Stipulation and Agreement regarding Ratemaking Principles


    
      
        

      


      EXHIBIT
        10.2

       

      STIPULATION
        AND AGREEMENT

      


      Dated
        December __, 2004

      


      Article
        I Introduction

      


      On
        October 17, 2003, the Iowa Utilities Board (“Board”) issued an “Order
        Approving Stipulation and Agreement” in Docket No. RPU-03-l. In that decision
        the Board approved ratemaking principles pursuant to Iowa Code Section
        476.53 for
        MidAmerican Energy Company’s (“MidAmerican” or “Company”) proposed 310 megawatt
        (MW) wind-powered generating project MidAmerican had committed to the
        development of wind resources in response to public policy pronouncements.
        The
        Honorable Thomas J. Vilsack, Governor of the state of Iowa, established a
        goal
        of 1000 megawatts (MW) of renewable energy (such as wind power) in the state
        by
        2010. The Honorable Rod Blagojevich, Governor of the state of Illinois, and
        members of the South Dakota Public Utilities Commission have also urged the
        development of more renewable energy in the Midwest.

      


      MidAmerican
        is currently constructing the 310 MW wind generating project. MidAmerican
        anticipates that it will complete approximately 160 MW of the wind generating
        project prior to the end of 2004, with the balance of the project slated
        for
        completion prior to the fourth quarter of 2005.

      


      MidAmerican
        has determined that it would be beneficial to the Company and its customers
        to
        pursue an expansion of the 310 MW wind generating project by up to 90 MW
        (“Expansion Project”) at this time because of the following
        factors:

      


      
        	 	
                (a)

              	
                The
                  310 MW wind generating project is progressing well;

              
	 	 	 
	 	
                (b) 

              	
                One
                  or both of the sites where construction is currently occurring
                  should
                  support the Expansion Project;

              


      

       

      
        	 	
                (c)

              	
                From
                  a transmission/interconnection, landowner and substation perspective
                  the
                  Expansion Project is likely to require only a relatively small
                  incremental
                  investment;

              
	 	 	 
	 	
                (d)

              	
                The
                  federal production tax credit for wind energy projects is scheduled
                  to
                  expire on January 1, 2006; and

              
	 	 	 
	 	
                (e)

              	
                The
                  anticipated incremental revenues generated by the Expansion Project
                  are in
                  excess of incremental expansion costs. The Expansion Project size
                  will be
                  determined by MidAmerican following the completion of wind turbine
                  siting
                  studies and regional transmission reliability
                  analysis.

              


      

      


      The
        Office of Consumer Advocate (“OCA’) supports the Expansion Project and concurs
        with the ratemaking principles specified below.

       

      
        
          
          

        

        
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      Article
        II - Purpose

      


      This
        Stipulation 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 Expansion Project, to be commenced by MidAmerican pursuant
        to
        Section 476.53 of
        the
        Iowa Code. MidAmerican commits to commencing such case as soon as feasible
        after
        executing this Stipulation.

      


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

      


      Terms:

      


      


      
        	
                1.

              	
                The
                  signatories to this Stipulation agree to support the Expansion
                  Project
                  with the following ratemaking
                  principles:

              


      

      


      
        	 	
                a.

              	
                Cost
                  Cap.
                  The Iowa jurisdictional portion of MidAmerican’s prudently incurred
                  capital costs, operation and maintenance expenses and other actual
                  costs
                  of the Expansion Project shall be included in MidAmerican’s regulated
                  electric rates. MidAmerican shall be permitted to include in rates
                  the
                  actual costs of the Expansion Project, up to the Iowa jurisdictional
                  portion of $1.3 million per MW installed (inclusive of associated
                  costs necessary for the reliable integration of the Expansion Project
                  into
                  the MidAmerican delivery system), without the need to establish
                  prudence
                  or reasonableness. MidAmerican anticipates installing up to 90
                  MW of
                  additional wind capacity. MidAmerican shall be required to establish
                  the
                  prudence and reasonableness of any Expansion Project costs in excess
                  of
                  the foregoing calculated per MW amount before the Iowa jurisdictional
                  portion of such excess can be included in
                  rates.

              


      

       

      
        	 	
                b.

              	
                Depreciation.
                  The depreciation life of the Expansion Project for ratemaking purposes
                  shall be 20 years.

              
	 	 	 
	 	
                c.

              	
                Return
                  on Equity.
                  The allowed return on common equity investment (ROE) on the portion
                  of the
                  Expansion Project included in Iowa electric rate base shall be
                  12.2%.

              
	 	
                d.

              	
                Renewable
                  Energy and Carbon Tax Credits.
                  The Iowa jurisdictional portion of any revenues from the sale of
                  renewable
                  energy credits and carbon dioxide credits associated with the Expansion
                  Project shall be recorded above-the-line by MidAmerican 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 RPU-03-1
                  and the revenue sharing calculation for calendar year 2011 as provided
                  in
                  Term 2(a) hereof.

              
	 	 	 
	 	e.	
                Federal
                  Production Tax Credit.
                  The Iowa jurisdictional portion of any federal production tax credits
                  associated with the Expansion Project shall be recorded above-the-line
                  by
                  MidAmerican 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 RPU-03-l and the revenue sharing calculation
                  for
                  calendar year 2011 as provided in Term 2(a) hereof.

