20051031Part III response staff request.pdf

UTAH
05-035-
MEHC/PPW
CCS 2nd Set DATA REQUEST
CONFIDENTIAL ATTACHMENTS
CCS 7 a-3 and 4.
CONFIDENTIAL (LEVEL YELLOW)
ON THE ENCLOSED CD
05-035-54/PacifiCorp
September 16,2005
CCS 4th Set Data Request 4.
CCS Data Request 4.
The Associated Press reported on 28 August 2005 that PacifiCorp is expected to
begin laying off 47 employees in the corporate support division in Portland and
Salt Lake City. Are these layoffs the result of the "re-basing" that was discussed
in the meeting in Salt Lake City on 24 August? How many employees will be
laid off in each location?
PPW's Response to CCS Data Request 4.
The referenced Associated Press report on 28 August 2005 was from a brief story
in the Oregonian newspaper regarding the Rebasing Project, which is covered in
detail in the response to CCS Data Request 4.7. The figure reported as the
number of employees affected, 47, was inaccurate to the extent that actual layoffs
have not been fully determined and will be occurring over 2 years. This number
was the difference between the 175 budgeted positions, both filled and unfilled,
identified for Rebasing reductions, and the number of open positions, 128, at the
time the project completed. These are not strictly comparable lists of positions.
Individuals in positions identified for reductions will be able to apply for other
opportunities within the company, so exact layoff numbers are unknown at this
time. Regarding the locations of employees whose positions are being eliminated
through rebasing, please see the response to CCS Data Request 4.7 d.
05-035-54/PacifiCorp
September 16, 2005
CCS 4th Set Data Request 4.
CCS Data Request 4.
Please show in detail how the costs of the special purpose holding company that
would be used to "ring-fence" PacifiCorp would be charged to PacifiCorp. (a)
Also show by year the anticipated charges to Utah by year from this special
purpose holding company.
Response to CCS Data Request 4.
It is anticipated that costs incurred by PPW Holdings LLC would be allocated 100
percent to PacifiCorp. At this time there have not been any estimates made of the
ongoing charges for operating PPW Holdings LLC.
These costs will be allocated to Utah in rate proceedings in the same manner that
similar costs are now allocated, using then-current interjurisdictional allocation
factors.
05-035-54/PacifiCorp
September 16 2005
CCS 4th Set Data Request 4.
CCS Data Request 4.
Will PacifiCorp have a separate board of directors under MEHC ownership? (a)
Who will be on the PacifiCorp board? (b) How will the cost of the PacifiCorp
board be charged to Utah?
MEHC's Response to CCS Data Request 4.
PacifiCorp will have its own board of directors as indicated in the testimony of
MEHC witness Abel (p. 24).
(a) Mr. Abel will serve as chairman of the PacifiCorp board as indicated at page 2
of his testimony. ScottishPower representatives will be replaced on the board
and there will be some, as yet unspecified, restructuring of the board. Beyond
this, decisions have yet to be made.
(b) These costs will be allocated to Utah in rate proceedings in the same manner
that similar costs are now allocated, using then-current interjurisdictional
allocation factors.
05-035- 54/Pacifi Corp
September 16, 2005
CCS 4th Set Data Request 4.
CCS Data Request 4.
What specific provisions, if any, is MEHC offering that would protect ratepayers
from upstream transactions? Please list all such protections. (a) For each
protection listed, please explain in detail how such protection replaces or
enhances the protection that would have existed under the PUHCA.
MEHC's Response to CCS Data Request 4.
MEHC believes that there are basically three PUHCA protections that are
relevant. First of all PUHCA prohibits upstream loans to holding companies from
subsidiaries. Second, PUHCA restricts holding companies from providing
services to utilities and prevents service companies from charging more than cost.
Finally, PUHCA restricts the payment of dividends out of capital to protect utility
financial soundness and requires the terms of loans to a utility subsidiary from its
holding company parent to be on reasonable terms - generally without mark-up to
the holding company s cost of funds.
With regard to the first PUHCA protection, f\ffiHC has-committed that PacifiCorp
will not, without the approval of the Commission, assume any obligation or
liability as guarantor, endorser, surety or otherwise for f\ffiHC or its affiliates
provided that this condition will not prevent PacifiCorp from assuming any
obligation or liability on behalf of a subsidiary of PacifiCorp. Thus the
Commission would have to approve any proposed upstream loan. See the
prepared direct testimony of f\ffiHC witness Goodman, Table 3, Financial
Integrity section, paragraph "
With regard to services provided by MEHC or MEC, f\ffiHC witness Specketer
explains in detail the commitments made by f\ffiHC, to the Commission
regarding charges allocated to PacifiCorp. See the direct testimony of applicant
witness Specketer, Table 1 , Regulatory Oversight section, paragraph "
Lastly, to address the concerns regarding PacifiCorp s financial soundness
MEHC witness Goodman explains MEHC's commitment, to the Commission
regarding the common equity ratio that PacifiCorp will not fall below without
regulatory approval. See the direct testimony of f\ffiHC witness Goodman, Table
, Financial Integrity section, paragraph "" Furthermore, any downstream loans
to PacifiCorp from its holding company parent would be on reasonable terms
without mark-up to the holding company s cost of funds. See the direct testimony
of applicant witness Specketer, page 7, line 13. However, it is contemplated that
PacifiCorp will maintain its own capital structure, its own credit rating (See direct
testimony of applicant witness Goodman, Table 3, Financial Integrity section
paragraph ") and its own lines of credit.
05-035-54/PacifiCorp
October 19, 2005
CCS 6th Set Data Request 6.
CCS Data Request 6.
Page 7 of the Joint Application lists PacifiCorp subsidiaries that will be
transferred to MERC with the approval of the acquisition. Please identify each of
the subsidiaries as to whether it is regulated or unregulated.
Response to CCS Data Request 6.
The following subsidiaries are regulated for rate-making purposes: Centralia
Mining Company, Energy West Mining Company, Glenrock Coal Company,
Interwest Mining Company, Pacific Minerals, Inc., Bridger Coal Company, and
Trapper Mining, Inc.
UE-051090/PacifiCorp
September 20 2005
WUTC Staff Data Request 2
WUTC Staff Data Request 2
Referring to the pre-filed direct testimony of Gregory E. Abel, Exhibit (GEA-I T),
page 9-, lines 19-23 and 1-, respectively, please provide all studies, analyses
memoranda, internal reports, electronic messages or other documentation relied
upon by Mr. Abel to determine that the price paid for PacifiCorp is fair to
shareholders of MERC and Berkshire Hathaway.
MERC's Response to WUTC Staff Data Request 2
MEHC objects to this data request on the grounds that it is overly broad
and unduly burdensome, and vague and indefinite, to the extent that it requests
all studies, analyses, internal reports, memoranda, electronic messages or other
documentation relied upon by Mr. Abel.. .." Without waiving these objections
MEHC provides the following response regarding the documents upon which it
relied.
Please Note: The documents responsive to this request are HIGHLY
CONFIDENTIAL and price- and transaction-sensitive to MEHC, and should not
be disclosed, directly or indirectly, to PacifiCorp or ScottishPower or any other
person or entity. Disclosure of such information would result in irreparable
financial harm and expense to MEHC. The responsive documents, which are
described below, are available for inspection at the offices of Applicant's counsel
in Seattle, Washington. Please contact Jamie Van Nostrand at [phone] to
make arrangement for this inspection.
Due Diligence Materials. Available for inspection are the memoranda prepared
by MEHC in conjunction with the due diligence review ofPacifiCorp. The
memoranda, prepared by members ofMERC's in-house due diligence team
address various aspects ofPacifiCorp s operations. While the materials do not
comprise all of the documents gathered, reviewed or generated in the due
diligence process, they are a culmination ofMEHC's due diligence efforts
provide a concise summary of the due diligence process, and represent the work
product that was provided to MEHC's senior management.
Also available for inspection is a PowerPoint presentation entitled "Project
Apollo: Management Presentation." This presentation summarizes the above-
mentioned memoranda.
A key to the code names used in the materials is provided hereafter.
Saturn = Scottish Power pIc
Mercury = MidAmerican Energy Holdings Company
Venus = PacifiCorp
Apollo = Name given to the project
UE-051090/PacifiCorp
September 20, 2005
WUTC Staff Data Request 2
On the basis of attorney-client and work product privileges, MEHC does
not plan to produce certain of the documents that were originally included in the
binder of materials. MEHC has noted where the documents were withheld from
the binder at the original position of each such privileged document.
Fairness Opinion Materials.Finally, MEHC is making available for
inspection the 3-page "fairness opinion" (cover page plus 2-page letter) issued by
the Houlihan, Lokey, Howard & Zukin investment banking fmn.
UE-051 090/Pacifi Corp
September 20, 2005
WUTC Staff Data Request 3
WUTe Staff Data Request
Referring to the pre-filed direct testimony of Gregory E. Abel, Exhibit (GEA-IT),
page 10, lines 1-, please provide all studies, analyses, internal reports
memoranda, electronic messages or other documentation relied upon by Mr. Abel
to determine that the purchase price for PacifiCorp and all future investments in
PacifiCorp s electric operations
, "
... will be fair to customers, employees and
shareholders. "
MEHe's Response to WUTe Staff Data Request 3
f\ffiHC objects to this data request on the grounds that it is overly broad and
unduly burdensome, and vague and indefinite, to the extent that it requests "all
studies, analyses, internal reports, memoranda, electronic messages or other
documentation relied upon by Mr. Abel.. .." f\ffiRC also objects to this data
request on the grounds that it is vague and indefinite to the extent that it refers to
.. . all future investments in PacifiCorp s electric operations...." Without waiving
these objections f\ffiHC provides the following response.
Please refer to the response to WUTC 2.
UE-0510901PacifiCorp
September 20, 2005
WUTC Staff Data Request 4
WUTC Staff Data Request 4
Referring to the pre-filed direct testimony of Gregory E. Abel, Exhibit (GEA-l T),
page 11, lines 5-6, please provide all studies, analyses, internal reports
memoranda, electronic messages or other documentation relied upon by Mr. Abel
to determine that"... the energy industry is a preferred area of investment. . ." for
MEHC.
MERC's Response to WUTC Staff Data Request 4
f\ffiHC's experience and expertise is in the energy industry. To take advantage
that experience and expertise, f\ffiHC focuses its investments on energy
businesses.
UE-051 090/Pacifi Corp
September 20, 2005
WUTC Staff Data Request 5
WUTe Staff Data Request 5
Referring to the pre-filed direct testimony of Gregory E. Abel, Exhibit (GEA-l T),
page 11 , lines 5-6, please provide all studies, analyses, internal reports
memoranda, electronic messages or other documentation prepared by MEHC to
determine the amount of capital that can be expected to be provided by Berkshire
Hathaway.
MERe's Response to WUTe Staff Data Request
Please see the response to WUTC 2. The due diligence materials contain, among
other items, analyses of the financial forecast for PacifiCorp provided to MEHC
by ScottishPower.
UE-0510901PacifiCorp
September 20, 2005
WUTC Staff Data Request 6
WUTe Staff Data Request 6
Referring to the pre-filed direct testimony of Gregory E. Abel, Exhibit (GEA-l T),
page 11 , lines 7-, please provide all studies, analyses, internal reports
memoranda, electronic messages or other documentation relied upon by Mr. Abel
to determine the fair and reasonable return from its purchase price of PacifiCorp
and the amounts MEHC expects to invest in the near future in PacifiCorp.
MER C' s Response to WUTC Staff Data Request 6
f\ffiHC objects to this data request on the grounds that it is overly broad and
unduly burdensome. MERC also objects to the data request on the grounds that it
is vague and indefinite. Without waiving these objections f\ffiHC responds as
follows.
Mr. Abel's testimony is that MEHC believes it should be able to earn a reasonable
return on its investment in PacifiCorp if it focuses on the objectives of customer
satisfaction, reliable service, employee safety, environmental stewardship and
regulatorynegislative credibility. His expectation is based upon Mr. Abel's and
f\ffiRC's experience in the industry, and MEHC's due diligence review of
PacifiCorp, including its review of the publicly available PacifiCorp rate orders of
the regulatory agencies in PacifiCorp s six states, from which MEHC determined
that the authorized returns on common equity for PacifiCorp had not historically
been unreasonable.
With respect to the amount f\ffiHC expects to invest in PacifiCorp, the amount
would include the $5.1 billion initial investment to fund the transaction, the $1
million shareholder cost of the DSM study commitment, and the common-equity-
funded portions of (a) the $1 billion annual expected infrastructure investment by
PacifiCorp and (b) the amount of the $1.3 billion investment commitment in this
proceeding that is incremental to the annual investment projected in (a).
For information regarding MEHC's due diligence review, please refer to the
response to WUTC 2.
UE-05!090/PacifiCorp
September 20, 2005
WUTC Staff Data Request 7
WUTC Staff Data Request 7
Referring to the pre-filed direct testimony of Gregory E. Abel, Exhibit (GEA-l T),
page 12, lines 3-, please provide any study, document or analysis either prepared
by Mr. Abel or under his direct supervision to show MERC's Board of Directors
that the expected returns from the purchase of PacifiCorp will adequately
compensate shareholders for the risks of the business.
