20070604Notice of affiliate transaction.pdf

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\3: o~,Dean S. Brockbank, Sr. Counsel
(801) 220- 4568
Fax: [phone]
Dean.Brockbank~Pacifi Corp. com
One Utah Center
201 South Main, Suite 2300
Salt Lake City, UT 84111
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UTIL 111::':;Y"j\Ub\\,
June 4, 2007
Idaho Public Utilities Commission
472 West Washington
Boise, ill 83702-5983
Attention:Jean D. Jewell
Commission Secretary
Re:PacifiCorp Notice of Affiliate Transaction
Docket No. P AC-05-
Dear Ms. Jewell:
This letter will serve as notice pursuant to Commitment I 17(2), incorporated in the Idaho
Public Utilities Commission Order No. 29973 issued February 13 2006, as supplemented by
Order No. 29998 March 14, 2006, in the above-referenced proceeding, approving the acquisition
ofPacifiCorp by MidAmerican Energy Holdings Company, concerning certain affiliate
transactions. By virtue of certain stock purchases by PacifiCorp s ultimate parent, Berkshire
Hathaway, Inc. ("Berkshire ) (that will be explained below), PacifiCorp is now party to certain
affiliate transactions that were not affiliate transactions prior to the stock purchases.
PacifiCorp is a wholly-owned indirect subsidiary of MidAmerican Energy Holdings
Company ("MEHC"). MEHC is a wholly-owned direct subsidiary of Berkshire Hathaway, Inc.
Berkshire ). On April 4 and 5, 2007, Berkshire purchased 1.6 million share of Burlington
Northern Santa Fe Railway Company ("BNSF") stock to increase Berkshire s total ownership of
BNSF to 10.9%. BNSF is a Delaware corporation, providing railroad transportation services
throughout the United States. With Berkshire owning this level ofBNSF's outstanding shares
Berkshire, MEHC and PacifiCorp could all be construed as being affiliates ofBNSF.
Prior to becoming an affiliate ofBNSF, PacifiCorp and BNSF entered into several arm
length Rail Transportation Agreements ("Agreements ) whereby BNSF would provide
transportation services (1) from various coal mines in the Wyoming Powder River Basin to
PacifiCorp s Dave Johnston Steam Plant near Glenrock, Wyoming ("Dave Johnston ) and (2)
from various coal mines in Wyoming, New Mexico and Montana to PacifiCorp s Cholla
Generating Station ("Cholla
Under Agreement BNSF-12123 , with a term from January 26, 1998 to December 31
2013, BNSF transports coal obtained from eighteen mines in the Wyoming Powder River Basin
to Dave Johnston. Under this Agreement, BNSF transports a minimum of 3.5 million tons of coal
per year for PacifiCorp. Agreement BNSF-12470, with a term from January 10 2006 to
December 31 , 2017, governs transportation services for coal obtained from twenty mines located
in Wyoming, New Mexico and Montana and delivered to Unit Four ofCholla Generation Plant
near Joseph City, Arizona. Under this Agreement, BNSF is required to transport a minimum of
8 million tons of coal per year for PacifiCorp. PacifiCorp estimates that it will pay
approximately $30 million per year for services under the Agreements.
Under both Agreements, PacifiCorp manages the volume of coal per car and train as well
as the origin ofthe coal shipments. PacifiCorp also manages the unloading ofthe cars at the
destination. BNSF sends empty trains with separated cars to the mines, loads the separated cars
with coal, and then transports the coal across BNSF routes to Cholla and Dave Johnston
respectively. Both Agreements were entered into pursuant to 49 U.C. Section 10709, under
which railroads may enter into railroad service contracts at terms and conditions specified in the
contract, which are then approved by the United States Surface Transportation Board ("STB"
Although the Agreements were executed and approved by the STB prior to the parties
becoming affiliates with Berkshire s stock purchases ofBNSF, PacifiCorp and BNSF could now
be considered affiliates. The Agreements were negotiated at arms-length and serve the public
interest by ensuring that PacifiCorp obtains fuel supplies for its coal-fired generation plants at
rates overseen by the STB. As provided in Commitment U 14 in the referenced docket, a copy of
this letter is being provided to the Division of Public Utilities and the Committee of Consumer
Services.
Please call me at the above number if you have any questions regarding this filing.
Sincerely,
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Dean S. Brockbank