UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of
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Portland General Electric Company

(Name of Registrant as Specified In Its Charter)

 

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

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April 3, 2009

 

To our shareholders:

 

On behalf of the Board of Directors, we are pleased to invite you to Portland General Electric Company’s 2009 Annual Meeting of Shareholders. The meeting will be held at 10:00 a.m. Pacific Time on Wednesday, May 13, 2009, at the Conference Center Auditorium located at Two World Trade Center, 25 SW Salmon Street, Portland, Oregon.

 

Details of the business we plan to conduct at the meeting are included in the attached Notice of Annual Meeting of Shareholders and proxy statement. Only holders of record of PGE common stock at the close of business on March 6, 2009 are entitled to vote at the meeting.

 

Your vote is very important. Regardless of the number of shares you own, we encourage you to participate in the affairs of the company by voting your shares at this year’s annual meeting. Even if you plan to attend the meeting, it is a good idea to vote your shares before the meeting.

 

We hope you will find it possible to attend this year’s annual meeting, and thank you for your interest in PGE and your participation in this important annual process.

 

Cordially,

 

 

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held On MAY 13, 2009

 

To our shareholders:

 

The 2009 Annual Meeting of Shareholders of Portland General Electric Company will be held at the Conference Center Auditorium located at Two World Trade Center, 25 SW Salmon Street, Portland, Oregon, 97204 at 10:00 a.m. Pacific Time on Wednesday, May 13, 2009.

 

The meeting is being held for the following purposes, which are more fully described in the proxy statement that accompanies this notice:

 

1. To elect directors for the coming year;

 

2. To ratify the appointment of Deloitte & Touche LLP as the company’s independent registered public accounting firm for fiscal year 2009;

 

3. To approve an amendment to the company’s Amended and Restated Articles of Incorporation to increase the total number of authorized shares of common stock from 80 million to 160 million; and

 

4. To transact any other business that may properly come before the meeting and any adjournment or postponement of the meeting.

 

As of the date of this notice, the company has received no notice of any matters, other than those set forth above, that may properly be presented at the annual meeting. If any other matters are properly presented for consideration at the meeting, the persons named as proxies on the enclosed proxy card, or their duly constituted substitutes, will be deemed authorized to vote the shares represented by proxy or otherwise act on those matters in accordance with their judgment.

 

The close of business on March 6, 2009 has been fixed as the record date for determining shareholders entitled to vote at the annual meeting. Accordingly, only shareholders of record as of the close of business on that date are entitled to vote at the annual meeting or any adjournment or postponement of the annual meeting.

 

Your vote is very important.  Please read the proxy statement and then, whether or not you expect to attend the annual meeting, and no matter how many shares you own, please vote your shares as promptly as possible. You can vote by proxy over the Internet, by mail or by telephone by following the instructions provided in the proxy statement. Submitting a proxy now will help ensure a quorum and avoid added proxy solicitation costs. If you attend the meeting you may vote in person, even if you have previously submitted a proxy.

 

You may revoke your proxy at any time before the vote is taken by delivering to the Corporate Secretary of PGE a written revocation or a proxy with a later date or by voting your shares in person at the meeting, in which case your prior proxy will be disregarded.

 

BY ORDER OF THE BOARD OF DIRECTORS

 

Marc S. Bocci

Marc S. Bocci

Corporate Secretary

 

April 3, 2009

Portland, Oregon

 

Table of Contents

 

PRELIMINARY COPY

 

Portland General Electric Company
121 SW Salmon Street
Portland, Oregon 97204

 

 

 

 

PROXY STATEMENT

 

 

 

 

FOR THE ANNUAL MEETING OF SHAREHOLDERS
To Be Held On MAY 13, 2009

 

This proxy statement is being furnished to you by the Board of Directors of Portland General Electric Company (“PGE” or the “company”) to solicit your proxy to vote your shares at our 2009 Annual Meeting of Shareholders. The meeting will be held at the Conference Center Auditorium located at Two World Trade Center, 25 SW Salmon Street, Portland, Oregon at 10:00 a.m. Pacific Time on Wednesday, May 13, 2009. This proxy statement and the enclosed proxy card and 2008 Annual Report are being mailed to shareholders, or made available electronically, on or about April 3, 2009.

Why did I receive a notice in the mail regarding the Internet availability of proxy materials this year instead of a full set of proxy materials?

 

Pursuant to rules adopted by the Securities and Exchange Commission, we have elected to provide access to our proxy materials over the Internet. Accordingly, we are sending a Notice of Internet Availability of Proxy Materials (the “Notice of Internet Availability”) to our shareholders of record and beneficial owners. All shareholders will have the ability to access the proxy materials on a website referred to in the Notice of Internet Availability or request to receive a printed set of the proxy materials, at no charge. Instructions on how to access the proxy materials over the Internet or to request a printed copy may be found on the Notice of Internet Availability. In addition, shareholders may request to receive proxy materials in printed form by mail or electronically by email on an ongoing basis by following the instructions on the website referred to in the Notice of Internet Availability.

 

Why am I receiving these materials?

 

Our Board of Directors has made these materials available to you on the Internet, or, upon your request, will deliver printed versions of these materials to you by mail, in connection with the board’s solicitation of proxies for use at our 2009 Annual Meeting of Shareholders. You are invited to attend the annual meeting and are requested to vote on the proposals described in this proxy statement.

 

What is included in these materials?

 

These materials include:

 

 

If you request printed versions of these materials by mail, these materials will also include the proxy card for the 2009 annual meeting.

 

How can I get electronic access to the proxy materials?

 

The Notice of Internet Availability provides you with instructions regarding how to:

 

 

 

Who is entitled to vote at the annual meeting?

 

Holders of PGE common stock as of the close of business on the record date, March 6, 2009, may vote at the 2009 annual meeting, either in person or by proxy. As of the close of business on March 6, 2009, there were 62,650,484 shares of PGE common stock outstanding and entitled to vote. The common stock is the only authorized voting security of the company, and each share of common stock is entitled to one vote on each matter properly brought before the 2009 annual meeting.

 

What matters will be voted on at the annual meeting?

 

There are three matters scheduled for a vote at the annual meeting:

 

1. The election of directors;

 

2. The ratification of the appointment of Deloitte & Touche LLP as the company’s independent registered public accounting firm for fiscal year 2009; and

 

3. The approval of an amendment to the company’s Amended and Restated Articles of Incorporation to increase the total number of authorized shares of common stock.

 

What are the board’s voting recommendations?

 

The board recommends that you vote your shares in the following manner:

 

 

What is the difference between holding shares as a shareholder of record and as a beneficial owner?

 

If your shares are registered directly in your name with our transfer agent, American Stock Transfer & Trust Company, or AST, you are considered the “shareholder of record” with respect to those shares.

 

If your shares are held in a stock brokerage account or by a bank or other nominee, those shares are held in “street name” and you are considered the “beneficial owner” of the shares. As the beneficial owner of those shares, you have the right to direct your broker, trustee or nominee how to vote your shares, and you will receive separate instructions from your broker, bank or other holder of record describing how to vote your shares. You also are invited to attend the annual meeting. However, because a beneficial owner is not the shareholder of record, you may not vote these shares in person at the meeting unless you obtain a “legal proxy” from the broker, trustee or nominee that holds your shares, giving you the right to vote the shares at the meeting.

 

How can I vote my shares before the annual meeting?

 

If you hold shares in your own name as a shareholder of record, you may vote before the annual meeting by Internet by following the instructions contained in the Notice of Internet Availability. If you request printed copies of the proxy materials by mail, you may also cast your vote by authorizing the individuals named on the enclosed proxy card to serve as your proxy to vote your shares at the annual meeting in the manner you indicate. You may do so by completing, signing and dating the enclosed proxy card and returning it in the enclosed postage-paid envelope.

 

If you are a beneficial owner of shares held in street name, your broker, bank or other nominee will provide you with materials and instructions for voting your shares. Please check with your bank or broker and follow the voting procedures your bank or broker provides to vote your shares.

Even if you plan to attend the annual meeting, we recommend that you vote before the meeting as described above so that your vote will be counted if you later decide not to attend the meeting. Submitting a proxy or voting through the telephone or the Internet will not affect your right to attend the annual meeting and vote in person.

 

How will my shares be voted if I give my proxy but do not specify how my shares should be voted?

 

If your shares are held in your own name as a shareholder of record and you return your signed proxy card but do not indicate your voting preferences, or you indicate when voting on the Internet or by telephone that you wish to vote as recommended by our Board of Directors, your shares will be voted as follows:

 

 

If I am the beneficial owner of shares held in street name by my broker, will my broker automatically vote my shares for me?

 

New York Stock Exchange rules applicable to broker-dealers grant your broker discretionary authority to vote your shares without receiving your instructions on certain matters, which include each of the matters scheduled to be voted on at this annual meeting: the election of directors, the ratification of the appointment of the independent registered public accounting firm and the proposed amendment to the Amended and Restated Articles of Incorporation.

 

Could other matters be decided at the annual meeting?

 

As of the date of this proxy statement, we are unaware of any matters other than those set forth in the Notice of Annual Meeting of Shareholders that may properly be presented at the annual meeting. If any other matters are properly presented for consideration at the meeting, including, among other things, consideration of a motion to adjourn the meeting to another time or place, the persons named as proxies on the enclosed proxy card, or their duly constituted substitutes, will be deemed authorized to vote those shares for which proxies have been given or otherwise act on such matters in accordance with their judgment.

 

Can I vote in person at the annual meeting?

 

Yes. If you hold shares in your own name as a shareholder of record, you may come to the annual meeting and cast your vote at the meeting by properly completing and submitting a ballot. If you are the beneficial owner of shares held in street name, you must first obtain a legal proxy from your broker, bank or other nominee giving you the right to vote those shares and submit that proxy along with a properly completed ballot at the meeting.

 

What do I need to bring to be admitted to the annual meeting?

 

All shareholders must present a form of personal photo identification in order to be admitted to the meeting. In addition, if your shares are held in the name of your broker, bank or other nominee and you wish to attend the annual meeting, you must bring an account statement or letter from the broker, bank or other nominee indicating that you were the owner of the shares on March 6, 2009.

 

How can I change or revoke my vote?

