20050817Revised Gale direct, exhibits.pdf

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BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE JOINT
APPLICATION OF MIDAMERICAN
ENERGY HOLDINGSCOMP ANY AND
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PACIFICORP DBA UTAH POWER &
LIGHT COMPANY FOR AN ORDER
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AUTHORIZING PROPOSED
TRANSACTION
CASE NO. P AC-O5-08
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) Direct Testim9ny of Brent E. Gale
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P A CIFI CO RP
CASE NO. PAC-05-
J Diy 2005
Introduction
Please state your name and business address.
My name is Brent E. Gale. My business address is 666 Grand Avenue, Suite
2600, Des Moines, Iowa 50309.
By whom are you employed and in what position?
lam Senior Vice President, Legislation & Regulation, for MidAmerican Energy
Company ("MEC"), a subsidiary and business platform of MidAmerican Energy
Holdings Company ("MEHC"
Please describe the responsibilities of your current position.
My primary responsibilities for MEC include U.S. regulatory and legislative
strategic planning, state legislative relations, federal and state regulatory relations
rates, regulated cost of service, rate design, utility acquisitions, representation of
MEC's interest in North America regarding electric and gas industry
restructuring, and providing advice and assistance to MEHC regarding federal
legislative policy.
Please describe your background.
I received a B.A. degree from Drake University in 1972 and a J.D. degree, also
from Drake, in 1976. After graduation Ijoined one of MEC's predecessor
companies, holding positions of attorney, general counsel and vice president-
general counsel. After the formation of MEC, I held the positions of vice
president-regulatory law & analysis and vice president-legislation & regulation.
I am licensed to practice law in all state courts of Iowa, before the federal
court for the Southern District of lliinois and before the District of Columbia
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Circuit. I am a member of the Iowa State Bar Association, the EEl Legal
Committee, the EEl Energy Delivery and Public Policy Executive Advisory
Committee, the boards of the illinois Energy Association, the illinois Institute for
Regulatory Policy Studies, and the New Mexico State Center for Public Utilities.
During my career, I have spoken before numerous consumer, industry, and
national and international regulatory conferences, most recently upon the topics of
renewable energy, alternative regulation, electric restructuring, and generation
portfolio diversity.
I have also participated extensively in the negotiation and drafting of
electric and gas legislation in several states and at the federal level. I have
previously testified before the Iowa Utilities Board, illinois Commerce
Commission and in the courts of Iowa and illinois.
Summary of Testimony
What is the purpose of your direct testimony in this proceeding?
The purpose of my testimony is as follows:
to provide evidence that the transaction will be in the public interest and to
sponsor some of the commitments that are being offered to protect the
interests of consumers;
to identify the similarities between PacifiCorp and MEC;
to discuss the experience of MEC as evidence of how a regulated utility can
be expected to operate as a subsidiary of MEHC; and
to discuss the various shareholder, state and federal approvals required for
completion of the transaction.
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Please summarize your testimony.
My testimony provides evidence that the transaction is in the public interest and
will not harm the ability of PacifiCorp to provide adequate and reliable service to
its customers in all states that it is privileged to serve. This evidence includes the
pro-active offer by MEHC and PacifiCorp to adopt a uniform set of transaction
commitments based upon the commitments in all states from PacifiCorp s prior
transaction. My testimony also includes a detailed discussion of MEC'
experience as an MEHC subsidiary and the similarities between MEC and
PacifiCorp.
The Transaction is in the Public Interest
You have said that MERC's acquisition of PacifiCorp will be in the public
interest and that commitments will be undertaken to ensure that customers
are protected. What is the basis for your statement?
My reasoning is based upon the following:
As part of my testimony, MEHC and PacifiCorp will adopt a uniform set
of commitments that are based upon the commitments undertaken by
PacifiCorp as a part of the prior merger transaction; these uniform
commitments will be extended to all six states, not just the states that
requested a particular commitment in the previous PacifiCorp transaction.
Also as part of my testimony, in recognition of the differences among the
states, MEHC and PacifiCorp will offer to continue several state-specific
commitments undertaken by PacifiCorp in the previous transaction.
As part ofMEHC witness Mr. Abel's testimony, MEHC and PacifiCorp
will offer numerous new commitments involving generation options
transmission investment, clean air investment, energy efficiency, customer
service and other important matters.
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PacifiCorp will become a separate business platform under MERC, with
its own business plan, its own management, its own state policies, and the
responsibility for making decisions that achieve the objectives identified
in the testimony ofMERC witness Mr. Abel (i., customer satisfaction
reliable service, employee safety, environmental stewardship, and
regulatory/legislative credibility).
The many similarities between MEC and PacifiCorp will facilitate an easy
transition ofPacifiCorp as a separate subsidiary ofMERC.
MEC's operations, as a subsidiary ofMERC, provide demonstrable
evidence that PacifiCorp will have the ability to continue its emphasis on
key utility performance areas such as: customer service; safety; integrated
resource planning; a balanced mix of generating resources, including
renewable generation; use of energy efficiency and demand-side
management ("DSM"); investment in environmental emission control
technology; and collaborative processes.
MERC and PacifiCorp Commitments
Please explain the uniform set of commitments you referenced.
MERC and PacifiCorp have reviewed the commitments required by the six states
in the Scottish Power pIc ("ScottishPower ) transaction. We have also met with
numerous groups that may have an interest in this transaction and asked them to
identify the risks and concerns that they have at this time.
Exhibit No.2 responds to the risks and concerns addressed in the previous
PacifiCorp transaction and to many of the risks and concerns that have been
raised in the meetings with interested groups. This Exhibit identifies MERC'
and PacifiCorp ' s commitments to address these risks and concerns. The new
commitments sponsored by MERC witness Mr. Abel address other concerns
expressed in the meetings with interested groups. MERC and PacifiCorp propose
that the commitments in this Exhibit and those in MERC witness Mr. Abel'
Exhibit No., supersede prior commitments and apply upon the close of the
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transaction.
Section I of Exhibit No.2 identifies commitments that address customer
service, regulatory oversight, financial integrity, revenue requirements impact, the
environment, communities, employees and planning. The commitments in
Section I will be applied uniformly to all six states. We are applying these
commitments uniformly to simplify administration for everyone involved,
including PacifiCorp, and to ensure equitable treatment of customers in all six
states. The pro-active adoption of these commitments by MERC is important
evidence that there will be no harm to the public interest from the transaction.
Moreover, MEHCbelieves the uniform application of the commitments in
Exhibit No.2 to all states also provides evidence of benefits from the transaction.
MEHC understands that no single state was previously provided all of these
commitments. Thus, with the uniform application of these commitments in all
states, each state will be receiving commitments that previously were not
applicable to it. In other words, each state is receiving new benefits and
protections for customers and the public.
While I am sponsoring all of the commitments in Exhibit No., MEHC
witnesses Mr. Goodman and Mr. Specketer in their testimony discuss some of the
regulatory oversight, revenue requirements and the financial commitments in
greater detail. The commitments that they discuss are identified in my Exhibit
No.
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Where do you address the state-specific commitments by MERC and
PacifiCorp related to the prior transaction?
These state-specific commitments are in Section II of Exhibit No.2. These
commitments reflect MERC's understanding of commitments previously made by
PacifiCorp that reflect unique or state-specific issues.
What is the purpose of the provisions in Section III of that Exhibit?
These are administrative provisions that previously applied in one or more states.
We believe these should be applied uniformly in all states to simplify
administration and to ensure equitable application of the commitments in all
, jurisdictions.
Similarities between PacifiCorp and MEC
Why do you believe the similarities between PacifiCorp and MEC provide
evidence that the proposed transaction will be in the public interest and not
harm the interests of consumers?
There are several reasons. First, the existence of these similarities means that
MEHC has experience with the types of issues and risks that confront PacifiCorp.
Second, the existence of the similarities means that MEC and PacifiCorp have
experiences and advice that can be shared to enable them to better pursue the
objectives of customer satisfaction, reliable service, employee safety,
environmental stewardship and regulatoryllegislative credibility. Third, the
similarities suggest compatible corporate cultures that should facilitate
PacifiCorp s transition to a business platform of MERC, Fourth, in meetings with
interested parties prior to the filing of this testimony, one of the most frequently
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offered comments was to the effect that it was one thing to "talk the talk" but
most were interested in whether PacifiCorp, under MEHC, would "walk the
walk." MEC's operation as a business platform under MEHC provides
demonstrable evidence of how that company has "walked the walk.
What are some of the similarities between PacifiCorp and MEC that you
deem significant?
The most significant of the similarities are as follows:
The utilities operate in contiguous states.
Wholesale transactions, interconnections and positive relationships with
non-jurisdictional (public power and cooperative) utilities are important to
the conduct and financial health of the business.
The presence of the non-jurisdictional utilities creates unique challenges
and opportunities for transmission planning, coordination and operation.
A demonstrable focus upon customer satisfaction is indicated by
independent survey results.
A willingness to utilize renewable energy technologies has been
demonstrated where the utilization is cost-effective for customers and
there is an opportunity for a fair return to shareholders.
A willingness to make significant investments in infrastructure
improvements has been demonstrated where the investments are cost-
effective for customers and there is an opportunity for a fair return to
shareholders.
Investments in DSM and energy efficiency programs are made to the full
extent determined to be cost-effective by applicable state standards.
Collaborative processes are employed to develop environmental, DSM
and energy efficiency programs.
Low-sulfur, Western-basin coals are the only coals used for generation
and provide more than 80% of the energy serving bundled retail
customers.
Coal shipping options are the Burlington Northern and Union Pacific
railroads.
The delivered cost of coal is among the lowest in the United States.
Wind, natural gas and hydro are included in the regulated generation
portfolio, with the percentage of wind capacity projected to comprise a
significant portion of the portfolio by 2010, if cost-effective.
There is a demonstrable commitment to employee safety.
There is a need to plan for and deal with adverse weather conditions
impacting the reliability of the delivery systems to the extent economical
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REVISED 8/17/05
and practicable; such conditions include ice, floods, tornados, storms and
snow.
Regulated delivery and electric supply services are provided in multiple
state jurisdictions, with at least one state having competitive retail electric
supply access.
The economy of the service area is significantly tied to the land
(agriculture, forestry, and mining).
On the whole, the area served has a comparatively low-density population
except for a few major population centers.
The maps attached to Exhibit No.3 provide some additional information
regarding the similarities.
MidAmerican Energy Company
Please provide some historical background on MEC.
