<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, 1994
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>
<S>
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
None
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
7.75% Series, Cumulative Preferred Stock, no par value
</TABLE>
1
<PAGE> 1
<TABLE>
<CAPTION>
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. [ ]
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 February 28, 1995 is
$1,031,163,041
The number of shares outstanding of the registrants' common
stocks as of February
28, 1995 are:
<S> <C> <C>
Portland General Corporation
50,609,229
Portland General Electric Company
42,758,877
(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 27, 1995.
</TABLE>
2
<PAGE> 2
TABLE OF CONTENTS
Page
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . 4
PART I
Item 1. Business . . . . . . . . . . . . . . . . . . . .
. . . . 5
Portland General Corporation . . . . . . . . .
. . . . 5
Portland General Electric Company . . . . . . .
. . . . 5
Portland General Holdings, Inc. . . . . . . . .
. . . . 15
Item 2. Properties . . . . . . . . . . . . . . . . . . .
. . . . 16
Item 3. Legal Proceedings . . . . . . . . . . . . . . . .
. . . . 17
Item 4. Submission of Matters to a Vote of Security
Holders . . . . . . . . . . . . . . . . . . . . .
. . . . 20
Executive Officers of the Registrant . . . . . .
. . . . 21
PART II
Item 5. Market for the Registrant's Common Equity and
Related Stockholder Matters . . . . . . . . . . .
. . . . 22
Item 6. Selected Financial Data . . . . . . . . . . . . .
. . . . 23
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . .
. . . . 24
Item 8. Financial Statements and Supplementary Data . . .
. . . . 33
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure . . . . . . .
. . . . 55
PART III
Item 10. Directors and Executive Officers of the Registrant
. . . 55
Item 11. Executive Compensation . . . . . . . . . . . . .
. . . . 55
Item 12. Security Ownership of Certain Beneficial Owners
and Management . . . . . . . . . . . . . . . . .
. . . . 55
Item 13. Certain Relationships and Related Transactions .
. . . . 55
PART IV
Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K . . . . . . . . . . . . . . .
. . . . 56
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . 57
Exhibit Index . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . 60
Appendix - PGE Financial Information . . . . . . . . . . . . . .
. . . . 65
3
<PAGE> 3
<TABLE>
<CAPTION>
DEFINITIONS
The following abbreviations or acronyms used in the text and
notes are defined
below:
Abbreviations
or Acronyms Term
<S> <C>
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
Colstrip . . . . . . . . . . . . . Colstrip Units 3 and 4 Coal
Plant
Coyote Springs . . . . . . . . . . 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
IOUs . . . . . . . . . . . . . . . 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
PRP . . . . . . . . . . . . . . . . Potentially Responsible Party
PUC . . . . . . . . . . . . . . . . Oregon Public Utility
Commission
Portland General or PGC . . . . . . Portland General 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
Tule . . . . . . . . . . . . . . . Tule Hub Services Company
USDOE . . . . . . . . . . . . . . . United States Department of
Energy
WNP-3 . . . . . . . . . . . . . . . Washington Public Power
Supply System Unit 3
Nuclear Project
WSA . . . . . . . . . . . . . . . . WNP-3 Settlement Exchange
Agreement
</TABLE>
4
<PAGE> 4
Part 1
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
provides organizational separation
for Portland General's nonutility
businesses (see page 16). 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, 1994, Portland
General and its subsidiaries had
2,536 regular employees compared to
2,618 and 3,253 at December 31, 1993
and 1992, 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. PGE also
sells energy in the wholesale market to other
utilities, primarily in the State of
California. PGE's 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 at the end of 1994 its
service-area population was approximately
1.35 million, constituting approximately 45%
of the state's population. At December 31,
1994 PGE served over 637,000 customers.
In early 1993 PGE ceased commercial operation
of the Trojan Nuclear Plant (Trojan) of which it is a
67.5% owner. PGE is seeking to recover its investment
in Trojan and the plant decommissioning costs in its
electric rates. See Oregon Regulatory Matters below and Note 5,
Trojan Nuclear Plant, in the Notes to Financial Statements
for further discussion.
5
<PAGE> 5
Portland General Electric Company
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:
<TABLE>
<CAPTION>
1994 1993
1992
<S> <C> <C>
<C>
Operating Revenues (thousands)
Residential $360,651 $339,174
$311,213
Commercial 315,156 303,783
293,768
Industrial 147,347 147,274
137,901
Public Street Lighting 11,205 11,002
10,998
Tariff Revenues 834,359 801,233
753,880
Accrued Revenues 10,644 57,160
12,053
Retail 845,003 858,393
765,933
Wholesale 105,911 79,035
108,793
Other 8,041 7,103
5,372
Total Operating Revenues $958,955 $944,531
$880,098
Kilowatt-Hours Sold (millions)
Residential 6,704 6,760
6,285
Commercial 6,142 5,885
5,737
Industrial 3,863 3,764
3,615
Public Street Lighting 93 98
99
Retail 16,802 16,507
15,736
Wholesale 2,701 1,599
2,739
Total Kwh Sold 19,503 18,106
18,475
Improved wholesale sales, retail load growth and the pass through
of a Bonneville Power Administration (BPA) price increase
resulted in higher
operating revenues for 1994.
These were partially offset by a decline in accrued revenues due
to a $48 million decrease in power cost deferrals.
Total kilowatt-hour sales increased a total of 8% supported
by PGE's active wholesale marketing throughout the Western
United States and the availability of low
cost power for resale. While commercial and industrial
sales remained strong,
residential sales were flat due to mild first quarter weather.
</TABLE>
6
<PAGE> 6
Portland General Electric Company
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 wholesale
electric energy, licensing of hydroelectric
projects and certain other matters.
Construction of new generating facilities
requires a permit from the Energy Facility
Siting Council (EFSC).
The Nuclear Regulatory Commission (NRC)
regulates the licensing and decommissioning
of nuclear power plants. In 1993 the NRC
issued a possession-only license amendment to
PGE's Trojan operating license. Trojan will
be subject to NRC regulation until Trojan is
fully decommissioned, all nuclear fuel is
removed from the site and the license is
terminated. The Oregon Department of Energy
also monitors Trojan.
Oregon Regulatory Matters
General Rate Filing
On November 8, 1993 PGE filed a general rate
case with the PUC requesting an increase in
electric prices by an average of 5.1%
beginning January 1, 1995. PGE's request
included a return on equity of 11.5% and
11.8% for the years 1995 and 1996,
respectively, down from the prior authorized
return of 12.5%, and full recovery of the
Trojan investment and decommissioning costs.
In mid-1994 PGE and the PUC Staff reached settlement
on the majority of non-Trojan issues.
In July 1994 PGE agreed to delay a final
order addressing all rate case matters to no
later than March 31, 1995 in return for
approval of a first quarter 1995 power cost
deferral. Recovery of
power cost deferrals is addressed in separate
rate proceedings (see discussion below).
On November 11, 1994 PGE and the PUC Staff
stipulated to a joint recommendation to the
PUC on all outstanding cost of capital issues
including an 11.6% return on equity for 1995
and 1996.
The PUC Staff recommended
that PGE be allowed to recover 100% of Trojan
decommissioning and transition costs and
85.9% of the remaining Trojan investment.
Hearings were held in January 1995 and PGE
expects a rate order no later than March 31,
1995. See General Rate Filing discussion in
Management's Discussion and Analysis of Financial
Condition and Results of Operations for further
details.
Trojan Replacement Power Cost Deferrals
PGE operates without a power cost adjustment
provision which necessitates separate filings
with the PUC to recover increases in power
costs not reflected in current rates. 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 power no longer generated
by Trojan. The PUC authorized PGE to start
collecting this power cost deferral over a
three year period beginning in April 1994.
The PUC authorized PGE to defer, for later
collection, 50% of the incremental power
costs incurred from July 1, 1993 to March 31,
1994, subject to a review of PGE earnings.
The first quarter 1995 power cost deferral
(see General Rate Filing discussion above)
authorizes PGE to defer, for later
collection, 40% of the incremental power
costs incurred from January 1, 1995 to March
31, 1995, subject to a review of PGE
earnings. PGE will file for recovery of this
and its prior power cost deferral on June 30,
1995.
1993 Residential and Small Farm Customer
Price Increase
Under provisions of the Regional Power Act (RPA), PGE exchanges
with BPA higher-cost power for lower-cost
federal hydroelectric power 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 approximately $29 million in annual
revenues, effective October 1, 1993. This
allowed PGE to
7
<PAGE> 7
Portland General Electric Company
pass through the BPA's nearly
16% price increase which reduced the power
exchange credit to PGE's residential and
small farm customers.
1992 Temporary Rate Increase
The PUC authorized PGE to recover a portion
of the incremental power costs it 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 rate at which it was
recovering excess power costs. Residential
rates decreased by 0.5% while commercial and
industrial rates decreased by 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 work together to provide the
appropriate financial incentives for PGE's
energy efficiency programs. PGE is allowed a
return of and 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
consisted of a lost revenue component, an
energy efficiency investment true-up
mechanism, and a shared savings incentive
that rewards PGE with additional revenues for
a portion of the difference between the
equivalent cost of 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 four years of
the program, PGE exceeded benchmarks set by
the PUC, and qualified programs achieved an
annualized 55 average megawatts of saved
energy.
SAVE, which began as a three-year tariff in
1991, was extended for 1994. A program for
1995 and beyond is being discussed with the
PUC.
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 rate order.
The settlement did not resolve the issue
related to the gain on PGE's sale of a
portion of the Boardman Coal Plant (Boardman)
and the Pacific Northwest Intertie
transmission line (Intertie). 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. In accordance with the
1987 rate order the unamortized gain, $119 million
before taxes, at December 31, 1994, is being
distributed as a reduction of customer
revenue requirements.
On January 23, 1995 the Marion County Circuit
Court affirmed the PUC's decision in the 1987
rate order discussed above. PGE has sixty
days from the date of the decision to appeal.
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 (e.g.,
conservation and load management)
as well as traditional "supply side" options (e.g.,
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
8
<PAGE> 8
Portland General Electric Company
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 will file its next Least
Cost Plan (LCP) in 1995.
Competition and Marketing
The passage of the Energy Policy Act of 1992 (Energy
Act) fostered increased competition in the electric
utility industry. Currently, wholesale markets are
reflecting the greatest competitive challenges.
The Energy Act created new entrants in the
wholesale market by facilitating the ownership and operation
of generating facilities by exempt wholesale generators (which
may include independent power producers as well as affiliates
of electric utilities). The Energy Act also authorized
FERC to require a utility to provide transmission service
for other entities generating electric energy for sale or
resale. In addition, the Energy Act granted states the
authority to adopt retail wheeling,
the transmission by an electric utility of
electric power from another supplier to a
customer located within the utilities service
area. Certain states, including California, are considering
proposals which would allow customers to
select their electricity provider. The
Oregon PUC has not yet considered similar
measures.
Retail Competition and Marketing
PGE operates within a state-approved service
area and is substantially free from direct
retail competition with other electric utilities.
However, a local natural gas utility competes
with PGE for residential and commercial
customers' space and water heating.
Additionally, industrial and commercial
customers have become more aggressive in
managing their energy costs.
PGE is working to be the energy expert and
utility of choice for its retail customers.
A key initiative is PGE's Power Smart Program which is targeted
at residential and commercial customers. It
includes a program which offers home
buyers high energy efficiency homes built
with the use of construction techniques and
materials specifically designed to minimize
the impact of construction on the
environment, programs to influence market growth through
high value electrical applications and
managing capacity demand through load
shaping, an Energy Resource Center to provide
customers with technical assistance and
training for energy-related business issues,
and a joint program 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.
Wholesale Competition and Marketing
PGE's generating resources, coupled with its
transmission rights on the Pacific Northwest
Intertie (Intertie) provides the Company with
flexibility to buy and sell power in California, the
desert Southwest, the Northwest and Canada.
The ability to make wholesale energy sales
depends on the availability and price of surplus power,
access to transmission systems, changing
prices of fossil fuels, competition from
alternative suppliers, and the demand for
power by other parties.
The 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 the South. PGE has
scheduling capability for 850 megawatts on
the Intertie and 100 megawatts of scheduling
capability on BPA's DC Intertie.
The federal Energy Act established competition in bulk power
generation as national policy. FERC can now
order wholesale transmission of electric
power, called wholesale wheeling. Wholesale
wheeling allows independent power producers,
utilities, and brokers with little or no
generating capacity to market power over wide
geographic areas. Ownership of 950 megawatts
of transmission rights secures the Company's
presence in the increasingly competitive wholesale
market by providing 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 5, Trojan
Nuclear Plant in the Notes to Financial Statements)
ended 17 years of operation
during which the plant provided 745
megawatts of capacity, and supplied about one
quarter of PGE's annual energy requirements.
PGE is replacing this output and meeting new
load growth with a mix of energy purchases,
new generating resources and demand-side
programs.
9
<PAGE> 9
Portland General Electric Company
Generating Capability
PGE's existing hydroelectric, coal-fired and
gas-fired plants are key economic resources
for the Company providing 1,911 megawatts of
generating capability. PGE's lowest-cost
producers are its eight hydroelectric
projects on the Clackamas, Sandy, Deschutes,
and Willamette rivers in Oregon.
The gas-fired Beaver Combustion Turbine Plant
(Beaver) set operating records in 1994,
providing 13% of PGE's energy requirements at
a cost competitive with the Company's
spot market purchases. The Boardman Coal-Fired
Plant (Boardman) also set records in 1994,
operating at an 86% capacity factor.
Purchased Power
PGE relies on long-term power contracts with
four hydro projects on the mid-Columbia River
which provide PGE with 667 megawatts. PGE
also purchases surplus energy, primarily
hydro-generated, from other Pacific Northwest
utilities with firm contracts for 1,377
megawatts ranging in term from one to 22
years. In addition, PGE has long-term
exchange contracts with summer-peaking
California utilities to help meet its winter-
peaking requirements.
PGE has a total of 2,299 megawatts of firm
capacity to serve PGE's peak loads. PGE also
has access to surplus energy in the spot
market, called secondary energy, which is
utilized to meet customers' needs when it is
economical to do so, and to provide
replacement energy during plant 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, 1994,
capacity available to PGE compared with
historical peak loads is:
<TABLE>
<CAPTION>
Source: Megawatts
<S> <C>
Hydro plants 610
Coal-fired plants 651
Gas-fired plants 650
Firm power purchases 2,299
contracts
Total 4,210
Peak Load:
System record (Dec. 1990) 3,698
1994 peak (February) 3,332
</TABLE>
Year in Review
PGE generated 47% of its load requirements
in 1994 compared with 42% in 1993. Firm and
secondary purchases met the remaining load.
Below average precipitation in some parts of
the Columbia River basin reduced the
availability of inexpensive hydro power on
the secondary market in 1994. Regional water
conditions were about 71% of normal.
However, mild weather, increased
thermal-unit production, and lower gas prices mitigated
the effect of poor water conditions.
10
<PAGE> 10
Portland General Electric Company
1995 Outlook
The early predictions of water conditions
indicate they will be about 95% of normal.
While this should improve PGE hydro
generation, efforts to restore salmon runs on
the Columbia and Snake Rivers may affect the
supply and price of purchased power (see the
Restoration of Salmon Runs discussion below).
Commercial operation of The Coyote Springs
Generation Project (Coyote Springs), a 220
megawatt cogeneration facility being constructed
near Boardman, Oregon is planned for
late 1995. See Item 3, Legal Proceedings for
discussion of legal challenges to the development
of Coyote Springs.
Even with the addition of Coyote Springs, PGE will
continue to purchase power in 1995 and beyond.
Price and supply of power purchases will
continue to be of particular importance.
Adequate supplies of secondary energy are expected to
be available to meet customer demand.
The Company will proceed with obtaining required
site permits for potential new generating resources
but does not anticipate new construction in the
foreseeable future.
Restoration of Salmon Runs - Several species
of Snake River salmon are protected as threatened
under the Endangered Species Act (ESA). In an
attempt to save the endangered fish the federal
government has taken emergency actions that
have reduced the amount of electricity
generated at the Columbia and Snake River
dams. In January 1995 the National Marine
Fisheries Service (NMFS) released, for public
comment, a draft plan calling for altering
the management of federal dams and reservoirs
in the Columbia River basin in order to
protect dwindling salmon stocks. The plan
proposes to boost river flows while young
salmon are migrating which reduces the water
available for hydropower generation. NMFS is
empowered by the ESA to require salmon-
protection measures by the Bureau of
Reclamation and the Army Corps of Engineers,
the agencies which operate the federal dams
on the river.
The Columbia river and its tributaries
produce nearly two thirds of the electricity
used in the region. PGE purchases power from
many sources, including the mid-Columbia
dams. Reductions in
the amount of water allowed to flow through
the dams' turbines reduces generation and
increases the cost of power available to
purchase on a non-contract or secondary
basis. The attempt to improve fish passage
by releasing more water from the reservoirs
in the spring and summer could mean less
water available in the fall and winter, when
the demand for electricity in the Pacific
Northwest is the highest. This could lead to
higher power costs.
By utilizing its transmission system to
increase seasonal power exchanges with
California and the Southwest PGE could
partially offset the cost of reduced hydro
generation on the Columbia and Snake Rivers.
California energy demand peaks in
11
<PAGE> 11
Portland General Electric Company
the summer, while the Pacific Northwest demand peaks in
winter. Furthermore, PGE is less vulnerable to
operational changes on the Columbia and Snake
Rivers' hydro projects because of its base of thermal
generating resources.
PGE's fish biologists are working with state
and federal agencies to ensure that PGE's
hydro operations located on several Columbia
River tributaries are compatible with the
survival of wild salmon and other wildlife.
PGE does not expect the ESA process to
significantly impact its own hydro
generation.
Fuel Supply
Coal
Boardman. PGE has an agreement to
supply coal to Boardman through the year
2000. The agreement does not require a minimum amount
of coal to be purchased. PGE did not take
deliveries under this agreement during 1994
but utilized several short and medium term
contracts to supply coal for Boardman
generation. Coal purchased in 1994 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 million
British thermal units (MMBtu) when burned.
The coal is from both surface mining
operations and underground operations, each
subject to federal, state, and local
regulations. Coal is delivered to Boardman
by railroad.
Colstrip. Coal for Units 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 Colstrip
plant has sulfur dioxide removal equipment to
allow operation in compliance with EPA's
source performance emission standards.
Centralia. Coal for Units 1 and 2, located
in southwestern Washington, is provided under
contract with PacifiCorp doing business as
PacifiCorp Electric Operations. Most of
Centralia's coal requirements are expected to
be provided under this contract.