 

If you hold shares in your own name as a shareholder of record, you may change your vote or revoke your proxy at any time before voting begins by:

 

 

 

Any written notice of revocation, or later dated proxy, should be delivered to:

 

Portland General Electric Company
121 SW Salmon Street, 1WTC1301
Portland, Oregon 97204
Attention: Marc S. Bocci, Corporate Secretary

 

Alternatively, you may hand deliver a written revocation notice, or a later dated proxy, to the Corporate Secretary at the annual meeting before the voting begins.

 

If you are the beneficial owner of shares held in street name, please check with your bank or broker and follow the procedures your bank or broker provides if you wish to change your vote with respect to those shares.

 

What are the voting requirements to elect directors and approve the proposals described in the proxy statement?

 

The vote required to approve each of the matters scheduled for a vote at the annual meeting is set forth below:

 

 

The election of directors by a “plurality” of the votes cast at the meeting means that the nominees receiving the largest number of votes cast will be elected as directors up to the maximum number of directors to be elected at the meeting.

 

What is the “quorum” for the annual meeting and what happens if a quorum is not present?

 

The presence at the annual meeting, in person or by proxy, of a majority of the shares issued and outstanding and entitled to vote as of March 6, 2009 is required to constitute a “quorum.” The existence of a quorum is necessary in order to take action on the matters scheduled for a vote at the annual meeting. If you vote by Internet or telephone, or submit a properly executed proxy card, your shares will be included for purposes of determining the existence of a quorum. Proxies marked “abstain” and “broker non-votes” (each of which are explained below) also will be counted in determining the presence of a quorum. If the shares present in person or represented by proxy at the annual meeting are not sufficient to constitute a quorum, the chairman of the meeting or the shareholders by a vote of the holders of a majority of votes present in person or represented by proxy, may, without further notice to any shareholder (unless a new record date is set), adjourn the meeting to a different time and place to permit further solicitations of proxies sufficient to constitute a quorum.

 

What is an “abstention” and how would it affect the vote?

 

An “abstention” occurs when a shareholder sends in a proxy with explicit instructions to decline to vote regarding a particular matter. Abstentions are counted as present for purposes of determining a quorum. However, an abstention with respect to a matter submitted to a vote of shareholders will not be counted for or against the matter. Consequently, an abstention with respect to Proposal 1 (election of directors) and Proposal 2 (ratification of appointment of Deloitte & Touche LLP) will not affect the outcome of the vote, and an

abstention with respect to Proposal 3 (approval of amendment to the Amended and Restated Articles of Incorporation) will have the same effect as a vote against the proposal.

 

What is a “broker non-vote” and how would it affect the vote?

 

A broker non-vote occurs when a broker or other nominee who holds shares for another person does not vote on a particular proposal because that holder does not have discretionary voting power for the proposal and has not received voting instructions from the beneficial owner of the shares. Brokers will have discretionary voting power to vote shares for which no voting instructions have been provided by the beneficial owner with respect to each of the matters scheduled to be voted on at this annual meeting: the election of directors, the ratification of the appointment of the independent registered public accounting firm and the proposed amendment to the company’s Amended and Restated Articles of Incorporation. Accordingly, there will be no broker non-votes with respect to the three proposals scheduled to be voted on at this annual meeting.

 

Who will conduct the proxy solicitation and how much will it cost?

 

The company is soliciting your proxy for the annual meeting and will pay all the costs of the proxy solicitation process. We have engaged Broadridge Financial Solutions, Inc. to assist in the distribution of proxy materials, and we will pay their reasonable out-of-pocket expenses for these services. Our directors, officers and employees may communicate with shareholders by telephone, facsimile, email or personal contact to solicit proxies. These individuals will not be specifically compensated for doing so. We will reimburse brokerage houses and other custodians, nominees and fiduciaries for their reasonable out-of-pocket expenses for forwarding solicitation materials to the beneficial owners of PGE common stock.

 

Who will count the votes?

 

Broadridge Financial Solutions, Inc. will tabulate the votes cast by mail, Internet, or telephone. Nora E. Arkonovich, our Assistant Secretary, will tabulate any votes cast at the annual meeting and will act as inspector of election to certify the results.

 

If you have any questions about voting your shares or attending the annual meeting, please call our Investor Relations Department at (503) 464-7395.

 

 

On February 26, 2009 there were 62,650,484 shares of PGE common stock outstanding. The following table sets forth, as of that date unless otherwise specified, the beneficial ownership of PGE common stock of (1) known beneficial owners of more than 5% of PGE’s common stock, (2) each director or nominee for director, (3) each of our “named executive officers” listed in the Summary Compensation Table, and (4) our executive officers and directors as a group. Each of the persons named below has sole voting power and sole investment power with respect to the shares set forth opposite his, her or its name, except as otherwise noted.

 

 

 

 

 

The rules of the Securities and Exchange Commission require that we disclose late filings of reports of stock ownership (and changes in stock ownership) by our directors and executive officers and persons who beneficially own more than 10% of our common stock. To the best of our knowledge, all of the filings required by Section 16(a) of the Securities Exchange Act of 1934 for our directors and executive officers and persons who beneficially own more than 10% of our common stock were made on a timely basis in 2008, except that one late Form 4 was filed for Maria M. Pope to reflect the forfeiture of unvested restricted stock units upon her resignation as a director and appointment as Senior Vice President Finance, Chief Financial Officer and Treasurer.

 

 

 

 

 

 

 

 

 

PGE common stock is listed on the New York Stock Exchange. In connection with that listing, our board has implemented a corporate governance program, including the adoption of charters for our Audit Committee, Compensation and Human Resources Committee, and Nominating and Corporate Governance Committee; Corporate Governance Guidelines (including Categorical Standards for Determination of Director Independence); a Process for Handling Communications to the Board of Directors and Board Committees; a Code of Business Ethics and Conduct; and a Code of Ethics for the Chief Executive and Senior Financial Officers. These documents are published under the “Investors — Corporate Governance” section of our website at www.portlandgeneral.com and are available in print to shareholders, without charge, upon request to Portland General Electric Company at its principal executive offices at 121 SW Salmon Street, Portland, Oregon 97204, Attention: Corporate Secretary.

 

Our business, property and affairs are managed under the direction of our Board of Directors. Members of the board are kept informed of our business by consulting with our Chief Executive Officer and other officers and senior management, by reviewing and approving capital and operating plans and budgets and other materials provided to them, by visiting our offices and plants and by participating in meetings of the board and its committees.

 

During 2008, the Board of Directors met six times. Under our Corporate Governance Guidelines, the non-management directors must meet in executive session without management at least quarterly. The Chairman of the board (or if the Chairman is not an independent director, the lead independent director) presides over these executive sessions. The non-management directors met in executive session five times in 2008, generally at the end of each board meeting. In the event that the non-management directors include directors who are not independent under the New York Stock Exchange listing standards, our Corporate Governance Guidelines require the independent directors to meet separately in executive session at least once a year. The independent directors met in executive session twice in 2008. Each director attended at least 75% of the aggregate of the meetings of the Board of Directors and meetings held by all committees on which the director served, during the period for which the director served.

 

It is our policy that directors are expected to attend the annual meeting of shareholders. A director who is unable to attend the annual meeting of shareholders (which it is understood may occur on occasion) is expected to notify the Chairman of the board. Nine of our 10 directors attended the 2008 annual meeting of shareholders.

 

Selection of Candidates for Board Membership

 

The Nominating and Corporate Governance Committee is responsible for identifying, screening and recommending candidates to the board for election as directors. The committee seeks candidates with the qualifications and areas of expertise that will enhance the composition of the board. The committee also seeks to have the board represent a diversity of backgrounds, experience, gender and race. The committee considers a number of criteria in selecting nominees, including:

 

 

 

The Nominating and Corporate Governance Committee will consider director candidates recommended by shareholders. In considering candidates submitted by shareholders, the committee will take into consideration the needs of the board and the qualifications of the candidate. To have a candidate considered by the Nominating and Corporate Governance Committee, a shareholder must submit the recommendation in writing and must include the following information:

 

 

The shareholder recommendation and information described above must be sent to our Corporate Secretary at Portland General Electric Company, 121 SW Salmon Street, 1WTC1301, Portland, Oregon 97204 and must be received by our Corporate Secretary not less than 120 days prior to the anniversary date of our most recent annual meeting of shareholders.

 

The Nominating and Corporate Governance Committee retains an outside search firm to assist the committee members in identifying and evaluating potential nominees for the board. The committee also identifies potential nominees by asking current directors and executive officers to notify the committee if they become aware of persons meeting the criteria described above who might be available to serve on the board, especially business and civic leaders in the communities in our service area. As described above, the committee will also consider candidates recommended by shareholders.

 

Once a person has been identified by the Nominating and Corporate Governance Committee as a potential candidate, the committee may collect and review publicly available information to assess whether the person should be considered further. If the committee determines that the person warrants further consideration, the committee chair or another member of the committee will contact the person. Generally, if the person expresses a willingness to be a candidate and to serve on the board, the Nominating and Corporate Governance Committee will request information from the candidate, review the candidate’s accomplishments and qualifications and compare them to the accomplishments and qualifications of any other candidates that the committee might be considering, and conduct one or more interviews with the candidate. In certain instances, committee members may contact references provided by the candidate or may contact other members of the business community or other persons who may have greater first-hand knowledge of the candidate’s accomplishments. The committee’s evaluation process does not vary based on whether a candidate is recommended by a shareholder.

 

The following table describes the compensation earned by persons who served as non-employee directors during any part of 2008.

 

2008 Director Compensation

 

 

 

 

Current Compensation Arrangements for Non-Employee Directors

 

The following table describes the current compensation arrangements with our non-employee directors:

 

The annual cash retainers and board and committee meeting fees are paid quarterly in arrears. We will also reimburse certain expenses related to the directors’ service on the board, including expenses in connection with attendance at board and committee meetings.

 

Our non-employee directors are required to hold at least 3,300 shares of PGE common stock while serving as a director. Non-employee directors elected at the 2007 annual meeting of shareholders have three years from the date of that meeting to meet this requirement. Non-employee directors appointed or elected after the 2007 annual meeting of shareholders must meet this requirement within three years following the first annual meeting at which they are elected.

