11. Assignment of Proceeding

Michael Peevey is the Assigned Commissioner and Seaneen M. Wilson is the assigned ALJ in this proceeding.

Findings of Fact

1. In January 2008, PacifiCorp and over 40 federal, state, county, tribal, irrigation, conservation, and fishing organizations started focused negotiations that resulted in the a final KHSA executed by the parties involved in February 2010.

2. On March 18, 2010, PacifiCorp filed this application, in which it requests authorization, pursuant to the KHSA, to: 1) institute a surcharge of $13.76 million; 2) institute the California Klamath Trust Accounts for the deposit of the surcharge; 3) depreciate the rate base, and amortize the relicensing and settlement costs associated with the Klamath River Project, on an accelerated basis; and 4) transfer the Klamath River Project assets to an entity designated to remove the dams in question.

3. On April 26, 2010, DRA filed a Motion requesting that the assigned ALJ hold A.10-03-015 in abeyance until after the Bond Measure is voted on by the California voters or the state of California finds another source of funding for the cost of removal allocated to the state in the KHSA.

4. On April 26, 2010, DRA filed a protest to the application requesting that A.10-03-015 be either denied without prejudice and PacifiCorp directed to file a new application after California financing had been secured, or that DRA's Motion be approved.

5. Both DRA's Motion and protest were denied by the assigned Commissioner in his Scoping Memo.

6. DRA presented no evidence in testimony regarding its request to dismiss the current application that would have us reconsider the assigned Commissioner's original ruling not to do so.

7. The KHSA is supported by the Conservation Groups and PacifiCorp, both of whom are signatories to the KHSA and parties to the current case.

8. Through the use of the KHSA cost cap, ratepayers are protected from the uncertain costs of relicensing, litigation, and decommissioning that customers may be responsible for sans the KHSA. If the KHSA surcharge is not instituted, ratepayers would be exposed to an uncertain amount of costs.

9. In order for PacifiCorp to collect sufficient surcharge funds for the DRE to begin removal of the Klamath assets proposed in the KHSA in a timely fashion and to accrue sufficient interest on the surcharge funds to make up the difference between the collected customer surcharge and the amount required by the KHSA, the surcharge must be recovered over nine years.

10. PacifiCorp's proposed rate design method of allocating the surcharge to customer classes is based on authorized generation revenues.

11. Pursuant to the KHSA, the surcharge paid by customers is the first source of funding for the KHSA, and the California bond funding is a source of funding that will only be used to the extent if any, that the cost of removal exceeds the Oregon and California customer contributions.

12. DRA did not consult with any member of Congress regarding introduction of federal legislation to implement the KHSA and, in particular, did not consult with any member of the California or Oregon Federal delegations, or their staffs, whose districts encompass the Klamath Basin.

13. Pursuant to D.10-09-020, PacifiCorp is already authorized to recover depreciation an amortization related to the Klamath River Project assets over a shorter length of time.

14. Given the extended time over which the KHSA process takes place, it is important for parties to be kept informed of the progress towards achievement of the terms of the KHSA.

Conclusions of Law

1. The proposed surcharge of $13.76 million collected over nine years from PacifiCorp's California customers should be authorized.

2. Since the customer surcharge is the first source of funding pursuant to the KHSA, and California bond funding will only be used to the extent if any, that the cost of removal exceeds the Oregon and California customer contributions, there is no reason to hold up consideration of the reasonableness of the customer surcharge while approval of California Bond funding is pending.

3. By its nature, the ratepayer surcharge must be collected over a period of time before the funds are needed, while the State of California's share of the funding need not be collected over time.

4. By collecting the surcharge over nine years, there is time for interest to accrue on the amount collected, which is intended to allow California ratepayers to pay less in rates.

5. Even though there may not currently be a sponsor for the federal legislation required by the KHSA, that does not mean there will never be a sponsor for such legislation.

6. The denial of DRA's motion to hold in abeyance and protest to dismiss the current application should be confirmed.

7. Within 30 days of this decision being issued, PacifiCorp should file a Tier 1 advice letter requesting approval of revised tariffs, adding the surcharge authorized herein. PacifiCorp should not collect this surcharge until the Commission's Energy Division has determined that the revised tariffs are in compliance with this decision, and Commission staff has informed the assigned ALJ and service list of the current proceeding that the California Klamath Trust Accounts have been established. Within 30 days of the latter of (i) the Energy Division's determination of compliance and (ii) Commission staff notification of the California Klamath Trust Accounts establishment, PacifiCorp should begin collecting the surcharge from its California customers.

8. PacifiCorp's proposed method of allocating the surcharge to customer classes, using the authorized allocation of generation revenues as of January 1, 2010, as discussed in Section 5 of this decision, is reasonable and should be adopted. The resulting surcharge revenue requirement for each class should be collected from customers within that class based on the number of kilowatt hours consumed.

