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, 1995
<TABLE>
<CAPTION> <S> <C>
Registrant; State of Incorporation; IRS Employer
COMMISSION FILE NUMBER ADDRESS; AND TELEPHONE NUMBER IDENTIFICATION NO.
1-5532 PORTLAND GENERAL CORPORATION 93-0909442
(an Oregon Corporation)
121 SW Salmon Street
Portland, Oregon 97204
(503) 464-8820
1-5532-99 PORTLAND GENERAL ELECTRIC COMPANY 93-0256820
(an Oregon Corporation)
121 SW Salmon Street
Portland, Oregon 97204
(503) 464-8000
</TABLE>
Securities registered pursuant to Section 12(b) of the Act:
<TABLE> <S> <C>
<CAPTION>
Name of each exchange
Title of each class on which registered
Portland General Corporation
Common Stock, $3.75 par value per share New York Stock Exchange
Pacific Stock Exchange
Portland General Electric Company
8.25% Quarterly Income Debt Securities
(Junior Subordinated Deferrable Interest Debentures, Series A) New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
Portland General Corporation
None
Portland General Electric Company,
8.10% Series, Cumulative Preferred Stock, $100 par value per share
7.75% Series, Cumulative Preferred Stock, no par value
</TABLE>
1
<PAGE>
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [ X ]
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No .
The aggregate market value of Portland General Corporation voting stock held
by non-affiliates of the registrant as of January 31, 1996 (based on the last
sales price on the New York Stock Exchange as of such date) was
$1.5 billion.
The number of shares outstanding of the registrants' common stocks as of
January 31, 1996 was:
Portland General Corporation 51,024,810
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, 1996.
2
<PAGE>
DEFINITIONS
The following abbreviations or acronyms used in the text and notes are defined
below:
Abbreviations
OR ACRONYMS TERM
Beaver ............................Beaver Combustion Turbine Plant
Bethel ............................Bethel Combustion Turbine Plant
Boardman ..........................Boardman Coal Plant
Bonneville Pacific ................Bonneville Pacific Corporation
BPA ...............................Bonneville Power Administration
Centralia .........................Centralia Coal Plant
COB ...............................California/Oregon Border
Colstrip ..........................Colstrip Units 3 and 4 Coal Plant
Coyote Springs ....................Coyote Springs Generation Plant
CWL ...............................Columbia Willamette Leasing, Inc.
DEQ ...............................Oregon Department of Environmental Quality
EFSC ..............................Oregon Energy Facility Siting Counsel
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
kWh ...............................Kilowatt-Hour
MMBtu .............................Million British thermal units
MW ...............................Megawatt
MWa ...............................Average megawatts
MWh ...............................Megawatt-hour
NRC ...............................Nuclear Regulatory Commission
NYMEX .............................New York Mercantile Exchange
OPUC or the Commission ............Oregon Public Utility Commission
Portland General or PGC ...........Portland General Corporation
PGE or the Company ................Portland General Electric Company
PUD ...............................Public Utility District
Regional Power Act ................Pacific Northwest Electric Power Planning
and Conservation Act
SFAS ..............................Statement of Financial Accounting Standards
issued by the FASB
WPPSS or Supply System ............Washington Public Power Supply System
Trojan ............................Trojan Nuclear Plant
Tule ..............................Tule Hub Services Company
USDOE .............................United States Department of Energy
WAPA ..............................Western Area Power Authority
WNP-3 .............................Washington Public Power Supply System
Unit 3 Nuclear Project
WSCC ..............................Western Systems Coordinating Council
3
<PAGE>
TABLE OF CONTENTS
PAGE
Definitions ............................................................... 3
PART I
Item 1. Business .................................................... 5
Portland General Corporation .............................. 5
Portland General Electric Company ......................... 5
Portland General Holdings, Inc. .......................... 17
Item 2. Properties ................................................. 18
Item 3. Legal Proceedings .......................................... 20
Item 4. Submission of Matters to a Vote of Security
Holders .................................................... 23
Executive Officers of the Registrant ....................... 23
PART II
Item 5. Market for Registrant's Common Equity and
Related Stockholder Matters ................................ 24
Item 6. Selected Financial Data .................................... 25
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations ........................ 26
Item 8. Financial Statements and Supplementary Data ................ 35
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure ........................ 56
PART III
Item 10. Directors and Executive Officers of the Registrant ........ 56
Item 11. Executive Compensation .................................... 56
Item 12. Security Ownership of Certain Beneficial Owners
and Management ............................................. 56
Item 13. Certain Relationships and Related Transactions ........... 56
PART IV
Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K ........................................ 56
Signatures ............................................................... 57
Exhibit Index ............................................................ 59
Appendix - PGE Financial Information ..................................... 64
4
<PAGE>
Part I
ITEM 1. BUSINESS
PORTLAND GENERAL CORPORATION - HOLDING COMPANY
Portland General Corporation, an electric utility holding company, was
organized in December 1985. Portland General Electric 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., which provides organizational separation for Portland
General's nonutility businesses (see page 17). 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, 1995, Portland General and its subsidiaries had 2,562
regular employees compared to 2,536 and 2,618 at December 31, 1994 and 1993,
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 to wholesale customers throughout the western
United States. 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 1995 its service-area population was approximately
1.4 million, constituting approximately 44% of the state's population. At
December 31, 1995 PGE served approximately 650,000 customers.
As of December 31, 1995, PGE had 2,533 regular employees. This compares to
2,502 and 2,577 regular PGE employees at December 31, 1994 and 1993,
respectively.
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<PAGE>
OPERATING REVENUES
PGE serves a diverse retail customer base. Residential customers constitute
the largest customer class and accounted for 39% of the retail demand and 43%
of retail revenues during 1995. Residential demand is highly sensitive to the
effects of weather. Commercial customers consumed 37% and industrial 24% of
retail energy sales for the year. Since 1993 industrial demand has grown
nearly 8%, making this the Company's most rapidly growing customer class
followed by the commercial segment with 7% growth. The commercial and
industrial classes are not dominated by any single industry. While the 20
largest customers constituted 21% of retail demand, they represented 10
different industrial groups including paper manufacturing, high
technology, metal fabrication, transportation equipment, and health services.
No single customer represents more than 6% of PGE's retail load.
Wholesale revenues continue to make a significant contribution to Company
revenues providing nearly 10% of total operating revenues for 1995. PGE
actively markets wholesale power throughout the western United States and has
more than doubled its level of sales since 1993. A majority of PGE's
wholesale sales were to its traditional customers comprised of IOUs, federal
agencies, municipalities and PUDs. However, most of the Company's wholesale
growth has come through sales to marketers and brokers, relatively new
entrants to the increasingly competitive wholesale electric energy market.
These sales are predominantly of a short-term nature.
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>
1995 1994 1993
<S> <C> <C> <C>
Operating Revenues (thousands)
Residential $379,485 $360,651 $339,174
Commercial 335,607 315,156 303,783
Industrial 153,347 147,347 147,274
Public Street Lighting 11,311 11,205 11,002
Tariff Revenues 879,750 834,359 801,233
Accrued Revenues (2,973) 10,644 57,160
Retail 876,777 845,003 858,393
Wholesale 94,967 105,911 79,035
Other 9,884 8,041 7,103
Total Operating Revenues $981,628 $958,955 $944,531
Kilowatt-Hours Sold (millions)
Residential 6,622 6,704 6,760
Commercial 6,285 6,142 5,885
Industrial 4,056 3,863 3,764
Public Street Lighting 102 93 98
Retail 17,065 16,802 16,507
Wholesale 3,383 2,701 1,599
Total kWh Sold 20,448 19,503 18,106
</TABLE>
For an analysis of the year-to-year revenue trends, see Item 7, Management's
Discussion and Analysis of Financial Condition and Results of Operations.
6
<PAGE>
REGULATION
PGE is subject to regulation by the OPUC, which consists of a three-member
commission appointed by the Governor. The OPUC approves PGE's retail rates
and establishes conditions of utility service. The OPUC ensures that prices
are fair and equitable and provides PGE an opportunity to earn a fair return
on its investment. In addition, the OPUC 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 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 EFSC.
The 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
REGULATORY ENVIRONMENT
The OPUC is presently approaching issues of retail competition on an informal,
utility-by-utility basis, rather than through generic, broad-based proceedings
such as other states are pursuing. The OPUC has long had a policy of allowing
special contracts for customers that have competitive options, and many of
PGE's largest customers receive power under such contracts. In addition, the
OPUC last year approved an innovative rate schedule under which PGE is sharing
some of the risks and rewards of a more competitive wholesale market with
large industrial and commercial customers not already under special contract.
The OPUC is currently exploring performance-based ratemaking in a rate case
for another Oregon investor-owned utility and, with regard to PGE, has
expressed interest in receiving proposals for accelerated recovery of
regulatory assets.
Recent rate orders have significantly reduced the uncertainty associated with
PGE's recovery of various regulatory assets, as well as reduced the overall
total of such assets. The OPUC approved recovery of most of PGE's remaining
investment in Trojan and full recovery of Trojan's decommissioning costs. The
OPUC also authorized PGE to simultaneously reduce certain regulatory assets
and liabilities (see discussion of recent rate orders below).
1995 GENERAL RATE ORDER
In March 1995 the OPUC issued an order on PGE's 1993 general rate request
after an 18-month process. The order, based on a two-year test period,
authorized a single average rate increase of 5% representing additional
revenues of $51 million in 1995 and $52 million in 1996. The tariff change,
which increased residential rates 7.7%, commercial rates 5.6% and industrial
rates 2.6%, became effective April 1, 1995. The order established PGE's
return on equity at 11.6%, a decrease from the previously authorized 12.5%.
The order authorized PGE to recover all of the estimated Trojan
decommissioning costs and 87% of its remaining investment in Trojan. These
amounts will be collected over Trojan's original license period ending in
2011. The order also adopted a mechanism to decouple short-term profits from
retail kilowatt-hour sales during the two-year test period (decoupling).
The disallowed portion of the Trojan investment, on a net of tax basis, is
comprised of $17 million of post-1991 capital expenditures, primarily
related to steam generator repair activities,
7
<PAGE>
and $20 million of general
Trojan investment. As a result of this disallowance, PGE recorded a first
quarter 1995 after-tax charge to income of $37 million.
The decoupling mechanism adopted by the OPUC set revenue targets associated
with retail loads for each month beginning April 1995 through December 1996.
If actual weather-adjusted retail revenues exceed or fall short of target
revenues,
PGE will refund or collect the difference from customers over an 18-month
period. The adjustment at any time during the two-year period cannot result
in an overall increase or decrease in rates, due solely to decoupling, of more
than 3% in total. Adjustments to rates, if necessary, can be made every six
months. Large commercial and industrial customers are excluded from the
decoupling mechanism.
New rates, effective April 1, included approximately $16 million of
variable power cost savings expected from the future commercial operation of
Coyote Springs. The order did not include projected capital and fixed costs
associated with Coyote Springs nor the collection of PGE's power cost
deferrals which were addressed in a subsequent rate proceeding discussed
below.
Legal challenges have been filed against the OPUC's rate order (see Item 3,
Legal Proceedings, for further discussion).
POWER COST RECOVERY AND COYOTE SPRINGS ORDER
In November 1995 the OPUC issued an order authorizing PGE to increase rates by
an average 2.7% to recover the capital and fixed costs associated with Coyote
Springs and an October 1995 BPA price increase. The order resulted in a $40
million increase in annual revenues for the Company. New prices became
effective in late November 1995 concurrent with the commercial operation of
Coyote Springs.
The order addressed recovery of approximately $60 million of
incremental power costs incurred after the 1993 closure of Trojan. While the
order authorized full recovery of $11 million of power costs
deferred in early 1995, it allowed recovery of only $9 million
of the $50 million of excess power costs deferred from July 1993 through
March 1994. The order also authorized the immediate recovery of approximately
$29 million in incentive revenues associated with prior years' achievements of
the Company's energy efficiency programs. PGE recorded a $13 million after-
tax charge to income in the third quarter of 1995 to reflect the write-off of
unrecoverable costs.
The order implemented the Company's proposal to offset certain regulatory
assets including the uncollected balance of all power cost deferrals,
incentive revenues and a portion of the remaining Trojan investment, against
PGE's unamortized gain on the prior sale of a portion of Boardman. The offset
allowed for recovery of the deferred power costs and incentive revenues and
the elimination of approximately $117 million of regulatory assets and
liabilities from the Company's Balance Sheets without increasing customer
rates.
A party to the rate proceeding has requested that the OPUC reconsider the
order. A decision on the motion is pending from the OPUC.
Under the terms adopted in the order, PGE withdrew its appeal of the Boardman
gain issue in PGE V. RONALD EACHUS, MYRON KATZ, NANCY RYLES AND THE OPUC,
MARION COUNTY CIRCUIT COURT (see Item 3, Legal Proceedings, for further
discussion).
RESIDENTIAL EXCHANGE PROGRAM
The RPA, passed in 1980, attempted to resolve growing power supply and cost
inequities between customers of government and publicly owned utilities, who
have priority access to the low-cost power from the federal hydroelectric
system, and the customers of IOUs. The RPA residential exchange program
exists to ensure that all residential and farm customers in the region, the
vast majority of which are served by IOUs, receive similar benefits from the
publicly funded federal power system. Exchange program benefits are passed
directly to residential and farm customers. The exchange benefit for PGE
residential and small farm customers totaled $51 million for calendar year
1995. In July 1995, the BPA released its 1996 rate proposal, which included a
significant reduction in the benefits to PGE's customers from the residential
exchange program under the RPA.
8
<PAGE>
Under recent Congressional legislation, this exchange benefit will decline by
$10 to $15 million, annually, on October 1, 1996. The amount of the
residential exchange benefit beginning October 1, 1997 is among the subjects
of current regional discussions regarding BPA's role in the region.
In 1993 the OPUC allowed PGE to pass through a BPA price increase which
reduced exchange benefits $29 million, resulting in a corresponding increase
in electricity prices to residential and small farm customers.
ENERGY EFFICIENCY
PGE has promoted the efficient use of electricity for over two decades.
Jointly, PGE and the OPUC have worked together to provide appropriate
financial incentives for PGE's energy efficiency programs. In 1990, PGE and
the OPUC first implemented the Share All Value Equitably (SAVE) program. The
program was designed to remove the financial disincentive to the Company of
pursuing cost-effective Demand Side Management (DSM) measures. During the
four-year program, which ended in 1994, PGE invested $61 million in DSM
measures and achieved an annualized 55 MWa of saved energy. PGE invested an
additional $25 million during 1995 in DSM programs resulting in an additional
20 MWa in annual energy savings. The Company is allowed a return of and a
return on its energy efficiency program expenditures.
Current DSM programs provide a range of services to all classes of PGE
customers. These programs seek to capitalize on windows of opportunity in
which DSM measures are most cost-effective, such as new residential and
commercial construction, and the replacement and renovation markets. PGE
continues to provide a weatherization program for eligible low-income
families.
PGE recognizes the value of and remains committed to encouraging the efficient
use of energy. With the prospect of increased competition and customer
choice, PGE is focusing its DSM efforts more toward customer needs and wants.
The goal is to allow more customer choice in determining what amount of energy
efficiency is appropriate to satisfy business and lifestyle choices. PGE will
meet these needs through cost-effective DSM services to its customers in the
form of energy expertise and information, project facilitation and financing
support.
LEAST COST ENERGY PLANNING
The OPUC adopted Least Cost Energy Planning for all energy utilities in Oregon
with the goal of selecting the mix of options that yields an adequate and
reliable supply of energy at the least cost to the utilities and customers.
"Demand side" options (ie, conservation and load management) as well as
traditional "supply side" options (ie, generation and purchase of power) are
evaluated. Although utility management continues to be fully responsible for
decision making, the process allows the OPUC and the public to participate in
resource planning. Ratemaking decisions are not made in the planning process.
However, participation by the OPUC and the public may reduce the uncertainty
regarding the ratemaking treatment of actions consistent with a plan
acknowledged by the OPUC.
In November 1995, PGE's 1995-1997 Integrated Resource Plan (IRP) was submitted
to the OPUC for review and acknowledgment in fulfillment of its least cost
planning obligation. Under the IRP, PGE will rely on the increasingly
competitive energy marketplace to meet near-term load growth and reliability
needs. PGE will make economical use of existing assets and engage in system
efficiency improvements. PGE's "just in time" resource acquisition strategy
calls for reducing the lead time required for new generating capacity by
completing the siting and permitting process in advance of a need for
additional resources. As noted above, PGE will refocus DSM activities to
deliver customer value and choice while emphasizing the economic viability of
each program. PGE anticipates acknowledgment of its IRP by the OPUC by mid-
1996.
COMPETITION AND MARKETING
Progress toward greater customer choice and direct access to customers by all
competitors has been dramatic in the last two years. The National Energy
Policy Act of 1992 (Energy Act) allows the FERC to order wholesale wheeling
between utilities. The Energy Act reserved the right to order true "retail
wheeling" to the individual states. Retail wheeling is the movement of
electric energy produced and sold by another entity over
9
<PAGE>
an electric utility's
transmission and distribution system, to a retail customer in the utility's
service territory. Retail wheeling would permit retail customers to purchase
electric capacity and energy from any electric utility or power supplier.
Recently, Michigan ordered utilities in that state to test 150 MW of retail
wheeling. California has proposed a comprehensive restructuring of electric
utility regulation that would lead to intense competition for customers and
free choice for all customers by 2002. Although the OPUC has not yet
considered similar measures, in the coming years the Company's growth will
increasingly be influenced by competitive factors rather than within the
traditional regulatory framework.
The electric industry is in the early stages of an increasingly competitive
climate that is already making dramatic differences in the way the Company
produces, transmits, distributes and markets electric energy and associated
services. During 1995 PGE aligned the Company along its major business lines:
energy services encompassing retail sales, marketing and customer service;
wholesale marketing; and power supply encompassing hydro and thermal power
operations.
TRADING FLOOR OPERATIONS
In 1995 PGE established its trading floor operations which fully integrates
the Company's wholesale marketing, energy supply, financial risk management
and power operations functions. The trading floor activities seek to
enhance PGE's competitive
position in retail and wholesale markets by assuring a reliable, low-cost
supply of energy to meet retail and wholesale loads and enhance the Company's
ability to profitably market to current and emerging wholesale markets.
RETAIL COMPETITION AND MARKETING
PGE operates within a state-approved service area and under current regulation
is substantially free from direct retail competition with other electric
utilities. PGE's competitors within its Oregon service territory include
other fuel suppliers, such as the local natural gas company, which compete with
PGE for the residential and commercial space and water heating market. In
addition there is the potential of a loss of PGE service territory to the
creation of public utility districts by voters. In the near term much of the
Company's business is likely to remain regulated with progress toward
increased retail competition taking place in stages. For example, basic
residential electric service is likely to remain highly regulated with little
competition, while industrial service may see rapid development of
competition. Deregulation of other industries such as telecommunications has
led to a host of new suppliers, products and services. The same is expected
for the electric industry as more and more groups of customers will have
increasing degrees of choice and alternative suppliers from whom to purchase.
Increased competition presents both a threat and an opportunity. PGE is
preparing to meet varying levels of competition from traditional and non-
traditional sources in the various retail markets within its service territory
as well as throughout the western United States. Much of the Company's growth
potential may no longer be limited by service territory boundaries. The
Company plans to look beyond traditional boundaries at opportunities to serve
customers with energy related products and services allowable in the current
regulated markets and to be prepared to further expand as greater access to
these markets emerges.
Within the core markets that make up PGE's current service territory, the
Company will continue to deliver quality electric
service by focusing on traditional values like reliability, cost management,
resource acquisition, effective energy efficiency services, safe operations
and responsive customer-oriented service. In addition, the Company plans to
provide an array of new products and services to its existing and prospective
customers. For instance, PGE launched its Power Smart marketing
campaign to encourage the wise use of beneficial electro-technologies. Other
services currently being offered or under development include distribution
services, such as power quality-related services and lighting maintenance;
power services, such as load following and system control; utility services,
such as automated billing services and outage management; and retail services,
such as power quality and time-of-day rates.
WHOLESALE COMPETITION AND MARKETING
During the last few years, the western United States has become a vibrant
marketplace for the trading of electricity in which PGE has become an active
participant. Wholesale sales continue to make a significant contribution to
Company revenues. During 1995 PGE's wholesale sales increased 25% over 1994
levels and
10
<PAGE>
accounted for 10% of total revenues and 17% of total sales.
However, a surplus of energy, in conjunction with the entrance of numerous
marketers/brokers, independent power producers and affiliates of electric
utilities, has increased the competition for market share and is resulting in
lower prices and profit margins. During 1995, the average price of PGE's
wholesale sales decreased 28%.
PGE plans to utilize its wholesale marketing experience to expand its presence
in the western United States. Wholesale activities are focused on both
bulk energy markets and large end-user customers that can purchase
energy directly from the market. As part of this effort, PGE recently
established wholesale power marketing offices in other Western states.
In 1996 FERC is expected to issue new rules creating open access to the
nation's electric transmission grid. The new rules could create even higher
levels of competition in the bulk power markets as all wholesale buyers and
sellers have equal access to transmission resources. Utilities such as PGE
will be required to make their transmission systems available to anyone on the
same terms and costs that they offer to themselves. In November 1995, PGE
filed an open access transmission tariff with FERC in response to the FERC
notice of proposed rulemaking. The Company's transmission system connects
winter-peaking utilities in the Northwest and Canada, which have access to
low-cost hydroelectric generation, with summer-peaking wholesale customers in
California and the Southwest, which have higher-cost fossil fuel generation.
PGE has used this system to purchase and sell in both markets depending upon
the relative price and availability of power, water conditions, and seasonal
demand from each market. Under its open access tariff the Company will
lose any competitive advantage it may have had through the use of its
transmission assets for wholesale transactions. Open access may provide new
opportunities as the Company has equal access to the transmission capabilities
of other utilities.
The Company has actively participated in the development of a NYMEX electric
futures contract and promoted COB as the
preferred physical delivery point for pricing purposes. A NYMEX contract has
been approved to facilitate electric futures trading by April 1996. PGE is
prepared to be an active participant in the market.
POWER SUPPLY
Growth within PGE's service territory as well as its aggressive wholesale
marketing plans have underscored the Company's need for sources of reliable,
low-cost energy supplies such as the abundant hydro resources of the Pacific
Northwest. The demand for energy within PGE's service
territory has experienced an average annual growth rate of approximately
2.5% over the past 10 years. During 1996 PGE expects an even
greater level of load growth due to a vibrant economy and the expansion plans
of the high-tech industry in the region. The emerging wholesale energy
marketplace has caused PGE to postpone the acquisition of significant
additional new generating resources and capacity for the foreseeable
future. Rather PGE will rely on the purchase of power in the wholesale market
to supplement its existing base of hydro and thermal generating resources.