 

Restricted Stock Unit Grants

 

Each non-employee director received a grant of restricted stock units on May 6, 2008. The number of restricted stock units each director received was determined by dividing $30,000 by the closing price of PGE common stock on the date of grant. We intend to make additional grants of $30,000 worth of restricted stock units to each director each year on or about the date of our annual meeting of shareholders. Each restricted stock unit represents the right to receive one share of common stock at a future date. Provided that the director remains a non-employee member of the board, the restricted stock units will vest over a one-year vesting period in equal installments on the last day of each calendar quarter and will be settled exclusively in shares of common stock. Restricted stock units do not have voting rights with respect to the underlying common stock until the units vest and the common stock is issued.

 

Each director also was granted one dividend equivalent right with respect to each restricted stock unit. Each dividend equivalent right represents the right to receive an amount equal to dividends paid on one share of common stock, having a record date between the grant date and vesting date of the related restricted stock unit. The dividend equivalent rights will be settled exclusively in cash on the date that the related dividends are paid to holders of common stock.

 

The grants of restricted stock units and dividend equivalent rights were made pursuant to the terms of the Portland General Electric Company 2006 Stock Incentive Plan. The grants are subject to the terms and conditions of the plan and agreements between PGE and each director.

 

Outside Directors’ Deferred Compensation Plan

 

The company maintains the Portland General Electric Company 2006 Outside Directors’ Deferred Compensation Plan to provide directors with the opportunity to defer payment of compensation for their board service. Directors may defer fees and retainers, as well as any other form of cash remuneration included on a deferral election form approved by the Compensation and Human Resources Committee. Deferral elections must be made no later than December 15 of the taxable year preceding the year in which the compensation is earned. Deferrals accumulate in an account that earns interest at a rate that is one-half percentage point higher than the Moody’s Average Corporate Bond rate. Benefit payments under the plan may be made in a lump sum or in monthly installments over a maximum of 180 months.

 

For a director to be considered independent under the New York Stock Exchange (“NYSE”) corporate governance listing standards, the Board of Directors must affirmatively determine that the director does not have any direct or indirect material relationship with the company, including any of the relationships specifically proscribed by the NYSE independence standards. The board considers all relevant facts and circumstances in making its independence determinations. Only independent directors may serve on our Audit Committee, Compensation and Human Resources Committee, and Nominating and Corporate Governance Committee.

 

In addition to complying with NYSE independence standards, our Board of Directors has adopted a formal set of categorical standards with respect to the determination of director independence. Under our Categorical Standards for Determination of Director Independence, a director must be determined to have no

material relationship with the company other than as a director. These standards specify the criteria by which the independence of our directors will be determined, including guidelines for directors and their immediate families with respect to past employment or affiliation with the company, its customers or its independent registered public accounting firm. The standards also restrict commercial and not-for-profit relationships with the company, and prohibit Audit Committee members from having any accounting, consulting, legal, investment banking or financial advisory relationships with the company. Directors may not be given personal loans or extensions of credit by the company, and all directors are required to deal at arm’s length with the company and its subsidiaries, and to disclose any circumstance that may result in the director no longer being considered independent. The full text of our Categorical Standards for Determination of Director Independence is published as an addendum to our Corporate Governance Guidelines, which are available under the “Investors — Corporate Governance” section of our website at www.portlandgeneral.com.

 

During its review of director independence, the board considered whether there were any transactions or relationships between the company and any director or any member of his or her immediate family (or any entity of which a director or an immediate family member is an executive officer, general partner or significant equity holder). The board also considered our charitable contributions to not-for-profit organizations of which a director or an immediate family member of a director is an executive officer.

 

As a result of this review, the board affirmatively determined that the following directors nominated for election at the annual meeting are independent under the NYSE listing standards and our independence standards: John W. Ballantine, Rodney L. Brown, Jr., David A. Dietzler, Mark B. Ganz, Corbin A. McNeill, Jr., Neil J. Nelson, M. Lee Pelton and Robert T. F. Reid. In confirming each nominee’s status as an independent director, the board considered all relationships such directors have with us, including charitable contributions we make to organizations where our directors serve as board members. In addition, the board considered that in the ordinary course of our business we provide electricity to some directors and entities with which they are affiliated on the same terms and conditions as provided to other customers of the company.

 

The board determined that James J. Piro and Peggy Y. Fowler are not independent. Mr. Piro is not independent because of his employment as our Chief Executive Officer and President. Ms. Fowler is not independent because she was an employee of the company during the past three years.

 

The Board of Directors has four standing committees: the Audit Committee, the Nominating and Corporate Governance Committee, the Compensation and Human Resources Committee and the Finance Committee. The Board of Directors has determined that each of the Audit Committee, the Nominating and Corporate Governance Committee and the Compensation and Human Resources Committee is comprised solely of independent directors in accordance with the NYSE listing standards. Copies of the charters for each of these committees are available under the “Investors — Corporate Governance” section of our website at www.portlandgeneral.com.

 

The table below provides membership information for each of the committees as of March 31, 2009.

 

Audit Committee

 

The Audit Committee met seven times in 2008. Under the terms of its charter, the Audit Committee must meet at least once each quarter. The committee regularly meets separately with management, our internal auditor and our independent registered public accounting firm. The responsibilities of the Audit Committee include:

 

 

The committee has the authority to secure independent expert advice to the extent the committee determines it to be appropriate, including retaining independent counsel, accountants, consultants or others, to assist the committee in fulfilling its duties and responsibilities.

 

The Board of Directors has determined that Mr. Dietzler is an “audit committee financial expert” as that term is defined under rules of the Securities and Exchange Commission.

 

Nominating and Corporate Governance Committee

 

The Nominating and Corporate Governance Committee met four times in 2008. Under the terms of its charter, the committee must meet at least two times annually. The responsibilities of the committee include:

 

 

The committee may retain or terminate search firms to identify director candidates, and has the sole authority to approve the search firm’s fees and other retention terms. The committee also may retain independent counsel or other consultants or advisers as it deems necessary to assist in its duties to the company.

Compensation and Human Resources Committee

 

The Compensation and Human Resources Committee met six times in 2008. Under the terms of its charter, the committee must meet at least two times annually. The committee’s responsibilities include:

 

 

Under its charter, the committee has authority to retain and terminate compensation consultants to assist the committee in carrying out its responsibilities, including sole authority to approve the consultants’ fees and other retention terms. In late 2005, the committee engaged Watson Wyatt Worldwide to advise it on matters related to executive compensation. The committee has adopted a policy that executive compensation consultants should not be retained to perform other services for the company without the express permission of the committee.

 

The committee is supported in its work by members of our Compensation and Benefits Department. The formal role of our executive officers in determining executive compensation is limited to the responsibility of the Chief Executive Officer to provide the committee with a self-evaluation, as well as an evaluation of the performance of the other executive officers. The committee may also seek input from our executive officers in developing overall compensation philosophy and decisions about specific pay components.

 

The committee has authority to conduct or authorize investigations or studies of matters within the committee’s scope of responsibilities, and to retain independent counsel or other consultants or advisers as it deems necessary to assist it in those matters. To the extent permitted by applicable law, regulation or the NYSE listing standards, the committee may form subcommittees and delegate to the subcommittees, or to the committee chairperson individually, the power and authority the committee deems appropriate.

 

Finance Committee

 

The Finance Committee met eight times in 2008. Under the terms of its charter, the committee meets as often as it determines necessary to carry out its duties and responsibilities, but no less frequently than annually. The committee is responsible for:

 

 

 

All of our directors, officers and employees are required to abide by our Code of Business Ethics and Conduct. This code of ethics covers all areas of professional conduct, including conflicts of interest, unfair or unethical use of corporate opportunities, protection of confidential information, compliance with all applicable laws and regulations, and oversight and compliance. Our Chief Executive Officer, Chief Financial Officer and Controller are also required to abide by the Code of Ethics for Chief Executive and Senior Financial Officers. These ethics codes form the foundation of a comprehensive program of compliance with our Guiding Behaviors — Be Accountable, Earn Trust, Dignify People, Make the Right Thing Happen, Positive Attitude and Team Behavior — and all corporate policies and procedures to ensure that our business is conducted ethically and in strict adherence to all laws and regulations applicable to us. Our directors, officers and employees are not to tolerate violations of the standards set out in our ethics codes. Employees are responsible for reporting any violation, including situations or matters that may be considered to be unethical or a conflict of interest under the ethics codes.

 

The full texts of both the Code of Business Ethics and Conduct and the Code of Ethics for Chief Executive and Senior Financial Officers are available under the “Investors — Corporate Governance” section of our website at www.portlandgeneral.com or in print to shareholders, without charge, upon request to Portland General Electric Company, 121 SW Salmon Street, Portland, Oregon 97204, Attention: Corporate Secretary. Any future amendments to either of these codes, and any waiver of the Code of Ethics for Chief Executive and Senior Financial Officers, and of certain provisions of the Code of Business Ethics and Conduct for directors, executive officers or our Controller, will be disclosed on our website promptly following the amendment or waiver.

 

NYSE rules require listed company audit committees to have procedures in place regarding the receipt, retention and treatment of complaints received regarding accounting, internal accounting controls or auditing matters and allowing for the confidential and anonymous submission by employees of concerns regarding questionable accounting or auditing matters. We have such procedures in place. In addition, we have a Policy Regarding Compliance with Securities and Exchange Commission Attorney Conduct Rules that requires all of our lawyers to report to the appropriate persons at the company evidence of any actual, potential or suspected material violation of state or federal law or breach of fiduciary duty by the company or any of our directors, officers, employees or agents.

 

PGE and Local Union No. 125 of the International Brotherhood of Electrical Workers have established a trust that is partly funded by PGE to provide health and welfare benefits to employees and retirees, and their dependents and beneficiaries, who are covered by the collective bargaining agreement between PGE and the union. The trust is administered by a Board of Trustees composed of six members, three of whom are appointed by PGE and three of whom are appointed by the union. Currently all six members of the Board of Trustees are PGE employees, one of whom, Joe A. McArthur, Vice President Transmission and Customer Service, is an executive officer. All decisions of the Board of Trustees must be by majority vote, with the members appointed by each party jointly having one vote. By action of the Board of Trustees, the trust engaged Regence BlueCross BlueShield of Oregon, a subsidiary of The Regence Group, to provide health products and services. Pursuant to the agreement between PGE and Local Union No. 125 of the International Brotherhood of Electrical Workers, PGE pays approximately $800,000 per month, less than 2% of The

Regence Group’s consolidated gross revenues, to the trust toward the cost of these services. Mark B. Ganz, a member of our Board of Directors, is President and Chief Executive Officer and a director of The Regence Group.

