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PORTLAND GENERAL CORPORATION

 


Address:
121 S.W. Salmon St.
Portland, Oregon 97204
U.S.A.

Telephone: (503) 464-8820
Fax: (503) 464-2236


Statistics:
Public Company
Incorporated: 1888 as Willamette Falls Electric Company
Employees: 3,321
Sales: $889 million
Stock Exchanges: New York Pacific


Company History:

Portland General Corporation is a diversified holding company whose main subsidiary, Portland General Electric Co. (PGE), generates, buys, transmits, distributes, and sells electricity to more than 580,000 customers in northwestern Oregon. The company's other large subsidiary, Portland General Holdings, provides financial flexibility for nonutility businesses involved in wholesale electric power marketing, independent power production, real estate development, leasing, and world trade services.

Portland General's beginnings coincided with those of electric light in Oregon. In 1888 Edward Eastham, an Oregon City attorney, bank president, and state legislator, used a generator driven by Willamette Falls to bring electricity to Oregon City. Later that same year he joined with businessman Parker Morey to form the Willamette Falls Electric Company, with the intent of bringing power to Portland.

Under the leadership of Eastham, the Willamette Falls Electric Company--Portland General's ultimate parent--built a dynamo house on the Willamette river and ran 14 miles of transmission line, then the longest transmission line in the country, to Portland. On June 3, 1889, the company lit its first small circuit of Portland street lights. The next day the Oregonian wrote, "It worked magnificently and conclusively demonstrated that our city can be lighted successfully from the falls."

Eastham soon recognized that an alternating current, which loses little power as it travels over transmission lines, was better suited to the company's needs than the direct current it initially used. So in 1890 the company bought two 4,000-volt alternators from Westinghouse. Having never manufactured alternators so huge, Westinghouse agreed to build them only on the condition that they did not have to be guaranteed.

Demand grew quickly despite inconsistent service and monthly costs that ran higher than an average day's wages. Important customers of the era included trolley and interurban companies, which were among the first businesses to take advantage of electric power. To meet increasing demand, Eastham and Morey took on new investors and reincorporated as Portland General Electric (PGE) on August 5, 1892.

Parker Morey, who became president in the reorganization, began his administration by acquiring two Oregon City businesses--a lighting company and one that owned water rights in the Willamette Falls area. He then built a new, larger hydroelectric plant on the west side of the falls. Completed in 1895, the plant was supposed to supply all of the company's needs for 50 years. Demand grew so quickly, however, that the company had to build a new steam generator just six years later.

In 1902 Henry Goode succeeded Parker Morey as president. Realizing what positive advertising could do for the city and for PGE, Goode convinced the company's backers to invest $300,000 in a new steam generator to light the 1905 Lewis & Clark Centennial and American Exposition Oriental Fair. Both the lights and the fair itself were tremendous successes; more than three million people witnessed the uses and splendor of electric light.

After the fair, the company published a bulletin advertising electric appliances. It slashed rates and offered free trials for items like electric irons, vacuum cleaners, toasters, and curling irons. By 1906 city officials claimed Portland used more electric light per capita than any other city. The utility was soon selling electric appliances from a store within its headquarters--the Electric Building on Sixth and Adler in Portland.

In 1906 a group of Eastern investors gained control of PGE and merged it with the Portland Railway Company and the Oregon Water Power and Railway Company, thus bringing together electrical generating and distribution facilities with all of the diverse electric trolley and interurban companies that had sprung up in and around Portland. This new conglomerate was called Portland Railway Electric Light & Power Company (PREL&P).

PREL&P's first president was a transplanted Easterner named Benage Josselyn, whose primary business was trolley and interurban traction services, a booming enterprise in pre-automobile days. By 1908 gross revenue from railway operations was nearly three times that from light and power operations. Railway operations continued to grow until they peaked in 1913 with revenues at just under $4 million a year.

