Good day everyone and welcome to the Portland General Electric second quarter 2008 earnings results conference call. Today is Thursday August 7th, 2008 and this call is being recorded. 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 now 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, [Jamara]. Good afternoon everyone. I am Bill Valach, Director of Investor Relations at Portland General Electric and we are very 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 commentary. There will be statements in 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 second quarter ending June 31, 2008 will be available tomorrow at portlandgeneral.com. The company undertakes no obligations 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 second quarter 2008 earnings were released before the market opened today and the release is available at portlandgeneral.com. With this release, PGE announced earnings of $39 million or $0.63 per diluted share for the second quarter ending March 30, 2008 compared to $46 million or $0.73 per diluted share for the second quarter ending March 30, 2007. With me today are Peggy Fowler, CEO and President and Jim Piro, Executive Vice President of Finance, CFO and Treasurer. Peggy will begin the call with an overview, Jim will then discuss in more detail our second quarter results and then we will open the call up to question. So, with that, I would like to turn the call over to Peggy.

Thank you, Bill. Good afternoon and thank you for joining us today. Welcome to Portland General Electric's 2008 second quarter earnings call. I enjoyed the opportunity to seeing many of you in June, when we were in New York on Boston for Analyst Day presentation. For those of you, who are able to join us thank you again for your timing interest in our company. During these meetings Jim Piro and I along with three other members of our executive team described how things look a bit different in Oregon and at Portland General. We explained how these differences create opportunities for us to deliver long-term value to our shareholders and customers. During today's call, we will describe how our external operations during the first half of 2008 provided values. We will also update you on PGE's earning guidance, provide an overview of Oregon's economy and customer growth and review PGE's progress in investing to meet customer needs, which will drive earnings and growth for our shareholders. Let's begin with earnings guidance. Today, we are increasing our full year 2008 earnings guidance by $0.10. The new guidance is now $1.85 to $1.95 per diluted share. The increase of space on continuing outstanding operations and gains from the sale of fuel from our Beaver plant, which we determined has surplus inventory that exceeded our needs for maintaining plant reliability. For the long-term, we continued to expect our annual earnings growth to remain at 6% to 8%, which will support continued growth in our dividends. Now I would like to talk a little bit about the state of Oregon's economy. So, far this year Oregon's economy has performed better than the national average and this performance is expected to continue through the remainder of the year. During the first half of 2008,…

Thank you, Peggy and good afternoon everyone. .PGE's net income for the second quarter 2008 was $39 million or $0.63 per diluted share compared to $46 million or $0.73 per diluted share for the second quarter of 2007. 2008 results reflect an increase in retail energy deliveries due to cooler weather and an increase in the number of customer served compared to the second quarter 2007. Also contributing to earnings was the addition of Biglow Canyon phase I into customers' prices. These positive results were offset by decreased fair market values on non-qualified benefit plan trust assets and higher operating expenses. As we discussed, our first quarter earnings call PGE's 2008 hydro production was lower than normal due to colder temperatures and a resulting delay in snow melts, which had an impact of approximately $6 million after tax or $0.10 per share based on a comparison to our forecast of normal hydro condition. We have seen partial recovery of the $0.10 per share during the second quarter amounting to approximately $2 million after tax or $0.03 per share. We expect to have above normal hydro production for the remainder of the year, resulting in above normal hydro production for the full year. Due to the improving hydro conditions, solid thermal operations and gains from the sale of oil inventory to the second quarter, PGE has experienced a reduction in its power cost as compared to the base line as filed in the Annual Update Tariff. As a result, we have triggered the power cost adjustment mechanism and have booked $7 million for our potential refund to customers. We will continue to update the power cost adjustment mechanism quarterly and we will make a final determination of any customer refund or collection with completion of an earnings test at year end.…

Thanks, Jim. Our second quarter results show we are making solid progress on several key projects and keeping our customers satisfied. We are reaching settlement on critical areas of our 2009 general rate case with regulators and customer groups and we have received regulatory approval for our smart meter projects and have started in selling the meters. Construction of Biglow Canyon Phase II has begun. We have also received good response to our RFP for additional renewable resources and are in the process of carefully reviewing our best available options. Our solid thermal operations and improving hydro conditions allow PGE to provide value to both our customers and shareholders. Finally, we will continue to invest in our business to deliver value to our shareholders and our growing customer base. Jamara, now we would like to open up the call for questions.