GENERATING CAPABILITY
PGE's existing hydroelectric, coal-fired and gas-fired plants are key
resources for the Company, providing 2,117 MW of generating capability (see
Item 2, Properties, for a full listing of PGE's generating facilities). PGE's
lowest-cost producers are its eight hydroelectric projects on the Clackamas,
Sandy, Deschutes, and Willamette rivers in Oregon. In 1995 generation from
PGE's hydroelectric facilities met 11% of the Company's total load.
In 1995 PGE completed construction of Coyote Springs, a 241-MW, gas-fired
facility. Coyote Spring is the Company's first plant addition since Boardman
in 1980 and adds a state-of-the-art combined cycle combustion turbine plant to
its thermal generating resources. Its initial operation during the fourth
quarter of 1995 provided over 186,000 MWh of generation at a cost below the
average cost of Company spot market purchases.
11
<PAGE>
PURCHASED POWER
PGE has long-term power contracts with four hydro projects on the mid-Columbia
River which provide PGE with 590 MW of firm capacity. PGE also has firm
contracts, ranging in term from one to 21 years, to purchase energy,
primarily hydro-generated, from other Pacific Northwest utilities for 821 MW.
In addition, PGE
has long-term exchange contracts with summer-peaking Southwest utilities to
help meet its winter-peaking requirements. In total, the above contracts
provide PGE 1,766 MW of firm capacity to serve PGE's peak loads.
PGE has increasingly utilized short-term purchases to meet its energy needs.
Short-term contracts include all spot, or secondary, purchases as well as firm
purchases for periods less than one year in duration. During 1995, 60%
of PGE's power purchases were under short-term agreements compared to 43% in
1994. Short-term energy prices have remained at levels which make long-term
power and capacity contracts unattractive. PGE's 1995 short-term purchases
averaged 50% less than the cost of energy bought under long- and intermediate-
term firm power contracts. A continued surplus of energy within the region,
the emergence of a NYMEX electric futures contract and open transmission
anticipated during 1996 are expected to continue to place competitive
pressures on the market price of short-term power. PGE is susceptible to
wholesale price increases due to its reliance on purchased power.
SYSTEM RELIABILITY AND THE WSCC
PGE relies on wholesale market purchases within the WSCC in conjunction with
its base of generating resources to supply its resource needs and maintain
system reliability. The WSCC is geographically the largest of the nine
regional electric reliability councils. The WSCC performs an essential role
in developing and monitoring established reliability criteria guides and
procedures to ensure continued reliability of the region's electric system.
During the last few years, the area covered by WSCC has become a dynamic
marketplace for the trading of electricity. This region, which includes the
11 Western states, is very diverse in climates. Peak loads occur at
different times of the year in the different regions. Energy loads in the
Southwest peak in summer due to air conditioning; northern loads peak during
winter heating months. Further, according to WSCC forecasts, the 80
electric organizations participating in the WSCC, which include utilities,
independent power producers and transmission utilities, have sufficient
generating capacity to cover loads 25 to 30% greater than anticipated
peak loads for each month of the year beyond the year 2000 assuming adverse
water conditions. Favorable water conditions have the ability to even further
increase energy supplies with inexpensive hydro-generated power.
During 1995 PGE's peak load was 3,315 MW of which over 16% was met through
economical short-term purchases. The remaining load was met through a
combination of Company-owned generation and firm power purchase contracts
discussed above. PGE's firm resource capacity totaled 3,872 MW as of December
31, 1995. PGE reached a new system record in February 1996 of 3,888 MW.
The availability of wholesale power has made the traditional utility reserve
margin less relevant. The need for an individual utility to maintain a reserve
margin of 20% or higher in order to assure that it has the capacity to
meet, without interruption, customer peak energy needs is no longer necessary.
12
<PAGE>
YEAR IN REVIEW
PGE generated 36% of its load requirements in 1995 compared with 47% in 1994.
Firm and secondary purchases met the remaining load. Regional water
conditions were about 95% of normal. Average precipitation in the Columbia
River basin increased the availability of inexpensive hydropower on the
secondary market in 1995. Mild weather, lower gas prices and increased
competition also contributed to the availability of inexpensive power.
1996 OUTLOOK
The early predictions of water conditions indicate they will be about normal
in 1996. While this should result in similar levels of hydro generation as in
1995, efforts to restore salmon runs on the Columbia and Snake rivers may
affect the supply and price of purchased power.
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 actions that have reduced the amount of
electricity generated at the Columbia and Snake River dams. In early 1996,
the National Marine Fisheries Service (NMFS) will release its recovery plan,
which is expected to be similar to the draft plan released in 1995. NMFS is
empowered by the ESA to require salmon protection measures by the Bureau of
Reclamation and the Army Corps of Engineers, the agencies that operate the
federal dams on these rivers. Certain measures contained in the draft plan
were implemented during 1995. River flows were boosted and water was released
over spillways while young salmon were migrating during the spring and summer
in an attempt to protect the fish from entering the turbines. If this
practice is continued it could mean less water available in the fall and
winter when demand for electricity in the Pacific Northwest is highest.
Although PGE does not have any hydro-electric facilities on rivers affected by
the plan, it does buy large amounts of energy from the agencies which do.
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.
However, PGE is working cooperatively with federal and state agencies, tribes,
and the public to return salmon and steelhead to their historic habitat above
dams built on the Deschutes River.
NEW RESOURCES
The Company does not plan to build new generating resources in the forseeable
future but will rely on the current surplus of wholesale energy to meet its
growing power needs. Accordingly, the Company has developed a resource
strategy which combines flexibility and a just-in-time acquisition philosophy
to provide
13
<PAGE>
a response to potential persistent increases in wholesale prices.
Specifically, PGE plans to complete the siting and permitting process for the
construction of additional new combined cycle combustion turbine projects.
This two-step process separates siting and engineering from the decision to
construct a new resource and significantly reduces the lead time for a new
plant by as much as two years. This process also moves decisions involving
large capital commitments as close as possible to the anticipated time the
power will be needed. PGE is also evaluating efficiency improvements at its
existing facilities including the repowering of Beaver and upgrades at the
Company's hydro facilities.
FUEL SUPPLY
PGE manages its fuel supply contracts as part of its trading floor operations.
Fuel supply contracts are negotiated to support annual planned plant
operations. Flexibility in contract terms is sought to allow for the most
economic dispatch of PGE's thermal resources in conjunction with the current
market price of wholesale power.
COAL
BOARDMAN
PGE has an agreement to supply coal to Boardman through the year 2000 which
does not require a minimum amount of coal to be purchased, allowing PGE to
obtain coal from other sources. During 1995 PGE did not take deliveries under
this contract but purchased coal under favorable short-term agreements. Coal
purchases in 1995 contained less than 0.5% of sulfur by weight and emitted
less than the EPA allowable limit of 1.2 pounds of sulfur dioxide per MMBtu
when burned. The coal, from surface mining operations in the Powder River
Basin, was subject to federal, state, and local regulations. Coal is
delivered to Boardman by rail under a contract which expires in 2002.
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 for the foreseeable future.
<TABLE>
<CAPTION>
SULFUR TYPE OF POLLUTION
PLANT CONTENT CONTROL EQUIPMENT
<S> <C> <C>
Boardman, OR 0.3% Electrostatic precipitators
Centralia, WA 0.7% Electrostatic precipitators
Colstrip, MT 0.7% Scrubbers and precipitators
</TABLE>
14
<PAGE>
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, an interstate gas pipeline operating between British Columbia and
New Mexico. During 1995, PGE had access to 76,000 MMBtu per day of firm
transportation capacity, or enough to operate Beaver at approximately 70%
capacity.
COYOTE SPRINGS
In November of 1995, PGE began service to its Coyote Springs project utilizing
firm transportation capacity of 41,000 MMBtu/day on the interconnected systems
of various shippers. Two-year contracts expiring in 1997 supply natural gas
to Coyote Springs at a 75% load factor. PGE also obtained the required
licenses and certificates necessary for the Company to independently bring
natural gas from Canada which will provide PGE with the opportunity to
contract directly with Canadian suppliers of natural gas to support
Coyote Springs operations.
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 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 DEQ,
the Oregon Department of Energy and EFSC. Environmental matters regulated by
these agencies include the siting and operation of generating facilities and
the accumulation, cleanup and disposal of toxic and hazardous wastes.
AIR/WATER QUALITY
Congress passed amendments to the Clean Air Act (Act) 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. PGE has
purchased additional allowances and anticipates being able to operate the
plant at a normal 85% capacity factor. 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
limitations on power production. This permit expires in the year 2000.
The water pollution control facilities permit for Boardman expired in
15
<PAGE>
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.
DEQ air contaminant discharge permits for the combustion turbine
generators at Bethel expired in 1995 and were replaced by new federal permits.
Bethel was one of the first plants in the nation to successfully pass the more
rigorous federal permitting process. DEQ still limits night operations to one
unit due to noise considerations. Maximum plant operations are allowed during
the day. The combustion turbines are allowed to operate on either natural gas
or oil.
PGE is no longer accepting oil shipments by river for its Beaver plant in
order to eliminate the risk of an oil spill into the Columbia River. Instead,
the rail off-loading facility has been upgraded. This plant is normally fired
by natural gas, and only small amounts of oil are used.
ENVIRONMENTAL CLEANUP
PGE is involved with others in the environmental clean-up of PCB contaminants
at various sites as a potentially responsible party (PRP). The clean-up
effort is considered complete 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.
16
<PAGE>
PORTLAND GENERAL HOLDINGS, INC. - NONUTILITY BUSINESSES
GENERAL
Holdings is a wholly owned subsidiary of Portland General and is the parent
company of Portland General's subsidiaries presently engaged in leveraged
leasing and 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 primarily its investments in its subsidiaries.
LEASING
COLUMBIA WILLAMETTE LEASING
CWL acquires and leases capital equipment on a leveraged basis. During 1995,
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 energy at
COB. Tule is modeled after similar companies in
the crude oil and natural gas industries that evolved as a result of
deregulation and the trading of related futures contracts. Tule has been
working with the operators of the interconnected transmission lines to develop
and test a transfer service which will verify and reconcile the title
transfers occurring among the various buyers and sellers at COB. This
will facilitate the trading of electricity for power marketers by providing
record-keeping while protecting competitive information.
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 14, Legal Matters, in the Notes to
Financial Statements and Item 3, Legal Proceedings, for more information.
17
<PAGE>
ITEM 2. PROPERTIES
PORTLAND GENERAL CORPORATION
Discussion regarding nonutility properties is included in the previous
section.
PORTLAND GENERAL ELECTRIC COMPANY
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.
The map below shows PGE's Oregon service territory and location of generating
facilities:
OREGON
18
<PAGE>
Generating facilities owned by PGE are set forth in the following table:
<TABLE>
<CAPTION>
PGE Net MW
Capability
FACILITY Location Fuel
<S> <C> <C> <C> <C>
WHOLLY OWNED:
Faraday Clackamas River Hydro 44
North Fork Clackamas River Hydro 52
Oak Grove Clackamas River Hydro 44
River Mill Clackamas River Hydro 23
Pelton Deschutes River Hydro 108
Round Butte Deschutes River Hydro 300
Bull Run Sandy River Hydro 22
Sullivan Willamette River Hydro 16
Beaver Clatskanie, OR Gas/Oil 500
Bethel Salem, OR Gas/Oil 116
Coyote Springs Boardman, OR Gas/Oil 241
PGE
JOINTLY OWNED: INTEREST
Boardman Boardman, OR Coal 330 @ 65.0%
Centralia Centralia, WA Coal 33 @ 2.5%
Colstrip 3 & 4 Colstrip, MT Coal 288 @ 20.0%
Trojan Rainier, OR Nuclear - @ 67.5%
TOTAL 2,117
</TABLE>
PGE holds five licenses under the Federal Power Act which expire
during the years 2001 to 2006
for its hydroelectric generating plants. FERC requires that a notice of
intent to relicense these projects be filed approximately five years
prior to expiration of the license. PGE is actively pursuing the renewal of
these licenses. The State of Oregon also has licensed all or portions of five
hydro plants. For further information see the Hydro Relicensing discussion in
Item 7, Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Following the 1993 closure, PGE was granted a possession-only license
amendment for Trojan by the NRC. In early 1995 PGE filed its Trojan
decommissioning plan with the NRC. See Note 11, Trojan Nuclear Plant, in the
Notes to the Financial Statements for further information.
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.
19
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
NONUTILITY
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 a partnership, and
other actionable wrongs. The Court has rejected the Trustee's previously
filed damage study which is expected to be revised and refiled. 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. No
discovery cutoff or trial date has been set.
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 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.
20
<PAGE>
UTILITY
PGE V. RONALD EACHUS, MYRON KATZ, NANCY RYLES (OREGON PUBLIC
UTILITY COMMISSIONERS) AND THE OPUC, MARION COUNTY CIRCUIT COURT
In July 1990 PGE reached an out-of-court settlement with the OPUC on two of
three matters arising from its 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 OPUC decision allocating 77% of the gain to
customers over a 27-year period which PGE subsequently appealed. PGE
withdrew its appeal in
December 1995, pursuant to an agreement adopted in an OPUC rate order.
Certain cross claims filed by the Utility
Reform Project are still active in this case which PGE will vigorously defend
against. See Note 13, Regulatory Matters, in the Notes to Financial
Statements for more details.
UTILITY REFORM PROJECT V. OPUC, MULTNOMAH COUNTY CIRCUIT COURT
On February 18, 1992 the Utility Reform Project (URP) filed a complaint in
Multnomah County Oregon Circuit Court asking the OPUC to set aside and rescind
OPUC Order No. 91-1781 which authorized PGE a temporary rate increase to
recover a portion of the excess power costs incurred during the 1991 Trojan
outage. URP and the OPUC agreed to stay the case pending OPUC hearings on the
OPUC order. On February 22, 1992 the OPUC issued an order approving the rate
increase. The case is currently under a stay. PGE has not intervened in this
case.
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 a 1972 territory allocation agreement
between PGE and PacifiCorp, dba Pacific Power & Light Company (PP&L), which
was subsequently approved by the OPUC and the City of Portland, 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 10-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 OPUC
approving the Agreement did not order the allocation of territories and
customers. Subsequently, 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.
PGE appealed to the U.S. Court of Appeals for the Ninth Circuit which on
July 20, 1995, issued an opinion in favor of PGE, reversing the judgment and
ordering judgment to be entered in favor of PGE. Columbia Steel filed a
petition for reconsideration which the court has not yet ruled on.
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.
21
<PAGE>
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 MW of firm
energy and capacity plus a 225-MW 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 $51 million).
PGE successfully moved for summary judgment on all of plaintiff's claims.
Judgment dismissing all of those claims with prejudice was entered on
September 12, 1995. Plaintiff has filed a notice of appeal.
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, URP and Don't Waste Oregon Council
(DWOC), respectively, filed Petitions for Judicial Review of the order of the
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.
In November 1995, the Court upheld the EFSC decision granting the Coyote
Springs Site Certificate and subsequently denied a petition for
reconsideration.
CITIZEN'S UTILITY BOARD OF OREGON V. PUBLIC UTILITY COMMISSION OF OREGON,
COURT OF APPEALS FOR THE STATE OF OREGON, JANUARY 1995
The Citizen's Utility Board (CUB) appealed a 1994 ruling from the Marion
County Circuit Court which upheld the order of the OPUC in its Declaratory
Ruling proceeding (DR-10). In the DR-10 proceeding, PGE filed an Application
with the OPUC requesting a Declaratory Ruling regarding recovery of the Trojan
investment and decommissioning costs. On August 9, 1993 the OPUC issued the
declaratory ruling. In its ruling, the OPUC agreed with an opinion issued by
the Oregon Department of Justice (Attorney General) stating that under current
law, the OPUC has authority to allow recovery of and a return on Trojan
investment and future decommissioning costs.
UTILITY REFORM PROJECT AND COLLEEN O'NEIL V. OPUC, MULTNOMAH COUNTY OREGON
CIRCUIT COURT, MARCH 1995
The URP filed an appeal of the OPUC's order in PGE's general rate case. Among
other things, the OPUC order granted PGE full recovery of Trojan
Decommissioning costs and 87% of its remaining investment in the plant. URP
alleges that the OPUC lacks authority to allow PGE to recover Trojan costs
through its rates. The complaint seeks to remand the case back to the OPUC
and have all costs related to Trojan immediately removed from PGE's rates.
CITIZENS UTILITY BOARD OF OREGON V. PUBLIC UTILITY COMMISSION OF OREGON,
MARION COUNTY OREGON CIRCUIT COURT, APRIL 1995
The CUB filed an appeal challenging the portion of the OPUC's order in PGE's
general rate case authorizing PGE to recover a return on its remaining
investment in Trojan. CUB alleges that the OPUC's decision is not based upon
evidence received in the rate case, is not supported by substantial evidence
in the record of the case, is based on an erroneous interpretation of law and
is outside the scope of the OPUC's discretion, and otherwise violates
constitutional or statutory provisions. CUB seeks to have the order modified,
vacated, set aside or reversed.
22
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
EXECUTIVE OFFICERS OF PORTLAND GENERAL CORPORATION AND PORTLAND GENERAL
ELECTRIC (*)
<TABLE>
<CAPTION>
NAME AGE BUSINESS EXPERIENCE
<S> <C> <C>
PGC/PGE
Ken L. Harrison 53 Appointed to current position of Chairman of the Board and Chief Executive
Chairman of the Board, Chief Officer on December 1, 1988 and President of Portland General since August
Executive Officer 4, 1992. Served as President of Portland General Electric from June 1987 until
President September 1989. Reappointed President of PGE on January 1, 1996.
Alvin Alexanderson 48 Appointed to current position on December 12, 1995. Served as Vice President,
Senior Vice President Rates and Regulatory Affairs from February 1991 until appointed to current
General Counsel and Secretary position. Previously served as President of Portland General Exchange from May
1988 until February 1991.
Joseph M. Hirko 39 Appointed to Senior Vice President on September 12, 1995. Has served as
Senior Vice President Vice President-Finance, Chief Financial Officer and Chief Accounting Officer
Chief Financial Officer since December 1991. Served as Treasurer beginning in June 1989. Served as Vice
President, Portland General Financial Services, Inc. from November 1985 until
June 1989.
Donald F. Kielblock 54 Appointed to current position on October 4, 1989. Previously served as General
Vice President - PGC/PGE Manager, Information Services of PGE until appointed to current position.
Human Resources
PGE
David K. Carboneau 49 Appointed to current position on January 1, 1996. Served as Vice President,
Vice President Thermal and Power Operations from September 12, 1995 until appointed to current
Information Technology position. Previously served as Vice President, Administration from October 1992
to September 1995. Served as Vice President, Information Resources from October
1989 to October 1992. For four years prior to October 1989, served as an executive
officer of PGE.
Richard E. Dyer 53 Appointed to current position on September 12, 1995. Previously served as Vice
Senior Vice President President and General Manager of Power Resources and Marketing from August
Power Supply 1994 until appointed to current position. Served as Vice President, PGE Marketing
and Supply from July 1991 to August 1994. Served as PGC Vice President and
Assistant to the Chairman of the Board from October 1990 until July 1991.
Peggy Y. Fowler 44 Appointed to current position on September 12, 1995. Served as Vice President,
Senior Vice President Distribution and Power Production from January 1990 until appointed to current
Energy Services position. Served as General Manager, Hydro Production and Transmission from
September 1989 to January 1990.
Frederick D. Miller 54 Appointed to current position on October 15, 1992. Served as Director of
Vice President Executive Department, State of Oregon, from 1987 until appointed to current
Public Affairs and Corporate position.
Services
</TABLE>
(*) Officers are listed as of January 31, 1996. The officers are elected
to serve for a term of one year or until their successors are elected and
qualified.
23
<PAGE>
Part II
ITEM 5. MARKET FOR 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 1995 and 1994.
<TABLE>
<CAPTION>
1995 1994
QUARTER 1ST 2ND 3RD 4TH 1ST 2ND 3RD 4TH
<S> <C> <C> <C> <C> <C> <C> <C> <C>
High 20-7/8 23-1/4 25-3/4 29-1/4 20-1/2 18-7/8 18-1/4 19-3/4
Low 18-7/8 20-1/4 21-5/8 25-1/4 17-1/4 16-3/8 16-1/2 16-1/2
Closing price 20-7/8 22-3/8 25-5/8 29-1/8 17-1/2 17 16-7/8 19-1/4
Cash dividends
declared (cents) 30 30 30 30 30 30 30 30
</TABLE>
The approximate number of shareholders of record as of December 31, l995
was 42,051.
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):
QUARTER 1995 1994
First $11,545 $15,393
Second 11,545 15,393
Third 13,682 12,828
Fourth 13,684 12,828
PGE is restricted, without prior OPUC approval, from making any dividend
distributions to Portland General that would reduce PGE's common equity
capital below 36% of total capitalization.
24
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
PORTLAND GENERAL CORPORATION
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31
1995 1994 1993 1992 1991
(thousands of dollars except per share amounts)
<S> <C> <C> <C> <C> <C>
Operating Revenues $983,582 $959,409 $946,829 $883,266 $889,876
Net Operating Income 195,576 154,296 158,181 163,500 136,531
Income (loss) from Continuing
Operations 81,036{1} 93,058 89,118 89,623 (20,698){2}
Gain (loss) from Discontinued
Operations{3} - 6,472 - - (29,169)
Net Income (loss) $ 81,036{1} $ 99,530 $ 89,118 $ 89,623 $(49,867)
Earnings (loss) per Average
Common Share
Continuing Operations $ 1.60 $ 1.86 $ 1.88 $ 1.93{4} $ (.43){4}
Discontinued Operations{3} - .13 - - (.63)
$ 1.60 $ 1.99 $ 1.88 $ 1.93{4} $(1.06){4}
Dividends Declared
per Common Share $ 1.20 $ 1.20 $ 1.20 $ 1.20 $ 1.20
Total Assets $3,448,017 $3,559,271 $3,449,328 $3,140,625 $3,092,596
Long-Term Obligations{5} 930,556 885,814 912,994 937,938 967,968
</TABLE>
PORTLAND GENERAL ELECTRIC COMPANY
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31
1995 1994 1993 1992 1991
(thousands of dollars)
<S> <C> <C> <C> <C> <C>
Operating Revenues $981,628 $958,955 $944,531 $880,098 $885,578
Net Operating Income 195,186 153,208 154,200 160,037 139,257
Net Income 92,787{1} 106,118 99,744 105,562 74,075
Total Assets $3,245,597 $3,354,151 $3,226,674 $2,920,980 $2,912,254
Long-Term Obligations{5} 930,556 855,814 872,994 887,938 887,952
NOTES TO THE TABLES ABOVE:
1 Includes a loss of $50 million from regulatory disallowances.
2 Includes a loss of $74 million from independent power.
3 Reflects the results of real estate operations which Portland General
discontinued in 1989.
