utility service. The PUC ensures
that prices are fair and
equitable and provides PGE an
opportunity to earn a fair return
on its investment. In addition,
the PUC regulates the issuance of
securities and prescribes the
system of accounts to be kept by
Oregon utilities. PGE is also
subject to the jurisdiction of
the Federal Energy Regulatory
Commission (FERC) with regard to
the transmission and sale of
electric energy between utilities
as well as with respect to
licensed hydroelectric projects
and certain other matters.
Construction of new generating
facilities requires a permit from
the Energy Facility Siting
Council, a council of the Oregon
Department of Energy. This
council reviews the Company's
need for energy and the resulting
environmental impact of the
generating plant.
The Nuclear Regulatory Commission
(NRC) regulates the licensing,
construction, operation and
decommissioning of nuclear power
plants. In 1993 the NRC issued
PGE a possession only license
amendment to its Trojan operating
license allowing it to own the
reactor and nuclear fuel but not
to operate the facility. This
license amendment eliminates
certain operating requirements
that are unnecessary for a
permanently shut down and
defueled reactor. PGE will
continue to be subject to NRC
regulation until the Trojan plant
is fully decommissioned, all
nuclear fuel is removed from the
site to a U.S. Department of
Energy facility and its license
is terminated. The Oregon
Department of Energy also
monitors Trojan.
Oregon Regulatory Matters
General Rate Filing
On November 8, 1993 PGE filed a
request with the PUC to increase
electric prices by an average of
5.1% beginning January 1, 1995.
Commercial and industrial
customers rates would increase,
on average, 3.2%. The proposed
increase in average annual
revenues is $43 million, after
the effects of the Regional Power
Act exchange credit. PGE
requested a return on equity of
11.5%, down from the current
authorized return of 12.5%. If
approved, this would be PGE's
first general price increase
since 1991.
Power Cost Deferrals
PGE has operated without a power
cost adjustment provision in its
rates since late 1987 which
necessitates separate filings
with the PUC to recover increases
in power costs. In February 1993
the PUC authorized PGE to defer,
for later collection, 80% of the
incremental costs incurred from
December 4, 1992 to March 31,
1993 to replace power no longer
generated by Trojan. In January
1994 the PUC authorized PGE to
start collecting this power cost
deferral beginning in April 1994.
In August 1993 the PUC authorized
PGE to defer, for later
collection, 50% of the
incremental replacement power
costs incurred from July 1, 1993
to March 31, 1994, subject to a
review of PGE earnings.
1993 Residential and Small Farm
Customer Price Increase
Under provisions of the Regional
Power Act (RPA) PGE exchanges
higher-cost power for lower-cost
federal hydroelectric power with
BPA and passes the benefits to
residential and small farm
customers.
In September 1993 the PUC
approved PGE's request to raise
its electricity prices to
residential and small farm
customers an average of 7.8%, or
$28.6 million in annual revenues,
effective October 1, 1993 to pass
through the Bonneville Power
Administration's (BPA) nearly 16%
price increase. BPA's price
increase reduces the power
exchange credit that is passed
through to PGE residential and
small farm customers.
1992 Temporary Rate Increase
The PUC granted PGE recovery of a
portion of its incremental power
costs incurred during Trojan's
1991 extended outage. PGE was
allowed to recover 90% of the
excess power costs incurred from
November 1, 1991 until Trojan
returned to service in early
March 1992. Revenue collections
started on January 1, 1992, with
commercial and industrial rates
increasing 4.8% and residential
rates increasing 0.6%. On April
7, 1992, the PUC approved the
Company's request to decrease the
<PAGE> 7
rate at which it was recovering
excess power costs. Residential
rates decreased 0.5% while
commercial and industrial rates
decreased 3.3%. Revenue
collections were completed in
June 1993. The PUC's temporary
rate increase order has been
challenged by the Utility Reform
Project. See Item 3, Legal
Proceedings.
Energy Efficiency
PGE and the PUC are working
together to provide the
appropriate financial incentives
for PGE's energy efficiency programs.
PGE is allowed a return on energy
efficiency program expenditures.
PGE and the PUC also developed
the Share All Value Equitably (SAVE)
program to remove a financial
disincentive and encourage PGE to
aggressively pursue cost-effective
energy efficiency measures. SAVE,
which began in 1991 consists of a
lost revenue component and a shared
savings incentive that rewards PGE
with additional revenues for a
portion of the difference between
the equivalent cost a new
generation and the cost of the
energy efficiency measures. The
shared savings component of the
SAVE tariff can result in a penalty
if the amount of energy savings falls
short of the established benchmark levels.
During the first three years of the
program, PGE exceeded benchmarks set by
the PUC, and qualified programs achieved
an annualized 35 average megawatts of
saved energy.
1991 General Rate Increase
The PUC authorized PGE a $27
million, or 3.4%, rate increase
which became effective February
5, 1991. The tariff change
represented PGE's first general
price increase since 1984. The
PUC set PGE's allowed return on
common shareholders' equity at
12.5%, a decrease from 12.75%.
The price increase covered higher
operating costs, including
programs to improve efficiency
and safety at Trojan. Additional
revenues were granted to cover
higher depreciation and
decommissioning provisions for
Trojan. The PUC also allowed PGE
to recover, over ten years, $29
million of costs associated with
terminating a prior coal supply
contract for Boardman.
Prior Years
Prior to the 1991 general rate
increase, general prices had not
increased since 1984. Between
1985 and 1990, PGE had price
reductions totaling $79 million
in revenue requirements including
refunds of excess tax credits.
In October 1989, PGE lowered
residential and small farm
customer prices by 3.8%, or
$11 million in annual revenue
requirements. The lower prices
resulted from increased benefits
under the provisions of the RPA.
In January 1989 revenue
requirements were reduced $12
million as a result of the
completion of PGE's recovery of
abandoned nuclear project costs.
Litigation Settlement
In July 1990, PGE reached an out-
of-court settlement with the PUC
on two of three rate matters
being litigated. PGE had sought
judicial review of the three rate
matters related to a 1987 general
case. In 1989, PGE reserved $89
million for an unfavorable
outcome on these three issues.
As a result of the settlement,
$16 million, or $.35 per share,
was restored to income during the
1990 third quarter.
The settlement resolved the
dispute regarding treatment of
accelerated amortization of
certain investment tax credits
(ITC) and 1986-1987 interim
relief. PGE restored ITC in a
manner consistent with the way
the PUC had ordered that it be
treated for ratemaking purposes.
As settlement of the interim
relief issue, PGE refunded
$17 million to its customers over
a 12-month period beginning
November 1, 1991. The
settlement, however, did not
resolve the issue regarding the
gain on the sale of a portion of
the Boardman/Intertie assets,
which the parties continue to
litigate. PGE's position is that
28% of the gain should be
allocated to customers. The 1987
rate order <PAGE> 8
allocated 77% of the gain to
customers. PGE has fully reserved this
amount which is being amortized
over a 27-year period in accordance
with the rate
order.
In PGE's general rate filing
filed November 8, 1993 PGE
proposes to accelerate the
amortization of the Boardman gain to
customers from 27 years to three
years, starting in January 1995,
as part of a comprehensive
settlement of the outstanding
litigation on this issue.
Least Cost Energy Planning
The PUC adopted Least Cost Energy
Planning for all energy utilities
in Oregon with the goal of
selecting the mix of options that
yields an adequate and reliable
supply of energy at the least
cost to the utilities and
customers. "Demand side" options
(ie, conservation and load
management) as well as
traditional "supply side" options
(ie, generation and purchase of
power) are evaluated. Although
utility management continues to
be fully responsible for
decision-making, the process
allows the PUC and the public to
participate in resource planning.
Ratemaking decisions are not made
in the planning process.
However, participation by the PUC
and the public may reduce the
uncertainty regarding the
ratemaking treatment of the
acquisition of new resources.
PGE filed its first Least Cost
Energy Plan (LCP) with the PUC in
October 1990, and the PUC
subsequently reviewed and
acknowledged PGE's plan. The
plan is updated every two years.
In August 1992, PGE submitted its
draft 1992 LCP to the PUC.
Included in the LCP was PGE's
plan for an orderly phase-out of
Trojan by 1996. In January 1993,
PGE submitted an update to its
LCP reflecting its decision to
immediately shut down Trojan.
The PUC acknowledged the LCP plan
on June 11, 1993.
Competition and Marketing
Retail Competition
PGE competes with a local natural
gas utility for residential and
commercial customers' space and
water heating. PGE captures the
majority of the space and water
heating market for new multi-
family construction, but most new
single-family homes are built
with natural gas heat and hot
water. PGE operates within a
state-approved service area and
is substantially free from direct
competition with other electric
utilities.
Competition in the industrial
market has increased in recent
years due to the availability and
low price of natural gas. To
meet this competition, PGE is
working to retain customers by
assisting them with energy-
related decisions. Neighboring
retail electric utilities are
becoming another competitive
factor. In 1990, two of PGE's
industrial customers approached
other utilities to investigate
obtaining power at a lower price.
PGE has signed a settlement
agreement with Pacific Power &
Light (PP&L) permitting PP&L to
serve one of these customers and
is continuing to serve the other
customer. See Item 3,
Legal Proceedings for more
information.
Cogeneration is another form of
competition. However, PGE also
views it as an opportunity to
invest in joint projects which
earn a return and provide
additional resources to meet
PGE's load growth and to replace
Trojan's output.
Retail Marketing
PGE recognizes that all customers
do not have the same energy needs
and that they do no all value a
product equally. Some customers
require more reliable services
to reduce outage costs. Other
price sensitive customers prefer
reduced service levels to achieve
a lower electric bill. PGE
continues to work with customers
to develop and deliver kWh products
and services that meet different
customers' needs.
Meeting customer needs while
promoting energy efficiency means
employing demand side management
strategies. Demand side management
includes influencing market growth
through high value electrical
applications, managing wise use of
electricity through energy
efficiency and managing capacity
demand through load shaping. PGE
and the PUC developed the SAVE
program (see discussion on page 8)
to remove a financial disincentive
from energy efficiency measures.
The most successful programs
under PGE's SAVE incentive tariff
include low-flow showerheads, the
Super Good Cents program which
encourages energy-efficient
construction, the Commercial
Rationalization program for
construction of
energy-efficient commercial
buildings, commercial and
industrial lighting, and a
program to encourage industrial
customers to install more
efficient motors.<PAGE> 9
PGE also has programs for
residential energy audits, low-
income weatherization, more
efficient lighting and
appliances, and the repair and
replacement of water heaters.
Among the other services provided
to commercial and industrial
customers, PGE and subsidiaries
offer power quality services and
high voltage maintenance services
for customer-owned equipment.
PGE's Energy Resource Center
provides commercial and other
customers with technical
assistance and training for
energy-related business issues.
Commercial customers can receive
a design review of energy
efficiency systems for their
buildings.
The U.S. Environmental Protection
Agency (EPA) has selected PGE as
the first utility in the Pacific
Northwest to participate in its
Green Lights program. This
program encourages the largest
businesses and industries to use
energy-efficient lighting. PGE
is working with its customers to
help them qualify for the Green
Lights program. In addition, PGE
is the first U.S. utility to
become a member of Power Smart,
an international organization
that promotes energy efficiency
through marketing and product
endorsements.
PGE has joined with the Oregon
Superintendent of Public
Instruction and other utilities
to develop a curriculum to
encourage teachers, students, and
parents to use energy more
efficiently in their homes. A
related plan is designed to make
school facilities more energy-
efficient.
Wholesale Sales
Energy sales to other utilities
depend on the availability of
surplus power in the Pacific
Northwest, access to transmission
systems, changing prices of
fossil fuels, competition from
alternative suppliers, and the
demand for power by other
utilities. Power supply and
transmission assets, including a
partial ownership in the AC
Intertie, provide valuable
linkages to a wide array of
wholesale customers.
The AC Intertie is a transmission
line with a total capacity of
4,800 megawatts that links
winter-peaking northwest
utilities with summer-peaking
wholesale customers in
California.
Currently, PGE has total
scheduling capability for 950
megawatts on the AC Intertie
including 150 MW gained from the
recent capacity expansion. PGE
and BPA completed expansion of
the capacity of the AC Intertie
in 1993. PGE has traded 100
megawatts of this scheduling
capability to BPA for 100
megawatts of scheduling
capability on BPA's DC Intertie
in order to reach additional
wholesale customers in the
Southwest. The January 1994
earthquake experienced in the Los
Angeles area removed the DC
intertie from service. Until
repaired, this outage limits
PGE's ability to make wholesale
sales to the southwest region.
FERC can now order wholesale
transmission access, wholesale
wheeling, of electric power.
Wholesale wheeling allows
independent power producers and
utilities to market excess power
to other utilities over wide
geographic areas. PGE's
ownership of 950 megawatts of
transmission rights on the
Pacific Northwest Intertie
provides access to power and
wholesale customers beyond PGE's
service territory.
Power Supply
PGE's decision in January 1993 to
immediately cease operation of
Trojan (see Note 6, Trojan
Nuclear Plant) ended 17 years of
operation during which the plant
provided about a quarter
of PGE's annual energy requirements.
PGE is replacing this output and
meeting new load growth with a
mix of demand-side and supply-
side resources, including
renewables, cogeneration,
combined-cycle combustion
turbines, and energy purchases
from other utilities.
Removing this major generating
plant from service increased the
importance of PGE's existing
hydroelectric and thermal
resources. Hydro power is a key
economic resource for the
Company. In addition to company-
owned hydroelectric projects, PGE
relies on long term power
contracts with four hydro
projects on the mid-Columbia
River. PGE also purchases
surplus energy, primarily hydro-
generated, from other Pacific
Northwest utilities. Operation
of the gas-fired Beaver plant
(Beaver) continues to benefit
from a larger natural gas
pipeline. This pipeline,
completed in 1993, gives PGE
assured access to natural gas
markets, enabling Beaver
generation to be competitive with
other resources in the Pacific
Northwest. The Boardman coal-
fired plant (Boardman) has run as
a base load plant since lower-
cost coal supply contracts were
negotiated in 1990. <PAGE> 10
Generating Capability
PGE has 1,911 megawatts of
generating capability, which
consists of hydroelectric, coal-fired
and gas-fired
plants. PGE's lowest-cost
producers are its eight
hydroelectric projects on the
Clackamas, Sandy, Deschutes, and
Willamette rivers in Oregon.
With the decision to permanently
close Trojan, PGE lost 745
megawatts of generating
capability.
Purchased Power
Long-term firm power contracts
with four hydro projects on the
mid-Columbia River in central
Washington state provide PGE with
669 megawatts. A long-term
contract with the BPA for 250
megawatts of capacity expired in
1991 and was replaced with 550
megawatts of new long-term (3 to
23 years) firm contracts from
several utilities. In addition,
PGE has long-
term exchange contracts with
summer-peaking California
utilities to help meet its
winter-peaking requirements.
During 1993 PGE negotiated new
firm power purchase contracts
ranging from two to four years
for the purchase of 300 MW to
replace capacity and energy
previously supplied by Trojan.
These agreements, with companies
in the Northwest and Southwest,
will help meet the Company's
needs until new resources are
brought on-line in the 1995/96
timeframe.
These and other sources provide
PGE with a total of 2,095
megawatts of firm capacity to
serve PGE's peak loads. PGE also has
access to surplus energy in the
"spot market", referred to as
secondary energy, which is
utilized to meet customers' needs
when it is economical to do so,
and to provide replacement energy
during plant maintenance outages.
Reserve Margin
Reserve margin is the amount of
firm resource capacity in excess
of customer demand during a
period of peak loads. Based on its
generating plants and firm
purchased power contracts in
place as of December 31, 1993,
capacity available to PGE
compared with historical peak
loads is:
Source: Megawatts
PGE-owned hydro plants 609
Coal-fired plants 652
Gas-fired plants 650
Firm power purchase
contracts 2,095
Total 4,006
Peak Load:
System record (Dec. 1990) 3,698
1993 peak (Jan.) 3,441
PGE has access to spot-market purchases
(referred to as secondary energy)
during peak demand.
Year in Review
PGE generated 42% of its load
requirements in 1993 compared
with 58% in 1992. Trojan
operated at a 48% capacity factor
in 1992. Firm and secondary
purchases primarily replaced
Trojan generation in 1993.
Below average precipitation in
some parts of the Columbia River
basin reduced the availability of
inexpensive hydro power on the
secondary market in 1993.
Regional water conditions were
about 83% of normal. Poor water
conditions in the region drove
secondary prices up, causing
Beaver to be a more economical
source of energy. Beaver
produced 13% more energy than in
1992. <PAGE> 11
1994 Forecast
The combination of power
purchases and increased internal
generation will continue to be
utilized to replace Trojan's
energy. PGE expects to purchase
57% of its 1994 load requirement.
The early predictions of
water conditions indicate they
will be about 75% of normal. A
high run-off in late spring is
expected because of water release
for fisheries. Early spring and
summer run-off will likely be low
due to the low water content of
the snow pack in the Columbia
River Basin.
PGE plans to operate Beaver at a
38% capacity factor, the
same level experienced in 1993.
Boardman will continue to operate
as a base-load plant.
Outlook
PGE's Least Cost Energy Plan (see
the discussion on page 9) focuses on
meeting customers' current and
anticipated future energy needs
with cogeneration, additional
natural gas-fired combined-cycle
combustion turbines, wind power,
geothermal, energy efficiency,
repowering existing resources and
efficiency improvements to
generating and transmission
facilities. Energy efficiency
programs include demand-side
measures such as load management
and encouraging more efficient
use of electricity by customers.
PGE plans on meeting 45% of new
load growth needs with energy
efficiency programs.
PGE is beginning construction of
the Coyote Springs Generation
Project (Coyote Springs). This
project will be a 220 megawatt
cogeneration facility constructed
near Boardman as part of the
Trojan replacement resource
portfolio. Coyote Springs is
expected to be completed in the
fall of 1995.
The Company is
reviewing plans to bring an
additional 380 average megawatts
(MWa) of new resources on-line by
1997. Average megawatts are
calculated by converting the
total annual output of a resource
into an hourly average.
Until new generating resources
come on line PGE will utilize a
combination of additional
internal generation and short and
medium-term power <PAGE> 12 purchase
contracts. Price and supply of
these power purchases will be of
particular importance until PGE
brings new resources on-line.
Adequate supplies of secondary
energy are expected to be
available to meet customer
demand. The completion of the
third intertie in 1993 increased
PGE's access to surplus energy in
California and Arizona. However,
potential curtailments of power
supply and voltage instability
could result if unusual weather-
related events or loss of
generating resources occur in the
region.
The January, 1994 earthquake in
the Los Angeles area caused
damage to the direct current (DC)
intertie. PGE expects this
transmission loss to affect the
supply of power from the
southwest to the Pacific
northwest. As a result, the
price of secondary power may be
affected.
Restoration of Salmon Runs - The
Snake River chinook salmon has
been listed as a threatened
species and the Snake River
sockeye salmon has been listed as
endangered under the federal
Endangered Species Act (ESA).
The National Marine Fisheries
Service (NMFS) has appointed a 7-
member team to develop a recovery
plan to reestablish these fish
runs. This plan was completed in
November 1993 and is now
undergoing public comment. The
plan proposes changes to current
river operations. Some
environmental organizations are
calling for major improvements in
fish passage around hydro
projects on the Snake and lower
Columbia rivers during the spring
and summer by increasing the
amount of water released from the
reservoirs. This could mean less
water will be available for
release from the reservoirs in
the fall and winter, resulting in
less electricity generated at the
hydro projects. NMFS is required
to consider the economic impact
as well as biological value of
the proposed measures.
Much of the regional impact from
reduced power generation could be
mitigated by increasing the
region's seasonal power exchanges
with California. California has
peak energy needs in the summer
while the Pacific Northwest has
peaks in the winter. BPA
estimates that proposed Columbia
and Snake river flows would have
only a small impact on power
generation. BPA estimates the
cost of power to replace lost
generation would result in a
retail rate increase of less than
2%. However, the final recovery
plan could alter this estimate.
PGE is closely monitoring this
process and the potential impact
of the proposals on its
operations. PGE does not own
hydro projects on the lower
Columbia or Snake rivers although
PGE purchases power from
facilities located on these
rivers. PGE's biologists are
working with state and federal
agencies to ensure that its hydro
operations are compatible with
the survival of both hatchery and
wild salmon and steelhead trout.
PGE does not expect the ESA
process to significantly impact
its generation or long-term
purchased power contracts.
However, the costs of secondary
purchased power may increase
throughout the region during low-
water years.
Fuel Supply
Nuclear
Since the permanent closure of
Trojan in January 1993 PGE has
terminated all uranium
conversion, enrichment and
fabrication contracts.
Termination costs were
approximately $4.5 million. In
addition PGE terminated, at no
cost, a uranium supply contract
from an Australian source and
assigned its remaining uranium
supply contract from a domestic
source to a third party,
permanently relieving PGE of any
future obligations associated
with either contract. PGE sold
its remaining inventory of
enriched and natural uranium.
Coal
PGE has an agreement with Cyprus
AMAX Coal Sales Company (in 1993
AMAX Coal Company merged with
Cyprus Coal Sales Corporation to
become Cyprus AMAX Coal Sales
Corporation) to supply coal to
Boardman through the year 2000.
The agreement does not require a
minimum amount of coal to be
purchased, leaving PGE free to
obtain coal from other sources.
PGE did not take deliveries from
AMAX under this agreement in 1993
because lower priced coal was
available on the spot market.
The coal purchased contained less
than 0.5% of sulfur by weight and
emitted less than the EPA
allowable limit of 1.2 pounds of
sulfur dioxide per MMBtu (million
British thermal units) when
burned. The coal is from both
surface mining operations and
underground operations, each
subject to federal, state, and
local regulations. Railroad
transportation to Boardman
represents the single largest
component of the total cost of
the coal. In 1993 PGE negotiated
a favorable railroad
transportation rate with the
Union Pacific Railroad and
Western Railroad Properties. PGE
believes it will continue to have
<PAGE> 13
several coal supply sources and
will be able to continue meeting
Boardman's needs.
Coal for Colstrip 3 and 4,
located in southeastern Montana,
is provided under contract with
Western Energy Company, a wholly
owned subsidiary of Montana Power
Company. The contract provides
that the coal delivered will not
exceed a maximum sulfur content
of 1.5% by weight. The plant
design includes sulfur dioxide
removal equipment to allow
operation in compliance with
EPA's source performance emission
standards.
Coal for Centralia 1 and 2,
located in southwestern
Washington, is provided under
contract with PacifiCorp doing
business as PacifiCorp Electric
Operations. The plant will need
to implement a blending (adding
low-sulphur coal to the current
supply), co-firing (adding
natural gas to the fuel mix), or
other strategies to achieve
compliance with EPA's source
performance emission standards.
The majority of Centralia's coal
requirements are expected to be
provided under this contract.
<TABLE>
<CAPTION>
About one quarter of PGE's firm resources comes from coal-fired
plants:
<S> <C> <C> <C>
PGE's % Sulfur Type of
Pollution
Plant Ownership and MWs Content Control
Equipment
Boardman, OR 65%; 330 MW 0.5% Electrostatic
precipitators
Centralia, WA 2.5%; 33 MW 0.9% Electrostatic
precipitators
Colstrip, MT 0%; 288 MW 1.0% Scrubbers and
precipitators
</TABLE>
Natural Gas
PGE has short-term agreements
with various suppliers to
purchase gas during the winter
peak demand period. PGE also
utilizes spot-market purchases of
gas when necessary.
PGE owns 90% of a pipeline which
directly connects Beaver to
Northwest Pipeline, an interstate
gas pipeline operating between
British Columbia and New Mexico.
Beginning in June 1993 PGE has
access to 30,000 MMBtu/day of
Northwest Natural Gas's capacity
on Northwest Pipeline. Increased
access to gas supplies
improves the cost effectiveness
and reliability of gas
transportation to the plant.
This agreement also allows for an
increase to 76,000 MMBtu/day in
November 1995.
PGE also signed an agreement in
1993 with Pacific Gas
Transmission to provide 41,000
MMBtu/day of capacity on its
natural gas pipeline. This
service is scheduled to start on
or after November 1995, when
PGE's new gas-fired resources
come on line.
Environmental Matters
PGE operates in a state
recognized for environmental
leadership. PGE's commitment to
environmental stewardship
resulted in the adoption of a
corporate environmental policy in
1991. The policy asserts PGE's
commitment to minimize waste in
its operations, minimize
environmental risk and take the
lead in promoting energy
efficiency.
Environmental Regulation
PGE is subject to regulation by
federal, state, and local
authorities with regard to air
and water quality, noise, waste
disposal and other environmental
issues. PGE is also subject to
the Rivers and Harbors Act of
1899 and similar Oregon laws
under which it must obtain
permits from the U.S. Army Corps
of Engineers or the Oregon
Division of State Lands to
construct facilities or perform
activities in navigable waters or
in waters of the State. The EPA
regulates the proper use,
transportation, clean up and
disposal of Polychlorinated
biphenyls (PCBs). State agencies
or departments which have direct
jurisdiction over environmental
matters include the Environmental
Quality Commission, the
Department of Environmental
Quality (DEQ), the Oregon
Department of Energy, and the
Energy Facility Siting Council.
Environmental matters regulated
by these agencies include the
siting and operation of
generating facilities and the
accumulation, clean-up and
disposal of toxic and hazardous
wastes.
Air/Water Quality
Congress passed amendments to the
Clean Air Act (Act) in 1990 that
will renew and intensify national
efforts to reduce air pollution.
Significant <PAGE> 14 reductions in
emissions of sulfur dioxide,
nitrogen oxide and other air
toxic contaminants will be
required over the next several
years. Coal-fired plant
operations will be affected by
these emission limitations.
Federal implementing standards
under the Act are being drafted
at the present time. State
governments are also charged with
monitoring and administering
certain portions of the Act.
Each state is required to set
guidelines that at least equal
the federal standards.
On March 5, 1993, the EPA issued
its final allocation of emission
allowances. Boardman was
assigned sufficient allowances to
operate after the year 2000 at a
60 to 67% capacity factor without
having to further reduce
emissions or to buy additional
credits. Centralia will be
required to reduce emissions by
the year 2000 and the owners are
examining several options such as
installing scrubbers, converting
to lower-sulfur coal or natural
gas, or purchasing emission
allowances. It
is not anticipated that Colstrip
will be required to reduce
emissions because it utilizes
scrubbers.
In addition, Congress is
currently considering other
legislation to reduce emissions
of gases that are thought to
cause global atmospheric warming.
The burning of coal, oil, and
natural gas by electric utilities
is thought to be a source of
these pollutants. Legislation,
if adopted, could significantly
increase PGE operating costs and
reduce coal-fired capacity.
Boardman's air contaminant
discharge permit, issued by the
DEQ, has no
restrictions on plant operations.
This permit expires in 1994 and will
be automatically
extended until a new permit is
issued under new permit rules
being reviewed by the EPA for
final approval. The water
pollution control facilities
permit for Boardman expired in
May 1991. The DEQ is processing
the permit application and
renewal is expected. In the
interim, Boardman is permitted to
continue operating under the
terms of the original permit.
The wastewater discharge permit
for Beaver expires in 1994. DEQ
is currently reviewing the permit
renewal application.
DEQ air contaminant discharge
permits for the combustion
turbine generators at Bethel
expire in 1995. The existing air
permits will automatically be
extended until new permits are
issued under new air permit rules
being reviewed by the EPA for
final approval. The current
permits allow unrestricted plant
operations except for a
limitation whereby only one
Bethel unit may operate at night
due to noise limitations. The
combustion turbines are allowed
to operate on either natural gas
or oil.
PGE has developed an emergency
oil spill response plan for the
fuel oil storage tanks and
unloading dock at Beaver. This
plan has been submitted to the
Coast Guard, EPA and DEQ in
compliance with new federal and
state oil spill regulations. The
plan includes employee training
and the probable acquisition of
clean up equipment.
Environmental Clean Up
PGE, as a "potentially
responsible party", is involved
with others in environmental
clean up of PCB contaminants at
various sites. The clean up
effort is underway and is
anticipated to take several years
to complete. The total cost of
clean up is presently estimated
at $27 million. PGE's share is
approximately $3 million.
Human Resources
As of December 31, 1993, PGE had
2,577 regular employees,
including 224 employees at
Trojan, compared to 3,157 and
3,094 employees at December 31,
1992 and 1991, respectively.
<PAGE> 15
Portland General Holdings, Inc. - Nonutility Businesses
General
Holdings is a wholly owned
subsidiary of Portland General
and is the parent company of
Portland General's subsidiaries
presently engaged in leveraged
leasing and the liquidation of
its real estate investment.
Holdings has provided
organizational separation from
PGE and financial flexibility and
support for the operation of non-
utility businesses. The assets
and businesses of Holdings are
its investments in its
subsidiaries. Portland General
has determined to no longer
pursue development in the
independent power and real estate
businesses, and has recorded
write-offs and reserves for
related phase-out costs.
Leasing
Portland General Financial
Services, Inc
Portland General Financial
Services (PGFS) is the parent
company of Columbia Willamette
Leasing (CWL), which acquired and
leases capital equipment on a
leveraged basis. CWL accounts
for essentially all of the assets
and earnings of PGFS. During
1993 and 1992, CWL made no new
investments in leveraged leases.
CWL's investment portfolio
consists of six commercial
aircraft, two container ships,
5,500 containers, coal, tank, and
hopper railroad cars, a truck
assembly plant, an acid treatment
facility, and a wood chipping
facility, totaling $454 million
in original cost. No new
investments are expected or
planned for the foreseeable
future.
Independent Power Production
PowerLink Corporation
PowerLink Corporation (PowerLink)
was Portland General's entry into
the independent power business.
During 1992 Portland General sold
PowerLink.
Investment in Bonneville Pacific
Corporation
In October 1990, Holdings
purchased 20% of the common stock
of Bonneville Pacific, an
independent power producer
headquartered in Salt Lake City,
Utah. Over the next six months,
Holdings purchased additional
shares of Bonneville Pacific
common stock, increasing its
investment to 46% of the
outstanding stock. Holdings also
has outstanding loans of
$28 million to Bonneville Pacific
and its subsidiaries. In
November 1991, Portland General
announced that it was halting
further investments, and Holdings
wrote off its equity investment
in and loans to Bonneville
Pacific. In addition, Holdings'
representatives resigned from
Bonneville Pacific's board of
directors. These decisions were
based in part on Bonneville
Pacific underperforming
expectations, the impairment of
the investment in Bonneville
Pacific and the inability of
Bonneville Pacific to meet
project sell-down commitments
under the original purchase
agreement. Bonneville Pacific
has filed for protection under
Chapter 11 of the Federal
Bankruptcy Code. Holdings has
instituted legal proceedings with
regard to its investment in
Bonneville Pacific. See Note 3,
Loss From Independent Power and
Note 14, Legal Matters, in the
Notes to the Financial Statements
and Item 3. Legal Proceedings for
more information.
Real Estate
Columbia Willamette Development
Company
Projects in Columbia Willamette
Development Company's (CWDC)
development portfolio include an
upscale retirement community
and single family
residential developments. The
process of liquidating the
projects is expected to be
substantially completed during
1994. See Note 2, Real Estate -
Discontinued Operations, in Notes
to the Financial
Statements.<PAGE> 16
Item 2. Properties
Portland General Corporation
Discussion regarding nonutility properties is included in the
previous section.
