Good morning everyone and welcome to the Portland General Electric Company’s second quarter 2009 earnings results conference call. Today is Monday, August 3, 2009. This call is being recorded. (Operator Instructions) For opening remarks, I would like to turn the conference call over the Portland General Electric's Director of Investor Relations, Mr. Bill Valach.

Good morning everyone, I’m Bill Valach, Director of Investor Relations of Portland General and we are very pleased that you're 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. There will be statements in this call that are not based on historical fact 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 difference, the company requests that you read our most recent Form 10-K and Form 10-Q's. The Form 10-Q for the second quarter of 2009 was available this morning at www.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. This Safe Harbor statement should be incorporated as part of any transcript of this call. Portland General Electric's second quarter 2009 earnings were released before the market opened today and the release is available at www.portlandgeneral.com. With me today are James Piro, CEO and President and Maria Pope, Senior Vice President of Finance, CFO and Treasurer. James will begin this call with an overview. Maria will then discuss in more detail our second quarter results, and then we will open the call to questions. Now it’s a pleasure to turn the call over to James.

Thank you Bill, good morning everyone and thank you for joining us. Welcome to Portland General Electric’s 2009 second quarter earnings call. This morning we issued our earnings release. On today’s call we’ll provide more clarity around the key drivers of both earnings and the revised guidance we announced on July 22. I’ll update you on Oregon’s economy, and the outlook for our operating area. Finally I’ll discuss the progress we’re making on our strategic initiatives. Later Maria will provide details on second quarter results, financing and liquidity, and current regulatory proceedings. So let’s begin, PGE’s net income for second quarter 2009 was $24 million or $0.31 per diluted share. Operating revenues decreased in the second quarter 2009 compared to the second quarter 2008 as a slow economy and mild weather reduced retail energy deliveries. With retail load demand down, power originally intended to meet forecasted load was instead sold into a low priced wholesale market. The combined impacts from lower revenues resulted in lower income taxes, which under Senate Bill 408 requires a customer refund. Higher customer prices and increases in the fair market value of our non-qualified benefit plan trust assets helped to partially offset these impacts. Now I’ll move on to guidance. On July 22 we revised our full year 2009 earnings guidance to $1.35 to $1.45 per diluted share from prior guidance of $1.80 to $1.90 per diluted share. Let me describe the key drivers that led us to reduce our full year’s earnings guidance. Oregon’s economy continues to be impacted by the national recession. Our industrial customers’ electric use has declined more than we projected just three months ago. This decrease in load resulted in a decline in retail margin. At the same time lower prices in the wholesale energy market made it difficult to…

Good morning, as James mentioned net income was $24 million or $0.31 per diluted share for the three months ended June 30, 2009. This compares to net income of $39 million or $0.63 per diluted share for the second quarter of 2008. Let me walk you through the major items that impacted net income for the second quarter this year compared to last year’s second quarter. Revenues decreased by $36 million due to a $19 million decrease from a decline in retail energy deliveries as a slow economy impacted energy usage of industrial and commercial customers and milder weather impacted the energy of residential customers. A $23 million decrease in wholesale revenues driven by a 51% decrease in the average price which was slightly offset by a 1% increase in wholesale energy sales. A $10 million in lower incomes taxes owed led to increased customer refunds under Senate Bill 408. A $10 million decrease due to fuel oil sales in the second quarter of 2008 compared to the second quarter of 2009. These decreases were partially offset by a $32 million increase from new customer prices that went into effect at the beginning of the year. Purchased fuel and power expense decreased by $1 million in the second quarter compared to the second quarter of 2008. This reflects the impact of higher average variable power costs being offset primarily by a reduction in total system load and refunds to customers booked in the second quarter of 2008 under the power cost adjustment mechanism or PCAM. Other expenses decreased by $4 million driven primarily by declines in production and distribution as well as administration and other expenses. Other income increased by $7 million due to an increase in the fair market value of non-qualified benefit plan trust assets and higher AFDC.…

Thanks Maria, we remain on track with major projects, Biglow Canyon Wind Farm, and our smart meter project. Customer satisfaction continues to be high. We expect to submit a draft IRP to the OPUC in this month and the final IRP plan by late 2009. And we continue to focus on running our business in a cost effective manner and continuously improving our operations. Looking ahead we remain focused on our business strategy with an emphasis on operational excellence, corporate responsibility, and investment opportunities that support our core utility business, enhance service to our customers, and deliver value to our shareholders. We’d now like to open the call for questions.

