STIPULATION AND AGREEMENT Dated March 23, 2007
EXHIBIT
10.1
Dated
March 23, 2007
Article
I – Introduction
In
Xxxxxx
Xxx. XXX-00-0, XXX-00-0, and RPU-05-4, the Iowa Utilities Board (“Board”) issued
orders approving settlements between the Iowa Office of Consumer Advocate
(“OCA”) and MidAmerican Energy Company (“MidAmerican”) addressing ratemaking
principles pursuant to Iowa Code Section 476.53 for the construction of
rate-regulated wind generation projects. MidAmerican and the OCA
support the development of additional new wind generation resources where
the
projected revenues of the wind generation resources offset, or exceed, the
projected costs. Projects that MidAmerican may undertake pursuant to
this Stipulation and Agreement shall be referred to collectively as the “Wind IV
Iowa Projects”.
Article
II – Purpose
This
Stipulation and Agreement has been prepared and executed by the signatories
for
the purpose of stipulating to their mutually-agreed position in the ratemaking
principles case regarding the Wind IV Iowa Projects. MidAmerican
commits to filing an application for ratemaking principles pursuant to Section
476.53 of the Iowa Code at a mutually agreeable date after executing this
Stipulation and Agreement.
In
consideration of the mutual agreements set forth herein, the signatories
stipulate their belief that the Board should issue an order that allows the
terms and provisions of this Stipulation and Agreement to be fully
implemented.
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Article
III – Ratemaking Principles and Ratemaking Provisions
The
signatories to this Stipulation and Agreement agree to support the Wind IV
Iowa
Projects with the following ratemaking principles and ratemaking
provisions:
RATEMAKING
PRINCIPLES:
Topic
|
Ratemaking
Principle
|
|
Iowa
Jurisdictional Allocation
|
The
Wind IV Iowa Projects will be allocated to Iowa in the same manner
as the
Greater Des Moines Energy Center, Council Bluffs Energy Center
Unit No. 4,
and authorized prior wind projects that were addressed in Dockets
SPU-
05-9
and SPU-05-12.
|
|
Economic
Test for Qualifying Projects
|
Each
Wind IV Iowa Project that, at a minimum, is projected
to earn its revenue requirement, including its allowed cost of
capital
shall qualify for rate treatment under
these ratemaking principles. In order to determine if a project
so qualifies, a conventional revenue requirement will be calculated
for
each proposed project, levelized and then converted to a cents
per kWh
basis. In turn, the incremental benefits (revenues) of the
project, converted to a comparable cents per kWh basis, will be
subtracted
from the revenue requirement. If the net result is a positive
cents
per kWh (i.e., the costs exceed the benefits), the project will
be deemed
to not earn its revenue requirement and will not qualify for rate
treatment under these ratemaking principles. On the other hand,
if the net result is
zero or a negative cents per kWh (i.e., the benefits equal or exceed
the
costs), the project will be deemed to earn its revenue requirement
and
will qualify for rate treatment under these ratemaking
principles. MidAmerican will perform the above-mentioned
economic test in good faith using reasonable estimates of projected
costs and other
reasonable assumptions and the test will be completed
prior to the decision to construct a project at any particular
site or
sites.
In
the event that actual capital costs of a Wind IV Iowa Project are
lower
than the projected capital costs, rate base shall consist of actual
costs. In the event that actual capital costs exceed the
capital expenditures that would result in the economic evaluation
greater
than zero as defined in
the above paragraph, MidAmerican shall be required to establish
the
prudence and reasonableness of such excess before it can be included
in
rates.
|
|
Size
Cap
|
The
ratemaking principles shall be applicable to all new wind capacity
up to
540 MW placed into service on or before December 31, 2013, and
not
currently in service, except
for the 123 XX Xxxxxxx Project currently under development, which
is being
completed under ratemaking principles approved in Docket No.
