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IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE JOINT
APPLICATION OF MIDAMERICAN
ENERGY HOLDINGS COMPANY (MEHC)
AND PACIFICORP DBA UTAH POWER &
LIGHT COMPANY FOR AN ORDER
AUTHORIZING MEHC TO ACQUIRE
PACIFICORP.
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) CASE NO. PAC-05-
SUPPLEMENTAL TESTIMONY OF TERRI CARLOCK
IDAHO PUBLIC UTILITIES COMMISSION
JANUARY 13 2006
Please state your name and address for the
record.
My name is Terri Carlock.My business address
is 472 West Washington Street, Boise, Idaho.
By whom are you employed and in what capacity?
I am employed by the Idaho Public utilities
Commission as the Accounting/Audit Section Supervisor.
Are you the same Terri Carlock that submitted
direct testimony in this case on December 20, 2005?
Yes, I am.
What is the purpose of your supplemental
testimony?
I am providing updated information to the
Commission and parties to this case related to the
additional Commitments by PacifiCorp and MidAmerican
Energy Holdings Company (MEHC) in the Oregon Stipulation
that Staff recommends be adopted as Idaho-Specific
Commitments in this case.At the time the Idaho
Stipulation (Exhibit No. 101) and direct testimony in this
case were filed, Staff had the opportunity to review the
Stipulations and Commitments in California and Utah. The
Oregon Stipulation with additional Commitments was filed
after the Idaho Settlement Stipulation.My supplemental
testimony and Staff Exhibit No.1 02 focuses on the Oregon
Commitments and recommendations for adoption and inclusion
CASE NO. PAC-05-
1/13/06
CARLOCK, T (Supp) 1
STAFF
in Idaho.
Why review the Oregon Commitments now?
The "most favored nation " clause set forth in
the Idaho Stipulation Section III and Idaho Commitment 25
allows this Commission to review and adopt Commitments
from the other five states.Reviewing the Oregon
Commitments now will simplify adoption and shorten the
required review after the final Orders in the various
states are issued.Any additional requirements, primarily
in the Washington and Wyoming proceedings, will remain for
the final review and adoption process set forth in the
Idaho Stipulation.
The Idaho Stipulation and Commitments, Exhibit
No. 101 , lists 50 General Commitments applicable to all
states.Do you recommend any modifications to the General
Commitments based upon your review of the Oregon
Stipulation and Commitments?
Yes, I recommend some modifications.The
modifications I am recommending be adopted provide
additional benefits or clarification above and beyond
those General Commitments originally included in Exhibit
No. 101 for Idaho.I would also observe that there are
clarifications and other variations in the Oregon
Stipulation that will benefit Idaho but do not necessitate
changes being recommended to the Idaho Settlement.
CASE NO. PAC-E- 05 - 81/13/06 CARLOCK, T (Supp) 2
STAFF
The recommended modifications are for General
Commitment Nos. 11 , 17 , 18 , 22 , 37 , 38, and 48.I al so
recommend adding two new General Commitments, Nos. 51 and
52.These Commitments are shown on Staff Exhibit No. 102.
I will discuss each of these changes individually.
Please explain each modification Staff
recommends for the Commitments Applicable to All States.
The change to General Commi tment No. 11
clarifies ring-fencing provisions with the attachment of
Appendix 1. Appendix 1 titled "PPW Holdings LLC
Ringfencing provisions " is included in Exhibit No. 102.
The final signed ring-fencing document will still be filed
with the Commission as required in Idaho-Specific
Commitment No.5 (I-5).
The adoption of Oregon General Commitment No. 17
provides clarification related to unrestricted access to
written information and documents used for credit rating
purposes.
Adoption of Oregon General Commitment No. 18
provides additional detail related to the restriction of
dividend payments when common equity ratios don ' t exceed
the percentage floors identified.Detail on how the
ratios will be calculated is also included in this
Commi tment General Commitment No. 18 is included for
di vidend restrictions only and is not intended by the
CASE NO. PAC-05-1/13/06 CARLOCK , T (Supp) 3
STAFF
parties as a ratemaking provision that impacts rates.
