10-K 1 bhe123118form10-k.htm 12.31.18 FORM 10-K Document
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the fiscal year ended December 31, 2018
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from ______ to _______

Commission
 
Exact name of registrant as specified in its charter;
 
IRS Employer
File Number
 
State or other jurisdiction of incorporation or organization
 
Identification No.
001-14881
 
BERKSHIRE HATHAWAY ENERGY COMPANY
 
94-2213782
 
 
(An Iowa Corporation)
 
 
 
 
666 Grand Avenue, Suite 500
 
 
 
 
Des Moines, Iowa 50309-2580
 
 
 
 
515-242-4300
 
 
 
 
 
 
 
001-05152
 
PACIFICORP
 
93-0246090
 
 
(An Oregon Corporation)
 
 
 
 
825 N.E. Multnomah Street
 
 
 
 
Portland, Oregon 97232
 
 
 
 
888-221-7070
 
 
 
 
 
 
 
333-90553
 
MIDAMERICAN FUNDING, LLC
 
47-0819200
 
 
(An Iowa Limited Liability Company)
 
 
 
 
666 Grand Avenue, Suite 500
 
 
 
 
Des Moines, Iowa 50309-2580
 
 
 
 
515-242-4300
 
 
 
 
 
 
 
333-15387
 
MIDAMERICAN ENERGY COMPANY
 
42-1425214
 
 
(An Iowa Corporation)
 
 
 
 
666 Grand Avenue, Suite 500
 
 
 
 
Des Moines, Iowa 50309-2580
 
 
 
 
515-242-4300
 
 
 
 
 
 
 
000-52378
 
NEVADA POWER COMPANY
 
88-0420104
 
 
(A Nevada Corporation)
 
 
 
 
6226 West Sahara Avenue
 
 
 
 
Las Vegas, Nevada 89146
 
 
 
 
702-402-5000
 
 
 
 
 
 
 
000-00508
 
SIERRA PACIFIC POWER COMPANY
 
88-0044418
 
 
(A Nevada Corporation)
 
 
 
 
6100 Neil Road
 
 
 
 
Reno, Nevada 89511
 
 
 
 
775-834-4011
 
 



Registrant
Securities registered pursuant to Section 12(b) of the Act:
BERKSHIRE HATHAWAY ENERGY COMPANY
None
PACIFICORP
None
MIDAMERICAN FUNDING, LLC
None
MIDAMERICAN ENERGY COMPANY
None
NEVADA POWER COMPANY
None
SIERRA PACIFIC POWER COMPANY
None

Registrant
Name of exchange on which registered:
BERKSHIRE HATHAWAY ENERGY COMPANY
None
PACIFICORP
None
MIDAMERICAN FUNDING, LLC
None
MIDAMERICAN ENERGY COMPANY
None
NEVADA POWER COMPANY
None
SIERRA PACIFIC POWER COMPANY
None

Registrant
Securities registered pursuant to Section 12(g) of the Act:
BERKSHIRE HATHAWAY ENERGY COMPANY
None
PACIFICORP
None
MIDAMERICAN FUNDING, LLC
None
MIDAMERICAN ENERGY COMPANY
None
NEVADA POWER COMPANY
Common Stock, $1.00 stated value
SIERRA PACIFIC POWER COMPANY
Common Stock, $3.75 par value

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Registrant
Yes
No
BERKSHIRE HATHAWAY ENERGY COMPANY
 
X
PACIFICORP
 
X
MIDAMERICAN FUNDING, LLC
 
X
MIDAMERICAN ENERGY COMPANY
X
 
NEVADA POWER COMPANY
 
X
SIERRA PACIFIC POWER COMPANY
 
X

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Registrant
Yes
No
BERKSHIRE HATHAWAY ENERGY COMPANY
 
X
PACIFICORP
 
X
MIDAMERICAN FUNDING, LLC
X
 
MIDAMERICAN ENERGY COMPANY
 
X
NEVADA POWER COMPANY
 
X
SIERRA PACIFIC POWER COMPANY
 
X




Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Registrant
Yes
No
BERKSHIRE HATHAWAY ENERGY COMPANY
X
 
PACIFICORP
X
 
MIDAMERICAN FUNDING, LLC
 
X
MIDAMERICAN ENERGY COMPANY
X
 
NEVADA POWER COMPANY
X
 
SIERRA PACIFIC POWER COMPANY
X
 

Indicate by check mark whether the registrants have submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrants were required to submit such files).Yes x No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of the registrants' knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Registrant
Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
Emerging growth company
BERKSHIRE HATHAWAY ENERGY COMPANY
 
 
X
 
 
PACIFICORP
 
 
X
 
 
MIDAMERICAN FUNDING, LLC
 
 
X
 
 
MIDAMERICAN ENERGY COMPANY
 
 
X
 
 
NEVADA POWER COMPANY
 
 
X
 
 
SIERRA PACIFIC POWER COMPANY
 
 
X
 
 

If an emerging growth company, indicate by check mark if the registrants have elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  o
Indicate by check mark whether the registrants are a shell company (as defined in Rule 12b-2 of the Exchange Act).Yes o No x

All shares of outstanding common stock of Berkshire Hathaway Energy Company are privately held by a limited group of investors. As of February 21, 2019, 76,549,232 shares of common stock, no par value, were outstanding.

All shares of outstanding common stock of PacifiCorp are indirectly owned by Berkshire Hathaway Energy Company. As of February 21, 2019, 357,060,915 shares of common stock, no par value, were outstanding.

All of the member's equity of MidAmerican Funding, LLC is held by its parent company, Berkshire Hathaway Energy Company, as of February 21, 2019.

All shares of outstanding common stock of MidAmerican Energy Company are owned by its parent company, MHC Inc., which is a direct, wholly owned subsidiary of MidAmerican Funding, LLC. As of February 21, 2019, 70,980,203 shares of common stock, no par value, were outstanding.

All shares of outstanding common stock of Nevada Power Company are owned by its parent company, NV Energy, Inc., which is an indirect, wholly owned subsidiary of Berkshire Hathaway Energy Company. As of February 21, 2019, 1,000 shares of common stock, $1.00 stated value, were outstanding.




All shares of outstanding common stock of Sierra Pacific Power Company are owned by its parent company, NV Energy, Inc. As of February 21, 2019, 1,000 shares of common stock, $3.75 par value, were outstanding.

Berkshire Hathaway Energy Company, MidAmerican Funding, LLC, MidAmerican Energy Company, Nevada Power Company and Sierra Pacific Power Company meet the conditions set forth in General Instruction I(1)(a) and (b) of Form 10-K and are therefore filing portions of this Form 10-K with the reduced disclosure format specified in General Instruction I(2) of Form 10‑K.

This combined Form 10-K is separately filed by Berkshire Hathaway Energy Company, PacifiCorp, MidAmerican Funding, LLC, MidAmerican Energy Company, Nevada Power Company and Sierra Pacific Power Company. Information contained herein relating to any individual company is filed by such company on its own behalf. Each company makes no representation as to information relating to the other companies.




TABLE OF CONTENTS
 
PART I
 
 
 
Mine Safety Disclosures
 
 
 
PART II
 
 
 
 
 
 
PART III
 
 
 
 
 
 
PART IV
 
 
 
 


i


Definition of Abbreviations and Industry Terms

When used in Forward-Looking Statements, Part I - Items 1 through 4, Part II - Items 5 through 7A, and Part III - Items 10 through 14, the following terms have the definitions indicated.
Entity Definitions
BHE
 
Berkshire Hathaway Energy Company
Berkshire Hathaway
 
Berkshire Hathaway Inc.
Berkshire Hathaway Energy or the Company
 
Berkshire Hathaway Energy Company and its subsidiaries
PacifiCorp
 
PacifiCorp and its subsidiaries
MidAmerican Funding
 
MidAmerican Funding, LLC and its subsidiaries
MidAmerican Energy
 
MidAmerican Energy Company
NV Energy
 
NV Energy, Inc. and its subsidiaries
Nevada Power
 
Nevada Power Company and its subsidiaries
Sierra Pacific
 
Sierra Pacific Power Company
Nevada Utilities
 
Nevada Power Company and Sierra Pacific Power Company
Registrants
 
Berkshire Hathaway Energy, PacifiCorp, MidAmerican Energy, MidAmerican Funding, Nevada Power and Sierra Pacific
Subsidiary Registrants
 
