It's been more than a year now since the Texas conglomerate Enron swaggered into Oregon to gobble up Portland General Electric for a cool $3.2 billion. The press delicately referred to the deal as a merger. But this has proven a grotesque misnomer. There is no question who the dominant partner is in this relationship, Enron. It's a company that never accepts a subservient role and doesn't tolerate anyone telling it how to behave.
Initially Wall Street mavens scratched their heads at the merger. What interest would Enron, a global energy giant, have in PGE, a moribund electric utility saddled with a defunct nuclear reactor? The answer came soon enough. Enron's sights weren't on Oregon, but our neighbor to the south, the 31 million residential electric consumers in California, and the high-tech, aerospace and defense factories that make the state one of the world's most power-hungry regions. This is the mother lode for the new energy robber barons. But to enter this lucrative market Enron needed credibility as a power provider. But like a apex corporate predator Enron also had its eyes on PGE's assets, cheap hydro-power that it could sell across the West at huge mark ups, power plants and dams that it could auction off, and a network of transmission lines that led right into the high-priced California market.
As for PGE's problem child, the Trojan reactor, Enron's acquisitions analysts believed it would prove only a minor irritant. There was a proven solution: stick the ratepayers with a large share of the costs of this misbegotten venture and dump the nuclear waste, and the attendant risk, on the federal government. This is the old strategy of privatizing the profits and socializing the costs.
Enron begrudingly admits to all this in one of their latest filings with the Securities Exchange Commission, where Enron's CEO Kenneth Lay confirmed that the acquisition of PGE "has allowed Enron to expand its West Coast power marketing operations and has assisted in establishing entry into retail markets in other parts of the country." In other words, PGE customers are funding Enron's expansion plans.
But the target is not just California. Enron truly has a global reach. In fact, more than 35 percent of the company's income derives from its international operations, pipelines across the Amazon, oil wells off the coast of Venezuela and Trinidad, power plants in Indonesia, China and India, and a water company in Great Britain. The guaranteed profits from PGE can be channeled into any of this overseas operations, where Enron expects to make as much as 50 percent of its profits by the year 2002.
Enron has a reputation for getting what it wants and doing whatever it takes to get the job done. The purchase of PGE presents a microcosm for how Enron operates on a global scale. The first strategy is to lubricate the political system with generous infusions of campaign cash. Enron is one of the nation's top sponsors of both the Democratic and Republican parties, pouring over $3 million into their coffers since 1989. This investment has yielded the company tremendous rewards, including government brokered and financed deals worth billions in China, Indonesia and India. In Oregon, Enron lavished contributions on the state's congressional delegation, supporting both Gordon Smith and Ron Wyden. Neither senator uttered a critical peep about the Texas takeover of Portland's electric utility.
The second tactic is to buy off the potential opposition, preferably as cheaply as possible. In Enron's power deals in India this took the form political bribery. The PGE deal was a fairly straightforward operation. Enron pledged $20 million to local charities and promised to contribute an addition $10 million to Oregon environmental groups and conservation projects, effectively muting any uncomfortable questions about how the Texas company planned to deal with such home-grown issues as salmon conservation and low-cost electricity.
When philanthropic disbursements don't quell all the critics, Enron doesn't hesitate to reveal its dark side. The company has a well-earned reputation as one of the most aggressive companies in the energy business. "They play with steel elbows," one bruised competitor said. In Oregon, Enron, and its partner in crime PGE, wasted no time in going after the Public Utilities Commission when the PUC had the temerity to question the public benefits of the merger. The energy conglomerate rushed to the Oregon legislature, promoting a bill that would eviscerate the PUC's regulatory power. Ultimately, the PUC buckled under the pressure and approved the deal.
And now the true price tag of Enron's takeover of PGE is being seen, as deals are cut to ensure that the lowest electric rates will go to largest and most wasteful consumers of power, the pulp mills and aluminum plants. Meanwhile, some of PGE's most prized assets are being auctioned off to the highest bidder, with the ratepayers being expected to make up any losses. For the residential consumer and the salmon the honeymoon for the ignominious marriage between PGE and Enron is clearly over.
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