 

We do not have a separate written policy or procedures for the review, approval or ratification of transactions with related persons. However, our Corporate Governance Guidelines and our Code of Business Ethics and Conduct address conflicts of interest and relationships with PGE. In its consideration of nominees for the Board of Directors, the Nominating and Corporate Governance Committee examines possible related person transactions as part of its review. The Board of Directors annually reviews the relationship that each director has with PGE, which includes relationships with our officers and employees, our auditors and our customers. Our Code of Business Ethics and Conduct requires any person, including our directors and officers, to report any violation of the code or any situation or matters that may be considered to be unethical or a conflict of interest. Any potential conflict of interest under the code involving a director, an executive officer or our Controller is reviewed by the Audit Committee. Only the Audit Committee may waive a conflict of interest involving a director, an executive officer or our Controller, which will be promptly disclosed to our shareholders to the extent required by law. In its review of director independence, the Board of Directors considered the related person transaction described above.

 

The members of the Compensation and Human Resources Committee during 2008 were Robert T. F. Reid, John W. Ballantine, Neil J. Nelson and M. Lee Pelton. All members of the committee during 2008 were independent directors and no member was an employee or former employee. During 2008, no member of the committee had any relationship requiring disclosure above under “Certain Relationships and Related Person Transactions.” During 2008, none of our executive officers served on the compensation committee (or its equivalent) or board of directors of another entity whose executive officer served on our Compensation and Human Resources Committee or Board of Directors.

 

 

The Audit Committee provides assistance to the Board of Directors in fulfilling its obligations with respect to matters involving the accounting, auditing, financial reporting, internal control and legal compliance functions of the company and its subsidiaries. Management is responsible for the company’s internal controls and the financial reporting process, including the integrity and objectivity of the company’s financial statements. The company’s independent registered public accounting firm, Deloitte & Touche LLP (“Deloitte”), is responsible for performing an independent audit of the company’s financial statements, expressing an opinion as to the conformity of the annual financial statements with generally accepted accounting principles, expressing an opinion as to the effectiveness of the company’s internal control over financial reporting and reviewing the company’s quarterly financial statements.

 

The committee has met and held discussions with management and Deloitte regarding the fair and complete presentation of the company’s financial results and the effectiveness of the company’s internal control over financial reporting. The committee has discussed with Deloitte significant accounting policies that the company applies in its financial statements, as well as alternative treatments. The committee also discussed with the company’s internal auditor and Deloitte the overall scope and plans for their respective audits.

 

Management represented to the committee that the company’s consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States of America, and the committee has reviewed and discussed the consolidated financial statements with management and Deloitte.

 

The committee has reviewed and discussed with Deloitte all communications required by generally accepted auditing standards. In addition, the Audit Committee has received the written disclosures and the letter regarding independence from Deloitte, as required by Ethics and Independence Rule 3526 (“Communication with Audit Committees Concerning Independence”) as adopted by the Public Company Accounting Oversight Board, and has discussed such information with Deloitte.

 

Based upon the review, discussions and representations referenced above, the committee recommended to the Board of Directors that the audited consolidated financial statements be included in the company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2008 for filing with the Securities and Exchange Commission.

 

The committee has appointed Deloitte as the company’s independent registered public accounting firm for fiscal year 2009.

 

Audit Committee

 

David A. Dietzler, Chair
Corbin A. McNeill, Jr.
Neil J. Nelson

 

 

The aggregate fees billed by Deloitte & Touche LLP for 2008 and 2007 were as follows:

 

 

 

 

 

The Audit Committee must separately pre-approve the engagement of the independent registered public accounting firm to audit our consolidated financial statements. Prior to the engagement, the Audit Committee reviews and approves a list of services, including estimated fees, expected to be rendered during that year by the independent registered public accounting firm.

 

In addition, the Audit Committee requires pre-approval of all audit and permissible non-audit services provided by the company’s independent auditors, pursuant to a pre-approval policy adopted by the committee. The term of pre-approval is 12 months, unless the Audit Committee specifically provides for a different period. A detailed written description of the specific audit, audit-related, tax and other services that have been pre-approved, including specific monetary limits, is required. The Audit Committee may also pre-approve particular services and fees on a case-by-case basis. Management and the independent auditors are required to report at least quarterly to the Audit Committee regarding the actual services, and fees paid for such services, compared to the services and fees that were pre-approved in accordance with this policy.

 

All audit and permissible non-audit services provided by the independent auditors during 2008 and 2007 were pre-approved by the Audit Committee.

 

 

 

All of our directors are elected annually by shareholders. Directors hold office until their successors are elected and qualified, or until their earlier death, resignation or removal. Our Amended and Restated Bylaws provide that the Board of Directors may determine the size of the board, which the board has currently set at 10 directors.

 

The board has nominated all of the current directors for re-election as directors. They are: John W. Ballantine, Rodney L. Brown, Jr., David A. Dietzler, Peggy Y. Fowler, Mark B. Ganz, Corbin A. McNeill, Jr., Neil J. Nelson, M. Lee Pelton, James J. Piro, and Robert T. F. Reid. This slate of nominees satisfies the NYSE listing standards for board composition and majority director independence. See the section above entitled “Corporate Governance — Director Independence” for further details regarding director independence.

 

All of the nominees have agreed to serve if elected. If any director is unable to stand for election, the board may reduce the number of directors or designate a substitute. In that case, shares represented by proxies will be voted for a substitute director. We do not expect that any nominee will be unavailable or unwilling to serve.

 

John W. Ballantine, age 63, director since February 2004

 

Mr. Ballantine has been an active, self-employed private investor since 1998, when he retired from First Chicago NBD Corporation where he had most recently served as Executive Vice President and Chief Risk Management Officer. During his 28-year career with First Chicago, Mr. Ballantine was responsible for International Banking operations, New York operations, Latin American Banking, Corporate Planning, US Financial Institutions business and a variety of trust operations. Mr. Ballantine also serves on the boards of directors of DWS Funds and Healthways, Inc.

 

Mr. Ballantine is Chairman of the Finance Committee and a member of the Compensation and Human Resources Committee.

 

Rodney L. Brown, Jr., age 52, director since February 2007

 

Mr. Brown is Managing Partner with Cascadia Law Group PLLC, a Seattle, Washington law firm he founded in 1996, which specializes in environmental law in the Pacific Northwest. From 1992 to 1996, Mr. Brown was a Managing Partner at the Seattle office of Morrison & Foerster, LLP, a large international law firm.

 

Mr. Brown is a member of the Nominating and Corporate Governance Committee.

 

David A. Dietzler, age 65, director since January 2006

 

Mr. Dietzler has been a certified public accountant for nearly 39 years and retired as a partner of KPMG LLP, a public accounting firm, in 2005. During his last 10 years with KPMG LLP he served in both administrative and client service roles, which included serving on the firm’s Board of Directors, including Governance, Nominating and Board Process and Evaluation committees, and was the Pacific Northwest partner in charge of the Audit Practice for KPMG’s offices in Anchorage, Boise, Billings, Portland, Salt Lake City, and Seattle, as well as the Managing Partner of the Portland office.

 

Mr. Dietzler is Chairman of the Audit Committee and a member of the Nominating and Corporate Governance Committee.

 

Peggy Y. Fowler, age 57, director since August 1998

 

Ms. Fowler served as Chief Executive Officer and President of the company from April 2000 to December 31, 2008 and as Co-Chief Executive Officer from January 1, 2009 to March 1, 2009. She was Chair

of the board from May 2001 until January 2004. She served as President of the company from 1998 until 2000. She served as Chief Operating Officer of PGE Distribution Operations from 1996 until 1998. Previously, she served in various positions with the company, including Senior Vice President Customer Service and Delivery and Vice President Power Production and Supply. She also serves on the board of directors of The Regence Group and the Portland Branch board of directors of the Federal Reserve Bank of San Francisco.

 

Ms. Fowler is a member of the Finance Committee.

 

Mark B. Ganz, age 48, director since January 2006

 

Mr. Ganz has served as President and Chief Executive Officer of The Regence Group, a parent corporation of various companies offering health, life and disability products and services under the BlueCross and BlueShield trademarks, since April 2004. Prior to holding his current position, Mr. Ganz served as President and Chief Operating Officer of The Regence Group from 2003 to 2004 and President of Regence BlueCross BlueShield of Oregon from 2001 to 2003. He was Senior Vice President, Chief Legal & Compliance Officer and Corporate Secretary of The Regence Group from 1996 to 2001. Mr. Ganz also serves on the board of directors of The Regence Group.

 

Mr. Ganz is a member of the Finance Committee.

 

Corbin A. McNeill, Jr., age 69, director since February 2004

 

Mr. McNeill served as Chairman and co-Chief Executive Officer of Exelon Corporation, which was formed in October 2000 by the merger of PECO Energy Company and Unicom Corporation until his retirement in 2002. Prior to the merger, he was Chairman, President and Chief Executive Officer of PECO Energy. He serves on the boards of directors of Ontario Power Generation Inc., Associated Electric & Gas Insurance Services Limited, Owens-Illinois, Inc., and Silver Spring Networks.

 

Mr. McNeill is Chairman of our Board of Directors, Chairman of the Nominating and Corporate Governance Committee and a member of the Audit Committee.

 

Neil J. Nelson, age 50, director since October 2006

 

Mr. Nelson has served as President and Chief Executive Officer of Siltronic Corporation since July 2003. He previously served as Vice President of Operations of Siltronic from 2000 to 2003. From 1987 to 2000, he served in various positions with Mitsubishi Silicon America. Mr. Nelson also serves on the board of directors of Siltronic Corporation.

 

Mr. Nelson is a member of the Audit Committee and the Compensation and Human Resources Committee.

 

M. Lee Pelton, age 58, director since January 2006

 

Dr. Pelton has served as President of Willamette University since July 1999. From 1991 until 1998, he was Dean of Dartmouth College. Prior to 1991, he held faculty and administrative posts at Colgate University and Harvard University. Dr. Pelton also serves on the board of directors of PLATO Learning, Inc.

 

Dr. Pelton is a member of the Compensation and Human Resources Committee and the Nominating and Corporate Governance Committee.

