20010627Order No 28755.mod.doc

BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION

IN THE MATTER OF THE APPLICATION
OF PACIFICORP FOR AN ORDER
APPROVING THE TRANSFER OF THE
SHARES OF COMMON STOCK OF
PACIFICORP FROM NA GENERAL
PARTNERSHIP TO A NEWLY FORMED
AFFILIATE, PACIFICORP HOLDINGS, INC.
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CASE NO. PAC-E-01-8

NOTICE OF APPLICATION

NOTICE OF
MODIFIED PROCEDURE

NOTICE OF
COMMENT/PROTEST DEADLINE

NOTICE OF SCHEDULING

ORDER NO. 28755

YOU ARE HEREBY NOTIFIED that on April 23, 2001, PacifiCorp filed a verified Application with the Idaho Public Utilities Commission (Commission) requesting an Order approving the transfer by PacifiCorp of all its shares of PacifiCorp common stock from NA General Partnership to a newly formed affiliate, PacifiCorp Holdings, Inc. Idaho Code § 61-328 requires Commission approval when a public utility proposes to transfer, directly or indirectly, control of property located in Idaho which is used in the generation, transmission, distribution or supply of electric power and energy to the public.
PacifiCorp proposes to implement an internal corporate restructuring whereby all of the common stock of PacifiCorp, presently held by NA General Partnership (NAGP), will be transferred to a newly formed, non-operating U.S. holding company, PacifiCorp Holdings, Inc. (PHI), in exchange for 100% of the capital stock of PHI. The PHI shares will constitute the consideration for the shares of PacifiCorp. No other consideration will be involved, so there will be no financing required for the exchange.
The corporate structure of PacifiCorp and its related entities following the restructuring which is the subject of this Application, as well as the current corporate structure, are set forth in Application Exhibits 1-A and 1-B.
Effective November 29, 1999 PacifiCorp became an indirect subsidiary of ScottishPower. The merger of PacifiCorp with ScottishPower was approved by Commission Order No. 28213 in Case No. PAC-E-99-1. To effectuate the merger, a holding company structure was adopted, whereby all the common stock of PacifiCorp came to be held by NAGP. The general partners of NAGP are ScottishPower NA 1 Limited and ScottishPower NA 2 Limited, which are direct, wholly owned subsidiaries of ScottishPower.
PacifiCorp, both prior to and since the ScottishPower merger, has been engaged in a number of non-utility activities, principally through PacifiCorp Group Holdings Company (PGHC) and its subsidiaries, all of which are wholly owned.
PHI is a newly formed, non-operating holding company incorporated under the laws of the State of Delaware. As reflected in its Application, the proposed stock exchange between NAGP and PHI will facilitate the further separation of PacifiCorp’s non-utility operations from its regulated utility operations. PacifiCorp states the Commission recognized the desirability of such “ring-fencing” in its Order approving the PacifiCorp/ScottishPower merger:
Any diversified holding and investments (e.g., non-utility business or foreign utilities) of ScottishPower and PacifiCorp shall be held in a separate company other than PacifiCorp, the entity for utility operations. Provisions shall be provided for each of these diversified activities to fully separate accounting functions and to provide full cost allocations. This condition shall not prohibit the holding of diversified businesses and investments by affiliates of PacifiCorp, such as PacifiCorp Group Holdings Company.

Case No. PAC-E-99-1, Order No. 28213, p. 14, Condition 33. In connection with the proposed internal structuring, PacifiCorp states its intention to transfer over time some or all of the non-utility businesses of PGHC and its subsidiaries to PHI, a non-regulated entity. PacifiCorp states that it is not requesting approval for the transfer of PGHC or any of its subsidiaries to PHI, as these transfers are not subject to the Commission’s jurisdiction.
Idaho Code § 61-328(3) requires the following findings by the Commission for approval of a transfer governed by the statute:
(a) That the transaction is consistent with the public interest;

(b) That the cost of and rates for supplying service will not be increased by reason of such transaction; and

(c) That the applicant for such acquisition or transfer has the bona fide intent and financial ability to operate and maintain said property in the public service.

