20060309Stipulated motion amend ID commitments.pdf

James M. Van Nostrand, ISH No. 7323
STOEL RIVES LLP
900 SW Fifth Avenue, Suite 2600
Portland, OR 97204
Telephone: [phone]
Fax: [phone]
Email: imvannostrand0)stoel.com
Joint Counsel for MidAmerican Energy
Holdings Company and PacifiCorp dba Utah
Power & Light Company
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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-O5-
STIPULATED MOTION TO
AMEND IDAHO COMMITMENTS
IN ORDER NO. 29973
I. PARTIES
This Stipulated Motion is entered into by and among PacifiCorp, doing business as
Utah Power & Light Company ("PacifiCorp ), MidAmerican Energy Holdings Company ("MEHC"
the Idaho Public Utilities Commission Staff ("Staff'), Monsanto Company ("Monsanto ), the Idaho
Irrigation Pumpers Association ("lIP A"), J.R. Simplot Company ("Simplot"), and Community Action
Partnership Association of Idaho ("CAP AI") (collectively referred to as the "Parties ). 1
II. BACKGROUND
On December 16, 2005 , the Parties filed a stipulation ("Settlement Stipulation ) in this
proceeding recommending that the Idaho Public Utilities Commission ("Commission ) approve the
I Idaho Power Company and IBEW Local 57 are also parties to this proceeding, but did not oppose the settlement and do
not oppose this Stipulated Motion.
STIPULATED MOTION TO AMEND
IDAHO COMMITMENTS - Page 1
acquisition of PacifiCorp by MEHC , subject to the commitments included as Appendix A to the
Settlement Stipulation.
On February 13 2006, the Commission issued its Order No. 29973 in this proceeding
(the "Order ). The Order approved the acquisition, conditioned by the commitments included in a
Consolidated List of Commitments attached to the Order ("Idaho Commitments
).
Order at 13. The
Idaho Commitments comprise 76 commitments or conditions that Applicants or other named parties
commit to perform in support of the Application for approval ofthe acquisition. Id. at 8. The Idaho
Commitments consist of two groups: 50 general commitments applicable to all states, and 26 Idaho-
specific commitments. Id.
Paragraph 7 of the Settlement Stipulation provides for a "most favored nations
process following issuance ofthe Order. According to this provision:
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 ofthe 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 ofthe 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
STIPULATED MOTION TO AMEND
IDAHO COMMITMENTS - Page 2
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 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 non-substantive 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
representation of same by MEHC) 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.
The Order describes this process as follows:
The settlement Stipulation also contains a "most favored nations" provision.
Stipulation at ~ 7. This provision allows the Commission to review and adopt
any commitment or condition ordered by the other five states, even after this
Order is issued. In other words, any assurances, conditions or benefits adopted
in the other five states that would create a benefit to Idaho customers could
subsequently be adopted in Order under the terms of the Stipulation.
Order at
Later in the Order, the Commission stated that it expected "the Staff and other parties
to apprise us if there are new or modified commitments that would benefit Idaho customers.Order
at 13. The Order states that in approving the acquisition
, "
(t)he Commission recognizes under the
most favored nations ' provision ofthe Stipulation the commitments may be amended based upon the
orders issued in the other five (5) states.Id.
On March 9 2006, the Parties met at the Commission s offices in Boise for purposes
of implementing the "most favored nations" process contemplated by paragraph 7 of the Settlement
Stipulation. The Parties originally developed the Settlement Stipulation with the benefit of the
commitments agreed upon by Applicants in approval proceedings in the states of Utah, Oregon, Idaho
and California; Washington and Wyoming were the only states in which a settlement was reached
after the Parties had agreed upon the Settlement Stipulation in Idaho. As part of the "most favored
nations" process, the Parties considered, and agreed upon adoption in Idaho of various commitments
STIPULATED MOTION TO AMEND
IDAHO COMMITMENTS - Page 3
from, the stipulations entered into by the Applicants in Washington and Wyoming. In addition, the
Parties considered the orders issued by the commissions in the other jurisdictions, and the covenants
commitments and conditions included in such orders. The Parties agreed upon adoption in Idaho of
various covenants, commitments and conditions from the orders issued by the commissions in the
other jurisdictions.
and conditions which the Parties agree should be adopted in Idaho. These include the following:
Attachment 1 to this Stipulated Motion identifies the various covenants, commitments
General Commitment 11 (c), which requires notification to the Commission of any
changes in the ring-fencing provisions.
125, which pertains to the Commission s jurisdiction to determine the prudence of
PacifiCorp s wholesale power transactions. The language formerly included in 125 is
deleted and replaced with language from a Wyoming-specific commitment on that
same Issue.
131 , which pertains to a reduction in PacifiCorp s A&G costs. The language formerly
included in I 31 is replaced with language from a Wyoming-specific commitment on
that same issue. As a result, Appendix 3 is deleted as no longer necessary.
137, which prohibits PacifiCorp from directly owning equity shares of either Berkshire
Hathaway or MEHc.
138, which requires 30 days ' notice to the Commission ifMEHC intends to create a
corporate entity between PPW Holdings LLC and MEHC.
139, which commits MEHC and PacifiCorp to use asymmetrical pricing under
specified circumstances for affiliate charges or costs not covered by the provisions of
the IASA.
I 40, which describes the showing that PacifiCorp must make in a subsequent rate
proceeding in the event that PacifiCorp obtains a loan from its parent company or any
affiliated company.
I 41 , which commits PacifiCorp to initiate a collaborative effort to track low-income
issues by identifying and collecting data pertinent to low-income customers in
PacifiCorp s Idaho service territory.
amend the Idaho Commitments attached to the Order to include the additional agreed upon covenants
The Parties therefore present the following Stipulated Motion for the Commission to
commitments and conditions arising from the "most favored nations" process.
STIPULATED MOTION TO AMEND
IDAHO COMMITMENTS - Page 4
III. STIPULATED MOTION TO AMEND IDAHO COMMITMENTS
10.The Parties jointly request that the Commission, in exercise of the authority it
expressly reserved for itself on page 13 ofthe Order, to amend the Idaho Commitments by
substituting the Consolidated List of Commitments included as Attachment 2 to this Stipulated
Motion in replacement of the Idaho Commitments originally attached to the Order.
11.The Parties agree that with the additional commitments included in Attachment 2, the
acquisition continues to meet the standard for approval under Idaho Code ~ 61-328. The Parties
recommend approval of the acquisition subject to the commitments set forth in Attachment 2. The
Parties further agree to update Appendix 2 to reflect Idaho-specific calculations and to delete
Appendix 3 to the Order.
12.The Parties agree that through December 31 , 2011 , MEHC and PacifiCorp will both
confer with the signatories and provide drafts in a timely manner prior to introducing legislation in
the Idaho Legislature that would impact Idaho utility regulation.
13.The Parties request that the Commission issue its order adopting the amended Idaho
Commitments on an expedited basis, as permitted by Rule 256.02 and 256.03 of the Commission
Rules of Procedure, IDAP A 31.01.01. Specifically, the Parties request that such order be issued no
later than March 15, 2006, which will permit the transaction to close by the end of March, as
requested in the original Joint Application. Inasmuch as all parties to the proceeding are aware of the
Stipulated Motion and either join in it or do not oppose it, the Parties submit that this Stipulated
Motion complies with the provisions of Rule 256.02.a. and 256.02.b. of the Commission Rules of
Procedure, IDAP A 31.01.01.
14.Except as otherwise modified herein, the Settlement Stipulation remains in full force
and effect. The obligations of the Applicants under such Settlement Stipulation are subject to the
Commission s approval ofthe Application in this docket on terms and conditions acceptable
Applicants, in their sole discretion, and the closing of the transaction.
STIPULATED MOTION TO AMEND
IDAHO COMMITMENTS - Page 5
This STIPULATED MOTION is entered into by the Parties as of March 9, 2006.
Donald L. H ell II
Deputy Attorney General
PacifiCorp
D. Douglas Larson
Vice President, Regulation
R. Simp lot Company
R. Scott Pasley
Assistant General Counsel
~ho ~n Pumpers Association
BJY-
CEflc L. Olsen
Racine, Olson, Nye, Budge & Bailey,
Chartered
STIPULATED MOTION TO AMEND
IDAHO COMMITMENTS - Page 6
MidAmerican Energy Holdings Company
Mark . Moench
Senior Vice President, Law
Monsanto Company
~C,
Randall C. Budge
Racine, Olson, Nye, Budge & Bailey,
Chartered
Community Action Partnership
Association of Idaho (CAP AI)
By
Brad M. Purdy
Attorney at Law
This STIPULATED MOTION is entered into by the Parties as of March 9, 2006.
