CLINTON ST. QUARTERLY forts last year? They must have thought they were buying something for their money._________________ It is no more ridiculous for the public to own its own energy system than it is for it to own its own schools, sewer systems, police and fire protection or any other necessarypublic service. investor-owned utilities can do a better job. I’ll give you a good example. In the case of the Trojan nuclear /p lan t, built by Portland General Electric, the total investment per customer is about $1,000. In the case of the nuclear plants built by the publics in the state of Washington, their share on a per customer basis exceeds $30,000. They’re inefficient. They’re managed by a board that doesn’t have the knowledge of the business. The basic philosophy of energy being managed by non-professionals is ridiculous. The issue is: do you want your energy problems managed by business enterprise, or do you want it managed by government enterprise? Comment: We took Mr. Spicer’s ■advice and did check the facts and we have to conclude that his answer con- tains several misleading & inaccurate statements. Ffrst, forming a PUD has nothing to do with nationalizing the industry. It is the establishment of Nebra ates to Oregon’s rates is like comparing apples to donuts. Orepower from the Bonneville system which the private utilities have shared in. A more valid comparison would be between Nebraska’s Public Power District rates and neighboring Iowa's private rates. The fact is that Nebraska’s are almost 50% cheaper. (Nationwide public systems are 43% cheaper than private systems.) Nebraska’s Public Power District currently has a surplus, not a shortage, of energy. They are not curtailing industry . Third, we’re not sure how Spicer arrived at his population figures, but his cost per customer comparison between Trojan and the Washington Public Power Supply System (WPPSS) plants is irrelevant. PGE’s contracts for the construction o f Trojan were written before increasing inflation and more stringent Atomic Energy Commission requirements drove the price tot all nuJcai conmore ridiculous for the public to own energy ■y ■m ’ to own its own schools, sewer systems, police and fire protection, or any other necessary public service. CSQ: PP&L outspent its opposition and handily defeated three previous initiatives in the last decade to have the city o f Portland take over its facilities. This year, PUD proponents have told me they fee l they have the best chance they’ve ever had to win. The utilities have been reported as organizing ‘‘citizen’s committees” in the counties affected by the election. You’re onfile as estimating $840,000, or “whatever it takes, ” as what you plan to spend. My question is — what specifically is the company’s relationship in terms o f bankrolling these committees? Spicer: Oh, we’ve helped bankroll them, obviously, but they’re also being bankrolled by thousands of other people, independent citizens throughout the state. It’s pure and simple — the PUD proponents have nothing to lose. Our stockholders have a lot to lose. And it should be made clear that that (money) is not being supported by the ratepayers. Its being supported by the stockholders. That’s the law. Comment: Simple, perhaps, not the Oregonians te Government Takeover books showed less lunds came from Diego tai ot $400,000) came directly from PGE and PP&L. The rest was pm up by ■• s e p a r a t io n o f ra te p a y e r and stockholder costs is basically a false issue. Ratepayer expetses pay for the company’s operating costs. as well as providing a return on investments to stockholders (called dividends, or profits). If that money is used fur political purposes, (he stockholders receive less in dividends. Then the company comes in for a rate increase, claiming (hey need a higher “ rale of return” to insure investor confidence. Guess who picks up the lab. Incidentally. PP&L stockholders with “ a lot to lose.” are, for the most part, large Eastern financial institutions like Merrill Lynch and Dean Witter. CSQ: How much influence would you say that PP&L has on the politics o f this state? I ’ve heard it said that the first group that Governor A tiyeh met with after his election was representatives o f the utilities . . . Spicer: If I had to put it on a scale of 1 to 10 how effective we are in controlling the politics in the state of Oregon, I ’d give it about a 2. Or 1. None of those people (the legislators) are utility-oriented. None of ’em are big business-oriented. Most of their philosophy is totally against that. I don’t think we have any influence at all with Atiyeh, Lobdell (Oregon’s Public Utilities Commissioner) or anybody else in the regulatory process. If it was true, you wouldn’t see the state siting council raising such a fuss on what we would like to do. This whole thing you hear about the utilities having the regulatory process and the politicians in their pocket is a bunch of crap. It just isn’t so. Comment: Crap? As the head of the Oregon State Department of Transportation under both Republican and Democratic administrations, the late Glenn Jackson was widely regarded as the most powerful man in the state. In addition to serving on the boards of many other Northwest corporation',. Jackson was President and then Chairman of the Board of PP&L. Jackson