Portland General Electric Company
Generating facilities owned by PGE are set forth in the following
table:
<TABLE>
<CAPTION>
Net MW
Facility Location Fuel Capability
Wholly owned:
<S> <C> <C> <C>
Sullivan Willamette River Hydro 16
Faraday Clackamas River Hydro 43
River Mill Clackamas River Hydro 23
Bull Run Sandy River Hydro 22
Oak Grove Clackamas River Hydro 43
Pelton Deschutes River Hydro 108
North Fork Clackamas River Hydro 54
Round Butte Deschutes River Hydro 300
Bethel * Salem, OR Gas/Oil 116
Beaver * Clatskanie, OR Gas/Oil 534
Jointly Owned:
PGE %
Interest
Trojan** Rainier, OR Nuclear -
67.5
Boardman Boardman, OR Coal 508
65.0
Colstrip 3 & 4 Colstrip, MT Coal 1,440
20.0
Centralia Centralia, WA Coal 1,310
2.5
* Combustion turbine generators at Bethel and Beaver are leased
by PGE
** Trojan ceased commercial operation in early 1993
PGE holds licenses under the
Federal Power Act (which expire
during the years 2001 to 2006)
for all of its hydroelectric
generating plants and state
licenses covering all or portions
of certain plants. The NRC
granted a 40-year license, which
expires in the year 2011, to
operate Trojan at full power, and
all other presently required
permits and certificates have
been granted by other federal and
state agencies. PGE has been
granted a possession only license
amendment for Trojan by the NRC.
PGE's principal plants and
appurtenant generating facilities
and storage reservoirs are
situated on land owned by PGE in
fee or land under the control of
PGE pursuant to valid existing
leases, federal or state
licenses, easements, or other
agreements. In some cases meters
and transformers are located upon
the premises of customers. The
Indenture securing PGE's first
mortgage bonds constitutes a
direct first mortgage lien on
substantially all utility
property and franchises, other
than expressly excepted property.
Leased Properties
Combustion turbine generators at
Bethel and Beaver are leased by
PGE. These leases expire in the
late 1990s. PGE leases its
headquarters complex in downtown
Portland and the coal-handling
facilities and certain railroad
cars for Boardman.<PAGE> 17
Item 3. Legal Proceedings
Nonutility
Gerhard W. Gohler, IRA, et al v.
Robert L. Wood et al, U.S.
District Court for the District
of Utah
This case, filed on August 31,
1992 is the consolidation of the
various class action suits
previously filed on behalf of
persons who purchased Bonneville
Pacific Corporation common shares
and convertible subordinated
debentures between August 18,
1989 and January 22, 1992. The
defendants in the action are
certain Bonneville Pacific
Corporation insiders, Portland
General Corporation, Portland
General Holdings, Inc., certain
Portland General individuals,
Deloitte & Touche (Bonneville's
independent auditors) and three
underwriters of a Bonneville
offering of subordinated
debentures (Kidder, Peabody &
Co., Piper Jaffray & Hopwood
Incorporated, and Hanifen, Imhoff
Inc.). The claims against
Portland General defendants are
for alleged violations of federal
and Utah state securities laws,
common law fraud and negligent
misrepresentation. The amount of
damages alleged is not specified.
Portland General, Holdings and
Portland General individual
defendants have filed motions to
dismiss. Plaintiffs have filed a
response to the motions. A
decision has not been rendered.
Roger G. Segal, as the Chapter 11
Trustee for Bonneville Pacific
Corporation v. Portland General
Corporation, Portland General
Holdings, Inc. et al, U.S.
District Court for the District
of Utah
On April 24, 1992, Bonneville
Pacific Corporation filed a suit
against Portland General
Corporation, Portland General
Holdings, Inc., and certain
individuals affiliated with
Portland General and Holdings
seeking $200 million in damages
alleging breach of fiduciary
duty, tortious interference,
breach of contract, and other
actionable wrongs.
On August 2, 1993 an amended
complaint was filed by the
Bonneville Pacific bankruptcy
trustee against Portland General,
Holdings, certain individuals
affiliated with Portland General
and Holdings and over 50 other
defendants unrelated to Portland
General or Holdings alleging
federal and state securities
violations, common law fraud,
breach of fiduciary duty,
tortious interference,
negligence, negligent
misrepresentation, partnership by
estoppel and other actionable
wrongs. This complaint was
dismissed by the Court. In
January 1994 the bankruptcy
trustee filed another amended
complaint which deleted the
federal and state securities law
violations and the partnership by
estoppel count which were claimed
in the previously filed amended
complaint. The amount of damages
sought is not specified in the
complaint.
Portland General Holdings, Inc.
v. Deloitte & Touche, et al,
Third Judicial District Court for
Salt Lake County
On January 22, 1992, Holdings
filed a complaint alleging
Deloitte & Touche and certain
individuals associated with
Bonneville Pacific misrepresented
the financial condition of
Bonneville Pacific. The
complaint alleges that Holdings
relied on fraudulent statements
and omissions by Deloitte &
Touche and the individual
defendants in acquiring a 46%
interest in and making loans to
Bonneville Pacific starting in
September 1990. In late April
1992, the Court granted motions
by Deloitte & Touche to dismiss
the complaint. Holdings filed an
amended complaint and various
motions with regard to the
dismissal. The Court granted the
Portland General motions and
denied motions by Deloitte &
Touche and all other defendants
to dismiss.
Holdings alleges, among other
things, the existence of
transactions in which generation
projects developed or purchased
by Bonneville Pacific were
transferred at exaggerated
valuations or artificially
inflated prices to Bonneville
Pacific's affiliated entities,
Bonneville Pacific related
parties or third parties. The
suit claims that Bonneville
Pacific's books, as audited by
Deloitte & Touche, led Holdings
to conclude wrongly that
Bonneville Pacific's management
was effective and could achieve
the profitable sale of certain
assets, as called for in Holdings
purchase agreement with
Bonneville Pacific. Holdings is
seeking approximately
$228 million in damages.
Portland General Holdings, Inc.
v. The Bonneville Group and
Raymond L. Hixson, Third Judicial
District Court for Salt Lake
County
On June 1, 1993 Holdings filed a
complaint alleging The Bonneville
Group and Raymond L. Hixson
misrepresented the financial
condition of Bonneville Pacific.
The complaint contains
substantially the same
allegations against these
defendants as claimed in Portland
General Holdings, <PAGE> 18
Inc. v. Deloitte & Touche, et al
and seeks the same damages. The
defendants have filed three
counterclaims, two for a total of
approximately $11 million and one
for an unspecified amount of
damages.
Utility
BPA v. WPPSS (WPPSS v. 88
Participants), U.S. District
Court for the Western District of
Washington
Cost Sharing Litigation
On October 26, 1982, the
Washington Public Power Supply
System filed suit against PGE,
Puget Sound Power & Light Company
(Puget), PacifiCorp, The
Washington Water Power Company
(Water Power), BPA, the public
power entities that are
participants in Supply System
Units 1, 3, 4 and 5 (the
Participants), and the Morgan
Guaranty Trust Company of New
York seeking a declaration of the
respective rights and obligations
of the parties to the litigation
for the proper allocation of
shared costs between and among
the various Supply System Units
(the Cost-Sharing Litigation).
While the Cost-Sharing Litigation
was pending, the Supply System on
or about May 27, 1983, ceased
work on Unit 3, the Unit owned by
PGE, Puget, PacifiCorp, and Water
Power (the IOUs) in common with
the Supply System.
In August 1983, PGE, Puget, and
Water Power filed in the
Cost-Sharing Litigation
counterclaims, cross-claims,
third-party claims and a motion
for a preliminary injunction
against the Supply System, BPA,
and certain of the Participants
seeking injunctive relief and a
declaratory judgment that the
Supply System was obligated to
complete Unit 3, that the Supply
System, BPA, and the Participants
in Unit 3 were obligated to
collect and pay funds to finance
the Supply System's 70% portion
of the construction costs, or in
the alternative for monetary
damages on account of the
suspension of work on Unit 3 (the
Suspension of Construction
Litigation).
To avoid potential jurisdictional
problems, the court realigned the
parties to the litigation making
BPA the plaintiff and the Supply
System, the IOUs, the
Participants and others, the
defendants. As a result, the
title of the action is now BPA v.
WPPSS.
In the Cost-Sharing Litigation,
PGE, Puget and Water Power sought
a declaratory judgment against
the Supply System, PacifiCorp and
the Unit 4 and 5 Participants
requiring costs between Units 3
and 5 to be allocated in
accordance with the 1976 Policy
Statement or if the Policy
Statement was found to be non-
binding, then damages from the
Supply System and others for
misrepresentations and omissions
would be requested. Following
decisions by the Washington
Supreme Court that certain of the
Unit 4 and 5 Participants were
not responsible for Unit 4 and 5
costs, Chemical Bank, as trustee
for the Unit 4 and 5 bondholders,
intervened in this litigation.
In May 1989 the Court ruled that
Bond Resolution No. 890, adopted
by the Supply System, controlled
disbursement of proceeds from
bonds issued for the construction
of Unit 5, including the method
for allocation of shared costs.
In October 1990, the Court, in
granting a motion by Chemical
Bank for an accounting of the
cost of facilities shared between
Units 3 and 5, ruled that the
proper methodology for the
allocation of shared costs
"required the application of
principles akin to those espoused
by Chemical Bank". The Court
stated that as a result, Units 4
and 5 "apparently bore more than
their fair and equitable share of
construction costs". PGE and the
IOUs appealed the order to the
Ninth Circuit Court of Appeals.
On February 25, 1992 the Court of
Appeals reversed the District
Court's decision on the method of
allocating shared costs. The
Court of Appeals ruled that
shared costs between Units 3 and
5 should be allocated in
proportion to benefits under the
equitable method supported by PGE
and the IOUs.
A trial remains necessary to
assure that the allocations were
properly performed.
PGE v. Ronald Eachus, Myron Katz,
Nancy Ryles (Oregon Public
Utility Commissioners) and the
Oregon Public Utility Commission,
Marion County Circuit Court
In July 1990 PGE reached an out-
of-court settlement with the PUC
on two of three 1987 rate matters
being litigated. The settlement
resolved the dispute regarding
the treatment of certain
investment tax credits and the
1986-1987 interim relief. The
settlement, however, did not
resolve the Boardman/Intertie
gain issue, which the parties
continue to litigate.
On January 7, 1991 the Utility
Reform Project (URP) petitioned
the PUC to reconsider the order
approving the settlement. On the
same date, The Citizen's Utility
Board (CUB) filed a complaint in
the Marion County Circuit Court
seeking to <PAGE> 19
modify, vacate, set aside or
reverse the PUC's order
implementing the settlement. CUB
claims the PUC's action in
accepting the settlement was
unlawful and not within the PUC's
authority.
On January 14, 1991 the Oregon
Department of Justice filed an
answer to the CUB's complaint
denying that the PUC's action was
unlawful. On February 1, 1991,
the PUC granted the URP's motion,
and PGE later filed its reply to
the issues raised by URP. The
1991 Oregon legislature
subsequently passed a law
clarifying the PUC's authority to
approve the settlement. On
August 28, 1991, the PUC issued
an order implementing the
settlement.
On October 28, 1991 URP filed an
appeal in the Multnomah County
Circuit Court to overturn the
PUC's order implementing
settlement. On September 22,
1992, a decision was issued by
the Marion County Circuit Court
upholding the PUC orders
approving the settlement. CUB
filed an appeal with the Oregon
Court of Appeals on November 9,
1992. On December 15, 1993 the
Oregon Court of Appeals affirmed
without opinion the Circuit Court
decision upholding the PUC order.
URP's appeal filed in the
Multnomah County Circuit Court
remains inactive. PGE will
vigorously oppose this appeal.
See Note 13, Regulatory Matters,
in the Notes to the Financial
Statements for related details.
Utility Reform Project v. Oregon
Public Utility Commission,
Multnomah County Circuit Court
On February 18, 1992 URP filed a
complaint in Multnomah County
Oregon Circuit Court asking the
PUC to set aside and rescind PUC
Order No. 91-1781 that authorized
PGE a temporary rate increase to
recover a portion of the excess
power costs incurred during the
1991 Trojan outage. URP and the
PUC agreed to stay the case
pending PUC hearings on the PUC
order. On February 22, 1992 the
PUC issued an order approving the
rate increase.
Pacificorp v. PGE, Columbia Steel
Casting Co., Inc., and Public
Utility Commission of Oregon,
U.S. District Court for the
District of Oregon
In 1972, PGE and PacifiCorp, dba
Pacific Power & Light Company
(PP&L) entered into an agreement
(Agreement) which was
subsequently approved by the PUC
and the City of Portland. PGE
and the PUC believe the Agreement
created exclusive service
territory for PGE and PP&L in
defined areas within the City of
Portland. Columbia Steel Casting
Co. (Columbia Steel), an
industrial customer of PGE
located inside the area allocated
to PGE, requested that PP&L
provide it with electric service.
On May 31, 1990 PP&L filed a
complaint for declaratory
judgment in the US District Court
for the District of Oregon
seeking a determination of the
respective rights and
responsibilities of the parties
under the Agreement and the
Sherman Antitrust Act with regard
to Columbia Steel's request. On
June 19, 1990, Columbia Steel
also filed a complaint in US
District Court for the District
of Oregon with regard to the
allocation of the service
territories between PGE and PP&L.
(See Columbia Steel Casting Co.,
Inc. v. PGE, et al below.) These
two cases were consolidated.
UA 37 - On July 2, 1990 PGE
requested the PUC, the
governmental agency charged with
allocating the service
territories among utilities, to
affirm the exclusive territories
allocated under the 1972
Agreement. Columbia Steel
intervened.
On May 2, 1991 PGE and PP&L
entered into an agreement to
settle the District Court
litigation filed by PP&L. The
settlement provided, among other
things, that the parties would
file a joint application to the
PUC for exclusive territories
within the City of Portland and
that PP&L would serve Columbia
Steel in exchange for certain
assets.
UA 41 - On October 2, 1991 PGE
and PP&L filed a joint
application with the PUC for the
purpose of fully and finally
allocating service territory
within the City of Portland and
transferring from PGE to PP&L the
right to serve Columbia Steel.
UA-37 and UA-41 were
consolidated.
On April 16, 1992 the PUC issued
an order in UA-37/UA-41 which
corrected and affirmed the 1972
Order allocating exclusive
territories within the City of
Portland pursuant to the 1972
Agreement between PGE and PP&L
requested in UA-37. The Order
also approved the 1992
territorial allocation agreement
between PGE and PP&L and approved
the transfer of the right to
serve Columbia Steel as requested
in UA-41.
Columbia Steel requested
reconsideration by the PUC of the
1992 Order, which the PUC denied
on August 7, 1992.
Columbia Steel Casting Co., Inc.
v. PGE, Pacificorp, and Myron
Katz, Nancy Ryles and Ronald
Eachus, Ninth Circuit Court of
Appeals <PAGE> 20
On June 19, 1990 Columbia Steel
filed a complaint for declaratory
judgment, injunctive relief and
damages in U.S. District Court
for the District of Oregon.
Columbia Steel contends that the
1972 territory allocation
agreement (Agreement) (see above
case for background information)
does not give PGE the exclusive
right to serve them nor does it
allow PP&L to deny service to
them. Columbia Steel is seeking
an unspecified amount in damages
amounting to three times the
excess power costs paid over the
last ten years.
On July 3, 1991 the federal court
granted Columbia Steel's motion
for partial summary judgment.
The Court concluded that the
Agreement only provided for the
exchange of electric utility
property and service facilities
and that the Agreement did not
allocate customers for the
provision of exclusive services.
The Court further found that the
1972 order of the PUC approving
the Agreement did not order the
allocation of territories and
customers.
On February 4, 1993 the Court
ruled that Columbia Steel is
entitled to recover the
additional costs incurred by it
for electric service from
July 25, 1990 to July 1991. On
March 22, 1993, PGE filed for
reconsideration.
On May 28, 1993 the Court denied
PGE's motion for reconsideration.
On August 19, 1993 the Court
ruled that Columbia Steel was
entitled to receive from PGE
approximately $1.3 million in
damages which represented the
additional costs incurred by
Columbia Steel for electric
service from July 25, 1990 to
July 1991, trebled, plus costs
and attorney's fees. Both PGE
and Columbia Steel appealed the
ruling.
Columbia Steel Casting Co., Inc.
v. Oregon Public Utility
Commission, Oregon Court of
Appeals
On October 6, 1992 Columbia Steel
filed a complaint in Marion
County Circuit Court seeking
review of the PUC's decision made
on April 16, 1992 regarding PGE
and PP&L exclusive service
territories. (See descriptions
of PacifiCorp v. PGE, et al and
Columbia Steel Casting Co., Inc.
v. PGE, et al above.) On
February 9, 1993 the Court ruled
on the motion for summary
judgement in favor of the
defendant. On February 18, 1993
the Court reviewed the PUC order
and ruled that the PUC analysis
was correct and confirmed that
PGE and PP&L had exclusive
territories within the City of
Portland. Columbia Steel filed a
Notice of Appeals with the Oregon
Court of Appeals. On December
15, 1993 the Oregon Court of
Appeals affirmed without opinion
the determination on exclusive
territories.
PGE v. Columbia River People's
Utility District, Circuit Court
of Oregon for the County of
Multnomah
On September 18, 1990 PGE filed a
complaint in the Circuit Court of
Oregon charging Columbia River
People's Utility District (CRPUD)
with violating Oregon law in its
efforts to annex a portion of
PGE's service territory and
supply power to a northwest
Portland chemical plant
(Atochem). The complaint seeks
an injunction to prohibit CRPUD
from attempting to provide
electric service outside of its
service territory and unspecified
damages for interference with a
business relationship.
Subsequently, CRPUD and PGE each
filed an action in Columbia
County seeking to validate its
annexation process. These cases
are inactive. Atochem intervened
in PGE's suit as a defendant
(although no claims are asserted
against it) and in the CRPUD suit
as a plaintiff.
On April 12, 1991 the Multnomah
County Court ruled that the
territorial allocation statutes
apply to CRPUD. It later ruled
that the annexation process
employed by CRPUD was invalid.
PGE, Atochem and CRPUD agreed to
stay entry of the court judgement
until the PUC rendered a decision
regarding a 1982 PUC order that
authorized the sale to BPA of a
substation then used to serve
Atochem.
On July 15, 1993 CRPUD, PGE and
Atochem settled all litigation.
Under the settlement, CRPUD
agreed to give up any rights to
annex Atochem into its service
territory and to terminate its
1990 power sales agreement with
Atochem. PGE agreed to sell to
Atochem any additional power
required by Atochem.
Portland General Electric Company
v. Westinghouse Electric
Corporation, U.S. District Court
for the Western District of
Pennsylvania
On February 17, 1993 PGE filed a
complaint against Westinghouse
Electric Corporation
(Westinghouse), the manufacturer
of Trojan's steam generators,
alleging breach of contract,
negligence, fraud, negligent
misrepresentation and violation
of federal and state racketeering
statutes relating to
Westinghouse's design,
manufacture and installation of
the steam generators. <PAGE> 21
On June 28, 1993 the Court ruled
on Westinghouse's motions to
dismiss PGE's causes of action.
The Court dismissed PGE's claims
of negligence and negligent
misrepresentation. The Court did
not dismiss PGE's claims alleging
breach of contract, violation of
federal and state racketeering
statutes and fraud.
In the Matter of Porland General
Electric Company, U.S.
Environmental Protection Agency
The U.S. Environmental Protection
Agency (EPA) has filed a civil
complaint against PGE alleging
violations of environmental
standard with respect to storage
of materials and related
recordkeeping at a transmission
substation. EPA is seeking to
collect $190,000 in civil
penalties related to the alleged
violations.
Item 4. Submission of Matters to a Vote of Security Holders
None. <PAGE> 22
Executive Officers of Portland General Corporation and Portland
General
Electric (*)
</TABLE>
<TABLE>
<CAPTION>
Name Age Business
Experience
<S> <C> <C>
Ken L. Harrison 51 Appointed to current
position of Chairman
Chairman of the Board, Chief of the Board and Chief
Executive Officer
Executive Officer - PGC/PGE on December 1, 1988 and
President of
President - PGC Portland General since
August 4, 1992.
Served as President of
Portland General
Electric from June 1987
until September
1989.
Richard G. Reiten 54 Appointed to current
position on August
President and Chief Operating 4, 1992. Served as
President of Portland
Officer - PGE General from January 1989
until appointed
to current position.
Leonard A. Girard 51 Appointed to current
position on September
Senior Vice President 1, 1988. Served as Vice
President, Legal
General Counsel and Secretary and Regulatory Affairs,
and Secretary from
PGC/PGE January 1988 until
appointed to current
position.
Joseph M. Hirko 37 Appointed to current
position on December
Vice President-Finance, Chief 3, 1991. Served as
Treasurer beginning
Financial Officer, Chief in June 1989. Served as
Vice President,
Accounting Officer and Portland General
Financial Services, Inc.
Treasurer PGC/PGE from November 1985 until
June 1989.
Donald F. Kielblock 52 Appointed to current
position on October
Vice President - PGC/PGE 4, 1989. Previously
served as General
Human Resources Manager, Information
Services of PGE until
appointed to current
position.
Alvin Alexanderson 46 Appointed to current
position on February
Vice President - PGE 5, 1991. Served as
President of Portland
Rates and Regulatory Affairs General Exchange from May
1988 until
appointed to current
position.
David K. Carboneau 47 Appointed to current
position on October
Vice President - PGE 1, 1991. Served as Vice
President,
Administration Information Resources
from October 1989
until appointed to
current position. For
four years prior to
October 1989, served
as an executive officer
of PGE.
James E. Cross 47 Appointed to current
position on December
Vice President and 3, 1991 (assumed
responsibility for
Chief Nuclear Officer - PGE Thermal Generation on
February 15, 1994).
Thermal Generation Served as Vice President,
Nuclear from May
1990 until appointed to
current position.
Served as Plant Manager
of Florida Power
& Light Company's Turkey
Point Nuclear
Plant from 1988 until May
1990.
Richard E. Dyer 51 Appointed to current
position on July 17,
Vice President - PGE 1991. Served as PGC Vice
President and
Marketing and Supply Assistant to the Chairman
of the
Board from October 1990
until appointed
to current position.
Prior to October
1990 served as Vice
President, PGE Power
Management.
Peggy Y. Fowler 42 Appointed to current
position on January
Vice President - PGE 1, 1990 (assumed
responsibility for
Distribution Distribution on February
15, 1994).
Served as General
Manager, Hydro
Production and
Transmission from September
1989 until appointed to
current position.
Previously served as
General Manager,
Service and Installation.
Frederick H. Lamoureaux 54 Appointed to current
position on July 17,
Vice President - PGE 1991 (assumed
responsibility for Hydro
Hydro Production and Production and Utility
Services on
Utility Services February 15, 1994).
Served as Vice
President, Distribution
from September
1989 until appointed to
current position.
Previously served as
General Manager,
Hydro Production and
Transmission.
Frederick D. Miller 52 Appointed to current
position on October
Vice President - PGE 15, 1992. Served as
Director of Executive
Department, State of
Oregon, from 1987
until appointed to
current position.
</TABLE>
(*) Officers are listed as of January 31, 1994. The officers
are elected to
serve for a
term of one year or until their successors are elected and
qualified.<PAGE> 23
PART II
Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters
Portland General Corporation
Portland General's common stock is publicly held and traded on
the New York and
Pacific Stock
Exchanges. The table below reflects the dividends on Portland
General's common
stock and the
stock price ranges as reported by The Wall Street Journal for
1993 and 1992.
<TABLE>
<CAPTION>
1993
1992
Quarter 1st 2nd 3rd 4th 1st 2nd
3rd 4th
<S> <C> <C> <C> <C> <C> <C>
<C> <C>
High 21-1/8 22-1/4 23-1/8 22 7/8 16-5/8 16-7/8
19-5/8 19-3/8
Low 16 19-7/8 21-1/2 18 3/4 15 15-1/8
16 18
Closing price 21 22-1/8 22-1/4 20 1/2 15-1/8 16-1/8
19 18-3/8
Cash
dividends
declared (cents) 30 30 30 30 30 30
30 30
</TABLE>
The approximate number of shareholders of record as of December
31, l993 was
48,521.
Portland General Electric Company
PGE is a wholly owned subsidiary of Portland General. PGE's
common stock is not
publicly
traded. Aggregate cash dividends declared on common stock were
as follows
(thousands of
dollars):
<TABLE>
<CAPTION>
Quarter 1993 1992
<S> <C> <C>
First $ 18,206 $16,184
Second 18,206 18,206
Third 18,206 18,206
Fourth 18,206 18,206
</TABLE>
PGE is restricted, without prior PUC approval, from making any
dividend
distributions to
Portland General that would reduce PGE's common equity capital
below 36%
of total capitalization.<PAGE> 24
Item 6. Selected Financial Data
Portland General Corporation
<TABLE>
<CAPTION>
For the Years Ended December
31
1993 1992 1991 1990
1989
(Thousands of dollars except per share amounts)
<S> <C> <C> <C> <C>
<C>
Operating Revenues $946,829 $883,266 $889,876
$852,105 $796,910
Net Operating Income 160,431 163,500 136,531
176,457 161,877
Income (Loss) from Cont.
Operations 89,118 89,623 (20,698)1
99,9522 (9,900)2
Loss from Discontinued
Operations3 - - (29,169)
- - (17,033)
Net Income (loss) $ 89,118 $ 89,623 $(49,867) $
99,952 $(26,933)
Earnings (loss) per Avg.
Common Share
Continuing Operations $ 1.88 $ 1.934 $ (.43)4
$2.17 $ (.21)
Discontinued Operations - - (.63)
- - (.37)
$ 1.88 $ 1.934 $(1.06)4
$2.17 $ (.58)
Dividends Declared
per Common Share $ 1.20 $ 1.20 $1.20
$1.20 $ 1.96
Total Assets $3,449,328 $3,140,625 $3,092,596
$3,104,736 $2,680,082
Long-Term Obligations5 912,994 937,938 967,968
820,538 875,751
</TABLE>
Portland General Electric Company
<TABLE>
<CAPTION>
For the Years Ended December 31
1993 1992 1991 1990
1989
(Thousands of Dollars)
<S> <C> <C> <C> <C>
<C>
Operating Revenues $ 944,531 $ 880,098 $ 885,578 $
884,720 $ 784,083
Net Operating Income 156,450 160,037 139,257
181,344 160,334
Net Income 99,744 105,562 74,075
121,9492 3,0742
Total Assets 3,226,674 2,920,980 2,912,254
2,855,809 2,434,678
Long-Term Obligations5 872,994 887,938 887,952
810,538 867,751
1 Includes a loss of $74 million from independent power. See
Note 3, Loss From
Independent
Power, in the Notes to Financial Statements.
2 Includes regulatory loss reserves of $89 million for certain
rate issues in
1989 and a
gain of $16 million for settlement of certain of these issues in
1990. See Note
13,
Regulatory Matters, in the Notes to Financial Statements.
3 Portland General discontinued its real estate operations.
Current and prior
years'
amounts are not reflected in operating revenues and net operating
income.
4 Includes $.02 for tax benefits from ESOP dividends.
5 Includes long-term debt, preferred stock subject to mandatory
redemption
requirements and
long-term obligations under capital leases.
</TABLE>
<PAGE> 25
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Financial and Operating Outlook
Trojan Related Issues
Shutdown - In early 1993, Portland
General Electric Company (PGE or the
Company) ceased commercial operation of
the Trojan Nuclear Plant (Trojan). PGE
made the decision to shut down Trojan as
part of its least cost planning process,
a biennial process whereby PGE evaluates
a mix of energy options that yield an
adequate and reliable supply of
electricity at the least cost to the
utility and to its customers. On June
3, 1993 the Oregon Public Utility
Commission (PUC) acknowledged PGE's
Least Cost Plan.
Decommissioning Estimate - The 1993
nuclear decommissioning estimate of $409
million represents a site-specific
decommissioning cost estimate performed
for Trojan by an experienced
decommissioning engineering firm. This
cost estimate assumes that the majority
of decommissioning activities will occur
between 1998 and 2002, after
construction of a temporary dry spent
fuel storage facility. The final
decommissioning activities will occur in
2018 after PGE completes shipment of
spent fuel to a United States Department
of Energy (USDOE) facility.
The decommissioning cost estimate
includes the cost of decommissioning
planning, removal and burial of
irradiated equipment and facilities as
required by the Nuclear Regulatory
Commission (NRC); building demolition
and nonradiological site remediation;
and fuel management costs including
licensing, surveillance and $75 million
of transition costs. Transition costs
are the costs associated with operating
and maintaining the spent fuel pool and
securing the plant until dismantlement
can begin.
The 1992 decommissioning cost estimate
of $411 million was based upon a study
performed on a nuclear plant similar to
Trojan and included the cost of
dismantlement activities performed
during the years 1996 through 2002,
monitoring of stored spent fuel through
2018 and $130 million of miscellaneous
closure and transition costs ($43
million was amortized to nuclear
operating expenses during 1993).
The 1992 estimate and the 1993 site-
specific estimate are reflected in the
Company's financial statements in
nominal dollars (actual dollars expected
to be spent in each year). The
difference between the 1992 and the 1993
cost estimates, reflected in nominal
dollars, is due to the application of a
higher inflation factor, the timing of
decommissioning activities and certain
changes in assumptions, such as
decommissioning the temporary dry spent
fuel storage facility and shipping
highly activated reactor components to
the USDOE repository in 2018, which are
included in the 1993 estimate. Both the
1992 cost estimate and the 1993 site-
specific cost estimate reflected in 1993
(current) dollars are $289 million.
Assumptions used to develop the site-
specific cost estimate represent the
best information PGE has currently.
However, the Company is continuing its
analysis of various options which could
change the timing and scope of
dismantling activities. Presently, PGE
is planning to accelerate the timing of
large component removal which could
reduce overall decommissioning costs.
PGE plans to submit a detailed
decommissioning work plan to the NRC in
mid-1994. The Company expects any
future changes in estimated
decommissioning costs to be incorporated
in future revenues to be collected from
customers.
Investment Recovery - PGE filed a
general rate case on November 8, 1993,
which addresses recovery of Trojan plant
costs, including decommissioning. In
late February 1993, the PUC granted PGE
accounting authorization to continue
using previously approved depreciation
and decommissioning rates and lives for
its Trojan investment.
Least cost analysis assumed that
recovery of the Trojan plant investment,
including future decommissioning costs,
would be granted by the PUC. Regarding
the authority of the PUC to grant
recovery, the Oregon Department of
Justice (Attorney General) issued an
opinion that the PUC may allow rate
recovery of total plant costs, including
operating expenses, taxes,
decommissioning costs, return of capital
invested in the plant and return on the
undepreciated investment. While the
Attorney General's opinion does not
guarantee recovery of costs associated
with the shutdown, it does clarify that
under current law the PUC has authority
to allow recovery of such costs in
rates.<PAGE> 26
PGE asked the PUC to resolve certain
legal and policy questions regarding the
statutory framework for future
ratemaking proceedings related to the
recovery of the Trojan investment and
decommissioning costs. On August 9,
1993, the PUC issued a declaratory
ruling agreeing with the Attorney
General's opinion discussed above. The
ruling also stated that the PUC will
favorably consider allowing PGE to
recover in rates some or all of its
return on and return of its
undepreciated investment in Trojan,
including decommissioning costs, if PGE
meets certain conditions. PGE believes
that its general rate filing provides
evidence that satisfies the conditions
established by the PUC. In February
1993 the Citizens' Utility Board of
Oregon appealed the ruling to the Marion
County Circuit Court.
Management believes that the PUC will
grant future revenues to cover all, or
substantially all, of Trojan plant costs
with an appropriate return. However,
future recovery of the Trojan plant
investment and future decommissioning
costs requires PUC approval in a public
regulatory process. Although the PUC
has allowed PGE to continue, on an
interim basis, collection of these costs
in the same manner as prescribed in the
Company's last general rate proceeding,
the PUC has yet to address recovery of
costs related to a prematurely retired
plant when the decision to close the
plant was based upon a least cost
planning process. Due to uncertainties
inherent in a public process, management
cannot predict, with certainty, whether
all, or substantially all, of the $367
million Trojan plant investment and $356
million of future decommissioning costs
will be recovered. Management believes
the ultimate outcome of this public
regulatory process will not have a
material adverse effect on the financial
condition, liquidity or capital
resources of Portland General. However,
it may have a material impact on the
results of operations for a future
reporting period.
The Company's independent accountants
are satisfied that management's
assessment regarding the ultimate
outcome of the regulatory process is
reasonable. Due to the inherent
uncertainties in the regulatory process
discussed above, the magnitude of the
amounts involved and the possible impact
on the results of operations for a
future reporting period, the Company's
independent accountants have added a
paragraph to their audit report to give
emphasis to this matter.