MEHC's Response to WUTC Staff Data Request 7
The due diligence materials referenced in response to WUTC 2 are the materials
relied upon by those (Messrs. Sokol and Abel) who made a presentation to the
MEHC Board of Directors. Messrs. Sokol and Abel also relied upon their
experience in the industry.
UE-051 090/Pacifi Corp
September 20, 2005
WUTC Staff Data Request 8
WUTe Staff Data Request 8
Referring to the pre-filed direct testimony of Gregory E. Abel, Exhibit (GEA-l T),
page 13, lines 7-, please provide a calculation of the acquisition premium.
MERC's Response to WUTC Staff Data Request 8
The derivation of the estimated purchase price in excess of equity book value is
provided as Confidential Attachment WUTC 8 on the enclosed Confidential CD.
This information is confidential and is provided subject to the terms and
conditions of the protective order in this proceeding.
WASHINGTON
UE-051090
MEHC/PPW
WUTC STAFF DATA REQUEST
CONFIDENTIAL ATTACHMENT
WUTC 8
CONFIDENTIAL (LEVEL YELLOW)
ON THE ENCLOSED CD
UE-051090/PacifiCorp
September 20, 2005
WUTC Staff Data Request 9
WUTC Staff Data Request 9
Referring to the pre-filed direct testimony of Gregory E. Abel, Exhibit (GEA-IT),
page 13 , lines 7-, please provide all studies, analyses, internal reports
memoranda, electronic messages or other documentation relied upon by Mr. Abel
to demonstrate to MEHC's shareholders that the transaction represents fair and
adequate compensation for the equity investment in PacifiCorp despite the
opportunity to earn a fair return on the acquisition premium.
MERC's Response to WUTC Staff Data Request 9
MEHC objects to this data request on the grounds that it is overly broad and
unduly burdensome. MEHC also objects to the data request on the grounds that it
is vague and indefinite. Without waiving these objections MEHC responds as
follows.
In the referenced testimony, Mr. Abel stated: "MEHC shareholders understand
they may not earn a return on the acquisition premium, and they have accepted
that risk. However, MEHC shareholders believe the price negotiated for the
transaction is Jair for the value received, ifPacifiCorp is able to earn its
authorized return.
When presenting this transaction to the other shareholders, Mr. Abel (who is one
of four shareholders) relied upon his experience in the industry, and upon the
materials which will be provided for review in response to WUTC 2.
For purposes of clarifying the record, MEHC will record the acquisition premium
on the books of the acquisition company and not in the utility accounts
PacifiCorp. MEHC and PacifiCorp will not propose to recover the acquisition
premium in PacifiCorp s regulated retail rates; provided, however, that if the
Commission in a rate order issued subsequent to the closing of the transaction
reduces PacifiCorp s retail revenue requirement through the imputation of
benefits (other than those benefits committed to in this transaction) accruing from
the acquisition company (PPW Holdings LLC), Berkshire Hathaway, or MEHC
MEHC and PacifiCorp will have the right to propose, upon rehearing and in
subsequent cases, a symmetrical adjustment to recognize the acquisition premium
in retail revenue requirements.
DE-051 090/Pacifi Corp
September 20, 2005
WUTC Staff Data Request 10
WUTC Staff Data Request 10
Referring to the pre-filed direct testimony of Gregory E. Abel, Exhibit (GEA-l T),
page 13, lines 7-, please provide copies of all documents Mr. Abel reviewed in
preparing his testimony on the issue of acquisition premiums paid for utility
property.
MERC's Response to WUTe Staff Data Request 10
Mr. Abel did not review any documents in preparing testimony on acquisition
premiums paid for utility property.
UE-0510901PacifiCorp
September 20, 2005
WUTC Staff Data Request
WUTe Staff Data Request
Referring to the pre-filed direct testimony of Gregory E. Abel, Exhibit (GEA-l T),
page 13, lines 11-16, please provide all studies and analyses prepared by Mr.
Abel, or any other MEHC employee or consultant supporting Mr. Abel'
testimony, regarding the ability of PacifiCorp to earn its authorized rate of return
and the impact of not recovering the acquisition premium in rates.
MERC's Response to WUTe Staff Data Request 11
Mr. Abel's testimony was based upon his industry experience and that of MEHC.
Please also refer to the response to WUTC 2.
UE-0510901PacifiCorp
September 20, 2005
WUTC Staff Data Request 12
WUTe Staff Data Request
Please provide PacifiCorp s SEC 10-K for 3/31/05
PPW's Response to WUTe Staff Data Request 12
Please refer to Attachment WUTC 12 on the enclosed CD.
WASHINGTON
UE-O51090
MEH CIPPW
WUTC STAFF DATA REQUEST
TT A CHMENT WUTC
ON THE ENCLOSED CD
UE-051 090/Pacifi Corp
September 20, 2005
WUTC Staff Data Request
WUTC Staff Data Request 13
Referring to the pre-filed direct testimony of Patrick J. Goodman, Exhibit (PJG-
T), page 5, please provide the amount of short-term debt outstanding for each of
the four quarters preceding March 31 , 2005 and the amount of short-term debt on
MEHC's books.
MERe's Response to WUTC Staff Data Request 13
f\ffiHC's short-term debt balances for the periods requested are as follows:
As of March 31 , 2005
As of December 31 , 2004
As of September 30, 2004
As of June 30, 2004
$9,355,000
$9,090,000
691 000
$14 578 000
PacifiCorp s short-term debt balances for the periods requested are as follows:
As of March 31, 2005
As of December 31 , 2004
As of September 30, 2004
As of June 30, 2004
$490,493 899
$305 570 776
$161 166 919
$341,332,455
UE-051 090/Pacifi Corp
September 20, 2005
WUTC Staff Data Request 14
WUTe Staff Data Request 14
Referring to the pre-filed direct testimony of Patrick J. Goodman, Exhibit (pJG-
T), page 5 , please provide a complete income statement for the twelve months
ending March 31, 2005 and a corresponding balance sheet for the same twelve
month period.
MERe's Response to WUTe Staff Data Request 14
MEHC operates on a calendar year basis for financial reporting. As such, the
SEC does not require income statements for periods of twelve months ending
March. Therefore, MEHC does not have a publicly available income statement
covering the twelve months ending March 31 2005. However, the requested
income statement could be constructed using Electronic Document Room Item
Nos. 1.03., 1.03., and 1.03.05.
Balance sheet information for March 31 , 2005 can be found in Electronic
Document Room Item No. 1.03.04.
UE-0510901PacifiCorp
September 20 2005
WUTC Staff Data Request
WUTe Staff Data Request 15
Referring to the pre-filed direct testimony of Patrick J. Goodman, Exhibit (pJG-
T), page 5, please provide a copy of PacifiCorp s SEC 10-K for fiscal year
March 31, 2005 and a work paper reconciling the capitalization ratios for
PacifiCorp on page 5 of the testimony with the amounts in PacifiCorp s SEC 10-
MERe's Response to WUTe Staff Data Request
There is no reconciling work paper, as the amounts of capitalization presented in
direct testimony of MERC witness Goodman, at page 5, and which are shown in
PacifiCorp s SEC 10-K for fiscal year March 31, 2005, tie precisely to each other.
For PacifiCorp s SEC 10-K for the fiscal year ending March 31, 2005, please see
Attachment WUTC -12.
UE-051 090/Pacifi Corp
September 20, 2005
WUTC Staff Data Request 16
WUTC Staff Data Request 16
Referring to the pre-filed direct testimony of Patrick J. Goodman, Exhibit (pJG-
IT), page 5 , please provide an audited balance sheet for MEHC for the twelve
month period ending March 31 , 2005
MERe's Response to WUTe Staff Data Request 16
MEHC operates on a calendar year for financial reporting. As such the SEC does
not require an audited balance sheet for the date requested. For an unaudited
balance sheet, for the period requested, please refer to the response to WUTC
Staff Data Request 14. For an audited balance sheet for the calendar year ended
December 31, 2004, please also refer to the response to WUTC Staff Data
Request 14.
UE-0510901PacifiCorp
September 20, 2005
WUTC Staff Data Request 17
WUTC Staff Data Request 17
Referring to the pre-filed direct testimony of Patrick J. Goodman, Exhibit (pJG-
IT), page 4, lines 10-, please provide the amount of debt on MEHC'
consolidated financial statement for: a) parent company senior debt; 2) subsidiary
and project debt; and 3) parent company subordinated debt.
MERC's Response to WUTC Staff Data Request 17
Please see the Direct Testimony of MEHC witness Patrick J. Goodman, at page 5
Table 1.
UE-0510901PacifiCorp
September 20, 2005
WUTC Staff Data Request 18
WUTe Staff Data Request
Referring to the pre-filed direct testimony of Patrick J. Goodman, Exhibit (PJG-
T), page 4, lines 18-19, please provide a schedule showing the amount of non-
recourse debt and the specific projects that are financed with these instruments.
MERC's Response to WUTe Staff Data Request 18
All "Subsidiary and project debt" as well as all "Preferred securities of
subsidiaries" as presented in MEHC witness Goodman s Table 1 (See Revised
Direct Testimony of Patrick J. Goodman, Page 5) is non-recourse to f\ffiHC
except for $37 million of project financing that MEHC guarantees.
See Attachment WUTC 18 on the enclosed CD, which lists the project debt and
the specific projects that the debt is related to, as of December 31, 2004. This is
the most recent detailed information available. Changes which occurred between
December 31 2004, and March 31 , 2005, are listed in the f\ffiHC 10-Q for March
2005, Footnote 7, on page 9. See Electronic Document Room Item No.
03.04.
WASHINGTON
UE-OSI090
MEH CIPPW
WUTC STAFF DATA REQUEST
ATTACHMENT WUTC
ON THE ENCLOSED CD
UE-0510901PacifiCorp
September 20, 2005
WUTC Staff Data Request 19
WUTe Staff Data Request
Referring to the pre-filed direct testimony of Patrick J. Goodman, Exhibit (pJG-
T), page 5 , please provide a schedule showing the subsidiary and project debt
and identify the amount of the debt for each of the companies identified in Exhibit
(PJG-3).
MERe's Response to WUTe Staff Data Request
Please see the response to WUTC Staff Data Request 18.
UE-051 090/Pacifi Corp
September 20, 2005
WUTC Staff Data Request 20
WUTe Staff Data Request
Referring to the pre-filed exhibit of Patrick J. Goodman, Exhibit (PJG-3) please
provide the 12/31/04 balance sheet for all operating companies within MEHC.
MERe's Response to WUTe Staff Data Request
The operating companies are: Northern Natural Gas Company; Kern River Gas
Transmission Company; MidAmerican Energy Company; Northern Electric
Distribution, Ltd; Yorkshire Electric Distribution pIc; HomeServices of America
Inc.; CalEnergy Generation-Domestic; and CalEnergy Generation-Foreign. For
balance sheet information on each, please see the following references:
Northern Natural Gas Company: Please see Attachment WUTC 20 -Ion the
enclosed CD.
Kern River Gas Transmission Company: Please see Attachment WUTC 20 -2 on
the enclosed CD.
MidAmerican Energy Company: Please see Electronic Document Room Item
No. 1.04., for the f\ffiC 10-, 2004.
Northern Electric Distribution, Ltd: Please see http://www.ce-
electricuk.comllib/liDownload/70INEDL Reg Accs 2005.pdf This represents
Northern Electric s publicly available financial statements for the fiscal year
ending March 31, 2005, which is the date the regulatory year ends in the UK.
Yorkshire Electric Distribution pIc: Please see http://www .ce-
electricuk.com/liblliDownload/143/YEDL Reg Accs 2oo5.pdf.This represents
Yorkshire Electric s publicly available financial statements for the fiscal year
ending March 31 , 2005, which is the date the regulatory year ends in the UK.
HomeServices of America, Inc.: Please see Confidential Attachment WUTC
20 -3 on the enclosed Confidential CD.
CalEnergy Generation-Domestic: Please see Confidential Attachment WUTC
20 -4 on the enclosed Confidential CD.
CalEnergy Generation-Foreign: Please see Confidential Attachment WUTC
20 -5 on the enclosed Confidential CD.
We understand that Mr. Cedarbaum plans to change the wording of this question
to request a balance sheet for 12/31/05, but f\ffiHC does not have that information
available at this time.
WASHINGTON
UE-051090
MEH CIPPW
WUTC STAFF DATA REQUEST
TT A CHMENTS WUTC
20 -1 & 20 -
ON THE ENCLOSED CD
WASHINGTON
UE-051090
MEHC/PPW
WUTC STAFF DATA REQUEST
CONFIDENTIAL ATTACHMENTS
WUTC 20 (3-
CONFIDENTIAL (LEVEL YELLOW)
ON THE ENCLOSED CD
UE-0510901PacifiCorp
September 20, 2005
WUTC Staff Data Request 21
WUTe Staff Data Request
Referring to the pre-filed exhibit of Patrick J. Goodman, Exhibit (PJG-3), please
provide a schedule reconciling the balance sheet amounts for long-term debt
preferred stock and common equity for each operating company to the
consolidated balance sheet for MEHC as appearing in Exhibit (PJG-4) page 59.
MERe's Response to WUTe Staff Data Request 21
Please see Confidential Attachment WUTC 21 on the enclosed Confidential CD
and pages 75 - 81 of Electronic Document Room Item No. 1.03., the MEHC
10- K 2004.
