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Merger-linked rate cut shrinks PUC staff favors ScottishPower takeover; hearings begin in Salem on Wednesday Staff and wire reports A temporary rate cut has shrunk as the proposed merger between PacifiCorp and ScottishPower moves toward to regulatory approval in Oregon. The companies have reached agreement with the staff of the Oregon Public Utility Commission on the proposed merger, which the staff will now recommend the commissioners approve with a set of conditions. The agreement, reached over the weekend, calls for customers to get a rate credit of $12 million a year for the first three years after the merger and $15 million for the fourth year. The PUC staff had been asking for a credit of $20 million a year for four to six years, while the companies had hoped to gain approval based on improved customer service rather than specific rate cuts. The original $20 million credit had amounted to a rate cut of about 2.5 percent, while the $12 million works out to a 1.7 percent cut. Under the agreement, the company would have the same ability to ask for rate increases that PacifiCorp currently does. The deal comes just days before the formal hearings before the three-person Oregon PUC. The hearings, which are open to the public, are Wednesday, Thursday and Friday in Salem. The commission is expected to rule on the merger sometime this fall and could v still reject it although the commission has traditionally followed its staff's lead. "It's a significant step forward," said PacifiCorp spokeswoman Leslie Carlson of the agreement. In May the PUC staff was recommending against approval of the merger, saying it did not serve the public interest and gave no assurance of lower rates. Two weeks ago, the staff unveiled a set of 24 conditions under which it would recommend approval -- including the rate credit to protect customers from the risk of higher rates because of the merger. "Oregon always said they wanted a merger credit for customers," said ScottishPower spokeswoman Rachel Sherrard. "Right from the outset, they made that clear to us." The companies and regulators met to negotiate several times after those conditions were announced before reaching a compromise. In June, PacifiCorp shareholders overwhelmingly approved the $7.9 billion takeover bid, the first foreign purchase of an American utility. The deal, announced in December, would form one of the world's largest power suppliers, with 7 million customers and 23,500 employees. PacifiCorp serves 1.5 million customers in six Western states, including about 500,000 in Oregon. The PUC staffs in all six states have recommended approval of the merger and California's commission already has voted approval. Today's Business Index Mail Tribune Copyright � The Mail Tribune 1999, Medford, Oregon USA