PacifiCorp, MidAmerican Energy, MidAmerican Funding, Nevada Power and Sierra Pacific
Northern Powergrid
 
Northern Powergrid Holdings Company
Northern Natural Gas
 
Northern Natural Gas Company
Kern River
 
Kern River Gas Transmission Company
AltaLink
 
BHE Canada Holdings Corporation
ALP
 
AltaLink, L.P.
BHE U.S. Transmission
 
BHE U.S. Transmission, LLC
BHE Renewables, LLC
 
BHE Renewables, LLC
HomeServices
 
HomeServices of America, Inc. and its subsidiaries
BHE Pipeline Group or Pipeline Companies
 
Consists of Northern Natural Gas and Kern River
BHE Transmission
 
Consists of AltaLink and BHE U.S. Transmission
BHE Renewables
 
Consists of BHE Renewables, LLC and CalEnergy Philippines
ETT
 
Electric Transmission Texas, LLC
Domestic Regulated Businesses
 
PacifiCorp, MidAmerican Energy Company, Nevada Power Company, Sierra Pacific Power Company, Northern Natural Gas Company and Kern River Gas Transmission Company
Regulated Businesses
 
PacifiCorp, MidAmerican Energy Company, Nevada Power Company, Sierra Pacific Power Company, Northern Natural Gas Company, Kern River Gas Transmission Company and AltaLink, L.P.
Utilities
 
PacifiCorp, MidAmerican Energy Company, Nevada Power Company and Sierra Pacific Power Company
Northern Powergrid Distribution Companies
 
Northern Powergrid (Northeast) Limited and Northern Powergrid (Yorkshire) plc
Topaz
 
Topaz Solar Farms LLC
Topaz Project
 
550-megawatt solar project in California
Agua Caliente
 
Agua Caliente Solar, LLC
Agua Caliente Project
 
290-megawatt solar project in Arizona
Bishop Hill II
 
Bishop Hill Energy II LLC
Bishop Hill Project
 
81-megawatt wind-powered generating facility in Illinois
Pinyon Pines I
 
Pinyon Pines Wind I, LLC

ii


Pinyon Pines II
 
Pinyon Pines Wind II, LLC
Pinyon Pines Projects
 
168-megawatt and 132-megawatt wind-powered generating facilities in California
Jumbo Road
 
Jumbo Road Holdings, LLC
Jumbo Road Project
 
300-megawatt wind-powered generating facility in Texas
Solar Star Funding
 
Solar Star Funding, LLC
Solar Star Projects
 
A combined 586-megawatt solar project in California
Solar Star I
 
Solar Star California XIX, LLC
Solar Star II
 
Solar Star California XX, LLC
 
 
 
Certain Industry Terms
 
 
2017 Tax Reform
 
The Tax Cuts and Jobs Act enacted on December 22, 2017, effective January 1, 2018
AESO
 
Alberta Electric System Operator
AFUDC
 
Allowance for Funds Used During Construction
AUC
 
Alberta Utilities Commission
Bcf
 
Billion cubic feet
BTER
 
Base Tariff Energy Rates
California ISO
 
California Independent System Operator Corporation
CPUC
 
California Public Utilities Commission
DEAA
 
Deferred Energy Accounting Adjustment
Dodd-Frank Reform Act
 
Dodd-Frank Wall Street Reform and Consumer Protection Act
Dth
 
Decatherms
DSM
 
Demand-side Management
EBA
 
Energy Balancing Account
ECAC
 
Energy Cost Adjustment Clause
ECAM
 
Energy Cost Adjustment Mechanism
EEIR
 
Energy Efficiency Implementation Rate
EEPR
 
Energy Efficiency Program Rate
EIM
 
Energy Imbalance Market
EPA
 
United States Environmental Protection Agency
ERCOT
 
Electric Reliability Council of Texas
FERC
 
Federal Energy Regulatory Commission
GAAP
 
Accounting principles generally accepted in the United States of America
GEMA
 
Gas and Electricity Markets Authority
GHG
 
Greenhouse Gases
GWh
 
Gigawatt Hour
ICC
 
Illinois Commerce Commission
IPUC
 
Idaho Public Utilities Commission
IRP
 
Integrated Resource Plan
IUB
 
Iowa Utilities Board
kV
 
Kilovolt
LNG
 
Liquefied Natural Gas
LDC
 
Local Distribution Company
MATS
 
Mercury and Air Toxics Standards
MISO
 
Midcontinent Independent System Operator, Inc.
MW
 
Megawatt
MWh
 
Megawatt Hour
NERC
 
North American Electric Reliability Corporation

iii


NRC
 
Nuclear Regulatory Commission
OATT
 
Open Access Transmission Tariff
OCA
 
Iowa Office of Consumer Advocate
Ofgem
 
Office of Gas and Electric Markets
OPUC
 
Oregon Public Utility Commission
PCAM
 
Power Cost Adjustment Mechanism
PTAM
 
Post Test-year Adjustment Mechanism
PUCN
 
Public Utilities Commission of Nevada
RCRA
 
Resource Conservation and Recovery Act
REC
 
Renewable Energy Credit
RPS
 
Renewable Portfolio Standards
RRA
 
Renewable Energy Credit and Sulfur Dioxide Revenue Adjustment Mechanism
RTO
 
Regional Transmission Organization
SEC
 
United States Securities and Exchange Commission
SIP
 
State Implementation Plan
TAM
 
Transition Adjustment Mechanism
UPSC
 
Utah Public Service Commission
WECC
 
Western Electricity Coordinating Council
WPSC
 
Wyoming Public Service Commission
WUTC
 
Washington Utilities and Transportation Commission


iv


Forward-Looking Statements

This report contains statements that do not directly or exclusively relate to historical facts. These statements are "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements can typically be identified by the use of forward-looking words, such as "will," "may," "could," "project," "believe," "anticipate," "expect," "estimate," "continue," "intend," "potential," "plan," "forecast" and similar terms. These statements are based upon the relevant Registrant's current intentions, assumptions, expectations and beliefs and are subject to risks, uncertainties and other important factors. Many of these factors are outside the control of each Registrant and could cause actual results to differ materially from those expressed or implied by such forward-looking statements. These factors include, among others:
general economic, political and business conditions, as well as changes in, and compliance with, laws and regulations, including income tax reform, initiatives regarding deregulation and restructuring of the utility industry, and reliability and safety standards, affecting the respective Registrant's operations or related industries;
changes in, and compliance with, environmental laws, regulations, decisions and policies that could, among other items, increase operating and capital costs, reduce facility output, accelerate facility retirements or delay facility construction or acquisition;
the outcome of regulatory rate reviews and other proceedings conducted by regulatory agencies or other governmental and legal bodies and the respective Registrant's ability to recover costs through rates in a timely manner;
changes in economic, industry, competition or weather conditions, as well as demographic trends, new technologies and various conservation, energy efficiency and private generation measures and programs, that could affect customer growth and usage, electricity and natural gas supply or the respective Registrant's ability to obtain long-term contracts with customers and suppliers;
performance, availability and ongoing operation of the respective Registrant's facilities, including facilities not operated by the Registrants, due to the impacts of market conditions, outages and repairs, transmission constraints, weather, including wind, solar and hydroelectric conditions, and operating conditions;
the effects of catastrophic and other unforeseen events, which may be caused by factors beyond the control of each respective Registrant or by a breakdown or failure of the Registrants' operating assets, including severe storms, floods, fires, earthquakes, explosions, landslides, an electromagnetic pulse, mining incidents, litigation, wars, terrorism, embargoes, and cyber security attacks, data security breaches, disruptions, or other malicious acts;
a high degree of variance between actual and forecasted load or generation that could impact a Registrant's hedging strategy and the cost of balancing its generation resources with its retail load obligations;
changes in prices, availability and demand for wholesale electricity, coal, natural gas, other fuel sources and fuel transportation that could have a significant impact on generating capacity and energy costs;
the financial condition and creditworthiness of the respective Registrant's significant customers and suppliers;
changes in business strategy or development plans;
availability, terms and deployment of capital, including reductions in demand for investment-grade commercial paper, debt securities and other sources of debt financing and volatility in interest rates;
changes in the respective Registrant's credit ratings;
risks relating to nuclear generation, including unique operational, closure and decommissioning risks;
hydroelectric conditions and the cost, feasibility and eventual outcome of hydroelectric relicensing proceedings;
the impact of certain contracts used to mitigate or manage volume, price and interest rate risk, including increased collateral requirements, and changes in commodity prices, interest rates and other conditions that affect the fair value of certain contracts;
the impact of inflation on costs and the ability of the respective Registrants to recover such costs in regulated rates;
fluctuations in foreign currency exchange rates, primarily the British pound and the Canadian dollar;
increases in employee healthcare costs;
the impact of investment performance and changes in interest rates, legislation, healthcare cost trends, mortality and morbidity on pension and other postretirement benefits expense and funding requirements;

v


changes in the residential real estate brokerage, mortgage and franchising industries and regulations that could affect brokerage, mortgage and franchising transactions;
the ability to successfully integrate future acquired operations into a Registrant's business;
unanticipated construction delays, changes in costs, receipt of required permits and authorizations, ability to fund capital projects and other factors that could affect future facilities and infrastructure additions;
the availability and price of natural gas in applicable geographic regions and demand for natural gas supply;
the impact of new accounting guidance or changes in current accounting estimates and assumptions on the financial results of the respective Registrants; and
other business or investment considerations that may be disclosed from time to time in the Registrants' filings with the SEC or in other publicly disseminated written documents.

