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Portland General Electric Company (NYSE:POR)

Q4 2007 Earnings Call

February 26, 2008 5:00 pm ET

Executives

William Valach - Director, Investor Relations

Peggy Fowler - Chief Executive Officer and President

Jim Piro - Executive Vice President of Finance, Chief Financial Officer and Treasurer

Analysts

Brian Russo - Ladenburg Thalmann

Michael Lapides - Goldman Sachs

James Bellessa - D.A. Davidson & Company

Rudy Tolentino - Morgan Stanley

Operator

Welcome to the Portland General Electric Company’s fourth quarter and fiscal year 2007 results conference call. (Operator Instructions) For opening remarks, I would now like to turn the conference call over to Portland General Electric’s Director of Investor Relations, Mr. Bill Valach.

William Valach

Good afternoon, everyone, I am Bill Valach, Director of Investor Relations at Portland General Electric. And we are pleased that you are able to participate with us today.

Before we begin our discussion this afternoon, I would like to make our customary statements regarding Portland General Electric’s written and oral disclosures and commentaries.

There will be statements in this call that are not based on historical facts and as such constitute forward-looking statements under current laws. These statements are subject to factors that may cause actual results to differ materially from the forward-looking statements made today. For a description of some of the factors that may occur that could cause such differences, company requests that you read our most recent Form 10-K and Form 10-Qs.

Form 10-K for the year ending December 31, 2007 will be available tomorrow at portlandgeneral.com. The company undertakes no obligation to update publicly any forward-looking statements whether as a result of new information, future events or otherwise. The Safe Harbor statement should be incorporated as part of any transcript of this call.

Portland General Electric’s fourth quarter and full year 2007 earnings were released before the market opened today and the release is available at portlandgeneral.com.

With the release, PGE announced earnings of $24 million or $0.40 per diluted share for the fourth quarter ending December 31, 2007 compared to $40 million or $0.64 per diluted for the fourth quarter ending December 31, 2006. Earnings for the year ending December 31, 2007 were $145 million or $2.33 per diluted share compared to $71 million or $1.14 per diluted share for the same period in 2006.

With me today are Peggy Fowler, CEO and President; and Jim Piro, Executive Vice President of Finance, CFO, and Treasurer. Peggy will begin this call with an overview. Jim will then discuss in more detail our year-end and fourth quarter results, then we will open the call up to questions.

Now I would like to turn it over to Peggy.

Peggy Fowler

Good afternoon, everyone, and thank you for joining us, we welcome you to Portland General Electric’s 2007 year end and fourth quarter earnings call. 2007 was an exciting year of progress and growth for our company. We committed to providing value to our customers and investors, and our 2007 results demonstrate that we delivered on that commitment. I am pleased to share with you our accomplishments, as well as plans for the future.

As Bill mentioned earlier, we saw strong 2007 results. Today, PGE announced earnings of $2.33 per diluted share, which is on target with our 2007 guidance. PGE is reaffirming its full year 2008 earnings guidance of $1.75 to $1.85 per diluted share. 2008 guidance assumes normal hydro and plant operations.

Based on our current capital forecasts, our long-term annual earnings growth expectation beginning in 2008 is 6% to 8%, which will support continued growth in our dividend. To let everyone know, PGE’s dividend policy is reviewed each May by our Board of Directors.

Now I would like to review highlights from 2007 and talk about key drivers for 2008. Some of our biggest accomplishments have been in generation build out. In June, we brought Port Westward, our 406-megawatt natural gas-fired plant online. This plant came in on budget, is running exceptionally well, and has received international recognition for its engineering excellence.

In January 2007, the OPUC issued a rate order proving a 2.8% price increase for Port Westward with its prices effective June 15. In December, we brought Phase I of the Biglow Canyon Wind Farm into commercial operation. This project was completed on time and on budget with an installed capacity of 125-megawatts. To cover the cost of Biglow, prices went into effect January 1, 2008 with an increase of less than 1%.

We are planning to announce final contracts for Phases II and III by the end of April. We estimate the cost of both phases to be between $700 and $800 million including AFDC. This is an increase from our previous estimate, and is a result of fluctuations in the currency market, increased transportation costs, and increased costs of materials. Phase II is expected to be completed by the end of 2009, and Phase III by the end of 2010. All three phases combined are expected to provide a total capacity of 400 to 450-megawatts.