RPU-05-4.
|
2
Depreciation
|
The
depreciation life of each Wind IV Iowa Project for ratemaking purposes
shall be 20 years.
|
|
Return
on Equity
|
The
allowed return on common equity investment (XXX) on
the portion of the Wind IV Iowa Projects included in Iowa electric
rate
base shall be 11.7%.
|
|
Renewable
Energy and CO2
Credits and
the Like
|
The
Iowa jurisdictional portion of any revenues from the sale of renewable
energy credits, carbon dioxide credits or other environmentally
related
benefits associated with each Wind IV Iowa Project shall be recorded
above-the-line, in FERC accounts 456 and 411.8, by MidAmerican,
through
the 20-year depreciation life of such Projects (and thereafter
as ordered by the Board in a contested case proceeding), and for
the
duration of the Stipulation and Settlement in Xxxxxx Xx. XXX-00-0,
such
revenues and benefits shall be recorded in the accounts specified
in
Appendix 2 and included in the revenue sharing calculations
of items “g” and “h” of, the Stipulation and Settlement in that
docket.
|
|
Federal
Production Tax Credit
|
The
Iowa jurisdictional portion of any federal production tax credits
associated with each Wind IV Iowa Project shall
be recorded above-the-line, in FERC account 409.1, by
MidAmerican, through the 20-year depreciation life of such Projects
(and
thereafter as ordered by the Board in a contested case proceeding),
and
for the duration of the Stipulation and Settlement in Xxxxxx Xx.
XXX-00-0,
such federal production tax credits shall be recorded in the accounts
specified in Appendix 2 and included in the revenue sharing calculations
of items “g” and “h” of the Stipulation and Settlement in that
docket.
|
|
Wholesale
Sales Revenue
|
Through
the revenue sharing calculation for calendar year 2013, the Iowa
jurisdictional portion of wholesale sales revenue associated with
all
generating units included in MidAmerican’s Iowa jurisdictional electric
rate base (including the Wind IV Iowa Projects) shall be recorded
above-the-line in the accounts specified in Appendix 2 and included
in the
revenue sharing calculations of items “g” and “h” of the Stipulation and
Settlement in Docket No. RPU-03-1. Thereafter, the ratemaking
treatment of the Iowa jurisdictional portion of wholesale sales
revenue
associated with all generating units included in MidAmerican’s Iowa
jurisdictional electric rate base (including the Wind IV Iowa Projects)
shall be determined by the Board in a contested case
proceeding.
|
3
RATEMAKING
PROVISIONS:
Topic
|
Ratemaking
Provision
|
|
Renewable
Energy and CO2
Credits and
the Like (for existing MidAmerican wind generation covered by prior
Board-approved ratemaking principles)
|
The
Iowa jurisdictional portion of any revenues from the sale of renewable
energy credits, carbon dioxide credits or other environmentally
related
benefits associated with each wind power generation project covered
by
settlements approved by the Board in Docket Nos. XXX-00-0, XXX-00-0,
XXX-00-0 shall be recorded above-the-line, in accounts 456 and
411.8, by
MidAmerican, through the 20-year depreciation life of such projects
(and
thereafter as ordered by the Board in a contested case proceeding),
and
for the duration of the Stipulation and Settlement in Xxxxxx Xx.
XXX-00-0,
such revenues and benefits shall be recorded in the accounts specified
in
Appendix 2 and included in the revenue sharing calculations of
items “g”
and “h” of the Stipulation and Settlement in that
docket.
|
|
Federal
Production Tax Credit
|
The
Iowa jurisdictional portion of any federal production tax credits
associated with each wind power generation project covered by settlements
approved by the Board in Docket Nos. XXX-00-0, XXX-00-0, XXX-00-0
shall be
recorded above-the-line, in FERC account 409.1, by MidAmerican,
through
the 20-year depreciation life of such projects (and thereafter
as ordered
by the Board in a contested case proceeding), and for the duration
of the
Stipulation and Settlement in Xxxxxx Xx. XXX-00-0, such federal
production
tax credits shall be recorded in the accounts specified in Appendix
2 and
included in the revenue sharing calculations of items “g” and “h” of the
Stipulation and Settlement in that docket.
|
|
Conditional
Overall Rate Freeze Extension Through December 31,
2013
|
Subject
to the conditional exit explained below, neither MidAmerican nor
the OCA
shall seek or support a non-revenue neutral electric rate change
to become
effective prior to January 1, 2014.