 

James J. Piro, age 56, director since January 2009

 

Mr. Piro has served as Chief Executive Officer and President since March 1, 2009 and as Co-Chief Executive Officer and President since January 1, 2009. He was appointed to the Board of Directors effective January 1, 2009 in conjunction with his appointment as Co-Chief Executive Officer and President. From July 2002 to December 2008, he served as Executive Vice President Finance, Chief Financial Officer and Treasurer. From May 2001 to July 2002, he served as Senior Vice President Finance, Chief Financial Officer and Treasurer. From November 2000 to May 2001, he served as Vice President, Chief Financial Officer and Treasurer. Prior to November 2000, he served in various positions with the company, including Vice President, Business Development and General Manager, Planning Support, Analysis and Forecasting.

Robert T. F. Reid, age 60, director since January 2006

 

Mr. Reid has served as Corporate Director of British Columbia Transmission Corporation since 2003. Mr. Reid served as Chair of British Columbia Transmission Corporation from 2003 to November 2008. Mr. Reid served as president of Duke Energy Corporation’s Canadian operations from 2002 to 2003. He served as Executive Vice President and Chief Operating Officer of Westcoast Energy Inc. from 2001 until its acquisition by Duke Energy in 2002. Prior to his appointment as Westcoast’s Chief Operating Officer in 2001, Mr. Reid held senior executive positions in both the natural gas industry and in government service, including Union Gas Ltd., Westcoast Energy Inc., Pan-Alberta Gas, Foothills Pipe Lines, and the Independent Petroleum Association of Canada. He also serves as a director of Fort Chicago Energy Partners L.P. and Greystone Capital Management, Inc.

 

Mr. Reid is Chairman of the Compensation and Human Resources Committee.

 

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” EACH NOMINEE FOR ELECTION TO THE BOARD OF DIRECTORS.

Proposal 2: Ratification of the Appointment of
Independent Registered Public Accounting Firm

 

 

 

 

The Audit Committee has appointed Deloitte & Touche LLP (“Deloitte”) as the independent registered public accounting firm to audit the consolidated financial statements of PGE and its subsidiaries for the fiscal year ending December 31, 2009, and to audit the effectiveness of internal control over financial reporting as of December 31, 2009.

 

The Audit Committee carefully considered the firm’s qualifications as an independent registered public accounting firm. This included a review of the qualifications of the engagement team, the quality control procedures the firm has established, the issues raised by the most recent quality control review, the coordination of the firm’s efforts with our internal audit department and its reputation for integrity and competence in the fields of accounting and auditing. The Audit Committee’s review also included matters required to be considered under the Securities and Exchange Commission’s rules on auditor independence, including the nature and extent of non-audit services, to ensure that the provision of those services will not impair the independence of the auditors. The Audit Committee expressed its satisfaction with Deloitte in all of these respects.

 

Under NYSE and SEC rules, and the Audit Committee Charter, the Audit Committee is directly responsible for the selection, appointment, compensation, and oversight of the company’s independent registered public accounting firm and is not required to submit this appointment to a vote of the shareholders. The Board of Directors, however, considers the appointment of the independent registered public accounting firm to be an important matter of shareholder concern and is submitting the appointment of Deloitte for ratification by the shareholders as a matter of good corporate practice. One or more representatives of Deloitte are expected to be present at the annual meeting and will have an opportunity to make a statement and respond to appropriate questions from shareholders. In the event that our shareholders fail to ratify the appointment, it will be considered as a direction to the Audit Committee to consider the appointment of a different firm. Even if the appointment is ratified, the Audit Committee in its discretion may select a different independent registered public accounting firm at any time during the year if it determines that such a change would be in the best interests of the company and its shareholders.

 

Ratification of the appointment of Deloitte & Touche LLP as the company’s independent registered public accounting firm will require that a majority of the outstanding shares of common stock be present in person or represented by proxy at the annual meeting and that the number of votes cast in favor of this proposal exceeds the number of votes cast against this proposal.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE RATIFICATION OF THE APPOINTMENT OF DELOITTE & TOUCHE LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM.

 

 

 

 

The Board of Directors has approved, and recommends that shareholders approve, an amendment to the company’s Amended and Restated Articles of Incorporation to increase the number of shares of common stock that the company is authorized to issue from 80 million to 160 million. The proposed amendment would revise the statement of authorized capital stock at the beginning of Article IV, as set forth below:

 

ARTICLE IV

 

Classes of Capital Stock

 

The amount of the capital stock of the Corporation is:

 

COMMON STOCK.  Common Stock of the Corporation shall consist of a class without par value consisting of 160,000,000 shares.

 

PREFERRED STOCK.  Preferred Stock of the Corporation shall consist of a class without par value consisting of 30,000,000 shares issuable in series as hereinafter provided.

 

The company is currently authorized to issue up to 80 million shares of common stock. As of March 13, 2009, 75,127,984 shares of common stock were issued and outstanding, including 12,477,500 shares issued by the Company on March 11, 2009 pursuant to a registered public offering. The company anticipates that it will issue the substantial majority of the remaining 4,872,016 authorized but unissued shares of common stock under the company’s 2006 Stock Incentive Plan and the company’s 2007 Employee Stock Purchase Plan.

 

The Board of Directors believes that it is in the company’s best interests to increase the number of authorized shares of common stock in order to have additional shares available to meet the company’s future business needs as they arise, including issuances to raise additional capital, grants of employee stock awards under the company’s 2006 Stock Incentive Plan, issuances under the company’s 2007 Employee Stock Purchase Plan, stock splits, stock dividends, possible acquisitions and other corporate purposes. In addition, the Board believes that having such additional authorized shares of common stock available for issuance in the future would give the Company greater flexibility to pursue transactions in which an issuance of common stock might be appropriate or desirable, without the expense and delay of calling and holding a special shareholders’ meeting for such purpose, except to the extent that shareholder approval is required by applicable law or stock exchange listing requirements.

 

The company has no present plans to issue shares that would be authorized by the proposed amendment. However, in order to fund future capital expenditures over the medium term future and maintain a common equity ratio (common equity to total consolidated capitalization, including current debt maturities) of approximately 50%, the company anticipates that it may need to issue additional shares of common stock in the future. The company attempts to maintain a debt to total capitalization ratio of approximately 50% in order to help ensure acceptable credit ratings and allow access to long-term capital at attractive interest rates. The company is also required to maintain a debt to total capitalization ratio of 65% or less under its current revolving credit agreements. Accordingly, future capital expenditures may require that the company issue additional shares of common stock in order to maintain its common equity ratio at target levels. In addition, the company may review and evaluate other potential capital-raising activities, strategic transactions and other corporate transactions from time to time to determine if such transactions would be in the best interests of the company and its shareholders, and any such transaction could involve the issuance of some or all of the company’s authorized but unissued common stock.

The issuance of any additional shares of common stock may have the effect of diluting the percentage of stock ownership, book value and voting rights of present shareholders. The amendment may also have the effect of discouraging attempts to acquire control of PGE, as additional shares of common stock could be issued to make such an attempt more difficult by diluting the stock ownership and voting power of, or increasing the cost to, a party seeking to obtain control. This amendment is not being proposed in response to any known effort or threat to acquire control of PGE and is not part of a plan by management to adopt measures having an anti-takeover effect.

 

The Amended and Restated Articles of Incorporation also grant to the Board the authority to issue 30 million shares of preferred stock. As of the date of this proxy statement, there are no shares of preferred stock issued or outstanding. The proposed amendment does not change the amount of preferred stock currently authorized, which the board considers to be adequate for appropriate future corporate purposes.

 

If the proposed amendment is approved, the newly authorized shares of common stock will be available for issuance from time to time at the discretion of the Board of Directors for such purposes and consideration as the board may approve. Generally, no shareholder approval is required for the issuance of authorized but unissued shares of common stock, except as provided by the rules of the New York Stock Exchange (“NYSE”). NYSE rules require shareholder approval of issuances of common stock under certain circumstances, including when the number of shares to be issued equals or exceeds 20% of the voting power outstanding. However, this shareholder approval requirement does not apply in the case of a public offering for cash or under certain other circumstances. The additional shares, when issued, will have the same rights and privileges as the shares of common stock currently outstanding.

 

Shareholders have no preemptive rights to acquire shares issued by the company under its Amended and Restated Articles of Incorporation and shareholders would not acquire any such right with respect to the additional authorized shares that would be available under the proposed amendment to the Amended and Restated Articles of Incorporation. Holders of PGE common stock do not have the right of cumulative voting at any election of directors.

 

If approved by shareholders, the amendment will be effective upon its filing with the Secretary of State of the State of Oregon.

 

Vote Required and Board of Directors Recommendation

 

Approval of this amendment of the company’s Amended and Restated Articles of Incorporation requires the affirmative vote of a majority of the outstanding shares of common stock, as provided in our Amended and Restated Articles of Incorporation.

 

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE APPROVAL OF THE AMENDENT TO THE AMENDED AND RESTATED ARTICLES OF INCORPORATION TO INCREASE THE TOTAL NUMBER OF AUTHORIZED SHARES OF COMMON STOCK.

 

 

The following table provides information as of December 31, 2008, for the Portland General Electric Company 2006 Stock Incentive Plan and the Portland General Electric Company 2007 Employee Stock Purchase Plan. The 2006 Stock Incentive Plan was amended and restated as of October 24, 2007 and was approved by the shareholders on May 7, 2008 at the company’s 2008 annual meeting of shareholders. The 2007 Employee Stock Purchase Plan was approved by the shareholders on May 2, 2007 at the company’s 2007 annual meeting of shareholders.

 

 

 

 

 

The Compensation and Human Resources Committee of the Board of Directors has reviewed and discussed with the company’s management the following Compensation Discussion and Analysis prepared by the company’s management and, based on that review and discussion, the Compensation and Human Resources Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement.

 

Compensation and Human Resources Committee

 

Robert T. F. Reid, Chair

John W. Ballantine

Neil J. Nelson

M. Lee Pelton

 

 

This section is intended to inform our shareholders about our 2008 executive compensation program, particularly as it relates to the following individuals, who were our “named executive officers” in 2008:

 

 

 

 

 

The Compensation and Human Resources Committee (“Compensation Committee”) oversees the compensation of our executive officers. Each year the Compensation Committee reviews the performance of the executive officers and establishes base salaries and incentive awards. The committee also regularly reviews the company’s executive compensation programs and makes changes or recommends changes to the full Board of Directors. The report of the Compensation Committee relating to this Compensation Discussion and Analysis can be found on page 25 under the heading “Compensation and Human Resources Committee Report.” Additional information concerning the Compensation Committee is on page 15 under the subheading “Compensation and Human Resources Committee” and on page 17 under the subheading “Compensation Committee Interlocks and Insider Participation.”