Idaho Public Utilities Commission Staff
Donald L. HowelllI
Deputy Attorney General
PacifiCorp
D. Douglas Larson
Vice President, Regulation
R. Simp)ot Company
R. Scott Pasley
Assistant General Counsel
Idaho Irrigation Pumpers Association
Eric L. Olsen
Racine, Olson, Nye, Budge & Bailey,
Chartered
STIPULATED MOTION TO AMEND
IDAHO COMMITMENTS - Page 6
Mid American Energy H()ldings Company
Mark C. Moench
Senior Vice President, Law
Monsanto Company
Randall C. Budge
Racine, Olson, Nye, Budge & Bailey,
Chartered
Community Action Partnership
Association of Idaho (CAPAI)
Brad M. Purdy
Attorney at Law
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-O5-
STIPULATED MOTION TO
AMEND IDAHO COMMITMENTS
IN ORDER NO. 29973
ATTACHMENT 1
NEW OR REVISED COMMITMENTS
A TT ACHMENT
New General Commitment:
New subsection (c) is added to General Commitment 11:
PacifiCorp will notify the Commission of any changes in the ring-fencing provisions. Such
notice shall include verification that (i) the change has been approved by the independent
director ofPacifiCorp s parent company, and (ii) the rating agencies have confirmed that
there will be no credit downgrade from the changed ring-fencing protections.
Revised Idaho-Specific Commitments
Language formerly included as I 25 is replaced with the following:
125. With respect to any proceeding, including but not limited to any rate case, tariff filing,
pass-through application, show cause, complaint or other proceeding, wherein PacifiCorp
Idaho retail rates are based, in whole or in part, upon PacifiCorp s wholesale power
transactions, PacifiCorp and MEHC acknowledge that the Commission has jurisdiction to
determine the prudence ofPacifiCorp s wholesale power transactions and whether
PacifiCorp s retail rates are just and reasonable. To the extent PacifiCorp contends the
Commission is required to include the costs of the wholesale power transactions in Idaho
retail rates, PacifiCorp and MEHC commit that PacifiCorp will raise and litigate such
issues before the Commission. To the extent decisions regarding such issues are within the
areas reserved to the exclusive jurisdiction of the Commission, PacifiCorp and MEHC
agree that any challenge to the Commission order will be in the form of an appeal of that
order. In the event that PacifiCorp anticipates a court challenge to a Commission order that
would trigger the provisions of Commitment 125 , PacifiCorp will (1) seek a rehearing of
such Commission order; and (2) identify in writing in its petition for rehearing those
contested issues which it believes are and are not within the areas reserved to the exclusive
jurisdiction of the Commission. (Source: Wy 6, as modified by Wyoming PSC order)
Language formerly included as I 31 is replaced with the following:
131.
MEHC and PacifiCorp commit that PacifiCorp s total company A&G costs as reflected in
FERC Accounts 920 through 935 will be reduced by $6 million annually from a baseline
amount of$228.8 million. The maximum amount of the total company rate credit in any
year is $6 million per year. This commitment expires December 31 , 2010. Beginning with
the first month after the close of the transaction, Idaho s share of the $0.5 million monthly
rate credit will be deferred for the benefit of customers and accrue interest at PacifiCorp
authorized rate of return. This Commitment is in lieu of Commitments 22 and U 23 from
the Utah settlement, and a state must choose between this Commitment I 31 and
Commitments 22 and U 23.
The credit will be offsetable on a prospective basis, for every dollar that PacifiCorp
demonstrates to the Commission s satisfaction, in a subsequent general rate case, that total
company A&G expenses included in PacifiCorp s rates (including any adjustments adopted
ATTACHMENT
by the Commission to these categories) are less than $6 million above the "Stretch Goal"
and have not been shifted to other regulatory accounts. The 2006 Stretch Goal will be
$222.8 million. Subsequent Stretch Goals shall equal the 2006 Stretch Goal multiplied by
the ratio of the Global Insight's Utility Cost Information Service (UCIS)-Administrative
and General- Total Operations and Maintenance Index (INDEX CODE Series
JEADGOM), for the test period divided by the 2006 index value. If another index is
adopted in a future PacifiCorp case, that index will replace the aforementioned index and
will be used on a prospective basis only. If this occurs, the Stretch Goal for future years
will equal the Stretch Goal from the most recent full calendar year multiplied by the ratio
of the new index for the test period divided by the new index value for that same most
recent full calendar year. (Source: Wy 12)
New Idaho-Specific Commitments:
137. MEHC and PacifiCorp commit that PacifiCorp will not directly own equity shares of either
Berkshire Hathaway or MEHC, if MEHC were ever to become publicly traded. (Source:
Wa9)
138. MEHC commits to provide 30 days' notice to the Commission if it intends to create a
corporate entity between PPW Holdings LLC and MEHC. MEHC further states that it has
no current intention to create such a corporate entity. (Source: Wa 10)
139. MEHC and PacifiCorp commit to use asymmetrical pricing for affiliate charges or costs
not covered by the provisions ofthe IASA, if a readily identifiable market for the goods
services or assets exists, and if the transaction involves a cost of more than $500 000.
(Source: Wy 14)
140. MEHC and PacifiCorp commit that in the event that PacifiCorp obtains a loan from its
parent company or any affiliated company, PacifiCorp will, in any subsequent rate
proceeding demonstrate that the debt obligation interest, terms, and conditions are
comparable to or less than what PacifiCorp could have obtained in the market at the time
ofthe debt was obtained by PacifiCorp, that the loan is on reasonable terms and without
markup to the holding company s cost of funds, and that the debt procurement will not
interfere with any ring-fencing mechanisms that secure the utility. (Source: Wy 18)
141. MEHC and PacifiCorp commit that, within sixty (60) days of the close ofthe transaction
PacifiCorp will initiate a collaborative effort with the Commission Staff, representatives of
the Community Action Partnership Association of Idaho, and other interested parties to
track low-income issues by identifying and collecting data pertinent to low-income
customers in PacifiCorp s Idaho service territory. (Source: Wa 15)
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-
STIPULATED M OTI ONTO
AMEND IDAHO COMMITMENTS
IN ORDER NO. 29973
ATTACHMENT 2
CONSOLIDATED LIST OF COMMITMENTS
TO BE SUBSTITUTED FOR IDAHO COMMITMENTS
INCLUDED AS A TT ACHMENT TO ORDER NO. 29973
ATTACHMENT 2
MEHC Acquisition of PacifiCorp
Idaho
Consolidated List of Commitments
Commitments Applicable to All States
1 )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
, 2008. Refer to Commitment 45 for the extension of this commitment through 2011.
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's 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
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 ofPacifiCorp. 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.
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.
MEHC and PacifiCorp will comply with all applicable Commission statutes and
regulations regarding affiliated interest transactions, including timely filing of applications
and reports.
IDAHO COMMITMENTS
CASE NO. P AC-05-
ORDER NO. 29973
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.
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
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
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 ofMEHC
and PacifiCorp. However, while PUHCA is in effect, Berkshire Hathaway and MEHC
waive such defenses.
11 )a) Any diversified holdings and investments (e., non-utility business or foreign utilities) of
MEHC following approval of the transaction will not be held by PacifiCorp or a subsidiary
of PacifiCorp. This condition will not prohibit MEHC or its affiliates other than PacifiCorp
from holding diversified businesses.
Ring-fencing provisions for PPW Holdings LLC will include the provisions in Appendix 1.
These provisions have been derived from those in effect for NNGC Acquisition, LLC as of
December 1 2005.
PacifiCorp will notify the Commission of any changes in the ring-fencing provisions. Such
notice shall include verification that (i) the change has been approved by the independent
director ofPacifiCorp s parent company, and (ii) the rating agencies have confirmed that
there will be no credit downgrade from the changed ring-fencing protections.
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 of MEHC; 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 of 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 (t). Amendments to the IASA will also
be filed with the Commission.
IDAHO COMMITMENTS
CASE NO. PAC-05-
ORDER NO. 29973
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:
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 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 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.
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.
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) MEHC and PacifiCorp will exclude all costs ofthe 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 ofthe accounting close.
17) MEHC and PacifiCorp will provide the Commission with unrestricted access to all written
information provided by and to credit rating agencies that pertains to PacifiCorp or MEHC.
Berkshire Hathaway and MEHC will also provide the Commission with unrestricted access
to all written information provided by and to credit rating agencies that pertains to MEHC's
subsidiaries to the extent such information may potentially impact PacifiCorp.
IDAHO COMMITMENTS
CASE NO. P AC-05-
ORDER NO. 29973
18)
a) MEHC and PacifiCorp commit that PacifiCorp will not make any dividends to PPW
Holdings LLC or MEHC that will reduce PacifiCorp s common equity capital below the
following percentages of its Total Capital without Commission approval:
48.25% from the date ofthe close of the transaction through
December 31 , 2008;
47.25% from January 1 2009, through December 31 , 2009;
46.25% from January 1 2010 through December 31 , 2010;
45.25% from January 1 2011 through December 31 , 2011;
44.00% after December 31 , 2011.