About one quarter of PGE's firm resources comes from coal-fired
plants:
<TABLE>
<CAPTION>
PGE's % Sulfur
Type of Pollution
Plant Ownership and MWs Content
Control Equipment
<S> <C> <C> <C> <C>
Boardman, OR 65%; 330 MW 0.4%
Electrostatic precipitators
Centralia, WA 2.5%; 33 MW 0.6%
Electrostatic precipitators
Colstrip, MT 20%; 288 MW 0.7%
Scrubbers and precipitators
</TABLE>
Natural Gas
In addition to the agreements discussed below
the Company utilizes short-term agreements and
spot-market purchases to secure transportation capacity
and gas supplies sufficient to fuel plant
operations.
Beaver. PGE owns 90% of a pipeline which directly connects
Beaver to Northwest Pipeline (NWP), an
interstate gas pipeline operating between
British Columbia and New Mexico. PGE presently has
access to 30,000 MMBtu per day of firm
capacity on NWP or enough to operate Beaver
at approximately a 30% capacity. The
contracted firm capacity on NWP increases to
76,000 MMBtu per day in late 1995 or enough
to operate Beaver at approximately 70%
capacity.
Coyote Springs. During 1994 PGE took
assignment of existing firm transportation
capacity on the interconnected systems of
various suppliers sufficient to deliver
41,000 MMBtu per day of natural gas from
Alberta, Canada to Coyote Springs. This
service should be sufficient to fuel 100% of
plant operations and will start in
late 1995 when the plant is expected to come
on-line. In late 1995 PGE will begin purchasing
under two-year contracts for the supply
of natural gas to Coyote Springs at a 75
percent load factor.
12
<PAGE> 12
Portland General Electric Company
Environmental Matters
PGE operates in a state recognized for
environmental leadership. PGE's
environmental stewardship policy emphasizes
minimizing waste in its operations,
minimizing environmental risk and 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 reductions in
emissions of sulfur dioxide, nitrogen oxide
and other 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.
In 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. However,
future legislation, if adopted, could affect plant
operations and increase operating costs or
reduce coal-fired capacity.
Boardman's air contaminant discharge permit,
issued by the DEQ, has no
restrictions on plant operations. This
permit expired in 1994 and is being renewed
in 1995. Plant operations have not been
affected as a result of this routine renewal
process.
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 waste-
water discharge permit for Beaver was
approved in 1994.
DEQ air contaminant discharge permits for the
combustion turbine generators at Bethel
expire in 1995 but are expected to be
replaced by new permits during the year.
The current permits allow unrestricted plant
operations during the day. Due to noise
limitations only one unit may operate at
night. 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 acquisition of
clean up equipment.
Environmental Clean Up
PGE is involved with others in environmental
clean up of PCB contaminants at various sites
as a potentially responsible party (PRP).
The clean up effort is considered complete by
the PRP's at several sites which are awaiting
consent orders from the appropriate
regulatory agencies. Future clean-up costs
associated with these sites are not expected
to be material.
13
<PAGE> 13
Portland General Electric Company
Human Resources
As of December 31, 1994, PGE had 2,502
regular employees, including 164 employees at
Trojan. This compares to 2,577 and 3,157
regular PGE employees at December 31, 1993
and 1992, respectively.
14
<PAGE> 14
Portland General Holdings, Inc. - Nonutility
Businesses
General
Portland General Holdings, Inc. (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 administrative services
for electric futures trading. 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.
Leasing
Columbia Willamette Leasing
Columbia Willamette Leasing (CWL) acquires
and leases capital equipment on a leveraged
basis. During 1994 and 1993, 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 $153 million of net investment.
No new investments are expected or
planned for the foreseeable future.
Electricity Trading Administrative
Services
Tule Hub Services Company (Tule)
Tule, incorporated in Oregon during 1994, was
created to provide administrative services to
facilitate the trading of electric futures at
the California-Oregon border. Tule is
modeled after similar companies in the crude
oil and natural gas industries which evolved
as a result of deregulation and trading of
related futures contracts.
Independent Power
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. Numerous lawsuits have
been filed in this matter by Bonneville
Pacific and other parties since late 1991.
See Note 13, Legal Matters, in the Notes to
the Financial Statements and Item 3. Legal
Proceedings for more information.
Real Estate
Columbia Willamette Development Company
The process of liquidating real estate
projects was substantially completed during
1994. See Note 2, Real Estate - Discontinued
Operations, in Notes to the Financial
Statements.
15
<PAGE> 15
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
<S> <C> <C> <C>
<C>
Wholly owned:
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 44
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
Coyote Springs** Boardman, OR Gas/Oil 220
PGE %
Jointly Owned:
Interest
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
Trojan*** Rainier, OR Nuclear -
67.5
<FN>
* Combustion turbine generators at Bethel and Beaver are leased
by PGE
** The facility is under construction and is expected to be
completed in late 1995
*** Trojan ceased commercial operation in early 1993
</FN>
</TABLE>
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. Following the
1993 closure, PGE has been granted a
possession-only license amendment for Trojan
by the NRC. In addition, in early 1995 PGE
filed its Trojan decommissioning plan with
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 1999. PGE leases its
headquarters complex in downtown Portland and
the coal-handling facilities and certain
railroad cars for Boardman.
16
<PAGE> 16
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 was originally filed on August 31, 1992
as the consolidation of various class actions filed
on behalf of certain purchasers of Bonneville Pacific
Corporation common (Bonneville Pacific) shares and
subordinated debentures. In April 1994 the Court
dismissed certain of the plaintiffs'
claims and thereafter plaintiffs filed a second amended
consolidated class action complaint. The defendants in
the action are certain Bonneville Pacific insiders
and other individuals associated with Bonneville
Pacific, Portland General Corporation (Portland General),
Portland General Holdings, Inc. (Holdings), certain Portland
General individuals, Deloitte & Touche (Bonneville Pacific's
independent
auditors) and one of its partners, Mayer, Brown & Platt, a law
firm used by Bonneville Pacific, and two partners of that firm,
three
underwriters of a Bonneville Pacific offerings of convertible
subordinated debentures (Kidder, Peabody & Co., Piper Jaffray
& Hopwood Incorporated, and Hanifen, Imhoff Inc.), and
Norwest Bank, Minnesota, N.A., indenture trustee on a
Bonneville Pacific's offering of convertible subordinated
debentures. The amount of damages sought is not specified.
The claims asserted against Portland General, Holdings, and
the Portland General individuals allege violations of
federal and Utah state securities laws and of the Racketeer
Influenced and Corrupt Organizations Act (RICO).
Further motions to dismiss have been filed in response to the
amended complaint, however hearing on the motions of Portland
General, Holdings, and the Portland General individuals has
been deferred pending ongoing settlement discussions between
those parties and the plaintiffs.
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
This action was originally filed on April 24, 1992 by
Bonneville Pacific against Portland General,
Holdings, and certain individuals affiliated with Portland
General or Holdings alleging breach of fiduciary duty,
tortious interference, breach of contract, and other
actionable wrongs related to Holdings' investment in
Bonneville Pacific.
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 or Holdings and over 50 other defendants
unrelated to Portland General or Holdings. This complaint
and another subsequent amended version were dismissed by
the Court in whole or in part. The Trustee has currently
on file his Fifth Amended Complaint. The complaint includes
allegations of RICO violations and RICO conspiracy, collusive
tort, civil conspiracy, common law fraud, negligent
misrepresentation,
breach of fiduciary duty, liability as a partner for the debts of
partnership, and other actionable wrongs. Although the amount
of damages sought is not specified in the Complaint, the Trustee
has filed a damage disclosure calculation which purports to
compute damages in amounts ranging from $340 million to $1
billion -
subject to possible increase based on various factors. The
Portland General parties have again filed motions to dismiss.
Arguments were heard in December, 1994, and the motions are
awaiting decision by the Court.
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. 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
17
<PAGE> 17
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.
This case has been consolidated for all purposes with Portland
General Holdings, Inc. v. Bonneville Group and
Raymond L. Hixson noted below.
Some of the defendants in the consolidated case
have asserted counterclaims against Holdings.
Certain counterclaims do not presently specify an amount of
damages. The remaining counterclaims, taken together, seek
approximately $80 million in specified and punitive damages. The
Company believes the counterclaims have little merit.
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, Inc. v. Deloitte &
Touche, et al and seeks the same 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 Portland
General Electric Company (PGE)
and other 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 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 ceased work on
Unit 3, the unit owned by PGE, Puget,
PacifiCorp, and other investor owned
utilities (IOUs) in common with the Supply
System. In August 1983 PGE and two IOUs
filed counterclaims, cross-claims,
third-party claims and a motion for a
preliminary injunction against the Supply
System, BPA, and certain of the Participants.
PGE and the IOUs also 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 a 1976 Policy
Statement or if the Policy Statement was
found to be non-binding, damages from the
Supply System and others for
misrepresentations and omissions. 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.
On February 25, 1992 the Ninth Circuit Court
of Appeals ruled in support of PGE and the
IOUs. A trial remains necessary to assure
that the allocations were properly performed.
PGE has agreed to a tentative settlement in
the case which would result in a $1 million
payment by the Company. Any final settlement
will require court approval.
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 Oregon Public Utility
Commission (PUC) on two of three
matters arising from the 1987 rate case. The
settlement resolved the dispute regarding the
treatment of certain investment tax credits
and the 1986-1987 interim relief. The
settlement did not resolve the issue related
to the gain on PGE's sale of a portion of
Boardman and the Intertie. On January 23,
1995, the judge affirmed the PUC decision
allocating 77% of the gain to customers over
a 27 year period. See Note 12, Regulatory
Matters, in the Notes to the Financial
Statements for more details. PGE has sixty
days to appeal from the date of the decision.
Utility Reform Project v. Oregon Public
Utility Commission, Multnomah County Circuit
Court
On February 18, 1992 the Utility Reform
Project (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
18
<PAGE> 18
the PUC issued an order approving the rate
increase. The case is currently under a stay.
PGE has not intervened in this case.
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) subsequently approved
by the PUC and the City of Portland, which
PGE and the PUC believe 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.
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. On April 16, 1992 the PUC issued an
order which corrected and affirmed the 1972
Order, approved the Agreement, and the 1992
territorial allocation agreement between PGE
and PP&L.
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
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
contending 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 a ten year period.
On July 3, 1991 the Court ruled that the
Agreement did not allocate customers for the
provision of exclusive services and that the
1972 order of the PUC approving the Agreement
did not order the allocation of territories
and customers.
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 1990 to July 1991, trebled,
plus costs and attorney's fees. Both PGE and
Columbia Steel have appealed the ruling.
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.
On June 28, 1993 the Court dismissed PGE's
claims of negligence and negligent
misrepresentation. A Trial date has not been
set.
In the Matter of Portland General Electric
Company, U.S. Environmental Protection Agency
PGE and the U.S. Environmental Protection
Agency (EPA) have settled a civil complaint
against PGE, for a nominal amount. The complaint
alleged violations of environmental standard with
19
<PAGE> 19
respect to storage of materials and related
recordkeeping at a transmission substation.
Southern California Edison Company v. PGE,
U.S. District Court for the District of
Oregon
On August 3, 1994, Southern California Edison
(SCE) filed a complaint in Multnomah County
Circuit Court in Portland, Oregon claiming
PGE's decision to close Trojan violated the
terms of a long-term firm power sales and
exchange agreement entered into in 1986. The
25-year contract is for 75 megawatts of firm
energy and capacity plus a 225 megawatt
seasonal exchange. Under the agreement SCE
is obligated to pay to PGE a reservation fee for system capacity,
seasonal exchange and other services equal to
$16.9 million annually.
SCE is seeking termination of the agreement
and damages including a return of payments
made to PGE from the date of PGE's alleged
default (approximately $34 million).
PGE has filed a petition with FERC asking
FERC to assume jurisdiction and seeking a
Declaratory Order and Motion for Summary
Disposition. PGE also removed the case
from the State court to federal court.
Subsequent to removal, SCE filed a motion
for remand to the state court. The motion
was granted. PGE's motion for the state
court to stay or dismiss the case pending
a decision by FERC was denied. Trial in
the state court has been set for October 1995.
The Company will vigorously defend itself and
believes it will succeed in the defense of
these claims.
Utility Reform Project and Don't Waste Oregon
Council v. Energy Facility Siting Council,
Portland General Electric Company and Oregon
Department of Fish and Wildlife, Supreme Court
of the State of Oregon
On November 16, 1994 and November 17, 1994, Utility
Reform Project (URP) and Don't Waste Oregon Council
(DWOC), respectively, filed Petitions for Judicial
Review of the order of the Energy Facility Siting
Council (EFSC) granting a site certificate for the
Coyote Springs Generation Plant. The Petitions have
been consolidated. URP and DWOC seek to have the
order remanded to EFSC for reconsideration. They
allege that EFSC did not adequately address standards
related to the need for power and financial assurances,
and erred in its treatment of certain confidential information.
Briefs have been filed and argument is set for early March.
Item 4. Submission of Matters to a Vote of Security Holders
None.
20
<PAGE> 20
<TABLE>
<CAPTION>
Executive Officers of Portland General Corporation and Portland
General Electric (*)
Name Age Business
Experience
<S> <C> <C>
Ken L. Harrison 52 Appointed to current
position of Chairman of the
Board and
Chief
Chairman of the Board, Chief Executive Officer on
December 1, 1988 and
President of
Portland General
Executive Officer - PGC/PGE since August 4, 1992.
Served as President of
Portland General
Electric
President - PGC from June 1987 until
September 1989.
Richard G. Reiten 55 Appointed to current
position on August 4, 1992.
Served as
President of
President and Chief Operating Portland General from
January 1989 until appointed
to current
position.
Officer - PGE
Leonard A. Girard 52 Appointed to current
position on September 1, 1988.
Served as
Vice
Senior Vice President, President, Legal and
Regulatory Affairs, and
Secretary from
January 1988
General Counsel and Secretary until appointed to current
position.
PGC/PGE
Joseph M. Hirko 38 Appointed to current
position on December 3,
1991. Served
as Treasurer
Vice President-Finance, Chief beginning in June 1989.
Served as Vice President,
Portland
General
Financial Officer, Chief Financial Services, Inc.
from November 1985 until
June 1989.
Accounting Officer and Treasurer
PGC/PGE
Donald F. Kielblock 53 Appointed to current
position on October 4,
1989.
Previously served as
Vice President - PGC/PGE General Manager,
Information Services of PGE
until
appointed to current
Human Resources position.
Alvin Alexanderson 47 Appointed to current
position on February 5,
1991. Served
as President of
Vice President - PGE Portland General Exchange
from May 1988 until
appointed to
current position.
Rates and Regulatory Affairs
David K. Carboneau 48 Appointed to current
position on October 1, 1991.
Served as Vice
President,
Vice President - PGE Information Resources from
October 1989 until
appointed to
current
Administration position. For four years
prior to October 1989,
served as an
executive
officer of PGE.
Richard E. Dyer 52 Appointed to current
position on July 17, 1991.
Served as PGC
Vice
Vice President - PGE President and Assistant to
the Chairman of the Board
from October
1990
Marketing and Supply until appointed to current
position. Prior to
October 1990
served as Vice
President, PGE Power
Management.
Peggy Y. Fowler 43 Appointed to current
position on January 1, 1990
(assumed
responsibility
Vice President - PGE for Distribution on
February 15, 1994).
Served as General
Manager, Hydro
Distribution Production and
Transmission from September 1989
until
appointed to
current position.
Previously served as General
Manager, Service
and Installation.
Frederick H. Lamoureaux 55 Appointed to current
position on July 17, 1991
(assumed
responsibility for
Vice President - PGE Hydro Production and
Utility Services on
February 15, 1994).
Served as
Hydro Production and Vice President,
Distribution from September 1989
until
appointed to current
Utility Services position. Previously
served as General Manager,
Hydro
Production and
Transmission.
Frederick D. Miller 53 Appointed to current
position on October 15,
1992. Served
as Director of
Vice President - PGE Executive Department,
State of Oregon, from
1987 until
appointed to
current position.
<FN>
(*) Officers are listed as of January 31, 1995. The officers
serve for a term of one
year or until their successors are elected and qualified.
</FN>
</TABLE>
21
<PAGE> 21
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 1994 and 1993.
<TABLE>
<CAPTION>
1994
1993
Quarter 1st 2nd 3rd 4th 1st
2nd 3rd 4th
<S> <C> <C> <C> <C> <C> <C>
<C> <C>
High 20-1/2 18-7/8 18-1/4 19-3/4 21-1/8
22-1/4 23-1/8 22 7/8
Low 17-1/4 16-3/8 16-1/2 16-1/2 16
19-7/8 21-1/2 18 3/4
Closing price 17-1/2 17 16-7/8 19-1/4 21
22-1/8 22-1/4 20 1/2
Cash dividends
declared (cents) 30 30 30 30 30 30
30 30
</TABLE>
The approximate number of shareholders of record as of December
31, l994
was 45,152.
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 1994 1993
<S> <C> <C>
First $ 15,393 $ 18,206
Second 15,393 18,206
Third 12,828 18,206
Fourth 12,828 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.
22
<PAGE> 22
Item 6. Selected Financial Data
Portland General Corporation
<TABLE>
<CAPTION>
For the Years Ended
December 31
1994 1993 1992
1991
1990
(Thousands of Dollars
except per share amounts)
<S> <C> <C> <C>
<C> <C>
Operating Revenues $959,409 $946,829
$883,266 $889,876
$852,105
Net Operating Income 154,296 158,181
163,500 136,531
176,457
Income (loss) from Continuing
Operations 93,058 89,118
89,623 (20,698) 1
99,952 2
Gain (loss) from Discontinued
Operations 3 6,472 -
- - (29,169)
- -
Net Income (loss) $99,530 $ 89,118 $
89,623 $(49,867) $
99,952
Earnings (loss) per Average
Common Share
Continuing Operations $ 1.86 $ 1.88 $
1.93 4 $ (.43) 4
$2.17
Discontinued Operations 3 .13 -
- - (.63)
- -
$ 1.99 $ 1.88 $
1.93 4 $(1.06) 4
$2.17
Dividends Declared
per Common Share $ 1.20 $ 1.20 $
1.20 $1.20
$1.20
Total Assets $3,559,271 $3,449,328
$3,140,625 $3,092,596
$3,104,736
Long-Term Obligations 5 885,814 912,994
937,938 967,968
820,538
</TABLE>
Portland General Electric Company
<TABLE>
<CAPTION>
For the Years Ended
December 31
1994 1993 1992
1991
1990
(Thousands of
Dollars)
<S> <C> <C> <C>
<C> <C>
Operating Revenues $958,955 $944,531
$880,098 $885,578
$884,720
Net Operating Income 153,208 154,200
160,037 139,257
181,344
Net Income 106,118 99,744
105,562 74,075
121,949 2
Total Assets $3,354,151 $3,226,674
$2,920,980 $2,912,254
$2,855,809
Long-Term Obligations 5 855,814 872,994
887,938 887,952
810,538
<FN>
1 Includes a loss of $74 million from independent power.
2 Includes a gain of $16 million for settlement of certain
regulatory issues in 1990.
