PACIFIC POWER A DIVISION OF PACIFICORP

February 24, 2014

VIA ELECTRONIC FILING AND OVERNIGHT DELIVERY

Public Utility Commission of Oregon 3930 Fairview Industrial Dr. S.E. Salem, OR 97302-1166

Attn: Filing Center

825 NE Multnomah, Suite 2000 Portland, Oregon 97232

RE: UI _-Affiliated Interest Application Requesting Approval of a Share Assessment

Agreement with Huntington Cleveland Irrigation Company

PacifiCorp d/b/a Pacific Power submits for filing its Application Requesting Approval of a Share Assessment Agreement with Huntington Cleveland Irrigation Company. An original and three copies will be provided by overnight delivery.

PacifiCorp respectfully requests that all data requests regarding this matter be addressed to:

By E-mail (preferred):

By regular mail: Data Request Response Center PacifiCorp 825 NE Multnomah St., Suite 2000 Portland, OR 97232

Informal questions concerning this filing may be directed to Gary Tawwater, Regulatory Affairs Manager, at (503) 813-6805.

Sincerely,

0V. fYvt1 Cu R. Bryce Oalley Vice President, Regulation

Enclosures

BEFORE THE PUBLIC UTILITY COMMISSION OF OREGON

UI

In the Matter of the Application of PACIFICORP d/b/a Pacific Power, Requesting Approval of a Share Assessment Agreement with Huntington Cleveland Irrigation Company, an Affiliated Interest

APPLICATION OF PACIFICORP

1 Under ORS 757.495(1) and in accordance with OAR 860-027-0040, PacifiCorp d/b/a

2 Pacific Power (PacifiCorp or Company) respectfully requests approval from the Public

3 Utility Commission of Oregon (Commission) of an agreement with Huntington-Cleveland

4 Irrigation Company (HCIC), an affiliated interest of the Company, for assessments to the

5 Company for its shares in HCIC. A copy of the Share Assessment Agreement by and

6 between Huntington-Cleveland Irrigation Company and PacifiCorp Energy1 (Agreement) is

7 included as Attachment A.

8 I. Background

9 HCIC is a non-profit company that holds water rights in the Huntington Creek

10 drainage, located in Utah, and its tributaries. The Company currently owns approximately

11 one-third of the shares of HCIC. Additionally, HCIC manages access to certain water

12 supplies on behalf of PacifiCorp. "Affiliated interest," as defined in ORS 757.015(6),

13 includes every corporation or person, five percent or more of which is directly or indirectly

14 owned by a public utility. PacifiCorp's ownership interest in HCIC qualifies as an affiliated

15 interest.

16 The Company primarily uses the water obtained through HCIC as part of the supply

17 to its Huntington Plant located in Emery County, Utah. The HCIC Board of Directors

1 PacifiCorp Energy is a division ofPacifiCorp.

Page 1- UI PacifiCorp Application Affiliated Interest HCIC Share Assessment

1 recently approved a share use reclassification for its municipal and industrial water users, and

2 a rate increase for all HCIC shareholders. HCIC and PacifiCorp entered into a new share

3 assessment agreement to reflect the decision made by the HCIC Board of Directors.

4 With this Application, the Company requests Commission approval of the Agreement

5 and authorization to conduct business thereunder.

6 II. Compliance with OAR 860-027-0040 Filing Requirements

7 A. Address

8 The Company's name and address of its principal business office are:

9 10 11

12

PacifiCorp 825 NE Multnomah Street Portland, OR 97232

B. Communications and Notices

13 14

All notices and communications with respect to this Application should be addressed to:

15 16 17 18 19 20 21

PacifiCorp Oregon Dockets 825 NE Multnomah Street, Suite 2000 Portland, OR 97232

Michelle R. Mishoe Senior Counsel Pacific Power 825 NE Multnomah Street, Suite 1800

OR 97232 813-5977

22 Additionally, PacifiCorp respectfully requests that all data requests regarding this

23 matter be addressed to:

24 By e-mail (preferred)

25 26 27 28

By regular mail Data Request Response Center PacifiCorp 825 NE Multnomah St., Suite 2000 Portland, OR 97232

29 Informal inquires may be directed to Gary Tawwater, Regulatory Affairs Manager, at

30 (503) 813-6805.