PacifiCorp contends that the proposed stock exchange meets the standards of Idaho Code § 61-328(3).
PacifiCorp contends that the further separation of PacifiCorp’s non-utility businesses from its regulated utility operations, which will be facilitated by the proposed stock exchange, is consistent with the public interest. Specifically, PacifiCorp contends that such separation will reduce the exposure of the regulatory side of PacifiCorp’s business to any adverse results in its non-utility operations, to the benefit of PacifiCorp’s customers. The proposed restructuring, it states, will allow ScottishPower to infuse capital into and receive distributions from the non-utility businesses without involving PacifiCorp. In addition, as restructuring is implemented, PacifiCorp’s consolidated financial statements will no longer include the results of the transferred non-utility businesses, thereby presenting more clearly the results of its utility operations.
PacifiCorp affirms that the cost of and rates for supplying electric service will not be increased by reason of the proposed transaction. This, the Company states, is not a case involving the merger of two operating utilities or the sale of utility assets used for providing utility service, whereby the utility’s costs might be changed. The cost incurred to accomplish the exchange of PacifiCorp’s stock held by NAGP for the capital stock of PHI will not, PacifiCorp states, be borne by the Company’s customers, and there are no other factors which would cause PacifiCorp’s costs or rates to increase by reason of the transaction.
Finally, the Company states that PacifiCorp and ScottishPower will continue to have the bona fide intent and financial ability to operate and maintain PacifiCorp’s utility system in the public service. The proposed exchange of shares, PacifiCorp states, will have absolutely no impact on the ultimate ownership or control of PacifiCorp. PacifiCorp will continue to be an indirect subsidiary of ScottishPower, which the Commission in Case No. PAC-E-99-1 found to have the bona fide intent and financial ability to operate the PacifiCorp system in the public service. The proposed internal restructuring, the Company contends, will not affect the operations or financial conditions of PacifiCorp. PacifiCorp maintains that it will continue to own, operate and manage all of its facilities used in the generation, transmission and sale of electricity. The ownership of PacifiCorp’s common stock by PHI, a wholly owned subsidiary of NAGP, rather than NAGP itself, the Company states, will not adversely affect the ability of PacifiCorp to serve the public. After consummation of the proposed transaction, the Company contends that the Commission will continue to have the same regulatory oversight over PacifiCorp that it has currently.
In summary, PacifiCorp states that the proposed reorganization meets the standards of Idaho Code § 61-328(3) because it reduces PacifiCorp’s exposure to adverse results in non-utility affiliate operations, will not affect rates, and maintains the ultimate corporate structure previously approved by the Commission without affecting the Commission’s oversight.
PacifiCorp requests that the Commission issue an Order authorizing the transfer of all common stock of PacifiCorp from NAGP to PHI, in exchange for the capital stock of PHI. PacifiCorp submits that, but for the statutory requirement in Idaho Code § 61-328 for a hearing, the proposed reorganization is an uncomplicated matter that does not raise any significant regulatory concerns and would be appropriate for processing under Modified Procedure.
YOU ARE FURTHER NOTIFIED that the Commission after reviewing the Company’s Application finds it reasonable to issue a Notice of Application, provide an opportunity for discovery, and process the case pursuant to Modified Procedure, i.e., by written submission rather than by hearing. Reference IDAPA 31.01.01.201-204. The Commission finds that the hearing requirement of Idaho Code § 61-328 was satisfied by the hearings held in PacifiCorp’s underlying merger case, Case No. PAC-E-99-1. The Commission views the Company’s filing in this case as a compliance filing in furtherance of the merger conditions established in Order No. 28213, Merger Condition Nos. 21 to 43, especially Condition Nos. 33 and 37.
YOU ARE FURTHER NOTIFIED that discovery is available in Case No. PAC-E-01-8 pursuant to the Commission’s Rules of Procedure, IDAPA 31.01.01.221-234.
YOU ARE FURTHER NOTIFIED that the Commission will not hold a hearing in this proceeding unless it receives written protests or comments opposing the use of Modified Procedure and stating why Modified Procedure should not be used. Reference IDAPA 31.01.01.203.
YOU ARE FURTHER NOTIFIED that the deadline for filing written comments or protests with respect to the Application and the Commission’s use of Modified Procedure in Case No. PAC-E-01-8 is Wednesday, July 25, 2001 for Commission Staff and Friday, July 27, 2001 for the public. Persons desiring a hearing must specifically request a hearing in their written protest or comments.
YOU ARE FURTHER NOTIFIED that pursuant to the agreement of the parties and the Commission the following scheduling for filing Company reply comments has been adopted:

Monday, July 30, 2001 Prefile deadline—PacifiCorp Reply Comments
The parties should coordinate discovery requests and responses so they are able to comply with the established prefile deadlines.
YOU ARE FURTHER NOTIFIED that if no written comments or protests are received within the deadline, the Commission will consider the matter on its merits and enter its Order without a formal hearing. If comments or protests are filed within the deadline, the Commission will consider them and in its discretion may set the matter for hearing or may decide the matter and issue its Order on the basis of the written positions before it. Reference IDAPA 31.01.01.204.
YOU ARE FURTHER NOTIFIED that the Company’s Application together with filings of records can be reviewed at the Commission’s office in Boise, Idaho and at the Company’s Idaho offices during regular business hours. Written comments concerning this Application should be mailed to the Commission and the Company at the addresses reflected below:

COMMISSION SECRETARY
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074

Street Address for Express Mail:

472 W. WASHINGTON ST
BOISE, ID 83702-5983 BRUCE N. WILLIAMS, TREASURER
PACIFICORP
825 NE MULTNOMAH, SUITE 1900
PORTLAND, OR 97232

MARY S. HOBSON
STOEL RIVES LLP
101 S. CAPITOL BLVD., SUITE 1900
BOISE, ID 83702-5958

JOHN M. ERIKSSON
STOEL RIVES LLP
ONE UTAH CENTER
201 S. MAIN STREET, SUITE 1100
SALT LAKE CITY, UT 84111-4904

O R D E R
In consideration of the foregoing and as more particularly described above, IT IS HEREBY ORDERED and the Commission does hereby adopt the foregoing procedure and schedule in Case No. PAC-E-01-8.
DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho, this
day of June 2001.

PAUL KJELLANDER, PRESIDENT

MARSHA H. SMITH, COMMISSIONER

DENNIS S. HANSEN, COMMISSIONER

ATTEST:

Jean D. Jewell
Commission Secretary

bls/O:pace018_sw

NOTICE OF APPLICATION
NOTICE OF MODIFIED PROCEDURE
NOTICE OF COMMENT/PROTEST DEADLINE
NOTICE OF SCHEDULING
ORDER NO. 28755 1

Office of the Secretary
Service Date
June 27, 2001