Another accomplishment that made sense for our customers and the communities we serve was the removal of the Marmot Dam facility, part of our 22-megawatt Bull Run hydro system. Our analysis showed that decommissioning the dam was more cost effective than upgrading and maintaining its fish passage system.

We reached an agreement with 22 agencies that resulted in the removal of the dam. Our execution won the Grand Award for Engineering Excellence from the American Council of Engineering Companies of Oregon.

One of our most interesting projects underway is construction of the Selective Water Withdrawal tower at the Pelton Round Butte hydro facility. This project restores fish passage on the Deschutes river basin, and this restoration has earned Pelton Round Butte the designation as a Green Power Resource by the Low Impact Hydropower Institute, one of just 26 hydro facilities in the United States.

Completion of the project is expected in 2009. As the 67% owner PGE’s portion of the cost is approximately $80 million, including AFDC. Availability of all our plants for the year including both thermal and hydro was approximately 94%, with thermal at 91%, and PGE owned hydro at 99%.

We continue to invest in infrastructure, making sure our system is safe and reliable. In 2007, we invested $182 million in system upgrades on transmission, distribution, and existing generation. This enables our system to perform very well. Results for power quality and reliability performance including customer outages, outage durations and momentary interruptions exceeded our aggressive 2007 goals.

As our service territory continues to grow, our system is ready to power that expansion. At the close of 2007, we served approximately 804,000 customers, an increase of 1.4% from the close of 2006. We are committed to providing value to this growing customer base. Results from recent surveys show that we have delivered on that commitment. Overall satisfaction remains in the top quartile for residential customers, and in the top decile for small to medium-sized business customers.

Our customers also remain very interested in renewable power. Once again, PGE ranks number one in the nation for residential renewable power sales. And in 2007, we were instrumental in developing a renewable energy standard for Oregon that is both reasonable and achievable.

A key component of our future capital program is the requirement to meet this standard. The target of 15% by 2015 will require that we add an additional 218 average megawatts of renewable power over and above Biglow Canyon Phases II and III.

Our Integrated Resource Plan addresses these resource needs. Regulators showed support for renewable resources by adopting rules for streamlined cost recovery. Jim will talk more about this later in the call.

Renewable resources and climate change issues are at the forefront of most energy discussions these days, and I am pleased that I have been appointed to the Oregon’s first Global Warming Commission by the Governor. This taskforce will work with all economic sectors to address the difficult challenges ahead regarding the reduction of greenhouse gas emissions.

We are sensitive to our customers’ desire to minimize PGE’s impact on the environment. The Boardman plant is part of our diverse resource mix, and is key to fulfilling our promise of providing safe, reliable and reasonably priced power.

PGE submitted its emissions control strategy to the Oregon Department of Environmental Quality under the requirements of the Regional Haze Best Available Retrofit Technology program. Our proposal describes the best way for PGE to comply with the federal regional haze requirements. We expect the final review process to be completed in the second half of 2009.

Moving forward in 2008, we will continue to look for more cost-effective, efficient ways to improve our performance and better serve our customers. Through Advanced Metering Infrastructure, we will be able to offer enhanced services, operational savings, and environmental benefits. In 2007, our AMI accomplishments included successfully completing the scalability testing process, and announcing that Sensus is the vendor best suited to meet our AMI needs.

In 2008, we plan to complete systems acceptance testing, and begin the installation of over 800,000 meters at an estimated capital cost of $130 to $135 million. AMI will give customers different product choices and billing options. They will also get more information about their energy use with the future potential for demand response and direct load control program. We are currently working through the regulatory process, and expect a decision from the OPUC by mid year.

Let me now move on to our 2009 rate case. We have determined that we will need to file a general rate case, and plan to file tomorrow. With the forward test year standard in Oregon, our general rate increase will be based on 2009. The new prices are expected to go in effect in January 2009.

The filing will propose an 8.9% increase in prices. The increase is driven by three key factors. The annual update of power and fuel costs, higher O&M expense including the increased cost of materials, labor, and healthcare and compliance with governmental regulations, and systems investment including hydro relicensing.