WASHINGTON
UE-051090
MEHC/PPW
WUTC STAFF DATA REQUEST
CONFIDENTIAL ATTACHMENT
WUTC
CONFIDENTIAL (LEVEL YELLOW)
ON THE ENCLOSED CD
UE-051 090/Pacifi Corp
September 20 2005
WUTC Staff Data Request 22
WUTe Staff Data Request
Referring to the pre-filed direct testimony of Patrick J. Goodman, Exhibit (PJG-
IT), page 4, lines 19-, please provide a schedule which reconciles the amount
of debt identified in response to Staff Data Request 19 and the amount of debt on
MEHC's consolidated financial statement on page 5 of Mr. Goodman
testimony.
MERe's Response to WUTe Staff Data Request 22
Please see the response to WUTC Data Request 18.
UE-0510901PacifiCorp
September 20, 2005
WUTC Staff Data Request 23
WUTe Staff Data Request
Referring to the pre-filed direct testimony of Patrick J. Goodman Exhibit, (pJG-
T), page 4, lines 10-, please provide a reference to the FERC uniform system
of accounts that describes the entries on f\ffiHC's accounting records that would
reconcile the f\ffiHC Pro Forma amount for consolidated equity on page 5 of Mr.
Goodman s testimony.
MERe's Response to WUTe Staff Data Request 23
The Federal Energy Regulatory Commission s Uniform System of Accounts does
not apply to MERC. Please see the response to WUTC Staff Data Request 24.
UE-051 090/Pacifi Corp
September 20,2005
WUTC Staff Data Request 24
WUTC Staff Data Request 24
Referring to the pre-filed direct testimony of Patrick J. Goodman, Exhibit (pJG-
T), page 5, please provide all references to the FERC system of accounts that
justify the treatment of PacifiCorp s equity investment as described in footnote 4.
MERC's Response to WUTC Staff Data Request 24
The standard consolidating entry identified by footnote 4 in Table 1 of Exhibit
No. - (PJG-IT), page 5, eliminates f\ffiHC's investment in PacifiCorp against
PacifiCorp s equity, thus leaving MEHC's equity and the acquisition premium on
MEHC's balance sheet to which PacifiCorp s assets and liabilities are added in
arriving at consolidated MEHC amounts. This eliminating entry is typical under
GAAP. Please see the response to WUTC Staff Data Request 23.
UE-051 090/Pacifi Corp
September 20, 2005
WUTC Staff Data Request 25
WUTe Staff Data Request
Referring to the pre-filed direct testimony of Patrick J. Goodman, Exhibit (pJG-
T), page 5, and the statement in footnote (2) which reads, "Certain
reclassifications have been made to PacifiCorp s historical presentation in order to
conform to MEHC's historical presentation." please provide a work paper
showing all reclassifications and provide all supporting documents necessary to
replicate the presentation in Table
MERe's Response to WUTe Staff Data Request 25
The only reclassification that took place was that PacifiCorp s "Preferred stock
subject to mandatory redemption, currently maturing" and its "Preferred stock
subject to mandatory redemption, net of current maturities" were classified in
f\ffiHC's Table 1 as "Preferred securities of subsidiaries . There are no additional
workpapers supporting this reclassification.
DE-OS! 090/Pacifi Corp
August 15,2005
PC Data Request 3
PC Data Request 3
At page 17 of the Joint Application the applicants indicate that PacifiCorp will be
operated "much as it is operated today." Please indicate all areas where MERC or
PacifiCorp have identified anticipated changes in operations or policies.
Response to PC Data Request 3
PacifiCorp objects to this request on the grounds that it is overly burdensome. The
company s accounts payable records for the years relevant to this request were
maintained on the company s predecessor accounting system and do not
reasonably allow an identification of payments made to Bank of New York
for services rendered as trustee for the PacifiCorp pension plan.
Responder: Gregory E. Abel
Witness: Gregory E. Abel
UE-0510901PacifiCorp
September 2, 2005
PC Data Request 3 Revised
PC Data Request 3
At page 17 of the Joint Application the applicants indicate that PacifiCorp will be
operated "much as it is operated today." Please indicate all areas where MEHC or
PacifiCorp have identified anticipated changes in operations or policies.
Revised Response to PC Data Request 3
Given that the parties are still in the very early stages of the transaction and the
fact that no formal integration or transition activities between the organizations
have taken place to date, MEHC and PacifiCorp have not formally identified
anticipated changes in operations or policies.
Responder: Gregory E. Abel
Witness: Gregory E. Abel
UE-0510901PacifiCorp
August 15, 2005
PC Data Request 4
PC Data Request 4
Please identify all known operational or policy differences between MEHC (or
MEC) and PacifiCorp as known today or as identified prior to the transaction.
Response to PC Data Request 4
To date, the following have been identified as areas where some differences occur
although these differences do not necessarily rise to the level of operational or policy
differences:
Insurance Coverage
Employee Benefit Plans
Energy Efficiency Programs
Environmental
Following are examples of the types of differences identified in the above-listed areas:
Insurance Coverage: The two companies have different deductibles in their insurance
programs, with PacifiCorp generally having lowerdeductibles, and some different lines
of coverage. For example, PacifiCorp carries business interruption and terrorism
coverage, while MEHC self-insures for these risks. Additionally, PacifiCorp, as a part of
the ScottishPower program, carries higher limits on certain liability coverages than does
MEHC.
Employee Benefits Plans: The two companies have differences in the following, related
to active employee benefits: (i) different pension plan fonnulas (most PacifiCorp
employees have a traditional benefit fonnula and most MEHC employees have a cash
balance formula); (ii) different 401(k) plan matches; and (iii) different cost-sharing
arrangements for health and welfare benefits. The companies also have differences in the
cost sharing formula with retirees for medical coverage.
Energy Efficiency Programs: PacifiCorp s energy efficiency programs, in Oregon, are
not controlled by the utility itself. MEC has no similar experience.
Environmental: Historically, PacifiCorp has supported multi-pollutant legislation that
potentially addresses four pollutants (i.e., including carbon), while MEHC has supported
legislation that addresses three pollutants (i., not including carbon).
Responder: Brent E. Gale
Witness: Brent E. Gale
UE-O51090lPacifiCorp
August 15, 2005
PC Data Request 6
PC Data Request 6
How does MEHC anticipate dealing with the failure of PacifiCorp to achieve a
durable interstate allocation methodology?
Response to PC Data Request 6
MERC does not concur that PacifiCorp has failed to achieve a durable interstate
allocation methodology. MEHC understands that the Revised Protocol has
been adopted by the states of Utah, Oregon, Wyoming and Idaho and has been
used in the most recently completed rate cases in Utah, Oregon and Idaho.
MERC is also aware that the issue is under consideration in the pending
Washington rate case and that PacifiCorp remains hopeful that the WUTC will
accept the Revised Protocol for use in Washington.
Responder: Thomas B. Specketer
Witness: Thomas B. Specketer
UE-051 090/Pacifi Corp
August 15, 2005
PC Data Request 10
PC Data Request 10
Referring to PJG-, is it correct that the transaction proposed by the Joint
Applicants reflects $3.4 billion in stock investment from Berkshire Hathaway and
$6 billion in new and assumed debt?
Response to PC Data Request 10
The proposed transaction involves consideration totaling approximately $ 9.4
billion as discussed in Mr. Goodman s testimony at page 7, lines 3 - 12 and page
8, lines 6 through 18. This is composed of (figures in billions):
MERC Security Issuances:
Equity or equity-like investment
by Berkshire Hathaway into MEHC $ 3.4
Incremental long-term senior notes,
preferred stock or other securities
with equity characteristics of MEHC 1.7
Estimated equity purchase price $ 5.
Estimated PacifiCorp net debt and preferred
stock at March 31 , 2006
Total proposed consideration $ 9.4
Responder: Patrick J. Goodman
Witness: Patrick J. Goodman
DE-05l090lPacifiCorp
August 15, 2005
PC Data Request 11
PC Data Request 11
Referring to PJG-I T at p. 11 , please identify all anticipated Scottish Power equity
infusions to PacifiCorp and all anticipated PacifiCorp dividends, payments, or
other transfers of value to Scottish Power during the pendency of this transaction.
Response to PC Data Request 11
Refer to PJG-l T, page 7, line 13 through page 8, line 4.
In particular, Scottish Power and PacifiCorp Holdings, Inc. will make cash capital
contributions of the following amounts on or before the indicated dates. Any cash
capital contribution owed during the quarter that the proposed transaction closed
will be pro rated. All of the following figures are in millions of U.S. dollars:
June 30, 2005
September 30, 2005
December 31 , 2005
March 31, 2006
$ 125.
125.
125.
125.
$ 500.
If the transaction does not close by March 31, 2006, Scottish Power and
PacifiCorp Holdings, Inc. are obligated to make the following cash capital
contributions on or before the indicated dates. Again, the amounts will be pro
rated for the quarter in which the transaction closes. If the transaction is
completed, MidAmerican Energy Holdings Company will refund to PHI the
amount of required fiscal 2007 common equity contributions as an increase to the
purchase price.
June 30, 2006
September 30 2006
December 31 , 2006
March 31 , 2007
$ 131.25
131.25
131.
131.25
$ 525.
With regard to dividends by PacifiCorp, it may not declare, set aside or pay any
dividends on or make other distributions in respect of its respective capital stock
except, that PacifiCorp may continue to pay the regular and required cash
dividends on its preferred stock and cash dividends on its common stock at the
rate of $53.7 million in aggregate per fiscal quarter during the fiscal year ending
March 31, 2006 and at the rate of $60.575 million per fiscal quarter during the
fiscal year ending March 31 , 2007. During the fiscal quarter when the proposed
transaction closes, any common stock dividend payment allowed by the Stock
Purchase Agreement for that fiscal quarter will be pro rated and any future
UE-0510901PacifiCorp
August 15 , 2005
PC Data Request 11
common stock dividends contemplated by the Stock Purchase Agreement will
cease.
PacifiCorp has budgeted $19,136 588 for FY 2006 to be paid to ScottishPower
under the terms of the cross charge policy during FY 2006. These charges cover
administrative services including shareholder, investor relations, management and
resources servIces.
PacifiCorp has budgeted $3 029,083 for FY 2006 to be paid to ScottishPower for
International Assignees in the U.S. These charges cover paYroll costs and related
benefits.
Responder: Patrick J. Goodman
Witness: Patrick J. Goodman
UE-0510901PacifiCorp
August 15 2005
PC Data Request 13
PC Data Request 13
Referring to TBS-, the Intercompany Administrative Service Agreement (IASA),
please provide a copy of the last three years' billings to MEC pursuant to this
agreement.
Response to PC Data Request 13
We assume this question pertains to charges from MEHC to MEC pursuant to the
IASA. Other MEC affiliates besides MEHC bill relatively small amounts to MEC
as well. Attachment PC 13, on the enclosed CD, provides copies of f\ffiHC bills
to MEC from January 2002 through June 2005.
Responder: Thomas B. Specketer
Witness: Thomas B. Specketer
WASHINGTON
UE-O51090
MEH C/pPW
PC DATA REQUEST
TT A CHMENT PC
PROVIDED ON THE
EN CLOSED CD
UE-05l 090/Pacifi Corp
August 15, 2005
PC Data Request 14
PC Data Req nest
Excluding billings pursuant to the IASA, please provide a copy of the last three
years' billings paid by MEC to MEHC or to any other MEHC entity or "platform
if any, for all goods or services.
Response to PC Data Request 14
Attachment PC 14 is provided on the enclosed CD and provides summaries of
payments by MEC to affiliates for the last three years that include payments for
services other than those covered under the IASA, as described below. Copies
all such invoices, particularly those from Northern Natural Gas would be
extremely voluminous. If after reviewing this response, there is a need to review
specific invoices in greater detail, they will be provided.
Affiliate Service Comments
CBEC Railway Rail spur to Council Bluffs
Energy Center
Contract approved by Illinois
Commerce Commission
Cordova Energy
Center
Power purchase agreement Contract approved by Illinois
Commerce Commission
(expired May 2004)
Iowa Realty Relocation services Ordinary course of business
Iowa Title Title services Ordinary course of business
Northern Natural
Gas
Gas transportation FERC Approved Tariffs
Responder: Thomas B. Specketer
Witness: Thomas B. Specketer
WASHINGTON
UE-O51090
MEH CIPPW
PC DATA REQUEST
TT A CHMENT PC
PROVIDED ON THE
EN CLOSED CD
UE-051 090/Pacifi Corp
August 15, 2005
PC Data Request
PC Data Request 15
Excluding billings already provided pursuant to the prior two data requests, please
provide a copy of the last three years' billings to MEC from any entity with which
Berkshire Hathaway. Inc., Warren Buffett, Gregory E. Abel, Walter Scott, Jr., or
David Sokol possess an economic interest. This data request includes, but is not
limited to, all entities, domestic or foreign, in which the above named corporation
and individuals possess a partial or controlling economic interest.
Response to PC Data Request 15
Applicants object to this request on the following grounds:
(b)
The request is overbroad and unduly burdensome. Given the extensive
holdings of Berkshire Hathaway, the request cannot be answered, if at all
without undue expense and delay. The benefits to be obtained by the
discovery, if any, are significantly outweighed by the undue burden.
