20070409_1876.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:IDAHO POWER COMPANY'S REQUEST FOR SHORT-TERM
DEBT AUTHORITY; 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 initial credit agreement(s)
will be for up to $300 million with the option to increase the limits to $450 million. The
Company will notify the Commission if this option is exercised. 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.
DECISION MEMORANDUM APRlL 3 , 2007
The term of the requested authority will initially be for five years with the option to
extend for two one-year extensions. The Company will notify the Commission if the extensions
are exercised. Considering that the Public Utilities industry as a whole has experienced credit
downgrades from the major credit rating agencies, Idaho Power requests authorization to
continue 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 s 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 on
pages 4 - 5 of the Application.
STAFF RECOMMENDATION
The requested authorization for Idaho Power Company to secure up to $450 000 000 in
aggregate principal amount of short-term borrowings for up to seven years 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 related to increases
in the base amount, extension of the term and change in ratings as set forth in the
Application.
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Tom McKeown
i:udmemos/ipceO7.
DECISION MEMORANDUM APRlL 3, 2007