MEC and its predecessor corporations (~., Iowa Power Inc., Iowa-Illinois Gas
and Electric Company, Iowa Public Service Company and their respective
predecessors) have been providing electric service in Iowa, Illinois and South
Dakota for approximately 100 years. MEC is the product of a merger between
Midwest Power Systems Inc. and Iowa-Illinois Gas and Electric Company in
1995. Midwest Power Systems Inc., in turn, was the result of a prior merger
between Iowa Power Inc. and Iowa Public Service Company1 in 1992. In 1999
MEC was acquired by CalEnergy Company Inc. (subsequently known as
MidAmerican Energy Holdings Company" or "MEHC"), and in 2000, MEHC
and an investor group comprised of Berkshire Hathaway Inc, Walter Scott, Jr. (a
director ofMEHC), David Sokol (Chairman and Chief Executive Officer of
MEHC), and
1 The utilities ' parent holding companies (non-registered , exempt holding companies),
Iowa Resources Inc. and Midwest Energy Company, were previously merged in 1990 creating a
new holding company (also a non-registered, exempt holding company) called Midwest
Resources Inc.
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Greg Abel (President and Chief Operating Officer of MEHC), closed on a
definitive agreement and plan of merger whereby the investor group, together
with certain of Mr. Scott's family members and family trusts and corporations
acquired all of the outstanding common stock of MEHC.
Where and how does MEC provide electric service?
MEC provides electric service in Iowa, illinois and South Dakota, and is the
largest utility in Iowa. It provides service to more than 690,000 electric
customers and more than 670,000 natural gas customers in a 10,600 square-mile
area from Sioux Falls, South Dakota to the Quad Cities area of Iowa and illinois.
The largest communities served by MidAmerican are Des Moines, Cedar Rapids
Sioux City, Waterloo, Iowa City and Council Bluffs, Iowa; the Quad Cities area
of Iowa and illinois; and Sioux Falls, South Dakota. I have provided a map of the
areas served by MEC in my Exhibit No.
After MEC's 360.5 MW wind project is completed in 2005 , and its 790
MW Council Bluffs Energy Center Unit No.4 is also completed in 2007, the
company will meet the needs of its electric customers with more than 6,100
megawatts of generating capability: approximately 59 percent fueled by coal; 26
percent by natural gas and oil; 8 percent by wind, hydroelectric and biomass; and
7 percent by nuclear. MEC has majority ownership in four of the five jointly-
owned coal-fueled generating stations in Iowa, and a forty percent ownership in
the fifth. Exhibit No.4 shows the locations of MEC's base-load generating
facilities. In Exhibit No.5), I have provided some basic facts and figures related
to MEC's performance.
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Customer Service
Would it be reasonable for the Commission to expect no diminution in
PacifiCorp s performance in the area of customer service as a consequence of
the transaction?
Based on MEC's experience, the transaction will not diminish PacifiCorp
performance in this area. MEC has a strong track record of success in satisfying
its customers. In both 2004 and 2005, MEC's electric business customers ranked
MEC first in the Midwest for overall customer satisfaction, according to the J.
Power and Associates study. In 2004, the J. D. Power and Associates residential
electric study results placed MEC in a tie for first place in the Midwest on overall
customer satisfaction, and the residential gas study placed MEC in a tie for second
place in the Midwest on overall customer satisfaction.
The following performance factors were included in the respective
customer satisfaction studies: Communications with Customers (Business Study);
Power Quality and Reliability (Business and Residential Studies); Billing and
Payment (Business and Residential Studies); Customer Service (Business and
Residential Studies); Company Image (Business and Residential Studies); Price
(Business Study); and Price and Value (Residential Study).
Please describe MEC's relationship with its major customer stakeholders.
Our largest 800 customers are assigned energy consultants who are capable of
assisting customers with unique needs such as energy efficiency, power quality,
gas transportation and metering. MEC's interruptible credit program, which
offers customers an opportunity to achieve price reductions, has been popular
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among larger customers, with 197 MW of load control currently enrolled. MEC
also works constructively with its largest customers to ensure the rates they pay
are based on their costs of service and appropriately reflect any benefits that the
customers bring to the retail system
~,
interruptibility, co-generation). In
2004, our large commercial and industrial customers rated us second in the nation
on overall customer satisfaction in the TQS Research Inc. study.
Energy Efficiency and DSM
Please discuss MEC's experience with energy efficiency programs and DSM
programs.
MEC and its predecessors have offered cost-effective, energy efficiency and DSM
programs in Iowa for more than fifteen (15) years. MEC is represented on the
boards of the Consortium for Energy Efficiency and the Peak Load Management
Alliance and is a member of the Midwest Energy Efficiency Alliance. Similar to
PacifiCorp, MEC has received numerous state and federal awards for its
programs. MEC estimates that customer demand has been reduced by some 220
MW through DSM programs and some 180 MW from energy efficiency
programs. Further, customer annual energy requirements have been reduced by
some 500 000 MWh as a result of the DSM and energy efficiency programs.
These impacts are taken into account in MEC's resource planning analyses.
Does MEC have state approved energy efficiency plans?
Yes. MEC's plans are reviewed and approved by Iowa regulators, usually every
three to five years. Through the review and approval process, the Iowa regulators
determine which programs proposed by MEC meet the tests for cost-
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effectiveness, as discussed below. MEC's actual plan expenditures have
exceeded budget for several years due to the success of and demand for the
programs. For example, in 2004 MEC's actual plan expenditures compared to
budgeted plan expenditures were $35.1 million (actual) and $31.3 million
(budgeted), respectively. In 2003, MEC's actual versus budgeted expenditures
were $31.2 million versus $20.1 million, respectively. A comparison, on a
program-by-program basis, for these same years is provided in my Exhibit No.
MEC utilizes a collaborative process to determine which energy efficiency
and DSM programs it will offer for consideration by regulators. The company
most recent collaborative process involved roughly a dozen different parties.
order to be included in MEC's plan, programs must pass a feasibility screening
process that incorporates a societal test. The societal test is an economic test that
compares the present value of the costs and the benefits over the useful life of an
energy efficiency program or DSM program from a societal perspective.
Exceptions to the requirement to pass the cost -benefit tests are provided by rule
for low-income and tree-planting programs. MEC's plans have included all
programs that were identified as feasible and cost effective.
You mentioned MEC's Iowa programs. What about Illinois and South
Dakota ?
These states previously have not been as interested as Iowa in energy efficiency
and DSM programs being offered by regulated utilities. However, that may
change in illinois as regulators, at the Governor s request, are considering
whether to allow such programs. MEC is an active participant in the illinois
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process and is encouraging the state to allow it to extend its Iowa programs to
illinois consumers.
Environmental Actions
What has been the experience of MERC and MEC regarding environmental
stewardship?
MEHC is committed to responsible stewardship of the environment and, in 2000,
adopted a policy of "Environmental RESPECT" that guides its corporate
commitment to the environment. MEHC is a world leader in geothermal energy
development and believes that good environmental management is a good
business practice. Once again this is revealed in MEC's performance.
Does MEC have a plan to address future air emission reduction
requirements?
Yes. MEC in 2001 helped the state of Iowa develop and adopt an energy and
environmental policy reflected in House File 577. Pursuant to that law, regulated
utilities such as MEC develop, through a collaborative process, a multi-year plan
and budget for managing regulated emissions from their coal-fueled facilities in a
cost-effective manner. Mandatory participants in the review and approval process
for that plan and budget are the Iowa Utilities Board, the Iowa Office of
Consumer Advocate and the Iowa Department of Natural Resources. To be
approved, the plan and budget must: (1) meet applicable state environmental
requirements; (2) be expected to achieve cost-effective compliance with
applicable state environmental requirements and federal ambient air quality
standards; and (3) reasonably balance costs, environmental requirements
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economic development potential, and reliability of the electric generation and
transmission systems. The state agencies concerned with environmental matters
and utility rates are involved in the collaborative process with the result that the
reasonableness and prudence of the environmental plan is determined prior to its
implementation.
Does MEC have an approved environmental plan?
Yes. MEC filed its first multi-year environmental plan and budget with the Iowa
Utilities Board and the Iowa Department of Natural Resources in April 2002.
That plan addressed MEC's projected air emission reductions considering
..
legislative and regulatory proposals at the time, and described a coordinated long-
range plan to achieve those air emissions reductions. The plan proposed specific
actions to be taken at each MEC coal-fueled facility and related costs and timing
for each action through the year 2010. The Iowa Utilities Board approved the
plan on July 17 2003, covering the period April 1 , 2002 to April 1 , 2004, and
adopted a process to review the plan every two years. MEC filed its most recent
plan on April 1, 2004, and that plan was approved by the Iowa Utilities Board on
October 4, 2004. This plan covers the period from April 1 , 2004 through
December 31,2006.
Did the plan approved by the Iowa Utilities Board include the addition of
emissions controls?
Yes. MEC's approved initial plan (2002 - 2004) called for installing six neural
networks at Council Bluffs Energy Center Unit No.3, G,eorge Neal Energy Center
Unit Nos. 1-, and Riverside Generating Station Unit No.5 during the period
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ending March 31 , 2004. All six neural networks were installed during the 2002-
2004 plan period. The current approved plan (2004-2006) continues the addition
of NOx controls with the installation of low NOx burners and overfire air at
Council Bluffs Energy Center Unit Nos. 1-3, George Neal Energy Center Unit
Nos. 1-4, and Louisa Generating Station. Low NOx burners have been installed
so far at the Neal 3 and Louisa units, with work continuing on the remaining units
through 2007.
Was MEC required to make these reductions in NOx emissions?
No. MEC has voluntarily moved forward to reduce the NOx emissions from its
facilities. Doing so voluntarily, in advance of required reductions, affords MEC
the advantages of (1) being able to appropriately plan the installation of
equipment during the respective units' normal outage time and duration; (2)
achieving cost savings by aggregating the projects into a single contract to take
advantage of volume discounts; and (3) achieving NOx reductions earlier
allowing impacted states to begin realizing benefits sooner than a just-in-time
installation would provide.
Will these voluntary NOx reductions make a significant difference in the
MEC NOx emissions?
Yes. Prior to this voluntary initiative, the ,MEC coal-fueled facilities had an
average rate of N Ox emissions of 0.41 lbs/mmbtu. By the latter part of 2007
with the completion of the low NOx burner installations, MEC is projected to be
at an average NOx emissions rate from the coal-fired facilities of 0.21Ibs/mmbtu.
This is a 49 percent reduction in NOx emissions that will benefit all impacted
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states.
In addition to the NOx controls, do you anticipate any near-term reductions
in SO2 and mercury?
Yes. MEC has analyzed the Clean Air Interstate and Clean Air Mercury rules as
promulgated by EPA, and MEC will seek approval in July 2005 for an
environmental plan that includes the installation of a scrubber and baghouse at
Louisa Generating Station. In addition, in 2003 MEC was the first company to
commit to the installation of an activated carbon injection system for the control
of emissions at the new Council Bluffs Energy Center Unit No., which is
scheduled to come on-line in June 2007.