The request calls for material that is neither admissible in these
proceedings nor reasonably caIculated to lead to the discovery of
admissible material. MEC is not a party to these proceedings, and
operates as a stand-alone subsidiary of MEHC, just as PacifiCorp would
upon approval of this transaction. The nature and extent of MEC'
transactions with affiliated entities, if any, are subject to regulatory
oversight in Iowa, illinois and South Dakota, and have no bearing on the
issues in this proceeding.
(a)
Notwithstanding the foregoing objections, and without waiving them, Applicants
provide the following response.
MEC does not track transactions with these entities for affiliate transaction
purposes, inasmuch as they are not considered affiliates for regulatory purposes in
Iowa, lllinois or South Dakota, and/or there are no affiliate transactions to report.
Responder: Thomas B. Specketer
Witness: Thomas B. Specketer
UE-0510901PacifiCorp
September 6, 2005
PC Data Request 17 MEHC
PC Data Request 17 MERe
The joint application indicates that MEHC is committing to cap ServCo costs
charged to PacifiCorp to $9 million per annum for a five year period, and
that PacifiCorp is projected to incur comparable costs from ScottishPower
in FY 2006 in the approximate amount of $15 million. Please provide the
following regarding such ServCo costs:
a. Provide actual ScottishPower Servco costs directly assigned to PacifiCorp
for the most recent two fiscal years available broken down by ServCo
Department or Responsibility Center providing such directly-assigned
servIces.
b. Provide actual ScottishPower ServCo costs allocated to PacifiCorp for the
most recent two fiscal years available broken down by ServCo Department
or Responsibility Center providing such allocated services.
c. Are there any services currently being provided by Scottish Power ServCo
that are not expected to be carried out by f\ffiHC ServCo? If yes,
i. Please describe each service
H. Provide the costs allocated/directly assigned to PacifiCorp for each
service for each of the two most recent fiscal years available
111. Explain how such services will now be undertaken by PacifiCorp
(i.e., using outside expertise or adding internal employees to
undertake)
iv. Provide the annual incremental costs expected to be incurred by
PacifiCorp in efforts to replace each service now being provided
by ScottishPower ServCo that will be eliminated if the MEHC
acquisition occurs.
MERC's Response to PC Data Request 17 MEHC
Yes, shareholder services and executive management training services
provided by ScottishPower will not be provided by MEHC, resulting in
annual reduced costs to PacifiCorp of approximately $4 million and
million, respectively. A shareholder services department is unnecessary
given the fact that MEHC is a privately-held company. Executive
management training will not be provided by MEHC. It is not expected
that PacifiCorp will incur any incremental costs to replace these services.
For parts a and b, please see PPW's response to this request.
Responder: Thomas B. Specketer
Witness: Thomas B. Specketer
UE-0510901PacifiCorp
September 6, 2005
PC Data Request 17 PPW
PC Data Request 17 PPW
The joint application indicates that f\ffiHC is committing to cap ServCo costs
charged to PacifiCorp to $9 million per annum for a five year period, and
that PacifiCorp is projected to incur comparable costs from ScottishPower
in FY 2006 in the approximate amount of $15 million. Please provide the
following regarding such ServCo costs:
a. Provide actual ScottishPower Servco costs directly assigned to PacifiCorp
for the most recent two fiscal years available broken down by ServCo
Department or Responsibility Center providing such directly-assigned
serVIces.
b. Provide actual ScottishPower ServCo costs allocated to PacifiCorp for the
most recent two fiscal years available broken down by ServCo Department
or Responsibility Center providing such allocated services.
c. Are there any services currently being provided by Scottish Power ServCo
that are not expected to be carried out by MEHC ServCo? If yes
i. Please describe each service
11. Provide the costs allocated/directly assigned to PacifiCorp for each
service for each of the two most recent fiscal years available
111. Explain how such services will now be undertaken by PacifiCorp
(i., using outside expertise or adding internal employees to
undertake)
iv. Provide the annual incremental costs expected to be incurred by
PacifiCorp in efforts to replace each service now being provided
by ScottishPower ServCo that will be eliminated if the MEHC
acquisition occurs.
PPW's Response to PC Data Request 17
Clarification: Please note that there is no ScottishPower ServCo.
a. There are no group costs directly assigned to PacifiCorp by
ScottishPower.
b. Please see Attachment PC 17 b on the enclosed CD. Note that the group
charge only existed for FY05, so two fiscal years of data are not available.
Regarding part c, please see MEHC's response to this request.
Responder: J udi A. Johansen
Witness: Judi A. Johansen
WASHINGTON
UE-O51090
MEH CIPPW
PC DATA REQUEST
ATTACHMENT PC
ON THE ENCLOSED CD
UE-051 090/Pacifi Corp
September 6, 2005
PC Data Request 18
PC Data Request 18
Reference page 13 of Mr. Gregory Abel's testimony. Please provide the financial
forecasts, analysis and studies that leads to the conclusion that "MERC
shareholders believe the price negotiated for the transaction is fair for the value
received, if PacifiCorp is able to earn its authorized return.List major
assumptions included within such analysis, and if not specifically shown, please
state the targeted return that MEHC anticipates achieving.
Response to PC Data Request 18
It is MEHC's assumption that the business plan provided to f\ffiHC can be
achieved as presented. This business plan, which is Highly Confidential, will be
made available for review subject to the terms and conditions of the Protective
Agreement in this proceeding at the Company s offices in Portland. The major
assumptions included in the business plan/financial forecasts are:
File five general rate cases within the next 12 months.
Reduced volatility in the business through the adoption of PCAMs by
FY08.
Move Utah to a full future test period.
Ensure inter-jurisdictional cost allocation agreement remains intact.
Improve the regulatory environment within the states.
Responder: Gregory E. Abel
Witness: Gregory E. Abel
UE-0510901PacifiCorp
September 6, 2005
PC Data Request 19
PC Data Request 19
Given that PacifiCorp has been unable to achieve its authorized (i., targeted)
rate of return in recent years, please list each and every effort expected to be
undertaken by PacifiCorp, once owned by MEHC, to enable it to achieve its
targeted rate of return that has not heretofore been undertaken by PacifiCorp
management.
Response to PC Data Request 19
MEHC has not had enough time and experience with PacifiCorp to fully examine
and understand all of the efforts undertaken by PacifiCorp over the past years to
enable it to achieve its targeted rate of return. Nonetheless, MEHC fully expects
PacifiCorp, under MEHC ownership, to continue to work with regulators,
customers, and all stakeholders to position itself to achieve its targeted rate of
return while providing quality service at fair and reasonable rates.
Specifically, MEHC assumes that the actions identified in response to PC 18, or
equivalents, will be implemented.
Responder: Judi A. Johansen
Witness: Judi A. Johansen
UE-0510901PacifiCorp
September 6, 2005
PC Data Request 20
PC Data Request 20
Reference page 15 of Mr. Gregory Abel's testimony. Please state and describe
specifically the analysis and calculations envisioned to be undertaken to
demonstrate that PacifiCorp s incremental long-term debt issuances will be at a
yield of ten basis points below its similarly rated peers.
Response to PC Data Request 20
At this time it is envisioned that over the five year commitment period, on each
occasion that PacifiCorp makes a long-term debt issuance, an investment banking
firm familiar with the public utility debt issuance market would be requested to
compile examples of comparable debt issuances by other public utilities that have
similar credit ratings (excluding similarly rated MEHC public utility subsidiaries).
The difference between the simple average spread of the comparable issuances
would then be compared to the spread PacifiCorp was able to obtain.
This analysis could be provided to the regulatory authority for its review at a time
convenient to that agency.
Responder: Gregory E. Abel
Witness: Gregory E. Abel
UE-0510901PacifiCorp
September 6, 2005
PC Data Request 21
PC Data Request 21
Please provide the actual calculations underlying the estimate of the projected
benefit of lower cost debt issuances that "will yield a value roughly equal to $6.3
million over the post-acquisition five-year period." (Abel direct, pages 15 & 16).
Response to PC Data Request 21
See the attachment identified as Confidential Attachment PC 21 on the enclosed
Confidential CD. This information is confidential and is provided subject to the
tenns and conditions of the protective order in this proceeding.
Responder: Gregory E. Abel
Witness: Gregory E. Abel
WASHINGTON
UE-051090
MEHC/PPW
PC STAFF DATA REQUEST
CONFIDENTIAL ATTACHMENT
CONFIDENTIAL (LEVEL YELLOW)
ON THE ENCLOSED CD
UE-051 090/Pacifi Corp
September 6, 2005
PC Data Request 22
PC Data Request 22
On page 5 of her direct testimony Ms. Judi Johansen lists two main issues or
reasons why PacifiCorp has been unable to earn its allowed return on equity.
Please state specifically and describe specifically how ownership by MERC
versus ownership by ScottishPower will eliminate or minimize the two major
causes attributed to PacifiCorp s inability to earn its authorized rate of return.
Response to PC Data Request 22
MEHC expects that successful implementation of its infrastructure commitments
will increase stability and reliability throughout the PacifiCorp system and make
it less vulnerable to volatility in its fundamentals, thus improving its ability to
earn its allowed rates of return. As these infrastructure commitments are
implemented, MEHC and PacifiCorp fully expect to continue to work with
regulators, customers, and all stakeholders to position PacifiCorp to achieve its
targeted rate of return while providing quality service at fair and reasonable rates.
Responder: Judi A. Johansen
Witness: Judi A. Johansen
UE-051 090/Pacifi Corp
September 6, 2005
PC Data Request 23
PC Data Request 23
Please provide a list of utility regulation legislative initiatives supported or
opposed in each of the three states in which MEHC provides retail electric and
gas service for the entire period in which MEHC has owned Mid-America Energy
Company. Briefly describe the legislation being proposed by year, state
MEHC' sIMEC' s position regarding the proposed legislation, and state the
ultimate resolution of the proposed legislation.
Response to PC Data Request 23
Please refer to Attachments PC 23-1 and PC 23-2 provided on the enclosed CD.
Responder: Brent E. Gale
Witness: Brent E. Gale
WASHINGTON
UE-O51090
MEH CIPPW
PC DATA REQUEST
TT A CHMENTS PC 23 -1 and 23
ON THE ENCLOSED CD
DE-051090/PacifiCorp
September 6, 2005
PC Data Request 24
PC Data Request 24
Reference Table 1 of Mr. Patrick Goodman s direct testimony. Please provide the
following regarding various securities - currently issued or expected to be issued
- as reflected within Table
Interest or dividend requirement on each issuance of fixed-income
securities, as well as the effective interest/dividend rate that
considers issuance cost and discount/premium amortizations
Anticipated terms (coupon rates, issuance costs, discounts
premiums, yields to maturity, maturity dates, call dates and call
premiums) associated with the planned issuance of long-term
senior unsecured debt of f\ffiRC ($1 709.8 million).
Response to PC Data Request 24
(a)Table 1 is intended to represent a pro forma calculation of the long-term
capitalization of f\ffiHC after the acquisition of PacifiCorp. The fixed
income securities incorporated in that consolidated presentation represent
the securities of PacifiCorp, MEHC and all of MERC' s other subsidiaries.
While schedules are prepared reflecting the existing interest cost and
dividend requirements of the regulated entities, no such schedules are
prepared for the non-regulated entities. Please find attached schedules on
the enclosed CD showing the interest and dividend requirements for each
regulated entity, MidAmerican Energy Company, Northern Natural Gas
Company, and Kern River Gas Transmission Company. They are labeled
as:
Attachment PC a -
Attachment PC a -, and
Attachment PC a -, respectively.
However, for the non-regulated entities information needed to create the
requested information can be found in the December 31 , 2004 f\ffiHC
Form 10K, pages 75 through 80. Please see Electronic Document Room
Item No. 1.03.01 MEHC 10K 2004.
(b)Applicant witness Patrick J. Goodman testified that the timing and
composition of future financing needs to be flexible and subject to
modification because market conditions can change quickly. (See Direct
Testimony of Patrick J. Goodman, Exhibit No. _(PJG-l T), Revised
8/15/05, Page 8, Lines 16 - 20.) As a result, at this time, no "anticipated
terms" exist associated with the issuance of the $1.7 billion of MEHC
long-term debt.
Responder: Patrick J. Goodman
Witness: Patrick J. Goodman
WASHINGTON
UE-OS 1090
MEH C/pPW
PC DATA REQUEST
ATTACHMENTS PC 24 a(I-
ON THE ENCLOSED CD
UE-051 090/Pacifi Corp
September 6, 2005
PC Data Request 25
PC Data Request 25
Reference page 8 of Mr. Patrick Goodman s direct testimony. Assuming the
planned issuance by MEHC of long-term senior notes, preferred stock, or other
securities with equity characteristics in the approximate amount of $1.7 billion is
not available from third parties, state all legal obligations for Berkshire Hathaway
to provide any required funding.
Response to PC Data Request 25
In the scenario described in the question, Berkshire Hathaway has no legal or
contractual obligation to provide the required funding. However, if the scenario
described above were to evolve, MEHC has been assured that Berkshire
Hathaway will indeed provide the required funding.
Responder: Patrick J. Goodman
Witness: Patrick J. Goodman
UE-0510901PacifiCorp
September 6, 2005
PC Data Request 26
PC Data Request 26
Reference pages 8 and 9 of Mr. Patrick Goodman s direct testimony. Please
provide the "market data independently obtained from JP Morgan and ABN
AMRO" that caIculates and demonstrates the average 10 basis point interest rate
savings on MidAmerican Energy Company s debt issuances over the past ten
years.