Page 2- UI __ PacifiCorp Application Affiliated Interest HCIC Share Assessment

1 c. Relationship Between PacifiCorp and Affiliated Interest

2 The Company currently owns approximately one-third of the shares of HCIC.

3 Therefore, HCIC is an "affiliated interest" of the Company as set forth in ORS 757.015(6).

4 D. Voting Securities

5 The Company owns approximately one-third of the voting securities in HCIC.

6 PacifiCorp may use its shares to vote for the one seat on HCIC's Board of Directors2 allotted

7 to a municipal/industrial representative. Additionally, PacifiCorp has the right to vote its

8 shares on all general matters put before the general shareholders for a vote.

9 E. Common Officers and Directors

10 The Company and HCIC do not share any officers or directors.

11 F. Pecuniary Interest

12 No officer or director of either the Company or HCIC is a party to or has a pecuniary

13 interest in the contemplated business transactions between the Company and HCIC.

14 15

G. Description of Goods and Services Provided; Cost(s) Incurred; Market Value; Pricing Methods

16 il�s noted above, HCIC holds water rights in the Huntington Creek drainage, of which

17 PacifiCorp owns approximately one-third of the shares. HCIC manages the water rights on

18 behalf of Pacifi Corp and the other subscribers (shareholders) to the water rights. Pacifi Corp

19 primarily uses its shares of the water rights in Huntington Creek as part of the supply to the

20 Huntington Plant located in Emery, Utah. Under the Utah Share Assessment Act,3 HCIC's

21 Board of Directors sets the value of the share assessments for its water users, which are

22 divided into different classes much like electric utilities. On October 12, 2013, the HCIC

23 Board of Directors passed a resolution to restructure its share classifications by creating a

2 There are a total often seats on HCIC's Board of Directors. 3 Utah Code §16-4-101, et. seq.

Page 3- UI __ PacifiCorp Application Affiliated Interest HCIC Share Assessment

1 new category of shares known as "Industrial" and to include PacifiCorp's shares in HCIC in

2 that category. PacifiCorp's shares previously had been classified as "Municipal/Industrial."

3 This resolution also approved a new share assessment ratio for the Industrial class, which

4 effectively represents a rate increase.4 A copy of the resolution is included as Attachment 1

5 to Attachment A. As an industrial user, PacifiCorp will pay a 5:1 ratio to the share

6 assessment for irrigation users.

7 H. Estimate of Amount PacifiCorp will Pay Annually for Services

8 The Agreement is for an eleven-year term. PacifiCorp anticipates spending

9 approximately $530,000 per year under the Agreement.

10 11

I. Reasons Relied Upon for Procuring the Proposed Services, and Benefits to the Public

12 PacifiCorp was already using the water supply managed by HCIC for the Huntington

13 Plant. Water access is limited in the area and PacifiCorp continues to rely on the supply from

14 HCIC for effective operation of the Huntington Plant for safe and reliable electric service.

15 The public benefits from being able to receive this safe and reliable electric service.

16 J. Description of the Procurement Process

17 As described in Section G above, the HCIC Board of Directors passed a resolution to

18 increase PacifiCorp's share assessment.

19 K. Relationship of Cost of Provision of Services and Market Value

20 The HCIC Board of Directors establishes the share assessments for the users of its

21 water rights in the Huntington Creek drainage.

4 PacifiCorp's representative on the Board of Directors voted against the resolution.

Page 4 UI __ PacifiCorp Application Affiliated Interest HCIC Share Assessment

1 L. Contracts Between Affiliated Interest and PacifiCorp

2 A copy of the Share Assessment Agreement by and between Huntington-Cleveland

3 Irrigation Company and PacifiCorp Energy is included as Attachment A.

4 M. Copy of Board Resolutions

5 The Agreement did not require approval by PacifiCorp's Board of Directors.

6 WHEREFORE, for the reasons set forth above, PacifiCorp respectfully requests that

7 the Commission issue an order authorizing PacifiCorp to conduct business with Huntington

8 Cleveland Irrigation Company, under ORS 757.495 and OAR 860-027-0040.

DATED: February 24, 2014.