Do you anticipate seeking approval for additional emission controls as a part
of the environmental plan process?
Yes. Although compliance with the reduction requirements can be achieved by
installing controls or meeting the emission reduction obligations by obtaining
sufficient allowances to cover the annual emissions or some combination of the
two compliance mechanisms, I anticipate that MEC as a part of the environmental
planning process will seek approval for significant investments in controls
between now and 2018.
Is equivalent environmental planning required of MEC in other states where
it provides service?
There are no equivalent requirements in MEC's other states, but all impacted
states benefit from MEC's Iowa-approved environment~l activities.
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Renewable Generation
How do you expect the transaction to affect PacifiCorp s commitment to
renewable generation resources?
I expect that PacifiCorp s commitment in this area will be undiminished and
perhaps even strengthened by MEC's experience with owning and operating wind
energy facilities and MEHC's experience owning and operating geothermal
facilities. MEHC and MEC are leaders in the ownership of renewable resources
particularly geothermal (MEHC) and wind in a regulated portfolio (MEC).
How much geothermal generation does MER C own?
Worldwide, MERC has 14 geothermal facilities in California and the Philippines.
It also owns and operates an innovative hydro-electric and irrigation project in the
Philippines and is evaluating the development of one of the largest geothermal
projects (215 MW) in the world in California.
What is MEC's experience with wind and renewable resources?
MEC is in the midst of constructing a 360.5 MW wind project, one of the largest
land-based wind projects in the world. This project was undertaken without a
state mandate. The project will occupy two sites in Iowa to obtain wind resource
diversity. In 2004, MEC placed 160.5 MW of the project into service, and
another 200 MW will be placed into service by the end of 2005. The sites were
developed in coordination with two developers, enXco, Inc. and Clipper
Windpower Development Company, Inc. MEC owns and operates the project as
part of its regulated portfolio. The all-in cost of the wind energy, with the federal
production tax credit, is projected to be about three (3) cents per kWh over the life
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of the facilities.
In addition MEC purchases or owns another 127.6 MW of capacity from
renewable energy sources, including: wind (112.5 MW purchased capacity),
hydro (3.6 MW of owned capacity), and biomass (11.5 MW of purchased
capacity). MEC and another utility are also owners of Ottumwa Generating
Station where supplementing Powder River Basin coal with switch grass is being
tested.
Once MEC's wind farm construction is completed, and after completion
of its new Council Bluffs Energy Center Unit No., renewable energy in MEC'
generation portfolio will equal approximately 8 percent of nameplate capacity and
5 percent of energy production, assuming a 34 percent annual average capacity
factor at the MEC-ownedwind project.
Resource Selection
Based on MEC's experience, how can the transaction be expected to affect
PacifiCorp s resource planning process?
MEHC expects its energy business platforms to follow the planning method
preferred in the states where it operates. Obviously, there are limitations to such
an approach. For instance, if the preferred resource planning methods, state-to-
state, become so incompatible as to make efficient resource planning infeasible,
some effort would need to be undertaken to harmonize the various methodologies.
I have some familiarity with PacifiCorp s resource planning process, and I
am aware that it has received acclaim for its level of st*eholder input.
PacifiCorp s process is recognized as a good, sound approach to resource
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planning. MEHC supports PacifiCorp s continued use of this process for its state
jurisdictions.
Do MERC and MEC prefer one variety of generation resource above others?
No. In recent years, MEHC business platforms have invested in a broad range of
generation technologies, including coal, gas, geothermal and wind. As explained
below, MEC is completing its investments in gas combined-cycle generation
super-critical western-coal-fired generation and wind generation, all pursuant to a
state policy encouraging a diverse portfolio of generation. MEC also utilizes the
wholesale market when prudent and cost-effective, as demonstrated by its multi-
year power purchase agreements ~., a 250 MW purchase from the Nebraska
Public Power District).
Does MEC utilize integrated resource planning?
Yes, in,lowa. As I have testified, energy efficiency and DSM programs are
reviewed and approved by the Iowa Utilities Board. All programs determined to
be cost-effective must be implemented before supply options are considered. The
supply options are reviewed in separate siting and rate-making principles
proceedings before commencement of construction. Integrated planning occurs in
the sense that supply options are only considered after taking into account the
effects of the utility s energy efficiency and DSM programs. I recognize
however, that there are varying degrees of integration used in different
jurisdictions within the United States, and the meaning of "integrated resource
planning" may vary significantly.
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Generation and Transmission Operations
Please provide some insight into MERC's philosophy regarding operation of
a utility s generation facilities.
Again, I will point to our experience at MEC. MEC has decades of experience
operating traditional generation facilities and owning such facilities jointly with
other utilities, including investor-owned, municipal and cooperative utilities.
Refer for example to Exhibit No.7. MEC has some of the lowest cost coal-fueled
plants in the nation. Power magazine, a publication for the electric generation
industry, recently named MEC's Iowa-based electric plants among the best in the
nation. Power annually ranks the country s top plants, and MEC had four among
the top 22 coal-fueled plants in the category of lowest-cost producers.
MEC's experience in cooperative relationships with other utilities, public
and private, and in the safe and efficient operation of base-load generating,plants
matches well with that of PacifiCorp. Again, our MEC experience attests to the
fact that MEHC's ownership of PacifiCorp will result in a continuation of the
good practices for which PacifiCorp is known.
Ras MEC invested in nuclear generation?
By virtue of a predecessor corporation s investment, MEC has a 25 percent
ownership interest in both units at Quad Cities Nuclear Power Station, for a total
of 437 MW of accredited capacity. The units are operated by the owner of the
remaining 75 percent of the units, Exelon Generation Company, LLC ("Exelon
In 2004, Exelon obtained license renewals from the Nw;lear Regulatory
Commission, permitting operation of both Quad Cities units through December
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2032. These two units represent MEC's only ownership interest in nuclear
generation.
Will PacifiCorp be exposed to any additional risk as a consequence of MEC'
ownership of nuclear facilities and nuclear decommissioning obligation?
No. MEC is ring-fenced. PacifiCorp will be ring-fenced as well.
PacifiCorp will need to construct transmission infrastructure as well
generation infrastructure. What does MERC's track record suggest with
respect to such endeavors?
MEHC has recent experience with the construction of transmission facilities
through its MEC operations. This experience demonstrates a commitment to
working well with regulators and the public in siting and locating vital
transmission assets. I believe this to be consistent with PacifiCorp s approach.
Please relate MEC's recent experience with transmission.
MEChas decades of experience operating its transmission system. Again, MEC
jointly owns many such facilities with other utilities, both investor-owned and
publicly-owned. Most recently, MEC obtained franchise authority in December
2004 to construct a 122-mile, 345 kV transmission line to integrate its new
Council Bluffs Energy Center Unit No.4 with the grid. .The new generating plant
will be in service in 2007; the transmission line is due to be in service in 2006.
The capital investment in the interconnection facilities and the system additions
totals approximately $170 million. The new line itself represents approximately
$128 million of investment. MEC was required to use eminent domain authority
with respect to only one landowner, having reached voluntary accommodations
Gale, Di - 21
PacifiCorp
for over 430 easements required along the 122-mile route.
Regional Transmission Memberships
The Federal Energy Regulatory Commission continues to promote oversight
of utility transmission by an independent entity. What has MERC'
approach been with respect to this subject?
MEHC's approach has been similar to that of PacifiCorp, in that both companies
efforts have focused upon trying to design solutions that accommodate private
and public utilities while balancing costs and benefits.
What has been MEC's experience?
MEC's approach has been one of caution. MEC has determined that existing
RTO membership options~, MISO and PJM) have not been in the best
interests of its customers due to the costs of such membership and the penalties
for ending membership. Given the existence of numerous publicly-owned
utilities in Iowa and states to the north and west of Iowa, MEC is particularly
concerned that unless those entities are also participants, the potential benefits
will be limited.
MEC previously sought to address this concern by joining the effort to
create TRANS Link, an independent transmission company that would encompass
both investor-owned and publicly-owned entities. Although the TRANS Link
proposal addressed many of the difficult issues surrounding regional operation
and pricing of transmission, the Minnesota Public Service Commission and the
Iowa Utilities Board in 2003 expressed concerns regarding costs and benefits.
The proposal was subsequently tabled. Since that time, MEC has continued to
Gale, Di - 22
Pacifi Corp
Regulatory Experience
monitor potential costs and benefits of other alternatives. I will outline the current
alternative that MEC is pursuing in my testimony regarding regulatory approvals
for this transaction.
Based on MEC's experience, what will MERC ownership mean for
PaciflCorp s regulatory relationships?
As reflected in MEC's relationships, MEHC seeks positive, constructive working
relationships with the regulators who monitor its utility operations. MEHC will
be committed to the same kind of relationships with PacifiCorp s regulators.
How is MEC's relationship with its state regulators?
MEC understands the role of the public utility commission and has decades of
successful experience working within the regulatory framework. MEC takes
seriously the need to maintain its regulatory credibility. For example, in Iowa, the
company has worked very cooperatively and successfully within the regulatory
process. Through settlements in the previous five years, MEC has sited and
received rate-making principles orders in advance of construction for roughly $2
billion in energy infrastructure and environmental investment.
What is MEC's experience with regulatory treatmen~ of affiliates?
In Iowa, MEC makes an annual filing that reflects its affiliate transactions in the
prior year. This filing includes a copy of the written agreements that govern its
affiliate transactions. In illinois, MEC is required to obtain prior approval of
affiliate transactions unless they fall within the "ordinary course of business" or
other enumerated exemptions. For several years, MEC has had an Intercompany
Gale, Di - 23
, PacifiCorp
Administrative Services Agreement ("IASA") that governs the provision of
routine services between MEC and its affiliates. This IASA has been reviewed
and approved by Iowa and illinois regulators. MEHC witness Specketer provides
a copy of the IASA with his testimony and explains its operation.
On the whole, our experience with affiliate transactions has been
uncomplicated. I would note, however, that we have a pending proceeding in
illinois wherein the illinois Commerce Commission staff examined MEHC'
transfer of two new gas turbines to MEC in 2001 for the Greater Des Moines
Energy Center ("GDMEC"). MEC did not seek prior approval of the transaction
because MEC believed the law and regulations exempted the transaction from the
need for approval. A hearing examiner for the illinois Commerce Commission
determined the exemption was not available. In an effort to resolve the matter
without further litigation, MEC has proposed to Iowa and illinois regulators that
the portion of GDMEC that would have been allocated to illinois be allocated to
Iowa. The Iowa Office of Consumer Advocate supports this approach, and this
resolution is proceeding through the regulatory process.
Operations in States with Retail Access
PacifiCorp s service territory includes both a state that operates on a model
of competitive electric supply ("retail access ) and states that operate on a
model of traditional regulated electric service. Based on MEC's experience
how will the transaction affect PacifiCorp s view of this kind of mixed service
area?