Response to PC Data Request 26
The referenced testimony addresses the average 10 basis point interest rate
savings on MidAmerican Energy Company s debt issuance related to the
company s most recent to-year debt issuance. (See Direct Testimony of Patrick
J. Goodman, Exhibit No. -(PJG-IT), Page 9, Line 3.) It is not alleged that the
ten basis point interest rate savings has existed over the past ten years.
The JP Morgan and ABN AMRO data is provided on the attachment identified as
Attachment PC 26 on the enclosed CD.
Responder: Patrick J. Goodman
Witness: Patrick J. Goodman
WASHINGTON
UE-O51090
MEH CIPPW
PC DATA REQUEST
TT A CHMENT PC
ON THE ENCLOSED CD
UE-051 090/Pacifi Corp
September 6, 2005
PC Data Request 27
PC Data Request 27
Reference page 9 of Mr. Patrick Goodman s direct testimony. Please provide the
calculations, including major underlying assumptions, that support the statement
that "(i)f this ten basis point difference is applied to the incremental long-term
debt issuances contained in PacifiCorp s financial forecast, incremental interest
costs might be as much as $26.7 million lower over the next ten years " and that
( e )xtending the same assumptions out twenty years implies possible savings
totally $71. 1 million.
Response to PC Data Request 27
The calculations are included on the confidential attachment to the response to
Data Request PC 21. The assumptions made in the calculation are that:
(2)
PacifiCorp issues the amount of long-term debt and at the time
indicated in the company s confidential financing forecast. (The
confidential financing forecast is shown on the confidential
attachment to the response to Data Request PC 21.
The debt is assumed to "roll-over" as it matures and can be re-
issued at a 10 basis point discount to issues by other public utilities
of similar credit quality.
(1)
Responder: Patrick J. Goodman
Witness: Patrick J. Goodman
UE-051 090/Pacifi Corp
September 6, 2005
PC Data Request 28
PC Data Request 28
Please explain in detail the research, analyses and calculations that MEHC would
anticipate undertaking in efforts to demonstrate that new long-term debt issuances
will be at a yield that is ten basis points below its similarly rated peers. We are
seeking a fairly detailed description of the source of documents expected to be
relied upon, assumptions expected to be employed, and actual calculations to be
undertaken.
Response to PC Data Request 28
The basic concept is described in the response to Data Request PC 20 and
materials similar to those identified in the response to Data Request PC 26 would
be used to determine whether or not the 10 basis point spread has or has not been
achieved.
Responder: Patrick J. Goodman
Witness: Patrick J. Goodman
UE-051 090/Pacifi Corp
September 6, 2005
PC Data Request 29 f\ffiHC
PC Data Request 29 MERe
Please provide any and all correspondence to/from credit rating agencies and
MEHC (and any subsidiary/affiliate of MEHC) as well any correspondence
to/from such credit rating agencies and ScottishPower, PacifiCorp or any affiliates
issued that address in any fashion the proposed acquisition.
MERC's Response to PC Data Request 29
Please see the confidential attachment identified as Confidential Attachment PC
29 -Ion the enclosed Confidential CD. This addresses the correspondence from
MEHC to the rating agencies.
The only correspondence received by MERC from the rating agencies consisted
of the releases they made at the time of the announcement of the acquisition.
Please see the following attachments on the enclosed CD:
Attachment PC 29 -2 Standard & Poor
Attachment PC 29 -3 Fitch
Attachment PC 29 -4 Moody s Investors Service
Responder: Patrick J. Goodman
Witness: Patrick J. Goodman
WASHINGTON
UE-051090
MEHC/PPW
PC STAFF DATA REQUEST
CONFIDENTIAL ATTACHMENT
PC 29 -
CONFIDENTIAL (LEVEL YELLOW)
ON THE ENCLOSED CD
WASHINGTON
UE-OS!090
MEH CIPPW
PC DATA REQUEST
ATTACHMENTS 29 -2 thru 29
ON THE ENCLOSED CD
00-051 090/Pacifi Corp
September 6, 2005
PC Data Request 29 PPW
PC Data Request 29 PPW
Please provide any and all correspondence to/from credit rating agencies and
MEHC (and any subsidiary/affiliate of MEHC) as well any correspondence
to/from such credit rating agencies and ScottishPower, PacifiCorp or any affiliates
issued that address in any fashion the proposed acquisition.
PPW's Response to PC Data Request 29
PacifiCorp has not provided any correspondence to credit rating agencies that
address the proposed acquisition.
The rating agencies have published several reports that include their views on the
proposed acquisition. Those reports are attached as Attachment PC 29 -5 and are
provided on the enclosed CD.
There has been no written correspondence between ScottishPower and credit
rating agencies that addresses the proposed transaction. Shortly after the
announcement of the proposed transaction, updated research notes were issued by
Moody s and S&P, and these are available on the agencies' web sites and are
provided on the enclosed CD as Attachments PC 29 -6 and PC 29 -
Responder: Judi A. Johansen
Witness: Judi A. Johansen
WASHINGTON
UE-O51090
MEH CIPPW
PC DATA REQUEST
TT A CHMENTS 29 -5 thru 29
ON THE ENCLOSED
DE-05l 090/Pacifi Corp
September 6, 2005
PC Data Request 32
PC Data Request 32
Reference page 18 of Mr. Patrick Goodman s direct testimony. Please provide a
complete listing of the "certain fundamental transactions" for which MEHC must
obtain Berkshire Hathaway approval to proceed.
Response to PC Data Request 32
Such fundamental transactions include:(a) the sale, lease, exchange, mortgage or other disposition of any
business or assets having a fair market value of twenty five percent
or more of the fair market value of the business or assets of MERC
and its subsidiaries taken as a whole, the merger or consolidation
of MEHC with any other person, a liquidation, dissolution or
winding-up of f\ffiHC or any recapitalization or reclassification of
the securities of MEHC;
the acquisition of any business or assets or the making of capital
expenditures not included in the applicable annual budget
approved by the MERC board of directors, in each case for a
consideration or involving expenditures in excess of $50,000,000;
the issuance, grant or sale, or the repurchase, of any equity
securities of f\ffiRC or securities convertible into or exchangeable
or exercisable for any such equity securities;
transactions with officers, directors, stockholders and affiliates of
f\ffiHC except
a. to the extent effectuated on terms no less favorable to MERC
than those obtainable in an arms' length transaction with an
unaffiliated person or
b. in the case of cash compensation arrangements, which are
approved by the MEHC board of directors
the removal as chief executive officer of f\ffiRC of the person
occupYing that position on the date of original issuance of the zero
coupon convertible preferred stock; and
the appointment or removal of any person as chief executive
officer of MERC after the removal, resignation, death or disability
of the chief executive officer on the date of original issuance of the
zero coupon convertible preferred stock.
(b)
(c)
(d)
(e)
(f)
Note: These provisions become moot once Berkshire Hathaway converts its zero
coupon non-voting convertible preferred stock to common stock and obtains
voting control.
Responder: Patrick J. Goodman
Witness: Patrick J. Goodman
UE-051 090/Pacifi Corp
September 6, 2005
PC Data Request 33
PC Data Request 33
Please provide a listing of transactions that MEHC previously sought to undertake
but which were cancelled due to lack of approval by Berkshire Hathaway.
Response to PC Data Request 33
There are no such transactions.
Responder: Gregory E. Abel
Witness: Gregory E. Abel
UE-0510901PacifiCorp
September 6, 2005
PC Data Request 34
PC Data Request 34
Reference Mr. Jeffrey Gust's direct testimony. Please provide any and all
feasibility studies undertaken to date regarding transmission paths being sought to
achieve an interconnection for purposes of meeting the requirements of the Public
Utility Holding Company Act of 1935.
Response to PC Data Request 34
With the recent enactment of new energy legislation, the Domenici- Barton
Energy Policy Act of 2005 ("Energy Act,,, signed into law on August 8, 2005
the Public Utility Holding Company Act of 1935 will be repealed effective
February 8, 2006. As a result of PUHCA' s repeal, it will not be necessary to
secure such a contract path for approval of the transaction under PUHCA. The
prefiled direct testimony of Jeffrey J. Gust and accompanying exhibits are
withdrawn.
Responder: Jeffrey J. Gust
Witness: Jeffrey J. Gust
R. Rep. No. 109-190 (Cant. Rep.
UE-051 090/Pacifi Corp
September 6, 2005
PC Data Request 35
PC Data Request 35
If a transmission path to achieve an interconnection for purposes of meeting the
requirements of the Public Utility Holding Company Act of 1935 cannot be
economically achieved, does MEHClPacifiCorp agree to hold ratepayers harmless
for any uneconomic purchases undertaken simply to meet the requirements of the
Public Utility Holding Company Act of 1935. Please explain any answer given as
necessary to be complete in understanding the companies' position.
Response to PC Data Request 35
With the recent enactment of new energy legislation, the Domenici-Barton
Energy Policy Act of 2005 ("Energy Act") I , signed into law on August 8, 2005
the Public Utility Holding Company Act of 1935 will be repealed effective
February 8 2006. As a result of PUHCA's repeal, it will not be necessary to
secure such a contract path for approval of the transaction under PUHCA. The
prefiled direct testimony of Jeffrey J. Gust and accompanying exhibits are
withdrawn.
Responder: Jeffrey J. Gust
Witness: Jeffrey J. Gust
R. Rep. No. 109-190 (Cant. Rep.
UE-051 090/Pacifi Corp
September 9, 2005
PC Data Request 37
PC Data Request 37
(Ref.: Joint Application, p. 6)
a) Please explain what is meant by the term "net debt." What is the debt
netted against and what would be the amount of debt involved in the transaction if
it were not "netted" against something else.
b) What will be the amount of PacifiCorp debt on the liability side of its
balance sheet before and after the merger?
MERC's Response to PC Data Request 37
(a) Net debt" means PacifiCorp s total debt less PacifiCorp s cash. The Joint
Application, at page 6, discusses the amount of net debt and preferred stock
that will remain outstanding at PacifiCorp will be approximately $4.3 billion.
The amount of debt and preferred stock forecasted as of March 31, 2006 is
approximately $4.5 billion.
(b) The amount of debt and preferred stock on PacifiCorp s balance sheet before
and after the acquisition is expected to be $4.5 billion.
Responder: Patrick J. Goodman
Witness: Patrick J. Goodman
UE-051 090/Pacifi Corp
September 9, 2005
PC Data Request 39
PC Data Request 39
(Ref.: Joint Application, p. 10) The Company notes that f\ffiHC is a "privately
held global company" and elsewhere in it's Application notes that Berkshire
Hathaway holds a principal interest in MEHC.
a) Please list the owners of MEHC.
b) Please list the other businesses in which Berkshire Hathaway is
involved.
c) What percent of Berkshire Hathaway s 2004 revenues does MEHC
represent? Please provide support for your response.
MERe's Response to PC Data Request 39
(a)The owners of MERC are identified in the Joint Application document on
page 3. The owners are:a. Berkshire Hathaway Inc.
b. Walter Scott, Jr., including family interests;
c. David Sokol; and
d. Greg Abel
(b)The subsidiaries of Berkshire Hathaway Inc. as listed on its web site are as
follows:
a. Acme Brick Company;
b. Ben Bridge Jeweler;c. Berkshire Hathaway Group;d. Berkshire Hathaway Homestates Companies;
e. Borsheim s Fine Jewelry;
f. Buffalo NEWS, Buffalo NY;
g.
Central States Indemnity Company;
h. Clayton Homes;
1. CORT Business Services;
j. CTB Inc.
k. Fechheimer Brothers Company;
1. FlightS afety;
m. Fruit of the LoomCID;
n. Garan Incorporated;
o. GEICO Auto Insurance;
p. General Re;
q. Helzberg Diamonds;
r. H.H. Brown Shoe Group;s. International Dairy Queen, Inc.
t. Johns Manville;
u. Jordan s Furniture;
v. Justin Brands;
w. Larson-Juhl;
UE-0510901PacifiCorp
September 9, 2005
PC Data Request 41
PC Data Request 41
(Ref.: Joint Application, p. 11) Please provide a complete copy of the most recent
in-depth S&P and Moody s bond rating reports on Berkshire Hathaway.
MERC's Response to PC Data Request 41
Please see Attachment PC 41 -1 and Attachment PC 41 -2 on the enclosed CD.
Responder: Patrick J. Goodman
Witness: Patrick J. Goodman
WASHINGTON
UE-OSI090
MEH C/pPW
PC DATA REQUEST
ATTACHMENTS PC 1 and 41
ON THE ENCLOSED CD
UE-051090/PacifiCorp
September 9 2005
PC Data Request 42
PC Data Request 42
(Ref.: Joint Application, p. 13)
a) If not otherwise provided, please provide a complete copy of the S&P
bond rating report on PacifiCorp in which that agency discusses "the
benefit of any 'ring-fencing' measures that MEHC structures around
PacifiCorp. "
b) How does S&P derIDe "ring-fencing.
c) Does the Company agree that one of the primary reasons that
PacifiCorp was able to withstand the bankruptcy of its former parent
Enron, was the ring-fencing measures in place in Oregon? If so, why; if
not, why not?
d) Are the ring-fencing measures to be applied by MEHC in all
jurisdictions equivalent to those in place in Oregon? Do they include
dividend restrictions and restrictions on cash transfers from the utility to
the parent without regulatory approval?