But while traction services dominated, Josselyn did not neglect generating facilities. In 1907 PREL&P completed the Cazadero Plant, a Clackamas River hydroelectric facility that increased available power by one-third. The following year the company finished Station L, a large steam generating plant along the Willamette River. In 1911 the River Mill Plant went on line, and in 1912 the Bull Run Plant along the Sandy River was completed.

Taking over the presidency from Josselyn in 1913, Franklin Griffith faced a variety of problems. In addition to a newly created Public Service Commission looking over the company's shoulder, the public, which had shown so much good will after the World's Fair, became disenchanted after the merger put the company in the hands of Easterners. Competition also became a concern for PREL&P when Northwestern Electric Company entered the Portland market.

Northwestern Electric Company had built a hydroelectric plant to serve a Washington paper mill. The plant produced excess electricity, and Northwestern planned to sell that electricity to the residents of Portland as new customers. The company undercut PREL&P's prices and soon obtained half of Portland's downtown business; it was only the Public Service Commission's 1917 ruling standardizing electric prices that kept Northwestern from getting more. Northwestern Electric stayed in Portland, and its entry into the market marked the beginning of 50 years of door-to-door competition.

Despite competition, PREL&P continued to expand. It acquired smaller companies and provided power to previously unserved areas. During World War I the company satisfied demand for electricity from the shipbuilding industry and other war-related manufacturers. To better reflect its emphasis on electric power, PREL&P changed its name in 1924 to Portland Electric Power Company (PEPCO). By the late 1920s, PEPCO was serving more than 70 communities in Oregon and Washington.

Also in the late 1920s and in the early 1930s, PEPCO changed hands several times and went through a series of manipulations that left the company in debt and hardly ready for the economic Depression. In October of 1929 PEPCO's majority stockholders, the Clark family of Philadelphia, sold out to Public Utility Holding Company of America (PUH), one of many holding companies trying to consolidate the utility industry in that era. After the stock market crash of 1929, PUH turned over its PEPCO stock to another utility holding company, Central Public Service Corporation (CPS) of Chicago.

CPS wanted to make PEPCO into a strong regional utility holding company. It changed PEPCO's name to Pacific Northwest Public Service Company and divided its operations into an electric services subsidiary, Portland General Electric (PGE), and a trolley subsidiary, Portland Traction Company. It also added the financially troubled Seattle Gas Company.

The new arrangement, however, did not last. After CPS declared bankruptcy in 1932, Franklin Griffith, who had remained president during the restructurings, saved the Portland utilities from a similar fate by resurrecting the PEPCO corporate structure--under which he kept PGE as a subsidiary--severing ties to Seattle Gas, refinancing a note that was due, and enabling CPS stockholders to trade CPS shares for PEPCO stock.

But while Griffith had saved PEPCO from the machinations of financiers from the East, the Depression took its toll on the company: between 1930 and 1933 earnings fell 25 percent. Griffith cut costs, streamlined operations, and expanded rural service to 86 percent of farms and rural dwellings in PGE's seven-county, 2,800 square-mile service area. Despite these moves the company still found it necessary to seek protection in two court-supervised reorganizations.

The Depression was not the only threatening force in the 1930s. In the late 1930s and early 1940s, advocates of public power held repeated referenda on whether municipalities should take over PEPCO's business. Though most of their motions were defeated, the advocates of public power did win an election in Clark County, Washington, that ended PEPCO's service to the Vancouver, Washington, area.

By 1940 the company had again become profitable. The new president, former Port of Portland general manager and chief engineer James Polhemus, rebuilt part of the Faraday Plant and signed a deal to distribute power from the government-built Bonneville Dam.

With the outbreak of World War II the economy in the northwestern United States revived. Defense plants such as the Kaiser Shipyards and the Iron Fireman Manufacturing Company stretched PEPCO's generating capacity to the limit. Power plants ran at full steam, and in 1942 the company joined the Northwest Power Pool as part of a general effort to better coordinate the use of the region's power resources. Two years later PEPCO was providing nearly 75 percent more electricity than it had in 1940.

