20080804final_order_no_30606.pdf

Offce of the Secretar
Service Date
August 4, 2008
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION OF )
ROCKY MOUNTAIN POWER FOR AUTHORITY ) CASE NO. PAC-E-08-05
TO (1) BORROW THE PROCEEDS OF NOT )
MORE THAN $450,345,000 OF POLLUTION )
CONTROL REVENUE BONDS, (2) ENTER INTO )
SUCH AGREEMENTS OR ARRNGEMENTS AS )
MAY BE REASONABLY NECESSARY TO )
EFFECT THE BORROWIGS AND TO PROVIDE )
CREDIT ENHANCEMENT FOR THE BONDS, )
INCLUDING THE ISSUANCE OF FIRST ) ORDER NO. 30606
MORTGAGE AND COLLATERAL TRUST )
BONDS, AND (3) REPLACE OR MODIFY FROM )
TIME TO TIME THE CREDIT ENHANCEMENT )
ARRNGEMENTS SUPPORTING THE BONDS. )
On June 30, 2008, Rocky Mountain Power (Company) fied an Application that
requested authority to: (1) borrow the proceeds of not more than $300,345,000 of Pollution
Control Revenue Refuding Bonds ("Refunding Bonds") to be issued by the Counties of Emery,
Uta; Carbon, Uta; Lincoln, Wyoming; Sweetwater, Wyoming; Converse, Wyoming; and
Moffat, Colorado ("Refuding Counties"); (2) borrow the proceeds of not more than
$150,000,000 of Pollution Control Revenue Bonds ("New Money Bonds") to be issued by one or
more of the following Counties or muncipalities: Emery, Utah; Converse, Wyoming; Lincoln,
Wyoming; Sweetwater, Wyoming; City of Gilette, Wyoming; Navajo County, Arizona; and
Routt County, Colorado ("New Money Issuers"); (3) enter into such agreements or arangements
with the Refuding Counties and New Money Issuers and with other entities as may be
reasonably necessar to effect the borrowings and to provide credit enhancement for the
Refuding Bonds and the New Money Bonds, including the issuance of the Company's First
Mortgage and Collateral Trust Bonds as collateral; and (4) replace or modify from time-to-time
the credit enhancement arangements supporting the Refuding Bonds or the New Money
Bonds.
These borrowings will be in connection with the financing, or refinancing, of the cost
of certn pollution control, solid waste disposal and sewage facilities at the Company's electrc
ORDER NO. 30606 1
generating plants including Jim Bridger, Carbon, Cholla, Craig, Dave Johnston, Hayden, Hunter,
Huntington, Naughton and Wyodak.
Having fully considered the Application and exhibits, the Commission enters this
Order approving Rocky Mountain Power's Application.
FINDINGS OF FACT
The Company was incorporated under Oregon law in August 1987 for the purpose of
facilitating consummation of a merger with Uta Power & Light Company, a Utah corporation,
and changing the state of incorporation of PacifiCorp from Maine to Oregon. The Company
currently serves customers as Rocky Mountain Power in Idaho, Utah and Wyoming and as
Pacific Power in California, Oregon and Washington.
The Application states that Pollution Control Revenue Bonds wil be issued by
municipalities in an amount not more than $450,345,000 in several series. Up to $300,345,000
wil be issued as Refuding Bonds and up to $150,000,000 will be issued as New Money Bonds
(Refuding Bonds and New Money Bonds wil collectively be referred to as "Bonds"). The
proceeds from the sale of the Bonds wil be loaned to the Company who wil be responsible to
pay the principal and interest on the Bonds. These Bonds will either bear a fixed interest rate or
a floating interest rate. If these Bonds bear a fixed interest rate, the rate wil be set at the time of
issuance. If these bonds bear a floating interest rate, the rate wil be set periodically based upon
market conditions. The Company expects these bonds to be issued and the related agreements to
be executed from time-to-time. Dates of maturity wil be determined based upon an engineer's
certificate verifying the economic life of the qualifying pollution control equipment and solid
and sewage waste facilties ("Qualifying Facilties").
While floating rate Bonds have a nominal long-term maturity, the obligations wil be
remarketed and bear interest at one or more frequencies, including, but not limited to, daily,
weekly, monthly, flexible or term periods. Because of the remarketing feature, combined with
the support of a letter of credit, investors are indifferent to the final maturity of the instruent; as
a result, the floating rate Bonds may be structured with the longest maturity justified by the
underlying assets being financed, while obtaining rates reflective of short matuities.
