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HomeMy WebLinkAbout20051221Moench direct, exhibits.pdfi::i ' STOEL ~~, ;:~ D h) L;: ~ : 900 sow. Fifth Avenue, Sllil~ 2600 Portland, Oregon 97204 phone 503.224.3380 fax 503.220.2480 ""W.stoel.com ATTORNEYS AT LAW , '. .' ,- , ' Ji!L! j IES COHi':ISSIOfJ JAMES M. VAN NOSTRAND Direct (503) 294-9679 jrnvann ostrand~stoel. com HAND DELIVERY December 20, 2005 Ms. Jean D. Jewell Commission Secretary Idaho Public Utilities Commission 472 W. Washington Boise, ill 83702-0074 Re:Case No. PAC-O5- Joint Application of MidAmerican Energy Holdings Company and PacifiCorp d/b/a Utah Power & Light Company for an Order Authorizing Proposed Transaction Dear Ms. Jewell: Enclosed for filing are nine (9) copies of the Testimony of Mark C. Moench in Support of the Stipulation filed on December 16, 2005. Electronic copies are also enclosed on disk. Thank you for your assistance. Very truly yours ~~, JamesM. :an Jltrand JMV:jlf Enclosurescc: Service list Oregon W ,1\ 11 i 11 t, I " C "I i r ,) r 11 i J Lt I a II Port1nd3-1537136.10051851-00005 I d " II " :~c i \' ; i ':;', : : .2 Pil Ii: 5 : ;. . , 'I .. " -... - I it;; .,, Jj'ilSSION BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION IN THE MATTER OF THE JOINT APPLICATION OF MIDAMERICAN ENERGY HOLDINGS COMPANY AND ACIFICORP DBA UTAH POWER & LIGHT COMPANY FOR AN ORDER AUTHORIZING PROPOSED TRANSACTION CASE NO. P AC-05- TESTIMONY OF MARK C. MOENCH IN SUPPORT OF STIPULATION December 20, 2005 Please state your name and business address. My name is Mark C. Moench and my business address is 201 South Main Street Suite 2300, Salt Lake City, Utah. By whom are you employed and in what position? I am the Senior Vice President, Law, for MidAmerican Energy Holdings Company (MEHC). Please summarize your education and business experience. I received a B.S. degree from the University of Utah in 1978 and a J.D. degree from the California Western School of Law in 1981. My experience in the energy industry covers a twenty-two (22) year time span. I served as an Assistant Attorney General for the State of Utah from 1981 to 1987, representing among other state agencies, the Division of Public Utilities and the Board of Oil, Gas and Mining. Thereafter I joined the Williams Companies, Inc. in 1987, where I held positions as senior attorney for Northwest Pipeline Corporation, general counsel for Kern River Gas Transmission Company (Kern River) and finally senior counsel for the pipeline holding company, Williams Gas Pipeline Company. Upon the acquisition of Kern River by MEHC in 2002, I served as Vice President and General Counsel at Kern River until named to my present position this year. Purpose and Summary of Testimony What is the purpose of your testimony? The purpose of my testimony is to describe the Stipulation in this proceeding, which was filed with the Idaho Public Utilities Commission (Commission) on December 16. My testimony explains why the terms of the Stipulation are in the Moench, Di - Joint Applicants public interest and provide a basis for the Commission to find that the proposed transaction satisfies the standard under Idaho Code ~ 61-328 for approval of the transaction. A copy of the Stipulation is attached to my testimony as Exhibit No. 15. Please describe the process that led to the Stipulation. On July 15, 2005, MEHC and PacifiCorp (jointly referred to as the "Applicants filed an Application and supporting testimony with the Commission for authorization of a transaction whereby MEHC would acquire all of the outstanding common stock ofPacifiCorp (Transaction), and PacifiCorp would thereafter become an indirect, wholly owned subsidiary ofMEHc. On August 17 2005, Applicants submitted a revised Application reflecting the impact of the enactment of the Energy Policy Act of2005 , including the repeal of the Public Utility Holding Company Act of 1935. Thereafter, Applicants and the parties to the case participated in a technical conference on October 4, followed by settlement conferences on November 2 and December 8, in an attempt to understand and reach agreement on the issues in this proceeding. As a result of that process, the parties to this proceeding reached agreement on the resolution of the issues in this proceeding, as set forth in the Stipulation. All of the parties to the proceeding have either joined the Stipulation, or have indicated that they do not oppose it. Please identify the parties to the Stipulation. The parties to the Stipulation are the Applicants, Idaho Public Utilities Commission Staff, Monsanto Company, Idaho Irrigation Pumpers Association Moench, Di- Joint Applicants R. Simplot Company, and Community Action Partnership Association ofldaho. Two other intervenors in the proceeding, Idaho Power Company and International Brotherhood of Electrical Workers Local 57, did not join in the Stipulation, but indicated that they will not oppose it. General Description of Stipulation and Commitments Please generally describe the Stipulatio~. In their direct testimony, the Applicants provided evidence that the Transaction is in the public interest, including an offer to adopt a set of commitments based upon the commitments adopted in this and other jurisdictions from the prior transaction (i.ScottishPower s acquisition ofPacifiCorp). In addition, the Applicants offered numerous new commitments involving generation options, transmission investment, clean air investment, energy efficiency, and customer service, among other subjects. While the parties that participated in the technical conference and settlement discussions recognized the benefits of those commitments, they raised some additional issues they thought should be addressed by the Applicants. The Stipulation addresses and resolves those issues in a way which, the parties to the Stipulation agree, satisfies the standard in Idaho for approval of the Transaction under Idaho Code ~ 61-328. Please generally describe the commitments included in the Stipulation. The commitments included in Appendix A to the Stipulation consist of the commitments offered in the Applicants' direct testimony with , in some cases modifications to address issues raised by the parties; new commitments entered into by the Applicants that apply to all PacifiCorp s jurisdictions; and new Idaho- Moench, Di- Joint Applicants specific commitments that either apply only to the Applicants' activities and operations in Idaho or could be extended to other states at their option. The parties were able to build upon the agreements that had been reached in Utah. Prior to the second settlement conference in Idaho, PacifiCorp and MEHC had reached agreement with the Utah parties, and filed a stipulation in Utah PSC Docket No. 05-035-54 (Utah Stipulation) on November 18. The Utah Stipulation included a number of modifications to the original commitments in response to issues raised in the Utah discussions; as well as new commitments agreed upon by the Applicants that were applicable to all of PacifiCorp' s jurisdictions. By using the Utah Stipulation as the starting point, the parties in Idaho were able to focus more of their attention on the issues specific to Idaho. This process resulted in 26 Idaho-specific commitments, which are included in Appendix A. Under the terms of the Stipulation, the Applicants agree to perform all of the commitments set forth in Appendix A according to the provisions of each commitment. The commitments set forth in Appendix A are intended to supersede the commitments from the prior transaction and the commitments offered in the Applicants ' direct testimony. The commitments are binding only upon MEHC, PacifiCorp and, where noted, their affiliates. The commitments have been offered by MEHC and PacifiCorp to ensure that the Transaction provides benefits to customers addresses identified concerns and risks, creates no harm to the public interest, and otherwise satisfies the regulatory requirements for approval of the Transaction. MEHC and PacifiCorp will not allege in any future proceeding before the Moench, Di - Joint Applicants Commission or the courts that by approving or agreeing to the Stipulation and the Transaction the Commission or the signatories agreed to waive any right to assert or adopt such positions regarding the prudence, just and reasonable character, rate or ratemaking impact or treatment, or public interest as they deem appropriate pertaining to the commitments. In the event MEHC and PacifiCorp determine that a commitment ceases to be in the public interest or otherwise should be eliminated or modified, MEHC and PacifiCorp will file with the Commission for approval of the elimination or modification, serving copies of the filing upon all parties to this proceeding. Does the Stipulation include provisions to address the expansion or modification of commitments in other jurisdictions? Yes. We anticipated the Idaho parties' concerns regarding the potential uncertainty associated with entering into a stipulation while negotiations were still underway in other PacifiCorp jurisdictions. In order to address those concerns the Stipulation provides the Commission with the opportunity and authority to consider and adopt commitments or conditions accepted by the Applicants or ordered in another state jurisdiction. Paragraph 7 of the Stipulation provides a proposed "most favored states" process to facilitate the Commission s and the