After World War II PEPCO embarked on a three-year program of new construction. It dropped its rate to 1.5 cents per kilowatt-hour and in 1946 finally sold its long unprofitable trolley and railway operations. James Polhemus used the sales proceeds to settle a large debt left over from the early 1930s, and in 1948 he dissolved PEPCO, leaving its electrical subsidiary, Portland General Electric, to emerge as an independent investor-owned utility.

In the 1950s PGE promoted a modern electricity-consuming lifestyle. It pushed model kitchens and taught homeowners to use new electrical gadgets. To meet an ever-increasing demand, Frank Warren, who became president in 1955, upgraded the Station B Plant on the Willamette River, created two lakes to increase the capacity of PGE's Clackamas River plants, signed a new distribution agreement with the Bonneville Power Administration, and in 1958 completed both the North Fork Dam on the Clackamas River and the Pelton Dam on the Deschutes River. The latter, a $2.5 million structure with a $3.7 million state-of-the-art fish ladder, was the first plant into which the company had figured environmental costs.

On October 12, 1962, the Pacific Northwest was hit by a cyclone. Winds traveling one hundred miles per hour knocked out service for 262,000 of 268,000 PGE customers. For ten days line crews, retired employees, apprentices, and contractors from as far away as Utah worked 18-hour days before power was restored. Two years later floods washed out PGE's Faraday Dam and deposited twelve feet of silt in the dam's powerhouse.

Despite these events, demand continued to increase. The company needed new power plants, but building a new plant was not as simple as it had previously been. PGE had already used many of the region's available hydro sites and the remaining spots were inaccessible due to concerns about environmental damage. The company therefore turned to nuclear energy. On February 14, 1967, PGE President Frank Warren announced plans for a 1.1 million-kilowatt nuclear plant along the Columbia River.

PGE began the mammoth undertaking of constructing the Trojan Nuclear Plant in 1968. Environmentalists were raising questions about the effects of thermal pollution, so in 1970 the company added cooling towers to its design. That same year it formed partnerships with Pacific Power & Light and the Eugene Water & Electric Board. Construction dragged on, and it was not until December of 1975 that what was then the largest nuclear facility in the nation was finally completed at a cost of $420 per kilowatt of capacity.

PGE needed more generating capacity before the Trojan plant could be completed, so it built gas/oil-fired combustion turbine plants in Salem, Oregon, and in the Harboton neighborhood of Portland. Fortunately for PGE, these plants came on line just before a 1973 drought threatened to create a hydropower shortage in the area.

Financially, the 1970s were a difficult time for the company. Oil and gas became expensive, and the cost of credit for the power projects skyrocketed. In 1970 the company asked for and was granted permission to make the first of ten rate increases it would need over the decade.

PGE responded to the energy crunch of the 1970s with a series of public relations programs designed to help consumers conserve. "Mr. Watt Watcher" became a familiar face reminding customers to save energy. A weekly television program, How to with Pete, showed consumers how to make storm windows, wrap water heaters, and take other conservation steps.

More than instructing customers in various household conservation techniques, PGE mailed complimentary water-regulating shower heads, insulated electric water heaters for free, and offered interest-free loans to electric heating customers who wanted to weatherize their homes. Over the decade electrical use per household decreased ten percent.

In the latter half of the 1970s, PGE continued to pursue more power, becoming the majority partner in a coal plant in Boardman, Oregon. The company also planned to build a two-unit nuclear project at Pebble Springs and was an investor in nuclear projects planned by Montana Power Company, Washington Public Power Supply System, and Puget Sound Power & Light. When Bob Short, a former journalist and PGE lobbyist, became PGE chairman and chief executive officer (CEO) in 1980, he faced a recessionary Oregon with a reduced demand for electricity and a population with little patience for rising rates and expensive nuclear power plants. Short responded by cutting costs and opening the company to the media. He reexamined PGE's nuclear commitments and concluded that the plants were too expensive, too controversial, and not needed. In 1983 the company wrote off its $250 million investment in the Pebble Springs and Skagit Plants and three years later wrote off its share of the Washington Public Power Supply System.

