20250131Direct R. Adelman.pdf

RECEIVED
Friday, January 31, 2025
IDAHO PUBLIC
UTILITIES COMMISSION
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF IDAHO POWER )
COMPANY' S APPLICATION FOR ) CASE NO. IPC-E-25-03
APPROVAL OF THE NORTH VALMY POWER )
PLANT NATURAL GAS CONVERSION )
AGREEMENT WITH NV ENERGY. )
IDAHO POWER COMPANY
DIRECT TESTIMONY
OF
RYAN N. ADELMAN

1 Q. Please state your name and business address .
2 A. My name is Ryan Adelman. My business address
3 is 1221 West Idaho Street, Boise, Idaho 83702 .
4 Q. By whom are you employed and in what capacity?
5 A. I am employed by Idaho Power Company ("Idaho
6 Power" or "Company") as the Vice President of Power Supply.
7 Q. Please describe your educational background.
8 A. I graduated in 1996 from the University of
9 Idaho, Moscow, Idaho, receiving a Bachelor of Science
10 Degree in Civil Engineering. I am a registered
11 professional engineer in the state of Idaho. In 2018, I
12 earned a Master of Business Administration through Boise
13 State University' s Executive MBA program. In 2019, I
14 completed the Energy Executive Course through the
15 University of Idaho .
16 Q. Please describe your work experience with
17 Idaho Power.
18 A. From 2004 to 2008, I was employed by Idaho
19 Power as an engineer in Power Production' s Civil
20 Engineering Group. In 2008, I became an Engineering
21 Leader, initially responsible for the Langley Gulch power
22 plant project and later the Power Production Civil
23 Engineering Department. In 2015 I was promoted to Senior
24 Manager of the Projects Department where I managed the
25 Project Management and Cost and Controls group. In 2018, I
ADELMAN, DI 1
Idaho Power Company

I led the Company' s Southeast Idaho area as a Regional
2 Manager. In 2019, I was promoted to Vice President of
3 Transmission and Distribution Engineering and Construction,
4 later renamed to Planning, Engineering and Construction. In
5 2020, I transitioned to my current position, Vice President
6 of Power Supply, where my responsibilities include
7 oversight of Idaho Power' s generation assets, jointly-owned
8 generation assets, load serving operations, merchant
9 activities, and other operational functions of generation
10 resources and support .
11 Q. What is Idaho Power' s request in this case?
12 A. The Company is requesting the Idaho Public
13 Utilities Commission ("Commission") issue an order
14 approving the Natural Gas Conversion Agreement ("Conversion
15 Agreement") between Sierra Pacific Power Company d/b/a NV
16 Energy ("NV Energy") and Idaho Power associated with the
17 North Valmy Power Plant ("Valmy") . The conversion of both
18 Valmy units from coal-fired operations to natural gas
19 operations is necessary for the Company to continue to
20 provide safe, reliable electric service in 2026 and beyond.
21 Q. What is the purpose of your testimony in this
22 proceeding?
23 A. The purpose of my testimony is to present the
24 outcome of successful negotiations between Idaho Power and
25 NV Energy that resulted in the Conversion Agreement,
ADELMAN, DI 2
Idaho Power Company

1 describing the provisions that will allow for conversion of
2 Valmy to natural gas operations . I will discuss how those
3 provisions clarify the respective rights and obligations of
4 Idaho Power and NV Energy with respect to the continued
5 operation, retirement, and decommissioning of the Valmy
6 plant following conversion in 2026, ensuring the plant
7 continues to be available for reliable load service beyond
8 2025 .
9 Q. Have you prepared any exhibits?
10 A. Yes . Exhibit No. 1 is the Agreement for the
11 Ownership of the North Valmy Power Plant Project
12 ("Ownership Agreement") . Exhibit No. 2 is the Agreement for
13 the Operation of the North Valmy Power Plant Project
14 ("Operation Agreement") , both of which are dated December
15 12, 1978 . Exhibit No. 3 is the North Valmy Station
16 Operating Procedures Criteria, dated as of February 11,
17 1993, between Idaho Power Company and Sierra Pacific Power
18 Company, as amended by Amendment No. 1 to the Operating
19 Procedure Criteria for Valmy Coal Diversion Procedures and
20 Usage, dated as of January 1, 2012 ("Operating Procedures
21 Criteria") . Confidential Exhibit No . 4 is the North Valmy
22 Project Framework Agreement between NV Energy and Idaho
23 Power dated as of February 22, 2019, ("Framework
24 Agreement") . Exhibit No. 5 is the Conversion Agreement.
25
ADELMAN, DI 3
Idaho Power Company

1 I . THE VALMY PLANT
2 Q. Please describe the Valmy plant .
3 A. Valmy is a coal-fired power plant that
4 consists of two units and is located near Winnemucca,
5 Nevada. Unit 1 went into service in 1981 and Unit 2
6 followed in 1985 . Idaho Power owns 50 percent of Valmy. NV
7 Energy is the co-owner of the plant with the remaining 50
8 percent ownership and operates the Valmy facility. Idaho
9 Power and NV Energy (collectively, the "Co-Owners") work
10 jointly to make decisions regarding Valmy. The Company
11 exited coal-fired operations of Unit 1 on December 31,
12 2019, as accepted by the Commission in Order No. 33983 as
13 part of Idaho Power' s 2017 Integrated Resource Plan
14 ("IRP") . The Preferred Portfolio identified in the 2021
15 IRP, filed in Case No . IPC-E-21-43, concluded an exit from
16 Valmy Unit 2 in 2025 provides a more favorable economic
17 outcome when compared to an earlier exit. Then, as
18 explained in the Direct Testimony of Mr. Ellsworth, the
19 2023 IRP Preferred Portfolio included the conversion of
20 Valmy Units 1 and 2 from coal to natural gas operations by
21 summer 2026, indicating the conversion is the least-cost,
22 least-risk option necessary to continue providing reliable,
23 economic service to customers into the future.
24 Q. What are the current agreements under which
25 the Co-Owners own and operate Valmy?
ADELMAN, DI 4
Idaho Power Company

1 A. The ownership and operation of Valmy is
2 governed by three agreements : the Ownership Agreement, the
3 Operation Agreement, and the Operating Procedures Criteria.
4 Additionally, the Co-Owners entered into the Framework
5 Agreement memorializing the terms and conditions under
6 which either partner may exit participation of Valmy.
7 A fourth agreement, the Framework Agreement,
8 provided the contractual mechanism by which the Company met
9 its obligations pursuant to Order No. 33771 in Case No.
10 IPC-E-16-24 in which Idaho Power agreed to use prudent and
11 commercially reasonable efforts to reach an agreement with
12 NV Energy to provide for the cessation of Idaho Power' s
13 coal-fired operations, or participation thereof, at Valmy
14 (collectively, the "Existing Valmy Agreements") .
15 II . THE VALMY CONVERSION AGREEMENT
16 Q. Do the Existing Valmy Agreements offer the
17 Company the ability to continue participation in plant
18 operations after 2025?
19 A. No . The terms of the Framework Agreement
20 were designed to consider Idaho Power' s commitment in Case
21 No . IPC-E-16-24 which provided for the cessation of the
22 Company' s participation in Valmy coal-fired operations .
23 Therefore, Article 4 . 4 of the Framework Agreement indicates
24 that if NV Energy continues to operate either unit after
25 December 31, 2025, Idaho Power' s ownership interests in the
ADELMAN, DI 5
Idaho Power Company

1 Valmy plant would be terminated by the conveyance to NV
2 Energy via an asset purchase agreement, releasing the
3 Company of liability for future claims with respect to the
4 Valmy plant .
5 Following NV Energy' s approval by the Public
6 Utilities Commission of Nevada to move forward with
7 cessation of coal-fired operations of Valmy and transition
8 to a natural gas plant by the end of 2025, and the
9 Commission' s acknowledgement of Idaho Power' s 2023 IRP
10 Preferred Portfolio which also showed economic benefits of
11 a conversion in 2026, the Co-Owners collaborated to develop
12 the terms for the gas conversion that would allow for the
13 Company' s continued participation in Valmy operations,
14 memorialized in the Conversion Agreement.
15 Q. If approved, will the Conversion Agreement
16 replace the Existing Valmy Agreements?
17 A. No. The Ownership Agreement, the Operation
18 Agreement and the Framework Agreement all required
19 revisions to allow for the conversion to, and operation of,
20 a natural gas plant . The Conversion Agreement was developed
21 to include the terms that would serve to replace or revise
22 the necessary provisions of the Existing Valmy Agreements .
23 Q. What provisions of the Conversion Agreement
24 amend those of the Ownership Agreement?
25 A. The Ownership Agreement, included as Exhibit
ADELMAN, DI 6
Idaho Power Company

1 No . 1 to my testimony, sets forth Idaho Power' s ownership
2 rights and interests in the Valmy plant. While not
3 inclusive of all provisions, the revisions necessary
4 include a global replacement of the terms coal or coal-
5 fired with natural gas or gas-fired.
6 In addition, the Conversion Agreement provides the
7 terms to amend the definition of Project in Section 1 . 5 of
8 the Ownership Agreement to incorporate both the Unit 1
9 Conversion Project and the Unit 2 Conversion Project, the
10 conversion of each unit from coal to natural gas
11 operations . Also, the definitions in Section 1 . 8 of the
12 Ownership Agreement, are revised to include the Units 1 and
13 2 Conversions Project including a description of each unit,
14 nameplate capacity, and all related equipment owned by the
15 Parties and solely associated with each unit.
16 Finally, the Conversion Agreement identifies two
17 sections of the Ownership Agreement that are to be deleted
18 in their entirety, Sections 3 and 16, as they both would no
19 longer be applicable.
20 Q. Please describe the revisions necessary to the
21 Operation Agreement as outlined in the Conversion
22 Agreement .
23 A. The Operation Agreement assigns NV Energy as
24 the operator of the Valmy plant while also setting forth
25 operating decision procedures, operating expense payments,
ADELMAN, DI 7
Idaho Power Company

1 and the annual budgeting process, among other terms and
2 conditions . Similar to the Ownership Agreement, the
3 Conversion Agreement includes revisions to the Operation
4 Agreement that provide for the global replacement of
5 references to coal, coal-fired, oil, fuel oil, and related
6 terms to be deleted and replaced with natural gas, gas-
7 fired, and similar terms, as well as incorporation into
8 Section 1 . 7 of the Operation Agreement the Unit 1
9 Conversion Project and Unit 2 Conversion Project
10 descriptions, and the detailed description of each Unit as
11 part of the Section 1 . 11 definitions .
12 While not inclusive of all terms, the Conversion
13 Agreement outlines revisions to Section 3 . 3 of the
14 Operation Agreement to provide that NV Energy as the
15 operator shall keep the Operating Committee, which includes
16 as a member Idaho Power, fully informed regarding the
17 development, construction, and testing of the conversion
18 project, providing the Company an accounting of monthly
19 expenses related to the conversion project.' Section 4 . 1 of
20 the Operation Agreement is revised to provide that
21 operating expenses incurred as a result of natural gas
22 operations are treated in the same manner as current
23 operating expenses incurred as a result from coal-fired
24 operations . Finally, Article 8 of the Operation Agreement
1 Revision to Article 7 of the Operation Agreement.
ADELMAN, DI 8
Idaho Power Company

1 is deleted in its entirety as it is specific to fuel costs
2 associated with coal .
3 Q. You indicated deletion of sections in both the
4 Ownership Agreement and the Operation Agreement that are
5 associated with coal . Will those sections require
6 replacement with provisions related to natural gas as the
7 fuel source?
8 A. No. However, the Conversion Agreement also
9 sets forth a framework for the negotiation of further
10 agreements between the Parties, which I will discuss in
11 more detail later in my testimony, one of which relates to
12 natural gas supply matters . Idaho Power is currently in
13 negotiations for natural gas contracts and is moving
14 forward toward execution of those agreements; therefore,
15 the fuel source supply will no longer be contained in the
16 Ownership Agreement and Operation Agreement. Although the
17 natural gas contracts have not been executed, the most
18 recent estimate of costs were modeled as part of the Valmy
19 analysis discussed by Mr. Ellsworth in his testimony.
20 Q. What provisions of the Conversion Agreement
21 amend those of the Framework Agreement?
22 A. There are only two provisions that required
23 amendments to the Framework Agreement: (1) the deletion of
24 Article IV, and (2) revision to Article VI . Article IV is
25 specific to the election to retire or continue to operate
ADELMAN, DI 9
Idaho Power Company

1 the units after 2025, a decommissioning study and
2 associated decommissioning fee, and a final exit fee.
3 Because the provisions are specific to operation of the
4 plant with only one party, they will no longer be
5 applicable with both Parties participating in natural gas
6 operations of Valmy. The amendment to Article VI provides
7 for a 50 percent responsibility of all costs associated
8 with the decommissioning, demolition and closure activities
9 associated with the retirement of coal facilities .
10 Q. Are there any other provisions of the
11 Conversion Agreement you would like to discuss?
12 A. Yes . In addition to the provisions that would
13 revise the Existing Valmy Agreements, the Conversion
14 Agreement includes additional terms including conditions
15 associated with: (1) the reimbursement of past costs for
16 Unit 1, (2) operation and maintenance cost sharing, and (3)
17 future agreements .
18 Q. What is the basis for the provision associated
19 with past costs for Unit 1 included in the Conversion
20 Agreement?
21 A. As explained earlier in my testimony, the
22 Company exited participation in coal-fired operations of
23 Unit 1 on December 31, 2019 . NV Energy however, continued
24 operations of Unit 1 upon Idaho Power' s exit, using their
25 127 MW ownership share of the output of the unit. Since
ADELMAN, DI 10
Idaho Power Company

1 then, Unit 1, the common facilities that support Unit 1,
2 and the materials and supplies necessary for Unit 1, have
3 all required capital additions necessary to maintain the
4 continued safe, reliable operation of the unit. Because the
5 Company will again participate in operations of Unit 1
6 beginning 2026, under Section 6 of the Conversion
7 Agreement, Idaho Power is responsible for 50 percent of the
8 remaining value of the investments that continue past 2025
9 that benefit gas operations for those capital additions
10 made beginning January 1, 2020, through December 31, 2025 .
11 Q. What is Idaho Power' s share of the capital
12 investments associated with Unit 1 since December 31, 2019?
13 A. The value of the past costs associated with
14 investments made in Unit 1, the common facilities that
15 support Unit 1, and the materials and supplies necessary
16 for Unit 1, commencing in 2020 has not yet been finalized
17 as operation of the unit absent the Company' s participation
18 will continue through December 31, 2025 . Idaho Power
19 estimates the Company' s share of the past costs to be
20 approximately $1 . 8 million . The estimate of the past costs
21 associated with Unit 1 were modeled as part of the most
22 recent Valmy analysis discussed by Company witness Mr.
23 Ellsworth.
24 Q. What provisions does the Conversion Agreement
25 contain specific to the operation and maintenance cost
ADELMAN, DI 11
Idaho Power Company

1 sharing?
2 A. Because the Framework Agreement did not
3 envision Idaho Power' s participation in the Valmy plant
4 after 2025, the operation and maintenance cost sharing
5 provisions of the Conversion Agreement are primarily
6 related to the cost responsibilities of each Co-Owner
7 following cessation of coal-fired operations . These terms
8 include the Company' s responsibility for the Unit 1 exit
9 fee through 2025, revocation of Idaho Power' s Unit 1 exit
10 notice, cost responsibilities of Unit 2 following cessation
11 of coal-fired operations equivalent to each party' s
12 ownership share, and the terms under which a Co-Owner may
13 exit participation if coal-fired operations do not cease as
14 planned on December 31, 2025 .
15 Q. You indicated the Conversion Agreement
16 includes terms associated with future agreements . What
17 additional agreements are envisioned?
18 A. The Conversion Agreement acknowledges that in
19 connection with transactions contemplated in the agreement,
20 there are some additional agreements that will need to be
21 negotiated in the future following conversion to natural
22 gas operations . While not inclusive of all additional
23 agreements, revisions to the Operating Procedures Criteria
24 will be required to update the references to coal or coal-
25 fired, and similar terms, and to include the provisions
ADELMAN, DI 12
Idaho Power Company

1 associated with the conversion of both units . The Operating
2 Procedures Criteria will also need to be updated, or a
3 separate agreement executed, to outline operations,
4 scheduling and related budgeting and plant accounting
5 guidelines, and requirements for the conversion. Also, as
6 indicated earlier in my testimony, the agreement (s) for
7 natural gas fuel transportation will need to be executed.
8 Q. Is the Conversion Agreement contingent on
9 Commission approval?
10 A. Yes . As described in Section 3, the effective
11 date of the Conversion Agreement will not occur until all
12 required governmental approvals and required consents have
13 been received, which, for Idaho Power, includes approval by
14 the Commission. In accordance with Schedule 1 of the
15 Conversion Agreement, and subsequently in Docket No. 23-
16 08015, NV Energy is concurrently notifying the Public
17 Utilities Commission of Nevada of the Company' s request for
18 approval of the agreement in this case.
19 III . CONCLUSION
20 Q. Please summarize your testimony.
21 A. Because the terms of the Framework Agreement
22 were designed to consider Idaho Power' s commitment in Case
23 No . IPC-E-16-24, providing for the cessation of the
24 Company' s participation in Valmy operations by 2025, the
25 Conversion Agreement is necessary for participation in
ADELMAN, DI 13
Idaho Power Company

1 natural gas operations at the plant beginning January 1,
2 2026 . The Conversion Agreement was the result of successful
3 negotiations between the Company and NV Energy, providing
4 the provisions that will allow for the conversion of Valmy
5 to natural gas operations, and Idaho Power' s participation
6 in the continued operation, retirement, and decommissioning
7 of the plant following conversion in 2026, ensuring the
8 plant continues to be available for reliable load service
9 beyond 2025 .
10 Q. Does this conclude your testimony?
11 A. Yes .
12
ADELMAN, DI 14
Idaho Power Company

1 DECLARATION OF RYAN N. ADELMAN
2 I, Ryan N. Adelman, declare under penalty of perjury
3 under the laws of the state of Idaho:
4 1 . My name is Ryan N. Adelman. I am employed
5 by Idaho Power Company as the Vice President of Power
6 Supply.
7 2 . On behalf of Idaho Power, I present this
8 pre-filed direct testimony and Exhibit Nos . 1 through 3,
9 Confidential Exhibit No . 4, and Exhibit No. 5 in this
10 matter.
11 3 . To the best of my knowledge, my pre-filed
12 direct testimony and exhibits are true and accurate.
13 I hereby declare that the above statement is true to
14 the best of my knowledge and belief, and that I understand
15 it is made for use as evidence before the Idaho Public
16 Utilities Commission and is subject to penalty for perjury.
17 SIGNED this 31st day of January 2025, at Boise,
18 Idaho .
19
20 Signed.
21 Ryan N. Adelman
22
ADELMAN, DI 15
Idaho Power Company

BEFORE THE
IDAHO PUBLIC UTILITIES COMMISSION
CASE NO. IPC-E-25-03
IDAHO POWER COMPANY
ADELMAN, DI
TESTIMONY
EXHIBIT NO. 1

AGREEMENT FOR THE OWNERSHIP OF THE
NORTH VALMY POWER PLANT PROJECT-
2
3 THIS AGREEMENT, made this 1ZIV day of [)�Cenubec 1978, between
4 SIERRA PACIFIC POWER COMPANY (hereinafter referred to as "Sierra Pacific") ,
5 a public utility corporation duly organized and existing according to
6 the laws of the State of Nevada, and IDAHO POWER COMPANY (hereinafter
7 referred to as "Idaho") , a public utility corporation duly organized and
8 existing according to the laws of the State of Maine, and duly qualified
9 and doing business in the State of Nevada.
10 WITNESSETH:
11 WHEREAS, Sierra Pacific is an investor-owned electric utility
12 company subject to the regulation of the Public Service Commission of
the State of Nevada, the Public Utilities Commission of the State of
--�=: 14 California, and the Federal Energy Regulatory Commission; and
15 WHEREAS, Idaho is an investor-owned electric utility subject to the
16 regulatory jurisdiction of the Public Utility Commissioner of Oregon,
17 the Idaho Public Utilities Commission, Public Service Commission of
18 Wyoming, the Public Service Commission of Nevada, and the Federal Energy
19 Regulatory Commission; and
20 WHEREAS, Sierra Pacific has applied for and has been granted
21 permission by the Public Service Commission of the State of Nevada, in
22 Docket No. 732$ to build a 250 MW cowl-fired plant and common facilities
23 for the generation of electricity near Valmy, Humboldt County, Nevada,
24 and Sierra Pacific contemplates future construction of additional coal-
25 fired facilities; and
6 WHEREAS, these coal-fired facilities are to be built at Valmy,
Exhibit No. 1
Case No. IPC-E-25-03
R.Adelman, IPC
Page 1 of 23

Humboldt County, Nevada, and are known as the North Valmy Power Plant
2 Project; and
3 WHEREAS, Sierra Pacific is completing the plans for the construction
4 - of Unit No. 1, North Valmy Power Plant Project; and
5 WHEREAS, Sierra Pacific has and continues to obtain in its name
6 rights to water necessary for the North Valmy Power Plant Project from
7 others and permits from appropriate regulatory agencies (State Engineer
8 of the State of Nevada) to be owned by Sierra Pacific for the benefit of
9 the parties; and
10 WHEREAS, Sierra Pacific has a contract for a suitable coal supply
11 for Unit No. 1 and will seek other sources of coal for any additional
12 Units; and
3 WHEREAS, Idaho has access to purchased and owned coal, which could
14 be used by the Project, the parties have agreed to investigate the usage
15 of the same; and
16 WHEREAS, Idaho is interested in the development of the North Valmy
17 Power Plant Project and in acquiring an ownership interest in the project
18 on a 50-50 basis and has shared in Sierra Pacific's expense incurred in the
19 study and investigation of additional water sources for the project; and
20 WHEREAS, the parties have examined their respective electric load
21 and resource requirements and because of the load diversity between
22 their systems, the contemplated project promises to be beneficial to the
2 3 electric consumers of each of the parties.
24 NOW, THEREFORE, the parties covenant and agree as follows:
25 1. DEFINITIONS: The following terms when used herein shall have
the following meaning:
Exhibit No. 1
2• Case No. IPC-E-25-03
R.Adelman, IPC
Page 2 of 23

L 1.1 Common Facilities: Common Facilities means all facilities,
2 other than the facilities included in each Unit, which will serve and be
3 required in connection with the operation and maintenance of more than
4- one Unit, including, without limitation, water supply system, coal
5 supply system, related transmission substation facilities, access roads,
6 railroads, engineering and legal fees and expenses, rights-of-way, and
7 all lands or interests in land included in the Project as reflected in
8 the attached Exhibit "A".
9 1.2 Completion: Completion is the date when the Operating
10 Committee certifies that a Unit has been adequately tested and is
11 accepted for commercial operation.
12 1.3 Design-Construction Committee: Design-Construction
3 Committee is defined and established in the Construction Agreement.
14 1.4 Operating Committee: Operating Committee is defined and
15 established in the Operating Agreement.
16 1.5 Project: Project is the North Valmy Power Plant
17 Project, located north of Valmy, Humboldt County, Nevada, which will
18 consist of one or more coal-fired Units, each of approximately 250
19 megawatts, auxiliary equipment, common facilities and necessary water
20 rights.
21 1.6 Project Agreement: The following agreements constitute
22 the Project Agreement and shall be construed together.
23 (a) Agreement for the Ownership of the North Valmy Power
24 Plant Project (Ownership Agreement) ;
25 (b) Agreement for the Construction of the North Valmy
S Power Plant Project (Construction Agreement) .
z
Exhibit No. 1
Case No. IPC-E-25-03
R.Adelman, IPC
Page 3 of 23

(c) Agreement for the Operation of the North Valmy
2 Power Plant Project (Operating Agreement) ;
3 _ 1.7 Prudent Utility Practice: Prudent Utility Practice
4 means any of the practices, methods and acts engaged in or approved by a
5 significant proportion of the electrical utility industry prior to the
6 time of the reference, or any of the practices, methods and acts which,
7 in the exercise of reasonable judgment in light of the facts known at
8 the time the decision was made, could have been expected to accomplish
9 the desired result at the lowest reasonable cost consistent with relia-
10 bility, safety and expedition. Prudent Utility Practice shall apply not
11 only to functional parts of the Project but also to appropriate structures,
12 landscaping, painting, signs, lighting and other facilities and public
relations programs reasonably designed to promote public enjoyment,
-�- 14 understanding and acceptance of the Project. Prudent Utility Practice
15 is not intended to be limited to the optimum practice, method or act to
16 the exclusion of all others, but rather to be a range of accepted practices,
17 methods or acts.
18 1.8 Unit: Unit means a complete 250 megawatt generating
19 plant, including boiler, turbine generator, that part of coal preparation
20 and supply system, that part of the switchyard, and all auxiliaries,
21 accessories and controls, readily identified with and solely associated
22 with the Unit as reflected in attached Exhibit "A".
23 2. Ownership Rights and Interests:
24 2.1 Except as otherwise provided in this Agreement, the
25 parties will own the Project as tenants in common with Idaho owning a
6 50% undivided interest and Sierra Pacific owning a 50% undivided interest.
Exhibit No. 1
4. Case No. IPC-E-25-03
R.Adelman, IPC
Page 4 of 23

Such percentages are hereinafter referred to as the parties' "Percentage
2 Share".
3 _ 2.2 In order to effectuate the ownership as tenants in common
4 in the respective percentages set out in- Section 2.1, the parties will,
5 within a reasonable time, execute and cause to be recorded any instruments
6 of title required in order to establish the respective ownership interests
7 of the parties in and to the Project.
8 2.3 In order to transmit the electricity generated from the
9 North Valmy Power Plant Project it will be necessary to construct
10 electric transmission lines and utilize existing transmission lines, and
11 separate agreements will be made between the parties covering the respective
12 ownership, use, operation and maintenance thereof.
3 3. Coal: Sierra Pacific has a firm supply of coal from a Utah
= 14 source for the first Unit of the Project. Idaho has a source of coal
15 supply which can be made available for the Project in the event the
16 parties determine that the use of the Idaho coal will better serve the
17 interests of the parties and of the said Project.
18 4. Insurance: The parties agree that Sierra Pacific shall
19 maintain in force, for the benefit of Sierra Pacific and Idaho, as their
20 interest shall appear, all insurance coverages required for the purposes
21 of this project. The appropriate committee (Design-Construction or
22 Operating) shall review the insurance coverage requirements so that
23 there is an agreement as to proper coverage for the project in conformance
24 with Prudent Utility Practice. Sierra Pacific shall keep the appropriate
25 committee informed as to the status of insurance in force, and as long
6 as it does so, Sierra Pacific shall not be liable for any failure to
5. Exhibit No. 1
Case No. IPC-E-25-03
R.Adelman, IPC
Page 5 of 23

insure or for inadequacy of coverage.
2 5. Uncontrollable Forces: Neither Sierra Pacific nor Idaho shall
3 be considered in default in performance of any of the obligations here-
4 under, other than obligations of either party to pay costs and expenses,
5 if failure of performance shall be due to uncontrollable forces. The
6 term "uncontrollable forces" shall mean any cause beyond the control of
7 the party affected and which by the exercise of reasonable diligence the
8 party is unable to avoid and shall include, but not be limited to, an
9 act of God, fire, flood, explosion, strike, sabotage, an act of the
10 public enemy, civil or military authority, including court orders,
11 injunctions, and orders of government agencies with proper jurisdiction
12 prohibiting acts necessary to performance hereunder or permitting any
3 such act subject to unreasonable conditions, insurrection or riot, an
�. 14 act of the elements, failure of equipment, or inability to obtain or
15 ship materials or equipment because of the effect of similar causes on
16 suppliers or carriers. Nothing contained herein shall be construed so
17 as to require either party to settle on an unreasonable basis any strike
18 or labor dispute in which it may be involved which directly affects the
19 Project. If either Sierra Pacific or Idaho is rendered unable to fulfill
20 any obligation by reason of uncontrollable forces, it shall exercise due
21 diligence to remove such inability with all reasonable dispatch.
22 6. Damage to the Project:
23 6.1 In the event that the Project or any portion thereof
24 suffers damage resulting from causes other than ordinary wear, tear or
25 deterioration to the extent that the estimated cost of repair as agreed
6 by the members of the appropriate Committee (Design-Construction or
6.
Exhibit No. 1
Case No. IPC-E-25-03
R.Adelman, IPC
Page 6 of 23

1 Operating) exceeds the estimated available proceeds, if any, of insurance
2 maintained pursuant to Section 4 by more than $20,000,000, the parties
3 will proceed as follows:
4 6.1.1 If the parties agree to repair the Project or the
5 damaged portion thereof, Sierra Pacific shall promptly submit a revised
6 construction or operating budget and after approval by the appropriate
7 committee (Design-Construction or Operating) , it shall proceed to repair
8 the Project, and each party shall pay its Percentage Share of the cost
9 thereof.
10 6.1.2 If the parties do not agree that the Project or
11 the damaged portion thereof should be repaired, or one party is unable,
12 for financial or other reasons, to participate in said repair, and the
'.3 other party elects to repair, then, the appropriate Committee shall
14 agree upon, or if they cannot so agree within six (6) months from the
15 date of the damage, an arbitrator chosen in accordance with Section 14
16 herein shall determine the estimated value of the Project as and when
17 repaired. Thereafter, the Percentage Share of the party not participating
18 in the repair shall be reduced to the extent determined by the following
19 formula:
20 Pr = Ps [V - (C - I) ]
[ V ]
21
where
22
V = Estimated value of the Project as repaired
23 C = Estimated cost of repair
I = Estimated insurance proceeds
24 Ps= Percentage Share prior to loss
Pr= Reduced Percentage Share
25
'6
Exhibit No. 1
Case No. IPC-E-25-03
R.Adelman, IPC
Page 7 of 23

I At the same time the amount of such reduction of Percentage Share
2 shall be added to the Percentage Share of the party electing to rebuild.
3 6.1.3 If the parties agree that the Project or any
4- portion thereof should be ended, Sierra Pacific shall initiate proceed-
5 ings to dispose of the Project in accordance with Section 7.
6 6.2 If the Project or any portion thereof suffers damage
7 resulting from causes other than ordinary wear, tear or deterioration to
8 the extent that the estimated cost of repair as agreed by the members of
9 the appropriate Committee (Design-Construction or Operating) exceeds the
10 estimated available proceeds of insurance maintained pursuant to Section
11 4 by less than $20,000,000, the Project shall be repaired, rebuilt or
12 restored by the parties so as to restore the Project to substantially
3 the same general character and use that existed prior to the damage.
14 The cost of such reconstruction or repair in excess of the proceeds of
15 insurance shall be paid by the parties in accordance with their respective
16 Percentage Shares.
17 7. End of the Project:
18 7.1 When the Generating Unit(s) can no longer be made capable,
19 consistent with the Prudent Utility Practice, of producing electricity,
20 or cannot be licensed, or when the Project is ended pursuant to Section
21 6.1.3, or when the parties otherwise agree to end the Project, Sierra
22 Pacific shall sell for removal all salable parts of the Project to the
23 highest bidders; provided, however, that the Project real property and
24 water rights shall revert to Sierra Pacific. After deducting all costs
2 5 of termination of the Project, including, without limiting the generality
'.6 of the foregoing, the cost of decommissioning, razing all structures,
Exhibit No. 1
8• Case No. IPC-E-25-03
R.Adelman, IPC
Page 8 of 23

and disposing of the debris and meeting all requirements of Federal,
2 State or local law, Sierra Pacific shall close the appropriate Trust
3 Account (Construction or Operating) and, if there are net proceeds,
4 distribute to each party its Percentage Share of such proceeds, including
5 the value of the Project real property and the water rights applicable
6 thereto, as determined by the parties. In the event such cost of ending
7 the Project exceeds net proceeds, each party shall pay its Percentage
8 Share of such excess costs incurred.
9 7.2 Sierra Pacific and Idaho expressly waive any right of
10 partition of the Project and the real or personal property related
11 thereto, whether by partition in kind or sale and division of the proceeds
12 thereof, until the end of the Project, as described in Section 7.1.
3 8. Liabilities: Any loss, cost, liability, damage or expense
-- 14 incurred by either party resulting from the maintenance, reconstruction
15 or repair of the Project because of injury to any individual, or because
16 of damage to property of parties or of other persons, to the extent not
17 covered by collectible insurance, shall be chargeable to Construction
18 Cost or Operating Expenses as may be appropriate.
19 9. Defaults: Except as otherwise provided herein, in the event
20 of default by a party this agreement shall be terminated in accordance
21 with the provisions of Section 7, unless the party not in default elects
22 to continue the Agreement. The following shall be deemed events of
23 default:
24 (a) Failure of a party to make any payment when due;
25 (b) Failure of a party to perform any obligation required to
'.6 be performed herein;
Exhibit No. 1
9• Case No. IPC-E-25-03
R.Adelman, IPC
Page 9 of 23