parties' prompt consideration and adoption of out-of-state commitments. This process is based on the recognition that the Transaction cannot close until final state orders have been issued. Moench, Di - Joint Applicants Idaho-Specific Commitments Please discuss some of the Idaho-specific commitments included in the Stipulation. An issue of particular concern in Idaho is the continued availability of a dedicated Irrigation Specialist in the Company s Idaho service territory, which is addressed in Commitment I 1. The Applicants are committing to continue to make available a dedicated Irrigation Specialist in Rexburg and Shelley, and to continue to provide an Irrigation Hotline. Another issue important to some parties is the evaluation of market potential associated with the expansion of load curtailment programs in Idaho. Commitment I 8 provides that this issue will be considered part of the DSM study required under Commitment 44. Commitment I 10 concerns the implementation of a plan for measuring network performance in Idaho as an alternative to Momentary Average Interruption Frequency Index (MAIFI). Commitment I 10 provides that MEHC and PacifiCorp will promptly implement the proposed measurement plan and provide the results produced by that plan to Commission Staff and other interested parties in reliability review meetings. Please discuss the Idaho-specific commitments regarding resource acquisition issues. Idaho-specific Commitment I 22, which is found on pages 13 and 14 of Appendix A to the Stipulation, sets up a process to address various policy, technical, economic and planning issues associated with Integrated Gasification Combined Cycle (IGCC) technology. This Commitment provides for the Moench, Di - J oint Applicants formation of an IGCC Working Group to discuss, consider, share information regarding and develop a common understanding of issues associated with IGCC technology, including the benefits, costs and risks of that technology. Under Commitment I 23 , PacifiCorp will include within its 2006 IRP a wind penetration study to reappraise wind integration costs and cost-effective renewable energy levels, and an assessment of transmission options for PacifiCorp s system identified in the Rocky Mountain Area Transmissions Study (RMA TS) scenario 1 related to facilitating additional generation at Jim Bridger and, on equal footing, new cost-effective wind resources. Please discuss the Idaho-specific commitments related to low-income issues. Three separate Idaho-specific commitments address low-income issues. Commitment 113 addresses an identified concern relating to the PacifiCorp current policy of funding 50% of measure cost when federal matching funds are available. Under this commitment, PacifiCorp will file tariff revisions to effect a change to 100% funding of conservation measures when federal matching funds are no longer available, and will also consider in its next general rate case the possibility of changing its current 50% funding level to a higher percentage amount. Under Idaho-specific Commitment 114, MEHC and PacifiCorp commit to provide up to $20 000 annually for five years to match Idaho customers and employee contributions to Lend-a-Hand. This contribution will be recorded in non-utility accounts. Moench, Di - Joint Applicants Idaho-specific Commitment I 15 provides for use of shareholder funds to hire a consultant to study and design for possible implementation an arrearage management project for low-income customers. The goals of the project will include reducing service terminations, reducing referral of delinquent customers to third party collection agencies, reducing arrearages and collection litigation and increasing voluntary customer payment of arrearages. Please explain the Idaho-specific acquisition premium commitment. Idaho-specific Commitment I 18 , which is found on page 13 of Appendix A to the Stipulation, addresses the acquisition premium issue. The commitment, which is a modified version of the general commitment offered in direct testimony, requires the premium be recorded in the accounts of the acquisition company and not in PacifiCorp s accounts. What exactly does the commitment language allow PacifiCorp/MEHC to do? The commitment language clarifies that PacifiCorp and MEHC are precluded from deciding unilaterally at some future point to include the acquisition premium in the retail rates ofPacifiCorp customers. Because the premium will be recorded at the holding company level, the only way that the acquisition premium could ever be included in PacifiCorp s rates would be ifPacifiCorp affirmatively proposed to include the premium in retail rates and the Commission agreed. The intent of the commitment language is merely to preserve the right to make an argument to the Commission that the acquisition premium should be included in retail rates under one limited condition. MEHC is concerned that if it agrees to a commitment not to include the acquisition premium in rates and if it Moench, Di - Joint Applicants does so without a clear reservation of its rights, it would be denied the opportunity in a future rate case to even point out a potential violation of the matching principle, as discussed hereafter. The commitment leaves the determination of whether the inclusion of a premium should be allowed in the hands of the Commission, not PacifiCorp or MEHc. MEHC is seeking only to retain the right to make a future argument if necessary, nothing more. Under what limited condition would MEHC expect this right to be exercised? In order for MEHC and PacifiCorp to exercise their right to present its argument to the Commission regarding inclusion in rates of the acquisition premium PacifiCorp must be confronted with a potential violation of the matching principle of original cost ratemaking that (1) imputes to PacifiCorp customers (i.reduces the regulated revenue requirement on the basis of) a benefit associated with the premium accruing from a company above PacifiCorp in the holding company system while (2) failing to recognize in rates the cost associated with achieving that benefit. Such a situation would occur, for example, if the Commission were to attribute a lower cost of capital to PacifiCorp s regulated operations based upon substitution of debt costs from the holding company for the cost of utility equity, without recognizing the additional risk (higher cost of equity) to the holding company of its higher leverage. In this instance, PacifiCorp s regulated customers would benefit from a lower cost of capital that assumes a greater percentage of debt, which is typically lower cost than equity, without recognizing Moench, Di - Joint Applicants the increase in the cost of common equity (due to increased risk) that occurs as a result of that more leveraged financial structure. No request for inclusion of the acquisition premium in rates would be triggered, however, in situations where benefits obtained at the holding company level are appropriately allocated to PacifiCorp, along with the costs of achieving those benefits. For example, ifMEHC were able to achieve lower insurance costs post acquisition as a result of combining the insurance needs of itself and PacifiCorp, a portion of such savings (along with the costs related to achieving them) would be properly allocated to PacifiCorp. MEHC expects the lower net costs would be included in retail rates (reducing the regulated revenue requirement). MEHC would not consider this a situation that would allow PacifiCorp to argue for inclusion of the acquisition premium in retail rates. The commitment also makes clear that neither the Commission nor any party is being asked to accept or agree with any such arguments, or to waive any of its rights to object to such a request for relief. Conclusion A.' Why do you believe the Stipulation is just, reasonable and in the public interest? Appendix A to the Stipulation includes 50 general and 26 Idaho-specific commitments which address issues of importance to PacifiCorp s Idaho customers. Among those commitments are new commitments related to reducing costs for PacifiCorp and to address the Idaho-specific issues identified by Commission Staff and intervenors in our technical conference and settlement Moench, Di - Joint Applicants discussions. The Stipulation also includes commitments which reflect MEHC' willingness and ability to deploy capital to meet PacifiCorp s significant infrastructure needs, including increased investment in transmission, renewable energy and energy efficiency. The Applicants have also agreed, as I discussed above, that the Commission shall have the opportunity and authority to consider and adopt conditions and commitments agreed to or adopted in other jurisdictions. The Applicants submit that this Stipulation, including the commitment to a most favored states" process, strengthens many of the existing commitments addresses the issues and concerns raised by the parties, and provides real and significant benefits to PacifiCorp s Idaho customers. For all ofthese reasons, I conclude that the Stipulation is in the public interest and should be approved by the Commission. Does this conclude your testimony? Yes. Moench, Di - Joint Applicants CERTIFICATE OF SERVICE I hereby certify that I served a copy of the foregoing document upon the parties of record in this proceeding by first-class mail, addressed to said parties/attorneys ' addresses as