|
|
Conditional
Overall Revenue Sharing Extension Through December 31,
2013
|
Subject
to the modifications described below, revenue sharing as approved
by the
Board in Xxxxxx Xx. XXX-00-00 for the years 2006-2010 shall apply
in
2013. The customer portion of any revenue sharing benefits
generated with respect to the 2013 revenue sharing year shall be
used to
reduce the Iowa jurisdictional portion of the investment in the
Wind IV
Iowa Projects.
|
4
Condition
for Exiting Overall Rate Freeze Extension and Modifying Revenue
Sharing
Extension
|
MidAmerican
shall be released from its obligation not to seek or support a
non-revenue
neutral electric rate change to become effective prior to January
1, 2014,
only in the event its projected return on equity for 2013 would
be below
10% with such projection to be based upon its 2011 actual Iowa
jurisdictional electric cost of service plus pro forma
adjustments (to cost of service, rate base, revenues, etc.), including
pro forma adjustments to achieve a reasonable, representative
and
recurring level of wholesale margins. In the rate case
contemplated above, MidAmerican’s wholesale margins pro forma
adjustments shall not include any sharing between customers and
shareholders of such wholesale margins, and all such reasonable,
representative and recurring margins shall be shall be recorded
above-the-line, in MidAmerican’s proposals in such proceeding. In the
event MidAmerican seeks such a rate change as a result of this
condition
occurring, then in such rate case there shall be no limitations
or
requirements with respect to the positions that may be taken by
the OCA
and MidAmerican, except that the OCA and MidAmerican shall be required
to
honor their settlement obligations as approved and ordered in this
and in
the prior Board ratemaking principles determinations, and other
stipulations/agreements between the OCA and
MidAmerican.
|
|
Revenue
Sharing Condition Applicable to Any Rate Case for Electric Rates
to be
Effective in 2013
|
In
the event MidAmerican receives Board approval to increase Iowa
electric
rates effective in 2013, the revenue sharing arrangement currently
in
effect shall apply in 2013, subject to the following
modifications:
i)
All Iowa jurisdictional electric operating income, if any, that
exceeds
the combined allowed return on common equity established in the
rate case
(i.e. the allowed rates of return applicable from ratemaking principle
decisions and all other rate base weighted as a percentage of total
rate
base) shall be subject to revenue sharing.
ii)
The revenue sharing formula shall be as follows: 83.3% of operating
income
subject to revenue sharing shall be used to offset Wind IV Iowa
Projects
rate base and the remaining 16.7% of operating income shall be
retained by
MidAmerican.
iii)
100% of the Iowa jurisdictional portion of wholesale electric margins
shall be accounted for above-the-line for purposes of these revenue
sharing calculations.
|
5
Quad
Cities Nuclear Decommissioning Expenses Ratemaking Treatment Through
2012
or 2013
|
Subject
to regulatory approval, effective January 1, 2007, through December
31,
2013 (or December 31, 2012 in the event there is a rate increase
in 2013),
there shall be a reduction in decommissioning funding from the
2006 level
of $8,299,012 deposited annually into the Quad Cities Nuclear Power
Stations’ decommissioning trusts funds to a new decommissioning funding
level, effective January 1, 2007, of $1,595,964. The remaining
difference, of $6,703,048 shall be used to reduce east and south
residential base rates in 2008, to $.089/kWh and to reduce east
and south
residential base rates in 2009 to $.088/kWh as approved by the
Board in
Docket No. RPU-04-2, or as ultimately required by subsequent Board
order. To the extent the amount of the above-mentioned
reduction in funds contributed annually to the decommissioning
trusts
funds exceeds the amount needed to implement the Board-approved
rate-reductions for south and east zones for residential customers,
100
percent of the remaining amount shall be used, during 2007-2013
(or 2007 -
2012 in the event there is a rate increase in 2013), to reduce
the Wind IV
Iowa Projects investment in rate base (including AFUDC) or the
investment
in Council Bluffs Energy Center Unit No. 4 plant (including AFUDC),
whichever has the highest XXX.
|
Article IV -- Joint Motion
The
signatories shall jointly file with the Board this Stipulation and Agreement
in
the docket initiated by MidAmerican’s filing of a ratemaking principles
application pursuant to Iowa Code Section 476.53 for the Wind IV Iowa Projects.