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 more than one year. For purposes
of calculating the numerator of the percentage, common equity will be increased by 50% of
the remaining balance of preferred stock that was in existence prior to the acquisition of
PacifiCorp by MEHc. PacifiCorp and MEHC will work with Commission staff to
determine a percentage of common equity credit to apply to preferred stock issued by
PacifiCorp after the acquisition of PacifiCorp by MEHC. In the absence of such an
agreement between Commission staff and the Companies, MEHC and PacifiCorp agree to
treat new issuances of preferred stock as 100% debt, unless a Commission order approves a
different percentage.
MEHC and PacifiCorp commit that PacifiCorp will not make any dividends to PPW
Holdings LLC or MEHC that will reduce PacifiCorp s common equity capital below 35%
of its Total Adjusted Capital without Commission approval. For purposes of calculating
the numerator ofthe percentage, common equity will not include any portion ofPacifiCorp
preferred stock issued and outstanding. PacifiCorp s Total Adjusted Capital is defined as
common equity, preferred equity, long-term debt, short-term debt and capitalized lease
obligations.
The Commission, on its own motion or at the request of any party, may reexamine the
minimum common equity percentages as financial conditions or accounting standards
warrant.
19) 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 of
MEHC and PacifiCorp.
20) Neither PacifiCorp nor its subsidiaries will, without the approval ofthe 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
IDAHO COMMITMENTS
CASE NO. P AC-05-
ORDER NO. 29973
business of PacifiCorp as backing for any securities which MEHC 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 ifthe transaction had not occurred.
Specifically, no capital financing costs should increase by virtue of the fact that PacifiCorp
was acquired by MEHc.
22) (This Commitment number has intentionally been left blank. Commitment 22 is not
available if a state selects Oregon-Specific Commitment 0 12 as Staff recommends in
Idaho-Specific Commitment No. I 31.
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) MEHC will maintain at least the existing level ofPacifiCorp s community-related
contributions, both in terms of monetary and in-kind contributions. The distribution of
PacifiCorp s community-related contributions among the states will be done in a manner
that is fair and equitable to each state.
27) MEHC will continue to consult with regional advisory boards to ensure local perspectives
are heard regarding community issues.
28) MEHC will honor PacifiCorp s existing labor contracts.
29) After the closing of the transaction, MEHC 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.
IDAHO COMMITMENTS
CASE NO. P AC-05-
ORDER NO. 29973
32) Nothing in these acquisition commitments shall be interpreted as a waiver ofPacifiCorp
or MEHC's rights to request confidential treatment for information that is the subject ofany 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 determine if the corrective
action has satisfied or corrected the violation. MEHC or PacifiCorp may request, for cause
an extension ofthese 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 permitting and the availability of materials
equipment and rights-of-way, MEHC and PacifiCorp commit to use their best efforts to
achieve the following transmission system infrastructure improvements
Path C Upgrade (~$78 million)- Increase Path C capacity by 300 MW (from S.E. 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.
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
! While MEHC has immersed itself in the details of PacifiCorp' 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. If 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 MEHC/PacifiCorp that one or more of the identified transmission
investments is not cost-effective or optimal for customers.
IDAHO COMMITMENTS
CASE NO. PAC-05-
ORDER NO. 29973
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.
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 ofthese 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:MEHC and PacifiCorp make the following
commitments to improve system reliability:
investment in the Asset Risk Program of$75 million over the three years, 2007-2009
investment in local transmission risk projects across all states of $69 million over eight
years after the close of the transaction
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 ofthe transaction
and
extension ofthe O&M investment across all states for the Saving SAIDI Initiative for three
additional years at an estimated cost of $2 million per year.
MEHC and PacifiCorp will support the Bonneville Power Administration in its
development of short-term products such as conditional firm. Based on the outcome from
BP A's efforts, PacifiCorp 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 parties to this proceeding if it proposes
changes to these two elements of its OA TT.
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. MEHC 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 oftransmission projects upon which the states can agree. Examples of such
projects would be RMA TS and the proposed Frontier transmission line.
37) (This Commitment number has intentionally been left blank. Commitment 37 is not
available if a state selects Oregon-Specific Commitment 0 14 as Staff recommends in
Idaho-Specific Commitment No. I 32.).
IDAHO COMMITMENTS
CASE NO. P AC-05-
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38) (This Commitment number has intentionally been left blank. Commitment 38 is not
available if a state selects Oregon-Specific Commitments 0 9 and 0 11 as Staff
recommends in Idaho-Specific Commitment Nos. I 28 and I 30.
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 s ability to increase the proportion of cost-effective
renewable energy in its generation portfolio, based upon the actual experience of MEC 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
load. MEHC 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.
MEHC 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. MEHC 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, MEHC 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:MEHC 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:MEHC and PacifiCorp commit to participate in the
Environmental Protection Agency s SF6 Emission Reduction Partnership for Electric Power
Systems. Sulfur hexafluoride (SF 6) 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
IDAHO COMMITMENTS
CASE NO. P AC-05-
ORDER NO. 29973
state for many centuries. Thus, a relatively small amount of SF6 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 SF 6 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 of improved 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, MEHC and
PacifiCorp commit to install the equipment likely to be necessary under future emissions
control scenarios at a cost of approximately $812 million. Concurrent with any application
for an air permit, 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 of
PacifiCorp 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
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 ofthe transaction, MEHC and PacifiCorp will consult with DSM
advisory groups and other interested parties to define the proper scope of the study. The
findings of the 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 ofthe costs of the study.
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.
IDAHO COMMITMENTS
CASE NO. PAC-05-
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In addition, MEHC and PacifiCorp commit that PacifiCorp and MEHC 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 performance standards as established in each jurisdiction, provided that
MEHC 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 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 44 and 52. PacifiCorp
will hold 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.
51) Subject to, and in consideration for, dismissal of all existing proceedings and no
commencement of any future state regulatory proceeding against PacifiCorp involving or
arising from the SEC PUIHCA Audit Report of ScottishPower dated May 11 , 2004, MEHC
IDAHO COMMITMENTS
CASE NO. P AC-05-
ORDER NO. 29973
will contribute to PacifiCorp, at no cost to PacifiCorp, MEHC's stock ownership in the
Intermountain Geothermal Company and the associated steam rights (approximately 70%
of the total rights) to the steam resources serving PacifiCorp s Blundell geothermal plant
and terminate MEHC's and Intermountain Geothermal Company s rights and obligations
under the contracts. MEHC will assist PacifiCorp in determining the cost-effectiveness of
acquiring the remaining 30% of the rights. No more than six months after the close of the
transaction, MEHC will provide parties a clear and complete disclosure statement that
details any potential liabilities and risks, identified by or for MEHC, associated with the
ownership rights ofMEHC in Intermountain Geothermal. MEHC also commits that
PacifiCorp customers will not be harmed from the contribution to PacifiCorp of the
Intermountain Geothermal steam resources and stock.
52) Upon closing, MEHC and PacifiCorp commit to immediately evaluate increasing the
generation capacity of the Blundell geothermal facility by the amount determined to be
cost-effective. Such evaluation shall be summarized in a report and filed with the
Commission concurrent with the filing ofPacifiCorp s next IRP. This incremental amount
is expected to be at least 11 MW and maybe as much as 100 MW. All cost effective
increases in Blundell capacity, completed before January 1 2015 , should be counted
toward satisfaction ofPacifiCorp s 1400 MW renewable energy goal, in an amount equal
to the capacity of geothermal energy actually added at the plant.
IDAHO COMMITMENTS
CASE NO. P AC-05-
ORDER NO. 29973
Idaho-Specific Commitments
I 1. 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.
12. 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 related source
documents that are relevant to the business and risk analysis of PacifiCorp. PacifiCorp and
the Commission Staff will 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 Staff will establish
agreeable procedure to review these confidential documents and the timeline to provide an
annual listing of such audits.
15. 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 ofthe 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.
17. Through December 31 , 2015, PacifiCorp will provide the Commission notice when it
intends to increase the amount of dividend payments by 10% or more.
I 8. As part ofthe 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 of DSM 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
IDAHO COMMITMENTS
CASE NO. P AC-05-
ORDER NO. 29973
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.
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.
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 determination 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:
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.
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 to a total contribution level for Idaho low income bill
payment assistance in the amount of $40 000 annually, for a five-year period beginning
July 1 , 2006. The contributions may be comprised of contributions from corporate
employee, other sources, and customer donations. The corporate contribution will be
recorded in non-utility accounts. Before the end of the five-year period, MEHC and
PacifiCorp commit to work with low income advocates and customer groups to evaluate
additional contributions.