General Rate Filing
On November 8, 1993, the Company filed a
request with the PUC to increase
electric prices by an average of 5%
beginning January 1, 1995. Commercial
and industrial customers' rates would
increase, on average, 3.2%. The
proposed increase in average annual
revenues is $43 million, after the
effects of the Regional Power Act
exchange credit. PGE requested a return
on equity of 11.5%, down from the
current authorized return of 12.5%. If
approved, this would be the Company's
first general price increase since 1991.
The increase in the cost of power,
driven by higher priced purchased power
and increased fuel costs, is the single
largest factor behind the need to
request an increase in prices. Other
operating factors that contributed to
the request are federal tax increases
and capital improvements to PGE's
distribution system. Helping to offset
these cost increases are cost savings at
Trojan, property tax reductions and
customer growth. In addition, the
Company is proposing to accelerate the
return to customers of profits from the
1985 sale of a portion of the Boardman
Coal Plant (Boardman) from 27 years to
three years. In the 1987 rate
proceeding the PUC ordered PGE to
allocate 77% of the gain to customers
over a 27 year period.
The general rate filing includes PGE's
request for continued recovery of Trojan
costs including decommissioning,
operating expenses, taxes, return of
capital invested in the plant and return
on the undepreciated investment. PGE's
current rates include recovery of these
Trojan costs. The Company expects a PUC
decision in late 1994.
Recovery of power cost deferrals is
addressed in separate rate proceedings,
not in the general rate filing (see the
discussion of Power Cost Recovery
below).
Customer Growth and Revenues
Customer growth in PGE's service
territory was evident with the addition
of 11,000 retail customers in 1993.
This growth accounted for a 2.6%
increase in weather-adjusted retail
sales. In 1993, 9,300 residential
customers were added to the system,
compared to 9,400 in 1992. The Company
estimates retail load growth in 1994 to
be approximately the same as the growth
experienced in 1993.
Power Cost Recovery
The Company is incurring substantial
near-term power costs to replace Trojan
generation. PGE's Power Cost Adjustment
Tariff (PCA) was eliminated in 1987. As
a result, adjustments for power costs
above or below those used in existing
general tariffs are not automatically
reflected in <PAGE> 27
customers' rates. In
February 1993, the PUC authorized PGE to
defer, for later collection, 80% of the
incremental power costs incurred from
December 4, 1992, to March 31, 1993, to
replace Trojan generation. In January
1994, the PUC authorized PGE to start
collecting this power cost deferral
beginning in April 1994.
In August 1993, the PUC authorized PGE
to defer, for later collection, 50% of
the incremental replacement power costs
incurred from July 1, 1993, to March 31,
1994, subject to a review of PGE
earnings. This power cost deferral
authorization does not immediately
affect customer rates. However, PGE
expects future rates to allow recovery
of these costs.
Power Supply
The combination of power purchases and
internal generation will continue to be
utilized to replace Trojan's energy
until new generating resources come on
line by 1996. PGE expects to purchase
approximately 57% of its 1994 load
requirement. The early predictions of
1994 water conditions indicate they will
be about 75% of normal. However,
adequate supplies of secondary energy
are expected to be available to meet
customer demand. The completion of the
third intertie in 1993 increased the
Company's access to surplus energy and
sales opportunities in California and
Arizona.
The January 1994 earthquake in the Los
Angeles area caused damage to the direct
current (DC) intertie. PGE expects this
transmission loss to affect the supply
of power from the Southwest to the
Pacific Northwest. As a result, the
price of secondary power, and the
Company's wholesale efforts, may be
affected. PGE has 100 MW of scheduling
capability on the DC line to reach
wholesale customers in the Southwest.
Restoration of Salmon Runs - The Snake
River chinook salmon has been listed as
a threatened species and the Snake River
sockeye salmon has been listed as
endangered under the federal Endangered
Species Act. The National Marine
Fisheries Service has proposed minor
changes to current river operations in a
draft recovery plan that is undergoing
public comment. Proposals to restore
these salmon runs include measures to
increase the river flows on the Snake
and lower Columbia rivers during the
spring to allow salmon to reach the
Pacific Ocean faster, resulting in less
water available for power generation in
the fall and winter months. Although
Company-owned hydro projects are not
located on these rivers, future costs of
secondary purchased power will likely
increase throughout the region during
low-water years.
Fuel Supply
PGE has short-term agreements with
various suppliers to purchase gas during
the winter peak demand period. PGE also
utilizes spot-market purchases of gas
when necessary.
PGE owns 90% of a pipeline which
directly connects the Beaver Combustion
Turbine Plant (Beaver) to an interstate
gas pipeline operating between British
Columbia and New Mexico. Beginning in
June 1993, PGE had access to 30,000
million British thermal units
(MMBtu/day) of capacity on the pipeline,
increasing to 76,000 MMBtu/day in
November 1995. Also in 1993, PGE signed
an agreement with Pacific Gas
Transmission to provide 41,000 MMBtu/day
of capacity, starting in November 1995,
on its natural gas pipeline.
National Energy Policy Act of 1992
The Federal Energy Regulatory Commission
(FERC) can now order wholesale
transmission access (wholesale wheeling)
of electric power. Wholesale wheeling
allows independent power producers and
utilities to market excess power to
other utilities over wide geographic
areas. PGE's ownership of 950 megawatts
of transmission rights on the Pacific
Northwest Intertie provides access to
power and wholesale customers beyond
PGE's service territory.
Nonutility
Bonneville Pacific Litigation - Portland
General Corporation (Portland General),
Portland General Holdings, Inc.
(Holdings), and certain affiliated
individuals have been named in a class
action suit by investors in Bonneville
Pacific Corporation (Bonneville Pacific)
and in a suit filed by the
<PAGE> 28
bankruptcy
trustee for Bonneville Pacific. The
class action suit alleges various
violations of securities law, fraud and
misrepresentation. The suit by the
bankruptcy trustee for Bonneville
Pacific alleges federal and Utah
securities violations, common law fraud,
breach of fiduciary duty, tortious
interference, negligence, negligent
misrepresentation and other actionable
wrongs.
Holdings has filed a complaint seeking
approximately $228 million in damages
against Deloitte & Touche and certain
parties associated with Bonneville
Pacific alleging that it relied on
fraudulent and negligent statements and
omissions when it acquired a 46%
interest in and made loans to Bonneville
Pacific.
A detailed report released in June 1992,
by a U.S. Bankruptcy examiner outlined a
number of questionable transactions that
resulted in gross exaggeration of
Bonneville Pacific's assets prior to
Holdings' investment. This report
includes the examiner's opinion that
there was significant mismanagement and
very likely fraud at Bonneville Pacific.
These findings support management's
belief that a favorable outcome on these
matters can be achieved.
For background information and further
details, see Note 14, Legal Matters, in
Notes to Financial Statements.
Results of Operations
1993 Compared to 1992
Portland General reported 1993 earnings
of $89 million, $1.88 per share,
compared to $90 million, $1.93 per
share, in 1992. In 1992, upon approval
from the PUC, PGE applied capital
treatment to $18 million of Trojan steam
generator repair costs which were
incurred in 1991. As a result, $11
million, after tax, was restored to 1992
earnings. Excluding this event, 1992
earnings would have been $79 million
compared to $89 million in 1993.
Regulatory action, continued customer
growth and cost reductions contributed
to the favorable 1993 results.
In August 1993, the PUC authorized PGE
to defer, for later collection, 50% of
the incremental Trojan replacement power
costs incurred from July 1, 1993,
through March 31, 1994. This
authorization, coupled with the 80%
deferral in place from December 4, 1992,
to March 31, 1993, (see the Power Cost
Recovery discussion in the Outlook
section above) allowed the Company to
record, in 1993, $67 million of revenues
related to the future recovery of
replacement power costs.
Retail load growth of 2.6% and cooler
weather during the early months of 1993
positively affected revenue by
increasing sales of kilowatt-hours 5%.
Wholesale revenue declined $30 million
due to the lack of low-cost power for
resale. The recording of replacement
power revenues and retail sales growth,
partially offset by the decline in
wholesale revenues, yielded an operating
revenue increase of $64 million.
Operating costs (excluding variable
power, depreciation, decommissioning and
amortization) declined 14% due to a $53
million decline in nuclear expenses. In
May 1993, the NRC issued PGE a
possession only license amendment for
Trojan. This license amendment reduced
or eliminated certain operating
requirements that were unnecessary for a
shut down and defueled reactor which
allowed PGE to reduce personnel.
Nuclear expenses for 1993 reflect the
amortization of Trojan
<PAGE> 29
miscellaneous
closure and transition costs (which were
accrued and capitalized at December 31,
1992). These costs are amortized as
payments are made. During 1993 the
Company amortized $43 million to nuclear
operating expenses.
The $53 million nuclear savings
partially offset the $90 million
increase in variable power costs. The
average variable power cost increased
from 15 mills per kilowatt-hour in 1992
to 19 mills per kilowatt-hour (10 mills
= 1 cent) in 1993. Trojan generated 16%
of the Company's 1992 power needs at an
average fuel cost of 4 mills per
kilowatt-hour. This generation was
primarily replaced by power purchases at
an average price of 24 mills per
kilowatt-hour.
Good plant performance helped control
variable power costs. PGE's Beaver
plant operated well in 1993, generating
13% more power than in 1992. Company-
owned hydro production rose 21%.
Additional maintenance outage time
caused the Colstrip Units 3 and 4 Coal
Plant (Colstrip) generation to decline
which slightly reduced the Company's
1993 thermal generation from the 1992
level (excluding Trojan), however the
total average fuel cost increased from 9
mills per kilowatt-hour to 10 mills per
kilowatt-hour driving 1993 fuel expense
up $5 million.
Depreciation, decommissioning and
amortization increased $24 million in
1993. The 1992 amount includes a credit
of $18 million associated with the
capitalization of 1991 Trojan steam
generator repair costs discussed above.
The remaining increase reflects
depreciation charges for new plant
placed in service.
Other income increased slightly
reflecting accrued interest on deferred
charges and declining interest costs,
partially offset by an increase in
charitable contributions of
approximately $4 million.
1992 Compared to 1991
Financial results for 1992 were much
improved over 1991. Portland General's
earnings of $90 million, or $1.93 per
share, reflected improved operations at
the utility's generating facilities,
continued customer growth and cost
control. In 1991, Portland General
experienced a loss of $50 million, or
$1.06 per share, which included losses
from independent power of $74 million
and additional real estate reserves of
$29 million. Excluding the effects of
losses from nonutility interests, 1991
earnings would have been $53 million.
Trojan operated for six months in 1992
compared with two months in 1991,
generating more than twice the power.
This reduced the need for power
purchases on the secondary market.
Operating and maintenance costs for
Trojan declined 30% in 1992. The 1991
operating and maintenance costs included
$18 million for repairs that were
capitalized in 1992 (see the discussion
of 1993 compared to 1992 above).
The Company's non-nuclear generating
facilities performed well in 1992.
Boardman operated at an 85% capacity
factor generating 31% more power than in
1991. Other thermal generation
increased 30%, while Company-owned hydro
power production declined 9% due to poor
water conditions. Higher internal
generation raised fuel expense 34%, but
significantly reduced the need for
incremental power purchases. 34% fewer
megawatt-hours were purchased; however,
the average price per megawatt-hour
purchased increased 26% due to poor
hydro conditions experienced in the
region. The poor hydro conditions also
limited PGE's ability to make nonfirm
resales. Consequently, 1992 wholesale
revenue declined 17%.
<PAGE> 30
Even though unseasonably warm weather
reduced
demand, 1992 retail revenues rose
slightly due to the addition of 11,000
retail customers and $18 million of
accrued revenues associated with the
recovery of Trojan replacement power
costs. Accrued revenues of $12 million
were recorded in 1991 representing the
1991 portion of 90% of the replacement
power costs incurred from November 1,
1991 to March 6, 1992. The PUC
authorized a temporary price increase to
collect these revenues. The 1992
accrued revenues of $18 million
represented $10 million of the 90%
deferral and $8 million of the 80%
deferral (see the Power Cost Recovery
discussion in the Outlook section
above). Total 1992 operating revenues
declined slightly due to the drop in
wholesale revenue.
Corporate cost containment also
contributed to the earnings growth.
Operating expenses (excluding variable
power, depreciation, decommissioning and
amortization) declined 10% due to cost
cutting measures. A manpower reduction
program was implemented in 1991 that
eliminated 300 positions. The severance
costs associated with the program were
reflected in 1991 results. Interest
expense declined 10% as the Company took
advantage of lower interest rates.
Financial Condition
1993 Compared to 1992
During 1993 PGE invested approximately
$126 million in electric utility plant.
Plant investments included $29 million
in the Coyote Springs Generation Project
(Coyote Springs). This project will be
a 220 megawatt cogeneration facility
constructed near Boardman as part of the
Trojan replacement resource portfolio.
Coyote Springs is expected to be
completed in the fall of 1995. Also
during 1993, PGE completed construction
of a third intertie to California which
gave the Company an additional 150
megawatts of scheduling capability. The
intertie project has increased PGE's
capacity for buying and selling
wholesale energy. In addition to
utility plant, the Company invested $18
million in energy efficiency assets
including new construction, lighting and
appliances. The PUC has authorized a
return on PGE's investment in energy
efficiency projects.
The Company's non-cash revenues
increased in 1993 due to the recording
of $67 million of revenues associated
with the future recovery of Trojan
replacement power costs (see the Power
Cost Recovery discussion in the
Financial and Operating Outlook
section).
Deferred charges increased over $200
million primarily due to the recording
of $228 million of deferred tax
liabilities and related regulatory
assets representing future collections
from customers. Under the liability
method specified by SFAS No. 109, the
deferred tax assets and liabilities are
determined based on the temporary
differences between the financial
statement bases and tax bases of assets
and liabilities as measured by the
enacted tax rates for the years in which
the taxes are expected to be paid.
Management believes it is probable that
the regulatory asset will be fully
recovered in customer rates.
Changes in liabilities primarily reflect
the adoption of SFAS No. 109, the
revision of the decommissioning estimate
to $409 million, and financing
activities.
Common stock equity of Portland General
increased $46 million reflecting
earnings of $89 million, dividends
declared of $57 million, and common
stock issuances. Portland General's
return on average shareholders' equity
was 11.6% in 1993.
Cash Flow
Portland General Corporation
Portland General requires cash to pay
dividends to its common stockholders, to
provide funds to its subsidiaries, to
meet debt service obligations and for
day to day operations. Sources of cash
are dividends from PGE, its principal
subsidiary, asset sales and leasing
rentals, short- and intermediate-term
borrowings, and the sale of its common
stock.
Portland General received $73 million in
dividends from PGE and $10 million in
proceeds from the issuance of shares of
common stock under its Dividend
Reinvestment and Optional Cash Payment
Plan.
In October 1993, Portland General filed
a Registration Statement with the
Securities and Exchange Commission (SEC)
to issue up to 5,000,000 additional
shares of its $3.75 par value common
stock. The net proceeds from the sale
of common stock will be used to purchase
additional shares of PGE common stock.
In February 1994, Portland General filed
a Prospectus Supplement covering the
sale of up to 2,300,000 of these shares.
Portland General Electric Company
Cash Provided by Operations is the
primary source of cash used for day to
day operating needs of PGE and funding
of construction activities. PGE also
obtains cash from external borrowings,
as needed.
<PAGE> 31
A significant portion of cash from
operations comes from depreciation and
amortization of utility plant, charges
which are recovered in customer revenues
but require no current cash outlay.
Changes in accounts receivable and
accounts payable can also be significant
contributors or users of cash. Cash
provided by operations increased
slightly in 1993 reflecting lower
income tax payments. The 1992 cash flow
from current operations declined
slightly from the 1991 level.
Increased replacement power costs have
affected current cash flows. A
significant portion of such costs have
been offset by cost savings driven by
personnel reductions at Trojan.
Future cash requirements may be affected
by the ultimate outcome of the IRS audit
of PGE's 1985 WNP-3 abandonment loss
deduction. The IRS has completed its
audit of Portland General's tax returns
for the years 1985 to 1987 and has
issued a statutory notice of tax
deficiency, which PGE is contesting.
See Notes 5 and 5A, Income Taxes, in
Notes to Financial Statements for
further information.
PGE has been named a "potentially
responsible party" (PRP) of PCB
contaminants at various environmental
cleanup sites. The total cost of
cleanup is estimated at $27 million, of
which the Company's share is
approximately $3 million. Should the
eventual outcome of these uncertainties
result in additional cash requirements,
PGE expects internally generated cash
flows or external borrowings to be
sufficient to fund such obligations.
PGE has made an assessment of the other
involved PRP's and is satisfied that
they can meet their share of the
obligation.
Investing activities are primarily for
investment in facilities for generation,
transmission and distribution of
electric energy and for energy
efficiency improvements. In 1993, PGE's
capital expenditures of $144 million
were 20% new generating resources, 7%
existing generation plants, 43%
transmission and distribution, 13%
energy efficiency, and 17% general plant
and other. 1994 expected capital
expenditures of $265 million include
$115 million for new generating
resources, $20 million for existing
generating plants, $75 million for
transmission and distribution,
$25 million for energy efficiency and
$30 million of other expenditures. The
PUC has authorized a return on PGE's
investment in energy efficiency
projects, which will help alleviate the
need for additional energy resources in
the future.
PGE continues to fund an external trust
for the future costs of Trojan
decommissioning. Funding began in March
1991. Currently PGE funds $11 million
each year. As of December 31, 1993, $46
million had been funded and invested
primarily in investment grade tax-exempt
bonds with a current market value of $49
million.
PGE's future capital expenditure program
is expected to include investment of
$400 million to $450 million to add up
to 600 megawatts of gas-fired combustion
turbines and cogeneration projects to
PGE's resource base over the next five
years. In addition, PGE expects to
continue investing in energy efficiency
programs.
PGE's cash provided by operations, after
dividends, is expected to meet
approximately 50% of PGE's estimated
1994 investing activities compared to
90% in 1993 and 85% in 1992.
Financing activities to fund the
remaining capital requirements are
accomplished through intermediate-term
and long-term debt and equity issuances.
Access to capital markets is necessary
to implement the asset growth strategy
discussed above. PGE intends to
maintain approximately the same
capitalization ratios while funding this
asset expansion.
The maturities of intermediate and long-
term debt are chosen to match expected
asset lives and maintain a balanced
maturity schedule. Short-term debt,
which includes commercial paper and
lines of credit, is used for day-to-day
operations.
Interest rates continued to decline
during 1993. As a result, PGE refunded
higher coupon debt. PGE issued $150
million of 7 3/4% First Mortgage Bonds
in April 1993, and $27 million of 5.65 %
Medium
<PAGE> 32
Term Notes in May 1993. Proceeds
from these issuances redeemed the 9 5/8%
Series First Mortgage Bonds and 10%
Debentures. Additionally, in August 1993
PGE issued $75 million of Medium Term
Notes consisting of $35 million of five
year notes at 5.69% and $40 million of
ten year notes at 6.47%. Proceeds from
this issuance were used to redeem the 8%
and both 8 3/4% Series First Mortgage
Bonds.
The issuance of additional preferred
stock and First Mortgage Bonds requires
PGE to meet earnings coverage and
security provisions set forth in the
Articles of Incorporation and the
Indenture securing its First Mortgage
Bonds. As of December 31, 1993, PGE
could issue $475 million of preferred
stock and $370 million of additional
First Mortgage Bonds.
<PAGE> 33
Appendix
(Electronic Filing Only)
Omitted graphic material:
Page 8 Retail Price v. Inflation graph comparing
PGE retail price (price per KWh) to Portland CPI
Retail Price CPI
1984 4.84 102.8
1985 5.12 106.7
1986 5 108.2
1987 4.93 110.9
1988 4.77 114.7
1989 4.69 120.3
1990 4.57 127.4
1991 4.69 134
1992 4.78 140
1993 4.86 143.6
Page 12 Loads v. Firm Resources graph: (average MW)
Loads Firm Resources
1989 1862 2079
1990 1973 2078
1991 2018 2071
1992 2138 2225
1993 2195 2022
1994 2268 2051
1995 2316 2055
1996 2368 2049
1997 2432 2223
1998 2479 2223
Page 12 1993 Actual Power Sources pie chart:
PGE Hydro: 12% (2,355,000 MWh)
Coal: 21% (4,111,000 MWh)
Secondary Purchases: 28% (5,305,000 MWh)
Firm Purchases: 30% (5,888,000 MWh)
Combustion Turbines: 9% (1,714,000 MWh)
Page 12 1994 Forecasted Power Sources pie chart:
PGE Hydro: 12% (2,347,000 MWh)
Secondary Purchases: 20% (3,980,000 MWh)
Coal: 21% (4,272,000 MWh)
Firm Purchases: 37% (7,231,000 MWh)
Combustion Turbines: 10% (1,874,000 MWh)
Page 28 Residential Customers graph:
(Thousands)
1983 454950
1984 454732
1985 461076
1986 470136
1987 476481
1988 484293
1989 496165
1990 512913
1991 526699
1992 536111
1993 545410
Page 29 Operating Revenue and Net Income
(Loss) graph:
($ Millions)
Operating Revenue Net Income
1989 797 -27
1990 852 100
1991 890 -50
1992 884 90
1993 947 89
Page 29 PGE Electricity Sales graph:
(Billions of KWh)
1989 Residential 6.1
Commercial 5.2
Industrial 3.5
Wholesale 3.0
1990 Residential 6.4
Commercial 5.5
Industrial 3.6
Wholesale 4.3
1991 Residential 6.5
Commercial 5.6
Industrial 3.6
Wholesale 3.9
1992 Residential 6.3
Commercial 5.8
Industrial 3.6
Wholesale 2.7
1993 Residential 6.8
Commercial 6.0
Industrial 3.8
Wholesale 1.6
Page 30 Operating Expenses graph:
($ Millions)
1989 Operating Expenses 295
Variable Power 179
Depreciation 91
1990
Operating Expenses 302
Variable Power 200
Depreciation 90
1991
Operating Expenses 361
Variable Power 226
Depreciation 112
1992
Operating Expenses 327
Variable Power 222
Depreciation 99
1993
Operating Expenses 283
Variable Power 311
Depreciation 122
Page 30 Net Variable Power Costs graph:
Net variable power is defined as
variable power less wholesale revenues.
(Mills/KWh)
Net Variable Power Retail Revenues
1989 5 46
1990 5 46
1991 6 48
1992 7 49
1993 13 52
Page 32 Utility Capital Expenditures
graph:
($ Millions)
1989 119
1990 109
1991 148
1992 154
1993 144
Page 33 Capitalization
($ Millions)
1989 Long-term Debt 817
Common Equity 762
Preferred Stock 153
1990 Long-term Debt 763
Common Equity 771
Preferred Stock 152
1991 Long-term Debt 913
Common Equity 679
Preferred Stock 150
1992 Long-term Debt 874
Common Equity 724
Preferred Stock 152
1993 Long-term Debt 803
Common Equity 744
Preferred Stock 140
Management's Statement of Responsibility
Portland General Corporation's management is responsible for the
preparation
and presentation of the consolidated financial statements in
this report.
Management is also responsible for the integrity and
objectivity of the
statements. Generally accepted accounting principles have
been used to
prepare the statements, and in certain cases informed estimates
have been used
that are based on the best judgment of management.
Management has established, and maintains, a system of
internal accounting
controls. The controls provide reasonable assurance that
assets are
safeguarded, transactions receive appropriate authorization,
and financial
records are reliable. Accounting controls are supported by
written policies
and procedures, an operations planning and budget process
designed to achieve
corporate objectives, and internal audits of operating
activities.
Portland General's Board of Directors includes an Audit
Committee composed
entirely of outside directors. It reviews with management,
internal auditors
and independent auditors, the adequacy of internal
controls, financial
reporting, and other audit matters.
Arthur Andersen & Co. is Portland General's independent public
accountant. As
a part of its annual audit, internal accounting controls are
selected for
review in order to determine the nature, timing and extent of
audit tests to
be performed. All of the corporation's financial records and
related data are
made available to Arthur Andersen & Co. Management has also
endeavored to
ensure that all representations to Arthur Andersen & Co.
were valid and
appropriate.
Joseph M. Hirko
Vice President Finance,
Chief Financial Officer,
Chief Accounting Officer
and Treasurer
Report of Independent Public Accountants
To the Board of Directors and Shareholders of
Portland General Corporation:
We have audited the accompanying consolidated balance sheets and
statements of
capitalization of Portland General Corporation and subsidiaries
as of December
31, 1993 and 1992, and the related consolidated statements of
income, retained
earnings and cash flows for each of the three years in the
period ended
December 31, 1993. These financial statements are the
responsibility of the
Company's management. Our responsibility is to express an
opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally
accepted auditing
standards. Those standards require that we plan and perform
the audit to
obtain reasonable assurance about whether the financial
statements are free of
material misstatement. An audit includes examining, on a test
basis, evidence
supporting the amounts and disclosures in the financial
statements. An audit
also includes assessing the accounting principles used and
significant
estimates made by management, as well as evaluating the
overall financial
statement presentation. We believe that our audits provide a
reasonable basis
for our opinion.
As more fully discussed in Note 6 to the consolidated financial
statements,
the realization of assets related to the abandoned Trojan Nuclear
Plant in the
amount of $722 million is dependent upon the ratemaking
treatment as
determined by the Public Utility Commission of Oregon.
In our opinion, the financial statements referred to above
present fairly, in
all material respects, the financial position of Portland
General Corporation
and subsidiaries as of December 31, 1993 and 1992, and the
results of their
operations and their cash flows for each of the three years
in the period
ended December 31, 1993 in conformity with generally
accepted accounting
principles.
As more fully discussed in Note 5 to the consolidated
financial statements,
effective January 1, 1993, the Company changed its method of
accounting for
income taxes.
Portland, Oregon,
January 25, 1994 (except with respect to
the matter discussed in Note 16, as to
which the date is February 23, 1994) ARTHUR ANDERSEN & CO.
<PAGE> 34
Item 8. Financial Statements and Supplementary Data
<TABLE>
<CAPTION>
Portland General Corporation and Subsidiaries
Consolidated Statements of Income
For the Years Ended December 31 1993 1992
1991
<S> <C> <C>
<C>
(Thousands of Dollars except per share amounts)
Operating Revenues $946,829
$883,266 $889,876
Operating Expenses
Purchased power and fuel 311,713
222,127 226,312
Production and distribution 73,576
93,677 95,960
Maintenance and repairs 55,320
70,496 91,304
Administrative and other 100,321
112,010 124,174
Depreciation, decommissioning and amortization 122,218
98,706 112,567
Taxes other than income taxes 55,730
55,515 59,023
718,878
652,531 709,340
Operating Income Before Income Taxes 227,951
230,735 180,536
Income Taxes 67,520
67,235 44,005
Net Operating Income 160,431
163,500 136,531
Other Income (Deductions)
Loss from independent power - net of taxes $16,058 -
- -
(74,144)
Interest expense (70,802)
(73,895)
(81,745)
Allowance for funds used during construction 785
2,769 2,049
Preferred dividend requirement - PGE (12,046)
(12,636)
(12,913)
Other - net of income taxes 10,750
9,885 9,524
Income (Loss) From Continuing Operations 89,118
89,623
(20,698)
Discontinued Operations
Estimated loss on disposal of real estate operations,
including provision for operating losses during
the phase-out period -
- -
(29,169)
Net Income (Loss) $ 89,118 $
89,623
$(49,867)
Common Stock
Average shares outstanding 47,392,185
46,887,184 46,333,096
Earnings (loss) per average share
Continuing operations $1.88
$1.93*
$(0.43)*
Estimated loss from disposal of real
estate operations -
- -
(0.63)
Earnings (loss) per average share $1.88
$1.93*
$(1.06)*
Dividends declared per share $1.20
$1.20 $1.20
* Includes $.02 for tax benefits from ESOP dividends.
Portland General Corporation and Subsidiaries
Consolidated Statements of Retained Earnings
For the Years Ended December 31 1993 1992
1991
(Thousands of
Dollars)
Balance at Beginning of Year $ 50,481 $
19,635 $124,112
Net Income (Loss) 89,118
89,623
(49,867)
ESOP Tax Benefit & Preferred Stock
Premium @ Redemption (1,524)
(2,505) 992
138,075
106,753 75,237
Dividends Declared on Common Stock 56,916
56,272 55,602
Balance at End of Year $ 81,159 $
50,481 $ 19,635
</TABLE>
The accompanying notes are an integral part of these
consolidated statements.
<PAGE> 35
<TABLE>
<CAPTION>
Portland General Corporation and Subsidiaries
Consolidated Balance Sheets
At December 31 1993
1992
(Thousands of Dollars)
<S> <C>
<C>
Assets
Electric Utility Plant - Original Cost
Utility plant (includes Construction Work
in Progress of $46,679 and $12,308)
$2,370,460 $2,260,935
Accumulated depreciation
(894,284) (825,365)
1,476,176 1,435,570
Capital leases - less amortization of $23,626 and $21,471
13,693 15,847
1,489,869 1,451,417
Other Property and Investments
Leveraged leases
155,618 155,697
Net assets of discontinued real estate operations
31,378 33,978
Trojan decommissioning trust, at market value
48,861 32,945
Other investments
102,164 93,126
338,021 315,746
Current Assets
Cash and cash equivalents
3,202 6,689
Accounts and notes receivable
91,641 83,065
Unbilled and accrued revenues
133,476 69,151
Inventories, at average cost
46,534 61,550
Prepayments and other
22,128 33,759
296,981 254,214
Deferred Charges
Unamortized regulatory assets
Trojan abandonment - Plant
366,712 399,255
Trojan abandonment - Decommissioning
355,718 339,514
Trojan - other
66,387 94,759
Income taxes recoverable
228,233 -
Debt reacquisition costs
34,941 22,855
Energy efficiency programs
39,480 23,989
Other
33,857 37,445
WNP-3 settlement exchange agreement
178,003 182,492
Miscellaneous
21,126 18,939
1,324,457 1,119,248
$3,449,328 $3,140,625
Capitalization and Liabilities
Capitalization
Common stock $
178,630 $ 176,624
Other paid-in capital
519,058 509,802
Unearned compensation
(19,151) (23,478)
Retained earnings
81,159 50,481
759,696 713,429
Cumulative preferred stock of subsidiary
Subject to mandatory redemption
70,000 81,800
Not subject to mandatory redemption
69,704 69,704
Long-term debt
842,994 856,138
1,742,394 1,721,071
Current Liabilities
Long-term debt and preferred stock due within one year
51,614 47,500
Short-term borrowings
159,414 140,678
Accounts payable and other accruals
109,479 116,503
Accrued interest
18,581 25,236
Dividends payable
17,657 17,591
Accrued taxes
25,601 42,378
382,346 389,886
Other
Deferred income taxes
660,248 365,434
Deferred investment tax credits
60,706 64,781
Regulatory reserves
120,410 121,914
Trojan decommissioning reserve and misc. closure costs
407,610 411,404
Miscellaneous
75,614 66,135
1,324,588 1,029,668
$3,449,328 $3,140,625
The accompanying notes are an integral part of these
consolidated balance sheets.
