20051219Stipulation.pdf

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James M. Van Nostrand, ISB No. 7323
STOEL RIVES LLP
900 SW Fifth A venue, Suite 2600
Portland, OR 97204
Telephone: [phone]
Fax: [phone]
Email: imvannostrand~stoel.com
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Joint Counsel for MidAmerican Energy
Holdings Company and PacifiCorp dba Utah
Power & Light Company
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE JOINT
APPLICATION OF MIDAMERICAN
ENERGY HOLDINGS COMPANY AND
PACIFICORP DBA UTAH POWER &
LIGHT COMPANY FOR AN ORDER
AUTHORIZING PROPOSED
TRANSACTION
CASE NO. P AC-O5-
STIPULATION
This Stipulation ("Stipulation ) is entered into by and among PacifiCorp, doing business
as Utah Power & Light Company ("PacifiCorp ), MidAmerican Energy Holdings Company
MEHC"), the Idaho Public Utilities Commission Staff ("Staff'), Monsanto Company
Monsanto ), the Idaho Irrigation Pumpers Association ("lIP A"), lR. Simplot Company
Simplot"), Community Action Partnership Association of Idaho ("CAP AI"), and Idaho Power
Company ("Idaho Power ) (collectively referred to as the "Parties
I. INTRODUCTION
The terms and conditions of this Stipulation are set forth herein. The Parties
agree that this Stipulation represents a fair, just and reasonable compromise ofthe issues raised
in this proceeding and that this Stipulation is in the public interest. The Parties, therefore
I Although it is not a signatory to this Stipulation, Idaho Power does not oppose either the settlement of this matter
or the terms of the Stipulation.
STIPULATION - Page
recommend that the Public Utilities Commission ("Commission ) approve the Stipulation and all
of its terms and conditions. Reference IDAPA 31.01.01.272, 274.
II. BACKGROUND
On July 15, 2005, MEHC and PacifiCorp (sometimes hereinafter jointly referred
to as "Applicants ) filed an Application with the Commission seeking authorization pursuant to
Idaho Code 9 61-328 authorizing a proposed transaction ("Transaction ) whereby MEHC would
acquire all of the outstanding common stock ofPacifiCorp and PacifiCorp would thereafter
become an indirect wholly owned subsidiary ofMEHC. On August 17 2005 , Applicants
submitted a revised Application reflecting the impact of the enactment of the Energy Policy Act
of2005 , including the repeal of the Public Utility Holding Company Act of 1935.
On August 18 , 2005 , the Commission issued a Notice of Application and a Notice
of Revised Application.
Petitions to intervene in this proceeding were filed by Monsanto, lIP A, Simplot
CAPAI, Idaho Power Company and IBEW LocalS? By various orders, the Commission
granted these interventions.
Pursuant to the Commission s Order No. 29867, representatives of the Parties met
on November 2 and engaged in initial settlement discussions with a view toward resolving the
Application in this case. Subsequent discussions were held on December 8.
Based upon the settlement discussions among the Parties, as a compromise of the
positions in this case, and for other consideration as set forth below, the Parties agree to the
following terms:
III. TERMS OF THE STIPULATION
Appendix A contains the complete list of Commitments that Applicants
collectively and individually agree to make in exchange for the support of the Parties in this
proceeding (hereinafter referred to as "Commitments ). The Commitments are comprised of
general commitments applicable to all the states in which PacifiCorp s service territory extends
STIPULATION - Page 2
and Idaho-specific commitments which apply only to the activities and operations of Applicants
within Idaho. By virtue of executing this Stipulation, the Applicants agree to perform all of the
Commitments set forth in Appendix A according to the provisions of each Commitment as set
forth therein.
In the process of obtaining approvals of the Transaction in other states, the
Commitments may be expanded or modified as a result of regulatory decisions or settlements.
The Applicants agree that the Commission shall have an opportunity and the authority to
consider and adopt in Idaho any commitments or conditions to which the Applicants agree or
with which the Applicants are required to comply in other jurisdictions, even if such
commitments and conditions are agreed to after the Commission enters its order in this docket.
To facilitate the Commission s consideration and adoption of the commitments and conditions
from other jurisdictions, the Parties urge the Commission to issue an order accepting this
Stipulation as soon as practical , but to reserve in such order the explicit right to re-open
Appendix A to add (without modification of the language thereof except such non-substantive
changes as are necessary to make the commitment or condition applicable to Idaho)
commitments and conditions accepted or ordered in another state jurisdiction. To provide input
to the Commission to facilitate a prompt decision regarding the desirability or lack of desirability
for these out-of-state commitments and conditions to be adopted in Idaho, the Parties agree to
and recommend the following process:
Within five calendar days after a stipulation with new or amended commitments
is filed by the Applicants with a commission in another state jurisdiction
Applicants will send a copy of the stipulation and commitments to the Parties.
