20131119Notice of Affiliate Transaction.pdf

YPAFIFICon^n\ A MIOAMERICAN ENERGY HOLDINGS COMPi
.
Mark C. Moench
Senior Vice President und General Counsel
201 S. Main Steet, Suite 2400
Salt Lake CiA, UT 84111
801-2204159 Offtce
801-2204058 Fax
mar k. mo e n c h@1t a c iJi c o rp. c o m
November 19,2013
VA OWRNIGHT DELIWRY
Idaho Public Utilities Commission
472West Washington
Boise,ID 83702-5983
Attention: Jean D. Jewell
Commission Secretary
Re: PacifiCorp Notice of Affiliate Transaction
Case No. PAC-E-05-8
Dear Ms. Jewell:
This letter will serve as notice pursuant to Commitment I l7(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 of PacifiCorp by MidAmerican Energy Holdings Company (MEHC), of an affiliate
interest transaction between Huntington-Cleveland Irrigation Company (HCIC) and PacifiCorp
regarding assessments for HCIC shares owned by PacifiCorp. The Share Assessment Agreement
by and between HCIC and PacifiCorp Energyl is included with this Notice as Attachment A.
PacifiCorp is a wholly-owned indirect subsidiary of MEHC. MEHC is a subsidiary of
Berkshire Hathaway, Inc. (Berkshire Hathaway). As of March 31,2010, Warren E. Buffet (an
individual who may be deemed to control Berkshire Hathaway), Berkshire Hathaway, various
subsidiaries of Berkshire Hathaway and various employee benefit plans of Berkshire Hathaway
subsidiaries together held an interest in excess of 5 percent in HCIC. Therefore, Berkshire
Hathaway's ownership interest in HCIC may create an affiliated interest in some PacifiCorp
jurisdictions.
PacifiCorp uses the water obtained through HCIC as the primary supply of water to its
Huntington Plant and as a secondary supply to its Hunter Plant located in Emery County, Utah.
The HCIC Board of Directors recently approved a share use reclassification for its municipal and
industrial water users, and a rate increase for all HCIC shareholders. HCIC and PacifiCorp intend
to enter into a new share assessment agreement to reflect the decision made by the HCIC Board
of Directors.
I PacifiCorp Energy is dlblaPacifiCorp.
Jean D. Jewell
Notice of Affiliate Transaction
November 19,2013
Please do not hesitate to contact me if you have any questions.
Best Regards,
7r(r,!LG
Mark C. Moench
Senior Vice President and General Counsel
PacifiCorp
Enclosures
Attachment A
Share Assessment Agreement
Share Assessment Agreement bv and between
H untineton-Cleveland lrrigation Com pa nv and PacifiCorp Energv
This Share Assessment Agreement ("Agreement") is effective as of the _ day of November,
2013, ("Effective Date") by and between PacifiCorp Energy, a division of PacifiCorp, an Oregon
corporation, ("PacifiCorp") and Huntington Cleveland lrrigation Company ("HClC"), a Utah
nonprofit irrigation company. PacifiCorp and HCIC shall collectively be referred to as the
"parties" or individually as a "party" as the context so requires.
RECITALS
A. PacifiCorp owns 52,830.87 shares of Class A stock in HCIC (the "PacifiCorp Shares"),
which HCIC had previously described as "Municipal/lndustrial" for purposes of imposing share
assessments on PacifiCorp's Shares. PacifiCorp uses the water delivered by HCIC pursuant to
the PacifiCorp Shares at the Huntington Power Plant for electric power generation and general
industrial purposes.
B, By letters dated April 26, 2013 and July 1, 20L3, HCIC informed PacifiCorp of its intent to
create a new separate "lndustrial" water use category, to include all of the PacifiCorp Shares
within the lndustrial water use category, and also to increase the assessment for the PacifiCorp
Shares. HCIC's Board of Directors approved the new lndustrialwater use category and
increased assessment of the PacifiCorp Shares on October L2,2013. A copy of such approval is
included as Attachment 1 ("Resolution lmplementing an lndustrial Assessment for Shares of the
Company for which Water Represented Thereby is Used for lndustrial Use" (Resolution
10122013-C), hereafter referred to as the "lndustrial Shares Assessment Restructuring and
lncrease").
C. HCIC believes the lndustrial Shares Assessment Restructuring and lncrease was
necessary in order to adequately fund ongoing HCIC operations, more equitably balance the
assessment burden between share water use categories, and better reflect the benefits
PacifiCorp receives pursuant to the PacifiCorp Shares as compared to the benefits of other
shareholders. HCIC further believes the Share Reclassification is consistent with HCIC's internal
governance requirements and the Utah Share Assessment Act.
D. From the Effective Date of this Agreement, PacifiCorp will not challenge or oppose the
lndustrial Shares Assessment Restructuring and lncrease or the efficacy or regularity of all
actions of HCIC necessary to approve the lndustrial Shares Assessment Restructuring and
lncrease on the terms and conditions stated herein.