<PAGE> 36
Portland General Corporation and Subsidiaries
Consolidated Statements of Capitalization
At December 31 1993
1992
(Thousands of Dollars)
Common Stock Equity
Common stock, $3.75 par value per
share, 100,000,000 shares authorized,
47,634,653 and 47,099,701 shares outstanding $
178,630 $ 176,624
Other paid-in capital - net
519,058 509,802
Unearned compensation
(19,151) (23,478)
Retained earnings
81,159 50,481
759,696 43.6% 713,429 41.5%
Cumulative Preferred Stock
Subject to mandatory redemption
No par value, 30,000,000 shares authorized
7.75% Series, 300,000 shares outstanding
30,000 30,000
$100 par value, 2,500,000 shares authorized
8.875% Series, 0 and 36,000 shares outstanding
- - 3,600
Current sinking fund
- - (1,800)
8.10% Series, 500,000 shares outstanding
50,000 50,000
Current sinking fund
(10,000) -
70,000 4.0 81,800 4.8
Not subject to mandatory redemption
7.95% Series, 298,045 shares outstanding
29,804 29,804
7.88% Series, 199,575 shares outstanding
19,958 19,958
8.20% Series, 199,420 shares outstanding
19,942 19,942
69,704 4.0 69,704 4.0
Long Term Debt
First mortgage bonds
Maturing 1993 through 1997
4-5/8% Series due February 1, 1993
- - 7,851
4-3/4% Series due June 1, 1993
- - 9,720
4-3/4% Series due April 1, 1994
8,119 8,344
4.70% Series due March 1, 1995
3,220 3,395
5-7/8% Series due June 1, 1996
5,366 5,516
6.60% Series due October 1, 1997
15,363 15,663
Medium-term notes, 6.60%-9.27%
136,000 148,550
Maturing 1998 through 2002, 5.65%-8.88%
140,625 98,615
Maturing 2003 through 2007, 6.47%-9.07%
131,658 145,473
Maturing 2016 through 2023, 7.75%-9-5/8%
195,000 145,000
Pollution control bonds
Port of Morrow, Oregon, variable rate
(Average 2.3% for 1993), due 2013
23,600 23,600
City of Forsyth, Montana, variable rate
(Average 2.4 for 1993), due 2013 through 2016
118,800 118,800
Amount held by trustee
(8,537) (8,498)
Port of St. Helens, Oregon, due 2010 and 2014
(Average variable 2.2%-2.4% for 1993)
51,600 51,600
10% Debentures due March 1, 2018
- - 50,000
Medium-term notes maturing 1994 through
1996, 7.23%-8.09%
50,000 50,000
Notes maturing 1993, 8.62%
- - 13,000
Capital lease obligations
13,693 15,847
Other
101 (638)
884,608 901,838
Long-term debt due within one year
(41,614) (45,700)
842,994 48.4 856,138 49.7
Total capitalization
$1,742,394 100.0% $1,721,071 100.0%
</TABLE>
The accompanying notes are an integral part of these consolidated
statements.
<PAGE> 37
<TABLE>
<CAPTION>
Portland General Corporation and Subsidiaries
Consolidated Statements of Cash Flow
For the Years Ended December 31 1993 1992
1991
<S> <C> <C>
<C>
(Thousands of
Dollars)
Cash Provided by Operations:
Net income (loss) $ 89,118 $
89,623 $ (49,867)
Adjustments to reconcile net income (loss)
to net cash provided by operations:
Non-cash loss from independent power -
- 83,493
Depreciation, decommissioning and amortization 92,367
109,884 115,285
Amortization of WNP-3 exchange agreement 4,489
5,658 6,231
Amortization of deferred charges - Trojan 31,419
1,609 573
Amortization of deferred charges - other 5,087
7,080 9,225
Deferred income taxes - net 59,193
26,480 1,200
Other noncash revenues (1,926)
(2,659) (4,160)
Increase in receivables (72,837)
(12,736) (3,750)
(Increase) Decrease in inventories 15,017
(4,181) 751
Increase (Decrease) in payables (29,837)
(6,231) 25,208
Other working capital items - net 14,366
7,020 (1,895)
Loss from discontinued operations -
- 29,169
Deferred charges - other (3,808)
(13,175) (6,825)
Miscellaneous - net 17,475
21,527 14,214
220,123
229,899 218,852
Investing Activities:
Utility construction (125,787)
(143,561) (138,905)
Energy efficiency programs (18,149)
(10,365) (8,610)
Rentals received from leveraged leases 12,005
12,373 11,099
Trojan decommissioning trust (11,220)
(11,220) (19,272)
Advances to affiliates -
- (42,494)
Other (11,924)
(9,964) (14,143)
(155,075)
(162,737) (212,325)
Financing Activities:
Short-term borrowings - net 18,736
48,273 (22,701)
Long-term debt issued 252,000
123,000 178,016
Long-term debt retired (279,986)
(143,902) (119,004)
Repayment of nonrecourse borrowings for
leveraged leases (10,955)
(11,215) (10,304)
Preferred stock issued -
30,000 -
Preferred stock retired (3,600)
(31,225) (1,800)
Common stock issued 9,520
9,753 6,585
Dividends paid (56,850)
(56,230) (55,564)
(71,135)
(31,546) (24,772)
Net Cash Provided (Used) by:
Continuing Operations (6,087)
35,616 (18,245)
Discontinued Operations 2,600
(30,948) 5,582
Increase (Decrease) in Cash and
Cash Equivalents (3,487)
4,668 (12,663)
Cash and Cash Equivalents at the Beginning
of Year 6,689
2,021 14,684
Cash and Cash Equivalents at the End
of Year $ 3,202 $
6,689 $ 2,021
Supplemental disclosures of cash flow information
Cash paid during the year:
Interest $ 74,261 $
72,535 $ 76,326
Income taxes 12,259
22,241 23,560
</TABLE>
The accompanying notes are an integral part of these consolidated
statements.
<PAGE> 38
Portland General Corporation and Subsidiaries Notes to Financial
Statements
Note 1
Summary of Significant Accounting Policies
Consolidation Principles
The consolidated financial statements
include the accounts of Portland General
Corporation (Portland General or the
Company) and all of its majority-owned
subsidiaries. Significant intercompany
balances and transactions have been
eliminated.
Basis of Accounting
Portland General and its subsidiaries
conform to generally accepted accounting
principles. In addition, Portland
General Electric Company's (PGE)
policies are in accordance with the
accounting requirements and the
ratemaking practices of regulatory
authorities having jurisdiction.
Revenues
PGE accrues estimated unbilled revenues
for services provided to month-end.
Purchased Power
PGE credits purchased power costs for
the net amount of benefits received
through a power purchase and sale
contract with the Bonneville Power
Administration (BPA). Reductions in
purchased power costs that result from
this exchange are passed directly to
PGE's residential and small farm
customers in the form of lower prices.
Depreciation
PGE's depreciation is computed on the
straight-line method based on the
estimated average service lives of the
various classes of plant in service.
Excluding the Trojan Nuclear Plant
(Trojan), depreciation expense as a
percent of the related average
depreciable plant in service was
approximately 3.9% in 1993, 3.8% in 1992
and 3.9% in 1991.
The cost of renewal and replacement of
property units is charged to plant, and
repairs and maintenance are charged to
expense as incurred. The cost of
utility property units retired, other
than land, is charged to accumulated
depreciation.
Allowance for Funds Used During
Construction (AFDC)
AFDC represents the pretax cost of
borrowed funds used for construction
purposes and a reasonable rate for
equity funds. AFDC is capitalized as
part of the cost of plant and is
credited to income but does not
represent current cash earnings. The
average rates used by PGE were 3.52%,
4.72% and 8.05% for the years 1993, 1992
and 1991, respectively.
Income Taxes
Portland General files a consolidated
federal income tax return. Portland
General's policy is to collect for tax
liabilities from subsidiaries that
generate taxable income and to reimburse
subsidiaries for tax benefits utilized
in its tax return.
Income tax provisions are adjusted, when
appropriate, for potential tax
adjustments. Deferred income taxes are
provided for temporary differences
between financial and income tax
reporting. See Notes 5 and 5A, Income
Taxes, for more details.
Amounts recorded for Investment Tax
Credits (ITC) have been deferred and are
being amortized to income over the
approximate lives of the related
properties, not to exceed 25 years.
Nuclear Fuel
Amortization of the cost of nuclear fuel
was based on the quantity of heat
produced for the generation of electric
energy.
<PAGE> 39
Investment in Leases
Columbia Willamette Leasing (CWL), a
subsidiary of Portland General Holdings,
Inc. (Holdings), acquires and
leases capital equipment. Leases that
qualify as direct financing leases and
are substantially financed with
nonrecourse debt at lease inception are
accounted for as leveraged leases.
Recorded investment in leases is the sum
of the net contracts receivable and the
estimated residual value, less unearned
income and deferred ITC. Unearned
income and deferred ITC are amortized to
income over the life of the leases to
provide a level rate of return on net
equity invested.
The components of CWL's net investment
in leases as of December 31, 1993 and
1992, are as follows (thousands of
dollars):
1993 1992
Lease contracts receivable $ 600,710 $ 645,746
Nonrecourse debt service (481,988) (524,661)
Net contracts receivable 118,722 121,085
Estimated residual value 88,047 88,085
Less - Unearned income (41,395) (43,436)
Investment in leveraged leases 165,374 165,734
Less - Deferred ITC (9,756) (10,037)
Investment in leases, net $ 155,618 $ 155,697
Cash and Cash Equivalents
Highly liquid investments with original
maturities of three months or less are
classified as cash equivalents.
WNP-3 Settlement Exchange Agreement
The Washington Public Power Supply
System Unit 3 (WNP-3) Settlement
Exchange Agreement, which has been
excluded from PGE's rate base, is
carried at present value and amortized
on a constant return basis.
Regulatory Assets
PGE defers, or accrues revenue for,
certain costs which otherwise would be
charged to expense, if it is probable
that future collections will permit
recovery of such costs. These costs are
reflected as deferred charges or accrued
revenues in the financial statements and
are amortized over the period in which
revenues are collected. Trojan plant
and decommissioning costs are currently
covered in customer rates. Of the
remaining regulatory assets,
approximately 78% have been treated by
the Oregon Public Utility Commission
(PUC) as allowable cost of service items
in PGE's most recent rate processes.
The remaining amounts are subject to
regulatory confirmation in PGE's future
ratemaking proceedings.
Reclassifications
Certain amounts in prior years have been
reclassified for comparative purposes.
<PAGE> 40
Note 2
Real Estate - Discontinued Operations
Portland General is divesting its real
estate operations, which consist
primarily of Columbia Willamette
Development Company (CWDC). In early
1993, CWDC withdrew from the Cornerstone
Columbia Development Company
(Cornerstone), a partnership with
Weyerhauser Real Estate Company. As a
distribution and complete liquidation of
CWDC's interest in Cornerstone, CWDC
received all of Cornerstone's interest
in a joint venture.
In 1991, Portland General reviewed the
adequacy of its real estate loss reserve
and determined that an additional
reserve was warranted. A loss of $29
million (net of related income tax
benefits of $17 million) was recorded in
the fourth quarter of 1991 to recognize
lower market values and additional
holding costs.
At December 31, 1993 and 1992, the net
assets of real estate operations were
composed of the following (thousands of
dollars):
1993 1992
Assets
Real estate development $18,900 $22,132
Other assets 21,234 27,248
Total assets 40,134 49,380
Liabilities 1,632 2,181
Reserve for discontinuance - net 7,124 13,221
Net assets $31,378 $33,978
Management believes that it has
adequately provided for accounting
losses to be incurred during the
disposal of real estate assets. Prior
estimates will be continually monitored
during the liquidation period.
<PAGE> 41
Note 3
Loss from Independent Power
In late 1991 Holdings, a wholly owned
subsidiary of Portland General, recorded
losses totaling $74 million, net of tax
benefits of $16 million, related to the
write-off of Holdings' equity investment
in Bonneville Pacific Corporation
(Bonneville Pacific) and a provision for
uncollectible loans, project development
and other costs.
Holdings owns 9.8 million shares, or
46%, of Bonneville Pacific's common
stock. The write-off followed a review
of the Bonneville Pacific investment,
which raised various concerns including
the carrying values of certain of its
assets, the lack of progress by
Bonneville Pacific to complete agreed-
upon project selldowns and
Bonneville Pacific's poor financial
performance. In December 1991,
Bonneville Pacific voluntarily filed for
protection under Chapter 11 of the
Bankruptcy Code. Holdings also has $28
million of secured and unsecured loans
outstanding to Bonneville Pacific and
its subsidiaries. Holdings recorded a
reserve in December 1991 against the
outstanding loans. Holdings intends to
pursue recovery of these loans but
cannot predict what amount, if any, may
be recovered. See Note 14, Legal
Matters, for litigation related to
Bonneville Pacific.
Note 4
Employee Benefits
Pension Plan
Portland General has a non-contributory
pension plan (the Plan) covering
substantially all of its employees.
Benefits under the Plan are based on
years of service, final average pay and
covered compensation.Portland
General's policy is to contribute
annually to the Plan at least the
minimum required under the Employee
Retirement Income Security Act of 1974
but not more than the maximum amount
deductible for income tax
purposes. The Plan's assets are held in
a trust and consist primarily of
investments in common and preferred
stocks, corporate bonds and
US government and agency issues.
Portland General determines net periodic
pension expense according to the
principles of SFAS No. 87, Employers'
Accounting for Pensions.
The following table sets forth the
Plan's funded status and amounts
recognized in Portland General's
financial statements (thousands of
dollars):
1993 1992
Actuarial present value of benefit obligations:
Accumulated benefit obligation, including
vested benefits of $151,334 and $133,870 $166,301
$145,670
Effect of projected future compensation levels 32,608
34,531
Projected benefit obligation (PBO) 198,909
180,201
Plan assets at fair value 262,412
226,413
Plan assets in excess of PBO 63,503
46,212
Unrecognized net experience gain (60,445)
(42,324)
Unrecognized prior service costs 14,147
16,677
Unrecognized net transition asset being
recognized over 18 years (21,533)
(23,490)
Pension - prepaid cost (liability) $ (4,328)
$(2,925)
<PAGE> 42
1993
1992 1991
Assumptions:
Discount rate used to calculate PBO 7.25% 8.00%
8.00%
Rate of increase in future compensation levels 5.25 6.00
6.25
Long-term rate of return on assets 8.50 8.50
8.50
Net pension expense for 1993, 1992 and
1991 included the following components
(thousands of dollars):
1993 1992
1991
Service cost $ 6,151 $
6,082 $ 5,627
Interest cost on PBO 14,241
13,792 13,641
Actual return on plan assets (48,231)
(18,272) (45,693)
Net amortization and deferral 29,839
1,496 30,029
Net periodic pension expense $ 2,000 $
3,098 $ 3,604
Other Post-Retirement Benefit Plans
Portland General accrues for health,
medical and life insurance costs during
the employees' service years, per SFAS
No. 106. PGE receives recovery
for the annual provision in customer
rates. Employees are covered under a
Defined Dollar Medical Benefit Plan
which limits Portland General's
obligation by establishing a maximum
contribution per employee. The
accumulated benefit obligation for
postretirement health and life insurance
benefits at December 31, 1993 was
$31 million, for which there were
$31 million of assets held in trust.
The projected benefit obligation for
postretirement health and life insurance
benefits at December 31, 1992 was $29
million.
Portland General also provides senior
officers with additional benefits under
an unfunded Supplemental Executive
Retirement Plan (SERP). Projected
benefit obligations for the SERP are $16
million and $12 million at December 31,
1993 and 1992, respectively.
Deferred Compensation
Portland General provides certain
management employees with benefits under
an unfunded Management Deferred
Compensation Plan (MDCP). Obligations
for the MDCP are $18 million and
$14 million at December 31, 1993 and
1992, respectively.
Trojan Retention Plan
In October 1992, Portland General
implemented a defined contribution plan
to retain Trojan employees during a
phaseout of plant operations. Trojan
ceased commercial operation in early
1993; participation in the retention
plan was terminated on May 31, 1993 and
all benefits under the plan were paid.
Employee Stock Ownership Plan
Portland General has an Employee Stock
Ownership Plan (ESOP) which is a part of
its 401(k) retirement savings plan.
Employee contributions up to 6% of base
pay are matched by employer
contributions in the form of ESOP common
stock. Shares of common stock to be
used to match contributions of PGE
employees were purchased from a
$36 million loan from PGE to the ESOP
trust in late 1990. This loan is
presented in the common equity section
as unearned compensation. Cash
contributions from PGE and dividends on
shares held in the trust are used to pay
the debt service on PGE's loan. As the
loan is retired, an equivalent amount of
stock is allocated to employee accounts.
In 1993, total contributions to the ESOP
of $5 million combined with dividends on
unallocated shares of $2 million were
used to pay debt service and interest on
PGE's loan. Shares of common stock used
to match contributions by employees of
Portland General and its subsidiaries
are purchased on the open market.
<PAGE> 43
Note 5
Income Taxes
The following table shows the detail of
taxes on income and the items used in
computing the differences between the
statutory federal income tax rate and
Portland General's effective tax rate.
Note: The table does not include income
taxes related to 1991 losses from
independent power or discontinued real
estate operations (thousands of
dollars):
1993 1992
1991
Income Tax Expense:
Currently payable $ 2,989 $ 44,057
$ 22,520
Deferred income taxes
Accelerated depreciation 15,477 20,049
26,258
WNP-3 amortization (1,099)
(2,190) (2,570)
AMAX coal contract (1,238)
(1,227) (1,050)
Trojan operating costs 17,332 7,402
4,080
Energy efficiency programs 7,327 3,246
2,859
Replacement power costs 26,543
(246) 5,084
Repurchase debt 4,847 1,019
(850)
USDOE nuclear fuel assessment 6,108 -
-
Excess deferred taxes (3,494)
(1,888) (1,557)
Interim rate relief - 6,573
1,036
Lease income (18,151)
(15,453) (14,892)
Nonrecourse debt interest 12,578 11,621
12,156
Other 6,659
(1,258) (3,469)
Investment tax credit adjustments (4,356)
(6,981) (4,589)
$ 71,522 $ 64,724
$ 45,016
Provision Allocated to:
Operations $ 67,520 $ 67,235
$ 44,005
Other income and deductions 4,002
(2,511) 1,011
$ 71,522 $ 64,724
$ 45,016
Effective Tax Rate Computation:
Computed tax based on statutory $ 56,224 $ 52,478
$ 33,477
federal income tax rates applied to
income before income taxes
Increases (Decreases) resulting from:
Accelerated depreciation 10,748 9,462
7,763
State and local taxes - net 3,288 10,117
5,766
Investment tax credits (4,356)
(6,981) (4,589)
Adjustments to income tax reserves -
(3,284) (393)
Excess deferred taxes (3,419)
(1,816) (1,483)
USDOE nuclear fuel assessment 5,075
- - -
Preferred dividend requirement 3,935
4,296 4,390
Other 27
452 85
$ 71,522 $
64,724 $ 45,016
Effective tax rate 44.5% 41.9%
45.7%
<PAGE> 44
Effective January 1, 1993, Portland
General adopted SFAS No. 109,
"Accounting for Income Taxes". Prior to
SFAS No. 109, Portland General accounted for
income taxes in accordance with
Accounting Principles Board Opinion No.
11. Prior period financial statements
have not been restated. As of December
31, 1993 and 1992, the significant
components of the Company's deferred
income tax assets and liabilities were
as follows (thousands of dollars):
1993 1992
Deferred Tax Assets
Plant-in-service $ 83,602 $ 18,608
Regulatory reserve 47,718 46,804
Other 75,404 40,796
206,724 106,208
Deferred Tax Liabilities
Plant-in-service (497,476) (201,596)
WNP-3 exchange contract (70,542) (71,099)
Replacement power costs (29,574) (4,838)
Leasing (147,101) (140,980)
Other (94,924) (53,129)
(839,617) (471,642)
Less current deferred taxes 842 -
Less valuation allowance (28,197) -
Total $(660,248) $(365,434)
As a result of implementing SFAS No. 109,
Portland General has recorded deferred
tax assets and liabilities for all
temporary differences between the
financial statement bases and tax bases
of assets and liabilities.
Portland General has certain state
pollution control tax credit
carryforwards and the benefits of
capital loss carryforwards that
presently cannot be offset with future
taxable income or capital gains and
accordingly has recorded a valuation
allowance totalling $28.2 million at
December 31, 1993 to fully reserve
against these assets.
Federal alternative minimum tax credit
carryforwards, which have no expiration
date, are $15.7 million at December 31,
1993.
The Omnibus Budget Reconciliation Act of
1993 resulted in a federal tax rate
increase from 34% to 35% effective
January 1, 1993. The tax rate increase
resulted in additional income tax
expense for the Company of $4.9 million.
The IRS completed its examination of
Portland General's tax returns for the
years 1985 to 1987 and has issued a
statutory notice of tax deficiency,
which Portland General is contesting.
As part of this audit, the IRS has
proposed to disallow PGE's 1985 WNP-3
abandonment loss deduction on the
premise that it is a taxable exchange.
PGE disagrees with this position and
will take appropriate action to defend
its deduction. Management believes that
it has appropriately provided for
probable tax adjustments and is of the
opinion that the ultimate disposition of
this matter will not have a material
adverse impact on the financial
condition of Portland General.
<PAGE> 45
Note 6
Trojan Nuclear Plant
Shutdown - PGE is the 67.5% owner of
Trojan. In early 1993, PGE ceased
commercial operation of Trojan. PGE
made the decision to shut down Trojan as
part of its least cost planning process,
a biennial process whereby PGE evaluates
a mix of energy options that yield an
adequate and reliable supply of
electricity at the least cost to the
utility and to its customers. On June
3, 1993 the PUC acknowledged PGE's Least
Cost Plan (LCP).
Decommissioning Estimate - The 1993
nuclear decommissioning estimate of $409
million represents a site-specific
decommissioning cost estimate performed
for Trojan by an experienced
decommissioning engineering firm. This
cost estimate assumes that the majority
of decommissioning activities will occur
between 1998 and 2002, after
construction of a temporary dry spent
fuel storage facility. The final
decommissioning activities will occur in
2018 after PGE completes shipment of
spent fuel to a United States Department
of Energy (USDOE) facility.
The decommissioning cost estimate
includes the cost of decommissioning
planning, removal and burial of
irradiated equipment and facilities as
required by the Nuclear Regulatory
Commission (NRC); building demolition
and nonradiological site remediation;
and fuel management costs including
licensing, surveillance and $75 million
of transition costs. Transition costs
are the operating costs associated with
closing Trojan, operating and
maintaining the spent fuel pool and
securing the plant until dismantlement
can begin. Except for transition costs,
which will continue to be amortized as
incurred PGE will fund the
decommissioning costs through
contributions to the Trojan
decommissioning trust.
The 1992 decommissioning cost estimate
of $411 million was based upon a study
performed on a nuclear plant similar to
Trojan and included the cost of
dismantlement activities performed
during the years 1996 through 2002,
monitoring of stored spent fuel through
2018 and $130 million of miscellaneous
closure and transition costs ($43
million was amortized to nuclear
operating expenses during 1993).
The 1992 estimate and the 1993 site-
specific estimate are reflected in the
financial statements in nominal dollars
(actual dollars expected to be spent in
each year). The difference between the
1992 and the 1993 cost estimates,
reflected in nominal dollars, is due to
the application of a higher inflation
factor, the timing of decommissioning
activities and certain changes in
assumptions, such as decommissioning the
temporary dry spent fuel storage
facility and shipping highly activated
reactor components to the USDOE
repository in 2018, which are included
in the 1993 estimate. Both the 1992
cost estimate and the 1993 site-specific
cost estimate reflected in 1993
(current) dollars are $289 million.
Assumptions used to develop the site-
specific cost estimate represent the
best information PGE has currently.
However, the Company is continuing its
analysis of various options which could
change the timing and scope of
dismantling activities. Presently, PGE
is planning to accelerate the timing of
large component removal which could
reduce overall decommissioning costs.
PGE plans to submit a detailed
decommissioning work plan to the NRC in
mid-1994. PGE expects any future
changes in estimated decommissioning
costs to be incorporated in future
revenues to be collected from customers.
PGE is recording an annual operating
provision of $11 million for
decommissioning. This provision is
being collected from customers and
deposited in an external trust fund.
Earnings on the trust fund assets reduce
the amount of decommissioning costs to
be collected from customers. Trojan
abandonment - decommissioning of $356
million (reflected in the deferred
charges section of the Company's balance
sheet) represents remaining
decommissioning costs expected to be
collected from customers.
Trojan decommissioning trust assets are
invested primarily in investment grade
tax-exempt bonds. At December 31, 1993
the trust reflects the following
activity (thousands of dollars):
Beginning Balance 1/01/93 $32,945
1993 Activity
Contributions 11,220
Earnings 4,696
Ending Balance 12/31/93 $48,861
<PAGE> 46
Investment Recovery - PGE filed a
general rate case on November 8, 1993
which addresses recovery of Trojan plant
costs, including decommissioning. In
late February 1993, the PUC granted PGE
accounting authorization to continue
using previously approved depreciation
and decommissioning rates and lives for
its Trojan investment.
As stated earlier, PGE made the decision
to permanently cease commercial
operation of Trojan as part of its least
cost planning process. Management
determined that continued operation of
Trojan was not cost effective. Least
cost analysis assumed that recovery of
the Trojan plant investment, including
future decommissioning costs, would be
granted by the PUC. Regarding the
authority of the PUC to grant recovery,
the Oregon Department of Justice
(Attorney General) issued an opinion
that the PUC may allow rate recovery of
total plant costs, including operating
expenses, taxes, decommissioning costs,
return of capital invested in the plant
and return on the undepreciated
investment. While the Attorney
General's opinion does not guarantee
recovery of costs associated with the
shutdown, it does clarify that under
current law the PUC has authority to
allow recovery of such costs in rates.
PGE asked the PUC to resolve certain
legal and policy questions regarding the
statutory framework for future
ratemaking proceedings related to the
recovery of the Trojan investment and
decommissioning costs. On August 9,
1993, the PUC issued a declaratory
ruling agreeing with the Attorney
General's opinion discussed above. The
ruling also stated that the PUC will
favorably consider allowing PGE to
recover in rates some or all of its
return on and return of its
undepreciated investment in Trojan,
including decommissioning costs, if PGE
meets certain conditions. PGE believes
that its general rate filing provides
evidence that satisfies the conditions
established by the PUC.
Management believes that the PUC will
grant future revenues to cover all, or
substantially all, of Trojan plant costs
with an appropriate return. However,
future recovery of the Trojan plant
investment and future decommissioning
costs requires PUC approval in a public
regulatory process. Although the PUC
has allowed PGE to continue, on an
interim basis, collection of these costs
in the same manner as prescribed in its
last general rate proceeding, the PUC
has yet to address recovery of costs
related to a prematurely retired plant
when the decision to close the plant was
based upon a least cost planning
process. Due to uncertainties inherent
in a public process, management cannot
predict, with certainty, whether all, or
substantially all, of the Trojan plant
investment and future decommissioning
costs will be recovered. Management
believes the ultimate outcome of this
public regulatory process will not have
a material adverse effect on the
financial condition, liquidity or
capital resources of Portland General.
However, it may have a material impact
on the results of operations for a
future reporting period.
Portland General's independent
accountants are satisfied that
management's assessment regarding the
ultimate outcome of the regulatory
process is reasonable. Due to the
inherent uncertainties in the regulatory
process discussed above, the magnitude
of the amounts involved and the possible
impact on the results of operations for
a future reporting period, the
independent accountants have added a
paragraph to their audit report to give
emphasis to this matter.
Nuclear Fuel Disposal and Clean up of
Federal Plants - PGE has a contract with
the USDOE for permanent disposal of
spent nuclear fuel in USDOE facilities.
These disposal services are now
estimated to commence no earlier than
2010. PGE paid the USDOE .1 cent per net
kilowatt-hour sold at Trojan for these
future disposal services. On-site
storage capacity is able to accommodate
fuel until the federal facilities are
available.
The Energy Policy Act of 1992 provided
for the creation of a Decontamination
and Decommissioning Fund (DDF) to
provide for the clean up of the USDOE
gas diffusion plants. The DDF is to be
funded by domestic nuclear utilities and
the Federal Government. The legislation
provided that each utility pays based on
the ratio of the amount of enrichment
services the utility purchased and the
total amount of enrichment services
purchased by all domestic utilities
prior to the enactment of the
legislation. Trojan's estimated usage
was 1.03%. Based on this estimate,
PGE's portion of the funding requirement
is approximately $15.6 million. Amounts
are funded over 15 years beginning with
the USDOE's fiscal year 1993. PGE made
its first of the 15 annual payments on
September 30, 1993 for $1.04 million.
Nuclear Insurance - The Price-Anderson
Amendment of 1988 limits public
liability claims that could arise from a
nuclear incident to a maximum of $9.4
billion per incident. PGE has purchased
the maximum primary insurance coverage
currently available of $200 million.
The
<PAGE> 47
remaining $9.2 billion is covered by
secondary financial protection required
by the NRC. This secondary coverage
provides for loss sharing among all
owners of nuclear reactor licenses.
In the event of an incident at any
nuclear plant in which the amount of the
loss exceeds $200 million, PGE could be
assessed retrospective premiums of up to
$53.5 million per incident, limited to a
maximum of $7 million per incident in
any one year under the secondary
financial protection coverage.
PGE's share of property damage and
decontamination coverage is provided for
losses at Trojan up to $337 million
primary and $378 million excess. The
$378 million excess coverage is provided
subject to a potential maximum
retrospective premium adjustment of
$0.8 million per policy year. The NRC
requires that, in case of an incident,
insurance proceeds must first be
dedicated to stabilizing and
decontaminating the reactor. This could
reduce the amount of proceeds available
to repair, replace or restore the
property or otherwise available to the
trustee for application under PGE's
First Mortgage Bond Indenture.
Insurance coverage is provided primarily
through insurance companies owned by
utilities with nuclear facilities.
<PAGE> 48
Note 7
<TABLE>
<CAPTION>
Common and Preferred Stock
Cumulative Preferred
Common Stock of Subsidiary
Other
Number $3.75 Par Number $100
Par $25 Par No-Par Paid-in Unearned
of Shares Value of Shares
Value Value Value Capital Compensation*
<S> <C> <C> <C> <C>
<C> <C> <C> <C>
(Thousands of Dollars
except share amount)
December 31, 1990 46,145,208 $173,045 2,287,040
$128,704 $25,000 - $495,212 $(35,789)
Sales of stock 381,342 1,430 -
- - - - 5,161 -
Redemption of stock (1,387) (6) (18,000)
(1,800) - - 2,119 -
Repayment of ESOP loan
and other - - -
- - - - 67 5,719
December 31, 1991 46,525,163 174,469 2,269,040
126,904 25,000 - 502,559 (30,070)
Sales of stock 574,538 2,155 300,000
- - - $30,000 7,293 -
Redemption of stock - - (1,036,000)
(3,600) (25,000) - 871 -
Repayment of ESOP loan
and other - - -
- - - - (921) 6,592
December 31, 1992 47,099,701 176,624 1,533,040
123,304 - 30,000 $509,802 (23,478)
Sales of stock 534,952 2,006 -
- - - - 8,802 -
Redemption of stock - - (36,000)
(3,600) - - 2,130 -
Repayment of ESOP loan
and other - - -
- - - - (1,676) 4,327
December 31, 1993 47,634,653 $178,630 1,497,040
$119,704 $ - $30,000 $519,058 $(19,151)
</TABLE>
*See the discussion of stock compensation plans below and Note
4, Employee Benefits for a
discussion of the ESOP.
Common Stock
As of December 31, 1993, Portland
General had reserved 367,000 authorized
but unissued common shares for issuance
under its dividend reinvestment plan.
In addition, new shares of common stock
are issued under an employee stock
purchase plan.
Cumulative Preferred Stock of Subsidiary
No dividends may be paid on common stock
or any class of stock over which the
preferred stock has priority unless all
amounts required to be paid for
dividends and sinking fund payments have
been paid or set aside, respectively.
The 7.75% Series preferred stock has an
annual sinking fund requirement which
requires the
redemption of 15,000 shares at $100 per
share beginning in 2002. At its option,
PGE may
redeem, through the sinking fund, an
additional 15,000 shares each year. All
remaining shares shall be mandatorily
redeemed by sinking fund in 2007. This
Series is only redeemable by operation
of the sinking fund.
The 8.10% Series preferred stock has an
annual sinking fund requirement which
requires the redemption of 100,000
shares at $100 per share beginning in
1994. At its option, PGE may redeem,
through the sinking fund, an additional
100,000 shares each year. This Series
is redeemable at the option of PGE at
$103 per share to April 14, 1994 and at
reduced amounts thereafter.
Common Dividend Restriction of Subsidiary
PGE is restricted from paying dividends
or making other distributions to
Portland General, without prior PUC
approval, to the extent such payment or
distribution would reduce PGE's common
stock equity capital below 36% of its
total capitalization. At December 31,
1993, PGE's common stock equity capital
was 44% of its total capitalization.