(c) A purported termination, transfer, sale assignment,
2 pledge or encumbrance of a party's interest in this Agreement,
3 except as permitted herein;
4 (d) A transfer of a party's interest to any purchaser
5 from a mortgagee or secured party having realized upon its
6 security or otherwise; and
7 (e) The bankruptcy or insolvency of a party under
8 bankruptcy or reorganization, composition or arrangement statutes.
9 If one party believes that the other party has committed an event of
10 default, the nondefaulting party shall notify the other party in writing,
11 describing the alleged default, and if 'the alleged default is not cured
12 or protested within sixty (60) days from the date of such notice, it
3 shall at the expiration of such period constitute a default. If a party
14 in good faith disputes the existence or extent of an alleged default, it
15 shall within a 60-day period make such payment or perform such obligation
16 under written protest directed to the other party. Such a dispute shall
17 be submitted to an arbitrator who shall determine whether a default has
18 occurred. If the arbitrator determines that no default has occurred,
19 the allegation of default shall be deemed to have been withdrawn. If
20 the arbitrator determines that a default has occurred, the party not in
2 1 default may elect to continue this Agreement, but the party in default
22 shall have no right to the Output of the Project, to have representation
2 3 on any committee, or to exercise any of the other rights under this
24 Agreement excepting the legal right of termination. In the case of a
2 5 default the defaulting party's Percentage Share of power and energy may
6 be sold during the period of default for the benefit of the defaulting
10. Exhibit No. 1
Case No. IPC-E-25-03
R.Adelman, IPC
Page 10 of 23

l party and the proceeds applied to any amounts owed by such party.
2 Notwithstanding the foregoing, the defaulting party shall remain liable
3 to the party not in default and to the creditors of the Project for
4 obligations incurred prior to the cure of any such default. Payments
5 not made when due by either party shall bear interest until paid at the
6 rate of one percent (1%) per month, or the highest lawful rate, whichever
7 is lower.
8 10. Transfer and Assignments; Secured Interests:
9 10.1 This Agreement shall be binding upon the successors in
10 interest and assigns of the parties. Any transfer and assignment shall
11 be as follows, and not otherwise:
12 10.1.1 To any mortgagee, trustee, or secured party,
3 as security for bonds or other indebtedness of such party, present or
14 future, and such mortgagee, trustee or secured party may realize upon
15 such security in foreclosure or other suitable proceedings and succeed
16 to all right, title and interest of such party.
17 10.1.2 To any corporation or other entity acquiring
18 all or substantially all the property of the party making the transfer.
19 10.1.3 To any corporation or entity into which or with
20 which the party making the transfer may be merged or consolidated.
21 10.1.4 To any corporation or entity, the stock or
22 ownership of which is wholly-owned by the party making the transfer.
23 10.1.5 To any corporation or entity in a contempor-
24 aneous transaction constituting a financing arrangement under which the
2 5 party's control of its Percentage Share is subject to defeat only on
'.6 default.
Exhibit No. 1
Case No. IPC-E-25-03
R.Adelman, IPC
Page 11 of 23

L
10.1.6 To any other financially responsible person
2 where the other party consents to such transfer in advance in writing.
3 The_party requesting said transfer or assignment shall first offer to
4 transfer or assign such interest to the other party at the amount of and
5 on terms and conditions not less advantageous than those which it is
6 willing to accept for a transfer or assignment to such other person.
7 Such offer shall remain open for a reasonable period, but not to exceed
8 180 days after receipt of written notification of the offer.
9 10.1.7 No transfer or assignment may be made except
10 under Section 10.1.1, or Section 10.1.5 unless simultaneously the
11 party's interests in all other Project Agreements are similarly trans-
12 ferred or assigned to the same person or persons, and such person or
3 persons have assumed all the duties and obligations of the party
14 transferring or assigning under this Agreement and under all other
15 . Project Agreements.
16 10.1.8. Any interest or assignment permitted hereunder
17 (except as provided by Section 10.1.1 and 10.1.5) is expressly conditioned
18 upon the execution of a written assumption by transferee or assignee of
19 all of the obligations hereunder.
20 11. Covenants Running with the Land: All of the covenants and
21 agreements set forth herein shall bind and shall be and become the
22 obligations of each party, its successors and assigns, and shall be
23 obligations and covenants running with and a burden upon each of such
24 party's rights, titles and interest in the Project. All of the right,
25 title and interest of each party in and to all real and personal property
6 constituting the Project shall be subject to the covenants, promises and
12. Exhibit No. 1
Case No. IPC-E-25-03
R.Adelman, IPC
Page 12 of 23

I obligations made and established hereby, and all transferees to any such
2 property shall take subject thereto. The parties shall cause to be
3 effectively recorded a memorandum of this agreement for the purpose of
4 giving notice to the world of the promises, obligations and covenants
5 set forth herein. The documents of title to the properties of the
6 Project shall be constructed to cause so far as possible such promises,
7 obligations and covenants to bind the assignees of any such property
8 interests.
9 12. Obligations Are Several: The duties, obligations and lia-
10 bilities of the parties hereunder are intended to be several and not
11 joint or collective, and neither of the parties shall be jointly or
12 severally liable for the acts, omissions or obligations of the other.
3 Nothing herein contained shall be construed to create an association,
14 joint venture, partnership, or impose a partnership duty, obligation or
15 liability on or with regard to either of the parties except to the
16 extent otherwise agreed upon solely for United States income tax
17 purposes. No party shall have the right or power to bind the other
18 party without its express, written consent except as expressly provided
19 in this Agreement.
2 0 13. Successors and Assigns: Subject to the restrictions on
21 transfer and assignment herein provided, all of the respective covenants
22 and obligations of each of the parties shall be and become the respective
2 3 obligations of the successors and assigns of each such party and shall
24 be obligations running with the respective party's rights, titles and
2 5 interests in the Project. It is the specific intention of this provision
'6 that all such covenants and obligations shall be binding upon any party
13. Exhibit No. 1
Case No. IPC-E-25-03
R.Adelman, IPC
Page 13 of 23

which acquires any of the right, title and interest of either of the
2 parties to the Project.
3 f 14. Arbitration: Any dispute arising between the parties involving
4 any of the items, covenants and conditions of this Ownership Agreement
5 shall be subject to arbitration in accordance with the rules then obtaining
6 of the American Arbitration Association and the following procedure:
7 The party demanding arbitration shall give to the other party
8 notice in writing of such demand. The parties shall meet within ten
9 (10) days thereafter to select an arbitrator by agreement. In the event
10 the parties cannot agree upon such arbitrator, a judge of the District
11 Court of the United States for the State of Nevada or such tribunal as
12 may at the time be the successor of such Court, may, upon request of
3 either party, appoint an arbitrator who shall be an individual of
".11 14 national reputation having demonstrated expertise in the field of the
15 matter or item to be arbitrated. Each party shall provide the judge
16 with a list of two (2) arbitrators. The judge shall select an arbitrator
17 from the panel of four (4) arbitrators submitted. If, pending any
18 arbitration under this Agreement, the arbitrator, or successor or
19 substitute arbitrator shall for any reason be unable or unwilling to
20 act, his successor shall be appointed as he was appointed, and such
21 successor or substitute arbitrator as to all matters then pending shall
22 act the same as if he had been originally appointed as an arbitrator.
23 The award of the arbitrator so chosen shall be final and binding upon
24 all parties, and if necessary and appropriate in the premises, the
2 5 arbitrator may make an order requiring specific performance of any of
5 the terms and conditions of said award. The award rendered by the
14. Exhibit No. 1
Case No. IPC-E-25-03
R.Adelman, IPC
Page 14 of 23

arbitrator shall be final, and judgment may be entered upon it in any
2 court having jurisdiction thereof. Each party shall bear the expense of
3 preparing and presenting its own case, and the expense of the arbitrator
4 shall be equitably divided between the parties by the arbitrator.
5 15. Applicable Laws and Regulations: The parties in their
6 performance of their obligations hereunder shall conform to all appli-
7 cable laws, rules, regulations and administrative orders. This Agreement
8 shall be construed under the laws of the State of Nevada. This Agreement
9 is subject to the approval of any state or federal regulatory agency
10 having jurisdiction thereof.
11 16. Sierra Pacific's Participation in Idaho's Units:
12 If in the future Idaho develops any additional thermal generating
units in its service territory, Sierra Pacific shall have the right of
14 first refusal to participate in the Ownership of such units. This right
15 of first refusal shall entitle Sierra Pacific to purchase and own a
16 percentage share of each Idaho unit as it is developed. The amount
17 of this percentage share shall be subject to mutual agreement and will
18 be determined at least 120 days prior to the date that Idaho intends
19 to file with the appropriate state regulatory agency for permission
20 to construct a thermal generating unit. This right to participate shall
21 exist until Sierra Pacific has participated in Idaho's units in at
22 least an aggregate amount equal to the aggregate amount of Idaho's
23 share of capacity in the North Valmy Power Plant Project. Any additional
24 capacity Sierra Pacific might obtain in Idaho's units in excess of
25 Idaho's share in the North Valmy Power Plant Project shall be subject
to mutual agreement.
Exhibit No. 1
Case No. IPC-E-25-03
R.Adelman, IPC
Page 15 of 23

17. Notices: Any notice, demand or request provided for in this
2 Agreement served, given or made in connection therewith shall be deemed
3 properly served, given or made if sent by registered or certified mail,
4 postage prepaid, addressed to the party at its principal place of business
5 to the attention of the President or Chief Executive Officer of Sierra
6 Pacific or Idaho. A party may at any time change its designation of the
7 person to whom notice shall be given by written notice to the other
g party as hereinabove provided.
9 18. Additional Documents: Each party upon request by the other
10 party shall make, execute and deliver any and all documents reasonably
11 required to implement the terms of this Agreement. The parties further
12 agree that there shall be a "Memorandum of Agreement" (see attached
3 exhibit) filed among the official records of the Humboldt County Recorder,
14 County Courthouse, Winnemucca, Nevada.
15 19. Entire Agreement: This contract constitutes the entire agreement
16 between Sierra Pacific and Idaho relating to the subject matter hereof,
17 and supersedes any previous agreements or understandings excepting those
18 specific Project Agreements as referenced in Article 1.6.
19 IN WITNESS WHEREOF, the parties hereto have executed this Agreement
20 in several counterparts effective the day and year first above written.
21 IDAHO POWER COMPANY
22
23 Jam s E. Bruce, President
24 ATTEST:
25
6
16. Exhibit No. 1
Case No. IPC-E-25-03
R.Adelman, IPC
Page 16 of 23

SIERRA PACIFIC POWER COMPANY
2
By
3 J e L. Gremban, President
4
ATTEST:
5
6
7
8
STATE OF NEVADA )
9 )ss.
COUNTY OF
10
' On this 1Zk day of December, 1978, personally appeared before me,
11 a Notary Public, JOE L. GREMBAN, President of Sierra Pacific Power Company,
who acknowledged to me that he executed the within instrument on behalf of
12 Sierra Pacific Power Company.
3
otary Public
_. L 4 ]:III,IIIII/IIIN:IYa1M11111::C p1I11N1:11V111:1:IIPo U:•1•1.❑N:A II .�!:.:,IJ,p J.6:b, :.:�: I1,•!•:U,�
15
F'.,' !u:. s
1.VashOS�County
16
STATE OF NEVADA My Commission E:cpires Dec.
�1111I111111,111:111111111111I:111111111111111,II III:IIIIIII IIIIIII11•i:l:tl:1,1111111111111111'l 11 llil�.::.:1' !�11,1.
17 )ss.
COUNTY OF Gre-sl,.ee )
18
On this 1-Z tA day of December, 1978, personally appeared before. me,
19 a Notary Public, JAMES E. BRUCE, President of Idaho Power Company, who
acknowledged to me that he executed the within instrument on behalf of
20 Idaho Power Company.
21 4Q
otary Public
22 ynnll nl nuauul.11;unnam:w
.I:I,!A1111:111111111i1111111111!11111•1111.1,,.:•11111•il•�'1""`••
CA
JOH
23 t
Netary Pub!ic of Nevada
t x,.'., Washoe County
24 _ My Commission Expires Dec. 4.1982 1s_
�,1,1„IIIIIIIIN 11111111111111111NI1111111111111111 N III III11111111II111111111111111111II IIM 1111/IIII IIIIIIIIII II II s
25
i
17.
Exhibit No. 1
Case No. IPC-E-25-03
R.Adelman, IPC
Page 17 of 23

MEMORANDUM OF AGREEMENT
The undersigned have this 14�" day of December, 1978, entered into
a formal written agreement with each other covering their mutual promises,
obligations and covenants touching and concerning the following described
real property and improvements located in Humboldt County, State of
Nevada, more particularly described as follows:
Sections 20, 21, 22, 27, 28, 29, 32, 33 and 34, Township
35, North Range 43 East M.D.B.&M.
Any person seeking information with respect to those promises,
obligations and covenants may have that information by inquiring at the
office of the President of Sierra Pacific Power Company, 100 East Moana
Lane, Reno, Nevada.
IDAHO POWER COMPANY SIERRA PACIFIC POWER COMPANY
By QJw► Z By (1" - Z-1 —i� -.d
Jame E. Bruce Oze L. Gremban
i d e n t President
STATE OF NEVADA )
)ss.
COUNTY OF k0waO& )
On this X;1-2 day of December, 1978, personally appeared before me,
a Notary Public JOE L. GREMBAN, President of Sierra Pacific Power Company,
who acknowledged to me that he executed the within instrument on behalf of
Sierra Pacific Power Company.
"d-e obt-A
�I:,1111i 1 11S..... .IN......:IN1...... a III.I IINNII,NI
JGHN MADARIAGA
STATE OF NEVADA ) _ ;.i'` 1; .
Nct2.ry Public-State of Nevada
S8• = J Washoe County =_
COUNTY OF // ) = My Commission Expires Dec. 4, 1982 =_
LL
�I III I I I II II I II M IIII I II IIIIIIIIIIIIIIIII I IIIIIIIIII II,N 11111......111„III IIIIIIIIN1111NINNIOINININIIIIIN11111[
On this /*2 ay of December, 1978, personally appeared before me,
a Notary Public, JAMES E. BRUCE, President of Idaho Power Company, who
acknowledged to me that he executed the within instrument on behalf of
Idaho Power Company.
Not9,0 Public
•,'y�.''.t'.f I.,�TC,;.i S1'0'� •-(C;r 4S r,`- 4. 1r-J2
�nuu u,uu,.rtl,.UN.../,s•uu,i:•n,n,u nnr un:ul.r•.••,•r.•,d;wn,.,-r•.•Nur«.untlaeu:nt
Exhibit No. 1
Case No. IPC-E-25-03
R.Adelman, IPC
Page 18 of 23

E X H I B I T "A"
Exhibit "A" is a five (5) page document of the overall
North Valmy Power Plant Project and includes :
Site Plan Page 1 of 5
Railroad & Road Access Page 2 of 5
Construction Facilities
(Water Pipeline) Page 3 of 5
Main Water Pipeline
(Key Plan) Page 4 of 5
One-Line Diagram
(Unit No. 1 No. Valmy Sub) Page 5 of 5
The common facilities as to this Power Plant Project
are indicated on pages 2-5, and specifically by asterisk on
page 1 of 5.
Exhibit No. 1
Case No. IPC-E-25-03
R.Adelman, IPC
Page 19 of 23

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R.Ado|mon. |PC

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Exhibit No. 1
R.Adelman, IPC
Page 21 of 23

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R.Adoman. |PC

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Exhibit No. 1
Case No.IPC-E-25-03
R.Adelman, IPC
Page 23 of 23

BEFORE THE
IDAHO PUBLIC UTILITIES COMMISSION
CASE NO. IPC-E-25-03
IDAHO POWER COMPANY
ADELMAN, DI
TESTIMONY
EXHIBIT NO. 2

1 AGREEMENT FOR THE OPERATION
OF THE NORTH VALMY POWER PLANT PROJECT
2
3 T�
THIS AGREEMENT, made this �- day of beca*ber 197 t
4 between SIERRA PACIFIC POWER COMPANY (hereinafter referred to as "Sierra
5 Pacific") , a public utility corporation duly organized and existing
6 according to the laws of the State of Nevada, and IDAHO POWER COMPANY
7 (hereinafter referred to as "Idaho") , a public utility corporation duly
8 organized and existing according to the laws of the State of Maine, and
9 duly qualified and doing business in the State of Nevada.
10 WITNESSETH:
11 WHEREAS, Sierra Pacific is an investor-owned electric utility
12 company subject to the regulation of the Public Service Commission of
13 the State of Nevada, the Public Utilities Commission of the State of
14 California, and the Federal Energy Regulatory Commission; and
15 WHEREAS, Idaho is an investor-owned electric utility subject to the
16 regulatory jurisdiction of the Public Utility Commissioner of Oregon,
17 the Idaho Public Utilities Commission, Public Service Commission of
18 Wyoming, the Public Service Commission of Nevada, the Federal Energy
19 Regulatory Commission; and
20 WHEREAS, Idaho and Sierra Pacific have, concurrently herewith
21 entered into agreements for the Construction and Ownership of the North
22 Valmy Power Plant Project; and
23 WHEREAS, in the Ownership Agreement the parties have stated and
24 recited the mutual benefits to, and covenants of, the parties, those
25 recitals are adopted as part hereof.
26 NOW, THEREFORE, the parties covenant and agree as follows:
Exhibit No.2
Case No. IPC-E-25-03
c R.Adelman, IPC
Page 1 of 24

1 1. DEFINITIONS: The following terms when used herein shall have
2 the meaning specified:
3 1.1 Capital Additions: Capital Additions means any additions,
4 improvements or betterments to the Project other than additional generat-
5 ing facilities. Capital Additions shall include but are not limited to
6 facilities and equipment required to assure design capability or to
7 conform to applicable governmental requirements or as the Operating
8 Committee may require.
9 1.2 Common Facilities: Common Facilities means all facilities,
10 other than the facilities included in each Unit which will serve and be
11 required in connection with the operation and maintenance of more than
12 one Unit, including, without limitation, water supply system, coal
13 supply system, related transmission substation facilities, access roads,
14 railroads, engineering and legal fees and expenses, rights-of-way, and
15 all lands or interests in land included in the Project as reflected in
16 attached Exhibit "A".
17 1.3 Completion: Completion is the date when the Operating
18 Committee certifies that a Unit has been adequately tested and is accepted
19 for commercial operation.
20 1.4 Operating Committee: Operating Committee is as defined
21 and established in this Agreement.
22 1.5 Operating Procedures Criteria: A formal document prepared
23 and maintained by the Operating Committee setting forth the operating
24 limits and capabilities of the Project and guidelines and procedures to
25 ,be used in operating the Project.
16 1. 6 Output: Output means the net capacity and energy from
2.
Exhibit No.2
Case No. IPC-E-25-03
R.Adelman, IPC
Page 2 of 24

1 the Unit(s) which can be made available at the Valmy Substation 345 KV
2 bus for transmission to the parties' respective systems.
3 1.7 Project: Project is the North Valmy Power Plant Project
4 located north of Valmy, Humboldt County, Nevada, which will consist of
5 one or more coal-fired Units, each of approximately 250 megawatts,
6 auxiliary equipment, common facilities, water rights and other necessary
7 property.
8 1.8 Project Agreement: The following agreements constitute
9 the Project Agreement and shall be construed together:
10 (a) Agreement for the Ownership of the North Valmy
11 Power Plant Project (Ownership Agreement) .
12 (b) Agreement for the Construction of the North
13 Valmy Power Plant Project (Construction Agreement) .
14 (c) Agreement for the Operation of the North Valmy
15 Power Plant Project (Operating Agreement) .
16 1.9 Project Arbitrator: Project Arbitrator is an individual
17 having a national reputation for expertise in the field of the matter or
18 item referred to him and appointed for the resolution by arbitration of
19 a difference regarding a matter or item referred to him. A different
20 Project Arbitrator may be appointed for each matter or item referred.
21 1.10 Prudent Utility Practice: Prudent Utility Practice
22 means any of the practices, methods and acts engaged in or approved by a
2 3 significant proportion of the electrical utility industry prior to the
24 time of the reference, or any of the practices, methods and acts which
25 in the exercise of reasonable judgment in light of the facts known at
�6 the time the decision was made, could have been expected to accomplish
3.
Exhibit No.2
Case No. IPC-E-25-03
R.Adelman, IPC
Page 3 of 24

1 the desired result at the lowest reasonable cost consistent with relia-
2 bility, safety and expedition. Prudent Utility Practice shall apply not
3 only to functional parts of the Project but also to appropriate structures,
4 landscaping, painting, signs, lighting and other facilities and public
5 relations programs reasonably designed to promote public enjoyment,
6 understanding and acceptance of the Project. Prudent Utility Practice
7 is not intended to be limited to the optimum practice, method or act to
8 the exclusion of all others, but rather to be a range of accepted practices,
9 methods or acts.
10 1.11 Unit: Unit means a complete 250 megawatt generating
11 plant, including boiler, turbine generator, that part of coal preparation
12 and supply system, that part of the switchyard, and all auxiliaries,
13 accessories and controls readily identified with and solely associated
14 with the Unit as reflected in the attached Exhibit "A".
15 2. OPERATION OF PROJECT
16 2.1 Sierra Pacific shall be the operator of the Project on
17 behalf of and for the account of the parties subject to the terms,
18 conditions and covenants contained in this Agreement.
19 2.2 Sierra Pacific covenants that it will operate and maintain
20 the Project in accordance with Prudent Utility Practice, applicable laws
21 and valid orders and regulations of regulatory or other agencies having
22 jurisdiction, and under the direction of the Operating Committee and the
23 Operating Procedures Criteria. Subject to the foregoing, Sierra Pacific
24 will operate and maintain the Project so as to produce the energy
25 scheduled by the parties.
26 2.3 All persons employed in the operation and maintenance of
4,
Exhibit No.2
Case No. IPC-E-25-03
C R.Adelman, IPC
Page 4 of 24

1 the Project, other than employees of independent contractors, shall be
2 Sierra Pacific employees and shall not be considered to be employees or
3 agents of Idaho, excepting those Idaho employees who are assigned train-
4 ing positions on this Project on a temporary basis.
5 2.4 Sierra Pacific shall pay promptly ,all sums due employees
6 or due any governmental or other agency on their behalf and shall not
7 permit any labor claims to become a lien against the Project other than
8 claims that are being contested in good faith.
9 3. OPERATING DECISIONS
10 3.1 At the time of the execution of this Agreement and
11 thereafter as required, the parties shall each appoint one (1) member to
12 the Operating Committee. The Committee shall meet at such times as may
13 be agreed or upon seven (7) days' written notice by either member, and
14 shall keep written minutes of meetings. Each member of the Committee
15 shall be entitled to vote its Percentage Share. Each member by written
16 notice may appoint an alternate or alternates to serve on the Operating
17 Committee in that member's absence. Any action taken which may be taken
18 at a meeting of the Committee may be taken without a meeting by mutual
19 written consent.
20 3.2 The Operating Committee shall act on behalf of the
21 parties in providing general coordination and direction for the operation
22 of the Project. In addition to those responsibilities specifically set
23 out in this Agreement, the Operating Committee shall establish general
24 policies and practices to be followed in operating the Project. In
25 addition, the Operating Committee shall be responsible for resolving on
26 a prompt and orderly basis the various administrative, technical,
5.
Exhibit No.2
Case No. IPC-E-25-03
R.Adelman, IPC
Page 5 of 24

1 financial and other operating issues which may arise in connection with
2 the operation of the Project. It shall also develop, maintain and
3 update the Operating Procedures Criteria.
4 3.3 Sierra Pacific shall keep the Operating Committee fully
5 informed regarding all significant matters with respect to operation of
6 the Project and on such other Project matters as may be specifically
7 requested by either member of the Committee.
8 3.4 Sierra Pacific shall submit bids and proposed contracts
9 exceeding $500,000 involving completed Unit(s) , and all major maintenance
10 schedules, all budgets and revisions thereto to the Operating Committee
11 for approval before taking action thereon.
12 3. 5 Matters required to be submitted to the Operating
13 Committee pursuant to this Agreement or matters that either party may
14 desire to submit to the Committee shall be acted upon within the time
15 period specified in the submittal, which time period shall not be less
16 than fourteen (14) days after the date of submittal. Matters not dis-
17 approved by a member within the specified time period shall be deemed
18 approved by such member. Matters disapproved by a member shall be
19 segregated by the member so that the exact items of difference are
20 identified and, if resolution cannot be achieved in negotiation between
21 the parties, then those unresolved items so identified shall be referred
22 by the Operating Committee to an arbitrator. Each member who within the
23 limited time disapproves an item shall at the time of such disapproval
24 state in writing his reasons for disapproval and a proposed resolution
25 to the item of difference. Items not so identified shall be deemed
26 approved.
6.
Exhibit No.2
Case No. IPC-E-25-03
R.Adelman, IPC
Page 6 of 24

1 3.6 A Project Arbitrator shall be employed by the parties
2 after selection by the Operating Committee. In the absence of agree-
3 ment, the parties shall request the appointment ppointment of the Project Arbitrator
4 by a judge of the District Court of the United States for the State of
5 Nevada utilizing the procedures for selecting an Arbitrator described in
6 Section 14 of the Ownership Agreement.
7 3.7 In submitting items of difference to the Project Arbitrator
8 the parties shall each propose a resolution of the item(s) of difference
9 which proposal shall not differ from its last proposal made during
10 negotiation pursuant to Section 3. 5 above. Each party shall within ten
11 (10) days of selection of the Project Arbitrator submit to the Project
12 Arbitrator all written arguments and factual information regarding the
13 disputed item and such factual information shall not contain any new
14 information not previously communicated to the other party. Except as
15 otherwise provided herein, the authority of the Project Arbitrator is
16 specifically limited to selecting one of the two proposed resolutions
17 thus submitted, and the Arbitrator shall not have authority to effect
18 any other resolution of the dispute. The Arbitrator shall be required
19 to render its decision no later than ninety (90) days after the submis-
20 sion of written arguments and factual materials unless otherwise agreed
21 by the parties in writing. The Project Arbitrator shall determine which
22 of the two proposed resolutions is more desirable, and shall determine
23 if the proposed resolutions are consistent with Prudent Utilitv Practice.
24 The resolution chosen by the Project Arbitrator shall become effective
25 immediately. If neither proposed resolution is found by the Project
26 Arbitrator to be consistent with Prudent Utility Practice, that item of
7.
Exhibit No.2
Case No. IPC-E-25-03
R.Adelman, IPC
Page 7 of 24

I difference shall be modified to conform to the recommendation of the
2 Project Arbitrator or as the Operating Committee other-.rise agrees and
3 shall become effective as and when modified.
4 3.8 If the Project Arbitrator determines that neither of the
5 proposed resolutions is consistent with Prudent Utility Practice, then
6 the Arbitrator shall recommend what would, under the same circumstances,
7 meet such a test.
8 3.9 The cost of employing the Project Arbitrator shall be an
9 Operating Expense, unless the Project Arbitrator determines that the
10 resolution proposed by one of the parties was not consistent with Prudent
11 Utility Practice while the resolution proposed by the other party was.
12 In such event, the costs of employing the Project Arbitrator shall be
13 borne by the party whose proposed resolution was not consistent with
14 Prudent Utility Practice.
15 3.10 Sierra Pacific shall have the right, or the duty if
16 requested by Idaho in writing, to proceed with an item prior to the time
17 allowed under Section 3.5 or without approval by a member of the Operat-
18 ing Committee; provided, however, if subsequently the Project Arbitrator
19 determines that the deciding party's actions were not preferable to the
20 proposed resolution of the non-deciding party, then the deciding party
21 shall individually bear the increased expense of such action.
22 3.11 No member of the Committee (or such member's successor)
23 shall disapprove (i) matters which were submitted to the Committee
24 pursuant to the terms of this Agreement and not disapproved within the
25 time allowed, (ii) any item(s) of difference after resolution by the
26 Project Arbitrator, or (iii) items or series of related items with a
8.
Exhibit No.2
Case No. IPC-E-25-03
R.Adelman, IPC
` Page 8 of 24

1 total present worth of less than $100,000.
2 4. OPERATING EXPENSES
3 4.1 Operating expenses shall consist of all payments made
4 for and obligations incurred in operating and maintaining the Project
5 including:
6 4.1.1 The cost of all services performed by either
7 party directly applicable to Project operation and maintenance, includ-
8 ing, but not limited to:
9 (a) Payroll expenses of Project employees
10 on an actual time basis including employee benefit costs
11 such as Social Security Taxes, unemployment insurance expense,
12 group life insurance, group hospitalization and medical
13 insurance, pension funding expense, worl:men's compensation,
14 long-term disability and other insurance and paid leave.
15 (b) Materials and supplies including
16 related purchasing and handling costs.
17 (c) Costs related to leased equipment.
18 (d) All net costs of insurance obtained
19 for and applicable to operation.
20 4.1.2 All federal, state or local taxes imposed upon the
21 Project and payments in lieu of taxes (but excluding state and federal
22 net income taxes levied upon income derived by the parties during said
23 period) , except any tax assessed directly against either party unless
24 such tax was assessed to a party on behalf of the Project.
25 4.1.3 All costs relating to personal injuries, property
26 damage claims and claims of contractors which arise out of the operation
9.
Exhibit No.2
Case No. IPC-E-25-03
R.Adelman, IPC
Page 9 of 24

of the Project less proceeds of insurance.
2 4.1.4 All other direct costs or expenses properly
3 allocable to Project Operating Expense.
4 4.2 Each party shall charge the Project for its administrative
5 and general expenses directly related to operation of the Project and
6 are not included in the items set forth above. These expenses shall be
7 determined as a result of a study performed by each party on a budget-
8 year basis. Each party's yearly budgeted administrative and general
9 costs related to operation of the Project shall be submitted for approval
10 by the Operating Committee, and shall be paid from the Operation Trust
11 Account to each party in equal monthly installments. At the end of the
12 budget year, each party shall submit to the Operating Committee invoices
13 and/or other data supporting such payments from the Operation Trust
Account. Any underpayments or overpayments shall be reimbursed to or by
15 the parties at the direction of the Operating Committee.
16 4. 3 The Operator shall account for all Operating Expenses
17 and income in accordance with the Uniform System of Accounts prescribed
1s for electric utilities by the Federal Energy Regulatory Commission or
19 its successor, or if there be none, by an appropriate regulatory agency.
20 4.4 For purposes of this Agreement, any noncash expenses
21 incurred by either party, i.e. , depreciation and deferred income taxes,
22 shall not be considered Operating Expenses.
23 5. ANNUAL BUDGET
24 5.1 On or before September 1 of each year, Sierra Pacific
25 shall submit to the Operating Committee for approval a budget of its
- - estimate of Project Operating Expenses, fuel costs and Capital Additions
10.
Exhibit No.2
Case No. IPC-E-25-03
R.Adelman, IPC
Page 10 of 24