shown below: Andrea L. Kelly Managing Director, Strategy PacifiCorp 825 NE Multnomah Portland, OR 97232 James R. Smith Monsanto Company Highway 34 North PO Box 816 Soda Springs, ill 83276 Douglas L. Anderson Senior Vice President and General Counsel MidAmerican Energy Holdings Company 302 S 36t Street, Suite 400 Omaha, NE 68131 Katie Iverson Brubaker & Associates 17244 W Cordova Court Surprise 85387 Mark C. Moench Senior Vice President, Law MidAmerican Energy Holdings Company 201 S Main Street, Suite 2300 Salt Lake City, UT 84111 Eric L. Olsen Racine, Olson, Nye, Budge & Bailey 201 E Center Pocatello, ill 83204-1391 Anthony Yankel 29814 Lake Road Bay Village, OH 44140 Donald L. Howell Deputy Attorney General Idaho Public Utilities Commission 472 West Washington Boise, ill 83702 Barton Kline Monica B. Moen Idaho Power Company PO Box 70 Boise, ill 83707 Terri Carlock Accounting Supervisor Idaho Public Utilities Commission 472 West Washington Boise, ill 83702 John R. Gale Vice President, Regulatory Affairs Idaho Power Company PO Box 70 Boise, ill 83707 Randall C. Budge Racine, Olson, Nye, Budge & Bailey, Chartered 201 E Center Pocatello, ill 83204-1391 Brad M. Purdy Attorney at Law 2019 N 17th Street Boise, ill 83702 Page 1 - CERTIFICATE OF SERVICE (PAC-05- Port1nd3-1527178.10051851-00005 Arthur F. Sandack 8 E Broadway, Suite 510 Salt Lake City, UT 84111 Alan Herzfeld Herzfeld & Piotrowski LLP 713 W Franklin Boise, ill 83701 DATED: December 20 2005. Joint Counsel for MidAmerican Energy Holdings Company and PacifiCorp dba Utah Power & Light Company Page 2 - CERTIFICATE OF SERVICE (PAC-05- Portlnd3-1527178.10051851-00005 Case No. P AC-OS- Exhibit No. 15 Witness: Mark C. Moench BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION IN THE MATTER OF THE JOINT APPLICATION OF MIDAMERICAN ENERGY HOLDINGS COMPANY AND ACIFICORP DBA UTAH POWER & LIGHT COMPANY FOR AN ORDER AUTHORIZING PROPOSED TRANSACTION CASE NO. PAC-05- EXHIBIT ACCOMPANYING TESTIMONY OF MARK C. MOENCH STIPULATION AND IDAHO COMMITMENTS December 20, 2005 Exhibit No. 15 Case No. PAC-05- Joint Applicants Witness: Mark C. Moench James M. Van Nostrand, ISB No. 7323 STOEL RIVES LLP 900 SW Fifth Avenue, Suite 2600 Portland, OR 97204 Telephone: (503) 294-9679 Fax: (503) 220-2480 Email: imvannostrand~stoe1.com Joint Counsel for MidAmerican Energy Holdings Company and PacifiCorp dba Utah Power & Light Company BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION IN THE MA TIER OF THE JOINT APPLICATION OF MIDAMERICAN ENERGY HOLDINGS COMPANY AND P ACIFICORP DBA UTAH POWER & LIGHT COMPANY FOR AN ORDER AUTHORIZING PROPOSED TRANSACTION CASE NO. P AC-O5- STIPULATION This Stipulation ("Stipulation ) is entered into by and among PacifiCorp, doing business as Utah Power & Light Company ("PacifiCorp ), MidAmerican Energy Holdings Company MERC"), the Idaho Public Utilities Commission Staff ("Staff'), Monsanto Company Monsanto ), the Idaho Irrigation Pumpers Association ("lIP A"), lR. Simplot Company Simplot"), Community Action Partnership Association of Idaho ("CAPAI"), and Idaho Power Company ("Idaho Power )! (collectively referred to as the "Parties I. INTRODUCTION The terms and conditions of this Stipulation are set forth herein. The Parties agree that this Stipulation represents a fair, just and reasonable compromise of the issues raised in this proceeding and that this Stipulation is in the public interest. The Parties, therefore I Although it is not a signatory to this Stipulation, Idaho Power does not oppose either the settlement of this matter or the tenus of the Stipulation. STIPULA nON - Page 1 Exhibit No. 15 Case No. P AC-O5- Joint Applicants Witness: Mark C. Moench recommend that the Public Utilities Commission ("Commission ) approve the Stipulation and all of its terms and conditions. Reference IDAP A 31.01.01.272,274. II. BACKGROUND On July 15 2005, MEHC and PacifiCorp (sometimes hereinafter jointly referred to as "Applicants ) filed an Application with the Commission seeking authorization pursuant to Idaho Code 9 61-328 authorizing a proposed transaction ("Transaction ) whereby MEHC would acquire all of the outstanding common stock ofPacjfiCorp and PacifiCorp would thereafter become an indirect wholly owned subsidiary ofMEHC. On August 17 2005 , Applicants submitted a revised Application reflecting the impact of the enactment of the Energy Policy Act of2005, including the repeal of the Public Utility Holding Company Act of 1935. . On August 18 , 2005 , the Commission issued a Notice of Application and a Notice of Revised Application. Petitions to intervene in this proceeding were filed by Monsanto, lIP A, Simplot CAPAI, Idaho Power Company and IBEW Local 57. By various orders, the Commission granted these interventions. Pursuant to the Commission s Order No. 29867 , representatives of the Parties met on November 2 and engaged in initial settlement discussions with a view toward resolving the Application in this case. Subsequent discussions were held on December 8. Based upon the settlement discussions among the Parties, as a compromise of the positions in this case, and for other consideration as set forth below, the Parties agree to the following terms: III. TERMS OF THE STIPULATION Appendix A contains the complete list of Commitments that Applicants collectively and individually agree to make in exchange for the support of the Parties in this proceeding (hereinafter referred to as "Commitments ). The Commitments are comprised of general commitments applicable to all the states in which PacifiCorp s service territory extends STIPULATION - Page 2 Exhibit No. 15 Case No. P AC-O5- Joint Applicants Witness: Mark C, Moench and Idaho-specific commitments which apply only to the activities and operations of Applicants within Idaho, By virtue of executing this Stipulation, the Applicants agree to perform all of the Commitments set forth in Appendix A according to the provisions of each Commitment as set forth therein. In the process of obtaining approvals of the Transaction in other states, the Commitments may be expanded or modified as a result of regulatory decisions or settlements. The Applicants agree that the Commission shall have an opportunity and the authority to consider and adopt in Idaho any commitments or conditions to which the Applicants agree or with which the Applicants are required to comply in other jurisdictions, even if such commitments and conditions are agreed to after the Commission enters its order in this docket. To facilitate the Commission s consideration and adoption of the commitments and conditions from other jurisdictions, the Parties urge the Commission to issue an order accepting this Stipulation as soon as practical, but to reserve in such order the explicit right to re-open Appendix A to add (without modification of the language thereof except such non-substantive changes as are necessary to make the commitment or condition applicable to Idaho) commitments and conditions accepted or ordered in another state jurisdiction. To provide input to the Commission to facilitate a prompt decision regarding the desirability or lack of desirability for these out-of-state commitments and conditions to be adopted in Idaho, the Parties agree to and recommend the following process: Within five calendar days after a stipulation with new or amended commitments is filed by the Applicants with a commission in another state jurisdiction Applicants will send a copy of the stipulation and commitments to the Parties. Within five calendar days after a commission in another state jurisdiction issues an order that accepts a stipulation to which Applicants are a party or otherwise imposes new or modified commitments or conditions, that order, together with all commitments and conditions of any type agreed to by Applicants or ordered by the commission in such other state, will be filed with the Commission and served STIPULATION - Page 3 Exhibit No. 15 Case No. PAC-O5- J oint Applicants Witness: Mark C. Moench on all parties to this docket by the most expeditious means practical. Within ten calendar days after the last such filing from the other states ("Final Filing ), any party to the docket wishing to do so shall file with the Commission its response including its position as to whether any of the covenants, commitments and conditions from the other jurisdictions (without modification of the language thereof except such nonMsubstantive changes as are necessary to make the commitment or condition applicable to Idaho) should be adopted in Idaho. Within five calendar days after any such response filing, any party to the docket may file a reply with the Commission. The parties agree to support in their filings (or by representation of same by MERC) the issuance by the Commission of an order regarding the adoption of such commitments and conditions as soon as practical thereafter, recognizing that the transaction cannot close until final state orders have issued. Not later than the Final Filing, MEHC and PacifiCorp will disclose to the Parties any written commitments, conditions or covenants made in another state jurisdiction (between the date of the filing of the Stipulation and the receipt of the last state order in the transaction docket) intended to encourage approval of the transaction or avoidance of an objection thereto. The Parties, by signing this Stipulation, acknowledge that the Applicants have satisfied the standard under Idaho Code g 61-328 for approval of the Transaction and request that the Commission issue its order approving the Application and this Stipulation. The Parties encourage the Commission to enter a final Idaho approval order by February 28, 2006. 