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 capital lease obligations.
</FN>
</TABLE>
23
<PAGE> 23
Item 7. Management's Discussion and Analysis of
Condition and Results of Operations
General
Results of Operations
Portland General Corporation (Portland
General) reported 1994 earnings of $100
million or $1.99 per share. Portland General
Electric (PGE or the Company), an electric
utility company and Portland General's
principal operating subsidiary, performed
well, contributing $95 million to Portland
General's earnings.
1994 Compared to 1993
PGE accounts for substantially
all of Portland General's assets, revenues and
net income. The following discussion focuses on
utility operations, unless noted.
Portland General's 1994 earnings of $100
million, $1.99 per share, compared favorably
to 1993 earnings of $89 million, $1.88 per
share. In 1994 previously recorded real
estate reserves of $6 million, after tax, or $.13
per share, were restored to income as a result of the
substantial completion of divestiture of real
estate investments. Income from continuing
operations was $93 million compared to $89 million in
1993.
Customer growth and increased wholesale activity
resulted in strong energy sales for the year.
Kilowatt-hour (kWh) sales increased 8% over the
prior year, adding $60 million to revenues.
Weather adjusted retail load grew
approximately 2.5% with the addition of
nearly 13,700 retail customers. Wholesale kWh
sales escalated 69% reflecting the
availability of low cost
power for resale and the Company's active wholesale marketing of
energy throughout the Western United States.
Accrued revenues of $19 million, relating to
power cost deferrals, were down substantially
from the $67 million in 1993. PGE deferred
for later collection a portion of incremental
Trojan Nuclear Plant (Trojan) replacement power costs for nine
months during 1993. Nuclear cost savings
allowed PGE to operate the last nine months
of 1994 without the need for additional power
cost deferrals.
An 8% increase in total sales combined with a
14% decline in PGE's hydro generation
contributed to a $35 million increase in
variable power costs. Strong performance at
PGE's thermal generating facilities allowed
PGE to generate 47% of its total system load
compared to 42% in 1993. Generation at coal
fired plants increased 20%, with all plants
producing above last year's levels. Despite
the increased generation at its thermal
plants, average fuel costs decreased by 4% due to low
natural gas prices. These factors
contributed to a reduction in total average
variable power costs to 19.1 mills/Kwh from
19.4 mills/Kwh (10 mills = 1 cent) in 1993.
Operating expenses (excluding variable power
costs, depreciation, decommissioning and amortization)
decreased by $24 million. Continued emphasis
on cost reductions at Trojan resulted in $30
million in decreased nuclear operating
expenses. Since plant closure in 1993, the
number of PGE nuclear employees has dropped
from 984 to 166 and correspondingly, annual
nuclear operating expenses have declined from
24
<PAGE> 24
approximately $96 million to $15 million.
Increases in operating costs on PGE's
distribution system partially
offset nuclear cost savings.
The $4 million increase in other income
reflects an increase in accrued interest on
deferred power costs and a gain on the sale
of non-utility property, partially offset by
provisions for litigation costs.
Allowance for funds used during construction
increased $4 million primarily due to the level of
construction expenditures at the Coyote Springs
Generation Project (Coyote Springs)
in 1994, which helped offset increased interest
costs on short-term borrowings.
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 Oregon Public Utility Commission (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. Regulatory action,
continued customer growth and cost reductions
were the major contributors to the 1993
results.
Operating revenues increased $64 million over 1992.
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 for the period from
December 4, 1992, to March 31, 1993, (see the
Power Cost Recovery discussion in the Financial and Operating
Outlook section below) allowed the Company to record
$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 part of the year increased
Kwh sales 5% for 1993.
Wholesale revenue declined $30 million due to
the lack of low-cost power for resale.
Operating expenses (excluding variable power costs,
depreciation, decommissioning and
amortization) declined 14% for 1993 due to a
$53 million decline in nuclear expenses from
closing Trojan. Nuclear operating expenses for 1993
reflect the amortization of Trojan
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 $45 million to nuclear
operating expenses.
Variable power costs increased $90 million in
1993. The average variable power cost
increased from 15 mills per kWh in
1992 to 19 mills per Kwh in 1993.
Trojan generated 16% of the Company's 1992
power needs at an average fuel cost of 4
mills per Kwh. This generation was
primarily replaced by power purchases at an
average price of 24 mills per Kwh.
However, good performance at PGE's generating
plants helped control the increase of
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 generation at Units 3 and
4 of the Colstrip Coal Plant (Colstrip) to
decline which slightly reduced the Company's
1993 thermal generation from the 1992 level
(excluding Trojan). Fuel cost increased from
9 mills per Kwh to 10 mills per
Kwh driving 1993 fuel expense up $5
million.
25
<PAGE> 25
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.
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, asset sales, leasing rentals, short-
and intermediate-term borrowing, and the
sale of Portland General's common stock.
In 1994 Portland General replaced its
expiring committed borrowing facilities with
a $15 million committed borrowing
facility.
Portland General received $62 million in
dividends from PGE. In February 1994
Portland General issued 2.3 million shares of
common stock. The $41 million of proceeds
were used to purchase additional shares of
PGE common stock. In addition, Portland
General received $9 million in proceeds from
the issuance of shares of common stock under
its Dividend Reinvestment and Optional Cash
Payment Plan.
Portland General Electric Company
Cash Provided by Operations is the primary
source of cash used for day to day operating
needs of PGE. The Company also obtains cash
from external borrowings, as needed.
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. Cash provided by operations
increased primarily due to growth in
operating revenues which were comprised of
fewer non-cash revenues. This was partially
offset by a related increase in tax payments
and a $20 million prepayment made to the IRS
(see below). Cash provided by operations
increased slightly in 1993 as compared to
1992 reflecting lower income tax payments.
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 issued a statutory notice of tax
deficiency, which PGE is contesting. In
September 1994, PGE made a $20 million
prepayment to the IRS to mitigate the
interest cost exposure, if any, related to
the alleged tax deficiency. The prepayment
is refundable with interest should PGE
prevail. See Notes 4 and 4A, Income Taxes,
in the Notes to Financial Statements for further
information.
Investing Activities are primarily for
generation, transmission and distribution
facilities and energy efficiency improvements
at PGE. PGE's capital expenditures for 1994
of $247 million were primarily for new
generating resources and expansion and
upgrade of its transmission and distribution
system. PGE's capital expenditures for 1995
are expected to be at similar levels.
Capital expenditures for distribution, system
improvements and energy efficiency investmentsare expected to be
approximately $180 million in 1996 .
At this time the Company will proceed
with obtaining required site permits for potential
new generating resources but does not anticipate
new construction in the foreseeable future.
PGE pays $11 million per year into an
external trust for the future costs of Trojan
decommissioning.
26
<PAGE> 26
Financing Activities provide supplemental cash
for day-to-day operations and PGE's capital requirements.
Internal funding will cover the majority of the
Company's 1995 capital expenditures. PGE anticipates
continued access to capital markets to finance
the remainder.
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.
PGE has committed borrowing facilities of
$120 million and $80 millon which are used
primarily as backup for PGE's $200 million
commercial paper facility.
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, 1994, PGE could
issue $370 million of preferred stock and
$430 million of additional First Mortgage Bonds.
During 1994 PGE received proceeds of $41 million from the
issuance of 2.3 million shares of $3.75 par
value common stock to Portland General. PGE
redeemed 200,000 shares of its $100 par value
8.10% preferred stock series.
In late 1994, the Company issued $30 million
of three year notes and $45 million of seven
year notes. PGE also borrowed $22 million
against the assets of its Corporate Owned
Life Insurance (COLI) program at variable
rates. Proceeds from these activities were
used to fund PGE's construction program.
The Company has engaged in the limited use of
derivative financial instruments as a means
of managing its exposure to interest rate
fluctuations. The Company does not use these
financial instruments for speculative purposes.
In November 1994, PGE entered into two $25
million interest rate swap agreements to hedge
the cost of new long-term debt expected to be
issued in mid-1995. See Note 8, Long-Term Debt
in the Notes to Financial Statements for further discussion.
Financial and Operating Outlook
General Rate Filing
In late 1993, PGE filed a general rate case
with the PUC requesting an increase in
electric rates by an average of 5.1% to take
effect January 1, 1995. PGE's request
included a return on equity of 11.5% and
11.8% for the years 1995 and 1996
respectively, down from the current
authorized return of 12.5%, and full recovery
of the Trojan investment and decommissioning
costs.
In early 1994 PGE and the PUC staff reached
settlement on the majority of non-Trojan
issues.
In July 1994, PGE agreed to the PUC staff's
request to delay a final order addressing all
rate case matters to no later than March 31,
1995 in return for approval of a first
quarter 1995 power cost deferral. Recovery
of power cost deferrals is addressed in
separate rate proceedings, not in the general
rate case (see the discussion of Power Cost
Recovery below).
In early November 1994, PGE and the PUC staff
entered into a stipulation jointly
recommending to the PUC a settlement on all
outstanding cost of capital issues which
included an 11.6% return on equity for the
years 1995 and 1996.
The PUC staff recommended
that PGE be allowed to recover 100% of Trojan
decommissioning and transition costs and
85.9% of the remaining Trojan investment.
If the PUC staff's recommendation on Trojan
were the ultimate outcome of the regulatory process,
PGE estimates that it could record a loss of
up to approximately $39 million. Hearings were
held in January 1995 and PGE expects a rate order
no later than March 31, 1995.
Trojan Related Issues
Plant Shutdown and Transition Costs - In early
1993, PGE ceased commercial operation of Trojan.
27
<PAGE> 27
Since plant closure PGE has committed itself to a safe
and economical transition toward a
decommissioned plant.
Transition costs associated with operating
and maintaining the spent fuel pool and
securing the plant until dismantlement begins
are estimated at $51 million for the period
1995 through 1998 inclusive. These costs are paid from current
operating funds.
Investment Recovery - PGE's pending general
rate case addresses recovery of Trojan plant
costs (see General Rate Filing discussion
above), including decommissioning. In the
interim, the PUC authorized PGE to continue recovery of
depreciation and decommissioning costs at
previously approved rates.
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. In
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, recovery of
the Trojan plant investment and
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 not
previously addressed recovery of costs
related to a prematurely retired plant when
the decision to close the plant was based
upon a least cost planning process. While
the PUC Staff has recommended recovery of
85.9% of the Trojan investment and full
recovery of decommissioning costs, the
ultimate decision will be made by the PUC.
Due to uncertainties inherent in a public
process, management cannot predict, with
certainty, whether the PUC will allow
recovery of all, or substantially all, of the
$342 million Trojan plant investment and $339
million of decommissioning costs.
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.
Decommissioning - In January 1995 PGE
submitted a decommissioning plan to the Nuclear Regulatory
Commission (NRC)
and Energy Facility Siting Council of Oregon
(EFSC). PGE estimates the cost to
decommission its share of Trojan is $351
million in nominal dollars (actual dollars
expected to be spent in each year). The
decommissioning cost estimate reflects expected cost
savings from PGE's plan for the early removal
of some of Trojan's large components. Since
the large component removal project (LCRP)
will be completed prior to NRC and EFSC
approval of PGE's decommissioning plan,
specific approval of the LCRP was obtained
from EFSC in November 1994.
The decommissioning estimate 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
1997 and 2001, beginning with the removal of
certain large plant components while
28
<PAGE> 28
construction of a temporary dry spent fuel
storage facility is taking place. The plan
anticipates final site restoration activities
will begin in 2018 after PGE completes
shipment of spent fuel to a United
States Department of Energy (USDOE) facility. The
federal repository which was originally
scheduled to begin operations in 1998 is now
estimated to commence no earlier than 2010.
On-site storage capacity is able to
accommodate fuel until the federal facilities
are available.
PGE collects revenues from customers for
decommissioning costs and deposits them into
an external trust fund. PGE expects any future changes in
estimated decommissioning costs to be
incorporated in revenues to be collected from
customers.
SCE Complaint - Southern California Edison (SCE)
filed a complaint claiming PGE's decision to close
Trojan violated the terms of a long-term firm
power sales and exchange agreement under which SCE
is obligated to pay to PGE a reservation fee equal to
$16.9 million annually, through 2010. SCE is seeking
termination of the agreement and damages.
Competition
The Energy Policy Act of 1992 and the
California Public Utility Commission Industry
Restructuring Proposal (Restructuring
Proposal) have caused utilities to address
their competitive environment. The 1994
Restructuring Proposal outlines an electric
services industry in which consumers are
gradually allowed direct access to generation
suppliers, marketers, brokers and other
service providers in the competitive
marketplace for energy services.
Although presently operating in a cost-based
regulated environment, PGE expects increasing
competition from other forms of energy and
other suppliers of electricity. PGE's
ownership of 950 megawatts of transmission
rights on the Pacific Northwest Intertie
(Intertie) provides it access to power and
wholesale customers beyond its service
territory.
Customer Growth and Revenues
PGE's customer base grew by 13,700 retail
customers in 1994, which led to a 2.5%
increase in weather-adjusted retail Kwh sales.
In 1994, 11,900 residential customers were
added to the system
compared to 9,300 in 1993. The Company
estimates retail load growth in 1995 to be
approximately the same level as 1994. In
addition, PGE plans to actively market
wholesale energy throughout the Western
United States.
Power Cost Recovery
PGE operates without a power cost adjustment
tariff, therefore adjustments for power costs above
or below those used in existing general
tariffs are not automatically reflected in
customers' rates. As a result, PGE has
obtained PUC approval to defer incremental
replacement power costs related to the
closure of Trojan. The following table sets
out the amounts deferred and the collection
status of the 1993 and 1994 deferrals. In
accordance with Oregon law, collection of the
deferrals is subject to PUC review of PGE's
reported earnings, adjusted for the
regulatory treatment of unusual and/or non-
recurring items, as well as the determination
of an appropriate rate of return on equity
for a given review period.
29
<PAGE> 29
<TABLE>
<CAPTION>
Synopsis of Power Cost Deferrals
Deferral Earnings
Amounts
Period Covered Rate Review
Deferred
Collected
<S> <C> <C> <C>
<C>
December 4, 1992 80% Approved (1) $53
million $12
million
- March 31, 1993
(4)(a)
July 1, 1993 - 50% Mid-1995 (2) $55
million N/A
March 31, 1994
(4)(b)
January 1, 1995 - 40% Mid-1995 (3)
N/A N/A
March 31, 1995
<FN>
(1) Approved for collection which began on 4/1/94.
(2) Subject to earnings review for the period 4/1/93
through 3/31/94 to be filed
on June 30,
1995.
(3) Subject to earnings review for the period 4/1/94
through 3/31/95 to be filed
on June 30,
1995.
(4) Includes accrued interest of (a) $9 million and (b)
$6 million.
</FN>
</TABLE>
Power Supply
PGE expects to generate approximately 50% of its 1995 load
requirements from company owned resources. Coyote Springs, a
220 megawatt cogeneration facility under construction near
Boardman, Oregon is expected to be completed and on-line in late
1995. PGE expects to purchase the remainder of its 1995 load
requirement. Although early predictions of 1995 water
conditions indicate they will be about 95% of normal, efforts
to restore salmon runs on the Columbia and Snake Rivers may
affect the supply and price of purchased power. Additional
factors that could affect purchased power include weather
conditions in the Northwest during winter months and in
California and the Southwest during the summer months, and the
performance of major generating facilities in those regions.
Restoration of Salmon Runs - Several species of Snake River
salmon are protected as threatened under the Endangered Species
Act (ESA). The federal government has taken emergency actions
that have reduced the amount of electricity generated at the
Columbia and Snake River dams in an attempt to save the
endangered fish. In January 1995 the National Marine Fisheries
Service (NMFS) released a draft plan calling for altering the
management of federal dams and reservoirs in the Columbia
River basin in order to protect dwindling salmon stocks. The
plan takes steps to boost river flows while young salmon are
migrating and further reduces the water available for
generation. NMFS is empowered by the ESA to require salmon
protection measures by the Bureau of Reclamation and the Army
Corps of Engineers, which operate the federal dams.
The Columbia river and its tributaries produce nearly two
thirds of the electricity used in the region. PGE purchases
power from many sources, including the mid-Columbia dams.
Reductions in the amount of water allowed to flow through the
dams' turbines reduces generation and increases the cost of
power available to purchase on a non-contract or secondary
basis. The attempt to improve fish passage by releasing more
water from the reservoirs in the spring and summer could mean
less water available in the fall and winter, when the demand
for electricity in the Pacific Northwest is the highest. This
could lead to higher power costs.
Hydro Relicensing - PGE's licenses for its hydroelectric
generating plants under the Federal Power Act will expire
during the years 2001 to 2006. PGE is actively pursuing
relicensing of these low-cost power resources.
Fuel Supply
Natural Gas - In addition to the agreements discussed below
the Company utilizes short-term agreements and spot-market
purchases to secure transportation capacity and gas supplies
sufficient to fuel plant operations.
PGE seeks to manage a portion of market risk associated with
the fluctuations in the price of natural gas through its hedging
program. PGE entered into hedge agreements to fix the price of a
portion of the natural gas purchased to fuel operations at its
Beaver plant during October 1994 through February 1995.
Additional natural gas hedging activity is expected in 1995. The
Company does not enter into natural gas hedging agreements for
speculative purposes. See Note 9, Commitments in Notes to
Financial Statements for further discussion.
30
<PAGE> 30
Beaver - PGE owns 90% of a pipeline which directly connects
Beaver Beaver to Northwest Pipeline (NWP), an interstate
gas pipeline operating between British Columbia and New Mexico.
PGE presently has access to 30,000 MMBtu per day of firm capacity
on NWP or enough to operate Beaver at approximately 30% of
capacity. The contracted firm capacity on NWP increases in late
1995 to 76,000
MMBtu per day or enough to operate Beaver at approximately 70%
capacity.
Coyote Springs - During 1994 PGE took assignment of existing
firm transportation capacity
on the interconnected systems of various shippers
sufficient to deliver 41,000 MMBtu per day of
natural gas from Alberta, Canada to
Coyote Springs. This service should be sufficient to fuel
100% of plant operations and will start in late 1995
when the plant is expected to come on-line. In late
1995 PGE will begin purchasing under two-year contracts for
the supply of natural gas to Coyote Springs at a 75%
load factor.