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.
</TABLE>
25
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
GENERAL
Portland General reported 1995 earnings of $81 million or $1.60 per share,
compared to $100 million or $1.99 per share for 1994. 1995 results include a
$50 million after-tax charge to income related to the OPUC's rate orders
disallowing certain deferred power costs and 13% of PGE's remaining investment
in Trojan. 1994 earnings include the restoration to income of $6 million,
after tax, of previously recorded real estate reserves. Excluding the effect
of the regulatory disallowances, income from continuing operations would have
been $131 million compared to $93 million in 1994.
PGE ACCOUNTS FOR SUBSTANTIALLY ALL OF PORTLAND GENERAL'S ASSETS, REVENUES AND
NET INCOME. THE FOLLOWING DISCUSSION FOCUSES ON PGE UTILITY OPERATIONS,
UNLESS OTHERWISE NOTED.
1995 COMPARED TO 1994
Strong operating earnings reflected the benefits of low variable power costs
due to improved hydro conditions, lower natural gas prices and a competitive
wholesale market. The Company also benefited from continued sales growth and
a retail price increase.
Retail revenues increased $32 million, or nearly 4%, due largely to the
Company's general rate increase and continued load growth. An average 5%
general rate increase effective April 1, coupled with a 263,000 MWh increase in
energy sales, resulted in $45 million of additional revenue.
An increase in retail customers of 14,600 and a continuing
strong local economy resulted in weather-adjusted load growth of 2.8%.
Industrial customers contributed the major portion of load growth for the year
due to the recent expansion of high-technology and supporting industries in
the region. Weather-adjusted load for residential customers increased 1.2%
over last year. Over 12,900 residential customers were added during 1995.
Retail revenue increases were partially offset by warmer than normal
weather during winter heating months which decreased residential demand for
energy, and a decrease in accrued
revenues, a result of fewer power cost deferrals and SAVE incentive revenues.
Wholesale sales contributed $95 million or approximately 10% of total
operating revenues. The Company's aggressive marketing efforts resulted in a
25% increase in sales; however, revenues declined $11 million as average
prices decreased 28%.
Variable power costs fell $54 million, or 15%, despite increased Company load
as the average cost of power decreased from 19.1 to 15.9 mills (10 mills = 1
cent). Improved hydro conditions, mild weather, cheaper natural gas, and
competition among suppliers all contributed to abundant and low-cost supplies
of secondary energy in the region. Company hydro generation increased 20%, or
412,000 MWh, reflecting good water conditions on the Clackamas River system
similar to those experienced throughout the
26
<PAGE>
West. Energy purchases were up 28% due to increased loads and thermal
displacement, while abundant supplies of energy drove secondary prices below
1994 levels. Secondary purchases averaged 11.3 mills, ranging from 1.8 to
28 mills, compared to an average 20.1 mills in 1994.
Throughout the year PGE was able to economically dispatch or displace thermal
generation in response to movements in the cost of short-term power. Low-cost
hydro significantly displaced PGE thermal generation, which decreased 32% from
1994. Beaver generated electricity at 38%
lower cost due to favorable gas prices.
<TABLE>
<CAPTION>
RESOURCE MIX/VARIABLE POWER COSTS
<S> <C> <C> <C> <C>
Average Variable
Resource Mix Power Cost (Mills/KWh)
1995 1994 1995 1994
Generation 36% 47% 8.0 10.6
Firm Purchases 39% 33% 22.7 25.7
Secondary Purchases 25% 20% 11.3 20.1
Total 100% 100% 15.9 19.1
</TABLE>
Operating expenses (excluding variable power costs, depreciation and income
taxes) were $10 million, or 4%, higher primarily due to storm damages incurred
in December 1995. A combination of wind and ice storms caused a record number
of customer outages in PGE's service territory. Repair efforts to restore
customers' service included around the clock efforts from PGE personnel and
contract crews at a total cost exceeding $10 million, of which PGE is self-
insured for the first $5 million.
A March 1995 general rate order disallowed recovery of 13% of PGE's Trojan
investment resulting in a $37 million after-tax charge to income. PGE also
recorded a $13 million after-tax third quarter loss as a result of an OPUC
order which
disallowed recovery of a portion of the Company's deferred power costs. For
further information on the OPUC order, see Note 13, Regulatory Matters.
Depreciation increased $10 million, or 8%, largely due to higher
depreciation rates effective with the Company's general rate increase. Income
taxes increased $18 million primarily due to an increase in before-tax
operating income. The Company benefited from a one-time state tax refund of
approximately $4 million which contributed to a lower effective
tax rate for the year.
The construction of Coyote Springs accounted for the increases in capitalized
interest during each year, which partially offset a corresponding increase in
interest expense. Income also includes a $5 million charge for
increased charitable donations.
1994 COMPARED TO 1993
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. 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.
27
<PAGE>
Accrued revenues of $19 million, relating to power cost deferrals, were down
substantially from $67 million in 1993. PGE deferred for later collection a
portion of incremental 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 1993
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 in 1993.
Operating expenses (excluding variable power costs, depreciation,
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 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 reflected 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 Coyote Springs in 1994, which helped offset
increased interest costs on short-term borrowings.
FINANCIAL CONDITION
During 1995 regulatory actions resulted in the write-down and elimination of
certain regulatory assets and liabilities. The March 1995 general rate order,
discussed in Note 13, Regulatory Matters,
resulted in the write-down of 13% of PGE's investment in Trojan.
Continued amortization and the regulatory offset of
$20 million, discussed below, also contributed to the
decrease in the Trojan investment balance.
In November 1995 the Company placed Coyote Springs in service.
Concurrently, a rate proceeding was finalized
which provided recovery of the fixed and capital costs of the plant.
The November 1995 proceeding also approved partial recovery of PGE's
outstanding power costs deferrals, recorded as unbilled and accrued revenues.
The order adopted
the Company's proposal to offset the uncollected balances of all power cost
deferrals approved for recovery, a portion of
the Trojan Investment, and certain other regulatory assets
against the Company's $117 million deferred gain remaining from the 1985
sale of a portion of
Boardman and the Intertie. See Note 13, Regulatory Matters, in the Notes to
the Financial Statements for additional discussion regarding the November 1995
order.
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 borrowings, and the sale of
Portland General's common stock.
During 1995, Portland General discontinued its commercial paper program. In
order to meet periodic liquidity and operational needs, Portland General has
maintained a one-year credit facility of $15 million from which no borrowings
were made during 1995.
As of year-end 1995 Portland General had $30 million of debt which
matures in 1996.
Portland General received $50 million in dividends from PGE. In addition,
Portland General received $10 million in proceeds from the issuance of new
shares of common stock under its Dividend Reinvestment and
28
<PAGE>
Optional Cash
Payment Plan (DRIP). Beginning in November 1995 Portland General began open
market purchases of common stock for the DRIP program rather than issuing new
shares.
PORTLAND GENERAL ELECTRIC COMPANY
CASH PROVIDED BY OPERATIONS is used to meet the day-to-day cash requirements
of PGE. Supplemental cash is obtained 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. Changes in accounts receivable
and accounts payable can also be significant contributors or users of cash.
Improved cash flow for the current year reflects the Company's general price
increase and lower variable power costs. Cash flows were not adversely
affected by the $50 million non-cash charge to income for regulatory
disallowances. 1994 cash flows were affected by a $20 million tax prepayment
related to a 1985 WNP-3 abandonment loss deduction which was challenged by
the IRS. During 1995 Portland General reached a settlement with the IRS
regarding the deduction. The settlement did not materially affect the
Company's cash requirements (see Note 3, Income Taxes, for further
information).
INVESTING ACTIVITIES include generation, transmission and distribution
facilities improvements, as well as energy efficiency programs. 1995 capital
expenditures of $232 million were primarily for the expansion and upgrade of
its transmission and distribution system and completion of Coyote Springs.
Annual capital expenditures are expected to be approximately $170 million over
the next few years. The majority of anticipated capital expenditures are for
improvements to the Company's expanding distribution system to support the
addition of new customers to PGE's service territory.
The Company plans to proceed with obtaining required site permits for
potential new generating resources but does not anticipate new construction in
the foreseeable future. The Company will continue to make energy efficiency
expenditures but at approximately 50% of 1995 levels.
FINANCING ACTIVITIES provide supplemental cash for day-to-day operations and
capital requirements as needed. During 1996 internal funding is expected to
cover the Company's capital expenditures.
PGE maintains varying levels of short-term debt, primarily in the form of
commercial paper, which serve as the primary form of daily liquidity with
1995 balances ranging from $30 million to $170 million. PGE has committed
borrowing
facilities totaling $200 million which are used primarily as backup for PGE's
$200 million commercial paper facility. In July 1995, PGE extended the life
of its $200 million credit facility to five years and reduced the annual
commitment fee to ensure adequate liquidity and take advantage of an
attractive market for credit.
In 1995 PGE redeemed $80 million of preferred stock including a $10 million
sinking fund payment. To fund the redemption, PGE issued $75 million of
Junior Subordinated Deferrable Interest Debentures due 2035, which are listed
on the NYSE.
In May 1995 PGE issued $75 million of medium term notes secured by its First
Mortgage Bond Indenture with maturities ranging from 5 to 12 years.
Concurrently with the issuance of the debt, PGE settled two outstanding
forward interest rate swap agreements, each with a notional amount of $25
million, which were initiated in November 1994. The termination resulted in
a $5 million payment which was deferred and will
be amortized over the average life of the bonds issued.
PGE filed a shelf registration statement for $250 million providing for the
issuance of secured debt as well as unsecured senior and junior debentures.
The registration statement allows for the debt to be issued for terms ranging
from nine months to 40 years as either fixed or floating rate debt. With the
issuance of the $75 million
29
<PAGE>
of debentures discussed above, PGE currently has
$175 million of debt issuance capacity under its existing shelf registration.
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, 1995, PGE could issue $408 million of preferred stock and
$455 million of additional First Mortgage Bonds.
In January 1996 the Company issued a $35 million variable rate note to a
commercial bank maturing in January 1997 to fund the early redemption of
7.75% and 7.95% First Mortgage Bonds.
FINANCIAL AND OPERATING OUTLOOK
COMPETITION
The Energy Policy Act of 1992 (Energy Act) set the stage for change in federal
and state regulations aimed at increasing both wholesale and retail
competition in the electric industry. The Energy Act eased restrictions on
independent power production and granted authority to FERC to mandate open
access for the wholesale transmission of electricity.
FERC has taken steps to provide a framework for increased competition in the
electric industry. In March 1995 it issued a Notice of Proposed Rulemaking
(NOPR) regarding non-discriminatory open access transmission requirements for
all public utilities. The proposed rules address several issues including
stranded asset recovery and open access transmission of electricity. If
adopted, the proposed open access transmission requirements would give
wholesale competitors access to PGE's transmission facilities and, in turn,
give PGE access to others' transmission facilities. PGE filed an open access
transmission tariff with FERC but has not yet received an order.
Since the passage of the Energy Act, various state utility commissions have
addressed proposals which would gradually allow customers direct access to
generation suppliers, marketers, brokers and other service providers in a
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. While the Company
is unable to determine the future impact of increased competition, it believes
that ultimately it will result in reduced wholesale and retail prices.
OREGON REGULATORY ENVIRONMENT
The OPUC is approaching the issues of retail competition on an informal,
utility-by-utility basis, rather than through generic, broad-based
proceedings. The OPUC has had a long-standing policy of allowing special
contracts for customers that have competitive options, and many of PGE's
largest customers receive power under such contracts. In addition, the OPUC
approved an innovative rate schedule under which PGE is sharing some of the
risks and rewards of a more competitive wholesale market with large industrial
and commercial customers not already under special contract. The OPUC is
exploring performance-based ratemaking in a rate case for another Oregon
investor-owned utility and, with regard to PGE, has expressed interest in
receiving proposals for accelerated recovery of regulatory assets.
Recent rate orders have substantially reduced the Company's regulatory risks,
particularly the uncertainty associated with the recovery of various
regulatory assets. The OPUC approved recovery of 87% of PGE's remaining
investment in Trojan and full recovery of Trojan's decommissioning costs (see
Item 3, Legal Proceedings, for discussion on legal challenges to the OPUC's
authorization). The OPUC also approved a proposal under which PGE
simultaneously eliminated certain regulatory assets and liabilities (see
Note 13, Regulatory Matters, for further discussion of 1995 rate orders).
It remains to be determined what effect future competitive factors may have
on retail rates in Oregon and the Company's ability to fully recover remaining
regulatory assets.
30
<PAGE>
CUSTOMER GROWTH AND ENERGY SALES
The growth of PGE's retail customer base by over 14,600 contributed to an
average 2.8% increase in weather-adjusted retail kWh sales. The Company
continues to benefit from consistent growth in its residential customer class.
During 1995, the addition of approximately 12,900 residential customers
resulted in a 1.2% load growth for this customer class. Over the past 10
years increases in the number of residential customers has resulted in an
average annual residential load growth of 1.2%.
In 1995, industrial customers expanded their demand for energy by 4.9%,
making them the most rapidly growing customer class within PGE's service
territory. Above average growth in this class is expected to contribute to an
overall retail load growth of approximately 4.6% in 1996.
COMMODITY PRICE RISK MANAGEMENT
The Company is exposed to market risk arising from the need to purchase fuel
for its generating units (both natural gas and coal) as well as the direct
purchase and sale of wholesale electricity in support of its retail and
wholesale markets. PGE operates without a power cost adjustment tariff, and
therefore adjustments for power costs above or below those used in existing
general tariffs are not automatically reflected in retail customers' rates.
Through the formation of the trading floor, PGE has integrated its wholesale
marketing, fuels, power operations and price risk management functions. This
has led to a more efficient energy production and procurement process, as
well as an expansion of the Company's ability to offer its customers a variety
of energy solutions and pricing. This expansion of product offerings, in
conjunction with the development of a broader, more competitive wholesale
electricity market, means the Company must actively manage its market price
risk.
The Company uses financial instruments, such as commodity futures,
options, forwards and swaps, to hedge the price of natural gas and electricity
and reduce the Company's exposure to market fluctuations in the price
of natural gas and electricity. In addition to hedging
activities, Company policy has been expanded to allow for the use of
financial instruments for trading purposes in support of Company operations
although no trading of financial instruments was done during the year. In
1995, transactions consisted primarily of fixed for floating swap agreements
where the Company receives or makes payments based on the differential between
a specified price and the actual price of natural gas or electricity.
Swap contracts
generally require monthly cash settlements over the term of the contract.
The Company is exposed to credit risk in the event of non-performance by the
counterparties and has established guidelines to mitigate that risk.
POWER & FUEL SUPPLY
PGE's base of hydro and thermal generating capacity provides the Company with
the flexibility needed to respond to seasonal fluctuations in the demand for
electricity both within its Oregon service territory and from its wholesale
customers. PGE plans to generate 35% of its energy requirements during 1996,
approximately the same level achieved during 1995.
PGE maintains flexibility in fuel supply contracts to allow for the economic
dispatch of PGE's thermal resources in conjunction with hydro operations and
the current market price of wholesale power. The Company benefits from a
strategic location which places it adjacent to two competing natural gas
pipelines with access to three significant producing basins. Firm
transportation on both pipelines provides an adequate supply of natural gas to
meet plant generating capacities. In addition, the Company maintains a
flexible portfolio of physical supply which relies heavily on short-term
agreements and spot-market purchases to fuel plant operations.
During 1995 the Company relied on wholesale purchases to supply approximately
64% of its energy needs, and PGE expects to purchase approximately 65% of its
1996 load requirements. PGE has long-term power contracts with four hydro
projects on the mid-Columbia River which provide PGE with 590 MW. Early
predictions of 1996 water conditions indicate they will be about normal;
however, efforts to restore salmon
runs on the Columbia and Snake Rivers may affect the supply and price of
purchased power (see Restoration
31
<PAGE>
of Salmon Runs
below). Additional factors that could affect purchased power include weather
conditions in the Northwest during winter months and in the Southwest during
summer months, as well as the performance of major generating facilities in
both regions.
PGE has increasingly relied upon short-term purchases to meet its energy
needs. The Company anticipates that an active wholesale market and surplus of
generating capacity
within the WSCC (see the Power Supply discussion under Item 1, Business, for
further information regarding the WSCC) should provide sufficient wholesale
energy available at competitive prices to supplement Company generation and
purchases under existing firm power contracts.
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. The release of the NMFS final plan is scheduled for early 1996
and is expected to call for salmon protection measures similar to those
adopted by the draft plan. NMFS is empowered by the ESA to require salmon
protection measures by the U.S. Bureau of Reclamation and the U.S. 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 reduce generation and increase 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 and
could lead to higher power costs.
HYDRO RELICENSING
PGE HYDRO - PGE's hydroelectric plants are some of the Company's most
valuable resources supplying economical generation and flexible load following
capabilities. Company-owned hydro generation produced 2.4 million MWh of
renewable energy in 1995, meeting 11% of PGE's load. PGE's hydroelectric
plants, which operate under federal licenses, will be up for renewal between
the years 2001 and 2006. The license for the 408-MW Pelton/Round Butte
project - the Company's largest hydro resource - is the first up for renewal.
PGE
will file a notice of intent with FERC officially beginning the anticipated
minimum five year relicensing process. Should the relicensing process not be
completed prior to the expiration of the original license, annual licenses
will be issued, usually under the original terms and conditions.
The relicensing process includes the involvement of numerous interested
parties such as governmental agencies, public interest groups and communities,
with much of the focus on environmental concerns. PGE has already performed
many pre-filing activities including nearly 50 public meetings with such
groups. The cost of relicensing includes legal and filing fees as well as the
cost of environmental studies, possible fish passage measures and wildlife
habitat enhancements. Relicensing cost may be a significant factor in
determining whether a project remains cost-effective after a new license is
obtained, especially for smaller projects. Although FERC has never denied an
application or issued a license to anyone other than the incumbent licensee,
this is no assurance that a new license will be granted.
MID-COLUMBIA HYDRO - PGE's long-term power purchase contracts with certain
public utility districts in the state of Washington expire between 2005 and
2017. Certain Idaho Electric Utility Co-operatives have initiated proceedings
with FERC seeking to change the allocation of generation from the Priest Rapids
and Wanapum dams between electric utilities in the region upon expiration of
the current contracts. FERC is expected to rule on the matter during 1996.
PGE will seek renewal of these contracts under terms and conditions similar to
the original. However, an unfavorable FERC ruling could result in a reduction
of the amount of power from the two projects that PGE could acquire beyond the
expiration dates of the current contracts. For further information regarding
the power purchase contracts on the mid-Columbia dams, including Priest Rapids
and Wanapum, see Note 9, Commitments, in the Notes to Financial Statements.
32
<PAGE>
NUCLEAR DECOMMISSIONING
In January 1995 PGE submitted its Trojan decommissioning plan to the NRC and
EFSC. The plan, which estimates PGE's cost to decommission Trojan at $358
million in nominal dollars (actual dollars to be spent in each year),
represents a site-specific decommissioning estimate performed for Trojan by an
engineering firm experienced in decommissioning nuclear plants. This 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 USDOE facility (see Note
11, Trojan Nuclear Plant, for further discussion of the decommissioning plan
and other Trojan issues). PGE anticipates approval of its decommissioning
plan during 1996 following the completion of a review process.
During 1995, PGE successfully completed the removal and
burial of
32
<PAGE>
certain of Trojan's large components. Meanwhile, the Company is
pursuing the licensing and planning issues in preparation for decommissioning
activities to begin following plan approval.
NEW ACCOUNTING STANDARDS
SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and Long-
Lived Assets to be Disposed Of", imposes a stricter criterion for
continuing to carry
regulatory assets, requiring that such assets be probable of recovery at each
balance sheet date. As of December 31, 1995, all regulatory assets are being
collected in rates charged to customers.
The Company's accounting policies conform to generally accepted accounting
principles and consider the effects of ratemaking practices. The Company has
recorded certain regulatory assets and is dependent upon the regulatory
process to ensure that future revenues will be provided to recover these
costs. In the event that all or a portion of the Company's operations are no
longer subject to cost-
based regulation (due to a change in regulation or the effects of
competition), the Company could be required to recognize the impairment of and
write down its long-lived assets to their fair value as well as
write off any remaining regulatory assets.
SFAS No. 123, "Accounting for Stock-Based Compensation", effective in 1996,
encourages companies to recognize compensation expense for the fair value of
stock-based compensation. The Company has limited use of stock-based
compensation and does not anticipate that the adoption of this standard will
have a material impact on the financial position or results of operations
or cash flows of
the Company. For further information on the Company's stock compensation
plans see Note 4, Common and Preferred Stock, in the Notes to Financial
Statements.
NONUTILITY
BONNEVILLE PACIFIC LITIGATION - Portland General, Holdings, and certain
affiliated individuals, along with others, have been named as defendants in a
class action by investors in 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 $228 million in damages
against Deloitte & Touche and certain parties associated with Bonneville
Pacific alleging that it relied on fraudulent and negligent statements and
omissions when it acquired a 46% interest in and made loans to Bonneville
Pacific.
A detailed report released in June 1992 by a U.S. Bankruptcy examiner outlined
a number of questionable transactions that resulted in gross exaggeration of
Bonneville Pacific's assets prior to Holdings' investment. This report
includes the examiner's opinion that there was significant mismanagement and
very likely fraud at Bonneville Pacific. For additional information and
further details, see Note 14, Legal Matters, in the Notes to Financial
Statements.
33
<PAGE>
Appendix (Electronic Filing Only)
Omitted graphic material:
Page 7 Retail Price v. Inflation graph comparing
PGE retail price (cents per KWh) to Portland CPI:
Retail Price CPI
1986 5.0 108.2
1987 4.93 110.9
1988 4.77 114.7
1989 4.69 120.3
1990 4.57 127.4
1991 4.69 134
1992 4.79 139.9
1993 4.86 144.7
1994 4.97 148.9
1995 5.16 153.2
Page 12 January reserve margin for WSCC region
available capability less peak load (megawatts & percent)
Megawatts Percent
1992 34,689 35.2
1993 22,997 21.7
1994 31,033 31.0
1995 31,018 28.8
1996 32,076 29.3
1997 30,578 27.4
1998 31,970 28.1
1999 31,883 27.6
2000 30,943 26.3
2001 29,039 24.3
Page 13 1995 Actual Power Sources pie chart:
(megawatt hours)
Combustion Turbines: 11% (2,272,000)
PGE Hydro: 11% (2,434,000)
Coal: 14% (2,933,000)
Purchased Power: 64% (13,948,000)
Page 13 1996 Forecasted Power Sources pie chart:
(megawatt hours)
PGE Hydro: 10% (2,384,000)
Coal: 12% (2,903,000)
Combustion Turbines: 13% (3,236,000)
Purchased Power: 65% (16,159,000)
Page 18 Map of PGE's Oregon service territory and location
of generating facilities.