Expenditures by months for the next calendar year. If such approval is
2 not given by November 1 in any such year, the parties shall agree upon a
3 revised budget not later than December 1 of such year. The annual
4 budget shall include manpower allocations, projections of administration.
5 and general expenses, fuel costs, materials, services, and a contingency
6 item for emergency repairs and replacements during the course of the
7 year. The Capital Additions budget shall include an Engineering Estimate.
8 Such Engineering Estimate shall include a full description of the proposed
9 Capital Addition, the assqciated costs and benefits, a detailed cost
10 estimate of all expenditures required to be made for such Capital Addition
11 and a bill of materials. Sierra Pacific will submit to the Operating
12 Committee for approval, any budget revisions which change a budget
13 item's total annual cost by ten percent (10%) . Such revisions will be
deemed approved if not disapproved within fourteen (14) days after
15 submittal. Nonbudget items shall be approved by the Operating Committee.
16 5.2 Sierra Pacific shall each month submit to the Operating
17 Committee a comparison of monthly and yearly to date actual and budgeted
18 expenditures for Project Operating Expenses.
19 5.3 In addition to the annual budget as set forth in Section
20 5.1 above, Sierra Pacific shall submit to the Operating Committee on or
21 before December 1 of each year a forecast of annual Project Operating
22 Expenses, Fuel Costs and Capital Additions expenditures for the three
23 years following the two—year budget period.
24 6. PAYMENT OF PROJECT OPERATING EXPENSES
25 6.1 Sierra Pacific shall establish a separate Operation
Trust Account in a bank located in the State of Nevada and having
11.
Exhibit No.2
Case No. IPC-E-25-03
R.Adelman, IPC
Page 11 of 24

qualifications meeting all requirements imposed upon depositories for
2 either party. Ali funds for payment of Project Operating Expenses shall
3 be deposited therein and Sierra Pacific shall withdraw and apply funds
4 therefrom as necessary.
5 6. 2 Upon completion of the first Unit or at such other time
6 as the Operating Committee may determine each party shall deposit $50,000
7 into the Operation Trust Account and each party shall thereafter continue
8 in proportion to its Percentage Share to maintain that amount in the
9 Operation Trust Account or such other amount as the Operating Committee
10 may determine.
11 6.3 Following the initial deposit described in Section 6.2
12 above and except as other-prise agreed by the Operating Committee, on each
13 Monday before the first and fifteenth of each month each party shall
deposit into the Operation Trust Account an amount proportionate to one-
15 half of its Percentage Share of the amount budgeted for coal and oil
16 purchases plus Operating Expenses. In the event of an immediate require-
17 ment of funds, Sierra Pacific may notify Idaho and each party shall
18 promptly deposit in the Operation Trust Account its Percentage Share of
19 the amount required.
20 6.4 On or before the 15th day of each month Operator will
21 furnish to the parties an Operating Expense statement prepared in
22 conformance with Section 7.1 showing for the preceding calendar month
23 all coal and oil purchases and Operating Expenses incurred by the Operator
24 during such preceding month. Any variance between such statement of
25 actual coal and oil purchases and actual Operating Expenses and the
amounts deposited by the parties in the previous month shall be added to
12.
Exhibit No.2
Case No. IPC-E-25-03
R.Adelman, IPC
Page 12 of 24

or deducted from the respective party's obligation to deposit in the
2 month or months succeeding the issuance of the statement.
3 7. ACCOUNTING
4 7.1 Sierra Pacific shall keep accounting and statistical
5 records of Project operation in accordance with regulatory requirements,
6 Prudent Utility Practice and the direction of the Operating Committee.
7 7.2 Each party, through its Operating Committee member, and
8 any regulatory commission having utility rate jurisdiction over either
9 party shall have the right at any reasonable time to examine the separate
10 books of account kept by each party pursuant to this Section 7 and all
11 supporting data and documents relating thereto which are applicable to
12 the North Valmy Power Plant Project.
13 7.3 By the 15th of each month Sierra Pacific shall supply to
Idaho a complete itemized accounting of Project monthly operations and
15 all deposits in and withdrawals from the Operation Trust Account during
16 the previous month.
17 7.4 At least once a year Sierra Pacific shall request an
18 independent certified public accounting firm of national reputation
19 acceptable to the parties to audit Project Operating Expenses and fuel
20 costs and copies of such audit shall be supplied to Idaho through the
21 Operating Committee.
22 8. FUEL COSTS
23 8. 1 Sierra Pacific shall arrange for the purchase and
24 delivery of coal for Unit No. 1 in accordance with the terms and condi-
25 tions of its contract with Southern Utah Fuel Company dated May 16,
1978, and will arrange for the purchase and delivery of fuel oil for use
13.
Exhibit No.2
Case No. IPC-E-25-03
R.Adelman, IPC
Page 13 of 24

in Unit No. 1. Either party may arrange for the purchase and delivery
2 of additional coal or oil for any future Project Unit(s) under such
3 terms and conditions as may be agreed upon by the parties.
4 8. 2 Once each calendar year, or as otherwise determined by
5 the Operating Committee, Sierra Pacific shall survey the total coal in
6 storage to determine the amounts of coal in the storage g pile. If the
7 coal in the storage pile as determined by such surveyis greater or less
8 than the inventory as set forth in the coal inventory records, each
9 party's coal account will be increased or decreased based on the inventory
10 adjustment procedure contained in the Operating Procedures Criteria. If
11 such adjustment results in either party having less than its Percentage
12 Share in the storage pile, such party shall make arrangements to correct
13 this deficiency as soon as reasonably possible.
8.3 On or before the 15th day of each month Sierra Pacific
15 will furnish to the parties a Coal Cost Statement prepared in conformance
16 with Section 7.1 showing the actual cost of coal consumed for the preced-
17 ing month. The calculation of the actual cost of coal shall reflect any
18 shipping losses and reductions in a Unit's heat rate due to one party's
19 scheduling of less than its Percentage Share of the Project's Output.
20 8.4 On at least an annual basis the parties shall make an
21 appropriate adjustment so that the cost borne by each party for the
22 Project's total actual cost of coal consumed shall be in the same propor-
23 tion as the Project's Output allocated to the account of each party
24 bears to the total Output of the Project.
25 8.5 All calculations and adjustments described in this
Section 8 shall be made in accordance with the guidelines set out in the
14.
Exhibit No.2
Case No. IPC-E-25-03
R.Adelman, IPC
Page 14 of 24

Operating Procedures Criteria.
2 8.6 If either party desires to use coal from the stockpile
3 for units other than the Project, it shall pay all costs associated with
4 the use of such coal for non-Project purposes. The use of Project coal
5 for units other than the Project shall require the written consent of
6 both parties.
7 9. RIGHTS TO OUTPUT; SCHEDULING
8 9. 1 Each party shall have a right to receive as scheduled
9 its Percentage Share of the Project Output within the ability of the
10 Project at such time to operate.
11 9.2 Neither party shall schedule a rate of change of its
12 share of Output greater than such party's percentage of the rate of
13 change which is within the ability of the Project to perform except to
the extent the other party schedules a rate of change such that the rate
15 of change of the combined schedules is not greater than the ability of
16 the Project to perform.
17 9.3 Sierra Pacific shall promptly notify each party of any
18 change in operating limits or operating capabilities of the Project and,
19 subject to the guidelines set out in the Operating Procedures Criteria,
20 the parties shall thereupon make any necessary changes in their percent-
2 1 age of such changed operating limits and capability.
22 9.4 If, at any time either party decides to sell or assign
23 any portion of its Percentage Share of the Output of the Project, that
24 party shall first, on a right of first refusal basis, offer to sell or
25 assign such Percentage Share to the other party.
15.
Exhibit No.2
Case No. IPC-E-25-03
R.Adelman, IPC
Page 15 of 24

10. SCHEDULING OF OUTAGES
2 10.1 Sierra Pacific shall schedule outages for major main-
3 tenance as required for insurance purposes and to achieve compliance
4 with manufacturer's applicable warranty conditions or as directed by the
5 Operating Committee. Maintenance shall be in such month and year for
6 such periods of time as agreed by the parties through the Operating
7 Committee. Additional maintenance outages required for safe operation
8 of the Project shall be scheduled by Sierra Pacific as required.
9 10.2 In the event unforeseen circumstances cause an emergency
10 outage, or a reduction in Project capability, Sierra Pacific shall
11 immediately notify Idaho, unless otherwise agreed, and shall take such
12 steps, including the use of premium time, as may be required to return
13 the Project to an operating condition as soon as is reasonably possible.
11. DISPOSAL OF WASTE OR SURPLUS COMMODITIES, MATERIALS,
EQUIPMENT AND OTHER PERSONAL, PROPERTY
15
16 11.1 Any commodities, materials, equipment or other personal
17 property which are produced from or are available from the Project and
18 which are surplus to the then present or reasonably foreseeable future
19 requirements of the Project may be sold or otherwise disposed of upon
20 such terms and conditions and for such periods of time that may be
21 agreed by the Operating Committee. The proceeds of any such sale or
22 costs and expenses of any such disposal shall be deposited in or with-
2 3 drawn from the Operation Trust Account and debited or credited to the
24 Operating Expenses of the Project.
25 11.2 The foregoing shall not be applicable under any circum-
stances or in any manner to sale or disposal of electric energy.
16.
Exhibit No.2
Case No. IPC-E-25-03
R.Adelman, IPC
Page 16 of 24

12. TERMINATION
2 12.1 This Agreement shall terminate in accordance with
3 Section 7 or 9 of the Ownership Agreement.
4 13. LIABILITIES
5 13.1 In the operation of the Project, each party shall act
6 without compensation other than reimbursement of costs and expenses as
7 provided herein. In consideration thereof, each party expressly agrees
8 that each other party individually, its agents and employees (but not
9 any contractor or subcontractor of any tier) shall not be liable to the
10 other party for any claims or damage including claims or damage covered
11 by insurance based on or arising from a negligent act or omission of an
12 agent or employee of such other party in connection with operation of
13 the Project, and that payment of such claims shall be an Operating
Y Expense. Each party shall cause its insurers to waive any rights of
15 subrogation against each of the other parties, its agents or employees
16 for losses, costs, damages or expenses arising out of the operation of
17 the Project.
13 14. UNCONTROLLABLE FORCES
19 14.1 Neither party shall be considered in default in perform-
20 ance of any of the obligations hereunder other than obligations of
21 either party to pay costs and expenses if failure of performance shall
22 be due to uncontrollable forces. The term "uncontrollable forces" shall
23 mean any cause beyond the control of the party required to perform and
24 any cause which that party cannot reasonably avoid. The term shall
25 include, but not be limited to, an act of God, fire, flood, explosion,
strike, sabotage, an act of the public enemy, civil or military authority,
17.
Exhibit No.2
Case No. IPC-E-25-03
R.Adelman, IPC
Page 17 of 24

including court orders, injunctions, and orders of government agencies
2 with proper jurisdiction prohibiting acts necessary to performance
3 hereunder or permitting any such act subject to unreasonable conditions,
4 insurrection or riot, an act of the elements, failure of equipment, or
5 inability to obtain or ship materials or equipment because of the effect
6 of similar causes on suppliers or carriers. Nothing contained herein
7 shall be construed so as to require either party to settle on an unreason-
8 able basis any strike or labor dispute which directly affects the Project.
9 If either party is rendered unable to fulfill any obligation by reason
10 of uncontrollable forces, it shall exercise due diligence to remove such
11 inability with all reasonable dispatch.
12 15. DEFAULT
13 15.1 Except as otherwise provided herein in the event of
default by a party this Agreement shall be terminated in accordance with
15 the provisions of Section 7 of the Ownership Agreement unless the party
16 not in default elects to continue the Agreement. The following shall be
17 deemed events of default.
18 (a) Failure of a party to make any payment when due;
19 (b) Failure of a party to perform, any obligation
20 required to be performed herein;
21 (c) A purported termination, transfer, sale,
22 assignment, pledge or encumbrance of a party's interest in
23 this Agreement except as permitted herein;
24 (d) A transfer to any purchaser from a mortgagee
25 or secured party having realized upon its security or otherwise;
and
18.
Exhibit No.2
Case No. IPC-E-25-03
c
R.Adelman, IPC
Page 18 of 24

(e) The bankruptcy or insolvency of a party under
2 bankruptcy or reorganization, composition or arrangement statutes.
3 If one party believes that the other party has committed a default, the
4 nondefaulting party shall notify the other party in writing describing
5 the alleged default, and if the alleged default is not cured or protested
6 within sixty (60) days from the date of such notice, it shall at the
7 expiration of such period constitute a default. If a party in good
S faith disputes the existence of an alleged default, it shall within a
9 sixty (60) day period make such payment or perform such obligation under
10 written protest direct to the other party. Such a dispute shall be
11 submitted to the Project Arbitrator who shall determine whether a default
12 has occurred. If the Project Arbitrator determines that no default has
13 occurred, the practice of default shall be deemed to have been withdrawn.
If the Project Arbitrator determines that a default has occurred, the
15 party not in default may elect to continue this Agreement, but the party
16 in default shall have no right to the Output of the Project, to have
17 representation on any committee, or to exercise any of the other rights
18 under this Agreement. In the case of a default the defaulting party's
19 Percentage Share of power and energy may be sold during the period of
20 default for the benefit of the defaulting party and the proceeds applied
21 to any amounts owed by such party. Notwithstanding the foregoing, the
22 defaulting party shall remain liable to the party not in default and to
23 the creditors of the Project for obligations incurred prior to the cure
24 of any such default. Pavments not made when due by either party shall
25 bear interest until paid at the rate of one percent (1%) per month, or
the highest lawful rate, whichever is lower.
19.
Exhibit No.2
Case No. IPC-E-25-03
R.Adelman, IPC
Page 19 of 24

16. TRANSFER AND ASSIGNMENT; SECURED INTERESTS
2 16.1 This Agreement shall be binding upon the successors in
3 interest and assigns of the parties. Except as provided in Section 9 of
4 the Ownership Agreement, the parties agree that any transfer and assignment
5 shall be as follows and not otherwise:
6 16.1.1 To any mortgagee, trustee or secured party, as
7 security for bonds or other indebtedness of such party, present or
8 future, and such mortgagee, trustee or secured party may realize upon
9 such security in foreclosure or other suitable proceedings, and succeed
10 to all right, title and interest of any such party.
11 16.1.2 To any corporation or other entity acquiring all
12 or substantially all the property of the party making the transfer.
13 16.1.3 To any corporation or entity into which or with
t which the party making the transfer may be merged or consolidated.
15 16.1.4 To any corporation or entity, the stock or owner-
16 ship of which is wholly owned by the party making the transfer.
17 16.1. 5 To any corporation or entity in a contemporaneous
18 transaction constituting a financing arrangement under which the part
19 control of its Percentage Share is subject to defeat only on default.
20 16.1.6 To any other financially responsible person
21 where the other party consents to such transfer in advance in writing.
22 A party requesting said transfer or assignment shall first offer to
23 transfer or assign such interest to the other party for an amount not
24 greater than and on terms and conditions not less advantageous than
25 those which it is willing to accept for a transfer or assignment to a
third person. Such offer shall remain open a period not to exceed 180
20.
Exhibit No.2
Case No. IPC-E-25-03
c R.Adelman, IPC
Page 20 of 24

18. OBLIGATIONS ARE SEVERAL
2 18.1 The duties, obligations and liabilities of the parties
3 hereunder are intended to be several and not joint or collective, and
4 neither of the parties shall be jointly or severally liable for the
5 acts, omissions or obligations of the other. Nothing herein contained
6 shall be construed to create an association, joint venture, partnership,
7 or impose a partnership duty, obligation or liability on or with regard
8 to either of the parties except to the extent otherwise agreed upon
9 solely for United States income tax purposes. No party shall have the
10 right or power to bind the other party without its express written
11 consent except as expressly provided in this Agreement.
12 19. SUCCESSORS AND ASSIGNS
13 19.1 All of the respective covenants and obligations of each
of the parties shall be and become the respective obligations of the
15 successors and assigns of each such party and shall be obligations
16 running with the respective party's rights, title and interests in the
17 Project. It is the specific intention of this provision that no transfer
18 of any interest in the Project may become effective unless the proposed
19 transferee assumes each of the transferor's covenants and obligations
20 simultaneously therewith.
21 20. APPLICABLE LAWS AND REGULATIONS
22 20.1 The parties in their performance of their obligations
23 hereunder shall conform to all applicable laws, rules, regulations and
24 administrative orders. This Agreement shall be construed under the laws
25 of the State of Nevada. This Agreement is subject to the approval of
any state or federal regulatory agency having jurisdiction thereof.
22.
Exhibit No.2
Case No. IPC-E-25-03
R.Adelman, IPC
Page 21 of 24

21. ADDITIONAL DOCUMENTS
2 21.1 Each party, upon request of the other shall make,
3 execute and deliver any and all documents reasonably required to imple-
4 ment the terms of this Agreement.
5 22. NOTICES
6 22.1 Any notice required or permitted hereunder shall be
7 deemed properly served, given or made if sent by registered or certified
8 mail, postage prepaid, addressed to the noticed party at its principal
9 place of business to the attention of the party`s member on the Operating
10 Committee. A party may at any time change its designation of the person
11 to whom notice shall be given as hereinabove provided.
12 23. ENTIRE AGREEMENT
13 23.1 This contract constitutes the entire Agreement between
r Sierra Pacific and Idaho relating to the subject matter hereof, and
15 supersedes any previous agreements or understandings excepting those
16 specific Project Agreements as referenced in Section 1.8.
17 IN WITNESS WHEREOF, the parties hereto have executed this Agreement
18 in several counterparts effective the day and year first above written.
19 IDAH POWER COMPANY
20 By
21 ATTEST JA: S E. BRUCE, President
22 5,,t�
23
24 SIERRA PACIFIC POWER COMPANYY
25 By /_1 Cd
ATTEST:
L. GRE;BAN, Presidenc
-9
23.
Exhibit No.2
Case No. IPC-E-25-03
R.Adelman, IPC
Page 22 of 24

2
3 STATE OF NEVADA )
)ss.
4 COUNTY OF WASHOE )
5 On this ;'"day of 1978, personally appeared
6 before me, a Notary Public, JAMES E. BRUCE, President of Idaho Power
7 Company, who acknowledged to me that he executed the within instrument
8 on behalf of Idaho Power Company.
9 �au..� d.,-
Notary Public
10 :11 r.r!"1..:11''.r.N..�1+1!r. .. ..........••1..1 rl•I:11e /.1.1 Y1
11
_ i
wasncc County
12 _
_ My Comrnrs,^ron c"xDlres Dec 4 7932 a
l..N..NNN.1...IIIII.II IIN.NI....I.N 111.:'N..:N.11.•r.I......N.......I.INt.l.11llIN.III............ ryll ll.�
13
15 STATE OF NEVADA )
)ss.
16 COUNTY OF WASHOE )
17 On this 4;2Aday of 1978, personally appeared
18 before me, a Notary Public, JOE L. GREIMAN, President of Sierra Pacific
19 Power Company, who acknowledged to me that he executed the within
20 instrument on behalf of Sierra Pacific Power Company.
21 .--
Notary Public
22 ,............ I............:...... .............ILL.IIINpIN...........
1N11.111..1�NN.I,YIE
.^ JCHiI %IADARIAGA
23 �` \' No'cry FubhC Stato c/ n esz�a
24
myC�mnll$$frll Ex^Ira— rnC 1 i82
711.r1YW N11N1.11.N11..IIN•1.r1.N.IN r...i llr!III..11....YrI.NI.".i.l lll'.1!rl•If.'rfll...l.r..l�l:�lll...11.11.=
25
l
Exhibit No.2
Case No. IPC-E-25-03
R.Adelman, IPC
Page 23 of 24

EXHIBIT IIAII
(See Exhibit "A" , Ownership Agreement)
Exhibit No.2
Case No. IPC-E-25-03
R.Adelman, IPC
Page 24 of 24

BEFORE THE
IDAHO PUBLIC UTILITIES COMMISSION
CASE NO. IPC-E-25-03
IDAHO POWER COMPANY
ADELMAN, DI
TESTIMONY
EXHBIT NO. 3

NORTH V.&LMY STATION OPERATING
PROCEDURES CRITERIA
Between
SIERRA PACIFIC PO« ER COMPANY
and
IDAHO POWER COMPANY
Exhibit No.3
Case No. IPC-E-25-03
R.Adelman, IPC
Page 1 of 81

INDEX
2 I . 1 . SCOPE, PURPOSE AND TERN[ OF OPC: p-Aim
3 1.1 Scope ..... .................................................................. 4
4 1.2 Purpose and Intent .............................................................. 4
5 1.3 Term ....... ...................................................................... 4
6 2. Plant Deschption •............................................................... 5
7 2.1 Valmy Unit I .................................................................... 5
8 2.2 Valmy Unit 2 ....... ............ .. . . ................................ 5
9 3. Responsibility for Upkeep of the OPC ....................................... 5
10 3.1 OPC Review .................................................................... 5
11 3.2 Rn-Wons ........................................................................ 5
12 3.2.1 Requests for Revisions ........................................................ 5
13 3.2.2 Approvals ........................................................................ 6
14 3.2.3 Deviations ............. .... . ......................................... 6
15 3.2.4 Distribution of OPC and Revisions ........................................... 6
16 11. 1 . PROJECT OWNERSHIP AGREEMENT: pAIM
17 1.1 HustoncalOveniew ............................................................ 6
18 1.2 ContracmW Relationship ....................................................... 6
19 2. Manpower Policy ............................................................... 7
20 2.1 Staffing of the North Valmy Station NNM.NN.............................. 7
21 3. Operati:g Committee ........................................................... 7
22 4. Operating Philosophy .......................................................... 7
23 III. 1 . OWNERSHIP OF STATION CAPACITY: E&U
24 2. Unit 1 and 2 Dispatch .......................................................... 8
25 2.1 Introduction ..................................................................... 8
26 2.2 Daily Scbeduling ................................................................ 9
2 7 2.3 Schedule Rate of Change ...................................................... 9
28 2.4 Unused Capacity(mfer to Section V. Accounting Procedures) ........... 9
29 2.5 Plant Operating Capacity ...................................................... 10
30 2.6 Control Error ............................................... ............... 10
31 2.7 Records .............. .......................................................... 10
32 2.8 Valmy Midpoint lint Maintenance .......................................... 10
33 2.9 Forced Outages ................................................................ 10
34 3. Maintenance and Outage Planning ........................................... 11
35 4. Coal Car Maintenance and Opaations ...................................... 11
36 5. Safety Program ................................................................ 12
37 6. Training ........................................................................ 12
38 7. Security ..........................•.............................................. 12
39 8. Environmental Prvuxbon ..................................................... 12
40 9. Governing Codes and Standards ............................................ 13
] 1 V . ADMINISTRATIVE POLICIES: E&U
42 1. Budget Preparation and Controls ............................................ 13
1.1 O&M Budget. 13
1.2 Capital Budget ......... 13
......................................................•.
45 1.3 Non-Budget Items ............................................................. 13
46 2. Procurement and Warehousing .............................................. 13
47 3. Records Retention Program .................................................. 14
48 4. Station Reports .......................................... 14
91V92 North Valmy OPC Papa 2
Exhibit No.3
Case No. IPC-E-25-03
R.Adelman, IPC
Page 2 of 81

1 V. ACCOUNTING PROCEDURES: p&M
2 l Accounting Committee ........................................................ 16
3 2. Fuel Purchases wad Accounting _.... ............... ....................... 16
4 2.1 Pnaoedurt and Determinaboo of Monthly Coal Cost Allocation
5 and Pncing of Extended Valmy Capacity Usage ........................... 17
6 2.1.1 Shutdown of Units ............................................................ 17
7 2.1.1.1 Two Urut Operwon ........................................................... 18
8 2.1.1.2 One Unit Operwon ... ........................................................ 18
9 2.1.1.3 Other Shutdown Requim heats .............................................. 18
10 2.1.2 Coal Consumption by Each Party .......................................... 19
11 2.1.2.1 Base Coal Consumption .. .................... ................................ 19
12 2.1.2.2 Intercompany Us a(Coal Transfer Credits) ..............................20
13 2.1.2.3 Formula For Allocation of Coal ..............................................20
14 2.1.3 Operations and Maintenance Costs ..........................................23
15 2.l.4 Usage Charge ..................................................................23
16 2.1.5 Allocation of Coal Inventory Owsa tip ...................................23
17 2.1.6 Inventory Adjustment ........................................................25
18 2.2 Coal Aaalyscs and MenatrnM ............................................25
19 2.3 Coal Record Keeping .........................................................25
20 2.4 Coal Quality Control ..........................................................26
21 2.4.1 Coal Samplingrresung ........................................................26
22 2.4.2 Valmy Lab Quality Count ................................................... 26
. ....i ...................................
23 2.4.3 Periodic Inspections of the Mint .......... 26
24 2.4.4 Physical Inventories ...........................................................26
25 2.4.5 Freezing Conditions ...........................................................26
26 2.4.6 Mine Scale Calibrations .......................................................26
27 2.4.7 Trestle Camera System ........................................................27
28 2.5 Diesel O1 .......................................................................27
29 VI. GENERATION/ NTERCOMPANY USAGE: pAM
30 1.1 Calculation of Net Generation ................................................27
31 2.1 Determinatioa of InterzonVaay Usage ......................................21
32 2.2 Allocation of Intercompany Usage and Base FneW Bctw= Units ... 28
33 3.1 Allocation of Monthly Net Generation Betwern Companies ............. 29
34 VI1. 1 . %MISCELLANEOUS PROVISIONS: Peel:
35 1.1 End= Agreement .............................................................. 30
36 1.2 Assignment and Delegation ....»............................................30
37 1.3 Clause He:ading3 ...............................................................31
38 APPENDICES:
39 Appendix 1 ................................................................ ...........Deft Boas
40 Appendot 2 ..............................................................Accounting Guidelines
41 Appendix 3 ....................................................Inventory Allocation Exam Les
42 Appendix4 .....................................................................Martpowcr Chart
43 Ain=dix S ............................................... Coal Physical Inventory Procedure
44 Appendix 6...........................................Switchyard Cost Allocation Procedure
45 Appendix 7 ..................................................Example Incremental Cost Curve
46 Appendix 8 .....................................................Example Belt Scale Procedurt
911!92 North Valmy OPC Pale 3
Exhibit No.3
Case No. IPC-E-25-03
R.Adelman, IPC
Page 3 of 81

1 North 'Valmy Station Operating Procedures Criteria
2
3 In compliance with the North Valmy Power Plant Project Operation Agreement
4 dated December 12, 1978, including but not limited to Sections 1.5. 211. 3.2, 8.2. 8.5, and 9.3,
5 the undersigned parties hereby enter into the following Operating Procedures Criteria("OPC").
6 This OPC is made this IL_day of Aehr..Qru 93 between SIERRA PACIFIC
7 PO%TR COMPANY(bueinafter referred to as "Sierra Pacific), a public utility corporation duly
8 organized and existing according to the laws of the state of Nevada. and IDA.HO POWER
9 COMPANY (hereinafter referred to as 'Idaho") a public utility corporation duly organized and
10 existing according to the laws of the State of Idaho. and duly quaL'ficd and doing busiaus in the
11 State of Nevada (Sierra Pacific and Idaho are hereinafter referred to as the "Company" or
12 "Companies ).
13 in consideration of the mutual promises to each other, Sierra Pacific and Idaho
14 agree to implement the OPC as follows:
15 I. 1 . SCOPE, PURPOSE, AND TERM OF OPC:
16 1 . 1 .1 SCOPE
17 This OPC provides a basis of agreement between Sierra Pacific and Idaho
18 regarding the operation of the North Valmy Electric Generation Station ("Station'). The ocigin31
19 Operating Criteria for the operation of the Station owned jointly by Idaho and Sierra PacTic was
20 dated February 2. 1979. and finalized on April 20. 1979. At the present time, with the onset of
21 two unit operation it is prudeat to review and update the plant operating procedures_
22 1 . 1.2 PURPOSE AND INTENT
23 The purpose of this OPC is to set forth in reasonable detail all of the significant
24 procedures relating to the operation of the Station- This document supetzedcs the previous OPC
25 dated July 1, 1986.
26 The Station Operating Committee was onginally established by the Dumber 12,
27 1978, North Valmy Power Plant Pmject ("Project Agreement')between Sierra Pacific and Idaho.
28 The Operating Committee consists of two membetz. one designated by each participating utility.
29 The responsibilities of the Operating Committee are described in Section II. 3.
30
31 I. 1.3 TERM
32 It is hereby agreed that this OPC shall continue in force from the effective date of
33 May 1, 1986. until the end of the project as set forth in Sections 7 and 9 of the North Valmy
34 Power Plant Project Ownership Agreement dazed December 12, 1978, or until the Companies shall
35 by amendment or other mutual anon in writing alter the term.
IV27r92 North Val my 0PC Pace 4
Exhibit No.3
Case No. IPC-E-25-03
R.Adelman, IPC
Page 4 of 81

1 I . 2 . PLANT DESCRIPTION
2 1 . 2. 1 VADAY UNrr 1 :
3 Valmy Unit 1 is a coal-find cicctnc gcncmng unit. .;4 MW (nominal rating) at
4 the Station, which became oommercially operable in 1981.
5 The Valmy Unit 1 turbine is a tandem compound, two flow exhaust.condensing.
6 reheat type steam turbine. The turbine generator unit is nameplate rated at 254.300 KW gross
7 when operating at 2,400 prig, 1.000T at the throttle, reheating to 1,000T, exhausting at 2.5
8 inch Hg A. and with all seven stages of feedwater heating in service. Steam for the turbine-
9 generator is provided by a boiler having a continuous razing of 1,909,300 IbJhr, at 2,600 psi and
10 1,005'F, using pulverized bituminous coal as fuel.
11 I. 2.2 VALMY UNrr 2:
12 Valmy Unit 2 is a coal-find electric generating unit, 267 MW' (nominal rating) at
13 the Station which operates with certain common facilities in conjunction with the Valmy Unit No.
14 1. Valmy Unit 2 became commercially operable in 1985.
15 The Valmy Unit 2 turbine is a tandem compound, two flow exhaust,condensing.
16 reheat type steam turbine. The turfiine generator unit is nameplate rated at 267.000 KW gross
17 when operating at ?,400 psig, 1.000T, reheating to 1,000T. exhausting at 2.5 inch Hg A and
18 with all seven stages of feedwater heating in service. Steam for the turbine-generator is provided
19 by a boiler having a continuous rating of 1.997.600 lb-/hr. at 2,640 prig and 1.005'F, using
20 pulverized bituminous coal as fuel.
21 I. 3 . RESPONSIBILIT-Y FOR UPKEEP OF THE OPC
22 I . 3. 1 OPC REVIEW
23 This OPC will be reviewed annually by the responsible departments of each
24 company.
25 On an annual basis. Sierra Pacific's Member of the Operating Committee will
26 coordinate and confirm this review process and will maintain a record of these reviews.
27
28 I. 3.2 REVISIONS
29 I . 3.2.1 REQUESTS FOR REVISIONS
30 Requests for revision from either company shall be sent to Sierra Pacific's
31 !Member of the Operating Committee.
32 I . 3.2.2 APPROVALS
33 A revision to this OPC must be approved by the tionh Valmy Operating
34 Committee.
8/27/92 Nonh Valmy OPC Page 5
Exhibit No.3
Case No. IPC-E-25-03
R.Adelman, IPC
Page 5 of 81

