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PacifiCorp merger OK'd with strings
Conditions for ScottishPower deal include a rate cap

Sure, PacifiCorp and ScottishPower should be allowed to merge . . . as long as they agree to a list of 46 conditions, including a temporary rate cap.

That is the message of Utah's Division of Public Utilities, which filed testimony Friday regarding the proposed $11 billion marriage of Utah Power's parent company with the British utility."We feel that ScottishPower's testimony basically says, 'Trust me,' " said Ric Campbell, division director. "Our conditions are meant to lock in their promises as well as the potential benefits of the merger. Frankly, I don't know if ScottishPower will be able to swallow all of our conditions."

The merger cannot close unless it gains the approval of the Utah Public Service Commission and its counterparts in the five other Western states PacifiCorp serves. California already has approved the merger. The commission staffs in Wyoming, Idaho and Washington have come out in favor of the merger, while the Oregon commission staff is recommending that the merger application be denied. In Utah, the division acts as the PSC's

staff.

The Utah PSC will consider the recommendations of the division and other interested parties, as well as additional testimony from August public hearings, in deciding whether to approve the deal.

Campbell said one of the major conditions the Utah division wants the PSC to require of the companies is a rate cap.

ScottishPower claims rates would be lower with the merger than otherwise.

"That's a fine promise, but it provides us no guarantee. So we propose that any rate increases be somewhat limited for the next three years, based on various criteria," Campbell said.

Matthew Wright, a member of ScottishPower's integration team in the United States, said late Friday that the company was still analyzing the division's testimony. However, he said ScottishPower does not think the merger should become a rate case.

"The issue of rates is one that we've stayed away from because there are lots of things that go into a rate case," Wright said. "Our preference would be to not cloud the merger benefits issue by looking at rates specifically in this proceeding."

Also on Friday, the state's Committee of Consumer Services urged the PSC not to approve the merger, saying the benefits to consumers were slim.

Dan Gimble, energy group manager for the committee that looks out for the state's residential, agricultural and small commercial utility users, said the agency's analysis found the risks of the merger outweighed the potential benefits.

In earlier testimony, ScottishPower made several promises to improve customer service and reliability after the merger.

Ted Rampton, government affairs manager for Utah Associated Municipal Power Systems, said its testimony asks the PSC to impose conditions that would guarantee reliability improvements.

"If they can do some things that bolster and help our concerns about reliability, that's what we need. That's what we're asking for," Rampton said.

Campbell said he thinks ScottishPower's promises of improved service will help Utah customers.

"But it's not enough," he said. "The standard in Utah is that the merger show net positive benefit. If you put that in the benefit column, there is enough in the risk column of potential detriment that could far outweigh it."

So why is the division recommending approval of the merger?

"I wouldn't say that our concerns are any less than the Oregon staff," Campbell said. "We did take a different approach, though. We took the approach of, 'What are the risks, and what would it take for the company to mitigate those risks in our minds?' "

Joro Walker, director of the Utah office of the Land and Water Fund of the Rockies, said his group supports the merger because it believes ScottishPower will improve PacifiCorp's environmental performance.

"(ScottishPower) says they're committed to developing an additional 50 megawatts of renewable resources within five years," Walker said. "We're pleased with that, and also with this process that they committed to allow those with environmental concerns to bring those to the company's attention."

Campbell said he expects representatives of all interested parties to resolve their areas of disagreement prior to August's PSC hearings.

"(The companies have) clearly indicated to us that, once our testimony was filed, they'd like to sit down with us and discuss the issues and see what we could agree on," Campbell said. "But it's too early to say whether we'll be able to reach agreement or not."

Rachel Sherrard, ScottishPower communications manager, said the company will respond to many of the division's concerns in rebuttal testimony it will file by mid-July.

"Some of the things that we're seeing in the first reading are familiar to us, and others we haven't quite determined the impact of yet," she said Friday. "But this is all part of the process."