Response to PC Data Request 42
a. Please see attached Attachment PC 42 a on the enclosed CD.
b. Standard & Poor s defines "ring-fencing" in a research document entitled
Ring-Fencing a Subsidiary, dated October 19, 1999. A copy of that document
is attached, and labeled as Attachment PC 42 b on the enclosed CD.
c. Applicants assume that "PacifiCorp" should be replaced with "PGE" in this
question. Because ring- fencing is designed to insulate the credit quality of a
subsidiary from that of the consolidated entity, Applicants agree that, as a
general matter, ring-fencing should be helpful in protecting a subsidiary such
as PGE from the impacts of the bankruptcy of a parent such as Enron.
Applicants do not know, however, the extent to which the ring-fencing
between Enron and PGE played a role in PGE withstanding the bankruptcy of
Enron. Standard & Poor s has issued reports which include observations on
the efficacy of the ring-fencing measures between PGE and Enron; these are
included as Attachments PC 42 c-l and 42 c-2 on the enclosed CD.
d. MEHC's ring-fencing commitments are derived in part from the ring-fencing
provisions contained in the ScottishPower/PacifiCorp merger stipulations and
orders. One of the sources of the ring-fencing provisions in the
ScottishPower/PacifiCorp merger stipulation and order in Oregon, in turn, was
the stipulation and order approving Enron s acquisition of PGE. Therefore
while the ring-fencing measures proposed by MEHC are not the same as those
between PGE and Enron, there are substantial similarities between them. This
includes, for example, MEHC's commitment that PacifiCorp will maintain
UE-051090/PacifiCorp
September 9, 2005
PC Data Request 42
separate debt and, if outstanding, preferred stock ratings (this was
PacifiCorplScottishPower Oregon Merger Condition 5 and PGE/Enron
Merger Condition 5); MEHC's commitment to exclude from PacifiCorp
utility accounts the costs of the transaction (this was
PacifiCorplScottishPower Oregon Merger Condition 3 and PGE/Enron
Merger Condition 4); and MEHC's commitment that PacifiCorp will not make
any distribution to PPW Holdings LLC or MEHC that would result in
PacifiCorp s common equity dropping below 40 percent (this was
PacifiCorplScottishPower Merger Condition 6 (after 12/31/04; before then the
floor ranged from 35-39 percent common equity) and PGE/Enron Merger
Condition 6 except that the common equity percentage was 48 percent).
Responder: Patrick J. Goodman
Witness: Patrick J. Goodman
WASHINGTON
UE-O51090
MEH CIPPW
PC DATA REQUEST
TT A CHMENTS PC 42 a, 42 b,
42 c-, and 42 c-
ON THE ENCLOSED CD
OO-0510901PacifiCorp
September 9, 2005
PC Data Request 43
PC Data Request 43
(Ref.: Stock Purchase Agreement, p. 20) Please provide a complete copy of the
Seller Parent Disclosure Letter.
MERe's Response to PC Data Request 43
This document is considered "highly confidential" by MEHC and it will be
provided for review at the offices of PacifiCorp once arrangements are made for
viewing the document. Such arrangements can be made by contacting Jamie Van
Nostrand of Stoel Rives at [phone].
Responder: Gregory E. Abel
Witness: Gregory E. Abel
DE-OS I 090/Pacifi Corp
September 9, 2005
PC Data Request 44
PC Data Request 44
(Ref.: Abel Testimony, p. 12, 11. 3-
a) Please explain what range of returns Mr. Abel is referring to with the
term "relatively high returns on investments." Please provide support for
your response that shows that utility returns have been "relatively high.
b) Please explain why, from an economic perspective, a private investor
(an investor in closely held company) would require a return any different
from an investor in publicly-traded companies.
c) When MEC has used the services of rate of return experts in other
jurisdictions, have those experts relied on the market data of publicly-
traded companies to estimate the cost of equity capital for MEC's utility
operations? Have those experts applied a discount to that market-based
cost of equity to account for the fact that investors in privately-held
companies don t require relatively high returns on investment? If not
please explain why not.
MERC's Response to PC Data Request 44
(a)In the testimony referenced in the question, Mr. Abel was not limiting his
universe of public shareholders to just public utility shareholders. Mr.
Abel has observed that stock valuations in today s equity markets
frequently appear to have a relatively short-run focus, rewarding or
punishing the value of a security based on whether or not the company
current quarter earnings have missed, met or exceeded Wall Street
expectations. In addition, see parts (b) and (c) below.
From an economic perspective the return required on any investment
whether held publicly or privately, is a function of the risk of the
investment's future cash flows. However, while public equity market
valuations reflect the expectations of all investors in a particular security,
the valuation of a privately held company will reflect the expectations of
just those privately holding the company. If the investment horizon is
significantly different between public shareholders and private
shareholders then the pattern of the cash flows of the two investments can
be significantly different and still yield equivalent rates of return. For
instance, public shareholders may expect a rate of return of 11 percent on
an investment over the next year and the dividends and price appreciation
of the security over that time frame would have to accommodate that rate
of return. However, a private shareholder with an extremely long
investment horizon (i.e. decades) may also expect an 11 percent rate of
return, but be willing to receive that return through a different pattern of
cash flows that spreads over many years.
MEC has employed financial experts in the past to estimate the required
rate of return on an equity investment in an electric or natural gas public
(b)
(c)
UE-0510901PacifiCorp
September 9, 2005
PC Data Request 44
utility company. Those financial experts, in complying with the tenets of
the Hope and Bluefield decisions have relied on data of comparable risk
companies to estimate the required return of the equity holders of MEC.
As explained in the response to part (b) above, there is no reason to
believe that the market required equity return for a privately held company
is different than that of a publicly held company, although the pattern of
the cash flows could be materially different.
Responder: Gregory E. Abel
Witness: Gregory E. Abel
UE-05l090lPacifiCorp
September 9, 2005
PC Data Request 45
PC Data Request 45
(Ref.: Abel Testimony, p. 13, ll. 7-10) Mr. Abel indicates that although the
Company will not earn a return on its acquisition premium, if PacifiCorp is able
to earn its allowed return, that will be a fair return.
a) If $1.2 Billion of the $9.4 Billion sales price is an acquisition premium
over book value and PacifiCorp is allowed and earns a 10.3% return on
equity (the most recent electric utility equity return award in Washington),
the resultant equity return on the purchase price to f\ffiHC would be
98% (($9.4B-$1.2B)/$9.4B x 10.3%). Is an 8.98% return on the market
price of PacifiCorp reasonable? Why, or why not?
b) In determining the value of PacifiCorp, what DCF discount rate was
used to determine the present value of the Company s future cash flows?
Please provide support for your response from the analysis of the
investment bankers that assisted MEHC in preparing its bid for
PacifiCorp.
MERe's Response to PC Data Request 45
a. Applicants do not agree that an 8.98% return on equity would be
reasonable as a return on equity authorized in the context of a rate
proceeding. A fair return should be equal to that required by investors in
securities of commensurate risk. That return should also be sufficient to
permit PacifiCorp to attract capital on reasonable terms and maintain its
credit rating.
Applicants do not endorse the method used in this request to relate the
acquisition premium and rates of return. The amount of the acquisition
premium must be evaluated in the context of the transaction as a whole.
Strategic considerations important to MEHC are described in the Direct
Testimony of Gregory E. Abel. Financial factors are also discussed in the
Direct Testimony of Patrick J. Goodman.
b. The information responsive to part "b" is Highly Confidential. Please
contact Jamie Van Nostrand of Stoel Rives, at [phone], to make
arrangements for inspection of this information.
Responder: Gregory E. Abel
Witness: Gregory E. Abel
UE-051 090/Pacifi Corp
September 9, 2005
PC Data Request 46
PC Data Request 46
(Ref.: Abel Testimony, p. 15, ll. 35-37) Please provide support for the statement
that "historically, MEHC's utility subsidiaries have been able to issue long-term
debt at levels below their peers with similar credit ratings.
MERC's Response to PC Data Request 46
Please see response to PC 26.
Responder: Gregory E. Abel
Witness: Gregory E. Abel
UE-051 090/Pacifi Corp
September 9, 2005
PC Data Request 47
PC Data Request
(Ref.: Johansen Testimony, p. 5, ll. 14-17) Please provide support for Ms.
Johansen statement that "major disappointment for Scottish Power
shareholders has been the inability of PacifiCorp to earn its allowed return on
equity.
PPW's Response to PC Data Request
Referring to the next line of Johansen s testimony on page 5
, "
We believe this is
due to combination of two main issues:
the negative impact of volatility in our fundamentals, primarily in
the areas of load, hydro and thermal availability; and
an inability to match the growing cost of our capital investment
program with additional revenues generated through either general
rate cases or contributions from load growth.
While there are many different routes for investors to voice their concern
including, informal feedback, several quotes from analyst notes are highlighted in
Attachment PC 47 on the enclosed CD.
Responder: Judi A. Johansen
Witness: Judi A. Johansen
WASHINGTON
DE-OS! 090
MEH C/pPW
PC DATA REQUEST
TT A CHMENT PC 47
ON THE ENCLOSED CD
UE-051 090/Pacifi Corp
September 9, 2005
PC Data Request 49
PC Data Request 49
(Ref.: Gale Testimony, p. 4, ll. 11-17) Please list all of the jurisdictions in which
MEC operates and the most recent allowed return on equity in each of those
jurisdictions as well as the Docket Number for each of those cases.
MEHC's Response to PC Data Request 49
In the states of Iowa and Illinois, MidAmerican Energy Company s electric
operations are subject to alternative rate regulatory plans. The plans in both states
do not establish traditional authorized returns on common equity (ROE). Instead
the plans establish ROE dead-bands. Earnings above the dead-band require
revenue sharing with customers; earnings below the dead-band permit the utility
to request rate relief. The Iowa plan was established in Consolidated Docket Nos.
APP-96-01 and RPU-96-8. The orfier approving settlement, the amended
settlement agreement, and amendments to the settlement agreement of these
consolidated dockets can be found in the Electronic Document Room, Item Nos.
01.01, 3.01.02, 3.01.03, 3.01.04, and 3.01.05. The illinois law which
established the alternative regulatory plan was the Electric Service Customer
Choice and Rate Relief Law of 1997, and the statue reference is 220 ILCS 5/16-
111 (e )(2). There is no related order for this law, but MEC makes annual
compliance filings related to this law.
The most recent illinois Natural Gas proceeding was Docket No. 01-0696, and the
authorized return on common equity was 11.20%. The most recent Iowa natural
gas proceeding was Docket No. RPU-02-2, and the authorized return on common
equity in the docket was 10.75%.
MidAmerican Energy Company also has retail electric and natural gas operations
in South Dakota. While these operations are subject to traditional rate base/rate of
return regulation, both the previous electric and natural gas rate proceedings in
South Dakota resulted in a negotiated settlement that did not specify an allowed
return on equity. The most recent natural gas settlement was in Docket No.
NGC04-001 , while the most recent electric proceeding was Docket No. EL 95-
011. Please see Attachment PC 49 -, and Attachment PC 49 -2 on the enclosed
, respectively, for these two South Dakota rate orders.
MidAmerican Energy Company also operates a small retail natural gas operation
in Nebraska. This business is subject to regulation by each municipality that is
served, not by a state regulatory agency. No allowed rate of return was specified
in the city ordinances approving the rates under which service is billed in that
jurisdiction, and there are no docket numbers established in Nebraska for this
regulation.
Responder: Brent E. Gale
Witness: Brent E. Gale
WASHINGTON
UE-O51090
MEH C/pPW
PC DATA REQUEST
ATTACHMENTS PC 49 -1 and 49
ON THE ENCLOSED CD
UE-0510901PacifiCorp
September 9, 2005
PC Data Request 51
PC Data Request 51
(Ref.: Gale Testimony, BEG-, p. 2, Letter I) Does Mr. Gale believe that
providing for separate financial and accounting treatment are the only ring-
fencing measures available? If so why? If not, please list other ring-fencing
mechanisms of which Mr. Gale is aware.
MEHC's Response to PC Data Request 51
Mr. Gale is aware that there are a variety of measures that can be employed in the
process of "ring-fencing" an entity. MEHC has outlined the fundamental
provisions of the ring-fencing structures it currently employs in the prepared
direct testimony of Patrick J. Goodman, (Exhibit No. -(PJG-IT) ) page 16, line
1 through page 17, line 17. A review of "ring-fencing" measures is contained in
Attachment PC 42 b to MEHC's response to PC 42.
Responder: Brent E. Gale
Witness: Brent E. Gale
UE-0510901PacifiCorp
September 9, 2005
PC Data Request 52
PC Data Request 52
(Ref.: Gale Testimony, BEG-, p. 4, Letter D) If the Company has not already
provided a complete copy of PacifiCorp' s latest rating agency presentation (all
written information) in this filing, please do so in response to this data request.
PPW's Response to PC Data Request 52
Please see Confidential Attachment PC 52 on the enclosed Confidential CD.