Based on MEC's experience, the transaction should have no impact in that regard
Gale, Di - 24
PacifiCorp
since MEC also has experience serving in states with and without retail access.
MEHC and MECsupport the right of a state to determine whether or not to
implement retail access.
illinois has offered electric retail choice since 1999, following enactment
of a law in 1997. Thus, MEC operates in two states (Iowa and South Dakota) that
do not have electric retail access and one state (lliinois) that does. This makes
MEC's experience similar to PacifiCorp s in that both utilities need to be able to
conduct their utility businesses in states with varying positions regarding retail
choice.
Ras MEC been supportive of retail access for electric customers?
MEC has been supportive of retail access in illinois and participated in drafting
the 1997 restructuring legislation in that state. Since the law s passage, MEC has
supported several implementation measures designed to promote effective
competition in illinois.
In Iowa, MEC took a leadership role in advancing retail access legislation
but Iowa elected not to pursue retail access. MEC's response was to work with
Iowa s Governor, lawmakers, regulators and consumers to develop an energy and
environmental policy for the state, using the regulatory model Iowa prefers.
Again, MEHC expects its energy business platforms to operate on either model
regulated or competitive, depending on the state s preference.
Gale, Di - 25
Pacifi Corp
Serving Communities
What will MERC's ownership of PacifiCorp mean for the communities that
Pacifi Corp serves?
Based on MEC's experience, they can expect a continued focus on good service
and good corporate citizenship.
What efforts does MEC's undertake in the area of community leadership?
A key effort is MEC's Community Contact Program, which relies on the
volunteer efforts of some 170 MEC employees who represent MEC in
approximately 225 communities in Iowa, illinois and South Dakota. These
, employees advise MEC of community needs and represent MEC in the
community. Each of the 170 employees has a small discretionary budget from
which grants are awarded in their communities. In addition, these employees
participate in community meetings (~., city council) and relay community needs
that MECmay be able to satisfy
~,
moving poles, digging holes, providing in-
kind contributions to volunteer fire departments, sponsoring floats in community
parades, sponsoring local events, etc.
).
These 170 employees also provide MEC
support for community activities such as local environmental clean-up efforts and
tree planting projects on Earth Day and Arbor Day. They also serve as channels
for communicating any community complaints about MEC's quality of service.
As a result, the city councils in these 225 communities know who to contact
regarding concerns with MEC.
MEC is also actively engaged in the annual Unit~d Way campaigns of the
twenty communities it serves that have such campaigns.MEC actively
Gale, Di - 26
Pacifi Corp
encourages its employees to contribute to such campaigns and matches employee
contributions dollar for dollar, up to a maximum value of $436 000. MEC also
promotes employee involvement in local Rotary, Chamber, Kiwanis and
economic development organizations.
In addition to MEHC's corporate gift-matching program, MEHC
shareholders fund an innovative program called Global Days of Service. This
program encourages employees to volunteer time for charitable and educational
organizations through a shareholder contribution to the organizations based upon
employee hours volunteered. Employees simply keep track of the number of
hours spent in volunteer work for charitable groups (501 (c)(3) IRS designation)
and for educational institutions worldwide. Employees submit a form listing the
number of hours (over eight) they have volunteered. At the end of the program
year, the shareholder contribution amount is divided among qualifying
organizations based upon the volunteer hours worked.
Does MEC support economic development in the communities it serves?
Yes. Refer to the letters in Exhibit No.7 for examples of confirmation.
Delivery of Transaction Benefits
Please describe how you envision the delivery of the benefits of the
transaction to PacifiCorp customers.
MEHC expects the benefits of the transaction to be delivered to all customers in
all jurisdictions via rate case proceedings and using PacifiCorp s recently
established multi-state allocation protocol when appropriate.
Gale, Di - 27
PacifiCorp
What impact would the transaction have on the degree of regulatory
oversight this Commission has over PacifiCorp?
It would have no impact. The Commission will continue to exercise the same
degree of regulatory oversight over PacifiCorp as it does today.
Will MERC offer rate credits, rate reductions or rate freezes as a part of the
benefits of the proposed transaction?
No. We believe the demonstrable benefits of the transaction discussed in the
testimonies should be more than sufficient to satisfy the standards for the
acquisition.
Moreover, rate credits are simply a proxy for capturing the costs and
benefits of a transaction between rate proceedings. In the case of PacifiCorp,
such a proxy is unnecessary given the planned rate proceedings. These rate
proceedings will incorporate new investment into rate base and any cost
reductions in cost-of-service.
Finally, PacifiCorp is currently failing toeam its allowed return.
Providing rate credits, reductions or freezes under such conditions would simply
worsen PacifiCorp s financial performance. This could precipitate ratings
downgrades and higher financing costs. Going forward, as PacifiCorp strengthens
the infrastructure, investment and rate treatment of that investment must be
implemented in a manner that is fair to customers, employees and shareholders.
What impact will the commitments made by MERC and PacifiCorp have
upon the rate increases projected by PacifiCorp?
We do not expect that the commitments that we are offering will cause an
Gale, Di - 28
PacifiCorp
REVISED 8/17/05
increase in the percentage discussed in PacifiCorp witness Johansen s testimony.
Please also note the commitment, Revenue Requirements Impacts B, of Exhibit
No.
Review and Approval of the Transaction
Please describe the various reviews and/or approvals of the transaction that
MERC anticipates.
Following are the shareholder and regulatory reviews anticipated with respect to
the proposed transaction:
approval of the shareholders of ScottishPower;
approval and/or waiver from the public utility commissions in the states of
California, Idaho, Oregon, Utah, Washington, and Wyoming;
approval of the transfer of the Trojan spent fuel storage license by the U.
Nuclear Regulatory Commission;
approval of the transfer of jurisdictional facilities by the Federal Energy
Regulatory Commission ("FERC") under Section 203 of the Federal
Power Act;
approval by FERC of revisions to the open access transmission tariffs of
PacifiCorp and MEC under Section 205 of the Federal Power Act;
Gale, Di - 29
PacifiCorp
REVISED 8/17/05
review of the proposed transaction by the U.S. Department of Justice
under the Hart-Scott-Rodino Act; and
approval by the Federal Communications Commission of the change of
control with respect to certain communication licenses held by PacifiCorp.
Market Monitor and Transmission Services Coordinator
Please describe the Market Monitor Proposal that MERC has put forward in
connection with its proposed acquisition of PacifiCorp.
Under the proposal, MEC and PacifiCorp would each contract with a market
monitor to assure nondiscrimination in the management of each company
transmission systems commencing on the day of the closing of the acquisition.
market monitor is an independent organization retained to review, on an after-the-
fact basis, transmission system operations necessary to ensure the transmission
provider does not favor its wholesale merchant function or any energy affiliate.
The market monitor would review and report to the FERC on such matters as the
utility s performance of the following transmission functions:
generation dispatch and potential impacts on constrained facilities
actions to relieve constrained facilities
derating of transmission facilities, and
ratings and other data used for total transfer capability calculations.
Gale, Di - 30
Pacifi Corp
REVISED 8/17/05
What are the expected costs to PacifiCorp of the market monitor?
Bids for the market monitor services have not yet been solicited. However, we
estimate that the on-going costs to PacifiCorp will be about $200 000 annually.
Does the market monitor proposal impact the development of Grid West?
No. The efforts are complementary. For example, it is possible that some market
monitor services may be provided as an early service by Grid West. When Grid
West is fully operational it should obviate the need for a market monitor for
PacifiCorp, since Grid West would be providing non-discriminatory transmission
services to multiple parties including PacifiCorp.
Will Grid West also serve MEC?
, at least not for the foreseeable future. Subject to regulatory approval, MEC is
planning to enter into a contract with an outsource provider of transmission
services to be known as the transmission service coordinator ("TSC"
).
The TSC
initially will administer or oversee only MEC's transmission assets. However
MEC is working with other utilities located to its west that currently are not part
of any regional transmission organization to consider having them also use the
TSC. Ultimately, the TSC may provide transmission services to an area abutting
that of Grid West. At such time, it may be appropriate to put into place a seams
agreement between the TSC and Grid West to enhance transmission system
coordination among transmission users in the states served by PacifiCorp and
MEC.
Gale, Di - 31
PacifiCorp
REVISED 8/17/05
Proposed Schedule
When does MERC expect to complete the process of obtaining all of the
foregoing approvals and reviews?
We very much want to complete all of the state approvals by February 28 2006
in time to close on the transaction on or before March 31 , 2006. This is an
important transaction for PacifiCorp customers, employees and communities. In
order to mitigate the ill effects of uncertainty and expedite the delivery of
important benefits, we respectfully request that the Commission act in a manner
that will facilitate an order by February 28, 2006.
Closing on that date will also facilitate the transition ofPacifiCorp
financial reporting from a fiscal year ending March 31 as used by Scottish Power
to a calendar fiscal year consistent with how MEHC companies report their
financial statements. Such calendar year reporting is also consistent with
regulatory reporting, which should enable regulators to utilize a single year
audited financial statements rather than have regulatory reporting span two fiscal
years.
Does this conclude your testimony?
Yes, it does.
Gale, Di - 32
PacifiCorp
provider does not favor its wholesale merchant function or any energy affiliate.
The market monitor would review and report to the FERC on such matters as the
utility s performance of the following transmission functions:
generation dispatch and potential impacts on constrained facilities,
actions to relieve constrained facilities
derating of transmission facilities, and
ratings and other data used for total transfer capability caIculations.
What are the expected costs to PacifiCorp of the market monitor?
Bids for the market monitor services have not yet been solicited. However, we
estimate that the on-going costs to PacifiCorp will be about $200 000 annually.
Does the market monitor proposal impact the development of Grid West?
No. The efforts are complementary. For example, it is possible that some market
monitor services may be provided as an early service by Grid West. When Grid
West is fully operational it should obviate the need for a market monitor for
PacifiCorp, since Grid West would be providing non-discriminatory transmission
services to multiple parties including PacifiCorp.
Will GridW est also serve MEC?
, at least not for the foreseeable future. Subject to regulatory approval , MEC is
planning to enter into a contract with an outsource provider of transmission
services to be known as the transmission service coordinator ("TSC"). The TSC
initially will administer or oversee only MEC's transmission assets. However
MEC is working with other utilities located to its west that currently are not part
of any regional transmission organization to consider having them also use the
Gale, Di - 33
PacifiCorp
TSC. Ultimately, the TSC may provide transmission services to an area abutting
that of Grid West. At such time, it may be appropriate to put into place a seams
agreement between the TSC and Grid West to enhance transmission system
coordination among transmission users in the states served by PacifiCorp and
MEC.