1 1 . 3.2.3 DEVIATIONS
2 It is the understanding of the Companies that there may be deviations from these
3 operating procedures cntena with the approval of the Operating Committee. However, any such
4 deviation and the tom shall be specifically identified to the Operating Committee prior to approval
5 of such deviation.
6 I. 3.2.4 DISTRIBLMON OF OPC AND REVISIONS
7 Once a revision has been reviewed and approved, Sierra Pacific's Member of the
8 Operating Comunince will disuibute the revisions and will cause a list of revisions to be maintained
9 by Operations Support, and an update lit will be distributed%ith each revision that is issued.
10 'Ibis OPC and aay revisions or amendments thereto, shall be distributed as
1: follows:
12 Sierra Paciftc Idaho
13 (I3 copies) (8 copies)
14 Sierra Pacific's Member of the Operating Co=n= shall be responsible for the
15 prompt distribution of this OPC, and any revision or amendmennts thereto.
16 H. 1 . PROJECT OWNERSHIP AGREEMENT
17 II. 1 . 1 HISTORICAL OVERVIEW
18 On December 12, 1978, an agreement was reached between Sierra Pacific and
19 Idaho with regard to the licensing, design, consuvc6on, ownership, and operation of a coal-fired
20 plant and common facilities near Valmy, Humboldt County, Nevada. It was agreed at that time,
21 that the North Valmy project, which would ultimm ly consist of two coal-firrd generating units,
22 would be jointly owned by Sierra Pacific and Idaho. Subsequently, the Public Service
23 Commission of Nevada and the Idaho Public Utilities Commission approved the agreement
24 between the two companies providing for equal ownership of the two units and common facilities.
25 North Valmy Unit 1 was placed in commercial operation on December 11, 1981.
26 North Valmy Unit 2 was plaid in commercial operation on May 21. 1985.
27
28 II. 1.2 CONrRAC.'TL'AL RELATIONSHIP
29 The contractual relationship between Sierra Pacific and Idaho is defined in the
30 Project Agreement. 'Ile Praim Agreement addresses the ownership. the constniction (including
31 related financing. licensing, design and construction of the Station), and the operation of the
32 Station including the rules and methodology whereby the Station operations will be supervised by
33 the Operating Committee.
Bn7/92 North Valmy 0PC Pace 6
Exhibit No.3
Case No. IPC-E-25-03
R.Adelman, IPC
Page 6 of 81

l II. 2 . MANPOWER POLICY
2 11. 2. 1 STAFFING OF THE NORTH VALMY STATION
3 The staffing of the North Valmy Station is the direct responsibility of the Station
4 Manager. (Sec Appendix 4). Approval of specific Station staffing policy is requicrd by the
5 Operating Committer. The general policy for staffing is to provide adequate and technically
6 competent personnel such that the Station can be operated and maintained in a reliable and efficient
7 manner. A.nnuafly, the Station operating, manpower. and maintenance budgets are submitted to
8 the Operating Committee for Station staffing review and approval. Additionally, from time to tirne,
9 outside contractors and vendors may by required to support Station personnel during scheduled
10 outages and for major maintenance activities. subject to Operating Committee approval. (See
11 Section M. 2.9).
12 II. 3 . OPERATING COMMITTEE
13 The Operating Committer is comprised of one appointed reprrscntativc of each
14 company. The committee meets at such times as may be agreed to or upon two weeks writL-n
15 notice by either member.
16 The complete function of the Operating Committee is established in the
17 December 12. 1978, Operation Agreement for the North Valmy Power Plant Projext_
18 The Operating Committee shall meet at least once each year to approve the
19 operating budgets, plant schedules for maintenance, and any similar matters of significance for
20 planning and operating purposes.
21 The Operating Committee is to establish general policies and practices to be
22 followed in the operation of the Station. The Operating Committee is responsible for providing
23 and approving all major Station operating decisions. review and approval of operating expenses,
24 review and approval of the Station annual budget, review and approval of payment of Station
25 operating expenses, review and approval of additional activities as rrLrxd to accounting. fuel costs.
26 scheduling of power output and scheduling of station outages.
27
28 II. 4 . OPERATING PHILOSOPHY
29 All Station activities are under the direction of the Plant Manager. To the extent
30 practicable, all operating procedures a= written and all Station work is planned and scheduled in
31 advance.
32 The "Station Operitin,g Procedures Manual' contains regulations defining
33 administrative actions necessary and approvals that roust be obtained prior to initiating action for
34 any task during operation or shutdown conditions. These regulations contain specific instructions
9/27/92 North Valmy OPC Page 7
Exhibit No.3
Case No. IPC-E-25-03
R.Adelman, IPC
Page 7 of 81

1 appb"ble for reliable Station operation including, but not limited to: (1) Operating Procedures,
2 (2) Operating Orders. (3) System Descriptions. and (4) Tagging Procedures.
3 Ill . l . OWNERSHIP OF STATION CAPACITY
4 Sierra Pacific and Idaho are entitled to their 50 percent ownership shares of the
5 Station (or unit) net generating capacity to the extent that this capacity is actually available.The
6 Station, and unit maximum continuous capacity ratings and each parmer's ownership in that
7 capacity is dcw=ined as follows: (a) each generating unit is tested every thin months and after
8 each major overhaul, for a period of four hours and (b) such test determines what the unit or
9 Station's maximum net generating capacity actually is with all necessary auxiliary equipment in full
10 operation.
11 Whenever the Station (or unit) has its maximum net capacity restricted to
12 something less than the maximum continuous capacity razing as determined above, each Company
13 shall be entitled to its 50 perrtnt share of this lesser net capacity. These mstnctions will be based
14 upon the quarterly capacity tests interim tests as economic loading permits, and estimated load
15 reductions caused by equipment failures and changes in operating conditions. Each Company shall
16 be able to dispatch its full or restricted ownership capacity as it wishes, within the constraints of
17 this and other applicable agmcmcnts.
18 As the plant operator, Sierra Pacific shall have the rrspeasibility of determining
19 when and to what extent the Station (or unit) has restricted capacity and shall immediately notify
20 Idaho of any change in Station(or unit)capacity. A record will be made of the available Station(or
21 unit)capacity for each hour during the day, and this record will be sent to the Operating Committee
22 members each week.
23
24 III. 2. UNIT 1 AND 2 DISPATCH
25 III. 2.1 INTRODUCTION
26 Valmy Unit 1 and 2 shall be dispatched as a total Station based on the most
27 economic Station operating level without jeopardizing Station reliability while meeting the system
28 reliability requkcments of both Sierra Pacific and Idaho's Systems. If a Company requires the
29 Station output to be reduced due to its system reliability requirements, such reduction will be
30 applied to that Company's share of the Station output. Each Company shall provide a weekly
31 Station utilization estimate indicating the maximum Station capacity they will require during that
32 week. If the combined requirement of both Companies is less than the total capacity of either Unit
33 1 or 2, then by mutual agrrement, one of the units may be shut down for economic reasons during
34 that weekly perind. If either Company requests that both units remain in operation that Company
5,27 9: North Valmy OPC Pat- 4
Exhibit No.3
Case No. IPC-E-25-03
R.Adelman, IPC
Page 8 of 81

is obligated to take sufficient power to maintain minimum load on both units as determined by tee
2 Plant Manager,
3 III. 2.2 DALLY SCHEDULING
4 Not later than 3:00 p.m. Pacific Time !Standard or Day Light Savings, of cx.h
5 working day, each Company's designated scheduler or dispatcher agree on a plant generating
6 schedule for the next day or days. Scheduling is on Pacific Time. The Sierra Pacific dispatcher
7 will then notify the plant operator of the estimated hourly amounts of generation and capacity
8 desired. Such schedules may thereafter be changed by either Company by giving notice to the
9 other Company at least 20 minutes prior to the how in which the change is to take place. If the
10 transmission path from the Station to either Company is open, the schedule from the Station to the
11 affected party wiU be zero. unless arrangements for an a:tcrnate path can be made. Station net
12 output will be verified hourly to the Sierra Pacific dispatcher. Idaho's sham of the Station
13 generation as ptesebeduled or as confirrwd at least_0 minutes prior to the hour is considered firm
14 for that hour by Sierra Pacific unless the plant experiences a forced outage or an equipment
15 problem which limits Idaho's share of the total plant output to a point where Idaho's schedule
16 cannot be art. Any devianotis of Station output from a schedule will be rworded and be corrected
17 in future generation schedules.
18 III. 2.3 SCHEDULE RATE OF CHANCE
19 Neither Company &'hall schedule a raze of change of its shoe of the Station output
20 greater than such Company's perocntage of the rate of change which is within the ability of the
21 Station to perform,except to the extent the other Company scbedules a rate of change such that the
22 rate of change of the combined schedule is not greater than the ability of the Station to perform.
23 The normal maximum rate of change is 2 percent per minute of generator an plate rating and
24 3 percent per minute for emergency, Generator load changes will be tirade by Station Operators as
25 instructed by Sierra Pacific dispatchers. In extreme emergencies, s}stem and plant personnel shall
26 use their best judgement rtgarding the cart of change of plant output
27 Ill. 2.4 UNUSED CAPACITY (REFER TO SECTION V. ACCOLWnNG PROCEDURES)
28 A Company may schedule in any hour. for the purpose of meeting its own system
29 leads and when its own Valmy capadry is fully utilized, any unused capacity of the other Company
30 in the project In vxh hour. A Company will not rake a direct off system sale of the unused
31 capacity of the other Company without prior mutual agreement_
32 If mutually agreed the unused capacity of one Company may be utilized by the
33 other Company for the purpose of meeting its hourly operating reserve requirements. Such
311 capacity shall be considered firm for the hour.
8/27,92 North Valmy OPC Pale 9
Exhibit No.3
Case No. IPC-E-25-03
R.Adelman, IPC
Page 9 of 81

1 Each Company shall he noufrod when its unused capacity is being utilized by the
2 other Company.
3 Two-Unit Operation:
4 If both Companies desire that both units be left on-line. then either Company may
5 use the unused portion of Station output of the other Company on a non-firm basis unless
6 otherwise provided for in this OPC. If, for any reason. the Company which is not using its full
7 share of the Station output desires its share be returned. ;hen that share will be made available to it
8 within the runp conuraints.
9 U one Company desires its share of the Starion be shut down but the other needs
10 both units left on-line, then the Company which needs both units left on-line must take enough
11 generation to maintain minimum loading on tx)th units.
12 111. 2.5 PLANT OPERATING CAPACITY
13 The plant operator shall promptly notify Sierra Pacific dispatchers who wit
14 promptly inform Idaho dispatchers of any foreseeable, impending or emergency change in
15 operating limits or operating capacity of the Station. The Companies shall thereupon make any
16 necessary changes in the respective generation schedules to conform such schedules to the;:
17 respective percentage of such changed operating limits and capail:4
18 III. 2.6 CONTROL ERROR
19 The plant operator shall., subject to unscheduled outages or operating limitations,
20 operate the Station as scheduled by the Companies. The plant operator will attempt to hold
21 deviations from schedule to a minimum, and will adjust for any deviation as soon as possible
22 under like conditions.
23 Any unit control error for the Valmy units wM be included in Sierra Pacific Power
24 Company's control area.
25
26 III. 2.7 RECORDS
27 The plant operator shall keep adequate records of plant operations, including
28 records neccismy to mflect the efficiency of project operation and maintenance programs, and to
29 record generation of power, and shall keep other records at the request of either Company as
30 required by mgulnory authorities. All records shall be made available for inspection by the
31 Companies as desired, and copies shall he furnished to the Comparum as rcqucsted.
32 III. 2.8 VALMY-MIDPOtmr LINE MAINTENANCE
33 When practicable, Valmy-Midpoint line maintenance for other than emergencies
34 wZll be scheduled at least one week in advance.
812 i/92 ,North Valmy OPC Pale 1
Exhibit No.3
Case No. IPC-E-25-03
R.Adelman, IPC
Page 10 of 81

1 III. 2.9 FORCED OUTAGES
In the event of an Cniergency outage, or a reduction in Station capacity Sierra
3 Pacific shall imrnediuely notify Idaho as to the capacity lost and its expected duration, and shall
4 taste such steps, including the use of premium time or outside contractors, as may be required to
5 return the Station to maximum capacity as soon as is masonably possible unless mutually agreed to
6 otherwise.
7 III. 3. MAIN"TENANCE AND OUTAGE PLANNING
8 Recognizing the importance of maintenance and outage planning to the
9 Sierra Pacific and Idaho systems, Sierra Pacific will submit, prior to May 1 of each year, its
10 proposed annual maintenance and outage plans and schedules for each unit at Valmy for the
11 following year to the Operating Committee. The Operating Committee will review and approve
12 these plans and schedules in the same manner and at the same time that the annual budget is
13 reviewed and approved as requited in Section S of the 'Agreement for the Operation of the North
14 Valmy Power Plant Project.' dated December 12, 1978.
15 The North Valmy maintenance and outage planning philosophy, in recognition of
16 the high cast of down time, is to maziml availability and minimiz forced outage nuts.
17 Anticipated outages are planned using network diagrams(such as CPM or PERT)
18 to minimize total time involved and to locate points where additional resources (beyond those
19 normally available at the Station) rruy be profitably employed (including premium time and outside
20 contractors) to reduce the duration and, therefore, the total cost of the outage unless mutually
21 agreed by both Companies to do othemise.
22 The objectives of maintenance planning art:
23 (1) To meet roquirtm uts imposed by Lmw and applicable insurance carriers;
24 (2) To avoid performing maintenance on a crisis-only basis or on a rigid
25 timetable; and
26 (3) To schedule and perform maintenance when analysis of test and operating
27 results indicate such maintenance is necessary to prevent failure or improve
28 the efficiency of operation.
29 I11. 4 . COAL CAR MAINTENANCE AND OPERATIONS
30 The Sierra Pacific Power Production Depa=ent is responsible for developing
31 and maintaining procedures addressing coal car maintenance and operations. The Operations
32 Support Department Manual currently sets forth the following procedures:
33 A. Acceptance of Railroad Repaired Coal Cars
34 B. Coal Scale Calibration
35 C. G.E. Rail Car Contract
36 D. Coal Inventory
37 E. Rail Car Derailment
38 F. Coal Pile Inventory
9127/92 Norh Valmy OPC Page 1 :
Exhibit No.3
Case No. IPC-E-25-03
R.Adelman, IPC
Page 11 of 81

1 G Door System Maintenance
2 H. Coal Car Reweighing
3 I. Trestle Carncra Operations
4 1. Frozen Coal Handling
5 K. Railcar Fleet Slaintznanae Manageruent
6 Ill. 5 . SAFETY PROGRAM
7 In accordance with Sierra Pacific's "Handbook of Safcty Rules` Part III.
8 Generation Plant Rules,Sierra Pacific is committed to an effective safety program that will comply
9 with all laws, rules, and regulations promulgated by governing bodies, and more importantly, to
10 achieNing the lowest industrial injury ravc attainable.
11 The key pars of the current program are:
12 A. Strict eaforuroent of safety rules including appropriate disciplinary aaion
13 for violations.
14 B. Effective use of the plant safety committee.
15 C. Assignment of high priority to plant safety wort requests.
16 D. Steam plant fire protection. as discussed in Sierra Pacific's Policy and
17 Procedures Manual. Section 10135.
18 III. 6 . TRAINING
19 Sierra Pacific shall maintain an ongoing training program for steam plant
20 operators_ This training shall include both classroom and on-the-job training and is the
21 responsibility of the Plant Manager,
22 The scope and content of the North Valmy training program is defined in the
23 Sierra Pacific's Oper doors Support Department Manual under the section titled 'Training for Steam
24 Pant Operator.'
25
26 III. 7 . SECURITY
27 Station security shall be maintained in aecorda= with SiCTM Page's security
28 procedures. Specific security requirements for the North Valmy Station are defined in Sierra
29 Pacific's 'Security Procedures Manual_'
30 III. 8. ENVIRONMENTAL PROTECTION
31 It is the Companies' policy to comply fully with aJ applicable federal and state
32 rules and regulations and, further, to cooperate fully with all concerned agencies to assure
33 minimum environmental impact from plant oper2bons.
34 The Station environmental compliance procedures are written, in place, and
35 audited quarterly by Sierra Pacific's Environmental Affairs Department.
36 In addition, the Environmental Affairs Department controls and updates the
37 'Sierra Pacific Emission Identification and Control Plan" manual which addresses station
38 cmironmental compliance requirements.
8127192 North Valmy OPC PaLm 12
Exhibit No.3
Case No. IPC-E-25-03
R.Adelman, IPC
Page 12 of 81

1 Ill. 9. GOVERNING CODES AND STANDARDS
2 Specific codes and staadm&currently pertaining to the Station include-
3 A. National Board rasp on Code
4 B. ASME Boiler and P um Vessel Code
5 C. Nanonal F= Code, ti anonal Fire Protwuoa Association
6 D. ANSIIASME B 31.1 Power Piping Code
7 E. State of Nevada Boiler and Pressure Vessel Rules and Regulations
8 I V. ADMINISTRATIVE POLICIES
9 IV. 1 . BUDGET PREPARATION AND CONTROLS
10 1 V. 1.1 O&IM BUDGET
11 Any department of either Company whrch anticipates charging any expenses to
12 Valmy FERC accounts roust submit their budgets (Vilmy sections only) to Siern Pacific's Joint
13 Facilities Accounting. Joint Facilities Accounting combines all the departments' data and present a
14 total Valmy budget to the Valmy Operating Committee for approval as required in the 'Operating
15 Agmcnient." (Refer to Section 5.)
16 1 V. 1.2 CAPrrAL BUDGET
14 On or before September 1st of each calendar year, Sierra Pacific and Idaho
18 prepare a joint budget for major capital expenditures. Detailed estirnatrs for all proposed capital
19 additions to the Staoon are supplied to Sierra Pacific and Idaho manzgernent prior to approval by
20 the Operating C=mmm.
21
22 IV. 1.3 NON-BUDGET ITEMS
23 `Jon-budget expenditures must be submitted to the Operating Committee for
24 approval.
25 IV. 2. PROCL'REMEN'T AND WAREHOUSING
26 Procurement is in accordance with Sierra Pacific's Purcbastng Department
27 Policies and Procedures,, dated OctoW 1, 1994. or approved revisions thereof.
28 Warehousing is in accordance with Sierra Pacific's "Inventory Slanagemcm
29 Policies and Pnxxdares Manual,' or approved revisions thereof.
30 Revisions to Procurement or Warehousing policies or procedures are submitted to
31 the Operating Committee for approval_
North Valmy OK Pao 13
Exhibit No.3
Case No. IPC-E-25-03
R.Adelman, IPC
Page 13 of 81

I I V. 3 . RECORDS RETENTION PROGRAM
2 A formal Rccord Retention Schedule, designed to meet both Station and corporate
3 needs as well as regulatory requimmcots, is an file with Sierra Pacific corporate archives.
4 All records art: retained at the Station for one calendar year. They art then
5 disposed of or stored in the archives for varying periods in accordance with the retention schedule.
6 The record retention schedule shall conform to FERC requirements and any
7 additional requirements imposed by either Sierra Pacific or Idaho.
8 [Federal law dictates record retention mquirements for power plants in 18 CFR
9 125.3 Section 30a, 30b, 31a, and following. In addition. Sierra Pacific mainL-uns a records
10 retention handbook entitled "Sierra Pacific Records R=ntion Schedu:e Handbook."]
11 I V. 4 . STATION REPORTS
12 Daily reports covering Station operation arc maintained at the site and consist of
13 reports as listed below:
14 1 , Steam Electric Unit Perforrnaocc Work Shea
15 2. Turbine Daily Log
16 3. Boiler Daily Log
17 4. Plant Equipment Daily Log
18 5. Chemical Usage Daily Log
19 6. Water Tream=t System In Service Log
20 7, Mainten>.ance Work Orden Daily Report
21 8.' 0800 Daily Summary Report
22 9.• Report of Capability Restriction
23 ['To be sent to Idaho daily.]
24 Monthly reports are scot to the General Manager, Power Production and to
25 members of the Operating Committee. These include reports on coal, water treatment, and
26 operation and maintenance. The coal report includes coal inventory, coal burned, average beat
27 content, and sulfur content. The water tre rent report includes boiler water and cwhog water
28 analyses, chemicals added, demineralizer operation summary and well oper3hon, in hours and
29 gallons. The operation and maintenance reports include the daily heat races for each unit, summary
30 of maintenance performed, and aunrnary of plant operations.
31 TW following listed reports art given to the Operating Committee and Accnunting
32 Commium memmben:
S,27,92 North Valmy OPC ['ate 14
Exhibit No.3
Case No. IPC-E-25-03
R.Adelman, IPC
Page 14 of 81

1 C-ne_r_ntiQIl and n!erchanee
2 1. Gross Generation
3 2. Station Use
4 3. Energy Delivered to Idaho at Interconnection
5 4. Detail of Losses (This will he dependent on loss accounting procedure
6 established.)
7 5, Maximum Demands on Plant(60 minutes)
8 6. Plant Hours Connected to load Annually
9 7. 0800 Daily Summary Report by Telephone
10 8. KERC Outage Listing Report
11 9. Weeidy Unit Capability Restriction Report
12 Fuel D=
13 1. Coal Received
14 2. Coal Inventory Reports
15 3. Coal Burned
16 4. Coal Cost Report
17 5. Oil Purchases
18 6. Oil Inventory Report
19 7. Ott Burned
20 8. Periodic laboratory AnalyS:s of Fuels
21 Fuel Shino'nQ Data Rcpoctt
22 1 . Freight Costs
23 _' Equipment Maintenance Cost Relx�rt
24 3. Equipment Lease Costs(if applicable)
25 4. Equipment Inspection Reports
26 5. Shipping Losses
27 Q2:ration and Mainte any l=-xs R=m
28 1 . Operation and Maintenance Expense Sionthly by FERC Account Number,
29 C piw Ex;!cnditurc ReDurts
30 1 . Monthly Prvjw Reports for Capital Expenditures
31 The following listed reports am generated at the Valmy Station and are provided
32 to the Opemng Commirtee and Accounting Committee members upon request.
33 Monthly
34 I . Safety Meeting Report
35 2. Fuel Oil Inventory
36 3. Coal Inventory
37 4. Gcwx;rjon Report
38 5. Coal Cost Report
39 6. Vehicle Time Sheet Report
40 7. Petty Cash Report
41 8. O&M and Capital Budget Report
42 9. Coal Quality and Quantity Report
43 10. Manager's Monthly Report
8127/92 North Valroy OPC PW 15
Exhibit No.3
Case No. IPC-E-25-03
R.Adelman, IPC
Page 15 of 81

1 $rt�klx
2 1 . Fuel Status Report
3 2. Coal Consumption Report
4 BiW=kly
5 1. Tune Sheets
6 Dill
7 I . Valmy Plant Report
s i�uuc�x
9 1 . Quarteriy Emimions Report
10 2. Manager's Quarterly Report
11 lntt - Ital
12 L Upset Breakdown Report
13 2. Ambient Air Station Data Rermn
14 3. Excess Emissions Report
15 Special reports on taps and outages are provided to the members of the Operatiug
16 Committee through the Sierra Pacific member.
17 V . ACCOUNTING PROCEDURES:
18 V . 1 . ACCOUNTING COMMITTEE
19 The Accounting Committee was establishod under Section 9.1 of the Construction
20 Ag=mcnt, and will continue its jurisdiction during the operating period of the Station. The
21 commiuce consists of one member from each company.
22 The Amounting Committee has the following objectives:
23 A. To establish, review, and maintain the Station accounting and auditing
24 procedures, policies, and programs. This includes all budget. finance. and
25 tax requirements.
26 B. To e=rt compliance with regulatory accounting mtquirements.
27 C. To provide accounting liaison between all involved in the construction and
28 operation of the project.
29 Amounting procedures and guidelines are outlined in 'Accounting Guidelines for
30 the Operation of the North Valmy Power Plant Project Units No. 1 and No. 2' which is included
31 as Appendix 2.
32
33 N' . 2. FUEL PURCHASES AND ACCOUNTING
34 Weighmaster certificates and freight bills are received at the Station with each coal
35 delivery, and arc the official notification to the Plant Manager of the arrival of that delivery.
36 Weighmaster certificates and freight bills for each coal delivery are verified and sent to Sierra
37 Pacific's Accounts Payabtc Department as soon as they are received at the Station.
W27i92 North Valmy OPC Page 16
Exhibit No.3
Case No. IPC-E-25-03
R.Adelman, IPC
Page 16 of 81

I Accouning is done in accordance with operating accounting guidelines. as
2 specified in the Operating Agreement, Section 4 and the OPC. These guidelines are discussed in
3 the "Accounting Guidelines for the Operation of the North `'almy Power Plant Project Units No. 1
4 and _" which is included as Appendix 2.
5 T'he a ciministmon and accounting of the pricing of coal in the Companies' shatrs
6 of the coal inventory shall be adjusted monthly as set forth in the 'Accounting Guidelines.'
7 Appendix 2.
S V. 2.1 PROCEDURE FOR DETERM11NATION OF MONTHLY COAL COST
9 ALLOCATION AND PRICING OF EXTENDED VALMY CAPACITY
10 USAGE (SEE APPEINDIX 1 FOR DEFINITION OF TERMS)
11 V. 2.1.1 SIILTDOWN OF UNITS
12 Either Company has the prerogative, at any tithe, to request that its half of the
13 plant's available capacity be shutdown. However. the requesting Company may do so only with
14 the intent that the shutdown be for a period of not less than sev= (7) days ('Sbutdown'). Except
15 as specified below, a shutdown of the Station by a Company will be treated as a period of time
16 when the Station is unavailable for that Company's use and as a result. that Company will not be
17 charged no-load costs for that period.
18 If the requesting Company ends a shutdown before the seven(7)day minimum is
19 mached-then the tune period will not be considered a shutdown and that Company will be charged
20 its share of the Station's no-load costs for the total number of hours from the beginning of the
21 requested shutdown to the tune thst energy is futt scheduled and received by that Company.
22 After one Company requests a shutdown, one or more of the units will be
23 physically shut down only if mutually agreed upon_ If neither unit is physically shut down as a
24 result of the request and the requester decides to end the shutdown. the requester must give the
25 other Company notice of its intent.
26 If the requesting Company ends the shutdown after the initial seven (7) day
27 minimum has beta reached. then:
28 (1) If the shutdown is ended due to an emergency on its system, then the
29 requesting Company will not be charged no-load costs for the cntue period
30 of shutdown, or
31 (2) U the shutdown is ended due to reasons other than an emergency on its
32 system, then the requesting Company will pay its share of the no-load
33 charges for the previous five (5) days' service hours minus the hours of
34 advance notice to end the shutdown. 'Therefore, if the requesting Company
35 ends the shutdown and wants energy as soon as possible, that Company
36 will be entitled to reserve its full percentage share of the Station output
37 within twenty-four(24) hours after first giving notice (as specified herein)
38 and will be charged for its share of the Station's no-load costs for the total
39 number of hours cakulated as follows: 120 hours nunus the number of
40 hours between the requesting Company's first notice to end and the
+2 North Valmy 0PC Page 17
Exhibit No.3
Case No. IPC-E-25-03
R.Adelman, IPC
Page 17 of 81

1 shutdown and Lhe tune that energy is first scheduled and received by that
2 Company. If the requesting Company gives five (5) days (120 hours)
3 advance notice that they intend to end the shutdown. they will not be
4 charged no-load costs for that five(5)day perm.
5 V. 2. 1.1.1 TWO UNIT OPERATION
6 If a Company has requested that its shim of the plant be shutdown, but for
7 whatever reason both units are kept on-line,the requcsroes full percentage share of the Station will
8 be available to it within twenty-four(24) hours after f= requesting the shutdown to end.
9 If there is an emergency (emergency means loss of resources or transmission
10 beyond the control of the affected Company affecting its ability to serve firm obligations. see
11 Appendix 1) on the put of the requesting Company, or if mutually agreed to at the time, the
12 requestor shall be entitled to schedule and receive imunediately, any unused capacity in the Station
13 less any unused capacity being utilized by the other Company for spinning reserve; subject to any
14 ramp rate restrictions in effect at the time. In addition, the Company which is utilizing the
15 requestor's sham of the Station will immediately take reasonable steps necessary to release the
16 requestor's share of the Station back to it. In no instance, will any portion of the requestor's full
17 perccztage share of the Station's available capacity be withheld from its use for a period of more
18 than twenty-four (24) hours after first giving notice of its desire to end the shutdown and take
19 energy from the Station.
20 V. 2.1.1.2 ONE UNn OPERATION
21 If a unit has been physically shut down due to a request for shutdown by either
22 Company then the mquestor shall be entitled to schedule and roc:ive energy from its percentage
23 share of the Station only as it becomes available during the start-up of the off-line unit, provided.
24 however.the requestor shall be entitled to receive its full percentage share of the Station's available
25 capacity w-ithin twenty-four(24)hours after first giving notice to end the shutdown.
26 V. 2.1.1.3 OTHER SHUTDOWN REQUIREMENTS
27 At no time during the twenty-four hour period following a request to end a
28 shutdown shall the non-requesting Company be required to curtail load or incur higher costs in
29 order to meet the demsnd of the rtquestor.
30 If during a shutdown. the non-requesting Company chooses to keep both units in
31 service, the mquectot r, portion will still be considered shut down for the purposes of assigning
32 no-load costs. If the Station is requested to be shut down, and the other Company chooses to keep
33 at least one unit in service. the Company keeping the unit(s) in service is responsible for no-load
34 casts for all operating units and shall have the capacity available for its use until the other Company
35 gives notice to end the shutdown and begins to schedule and receive energy in accordance v►ith
36 Sections V. 2.1.1, V.2.1.1.1, and V. 2.1.1.2.
911l92 North Valmy OPC Page 18
Exhibit No.3
Case No. IPC-E-25-03
R.Adelman, IPC
Page 18 of 81

1 V . 2.1.2 COAL CONSUMPTION BY EACH PARTY
2 V. 2. 1 .2.1 BASE COAL CONSUMPTION
3 The following discussion concerns only the amount of coal consumed by each
4 Company in its own portion of Valmy, The amount of coat consumed by one Company in the
5 other Company's portion of Valmy is additssed in Section V. 2.1.2.2 "Intercompany Usage."
o Each urit's monthly coal consumption is allocated based upon the summation of
each Company's hourly Btu consumption. During times of Stat:ow shutdown, the hourly Btu
8 consumption will equal zero for the requestor. If a unit is physically shutdown, the Btu allocation
9 for both Companies will be zero_ The hourly Btu consumption is esvtated based upon the heat
10 rate came in the form:
11 Y= AX3 +BX2 +CX+ D
12 Y= Btu./hr. Consumed
13 X =Megawatt Load
14 A. B. C. D =Cun-e Coefficients
15 CUrrratly, the ctwve coefficients are defined as foiloa-s:
16 A = 13.2274735036 (Unit 1); 15.2873081285 (Unit 2)
17 B = •1. 44,4225261638 (Unit 1); -4.745.2227714770 (taut 2)
18 C = 8,015,160.1986559285 (Unit 1); 8,802.4082679119983 (Unit 2)
19 D - 286,654315.66236201W (Unit 1). 237,293,304.6652663310 (Unit 2)
20 Between 6 and 12 months after completion of consauc ion and 'initial opera ion of
21 a unit an abbreviated ASME FTC 6.1 performance test is conducted on the unit to determine actual
22 unit heat rate at operating conditions, Thertaftcr, a test is run every five years or immediately after
23 any unit modification or operating change which could siguificantly alter the unit heat rate as
24 determined by the Operating Committee. If necessary, with the approval of the Operating
25 Committee, the coefficients are changed to correspond to the msulu of these cats.
26
27 The hourly Btu consumption is estimated as follows:
28 Hourly Btu Consumption =&Zl� + Bt22[)Z t Cf2X0 t D
29 2
30 Whem X = hourly act average load for each Company, and A. B, C, and D are
31 t-�,c cun-c coeftlents previously defined for each unit.
32 Monthly Btu Consumption =The summation of hourly Btu consumption data for
33 each Company.
34 Idaho Power Company Coal Consumption =TC ' IBtu
35 SBtu +IBtu + ICBtu
36
37 Sierra Pacific Coal Consumption =TC • �-B to
38 SBm + IBra + ICBtu
911,192 North Valmy OPC Page !9
Exhibit No.3
Case No. IPC-E-25-03
R.Adelman, IPC
Page 19 of 81