Responder: Brent E. Gale
Witness: Brent E. Gale
WASHINGTON
UE-051090
MEHC/PPW
PC DATA REQUEST
CONFIDENTIAL ATTACHMENT
PC
CONFIDENTIAL (LEVEL YELLOW)
ON THE ENCLOSED CD
UE-051 090/Pacifi Corp
September 9, 2005
PC Data Request 53
PC Data Request 53
(Ref.: Gale Testimony, BEG-, p. 4, Letter E)
a) Please define the term "distribution" as used in the first sentence of that
paragraph.
b) Please list all the ways in which PacifiCorp would be able to make a
distribution" to PPW Holdings LLC, or its immediate parent company.
MEHC's Response to PC Data Request 53
(a)The term "distribution" is meant to refer to cash dividend payments by
PacifiCorp to PPW Holdings LLC.
(b)PPW Holdings LLC will be PacifiCorp s immediate parent company.
Forms of distributions, to PPW Holdings LLC from PacifiCorp, that
would affect PacifiCorp s balance sheet as described in Mr. Gale s Exhibit
No. - (BEG-2), page 4 of 8, paragraph E, are limited to cash dividends.
Responder: Brent E. Gale
Witness: Brent E. Gale
UE-051 090/Pacifi Corp
September 9,2005
PC Data Request 54
PC Data Request 54
(Ref.: Gale Testimony, BEG-, p.4, Letter G) Will the coal mines and the
environmental operations that are part of the PacifiCorp purchase by MEHC from
Scottish Power become subsidiaries of PacifiCorp following the merger? If so,
will there be any means to prevent PacifiCorp from guaranteeing the debt of any
of those subsidiaries?
MERC's Response to PC Data Request 54
The coal mines and the environmental operations current! yare subsidiaries
PacifiCorp and it is envisioned that they will remain so.
There are no existing commitments that would prevent PacifiCorp from
guaranteeing the debt, if any, of its subsidiaries.
Responder: Brent E. Gale
Witness: Brent E. Gale
UE-0510901PacifiCorp
September 9, 2005
PC Data Request 56
PC Data Request 56
(Ref.: Goodman Testimony, pp. 5, 6, regarding MERC's capital structure)
a) Please explain why MEHC is able to maintain an investment grade
bond rating with its current capital structure.
b) Please list all of the operating platforms contained within MEHC and
indicate what type of business each is.
c) Please provide the year-end 2004 capital structure of each operation
listed in "b)", above.
d) How much of the subsidiary debt on the books of MERC is "non-
recourse" debt? Please provide support for your response.
e) Will PacifiCorp s debt be "non-recourse" to MEHC? Why?
f) What capital structure will PacifiCorp have immediately before and
immediately after the merger?
MERC's Response to PC Data Request 56
(a)MEHC's investment grade credit rating is supported by the quality of its
cash flows from its regulated and non-regulated platforms. A large
proportion of MEHC's debt consists of non-recourse debt and also
includes trust preferred securities issued to Berkshire Hathaway which are
subordinate to senior debt, have deferral provisions and are non-
transferable by Berkshire Hathaway. The investment grade rating is
further supported by the expectation that acquisitions will be financed in a
credit enhancing way. In addition, f\ffiRC operates in constructive
regulatory environments in Iowa, illinois and South Dakota.
(b)Please refer to the testimony of MEHC witness Abel, at pages 7-
(c)Please see Confidential Attachment PC 56 c on the enclosed Confidential
CD.
(d)All "Subsidiary and project debt" as well as all "Preferred securities of
subsidiaries" as presented in MERC witness Goodman s Table 1 (See
Revised Direct Testimony of Patrick J. Goodman, Page 5) is non-recourse
to MEHC except for $37 million of project financing that MERC
guarantees.
(e)Yes. MEHC attempts to send a consistent economic signal to all of its
subsidiaries that they are each responsible for the execution of their
respective business plans. If a subsidiary issues debt, that subsidiary
needs to be able to cover the service on that debt. PacifiCorp can expect
to be treated like any other MERC subsidiary.
UE-051 090/Pacifi Corp
September 9, 2005
PC Data Request 56
(f) PacifiCorp s long-term capital structure will be the same after the acquisition
as it was before the acquisition.
Responder: Patrick J. Goodman
Witness: Patrick J. Goodman
WASHINGTON
UE-051090
MEHC/PPW
PC DATA REQUEST
CONFIDENTIAL ATTACHMENT
PC 56
CONFIDENTIAL (LEVEL YELLOW)
ON THE ENCLOSED CD
DE-051 090/Pacifi Corp
September 9, 2005
PC Data Request 57
PC Data Request 57
(Ref.: Goodman Testimony, pp. 5, 6) If MEHC is comprised of a portfolio of
companies, some of which have higher risk profiles than PacifiCorp and is able to
maintain an investment grade bond rating with a 22% common equity ratio, why
would it not be cost-effective to capitalize PacifiCorp s utility operations in that
same manner?
MERe's Response to PC Data Request 57
Capitalizing an individual electric utility, with a risk profile similar
to PacifiCorp , with 78% debt would not be prudent. Such an entity, without
MEHC's advantages, would likely not be rated investment grade and its access to
the capital markets might be restricted. The return required to raise equity capital
for an entity capitalized in such a manner would increase as well.
MEHC's advantages, that are not available to PacifiCorp s utility operations
include: the ownership by Berkshire Hathaway of both common stock
equivalents and trust preferred securities, as well as the fact it (f\ffiHC) benefitsfrom diversification of its other businesses.
Responder: Patrick J. Goodman
Witness: Patrick J. Goodman
UE-0510901PacifiCorp
September 9, 2005
PC Data Request 63
PC Data Request 63
(Ref.: Goodman Testimony, p. 14, Letter I)
a) Will PacifiCorp' s coal mining subsidiaries be held in separate
subsidiaries apart from PacifiCorp or will they be included in PacifiCorp?
b) Would the Company consider limiting the amount of unregulated
investment allowed PacifiCorp as a condition to approving the merger?
MEHC's Response to PC Data Request 63
(a)The coal mine operations are currently subsidiaries of PacifiCorp and it is
expected that they will remain so.
(b)f\ffiHC does not envision that PacifiCorp would be involved with any
unregulated operations.
Responder: Patrick J. Goodman
Witness: Patrick J. Goodman
UE-0510901PacifiCorp
October 11 , 2005
PC Data Request 66 MEHC
PC Data Request 66 MER C
Reference the Company s response to PC Data Request 17 MEHC and provide
the following:
a. Please provide a brief description of the activities undertaken with
regard to each separate department listed for which costs were
allocated to PPW.
b. Please state what comparable MERC department (or other affiliate
department) will undertake each noted activity formerly undertaken by
ScottishPower.
c. If any activities formerly undertaken at the ScottishPower level are
now going to be undertaken on a PacifiCorp standalone basis, please
identify the activity; provide the FY2005 total ScottishPower and
PacifiCorp-allocated amount, as well as the estimated annual cost of
undertaking such activity at the PacifiCorp level on a stand alone
basis.
d. Delineate which ScottishPower activities, and what FY 2005 amount,
will be eliminated by virtue of MEHC being privately held.
e. Notwithstanding the fact that comparable costs were not allocated to
PacifiCorp in prior years, nonetheless, provide comparable actual costs
on a total ScottishPower basis (Le., before allocation of costs to any
subsidiary/affiliate) for FY 2002, 2003 and 2004.
f. Please explain the reasons why such costs were not previously
allocated to PacifiCorp in prior fiscal years.
g.
Please provide the total ScottishPower costs, the total PacifiCorp
allocated amount, and the various state jurisdictional allocated
amounts of each department costs for each PacifiCorp state
jurisdiction current/pending rate case, and if there is no
current/pending rate case for a given jurisdiction, the last rate case
amount.
MERC's Response to PC Data Request 66
b. The shared services contemplated in the testimony of Mr. Specketer are for
executive management, and in support of executive management, of MEHC' s
portfolio of companies and assets, or for matters that are of a corporate nature.
Departments that are expected to provide such services include:
UE-051 090/Pacifi Corp
October 11 , 2005
PC Data Request 66 MEHC
CEO
Corporate Insurance
Legislative and Regulatory Affairs
Financial Services
Financial Reporting
Treasury
Tax Services
CFO
Corporate Communications
Human Resources
Information Technology
c. Given that the parties are still in the very early stages of the transaction and the
fact that no formal integration or transition activities between the organizations have
taken place to date, there have been no decisions made regarding new activities to be
undertaken by PacifiCorp on a standalone basis.
" '
ScottishPower shareholder services costs will be eliminated due to the fact that
f\ffiHC is a private company.
Regarding parts a and e-g, please see PPW's response to this request.
UE-051 090/Pacifi Corp
October 11, 2005
PC Data Request 66 PPW
PC Data Request 66 PPW
Reference the Company s response to PC Data Request 17 MEHC and provide
the following:
a. Please provide a brief description of the activities undertaken with
regard to each separate department listed for which costs were
allocated to PPW.
b. Please state what comparable MEHC department (or other affiliate
department) will undertake each noted activity formerly undertaken by
ScottishPower.
c. If any activities formerly undertaken at the ScottishPower level are
now going to be undertaken on a PacifiCorp standalone basis, please
identify the activity; provide the FY2005 total ScottishPower and
PacifiCorp-allocated amount, as well as the estimated annual cost of
undertaking such activity at the PacifiCorp level on a stand alone
basis.
d. Delineate which ScottishPower activities, and what FY 2005 amount,
will be eliminated by virtue of MEHC being privately held.
e. Notwithstanding the fact that comparable costs were not allocated to
PacifiCorp in prior years, nonetheless, provide comparable actual costs
on a total ScottishPower basis (i., before allocation of costs to any
subsidiary/affiliate) for FY 2002, 2003 and 2004.
f. Please explain the reasons why such costs were not previously
allocated to PacifiCorp in prior fiscal years.
g.
Please provide the total ScottishPower costs, the total PacifiCorp
allocated amount, and the various state jurisdictional allocated
amounts of each department costs for each PacifiCorp state
jurisdiction current/pending rate case, and if there is no
current/pending rate case for a given jurisdiction, the last rate case
amount.
PPW's Response to PC Data Request 66
a. Please see Attachment PC 66 a on the enclosed CD.
UE-051 090/Pacifi Corp
October 11, 2005
PC Data Request 66 PPW
Please see Confidential Attachment PC 66 e on the enclosed
Confidential CD.
Corporate services from ScottishPower UK have been received by
PacifiCorp since the merger. However, at the time of the merger
ScottishPower indicated that costs associated with these services
would not be allocated until a future point. See the response to
part g of this request.
PacifiCorp interprets this data request as requesting SPUK cross
charge amounts. PacifiCorp and Scottish Power UK (SPUK)
executed a cross charge agreement governing the allocation of
costs incurred by each entity on behalf of the other. Although
SPUK has provided corporate services to PacifiCorp since the
merger, the cross charges only began to be invoiced as of April
2004. As such, it has not yet been included in Wyoming or
California since no general rate case has been filed in either of
those states since April of 2004. The unadjusted and adjusted cross
charges included in the most recent Washington, Oregon, Utah and
Idaho general rate cases are as follows:
SPUK Cross Charges from
Most Recent PacifiCorp GRCs
Washington Oregon Utah Idaho
GRC Filed May-Nov-Aug -Jan-
Base Year Sep-Mar -Mar-Mar-
Cross Charge Amount in Unadjusted Data 416,964
Test Period (for Cross Charge)Mar-Dec-Mar-Mar-
Annualized Cross Charge Amount 15,657,490 044,137 657,489 657,489
SO Factor 8.3282%29.4462%41.6087%9608%
Jurisdictional Al1ocated Share of Cross Charge 303 991 841 003 514 883 933,312
*The $13 044,137 amount included for Dec-06 is prior to the SEC revision that caused it to increase
to $15,657,490.
Regarding parts b, c and d, please see MEHC's response to this request.
WASHINGTON
UE-O51090
MEH CIPPW
PC DATA REQUEST
TT A CHMENT PC 66 a
ON THE ENCLOSED CD
WASHINGTON
UE-051090
MEHC/PPW
PC DATA REQUEST
CONFIDENTIAL ATTACHMENT
PC 66
CONFIDENTIAL (LEVEL YELLOW)
ON THE ENCLOSED CD
UE-051 090/Pacifi Corp
October 11 , 2005
PC Data Request 71
PC Data Request 71
Please describe, discuss and quantify the impact of any of MEHC plans to change
PacifiCorp s various employee benefit plans and/or to merge MEHC's and
PacifiCorp s various employee benefit plans. Include within any discussion any
planned changes in PacifiCorp employee cost responsibilities for participating in a
given employee benefit option.
MERC's Response to PC Data Request 71
Gi yen that the parties are still in the very early stages of the transaction and the
fact that no formal integration or transition activities between the organizations
have taken place to date, there have been no decisions made regarding changes to
the benefit plans.
UE-051 090/Pacifi Corp
October 11 , 2005
PC Data Request 72
PC Data Request 72
Please discuss, describe and quantify the federal and state tax impacts of the
planned purchase of PacifiCorp s depreciable plant tax basis. Specifically
address, without limitation:
a) Whether ScottishPower or PacifiCorp as a separate tax entity will
experience a tax gain that would result in a full or partial turn around
of its various accumulated deferred income tax ("ADIT") reserves.
b) PacifiCorp s projected stand alone ADIT reserves immediately before
consummation of the acquisition and immediately after the
consummation of the acquisition, with a description of events causing
any substantial change in balances stemming from the acquisition
transaction.
c) Whether PacifiCorp s tax basis of its depreciable plant assets will
remain the same after the transaction, and if not, an explanation and
quantification of the difference being caused by the transaction.