Staff next recommends that General Commitment
Nos. 22, 37 and 38 be noted as intentionally left blank.
They are replaced with Oregon-Specific Commitment Nos.
9, 0-11, 0-, and 0-14.These four new Commitments
will be discussed later as Idaho-Specific Commitment Nos.
28, I-30, I-31 and I-32.
Next, General Commitment Nos. 51 and 52 are
added to reflect the ownership transfer to PacifiCorp of
the Intermountain Geothermal Company and the associated
steam rights to the steam resources serving PacifiCorp
Blundell geothermal plant.This Commitment will eliminate
some affiliate transactions and payments for steam
purchases at Blundell thus reducing the annual steam
costs.It also allows for expansion of the plant and
purchase of additional steam rights where cost-effective.
Finally General Commitment No. 48 should be
modified to add the reference to Commitment No. 52 in the
IRP consideration list.
Are there Oregon-Specific Commitments that you
recommend being adopted as Idaho-Specific Commitments in
this case?
Yes, I recommend adoption in whole or in part of
Oregon-Specific Commitment Nos. 5, 7 , 8, 9, 10, 11, 12
14, 15, 16, 17 , 18, 21 and 22. These Commitments if
CASE NO. PAC-E- 05 - 81/13/06 CARLOCK , T (Supp) 4
STAFF
adopted will replace or will be added to existing Idaho-
Specific Commitments as shown on Staff Exhibit No. 102.
The current Idaho-Specific Commitment No. I-26 will be
modified to become No. 1-36 to include all the recommended
Idaho-Specific Commitments.
Please explain the benefits to Idaho if these
modified or additional Idaho-Specific Commitments shown on
Exhibit No. 102 are adopted.
Idaho-Specific Commitment No. I -14 is replaced
with modified Oregon-Specific Commitment No. 0-22.
establishes an annual contribution of $40 000 to the Lend-
Hand program that assists low-income residential
customers.It is superior because it does not limit
PacifiCorp and MidAmerican contributions to simply
matching customer and employee contributions up to a
maximum amount of $20,000.If customer and employee
contributions were less than $20 000 (which has been the
case for Pacif iCorp ' s Idaho service territory
historically), the matching contribution would also be
less than $20,000, making the total contribution less than
the $40 000 fixed amount guaranteed under 1-(0-22) .
I -14 now provides a predictable funding amount rather than
an amount that varies depending on the generosity of
parties other than the Applicants.
CASE NO. PAC-E- 05 - 81/13/06 CARLOCK , T (Supp) 5
STAFF
Idaho-Specific Commitment No. 1-15 is replaced
with modified 0-21.It improves upon the provisions of
15 by setting timelines for the proposed arrearage
management project and establishing the $66,000 project
funding level as a floor rather than a ceiling.
Idaho-Specific Commitment No. 1-21 is replaced
with modified 0-15 to be consistent with General
Commi tment No. 18 Applicable to all states.It also
strengthens or reinforces the ring- fencing language and
provisions.
Idaho-Specific Commitment No. I -24 is replaced
with 0-5 to provide clarification and to strengthen or
reinforce the ring- fencing language and provisions.
I recommend that Oregon-Specific Commitment Nos.
7 through 0-12 become Idaho-Specific Commitment Nos.
26 through 1-31.These Oregon-Specific Commitments
provide additional structure to implement the hold
harmless clauses already recommended in the Idaho
Stipulation and Commitments (Exhibit No. 101) and provide
for rate credits.The rate credits in 1-27 and 1-
provide additional benefits to Idaho customers of
approximately $640,000 annually for test years 2006 and
2007.The rate credits will then decline until eliminated
in a 2011 test year.The hold harmless provisions as
structured and clarified in 1-28 through 1-30 guarantee
CASE NO. PAC-05-1/13/06 CARLOCK , T (Supp) 6
STAFF
that approximately $820,000 annually in costs will not be
reflected in Idaho rates for test years 2006 through 2010
wi th approximately $380,000 annually thereafter.
