19950613Final_Order_No_26039.pdf

Office of the Secretary
Service Date
June 13,1995
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION OF )
PACIFICORP FOR AUTHORITY TO (1)BOR-)CASE NO.PAC-S-95-2
ROW THE PROCEEDS OF NOT MORE THAN )
$125,000,000 OF POLLUTION CONTROL REV-)
ENUE BONDS,(2)ENTER INTO SUCH AGREE-)
MENTS OR ARRANGEMENTS AS MAY BE )
REASONABLY NECESSARY TO EFFECT THE )
BORRO WINGS AND TO PROVIDE CREDIT )
ENHANCEMENT FOR THE BONDS,INCLUD-)ORDER NO.26039
ING THE ISSUANCE OF FIRST MORTGAGE )
AND COLLATERAL TRUST BONDS,AND (3))
REPLACE OR MODIFY FROM TIME TO TIME )
THE CREDIT ENHANCEMENT ARRANGE-)
MENTS SUPPORTING THE BONDS.)
On April 25,1995 PacifiCorp (Company)filed its Application,pursuant to Chapter 9,
Title 61,of the Idaho Code and Rule 14 of the Commission's Rules of Practice and Procedure
for authority to (1)borrow the proceeds of not more than $125,000,000 of Pollution Control
Revenue Bonds (Bonds)to be issued by one or more of the followingCounties or municipalities
therein:Emery,Utah;Carbon,Utah;Lincoln,Wyoming;Sweetwater,Wyoming;Converse,
Wyoming;Campbell,Wyoming;Moffat,Colorado;Routt,Colorado;and Lewis,Washington
(Issuers);(2)enter into such agreements or arrangements with the Issuers and with other entities
as may be reasonably necessary to effect the borrowings and to provide credit enhancement for
the Bonds,including the issuance of its First Mortgage and Collateral Trust Bonds as collateral
for the Bonds;and (3)replace or modify from time to time the credit enhancement arrangements
supporting the Bonds.
Company Representations Regarding the Issuance:
The Issuers will issue the Bonds.The Company will enter into an agreement with the
Issuers by which it will receive the proceeds of any such issuance and agree to make payments
sufficient to pay principal,interest,and the premium (if any)on the Bonds and to cover certain
additional expenses.The aggregate principal amount of the Bonds will not exceed $125,000,000.
In order to achieve a lower cost of money,the Company also expects to enter into one or more
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agreements with unrelated third parties,such as commercial banks or insurance companies,to
provide further assurance to the purchasers of the Bonds that the principal,the interest and the
premium (if any)on the Bonds will be paid on a timely basis.These arrangements may involve
the issuance of the Company's First Mortgage and Collateral Trust Bonds as collateral for the
Bonds in an amount not greater than the aggregate principal amount of the Bonds.
These borrowings will be made in connection with the issuance of Bonds by the
Issuers to finance or refinance air and water pollutioncontrol,solid waste disposal and sewage
facilities at one or more of the following electric generating plants:Jim Bridger,Carbon,
Wyodak,Dave Johnston,Huntington,Hunter,Naughton,Craig,Hayden and Centralia.The
Facilities consist principally of systems to remove and finally dispose of particulates and sulfur
dioxide from flue gases and certain solid and sewage wastes.
The Company represents that Wyoming,Utah,Washington and Colorado statutes and
the Internal Revenue Code permit local governmental agencies to issue bonds,the interest on
which is not subject to federal income taxation for most bondholders,for the purpose of the
construction of qualified pollution control equipment and solid and sewage waste facilities.The
Issuers will be asked to adopt appropriate resolutions providing for the issuance of the
appropriate series of the Bonds.
The Company also expects to enter into agreements with a commercial bank or
insurance company to provide credit support for the Bonds.The Company may also issue its
First Mortgage and Collateral Trust Bonds as collateral for repayment of the Bonds,either alone
or in conjunction with bank or insurance company credit support.
The Bonds will be issued pursuant to Indentures of Trust between the Issuers and
trustees.Pursuant to agreements between the Issuers and the Company,the proceeds from the
sale of the Bonds,other than refundable accrued interest,will be loaned to the Company to
finance or refinance the Facilities.Under the loan agreements,the Company will be obligated
to pay absolutely and unconditionally,to the extent sufficient funds are not already in the
possession of the trustee,the principal,the interest,and the premium (if any)on the Bonds,as
well as certain fees and expenses of the Issuers.Under no circumstances will the Bonds and
their related costs become an obligation of the Issuers.
