Article XI, Section 9 of the Oregon Constitution says:
No county, city, town or other municipal corporation, by vote of its citizens, or otherwise, shall become a stockholder in any joint company, corporation or association, whatever, or raise money for, or loan its credit to, or in aid of, any such company, corporation or association.
The City of Portland is a city, and Portland General Electric is a corporation. This provision prohibits Portland from buying and owning stock in Portland General Electric. A fair amount of the talk about public ownership of PGE has been directed to finding a way for the government to own PGE without running afoul of this provision.
The Willamette Regional Electric Company (WREC) would be a corporation, formed either as a mutual benefit nonprofit corporation under Chapter 65, Oregon Revised Statutes (ORS), or as a cooperative corporation formed under ORS Chapter 62. Each of these types of corporation can have shareholders, but is not required to have shareholders. In place of shareholders they can have members, who might pay either a single-premium membership fee or annual or other periodic membership dues.
WREC would have members, but not shareholders. Membership would be open to any city or county government within WREC's service area. The membership fees and participation in distributions would be roughly proportional to electrical consumption.
Cities and counties can be members of corporations and other associations. They're members of all sorts of organizations now (the League of Oregon Cities is one example). They could be members of WREC as well. They are not raising money for WREC; that is, they are not looking for capital contributions from their citizens or other third parties to pay to WREC, and if they do not guarantee the debt of WREC then they will not be lending their credit to WREC.
WREC should be exempt from income taxes (the closest analogue is the Eugene Water & Electric Board, which I think is exempt), but it should as a matter of policy pay property taxes to local governments even though it might be exempt. The loss of income taxes from PGE costs the state only $10 per year, based on the taxes paid for the last few years. PGE pays property taxes (it's centrally assessed), and WREC should pay property taxes or make equivalent payments in lieu of taxes so that its formation doesn't affect local budgets.
The legal twist that allows WREC to own PGE without owning its stock, and with the local governments having control, is in how the purchase is set up. WREC would not buy the stock of PGE and become its sole shareholder; instead, WREC would merge with PGE in what is called a "cash merger," in which the PGE shareholder (Enron) would receive cash in liquidation of its shares, leaving WREC as the surviving corporation owning the combined assets of WREC and PGE. WREC never becomes a shareholder of PGE as PGE disappears at the moment of merger.
The structure works, and it has the advantages of using existing legal technology and not needing any legislative approvals. Let's encourage our local governments to take one more try at getting PGE into the WREC room.
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