Page 26 Operating Revenue and Net Income (Loss) graph:
($ Millions):
Operating Net
Revenue Income
1991 890 (50)
1992 883 90
1993 947 89
1994 959 100
1995 984 81
Page 26 PGE Electricity Sales graph:
(Billions of kWh)
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
1995 Residential 6.6
Commercial 6.4
Industrial 4.1
Wholesale 3.3
Page 26 Retail Revenues and Power Costs Graph:
(excluding effect of RPA credit) (Mills/kWh)
Net Variable Retail
Power Revenues
1991 10 52
1992 11 53
1993 17 56
1994 16 53
1995 14 54
Page 27 Operating Expenses graph:
($ Millions)
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
1995 Operating Costs 271
Variable Power 294
Depreciation 134
Page 29 Utility Capital Expenditures graph:
($ Millions)
1991 150
1992 159
1993 149
1994 243
1995 232
Page 31 Residential Customers graph:
(Thousands)
1985 461076
1986 470136
1987 476481
1988 484293
1989 496165
1990 512913
1991 526699
1992 536111
1993 545410
1994 557338
1995 570253
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
Senior Vice President,
Chief Financial Officer
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders of
Portland General Corporation:
We have audited the accompanying consolidated balance sheets of Portland
General Corporation and subsidiaries as of December 31, 1995 and 1994, and the
related consolidated statements of income, retained earnings and cash flows
for each of the three years in the period ended December 31, 1995. 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.
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, 1995 and 1994, and the results of their
operations and their cash flows for each of the three years in the period
ended December 31, 1995 in conformity with generally accepted accounting
principles.
Arthur Andersen LLP
Portland, Oregon,
January 24, 1996
34
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
PORTLAND GENERAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31 1995 1994 1993
<S> <C> <C> <C>
(THOUSANDS OF DOLLARS EXCEPT PER SHARE AMOUNTS)
OPERATING REVENUES $ 983,582 $ 959,409 $ 946,829
OPERATING EXPENSES
Purchased power and fuel 293,589 347,125 311,713
Production and distribution 63,841 61,891 73,576
Maintenance and repairs 47,532 47,391 55,320
Administrative and other 108,067 100,596 100,321
Depreciation and amortization 134,423 124,081 122,218
Taxes other than income taxes 51,490 52,151 55,730
698,942 733,235 718,878
OPERATING INCOME BEFORE INCOME TAXES 284,640 226,174 227,951
INCOME TAXES 89,064 71,878 69,770
NET OPERATING INCOME 195,576 154,296 158,181
OTHER INCOME (DEDUCTIONS)
Regulatory disallowances - net of income taxes of $25,542 (49,567) - -
Interest expense (79,128) (71,653) (70,802)
Allowance for funds used during construction 11,065 4,314 785
Preferred dividend requirement - PGE (9,644) (10,800) (12,046)
Other - net of income taxes 12,734 16,901 13,000
INCOME FROM CONTINUING OPERATIONS 81,036 93,058 89,118
DISCONTINUED OPERATIONS
Gain on disposal of real estate operations -
net of income taxes of $4,226 - 6,472 -
NET INCOME $ 81,036 $ 99,530 $ 89,118
COMMON STOCK
Average shares outstanding 50,766,916 49,896,685 47,392,185
Earnings per average share
Continuing operations $1.60 $1.86 $1.88
Discontinued operations - 0.13 -
Earnings per average share $1.60 $1.99 $1.88
Dividends declared per share $1.20 $1.20 $1.20
PORTLAND GENERAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
FOR THE YEARS ENDED DECEMBER 31 1995 1994 1993
(THOUSANDS OF DOLLARS)
BALANCE AT BEGINNING OF YEAR $ 118,676 $ 81,159 $ 50,481
NET INCOME 81,036 99,530 89,118
ESOP TAX BENEFIT AND OTHER (2,872) (1,705) (1,524)
196,840 178,984 138,075
DIVIDENDS DECLARED ON COMMON STOCK 60,955 60,308 56,916
BALANCE AT END OF YEAR $ 135,885 $ 118,676 $ 81,159
The accompanying notes are an integral part of these consolidated statements.
</TABLE>
35
<PAGE>
PORTLAND GENERAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
AT DECEMBER 31 1995 1994
<S> <C> <C>
(THOUSANDS OF DOLLARS)
ASSETS
ELECTRIC UTILITY PLANT - ORIGINAL COST
Utility plant (includes Construction Work
in Progress of $33,382 and $148,267) $ 2,754,280 $ 2,563,476
Accumulated depreciation (1,040,014) (958,465)
1,714,266 1,605,011
Capital leases - less amortization of $27,966 and $25,796 9,353 11,523
1,723,619 1,616,534
OTHER PROPERTY AND INVESTMENTS
Leveraged leases 152,666 153,332
Trojan decommissioning trust, at market value 68,774 58,485
Corporate owned life insurance less loans of $26,432 and $21,731 74,574 65,687
Other investments 28,603 40,188
324,617 317,692
CURRENT ASSETS
Cash and cash equivalents 11,919 17,542
Accounts and notes receivable 104,815 91,418
Unbilled and accrued revenues 64,516 162,151
Inventories, at average cost 38,338 31,149
Prepayments and other 16,953 34,455
236,541 336,715
DEFERRED CHARGES
Unamortized regulatory assets
Trojan investment 301,023 402,713
Trojan decommissioning 311,403 338,718
Income taxes recoverable 217,366 217,967
Debt reacquisition costs 29,576 32,245
Energy efficiency programs 77,945 58,894
Other 27,611 47,787
WNP-3 settlement exchange agreement 168,399 173,308
Miscellaneous 29,917 16,698
1,163,240 1,288,330
$ 3,448,017 $ 3,559,271
CAPITALIZATION AND LIABILITIES
CAPITALIZATION
Common stock equity
Common stock, $3.75 par value per share 100,000,000 shares authorized,
51,013,549 and 50,495,492 shares outstanding $ 191,301 $ 189,358
Other paid-in capital - net 574,468 563,915
Unearned compensation (8,506) (13,636)
Retained earnings 135,885 118,676
893,148 858,313
Cumulative preferred stock of subsidiary
Subject to mandatory redemption 40,000 50,000
Not subject to mandatory redemption - 69,704
Long-term debt 890,556 835,814
1,823,704 1,813,831
CURRENT LIABILITIES
Long-term debt and preferred stock due within one year 105,114 81,506
Short-term borrowings 170,248 148,598
Accounts payable and other accruals 133,405 104,254
Accrued interest 16,247 19,915
Dividends payable 16,668 18,109
Accrued taxes 15,151 27,778
456,833 400,160
OTHER
Deferred income taxes 652,846 687,670
Deferred investment tax credits 51,211 56,760
Deferred gain on sale of assets - 118,939
Trojan decommissioning and transition obligation 379,179 396,873
Miscellaneous 84,244 85,038
1,167,480 1,345,280
$ 3,448,017 $ 3,559,271
The accompanying notes are an integral part of these consolidated balance sheets.
</TABLE>
36
<PAGE>
PORTLAND GENERAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31 1995 1994 1993
<S> <C> <C> <C>
(THOUSANDS OF DOLLARS)
CASH PROVIDED (USED) BY -
OPERATIONS:
Net income $ 81,036 $ 99,530 $ 89,118
Adjustment to reconcile net income to net cash
provided by operations:
Depreciation and amortization 102,266 94,217 89,749
Amortization of WNP-3 exchange agreement 4,910 4,695 4,489
Amortization of Trojan investment 24,884 26,738 26,329
Amortization of Trojan decommissioning 13,336 11,220 11,220
Amortization of deferred charges - other (1,777) 2,712 6,713
Deferred income taxes - net (9,555) 37,396 61,086
Other noncash revenues (5,037) (2,570) (1,926)
Regulatory Disallowances 49,567 - -
Changes in working capital:
(Increase) Decrease in receivables (14,687) (22,952) (74,123)
(Increase) Decrease in inventories (7,189) 3,264 15,017
Increase (Decrease) in payables 22,122 (5,105) (29,837)
Other working capital items - net 1,957 (18,104) 13,759
Trojan decommissioning expenditures (10,927) (3,360) (1,625)
Deferred charges - other (9,472) 13,987 (3,331)
Miscellaneous - net 15,108 5,897 17,728
256,542 247,565 224,366
INVESTING ACTIVITIES:
Utility construction - new resources (49,096) (87,537) (28,666)
Utility construction - other (158,198) (131,675) (101,692)
Energy efficiency programs (25,013) (23,745) (18,149)
Rentals received from leveraged leases 21,204 20,886 15,530
Nuclear decommissioning trust deposits (16,598) (11,220) (11,220)
Nuclear decommissioning trust withdrawals 13,521 - -
Discontinued operations - 26,288 2,600
Other (1,465) (14,058) (10,763)
(215,645) (221,061) (152,360)
FINANCING ACTIVITIES:
Short-term borrowings - net 21,650 (10,816) 18,736
Borrowings from Corporate Owned Life Insurance 4,679 21,731 -
Long-term debt issued 147,138 74,631 249,782
Long-term debt retired (69,445) (49,882) (279,986)
Repayment of nonrecourse borrowings for
leveraged leases (18,741) (18,046) (13,095)
Preferred stock retired (79,704) (20,000) (3,600)
Common stock issued 10,299 50,074 9,520
Dividends paid (62,396) (59,856) (56,850)
(46,520) (12,164) (75,493)
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (5,623) 14,340 (3,487)
CASH AND CASH EQUIVALENTS AT THE BEGINNING
OF YEAR 17,542 3,202 6,689
CASH AND CASH EQUIVALENTS AT THE END
OF YEAR $ 11,919 $ 17,542 $ 3,202
Supplemental disclosures of cash flow information
Cash paid during the year:
Interest, net of amounts capitalized $ 66,584 $ 60,852 $ 73,476
Income taxes 86,778 31,539 12,259
The accompanying notes are an integral part of these
consolidated statements.
</TABLE>
37
<PAGE>
PORTLAND GENERAL CORPORATION AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS
NATURE OF OPERATIONS
Portland General Corporation is an electric utility holding company. PGE, an
electric utility company and Portland General's principal operating
subsidiary, accounts for substantially all of Portland General's assets,
revenues and net income.
PGE is engaged in the generation, purchase, transmission, distribution, and
sale of electricity in the State of Oregon. PGE also sells energy to
wholesale customers, predominately utilities throughout the western United
States. 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. At the end of
1995 PGE's service area population was approximately 1.4 million, constituting
approximately 44% of the state's population. At December 31, 1995, PGE served
approximately 650,000 customers.
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CONSOLIDATION PRINCIPLES
The consolidated financial statements include the accounts of 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, PGE's accounting
policies are in accordance with the requirements and the ratemaking practices
of regulatory authorities having jurisdiction.
USE OF ESTIMATES
The preparation of financial statements requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities
at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
RECLASSIFICATIONS
Certain amounts in prior years have been reclassified for comparative
purposes.
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 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.
Depreciation expense as a percent of the related average depreciable plant in
service was approximately 4.0% in 1995, 3.8% in 1994 and 3.9% in 1993.
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 7.16%, 4.65%, and 3.52%
for the years 1995, 1994 and 1993, respectively.
38
<PAGE>
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. Deferred income taxes are
provided for temporary differences between financial and income tax reporting.
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. See Notes 3 and 3A, Income Taxes, for
more details.
INVESTMENT IN LEASES
CWL, a subsidiary of 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, 1995 and
1994, are as follows (thousands of dollars):
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Lease contracts receivable $508,190 $550,620
Nonrecourse debt service (389,619) (434,542)
Net contracts receivable 118,571 116,078
Estimated residual value 84,610 86,202
Less - Unearned income (41,134) (39,391)
Investment in leveraged leases 162,047 162,889
Less - Deferred ITC (9,381) (9,557)
Investment in leases, net $152,666 $153,332
</TABLE>
CASH AND CASH EQUIVALENTS
Highly liquid investments with original maturities of three months or less are
classified as cash equivalents.
DERIVATIVE FINANCIAL INSTRUMENTS
PGE uses financial instruments such as commodity futures, options, forwards
and swaps to hedge against exposures to interest rate, foreign currency and
commodity price risks. The objective of PGE's hedging program is to mitigate
risks due to market fluctuations associated with external financings or the
purchase of natural gas, electricity and related products. Gains and losses
from derivatives that reduce commodity price risks are recognized as fuel or
purchased power expense. Gains and losses on financial instruments that
reduce interest rate risk of future debt issuances are deferred and amortized
over the life of the related debt as an adjustment to interest expense.
Company policy also allows the use of the financial instruments, noted above,
for trading purposes. Gains or losses on financial instruments that are used
for trading purposes, or otherwise do not qualify for hedge accounting, are
recognized in income on a current basis (see Note 7, Other Financial
Instruments, for further information).
WNP-3 SETTLEMENT EXCHANGE AGREEMENT
The 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.
39
<PAGE>
REGULATORY ASSEETS AND LIABILITIES
The Company is subject to the provisions of Statement of Financial Accounting
Standards
No. 71, "Accounting for the Effects of Certain Types of Regulation" (SFAS
No. 71). When the requirements of SFAS No. 71 are met, 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
(regulatory assets). In addition PGE defers, or accrues a liability for,
certain revenues, gains or cost reductions which would otherwise be reflected
in income but through the ratemaking process ultimately will be credited to
customers (regulatory liabilities). These regulatory assets and liabilities
are reflected as deferred charges, accrued revenues and other liabilities
in the financial statements and are amortized over the period in which they
are included in billings to customers.
Regulatory assets and liabilities reflected in the Consolidated Balance
Sheets of December 31 relate to the following:
1995 1994
Regulatory Assets
Power cost deferrals $ - $ 96,216
Trojan-related assets 612,426 741,431
Income taxes recoverable 217,366 217,967
Debt reacquisition and other 57,187 80,032
Energy efficiency programs 77,945 58,894
Total Regulatory Assets $964,924 $1,194,540
Regulatory Liabilities
Deferred gain on sale of assets $ - $ 118,939
Miscellaneous 11,801 19,114
Total Regulatory Liabilities $ 11,801 $ 138,053
As of December 31, 1995, all of the Company's regulatory assets and liabilities
are being reflected in rates charged to customers over periods ranging from
approximately 3 to 28 years. Based on rates in place at year-end 1995, the
Company estimates that it will collect the majority of its regulatory assets
within the next 10 years and substantially all of its regulatory assets
within the next 20 years. During 1995 the Company wrote down and offset
certain regulatory assets and liabilities in conjunction with regulatory
actions taken by the OPUC. For further discussion of the write-down and
elimination of certain regulatory assets in 1995 see Note 13, Regulatory
Matters.
NOTE 2 - EMPLOYEE BENEFITS
PENSION PLAN
Portland General has a non-contributory defined 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 U.S. 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 are included in net
amortization and deferral and are considered in the determination of future
pension expense.
40
<PAGE>
The following table sets forth the Plan's funded status and
amounts recognized in Portland General's financial statements (thousands of
dollars):
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Actuarial present value of benefit obligations:
Accumulated benefit obligation, including
vested benefits of $174,694 and $142,082 $187,977 $154,320
Effect of projected future compensation levels 34,345 35,134
Projected benefit obligation (PBO) 222,322 189,454
Plan assets at fair value 295,516 245,225
Plan assets in excess of PBO 73,194 55,771
Unrecognized net experience gain (71,691) (54,391)
Unrecognized prior service costs amortized
over 13- to 16-year periods 13,180 12,935
Unrecognized net transition asset being
recognized over 18 years (17,618) (19,575)
Pension liability $ (2,935) $ (5,260)
</TABLE>
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
ASSUMPTIONS:
Discount rate used to calculate PBO 7.00% 8.50% 7.25%
Rate of increase in future compensation levels 5.00 6.50 5.25
Long-term rate of return on assets 8.50 8.50 8.50
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
COMPONENTS OF NET PERIODIC PENSION
EXPENSE (THOUSANDS OF DOLLARS):
Service cost $ 5,500 $ 6,199 $ 6,151
Interest cost on PBO 15,722 14,693 14,241
Actual return on plan assets (61,377) 6,011 (48,231)
Net amortization and deferral 37,830 (25,971) 29,839
Net periodic pension expense/(benefit) $ (2,325) $ 932 $ 2,000
</TABLE>
OTHER POST-RETIREMENT BENEFIT PLANS
Portland General accrues for health, medical and life insurance costs during
the employees' service years, in accordance with 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 post-retirement health and life insurance benefits at
December 31, 1995 was $30 million, for which there were $28 million
of assets held in trust. The benefit obligation for post-retirement health
and life insurance benefits at December 31, 1994 was $27 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 at December 31, 1995 and 1994.
DEFERRED COMPENSATION
Portland General provides certain employees with benefits under an unfunded
Management Deferred Compensation Plan (MDCP). Obligations for the MDCP are
$25 million and $21 million at December 31, 1995 and 1994, 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 by 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.
Contributions to the ESOP of $4 million for 1995 and $5 million for each of
1994 and 1993 combined with dividends on unallocated shares of $1 million
for each of 1995 and 1994 and
41
<PAGE>
$2 million for 1993 were used to pay principal 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.
NOTE 3 - 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):
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Income Tax Expense:
Currently payable
Federal $ 77,845 $ 41,833 $ 7,874
State 9,230 7,072 (4,885)
87,075 48,905 2,989
Deferred income taxes
Federal (15,359) 22,269 63,534
State (6,741) 4,472 9,355
(22,100) 26,741 72,889
Investment tax credit adjustments (5,725) (4,145) (4,356)
$ 59,250 $ 71,501 $ 71,522
Provision Allocated to:
Operations $ 89,064 $ 71,878 $ 69,770
Other income and deductions (29,814) (377) 1,752
$ 59,250 $ 71,501 $ 71,522
Effective Tax Rate Computation:
Computed tax based on
statutory federal income
tax rates applied to
income before income taxes $ 49,101 $ 57,596 $ 56,224
Increases (Decreases) resulting from:
Flow through depreciation 6,715 8,283 10,748
Regulatory disallowance 3,470 - -
State and local taxes - net 4,857 8,953 3,288
State of Oregon refund (3,668) - -
Investment tax credits (5,725) (4,145) (4,356)
Excess deferred taxes (700) (767) (3,419)
USDOE nuclear fuel assessment - - 5,075
Preferred dividend requirement 3,155 3,526 3,935
Other 2,045 (1,945) 27
$ 59,250 $ 71,501 $ 71,522
Effective tax rate 42.2% 43.5% 44.5%
</TABLE>
42
<PAGE>
As of December 31, 1995 and 1994, the significant components of the Company's
deferred income tax assets and liabilities were as follows (thousands of
dollars):
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
DEFERRED TAX ASSETS
Plant-in-service $ 86,721 $ 72,012
Deferred gain on sale of assets - 47,134
Other 60,245 51,924
146,966 171,070
DEFERRED TAX LIABILITIES
Plant-in-service (448,049) (444,546)
Energy efficiency programs (30,314) (23,024)
Trojan abandonment (54,335) (80,944)
WNP-3 exchange contract (60,489) (68,698)
Replacement power costs - (38,136)
Leasing (142,606) (146,468)
Other (43,470) (40,829)
(779,263) (842,645)
Less current deferred taxes (414) 4,040
Less valuation allowance (20,135) (20,135)
Total $(652,846) $(687,670)
</TABLE>
Portland General has recorded deferred
tax assets and liabilities for all temporary differences between the financial
statement and tax bases of assets and liabilities. Valuation allowances
represent capital loss carryforwards that presently
cannot be offset with capital gains.
Portland General reached a settlement with the IRS on all issues regarding
the 1985-1990 tax returns, including PGE's WNP-3 abandonment loss
deduction. During 1996, Portland General will be filing amended state
returns to reflect
appropriate audit adjustments. The settlement did not have a material
adverse impact on the results of current operations or cash flows of
Portland General.
43
<PAGE>
NOTE 4 - COMMON AND PREFERRED STOCK
COMMON AND PREFERRED STOCK
<TABLE>
<CAPTION>
CUMULATIVE PREFERRED
COMMON STOCK OF SUBSIDIARY Other
Number $3.75 Par Number $100 Par No-Par Paid-in Unearned
OF SHARES VALUE OF SHARES VALUE VALUE CAPITAL COMPENSATION*
<S> <C> <C> <C> <C> <C> <C> <C>
(thousands of dollars
except share amounts)
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)
Sales of stock 539,057 2,022 - - - 9,355 -
Redemption of stock (21,000) (79) (797,040) (79,704) - 2,778 -
Repayment of ESOP loan
and other - - - - - (1,580) 5,130
December 31, 1995 51,013,549 $191,301 500,000 $ 20,000 $30,000 $574,468 $ (8,506)
</TABLE>
*See the discussion of stock compensation plans below and Note 2, Employee
Benefits, for a description of the ESOP.
COMMON STOCK
As of December 31, 1995, Portland General had reserved 2,493,351 and 17,533
authorized but unissued common shares for issuance under its dividend
reinvestment plan and employee stock purchase plan, respectively.
CUMULATIVE PREFERRED STOCK
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. 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 $101 per share up to
April 14, 1996 and at reduced amounts thereafter.
44
<PAGE>
<TABLE>
<CAPTION>
PGE's cumulative preferred stock consisted of:
<S> <C> <C>
At December 31, 1995 1994
(thousands of dollars)
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 200,000 and 300,000 shares 20,000 30,000
outstanding
Current sinking fund (10,000) (10,000)
40,000 50,000
Not subject to mandatory redemption, $100 par
value
7.95% Series, 298,045 shares outstanding - 29,804
7.88% Series, 199,575 shares outstanding - 19,958
8.20% Series, 199,420 shares outstanding - 19,942
- 69,704
$40,000 $119,704
</TABLE>
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.
COMMON DIVIDEND RESTRICTION OF SUBSIDIARY
PGE is restricted from paying dividends or making other distributions to
Portland General without prior OPUC 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, 1995, PGE's common stock equity capital
was 48% of its total capitalization.