Within five calendar days after a commission in another state jurisdiction issues
an order that accepts a stipulation to which Applicants are a party or otherwise
imposes new or modified commitments or conditions, that order, together with all
commitments and conditions of any type agreed to by Applicants or ordered by
the commission in such other state, will be filed with the Commission and served
STIPULATION - Page 3
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 by 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.
Not later than the Final Filing, MEHC and PacifiCorp will disclose to the Parties
any written commitments, conditions or covenants made in another state jurisdiction (between
the date of the filing of the Stipulation and the receipt of the last state order in the transaction
docket) intended to encourage approval of the transaction or avoidance of an objection thereto.
The Parties, by signing this Stipulation, acknowledge that the Applicants have
satisfied the standard under Idaho Code 9 61-328 for approval ofthe Transaction and request
that the Commission issue its order approving the Application and this Stipulation. The Parties
encourage the Commission to enter a final Idaho approval order by February 28, 2006.
10.The Parties submit this Stipulation to the Commission and recommend approval
in its entirety pursuant to IDAP A 31.01.01.274. Parties shall support this Stipulation before the
Commission, and no Party shall appeal any portion of this Stipulation or Order approving the
same. If this Stipulation is challenged by any person not a party to the Stipulation, the Parties to
this Stipulation reserve the right to cross-examine witnesses and put on such case as they deem
appropriate to respond fully to the issues presented, including the right to raise issues that are
STIPULATION - Page 4
incorporated in the settlements embodied in this Stipulation. Notwithstanding this reservation of
rights, the Parties to this Stipulation agree that they will continue to support the Commission
adoption of the terms ofthis Stipulation.
11.The Parties agree that this Stipulation represents a compromise of the positions of
the Parties in this case. Other than the above referenced positions and any testimony filed in
support of the approval of this Stipulation, and except to the extent necessary for a Party to
explain before the Commission its owrI statements and positions with respect to the Stipulation
all negotiations relating to this Stipulation shall not be admissible in evidence in this or any other
proceeding regarding this subject matter.
12.Applicants acknowledge that the Commission s approval of the Stipulation, the
Commitments or the Joint Application shall not bind the Commission in other proceedings with
respect to the determination of prudence, just and reasonable character, rate or ratemaking
treatment, or public interest of services, accounts, costs, investments, any particular construction
project, expenditures or actions referenced in these Commitments.
13.In the event the Commission rejects any part or all ofthis Stipulation, or imposes
any additional material conditions on approval of this Stipulation, each Party reserves the right
upon written notice to the Commission and the other Parties to this proceeding, within 14 days of
the date of such action by the Commission, to withdraw from this Stipulation. In such case, no
Party shall be bound or prejudiced by the terms ofthis Stipulation, and each Party shall be
entitled to seek reconsideration of the Commission s order, file testimony as it chooses, cross-
examine witnesses, and do all other things necessary to put on such case as it deems appropriate.
In such case, the Parties immediately will request the prompt reconvening of a prehearing
conference for purposes of establishing a procedural schedule for the completion of the case.
The Parties agree to cooperate in development of a schedule that concludes the proceeding on the
earliest possible date, taking into account the needs ofthe Parties in participating in hearings and
preparing briefs.
STIPULATION - Page 5
14.No Party shall be bound, benefited or prejudiced by any position asserted in the
negotiation of this Stipulation, except to the extent expressly stated herein, nor shall this
Stipulation be construed as a waiver of the rights of any Party unless such rights are expressly
waived herein. Execution of this Stipulation shall not be deemed to constitute an
acknowledgment by any Party of the validity or invalidity of any particular method, theory or
principle of regulation or cost recovery. No Party shall be deemed to have agreed that any
method, theory or principle of regulation or cost recovery employed in arriving at this Stipulation
is appropriate for resolving any issues in any other proceeding in the future. No findings of fact
or conclusions of law other than those stated herein shall be deemed to be implicit in this
Stipulation.
15.Subject to Paragraph 16 of this Stipulation, the effective date of this Stipulation
shall be the date of the closing of the Transaction.
16.The obligations of the Applicants under this Stipulation are subject to the
Commission s approval of the Application in this docket on terms and conditions acceptable to
the Applicants, in their sole discretion, and the closing of the Transaction.
17.To the extend any of above reference filing dates falls on a weekend or a holiday,
the filing shall be due on the next business day.
