BACKGROUND

Utilities proposing to sell, lease, dispose of, or otherwise encumber property must comply with PU Code Section 851. Ordinarily, such a proposal would entail a full Application to the Commission, including a review pursuant to CEQA or a demonstration that such a review is not necessary. The Commission on August 25, 2005, initiated a 24-month pilot program per Resolution ALJ-186 that provides for an expedited process for certain transactions meeting criteria specified in the Resolution. On August 23, 2007, the Commission approved Resolution ALJ-202, which extends the pilot program an additional 36 months. Resolution ALJ-202 provides for an expedited process for certain transactions meeting criteria specified in the ALJ Resolution. For proposals that meet the requirements, an Advice Letter may be filed demonstrating the applicability of the pilot program to the utility's proposal and requesting an expedited review of the Advice Letter, resulting in a Resolution confirming that the proposal meets the requirements of Resolution ALJ-202 and granting approval to the proposed project.

On August 27, 2007, PacifiCorp filed Advice Letter 351-E requesting approval under PU Code Section 851 to allow PacifiCorp to sell its Goose Creek Line to Basin. Protests or comments were due to the Commission on September 17, 2007; no protests or comments were filed.

PacifiCorp owns the Goose Creek Line, consisting of a 13.85 mile 230 kV radial transmission line that extends between PacifiCorp's Goose Creek 230 kV switchyard and Flathead Electric Cooperative's ("Flathead") Decker 230 kV substation. Currently, this line is only used to make transfers of Basin's Network Resources delivered at Yellowtail to the Decker 230 kV substation under Basin's Open Access Transmission Tariff ("OATT") Network Transmission Service Agreement. The Company wheels resources for Basin southeast over the Yellowtail to Goose Creek transmission line and then north over the Goose Creek radial transmission line to Basin's retail distribution member, Flathead, at its Decker 230 kV substation. Selling the Goose Creek Line to Basin will not reduce the service charge to Basin or cause PacifiCorp to forego revenues from other potential customers. The sale would merely move the point of delivery to Basin from the Decker substation to the Goose Creek switchyard.

The Goose Creek Line is a 13.85 mile 230 kV radial transmission line supported by approximately 180 H-frame structures extending from PacifiCorp's Goose Creek 230 kV switching station approximately one mile north of Sheridan, Wyoming and extending north to a terminus at the Decker 230 kV substation near Decker, Montana, which is owned by Flathead. In addition to the Goose Creek radial transmission line, structures and miscellaneous support equipment, the Company also owns easements and right-of-way for the Goose Creek line.

Basin is a wholesale electric cooperative serving approximately 120 member systems in nine states. Basin intends to use the Goose Creek Line to serve its anticipated load growth. The Company currently uses the line solely to make transfers of Basin Network Resources delivered at Yellowtail to the Decker 230 kV substation under Basin's OATT Network Transmission Service Agreement. The Company does not anticipate serving any additional customers on this line and no longer needs this line to serve its current customers. Selling the Goose Creek Line will not reduce the service charge to Basin or cause the Company to forego revenues from other potential customers. The sale merely moves the point of delivery to Basin from the Decker substation to the Goose Creek switchyard. Essentially, the line is used solely for Basin's needs. Constructing a duplicate line would be more costly to Basin than purchasing the Goose Creek Line from PacifiCorp. Additionally, given that the Company would not be serving additional customers from the Goose Creek Line, Basin's construction of a new line would render the Goose Creek Line obsolete.

Basin agrees to pay $2,849,152 to PacifiCorp for the Goose Creek Line, to be paid upon closing. Pursuant to the Revised Protocol Allocation Methodology¹ approved by the Commission in the Company's most recent general rate case, Application No. 05-11-022 and Decision No. 06-12-011, California's allocation of the purchase price is $52,341.

