STIPULATION AND AGREEMENT Dated December __, 2004
EXHIBIT
10.2
Dated
December __, 2004
Article
I Introduction
On
October 17, 2003, the Iowa Utilities Board (“Board”) issued an “Order
Approving Stipulation and Agreement” in Docket No. RPU-03-l. In that decision
the Board approved ratemaking principles pursuant to Iowa Code Section
476.53 for
MidAmerican Energy Company’s (“MidAmerican” or “Company”) proposed ▇▇▇ ▇▇▇▇▇▇▇▇
(▇▇) wind-powered generating project MidAmerican had committed to the
development of wind resources in response to public policy pronouncements.
The
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Governor of the state of Iowa, established a
goal
of 1000 megawatts (MW) of renewable energy (such as wind power) in the state
by
2010. The Honorable ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇, Governor of the state of Illinois, and
members of the South Dakota Public Utilities Commission have also urged the
development of more renewable energy in the Midwest.
MidAmerican
is currently constructing the 310 MW wind generating project. MidAmerican
anticipates that it will complete approximately 160 MW of the wind generating
project prior to the end of 2004, with the balance of the project slated
for
completion prior to the fourth quarter of 2005.
MidAmerican
has determined that it would be beneficial to the Company and its customers
to
pursue an expansion of the 310 MW wind generating project by up to 90 MW
(“Expansion Project”) at this time because of the following
factors:
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(a)
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The
310 MW wind generating project is progressing well;
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(b)
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One
or both of the sites where construction is currently occurring
should
support the Expansion Project;
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(c)
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From
a transmission/interconnection, landowner and substation perspective
the
Expansion Project is likely to require only a relatively small
incremental
investment;
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(d)
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The
federal production tax credit for wind energy projects is scheduled
to
expire on January 1, 2006; and
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(e)
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The
anticipated incremental revenues generated by the Expansion Project
are in
excess of incremental expansion costs. The Expansion Project size
will be
determined by MidAmerican following the completion of wind turbine
siting
studies and regional transmission reliability
analysis.
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The
Office of Consumer Advocate (“OCA’) supports the Expansion Project and concurs
with the ratemaking principles specified below.
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Article
II - Purpose
This
Stipulation 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 Expansion Project, to be commenced by MidAmerican pursuant
to
Section 476.53 of
the
Iowa Code. MidAmerican commits to commencing such case as soon as feasible
after
executing this Stipulation.
In
consideration of the mutual agreements set forth, the signatories stipulate
that
the Board should issue an order that allows the terms and provisions of this
Stipulation to be fully implemented.
Terms:
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1.
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The
signatories to this Stipulation agree to support the Expansion
Project
with the following ratemaking
principles:
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a.
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Cost
Cap.
The Iowa jurisdictional portion of MidAmerican’s prudently incurred
capital costs, operation and maintenance expenses and other actual
costs
of the Expansion Project shall be included in MidAmerican’s regulated
electric rates. MidAmerican shall be permitted to include in rates
the
actual costs of the Expansion Project, up to the Iowa jurisdictional
portion of $1.3 million per MW installed (inclusive of associated
costs necessary for the reliable integration of the Expansion Project
into
the MidAmerican delivery system), without the need to establish
prudence
or reasonableness. MidAmerican anticipates installing up to 90
MW of
additional wind capacity. MidAmerican shall be required to establish
the
prudence and reasonableness of any Expansion Project costs in excess
of
the foregoing calculated per MW amount before the Iowa jurisdictional
portion of such excess can be included in
rates.
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b.
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Depreciation.
The depreciation life of the Expansion Project for ratemaking purposes
shall be 20 years.
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c.
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Return
on Equity.
The allowed return on common equity investment (▇▇▇) on the portion
of the
Expansion Project included in Iowa electric rate base shall be
12.2%.
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d.
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Renewable
Energy and Carbon Tax Credits.
The Iowa jurisdictional portion of any revenues from the sale of
renewable
energy credits and carbon dioxide credits associated with the Expansion
Project shall be recorded above-the-line by MidAmerican 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 ▇▇▇▇▇▇ ▇▇▇-▇▇-▇
and the revenue sharing calculation for calendar year 2011 as provided
in
Term 2(a) hereof.
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| e. |
Federal
Production Tax Credit.
The Iowa jurisdictional portion of any federal production tax credits
associated with the Expansion Project shall be recorded above-the-line
by
MidAmerican 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 ▇▇▇▇▇▇ ▇▇▇-▇▇-▇ and the revenue sharing calculation
for
calendar year 2011 as provided in Term 2(a) hereof.