STIPULATION - Page 6
Respectfully submitted this l~fh day of December 2005.
Idaho Public Utilities Commission Staff
dlI
Deputy Attorney General
PacifiCorp
D. Douglas Larson
Vice President, Regulation
R. Simplot Company
R. Scott Pasley
Assistant General Counsel
Idaho Irrigation Pumpers Association
Eric L. Olsen
Racine, Olson, Nye, Budge & Bailey,
Chartered
N:P AC-O5-08 - db Stipulation
STIPULATION - Page 7
MidAmerican Energy Holdings Company
~~~
ark C. Moench
Senior Vice President, Law
Monsanto Company
Randall C. Budge
Racine, Olson, Nye, Budge & Bailey,
Chartered
Community Action Partnership
Association of Idaho (CAP AI)
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B y L.-/ 1:-
Brad M. Purdy
Attorney at Law
Respectfully submitted this It../''''''ay of December 2005.
Idaho Public Utilities Commission Staff MidAmerican Energy Holdings Company
Donald L. Howell II
Deputy Attorney General
Mark C. Moench
Senior Vice President, Law
Monsanto CompanyBy D. ou Larson
Vice President, Regulation
Randall C. Budge
Racine, Olson, Nye, Budge & Bailey,
Chartered
R. Simplot Company Community Action Partnership
Association of Idaho (CAP AI)
R. Scott Pasley
Assistant General Counsel Brad M. Purdy
Attorney at Law
Idaho Irrigation Pumpers Association
Eric L. Olsen
Racine, Olson, Nye, Budge & Bailey,
Chartered
N:P AC-O5-- Stipulation
STIPULATION - Page 7
12/14/05 WED 09:20 FAX [phone] J R Slmp!ot Co-Legal 141 002
Respectfully submitted this ay of December 2005.
Idaho Public Utilities Commission Staff MidAmerican Energy Holdings Company
Mark C. Moench
Senior Vice President, Law
Donald L. Howell II
Deputy Attorney General
PacifiCorp Monsanto Company
Randall C. Budge
Iticine, Olson, Nye, Budge & Bailey,
Chartered
D. Douglas Larson
Vice President, Regulation
R. Scott Pasley
Assistant General Counse
Community Action Partnership
Association of Idaho (CAP AI)
R. Simplot Company
Brad M. Purdy
Attorney at Law
Idaho Irrigation Pumpers Association
Eric 1. Olsen
Racine, Olson, Nye, Budge & Bailey,
Chartered
N: P AC-E-QS-o8 - dh - Stipulation
STIPULATION - Page 7
Respectfully submitted this lfo~ay of December 2005.
Idaho Public Utilities Commission Staff
Donald L. Howell II
Deputy Attorney General
PacifiCorp
D. Douglas Larson
Vice President, Regulation
R. Simp lot Company
R. Scott Pasley
Assistant General Counsel
ric L. Olsen /Z//b/o6
Racine, Olson, Nye, Budge & Bailey,
Chartered
N:P AC-O5-- Stipulation
STIPULA nON - Page 7
MidAmerican Energy Holdings Company
Mark C. Moench
Senior Vice President, Law
Monsanto Company
(I. It-l4-os-
Randall C. Budge
Racine, Olson, Nye, Budge & Bailey,
Chartered
Community Action Partnership
Association of Idaho (CAP AI)
Brad M. Purdy
Attorney at Law
IBEW Local 57
Alan Herzfeld
fIerzfeld dt Piotrovvski
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MEHC Acquisition of PacifiCorp
Idaho
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Consolidated List of Commitments
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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 31 2008. Refer to Commitment 45 for the
extension of this commitment through 2011.
2) Penalties for noncompliance with performance standards and customer guarantees
shall be paid as designated by the Commission and shall be excluded from results of
operations. PacifiCorp will abide by the Commission s decision regarding payments.
PacifiCorp will maintain its own accounting system, separate from MEHC'
accounting system. All PacifiCorp financial books and records will be kept in
Portland, Oregon. PacifiCorp s financial books and records and state and federal
utility regulatory filings and documents will continue to be available to the
Commission, upon request, at PacifiCorp s offices in Portland, Oregon, Salt Lake
City, Utah, and elsewhere in accordance with current practice.
MEHC and PacifiCorp will provide the Commission access to all books of account
as well as all documents, data, and records of their affiliated interests, which pertain
to transactions between PacifiCorp and its affiliated interests or which are otherwise
relevant to the business of PacifiCorp. This commitment is also applicable to the
books and records of Berkshire Hathaway, which shall retain its books and records
relevant to the business of PacifiCorp consistent with the manner and time periods of
the Federal Energy Regulatory Commission s record retention requirements that are
applicable to PacifiCorp s books and records.
