Portland General Electric Co (POR) 2010 Q3 法說會逐字稿

Good morning, everyone, and welcome to Portland General Electric Company's third-quarter 2010 earnings results conference call. Today is Thursday, October 28, 2010. This call is being recorded and as such, all lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer period. (Operator Instructions). For opening remarks, I would like to turn the conference call over to Portland General Electric's Director of Investor Relations, Mr. Bill Valach. Please go ahead, sir.

Thank you, Katrina, and good morning, everyone. We are very pleased that you are able to join us today. Before we begin our discussion this morning, I'd like to make our customary statements regarding Portland General Electric's written and oral disclosures and commentary, that there will be statements on this call that are not based on historical facts and as such, constitute forward-looking statements under current law. 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, the Company requests that you read our most recent Form 10-K and Form 10-Qs. The Form 10-Q for the third quarter of 2010 was available this morning 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. And this Safe Harbor statement should be incorporated as part of any transcript of this call. Portland General Electric's third-quarter earnings were released before the market opened today and the release is also available at portlandgeneral.com.

Leading our discussion today are Jim Piro, President and CEO; and Maria Pope, Senior Vice President of Finance, CFO and Treasurer. Jim will begin today's discussion by providing a general overview of the quarter's results and our strategic capital projects; then, Maria will provide more detail around the quarterly results and key regulatory proceedings. Following prepared remarks, we will open the lines up for your questions.

And I'm pleased to turn the call over to Jim this morning.

Thank you, Bill. Good morning and thank you for joining us. Welcome to Portland General Electric's third quarter 2010 earnings call. PGE's net income for third quarter 2010 was $49 million or $0.65 per diluted share compared to $32 million or $0.43 per diluted share for the third quarter of 2009.

We are increasing our full-year 2010 earnings guidance by $0.25 from the prior guidance of $1.40 to $1.55 per share to $1.65 to $1.80 per diluted share. The key driver to the increase in quarterly earnings and the revised guidance is the effects of a newly passed Federal Legislation regarding 2010 bonus depreciation on the Senate Bill 408 tax calculation. Senate Bill 408 accounts for approximately $0.20 per share increase in the 2010 guidance and approx. $0.16 per share increase in the third quarter results. Maria will provide more details later in the call.

We will initiate 2011 earnings guidance on the fourth quarter earnings call in late February next year. By waiting until the next quarter, we will have more information to base our earnings forecast on, including initial hydro conditions and customer retail demand. This time frame also puts us more in line with our peers for initiating guidance.

I am very pleased with our strong operational performance during the third quarter as well as the productive regulatory process for the 2011 generate rate case. Let me give you a few highlights on both. We continue to deliver excellent operating performance Company wide. Our system operated well, our distribution metrics remain strong and plant availability was high at our generating facilities.

The 2011 general rate case process has been constructive. If the settlements we've reached with all parties are approved by the commission, it will result in an outcome that is fair and reasonable for customers and shareholders. We've aligned our customer prices with our cost structure and have updated our load forecast. We've agreed upon several mechanisms that reduce volatility, including modification to the Power Cost Adjustment Mechanism, continuation of decoupling and a tariff for recovery of our remaining investment in Boardman. These mechanisms are in line with the stipulated ROE of 10% and will provide the Company with an opportunity to earn a fair return in 2011.

Now, let's move on to the economic outlook in our operating area. While we experienced customer growth of 0.5% quarter-over-quarter, total retail energy deliveries on a weather-adjusted basis were essentially flat. The continued effect of the slow economy and energy efficiency initiatives resulted in a decrease in energy deliveries to residential and commercial customers. We did, however, see an increase in energy deliveries to our large industrial customers.

Oregon's unemployment rate remained 10.6% in September, essentially unchanged since December 2009. Through September, the rate at which Oregon added new jobs was slower than the overall US economy. There are some positive economic signs in our service area, including Intel's recent announcement last week that it plans to invest multi-billion dollars in new facilities at their Hillsboro, Oregon site.