The Company wil enter into an agreement with a remarketing agent who will agree
in advance to seek new purchasers for the floating rate Bonds on a best-efforts basis if existing
investors no longer wish to hold their bonds at the end of the interest period. To satisfy the
ORDER NO. 30606 2
investment criteria of potential purchasers, the Company expects to arrange for a letter of credit
or insurance contract as a source of credit support and liquidity. For example, a letter of credit
wil provide amounts required to purchase tendered floating rate Bonds that have not been
successfully remarketed immediately, as well as amounts required for payment of scheduled
interest and principal at maturity or through acceleration. The floating rate bonds not
immediately remarketed may then be sold to other investors.
The floating rate Bonds' structure may include the selection of one of several tax-
exempt market rate pricing modes, including pricing modes as short as daily and as long as
anually. The Bonds may also include an option to convert to a term mode in which the rate is
fixed for a certain period of time. The operation of those modes wil be described in the offcial
statement for floating rate Bonds.
The pricing mode selection wil depend upon a number of factors, including
expectations as to which mode offers the lowest relative rates at the time of issuance. During the
time the floating rate Bonds carr a floating rate, the Bonds would be prepayable at par plus
accrued interest at the end of any interest rate period.
Subject to market conditions, the Bonds may be issued at fixed interest rates. The
Company expects to pay interest on a semi-anual basis. The fixed rate Bonds may include call
provisions at fixed prices at future dates. To achieve lower borrowing costs, the Company may
purchase credit enhancement from insurance companies, which would give the Bonds an
AAAI Aaa rating. The insurance companies may require the Company to collateralize the Bonds
with the Company's First Mortgage and Collateral Trust Bonds. However, if the anticipated
interest savings are not suffcient or the terms relating to the bond insurance are considered to be
unduly restrictive, the Company may choose not to obtain insurance. In this situation, the
Company may collateralize the Bonds with the Company's First Mortgage and Collateral Trust
Bonds in an aggregate principal amount not exceeding the principal amount of the Bonds,
thereby providing the Bonds with a credit rating equal to its senior debt (A-fA3). The
Commission previously authorized the Company to incur the lien of the PacifiCorp Mortgage in
Case No. U-1046-158, Order No. 22157.
The Company asserts that the net proceeds of the proposed financings wil be used for
one or more of the utility purposes authorized by Idaho Code § 61-901. To the extent that any
ORDER NO. 30606 3
fuds to be reimbursed were used for the discharge or refuding of obligations, those obligations
or their precedents were originally incured in fuherance of a utility purose.
The proposed financings are par of an overall plan to finance the cost of the
Company's facilities taking into consideration prudent capital ratios, earings coverage tests and
market uncertainties as to the relative merits of the varous types of securities the Company
could sell.
STAFF COMMENTS
Staff recommended approval of the Pollution Control Revenue Bonds or Refuding
Bonds up to an aggregate amount of $450,345,000. The Pollution Control Refunding Revenue
Bonds may be issued up to $300,345,000. New Pollution Control Revenue Bonds may be used
up to $150,000,000. Staff also recommended authority for agreements to be provided, replaced
or modified for credit enhancements.
Staff recommended approval of the continuing authority request. As a condition of
this authority, PacifiCorp's senior secured debt wil be rated at investment grade (BBB- or higher
by Standard & Poor's Rating Services and Baa3 or higher by Moody's Investors' Service, Inc.).
PacifiCorp wil follow the established procedure of notification if the ratings drop below
investment grade. The required credit rating reports, to the extent not fied in the MEHC
Acquisition Case No. PAC-E-05-8, Order No. 29998, wil be fied in this case.
The all-in-cost of the issuances and refinancing wil be reviewed in general rate cases.
The Company wil provide Staff with the documentation showing the reasonableness of its
financing activities.
CONCLUSIONS OF LAW
PacifiCorp doing business as Rocky Mountain Power is an electrical corporation
within the definition of Idaho Code § 61-119 and is a public utilty within the definition of Idaho
Code § 61-129. The Commission has jurisdiction over this Application pursuant to the
provisions of Idaho Code § 61-901 et seq. The Commission finds that the Application
reasonably conforms to Rules 141 through 150 of the Commission's Rules of Procedure,
IDAPA 31.01.01.141-150.
The Company has paid the fees required by Idaho Code § 61-905.
The Commission further finds that the proposed transaction is in the public interest
and a formal hearing on this matter is not required.
ORDER NO. 30606 4
The method of issuance is proper.
The general purposes to which the proceeds wil be put are lawful purposes under the
Public Utilties Law of the State of Idaho and are compatible with the public interest. However,
this general approval of the general puroses to which the proceeds will be put is neither a
finding of fact nor a conclusion of law that any paricular construction program of the Company
which may be benefited by the approval of this Application has been considered or approved by
this Order, and this Order shall not be construed to that effect.
The issuance of an Order authorizing the proposed financing does not constitute
agency determination/approval of the type of financing or the related costs for ratemaking
purposes, which determination the Commission expressly reserves until the appropriate
proceeding.