10.The Parties submit this Stipulation to the Commission and recommend approval in its entirety pursuant to IDAP A 31.01.01.274. Parties shall support this Stipulation before the Commission, and no Party shall appeal any portion of this Stipulation or Order approving the same. If this Stipulation is challenged by any person not a party to the Stipulation, the Parties to this Stipulation reserve the right to cross-examine witnesses and put on such case as they deem appropriate to respond fully to the issues presented, including the right to raise issues that are STIPULATION - Page 4 Exhibit No. 15 Case No. PAC-O5- Joint Applicants Witness: Mark C. Moench incorporated in the settlements embodied in this Stipulation. Notwithstanding this reservation of rights , the Parties to this Stipulation agree that they will continue to support the Commission adoption of the terms of this Stipulation. 11.The Parties agree that this Stipulation represents a compromise of the positions of the Parties in this case. Other than the above referenced positions and any testimony filed in support of the approval of this Stipulation, and except to the extent necessary for a Party to explain before the Commission its own statements and positions with respect to the Stipulation all negotiations relating to this Stipulation shall not be admissible in evidence in this or any other proceeding regarding this subject matter. 12.Applicants acknowledge that the Commission s approval of the Stipulation, the Commitments or the Joint Application shall not bind the Commission in other proceedings with respect to the determination of prudence, just and reasonable character, rate or ratemaking treatment, or public interest of services, accounts, costs, investments, any particular construction project, expenditures or actions referenced in these Commitments. 13.In the event the Commission rejects any part or all of this Stipulation, or imposes any additional material conditions on approval of this Stipulation, each Party reserves the right upon written notice to the Commission and the other Parties to this proceeding, within 14 days of the date of such action by the Commission, to withdraw from this Stipulation. In such case, no Party shall be bound or prejudiced by the terms of this Stipulation, and each Party shall be entitled to seek reconsideration of the Commission s order, file testimony as it chooses, cross- examine witnesses, and do all other things necessary to put on such case as it deems appropriate. In such case, the Parties immediately will request the prompt reconvening of a prehearing conference for purposes of establishing a procedural schedule for the completion of the case. The Parties agree to cooperate in development of a schedule that concludes the proceeding on the earliest possible date, taking into account the needs of the Parties in participating in hearings and preparing briefs. STIPULATION - Page 5 Exhibit No. 15 Case No. PAC-O5- Joint Applicants Witness: Mark C. Moench 14.No Party shall be bound, benefited or prejudiced by any position asserted in the negotiation of this Stipulation, except to the extent expressly stated herein, nor shall this Stipulation be construed as a waiver of the rights of any Party unless such rights are expressly waived herein. Execution of this Stipulation shall not be deemed to constitute an acknowledgment by any Party of the validity or invalidity of any particular method, theory or principle of regulation or cost recovery. No Party shall be deemed to have agreed that any method, theory or principle of regulation or cost recovery employed in arriving at this Stipulation is appropriate for resolving any issues in any other proceeding in the future. No findings of fact or conclusions of law other than those stated herein shall be deemed to be implicit in this Stipulation. 15.Subject to Paragraph 16 of this Stipulation, the effective date of this Stipulation shall be the date of the closing of the Transaction. 16.The obligations of the Applicants under this Stipulation are subject to the Commission s approval of the Application in this docket on terms and conditions acceptable to the Applicants, in their sole discretion, and the closing of the Transaction. 17.To the extend any of above reference filing dates falls on a weekend or a holiday, the filing shall be due on the next business day. STIPULATION - Page 6 Exhibit No. 15 Case No. PAC-O5- Joint Applicants Witness: Mark C. Moench Respectfully submitted this Il/h day of December 2005. Idaho Public Utilities Commission Staff d t~,;f Deputy Attorney General PacifiCorp D. Douglas Larson Vice President, Regulation R. Simplot Company R. Scott Pasley Assistant General Counsel Idaho Irrigation Pumpers Association Eric L. Olsen Racine, Olson, Nye, Budge & Bailey, Chartered N: P AC-OS-- dh _Stipulation STIPULATION -Page 7 MidAmerican Energy Holdings Company ~!~ Senior Vice President, Law Monsanto Company Randall C. Budge Racine, Olson, Nye, Budge & Bailey, Chartered Community Action Partnership Association of Idaho (CAP AI) ~~_ Attorney at Law Exhibit No. 15 Case No. PAC-05- Joint Applicants Witness: Mark C. Moench Respectfully submitted this ~'-i""'ay of December 2005. Idaho Public Utilities Commission Staff MidAmerican Energy Holdi~gs Company Donald L. Howell II Deputy Attorney General Mark C. Moench Senior Vice President, Law Monsanto CompanyBy D. ou Larson Vice President, Regulation Randall C. Budge Racine, Olson, Nye, Budge & Bailey, Chartered R. Simp lot Company Community Action Partnership Association ofldaho (CAP AI) R. Scott Pasley Assistant General Counsel Brad M. Purdy Attorney at Law Idaho Irrigation Pumpers Association Eric L. Olsen Racine, Olson, Nye, Budge & Bailey, Chartered N:P AC-05-08 _Stipulation STIPULATION - Page 7 12/14/05 WED 09: 20 FAX 208 389 7464 J R Simp lot Co-Legal Exhibit No. 15 Case No. P AC-05- Joint Applicants Witness: Mark C. Moench Respectfully submitted tills ay of December 2005. Idaho PubUe Utilities Commission Staff MidAmeriean Energy Holdings Company Mark C. Moench Senior Vice President, Law Donald 1. Howell II Deputy Attorney General PacifiCorp Monsanto Company By' Randall C. Budge Racm,e, Olson, Nye, Budge & Bailey, Chartered D. Douglas Larson Vice President, Regulation R. Scott Pasley Assistant General Counse Community Action Partnership Association of Idaho (CAPAI) R. Simplot Company Brad M. Purdy Attorney at Law Idaho Irrigation Pumpers Association Eric L. Olsen Racine, Olson, Nye, Budge & Bailey, Chartered N:P AC.E-QS-o S- dh - Stipulation STIPULATION - Page 7 12/16/2005 16: 17 FAX 1 208 232 7352 Racine Law Exhibit No. 15 Case No. PAC-O5- Joint Applicants Witness: Mark C. Moench Respectfully submitted this b.f...day of December 2005. Idaho Public Utilities Connnission Staff MidAmerican Energy Holdings Company Mark C. Moench Senior Vice President, Law Donald L. Howell II Deputy Attornay General PacifiCorp Monsanto CompanyBy C. r1.../4-os- Randall C. Budge Racine, 0lso~ Nye, Budge & Bailey, Chartered D. Douglas Larson Vice President. Regulation R. Sjmplot Company Community Action Partnership Association of Idaho (CAP AI) R. Scott Pasley Assistant General Counsel Brad M. Purdy Attorney at Law . nc L. 01scn Izllb/f:JfJ Racine, Olson, Nye, Budge & Bailey, Chartered N:P AC-H.OS..oS ~S1.ip1,lhd.ion STIPULATION - Page 7 Exhibit No. 15 Case No. P AC-O5- Joint Applicants Witness: Mark C. Moench MEHC Acquisition ofPacifiCorp Idaho Consolidated List of Commitments Commitments Applicable to All States MEHC and PacifiCorp affirm the continuation (through March 31 , 2008) of the existing customer service guarantees and performance standards in each jurisdiction. MEHC and PacifiCorp will not propose modifications to the guarantees and standards prior to March 31 , 2008. Refer to Commitment 45 for the extension of this commitment through 2011. 2) 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. PacifiCorp will maintain its own accounting system, separate from MEHC' accounting system. All PacifiCorp financial books and records will be kept in Portland, Oregon. PacifiCorp s financial books and records and state and federal utility regulatory filings and documents 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. MEHC and PacifiCorp 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 or which are otherwise relevant to the business of PacifiCorp. This commitment is also applicable to the books and records of Berkshire Hathaway, which shall retain its books and records relevant to the business of PacifiCorp consistent with the manner and time periods of the Federal Energy Regulatory Commission s record retention requirements that are applicable to PacifiCorp s books and records. 5) 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 MERC to assign costs to PacifiCorp and amounts subject to allocation or direct charges. MEHC agrees to cooperate fully with such Commission audits. IDAHO COMMITMENTS CASE NO. PAC-O5- Exhibit No. 15 Case No. PAC-O5- Joint Applicants Witness: Mark C, Moench MERC Acquisition ofPaciflCorp Idaho Consolidated List of Commitments Commitments Applicable to All States 1 )MERC and PacifiCorp affirm the continuation (through March 31 , 2008) of the existing customer service guarantees and perfonnance standards in each jurisdiction. MEHC and PacifiCorp will not propose modifications to the guarantees and standards prior to March 31 , 2008. Refer to Commitment 45 for the extension of this commitment through 2011. 