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f.
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Wholesale
Sales Revenue.
The Iowa jurisdictional portion of wholesale sales revenue associated
with
all generating units included in MEC’s Iowa jurisdictional electric rate
base (including the wind power facilities of the Expansion Project)
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 ▇▇▇▇▇▇ ▇▇▇-▇▇-▇ and the revenue sharing
calculation for calendar year 2011 as provided in Term 2(a)
hereof.
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2.
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The
signatories to this Stipulation agree to support the Expansion
Project
with the following ratemaking
provisions:
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a.
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Revenue
Sharing 2011.
Revenue sharing as approved by the Board in its October 17, 2003,
“Order Approving Stipulation and Agreement,” in Docket No. RPU-03-l for
the years 2006-2010 shall continue throughout 2011, except with
respect to
the method for crediting customers for any revenue sharing benefits.
The
customers’ share of any revenue sharing for 2011 earnings will be returned
to the customers in 2012 through a ▇▇▇▇-crediting mechanism approved
by
the Board in accordance with the methodology set out in the enclosed
Attachment.
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b.
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Restrictions
on General Rate Increases.
MidAmerican commits not to seek any general rate increase in Iowa
electric
base rates to become effective during 2011, unless its Iowa jurisdictional
return on equity on electric operations for calendar year 2010
falls below
10%. This provision shall not be interpreted to prevent the
implementation, prior to December 31, 2011, of any electric rate or
tariff changes approved by the Board in ▇▇▇▇▇▇ ▇▇. ▇▇▇-▇▇-▇ and
associated
dockets.
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c.
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Restrictions
on Show Cause Filings.
The OCA commits not to seek any decrease in Iowa electric base
rates to
become effective before January 1,
2012.
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Article
III - Joint Motion
The
signatories shall jointly file this Stipulation and Agreement in the ratemaking
principles proceeding for the Expansion Project to be commenced by MidAmerican
pursuant to Section 476.53. The signatories shall also file with the Board
a
joint motion requesting that the Board accept this Stipulation and Agreement
without condition or modification.
Article
IV - Condition Precedent
This
Stipulation shall not become effective unless and until the Board accepts
the
same in its entirety without condition or modification.
Article
V - Privilege and Limitation
This
Stipulation and Agreement is made pursuant to Iowa Code §17A.l0 and 199 I.A.C.
§7.2(11). The 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 IV above,
it
shall be null, void and privileged. This Stipulation and Agreement is intended
to relate only to the specific matters referenced herein,
and no 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, no 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. This
Stipulation and Agreement shall not, directly or indirectly, be referred
to as
precedent in any other current or future proceeding before the
Board.
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Article
VI - Execution
To
facilitate and expedite execution, the 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 to be filed with
the
Board. The facsimile signatures of the signatories shall be deemed to constitute
original signatures, and facsimile copies hereof shall be deemed to constitute
duplicate originals.
Article
VII -
Modification
and Amendment
This
Stipulation and Agreement shall not be amended or modified except by an
instrument in writing signed by all signatories.
Article
VIII - Term
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1.
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Unless
terminated earlier by operation of paragraph 2 of this Article,
this
Stipulation and Agreement shall terminate January 1, 2012, except for
MEC’s responsibility for revenue sharing for the year 2011 and except
for
items “a” through “f” of the “Term” section in Article II that shall
remain in effect as long as the wind power facilities of the Expansion
Project continue to provide regulated electric service to Iowa
consumers.
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2.
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This
Stipulation and Agreement and the obligations of the signatories
shall
terminate if:
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a.
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the
Board does not approve the terms of this Stipulation and
Agreement;
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b.
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MidAmerican
is unable to secure access to sufficient transmission for the Expansion
Project; or
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c.
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On
or before March 1, 2005, MidAmerican determines that it is not
likely to
secure acceptable contracts that will result in the Expansion Project
obtaining revenues in excess of costs.
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3.
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In
the event of termination pursuant to the preceding subparagraph,
MidAmerican shall be permitted to record as above-the-line expenses
an
amortization over a 5-year period of all reasonable costs of the
Expansion
Project, including cancellation costs, but shall not be entitled
to
recover a return on such costs.
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Article
XI -
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
the
scope or effect of this Stipulation and Agreement throughout its
term.
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Article
X -
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.
Article
XI -
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/ ▇▇▇▇ ▇. ▇▇▇▇ | /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ | ||
| Name: ▇▇▇▇ ▇. ▇▇▇▇ | Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ | ||
| Date: 12/20/04 | Date: 12/20/04 |
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