STIPULATION AND AGREEMENT Dated December 14, 2005
EXHIBIT
10.3
Dated
December 14, 2005
Article
I -
Introduction
On
October 17, 2003, the Iowa Utilities Board (“Board”) issued an “Order
Approving Stipulation and Agreement” in Docket No. RPU-03-1. In that
decision the
Board
approved a settlement between the Iowa Consumer Advocate (“OCA”) and MidAmerican
Energy Company (“MidAmerican” or “Company”) addressing ratemaking principles
pursuant to Iowa Code Section 476.53 for MidAmerican Energy Company’s
(“MidAmerican” or “Company”) proposed ▇▇▇ ▇▇▇▇▇▇▇▇ (▇▇) wind-powered generating
project. On January 25,2005, the Board issue an order “Order Approving
Stipulation and Agreement” in Docket No. RPU-04-3. In that decision the Board
again, approved a settlement between OCA and
addressing ratemaking principles pursuant to Iowa Code Section
476.53 for
MidAmerican to expand its initial 310 MW wind-power generating project. Except
for the size of the projects and the cost cap, the two decisions approve
the
same substantive ratemaking principles.
MidAmerican
has determined that it would be beneficial to the Company and its customers
to
pursue a 2006-2007 Expansion Project at this time because of the following
factors:
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1.
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The
State of Iowa is encouraging more renewable energy be built in
the state
as set forth in Iowa Code Section 476.41(2005) and. Executive Order
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which among other objectives promotes the use of a 10% renewable
energy
for state-owned facilities;
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2.
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MidAmerican’s
positive experience with existing wind projects (operationally
and
installation costs);
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The
2006-2007 Expansion Project has favorable economics to customers
and
MidAmerican.
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4.
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The
need to further increase diversity as fuel costs (coal and natural
gas)
have become increasingly volatile;
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5.
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The
current production tax credit ends January 1, 2008 and if it is
extended
will most likely be of less value.
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The
Office of Consumer Advocate (“OCA”) supports the Expansion Project and concurs
with the ratemaking principles specified below.
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 2006-2007 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:
The
signatories to this Stipulation agree to support the 2006-2007 Expansion
Project
with the following ratemaking principles and ratemaking provisions:
RATEMAKING
PRINCIPLES
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Topic
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Ratemaking
Principle
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Iowa
Jurisdictional
portion
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The
2006-2007 Expansion Project will be allocated to Iowa in the same
manner
as for the new generation (Greater Des Moines Energy Center, Council
Bluffs Energy Center Unit 4, initial wind project and wind expansion
project) specified in Dockets SPU-05-09 and SPU-05-12.
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Cost
Cap
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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 2006- 2007 Expansion Project shall be included in MidAmerican’s
regulated electric rates. MidAmerican shall be permitted to include
in
rates the actual costs, up to the Iowa jurisdictional portion of
[CONFIDENTIAL]
million
per MW installed
(inclusive of associated costs necessary for the reliable integration
of
the expansion project into the MidAmerican or other transmission
provider’s delivery system), without the need to establish prudence or
reasonableness. MidAmerican anticipates installing up to545 MW
of
additional wind capacity. MidAmerican shall be required to establish
the
prudence and reasonableness of any 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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Depreciation
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The
depreciation life of the 2006-2007 Expansion Project for ratemaking
purposes shall be 20 years.
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Return
on Equity
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The
allowed return on common equity investment (▇▇▇) on the portion
of the
2006-2007 Expansion Project included in Iowa electric rate base
shall be
11.9%.
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Renewable
Energy
and
CO2
Credits
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The
Iowa jurisdictional portion of any revenues from the sale of renewable
energy credits and carbon dioxide credits associated with the 2006-2007
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 included in the revenue sharing calculation
through calendar year 2012.
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Federal
Production
Tax
Credit
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The
Iowa jurisdictional portion of any federal production tax credits
associated with the 2006-2007 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 included
in the
revenue sharing calculation through calendar year 2012.
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Wholesale
Sales
Revenue
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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 power facilities of the 2006-2007
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
included in the revenue sharing calculation for through calendar
year
2012.
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RATEMAKING
PROVISIONS
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 2012.
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
2006-20 10 shall continue throughout 2012, except with respect
to the
method for crediting customers for any revenue sharing benefits.