2) Penalties for noncompliance with perfonnance 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. PacifiCorp will maintain its own accounting system, separate from MEHC' accounting system. All PacifiCorp financial books and records will be kept in Portland, Oregon. PacifiCorp s financial books and records and state and federal' utility regulatory filings and documents 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. MEHC and PacifiCorp 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 or which are otherwise relevant to the business of PacifiCorp. This commitment is also applicable to the books and records of Berkshire Hathaway, which shall retain its books and records relevant to the business of PacifiCorp consistent with the manner and time periods of the Federal Energy Regulatory Commission s record retention requirements that are applicable to PacifiCorp s books and records. 5) 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 MERC to assign costs to PacifiCorp and amounts subject to allocation or direct charges. MERC agrees to cooperate fully with such Commission audits. IDAHO COMMITMENTS CASE NO. PAC-05- Exhibit No. 15 Case No. PAC-O5- Joint Applicants Witness: Mark C. Moench 7) MEHC and PacifiCorp will comply with all applicable Commission statutes and regulations regarding affiliated interest transactions, including timely filing of applications and reports. 8) PacifiCorp will file on an annual basis an affiliated interest report including an organization chart, narrative description of each affiliate, revenue for each affiliate and transactions with each affiliate. 9) 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 applicable orders and rules with respect to such matters. 10) 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 may be 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 regulation ofMEHC and PacifiCorp. However, while PUHCA is in effect, Berkshire Hathaway and MEHC waive such defenses. 11) Any diversified holdings and investments non-utility business or foreign utilities) ofMEHC following approval of the transaction will not be held by PacifiCorp or a subsidiary ofPacifiCorp. Ring-fencing provisions for PPW Holdings LLC will be the same as those in effect for NNGC Acquisitions, LLC. MEHC and PacifiCorp will notify the Commission of any changes in the ring-fencing provisions. This condition will not prohibit MEHC or its affiliates other than PacifiCorp from holding diversified businesses. 12) PacifiCorp or MEHC will notify the Commission subsequent to MEHC's 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. 13) The Intercompany Administrative Services Agreement (IASA) will include the corporate and affiliate cost allocation methodologies. The IASA will be filed with the Commission as soon as practicable after the closing of the transaction. Approval the IASA will be requested if required by law or rule, but approval for ratemaking purposes will not be requested in such filing. Refer to Commitment 14 (f). Amendments to the IASA will also be filed with the Commission. 14) 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: IDAHO COMMITMENTS CASE NO. PAC-05- Exhibit No. 15 Case No. P AC-O5- Joint Applicants Witness: Mark C. Moench a) For services rendered to PacifiCorp or each cost category subject to allocation to PacifiCorp by MERC or any of its affiliates, MERC must be able to demonstrate that such service or cost category is necessary to PacifiCorp for the performance of its regulated operations, is not duplicative of services already being performed within PacifiCorp, and is reasonable and prudent. b) 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.c) MERC and its subsidiaries will have in place positive time reporting systems adequate to support the allocation and assignment of costs of executives and other relevant personnel to PacifiCorp. d) 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. e) 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 MERC group. f)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. 15) 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. 16) MERC and PacifiCorp will exclude all costs of the transaction from PacifiCorp 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 ofthese costs within 30 days of the accounting close. 17) MERC and PacifiCorp will provide the Commission with unrestricted access to all written information provided by and to credit rating agencies that pertains to PacifiCorp. 18) 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 will notify the Commission if for any reason its common equity capital is reduced to below 44 percent of its total capital for a period longer than three consecutive months. PacifiCorp s 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 these minimum common equity percentages as financial conditions or accounting standards change, and PacifiCorp may request adjustments. IDAHO COMMITMENTS CASE NO. PAC-O5- Exhibit No. 15 Case No. PAC-05- Joint Applicants Witness: Mark C. Moench 19) The capital requirements of PacifiCorp, 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. 20) Neither PacifiCorp nor its subsidiaries will, without the approval of the Commission, make loans or transfer funds (other than dividends and payments pursuant to the Intercompany Administrative Services Agreement) to MEHC or its affiliates, or 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 of PacifiCorp. MEHC will not pledge any of the assets of the business ofPacifiCorp as backing for any securities which MERC or its affiliates (but excluding PacifiCorp and its subsidiaries) may issue. 21) 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 MERC. 22) MERC and PacifiCorp guarantee that the customers of P acifi Corp will be held harmless ifthe transaction between MEHC and PacifiCorp results in a higher revenue requirement for PacifiCorp than if the transaction had not occurred; provided, however, that MEHC and PacifiCorp do not intend that this commitment be interpreted to prevent PacifiCorp from recovering prudently incurred costs approved for inclusion in revenue requirement by the Commission. 23) PacifiCorp will continue a Blue Sky tariff offering in all states. PacifiCorp will continue to support this offering through innovative marketing, by modifying the tariff to reflect the developing green power market and by monitoring national certification standards. 24) PacifiCorp will continue its commitment to gather outside input on environmental matters, such as through the Environmental Forum. 25) 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. 26) MERC will maintain at least the existing level ofPacifiCorp s community-related contributions, both in terms of monetary and in-kind contributions. The distribution ofPacifiCorp s community-related contributions among the states will be done in a manner that is fair and equitable to each state. 27) MERC will continue to consult with regional advisory boards to ensure local perspectives are heard regarding community issues. IDAHO COMMITMENTS CASE NO. PAC-OS- Exhibit No. 15 Case No. PAC-O5- Joint Applicants Witness: Mark C. Moench 28) MEHC will honor PacifiCorp s existing labor contracts. 29) After the closing of the transaction, MERC and PacifiCorp will make no unilateral changes to employee benefit plans prior to May 23, 2007 that would result in the reduction of employee benefits. 30) PacifiCorp will continue to produce Integrated Resource Plans according to the then current schedule and the then current Commission rules and orders. 31) When acquiring new generation resources in excess of 100 MW and with a dependable life of 10 or more years, 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 for PacifiCorp. 32) Nothing in these acquisition commitments shall be interpreted as a waiver of PacifiCorp s or MERC's rights to request confidential treatment for information that is the subject of any commitments. 33) Unless another process is provided by statute, Commission regulations or approved PacifiCorp tariff, MEHC and PacifiCorp encourage the Commission to use the following process for administering the commitments. The Commission should 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 should take no action. The Commission shall have the authority to detennine if the corrective action has satisfied or corrected the violation. MEHC or PacifiCorp may request, for cause, an extension of these time periods. IfMEHC 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, as allowed under state laws and regulations. 