Idaho-Specific Commitment No. 1-32 replaces
Commitment No. 37 applicable to all states.This is
beneficial to Idaho by protecting customers from any
credit rating downgrades caused by actions resulting from
this transaction during the first year.The debt cost
adj ustment for each notch of credit rating downgrade will
reduce debt costs until the debt issuance is no longer
outstanding.This Commitment 1-32 must be compared to
1- 3 7 as only one of these adj ustments is available in the
guarantee.Since PacifiCorp s Rating Outlook is negative
it is possible that a credit rating downgrade could occur,
making 1-32 beneficial.The actual debt costs as
discussed in 1- 3 7 can still be lower than rates for
comparable companies even without the guarantee.
Idaho-Specific Commitment Nos. 1-33 through 1-
should be adopted to strengthen or reinforce the ring-
fencing language and provisions.
Are there other provisions in the Oregon
Stipulation that should be adopted in this Idaho case?
Yes, paragraph 10 of the Oregon Stipulation
should be adopted in concept in the Idaho Order.This
addi tion strengthens or reinforces the ring- fencing
CASE NO. PAC-05-1/13/06 CARLOCK , T (Supp) 7
STAFF
language and provisions.Instead of making Berkshire
Hathaway an Applicant in this Idaho case, paragraph 10 can
be adopted by having the sworn statements filed as
follows:
The sworn statements of Warren Buffett and
Wal ter Scott, Jr. (together , the shareholders)
will provide that neither will exercise any
control, directly or indirectly, on matters that
pertain to PacifiCorp (except for matters
relating to PacifiCorp that are ministerial innature). The sworn statements will also provide
that the Shareholders will recuse themselves
from voting as MEHC or Berkshire Hathaway
directors on MEHC or Berkshire Hathaway Board of
Directors matters concerning PacifiCorp
activities or operations. The sworn statements
will provide that the future transfer of theShareholders' shares will require an agreement
by the transferee to abide by the limitations
recited above, as applicable, regarding the
power to exercise substantial influence over
PacifiCorp if, to the Shareholders ' knowledge,
the transferee would own 5% or more of the
voting interests of MEHC or Berkshire Hathaway
after such transfer. By the foregoing, the
Shareholders, PacifiCorp, MEHC and Berkshire
Hathaway do not concede that such transferees
are affiliated interests...
Does this conclude your supplemental testimony
in this proceeding?
Yes, it does.
CASE NO. PAC-05-1/13/06 CARLOCK, T (Supp) 8
STAFF
Staff Recommended
Modification to Idaho Commitments
January 2006
General Commitments Applicable to All States:
11) a)
17)
18) a)
Any diversified holdings and investments (e., non-utility business or foreign
utilities) ofMEHC following approval of the transaction will not be held by
PacifiCorp or a subsidiary ofPacifiCorp. 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.
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.
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 ofPacifiCorp 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 ofPacifiCorp by MEHC. In the absence of
such an agreement between Commission staff and the Companies, MEHC and
Supplemental Exhibit No. 102
Case No. P AC-05-
T. Carlock, Staff
1/13/06 Page 1 of21
22)
37)
38)
48)
51)
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 of the percentage
common equity will not include any portion ofPacifiCorp preferred stock
issued and outstanding. PacifiCorp s Total Adjusted Capital is derIDed 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.
(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. 131.
(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. 132.
(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. 128 and I 30.
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, 40, 41 , 44 and 52.
PacifiCorp will hold IRP meetings at locations or using communications
technologies that encourage broad participation.
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 PUlliCA Audit Report of
ScottishPower dated May 11 , 2004, MEHC 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% ofthe rights. No more than six months after the close of the transaction
MEHC will provide parties a clear and complete disclosure statement that
Supplemental Exhibit No. 102
Case No. P AC-05-
T. Carlock, Staff
1/13/06 Page 2 of 21
52)
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.