I %lem: TC =Total Measured Coal Consumption
2 SBtu =Sierra Pacific Monthly Btu Consumption
3 IBm • Idaho Monthly Btu Consumption
4 ICBru a tnmmompany Monthly Btu Consumption
5 V. 2.1.2.2 INTERCOMPANY USAGE (INTERCOMPANY BTU CONSUMPTION)
6 If either Company does not utilize its full sham: of the output and the other
7 Company desirrs to use this unused portion. the non-utilizing Company shall allow the other to
8 use the unused output in accordance with Sections III. 2.4.. V. 2.1.1. V. 2.l.l.l, and
9 V. 2.1.1.2. A Btu Consumption is detemuned that will charge the utilizing Company for fuel
10 consumed in the other Company's capacity.
11 The Intercompany Btu Consumption is based on the average plant incremental
12 ftxl value on an hourly basis_
13 The hourly Intercompany Btu Consumption is detrimined by using the following
14 formula:
15 (A(X+Y+Z)3 + B(X+Y+Z)2 +C(X+Y+Z) +D) -
16 (A(X+Y)3 + B(X+Y)2+C(X+Y) +D)
17 Where: A. B. C. D -Curve Coefficients
18 X = Party A Initial MW
19 Y• Party B Initial MW
20 Z = MW Produced by One Party in the Other Party's Portion of
21 Valmy
22 All components tie for either or both units.
23
24 The monthly Intercompany Btu Consumption is calculated through the summation
25 of the hourly Btu components. This monthly Intercompany Btu Consumption is converted to tons
26 through the following formula:
27 Intercompany Usage Coal Coasumptioo =
28 Total Measured Coal Consumption • ICfltu
29 30 SBtu + [Btu + ICBtu
31 C mpooects defined in Section V.2.11.1
32 V. 2.1.2.3 COAL ALLOCATION AND EXAMPLE
33 At the end of each month. the amount of coal consumed by each of the Valmy
34 units is divided into four sections: coal used by Sierra Pacific in Sierra Paciflc's portion of V11my,
35 coal used by Idaho Power Company in Idaho Pow&s portion of Valmy, coal used by Sierra
36 Pacific in Idaho Power Company's portion of Valmy, and coal used by Idaho Power in Sierra
e/27/92 North Valmy OPC Pare 20
Exhibit No.3
Case No. IPC-E-25-03
R.Adelman, IPC
Page 20 of 81

1 Pacific's portion of Valmy. The allocation is based upon a monthly summation of hourly Btu
2 consumption for these four categories.
3 UniLl
4 The unit was in service for 744 hours.
5 • A tail of 50.769.15 tors of coal was consumed,
6 • For 330 hours. 'A" produced 129 MW, 'B' produced 50 MW, and 'A"
7 produced 10 MW in "B's" portion of Valmy.
8 • For 414 hours, 'A' produced 129 MW, "B" produced 0 SM, and "A"
9 produced 10 MW in 'BY portion of Valmy. Of these 414 hours. 240 hours
10 qualify as Shutdown' hours for "B.'
11 • 'B" had its half of the Valmy Station shutdown from November 15 through
12 December 10.
13 C'nst AlloaLtion or Unit Number One
14 A. Intercompany Btu Consumption
15 For each of the 330 hours wberr B produced 50 MW in its own portion of Unit
16 Number One, the Intercompany Btu Consumption is cakuLiltd as follows:
17 'A's" Btus coasurned in generating 10 MW at these conditions equals:
18 (A(129+50+1OP + BO 89)2 +Q 189) +D)-
19 (A(129+50)3 +B(179)2+C(179)+D)
20 = 87.170,315 BaWbr.
21
22 For each of the 414 hours where B' produced 0 MW in its own portion of Unit
23 Number One. the Intercompany Btu Consumption is calculated as follows:
24 "Ks" Ban consumed in generating 10 N%,* at these conditions equals:
25 (A(129+10)3 +B(139)2 + C(139)+ D) -
26 (A(129)3 + B(129)2 + C(129)+ D)
2? = 92,605.232 Btuslhr.
28 The tots] Intercompany Btu Consumption for Unit Number One for December
29 equals:
30 330 hours X 87,170,315 Btus/hour +
31 414 hours X 82,605,232 Btuslhour or
32 6.29648 X 1010 Btus
33 B. 'A's' Btu Consumption
9)2V92 North Valmy OPC Page 21
Exhibit No.3
Case No. IPC-E-25-03
R.Adelman, IPC
Page 21 of 81

I For each of the 744 hours where W produced 129 MVO', the amount of Btus
2 consumed is acalated as follows:
3 (A(129 X 2)3 + B(258)2 + C(258)+ D)12
4 = 1,232,806,042 Btuslhr.
5 Therefore, the total Btus consumed by "A" in 'A's" portion of Unit Number One
6 for the month equals 9.17208 X 1011 Btus,
7 C. 'B's" Btu Consumption
8 For each of the 330 hours where "B' produced 50 MW, the amount of Btus
9 consumed is;,alculated as follows:
10 (A(SO X 2)3 + B(100)2 + C(l00) + D)r.
11 = 541,976,792 Btus/hr.
12 For each of the 174 hours where 'B' produced 0 MW (during tithes of non-
13 shutdown), the amount of Bms consumed is calculated as folloa5:
14 (A(0)3 +B(0)2 +C(0) + DY2
15 = 143.327.158 Btus/hr_
16 For each of the 240 hours where 'B' produced 0 MW (during times of
17 shutdown),the amount of Btus consumed equals zero.
19
19 Therefore, the total Btus consumed by 'B' in "B's' portion of Unit Number One
20 for the month equals:
21 330 hours X 541,976,792 Btus/hr. +
22 174 hours X 143,327,159 Btus/hr. +
23 240 hours X 0 Btuslhr. or
24 2.03791 X 1011 Bms
25 D. ADocatim of Coal
26 "A's' ron-w IDt1oII
2 7 A769.15 tons times
28 9-17208 X 1011
29 9.17208 X 1011 + 2.03791 X 1011 + 6.29648 X 1010
30
31 = 39.330.49 tons
32 'B's" ConsumntiQII
33 50,769.15 tons times
34
8/27192 North velmy OFC Page 22
Exhibit No.3
Case No. IPC-E-25-03
R.Adelman, IPC
Page 22 of 81

1 2.03791 X IOU
2 9.17208 X 101 ! + 2.03791 X 101! + 6.29648 X 1010
3
4 = 8.738.69 tons
5
6 InternmVany t?sag s ImrLQri fA's)
b 50.769.15 tons times
9
10 6.2J&3 X. l ra
11 9.17208 X 1011 + 2.03791 X 101 l + 6.29648 X 1010
12
13 = 2.699.97 tons
14
15 Note: In actual operation, the two Valmy units are dispatched as shown in Section M-1.
16
17 V. 2.1.3 OPERATIONS AND b1AMrENANCE COSTS
18 All Valmy operations and maintenance costs are shared equally.
19 V. 2.1.4 USAGE CHARGE
20 If one Company (the purchaser) receives electricity from the other Company's
21 (the seller's) unused portion of the Station the purchaser pays a Usage Charge (UC). A Usage
22 Charge is a fixed dollar per megawanhour(S/MWh) charge that is based upon the most =Cntly
23 avadabl,e twelve (12)months Valmy shared Operating and Maintenance(OW expenses including
24 Administrative and General (A&G)expenses as sa forth in Appendix 2. The following month's
25 Usage Charge is calculated by dividing Valmy's most recent twelve (12)months actual shared noa-
26 fuel O&M expenses, as billed, including mijor outage expenses, as defined in Appendix 1,
27 amortized over five (5) years by one (1) year's Expected Available Megawatthours (EAM). The
28 EA-M is calculated by multiplying the Mmimum Dependable Capacity as defined in Appendix 1,by
29 ninety percent of 8,760 hours.
30 For example, (a) at the end of month 1, the most rueotly available twelve (12)
31 months O&M expenses total S10.300,000($5.150.000 has been billed to each Company) and (b)
32 the maximum dependable capacity for the Valmy Station is 521 MW. Month 2's Usage Charge
33 shall be $2.51/MWh. Therefore, if during the month 2, "A" produces 500 NlWh's from TV
34 portion of Valmy, 'A" shall pay 'B" $1.:55.00 for month 2's Usage Charge, (52.51 X 500 WIN%
35 = S 1,255.00).
36 V. 2.1.5 ALLOCATION OF COAL INNT-%70RY OWNERSHIP
37 (a) The Companies jointly determine, prior to start of each operating year,
38 (utilizing the flexibility existing under the Southern Utah Fuel Company ('SUFCo") Contract and
39 the Black Butte Contract), the total amount of coal to be delivered for each Operating Year{luly 1 -
8/27192 North Valmy OPC Page 23
Exhibit No.3
Case No. IPC-E-25-03
R.Adelman, IPC
Page 23 of 81

I June 30) for Valmy Unit Nos. 1 and 2 taking into consideration, among other things. (i) the
2 amount of tons projected to be in the stockpile at the end of the Operating Year, (ii) the budgeted
3 utilization of the Valmy Project by Idaho and Sierra Pacific forecasted for the subsequent operating
4 year, and (iii) total cost of the coal to the Project- The purpose is to permit the Companies to
S provide necessary notification to SUFCo and Black Butte and to manage the volume of tons in the
6 stockpile to maintain an acptable coal inventory stockpile Level.
? (b) Coal is purchased in the most economic manner while rer=niog within the
8 constraints of the SUFCo contract and the Blade Butte contract.
9 (c) All coal purchased, transported, and delivered (both under the SUFCo
10 Contract and the Black Butte Contract) is initially recorded on the books of Siem Pacific and Idaho
11 on a 50-50 ownership basis as invoiced to Sierra Pacific.
12 (d) At the end of each month, each Company's ending coal inventory is
13 determined as follows:
14 (1) The minimum inventory stockpile level for the Station shall be
15 established by the Operating Committee;
16 (b) The Companies will allocate the coal in the stockpile on a 50150
17 after-burn basis up to the minimum inventory level as established by the Operating Committee,
18 however, the 50150 after-bum allocation shall be applied to all quantities up to 325,000 tons, but
19 not more than 425.000,
20 (iii) The tons of coal in the stockpile above that allocation on a 5(1150
21 after-burn basis shall be allocated on a method inverse to each Company's use of the Station
22 ('Station Utilization' hereby defined as act NMI), however, in no event, except as provided in
23 subparagraph (iv) below, shall either Company be allocated more than 70 percent of the excess
24 coal based on Station Utilization or less than 30 percent of the excess coal based on Station
25 Utilization. Under as allocation based on Station Utilization, Sierra Pacific's and Idaho's share of
26 the excess shall be determined by calculating their average use of the Station for the most recent 12
27 months as a percentage of the average total Station usage for the most recent 12 months and
28 subtracting that pc=ntage from 100 percent,. In determining Station Utilisation for the most recent
29 12 months,ut5bation of the other Companys unused portion of the Station shall be considered the
30 owning Company's usage;
31 (iv) In the event Sierra Pacific's share of the stockpile exceeds 300.000
32 tons, coal above this 300.000 ton amount will be allocated based solely on Station Utilization
3.11 without limiting either Company to a maximum allocation of 70 percent or to a minimum allocation
34 of 30 percent;
91 U92 Namh Valmy OPC Page 24
Exhibit No.3
Case No. IPC-E-25-03
R.Adelman, IPC
Page 24 of 81

1 (v) The Companies agree that the coal allocatic.Nn procedures set forth
2 above shall continue until such time the coal contract with Black Butte Coal Company is
3 terminated. At such t:mc the Compar-ics agrrc to nch-,1u.i!r zcw Station coal inventory prxedurts.
4
5 APPROPRIATE EXAMPLES OF HOW THE COAL
b FMArENTORYALLOCATION IS TO BE DETERM NM ARE SET FORTH
7 IN APPE!�DIX 3
a
9 V . 2.1.6 INVENTORY ADJUSTMENT
10 Whenever a coal supply inventory is performed, any amount of overage or
11 shortage shall be measured and allocated to each Company in accordance with the provisions set
12 forth in the "Valmy Coal Physical Inventory Procedures."
13 V 2.2 COAL ANALYSES AND MEASUREMENT
14 Immediately following the filling of the boiler coal storage silos, the coal
15 sampling autocratically obtained from the conveyor belt is cut,sampled, and scaled in accordance
16 with ASTM Procedure No. D2234. These coal samples are analyzed in the coal laboratory as
17 specified in ASTM. Procedure No. D2015. The results of these analyses are entered in permareat
18 records at the Station.
19 Each time coal is delivered to the storage silos, the conveyor belt scale is to be
20 read and recorded just prior to and just after receipt of the delivery. 71c difference between these
21 two readings is to be calculated during the completion of each sampling period to give the amount
22 of coal placed in the silos. This is done in cn-der to permit unit heat-rant analyses.
23
24 V. 2.3 COAL RECORD KEEPING
25 The Plant Manager is notified when the coal deliveries will arrive at L%c Station_
26 All coal is weighed at the thine prior to departure. Station personnel are in contact with the coal
27 supplier to obtain coal quality data of coal being shipped to the Station. Coal samples will be tested
28 at the Station on an unscheduled basis to ensure suppliers' figures are correct. The conveyor belt
29 srzles will be used to obtain coal consumption data for financial mporting and Station performance
30 purposes. A written procedure for using the belt scales will be kept at the plant site. An example
31 of such a procedure is attalicbed as Appendix 8. The silo levels will be measured at midnight at the
32 end of every month and these measurements will be combined with the conveyor belt scale
33 readings to provide monthly coal consumption data. In addition, the gravi,metric feeder integrator
34 readings will be obtained for use as a check against the belt scales in case of unexplained
35 performance deviations. For any given month, if there is rtason to believe that the belt scales are
36 reading erroneously, the gravvnetric feeder scales will be used to obtain coal consumption data for
37 financial reporting and Station performance purposes.
9/1192 North Valmy OPC Page 25
Exhibit No.3
Case No. IPC-E-25-03
R.Adelman, IPC
Page 25 of 81

2.4 COAL QUALrrY CONTROL
2.4.1 COAL SAMPLINGrrESTING
3 Each time a shipment of coal is loaded at a mice loading facility, a representative
4 sample is taken through an automatic sampler, This coal is divided into three smaller samples.
5 One sample is tested by the mine. One sample is delivered to and tested by Valmy's lab, and the
6 remaining sample is retained by the mine to be tested in case of discrepancies in test results.
7 Valmy's results are compared with the mine's results with regard to moisture, heat value, and
8 sulfur content. Should discrepancies arise. the third sample is sent to a third-party lab for analysis.
9 V . 2.4.2 VALMY LAB QUALITY CONTROL
10 The Valmy LLb receives monthly DOE teat samples of coal. These test samples
11 are unmarked as to chemical quahties. The Valmy lab analyzes these samples and sends their
12 results to the DOE. The DOE then sends Valmy the actual moisture, beating value, and sulfur
13 content values. This procedure assists the Valmy lab in venfying reasonable testing methods.
14 V. 2.4.3 PERIODIC INSPECTIONS OF THE MINE
15 In order to help verify that the samples received at Valmy are representative of the
16 coal shipped, periodically, a Sierra Pacific representative makes an unannounced inspection of the
17 mine's loading facility in order to take a coil sample directly from the automatic sampler. This
18 sample is analyzed by a third-party lab and the results compared with cuntnt and previous lab dsta
19 V. 2.4.4 PHYSICAL INVENTORIES
20 The method and frequency of coal supply physical inventones will be performed
21 in accordance with the Walmy Coal Physical Inventory Procedures.',
22
23 V. 2.4.5 FREEZING CONDITIONS
24 When freezing conditions art encountered, reasonable efforts to unload the train
25 will be employed. If a suhstandal amount of coal (over 30 tons) still remains in the train. the
26 SUFCo mine is instructed to weigh the train empty and credit the owners for the remaining coal.
27 Furthermore, to minimize freeze problems whenever possible, the thins may be scheduled to
28 minimize deliveria during the months of December and January,consistent with the tarns of the
29 coal cnnu-xm
30 V . 2.4.6 MINE SCALE CALIBRATIONS
31 The scale at the mine's loading facility is calibrated consistent with the terms of
32 the coal contracts. Sierra Pacific and Idaho representatives along with governmental and railroad
33 mpresentmves are enutled to witness such calibrations.
9127,92 tionh Val my 0PC Paste
Exhibit No.3
Case No. IPC-E-25-03
R.Adelman, IPC
Page 26 of 81

1 V . 2.4.7 TRESTLE CAAIER:► SYSTEM
2 A trestle camera system is operated to rtcord the coal shipments on video tapes
3 which art used to substantiate the adoquacy of the unloading operation.
4 V, 2.5 DIESEL OIL
5 Start-up and flame stabLh=on fuel oil costs will be allocated on a RV50 basis.
6 GENERATIONANTERCOMPANY USAGE
i This section outlines the procedures that art used to determine the following:
8 Monthly net generation, by unit. for Sierra Pacific and Idaho
9 intercompany usage, by unit. for Sierra and Idaho
10 VI. 1 . 1 CALCULATION OF NET GENERATION
11 Total net generation for each of the Valmy units is calculated through the use of
12 the generation meters that are located at the Valmy plant. Each units net generation is determined
13 by taking the gross generation and subtracting the station service (energy used while the station is
14 on-line). The reserve station service, scrubber power, and we:lfield power is ignored when
15 determining net generation.
16 Idaho's net generation for the Valmy plant is taken from Sierra's System Control
17 log sheets which arc based on integrator readings_ Idaho's net generation fer the plant is
18 - subluxtcd from the total nct gcncradon to coax up with S:crews net generation for tfle pl:aL For
19 example, if, during the month of January, 19XX, the Valmy plant's (bath units combined)
20 generation meters showed that the gross generation was 100.000 MWh. the station service was
21 5,000 MWh, and the reserve station service was 1,000 MWb, the net generadon would be 95,000
22 MWh_ Further, if the System Control log sheets showed that Sierra's monthly act generation was
23 48,000 V%h and that Idaho's was 45,000 MWh. Idaho's net generation would stay at 45.000
24 MWb and Sierra's would be calculated at 50,000 MWh(95,000 - 45,000).
25 The rt=ner in which each companVs net generation is divided between units will
26 be discussed later.
27 VI. 2. 1 DETERMINATION OF INTERCOMPANY USAGE
28 On an hourly basis, intercompany usage is calculated by subtracting each
29 Company's energy reccipt from either one-half of the station's capability or one-half of the
30 stations' net generation, whichever is higher. All of these amounts are taken from System
31 Control's log sheets. Intercompany usage applies only when the result is less than zero.
32 While a unit is being tamped up after an outage,the capability that is used shall be
33 the expected net capability of the unit at fuU load, provided that the unit can be loaded to full load
34 with no restrictions other than the ramp rate restriction specified in Section 1112.3 of the OPC.
8127/92 North Valmy OPC Page 27
Exhibit No.3
Case No. IPC-E-25-03
R.Adelman, IPC
Page 27 of 81

I If one company is in "shutdown' mode and the other company decides to
2 physically shutdown one unit and take all of its required energy from the rrmaining unit, no
3 interwmpany usage shall be determined.
4 VI. 2.2 ALLOCATION OF INTERCOMPANY USAGE AND BASE ENERGY
5 BETWEEN UNITS
6 The following procrdurt shall be used to split the total hourly intercompany usage
7 and base energy (total energy less intercompany usage) between the two Valmy units. These
8 variables art rtquircd to solve the equations that are outlined in section V.2.1 of the OPC. The
9 example shown is for display purposes only and is not based upon any actual incremental cost
10 curves.
11 A. On an hourly basis, determine the following five net generation (MWb)
12 amounts: Unit No. 1 net generation. Unit No. 2 act generation. Sierra total
13 energy usage from the Valmy station. Idaho total energy usage from the
14 Valmy station, and total station capability. These five amounts are taken
15 from the System Control logs.
16 B. Calculate intercompany usage as previously described.
17 C. Subtract the intercompany usage from the applicable Company's total plant
18 usage. The result is the base energy. For example, if Company A's total
19 station energy usage during the hour is 300 MWh, and Company A's
20 intercompany usage is 39 MWh, subv=the 39 MWb from the 300 MWh,
21 yielding 261 MWb.
22 D. Determine how Valmy would be dispatched if them were no intc=mpany
23 usage. Continuing with this example, if Comppany Bs station usage was
24 100 MWh,determine the economic dispatch of 361 MW (261 MW pb1s 100
25 NM. Economic dispatch loading for each unit will be based on the
26 monthly incremental cost curve(Appendix 7).
27 E. Subtract the economic dispatch of each unit as determined from step 'D'
28 from the actual dispatch (oct generation per unit from step "A'). The
29 difference is the allocation of intercompany usage by unit_
30 F. Allocate each company's base energy between each unit based upon a
31 straigbt proration of each Company's base energy. Keeping with the same
32 examp4 if it was determined through economic dispatch that the 39 MWh
33 of intercompany usage (ICU) was allocated with 10 MWh to Unit No. 1
34 and 29 MWh to Unit No. 2, and if Unit No. I's total act generation was
35 150 MWh and Unit No. 2's was 250 MWb, Unit No. 1's base energy
36 would be 140 NM'h (150 less 10) and Unit No. 2's would be 221 MWh
37 (250 less 29). Unit No. 1's 140 MWh would be split 101 hiW'b for
38 Company A (261 divided by 361 times 140) and 39 MWh for Company B
39 (100 divided by 361 tunes 140). Unit No. 2's 221 MWb would be split
40 160 M%h for Company A (261 divided by 361 times 221) and 61 MWh for
41 Company B (100 divided by 361 dines 221).
8/27/92 'North Valmy OPC Page 28
Exhibit No.3
Case No. IPC-E-25-03
R.Adelman, IPC
Page 28 of 81

Res:arement of Examp Le.
2 Total Allocation I)ispx h
3 Net of without . ll scion of Bye
4 Sall. IM LM Cclm♦1..A comp.H
5 Unit No. 1 ISO 10 140 101 39
6 Unit No. 2 250 29 221 160 61
7 Total 400 39 361 261 100
8 Company A 300
9 Company B 100
10 VI. 3. 1 ALLUCATIOti OF MONTHLY NET GE.YERATION BETWEEN
11 COMPANIES
12 Using the pr000dwt previously described,every hour the following amounts an
13 calculated for each unit: Sierra base energy, Sierra ICU, Idaho Base energy, and Idaho ICU.
14 These amounts are required for two purposes. On an hourly basis, the kM b amounts art used to
15 estimau Btu consumption which is the bus for the monthly coal allocation. On a monthly basis.
16 the M'W'b amounts ate used to allocate the aw-1 act generation (as calculated from the Station's
17 gcncr=oo teeters)bcmeen the two Companies
18 For the allocation of each unit's monthly net generation between the two
19 Companies,each of the eight categories' hourly amounts ate totaled for the month. For each unit.
20 and for each company, the base energy is then added to the ICU. The result of these additions
21 gives the following four amounts: Sierra Unit No. 1 total net generation. Idaho Unit No. 1 total
22 act generation. Sierra Unit No. 2 total act generation, and Idaho Unit No. 2 total net generation-
23 However, sinct these amounts are based upon the System Control logs, they ate only estimates
24 and arc used only to allocate the actual net generation (as calculated from the station's generation
25 meters)between the two companim-
26 To perform this calculanon.Idaho's total moctlily net generation is taken from the
27 log sheet and is accepted to be actual. This monthly total for Idaho is then allocated between the
28 two units based upon each urafs estimate for Idaho base energy and ICU. The result of this
29 allocation is Idaho's monthly act generation for Ututs No. 1 and 2. These two numbers art
30 subu-wed from ewh unit's monthly act generation (again, per the stuioo's generation teeters) in
31 order to get SMm's act generation by unit_
3 2 This procadurt can be best understood through an example.
33 Example:
34 During the month of January. 19XX, the Valmy station's generation meters
35 showed that Untt No. 1's net generation was 110,000 .%Mrh and Unit No. 2's was 130.000 NM'h.
36 The System Control log sheets show that Idaho's total net gc=mioo was 140,000 SM1. Sicrm's
8127/92 North Valmy OPC Peer 29
Exhibit No.3
Case No. IPC-E-25-03
R.Adelman, IPC
Page 29 of 81

net generation is then calculated to be 100.000 SM1 (110.000 ♦ 130.000. 140.000)rcgudkss of
2 what the log sheets state.
3 Assume further that the summations of the hourly base energy and ICU
4 calculations result in the following monthly totals(all in MWh):
5 Sierra Unit No, 1 Base Energy: 45,000
6 Sierra Unit No. 1 ICU: 2.000
7 Sierra Unit No. 1 Tool. 47.000
8 Idaho Unit No_ I Base Energy: 62,000
9 Idaho Unit No. 1 ICU: 0
10 Idaho Unit No. 1 Total: 62,000
11 Sierra Unit No.2 Base Energy- 47.000
12 Sierra Unit No. 2 ICU: 1.000
13 Sierra Unit No.2 Toed: 48,000
14 Idaho Unit No. 2 Base Energy: 81,000
1S Idaho Unit No. 2 ICU: 0
16 Idaho Unit No. 2 Total: 91.000
17 Idaho's total monthly act generation of 140,000 MWb would be allocated
18 between the two units based upon these numbers_ Idaho's Unit No. 1 ne; generation would be
19 60,699 MWh (62.000 divided by (62.000 ♦ 81,000) tin)r-s 140.000). Idaho's Unit No. 2 net
20 generation would be 79,301 MWh (81.000 divided by (62,000 + 81,000) times 140.000).
21 Sierra's Utut No. I net generatioa mould equal 49,301 MWb (110.000 - 60,699). Sierra's Unit
22 No. 2 net generation would be 50,699 MWh(130.000-79.301).
23
24 VII. I . MISCELLANEOUS PROVISIONS
25 V 11. 1 . 1 E NITRE O P C
26 This document constitutes the entire agreement of the pa,-ucs with regard to the
27 muters addressed hertia, and supersedes all prior operating procedures crttena, whether oral or
28 written. ,any substantive changes to this OPC may be made pursuant to Section L 31 In the
29 event of eonhim bemecn this OPC and the Project AgmemenL the terms of the Project Agreement
30 shall be controlling.
31 VI I. 1.2 ASSIGNMENT AND DELEGATION
32 Neither party may assign its rights or delegate its duties under this OPC without
33 the prior written consent of the etber party. Such consent shall not unreak)nably be withheld.
8127192 North Valmy OPC Pale 30
Exhibit No.3
Case No. IPC-E-25-03
R.Adelman, IPC
Page 30 of 81

1 N"t 1. 1 .3 CLAUSE HEADINGS
2 The c1mm headings appearing in this OPC have been inserted for the purpose of
3 coavcaicnce and ready reference. They do not purport to, and shall not be deemed to,define, Limit
4 or extend the scope or intent of the clauses to which they appertain
5
6 1N WITNESS WHEREOF, each patty has executed this OPC, through its
7 duly authorized r presentative,on the day and year first above written.
8
9 SIERRA P ,CTFTC POWER COMPANY IDAHO POWER COSTA-NY
10
11I ' _
12 Title:
13 pate_
9/19/92 North Valmy OPC Page 31
Exhibit No.3
Case No. IPC-E-25-03
R.Adelman, IPC
Page 31 of 81

1
2 :�PP>r�'DICES
3
4 Appendix 1 Definitions
b Appendix 2 Accounting Guidelines
6 Appendix 3 Inventory Allocation Ecunples
7 Appendix 4 Maw cr Chat
8 Appendix S Coal Physical Inventory Procedure
9 Appendix 6 Switcbyad Cost Allocation Pn=dure
10 Appendix 7 Example Inarmcntal Cost Cusvc
11 Appendix 8 F_xwWk Belt Scale Procedure
8/27/92 North Valmy OPC Pact 3_
Exhibit No.3
Case No. IPC-E-25-03
R.Adelman, IPC
Page 32 of 81

1 Appendix 1
2
3 Difinition
5 1 , No-Load Cos
6
7 No-load cost consists solely of the cost of the "D" component of the unit heat input-output
8 equation. This value represents the fixed component of the equation.
9
10 2. Major Outage
11
12 Any outage, planned of forcrd, which is expected to cost at least S250.000 in incmnrntal
13 labor, mawnals, overheads, and taxes.
14
15 3. %Awd n m Dependable Capadty(MDC)
16
17 Net capacity basted on a full-load test performed quarterly and detated as necessary for
19 partial outages equivalent to 5 percent or more whose duration is at least one caleodar
month
20
21 4. Emergency
22
23 An emergency shall mean loss of rewurces or transmission beyond the control of the
24 aPfecud Company Occting its ability to Berm firm obligations.
=; 4= North Valmy OPC Pace 33
Exhibit No.3
Case No. IPC-E-25-03
R.Adelman, IPC
Page 33 of 81

1
2 .Appendix 11
:3
4 Accountine Guidelines
5
6
7 These Accounting Guidelines relating to the operation and maintenance (operation) of the
8 North Valmy coal-fired generating station. Units ell & 02, owned jointly by Sierra Pacific Power
9 Company (SPPCo) and Idaho Power Company (IPCo), have been prepared to standardize and
10 formalize the joint accounting proccdures and policies to be followed by bath Companies in
11 compliance with the 'Agreement for the Operation of the North Valmy Power Plant Project,' dated
12 December 12, 1975, and the "Operating Procedures Criteria" ("OPC').
13
14 These Accounting Guidelines shall be reviewed by the Valmy Accounting Committee
15 periodically or at the request of either Owner. If upon review , corrections are necessary, these
16 Guidelines will be revised and these revisions will become a part of the OPC.
17
18
19 its
20
21 To establish, review, and maintain the Project accounting and auditing procedures,
22 policies, and programs, which includes all budget, fin2nee and tax requi.rernents, definition of cast
23 estimate for=L. and cash forecast review,
24
25 To ensure compliznce with regulatory accounting requ=ments.
26
27 To provide liaison and communication between the Owners, the Operating Committee, and
28 the.accounting Committee.
29
30 To establish the following Articles which shall at all times govern the objectives of the
31 Accounting Committcc; the Committee's actions shall always be in cornplia= with these Articles:
32
33
34 Article
35
36 The Accounting Committee was established under Section 9.1 of the Construction
37 Agreement. It is understood that the Committee will continue its accounting jurisdiction until such
38 time as the Joint Owners desire to terminate the Committee pursuant to the OPC.
39
40
41 Art;cic Il
42
43 The Accounting Committee shall always act within the confines of the Operation and
44 Ownership Agreements and shall at all times be consistent with sound and generally accepted
45 accounting prilb6ples and regulatory requirements-
46
47
48 Anicif M
49
50 The Accounting Committee shall be responsible for establishing, reviewing, and
51 maintaining the accounting, auditing, budgeting, and tax policies and procedures pertinent to the
52 operation of the Project The Accounting Committee shall make mcorr"mendations relating to the
53 above matters to the Operating Committee.
54
8'27,192 North Valmy OPC Page
Exhibit No.3
Case No. IPC-E-25-03
R.Adelman, IPC
Page 34 of 81