The signatories shall also file with the Board a joint motion requesting
that
the Board accept this Stipulation and Agreement without condition or
modification.
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Article
V — Condition Precedent
This
Stipulation shall not become effective unless and until the Board accepts
the
same
in
its entirety without condition or modification.
Article
VI -- Privilege and Limitation
This
Stipulation and Agreement is made pursuant to Iowa Code §17A.10 and 199
I.A.C. §7.2(11). This Stipulation and Agreement shall become binding upon the
signatories upon
its
execution; provided, however, that if this Stipulation and Agreement does
not
become effective in accordance with Article V above, it shall be null, void
and
privileged.
This
Stipulation and Agreement relates only to the specific matters referenced
herein, and neither signatory waives any claim or right that it may otherwise
have with respect to any matter not expressly provided for herein. Except
as
expressly provided in this Stipulation and Agreement, neither signatory shall
be
deemed to have approved, accepted, agreed or consented to any ratemaking
principle, any method of cost of service determination, or any method of
cost
allocation underlying the provisions of this Stipulation and Agreement or
be
prejudiced or bound thereby in any other current or future proceeding before
any
agency. Except as necessary to implement Article III, this
Stipulation and Agreement shall not, directly or indirectly, be referred
to as
precedent in any other current or future proceeding before the
Board.
Article
VII – Execution
To
facilitate and expedite execution, this Stipulation and Agreement may be
executed by the signatories in multiple conformed copies which, when the
original signature pages are consolidated into a single document, shall
constitute a fully-executed document binding upon all
the
signatories. The facsimile signatures of the signatories shall be deemed
to
constitute original signatures, and facsimile copies hereof shall be deemed
to
constitute duplicate originals.
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Article
VIII - Modification and Amendment
This
Stipulation and Agreement shall not be amended or modified except by an
instrument in writing signed by all signatories.
Article
IX — Term
1. This
Stipulation and Agreement shall terminate January 1, 2014, except for the
following provisions that shall survive termination: (a) MidAmerican’s
responsibility for revenue sharing for the year 2013; (b) the Ratemaking
Principles in Article III that shall remain in effect as long as the wind
power
facilities covered by the Ratemaking Principles continue to provide regulated
electric service to Iowa consumers, and (c) the Ratemaking Provisions in
Article
III.
2. This
Stipulation and Agreement and the obligations of the signatories shall terminate
if the Board does not approve the terms of this Stipulation and Agreement,
or if
for reasons unrelated to this Stipulation and Agreement MidAmerican’s rate
freeze terminates prior to 2013.
3. In
the event of termination pursuant to the preceding subparagraph 2, MidAmerican
shall be permitted to record as above-the-line expenses an amortization over
a
5-year
period all reasonable costs of the Wind IV Iowa Projects, including cancellation
costs, but shall not be entitled to recover a return on such costs.
Article
X – Binding Nature
This
Stipulation and Agreement shall be binding on the signatories. The signatories
shall
take no actions directly or indirectly to eliminate or otherwise limit or
expand
the scope or effect of this Stipulation and Agreement throughout its
term.
Article
XI -- Further Assurances
The
signatories agree to cooperate in order to effectuate the full and complete
intent of
the
signatories as expressed in this Stipulation and Agreement.
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Article
XII -- Entire Agreement
This
Stipulation and Agreement contains the entire agreement between the signatories.
There are no additional terms, whether consistent or inconsistent, oral or
written, that
have
not been incorporated into this Stipulation and Agreement
MIDAMERICAN
ENERGY COMPANY |
OFFICE OF CONSUMER ADVOCATE | |||
/s/
Xxxx
X. Xxxxx
|
/s/
Xxxx
X. Xxxxxxx
|
|||
Name:
Xxxx
X. Xxxxx
|
Name:
Xxxx
X. Xxxxxxx
|
|||
Date:
March 23, 2007
|
Date:
March 23, 2007
|
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