Portland General Electric Co (POR)

Environmental Matters

PGE operates in a state that is recognized for its environmental leadership and awareness. Accordingly, the Company’s policy of environmental stewardship seeks to minimize risk and waste in its operations and promote the efficient use of energy.

PGE’s operations are subject to a wide range of environmental protection laws, including those related to air and water quality, noise, waste disposal, endangered species, and climate change. The U.S. Environmental Protection Agency (EPA) and certain state agencies, including the Oregon Environmental Quality Commission (OEQC), the Oregon Department of Environmental Quality (DEQ), the Oregon Department of Energy, and the EFSC, have direct jurisdiction over environmental matters that include the siting and operation of generation and transmission facilities and the accumulation, cleanup, and disposal of toxic and hazardous substances. In addition, the Company’s hydroelectric facilities are regulated and licensed by the FERC and are, in some cases, located on property under the jurisdiction of the U.S. Forest Service, which has authority over environmental protection in those cases.

Clean Air Standards

Clean Air Act - PGE’s operations, principally its thermal generation plants, are subject to the federal Clean Air Act (CAA). Primary pollutants addressed by the CAA that affect PGE are sulfur dioxide (SO₂), nitrogen oxides, carbon monoxide, and particulate matter. State governments also monitor and administer certain portions of the CAA and must set standards that are at least equal to federal standards. Oregon’s air quality standards currently equal or exceed federal standards.

PGE manages its air emissions by the use of low sulfur fuel, emission controls, emission monitoring, and combustion controls. The SO₂ emissions allowances awarded under the CAA, along with expected future annual allowances, are anticipated to be sufficient to permit the Company to operate its thermal generation plants at forecasted capacity for at least the next several years within the limitations of current SO₂ emission requirements.

Clean Air Mercury Rule - The federal government adopted the Clean Air Mercury Rule in 2005 to regulate mercury air emissions from coal-fired generating plants. That rule was vacated by an appellate court decision in 2008; however, the states in which PGE facilities are located have adopted the following regulations concerning mercury emissions that could have an impact on the Company’s Boardman and Colstrip plants:

Regional Haze - In accordance with federal regional haze rules aimed at visibility impairment in several federally protected areas, the DEQ conducted an assessment of emission sources that has

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indicated that the Boardman generating plant may cause or contribute to visibility impairment in several federally protected areas and would be subject to a Regional Haze Best Available Retrofit Technology (BART) Determination.

In December 2008, the DEQ issued a proposed plan that would require the installation of controls at Boardman in three phases. PGE estimates that the DEQ plan would cost between $575 million and $636 million (100% of total costs, excluding AFDC, in nominal dollars). PGE has no commitments in place at this time and cautions that the cost estimates are preliminary and subject to change.

The comment and public input period for the DEQ proposed plan has closed. PGE commented with an alternative BART/Reasonable Progress proposal that would allow for decision points along the DEQ timeline to provide flexibility to make the most responsible decision on future controls at those points. The OEQC is expected to adopt a rule in April 2009 now that the public process has been completed. The rule will be submitted to the EPA for approval as part of the Oregon Regional Haze State Implementation Plan (SIP). The Company expects the EPA to issue a decision on the SIP in early 2010.

Climate Change

Greenhouse gas emissions and their potential impacts on climate change have recently received increased public attention, with several legislative efforts initiated to establish mandatory control of greenhouse gas emissions. PGE is participating as a stakeholder in the Western Climate Initiative, a regional accord with a stated goal of reducing greenhouse gas emissions to 15% below 2005 levels by the year 2020. The DEQ, also a participant in the regional accord, has issued a notice of advanced rulemaking that would require reporting of greenhouse gas emissions for stationary sources. Any future laws that impose mandatory reductions in greenhouse gas emissions could have a material impact on PGE, as the Company relies on fossil fuels as a resource for power generation. PGE’s Beaver, Coyote Springs, and Port Westward natural gas fired facilities and the Company’s ownership shares of the Boardman and Colstrip coal plants provide nearly 75% of the Company’s net generation capability.

