Thanks for the update. My only concern is that we should really try to go for a much shorter time period for Oregon.  I would think about 6 months.  After all, that is NWN's attraction.  Our goal should be to reach CLOSING in 9 months.  Paul, can you talk to Mark and make sure that Sue Ackerman is on board?  Thanks.

 -----Original Message-----
From: 	Kaufman, Paul  
Sent:	Monday, October 08, 2001 6:38 PM
To:	Metts, Mark; Uhl, Jessica; Mordaunt, Kristina; Shapiro, Richard
Subject:	update

Three matters:

1.	Conference call with Staff.

Particpants were:  Phil Nyegaard (staff lead for the Enron/PGE merger and currently acting chief of staff); Bryan Conway (lead staff electric techie and staff on the Sierra/PGE transaction); Mark Helman (Staff lead on PGE's rate case and the lead on the Sierra/PGE transaction); Lee Sparling (a lead on a number of gas company cases); and Bonnie Tatum (lead staff gas techie).  The call went well.  Staff was upbeat, interested, but (of course) non-commital.  They asked a number of questions--none of them troubling.  

	Timing.  They asked when we wanted a OPUC order.  Sue Ackerman suggested 9 months.  Pamela Lesh suggested that we would push for a shorter time frame.  Helman replied that we may be able to get this transaction done quicker, but this transaction presented different issues than past cases.  Helman asked suggested that we may need to propose conditions limiting anti-competitive gas vs. electric practices.

	Financing.  Helman asked how NNG will finance the ($1.55 billion) cash portion of the purchse.   Ackerman responded that she would provide detail on the terms and conditions of the CSFB/Merrill financing.  

	Other Regulatory Review.  Helman asked whether the SEC would be reviewing the financial condition of the holding company.  We responded that the SEC would not be focusing on the financial condition of the holding company as it will be an exempt, intrastate.  I explained the other regulatory processes that would apply to the transaction.  Ackerman noted that the Washington Commission would review, but that we expected the issues to be limited.  

	Process.  Nyegaard noted that Mark D. and Peggy F. had met with the Commissioners.  He asked whether additional briefing would be necessary.  I responded that our discussions with the Commissioners had been brief and focused on the overall structure of the transaction and process.  I stated that we did not have any numbers at the time or other key details.  We said that we intended to seek a public meeting with the full commission (after our application is filed).  Staff supported a public meeting on the transaction.   They offered to join us in any future private meetings with the Commissioners (!!!!).  We said that we weren't planning any addition private meetings.  

2.	Other parties

	Sue Ackerman spoke with Bob Jenks of CUB yesterday.  Her call followed our unsuccessful attempt to reach him via conference call.  Jenks was interviewed by the Oregonian for today's article.  He questioned NNG's ability to finance the purchase of a larger company.  In his private discussion with Sue, Jenks repeated his concern with NNG's ability to finance the transaction.  The only other concern he raised was NNG's practice of bringing regulatory issues to the legislature.  

	We were unable to reach ICNU and NWIGU--but left messages with Ken Cannon and Paula Pyron--respectively.

3.	Rate Conditions.

	We're still working on a variety of proposals for a rate condition.  At this time we are considering a proposal that would mirror NNG's ROE earnings test.   Under this approach, PGE would:  (1) compare actual distribution system related earnings to authorized earnings; (2) create an account which would track the difference between actual and authorized; (3) share a certain portion of the difference between actual and authorized--above 300 basis points.  The sharing would not take place until the next filed rate case.

	Under this approach neither PGE nor NNG would commit to a rate freeze.  Parties could drag the utilities into the PUC through a show cause order--however, note that there have not been any show-cause rate cases at the OPUC in recent history.  Fuel savings (resulting from the merer of gas procurement activities) would flow through automatically to ratepayers through NNG's PGA and through PGE's PCA (of its progeny).  

	PGE is conducting an analysis of this mechanism to determine its impact on earnings.  We will discuss this mechanism with all of you before discussing it further with NNG.  

4.	FERC Review

	We're pushing PGE and NNG to complete the data collection effort for CRA's market power analysis.  A revised schedule for the FERC, SEC, OPUC and WUTC proceedings will be circulated by mid-week.  

--end--