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Power Players: the Spark Plug by Ben Jacklet, Penn Energy, August 24, 2009

Keeping up with the new CEO of Portland General Electric takes energy.

Tightly wired, ebullient and humming with his own internal electricity, Jim Piro is both blunt and thoughtful as he races through the list of challenges that he faces running Oregon's largest utility during a time of looming uncertainties. Whether the subject is the undecided future of the Boardman coal plant, the troubled past of the Trojan nuclear plant, or the futuristic potential of smart-grid technologies and electric vehicles, Piro tackles each new subject with candor and enthusiasm, rarely if ever seeming to censor himself.

It's not uncommon for him to shrug and say, "We don't know the answers to any of those questions," or "Whether that's good news or bad news, it's the truth." Late in the interview, he jokes that sometimes the company's corporate communications staff wishes he would be more cautious about what he says and doesn't say, but by then it is too late to take anything back.

Unlike other top executives in Oregon's energy sector, Piro is neither a political appointee nor a longtime political insider. He is a technocrat, a former Oregon State University engineer with 35 years in the electricity business.

He joined PGE in 1980 as a civil engineer, developed his financial acumen working on rate cases, and served as CFO from November 2000 through the end of 2008 before taking over for former CEO Peggy Fowler this year.

Fowler's tenure was complicated by the implosion of former PGE owner Enron and takeover attempts by the private equity group TPG and the City of Portland. Since going public in April 2006, PGE has reasserted its viability as an independent, vertically integrated electric utility. Its stock, however, has not performed well, losing a third of its value over the past three years.

The biggest immediate change Piro inherits involves wind power. PGE is investing a billion dollars in the 450-megawatt Biglow Canyon Wind Farm in the Columbia River Gorge. But wind accounts for just 4% of PGE's current power mix. Wind's share is expected to grow to 11% by 2012, but those electrons mostly would replace power generated by hydro dams, not coal or gas plants, meaning pollution gains would be modest. Furthermore, growing PGE's renewable portfolio to 25% by 2025 as required by Oregon law will be an engineering challenge as well as a fiscal one, because wind is proving even less predictable as a source of energy than was originally expected. Too much wind is proving even more problematic for utility engineers than not enough of it.

That means PGE will need to back up its wind investments with something reliable and easily cranked up, i.e., natural gas power plants. That means more emissions, because while gas plants pollute less than coal plants, they still pollute.

"We're not going to go back to being a Third World country and say, 'Guess what? The wind's not blowing so we're not going to have any electricity today,"' says Piro. "At the end of the day, if we're going to replace coal, we're going to need new molecules."

That's a big if, and it raises a complex issue for PGE. PGE owns and operates the Boardman coal plant, which is by far the largest source of greenhouse gases in Oregon. PGE also holds a 20% interest in the Colstrip coal plant in Montana. Both plants are low-cost power producers, as well as increasingly risky environmental liabilities. After years of scrutiny, the Oregon Department of Environmental Quality has required major investments at Boardman, with strict deadlines.

"The company has two choices," says Piro. "Run the plant through 2014 and shut it down, or spend $700 million, implement all those measures, and run the plant basically forever. This is not an easy analysis. If we shut down Boardman we'll have to replace it with natural gas. That's the only really viable resource. The questions are: What are gas prices going to be? What are coal prices going to be? And the biggest uncertainty is how much is carbon going to cost? We don't know the answer to any of those questions."

There are only two coal power plants in Oregon and Washington, and environmental groups are considering a campaign to shut down both of them. Piro is a veteran of PGE's controversial foray into nuclear power (which he considers a mistake in retrospect), so he is familiar with the political implications of operating unpopular plants. Still, he says, "We have a responsibility to be prudent about fuel diversification, so we have to think seriously about what shutting down Boardman would mean for our dependence on natural gas and the availability of gas or lack thereof. There's only a limited supply of natural gas, and we would have to study the supply side very carefully."

So does he support the proposal to build a liquefied natural gas terminal near Astoria? Piro shakes his head and says he "wouldn't want to burn any bridges" by backing LNG.

Clearly, Piro is more comfortable discussing technology than taking political stands. His enthusiasm returns once the conversation turns to smart-grid technology and electric vehicles. PGE is spending $130 million to install 850,000 smart meters by 2010, allowing two-way communication between the utility and residential and commercial customers. The utility is also working to recruit electric car companies such as Think, Nissan and Mitsubishi to Oregon.

The efforts to encourage electric cars and build a smarter grid are connected because a smart grid would grant the utility some control over when and how electric cars and other appliances are charged and used, to maximize efficiency.

"Eventually as we put our smart meters out there and create a smart grid with smart appliances, we'll be able to do some load control when the wind stops blowing, to manage the uncertainty," Piro says. "And when the wind is really blowing, you can add load by doing things like charging your. electric vehicles at night. Over time, appliances will have these smart chips installed, as will electric vehicles. And technology will improve for communicating with those devices. That's where the smart grid's ultimately going. It just makes sense from an efficiency standpoint."

If only all of the industry's uncertainties could be so smartly resolved.

PORTLAND GENERAL ELECTRIC

ESTABLISHED: 1889 PORTLAND

2008 REVENUES: $1,745 BILLION

EMPLOYEES: 2,700

CUSTOMERS: 814,000

2009 ENERGY MIX: 27% NATURAL GAS, 26% HYDRO, 24% COAL, 19% MARKET 4% WIND

GREEN CLAIMS TO FAME: LEADS NATION IN CUSTOMERS WHO VOLUNTARILY PAY MORE FOR CLEAN POWER

GREEN LIABILITY: BOARDMAN COAL PLANT, OREGON'S LARGEST PRODUCER OF GREENHOUSE GASES

OWNERSHIP: INDEPENDENT; WENT PUBLIC IN 2004; NYSE: POR

SOURCES: PGE, DEQ, Business Week

EXECUTIVE: CEO JIM PIRO

AGE: 57

BACKGROUND: PGE EMPLOYEE SINCE 1980; CFO 2000-2008; CEO SINCE JANUARY 2009

2008 TOTAL COMPENSATION: $942,625

REPORTS TO: PGE BOARD OF DIRECTORS