IDAHO COMMITMENTS
CASE NO. P AC-05-
ORDER NO. 29973
I 15. MEHC commits to provide shareholder funding to hire a consultant to study and design for
possible implementation of an arrearage management project for low income customers
that could be made applicable to Idaho and other states that PacifiCorp serves. PacifiCorp
will provide a resource for facilitation of a working group to oversee the project. The study
shall commence no later than 180 days after close of the transaction and be completed
through the issuance of a formal report to the Commission, no later than 365 days after
close of the transaction. MEHC recognizes that such a program may have to be tailored to
best fit the unique low-income environment of each individual state. The project will be
developed by PacifiCorp in conjunction with the relevant regulatory and governmental
agencies, low-income advocates, and other interested parties in each state that is interested
in participating. The goals for the project will include reducing service terminations
reducing referral of delinquent customers to third party collection agencies, reducing
collection litigation and reducing arrearages and increasing voluntary customer payments
of arrearages. The costs of this study will be at least $66 000 on a total company basis paid
for by shareholders. 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 sregulated 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 of PacifiCorp. 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 guar~tees.
IDAHO COMMITMENTS
CASE NO. P AC-05-
ORDER NO. 29973
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.
121.
a) MEHC commits that immediately following the closing of the transaction, the acquiring
company (PPW Holdings LLC) will have no debt in its capital structure. MEHC and
PacifiCorp commit that the consolidated capital structure ofPPW Holdings LLC will not
contain common equity capital below the following percentages of its Total Capital as
defined in Commitment 18b:
48.25% from the date of the close of the transaction through
December 31 , 2008;
47.25% from January 1 , 2009 through December 31 , 2009;
46.25% from January 1 2010 through December 31 , 2010;
45.25% from January 1 2011 through December 31 , 2011;
44.00% after December 31 , 2011.
MEHC and PacifiCorp commit that the consolidated capital structure of PPW Holdings
LLC will not contain common equity capital below 35% of its Total Adjusted Capital as
defined in Commitment 18c.
MEHC will provide the Commission 30 days prior notice ifPPW Holdings LLC intends to
issue debt. MEHC and PacifiCorp acknowledge that ifPPW Holdings LLC does issue
debt, the Commission has the authority to consider additional ring-fencing provisions that
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 representatives from major
stakeholder and regulatory groups, PacifiCorp and MEHC 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 ofSB 26 on development oflGCC plants given the implications of long
development lead times, development costs, project risk, and cost uncertainty.
IDAHO COMMITMENTS
CASE NO. P AC-05-
ORDER NO. 29973
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.
123. PacifiCorp agrees to include the following items in the 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 RMATS
scenario 1 related to facilitating additional generation at Jim Bridger and, on equal footing,
new cost-effective wind resources.
I 24. Berkshire Hathaway acknowledges the Commitments made by MEHC and PacifiCorp and
will not impede satisfaction of the Commitments. Berkshire Hathaway acknowledges that
it is bound by Commitments 4, 5 and 17 and that it is subject to Commitments that are
applicable to the affiliates ofPacifiCorp and MEHC; provided, however, that Berkshire
Hathaway does not guarantee or agree to be responsible for performance of Commitments
made by MEHC and PacifiCorp.
125. With respect to any proceeding, including but not limited to any rate case, tariff filing,
pass-through application, show cause, complaint or other proceeding, wherein PacifiCorp
Idaho retail rates are based, in whole or in part, upon PacifiCorp s wholesale power
transactions, PacifiCorp and MEHC acknowledge that the Commission has jurisdiction to
determine the prudence ofPacifiCorp s wholesale power transactions and whether
PacifiCorp s retail rates are just and reasonable. To the extent PacifiCorp contends the
Commission is required to include the costs ofthe wholesale power transactions in Idaho
retail rates, PacifiCorp and MEHC commit that PacifiCorp will raise and litigate such
issues before the Commission. To the extent decisions regarding such issues are within the
areas reserved to the exclusive jurisdiction of the Commission, PacifiCorp and MEHC
agree that any challenge to the Commission order will be in the form of an appeal of that
order. In the event that PacifiCorp anticipates a court challenge to a Commission order that
would trigger the provisions of Commitment I 25, PacifiCorp will (1) seek a rehearing of
such Commission order; and (2) identify in writing in its petition for rehearing those
contested issues which it believes are and are not within the areas reserved to the exclusive
jurisdiction of the Commission.
I 26. MEHC and PacifiCorp commit to $142.5 million (total company amount) of offsetable rate
credits as reflected in Appendix 2 and as described in the following Commitments I 27
through I 31. These rate credits will be reflected in rates on the effective date of new rates
as determined by the Commission in a general rate case. The rate credits will terminate on
December 31 , 2010, to the extent not previously offset, unless otherwise noted. The rate
credits in Commitments I 27 and 131 are subject to deferred accounting as specified
therein. Where total company values are referenced, the amount allocated to Idaho will
equal the Idaho-allocated amount using Commission-adopted allocation factors.
IDAHO COMMITMENTS
CASE NO. P AC-05-
ORDER NO. 29973
127.
MEHC and PacifiCorp commit to reduce the annual non-fuel costs to PacifiCorp customers
of the West Valley lease by $0.417 million per month (total company) or an expected $3.
million in 2006 (assuming a March 31 , 2006 transaction closing), $5 million in 2007 and
$2.1 million in 2008 (the lease terminates May 31 , 2008), which shall be the amounts of the
total company rate credit. Beginning with the first month after the close of the transaction
to purchase PacifiCorp, Idaho s share of the monthly rate credit will be deferred for the
benefit of customers and accrue interest at PacifiCorp s authorized rate of return. (This
commitment is reflected in Row 1 of Appendix 2.
This commitment is offsetable, on a prospective basis, to the extent PacifiCorp
demonstrates to the Commission s satisfaction, in the context of a general rate case, that
such West Valley non-fuel cost savings:
i) are reflected in PacifiCorp s rates; and
ii) there are no offsetting actions or agreements by MEHC or PacifiCorp for
which value is obtained by PPM or an affiliated company, which, directly or
indirectly, increases the costs PacifiCorp would otherwise incur.
128.
a) MEHC and PacifiCorp will hold customers harmless for increases in costs retained by
PacifiCorp that were previously assigned to affiliates relating to management fees. The
total company amount assigned to PacifiCorp s affiliates is $1.5 million per year, which is
the amount of the total company rate credit. This commitment expires on December 31
2010. This Commitment is in lieu of Commitment 38 , and a state must choose between
this Commitment 128 and Commitment 38. (The commitment is reflected in Row 2 of
Appendix 2.
This commitment is offsetable to the extent PacifiCorp demonstrates to the Commission
satisfaction, in the context of a general rate case the following:
i) Corporate allocations from MEHC to PacifiCorp included in PacifiCorp s rates
are less than $7.3 million;
ii) Costs associated with functions previously carried out by parents to PacifiCorp
and previously included in rates have not been shifted to PacifiCorp or otherwise
included in PacifiCorp s rates; and
iii) Costs have not been shifted to operational and maintenance accounts (FERC
accounts 500-598), customer accounts (FERC accounts 901-905), customer
service and informational accounts (FERC accounts 907-910), sales accounts
(FERC accounts 911-916), capital accounts, deferred debit accounts, deferred
credit accounts, or other regulatory accounts.
129.
a) MEHC commits to use an existing, or form a new, captive insurance company to provide
insurance coverage for PacifiCorp s operations. The costs of forming such captive will not
be reflected in PacifiCorp s regulated accounts, nor allocated directly or indirectly to
PacifiCorp. Such captive shall be comparable in costs and services to that previously
IDAHO COMMITMENTS
CASE NO. PAC-05-
ORDER NO. 29973
provided through ScottishPower s captive insurance company Domoch. MEHC further
commits that insurance costs incurred by PacifiCorp from the captive insurance company
for equivalent coverage for calendar years 2006 through 2010, inclusive, will be no more
than $7.4 million (total company). Oregon Commission Staff has valued the potential
increase in PacifiCorp s total company revenue requirement from the loss of
ScottishPower s captive insurance affiliate as $4.3 million annually, which shall be the
amount of the total company rate credit. This commitment expires on December 31 , 2010.
This commitment is offsetable ifPacifiCorp demonstrates to the Commission s satisfaction
in the context of a general rate case, the costs included in PacifiCorp s rates for such
insurance coverage are not more than $7.4 million (total company). (This commitment is
reflected in Row 3 in Appendix 2.
130.
a) MEHC and PacifiCorp will hold customers harmless for increases in costs resulting from
PacifiCorp corporate costs previously billed to PPM and other former affiliates of
PacifiCorp. Oregon Commission Staff has valued the potential increase in total company
revenue requirement ifthese costs are not eliminated as $7.9 million annually (total
company) through December 31 , 2010 and $6.4 million annually (total company) from
January 1 2011 through December 31 , 2015, which shall be the amounts ofthe total
company rate credit. This commitment shall expire on the earlier of December 31 , 2015 or
when PacifiCorp demonstrates to the Commission s satisfaction, in the context of a general
rate case, that corporate costs previously billed to PPM and other former affiliates have not
been included in PacifiCorp s rates. This Commitment is in lieu of Commitment 38, and a
state must choose between this Commitment 130 and Commitment 38.