Water Quality and Endangered Species Protection

Populations of many migratory fish species in the Pacific Northwest have declined significantly over the last several decades. Many of these distinct populations have been granted protection under the federal Endangered Species Act (ESA). Long-term recovery plans for these species include major operational changes to the region’s hydroelectric projects. Significant changes thus far include modification in the timing of stored water releases, a spill program to assist juvenile fish at federal dams located in the Columbia River and Snake River basins, and continued investment in fish protection infrastructure (ladders and screens). These changes have resulted in occasional reductions in hydroelectric generation capability and the seasonal shifting of other generation from the fall and winter periods to the spring and summer periods. While PGE does not own facilities on these rivers, the Company does have contracts for power generated at facilities on the mid-Columbia River in central Washington and may be adversely affected by such reductions and seasonal shifting at those facilities. The timing of stored water releases also has an influence on the availability and prices of power in the regional wholesale market in which PGE participates to acquire adequate power to serve its retail customers.

PGE is implementing a series of fish protection measures at its hydro generation facilities on the Clackamas, Deschutes, and Willamette rivers that were prescribed by the U.S. Fish and Wildlife

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Service and the National Marine Fisheries Service under their authority granted in the ESA and are contained in the Company’s FERC operating licenses.

In accordance with a 2002 agreement with state and federal agencies, environmental groups, and others, PGE is proceeding with decommissioning the Company’s 22 MW Bull Run hydroelectric project, which included the Marmot and Little Sandy dams, located in the Sandy River basin. During 2008, the project ceased generation, as planned. Decommissioning and removal of project facilities continues in accordance with a FERC Surrender Order issued in 2004.

Hazardous Waste

PGE has a comprehensive program to comply with requirements of both federal and state regulations related to hazardous waste storage, handling and disposal. The handling and disposal of hazardous waste from PGE facilities is subject to regulation under the federal Resource Conservation and Recovery Act. In addition, the use, disposal, and clean-up of polychlorinated biphenyls, contained in certain electrical equipment, is regulated by the federal Toxic Substances Control Act.

PGE is also subject to regulation under the Comprehensive Environmental Response Compensation and Liability Act (CERCLA), referred to as Superfund. CERCLA can assert joint and several liability for investigation and remediation costs for designated Superfund sites. PGE is currently listed by the EPA as a Potentially Responsible Party (PRP) at two Superfund sites discussed below.

Under the Nuclear Waste Policy Act of 1982, the U.S. Department of Energy (USDOE) is responsible for the permanent storage and disposal of spent nuclear fuel. PGE has contracted with the USDOE for permanent disposal of spent nuclear fuel for Trojan. Trojan spent nuclear fuel is stored in the Independent Spent Fuel Storage Installation (ISFSI), an NRC-licensed interim dry storage facility that houses the fuel at the plant site until the permanent off-site storage is available. No federal repository is expected to be available until 2020. Shipment of the spent nuclear fuel stored in the ISFSI to the off-site storage is not expected to be completed prior to 2033.

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EPA Actions

Portland Harbor - A 1997 investigation by the EPA of a segment of the Willamette River, known as the Portland Harbor revealed significant contamination of river sediments. The EPA subsequently included the Portland Harbor on the federal National Priority List pursuant to CERCLA and listed sixty-nine PRPs, including PGE.

The Portland Harbor is currently undergoing a remedial investigation and feasibility study (RI/FS) pursuant to an Administrative Order on Consent (AOC) between the EPA and several PRPs, not including PGE. In the AOC, the EPA determined that the RI/FS would focus on a segment of the river approximately 5.7 miles in length.

In January 2008, PGE received a request from the EPA requiring the Company to provide information concerning its properties in or near the area being examined in the RI/FS, as well as several miles beyond that 5.7 mile segment. PGE requested, and the EPA has granted, an extension to August 2009 to respond. The boundaries of the site will be determined at the conclusion of the RI/FS in a Record of Decision, expected in 2010, in which the EPA will document its findings and select a preferred cleanup alternative.