Respectfully submitted,

Michelle R. Mishoe, #072 Senior Counsel Pacific Power

Page 5- UI __ PacifiCorp Application Affiliated Interest HCIC Share Assessment

ATTACHMENT A

Share Assessment Agreement

Share Assessment Agreement by and between

Huntington-Cleveland Irrigation Company and PacifiCorp Energy

� This Share Assessment Agreement ("Agreement") is effective as of the 1...5 day of November,

2013, (11Effective Date"} by and between PacifiCorp Energy, a division of PacifiCorp, an Oregon

corporation, ("PacifiCorp") and Huntington Cleveland Irrigation Company ("HCIC"), a Utah

nonprofit irrigation company. PacifiCorp and HCIC shall collectively be referred to as the

"parties" or individually as a "party" as the context so requires.

RECITALS

A. PacifiCorp owns 52,830.87 shares of Class A stock in HCIC (the "PacifiCorp Shares"},

which HCIC had previously described as "Municipal/Industrial" for purposes of imposing share

assessments on PacifiCorp's Shares. PacifiCorp uses the water delivered by HCIC pursuant to

the PacifiCorp Shares at the Huntington Power Plant for electric power generation and general

industrial purposes.

B. By letters dated April 26, 2013 and July 1, 2013, HCIC informed PacifiCorp of its intent to

create a new separate "Industrial" water use category, to include all of the PacifiCorp Shares

within the Industrial water use category, and also to increase the assessment for the PacifiCorp

Shares. HCIC's Board of Directors approved the new Industrial water use category and

increased assessment of the PacifiCorp Shares on October 12, 2013. A copy of such approval is

included as Attachment 1 ("Resolution Implementing an Industrial Assessment for Shares of the

Company for which Water Represented Thereby is Used for Industrial Use" (Resolution

10122013-C), hereafter referred to as the "Industrial Shares Assessment Restructuring and

Increase").

C. HCIC believes the Industrial Shares Assessment Restructuring and Increase was

necessary in order to adequately fund ongoing HCIC operations, more equitably balance the

assessment burden between share water use categories, and better reflect the benefits

PacifiCorp receives pursuant to the PacifiCorp Shares as compared to the benefits of other

shareholders. HCIC further believes the Share Reclassification is consistent with HCIC's internal

governance requirements and the Utah Share Assessment Act.

D. From the Effective Date of this Agreement, PacifiCorp will not challenge or oppose the

Industrial Shares Assessment Restructuring and Increase or the efficacy or regularity of all

actions of HCIC necessary to approve the Industrial Shares Assessment Restructuring and

Increase on the terms and conditions stated herein.

E. HCIC will not challenge or oppose the terms and conditions of this Agreement during the

effective Term of this Agreement.

1

TERMS AND CONDITIONS

For the exchange of valuable consideration, the parties agree as follows:

1. Term: The term of this Agreement shall be from the Effective Date until December 31, 2023

(the "Term.")

2. Share Assessment Categories: HCIC delivers water to three water user categories among its

shareholders: (i) Irrigation; (ii) Municipal; and (iii) Industrial. Each of these categories is

described in more detail in Article X F 2 of the Amended and Restated Bylaws, included as

Attachment 2. If HCIC does not assess all Irrigation users equally, for purposes of this

Agreement, HCIC shall determine annually the average Irrigation assessment by totaling all

assessments levied on Irrigation users and dividing the total by the total number of Irrigation

shares ("Annual Average Irrigation Assessment"). HCIC shall provide annually with its

assessment notice to PacifiCorp the reasonably detailed calculations used to determine the

Annual Average Irrigation Assessment. If HCIC assesses all Irrigation users equally, it shall

provide annually with its assessment notice to PacifiCorp the amount of the assessment of

shares that the water represented thereby is used for Irrigation use ("Annual Irrigation

Assessment").