 

The company’s executive officers do not set executive pay. On many compensation matters, however, our management provides information and recommendations to the Compensation Committee, particularly in areas requiring detailed knowledge of company operations and the utility industry. In 2008, several members of our management team assisted the committee with the development of performance goals for incentive awards. Ms. Fowler and Mr. Piro provided input on financial and operating results and the individual performance of the other executive officers. Our CEO does not make recommendations to the committee regarding his or her own compensation.

 

The Compensation Committee selected and retained an outside compensation consultant, Watson Wyatt Worldwide (“Watson Wyatt”), to assist with the development of the company’s executive compensation program. The committee has adopted a policy that executive compensation consultants may not be retained to perform other services for the company without the express permission of the committee. In 2008, Watson Wyatt provided input to the committee on compensation trends, appropriate comparison companies and market survey data. Watson Wyatt also assisted management in preparing recommendations to the committee regarding salaries, performance goals for the incentive award programs and other aspects of executive compensation.

 

 

The goals of the company’s executive compensation program are to attract and retain highly qualified and motivated executives and to provide them with incentives to advance the interests of the company’s key

constituents: our shareholders, our customers and the communities we serve. In attempting to accomplish these goals, the Compensation Committee is guided by the following principles:

 

 

To ensure the competitiveness of our executive pay packages, the Compensation Committee considers market comparisons provided by Watson Wyatt to establish base salary ranges and the level of incentive awards. The data are generally derived from utility industry compensation surveys and studies of the compensation practices of a peer group of utility companies.

 

Watson Wyatt relied on the following surveys in developing its market comparisons for 2008 executive compensation:

 

 

For its 2008 compensation decisions, the Compensation Committee selected the following 15 companies as our peer group:

 

The only change to the peer group for 2008 was the addition of Northwest Natural Gas Company. We included Northwest Natural because its geographical proximity makes it a potential competitor for executive talent. We selected the other members of the peer group because we believe they represent the best overall match with the company based on the following criteria:

 

 

 

Our 2008 executive pay packages included the following components:

 

 

Each of these components contributes to the competitiveness of our pay packages, enabling the company to attract and retain qualified executives. Incentive awards are structured to further align executives’ interests with important stakeholder interests.

 

Base salaries, incentive awards and certain perquisites are established annually, while other elements of compensation are generally paid pursuant to written plans. As a general rule, we do not enter into employment agreements with our executives. On May 6, 2008, however, the company entered into an agreement with Mr. Quennoz, Vice President, Nuclear and Power Supply/Generation. The agreement provides, among other things, that the company will continue to employ Mr. Quennoz through March 31, 2013, subject to the company’s right to terminate his employment for cause at any time. The agreement does not guarantee that Mr. Quennoz will be employed in his current position or at his current rate of pay, but does provide that his annual base salary will not be below the base salary range for an EX-17 General Manager. As of March 1, 2009 the annual base salary range for an EX-17 General Manager was $116,486 to $174,730. We entered into the agreement to help ensure that we will continue to receive the benefit of Mr. Quennoz’s knowledge and experience through the completion of the decommissioning of our Trojan Nuclear Plant.

 

Each component of our executive pay program is described in greater detail below.

 

A.  Base Salaries.

 

1. Overview.  We pay base salaries to provide management with a fixed amount of compensation at levels needed to attract and retain qualified executives. We base our salary decisions on market comparisons, our executives’ experience, qualifications, performance and ability to contribute to the company’s financial and operational success, and considerations of internal pay equity.

2. 2008 Increases in Base Salary.  The Compensation Committee approved two increases in the base salaries of the named executive officers that went into effect in 2008: a one-time increase ranging from $11,500 to $15,900, effective January 1, 2008, and an additional increase of approximately 5% to 8%, effective May 1, 2008. The first increase was to offset the effect of the committee’s termination of several of the Company’s perquisite plans. These plans provided for reimbursement of certain vehicle expenses and financial planning and health expenses. The second increase was an annual adjustment based on market comparisons and the company’s financial condition and strong performance in 2007.

 

As shown in the table below, the 2008 base salaries were generally close to the median, based on data provided by Watson Wyatt.

 

 

 

 

We set the base salary and other pay elements for Ms. Barnett and Messrs. Hawke and Quennoz at the same levels because the functions they serve are generally of equal significance to the success of the company.

 

B.  Annual Cash Incentive Awards.

 

1. Overview.  We regard annual cash incentive awards as an effective means of encouraging executives to advance stakeholder interests because they create a direct link between executive pay and annual company performance in key financial, strategic and operational areas. Annual cash incentive awards are also consistent with market practices and therefore contribute to the competitiveness of our executive pay packages.

 

We grant annual cash incentive awards to our executives under our 2008 Annual Cash Incentive Master Plan for Executive Officers (“2008 Annual Cash Incentive Plan”). The plan authorizes the Compensation Committee to make cash incentive awards to executive officers for the achievement of individual, department or corporate goals. Each year the Compensation Committee establishes performance goals and a formula for calculating awards. In the first quarter of the next year the committee determines the amount of the awards by comparing actual performance against the goals. Under the terms of the plan, the committee may exclude the impact of non-recurring, unusual events in determining the attainment of performance goals. The committee is generally required to exclude the impact of such events in the case of awards that are intended to qualify for the exemption for “performance-based compensation” under Internal Revenue Code section 162(m) (“162(m) awards”), although the plan permits the committee to exercise its discretion to adjust awards downward, even in the case of 162(m) awards. See below under the heading “— Tax Considerations” for a discussion of Internal Revenue Code section 162(m).

 

2. Changes to Annual Cash Incentive Program for Executives.  In 2008 the Compensation Committee modified the cash incentive award program for executives to simplify it and improve its alignment with key stakeholder interests. For 2007, awards made to the executive officers were based on net income results and five corporate goals: high customer value; electric service power quality and reliability; reliable, reasonably priced power supply; engaged valued workforce; and active corporate responsibility. For 2008, executive awards were based solely on corporate goals in four areas: net income, generation plant availability, customer satisfaction, and electric service power quality and reliability.

As in previous years, the 2008 awards were a function of quantifiable and objectively measurable performance goals. The Compensation Committee believes this is an important means of ensuring consistency in administration and accountability. The 2008 officer awards were based on a single set of performance goals, which we believe fosters a team approach and ensures that incentives for all executives are closely aligned with the primary objectives of the company.

 

More detailed information about the 2008 executive cash incentive program is provided below.

 

3. 2008 Annual Cash Incentive Program.  Under the program approved by the committee, each officer’s award for 2008 was calculated by multiplying a “target award” by a “performance percentage” ranging from 0 to 200%.

 

i. Target Awards.  The target awards of the named executive officers ranged from 50% to 80% of their 2008 base salaries. This reflects a 5% increase over the prior year’s target awards for each of the officers. The target amounts were increased to better align with market data provided by Watson Wyatt. The target awards of our CEO and CFO were higher as a percentage of base salary, in keeping with our belief that greater responsibility should be accompanied by a greater share of the risks and rewards of company performance.

 

ii. Performance Goals.  The four company performance goals used to calculate the 2008 awards — net income, generation plant availability, customer satisfaction, and electric service power quality and reliability — were selected because they represent the principal interests of our key stakeholders: our customers, shareholders and the community. They also represent business objectives that are fundamental to a well-run utility. The measures used to calculate the company’s performance relative to these goals and the primary rationale for selecting them are described below.

 

 

In establishing threshold, target and maximum levels — both for our annual cash award program and for our long-term incentive award program — we are guided by the following principles:

 

 

For details regarding the threshold, target and maximum performance levels and the calculation of annual cash incentive awards, see “Executive Compensation Tables — 2008 Grants of Plan-Based Awards” below.

 

To determine awards under the award formula, results for the net income and generation plant availability goals were each weighted 30%, while results for the customer satisfaction and electric service power quality

and reliability goals were each weighted 20%. In addition, net income results had to be at least 70% of budgeted net income in order for participants to earn any payout under the 2008 cash incentive program. We assigned greater weight to net income and generation plant availability results because of their more direct relation to shareholder interests.

 

iii. Determination of Award Amounts.  After considering results relative to the four corporate performance goals, the Compensation Committee approved cash incentive awards for the executive officers that were 137.3% of their target awards. Under the terms of the 2008 Annual Cash Incentive Plan, performance results for awards that are intended to qualify as performance-based compensation under Internal Revenue Code section 162(m) are adjusted upward or downward to offset the effect of extraordinary, non-recurring items. Accordingly, the initial calculation of performance results did not reflect the impact of the Oregon Public Utility Commission (“OPUC”) order in the proceedings relating to the company’s recovery of its investment in the Trojan nuclear plant (the “Trojan Proceedings”), which resulted in a $28.4 million decrease in net income for 2008. In accordance with regulations under section 162(m), however, the plan permits the Compensation Committee to make discretionary downward adjustments in determining awards. In light of current economic conditions, the committee exercised its discretion to adjust the initial net income results downward by $28.4 million to include the impact of the OPUC order in the Trojan Proceedings. For details regarding the Trojan Proceedings, see “Item 3 — Legal Proceedings” and Note 18, Contingencies, in the Notes to Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2008.

 

The overall performance results, adjusted by the Compensation Committee to include the impact of the OPUC order in the Trojan Proceedings, are expressed as a percentage of the target for each goal and weighted as set forth below. These weighted results were added together to produce the performance percentage.

 

 

 

 

Based on the performance percentage of 137.3%, the committee approved the following annual cash awards for 2008:

 

 

Excluding the impact of the order in the Trojan Proceedings would have resulted in a performance percentage of 177.2%, and awards for the named executive officers ranging from $939,573 to $210,361.

 

For additional details regarding the calculation of the 2008 awards, see below under the heading “Executive Compensation Tables — 2008 Grants of Plan-Based Awards.”

 

C.  Long-Term Equity Awards.

 

1. Overview.  We believe that the interests of executives and key employees should be aligned with those of shareholders through the risks and rewards of company stock ownership. We seek to accomplish this

goal through awards under our 2006 Stock Incentive Plan. The Compensation Committee is authorized under the plan to grant stock-based awards to directors, officers and other employees. The Compensation Committee may determine the amount and type of awards, up to certain maximum amounts described in the plan.