Nonutility
Bonneville Pacific Litigation - Portland General,
Portland General Holdings, Inc. (Holdings),
and certain affiliated individuals, along with others, have been
named as defendants in a class action by investors in Bonneville
Pacific Corporation (Bonneville Pacific) and in a suit filed by
the bankruptcy
trustee for Bonneville Pacific. The class action includes
allegations
of various violations of federal and Utah securities laws and of
the
Racketeer Influenced and Corrupt Organizations Act (RICO). The
suit by
the bankruptcy trustee for Bonneville Pacific alleges RICO
violations
and RICO conspiracy, collusive tort, civil conspiracy, common law
fraud,
negligent misrepresentation, breach of fiduciary duty, liability
as a
partner for the debts of a partnership and other actionable
wrongs.
Holdings has filed a complaint seeking approximately $228
million in damages against Deloitte & Touche and certain
parties associated with Bonneville Pacific alleging that it
relied on fraudulent and negligent statements and omissions
when it acquired a 46% interest in and made loans to Bonneville
Pacific.
A detailed report released in June 1992, by a U.S. Bankruptcy
examiner outlined a number of questionable transactions that
resulted in gross exaggeration of Bonneville Pacific's assets
prior to Holdings' investment. This report includes the
examiner's opinion that there was significant
mismanagement and very likely fraud at Bonneville Pacific.
For background information and further details, see Note 13,
Legal Matters in the Notes to Financial Statements.
31
<PAGE> 31
Appendix (Electronic Filing Only)
Omitted graphic material:
Page 8 Retail Price v. Inflation graph comparing
PGE retail price (cents per KWh) to Portland CPI:
Retail Price CPI
1985 5.12 106.7
1986 5.0 108.2
1987 4.93 110.9
1988 4.77 114.7
1989 4.69 120.3
1990 4.57 127.4
1991 4.69 134
1992 4.78 140
1993 4.86 143.6
1994 4.97 147.7
Page 10 1994 Actual Power Sources pie chart:
(megawatt hours)
PGE Hydro: 10% (2,022,000)
Coal: 24% (4,918,000)
Secondary Purchases: 20% (4,036,000)
Firm Purchases: 33% (6,905,000)
Combustion Turbines: 13% (2,766,000)
Page 11 1995 Forecasted Power Sources pie chart:
(megawatt hours)
PGE Hydro: 12% (2,356,000)
Coal: 24% (4,810,000)
Secondary Purchases: 16% (3,173,000)
Firm Purchases: 34% (6,784,000)
Combustion Turbines: 14% (2,912,000)
Page 11 Loads v. Firm Resources graph:
(average MW)
Loads Firm Resources
1990 1973 2078
1991 2018 2071
1992 2138 2225
1993 2195 2022
1994 2350 1887
1995 2398 2068
1996 2431 2073
1997 2481 2017
1998 2531 2049
1999 2583 2038
<PAGE>
Page 24 Operating Revenue and Net Income (Loss) graph:
($ Millions):
Operating Net
Revenue Income
1990 852 100
1991 890 -50
1992 883 90
1993 947 89
1994 959 100
Page 24 PGE Electricity Sales graph:
(Billions of KWh)
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
1994 Residential 6.7
Commercial 6.2
Industrial 3.9
Wholesale 2.7
Page 25 Retail Revenues and Power Costs Graph:
(Mills/KWh)
Net Variable Retail
Power Revenues
1990 8 50
1991 10 52
1992 11 53
1993 17 56
1994 16 53
<PAGE>
Page 25 Operating Expenses graph:
($ Millions)
1990 Operating Costs 302
Variable Power 200
Depreciation 90
1991 Operating Costs 361
Variable Power 226
Depreciation 112
1992 Operating Costs 327
Variable Power 222
Depreciation 99
1993 Operating Costs 283
Variable Power 311
Depreciation 122
1994 Operating Costs 262
Variable Power 347
Depreciation 124
Page 26 Utility Capital Expenditures graph:
($ Millions)
1990 115
1991 150
1992 159
1993 149
1994 247
Page 27 Capitalization graph:
($ Millions)
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
1994 Long-term Debt 806
Common Equity 834
Preferred Stock 120
Page 29 Residential Customers graph:
(Thousands)
1984 454732
1985 461076
1986 470136
1987 476481
1988 484293
1989 496165
1990 512913
1991 526699
1992 536111
1993 545410
1994 557338
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 LLP is Portland General's independent public
accountant. As a part of its
annual audit, selected internal accounting controls are reviewed
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 LLP. Management
has also endeavored to ensure that all representations to Arthur
Andersen LLP 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, 1994
and 1993, and the related consolidated statements of income,
retained earnings and cash
flows for each of the three years in the period ended December
31, 1994. 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 5 to the consolidated
financial statements, the
realization of assets related to the abandoned Trojan Nuclear
Plant in the amount of $681
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, 1994 and 1993, and the results of their operations
and their cash flows for
each of the three years in the period ended December 31, 1994 in
conformity with generally
accepted accounting principles.
Arthur Andersen LLP
Portland, Oregon,
February 7, 1995
32
<PAGE> 32
Item 8. Financial Statements and Supplementary Data
<TABLE>
<CAPTION>
Portland General Corporation and Subsidiaries
Consolidated Statements of Income
For the Years Ended December 31 1994
1993 1992
(Thousands of Dollars except per share amounts)
<S> <C>
<C> <C>
Operating Revenues $959,409
$946,829 $883,266
Operating Expenses
Purchased power and fuel 347,125
311,713 222,127
Production and distribution 61,891
73,576 93,677
Maintenance and repairs 47,391
55,320 70,496
Administrative and other 100,596
100,321 112,010
Depreciation, decommissioning and amortization 124,081
122,218 98,706
Taxes other than income taxes 52,151
55,730 55,515
733,235
718,878 652,531
Operating Income Before Income Taxes 226,174
227,951 230,735
Income Taxes 71,878
69,770 67,235
Net Operating Income 154,296
158,181 163,500
Other Income (Deductions)
Interest expense (71,653)
(70,802) (73,895)
Allowance for funds used during construction 4,314
785 2,769
Preferred dividend requirement - PGE (10,800)
(12,046) (12,636)
Other - net of income taxes 16,901
13,000 9,885
Income From Continuing Operations 93,058
89,118 89,623
Discontinued Operations
Gain on disposal of real estate operations -
net of income taxes of $4,226 6,472
- -
Net Income $ 99,530 $
89,118 $ 89,623
Common Stock
Average shares outstanding 49,896,685
47,392,185 46,887,184
Earnings per average share
Continuing operations $1.86
$1.88 $1.93 *
Discontinued operations 0.13
- -
Earnings per average share $1.99
$1.88 $1.93 *
Dividends declared per share $1.20
$1.20 $1.20
<FN>
* Includes $.02 for tax benefits from ESOP dividends.
</FN>
</TABLE>
<TABLE>
<CAPTION>
Portland General Corporation and
Subsidiaries
Consolidated Statements of Retained Earnings
For the Years Ended December 31 1994
1993 1992
(Thousands of Dollars)
<S> <C>
<C> <C>
Balance at Beginning of Year $ 81,159 $
50,481 $19,635
Net Income 99,530
89,118 89,623
ESOP Tax Benefit & Amortization of
Preferred Stock Premium (1,705)
(1,524) (2,505)
178,984
138,075 106,753
Dividends Declared on Common Stock 60,308
56,916 56,272
Balance at End of Year $118,676 $
81,159 $ 50,481
<FN>
The accompanying notes are an integral part of these consolidated
statements.
</FN>
</TABLE>
33
<PAGE> 33
<TABLE>
<CAPTION>
Portland General Corporation and
Subsidiaries
Consolidated Balance Sheets
At December 31
1994 1993
(Thousands of Dollars)
Assets
<S> <C>
<C>
Electric Utility Plant - Original Cost
Utility plant (includes Construction Work
in Progress of $148,267 and $46,679)
$2,563,476 $2,370,460
Accumulated depreciation
(958,465) (894,284)
1,605,011 1,476,176
Capital leases - less amortization of $25,796 and $23,626
11,523 13,693
1,616,534 1,489,869
Other Property and Investments
Leveraged leases
153,332 155,618
Net assets of discontinued real estate operations
11,562 31,378
Trojan decommissioning trust, at market value
58,485 48,861
Corporate Owned Life Insurance, less loan of $21,731 in 1994
65,687 72,612
Other investments
28,626 29,552
317,692 338,021
Current Assets
Cash and cash equivalents
17,542 3,202
Accounts and notes receivable
91,418 91,641
Unbilled and accrued revenues
158,259 133,476
Inventories, at average cost
43,269 46,534
Prepayments and other
38,347 22,128
348,835 296,981
Deferred Charges
Unamortized regulatory assets
Trojan abandonment - plant
342,276 366,712
Trojan abandonment - decommissioning
338,718 355,718
Trojan - other
65,922 66,387
Income taxes recoverable
217,967 228,233
Debt reacquisition costs
32,245 34,941
Energy efficiency programs
58,894 39,480
Other
30,182 33,857
WNP-3 settlement exchange agreement
173,308 178,003
Miscellaneous
16,698 21,126
1,276,210 1,324,457
$3,559,271 $3,449,328
Capitalization and Liabilities
Capitalization
Common stock $
189,358 $ 178,630
Other paid-in capital
563,915 519,058
Unearned compensation
(13,636) (19,151)
Retained earnings
118,676 81,159
858,313 759,696
Cumulative preferred stock of subsidiary
Subject to mandatory redemption
50,000 70,000
Not subject to mandatory redemption
69,704 69,704
Long-term debt
835,814 842,994
1,813,831 1,742,394
Current Liabilities
Long-term debt and preferred stock due within one year
81,506 51,614
Short-term borrowings
148,598 159,414
Accounts payable and other accruals
104,254 109,479
Accrued interest
19,915 18,581
Dividends payable
18,109 17,657
Accrued taxes
27,778 25,601
400,160 382,346
Other
Deferred income taxes
687,670 660,248
Deferred investment tax credits
56,760 60,706
Deferred gain on sale of assets
118,939 120,410
Trojan decommissioning and transition costs
396,873 407,610
Miscellaneous
85,038 75,614
1,345,280 1,324,588
$3,559,271 $3,449,328
<FN>
The accompanying notes are an integral part of these consolidated
balance sheets.
</FN>
</TABLE>
34
<PAGE> 34
<TABLE>
<CAPTION>
Portland General Corporation and
Subsidiaries
Consolidated Statements of Capitalization
At December 31
1994
1993
(Thousands of Dollars)
<S>
<C> <C> <C>
<C>
Common Stock Equity
Common stock, $3.75 par value per
share 100,000,000 shares authorized,
50,495,492 and 47,634,653 shares outstanding $
189,358 $
178,630
Other paid-in capital - net
563,915
519,058
Unearned compensation
(13,636)
(19,151)
Retained earnings
118,676
81,159
858,313 47.3%
759,696 43.6%
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 per share, 2,500,000 shares authorized
8.10% Series, 300,000 and 500,000 shares outstanding
30,000
50,000
Current sinking fund
(10,000)
(10,000)
50,000 2.8
70,000 4.0
Not subject to mandatory redemption, $100 par value
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 3.8
69,704 4.0
Long Term Debt
First mortgage bonds
Maturing 1994 through 1999
4-3/4% Series due April 1, 1994
-
8,119
4.70% Series due March 1, 1995
3,045
3,220
5-7/8% Series due June 1, 1996
5,216
5,366
6.60% Series due October 1, 1997
15,363
15,363
Medium-term notes - 5.65%-9.27%
251,000
242,000
Maturing 2001 through 2005 - 6.47%-9.07%
210,845
166,283
Maturing 2021 through 2023 - 7-3/4%-9.46%
195,000
195,000
Pollution control bonds
Port of Morrow, Oregon, variable rate
(Average 2.7% for 1994), due 2013
23,600
23,600
City of Forsyth, Montana, variable rate
(Average 2.9% for 1994), due 2013 through 2016
118,800
118,800
Amount held by trustee
(8,355)
(8,537)
Port of St. Helens, Oregon, due 2010 and 2014
(Average variable 2.7%-2.9% for 1994)
51,600
51,600
Medium-term notes maturing 1994 through
1996 - 7.19%-8.09%
30,000
50,000
Capital lease obligations
11,523
13,693
Other
(317)
101
907,320
884,608
Long-term debt due within one year
(71,506)
(41,614)
835,814 46.1
842,994 48.4
Total capitalization
$1,813,831 100.0%
$1,742,394 100.0%
<FN>
The accompanying notes are an integral part of these
consolidated statements.
</FN>
</TABLE>
35
<PAGE> 35
<TABLE>
<CAPTION>
Portland General Corporation and
Subsidiaries
Consolidated Statements of Cash Flow
For the Years Ended December 31 1994
1993 1992
(Thousands of Dollars)
<S> <C>
<C> <C>
Cash Provided (Used) By -
Operations:
Net income $
99,530 $ 89,118 $ 89,623
Adjustments to reconcile net income
to net cash provided by operations:
Depreciation and amortization
94,217 89,749 113,405
Amortization of WNP-3 exchange agreement
4,695 4,489 5,658
Amortization of deferred charges - Trojan plant
24,417 24,015 -
Amortization of deferred charges - Trojan decomm.
11,220 11,220 -
Amortization of deferred charges - Trojan other
2,321 2,314 1,609
Amortization of deferred charges - other
2,712 6,713 7,080
Deferred income taxes - net
37,396 61,086 26,480
Other noncash income
(677) (1,926)
(2,659)
Changes in working capital:
(Increase) in receivables
(24,440) (72,837)
(12,736)
(Increase) Decrease in inventories
3,264 15,017
(4,181)
(Decrease) in payables
(1,300) (29,837)
(6,231)
Other working capital items - net
(18,509) 12,473 7,020
Gain from discontinued operations
(6,472) - -
Deferred items
10,258 (7,174)
(12,835)
Miscellaneous - net
12,369 17,728 21,260
251,001 222,148 233,493
Investing Activities:
Utility construction - new resources
(91,342) (28,666) -
Utility construction - general
(131,675) (101,692)
(148,348)
Energy efficiency programs
(23,745) (18,149)
(10,705)
Rentals received from leveraged leases
20,886 15,530 9,007
Trojan decommissioning trust
(11,220) (11,220)
(11,220)
Other investments
(14,058) (10,763)
(7,245)
(251,154) (154,960)
(168,511)
Financing Activities:
Short-term debt - net
(10,816) 18,736 48,273
Borrowings from Corporate Owned Life Insurance
21,731 - -
Long-term debt issued
75,000 252,000 123,000
Long-term debt retired
(49,882) (279,986)
(143,902)
Repayment of nonrecourse borrowings for
leveraged leases
(18,046) (13,095)
(9,035)
Preferred stock issued
- - - 30,000
Preferred stock retired
(20,000) (3,600)
(31,225)
Common stock issued
50,074 9,520 9,753
Dividends paid
(59,856) (56,850)
(56,230)
(11,795) (73,275)
(29,366)
Net Cash Provided By (Used In)
Continuing Operations
(11,948) (6,087) 35,616
Discontinued Operations
26,288 2,600
(30,948)
Increase (Decrease) in Cash and
Cash Equivalents
14,340 (3,487) 4,668
Cash and Cash Equivalents at the Beginning
of Year
3,202 6,689 2,021
Cash and Cash Equivalents at the End
of Year $
17,542 $ 3,202 $ 6,689
Supplemental disclosures of cash flow information
Cash paid during the year:
Interest $
64,895 $ 74,261 $ 72,535
Income taxes
31,539 12,259 22,241
<FN>
The accompanying notes are an integral part of these consolidated
statements.
</FN>
</TABLE>
36
<PAGE> 36
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) and all of its majority-owned
subsidiaries. Significant intercompany balances
and transactions have been eliminated.
Basis of Accounting
Portland General and its subsidiaries' financial statements
conform to generally accepted accounting principles.
In addition, Portland General Electric
Company's (PGE or the Company) accounting policies are
in accordance with the requirements and the
ratemaking practices of regulatory
authorities having jurisdiction.
Revenues
PGE accrues estimated unbilled revenues for
services provided from the meter read date 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 3.8% in 1994, 3.9% in 1993 and
3.8% in 1992.
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 4.65%, 3.52%, and 4.72% for
the years 1994, 1993 and 1992, 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 4 and 4A,
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 nuclear fuel (reflected only
in 1992 expenses) was based on the quantity
of heat produced for the generation of
electric energy.
37
<PAGE> 37
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, 1994 and 1993, are
as follows (thousands of dollars):
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
Lease contracts receivable $ 550,620 $ 600,710
Nonrecourse debt service (434,542) (481,988)
Net contracts receivable 116,078 118,722
Estimated residual value 86,202 88,047
Less - Unearned income (39,391) (41,395)
Investment in leveraged leases 162,889 165,374
Less - Deferred ITC (9,557) (9,756)
Investment in leases, net $ 153,332 $ 155,618
</TABLE>
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 would otherwise be charged to
expense, if it is probable that future
rates 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 of approximately $500 million,
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, primarily comprised of power
cost deferrals, are subject to regulatory
confirmation in future ratemaking
proceedings.
Hedge Accounting
PGE may use derivative products to hedge
against exposures to interest rate and
commodity price risks. The objective is to
mitigate risks due to market fluctuations
associated with external financings or the
purchase of natural gas, electricity and
related products. PGE's hedging programs are
intended to reduce such risks.
Gains and losses from derivatives that reduce
commodity price risks are recognized as fuel
or purchased power expense. Gains and losses
from derivatives that reduce interest rate
risk of future debt issuances are deferred
and amortized over the life of the related
debt.
Reclassifications
Certain amounts in prior years have been
reclassified for comparative purposes.
38
<PAGE> 38
Note 2
Real Estate - Discontinued Operations
Portland General has substantially completed
divestiture of its real estate operations in
Columbia Willamette Development Company
(CWDC). In June 1994, CWDC sold the largest
remaining property in its real estate
holdings for
$16 million. As a result, the real estate
reserve was liquidated.
Note 3
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 stocks, corporate bonds
and US government issues.
Portland General determines net periodic
pension expense according to the principles
of SFAS No. 87, Employers' Accounting for
Pensions. Differences between the actual and
expected return on plan assets is included in
net amortization and deferral and is considered
in the determination of future pension expense.