3. Industrial Category: PacifiCorp agrees not to challenge or oppose the Industrial Shares

Assessment Restructuring and Increase or the efficacy or regularity of all actions of HCIC

necessary to approve the Industrial Shares Assessment Restructuring and Increase. Except

upon prior approval by PacifiCorp which shall not be unreasonably withheld, HCIC agrees that

categorization of all HCIC water shares shall be limited to one or more of the following

categories during the Term: (i) Irrigation; (ii) Municipal; and (iii) Industrial.

4. Share Assessments: HCIC shall assess the PacifiCorp Shares in accordance with HCIC

governance requirements, this Agreement and the Utah Share Assessment Act. Beginning with

share assessments for 2013, and based on the share assessment categories described in Section

2, (the "Industrial Share Assessment"L the Industrial Share Assessment rate for the PacifiCorp

Shares shall be no more than a 5:1 ratio as compared to the Annual Irrigation Assessment or

Annual Average Irrigation Assessment. By way of example only, if the Annual Average Irrigation

Assessment is $3.00 per share, then the Industrial Share Assessment shall be no more than

$15.00 per share. PacifiCorp acknowledges that the Industrial Shares Assessment Restructuring

and Increase as provided herein complies with this Agreement and the Utah Share Assessment

Act.

5. 2013 Share Assessment and Payment: The parties acknowledge that HCIC already assessed the

PacifiCorp Shares under the prior Municipal/Industrial category for 2013, and that PacifiCorp

has paid that assessment in full in the amount of $169,461.73. Notwithstanding the assessment

by HCIC and payment by PacifiCorp, the parties agree that the new Industrial Share Assessment

for the PacifiCorp Shares shall apply during 2013. The parties further agree that this prior

2

payment by PacifiCorp shall be considered as a credit against the Industrial Share Assessment

imposed by HCIC on the PacifiCorp Shares for 2013 under this Agreement.

6. Share Assessment Administration: Industrial Share Assessments shall be administered

according to the following principles:

a. HCIC shall not assess any other Industrial water users more favorably to the water user

than it assesses the PacifiCorp Shares, except as HCIC may establish as appropriate

under the Utah Share Assessment Act.

b. The Industrial Share Assessment is intended to include a proportionate share of all

expenses, including but not limited to general operation, maintenance and other costs ,

associated with HCIC that are assessable to shareholders. The parties intend that no

additional costs will be imposed on PacifiCorp or the PacifiCorp Shares outside of the

Industrial Share Assessment.

c. HCIC shall invoice PacifiCorp only on the basis of a one-line assessment of so many

dollars per Class A share of stock owned by PacifiCorp.

7. Designated Representative and Notices: Any notice by either party to the other shall be

delivered in writing to the office of the designated representative of the other party, or, if

deposited in the mail, properly stamped with the required postage and addressed to the office

of such representative as follows:

If to PacifiCorp:

PacifiCorp Energy- Huntington Plant

P.O. Box 680

Huntington, Utah 84528

Attn: Plant Manager

Telephone: (435) 687-4211

8. Miscellaneous Provisions:

If to HCIC:

Huntington Cleveland Irrigation Company

P.O. Box 327

Huntington, Utah 84528

Attn: President

Telephone: (435) 687-2505

a. Governing Law. This Agreement shall be governed by the laws of the State of Utah,

without giving effects to its conflict of law rules contained therein.

b. Entire Agreement. This Agreement represents the entire agreement between PacifiCorp

and HCIC with respect to the Industrial Shares Assessment Restructuring and Increase and

supersedes all prior negotiations, representations or agreements, either written or oral,

relating thereto. This Agreement may be amended only in writing signed by both parties.

c. Interpretation. Each term hereof shall be construed simply according to its fair meaning

and not strictly for or against either party. The parties have jointly prepared this

Agreement, and no term hereof shall be construed against a party on the ground that the

party is the author of that provision. The Recitals contained herein are repeated verbatim

and are incorporated as part of this Agreement.

d. Jury Waiver. To the fullest extent permitted by law, each party waives any right it may

have to a trial by jury in respect of litigation directly or indirectly arising in connection with

this Agreement.