I A=Ic IV
2
3 It is understood that SPPCo, as Operator of the North Valmy Project shall, with respect to
4 accounting related to Project operabons and capital improvements, conform to the Accounting
5 Guidelines established by the Accounting Comtn:ttee.
6
8 A,xkY
9
10 All intercompany requests for major non-recurring Project accounting data and/or
11 inforn=on shall be processed through each Company's Accounting Cotiuuittec member.
12
13
14 dt:�Clc NI
15
16 SPPCo will provide the Owners with the names of the sources of reportable information
17 within SPPCo in order to assure consistent reporting of Project information.
18
19
20 tk tick �u
21
22 The Accounting Committee will be responsible for tesolvi.ng any dispute arising out of
23 shared costs Leer determined to be non-shared as a result of m audit of SPPCo's records by an
24 Owncr.
25
26
27 Ankle VM
28
29 Matters of disagreement rtladng to accounting between the Accounting Committee and the
30 Operating Committee shall be referred to the joint Owner's principal accounting officers for
31 resolution.
32
33
I
8/27/92 North Valmy OPC Page 35
Exhibit No.3
Case No. IPC-E-25-03
R.Adelman, IPC
Page 35 of 81

1 npER aTD;G ACCOU.%"MG G[.TDEi i'VFC
2
3 SPPCo as the operator of the North Valmy Power Plant Project shall account for all Protect
4 operation expenses and receipts in accordance with the Uniform System of Accounts (Pan 101)
5 prescribed for Electric Utilities by the Federal Energy Regulatory Commission (FERC) and any
6 ether appropriate regulatory agency or their successors.
J
8 SPPCo will provide the Operating Committee with certain reports of the accounting
9 information detailed on the following pages, with copies to the Accounting Committer These
10 reports will be prepared, in accordance with the OPC, when requested in writing by the Operating
11 Comminre.
12
13 Operating Expcnses fOperwinQ Ag=mcnt_- Section 4'�_
14
15 Operating expenses shall consist of obiigauons incurred in the operation of the Project.
16
1 i l.The cost of all services performed by the Operator directly applicable to Project operation
18 and maintenance including. but not limited to:
19
20 A. Payroll of Project employers on an actual time basis, including related employee
21 benefit costs such as social security (FICA) tares, unemployment insurance
22 expense,group life insurance, group hospitalization and medical insurance, pension
23 funding expense, workincn's compensation, long-term disability and other
24 insurance, and paid leave.
25
26 B. Materials and supplies including relaW purchasing and handling costs.
27
28 C. Leased equipment costs.
29
30 D. Travelling expense including use of Ownees t.-ansportation equipment.
31
32 E. Insurance costs applicable to the Project.
33
34 2. All federal ,state, and local taxes imposed upon the Project and payments in lieu of taxes
35 (excluding federal and state income tares).
36
37 3. All costs relating to injuries, damage claims, and claims of contractors which may be
38 payable and paid which arise out of the operation of the Project less proceeds of insurance.
39
40 4 All other duet costs or expenses properly allocable to the Project.
41
42 Each party shall charge the Project for its administrative and general expenses directly
43 reLued to operation of the Project which expenses art not included in the :terns enumerated
44 above. (See Operating Agreement.Section 4.2.).
45
46
47 Annual Budget
48
49 1. Based on the tinning requirements as set forth in Section S of the Operating Ag:ecmcnt and
50 Section IV of the OPC, a monthly budget of Project operating and maintenance expenses
51 and capital improvement expenditures sill be submitted by SPPCo to the Operating and
52 Accounting Committees. The budget year information is required by months and detailed
53 as follows:
54
1/1 SM North Valmy OPC Page 36
Exhibit No.3
Case No. IPC-E-25-03
R.Adelman, IPC
Page 36 of 81

1 A InYrntcriC5
3 (1)Diesel oil(FERC A/C 151)
4
5 - Activity (receipts. usage. salcs, and adjustments) shown in gallons and
6 dollars-
7
8 (2)Coal (FERC A/C 151)
9
10 - Activity (receipts. Lmcs, and adjusmencs) shown in tons and dollars.
11
12 (3)Muen2l and Supplies(FERC A/C 154)
13
14 - Activity (receipts, issues, returns and adjustments) shown in dollars.
15
16 (4) Stores Expense Uod=butcd(FERC A)C 163)
17
18 - Activity shown in dollars.
19
20 B. Pmducti n FxRCnses
21
22 (1)Operation (FERC A)Cs 500 thru 507)
23
24 - By individual FERC account.
25
26 (2) Maintenance CFERC A/Cs 510 thru 514)
27
28 - By individual FERC axxxmt.
29
30 C.? ncmiynnn Expcn=(step-up station only)
31
32 (1) Operation (FERC A/Cs 560, 562, 566. and 567)
33
34 -By individual FERC account_
35
36 (2) M ai nt cnancc (FERC A/Cs 568. 569, 570, and 573)
37
38 - By individual FERC aucunL
39
40 D. 1>Snb Rion xVCnsrs (weRfield electric tines)
41
42 (1) Oper=oas (FERC A/Cs 580. 583. 586. 588, and 9M)
43
44 - By individual FERC aaount.
45
46 (2) Maintenance (FERC A/Cs 590. 593, 595, 597. and 598)
47
48 - By individual FERC wz unt.
49
9/27/92 Norh Palmy OPC Pane 37
Exhibit No.3
Case No. IPC-E-25-03
R.Adelman, IPC
Page 37 of 81

1 E. C- her Eitj cs
2
3 (1) Property Insurance tFERC VC 91-4)
4
5 (2)Injuries and Damages (TUC A1C 925)
6
7 (3) Employee Pensions and Benefits(FERC A/C 926)
8
9 (4) Payroll Talcs(FERC A!C 408)
10
11 2. Each of the above shall be detailed in the following manner,where applicable:
12
13 A. Direct Payroll
14
15 B. Payroll Additives
16
17 C Transportation
18
19 D. Material and Supplies (from inventory)
20
21 E. Vouchers
22
23 F. Other Costs
24
25 G. Administrativc and General
26
27 3. The budget shall include a statement of the assurnrtions used in its prrparadon_ Including
28 but not litnttal to the following:
29
30 (1)Escalations (labor,etc)
31
32 (2) Rates(transportation. height, etc)
33
34 (3)Work Fora
35
36 (4)Slaintenance Schedule(major only)
37
38 (5)Capacity Factor(Operating Co(=iwee)
39
40 (6) Forecasted Generation(total and each company•Operuing Cortmwace)
41
42 M CorlWor Utilization
43
44 4. Praiecx capital improvement expenditures budget:
45
46 A. Proje a capital improvement expenditures will be detailed by major items and will
47 include the estimated cost, time period in which the expeaditures are to be made.
48 and any applicable retiremenes. The budget will include a full description of each
49 item and the justification for the expenditure.
50
51 B. This infornnation will be provided to the Owner's Accounting Committee members
52 by the Operating Committm on or before October 1 st of each year.
53
9/27192 :forth Valmy OPC Page 38
Exhibit No.3
Case No. IPC-E-25-03
R.Adelman, IPC
Page 38 of 81

1 C. Items detcrtruned to be Capital improvements arc budgeted in advance by SPPCo.
2 and sent to the Valmy Operating Committee for their approval, per their
3 requirements, and subsequently approved by SPPCo's and IPCo's Board of
4 Directors. Nonhudget items which occur periodically throughout the year will
5 require approval by the IPCo Operating Committoc .Mcmbcr and the SPPCo Board
6 of Dutxtors.
7
8 D. The approved SPPCo Budget. including these Valmy items, is published by the
9 fast of the year and each Owner is sent a copy of the applicable Valiny items.
10
11 ccoi ring for and Pa=cnt of Oocrating,Exgcnc_is(Operating Agmement, Seaions 6 and n:
12
13 1. SPPCo shall keep acouoting and statistical records of the Project operations in
14 accordance with regulatory requirements. prudent utility practice. and the direction
15 of the Accounting Comrnituce.
16
17 Each Owner, through its Accounting Commium member, shall have the right at any
18 reasonable time to examine the other Owner's charges to the Project puraant to this
19 section and all supporting data and documents relating thereto.
20
21 3. SPPCo shall establish a separate Valmy Operating Bank Account on behalf of the
22 Owners. This account will maintain a balance of S10,000, cacti Owner being
23 responsible for the deposit of their percentage share for use as minimum working
24 capital- All expenditures for operatinn. maintenance, and capital improvements will
25 be made through this account.
26
27 4_ F-ch Owner will deposit their respective participation percentage rounded to the
28 ncamst one hundred dollars of the weekly estimated Valmy fuel purchases,
29 operating expernscs, and capital umptovtmetnt cxp*nditures into the Valmy Opcg
30 Bartle Account to be used by SPPCo solely for these items.
31
32 S. SPPCo will provide, weekly, an analysis of each Ownces percentage sham of the
33 previous wetYs funding and actual expenditures, rounded to the nearest one
34 hundred dollars. This analysis will reconcile the previous week's actual
35 expenditures for Valmy fuel purchases, operating expenses, and capital
36 improvemeats to that week's funding request(s). This analysis will be suminarizod
3 7 by F1rRC account.
38
39 6. Any variance between the previous weeks actual expenditures and the amount(s)
40 requested will be added to, or deducted from, the current week's funding
41 R�uLst(S)
42
43 1 In the event unforeseen obligations air incurred during the week Sierra Pacific will
44 modfy Idaho and each party will deposit their respective participation percentage
45 shwr in the Valmy Operating Bank Account on or before the date the funds are
46 required.
47
48 8. On or before the 2-Rh day of the following month. SPPCo will furnish to each
49 Owner.
50
51 A. An operating expense statement showing all operating and capital
52 improvement expenditures incurred during the preceding month. This
53 statement will list each Ownees participation percentage shame, detailed by
54 FERC primary expense accounts and will show the following breakdown:
8I27/92 :Forth Val my OPC Page 39
Exhibit No.3
Case No. IPC-E-25-03
R.Adelman, IPC
Page 39 of 81

1 1. labor
2
3 2. Labor Additives,detailed
4
5 3.Transportation
6
i 4. Macrials
8
9 S. Vouchers
10
11 6. Cash Advances
12
13 7. Other
14
15 8. Cuntat Month Total
16
17 9. Balance
18
19 B. Other statistics and information pertinent to Praject operation (as designated
20 by the Accounting Committee).
21
22 C. An operating budget report comparing actual costs to budgeted casts for the
23 csrrtas month and for year-to-lost.
24
25 CaDS3 IL��rov�mcn!lvtpcnd rures Accounting:
26
27 1. Definition of Capital vs. Maintenance - please sec Exhibit A.
28
29 2. Capital improvement expenditure work order approvaL•
30 A. Prior to beginning work on a specific budget item, a SPPCo work order is
31 prepared and approved. Before worts commences, a copy is forwarded to
32 cach cr%mcr.
33
34 B. The work order details the total cost each Owner's portion, description of
35 work, and approvals.
36
37 3. Monthly progress reports am sent to each Crumer detailing the following for each
38 work order(improvement and redmment):
39
40 A. SPPCo Budget Item Number
41
42 B. SPPCo Work Order Number
43
44 C. Estimate of Costs
45
46 D. Beginning Balan;:e, Current. Ending Balance, and Total Cost
47
48 E. Percent of F.stin= vs. Act"
49
50 F. Date Closed, Date Completed. and Date of last GL Charges
51
52 G. FERC Accounts
53
54 H. Vintage Year of Rairtments
3 2; 92 North Valmy OPC Pap 40
Exhibit No.3
Case No. IPC-E-25-03
R.Adelman, IPC
Page 40 of 81

1
r I. Removal Costs and Salvage Credits
3
4 1. Unit Designation (1 w, or Common)
5
6
7 Dertlsi.
8
9 Each Owner, having recorded their percentage share of the construction costs of the
10 Project, will compute and record their own depreciation expense applicable to those costs.
11
12 Ad Valorem Taxes-
13
14 Each Owner is assessed and billed separately for the ad valorem taxes applicable to their
15 pc rccntagc share of the Project.
16
17 SPPCo will provide the Owners with the State of Nevada 'Claim for Property Tax
18 Exemption of Pollution Conta)l Fa6lities" by February 1 Sth of the following year.
19
20 L:,sumnct:
21
22 Insurance is a prepaid items and e3cb Owner will carry their percentage stare of prepaid
23 insurance of their books. The insurance company(s) will bill SPPCo, who will pay all premiums
24 through the Valmy Operating Bank Account. (See section on "Accounting for and Payment of
25 Operating Expenses.')
26
27 :
28
29 1. FERC Form No. l:
30
31 A. An annual summary of environmental and pollution control expenditures will be
32 prepared by SPPCo and submitted to the Owners by February 15th of the following
33 year. This summary will detail the above-rrfertnce expenditures by:
34
35 (1) Capital Addition
36
37 (2) Capital Retirements
38
39 (3) Operation Expenses
40
41 (4) Maintenance Expenses
42
43 B. If SPPCo is not able to segregate these costs, then reasonable estimates for each for
44 the above will be acceptabic.
45
46 C. The desired format of the above requirement information will be as indicated on
47 FERC Form No I pages entidcd 'Environmental Protection Facilities" and
48 "Environmental Protection Expenses" (currently pages 428 and 429, respectively).
49
L15J93 North Valmy OK Page 41
Exhibit No.3
Case No. IPC-E-25-03
R.Adelman, IPC
Page 41 of 81

1 '_. Other Reporting:
2
3 A. Operating statistics required by the Accounting Committee will come from the
4 Operating Committee who will get the appropriate information from SPPCo's
5 Operation Support Group_
6
B. Any other information needed by either company wiU be furnished upon written
& request.
9
10 Irimme Taxest
11
12 1. Each Owner will provide a detailed list of the tax information needed for the preceding
13 year, from the other Owners by Much lst of each year. This information is required in
14 order for each Owner to complete their own Federal and Stale Income Tax Returns.
15
16 2. Each Owner will have 45 days from the mccipt of any information request (other than tax
17 return information) to supply the requested information in writing. If the information
18 requested must come from an auditor's report, then the Owner furnishing such information
19 will have 45 days from the date of receipt of said report to furnish the requested
20 information.
21
22 3. Information necessan+ for completing a tax return will be providod to each Omer within 45
23 days after the steps 1 and '_' above have been satisfied.
24
25 4. SPPCa will furnish each Owner a signed copy of the North Valmy Power Plant Project's
26 Federal Partnership Return by August 15th of ewh
8127192 Korth Valmy OPC PaLr 42
Exhibit No.3
Case No. IPC-E-25-03
R.Adelman, IPC
Page 42 of 81

1 F1I L_ACCOUN7M,Gl'ID _LItiEC
2
3 (Operating Agreerrm Section 8)
4
5 1 Acr_nunt 151 lInventory -Coal and Diewl Oil-
6
7 Account 151 wiU reflect the monthly fuel stock (inventory) balance of each Company.
8 Each Company's coal inventory sham will be equal. both tons and dollars, up to the muumum
9 inventory level established by the Operating Committee. Coal inventory levels exceeding each
10 Company's minimum tonnage share will be allocated in accordance with the OPC section V.2.1.5.
11 with the average price determined individually based on their tonnage share and the actual costs
12 associated with those tons_ At such time as the total tonnage drops below the minimum, an
13 equalizing adjustment will be made to make the Companies shirts equal, both tons and dollars.
14 Diesel oil inventory a-W always remain equal to each Company's ownership percentage.
15
16 A. Fuel Purchascs:
17
18 All fuel (coal and diesel oil) as well as applicable sales tax.
19 transportation and related refunds, and leased rail car costs for the North
20 Valmy Power Plant Project will be purchased. via specific coil and oil
21 contracts or purchase orders and will be paid for through the Operating
22 Trust Account based on each Company's ownership pementage.
23
24 B.
25
26 1. Each Company will compute their average inventory cost by adding their beginning
27 balance (tons and dollars) to any appropriate price or physical inventory
28 adjustments, plus current month's receipts (based on their plant ownership
29 percentage) and dividing their total doUar amount by their total tons. Each
30 Company's average inventory cost will be the baits for the cost of coal consumed.
31
32 The average cast of diesel od will be computed by adding the beginning balance
33 (gallons and dollars), price adjustments, plus current month's receipts, and dividing
34 the total dollar arnount by the total g3llocs. All sour=of oil will be added together
35 to develop the monthly raaipts and price adjustments.
36
37 2. Diesel oil used for stet-up and Haire stabilization will be credited to this account
38 monthly. based on each Company's ownership percentage, as established in the
39 OPC, Section V;.S.
40
41 C. Inventory Trnnsfer-
42
43 At the eel of each month, each Company will book an adjustment to
44 tlwk 151 account to align the inventory tonnage to a level as prtscnbed for in the
45 CWC, Section V2.1.5. The adjustment will be made at the transferor's average
46 inventory price in effect at the end of the month. At such time that the total
47 inventory, tonnage is below the minimum inventory level, after the equalizing
48 tonnage adjustment, a second adjustment will be trade to equalize the price per ton.
49
N 7 19= North Valmy OPC Page 43
Exhibit No.3
Case No. IPC-E-25-03
R.Adelman, IPC
Page 43 of 81

1 D. ArtiI►stm nrc:
2
3 I. Invoice
4
5 All coal invoice adjustments will be recorded in the current business month,
6 based on the recalculation of the adjustments impact on each Company's coal
7 ownership and/or coal consumpuon, for the period covered by such adjustments.
8
9 2. Quality
10
11 All quality adjustments will be made to both BTU and dollar values. The dollar
12 value will be based on the pnce per ton in effect on the first day of the month that
13 quality was not within contractual limits.
14
15 3, Transportation
16
17 Any adjustment resulting from a change in rail transportation cost will be
18 recorded in the current business month based on the recalculation of the
19 adjustment's impact on each Company's coal ownership and/or coal consumption
20 for the period covered by such adjustments.
21
22 4. Scale
23
24 a. Loadsite - Scale calibrations are performed once a year with a r-prtsentative
25 from the Companies to observe.
26
27 Adjustments based on ioadsite scale calibrations will use a weighted average
28 price, for the period the scale was not calibrated correctly, and be booked into
29 inventory.
30
31 b. Plant
32 i. The scale of record for plant coal consumption will be define in the
33 QPC. Section V.
34
35 ii. All adjustments based on plant scales will be booked according to a
36 method mutually agreed to by the Accounting Committee after taking into
37 consideration coal inventory and plant operating statistics.
38
39 5. Physical Inventory
40
41 The method and frequency of coal supply physical inventories and the method
42 by which physical inventory adjustments are allocated to each Company will be
43 performed in accordance with the "Valmy Coal Physical Inventory Procedures."
44
45 11. Account 501 (Fuel and Fuel-Handling FxCcnsc)_-.
46
47 All labor, materials, supplies, and related rxpenses for coal and oil will be charged
48 to this account.
49
50 A. Fuel(Coal and
51
52 Each Company's NO consumption cost will be recorded in this account based on
53 the pricing determined in Section I.B_L of these Fuel Accounting Guidelines. All other
54 adjustments effecting coal consumption will be recorded in this account.
V 151,93 North Valmy OPC Page 4;
Exhibit No.3
Case No. IPC-E-25-03
R.Adelman, IPC
Page 44 of 81

I B. Fuel-Handling - scams'
2
All casts of handling the coal from the rail car to the beginning point of the belt
4 feeding the boiler will be charged to this account, along with diesel oil unloading costs.
The fuel-handling costs consist of labor, materials, and supplies, transporation, fuel
E testing, and related expenses. Fuel-handling expenses will be based on each Company's
i ow-nership percentage.
8
9 M.
10
1 i A. SUF _o Contrwt
12
13 Sierra Pacifcc's Power Production Depan=rt monitors the quality and will
14 contact Joint Fay-Lics Accounting on what adjustr Ls,need to be trade.
15
16 B. Black Butic Con=
17
18 Sierra Pacific mill have a minimum of one emplo}=on site al Valmy to monitor
19 compliance with contract quality specifications. Each trainload delivery will be
20 sampled and compared to specificadoas.
21
22 Sierra will install and maintain software to monitor contract specifications and
23 will detarnine if each tie-mnload mess quality specifications.
24
25 The responsible employee will notify the plant superintendent of the results of
26 each trainload quality test_
27
28 The plant superintendent will make all decisior>s relative to rejection of any
29 trainload delivery due to non-compliance with quality spoci.A'V=ons.
30
31 IV. C cul Conti= Audi my
32
33 Each major coal contract shall be audited annually under the direction of the
34 Accounting Committee.
35
36 V• t?ag
37
38 A. The usage charge will be determined by the procedure outlined in the OPC, Section
39 V 2.1.4.
40
8/27192 North Valmy OPC Pap 45
Exhibit No.3
Case No. IPC-E-25-03
R.Adelman, IPC
Page 45 of 81

I 0 Sierra wiU prrparr monthly a report detailing all shared expenses applicable to the
2 North Valmy Power Plant, excluding coal and diesel oil for the most recent 12.
3 mouth penod. The report will also deterl the accounting of all major outage
4 incremental expenses in excess of$250.000 This report will be used to ca"late
5 the usage charge to be used by either Company when sales are made from their
6 share of the plant. The usage charge will be calculated by the last day of each
7 month and wnU be used in billing any Megawatt hours purchased from the seller's
8 share of the plant during the following month. Copies of the calculation will be
10 proms Operating
to the Committee.
11
12
13
14
15
16
1?
18
19
20
21
22
23
24
25
26
2i
28
29
30 Sierra Pacific P W=Company Waho mpaay
31 Accounting Committee Member Accot=tmg Comnu= Slemrber
.g 2 7 r92 North Val my 0PC Pale 46
Exhibit No.3
Case No. IPC-E-25-03
R.Adelman, IPC
Page 46 of 81

1 EX {IBIT A
2 Guidelines for Determining Whether the Cost of
3 an Item Should be Capitalized or Expensed
4 for the North V31my Steam PSart
5
6 These guidelines have been prepartd to order to determine whether the cost of an item
7 purchased or instaVed at the Noah Valmy Steam Plant should be CAPITALIZED to Valmy Plant
8 in Service or EXTENSED to a Valmy Operation&Maintenance(O&M) Account.
9
10 A. NEW ITEMS OF PLA.N'T
11
12 The cost of the item must be capitalized, through the use of a Valmy Budget IterntWork
13 Order, if Ai„Lof the following guidelines art met, otherwise the cost must be expensed to the
14 appropriate Valmy O&M accounts:
15
16 1. Life FXDCCj;MCv
17
18 The item purchased/installed must be expected to last (be used and useful), through
19 ncnTW use, at least one (1) year_
20
21
22
23 The installod cost of the item must exceed S2.000.
24
25 3. Unit of Plant
26
27 The item must be a complete 'unit of plant' or be a major portion of a large "unit of
28 plant". ("Unit of Plant" is to be consistent with the units found in the Valmy Completion
29 Cost Report or, if not found there, as defined by FERC). If not sure, please call Joint
30 Facilities Accounting.
31
32 B. REPLACEMENT OF UNITS OF PLA-NT_
33
34 1. Rcpl3dng a Complete Unit of Plant (Existing)
35
36 a. An improvement and $etircrrym Work Order must be written to properly account
37 for the replacement of the item iLthe item meets all of the criteria set forth in "A"
38 above.
39
40 b. If some of the criteria in "A' art not met, then the item must be expensed to a
41 Valtny O&M account_ The original item that is being mpLaced will be retired from
42 the accounting records, thus a retirement is requited.
43
44 2. RlVlacfat a Major Portion of a Unit of Plant fExistinel
45
46 Please call Joint Facilities Accounting, as this must be done with their approval on a
4 7 case by case basis.
48
49 C. OFFICE FLMN9TLTRE& EOM IP.%
50
51 The purchase of all Office Furniturt and Equipment must follow the existing SPPCo
52 guidelines in determining whether or not the items) is to be capitalized or expensed. All items
53 musst be tagged with an inventory control number and kept track of until the item is property
54 disposed, regardless of whether it is capitalized or expensed.
8127192 North Valmy OPC Page 4"
Exhibit No.3
Case No. IPC-E-25-03
R.Adelman, IPC
Page 47 of 81

1
2 Appendix 3
3
4 In"01011 A114catiQ0 LUM21C
8/27/92 North Valmy OPC Page 48
Exhibit No.3
Case No. IPC-E-25-03
R.Adelman, IPC
Page 48 of 81

I In accordance with Section V__ 1.5 of this OPC, the following examples illustrate how the
2 Valmy coal pile would be allocated under certain circumstances-
3
4
5 F12mole -No.
6
7 Assume that (a) the minimum inventory level for the svtion as established by the Operaung
8 Commincc is 325.000 tons. (b) the station stockpile at the end of:he mooch is 475,000 tons. (c)
9 for the most recent twelve months the average total station usage was 84 percent. (d) Idaho's
10 average use of the station was 20 percent of the average total station usage of 80 percent, and (e)
11 Sierra Pacific's average use of the station was 60 percent of the average term station usage of 80
12 percent. Under these assumptions. Idaho's avenge use of the station for the most recent twelve
13 months as a percentage of the average total station usage would be 25 percent (20 divided by 80).
14 Subtracting that 25 percent from 100 percent would result in Idaho being allocated 75 percent of
15 the excess tons in the stockpile inventory above 325.000 tons. Since Idaho's maximum allocation
16 cannot exceed 70 percent (unless Sierra Pacific's shalt of the stockpile exceeds 300.000 tons)
17 which is less that its split based on station utilization (75 percent), Idaho would be allocated 70
18 percent of the 150.000 excess tons in the stockpile above the 50150 after-burn allocation or
19 105.000 tons.
20
21 Under these assumptions, Sierra Pacific's average use of the station for the most resent twelve
22 months as a percentage of the average total cation usage mould be 75 percent (60 divided by 80).
23 Subtracting that from 100 percent would result in Sierra Pacific being allocated a 25 percent share
24 of the excess tons in the stockpile inventory above 325,000 tons. Since Sierra Pacific's tnutirnum
25 allocation cannot be less than 30 percent (unless Sierra Pacific's share of the Stockpile exceeds
26 300.000 tons) which is greater than its split of the excess based on station utilization(25 percent)
27 Sierra Pacific would be allocated 30 percent of the 150.000 excess tors in the stockpile above the
28 50/50 after-burn allocation or 45,000 tons.
29
30 In this example. Idaho's share of the stockpile would be 267,500 tons; that is. one-half of the
31 first 325,000 tons or 162.500 tons plus 70 percent of the 150.000 excess tons in the stockpile
32 above 325.000 tons or 105,000 tons. 162.500 tots plus 105.000 tons equals 267.500 tons.
33 Sierra Pacific's share of the stockpile would be 207.500 tons; that is. one-half of the fast 325.000
34 tons or 162.500 tons plus 30 percent of the 150,000 excess tons in the stockpile or 45.000 tons.
35 162,500 tons plus 45,000 tons equals 1,07.500 tons.
36
37 For further example, assume the stauon stockpile was 850.000 tons at the end of the month
38 rather that 475.000 tons. Under the other assumptions set forth in Example No. 1 above, Sierra
39 Pacific's share of the st.auon stockpile would exceed 300,000 tons. Based on the allocauon set
40 forth above in Example No. 1, Sierra Pacific's share of the stockpile would be 320.000 tons: that
41 is, one-half of the first 325,000 tans or 162,300 tons plus 30 percent of the 525.000 excess tons in
42 the stockpile above the 50/50 after-burn allocation or 157,500 tons. 162,500 tons plus 175,500
43 tons equab 3X.000 tons. In the event Sierra Pacific's share of the stockpile exceeds 300.000
44 ton coal in the stockpile above this amount will be allocated based solely on station utilization
45 without limiter Idaho to a maximum allocauoai of 70 percent and Sierra Pacific to a minimum
46 allocations of 30 pemem In this example, throe (3)separate allocatson methods would be utilized to
47 allocate tons in the stockpile. Fuss, 325.000 tons would be divided 50/50 after burn or 162,500
48 tons to each Sierra Pacific and Idaho. Second, the text 458.333 tons (300,000 - 162.500 =
49 137.500, 137.500 divided by .30 a 458,333) would be allocated 70 percent to Idaho (320.833
50 tons) and 30 percent to Sierra Pacific (137,500 tons); at this point, Sierra Pacific has 300.000 tons
51 in its shut of the stockpile. 162.500 tons plus 137,500 tons equals 300,000 toss. At this point.
52 783.333 tons of the totals, of 850.000 tons in the station stockpile hive been allocated. Ibis third
53 step is to allocate the remaining 66,667 tons in the station stockpile, based on station utilization
54 without limiting Idaho's maximum allocation to 70 percent and Sierra Paciftc's minimum allocation
8/27/92 North Valmy OPC Pap 49
Exhibit No.3
Case No. IPC-E-25-03
R.Adelman, IPC
Page 49 of 81

I to 30 percent. In Example No. 1. Idaho's average total station usage was 25 percent which when
2 subtracted from 100 percent results in Idaho bang allocated 75 percent of the 66.667 tons
3 remaining in the stockpile or 50.000 tons. Sierra Pacific's average total station usage was 75
4 percent which when subtracted from 100 percent results in Sierra Pacific being allocated 25 percent
5 of 66,667 tons remaining in tht stockpile or 16.667.
6
7 In this example. Idaho's share of the stockpile would be 533,333 tons; that is, one-half of the
8 first 325.000 tons or 162,500 tons, plus 70 percent of the next 458,333 tons in the stockpile or
9 320.833 tons plus 75 percent of the remaining 66,667 tons or 50,000 tons. 162.500 tons plus
10 320,833 tons plus 50,000 tons equals 533,333 tons. Sierra Pacifies share of the stockpile would
11 be 316,667 tons. One-half of the first 325,000 tons or 162,500 tons, plus 30 percent of the next
12 459.333 tons in the stockpile or 137.500 tons plus 25 percent of the remaining 66,667 tors or
13 16,667 tons. 162.500 tons plus 137,500 tons plus 16,667 tons equals 316,667 tons.
14
15
16 Examss.',
17
18 Assume (a) the minimum inventory level for the station as established by the Operating
19 Committee is 425.000 tons, (b) the Station stockpile at the end of the month is 550.000 tons, (c)
20 for the most recent twelve months the average totals station usage was 80 percent, (d) Idaho's
21 average use of the station was 30 percent of the average total station usage of 80 percent, and (e)
22 Sierra Pacific's average use of the station was 50 percent of the average total station usage of 80
23 percent. Under these assumptions, Idaho's average use of the station for the most recent twelve
24 months as a percentage of the average total station usage would be 37.5 percent (30 divided by
25 80). Subtracting that 37.5 percent from 100 percent would result in Idaho being allocated a 62.5
26 percent share of the excess tons in the stockpile inventory above 425.000 tons. Since this is less
27 that Idaho's maximum obligation to 70 percent, 62.5 percent would represent Idaho's shave of the
28 125,000 excess tons in the stockpile above the 50/50 after-burn allocation or 78.125 tons.
29
30 Under these assumptions, Sierra Pacifies average use of the station for the most recent twelve
31 months as a percentage of the average total station usage would be 62.5 percent (50 divided by
32 80). Subt=ng that from 100 percent would result in Sierra Pacific being allocated a 37.5 percent
33 share of the excess tons in the stockpile inventory above 425,000 tons. Since this is in excess of
34 Sierra Pacific's minimum allocation of 30 percent. Sierra Pacific would be allocated 37-5 percent
35 of the 125,000 excess tons Ln the stockpile above the 50150 after-burn allocation or 46,875 tons.
36
37 In this example, Idaho's share of the stockpile would be 290.625 tons; that is, one-half of the
38 first 425,000 tons or 212.500 tons plus 62.5 percent of the 125.000 excess tons in the stockpile
39 above the 425.000 tons or 78.125 tons. 212.500 tons plus 78,125 tons equals 290,625 tons.
40 Sierra Pacific's share of the stockpile would be 259,375 tons; that is, one-half of the first 425.000
41 tons or 212.500 tons plus 37S percent of the 125.000 excess tons in the stockpile above 425,000
42 tons or 46,875 tons. 212,500 tons plus 46.875 tons equals 259,375 tons.
43
44 For further example, assume that minimum inventory level for the station as established by the
45 Operating Committee was 250,000 tons rather than 400,000 tons. Any time stockpile inventory is
46 325,000 tons or less, the total stockpile shall be allocated on a 50/50 after-burn basis even if the
47 Operating Committee has set a lower station minimum inventory stockpile level for the station
48 below 325.000 tons. Under the other assumptions set forth in Example No. 2, the first 325.000
49 tons would be allocated on the 50150 after-bum basis. The 225.000 excess tons in the stockpile
50 inventory above the 325.000 would be allocated based on station utilization with 62-5 percent of
51 the 225,000 excess tons, or 140.625 tons being allocated to Idaho and 37-5 percent of the 225.000
52 excess tons, or 94.375 tons being allocated to Sierra Pacific.
53
8127/92 North Val ray 0PC Page 3
Exhibit No.3
Case No. IPC-E-25-03
R.Adelman, IPC
Page 50 of 81

