ML20138J707

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Provides Supplemental Info on Planned Merger of Poge'S Parent Company,Portland General Corp W/Enron Corp. Stipulation,Also Encl
ML20138J707
Person / Time
Site: Trojan  File:Portland General Electric icon.png
Issue date: 05/01/1997
From: Quennoz S
PORTLAND GENERAL ELECTRIC CO.
To:
NRC OFFICE OF INFORMATION RESOURCES MANAGEMENT (IRM)
References
TAC-N96511, VPN-037-97, VPN-37-97, NUDOCS 9705080300
Download: ML20138J707 (37)
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PortlandGeneralElectricCoraxiny f E Stephen M. Quennoz Trojan Site Executive May 1,1997 VPN-037-97 Trojan Nuclear Nant Docket 50-344 License NPF-1 Docket 72-0017 U. S. Nuclear Regulatory Commission Document Control Desk Washington, DC 20555

Dear Sirs:

Suoplemental Information on Planned Merger of Portland General Electric Company's hrsnntCompany. Portland General Corooration with Enron Coro.

The merger between Enron Corp. and Portland General Electric Company's ("PGE's") parent r company, Portland General Corporation ("PGC"), which was approved by the NRC's March 6, 1997 Order (TAC No. N96511), has now received all regulatory approvals with the exception of <

the Oregon Public Utilities Commission ("OPUC"). However, on April 29,1997, the OPUC staff, PGC, Enron, and some of the other parties to the OPUC proceeding on the merger agreed to a stipulation to resolve identified issues. Although the stipulation is still being circulated for additional intervenor signatures, a copy of the stipulation is enclosed for the NRC's information.

To address the OPUC staff s April 11,1997 recommendation to disapprove the merget unless greater benefits are provided to ratepayers, on April 13 and 14,1997, respectively, the Enron Board of Directors and the PGC Board of Directors approved an amendment to the merger agreement between the two companies to provide a substantial increase in merger-related benefits to PGE customers. A copy of the amendment to the merger agreement is also enclosed. The amendment and stipulation do not materially alter the basis for the NRC's Order approving PGE's application to the NRC regarding the merger.

Enron initially committed to the OPUC that it would pass on to customers its merger-related cost savings, subject to a minimum annual benefit of at least $3 million. This became the subject of extensive discussions with the OPUC staff and a number ofintervenors, with the OPUC staff ultimately seeking $141 million in compensation and benefits to PGE's customers. Included in the

22 negotiated conditions governing the merged companies is Enron's agreement to provide customer gJ ate.re u u@t. J aetiens in the amount sought by the OPUC staff. The increased benefits to ,

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VPN-037-97 May 1,1997 Page 2 of 2 ratepayers is to be funded by a significant increase in Enron's financial commitment and by an ,

amendment to the merger agreement wl'ich reduces the exchange value of PGC shares for Enron '

shares. The agreement previously provi&d for a one to one exchange of Enron shares for PGC shares. The amended agreement provides for an exchange of I share of PGC common stock for 0.9825 shares of Enron common stock. This change in the conversion ratio results in a corresponding reduction in the acquisition premium incurred by Enron in the transaction, but will not affect the capital structure of PGE.

The $141 million rate reduction is accomplished in conditions 19 and 20 of the stipulation.

Condition 19 provides for cost of service reductions of $36 million spread over four years.

~ Condition 20 provides for additional rate reductions to be $105 million over an eight to ten year period to be paid for by Enron. Immediately upon completion of the merger PGE will record a receivable from Enron and an equal obligation to reflect the payment owed to PGE customers.

The stipulation will be submitted to the OPUC for approval. Oral arguments before the OPUC are scheduled for May 6,1997, and the OPUC plans to issue its order on the merger on June 4, 1997. The amended merger agreement also requires the approval of Portland General shareholders. A shareholder vote is tentatively scheduled for June 24,1997 at the Company's annual shareholder meeting.

Except as noted here, the stipulation with the OPUC staff and the amendment to the merger agreement does not affect the basis for the NRC's March 6,1997 Order approving the planned merger. Nevertheless, the enclosed amendment is provided for the NRC's information.

If there are any questions, please contact Mr. Douglas R. Nichols, at (503) 464-8402.

Sincerely, M#

Stephen M. Quennoz Trojan Site Executive Enclosures c: M. T. Masnik, NRC, NRR D. G. Reid, NRC, NESS R. A. Scarano, NRC Region IV David Stewart-Smith

Enclosure (1)

Stipulation of April 29,1997, In the Matter of the Application of Enron Corp for an Order Authorizing the Exercise ofInfluence Over Portland General Electric Company, a Public Utility 1

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BEFORE THE PUBLIC UTILITY COMMISSION I

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In the Matter of the Application of Enron )

Corp for an Order Authorizing the )

Exercise ofInfluence Over Portland ) STIPULATION General Electric Company, a Public Utility )

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RECITALS

1. On August 30,1996, Enron Corp (Enron) filed an Application to Exercise Influence over Portland General Electric Company (PGE) (hereinafter, " Application"). A Prehearing Conference was held on September 16,1996, at which the events and schedule for the proceedings were agreed upon by all the parties. A Conference Memorandum confirming the agreement was issued September 17,1996.
2. The procedure agreed to by the parties included, among other things, discovery, an l exchange of comments, a preliminary recommendation by Staff and a settlement conference. The dates for these events were revised by subsequent orders of the Administrative Law Judge dated November 26,1996, December 11,1996, and Feb aary 26,1997.
3. At the request of Staff, depositions of Geoffrey D. Roberts, Steven J. Kean, Kenneth D.

Rice, Jeffrey K. Skilling, J. Clifford Baxter, John Stinebaugh, Joseph Hirko, Alvin Alexanderson and James J. Piro were conducted on November 21,1996.

4. The parties commenced a settlement conference on January 22,1997, and continued discussions until January 24,1997. The Commissioners held a public hearing on the status of settlement discussions on February 14,1997. Additional settlement discussions were conducted on February 25, March 12, April 24, and April 29,1997.
5. On April 14,1997, Enron and PGC announced a revised merger agreement, in which Enron and PGC agreed to change the ratio by which PGC's shareholders may exchange PGC shares for Enron shares from a one-to-one ratio to a one-to-0.9825 ratio.

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6. Based cn the record in the case, and for the purpose of recommending to the Commission that Enron's Application satisfies the statutory standard of serving PGE's customers in the public interest, the following undersigned parties (" Settlement Parties") desire to enter into this Stipulation.

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WHEREFORE, the Settlement Parties stipulate and agree as follows: i I l

CONDITIONS The Settlement Parties agree that the following conditions shall be incorporated in a final '

Commission order approving the Application: !i il

1. To determine the reasonableness of allocation factors used by Enron to assign costs to i PGE and amounts subject to allocation or direct charges, the Commission or its agents may audit the accounts of Enron and its unregulated subsidiaries which are the bases for i j

charges to PGE. Enron agrees to cooperate fully with such Commission audits. l

2. Enron and PGE shall provide the Commission access to all books of account, as well as all documents, data and records of their affiliated interests, which pertain to .

transactions between PGE and all its affiliated interests. ,

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3. PGE shall maintain its own accounting system, separate from Enron's accountmg  :

system. All PGE financial books and records shall be kept in Portland, Oregon. I 1

4. Enron and PGE shall exclude all costs of the merger, including merger transition costs, from PGE's utility accounts. Within 90 days following the merger completion, Enron will provide a preliminary accounting of these costs. Further, Enron agrees to provide the Commission a final accounting of these costs, within 30 days following the accounting close of the merger.
5. PGE shall maintain separate debt and, if outstanding, preferred stock ratings.
6. PGE shall not make any distribution to Enron that would cause PGE's equity capital to fall below 48 percent of the total PGE capital without Commission approval. The Commission Staff, PGE and Enron may re-examine this minimum common equity percentage as financial conditions change, and may request that it be adjusted.
7. Enron, PGE and Commission Stafi agree that the allowed return on common equity and other costs of capital will not rise as a result of the merger. These capital costs refer to the costs of capital used for purposes of rate setting, avoided cost calculations, affiliated interest transactions, least cost planning, and other regulatory purposes.
8. Enron and PGE shall provide the Commission unrestricted access to all written information provided to common stock, bond, or bond rating analysts, which directly or indirectly pertains to PGE or any affiliate that exercises influence or control over PGE.

