ALJ/TIM/jt2 Mailed 2/21/2006

Decision 06-02-033 February 16, 2006

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

DECISION GRANTING CONDITIONAL APPROVAL OF THE ACQUISITION OF PACIFICORP BY MIDAMERICAN ENERGY HOLDINGS COMPANY

Title Page

OPINION 2

1. Summary 2

2. Procedural Background 2

3. Application 05-07-010 3

A. Description of the Applicants 3

B. Summary of the Proposed Transaction 5

C. Requested Authority 7

D. The Applicants' Commitments 8

E. The Settlement Agreement 11

F. Tangible Benefits of the Proposed Transaction 13

G. Most-Favored-Nation Treatment 13

4. Responses to A.05-07-010 and the Settlement Agreement 14

A. The Conservation Groups 14

B. Karuk Tribe 14

C. DRA 15

i. Capital Expenditures 15

ii. Reduced Costs 16

iii. Applicants' Commitments 16

iv. Necessary Conditions 17

5. Discussion 17

A. Denial of § 853(b) Exemption 18

B. Applicability of § 854(a) 20

C. Review of the Proposed Transaction Pursuant to § 854(a) 23

i. Maintain or Improve Financial Condition 24

a. Background 24

b. Discussion 24

ii. Maintain or Improve Service Quality 29

a. Background 29

b. Discussion 30

iii. Maintain or Improve the Quality of Management 31

a. Background 31

b. Discussion 31

iv. Fair and Reasonable to Affected Utility Employees 31

a. Background 31

b. Discussion 32

v. Affect on State and Local Communities 32

a. Background 32

b. Discussion 33

vi. Preserve the Jurisdiction of the Commission 33

a. Background 33

b. Discussion 34

vii. Competitive Effects 34

a. Background 34

b. Discussion 35

D. Approval of the Transaction 35

i. Adopted Conditions 36

ii. DRA's Conditions 40

iii. Approval of the Settlement Agreement 41

iv. Gain or Loss from the Sale 42

6. California Environmental Quality Act 44

7. Category and Need for Hearings 44

8. Comments on the Draft Decision 45

9. Assignment of Proceeding 45

Findings of Fact 45

Conclusions of Law 48

ORDER 53

Appendix A: PacifiCorp & MEC Service Territories

Appendix B: Post Transaction Corporate Structure

Appendix C: Settlement Agreement

Appendix D: Adopted Conditions

OPINION

1. Summary

This Decision grants authority under Pub. Util. Code § 854(a)¹ to transfer control of PacifiCorp from Scottish Power PLC (ScottishPower) to MidAmerican Energy Holdings Company (MEHC). The authority granted by this Decision is subject to the conditions in Appendix D and any conditions subsequently adopted in other states that provide additional benefits or protections.

¹ All section references are to the Public Utilities Code unless otherwise indicated.