Proposed Schedule
When does MERC expect to complete the process of obtaining all of the
foregoing approvals and reviews?
We very much want to complete all of the state approvals by February 28, 2006,
in time to close on the transaction on or before March 31, 2006. This is an
important transaction for PacifiCorp customers, employees and communities. In
order to mitigate the ill effects of uncertainty and expedite the delivery of
important benefits, we respectfully request that the Commission act in a manner
that will facilitate an order by February 28, 2006.
Closing on that date will also facilitate the transition of PacifiCorp
financial reporting from a fiscal year ending March 31 as used by Scottish Power
to a calendar fiscal year consistent with how MEHC companies report their
financial statements. Such calendar year reporting is also consistent with
regulatory reporting, which should enable regulators to utilize a single year
audited financial statements rather than have regulatory reporting span two fiscal
years.
In connection with this request, I would note tha~ the SEC has told us that
it will not act in advance of approvals from the respective state public utility
Gale, Di - 34
Pacifi Corp
commissions. The SEC's policy in this respect is founded on their desire to avoid
pressuring the states to act in a particular manner, to avoid rendering decisions on
theoretical transactions, and to avoid impacting share prices and yalue by having
an extended period between its approval and closing. Thus, I would respectfully
ask the Commission not to delay its ruling on the acquisition in the hope that the
SEC will rule first.
Does this conclude your testimony?
Yes, it does.
Gale, Di - 35
Pacifi Corp
F;tEGEIVEO ill
' ,,;~
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, '
f' ;
' . '"~ =.." '
LO05 JUL .15 AH \1:
, '
lDAJ-!O PUBLIC
UTiliTiES COHf11SS10N
Case No. P AC-05-
Exhibit No.
Witness: Brent E. Gale
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
ACIFICORP
Exhibit Accompanying Direct Testimony of Brent E. Gale
MEHC Adoption of Prior Commitments
July 2005
' ..
PacifiCorp
Exhibit No.2, Page 1 of 8
CASE NO. P AC-O5-
Witness: Brent E. Gale
MEHC Adoption of ScottishPower s Prior Commitments
Commitments AIDJlicable to All Jurisdictions
Customer Service
MEHC and PacifiCorp affirm the continuation of the existing customer
service guarantees and performance standards in each jurisdiction through
2009.
Penalties for noncompliance with performance standards and customer
guarantees shall be paid as designated by the Commission and shall be
excluded from results of operations. PacifiCorp will abide by the
Commission s decision regarding payments.
Regulatory Oversight
PacifiCorp will maintain its own accounting system, separate from
MEHC's accounting system. All PacifiCorp financial books and records
will be kept in Portland, Oregon, and will continue to be available to the
Commission, upon request, at PacifiCorp s offices in Portland, Oregon,
Salt Lake City, Utah, and elsewhere in accordance with current practice.
(Witness Goodman)
MEHC andPacifiCorp will provide the Commission access to all books of
account, as well as all documents, data, and records of their affiliated
interests, which pertain to transactions between PacifiCorp and its
affiliated interests. (Witness Goodman)
MEHC, PacifiCorp and all affiliates will make their employees, officers
directors, and agents available to testify before the Commission to provide
information relevant to matters within the jurisdiction of the Commission.
The Commission or its agents may audit the accounting records of MEHC
and its subsidiaries that are the bases for charges to PacifiCorp, to
determine the reasonableness of allocation factors used by MEHC to
assign costs to PacifiCorp and amounts subject to allocation or direct
charges. MEHC agrees to cooperate fully with such Commission audits.
(Witness Specketer)
MEHC and PacifiCorp will comply with all existing Commission statutes
and regulations regarding affiliated interest transactions, including timely
filing of applications and reports. (Witness Specketer)
PacifiCorp will file on an annual basis an affiliated interest report
including an organization chart, narrative description of each affiliate,
REVISED 8/17/05 PacifiCorp
Exhibit No.2, Page 2 of 8
CASE NO. PAC-O5-
Witness: Brent E. Gale
revenue for each affiliate and transactions with each affiliate. (Witness
Specketer)
PacifiCorp and MEHC will not cross-subsidize between the regulated and
non-regulated businesses or between any regulated businesses, and shall
comply with the Commission s then-existing practice with respect to such
matters. (Witness Specketer)
Due to PUHCA repeal, neither Berkshire Hathaway nor MEHC will be
registered public utility holding companies under PUHCA. Thus, no
waiver by Berkshire Hathaway or MEHC of any defenses to which they
maybe entitled under Ohio Power Co. v. FERC, 954 F.2d 779 (D.C. Cir.
cert. denied sub nom. Arcadia v. Ohio Power Co.506 U.S. 981 (1992)
Ohio Power
),
is necessary to maintain the Commission s regulation of
MEHC and PacifiCorp. However, while PUHCA is in effect, Berkshire
Hathaway and MEHC waive such defenses. (Witness Specketer)
Any diversified holdings and investments
(~,
non-utility business or
foreign utilities) of MEHC and PacifiCorp following approval of the
transaction will be held in a separate company(ies) other than PacifiCorp,
the entity for utility operations. Ring-fencing provisions (i., measures
providing for separate financial and accounting treatment) will be
provided for each of these diversified activities, including but not limited
to provisions protecting the regulated utility from the liabilities or
financial distress ofMEHC. This condition will not prohibit the holding
of diversified businesses. (Witness Goodman)
PacifiCorp or MEHC will notify the Commission subsequent to MEHC'
board approval and as soon as practicable following any public
announcement of: (1) any acquisition of a regulated or unregulated
business representing 5 percent or more of the capitalization ofMEHC; or
(2) the change in effective control or acquisition of any material part or all
ofPacifiCorp by any other firm, whether by merger, combination, transfer
of stock or assets.
Within 30 days of receiving all necessary state and federal regulatory
approvals of the final corporate and affiliate cost allocation methodology,
a written document setting forth the final corporate and affiliate cost
methodology will be submitted to the Commission. On an on-going basis
the Commission will also be notified of anticipated or mandated changes
to the corporate and affiliate cost allocation methodologies. (Witness
Specketer)
Any proposed cost allocation methodology for the allocation of corporate
and affiliate investments, expenses, and overheads, required by law or rule
to be submitted to the Commission for approval, will comply with the
following principles:(a) For services rendered to PacifiCorp or each cost category subject
to allocation to PacifiCorp by MEHC or any of its affiliates
MEHC must be able to demonstrate that such service or cost
category is necessary to PacifiCorp for the performance of its
REVISED 8/17/05 PacifiCorp
Exhibit No.2, Page 3 of 8
CASE NO. P AC-O5-
Witness: Brent E. Gale
(b)
regulated operations, is not duplicative of services already being
performed within PacifiCorp, and is reasonable and prudent.
Cost allocations to PacifiCorp and its subsidiaries will be based on
generally accepted accounting standards; that is, in general, direct
costs will be charged to specific subsidiaries whenever possible
and shared or indirect costs will be allocated based upon the
primary cost-driving factors.
MEHC will have in place time reporting systems adequate to
support the allocation of costs of executives and other relevant
personnel to PacifiCorp.
An audit trail will be maintained such that all costs subject to
allocation can be specifically identified, particularly with respect to
their origin. In addition, the audit trail must be adequately
supported. Failure to adequately support any allocated cost may
result in denial of its recovery in rates.
Costs which would have been denied recovery in rates had they
been incurred by PacifiCorp regulated operations will likewise be
denied recovery whether they are allocated directly or indirectly
through subsidiaries in the MEHC group.
Any corporate cost allocation methodology used for rate setting,
and subsequent changes thereto, will be submitted to the
Commission for approval if required by law or rule. (Witness
Specketer)
(c)
(d)
(e)
(t)
Financial Integrity
PacifiCorp will maintain separate debt and, if outstanding, preferred stock
ratings. PacifiCorp will maintain its own corporate credit rating, as well
as ratings for each long-term debt and preferred stock (if any) issuance.
(Witness Goodman)
MEHC and PacifiCorp will exclude all costs of the transaction from
PacifiCorp s utility accounts. Within 90 days following completion of the
transaction, MEHC will provide a preliminary accounting of these costs.
Further, MEHC will provide the Commission with a final accounting of
these costs within 30 days of the accounting close. (Witness Goodman)
The premium paid by MEHC for PacifiCorp will be recorded in the
accounts of the acquisition company and not in the utility accounts of
PacifiCorp. MEHC and PacifiCorp will not propose to recover the
acquisition premium in PacifiCorp s regulated retail rates; provided
however, that if the Commission in a rate order issued subsequent to the
closing of the transaction reduces PacifiCorp s retail revenue requirement
through the imputation of benefits (other than those benefits committed to
REVISED 8/17/05 PacifiCorp
Exhibit No.2, Page 4 of 8
CASE NO. PAC-O5-
Witness: Brent E. Gale
in this transaction) accruing from the acquisition company (PPW Holdings
LLC), Berkshire Hathaway, or MEHC, MEHC and PacifiCorp will have
the right to propose upon rehearing and in subsequent cases a symmetrical
adjustment to recognize the acquisition premium in retail revenue
requirement. (Witness Goodman)
MEHC and PacifiCorp will provide the Commission with unrestricted
access to all written information provided to credit rating agencies that
pertains to PacifiCorp. (Witness Goodman)
PacifiCorp will not make any distribution to PPW Holdings LLC or
MEHC that will reduce PacifiCorp s common equity capital below 40
percent of its total capital without Commission approval. PacifiCorp
total capital is defined as common equity, preferred equity and long-term
debt. Long-term debt is defined as debt with a term of one year or more.
The Commission and PacifiCorp may reexamine this minimum common
equity percentage as financial conditions or accounting standards change
and may request that it be adjusted. (Witness Goodman)
The capital requirements ofPacifiCorp, as determined to be necessary to
meet its obligation to serve the public, will be given a high priority by the
Board of Directors ofMEHC and PacifiCorp. (Witness Goodman)
PacifiCorp will not, without the approval of the Commission, assume any
obligation or liability as guarantor, endorser, surety or otherwise for
MEHC or its affiliates, provided that this condition will not prevent
PacifiCorp from assuming any obligation or liability on behalf of a
subsidiary ofPacifiCorp. MEHC will not pledge any of the assets of the
regulated business ofPacifiCorp as backing for any securities which
MEHC or its affiliates (but excluding PacifiCorp and its subsidiaries) may
issue. (Witness Goodman)
Revenue Requirement Impacts
MEHC and PacifiCorp, in future Commission proceedings, will not seek a
higher cost of capital than that which PacifiCorp would have sought if the
transaction had not occurred. Specifically, no capital financing costs
should increase by virtue of the fact that PacifiCorp was acquired by
MEHC.