Further details of the potential risks and uncertainties affecting the Registrants are described in the Registrants' filings with the SEC, including Item 1A and other discussions contained in this Form 10-K. Each Registrant undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. The foregoing factors should not be construed as exclusive.


vi


PART I

Item 1.    Business

GENERAL

BHE is a holding company that owns a highly diversified portfolio of locally managed businesses principally engaged in the energy industry and is a consolidated subsidiary of Berkshire Hathaway. As of February 21, 2019, Berkshire Hathaway, Mr. Walter Scott, Jr., a member of BHE's Board of Directors (along with his family members and related or affiliated entities) and Mr. Gregory E. Abel, BHE's Executive Chairman, beneficially owned 90.9%, 8.1% and 1.0%, respectively, of BHE's voting common stock.

Berkshire Hathaway Energy's operations are organized as eight business segments: PacifiCorp, MidAmerican Funding (which primarily consists of MidAmerican Energy), NV Energy (which primarily consists of Nevada Power and Sierra Pacific), Northern Powergrid (which primarily consists of Northern Powergrid (Northeast) Limited and Northern Powergrid (Yorkshire) plc), BHE Pipeline Group (which consists of Northern Natural Gas and Kern River), BHE Transmission (which consists of AltaLink and BHE U.S. Transmission), BHE Renewables and HomeServices. BHE, through these locally managed and operated businesses, owns four utility companies in the United States serving customers in 11 states, two electricity distribution companies in Great Britain, two interstate natural gas pipeline companies in the United States, an electric transmission business in Canada, interests in electric transmission businesses in the United States, a renewable energy business primarily investing in wind, solar, geothermal and hydroelectric projects, the second largest residential real estate brokerage firm in the United States and one of the largest residential real estate brokerage franchise networks in the United States.

BHE owns a highly diversified portfolio of primarily regulated businesses that generate, transmit, store, distribute and supply energy and serve customers and end-users across geographically diverse service territories, including 18 states in the Western and Midwestern United States and in Great Britain and Canada.
87% of Berkshire Hathaway Energy's consolidated operating income during 2018 was generated from rate-regulated businesses.
The Utilities serve 4.9 million electric and natural gas customers in 11 states in the United States, Northern Powergrid serves 3.9 million end-users in northern England and ALP serves approximately 85% of Alberta, Canada's population.
As of December 31, 2018, the Company owns approximately 33,700 MWs of generation capacity in operation and under construction:
Approximately 29,000 MWs of generation capacity is owned by its regulated electric utility businesses;
Approximately 4,700 MWs of generation capacity is owned by its nonregulated subsidiaries, the majority of which provides power to utilities under long-term contracts;
Owned generation capacity in operation and under construction consists of 35% wind and solar, 32% natural gas, 27% coal, 5% hydroelectric and geothermal and 1% nuclear and other; and,
Cumulative investments in wind, solar, geothermal and biomass generation facilities is approximately $25 billion.
The Company owns approximately 33,000 miles of transmission lines and owns a 50% interest in ETT that has approximately 1,200 miles of transmission lines.
The BHE Pipeline Group owns approximately 16,400 miles of pipeline with a market area design capacity of approximately 8.2 Bcf of natural gas per day, serves customers and end-users in 14 states and transported approximately 8% of the total natural gas consumed in the United States during 2018.
HomeServices closed over $129.9 billion of home sales in 2018, up 20.5% from 2017, and continued to grow its brokerage, mortgage and franchise businesses, with services in 49 states. HomeServices' franchise business has approximately 370 franchisees throughout the United States and Europe.

As of December 31, 2018, the Company has approximately 23,000 employees, of which approximately 8,300 are covered by union contracts. The majority of the union employees are employed by the Utilities and are represented by the International Brotherhood of Electrical Workers, the Utility Workers Union of America, the United Utility Workers Association and the International Brotherhood of Boilermakers. These collective bargaining agreements have expiration dates ranging through August 2024. HomeServices currently has over 42,500 real estate agents who are independent contractors and not employees.


1


BHE's principal executive offices are located at 666 Grand Avenue, Suite 500, Des Moines, Iowa 50309-2580, its telephone number is (515) 242-4300 and its internet address is www.berkshirehathawayenergyco.com. BHE was initially incorporated in 1971 as California Energy Company, Inc. under the laws of the state of Delaware and through a merger transaction in 1999 was reincorporated in Iowa under the name MidAmerican Energy Holdings Company. In 2014, its name was changed to Berkshire Hathaway Energy Company.

PACIFICORP

General

PacifiCorp, an indirect wholly owned subsidiary of BHE, is a United States regulated electric utility company headquartered in Oregon that serves 1.9 million retail electric customers in portions of Utah, Oregon, Wyoming, Washington, Idaho and California. PacifiCorp is principally engaged in the business of generating, transmitting, distributing and selling electricity. PacifiCorp's combined service territory covers approximately 141,400 square miles and includes diverse regional economies across six states. No single segment of the economy dominates the service territory, which helps mitigate PacifiCorp's exposure to economic fluctuations. In the eastern portion of the service territory, consisting of Utah, Wyoming and southeastern Idaho, the principal industries are manufacturing, mining or extraction of natural resources, agriculture, technology, recreation and government. In the western portion of the service territory, consisting of Oregon, southern Washington and northern California, the principal industries are agriculture, manufacturing, forest products, food processing, technology, government and primary metals. In addition to retail sales, PacifiCorp buys and sells electricity on the wholesale market with other utilities, energy marketing companies, financial institutions and other market participants to balance and optimize the economic benefits of electricity generation, retail customer loads and existing wholesale transactions. Certain PacifiCorp subsidiaries support its electric utility operations by providing coal mining services.

PacifiCorp's operations are conducted under numerous franchise agreements, certificates, permits and licenses obtained from federal, state and local authorities. The average term of the franchise agreements is approximately 24 years, although their terms range from five years to indefinite. Several of these franchise agreements allow the municipality the right to seek amendment to the franchise agreement at a specified time during the term. PacifiCorp generally has an exclusive right to serve electric customers within its service territories and, in turn, has an obligation to provide electric service to those customers. In return, the state utility commissions have established rates on a cost-of-service basis, which are designed to allow PacifiCorp an opportunity to recover its costs of providing services and to earn a reasonable return on its investments.

PacifiCorp's principal executive offices are located at 825 N.E. Multnomah Street, Portland, Oregon 97232, its telephone number is (888) 221-7070 and its internet address is www.pacificorp.com. PacifiCorp was initially incorporated in 1910 under the laws of the state of Maine under the name Pacific Power & Light Company. In 1984, Pacific Power & Light Company changed its name to PacifiCorp. In 1989, it merged with Utah Power and Light Company, a Utah corporation, in a transaction wherein both corporations merged into a newly formed Oregon corporation. The resulting Oregon corporation was re-named PacifiCorp, which is the operating entity today. PacifiCorp delivers electricity to customers in Utah, Wyoming and Idaho under the trade name Rocky Mountain Power and to customers in Oregon, Washington and California under the trade name Pacific Power.

BHE controls substantially all of PacifiCorp's voting securities, which include both common and preferred stock.