For the year, we project that weather-adjusted retail energy deliveries will be approx. 1.5% below 2009 levels, due to a combination of energy efficiency initiatives as well as the effects of the slow economy on the residential and commercial sectors. We expect a moderate increase in deliveries to existing industrial customers, including those in the hi-tech sector.

Now, an update on our strategic initiatives, starting with operational excellence. Our overall customer satisfaction ratings were very strong in the third quarter. We ranked in the top decile for both residential and general business customers and in the top quartile for large industrial customers. Recently, E Source ranked PGE second in their top utilities and large business customer satisfaction study. These positive results demonstrate our commitment to providing outstanding customer service. And last week, the Department of Energy presented PGE with the Utility Green Power Program of the Year Award, a testament to our customers' ongoing commitment to renewable energy.

Now, an update on our key capital projects. At the end of September, we successfully completed the installation of all 820,000 new smart meters in our service area. The next steps for the project include completing the planned enhancements and developments related to business process automation, which will provide improved service and operational efficiencies.

We recently announced the successful completion of Phase III of our Biglow Canyon Wind Farm. The final phase completed in August 2010 added an additional 76 wind turbines with an installed nameplate capacity of 175 megawatts. The total cost of Phase III was $383 million, including $22 million of AFDC. The costs for this entire project are fully included in customer prices. Now, all 217 turbines are available to generate renewable power for customers with a total installed nameplate capacity of 450 megawatts. We're proud to have completed one of the largest wind farm projects in the Pacific Northwest, constructed on time and under budget.

With all phases of Biglow Canyon up and running, we expect to meet approximately 11% of our load with renewable energy in 2011. This is well ahead of Oregon's Renewable Energy Standard's first benchmark of 5% by 2011. The next benchmark is 15% by 2015, and the final target is set at 25% by 2025. We've outlined how we plan to meet the 2015 Renewable Energy Benchmark in our 2009 Integrated Resource Plan.

The 2009 IRP also addresses the various options being considered for new emission controls on the Boardman plant. We have submitted a letter to the DEQ asking to reopen the rule-making period, to consider additional information that would reduce emissions further and would allow us to continue to operate on coal through 2020. The DEQ is expected to release its final rule-making recommendation to the Oregon Environmental Quality Commission in November with a final rule decision by the OEQC anticipated by the end of 2010.

As the operating life of the Boardman plant continues to be evaluated, it's reassuring that through our general rate case process, we agreed on a mechanism that will allow recovery of our remaining investment in the plant, if a decision is made on an early closure.

Now, I'd like to comment on another matter related to the Boardman plant. In September, we received a notice of violation from the EPA asserting that PGE has operated the boiler at the Boardman plant in violation of the New Source Performance Standard under the Clean Air Act. We disagree with their findings and we are planning to meet with the EPA in the first quarter of next year to present the analysis supporting our position.

Let me move on to our Integrated Resource Plan, which was filed with the OPUC in November of 2009. The proposed 2015 IRP action plan includes meeting approximately 50% of our load growth through energy efficiency measures as well as the following generation and transmission projects, 122 average megawatts of renewable resources to meet Oregon's RES requirements of 15% by 2015, a natural gas facility to meet additional base load requirements estimated at 300 to 500 megawatts, a natural gas facility for additional peak load requirements estimated at 200 megawatts and a new transmission project called Cascade Crossing.

On October 15, the PUC staff submitted their recommendations for acknowledgement of our 2015 action plan, largely as filed. We expect a final OPUC decision on the 2015 action plan in November, which will allow us to move forward on the RFPs for new resources. We plan to conduct three separate RFP bidding processes in early 2011, the first for new renewable resources, the second for base load generation and the third for peaking generation.