9. By collecting the surcharge over nine years, there is time for interest to accrue on the amount collected, which is intended to allow California ratepayers to pay less in rates.

10. The surcharge authorized herein together with accrued interest should be refundable to California customers, and should be used only for the benefit of ratepayers through, for example, customer refunds, the funding of beneficial programs associated with the Klamath assets, or to fund relicensing of the Klamath assets.

11. Consideration of how to revise the Klamath surcharge, or use it to benefit customers through a means other than implementation of the KHSA, should be requested through an application, with notice to all parties of record in the current proceeding. The amount of the surcharge may be revised, subject to the annual limit on surcharge revenue of 2% of the authorized annual revenue requirement as of January 1, 2010.

12. Pursuant to our authority under Pub. Util. Code §1701 and consistent with the KHSA, the Commission should direct its Executive Director to create the interest bearing California Klamath Trust Accounts and appoint a trustee to manage and administer the interest bearing California Klamath Trust Accounts, in which the surcharge authorized herein should be held.

13. Surcharge funds collected from California customers should not be taxable income to PacifiCorp.

14. Once PacifiCorp begins collecting the surcharge, PacifiCorp should remit the surcharge on a monthly basis to the trustee, no later than the 15th day of the following calendar month.

15. Consistent with the KHSA, 75% of the surcharge funds collected should be deposited to the California Copco I and II/Iron Gate Dams Trust Account and 25% of the surcharge funds collected should be deposited to the California J.C. Boyle Dam Trust Account.

16. D.10-09-020 authorized accelerated depreciation for Klamath assets and amortization for relicensing and settlement process costs.

17. PacifiCorp should identify the annual and cumulative balance of accelerated depreciation on the Klamath assets and the relicensing and settlement process costs in all future GRC applications, until the Klamath assets are totally depreciated and the costs totally amortized.

18. Further review of PacifiCorp's request to dispose of the Klamath assets is necessary, given the amount of time that will pass between the current decision and disposition of the Klamath assets, as well as the controversial nature of the issues addressed by the KHSA.

19. Since the Commission has performed a review of PacifiCorp's KHSA requests in the current proceeding, it and the parties will only need to review events that occur subsequent to this proceeding in regards to whether the Klamath assets should be transferred or not. This limited review can be performed in a Tier 3 advice letter review. Use of a Tier 3 advice letter should require much less time to process than an application, while providing all parties the opportunity to provide input on the process and the Commission to perform a more informed review to determine PacifiCorp's compliance with all applicable requirements closer to the time of disposition.

20. The inclusion of milestone d as a criterion for transfer of the Klamath assets as originally requested by PacifiCorp would create a circular requirement, where achievement of the requested milestone d would be required to request our approval for the transfer, but this milestone d would not be achieved until Commission approval is granted. Since the only item making this criterion circular is the authority granted by the Commission, instead of completely omitting the requested milestone d, we modify it so that the remaining parts of the criteria, which provide valuable information regarding whether the Klamath assets should be transferred, remain.

21. While we incorporate PacifiCorp's suggestion that the advice letter can be filed at a time when dam removal is expected to begin within six months, we decline to delete the requirement that all other permits are in hand and that all contracts have been finalized before PacifiCorp files the advice letter. The Commission wants to be sure that at the time it authorizes the actual transfer of the Klamath assets to the DRE that dam removal will occur and is not subject to the risk that some other approval will not be obtained.

22. PacifiCorp should file a Tier 3 advice letter to request authority to dispose of each Klamath asset after the milestones listed below are met. These milestones are:

a. The passage of federal legislation which contain provisions that are materially consistent with Section 2.1.1.A of the KHSA;

b. The availability of sufficient funds to cover estimated costs of dam removal, provided by California and Oregon customers, as set forth in Section 4.1 of the KHSA;

c. An Affirmative Determination by the United Stated Secretary of the Interior determining that the costs of dam removal will not exceed available funds, removal of the dams will advance restoration of the salmon fisheries of the Klamath basis, and removal of the dams is in the public interest as required in Section 3 of the KHSA; and

d. All necessary permits and approvals have been obtained for the removal of a main stem dam, except for the approval of the California Public Utilities Commission; all contracts necessary for that facility's removal have been finalized and that facility's removal is ready to commence within 6 months; and the DRE is prepared to issue the DRE Notice, as defined in Section 7.4.1 of the KHSA, after receipt of this Commission's approval of the transfer of the facility.

23. PacifiCorp should file a Status Report as an information only filing with the Energy Division on an annual basis, and serve this Status Report on the service list of this proceeding on an annual basis, due May 1st of each year. The filing of this compliance filing should not reopen the record of this proceeding.

24. As of the date of this decision, PacifiCorp should no longer file and serve the monthly status report it has been providing during the processing of A.10-03-015.

