exh10-1.htm


    
      

    

    EXHIBIT
      10.1

     

    
      STIPULATION
        AND AGREEMENT

      


      Dated
        March 23, 2007

      


      Article
        I – Introduction

      


      In
        Docket
        Nos. RPU-03-1, RPU-04-3, and RPU-05-4, the Iowa Utilities Board (“Board”) issued
        orders approving settlements between the Iowa Office of Consumer Advocate
        (“OCA”) and MidAmerican Energy Company (“MidAmerican”) addressing ratemaking
        principles pursuant to Iowa Code Section 476.53 for the construction of
        rate-regulated wind generation projects.  MidAmerican and the OCA
        support the development of additional new wind generation resources where
        the
        projected revenues of the wind generation resources offset, or exceed, the
        projected costs.  Projects that MidAmerican may undertake pursuant to
        this Stipulation and Agreement shall be referred to collectively as the “Wind IV
        Iowa Projects”.

       

      Article
        II – Purpose

       

      This
        Stipulation and Agreement has been prepared and executed by the signatories
        for
        the purpose of stipulating to their mutually-agreed position in the ratemaking
        principles case regarding the Wind IV Iowa Projects.  MidAmerican
        commits to filing an application for ratemaking principles pursuant to Section
        476.53 of the Iowa Code at a mutually agreeable date after executing this
        Stipulation and Agreement.

       

      In
        consideration of the mutual agreements set forth herein, the signatories
        stipulate their belief that the Board should issue an order that allows the
        terms and provisions of this Stipulation and Agreement to be fully
        implemented.

       

       

       

      
        
          
          

        

        
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      Article
        III – Ratemaking Principles and Ratemaking Provisions

      


      The
        signatories to this Stipulation and Agreement agree to support the Wind IV
        Iowa
        Projects with the following ratemaking principles and ratemaking
        provisions:

      
         

        RATEMAKING
          PRINCIPLES: 

      

      


      
        	
                Topic

              	 	
                Ratemaking
                  Principle

              
	
                Iowa
                  Jurisdictional Allocation

              	 	
                The
                  Wind IV Iowa Projects will be allocated to Iowa in the same manner
                  as the
                  Greater Des Moines Energy Center, Council Bluffs Energy Center
                  Unit No. 4,
                  and authorized prior wind projects that were addressed in Dockets
                  SPU-

                05-9
                  and SPU-05-12.

              
	
                Economic
                  Test for Qualifying Projects

              	 	
                Each
                  Wind IV Iowa Project that, at a minimum, is projected
                  to earn its revenue requirement, including its allowed cost of
                  capital
                  shall qualify for rate treatment under
                  these ratemaking principles.  In order to determine if a project
                  so qualifies, a conventional revenue requirement will be calculated
                  for
                  each proposed project, levelized and then converted to a cents
                  per kWh
                  basis.  In turn, the incremental benefits (revenues) of the
                  project, converted to a comparable cents per kWh basis, will be
                  subtracted
                  from the revenue requirement.  If the net result is a positive
                  cents
                  per kWh (i.e., the costs exceed the benefits), the project will
                  be deemed
                  to not earn its revenue requirement and will not qualify for rate
                  treatment under these ratemaking principles.  On the other hand,
                  if the net result is
                  zero or a negative cents per kWh (i.e., the benefits equal or exceed
                  the
                  costs), the project will be deemed to earn its revenue requirement
                  and
                  will qualify for rate treatment under these ratemaking
                  principles.  MidAmerican will perform the above-mentioned
                  economic test in good faith using reasonable estimates of projected
                  costs and other
                  reasonable assumptions and the test will be completed
                  prior to the decision to construct a project at any particular
                  site or
                  sites.

                 

                In
                  the event that actual capital costs of a Wind IV Iowa Project are
                  lower
                  than the projected capital costs, rate base shall consist of actual
                  costs.  In the event that actual capital costs exceed the
                  capital expenditures that would result in the economic evaluation
                  greater
                  than zero as defined in
                  the above paragraph, MidAmerican shall be required to establish
                  the
                  prudence and reasonableness of such excess before it can be included
                  in
                  rates.

              
	
                Size
                  Cap

              	 	
                The
                  ratemaking principles shall be applicable to all new wind capacity
                  up to
                  540 MW placed into service on or before December 31, 2013, and
                  not
                  currently in service, except
                  for the 123 MW Pomeroy Project currently under development, which
                  is being
                  completed under ratemaking principles approved in Docket No.
                  RPU-05-4.

              


      

       

      
        
          
          

        

        
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                Depreciation

              	 	
                The
                  depreciation life of each Wind IV Iowa Project for ratemaking purposes
                  shall be 20 years.