STOCK COMPENSATION PLANS
Portland General has a plan under which 2.3 million shares of Portland General
common stock are authorized for stock-based incentives including a stock
option plan and restricted common shares. At December 31, 1995, 1.2 million
common shares were available for issuance under the plan. 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. Stock option plan
activity is as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
Option Price
Options Per Share
December 31, 1992 838,750 $14-$19
Granted 65,300 $17.125-$22.25
Canceled (47,250) $14-$19
December 31, 1993 856,800 $14-$22.25
Granted 32,000 $13-$18.125
Exercised (10,000) $15.75
Canceled (43,500) $14-$22.25
December 31, 1994 835,300 $13-$22.25
Granted 88,600 $17-$25
Exercised (114,400) $14.75-$18.125
Canceled (17,000) $14-$20
December 31, 1995 792,500 $13-$25
Stock options exercisable
at December 31, 1995 362,600 $13-$15.75
</TABLE>
During 1995, Portland General issued 18,839 (net of cancellations)
restricted common shares to officers and selected employees of
Portland General and PGE. As of December 31, 1995, 139,721 restricted
common shares under the plan were outstanding for officers and
employees.
45
<PAGE>
NOTE 5 - SHORT-TERM BORROWINGS
At December 31, 1995, Portland General had total committed lines of
credit of $215 million. Portland General has a $15 million committed
facility expiring in July 1996. PGE has a committed facility of $200
million expiring in July 2000. These lines of credit have annual fees
of 0.10% 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, 1995, 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.
Short-term borrowings and related interest rates were as follows:
<TABLE>
<CAPTION>
1995 1994 1993
(thousands of dollars)
<S> <C> <C> <C>
AS OF YEAR-END:
Aggregate short-term debt outstanding
Commercial paper $170,248 $148,598 $159,414
Weighted average interest rate*
Commercial paper 6.1% 6.2% 3.5%
Unused committed lines of credit $215,000 $215,000 $240,000
FOR THE YEAR ENDED:
Average daily amounts of short-term
debt outstanding
Bank loans $ 206 $ 1,273 $ 10,949
Commercial paper 111,366 138,718 123,032
Weighted daily average interest rate*
Bank loans 6.5% 4.3% 3.6%
Commercial paper 6.3 4.5 3.5
Maximum amount outstanding
during the year $170,248 $174,082 $171,208
</TABLE>
* Interest rates exclude the effect of commitment fees, facility
fees and other financing fees.
46
<PAGE>
NOTE 6 - 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.
In 1995, PGE issued $75 million in 8.25 Junior Subordinated
Deferrable Interest Debentures, listed below, which pay interest quarterly
and are traded on the NYSE. PGE may redeem the debentures at its option
beginning on October 1, 2000 at a redemption price equal to 100% of the
principal amount plus any accrued interest.
<TABLE>
<CAPTION>
<S> <C> <C>
Schedule of long-term debt at December 31, 1995 1994
(thousands of dollars)
First Mortgage Bonds
Maturing 1995 through 2000
4.70% Series due March 1, 1995 $3,045
5.875% Series due June 1, 1996 5,066 5,216
6.60% Series due October 1, 1997 15,363 15,363
Medium-term notes 5.65% - 9.27% 210,000 251,000
Maturing 2001 - 2007 6.47% - 9.07% 260,595 210,845
Maturing 2021 - 2023 7.75% - 9.46% 195,000 195,000
686,024 680,469
Pollution Control Bonds
Port of Morrow, Oregon, variable rate
(Average 3.8% for 1995), due 2013 23,600 23,600
City of Forsyth, Montana, variable rate
(Average variable rates 3.8% - 4.0% for 1995),
due 2013-2016 118,800 118,800
Amount held by trustee (8,152) (8,355)
Port of St. Helens, Oregon, variable rate due 2010
and 2014 (Average variable rates 3.8% - 4.0% for 1995) 51,600 51,600
185,848 185,645
Other
8.25% Junior Subordinated Deferrable Interest 75,000
Debentures, Series A, due 2035 -
Portland General medium-term notes 8.09% due 30,000 30,000
1996
Capital lease obligations 9,353 11,523
Other (555) (317)
113,798 41,206
985,670 907,320
Long-term debt due within one year (95,114) (71,506)
Total long-term debt $890,556 $835,814
</TABLE>
The following principal amounts of long-term debt become due through early
redemptions and maturities (thousands of dollars):
<TABLE>
<CAPTION>
1996 1997 1998 1999 2000
<S> <C> <C> <C> <C> <C>
Maturities:
PGC (Parent only) $30,000 $ - $ - $ - $ -
PGE 65,114 86,985 64,745 45,383 25,000
$95,114 $86,985 $64,745 $45,383 $25,000
</TABLE>
47
<PAGE>
NOTE 7 - OTHER FINANCIAL INSTRUMENTS
HEDGING ACTIVITIES
COMMODITY - Company policy allows
the use of financial instruments such as
commodity futures, options and swaps to hedge the price
of natural gas and electricity and reduce the Company's
exposure to market fluctuations in these commodities.
In 1995 transactions
consisted primarily of fixed for floating swap agreements
where the Company receives or makes payments based on the
differential between a specified price and an index reference
price of natural gas or electricity.
Swap contracts generally require monthly cash settlements
over the term of the contract. The Company is exposed to
credit risk in the event of non-performance by the
counterparties and has established guidelines to mitigate this risk.
At December 31, 1995, the Company had outstanding swap
and option contracts for the net purchases of 4.6 billion
cubic feet of natural gas over the following 14
months. Electric swap and option contracts totaled
256,000 MWh of electricity over the following nine
months. Recognition of gains or losses on the hedging instruments
is deferred until the underlying physical transaction occurs. See
the discussion in Note 8, Fair Value of
Financial Instruments, for the estimated fair value of
these contracts.
INTEREST RATE - In November 1994 PGE entered into two 10-year forward
interest rate swap agreements, each with a notational
amount of $25 million to hedge the future issuance costs of debt.
PGE settled the swap agreements
for approximately $5 million in 1995 concurrently with the
issuance of $75 million of long-term debt. The
settlement amount was deferred and will be amortized over
10 years. This amortization does not materially
affect the Company's weighted average borrowing rate.
TRADING ACTIVITIES
In addition to hedging activities, Company policy allows the use of the
financial instruments, noted above, for trading purposes in support
of Company operations. Gains or losses on financial instruments that do not
qualify as hedges are recognized in income on a current basis. During 1995
no trading activity took place.
NOTE 8 - 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 SWAPS
The fair value of the Company's 1994 interest rate swap agreements was based
on the estimated termination value at December 31, 1994.
NATURAL GAS AND ELECTRICITY SWAPS
The fair value of natural gas and electricity swaps 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.
48
<PAGE>
The estimated fair values of financial instruments are as
follows (thousands of dollars):
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C> <C> <C>
Carrying Fair Carrying Fair
Amount Value Amount Value
Preferred stock subject to
mandatory redemption $ 50,000 $ 52,900 $ 60,000 $ 60,000
Long-term debt
PGC (Parent only) $ 30,000 $ 30,531 $ 30,000 $ 29,887
PGE 946,872 994,996 866,114 824,211
$976,872 $1,025,527 $896,114 $854,098
Interest rate swaps in net
(payable) position - - - (401)
Commodity swaps in net
(payable) position:
Natural gas - (261) - (598)
Electricity - (335) - -
</TABLE>
NOTE 9 - COMMITMENTS
NATURAL GAS AGREEMENTS
PGE has long-term agreements for transmission of natural
gas from domestic and Canadian sources to natural gas-
fired generating facilities. The agreements provide firm
pipeline capacity. Under the terms of these agreements,
PGE is committed to paying capacity charges of
approximately $15 million annually in 1996 through 1999,
and $149 million over the remaining years of the
contracts which expire at varying dates from 1998 to
2015. PGE has the right to assign unused capacity to
other parties.
RAILROAD SERVICE AGREEMENT
PGE has a railroad service agreement to deliver coal from
Wyoming to Boardman and is required to
contribute $5 million over the 4 years remaining in the
contract.
PURCHASE COMMITMENTS
Other purchase commitments outstanding (principally
construction at PGE) totaled approximately $61 million at
December 31, 1995. Cancellation of these purchase
agreements could result in cancellation charges.
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.
49
<PAGE>
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, 1995 $210,322 $128,360 $183,135 $189,540 $ 38,045
PGE's current share of:
Output 12.0% 13.9% 18.7% 21.8% 100%
Net capability (megawatts) 144 156 156 175 27
Annual cost, including debt service:
service:
1995 $4,900 $3,900 $4,700 $5,700 $4,300
1994 4,500 3,400 4,800 6,600 4,600
1993 4,000 3,800 5,400 5,500 4,800
Contract expiration date 2011 2005 2009 2018 2017
</TABLE>
PGE's share of debt service costs, excluding interest,
will be approximately $9 million for 1996, $4 million annually for 1997 and
1998 and $6 million annually for 1999 and 2000. The minimum payments
through the remainder of the contracts are estimated to total $93 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 $37 million in 1996,
$27 million in 1997, and $26 million in both 1998 and 1999 and $21 million
in 2000. After that date, capacity contract charges will average $19 million
annually until 2016.
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 $21 million for 1995, and $22 million annually for
1994 and 1993. PGE has capitalized its combustion
turbine leases. However, these leases are considered
operating leases for ratemaking purposes.
Future minimum lease payments under non-cancelable leases
are as follows (thousands of dollars):
<TABLE>
<CAPTION>
YEAR ENDING OPERATING LEASES
DECEMBER 31 CAPITAL LEASES (NET OF SUBLEASE RENTALS) TOTAL
<S> <C> <C> <C>
1996 $ 3,016 $ 19,127 $ 22,143
1997 3,016 18,326 21,342
1998 3,016 18,403 21,419
1999 1,388 19,454 20,842
2000 - 19,768 19,768
Remainder - 152,756 152,756
Total 10,436 $247,834 $258,270
Imputed Interest (1,083)
Present Value of
Minimum Future
Net Lease Payments $ 9,353
</TABLE>
Included in the future minimum operating lease payments
schedule above is approximately $129 million for Portland General's
and PGE's headquarters complex.
50
<PAGE>
NOTE 10 - JOINTLY OWNED PLANT
At December 31, 1995, 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 $370,721 $176,365
Colstrip 3&4 Colstrip, MT Coal 1,440 20.0 451,176 189,799
Centralia Centralia, WA Coal 1,310 2.5 9,649 5,665
</TABLE>
The dollar amounts in the table above represent PGE's
share of each jointly owned plant. Each participant in
the above generating plants has provided its own
financing. PGE's share of the direct expenses of these
plants is included in the corresponding operating
expenses on Portland General's and PGE's consolidated
income statements.
NOTE 11 - TROJAN NUCLEAR PLANT
PLANT SHUTDOWN AND TRANSITION COSTS - PGE is a 67.5%
owner of Trojan. In early 1993, PGE ceased commercial
operation of the nuclear plant. Since plant closure, PGE
has committed itself to a safe and economical transition
toward a decommissioned plant. Remaining transition
costs associated with operating and maintaining the
spent fuel pool and securing the plant until
dismantlement begins in 1998 are estimated at $37 million
and will be paid from current operating funds.
DECOMMISSIONING - In 1995, PGE submitted a
decommissioning plan to the NRC and EFSC. The plan
estimates PGE's cost to decommission Trojan at $358
million, reflected in nominal dollars (actual dollars
expected to be spent in each year). The plan represents
a site-specific decommissioning estimate performed for
Trojan by an engineering firm experienced in estimating
the cost of decommissioning nuclear plants. This
estimate assumes that the majority of decommissioning
activities will occur between 1997 and 2001, while fuel
management costs extend through the year 2018. Final
site restoration activities are anticipated to begin in
2018 after PGE completes shipment of spent fuel to a
USDOE facility (see the Nuclear Fuel Disposal discussion
below). The cost estimate is adjusted periodically due
to refinement of the timing and scope of certain
dismantlement activities. Stated in 1995 dollars, the
current decommissioning cost estimate is $246 million.
Until plan approval, PGE is prohibited from initiating
any major decommissioning activities. However,
decommissioning planning and licensing activities are
continuing. PGE anticipates approval by the NRC and EFSC
of its decommissioning proposal during 1996.
PGE is collecting $14 million annually through 2011 from
customers for decommissioning costs. These amounts are
deposited in an external trust fund which is limited to
reimbursing PGE for activities covered in Trojan's
decommissioning plan. Funds were withdrawn during 1995
to cover the costs of large component removal. Trojan
decommissioning trust assets are invested primarily in
investment-grade, tax-exempt and U.S. Treasury bonds. Year-end
balances are valued at market.
51
<PAGE>
Earnings on the trust are used to reduce the amount of
decommissioning costs to be collected from customers.
PGE expects any future changes in estimated
decommissioning costs to be incorporated in future
revenues to be collected from customers.
INVESTMENT RECOVERY - The OPUC issued an order in March
1995 authorizing PGE to recover all of the estimated
costs of decommissioning Trojan and 87% of the remaining
investment in the plant. Amounts are to be collected
over Trojan's original license period ending in 2011. The
disallowed portion of the Trojan investment was comprised
of $17 million of post-1991 capital expenditures,
primarily related to steam generator repair activities,
and $20 million of general Trojan investment. As a
result of this disallowance, PGE recorded an after-tax
charge to income of $37 million.
The OPUC's order and the agency's authority to grant
recovery of the Trojan investment under Oregon law are
being challenged in state courts. Management believes
that the authorized recovery of the Trojan investment and
decommissioning costs will be upheld and that these legal
challenges will not have a material adverse impact on the
results of operations or financial condition of the
Company for any future reporting period.
NUCLEAR FUEL DISPOSAL AND CLEANUP OF FEDERAL PLANTS -
PGE contracted with the USDOE for permanent disposal of
its spent nuclear fuel in federal facilities at a cost of
.1 cent per net kilowatt-hour sold at Trojan which the
Company paid during the period the plant operated.
Significant delays are expected in the USDOE acceptance
schedule of spent fuel from domestic utilities. The
federal repository, which was originally scheduled to
begin operations in 1998, is now estimated to commence
operations no earlier than 2010. This may create
difficulties for PGE in disposing of its high-level
radioactive waste by 2018. However, federal legislation
has been introduced which, if passed, would require USDOE
to provide interim storage for high level waste until a
permanent site is established. PGE intends to build an
interim storage facility at Trojan to house the nuclear
fuel until a federal site is available.
The Energy Policy Act of 1992 provided for the creation
of a Decontamination and Decommissioning Fund to finance
the cleanup of USDOE gas diffusion plants. Funding
comes from domestic nuclear utilities and the federal
government. Each utility contributes 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
million. Amounts are funded over 15 years beginning with
the USDOE's fiscal year 1993. Since enactment, PGE has
made the first four of the 15 annual payments with the
first payment made in September 1993.
NUCLEAR INSURANCE - The Price-Anderson Amendment of 1988
limits public liability claims that could arise from a
nuclear incident and provides for loss sharing among all
owners of nuclear reactor licenses. Because Trojan has
been permanently defueled, the NRC has exempted PGE from
participation in the secondary insurance pool covering
losses in excess of $200 million at other nuclear plants.
In addition, the NRC has reduced the required primary
nuclear insurance coverage for Trojan from $200 million
to $100 million following a 3 year cool-down period of
the nuclear fuel that is still on-site. The NRC has
allowed PGE to self-insure for on-site decontamination.
PGE continues to carry non-contamination property
insurance on the Trojan plant at the $155 million level.
52
<PAGE>
NOTE 12 - WNP-3 SETTLEMENT EXCHANGE AGREEMENT
PGE is selling energy received under a WNP-3 Settlement Exchange Agreement
(WSA) to 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 MW 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 13 - REGULATORY MATTERS
SETTLEMENT REACHED - Pursuant to the agreement adopted by the OPUC in the
order discussed below, the Marion County Circuit Court approved PGE's request
for dismissal of its dispute with the Commission regarding the allocation of
the gain on a sale of a portion of Boardman and the Intertie in PGE V. RONALD
EACHUS, MYRON KATZ, NANCY RYLES AND THE OREGON PUBLIC UTILITY COMMISSION.
1995 Rate Orders - On March 29, 1995 the OPUC issued an order on PGE's 1993
general rate request. The order, based on a two-year test period, authorized
a single average rate increase of 5% representing additional revenues of $51
million in 1995 and $52 million in 1996. The order established PGE's return on
equity at
11.6% for both 1995 and 1996. This is a decrease from the previously
authorized 12.5%. The order authorized PGE to recover all of the estimated
Trojan decommissioning costs and 87% of its remaining investment in Trojan
which will be collected over Trojan's original license period ending in 2011.
As a result of the disallowance of 13% of PGE's investment in Trojan, the
Company recorded a $37 million after-tax charge to income. The order also
adopted a mechanism to decouple short-term profits from retail kilowatt-hour
sales. For further information regarding the Trojan disallowance see Note 11,
Trojan Nuclear Plant.
On November 21, 1995 the Commission issued an order granting PGE an average
2.7% rate increase to recover the capital and fixed costs associated with
Coyote Springs and BPA's October 1995 price increase. The order also
addressed recovery of PGE deferred power costs and proposed elimination of
certain regulatory assets.
The order authorized full recovery of $11 million of power costs deferred from
January through March 1995 and allowed recovery of only $9 million of the $50
million of power costs deferred from July 1993 through March 1994. The order
also authorized the immediate recovery of approximately $29 million in
incentive revenues associated with prior years' achievements of the Company's
energy efficiency programs. PGE recorded a $13 million after-tax charge to
income based on the order.
The order implemented the Company's proposal to offset certain regulatory
assets, including the uncollected balance of all power cost deferrals,
incentive revenues and a portion of the remaining Trojan investment, against
PGE's unamortized gain on the prior sale of a portion of Boardman. The offset
allowed for recovery of the deferred power costs and incentive revenues
discussed above, without increasing customer rates, while eliminating
approximately $117 million of regulatory assets and liabilities from the
Company's balance sheets.
An application for reconsideration of the November 1995 order was filed with
the OPUC by a party to the proceeding. A decision from the OPUC is pending.
53
<PAGE>
NOTE 14 - LEGAL MATTERS
BONNEVILLE PACIFIC CLASS ACTION AND LAWSUIT
In April 1992 legal action was filed 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. Following his appointment, the Bonneville Pacific
bankruptcy trustee, on behalf of Bonneville Pacific, filed numerous amendments
to the complaint. The complaint now 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. The Court has
rejected the Trustee's previously filed damage study which is expected to be
revised and refiled.
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 has filed complaints seeking approximately $228 million in damages
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 an
interest in and made loans to Bonneville Pacific.
54
<PAGE>
QUARTERLY COMPARISON FOR 1995 AND 1994 (UNAUDITED)
PORTLAND GENERAL CORPORATION
<TABLE>
<CAPTION>
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
(THOUSANDS OF DOLLARS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
1995
Operating revenues $259,177 $219,892 $222,612 $281,901
Net operating income 49,553 47,179 40,266 58,578
Net income/(loss) (1,954) 32,403 14,181 36,406
Common stock
Average shares outstanding 50,591,449 50,697,040 50,798,082 50,976,781
Earnings/(loss) per
average share{1} $(.04) $.64 $.28 $.71
1994
Operating revenues $278,014 $202,110 $214,180 $265,105
Net operating income 55,920 30,019 27,525 40,832
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
{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.
</TABLE>
PORTLAND GENERAL ELECTRIC COMPANY
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
(THOUSANDS OF DOLLARS)
1995
Operating revenues $258,891 $218,476 $222,240 $282,021
Net operating income 49,388 46,499 39,902 59,397
Net income/(loss) 640 34,800 16,789 40,558
Income available for
common stock (1,943) 32,383 14,409 38,294
1994
Operating revenues $277,672 $201,773 $213,897 $265,613
Net operating income 53,555 27,734 26,342 45,577
Net income 41,187 18,540 14,807 31,584
Income available for
common stock 38,199 15,894 12,224 29,001
55
<PAGE>
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
Information for Items 10-13 is incorporated by reference to Portland
General's definitive proxy statement to be filed on or about March 27, 1996.
Executive officers of Portland General are listed on page 23 of this report.
PORTLAND GENERAL ELECTRIC COMPANY
Information for Items 10-13 is incorporated by reference to Portland
General's definitive proxy statement to be filed on or about March 27, 1996.
Executive officers of Portland General Electric are listed on page 23 of this
report.
Part IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
ON FORM 8-K
PORTLAND GENERAL CORPORATION AND PORTLAND GENERAL ELECTRIC COMPANY
(a) INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
PAGE NO.
PGC PGE
FINANCIAL STATEMENTS
Report of Independent Public Accountants 34 65
Consolidated Statements of Income for each of the three years
in the period ended December 31, 1995 35 66
Consolidated Statements of Retained Earnings for each of the
the three years in the period ended December 31, 1995 35 66
Consolidated Balance Sheets at December 31, 1995 and 1994 36 67
Consolidated Statement of Cash Flows for each of the three
years in the period ended December 31, 1995 37 68
Notes to Financial Statements 38 69
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 59 of this report.
(b) REPORT ON FORM 8-K
PGC PGE
November 21, 1995 - Item 5. Other Events: X X
The OPUC issued an order on PGE's August 1995 consolidated
filing.
56
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Portland General Corporation
February 29, 1996 By /S/ KEN L. HARRISON
Ken L. Harrison
Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Chairman of the Board and
/S/ KEN L. HARRISON Chief Executive Officer February 29, 1996
Ken L. Harrison
Senior Vice President,
/S/ JOSEPH M. HIRKO Chief Financial Officer February 29, 1996
Joseph M. Hirko
*Gwyneth Gamble Booth
*Peter J. Brix
*Carolyn S. Chambers
*John W. Creighton, Jr.
*Ken L. Harrison
*Jerry E. Hudson Directors February 29, 1996
*Warren E. McCain
*Jerome J. Meyer
*Randolph L. Miller
*Bruce G. Willison
*By /S/ JOSEPH E. FELTZ
(Joseph E. Feltz, Attorney-in-Fact)
57
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Portland General Electric Company
February 29, 1996 By /S/ KEN L. HARRISON
Ken L. Harrison
Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Chairman of the Board and
/S/ KEN L. HARRISON Chief Executive Officer February 29, 1996
Ken L. Harrison
Senior Vice President
/S/ JOSEPH M. HIRKO Chief Financial Officer February 29, 1996
Joseph M. Hirko
*Gwyneth Gamble Booth
*Peter J. Brix
*Carolyn S. Chambers
*John W. Creighton, Jr.
