Bid for PacifiCorp stumbles

PORTLAND, Ore. — The $9.4 billion MidAmerican Energy bid for PacifiCorp has failed to pass its first regulatory hurdle.

Oregon Public Utility Commission staff has recommended against approving the sale of the ScottishPower subsidiary to MidAmerican Energy Holding Co., controlled by billionaire investor Warren Buffett. But the PUC staff said it might reconsider if MidAmerican can offset the potential risks of the proposed PacifiCorp purchase by providing rate credits to its 517,000 Oregon customers.

Rate credits were the "clearest method" for addressing risks, which included possible increases in debt costs, and higher insurance and overhead expenses, the commission staff said. They suggested a credit that would show up on monthly bills.

The PUC staff comments were outlined in documents filed Monday with the three-member commission. Customer groups and business organizations also submitted testimony calling for rate credits or a rate freeze.

Under state law, any company that wants to buy an Oregon utility must prove to the PUC that the transaction is in the public interest and results in a "net benefit" to customers.

MidAmerican, based in Des Moines, Iowa, has resisted previous calls for rate credits. Instead, it has emphasized plans to spend $1.3 billion to improve PacifiCorp's electricity network, including transmission upgrades and emissions reductions at coal plants.

"We believe we've made a strong case to the PUC that a transaction should be approved," said Keith Hartje, a MidAmerican spokesman.

Bob Jenks, executive director of the Oregon Citizens Utility Board, a ratepayer group, said the cost of the network improvements would fall on customers and raise rates by an estimated 3 percent annually — in addition to 4 percent annual increases already projected by PacifiCorp.

"You'll see a net harm because rates will go up," Jenks said.

The PUC staff also concluded that Buffett, his company — Berkshire Hathaway Inc. — and Walter Scott, all investors with substantial stakes in MidAmerican, should be included in the formal request to buy PacifiCorp. At this point, MidAmerican is the sole applicant.

PacifiCorp is owned by ScottishPower of Glasgow, Scotland. It operates in Oregon as Pacific Power but also serves customers in Utah, Washington, Wyoming, Idaho and California.

MidAmerican has until Dec. 7 to respond. Commissioners are not expected to decide on the sale until next year.