              
	
                Return
                  on Equity

              	 	
                The
                  allowed return on common equity investment (ROE) on
                  the portion of the Wind IV Iowa Projects included in Iowa electric
                  rate
                  base shall be 11.7%.

              
	
                Renewable
                  Energy and CO2
                  Credits and
                  the Like

              	 	
                The
                  Iowa jurisdictional portion of any revenues from the sale of renewable
                  energy credits, carbon dioxide credits or other environmentally
                  related
                  benefits associated with each Wind IV Iowa Project shall be recorded
                  above-the-line, in FERC accounts 456 and 411.8, by MidAmerican,
                  through
                  the 20-year depreciation life of such Projects (and thereafter
                  as ordered by the Board in a contested case proceeding), and for
                  the
                  duration of the Stipulation and Settlement in Docket No. RPU-03-1,
                  such
                  revenues and benefits shall be recorded in the accounts specified
                  in
                  Appendix 2 and included in the revenue sharing calculations
                  of items “g” and “h” of, the Stipulation and Settlement in that
                  docket.

              
	
                Federal
                  Production Tax Credit

              	 	
                The
                  Iowa jurisdictional portion of any federal production tax credits
                  associated with each Wind IV Iowa Project shall
                  be recorded above-the-line, in FERC account 409.1, by
                  MidAmerican, through the 20-year depreciation life of such Projects
                  (and
                  thereafter as ordered by the Board in a contested case proceeding),
                  and
                  for the duration of the Stipulation and Settlement in Docket No.
                  RPU-03-1,
                  such federal production tax credits shall be recorded in the accounts
                  specified in Appendix 2 and included in the revenue sharing calculations
                  of items “g” and “h” of the Stipulation and Settlement in that
                  docket.

              
	
                Wholesale
                  Sales Revenue

              	 	
                Through
                  the revenue sharing calculation for calendar year 2013, the Iowa
                  jurisdictional portion of wholesale sales revenue associated with
                  all
                  generating units included in MidAmerican’s Iowa jurisdictional electric
                  rate base (including the Wind IV Iowa Projects) shall be recorded
                  above-the-line in the accounts specified in Appendix 2 and included
                  in the
                  revenue sharing calculations of items “g” and “h” of the Stipulation and
                  Settlement in Docket No. RPU-03-1.  Thereafter, the ratemaking
                  treatment of the Iowa jurisdictional portion of wholesale sales
                  revenue
                  associated with all generating units included in MidAmerican’s Iowa
                  jurisdictional electric rate base (including the Wind IV Iowa Projects)
                  shall be determined by the Board in a contested case
                  proceeding.

              


      

       

      
        
          
          

        

        
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      RATEMAKING
        PROVISIONS:

      


      
        	
                Topic

              	 	
                Ratemaking
                  Provision

              
	
                Renewable
                  Energy and CO2
                  Credits and
                  the Like (for existing MidAmerican wind generation covered by prior
                  Board-approved ratemaking principles)

              	 	
                The
                  Iowa jurisdictional portion of any revenues from the sale of renewable
                  energy credits, carbon dioxide credits or other environmentally
                  related
                  benefits associated with each wind power generation project covered
                  by
                  settlements approved by the Board in Docket Nos. RPU-05-4, RPU-04-3,
                  RPU-03-1 shall be recorded above-the-line, in accounts 456 and
                  411.8, by
                  MidAmerican, through the 20-year depreciation life of such projects
                  (and
                  thereafter as ordered by the Board in a contested case proceeding),
                  and
                  for the duration of the Stipulation and Settlement in Docket No.
                  RPU-03-1,
                  such revenues and benefits shall be recorded in the accounts specified
                  in
                  Appendix 2 and included in the revenue sharing calculations of
                  items “g”
                  and “h” of the Stipulation and Settlement in that
                  docket.

              
	
                Federal
                  Production Tax Credit

              	 	
                The
                  Iowa jurisdictional portion of any federal production tax credits
                  associated with each wind power generation project covered by settlements
                  approved by the Board in Docket Nos. RPU-05-4, RPU-04-3, RPU-03-1
                  shall be
                  recorded above-the-line, in FERC account 409.1, by MidAmerican,
                  through
                  the 20-year depreciation life of such projects (and thereafter
                  as ordered
                  by the Board in a contested case proceeding), and for the duration
                  of the
                  Stipulation and Settlement in Docket No. RPU-03-1, such federal
                  production
                  tax credits shall be recorded in the accounts specified in Appendix
                  2 and
                  included in the revenue sharing calculations of items “g” and “h” of the
                  Stipulation and Settlement in that docket.

              
	
                Conditional
                  Overall Rate Freeze Extension Through December 31,
                  2013

              	 	
                Subject
                  to the conditional exit explained below, neither MidAmerican nor
                  the OCA
                  shall seek or support a non-revenue neutral electric rate change
                  to become
                  effective prior to January 1, 2014.