2


Regulated Electric Operations

Customers

The GWhs and percentages of electricity sold to PacifiCorp's retail customers by jurisdiction for the years ended December 31 were as follows:
 
2018
 
2017
 
2016
 
 
 
 
 
 
 
 
 
 
 
 
Utah
24,514

 
45
%
 
24,134

 
44
%
 
24,020

 
44
%
Oregon
12,867

 
23

 
13,200

 
24

 
12,869

 
24

Wyoming
9,393

 
17

 
9,330

 
17

 
9,189

 
17

Washington
3,949

 
7

 
4,221

 
8

 
3,982

 
7

Idaho
3,643

 
7

 
3,603

 
6

 
3,510

 
7

California
749

 
1

 
762

 
1

 
748

 
1

 
55,115

 
100
%
 
55,250

 
100
%
 
54,318

 
100
%

Electricity sold to PacifiCorp's retail and wholesale customers by class of customer and the average number of retail customers for the years ended December 31 were as follows:
 
2018
 
2017
 
2016
GWhs sold:
 
 
 
 
 
 
 
 
 
 
 
Residential
16,227

 
26
%
 
16,625

 
27
%
 
16,058

 
26
%
Commercial
18,078

 
28

 
17,726

 
28

 
16,857

 
28

Industrial, irrigation, and other
20,810

 
33

 
20,899

 
33

 
21,403

 
35

Total retail
55,115

 
87

 
55,250

 
88

 
54,318

 
89

Wholesale
8,309

 
13

 
7,218

 
12

 
6,641

 
11

Total GWhs sold
63,424

 
100
%
 
62,468

 
100
%
 
60,959

 
100
%
 
 
 
 
 
 
 
 
 
 
 
 
Average number of retail customers (in thousands):
 
 
 
 
 
 
 
 
 
 
 
Residential
1,651

 
87
%
 
1,622

 
87
%
 
1,599

 
87
%
Commercial
212

 
11

 
208

 
11

 
205

 
11

Industrial, irrigation, and other
37

 
2

 
37

 
2

 
37

 
2

Total
1,900

 
100
%
 
1,867

 
100
%
 
1,841

 
100
%


Variations in weather, economic conditions and various conservation, energy efficiency and private generation measures and programs can impact customer usage. Wholesale sales are impacted by market prices for energy relative to the incremental cost to generate power.

The annual hourly peak customer demand, which represents the highest demand on a given day and at a given hour, occurs in the summer when air conditioning and irrigation systems are heavily used. The winter also experiences a peak demand due to heating requirements. During 2018, PacifiCorp's peak demand was 10,551 MWs in the summer and 8,436 MWs in the winter.


3


Generating Facilities and Fuel Supply

PacifiCorp has ownership interest in a diverse portfolio of generating facilities. The following table presents certain information regarding PacifiCorp's owned generating facilities as of December 31, 2018:
 
 
 
 
 
 
 
 
Facility
 
Net Owned
 
 
 
 
 
 
 
 
Net Capacity
 
Capacity
Generating Facility
 
Location
 
Energy Source
 
Installed
 
(MWs)(1)
 
(MWs)(1)
COAL:
 
 
 
 
 
 
 
 
 
 
Jim Bridger Nos. 1, 2, 3 and 4
 
Rock Springs, WY
 
Coal
 
1974-1979
 
2,123

 
1,415

Hunter Nos. 1, 2 and 3
 
Castle Dale, UT
 
Coal
 
1978-1983
 
1,363

 
1,158

Huntington Nos. 1 and 2
 
Huntington, UT
 
Coal
 
1974-1977
 
909

 
909

Dave Johnston Nos. 1, 2, 3 and 4
 
Glenrock, WY
 
Coal
 
1959-1972
 
751

 
751

Naughton Nos. 1, 2 and 3(2)
 
Kemmerer, WY
 
Coal
 
1963-1971
 
637

 
637

Cholla No. 4
 
Joseph City, AZ
 
Coal
 
1981
 
395

 
395

Wyodak No. 1
 
Gillette, WY
 
Coal
 
1978
 
332

 
266

Craig Nos. 1 and 2
 
Craig, CO
 
Coal
 
1979-1980
 
837

 
161

Colstrip Nos. 3 and 4
 
Colstrip, MT
 
Coal
 
1984-1986
 
1,480

 
148

Hayden Nos. 1 and 2
 
Hayden, CO
 
Coal
 
1965-1976
 
441

 
77

 
 
 
 
 
 
 
 
9,268

 
5,917

NATURAL GAS:
 
 
 
 
 
 
 
 
 
 
Lake Side 2
 
Vineyard, UT
 
Natural gas/steam
 
2014
 
631

 
631

Lake Side
 
Vineyard, UT
 
Natural gas/steam
 
2007
 
546

 
546

Currant Creek
 
Mona, UT
 
Natural gas/steam
 
2005-2006
 
524

 
524

Chehalis
 
Chehalis, WA
 
Natural gas/steam
 
2003
 
477

 
477

Hermiston
 
Hermiston, OR
 
Natural gas/steam
 
1996
 
461

 
231

Gadsby Steam
 
Salt Lake City, UT
 
Natural gas
 
1951-1955
 
238

 
238

Gadsby Peakers
 
Salt Lake City, UT
 
Natural gas
 
2002
 
119

 
119

 
 
 
 
 
 
 
 
2,996

 
2,766

HYDROELECTRIC:(3)
 
 
 
 
 
 
 
 
 
 
Lewis River System
 
WA
 
Hydroelectric
 
1931-1958
 
578

 
578

North Umpqua River System
 
OR
 
Hydroelectric
 
1950-1956
 
204

 
204

Klamath River System
 
CA, OR
 
Hydroelectric
 
1903-1962
 
170

 
170

Bear River System
 
ID, UT
 
Hydroelectric
 
1908-1984
 
105

 
105

Rogue River System
 
OR
 
Hydroelectric
 
1912-1957
 
52

 
52

Minor hydroelectric facilities
 
Various
 
Hydroelectric
 
1895-1986
 
26

 
26

 
 
 
 
 
 
 
 
1,135

 
1,135

WIND:(3)
 
 
 
 
 
 
 
 
 
 
Foote Creek
 
Arlington, WY
 
Wind
 
1999
 
41

 
32

Leaning Juniper
 
Arlington, OR
 
Wind
 
2006
 
100

 
100

Marengo
 
Dayton, WA
 
Wind
 
2007-2008
 
210

 
210

Seven Mile Hill
 
Medicine Bow, WY
 
Wind
 
2008
 
119

 
119

Goodnoe Hills
 
Goldendale, WA
 
Wind
 
2008
 
94

 
94

Glenrock
 
Glenrock, WY
 
Wind
 
2008-2009
 
138

 
138

High Plains
 
McFadden, WY
 
Wind
 
2009
 
99

 
99

Rolling Hills
 
Glenrock, WY
 
Wind
 
2009
 
99

 
99

McFadden Ridge
 
McFadden, WY
 
Wind
 
2009
 
28

 
28

Dunlap Ranch
 
Medicine Bow, WY
 
Wind
 
2010
 
111

 
111

 
 
 
 
 
 
 
 
1,039

 
1,030

OTHER:(3)
 
 
 
 
 
 
 
 
 
 
Blundell
 
Milford, UT
 
Geothermal
 
1984, 2007
 
32

 
32

 
 
 
 
 
 
 
 
32

 
32

Total Available Generating Capacity
 
 
 
 
 
14,470

 
10,880

 
 
 
 
 
 
 
 
 
 
 
PROJECTS UNDER CONSTRUCTION
 
 
 
 
 
 
 
 
 
 
Various wind projects
 
 
 
 
 
 
 
950

 
950

 
 
 
 
 
 
 
 
15,420

 
11,830



4


(1)
Facility Net Capacity represents the lesser of nominal ratings or any limitations under applicable interconnection, power purchase, or other agreements for intermittent resources and the total net dependable capability available during summer conditions for all other units. An intermittent resource's nominal rating is the manufacturer's contractually specified capability (in MWs) under specified conditions. Net Owned Capacity indicates PacifiCorp's ownership of Facility Net Capacity.
(2)
As required by previous state permits, PacifiCorp planned to remove Naughton Unit No. 3 (280 MWs) from coal-fueled service by year-end 2017. In March 2017, the state of Wyoming issued an extension to operate the unit as a coal-fueled unit through January 30, 2019 and then either close or be converted to a natural gas-fueled unit. PacifiCorp removed the unit from coal-fueled service on January 30, 2019, and is evaluating the economic benefits of converting it to a natural gas-fueled generation resource. Refer to "Environmental Laws and Regulations" in Item 1 of this Form 10-K for further discussion.
(3)
All or some of the renewable energy attributes associated with generation from these generating facilities may be: (a) used in future years to comply with RPS or other regulatory requirements or (b) sold to third parties in the form of RECs or other environmental commodities.