In each of the RFPs, we currently plan to include our own self-build option to compete with the market bids. The RFP bidding process will likely be completed in the second half of 2011, which will then provide us a clear picture on our future capital expenditures. The amount and timing of future equity requirements is dependent on the outcome of the RFP bidding process, project timing, PGE's financial performance and the capital market conditions.

Now, I'd like to turn this call over to Maria Pope, our Chief Financial Officer to discuss our financial results in greater detail.

Thank you, Jim. Good morning. Today, I will cover the quarter's financial results, review the agreement on our general rate case, discuss financing and liquidity, and conclude with details on the increase in our 2010 earnings guidance.

Third quarter 2010 net income was $49 million or $0.65 per diluted share. This compares to $32 million or $0.43 per diluted share for the third quarter of 2009. Operating results for the quarter were positively impacted by Senate Bill 408 and strong power supply operation, which were partially offset by cooler-than-normal temperatures and the continued effects of a weak economy.

Retail revenues increased 6% in the third quarter of 2010 compared to the third quarter of 2009 and a majority of this increase is related to the positive impacts of federal tax law changes regarding the extension of bonus depreciation and its effects on Senate Bill 408.

PGE recorded a collection from customers of $20 million or approximately $0.16 per diluted share for the third quarter, of which $15 million was related to bonus depreciation. Also contributing to the increase in retail revenues is the return of a large direct access industrial customer to PGE for its energy supply in 2010. We continued to see customer growth with the addition of approximately 4,000 retail customers since the third quarter of 2009.

As we've discussed in prior quarters, when differences exist between taxes paid and taxes collected in customer prices, a surcharge or a refund to customers is required. A key element in SB 408 is the protection of federal tax normalization rule. For the year, PGE estimates that it has additional accelerated tax depreciation of approximately $75 million due to the recent federal tax law change allowing for 50% bonus depreciation in 2010. Due to the increase in tax depreciation, tax normalization rules come into effect. As such, PGE recorded an estimated collection from customers of $20 million this quarter compared to an estimated refund of less than $1 million in the third quarter of 2009.

Now, I'll move on to discuss retail energy deliveries. On a weather-adjusted basis, total retail energy deliveries were essentially flat quarter-over-quarter. This is an improvement compared to first and second quarters of 2010 when total weather-adjusted retail energy deliveries decreased approximately 3% in each quarter. For the third quarter, weather-adjusted residential and commercial energy deliveries decreased 2.4% and 1.4% respectively, reflecting increased energy efficiency initiatives coupled with the sustained effects of a weak economy.

Energy deliveries to our industrial customers increased 4.9%, as a large pulp and paper customer increased its operating rate and as solar and high-tech customers continued their upward trend. For 2011, we continue to forecast loads to be flat compared to the weather-adjusted loads in 2010. This was also the basis for the 2011 rate case with customer prices going into effect January 1, 2011.

In the third quarter, overall customer prices decreased approximately 5%, reflecting a decrease in net variable power costs, partially offset by increases from Biglow Canyon Phase II and the Selective Water Withdrawal project, which are now in customer prices.

Average variable power cost decreased 8% in the third quarter of 2010 compared to the third quarter of 2011, primarily due to the increase in low-cost generation resources coupled with higher thermal plant availability. Year-to-date through September 30, total Company thermal plant availability was at 93% and for PGE-operated plants, availability was at 94%.

Now on to hydro. In the third quarter of 2010, regional hydro conditions declined from second quarter expectations. Energy received from hydro resources during the third quarter of 2010 was 9% below normal levels compared to 16% below normal levels in the third quarter of 2009. Hydro negatively impacted our financial performance by approximately $3 million pre-tax in the third quarter of 2010 compared to a negative impact of approximately $5.8 million pre-tax in the third quarter of 2009.

On the wind side, we continue to see an increase in generation as we added resources and with the completion of Biglow Canyon Phase III. Wind production provided 7% of PGE's retail load requirements in the third quarter of 2010 compared to 4% in the third quarter of 2009.