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 of
PacifiCorp s next IRP. This incremental amount is expected to be at least
MW and maybe as much as 100 M\V. 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.
Supplemental Exhibit No.1 02
Case No. PAC-05-
T. Carlock, Staff
1/13/06 Page 3 of21
Idaho-Specific Commitments:
Modified or added as a result of Oregon-Specific Commitments.
114 (0 22)
115 (021)
121 (0 15)
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.
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. Ifless than six states participate, the amount of the
shareholder funds will be reduced proportionally.
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 of PPW 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.
Supplemental Exhibit No. 102
Case No. PAC-05-
T. Carlock, Staff
1/13/06 Page 4 of21
124 (0 5)
I 26 (0 7)
127 (0 8)
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 if PPW Holdings LLC does issue debt, the Commission has the
authority to consider additional ring-fencing provisions that may be
appropriate.
Berkshire Hathaway acknowledges the Commitments made by MERC 3.J.ld
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.
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 127 through I 31 (0 8 through 0 12). 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 127 and I 31 (0 8
and 0 12) 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.
MEHC and PacifiCorp commit to reduce the annual non-fuel costs to
PacifiCorp customers of the West Valley lease by $0.4 17 million per
month (total company) or an expected $3.7 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 flTst month after the
close of the transaction to purchase PacifiCorp, Idaho s share ofthe
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.
Supplemental Exhibit No. 102
Case No. PAC-05-
T. Carlock, Staff
1/13/06 Page 5 of 21
128 (0 9)
129 (0 10)
This commitment is offsetab1e, 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
rncur.
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
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 I 28 (0 9) 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 s 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.
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
regulated accounts, nor allocated directly or indirectly to PacifiCorp. Such
captive shall be comparable in costs and services to that previously
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
Supplemental Exhibit No.1 02
Case No. PAC-05-
T. Carlock, Staff
1/13/06 Page 6 of 21
130 (0 11)
131 (012)
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 is not more
than $7.4 million (total company). (This commitment is reflected in Row 3
in Appendix 2.
MEHC and PacifiCorp will hold customers harmless for increases in costs
resulting from PacifiCorp corporate costs previously billed to PPM and
other former affiliates ofPacifiCorp. Oregon Commission Staffhas valued
the potential increase in total company revenue requirement if these 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
of the 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 I 30
(011) and Commitment 38.
This commitment is offsetable to the extent 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. (The commitment is reflected in
Row 4 of Appendix 2.
MEHC and PacifiCorp commit that PacifiCorp s total company A&G
costs will be reduced by $6 million annually based on the A&G categories
assumptions, and values contained in Appendix 3 titled
, "
UM 1209 A & G
Stretch". The amount of the total company rate credit 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.
million monthly rate credit will be deferred for the benefit of customers
and accrue interest at PacifiCorp 5 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 (0 12)
and Commitments 22 and U 23.
Supplemental Exhibit No. 102
Case No. PAC-05-
T. Carlock, Staff
1/13/06 Page 7 of 21
132 (0 14)
133 (0 16)
The credit will be offsetable, on a prospective basis, by the amount that
PacifiCorp demonstrates to the Commission s satisfaction, in a general
rate case, that total company A&G expenses included in PacifiCorp s rates
are lower than the benchmark and have not been shifted to other regulatory
accounts. The 2006 benchmark will be $228.8 million. Subsequent
benchmarks shall equal the 2006 benchmark multiplied by the ratio of the
Global Insight's Utility Cost Information Service (UCIS)-Administrative
and Genera1- 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 benchmark for future years will equal the
benchmark from the rate case in which anew index was adopted multiplied
by the ratio of the new index for the test period divided by the index value
for the first year that the index is adopted.