 

In 2008, the committee made grants of restricted stock units (“RSUs”) with performance-based vesting conditions to each of the executive officers and certain key employees. These RSUs give the grantee the right to receive shares of company common stock at no cost, provided that certain performance goals are met and the grantee remains employed by the company throughout the performance period. Grantees whose employment is terminated due to retirement, death or disability are eligible to receive a portion of their award, prorated according to the percentage of the performance period that the grantee was employed. The performance period for the 2008 awards is three years. The number of shares that the holder of the RSUs receives depends on how well the company performs relative to the performance goals in each of the three years.

 

We chose to award RSUs with performance-based vesting conditions (“performance RSUs”), rather than other forms of stock-based compensation, because we believe that on the whole, they are the best means of advancing several of the objectives of our compensation program:

 

 

In 2008, we modified our RSU awards for both executives and key employees. The 2007 awards were based on four corporate performance goals: net income, generation plant availability, electric service power quality and reliability, and customer satisfaction. While we continue to regard these as important measures of corporate performance, we believe we can achieve greater alignment with long-term shareholder interests by basing awards on two corporate performance measures: return on equity (as a percentage of allowed return on equity) and regulated asset base growth (relative to internal projections established by the Board of Directors).

 

The 2008 awards are described in greater detail below.

 

2. 2008 Long-Term Incentive Awards.

 

i. Award Formula.  To determine each officer’s award at the end of the three-year performance period, the Compensation Committee will use the following formula:

 

Number of Shares Received = Number of RSUs Granted x Performance Percentage

 

The Performance Percentage is a percentage between 0 and 150%, which will be based on results over the three-year performance period. See “Executive Compensation Tables — 2008 Grants of Plan-Based Awards” for details.

 

ii. Number of RSUs Granted.  Each executive was granted a number of RSUs calculated by multiplying his or her 2008 base salary by a specified percentage and dividing the result by the closing price of the company’s common stock on the grant date:

 

The table below shows the percentages used to calculate the awards and the number of RSUs granted to the named executive officers. These same percentages were used for the awards of performance RSUs made in 2007. The table also shows the estimated value of the awards on the grant date (assuming that the company will perform at target levels over the performance period and using the closing price of the company’s common stock on the grant date):

 

 

The awards are below the median of the utility market, based on survey data provided by Watson Wyatt. As in prior years, the committee set Ms. Fowler’s award more significantly below the median, based on considerations of internal pay equity.

 

iii. Performance Percentage.  In choosing performance goals for the 2008 awards we sought to identify measures that would best align with our shareholders’ interests, while avoiding complexities of accounting treatment and measurement associated with many commonly-used performance measures. The performance goals, the measures used to calculate the company’s performance relative to these goals and the primary rationale for selecting them, are described below.

 

 

 

 

 

For details regarding the threshold, target and maximum performance levels assigned for the long-term performance goals, see “Executive Compensation Tables — 2008 Grants of Plan-Based Awards” below.

 

3. Determination of 2006 Long-Term Incentive Awards.  On February 19, 2009, the Compensation Committee met to determine the number of shares that vested under the performance RSUs granted to the company’s executive officers and other key employees in 2006. The number of RSUs that vested was a function of company performance over a three-year period in four areas: net income relative to budgeted net

income, generation plant availability, customer satisfaction and electric service power quality and reliability. The measures of company performance in these areas were objective. Because these awards were granted at a time when the company was not subject to the limitations of Internal Revenue Code section 162(m), the committee did not intend that the awards constitute “performance-based compensation” for purposes of section 162(m). Accordingly, the committee was not required under the 2006 Stock Incentive Plan to adjust for unusual, non-recurring events in determining the attainment of performance goals. (See below under the heading “— Tax Considerations” for a discussion of Internal Revenue Code Section 162(m).) Rather, in granting the awards the committee retained the right to adjust the awards upward or downward in its discretion.

 

The following discretionary adjustments to 2006 performance results — specifically, net income results — were made in determining the 2006 long-term incentive awards:

 

 

The table below shows the performance results, including these adjustments, for the three-year performance period ended December 31, 2008:

 

 

Based on these results, 129.4% of the performance RSUs vested, resulting in the award values set forth below, based on the closing price of the company’s common stock on February 19, 2009, the vesting date.

 

 

The terms of the 2006 long-term incentive awards are described more fully in the company’s 2007 proxy statement under the heading “— 2006 Grants of Plan-Based Awards.”

 

D.  Other Benefits.

 

1. Overview.  We provide retirement benefits, health and welfare benefits and other standard benefits to all of our executives. Our primary reason for providing these benefits is that they enable us to be competitive in attracting and retaining highly qualified executives. In the sections below we provide a brief description of these benefits as well as further explanation of our reasons for providing them.

2. Pension Plan.  Eligible employees, including all of the named executive officers, participate in the company’s pension plan. (Non-union employees hired on or after February 1, 2009 and union employees hired on or after January 1, 1999 do not participate in the plan, but instead are eligible to receive enhanced company contributions to their 401(k) accounts.) Benefits for both executive and non-executive employees are based upon the employee’s years of service and the employee’s Final Average Earnings (defined as the highest 60 consecutive monthly earnings during the last 120 months of employment). See the section below entitled “Executive Compensation Tables — 2008 Pension Benefits” for additional details regarding benefits available under the pension plan.

 

3. 401(k) Plan.  All named executive officers participate in the company’s 401(k) Plan, which is a broad-based retirement plan to which eligible employees may contribute. Matching contributions for eligible non-union employees (those hired before February 1, 2009 — including all of our named executive officers) equal the lesser of 100% of employee contributions or 6% of base pay, subject to limitations under Section 401(a)(17) of the Internal Revenue Code (which caps annual compensation for purposes of calculating company matching contributions at $230,000 for 2008). Employees hired on or after February 1, 2009 receive enhanced company contributions — an automatic company contribution of 5% of base play, as well as a matching contribution of 5% of base pay — in lieu of participating in the company’s pension plan. Information regarding 401(k) matching contributions paid to the named executive officers in 2008 appears in the 2008 Summary Compensation Table under “All Other Compensation.”

 

4. SERP.  The Portland General Electric Company Supplemental Executive Retirement Plan (“SERP”) is a benefit plan that was designed to provide retirement income for executive officers in addition to the income provided under the company’s pension plan. The company originally adopted the SERP in 1983, at a time when plans of this kind were standard elements of executive pay packages. Our reasons for adopting the SERP were to provide key executives with competitive retirement benefits and to protect against reductions in retirement benefits due to tax law limitations on qualified plans. By action of the Board of Directors, the SERP was closed to new participants in 1997. In 2008 Ms. Fowler was the only active employee to participate in the plan. Additional information regarding the terms of the SERP and the compensation payable under the SERP appears below in the section entitled “Executive Compensation Tables — 2008 Pension Benefits” and “Executive Compensation Tables — Termination and Change in Control Benefits.”

 

5. Deferred Compensation Plans.  We maintain the 2005 Management Deferred Compensation Plan (“2005 MDCP”), under which executives and other highly paid employees can defer a portion of their compensation on a pre-tax basis, receive a company matching contribution and earn a guaranteed rate of interest on their account balances until the date of distribution. A number of our executives and other highly paid employees also have account balances under a prior deferred compensation plan (the “1986 MDCP”). Under the 2005 MDCP, participants may elect to defer to later years the payment of up to 80% of their base salary, 100% of their cash incentive compensation and the value of up to 120 hours of cancelled paid time off. Participants also receive a match from the company of 3% of base pay deferred. See the section below entitled “Executive Compensation Tables — Nonqualified Deferred Compensation” for additional information regarding the 2005 MDCP and 1986 MDCP. Above-market earnings on the named executive officers’ balances under both plans are included in amounts under “Change in Pension Value and Nonqualified Deferred Compensation Earnings” in the Summary Compensation Table.

 

6. Severance Benefits.  We sponsor severance benefit plans for both executives and non-executive employees. Under the plans, benefits are paid to eligible employees whose employment is terminated as a result of corporate, departmental, or work group reorganization or similar business circumstances. Under both the executive and non-executive pay plans, employees are eligible to receive up to 52 weeks of base pay, depending on length of service. The purpose of the plans is to provide reasonable severance benefits to employees in light of the fact that employees may have difficulty finding comparable employment quickly following termination of their employment. See the section below entitled “Executive Compensation Tables — Termination and Change in Control Benefits.”

 

7. Outplacement Assistance.  We maintain a broad-based plan to cover the cost of outplacement assistance for employees who lose their jobs as a result of corporate, departmental or work group

reorganization, including the elimination of a position, or similar business circumstances. See the section below entitled “Executive Compensation Tables — Termination and Change in Control Benefits” for further details.

 

8. Active Employee Health and Welfare Benefits.  Active employee health and welfare benefits such as medical, dental, life insurance and disability coverage are available to the named executive officers and their eligible dependants through the Portland General Electric Company Health and Welfare Plan for Active Employees. Under the plan, eligible employees (generally all non-temporary non-union employees who are regularly scheduled to work at least 20 hours per week), can participate in a variety of company-sponsored programs, including medical, dental and vision coverage; life insurance; accident insurance; long-term disability insurance; a health flexible spending arrangement; an employee assistance program; a pre-paid legal services program; and (as described above) severance programs. The cost of these programs (not including the employee assistance program and severance programs) is shared by participating employees and the company. Employees are allocated a number of “flexdollars” based on their medical coverage selections and employment status (full-time, reduced-hour or part-time), which they may apply to eligible programs, with other costs being covered through before-tax or after-tax employee contributions. Coverage levels under the various programs are comparable to benefits provided by other large companies and are made available on a company-wide basis to all eligible employees regardless of pay levels.

 

9. Post-Retirement Health and Welfare Benefits.  Health and welfare benefits are available to eligible retirees, including the named executive officers, under the Portland General Electric Company Health and Welfare Plan for Inactive Employees. Under the plan, retirees and surviving spouses of active and retired employees can participate in company-sponsored medical and dental plans. Participating employees and the company share the cost of this coverage, with the monthly company contributions ranging from $80 to $200 for an employee and his or her spouse, depending on the age and years of service of the employee and spouse. Company contributions for employee-only coverage ranges from $40 to $100 per month. The company also maintains a Health Reimbursement Arrangement, or HRA, for both union and non-union employees. Under the non-union HRA, we credit company contributions and earnings to eligible employees’ HRA accounts in amounts determined by the Board of Directors. Upon retirement, amounts in the employee’s HRA account may be used to pay for eligible medical expenses that are not covered by a medical plan or reimbursed through a Health Savings Account. In the event of the employee’s death, the employee’s surviving spouse and eligible dependents may continue drawing on the HRA account until it is depleted. For 2008, $357.40 was credited to each named executive officer’s account, and 5.3% in earnings was credited to their outstanding balances. Non-union employees, including the named executive officers, are also eligible to receive life insurance coverage equal to the greater of 10% of base pay or $5,000 at no cost, and are eligible to purchase additional life insurance coverage through a company-sponsored group life insurance plan.