*Ken L. Harrison
*Jerry E. Hudson Directors February 29, 1996
*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>
PORTLAND GENERAL CORPORATION AND SUBSIDIARIES
EXHIBIT INDEX
<TABLE> <S> <C>
<CAPTION>
NUMBER EXHIBIT PGC PGE
(3) Articles of Incorporation and bylaws
* 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
year ended December 31, 1991, Exhibit (3)]. X
(4) Instruments defining the rights of security holders,
including indentures
* Portland General Electric Company Indenture of Mortgage
and Deed of Trust dated July 1, 1945;
* Fifteenth Supplemental Indenture, dated June 1, 1966;
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
* Fortieth Supplemental Indenture, dated October 1,
1990 [Form 10-K for the fiscal year ended December 31,
1990, Exhibit (4)]. X X
</TABLE>
59
<PAGE>
PORTLAND GENERAL CORPORATION AND SUBSIDIARIES
EXHIBIT INDEX
<TABLE>
<CAPTION>
NUMBER EXHIBIT PGC PGE
(4) * Forty-First Supplemental Indenture dated December 31,
Cont. 1991 [Form 10-K for the fiscal year ended December 31,
1991, Exhibit (4)]. X X
* 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
* Forty-Fifth Supplemental Indenture dated May 1, 1995
[Form 10-Q for the quarter ended June 30, 1995,
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) Material Contracts
* 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
<S> <C>
</TABLE>
60
<PAGE>
PORTLAND GENERAL CORPORATION AND SUBSIDIARIES
EXHIBIT INDEX
<TABLE>
<CAPTION>
NUMBER EXHIBIT PGC PGE
(10) * Lease Agreement, dated December 30, 1985 [Form 10-K
Cont. 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
<S> <C>
</TABLE>
61
<PAGE>
PORTLAND GENERAL CORPORATION AND SUBSIDIARIES
EXHIBIT INDEX
<TABLE>
<CAPTION>
NUMBER EXHIBIT PGC PGE
(10) * Portland General Corporation Outside Directors Life
Cont. 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
EXECUTIVE COMPENSATION PLANS AND ARRANGEMENTS
Portland General Corporation Management Deferred
Compensation Plan, 1994 Restatement dated October 1,
1994 (filed herewith). X X
Portland General Corporation Management Deferred
Compensation Plan, Amendment No. 1 dated April 1,
1995 (filed herewith). X X
* Portland General Corporation Senior Officers Life
Insurance Benefit Plan, Amendment No. 2 dated
December 3, 1989 [Form 10-K for the fiscal year ended
December 31, 1989, Exhibit (10)]. X X
* Portland General Corporation Annual Incentive Master Plan
[Form 10-K for the fiscal year ended December 31, 1987,
Exhibit (10)]. X X
* Portland General Corporation Annual Incentive Master Plan,
Amendments No. 1 and No. 2 dated March 5, 1990 [Form
10-K for the fiscal year ended December 31, 1989, Exhibit
(10)]. X 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
<S> <C>
</TABLE>
62
<PAGE>
PORTLAND GENERAL CORPORATION AND SUBSIDIARIES
EXHIBIT INDEX
<TABLE>
<CAPTION>
NUMBER EXHIBIT PGC PGE
(10) * Portland General Corporation Supplemental Executive
Cont. Retirement Plan, Amendment No. 1 dated January 1, 1991,
[Form 10-K for the fiscal year ended December 31, 1991, X X
Exhibit (10)].
* Change in Control Severance Agreement, effective October 1,
1994 [Form 10-K for the fiscal year ended December 31,
1994, Exhibit 10(a)]. X X
* Portland General Corporation Amended and Restated 1990
Long-Term Incentive Master Plan, amended July 1993
[Form 10-K for the fiscal year ended December 31, 1993,
Exhibit (10)]. X
* Portland General Corporation 1990 Long-Term Incentive
Master Plan, Amendment No. 1 dated February 8, 1994
[Form 10-K for the fiscal year ended December 31, 1993,
Exhibit (10)]. X
(23) Consents of experts and counsel
Portland General Corporation Consent of Independent
Public Accountants (filed herewith). X
Portland General Electric Company Consent of Independent
Public Accountants (filed herewith). X
(24) Power of attorney
Portland General Corporation Power of Attorney
(filed herewith). X
Portland General Electric Company Power of Attorney
(filed herewith). X
(99) Additional exhibits
Form 11-K relating to Employee Stock Purchase Plan of
Portland General Corporation (filed herewith). X
* Incorporated by reference as indicated.
<S> <C>
</TABLE>
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
Senior Vice President
Chief Financial Officer
Portland General Corporation
121 SW Salmon Street
Portland, OR 97204
63
<PAGE>
APPENDIX
PORTLAND GENERAL ELECTRIC COMPANY
TABLE OF CONTENTS
PART II
Page
Item 8. Financial Statements and Notes ............................. 66
64
<PAGE>
MANAGEMENT'S STATEMENT OF RESPONSIBILITY
PGE's management is responsible for the preparation and presentation of the
consolidated financial statements in this report. Management is also
responsible for the integrity and objectivity of the statements. Generally
accepted accounting principles have been used to prepare the statements, and
in certain cases informed estimates have been used that are based on the best
judgment of management.
Management has established, and maintains, a system of internal accounting
controls. The controls provide reasonable assurance that assets are
safeguarded, transactions receive appropriate authorization, and financial
records are reliable. Accounting controls are supported by written policies
and procedures, an operations planning and budget process designed to achieve
corporate objectives, and internal audits of operating activities.
PGE's Board of Directors includes an Audit Committee composed entirely of
outside directors. It reviews with management, internal auditors and
independent auditors the adequacy of internal controls, financial reporting,
and other audit matters.
Arthur Andersen 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
Senior Vice President,
Chief Financial Officer
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders of
Portland General Electric Company:
We have audited the accompanying consolidated balance sheets of Portland
General Electric Company and subsidiaries as of December 31, 1995 and 1994,
and the related consolidated statements of income, retained earnings and cash
flows for each of the three years in the period ended December 31, 1995.
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.
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, 1995 and 1994, and the results of
their operations and their cash flows for each of the three years in the
period ended December 31, 1995 in conformity with generally accepted
accounting principles.
Arthur Andersen LLP
Portland, Oregon,
January 24, 1996
65
<PAGE>
PORTLAND GENERAL ELECTRIC COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31 1995 1994 1993
<S> <C> <C> <C>
(THOUSANDS OF DOLLARS)
OPERATING REVENUES $ 981,628 $ 958,955 $ 944,531
OPERATING EXPENSES
Purchased power and fuel 293,589 347,125 311,713
Production and distribution 63,841 61,891 73,576
Maintenance and repairs 47,532 47,389 55,320
Administrative and other 106,128 97,987 98,408
Depreciation and amortization 134,340 124,003 121,898
Taxes other than income taxes 51,489 52,038 55,676
Income taxes 89,523 75,314 73,740
786,442 805,747 790,331
NET OPERATING INCOME 195,186 153,208 154,200
OTHER INCOME (DEDUCTIONS)
Regulatory disallowances - net of income taxes of $25,542 (49,567) - -
Allowance for equity funds used during construction 3,257 271 -
Other 8,415 15,500 11,771
Income taxes 4,272 377 (1,752)
(33,623) 16,148 10,019
INTEREST CHARGES
Interest on long-term debt and other 69,667 61,493 61,817
Interest on short-term borrowings 6,917 5,788 3,443
Allowance for borrowed funds used during construction (7,808) (4,043) (785)
68,776 63,238 64,475
NET INCOME 92,787 106,118 99,744
PREFERRED DIVIDEND REQUIREMENT 9,644 10,800 12,046
INCOME AVAILABLE FOR COMMON STOCK $ 83,143 $ 95,318 $ 87,698
PORTLAND GENERAL ELECTRIC COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
FOR THE YEARS ENDED DECEMBER 31 1995 1994 1993
(THOUSANDS OF DOLLARS)
BALANCE AT BEGINNING OF YEAR $ 216,468 $ 179,297 $ 165,949
NET INCOME 92,787 106,118 99,744
ESOP TAX BENEFIT AND OTHER (3,570) (1,705) (1,524)
305,685 283,710 264,169
DIVIDENDS DECLARED
Common stock 50,456 56,442 72,826
Preferred stock 8,947 10,800 12,046
59,403 67,242 84,872
BALANCE AT END OF YEAR $ 246,282 $ 216,468 $ 179,297
The accompanying notes are an integral part of these consolidated statements.
</TABLE>
66
<PAGE>
PORTLAND GENERAL ELECTRIC COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
AT DECEMBER 31 1995 1994
<S> <C> <C>
(THOUSANDS OF DOLLARS)
ASSETS
ELECTRIC UTILITY PLANT - ORIGINAL COST
Utility plant (includes Construction Work in
Progress of $33,382 and $148,267) $ 2,754,280 $ 2,563,476
Accumulated depreciation (1,040,014) (958,465)
1,714,266 1,605,011
Capital leases - less amortization of 9,353 11,523
$27,966 and $25,796
1,723,619 1,616,534
OTHER PROPERTY AND INVESTMENTS
Trojan decommissioning trust, at market 68,774 58,485
value
Corporate owned life insurance, less loans 44,635 40,034
of $ 26,432 and $21,731
Other investments 24,943 26,074
138,352 124,593
CURRENT ASSETS
Cash and cash equivalents 2,241 9,590
Accounts and notes receivable 102,592 91,672
Unbilled and accrued revenues 64,516 162,151
Inventories, at average cost 38,338 31,149
Prepayments and other 15,619 33,148
223,306 327,710
DEFERRED CHARGES
Unamortized regulatory assets
Trojan investment 301,023 402,713
Trojan decommissioning 311,403 338,718
Income taxes recoverable 217,366 217,967
Debt reacquisition costs 29,576 32,245
Energy efficiency programs 77,945 58,894
Other 27,611 47,787
WNP-3 settlement exchange agreement 168,399 173,308
Miscellaneous 26,997 13,682
1,160,320 1,285,314
$ 3,245,597 $ 3,354,151
CAPITALIZATION AND LIABILITIES
CAPITALIZATION
Common stock equity
Common stock, $3.75 par value per share,
100,000,000 shares authorized,
42,758,877 shares outstanding $ 160,346 $ 160,346
Other paid-in capital - net 466,325 457,412
Retained Earnings 246,282 216,468
Cumulative preferred stock
Subject to mandatory redemption 40,000 50,000
Not subject to mandatory redemption - 69,704
Long-term debt 890,556 805,814
1,803,509 1,759,744
CURRENT LIABILITIES
Long-term debt and preferred stock due 75,114 81,506
within one year
Short-term borrowings 170,248 148,598
Accounts payable and other accruals 132,064 104,612
Accrued interest 15,442 19,084
Dividends payable 14,956 15,702
Accrued taxes 12,870 32,820
420,694 402,322
OTHER
Deferred income taxes 525,391 549,160
Deferred investment tax credits 51,211 56,760
Deferred gain on sale of assets - 118,939
Trojan decommissioning and transition costs 379,179 396,873
Miscellaneous 65,613 70,353
1,021,394 1,192,085
$ 3,245,597 $ 3,354,151
The accompanying notes are an integral part of these consolidated balance sheets.
</TABLE>
67
<PAGE>
PORTLAND GENERAL ELECTRIC COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
FOR THE YEARS ENDED DECEMBER 31 1995 1994 1993
(THOUSANDS OF DOLLARS)
CASH PROVIDED (USED IN)
OPERATIONS:
Net Income $ 92,787 $ 106,118 $ 99,744
Non-cash items included in net income:
Depreciation and amortization 102,183 94,140 89,718
Amortization of WNP-3 exchange agreement 4,910 4,695 4,489
Amortization of Trojan investment 24,884 26,738 26,329
Amortization of Trojan decommissioning 13,336 11,220 11,220
Amortization of deferred charges - other (1,777) 2,712 6,713
Deferred income taxes - net 1,714 25,720 60,721
Other noncash revenues (3,257) (271) -
Regulatory disallowances 49,567 - -
Changes in working capital:
(Increase) Decrease in receivables (11,539) (29,678) (68,717)
(Increase) Decrease in inventories (7,189) 3,264 15,017
Increase (Decrease) in payables 13,196 (3,470) (26,588)
Other working capital items - net 1,946 (20,754) 11,886
Trojan decommissioning expenditures (10,927) (3,360) (1,625)
Deferred charges - other (9,472) 13,987 (3,331)
Miscellaneous - net 12,128 7,374 15,869
272,490 238,435 241,445
INVESTING ACTIVITIES:
Utility construction - new resources (49,096) (87,537) (28,666)
Utility construction - other (158,198) (131,675) (101,692)
Energy efficiency programs (25,013) (23,745) (18,149)
Nuclear decommissioning trust deposits (16,598) (11,220) (11,220)
Nuclear decommissioning trust withdrawals 13,521 - -
Other investments (8,624) (9,954) (7,133)
(244,008) (264,131) (166,860)
FINANCING ACTIVITIES:
Short-term debt - net 21,650 18,678 29,855
Borrowings from Corporate Owned Life Insurance 4,679 21,731 -
Long-term debt issued 147,138 74,631 249,782
Long-term debt retired (69,445) (29,882) (266,986)
Preferred stock retired (79,704) (20,000) (3,600)
Common stock issued - 41,055 -
Dividends paid (60,149) (73,026) (84,951)
(35,831) 33,187 (75,900)
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (7,349) 7,491 (1,315)
CASH AND CASH EQUIVALENTS AT THE BEGINNING
OF YEAR 9,590 2,099 3,414
CASH AND CASH EQUIVALENTS AT THE END
OF YEAR $ 2,241 $ 9,590 $ 2,099
Supplemental disclosures of cash flow information
Cash paid during the year:
Interest, net of amounts capitalized $ 64,136 $ 55,995 $ 67,447
Income taxes 94,327 44,918 17,242
The accompanying notes are an integral part of these consolidated statements.
</TABLE>
68
<PAGE>
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
Notes to Financial Statements
Note 1A. Summary of Significant Accounting Policies 38
Note 2A. Employee Benefits 40
Note 4B. Preferred Stock 44
Note 5A. Short Term Borrowings 46
Note 6A. Long-Term Debt 47
Note 7A. Other Financial Instruments 48
Note 8A. Fair Value of Financial Instruments 48
Note 9A. Commitments 49
Note 10A. Jointly Owned Plant 51
Note 11A. Trojan Nuclear Plant 51
Note 12A. WNP-3 Settlement Exchange Agreement 53
Note 13A. Regulatory Matters 53
Note 14A. Legal Matters 54
Management's Discussion and Analysis of Financial
Condition and Results of Operations 26
69
<PAGE>
NOTE 3A -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
PGE's effective tax rate (thousands of dollars):
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Income Tax Expense
Currently payable
Federal $ 74,089 $ 40,680 $ 12,495
State & local 9,448 8,536 1,591
83,537 49,216 14,086
Deferred income taxes
Federal (11,631) 24,856 53,718
State & local (6,648) 4,811 11,763
(18,279) 29,667 65,481
Investment tax credit adjustments (5,549) (3,946) (4,075)
$ 59,709 $ 74,937 $ 75,492
Provision Allocated to:
Operations $ 89,523 $ 75,314 $ 73,740
Other income and deductions (29,814) (377) 1,752
$ 59,709 $ 74,937 $ 75,492
Effective Tax Rate Computation:
Computed tax based on statutory
federal income tax rates applied
to income before income taxes $ 53,374 $ 63,369 $ 61,333
Flow through depreciation 7,389 8,080 9,207
Regulatory disallowance 3,456 - -
State and local taxes - net 5,552 9,839 9,783
State of Oregon refund (4,346) - -
Investment tax credits (5,549) (3,946) (4,075)
USDOE nuclear fuel assessment - - 5,050
Excess deferred tax (700) (767) (3,419)
Other (533) (1,638) (2,387)
$ 59,709 $ 74,937 $ 75,492
Effective tax rate 39.2% 41.4% 43.1%
</TABLE>
70
<PAGE>
As of December 31, 1995 and 1994, the significant components of PGE's deferred
income tax assets and liabilities were as follows (thousands of dollars):
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
DEFERRED TAX ASSETS
Plant-in-service $ 86,721 $ 72,012
Deferred gain on sale of assets - 47,134
Other 23,339 22,246
110,060 141,392
DEFERRED TAX LIABILITIES
Plant-in-service (448,049) (444,546)
Energy efficiency programs (30,314) (23,024)
Trojan abandonment (54,335) (80,944)
Replacement power costs - (38,136)
WNP-3 exchange contract (60,489) (68,698)
Other (42,470) (39,826)
(635,657) (695,174)
Less current deferred taxes 206 4,622
Total $ (525,391) $ (549,160)
</TABLE>
PGE 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 reached a settlement with the IRS on all issues regarding
the 1985-1990 tax returns including PGE's WNP-3 abandonment loss deduction.
During 1996, Portland General will be filing amended state returns to reflect
appropriate audit adjustments. The settlement did not have a material adverse
impact on the results of current
operations or cash flows of Portland General Electric.
NOTE 4A - 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, 1992 40,458,877 $151,721 $431,673 $(23,267)
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 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)
Redemption of preferred stock - - 3,093 -
Repayment of ESOP loan and other - - 338 5,482
December 31, 1995 42,758,877 $160,346 $473,439 $ (7,114)
</TABLE>
COMMON STOCK
Portland General is the sole shareholder of PGE common stock. PGE is
restricted, without prior OPUC 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, 1995, PGE's common stock equity capital was
48% of its total capitalization.
71
<PAGE>
Exhibit (23)
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. 33-40943 on Form S-8, Registration
Statement No. 33-49811 on Form S-8,
Registration Statement No. 33-55321 on Form S-3 and Registration Statement
No. 33-61313 on Form S-3.
Arthur Andersen LLP
Portland, Oregon,
January 24, 1996
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. 33-62549
on Form S-3.
Arthur Andersen LLP
Portland, Oregon,
January 24, 1996
<PAGE>
POWER OF ATTORNEY
The undersigned director(s) of Portland General Corporation hereby
appoint(s) Alvin Alexanderson, Joseph M. Hirko and Joseph E. Feltz, and
each of them generally, 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, 1995.
Dated: FEBRUARY 6, 1996
Portland, Oregon
/S/ GWYNETH GAMBLE BOOTH
Gwyneth Gamble Booth Jerry E. Hudson
/S/ PETER J. BRIX
Peter J. Brix Warren E. McCain
/S/ CAROLYN S. CHAMBERS /S/ JEROME J. MEYER
Carolyn S. Chambers Jerome J. Meyer
/S/ JOHN W. CREIGHTON, JR. /S/ RANDOLPH L. MILLER
John W. Creighton, Jr. Randolph L. Miller
/S/ KEN L. HARRISON /S/ BRUCE G. WILLISON
Ken L. Harrison Bruce G. Willison
<PAGE>
POWER OF ATTORNEY
The undersigned director(s) of Portland General Electric Company
hereby appoint(s) Alvin Alexanderson, Joseph M. Hirko and Joseph E. Feltz,
and each of them generally, 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 Electric Company
Annual Report on Form 10-K for the fiscal year ended December 31, 1995.
Dated: FEBRUARY 6, 1996
Portland, Oregon
/S/ GWYNETH GAMBLE BOOTH
Gwyneth Gamble Booth Jerry E. Hudson
/S/ PETER J. BRIX
Peter J. Brix Warren E. McCain
/S/ CAROLYN S. CHAMBERS /S/ JEROME J. MEYER
Carolyn S. Chambers Jerome J. Meyer
/S/ JOHN W. CREIGHTON, JR. /S/ RANDOLPH L. MILLER
John W. Creighton, Jr. Randolph L. Miller
/S/ KEN L. HARRISON /S/ BRUCE G. WILLISON
Ken L. Harrison Bruce G. Willison
<PAGE>
Exhibit (99)
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, 1995
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>
EMPLOYEE STOCK PURCHASE PLAN OF
PORTLAND GENERAL CORPORATION
STATEMENTS OF FINANCIAL CONDITION
At December 31 1995 1994
Receivable from Portland General $13,579 $11,852
Participants' Equity $13,579 $11,852
STATEMENTS OF INCOME AND CHANGES IN PARTICIPANTS' EQUITY
For the Years Ended December 31 1995 1994 1993
Dividend Income $ 4,752 $ 5,981 $ 5,243
Contributions from (Note 2):
Participants 242,261 231,575 229,940
Portland General and Affiliates 33,503 26,154 25,659
275,764 257,729 255,599
Distributions to Participants:
Cost of 12,067, 14,582, and
12,628 shares, respectively, of
common stock of Portland General
issued to participants under the
terms of the Plan (including
$699, $475 and $2,326,
respectively, in cash) (278,789) (262,304) (257,904)
Change in Participants' Equity for
the Year 1,727 1,406 2,938
Participants' Equity, at beginning
of year 11,852 10,446 7,508
Participants' Equity, at end of year $ 13,579 $ 11,852 $ 10,446
The accompanying notes are an integral part of these statements.
<PAGE>
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 CWL TOTAL
1995 CONTRIBUTIONS
Employer $ 33,503 $ - $ - $ 33,503
Participants 242,261 - - 242,261
Total $275,764 $ - $ - $275,764
1994 CONTRIBUTIONS
Employer $ 26,127 $ - $ 27 $ 26,154
Participants 231,345 - 230 231,575
Total $257,472 $ - $ 257 $257,729
1993 CONTRIBUTIONS
Employer $ 25,587 $ 44 $ 28 $ 25,659
Participants 229,295 405 240 229,940
Total $254,882 $ 449 $ 268 $255,599
<PAGE>
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, 1995 and 1994, and the related statements of income and changes
in participants' equity for each of the three years in the period ended
December 31, 1995. 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, 1995 and 1994, and
the income and changes in participants' equity for each of the three years in
the period ended December 31, 1995 in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
Portland, Oregon,
January 24, 1996
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. 33-40943 on Form S-8, Registration Statement
No. 33-49811 on Form S-8, Registration Statement No. 33-55321 on Form S-3
and Registration Statement No. 33-61313 on Form S-8.