(Operator Instructions) Your first question comes from the line of Marc De Croisset - Macquarie Research

If I heard you correctly, you’re guiding for flat earnings deliveries in 2010, does that mean that you’re not expecting a rebound in industrial sales next year and if so, who are your industrial customers and can you give us a little bit of color around that.

Right now we have some major industrial customers who are commodity oriented businesses and we’re not seeing a this point a recovery in that sector probably until late 2010. Now we could be surprised but we’re being fairly conservative just given the uncertainty of how this recession is going to work through the system. But they’re large customers who consumer a fair amount of energy and they’re in the commodity space primarily in the paper and in the metals business. That’s kind of our view right now. Its been a tough sector to forecast just because they’re so close to the margin in their operations and so dependent on the markets in the US and worldwide for that matter.

If you look at where we were on 2009 if it wasn’t for those customers we would have had much less of a change so there’s a large focus on about the five or so customers.

Kind of on the good news side we still are seeing a commitment by the solar companies that have come in primarily Solar World and Sanyo who are building new facilities in our service territory and they’re still committed to their strategy and moving forward so that has still been a bright spot, Genentech, whose another major customer is doing quite well also. So there have been some bright sectors in the market and we are hopeful that things are going to start stabilizing and indications are that they are but at this point for 2010 and given where we are today we’re being relatively conservative in terms of the look at what’s going to happen next year.

Are you willing to disclose amending rate base number for 2009 at this stage and also do you have a sense for 2009 cash flow from operations. I’m guessing around $300, $320 million for cash flow from operations in 2009 but are you willing to give us a little bit more color there as well.

Let me just speak to the rate base issue and then Maria can give you a little bit more information on the cash flow, we provided, we did a 2009 general rate case and things are pretty much in line with that 2009 general rate case albeit the SWW, the selective water withdrawal project, is not going to close the plant this year, its going to stay in construction work in progress. And so that would be the only real difference to if you will approved rate base, but generally we’re kind of consistent with our capital forecasts we provided in 2009.

More specifically we’re looking at about $2.4 billion by the end of this year in terms of rate base and then in terms of cash flow from operations you’re very close, we’re roughly looking at about $330 million.

Do you see an earnings trajectory that moves you towards an adequate return on your rate base investments. I understand there’s been a lot of earnings volatility over the past couple of years, is there anything that you can do operationally or on the regulatory front to diminish volatility and achieve a more systematic return on your rate base investments.

Couple of things we are doing, we’re likely to file, I think we’re moving along the path to file a 2011 general rate case primarily driven by the reduction in load. That will give us another chance to benchmark our costs with our revenues. Secondly we did get decoupling included for the next couple of years to address any potential volatility on our residential, small commercial customers. So that albeit its worked against us so far through the first two quarters this year its still a mechanism to reduce some of that volatility due to conservation energy efficiency. The third big area is power costs and by far it’s the area that’s most volatile in our business because of hydro conditions and power plant operations. In the next general rate case we’re going to have to look real closely at trying to reduce the size of [dead bans] to reduce some of the volatility and that’s something that’s an ongoing conversation with our customers and our commission. The west has a history of having these dead bans where if you look other places in the country they tend to have full pass throughs. And its something that we’ll continue to work on and those are the three areas of volatility that we see. The industrial customer is a much tougher nut to crack just because they are so subject to market conditions and hard to find a mechanism that effectively addresses that. Historically we’ve seen pretty predictable industrial loads but any time you get these major economic downturns and dislocations you get challenges in that sector. So we are trying to look at mechanisms to do that. Clearly the 2011 rate case is key to getting our revenues and our costs to aligned.