Such information includes, but is not limited to, reports provided to, and presentations made to, common stock analysts and bond rating analysts. For purposes of this condition, " written" information includes but is not limited to any written and printed Page 2 - STIPULATION

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! l l 3 material, audio and video tapes, computer disks and electronically-stored information.

l Nothing in this condition shall be deemed to be a waiver of Enron's c': PGE's right to I

seek protection of the information.

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9. Unless such a disclosure is unlawful, Enron shall notify the Commission of:
a. Its intention to transfer more than 5 percent ofPGE's retained earnings to Enron over a six-month period, at least 60 days before such a transfer begins.
b. Its intention to declare a special cash dividend from PGE, at least 30 days before declaring each such dividend.
c. Its most recent quarterly conunon stock cash dividend payment from PGE within 30 days after declaring each such dividend.
10. Enron guarantees that the customers ofPGE shall be held harmless if the merger between Enron and PGC results in a higher revenue requirement for PGE than if the merger had not occurred.

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11. PGE shall stipulate to, adopt, and implement service quality performance measures, as fully described in Commission Staft's Proposed Stipulations for Service Quality Measures, to ensure that its current levels of service quality are maintained or f!

improved. The P1 and P2 measures for 1997 shall be:

P1 P2 C1 .10 .13 RI 1.5 1.7 R2 1.2 1.4 R3 NA NA

12. PGE and Enron agree to comply with all Commission requirements regarding affiliated l interest (AI) transactions, including timely filing of applications and reports. For 1997, 1998, and 1999, PGE will file semi-annual AI reports, as othenvise required by OAR 860-27-200. The AI report due dates shall be April 1,1998, for the second halfof 1997 and October 1,1998, and June 1,1999, respectively, for the 1998 semiannual reports. For 1999, the semiannual AI report due dates shall be October 1,1999 and June 1,2000.
13. Within 45 days of the end of each calendar quarter for 1997,1998, and 1999, beginning with the first full quarter following completion of the merger, PGE shall file detailed quarterly reports with the Commission regarding: (a) employee transfers, permanent and temporary, between PGE and Enron; and (b) consulting and training activities conducted by both PGE and Enron personnel for the other entity.

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Enron shall not subsidize its activities by allocating to or directly charging PGE expenses not authorized by the Conunission to be so allocated or directly charged.

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PGE shall not give its amliates preferential access through any prearranged, fonnal or informal, agreement with any ofits amliates regarding PGE's excess pipeline capacity and related capacity assets. PGE's capacity releases will be posted on the appropriate  ;

interstate pipeline Electronic Bulletin Board (" EBB"). '

PGE shall not give its amliates preferential access through any prearranged, formal or informal, agreement with any ofits amliates regarding PGE's power or natural gas assets.

If PGE and an affiliate engage in a blind (i.e. arm's length) exchange transaction (e.g.

NYMEX, EBBS and similar exchanges), the Commission will presume that the transaction meets the Commission's amliated interest transfer pricing policy requirements.

16. PGE shall file detailed quarterly reports with the Commission regarding transactions between PGE and Enron involving: (a) gas conunodity sales and pipeline capacity releases, and (b) electric power exchanges and sales, and (c) competitive ancillary electric services sales. Commission Staff, Enron, and PGE will promptly develop a report acceptable to the Commission. Such quarterly reports shall be filed for 1997, 1998, and 1999, within 45 days of the end of the quarter, beginning with the first full quarter after completion of the merger.
17. PGE shall not provide to any marketing personnel of any of PGE's affiliates or to any other person not afliliated with PGE, data or infonnation regarding any individual PGE franchise retail customer unless the customer grants written permission, which may be by electronic ioeans. PGE shall provide information developed by it on end-use customer opinions, end-use customer usage, end-use customer characteristics, or similar aggregated retail customer market information to all entities, on the same tenns and conditions, as stated below:
a. All entities including PGE afIlliates shall provide PGE a written request for information, with a copy to the Commission. PGE shall maintain, at its headquarters, a list of all requests within the last 12 months, and shall make it i

available to any person requesting it.

b. If the identical information has been previously provided to the marketing personnel of any of PGE's amliates or to any other entity not affiliated with PGE, PGE must provide the information within 10 business days of receiving the request.

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c. If the identicalinformation has not been previously provided to the marketing personnel of any of PGE's affiliates or to any other entity not affiliated with PGE, PGE must, within ten business days, either (1) provide the requested information; (2) provide an estimate of the date by which it can provide the infonnation and an explanation of why more than ten business days is necessary; or (3) deny the request with an explanation of the reason for denial.
d. If PGE denies a request for information by an entity not affiliated with PGE, it shall not make the information available in response to a request from the marketing personnel of any of PGE's affiliates for three months.
e. Any requesting person may fle a complaint under ORS 756.500 with the Commission.
f. PGE shall be entitled to collect, in advance ofproviding the requested information, reasonable compensation for the cost of providing it.
18. The Commission understands that PGE and Enron will abide by the agreements reflected in the Memorandum of Understanding (MOU), entered into in January 1997 between PGC, Enron, Natural Resources Defense Council, Northwest Conservation Act Coalition, The Nature Conservancy of Oregon, Northwest Environmental Advocates, Renewable Northwest Project, Oregon Citizen's Utility Board, Oregon Trout, Trout Unlimited, Native Fish Society, American Rivers, Oregon Energy Coordinator's Association, Community Action Directors of Oregon, and Oregon HEAT.

The Commission acknowledges the MOU and the commitments made therein.

However, such acknowledgment by the Commission does not include acceptance or denial of 1) any of the costs or benefits contained withir. MOU, for which PGE may desire to seek inclusion in rates, or 2) any filings that PGE may make to the Commission in accordance with the terms of the MOU. The parties maintain whatever enforcement rights exist in other forums.

19. Enron and PGE commit to provide guaranteed merger related cost of service reductions of $9 million per year for 4 years for a total of $36 million. PGE will i

' establish a balancing account and credit that account with $9 million per year beginning on the anniversary of the merger completion date and the three subsequent anniversary dates. The balancing account will accrue interest on the unamortized balance at the then current PGE approved rate of return. Customers will receive the benefit of these cost of service reductions through a tariff that shall reduce the unamortized account l balance. The customer credit will remain in effect for a total of 4 years, or until the i

effective date of new tariffs following a general rate case, whichever occurs first.

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l Residual balances in the balancing account, if any, whether debit or credit, will be disposed of only at the discretion of the Commission.

In the event that the actual savings are less than the guaranteed amount of $9 million per year, when determining the new tariffs, PGE will adjust its cost of service to reflect i

a total merger related cost of service reduction of $9 million in such new tariffs for a '

period not to extend beyond five years after merger completion. In the event that the new tariffs are a result of PGE disaggregation or divestiture, occurring prior to 5 years after merger completion, the disposition of the $9 million per year for the remainder of the 5 years will be decided in such proceeding.