The following table sets forth the Plan's
funded status and amounts recognized in
Portland General's financial statements
(thousands of dollars):
<TABLE>
<CAPTION>
1994
1993
<S> <C>
<C>
Actuarial present value of benefit
obligations:
Accumulated benefit obligation, including
vested benefits of $142,082 and $151,334 $154,320
$166,301
Effect of projected future compensation levels 35,134
32,608
Projected benefit obligation (PBO) 189,454
198,909
Plan assets at fair value 245,225
262,412
Plan assets in excess of PBO 55,771
63,503
Unrecognized net experience gain (54,391)
(60,445)
Unrecognized prior service costs 12,935
14,147
Unrecognized net transition asset being (19,575)
(21,533)
recognized over 18 years
Pension - prepaid cost (liability) $ (5,260)
$ (4,328)
</TABLE>
<TABLE>
<CAPTION>
1994
1993 1992
<S> <C>
<C> <C>
Assumptions:
Discount rate used to calculate PBO 8.50%
7.25% 8.00%
Rate of increase in future compensation levels 6.50
5.25 6.00
Long-term rate of return on assets 8.50
8.50 8.50
</TABLE>
39
<PAGE> 39
Net pension expense for 1994, 1993 and 1992 included the
following components
(thousands of dollars):
<TABLE>
<CAPTION>
1994
1993 1992
<S> <C>
<C> <C>
Service cost $ 6,199
$ 6,151 $ 6,082
Interest cost on PBO 14,693
14,241 13,792
Actual return on plan assets 6,011
(48,231) (18,272)
Net amortization and deferral (25,971)
29,839 1,496
Net periodic pension expense $ 932
$ 2,000 $ 3,098
</TABLE>
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,
1994 was $27 million, for which there were
$25 million of assets held in trust. The
benefit obligation for postretirement health
and life insurance benefits at December 31,
1993 was $31 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 $15 million and $16 million
at December 31, 1994 and 1993, respectively.
Deferred Compensation
Portland General provides certain employees
with benefits under an unfunded Management
Deferred Compensation Plan (MDCP).
Obligations for the MDCP are $21 million and
$18 million at December 31, 1994 and 1993,
respectively.
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 1994,
total contributions to the ESOP of $5 million
combined with dividends on unallocated shares
of $1 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.
40
<PAGE> 40
Note 4
<TABLE>
<CAPTION>
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 1994 gains on discontinued real estate
operations (thousands of
dollars):
1994
1993 1992
<S> <C> <C>
<C>
Income Tax Expense:
Currently payable $ 48,905 $
2,989 $ 44,057
Deferred income taxes 26,741
72,889 27,648
Investment tax credit adjustments (4,145)
(4,356) (6,981)
$ 71,501 $
71,522 $ 64,724
Provision Allocated to:
Operations $ 71,878 $
69,770 $ 67,235
Other income and deductions (377)
1,752 (2,511)
$ 71,501 $
71,522 $ 64,724
Effective Tax Rate Computation:
Computed tax based on
statutory federal income
tax rates applied to
income before income taxes $ 57,596 $
56,224 $ 52,478
Increases (Decreases) resulting from:
Accelerated depreciation 8,283
10,748 9,462
State and local taxes - net 8,953
3,288 10,117
Investment tax credits (4,145)
(4,356) (6,981)
Excess deferred taxes (767)
(3,419) (1,816)
USDOE nuclear fuel assessment -
5,075 -
Preferred dividend requirement 3,526
3,935 4,296
Other (1,945)
27 (2,832)
$ 71,501 $
71,522 $ 64,724
Effective tax rate 43.5%
44.5% 41.9%
</TABLE>
41
<PAGE> 41
<TABLE>
<CAPTION>
As of December 31, 1994 and 1993, the significant components
of the Company's
deferred income tax assets and liabilities were as follows
(thousands of
dollars):
1994 1993
<S> <C> <C>
Deferred Tax Assets
Plant-in-service $ 72,012 $
73,625
Deferred gain on sale of assets 47,134
47,718
Other 51,924
74,334
171,070
195,677
Deferred Tax Liabilities
Plant-in-service (444,546)
(448,559)
Energy Efficiency programs (23,024)
(15,395)
Trojan abandonment (80,944)
(75,948)
WNP-3 exchange contract (68,698)
(70,542)
Replacement power costs (38,136)
(29,574)
Leasing (146,468)
(147,101)
Other (40,829)
(41,451)
(842,645)
(828,570)
Less current deferred taxes 4,040
842
Less valuation allowance (20,135)
(28,197)
Total $(687,670)
$(660,248)
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 benefits of capital loss carryforwards that
presently cannot
be offset with capital gains and accordingly has recorded a
valuation allowance
totalling $20.1 million at December 31, 1994 to fully
reserve against these
assets.
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.
</TABLE>
42
<PAGE> 42
Note 5
Trojan Nuclear Plant
Plant Shutdown and Transition Costs - PGE is
the 67.5% owner of Trojan. In early 1993 PGE
ceased commercial operation of Trojan. Since
plant closure PGE has committed itself to a
safe and economical transition toward a
decommissioned plant.
Transition costs associated with operating
and maintaining the spent fuel pool and
securing the plant until dismantlement begins
are estimated at $51 million for the period
1995 through 1998 inclusive. These costs are
recorded as part of the Trojan
decommissioning reserve and transition costs
on the Company's balance sheet. Unlike
decommissioning costs which will utilize
funds from PGE's Nuclear Decommissioning
Trust (NDT), transition costs are paid from
current operating funds.
Decommissioning - In January 1995 PGE
submitted a decommissioning plan to the
Nuclear Regulatory Commission (NRC) and
Energy Facility Siting Council of Oregon
(EFSC). The plan estimates PGE's cost to
decommission Trojan at $351 million
reflected in nominal dollars (actual
dollars expected to be spent in each year).
The decommissioning estimate 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
1997 and 2001, beginning with the removal of
certain large plant components while
construction of a temporary dry spent fuel
storage facility is taking place. The plan
anticipates final site restoration activities
will begin in 2018 after PGE completes
shipment of spent fuel to a United States
Department of Energy (USDOE) facility (see
the Nuclear Fuel Disposal discussion below).
As noted above, the decommissioning plan
reflects PGE's current efforts to remove some
of Trojan's large components which is
expected to result in overall decommissioning
cost savings. Since the Trojan large
component removal project (LCRP) will be
completed prior to NRC and EFSC approval of
PGE's formal decommissioning plan, specific
approval of the LCRP was obtained from EFSC
in November 1994.
Decommissioning activities reflected in the
cost estimate include the cost of
decommissioning planning, removal and
disposal of radioactively contaminated
equipment and facilities as required by the
NRC; building
demolition; nonradiological site remediation;
and extended fuel management costs including
licensing and surveillance through the year
2018.
The Trojan decommissioning plan filed with
the NRC was the culmination of a two-year
process undertaken by PGE to evaluate the
most economical way to safely decommission
Trojan in a regulated environment. Both the
1994 update and the 1993 site specific cost
estimates are reflected in the financial
statements in nominal dollars (actual dollars
expected to be spent in each year). The $17
million difference between the 1993 $334
million estimate and the 1994 $351 million
estimate, stated in nominal dollars, is due
to refinement of the timing and scope of
certain dismantlement activities. Stated in
1994 dollars the current estimate of $234
million is not significantly changed from the
previous estimate of $230 million.
Following is a reconciliation of the
decommissioning cost estimate from December
31, 1992 to December 31, 1994 (thousands of dollars):
<TABLE>
<S> <C>
Decommissioning estimate -
12/31/92 $281,779
Adjustments:
Site specific cost estimate -
12/31/93 52,431
Rate case testimony filed with
PUC - 9/30/94 16,556
NRC decommissioning plan filed -
12/31/94 528
351,294
Decommissioning expenditures
through 12/31/94 (4,986)
Decommissioning liability -
12/31/94 $346,308
Decommissioning liability $346,308
Transition costs 50,565
Trojan decommissioning liability
and transition costs $396,873
</TABLE>
PGE expects any future changes in estimated
decommissioning costs to be incorporated in
future revenues to be collected from
customers. PGE collects revenues from customers
for decommissioning costs and deposits them into an
43
<PAGE> 43
external trust fund.
Earnings on the trust fund will be used to adjust
the amount of decommissioning costs to
be collected from customers.
Trojan decommissioning trust assets are
invested primarily in investment grade tax-
exempt bonds which are available for sale.
Year-end balances are valued at market which
approximates cost. For the year ended December
31, 1994 and 1993 the trust reflected the following
activity (thousands of dollars):
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
Beginning Balance $48,861 $32,945
Activity
Contributions 11,220 11,220
Gain (loss) (1,596) 4,696
Disbursements - -
Ending Balance $58,485 $48,861
</TABLE>
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.
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, recovery of
the Trojan plant investment and
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 not
previously addressed recovery of costs
related to a prematurely retired plant when
the decision to close the plant was based
upon a least cost planning process. While
the PUC Staff has recommended recovery of
85.9% of the Trojan investment and full
recovery of decommissioning costs, the
ultimate decision will be made by the PUC.
If the PUC staff's recommendation on Trojan
were the ultimate outcome of the regulatory process,
PGE estimates that it could record a loss of
up to approximately $39 million. Due to uncertainties
inherent in a public process, management cannot predict, with
certainty, whether the PUC will allow
recovery of all, or substantially all, of the
$342 million Trojan plant investment and $339
million of decommissioning costs.
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 contracted with the USDOE for
permanent disposal of its spent nuclear fuel
in USDOE facilities at a cost of .1 cent per net
kilowatt-hour sold at Trojan which PGE pre-
paid during the period of Trojan's
operations. Significant
44
<PAGE> 44
delays are expected
in the USDOE acceptance schedule of spent
nuclear fuel from domestic utilities. The
federal repository which was originally
scheduled to begin operations in 1998 is now
estimated to commence no earlier than 2010.
Based on this projection, PGE anticipates the
possibility of difficulties in disposing of
its high-level radioactive waste by 2018.
However, 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 to
the total amount of enrichment services
purchased by all domestic utilities prior to
the enactment of the legislation. Based on
Trojan's 1.1% usage of total industry
enrichment services, PGE's portion of the
funding requirement is approximately $17.3
million. Amounts are funded over 15 years
beginning with the USDOE's fiscal year 1993.
Since enactment PGE has made the first three
of the 15 annual payments with the first
annual payment made in September 1993.
Nuclear Insurance - The Price-Anderson
Amendment of 1988 limits public liability
claims that could arise from a nuclear
incident to a maximum of $9.0 billion per
incident. PGE has purchased the maximum
primary insurance coverage currently
available of $200 million. The remaining
$8.8 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 $6.75
million per incident in any one year under
the secondary financial protection coverage.
Based upon Trojan's permanently defueled
condition and following the NRC and other
regulators' approval, PGE and co-owners carry
property insurance coverage on the Trojan
plant in the amount of $155 million and self-
insure for on-site decontamination.
45
<PAGE> 45
Note 6
<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*
(Thousands of Dollars
except share amount)
<S> <C> <C> <C>
<C> <C>
<C>
<C> <C>
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)
Sales of stock 2,864,839 10,743 -
- -
-
40,390 -
Redemption of stock (4,000) (15) (200,000)
(20,000)
-
2,055 -
Repayment of ESOP loan
and other - - -
- -
-
2,412 5,515
December 31, 1994 50,495,492 $189,358 1,297,040
$ 99,704 $ -
$30,000
$563,915 $(13,636)
<FN>
* See the discussion of stock compensation plans below and Note
3, Employee Benefits
for a
discussion of the ESOP.
</FN>
</TABLE>
Common Stock
As of December 31, 1994, Portland General had
reserved 2,872,476 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 which began 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 $102 per share to April 14, 1995 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, 1994, PGE's common stock equity
capital was 47% 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, 1994, stock options for 835,300
shares of common stock were outstanding.
Options for 15,000 shares are currently
exercisable: 2,500 at $17.375 per share;
7,500 at $14.75 per share and 5,000 shares at
$17.125 per share. The options for the
remaining 820,300 shares are exercisable
beginning in 1995 through 1999 at prices
ranging from $13 to $22.25 per share.
During 1994, Portland General issued 60,882
restricted common shares for officers and
selected employees of both Portland General
and PGE. As of December 31, 1994, 120,882
restricted common shares under the plan were
outstanding for officers and employees.
46
<PAGE> 46
Note 7
Short-Term Borrowings
At December 31, 1994, Portland General had
total committed lines of credit of
$215 million. Portland General has a
$15 million committed facility expiring in
July 1995. PGE has committed facilities of
$120 million expiring in July 1997 and $80
million expiring in July 1995. These lines of
credit have annual fees ranging from 0.125%
to 0.15% 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,
1994, 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 PGE's
commercial paper outstanding.
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):
<TABLE>
<CAPTION>
1994
1993 1992
As of year end:
<S> <C>
<C> <C>
Aggregate short-term debt outstanding
Bank loans -
- $ 10,002
Commercial paper $148,598
$159,414 130,676
Weighted average interest rate
Bank loans -
- 4.4%
Commercial paper 6.2%
3.5% 4.1
Unused committed lines of credit $215,000
$240,000 $180,000
For the year ended:
Average daily amounts of short-term
debt outstanding
Bank loans $ 1,273 $
10,949 $ 7,671
Commercial paper 138,718
123,032 89,077
Weighted daily average interest rate
Bank loans 4.3%
3.6% 5.0%
Commercial paper 4.5
3.5 4.2
Maximum amount outstanding
during the year $174,082
$171,208 $144,056
<FN>
Interest rates exclude the effect of commitment fees, facility
fees and other financing
fees.
</FN>
</TABLE>
47
<PAGE> 47
Note 8
<TABLE>
<CAPTION>
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):
1995 1996 1997
1998 1999
<S> <C> <C> <C> <C>
<C>
Sinking Funds $ 1,138 $ 988 $ 688 $
688 $ 688
Maturities:
PGC (Parent only) - $30,000 -
- - -
PGE $71,356 17,528 $86,385
$64,745 $44,000
$71,356 $47,528 $86,385
$64,745 $44,000
The sinking funds include $988,000 a year for 1995 and 1996 and
$688,000 for 1997
through 1999, 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.
</TABLE>
Interest Rate Swap Agreements
In November 1994, PGE entered into two 10
year forward interest rate swap agreements,
each with a notional amount
of $25 million. The agreements are used to
hedge against interest rate movements on long-term
debt which PGE anticipates issuing in mid-
1995. PGE is committed to terminate the agreements
on or before May 15, 1995.
PGE is exposed to credit risks in the event
of nonperformance by the counterparties to
these interest rate swap agreements. PGE
anticipates that the counterparties will be
able to fully satisfy their obligations.
Note 9
Commitments
Natural Gas Agreements
PGE has 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. 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 $5 million during 1995,
$14 million annually in 1996 through 1999,
and $140 million over the remaining years of
the contract which expires in 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
approximately $3 million in 1995.
For the period of October 1994 through
February 1995, PGE hedged an average of
38,000 MMBtus per day of physical gas
purchases which represented approximately 40% of
gas usage for the period. The effect of these agreements
was to fix the prices of gas.
Railroad Service Agreement
In October 1993, PGE entered into a railroad
service agreement to deliver coal from
Wyoming to the Boardman Coal Plant (Boardman)
and is required to contribute $7 million over
the 5 years remaining in the contract.
Purchase Commitments
Other purchase commitments outstanding
(principally construction at PGE) totaled
approximately $69 million at December 31,
1994.
Cancellation of these purchase
agreements could result in cancellation
charges.
48
<PAGE> 48
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):
<TABLE>
<CAPTION>
Rocky Priest
Portland
Reach Rapids
Wanapum Wells Hydro
<S> <C> <C> <C>
<C> <C>
Revenue bonds outstanding at
December 31, 1994 $218,246 $131,163
$186,425 $195,320 $ 39,190
PGE's current share of output,
capacity, and cost
Percentage of output 12.0% 13.9%
18.7% 22.7% 100%
Net capability in megawatts 155 127
194 191 36
Annual cost, including debt
service
1994 $4,500 $3,400
$4,800 $6,600 $4,600
1993 4,000 3,800
5,400 5,500 4,800
1992 3,900 3,100
4,400 4,800 4,400
Contract expiration date 2011 2005
2009 2018 2017
</TABLE>
PGE's share of debt service costs, excluding
interest, will be approximately $6 million
for 1995 and 1996, $7 million for 1997, and
$6 million for 1998 and 1999. The minimum
payments through the remainder of the
contracts are estimated to total $97 million.
PGE has entered into long-term contracts to
purchase power from other utilities in the
west. These contracts will require fixed
payments of up to $67 million in 1995, $32
million in 1996, and $22 million in 1997.
After that date, capacity contract charges
will be up to $25 million annually until
2001. From 2001 until 2016 capacity charges
total $19 million annually.
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
1994 and 1993, and $20 million in 1992. PGE
has capitalized its combustion turbine
leases. However, these leases are considered
operating leases for ratemaking purposes.
49
<PAGE> 49
<TABLE>
<CAPTION>
As of December 31, 1994, 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
<S> <C> <C>
<C>
1995 $ 3,016 $ 18,224
$21,240
1996 3,016 18,331
21,347
1997 3,016 18,821
21,837
1998 3,016 18,618
21,634
1999 1,388 19,604
20,992
Remainder - 167,015
167,015
Total 13,452 $260,613
$274,065
Imputed Interest (1,929)
Present Value of
Minimum Future
Net Lease Payments $11,523
</TABLE>
Included in the future minimum operating lease payments schedule
above is
approximately $135 million for PGE's headquarters complex.
Note 10
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.
Note 11
Jointly-Owned Plant
At December 31, 1994, PGE had the following investments in
jointly-owned
generating plants (thousands of dollars):
<TABLE>
<CAPTION>
MW PGE %
Plant Accumulated
Facility Location Fuel Capacity Interest In
Service Depreciation
<S> <C> <C> <C> <C>
<C> <C>
Boardman Boardman, OR Coal 508 65.0
$364,947 $164,199
Colstrip 3&4 Colstrip, MT Coal 1,440 20.0
447,053 174,075
Centralia Centralia, WA Coal 1,310 2.5
9,588 5,435
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.
</TABLE>
50
<PAGE> 50
Note 12
Regulatory Matters
Public Utility Commission of Oregon
PGE had sought judicial review of three rate matters
related to a 1987 general rate case. In July
1990 PGE reached an out-of-court settlement
with the PUC on two of the three rate matter issues
being litigated. The settlement resolved the
dispute with the PUC regarding treatment of
accelerated amortization of certain
investment tax credits and 1986-1987
interim relief.
The settlement, however, did not resolve the
issue related to the gain on PGE's sale of a
portion of Boardman and the Intertie. 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. In accordance with the
1987 rate order, the unamortized gain, $119
million at December 31, 1994, is being
distributed as a reduction of customer
revenue requirements .
On January 23, 1995 the Marion County Circuit
Court affirmed the PUC's decision in the 1987
rate order discussed above. PGE has sixty
days from the date of the decision to appeal.
Note 13
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 February 1992, 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 are properly
performed.
PGE has agreed to a tentative settlement in
the case which would result in a $1 million
payment by the Company. Any final settlement will require
court approval.
Bonneville Pacific Class Action and Lawsuit
A complaint was originally filed on August 31, 1992 as
the consolidation of various class actions filed on
behalf of certain purchasers of Bonneville Pacific
Corporation common shares and subordinated debentures.