(Operator Instructions) Your first question will come from the line of Maurice May with Power Insights.

Good afternoon folks. Congratulations on a good quarter.

Thank you, Maury.

Thanks, Maury.

First question has to do with the profit you book from the sale of fuels. Why are those profits flowing to shareholders and not to rate payers?

Jim, I will let you talk about how the accounting works on that.

Yes. We had a certain amount of your oil inventory at the end of the year and the decision was made based on new requirements to meet our restrictions that we could sell some of that oil. That is considered part of our PCAM and it goes to the PCAM mechanism. So, that would go through the mechanism and to the extent we are in the deadband that is 90% with customers and 10% with the shareholders, so that is the way the sharing mechanism is.

Okay. So, the $0.10 pickup is a combination of 10% to shareholder plus recovery of previously under recovered fuel?

Yes. I think that plus the ongoing good operations remember the deadband has a $14 million deadband on the upside. So, essentially we will work through that deadband.

Okay.

Now we are in a sharing mechanism and that is primarily due to good hydro conditions. The plants have been operating well and that adds to that the sale of the oil inventory.

Okay. So, you work on the positives. You can flow it through because you are in the positive side of the deadband.

That is correct. Then that is also due to an earnings test as you recall that we would not start refunding the customers until we achieve a ROV of 11.1%, and we will look at that closely in the third and the fourth quarter, as we get the full year results.

Okay great. Second question has to do with the Trojan Remand is there any update their please?

We are still working through the process on the Trojan Remand. You are probably aware of the schedule that is out there and we still are confident that the Commission wants to resolve it as quickly as possible. The utility reform project has recently requested oral arguments so it is possible that there could be a slight push out in the schedule after OPUC. I think it is important to remember that we still have not taken any reserve. We want to work through the final process and continue to attract what is going on here, but really not a significant change at this point.

Okay. The existing schedule calls for a decision sometime in early September I believe?

Yes. Commission order by September 12th, I would not be surprised to see that push until the end of September. We are right now trying to decide what we want to say about oral arguments. I think in the name of wanting to have this result carefully and fully it is probably good for us to go ahead and allow that but ask that it would be scheduled quickly so that we can get it done in a reasonable timeframe.

Okay. Do you any estimate or what is your potential exposure might be?

No, we do not. We still, like I said we have not taken any reserves. We do not think we have exposure here. And the Staff case has come in basically saying that if you are to really do this, it was in the $5 million range, but then Dan make out his numbers out there that are significantly larger than that.

Yes, okay. Well, thank you very much folks.

You're welcome.

Thanks, Maury.

Your next question will come from the line of Michael Lapides with Goldman Sachs.

Two questions. One related to Trojans, I am following up on the last one and then going back to the renewable RFP. On Trojan, regardless of how the Commission orders, do you expect whoever "loses" to windup taking it back into the court system again.

Yes, we expect that, but not necessarily whoever loses. If Dan loses, he will take it back to the court system, and he will continue to pursue this as he can. I think that we will make his case very hard, if we get a good and thorough order out of this. We will have some clarity around magnitude and what could be involved here.

Is there any concern that he would try and take it in the federal versus state, I mean it does not seem like there is jurisdiction for federal but just wanted to check with you?

I have never had any concern around that at all, no.

Okay. Second question, on the renewable RFP, are there opportunities that could lead to transmission build-out by Portland General related to the renewable RFP?

Yes, anytime that we look at any new generating resource, as part of that we look at the transmission that would be needed and we would include that as part of the project. Now the things I have to embed in, we have not looked at details but they need to include transmission into our system and so there might be some that would makes sense to have some transmission build-out. Again transmission for us for the most part is to serve our native load, and we want to do that to connect our resource. The other piece, we are looking at over time is the Southern Crossing Project, but that really is not part of that RFP at all and if associated with those resources.

Got it, okay, thank you.

You're welcome.

Your next question will come from the line of Brian Russo with Ladenburg Thalmann.

Hi good afternoon

Hey Brian

Hi Brian.

It looks like most of my questions have been asked and answered. I just want to be clear, the $0.10 increase in guidance assumes approximately $0.07 for the fuel oil gain?

Jim is looking through the numbers here - -

It was $7 million pretax, I think is the forecast amount.

Okay, all right. So, I get back into the EPS. Also, it looks like your income tax rate was much lower in the second quarter; I am wondering what a good full years tax rate would be?