3

e. Successors and Assigns. This Agreement shall be binding upon all successors and assigns

of the parties.

Now, T HE R EFOR E, this Agreement is entered into as of the day and year first written above.

By: &'J� a f!4c: PacifiCorp Energy, a division of PacifiCorp

Its: lf .f> -?ttz:.._..sR,..... t1-c.. GcxJ

Date: /( ( .2 "51 ('3>

Attest:

Secretary

4

Attachment 1

HUNTINGTON-CLEVELAND IRRIGATION COMPANY BOARD RESOLUTION 10122013-C

RESOLUTION .IMPLEMENTING AN INDUSTRIAL ASSESSMENT FOR SHARES OF THE COMPANY FOR WHICH WATER REPRESENTED

THEREBY IS USED FOR INDUSTRIAL USE

WHEREAS the members and Board ofDirectors ("Board") o:fHuutington-.cleveland

1rrigation Company ("Company") have approved certain amendments to the Articles of

Incorporation of the Company which empower the Board to it:npose an assessment on shares of

the Company Jor which the water represented thereby is used for Industrial Use as defined in

Restated and Amended Bylaws of the Company dated October 12, 2013 (herein alter

"Industrial Shares'�);

WHEREAS the Board of the Company has approved certain amendments to the .Bylaws

of the Company that similarly empower the Board to impose an assessment on T.nd:ustrial Shares

of the Company;

WHEREAS the Utah Share Assessment Act, 'fitle 16, Chapter 4 of the Utah Code aJlows

for differing assessment of shares that have differing right or benefits;

WHEREAS the Board has detem1ined that water that is used for Industrial Use has

higher econom.ic value and benefit to the shareholder than water that is used for Irrigation Use.

WHEREAS the Board has determined that it is equitable to assess Industrial Shares at

five times the assessment of shares which represent water that is used for Irrigation Use.

WHEREAS the Board has met with Representatives of PacifiCorp En(',rgy a division of

Paciflcorp, an Oregon Corporation (".PacifiCor1>") which is the largest owner of Industrial

Shares and PacifiCorp is aware of the .Board's intent to establish assessment on IndustriaJ Shares

at a rate of five times the assessment of Irrigation Shares and that such assessment will be

effective for 2013 for shares owned by PaciOCorp.

5

NOW TliEREFORE, BE IT HEREBY RESOLVED that the Board does hereby establish

an annual assessment on Industrial Shares that shall be five times the annual assessment on

irrigation shares of the Company for which water represented thereby is used for inigation use as

such water use is defined in the Restated and Amended Bylaws of the Company dated October

12, 2013. This assessment on Industrial Shares shaH be effective for the 2013 year for shares

owned by PacifiCorp and 2014 for all other 1ndustrial Shares. PacifiCorp shall be entitled to a

credit tor 2013 assessments it has previously paid.

'T'his resolution shall be effective upon passage and shall remain in force until revoked,

repealed or amended by a subsequent action of the Board of Directors of the Company.

DATED the 12th day of October, 2013

liUNTINGTON-CLEVELAND IRRIGA'I'JON COMPANY

ATTEST:

(Seal)

6

Attachment 2

Article X.F.2 of the Amended and Restated Bylaws (October 12, 2013)

2. NATURE OF W A·rm< OSE. The voting and assessrn.cnt procedures of

the Company arc bnsed upon vvhcthcr or not the water represented by each share is used for

irrigation use. rmmieipa! usc, or industrial usc. With respect to the voting rights, assessments,

and procedures set forth in the Company's Articles of Incorporation and these Bylaws,

·'irrigation use" shall mean water applied to land for crop or livestock feed production purposes,

and water used for stockwntering purposes, j()r pecuniary gain; '·municipal use" shall mean wa.tcr

used by a municipality, district, or other governmental entity to provide water service to residents

and businesses: and "industrial usc" shall include all other beneficial uses whi.ch are not

classified hereunder as "irrigation use" or "munieipal tJsc." 'f'he designation as to the nature of

usc to which each share of' water is being placed shall be conclusively established by the

designation on the books and records of the Company on thl: date of record as established in the

pn.:ccding paragraph.

7