In April 1994 the Court dismissed certain of the plaintiffs'
claims and thereafter plaintiffs filed a second amended
consolidated class action complaint. The defendants in
the action are certain Bonneville Pacific Corporation insiders
and other individuals associated with Bonneville Pacific,
Portland
General Corporation (Portland General), Portland General
Holdings,
Inc. (Holdings), certain Portland General individuals, Deloitte &
Touche (Bonneville's independent auditors) and one of its
partners,
Mayer, Brown & Platt, a law firm used by Bonneville, and two
partners of that firm, three underwriters of a Bonneville
offering
of convertible subordinated debentures (Kidder, Peabody & Co.,
Piper Jaffray & Hopwood Incorporated, and Hanifen, Imhoff Inc.),
and Norwest Bank, Minnesota, N.A., indenture trustee on a
Bonneville Pacific's offering of convertible subordinated
debentures.
The amount of damages sought is not specified.
The claims asserted against Portland General, Holdings, and the
Portland General individuals allege violations of federal and
Utah
state securities laws and of Racketeer Influenced and Corrupt
Organizations Act (RICO).
Further motions to dismiss have been filed in response to the
amended
complaint, however hearing on the motions of Portland General,
Holdings,
and the Portland General individuals has been deferred pending
ongoing
settlement discussions between those parties and the plaintiffs.
A separate legal action was filed on April 24, 1992 by Bonneville
Pacific
Corporation against Portland General, Holdings, and certain
individuals affiliated with Portland General or Holdings alleging
breach of fiduciary duty, tortious
51
<PAGE> 51
interference, breach of contract, and other
actionable wrongs
related to Holdings' investment in Bonneville Pacific. On August
2, 1993
an amended complaint was filed by the Bonneville Pacific
bankruptcy trustee
against Portland General or Holdings and over 50 other defendants
unrelated to Portland General or Holdings. This complaint and
another
subsequent amended version were dismissed by the Court in whole
or in
part. The Trustee has currently on file his Fifth Amended
Complaint.
The complaint includes allegations of RICO violations and RICO
conspiracy,
collusive tort, civil conspiracy, common law fraud, negligent
misrepresentation, breach of fiduciary duty, liability as a
partner
for the debts of a partnership, and other actionable wrongs.
Although the amount of damages sought is not specified in the
Complaint, the Trustee has filed a damage disclosure
calculation which purports to compute damages in amounts ranging
from
$340 million to $1 billion - subject to possible increase based
on various
factors. The Portland General parties have again filed motions
to dismiss.
Arguments were heard in December, 1994, and the motions are
awaiting
decision by the Court.
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 (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.
Note 14
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.
Interest Rate/Natural Gas Hedging
The fair value of interest rate and natural
gas derivatives is the estimated amount that
the Company would receive or
pay to terminate the agreements at the
reporting date, taking into account current
market rates. At year-end 1994 this amount
was not material.
52
<PAGE> 52
The estimated fair values of financial
instruments are as follows (thousands of
dollars):
<TABLE>
<CAPTION>
1994
1993
Carrying Fair
Carrying Fair
Amount Value
Amount Value
<S> <C> <C> <C>
<C>
Preferred stock subject to
mandatory redemption $ 60,000 $ 60,000 $
80,000 $ 84,815
Long-term debt
PGC (Parent only) $ 30,000 $ 29,887 $
50,000 $ 53,363
PGE 866,114 824,211
820,814 848,696
$896,114 $854,098
$870,814 $902,059
</TABLE>
53
<PAGE> 53
<TABLE>
<CAPTION>
QUARTERLY COMPARISON FOR 1994 AND 1993
(Unaudited)
Portland General Corporation
March 31 June 30
September 30 December 31
(Thousands of Dollars
except per share amounts)
<S> <C> <C> <C>
<C>
1994
Operating revenues $278,014 $202,110
$214,180 $265,105
Net operating income 57,116 31,012
28,667 37,501
Net income 39,165 23,965
11,887 24,513
Common stock
Average shares outstanding 48,670,211 50,145,565
50,285,669 50,461,348
Earnings per average share 1 $.80 $.48
$.24 $.49
1993
Operating revenues $276,832 $192,146
$209,250 $268,601
Net operating income 55,187 31,174
23,816 48,004
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 share 1 $.77 $.28
$.13 $.69
<FN>
1 As 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.
</FN>
</TABLE>
Portland General Electric Company
<TABLE>
<CAPTION>
March 31 June 30
September 30 December 31
(Thousands of Dollars
except per share amounts)
<S> <C> <C> <C>
<C>
1994
Operating revenues $277,672 $201,773
$213,897 $265,613
Net operating income 54,751 28,727
27,484 42,246
Net income 41,187 18,540
14,807 31,584
Income available for
common stock 38,199 15,894
12,224 29,001
1993
Operating revenues $276,304 $191,632
$208,534 $268,061
Net operating income 51,369 30,385
27,656 44,790
Net income 37,382 16,704
14,302 31,356
Income available for
common stock 34,314 13,703
11,314 28,367
</TABLE>
54
<PAGE> 54
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
None.
Part III
Items 10-13 Information Regarding Directors and Executive
Officers
of the Registrant
Portland General Corporation
<TABLE>
<S> <C>
Information for items 10-13 are incorporated by reference to
Portland General's
definitive proxy statement to be filed on or about March 27,
1995. Executive
officers of Portland General are listed on page 21 of this
report.
Portland General Electric Company
Information for items 10-13 are incorporated by reference to
Portland General's
definitive proxy statement to be filed on or about March
27, 1995. Executive
officers of Portland General Electric are listed on page 21 of
this report.
</TABLE>
55
<PAGE> 55
Part IV
Item 14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K
<TABLE>
<CAPTION>
Portland General Corporation and Portland General Electric
Company
(a) Index to Financial Statements and Financial Statement
Schedules
Page No.
PGC PGE
<S> <C>
<C> <C>
Financial Statements
Report of Independent Public Accountants
32 66
Consolidated Statements of Income for each of the three
years
in the period ended December 31, 1994
33 67
Consolidated Statements of Retained Earnings for each of
the
the three years in the period ended December 31, 1994
33 67
Consolidated Balance Sheets at December 31, 1994 and 1993
34 68
Consolidated Statements of Capitalization at December 31,
1994
and 1993
35 69
Consolidated Statements of Cash Flow for each of the three
years in the period ended December 31, 1994
36 70
Notes to Financial Statements
37 71
Financial Statement Schedules
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.
Exhibits
See Exhibit Index on Page 60 of this report.
(b) Report on Form 8-K
PGC PGE
December 7, 1994 - Item 5. Other Events:
X X
Deferred accounting application withdrawn by PGE.
December 29, 1994 - Item 5. Other Events:
X X
PUC staff recommends that PGE recover 85.9% of Trojan
investment.
</TABLE>
56
<PAGE> 56
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
March 2, 1995 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
March 2, 1995
Ken L. Harrison
Vice President Finance,
Chief Financial Officer,
Chief Accounting Officer
/s/ Joseph M. Hirko and Treasurer
March 2, 1995
Joseph M. Hirko
*Gwyneth Gamble Booth
*Peter J. Brix
*Carolyn S. Chambers
*John W. Creighton, Jr.
*Ken L. Harrison
*Jerry E. Hudson Directors
March 2, 1995
*Warren E. McCain
*Jerome J. Meyer
*Randolph L. Miller
*Richard G. Reiten
*Bruce G. Willison
*By /s/ Joseph E. Feltz
(Joseph E. Feltz, Attorney-in-Fact)
57
<PAGE> 57
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
March 2, 1995 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
March 2, 1995
Ken L. Harrison
Vice President Finance
Chief Financial Officer,
Chief Accounting Officer
/s/ Joseph M. Hirko and Treasurer March
2, 1995
Joseph M. Hirko
*Gwyneth Gamble Booth
*Peter J. Brix
*Carolyn S. Chambers
*John W. Creighton, Jr.
*Ken L. Harrison
*Jerry E. Hudson Directors
March 2, 1995
*Warren E. McCain
*Jerome J. Meyer
*Randolph L. Miller
*Bruce G. Willison
*By /s/ Joseph E. Feltz
(Joseph E. Feltz, Attorney-in-Fact)
58
<PAGE> 58
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
59
<PAGE> 59
<TABLE>
<CAPTION>
PORTLAND GENERAL CORPORATION AND SUBSIDIARIES
EXHIBIT INDEX
Number Exhibit
PGC PGE
<S> <C>
<C> <C>
(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;
* 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;
Twentieth Supplemental Indenture, dated November 1,
1972;
Twenty-First Supplemental Indenture, dated April 1,
1973;
(Registration No. 2-61199, Exhibit 2.d-1).
X X
</TABLE>
60
<PAGE> 60
<TABLE>
<CAPTION>
PORTLAND GENERAL CORPORATION AND SUBSIDIARIES
EXHIBIT INDEX
Number Exhibit
PGC PGE
<S> <C>
<C> <C>
* 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
* Forty-Fourth Supplemental Indenture dated August 1, 1994
[Form 10-Q for the quarter ended September 30, 1994,
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 12 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
* Participation Agreement, dated December 30, 1985
[Form 10-K for the fiscal year ended December 31,
1985, Exhibit (10)].
X X
</TABLE>
61
<PAGE> 61
<TABLE>
<CAPTION>
PORTLAND GENERAL CORPORATION AND SUBSIDIARIES
EXHIBIT INDEX
Number Exhibit
PGC PGE
<S> <C>
<C> <C>
* 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
* 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
</TABLE>
62
<PAGE> 62
<TABLE>
<CAPTION>
PORTLAND GENERAL CORPORATION AND SUBSIDIARIES
EXHIBIT INDEX
Number Exhibit
PGC PGE
<S> <C>
<C> <C>
* 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)].
Portland General Corporation outside Directors' Stock
Compensation Plan, Amendment No. 1 dated February 8,
1994 [Form 10-Q for the quarter ended March 31, 1994,
Exhibit (10)].
X
(23) Portland General Corporation Consent of Independent
Public Accountants (filed herewith).
X
Portland General Electric Company Consent of Independent
Public Accountants (filed herewith).
X
(24) Portland General Corporation Power of Attorney
(filed herewith).
X
Portland General Electric Company Power of Attorney
(filed herewith).
X
(99) Form 11-K relating to Employee Stock Purchase Plan of
Portland General Corporation (filed herewith).
X
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 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 X
</TABLE>
63
<PAGE> 63
<TABLE>
<CAPTION>
PORTLAND GENERAL CORPORATION AND SUBSIDIARIES
EXHIBIT INDEX
Number Exhibit
PGC PGE
<S> <C>
<C> <C>
(10) * Portland General Corporation Annual Incentive Master
Plan,
Cont. Amendments No. 1 and No. 2 dated March 5, 1990 [Form
10-K for the fiscal year ended December 31, 1989,
Exhibit
(10)].
X 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 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
* Portland General Corporation Supplemental Executive
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, effective October
1,
1994 (filed herewith).
X X
* Portland General Corporation Amended and Restated 1990
Long-Term Incentive Master Plan, amended July 1993.
X
* Portland General Corporation 1990 Long-Term Incentive
Master Plan, Amendment No. 1 dated February 8, 1994.
X
Portland General Corporation Financial Data Schedule -
UT (filed herewith - Electronic Filing Only).
X
Portland General Electric Company Financial Data
Schedule - UT (filed herewith - Electronic Filing Only).
X
<FN>
* Incorporated by reference as indicated.
</FN>
</TABLE>
64
<PAGE> 64
APPENDIX
PORTLAND GENERAL ELECTRIC
COMPANY
TABLE OF CONTENTS
PART II
Page
Item 8. Financial Statements and Notes . . . . .
. 67
65
<PAGE> 65
<TABLE>
<CAPTION>
Management's Statement of Responsibility
<S>
<C>
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 LLP is PGE's independent public accountant. As
a part of its
annual audit, selected internal accounting controls are reviewed
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 LLP Management has also endeavored to ensure that all
representations
to Arthur Andersen LLP 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, 1994 and 1993, and the related consolidated
statements of income,
retained earnings and cash flows for each of the three years in
the period ended
December 31, 1994. 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 5 to the consolidated financial
statements, the
realization of assets related to the abandoned Trojan Nuclear
Plant in the amount
of $681 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, 1994 and 1993, and the
results of their
operations and their cash flows for each of the three years in
the period ended
December 31, 1994 in conformity with generally accepted
accounting principles.
Arthur Andersen LLP
Portland, Oregon,
February 7, 1995
</TABLE>
66
<PAGE> 66
Item 8. Financial Statements and Supplementary Data
<TABLE>
<CAPTION>
Portland General Electric Company and Subsidiaries
Consolidated Statements of Income
For the Years Ended December 31 1994
1993 1992
(Thousands of Dollars)
<S> <C> <C>
<C>
Operating Revenues $958,955
$944,531 $880,098
Operating Expenses
Purchased power and fuel 347,125
311,713 222,127
Production and distribution 61,891
73,576 93,677
Maintenance and repairs 47,389
55,320 70,476
Administrative and other 97,987
98,408 107,657
Depreciation, decommissioning and amortization 124,003
121,898 98,039
Taxes other than income taxes 52,038
55,676 54,945
Income taxes 75,314
73,740 73,140
805,747
790,331 720,061
Net Operating Income 153,208
154,200 160,037
Other Income (Deductions)
Allowance for equity funds used
during construction 271
- 311
Other 15,500
11,771 7,717
Income taxes 377
(1,752) 2,511
16,148
10,019 10,539
Interest Charges
Interest on long-term debt and other 61,493
61,817 64,718
Interest on short-term borrowings 5,788
3,443 2,754
Allowance for borrowed funds used
during construction (4,043)
(785) (2,458)
63,238
64,475 65,014
Net Income 106,118
99,744 105,562
Preferred Dividend Requirement 10,800
12,046 12,636
Net Income Available for Common Stock $ 95,318 $
87,698 $ 92,926
</TABLE>
<TABLE>
<CAPTION>
Portland General Electric Company and
Subsidiaries
Consolidated Statements of Retained
Earnings
For the Years Ended December 31 1994
1993 1992
(Thousands
of Dollars)
<S> <C> <C>
<C>
Balance at Beginning of Year $179,297
$165,949 $146,198
Net Income 106,118
99,744 105,562
ESOP Tax Benefit & Amortization of
Preferred Stock Premium (1,705)
(1,524) (2,505)
283,710
264,169 249,255
Dividends Declared
Common stock 56,442
72,826 70,670
Preferred stock 10,800
12,046 12,636
67,242
84,872 83,306
Balance at End of Year $216,468
$179,297 $165,949
<FN>
The accompanying notes are an integral part of these
consolidated
statements.
</FN>
</TABLE>
67
<PAGE> 67
<TABLE>
<CAPTION>
Portland General Electric Company and Subsidiaries
Consolidated Balance Sheets
At December 31
1994 1993
(Thousands of Dollars)
Assets
<S> <C>
<C>
Electric Utility Plant - Original Cost
Utility plant (includes Construction Work
in Progress of $148,267 and $46,679)
$2,563,476 $2,370,460
Accumulated depreciation
(958,465) (894,284)
1,605,011 1,476,176
Capital leases - less amortization of $25,796 and $23,626
11,523 13,693
1,616,534 1,489,869
Other Property and Investments
Trojan decommissioning trust, at market value
58,485 48,861
Corporate Owned Life Insurance, less loan of $21,731 in 1994
40,034 52,008
Other investments
26,074 25,706
124,593 126,575
Current Assets
Cash and cash equivalents
9,590 2,099
Accounts and notes receivable
91,672 85,169
Unbilled and accrued revenues
158,259 133,476
Inventories, at average cost
43,269 46,534
Prepayments and other
37,040 20,646
339,830 287,924
Deferred Charges
Unamortized regulatory assets
Trojan abandonment - plant
342,276 366,712
Trojan abandonment - decommissioning
338,718 355,718
Trojan - other
65,922 66,387
Income taxes recoverable
217,967 228,233
Debt reacquisition costs
32,245 34,941
Energy efficiency programs
58,894 39,480
Other
30,182 33,857
WNP-3 settlement exchange agreement
173,308 178,003
Miscellaneous
13,682 18,975
1,273,194 1,322,306
$3,354,151 $3,226,674
Capitalization and Liabilities
Capitalization Common stock equity $
834,226 $ 747,197
Cumulative preferred stock
Subject to mandatory redemption
50,000 70,000
Not subject to mandatory redemption
69,704 69,704
Long-term debt
805,814 802,994
1,759,744 1,689,895
Current Liabilities
Long-term debt and preferred stock due within one year
81,506 41,614
Short-term borrowings
148,598 129,920
Accounts payable and other accruals
104,612 111,647
Accrued interest
19,084 17,139
Dividends payable
15,702 21,486
Accrued taxes
32,820 27,395
402,322 349,201
Other
Deferred income taxes
549,160 534,194
Deferred investment tax credits
56,760 60,706
Deferred gain on sale of assets
118,939 120,410
Trojan decommissioning and transition costs
396,873 407,610
Miscellaneous
70,353 64,658
1,192,085 1,187,578
$3,354,151 $3,226,674
<FN>
The accompanying notes are an integral part of these
consolidated balance
sheets.
</FN>
</TABLE>
68
<PAGE> 68
<TABLE>
<CAPTION>
Portland General Electric Company and Subsidiaries
Consolidated Statements of Capitalization
At December 31 1994
1993
(Thousands of Dollars)
<S> <C>
<C> <C>
<C>
Common Stock Equity
Common stock, $3.75 par value per
share, 100,000,000 shares authorized, 42,758,877
and 40,458,877 shares outstanding $
160,346 $ 151,721
Other paid-in capital - net
470,008 433,978
Unearned compensation
(12,596)
(17,799)
Retained earnings
216,468 179,297
834,226 47.4% 747,197
44.2%
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
8.10% Series, 300,000 and 500,000 shares outstanding
30,000 50,000
Current sinking fund
(10,000)
(10,000)
50,000 2.8 70,000
4.2
Not subject to mandatory redemption, $100 par value
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
4.1
Long-Term Debt
First mortgage bonds
Maturing 1994 through 1999
4-3/4% Series due April 1, 1994
- - 8,119
4.70% Series due March 1, 1995
3,045 3,220
5-7/8% Series due June 1, 1996
5,216 5,366
6.60% Series due October 1, 1997
15,363 15,363
Medium-term notes - 5.65%-9.27%
251,000 242,000
Maturing 2001 through 2005 - 6.47%-9.07%
210,845 166,283
Maturing 2021 through 2023 - 7-3/4%-9.46%
195,000 195,000
Pollution control bonds
Port of Morrow, Oregon, variable rate
(Average 2.7% for 1994), due 2013
23,600 23,600
City of Forsyth, Montana, variable rate
(Average 2.9% for 1994), due 2013
through 2016
118,800 118,800
Amount held by trustee
(8,355)
(8,537)
Port of St. Helens, Oregon, due 2010 and 2014
(Average variable 2.7%-2.9% for 1994)
51,600 51,600
Capital lease obligations
11,523 13,693
Other
(317) 101
877,320 834,608
Long-term debt due within one year
(71,506)
(31,614)
805,814 45.8 802,994
47.5
Total capitalization
$1,759,744 100.0% $1,689,895
100.0%
<FN>
The accompanying notes are an integral part of these consolidated
statements.