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 ofthe ratings
downgrade, the assumed yield for any incremental debt issued by
P;1cifiCorp 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 ofPacifiCorp equal to the rating on the
Baseline Date. This Commitment is in lieu of Commitment 37, and a state
must choose between this Commitment I 32 (014) 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 of the debt, as compared to the revenue
requirements pursuant to subparagraph a) and its basis point reductions, of
the originally financed debt.
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.
Supplemental Exhibit No.1 02
Case No. PAC-05-
T. Carlock, Staff
1/13/06 Page 8 of21
134 (0 17)
135 (0 18)
I 36 (126)
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 of this 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
oplillon.
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.
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 of the three rating agencies.
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 35.
Supplemental Exhibit No.1 02
Case No. PAC-05-
T. Carlock, Staff
1/13/06 Page 9 of 21
APPENDIX 1
PPW HOLDINGS LLC RINGFENCING PROVISIONS
Purposes.
(a)The purposes oJthe Company are to engage in the following activities:
1. to purchase and own 100% of the capital stock in PacifiCorp
PacifiCorp ; and any equity interest therein, an "Equity Interest"
2. in co ection with the purchase of the Equity Interest, to negotiate
authorize, execute, deliver and perform documents including, but not limited to, that
cerl2.in Assignment and Assumption of Stock Purchase Agreement between the Member
and the Company pursuant to which the Member will assign to the Company all ofthe
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 hereill, detennines to be necessary,
convenient or incidental to any ofthe foregoing purposes, and to have and exercise all of
the power and rights conferred upon limited liability companies formed 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 terms 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 Officer 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 ofthe Company, are hereby ratified, approved and confirmed in
respects. Simultaneously with or following the execution of this Agreement the Company may
enter into each of the Transaction Documents with such filial terms 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 ofPPW Holdings, LLC (the
Company ) shall be managed by or under 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.
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Supplemental Exhibit No.1 02
Case No. P AC-05-
T. Carlock, Staff
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An Independent Director shall mean a member of the Board who 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, attorney 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 orreceiver for the Company or any affiliate of
the Company. As used in this definition
, "
affiliate" shall have the meaning given to such term
under Rule 405 under the Securities Act of 1933 , as amended.
Except as otherwise provided in this Section l(a) with respect to the Independent
Director, MidAmerican Energy Holdings Company (the "Member ) by unanimous vote or
unanimous written consent, may determine at any time in its sale 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 ofthe 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 ofthe Directors then in office. Each Director elected
designated or appointed shall hold office until a successor is elected and qualified or illltil such
Director s earlier death, resignation or removal. Each Director shall be a "manager" within the
meaning ofthe Limited Liability Company Act of the State of Delaware (the "Act"
(b) Powers. Subject to this Section 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 quonun 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 requires the unanimous vote ofthe
Directors and/or the vote ofthe 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 ofthe 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.
(d) Removal of Directors. Unless otherwise restricted by law, any Director or
the entire Board maybe 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 ofthe
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Case No. PAC-05-
T. Carlock, Staff
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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 e Co any to do or cause to be done all things necessary to preserve
and keep in full force and effect its existence, rights (charter and statutorj) 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:
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maintain its ov,'ll 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 of which in sum is unique from that
of any other Person;
file its own tax 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 ?-ssets 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 arm 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;
Supplemental Exhibit No.1 02
Case No. P AC-05-
T. Carlock, Staff
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maintain its own office and telephone line separate and apali 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\vn misunderstanding regarding its separate
identity;
maintain adequate capital and 3.J.1 adequate number of employees in
light of its contemplated business purposes; and
not acquire any obligations or securities ofthe 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 Company as a separate legal entity or the limited liability ofthe Member or the Directors.