The revenue requirements include a return on common equity of 10.75%, based on an expected capital structure of 50% equity and 50% debt, and an overall weighted average cost of capital of 8.66%. We are filing the rate case to ensure that our customers’ prices are aligned to sufficiently cover our operating costs, while providing a reasonable rate of return.

Now an update on Trojan; the courts have fully remanded the issue back to the OPUC, and this past Friday the administrative law judge for the Trojan case issued a ruling allowing additional proceedings. The ruling established a scheduling conference for March 12. Additionally, the class action plaintiffs had asked the OPUC for standalone decision on its authority to order refunds or other rate relief.

On February 13, the Commission denied the motion and reiterated its intent to resolve all issues in one comprehensive order. The Commission said that it has come to the preliminary conclusion that it has refund authority under limited conditions. It also stated that its final comprehensive order will resolve the question about its authority, and whether or not it will exercise that authority. We expect the Commission to make a comprehensive decision on all issues related to the case following the additional proceedings.

Finally, let me wrap up my comments with our list of accomplishments by mentioning that we submitted our Integrated Resource Plan for regulatory review last year. RFPs will be issued following the OPUC acknowledgement, which we expect next month. The plan which was developed in collaboration with customer groups and key stakeholders includes a strong emphasis on development of new renewable power and increased energy efficiency. We are pleased by the positive feedback we have been receiving.

With that, I would like to turn it over to our Chief Financial Officer, Jim Piro, to discuss our financial results in more detail.

Jim Piro

Good afternoon, everyone, as Bill mentioned for the 12 months ending December 31, 2007 net income was $145 million or $2.33 per diluted share compared to $71 million or $1.14 per diluted share for 2006. Results for 2007 were driven primarily by increased energy deliveries, excellent plant operations, the addition of Port Westward, and three non-recurring items.

The non-recurring items in 2007 totaled $0.50 per diluted share: and were a positive $16 million after tax, including interest or $0.26 per share for the deferral of a portion of Boardman’s replacement power costs incurred during it’s outage in 2005 and 2006; A positive $4 million after tax or $0.06 per share resulting from the settlement with certain Californian parties involving wholesale energy transactions in 2000 and 2001; and a positive $11 million after tax or $0.18 per share due to the full impact of Senate Bill 408 for 2007, which includes the effect of the two non-recurring items I just discussed.

PGE’s net income for the fourth quarter 2007 was $24 million or $0.40 per diluted share. This compared to a net income of $40 million or $0.64 per diluted share for the fourth quarter 2006. Fourth quarter 2007 results compared to 2006 were primarily attributable to lower other income, Senate Bill 408, and two non-recurring gains that were recorded in 2006.

They were, first, a positive 4 million after-tax or $0.06 per share for the deferral of a portion of Boardman’s replacement power costs; and second, a positive $11 million after tax, or $0.18 per share for the unrealized gains on derivative activities. Partially offsetting these decreases was a positive $10 million after tax or $0.16 per share related to the Senate Bill 408.

Now let me provide you some additional details on our Senate Bill 408 adjustment for 2007. Recall that SB 408 is the Oregon law which adjusts the way that PGE and other investor owned utilities collect from or refund to customers differences in actual income taxes from that included in the last rate case.

In 2007, PGE recorded a collection from customers of approximately $15 million pre-tax for the 2007 tax reporting year, plus $3 million pre-tax related to the 2006 tax reporting year. The calculated collection from customers for the 2007 tax year will be reported to the OPUC by October 15, 2008. Under the OPUC rules, collections from customers for the 2007 tax year will likely begin in June 2009.

In 2007, we saw many fair and reasonable state regulatory outcomes. For example, 2007 was the first full year that we had our two regulatory mechanisms for recovery of power costs in place, the Annual Power Cost Update Tariff and the Power Cost Adjustment Mechanism or PCAM.

Annual Power Cost Update Tariff resets customer price each year on January 1. Our 2008 update which reflects our power cost for 2008 resulted in a decrease in customer prices of 0.3%. The PCAM for 2007 had deadbands of approximately $11.7 million below and $23.4 million above the net variable power cost baseline. Actual net variable power cost as determined under the PCAM for 2007 were $29.4 million below the established baselines, which activated the 90/10 sharing mechanism.