</FN>
</TABLE>
69
<PAGE> 69
<TABLE>
<CAPTION>
Portland General Electric Company and Subsidiaries
Consolidated Statements of Cash Flow
For the Years Ended December 31 1994
1993 1992
(Thousands of Dollars)
<S> <C> <C>
<C>
Cash Provided (Used) By -
Operations:
Net income $ 106,118 $
99,744 $ 105,562
Adjustments to reconcile net income to net
cash provided by operations:
Depreciation and amortization 94,140
89,718 113,270
Amortization of WNP-3 exchange agreement 4,695
4,489 5,658
Amortization of deferred charges - Trojan plant 24,417
24,015 -
Amortization of deferred charges - Trojan decomm. 11,220
11,220 -
Amortization of deferred charges - Trojan other 2,321
2,314 1,609
Amortization of deferred charges - Other 2,712
6,713 7,080
Deferred income taxes - net 25,720
60,721 4,252
Other non-cash revenues (271)
- (311)
Changes in working capital:
(Increase) in receivables (31,166)
(67,431) (9,588)
(Increase) Decrease in inventories 3,264
15,017 (4,181)
Increase (Decrease) in payables 335
(26,588) (2,084)
Other working capital items - net (19,266)
10,600 7,328
Deferred items 10,258
(7,174) (12,858)
Miscellaneous - net 7,374
15,869 18,982
241,871
239,227 234,719
Investing Activities:
Utility construction - new resources (91,342)
(28,666) -
Utility construction - general (131,675)
(101,692) (148,348)
Energy efficiency programs (23,745)
(18,149) (10,705)
Trojan decommissioning trust (11,220)
(11,220) (11,220)
Other investments (9,954)
(7,133) (5,883)
(267,936)
(166,860) (176,156)
Financing Activities:
Short-term debt - net 18,678
29,855 27,939
Borrowings from Corporate Owned Life Insurance 21,731
- -
Long-term debt issued 75,000
252,000 123,000
Long-term debt retired (29,882)
(266,986) (123,902)
Preferred stock issued -
- 30,000
Preferred stock retired (20,000)
(3,600) (31,225)
Common stock issued 41,055
- -
Dividends paid (73,026)
(84,951) (82,293)
33,556
(73,682) (56,481)
Increase (Decrease) in Cash and
Cash Equivalents 7,491
(1,315) 2,082
Cash and Cash Equivalents at the Beginning
of Year 2,099
3,414 1,332
Cash and Cash Equivalents at the End
of Year $ 9,590 $
2,099 $ 3,414
Supplemental disclosures of cash flow information
Cash paid during the year:
Interest $ 60,038 $
68,232 $ 64,452
Income taxes 44,918
17,242 61,915
<FN>
The accompanying notes are an integral part of these consolidated
statements.
</FN>
</TABLE>
70
<PAGE> 70
<TABLE>
<CAPTION>
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 Part II of
Portland General's
Form 10-K on the following page numbers.
Page
<S>
<C>
Notes to Financial Statements
Note 1A. Summary of Significant Accounting Policies
37
Note 3A. Employee Benefits
39
Note 5A. Trojan Nuclear Plant
43
Note 6A. Preferred Stock
46
Note 8A. Long-Term Debt
48
Note 9A. Commitments
48
Note 10A. WNP-3 Settlement Exchange Agreement
50
Note 11A. Jointly-Owned Plant
50
Note 12A. Regulatory Matters
51
Note 13A. Legal Matters
51
Note 14A. Fair Value of Financial Instruments
52
Management's Discussion and Analysis of Financial
Condition and Results of Operations
24
</TABLE>
71
<PAGE> 71
Note 4A
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>
1994 1993
1992
<S> <C> <C> <C>
Income Tax Expense
Currently payable $ 49,216 $ 14,086 $
59,804
Deferred income taxes 29,667 65,481
17,584
Investment tax credit adjustments (3,946) (4,075)
(6,759)
$ 74,937 $ 75,492 $
70,629
Provision Allocated to:
Operations $ 75,314 $ 73,740 $
73,140
Other income and deductions (377) 1,752
(2,511)
$ 74,937 $ 75,492 $
70,629
Effective Tax Rate Computation
Computed tax based on statutory
federal income tax rates applied
to income before income taxes $63,369 $ 61,333 $
59,905
Increases (Decreases) resulting from:
Accelerated depreciation 8,080 9,207
9,462
State and local taxes - net 9,839 9,783
10,568
Investment tax credits (3,946) (4,075)
(6,759)
USDOE nuclear fuel assessment - 5,050
- -
Excess deferred tax (767) (3,419)
(1,816)
Other (1,638) (2,387)
(731)
$ 74,937 $ 75,492 $
70,629
Effective tax rate 41.4% 43.1%
40.1%
</TABLE>
72
<PAGE> 72
As of December 31, 1994 and 1993, the significant components of
PGE's deferred
income tax assets and liabilities were as follows (thousands of
dollars):
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
Deferred Tax Assets
Plant-in-service $ 72,012 $
73,625
Deferred gain on sale of assets 47,134
47,718
Other 22,246
22,968
141,392
144,311
Deferred Tax Liabilities
Plant-in-service (444,546)
(448,559)
Energy Efficiency programs (23,024)
(15,395)
Trojan abandonment (80,944)
(75,948)
Replacement power costs (38,136)
(29,574)
WNP-3 exchange contract (68,698)
(70,542)
Other (39,826)
(40,238)
(695,174)
(680,256)
Less Current deferred taxes 4,622
1,751
Total $(549,160) $
(534,194)
</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 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
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.
73
<PAGE> 73
Note 6A
Common Stock
<TABLE>
<CAPTION>
Common Stock
Other
Number $3.75 Par
Paid-in Unearned
of Shares Value
Capital Compensation
(thousands of dollars)
<S> <C> <C> <C>
<C>
December 31, 1991 40,458,877 $151,721
$431,517 $(29,759)
Sales of stock - -
- - -
Redemption of preferred - -
565 -
stock
Repayment of ESOP loan
and other - -
(409) 6,492
December 31, 1992 40,458,877 151,721
431,673 (23,267)
Sales of stock - -
- - -
Sale and redemption of
preferred stock - -
2,130 -
Repayment of ESOP loan
and other - -
175 5,468
December 31, 1993 40,458,877 151,721
433,978 (17,799)
Sales of stock 2,300,000 8,625
32,430 -
Redemption of stock - -
- - -
Sale and redemption of
preferred stock - -
2,119 -
Repayment of ESOP loan
and other - -
1,481 5,203
December 31, 1994 42,758,877 $160,346
$470,008 $ (12,596)
</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, 1994,
PGE's common
stock equity capital was 47% of its total capitalization.
74
<PAGE> 74
Note 7A
Short-Term Borrowings
<TABLE>
<CAPTION>
At December 31, 1994, PGE had a committed facility of $120
million expiring in
July 1997 and an $80 million facility expiring in July 1995.
These lines of
credit have commitment fees and/or facility fees ranging from
0.125 to 0.15 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, 1994, 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 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):
1994 1993
1992
As of year end:
<S> <C> <C>
<C>
Aggregate short-term debt outstanding
Bank loans -
- - $ 4,001
Commercial paper $148,598
$129,920 96,064
Weighted average interest rate
Bank loans -
- - 4.1%
Commercial paper 6.2%
3.5% 3.9
Unused committed lines of credit $200,000
$200,000 $125,000
For the year ended:
Average daily amounts of short-term
debt outstanding
Bank loans $ 1,273 $
5,025 $ 2,803
Commercial paper 126,564
94,983 62,036
Weighted daily average interest rate
Bank loans 4.3%
3.6% 5.5%
Commercial paper 4.6
3.5 4.2
Maximum amount outstanding
during year $159,482
$144,774 $101,028
<FN>
Interest rates exclude the effect of commitment fees,
facility fees, and other
financing fees.
</FN>
</TABLE>
75
<PAGE> 75
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.
33-27462 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. 33-49811 on Form
S-8,
Registration Statement No. 33-50637 on Form S-3 and Registration
Statement
No. 33-55321 on Form S-3.
Arthur
Andersen LLP
Portland, Oregon,
February 7, 1995
<PAGE> 1
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.
33-62514 on
Form S-3.
Arthur
Andersen LLP
Portland, Oregon,
February 7, 1995
<PAGE> 2
POWER OF ATTORNEY
The undersigned director(s) of Portland General Electric Company
hereby appoint(s) 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 the Securities Exchange
Act of 1934, as amended, the Portland General Corporation Annual
Report on Form 10-K for the fiscal year ended December 31, 1994.
Dated: February 7, 1994
Portland, Oregon
/s/ Gwyneth Gamble Booth /s/ Warren E. McCain
Gwyneth Gamble Booth Warren E. McCain
/s/ Peter J. Brix /s/ Jerome J. Meyer
Peter J. Brix Jerome J. Meyer
/s/ Carolyn S. Chambers /s/ Randolph L. Miller
Carolyn S. Chambers Randolph L. Miller
/s/ John W. Creighton, Jr. /s/ Richard G. Reiten
John W. Creighton, Jr. Richard G. Reiten
/s/ Ken L. Harrison /s/ Bruce G. Willison
Ken L. Harrison Bruce G. Willison
/s/ Jerry E. Hudson
Jerry E. Hudson
<PAGE> 1
POWER OF ATTORNEY
The undersigned director(s) of Portland General Corporation
hereby appoint(s) 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 the Securities Exchange
Act of 1934, as amended, the Portland General Corporation Annual
Report on Form 10-K for the fiscal year ended December 31, 1994.
Dated: February 7, 1994
Portland, Oregon
/s/ Gwyneth Gamble Booth /s/ Warren E. McCain
Gwyneth Gamble Booth Warren E. McCain
/s/ Peter J. Brix /s/ Jerome J. Meyer
Peter J. Brix Jerome J. Meyer
/s/ Carolyn S. Chambers /s/ Randolph L. Miller
Carolyn S. Chambers Randolph L. Miller
/s/ John W. Creighton, Jr. /s/ Richard G. Reiten
John W. Creighton, Jr. Richard G. Reiten
/s/ Ken L. Harrison /s/ Bruce G. Willison
Ken L. Harrison Bruce G. Willison
/s/ Jerry E. Hudson
Jerry E. Hudson
<PAGE> 2
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, 1994
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 1994 1993
Receivable from Portland General $11,852 $10,446
Participants' Equity $11,852 $10,446
Statements of Income and Changes in Participants' Equity
For the Years Ended December 31 1994 1993 1992
Dividend Income $ 5,981 $ 5,243 $ 8,465
Contributions from (Note 2):
Participants 231,575 229,940 273,142
Portland General and Affiliates 26,154 25,659 31,796
Distributions to Participants:
Cost of 14,582, 12,628, and 18,558 shares
of common stock of Portland General
issued to participants under the
terms of the Plan (including
$475, $2,326, and $1,592 in cash) (262,304) (257,904) (318,561)
Change in Participants' Equity for the Year 1,406 2,938 (5,158)
Participants' Equity, at beginning of year 10,446 7,508 12,666
Participants' Equity, at end of year $ 11,852 $ 10,446 $ 7,508
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
(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.
PGE PGC PGH PLC CWL Total
1994 Contributions
Employer $ 26,127 $ - $ - $ - $ 27 $ 26,154
Participant 231,345 - - - 230 231,575
Total $257,472 $ - $ - $ - $ 257 $257,729
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
<PAGE> 3
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Portland General Corporation:
We have audited the accompanying statements of financial condition
of the Employee Stock Purchase Plan (Plan) of Portland General Corporation as
of December 31, 1994 and 1993, and the related statements of income and changes
in participants' equity for each of the three years in the period ended
December
31, 1994. 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, 1994 and 1993, and the
income and changes in participants' equity for each of the three years in the
period ended December 31, 1994 in conformity with generally accepted accounting
principles.
Portland, Oregon,
February 7, 1995 ARTHUR ANDERSEN LLP
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation of our reports included in this Form 11-K, into Portland General
Corporation's previously filed 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. 33-49811 on Form S-8,
Registration Statement No. 33-50637 on Form S-3 and Registration Statement
No. 33-55321 on Form S-3.
Portland, Oregon,
February 7, 1995 ARTHUR ANDERSEN LLP
<PAGE> 4
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Portland General Corporation:
We have audited the accompanying statements of financial condition
of the Employee Stock Purchase Plan (Plan) of Portland General Corporation as
of December 31, 1994 and 1993, and the related statements of income and changes
in participants' equity for each of the three years in the period ended
December 31, 1994. 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, 1994 and 1993,
and the income and changes in participants' equity for each of the three years
in the period ended December 31, 1994 in conformity with generally accepted
accounting principles.
Portland, Oregon,
February 7, 1995
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation of our reports included in this Form 11-K, into Portland General
Corporation's previously filed 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. 33-49811 on Form S-8,
Registration Statement No. 33-50637 on Form S-3 and Registration Statement
No. 33-55321 on Form S-3.
Portland, Oregon,
February 7, 1995
<PAGE> 5
CHANGE IN CONTROL
SEVERANCE AGREEMENT
THIS AGREEMENT between PORTLAND GENERAL CORPORATION an
Oregon
corporation ("PGC"), and ("Executive"), dated this
of
November, 1994.
WITNESSETH:
WHEREAS, PGC wishes to attract and retain well-qualified
executives and
key personnel to PGC and its family of companies, and to assure
both itself
and the Executive of continuity of management in the event of a
change in
control;
NOW, THEREFORE, it is hereby agreed by and between the
parties as
follows:
1. Operating Agreement.
1.1 For purposes of determining the "Term of this
Agreement", this
Agreement shall commence as of October 1, 1994, and shall
continue in effect
through September 30, 1997; provided, however, that commencing
on October 1,
1997, and each third anniversary of the commencement date of this
Agreement
thereafter, the term of this Agreement shall automatically be
extended for
three (3) additional years unless, not later than June 1 of the
year of any
such third anniversary, the either party shall have given notice
that it does
not wish to extend this Agreement; and provided further, that if
a Change in
Control, as defined in Paragraph 2, of the Company, as defined in
Paragraph
1.2, shall have occurred during the original or an extended term
of this
Agreement, this Agreement shall continue in effect for a period
of not less
than thirty-six (36) months beyond the month in which such Change
in Control
occurred. Notwithstanding anything provided herein to the
contrary, the term
of this Agreement shall not extend beyond the end of the month in
which
Executive shall attain "normal retirement age" under the
provisions of the
Portland General Corporation Pension Plan then in effect.
1.2 The term "Company" shall include Portland
General Corporation
("PGC"), Portland General Electric Company ("PGE"), and any
present or future
parent or subsidiary corporation of PGC or PGE (as defined in
Sections 425(e)
and (f) of the Internal Revenue Code of 1986, as amended) or any
successor to
such corporations.
2. Change in Control. For purposes of this
Agreement, a "Change
in Control" shall occur if during the Term of this Agreement:
(a) Any "person," as such term is used in Sections
13(d) and 14(d)
of the Securities Exchange Act of 1934, as
amended (the
"Exchange Act") (other than PGC or PGE, any
trustee or other
fiduciary holding securities under an employee
benefit plan of
PGC or PGE, or any
<PAGE> 1
corporation owned, directly or indirectly, by
the stockholders
of PGC or PGE in substantially the same
proportions as their
ownership of stock of PGC or PGE), is or becomes
the
"beneficial owner" (as defined in Rule 13d-3
under the
Exchange Act), directly or indirectly, of
securities
representing thirty percent (30%) or more of the
combined
voting power of PGC's or PGE's then outstanding
voting
securities;
(b) During any period of two consecutive years (not
including any
period prior to the execution of this
Agreement), individuals
who at the beginning of such period constitute
the Board of
Directors of Portland General Corporation ("PGC
Board"), and
any new director (other than a director
designated by a person
who has entered into an agreement with PGC to
effect a
transaction described in clause (a), (c) or (d)
of this
Paragraph) whose election by the PGC Board or
nomination for
election by PGC's stockholders was approved by a
vote of at
least two-thirds (2/3) of the directors then
still in office
who either were directors as of the beginning of
the period or
whose election or nomination for election was
previously so
approved, cease for any reason to constitute at
least a
majority thereof;
(c) The stockholders of PGC or PGE approve a merger
or
consolidation of PGC or PGE with any other
corporation, other
than (a) a merger or consolidation which would
result in the
voting securities of PGC or PGE outstanding
immediately prior
thereto continuing to represent (either by
remaining
outstanding or by being converted into voting
securities of
the surviving entity) more than 80% of the
combined voting
power of the voting securities of PGC or PGE or
such surviving
entity outstanding immediately after such merger
or
consolidation or (b) a merger or consolidation
effected to
implement a recapitalization of PGC or PGE (or
similar
transaction) in which no "person" (as
hereinabove defined)
acquires more than thirty percent (30%) of the
combined voting
power of PGC's or PGE's then outstanding
securities; or
(d) The stockholders of PGC or PGE approve a plan of
complete
liquidation of PGC or PGE or an agreement for
the sale or
disposition by PGC or PGE of all or
substantially all of PGC's
or PGE's assets.
3. Employment. PGC hereby agrees to continue the
Executive in the
Company's employ, and the Executive hereby agrees to remain in
the employ of
the Company, for the period commencing on the date on which there
occurs a
Change in Control, and ending upon the earlier of (i) three (3)
years
thereafter; or (ii) the date upon which the Executive retires
(the "Employment
Period"). During the Employment Period the
<PAGE> 2
Executive shall exercise such authority and perform such
executive duties as are
commensurate with the authority being exercised and duties being
performed by
the Executive immediately prior to the commencement of the
Employment Period,
which services shall be performed at the location where the
Executive was
employed immediately prior to the commencement of the Employment
Period or at
such other location as the Company may reasonably require;
provided, that the
Executive shall not be required to accept a location or travel
which is
unreasonable in light of the Executive's personal circumstances.
The Executive
agrees that during the Employment Period the Executive shall
devote the
Executive's full business time exclusively to the Executive's
duties as
described herein and perform such duties faithfully and
efficiently.
4. Compensation, Compensation Plans, Perquisites.
During the
Employment Period, the Executive shall be compensated as follows:
(a) The Executive shall receive an annual salary
which is not less
than the Executive's annual salary immediately
prior to the
commencement of the Employment Period, with the
opportunity for
increases, from time to time thereafter, which
are in
accordance with the Company's regular practices.