5) MEHC, PacifiCorp and all affiliates will make their employees, officers, directors
and agents available to testify before the Commission to provide information relevant
to matters within the jurisdiction of the Commission.
The Commission or its agents may audit the accounting records of MEHC and its
subsidiaries that are the bases for charges to Pacifi Corp, 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.
IDAHO COMMITMENTS
CASE NO. P AC-05-
7) MEHC and PacifiCorp will comply with all applicable Commission statutes and
regulations regarding affiliated interest transactions, including timely filing of
applications and reports.
8) PacifiCorp will file on an annual basis an affiliated interest report including an
organization chart, narrative description of each affiliate, revenue for each affiliate
and transactions with each affiliate.
9) PacifiCorp and MEHC will not cross-subsidize between the regulated and non-
regulated businesses or between any regulated businesses, and shall comply with the
Commission s applicable orders and rules with respect to such matters.
10) Due to PUHCA repeal, neither Berkshire Hathaway nor MEHC will be registered
public utility holding companies under PUHCA. Thus, no waiver by Berkshire
Hathaway or MEHC of any defenses to which they may be entitled under Ohio Power
Co. v, FERC 954 F.2d 779 (D.C. Cir.), cert. denied sub nom. Arcadia v. Ohio Power
Co., 506 U.S. 981 (1992) Ohio Power
),
is necessary to maintain the Commission
regulation of MEHC and PacifiCorp. However, while PUHCA is in effect, Berkshire
Hathaway and MEHC waive such defenses.
11) Any diversified holdings and investments
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non-utility business or foreign
utilities) ofMEHC following approval ofthe transaction will not be held
PacifiCorp or a subsidiary ofPacifiCorp. Ring-fencing provisions for PPW Holdings
LLC will be the same as those in effect for NNGC Acquisitions, LLc. MEHC and
PacifiCorp will notify the Commission of any changes in the ring-fencing provisions.
This condition will not prohibit MEHC or its affiliates other than PacifiCorp from
holding diversified businesses.
12) PacifiCorp or MEHC will notify the Commission subsequent to MEHC's board
approval and as soon as practicable following any public announcement of: (1) any
acquisition of a regulated or unregulated business representing 5 percent or more of
the capitalization of MEHC; or (2) the change in effective control or acquisition of
any material part or all of PacifiCorp by any other firm, whether by merger
combination, transfer of stock or assets.
13) The Intercompany Administrative Services Agreement (IASA) will include the
corporate and affiliate cost allocation methodologies. The IASA will be filed with the
Commission as soon as practicable after the closing of the transaction. Approval
the IASA will be requested if required by law or rule, but approval for ratemaking
purposes will not be requested in such filing. Refer to Commitment 14 (f).
Amendments to the IASA will also be filed with the Commission.
14) Any proposed cost allocation methodology for the allocation of corporate and
affiliate investments, expenses, and overheads, required by law or rule to be
submitted to the Commission for approval, will comply with the following principles:
IDAHO COMMITMENTS
CASE NO. P AC-05-
a) 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.
b) Cost allocations to PacifiCorp and its subsidiaries will be based on generally
accepted accounting standards; that is, in general , direct costs will be charged to
specific subsidiaries whenever possible and shared or indirect costs will be
allocated based upon the primary cost-driving factors.
c) 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.
d) An audit trail will be maintained such that all costs subject to allocation can be
specifically identified, particularly with respect to their origin. In addition, the
audit trail must be adequately supported. Failure to adequately support any
allocated cost may result in denial of its recovery in rates.
e) Costs which would have been denied recovery in rates had they been incurred by
PacifiCorp regulated operations will likewise be denied recovery whether they are
allocated directly or indirectly through subsidiaries in the MEHC group.
f)Any corporate cost allocation methodology used for rate setting, and subsequent
changes thereto, will be submitted to the Commission for approval if required by
law or rule.
15) PacifiCorp will maintain separate debt and, if outstanding, preferred stock ratings.
PacifiCorp will maintain its owrI 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 of the transaction from PacifiCorp
utility accounts. Within 90 days following completion ofthe 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 of the 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.
18) PacifiCorp will not make any distribution to PPW Holdings LLC or MEHC that
will reduce PacifiCorp s common equity capital below 40 percent of its total capital
without Commission approval. PacifiCorp will notify the Commission if for any
reason its common equity capital is reduced to below 44 percent of its total capital for
a period longer than three consecutive months. PacifiCorp s total capital is defined as
common equity, preferred equity and long-term debt. Long-term debt is defined as
debt with a term of one year or more. The Commission and PacifiCorp may
reexamine these minimum common equity percentages as financial conditions or
accounting standards change, and PacifiCorp may request adjustments.
