20030725Final Order No 29305.pdf

Office of the Secretary
Service Date
July 25, 2003
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION
OF IDAHO POWER COMPANY TO ENTER
INTO CERTAIN FINANCING TRANSACTIONS
FOR THE REFUNDING OF $49,800,000 OF
HUMBOLDT COUNTY, NEVADA POLLUTION
CONTROL REVENUE BONDS.
ORDER NO. 29305
CASE NO. IPC-03-
On June 24, 2003 , Idaho Power Company ("Idaho Power" or "Company ) filed an
Application for authority to enter into certain financing transactions for the refunding of
$49 800 000 in outstanding pollution control revenue bonds issued by Humboldt County, Nevada
Humboldt County"). The purpose of these transactions is to secure a lower average interest
rate and/or extend the average maturity of the bonds. Idaho Power is an electrical utility
headquartered in Boise, Idaho, that provides retail electrical service to approximately 380 000
customers in southern Idaho and eastern Oregon. The Commission, having fully considered the
Application, attached exhibits, its files relating to this Application and the applicable laws and
rules, grants the Application.
FINDINGS OF FACT
Idaho Power is an electric public utility incorporated under the laws of the State of
Idaho that is engaged principally in the generation, purchase, transmission, distribution, and sale
of electric energy in southern Idaho and eastern Oregon. Its principal executive offices are
located in Boise, Idaho.
Idaho Power proposes, subject to the approval of the Commission, to enter into an
agreement with Humboldt County whereby Humboldt County will issue and sell not to exceed
$49 800 000 aggregate principal amount of one or more series of pollution control revenue
refunding bonds (the "Refunding Bonds ) and loan the proceeds from such sale to Idaho Power.
The Company will use the loan proceeds, together with certain monies provided by Idaho Power
to redeem the $49 800 000 aggregate principal amount of Humboldt County, Nevada Pollution
Control Revenue Bonds (Idaho Power Company Project) Series 1984 (the "Outstanding Bonds
According to the Company s Application, the proposed refunding transactions will secure a
lower average interest rate and/or extend the average maturity for the Refunding Bonds as
compared to the Outstanding Bonds.
ORDER NO. 29305
The Outstanding Bonds were issued by Humboldt County on December 20, 1984, in
the original principal amount of $56 200 000, of which $6 400 000 was subsequently retired. On
June 2, 1986, the Outstanding Bonds were re-offered at a fixed interest rate of 8.30% per annum.
The Commission approved Idaho Power s participation in the original issuance of the
Outstanding Bonds in 1984 in Case No. U-1006-246 (Order No. 19275) and in the re-offering of
the Outstanding Bonds at a fixed rate in 1986 in Order No. 20348. The proceeds of the
Outstanding Bonds were applied to refinance prior notes issued by Humboldt County to finance a
portion of the cost of construction of Idaho Power s 50% undivided interest in certain air and
water pollution control facilities at the Valmy Thermal Generating Plant located in Humboldt
County in northern Nevada.
To the extent that the proceeds from the sale of the Refunding Bonds are not
immediately applied to the refunding of the Outstanding Bonds, they may be temporarily
invested by the trustee in high grade, short-term taxable securities.
The interest rate or rates for the Refunding Bonds may be fixed or variable and may
be converted to fixed or variable rate(s) during the term(s) of the Refunding Bonds. Idaho Power
will notify the Commission by letter within seven (7) days (or as soon as possible, if the required
information is not available within seven (7) days) before the issuance of the Refunding Bonds of
their likely range of interest rates and other terms.
Idaho Power expects the Refunding Bonds will be issued on or prior to December 1
2003, which is the first redemption date of the Outstanding Bonds. Idaho Power states that the
Refunding Bonds may be issued prior to December 1 , 2003 to take advantage of favorable
interest rates. The Refunding Bonds may also be issued through a "forward delivery" process
under which the parties would execute the transaction documents for the issuance of the
Refunding Bonds, and set the interest rate for the Refunding Bonds (which may be fixed or
variable), prior to the actual issuance date for the Refunding Bonds. According to Idaho Power
the forward delivery process would allow the Company to lock in favorable interest rates for an
early lock-in fee, in advance of the December 2003 redemption date of the Outstanding Bonds.
Idaho Power may also enter into interest rate swaps with respect to the Refunding Bonds, and/or
interest rate hedging arrangements, including treasury interest rate locks, treasury interest rate
caps and/or treasury interest rate collars.
ORDER NO. 29305
The Company will endeavor to extend the average maturity of the Refunding Bonds
beyond the December 1 , 2014 maturity date of the Outstanding Bonds, where possible, to take
advantage of the lower interest expense of the Refunding Bonds.
Idaho Power states that the Refunding Bonds will be issued pursuant to an indenture
of trust between Humboldt County and a trustee. Pursuant to a loan agreement between
Humboldt County and the Company, the proceeds from the sale of the Refunding Bonds will be
loaned to Idaho Power to pay for the refunding of $49 800 000 aggregate principal amount of the
Outstanding Bonds. Under the loan agreement, the Company will be obligated to pay absolutely
and unconditionally, to the extent sufficient funds are not already in the possession of the trustee
the principal of, interest on, and premium, if any, on the Refunding Bonds, as well as certain fees
and expenses associated with the transaction. Humboldt County's full faith and credit will not be
pledged to the payment of the Refunding Bonds.