Harbor Oil - In 2005, PGE received a Special Notice Letter for Remedial Investigation/Feasibility Study from the EPA, in which the Company was named as one of fourteen PRPs with respect to the Harbor Oil site, located in north Portland. The site includes the location of a company, Harbor Oil, Inc., that PGE utilized to process used oil from power plants and electrical distribution systems until 2003. The Harbor Oil facility continues to be utilized by other entities for the processing of used oil and other lubricants. The EPA has approved an RI/FS work plan for the site and on-site sampling commenced in 2008.

For further information on EPA actions, see “Environmental Matters” in Note 18, Contingencies, in the Notes to Consolidated Financial Statements.

Certain risks and uncertainties that may affect PGE’s business, financial condition, results of operation or cash flows, or that may cause the Company’s actual results to vary from the forward-looking statements contained in this Annual Report on Form 10-K, include those set forth below.

Environmental Matters

Portland Harbor

Since 1973, PGE has operated a substation on land owned by the Company located near the Willamette River. A 1997 investigation by the U.S. Environmental
Protection Agency (EPA) of a segment of the river known as the Portland Harbor revealed significant contamination of river sediments. The EPA subsequently included this segment on the federal National Priority List pursuant to the federal
Comprehensive Environmental Response, Compensation, and Liability Act as a federal Superfund site and listed sixty-nine Potentially Responsible Parties (PRPs), including PGE.

FACE="Times New Roman" SIZE="2">The Portland Harbor site is currently undergoing a remedial investigation and feasibility study (RI/FS) pursuant to an Administrative Order on Consent (AOC) between the EPA and several PRPs, not including PGE. In the
AOC, the EPA determined that the RI/FS would focus on a segment of the river approximately 5.7 miles in length.

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On January 22, 2008, PGE received a Section 104(e) Information Request from the EPA requiring the
Company to provide information concerning its properties in or near the segment of the river being examined in the RI/FS, as well as several miles beyond that 5.7 mile segment. PGE has requested, and the EPA granted, an extension until August 2009
for the Company to respond.

The EPA will determine the boundaries of the site at the conclusion of the RI/FS in a Record of Decision, expected in
2010. The EPA will document its findings in the Record of Decision and select a preferred cleanup alternative.

Sufficient information is currently not
available to determine the total cost of any required investigation or remediation of the Portland Harbor site or the liability of PRPs, including PGE. Management cannot predict the ultimate outcome of this matter. Management believes that the
outcome will not have a material adverse impact on the financial condition of the Company, but may have a material adverse impact on PGE’s results of operation and cash flows in future reporting periods.

Environmental Matters

FACE="Times New Roman" SIZE="2">PGE operates in a state recognized for environmental leadership. The Company’s policy of environmental stewardship seeks to minimize environmental risk and waste in its operations and promote the efficient use of
energy.

PGE’s operations are subject to a wide range of environmental protection laws, including those related to air and water quality, noise, and
waste disposal. The EPA and certain state agencies, including the Oregon Environmental Quality Commission (OEQC), the Oregon Department of Environmental Quality (DEQ), the Oregon Department of Energy, and the EFSC, have direct jurisdiction over
environmental matters that include the siting and operation of generating facilities and the accumulation, cleanup, and disposal of toxic and hazardous wastes.

SIZE="3">Climate Change

Greenhouse gas emissions and their potential impacts on climate change and global warming have recently received
increased public attention, with several legislative efforts initiated to establish mandatory control of emissions from thermal electricity generating plants. PGE is participating as a stakeholder in the Western Climate Initiative, a regional accord
with a stated goal of reducing greenhouse gas emissions to 15% below 2005 levels by the year 2020. Any future laws that impose mandatory reductions in carbon dioxide emissions could have a material impact on electric utilities that rely on coal as a
fuel resource. PGE’s ownership shares of the Boardman and Colstrip coal plants comprise approximately one-fourth of the Company’s net generation capability.