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A. Payment Enron and PGE are obligated to provide PGE's customers $105 million upon merger completion, which represents full payment for any entitlement PGE's customers may have to value that relates to:

1) use of PGE's name, reputation, business relationships, expertise, goodwill or other intangibles;
2) wholesale and non-franchise retail activities that PGE has undertaken that will not take place within PGE after the merger (this includes but is not limited to PGE's discontinued term wholesale trading and risk management activities), and wholesale and non-franchise retail activities that PGE might have undertaken had the merger with Enron not occurred; and,
3) added value of the merged entity that is achievable because of the combination or because of the association with PGE.

I This payment obligation also shall constitute full payment to PGE's customers for I any entitlement to the revenues, value or other benefits arising from the business

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activities of the merged entity, other than the regulated business activities conducted j

by PGE. The term " regulated business activities" shall mean the assets and services l

of PGE which are subject to economic regulation under Oregon or federal law.

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j B. Exclusions This payment does not include:

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1) revenues from current and future long-term power sales, if any, made by PGE using PGE resources, the cost of which is included in PGE's
revenue requirement;
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2) revenues from future short-term power sales, if any, made by PGE,

' using PGE resources, the cost of which is included in PGE's revenue requirement, but only in the event that PGE has surplus resources at the j time it enters into such sales; or 1

3) any benefit resulting from purchases by PGE ofBonneville Power Administration (BPA) power that BPA has allocated to PGE for the
benefit ofPGE's retail customers.

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C. Accounting
1) The $105 million described in this Condition 20 shall be recorded j immediately upon completion of the merger. PGE will record a j receivable from Enron and an equal obligation to reflect the payment owed to PGE customers. PGE shall amortize the balance in the j customer credit account based on the actual amounts refunded.

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2) The customer credit account is established for customers within PGE's service territory, and the amount of the credit shall not be affected by a customer's decision to purchase electricity from third parties pursuant to a direct access or retail wheeling tariff. If functional or corporate disaggregation occurs, or if divestiture occurs, the remaining unamortized balance of the customer credit at that time will be attributed entirely to the distribution function ofPGE. The customer -

credit will stop when the unamortized balance reaches zero.

3) Interest on the unamortized balance shall be accrued at the then-current PGE approved rate of return and added to the customer credit account.
4) Customers will receive the benefit of this credit through a tariff that shall reduce the unamortized balance of the customer credit. The tariff will be canceled when the customer credit has been fully amortized to customers. Residual balances, if any, whether debit or credit, will be disposed of only at the discretion of the Commission.

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D. Implementation '

1) Customer credits will be determined based on an eight-year amortization period for the customer credit account. The Commission may change the amortization period in future rate proceedings, provided that the total amortization period does not exceed ten (10) years.
2) The customer credits will be apportioned among customer classes in the following manner:

a) 27 percent of the customer credits will be apportioned on an equal-percent-of-revenues basis among all customer classes, including retail power customers served under special contracts but excluding lighting maintenance and ownership charges under lighting Schedules 14,15 and 91. The maximum credit available to any special contract customers under this subsection shall not exceed the average percentage credit available to all customers under this subsection.

b) The remaining 73 percent of the customer credits will be apportioned on an equal-percent-of-revenues basis among all customer classes excluding lighting maintenance and ownership charges under lighting Schedules 14,15 and 91, provided that customers purchasing under Schedule 99 shall receive a benefit only to the extent that they would be credited under the terms of their contracts.

The Commission may change this apportionment in future rate proceedings.

3) PGE will file tariffs to ensure that credits to all customers as set forth herein will begin no later than 45 days after the merger completion date.

E. Compensation For Use of Employees Enron shall compensate PGE for the use of PGE employees spending time on Enron matters at the higher ofcost or market. PGE shall access Enron employees at a rate equivalent to the lower of cost or market.

21. _ If PGE or Enron violates any of the conditions 1-20, except for conditions 11 and 18, the Commission may impose in an Order, without first acquiring an order of the Circuit Couit, a sum as prescribed in ORS 756.990, subject to the following:

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, a. For failure to file any notice or report required by these conditions, the Commission i must give PGE and Enron written notice of the violation. If such notice or report is i provided to the Commission within 10 business days ofreceipt of the written notice, there will be no penalty assessment. PGE or Enron may request permission for extensions of the 10 business day period for cause, which permission the Commission shall not unreasonably withhold. '

b. For any violation of conditions 2, 3, 5, 6, 9a, 9b,15, and 17, Staff must give PGE and Enron notice of ine violation, and the date or dates on which the violation occurred.

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c. For any alleged violation other than those covered in a. and b. above,8 Staffmust i give PGE and Enron written notice of the violation. If such failure is corrected i within 5 business days of receipt of the written notice, there will be no penalty I assessment. PGE or Enron may request permission for extensions of the 5 business I day period for cause, which permission the Commission shall not unreasonably withhold.
d. Notice of any failure of a., b. or c. shall be delivered to both Enron and PGE.
e. If Enron and/or PGE remain in violation following the periods specified by sections
a. and c. above, Staff shall propose imposition of the penalty to the Commission.  ;

However, the Commission will impose a penalty on only one of either Enron or PGE l for the same violation. l

f. Penalties impe..ed under this condition shall not go to the General Fund. PGE l penaltie2 9 ell be included in a deferred account established under ORS 757.259.

Enron penalties require a cash payment to PGE, whereupon the cash payment amount would be included in a deferred account established under ORS 757.259.

g. Enron and PGE shall have the right to appeal an order imposing any sums pursuant  ;

to this condition under ORS 756.580. '

22. On or before 60 days after the closing of the merger, PGE shall file a plan with the Commission which includes the following components:
a. proposed terms and conditions on which all customer classes will have the opportunity to choose their electricity provider;
b. proposed separation of competitive from monopoly businesses of PGE; and 2

Condition Nos. 1, 7, 8,10,14,19, 20 and insofar as the they do not deal with the filing of a report, Conditions Nos. 4 and 12.

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c. the proposed resolution and recovery of stranded costs.

OTHER PROVISIONS In order to support the incorporation of the above agreements into a final order of the Commission on the Application, the Settlement Parties further agree as follows:

1. Settlement Parties agree that the conditions and commitments made in this Stipulation constitute benefits of the proposed merger to PGE customers and that completion of the merger will serve PGE's customers in the public interest.

Settlement Parties recommend that the Conunission adopt this Stipulation in its entirety and approve the proposed merger. The parties have negotiated this Stipulation as an integrated document. Accordingly, if the Commission rejects all or any material part of this Stipulation, or adds elements to any final order which are not contemplated by this Stipulation, each party reserves the right to withdraw from this Stipulation upon written notice to the Commission and Settlement Parties within five (5) business days of service of the final order rejecting or changing this Stipulation.

2. This Stipulation and all pleadings, data requests, responses to data requests, depositions, transcripts, testimony and written comments shall be entered into the record as evidence. With respect to the issues covered by this Stipulation, the Settlement Parties agree to waive cross examination of one another at any hearing held in this docket. The Settlement Parties agree to support approval of this Stipulation throughout this proceeding.
3. Settlement Parties have executed this Stipulation to resolve identified issues in this proceeding. With respect to the dollar amounts referenced in this Stipulation, no Settlement Party shall be deemed to have accepted or consented to the principles, methods or theories, employed in arriving at such amounts referenced in this i Stipulation.