E. HCIC will not challenge or oppose the terms and conditions of this Agreement during the
effective Term of this Agreement.
1.
2.
TERMS AND CONDITIONS
For the exchange of valuable consideration, the parties agree as follows:
Term: The term of this Agreement shall be from the Effective Date until December 3\2A23
(the "Term.")
Share Assessment Categories: HCIC delivers water to three water user categories among its
shareholders: (i) lrrigation; (ii) Municipal; and (iii) lndustrial. Each of these categories is
described in more detailin Article X F 2 of the Amended and Restated Bylaws, included as
Attachment 2. lf HCIC does not assess all lrrigation users equally, for purposes of this
Agreement, HCIC shall determine annually the average lrrigation assessment by totaling all
assessments levied on lrrigation users and dividing the total by the total number of lrrigation
shares ("Annual Average lrrigation Assessment"). HCIC shall provide annually with its
assessment notice to PacifiCorp the reasonably detailed calculations used to determine the
Annual Average lrrigation Assessment. lf HCIC assesses all lrrigation users equally, it shall
provide annually with its assessment notice to PacifiCorp the arnount of the assessment of
shares that the water represented thereby is used for lrrigation use ("Annual lrrigation
Assessrnent").
lndustrial Category: PacifiCorp agrees not to challenge or oppose the lndustrial Shares
Assessment Restructuring and lncrease or the efficacy or regularity of all actions of HCIC
necessary to approve the lndustrial Shares Assessment Restructuring and lncrease, Except
upon prior approval by PacifiCorp which shall not be unreasonably withheld, HCIC agrees that
categorization of all HCIC water shares shall be limited to one or more of the following
categories duringthe Term: (i) lrrigation; (ii) Municipal; and (iii) lndustrial.
Share Assessments: HCIC shall assess the PacifiCorp Shares in accordance with HCIC
governance requirements, this Agreement and the Utah Share Assessment Act. Beginning with
share assessments for 20L3, and based on the share assessment categories described in Section
2, (the "lndustrial Share Assessment"), the lndustrial Share Assessment rate for the PacifiCorp
Shares shall be no more than a 5:1 ratio as compared to the Annual lrrigation Assessment or
Annual Average lrrigation Assessment. By way of example only, if the Annual Average lrrigation
Assessment is 53.00 per share, then the lndustrial Share Assessment shall be no more than
Sf S.OO per share. PacifiCorp acknowledges that the lndustrial Shares Assessment Restructuring
and lncrease as provided herein complies with this Agreement and the Utah Share Assessment
Act.
2013 Share Assessment and Payment: The parties acknowledge that HCIC already assessed the
PacifiCorp Shares under the prior Municipal/lndustrial category for 20L3, and that PacifiCorp
has paid that assessment in full in the amount of $169,46L.73. Notwithstanding the assessment
by HCIC and payment by PacifiCorp, the parties agree that the new lndustrial Share Assessment
for the PacifiCorp Shares shall apply during 2013. The parties further agree that this prior
3.
4.
5.
payment by PacifiCorp shall be considered as a credit against the lndustrial Share Assessment
imposed by HCIC on the PacifiCorp Shares for 2013 under this Agreement.
6. Share Assessment Administration: lndustrial Share Assessments shall be administered
according to the following principles:
a, HCIC shall not assess any other lndustrial water users more favorably to the water user
than it assesses the PacifiCorp Shares, except as HCIC may establish as appropriate
under the Utah Share Assessment Act.
b. The lndustrial Share Assessment is intended to include a proportionate share of all
expenses, including but not limited to general operation, maintenance and other costs ,
associated with HCIC that are assessable to shareholders. The parties intend that no
additional costs will be imposed on PacifiCorp or the PacifiCorp Shares outside of the
lndustrial Share Assessment.
c. HCIC shall invoice PacifiCorp only on the basis of a one-line assessment of so many
dollars per Class A share of stock owned by PacifiCorp.
7. Designated Representative and Notices: Any notice by either party to the other shall be
delivered in writingtothe office of the designated representative of the other party, or, if
deposited in the mail, properly stamped with the required postage and addressed to the office
of such representative as follows:
lf to PacifiCorp: lf to HCIC:
PacifiCorp Energy - Huntington Plant Huntington Cleveland lrrigation Company
P.O. Box 680 P.O. Box 327
Huntington, Utah 84528 Huntington, Utah 84528
Attn: Plant Manager Attn: President
Telephone: [phone]L Telephone: [phone]
B. Miscellaneous Provisions:
a. Governing Law. This Agreement shall be governed by the laws of the State of Utah,
without giving effects to its conflict of law rules contained therein.
b. Entire Agreement. This Agreement represents the entire agreement between PacifiCorp
and HCIC with respect to the Industrial Shares Assessment Restructuring and lncrease and
supersedes all prior negotiations, representations or agreements, either written or oral,
relating thereto. This Agreement may be amended only in writing signed by both parties.
c. lnterpretation. Each term hereof shall be construed simply according to its fair meaning
and not strictly for or against either party. The parties have jointly prepared this
Agreement, and no term hereof shall be construed against a party on the ground that the
party is the author of that provision. The Recitals contained herein are repeated verbatim
and are incorporated as part of this Agreement.
d. Jurv Waiver. To the fullest extent permitted by law, each party waives any right it may
have to a trial by jury in respect of litigation directly or indirectly arising in connection with
this Agreement.
e. Successors and Assigns. This Agreement shall be binding upon all successors and assigns
of the parties.