As a result on a pre-tax basis, shareholders retain the $11.7 million deadband, as well as 10% of the amount below the deadband of $1.8 million. The remaining balance of $16 million will be refunded with interest to customers in the future period. The customer refund for 2007 is subject to an OPUC review, which will include the results of a regulated earnings test.

As a result of the increase in our rate base for 2008, the PCAM deadband for 2008 will range from $14 million below to $28 million above the net variable power cost baseline.

Another fair and reasonable decision by the OPUC was their order last December regarding an automatic adjustment clause for renewable resources. The renewable adjustment clause provides that utilities by April 1 of each year file proposed prices to be effective January 1 of the following year for new renewable resources expected to come online during the current year.

The mechanism will enable PGE to first defer the net cost of new renewable resources for collection in future period, and then track in those costs in the next calendar year without the need for a general rate case. The return component of these costs will be based upon the last authorized cost of capital.

So for example, when we move forward with completing Phase II of Biglow Canyon in 2009, we would make a filing by April 1, 2009 with proposed price changes effective January 1, 2010. We would also defer the net costs of Phase II from the in service date in 2009 until December 31 of 2009.

Now, I will provide you an update on PGE’s capital expenditures. In 2007, we invested $455 million on capital infrastructure projects. The breakdown is as follows: $182 million for ongoing production, transmission and distribution; $199 million for the Biglow Canyon Wind Farm Phase I; $17 million for Phases II and III of that project; $40 million for hydro relicensing projects; $16 million for Port Westward; and $1 million for Advanced Metering Infrastructure.

For 2008, capital expenditures are expected to be approximately $428 million, including $229 million for ongoing production, transmission and distribution; $121 million for Biglow Canyon Wind Farm Phases II and III; $55 million for ongoing hydro relicensing projects; and $23 million for the Advanced Metering Infrastructure project.

To finance PGE’s capital expenditures during 2007, the company issued $375 million in First Mortgage Bonds at favorable terms and rates renewed the revolver for an additional year extending it to 2012, and regained debt and preferred stock totaling $71 million.

As a result of these financing activities, PGE’s actual capital structure as of December 31, 2007, was right in line with our target capital structure of 50% debt and 50% equity. We continue to maintain stable operating cash flow and adequate liquidity through both our $400 million five-year revolver, and access to the commercial paper market. At the end of the year, PGE had approximately $386 million of available liquidity under the revolver.

Additionally, PGE recently received approval from the FERC to increase its short-term borrowings up to $550 million, and has received approval from the OPUC to issue an additional $250 million in long-term debt.

Cash provided by operating activities totaled $344 million in 2007 compared to $106 million in 2006. The increase was driven primarily by four key factors: a $115 million decrease in margin deposits with certain wholesale customers; a $55 million decrease in income tax payments; a $33 million decrease in power purchased to replace the output of Boardman during it’s planned extended outage; and a $28 million cash payment received from the California Power Exchange resulting from a settlement related to a wholesale energy transactions in 2000 and 2001.

We continue to maintain investment grade bond ratings, our senior secured ratings are Baa1 at Moody’s and A at Standard & Poor’s. On January 31, 2008, Standard & Poor’s issued a credit report, which included a ratings action updating PGE’s outlook from negative to stable.

The focus of our financial objectives continued to be on our core utility business. We remain focused on efficiently accessing the capital markets to support investment in new and existing generating assets and our transmission and distribution system, achieving fair and reasonable regulatory outcomes, maintaining investment grade credit ratings, and earning a fair return on our invested capital.

Now I would like to turn it back over to Peggy.

Peggy Fowler

In our annual report last year, we said that as a midsized, vertically integrated utility, we were perfectly positioned to deliver long-term value to customers and investors. In 2007, we saw those words start to become reality. We delivered strong financial performance.

To meet the growing energy needs of our customers, we brought two new generation resources online in enterprises, Port Westward and Biglow Canyon Phase I. We had excellent operational performance with all our generating plants running well. Our system exceeded aggressive reliability metrics. We continue to operate in a reasonable regulatory environment, and we received positive feedback from customers.

I would like to acknowledge that our success and execution comes from an environment of teamwork and collaboration from our employees, customers and the communities we serve.

