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An Enron survivor, Piro had to reassure banks, creditors, ratings agencies, and customers that the utility wasn't tainted by the energy trader's sins.
Joseph McCafferty, CFO Magazine
June 1, 2006
Jim Piro is an Enron survivor. As CFO of Portland General Electric, he helped steer the 116-year-old utility — purchased by Enron in 1997 for $3 billion — through the massive scandal at its parent company. To do that, Piro, 53, had to reassure banks, creditors, ratings agencies, and customers that the utility wasn't tainted by the energy traders' sins. More important, he had to focus employees, who had lost much of their retirement savings in Enron stock, on the task at hand — keeping their customers' lights on.
The effort paid off. On the April day when Jeffrey Skilling first took the stand to defend himself in the Enron criminal trial, PGE listed on the New York Stock Exchange, establishing itself once again as an independent entity. It is the only surviving business of Enron.
What were your thoughts when news of the scandal broke?
Early on, there was so much [information] swirling about, you couldn't tell fact from fiction. As I learned more about it, I was shocked. I'm generally a trusting person and this doesn't change my view about people; it's just that some people are crooks. When Enron had bad periods, they had the chance to come clean and they didn't; they kept going down the path and, ultimately, it led to their demise.
Was it hard to stay focused amid all the negative publicity?
By far the biggest impact was that we all had Enron stock in our 401(k)s and people saw significant financial losses. That obviously created a lot of talk around the water cooler, especially since some people made big bets on Enron and lost. So from that perspective, it had a really bad effect, and some people carried that pain longer than others. But we knew our customers were depending on us, so we rolled up our sleeves and went to work.
What is PGE doing to try to compensate employees for those losses?
We are supporting legislation that would allow them to put more money aside in their 401(k)s, so that they can catch up a bit. There have been a number of lawsuits and a few other settlements to try to restore some of what was lost, though it can never really be replaced. We also have a very good, well-funded defined-compensation plan.
How did PGE avoid being liquidated, or dragged into bankruptcy along with Enron?
First, everyone rallied around the issue and said, "OK, we've had some losses, but we need to do our job — get the lights on, put up the wires, meet our customers' needs." Second, we had very strong relationships with the ratings agencies and commercial banks, and they stood by us. Typically, ratings agencies practice the two-notch rule, meaning you can't be more than two notches away from your parent. At the time of Enron's bankruptcy, it became junk status, but we were able to retain our investment-grade rating thanks to some structural [strengths], including a ring-fencing provision — meaning we could never have our equity balance go below 48 percent of total capitalization. And that gave the ratings agencies comfort that Enron couldn't raid the bank.
How well insulated was PGE from the things that went on at Enron?
We never got integrated into the Enron culture. Not many people from Enron came to Portland. Plus, since we were a good distance from Houston, we weren't really connected to [the company's] operations. In fact, we had been in the process of being sold to Northwest Natural Gas when the bankruptcy occurred, so there was a feeling that we weren't really in the Enron family at all.
There have been allegations that PGE employees suspected that some of Enron's energy-trading transactions were at least questionable. What were the signs?
They were in the same building, but on a different floor. We saw some things that definitely looked a little screwy, but the trades we took part in were minuscule compared with other energy companies. Enron didn't talk to us about its strategy; it looked at us as outsiders. So some of our traders saw transactions that just didn't make a lot of sense, but they didn't know exactly what they were.
In 2001, your rates increased 41 percent. What do you say to the consumer groups that have been critical of the increases?
Rates went up, down, and then back up again. Rates went up dramatically during the energy crisis [in California]. The recent increases have been due to a rise in the price of natural gas — of which we buy a fair amount — and of other purchased power. Our rates are generally higher than those of others that use more hydro [electricity] or coal. We're only about 25 percent hydro, while others are as much as 50 percent hydro-based. Fifty percent of our costs are related to power costs, so we'll continue to see that [higher rate] until there is a decline in natural-gas prices.
The city of Portland is investigating PGE for allegedly overcharging customers and misusing tax revenues. Will you be exonerated?
Absolutely. There have been a number of investigations due to our association with Enron. Enron didn't pay some taxes that were due [to the city of Portland]. We've been up front about it and settled most of the investigations. In the Portland case, the city was interested in buying the company. But the city really didn't have broad-based support for the acquisition, and things eventually fell apart. It felt like it was jilted a bit. [Part of] Portland's agenda going forward has been to try to discredit us.
How is PGE putting the scandal behind it?
We need to show people, by focusing on our customers, that we're the same company that existed for 100 years before Enron and that we're a good member of the community. Customer-service satisfaction rates went down considerably after Enron collapsed, but they have come up again. Enron has no direct economic interest in PGE. I'm proud that we survived. We're a better company. When you go through something like that, you find out who your friends are.