FACE="Times New Roman" SIZE="3">Renewable Energy Standards

Renewable Energy Standards adopted by the 2007 Oregon legislature require that PGE
and other large electricity providers serve at least 5% of their retail load within the state from renewable resources by the year 2011, increasing to 25% by 2025. Additional interim steps in the standard include meeting 15% of retail load by 2015
and 20% by 2020. Biglow Canyon, which is expected to have a total installed capacity of 400 to 450 MW when all three phases are completed by the end of 2010, represents a significant step toward the Company’s achievement of these goals.

Environmental Matters

Harborton - Since 1973, PGE has operated the Harborton Substation on land owned by the Company located near the Willamette River. A 1997 investigation by the Environmental Protection Agency (EPA) of a 5.5 mile segment of the river, known as the Portland Harbor, revealed significant contamination of sediments within the harbor. The EPA subsequently included the Portland Harbor on the federal National Priority List pursuant to the federal Comprehensive Environmental Response, Compensation, and Liability Act (Superfund).

In December 2000, PGE received from the EPA a “Notice of Potential Liability” regarding the Harborton Substation facility. The notice listed sixty-eight companies in addition to PGE that the EPA believes may be Potentially Responsible Parties (PRPs) with respect to the Portland Harbor Superfund Site.

In February 2002, PGE provided a report on its remedial investigation of the Harborton Substation site to the Oregon Department of Environmental Quality (DEQ). The report concluded that there is no likely present or past source or pathway for release of hazardous substances to surface water or sediments in the Portland Harbor Superfund Site at or from the site and that the site does not present a high priority threat to present and future public health, safety, welfare, or the environment. The DEQ submitted the report to the EPA and, in a May 18, 2004 letter, the EPA notified the DEQ that, based on the summary information from the DEQ and the stage of the process, the EPA, as of that time, agreed that the Harborton Substation site does not appear to be a current source of contamination to the river.

In a December 6, 2005 letter, the DEQ notified PGE that the site is not likely a current source of contamination to the river and that the site is a low priority for further action.

On January 22, 2008, PGE received a Section 104e Information Request from the EPA requiring the Company to provide information concerning its properties in or near the Portland Harbor Superfund Site as well as several miles beyond the initial 5.5 mile segment of the river. PGE’s response is due May 16, 2008.

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Sufficient information is currently not available to determine the total cost of any required investigation or remediation of the Portland Harbor or the liability of PRPs, including PGE. Management cannot predict the ultimate outcome of this matter. However, it believes this matter will not have a material adverse impact on the Company’s financial condition, results of operations or cash flows.

Harbor Oil - Harbor Oil, Inc. (Harbor Oil), located in north Portland, was utilized by PGE to process used oil from the Company’s power plants and electrical distribution system from at least 1990 until 2003. Harbor Oil is also utilized by other entities for the processing of used oil and other lubricants.

In 1974 and 1979, major oil spills occurred at the Harbor Oil site that impacted an approximate two acre area. Elevated levels of contaminants, including metals, pesticides, and polychlorinated biphenyls (PCBs), have been detected at the site. On September 29, 2003, Harbor Oil was included on the federal National Priority List as a federal Superfund site.

PGE received a Special Notice Letter for Remedial Investigation/Feasibility Study (RI/FS) from the EPA, dated June 27, 2005, in which the Company was named as one of fourteen PRPs with respect to the Harbor Oil site. The letter started a period for the PRPs to participate in negotiations with the EPA to reach a settlement to conduct or finance an RI/FS of the Harbor Oil site. On May 31, 2007, an Administrative Order on Compliance was signed by the EPA and six other parties, including PGE, to implement an RI/FS at the Harbor Oil site. The final revised work plan for the RI/FS has been submitted to the EPA. Site access agreements are being negotiated with surrounding properties and the site operator. On-site sampling is expected to begin in the first quarter of 2008.

Sufficient information is currently not available to determine the total cost of investigation and remediation of the Harbor Oil site or the liability of the PRPs, including PGE. Management cannot predict the ultimate outcome of this matter. However, it believes this matter will not have a material adverse impact on the Company’s financial condition, results of operations or cash flows.