Your next question comes from the line of Michael Lapides - Goldman Sachs

Trying to think through what’s happened in the first half of 2009 that would not be recurring into 2010, just trying to think about what are the items we should back out of 2010 numbers that aren’t necessarily normal or recurring.

Maybe we should talk about relative to the guidance because the first two quarters is probably not indicative of what we’ve seen for the year and I think the major ones, and Maria can get the exact numbers, but the major issues would be the Colstrip outage was clearly a one-time item. Boardman with the new generator installation and the new statter, clearly that’s a one-time item. We expect to get that plant up and running and last year we had a great operating year with Boardman, its been a consistent good workhorse for us and it’s a low cost system. That’s a one-time item. Hydro is obviously a little bit of impact this year. Those are the major one-time items. The load is the issue that we’re going to have to work through into next year and what that does to revenues versus increases in costs that we would see due to inflation and we’re right now in the 2010 budgeting process to see what choices and options we have as we set ourselves up for the 2011 rate case.

As we said in our previous conversation it was about $0.15 on the generation area, that was hydro was roughly on a net income basis about a million, Colstrip totaled about $8 and Boardman about $2. In terms of the effect of SB408 on that, that was also about $0.15 and about half of that would have been associated with the generation issues that took place. The part that we’re analyzing more closely as we look to 2010 is the impact on the economy and the load loss which for the 2009 is also about $0.15 before the effects of SB408.

I going to make sure I understand specifically so, I’m going to go through some of the specific lines you mentioned, the Colstrip impact, are we talking about an impact on the production and distribution line item on your income statement or is this up at the purchase power and fuel or elsewhere. Do you mind walking through, you mentioned Colstrip, Boardman and then the SB408, walking through the specific line item you expect to be negatively impacted in 2009.

Colstrip was $2 million on the O&M side, and $11 million on the power cost side. Boardman was largely all on the power cost side at about $5 million, and these are pre-tax numbers I’ve just given you. And then hydro again on a pre-tax basis is now about $2 million on the power cost side. And then SB408 effects are on about $14 million.

And that’s on the revenue side.

Yes.

Your next question comes from the line of James Bellessa - DA Davidson & Co. James Bellessa - DA Davidson & Co. : You had decoupling mechanism that is on trail basis starting in February and I heard it had a minimum impact on second quarter and then I heard you say that it has not worked in your favor in the first half, can you go through and explain the benefits or why it hasn’t worked and so forth.

Let me give you the high points and Maria can give you the exact numbers and how it worked, so the whole theory of decoupling was to get it to a dollars per customer basis and when we put the mechanism in place and given the recession we were seeing and the continuing promotion of energy efficiency, we actually thought use per customer would decline this year due to both more energy efficiency being installed as well as just people conserving energy because of the recession and trying to watch their energy costs pretty closely. What we saw in the first half of the year was just the opposite, that actually use per customer increased which was kind of frankly a surprise to us and the only thing we can attribute that to is because the recession, more customers are staying home, they’re not going to restaurants, they’re using more electricity in terms of cooking, they’re buying more plasma TVs then we expected which is kind of surprise and we’re seeing the installation of a greater penetration of air conditioners. So all that kind of added to the fact that actual customer demand on a residential basis, on a use per customer increase. In the commercial sector we actually did see some reduction in revenues which kind of offset the residential impact and this was a result of commercial customers installing energy efficiency measures where we have to track those in. So those were the two things and then offsetting all that obviously we had the ROE reduction. So that’s kind of the big picture as we saw it and as we put this in place we looked back to the last recession in 2001 and 2002 where we did see a significant reduction in use per customer by our residential customer. So again due to energy efficiency and conservation due to the point where we had high energy prices. So we kind of assumed that that same thing would happen and as you can imagine past performance isn’t always indicative of future activity so we learn something new every day. That being said we still think it’s the right mechanism from a policy perspective because it does kind of take away the disincentive for customers to do energy efficiency. So kind of first half of year it kind of worked against us but we haven’t see the whole year play it out and we’ll watch this through next year. It’s a two year trial plan and at the end of two years we’ll have to refile with the commission if we want to continue that mechanism. So we’ll learn a lot over the next couple of years and still believe it’s the right policy decision for our company and our customers.