1 In this example, Idaho's share of the stockpile would be 303.125 tons. that is, one-half of the
2 first 325.000 tons or 162,500, plus 62.5 percent of the next 225.000 tons or 140.625 tons.
3 162,500 tons plus 140,625 tons equals 303,125 tons. Sierra Pacific's share of the stockpile
4 mould be 246.875 tons; that is, one-half of the first 325,000 tons or 162,500 tons plus 37.5
5 percent of the next 225.000 tons or 84.375 tons. 162.500 tons plus 84,3 75 tons equals 246.975
6 tons.
8 Finally, in Example No. 2, assume the minimum inventory level for the station as established
9 by the Operating Committee was 500.000 torts rather than 400.000 tons. Any time the Operating
10 Cornmittee established a minimum inventory stockpile level that exceeds 425,000, the first
11 425.000 tots shall be allocated on a SQ150 after-burn basis with the tons in the stockpile above
12 425,000 tots being allocated based on station utilization. Under the other assumpuons set forth in
13 Example No. 2, the first 425.000 tons would be allocated on a 50150 after-burn basis. The
14 125.000 excess tons in the stockpile inventory above 425.000 tons would be allocated based on
15 station utibzauon with 62.5 percent of the 125,000 excm tons or 78.125 tons bang allocated to
16 Idaho and 37.5 percent of the 125,000 excess was or 46.875 tons being allocated to Sierra Pacific.
17 In this example. Idaho's share of the stockpile would be 290.625 tots: that is. one-half of the rust
18 425,000 tons or 212,500 tons, plus 62.5 percent of the next 125,000 tons or 78,125 tons.
19 212,500 tons plus 78,125 tons equals 290,625 tons. Sierra Pacific's shaft of the stockpile would
20 be 259,375 tons; that is, one-half of the first 425,000 tons or 212.500 tons plus 37.5 percent of
21 the next 125,000 tots or 46,875 tons. 212,500 tons plus 46,875 tons equal 259.375 tons.
'2 92 North Valmy OPC Pare 5
Exhibit No.3
Case No. IPC-E-25-03
R.Adelman, IPC
Page 51 of 81

t
Appendix d
4 Manaower Chzrt
Pace
Exhibit No.3
Case No. IPC-E-25-03
R.Adelman, IPC
Page 52 of 81

s
M C O 1
CL
o
.s
G° La
i fl!y
LO m , -
l�
Li
= a- fit
10
Cate No. IPC-E-25-03
R.Adelman, IPC
Page 53 of 81

3 Y
a ;
r
E0 .
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3 .0
a e' _
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Exhibit No.3
Case No. IPC-E-25-03
R.Adelman, IPC
Page 54 of 81

1 Appendix S
2
3 Coal Ph--sisal Invt lard Procedure
"7192 North Valmy OPC Parr '3
Exhibit No.3
Case No. IPC-E-25-03
R.Adelman, IPC
Page 55 of 81

1 VALMY COAL.PHYSICAL INVf-MQRY PROC 'n[7FtEc
2
3
4 SECTION CONTEW
5
6
7 I. Superxded Sections
8
9 11. General
10
11 o Purpose
12 u B wkground
13 o Defuutions
14 o Applicability
15 a Refcrcuces
16
17 M. Physical Inventory Procedures - Valmy Coal Pile
18
19 IV. inventory Adjustments
W27l92 North Valmy OPC Page 514
Exhibit No.3
Case No. IPC-E-25-03
R.Adelman, IPC
Page 56 of 81

I SECTION'L SuQerseded Sctt:-ins
2
3
4 The only Hutt secuon that are superseded by Che new procedure arc the following:
5
6 1. Page 38 of OPC. Section V 2.1.6
Page 41 of OPC. Section V.2.4.4
b 3. Page 'N of Appendix 2.Section S
9
to These three section are superseded in their entirety. AU other provisions rtmain to effect.
1'15 93 North Valmy OPC Pagv 55
Exhibit No.3
Case No. IPC-E-25-03
R.Adelman, IPC
Page 57 of 81

1 S>`MON II: Cn neMl
2
3
4 Purpose To detail the accounting and physical inventory procedures used to track the
5 coal inventory at the North Valmy Power Plant.
6
7 Background Physical inventory adjustments to the coal inventory at Valmy show misty
8 fluctuations, both above and below the "book inventory". These
9 fluctuations may be due to inherent inaccuracies in the inventory survey
10 itself. The adjustments do not necessarily represent an actual gain or loss o!
11 coal.
12
13 Definitions Nuclear DensiIX Test
14 A method of measuring the density of a coal pile. Test holes are
15 drilled in the pile and a radioamve probe is inserted into the hole. Radimon
16 passing through the pile is recorded by a gciger counter. The amount of
17 radiation passing through the pile is compared with the radiation passed
18 through a compacted coal sample in a container of known volume and
19 density is calculated on this basis.
20
21 Aerist SurvrY
22 A method of measuring the volume of the coal pile using aerial
23 photography.
24
25 buy
26 The total amount of coal purchased and consumed during the period
27 since the last survey.
28
29 Applicability Joint Facilities Accounung Unit. Sierra Pacific Power Company; Fuels
30 Accounting Section, Idaho Power Company.
31
32 References No specific references.
1l15;93 Noah Valmy OPC Page 56
Exhibit No.3
Case No. IPC-E-25-03
R.Adelman, IPC
Page 58 of 81

I SECTION III: Phy5ical Inyenle[r - Procedure, - Valmy Plant Coal P 'e
2
3 Nuclear Density Test IM
4 Density tests have peen scheduled twice a year through 1989.
5
6 08() and Latcr
i Starting in 1989. density tests will be scheduled once a year
8 during the spring_ In the fall, the SPPCo. supervisor of Joint
9 Facilities Accounting and the Idaho Power Company Fuels
10 Management Coordinator will review the coal pile activity with
11 Operations Support personae!.
12 r
13 The density figure used for computing the coal inventary
14 will be the current density test. Should the current density appear
15 inaccurate, the Valmy Accounting Committee shall have the
16 responsibility to review and modify the density figure as necessary.
17 If the pile has not changed in the previous six months (in other
18 words, the plant has been using coal from the trestle and the
19 inventory has remained somewhat constant), it may be
20 recommended that a dcQty test not be performed.
21
22 Aerial Survcy An aerial survey to determine the coal pile volume will be
23 conducted each time a density test is performed or as requested by
24 the Accounting or Operations Departments.
25
26 Maintenance Maintensmce and scale calibrations should be conducted in
2'" accord with manufactures' recommendations, or as determined
28 necessary by Operations personnel to tninimi2e scale error.
29
30 Scales included are:
31
32 o &:lt scale w the Black Butte mine.
33 o Track scale at the SUFCo. loadout facility.
34 o Stock feeders and belt scales at the Valmy Plant.
35
36
3 i SECTION IV: Inventory Adjustments
38
39 An inventory adjustment will be made to the company records if the measured amount differs
40 from the "book amount" by +/- four percent of the total acti%7ty. 'Activity" is defined as the total
41 amount of coal purchased and coal consumed during the period since the last survey.
42
43 T`:e adjustment will be:
44
45 iInventory Discrepancy)-(Four Percent of Activity)
46
4 i x;3 nrIc-
48
49 Bcck Inventory: 400.000 tons
50 Stcasured Inventory: 350.000 tons
51 Tc4al Activity: 1.000.000 tons
52 Four Percent of Activity: 40.000 tons (1.000.000 x 0.04)
53 Discreparwy: 50,000 tons (4W.000 - 350,000)
54 Adjustment to be booked: 10,000 tons (50,000 - 40.000)
1,115193 North Valmy OPC Pale
Exhibit No.3
Case No. IPC-E-25-03
R.Adelman, IPC
Page 59 of 81

1
2 The Accounting Committee may rrcommcnd adjustments be rrade whcn the discmpancv is Less
3 thin the four percent figure. This situation may occur wl:en a scale is found to be out of
4 adjustme.=
5
6 If it becomes necessary to make an adjustment, the Accounting Committee wiU ask the
7 Operating Ccmminec for the probable cause of the discrepancy. Using all data available. the
8 Accounting Committee wW decide on an appropriate allocation of the amount in question between
9 the two compaaics Any adjustments made will be in accordwvt with the Operating Procedures
10 Cntena and applicable amendments in effect at the arnc of the inventM,
dM7/92 North Valmy OPC Page 58
Exhibit No.3
Case No. IPC-E-25-03
R.Adelman, IPC
Page 60 of 81

1
{ Appendix 6
Switchyard Cost A11ncation Procedure
'9. Ncrth Valmy OPC Par? 59
Exhibit No.3
Case No. IPC-E-25-03
R.Adelman, IPC
Page 61 of 81

1 North Valmy Switchyard
2 Cost AUocation Procedums
3
4 Purpose.: To clarify the cost allocation between Sierra Pacific Power (SPPCo) and
5 Idaho Power JPCo) for expenditures incurred for operation, maintenance.
6 and capital additions pertaining to the North Valmy switchyard ama-
7
8 Background: Costs pertaining to the North Valmy switchyard have been allocated
9 between SPPCo and IPCo based on Exhibit "A', page 5 of 5, of the
10 'agreement for the ownership of the North Valmy Power Plant Project"
11 dated December 12. 1978. This is a one-line diagram and has not been
12 sufficient in providing an ac==allocation of switcbyard costs.
13
14 Procedure: Cost allocation for the Valmy switchyard will be based on the physical
15 location or function of any c4gwpment or facility in the switchyard, as
16 detailed by the following three categories.
17
1E Category 1 Item - Cost allocation based on usage of individual equipment.
19
20 The attached North Valmy switchyard plot plan, control building
21 plan, and one-line diagram indicate the cost sharing percentages to be
22 utilized for all cost allocation in one of the following ratios: 100% SPPCo-
23 0% IPCo, 85% SPPCo-15%IPCo, 75% SPPCo-25% IPCo, or 509E
24 SPPCo-50% IPCo
25
26 Category 1 items include,but are not limited to:
27
28 Saytchyard Equipment Meter House Equipment
29
30 Foundations Panels
31 Grounding Individual Circuit Brtakcrs
32 Structures Switches
33 Circuit Breakers Relaying and Control
34 Transformers AC and DC Auxiliary Power Systems
35 Buswork
36
37 Category 2 Items - Cost allocation based on a predetermined percentage split of
38 85% SPPCo - 15% IPCo
39
40 The 85115 split was derived through a study of meter house relay panel functions as
41 well as yard equi went functions as they relate to the companies interests. This split is
42 applicabie for the following facilities and equipment:
43
44 Meta House Battery House
45
46 Building Structural Building Structural
47 Plumbing/Plumbing Furtures Batteries and Chargers
48 (not commtitvcations)
49 Hearing
50 Cooling
51 Lighting Station SeMce
52 Electrical Consumption Station Service Transformcrs
53 AC and DC Auxiliary Panels
54 Transfer Switch
8127192 NaKh Valmy 0PC ?agr 60
Exhibit No.3
Case No. IPC-E-25-03
R.Adelman, IPC
Page 62 of 81

1
2 Category 3 Items: 100% Cost to SPPCo
3
4 Tl=c items include common switchyud utas which am not adjacent to a Gregory
S 1 facility and communications facilities which were not onginally a put of the shard
6 projoct investment.
8 'Common" Switchyard A= Communications Facilities
9 Exthw ork Panels (see Category 1)
10 Grading(Gravel,etc ) Batteries and charge:
11 Gmundmg System
12 Fencing
13 Yard M un=ancc
$127192 Nort h V nl m v 0 PC Pap 61
Exhibit No.3
Case No. IPC-E-25-03
R.Adelman, IPC
Page 63 of 81

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R.Adelman, IPC
Page 64 of 81

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Page 65 of 81

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Exhibit No.3_
Case No. IPC-E-25-03
`- R;Adelma7f, IPC
Page 66 of 81

2 Appendix 7
3 E12mn1e Incremental Cast Curve
5-27:92 North Valmy OPC Pare 62
Exhibit No.3
Case No. IPC-E-25-03
R.Adelman, IPC
Page 67 of 81

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Exhibit No.3
Case No. IPC-E-25-03
R.Adelman, IPC
Page 68 of 81

1 Appendix 8
2
3 IL12mule Deli Scale Pruccdure
4
North Palmy OPC Pale 63
Exhibit No.3
Case No. IPC-E-25-03
R.Adelman, IPC
Page 69 of 81

Pa NORTH VALM Station
Unit # Tw
NUMBER VA20P-119
OPERATING PROCEDURE DATE ISSUED 1-20-a9
Title: RFCOALiNG COAL SILDS
when recoaling silos from trestle:
A. Prior to starting plows, record belt scale integrator readings
on belts 1 and 2 for the unit coal is being conveyed to.
B. When recoal of that unit is complete. record belt scale readings
an belts 1 and 2.
C. Record belt scale readings for conveyor belts 1 and 2 before
starting recoal of other unit.
0. Record belt scale integrator readings upon completion. of
recoal .
E. Denote whether coal being conveyed from trestle is Black Butte.
Sufco or blend.
F. Compute total tonnage for belt scale integrators 1 and 2 for
each unit.
2. When Reclaiming From Stock Out:
A. Prior to starting reclaim feeders. record the reading from
integrator for belt scale 8 for unit being recoaled.
B. Upon completion of recoal from stockout, record reading from
belt scale integrator 8.
C. Den*U whether coal being reclaimed is Black Butte or Sufco.
0. Before reclaiming to second unit. record belt 8 integrator
reading.
E. Record belt 8 integrator reading upon completion of recoal
from stockout.
F. Denote whether coal being reclaimed is Black Butte or Sufco.
G. Compute total tonnage for belt scale integrator 8.
tEPARED BY: Patrick A. Jones APPROVED BY:
REVISED BY: to Lai= pa9c �
F=xhmbit No.3
REVISION NO: 1 REVISION OATS: PAGeay R.N Adelman, IPC
Page 10 of 81

..
RECOAL INTEGRATOR READINGS
UNIT ONE UNIT TWO
BELT SCALE INTEGRATOR READINGS BELT SCALE INTEGRATOR READINGS
BLACK BUTTE SUFCO BLEND BLACK BUTTE SUFCO BLEINO
RECOAL START RECCAL START
Integrator I Integrator 1
Integrator 2 Integrator 2
RECOAL STOP RECOAL STOP
Integrator 1 Integrator 2
Integrator 2 Integrator 2
RECLAIM START RECLAIM START
Black Butte Sufco Black Butte Sufco
:ntegrator B Integrator 8
RECLAIM STOP - - RECLAIM STOP
Integrator 8 Integrator 8-
TOTALS TOTALS
Integrator 1 Integrator 1
:ntegrator 2 Integrator 2
Integrator 8 Integrator 8
TOTALS TOTALS
Black Butte Black Butte
Sufco Sufco
A
Caamants nyc 43D
operator
o.3
Case No. IPC-E-25-03
R.Adelman, IPC
Page 71 of 81

Amendment No. 1
to the
Operating Procedure Criteria
for Valmy Coal Diversion Procedures
and Usage
This AMENDMENT to the NORTH VALMY STATION OPERATING PROCEDURES
CRITERIA ("Amendment No. 1") is entered into on January 1, 2012 (the"Effective Date")
between SIERRA PACIFIC POWER COMPANY d/b/a NV Energy("NVE"), a public utility
corporation duly organized and existing according to the laws of the State of Nevada, and
IDAHO POWER COMPANY ("IPC") a public utility corporation organized and existing
according to the laws of the State of Idaho, and duly qualified and doing business in the State of
Nevada (NVE and IPC are hereinafter referred to as the "Company" or"Companies").
A. NVE and IPC jointly own a coal-fired power generation facility in Valmy, Nevada (the
"Project"). The Project is operated in accordance with the Operating Procedures Criteria
dated February 11, 1993, as amended from time to time ("OPC").
B. Currently NVE procures all coal for the Project, pays for the coal and related charges,
and bills IPC for its share. Each Company is, in accordance with Section V 2.1.5 of the
OPC (by an amendment effective January 24, 2003), allocated its Percentage Share of the
coal delivered for each train and ownership of the inventory is maintained on a 50150
after-burn basis. Title to the coal passes to NVE upon loading at the source, although
IPC has an ownership interest.
C. The Companies now wish to change this process so that purchased coal is designated on
the basis of individual trains as being 100% for the account of IPC or NVE, individually,
to allow either Company to divert its designated coal to a delivery point, other than the
Project.
NOW, THEREFORE, for good and valuable consideration the sufficiency of which is hereby
acknowledged, NVE and IPC agree as follows:
I. Section V. 2.1.5 is, amended by deleting it and replacing it with the following:
"V. 2.1.5 Fuel Management
The terms governing the management of fuel for the Project are set forth on Appendix
3, attached hereto."
I1. The"Fuel Accounting Guidelines" in Appendix II of the OPC (also referred to as Appendix
2 in the OPC) are deleted and replaced in their entirety with the new Appendix 2 "Fuel
Accounting Guidelines" attached to this Amendment No. 1.
III. Appendix 3 of the OPC is deleted in its entirety and replaced with the revised Appendix 3
"Fuel Management" attached to this Amendment No. 1.
IV. Section V. 2.1.6 of the OPC is deleted in its entirety.
V. Section V. 2.5 of the OPC is deleted in its entirety.
Exhibit No.3
Case No. IPC-E-25-03
R.Adelman, IPC
Page 72 of 81

VI. MISCELLANEOUS
A. No Representations. The Companies acknowledge that, except as expressly set forth
herein, no representations of any kind or character have been made to or by any other
party or any of their agents, employees, or representatives, relating in any way to this
Amendment No. 1.
B. Entire Agreement. The Companies each warrant that no promise, inducement, or
agreement not expressed herein has been made to them in connection with this
Amendment No. 1 and that this Amendment constitutes the entire agreement between the
Companies. It is expressly understood and agreed that this Amendment No. 1 may not be
altered, amended, modified, or otherwise changed in any respect whatsoever, except in
writing duly executed by authorized representatives of the Companies.
C. Defined Terms. Capitalized terms in this Amendment No. 1 shall have the same meaning
that they are given in the OPC or other written agreements related to the Project, unless
this Amendment No. 1 expressly provides otherwise.
D. Effect on OPC. The portions of the OPC that are not modified or amended by this
Amendment No. 1 shall remain in full force and effect.
E. Interpretation. No provision in this Amendment No. 1 is to be interpreted for or against
either Company because that Company or that Company's legal representative drafted
such provision of this Amendment No. 1. It is understood and agreed that the language
of this Amendment No. 1 is a result of the joint efforts of both Companies. To the extent
that there is any conflict between this Amendment No. 1 and any prior written
agreements related to the Project, the terms of this Amendment No. 1 shall control.
F. Scope of Amendment. This Amendment No. 1 shall be binding upon and inure to the
benefit of the parties hereto, and their respective heirs, executors, administrators,
successors, and assigns, who are obligated to take any action that may be necessary or
proper to carry out the purpose and intent hereof.
G. Authority. Each party to this Amendment No. 1 represents and warrants that it has the
requisite authority to execute this Amendment No. 1.
H. Counterparts. This Amendment No. 1 may be executed in counterparts and each such
counterpart shall be binding on all of the parties so executing this Amendment No. 1 as
though one amendment had been signed by the parties.
IN WITNESS WHEREOF, each Company has executed this Amendment No. 1, through its duly
authorized representative, to be effective on the day and year first above written.
SIERRA PACIFIC POWER COMPANY d/b/a IDAHO POWER COMPANY
NV Energy
By: _ -- By:
Title: p W e t— �/a Title:,v,�D (�'�r, -I, �f h,
Valmy Coal Diversion OPC Amendment Page 2 of 10
Exhibit No.3
Case No. IPC-E-25-03
R.Adelman, IPC
Page 73 of 81

Appendix 2
FUEL ACCOUNTING GUIDELINES
I. Account 151 (Inventory—Coal and Diesel Oil) will reflect the monthly fuel stock(inventory)
balance as described below.
A. Diesel Oil
1. Purchases
All diesel oil, as well as applicable sales tax, transportation, and related refunds, via
specific diesel and oil contracts or purchase orders and will be paid by the Companies
on the basis of each Company's Percentage Share.
2. Pricing
The average cost of diesel oil will be computed by adding the beginning balance
(gallons and dollars), price adjustments,plus current month's receipts, and dividing
the total dollar amount by the total gallons.
All sources of oil will be added together to develop the monthly receipts and price
adjustments. Diesel oil used for start-up and flame stabilization will be credited to this
account monthly,based on Percentage Share.
3. Inventory
Each Company's diesel oil inventory will always remain equal to each Company's
Percentage Share.
B. Coal
1. Purchases
All coal will be purchased in accord with the procedures set forth in Appendix 3.
Each Company will individually pay for the costs associated with the purchase of
coal in accordance with Section II.G of Appendix 3, with the exception of rail car
leases which will be paid for by the Companies on the basis of each Company's
Percentage Share.
2. Allocation Of Coal Inventory Ownership
As of the first day of the month following full execution of this Amendment No. 1, a
Percentage Share will be allocated as each Company's ending inventory for the
previous month. Thereafter:
a. NVE will maintain its coal inventory on its own books in Account 151,but will
also maintain inventory records in tons of all coal delivered and burned for the
Project and separately for each Company. NVE will determine each Company's
share of the coal inventory on a monthly basis as follows:
Valmy Coal Diversion OPC Amendment Page 3 of 10
Exhibit No.3
Case No. IPC-E-25-03
R.Adelman, IPC
Page 74 of 81

Ending Inventory=Beginning Inventory+ Coal Delivered - Coal Consumed
+/- Applicable Adjustments
WHERE:
Beginning Inventory is equal to the prior month's Ending Inventory
Coal Delivered is equal to the amount of coal delivered to the Project during the
month that is designated to the Company's account in accordance with Section
II.E.1. of Appendix 3.
Coal Consumed is determined in accordance with Section V. 2.1.2 of the OPC
Applicable Adjustments are determined in accordance with Section I.C. of the
Fuel Accounting Guidelines included as part of Appendix 2; including without
limitation:
• Scale Adjustment;
• Physical Inventory Adjustment
• BTU Transfer Adjustment ; and
• Inadvertent Adjustment
b. IPC will separately maintain inventory records for its share of coal on its own
books consistent with the above.
c. Each Company will make its inventory records and supporting documents
available to the other Company as may be necessary to reconcile NVE's Project
records.
C. Inventory Adjustments:
1. Scale Adjustment
Loadsite:-Scale calibrations are performed in accordance with the Project coal
supply contracts with a representative from the Companies entitled to observe.
Adjustments for loadsite scale calibrations will be calculated based on
specifications in applicable Project coal supply contracts.
Plant: The scale of record for plant coal consumption will be as defined in the
OPC, Section V. 2.3 All adjustments based on plant scales will be booked
according to a method mutually agreed to by the Accounting Committee after
taking into consideration coal inventory and plant operating statistics.
2. Physical Inventory Adjustment
The method and frequency of coal supply physical inventories will be performed
in accordance with Appendix 5 to the OPC—"Valmy Coal Physical Inventory
Procedures." Physical inventory adjustments will be allocated to each Company
proportional to each Company's ownership interest in the total coal inventory,
Valmy Coal Diversion OPC Amendment Page 4 of 10
Exhibit No.3
Case No. IPC-E-25-03
R.Adelman, IPC
Page 75 of 81

unless the precise cause of a discrepancy is identified and the Fuel Committee
agrees on a more equitable adjustment.
a. BTU Transfer Adjustment:
A "BTU Transfer Adjustment" is required to account for variations in heat
content(commonly expressed as MMBtu/ton or Btu/lb) of individual coal
deliveries to the account of each Company on a single joint coal inventory pile.
The BTU Transfer Adjustment serves to equalize each Company's heat content to
that of the combined deliveries for each month,while retaining the total energy
content in MMBtus delivered for each Company. The BTU Transfer will be
accomplished, by the transfer of tons of coal between the Companies at no cost.
The BTU Transfer Adjustment will be determined in accordance with the
methodology provided in the example provided as Schedule 2.1.
b. Inadvertent Adjustment
If one Company inadvertently burns coal from the other Company's share of
inventory, as described in Section II.B. of Appendix 3, the Borrowing Company
shall repay the Lending Company by transferring tons of coal with equivalent
MMBtu content to the Lending Company at no cost at the earliest time possible,
or as otherwise agreed between the Companies. The tons of coal borrowed is the
amount by which the Borrowing Company's ending inventory as of month-end is
less than its Minimum Inventory Share. The equivalent MMBtu content of the
tons borrowed will be determined using the average heat content for the combined
pile as of month-end.
II. Account 501 (Fuel and Fuel-Handling Expense)
All labor,materials, supplies, and related expenses for oil will be charged to this account.
A. Fuel (Oil)
Each Company's fuel consumption cost and consumption related adjustments will be
recorded in this account on each Company's book of record.
All other adjustments effecting coal consumption will be recorded in this account.
B. Fuel-Handling Expenses
All costs of handling the coal from the rail car to the beginning point of the belt feeding
the boiler will be charged to this account, along with diesel oil unloading costs. The fuel-
handling costs consist of labor, materials, and supplies, transportation, fuel testing, and
related expenses. Fuel-handling expenses will be shared between the Companies on a
Percentage Share basis.
Valmy Coal Diversion OPC Amendment Page 5 of 10
Exhibit No.3
Case No. IPC-E-25-03
R.Adelman, IPC
Page 76 of 81

Appendix 2 Schedule 2.1 —BTU Transfer Adjustment Example
As Delivered for Month Total Deliveries for Month
Contract A Contract B Contract x
Stu's
Actual Deliveries(Tons)
[1 @ avg per delivery
Idaho Power 30,319.00 50% 75,709.00 70% 40,000.00 100% 146,028.00 1,616,986.613
SPPC 30,319.00 50% 32,447.00 30% - 01/. 62,766.00 713,962,863
Total 60,638.00 108,156.00 40,000.00 208,794.00 2,330,949,476
Delivered Heat Content
(Wt'd Avg.BTU/LB)(2)
Idaho Power 9,392.00 11,785.00 11,000.00 11,073.13
SPPC 10,933.00 11,788.00 - 11,374.99 [3]
Average 10,162.50 11,785.90 11,000 11,163.87 LJ
Delivered MMBtu 4
Idaho Power 569,512.10 1,784,461.13 880,00000 3,233,973.23
SPPC 662,955.25 764,970.47 - 1,427,925.73
Average 1,232,467 35 2,549,431,60 880,000 00 4,661,898.95
Normalized Distribution
(Tons)[51 @ average for pile
Idaho Power 25,506 93 79,921 25 39.412 85 144,841.03 1.616,986,709
SPPC 29,691 99 34,260 98 - 63,952 97 713,962,767
Total 55,198 92 11 4,182 23 39,412 85 208.794 00 2,330,949,476
BTU Transfer
Adjustment(Tons)[6]
Idaho Power (1,186.97)
SPPC 1,18697
Total -
Delhenes Notes
Delivery Data input 1 Delivered Tons by Contract from Monthly Received Report
Total Deliveries for Month 2 Weighted Average BTU/LB for all individual trains by Contract from Lab Quality Report
3 Weighted Average of(Actual Deliveries`Delivered Heat Content)
4 Delivered Heat Content`Actual Deliveries'2,000/1,000.000
5 Normalized Distribution=Equivalent tons at Heat Content for Total Deliveries for the Month=
Delivered Heat Content+Delivered Heat Content of Total Deliveries for Month`Actual Deli%eries(EX 939.
6 Difference between Actual Deliveries and Normalized Distribution to be transferred between Companies
Valmy Coal Diversion OPC Amendment Page 6 of 10
Exhibit No.3
Case No. IPC-E-25-03
R.Adelman, IPC
Page 77 of 81