              
	
                Conditional
                  Overall Revenue Sharing Extension Through December 31,
                  2013

              	 	
                Subject
                  to the modifications described below, revenue sharing as approved
                  by the
                  Board in Docket No. RPU-03-01 for the years 2006-2010 shall apply
                  in
                  2013.  The customer portion of any revenue sharing benefits
                  generated with respect to the 2013 revenue sharing year shall be
                  used to
                  reduce the Iowa jurisdictional portion of the investment in the
                  Wind IV
                  Iowa Projects.

              


      

       

      
        
          
          

        

        
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                Condition
                  for Exiting Overall Rate Freeze Extension and Modifying Revenue
                  Sharing
                  Extension

              	 	
                MidAmerican
                  shall be released from its obligation not to seek or support a
                  non-revenue
                  neutral electric rate change to become effective prior to January
                  1, 2014,
                  only in the event its projected return on equity for 2013 would
                  be below
                  10% with such projection to be based upon its 2011 actual Iowa
                  jurisdictional electric cost of service plus pro forma
                  adjustments (to cost of service, rate base, revenues, etc.), including
                  pro forma adjustments to achieve a reasonable, representative
                  and
                  recurring level of wholesale margins.  In the rate case
                  contemplated above, MidAmerican’s wholesale margins pro forma
                  adjustments shall not include any sharing between customers and
                  shareholders of such wholesale margins, and all such reasonable,
                  representative and recurring margins shall be shall be recorded
                  above-the-line, in MidAmerican’s proposals in such proceeding. In the
                  event MidAmerican seeks such a rate change as a result of this
                  condition
                  occurring, then in such rate case there shall be no limitations
                  or
                  requirements with respect to the positions that may be taken by
                  the OCA
                  and MidAmerican, except that the OCA and MidAmerican shall be required
                  to
                  honor their settlement obligations as approved and ordered in this
                  and in
                  the prior Board ratemaking principles determinations, and other
                  stipulations/agreements between the OCA and
                  MidAmerican.

              
	
                Revenue
                  Sharing Condition Applicable to Any Rate Case for Electric Rates
                  to be
                  Effective in 2013

              	 	
                In
                  the event MidAmerican receives Board approval to increase Iowa
                  electric
                  rates effective in 2013, the revenue sharing arrangement currently
                  in
                  effect shall apply in 2013, subject to the following
                  modifications:

                i)
                  All Iowa jurisdictional electric operating income, if any, that
                  exceeds
                  the combined allowed return on common equity established in the
                  rate case
                  (i.e. the allowed rates of return applicable from ratemaking principle
                  decisions and all other rate base weighted as a percentage of total
                  rate
                  base) shall be subject to revenue sharing.

                ii)
                  The revenue sharing formula shall be as follows: 83.3% of operating
                  income
                  subject to revenue sharing shall be used to offset Wind IV Iowa
                  Projects
                  rate base and the remaining 16.7% of operating income shall be
                  retained by
                  MidAmerican.

                iii)
                  100% of the Iowa jurisdictional portion of wholesale electric margins
                  shall be accounted for above-the-line for purposes of these revenue
                  sharing calculations.

              


      

       

       

      
        
          
          

        

        
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                Quad
                  Cities Nuclear Decommissioning Expenses Ratemaking Treatment Through
                  2012
                  or 2013

              	 	
                Subject
                  to regulatory approval, effective January 1, 2007, through December
                  31,
                  2013 (or December 31, 2012 in the event there is a rate increase
                  in 2013),
                  there shall be a reduction in decommissioning funding from the
                  2006 level
                  of $8,299,012 deposited annually into the Quad Cities Nuclear Power
                  Stations’ decommissioning trusts funds to a new decommissioning funding
                  level, effective January 1, 2007, of $1,595,964.  The remaining
                  difference, of $6,703,048 shall be used to reduce east and south
                  residential base rates in 2008, to $.089/kWh and to reduce east
                  and south
                  residential base rates in 2009 to $.088/kWh as approved by the
                  Board in
                  Docket No. RPU-04-2, or as ultimately required by subsequent Board
                  order.  To the extent the amount of the above-mentioned
                  reduction in funds contributed annually to the decommissioning
                  trusts
                  funds exceeds the amount needed to implement the Board-approved
                  rate-reductions for south and east zones for residential customers,
                  100
                  percent of the remaining amount shall be used, during 2007-2013
                  (or 2007 -
                  2012 in the event there is a rate increase in 2013), to reduce
                  the Wind IV
                  Iowa Projects investment in rate base (including AFUDC) or the
                  investment
                  in Council Bluffs Energy Center Unit No. 4 plant (including AFUDC),
                  whichever has the highest ROE.

