20070409_1875.pdf

DECISION MEMORANDUM
TO:COMMISSIONER KJELLANDER
COMMISSIONER SMITH
COMMISSIONER REDFORD
COMMISSION SECRETARY
LEGAL
WORKING FILE
FROM:TOM MCKEOWN AND TERRI CARLOCK
DATE:APRIL 3, 2007
RE:CASE NO. IPC-07-
On March 16, 2007, Idaho Power Company applied for authority to make up to
$450 000 000 aggregate principal amount at anyone time outstanding of short-term borrowings
consisting of loans issued by financial and other institutions and evidenced by unsecured notes or
other evidences of indebtedness of Idaho Power and unsecured promissory notes and commercial
paper of Idaho Power to be issued for public or private placement through one or more
commercial paper dealers or agents, or directly by Idaho Power. The net proceeds to be received
by the Idaho Power from the short-term borrowings will be used to obtain temporary short-term
capital for the acquisition of property; the construction, completion, extension or improvement of
its facilities; the improvement or maintenance of its service; the discharge or lawful refunding of
its obligations; and for general purposes. Idaho Power s line of credit arrangements are expected
to include one or more lead agents, and a number of additional banks as participating agents.
The Company s proposed new credit agreement would likely include the following fees for the
lead agent(s) and participating agents: an up-front arrangement fee payable to the lead agent(s)
totaling approximately $225 000; up-front agent participation fees payable to all participating
agents totaling approximately $87 500; annual commitment facility fees payable to all
participating agents totaling approximately $210 000 per year; and annual administrative fees
payable to the lead agent(s) of approximately $15 000 per year. Additional legal and
miscellaneous expenses amount to $65 000.
Considering that the Public Utilities industry as a whole has experienced credit
downgrades from the major credit rating agencies, Idaho Power requests authorization to make
DECISION MEMORANDUM APRIL 3, 2007
the short-term borrowings as described in its application during said seven year period, so long
as the Company maintains at least a BBB- or higher senior secured debt rating, as indicated by
Standard & Poor s Rating Services and a Baa3 or higher rating as indicated by Moody
Investors' Services , Inc. In the event that Idaho Power receives a downgrade below these ratings
than the Company must promptly notify the Commission in writing of the downgrade and will be
required to file a supplemental application with the Commission within (7) days after the
downgrade, requesting a supplemental order authorizing Idaho Power to continue to make short-
term borrowings and issue commercial paper issued as provided in the Order notwithstanding the
downgrade. This notification and authorization provision is found in section IX of the proposed
Order.
STAFF RECOMMENDATION
The proposed Order authorizing Idaho Power Company to secure a $450 000 000
aggregate principal amount of short-term borrowings should be approved by the Idaho Public
Utility Commission subject to the following conditions:
) For ratemaking purposes, the Commission shall reserve judgment on the reasonableness
of the Company s capital costs, comparative underwriting analysis and any associated
commissions and expenses incurred for any or all security issuances.
) In its next rate proceeding, the Company will be required to show that its capital cost
comparative underwriting analysis, imbedded expenses and methods of securities
marketing are just and reasonable.
) That the Company will promptly notify the Commission as required in Section IX of the
proposed Order.
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Tom McKeown
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DECISION MEMORANDUM APRIL 3 , 2007