Response to PC Data Request 72
a) This transaction is a purchase of stock, therefore, neither ScottishPower
nor PacifiCorp will experience a tax gain that would result in a full or
partial turn around of its various accumulated deferred income tax
AD IT") reserves.
b) The acquisition transaction will not change balances of any of the stand
alone ADIT reserves of PacifiCorp.
c) This transaction is a purchase of stock, therefore the tax basis of
PacifiCorp s depreciable plant assets will remain the same after the
transaction.
UE-O51 090/Pacifi Corp
October 11 , 2005
PC Data Request 73
PC Data Request 73
MEHC is expected to finance a portion of the acquisition of the PacifiCorp stock
with third party debt which will lead to a double leverage situation, that should, in
turn, result in consolidated tax savings to MEHC. No where in testimony do
MEHC witnesses offer to consider all or part of MEHC' s consolidated tax savings
stemming from the double leveraged capital structure in the development of retail
electric rates.
a) Please confirm whether it is the Company s position that all savings
stemming from the double leveraged MEHC capital structure should
be retained by MEHC equity owners
b) If it is the Company s position that all savings stemming from the
double leveraged MEHC capital structure should be retained by
MEHC equity owners, please describe and quantify in detail how
MEHClPacifiCorp intends to address Oregon s recently passed Senate
Bill 408 which would have consolidated tax savings passed back to
Oregon retail ratepayers via an automatic adjustment clause. State and
quantify the expected impact of such legislation upon savings to be
passed through the automatic adjustment clause, and specifically
address whether and what counter measures MEHC/PacifiCorp intends
to propose that might offset in whole or in part tax savings anticipated
to be passed back to Oregon ratepayers via an automatic adjustment
clause.
MERC's Response to PC Data Request 73
MEHC disagrees with the premise of this data request. Whether
f\ffiHC chooses to issue only common equity or whether it chooses
to issue a combination of common equity and debt (and/or
preferred stock) at the close of the transaction, there is no "double
leverage." This conclusion is supported by the following facts of
the proposed transaction:
i. If MEHC issues debt, it will be non-recourse to
PacifiCorp.
ii. PacifiCorp will be ring-fenced to isolate it from
whatever financing activities are employed by MEHC
and its other subsidiaries.
iii. PacifiCorp' s ability to issue its own debt is not
impaired if MEHC issues debt.
iv. There will be no debt at the intermediate holding
company (PPW Holdings LLC).
DE-051 090/Pacifi Corp
October 11 , 2005
PC Data Request 73 v. MEHC is a large, financially sound firm with
significant assets that give it capital flexibility
regardless of the proposed acquisition of PacifiCorp.
MEHC disagrees with the premise of this data request.
PacifiCorp s recent rate order imposed a revenue requirement
reduction (loosely justified by, in MEHC's opinion, an improper
and premature application of SB 408) premised upon the existence
of debt at the intermediate holding company. In addition, the
relationship among MEHC, PPW Holdings LLC, and PacifiCorp,
post-closing, will not be comparable to that among ScottishPower
PHI and PacifiCorp. At this point in time, the interim rule and SB
408, itself, are subject to a variety of interpretations and the
permanent rules for SB 408 implementation are now being
developed. For these reasons, MEHC cannot quantify the effect of
the legislation.
P AC-05-08/PacifiCorp
October 27 2005
IPUC Staff Data Request 2.4
IPUC Staff Data Request 2.4
Please provide a copy of the Applicants' response to the following data requests
and also provide the specific information for Idaho related to these requests.
Utah Committee of Consumer Services
Data Request Nos. 2., 2., 2., 4.
Response to IPUC Staff Data Request 2.4
Please see Attachment IPUC 2.4 for copies of the above data requests.
supplemental response will follow when information related to Idaho becomes
available.
IDAHO
A C- 05-
MEHC/PPW
IPUC 2nd Set DATA REQUEST
ATTACHMENT IPUC
05-035-54IPacifiCorp
August 25, 2005
CCS 2nd Set Data Request 2.6 MEHC
CCS Data Request 2.6 MERe
Corporate overhead. (a) Please identify the amount of Scottish Power corporate
overhead charges to PacifiCorp by year for 2001 through 2005. (b) Please show
how the Scottish Power corporate overhead charges to PacifiCorp in each year for
2001 through 2005 were allocated to Utah. (c) Please identify the amount of
budgeted or projected Scottish Power corporate overhead charges to PacifiCorp
by year for 2005 through 2008. (d) Please show the allocation of the corporate
overhead charges identified in part (c) to Utah. (e) Please identify the amount of
budgeted or projected corporate overhead charges to PacifiCorp under MEHC
ownership by year for 2006 through 2008. (f) Please identify, quantify and
describe the components that are included in the MEHC corporate overhead
charges.
MERe's Response to CCS Data Request 2.
(e) & (f) MERC has not estimated the amount of such charges, in detail, for
periods beyond 2006. However, MEHC has committed that such costs will not
exceed $9 million per year for five (5) years following the close of the
transaction. For 2006, Attachment CCS 2.6 on the enclosed CD provides a more
detailed breakdown of the costs appearing in Exhibit UP&L (TBS-2) of MEHC
witness Specketer.
Please refer to PPW's response to CCS Data Request 2.6 for parts (a) through (d).
UTAH
05-035-
MEH CIPPW
CCS 2nd Set DATA REQUEST
ATTACHMENT CCS 2.
ON THE ENCLOSED CD
05-035- 54IPacifiCorp
August 25 2005
CCS 2nd Set Data Request 2.6 PPW
CCS Data Request 2.6 PPW
Corporate overhead. (a) Please identify the amount of Scottish Power corporate
overhead charges to PacifiCorp by year for 2001 through 2005. (b) Please show
how the Scottish Power corporate overhead charges to PacifiCorp in each year for
2001 through 2005 were allocated to Utah. (c) Please identify the amount of
budgeted or projected Scottish Power corporate overhead charges to PacifiCorp
by year for 2005 through 2008. (d) Please show the allocation of the corporate
overhead charges identified in part (c) to Utah. (e) Please identify the amount of
budgeted or projected corporate overhead charges to PacifiCorp under MERC
ownership by year for 2006 through 2008. (f) Please identify, quantify and
describe the components that are included in the MEHC corporate overhead
charges.
PPW's Response to CCS Data Request 2.
(a) The corporate overhead charge began in FY 2005 and therefore that is the
only year to report. For FY 2005, the ScottishPower overhead charge
amount is $13 012,476. ($13,122 707 less $87 922 (PFS), $20,997, (PerCo),312 (Trans)).
(b) The amount of ScottishPower corporate overhead charges charged to
PacifiCorp and then allocated to the state of Utah for FY 2005 is $5 219 363.
($13 012,476 multiplied by the FY 2005 Utah "SO" allocation factor
percentage 40.11045%). This $13m overhead charge was partially offset by
PacifiCorp charging ScottishPower for providing overhead charges of $IAm.
(c) For FY 2006 ScottishPower expects to charge PacifiCorp at least $15
million. Budgeted amounts beyond FY 2006 have not been estimated.
(d) To allocate this amount to the state of Utah, it would be multiplied by the FY
2006 Utah "SO" allocation factor percentage which would be approximately
40%.
Please refer to MEHC's response to CCS Data Request 2.6 for parts (e) and (f).
05-035-54/PacifiCorp
August 25 , 2005
CCS 2nd Set Data Request 2.
CCS Data Request 2.
Corporate overheads. (a) Please identify, explain and quantify the amount of
ScottishPower corporate overheads that have been charged to Utah in each year
since ScottishPower assumed ownership of PacifiCorp. Include supporting
calculations. (b) Please identify, quantify and explain the amount of
ScottishPower corporate overhead costs that have been charged to Utah Power &
Light by year since ScottishPower assumed ownership of PacifiCorp. Include
supporting calculations. (c) By year since ScottishPower assumed ownership of
PacifiCorp please identify, quantify and explain the amount of ScottishPower
corporate overhead costs charged to Utah Power & Light that have been allowed
as operating expenses in determining UP&L's Utah revenue requirements.
Include supporting calculations.
Response to CCS Data Request 2.
(a)Please refer to the response provided in CCS 2.6 (a) and CCS 2.6 (b).
(b)PacifiCorp allocates corporate overhead costs by jurisdiction and not by
the two divisions known as Pacific Power & Light and Utah Power &
Light.
(c)In the Utah March 2006 forecasted general rate case (Docket No. 04-035-
42), a ScottishPower overhead of $13 044 000 was included in the initial
revenue requirement filing. The stipulation did not specify the amount of a
ScottishPower overhead charge that was to be allowed into rates.
05-035-54/PacifiCorp
August 25,2005
CCS 2nd Set Data Request 2.10 MEHC
CCS Data Request 2.10 MERC
Income taxes. (a) Please confirm that the merger will have no impact on the
rights of parties concerning the ratemaking treatment of upstream tax savings and
costs, including potential refunds of amounts of income taxes included in
PacifiCorp s operating expenses paid by Utah ratepayers that were not paid to the
government. If this is not the case, explain fully. (b) Please provide the PacifiCorp
tax sharing or tax allocation agreements that were in effect during the period of
ownership by ScottishPower. (c) For the period November 1 , 1999 through the
present, please provide the consolidated federal income tax returns filed by
General Partnership (ScottishPower s parent company for its United States
subsidiaries) and by PacfiCorp Holdings, Inc. (which became the parent company
of ScottishPower s U.S. consolidated group when N A General Partnership and
PacifiCorp Holdings, Inc merged). (d) For the period November 1, 1999 through
the present, please provide the amounts of income tax paid by PacifiCorp to
upstream holding companies. For each such payment, please clearly identify the
tax year (or if shorter than a full year, the tax return to which such tax payment
pertains).
MERC's Response to CCS Data Request 2.
Applicants object to this request insofar as it seeks information that is not relevant
and not reasonably calculated to lead to the discovery of admissable evidence.
Without waiving their objection, Applicants respond as follows:
(a)Applicants agree that the parties have the full opportunity to present their
legal and factual claims regarding tax issues in future rate case
proceedings. However, by stating this agreement, Applicants do not
waive any objections they may have to those claims (for example, but not
limited to, the right to assert that a party has not met its burden on an issue
or that a party s claim would amount to unlawful retroactive ratemaking).
Please refer to PPW's response to CCS Data Request 2.10 for parts (b) through
(d).
05-035-54/PacifiCorp
August 25, 2005
CCS 2nd Set Data Request 2.10 PPW
CCS Data Request 2.10 PPW
Income taxes. (a) Please confinn that the merger will have no impact on the
rights of parties concerning the rate making treatment of upstream tax savings and
costs, including potential refunds of amounts of income taxes included in
PacifiCorp s operating expenses paid by Utah ratepayers that were not paid to the
government. If this is not the case, explain fully. (b) Please provide the PacifiCorp
tax sharing or tax allocation agreements that were in effect during the period of
ownership by ScottishPower. (c) For the period November 1, 1999 through the
present, please provide the consolidated federal income tax returns filed by
General Partnership (ScottishPower s parent company for its United States
subsidiaries) and by PacfiCorp Holdings, Inc. (which became the parent company
of ScottishPower s u.s. consolidated group when NA General Partnership and
PacifiCorp Holdings, Inc merged). (d) For the period November 1 , 1999 through
the present, please provide the amounts of income tax paid by PacifiCorp to
upstream holding companies. For each such payment, please clearly identify the
tax year (or if shorter than a full year, the tax return to which such tax payment
pertains).
PPW's Response to CCS Data Request 2.
b) See Confidential Attachment CCS 2.1 O(b )-1 on the enclosed confidential CD
for the Income Tax Allocation Policy dated April 1 , 2000.
See Confidential Attachment CCS 2.1 O(b )- 2 on the enclosed confidential CD
for the Amended Tax Allocation Agreement dated April 1 , 2004.
c) Pursuant to Paragraph 1 (D) of the Protective Order issued by the Commission
in this Docket, PacifiCorp provides notice to the Committee of Consumer
Services that the consolidated federal income tax returns filed by NA General
Partnership and PacifiCorp Holdings, Inc. for the tax periods 3/31/2000
through 3/31/04 constitute highly sensitive documents. These documents will
be made available for review upon advance notice at PacifiCorp s Utah office.
Please contact Barry Bell at [phone] to make arrangements to review
the documents.
d) See Attachment CCS 2.10d on the enclosed CD.
Please refer to MEHC's response to CCS Data Request 2.10 for part (a).
UTAH
05-035-
MEHC/PPW
CCS 2nd Set DATA REQUEST
CONFIDENTIAL ATTACHMENTS
CCS 10 b-and 2.10 b-
CONFIDENTIAL (LEVEL YELLOW)
ON THE ENCLOSED CD
UTAH
05-035-
MEH CIPPW
CCS 2nd Set DATA REQUEST
ATTACHMENT CCS 2.10 d
ON THE ENCLOSED CD