MEHC and PacifiCorp guarantee that the customers ofPacifiCorp will be
held harmless if the transaction between MEHC and PacifiCorp results in
a higher revenue requirement for PacifiCorp than if the transaction had not
occurred. However, this hold harmless provision shall not apply to
incremental costs associated with cost-effective investments in renewable
and thermal generation, energy efficiency programs, demand-side
management programs, environmental measures, and transmission and
distribution facilities approved by the Commission.
REVISED 8/17/05 PacifiCorp
Exhibit No., Page 5 of 8
CASE NO. P AC-O5-
Witness: Brent E. Gale
Environment
PacifiCorp will continue its Blue Sky tariff offering in all states.
PacifiCorp will continue its commitment to gather outside input on
environmental matters, such as through the Environmental Forum.
PacifiCorp will continue to have environmental management systems in
place that are self-certified to ISO 14001 standards at all PacifiCorp
operated thermal generation plants.
Communities
MEHC will maintain the existing level ofPacifiCorp s community-related
contributions, both in terms of monetary and in-kind contributions.
MEHC will continue to consult with regional advisory boards to ensure
local perspectives are heard regarding community issues.
Employees
MEHC will honor existing labor contracts with all levels of staff.
MEHC and PacifiCorp will make no changes to employee benefit plans
for at least two (2) years following the effective date of the Stock Purchase
Agreement.
Planning
PacifiCorp will continue to produce Resource Plans every two years
according to the then current schedule and the then current Commission
rules.
When acquiring new generation resources in excess of 100 MW
PacifiCorp and MEHC will issue Requests for Proposals (RFPs) or
otherwise comply with state laws, regulations and orders that pertain to
procurement of new generation resources.
II.
Paci fi Corp
Exhibit No.2, Page 6 of 8
CASE NO. PAC-O5-
Witness: Brent E, Gale
State Specific Commitments
Utah
Customer Service
PacifiCorp will report call-handling results during wide-scale outages
against average answer speeds, hold times and busy indications.
Regulatory Oversight
Idaho
MEHC and PacifiCorp will provide notification of and file for
Commission approval of the divestiture, spin-off, or sale of any integral
PacifiCorp function. This condition does not limit any jurisdiction the
Commission may have.
PacifiCorp or MEHC will notify the Commission prior to implementation
of plans by PacifiCorp or MEHC: (1) to form an affiliate for the purpose
of transacting business with PacifiCorp s regulated operations; (2) to
commence new business transactions between an existing affiliate and
PacifiCorp; or (3) to dissolve an affiliate which has transacted substantial
business with PacifiCorp.
Customer ServiceA. MEHC/PacifiCorp will continue to make a dedicated Irrigation Specialist
available in Rexburg and Shelley in the Idaho service territory. The
Irrigation Hotline will continue to be available daily from 7 AM to 7 PM,
with the number published in the phone directory.
Water Rights agreements will be abided by MEHC.
Ore20n
Regulatory Oversight
MEHC and PacifiCorp agree to the following provisions with respect to
information requests and resolution of disputes related to information
requests: (1) PacifiCorp and MEHC will provide Staff, upon request,
access to books and records ofPacifiCorp and MEHC to the extent they
contain information specifically related to PacifiCorp, including Board of
Director s Minutes. This commitment will not be deemed to be a waiver
of PacifiCorp s or MEHC's right to seek a protective order for the
PacifiCorp
Exhibit No.2, Page 7 of 8
CASE NO. P AC-O5-
Witness: Brent E. Gale
information or to object to a request as overbroad, unduly burdensome or
outside the scope of the Commission s jurisdiction. (2) In the event of a
dispute regarding an information request, an Administrative Law Judge of
the Commission shall resolve the dispute by making a determination
whether or not the requested documents would be reasonably expected to
lead to the discovery of admissible evidence.
Corporate Presence
The corporate headquarters of PacifiCorp will remain in Oregon.
Washington
Customer Service
MEHC and PacifiCorp agree that during the 15-day period to investigate
and report back to customers regarding billing and metering problems, it
will not take action by initiating collection remedies or disconnecting.
Wyoming
Customer Service
Penalties for noncompliance with performance standards and customer
guarantees that are not paid to customers will be paid to EnergyShare of
Wyoming.
III.
Paci fi Corp
Exhibit No.2, Page 8 of 8
CASE NO. P AC-O5-
Witness: Brent E. Gale
Administrative Commitments
Nothing in these acquisition commitments shall be interpreted as a waiver
of PacifiCorp s or MEHC's rights to request confidential treatment for
information that is the subject of any commitments.
Unless otherwise specified by Commission regulations, the Commission
shall give MEHC and PacifiCorp written notification of any violation by
either company of the commitments made in this application. If such
failure is corrected within ten (10) business days for failure to file reports
or five (5) business days for other violations, the Commission shall take
no action. MEHC or PacifiCorp may request, for cause, an extension of
these time periods. If MEHC or PacifiCorp fails to correct such violations
within the specified time frames, as modified by any Commission-
approved extensions, the Commission may seek to assess penalties for
violation of a Commission order, against either MEHC or PacifiCorp, but
not both, as allowed under state laws and regulations.
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ZUO5JUL 15 AMI!: II
iDA11O PUBLIC
unLIT IESCOMHl$SlOH
Case No. P AC-05-
. , Exhibit No.
Witness: Brent E.Gale
BEFORE THE IDAHQ PUBLIC' UTILITIES COMMISSION
ACIFICORP
MEC Base Load Plants
Exhibit Accompanying Direct Testimony of Brent E. Gale
July 2005
PacltiCorp
Exhibit No., page 1 of 1
CASE NO. PAC-O5-
Witness: Brent E. Gale
MEC Service Areas and Base Load Generating Facilities
.~-,-,,-, "'-"""-"-~'---~- ",-~
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Base load generating facilities are currently located at or near
Sioux City, IA
Council Bluffs, IA
Ottumwa, IA
Bettendorf, IA (immediately north of Davenport, IA)
Muscatine, IA
Cordova, IL
ECEIVErl- '
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10;\fl0 PUBLIC
, U riLl TIE S COMMISSION
Case No. PAC~E-05-
Exhibit No. 5
Witness: Brent E. Gale
BEFORE THE IDAHO PUBLIC UTll..ITIES COMMISSION
ACWICORP
Exhibit Accompanying Direct Testimony of Brent E.Gale
MEC Facts and Figures
J~ly 2005
PacifiCorp
Exhibit No.
CASE NO. P AC-O5-
Witness: Brent E. Gale
MEC Electric Operations Facts
Facts at a Glance
Electric Operations (year-end 2004):
Total retail customers:
Iowa:
Illinois:
South Dakota:
Residential:
Small general service:
Large general service:
Other retail:
Average price per kilowatt-hour (residential)
Average price per kilowatt-hour (retail)
Average price per kilowatt-hour (industrial)
Average annual revenue per customer (residential)
Average annual revenue per customer (retail)
Accredited net generating capacity in
(owned)
Accredited net generating capacity in
(purchased)
Total accredited net generating capacity in
(owned and purchased)
Record summer peak load in MW - Aug. 20, 2003
697,611
609,725
84,166
720
602 218
81,047
302
13,044
$0.0860
$0.0613
$0.0404
$766
$1,579
4,481
416
897
935
h~ECE1VED
ZnnSJUl AM11:" Case No. PAC-05-
IDAHeJ puBLIC E~hibit No.
/ UTILlTIESCOHMlsstONWltness:Brent E. Gale
- /
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
, \: "
ACIFICORP
Exhibit Accompanying Direct Testimony of Brent E. Gale
MEC Energy Efficiency Comparisons
July2005
PacifiCorp
Exhibit No.6, Page 1 of 2
CASE NO. P AC-O5-
Witness: Brent E. Gale
MidAmerican Energy Company
EEP-95-3 2003 Actual and Planned Spending
Plan Actual Variance % Variance
AlC Load Control $ 2,062,141 $ 2 662,251 600,110 29.100/0
Efficiency Plus 1 ,072,360 $ 2,467 936 1 ,395,576 130.140/0
House Call1Energy Fitness 882,434 $ 3,487,377 $ 2,604,943 295.200/0
Low Income 529,099 1 ,090,458 561 359 106.100/0
Smart Home $ 2 518,061 $ 6,245,821 $ 3,727 760 148.040/0
C & I New Construction 1 ,252,543 $ 3,650,564 $ 2 398,021 191.450
CII HV AC&R 231 ,425 576,038 344,613 148.91 %
C/I Direct Incentive 97,761 477 173 379,412 388.100
C/I Lighting 261,428 976,568 715,140 273.550/0
Interruptible Curtailment $ 8,203,775 $ 6,746,128 $ (1,457 647)17.770
C/I Custom 80,392 368,461 288,069 358.330/0
Ind. Process Optimization 49,553 828,978 779,425 1572.91 %
Early HV AC Retirement $ 1 ,382 870 318 $ (1 382,552)99.980/0
Trees 100,000 243,707 143,707 143.710/0
Assessments $ 1,398,351 1 ,425,153 26,802 920
$20,122,193 $31,246 931 $11 124 738 55.290
PacifiCorp
Exhibit No.6, Page 2 of 2
CASE NO. P AC-O5-
Witness: Brent E. Gale
MidAmerican Energy Company
EEP-03-1 2004 Actual & Planned Spending
Plan Actual Variance Variance
Residential Load Management $ 2,941,000 $ 2,911,490 (29,510)000/0
Residential Equipment $ 3,295,000 $ 2,838,210 (456,790)13.860/0
Residential Audit $ 2,457,000 $ 2,874 890 417,890 17.010/0
Low Income $ 2 075,000 1 ,368,728 (706,272)34.040/0
Residential New Construction $ 4,132 000 $ 6,923,559 $ 2,791,559 67.560/0
Commercial New Construction $ 3,885,000 $ 3,959,724 74,724 920
Nonresidential Equipment $ 1 350,000 $ 2,285,604 935,604 69.300/0
Nonresidential Custom , 400,000 633,354 233,354 58.340/0
Nonresidential Load Management $ 6,685,000 $ 7,814,356 $ 1,129,356 16.890/0
Small Commercial Energy Audit 645,000 345,162 (299,838)46.490/0
Nonresidential Energy Analysis 669,000 407,275 (261 725)39.120
Efficiency Bid 939,000 666,568 (272,432)29.01 %
Trees 400,000 503,991 103,991 26.000/0
Assess ments $ 1,477,000 1 ,607 859 130 859 860/0
$31 350,000 $35,140,770 $ 3,790 770 12.090/0
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Case No. P AC~E-05-
rO;\lJOPUBLIC
ExhibitNo.