This commitment is offsetable to the extent PacifiCorp demonstrates to the Commission
satisfaction, in the context of a general rate case, that corporate costs previously billed to
PPM and other former affiliates have not been included in PacifiCorp s rates. (The
commitment is reflected in Row 4 of Appendix 2.
131.
a) MEHC and PacifiCorp commit that PacifiCorp s total company A&G costs as reflected in
FERC Accounts 920 through 935 will be reduced by $6 million annually from a baseline
amount of$228.8 million. The maximum amount of the total company rate credit in any
year is $6 million per year. This commitment expires December 31 , 2010. Beginning with
the first month after the close of the transaction, Idaho s share of the $0.5 million monthly
rate credit will be deferred for the benefit of customers and accrue interest at PacifiCorp
authorized rate of return. This Commitment is in lieu of Commitments 22 and U 23 from
the Utah settlement, and a state must choose between this Commitment I 31 and
Commitments 22 and U 23.
The credit will be offsetable on a prospective basis, for every dollar that PacifiCorp
demonstrates to the Commission s satisfaction, in a subsequent general rate case, that total
company A&G expenses included in PacifiCorp s rates (including any adjustments adopted
by the Commission to these categories) are less than $6 million above the "Stretch Goal"
IDAHO COMMITMENTS
CASE NO. PAC-05-
ORDER NO. 29973
and have not been shifted to other regulatory accounts. The 2006 Stretch Goal will be
$222.8 million. Subsequent Stretch Goals shall equal the 2006 Stretch Goal multiplied by
the ratio of the Global Insight's Utility Cost Information Service (UCIS)-Administrative
and General- Total Operations and Maintenance Index (INDEX CODE Series
JEADGOM), for the test period divided by the 2006 index value. If another index is
adopted in a future PacifiCorp case, that index will replace the aforementioned index and
will be used on a prospective basis only. If this occurs, the Stretch Goal for future years
will equal the Stretch Goal from the most recent full calendar year multiplied by the ratio
of the new index for the test period divided by the new index value for that same most
recent full calendar year.
132.
In the event of a ratings downgrade by two or more rating agencies of PacifiCorp' s senior
long-term debt that occurs within 12 months after the Commission approves the
Transaction or issues an order adopting acquisition commitments from other PacifiCorp
states, whichever, comes later (the "Baseline Date ), and at least one such agency identifies
issues related to MEHC's acquisition ofPacifiCorp as a cause of the ratings downgrade , the
assumed yield for any incremental debt issued by PacifiCorp after the downgrade will be
reduced by 10 basis points for each notch that PacifiCorp is downgraded below
PacifiCorp s rating on the Baseline Date. Such adjustment will continue until the debt is no
longer outstanding. In the case where one rating agency issues a rating downgrade, but not
two or more rating agencies, denoted as a split rating, the adjustment shall be 5 basis points
for each notch. The adjustment imposed by this commitment will be eliminated for debt
issuances following the ratings upgrade of PacifiCorp equal to the rating on the Baseline
Date. This Commitment is in lieu of Commitment 37, and a state must choose between this
Commitment 132 and Commitment 37.
In the event that debt issued by PacifiCorp within 12 months after the Baseline Date is
recalled and refinanced, PacifiCorp agrees to hold customers harmless, for the term ofthe
debt, as compared to the revenue requirements pursuant to subparagraph a) and its basis
point reductions, of the originally financed debt.
133. MEHC commits that no amendments, revisions or modifications will be made to the ring-
fencing provisions of Commitment 11 b) without prior Commission approval for the sole
purpose of addressing the ring-fencing provisions.
134. Within three months of closing of the transaction, MEHC commits to obtain a non-
consolidation opinion that demonstrates that the ring fencing around PPW Holdings LLC is
sufficient to prevent PPW Holdings LLC and PacifiCorp from being pulled into an MEHC
bankruptcy. MEHC commits to promptly file such opinion with the Commission. If the
ring-fencing provisions ofthis agreement are insufficient to obtain a non-consolidation
opinion, MEHC agrees to promptly undertake the following actions:
Notify the Commission of this inability to obtain a non-consolidation opinion.
IDAHO COMMITMENTS
CASE NO. P AC-05-
ORDER NO. 29973
Propose and implement, upon Commission approval , such ring-fencing provisions that are
sufficient to prevent PPW Holdings LLC from being pulled into an MEHC bankruptcy.
Obtain a non-consolidation opinion.
135. MEHC and PacifiCorp commit that PacifiCorp will not make any dividends to PPW
Holdings LLC or MEHC ifPacifiCorp s unsecured debt rating is BBB- or lower by
S & P or Fitch (or Baa3 or lower by Moody s), as indicated by two ofthe three rating
agencIes.
I 36. MEHC 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 41.
I 37. MEHC and PacifiCorp commit that PacifiCorp will not directly own equity shares of either
Berkshire Hathaway or MEHC , if MEHC were ever to become publicly traded.
I 38. MEHC commits to provide 30 days' notice to the Commission if it intends to create a
corporate entity between PPW Holdings LLC and MEHC. MEHC further states that it has
no current intention to create such a corporate entity.
139. MEHC and PacifiCorp commit to use asymmetrical pricing for affiliate charges or costs not
covered by the provisions of the IASA, if a readily identifiable market for the goods
services or assets exists, and ifthe transaction involves a cost of more than $500 000.
140. MEHC and PacifiCorp commit that in the event that PacifiCorp obtains a loan from its
parent company or any affiliated company, PacifiCorp will, in any subsequent rate
proceeding demonstrate that the debt obligation interest, terms, and conditions are
comparable to or less than what PacifiCorp could have obtained in the market at the time of
the debt was obtained by PacifiCorp, that the loan is on reasonable terms and without
markup to the holding company s cost of funds, and that the debt procurement will not
interfere with any ring-fencing mechanisms that secure the utility.
141. MEHC and PacifiCorp commit that, within sixty (60) days of the close ofthe transaction
PacifiCorp will initiate a collaborative effort with the Commission Staff, representatives of
the Community Action Partnership Association of Idaho, and other interested parties to
track low-income issues by identifying and collecting data pertinent to low-income
customers in PacifiCorp s Idaho service territory.
IDAHO COMMITMENTS
CASE NO. P AC-05-
ORDER NO. 29973
APPENDIX
PPW HOLDINGS LLC RlNGFENCIl'IG PROVISIONS
Purposes.
(a)The purposes of the Company are to engage in the following activities:
1. to purchase and own 100% 0 f the capital stock in P acifiCorp
PacifiCorp ; and any equity interest therein, an "Equity Interest"
2. in connection with the purchase of the Equity Interest, to negotiate
authorize, execute, deliver and perfonn documents including, but not limited to, that
certain Assignment and Assumption of Stock Purchase Agreement between the Member
and the Company pursuant to which the Member will assign to the Company all of the
Member s rights and obligations under that certain Stock Purchase Agreement, between
the Member and the other persons parties thereto , dated as of May 23 2005 and any other
agreement or document contemplated thereby (the "Transaction Documents ); and
3. to do such other things and carry on any other activities, and only
such things and activities, which the Board, defined herein, determines to be necessary,
convenient or incidental to any of the foregoing purposes, and to have and exercise all 01
the power and rights conferred upon limited liability companies fonned pursuant to the
Act in furtherance of the foregoing.
(b) The Company, by or through one or more Officers of the Company, may
enter into and perform the Transaction Documents and all documents, agreements, certificates or
financing statements contemplated thereby or related thereto, with such final tenns and
provisions as the Officer or Officers of the Company executing the same shall approve, his or
their execution thereof to be conclusive evidence of his or such approval, all without any further
act, vote or approval of the Member, the Board of Directors or any other Officer notwithstanding
any other provision of this Agreement, the Act or applicable law, rule or regulation. All actions
taken by the Member, any Director or 0 fficer on behalf of the Company or on behalf of any of
its affiliates prior to the date hereof, to effect the transactions contemplated by the Transaction
Documents or the formation of the Company, are hereby ratified, approved and confirmed in all
respects. Simultaneously with or following the execution of this Agreement the Company may
enter into each of the Transaction Documents with such final tenns and provisions as the Officer
or Officers of the Company executing the same shall approve , his or their execution thereof to be
conclusive evidence of his or their approval.
Management.
(a) Board of Directors. The business and affairs of PPW Holdings, LLC (the
Company ) shall be managed by or lUlder the direction of a board of one or more Directors (the
Board"); provided that from and after the purchase of an equity interest in PacifiCorp (an
Equity Interest"), and for so long as the Company shall own an Equity Interest, one of the
members of the Board shall be an Independent Director.