Appendix 3
FUEL MANAGEMENT
OVERSIGHT
I. Fuel Committee: A Fuel Committee will be established and will continue its
jurisdiction during the operating period of the Project. The committee shall
consist of three members appointed by written notice; one by each Company and
the Project's scheduling agent,. The Fuel Committee shall report to the Operating
Committee and shall establish, maintain and review appropriate procedures and
policies relating to fuel procurement, handling, diversion, accounting and auditing
or such other duties as may be required by the Operating Committee.
VII. PROCUREMENT
A. NVE, as the operating agent, will manage the Project's coal procurement and coal
handling process in coordination with IPC and in accordance with the OPC. NVE
will also manage coal supply, transportation, and related contract administration,
except as otherwise agreed between the Companies. IPC may not separately
procure coal for the Project. NVE will communicate to the mines when and what
quantity of coal should be delivered and to which Company such delivery is
designated for purchase.
B. The Operating Committee will, from time to time, establish a minimum and
maximum inventory stockpile level for the Project. Each Company's Percentage
Share of the minimum inventory shall be referred to as that Company's
"Minimum Inventory Share."
C. The Companies shall jointly determine,prior to the start of each calendar year, the
total amount of coal to contract for purchase for delivery in subsequent years for
each Company("Supply Plan") taking into consideration, among other factors:
• The total of each Company's inventory target;
• Existing supply contract obligations;
• IPC and NVE forecasted generation for the subsequent calendar year(s); and
• Projected Ending Inventory(as defined below) in tons at the end of the
calendar year in total and to each Company's account.
D. Coal procured for each Company at its Percentage Share is referred to as "Shared
Coal." Any disproportionate amount of coal procured for a Company in excess of
its Percentage Share is referred to as "Incremental Coal."
E. Coal shall be purchased pursuant to the Supply Plan on a competitive basis from
the lowest evaluated bid price, with Shared Coal requirements filled first followed
by any Incremental Coal requirements at the next marginal evaluated price
available.
1. Coal will be scheduled for delivery in accordance with the Supply Plan
and the following.
Valmy Coal Diversion OPC Amendment Page 7 of 10
Exhibit No.3
Case No. IPC-E-25-03
R.Adelman, IPC
Page 78 of 81

a) All individual trains loaded at any mine will be designated entirely
for purchase by one Company or the other. Title to the coal will
vest in the designated Company immediately upon loading to the
train or as otherwise provided in the applicable coal supply
agreement. The Company taking title shall be solely responsible
for all costs associated with the purchase and transportation of such
coal, with the exception of costs for rail car leases,
b) NVE's designations of individual trainloads for one Company or
the other will be done in a commercially reasonable manner taking
into consideration, among other things, (i) the Supply Plan, (ii)
each Company's coal inventory and iii) each Company's projected
generation.
c) Each Company will reasonably accommodate requests to designate
deliveries in a different manner.
F. The Companies will use commercially reasonable efforts to amend or replace
existing coal supply agreements, and will enter new, supply and transportation
agreements to make IPC a party to those agreements and require i) that title to
coal shall vest in the Company to which the coal shipment is designated, upon
transfer from the seller, ii) that the coal supplier and shipper invoice the Company
in which title is vested, including quality and other adjustments, and iii) to
provide coal quality and shipping weight for all Coal to both Companies,
consistent with coal sampling requirements.
I. If IPC is not a party to a supply or transportation agreement for the
Project:
a) NVE will pay for coal and transportation and bill IPC in
accordance with "NVE Billing Procedures" included in Appendix
2, attached hereto.
b) Neither Company may divert coal purchased under such agreement
in accordance with Section W.C. of Appendix 3.
G. In connection with coal purchased by one Company for the benefit of that
Company("Purchasing Company"), the Purchasing Company shall assume any
and all liabilities, including without limitation any obligations to coal suppliers,
transporters, any risk-of-loss related to the coal; and any liability incurred in the
transportation and handling of the coal, of the other Company("Non-Purchasing
Company")with respect to such coal ("Assumed Liabilities"). The Purchasing
Company shall indemnify, defend, and hold harmless the Non-Purchasing
Company from and against all of the Assumed Liabilities.
H. Either Company may,but is not obligated to, sell or lend coal to the other
Company.
VIII. RIGHT TO DISPATCH
A. A Company's right, under Section III.I of the OPC or any other agreement
between the Companies, to dispatch any amount of the Project's net generating
Valmy Coal Diversion OPC Amendment Page 8 of 10
Exhibit No.3
Case No. IPC-E-25-03
R.Adelman, IPC
Page 79 of 81

capacity is contingent on maintenance of such Company's Minimum Inventory
Share at all times. In the event a Company's share of the coal inventory at the
Project, including any loaned coal, falls below its Minimum Inventory Share, that
Company does not have the right to dispatch the Project.
B. If one Company("Borrowing Company") inadvertently dispatches the Project
when its share of coal inventory is less than its Minimum Inventory Share, it will
be deemed to have borrowed coal from the other Company("Lending Company")
and will repay the borrowed coal in accordance with Section I.C.4 of Appendix 2
to the OPC.
IX. COAL DIVERSION
A. Each Company may, in its sole discretion and subject to this Section, divert future
deliveries of coal that are designated for that Company's benefit to a delivery
point other than the Project for its own behalf or for a third party("Diverted
Coal"). The Companies agree that the intent of allowing coal diversion is to
increase flexibility in the management of the Project's coal pile and not to enter
the competitive coal market or to compete against the other Company in sales of
coal purchased for use in the Project.
B. Except as provided in subsection C below, NVE will, as operating agent, manage
coal diversions for the Project in coordination with IPC to:
1. Respond to solicitations from third-parties for the purchase of coal; and
2. Issue solicitations to third-parties for the sale of coal.
Each Company has the right but is not required, to participate in such
diversions up to its Percentage Share. Either Company may participate at
a greater percentage to the extent the other Company participates at a
lesser percentage.
C. Notwithstanding the above, either Company may divert coal independently,
without the other Company's participation, to generating plants in which the
diverting Company has an ownership interest ("Affiliated Plant"), e.g. IPC need
not allow NVE to participate in diversions to Bridger Station or Boardman Station
and NVE need not allow IPC to participate in diversions to its Reid Gardner
Station.
1. A Company wishing to divert coal from delivery to the Project must
provide written notice to the Fuel Committee representative for the other
Company("Non-Diverting Company"), and NVE's coal scheduling agent, no less
than 45 calendar days, unless mutually agreed otherwise on a case by case basis,
prior to the month in which the Diverted Coal is otherwise scheduled for delivery.
The notice must include at a minimum the following:
• Source:
o Project contract under which Diverted Coal is purchased
o Mine of origin
• Diversion:
o Company and plant to which coal is being diverted
Valmy Coal Diversion OPC Amendment Page 9 of 10
Exhibit No.3
Case No. IPC-E-25-03
R.Adelman, IPC
Page 80 of 81

o Tons to be diverted
o Delivery month
D. The Diverting Company(ies)is(are)responsible for obtaining transportation for
Diverted Coal. An individual Diverting Company may utilize trains owned or
leased for the benefit of the Project("Project Train") subject to the Companies'
executing a separate lease agreement.
Each Diverting Company assumes a share in proportion to its participation in the
diversion of all costs associated with and incurred due to the diversion, including
but not limited to costs for :
i) freeze protection;
ii) claims for lost coal;
iii) transportation;
iv) commodity cost;
v)insurance;
vi) applicable taxes;
vii) any penalties or fees incurred because a Project Train was idled; and
viii) any shortfall payment under any coal or transportation contract.
NVE will provide written documentation of any such costs incurred due to
diversion, regardless of which Company diverted, to the Fuel and Accounting
Committees representatives for each Company.
Valmy Coal Diversion OPC Amendment Page 10 of 10
Exhibit No.3
Case No. IPC-E-25-03
R.Adelman, IPC
Page 81 of 81

BEFORE THE
IDAHO PUBLIC UTILITIES COMMISSION
CASE NO. IPC-E-25-03
IDAHO POWER COMPANY
ADELMAN, DI
TESTIMONY
CONFIDENTIAL
EXHIBIT NO. 4

BEFORE THE
IDAHO PUBLIC UTILITIES COMMISSION
CASE NO. IPC-E-25-03
IDAHO POWER COMPANY
ADELMAN, DI
TESTIMONY
EXHIBIT NO. 5

Execution Version
NATURAL GAS CONVERSION AGREEMENT
This Natural Gas Conversion Agreement (this "Agreement") is made and entered into as
of June 25, 2024, by and between IDAHO POWER COMPANY, an Idaho corporation ("Idaho
Power'), and SIERRA PACIFIC POWER COMPANY d/b/a NV Energy, a Nevada corporation
("NV Energy"). Idaho Power and NV Energy shall be referred to individually as a "PAM�" and
collectively as the"Parties."
RECITALS
WHEREAS, each of Idaho Power and NV Energy holds a fifty percent (50%) undivided
ownership interest, as tenants in common, in the North Valmy Generating Station, which is an
operating, two-unit coal-fired electric generation plant located in Humboldt County,Nevada(the
"North Valmy Project"), as described in greater detail in the Agreement for the Ownership of the
North Valmy Power Plant Project dated as of December 12, 1978 between the Parties (the
"Ownership Agreement").
WHEREAS, Idaho Power and NV Energy also are parties to (a) the Agreement for the
Operation of the North Valmy Power Plant Project dated as of December 12, 1978 (the
"Operation Agreement") and(b)the North Valmy Station Operating Procedures Criteria dated as
of February 11, 1993, as amended by Amendment No.l to the Operating Procedure Criteria for
Valmy Coal Diversion Procedures and Usage, dated as of January 1, 2012, and Modification No.
I to Amendment No. 1, dated May 22, 2020 (as amended and modified, the "OPC"), with
respect to the operation of the North Valmy Project.
WHEREAS, Idaho Power and NV Energy also are parties to the North Valmy Project
Framework Agreement dated as of February 22, 2019 (the "Framework Agreement"), which,
among other things, clarifies the respective rights and obligations of the Parties with respect to
the continued operation, retirement, and eventual decommissioning of the North Valmy Project
or the units thereof, and provides a path for each Party to cease its participation in the North
Valmy Project or the units thereof. The Framework Agreement, together with the Ownership
Agreement and the Operation Agreement, are collectively referred to herein as the "Valmy
Agreements".
WHEREAS, the Parties desire to convert the North Vahny Project's (a) coal-fired Unit 1
to a natural gas-fired unit(the "Unit 1 Conversion Project") and (b) coal-fired Unit 2 to a natural
gas-fired unit (the "Unit 2 Conversion Project") (collectively, the "Conversion Project"), and to
allocate the costs of, take output from, and maintain and operate the Conversion Project in
accordance with the Valmy Agreements, as the Valmy Agreements are to be amended in .
accordance with this Agreement.
NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged,the Parties hereby agree as follows:
Exhibit No.5
Case No. IPC-E-25-03
R.Adelman, IPC
Page 1 of 12

AGREEMENT
1. Recitals Incorporated. The recitals set forth above are incorporated herein by
reference and are explicitly made a part of this Agreement. The Parties agree to abide by each of
their respective covenants made herein to the fullest extent authorized by law.
2. Purpose. This Agreement is intended to (a) amend the Valmy Agreements to
incorporate the Conversion Project within the Valmy Agreements, including with respect to the
allocation of the costs associated with, the rights of the Parties to the output from, and the
operation and maintenance of, the Conversion Project, and (b) set forth a framework for the
negotiation of further agreements between the Parties as it relates to natural gas supply matters,
future uses of the North Valmy Project real property and such other matters as set forth in this
Agreement.
3. Effective Date. This Agreement shall become effective, if at all, on the date upon
which all of the Required Governmental Approvals and Required Consents have been received,
in form and substance satisfactory to the Party seeking such Required Governmental Approvals
and Required Consents in such Parry's sole discretion, and following any reconsideration or
appeal timelines that a Party deems necessary (the "Effective Date"). The Required
Governmental Approvals and Required Consents are listed on Schedule 1.
4. Amendments to Valmy Agreements. The Parties agree that the amendments to
the Valmy Agreements described below are necessary to incorporate the Conversion Project into
the Valmy Agreements. Capitalized terms used but not defined in this Agreement shall have the
meanings given to them in the applicable Valmy Agreement.
(a) Ownership Agreement
(i) Global: References to "coal", "coal-fired" and similar terms are
hereby deleted and replaced with "natural gas", "gas-fired" and similar terms, effective as of the
date as of which both (A) the Unit 1 Conversion Project has achieved commercial operation (the
"Unit 1 Conversion Project COD"), and (B) the Unit 2 Conversion Project has achieved
commercial operation (the "Unit 2 Conversion Project COD") (such date, the "Conversion
Project COD").
(ii) Section 1.5: The definition of Project is hereby revised to
incorporate (A) the Unit 1 Conversion Project, effective as of the Unit 1 Conversion Project
COD, and(B)the Unit 2 Conversion Project,effective as of the Unit 2 Conversion Project COD.
(iii) Section 1.6: The definition of Project Agreement is hereby revised,
effective as of the Effective Date,to include, as a new clause(d), the Framework Agreement.
(iv) Section 1.8: The definition of Unit is hereby revised to include a
description of (A) the Unit 1 Conversion Project, including the nameplate capacity, and all
related equipment owned by the Parties and solely associated with the Unit 1 Conversion Project
(which descriptions shall be confirmed by the Parties prior to the Unit 1 Conversion Project
COD), effective as of the Unit 1 Conversion Project COD, and (B) the Unit 2 Conversion
Project, including the nameplate capacity, and all related equipment owned by the Parties and
2
Exhibit No.5
Case No. IPC-E-25-03
R.Adelman, IPC
Page 2 of 12

solely associated with the Unit 2 Conversion Project (which descriptions shall be confirmed by
the Parties prior to the Unit 2 Conversion Project COD), effective as of the Unit 2 Conversion
Project COD.
(v) Section 3: The existing Section 3 is hereby deleted in its entirety
and replaced with"3. Reserved.", effective as of the Conversion Project COD.
(vi) Section 16: The existing Section 16 is hereby deleted in its
entirety and replaced with"16. Reserved.", effective as of the Effective Date.
(b) Operation Agreement
(i) Global: References to "coal", "coal-fired", "oil", "fuel oil" and
similar or related terms are hereby deleted and replaced with "natural gas", "gas-fired" and
similar terms, effective as of the Conversion Project COD.
(ii) Section 1.1: The definition of Capital Additions is hereby revised
to include (A) the development, construction, and testing incurred as related to the Unit 1
Conversion Project as well as additions, improvements or betterments as related to the Unit 1
Conversion Project, effective as of the Unit 1 Conversion Project COD, and (B) the
development, construction, and testing incurred as related to the Unit 2 Conversion Project as
well as additions, improvements or betterments as related to the Unit 2 Conversion Project,
effective as of the Unit 2 Conversion Project COD.
(iii) Section 1.7: The definition of Project is hereby revised to
incorporate (A) the Unit 1 Conversion Project, effective as of the Unit 1 Conversion Project
COD, and(B)the Unit 2 Conversion Project, effective as of the Unit 2 Conversion Project COD.
(iv) Section 1.8: The definition of Project Agreement is hereby revised,
effective as of the Effective Date,to include, as a new clause (d), the Framework Agreement.
(v) Section 1.11: The definition of Unit is hereby revised to include a
description of (A) the Unit 1 Conversion Project, including the nameplate capacity, and all
related equipment owned by the Parties and solely associated with the Unit 1 Conversion Project
(which descriptions shall be confirmed by the Parties prior to the Unit 1 Conversion Project
COD), effective as of the Unit 1 Conversion Project COD, and (B) the Unit 2 Conversion
Project, including the nameplate capacity, and all related equipment owned by the Parties and
solely associated with the Unit 2 Conversion Project (which descriptions shall be confirmed by
the Parties prior to the Unit 2 Conversion Project COD), effective as of the Unit 2 Conversion
Project COD.
(vi) Section 3.3: In addition to the existing obligations in Section 3.3,
Section 3.3 is hereby revised, effective as of the Effective Date, to provide that NV Energy (as
operator) shall keep the Operating Committee fully informed regarding the development,
construction, and testing of the Conversion Project.
(vii) Section 3.4: In addition to the existing obligations in Section 3.4,
Section 3.4 is hereby revised, effective as of the Effective Date, to provide that any duty of NV
3
Exhibit No.5
Case No. IPC-E-25-03
R.Adelman, IPC
Page 3 of 12

Energy (as operator) to provide applicable contracting information to the Operating Committee
shall also extend to the Conversion Project.
(viii) Section 4.1: Section 4.1 is hereby revised, effective as of the
Effective Date, to provide that Operating Expenses related to the operation of (A) the Unit 1
Conversion Project after the Unit 1 Conversion Project COD, and (B) the Unit 2 Conversion
Project after the Unit 2 Conversion Project COD shall be considered Operating Expenses under
the Operation Agreement and shall be treated in the same manner currently identified within the
Operation Agreement, including but not limited to Section 4.1 and accounting procedures
provided in the OPC.
(ix) Article 7: In addition to the existing provisions in Article 7, Article
7 is hereby revised, effective as of the Effective Date, to provide that NV Energy (as operator)
shall keep accounting and statistical records related to the development and construction of the
Conversion Project and provide to Idaho Power an accounting of monthly expenses related to the
Conversion Project in accordance with the Operation Agreement.
(x) Section 7.2: In addition to the existing terms in Section 7.2,
Section 7.2 is hereby revised, effective as of the Effective Date, to provide that: (A) each Party,
through its Operating Committee member, or any regulatory commission having utility rate
jurisdiction over either Party, shall have the right to examine the separate books of account kept
by each Party and all supporting data and documents related thereto applicable to the Conversion
Project; and (B) NV Energy shall (1) provide Idaho Power with all books of account and
supporting data and documents kept by NV Energy applicable to the Conversion Project as may
be requested of Idaho Power by a regulatory commission in a regulatory commission audit or
proceeding or under a regulatory request for information, and (2) respond to Idaho Power with
the requested books of account and supporting data and documents as soon as reasonable
possible and without delay, and in any event within five (5) Business Days after request of same
by Idaho Power.
(xi) Article 8: The existing language in Article 8 is hereby deleted in its
entirety and replaced with"8. Reserved.", effective as of the Conversion Project COD.
(c) Framework Agreement
(i) Article IV: The existing provisions of Article IV are hereby
deleted and replaced with"ARTICLE IV—RESERVED", effective as of the Effective Date.
(ii) Article VI: The existing provisions of Article VI (and any
definitions related thereto) are hereby revised, effective as of the Effective Date, to provide that
the decommissioning, demolition and closure activities associated with retirement of coal
management, coal ash handling and diesel fuel handling (and any other Decommissioning-
related activities with respect to the Units) during the Interim Period constitute Decommissioning
Activities, and that each Parry's Decommissioning Share of all costs with respect to
Decommissioning Activities (whether during the Interim Period or in connection with
implementing the Decommissioning Plan) shall be fifty percent (50%), unless otherwise agreed
by the Parties.
4
Exhibit No.5
Case No. IPC-E-25-03
R.Adelman, IPC
Page 4 of 12

5. Reimbursement of Past Costs for Unit 1. Subject to the remainder of this
Section 5, Idaho Power agrees to reimburse NV Energy for (a) fifty percent (50%) of the costs
incurred by NV Energy for Capital Additions installed on Unit 1 that benefit the Unit 1
Conversion Project, (b) the net investment in Common Facilities by NV Energy that benefits the
Unit 1 Conversion Project and that has not been previously reimbursed by Idaho Power, up to
fifty percent (50%) of such net investment, and (c) fifty percent (50%) of the costs incurred by
NV Energy for all Materials and Supplies procured specifically for use in Unit 1 that benefit the
Unit 1 Conversion Project, in each case, that have been or will be incurred or invested by NV
Energy during the period commencing on the date that Idaho Power exits Unit 1 and ending on
or before the Unit 1 Conversion Project COD, in each case as determined by mutual written
agreement of the Parties (the "Past Costs"). The Parties agree to cooperate in good faith to
reasonably determine the Past Costs, and the Parties agree that the Past Costs to be reimbursed
shall reflect the negotiated balance, as of the date on which Unit 1 has permanently ceased coal-
fired operations, for each Capital Addition as described in clause (a), investment in the Common
Facilities as described in clause (b), and each Material or Supply as described in clause (c), in
each case based on the normal useful life established when the relevant asset was placed in-
service. Unless otherwise mutually agreed in writing by the Parties, Idaho Power shall reimburse
NV Energy for all Past Costs on or prior to the Unit 1 Conversion Project COD. NV Energy
shall provide all customary capital justification and documentation in accordance with existing
capital approval processes for the North Valmy Project.
6. Certain Agreements of the Parties regarding North Valmy Project Operation and
Maintenance Cost Sharing.
(a) Unless otherwise mutually agreed in writing by the Parties,NV Energy (as
operator) agrees to use commercially reasonable efforts and act in accordance with Prudent
Utility Practice to commence and complete the natural gas conversion of each of Unit 1 and Unit
2 as soon as reasonably practicable following the cessation of coal-fired operations with respect
to such Unit. Based on the anticipated project schedules as of the date of this Agreement, which
the Parties acknowledge are preliminary in nature and subject to change, the Parties initially
contemplate that (i) each of Unit 1 and Unit 2 would cease coal-fired operations by December
31, 2025 and (ii) the Unit 1 Conversion Project COD would occur on or prior to December 31,
2025 and the Unit 2 Conversion Project COD would occur on or prior to June 1, 2026.
(b) In the event that both Unit 1 and Unit 2 cease coal-fired operations on or
prior to December 31,2025, the Parties agree, effective as of the Effective Date,that:
(i) Idaho Power shall remain responsible for the payment of the
annual Unit 1 Exit Fee through the earlier of December 31, 2025 or the date that Unit 1 coal-
fired operations cease; provided that, in the event Unit 1 coal-fired operations end prior to
December 31, 2025, NV Energy shall reimburse Idaho Power the prorated amount of the Exit
Fee for 2025; provided, further, that, for purposes of determining the prorated amount, the Exit
Fee will continue to be payable through the end of the month in which Unit 1 coal-fired
operations cease;
5
Exhibit No.5
Case No. IPC-E-25-03
R.Adelman, IPC
Page 5 of 12

(ii) upon NV Energy ceasing Unit 1 coal-fired operations, Idaho Power
shall revoke its Unit 1 Exit Notice and, from and after such revocation, Idaho Power shall pay its
Percentage Share(i.e., fifty percent(50%)) of all costs with respect to Unit 1; and
(iii) Idaho Power and NV Energy shall continue to pay their respective
Percentage Shares (i.e., fifty percent (50%)) of all costs with respect to Unit 2 (including fuel
handling and administrative costs, costs relating to Common Facilities, and operations and
maintenance costs)both prior to and after the date that Unit 2 coal-fired operations cease.
(c) If, despite NV Energy's use of commercially reasonable efforts and acting
in accordance with Prudent Utility Practice, the cessation of coal-fired operations of both Unit 1
and Unit 2 is not achieved by December 31, 2025 and a Party (the "Participating Party")
reasonably determines that either or both of Unit 1 and Unit 2 will continue coal-fired operations
after December 31, 2025 until the cessation of coal-fired operations of either or both of Unit 1
and Unit 2, respectively, and the other Party (the "Non-Participating Party") does not desire to
participate in such coal-fired operations, then the Parties agree, effective as of the Effective Date,
that:
(i) the Non-Participating Party shall continue to pay its Percentage
Share (i.e., fifty percent (50%)) of all costs for such Unit(s) that the Parties would reasonably
expect to be incurred if the Unit(s) were available, but not operating (e.g., labor costs and fixed,
cyclic, and administrative costs), and the Participating Party shall continue to pay for all variable
costs (e.g., operations and maintenance costs and certain fuel handling costs) until coal-fired
operations cease with respect to the Unit(s); provided that the Parties shall use commercially
reasonable efforts and work together in good faith to determine the costs (or the methodology
that will be employed to determine such costs)to be borne by the Parties on or prior to December
31, 2025, or as soon as reasonably practicable thereafter;
(ii) the Participating Party shall have the right to continue coal-fired
operations for one or both Units without restriction, and shall be entitled to receive the Output
(as such term is defined in the Operation Agreement) from one or both Units, up to its
Percentage Share (i.e., fifty percent(50%)) of North Valmy Project Output;
(iii) the terms and provisions of the Unit Operations and Controls, as
described in Exhibit C of the Framework Agreement, shall remain in effect, subject to
modification of System Controls to restrict North Valmy Project operations to the Participating
Party's Percentage Share(i.e., fifty percent(50%))of North Valmy Project Output;
(iv) upon the date that both Units have ceased coal-fired operations, the
Parties shall resume paying their respective Percentage Shares (i.e., fifty percent (50%)) of all
costs with respect to the Units in accordance with the Valmy Agreements; and
(v) upon (A) NV Energy permanently ceasing Unit 1 coal-fired
operations prior to December 31, 2025 (even if Unit 2 continues coal-fired operations after
December 31, 2025) or(B) Unit 1 permanently ceasing coal-fired operations after December 31,
2025, Idaho Power shall revoke its Unit 1 Exit Notice and, from and after such revocation, Idaho
Power shall pay its Percentage Share(i.e., fifty percent(50%))of all costs with respect to Unit 1.
6
Exhibit No.5
Case No. IPC-E-25-03
R.Adelman, IPC
Page 6 of 12

7. Future Agreements. In connection with the transactions contemplated by this
Agreement, the Parties recognize the need to negotiate certain agreements in the future with
respect to the Conversion Project. The Parties agree to use commercially reasonable efforts and
work together in good faith to:
(a) (i) prior to the Conversion Project COD, mutually agree on revisions to
the OPC to delete provisions with respect to, and references to, "coal", "coal-fired", "oil", "fuel
oil" and similar or related terms, and to replace such provisions and terms with "natural gas",
gas-fired" and similar terms, and (ii) incorporate within the OPC (x) the Unit 1 Conversion
Project, effective as of the Unit 1 Conversion Project COD, and (y) the Unit 2 Conversion
Project, effective as of the Unit 2 Conversion Project COD;
(b) prior to each of the Unit 1 Conversion Project COD and the Unit 2
Conversion Project COD, mutually agree on revisions to the OPC and/or enter into one or more
separate agreements with respect to operations, scheduling and related budgeting and plant
accounting guidelines and requirements for the Unit 1 Conversion Project and the Unit 2
Conversion Project;
(c) after the Effective Date, negotiate one or more agreements for natural gas
fuel transportation and capacity rights with regard to both the Ruby Pipeline and the Pinyon
Pipeline commensurate with each Parry's respective Percentage Share (it being understood and
agreed that each Party will be responsible for its own natural gas fuel management with regard to
the Unit 1 Conversion Project and the Unit 2 Conversion Project);
(d) after the Effective Date, mutually agree on revisions to the applicable
Valmy Agreements to permit each Party the right to pursue other uses of the Common Facilities
(e.g., the development, construction, ownership and operation of additional generation facilities
unrelated to the Conversion Project), and to negotiate separate agreements that address, among
other things, the sharing of North Valmy Generating Station fixed operation, maintenance and
Common Facility capital costs, the sharing of variable operations, variable maintenance and
capital costs, and the allocation of operation, maintenance and capital costs payments for related
obligations (such as insurance) and liabilities associated with such other uses of the Common
Facilities; provided that, the Parties agree that such revisions shall include terms providing that
no such other uses of the Common Facilities will (i)have (or reasonably be expected to have) an
adverse impact on the Conversion Project or any assets, facilities or equipment associated
therewith, including any facilities to transport natural gas or electricity, (ii) have (or reasonably
be expected to have) an adverse impact on the transportation of natural gas to the Conversion
Project and the transmission of electricity from the Conversion Project, and (iii) cause (or
reasonably be expected to cause) an increase in any costs or liabilities as may be related to the
Conversion Project, including the cost of natural gas to supply the Conversion Project;
(e) after the Effective Date, mutually agree on the Parties' respective
obligations regarding decommissioning matters and current and future liabilities with respect to
the North Valmy Project as described in the Valmy Agreements in the event the Parties do not
mutually agree on a date to end the North Valmy Project pursuant to Section 7 of the Ownership
Agreement; provided that, if the Parties, despite their use of commercially reasonable efforts and
working together in good faith, do not mutually agree on such obligations, such obligations shall
7
Exhibit No.5
Case No. IPC-E-25-03
R.Adelman, IPC
Page 7 of 12

be subject to negotiation by the Parties based on the particular facts and circumstances that exist
at the time that a Parry desires to end the North Valmy Project pursuant to Section 7 of the
Ownership Agreement; and
(f) after the Effective Date, mutually agree on updated diagrams
incorporating the Conversion Project and changes made to the North Valmy Project to replace
the diagrams in"Exhibit A"of the Ownership Agreement and Operation Agreement.
8. Entire Agreement. This Agreement supersedes all prior discussions and
agreements between the Parties with respect to the subject matter hereof, and contains the sole
and entire agreement between the Parties with respect to the subject matter hereof.
9. No Reliance. The Parties may not rely on anything in this Agreement, or
communications related to this Agreement, whether written or oral, as the basis for taking any
action, foregoing any opportunity, or incurring any costs.
10. Governing Law. THIS AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER AND THE TRANSACTIONS
CONTEMPLATED HEREBY SHALL BE GOVERNED BY, ENFORCED AND
INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEVADA
WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW THAT WOULD APPLY
THE LAWS OF ANOTHER JURISDICTION.
11. Waiver of Trial by Jurv. TO THE FULLEST EXTENT PERMITTED BY LAW,
EACH OF THE PARTIES WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN
RESPECT OF LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR
IN CONNECTION WITH THIS AGREEMENT. EACH PARTY FURTHER WAIVES ANY
RIGHT TO CONSOLIDATE ANY ACTION IN WHICH A JURY TRIAL HAS BEEN
WAIVED WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS
NOT BEEN WAIVED.
12. Expenses. Except as otherwise expressly set forth in this Agreement, each Party
shall bear its own expenses in connection with the negotiation, execution and performance of this
Agreement and the transactions contemplated hereby.
13. Notices.
(a) Notice Addresses. Unless this Agreement specifically requires otherwise,
any notice, demand or request provided for in this Agreement, or served, given or made in
connection with it, shall be in writing and shall be deemed properly served, given or made if
delivered in person or sent by e-mail, by registered or certified mail, postage prepaid, or by a
nationally recognized overnight courier service that provides a receipt of delivery, in each case,
to a Party at its address specified below:
8
Exhibit No.5
Case No. IPC-E-25-03
R.Adelman, IPC
Page 8 of 12

For Idaho Power:
Idaho Power Company
1221 West Idaho Street
Boise, ID 83702
Attn: Joint Projects
Email: jcarstensen(d�idahopower.com
With a copy to:
Idaho Power Company
1221 West Idaho Street
Boise,ID 83702
Attn: Legal Department
Email: legal(ir idahonower.com
For NV Energy:
Sierra Pacific Power Company d/b/a NV Energy
6226 W. Sahara Avenue
Las Vegas,Nevada 89146
Attn: Brandon Barkhuff,Vice President, General Counsel, Corporate
Secretary and Chief Compliance Officer
Email: BBarkhuff(iDnvener .com
With a copy to:
NV Energy
6226 W. Sahara Avenue
Las Vegas,Nevada 89146
Attn: Legal Department
E-mail: Legal(a;nvenerg .com
A Party may change its contact information by giving notice to the other Party, as
applicable. Notices which do not comply with the requirements of this Agreement are
ineffective, and do not impart actual or any other kind of notice.
(b) Effective Time. Notice given by personal delivery, mail or overnight
courier pursuant to this Section 13(b) shall be effective upon physical receipt. Notice given by e-
mail pursuant to this Section 13(b) shall be effective as of(a) the date of delivery if delivered
before 5:00p.m. local time on any Business Day, or (b) the next succeeding Business Day if
delivery is after 5:00p.m. local time on any Business Day or during any non-Business Day.
14. Relationship Between Parties. The Parties do not intend to create nor may this
Agreement be construed as creating between the Parties, a partnership, joint venture, or other
association. Each Party waives any claim, whether arising before or after the signing hereof,
9
Exhibit No.5
Case No. IPC-E-25-03
R.Adelman, IPC
Page 9 of 12

known or unknown, based on or arising from any creation by this Agreement of a partnership,
joint venture, or other association.
15. Amendment. This Agreement may be amended, supplemented or modified only
by a written instrument duly executed by both Parties.
16. Waivers. Any term or condition of this Agreement may be waived at any time by
the Party that is entitled to the benefit thereof, but no such waiver shall be effective unless set
forth in a written instrument duly executed by or on behalf of the Party waiving such term or
condition. No waiver by any Party of any term or condition of the Agreement, in any one or
more instances, shall be deemed to be or construed as a waiver of the same or any other term or
condition of the Agreement on any future occasion. All remedies, either under this Agreement or
by law or otherwise afforded,will be cumulative and not alternative.
17, No Assignment; Binding Effect. Neither this Agreement nor any right, interest or
obligation hereunder may be assigned or delegated by a Party without the prior written consent
of the other Party, which consent will not be unreasonably withheld, conditioned or delayed, and
any attempt to do so will be void. This Agreement is binding upon, inures to the benefit of and is
enforceable by the Parties and their respective successors and permitted assigns.
18. No Third Party Beneficiary. The terms and provisions of this Agreement are
intended solely for the benefit of each Party hereto and their respective successors or permitted
assigns, and it is not the intention of the Parties to confer third-party beneficiary rights upon any
other person or entity.
19. Severability. All covenants, obligations, and liabilities of the Parties are, except as
otherwise specifically provided herein, intended to be several and not joint or collective. At no
time will a non-defaulting Party be responsible for making payments required under this
Agreement on behalf of any other Party. Each Party will be individually responsible for its own
covenants,obligations, and liabilities as provided for herein.
20. Counterparts. This Agreement may be executed in any number of counterparts,
each of which will be deemed an original, but all of which together will constitute one and the
same instrument.
21. Authorization. NV Energy represents and warrants that this Agreement has been
duly executed and delivered by it and that all requisite company authorization has been obtained
that is necessary for this Agreement to be binding on the NV Energy. Idaho Power represents
and warrants that this Agreement has been duly executed and delivered by it and that all requisite
company authorization has been obtained that is necessary for this Agreement to be binding on
the Idaho Power.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]
10
Exhibit No.5
Case No. IPC-E-25-03
R.Adelman, IPC
Page 10 of 12

IN WITNESS WHEREOF, this Agreement has been duly executed and delivered as of
the date first above written.
IDAHO POWER IDAHO POWER COMPANY
By:
Name: R n N. Adelman
Title: Vice President,Power Supply
NV ENERGY SIERRA PACIFIC POWEfLC8IMP1 Y
d/b/a NV ENE Y
By:
Na : J n mons
T e: a Preside -Ge
[Signature Page to Natural Gas Conversion Agreement]
Exhibit No.5
Case No. IPC-E-25-03
R.Adelman, IPC
Page 11 of 12

SCHEDULEI
REQUIRED GOVERNMENTAL APPROVALS AND REQUIRED CONSENTS
For NV Enemy: The filing of this Agreement with the Public Utilities Commission of
Nevada
For Idaho Power: The approval of this Agreement by the Idaho Public Utilities Commission
Schedule I
Exhibit No.5
Case No. IPC-E-25-03
R.Adelman, IPC
Page 12 of 12