3. So long as the Company holds or owns an Equity Interest and
unless otherwise provided in the Transaction Documents, the Company shall not:
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become or remain liable, directly or contingently, in connection
with ally 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 permit to exist any lien, encumbrance, claim, security
interest, pledge or other right in favor of any person or entity in the
assets ofthe 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 permit to remain outstanding any loan or advance to, or
own 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;
el1ter into, or be a paliy to, any transaction with any of its affiliates
except (A) in the ordinary course of business, (B) pursuant to the
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Case No. PAC-05-
T. Carlock, Staff
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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 terms of any
such transactions entered into by unaffiliated parties;
make any change to its name or principal business or use of any
trade names, fictitious names, assumed names or "doing business
" names.4. So long as the Company holds or owns an Equity hlterest, none of
the Company, the Member or the Board shall be authorized or empowered, nor shall they
pennit the CompfuiY, without the prior UTIi'inim ous ."ritten consent of all of the Directors
on the Board, including the Independent Director, (a) to consolidate, merge, dissolve
liquidate or sell ail 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 permitted 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 ' s
Leverage Ratio does not exceed 0.65: 1 and PacifiCoIp s Interest Coverage Ratio is not
less than 2.5: 1; or2. (ifPacifiCoIp is not in compliance with the foregoing ratios) at
such time, PacifiCorp ' s senior unsecUI'ed long term debt rating is at least BBR (or its then
equivalent) with Standard & Poor s Ratings Group and Baal (or its then equivalent) with
Moody s Investors Service, Inc.
For purposes of this Section 2(i), the following terms shall be defined as follows:
Capitalized Lease Obligations" means all lease obligations ofPacifiCoIp 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 conformity with such
principles.
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T. Carlock, Staff
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Consolidated Current Liabilities" means the consolidated current liabilities of
PacifiCorp and its Subsidiaries, but excluding the current portion of long term
Indebtedness which would othenvise be included therein, as determined 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 conformity with
GAAP.
Consolidated EBITDA" means, for any period, the sum ofthe amounts for such
period ofPacifiCorp s (i) Consolidated Net Operating Income, (ii) Consolidated Interest
Expense, (iii) income taxes and deferred taxes (other than income taxes (either positive or
negative) attributable to extraordinary andnon-recurring gains or losses or sales 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 GAAP; provided that to the extent PacifiCorp has any Subsidiary that is
not a wholly owned 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 nllIl1ber 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 P acifi Corp 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 conformity
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
nllI!lber 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
Portlnd3-1537021.3 0051851-00004
Supplemental Exhibit No. 102
Case No. PAC-05-
T. Carlock, Staff
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number of shares of outstanding common stock of such Subsidiary on the last day of suchperiod.
Consolidated Net Operating Income" means, for any period, the aggregate of
the net operating income (or loss) ofPacifiCorp 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 extraordinary losses.
Currency, Interest Rate or Commodity Agreements" means an agreement or
transaction involving any currency, interest rate or energy price or volumetric swap, cap
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 as ,
in effect from time to time.
Indebtedness" means, with respect to PacifiCorp or any of its Subsidiaries at
any date of detennination (without duplication), (i) all L.1debtedness 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 ofthe 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 definition, obligations under
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Supplemental Exhibit No.1 02
Case No. PAC-05-
T. Carlock, Staff
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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 maximum 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 arnOlll1t of
such Indebtedness less the remaining unamOliized portion of the original issue discount
of such Indebtedness at such time as determined in confornlity with GAAP.
Indebtedness for Borrowed :L\1oney" means any indebtedness (whether being
principal, premium, interest or other amounts) for (i) money borrowed, (ii) payment
obligations under or in respect or 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,
exclude 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 infonnation 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 Total 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 t6 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) of (a) Indebtedness for BolTowed 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 OVi'llS an Equity Interest, the Company shall at all times have at least one
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T. Carlock, Staff
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Independent Director who, except as provided in Section 2(a), will be appointed by the Member.