 

10. Paid Time Off.  We provide vacation and other paid holidays to all employees, including the named executive officers. These benefits are comparable to those provided at other large public companies. Executive officers receive two weeks’ annual vacation allowance in addition to amounts provided to other salaried employees. We believe that this policy helps further executives’ health, productivity and effectiveness. The benefit may also be exchanged for a cash payment or deferred under our deferred compensation plan for management. Any amounts received by the named executive officers in lieu of paid time off are included in the Summary Compensation Table under “Salary.”

 

11. Perquisites.  Certain members of the management team are reimbursed for the cost of their business or golf club membership dues. The Compensation Committee approves these reimbursements on a case-by-case basis, based on whether the committee believes that the executive’s membership in the club serves a legitimate business need of the company. In addition, all of the executive officers receive parking free of charge at our company headquarters. The value of these benefits is included in the Summary Compensation Table under “All Other Compensation.”

 

Under the terms of our 2006 Stock Incentive Plan, the Compensation Committee is responsible for all grants of equity awards. However, it has the ability to delegate its authority to make equity grants under the plan, and in January 2009 the committee delegated authority to the company’s Chief Executive Officer to make grants of RSUs with time-based vesting conditions to key employees who work on the company’s Trading Floor, up to an aggregate value to be established by the committee annually. The Compensation Committee has not delegated its authority to make equity awards to the company’s executives and is solely responsible for determining the size and frequency of all such equity awards.

 

We expect that we will continue to grant performance RSUs to executive officers and other key employees each year. We also expect to make annual grants of restricted stock units with time-based vesting conditions to the company’s directors. In addition, discretionary equity awards may be made from time to time to select employees for attraction and retention purposes, including Trading Floor employees. The company’s average annual “burn rate” (the total number of all equity award shares granted during the fiscal year divided by the total shares outstanding at the end of the fiscal year) was 0.45% from fiscal 2006 through fiscal 2008.

 

The committee has not adopted a formal policy governing the timing of equity awards. However, we have generally made awards to officers and directors at Compensation Committee meetings scheduled to occur shortly after the issuance of a quarterly earnings release, and we expect to continue this practice. We intend to make director awards on or around the date of the company’s annual meeting of shareholders and to make officer awards during the first quarter of the year.

 

(1) Internal Revenue Code Section 162(m).  Section 162(m) of the Internal Revenue Code generally places a limit of $1 million on the compensation that a publicly held corporation may deduct with respect to its CEO and its three next most highly paid executive officers other than the CFO. There are, however, certain exceptions to this limitation. Under one exception, compensation that is paid under a plan that was in place at the time a company becomes publicly held is not subject to the limit for a specified period. We became a public company in 2006 following our separation from Enron Corp. and our incentive awards granted in 2006 and 2007 qualified for this exception. Beginning with our 2008 incentive awards, we have attempted to structure our awards to executives so that they qualify for an exemption under 162(m) for certain “performance-based compensation.” Regulations under Internal Revenue Code section 162(m) provide, among other things, that awards will be considered exempt performance-based compensation only if: (i) the awards are payable solely on account of performance goals having been satisfied; (ii) the method of computing the amount payable upon satisfaction of the performance goals is stated in an objective formula; and (iii) the objective formula precludes discretion to increase the amount payable upon satisfaction of the goal, although discretion to adjust awards downward is permitted.

 

Notwithstanding our general policy, we believe that the long-term incentive awards granted to our named executive officers in 2008 do not qualify as performance-based compensation under section 162(m). In January 2009 it came to our attention that due to a clerical error, the materials documenting the awards granted in February 2008 contained incorrect measures for the asset base growth performance goal, which did not conform to the Committee’s intention to establish threshold, target and maximum levels of performance at specified percentages of projected asset base growth. On January 26, 2009 the committee modified the awards to ensure that the documentation properly reflected the committee’s intentions. We believe that due to this modification, the 2008 long-term incentive awards fail to comply with regulations regarding performance-based compensation under section 162(m). These regulations require that performance goals be established no later than 90 days following the commencement of the performance period to which the goals relate.

 

(2) Internal Revenue Code Section 409A Compliance.  In December 2008 the company adopted amendments to various company-sponsored non-qualified deferred compensation plans and agreements, including the following plans: the Portland General Electric Company Supplemental Executive Retirement Plan (the “SERP”), the Portland General Electric Company 2005 Management Deferred Compensation Plan, the Outside Directors’ Deferred Compensation Plan, and the Severance Plan for Executive Employees the (collectively, the

“Plans”). The principal reason for the changes to the Plans was to comply with Section 409A (“Section 409A”) of the Internal Revenue Code of 1986, as amended. Section 409A generally applies to nonqualified plans that provide for payment of compensation in a taxable year later than the taxable year in which the recipient earns a right to the compensation. Section 409A imposes new requirements with respect to the timing of deferral elections, payment elections and payments, among other things. None of the changes made to the Plans affected the amount of benefits to which the named executive officers are entitled under the Plans. Some of the changes are described below in the Executive Compensation Tables section of this proxy statement.

 

 

 

The table below shows the compensation that the company’s named executive officers (the CEO, CFO and three most highly compensated officers other than the CEO and CFO) earned during the years ended December 31, 2006, 2007 and 2008. Information about director compensation is included under the heading “Non-Employee Director Compensation” on pages 11 to 12.

 

2008 Summary Compensation Table

 

 

 

 

Performance RSUs with three-year performance periods were granted to each of the named executive officers in 2006, 2007 and 2008. The amounts recognized with respect to performance RSUs were as follows:

 

 

The amounts recognized with respect to performance RSUs awarded in 2006 reflect performance results that would allow the vesting of 128.2% of the RSUs awarded. This performance percentage differs from the actual performance percentage of 129.4% determined by the Compensation Committee, as reported in the Compensation Discussion and Analysis section above. However, this difference was deemed not material for accounting purposes and accordingly we did not reopen the Company’s books to adjust the amounts expensed following the Compensation Committee’s determination on February 19, 2009. The amounts recognized with respect to performance RSUs awarded in 2007 and 2008 assume performance results that would allow the vesting of 130.9% and 100.0% of RSUs awarded for 2007 and 2008, respectively. Amounts recognized with respect to performance RSUs also assume that the named executive officers will continue in the employment of the company throughout the performance period. See “Note 5 — Stock Based Compensation” in the Notes to the Consolidated Financial Statements in our Annual Report on Form 10-K for the years ended December 31, 2006 and December 31, 2007 and “Note 13 — Stock-Based Compensation Expense” in the Notes to the Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2008 for a discussion of certain assumptions underlying our determination of these amounts.

 

Time-vested RSUs were awarded to each of the named executive officers in 2006. The amounts recognized with respect to time-vested RSUs in 2006, 2007 and 2008 were as follows:

 

The 2008 awards are discussed in greater detail below in the section entitled “— 2008 Grants of Plan-Based Awards.”

 

 

 

For 2007, the amount shown in this column for Mr. Piro, Ms. Barnett and Mr. Hawke is 0, in accordance with applicable disclosure rules. As reflected in the figures above, however, the net effect of the amounts reflected in this column in 2007 were decreases of $7,361 for Mr. Piro, $2,936 for Ms. Barnett and $5,687 for Mr. Hawke.

 

Values for the pension plan assume a retirement age of 65. The increases in value for Ms. Fowler’s SERP account assume a retirement age of 55.4, 56.4, and 57.4, her age on December 31 of 2006, 2007 and

2008, respectively. See “Note 2 — Employee Benefits” in the Notes to Consolidated Financial Statements in our Annual Report on Form 10-K for the years ended December 31, 2006 and December 31, 2007 and “Note 10 — Employee Benefits” in the Notes to Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2008 for an explanation of additional assumptions made in calculating the increase in the value of benefits under the pension plan and the SERP.

 

Amounts shown in the Change in Pension Value and Nonqualified Deferred Compensation column for 2006, 2007 and 2008 include above-market interest (defined as above 120% of the long-term Applicable Federal Rate) on balances under the 1986 MDCP and the 2005 MDCP in the following amounts:

 

 

 

 

 

The following table shows information regarding plan-based awards made to the named executive officers in 2008.

 

2008 Grants of Plan-Based Awards

 

 

 

 

 

The figures in the columns under the heading “Estimated Possible Payouts Under Non-Equity Incentive Plan Awards” show the range of potential payouts for awards made for 2008 under the 2008 Annual Cash Incentive Plan. Actual payouts were determined by the Compensation and Human Resources Committee in February 2009 and are disclosed in the 2008 Summary Compensation Table in the Non-Equity Incentive Plan Compensation column.

 

Each award is calculated by multiplying the officer’s target award by a “performance percentage” ranging from 0 to 200%, which is a function of the company’s performance relative to a common set of goals. The figures shown in the Threshold, Target and Maximum columns assume that, for each of the goals, the company achieved threshold, target and maximum levels of performance, respectively, as shown on the table in the section entitled “Performance Percentage” below.

 

Details regarding the named executive officers’ target awards and the calculation of the performance percentage are set forth below.

1. Annual Cash Incentive Award Formula.  Each officer’s annual cash incentive award for 2008 was calculated by multiplying a “target award” by a “performance percentage” ranging from 0 to 200%.

 

Award = Target Award x Performance Percentage (from 0 to 200%)

 

2. Target Awards.  Target awards (shown in the table above) were established by multiplying base salary paid in 2008 by the applicable percentage shown below.

 

 

3. Performance Percentage.  The performance percentage is a function of quantifiable results relative to four company performance goals: net income, generation plant availability, customer satisfaction, and electric service power quality and reliability.

The table below describes the measures used for each of these goals, and how they correspond to threshold, target and maximum levels of performance.

 

2008 Annual Cash Incentive Award Performance Goals