When we look at our tax rate for the year, remember now we are qualified for production tax credit. So, that has really changed our tax position. So, taking advantage of those production tax credits with Biglow Canyon phase I will reduced our effective tax rate, and we are approximately to 30% range.

Okay. So, for full year 2008 on average tax rate is 30%.

Yes and that gets factored in the production tax credit, another credits that we have. Close to those related to wind.

Okay. Do you have confidence that you can earn the allowed ROE or I know you got a forward looking test year that helps but historically have you been able to earn closer to the allowed ROE?

We bringing our allowed ROE is very important to us. We work very hard to do that. So that is the key focus.

What was your actual ROE in 2007? I know, there is some….

Jim do you have the actual ROE?

Again, you always have to adjust that. The regulatory filing we made was above the ROE primarily because of the good results on the power side. So, we do a normalized look from a regulatory perspective and we follow that with the Commission on an annual basis and we were above last year. On a total basis, I think last year we are probably above that primarily because we have booked the Boardman deferral that was granted during the year, which was the timing issue. So, you have to start normalizing the things out. Your answer on the oil just to clarify through the first six months, the oil sales were about $4 million after tax and for the year they forecasted to be about $7 million after tax.

Okay. So, you are expecting an additional $3 million in the second half?

That is correct, and that would put us back to our reliability level for purposes of storage at Beaver in terms of our comfort level, where we want to be for the reliability.

Okay, and that is included in the full year increased guidance.

Yes. The increased guidance includes the full year.

Okay, great. Thank you.

Your next question will come from the line of Steve Gambuzza with Longbow Capital.

Good afternoon.

Hi, Steve.

The rate increase that you file for which is in the current power cost forecast, is it the 14% on customer increase? I was wondering you mentioned by marking at the market on the current gas price strip there might be something less than that. I am wondering, if you would give us some order of magnitude for what the difference might be at the current price level more or perhaps just say what gas price strip will bill out?

Sure. We are anticipating. We have run the numbers and as we currently look for where we currently are since that timeframe, we expect that the total increase would be around 11% well random again in September, and then again in November to see. Jim, do you want to---

We run the numbers weekly. They move around just because of the forward strip. So, the way to get people triangulated on a number, but price will not decrease. However, I will tell you that we are closing a lot of our position as we try to closer to setting our final power cost until the volatility will start reducing, as we get through the next filing.

Okay. So, changing your position for 2009?

Exactly 2009.

Okay. In terms of the impact of some of this one time items on the guidance relates to the fuel oil sale. It also looks like there was a negative charge for the impairment of pension related assets that somewhat offset the positive from the fuel oil sales, is that correct?

Yes. Our pension plan is like everybody, who is investing these days are suffering a little bit not of the same magnitude. Jim, do you want to talk about the mix?

Yes. The specific reduction we had it was called our non-qualified plans. Our pension plan goes through FAS 87 expense. We do that every year on an annual basis, but the non-qualified plans since they are not in the list of plans. We have few mark-to-market accounting there. We had a decline in the value of those assets. I think, if you look on the balance sheet you will see about $60 million of those assets and those are diversified portfolio and with the decline in the market those did go down. I think we did disclose in our earnings release the exact numbers related to that compared to last year and overall for the years. So…

But that includes….

It can go up and down and those are really below the line, those are non-utility results and the above the line obviously was the improvement in power cost.

Is that decline is part of your guidance, is that correct?

Yes.

Yes.

So, I am thinking about it will essentially offset a good portion of the gain on the sales of oil inventory in terms of the improvement in guidance. Is that a fair way to think about it?

Not precisely, because of the PCAM.

Okay.

The PCAM takes some of that, that the sale from the oil inventory away.

Meaning that there was even less of a benefit from the sales of oil inventory?

Right. So, then you have to look at the overall improvement relative to power cost and operations basically.

Great, thanks very much.

(Operator Instructions) Your next question will come from the line of James Bellessa with D.A. Davidson & Company. James Bellessa - D.A. Davidson & Company: Good afternoon.

Hi, Jim.

Hi, Jim. James Bellessa - D.A. Davidson & Company: You indicated that you had this late snowmelt and it cost you $0.06 of share but if I heard you correctly, you made of $0.03 of that in July?

In the second quarter. James Bellessa - D.A. Davidson & Company: In the second quarter you made it that.