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4. This Stipulation may be signed in any number of counterparts, each of which will be an original for all purposes, but all of which taken together will constitute only one agreement.

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DATED THIS Day of April,1997 i

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PUBLIC UTILITY COMMISSION PORTLAND GENERAL ELECTRIC COMPANY / PORTLAND GENERAL CORPORATION

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BONNEVILLE POWER ADMINISTRATION PORTLAND GENERAL ELECTRIC COMPANY / PORTLAND GENERAL CORPORATION By

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ENRON CORP.

By By CITIZENS UTILITY BOARD OF OREGON ENRON CORP.

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4. This stipulation may be siped in any mirnbar of coure g.i., such ofwMch will be i

an oziginal agreent. for all purposes, but all ofwMob taken together win conarinite only ons i

DATED THIS - i Day ofApril,1997 i

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By By Alvin Alexanderson j ENRON CORP. COMMUNITYACTIONDIRBCIORS

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i Enclosure (2)

First Amendment to Amended and Restated Agreement and Plan of Merger 4

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' FIRST AMENDMENT TO AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER THIS FIRST AMENDMENT TO AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER, dated as of April 14,1997 (this " Amendment"), is  !

by and among Enron Corp., a Delaware corporation ("Enron"), Ponland General Corporation, an Oregon corporation ("EQC"), and Enron Oregon Corp. (formerly New Falcon Corp.), an Oregon corporation and wholly owned subsidiary of Enron (the " Company"). 3 WHEREAS, the parties hereto have entered into that certain Amended and Restated Agreement and Plan of Merger, dated as of July 20,1996 and amended and restated as of September 24,1996 (as amended hereby, the "Acreement")(capitalized terms used but not defined herein shall have the respective meanings ascribed to such terms in the Agreement);

WHEREAS, the Mergers and the transactions contemplated by the Agreement have been approved by the holders of Enron Common Stock at the Enron Special Meeting and by the ,

holders of the PGC Common Stock at the PGC Special Meeting, each of which meetings was held on November 12,1996; WHEREAS, the Mergers and the transactions contempbted by the Agreement have received all regulatory approvals required in connection therewith, with the exception of the approval of the OPUC; WHEREAS, the parties desire to amend certain provisions of the Agreement in order to facilitate receipt of OPUC's approval of Enron's merger approval application; and WHEREAS, the boards of directors of Enron and PGC have approved and deemed it advisable and in the best interests of their respective shareholders to consummate the transactions on the terms set forth in the Agreement, as amended hereby; 1 NOW THEREFORE, in consideration of the foregoing and the respective representations, warranties, covenants and agreements contained herein, the parties hereto agree as follows:

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1. Section A2(b) of the Agreement is hereby amended so that the first sentence thereof '

is deleted and replaced with the following:

Each share of PGC Common Stock issued and outstanding immediately prior to the Second Effective Time (other than shares canceled pursuant to Ssetion 2.2(a)) shall be convened into l 0.9825 shares of Company Common Stock (the "PGC Conversion RatiQ").  !

2. _. Sections 2.5(b) and (c) of the Agreement are hereby amended by replacing each reference to "$41.75" with a reference to "$40.25." The parties acknowledge that although Section 2.5 also contains provisions relating to the adjustment of the Ceiling Price and the Floor Price, the 4

i parties agree that the provisions of the Agreement relating to the Ceiling Price and ceased to be Shareholders' applicable upon the obtaining of the PGC Shareholders' Approval and th Approval.

3.

The parties acknowledge that references in the Agreement to the term "as of th hereof," or "as of the date of this Agreement" shall continue to20,1996. refer to July unless l

otherwise specified. Unless otherwise specified, each reference in the Agreemenl document referring to the Agreement) to "this Agreement" shall be to the Agreemel hereby.

4.  ;

Section 4.8 of the Agreement is hereby amended to read in its entirety as follo shall be deemed to be made as of the date of this Amendment:

j Section 4.8 Recistration Statement and Proxy Statement. None of the information supplied or to be supplied by or on behalf of Enron that is included or incorpo reference in (i)(A) the registration statement on Form S-4 to be filed with the S Company in connection with the issuance ofshares of Company Conunon Stock in t Merger (the "Recistration Statement") or (B) the Post-Effective Amendment (as defin i Section 7.2(a)) will, at the time the Registration Statement or the Post-Effective Amenl i becomes effective under the Securities Act, contain any untrue statement of a materi or omit to state any material fact required to be stated therein or necessary to makethe statements therein not misleading, (ii) the joint proxy statement / prospectus in definitive l form, relating to the meetings of the shareholders of PGC and Enron to be held in conne with the Mergers and the prospectus relating to the Company Common Stock to be issuel in the PGC Merger (the " Joint Proxy Statement") will, at the date such document is mailj I to such shareholders and, as the same may be amended or supplemented, at the times of s meetings, contain any untrue statement of a material fact or omit to state any meterial fact) l necessary in order to make the statements therein, in light of the circumstances under which '

they are made, not misleading and (iii) the Supplemental Proxy Statement (as defined in Section 7.20(aT)in definitive form, relating to the Supplemental PGC Shareholders (as defined in Section 7.20(e)) will, at the date such document is mailed to the shareholders of PGC and, as the same may be amended or supplemented, at the times of such i contain any untme statement of a material fact or omit to state any material fact neces '

in order to make the statements therein, in light of the circumstances under which the made, not misleading. All documents that Enron is responsible for filing with the SEC in connection with the transactions contemplated herein shall comply as to form in all material respects with the applicable requirements of the Securities Act and the rules and regulations thereunder and the Exchange Act and the rules and regulations thereunder.

2

5.

Article IV of the Agreement is hereby amended by adding the following representations, which are made as of the date of this Amendment:

Section 4.18 Authority. Non-Contravention and Statutorv Anprovals relating to the Agreement As Amended by the First Amendment.

(a) Authority. Enron and the Company have all requisite power and authority to enter into the First Amendment (as defined in Section 4.19) and, subject to obtaining the Enron Required Statutory Approvals, to consummate the transactions contemplated by this Agreement. The execution and delivery of the First Amendment and the consummation by Enron and the Company of the transactions contemplated by this Agreement have been duly authorized by all necessary corporate action on the part of Enron or the Company, as the case may be. The First Amendment has been duly and validly executed and delivered by Enron and the Company and, assuming the due authorization, execution and delivery of this Agreement by PGC, the Agreement constitutes the legal, valid and binding obligation of Enron and the Company, enforceable against Enron and the Company in accordance with its terms.

(b) Non-Contravention. Except as disclosed in Section 4.4(b) of the Enron Disclosure Schedule, the execution and delivery of the First Amendment by Enron do not, and the consummation of the transactions contemplated by this Agreement will not, result in an Enron Violation under any provisions of(i) the certificate ofincorporation, bylaws or similar charter documents of Enron or any ofits subsidiaries or, to Enron's knowledge, any ofits joint ventures, (ii) subject to obtaining the Enron Required Statutory Approvals, any statute, law, ordinance, rule, regulation, judgment, decree, order, injunction, writ, permit or license of any Governmental Authority, applicable to Enron or any ofits subsidiaries or, to Enron's knowledge, any ofits joint ventures, or any of their respective properties or assets or (iii) subject to obtaining the Enron Required Consents, any note, bond, mortgage, indenture, deed of trust, license, franchise, permit, concession, contract, lease or other instrument, obligation or agreement of any kind to which Enron or any ofits subsidiaries or, to Enron's knowledge, any ofits joint ventures, is now a party or by which any of them or any of their respective properties or assets may be bound or affected, excluding from the foregoing clauses (ii) and (iii) such Enron Violations as would not have, in the aggregate, an Enron Material Adverse Effect.