Now, I'll update you on a few regulatory items starting with our Power Cost Adjustment Mechanism or PCAM. For 2010, the PCAM's deadband ranges are $17 million below to $35 million above the baseline for net variable power costs. Year-to-date, through September 30, net variable power costs were approximately $11 million below the base line as a result of efficient thermal plant operations, partially offset by lower hydro and wind generation.

Net variable power costs for the full year of 2010 are expected to be below the baseline, but within the established deadband. Accordingly, no amount was recorded for a refund to customers as of September 30.

Decoupling did not impact the third quarter as residential and small commercial weather-adjusted use per customer was consistent with that approved in the 2009 general rate case. Year-to-date, we have recorded an estimated $8 million collection in customers compared to a $4 million refund by this time last year.

I'll now move on to the 2011 rate case. We have reached agreement with parties on all revenue requirement items resulting in an increase of approximately $59 million in annual revenues or an approximate 3.5% overall increase in customer prices. The 2011 price increase is subject to net variable power cost updates, which will be final in November. The increase in customer prices will cover O&M and other inflationary cost increases updated 2011 load forecast, new rate-based investment and will provide PGE with the opportunity to earn a fair rate of return.

progress on the PCAM, resulting in a fixed deadband range of $15 million below to $30 million above baseline net variable power cost, avoiding the otherwise growth in the range as we add rate base; a return on equity of 10%; a capital structure of 50% debt and 50% equity, for an overall cost of capital of approximately 8%; extension of our decoupling mechanism for another three years; and a tariff related to the future recovery of our remaining investment in the Boardman plant. These agreements will staff and all parties remained subject to commission approval. A final order is expected by mid-December with new prices becoming effective January 1.

Now, on to liquidity and financing. We are active in the wholesale marketplace, entering into forward contracts for natural gas and power to mitigate commodity price risk for our customers. As of September 30, we posted approximately $354 million in collateral with wholesale counterparties, which consisted of $117 million in cash and $237 million in letters of credit.

As contracts settle and if market prices remain unchanged, we would anticipate that 13% or approximately $40 million in letters of credit and $6 million in cash will roll off by year-end and another 52% will roll off in 2011 with the balance of approximately 35% in 2012 through 2015.

We have $600 million in revolving lines of credit, of which $334 million was unused as of September 30. At quarter end, we had $9 million of commercial paper outstanding, with no direct draws on the revolvers. Additionally, to take advantage of tax carry-back opportunities, we made an early pension contribution of $30 million in the third quarter, offsetting 2011 and part of 2012 contributions.

While we target a capital structure of 50% debt and 50% equity, periodically, we are higher or lower. As of September 30, our equity ratio was 47%. Our 2010 capital expenditures have been reduced and are estimated at approximately $473 million, which the Company has completed a majority in the first nine months of 2010.

Now, on to earnings guidance. As Jim discussed, we are increasing our 2010 earnings guidance by $0.25 to $1.65 to $1.80 per diluted share. The key driver or $0.20 per share of the guidance increase is the result of federal tax law changes, which had a positive affect on Senate Bill 408 calculation. The additional $0.05 increase is the result of net affect of strong thermal plant operation, a continued focus on cost management, and the reversal of a tax deferral, partially offset by the continued effects of a slowed economy and below-normal hydro and wind conditions.

In closing, we continue to focus on financial objectives that support our core utility business and growth initiatives, including improved ROE and earnings performance to achieve a competitive rate of return on our invested capital. Adequate liquidity and a strong balance sheet to maintain our investment grade credit ratings. Thank you. Jim.

Thank you, Maria. Our third quarter results reflect our continued progress on key initiatives. Customer satisfaction, system reliability, and generation plant availability remain high. We completed our Biglow Canyon Wind Farm on time and under budget. And we continue a constructive regulatory process on our 2009 integrated resource plan including Boardman and our 2011 general rate case.