(b) The Executive shall be eligible to participate
on a reasonable
basis in bonus, stock option, restricted stock
and other
incentive compensation plans which provide
opportunities to
receive compensation that are equivalent to the
opportunities
provided under any such plans in which the
Executive was
participating immediately prior to the
commencement of the
Employment Period.
(c) The Executive shall be entitled to receive
employee benefits
(including, but not limited to, medical,
insurance and split-
dollar life insurance benefits) and perquisites
which are
equivalent to the employee benefits and
perquisites to which
the Executive was entitled immediately prior to
the
commencement of the Employment Period.
5. Termination. The term "Termination" shall mean
termination of
the employment of the Executive with the Company prior to the end
of the
Employment Period (i) by the Company for any reason other than
death, Disability
or Cause (as described below); or (ii) by resignation of the
Executive upon the
occurrence of either of the following events:
(a) A significant detrimental change in the nature
or scope of the
Executive's authorities or duties from those
described in
Paragraph 3, a reduction in total compensation
or customary
increases from that provided in Paragraph 4, or
the breach by
the Company of any other provision of
<PAGE> 3
this Agreement; or
(b) A reasonable determination by the Executive
that, as a result
of a Change in Control and a change in
circumstances
thereafter significantly affecting the
Executive's position,
the Executive is unable to exercise the
authorities, powers,
functions or duties attached to the Executive's
position as
contemplated by Paragraph 3 of this Agreement.
The term "Disability" means that as a result of the Executive's
incapacity due
to physical or mental illness, the Executive shall have been
absent from the
full-time performance of the Executive's duties with the Company
for six (6)
consecutive months, and within thirty (30) days after written
notice of
Company's intent to terminate employment is given the Executive
shall not have
returned to the full-time performance of the Executive's duties.
The term "Cause" means gross misconduct or willful and material
breach of this
Agreement by the Executive. The Executive shall not be deemed to
have been
terminated for Cause unless and until there shall have been
delivered to the
Executive a copy of a resolution duly adopted by the affirmative
vote of not
less than three-quarters of the entire membership of the PGC
Board, excluding
the Executive if Executive sits on the PGC Board, at a meeting of
the PGC Board
of which the Executive has been given reasonable notice and at
which the
Executive, together with the Executive's counsel, have been given
the
opportunity to be heard by the Board, finding that in the good
faith opinion of
the PGC Board the Executive was guilty of conduct constituting
gross misconduct
or willful and material breach of this Agreement and specifying
the particulars
thereof in detail.
6. Termination Payments. In the event of a
Termination, PGC and
the Company shall pay to the Executive and provide him with the
following:
(a) The Company shall pay the Executive's full base
salary through
the date of termination plus all other amounts
to which the
Executive is entitled under any Company
compensation plan at
the time of termination.
(b) PGC shall pay the Executive a lump sum severance
payment equal
to 2.99 multiplied by the Executive's "base
amount" as defined
in Section 280G of the Internal Revenue Code of
1986, as
amended (the "Code"), reduced as hereafter
provided. The base
amount shall be determined in accordance with
temporary or
final regulations, if any, promulgated under
Section 280G and
based upon the advice of tax counsel selected by
PGC's
independent auditors and acceptable to the
Executive. The
severance payment shall be reduced by the amount
of any other
payment or the value of any benefit the
Executive receives in
connection with a Change in Control (whether
pursuant to the
terms of this Agreement or any other plan,
agreement or
arrangement with the
<PAGE> 4
Company, any person whose actions result in a
Change in
Control, or any person affiliated with the
Company or such
person) unless (i) Executive has waived receipt
of such
payment or benefit; (ii) in the opinion of tax
counsel
selected by PGC's independent auditors and
acceptable to the
Executive such other payment or benefit does not
constitute a
"parachute payment" within the meaning of
Section 280G(b)(2)
of the Code; or (iii) in the opinion of such tax
counsel the
sum of the severance payment, plus all other
payments or
benefits constituting "parachute payments"
within the meaning
of Section 280G(b)(2) of the Code are reasonable
compensation
for services actually rendered, within the
meaning of Section
280G(b)(4) of the Code or are otherwise not
subject to
disallowance as deduction by reason of Section
280G of the
Code. The value of any non-cash benefit or any
deferred
payment or benefit shall be determined by PGC's
independent
auditors in accordance with the principles of
Sections
280G(d)(3) and (4) of the Code.
(c) To the extent that the Executive or any of the
Executive's
dependent's may be covered under the terms of
any medical and
dental plans of the Company for active employees
immediately
prior to the Termination, the Company will
provide the
Executive and those dependents with equivalent
coverages for
a period not to exceed thirty-six (36) months
from the
Termination. The coverages may be procured
directly by the
Company apart from, and outside of the terms of
the plans
themselves, provided that the Executive and the
Executives
dependents comply with all of the conditions of
the medical
or dental plans. In consideration for these
benefits, the
Executive must make contributions equal to those
required
from time to time from employees for equivalent
coverages
under the medical or dental plans.
All payments or benefits provided for above shall be made
available not later
than the thirtieth day following the date of Termination together
with interest
at the rate provided in Section 1274(b)(2)(B) of the Code
computed from the
date of Termination. The parties agree that, because there can
be no exact
measure of the damage which would occur to the Executive as a
result of a
Termination of Executive by PGC, the payments and benefits shall
be deemed to
constitute liquidated damages and not a penalty for PGC's
Termination of
Executive.
7. No Duty of Mitigation. PGC acknowledges and
agrees that
Executive shall have no duty to mitigate any damages the
Executive may incur by
reason of Termination under this Agreement and that Executive
shall be entitled
to receive the payments and benefits provided for in Paragraph 6
above
regardless of any income which Executive may receive from other
sources after
any such termination nor shall it be offset against any amount
claimed to the
owed by the Executive to the Company.
<PAGE> 5
8. Claims Procedure.
8.1 Claims for any benefits due under this Agreement
shall be made
in writing by the Executive to PGC which shall respond in writing
as soon as
practicable. Such claim shall state in full the basis of the
claim and the
factual information to be considered when reviewing the claim for
benefits.
8.2 If the claim is denied, the written notice of
denial shall
state:
(a) The reasons for the denial or dispute, with
specific reference
to the Agreement provisions upon which the
denial or dispute
is based; and
(b) A description of any additional material or
information
necessary for any reconsideration and an
explanation of why it
is necessary.
8.3 Any person whose claim is denied or who has not
received a
response within fifteen (15) days may request review by notice
given in writing
to the Senior Administrative Officer. The claim shall be
reviewed by the
Senior Administrative Officer, who may, but shall not be required
to grant the
claimant a hearing. On review, the claimant may have
representation, examine
pertinent documents and submit issues and comments in writing.
8.4 The decision of the Senior Administrative
Officer on review
shall be made within fifteen (15) days. The decision shall be in
writing and
shall state the reasons and the relevant Agreement provisions.
8.5 "Senior Administrative Officer" shall mean the
employee in the
management position designated by the Human Resources Committee,
or its
successor committee, of the PGC Board, to handle administrative
matters under
this Agreement.
9. Appeals Procedure. Any controversy or claim
arising out of or
relating to this Agreement or the breach thereof, shall be
settled, at the sole
option of the Executive, in either of the two methods set forth
in subsections
(a) and (b) as follows:
(a) Arbitration in the City of Portland, Oregon, in
accordance
with the laws of the State of Oregon by three
arbitrators, one
of whom shall be appointed by PGC, one by the
Executive and
the third of whom shall be appointed by the
first two
arbitrators. If the first two arbitrators
cannot agree on the
appointment of a third arbitrator, then the
third arbitrator
shall be appointed by the Chief Judge of the
United States
District Court for the District of Oregon. The
arbitration
shall be conducted in accordance with the rules
of the
American Arbitration Association, except with
respect to the
selection of arbitrators which shall be as
provided in
Paragraph 9. Judgment upon the award
<PAGE> 6
rendered by the arbitrators may be entered in
any court having
jurisdiction thereof; or
(b) Suit in any court of competent jurisdiction.
10. Attorneys Fees. If the Executive, in good
faith, believes PGC
or the Company have failed to pay or provide payment of any
amounts required
to be paid or provided for hereunder at any time, the
Executive shall be
entitled to consult with independent counsel, and PGC agrees to
pay the
reasonable fees and expenses of such counsel for the Executive in
advising him
in connection therewith or in bringing any proceedings, or in
defending any
proceedings, including any appeal arising from any proceeding,
involving the
Executive's rights under this Agreement, such right to
reimbursement to be
immediate upon the presentment by the Executive of written
billings of such
reasonable fees and expenses. The Executive shall be entitled to
the prime
rate of interest established from time to time at United States
National Bank
of Oregon or its successor for any payments of such expenses, or
any other
payments under this Agreement, that are overdue.
11. Notices. Any notices, requests, demands and
other
communications provided for by this Agreement shall be
sufficient if in
writing and if sent by registered or certified mail to the
Executive at the
last address the Executive has filed in writing with the
Company or, in the
case of PGC or the Company, at its principal executive offices.
12. Non-Alienation. The Executive shall not have
any right to
pledge, hypothecate, anticipate or in any way create a lien upon
any amounts
provided under this Agreement; and no benefits payable hereunder
shall be
assignable in anticipation of payment either by voluntary or
involuntary
acts, or by operation of law.
13. Amendment. This Agreement may be amended or
cancelled only
by mutual agreement of the parties in writing, without the
consent of any
other person, and so long as the Executive lives no person,
other than the
parties hereto, shall have any rights under or interest in
this Agreement
or the subject matter hereof.
14. Severability. In the event that any
provision or portion
of this Agreement shall be determined to be invalid or
unenforceable for any
reason, the remaining provisions of this Agreement shall be
unaffected thereby
and shall remain in full force and effect.
15. Terms. Whenever necessary in this instrument
and where in
the context so requires the singular term and the related
pronoun shall
include the plural, and the masculine, feminine and neuter
shall be freely
interchangeable.
16. Entire Agreement. This Agreement constitutes
the entire
agreement among the parties hereto pertaining to the employment
of the
Executive in the event that a
<PAGE> 7
Change in Control as described in Paragraph 2 above
occurs and
supersedes any and all prior and contemporaneous agreements,
understandings,
negotiations and discussions, whether oral or written, of the
parties with
respect thereto, except change of control provisions in the
Company's benefit
and compensation plans in which Executive is a participant. No
supplement,
modification or waiver of this Agreement or any provisions
hereof shall be
binding unless executed in writing by the parties to be bound
thereby.
17. Not an Employment Contract. This Agreement
shall not in any
way affect either the Executive's, PGC's or the Company's right
to terminate
the employment relationship at any time prior to a Change in
Control. In
such case, neither the Executive, PGC nor the Company shall
have any rights
under this Agreement.
18. Governing Law. The provisions of this
Agreement shall be
construed in accordance with the laws of the State of Oregon.
19. Successors; Binding Agreement. PGC and the
Company will
require any successor (whether direct or indirect, by
purchase, merger,
consolidation or otherwise) to all or substantially all of
the business
and/or assets of PGC or the Company to expressly assume and
agree to perform
this Agreement in the same manner and to the same extent that
PGC or the
Company would be required to perform it if no such succession
had taken
place. Failure of PGC or the Company to obtain such assumption
and agreement
prior to the effectiveness of any such succession shall be a
breach of this
Agreement and shall entitle the Executive to compensation from
PGC and the
Company in the same amount and on the same terms as the
Executive would be
entitled to hereunder upon a Termination (as defined in
Paragraph 5)
following a Change in Control, except that for purposes of
implementing the
foregoing, the date on which any such succession becomes
effective shall be
deemed the date of Termination. As used in this Agreement,
"Company" shall
mean the Company as hereinbefore defined and any successor to
its business
and/or assets as aforesaid which assumes and agrees to perform
this Agreement
by operation of law, or otherwise. This Agreement shall inure
to the benefit
of and be enforceable by the Executive's personal or legal
representatives,
executors, administrators, successors, heirs, distributees,
devisees and
legatees. If the Executive should die while any amount would
still be
payable to the Executive hereunder if the Executive had continued
to live, all
such amounts, unless otherwise provided herein, shall be paid in
accordance
with the terms of this Agreement to the Executive's devisee,
legatee or other
designee or, if there is no such designee, to the Executive's
estate.
IN WITNESS WHEREOF, the Executive has hereunto set
the Executive's
hand and, pursuant to the authorization from its Board of
Directors, the
Company has caused these presents to be executed in its name on
its behalf,
all as of the day and year first above written.
<PAGE> 8
Executive
PORTLAND GENERAL
CORPORATION
By:
Its:
<PAGE> 9
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS FILED ON FORM 10-K FOR THE PERIOD ENDED
DECEMBER 31, 1994 FOR PORTLAND GENERAL CORPORATION AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 1,616,534<F1>
<OTHER-PROPERTY-AND-INVEST> 317,692
<TOTAL-CURRENT-ASSETS> 348,835
<TOTAL-DEFERRED-CHARGES> 1,276,210
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 3,559,271
<COMMON> 189,358
<CAPITAL-SURPLUS-PAID-IN> 563,915
<RETAINED-EARNINGS> 118,676
<TOTAL-COMMON-STOCKHOLDERS-EQ> 858,313<F2>
50,000<F3>
69,704
<LONG-TERM-DEBT-NET> 835,814<F4>
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<LONG-TERM-NOTES-PAYABLE> 0
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<CAPITAL-LEASE-OBLIGATIONS> 9,212<F5>
<LEASES-CURRENT> 2,311
<OTHER-ITEMS-CAPITAL-AND-LIAB> 1,515,336
<TOT-CAPITALIZATION-AND-LIAB> 3,559,271
<GROSS-OPERATING-REVENUE> 959,409
<INCOME-TAX-EXPENSE> 71,878
<OTHER-OPERATING-EXPENSES> 733,235
<TOTAL-OPERATING-EXPENSES> 805,113
<OPERATING-INCOME-LOSS> 154,296<F6>
<OTHER-INCOME-NET> 16,901<F7>
<INCOME-BEFORE-INTEREST-EXPEN> 171,197
<TOTAL-INTEREST-EXPENSE> 67,339<F8>
<NET-INCOME> 110,330<F9>
10,800
<EARNINGS-AVAILABLE-FOR-COMM> 99,530
<COMMON-STOCK-DIVIDENDS> 60,308
<TOTAL-INTEREST-ON-BONDS> 58,014
<CASH-FLOW-OPERATIONS> 251,001
<EPS-PRIMARY> 1.99
<EPS-DILUTED> 1.99<F10>
<FN>
<F1>INCLUDING CAPITAL LEASE OBLIGATIONS NET OF AMORTIZATION.
<F2>INCLUDES UNEARNED COMPENSATION OF $13,636,000.
<F3>NET OF MANDATORY SINKING FUND OF $10,000,000.
<F4>NET OF CURRENT PORTION.
<F5>NET OF CURRENT PORTION OF CAPITAL LEASE OBLIGATIONS.
<F6>EXCLUSIVE OF INTEREST EXPENSE AND PREFERRED DIVIDEND REQUIREMENT.
<F7>EXCLUDES DISCONTINUED OPERATIONS.
<F8>INCLUDING AFUDC.
<F9>PRIOR TO PREFERRED DIVIDEND REQUIREMENT BUT INCLUDES GAIN FROM DISCONTINUED
OPERATIONS OF $6,472,000.
<F10>PORTLAND GENERAL CORPORATION DOES NOT HAVE DILUTIVE SECURITIES OR COMMON STOCK
EQUIVALENTS THAT DILUTE PRIMARY EARNINGS PER SHARE BY 3 PERCENT OR MORE AND
THEREFORE IT DOES NOT REPORT A FULLY DILUTED EARNINGS PER SHARE. THE AMOUNT
SHOWN IS BASED ON THE PRIMARY EARNINGS PER SHARE CALCULATION.
</FN>
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS FILED ON FORM 10-K FOR THE PERIOD ENDED
DECEMBER 31, 1994 FOR PORTLAND GENERAL ELECTRIC COMPANY AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 1,616,534<F1>
<OTHER-PROPERTY-AND-INVEST> 124,593
<TOTAL-CURRENT-ASSETS> 339,830
<TOTAL-DEFERRED-CHARGES> 1,273,194
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 3,354,151
<COMMON> 160,346
<CAPITAL-SURPLUS-PAID-IN> 470,008
<RETAINED-EARNINGS> 216,468
<TOTAL-COMMON-STOCKHOLDERS-EQ> 834,226<F2>
50,000<F3>
69,704
<LONG-TERM-DEBT-NET> 805,814<F4>
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 148,598
<LONG-TERM-DEBT-CURRENT-PORT> 69,195<F5>
10,000
<CAPITAL-LEASE-OBLIGATIONS> 9,212<F5>
<LEASES-CURRENT> 2,311
<OTHER-ITEMS-CAPITAL-AND-LIAB> 1,364,303
<TOT-CAPITALIZATION-AND-LIAB> 3,354,151
<GROSS-OPERATING-REVENUE> 958,955
<INCOME-TAX-EXPENSE> 75,314
<OTHER-OPERATING-EXPENSES> 730,433
<TOTAL-OPERATING-EXPENSES> 805,747
<OPERATING-INCOME-LOSS> 153,208<F6>
<OTHER-INCOME-NET> 16,148
<INCOME-BEFORE-INTEREST-EXPEN> 169,356
<TOTAL-INTEREST-EXPENSE> 63,238<F8>
<NET-INCOME> 106,118<F9>
10,800
<EARNINGS-AVAILABLE-FOR-COMM> 95,318
<COMMON-STOCK-DIVIDENDS> 56,442
<TOTAL-INTEREST-ON-BONDS> 57,714
<CASH-FLOW-OPERATIONS> 241,871
<EPS-PRIMARY> 0<F10>
<EPS-DILUTED> 0
<FN>
<F1>INCLUDING CAPITAL LEASE OBLIGATIONS NET OF AMORTIZATION.
<F2>INCLUDES UNEARNED COMPENSATION OF $12,596,000.
<F3>NET OF MANDATORY SINKING FUND OF $10,000,000.
<F4>NET OF CURRENT PORTION.
<F5>NET OF CURRENT PORTION OF CAPITAL LEASE OBLIGATIONS.
<F6>EXCLUSIVE OF INTEREST EXPENSE AND PREFERRED DIVIDEND REQUIREMENT.
<F8>INCLUDING AFUDC.
<F9>PRIOR TO PREFERRED DIVIDEND REQUIREMENT.
<F10>ALL SHARES OF PORTLAND GENERAL ELECTRIC'S STOCK IS OWNED BY PORTLAND GENERAL
CORPORATION AND IS NOT PUBLICALLY TRADED. EARNINGS PER SHARE CALCULATIONS ARE
NOT REPORTED.
</FN>
</TABLE>