ARTHUR ANDERSEN LLP
Portland, Oregon,
January 24, 1996
PORTLAND GENERAL CORPORATION
MANAGEMENT DEFERRED COMPENSATION PLAN
1994 RESTATEMENT
Effective October 1, 1994
<PAGE>
TABLE OF CONTENTS
(Continued)
PAGE
TABLE OF CONTENTS
PAGE
ARTICLE I PURPOSE 1
1.1 Restatement 1
1.2 Purpose 1
1.3 Effective Date 1
1.4 Plan Sponsor 2
ARTICLE II DEFINITIONS 2
2.1 Account 2
2.2 Base Salary 2
2.3 Beneficiary 2
2.4 Board 2
2.5 Bonuses 2
2.6 Change in Control 2
2.7 Committee 3
2.8 Company 3
2.9 Compensation 3
2.10 Deferral Election 4
2.11 Determination Date 4
2.12 Direct Subsidiary 4
2.13 Eligible Employee 4
2.14 Financial Emergency 5
2.15 Incentive Compensation 5
2.16 Indirect Subsidiary 5
2.17 Interest 6
2.18 Paid Time Off 6
2.19 Paid Time Off Cancellation 6
2.20 Participant 6
2.21 Participating Employer 6
2.22 Pension Plan 7
2.23 Plan 7
2.24 Policies 7
2.25 Senior Administrative Officer 7
(i)
<PAGE>
TABLE OF CONTENTS
(Continued)
PAGE
ARTICLE III ELIGIBILITY AND DEFERRALS 7
3.1 Eligibility 7
3.2 Deferral Elections 8
3.3 Limits on Elective Deferrals 9
3.4 Matching Contributions 9
3.5 Welfare Benefits 9
ARTICLE IV DEFERRED COMPENSATION ACCOUNT 10
4.1 Crediting to Account 10
4.2 Determination of Accounts 10
4.3 Vesting of Accounts 10
4.4 Statement of Accounts 10
ARTICLE V PLAN BENEFITS 11
5.1 Benefits 11
5.2 Withdrawals for Financial Emergency 11
5.3 Form of Benefit Payment 12
5.4 Accelerated Distribution 13
5.5 Withholding; Payroll Taxes 14
5.6 Commencement of Payments 14
5.7 Full Payment of Benefits 14
5.8 Payment to Guardian 14
ARTICLE VI RESTORATION OF PENSION PLAN BENEFITS 15
6.1 Pension Plan 15
6.2 Restoration of Pension Plan Benefits 15
6.3 Restoration of Pension Plan Benefits
in Event of Change in Control 16
ARTICLE VII BENEFICIARY DESIGNATION 16
7.1 Beneficiary Designation 16
7.2 Amendments 17
7.3 No Beneficiary Designation 17
7.4 Effect of Payment 17
(ii)
<PAGE>
TABLE OF CONTENTS
(Continued)
PAGE
ARTICLE VIII ADMINISTRATION 17
8.1 Senior Administrative Officer; Duties 17
8.2 Agents 18
8.3 Binding Effect of Decisions 18
8.4 Indemnity of Senior Administrative
Officer; Committee 18
8.5 Availability of Plan Documents 18
8.6 Cost of Plan Administration 18
ARTICLE IX CLAIMS PROCEDURE 19
9.1 Claim 19
9.2 Denial of Claim 19
9.3 Review of Claim 19
9.4 Final Decision 19
ARTICLE X AMENDMENT AND TERMINATION OF PLAN 20
10.1 Amendment 20
10.2 Termination 20
10.3 Payment at Termination 20
ARTICLE XI MISCELLANEOUS 21
11.1 Unfunded Plan 21
11.2 Liability 22
11.3 Trust Fund 23
11.4 Nonassignability 23
11.5 Not a Contract of Employment 24
11.6 Protective Provisions 24
11.7 Governing Law 24
11.8 Terms 24
11.9 Validity 25
11.10 Notice 25
11.11 Successors 25
(iii)
<PAGE>
INDEX OF TERM
TERM PROVISION PAGE
Account 2.1 2
Act 2.6 2
Base Salary 2.2 2
Beneficiary 2.3 2
Board 2.4 2
Bonuses 2.5 2
Change in Control 2.6 2
Committee 2.7 3
Company 2.8 3
Compensation 2.9 3
Deferral Election 2.10 4
Determination Date 2.11 4
Direct Subsidiary 2.12 4
Eligible Employee 2.13 4
ERISA 3.5 9
Financial Emergency 2.14 5
Incentive Compensation 2.15 5
Indirect Subsidiary 2.16 5
Interest 2.17 6
Paid Time Off 2.18 6
Paid Time Off Cancellation 2.19 6
Participant 2.20 6
Participating Employer 2.21 6
Pension Plan 2.22 7
PGC Board 2.6 3
Plan 2.23 7
Policies 2.24 7
Senior Administrative Officer 2.25 7
(iv)
<PAGE>
PORTLAND GENERAL CORPORATION
MANAGEMENT DEFERRED COMPENSATION PLAN
1994 RESTATEMENT
ARTICLE I
PURPOSE
1.1 RESTATEMENT. Portland General Corporation adopted a Management
Deferred Compensation Plan effective January 1, 1987 to cover qualified
management employees. Portland General Corporation also restated its
Directors' and Senior Officers' Deferred Compensation Plan on January 1,
1987. Pursuant to Article 8.1 of the Management Deferred Compensation
Plan and Article 9.1 of the Directors' and Senior Officers' Deferred
Compensation Plan, 1987 Restatement, the Company is amending both plans in
order to merge the plans for all employees of Participating Employers.
The existing plans were merged, renamed and amended for all management
employees of Participating Employers by the December 1, 1988 Restatement.
The Plan was restated effective November 1, 1990.
1.2 PURPOSE. The purpose of this Management Deferred Compensation
Plan is to provide elective deferred compensation in excess of the limits
on elective deferrals under qualified cash or deferred arrangements. It
is intended that the Plan will aid in attracting and retaining personnel
of exceptional ability.
1.3 EFFECTIVE DATE. This 1994 Restatement shall be effective as of
October 1, 1994.
PAGE 1 - MANAGEMENT DEFERRED COMPENSATION PLAN
<PAGE>
1.4 PLAN SPONSOR. The Plan is adopted for the benefit of selected
employees of Portland General Corporation, an Oregon corporation, and
selected employees of any corporations or other entities affiliated with
or subsidiary to it, if such corporations or entities are selected by the
Board.
ARTICLE II
DEFINITIONS
2.1 ACCOUNT. "Account" means the account maintained by a
Participating Employer in accordance with Article IV with respect to any
deferral of Compensation pursuant to this Plan.
2.2 BASE SALARY. "Base Salary" means the Eligible Employee's
actual base pay in the pay period and, except as provided herein,
excluding any bonuses and/or overtime pay.
2.3 BENEFICIARY. "Beneficiary" means the person, persons or entity
entitled under Article VII to receive any Plan benefits payable after a
Participant's death.
2.4 BOARD. "Board" means the Board of Directors of Portland
General Corporation.
2.5 BONUSES. "Bonuses" means Our Teamworks Awards, Notable
Achievement Awards, and any other form of cash Incentive Compensation
explicitly designated as deferrable pursuant to this Plan by the Deferral
Election form approved by the Senior Administrative Officer.
2.6 CHANGE IN CONTROL. "Change in Control" means an occurrence in
which:
(a) any "person" or "group" (within the meaning of Sections
13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended
(the Act)) becomes the "beneficial owner" (as defined in Rule 13-d
under the Act) of more than thirty percent
PAGE 2 - MANAGEMENT DEFERRED COMPENSATION PLAN
<PAGE>
(30%) of the then outstanding voting stock of Portland General
Corporation, otherwise than through a transaction arranged by, or
consummated with the prior approval of, the Board of Directors of Portland
General Corporation ("PGC Board"), or
(b) during any period of two (2) consecutive years,
individuals who at the beginning of such period constitute the PGC
Board (and any new PGC Board member whose election by the PGC Board or
whose nomination for election by the stockholders of Portland General
Corporation was approved by a vote of at least two-thirds (2/3) of the
PGC Board members then still in office who either were PGC Board
members at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any
reason to constitute a majority thereof.
2.7 COMMITTEE. "Committee" means the Human Resources Committee of
the Board.
2.8 COMPANY. "Company" means Portland General Corporation, an
Oregon Corporation.
2.9 COMPENSATION. "Compensation" means the total of the following,
before reduction for elective deferrals under this Plan or a Participating
Employer's tax qualified Retirement Savings Plan or any other flexible
benefit plan:
(a) Base Salary;
(b) Bonuses;
(c) Any interest on the above payments credited by a
Participating Employer for the benefit of an Eligible Employee prior
to the date of payment, without
PAGE 3 - MANAGEMENT DEFERRED COMPENSATION PLAN
<PAGE>
respect to any deferral of Compensation made pursuant to this Plan, by a
Participating Employer.
Compensation, for purposes of this Plan, may include any new form of
cash remuneration paid by a Participating Employer to any Eligible
Employee which is explicitly designated as deferrable pursuant to this
Plan by the Deferral Election form approved by the Senior Administrative
Officer. Compensation for purposes of this Plan, does not include expense
reimbursements, imputed income, or any form of noncash compensation or
benefits.
2.10 DEFERRAL ELECTION. "Deferral Election" means the election
completed by Participant in a form approved by the Senior Administrative
Officer which indicates Participant's irrevocable election to defer
Compensation as designated in the Deferral Election, pursuant to Article
III.
2.11 DETERMINATION DATE. "Determination Date" means the last day of
each calendar month.
2.12 DIRECT SUBSIDIARY. "Direct Subsidiary" means any corporation
of which a Participating Employer owns at least eighty percent (80%) of
the total combined voting power of all classes of its stock entitled to
vote.
2.13 ELIGIBLE EMPLOYEE. "Eligible Employee" means an employee of a
Participating Employer who:
(a) Is exempt;
(b) Is not covered by a collective bargaining agreement; and
(c) If employed for the entire calendar year, receives or,
based on current levels of base pay is expected to receive,
Compensation from one (1) or more
PAGE 4 - MANAGEMENT DEFERRED COMPENSATION PLAN
<PAGE>
Participating Employers in the calendar year, in an amount equal to or in
excess of the threshold amount described in 2.13(e) below, or
(d) If employed for a part of the calendar year, receives or,
based on an annualized level of base pay would have received,
Compensation from one (1) or more Participating Employers in the
calendar year, in an amount equal to or in excess of the threshold
amount described in 2.13(e) below. Notwithstanding the above,
eligibility is at the discretion of the Senior Administrative Officer.
(e) The threshold amount in calendar year 1994 and any
subsequent year shall be sixty-six thousand dollars ($66,000). Such
amount may be adjusted by the Senior Administrative Office each
subsequent calendar year at the same time and in not less than the
percentage ratio as the cost of living adjustment in the dollar limit
on defined benefits under Section 415(d) of the Internal Revenue Code.
2.14 FINANCIAL EMERGENCY. "Financial Emergency" means a financial
need resulting from a serious unforeseen personal or family emergency,
such as an act of God, an adverse business or financial transaction,
divorce, serious illness or accident, or death in the family.
2.15 INCENTIVE COMPENSATION. "Incentive Compensation" means
payments made to a Participant in recognition of meritorious work
performance but shall not include, without limitation, any payment
received as moving expense, mortgage expense or mortgage interest
reimbursement.
2.16 INDIRECT SUBSIDIARY. "Indirect Subsidiary" means any
corporation of which a Participating Employer directly and constructively
owns at least eighty percent (80%) of the total combined voting power of
all classes of its stock entitled to vote. In determining the amount of
PAGE 5 - MANAGEMENT DEFERRED COMPENSATION PLAN
<PAGE>
stock of a corporation that is constructively owned by a Participating
Employer, stock owned, directly or constructively, by a corporation shall
be considered as being owned proportionately by its shareholders according
to such shareholders' share of voting power of all classes of its stock
entitled to vote.
2.17 INTEREST. "Interest" means the interest yield computed at the
monthly equivalent of an annual yield that is three (3) percentage points
higher than the annual yield on Moody's Average Corporate Bond Yield Index
for the three (3) calendar months preceding the immediately prior month as
published by Moody's Investors Service, Inc. (or any successor thereto),
or, if such index is no longer published, a substantially similar index
selected by the Board.
2.18 PAID TIME OFF. "Paid Time Off" means those vacation and
holiday days for which the Employer pays employees for time not worked.
2.19 PAID TIME OFF CANCELLATION. "Paid Time Off Cancellation" means
cash payments made in lieu of Paid Time Off earned by an Eligible
Employee.
2.20 PARTICIPANT. "Participant" means any Eligible Employee who has
elected to make deferrals under this Plan.
2.21 PARTICIPATING EMPLOYER. "Participating Employer" means the
Company or any affiliated or subsidiary company designated by the Board as
a Participating Employer under the Plan, as long as such designation has
become effective and continues to be in effect. The designation as a
Participating Employer shall become effective only upon the acceptance of
such designation and the formal adoption of the Plan by a Participating
Employer. A Participating Employer may revoke its acceptance of
designation as a Participating Employer at any time, but
PAGE 6 - MANAGEMENT DEFERRED COMPENSATION PLAN
<PAGE>
until it makes such revocation, all of the provisions of this Plan and any
amendments thereto shall apply to the Eligible Employees of the
Participating Employer and their Beneficiaries.
2.22 PENSION PLAN. "Pension Plan" means the Participating
Employer's Pension Plan, as may be amended from time to time, and any
successor defined benefit retirement income plan or plans maintained by
the Participating Employer which qualify under Section 401(a) of the
Internal Revenue Code.
2.23 PLAN. "Plan" means the Portland General Corporation Management
Deferred Compensation Plan, as may be amended from time to time.
2.24 POLICIES. "Policies" means any life insurance policies,
annuity contracts or the proceeds therefrom owned or which may be acquired
by Participating Employer.
2.25 SENIOR ADMINISTRATIVE OFFICER. "Senior Administrative Officer"
means the employee in the management position designated by the Committee
to administer the Plan.
ARTICLE III
ELIGIBILITY AND DEFERRALS
3.1 ELIGIBILITY.
(a) GENERAL. An Eligible Employee who has completed one (1)
year of continuous employment with one (1) or more Participating
Employers shall be eligible to participate by making a Deferral
Election under Paragraph 3.2 below. The Senior Administrative Officer
shall notify Eligible Employees about the Plan and the benefits
provided under it. The requirement of one (1) year of continuous
employment may be waived by the Senior Administrative Officer.
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(b) CESSATION OF ELIGIBILITY. An Eligible Employee who ceases
to satisfy condition 2.13(a) or 2.13(b) of the definition of Eligible
Employee shall cease participating as to new deferrals immediately.
An Eligible Employee who ceases to satisfy condition 2.13(c) of the
definition of Eligible Employee may continue to participate in the
Plan if such individual has a current Account under the Plan at the
time the employee ceases to satisfy condition 2.13(c).
3.2 DEFERRAL ELECTIONS.
(a) TIME OF ELECTIONS. An Eligible Employee may elect to
participate in the Plan with respect to any Compensation and/or Paid
Time Off Cancellation designated in a Deferral Election in a form
approved by the Senior Administrative Officer. The Deferral Election
must be filed with the Senior Administrative Officer no later than
December 15, or such shorter period as is designated in the Deferral
Election form.
(b) MID-YEAR ELIGIBILITY. If an individual first becomes
eligible to participate during a calendar year and wishes to defer
Compensation and/or Paid Time Off Cancellation during the remainder of
the year, a Deferral Election may be filed no later than thirty (30)
days following notification of eligibility to participate to the
individual by the Senior Administrative Officer. Such Deferral
Election shall be effective only with regard to Compensation and/or
Paid Time Off Cancellation earned after it is filed with the Senior
Administrative Officer.
(c) IRREVOCABILITY. A Deferral Election for the following
calendar year shall become irrevocable on the December 15 by which it
is due under Paragraph 3.2(a) and a
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Deferral Election for the current calendar year shall become irrevocable
upon filing with the Senior Administrative Officer under Paragraph 3.2(b).
(d) TRANSFER TO A PARTICIPATING EMPLOYER. If a Participant
transfers employment from one (1) Participating Employer to another
Participating Employer, the Participant's Deferral Election shall
remain in effect for the remainder of the calendar year with respect
to Compensation earned by the individual after the transfer to the new
Participating Employer.
3.3 LIMITS ON ELECTIVE DEFERRALS. A Participant may elect to defer
up to eighty percent (80%) of Base Salary and up to one hundred percent
(100%) of Bonuses. The level of deferral elected in either case must be
in one percent (1%) increments. A Participant may elect to defer up to
one hundred twenty (120) hours per year of Paid Time Off in one-tenth
(1/10) hour increments, but may not defer any Paid Time Off earned in
prior calendar years, or the first two hundred (200) hours of Paid Time
Off earned in the calendar year to which the Deferral Election relates.
3.4 MATCHING CONTRIBUTIONS. The Participating Employer shall
provide a matching contribution for each Participant who is making
deferrals of Base Salary under this Plan. The matching contribution shall
be six percent (6%) of the Participant's annual elective Base Salary
deferral under this Plan. For purposes of this provision, Base Salary
shall not include amounts received as a Nuclear Regulatory Commission
licensing bonus.
3.5 WELFARE BENEFITS. Compensation deferred under this Plan shall
constitute compensation for purposes of any welfare plans, (as defined by
the Employee Retirement Income Security Act of 1974, as amended
("ERISA")), sponsored by the Participating Employer.
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ARTICLE IV
DEFERRED COMPENSATION ACCOUNT
4.1 CREDITING TO ACCOUNT. The amount of the elective deferrals and
matching contributions for a Participant under this Plan shall be credited
to an Account for the Participant on the books of the Participating
Employer at the time the Compensation would have been paid in cash. Any
taxes or other amounts due from the Participant with respect to the
deferred Compensation under federal, state or local law, such as a
Participant's share of FICA, shall be withheld from nondeferred
Compensation payable to the Participant at the time the deferred amounts
are credited to the Account.
4.2 DETERMINATION OF ACCOUNTS. The last day of each calendar month
shall be a Determination Date. Each Participant's Account as of each
Determination Date shall consist of the balance of the Account as of the
immediately preceding Determination Date, plus the Participant's elective
deferrals, matching contributions, and Interest credited under this Plan,
minus the amount of any distributions made from this Plan since the
immediately preceding Determination Date. Interest credited shall be
calculated as of each Determination Date based upon the average daily
balance of the Account since the preceding Determination Date.
4.3 VESTING OF ACCOUNTS. Account balances in this Plan shall be
fully vested at all times.
4.4 STATEMENT OF ACCOUNTS. The Senior Administrative Officer shall
submit to each Participant, after the close of each calendar quarter and
at such other times as determined by the Senior Administrative Officer a
statement setting forth the balance of the Account maintained for the
Participant.
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ARTICLE V
PLAN BENEFITS
5.1 BENEFITS.
(a) ENTITLEMENT TO BENEFITS AT TERMINATION. Benefits under
this Plan shall be payable to a Participant on termination of
employment with the Participating Employer, Portland General
Corporation, and any and all Direct or Indirect Subsidiaries of
Portland General Corporation. The amount of the benefit shall be the
balance of the Participant's Account including Interest to the date of
payment, in the form elected under Paragraph 5.3 below.
(b) ENTITLEMENT TO BENEFITS AT DEATH. Upon the death of a
Participant for whom an Account is held under this Plan, a death
benefit shall be payable to the Participant's Beneficiary in the same
form as the Participant elected for payments at termination of
employment, under Paragraph 5.3 below. The amount of the benefit
shall be the balance of the Participant's Account including Interest
to the date of payment.
5.2 WITHDRAWALS FOR FINANCIAL EMERGENCY. A Participant may
withdraw part or all of the Participant's Account for a Financial
Emergency as follows:
(a) DETERMINATION. The existence of a Financial Emergency and
the amount to be withdrawn shall be determined by the Senior
Administrative Officer.
(b) SUSPENSION. A Participant who makes a withdrawal for
Financial Emergency from any company-sponsored deferral plan, whether
qualified or nonqualified, shall be suspended from participation in
this Plan for twelve (12) months from the date of such withdrawal.
Compensation and/or Paid Time Off Cancellation payable during such
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<PAGE>
suspension that would have been deferred under this Plan shall instead be
paid to the Participant. No matching contribution shall be credited to a
Participant's Account under this Plan during any period of suspension.
5.3 FORM OF BENEFIT PAYMENT.
(a) The Plan benefits attributable to the elective deferrals
for any calendar year shall be paid in one (1) of the forms set out
below, as elected by the Participant in the form of payment
designation filed with the Deferral Election for that year. The forms
of benefit payment are:
(i) A lump sum payment;
(ii) Monthly installment payments in substantially equal
payments of principal and Interest over a period of up to one
hundred eighty (180) months. The amount of the installment
payment shall be redetermined on the first day of the month
coincidental with or next following the anniversary of the date
of termination each year, based upon the then current rate of
Interest, the remaining Account balance, and the remaining
number of payment periods; or
(iii) In the event the account balance is ten thousand
dollars ($10,000) or less, that benefit will be paid out in a
lump sum notwithstanding the form of benefit payment elected by
the Participant.
(b) A Participant may elect to file a change of payment
designation which shall supersede all prior form of payment
designations with respect to the Participant's entire Account. If,
upon termination, the Participant's most recent change of payment
designation has not been in effect for twelve (12) full months prior
to such termination,
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<PAGE>
then the prior election shall be used to determine the form of payment.
The Senior Administrative Officer may, in his sole discretion, direct that
plan benefits be paid pursuant to the change of payment designation,
notwithstanding the twelve (12) month requirement.
5.4 ACCELERATED DISTRIBUTION. Notwithstanding any other provision
of the Plan, a Participant shall be entitled to receive, upon written
request to the Senior Administrative Officer, a lump sum distribution of
all or a portion of the vested Account balance, subject to the following:
(a) PENALTY.
(i) If the distribution is requested within twenty-four
(24) months following a Change in Control, six percent (6%) of
the account shall be forfeited and ninety-four percent (94%) of
the account paid to the Participant.
(ii) If the distribution is requested at any time other
than that in (i) above, ten percent (10%) of the account shall
be forfeited and ninety percent (90%) of the account paid to
the Participant.
(b) SUSPENSION. A Participant who receives a distribution
under this section shall be suspended from participation in this Plan
for twelve (12) calendar months from the date of such distribution.
All eligibility requirements must be met to reenter the Plan. The
account balance shall be as of the Determination Date immediately
preceding the date on which the Senior Administrative Officer receives
the written request. The amount payable under this section shall be
paid in a lump sum within sixty-five (65) days following the receipt
of the Participant's written request by the Senior Administrative
Officer.
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5.5 WITHHOLDING; PAYROLL TAXES. Each Participating Employer shall
withhold from payments made hereunder any taxes required to be withheld
from a Participant's wages for the
federal or any state or local government. Withholding shall also apply to
payments to a Beneficiary unless an election against withholding is made
under Section 3405(a)(2) of the Internal Revenue Code.
5.6 COMMENCEMENT OF PAYMENTS. Payment shall commence at the
discretion of the Senior Administrative Officer, but not later than sixty-
five (65) days after the end of the month in which a Participant retires,
dies or otherwise terminates employment. All payments shall be made as of
the first day of the month.