U T ILt~t'ES COMt11sstON Witness: Brent E. Gale
/"'
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
ACIFICORP
Exhibit Accompanying Direct Testimony of BreIit E. Gale
- Letters from Communities
July 2005
LETTERS FROM
MUNI CIP AL UTILITIE S
AND PUBLIC POWER DISTRICTS
PacjfiCorp
Exhjbit No., Page 1 of 15CASE NO. PAC-O5-Whness: Brent E. Gale
MAY . 27 . 2005
..,
7:59AM
raclII\.-Orp
Exhibit No., Page 2 of 15
CASE NO. PAC-O5-
Witness: Brent E. Gale
Nebraska Public Power District
"AI..,." dam ~hen ,oM Meet tal
W. J. Fchnnsn
P.resident '" CEO
Phone (402) S63-5SS8
Fax (402) 563-S14S~c:om
May 24, 2005
Mr. David L. Sokol
Chairman and Chief Executive Officer
MidAmerican Energy Holdings Company
302 South 36th Street) Suite 400
Omah~ Nebraska 68131-3845
Dear David:
Congratulations and best wishes regarding your recent announcement of the acquisition
Pacificorp. NPPD appreciates the long-standing and positive relationship we have with
MidAmerican. MiclAmerican' s willingness to work collaboratively with public power entities
the areas of transmission and generation an"ing and joint ownership are important to us.
re excited about the potential benefits the acquisition may provide, especially as it relates to!
the opportunity to further develop a transmission model that can help address the critica1 issues I
we face throughout our respective service areas. We look forward to working with your team in!that regard.
Sincerely,
~ehnnan
President & CEO
Nebraska Public Power District
GENERAL OFFICE
1414 15th Street O. Box 4991 Columbus, NE 68602-0499
T8'ephone: (402) 584--8561/ Fax: [phone]
htfp=lANww."ppd.com
raCI1JCorp
Exhibit No.7. Page 3 of 15
CASE NO. p AC-05-Witness: Brent E. Gale
I!fiu
CEO AR FALLS UTILITIES
The Power of Service.
May 26, 2005
Mr. David Sokol
Chairman and CEO
MidAmerican Energy Holdings Company
302 South 36th Street, Suite 400
cnnaha, ~ebraska 68131-3845
Dear Mr. Sokol:
On behalf of Cedar Falls Utilities, I want to express our best wishes to your organization as you move
forward with the acquisition of Pacificorp.
As you mow, Cedar Falls Utilities has enjoyed a long history of successful cooperation and partnerships
with MEC and its predecessor companies. One of the most significant early partnerships brought about the
ground-breaking joint ownership of Council Bluffs #3 and the related 345 KV transmission line.
By working togetp.er, MEC predecessor Iowa Power and CFU were able to overcome political, legislative
and industry challenges. Today, CB#3 remains one of the most successful economic generating W1its in the
s. The joint ownership model forged by Iowa Power and CFU was soon copied by Iowa Public Service at
Neal 4, Iowa lllinois at Ottumwa, and others.
Our companies have cooperated in a unique joint dispatch arrangement since 1979. In 1984, CFU purchased
some Neal 4 generating capacity from IPS. The purchase kept the unit within the IPS dispatch group family
to the benefit of both organizations. At this time, a significant joint effort to solve transmission bottlenecks
at Quad Cities West is close to being finalized. Next month our Board is expected to give fmal approval for
our sale of energy and capacity to the City of Hudson, again benefiting both CFU and MEC. We have also
identified areas for possible future cooperation on various transmission and dispatch issues.
Many more examples of cooperation could be cited. At every opportunity for more than 30 years, our
message to FERC and the Iowa Utilities Board has been that MEC is an honorable friend and partner. Most
recently, we have commended MEC's efforts to offer every municipal utility in Iowa an opportunity to
control its own power supply through joint ownership of Council Bluffs #4. Our Electric Utility is taking
advantage of this important opportunity.
We look forward to continuing our productive partnership with MEC as your company expands through this
important acquisition.
Sincerely,
(\M'" -vL. ,jl
James R. Krieg,
General Manager/CEO
cc: Todd Raba
Utility Parkway, p.o. Box 769 . Cedar Falls/Iowa 50613 . PH: 319-266-1761 . Fax: [phone] . www.cfunet.'net
Muscotine Power and Water
3205 CecJarStreet . Muscatine, Iowa 52761-2204
563/263-2631
Jay D. Logel
General Manager
May 31 I 2005
Mr. David L. Sokol
Chairman & CEO
MidAmerican Energy Holdings Co.
Suite 400
302 S. 36th St.
Omaha, N E 68131 ~3845
Dear David:
Congratulations on your announced intent to acquire PacifiCorp.
I am certain the customers, employees, and other utilities that come in
contact with PacifiCorp will be well served by the new ownership.
I have no doubt that MidAmerican will apply the same attitude of
cooperation and support for municipal utilities and other potential
partners in serving the utility needs of customers in the PacifiCorpareas.
Please let me know if we can be of service to you in any small
way as we go forward.
Sincerely I
cc:Todd Raba, MEC
PacifiCorp
Exhibit No.7, Page 4 of 15
CASE NO. P AC-O5-
Witness: Brent E. Gale
ECONOMIC DEVELOPMENT LETTERS
PacifiCorp
Exhibit No., Page 5 of 15
CASE NO. P AC-O5-Witness: Brent E. Gale
raCIIlL.orp
Exhibit No, 7, Page 6 of 15
CASE NO. PAC-O5-
Witness: Brent E. Gale
July 12 2005
Mr. Todd Raba
President
MidAmerican Energy Company
666 Grand Ave., P.o. Box 657
Des Moines, IA 50303~O657
Dear Todd:
Congratulations on the recent announcement that MidAmerican Energy Holdings
Company intends to acquire PacifiCorp from Scottish Power. MidAmerican Energy
Company has been an outstanding partner with the State of Iowa on economic
development for decades, and I wish you the best of luck in completing this transaction.
Given your strong focus on improving the economic conditions in your service teuitory,
I'm sure you win bring an added level of economic development expertise to the six
states in which PacifiCorp operates.
I look forward to continuing the strong relationship between MidAmerican Energy
Company and the Iowa. Department of Economic Development. Please let me know if
there is anything I can do to assist your ongoing economic development efforts. Again,
good luck completing the transaction involving PacifiCorp.
Sincerely,I~v
Mary Lawyer
Acting Director
MKL/klm
IOWA DEPARTMENT OF ECONOMIC DEVELOPMENT
Michael 1 Blouin, Director $ 200 Ea$t Grand Avenue, Des Moines, Iowa 50309 USA ~ Phone: [phone] ~ Fax: [phone] & www.iowalifechanging.com
July 11, 2005
. ..,
Mt. Todd Raba, President
MidAmerican Energy, Company
666 Grand Avenue, P.O. Box(iS7
. Des Moines -Iowa. SO303..0~S? .
Dear Todd:
. ... .
Congratulations on the ,recent announcement that MidAmerican Energy Holdings
CompanywillbeacquiriJIgPacificCorp. MidAmerican Energy Company has been an
' outstanding partner with the State of South Dakota. on numerous development projects. I ,
. wisJ1 you thehest of luck in completing this transaction. Given your strong focus on
. improving the ecoDomic "itality iIlthefootprint ofy~ut service are~l know that. you will
. be a strong partner fordeveloprnent in the six states inwhichPacificCoq) operates.
i MidAmerican Energy has provided ,leadership not only to the utility industry butaIsoto
the ongoing development of a ,vibrant business environmenfin southeastern, South"
" Da1(ota. Again, goodluckcompletingthePacificCorptra.risaction,and I look for\Vardto
many more 'years of ast1ccessful partnership.
" "'. ',. ,' "..,
, Office.rYourism ,
~~~~(sQfficeofEconomic
Q~pm.I~f
" ,
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111,EYlelIIAv.;/pi"".SD 51501-3369
.113-D1/.ijX:Q-173-325I
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Idtriltalrilati."';calll' '
South Dakota Arts Council '
..
800 Govemors Dt I Pierre. so 57501.2294
Ibm 6m-7J3.3t31 .1~ WI s.D.
fax: [phone]
SdatOst3te.sd.ut sdarls.org
South Dakota State
Historical Society
9X) Govemrxs Or. I Piene, so 57501-2211
Alone: 605-113.34581 Fax: [phone]
sdhistory.org ,
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PacifiCorp
Exhibit No.7, Page 8 of 15
CASE NO. PAC-O5-
Witness: Brent E. Gale
June 29, 2005
Mayor
Donald P. Welvaert
6 t 9 - 16 Street
Moline, Illinois 61265
Todd Raba, President
MidAmerican Energy Company
666 Grand Avenue
Des Moines, IA 50303
Phone: [phone]Fax: [phone]
Dear Mr. Raba:
I would like to write in encouragement of the announced purchase of PacifiCorp
by MidAmerican Energy Holding Company. MidAmerican has been a strong
partner in the redevelopment of Moline s core. I believe the communities of
PacifiCorp will benefit from having MidAmerican s management commitment to
community success.
MidAmerican Energy has been a steadfast supporter of our public/pirate
partnership. Renew Moline, since its inception over 15 years ago. This partnership
has completely transformed our old core industrial area into a modem tourism
destination point and a premier and office employment center in the broader two
state region of western Illinois and eastern Iowa. Nearly $300 million has been
inves1ed
,~
in n~w buildings and public facilities in that time. It would not have
happened without Renew Moline and Renew Moline would not have happened
without your continued financial support as well as the ongoing participation
your economic development staff.
I've learned how ~portant it is for MidAmerican s economic development
programs to be built on strong community partnerships. I do not know what the
PacifiCorp economic development program is like, but if it ends up like
MidAmerican s then those communities will have a "winner" for a utility.
Good luck in your acquisition.
Sincerely,
CITY OF MOLINE, ILLINOIS
p~
Donald P. Welvaert
Mayor
PacifiCorp
Exhibit No.7, Page 9 of 15
CASE NO. PAC-O5-
Witness: Brent E. Gale
The Voice a/Iowa Business Since 1903.
June 13, 2005
Mr. Todd Raba, President
MidAmerican Energy Company
666 Grand Avenue
PO Box 657
Des Moines, IA 50303-0657
Dear Mr. Raba:
I was pleased to read about MidArnerican Energy Holding Company s recently
armounced acquisition ofPacifiCorp. Based on our Association s experience with
MidAmerican Energy Company, I'm sure PacifiCorp s businesses will be pleased with
the strong partnership its new owners will be able to provide to them.
F or many years, MidAmerican has been a vital and important business in Iowa. Your
company has shown a strong and continuing commitment to improving the state
business environment. MidAmerican' s commitment is further demonstrated by your
ability to deliver electric rate stability to our members. That is a critical economic
development tool for Iowa.
The three major generation-construction projects MidAmerican has initiated in the past
two years have also added jobs in the state. When completed, they will help assure that
Iowa businesses have adequate and reliable energy sources which will allow them to
grow into the future.