The outcome of the rate case if approved by the OPUC is fair and reasonable, aligning our customer prices with our cost structure and providing mechanisms that reduce volatility and are in line with the stipulated ROE. Looking ahead, we will continue to position the Company for future growth opportunities that deliver value to our customers and shareholders.

Operator, we'd now like to open the call for questions.

(Operator Instructions)

Operator?

Operator, are you there?

Yes, can you hear me now? Hello, can you hear me now?

Tina, hello?

It appears that we've lost the operator. We're trying to connect to the operator. Hey, give us a moment.

Hello, can you hear me now?

The operator there?

Yes, I have been having technical issues. Can you hear me now?

We're just in the process of trying to contact the operator, they must have just stepped away.

Hello, can you hear me now? Hello, can you hear me now? Hello, can you hear me now? Hello, can you hear me now?

It appears that we have a contact with the operator. We're trying to get her back online. Well, hang on for a minute, folks. We do have people on the call list. So hang on, we're not going to leave until we get the operator back online. So -- it appears that they're having technical difficulties. So they're working on it right now. So she would just be a few moments hopefully.

Hello, can you hear me now?

Working on a technical difficulty, just give us a few more moments. If not, I know, we'll be in EEI next week and we could probably answer many of your questions, but just hang on for a second. We'll see if we can get those things resolved.

Hello, can you hear me now? Hello? Hello?

[Appears] there must be a connection problem between here and the line. We will give it a few more minutes here; if not, as I mentioned, we'll be at EEI -- Maria and I will both be back at EEI next week. And if necessary, we can catch up with you on your calls.

And we also can see who is in the queue for asking questions and we'll call everyone back.

Yes, that's a good point. Give us a few more moments here and we'll see where it goes. So if you can see the people, I can. Okay. So let's start with Brian Russo. Why don't you open up the question for Brian?

Yes, hello, can everybody hear me?

It works. For somebody who we just can't hear the operator, but maybe we'll get the questions coming through. Brian is up --

Okay, just curious what's -- it looks like you've quoted --

Brian, are you there?

Yes, I'm here. Can you hear me?

Doesn't appear to be coming through.

Hello?

No, I think we should just call each individual back.

Hello?

Brian is talking, but we can't hear you. Brian, it looks like --

Yes, I'm trying.

I wonder if we should call back him.

He called back in.

Called back into the number. So it appears that we can't get the questions coming through. We're just going to take a pause and try to call back in. If you could just be patient for a second, we'll call back into the number and see if we can connect. If we miss the connection, then we will catch up with you today. Bill will call you all back who have questions and there will also be the IEE next week. So you want to tryto recall this number? (inaudible). Okay. So we'll hang up.

Hello, sir, you are in the conference now?

Yes, we are.

Okay, and you can hear me now.

Yes, I can.

Okay. Wonderful. Okay. We do have the next questions from Jennifer Sireklove with McAdams Wright Ragen.

Thank you, all, for your patience. Sounds like we're back on line. Jennifer, go ahead. Thank you.

Hi. Sounds like I cut in front of Brian Russo there.

That's okay. He will hopefully come back on.

All right. Very good. I just wanted -- I had some questions that were asked before already because I want to make sure that I understand it. You mentioned the federal tax normalization rules in your last transcript. But I don't think I was paying sufficient attention because in my mind, if you have depreciation and lower your tax bill, actually you would need to give a refund to customers. So could you just explain this normalization rules that you're talking about?

Yes, Maria will do that.

Hi, Jennifer. So one of the principles behind the normalization rules created by the federal government a number decades ago was that the funds that were directed towards utilities through tax incentives or production tax credits or whatnot were to be for the construction of plant and equipment for employment of individuals and particularly directed towards the expansion of renewables throughout the country.