Stock Compensation Plans
Portland General has a plan under which
2.3 million shares of Portland General
common stock are available for stock-
based incentives. Upon termination,
expiration or lapse of certain types of
awards, any shares remaining subject to
the award are again available for grant
under the plan. As of December 31,
1993, 856,800 stock options were
outstanding. Of the outstanding
options, 20,000 are exercisable: 10,000
at a price of $15.75 per share; 2,500 at
$17.375 per share; and 7,500 at $14.75
per share. The remaining 836,800
options are exercisable beginning in
1994 through 1998 at prices ranging from
$14 to $22.25 per share. In addition,
25,000 options granted under a separate
award were exercised in 1993.
On December 6, 1993 Portland General
issued 64,000 restricted common shares
for officers of Portland General and
PGE.
<PAGE> 49
Note 8
Short-Term Borrowings
Portland General meets its liquidity
needs through the issuance of commercial
paper and borrowings from commercial
banks. At December 31, 1993, Portland
General had total committed lines of
credit of $240 million. Portland
General has a $40 million committed
facility expiring in July 1994. PGE has
committed facilities of $120 million
expiring in July 1996 and $80 million
expiring in July 1994. These lines of
credit have annual fees ranging from
0.15% to 0.25% and do not require
compensating cash balances. The
facilities are used primarily as backup
for both commercial paper and borrowings
from commercial banks under uncommitted
lines of
credit. At December 31, 1993, there
were no outstanding borrowings under the
committed facilities.
Portland General has a commercial paper
facility of $40 million in addition to
PGE's $200 million facility. The amount
of commercial paper outstanding cannot
exceed each company's unused committed
lines of credit.
Commercial paper and lines of credit
borrowings are at rates reflecting
current market conditions and,
generally, are substantially below the
prime commercial rate.
Short-term borrowings and related
interest rates were as follows
(thousands of dollars):
1993 1992 1991
As of year end:
Aggregate short-term debt outstanding
Bank loans - $ 10,002 $
16,000
Commercial paper $159,414 130,676
76,473
Weighted average interest rate
Bank loans - 4.4%
6.8%
Commercial paper 3.5% 4.1
5.5
Unused committed lines of credit $240,000 $180,000
$175,000
For the year ended:
Average daily amounts of short-term
debt outstanding
Bank loans $ 10,949 $ 7,671 $
56,579
Commercial paper 123,032 89,077
30,539
Weighted daily average interest rate
Bank loans 3.6% 5.0%
7.2%
Commercial paper 3.5 4.2
6.5
Maximum amount outstanding
during the year $171,208 $144,056
$108,231
Interest rates exclude the effect of commitment
fees, facility fees and other financing fees.
<PAGE> 50
Note 9
Long-Term Debt
The Indenture securing PGE's First
Mortgage Bonds constitutes a direct
first mortgage lien on substantially all
utility property and franchises, other
than expressly excepted property.
The following principal amounts of
long-term debt become due for redemption
through sinking funds and maturities
(thousands of dollars):
1994 1995 1996 1997
1998
Sinking Funds $ 1,313 $ 1,138 $ 988 $ 688
$ 688
Maturities 41,289 71,356 57,528 56,085
64,745
The sinking funds include $988,000 a
year for 1994 through 1996 and $688,000
for 1997 and 1998, which, in accordance
with the terms of the Indenture, PGE may
satisfy by pledging available property
additions equal to 166-2/3% of the
sinking fund requirements.
Note 10
Commitments
New Generating Resources
During 1993 PGE entered into a $133
million agreement with a contractor for
construction of the Coyote Springs
cogeneration facility. Under the terms
of the agreement, PGE is committed to
making progress payments of
approximately $91 million in 1994, and
$16 million in 1995. At December 31,
1993, progress payments of approximately
$26 million have been made.
Natural Gas Transmission Agreements
In January 1993, PGE signed two long-
term agreements for transmission of
natural gas from domestic and Canadian
sources to PGE's existing and proposed
natural gas-fired generating facilities.
One agreement provides PGE firm pipeline
capacity beginning June, 1993 and
increased pipeline capacity in November
1995. Beginning in late 1995, the
second agreement will give PGE capacity
on a second interstate gas pipeline.
Under the terms of these two agreements,
PGE is committed to paying capacity
charges of approximately $3 million
during 1994, $4 million in 1995,
$11 million annually through 2010 and $3
million annually until 2015. Under
these agreements PGE has the right to
assign unused capacity to other parties.
In addition, PGE will make a capital
contribution for pipeline construction
of between $3 million and $7 million in
1995.
Railroad Service Agreement
In October 1993, PGE entered into a
railroad service agreement and will make
capital contributions toward upgrading a
line used to deliver coal from Wyoming
to the Boardman Coal Plant (Boardman).
PGE is required to contribute $8 million
over the 6-year contract life.
Purchase Commitments
Other purchase commitments outstanding
(principally construction at PGE)
totaled approximately $14 million at
December 31, 1993. Cancellation of
these purchase agreements could result
in cancellation charges.
<PAGE> 51
Purchased Power
PGE has long-term power purchase
contracts with certain public utility
districts in the state of Washington and
with the City of Portland, Oregon. PGE
is required to pay its proportionate
share of the operating and debt service
costs of the hydro projects whether or
not they are operable. Selected
information is summarized as follows
(thousands of dollars):
Rocky Priest
Portland
Reach Rapids Wanapum
Wells Hydro
Revenue bonds outstanding
at December 31, 1993 $189,752 $141,245 $189,395
$199,920 $ 40,230
PGE's current share of output,
capacity, and cost
Percentage of output 12.0% 13.9% 18.7%
21.9% 100%
Net capability in megawatts 154 125
170 184 36
Annual cost, including debt
service
1993 $4,000 $3,800 $5,400
$5,500 $4,800
1992 3,900 3,100 4,400
4,800 4,400
1991 3,800 3,400 4,000
4,300 3,800
Contract expiration date 2011 2005 2009
2018 2017
PGE's share of debt service costs,
excluding interest, will be
approximately $6 million for each of the
years 1994 through 1996, $7 million for
1997 and $5 million for 1998. The
minimum payments through the remainder
of the contracts are estimated to total
$104 million.
PGE has entered into long-term contracts
to purchase power from three other
utilities in the
region. These contracts will require
fixed payments of up to $25 million in
1994 and $32 million in 1995 and 1996.
After that date, capacity charges will
be up to $25 million annually until the
second contract terminates in 2001. The
third contract will continue until 2016
with capacity charges of $19 million
annually.
<PAGE> 52
Leases
PGE has operating and capital leasing
arrangements for its headquarters
complex, combustion turbines and the
coal-handling facilities and certain
railroad cars for Boardman. PGE's
aggregate rental payments charged to
expense amounted to $22 million in 1993,
$20 million in 1992 and $21 million in
1991. PGE has capitalized its
combustion turbine leases. However,
these leases are considered operating
leases for ratemaking purposes.
As of December 31, 1993, the future
minimum lease payments under non-
cancelable leases are as follows
(thousands of dollars):
Year Ending Operating Leases
December 31 Capital Leases (Net of Sublease Rentals)
Total
1994 $ 3,016 $ 18,568 $
21,584
1995 3,016 19,711
22,727
1996 3,016 20,261
23,277
1997 3,016 19,794
22,810
1998 3,016 18,992
22,008
Remainder 1,388 186,575
187,963
Total 16,468 $283,901
$300,369
Imputed (2,775)
Interest
Present Value of
Minimum Future
Net Lease Payments $13,693
Included in the future minimum operating
lease payments schedule above is
approximately $140 million for PGE's
headquarters complex.
Note 11
WNP-3 Settlement Exchange Agreement
PGE is selling energy received under a
WNP-3 Settlement Exchange Agreement
(WSA) to the Western Area Power
Administration (WAPA) for 25 years,
which began October 1990. Revenues from
the WAPA sales contract are expected to
be sufficient to support the carrying
value of PGE's investment.
The energy received by PGE under WSA is
the result of a settlement related to
litigation surrounding the abandonment
of WNP-3. PGE receives about 65 average
annual megawatts for approximately 30
years from BPA under the WSA. In
exchange PGE will make available to BPA
energy from its combustion turbines or
from other available resources at an
agreed-to price.
<PAGE> 53
Note 12
Jointly-Owned Plant
At December 31, 1993, PGE had the
following investments in jointly-owned
generating plants (thousands of
dollars):
MW PGE % Plant
Accumulated
Facility Location Fuel Capacity Interest In
Service Depreciation
Boardman Boardman, OR Coal 508 65.0
$359,555 $152,981
Colstrip 3&4 Colstrip, MT Coal 1,440 20.0
444,817 157,576
Centralia Centralia, WA Coal 1,310 2.5
9,301 5,143
The dollar amounts in the table above
represent PGE's share of each jointly-
owned plant. Each participant in the
above generating plants has provided its
own financing. PGE's share of the
direct expenses of these plants is
included in the corresponding operating
expenses on Portland General's and PGE's
consolidated income statements.
Note 13
Regulatory Matters
Public Utility Commission of Oregon
PGE had sought judicial review of three
rate matters related to a 1987 general
rate case. In 1989, PGE reserved $89
million for an unfavorable outcome of
these matters. In July 1990, PGE
reached an out-of-court settlement with
the PUC on two of the three rate matter
issues being litigated. As a result of
the settlement, $16 million was restored
to income in 1990. The settlement
resolved the dispute with the PUC
regarding treatment of accelerated
amortization of certain ITC and 1986-
1987 interim relief. As a settlement of
the interim relief issue, PGE refunded
approximately $17 million to customers.
In 1991, the Utility Reform Project (URP)
petitioned the PUC to reconsider the order
approving the settlement. The Oregon legislature
subsequently passed a law clarifying the PUC's
authority to approve the settlement. As a
result, the PUC issued an order implementing the
settlement. URP has filed an appeal in
Multnomah County Circuit Court to overturn the
PUC's order implementing settlement.
In addition, CUB filed a complaint in 1991 in
Marion County Circuit Court seeking to
modify, vacate, set aside or reverse the
PUC's order implementing settlement. In
September 1992, the Marion County
Circuit Court judge issued a decision
upholding the PUC orders approving the
settlement. CUB appealed the decision.
In December 1993 the Oregon Court of
Appeals affirmed without opinion the
Circuit Court decision upholding the PUC
order.
The settlement, however, did not resolve
the Boardman/Intertie gain issue, which
the parties continue to litigate. PGE's
position is that 28% of the gain should
be allocated to customers. The 1987 rate
order allocated 77% of the gain to customers
over a 27-year period. PGE has fully reserved
this amount, which is being amortized over a
27-year period in accordance with the 1987
rate order. The unamortized gain, $120
million at December 31, 1993, is shown as
"Regulatory reserves" on the balance sheet.
In PGE's general rate filing, PGE proposes to
accelerate the amortization of the Boardman
gain to customers from 27 years to three years,
starting in January 1995, as part of a
comprehensive settlement of the outstanding
litigation on this issue.
<PAGE> 54
While the ultimate disposition of these matters
may have an impact on the results of operations
for a future reporting period, management
believes, based on discussion of the underlying
facts and circumstances with legal counsel,
these matters will not have a material adverse
effect on the financial condition of
Portland General.
Note 14
Legal Matters
WNP Cost Sharing
PGE and three other investor-owned
utilities (IOUs) are involved in
litigation surrounding the proper
allocation of shared costs between
Washington Public Power Supply System
(Supply System) Units 1 and 3 and Units
4 and 5. A court ruling issued in May
1989 stated that Bond Resolution
No. 890, adopted by the Supply System,
controlled disbursement of proceeds from
bonds issued for the construction of
Unit 5, including the method for
allocation of shared costs. It is the
IOUs' contention that at the time the
project commenced there was agreement
among the parties as to the allocation
of shared costs and that this agreement
and the Bond Resolution are consistent
such that the allocation under the
agreement is not prohibited by the Bond
Resolution.
In October 1990, the U.S. District Court
ruled that the methodology for the
allocation of shared costs required the
application of principles akin to those
espoused by Chemical Bank. In February
1992, the Court of Appeals reversed the
U.S. District Court's decision and ruled
that shared costs between Units 3 and 5
should be allocated in proportion to
benefits under the equitable method
supported by PGE and the other IOUs. A
trial remains necessary to assure that
the allocations are properly performed.
Bonneville Pacific Class Action Suit and Lawsuit
A consolidated case of all previously
filed class actions has been filed in
U.S. District Court for the District of
Utah purportedly on behalf of purchasers
of common shares and convertible
subordinated debentures of Bonneville
Pacific Corporation in the period from
August 18, 1989 until January 22, 1992
alleging violations of federal and Utah
state securities laws, common law fraud
and negligent misrepresentation. The
defendants are specific Bonneville
Pacific insiders, Portland General,
Portland General Holdings, Inc., certain
Portland General individuals, Deloitte &
Touche and three underwriters of a
Bonneville Pacific offering of
subordinated debentures. The amount of
damages alleged is not specified.
In addition, the bankruptcy trustee for
Bonneville Pacific has filed an amended
complaint against Portland General,
Holdings, and certain affiliated
individuals in U.S. District Court for
the District of Utah alleging common law
fraud, breach of fiduciary duty,
tortious interference, negligence,
negligent misrepresentation and other
actionable wrongs. The original suit
was filed by Bonneville Pacific prior to
the appointment of the bankruptcy
trustee. The amount of damages sought
is not specified in the complaint.
Other Legal Matters
Portland General and certain of its
subsidiaries are party to various other
claims, legal actions and complaints
arising in the ordinary course of
business. These claims are not
considered material.
Summary
While the ultimate disposition of these
matters may have an impact on the
results of operations for a future
reporting period, management believes,
based on discussion of the underlying
facts and circumstances with legal
counsel, that these matters will not
have a material adverse effect on the
financial condition of Portland General.
Other Bonneville Pacific Related
Litigation
Holdings filed complaints seeking
approximately $228 million in damages in
the Third Judicial District Court for
Salt Lake County (in Utah) against
Deloitte & Touche and certain other
parties associated with Bonneville
Pacific alleging that it relied on
fraudulent and negligent statements and
omissions by Deloitte & Touche and the
other defendants when it acquired a 46%
interest in and made loans to Bonneville
Pacific starting in September 1990.
<PAGE> 55
Note 15
Fair Value of Financial Instruments
The following methods and assumptions
were used to estimate the fair value of
each class of financial instruments for
which it is practicable to estimate that
value:
Cash and cash equivalents
The carrying amount of cash and cash
equivalents approximates fair value
because of the short maturity of those
instruments.
Other investments
Other investments approximate market
value.
Redeemable preferred stock
The fair value of redeemable preferred
stock is based on quoted market prices.
Long-term debt
The fair value of long-term debt is
estimated based on the quoted market
prices for the same or similar issues or
on the current rates offered to Portland
General for debt of similar remaining
maturities.
The estimated fair values of financial
instruments are as follows (thousands of
dollars):
<TABLE>
<CAPTION>
1993 1992
<S> <C> <C> <C> <C>
Carrying Fair Carrying
Fair
Amount Value Amount
Value
Preferred stock subject to $ 80,000 $ 84,815 $ 83,600 $
82,686
mandatory redemption
Long-term debt 870,814 902,059 886,629
915,292
</TABLE>
Note 16
Subsequent Event
In February 1994, Portland General issued 2.3
million shares of common stock. Proceeds to
Portland General were $41 million.
These proceeds were used to purchase 2.3 million
additional shares of PGE common stock.
PGE, in turn, will use the funds to repay all or a
portion of its short-term borrowings or for its
construction program.
<PAGE> 56
QUARTERLY COMPARISON FOR 1993 AND 1992 (Unaudited)
Portland General Corporation
<TABLE>
<CAPTION>
<S> <C> <C>
<C> <C>
March 31
June 30 September 30 December 31
(Thousands of Dollars except per share amounts)
1993
Operating revenues $277,697
$192,236 $209,160 $267,736
Net operating income 56,052
31,264 23,726 49,389
Net income 36,556
13,328 6,349 32,885
Common stock
Average shares outstanding 47,243,743 47,354,072
47,458,575 47,564,862
Earnings per average share1 $.77
$.28 $.13 $.69
1992
Operating revenues $237,664
$196,935 $195,336 $253,331
Net operating income 47,006
31,094 31,834 53,566
Net income 26,408
11,522 12,436 39,2573
Common stock
Average shares outstanding 46,672,173 46,818,420
46,965,574 47,092,570
Earnings per average share1 $.57
$.25 $.272 $.842
1As a result of dilutive effects of shares issued during the
period, quarterly earnings per share cannot be
added to arrive at annual earnings per share.
2Includes $.01 for tax benefits from ESOP dividends.
3Includes $11 million related to capitalization of Trojan steam
generator repair costs.
Portland General Electric Company
March 31 June 30 September 30
December 31
(Thousands of Dollars)
1993
Operating revenues $277,169 $191,722 $208,444
$267,196
Operating income 52,234 30,475 27,566
46,175
Net income 37,382 16,704 14,302
31,356
Income available for
common stock 34,314 13,703 11,314
28,367
1992
Operating revenues $236,963 $196,144 $194,587
$252,404
Operating income 46,505 31,078 30,750
51,704
Net income 31,293 16,383 16,216
41,6703
Income available for
common stock 28,076 13,100 13,148
38,602
</TABLE>
<PAGE> 57
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
None.
Part III
Item 10-13.
Information Regarding Directors and Executive Officers of the
Registrant
Portland General Corporation
Information for items 10-13 are incorporated by reference to
Portland
General's definitive proxy statement to be filed on or about
March 29, 1994.
Executive officers of Portland General are listed on page 23 of
this report.
Portland General Electric Company
Information regarding item 10 (Executive Compensation) is
incorporated by
reference to Portland General's definitive proxy statement to be
filed on or
about March 29, 1994 with the exception of Mr. Cross'
compensation for
the year 1991 when he was an executive officer at Portland
General Electric.
The information for Mr. Cross is as follows:
Annual Compensation Long-Term
Compensation
Awards/Options
Year Salary ($) Bonus ($) (#)
1991 $150,000 $ 5,0251 15,000
1Mr. Cross received a bonus in 1991 due to his mid-year
starting date the
prior year; this
bonus was attributable to both 1990 and 1991.
Information for items 11-13 are incorporated by reference to
Portland
General's definitive proxy statement to be filed on or about
March 29, 1994.
Executive officers of Portland General Electric are listed on
page 23 of this
report.
<PAGE> 58
Part IV
Item 14. Exhibits, Financial Statement Schedules and Reports
on
Form 8-K
Portland General Corporation and Portland General Electric
Company
(a)Index to Financial Statements and Financial Statement
Schedules
<TABLE>
<CAPTION>
Page No.
PGC PGE
<S>
<C> <C>
Financial Statements
Report of Independent Public Accountants
34 76
Consolidated Statements of Income for each of the three years
in the period ended December 31, 1993
35 77
Consolidated Statements of Retained Earnings for each of the
the three years in the period ended December 31, 1993
35 77
Consolidated Balance Sheets at December 31, 1993 and 1992
36 78
Consolidated Statements of Capitalization at December 31, 1993
and 1992
37 79
Consolidated Statements of Cash Flow for each of the three
years in the period ended December 31, 1993
38 80
Notes to Financial Statements
39 81
Financial Statement Schedules
Schedule V - Property, Plant and Equipment
60 60
Schedule VI - Accumulated Depreciation and
Amortization of Property, Plant and Equipment
62 62
Schedule X - Supplementary Income Statement Information
63 63
Report of Independent Public Accountants
64 65
Other schedules are omitted because of the absence of conditions
under which they are
required or because the required information is given in the
financial statements or notes
thereto.
</TABLE>
Exhibits
See Exhibit Index on Page 69 of this report.
(b) Report on Form 8-K
PGC PGE
November 8, 1993 - Item 5. Other Events:
X X
A request was filed by PGE to increase electric prices.
February 15, 1994 - Item 5. Other Events:
X X
Portland General and PGE 1993 financial information.
<PAGE> 59
Schedule V - Property, Plant and Equipment (Thousands of Dollars)
Portland General Corporation
Substantially the same as PGE's Schedule V below.
Portland General Electric Company
<TABLE>
<CAPTION>
<S> <C> <C> <C>
<C> <C>
Balance at Retirements
Transfers Balance
Beginning Additions or Sales
and Other at End of
Classification of Period at Cost at Cost
Changes Period
For the Year Ended December 31, 1993
PROPERTY, PLANT AND EQUIPMENT
Electric utility plant:
Production $1,061,509 $ 10,383 $ 1,073
$ (383) $1,070,436
Transmission 245,809 3,986 921
401 249,275
Distribution 759,689 61,368 7,393
(32) 813,632
General 181,620 15,404 6,700
114 190,438
Construction work in
progress 12,308 34,371 -
- 46,679
Capital leases 37,318 - -
- 37,318
2,298,253 125,512 16,087
100 2,407,778
Nonutility property - PGE 16,080 799 126
(100) 16,653
$2,314,333 $126,311 $16,213
$ 0 $2,424,431
For the Year Ended December 31, 1992
PROPERTY, PLANT AND EQUIPMENT
Electric utility plant:
Production $1,562,158 $ 67,321 $
567,752(a)$ (218) $1,061,509
Nuclear decommissioning 488,000 -
488,000(b) - -
Transmission 235,459 15,962
5,517(a) (95) 245,809
Distribution 708,378 56,438 5,131
4 759,689
General 176,908 20,151
15,862(a) 423 181,620
Construction work in
progress 43,865 (16,876)
14,681(b) - 12,308
Nuclear fuel 254,113 849
254,962(b) - -
Capital leases 37,318 - -
- 37,318
3,506,199 143,845
1,351,905 114 2,298,253
Nonutility property - PGE 16,703 284
793 (114) 16,080
3,522,902 $144,129
$1,352,698 $ - $2,314,333
<PAGE> 60
For the Year Ended December 31, 1991
PROPERTY, PLANT AND EQUIPMENT
Electric utility plant:
Production $1,543,755 $ 19,448 $ 1,353
$ 308 $1,562,158
Nuclear decommissioning - - -
488,000(c) 488,000
Transmission 230,270 6,852 1,714
51 235,459
Distribution 657,066 56,571 5,199
(60) 708,378
General 167,059 14,385 4,239
(297) 176,908
Construction work in
progress 21,469 22,396 -
- 43,865
Nuclear fuel 234,234 19,879 -
- 254,113
Capital leases 37,318 - -
- 37,318
2,891,171 139,531 12,505
488,002 3,506,199
Nonutility property - PGE 15,794 1,060 149
(2) 16,703
$2,906,965 $140,591 $ 12,654
$488,000 $3,522,902
(a) Includes Trojan plant costs of $581,674 transferred to
Deferred Charges. See Note 6, Trojan Nuclear
Plant.
(b) Transferred to Deferred Charges. See Note 6, Trojan Nuclear
Plant.
(c) Nuclear decommissioning estimate was reclassified for 1991 in
order to provide comparable balance
sheets.
</TABLE>
<PAGE> 61
<TABLE>
<CAPTION>
Schedule VI - Accumulated Depreciation and Amortization of
Property, Plant and Equipment (Thousands of
Dollars)
Portland General Corporation
Substantially the same as PGE's Schedule VI below.
Portland General Electric Company
<S> <C> <C> <C>
<C> <C>
Additions
Deductions
Balance at Charged Charged
Balance
Beginning to to Other
Retirements at End of
Description of Period Income Accounts
(Net)(a) Period
For the Year Ended December 31, 1993
ACCUMULATED DEPRECIATION
Electric utility plant:
Production $ 407,210 $35,349 $ 265 $
898 $441,926
Transmission 76,971 6,870 -
1,783 82,058
Distribution 261,199 34,265 2
11,998 283,468
General 79,985 9,308 3,512 (d)
5,973 86,832
825,365 85,792 3,779
20,652 894,284
Nonutility property - PGE 5,704 674 (e) -
109 6,269
$ 831,069 $86,466 $ 3,779
$20,761 $900,553
ACCUMULATED AMORTIZATION
Capital leases $ 21,471 $ - $ 2,155 $
- $ 23,626
For the Year Ended December 31, 1992
ACCUMULATED DEPRECIATION
Electric utility plant:
Production $ 577,650 $ 56,148 $ -
$226,588(b) $ 407,210
Nuclear decommissioning 24,760 11,220 1,621(c)
37,601(b) -
Transmission 73,890 6,726 -
3,645(b) 76,971
Distribution 238,170 32,198 1
9,170 261,199
General 75,154 9,456 3,940(d)
8,565(b) 79,985
989,624 115,748 5,562
285,569 825,365
Nonutility property - PGE 5,202 648(e) -
146 5,704
$ 994,826 $116,396 $ 5,562
$285,715 $ 831,069
ACCUMULATED AMORTIZATION
Nuclear fuel $ 208,399 $ 11,662 $ -
$220,061(b) $ -
Capital leases 19,675 - 1,796
- 21,471
$ 228,074 $ 11,662 $ 1,796
$220,061 $ 21,471
For the Year Ended December 31, 1991
ACCUMULATED DEPRECIATION
Electric utility plant:
Production $ 513,951 $ 65,090 $ -
$ 1,391 $ 577,650
Nuclear decommissioning 23,928 - 832(c)
- 24,760
Transmission 69,758 6,403 -
2,271 73,890
Distribution 215,129 30,053 6
7,018 238,170
General 67,066 8,414 3,764(d)
4,090 75,154
889,832 109,960 4,602
14,770 989,624
Nonutility property - PGE 4,613 615(e) -
26 5,202
$ 894,445 $ 110,575 $ 4,602
$ 14,796 $ 994,826
ACCUMULATED AMORTIZATION
Nuclear fuel $ 204,736 $ 3,663 $ -
$ - $ 208,399
Capital leases 17,880 - 1,795
- 19,675
$ 222,616 $ 3,663 $ 1,795
$ - $ 228,074
(a) Retirements have been reduced by net salvage on depreciable
property.
(b) Includes Trojan amounts transferred to Deferred Charges.
See Note 6, Trojan Nuclear Plant.
(c) Earnings on external Decommissioning Trust.
(d) Additions charged to other accounts consist of provisions
for depreciation of transportation and
computer equipment.
(e) Nonutility provisions for depreciation are charged to Other
Income and Deductions in the Consolidated
Statements
of Income.
</TABLE>
<PAGE> 62
Schedule X - Supplementary Income Statement Information
(Thousands of Dollars)
Portland General Corporation
Substantially the same as PGE's Schedule X below.
<TABLE>
<CAPTION>
Portland General Electric Company
Charged to Expense for
the Year Ended December 31
Item 1993 1992 1991
<S> <C> <C> <C>
Taxes other than income taxes
Property $28,929 $30,142 $33,359
Payroll 7,584 7,962 8,536
City taxes and license fees 17,769 15,804 15,383
Other 1,393 1,037 1,059
Total $55,675 $54,945 $58,337
Nuclear fuel expenses
Amortization $ - $11,662 $ 3,663
Nuclear fuel storage - 593 1,019
Total $ - $12,255 $ 4,682
Maintenance expenses are set out separately in the 1993
Consolidated Financial Statements. Amounts
related to the amortization of intangible assets and advertising
costs are not material.
</TABLE>
<PAGE> 63
<TABLE>
<CAPTION>
<S> <C>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULES
To Portland General Corporation:
We have audited in accordance with generally accepted auditing
standards, the consolidated
financial statements of Portland General Corporation and
subsidiaries included in this
Form 10-K and have issued our report thereon dated January 25,
1994, except for the
matter discussed in Note 16, as to which the date is February 23,
1994. Our report on the
consolidated financial statements includes an emphasis paragraph
regarding the realization
of assets related to the abandoned Trojan Nuclear Plant in the
amount of $722 million,
discussed in Note 6, and an explanatory paragraph with respect to
the change in method of
accounting for income taxes discussed in Note 5 to the
consolidated financial statements.
Our audits were made for the purpose of forming an opinion on the
basic financial
statements taken as a whole. The schedules listed in the Index
to Financial Statements and
Financial Statement Schedules are the responsibility of the
Company's management and are
presented for purposes of complying with the Securities and
Exchange Commission's rules
and are not part of the basic financial statements. These
schedules have been subjected to
the auditing procedures applied in our audits of the basic
financial statements and, in our
opinion, fairly state in all material respects the financial data
required to be set forth therein
in relation to the basic financial statements taken as a whole.
Portland, Oregon,
January 25, 1994 (except for the matter
discussed in Note 16, as to which the date
is February 23, 1994) ARTHUR ANDERSEN & CO.
<PAGE> 64
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULES
To Portland General Electric Company:
We have audited in accordance with generally accepted auditing
standards, the consolidated
financial statements of Portland General Electric Company and
subsidiaries included in this
Form 10-K and have issued our report thereon dated January 25,
1994, except for the
matter discussed in Note 16, as to which the date is February 23,
1994. Our report on the
consolidated financial statements includes an emphasis paragraph
regarding the realization
of assets related to the abandoned Trojan Nuclear Plant in the
amount of $722 million,
discussed in Note 6, and an explanatory paragraph with respect to
the change in method of
accounting for income taxes discussed in Note 5A to the
consolidated financial statements.
Our audits were made for the purpose of forming an opinion on the
basic financial
statements taken as a whole. The schedules listed in the Index
to Financial Statements and
Financial Statement Schedules are the responsibility of the
Company's management and are
presented for purposes of complying with the Securities and
Exchange Commission's rules
and are not part of the basic financial statements. These
schedules have been subjected to
the auditing procedures applied in our audits of the basic
financial statements and, in our
opinion, fairly state in all material respects the financial data
required to be set forth therein
in relation to the basic financial statements taken as a whole.
Portland, Oregon,
January 25, 1994 (except for the matter
discussed in Note 16, as to which the date
is February 23, 1994) ARTHUR ANDERSEN & CO.
<PAGE> 65
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its
behalf by the undersigned,
thereunto duly authorized.
Portland General
Corporation
February 28, 1994 By /s/ Ken L.
Harrison
Ken L. Harrison
Chairman of the Board
and
Chief Executive
Officer
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been
signed below by the following persons on behalf of the Registrant
and in the capacities and
on the dates indicated.
Chairman of the Board and
/s/ Ken L. Harrison Chief Executive Officer February 28,
1994
Ken L. Harrison
Vice President Finance,
Chief Financial Officer,
Chief Accounting Officer
/s/ Joseph M. Hirko and Treasurer February 28,
1994
Joseph M. Hirko
*Gwyneth Gamble Booth
*Peter J. Brix
*Carolyn S. Chambers
Edward L. Clark, Jr.
*John W. Creighton, Jr.
*Ken L. Harrison
*Jerry E. Hudson Directors February 28,
1994
Calvert Knudsen
*Warren E. McCain
*Jerome J. Meyer
*Randolph L. Miller
*Richard G. Reiten
*Robert W. Roth
*Bruce G. Willison
*By /s/ Joseph E. Feltz
(Joseph E. Feltz, Attorney-in-Fact)
<PAGE> 66
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its
behalf by the undersigned,
thereunto duly authorized.
Portland General Electric
Company
February 28, 1994 By /s/ Ken L.
Harrison
Ken L. Harrison
Chairman of the Board
and
Chief Executive
Officer
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been
signed below by the following persons on behalf of the Registrant
and in the capacities and
on the dates indicated.
Chairman of the Board and
/s/ Ken L. Harrison Chief Executive Officer February 28,
1994
Ken L. Harrison
Vice President Finance
Chief Financial Officer,
Chief Accounting Officer
/s/ Joseph M. Hirko and Treasurer February 28,
1994
Joseph M. Hirko
*Gwyneth Gamble Booth
*Peter J. Brix
*Carolyn S. Chambers
Edward L. Clark, Jr.
*John W. Creighton, Jr.