PortlndJ-1537021.3 0051851-00004
APPENDIX
ORDER NO. 29973
CASE NO. PAC-O5-
An ';Independent Director" shall mean a member of the Board \vho is not at the
time of initial appointment, or at any time while serving on the Board, and has not been at any
time during the preceding five (5) years: (a) a member, stockholder, director (except as such
Independent Director of the Company), officer, employee, partner, at1omey or counsel of the
Company or any affiliate of the Company; (b) a creditor, customer other than a consumer
supplier or other person who has derived in anyone of the preceding (5) calendar years revenues
from its activities with the Company or any affiliate of the Company (except as such
Independent Director); (c) a person related to or employed by any person described in clause (a)
or clause (b) above, or (d) a trustee, conservator or receiver for the Company or any affiliate of
the Company. As used in this definition
, "
affiliate" shall have the meaning given to such tenD
under Rule 405 under the Securities Act of 1933 , as amended.
Except as othef\Viseprovided in this Section I (a) with respect to the Independent
Director, Mid.6unerican Energy Holdings Company (the "Member ) by unanimous vote or
unanimous written consent, may detennine at any time in its sole and absolute discretion, the
number of Directors to constitute the Board. The initial number of Directors shall be two. At the
time of the purchase of an Equity Interest by the Company, if one of the Directors is not then a
qualified Independent Director, the number of Directors on the Board shall be automatically
increased by one, such additional position to be filled as soon as practicable by an Independent
Director selected by a majority vote of all of the Directors then in office. Each Director elected
designated or appointed shall hold office until a successor is elected and qualified or until such
Director s earlier death , resignation or removal. Each Director shall be a "manager" within the
meaning of the Limited Liability Company Act of the State of Delaware (the "Act"
(b) Powers. Subj ect to this Section 1 , the Board shall have the power to do
any and all acts necessary, convenient or incidental to or for the furtherance of the purposes
described herein, including all powers, statutory or otherwise. Except as provided in the
certificate and subject to Section 2(e), the Board has the authority to bind the Company by a
majority of the votes held by the Directors. For purposes of voting, each Director shall have one
vote.
(c) Quorum; Acts of the Board. At all meetings of the Board, a majority of
the Directors shall constitute a quorum for the transaction of business and, except as otherwise
provided in any other provision of this Agreement or in the certificate of incorporation, the act of
a majority of the votes held by the Directors present at any meeting at which there is a quorum
shall be the act of the Board. In the case of an act which requiIes the unanimous vote of the
Directors and/or the vote of the Independent Director, only the presence at the subject meeting of
all of the Directors, including the Independent Director, shall constitute a quorum. If a quorum
shall not be present at any meeting of the Board, the Directors present at such meeting may
adjourn the meeting from time to time, without \vritten notice other than announcement at the
meeting, until a quorum shall be present.
Cd) Removal of Directors. Unless othef\Vise restricted by law, any Director or
the entire Board may be removed, with or without cause, by the Member, and subject to Section
, any vacancy caused by any such removal may be filled by action of the Member. In the event
of the removal of the Independent Director or other event that causes the Independent Director to
cease to be an Independent Director on the Board, no action requiring the vote of the
PortlndJ-15J7021.J 0051851-00004
Independent Director shall take place until such time as a replacement Independent Director is
elected to the Board by the Member.
(e)Limitations on the Company s Activities.
1. This Section 2(e) is being adopted in order to qualify the Company
as a "special purpose entity" and so long as the Company holds or owns an Equity
Interest, this Section 2(e) shall govern the activities of the Company notwithstanding any
other provision of this Agreement.
2. So long as the Company holds or owns an Equity Interest, the
Board shall cause the Company to do or cause to be done all things necessary to preserve
and keep in full force and effect its existence, rights (charter and statutory) and
franchises. At all times, unless otherwise provided in that certain Stock Purchase
Agreement, between the Member and the other persons parties thereto, dated as of May
2005 and any other agreement or document contemplated thereby (the "Transaction
Documents ), the Board shall cause the Company to:
Portlnd3-1537021J 0051851-00004
maintain its own separate books and records, financial statements
and bank accounts;
except for tax and accounting purposes, at all times hold itself out
to the public as a legal entity separate from the Member and any
other Person and not identify itself as a division of any other
Person;
have a Board, the composition ofwmch in sum is unique from that
of any other Person;
file its own ta.-x returns , if any, as may be required under applicable
law, and pay any taxes required to be paid under applicable law;
not commingle its assets with assets of any other Person;
conduct its business in its own name and hold all of its assets in its
own name;
pay its own liabilities only out of its own funds;
maintain an ann s length relationship with its affiliates, including
its Member;
from its own funds, pay the salaries of its own employees;
not hold out its credit as being available to satisfy the obligations
of others;
maintain its own office and telephone line separate and apart from
its affiliates, although it may lease space from an affiliate and share
a phone line with an affiliate, having either a separate number or
extension, and in furtherance thereof allocate fairly and reasonably
any overhead for shared office space;
use separate stationery, invoices and checks bearing its own name;
not pledge its assets for the benefit of any other Person;
correct any knO\VIl misunderstanding regarding its separateidentity;
maintain adequate capital and an adequate number of employees in
light of its contemplated business purposes; and
not acquire any obligations or securities of the Member or its
affiliates , other than an Equity Interest.
Failure of the Company to comply with any of the foregoing covenants shall not affect the status
of the Compa.'1Y as a separate legal entity or the limited liability of the Member or the Directors.
3. So long as the Company holds or O\vIlS an Equity Interest and
unless otherwise provided in the Transaction Documents, the Company shall not:
PortlndJ-15J702l.3 0051851-00004
become or remain liable, directly or contingently, in connection
with any indebtedness or other liability of any other person or
entity, whether by guarantee, endorsement (other than
endorsements of negotiable instruments for deposit or collection in
the ordinary course of business), agreement to purchase or
repurchase, agreement to supply or advance funds, or otherwise;
grant or pennit to exist a..'1y lien , encumbrance, claim, security
interest, pledge or other right in favor of any person or entity in the
assets of the Company or any interest (whether legal, beneficial or
otherwise) in any thereof;
engage , directly or indirectly, in any business other than as
pennitted to be perfonned under the Company s limited liability
company operating agreement;
make or pennit to remain outstanding any loan or advance to , or
0\\'11 or acquire (a) indebtedness issued by any other person or
entity, or (b) any stock or securities of or interest in, any person or
entity, other than the Equity Interest;
enter into , or be a party to, any transaction with any of its affiliates
except (A) in the ordinary course of business, (B) pursuant to the
reasonable requirements and purposes of its business and (C) upon
fair and reasonable terms (and, to the extent material, pursuant to
written agreements)) that are consistent with market tenns of any
such transactions entered into by unaffiliated partjes;
make any change to its name or principal business or use of any
trade names , fictitious names, asswned names or "doing business
" names.4. So long as the Company holds or owns an Equity Interest, none of
the Company, the Member or the Board shall be authorized or empowered, nor shall they
permit the Company, without the prior unanimous written consent of all of the Directors
on the Board, including the Independent Director, (a) to consolidate, merge, dissolve
liquidate or sell all or substantially all of the Company s assets or (b) to institute
proceedings to have the Company adjudicated bankrupt or insolvent, or consent to the
institution of bankruptcy or insolvency proceedings against the Company or file a
voluntary petition seeking, or consent to, reorganization or relief with respect to the
Company under any applicable federal or state law relating to bankruptcy, or consent to
appointment of a receiver, liquidator, assignee, trustee, sequestrator (or other similar
official) of the Company or a substantial part of its property, or make any assignment for
the benefit of creditors of the Company, or admit in writing the Company s inability to
pay its debts generally as they become due, or to the fullest extent pennitted by law, to
take any action in furtherance of any such action. Moreover, the Board may not vote on
or authorize the taking of, any of the foregoing actions unless there is at least one
Independent Director then serving in such capacity.
(j)
Limitations on Distributions. So long as the Company owns or holds an
Equity Interest, the Company shall not permit PacifiCorp to declare or make any
Distribution to the Company or any other person that owns or holds an Equity Interest,
unless , on the date of such Distribution, either:1. at the time and as a result of such Distribution, PacifiCorp
Leverage Ratio does not exceed 0.65:1 and PacifiCarp s Interest Coverage Ratio is not
less than 2.5:1; or2. (ifPacifiCorp is not in compliance with the foregoing ratios) at
such time, Pacifi Corp s senior unsecured long tenn debt rating is at least BBB (or its then
equivalent) with Standard & Poor s Ratings Group and Baa2 (ar its then equivalent) with
Moody s Investors Service, Inc.
For purposes of this Section 2(f), the following terms shall be defined as follows:
Capitalized Lease Obligations" means all lease obligations ofPacifiCorp and
its Subsidiaries which, under GAAP , are or will be required to be capitalized, in each
case taken at the amount thereof accounted for as indebtedness in confonnity with suchprinciples.
Portlnd3-1537021.3 0051851-00004
Consolidated Current Liabilities " means the consolidated current liabilities of
PacifiCorp and its Subsidiaries, but excluding the current portion of long tenn
Indebtedness which would otherwise be included therein, as detennined on a
consolidated basis in accordance with GAAP.
