990825_sw.doc

DECISION MEMORANDUM

TO: COMMISSIONER HANSEN
COMMISSIONER SMITH
COMMISSIONER KJELLANDER
MYRNA WALTERS
RON LAW
BILL EASTLAKE
TONYA CLARK
STEPHANIE MILLER
TERRI CARLOCK
RANDY LOBB
KATHY STOCKTON
BEV BARKER
WORKING FILE

FROM: SCOTT WOODBURY

DATE: AUGUST 25, 1999

RE: CASE NO. PAC-E-99-2 (PACIFICORP)
CENTRALIA PLANT/COAL MINE PURCHASE AND
SALE AGREEMENTS
PURCHASER: TECWA POWER (PLANT); TECWA FUEL (MINE)

On August 12, 1999, PacifiCorp (Company) filed an Application with the Idaho Public Utilities Commission (Commission) regarding the proposed sale by the Company of its 47.5% ownership interest in the Centralia steam generating plant (and related facilities) and the 47.5% rate based portion of its ownership interest in the Centralia Coal Mine. The purchaser of the Centralia generating unit is TECWA Power, Inc. (TECWA Power) and the purchaser of the Centralia Coal Mine is TECWA Fuel, Inc. (TECWA Fuel), both Washington corporations and both wholly-owned subsidiaries of TransAlta Corp., a Canadian energy corporation with $5 billion (Canadian) in assets and guarantor of certain obligations and duties undertaken by TECWA Power and TECWA Fuel. PacifiCorp seeks a Commission Order approving the sale of the Company interest in the Centralia steam generating plant and the rate based portion of the Centralia Coal Mine. Citing Idaho Code § 61-523--Valuation.
PacifiCorp also seeks a Commission Order adopting the Company’s methodology to calculate the gain associated with the sale and the proposed ratemaking treatment of the gain.
Finally, PacifiCorp seeks a Commission ruling pursuant to 15 U.S.C. § 79z–5a(c) properly classifying the Centralia plant as an “eligible facility,” thus allowing the purchaser to operate the plant as an exempt wholesale generator (EWG) under federal law. Specifically, PacifiCorp seeks Commission rulings that operation as an eligible facility (1) will benefit consumers, (2) is in the public interest, and (3) does not violate state law. PacifiCorp specifically asks for expedited processing of the EWG determination. Expedited processing, it states, is important from a timing standpoint. TransAlta, the Company explains, cannot commence processing its application with the Federal Energy Regulatory Commission (FERC) until the Commission has made the three determinations required by federal statute. PacifiCorp respectfully asks that the three determinations be made allowing Centralia to be considered an eligible facility at the completion of PacifiCorp’s sale to TransAlta. As completion of sale cannot take place without the relevant state regulatory approvals, this, the Company states, assures that making these determinations will not prejudge the merits of the proposed sale under the Idaho statutory standards.
As represented in the Application, the owners of the Centralia facilities decided to sell the assets due principally to the possible need for additional capital expenditures to meet new air emission requirements and the potential impact of U.S. electric utility industry deregulation trends on the prospect for recovery of utility plant-in-service investment. The gross proceeds from the sale of the generating facility and the mine were allocated between the generating plant price of $452,598,000 and coal mine price of $101,400,000. The gross purchase prices are subject to certain adjustments which must be incorporated in any calculation of net gain. PacifiCorp’s share of the gain associated with the sale is estimated to be approximately $83 million on a system wide basis. The actual dollar value of the net gain on the sale will not be finalized until the close of the transaction.
The Company requests that its Application be processed pursuant to Modified Procedure, i.e., by written submission rather than by hearing. Reference Commission Rules of Procedure, IDAPA 31.01.01.201-204.
The Company’s Application includes copies of the Centralia Power Plant Purchase and Sale Agreement and Centralia Coal Mine Purchase and Sale Agreement, other transactional documents and the prefiled testimonies of Company witnesses C. Alex Miller, Managing Director of Planning; Dr. Roger Weaver, Director, Regulatory and Strategy Support; and Anne E. Eakin, Vice President Regulation.

Staff Analysis
The Company has requested that its underlying Application be processed under Modified Procedure. While Staff finds PacifiCorp’s filing to be a more complete filing, as compared to a related Avista Centralia filing (AVU-E-99-6), Staff recommends that similar procedure be adopted in both cases. Staff recommends that the Commission issue a Notice of Application, a 14-day Intervention Deadline, Notice of Opportunity for Discovery by Parties, and establish a future date (i.e., September 30, 1999) when parties can submit comment on the Company’s proposed procedure. Alternatively, as in the Avista case, Staff recommends that the underlying matter be set for hearing.
The Company also requests a more expedited treatment of its request for Commission findings regarding EWG eligibility. As indicated by the Company, it is Staff’s understanding that the findings can be interlocutory and made contingent upon a favorable final Commission Order in the case and the co-owners ability to receive other required regulatory approvals.

Commission Decision
The Company has proposed Modified Procedure in this case. Staff proposes a more measured approach. What is the Commission’s preference? How does the Commission wish to handle the requested findings regarding EWG eligibility?

Scott D. Woodbury
Deputy Attorney General

bls/M:pace992_sw

DECISION MEMORANDUM 1