Short replaced the nuclear program with conservation efforts and innovative programs that encouraged the use of alternate forms of energy. PGE offered rebates to customers who installed solar water heating systems, participated in cogeneration ventures, and through its "Good &cent-ts" program, it promoted efficient heating systems. Between 1978 and 1988, in fact, the company estimated that its weatherization programs resulted in 105 million kilowatt hours of savings. By 1984 rates had stopped their upward spiral.

In the mid-1980s Short began seeking profits in non-utility subsidiaries. PGE incorporated Columbia Willamette Development Company (CWDC), which has since undertaken residential, commercial, and mixed-use projects in Oregon, Washington, Arizona, Idaho, and Hawaii. CWDC was followed first by Portland General Financial Services, which provides financing to other Portland General subsidiaries, and then by Columbia Willamette Leasing, Inc., and Portland General Leasing, Inc., which are involved in land leasing.

Because PGE's corporate structure made these non-utility subsidiaries subject to regulation by the Public Utility Commission and put them at a disadvantage in the marketplace, the company reorganized in 1986 as the Portland General Corporation. Serving as a holding company for PGE and Portland General Holdings, Inc.--which in turn holds the company's non-utility subsidiaries--the company's non-utility holdings are subject to no more regulation than other firms in their same fields.

In the late 1980s Portland General continued to expand its non-utility holdings, forming the World Trade Center Northwest Corporation in 1987 to encourage economic development in the Portland area. In December of the following year, Ken L. Harrison became the chief executive officer of Portland General. Under Harrison, Portland General worked to insure customer satisfaction. It also developed Portland General Exchange, which matches energy sources with energy customers in the wholesale power market, and Portland General Energy Systems, which designs, installs, and maintains electric equipment for commercial and industrial customers.

In January of 1991 SAVE, a new regulatory arrangement, went into effect. According to Public Utilities Fortnightly, SAVE "allows PGE to earn a profit on energy saved, extending the benefits of successful energy efficiency to the company's owners as well as its customers."

In the early 1990s financial troubles again hit Portland General. The Trojan nuclear plant had to be closed for lengthy repairs, and on November 13, 1991, the company announced it would write off its entire $45 million investment in the financially troubled power producer Bonneville Pacific Corporation. Praised by much of the financial community for this action, Portland General nevertheless reported a loss for 1991.

Formed in 1888 as the Willamette Falls Electric Company, Portland General grew quickly through the late nineteenth and early twentieth centuries. It relied heavily on hydroelectric power and, for a time, was dominated by a prospering rail business. A series of manipulations by utility trusts left it too weak to face the Depression. During the post-World War II expansion, the company built a long series of power plants, culminating in the completion of the Trojan Nuclear Plant in 1975. The 1980s marked reexamination of its needs and the write-off of several large nuclear investments. In 1992 Portland General announced that it would close its Trojan nuclear plant in 1996. Exploring its non-utility profit-making potential in the early 1990s, Portland General was also participating in innovative regulatory arrangements.

Principal Subsidiaries: Portland General Electric Co.; Portland General Holdings, Inc.; Columbia Willamette Development Co., F.F.P. Inc.; Columbia Willamette Investment Co.; Portland General Exchange Inc.; Portland General Financial Services, Inc.; Powerlink Corp.; Powerlink Services Corp.; Columbia Willamette Leasing, Inc.; Rail Leasing, Inc.; World Trade Center Northwest Corporation.





Further Reading:


Dillin, Carol A., "A Century of Investor-Owned Electric Service--A Utility History," Public Utilities Fortnightly, August 31, 1989.
Bergman, Liz, Bringing Power to Ideas: Portland General Electric, Portland, Oregon, Portland General Corporation, 1989.
Stevens, Amy, "Oregon Utility Will Write Off Bonneville Stake," Wall Street Journal, November 13, 1991.
Phillips-Israel, Kathy, James Hagerman, and James Aaron, "Collaboration SAVES Energy in Oregon," Public Utilities Fortnightly, April 1, 1992.

Source: International Directory of Company Histories, Vol. 6. St. James Press, 1992.




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