25. The annual Status Report should address, at a minimum, events regarding and progress toward achievement of:

a. All items listed in Exhibit 2 to Exhibit PPL-104;

b. The enactment of conforming federal legislation;

c. The enactment of California legislation to authorize the issuance of a California Bond;

d. The availability of sufficient funds to cover estimated costs of dam removal, provided by California and Oregon customers, as set forth in Section 4.1 of the KHSA;

e. An Affirmative Determination by the United Stated Secretary of the Interior determining that the costs of dam removal will not exceed available funds, removal of the dams will advance restoration of the salmon fisheries of the Klamath basin, and removal of the dams is in the public interest as required in Section 3 of the KHSA;

f. A list of all necessary permits, approvals, and contracts for removal of the Klamath assets and the date PacifiCorp receives, or expects to receive each;

g. The Interior Secretary's determination to proceed with dam removal;

h. The concurrence of Oregon and California in that determination and designation of a DRE;

i. The securing of California state funds through a California Bond or other form of state funding;

j. The DRE's development of a detailed plan to effect dam removal consistent with budget and liability controls;

k. The securing of all permits and funding necessary to perform the detailed plan;

l. The amount of surcharge revenue collected in California by year and cumulatively;

m. Both the amounts of interest accrued on the balances in the California Klamath Trust Accounts since the last Status Report and the cumulative total of interest earned to date;

n. Whether the combined total of surcharge collected and interest earned to date is expected to equal $16 million by the start of dam removal;

o. Based on the surcharge collected and interest earned to date, what adjustment, if any, should be made to the surcharge if it appears that there will be either more or less than $16 million by the start of dam removal;

p. Any other items that bear on the probability, schedule, and cost of implementing the KHSA; and

q. Any other significant events related to the KHSA that have occurred in the past 12 months.

26. Application 10-03-015 should remain open.

ORDER

IT IS ORDERED that:

1. Pursuant to the Klamath Hydroelectric Settlement Agreement, PacifiCorp is authorized to institute a Klamath surcharge, to collect $13.76 million over nine years from its California customers.

2. PacifiCorp must allocate the $13.76 million Klamath surcharge to customer classes, based on each customer class's authorized allocation of generation revenues as of January 1, 2010. The resulting surcharge revenue requirement for each class must be collected from customers within that class based on the number of kilowatt hours consumed.

3. Within 30 days after the effective date of this decision, PacifiCorp is authorized to file a Tier 1 advice letter requesting approval of revised tariffs adding the Klamath surcharge authorized herein. PacifiCorp must not collect the surcharge until the California Public Utilities Commissions (Commission) Energy Division has determined that the revised tariffs are in compliance with this decision, and the Commission staff has informed the assigned Administrative Law Judge and service list of the current proceeding by letter that the California Copco I and II/Iron Gate Dams Trust Account and the California J.C. Boyle Dam Trust Account, both of which are interest bearing, have been established.

4. Within 30 days of the latter of (i)the California Public Utilities Commissions (Commission) Energy Division's determination that the revised tariffs are in compliance with this decision and Commission staff has informed the assigned Administrative Law Judge and service list of the current proceeding by letter that the California Copco I and II/Iron Gate Dams Trust Account and the California J.C. Boyle Dam Trust Account have been established, PacifiCorp must then start collecting the Klamath surcharge.

5. The $13.76 million Klamath surcharge together with accrued interest is refundable to California customers, and must be used only for the benefit of ratepayers. Such benefits must be provided through customer refunds, the funding of beneficial programs associated with the Klamath assets, or to fund relicensing of the Klamath Hydroelectric Project assets.

6. The amount of the Klamath surcharge may be revised, subject to the annual limit on surcharge revenue of 2% of the authorized annual revenue requirement as of January 1, 2010.

7. Consideration of how to revise the Klamath surcharge, or use it to benefit customers through a means other than implementation of the Klamath Hydroelectric Settlement Agreement, must be requested through an application, with notice to all parties of record in the current proceeding.

8. The Division of Ratepayer Advocate's Motion to Hold in Abeyance is denied.

9. The California Public Utilities Commission directs its Executive Director to create the interest bearing California Copco I and II/Iron Gate Dams Trust Account and the interest bearing California J.C. Boyle Dam Trust Account, and appoint a trustee to manage the California Copco I and II/Iron Gate Dams Trust Account and the California J.C. Boyle Dam Trust Account, in which the Klamath surcharge must be held and administered.