First of all the decoupling mechanism covers approximately 60% of our customer base. It has on a year to date basis about $1.5 million negative impact to the company, $2 million in the second quarter and $0.50 million positive in the first quarter. As James mentioned its made up of two components. First is the decoupling adjustment itself and on a year to date basis that was approximately $700,000 to the negative. On the residential side it was actually unfavorable $1.1 million but the commercial or non-residential sector was 0.4 to the good for the $700,000. As James mentioned residential was up 1.3% on a weather adjusted basis in terms of load. So ROE component included $0.8 million or $800,000 getting us to the $1.5 year to date. James Bellessa - DA Davidson & Co. : You indicated that there was a draft IRP that you shared with some parties, is that a privileged party or is everybody available to see that draft IRP.

That’s a public document, it’s a fairly voluminous two set presentation, Bill Valach can get it to you if you’re interested, it is a public document. It gives you a lot of good detail on our plans for the future meeting resource load requirements. It may in fact be posted on our website. It is posted on our website. But if you can’t find it, get a hold of Bill and he can get it to you. But I’m sure its there from a public process standpoint. Good document, it really has some interesting data about the heat wave, air conditioning penetration, our strategy around Boardman and new resources. It’s a great document and a lot of good information there. James Bellessa - DA Davidson & Co. : Your rates are based on a 50% capital ratio but you’re not quite there and you talked about issuing debt between now and the end of 2010, so how are you going to be able to maintain your appropriate capital ratio.

We expect to issue debt. We are also about $375 million or so between now and the end of 2010. We also expect to redeem about $186 million of debt in the first quarter of next year and combined with earnings as well as collateral roll off we expect our ratios to roughly be around our target 50/50, maybe a tad bit higher on the debt side. James Bellessa - DA Davidson & Co. : And you indicated that you’re going to turn to maintaining the production tax credit in your income statement, did you say you were going to collect $210 million, I’m not certain of the figure you said.

Yes I used the figure of $110 in terms of PTCs over the next 10 years. James Bellessa - DA Davidson & Co. : Over 10 years.

Yes.

The production tax credit is based on a generation basis at certain mills per kilowatt hour of generation so it goes over 10 years and its based on the output of the wind farm and that would be included in customers’ prices that we filed in the [RAC] filing. James Bellessa - DA Davidson & Co. : How did you find that $60 to $90 million this year, next year was not as advantageous as $110 over 10 years.

We looked at our alternative cost of capital, how each would flow through to rates. The grants would have resulted in a reduction in our plant placed into service and our regulatory asset base and would have reduced that as well as would have gone to customers over the life of the wind farm [inaudible] 25 years. So the PTC is roughly about $0.03 per kilowatt hour and we felt that it made good sense with Biglow 2. We will do the same analysis and make a decision on Biglow 3 probably around this time next year. James Bellessa - DA Davidson & Co. : Would the $110 for just Biglow, Phase II.

Yes, its just for those 65 turbines.

The big problem there is that the grants have to be treated like investment tax credits which have to be shared between customers and shareholders which diminishes the value for customers. But we have to take the alternative that creates the greatest present value for customers and that’s why we went to the production tax credit.

Your next question comes from the line of Neil Kalton – Wells Fargo Neil Kalton – Wells Fargo: I just wanted to get a couple of things straight, I think in an earlier question you mentioned that the operating cash flow for 2009 would be roughly about $330 million, does that include the benefit of the net margin deposits reversing I guess a little bit in 2009, is that included in there.

No, that does not include that. Neil Kalton – Wells Fargo: Okay, so would that be an incremental, how much extra would that be.

That’s roughly, in this year it should be an additional $106 by 2009 and then $172 by the end of 2010, billion, and that assumes that prices are roughly where they were at the end of June. Neil Kalton – Wells Fargo: And then on pension it looks like by my calculations there’s going to be about a $0.07 headwind as we go into 2010, are there things that you can do to offset that incremental expense.