MidAmerican Energy has provided leadership not only to the Association of Business
and Industry, but also to the ongoing development of a vibrant business environment in
Iowa. I look forward to many more years of a successful partnership between our two
organizations.
Sincerely,
f)#t
James D. Aipperspach
President
ASSOCIATION OF BUSINESS AND INDUSTRY
904 Walnut Street 8 Suite 100 8 Des Moines. Iowa 50309-3503
515-280-8000 8 800-383-4224 . Fax [phone] Email abi(g)iowaabi.Qrg 8 www.iowaabi.org
PacitiCorp
Exhibit No, 7, Page 10 of IS
CASE NO. PAC-05-
Witness: Brent E. Gale
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Dear Mr. Raba:
THE greater' DES MOINESpartnership
June 14, 2005
Todd Raba, President
MidAmerican Energy Company
666 Grand Avenue
O. Box 657
Des Moines, IA 50303-0657
Congratulations on MidAmerican Energy Holdings Company s recently announced
acquisition of PacifiCorp! I am confident the communities and businesses served by
PacifiCorp will see the same commitment to partnership that we experience with
MidAmerican Energy Company here in the Des Moines area.
For many years, MidAmerican has supported the efforts of the Greater Des Moines
PartnerShip. Besides participating in and supporting traditional chamber
commerce activities, your employees are always there when we need them - as
leaders in our Choose Des Moines Communities and our Downtown Community
Alliance. Together, we have successfully attracted new businesses and expanded
many of our existing businesses in the Des Moines area. None of this could have
been accomplished without MidAmerican Energy Company.
I look folWard to many more years of a successful partnership between our two
organizations.
Sincerely, ~C~
Martha A. Willits
President & CEO
The PartnershiP Building' 700 Locust St. . Suite 100
Des Moines, fA so3O9 . tel SIS-286-49S0 . fax Sls-z86-4974
www.desmoinesmetro.co81
PacifiCorp
Exhibit No., Page II of
CASE NO. PAC-O5-
Witness: Brent E. Gale
Partnership
L7 c:l!
, ~
UNITING OUR AREA IN ECONOMIC
DEVELOPMENT
Mid Iowa Gro\lVth
Calhoun ft Hamilton ft Hardin
Humboldt ft Kossuth ft Palo Alto
Pocahontas * Webster * Wright
July 7, 2005
Mr. Todd Raba, President
MidAmerican Energy Company
666 Grand A venue
Des Moines, fA 50303
Dear Mr. Raba:
I read with interest of your announcement to PacifiCorp by Mid American Energy Holding Company.
I want to take this time to write my thoughts about MidAmerican Energy Company as I see it for
economic development in rural areas. I'm doing this in hopes that you can use these comments in
some way to benefit your acquisition.
Our organization covers a nine county ~rea in north central Iowa. Fostering economic development in
. such an area today is challenging to say the least. Over the years, though, MidAmerican Energy has
been an outstanding partner in helping guide us. Your economic development team comes to our aid
whenever called because we know that we can count on their professionalism in whatever our
undertaking. Here are just a couple examples. Your staff helped finance and facilitate a county-wide
economic development strategy then, brought it to the local community for implementation. When
the Iowa Department of Economic Development announced a regional marketing initiative
MidAmerican was among the first businesses to step forward and commit to sharing the required local
matching fund. Furthennore, your team committed to help guide us in the development of this new
and exciting initiative.
In short, we just know that we can count on MidAmerican Energy to be a full partner with us.
know that your staff works in a broad range of communities and for them to take the time to work
with us in small-town rural Iowa is truly appreciated. I believe the rural areas in the PacifiCorp area
wiU'have that same appreciation when they see what you will bring to them.
Keep up the good partnerships and good luck with your purchase.
S' ce ly, ~
LitiJ:I.t1~enols Bowman
President, Mid Iowa Growth Partnership
Yankton Area Progressive Growth, Inc.
",",Ul\.,..Ul",
Exhibit No., Page 12 of 15
CASE NO. PAC-O5-
Witness: Brent E. Gale
O. Box 588 . Yankton, South Dakota 57078 . (605) 665,9011 . Fax: 605,665,7501
July 12, 2005
Mr. Todd Raba, President
MidAmerican Energy Company
666 Grand Avenue, POBox 657
Des Moines; lA., 50303-0657
Dear Todd:
I was very pleased to hear your recent announcement about the proposed acquisition of Pacific Corp.
I would like to extend my support and encouragement to you as you wind your way through theapproval process.
When I served as a Yankton City Commissioner I knew that the community enjoyed an excellent
relationship with MidAmerican Energy. It is my opinion that the cities in the PacificCorp service
area can expect a similar experience. Your employees have always been active participants in
community activities and volunteer organizations.
MidAmerican Energy has been the best of partners. Your company has gone beyond the basics of
supplying energy. Whether advising local finns and home ,owners on how to save energy, checking
out gas leaks or suspected carbon monoxide problems with tremendous response time, or planning
and constructing facilities that ensure quality service and room for growth and development - your
folks have proven that MidAmerican is willing to go the extra mile.
As a professional economic developer I can attest that MidAmerican supports the communities that
. it serves with an economic development team that rivals that of many state economic development
offices. MidAmerican s economic development group partners with our community in truly
meaningful ways. I am sure that the communities in PacifiCorp s service area will be equally
pleased when they become your partners.
yankton s economic development corporation (yankton Area Progressive Growth) and I look
forward to many years of partnership with MidAmerican in making yankton a great place to live
and prosper.
Sincerely,
Kurt E. Hauser
President
PacifiCorp
Exhibit No.7, Page 13 of 15
CASE NO. PAC-O5-
Witness: Brent E. Gale
MAYOR, THOMAS P. HANAFAN
June 13,2005
Mr. Todd Raba, President
MidAmerican Energy
666 Grand Avenue
Des Moines, IA 50303-0657
Dear Todd:
I would like to extend my support on your company s recent announced acquisition of
PacifiCorp. This must be a very exciting time for your company and at the same time full
of many challenges.
Over the years, the City of Council Bluffs has had many positive experiences with
MidAmerican Energy and I believe that PacifiCorp communities will quickly realize the
commitment and partnership that MidAmerican Energy extends to the communities it
serves. Your employees have always been counted on to be active participants in this
community and we look forward to that continued support.
The City of Council Bluffs is especially appreciative of the recent investment
MidAmerican Energy has chosen to make in Council Bluffs by building the new
generation facility. In addition to the economic development-related benefits of the
current construction project, the City is proud to be involved in your company s efforts to
assure Iowa s energy future.
I would like to congratulate your company on a job well done and would like to again
extend my support for your PacifiCorp acquisition.
Sincerely,
lff5-
CITY OF COUNCIL BLUFFS, IOWA - 209 PEARL STREET - 51503-4270
FAX [phone] TTY [phone]
An Equal Opportunity Employer
".:IIIYo/'
TIIv10THY J.
HURLEY
COUNCIL
MEM BEI~S
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PacifiCorp
Exhibit No., Page) 4 of 15
CASE NO. PAC-O5-
Witness: Brent E. Gale
CITY WATERLOO.IOWA
CITY HALL . 715 MULBERRY ST. . WATERLOO, IA 50703 . [phone] FAX [phone]
June 13, 2005
Mr. Dan Arens
MidAmerican Energy
260 F airview Avenue
O. Box 600
Waterloo, Iowa 50704
Dear Dan:
Our community has benefited greatly from the services provided by
MidAmerican Energy and I want to add my support to their acquisition of
PacifiCorp.
MidAmerican Energy Company is acorn plete energy partner, going beyond
the fundamentals of supplying natural gas and electricity. They are
committed to providing outstanding service and to acting as an advocate for
their customers in the ever-changing market place. The acquisition of
PacifiCorp will provide a greater emphasis on customer satisfaction and
efficiency.
MidAmerican Energy has been a been an outstanding corporate citizen that
has partnered with the City in Waterloo in the following areas: joining in
economic development facilities, planning and cooperation; providing energy
audits were thousands of dollars in power costs have been saved by our
municipality; and working with the City of Waterloo in the replacement
incandescent traffic lights with light emitting diodes (LED) by providing
rebates to the city for each LED installed.
The City of Waterloo looks forward to our continued relationship with
MiclAmerican Energy and the additional opportunities the PacifiCorp
acquisition will provide for the City of Waterloo and for MidAmerican
customers.
Sincerely,
Tim Hurley, Mayor
City of Waterloo, Iowa
WE'RE WORKING FOR YOU!
An Equal Opportunlty/Aftinnatlve Action Employer
JUL -01-05 FR~ ~1: 58 PM MIDAMERICAN ENERGY\lUJ,. Vj 'VVv J J\J. H." o.J~ J U JUllru~\l"nn &:.1u=J\UJ
FAX NO. 5152424399I'M nv. "H"'OJ"(J(JVO
PacifiCorp
Exhibit No. 7, Page 15 of 15
CASE NO. P AC-O5-Witness: Brent E. Gale
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CitY of Davenport
Charl~$ W, B.roo1(e,. Mayor
CWb~cJ.dQV\inport .'a.
1une 29, 2005
Mr. Todd Raba, Pre&ide1\t
MidAmcric:ao EDbrgy Company
666 Grand Avenue
Des Moines, IA.
Dear Mr. Raba:
CongratuJatlons on &be planned purchase of PacifiCorp by MidAmerlcan Enc:rgy Holding
Company. If you operate the PaclfiCorp utility as you do MidAmerican Energy, the
customers and c:ommunidcs 1.hore will immensely benefit.
OYer the years MidAmerioan Energy and its predecessor company bas ,been a stroDg
partne\" with the City of t)aV~l1port in its gtGwth. Fro11\ downtown to the friDjC area,
MidAmerican is consistently at the table. For example, in the downtownl without
leadership from your management teanJ, a $45m t1n'ce b1ock offi~ and convention
tompl~ would not have oc~urred. On. the, edge of town, MidAlnerican stepped up 10
join the City and Scott County in funding p'Mehase of land \hat is nOW Ii fully
developed 220 ~te industrial Your economic development Staff continues playing
a vital tOte in ita marketing.
When wo II'C! con$idertng an econoznic d$veJ~ent imlta~vc, we can count on
MidAmertoan 10 bQQPG of our stronger partners. If you brbtg that phnosophy to the
communities and counties in the utility you are purchasing, then 'they will be much better
for It and you will greatly prosper.
Good luck in your endeQ.vor ~
s:;
Charles W. BtOoke, Mayor
226 West fourth streQt . Dovenport. Iowa 62801
Telephone: ~2~7101 fax-. 663--328~726 TDD: 563~6-6145
www.cHyofdov$nporttowa.com
.,.
where the Mississfppl River Celebrate,!"
. .. ... -