              


      

      
Article
        IV -- Joint Motion

      


      The
        signatories shall jointly file with the Board this Stipulation and Agreement
        in
        the docket initiated by MidAmerican’s filing of a ratemaking principles
        application pursuant to Iowa Code Section 476.53 for the Wind IV Iowa Projects.
        The signatories shall also file with the Board a joint motion requesting
        that
        the Board accept this Stipulation and Agreement without condition or
        modification.

       

       

      
        
          
          

        

        
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      Article
        V — Condition Precedent

       

      This
        Stipulation shall not become effective unless and until the Board accepts
        the
same
        in
        its entirety without condition or modification.

       

      Article
        VI -- Privilege and Limitation

      


      This
        Stipulation and Agreement is made pursuant to Iowa Code §17A.10 and 199
        I.A.C. §7.2(11). This Stipulation and Agreement shall become binding upon the
        signatories upon
        its
        execution; provided, however, that if this Stipulation and Agreement does
        not
        become effective in accordance with Article V above, it shall be null, void
        and
        privileged.

       

      This
        Stipulation and Agreement relates only to the specific matters referenced
        herein, and neither signatory waives any claim or right that it may otherwise
        have with respect to any matter not expressly provided for herein. Except
        as
        expressly provided in this Stipulation and Agreement, neither signatory shall
        be
        deemed to have approved, accepted, agreed or consented to any ratemaking
        principle, any method of cost of service determination, or any method of
        cost
        allocation underlying the provisions of this Stipulation and Agreement or
        be
        prejudiced or bound thereby in any other current or future proceeding before
        any
        agency.  Except as necessary to implement Article III, this
        Stipulation and Agreement shall not, directly or indirectly, be referred
        to as
        precedent in any other current or future proceeding before the
        Board.

      


      Article
        VII – Execution

      


      To
        facilitate and expedite execution, this Stipulation and Agreement may be
        executed by the signatories in multiple conformed copies which, when the
        original signature pages are consolidated into a single document, shall
        constitute a fully-executed document binding upon all
        the
        signatories. The facsimile signatures of the signatories shall be deemed
        to
        constitute original signatures, and facsimile copies hereof shall be deemed
        to
        constitute duplicate originals.

       

       

      
        
          
          

        

        
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      Article
        VIII - Modification and Amendment

      


      This
        Stipulation and Agreement shall not be amended or modified except by an
        instrument in writing signed by all signatories.

       

      Article
        IX — Term

       

      1.           This
        Stipulation and Agreement shall terminate January 1, 2014, except for the
        following provisions that shall survive termination: (a) MidAmerican’s
        responsibility for revenue sharing for the year 2013; (b) the Ratemaking
        Principles in Article III that shall remain in effect as long as the wind
        power
        facilities covered by the Ratemaking Principles continue to provide regulated
        electric service to Iowa consumers, and (c) the Ratemaking Provisions in
        Article
        III.

       

      2.          This
        Stipulation and Agreement and the obligations of the signatories shall terminate
        if the Board does not approve the terms of this Stipulation and Agreement,
        or if
        for reasons unrelated to this Stipulation and Agreement MidAmerican’s rate
        freeze terminates prior to 2013.

       

      3.           In
        the event of termination pursuant to the preceding subparagraph 2, MidAmerican
        shall be permitted to record as above-the-line expenses an amortization over
        a
5-year
        period all reasonable costs of the Wind IV Iowa Projects, including cancellation
        costs, but shall not be entitled to recover a return on such costs.

       

      Article
        X – Binding Nature

       

      This
        Stipulation and Agreement shall be binding on the signatories. The signatories
        shall
        take no actions directly or indirectly to eliminate or otherwise limit or
        expand
        the scope or effect of this Stipulation and Agreement throughout its
        term.

       

      Article
        XI -- Further Assurances

      


      The
        signatories agree to cooperate in order to effectuate the full and complete
        intent of
        the
        signatories as expressed in this Stipulation and Agreement.

       

       

      
        
          
          

        

        
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        Article
          XII -- Entire Agreement



      This
        Stipulation and Agreement contains the entire agreement between the signatories.
        There are no additional terms, whether consistent or inconsistent, oral or
        written, that
        have
        not been incorporated into this Stipulation and Agreement

       

       

       

      
 

      
        	 MIDAMERICAN
                ENERGY COMPANY
	 	 	 OFFICE
                OF CONSUMER ADVOCATE	 
	 	 	 	 	 
	
                /s/ 
Dean
                  A. Crist

              	 	 	
                /s/ 
John
                  R. Perkins

              	 
	
                Name: 
Dean
                  A. Crist

              	 	 	
                Name: 
John
                  R. Perkins 

              	 
	
                Date: 
                  March 23, 2007

              	 	 	
                Date: 
                  March 23, 2007

              	 


      

       

       

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