To achieve a lower cost of money,the Company may enter into reimbursement
agreements,guarantees,pledges,or other security agreements or arrangements to assure timely
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payment of amounts due in respect of the Bonds.For example,a letter of credit may be added
in order to support the Bonds.In connection with a letter of credit,the Company would enter
into a reimbursement agreement under which a bank would issue a letter of credit to support
payments in respect of the Bonds.Under the reimbursement agreement,the Company would be
required to reimburse each bank for any drawings under its letter of credit.Amounts advanced
by a bank under a letter of credit are expected to bear interest based upon various short-term
rates.The Company expects that any letter of credit bank will have a long-term credit rating of
not less than AA and a short-term rating of not less than A-l/P-1.In the event a letter of credit
is obtained,it is expected to have an initial term of three years unless extended by mutual
consent of the bank and the Company or replaced by the Company with another letter of credit
or an alternative credit enhancement arrangement.
The Company estimates expenses of the offering as follows:
Regulatory Agency Fees $1,500
Issuer Fees (1)1,000,000
Trustee Fees 50,000
Company Counsel Fees 100,000
Underwriters'Counsel Fees 150 000
Bond Counsel Fees 150,000
Accountants'Fees 50,000
Consulting Fees 37,500
Credit Enhancement Fees (2)1,000,000
Rating Agency Fees 100,000
Printing Fees 70,000
Miscellaneous 108..000
Total Other Expenses $2,817,000
(1)The Company may be required to pay an Issuer's fee to the Issuers to
compensate the Issuers for providing the Company the opportunity to
issue the Bonds.The Company's past experience indicates that Emery
County and Lincoln County will charge such a fee.Although the
Company is not familiar with Lewis County's or Routt County's policy
regarding such fees,the other Issuers generally have not charged a fee.
For purposes of this estimated expense,it is assumed that all Issuers will
require the Company to pay an Issuer's Fee.Issuer's Fees are not
expected to exceed an effective cost of 0.125 percent per annum of the
principal amount over the life of the Bonds.
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(2)Represents initial commitment fee for bond insurance.If a letter of
credit is used,credit enhancement cost is not expected to exceed 0.75
percent per annum.
The fees associated with the credit enhancement arrangement are not expected to
exceed 0.75 percent per annum.The Company believes,and its experience in previous
tax-exempt financings confirms,that the interest savings from enhancing the credit support for
the Bonds will exceed the cost of the letter of credit or alternative credit arrangements;that is,
the effective cost of the Bonds will be lowered by the credit enhancement arrangements.
Over the life of the Bonds,it may be necessary or desirable to replace one or more
letters of credit or alternative credit enhancement arrangements from time to time as,for example,
the credit ratings of the various banks (and thus the Company's interest costs)fluctuate or market
rates for letters of credit change.The Company therefore requests authority to substitute,as
necessary or desirable from time to time,letters of credit or other credit enhancement
arrangements for letters of credit or other credit enhancement arrangements then in effect with
respect to the Bonds.
The Bonds will be issued with floating or fixed interest rates in several series with an
aggregate principal amount not to exceed $125,000,000.
While floating rate Bonds have a nominal long-term maturity,the obligation will have
a "put"feature which enables the holder to tender the bonds at par within a short notice period.
Floating rate Bonds will be marketed with one or more put frequencies,including,but not limited
to,daily,weekly and monthly puts.Because of the put feature,investors are indifferent to the
final maturity of the instrument;as a result,the floating rate Bonds may be structured with the
longest maturityjustifiedby the underlyingassets being financed,while obtaining rates reflective
of short maturities.