Consolidated Debt" means , at any time, the sum of the aggregate outstanding
principal amount of all Indebtedness for Borrowed Money (including, without limitation
the principal component of Capitalized Lease Obligations, but excluding Currency,
Interest Rate or Commodity Agreements and all Consolidated Current Liabilities) of
PacifiCorp and its Subsidiaries, as determined on a consolidated basis in confonnity with
GAAP.
Consolidated EBITDA" means, for any period, the sum of the amounts for such
period ofPacifiCorp s (i) Consolidated Net Operating Income, (ii) Consolidated Interest
Expense, (iii) income ta."\es and deferred ta..-xes (other than income ta..-xes (either positive or
negative) attributable to extraordinary and non-recurring gains or losses or ~ales of
assets), (iv) depreciation expense, (v) amortization expense, and (vi) all other non-cash
items reducing Consolidated Net Operating Income, less all non-cash items increasing
Consolidated Net Operating Income, all as determined on a consolidated basis in
conformity with GA.P; provided that to the extent PacifiCorp has any Subsidiary that is
not a wholly o\vned Subsidiary, Consolidated EBITDA shall be reduced by an amount
equal to the Consolidated Net Operating Income of such Subsidiary multiplied by the
quotient of (A) the number of shares of outstanding common stock of such Subsidiary not
owned on the last day of such period by PacifiCorp or any Subsidiary of PacifiCorp
divided by (B) the total number of shares of outstanding common stock of such
Subsidiary on the last day of such period.
Consolidated Interest Expense" means, for any period, the aggregate amount
of interest in respect ofIndebtedness for Borrowed Money (including amortization of
original issue discount on any Indebtedness and the interest portion on any deferred
payment obligation, calculated in accordance with the effective interest method of
accounting; and all commissions, discounts and other fees and charges owed with respect
to bankers ' acceptance financing) and the net costs associated with Interest Rate
Agreements and all but the principal component of rentals in respect of Capitalized Lease
Obligations, paid, accrued or scheduled to be paid or to be accrued by PacifiCorp and
each of its Subsidiaries during such period, excluding, however, any amount of such
interest of any Subsidiary of PacifiCorp if the net operating income (or loss) of such
Subsidiary is excluded from the calculation of Consolidated Net Operating Income for
such Subsidiary pursuant to clause (ii) of the definition thereof (but only in the same
proportion. as the net operating income (or loss) of such Subsidiary is excluded), less
consolidated interest income, all as determined on a consolidated basis in confonnity
with GAAP; provided that, to the extent that PacifiCorp has any Subsidiary that is not a
wholly owned Subsidiary, Consolidated Interest Expense shall be reduced by an amount
equal to such interest expense of such Subsidiary multiplied by the quotient of (A) the
number of shares of outstanding common stock of such Subsidiary not owned on the last
day of such period by PacifiCorp or any Subsidiary ofPacifiCorp divided by (B) the total
PortlndJ-15J70~1.3 005185\-00004
number of shares of outstanding common stock of such Subsidiary on the last day of such
period.
Consolidated Net Operating Income ' means, for any period, the aggregate of
the net operating income (or loss) of PacifiCorp and its Subsidiaries for such period, as
determined on a consolidated basis in conformity with GAAP; provided that the
following items shall be excluded from any calculation of Consolidated Net Operating
Income (without duplication): (i) the net operating income (or loss) of any person (other
than a Subsidiary) in which any other person has ajoint interest, except to the extent of
the amount of dividends or other distributions actually paid to PacifiCorp or another
Subsidiary ofPacifiCorp during such period; (ii) the net operating income (or loss) of any
Subsidiary to the extent that the declaration or payment of dividends or similar
distributions by such Subsidiary of such net operating income is not at the time permitted
by the operation of the terms of its charter or any agreement, instrument, judgment
decree, order, statute, rule or governmental regulation or license; and (iii) all
extraordinary gains and extraordin:lry losses.
Currency, Interest Rate or Commodity Agreements" means an agreement or
transaction involving any currency, interest rate or energy price or volumetric swap, C:lp
or collar arrangement, forward exchange transaction, option, warrant, forward rate
agreement, futures contract or other derivative instrument of any kind for the hedging or
management of foreign exchange, interest rate or energy price or volumetric risks, it is
being understood, for purposes of this definition, that the term "energy" shall include
without limitation, coal, gas, oil and electricity.
Distribution" means any dividend, distribution or payment (including by way of
redemption, retirement, return or repayment) in respect of shares of capital stock of
PacifiCorp.
GAAP" means generally accepted accounting principles in the United States asin effect from time to time.
Indebtedness " means, with respect to PacifiCorp or any of its Subsidiaries at
any date of determination (without duplication), (i) all Indebtedness for Borrowed
Money, (ii) all obligations in respect of letters of credit or other similar instruments
(including reimbursement obligations with respect thereto), (iii) all obligations to pay the
deferred and unpaid purchase price of property or services, which purchase price is due
more than six months after the date of placing such property in service or taking delivery
and title thereto or the completion of such services, except trade payables, (iv) all
Capitalized Lease Obligations, (v) all indebtedness of other persons secured by a
mortgage, charge, lien, pledge or other security interest on any asset ofPacifiCorp or any
of its Subsidiaries, whether or not such indebtedness is assumed; provided that the
amount of such Indebtedness shall be the lesser of (A) the fair market value of such asset
at such date of determination, and (B) the amount of the secured indebtedness, (vi) all
indebtedness of other persons of the types specified in the preceding clauses (i) through
(v), to the extent such indebtedness is guaranteed by PacifiCorp or any of its Subsidiaries
and (vii) to the extent not otherwise included in this defmition, obligations under
Portlnd3-1537021.3 0051851-00004
Currency, Interest Rate or Commodity Agreements. The amount of Indebtedness at any
date shall be the outstanding balance at such date of all unconditional obligations as
described above and, upon the occurrence of the contingency giving rise to the
obligation, the ma:..:imum liability of any contingent obligations of the types specified in
the preceding clauses (i) through (vii) at such date; provided that the amount outstanding
at any time of any Indebtedness issued with original issue discount is the face amount of
such Indebtedness less the remaining unamortized portion of the original issue discount
of such Indebtedness at such time as determined in conformity with G.A.AP.
Indebtedness for Borrowed Money" means any indebtedness (whether being
principal, premium, interest or other amounts) for (i) money borrowed, (ii) payment
obligations under or in respect of any trade acceptance or trade acceptance credit, or (iii)
any notes, bonds , debentures, debenture stock, loan stock or other debt securities offered
issued or distributed whether by way of public offer, private placement, acquisition
consideration or otherwise and whether issued for cash or in whole or in part for a
consideration other than cash; provided, however in each case that such term shall
excJude any indebtedness relating to any accounts receivable securitizations.
Interest Coverage Ratio" means, with respect to PacifiCorp on any
Measurement Date, the ratio of (i) the aggregate amount of Consolidated EBITDA of
PacifiCorp for the four fiscal quarters for which financial information in respect thereof is
available immediately prior to such Measurement Date to (ii) the aggregate Consolidated
Interest Expense during such four fiscal quarters. .
Leverage Ratio" means the ratio of Consolidated Debt to TotaJ Capital
calculated on the basis of the most recently available consolidated balance sheet of
PacifiCorp and its consolidated Subsidiaries (provided that such balance sheet is as of a
date not more than 90 days prior to a Measurement Date) prepared in accordance with
GAAP.
Measurement Date" means the record date for any Distribution.
Subsidiary" means, with respect to any person, any corporation, association
partnership, limited liability company or other business entity of which 50% or more of
the total voting power of shares of capital stock or other interests (including partnership
interests) entitled (without regard to the occurrence of any contingency) to vote in the
election of directors , managers, or trustees thereof is at the same time owned, directly or
indirectly, by (i) such person, (ii) such person and one or more Subsidiaries of such
person, or (iii) one or more Subsidiaries of such person.
Total Capital" of any person is defined to mean, as of any date, the sum
(without duplication) ofCa) Indebtedness for Borrowed Money, and (b) consolidated
stockholder s equity of such person and its consolidated Subsidiaries.
Independent Director.
From the time an Independent Director is initially appointed and for so long as the
Company holds or owns an Equity Interest, the Company shall at all times have at least one
Portlnd3-1537021.3 0051851-00004
Independent Director who, except as provided in Section 2(a), will be appointed by the Member.
To the fullest extent permitted by Section IS-lIOI(c) of the Act, the Independent Director shall
consider only the interests of the Company, including its respective creditors, in acting or
otherwise voting on the matters that come before them. No Independent Director shall at any
time serve as trustee in bankruptcy for any affiliate of the Company.
Enforcement by Independent Director.
Notwithstanding any other provision of the Company s limited liability operating
agreement, the Member agrees that such agreement constitutes a legal, valid and binding
agreement of the Member, and is enforceable against the Member by the Independent Director
in accordance with its tenTIs. In addition, the Independent Director shall be an intended
beneficiary of the agreement.