34) Transmission Investment:MEHC and PacifiCorp have identified incremental transmission projects that enhance reliability, facilitate the receipt of renewable resources, or enable further system optimization. Subject to pennitting and the availability of materials, equipment and rights-of-way, MERC and PacifiCorp commit to use their best efforts to achieve the following transmission system infrastructure improvements I While MEHC has immersed itself in the details ofPacifiCorp s business activities in the short time since the announcement of the transaction, it is possible that upon further review a particular investment might not be cost-effective, optimal for customers or able to be completed by the target date. that should occur, MEHC pledges to propose an alternative to the Commission with a comparable benefit. The Commission may investigate the reasonableness of any determination by MEHClPacifiCorp that one or more of the identified transmission investments is not cost-effective or optimal for customers. IDAHO COMMITMENTS CASE NO. PAC-05- Exhibit No. 15 Case No. PAC-O5- Joint Applicants Witness: Mark C. Moench a) Path C Upgrade (-$78 million)- Increase Path C capacity by 300 MW (from S. Idaho to Northern Utah). The target completion date for this project is 2010. This project: enhances reliability because it increases transfer capability between the east and west control areas, facilitates the delivery of power from wind projects in Idaho, and provides PacifiCorp with greater flexibility and the opportunity to consider additional options regarding planned generation capacity additions. b) Mona - Oquirrh (-$196 million)- Increase the import capability from Mona into the Wasatch Front (from Wasatch Front South to Wasatch Front North). This project would enhance the ability to import power from new resources delivered at or to Mona, and to import from Southern California by "wheeling" over the Adelanto DC tie. The target completion date for this project is 2011. This project: enhances reliability by enabling the import of power from Southern California entities during emergency situations facilitates the acceptance of renewable resources, and enhances further system optimization since it enables the further purchase or exchange of seasonal resources from parties capable of delivering to Mona. c) Walla Walla - Yakima or Mid-C (-$88 million)- Establish a link between the Walla Walla bubble" and the "Yakima bubble" and/or reinforce the link between the "Walla Walla bubble" and the Mid-Columbia (at Vantage). Either of these projects presents opportunities to enhance PacifiCorp s ability to accept the output from wind generators and balance the system cost effectively in a regional environment. The target completion date for this project is 2010. 35) Other Transmission and Distribution Matters:MERC and PacifiCorp make the following commitments to improve system reliability: a) investment in the Asset Risk Program of$75 million over the three years, 2007- 2009 b) investment in local transmission risk projects across all states of $69 million over eight years after the close of the transaction c) 0 & M expense for the Accelerated Distribution Circuit Fusing Program across all states will be increased by $1.5 million per year for five years after the close of the transaction, and d) extension of the O&M investment across all states for the Saving SAIDI Initiative for three additional years at an estimated cost of$2 million per year.e) MERC and PacifiCorp will support the Bonneville Power Administration in its development of short-term products such as conditional firm. Based on the outcome from BPA's efforts, PaciflCorp will initiate a process to collaboratively design similar products at PacifiCorp. PacifiCorp will continue its Partial Interim Service product and its tariff provision that allows transmission customers to alter pre-scheduled transactions up to twenty minutes before any hour, and will notify IDAHO COMMITMENTS CASE NO. PAC-O5- Exhibit No. 15 Case No. PAC-O5- Joint Applicants Witness: Mark C. Moench parties to this proceeding ifit proposes changes to these two elements of its OATT. 36) Regional Transmission:MEHC recognizes that it can and should have a role in addressing the critical importance of transmission infrastructure to the states in which PacifiCorp serves. MERC also recognizes that some transmission projects, while highly desirable, may not be appropriate investments for PacifiCorp and its regulated customers. Therefore, MEHC shareholders commit their resources and leadership to assist PacifiCorp states in the development of transmission projects upon which the states can agree. Examples of such projects would be RMA TS and the proposed Frontier transmission line. 37) Reduced Cost of Debt: MERC believes that PacifiCorp s incremental cost OflOIlg- term debt will be reduced as a result of the proposed transaction, due to the association with Berkshire Hathaway. Historically, MERC's utility subsidiaries have been able to issue long-tenn debt at levels below their peers with similar credit ratings. MERC commits that over the next five years it will demonstrate that PacifiCorp s incrementallong-terrn debt issuances will be at least a spread often basis points below its similarly rated peers. MERC's demonstration will include information from a third party industry expert supporting its calculation and conclusion. IfMERC is unable to demonstrate to the Commission s satisfaction that PacifiCorp has achieved at least a ten-basis point reduction, PacifiCorp will accept up to a ten (10) basis point reduction to the yield it actually incurred on any incremental long-term debt issuances for any revenue requirement calculation effective for the five-year period subsequent to the approval of the proposed acquisition. It is projected that this benefit will yield a value roughly equal to $6.3 million over the post-acquisition five-year period. 38) Corporate Overhead Charges:MERC commits that the corporate charges to PacifiCorp from MERC and MEC will not exceed $9 million annually for a period of five years after the closing on the proposed transaction. (In FY2006, ScottishPower net cross-charges to PacifiCorp are projected to be $15 million. 39) Future Generation Options:In Commitment 31, MEHC and PacifiCorp adopt a commitment to source future PacifiCorp generation resources consistent with the then current rules and regulations of each state. In addition to that commitment, for the next ten years, MEHC and PacifiCorp commit that they will submit as part of any commission approved RFPs for resources with a dependable life greater than 10 years and greater than 100 MW , -- including renewable energy RFPs --a 100 MW or more utility "own/operate" alternative for the particular resource. It is not the intent or objective that such alternatives be favored over other options. Rather, the option for PacifiCorp to own and operate the resource which is the subject of the RFP will enable comparison and evaluation of that option against other viable alternatives. In addition to providing regulators and interested parties with an additional viable option for assessment, it can be expected that this commitment will enhance PacifiCorp ability to increase the proportion of cost-effective renewable energy in its generation IDAHO COMMITMENTS CASE NO. P AC-05- Exhibit No. 15 Case No. PAC-O5- Joint Applicants Witness: Mark C. Moench portfolio, based upon the actual experience ofMEC and the "Renewable Energy commitment offered below. 40) Renewable Energy:MEHC reaffirms PacifiCorp s commitment to acquire 1400 MW of new cost"effective renewable resources, representing approximately 7% of PacifiCorp s load. MERC and PacifiCorp commit to work with developers and bidders to bring at least 100 MW of cost-effective wind resources in service within one year of the close of the transaction. MERC and PacifiCorp expect that the commitment to build the Walla-Walla and Path C transmission lines will facilitate up to 400 MW of renewable resource projects with an expected in-service date of2008 -2010. MERC and PacifiCorp commit to actively work with developers to identify other transmission improvements that can facilitate the delivery of cost-effective wind energy in PacifiCorp s service area. In addition, MERC and PacifiCorp commit to work constructively with states to implement renewable energy action plans so as to enable PacifiCorp to achieve at least 1400 MW of cost-effective renewable energy resources by 2015. Such renewable energy resources are not limited to wind energy resources. 41) Coal Technology:MERC supports and affirms PacifiCorp s commitment to consider utilization of advanced coal-fuel technology such as super-critical or IGCC technology when adding coal-fueled generation. 42) Greenhouse Gas Emission Reduction:MERC and PacifiCorp commit to participate in the Environmental Protection Agency s SF6 Emission Reduction Partnership for Electric Power Systems. Sulfur hexafluoride (SF6) is a highly potent greenhouse gas used in the electric industry for insulation and current interruption in electric transmission and distribution equipment. Over a 1 OO-year period, SF6 is 23,900 times more effective at trapping infrared radiation than an equivalent amount of CO2, making it the most highly potent, known greenhouse gas. SF6 is also a very stable chemical, with an atmospheric lifetime of 3 200 years. As the gas is emitted, it accumulates in the atmosphere in an essentially un-degraded state for many centuries. Thus, a relatively small amount ofSF6 can have a significant impact on global climate change. Through its participation in the SF6 partnership, PacifiCorp will commit to an appropriate SF6 emissions reduction goal and annually report its estimated SF6 emissions. This not only reduces greenhouse gas emissions, it saves money and improves grid reliability. Since 1999, EPA's SF6 partner companies have saved $2.5 million from the avoided gas loss alone. Use ofimproved SF6 equipment and management practices helps protect system reliability and efficiency. Additionally, PacifiCorp will develop a strategy to identify and implement cost- effective measures to reduce PacifiCorp s greenhouse gas emissions. 