Looking to the future, we will continue to meet the needs of our growing service territory through excellence in operations and rate base investment opportunities that support our core utility business, enhance service to our customers, and deliver value to our shareholders.

Operator, we would now like to open up the call for questions.

Question-and-Answer Session

Operator

(Operator Instructions) Your first question comes from the line of Brian Russo - Ladenburg Thalmann.

Brian Russo - Ladenburg Thalmann

Could you just remind us what your allowed ROE currently is relative to the last general rate case, and then maybe what rate base we should be thinking about in the 2009 test year?

Peggy Fowler

We currently have a 10.1%, and the rate base is…

Jim Piro

$2.4 billion, roughly.

Brian Russo - Ladenburg Thalmann

Is that the 2009 test year rate base, is that current?

Peggy Fowler

That’s the 2009.

Brian Russo - Ladenburg Thalmann

And then the guidance in 2008 of $1.75 to $1.85, does that include any kind of these one-time items that we saw in 2007?

Peggy Fowler

No. They were taken out of that. If you take that out where we currently are, you get to that $1.75 to $1.85, if you take out the one-time items.

Brian Russo - Ladenburg Thalmann

And what assumptions are you assuming with AMI and the FERC order embedded in that guidance?

Jim Piro

It’s before the Commission right now for a decision. We have a separate tariff that they would put in place that will allow us to recover the cost of the existing meters that we would decommission, if you will, and for the cost of installing the new meters.

And that tariff would go into effect when they approve the tariff, which we hope to be in the second quarter of this year. And that gets ramped in over time as we invest the capital. As I mentioned in my capital numbers, about $23 million in 2008, with the bulk of the rest of the dollars spent in ‘09 and ‘10 to put the meters in place.

Peggy Fowler

And that’s $130 to $135 total.

Brian Russo - Ladenburg Thalmann

And also I noticed C&I sales were down quite a bit in the fourth quarter, and I was wondering if you could just comment on that?

Peggy Fowler

I think more than likely it was weather related, the change in open access customers.

Brian Russo - Ladenburg Thalmann

Administrative expense, it looks like it jumped by about $20 million. I am just curious do you expect that to kind of level of as we look forward?

Peggy Fowler

Well, that’s part of why we are filing a general rate increase is, we do know that healthcare continues to go up, we are continuing to see material escalation, those types of things. So we are doing everything we can to cut costs and keep expenses as low as possible, but that is a portion of why we are filing the rate case.

Operator

Your next question comes from the line Michael Lapides - Goldman Sachs.

Michael Lapides - Goldman Sachs

The Boardman emissions cost, I want to make sure I heard correctly, does this mean that you won’t know until middle of ‘09, whether you have got the go ahead to go forward with that work? And if so, how locked down are your EPC contracts and vendor contracts, meaning how certain is that cost range of $170, $180 million?

Peggy Fowler

We won’t know until 2009, and the costs aren’t locked down at all. And those numbers that you are using are probably for one year that you are looking at. At the PGE, what we have talked about is $300 to $400, or at the upper range even $470 to $620, but nothing is locked down there. But we do think that those are reasonable.

We have spent a lot of time talking to the vendors for what we can do with the pollution control devices and believe we can do it with that. But the whole issue of working with the Department of Environmental Quality, and what’s going to be required there, and then going on to the EPA about what the final requirements will be won’t be resolved until 2009.

Michael Lapides - Goldman Sachs

I was looking at page 21 of your EEI presentation, that $170 to $180 million was spread out over four years, so I didn’t – I may have misread that.

Jim Piro

PGE’s share, so I didn’t pick up that 12 and 13 years. I think it was the full project cost. The other thing I would mention, Michael is that, once we get through the EPA, we will go back to the regulators and conduct some type of mini IRP process to make sure that what we do going forward is kind of blessed by the Commission.

Michael Lapides - Goldman Sachs

What is the process for filling the extra 200-megawatts plus of renewable capacity that you need, what is that process for determining? And is it an RFP process, and if so when will that kick-off?