The
customers’ share of any revenue sharing for 2012 earnings will he returned
to the customers in 2013 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 2012, unless its Iowa jurisdictional
return on equity on electric operations for calendar year 2011
falls below
10%. This provision shall not be interpreted to prevent the
implementation, prior to December 31, 2012, 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, 2013.
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d.
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Data
Submission. On or
before April 30, 2013, MidAmerican shall provide to the OCA all
of the
information (except written testimony), including electronic copies,
required by the 199 Iowa Administrative Code 26.5(5) as
this rule is written and in effect on the date of this settlement.
The
information shall reflect a 2012 test year and include a calculation
and
explanation of all known and measurable changes m costs and revenues
that
MidAmerican believes should be included as pro forma adjustments
to test
year 2012 results under the provisions of Iowa Code Section 476.33
(2005).
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Article
III
-
Joint
Motion
The
signatories shall jointly file this Stipulation and Agreement in the ratemaking
principles proceeding for the 2006-2007 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.
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Article
V - Privilege and Limitation
This
Stipulation and Agreement is made pursuant to Iowa Code §17A.10 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 sha1l not, directly or indirectly, be referred to as precedent
in
any other current or future proceeding before the Board.
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.
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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, 2013, except
for
MEC’s responsibility for revenue sharing for the year 2012 and except
for
the Ratemaking Principles 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 2006-2007
Expansion Project; or
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c.
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On
or before June 30, 2007, if MidAmerican determines that it is not
likely
to secure acceptable contracts that will result in the 2006-2007
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
2006-2007
Expansion Project, including cancellation costs, but shall not
be entitled
to recover a return on such costs.
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Article
IX - 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: 12/15/05 | Date: 12/15/05 |
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ATTACHMENT
2011-2012
IOWA ELECTRIC REVENUE SHARING REVENUE CREDIT
METHODOLOGY
The
following approach will be used for Iowa Utilities Board review and approval
for
distribution of any revenue credits pursuant to the Stipulation and Settlement
between the Office of Consumer Advocate and MidAmerican Energy
Company.
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1.
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In
the event that electric earnings exceed the revenue sharing threshold
MidAmerican will calculate ▇▇▇▇ credits by: (1) determining the
amount to
be credited to each class, and (2) crediting to customers
within each class in proportion to each customer’s 2011 or 2012 electric
non-contract billed revenue. Credits will be applied to active
Iowa
non-contract electric customers and contract customers to the extent
they
were on tariff pricing in the year 2011 or 2012. Active customers
are
defined as customers of record receiving electric service during
the
single billing cycle in which revenue credits are applied to customers’
bills.
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2.
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The
revenue credit, if any, will be allocated among the residential,
commercial/small general service and industrial/large general service
classes to provide an equal percentage ▇▇▇▇ credit per class. MidAmerican
will allocate the revenue sharing credit to each class in proportion
to
2011 or 2012 non-contract billed revenues for each class. MidAmerican
will
further calculate a revenue sharing factor within each class to
be applied
to each customer’s 2011 or 2012 non-contract revenue. This factor will be
determined by dividing the revenue sharing credit amount for each
class as
determined above by the 2011 or 2012 non-contract revenue within
each
class.
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3.
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During
the first quarter of 2012 and 2013, MidAmerican will file its proposed
▇▇▇▇ credit analysis and applicable workpapers with the Iowa Utilities
Board for review.
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4.
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MidAmerican
will apply any ▇▇▇▇ credits during a single billing cycle subsequent
to
receipt of Iowa Utilities Board approval of MidAmerican’s
filing.
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5.
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In
the event that any active customers leave MidAmerican’s service territory
subsequent to issuance of the ▇▇▇▇ credit and there is no ▇▇▇▇
available
for credit, MidAmerican will contribute such revenue credit balance
to the
I-CARE program for distribution in those areas in which the former
active
customers had previously been located.
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6.
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Within
60 days of completion of the ▇▇▇▇ credits, MidAmerican will file
a final
report with the Iowa Utilities Board. No Iowa Utilities Board action
will
be required, unless the Iowa Utilities Board determines that MidAmerican
has failed to issue the revenue credits in accordance with the
Iowa
Utilities Board’s prior approval.
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