20070822Restructuring two subsidiaries.pdf

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August 20, 2007
Idaho Public Utilities Commission
472 W. Washington
Boise, ill 83702-5983
Attention:Jean D. Jewell, Commission Secretary
Re:Notice of Corporate Restructuring of Two Wholly-Owned Subsidiaries
PacifiCorp will be undertaking a corporate restructuring in which two PacifiCorp subsidiaries
Intennountain Geothennal Company and Steam Reserve Corporation will be merged into
PacifiCorp. PacifiCorp believes this consolidation will benefit customers in that it will help
facilitate any future expansion of the Blundell geothennal power plant and will simplify the
management and administration of this aspect ofPacifiCorp s business. The consolidation will not
hann PacifiCorp customers, in that from a regulatory perspective the consolidation results in
nothing more than a change in the fonn of ownership and it will not alter the current or future
regulatory treatment of the assets and costs associated with the two subsidiaries.
Corporate Background.
Intennountain Geothennal Company (IGC) is a Delaware corporation fonnerly held by
MidAmerican Energy Holdings Company (MEHC) through its Cal Energy Group. As part of
MEHe's acquisition of PacifiCorp in 2006, all of the outstanding capital stock of IGC was
contributed to PacifiCorp, such that IGC became a direct, wholly owned subsidiary of
PacifiCorp.
In July 2006, IGC acquired all of the outstanding capital stock of Steam Reserve Corporation
(SRC), also a Delaware corporation, such that SRC became a direct, wholly owned subsidiary of
IGC. See diagram below:
Intermountain Geothermal Company
Steam Reserve Corporation
Notice of Reorganization
August 20, 2007
Page 2 of 4
Current Operations and Contracts.
SRC is party to geothennal leases with the Utah School and Institutional Trust Lands
Administration (SITLA) that give SRC rights to the steam from the Roosevelt Hot Springs
geothennal field in Beaver County, Utah. SRC is also party to a Unit Operating Agreement with
IGC to sell the steam output from its leases to IGC and have IGC manage and operate its interest
in the Roosevelt Hot Springs geothennal field.
IGC, in turn, is party to similar geothennalleases with the federal Bureau of Land Management
(BLM) that give IGC rights to the same steam field. IGC delivers and sells the steam output to
PacifiCorp under a steam delivery agreement and geothennal steam prepurchase agreement. Per
the tenus of these agreements, the agreements will either need to be assigned to PacifiCorp, or
amended to reflect PacifiCorp interest as successor-in-interest upon completion of the
restructuring.
PacifiCorp intends to work with SITLA and BLM to place the leases directly in PacifiCorp
name. PacifiCorp may also amend or restate the Unit Operating Agreement to reflect the new
consolidated structure, but the result will not be different than the method of operation today.
The results of the transaction are more fonn rather than substance.
Current Regulatory Status.
The restructuring of the corporate subsidiaries does not impact the company s regulatory
treatment of the assets of IGC and SRc. The assets of IGC and SRC consist primarily of
production plant, intercompany accounts receivable, and the three contracts described above.
Any pre-payment by the company to IGC or SRC for steam is already included in rate base.
However, since all of the outstanding capital stock of IGC was contributed to the company by
MEHC, the company will net any prepayments to IGC for steam against the IGC assets to assure
that customers are held hannless. However, since SRC was acquired by the company through a
subsequent separate transaction, the company will likely request that the acquisition cost of SRC
be included in rate base in a future rate setting proceeding. Accordingly, the current or future
treatment of these assets by the company as utility or non-utility assets is not impacted by the
restructuring of the subsidiaries and the company s treatment of these assets is similar to the
treatment the assets would have received if the restructuring did not occur.
Notice of Reorganization
August 20, 2007
Page 3 of4.
Benefits of Restructure.
Any future expansion of Blundell III will require new wells to be drilled into the steam field.
BLM has notified PacifiCorp that consolidating IGC and SRC into PacifiCorp will accelerate
this process, allowing pennits to be issued sooner and allowing PacifiCorp to accelerate any
future development of this resource for its customers.
Through this restructuring of subsidiaries, several elements of the Blundell operation are
consolidated: PacifiCorp would become the direct lessee of all the steam leases, the steam field
operator, and it already serves as the power plant operator. The site license and right of way
arrangements currently held by PacifiCorp would no longer be necessary, nor would separate
perfonnance bonds be required, since PacifiCorp would be the direct lessee. BLM has stated
that all of these efficiencies would further facilitate BLM's cooperation with required pennitting
for the expansion project.
PacifiCorp is also attempting to combine the represented workers of IGC with the represented
PacifiCorp workforce at the Blundell plant. This would eliminate the need for a separate
collective bargaining agreement for IGC, and ease the administrative burden related to
administering a separate arrangement.
Regulatory Notice or Pre-approval Requirements
The company reviewed all applicable statutes, administrative rules, merger commitments, and
affiliate interest considerations that may arguably apply to this type of transaction and concluded
that there are no express pre-approval or notice requirements that were intended to apply to this
type of transaction or the resulting property transfers from the transaction where there is no
change in beneficial ownership of the assets, and the transaction does not violate any
commitments made as a condition to MEHC's acquisition ofPacifiCorp, including those related
to affiliate transactions or ring fencing agreements. Nonetheless, as a courtesy, the company is
providing the Commission with notice of the restructuring so that the Commission and the
Commission staff have the opportunity to ask any questions that may not already be addressed
herein. Upon request, the Company would be pleased to make any additional filing or an
infonnal presentation to the Commission regarding the reorganization.
It is respectfully requested that all fonnal correspondence and staff requests regarding this matter
be addressed to one or more of the following:
Bye-mail (preferred):datareq uest(qJpacificorp. com
By regular mail:Data Request Response Center
PacifiCorp
825 NE Multnomah, Suite 2000
Portland, Oregon, 97232
By fax:[phone]
Notice of Reorganization
August 20, 2007
Page 4 of 4
Infonnal inquiries may be directed to:
Brian Dickman
Idaho Regulatory Affairs Manager
201 South Main, Suite 2300
Salt Lake City, UT 84111
Telephone: [phone]
Facsimile: [phone]
E-mail: Brian.Dickman(qJPacifiCorp.com
Justin Lee Brown
Senior Counsel
201 South Main, Suite 2300
Salt Lake City, UT 84111
Telephone: [phone]
Facsimile: [phone]
E-mail: J ustin.BrownCll),Pacifi Corp .com