Peggy Fowler

Yes. It is a RFP process. That will kick-off as soon as we have the Commission’s approval of the Integrated Resource Plan. In fact, they have actually told us, if we wanted to go earlier on it, we could, but I don’t think we are quite ready to do that. So we expect that probably in March or April, we will be able to do that.

And then at the same time, we will be doing an RFP for the purchased power agreements that are a part of that. And then later on in the year towards the end of the year, we will be looking at the demand side management piece, and then next year, we will look at the capacity piece.

Michael Lapides - Goldman Sachs

So when you look at the potential sites for new wind capacity, are there any sites in particular that stand out, including ones that you may own, like Biglow Canyon?

Peggy Fowler

No. When we complete Phases II and III of Biglow that will use up all of our site capacity there. So there isn’t any remaining there. We would need to pick up another site. And this RFP will show what’s available out there and give us, I think, a better indication of what we might be able to do.

And we also know we are going to have to do some more beyond these two to continue to meet our renewable energy standards. So we are doing a step at a time here. We have got II and III in front of us, and we are looking forward to that. We are getting pretty close to getting those contracts tied down, and then we will issue the RFP for the 218-megawatts to see what’s out there, and then we will move forward after that.

Operator

Your next question comes from the line of James Bellessa - D.A. Davidson & Company.

James Bellessa - D.A. Davidson & Company

On this SB 408, I see where in the full year and in the fourth quarter, you collected or you made adjustments for the 2006 tax-reporting year, and what causes that?

Jim Piro

Okay. If you recall last year, I think, we booked about a $40 million refund to customers that included $2 million additional for interest, so about a $42 million adjustment last year. That was based on our preliminary assessments of the rules and regulations on how we do the calculation for Senate Bill 408.

As we finally got the rules finalized, we were able to refine our calculation, and we adjusted that $40 million down to $37 million. So we made an adjustment in the fourth quarter to reflect that adjustment consistent with when we made the filing to the Commission in October of 2007. That was part of it.

The other $15 million for 2007 really was the result of higher taxes paid in 2007, recorded in 2007, primarily driven because of the Boardman deferral and the good results on power costs. So last year, essentially we had a downside because of the $42 million for the Senate Bill 408. And that was probably two factors: one was the Boardman outage last year, and then the ownership of Enron of Portland General during the first quarter. This year, because of the Boardman deferral and better operations we had at collection.

James Bellessa - D.A. Davidson & Company

Going forward in ‘08 in your guidance of $1.75 to $1.85, there is no assumption of any benefit or detraction for SB 408, is that correct?

Jim Piro

We don’t typically comment on the detail on each of the calculations.

Peggy Fowler

It really assumes normal operations.

James Bellessa - D.A. Davidson & Company

And under normal operations, you don’t have an impact from SB 408, is that correct?

Jim Piro

Typically, it’s small, because you are closer to you normal operations. Obviously, it could be impacted if you are not earning your full rate of return, because that’s how the taxes in the rate case are determined. So I think you can have small differences, but usually they are small.

James Bellessa - D.A. Davidson & Company

Now the question earlier was about AMI, Advanced Metering Infrastructure, and is that built into your $1.75 to $1.85 guidance, is there any benefit in that guidance range or is it not included yet?

Peggy Fowler

No. It’s included the $23 million that’s being spent this year. But most of the spending on that will be in 2009 and 2010, and that’s built into what we project in terms of the 6% to 8%.

James Bellessa - D.A. Davidson & Company

Now earlier there was a question on C&I sales, and I look at industrial sales, they were down fairly sharply in the fourth quarter and for the whole year, and you said the explanation was what?

Peggy Fowler

Those customers have choice to go to another supplier under the Oregon structuring for deregulation. And more chose to take advantage of that window, than they did in 2006, because of where prices were when they made that choice. And we are held essentially neutral to that the way the regulatory framework is put in place.

James Bellessa - D.A. Davidson & Company

Are you seeing any softness in industrial sales?

Peggy Fowler

As we have been looking a lot at our growth, and we look more at small commercial and small business and residential, and we continue to see about average performance, and it hasn’t caused us to make any changes to our predictions going forward. That’s about that 1.4% in numbers, and about 1.9% in load.

James Bellessa - D.A. Davidson & Company

While it won’t have an impact on earnings, do you expect this Regional Power Act credit to resume anytime soon?

