By Lisa Cohn
Portland General Chairman Ken Harrison and Ken Lay, CEO of Houston energy giant Enron, looked as if they had worked together for years. At the official announcement of one of the biggest deals in Portland history, they gracefully passed the opportunity to speak back and forth. As part of the banter, they joked about how much they liked each other's first name.
They both appeared at the Monday press conference dressed in suits featuring tans and blues. They both were low-key but earnest while they hailed the merger as a step that would create a leading-edge energy company poised for the new era of deregulation.
Despite the similarity between the company heads and their apparent compatibility, it was difficult to believe that a 107-year-old Oregon electric utility and a fast-growing energy giant have anything in common. But utility analysts and industry insiders say Lay and Harrison bring similar visions to an industry undergoing the most dramatic changes in its history.
Many view Harrison - a former financial analyst with degrees in psychology and sociology - and Lay - who has a doctorate in economics and is a former Navy officer - as visionaries and risk-takers who are leading the nation's electric utilities into the competitive era.
"Ken (Lay) is a profound thinker, and great long-term strategist who has been on the forefront of the natural gas industry for many years," says Ron Barone, a utility analyst with PaineWebber in New York. He knew where this industry was going 10 years before it happened."
Ottie Nabors, a public-utility specialist with the Bonneville Power Administration who has studied Portland General, has similar comments about the company's CEO. "Harrison is a forward thinker, very aggressive. He has been trying to get PGE in a position to be an effective competitor in the new marketplace."
However, in Houston and Portland, the companies implement the visions with different styles.
In Texas, especially in the power-marketing business, the style is aggressive, make-the-deal at all costs and work until you drop. The staff is young, and managers often hold a master’s degree in business administration. Barone says the young execs love Enron’s fast pace.
“Generally Enron marketers will show up even on a hot day with a clean pressed shirt and tie. They have the charm of the South and steel teeth,” says one member of the industry who has worked with the marketers. “They are quick and think on their feet. The average employee is empowered to do deals worth up to $5 million without higher authority. It is a Darwinian organization. You survive or you drop out.”
Here in Oregon—where three generations of some families have worked for PGE—the style is slower, the clothes more casual and the pace more sustainable.
“We’re laid-back but we get the job done,” says Scott Guptill, a community resources specialist for PGE. “We don’t burn out.”
Getting the job done for Portland General has meant making some hard decisions, and observers credit the company for coming out ahead in the face of challenges. Many say that before Portland General decided to close the Trojan Nuclear Plant in the early 1990s, the company was risk-averse, traditional and provincial.
But when the company chose to close the plant—after a number of citizen initiatives to shut it down and troubles with cracked steam generator tubes—PGE made an about-face. The company became a gambler, but a smart one, led by Harrison, who Guptill says, is “a down-to-earth guy who shows respect for everyone.”
Risk paid off
Despite the argument that PGE should replace Trojan with another plant, the company decided to buy much of its power on the market.
“PGE took a big risk, and it paid off,” Barone says.
Fred Miller, vice president of corporate affairs and corporate services for PGE says, “Ken’s decision was to go and buy on the market, and that is hugely risky. But it caused us to be the second-most profitable utility in the nation in terms of shareholders.”
The risk paid off in part because spot-market prices dropped in response to advances in gas-plant technology and cuts in natural gas prices.
PGE also bolstered its reputation as a leader because it created the country’s first trading floor in electricity futures in preparation for the day—in five years or so—when all customers will be able to shop for their own energy provider. PGE took the unusual step of offering to buy gas for industries. And it recently proposed allowing some of its largest customers to look for other suppliers.
“After Trojan was shut down, it was like they sucked up their guts and became a new company,” says one source in the industry. Changing PGE’s culture hasn’t been easy, given that many employees have worked in the business for decades, says Dick Dyer, senior vice president of power supply.
“I have been in this business for 30 years,” he says. “Sometimes I think, ‘Can’t we just hold off on change until I retire?’ But you have to give up what you have built for 30 years. You have to reinvent who you are.”
But not everyone is convinced PGE has made the transition from the traditional, conservative utility.
Bill Warren, administrator of the electric and natural gas division of the Oregon Public Utility Commission, says the company’s decision to shut Trojan was based on assurances from the commission.
“We said we would take reasonable rate-making steps to allow the company to make that decision without substantial financial harm,” he says. “I can almost guarantee you they would not have taken those steps without our assurances.”
Bob Jenks, executive director of the Citizens’ Utility Board of Oregon, says PGE backed off on its promises to embrace a new era based on renewable resources and conservation.
“The new era is based on natural gas and purchased power,” he says.
While some naysayers questions whether there truly is a new Portland General Corp., virtually every industry insider questioned agreed that Enron’s style has been to think big, act big and to go where no company has gone before.
Enron employees love their company’s culture, says John Freud, a partner in Paul Ray Berndtson, Houston, a recruiting firm. “In 1993 or 1994, we staffed Enron Power Marketing and pulled eight or 10 people out of utilities. Out of those people, only one is no longer there.”
Freud described Enron employees as “good business people with strong analytical skills” who are handed a lot of autonomy. Enron’s take-no-prisoners style has reaped plenty of rewards. Enron, which began as a pipeline company, but expanded into power-plant development, gas trading and electric power marketing, has seen its earnings grow 15 percent per year consistently.
“In the energy business, that’s impressive, and to do that despite warm weather and cold weather,” Barone says. “I have seen the Federal Energy Regulatory Commission adopt ideas that resulted from Ken Lay’s brainstorming.”
Enron was the first company to expand into international power plant development. Company figures indicate that by 2002 it will have 14,000 megawatts of generating capacity and 6,000 miles of pipeline internationally.
The company’s tenacity recently was rewarded when officials in India decided to allow Enron Development Corp. to continue to work on the 2,450 megawatt Dabhol power plant. Earlier, the government canceled the project in the middle of construction. But Enron refused to go quietly and renegotiated a contract to sell the power at lower prices.
“We believe Enron controls its risk very well,” says Bill Christman, a senior analyst for Moody’s Investors Service in New York. “Their aggressiveness is not without control. It is calculated aggressiveness.”
Smart gamblers, progressive leaders: That’s what Enron and PGE have in common.
If the Texans with the steel teeth take control of Portland—where employees wear jeans and are proud of the fact that their grandfathers worked for the company—the cultures may clash.
However, officials at PGE and Enron say the two companies will go about their business separately, each contributing its own strengths in its own way. PGE brings its hand-on experience with the day-to-day operation of a retail electricity business, while Enron contributes its legendary marketing strategies.
“You can’t change a culture or a community overnight,” says Portland General’s Guptill. “I don’t think Portland will become a New York City or a Houston as a result of this.”
The Oregonian Friday, July 26, 1996