Now, THEREFORE, this Agreement is entered into as of the day and year first written above,
PacifiCorp Energy, a division of PacifiCorp
Its:
Huntington Cleveland lrrigation Company
Its:
Date:
Attest:
Secretary
Attachment 1
HUNTINGTO}:'I-CLEVELANI} IRRICATION COMPANY BOARD
RESOL1JTION 1 01 220 1 3-C
RES OLU-TION IIVIPLEMENTING AN I NDUSTRI AL AS SE S SMENT FOll
SHA}IES OF 1T{E COMTANY FOR WHICI-I WATER REPRESENTED
THEREBY IS T]SED FOR INDUSTRIAI, IJSE,
WHEREAS the members anci Board of Directeirs ("Board') of Huntington-Cleveland
ln"igatiorr Companl' ("Compuny") have approved cerlain amendments to the Articles of
lncorporation of the Conrpany which empower the Board to irtpose an a$sessment on shares of
the Company Jbr which ths water repre.sented thereby is used for Inclustrial Usc as defined in
Restatod and Arnended Ilylaws of the Company dated October 12,2A13 (herein atter
"Industrial Shares");
WIIEREAS the Board of the Company ltas approveii certain ernendments to thc Bylaws
of the Company that similmly empower the lloard to impose an asses$rnent on lrdush'ial Shares
of the Cornpany;
WHERHAS the Utah Sh'are Assessment Act, I'itle 1$" Clrapter 4 of the tJtah Code ailows
for dilTering irs:iessment of shares that have differing riglx or benefils;
WI{EREAS thc Bnard has determined that waler that is used for indush:iai Use has
higher economic value and benelit to the Ehareholdcr than water th&t is used lbr lrrigation Use.
WIIEREAS ttre Board has determined thet it is equitable lo assess Indusrial Shares at
five times the assessment of shares which rcpresefit water that is used for irrigation Use.
WHERIIAS lke Boarcl has mct with Representatives of PacifiCorp linergy a division of
Pacificolp, an (hegon Corporation ("PacifiCorp") u'hich is the largest owner of Industrial
Shares and PacifiCorp is aware of the Board's intent to establish assessmeflt on Industtial Shares
al ar1te of five times the assessmeffi of Irrigation Shires and that such assessmsnt wiil be
effective far 2A13 for shares owued by llacifiCorp.
NOW-fIIEI{EFOttli, BH I'I I^IEREISY IIESOLVED that tlre lloard does hercby establish
an annual alssessment on Industrial Shares tl"rat shall be five times the annual assessment on
inigation shares ol thc Company lbr wlrich water represented thereby is used for irrigation use as
such water use is defined in the Restated and Amended Ilylaws of the Company dated October
12,2013. 'i'his assessmenl on Industrial Shares shall be ellbctive for the 2013 year for sharcs
owned by PacitiCorp and 2014 for all other Industrial Shares. PacifiCorp shall be entitled to a
credit lbr 2013 assessments it has previously paid.
this resolution shall be eflective upon passage and shall remain in force unlil rcvoked,
repealed or amended by a subscquent action of the Board of l)irectors of the Company.
DAl'liD the 120' day of Octobcr, 2013
I IUN'I'ING'|ON-CL,EVI]I,AND IRRIGA'ilON COMPANY
AI"IES'I:
(Seal)
Attachment 2
Article X.F.2 of the Amended and Restated Bylaws (October !2,20L3)
2. NATURI OF WA'fEIl USlt. "ll-re voting and assessmcnt procedures ol'
thc Company are based upon whether or not thc watcr reprcsented by each share is used for
imigation use, municil:al use, or indushial use. With respect to tlre voting rights, assessments,
and procedures set l'orth in the Company'.s Articlcs of Incorporation and these Bylaws,
"irrigation use" slrall mean lvatcr applicd to land for crop or livcstock fced production purposcs,
and water used 1'rrr stockwnlering purposcs, I'or pecuniary gain; "murricipa.l usc" slra.ll mean water
rrscd by a municipality, dislrict, or other governrnen{.al entity to provide water scrvice to residents
ancl businesses; and "industrial use" shall include aii other beneficial uscs which nre not
classified hereunder as "irrigation use" or "municipal use." The designation as to the nature of
use to which caclr share ol water is being placed shall be conclusively establishcd by thc
dcsignation on fte books and records olthc Conrpany or the date ol'record as e^stablished in the
prccoding paragraph.