The following table shows the percentages of PacifiCorp's total energy supplied by energy source for the years ended December 31:
 
2018
 
2017
 
2016
 
 
 
 
 
 
Coal
54
%
 
56
%
 
56
%
Natural gas
16

 
11

 
15

Hydroelectric(1)
5

 
7

 
6

Wind and other(1)
5

 
5

 
5

Total energy generated
80

 
79

 
82

Energy purchased - short-term contracts and other
10

 
11

 
10

Energy purchased - long-term contracts (renewable)(1)
10

 
10

 
8

Energy purchased - long-term contracts (non-renewable)

 

 

 
100
%
 
100
%
 
100
%

(1)
All or some of the renewable energy attributes associated with generation from these generating facilities and purchases may be: (a) used in future years to comply with RPS or other regulatory requirements, (b) sold to third parties in the form of RECs or other environmental commodities, or (c) excluded from energy purchased.

PacifiCorp is required to have resources available to continuously meet its customer needs and reliably operate its electric system. The percentage of PacifiCorp's energy supplied by energy source varies from year to year and is subject to numerous operational and economic factors such as planned and unplanned outages, fuel commodity prices, fuel transportation costs, weather, environmental considerations, transmission constraints and wholesale market prices of electricity. PacifiCorp evaluates these factors continuously in order to facilitate economical dispatch of its generating facilities. When factors for one energy source are less favorable, PacifiCorp places more reliance on other energy sources. For example, PacifiCorp can generate more electricity using its low cost hydroelectric and wind-powered generating facilities when factors associated with these facilities are favorable. In addition to meeting its customers' energy needs, PacifiCorp is required to maintain operating reserves on its system to mitigate the impacts of unplanned outages or other disruption in supply, and to meet intra-hour changes in load and resource balance. This operating reserve requirement is dispersed across PacifiCorp's generation portfolio on a least-cost basis based on the operating characteristics of the portfolio. Operating reserves may be held on hydroelectric, coal-fueled, natural gas-fueled or certain types of interruptible load. PacifiCorp manages certain risks relating to its supply of electricity and fuel requirements by entering into various contracts, which may be accounted for as derivatives and may include forwards, options, swaps and other agreements. Refer to "General Regulation" in Item 1 of this Form 10-K for a discussion of energy cost recovery by jurisdiction and to PacifiCorp's Item 7A in this Form 10-K for a discussion of commodity price risk and derivative contracts.

Coal

PacifiCorp has interests in coal mines that support its coal-fueled generating facilities and operates the Bridger surface and Bridger underground coal mines. These mines supplied 17%, 16% and 15% of PacifiCorp's total coal requirements during the years ended December 31, 2018, 2017 and 2016, respectively. The remaining coal requirements are acquired through long and short-term third-party contracts.

Most of PacifiCorp's coal reserves are held through agreements with the federal Bureau of Land Management and from certain states and private parties. The agreements generally have multi-year terms that may be renewed or extended, and require payment of rents and royalties. In addition, federal and state regulations require that comprehensive environmental protection and reclamation standards be met during the course of mining operations and upon completion of mining activities.


5


Coal reserve estimates are subject to adjustment as a result of the development of additional engineering and geological data, new mining technology and changes in regulation and economic factors affecting the utilization of such reserves. PacifiCorp's recoverable coal reserves of operating mines as of December 31, 2018, based on recent engineering studies, were as follows (in millions):
Coal Mine
 
Location
 
Generating Facility Served
 
Mining Method
 
Recoverable Tons
 
 
 
 
 
 
 
 
 
Bridger
 
Rock Springs, WY
 
Jim Bridger
 
Surface
 
16

(1
)
Bridger
 
Rock Springs, WY
 
Jim Bridger
 
Underground
 
5

(1
)
Trapper
 
Craig, CO
 
Craig
 
Surface
 
4

(2
)
 
 
 
 
 
 
 
 
25

 

(1)
These coal reserves are leased and mined by Bridger Coal Company, a joint venture between Pacific Minerals, Inc. and a subsidiary of Idaho Power Company. Pacific Minerals, Inc., a wholly owned subsidiary of PacifiCorp, has a two-thirds interest in the joint venture. The amounts included above represent only PacifiCorp's two-thirds interest in the coal reserves.
(2)
These coal reserves are leased and mined by Trapper Mining Inc., a cooperative in which PacifiCorp has an ownership interest of 21%. The amount included above represents only PacifiCorp's 21% interest in the coal reserves. PacifiCorp does not operate the Trapper mine.

Recoverability by surface mining methods typically ranges from 90% to 95%. Recoverability by underground mining techniques ranges from 50% to 70%. To meet applicable standards, PacifiCorp blends coal mined at its owned mines with contracted coal and utilizes emissions reduction technologies for controlling sulfur dioxide and other emissions. For fuel needs at PacifiCorp's coal-fueled generating facilities in excess of coal reserves available, PacifiCorp believes it will be able to purchase coal under both long and short-term contracts to supply its generating facilities over their currently expected remaining useful lives.

Natural Gas

PacifiCorp uses natural gas as fuel for its combined and simple-cycle natural gas-fueled generating facilities and for the Gadsby Steam generating facility. Oil and natural gas are also used for igniter fuel and standby purposes. These sources are presently in adequate supply and available to meet PacifiCorp's needs.

PacifiCorp enters into forward natural gas purchases at fixed or indexed market prices. PacifiCorp purchases natural gas in the spot market with both fixed and indexed market prices for physical delivery to fulfill any fuel requirements not already satisfied through forward purchases of natural gas and sells natural gas in the spot market for the disposition of any excess supply if the forecasted requirements of its natural gas-fueled generating facilities decrease. PacifiCorp also utilizes financial swap contracts to mitigate price risk associated with its forecasted fuel requirements.

Hydroelectric

The amount of electricity PacifiCorp is able to generate from its hydroelectric facilities depends on a number of factors, including snowpack in the mountains upstream of its hydroelectric facilities, reservoir storage, precipitation in its watersheds, generating unit availability and restrictions imposed by oversight bodies due to competing water management objectives.

PacifiCorp operates the majority of its hydroelectric generating portfolio under long-term licenses. The FERC regulates 99% of the net capacity of this portfolio through 15 individual licenses, which have terms of 30 to 50 years. The licenses for major hydroelectric generating facilities expire at various dates through 2058. A portion of this portfolio is licensed under the Oregon Hydroelectric Act. For discussion of PacifiCorp's hydroelectric relicensing activities, including updated information regarding the Klamath River hydroelectric system, refer to Note 15 of the Notes to Consolidated Financial Statements of Berkshire Hathaway Energy in Item 8 of this Form 10-K and Note 13 of the Notes to Consolidated Financial Statements of PacifiCorp in Item 8 of this Form 10-K.


6


Wind and Other Renewable Resources

PacifiCorp has pursued renewable resources as a viable, economical and environmentally prudent means of supplying electricity and complying with laws and regulations. Renewable resources have low to no emissions and require little or no fossil fuel. PacifiCorp's wind-powered generating facilities, including those facilities where a significant portion of the equipment is expected to be replaced, are eligible for federal renewable electricity production tax credits for 10 years from the date the facilities are placed in-service. Production tax credits for PacifiCorp's currently eligible wind-powered generating facilities began expiring in 2016, with final expiration in 2020. PacifiCorp is in the process of repowering all of its wind-powered generating facilities in 2019 and 2020 to requalify the facilities for federal renewable electricity production tax credits for 10 years. The repowering project will extend the lives of the existing wind facilities by 10 years or more while increasing the anticipated electrical generation from the repowered wind facilities, on average, by approximately 26%. In addition to the discussion contained herein regarding repowering activities, refer to "Regulatory Matters" in Item 1 of this Form 10-K.

Wholesale Activities

PacifiCorp purchases and sells electricity in the wholesale markets as needed to balance its generation with its retail load obligations. PacifiCorp may also purchase electricity in the wholesale markets when it is more economical than generating electricity from its own facilities and may sell surplus electricity in the wholesale markets when it can do so economically. When prudent, PacifiCorp enters into financial swap contracts and forward electricity sales and purchases for physical delivery at fixed prices to reduce its exposure to electricity price volatility.