Dissolution.
(a) The Company shall be dissolved, and its affairs shall be wound up only
upon the entry of a decree of judicial dissolution under Section 1 S-802 of the Act; and shall not
dissolve prior to the. occurrence of such event provided however, to the fullest extent pennitted
by law, the lvlember and the Directors shall not make an application under Section 1S-802 of the
Act so long as the Company holds or O\YllS an Equity Interest.
(b) So long as the Company owns or holds an Equity Interest, the Member
shall cause the Company to have, at all times , at least one person who shall automatically
become a member having 0% economic interest in the Company (the "Springing Member
upon the dissolution of the Member or upon the OCCUITence of any other event that causes the
Member to cease being a member of the Company. Upon the occurrence of any such event, the
Company shall be continued without dissolution and the Springing Member shall , without any .
action of any person or entity, automatically and simultaneously become a member of the
Company having a 0% economic interest in the Company and the Personal Representative(s) (as
defined in the Act) of the Member shall automatically become an unadmitted assignee of the
Member, being entitled thereby only to the distributions to which the Member was entitled
hereunder and any other right conferred thereupon by the Act. In order to implement the
admission of the Springing Member as a member of the Company, the Springing Member has
executed a counterpart to this Agreement as of the date hereof. Pursuant to Section 18-301 of the
Act, the Springing Member shall not be required to ma.'i(e any capital contributions to the
Company and shall not receive any limited liability company interest in the Company. Prior to
its admission to the Company as a member of the Company pursuant to this Section 24(b), the
Springing Member shall have no interest (economic or otherwise) and is not a member of the
Company.
(c) Notwithstanding any other provision of this Agreement, the Bank.-uptcy of
a Member shall not cause the Member to cease to be a member of the Company and upon the
occurrence of such an event, the business of the Company shall continue without dissolution.
Notwithstanding any other provision of this Agreement, the 1fember waives any right they might
have under Section IS-Sal(b) of the Act to agree in writing to dissolve the Company upon the
Bankruptcy of a Member or the occurrence of any other event that causes such Member to cease
Portlnd3-1537021.3 0051851-00004
to be a member of the Company. "Bankruptcy me:lI1s, with respect to a Member, if the
Member (i) ma:.1.;:es an assignment for the benefit of creditors, (ii) files a voluntary petition in
ban..1auptcy, (iii) is adjudged a bankrupt or insolvent, or has entered against itself an order for
relief, in any bankruptcy or insolvency proceeding, (iv) files a petition or answer seeking for
itself any reorganization, arrangement, composi tion, readjustment, liquidation , dissolution or
similar relief under any statute, law or regubtion, (v) files an answer or other pleading admitting
or failing to contest the material allegations of a petition filed against it in any proceeding of this
nature, (vi) seeks, tonsents to or acquiesces in the appointment of a trustee, receiver or liquidator
of the Member or of all or any substantial part of its properties , or (vii) 120 days after the
commencement of any proceeding against the Member seeking reorganization, arrangement
composition, readjustment, liquidation, dissolution, or similar relief under any statute, law or
regulation, if the proceedings have not been dismissed, or if within 90 days after the
appointment, without the Member s consent or acquiescence, of a trustee, receiver or liquidator
of the Member or of all or any substantial part of its properties , the appointment is not vacated or
stayed, or within 90 days after the expiration of any such stay, the appointment is not vacated.
With respect to the Member, the foregoing definition of "Bankruptcy" is intended to replace and
shall supersede the definition of "bankruptcy" set forth in Sections 18-101 (1) and 18-304 of the
Act.
(d) In the event of dissolution, the Company shall conduct only such activities
as are necessary to wind up its affairs (including the sale of the assets of the Company in an
orderly manner), and the assets of the Company shall be applied in the manner, and in the order
of priority, set forth in Section 18-804 of the Act. Upon completion of the winding up process
the Board shall cause the execution and filing of a Certificate of Cancellation in accordance with
Section 18-203 of the Act.
Amendments.
Neither this Agreement nor the Certificate may be modified, altered
supplemented or amended (each such event being referred to as a "Change ) except pursuant to
a written agreement executed and delivered by the Member. So long as the Company holds or
owns an Equity Interest and PacifiCorp or any subsidiary thereof has any debt outstanding that is
rated by Standard & Poor , Moody s Investors Service, or by Fitch Ratings (each, a "Rating
Agency ), no Change shall take effect unless (i) each Rating Agency rating such debt shall have
delivered a written confinnation that such Change will not result in the downgrade or withdrawal
of any such rating assigned by it to such debt, and (ii) the Independent Director shall have
approved the Ch:lI1ge in a vote of Directors if the Change re1ates to Section 1 , Section lei) or
Section 3; provided that none of the conditions identified in either of c1ause (i) or (ii) hereof
needs be satisfied if the Change is designed to: (x) cure any ambiguity or internal inconsistency
in this Agreement or the Certificate or (y) convert or supplement any provision hereof in a
manner consistent with the intent of this Agreement or the Certificate.
PortlndJ-15J7021.3 0051851-00004
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.
CERTIFICATE OF SERVICE
HEREBY CERTIFY THAT I HAVE THIS 9TH DAY OF MARCH 2006
SERVED THE FOREGOING STIPULATED MOTION TO AMEND IDAHO
COMMITMENTS IN ORDER NO. 29973, IN CASE NO. P AC-05-, BY E-MAILING
AND MAILING A COpy THEREOF, POSTAGE PREPAID, TO THE FOLLOWING:
ANDREA L KELLY
MANAGING DIRECTOR - STRATEGY
P ACIFICORP
825 NE MUL TNOMAH STE 956
PORTLAND OR 97232
MAIL: andrea.kelly0),pacificorp com
DOUGLAS L ANDERSON
SENIOR VICE PRESIDENT & GENERAL
COUNSEL
MIDAMERICAN ENERGY HOLDINGS CO
302 S 36TH ST SUITE 400
OMAHA NE 68131
MAIL: danderson0),midamerican. com
RANDALL C BUDGE
RACINE OLSON NYE BUDGE & BAILEY
201 E CENTER
PO BOX 1391
POCATELLO ID 83204-1391
MAIL: rcb0),racinelaw.net
KATIE IVERSON
BRUBAKER & ASSOCIATES
17244 W CORDOVA COURT
SURPRISE AZ 85387
MAIL: kiverson0),consultbai.com
JAMES M V AN NOSTRAND
JAMES F FELL
STOEL RIVES LLP
900 SW FIFTH AVE STE 2600
PORTLAND OR 97204
E- MAIL: imvannostrand0)stoel.com
ffellCillstoel.com
MARK C MOENCH
SENIOR VICE PRESIDENT - LAW
MIDAMERICAN ENERGY HOLDINGS CO
201 S MAIN SUITE 2300
SALT LAKE CITY UT 84111
E- MAIL: mcmoench0),midamerican.com
JAMES R SMITH
MONSANTO COMPANY
HIGHWAY 34 NORTH
PO BOX 816
SODA SPRINGS ID 83276
MAIL: iil11 smith0),monsanto.com
ERIC L OLSEN
RACINE OLSON NYE BUDGE & BAILEY
201 E CENTER
PO BOX 1391
POCATELLO ID 83204-1391
MAIL: elo0),racinelaw.net
CERTIFICATE OF SERVICE
ANTHONY Y ANKEL
29814 LAKE ROAD
BAY VILLAGE OH 44140
MAIL: tony0)yanke1.net
BARTON L KLINE SR ATTORNEY
MONICA B MOEN ATTORNEY II
IDAHO POWER COMPANY
PO BOX 70
BOISE ID 83707
MAIL: bkline0)idahopower.com
mmoen0)idahopower .com
JOHN R GALE
VICE PRESIDENT/ REG AFFAIRS
IDAHO POWER COMPANY
PO BOX 70
BOISE ID 83707
MAIL: rgale0)idahopower.com
ARTHUR F SANDACK ESQ
8 E BROADWAY SUITE 510
SALT LAKE CITY UT 84111
MAIL: asandack0)itower .net
BRAD M PURDY
ATTORNEY AT LAW
2019 N 17TH STREET
BOISE ID 83702
MAIL: bmpurdv~hotmai1.com
ALAN HERZFELD
HERZFELD & PIOTROWSKI LLP
713 W FRANKLIN
PO BOX 2864
BOISE ID 83701
MAIL: aherzfeld~hpllp.net
DA VID HAWK, DIRECTOR
ENERGY NATURAL RESOURCES
J.R. SIMPLOT COMPANY
PO BOX 27
BOISE, ID 83702
MAIL: dhawk0)simplot.com
R. SCOTT PASLEY
ASSISTANT GENERAL COUNSEL
J.R. SIMPLOT COMPANY
PO BOX 27
BOISE, ID 83702
MAIL: spasley0)simplot.com
(~Cj~
SECRETARY
CERTIFICATE OF SERVICE