Peggy Fowler

Your guess is probably as good as ours on that. We are working very hard to get some funds back for our residential customers, and we think that we should be able to see some of that yet this year.

Operator

You have a follow-up question from Michael Lapides - Goldman Sachs.

Michael Lapides - Goldman Sachs

Can you reiterate the process for Trojan going forward; I understood the piece about the March hearing, but what comes after that?

Peggy Fowler

Well, we don’t know for sure. That’s what we will find out in March. It will be a process probably of filing testimony, and what we will find out in the March timeframe or March 12 is really what that timeframe looks like. So more than likely, they will set a schedule for when initial testimony is filed, what’s followed up on it.

The last information that was issued, did narrow the proceedings, and got very specific about what could be included in that. So we are hopeful that within this year, or within six months, something like that, we actually might be able to work through this process, and at least get down to more details and understanding by the various parties of where things are.

So we feel very good about where this is headed. Its all back with OPUC, they are setting up a timeframe for it. It’s out of the courts, and we will see what we have got when we get the schedule, and hopefully it’s something we can get wrapped up yet this year, or at least get wrapped up for this phase up until somebody decides to finish the third try, and make a run at the courts again or file an appeal or whatever. We know it’s here for a bit, but it’s getting much closer to being resolved.

Michael Lapides - Goldman Sachs

Potentially what’s the worse case outcome?

Peggy Fowler

Well, PGE’s position continues to be that, we don’t think we have any refunds that we owe to the customers. The URP believes that it’s in the hundreds of millions of dollars. The OPUC staff has actually given approximate refund of about $5 million, so there is the range.

Michael Lapides - Goldman Sachs

Can you define hundreds of millions?

Peggy Fowler

No. We really can’t because of how you look at the calculations on the return off and the return on. We sort of think the most reasonable approach that’s been out there in terms of analysis is probably the OPUC staff, which is that $5 million number, but again we have got to work through the process on that.

Operator

And you have follow-up question from Brian Russo - Ladenburg Thalmann.

Brian Russo - Ladenburg Thalmann

I think, you mentioned earlier that you have approval to issue a little over $200 million of debt. Can we expect you to issue that in 2008? And then secondly, would you be issuing equity as well to manage that 50% equity ratio?

Jim Piro

No, more likely 2009 consistent with the construction of Biglow Canyon Phase II, so I think, this year we have minimal financing needs. Towards the end of this year, we will be looking at both debt and equity as we figure out the cash flows associated with Biglow Canyon Phase II, so more likely late ‘08, more likely 2009.

Peggy Fowler

We will time it really based on what our need is.

Operator

Your next question comes from the line of Rudy Tolentino - Morgan Stanley.

Rudy Tolentino - Morgan Stanley

Can you reiterate how much revenue increase that you are asking for in your rate case?

Jim Piro

$146 million that’s split into three components basically, as Peggy mentioned. And the case will get filed tomorrow, that will be available on the website for those who want to be interested in looking at it.

Peggy Fowler

And it’s full of details.

Operator

And you have a follow-up question from James Bellessa - D.A. Davidson & Company.

James Bellessa - D.A. Davidson & Company

Some environmentalists say that they want to sue you about Boardman, do you have any comments?

Peggy Fowler

Well, we haven’t gotten this suit yet. They have actually said they want to talk to us, so we will be talking with them. We certainly take anything like this very seriously. We have been talking to the appropriate law firms to defend us. And we think that we are still trying to assess what they are talking about in terms of the suit, and try and figure it out, and we are moving forward with our process through the bar process so that we can go ahead and make the changes we need to make to Boardman.

James Bellessa - D.A. Davidson & Company

On items impacting your earnings guidance, do you have any advice on DD&A, other income, interest expense, perhaps your tax rate and things like that?

Jim Piro

No. We don’t even typically provide that kind of detail.

Operator

And there are no more questions at this time. I would now like to turn it over to the panel for closing remarks.

Peggy Fowler

Thank you for your interest in Portland General Electric Company. We invite you to join us when we report our first quarter results for 2008. If you have additional questions, please call Bill Valach, who will be available after this call. Thank you again for participating.

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Source: Portland General Electric Company Q4 2007 Earnings Call Transcript
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