(c) Statutory Anprovals. Except for (i) the OPUC Approval (as defined in Section 7.3(a)), (ii) a declaration of effectiveness by the SEC of the Post-Effective i Amendment (as defined in Section 7.2), (iii) the matters set forth in items (c) and (f) on {

Section 4.4(c) of the Enron Disclosure Schedule, (iv) those declarations, filings, registrations, !

notices, authorizations, consents, findings or approvals that have already been made and (v) any supplemental filings relating to any of the foregoing required by the execution of the First Amendment or the transactions contemplated thereby, there are no Enron Required 3'

Statutory Approvals in connection with the execution and delivery of the First Amendment 3 l l

l

by Enron and the Company or the consummation by Enron and the Company of the transactions contemplated by this Agreement the failure to obtain, make or give which would have,in the aggregate, an Enron Material Adverse Effect.

Section 4.19 Vote Required for First Amendment. No additional vote by the holders of any capital stock of Enron is required in connection with the First Amendment to this Agreement, which amendment was executed as of April 14,1997 (the "Eitsi Amendment").

6.

Section 5.8 of the Agreement is hereby amended to read in its entirety as follows, and i shall be deemed to be made by PGC as of the date of this Amendment:

i Section 5.8 Registration Statement and Proxy Statement. None of the information supplied or to be supplied by or on behalf of PGC that is included or incorporated by reference in (i) (A) the Registration Statement or (B) the Post-Effective Amendment will, at the time the Registration Statement or the Post-Effective Amendment becomes effective under the Securities Act, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, (ii) the Joint Proxy Statement will, at the date that document is mailed to the l

shareholders of PGC and Enron and, as the same may be amended or supplemented, at the times of the meetings of such shareholders to be held in connection with the Merger, contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading and (iii) the Supplemental Proxy Statement will, at the date that document is mailed to the shareholders of PGC and, as the same may be amended or supplemented, at the time of the Supplemental PGC Shareholders Meeting contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading. All documents that PGC is responsible for filing with the SEC in connection with the transactions contemplated herein shall comply as to form in all material respects with the applicable requirements of the Securities Act and the rules and regulations thereunder and the Exchange Act and the rules and regulations thereunder.

7. Article V of the Agreement is hereby amended by adding the following representations, which are made as of the date of this Amendment:

Section 5.18 Authority. Non-Contravention and Statutory Anorovals relatine to the Agreement As Amended by the First Amendment.

(a) Authority. PGC has all requisite power and authority to enter into the First Amendment and, subject to the Supplemental PGC Shareholders' Approval (as defined in Section 5.19) and the PGC Required Statutory Approvals, to consummate the transactions contemplated by this Agreement. The execution and delivery of the First Amendment and 4

s ,

O l

the consummation by PGC of the transactions contemplated by this Agreement and thereby have been duly authorized by all necessary corporate action on the part of PGC, subject to )

l obtaining the Supplemental PGC Shareholders' Approval. The First Amendment has been i

duly and validly executed and delivered by PGC and, assuming the due authorization,  !

execution and delivery hereof by Enron and the Company, constitutes the legal, valid and  ;

binding obligation of PGC enforceable against PGC in accordance with its terms.

(b) Non-Contravention. Except as disclosed in Section 5.4(b) of the PGC Disclosure Schedule, the execution and delivery of the First Amendment by PGC do not, and I the consummation of the transactions contemplated by this Agreement will not, result in a '

PGC Violation under any provisions of(i) the articles ofincorporation, bylaws or similar  ;

governing documents of PGC or any ofits subsidiaries or joint ventures, (ii) subject to obtaining the PGC Required Statutory Approvals and the Supplemental PGC Shareholders' l

Approval, any statute, law, ordinance, rule, regulation, judgment, decree, order, injunction, writ, permit or license of any Governmental Authority applicable to PGC or any ofits  :

subsidiaries orjoint ventures or any of their respective properties or assets, or (iii) subject to obtaining PGC Required Consents, any note, bond, mortgage, indenture, deed of trust,

)

I license, franchise, permit, concession, contract, lease or other instrument, obligation or agreement of any kind to which PGC or any ofits subsidiaries orjoint ventures is now a  :

party or by which any of them or any of their respective properties or assets may be bound or affected, excluding from the foregoing clauses (ii) and (iii) such PGC Violations as would not have,in the aggregate, a PGC Material Adverse Effect. l l

(c) Statutory Approvals. Except for (i) the OPUC Approval, (ii) a declaration of effectiveness by the SEC of the Post-Effective Amendment,(iii) the matters set forth in items (5) and (6) on Section 5.4(c) of the PGC Disclosure Schedule, (iv) those declarations, filings, registrations, notices, authorizations, consents, findings or approvals that have already been made and (v) any supplemental filings relating to any of the foregoing required by the execution of the First Amendment or the transactions contemplated thereby, there are no l PGC Required Statutory Approvals in connection with the execution and delivery of the First l Amendment by PGC or the consummation by PGC of the transactions contemplated by this I Agreement, the failure to obtain, make or give which would have, in the aggregate a PGC Material Adverse Effect.

Section 5.19 Vote Reauired for First Amendment. The approval of the First Amendment an4the PGC Merger by the holders of a majority of the shares of outstanding PGC Common Stock (the "Sucolemental PGC Shareholders' Aporoval") is the only vote of the holders of any class or series of the capital stock of PGC required to approve this ,

Agreement (as amended by the First Amendment), the PGC Merger and the other transactions contemplated by this Agreement.

Section 5.20 Supplemental Opinion of Financial Advisor. PGC has received the opinion of Goldman, Sachs & Co. dated the date of the First Amendment to the effect that, 5

as of such date, the consideration to be received by the holders of PGC Common Stock in the PGC Merger pursuant to this Agreement (as amended by the First Amendment) is fair from a financial point of view to the holders of PGC Common Stock.

8.

Section 7.3(a) of the Agreement is hereby amended to read in its entirety as follows:

(a) Esculatory Plans. Set forth on Appendix I are the terms of the revised regulatory plan to be submitted for approval by the OPUC (the " Revised OPUC Elan"). To the extent that the regulatory plans set forth in Schedule 7.3(a) (the "Reculatory Plans") relate to the OPUC er the state regulatory approval process, such regulatory plans (and Schedule 7.3(a)) are hereby amended to reflect the Revised OPUC Plan. The approval of the OPUC contemplated by the Revised OPUC Plan  !

is referred to herein as the "OPUC Aoproval." PGC and Enron shall cooperate in good faith, consult with each other and obtain each other's consent and agreement (which shall not be unreasonably withheld) on all components of, significant steps toward the achievement of the Revised OPUC Plan and obtaining the OPUC {

l Approval and with respect to significant filings, communications, agreements, arrangements or consents, written or oral, formal or informal, with the OPUC and/or any intervenor or representative thereof.

l

9. Article VII of the Agreement is hereby amended by adding Section 7.20, which shall read as follows:

Section 7.20 PGC Supolemental Proxy Statement and Registration Statement.