Energy Imbalance Market

PacifiCorp and the California ISO implemented an EIM in November 2014, which reduces costs to serve customers through more efficient dispatch of a larger and more diverse pool of resources, more effectively integrates renewables and enhances reliability through improved situational awareness and responsiveness. The EIM expands the real-time component of the California ISO's market technology to optimize and balance electricity supply and demand every five minutes across the EIM footprint. The EIM is voluntary and available to all balancing authorities in the western United States. EIM market participants submit bids to the California ISO market operator before each hour for each generating resource they choose to be dispatched by the market. Each bid is comprised of a dispatchable operating range, ramp rate and prices across the operating range. The California ISO market operator uses sophisticated technology to select the least-cost resources to meet demand and send simultaneous dispatch signals to every participating generator across the EIM footprint every five minutes. In addition to generation resource bids, the California ISO market operator also receives continuous real-time updates of the transmission grid network, meteorological and load forecast information that it uses to optimize dispatch instructions. Outside the EIM footprint, utilities in the western United States do not utilize comparable technology and are largely limited to transactions within the borders of their balancing authority area to balance supply and demand intra-hour using a combination of manual and automated dispatch. The EIM delivers customer benefits by leveraging automation and resource diversity to result in more efficient dispatch, more effective integration of renewables and improved situational awareness. Benefits are expected to increase further with renewable resource expansion and as more entities join the EIM bringing incremental diversity.

PacifiCorp will continue to monitor regional market expansion efforts, including creation of a regional Independent System Operator ("ISO"). California Senate Bill No. 350, which was passed in October 2015, authorized the California legislature to consider making changes to current laws that would create an independent governance structure for a regional ISO during the 2017 legislative session. The California legislature did not pass any legislation related to a regional ISO during its 2018 legislative session, which closed August 31, 2018.

Transmission and Distribution

PacifiCorp operates one balancing authority area in the western portion of its service territory and one balancing authority area in the eastern portion of its service territory. A balancing authority area is a geographic area with transmission systems that control generation to maintain schedules with other balancing authority areas and ensure reliable operations. In operating the balancing authority areas, PacifiCorp is responsible for continuously balancing electricity supply and demand by dispatching generating resources and interchange transactions so that generation internal to the balancing authority area, plus net imported power, matches customer loads. Deliveries of energy over PacifiCorp's transmission system are managed and scheduled in accordance with FERC requirements.


7


PacifiCorp's transmission system is part of the Western Interconnection, which includes the interconnected transmission systems of 14 western states, two Canadian provinces and parts of Mexico. PacifiCorp's transmission system, together with contractual rights on other transmission systems, enables PacifiCorp to integrate and access generation resources to meet its customer load requirements. PacifiCorp's transmission and distribution systems included approximately 16,500 miles of transmission lines in ten states, 64,000 miles of distribution lines and 900 substations as of December 31, 2018.

PacifiCorp's transmission and distribution system is managed on a coordinated basis to obtain maximum load-carrying capability and efficiency. Portions of PacifiCorp's transmission and distribution systems are located:

On property owned or used through agreements by PacifiCorp;
Under or over streets, alleys, highways and other public places, the public domain and national forests and state and federal lands under franchises, easements or other rights that are generally subject to termination;
Under or over private property as a result of easements obtained primarily from the title holder of record; or
Under or over Native American reservations through agreements with the United States Secretary of Interior or Native American tribes.
It is possible that some of the easements and the property over which the easements were granted may have title defects or may be subject to mortgages or liens existing at the time the easements were acquired.

PacifiCorp's Energy Gateway Transmission Expansion Program represents plans to build approximately 2,000 miles of new high-voltage transmission lines, with an estimated cost exceeding $6 billion, primarily in Wyoming, Utah, Idaho and Oregon. The $6 billion estimated cost includes: (a) the 135-mile, 345-kV Populus to Terminal transmission line between the Terminal substation near the Salt Lake City Airport and the Populus substation in Downey, Idaho placed in-service in 2010; (b) the 100-mile, 345/500-kV Mona to Oquirrh transmission line between the Mona substation in central Utah and the Oquirrh substation in the Salt Lake Valley placed in-service in 2013; (c) the 170-mile, 345-kV transmission line between the Sigurd Substation in central Utah and the Red Butte Substation in southwest Utah placed in-service in May 2015; and (d) other segments that are expected to be placed in-service in future years, depending on load growth, siting, permitting and construction schedules. The transmission line segments are intended to: (a) address customer load growth; (b) improve system reliability; (c) reduce transmission system constraints; (d) provide access to diverse generation resources, including renewable resources; and (e) improve the flow of electricity throughout PacifiCorp's six-state service area. Proposed transmission line segments are evaluated to ensure optimal benefits and timing before committing to move forward with permitting and construction. Through December 31, 2018, $2.0 billion had been spent and $1.6 billion, including AFUDC, had been placed in-service.

Future Generation, Conservation and Energy Efficiency

Integrated Resource Planning

As required by certain state regulations, PacifiCorp uses an IRP to develop a long-term resource plan to ensure that PacifiCorp can continue to provide reliable and cost-effective electric service to its customers while maintaining compliance with existing and evolving environmental laws and regulations. The IRP process identifies the amount and timing of PacifiCorp's expected future resource needs, accounting for planning uncertainty, risks, reliability, state energy policies and other factors. The IRP is prepared following a public process, which provides an opportunity for stakeholders to participate in PacifiCorp's resource planning process. PacifiCorp files its IRP on a biennial basis with the state commissions in each of the six states where PacifiCorp operates. Five states indicate whether the IRP meets the state commission's IRP standards and guidelines, a process referred to as "acknowledgment" in some states.

In April 2017, PacifiCorp filed its 2017 IRP with its state commissions. The IRP, which includes the Energy Vision 2020 project in the preferred portfolio, includes investments in renewable energy resources, upgrades to the existing wind fleet, and energy efficiency measures to meet future customer needs. The OPUC acknowledged PacifiCorp's 2017 IRP in December 2017, the UPSC acknowledged the 2017 IRP in March 2018, the IPUC acknowledged the 2017 IRP in April 2018 and the WUTC acknowledged the 2017 IRP in May 2018. PacifiCorp filed its 2017 IRP Update with its state commissions, except for California, in May 2018. In August 2018, PacifiCorp filed its 2017 IRP and its 2017 IRP Update with the CPUC to comply with new IRP requirements in California. PacifiCorp is currently developing its 2019 IRP that is expected to be filed in summer 2019.


8


Requests for Proposals

PacifiCorp issues individual Request for Proposals ("RFP"), each of which typically focuses on a specific category of generation resources consistent with the IRP or other customer-driven demands. The IRP and the RFPs provide for the identification and staged procurement of resources to meet load or renewable portfolio standard requirements. Depending upon the specific RFP, applicable laws and regulations may require PacifiCorp to file draft RFPs with the UPSC, the OPUC and the WUTC. Approval by the UPSC, the OPUC or the WUTC may be required depending on the nature of the RFPs.

As required by applicable laws and regulations, PacifiCorp filed its draft 2017R RFP with the UPSC in June 2017 and with the OPUC in August 2017. The UPSC and the OPUC approved PacifiCorp's 2017R RFP in September 2017. The 2017R RFP was subsequently released to the market on September 27, 2017. The 2017R RFP sought up to approximately 1,270 MWs of new wind resources that can interconnect to PacifiCorp's transmission system in Wyoming once a proposed high-voltage transmission line is constructed. The 2017R RFP also sought proposals for wind resources located outside of Wyoming capable of delivering all-in economic benefits for PacifiCorp's customers. The proposed high-voltage transmission line and new wind resources must be placed in service by December 31, 2020, to maximize potential federal production tax credit benefits for PacifiCorp's customers. PacifiCorp finalized its bid-selection process and established a final shortlist in February 2018. PacifiCorp plans to deliver 1,150 MWs from three new wind facilities under various commercial structures including a power purchase agreement, a build-transfer agreement, and traditional self-build agreements. PacifiCorp has finalized a 200-MW power purchase agreement and a 200-MW build-transfer agreement for one of three new wind facilities. PacifiCorp has also secured agreements for safe harbor wind turbine equipment, acquisition of development assets and balance-of-plant construction for the two remaining projects; one providing 250 MWs and a second providing 500 MWs. Agreements for acquisition of follow-on wind turbine equipment for the final two projects are nearing completion.