IDAHO COMMITMEN'
CASE NO. P AC-05-
19) The capital requirements of Pacifi Corp, 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 of the
Commission, make loans or transfer funds (other than dividends and payments
pursuant to the Intercompany Administrative Services Agreement) to MEHC or its
affiliates, or assume any obligation or liability as guarantor, endorser, surety or
otherwise for MEHC or its affiliates; provided that this condition will not prevent
PacifiCorp from assuming any obligation or liability on behalf of a subsidiary of
PacifiCorp. MEHC will not pledge any of the assets of the business ofPacifiCorp as
backing for any securities which 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) MEHC and PacifiCorp guarantee that the customers ofPacifiCorp will be held
harmless if the transaction between MEHC and PacifiCorp results in a higher revenue
requirement for PacifiCorp than if the transaction had not occurred; provided
however, that MEHC and PacifiCorp do not intend that this commitment be
interpreted to prevent PacifiCorp from recovering prudently incurred costs approved
for inclusion in revenue requirement by the Commission.
23) PacifiCorp will continue a Blue Sky tariff offering in all states. PacifiCorp will
continue to support this offering through innovative marketing, by modifying the
tariff to reflect the developing green power market and by monitoring national
certification standards.
24) PacifiCorp will continue its commitment to gather outside input on environmental
matters, such as through the Environmental Forum.
25) PacifiCorp will continue to have environmental management systems in place that
are self-certified to ISO 14001 standards at all PacifiCorp operated thermal
generation plants.
26) MEHC will maintain at least the existing level ofPacifiCorp s community-related
contributions, both in terms of monetary and in-kind contributions. The distribution
ofPacifiCorp s community-related contributions among the states will be done in a
manner that is fair and equitable to each state.
27) MEHC will continue to consult with regional advisory boards to ensure local
perspectives are heard regarding community issues.
IDAHO COMMITMEnrS
CASE NO. P AC-05-
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.
32) Nothing in these acquisition commitments shall be interpreted as a waiver of
PacifiCorp s or MEHC's rights to request confidential treatment for information that
is the subject of any commitments.
33) Unless another process is provided by statute, Commission regulations or approved
PacifiCorp tariff, MEHC and PacifiCorp encourage the Commission to use the
following process for administering the commitments. The Commission should give
MEHC and PacifiCorp written notification of any violation by either company ofthe
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
PacifiCorp may request, for cause, an extension of these time periods. IfMEHC or
PacifiCorp fails to correct such violations within the specified time frames, as
modified by any Commission-approved extensions, the Commission may seek to
assess penalties for violation of a Commission order, against either MEHC or
PacifiCorp, as allowed under state laws and regulations.
34) Transmission Investment:MEHC and PacifiCorp have identified incremental
transmission projects that enhance reliability, facilitate the receipt of renewable
resources, or enable further system optimization. Subject to 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
1 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.
that should occur, MEHC pledges to propose an alternative to the Commission with a comparable benefit.
The Commission may investigate the reasonableness of any determination by MEHClPacifiCorp that one
or more of the identified transmission investments is not cost-effective or optimal for customers.
IDAHO COMMITMENTS
CASE NO. P AC-05-
a) Path C Upgrade (-$78 million)- Increase Path C capacity by 300 MW (from S.
Idaho to Northern Utah). The target completion date for this project is 2010. This
project:
enhances reliability because it increases transfer capability between the east
and west control areas
facilitates the delivery of power from wind projects in Idaho, and
provides PacifiCorp with greater flexibility and the opportunity to consider
additional options regarding planned generation capacity additions.
b) Mona - Oquirrh (-$196 million)- Increase the import capability from Mona into
the Wasatch Front (from Wasatch Front South to Wasatch Front North). This
project would enhance the ability to import power from new resources delivered
at or to Mona, and to import from Southern California by "wheeling" over the
Adelanto DC tie. The target completion date for this project is 2011. This
project:
enhances reliability by enabling the import of power from Southern California
entities during emergency situations
facilitates the acceptance of renewable resources, and
enhances further system optimization since it enables the further purchase or
exchange of seasonal resources from parties capable of delivering to Mona.
c) Walla Walla - Yakima or Mid-C (-$88 million)- Establish a link between the
Walla Walla bubble" and the "Yakima bubble" and/or reinforce the link between
the "Walla Walla bubble" and the Mid-Columbia (at Vantage). Either of these
projects presents opportunities to enhance PacifiCorp s ability to accept the output
from wind generators and balance the system cost effectively in a regional
environment. The target completion date for this project is 2010.