(a) Prenaration and Filing. As p anptly as reasonably practicable after the date of the First Amendment, the parties shall prepare and file with the SEC a post-effective amendment to the Registration Statement and a Proxy Statement (the "Sucolemental Proxv Statement") in connection with the Supplemental PGC Shareholders' Meeting. The parties shall take such actions as may be reasonably required to cause the post-effective amendment to the Registration Statement (the " Post-Effective Amendment") to be declared effective under the Securities Act as promptly as practicable after such filing. The parties shall also take such action as may be reasonably required to cause the shares of Company Common Stock and Company Preferred Stock issuable in connection with the Mergers to be registered under or to obtain an exemption from registration under applicable state " blue sky" or securities laws,-and to promptly make any filings required in connection with the First Amendment and the transactions contemplated thereby; provided, however, that none of the Company, PGC or Enron shall be required to register or qualify as a foreign corporation or to take any other action that would subject it to general service of process in any jurisdiction in which the Company will not, following the Effective Time, be so subject. Each of the parties shall furnish all information concerning itself that is required or customary for inclusion in the Supplemental Proxy Statement and/or the Post-Effective Amendment. If, at any time prior to the Effective Time, Enron discovers any event or circumstance relating 6

4 to Enron or any ofits subsidiaries, or its or their respective officers or directors, that should be set forth in an amendment to the Post-Effective Amendment or a supplement to the Supplemental Proxy Statement, Enron shall promptly inform PGC If, at any time prior to the Effective Time, PGC discovers any event or circumstance relating to PGC or any ofits subsidiaries, or its or their respective officers or directors that should be set forth in an amendment to the Post-Effective Amendment or a supplement to the Supplemental Proxy Statement, PGC shall promptly inform Enron. No representation, covenant or agreement contained in this Agreement is made by any party hereto with respect to information supplied by any other party hereto for inclusion in the Post-Effective Amendment or the Supplemental Proxy Statement. The Post-Effective Amendment and the Supplemental Proxy Statement shall comply as to form in all material respects with the Securities Act and the rules and regulations thereunder.

(b) Letter of Enron's Accountants. Following receipt by Arthur Andersen LLP, Enron's independent auditors, of an appropriate request from PGC pursuant to SAS No. 72, Enron shall use best efforts to cause to be delivered to the Company and PGC a letter of Arthur Andersen LLP, dated a date within two business days before the effective date of the Post-Effective Amendment and addressed to the Company and PGC, in form and substance reasonably satisfactory to the Company and PGC and customary in scope and substance for

" cold comfort" letters delivered by independent public accountants in connection with registration statements and proxy statements similar to the Post-Effective Amendment and the Supplemental Proxy Statement.

i (c) Letter of PGC's Accountants. Following receipt by Arthur Andersen LLP, I PGC's independent auditors, of an appropriate request from Enron pursuant to SAS No. 72,  !

PGC shall use best efforts to cause to be delivered to the Company and Enron a letter of l Arthur Andersen LLP dated a date within two business days before the effective date of the Post-Effective Amendment and addressed to the Company and Enron, in form and substance satisfactory to the Company and Enron and customary in scope and substance for " cold comfort" letters delivered by independent public accountants in connection with registration statements and proxy statements similar to the Post-Effective Amendment and the Supplemental Proxy Statement.

(d) Fairness Ooinion. Prior to mailing the Supplemental Proxy Statement to the shareholders of PGC, PGC shall have received an opinion from Goldman, Sachs & Co.,

dated the date of4he Supplemental Proxy Statement, to the effect that, as of the date thereof, the consideration to be received by holders of PGC Common Stock pursuant to the PGC Merger is fair to such holders from a financial point of view.

(e) Sucolemental PGC Shareholder Aporoval. PGC shall, as promptly as reasonably practicable after the date of the First Amendment (i) take all steps reasonably necessary to call, give notice of, convene and hold a meeting ofits shareholders, which may be either a special meeting or annual meeting (the "Sucolemental PGC Shareholders' 7

Meeting"), for the purpose of securing the Supplemental PGC Shareholders' A (ii) distribute to its shareholders the Supplemental Proxy Statement in accordance applicable federal and state law and with its articles ofincorporation and bylaws, whi Supplemental Proxy Statement shall contain the recommendation of the Board of Dir of PGC that its shareholders approve the PGC Merger, this Agreement and the tran contemplated by this Agreement (as amended by the First Amendment), (iii) use all reasonable efforts to solicit from its shareholders proxies in favor of the approval and adoption of the PGC Merger this Agreement (as amended by the First Amendme transactions contemplated by this Agreement and to secure the Supplemental PGC Shareholders' Approval, and (iv) cooperate and consult with Enron with respect to eac the foregoing matters; provided, that nothing contained in this Section 7.20(a) sha the PGC Board of Directors from failing to make or from withdrawing or modifyin recommendation to the PGC shareholders hereunder if the Board of Directors of PGC, afte consultation with and based upon the written advice ofindependent legal counsel, determin in good faith that such action is necessary for such Board of Directors to comply w fiduciary duties to its shareholders under applicable law.

10.

Sections 7.12,9. l(f) and 9.3 of the Agreement are hereby amended to (a) replace reference to "PGC Special Meeting" with " Supplemental PGC Shareholders' Meeting replace each reference to "PGC Shareholders' Approval" with " Supplemental PGC Shareholde Approval."

11.

Section 7.18 of the Agreement is hereby amended to read in its entirety as follows:

Section 7.18 Exnenses. Subject to Section 7.1 and Section 9.3. all costs and expenses incurred in connection with this Agreement and the transactions contemplated

< hereby and thereby shall be paid by the party incurring such expenses, except that those expenses incurred in connection with printing the Joint Proxy / Registration Statement, the ,

Post-Effective Amendment and the Supplemental Proxy Statement, as well as the filing relating thereto, shall be shared equally by Enron, on the one hand, and PGC, on the other hand.

12.

Section 8.l(a) of the Agreement is hereby amended to read in its entirety as follows:

(a)- Shareholder Aoprovals. The PGC Shareholders' Approval, the Supplemental PGC Shareholder Approval and the Enron Shareholders' Approval shall have been obtained.

13.

Section 8.l(c) of the Agreement is hereby amended to read in its entirety as follows:

(c) Registration Statement and Post-Effective Amendment. The Registration Statement and the Post-Effective Amendment shall have become effective in accord with the provisions of the Securities Act, and no stop order suspending such effectiveness shall have been issued and remain in effect.

8

. , o 14.

The second sentence of Section 8.l(e) of the Agreement is hereby amended to read in its entirety as follows:

A " Final Order" means action by the relevant regulatory authority that has not been reversed, stayed, enjoined, set aside, annulled or suspended, with respect to which any waiting period prescribed by law before the vansactions contemplated hereby may be consummated has expired (but without the requirement for expiration of any applicable appeal period), and as to which all conditions to the consummation of such transactions prescribed by law, regulation or order have been satisfied. 1 15.

Section 8.2(f) of the Agreement is hereby amended to read in its entirety as follows:

(f) Aporoval of Regulatory Plans. The OPUC shall have issued a Final Order that approves the Revised OPUC Plan that (i) does not include the imposition or threatened imposition of any change to the payment obligations, direct or indirect, of PGC, Enron or a affiliate of either of them set forth in Sections 2(19) and 2(20) of Appendix I, (ii) adopts the conditions set forth in Appendix I (including those set forth in Sections 2(19) and 2(20)),

substantially in the form set forth in Appendix I, and (iii) does not include the imposition or threatened imposition of any other conditions that are substantive. For purposes of this Section 8.2(D, the term " threatened imposition" shall mean a formal or informal expression ofintent by any Governmental Authority. For purposes of this Section 8.2(0, the term " pay" shall include, without limitation, any imputation of revenues or reduction of revenues, and the term " paying" and " payment" shall have corresponding meanings. In order for Enron to assert that the condition set forth in this Section 8.2(D has not been satisfied as a result of any action by a Governmental Authority (including without limitation a Final Order of the OPUC), Enron must give written notice to PGC to such effect no later than five business days after the date of the receipt by Enron of notice that such Govemmental Authority has taken such action.

