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Deal on PacifiCorp takes step forward

Next up for MidAmerican: approval by Utah PSC

Utah utility regulators and MidAmerican Energy Holdings Co. have reached a settlement agreement over a $9.4 billion deal by MidAmerican to buy PacifiCorp.

The agreement was struck among the Utah Division of Public Utilities, Utah Committee of Consumer Services and MidAmerican, but it must still receive approval from the Utah Public Service Commission. Hearings begin Dec. 12, with a public witness day set to start at 4:30 p.m. Dec. 13.

If the agreement is approved, Utah would be the first of six states in which PacifiCorp operates to sign off on the deal, which would transfer ownership of Utah's largest electrical utility from Scottish Power to Iowa-based MidAmerican.

MidAmerican is 83 percent owned by billionaire Warren Buffett through his company, Berkshire Hathaway. PacifiCorp operates as Utah Power in Utah.

California, Idaho, Oregon, Washington and Wyoming also must approve the acquisition.

The Utah agreement includes 78 commitments, of which 28 were specific to the state.

Those commitments include a promise by MidAmerican to increase PacifiCorp's corporate presence from Portland to Salt Lake City. The agreement also delays by roughly 40 days the implementation of a 2006 scheduled electricity rate hike, provides for a working group to study a clean-coal power plant to be built in Utah and proposes a $196 million transmission upgrade from Mona into the Wasatch Front.

Connie White, director of the Division of Public Utilities, said the most noticeable benefit is MidAmerican's presence.

"At least they are in this country. They are not foreign owners," White said. "It's occasionally difficult when you have to go back to Scotland for some decisions."

Also, with the recent repeal of the Public Utility Holding Company Act, White said provisions were added to ensure that PacifiCorp was protected from the liabilities or financial distress of MidAmerican and its affiliates.

Along those lines, MidAmerican agreed to notify state regulators subsequent to its board approving any acquisition of a regulated or unregulated business representing 5 percent or more of the capitalization of MidAmerican.

While Utah appears eager to reach a deal with MidAmerican, other states, like Oregon, are criticizing the sale. Last month, business, consumer and environmental groups there all faulted MidAmerican's plan to buy PacifiCorp, saying the buyout offered no net benefits, according to an Associated Press article.

Earlier this summer Leslie Reberg, executive director of the Utah Committee of Consumer Services, said she would push for so called "merger credits," a move to lower electricity rates. That issue was soon dropped after MidAmerican executives made it clear that merger credits would not be entertained.

Still, the committee's push to beef up PacifiCorp's corporate presence in Salt Lake City was taken seriously by MidAmerican.

In August, Mark Moench, a senior vice president at MidAmerican, told the committee of the company's commitment to move senior-level positions, such as general counsel, chief financial officer or senior vice president of operations, to Utah as they opened.

"Oregon's needs and Utah's needs are different," Reberg said. "I'm not going to speak as to what Oregon likes or dislikes. What we think is attractive to Utah is the fact that these guys are willing to invest in the system and support the growth that the state is currently experiencing."

On Monday, Moench praised the Utah agreement, saying it provided a roadmap for other states.

"We believe that every state is going to come along and recognize the benefits," said Moench, who added that subsequent states that enter into settlements will have the opportunity to identify their own specific commitments.

Utah is the largest revenue generator in PacifiCorp's six-state region.