35) Other Transmission and Distribution Matters:MEHC and PacifiCorp make the
following commitments to improve system reliability:
a) investment in the Asset Risk Program of $75 million over the three years, 2007-
2009
b) investment in local transmission risk projects across all states of $69 million over
eight years after the close of the transaction
c) 0 & M expense for the Accelerated Distribution Circuit Fusing Program across
all states will be increased by $1.5 million per year for five years after the close of
the transaction, and
d) extension of the O&M investment across all states for the Saving SAIDI Initiative
for three additional years at an estimated cost of $2 million per year.
e) 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
IDAHO COMMITMEN'
CASE NO. P AC-05-
parties to this proceeding if it proposes changes to these two elements of its
OATT.
36) Regional Transmission:MEHC recognizes that it can and should have a role in
addressing the critical importance of transmission infrastructure to the states in which
PacifiCorp serves. 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 of transmission projects upon which the
states can agree. Examples of such projects would be RMA TS and the proposed
Frontier transmission line.
37) Reduced Cost of Debt: MEHC believes that PacifiCorp s incremental cost of long-
term debt will be reduced as a result of the proposed transaction, due to the
association with Berkshire Hathaway. Historically, MEHC's utility subsidiaries have
been able to issue long-term debt at levels below their peers with similar credit
ratings. MEHC commits that over the next five years it will demonstrate that
PacifiCorp s incremental long-term debt issuances will be at least a spread often
basis points below its similarly rated peers. MEHC's demonstration will include
information from a third party industry expert supporting its calculation and
conclusion. IfMEHC is unable to demonstrate to the Commission s satisfaction that
PacifiCorp has achieved at least a ten-basis point reduction, PacifiCorp will accept up
to a ten (10) basis point reduction to the yield it actually incurred on any incremental
long-term debt issuances for any revenue requirement calculation effective for the
five-year period subsequent to the approval of the proposed acquisition. It is
projected that this benefit will yield a value roughly equal to $6.3 million over the
post-acquisition five-year period.
38) Corporate Overhead Charges:MEHC commits that the corporate charges to
PacifiCorp from MEHC and MEC will not exceed $9 million annually for a period of
five years after the closing on the proposed transaction. (In FY2006, ScottishPower
net cross-charges to PacifiCorp are projected to be $15 million.
39) Future Generation Options:In Commitment 31 , MEHC and PacifiCorp adopt a
commitment to source future PacifiCorp generation resources consistent with the then
current rules and regulations of each state. In addition to that commitment, for the
next ten years, MEHC and PacifiCorp commit that they will submit as part of any
commission approved RFPs for resources with a dependable life greater than 10 years
and greater than 100 MW
, --
including renewable energy RFPs --a 100 MW or
more utility "own/operate" alternative for the particular resource. It is not the intent
or objective that such alternatives be favored over other options. Rather, the option
for PacifiCorp to owrI and operate the resource which is the subject of the RFP will
enable comparison and evaluation of that option against other viable alternatives. In
addition to providing regulators and interested parties with an additional viable option
for assessment, it can be expected that this commitment will enhance PacifiCorp
ability to increase the proportion of cost-effective renewable energy in its generation
IDAHO COMMITMEN'
CASE NO. P AC-05-
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 s 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 of 2008 -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 (SF6) is a highly potent greenhouse gas
used in the electric industry for insulation and current interruption in electric
transmission and distribution equipment. Over a 100-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, knowrI greenhouse gas. SF 6 is also a very stable
chemical, with an atmospheric lifetime of 3,200 years. As the gas is emitted, it
accumulates in the atmosphere in an essentially un-degraded state for many centuries.
Thus, a relatively small amount 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, EP A's SF 6 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 OwrIers 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
IDAI-IO COMMITMENTS
CASE NO. P AC-05-
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
ofPacifiCorp s coal-fueled generation fleet. The investments to which MEHC is
committing are expected to result in a decrease in the SO2 emissions rates of more
than 50%, a decrease in the NOx emissions rates of more than 40%, a reduction in the
mercury emissions rates of almost 40%, and no increase expected in the CO2
emissions rate.