16. i Section 9.l(b) of the Agreement is hereby amended to read in its entirety as follows:

l (b) by Enron or PGC, by written notice to the other, if the Effective Time shall not have occurred on or before the first anniversary of the date hereof (the " Termination D.aic"); provided, however, that either party may extend the Termination Date for an  ;

additional six mbnths (or three months if the condition set forth in Section 8.2(D has been l satisfied but thecondition set forth in Section 8.l(a) has not been satisfied) from such anniversary if(i) all the conditions to consununation of the Mergers set forth in Article VIII hereof have either been satisfied or are then capable of being satisfied by such date, other than the conditions set forth in Sections 8. l(a) and/or 8.2(D and (ii) such party believes that there is a reasonable probability that such condition will be satisfied by or before such extended Tennination Date; and provided further, that the right to terminate this Agreement under this Section 9.1(b) shall not be available to any party whose failure to fulfill any 9

1

. , . 1 obligation under this Agreement has been the cause of, or resulted in, the failure of the Effective Time to occur on or before the termination date; 17.

Section 9.l(c) of the Agreement is hereby amended to read in its entirety as follows:

(c) by Enron or PGC, by written notice to the other party, if (i) the Enron Shareholders' Approval shall not have been obtained at the Enron Special Meeting, including any adjournments thereof, (ii) the PGC Shareholders' Approval shall not have been obtained

. at the PGC Special Meeting, including any adjournments thereofor (iii) the Supplemental PGC Shareholders' Approval shall not have been obtained at the Supplemental PGC Shareholders' Meeting, including any adjournments thereof 18.

Section 9.1 of the Agreement is hereby amended by adding a new paragraph (n),

which shall read as follows:

(n) by Enron, by written notice to PGC, if the OPUC issues an order (regardless of whether such order has become a Final Order) that disapproves the Mergers or that approves the Mergers in a manner that does not satisfy the condition set forth in Section 8.2(f).

19.

Except as expressly set forth herein, the terms and provisions of the Agreement are hereby ratified and confirmed.

20. This Amendment may be executed in one or more counterparts, each of which shall be deemed to be an original, but all of which .iall constitute one and the same agreement.

I i

,e=

10

- - . -. - . - - =

IN WITNESS WHEREOF, Enron, PGC and the Company have caused this Amendment to be signed by their respective officers thereunto duly authorized as of the date first 4 above written.

ENRON CORP.

By:

- ",q I.hrd BaxW Senior Vice President, Corporate Development PORTLAND GENERAL CORPORATION By

Jls'e;((M. Hirko '

Senior Vice President and Chief Financial Officer ENRON OREGON CORP.

By: 'eAl- -  %'

Edmund P. Segner, III' President 11 l

=,

  • Appendix I Revised OPUC Plan .

1.

OPUC Approvals. The parties shall obtain the following OPUC approvals and authorizations no later than the time provided for in Section 9.l(b) of the Agreement (unless and to the extent that the parties mutually agree that such approvals are not reasonably required):

(a) Approval to Exercise Influence Over PGE pursuant to 0.R.S. 757-511 with the conditions set forth in Section 2 below; and (b) Certification under 15 U.S.C. 679z 5b(a)(2) enabling Enron Corp., and its subsidiaries, to own and acquire " Foreign Utility Companies" within the meaning of the 1935 Act.

2. OPUC Merger Conditions. The conditions set forth below shall constitute the full compensation and benefit to PGE's customers for the value (including intangible bene 6ts) flowmg to Enron as a result of this merger:
1. To detemune the reasonableness of allocation factors used by Enron to assign costs to PGE and amounts subject to allocation or direct charges, the Commission or its agents may audit the accounts of Enron and its unregulated subsidiaries which are the bases for charges to PGE. Enron agrees to cooperate fully with such Commission audits.
2. Enron and PGE shall provide the Commission access to all books of account, as well as all documents, data and records of their afEliated interests, which pertain to transactions between PGE and all its g affiliated interests.
3. PGE shall maintain its own accounting system, separate from Enron's accounting system. All PGE financial books and records shall be kept in Portland, Oregon.
4. Enron and PGE shall exclude all costs of the rnerger, including merger transition costs, from PGE's utility accounts Within 90 days following the merger completion, Enron will provide a prelimmary accounting of these costs. Further, Enron agrees to provide the Commission a final accounting of these costs, within 30 days following the accounting close of the merger.

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5. PGE shall maintain separate debt and, if outstanding, preferred stock  ;

ratings.

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I

6. PGE shall not make any distribution to Enron that would cause PGE's i equity capital to fall below 48 percent of the total PGE capital- '! I without Commission approval. The Commission staff, PGE and Enron may re-examme this muumum common equity percentage as fmancial conditions change, and may request that it be adjusted.
7. Enron, PGE and Commission staff agree that the allowed return on common equity and other costs of capital will not rise as a result of i the merger. These capital costs refer to the costs of capital used for purposes of rate setting, avoided cost calculations, affiliated interest transactions, least cost planning, and other regulatory purposes.
8. Enron and PGE shall provide the Conunission unrestricted access to all written information provided to common stock, bond, bond ranng analysts or financial institutions, which pertams to PGE. Such information includes, but is not limited to, reports provided to, and presentations made to, common stock analysts and bond ratmg analysts. For purposes of this condition, " written" information includes but is not limited to any written and printed material, audio and video tapes, computer disks and electronically-stored information. Nothing in this condition shall be deemed to be a waiver of Enron's or PGE's right to seek protection of the information.
9. Unless such a disclosure is unlawful, Enron shall notify the Commission of:
a. Its intention to transfer more than 5 percent of PGE's retained earmngs to Enron over a six-month period, at least 60 days i before such a transfer begms j
b. Its intention to declare a special cash dividend from PGE, at j

, least 30 days before declaring each such dividend.

s

c. Its most recent quarterly common stock cash dividend payment from PGE within 30 days after declaring each such dividend.
10. Enron guarantees that the customers of PGE shall be held harmless if the merger between Enron and PGC results in a higher revenue requirement for PGE than if the merger had not occurred.
11. . PGE shall stipulate to, adopt, and implement service quality performance measures, as fully described in Commission Staff's appuient.d.* 2

. e a

Proposed Stipulations for Service Quality Measures (Attachment 4, Staff Final Report dated 4/11/97), to ensure that its current levels of service quality are maintained or improved. He P1 and P2 measures for 1997 shall be:

P1 P2 C1 .10 .13 R1 1.5 1.7 R2 1.2 1.4 R3 NA NA

12. PGE and Enron agree to comply with all Commission requirements regarding afEliated interest (AI) transactions, including timely filing of applications and reports. For 1997,1998, and 1999, PGE will Sie semi-annual Al reports, as otherwise required by OAR 860 l 200. He AI report due dates shall be April 1,1998, for the second half of 1997 and October 1,1998, and June 1,1999, respectively for the 1998 semiannual reports. For 1999, the semiannual AI report due dates shall be October 1,1999 and June 1,2000.
13. Within 45 days of the end of each calendar quarter for 1997,1998, and 1999, beguuung with the first full quarter following completion of the merger, PGE shall file detailed quarterly reports with the Commission regarding: (a) ' employee transfers, permanent and L temporary, between PGE and Enron; and (b) consulting and training activities conducted by both PGE and Enron personnel for the other entity.
14. Enron shall not subsidize its activities by allocatmg to or directly charging PGE expenses not authorized by the Commission to be so  !

allocated or directly charged. i

15. PGE shall not give its afEliates preferential access through any prearranged, formal or informal, agreement with any ofits afEliates regarding PGE's power or gas supplies or PGE's pipeline capacity  ;

included in PGE's regulated revenue requirement. PGE may sell temporarily PGE's pipeline capacity to its afEliates if such sale l occurs over the Interstate Pipeline Electronic Bulletin Board (EBB). l

, PGE shall record any such sales at the bid price per the EBB. PGE may also sell power or gas to, or buy power or gas from, its  :

affiliates if such sale results from the matching of buyers and sellers by the NYMEX or similar third party blind exchange. He price at  !

which these exchange bids are matched will be assumed to be at the higher of cost or market for sales by PGE and assumed to be the lower of cost or market for purchases by PGE.