*Ken L. Harrison
*Jerry E. Hudson Directors
February , 1994
Calvert Knudsen
*Warren E. McCain
*Jerome J. Meyer
*Randolph L. Miller
*Robert W. Roth
*Bruce G. Willison
*By /s/ Joseph E. Feltz
(Joseph E. Feltz, Attorney-in-Fact)
<PAGE> 67
Note: Although the Exhibits furnished to the Securities and
Exchange
Commission with the Form 10-K have been omitted herein, they will
be supplied upon
written request and payment of a reasonable fee for reproduction
costs. Requests should be
sent to:
Joseph M. Hirko
Vice President Finance,
Chief Financial Officer,
Chief Accounting Officer
and Treasurer
Portland General Corporation
121 SW Salmon Street
Portland, OR 97204
<PAGE> 68
</TABLE>
PORTLAND GENERAL CORPORATION AND SUBSIDIARIES
EXHIBIT INDEX
Number Exhibit PGC
PGE
(3) * Restated Articles of Incorporation of Portland General
Corporation [Pre-effective Amendment No. 1 to Form S-4,
Registration No. 33-1987, dated December 31, 1985,
Exhibit (B)]. X
* Certificate of Amendment, dated July 2, 1987, to the
Articles of Incorporation limiting the personal
liability of directors of Portland General Corporation
[Form 10-K for the fiscal year ended December 31, 1987,
Exhibit (3)]. X
* Copy of Articles of Incorporation of Portland General
Electric Company [Registration No. 2-85001, Exhibit (4)].
X
* Certificate of Amendment, dated July 2, 1987, to the
Articles of Incorporation limiting the personal
liability of directors of Portland General Electric
Company [Form 10-K for the fiscal year ended
December 31, 1987, Exhibit (3)].
X
*Form of Articles of Amendment of the New Preferred
Stock of Portland General Electric Company
[Registration No. 33-21257, Exhibit (4)].
X
* Bylaws of Portland General Corporation as amended on
February 5, 1991 [Form 10-K for the fiscal year
ended December 31, 1990, Exhibit (10)]. X
* Bylaws of Portland General Electric Company as
amended on October 1, 1991 [Form 10-K for the fiscal
X
year ended December 31, 1991, Exhibit (3)].
(4) *Portland General Electric Company Indenture of Mortgage
and Deed of Trust dated July 1, 1945;
Ninth Supplemental Indenture dated June 1, 1960;
Tenth Supplemental Indenture dated November 1, 1961;
Eleventh Supplemental Indenture dated February 1, 1963;
Twelfth Supplemental Indenture dated June 1, 1963;
Thirteenth Supplemental Indenture dated April 1, 1964;
Fourteenth Supplemental Indenture dated March 1, 1965
(Form 8, Amendment No. 1, dated June 14, 1965). X
X
* Fifteenth Supplemental Indenture, dated June 1, 1966;
Sixteenth Supplemental Indenture, dated October 1, 1967;
Eighteenth Supplemental Indenture, dated November 1, 1970;
Nineteenth Supplemental Indenture, dated November 1, 1971;
Twentieth Supplemental Indenture, dated November 1, 1972;
Twenty-First Supplemental Indenture, dated April 1, 1973;
Twenty-Second Supplemental Indenture, dated October 1, 1973;
Twenty-Seventh Supplemental Indenture, dated April 1, 1976;
<PAGE> 69PORTLAND GENERAL CORPORATION AND SUBSIDIARIES
EXHIBIT INDEX
Number Exhibit PGC
PGE
Twenty-Ninth Supplemental Indenture, dated June 1, 1977
(Registration No. 2-61199, Exhibit 2.d-1). X
X
* Thirtieth Supplemental Indenture, dated October 1,
1978; Thirty-First Supplemental Indenture, dated
November 1, 1978 (Registration No. 2-63516,
Exhibit 2.d-3). X
X
* Thirty-Eighth Supplemental Indenture dated June 1,
1985 [Form 10-Q for the quarter ended June 30, 1985,
Exhibit (4)]. X
X
* Thirty-Ninth Supplemental Indenture, dated March 1,
1986 [Form 10-K for the fiscal year ended December 31,
1985, Exhibit (4)]. X
X
* Fortieth Supplemental Indenture, dated October 1,
1990 [Form 10-K for the fiscal year ended December 31,
1990, Exhibit (4)]. X
X
* Forty-First Supplemental Indenture dated December 31,
1991 [Form 10-K for the fiscal year ended December 31, X
X
1991, Exhibit (4)].
*Forty-Second Supplemental Indenture dated April 1, 1993
[Form 10-Q for the quarter ended March 31,1993,
Exhibit (4)]. X
X
* Forty-Third Supplemental Indenture dated July 1, 1993
[Form 10-Q for the quarter ended September 30, 1993,
Exhibit (4)]. X
X
Other instruments which define the rights of holders of
long-term debt not required to be filed herein will be
furnished upon written request.
(10) *Residential Purchase and Sale Agreement with the
Bonneville Power Administration [Form 10-K for the
fiscal year ended December 31, 1981, Exhibit (10)]. X
X
*Power Sales Contract and Amendatory Agreement Nos. 1 and
2 with Bonneville Power Administration [Form 10-K for
the fiscal year ended December 31, 1982, Exhibit (10)]. X
X
The following exhibits were filed in conjunction with the
1985 Boardman/Intertie Sale:
*Long-term Power Sale Agreement, dated November 5, 1985
[Form 10-K for the fiscal year ended December 31, 1985,
Exhibit (10)]. X
X
*Long-term Transmission Service Agreement, dated
November 5, 1985 [Form 10-K for the fiscal year
ended December 31, 1985, Exhibit (10)]. X
X
<PAGE> 70PORTLAND GENERAL CORPORATION AND SUBSIDIARIES
EXHIBIT INDEX
Number Exhibit PGC
PGE
* Participation Agreement, dated December 30, 1985
[Form 10-K for the fiscal year ended December 31,
1985, Exhibit (10)]. X
X
* Lease Agreement, dated December 30, 1985 [Form 10-K
for the fiscal year ended December 31, 1985,
Exhibit (10)]. X
X
* PGE-Lessee Agreement, dated December 30, 1985
[Form 10-K for the fiscal year ended December 31,
1985, Exhibit (10)]. X
X
* Asset Sales Agreement, dated December 30, 1985
[Form 10-K for the fiscal year ended December 31,
1985, Exhibit (10)]. X
X
* Bargain and Sale Deed, Bill of Sale and Grant of
Easements and Licenses, dated December 30, 1985
[Form 10-K for the fiscal year ended December 31,
1985, Exhibit (10)]. X
X
* Supplemental Bill of Sale, dated December 30, 1985
[Form 10-K for the fiscal year ended December 31,
1985, Exhibit (10)]. X
X
* Trust Agreement, dated December 30, 1985 [Form 10-K
for the fiscal year ended December 31, 1985, Exhibit (10)] X
X
* Tax Indemnification Agreement, dated December 30, 1985
[Form 10-K for the fiscal year ended December 31, 1985,
Exhibit (10)]. X
X
* Trust Indenture, Mortgage and Security Agreement, dated
December 30, 1985 [Form 10-K for the fiscal year ended
December 31, 1985, Exhibit (10)]. X
X
* Restated and Amended Trust Indenture, Mortgage and
Security Agreement, dated February 27, 1986 [Form 10-K
for the fiscal year ended December 31, 1985, Exhibit (10)]. X
X
<PAGE> 71PORTLAND GENERAL CORPORATION AND SUBSIDIARIES
EXHIBIT INDEX
Number Exhibit PGC
PGE
*Portland General Corporation Outside Directors'
Deferred Compensation Plan, 1990 Restatement
dated November 1, 1990 [Form 10-K for the fiscal
year ended December 31, 1990, Exhibit (10)]. X
X
* Portland General Corporation Retirement Plan for
Outside Directors, 1990 Restatement dated July 10, 1990
[Form 10-K for the fiscal year ended December 31, 1990,
Exhibit (10)]. X
X
* Portland General Electric Company Outside Directors'
Life Insurance Benefit Plan 1988 Restatement [Form 10-K
for the fiscal year ended December 31, 1988, Exhibit (10)]. X
X
* Portland General Electric Company Outside Directors Life
Insurance Benefit Plan, Amendment No. 1 dated October 3,
1989 [Form 10-K for the fiscal year ended December 31,
1989, Exhibit (10)]. X
X
* Portland General Corporation Outside Directors Life
Insurance Benefit Plan, Amendment No. 2 dated
December 3, 1989 [Form 10-K for the fiscal year ended
December 31, 1989, Exhibit (10)]. X
X
* Portland General Corporation Outside Directors' Stock
Compensation Plan, Amended and Restated December 6,
1989 [Form 10-K for the fiscal year ended December 31,
X
1991, Exhibit (10)].
* Special Board Assignment for Robert W. Roth, dated
May 1, 1992. [Form 10-K for the fiscal year ended
December 31, 1992, Exhibit (10)] X
X
(24) Portland General Corporation Consent of Independent
Public Accountants (filed herewith). X
Portland General Electric Company Consent of Independent
Public Accountants (filed herewith).
X
(25) Portland General Corporation Power of Attorney
(filed herewith). X
Portland General Electric Company Power of Attorney
(filed herewith).
X
(28) Form 11-K relating to Employee Stock Purchase Plan of
Portland General Corporation (filed herewith). X
<PAGE> 72PORTLAND GENERAL CORPORATION AND SUBSIDIARIES
EXHIBIT INDEX
Number Exhibit PGC
PGE
Executive Compensation Plans and Arrangements
(10) * Portland General Corporation Management Deferred
Compensation Plan, 1990 Restatement dated November 1,
1990 [Form 10-K for the fiscal year ended December 31,
1990, Exhibit (10)]. X
X
* Portland General Corporation Management Deferred
Compensation Plan, Amendment No. 1 dated December 16,
1991 [Form 10-K for the fiscal year ended December 31, X
X
1991, Exhibit (10)].
*Portland General Electric Company Senior Officers'
Life Insurance Benefit Plan 1988 Restatement [Form 10-K
for the fiscal year ended December 31, 1988, Exhibit (10)]. X
X
* Portland General Electric Company Senior Officers'
Life Insurance Benefit Plan, Amendment No. 1 dated
October 3, 1989 [Form 10-K for the fiscal year ended
December 31, 1989, Exhibit (10)]. X
X
* Portland General Corporation Senior Officers Life
Insurance Benefit Plan, Amendment No. 2 dated
December 3, 1989 [Form 10-K for the fiscal year ended
December 31, 1989, Exhibit (10)]. X
X
* Portland General Corporation Annual Incentive Master Plan
[Form 10-K for the fiscal year ended December 31, 1987,
Exhibit (10)]. X
* Portland General Corporation Annual Incentive Master Plan,
Amendments No. 1 and No. 2 dated March 5, 1990 [Form
10-K for the fiscal year ended December 31, 1989, Exhibit
(10)]. X
* Portland General Electric Company Annual Incentive Master
Plan [Form 10-K for the fiscal year ended December 31, 1987,
Exhibit (10)].
X
* Portland General Electric Company Annual Incentive Master
Plan, Amendments No. 1 and No. 2 dated March 5, 1990
[Form 10-K for the fiscal year ended December 31, 1989,
Exhibit (10)].
X
* Portland General Corporation 1990 Long-term Incentive
Master Plan [Form 10-K for the fiscal year ended
December 31, 1990, Exhibit (10)]. X
X
* Portland General Corporation Supplemental Executive
Retirement Plan, 1990 Restatement dated July 10, 1990
[Form 10-K for the fiscal year ended December 31, 1990,
Exhibit (10)]. X
X
<PAGE> 73PORTLAND GENERAL CORPORATION AND SUBSIDIARIES
EXHIBIT INDEX
Number Exhibit
PGC PGE
(10) * Portland General Corporation Supplemental Executive
Cont.Retirement Plan, Amendment No. 1 dated January 1, 1991,
[Form 10-K for the fiscal year ended December 31, 1991, X
X
Exhibit (10)].
* Change in Control Severance Agreement, dated October 11,
1989 [Form 10-K for the fiscal year ended December 31,
1989, Exhibit (10)]. X
X
* Employment Contract for James E. Cross, dated April 17,
1990. [Form 10-K for the fiscal year ended December 31,
1992, Exhibit (10)].
X
* Salary Continuation Agreement for James E. Cross, dated
December 21, 1992. [Form 10-K for the fiscal year ended
December 31, 1992, Exhibit (10)].
X
* Enhanced Benefit Under Supplemental Executive Retirement
Plan for James E. Cross, dated August 4, 1992. [Form 10-K
for the fiscal year ended December 31, 1992, Exhibit (10)].
X
Portland General Corporation Amended and Restated 1990
Long-Term Incentive Master Plan, amended July 1993 (filed
herewith).
X
Portland General Corporation 1990 Long-Term Incentive
Master Plan, Amendment No. 1 dated February 8, 1994 (filed
herewith).
X
* Incorporated by reference as indicated.
<PAGE> 74
APPENDIX
PORTLAND GENERAL ELECTRIC COMPANY
TABLE OF CONTENTS
Page
PART II
Item 8. Financial Statements and Notes ...... 77
<PAGE> 75
Management's Statement of Responsibility
PGE's management is responsible for the preparation and
presentation of
the consolidated financial statements in this report.
Management is
also responsible for the integrity and objectivity of the
statements.
Generally accepted accounting principles have been used to
prepare the
statements, and in certain cases informed estimates have been
used that
are based on the best judgment of management.
Management has established, and maintains, a system of
internal
accounting controls. The controls provide reasonable
assurance that
assets are safeguarded, transactions receive appropriate
authorization, and
financial records are reliable. Accounting controls are
supported
by written policies and procedures, an operations planning
and budget
process designed to achieve corporate objectives, and
internal audits
of operating activities.
PGE's Board of Directors includes an Audit Committee
composed entirely
of outside directors. It reviews with management,
internal auditors
and independent auditors, the adequacy of internal controls,
financial
reporting, and other audit matters.
Arthur Andersen & Co. is PGE's independent public
accountant. As
a part of its annual audit, internal accounting controls
are selected
for review in order to determine the nature, timing and extent of
audit tests
to be performed. All of the corporation's financial
records and related
data are made available to Arthur Andersen & Co. Management has
also
endeavored to ensure that all representations to Arthur
Andersen &
Co. were valid and appropriate.
Joseph M. Hirko
Vice President Finance,
Chief Financial Officer,
Chief Accounting Officer
and Treasurer
Report of Independent Public Accountants
To the Board of Directors and Shareholder of
Portland General Electric Company:
We have audited the accompanying consolidated balance
sheets
and statements of capitalization of Portland General Electric
Company
and subsidiaries as of December 31, 1993 and 1992, and the
related
consolidated statements of income, retained earnings and cash
flows for
each of the three years in the period ended December 31, 1993.
These
financial statements are the responsibility of the
Company's management.
Our responsibility is to express an opinion on these
financial statements
based on our audits.
We conducted our audits in accordance with generally
accepted
auditing standards. Those standards require that we plan and
perform the
audit to obtain reasonable assurance about whether the
financial statements
are free of material misstatement. An audit
includes examining,
on a test basis, evidence supporting the amounts and
disclosures in the
financial statements. An audit also includes assessing the
accounting
principles used and significant estimates made
by management,
as well as evaluating the overall financial
statement
presentation. We believe that our audits provide a
reasonable basis
for our opinion.
As more fully discussed in Note 6 to the consolidated financial
statements,
the realization of assets related to the abandoned Trojan
Nuclear Plant
in the amount of $722 million is dependent upon the ratemaking
treatment as
determined by the Public Utility Commission of Oregon.
In our opinion, the financial statements referred to above
present fairly, in
all material respects, the financial position of
Portland General
Electric Company and subsidiaries as of December 31, 1993 and
1992, and the
results of their operations and their cash flows for each of
the three
years in the period ended December 31, 1993 in
conformity with
generally accepted accounting principles.
As more fully discussed in Note 5A to the consolidated
financial
statements, effective January 1, 1993, the Company changed its
method of
accounting for income taxes.
Portland, Oregon,
January 25, 1994 (except with respect to
the matter discussed in Note 16, as to
which the date is February 23, 1994) ARTHUR ANDERSEN & CO.
<PAGE> 76
Item 8. Financial Statements and Supplementary Data
Portland General Electric Company and Subsidiaries
Consolidated Statements of Income
<TABLE>
<CAPTION>
For the Years Ended December 31 1993
1992 1991
(Thousands of Dollars)
<S> <C>
<C> <C>
Operating Revenues
$944,531 $880,098 $885,578
Operating Expenses
Purchased power and fuel
311,713 222,127 226,312
Production and distribution
73,576 93,677 96,174
Maintenance and repairs
55,320 70,476 91,272
Administrative and other
98,408 107,657 115,443
Depreciation, decommissioning and amortization
121,898 98,039 111,539
Taxes other than income taxes
55,676 54,945 58,337
Income taxes
71,490 73,140 47,244
788,081 720,061 746,321
Net Operating Income
156,450 160,037 139,257
Other Income (Deductions)
Allowance for equity funds used during construction
- - 311 617
Other
11,771 7,717 9,099
Income taxes
(4,002) 2,511 (991)
7,769 10,539 8,725
Interest Charges
Interest on long-term debt and other
61,817 64,718 73,359
Interest on short-term borrowings
3,443 2,754 1,979
Allowance for borrowed funds used during construction
(785) (2,458) (1,431)
64,475 65,014 73,907
Net Income
99,744 105,562 74,075
Preferred Dividend Requirement
12,046 12,636 12,913
Income Available for Common Stock $
87,698 $ 92,926 $ 61,162
</TABLE>
Portland General Electric Company and Subsidiaries
Consolidated Statements of Retained Earnings
<TABLE>
<CAPTION>
For the Years Ended December 31 1993
1992 1991
(Thousands of Dollars)
<S> <C>
<C> <C>
Balance at Beginning of Year
$165,949 $146,198 $146,610
Net Income
99,744 105,562 74,075
ESOP Tax Benefit & Preferred Stock
Premium @ Redemption
(1,524) (2,505) 992
264,169 249,255 221,677
Dividends Declared
Common stock
72,826 70,670 62,566
Preferred stock
12,046 12,636 12,913
84,872 83,306 75,479
Balance at End of Year
$179,297 $165,949 $146,198
The accompanying notes are an integral part of these
consolidated statements.
</TABLE>
<PAGE> 77
Portland General Electric Company and
Subsidiaries
Consolidated Balance Sheets
<TABLE>
<CAPTION>
At December 31 1993
1992
(Thousands of Dollars)
<S> <C>
<C>
Assets
Electric Utility Plant - Original Cost
Utility plant (includes Construction Work
in Progress of $46,679 and $12,308)
$2,370,460 $2,260,935
Accumulated depreciation
(894,284) (825,365)
1,476,176 1,435,570
Capital leases - less amortization of $23,626 and $21,471
13,693 15,847
1,489,869 1,451,417
Other Property and Investments
Conservation loans
12,018 14,061
Trojan decommissioning trust, at market value
48,861 32,945
Other investments
65,696 57,673
126,575 104,679
Current Assets
Cash and cash equivalents
2,099 3,414
Accounts and notes receivable
85,169 81,999
Unbilled and accrued revenues
133,476 69,151
Inventories, at average cost
46,534 61,550
Prepayments and other
20,646 32,997
287,924 249,111
Deferred Charges
Unamortized regulatory assets
Trojan abandonment - Plant
366,712 399,255
Trojan abandonment - Decommissioning
355,718 339,514
Trojan - other
66,387 94,759
Income taxes recoverable
228,233 -
Debt reacquisition costs
34,941 22,634
Energy efficiency programs
39,480 23,989
Other
33,857 37,445
WNP-3 settlement exchange agreement
178,003 182,492
Miscellaneous
18,975 15,685
1,322,306 1,115,773
$3,226,674 $2,920,980
Capitalization and Liabilities
Capitalization
Common stock equity $
747,197 $ 726,076
Cumulative preferred stock
Subject to mandatory redemption
70,000 81,800
Not subject to mandatory redemption
69,704 69,704
Long-term debt
802,994 806,138
1,689,895 1,683,718
Current Liabilities
Long-term debt and preferred stock due within one year
41,614 34,500
Short-term borrowings
129,920 100,065
Accounts payable and other accruals
111,647 117,850
Accrued interest
17,139 23,416
Dividends payable
21,486 21,566
Accrued taxes
27,395 41,503
349,201 338,900
Other
Deferred income taxes
534,194 242,619
Deferred investment tax credits
60,706 64,781
Regulatory reserves
120,410 121,914
Trojan decommissioning reserve and misc. closure costs
407,610 411,404
Miscellaneous
64,658 57,644
1,187,578 898,362
$3,226,674 $2,920,980
</TABLE>
The accompanying notes are an integral part of these
consolidated balance sheets.
<PAGE> 78
Portland General Electric Company and
Subsidiaries
Consolidated Statements of
Capitalization
<TABLE>
<CAPTION>
At December 31 1993
1992
(Thousands of Dollars)
<S> <C>
<C>
Common Stock Equity
Common stock, $3.75 par value per
share, 100,000,000 shares authorized,
40,458,877 shares outstanding $
151,721 $ 151,721
Other paid-in capital - net
433,978 431,673
Unearned compensation
(17,799) (23,267)
Retained earnings
179,297 165,949
747,197 44.2% 726,076 43.1%
Cumulative Preferred Stock
Subject to mandatory redemption
No par value, 30,000,000 shares authorized
7.75% Series, 300,000 shares outstanding
30,000 30,000
$100 par value, 2,500,000 shares authorized
8.875% Series, 0 and 36,000 shares outstanding
- 3,600
Current sinking fund
- (1,800)
8.10% Series, 500,000 shares outstanding
50,000 50,000
Current sinking fund
(10,000) -
70,000 4.2 81,800 4.9
Not subject to mandatory redemption
7.95% Series, 298,045 shares outstanding
29,804 29,804
7.88% Series, 199,575 shares outstanding
19,958 19,958
8.20% Series, 199,420 shares outstanding
19,942 19,942
69,704 4.1 69,704 4.1
Long-Term Debt
First mortgage bonds
Maturing 1993 through 1997
4-5/8% Series due February 1, 1993
- 7,851
4-3/4% Series due June 1, 1993
- 9,720
4-3/4% Series due April 1, 1994
8,119 8,344
4.70% Series due March 1, 1995
3,220 3,395
5-7/8% Series due June 1, 1996
5,366 5,516
6.60% Series due October 1, 1997
15,363 15,663
Medium-term notes, 6.60%-9.27%
136,000 148,550
Maturing 1998 through 2002, 5.65%-8.88%
140,625 98,615
Maturing 2003 through 2007, 6.47%-9.07%
131,658 145,473
Maturing 2016 through 2023, 7.75%-9-5/8%
195,000 145,000
Pollution control bonds
Port of Morrow, Oregon, variable rate
(Average 2.3% for 1993), due 2013
23,600 23,600
City of Forsyth, Montana, variable rate
(Average 2.4% for 1993), due 2013
through 2016
118,800 118,800
Amount held by trustee
(8,537) (8,498)
Port of St. Helens, Oregon, due 2010 and 2014
(Average variable 2.2%-2.4% for 1993)
51,600 51,600
10% Debentures due March 1, 2018
- 50,000
Capital lease obligations
13,693 15,847
Other
101 (638)
834,608 838,838
Long-term debt due within one year
(31,614) (32,700)
802,994 47.5 806,138 47.9
Total capitalization
$1,689,895 100.0% $1,683,718 100.0%
</TABLE>
The accompanying notes are an integral part of these consolidated
statements.
<PAGE> 79
Portland General Electric Company and
Subsidiaries
Consolidated Statements of Cash Flow
<TABLE>
<CAPTION>
For the Years Ended December 31 1993
1992 1991
(Thousands
of Dollars)
<S> <C>
<C> <C>
Cash Provided by Operations:
Net income $ 99,744
$ 105,562 $ 74,075
Noncash items included in net income:
Depreciation, decommissioning and amortization 92,336
109,749 114,103
Amortization of WNP-3 exchange agreement 4,489
5,658 6,231
Amortization of deferred charges - Trojan 31,419
1,609 577
Amortization of deferred charges - other 5,087
7,080 9,208
Deferred income taxes - net 60,721
4,252 7,628
Other noncash revenues -
(311) (617)
Changes in working capital:
Increase in receivables
(67,431) (9,588) (4,826)
(Increase) Decrease in inventories 15,017
(4,181) 751
Increase (Decrease) in payables
(26,588) (2,084) 22,314
Other working capital items - net 10,600
7,328 (2,399)
Deferred charges - other
(3,808) (13,198) (6,319)
Miscellaneous - net 14,231
20,435 13,388
235,817
232,311 234,114
Investing Activities:
Utility construction
(125,787) (143,561) (138,905)
Energy efficiency programs
(18,149) (10,365) (8,610)
Trojan decommissioning trust
(11,220) (11,220) (19,272)
Other investments
(8,294) (8,602) (7,915)
(163,450) (173,748) (174,702)
Financing Activities:
Short-term debt - net 29,855
27,939 17,451
Long-term debt issued 252,000
123,000 104,000
Long-term debt retired
(266,986) (123,902) (111,004)
Preferred stock issued -
30,000 -
Preferred stock retired
(3,600) (31,225) (1,800)
Dividends paid
(84,951) (82,293) (71,233)
(73,682) (56,481) (62,586)
Increase (Decrease) in Cash and
Cash Equivalents
(1,315) 2,082 (3,174)
Cash and Cash Equivalents at the Beginning
of Year 3,414
1,332 4,506
Cash and Cash Equivalents at the End
of Year $ 2,099
$ 3,414 $ 1,332
Supplemental disclosures of cash flow information
Cash paid during the year:
Interest $ 68,232
$ 64,452 $ 68,931
Income taxes 17,242
61,915 47,652
</TABLE>
The accompanying notes are an integral part of these consolidated
statements.
PAGE> 80
Portland General Electric Company and
Subsidiaries
Notes to Financial Statements
Certain information, necessary for a sufficient
understanding of PGE's
financial condition and results of operations, is
substantially the same as
that disclosed by Portland General in this report. Therefore,
the following
PGE information is incorporated by reference to Portland
General's financial
information on the following page numbers.
<TABLE>
<CAPTION>
Page
<S>
<C>
Notes to Financial Statements
Note 1A. Summary of Significant Accounting Policies
15
Note 4A. Employee Benefits
18
Note 6A. Trojan Nuclear Plant
22
Note 7A. Preferred Stock
25
Note 10A. Commitments
27
Note 11A. WNP-3 Settlement Exchange Agreement
29
Note 12A. Jointly-Owned Plant
30
Note 13A. Regulatory Matters
30
Note 14A. Legal Matters
31
Management's Discussion and Analysis of Financial
Condition and Results of Operations
2
</TABLE>
<PAGE> 81
Note 5A
Income Taxes
The following table shows the detail of taxes on income and the
items used in
computing the differences between the statutory federal income
tax rate and
Portland General Electric Company's (PGE) effective tax rate.
(thousands of
dollars)
<TABLE>
<CAPTION>
1993 1992
1991
<S> <C> <C>
<C>
Income Tax Expense
Currently payable $ 14,086 $ 59,804
$ 39,345
Deferred income taxes
Accelerated depreciation 5,039 5,987
9,167
WNP-3 amortization (560) (2,190)
(2,570)
Energy efficiency programs 7,449 3,246
2,859
USDOE nuclear fuel assessment 6,155 -
-
AMAX coal contract (1,170) (1,227)
(1,050)
Replacement power costs 26,785 (246)
5,084
Trojan operating costs 17,565 7,402 ,
4,080
Repurchase debt 4,952 1,019
(850)
Excess deferred taxes (3,494) (1,888)
(1,557)
Interim rate relief refund - 6,573
1,036
Other 2,760 (1,092)
(3,160)
Investment tax credit adjustments (4,075) (6,759)
(4,149)
$ 75,492 $ 70,629
$ 48,235
Provision Allocated to:
Operations $ 71,490 $ 73,140
$ 47,244
Other income and deductions 4,002 (2,511)
991
$ 75,492 $ 70,629
$ 48,235
Effective Tax Rate Computation
Computed tax based on statutory
federal income tax rates applied
to income before income taxes $ 61,333 $ 59,905
$ 41,430
Increases (Decreases) resulting from:
Accelerated depreciation 9,207 9,462
7,763
State and local taxes - net 9,783 10,568
4,984
Investment tax credits (4,075) (6,759)
(4,149)
USDOE nuclear fuel assessment 5,050 -
-
Excess deferred tax (3,419) (1,816)
(1,483)
Adjustments to income tax reserves - (3,284)
(507)
Other (2,387) 2,553
197
$ 75,492 $ 70,629
$ 48,235
Effective tax rate 43.1% 40.1%
39.6%
</TABLE>
<PAGE> 82
Effective January 1, 1993, PGE adopted Statement of
Financial Accounting
Standards (SFAS) No. 109, "Accounting for Income Taxes". Prior
to SFAS No. 109,
PGE accounted for income taxes in accordance with Accounting
Principles Board
Opinion No. 11. Prior period financial statements have not been
restated. As
of December 31, 1993 and 1992, the significant components of
PGE's deferred
income tax assets and liabilities were as follows:
<TABLE>
<CAPTION>
1993 1992
<S> <C> <C>
Deferred Tax Assets
Plant-in-service $ 83,602 $ 18,608
Regulatory reserve 47,718 46,804
Other 24,038 22,626
155,358 88,038
Deferred Tax Liabilities
Plant-in-service (497,476) (201,596)
Replacement power costs (29,574) (4,838)
WNP-3 exchange contract (70,542) (71,099)
Other (93,711) (53,124)
(691,303) (330,657)
Less current deferred taxes 1,751 -
Total $ (534,194) $ (242,619)
</TABLE>
As a result of implementing SFAS No. 109, PGE has recorded deferred
tax assets and
liabilities for all temporary differences between the
financial statement
bases and tax bases of assets and liabilities.
The Omnibus Budget Reconciliation Act of 1993 resulted in a
federal tax rate
increase from 34% to 35% effective January 1, 1993. The tax
rate increase
resulted in additional income tax expense for PGE of $3.6
million.
The IRS completed its examination of Portland General
Corporation's (Portland
General) tax returns for the years 1985 to 1987 and has issued
a statutory notice of tax deficiency which Portland General is
contesting. As
part of this audit, the IRS has proposed to disallow PGE's
1985 Washington
Public Power Supply System Unit 3 (WNP-3) abandonment loss
deduction on the
premise that it is a taxable exchange. PGE disagrees with this
position and
will take appropriate action to defend its deduction.
Management believes
that it has appropriately provided for probable tax adjustments
and is of the
opinion that the ultimate disposition of this matter will not
have a material
adverse impact on the financial condition of PGE.
<PAGE> 83
Note 7A
Common Stock
<TABLE>
<CAPTION>
Common Stock Other
Number $3.75 Par Paid-In
Unearned
of Shares Value Capital
Compensation
<S> <C> <C> <C>
<C>
(Thousands of Dollars)
December 31, 1990 40,458,877 $151,721 $429,398
$(35,338)
Sales of stock - - -
-
Redemption of preferred - - 2,119
-
stock
Repayment of ESOP loan
and other - - -
5,579
December 31, 1991 40,458,877 151,721 431,517
(29,759)
Sales of stock - - -
-
Sale and redemption of
preferred stock - - 565
-
Repayment of ESOP loan
and other - - (409)
6,492
December 31, 1992 40,458,877 151,721 431,673
(23,267)
Sales of stock - - -
-
Redemption of stock - - -
-
Sale and redemption of - - 2,130
-
preferred stock
Repayment of ESOP loan
and other - - 175
5,468
December 31, 1993 40,458,877 $151,721 $433,978
$ (17,799)
</TABLE>
Common Stock
Portland General is the sole shareholder of PGE common
stock. PGE is
restricted, without prior Oregon Public Utility Commission
(PUC) approval,
from paying dividends or making other distributions to Portland
General to the
extent such payment or distribution would reduce PGE's common
stock equity
capital below 36% of total capitalization. At December 31, 1993,
PGE's common
stock equity capital was 44% of its total capitalization.
<PAGE> 84
Note 8A
Short-Term Borrowings
PGE meets liquidity needs through the issuance of
commercial paper and
borrowings from commercial banks. At December 31, 1993, PGE
had a committed
facilities of $120 million expiring in July 1996 and an $80
million expiring
in July 1994. These lines of credit have commitment fees and/or
facility fees
ranging from 0.15 to 0.20 of one percent and do not require
compensating cash
balances. The facilities are used primarily as back-up for
both commercial
paper and borrowings from commercial banks under uncommitted
lines of credit.
