4. Nature of the Transaction

PacifiCorp proposes to sell and transfer to Washington LLC the dam, powerhouse, water rights, land, easements and other assets of the Skookumchuck Project.

The Skookumchuck Project is an earth-fill dam and hydroelectric generating plant located near Centralia, Washington, on property adjacent to the Centralia Power Plant. The dam was constructed in 1973 as water storage and cooling facility for the Centralia Power Plant. In 1991, a small generating plant with a capacity of approximately 1 megawatt (MW) was constructed at the dam. The Project was granted an exemption from licensing as a hydropower facility by FERC pursuant to 16 U.S.C. § 1705(d), which allows exemptions for facilities of less that 5 MW. However, the Project is subject to safety regulation by FERC.

The aggregate sale price of the transaction is approximately $7.57 million, and PacifiCorp's share of this amount is 47.5%. The sale price is determined in such a manner that PacifiCorp will receive its net book value of the assets being transferred, with no appreciable gain or loss. By contrast, the sale of the Centralia Power Plant approved by the Commission in the year 2000 showed a gain on sale, and the Commission approved a settlement that directed approximately $1.5 million of that gain for the benefit of PacifiCorp's northern California ratepayers.

After the transfer to Washington LLC, the Skookumchuck Project will continue to provide cooling water to the Centralia Power Plant, and will produce power from the Project either as an exempt wholesale generator (EWG) or as a qualifying facility under the Public Utility Regulatory Policies Act of 1978. None of the electrical output of the Project will be used to serve PacifiCorp's retail customers, except perhaps indirectly through the wholesale power markets.