And a primary aspect when 408 was created was to ensure that those normalization rules are not violated under any 408 issues in the State of Oregon. And so what we're essentially doing as we increase our deferred taxes is that we take the -- either taxes collected in rates versus the deferred tax amount and we make some adjustments and essentially we use a greater of calculation to make sure that we don't violate that amount. And so that's how you get to the collection within customers' prices.

And then how do customers see that in their bills? It's smoothed out over time and maybe the magnitude per your average bills [aren't] very much. I'm just curious if there is any risk of backlash, is this a large amount for customers?

Sure. In the overall history of 408 for Portland General Electric, if you include the full amount that we are now estimating for 2010, we're right about even, actually a refund to customers of about $1 million if you go back to the beginning of 2007. So we have had two years with surcharges since this began and we've had three years with collection. And so it will take a while for us to work this out through the OPUC. We have submitted our filings for 2009. 2010 tax year filings will be submitted next October and then customer prices are affected thereafter. It takes through April of each year to resolve this with the commission. So, we sort of have an ongoing balancing account with customers.

Okay. Very good. And then, just one little question, I saw the Portland Tribune had an article about a community, individual and group support for your 2020 plans, a letter was written, is this an iteration of existing support or is there any new news there?

Well, it is actually new support that we've never had the letter from the -- some of the key stakeholders to the DEQ that reinforces our plan for a 2020 phase out on coal. So the major parties was Angus Duncan with the Bonneville Environmental Foundation and the Head of the Global Warming Commission in Oregon; Andrea Durbin from Oregon Environmental Council; and the Renewable Energy Group also supported that. And so it is kind of a major step in the process to get them to support our 2020 plan.

The change in the plan was just additional efforts to put additional controls on the plant to get lower sulfur reductions between 2018 and 2020. And a commitment by us if that plan is approved, we would take the 2040 kind of ongoing plan off the table. So it's getting a milestone agreement, it represents at least agreement. I would also mention that Citizens' Utility Board signed on that letter also. So, we've got broad-based support for our 2020 plan and that's something new that we haven't had that visible support from all of those parties at this point.

Very good. Thanks so much. See you in a few days.

Yes. Thanks.

Your next question comes from Brian Russo with Ladenburg Thalmann.

Hi, Brian.

How are you?

Thanks for sticking with us.

No problem. Just curious -- I'm sorry if you may have discussed this earlier. I got on the call a little bit late, but the industrial sales pickup year-over-year, what's driving that and is that kind of considered sustainable over the next couple of quarters?

Maria, will you cover that?

Sure. There is a couple of key issues that are taking place. The first which affects revenues but not necessarily our bottom line is the return of a large industrial customer to our cost of service. They had previously been purchasing their energy elsewhere. The biggest impact to our bottom line is a pickup in one of our pulp and paper manufacturer's operating rate. And then secondarily, we are continuing to see continued upward trends in our high-tech and solar sector as they work through the economic downturn.

Okay. And was this kind of captured in the recently concluded rate case with the 2011 test year?

Yes, it was. We update our estimates, which for this year are approximately 1.5% below last year for total load. Those were updated in September when we had all of this information. And for 2011, we are expecting that year to be fairly flat with where we are in 2010.

Okay. And then just on this bonus depreciation and the SB 408, that hasn't been -- has it technically hit the cash flow statement and is that kind of the impact of bonus depreciation, is that kind of discounted in that 46% equity ratio you quoted for the September '10 period?

Sure. So there is two aspects of bonus depreciation, which we've had for a couple of years, as well as accelerated depreciation production tax credits. The first is that we are building our deferred tax liability on our balance sheet and have received a tax refund as we have carried back tax losses to prior years and we've noted that on the last couple of calls and consistent with many other utilities.

What's different for us is the effects of SB 408 and what we're seeing with the continuation of bonus depreciation in 2010 is that we're hitting a higher level, prompting the impact of the normalization floor. SB 408 in the current year is a non-cash item and it's not until after we file with the OPUC next October, finish the process in April of 2012 for 2010 and then prices go into -- or the impact in customer prices take effect. So there is quite a bit of lag on the cash side.