ORDER
IT IS HEREBY ORDERED that the Company's Application for authority to: (1)
borrow the proceeds of not more than $300,345,000 of Pollution Control Revenue Refuding
Bonds ("Refuding Bonds") to be issued by the Counties of Emery, Utah; Carbon, Uta;
Lincoln, Wyoming; Sweetwater, Wyoming; Converse, Wyoming; and Moffat, Colorado
("Refunding Counties"); (2) borrow the proceeds of not more than $150,000,000 of Pollution
Control Revenue Bonds ("New Money Bonds") to be issued by one or more of the following
Counties or municipalities: Emery, Utah; Converse, Wyoming; Lincoln, Wyoming; Sweetwater,
Wyoming; City of Gilette, Wyoming; Navajo County, Arizona; and Routt County, Colorado
("New Money Issuers"); (3) enter into such agreements or arangements with the Refunding
Counties and New Money Issuers and with other entities as may be reasonably necessary to
effect the borrowings and to provide credit enhancement for the Refunding Bonds and the New
Money Bonds, including the issuance of the Company's First Mortgage and Collateral Trust
Bonds as collateral; and (4) replace or modify from time-to-time the credit enhancement
arrangements supporting the Refunding Bonds or the New Money Bonds be approved.
These borrowings wil be in connection with the financing, or refinancing, of the cost
of certain pollution control, solid waste disposal and sewage facilities at the Company's electric
generating plants including Jim Bridger, Carbon, Cholla, Craig, Dave Johnston, Hayden, Hunter,
Huntington, Naughton and Wyoda.
ORDER NO. 30606 5
IT is FURTHER ORDERED that such authority will remain in effect so long as the
Company maintains a BBB- or higher senior secured debt rating, as indicated by Standard &
Poor's Rating Services, and a Baa3 or higher senior secured debt rating, as indicated by Moody's
Investors' Service, Inc.
IT IS FURTHER ORDERED that if the Company's senior secured debt ratings fall
below the investment grade levels referenced in the above ordering paragraph (Downgrade),
PacifiCorp's authority to incur Debt as provided in this Order wil not terminate but instead such
authority will continue for a period of 364 days from the date of the Downgrade (the "Continued
Authorization Period") provided that PacifiCorp:
(1) Promptly notifies the Commission in writing of the Downgrade; and
(2) Files a supplemental application with the Commission within seven (7)
days after the Downgrade requesting a supplemental order (Supplemental
Order) authorizing PacifiCorp to continue to incur Debt as provided in this
Order, notwithstanding the Downgrade. Until PacifiCorp receives the
Supplemental Order, any Debt incurred or issued by PacifiCorp during the
Continued Authorization Period wil become due or mature no later than
the final date of the Continued Authorization Period.
IT IS FURTHER ORDERED that the Company shall fie the following as they
become available:
a. The "Report of Securities Issued" required by 18 C.F .R. § 34.1 O.
b. Verified copies of any agreement entered into in connection with the
issuance of Debt pursuant to this order.
c. A verified statement setting forth in reasonable detail the disposition of the
proceeds of each offering made pursuant to this order.
d. Credit Rating Reports, to the extent not fied in PAC-E-05-08, Order No.
29998.
IT IS FURTHER ORDERED that this authorization is without prejudice to the
regulatory authority of the Commission with respect to rates, service, accounts, valuation,
estimates, or determination of costs, or any other matter that may come before this Commission
pursuant to this jurisdiction and authority as provided by law.
IT IS FURTHER ORDERED that nothing in this Order and no provision of
Chapter 9, Title 61, Idaho Code, or any act or deed done or performed in connection with this
ORDER NO. 30606 6
Order shall be construed to obligate the State of Idaho to payor guarantee in any maner
whatsoever any security authorized, issued, assumed, or guaranteed under the provisions of
Chapter 9, Title 61, Idaho Code.
IT IS FURTHER ORDERED that the Company notify the Commission as soon as
possible prior to the issuance with as much information as possible on the issue. The notice may
be by telephone or facsimile to be followed with letter of verification if notice is less than seven
days.
IT IS FURTHER ORDERED that issuance of this Order does not constitute
acceptance of the Company's exhibits or other material accompanying the Application for any
purpose other than the issuance of this Order.
THIS IS A FINAL ORDER. Any person interested in this Order may petition for
reconsideration within twenty-one (21) days of the service date of this Order. Within seven (7)
days after any person has petitioned for reconsideration, any other person may cross-petition for
reconsideration. See Idaho Code § 61-626.
ORDER NO. 30606 7
A DONE by Order of the Idaho Public Utilties Commission at Boise, Idaho this i. '1A:7"'JlAstday of) 2008.
~~EN
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MARSHA H. SMITH, COMMISSIONER
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ATTEST:
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Je D. Jewe1Ì
C mission Secretar
O:PAC-E-08-05_ks
ORDER NO. 30606 8