              
	 	 	 


      

       

      
        
          
          

        

        
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                f.

              	
                Wholesale
                  Sales Revenue.
                  The Iowa jurisdictional portion of wholesale sales revenue associated
                  with
                  all generating units included in MEC’s Iowa jurisdictional electric rate
                  base (including the wind power facilities of the Expansion Project)
                  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 RPU-03-1 and the revenue sharing
                  calculation for calendar year 2011 as provided in Term 2(a)
                  hereof.

              
	 	 	 


      

       

      
        	
                2.

              	
                The
                  signatories to this Stipulation agree to support the Expansion
                  Project
                  with the following ratemaking
                  provisions:

              


      

       

      
        	 	
                a.

              	
                Revenue
                  Sharing 2011.
                  Revenue sharing as approved by the Board in its October 17, 2003,
                  “Order Approving Stipulation and Agreement,” in Docket No. RPU-03-l for
                  the years 2006-2010 shall continue throughout 2011, except with
                  respect to
                  the method for crediting customers for any revenue sharing benefits.
                  The
                  customers’ share of any revenue sharing for 2011 earnings will be returned
                  to the customers in 2012 through a bill-crediting mechanism approved
                  by
                  the Board in accordance with the methodology set out in the enclosed
                  Attachment.

              
	 	 	 


      

       

      
        	 	
                b.

              	
                Restrictions
                  on General Rate Increases.
                  MidAmerican commits not to seek any general rate increase in Iowa
                  electric
                  base rates to become effective during 2011, unless its Iowa jurisdictional
                  return on equity on electric operations for calendar year 2010
                  falls below
                  10%. This provision shall not be interpreted to prevent the
                  implementation, prior to December 31, 2011, of any electric rate or
                  tariff changes approved by the Board in Docket No. RPU-04-2 and
                  associated
                  dockets.

              
	 	 	 
	 	
                c.

              	
                Restrictions
                  on Show Cause Filings.
                  The OCA commits not to seek any decrease in Iowa electric base
                  rates to
                  become effective before January 1,
                  2012.

              


      

       

      Article
        III - Joint Motion

      


      The
        signatories shall jointly file this Stipulation and Agreement in the ratemaking
        principles proceeding for the Expansion Project to be commenced by MidAmerican
        pursuant to Section 476.53. The signatories shall also file with the Board
        a
        joint motion requesting that the Board accept this Stipulation and Agreement
        without condition or modification.

      


      Article
        IV - Condition Precedent

      


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

      


      Article
        V - Privilege and Limitation

      


      This
        Stipulation and Agreement is made pursuant to Iowa Code §17A.l0 and 199 I.A.C.
§7.2(11). The 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 IV above,
        it
        shall be null, void and privileged. This Stipulation and Agreement is intended
        to relate only to the specific matters referenced herein,
        and no 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, no 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. This
        Stipulation and Agreement shall not, directly or indirectly, be referred
        to as
        precedent in any other current or future proceeding before the
        Board.

       

      
        
          
          

        

        
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      Article
        VI - Execution

      


      To
        facilitate and expedite execution, the 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 to be filed with
        the
        Board. The facsimile signatures of the signatories shall be deemed to constitute
        original signatures, and facsimile copies hereof shall be deemed to constitute
        duplicate originals.

      


      Article
        VII -
        Modification
        and Amendment

      


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

      


      Article
        VIII - Term

      


      


      
        	
                1.

              	
                Unless
                  terminated earlier by operation of paragraph 2 of this Article,
                  this
                  Stipulation and Agreement shall terminate January 1, 2012, except for
                  MEC’s responsibility for revenue sharing for the year 2011 and except
                  for
                  items “a” through “f” of the “Term” section in Article II that shall
                  remain in effect as long as the wind power facilities of the Expansion
                  Project continue to provide regulated electric service to Iowa
                  consumers.

              


      

       

      
        	 	 
	
                2.

              	
                This
                  Stipulation and Agreement and the obligations of the signatories
                  shall
                  terminate if:

              
	 	 


      

      


      
        	 	
                a.

              	
                the
                  Board does not approve the terms of this Stipulation and
                  Agreement;

              	 
	 	 	 	 
	 	
                b.

              	
                MidAmerican
                  is unable to secure access to sufficient transmission for the Expansion
                  Project; or

              	 
	 	 	 	 
	 	
                c.

              	
                On
                  or before March 1, 2005, MidAmerican determines that it is not
                  likely to
                  secure acceptable contracts that will result in the Expansion Project
                  obtaining revenues in excess of costs.

              	 


      

      


      
        	
                3.

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

              


      

      


      Article
        XI -
        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
        the
        scope or effect of this Stipulation and Agreement throughout its
        term.

       

      
        
          
          

        

        
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      Article
        X -
        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.

       

      Article
        XI -
        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/ Todd
                M. Raba	 	 	/s/ John
                R. Perkins 
	Name: 
                Todd M. Raba	 	 	Name: 
                John R. Perkins
	Date:  12/20/04	 	 	Date: 
                12/20/04


      

       

      
 

      
        
          
          

        

        
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