reportedly used to call on then-Governor Bob Straub twice a day. It's true that Governor Atiyeh's first appointee to the Public Utilities Commission was so industry- biased the State Senate refused to approve him. But it PP&L really - V trolling legislative politics, why did they spend $393,000 on lobbying efCSQ: In the long run, since PUDs can borrow money at lower interest rates, without having to pay a rate o f return to stockholders, how do you see that your rates will ever be as cheap as theirs? Spicer: Our embedded cost of capital at Pacific Power and Light is about 714% (interest), because you take all the old debt, which we got at three and four percent, and the new debt, which is going almost as low as the publics. That embedded cost of capital will continue on for many years, whereas if the publics go into the market today for money, they’re going to pay 10% (interest) — no question about it. Now publics have to make a profit too. They just call it a different thing. You look at any public agency in the Northwest tha t’s successful and you’ll see a hell of a bunch of money on the books that’s been retained from the ratepayers. If they were truly non-profit, they’d either reduce that rate, or they’d give it back at the end of the year. Comment: Mr. Spicer is being^ghb when he compares PP&L’s embedded raise* capital in three ways; selling bonds, selling preferred stock and is rmmon stock. of the three, and PP&L’s average interest on these bonds . 7 ’4% However, the company’s average overall cost of capital as determined by the Public Utility Commissioner is over 10%, and it’s going up, since their most recent bond sale was reported in the Oregon Journal on October 8 at fourteen percent. There is no doubt that a feasibility study would show that a new PUD can raise funds cheaper than PP&L and PGE. As for a PUD’s so-called profit — in a public utility, the retained earnings are re-invested in improving the system, just as in any business. The difference is who owns the system. In a publicly-owned system, the consumer owns the equity. Clark County bought its system in the late 1940s for $5.3 million. Today it’s worth over $80 million on the books. In real terms, that amounts to about $1,000 per person in value. < . . . CSQ: I have a poll here you conducted indicating that the key words fo r voters in the 1978 election campaign on Ballot Measure H4 were taxes and increased bureaucracy. I want to ask you a couple o f questions about this. Spicer: Sure. CSQ: ILTiy do you call revenue bond financing a lien against people’s property? Spicer: Revenue bond financing is a lien against the rates. The bonding companies who buy the bonds from a public agency are no different than ours. They must get a return on their investment. The state of Oregon has a restriction of 8% on whata PUD can sell a bond for. People ignore that fact. There’s no bonding company i n \ the United States today tha'. will handle a bond for a public ajency for 8%. So they’re dreaming to think they could ever go into business without a change in the law. We have never said revenue bonds are a lien on property. However, in the lav itself, it does state that if revenues are not sufficient to meet the requirements of the bonds in the district, people can te taxed. No PUD has ever done it. Bat it is in the law. Comment: As Mr. Spicer says, no PUD has ever taxed its constituents.^ Oregon's four operating have* sold millions of d , of bondsand they have never increased^ provisioi in bonds is tikts agree to a ise the rates if necessary to meet bonl requirements, not keep the rates down by taxing instead. Talk of taxes seem* to be a scare tactic. He is right about the 8% restriction. However, there is a statute allowing “ special districts” to sell at up to 10%, which might supersede the PUD law. I f not, the law will have to be changed, which shouldn’t be impossible. CSQ: Why do you call PUDs a new and costly bureaucracy when we already have a bureaucracy o f state regulators — the Public Utilitie; Commission. It seems to me that the PUDs in some ways constitute lets bureaucracy between the people aid the decision-making process thin what we have now. Spicer: That’s exactly what it is.Its a new and costly bureaucracy. V/hy buy a power system when you already own it? And that’s basically vhat you’re doing. If you look at the total need for funds through condemnation to take all of the investor-owned utility property out of the state of Oregon, it’s almost 4 billion dollars. Almost 4 billion dollars. Comment: “ Why buy a power system when ah it?” That’s easy for him to say! PP&L ai(d PGE ratepayers own nothing and have virtually no control over man- O m - s, not owners. By the way, I think he avoided the CSQ: How do you arrive at that figure o f 4 billion dollars? Spicer: It’s simply based on the historical buy-out cost all over the Northwest for the last 25 years. Comment: The industry yardstick for buy-out costs over the last 25 to 30 years has been annual revenue times the figure 5.5. This may have been an accurate formula in the past, but ii has little application now tor the following reason: The formula takes into account the costs of everything PGE and PP&L own, including coal and nuclear plants, because these 11
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