20080725Decision Memo.pdf

DECISION MEMORANDUM
TO:COMMISSIONER REDFORD
CO MMISSI 0 NER SMITH
CO MMISSI 0 NER KEMPTON
COMMISSION SECRETARY
LEGAL
WORKING FILE
FROM:TERRI CARLOCK
DATE:JULY 24, 2008
RE:P ACIFICORP'S POLLUTION CONTROL REVENUE BONDS
AUTHORITY REQUEST; CASE NO. P AC-08-
On June 30, 2008, PacifiCorp filed an Application requesting authority to borrow up to
$450 345 000 aggregate principal amount at anyone time of Pollution Control Revenue or
Refunding Bonds. Pollution Control Refunding Bonds to be issued by the Counties of Emery
and Carbon in Utah; Lincoln, Sweetwater and Converse in Wyoming; and Moffat, Colorado
represent up to $300 345 000 aggregate amount at anyone time. New Pollution Control
Revenue Bonds may represent up to $150 000 000 in new funds to be issued by one or more of
the following counties or municipalities: Emery, Utah, Converse, Wyoming, Lincoln, Wyoming,
Sweetwater, Wyoming, City of Gillette, Wyoming, Navajo County, Arizona and Routt County,
Colorado. To support the issuances, credit enhancements may be provided, replaced or modified
to lower the all-in-cost of the bonds.
The bonds may be issued at a fixed interest rate, to be set at the time of issuance or a
floating interest rate to be set periodically. Market developments for some insured variable rate
Pollution Control Revenue Bonds have reduced the liquidity when remarketed possibly resulting
in higher variable interest rates. Flexibility to refund these bonds and issue additional bonds with
more favorable terms in current markets is a benefit to the Company and customers. The all-in-
cost of the issuances and refinancing will be reviewed in general rate cases. The Company will
provide Staff with the documentation showing the reasonableness of its financing activities.
PacifiCorp requests this additional authority remain in effect so long as the Company
bond ratings for senior secured debt remains investment grade (BBB- or higher by Standard &
Poor s Rating Services and Baa30r higher by Moody s Investors' Service , Inc.
DECISION MEMORANDUM - 1 -JUL Y 24, 2008
Fees will be charged based on the type of security issued including fees for underwriters
and remarketing agents. The total costs of financing are expected to average 3% of the
outstanding balance.
The requested financing authority will provide funds for one or more utility purposes.
These include capital requirements for financing or refinancing the cost of certain pollution
control, solid waste disposal and sewage facilities at Company electric generating plants.
ST AFF RECOMMENDATION
Staff recommends approval of the Pollution Control Revenue Bonds or Refunding 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 issued up to
$150 000 000. Staff also recommends authority for agreements to be provided, replaced or
modified for credit enhancements.
As a condition of this authority, PacifiCorp s senior secured debt will be rated at
investment grade or PacifiCorp will follow the established procedure of notification ifthe ratings
drop. The required credit rating reports, to the extent not filed in the MEHC Acquisition Case
No. P AC-05-, Order No. 29998, will be filed in this case.
CO MMISSI ON D ECISI 0 N
Should the $450 345 000 in Pollution Control Revenue and Refunding Bonds be
approved?
Should the authority be approved with the condition that PacifiCorp s senior secured debt
must be maintained at investment grade?
LtJocN
Terri Carlock
TC\pace08.5 PCRB OM 7.24.
DECISION MEMORANDUM - 2 -JUL Y 24, 2008