20171122Notice of Affiliate Transaction.pdf

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November 22,2017
Idaho Public Utilities Commission
472West Washington
Boise,lD 83702-5983
Attention: Diane Hanian
Commission Secretary
PacifiCorp Notice of Affiliate Transaction
Case No. PAC-E-05-8
Dear Ms. Hanian:
This letter will serve as notice pursuant to Commitmentl 17(2), incorporated in the Idaho
Public Utilities Commission OrderNo. 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 (now "Berkshire Hathaway Energy
Company" or "BHE"), of an affiliated interest transaction with Ferron Canal & Reservoir
Company ("FCRC"). lnl974, Utah Power & Light Company (a predecessor PacifiCorp company)
entered into a long-term water lease agreement with the Ferron Canal & Reservoir Company to
make available up to 7,000 acre-feet of water to PacifiCorp for use at the Hunter plant. The lease
agreement has been, and will continue to be, a key component to Hunter plant's long term water
supply. The lease agreement is now in the final year of its original term, and the parties desire to
extend the term.
The proposed agreement, titled "Third Amendment to the Agreement Dated November 1974
Between Ferron Canal and Reservoir Company and PacifiCorp" ("Third Amendment"), once
signed, will extend the term through November of 2058. The 1974 lease agreement and all other
amendments thereto will remain in full force and effect. The Third Amendment also contains
provisions allowing PacifiCorp to reduce the contract water amount under the lease agreement or
terminate the lease agreement under specified conditions. The Third Amendment also establishes
a new minimum annualpayment amount, and prohibits PacifiCorp from making any water subject
to the lease available to third parties. A copy of the Third Amendment is included with this Notice
as Attachment A.
Re:
Diane Hanian
Notice of Affiliate Transaction
November 22,2017
FCRC is a non-profit mutual irrigation company, which is a privately owned "water stock"
company. PacifiCorp holds approximately 37 percent of the outstanding water stock in FCRC.
FCRC holds water rights in the Ferron Creek drainage, of which PacifiCorp, by virtue of its water
stock share ownership, is entitled to a proportionate amount of FCRC's water right entitlements.
FCRC manages the water rights on behalf of PacifiCorp and the other shareholders in the company.
While irrigation companies typically use "ownership by shares" exclusively to allocate and grant
water rights (and as such, they are not typical equity interests in the entity), this ownership interest
could be deemed to create an affiliate interest in some PacifiCorp jurisdictions. Therefore,
PacifiCorp's ownership interest in FCRC creates a potential affiliated interest relationship between
the Company and FCRC. PacifiCorp thereby submits this filing out of an abundance of caution.
In April 2016, PacifiCorp filed a Notice of Affiliate Transaction with FCRC related to a Share
Assessment Agreement that provided financial protection to PacifiCorp and allowed PacifiCorp to
represent itself as a member of the FCRC Board of Trustees. That Share Assessment Agreement
remains in place and is a separate agreement than the Third Amendment to the Agreement dated
November 1974 Between Ferron Canal and Reservoir Company and PacifiCorp.
PacifiCorp has used the water supply managed by Ferron Canal & Reservoir Company for the
Hunter plant since the plant was commissioned in the early 1970s. Entering into the Third
Amendment is in the public interest because water access is very limited in the area and PacifiCorp
continues to rely heavily on the water supply from Ferron Canal & Reservoir Company for
effective operation of the Hunter plant which, in turn, provides safe and reliable electric service.
Please do not hesitate to contact me if you have any questions.
Best Regards,
R.J
Vice President and General Counsel
PacifiCorp
Enclosures
Attachment A
Third Amendment to the Agreement Dated November
I97 4 Between Ferron Canal and Reservoir Company and
PacifiCorp
THIRD AMENDMENT TO
THE AGREEMENT DATED NOVEMBER 1974
BETWEEN FERRON CANAL AND RESERVOIR COMPANY AND PACIFICORP
This third Amendment ("Amendment") to the Agreement dated November 1974 between Ferron
Canal and Reservoir Company and PacifiCorp ("Agreement") is entered into as of the date of the
last signature below, between Ferron Canal and Reservoir Company and PacifiCorp (successor
to Utah Power and Light Co.), each sometimes referred to herein as "Party" or collectively as
"Parties."