At December 31, 1993, there were no outstanding borrowings under
the committed
facilities.
PGE has a $200 million commercial paper facility. Unused
committed lines of
credit must be at least equal to the amount of commercial paper
outstanding.
Most of PGE's short-term borrowings are through commercial paper.
Commercial paper and lines of credit borrowing are at rates
reflecting current
market conditions and generally are substantially below the
prime commercial
rate.
Short-term borrowings and related interest rates were as follows
(thousands of
dollars):
<TABLE>
<CAPTION>
1993 1992
1991
<S> <C> <C>
<C>
As of year end:
Aggregate short-term debt outstanding
Bank loans - $4,001
$15,000
Commercial paper $129,920 96,064
57,126
Weighted average interest rate
Bank loans - 4.1%
6.2%
Commercial paper 3.5% 3.9
5.5
Unused committed lines of credit $200,000 $125,000
$125,000
For the year ended:
Average daily amounts of short-term
debt outstanding
Bank loans $5,025 $ 2,803
$ 2,087
Commercial paper 94,983 62,036
28,892
Weighted daily average interest rate
Bank loans 3.6% 5.5%
6.0%
Commercial paper 3.5 4.2
6.5
Maximum amount outstanding $144,774 $101,028
$ 72,126
during year
</TABLE>
Interest rates exclude the effect of commitment fees, facility
fees, and
other financing fees.
<PAGE> 85
Note 9A
Long-Term Debt
The Indenture securing PGE's first mortgage bonds constitutes a
direct first
mortgage lien on substantially all utility property and
franchises, other than
expressly excepted property.
The following principal amounts of long-term debt become due
for redemption
through sinking funds and maturities (thousands of dollars):
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C>
Sinking Funds $ 1,313 $ 1,138 $ 988 $ 688 $ 688
Maturities 31,289 71,356 17,528 56,085 64,745
</TABLE>
The sinking funds include $988,000 a year for 1994 through 1996
and $688,000
for 1997 and 1998, which, in accordance with the terms of the
Indenture, PGE
may satisfy by pledging available property additions equal to
166-2/3% of the
sinking fund requirements.
Note 15A
Fair Value of Financial Instruments
The following methods and assumptions
were used to estimate the fair value of
each class of financial instruments for
which it is practicable to estimate that
value:
Cash and cash equivalents
The carrying amount of cash and cash
equivalents approximates fair value
because of the short maturity of those
instruments.
Other investments
Other investments approximate market
value.
Redeemable preferred stock
The fair value of redeemable preferred
stock is based on quoted market prices.
Long-term debt
The fair value of long-term debt is
estimated based on the quoted market
prices for the same or similar issues or
on the current rates offered to PGE for
debt of similar remaining maturities.
The estimated fair values of financial
instruments are as follows (thousands of
dollars):
<TABLE>
<CAPTION>
1993
1992
Carrying Fair
Carrying Fair
Amount Value Amount
Value
<S> <C> <C> <C>
<C>
Preferred stock subject to
mandatory redemption $ 80,000 $84,815
$83,600 $ 82,686
Long-term debt 820,814 848,696
823,629 849,876
</TABLE>
<PAGE> 86
Exhibit 24
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of
our reports included in this Form 10-K, into Portland General Corporation's
previously filed Registration Statement No. 33-25466 on Form S-3,
Registration Statement No.33-27462 on Form S-8, Registration Statement
No. 33-31441 on Form S-8, Registration Statement No. 33-40943 on Form S-8,
Registration Statement No. 33-62514 on Form S-3, Registration Statement
No. 33-49811 on Form S-8 and Registration Statement No.33-50637 on Form
S-3.
Portland, Oregon,
February 28, 1994 ARTHUR ANDERSEN & CO.
Exhibit (24)
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
of our reports included in this Form 10-K, into Portland General
Electric Company's previously filed Registration Statement No. 33-44114
on Form S-3 and Registration Statement No. 33-46358 on Form S-3.
Portland, Oregon,
February 28, 1994 ARTHUR ANDERSEN & CO.
POWER OF ATTORNEY
The undersigned directors of Portland General Electric
Company hereby appoint Leonard A. Girard, Joseph M. Hirko and
Joseph E. Feltz, and each of them severally, as the attorney-in-
fact, in any and all capacities stated herein, to execute on
behalf of the undersigned and to file with the Securities and
Exchange Commission under Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Portland General Electric Company Form
10-K Annual Report for the fiscal year ended December 31, 1993,
and any amendments thereto.
Dated: February 8, 1994
Portland, Oregon
/s/ Gwyneth Gamble Booth
Gwyneth Gamble Booth C. Calvert Knudsen
/s/ Peter J. Brix /s/ Warren E. McCain
Peter J. Brix Warren E. McCain
/s/ Carolyn S. Chambers /s/ Jerome J. Meyer
Carolyn S. Chambers Jerome T. Meyer
/s/ Randolph L. Miller
Edward L. Clark, Jr. Randolph L. Miller
/s/ John W. Creighton, Jr. /s/ Richard G. Reiten
John W. Creighton, Jr. Richard G. Reiten
/s/ Ken L. Harrison /s/ Robert W. Roth
Ken L. Harrison Robert W. Roth
/s/ Jerry E. Hudson /s/ Bruce G. Willison
Jerry E. Hudson Bruce G. Willison
<PAGE>
POWER OF ATTORNEY
The undersigned directors of Portland General Corporation
hereby appoint Leonard A. Girard, Joseph M. Hirko and
Joseph E. Feltz, and each of them severally, as the attorney-in-
fact, in any and all capacities stated herein, to execute on
behalf of the undersigned and to file with the Securities and
Exchange Commission under Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Portland General Corporation Form 10-K
Annual Report for the fiscal year ended December 31, 1993, and
any amendments thereto.
Dated: February 8, 1994
Portland, Oregon
/s/ Gwyneth Gamble Booth
Gwyneth Gamble Booth C. Calvert Knudsen
/s/ Peter J. Brix /s/ Warren E. McCain
Peter J. Brix Warren E. McCain
/s/ Carolyn S. Chambers /s/ Jerome J. Meyer
Carolyn S. Chambers Jerome T. Meyer
/s/ Randolph L. Miller
Edward L. Clark, Jr. Randolph L. Miller
/s/ John W. Creighton, Jr. /s/ Richard G. Reiten
John W. Creighton, Jr. Richard G. Reiten
/s/ Ken L. Harrison /s/ Robert W. Roth
Ken L. Harrison Robert W. Roth
/s/ Jerry E. Hudson /s/ Bruce G. Willison
Jerry E. Hudson Bruce G. Willison
J:\L\FINANCE\12743\10K93PWR.ATY
THIS DOCUMENT CONSTITUTES PART OF A PROSPECTUS COVERING SECURITIES THAT HAVE
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
AMENDMENT NO. 1
PORTLAND GENERAL CORPORATION
AMENDED AND RESTATED
1990 LONG-TERM INCENTIVE MASTER PLAN
WHEREAS, pursuant to Article 14 of the Portland General
Corporation Amended and Restated 1990 Long-Term Incentive Master
Plan (the "Plan"), the Committee, as defined in the Plan, may,
with the approval of the Board of Directors of Portland General
Corporation (the "Corporation"), amend or modify the Plan as
provided in Article 14, and
WHEREAS, the Board of Directors of the Corporation has
approved the amendment of the Plan,
NOW THEREFORE, effective as of February 8, 1994, the Plan is
hereby amended as follows:
1. Section 8.9 is deleted and the following new
Section 8.9 is inserted as follows:
"8.9 Termination of Employment Due to Death, Disability
or Retirement.
"(a) Termination by Death. Upon the death of a
Participant, all restrictions on the Participant's
Restricted Stock shall lapse, provided, however, such
restrictions shall not lapse until the expiration of
the six (6) month vesting period provided in
Section 8.3.
"(b) Termination by Disability. In the event that a
Participant's employment with the Company is terminated
by reason of Disability, the restrictions on the
Participant's Restricted Stock shall lapse on the date
the Participant's disability is determined by the
Committee to be total and permanent, provided, however,
such restrictions shall not lapse until the expiration
of the six (6) month vesting period provided in
Section 8.3.
Page 1 - AMENDMENT NO. 1 - LTI PLAN J:\l\INDEX\LTIP.AM1
<PAGE> 1
"(c) Termination by Retirement. In the event that
a Participant's employment with the Company is
terminated by reasons of 'normal retirement' (as
defined under the then established rules of the
Company's tax qualified pension retirement plan),
the restrictions shall lapse on the number of
shares of Restricted Stock in each restricted
stock grant which bears the same ratio to the
total number of shares of Restricted Stock in such
grant still subject to restrictions, as the period
of employment during the Period of Restriction for
such grant bears to the full Period of Restriction
for such grant, rounded up to a full share, unless
otherwise determined by the Committee to vest the
previously granted Restricted Stock in some
greater amount, provided, however, such
restrictions shall not lapse until the expiration
of the six (6) month vesting period provided in
Section 8.3."
IN WITNESS WHEREOF, the Board of Directors of the
Corporation has adopted this amendment on the 8th day of February
1994.
COMMITTEE UNDER THE LONG-TERM
INCENTIVE MASTER PLAN
By: /s/ Warren E. McCain
Warren E. McCain
Chairman
Page 2 - AMENDMENT NO. 1 - LTI PLAN J:\l\INDEX\LTIP.AM1
<PAGE> 2
THIS DOCUMENT CONSTITUTES PART OF A PROSPECTUS COVERING SECURITIES THAT
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
AMENDED AND RESTATED
1990 LONG-TERM
INCENTIVE MASTER PLAN
Portland General Corporation
July 1993<PAGE>
Portland General Corporation
AMENDED AND RESTATED
1990 Long-Term Incentive Master Plan
TABLE OF CONTENTS
Article Section Page
1. ESTABLISHMENT, PURPOSE, AND DURATION . . . . . . . 1
1.1 Establishment of the Plan . . . . . . . . 1
1.2 Purpose of the Plan . . . . . . . . . . . 1
1.3 Duration of the Plan . . . . . . . . . . . 1
2. DEFINITIONS AND CONSTRUCTION . . . . . . . . . . . 2
2.1 Definitions . . . . . . . . . . . . . . . 2
2.2 Gender and Number . . . . . . . . . . . . 5
2.3 Severability . . . . . . . . . . . . . . . 5
3. ADMINISTRATION . . . . . . . . . . . . . . . . . . 5
3.1 The Committee . . . . . . . . . . . . . . 5
3.2 Authority of the Committee . . . . . . . . 5
3.3 Decisions Binding . . . . . . . . . . . . 6
3.4 Grants of Options by Chief Executive Officer
or Insider Committee . . . . . . . . . . . 6
4. SHARES SUBJECT TO THE PLAN . . . . . . . . . . . . 7
4.1 Number of Shares . . . . . . . . . . . . . 7
4.2 Lapsed Awards . . . . . . . . . . . . . . 8
4.3 Adjustments in Authorized Shares . . . . . 8
5. ELIGIBILITY AND PARTICIPATION . . . . . . . . . . 8
5.1 Eligibility . . . . . . . . . . . . . . . 8
5.2 Actual Participation . . . . . . . . . . . 9
6. STOCK OPTIONS . . . . . . . . . . . . . . . . . . 9
6.1 Grant of Options . . . . . . . . . . . . . 9
6.2 Option Agreement . . . . . . . . . . . . . 9
6.3 Option Price . . . . . . . . . . . . . . . 9
6.4 Duration of Options . . . . . . . . . . . 9
6.5 Exercise of Options . . . . . . . . . . . 9
6.6 Payment . . . . . . . . . . . . . . . . . 10
6.7 Restrictions on Share Transferability . . 10
6.8 Dividend Equivalents on Stock Options . . 10
6.9 Termination of Employment Due to Death,
Disability, or Retirement . . . . . . . . 11
6.10 Termination of Employment for Other Reasons 12
6.11 Nontransferability of Options . . . . . . 12
7. STOCK APPRECIATION RIGHTS . . . . . . . . . . . . 12
7.1 Grant of SARs . . . . . . . . . . . . . . 12
7.2 Exercise of SARs in Lieu of Options . . . 13
7.3 Exercise of SARs in Addition to Options . 13
<PAGE> i<PAGE>
Article Section Page
7.4 Exercise of SARs Independent of Options . 14
7.5 SAR Agreement . . . . . . . . . . . . . . 14
7.6 Term of SARs . . . . . . . . . . . . . . . 14
7.7 Payment of SAR Amount . . . . . . . . . . 14
7.8 Section 16 Requirements . . . . . . . . . 14
7.9 Termination of Employment Due to Death,
Disability, or Retirement . . . . . . . . 14
7.10 Termination of Employment for Other Reasons 15
7.11 Nontransferability of SARs . . . . . . . . 16
8. RESTRICTED STOCK . . . . . . . . . . . . . . . . . 16
8.1 Grant of Restricted Stock . . . . . . . . 16
8.2 Restricted Stock Agreement . . . . . . . . 16
8.3 Transferability . . . . . . . . . . . . . 16
8.4 Other Restrictions . . . . . . . . . . . . 16
8.5 Certificate Legend . . . . . . . . . . . . 16
8.6 Removal of Restrictions . . . . . . . . . 17
8.7 Voting Rights . . . . . . . . . . . . . . 17
8.8 Dividends and Other Distributions . . . . 17
8.9 Termination of Employment Due to Death,
Disability, or Retirement . . . . . . . . 17
8.10 Termination of Employment for Other Reasons 17
9. PERFORMANCE UNITS AND PERFORMANCE SHARES . . . . . 18
9.1 Grant of Performance Units/Shares . . . . 18
9.2 Value of Performance Units/Shares . . . . 18
9.3 Earning of Performance Units/Shares . . . 18
9.4 Form and Timing of Payment of Performance
Units/Shares . . . . . . . . . . . . . . . 18
9.5 Termination of Employment Due to Death,
Disability, or Retirement . . . . . . . . 19
9.6 Termination of Employment for Other Reasons 19
9.7 Nontransferability . . . . . . . . . . . . 19
10. OTHER STOCK-BASED AWARDS . . . . . . . . . . . . 19
10.1 Other Stock-Based Awards . . . . . . . . . 19
10.2 Nontransferability . . . . . . . . . . . . 20
11. BENEFICIARY DESIGNATION . . . . . . . . . . . . . 20
12. RIGHTS OF EMPLOYEES . . . . . . . . . . . . . . . 20
12.1 Employment . . . . . . . . . . . . . . . . 20
12.2 Participation . . . . . . . . . . . . . . 20
13. CHANGE IN CONTROL . . . . . . . . . . . . . . . . 20
14. AMENDMENT, MODIFICATION, AND TERMINATION . . . . 21
14.1 Amendment, Modification, and Termination . 21
14.2 Awards Previously Granted . . . . . . . . 22
<PAGE> ii<PAGE>
Article Section Page
15. WITHHOLDING . . . . . . . . . . . . . . . . . . . 22
15.1 Tax Withholding . . . . . . . . . . . . . 22
15.2 Share Withholding . . . . . . . . . . . . 22
16. INDEMNIFICATION . . . . . . . . . . . . . . . . . 22
17. SUCCESSORS . . . . . . . . . . . . . . . . . . . 23
18. REQUIREMENTS OF LAW . . . . . . . . . . . . . . . 23
18.1 Requirements of Law . . . . . . . . . . . 23
18.2 Governing Law . . . . . . . . . . . . . . 23
<PAGE> iii
PORTLAND GENERAL CORPORATION
AMENDED AND RESTATED
1990 LONG-TERM INCENTIVE MASTER PLAN
ARTICLE 1. ESTABLISHMENT, PURPOSE, AND DURATION
1.1 Establishment of the Plan. Portland General
Corporation ("Portland General") established the Portland
General Corporation 1990 Long-Term Incentive Master Plan
(hereinafter referred to as the "Plan") to be effective
October 1, 1990, subject to the approval of the Board of
Directors and the shareholders of Portland General, which
approval was given by the Board of Directors on October 1,
1990 and by the Shareholders at the Annual Meeting of
Shareholders held April 30, 1991. The Plan shall remain in
effect as provided in Section 1.3 herein. The Plan permits
the grant of Nonqualified Stock Options, Incentive Stock
Options, Stock Appreciation Rights, Restricted Stock,
Performance Shares, Performance Units, and other Stock-Based
Awards.
1.2 Purpose of the Plan. The purpose of the Plan is to
promote the success, and enhance the value of the Company by
linking the personal interests of Employees to those of
Company shareholders, and by providing Employees with an
incentive for outstanding performance.
The Plan is further intended to provide flexibility to
the Company in its ability to motivate, attract, and retain
the services of Employees upon whose judgment, interest, and
special effort the successful conduct of its operation largely
is dependent.
1.3 Duration of the Plan. The Plan shall commence on
October 1, 1990 (the "Effective Date") and shall remain in
effect, subject to the right of the Board of Directors to
terminate the Plan at any time pursuant to Article 14 herein,
until all Shares subject to it shall have been purchased or
acquired according to the Plan's provisions. However, in no
event may an Award be granted under the Plan on or after the
tenth (10th) anniversary of the Plan's Effective Date.
<PAGE> 1
ARTICLE 2. DEFINITIONS AND CONSTRUCTION
2.1 Definitions. Whenever used in the Plan, the
following terms shall have the meanings set forth below and,
when the meaning is intended, the initial letter of the word
is capitalized:
(a) "Award" means, individually or collectively, a
grant under this Plan of Nonqualified Stock
Options, Incentive Stock Options, Stock
Appreciation Rights, Restricted Stock,
Performance Shares, Performance Units, or other
Stock-Based Awards.
(b) "Beneficial Owner" shall have the meaning
ascribed to such term in Rule 13d-3 of the
General Rules and Regulations under the
Exchange Act.
(c) "Board" or "Board of Directors" means the Board
of Directors of Portland General Corporation or
any successor thereto as provided in Article 17
herein.
(d) "Cause" means (i) willful and gross misconduct
on the part of a Participant that is materially
and demonstrably detrimental to the Company; or
(ii) the commission by a Participant of one or
more acts which constitute an indictable crime
under United States Federal, state, or local
law. "Cause" under either (i) or (ii) shall be
determined in good faith by a written
resolution duly adopted by the affirmative vote
of not less than two-thirds ( rds) of all the
Directors at a meeting duly called and held for
that purpose after reasonable notice to the
Participant and opportunity for the Participant
and his or her legal counsel to be heard.
(e) "Change in Control" of the Company shall be
defined by the Committee at the time of making
each and every Award hereunder.
(f) "Code" means the Internal Revenue Code of 1986,
as amended from time to time.
(g) "Committee" means the committee, as specified
in Article 3, appointed by the Board to
administer the Plan with respect to grants of
Awards.
(h) "Company" means Portland General Corporation,
an Oregon corporation (including any and all
Subsidiaries), or any successor thereto as
provided in Article 17 herein.
<PAGE> 2
(i) "Demotion" shall mean the reduction of a
Participant's salary grade, job classification,
or title (the Participant's job classification
or title shall govern in all cases where said
job classification or title are not defined by
means of a salary grade) with the Company to a
level at which Awards under this Plan or any
other plan providing long-term incentives to
Employees have not been granted within the
three (3) years preceding such demotion.
(j) "Director" means any individual who is a member
of the Board of Directors.
(k) "Disability" means a permanent and total
disability, within the meaning of Code
Section 22(e)(3), as determined by the
Committee in good faith, upon receipt of
sufficient competent medical advice from one or
more individuals, selected by the Committee,
who are qualified to give professional medical
advice.
(l) "Dividend Equivalent" means an accrual for
payment of cash or Shares equal in value to
dividends paid on Shares subject to Options.
(m) "Employee" means any employee of the Company.
Directors who are also employed by the Company
shall be considered Employees under this Plan.
(n) "Exchange Act" means the Securities Exchange
Act of 1934, as amended from time to time, or
any successor Act thereto.
(o) "Fair Market Value" means the closing price of
Shares on the relevant date, as reported in the
Wall Street Journal or a similar publication
selected by the Committee.
(p) "Grant Price" means the value of a SAR on the
date of grant, as determined by the Committee.
(q) "Incentive Stock Option" or "ISO" means an
option to purchase Shares, granted under
Article 6 herein, which is designated as an
Incentive Stock Option and is intended to meet
the requirements of Section 422 of the Code, or
any successor Section thereto.
(r) "Insider" shall mean an Employee of the Company
who is, at the time an Award is made under this
Plan, designated as subject to Section 16 of
the Exchange Act and the Rules promulgated
thereunder or a Director.
<PAGE> 3
(s) "Noninsider" shall mean an individual who is
not an Insider.
(t) "Noninsider Committee" means the committee, as
specified in Section 3.4, that may be appointed
by the Board to grant Options to Noninsiders.
(u) "Nonqualified Stock Option" or "NQSO" means an
option to purchase Shares, granted under
Article 6 herein, which is not intended to be
an Incentive Stock Option.
(v) "Option" means an Incentive Stock Option or a
Nonqualified Stock Option.
(w) "Option Price" means the price at which a Share
may be purchased by a Participant pursuant to
an Option, as determined by the Committee.
(x) "Outside Director" means a Director who is not
an Employee.
(y) "Participant" means an Employee of the Company
who has outstanding an Award granted under the
Plan.
(z) "Performance Unit" or "Performance Share" means
an Award granted to an Employee pursuant to
Article 9 herein.
(aa) "Period of Restriction" means the period during
which the transfer of Shares of Restricted
Stock is limited in some way (based on the
passage of time, the achievement of performance
goals, or upon the occurrence of other events
as determined by the Committee, at its
discretion), and the Shares are subject to a
substantial risk of forfeiture, as provided in
Article 8 herein.
(ab) "Restricted Stock" means an Award granted to an
Employee pursuant to Article 8 herein.
(ac) "Stock Appreciation Right" or "SAR" means an
Award, granted alone or in tandem with an
Option, designated as a SAR, granted to an
Employee pursuant to Article 7 herein.
(ad) "Stock-Based Award" means an Award granted to
an Employee pursuant to Article 10 herein.
(ae) "Shares" means the $3.75 par value Common Stock
of Portland General Corporation.
<PAGE> 4
(af) "Subsidiary" means any corporation in which the
Company owns directly, or indirectly through
subsidiaries, at least 50% of the total
combined voting power of all classes of stock,
or any other entity (including, but not limited
to, partnerships and joint ventures) in which
the Company owns at least 50% of the combined
equity thereof. In the event that applicable
law permits the ownership of less than 50% of
the total combined voting power of all classes
of stock of a corporation to cause such
corporation to constitute a "Subsidiary," then
the requirement of 50% ownership in this
definition shall be lowered to the lowest level
permitted under applicable law.
2.2 Gender and Number. Except where otherwise
indicated by the context, any masculine term used herein also
shall include the feminine; the plural shall include the
singular and the singular shall include the plural.
2.3 Severability. In the event any provision of the
Plan shall be held illegal or invalid for any reason, the
illegality or invalidity shall not affect the remaining parts
of the Plan, and the Plan shall be construed and enforced as
if the illegal or invalid provision had not been included.
ARTICLE 3. ADMINISTRATION
3.1 The Committee. The Plan shall be administered by a
committee consisting solely of two or more Outside Directors,
who shall be appointed from time to time by, and shall serve
at the discretion of, the Board of Directors, and who shall
meet the requirements for a "disinterested person" as defined
in Section 16 of the Exchange Act and the Rules promulgated
thereunder. Provided, however, that if for any reason the
Committee does not qualify to administer the Plan, as
contemplated by the Article 16 of the Exchange Act and the
Rules promulgated thereunder, the Board of Directors may
appoint a new Committee so as to comply therewith.
3.2 Authority of the Committee. The Committee shall
have full power except as limited by law or by the Articles of
Incorporation or Bylaws of Portland General or any successor
thereto as provided in Article 17 herein, subject to the
provisions herein, to determine the size and types of Awards;
to determine the terms and conditions of such Awards in a
manner consistent with the Plan; to construe and interpret the
Plan and any agreement or instrument entered into under the
Plan; to establish, amend, or waive rules and regulations for
the Plan's administration; and (subject to the provisions of
Article 14 herein) to amend the terms and conditions of any
outstanding Award to the extent such terms and conditions are
within the discretion of the Committee as provided in the
Plan. Further, the Committee shall make all other
<PAGE> 5
determinations which may be necessary or advisable for the
administration of the Plan. As permitted by law, the
Committee may delegate its authorities as identified
hereunder.
3.3 Decisions Binding. All determinations and
decisions made by the Committee pursuant to the provisions of
the Plan and all related orders or resolutions of the Board of
Directors shall be final, conclusive, and binding on all
persons, including the Company, its stockholders, Employees,
Participants, and their estates and beneficiaries.
3.4 Grants of Options by Chief Executive Officer or
Insider Committee. The Board of Directors may grant to the
Chief Executive Officer (the "CEO") of Portland General or any
successor thereto as provided in Article 17 herein, or a
Committee appointed by it consisting of at least two Directors
one of whom shall be the CEO if the CEO is a Director
("Noninsider Committee") the authority to grant Options to
Noninsiders. Options granted pursuant to this Section 3.4
shall be subject to the provisions of this Section 3.4, the
limits specifically prescribed by the Board of Directors and
the requirements of Oregon law. Prior to the grant of such
Options, the CEO or the Noninsider Committee, as the case may
be, shall obtain the opinion of legal counsel for the Company
that each person chosen to receive an Option under this
Section is properly classified as a Noninsider.
The Options granted by the CEO to Noninsiders pursuant to
this Section between October 1, 1990 and October 2, 1991 may
be granted upon such terms and provisions as deemed
appropriate by the CEO; provided, however, that the aggregate
number of Shares available for grant is one hundred thousand
(100,000), that any such Option granted not exceed 5,000
shares per employee per year, that the exercise price for any
such Options granted shall equal the fair market value of
Shares on the date of grant, and that all Options granted must
be exercised within ten (10) years after the date of the
grant.
At any time after October 2, 1991, the Board of Directors
may authorize the CEO or the Noninsider Committee to grant
Options for an additional number of Shares and upon such terms
and provisions as the Board shall determine subject to the
terms of this Section 3.4. The initial one hundred thousand
(100,000) Shares authorized pursuant to the immediately
preceding paragraph and any such additional Shares granted
under Options pursuant to this Section shall be counted toward
the maximum number of Shares subject to this Plan, as set
forth in Section 4.1.
In addition to the authority granted to the CEO or the
Noninsider Committee to grant Options to Noninsiders pursuant
to this Section 3.4, the CEO may, at any time, recommend to
the Committee Insiders to receive grants of Options, and may
<PAGE> 6
recommend the number of Shares and the terms and provisions
applicable to such Options; provided, however, that
notwithstanding such recommendation, the grant of any Option
to Insiders and the terms and conditions applicable thereto
shall be at the sole discretion of the Committee. In the
event that the Committee shall choose to grant an Option to an
Insider upon the recommendation of the CEO, the Committee may
choose to apply the number of Shares subject to such Option
against the number of Shares available for grant by the CEO or
the Noninsider Committee pursuant to this Section 3.4, such
that the number of Shares available to the CEO or the
Noninsider Committee is reduced by the number of Shares
covered by such Option.
ARTICLE 4. SHARES SUBJECT TO THE PLAN
4.1 Number of Shares. Subject to adjustment as
provided in Section 4.3 herein, the total number of Shares
available for grant under the Plan may not exceed 2,300,000;
of which no more than 1,150,000 may be issued as Restricted
Stock. These 2,300,000 Shares may be either authorized but
unissued or reacquired Shares.
The following rules will apply for purposes of the
determination of the number of Shares available for grant
under the Plan:
(a) The grant of an Option or Restricted Stock
Award shall reduce the Shares available for
grant under the Plan by the number of Shares
subject to such Award.
(b) The grant of a Stock Appreciation Right related
to an Option ("Tandem SAR") shall reduce the
number of Shares available for grant by the
number of Shares subject to the related Option
if the Tandem SAR is granted "in lieu of" the
Option. If the number of "in lieu of" SARs
granted in Tandem with Options exceeds the
number of Shares subject to the related Option,
then the number of Shares available for grant
shall additionally be reduced by the amount of
such excess; provided, however, that to the
extent such grants are paid in cash, such
Shares shall again be available for the grant
of Awards under the Plan in accordance with
Section 16 of the Exchange Act and the Rules
promulgated thereunder.
(c) The grant of a Tandem SAR "in addition to" the
related Option shall reduce the number of
Shares available for grant by the number of
Shares subject to the SAR, in addition to the
number of Shares subject to the related Option.
<PAGE> 7
(d) The grant of Stock Appreciation Rights not
related to an Option ("Freestanding SAR") shall
reduce the number of Shares available for grant
by the number of Freestanding SARs granted.
(e) The grant of Performance Units and/or
Performance Shares shall reduce the number of
Shares available for grant while outstanding;
provided, however, that to the extent such
grants are paid in cash, such Shares shall
again be available for the grant of Awards
under the Plan in accordance with Section 16 of
the Exchange Act and the Rules promulgated
thereunder.
(f) The grant of other Stock-Based Awards shall
reduce the number of Shares available for grant
hereunder to the extent Shares are utilized, as
determined by the Committee in accordance with
the provisions of Section 16 of the Exchange
Act and the Rules promulgated thereunder.
4.2 Lapsed Awards. If any Award granted under this
Plan terminates, expires, or lapses for any reason (with the
exception of the termination of a Tandem SAR granted "in lieu
of" the related Option or a related Option upon exercise of
the corresponding "in lieu of" SAR), any Shares subject to
such Award again shall be available for the grant of an Award
under the Plan to the extent allowed pursuant to Section 16 of
the Exchange Act and the Rules promulgated thereunder.
4.3 Adjustments in Authorized Shares. In the event of
any merger, reorganization, consolidation, recapitalization,
separation, liquidation, stock dividend, split-up, Share
combination, or other change in the corporate structure of the
Company affecting the Shares, such adjustment shall be made in
the number and class of Shares which may be delivered under
the Plan, and in the number and class of and/or price of
Awards granted under the Plan, as may be determined to be
appropriate and equitable by the Committee, in its sole
discretion, to prevent dilution or enlargement of rights; and
provided that the number of Shares subject to any Award shall
always be a whole number.
ARTICLE 5. ELIGIBILITY AND PARTICIPATION
5.1 Eligibility. Persons eligible to participate in
this Plan include all Employees of the Company, including
Employees who are members of the Board, but excluding
Directors who are not Employees.
<PAGE> 8
5.2 Actual Participation. Subject to the provisions of
the Plan, the Committee may, from time to time, select from
all eligible Employees, those to whom Awards shall be granted
and shall determine the nature and amount of each Award. No
Employee shall have any right to be granted an Award under
this Plan.
ARTICLE 6. STOCK OPTIONS
6.1 Grant of Options. Subject to the terms and
provisions of the Plan, Options may be granted to Employees at
any time and from time to time as shall be determined by the
Committee. The Committee shall have discretion in determining
the number of Shares subject to Options granted to each
Employee. The Committee may grant ISOs, NQSOs, or a
combination thereof. Nothing in this Article 6 shall be
deemed to prevent the grant of NQSOs in excess of the maximum
established by Section 422 of the Code, or any successor
Section thereto.
6.2 Option Agreement. Each Option grant shall be
evidenced by an Option Agreement that shall specify the Option
Price, the duration of the Option, the number of Shares to
which the Option pertains, and such other provisions as the
Committee shall determine. The Option Agreement also shall
specify whether the Option is intended to be an ISO within the
meaning of Section 422 of the Code, or any successor Section
thereto, or a NQSO whose grant is intended not to fall under
the Code provisions of Section 422, or any successor Section
thereto.
6.3 Option Price. The Option Price for each grant of
an Option to an Employee shall be determined by the Committee;
provided that, in the case of an ISO, the Option Price shall
not be less than 100% of the Fair Market Value of such Share
on the date the Option is granted; and, provided further, that
in the case of a NQSO, the Option Price shall not be less than
the minimum price permissible under Oregon law.
