20050415Decision memo.pdf

DECISION MEMORANDUM
TO:COMMISSIONER KJELLANDER
COMMISSIONER SMITH
COMMISSIONER HANSEN
COMMISSION SECRETARY
LEGAL
WORKING FILE
FROM:TERRI CARLOCK
DATE:APRIL 15, 2005
RE:IDAHO POWER COMPANY'S REQUEST FOR CLARIFICATION
OF ORDER NO. 29736 ON SHORT -TERM BORROWINGS OF
$300 MILLION CASE NO. IPC-05-
On April 14, 2005 , Idaho Power Company (Idaho Power) filed a Request for
Clarification of Order No. 29736 related to its authority to incur up to $300 000 000 aggregate
principal amount at anyone time of short-term debt. Idaho Power s authority is for a five-year
authorization period from April 1 , 2005 through March 31 , 2010. Since the requested five-year
authorization period is longer than the two-year period granted with prior authorities, the
Commission adopted Idaho Power s proposed condition (in response to Staffs concern) that the
five-year authority remains in place so long as bond ratings remain investment grade (BBB- or
higher by Standard & Poor s Rating Service and Baa3 or higher by Moody s Investors ' Service).
Bond counsel and underwriters have looked at the condition and are concerned that the
order, as written, could require immediate termination of the bond authority and immediate
repayment of debt if bond ratings fall below investment grade. This potential for immediate
termination and repayment could increase the risk analysis and require issuance restrictions or
limitations. The requested clarification allows for a continuation for 364 days thus allowing debt
series to be reissued, mature or be refunded no later than the 364 days after the downgrade.
Commission notification and further proceedings would be part of the process. The proposed
change and addition to the order for clarification is as follows:
Applicant desires to clarify that if its first mortgage bond ratings fall
below the investment grade levels referenced in said ordering paragraph
(the "Downgrade ), Applicant's authority to incur short-term borrowings
and issue commercial paper as provided in the Order will not terminate
DECISION MEMORANDUM - 1 -April 15, 2005
but instead such authority will continue for a period of 364 days from the
date of the Downgrade (the "Continued Authorization Period"). Applicant
requests such authority under the following conditions:(1) Applicant will promptly notify the Commission in writing of theDowngrade. (2) Applicant will file a supplemental application with the
Commission within days after the Downgrade requesting a
supplemental order (the "Supplemental Order ) authorizing Applicant to
continue to incur short-term borrowings and issue commercial paper as
provided in the Order, notwithstanding the Downgrade. Until Applicant
receives the Supplemental Order, any short-term borrowings incurred or
commercial paper issued by Applicant during the Continued Authorization
Period will become due or mature no later than the final date of the
Continued Authorization Period.
STAFF RECOMMENDATION
Staff discussed the underwriting concerns with Idaho Power. The above clarification
includes a process for the Commission to determine continuing authority that addresses Staff s
concerns. Therefore Staff recommends granting the Request for Clarification and approving the
recommended clarification language associated with the condition to maintain investment grade
ratings.
COMMISSION DECISION
Should the Request for Clarification be granted?
Should the above clarification language be accepted?
J~ ~cR
Terri Carlock
TC\ipce054ClarificationSTD300M.DM .4.14.
DECISION MEMORANDUM - 2-April 15 , 2005