RECITALS
PacifiCorp entered into the Agreement for the purpose of securing a water supply to the
Hunter Power Plant and pays Ferron Canal and Reservoir Company an agreed upon amount to
deliver up to 7,000 acre-feet of water ("Contract Water Amount") pursuant to Paragraph 5 of the
Agreement. The Parties agree that the Agreement has generally worked well for both Parties and
that there are benefits to maintaining the existing agreement;
The Agreement's term is ambiguous, but likely terminates by its own terms on November
l, 2018 under Paragraph 5. By this Amendment, the Parties intend to (l) extend the term of the
Agreement and (2) amend it to allow PacifiCorp to terminate the Agreement or modify it to
reduce the Contract Water Amount in the event of major operationalchanges at the Hunter plant.
AMENDMENT
In consideration of the mutual promises and covenants contained herein, together with the
benefits to be derived herefrom, the Parties agree as follows: The fourth sentence of Paragraph 5
of the Agreement which reads: "The annual payment provided for in this paragraph shall be
adjusted each year in accord with the wholesale price index for all commodities (1967:100)
prepared by the Bureau of Labor Statistics, but in no event shall the payment provided for herein
be less than $ 105,000 per year[]" shall be amended to read as follows: "The annual payment
provided for in this paragraph shall be adjusted each year in accord with the wholesale price
index for allcommodities (1967:100) prepared by the Bureau of Labor Statistics, but in no event
shall the payment provided for herein be less than $350,000 per year."
There shall be added to the Agreement the following Paragraphs:
11. Term. This Agreement and all amendments thereto, shall remain in full force and effect
through November l, 2058 unless PacifiCorp submits a written notice, pursuant to the terms of
Paragraph 12, to Ferron Canal and Reservoir Company to either reduce the Contract Water
Amount or terminate this Agreement.
12.1 Reductions to Water Supply. Only after the end of the initial ten year extension provided
by this Amendment and to accommodate for any major operational changes at the Hunter Power
Plant, PacifiCorp, in its sole discretion, may decrease the Contract Water Amount it requires
under the Agreement. To make such adjustment, PacifiCorp shallprovide Ferron Canal and
Reservoir Company with written notice at least two (2) years in advance of any such adjustment
becoming effective. The notice will state the amount of water PacifiCorp requests to be reduced
from the Contract Water Amount. Payment for the changed Contract Water Amount shall be
adjusted to account for the reduced water supply according to the same formula set forth in
Paragraph 5 of the Agreement.
12.2 Termination of Agreement due to Operational Changes. Only after the end of the initial
ten year extension provided by this Amendment and to accommodate for any major operational
changes at the Hunter Power Plant, PacifiCorp, in its sole discretion, may terminate this
Agreement in its entirety by providing written notice to Ferron Canal and Reservoir Company
within two (2) years from the date of termination.
13. PacifiCorp may only use the water provided pursuant to this agreement for the purposes
provided for herein, and in no event is PacifiCorp permitted to sublease, subcontract, otherwise
offer for sale or use any water provided to it under this Agreement to a third party.
Each Party hereby represents and warrants to the other Party that it has the right, power and
authority to execute, deliver and perform this Agreement.
All other terms and conditions in the Agreement, including any amendments thereto shall remain
in full force and effect. This Amendment may be executed in one or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute one and the same
instrument.
IN WITNESS WHEREOF, the parties have caused their properly authorized
representatives to execute and seal this Fourth Amendment on the dates set forth below.
PacifiCorp, an Oregon corporation
By:
Name:
Title:
Date:
Pacifi Corp Acknowledgement
STATE OF )
)ss
)COUNTY OF
On the day of _,and acknowledged
of
200_ before me
under oath
personally appeared
that he is the
of
the named in the attached
instrument, and as such was authorized to execute this instrument on behalf of the
Notary Public
My Commission Expires:
Ferron Canal and Reservoir Company
By:
Name:
Title:
Date:
STATE OF
)ss
COUNTY OF
On the day of _, 200_ before me personally appeared
and acknowledged under oath that he is the
of of
the named in the attached
instrument, and as such was authorized to execute this instrument on behalf of the
Notary Public:
)
My Commission Expires:
)