$0.03 James Bellessa - D.A. Davidson & Company: The late snowmelt was only a net $0.03 cost.

It was $0.03 better then normal if you will. So, that is eases into the prior three months that were below normal. We expect it to continue to be above normal for the rest of the year with the overall results being above normal. We did not provide any specific guidance for the total amount of hydro for the year in terms of dollar, in cents per share. James Bellessa - D.A. Davidson & Company: Then if I heard correctly, you have more oil sales to come during the rest of this year?

Yes, that is correct, but we have included that in the earnings guidance. James Bellessa - D.A. Davidson & Company: What is the amount that you are going to add to sales?

In July and August we have approximately 40,000 barrels for the two months for July and August sales. So they are last sales of oil inventory and cyclical pretax income in the $2.5 to $4.5 million range, but that included in the guidance. James Bellessa - D.A. Davidson & Company: You have already got the $0.7 from oil sales, here is another $0.3 is that what you are saying?

We have to know because of the PCAM.

PCAM goes on there and taxes all that. James Bellessa - D.A. Davidson & Company: Great, okay. You gave some guidance us to your customers take in the second half and their demand for energy, can you repeat that please?

I am not sure. Jim, you are cutting out the customers take for energy or what is the usage, what we are expecting? James Bellessa - D.A. Davidson & Company: Did not you tell us what your customers may have for the demand for electricity in the second half?

We continue to see about, not in the second half, but I think we continue to see about a 2% increase mostly on the industrial side. James Bellessa - D.A. Davidson & Company: The industrial is this, you talked about some of this solar development companies.

Yes, they are included in some of that other increased used. James Bellessa - D.A. Davidson & Company: You are not seeing any downturns by any other industrial users?

As we look at our loads and understand what our customers are doing, this is our best assessment of what is going on out there. Right now when some of our larger industrials have choice to go to the market, so we may not be serving some of those. We do not have any indications of anything like that at all. James Bellessa - D.A. Davidson & Company: Thank you very much.

Thanks Jim.

Your next question will come from the line of Phyllis Gray with Dwight Asset Management.

Good afternoon. I have a question about your smart meter program?

Yes.

Could you remind me what the total cost of the program implementation is?

Somewhere between $130 million and $135 million for the full process.

Yes. For the deployment of the basic systems that does not get us to the point of actually being able to do capacity or any of that type of work with the meter. We have to get another $20 million to $30 million to get there.

This year we expect to spend about $23 million on what is called the system acceptance test. We spend about six months going through that test to make sure that metes work, the communications work and the back office technology all works, if everything goes well we would start deployments starting January of next year. We will not start deployment until we complete that SAT test and are comfortable that these things all work as they need to. We will then deploy those over two years, hopefully completing by 2010.

Okay. Is the testing just around the automated meter reading, the remote meter reading?

No. It is really around software systems that tally you everything back into our customer system.

Right we need to make sure it links all the way back to the billing system, so we make sure we get bills out. So right from the meter all the way back to the billing system, we have to test through.

We are very comfortable with the technology we have selected; it is really the software that we have to test.

Will you be implementing any rate design changes along with the installation of the meters?

We received approval from the Power Commission for the capital cost, but this is just a basic roll out of our native meters, rate design and all of that would come more around beyond 2010, when we actually have the meters in place and figured out if on and off keep pricing or capacity or those types of things make any type of sense. We would also have to make some additional capital investments in order to be able to do that.

As far as the program we committed to do is a pilot program as Peggy mentioned, and we will charge that after the systems out there and then we will take that all back to the PUC to make sure they are comfortable with us moving forward with that next phase of the project.

Thanks very much

Okay. You're welcome.

At this time there are no further questions. I would now like to turn the call over to management for closing remarks.

We appreciate your interest in Portland General Electric and we invite you to join us in a few months when we report our third quarter 2008 results. If you have any additional questions, please contact Bill Valach who will be available after this call, thank you again for joining us today.

Ladies and gentlemen, thank you for participating in today's Portland General Electric second quarter 2008 earnings result conference call. This call will be available for replay beginning at 8 pm Eastern Time today, through 11.59 pm Eastern Time on August 14th, 2008, the conference ID number for the replay is 546-979-49, again the conference ID number is 546-979-49. The number to dial for the replay is 1800-642-1687 or 1706-645-9291. This concludes today’s conference you may disconnect at this time.