6.4 Duration of Options. Each Option granted to an
Employee shall expire at such time as the Committee shall
determine at the time of grant; provided, however, that no ISO
shall be exercisable later than the tenth (10th) anniversary
date of its grant.
6.5 Exercise of Options. Options granted to Employees
under the Plan shall be exercisable at such times and be
subject to such restrictions and conditions as the Committee
shall in each instance approve, which need not be the same for
each grant or for each Employee. However, in no event may any
Option granted under this Plan to an Insider become
exercisable prior to six (6) months following the date of its
grant.
<PAGE> 9
6.6 Payment. Options shall be exercised by the
delivery of a written notice of exercise to the Secretary of
the Company, setting forth the number of Shares with respect
to which the Option is to be exercised, accompanied by full
payment for the Shares.
The Option Price upon exercise of any Option shall be
payable to the Company in full either (a) in cash or its
equivalent, or (b) by tendering previously acquired Shares
having a Fair Market Value at the time of exercise equal to
the total Option Price; provided that any such Shares tendered
by an Insider shall have been held by such Insider for at
least six months prior to such tender, or (c) by a combination
of (a) and (b). The Committee also may allow cashless
exercise as permitted under Federal Reserve Board's Regulation
T, subject to applicable securities law restrictions, or by
any other means which the Committee determines to be
consistent with the Plan's purpose and applicable law. The
proceeds from such a payment shall be added to the general
funds of the Company and shall be used for general corporate
purposes.
The Committee also shall have the authority to extend
loans to Participants in order to aid Participants in the
exercise of their Options, upon such terms and requiring such
security as the Committee, in its sole discretion, shall deem
appropriate.
As soon as practicable after receipt of a written
notification of exercise and full payment, the Company shall
deliver to the Participant, in the Participant's name, Share
certificates in an appropriate amount based upon the number of
Shares purchased under the Option(s).
6.7 Restrictions on Share Transferability. The
Committee shall impose such restrictions, including
restrictions on transferability, on Options granted, and on
any Shares acquired pursuant to the exercise of an Option,
under the Plan, as it may deem advisable, including, without
limitation, restrictions under applicable Federal securities
laws, under the requirements of any stock exchange or market
upon which such Shares are then listed and/or traded, and
under any blue sky or state securities laws applicable to such
Shares.
6.8 Dividend Equivalents on Stock Options. Employees
owning Options may be granted, at no additional cost, Dividend
Equivalents based on the dividends declared on Shares on
record dates during the period between the grant date of an
Option and the date the Option is exercised, or an equivalent
period, as determined by the Committee. Such Dividend
Equivalents may be converted to additional Shares subject to
the Option ("Dividend Equivalent Shares"), or cash, or both,
by such formula as may be determined by the Committee,
provided, however, that such formula shall conform to any
<PAGE> 10
holding period, notice provision or other requirement under
Section 16 of the Exchange Act and the Rules promulgated
thereunder.
Dividend equivalents shall be computed as of each record
date, with respect to: (i) the number of Shares subject to the
Option; and (ii) the number of Dividend Equivalent Shares
previously earned by the Employee which were not issued during
the period immediately prior to the dividend record date.
6.9 Termination of Employment Due to Death, Disability,
or Retirement.
(a) Termination by Death. In the event the
employment of an Employee is terminated by
reason of death, any outstanding Options
granted to that Employee shall immediately vest
100% and shall remain exercisable at any time
prior to their expiration date, or for one (1)
year after the date that employment was
terminated, whichever period is shorter, by
such person or persons as shall have been named
as the Employee's beneficiary, or by such
persons that have acquired the Employee's
rights under the Option by will or by the laws
of descent and distribution.
(b) Termination by Disability. In the event the
employment of an Employee is terminated by
reason of Disability, any outstanding Options
granted to that Employee shall immediately vest
100%, and shall remain exercisable at any time
prior to their expiration date, or for one (1)
year after the date that the Employee's
Disability is determined by the Committee to be
total and permanent, whichever period is
shorter.
(c) Termination by Retirement. In the event the
employment of an Employee is terminated by
reason of "normal retirement" (as defined under
the then established rules of the Company's
tax-qualified pension retirement plan), any
outstanding Options granted to that Employee
shall immediately vest 100%, and shall remain
exercisable at any time prior to their
expiration date, or for three (3) years after
the date that employment was terminated,
whichever period is shorter.
In the event the employment of an Employee is
terminated by reason of "early retirement" (as
defined under the then established rules of the
Company's tax-qualified pension retirement
plan), any outstanding Options granted to that
<PAGE> 11
Employee that are not then vested shall be
forfeited. However, the Committee, at its
discretion, may vest these Options up to 100%.
Vested Options shall remain exercisable at any
time prior to their expiration date, or for
three (3) years after the date that employment
was terminated, whichever period is shorter.
(d) Exercise Limitations on ISOs. In the case of
ISOs, the tax treatment prescribed under
Section 422 of the Internal Revenue Code of
1986, as amended, or any successor Section
thereto, may not be available if the Options
are not exercised within the time periods after
each of the various types of employment
termination prescribed by said Section.
6.10 Termination of Employment for Other Reasons. If
the employment of an Employee shall terminate for any reason
(other than the reasons set forth in Section 6.9 or for
Cause), all nonvested Options held by the Employee immediately
shall be forfeited to the Company. However, the Committee, in
its sole discretion, shall have the right to immediately vest
all or any portion of such Options. Thereafter, all vested
Options shall remain exercisable at any time prior to their
expiration date, or for one (1) year after the date that
employment was terminated, whichever period is shorter.
If the employment of the Employee shall terminate for
Cause, all outstanding Options immediately shall be forfeited
to the Company and no additional exercise period shall be
allowed, regardless of the vested status of the Options.
Any Options forfeited under this Section shall again be
available for grant under the Plan in accordance with
Section 16 of the Exchange Act and the Rules promulgated
thereunder.
6.11 Nontransferability of Options. No Option granted
under the Plan may be sold, transferred, pledged, assigned, or
otherwise alienated or hypothecated, other than by will or by
the laws of descent and distribution. Further, all Options
granted to a Participant under the Plan shall be exercisable
during his or her lifetime only by such Participant.
ARTICLE 7. STOCK APPRECIATION RIGHTS
7.1 Grant of SARs. Subject to the terms and conditions
of the Plan, an SAR may be granted to an Employee at any time
and from time to time as shall be determined by the Committee.
An SAR may be granted in any of the following forms:
(a) "In lieu of" Options (as described in
Section 4.1(b) herein);
<PAGE> 12
(b) "In addition to" Options (as described in
Section 4.1(c) herein);
(c) Independent of Options (a "Freestanding SAR");
or
(d) In any combination of (a), (b), or (c) above.
The Committee shall have complete discretion in
determining the number of SARs granted to each Participant
(subject to Section 4.1 herein) and, consistent with the
provisions of the Plan, in determining the terms and
conditions pertaining to such SARs. However, the Grant Price
of a Freestanding SAR shall be at least equal to the Fair
Market Value of Shares on the date of grant of the SAR. The
Grant Price of "in lieu of" or "in addition to" SARs (as
described in Section 4.1 herein) shall equal the Option Price
of the related Option. Further, in no event shall any SAR
granted hereunder become exercisable within the first six (6)
months of its grant.
7.2 Exercise of SARs in Lieu of Options. SARs granted
"in lieu of" Options (as described in Section 4.1 herein) may
be exercised for all or part of the Shares subject to the
related Option upon the surrender of the right to exercise an
equivalent number of Options. The SAR may be exercised only
with respect to the Shares for which its related Option is
then exercisable. Option Stock with respect to which the SAR
shall have been exercised may not be subject again to an Award
under this Plan.
Notwithstanding any other provision of this Plan to the
contrary, with respect to an SAR granted "in lieu of" an
"Incentive Stock Option" within the meaning of Section 422 of
the Code, or any successor Section thereto: (i) the SAR will
expire no later than the expiration of the underlying
Incentive Stock Option; (ii) the SAR amount may be for no more
than one hundred percent (100%) of the difference between the
Option Price of the underlying Incentive Stock Option and the
market price of the Shares subject to the underlying Incentive
Stock Option at the time the SAR is exercised; and (iii) the
SAR may be exercised only when the market price of the Shares
subject to the Incentive Stock Option exceeds the Option Price
of the Incentive Stock Option.
7.3 Exercise of SARs in Addition to Options. SARs
granted "in addition to" Options (as described in Section 4.1
herein) shall be deemed to be exercised upon the exercise of
the related Options. The deemed exercise of SARs granted "in
addition to" Options shall not necessitate a reduction in the
number of related Options.
<PAGE> 13
7.4 Exercise of SARs Independent of Options. SARs
granted independently of Options may be exercised upon
whatever terms and conditions the Committee, in its sole
discretion, imposes upon the SARs.
7.5 SAR Agreement. Each SAR grant shall be evidenced
by an SAR Agreement that shall specify the Grant Price, the
term of the SAR, and such other provisions as the Committee
shall determine.
7.6 Term of SARs. The term of an SAR granted under the
Plan shall be determined by the Committee, in its sole
discretion, however, such term shall not exceed ten (10)
years.
7.7 Payment of SAR Amount. Upon exercise of an SAR, a
Participant shall be entitled to receive payment from the
Company in an amount determined by multiplying:
(a) The difference between the Fair Market Value of
a Share on the date of exercise over the Grant
Price; by
(b) The number of Shares with respect to which the
SAR is exercised.
At the sole discretion of the Committee, the payment upon
SAR exercise may be in cash, in Shares of equivalent value, or
in some combination thereof.
7.8 Section 16 Requirements. Notwithstanding any
other provision of the Plan, the Committee may impose such
conditions on exercise of an SAR (including, without
limitation, the right of the Committee to limit the time of
exercise to specified periods or the ability to exercise in
cash or Shares ) as may be required to satisfy the
requirements of Section 16 of the Exchange Act and the Rules
promulgated thereunder.
7.9 Termination of Employment Due to Death, Disability,
or Retirement.
(a) Termination by Death. In the event the
employment of a Participant is terminated by
reason of death, any outstanding SARs granted
to that Participant shall immediately vest
100%, and shall remain exercisable at any time
prior to their expiration date, or for one (1)
year after the date that employment is
terminated, whichever period is shorter, by
such person or persons as shall have been named
as the Participant's beneficiary, or by such
persons that have acquired the Participant's
rights under the SARs by will or by the laws of
descent and distribution.
<PAGE> 14
(b) Termination by Disability. In the event the
employment of a Participant is terminated by
reason of Disability, any outstanding SARs
granted to that Participant shall immediately
vest 100%, and shall remain exercisable at any
time prior to their expiration date, or for one
(1) year after the date the Participant's
Disability is determined by the Committee to be
total and permanent, whichever period is
shorter.
(c) Termination by Retirement. In the event the
employment of a Participant is terminated by
reason of "normal retirement" (as defined under
the then established rules of the Company's tax
qualified pension retirement plan), all
outstanding SARs granted to that Participant
shall immediately vest 100%, and shall remain
exercisable at any time prior to their
expiration date, or for one (1) year after the
date that employment was terminated, whichever
period is shorter.
In the event the employment of a Participant is
terminated by reason of "early retirement" (as
defined under the then established rules of the
Company's tax qualified pension retirement
plan), any outstanding SARs granted to that
Participant that are not then vested shall be
forfeited. However, the Committee, at its
discretion, may vest these SARs up to 100%.
Vested SARs shall remain exercisable at any
time prior to their expiration date, or for the
one (1) year after the date that employment was
terminated, whichever period is shorter.
7.10 Termination of Employment for Other Reasons. If
the employment of a Participant shall terminate for any reason
other than the reasons described in Section 7.9, or for Cause,
all nonvested SARs held by the Participant at that time
immediately shall be forfeited to the Company. However, the
Committee, in its sole discretion, shall have the right to
immediately vest all or any portion of such SARs. Thereafter,
all vested SARs shall remain exercisable at any time prior to
their expiration date, or for one (1) year after the date that
employment was terminated, whichever period is shorter.
If the employment of the Participant shall terminate for
Cause, all outstanding SARs immediately shall be forfeited to
the Company and no additional exercise period shall be
allowed, regardless of the vested status of the SARs.
Any SAR forfeited to the Company shall again be available
for grant under the Plan pursuant to Section 16 of the
Exchange Act and the Rules promulgated thereunder.
<PAGE> 15
7.11 Nontransferability of SARs. No SAR granted under
the Plan may be sold, transferred, pledged, assigned, or
otherwise alienated or hypothecated, otherwise than by will or
by the laws of descent and distribution. Further, all SARs
granted to a Participant under the Plan shall be exercisable
during his or her lifetime only by such Participant.
ARTICLE 8. RESTRICTED STOCK
8.1 Grant of Restricted Stock. Subject to the terms
and provisions of the Plan, the Committee, at any time and
from time to time, may grant Shares of Restricted Stock to
Employees in such amounts as the Committee shall determine.
8.2 Restricted Stock Agreement. Each Restricted Stock
grant shall be evidenced by a Restricted Stock Agreement that
shall specify the Period of Restriction, or Periods, the
number of Restricted Stock Shares granted, and such other
provisions as the Committee shall determine.
8.3 Transferability. Except as provided in this
Section 8.3, the Shares of Restricted Stock granted herein may
not be sold, transferred, pledged, assigned, or otherwise
alienated or hypothecated until the end of the applicable
Period of Restriction established by the Committee and
specified in the Restricted Stock Agreement, or upon earlier
satisfaction of any other conditions, as specified by the
Committee in its sole discretion and set forth in the
Restricted Stock Agreement. However, in no event may any
Restricted Stock granted under the Plan become vested in a
Participant prior to six (6) months following the date of its
grant. Prior to vesting, all rights with respect to the
Restricted Stock granted to a Participant under the Plan shall
be available during his or her lifetime only by such
Participant.
8.4 Other Restrictions. The Committee shall impose
such other restrictions on any Shares of Restricted Stock
granted pursuant to the Plan as it may deem advisable
including, without limitation, restrictions based upon the
achievement of specific performance goals (Company-wide,
divisional, and/or individual), and/or restrictions under
applicable Federal or state securities laws; and may legend
the certificates representing Restricted Stock to give
appropriate notice of such restrictions.
8.5 Certificate Legend. In addition to any legends
placed on certificates pursuant to Section 8.4 herein, each
certificate representing Shares of Restricted Stock granted
pursuant to the Plan shall bear the following legend:
"The sale or other transfer of the Shares of Stock
represented by this certificate, whether voluntary,
involuntary, or by operation of law, is subject to
certain restrictions on transfer as set forth in
<PAGE> 16
the Portland General Corporation 1990 Long-Term
Incentive Master Plan, and in a Restricted Stock
Agreement dated . A copy of the Plan and
such Restricted Stock Agreement may be obtained
from the Secretary of Portland General
Corporation."
8.6 Removal of Restrictions. Except as otherwise
provided in this Section, Shares of Restricted Stock covered
by each Restricted Stock grant made under the Plan shall
become freely transferable by the Participant after the last
day of the Period of Restriction. Once the Shares are
released from the restrictions, the Participant shall be
entitled to have the legend required by Section 8.5 removed
from his or her Share certificate.
8.7 Voting Rights. During the Period of Restriction,
Participants holding Shares of Restricted Stock granted
hereunder may exercise full voting rights with respect to
those Shares.
8.8 Dividends and Other Distributions. During the
Period of Restriction, Participants holding Shares of
Restricted Stock granted hereunder shall be entitled to
receive all dividends and other distributions paid with
respect to those Shares while they are so held. If any such
dividends or distributions are paid in Shares, the Shares
shall be subject to the same restrictions on transferability
and forfeitability as the Shares of Restricted Stock with
respect to which they were paid, and shall reduce the number
of Shares available for grant under the Plan.
8.9 Termination of Employment Due to Death, Disability,
or Retirement. In the event that a Participant's employment
with the Company is terminated by reason of death, Disability,
or "normal retirement" (as defined under the then established
rules of the Company's tax qualified pension retirement plan),
the restrictions on the Participant's Restricted Stock shall
lapse as of the date of termination (in the case of
Disability, the restrictions shall lapse on the date the
Participant's Disability is determined by the Committee to be
total and permanent).
8.10 Termination of Employment for Other Reasons.
If the employment of the Participant shall terminate for any
reason other than those reasons described in Section 8.9,
including a termination for Cause, all nonvested Shares of
Restricted Stock held by the Participant at that time
immediately shall be forfeited and returned to the Company.
However, with the exception of a termination of employment for
Cause, the Committee, in its sole discretion, shall have the
right to provide for lapsing of the restrictions on Restricted
Stock following employment termination, upon such terms and
<PAGE> 17
provisions as it deems proper; provided that, no such lapsing
of restrictions shall occur after the expiration date of the
Restricted Stock.
Shares of Restricted Stock forfeited and returned to the
Company shall not again be available for grant under the Plan
if the Participant received any "benefits of ownership" as
defined in Section 16 of the Exchange Act and the Rules
promulgated thereunder.
ARTICLE 9. PERFORMANCE UNITS AND PERFORMANCE SHARES
9.1 Grant of Performance Units/Shares. Subject to the
terms of the Plan, Performance Units or Performance Shares may
be granted to Employees at any time and from time to time, as
shall be determined by the Committee. The Committee shall
have complete discretion in determining the number of
Performance Units or Performance Shares granted to each
Employee.
9.2 Value of Performance Units/Shares. Each
Performance Unit shall have an initial value that is
established by the Committee at the time of grant. Each
Performance Share shall have an initial value that is in
direct relation to the Fair Market Value of a Share at the
time of grant. The Committee shall set performance goals in
its discretion which, depending on the extent to which they
are met, will determine the number and/or value of Performance
Units or Performance Shares that will be paid out to the
Participants. The time period during which the performance
goals must be met shall be called a "Performance Period." The
Performance Period pertaining to each Performance Unit or
Performance Share Award shall be between two (2) and six (6)
years in length, and shall be established by the Committee at
the time of grant.
9.3 Earning of Performance Units/Shares. After the
applicable Performance Period has ended, the holder of
Performance Units or Performance Shares shall be entitled to
receive payout on the number of Performance Units or
Performance Shares earned by the Participant over the
Performance Period, to be determined as a function of the
extent to which the corresponding performance goals have been
achieved.
9.4 Form and Timing of Payment of Performance
Units/Shares. Payment of earned Performance Units/Performance
Shares shall be made in a single lump sum, within forty-five
(45) calendar days, or such longer period as may be required
under Section 16 of the Exchange Act and the Rules promulgated
thereunder, following the close of the applicable Performance
Period. The Committee, in its sole discretion, may pay earned
Performance Units or Performance Shares in the form of cash or
in Shares (or in a combination thereof) which have an
aggregate Fair Market Value equal to the value of the earned
<PAGE> 18
Performance Units or Performance Shares at the close of the
applicable Performance Period; provided, however, that the
Committee may place transfer restrictions on such Shares to
meet the requirements of Section 16 of the Exchange Act and
the Rules promulgated thereunder.
9.5 Termination of Employment Due to Death, Disability,
or Retirement. In the event the employment of a Participant
is terminated by reason of death, Disability, or "normal
retirement" (as defined under the then established rules of
the Company's tax qualified pension retirement plan) during
the applicable Performance Period, the Participant shall
receive a prorated payout on the Performance Units or
Performance Shares based on the Participant's full number of
months of service during the Performance Period as compared to
the entire length of the Performance Period, further adjusted
based on the achievement of the preestablished performance
goals. Payment of earned Performance Units or Performance
Shares shall be made at the same time payments are made to
Participants who did not terminate service during the
applicable Performance Period, or such other time as is
required to comply with Section 16 of the Exchange Act and the
Rules promulgated thereunder.
9.6 Termination of Employment for Other Reasons. In
the event that a Participant terminates employment with the
Company for any reason other than those reasons set forth in
Section 9.5, all Performance Units or Performance Shares shall
be forfeited by the Participant to the Company; provided,
however, that in the event of early retirement or an
involuntary termination of the employment of the Participant
by the Company other than for Cause, the Committee, in its
sole discretion, may waive the automatic forfeiture provisions
and pay out on a pro rata basis, as provided in Section 9.5.
9.7 Nontransferability. Performance Units may not be
sold, transferred, pledged, assigned, or otherwise alienated
or hypothecated, other than by will or by the laws of descent
and distribution. Further a Participant's rights under the
Plan shall be exercisable during the Participant's lifetime
only by the Participant or the Participant's legal
representative.
ARTICLE 10. OTHER STOCK-BASED AWARDS
10.1 Other Stock-Based Awards. The Committee shall have
the right to grant other Stock-Based Awards which may include,
without limitation, the grant of Shares based on certain
conditions, the payment of cash based on the performance of
the Common Stock, and the payment of Shares in lieu of cash
under other Company incentive bonus programs. Payment under
or settlement of any such Awards shall be made in such manner
and at such times as the Committee may determine.
<PAGE> 19
10.2 Nontransferability. No Stock-Based Awards granted
under this Section of the Plan may be sold, transferred,
pledged, assigned, or otherwise alienated or hypothecated,
otherwise than by will or by the laws of descent and
distribution. Further, all such Awards granted to a
Participant under the Plan shall be exercisable during his or
her lifetime only by such Participant.
ARTICLE 11. BENEFICIARY DESIGNATION
Each Participant under the Plan may, from time to time,
name any beneficiary or beneficiaries (who may be named
contingently or successively) to whom any benefit under the
Plan is to be paid in case of his or her death before he or
she receives any or all of such benefit. Each such
designation shall revoke all prior designations by the same
Participant, shall be in a form prescribed by the Company, and
will be effective only when filed by the Participant in
writing with the Human Resource Department of the Company, or
such other department as the Company may specify in writing to
the Participant, during the Participant's lifetime. In the
absence of any such designation, benefits remaining unpaid at
the Participant's death shall be paid to the Participant's
estate.
ARTICLE 12. RIGHTS OF EMPLOYEES
12.1 Employment. Nothing in the Plan shall interfere
with or limit in any way the right of the Company to terminate
any Participant's employment at any time, nor confer upon any
Participant any right to continue in the employ of the
Company.
For purposes of the Plan, transfer of employment of a
Participant between the Company and any one of its
Subsidiaries (or between Subsidiaries) shall not be deemed a
termination of employment.
12.2 Participation. No Employee shall have the right to
be selected to receive an Award under this Plan, or, having
been so selected, to be selected to receive a future Award.
ARTICLE 13. CHANGE IN CONTROL
In order to maintain all of the Employees' rights in the
event of a Change in Control of the Company, the Committee, as
constituted prior to such Change in Control, in its sole
discretion, may, as to any outstanding Award to an Employee,
either at the time the Award to the Employee is made or at any
time thereafter, take any one or more of the following
actions:
(i) Provide for the acceleration of any time
periods relating to the exercise or realization
of any such Award so that such Award may be
<PAGE> 20
exercised or realized in full on or before a
date fixed by the Committee;
(ii) Provide for the purchase of any such Award by
the Company for an amount of cash equal to the
amount which could have been attained upon the
exercise of such Award or in realization of
such Employee's rights had such Award been
currently exercisable or payable;
(iii) Make such adjustment to any such Award then
outstanding as the Committee deems appropriate
to reflect such Change in Control providing,
however, that such change does not detriment
the value of any Award to the Employee;
(iv) Cause any such Award then outstanding to be
assumed, or new rights substituted therefore,
by the acquiring or surviving corporation in
such Change in Control.
The Committee may, at its discretion, include such
further provisions and limitations in any Employee's Award
Agreement, documenting such Awards, as the Committee may deem
equitable and in the best interests of the Company.
ARTICLE 14. AMENDMENT, MODIFICATION, AND TERMINATION
14.1 Amendment, Modification, and Termination. With the
approval of the Board, at any time and from time to time, the
Committee may terminate, amend, or modify the Plan. However,
without the approval of the stockholders of the Company (as
may be required by the Code, by Section 16 of the Exchange Act
and the Rules promulgated thereunder, by any national
securities exchange or system on which the Shares are then
listed or reported, or by a regulatory body having
jurisdiction with respect hereto) no such termination,
amendment, or modification may:
(a) Increase the total amount of Shares which may
be issued under this Plan, except as provided
in Section 4.3 herein; or
(b) Change the class of Employees eligible to
participate in the Plan; or
(c) Materially increase the cost of the Plan or
materially increase the benefits to
Participants; or
(d) Extend the maximum period after the date of
grant during which Options or SARs may be
exercised; or
(e) Change the provisions of the Plan regarding
Option Price.
<PAGE> 21
14.2 Awards Previously Granted. No termination,
amendment, or modification of the Plan shall in any manner
adversely affect any Award previously granted under the Plan,
without the written consent of the Participant.
ARTICLE 15. WITHHOLDING
15.1 Tax Withholding. The Company shall have the power
and the right to deduct or withhold, or require a Participant
to remit to the Company, an amount sufficient to satisfy
Federal, state, and local taxes (including the Participant's
FICA obligation) required by law to be withheld with respect
to any grant, exercise, or payment made under or as a result
of this Plan.
15.2 Share Withholding. With respect to withholding
required upon the exercise of NQSOs, upon the lapse of
restrictions on Restricted Stock, or upon any other taxable
event hereunder, Participants may elect, subject to the
approval of the Committee, to satisfy the withholding
requirement, in whole or in part, by having the Company
withhold Shares having a Fair Market Value, on the date the
tax is to be determined, equal to the amount required to be
withheld. All elections shall be irrevocable, and be made in
writing, signed by the Participant in advance of the day that
the transaction becomes taxable.
Share withholding elections made by Insiders must comply
with any additional restrictions required by Section 16 of the
Exchange Act and the Rules promulgated thereunder.
ARTICLE 16. INDEMNIFICATION
Each person who is or shall have been a member of the
Committee, or of the Board, shall be indemnified and held
harmless by the Company against and from any loss, cost,
liability, or expense that may be imposed upon or reasonably
incurred by him or her in connection with or resulting from
any claim, action, suit, or proceeding to which he or she may
be a party or in which he or she may be involved by reason of
any action taken or failure to act under the Plan and against
and from any and all amounts paid by him or her in settlement
thereof, with the Company's approval, or paid by him or her in
satisfaction of any judgment in any such action, suit, or
proceeding against him or her, provided he or she shall give
the Company an opportunity, at its own expense, to handle and
defend the same before he or she undertakes to handle and
defend it on his or her own behalf. The foregoing right of
indemnification shall not be exclusive of any other rights of
indemnification to which such Persons may be entitled under
the Company's Certificate of Incorporation or Bylaws, as a
matter of law, or otherwise, or any power that the Company may
have to indemnify them or hold them harmless.
<PAGE> 22
ARTICLE 17. SUCCESSORS
All obligations of the Company under the Plan, with
respect to Awards granted hereunder, shall be binding on any
successor to the Company, whether the existence of such
successor is the result of a direct or indirect purchase,
merger, consolidation, or otherwise, of all or substantially
all of the business and/or assets of the Company.
ARTICLE 18. REQUIREMENTS OF LAW
18.1 Requirements of Law. The granting of Awards and
the issuance of Shares under the Plan shall be subject to all
applicable laws, rules, and regulations, and to such approvals
by any governmental agencies or national securities exchanges
as may be required.
18.2 Governing Law. To the extent not preempted by
Federal law, the Plan, and all agreements hereunder, shall be
construed in accordance with and governed by the laws of the
State of Oregon.
a:bdr\10762LTI.93
<PAGE> 23
Exhibit (28)
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended December 31, 1993
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from _______________ to
_______________
Commission file number ___________________
EMPLOYEE STOCK PURCHASE PLAN
(Title of the Plan)
PORTLAND GENERAL CORPORATION
(Name of the Issuer of the Securities and Employer Sponsoring the Plan)
121 SW Salmon Street
Portland OR 97204
(Address of its Principal Executive Office)
<PAGE> 1
EMPLOYEE STOCK PURCHASE PLAN OF
PORTLAND GENERAL CORPORATION
Statements of Financial Condition
At December 31 1993 1992
Receivable from Portland General $10,446 $ 7,508
Participants' Equity $10,446 $ 7,508
Statements of Income and Changes in Participants' Equity
For the Years Ended December 31 1993 1992 1991
Dividend Income $ 5,243 $ 8,465 $ 8,640
Contributions from (Note 2):
Participants 229,940 273,142 321,501
Portland General and Affiliates 25,659 31,796 36,703
Distributions to Participants:
Cost of 12,628, 18,558, and 21,390 shares
of common stock of Portland General
issued to participants under the
terms of the Plan (including
$2,326, $1,592, and $3,711 in cash) (257,904) (318,561) (370,605)
Change in Participants' Equity for the Year 2,938 (5,158) (3,761)
Participants' Equity, at beginning of year 7,508 12,666 16,427
Participants' Equity, at end of year $ 10,446 $ 7,508 $ 12,666
The accompanying notes are an integral part of these statements.
<PAGE> 2
EMPLOYEE STOCK PURCHASE PLAN OF
PORTLAND GENERAL CORPORATION
NOTES TO FINANCIAL STATEMENTS
NOTE 1.
Portland General Corporation (Portland General) Employee Stock Purchase Plan
(the Plan) was established to enable employees of Portland General and its
affiliates to acquire an ownership interest in Portland General through
purchase of its common stock. Portland General acts as custodian for
each participant and pays all Plan expenses. Portland General affiliates in
turn reimburse Portland General for costs incurred on behalf of their
employees. The Plan is not subject to income taxes. The Plan may be altered,
amended, or discontinued at any time by Portland General; however, each
participant has the rights of an owner of record in shares held by Portland
General for the participant's account.
Participants' contributions are made through payroll deductions within certain
limitations. The price of the common stock to a participant is 90% of a five-
day average market price which is determined by dividing the sum of the closing
prices of Portland General stock on the New York Stock Exchange on the last
five business days ending on or before the 15th day of the month of the
allocation, by five. Shares of common stock are purchased directly from
Portland General. The amount of Portland General contributions and dividends
received by the Plan are reported to participants on a current basis for income
tax purposes.
NOTE 2.
<TABLE>
<CAPTION>
PGE PGC PGH PGX PLC CWL Total
<S> <C> <C> <C> <C> <C> <C> <C>
1993 Contributions
Employer $ 25,587 $ 44 - - - $ 28 $ 25,659
Participant 229,295 405 - - - 240 229,940
Total $254,882 $ 449 - - - $ 268 $255,599
1992 Contributions
Employer $ 31,109 $ 619 $ 32 - $ 27 $ 9 $ 31,796
Participant 267,532 5,065 215 - 220 110 273,142
Total $298,641 $ 5,684 $ 247 - $ 247 $ 119 $304,938
1991 Contributions
Employer $ 34,856 $ 1,725 $ 67 - $ 55 - $ 36,703
Participant 305,169 15,202 650 - 480 - 321,501
Total $340,025 $ 16,927 $ 717 - $ 535 - $358,204
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
<S> <C>
To Portland General Corporation:
We have audited the accompanying statements of financial condition of the
Employee Stock Purchase Plan (the Plan) of Portland General Corporation as of
December 31, 1993 and 1992, and the related statements of income and changes in
participants' equity for each of the three years in the period ended December 31,
1993. These financial statements are the responsibility of the Plan's management.
Our responsibility is to express an opinion on these financial statements based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also includes assessing
the accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the Employee Stock Purchase Plan
of Portland General Corporation as of December 31, 1993 and 1992, and the income and
changes in participants' equity for each of the three years in the period ended
December 31, 1993 in conformity with generally accepted accounting principles.
Portland, Oregon,
February 2, 1994 ARTHUR ANDERSEN & CO.
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
of our report included in this Form 11-K, into Portland General Corporation's
previously filed Registration Statement No. 33-25466 on Form S-3, Registration
Statement No. 33-27462 on Form S-8, Registration Statement No. 33-31441 on Form S-8,
Registration Statement No. 33-40943 on Form S-8, and Registration Statement No.
33-52320 on Form S-8.
Portland, Oregon,
February 2, 1994 ARTHUR ANDERSEN & CO.
</TABLE>
<PAGE> 4