Okay. And is there any opportunity to identify other assets that I guess are currently under construction or would fit in with the bonus depreciation tax laws and then what are your thoughts on the equity issuance that you're considering in late 2011? Does this bonus depreciation have any impact on that?

Sure. With regards to our analysis, I think we're fairly -- this is fairly straightforward from a bonus depreciation standpoint. That is not complicated and our capital expenditures for 2010 are well known. The complexity really comes in with SB 408 and I think that there is a lot of issues to continue to resolve there and continuation of bonus depreciation going forward would continue to have the same effect that we have seen in this quarter on SB 408.

In terms of its impact on our equity offering, we have been factoring in increases in deferred taxes in our estimates for some time. The biggest impact for us in terms of equity will really be the timing of our capital expenditures. As Jim noted, we are getting towards the tail end of the IRP processes, but we have not yet begun the RFP processes and due to the amount of time it takes, we are delayed in that and we will need to wait till we see more resolution with regards to those projects before we could be more certain on the timing. Additionally, our stock price capital market earnings will all have a factor.

All right. Thank you very much.

Thanks.

Your next question comes from James Bellessa with D. A. Davidson & Co.

Good morning.

Good morning, James.

This large customer that came back on to your system, why did they leave in the first place and what incented them to come back?

The large customer or all of our large customers have the ability to go directly to the market. The market availability for power for these customers has shrunk in the number of companies that they can purchase from. And they frequently will depend -- see what they can get in the marketplace and -- versus what they can get from us and take the best economic deal and we are the best economic deal.

Yes. And even though they do go to the market, they still pay their transmission and whatever distribution component of that rate to us, so the only thing that's different is we will purchase less power in the future or more power depending on whether we're serving them or not. That's part of the open access tariff that we have or what's called the competitive rates that we have.

You were enumerating the change in the guidance and one of the factors I think was a reversal of a tax deferral that I think that's what I heard. What might that have been?

Sure. We have, periodically have the number of one-time items and that was one of them. We had been expecting it for some time although we weren't exactly certain what quarter it would fall in. It is a tax kicker that goes back a number of years and at that time, we would debate whether we would have a refund to customers for it, but we were not at the ROE amounts and so we've been able to reflect that on our books. The decision was made by the OPUC about a month-and-a-half ago.

And what quarter did that hit, did that hit the most recent quarter?

Yes, it was in the third quarter.

Okay. Then how much was that in dollar amount or per-share basis?

It was about $5.5 million.

The tax kicker occurred in 2005, that's when we got it back and as part of the regulations, when you do a deferral, you do an earnings test to determine whether you have to refund or return those dollars or surcharge customers for the dollars under deferrals and the earnings at that time were low, therefore they decided we did not need to refund that kicker.

So, did that help your third quarter earnings by $0.15 a share? Is that what I'm calculating --?

No, Jim. It helped us by about $0.04 a share. The other number that you're looking at relates to the SB 408 impact from bonus depreciation, which is a much more significant number. When bonus depreciation was extended for 2010, we picked up another $75 million of deferred taxes and roughly about a third of that had an impact on the year and we reflected about $0.16 in the quarter.

Yes. I can see where I did my arithmetic wrong, but they came out -- I took $5.5 million divided by your shares and I came up with $0.06 or $0.07, is there a tax effect to the reversal of a tax deferral?

Yes, there is.

In that $0.04, is that what happened?

Yes, exactly.

Okay. And then, I see where the Public Utility Commission filed with the legislature biennial report saying that they think that you can get your greenhouse gases down by the year 2020 and that to do so, to meet certain guidelines, you'd have to close both Boardman and Colstrip and increase your rate somewhere between 10% and 38% by 2020. Do you have any comments on that? I guess it's a report, recommendation or something like that from the Public Utility Commission to this legislature.