43) Emission Reductions from Coal-Fueled Generating Plants:Working with the affected generation plant joint owners and with regulators to obtain required approvals, MERC and PacifiCorp commit to install the equipment likely to be necessary under future emissions control scenarios at a cost of approximately $812 IDAHO COMMITMENTS CASE NO. P AC"O5- Exhibit No. 15 Case No. PAC-O5- Joint Applicants Witness: Mark C. Moench million. Concucrent with any application for an air pennit, MEHC and PacifiCorp will discuss its plans regarding this commitment with interested parties and solicit input. While additional expenditures may ultimately be required as future emission reduction requirements become better defined, MEHC believes these investments in emission control equipment are reasonable and environmentally beneficial. The execution of an emissions reduction plan for the existing PacifiCorp coal-fueled facilities, combined with the use of reduced-emissions coal technology for new coal- fueled generation, is expected to result in a significant decrease in the emissions rate ofPacifiCorp s coal-fueled generation fleet. The investments to which MEHC is committing are expected to result in a decrease in the SO2 emissions rates of more than 50%, a decrease in the NOx emissions rates of more than 40%, a reduction in the mercury emissions rates of almost 40%, and no increase expected in the CO2 emissions rate. 44) Energy Efficiency and DSM Management: a) MEHC and PacifiCorp commit to conducting a company-defined third-party market potential study of additional DSM and energy efficiency opportunities within PacifiCorp s service areas. The objective of the study will be to identify opportunities not yet identified by the company and, if and where possible, to . recommend programs or actions to pursue those opportunities found to be cost- effective. The study will focus on opportunities for deliverable DSM and energy efficiency resources rather than technical potentials that may not be attainable through DSM and energy efficiency efforts. On-site solar and combined heat and power programs may be considered in the study. During the three-month period following the close of the transaction, MEHC and PacifiCorp will consult with DSM advisory groups and other interested parties to define the proper scope of the study. The findings ofthe study will be reported back to DSM advisory groups, commission staffs, and other interested stakeholders and will be used by the Company in helping to direct ongoing DSM and energy efficiency efforts. The study will be completed within fifteen months after the closing on the transaction, and MEHC shareholders will absorb the first $1 million of the costs of the study. b) PacifiCorp further commits to meeting its portion of the NWPPC's energy efficiency targets for Oregon, Washington and Idaho, as long as the targets can be achieved in a manner deemed cost-effective by the affected states. c) In addition, MEHC and PacifiCorp commit that PacifiCorp and MEC will annually collaborate to identify any incremental programs that might be cost- effective for PacifiCorp customers. The Commission will be notified of any additional cost-effective programs that are identified. 45) Customer Service Standards:MEHC and PacifiCorp commit to continue customer service guarantees and perfonnance standards as established in each jurisdiction provided that MERC and PacifiCorp reserve the right to request modifications of the guarantees and standards after March 31 , 2008 , and the right to request termination (as well as modification) of one or more guarantees or standards after 2011. The IDAHO COMMITMENTS CASE NO. PAC-OS- Exhibit No. 15 Case No. PAC-O5- Joint Applicants Witness: Mark C. Moench guarantees and standards will not be eliminated or modified without Commission approval. 46) Community Involvement and Economic Development:MEHC has significant experience in assisting its communities with economic development efforts. MEHC plans to continue PacifiCorp s existing economic development practices and use MEHC's experience to maximize the effectiveness of these efforts. 47) Corporate Presence (All States):MEHC understands that having adequate staffing and representation in each state is not optional. We understand its importance to customers, to regulators and to states. MEHC and PacifiCorp commit to maintaining adequate staffing and presence in each state, consistent with the provision of safe and reliable service and cost-effective operations. 48) IRP Stakeholder Process:PacifiCorp will provide public notice and an invitation to encourage stakeholders to participate in the Integrated Resource Plan (IRP) process. The IRP process will be used to consider Commitments 34, 39, 40 41 and 44. PacifiCorp will ~old IRP meetings at locations or using communications technologies that encourage broad participation. 49) Reporting on Status of Commitments:By June 1 , 2007 and each June 1 thereafter through June 1 2011 , PacifiCorp will file a report with the Commission regarding the implementation of the Commitments. The report will, at a minimum, provide a description of the performance of each of the commitments that have quantifiable results. If any of the commitments is not being met, relative to the specific terms of the commitment, the report shall provide proposed corrective measures and target dates for completion of such measures. PacifiCorp will make publicly-available at the Commission non-confidential portions of the report. 50) Pension Funding Policy:PacifiCorp will maintain its current pension funding policy, as described in the 2005 Actuarial Report, for a period of two years following the close of the transaction. Idaho-Specific Commitments I I. MEHC/PacifiCorp will continue to make a dedicated Irrigation Specialist available in Rexburg and Shelley in the Idaho service territory. The effectiveness of this service will be reviewed at the end of the 2007 irrigation season to determine whether it should be continued. The Irrigation Hotline will continue to be available Monday through Saturday, except holidays, from 7 AM to 7 PM, with the number published in the phone directory. I 2. Water Rights agreements will be abided by MEHC and PacifiCorp. 13. MEHC and PacifiCorp will provide the Commission access to corporate minutes including Board of Director s minutes and all committee minutes, along with any IDAHO COMMITMENTS CASE NO. PAC-OS- Exhibit No. 15 Case No. PAC-05- Joint Applicants Witness: Mark C. Moench related source documents that are relevant to the business and risk analysis of PacifiCorp. PacifiCorp and the Commission Staffwill establish an agreeable procedure to review these confidential documents in Portland, Oregon, Salt Lake City, Utah or Boise, Idaho. I 4. MEHC and PacifiCorp will provide the Commission access to operational, internal and risk audit reports and documentation. PacifiCorp and the Commission Staffwill establish an agreeable procedure to review these confidential documents and the timeline to provide an annual listing of such audits. IS. A near-final draft agreement for PPW Holdings LLC that contains the ring-fencing provisions of Commitment 11 will be sent to the Commission Staff by January 15, 2006. The final signed agreement will be filed with the Commission within 30 days after the close of the transaction. 16. Within 30 days of the close of the transaction, PacifiCorp will provide the Commission with a written list of changes that were made to employee benefit plans between the announcement of the transaction and the close of the transaction. PacifiCorp and MEHC will provide 30 days' notice to the Commission prior to merging PacifiCorp s pension with the pension plan of another MEHC business. I 7. Through December 31 , 2015, PacifiCorp will provide the Commission notice when it intends to increase the amount of dividend payments by 10% or more. 18. As part of the DSM study in Commitment 44, PacifiCorp will also consider the market potential associated with the expansion of existing programs, including the Irrigation and Monsanto load curtailment programs in Idaho. The study will compare the cost effectiveness ofDSM resources with comparable supply side resources. 