44) Energy Efficiency and DSM Management:
a) MEHC and PacifiCorp commit to conducting a company-defined third-party
market potential study of additional DSM and energy efficiency opportunities
within PacifiCorp s service areas. The objective of the study will be to identify
opportunities not yet identified by the company and, if and where possible, to
recommend programs or actions to pursue those opportunities found to be cost-
effective. The study will focus on opportunities for deliverable DSM and energy
efficiency resources rather than technical potentials that may not be attainable
through DSM and energy efficiency efforts. On-site solar and combined heat and
power programs may be considered in the study. During the three-month period
following the close 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 of the costs
of the study.
b) PacifiCorp further commits to meeting its portion of the NWPPC's energy
efficiency targets for Oregon, Washington and Idaho, as long as the targets can be
achieved in a manner deemed cost-effective by the affected states.
c) In addition, MEHC and PacifiCorp commit that PacifiCorp and MEC will
annually collaborate to identify any incremental programs that might be cost-
effective for PacifiCorp customers. The Commission will be notified of any
additional cost-effective programs that are identified.
45) Customer Service Standards:MEHC and PacifiCorp commit to continue customer
service guarantees and 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
IDAHO COMMITMEN'
CASE NO. P AC-05-
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 ofthese 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 41 and 44.
PacifiCorp will ~old IRP meetings at locations or using communications technologies
that encourage broad participation.
49) Reporting on Status of Commitments:By June 1 , 2007 and each June 1 thereafter
through June 1 , 2011 , PacifiCorp will file a report with the Commission regarding the
implementation of the Commitments. The report will, at a minimum, provide a
description of the performance of each of the commitments that have quantifiable
results. If any of the commitments is not being met, relative to the specific terms of
the commitment, the report shall provide proposed corrective measures and target
dates for completion of such measures. PacifiCorp will make publicly-available at
the Commission non-confidential portions of the report.
50) Pension Funding Policy:PacifiCorp will maintain its current pension funding policy,
as described in the 2005 Actuarial Report, for a period of two years following the
close of the transaction.
Idaho-Specific Commitments
I 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
IDAHO COMMITMEN'
CASE NO. P AC-05-
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 an agreeable procedure to review these confidential documents and the
timeline to provide an annual listing of such audits.
IS. A near-final draft agreement for PPW Holdings LLC that contains the ring-fencing
provisions of Commitment 11 will be sent to the Commission Staff by January 15
2006. The final signed agreement will be filed with the Commission within 30 days
after the close of the transaction.
16. Within 30 days of the close of the transaction, PacifiCorp will provide the
Commission with a written list of changes that were made to employee benefit
plans between the announcement of the transaction and the close of the transaction.
PacifiCorp and MEHC will provide 30 days' notice to the Commission prior to
merging PacifiCorp s pension with the pension plan of another MEHC business.
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.
18. 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 ofDSM resources with comparable supply side
resources.
19. MEHC and PacifiCorp commit to maintain a bid evaluation methodology that
prudently compares any company owrIed and operated alternative to valid and
conforming bid proposals submitted in response to a supply-side RFP.
I 10. On January 31 , 2005 , the Commission accepted PacifiCorp s proposal to eliminate
its Network Performance Standard relating to Momentary Average Interruption
Frequency Index (MAIFI) in light of the Company s commitment to develop an
acceptable alternative to MAIFI as soon as possible. The Company has developed
its proposed measurement plan and is scheduled to present to the Commission Staff
at its next reliability meeting (scheduled for December 20, 2005). Within 60 days
after this meeting, the Company will file the plan with the Commission. MEHC
and PacifiCorp commit to implement this plan and provide the results of these
calculations to Commission Staff and other interested parties in reliability review
meetings.
IDAHO COMMITMENTS
CASE NO. P AC-05-
I 11. PacifiCorp is required to apply to the Commission for approval of security
issuances pursuant to Idaho Code Title 61 , Chapter 9. PacifiCorp will not seek an
exemption from this requirement for twelve months following the closing of this
transaction. Staff will evaluate the "all-in-cost" of issuances for inclusion in rates
and as it relates to the Reduced Cost of Debt Commitment 3
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:
a) Within 30 days of completion of the transaction, PacifiCorp will file proposed
revisions to its Schedule 21 Tariff to effect a change in funding of conservation
measures from 50% of measure cost to 100% of measure cost when federal
matching funds are no longer available to fund measures at PacifiCorp
customer s premise, subject to the $150 000 annual funding limit in the tariff.
b) In PacifiCorp s next Idaho general rate case, PacifiCorp will include in its direct
testimony an analysis ofthe costs and benefits of changing its current practice
of matching 50% of federal contributions to matching at a higher percentage
amount.