I don't know we have that report here. I'll have to look at. Oregon did set some aspirational goals. They're trying to limit greenhouse gases from 1990 levels. Those are aspirational goals and I think that what you're referring to is if we try to reach those aspirational goals, this is what it would mean. There is no current requirement to meet those goals. Those are just aspirational.

Again, we use the Integrated Resource Plan to plan our future resource needs and we do take into account the risks and uncertainty of the externalities, things like carbon, but there is no mandate or requirement to reach those levels. And as you know, there is no federal legislation in that area. So my guess is this is just a -- if you had to reach those aspirational goals, this is what it would look like, but [they're showing no] requirements.

Your IRP calls for the closure of Boardman maybe by 2020, but you aren't talking about Colstrip?

No, that's not on our radar screen at this point. That plan is fully scrubbed and in compliance with of our greenhouse gas. I think as we see what happens with federal legislation in the future, you're going to have to evaluate all your options and determine what the cost of carbon is, to determine what your resource strategy is going forward. So again, there is no plans at this point to close Colstrip. And as you know, we're just a part owner of that plant.

Thank you very much.

Welcome. [See you], Jim.

(Operator Instructions).

[Operator], no further questions. We appreciate your interest in Portland General Electric and look forward to seeing many of you at EEI in a couple of -- we've got another call, just popped up. Hang on. We'll get Sarah online.

Your next question comes from Sarah Akers with Wells Fargo.

Hi, all.

Hi, Sarah.

First, I just want to make sure I heard a couple of dates correctly. Regarding the Boardman emissions controls, I think I heard you say that you are expecting a recommendation in November and then a final decision by the OEQC by the end of 2010, is that correct?

That is correct. That's the current plan. No, I think we'll have to watch how this process unfolds over the next month or so, but that's currently what we know today.

And so in terms of the IRP acknowledgement, I think I heard you say that that would be in November. So is it -- does that work correctly, where they can acknowledge the IRP in November but not have the final decision until the end of 2010?

It's kind of two separate issues. What the IRP decision was that -- and this is staff recommendations at this point is they would acknowledge -- the staff recommendations acknowledge our 2020 plan as the least-cost, lowest-risk option for customers, but it is subject to having a set of regulations that allows us to implement that 2020 plan. The staff suggested that if we do not get a workable 2020 plan, we would have to go back to the commission and refresh our analysis and look at what other options are available to the Company as we go forward.

So assuming that the Environmental Quality Commission approves the 2020 plan, it would be aligned with our commission acknowledgement, if the commission acknowledges that staff recommendation and we will be fine. If it's different or we have a plan from the Environmental Quality Commission that's different, then we will have to evaluate what those differences are and then go back to the commission to kind of brief them on the situation.

Got it. And then one other question, can you remind us when you originally filed the IRP, looking at those two gas needs, the peaking and the baseload. When those were originally thought to have been needed in service? And then with the knowledge that you have now, a better picture of the growth outlook in the economy, has that changed at all?

On the peaker, we're looking in the 2013 time frame because that's where we can get up pretty quickly. The gas generation would be probably in the 2015-2016 time frame, just depending on when we get transmission built. The Cascade Crossing, or we have other transmission passed, but the likelihood of not getting transmission constructed by until that time frame is what would kind of time that resource out.

In terms of the effects of a slower economy on those decisions, as you know, we do not have enough resources to meet our retail load and even if load stays flat, we would still need additional resources as we depend on the market for about 25% of our retail need. So we would still continue to move forward with those resource decisions and I think the commission's acknowledgement of that would represent their support for that direction.

Great. Thanks a lot.

Thank you. Okay, it looks like we are no longer having further questions. So again, we appreciate your interest in Portland General Electric and for those of you who have scheduled time next week at EEI, we look forward to seeing you there. And if you have any further questions, feel free to contact Bill Valach after this call. So thanks a lot and have a great day.

Thank you for participating in today's conference. You may now disconnect.