You’re exactly right and we’re currently in discussions with the OPUC. Traditionally we have received expense or [FAS] 87 expense and recovery in rates. As our recent history has led us to have no expense, we have no near-term recovery mechanism but we expect to be able to resolve that with the OPUC.

Your next question comes from the line of Brian Russo - Ladenburg Thalmann

I was just curious on your cost cutting initiatives following the disallowance of some costs on your last rate case, where will that show up in the income statement, is it going to fall primarily in administrative and other or is it elsewhere and it just seems that the expense items seem to be relatively flat excluding a drop in administrative and other and I’m just wondering if its being masked by some of these one-time costs that you discussed earlier.

What we tried to so was once the PUC made a decision, most of those disallowance were in the operating cost, production, transmission, distribution, administrative, other, customer service, so we went through and exercised with our officer team to try to get our costs back in line with what the rate case decision was. So its probably across the board in all the production and O&M lines and then there have been some costs that have gone the other way this year that have gone against us. We had a couple of things that we had incurred some additional costs for the maintenance of Colstrip. We also had small environmental reserve we had to take so that’s kind of where it is.

One of the things I think when you look at the quarter to quarter statements, remember that while we were disappointed with our outcome for our 2009 rate case, we did see an increase in costs that were passed on to customers, just not as high as we had requested in the initial filing.

Your next question comes from the line of Maurice May - Soleil-Power Insights

I have a question on the capital expenditures you listed quite a few projects, the Boardman expansion and the Port [Washington] expansion and then the transmission line etc., and also additional wind power to meet the 2015 requirements, so my question really here is is how many of these projects are in your five year CapEx projection at present.

If you look in the 10-Q none of the ones that you just mentioned are in our 10-K, 10-Q disclosures. We have [inaudible] just our base CapEx including hydro and then we have some of the Boardman initiatives, not all that James mentioned there. We will wait until the projects are more final and we finished our IRP process before formally including them into our CapEx plans for the next five years.

But do you see some of them ending up in the outer years of the five year forecast.

Sure, there’s a big concentration that would take place in 2012, 2013 and then 2014, which we don’t even list in our public disclosures.

And what might your equity needs be during these years.

As we look to target our capital structure at 50% debt and 50% equity and we’re adding significantly new generation, we would then look to the equity market at that point in time. At this point in time I think its too premature to speculate but we don’t have any equity plans in 2010 and nothing until we take a look at some of the additional generation assets that James outlined.

And for practical purposes the way we do these is we don’t usually put anything in our 10-Q or K in terms of the capital until they’re approved by the Board in terms of the direction we want to go. Boardman is a little different in that because we have a requirements to retrofit that project. But generally that’s the process we use and that’s, and as far as those, the energy and capacity resources we have to do an RFP to the marketplace where we would include our own self build options in that RFP and we’re required as part of that process to make sure we get the lowest cost option for customers. So until we go through that RFP process and we determine that our projects are the lowest cost option its hard to say that they’ll actually get built at this point albeit that I think our projects are very favorable and well positioned, we still have to go through that process.

Okay perhaps the toughest part of this question is you just had to sell stock at a substantial discount to book value, going forward, assuming that market prices don’t change a lot over the next couple of years, do you have enough flexibility with these proposals to put them off so that you don’t have to finance the equity portion below book value.

Let’s not assume that the market continues the way its been. Maybe we’ve gone through a pretty heavy economic recession and I do believe that at least in another 12 months we’ll start seeing a very strong recovery and the markets will get going again. That being said, clearly that’s an issue that we will be talking with our Board and our internal management team around is what is our strategy to maintain the most flexibility but still moving forward on our growth strategy, but clearly a part of our strategy assumes that we’ll be able to sell our stock above book value. These are great utility investment opportunities, we’ve got good mechanisms to track these projects and to customers’ prices and they do provide value to our customers so we hope that the conditions of the past don’t replicate themselves in the future. Maria and her team are working hard on how we can have more flexible financing strategies to be more responsive to changes in market conditions. And we’ll keep working on that one. Well thank you everyone, I think that concludes the question portion of our earnings call. We appreciate your interest in Portland General Electric and invite you to join us in a few months when we report on the third quarter 2009 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.