In view of the put feature,the Company will 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 and when the Bonds are put.To satisfy the 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 will 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
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maturity or through acceleration.The floating rate Bonds not immediately remarketed may
thereafter 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
annually.The Bonds may also include an option to convert to a fixed rate mode.The pricing
mode selection will 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
carry 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 Company may choose to issue the Bonds with fixed
interest rates.It is expected that interest payments would be made on a semi-annual basis.The
fixed rate Bonds may include call provisions at fixed prices at future dates.The Company may
choose to purchase credit enhancement from insurance companies to achieve lower borrowing
costs because the Bonds would then carry a AAA/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 sufficient or the terms relating
to the bond insurance are considered to be unduly restrictive,the Company may choose not to
obtain insurance and 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/A2).The
Commission previously authorized the Company to incur the lien of the PacifiCorp Mortgage in
Case No.U-1046-158,Order No.22157.As in its previous issuances,the Company would
expect to issue First Mortgage Bonds under the Pacific Power Mortgage and Utah Power
Mortgage as the basis for the issuance of its First Mortgage and Collateral Trust Bonds.
The Commission,having considered the application and appended exhibits,the
information in its files concerning the Company,the applicable law,and being fully advised in
the premises,FINDS and CONCLUDES:
FINDINGS OF FACT
The Company was incorporated under Oregon law in August 1987 for the purpose of
facilitating consummation of a merger with Utah Power &Light Company,a Utah corporation,
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and changing the state of incorporation of PacifiCorp from Maine to Oregon.The Company uses
the assumed business names of Pacific Power &Light Company and Utah Power &Light
Company within their respective service territories located in the states of California,Idaho,
Montana,Oregon,Utah,Washington and Wyoming.
Approximately 99 percent of the Company's direct utility revenues in 1994 were
derived from its electric operations and approximately 5 percent of those revenues were derived
from its Idaho operations.
The method of issuance is proper.
The Company has paid the fees required by Idaho Code §61-129.
CONCLUSIONS OF LAW
The Company is an electrical corporation within the definition of Idaho Code §61-119
and is a public utility within the definition of Idaho Code §61-129.
The Idaho Public Utilities Commission has jurisdiction over this application pursuant
to the provisions of Idaho Code§61-901 et seq.and the Application reasonably conforms to
Section 14 of the Commission's Rules of Practice and Procedure.
The general purposes for the issuance are lawful purposes under the Public Utility Law
of the State of Idaho and are compatible with the public interest.However,this general approval
of the general purposes of the issuance is neither a finding of fact nor a conclusion of law that
any particular construction program of the Company which may be benefitted 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 transaction 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.
The Application should be approved.
ORDER
IT IS THEREFORE ORDERED that the Application of PacifiCorp for authority to
(1)borrow the proceeds of not more than $125,000,000 of Pollution Control Revenue Bonds
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(Bonds)to be issued by one or more of the followingCounties or municipalities therein:Emery,
Utah;Carbon,Utah;Lincoln,Wyoming;Sweetwater,Wyoming;Converse,Wyoming;Campbell,
Wyoming;Moffat,Colorado;Routt,Colorado;and Lewis,Washington (Issuers);(2)enter into
such agreements or arrangements with the Issuers and with other entities as may be reasonably
necessary to effect the borrowings and to provide credit enhancement for the Bonds,including
the issuance of its First Mortgage and Collateral Trust Bonds as collateral for the Bonds;and (3)
replace or modify from time to time the credit enhancement arrangements supporting the Bonds,
is granted.
IT IS FURTHER ORDERED that this authorization is without prejudice to the
regulatory authority of this Commission with respect to rates,service,accounts,valuation,
estimates or determination of costs,or any other matter which may come before this Commission
pursuant to its 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 shall
be construed to obligate the state of Idaho to pay or guarantee in any manner whatsoever any
security authorized,issued,assumed,or guaranteed under the provisions of Chapter 9,Title 61,
Idaho Code.
IT IS FURTHER ORDERED that PacifiCorp shall file the followingas they become
available:
a)The "Report of Securities Issued"required by 18 CFR 34.10.
b)Verified copies of any agreement entered into pursuant to this Order.
c)Verified copies of any credit enhancement arrangements entered into
pursuant to this order.
IT IS FURTHER ORDERED that issuance of this Order does not constitute
acceptance of PacifiCorp exhibits or other material accompanying the Application for any
purpose other than the issuance of this Order.
ORDER NO.26039 -7 -
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.
DONE by Order of the Idaho Public Utilities Commission at Boise,Idaho this
day of May 1995.
RALPH NELSON,PRESIDENT
M SHA H.SMITH,COMMISSIONER
ENNIS S.HÄN E ,COMMISSIONER
ATTEST:
MyrÁa J.W$lters
Commission Secretary
vld/O-PAC-S-95-2.ws
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