10. Once PacifiCorp begins collecting the surcharge, PacifiCorp must remit all Klamath surcharge funds to the trustee on a monthly basis, no later than the 15^th day of the following calendar month, to be deposited in the California Copco I and II/Iron Gate Dams Trust Account and the California J.C. Boyle Dam Trust Account, pursuant to the Klamath Hydroelectric Settlement Agreement. Consistent with the Klamath Hydroelectric Settlement Agreement, 75% of the surcharge funds collected must be deposited to the California Copco I and II/Iron Gate Dams Trust Account and 25% of the surcharge funds collected must be deposited to the California J.C. Boyle Dam Trust Account.

11. PacifiCorp is required to adjust the depreciation of the Klamath Hydroelectric Project assets and amortization of relicensing and settlement process costs in any General Rate Case application, if, in the future, the anticipated useful lives of the Klamath Hydroelectric Project assets changes.

12. PacifiCorp must identify the annual and cumulative balance of accelerated depreciation on the Klamath Hydroelectric Project assets and amortized relicensing and settlement process costs in all future General Rate Case applications, until the Klamath Hydroelectric Project assets are totally depreciated and the costs totally amortized.

13. PacifiCorp must file a Tier 3 advice letter to request authority to dispose of each Klamath Hydroelectric Project asset after the milestones listed below are met. These milestones are:

a. The passage of federal legislation which contain provisions that are materially consistent with Section 2.1.1.A of the Klamath Hydroelectric Settlement Agreement;

b. The availability of sufficient funds to cover estimated costs of dam removal, provided by California and Oregon, as set forth in Section 4.1 of the Klamath Hydroelectric Settlement Agreement;

c. An Affirmative Determination by the United Stated Secretary of the Interior determining that the costs of dam removal will not exceed available funds, removal of the dams will advance restoration of the salmon fisheries of the Klamath basin, and removal of the dams is in the public interest as required in Section 3 of the Klamath Hydroelectric Settlement Agreement; and

d. All necessary permits and approvals have been obtained for the removal of a main stem dam, except for the approval of the California Public Utilities Commission; all contracts necessary for that facility's removal have been finalized and that facility's removal is ready to commence within 6 months; and the DRE is prepared to issue the DRE Notice, as defined in Section 7.4.1 of the KHSA, after receipt of this Commission's approval of the transfer of the facility.

14. PacifiCorp must file a Status Report as an information only filing with the Commission's Energy Division on an annual basis, and serve this Status Report on the service list of Application 10-03-015, due May 1^st of each year, starting on May 1, 2012.

15. The annual Status Report must address, at a minimum, events regarding and progress toward achievement of:

a. All items listed in Exhibit 2 to Exhibit PPL-104;

b. The enactment of conforming federal legislation;

c. The enactment of California legislation to authorize the issuance of a California Bond;

d. The availability of sufficient funds to cover estimated costs of dam removal, provided by California and Oregon customers, as set forth in Section 4.1 of the KHSA;

e. An Affirmative Determination by the United Stated Secretary of the Interior determining that the costs of dam removal will not exceed available funds, removal of the dams will advance restoration of the salmon fisheries of the Klamath basin, and removal of the dams is in the public interest as required in Section 3 of the KHSA;

f. A list of all necessary permits, approvals, and contracts for removal of the Klamath assets and the date PacifiCorp receives, or expects to receive each;

g. The Interior Secretary's determination to proceed with dam removal;

h. The concurrence of Oregon and California in that determination and designation of a Dam Removal Entity;

i. The securing of California state funds through a California Bond or other form of state funding;

j. The Dam Removal Entity's development of a detailed plan to effect dam removal consistent with budget and liability controls;

k. The securing of all permits and funding necessary to perform the detailed plan;

l. The amount of surcharge revenue collected in California by year and cumulatively;

m. Both the amounts of interest accrued on the balances in the California Copco I and II/Iron Gate Dams Trust Account and the J.C. Boyle Dam Trust Account since the last Status Report and the cumulative total of interest earned to date;

n. Whether the combined total of surcharge collected and interest earned to date is expected to equal $16 million by the start of dam removal;

o. Based on the surcharge collected and interest earned to date, what adjustment, if any, should be made to the surcharge if it appears that there will be either more or less than $16 million by the start of dam removal;

p. Any other items that bear on the probability, schedule, and cost of implementing the Klamath Hydroelectric Settlement Agreement; and

q. Any other significant events related to the Klamath Hydroelectric Settlement Agreement that have occurred in the past 12 months.

16. As of the date of this decision, PacifiCorp need no longer file and serve the monthly status report it has been providing during the processing of Application 10-03-015.

17. Application 10-03-015 remains open.

This order is effective today.

Dated May 5, 2011, at San Francisco, California.

MICHAEL R. PEEVEY

President

TIMOTHY ALAN SIMON

MICHEL PETER FLORIO

CATHERINE J.K. SANDOVAL

MARK FERRON

Commissioners

Attachment A

List of Testimony and Exhibits

Entered into Record in A.10-03-015

(ATTACHMENT A)

(END OF ATTACHMENT A)