To the fullest extent permitted by Section 18-1101 (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 wiii~ its terms. In addition, li~e 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 18-802 of the Act; and shall not
dissolve prior to the occurrence of such event provided however to the fullest extent permitted
by law, the Member and the Directors shall not make an application under Section 18-802 of the
Act so long as the Company holds or owns 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 occurrence 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 ill the Company and the Personal Representative(s) (as
defined in the Act) ofthe 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
adrrission 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 make 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 tills Section 24(b), the
Springing Member shall have no interest (economic or otherwise) and is not a member of the
~~~
( c) Notwithstanding any other provision of this Agreement, the Bankruptcy 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 Member waives any right they might
have under Section 18-801(b) ofthe 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
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Case No. PAC-05-
T. Carlock, Staff
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to be a member of the Company. "Bankruptcy" means, with respect to a Member, if the
Member (i) makes an assignment for the benefit of creditors, (ii) files a voluntary petition in
bankruptcy, (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, composition, readjustment, liquidation, dissolution or
similar relief under any statute, law or regulation, (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, consents to or acquiesces in the appointment of a trustee, receiver aT 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 defrnition 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 ofthe Company shall be applied in the manner, and in the order
of priority, set forth in Section 18-804 of the Act. Upon completion ofthe 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 Change in a vote of Directors if the Change relates to Section 1 , Section 2(i) or
Section 3; provided that none of the conditions identified in either of clause (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.
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Case No. P AC-05-
T. Carlock, Staff
1/13/06 Page 19 of21
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6
CERTIFICATE OF SERVICE
HEREBY CERTIFY THAT I HAVE THIS 13TH DAY OF JANUARY 2006
SERVED THE FOREGOING SUPPLEMENTAL TESTIMONY OF TERRI CARLOCK,
IN CASE NO. PAC-05-, BY 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),pacificoro 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 VAN NOSTRAND
JAMES F FELL
STOEL RIVES LLP
900 SW FIFTH AVE STE 2600
PORTLAND OR 97204
MAIL: jmvannostrand~stoel.com
i ffell(Zilstoel.com
MARK C MOENCH
SENIOR VICE PRESIDENT - LAW
MIDAMERICAN ENERGY HOLDINGS CO
201 S MAIN SUITE 2300
SALT LAKE CITY UT 84111
MAIL: mcmoench0),midamerican.com
JAMES R SMITH
MONSANTO COMPANY
HIGHWAY 34 NORTH
PO BOX 816
SODA SPRINGS ID 83276
MAIL: iim.r.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 OR 44140
MAIL: tony~yankel.net
JOHN R GALE
VICE PRESIDENT/ REG AFFAIRS
IDAHO POWER COMPANY
PO BOX 70
BOISE ID 83707
MAIL: rgale~idahopower.com
ARTHUR F SANDACK ESQ
8 E BROADWAY SUITE 510
SALT LAKE CITY UT 84111
MAIL: asandack(fYitower.net
DAVID HAWK., DIRECTOR
ENERGY NATURAL RESOURCES
R. SIMPLOT COMPANY
PO BOX 27
BOISE, ID 83702
MAIL: dhawk~simplot.com
DATA REQUEST RESPONSE CENTER
ACIFICORP
825 NE MUL TNOMAH STE 800
PORTLAND OR 97232
BARTON L KLINE SR ATTORNEY
MONICA B MOEN ATTORNEY II
IDAHO POWER COMPANY
PO BOX 70
BOISE ID 83707
MAIL: bkline~idahopower.com
mmoen(Ci),idahopower .com
BRAD M PURDY
ATTORNEY AT LAW
2019 N 17TH STREET
BOISE ID 83702
MAIL: bmpurdy~hotmail.com
ALAN HERZFELD
HERZFELD & PIOTROWSKI LLP
713 W FRANKLIN
PO BOX 2864
BOISE ID 83701
MAIL: aherzfeld~hpllp.net
R. SCOTT PASLEY
ASSISTANT GENERAL COUNSEL
R. SIMPLOT COMPANY
PO BOX 27
BOISE, ID 83702
MAIL: spasley~simplot.com
JJ~. I~~
SECRETARY
CERTIFICATE OF SERVICE