To achieve favorable ratings by national bond rating agencies for the Refunding
Bonds, Idaho Power may collateralize the Refunding Bonds with its own First Mortgage Bonds
or it may enter into guarantees, pledges or other security agreements or arrangements to insure
timely payment of amounts due in respect of the Refunding Bonds. The Company may also enter
into letters of credit, insurance or other arrangements with unrelated parties pursuant to which
such parties may lend additional credit or liquidity support to the Refunding Bonds. The
intended purpose of such additional credit or liquidity support is to enhance the credit rating of
the Refunding Bonds and thereby reduce the interest expense of the Refunding Bonds.
The Refunding Bonds will be sold on a negotiated public offering basis by Humboldt
County to the underwriters selected for the transaction (the "Underwriters ), pursuant to a
contract of purchase. Idaho Power expects the Underwriters to be selected by July 1 , 2003 and
will notify the Commission of the selection at that time. The Underwriters will receive a fee of
not greater than 1.00% of the aggregate principal amount of the Refunding Bonds offered.
CONCLUSIONS OF LAW
Idaho Power is an electrical corporation within the definition of Idaho Code ~ 61-119
and is a public utility within the definition of Idaho Code ~ 61-129.
The Idaho Public Utilities Commission has jurisdiction over this matter pursuant to
the provisions of Idaho Code ~ 61-901 et seq.and the Application reasonably conforms to Rules
141 through 150 of the Commission s Rules of Procedures, IDAPA 31.01.01.141-150.
ORDER NO. 29305
The method of issuance is proper.
The general purposes to which the proceeds will be put are lawful purposes under the
Public Utility Law of the state of Idaho and are compatible with the public interest. However
the Commission does not have before it for determination and, therefore, does not determine the
effect of the refunding transaction proposed in Idaho Power s Application on the rates Idaho
Power will charge consumers for electric serve in the state of Idaho. The issuance of an Order
authorizing the proposed financing does not constitute agency determination/approval of the type
of financing or the related costs for ratemaking purposes, which determination the Commission
expressly reserves until the appropriate proceeding.
All fees have been paid by Idaho Power in accordance with Idaho Code ~ 61-905.
ORDER
IT IS THEREFORE ORDERED that Idaho Power Company is granted authority to
(1) enter into contracts of purchase, loan agreements, letter of credit agreements, security
agreements and such other agreements or arrangements as may be reasonably necessary in
connection with the issuance by Humboldt County for the benefit of Idaho Power, and the loan
by Humboldt County to Idaho Power of the proceeds from the issuance, of up to $49 800 000
aggregate principal amount of pollution control revenue refunding bonds; and (2) assume liability
as guarantor, pledgor, surety or otherwise (including issuance of Idaho Power Company s First
Mortgage Bonds) with respect to the principal of, interest on, and premium, if any, on the
Refunding Bonds; all for the purpose of effecting the refunding of $49 800 000 aggregate
principal amount of the Outstanding Bonds, under the terms and conditions of and as set forth in
Idaho Power s Application.
IT IS FURTHER ORDERED that Idaho Power Company notify the Commission by
letter within seven (7) days (or as soon as possible, if the required information is not available
within seven (7) days) before the issuance of the Refunding Bonds of the likely range of interest
rates and other terms for the Refunding Bonds.
IT IS FURTHER ORDERED that Idaho Power file, as soon as possible after the
completion of the transactions, the final documents, exhibits and debt agreements as set forth in
its Application.
IT IS FURTHER ORDERED that the foregoing authorization is without prejudice to
the regulatory authority of this Commission with respect to rates, utility capital structure, service
ORDER NO. 29305
accounts, evaluation, estimates for determination of cost or any other matter which may come
before this Commission pursuant to its jurisdiction and authority as provided by law.
IT IS FURTHER ORDERED that nothing in this Order and no provisions of Title 61
Chapter 9, Idaho Code, or any act or deed done or performed in connection therewith shall be
construed to obligate the State of Idaho to payor guarantee in any manner whatsoever any
security authorized, issued, assumed or guaranteed under the provisions of said Title 61 , Chapter
, Idaho Code.
IT IS FURTHER ORDERED that issuance of this Order does not constitute acceptance
of the Idaho Power s exhibits or other material accompanying the Application for any purpose other
than the issuance of this Order.
THIS IS A FINAL ORDER. Any person interested in this Order (or in issues finally
decided by this Order) or in interlocutory Orders previously issued in this Case No. IPC-03-
may petition for reconsideration within twenty-one (21) days of the service date of this Order
with regard to any matter decided in this Order or in interlocutory Orders previously issued in
this Case No. IPC-03-Within seven (7) days after any person has petitioned for
reconsideration, any other person may cross-petition for reconsideration. See Idaho Code
61-626.
ORDER NO. 29305
DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho, this J.!;~
day of July 2003.
PAULKJELL ER' RE IDENT
JJ~
MARSHA H. SMITH, COMMISSIONER
ATTEST:
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Commission Secretary
O:IPCE0309 In
ORDER NO. 29305