(PORTLAND, OR) - - After an internal investigation, Portland General Electric said Friday that wholesale energy trading losses it suffered this summer were the result of “ill-conceived” positions — the same term CEO Maria Pope used when the losses that ultimately totaled $127 million were revealed.
The company said from the get-go that the losses would be borne by shareholders, but top executives from the company will also pay a price, PGE said after a board-appointed “special committee” probe: Pope, retiring CFO Jim Lobdell and an unnamed third executive won’t receive any incentive-related compensation for 2020.
PGE had immediately placed two employees involved in the trades on administrative leave, and it said Friday that those employees are no longer with the company.
PGE’s news release and communications to employees shed just a little new light on the losses, which came during a Western heat wave and power shortage in California that forced that state’s grid operator to order rolling blackouts. Here’s what PGE said:
“The energy trading positions resulting in these losses were
short in the desert Southwest and California power markets and long in the
Pacific Northwest power markets. In August 2020, wholesale electricity prices
increased substantially in the desert Southwest and California power markets
due to extreme weather conditions, constraints to regional transmission
facilities, and changes in power supply in the West. As a result of these
market disruptions and the company’s exposure to these positions, the company’s
energy portfolio realized significant losses.”
Changes it began putting in place in August would protect against a repeat, PGE said. Those include controls on “the ability of personnel to enter into wholesale energy transactions to the extent that PGE does not have physical or financial delivery capability.”
The company also noted it had added risk-management personnel, and that unit will report to Pope through a new risk and compliance team. PGE also replaced its power operations general manager.
“As I said in August, this situation did not reflect who we are as an organization, and we used this as an opportunity to learn and made necessary changes to prevent this from ever happening again,” Pope said in an email to employees.
Pope had received non-equity incentive compensation of more than $850,000 in each of the last two years. Lobdell, whose retirement was announced in October, had received bonuses of around $304,000 both years.
The trading losses have led to a proposed class-action shareholder lawsuit against PGE.