5.7 FULL PAYMENT OF BENEFITS. Notwithstanding any other provision
of this Plan, all benefits shall be paid no later than one hundred eighty
(180) months following the date payment to a Participant commences.
5.8 PAYMENT TO GUARDIAN. If a Plan benefit is payable to a minor
or a person declared incompetent or to a person incapable of handling the
disposition of property, the Senior Administrative Officer may direct
payment of such Plan benefit to the guardian, legal representative or
person having the care and custody of such minor or incompetent person.
The Senior Administrative Officer may require proof of incompetency,
minority, incapacity or guardianship as he may deem appropriate prior to
distribution of the Plan benefit. Such distribution shall completely
discharge the Senior Administrative Officer, the Participating Employer,
and the Company from all liability with respect to such benefit.
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ARTICLE VI
RESTORATION OF PENSION PLAN BENEFITS
6.1 PENSION PLAN. If a Participating Employer maintains a tax
qualified Pension Plan for the benefit of eligible employees, and the
Pension Plan provides benefits determined under a formula that is based in
part on the employee's nondeferred compensation, a Participant in this
Plan may receive a smaller benefit under the Pension Plan as a result of
electing deferrals under this Plan.
6.2 RESTORATION OF PENSION PLAN BENEFITS. In addition to the
benefits payable under Paragraph 5.1 above, Participating Employer shall
pay to any Participant whose Pension Plan benefit is not restored under
any other employee or executive benefit plan maintained by Participating
Employer, a benefit payment equal to the excess of (b) over (a) as
follows:
(a) The actuarial equivalent lump sum present value of the
retirement income (or death benefit) payable (either immediately or
deferred) under the Pension Plan; and
(b) the actuarial equivalent lump sum present value of the
retirement income (or death benefit) that would have been payable
under the Pension Plan if Participant had made no Deferral Elections
in any calendar year under this Plan. The actuarial equivalent lump
sum present values shall be calculated in the same manner and using
the same factors as are used to calculate lump sum distributions under
the Pension Plan. If Participant terminates employment prior to
attaining the age of fifty-five (55), payment of the restoration of
Pension Plan benefits shall be made as if Participant had made a lump
sum election pursuant to Paragraph 5.3(a)(i) above with respect to the
payment of the restoration of
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<PAGE>
Pension Plan benefits. If Participant terminates employment upon or
after attaining the age of fifty-five (55), payment of the restoration
of Pension Plan benefits shall be made as if Participant had made an
election to receive monthly installment payments in substantially
equal payments of principal and Interest over a period of eighty-four
(84) months pursuant to Paragraph 5.3(a)(ii) above with respect to the
payment of the restoration of Pension Plan benefits. In the event the
actuarial equivalent lump sum present value is ten thousand dollars
($10,000) or less, that benefit will be paid out in a lump sum.
6.3 RESTORATION OF PENSION PLAN BENEFITS IN EVENT OF CHANGE IN
CONTROL. In the event of a Change in Control, and a subsequent
termination of the Pension Plan within three (3) years following a Change
in Control, all Plan Participants shall receive a restoration of Pension
Plan benefits under Paragraph 6.2.
ARTICLE VII
BENEFICIARY DESIGNATION
7.1 BENEFICIARY DESIGNATION. Each Participant shall have the
right, at any time, to designate one (1) or more persons or entities as
the Participant's Beneficiary, primary as well as secondary, to whom
benefits under this Plan shall be paid in the event of the Participant's
death prior to complete distribution to the Participant of the benefits
due under the Plan. Each Beneficiary designation shall be in a written
form prescribed by the Senior Administrative Officer and will be effective
only when filed with the Senior Administrative Officer during the
Participant's lifetime.
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7.2 AMENDMENTS. Any Beneficiary designation may be changed by a
Participant without the consent of any Beneficiary by the filing of a new
Beneficiary designation with the Senior Administrative Officer. If a
Participant's Compensation is community property, any Beneficiary
designation shall be valid or effective only as permitted under applicable
law.
7.3 NO BENEFICIARY DESIGNATION. In the absence of an effective
Beneficiary designation, or if all Beneficiaries predecease a Participant,
the Participant's estate shall be the Beneficiary. If a Beneficiary dies
after a Participant and before payment of benefits under this Plan has
been completed, the remaining benefits shall be payable to the
Beneficiary's estate.
7.4 EFFECT OF PAYMENT. Payment to the Beneficiary shall completely
discharge the Participating Employer's obligations under this Plan.
ARTICLE VIII
ADMINISTRATION
8.1 SENIOR ADMINISTRATIVE OFFICER; DUTIES. This Plan shall be
administered by a Senior Administrative Officer appointed by the
Committee. The Senior Administrative Officer may be a Participant under
this Plan. The Senior Administrative Officer shall have the authority to
make, amend, interpret and enforce all appropriate rules and regulations
for the administration of this Plan and decide or resolve any and all
questions including interpretations of this Plan as may arise in
connection with the Plan. The Senior Administrative Officer shall report
to the Committee on an annual basis regarding Plan activity, and at such
other times as may be requested by the Committee.
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8.2 AGENTS. In the administration of this Plan, the Senior
Administrative Officer may, from time to time, employ agents and delegate
to such agents, including employees of any Participating Employer, such
administrative duties as he sees fit, and may from time to time consult
with counsel, who may be counsel to any Participating Employer.
8.3 BINDING EFFECT OF DECISIONS. The decision or action of the
Senior Administrative Officer in respect of any question arising out of or
in connection with the administration, interpretation and application of
the Plan and the rules and regulations promulgated hereunder shall be
final and conclusive and binding upon all persons having any interest in
the Plan.
8.4 INDEMNITY OF SENIOR ADMINISTRATIVE OFFICER; COMMITTEE. Each
Participating Employer shall indemnify and hold harmless the Senior
Administrative Officer, the Committee, and its individual members against
any and all claims, loss, damage, expense or liability arising from any
action or failure to act with respect to this Plan, except in the case of
gross negligence or willful misconduct.
8.5 AVAILABILITY OF PLAN DOCUMENTS. Each Participant shall receive
a copy of this Plan, and the Senior Administrative Officer shall make
available for inspection by any Participant a copy of the rules and
regulations used in administering the Plan.
8.6 COST OF PLAN ADMINISTRATION. The Company shall bear all
expenses of administration of this Plan. However, a ratable portion of
the expense shall be charged back to each Participating Employer.
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ARTICLE IX
CLAIMS PROCEDURE
9.1 CLAIM. Any person claiming a benefit, requesting an
interpretation or ruling under the Plan or requesting information under
the Plan shall present the request in writing to the Senior Administrative
Officer or his delegatee who shall respond in writing as soon as
practicable.
9.2 DENIAL OF CLAIM. If the claim or request is denied, the
written notice of denial shall state:
(a) The reasons for denial, with specific reference to the
Plan provisions on which the denial is based.
(b) A description of any additional material or information
required and an explanation of why it is necessary.
(c) An explanation of the Plan's claim review procedure.
9.3 REVIEW OF CLAIM. Any person whose claim or request is denied
or who has not received a response within thirty (30) days may request
review by notice given in writing to the Senior Administrative Officer.
The claim or request 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.
9.4 FINAL DECISION. The decision by the Senior Administrative
Officer on review shall normally be made within sixty (60) days. If an
extension of time is required for a hearing or other special
circumstances, the claimant shall be notified and the time limit shall be
one hundred
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<PAGE>
twenty (120) days. The decision shall be in writing and shall state the
reasons and the relevant Plan provisions. All decisions on review shall
be final and bind all parties concerned.
ARTICLE X
AMENDMENT AND TERMINATION OF PLAN
10.1 AMENDMENT. The Senior Administrative Officer may amend the
Plan from time to time as may be necessary for administrative purposes and
legal compliance of the Plan, provided, however, that no such amendment
shall affect the benefit rights of Participants or Beneficiaries in the
Plan. The Committee may amend the Plan at any time, provided, however,
that no amendment shall be effective to decrease or restrict the accrued
rights of Participants and Beneficiaries to the amounts in their Accounts
at the time of the amendment.
10.2 TERMINATION. The Board of each Participating Employer may at
any time, in its sole discretion, terminate or suspend the Plan in whole
or in part for that Participating Employer. However, no such termination
or suspension shall adversely affect the benefits of Participants which
have accrued prior to such action, the benefits of any Participant who has
previously retired, the benefits of any Beneficiary of a Participant who
has previously died, or already accrued Plan liabilities between
Participating Employers.
10.3 PAYMENT AT TERMINATION. Notwithstanding Paragraph 5.3 above,
if the Plan is terminated, payment of each Account to a Participant or a
Beneficiary for whom it is held shall commence within sixty (60) days of
Plan termination in the earlier of one (1) of the following forms:
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(a) The form and time of payment designated by the
Participant; or
(b) Paid in the following form:
APPROPRIATE ACCOUNT BALANCE PAYOUT PERIOD
Less than $25,000: Lump sum
$25,000 but less than $100,000: Monthly installments over 2 years
$100,000 but less than $500,000: Monthly installments over 3 years
$500,000 or more: Monthly installments over 5 years
Interest earned on the unpaid balance in Participant's Account shall be
the applicable Interest rate on the Determination Date immediately
preceding the effective date of such termination of the Plan.
ARTICLE XI
MISCELLANEOUS
11.1 UNFUNDED PLAN. This Plan is intended to be an unfunded plan
maintained primarily to provide deferred compensation benefits for a
select group of "management or highly compensated employees" within the
meaning of Sections 201, 301, and 401 of ERISA, and therefore to be exempt
from the provisions of Parts 2, 3 and 4 of Title I of ERISA. Accordingly,
the Board may terminate the Plan and commence termination payout under
10.3 above for all or certain Participants, or remove certain employees as
Participants, if it is determined by the United States Department of Labor
or a court of competent jurisdiction that the Plan constitutes an employee
pension benefit plan within the meaning of Section 3(2) of ERISA which is
not so exempt. This Plan is not intended to create an investment
contract, but to provide retirement
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benefits to eligible individuals who have elected to participate in the
Plan. Eligible individuals are select members of management who, by
virtue of their position with Participating Employer, are uniquely
informed as to Participating Employer's operations and have the ability to
materially affect Participating Employer's profitability and operations.
11.2 LIABILITY.
(a) LIABILITY FOR BENEFITS. Except as otherwise provided in
this paragraph, liability for the payment of a Participant's benefit
pursuant to this Plan shall be borne solely by the Participating
Employer that employs the Participant and reports the Participant as
being on its payroll during the accrual or increase of the Plan
benefit, and no liability for the payment of any Plan benefit shall be
incurred by reason of Plan sponsorship or participation except for the
Plan benefits of a Participating Employer's own employees. Provided,
however, that each Participating Employer, by accepting the Board's
designation as a Participating Employer under the Plan and formally
adopting the Plan, agrees to assume secondary liability for the
payment of any benefit accrued or increased while a Participant is
employed and on the payroll of a Participating Employer that is a
Direct Subsidiary or Indirect Subsidiary of the Participating Employer
at the time such benefit is accrued or increased. Such liability
shall survive any revocation of designation as a Participating
Employer with respect to any liabilities accrued at the time of such
revocation. Nothing in this paragraph shall be interpreted as
prohibiting any Participating Employer or any other person from
expressly agreeing to the assumption of liability for a Plan
Participant's payment of any benefits under the Plan.
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(b) UNSECURED GENERAL CREDITOR. Participants and their
Beneficiaries, heirs, successors, and assigns shall have no secured
legal or equitable rights, interest or claims in any property or
assets of a Participating Employer, nor shall they be beneficiaries
of, or have any rights, claims or interests in any Policies or the
proceeds therefrom owned or which may be acquired by a Participating
Employer. Except as provided in Section 11.3, such Policies or other
assets of a Participating Employer shall not be held under any trust
for the benefit of Participants, their Beneficiaries, heirs,
successors or assigns, or held in any way as collateral security for
the fulfilling of the obligations of a Participating Employer under
this Plan. Any and all of a Participating Employer's assets and
Policies shall be, and remain, the general, unpledged, unrestricted
assets of the Participating Employer. A Participating Employer's
obligation under the Plan shall be that of an unfunded and unsecured
promise to pay money in the future.
11.3 TRUST FUND. At its discretion, each Participating Employer,
jointly or severally, may establish one (1) or more trusts, with such
trustee as the Board may approve, for the purpose of providing for the
payment of such benefits. Such trust or trusts may be irrevocable, but
the assets thereof shall be subject to the claims of the Participating
Employer's creditors. To the extent any benefits provided under the Plan
are actually paid from any such trust, the Participating Employer shall
have no further obligation with respect thereto, but to the extent not so
paid, such benefits shall remain the obligation of, and shall be paid by
the Participating Employer.
11.4 NONASSIGNABILITY. Neither a Participant nor any other person
shall have any right to sell, assign, transfer, pledge, anticipate,
mortgage or otherwise encumber, hypothecate or convey in advance of actual
receipt the amounts, if any, payable hereunder, or any part thereof,
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which are, and all rights to which are, expressly declared to be
nonassignable and nontransferable. No part of the amounts payable shall,
prior to actual payment, be subject to seizure or sequestration for the
payment of any debts, judgments, alimony or separate maintenance owed by a
Participant or any other person, nor be transferable by operation of law
in the event of a Participant's or any other person's bankruptcy or
insolvency.
11.5 NOT A CONTRACT OF EMPLOYMENT. The terms and conditions of this
Plan shall not be deemed to constitute a contract of employment between a
Participating Employer and a Participant, and neither a Participant nor a
Participant's Beneficiary shall have any rights against a Participating
Employer except as may otherwise be specifically provided herein.
Moreover, nothing in this Plan shall be deemed to give a Participant the
right to be retained in the service of a Participating Employer or to
interfere with the right of a Participating Employer to discipline or
discharge a Participant at any time.
11.6 PROTECTIVE PROVISIONS. A Participant will cooperate with a
Participating Employer by furnishing any and all information requested by
a Participating Employer, in order to facilitate the payment of benefits
hereunder, and by taking such physical examination as a Participating
Employer may deem necessary and taking such other action as may be
requested by a Participating Employer.
11.7 GOVERNING LAW. The provisions of this Plan shall be construed
and interpreted according to the laws of the State of Oregon, except as
preempted by federal law.
11.8 TERMS. In this Plan document, unless the context clearly
indicates the contrary, the masculine gender will be deemed to include the
female gender, and the singular shall include the plural.
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11.9 VALIDITY. In case any provisions of this Plan shall be held
illegal or invalid for any reason, such illegality or invalidity shall not
affect the remaining parts hereof, but this Plan shall be construed and
enforced as if such illegal and invalid provision had never been inserted
herein.
11.10 NOTICE. Any notice or filing required or permitted to be given
to the Senior Administrative Officer under the Plan shall be sufficient if
in writing and hand delivered, or sent by registered or certified mail to
the Senior Administrative Officer or to Secretary of Participating
Employer. Notice to the Senior Administrative Officer, if mailed, shall
be addressed to the principal executive offices of Participating Employer.
Notice mailed to the Participant shall be at such address as is given in
the records of the Participating Employer. Notices shall be deemed given
as of the date of delivery or, if delivery is made by mail, as of the date
shown on the postmark on the receipt for registration or certification.
11.11 SUCCESSORS. The provisions of this Plan shall bind and inure
to the benefit of each Participating Employer and its successors and
assigns. The term successors as used herein shall include any corporate
or other business entity which shall, whether by merger, consolidation,
purchase or otherwise, acquire all or substantially all of the business
and assets of a Participating Employer, and successors of any such
corporation or other business entity.
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IN WITNESS WHEREOF, and pursuant to resolution of the Human Resources
Committee of the Board of Directors of Portland General Corporation, the
Company has caused this instrument to be executed by its duly authorized
Senior Administrative Officer effective as of the 1st day of October 1994.
PORTLAND GENERAL CORPORATION
By: /S/ DONALD F. KIELBLOCK
Donald F. Kielblock
Its: Vice President of Human Resources and
Senior Administrative Officer
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AMENDMENT NO. 1
TO PORTLAND GENERAL CORPORATION
MANAGEMENT DEFERRED COMPENSATION PLAN
THIS AMENDMENT to the Portland General Corporation Management Deferred
Compensation Plan (the "Plan") is made and entered into this 1st day of
April, 1995, by the Senior Administrative Officer of Portland General
Corporation, an Oregon Corporation;
WHEREAS, the Company has established the Plan as restated October 1, 1994;
and
WHEREAS, pursuant to Section 10.1 of the Plan, the Senior Administrative
Officer may amend the Plan from time to time as may be necessary for
administrative purposes and legal compliance;
NOW, THEREFORE, Section 2.13(e) of the Plan is hereby amended as follows:
2.13 ELIGIBILE EMPLOYEE.
(e) The threshold amount effective April 1, 1995 and any subsequent year
shall be eighty-five thousand dollars ($85,000). Such amount may be
adjusted by the Senior Administrative Officer each subsequent calendar
year or at any other time as the Senior Administrative Officer deems
necessary.
IN WITNESS WHEREOF, the Company has caused this instrument to be executed
as of the day and year first above written.
PORTLAND GENERAL CORPORATION
BY: /S/ DONALD F. KIELBLOCK
Donald F. Kielblock
Senior Administrative Officer
<PAGE>
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, 1995 AND 1994 FOR PORTLAND
GENERAL CORPORATION AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1994
<PERIOD-END> DEC-31-1995 DEC-31-1994
<BOOK-VALUE> PER-BOOK PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 1,723,619 1,616,534
<OTHER-PROPERTY-AND-INVEST> 324,617 317,692
<TOTAL-CURRENT-ASSETS> 236,541 336,715
<TOTAL-DEFERRED-CHARGES> 1,163,240 1,288,330
<OTHER-ASSETS> 0 0
<TOTAL-ASSETS> 3,448,017 3,559,271
<COMMON> 191,301 189,358
<CAPITAL-SURPLUS-PAID-IN> 574,468 563,915
<RETAINED-EARNINGS> 135,885 118,676
<TOTAL-COMMON-STOCKHOLDERS-EQ> 893,148 858,313
40,000 50,000
0 69,704
<LONG-TERM-DEBT-NET> 883,656 826,602
<SHORT-TERM-NOTES> 0 0
<LONG-TERM-NOTES-PAYABLE> 0 0
<COMMERCIAL-PAPER-OBLIGATIONS> 170,248 148,598
<LONG-TERM-DEBT-CURRENT-PORT> 92,661 69,195
10,000 10,000
<CAPITAL-LEASE-OBLIGATIONS> 6,900 9,212
<LEASES-CURRENT> 2,453 2,311
<OTHER-ITEMS-CAPITAL-AND-LIAB> 1,348,951 1,515,336
<TOT-CAPITALIZATION-AND-LIAB> 3,448,017 3,559,271
<GROSS-OPERATING-REVENUE> 983,582 959,409
<INCOME-TAX-EXPENSE> 89,064 71,878
<OTHER-OPERATING-EXPENSES> 698,942 733,235
<TOTAL-OPERATING-EXPENSES> 788,006 805,113
<OPERATING-INCOME-LOSS> 195,576 154,296
<OTHER-INCOME-NET> (33,576) 17,172
<INCOME-BEFORE-INTEREST-EXPEN> 162,000 171,468
<TOTAL-INTEREST-EXPENSE> 71,320 67,610
<NET-INCOME> 90,680 110,330
9,644 10,800
<EARNINGS-AVAILABLE-FOR-COMM> 81,036 99,530
<COMMON-STOCK-DIVIDENDS> 60,955 60,308
<TOTAL-INTEREST-ON-BONDS> 64,997 58,031
<CASH-FLOW-OPERATIONS> 256,542 247,565
<EPS-PRIMARY> 1.60 1.99
<EPS-DILUTED> 1.60 1.99
</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 PERIODS ENDED DECEMBER 31, 1995 AND 1994 FOR PORTLAND
GENERAL ELECTRIC COMPANY AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1994
<PERIOD-END> DEC-31-1995 DEC-31-1994
<BOOK-VALUE> PER-BOOK PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 1,723,619 1,616,534
<OTHER-PROPERTY-AND-INVEST> 138,352 124,593
<TOTAL-CURRENT-ASSETS> 223,306 327,710
<TOTAL-DEFERRED-CHARGES> 1,160,320 1,285,314
<OTHER-ASSETS> 0 0
<TOTAL-ASSETS> 3,245,597 3,354,151
<COMMON> 160,346 160,346
<CAPITAL-SURPLUS-PAID-IN> 473,439 470,008
<RETAINED-EARNINGS> 246,282 216,468
<TOTAL-COMMON-STOCKHOLDERS-EQ> 880,067 834,226
40,000 50,000
0 69,704
<LONG-TERM-DEBT-NET> 883,656 796,602
<SHORT-TERM-NOTES> 0 0
<LONG-TERM-NOTES-PAYABLE> 0 0
<COMMERCIAL-PAPER-OBLIGATIONS> 170,248 148,598
<LONG-TERM-DEBT-CURRENT-PORT> 62,661 69,195
10,000 10,000
<CAPITAL-LEASE-OBLIGATIONS> 6,900 9,212
<LEASES-CURRENT> 2,453 2,311
<OTHER-ITEMS-CAPITAL-AND-LIAB> 1,189,612 1,364,303
<TOT-CAPITALIZATION-AND-LIAB> 3,245,597 3,354,151
<GROSS-OPERATING-REVENUE> 981,628 958,955
<INCOME-TAX-EXPENSE> 89,523 75,314
<OTHER-OPERATING-EXPENSES> 696,919 730,433
<TOTAL-OPERATING-EXPENSES> 786,442 805,747
<OPERATING-INCOME-LOSS> 195,186 153,208
<OTHER-INCOME-NET> (33,623) 16,148
<INCOME-BEFORE-INTEREST-EXPEN> 161,563 169,356
<TOTAL-INTEREST-EXPENSE> 68,776 63,238
<NET-INCOME> 92,787 106,118
9,644 10,800
<EARNINGS-AVAILABLE-FOR-COMM> 83,143 95,318
<COMMON-STOCK-DIVIDENDS> 50,456 56,442
<TOTAL-INTEREST-ON-BONDS> 62,570 54,732
<CASH-FLOW-OPERATIONS> 272,490 238,435
<EPS-PRIMARY> 0<F1> 0<F1>
<EPS-DILUTED> 0<F1> 0<F1>
<FN>
<F1>PORTLAND GENERAL ELECTRIC COMPANY IS A WHOLLY OWNED
SUBSIDIARY OF PORTLAND GENERAL CORPORATION AND DOES
NOT REPORT EARNINGS PER SHARE INFORMATION.
</FN>
</TABLE>