19. MEHC and PacifiCorp commit to maintain a bid evaluation methodology that prudently compares any company owned and operated alternative to valid and conforming bid proposals submitted in response to a supply-side RFP. I 10. On January 31 2005, the Commission accepted PacifiCorp s proposal to eliminate its Network Performance Standard relating to Momentary Average Interruption Frequency Index (MAIFI) in light of the Company s commitment to develop an acceptable alternative to MAIFI as soon as possible. The Company has developed its proposed measurement plan and is scheduled to present to the Commission Staff at its next reliability meeting (scheduled for December 20, 2005). Within 60 days after this meeting, the Company will file the plan with the Commission. MEHC and PacifiCorp commit to implement this plan and provide the results of these calculations to Commission Staff and other interested parties in reliability review meetings. IDAHO COMMITMENTS CASE NO. PAC-O5- Exhibit No. 15 Case No. PAC-O5- Joint Applicants Witness: Mark C. Moench I 11. PacifiCorp is required to apply to the Commission for approval of security issuances pursuant to Idaho Code Title 61, Chapter 9. PacifiCorp will not seek an exemption from this requirement for twelve months following the closing of this transaction. Staff will evaluate the "all-in-cost" of issuances for inclusion in rates and as it relates to the Reduced Cost of Debt Commitment 37. I 12. MEHC and PacifiCorp acknowledge that the Commitments being made by MEHC and PacifiCorp are binding only upon them and their affiliates where noted (and upon Berkshire Hathaway where specifically mentioned). In this proceeding Applicants are not requesting a detennination of the prudence, just and reasonable character, rate or ratemaking treatment, or public interest of the investments, expenditures or actions referenced in the Commitments. In other appropriate proceedings, the parties may take positions regarding the prudence, just and reasonable character, rate or ratemaking treatment, or public interest of the investments, expenditures or actions referenced in these Commitments as the parties deem appropriate. I 13. With respect to the Low Income Weatherization Program managed by community action agencies in Idaho, PacifiCorp commits to the following: a) Within 30 days of completion of the transaction, PacifiCorp will file proposed revisions to its Schedule 21 Tariff to effect a change in funding of conservation measures from 50% of measure cost to 100% of measure cost when federal matching funds are no longer available to fund measures at PacifiCorp customer s premise, subject to the $150,000 annual funding limit in the tariff. b) In PacifiCorp s next Idaho general rate case, PacifiCorp will include in its direct testimony an analysis of the costs and benefits of changing its current practice of matching 50% of federal contributions to matching at a higher percentage amount. I 14. MEHC and PacifiCorp commit up to $20 000 annually for five years to match Idaho customer and employee contributions to Lend-a-Hand. This contribution will be recorded in non-utility accounts. When appropriate, MERC and PacifiCorp commit to work with low-income advocates and consumer groups to evaluate additional matching contributions. I 15. MEHC commits to provide shareholder funds to hire a consultant to study and design for possible implementation an arrearage management project for low- income customers. PacifiCorp will provide a resource for facilitation of a working group to oversee the project. The project will be developed by PacifiCorp in conjunction with the Idaho Public Utilities Commission, the Utah Division of Public Utilities, the Utah Committee for Consumer Services, low-income advocates and other interested parties. The goals of the project will include reducing service tenninations, reducing referral of delinquent customers to third party collection agencies, reducing arrearages and collection litigation, and increasing voluntary customer payments of arrearages. The amount of shareholder funds for this study will be up to $66 000 on a total company basis if all six PacifiCorp states elect to IDAHO COMMITMENTS CASE NO. P AC-05- Exhibit No. 15 Case No. PAC-O5- Joint Applicants Witness: Mark C. Moench participate. If less than six states participate, the amount of the shareholder funds will be reduced proportionally. I 16. 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. I 17. 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. I 18. The premium paid by MEHC for PacifiCorp will be recorded in the accounts of the acquisition company and not in the utility accounts ofPacifiCorp. By this commitment, MEHC and PacifiCorp are not agreeing or otherwise committing to waive any arguments that they might have pertaining to a symmetrical expense adjustment based on the regulatory theory of the matching principle in the event a party in a proceeding before the Commission proposes an adjustment to PacifiCorp s revenue requirement associated with the imputation of benefits (other than those benefits committed to in this transaction) accruing from PPW Holdings LLC, MEHC, or affiliates. MEHC and PacifiCorp acknowledge that neither the Commission nor any party to this proceeding is being asked to agree with or accept any such arguments or to waive any right to assert or adopt such positions regarding the prudence, just and reasonable character, rate or ratemaking impact or treatment, or public interest as they deem appropriate pertaining to this commitment. I 19 PacifiCorp will provide semi annual reports to the Commission and Commission Staff describing PacifiCorp s performance in meeting service standard commitments, including both performance standards and customer guarantees. I 20. PacifiCorp will provide to the Commission, on an informational basis, credit rating agency news releases and final reports regarding PacifiCorp when such reports are known to PacifiCorp and are available to the public. I 21. MERC commits that immediately following the closing of the transaction, the acquiring company (PPW Holdings LLC) will have no debt in its capital structure. MERC and PacifiCorp commit to provide the Commission 30 days prior notice if PPW Holdings LLC ever intends to issue debt. MERC and PacifiCorp acknowledge that if PPW Holdings LLC does issue debt, the Commission has the authority to consider whether additional ring-fencing provisions may be appropriate. 122. MEHC and PacifiCorp commit to form an IGCC Working Group, sponsored by PacifiCorp to discuss various policy and technology issues associated with IGCC, carbon capture, and sequestration. Working Group members would include IDAHO COMMITMENTS CASE NO. PAC~O5- Exhibit No. 15 Case No. P AC-O5- Joint Applicants Witness: Mark C. Moench representatives from major stakeholder and regulatory groups, PacifiCorp and MERC officials, and others as appropriate. Some issues and challenges to development that would be considered by the Working Group would include: the status of development of carbon sequestration policy and methods including requirements for monitoring and verifying sequestration options; information sharing, so that, to the extent possible, all parties develop a shared understanding of expected IGCC technology benefits, expected capital and O&M costs, and potential risks; information sharing to understand such terms and associated requirements with concepts such as "carbon capture ready" and "permanent sequestration issues related to technology of and permitting for IGCC air emissions, waste disposal, water use and site usage; commercial terms and conditions associated with IGCC plant development, construction, and maintenance; and implications of SB 26 on development of IGCC plants given the implications of long development lead times, development costs, project risk, and cost uncertainty. The IGCC Working Group would meet periodically to discuss the above issues and identify possible solutions, and to stay abreast of the evolving technology and commercial environment. I 23. PacifiCorp agrees to include the following items in the 2006 IRP: a) a wind penetration study to reappraise wind integration costs and cost-effective renewable energy levels; and b) an assessment of transmission options for PacifiCorp s system identified in the RMA TS scenario 1 related to facilitating additional generation at Jim Bridger and, on equal footing, new cost-effective wind resources. 124. At the time of the closing of the transaction, MERC will file with the Commission a letter from Berkshire Hathaway committing to be bound by Commitments 4 and 5 and any other commitments applicable to affiliates of MEHC. 125. The scope of the "most favored nation" commitment contained in Section III of the Stipulation will extend to and include any resolution or settlement prior to closing of the transaction of any procedural, jurisdictional or federal law issues or disputes raised in PacifiCorp vs. Rob Hurless Case No. CV -04-031 J, United States District Court, District of Wyoming, regardless of the manner, context or proceeding in which any such settlement or resolution paid in connection with such settlement or resolution, to the extent such settlement or resolution includes any kind of ongoing waiver, or agreement to litigate in state tribunals, of any federal preemption, filed rate doctrine or similar federal issues, or any other limitation, condition or waiver of federal jurisdiction or federal forwn as it relates to state ratemaking (referred to hereinafter as a procedural limitation clause ("PLC")). If any PLC is agreed to by PacifiCorp in any such settlement or resolution, PacifiCorp agrees to identify the PLC in stand-alone language and MEHC agrees to include such PLC as a deemed IDAHO COMMITMENTS CASE NO. P AC-05- Exhibit No. 15 Case No. PAC-O5- Joint Applicants Witness: Mark C. Moench commitment to the Wyoming transaction docket and by virtue of the most favored nations clause referred to above, the PLC will be available for adoption in Idaho pursuant to the procedures in the Stipulation. I 26. MERC and PacifiCorp will supplement the report filed with the Commission pursuant to Commitment 49 by including information regarding the implementation of each of the Idaho-Specific Commitments I 1 through I 25. N:P ACEOS08- Commitments - dh IDAHO COMMITMENTS CASE NO. P AC-O5-