PacifiCorp will remove from the Company's books the original book value of the sold assets with a credit to FERC account 101, Electric Plant in Service. In addition, the Accumulated provision for Depreciation in FERC account 108 and Accumulated Deferred Income Tax Reserve in FERC account 282 will be debited to eliminate the balances associated with the Goose Creek Line. The exact book value of the transaction in the various FERC accounts will not be known until the sale is closed. The net proceeds of the sale will be approximately $1.73 million consisting of the sale rice (approximately $2.85 million), less the net book value (approximately $0.33 million), less income taxes - net of deferred tax liability (approximately $0.60 million), less the cost of removing the Goose Creek switching station and the cost of replacing the short segment of 230 kV transmission line in place of the switching station (approximately $0.18 million).

Any financial proceeds from the sale of the Goose Creek Line will be recorded in the FERC account 108, Accumulated Provision for Depreciation of Electric Utility Plant, for distribution between shareholders and ratepayers during the next general rate case or other applicable proceeding.

In accordance with Rule 2.4 of the Commission's Rules of Practice and Procedure, PacifiCorp determined that the sale of the Goose Creek Line will not have a significant impact on the environment and should be categorically exempt from the provisions of CEQA. (Ca. Codes Regs., tit. 14, §§15300, et seq.) Among the classes of categorically exempt projects are those consisting of "the operation, repair, maintenance... or minor alteration of existing public or private structures, facilities, mechanical equipment or topographical features, involving negligible or no expansion beyond that existing" at the time of this application. (Id., §15301.) Examples include existing facilities of investor-owned utilities used to provide electric power. (Id., §15301(b)). The operation of a transmission line, such as the Goose Creek Line, matches the example of existing facilities of an investor-owned utility and therefore is categorically exempt from the provisions of CEQA. Additionally, the removal of a switching station and the rebuilding of the continuity of a transmission line meets the criteria for §15301 categorical exemption as a minor alteration of existing structures. (Id., §15301) No formal CEQA review is required and no Proponent's Environmental Assessment, as described in Rule 2.4 of the Commission's Rules of Practice and Procedure, is needed with this Advice Letter.

The transaction will not have an adverse effect on the public interest. PacifiCorp no longer uses the Goose Creek Line to serve its own customers, nor will PacifiCorp use the line to serve customers in the future. The Goose Creek Line solely serves Basin's transmission needs.

Any financial proceeds from the sale of the Goose Creek Line will be recorded in FERC account 108, Accumulated Provision for Depreciation of Electric Utility Plant, for distribution between shareholders and ratepayers during the next general rate case or other applicable proceeding.

The transaction involves the sale of depreciable assets with a purchase price of $2,849,152. The portion allocated to PacifiCorp's California service territory would be $52,341.

The transaction involves a change in ownership of facilities currently used in regulated utility operations. As previously stated, the Goose Creek Line currently is used solely to serve Basin's needs. PacifiCorp no longer uses the line for its own customers and will not need the line to serve customers in the future. Basin will continue to use the line to serve its customers. The transaction will not result in a physical or operation change in the facility other than the normal course of business.

To determine fair market value, PacifiCorp followed its policy to sell assets at the depreciated replacement cost less consideration for Basin's activities related to perfecting title to the property.

This project meets the criteria for categorical exemption for existing facilities. See Cal. Code Regs., tit. 14 §15301. This transaction involves the sale of existing utility transmission to an electric cooperative. The electric cooperative will continue to operate the transmission line. This project will also involve the replacement or reconstruction of existing structures by the removal of a switching station and the rebuilding of continuity in the Sheridan to Yellowtail transmission line. This meets the criteria for categorical exemption 15301 as a minor alteration. See Cal. Code Regs., tit. 14 §15301. No more exception to this categorical exemption applies. See Cal. Code Regs., tit. 14 §15300.2.

The project requires approval from the Oregon Public Utility Commission and the Wyoming Public Service Commission. This project requires notice to be filed with the Idaho Public Utilities Commission.

¹ The Revised Protocol Allocation Methodology is used to allocate costs among the six state jurisdictions PacifiCorp serves.