16. PGE shall file detailed quarterly reports with the Commission regarding transactions between PGE and Enron involving: (a) gas commodity sales and pipeline capacity releases, and (b) electric appendiXI. DOC

}

. g. -

power exchanges and sales, and (c) competitive ancillary electric sersices sales. Commission Staff. Enron. and PGE will promptly develop a report acceptable to the Commission. Such quarterly reports shall be filed for 1997,1998, and 1999, within 45 days of the end of the quarter, beginning with the first full quarter after completion of the merger.

17. PGE shall not provide to any person or entity data or irformation regarding sny individual PGE retail customer unless the customer grants written permission, either electronically or in hard copy.

PGE shall provide such data to the person (s) or entity (s) as the customer directs. Unless prior authorization is received from the Commission, PGE shall not provide to any person or entity any studies containing aggregated data on PGE end-use customer opinions, end-use customer usage, or end-use customer characteristics that PGE does not make available simultaneously to 2- all persons or entities on the same terms.

18. PGE and Enrca shall abide by the agreements reflected in the 2

Memorandum of Understanding, entered into between PGC, Enron, Natural Resources Defense Council, Northwest Conservation Act Coalition, The Nature Conservancy of Oregon, Northwest .

Environmental Advocates, Renewable Northwest Project, Oregon Citizen's Utility Board, Oregon Trout, Trout Unlimied Native Fish Society, American Rivers, Oregon Energy Coordinator's Association, Community Action Directors of Oregon, and Oregon HEAT.

The Commission acknowledges the MOU as an integral part of the merger conditions. However, such acknowledgment by the Commission does not include acceptance or denial of 1) any of the costs or benefits contamed within the MOU, for which PGE may desire to seek inclusion in rates, or 2) any filings that PGE may make to the Commission in accordance with the terms of the MOU.

4

19. Enron and PGE commit to provide guaranteed merger related cost  !

I of service reductions of $9 million/yr. for 4 years for a total of $36 j s million. Rese reductions will be credited at an annual rate of $9 million beginning on the anniversary of the merger completion date and the three subsequent anniversary dates. The reduction amounts will accrue at the then current PGE approved ROR. He reduction will remain in effect for a total of 4 years, or the effective date of new tariffs following a general rate case, whichever occurs first.

In the event that the actual savings are less than the guaranteed amount of $9 million/yr. when determuung the new tariff, PGE will

~

adjust its cost of service to reflect a total merger related cost of service reduction of $9 million in such new tanff for a period not to extend beyond four years after merger completion. In the event that w.nexiwe 4

, _ e, .

L j

i the new tariffs are a result of PGE disaggregation, which occurs

, pnor to 4 years after merger completion, the disposition of the $9

million per year for the remainder of the 4 years will be decided in j such proceeding.

20.

A. Payment.

Enron and PGE shall provide PGE customers $105 million upon 1

merger completion, which represents full payment for any l J

entitlement PGE's customers may have to value that relates to:  ;

i i 1) use of PGE's name, reputation, business relationships, '

. expertise, goodwill or other intangibles, i
2) wholesale and non-franchise retail activities that PGE has l undertaken that will not take place within PGE after the  ;

merger (this includes but is not limited to PGE's discontinued term wholesale trading and risk management activities), and  :

wholesale and non-franchise retail activities that PGE might  !

have undertaken had the merger with Enron not occurred; and

3) added value of the merged entity that is achievable because of the combination or because of the association with POE. .

I his payment also shall constitute full payment to PGE's  !

customers for any entitlement to the revenues, value or other bene 6ts arising from the business activities of the merged entity,. ,

other than the regulated business activities conducted by PGE. l He term " regulated business activities" shall mean the assets and l services of POE which are subject to economic regulation under Oregon or federal law.

B. Accountina. 4 I

1. The S105 million payment described in this Condition 20 shall i be recorded immediately upon completion of the merger. FGE l
  • will record a receivable from Enron and an equal obligation to  ;

reflect the payment owed to PGE customers. l 1

2. If functional disaggregation o> divestiture occurs, the remaming j unamortized balance of the customer credit at that time will be J attributed entirely to the distribution function of PGE. The l customer credit will stop when the unamortized balance ]

reaches zero.

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3. Interest on the unamortized balance shall be accrued and added to the customer credit account, appen6xt.'" 5
i. y ,

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l 4. Customers will receive the benefit of this credit through a tariff j that shall reduce the unamortized balance of the customer credit.

The tariff will be canceled when the customer credit has been- .}
- fully amortized to customers. )

i- t i

1 C. Emniovees. i j Enron shall compensate PGE for the use of PGE employees j

l spendmg time on Enron matters at the higher of cost or market.  !

PGE shall access Enron employees at a rate equivalent to the ,

i lower of cost or market. i i <

i I

21. Except as otherwise provided in these conditions (includmg i j' Condition 11 above), if PGE or Enron willfully violates any of  ;
the conditions 20 included herein, the Commission may l' I;. impose, without first acquiring an order of the Circuit Court, a j sum as prescribed in O.R.S. 756.990 per noticed violation, subject to the following: l

} 1. For failure to file any notice or report required by these , l

conditions, the Commission must give PGE and Enron l
l. written notice of the violation If such notice or report is  !

' provided to the Commission within 10 business days of >

j receipt of the written notice, there will be no penalty l l

assessment. PGE or Enron may request permission for i j extensions of the 10 business day period for cause, l l which permission the Commission staff shall not  ;

unreasonably withhold.  ;

[

2. For any alleged violation other than a failure to file any i notice or report required by these conditions, staff must j give PGE and Enron written notice of the violation. If j such failure is corrected within 5 business days of  ;

receipt of the written notice, there will be no penalty I

- assessment. PGE or Enron may request permission for  !

extensions of the 5 businers day period for cause, j which permission the Commission staff shall not i unreasonably withhold.

3. Notice of any failure of 1) or 2) shall be delivered to both Enron and PGE.
4. If Enron and/or PGE remains in violation following the

- periods speci6ed by sections 1) and 2) above, staff shall propose imposition of the fine to the Commission.

.,,.ami .4.c 6

-t ,, e  ;

l However, the Commission will impose a fine on only one of either Enron or PGE for the same violation. )

5. PGE penalties shall be included in a deferred account established under O.R.S. 757.259. Enron penalties require a cash payment to PGE, whereupon the cash payment amount would be included in a deferred account established under O.R.S. 757.259.
6. Enron and PGE shall have the right to appeal the imposition of any sums pursuant to this condition.

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