Demand-side Management

PacifiCorp has provided a comprehensive set of DSM programs to its customers since the 1970s. The programs are designed to reduce energy consumption and more effectively manage when energy is used, including management of seasonal peak loads. PacifiCorp offers services to customers such as energy engineering audits and information on how to improve the efficiency of their homes and businesses. To assist customers in investing in energy efficiency, PacifiCorp offers rebates or incentives encouraging the purchase and installation of high-efficiency equipment such as lighting, heating and cooling equipment, weatherization, motors, process equipment and systems, as well as incentives for energy project management, efficient building operations and efficient construction. Incentives are also paid to solicit participation in load management programs by residential, business and agricultural customers through programs such as PacifiCorp's residential and small commercial air conditioner load control program and irrigation equipment load control programs. Although subject to prudence reviews, state regulations allow for contemporaneous recovery of costs incurred for the DSM programs through state-specific energy efficiency surcharges to retail customers or for recovery of costs through rates. During 2018, PacifiCorp spent $149 million on these DSM programs, resulting in an estimated 598,712 MWhs of first-year energy savings and an estimated 306 MWs of peak load management. PacifiCorp began amortizing Utah DSM program costs over a 10-year period in 2017, as a result of the approved Senate Bill 115, "Sustainable Transportation and Energy Plan Act." In 2018, upon approval from the WPSC, PacifiCorp began amortizing Wyoming DSM program costs over a 10-year period for Category 3 large energy-using customers. In addition to these DSM programs, PacifiCorp has load curtailment contracts with a number of large industrial customers that deliver up to 305 MWs of load reduction when needed, depending on the customers' actual loads. Recovery of the costs associated with the large industrial load management program are captured in the retail special contract agreements with those customers approved by their respective state commissions or through PacifiCorp's general rate case process.

Employees

As of December 31, 2018, PacifiCorp had approximately 5,400 employees, of which approximately 3,100 were covered by union contracts, principally with the International Brotherhood of Electrical Workers, the Utility Workers Union of America and the International Brotherhood of Boilermakers.

MIDAMERICAN FUNDING AND MIDAMERICAN ENERGY

MidAmerican Funding is an Iowa limited liability company whose sole member is BHE. MidAmerican Funding, a holding company, owns all of the outstanding common stock of MHC Inc. ("MHC"), which is a holding company owning all of the common stock of MidAmerican Energy; Midwest Capital Group, Inc. ("Midwest Capital"); and MEC Construction Services Co. ("MEC Construction"). MidAmerican Energy is a public utility company headquartered in Des Moines, Iowa, and incorporated in the state of Iowa. MidAmerican Funding and MidAmerican Energy are indirect consolidated subsidiaries of Berkshire Hathaway.


9


MidAmerican Funding and MHC

MidAmerican Funding conducts no business other than activities related to its debt securities and the ownership of MHC. MHC conducts no business other than the ownership of its subsidiaries and related corporate services. MidAmerican Energy is a substantial portion of MidAmerican Funding's and MHC's assets, revenue and earnings.

MidAmerican Funding's principal executive offices are located at 666 Grand Avenue, Suite 500, Des Moines, Iowa 50309-2580 and its telephone number is (515) 242-4300. MidAmerican Funding was formed as a limited liability company in 1999 under the laws of the state of Iowa.

MidAmerican Energy

General

MidAmerican Energy, an indirect wholly owned subsidiary of BHE, is a United States regulated electric and natural gas utility company that serves 0.8 million retail electric customers in portions of Iowa, Illinois and South Dakota and 0.8 million retail and transportation natural gas customers in portions of Iowa, South Dakota, Illinois and Nebraska. MidAmerican Energy is principally engaged in the business of generating, transmitting, distributing and selling electricity and in distributing, selling and transporting natural gas. MidAmerican Energy's service territory covers approximately 11,000 square miles. Metropolitan areas in which MidAmerican Energy distributes electricity at retail include Council Bluffs, Des Moines, Fort Dodge, Iowa City, Sioux City and Waterloo, Iowa; and the Quad Cities (Davenport and Bettendorf, Iowa and Rock Island, Moline and East Moline, Illinois). Metropolitan areas in which it distributes natural gas at retail include Cedar Rapids, Des Moines, Fort Dodge, Iowa City, Sioux City and Waterloo, Iowa; the Quad Cities; and Sioux Falls, South Dakota. MidAmerican Energy has a diverse customer base consisting of urban and rural residential customers and a variety of commercial and industrial customers. Principal industries served by MidAmerican Energy include electronic data storage; processing and sales of food products; manufacturing, processing and fabrication of primary metals, farm and other non-electrical machinery; cement and gypsum products; and government. In addition to retail sales and natural gas transportation, MidAmerican Energy sells electricity principally to markets operated by RTOs and natural gas to other utilities and market participants on a wholesale basis. MidAmerican Energy is a transmission-owning member of the MISO and participates in its capacity, energy and ancillary services markets.

MidAmerican Energy's regulated electric and natural gas operations are conducted under numerous franchise agreements, certificates, permits and licenses obtained from federal, state and local authorities. The franchise agreements, with various expiration dates, are typically for 20- to 25-year terms. Several of these franchise agreements give either party the right to seek amendment to the franchise agreement at one or two specified times during the term. MidAmerican Energy generally has an exclusive right to serve electric customers within its service territories and, in turn, has an obligation to provide electricity service to those customers. In return, the state utility commissions have established rates on a cost-of-service basis, which are designed to allow MidAmerican Energy an opportunity to recover its costs of providing services and to earn a reasonable return on its investment. In Illinois, MidAmerican Energy's regulated retail electric customers may choose their energy supplier.

The percentages of MidAmerican Energy's operating revenue and operating income derived from the following business activities for the years ended December 31 were as follows:
 
2018
 
2017
 
2016
Operating revenue:
 
 
 
 
 
Regulated electric
75
%
 
75
%
 
76
%
Regulated gas
25

 
25

 
24

 
100
%
 
100
%
 
100
%
 
 
 
 
 
 
Operating income:
 
 
 
 
 
Regulated electric
85
%
 
86
%
 
88
%
Regulated gas
15

 
14

 
12

 
100
%
 
100
%
 
100
%


10


MidAmerican Energy's principal executive offices are located at 666 Grand Avenue, Suite 500, Des Moines, Iowa 50309-2580, its telephone number is (515) 242-4300 and its internet address is www.midamericanenergy.com. MidAmerican Energy was incorporated under the laws of the state of Iowa as part of the July 1, 1995 merger of Iowa-Illinois Gas and Electric Company, Midwest Resources Inc. and Midwest Power Systems Inc. On December 1, 1996, MidAmerican Energy became, through a corporate reorganization, a wholly owned subsidiary of MHC Inc., formerly known as MidAmerican Energy Holdings Company.

Regulated Electric Operations

Customers

The GWhs and percentages of electricity sold to MidAmerican Energy's retail customers by jurisdiction for the years ended December 31 were as follows:
 
2018
 
2017
 
2016
 
 
 
 
 
 
 
 
 
 
 
 
Iowa
23,670

 
92
%
 
22,365

 
91
%
 
21,766

 
91
%
Illinois
1,944

 
7

 
1,891

 
8

 
1,940

 
8

South Dakota
237

 
1

 
236

 
1

 
218

 
1

 
25,851

 
100
%
 
24,492

 
100
%
 
23,924

 
100
%

Electricity sold to MidAmerican Energy's retail and wholesale customers by class of customer and the average number of retail customers for the years ended December 31 were as follows:
 
2018
 
2017
 
2016
GWhs sold:
 
 
 
 
 
 
 
 
 
 
 
Residential
6,763

 
18
%
 
6,207

 
18
%
 
6,408

 
20
%
Commercial
3,897

 
11

 
3,761

 
11

 
3,812

 
12

Industrial
13,587

 
37

 
12,957

 
39

 
12,115

 
37

Other
1,604

 
4

 
1,567

 
5

 
1,589

 
5

Total retail
25,851

 
70

 
24,492

 
73

 
23,924

 
74

Wholesale
11,181

 
30

 
9,165

 
27

 
8,489

 
26

Total GWhs sold
37,032

 
100
%
 
33,657

 
100
%
 
32,413

 
100
%
 
 
 
 
 
 
 
 
 
 
 
 
Average number of retail customers (in thousands):
 
 
 
 
 
 
 
 
 
 
 
Residential
670

 
86
%
 
662

 
86
%
 
653

 
86
%
Commercial
94

 
12

 
92

 
12

 
91

 
12

Industrial
2

 

 
2

 

 
2

 

Other
14

 
2

 
14

 
2

 
14

 
2

Total
780

 
100
%
 
770

 
100
%
 
760

 
100
%

Variations in weather, economic conditions and various conservation and energy efficiency measures and programs can impact customer usage. Wholesale sales are impacted by market prices for energy relative to the incremental cost to generate power.