I 14. MEHC and PacifiCorp commit up to $20 000 annually for five years to match
Idaho customer and employee contributions to Lend-a-Hand. This contribution will
be recorded in non-utility accounts. When appropriate, MEHC and PacifiCorp
commit to work with low-income advocates and consumer groups to evaluate
additional matching contributions.
lIS. MEHC commits to provide shareholder funds to hire a consultant to study and
design for possible implementation an arrearage management project for low-
income customers. PacifiCorp will provide a resource for facilitation of a working
group to oversee the project. The project will be developed by PacifiCorp in
conjunction with the Idaho Public Utilities Commission, the Utah Division of
Public Utilities, the Utah Committee for Consumer Services, low-income advocates
and other interested parties. The goals ofthe project will include reducing service
terminations, reducing referral of delinquent customers to third party collection
agencies, reducing arrearages and collection litigation, and increasing voluntary
customer payments of arrearages. The amount of shareholder funds for this study
will be up to $66 000 on a total company basis if all six PacifiCorp states elect to
IDAHO COMMITMENTS
CASE NO. P AC-05-
participate. If less than six states participate, the amount of the shareholder funds
will be reduced proportionally.
I 16. MEHC and PacifiCorp will provide notification of and file for Commission
approval of the divestiture, spin-off, or sale of any integral PacifiCorp function.
This condition does not limit any jurisdiction the Commission may have.
I 17. PacifiCorp or MEHC will notify the Commission prior to implementation of plans
by PacifiCorp or MEHC: (1) to form an affiliate for the purpose of transacting
business with PacifiCorp s regulated operations; (2) to commence new business
transactions between an existing affiliate and PacifiCorp; or (3) to dissolve an
affiliate which has transacted substantial business with PacifiCorp.
I 18. The premium paid by MEHC for PacifiCorp will be recorded in the accounts of the
acquisition company and not in the utility accounts 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 guarantees.
I 20. PacifiCorp will provide to the Commission, on an informational basis, credit rating
agency news releases and final reports regarding PacifiCorp when such reports are
knOwrI to PacifiCorp and are available to the public.
I 21. 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 to provide the Commission 30 days prior notice if
PPW Holdings LLC ever intends to issue debt. MEHC and PacifiCorp
acknowledge that if PPW Holdings LLC does issue debt, the Commission has the
authority to consider whether additional ring-fencing provisions may be
appropriate.
122. MEHC and PacifiCorp commit to form an IGCC Working Group, sponsored by
PacifiCorp to discuss various policy and technology issues associated with IGCC
carbon capture, and sequestration. Working Group members would include
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CASE NO. P AC-05-
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 of SB 26 on development of IGCC plants given the implications
of long development lead times, development costs, project risk, and cost
uncertainty.
The IGCC Working Group would meet periodically to discuss the above issues
and identify possible solutions, and to stay abreast of the evolving technology and
commercial environment.
123. PacifiCorp agrees to include the following items in the 2006 IRP:
a) a wind penetration study to reappraise wind integration costs and cost-effective
renewable energy levels; and
b) an assessment of transmission options for PacifiCorp s system identified in the
RMA TS scenario 1 related to facilitating additional generation at Jim Bridger
and, on equal footing, new cost-effective wind resources.
I 24. At the time of the closing of the transaction, MEHC will file with the Commission a
letter from Berkshire Hathaway committing to be bound by Commitments 4 and 5
and any other commitments applicable to affiliates of MEHC.
125. The scope of the "most favored nation" commitment contained in Section III of the
Stipulation will extend to and include any resolution or settlement prior to closing
of the transaction of any procedural, jurisdictional or federal law issues or disputes
raised in PacifiCorp vs. Rob Hurless Case No. CV -04-03lJ, United States District
Court, District of Wyoming, regardless of the manner, context or proceeding in
which any such settlement or resolution paid in connection with such settlement or
resolution, to the extent such settlement or resolution includes any kind of ongoing
waiver, or agreement to litigate in state tribunals, of any federal preemption, filed
rate doctrine or similar federal issues, or any other limitation, condition or waiver of
federal jurisdiction or federal forum as it relates to state ratemaking (referred to
hereinafter as a procedural limitation clause ("PLC")). If any PLC is agreed to by
PacifiCorp in any such settlement or resolution, PacifiCorp agrees to identify the
PLC in stand-alone language and MEHC agrees to include such PLC as a deemed
IDAHO COMMITMENTS
CASE NO. PAC-05-
commitment to the Wyoming transaction docket and by virtue of the most favored
nations clause referred to above, the PLC will be available for adoption in Idaho
pursuant to the procedures in the Stipulation.
I 26. 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 25.
N:P ACEO508- Commitments
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CASE NO. P AC-05-