There are seasonal variations in MidAmerican Energy's electricity sales that are principally related to weather and the related use of electricity for air conditioning. Additionally, electricity sales are priced higher in the summer months compared to the remaining months of the year. As a result, 40% to 50% of MidAmerican Energy's regulated electric revenue is reported in the months of June, July, August and September.

A degree of concentration of sales exists with certain large electric retail customers. Sales to the ten largest customers, from a variety of industries, comprised 20%, 19% and 16% of total retail electric sales in 2018, 2017 and 2016, respectively. Sales to electronic data storage customers included in the ten largest customers comprised 9%, 9% and 7% of total retail electric sales in 2018, 2017 and 2016, respectively.


11


The annual hourly peak demand on MidAmerican Energy's electric system usually occurs as a result of air conditioning use during the cooling season. Peak demand represents the highest demand on a given day and at a given hour. On July 12, 2018, retail customer usage of electricity caused a new record hourly peak demand of 5,051 MWs on MidAmerican Energy's electric distribution system, which is 201 MWs greater than the previous record hourly peak demand of 4,850 MWs set July 19, 2017.

Generating Facilities and Fuel Supply

MidAmerican Energy has ownership interest in a diverse portfolio of generating facilities. The following table presents certain information regarding MidAmerican Energy's owned generating facilities as of December 31, 2018:
 
 
 
 
 
 
 
 
Facility
 
Net
 
 
 
 
 
 
Year Installed /
 
Net Capacity
 
Owned Capacity
Generating Facility
 
Location
 
Energy Source
 
Repowered(1)
 
(MWs)(2)
 
(MWs)(2)
WIND:
 
 
 
 
 
 
 
 
 
 
Intrepid
 
Schaller, IA
 
Wind
 
2004-2005 / 2018
 
176

 
176

Century
 
Blairsburg, IA
 
Wind
 
2005-2008 / 2018
 
200

 
200

Victory
 
Westside, IA
 
Wind
 
2006 / 2018
 
99

 
99

Pomeroy
 
Pomeroy, IA
 
Wind
 
2007-2011 / 2018
 
286

 
286

Adair
 
Adair, IA
 
Wind
 
2008
 
175

 
175

Carroll
 
Carroll, IA
 
Wind
 
2008
 
150

 
150

Charles City
 
Charles City, IA
 
Wind
 
2008 / 2018
 
75

 
75

Walnut
 
Walnut, IA
 
Wind
 
2008
 
150

 
150

Laurel
 
Laurel, IA
 
Wind
 
2011
 
120

 
120

Rolling Hills
 
Massena, IA
 
Wind
 
2011
 
443

 
443

Eclipse
 
Adair, IA
 
Wind
 
2012
 
200

 
200

Morning Light
 
Adair, IA
 
Wind
 
2012
 
100

 
100

Vienna
 
Gladbrook, IA
 
Wind
 
2012-2013
 
150

 
150

Lundgren
 
Otho, IA
 
Wind
 
2014
 
250

 
250

Macksburg
 
Macksburg, IA
 
Wind
 
2014
 
119

 
119

Wellsburg
 
Wellsburg, IA
 
Wind
 
2014
 
139

 
139

Adams
 
Lennox, IA
 
Wind
 
2015
 
150

 
150

Highland
 
Primghar, IA
 
Wind
 
2015
 
475

 
475

Ida Grove
 
Ida Grove, IA
 
Wind
 
2016
 
300

 
300

O'Brien
 
Primghar, IA
 
Wind
 
2016
 
250

 
250

Beaver Creek
 
Ogden, IA
 
Wind
 
2017-2018
 
340

 
340

Prairie
 
Montezuma, IA
 
Wind
 
2017-2018
 
168

 
168

Arbor Hill
 
Greenfield, IA
 
Wind
 
2018
 
250

 
250

Ivester
 
Wellsburg, IA
 
Wind
 
2018
 
91

 
91

North English
 
Montezuma, IA
 
Wind
 
2018
 
200

 
200

Orient
 
Greenfield, IA
 
Wind
 
2018
 
102

 
102

 
 
 
 
 
 
 
 
5,158

 
5,158

COAL:
 
 
 
 
 
 
 
 
 
 
Louisa
 
Muscatine, IA
 
Coal
 
1983
 
746

 
656

Walter Scott, Jr. Unit No. 3
 
Council Bluffs, IA
 
Coal
 
1978
 
708

 
560

Walter Scott, Jr. Unit No. 4
 
Council Bluffs, IA
 
Coal
 
2007
 
815

 
486

Ottumwa
 
Ottumwa, IA
 
Coal
 
1981
 
712

 
370

George Neal Unit No. 3
 
Sergeant Bluff, IA
 
Coal
 
1975
 
515

 
371

George Neal Unit No. 4
 
Salix, IA
 
Coal
 
1979
 
645

 
262

 
 
 
 
 
 
 
 
4,141

 
2,705

NATURAL GAS AND OTHER:
 
 
 
 
 
 
 
 
 
 
Greater Des Moines
 
Pleasant Hill, IA
 
Gas
 
2003-2004
 
489

 
489

Electrifarm
 
Waterloo, IA
 
Gas or Oil
 
1975-1978
 
190

 
190

Pleasant Hill
 
Pleasant Hill, IA
 
Gas or Oil
 
1990-1994
 
156

 
156

Sycamore
 
Johnston, IA
 
Gas or Oil
 
1974
 
150

 
150

River Hills
 
Des Moines, IA
 
Gas
 
1966-1967
 
115

 
115

Riverside Unit No. 5
 
Bettendorf, IA
 
Gas
 
1961
 
107

 
107

Coralville
 
Coralville, IA
 
Gas
 
1970
 
66

 
66

Moline
 
Moline, IL
 
Gas
 
1970
 
64

 
64

28 portable power modules
 
Various
 
Oil
 
2000
 
56

 
56

Parr
 
Charles City, IA
 
Gas
 
1969
 
32

 
32

 
 
 
 
 
 
 
 
1,425

 
1,425

NUCLEAR:
 
 
 
 
 
 
 
 
 
 

12


 
 
 
 
 
 
 
 
Facility
 
Net
 
 
 
 
 
 
Year Installed /
 
Net Capacity
 
Owned Capacity
Generating Facility
 
Location
 
Energy Source
 
Repowered(1)
 
(MWs)(2)
 
(MWs)(2)
Quad Cities Unit Nos. 1 and 2
 
Cordova, IL
 
Uranium
 
1972
 
1,823

 
456

 
 
 
 
 
 
 
 
 
 
 
HYDROELECTRIC:
 
 
 
 
 
 
 
 
 
 
Moline Unit Nos. 1-4
 
Moline, IL
 
Hydroelectric
 
1941
 
4

 
4

 
 
 
 
 
 
 
 
 
 
 
Total Available Generating Capacity
 
 
 
 
 
12,551

 
9,748

 
 
 
 
 
 
 
 
 
 
 
PROJECTS UNDER CONSTRUCTION
 
 
 
 
 
 
 
 
Various wind projects
 
 
 
 
 
 
 
1,440

 
1,440

 
 
 
 
13,991

 
11,188

(1)
Internal Revenue Service ("IRS") rules provide for re-establishment of the production tax credit for an existing wind-powered generating facility upon the replacement of a significant portion of its components. Such component replacement is commonly referred to as repowering. If the degree of component replacement in such projects meets IRS guidelines, production tax credits are re-established for ten years at rates that depend upon the date in which construction begins.
(2)
Facility Net Capacity represents the lesser of nominal ratings or any limitations under applicable interconnection, power purchase, or other agreements for intermittent resources and the total net dependable capability available during summer conditions for all other units. An intermittent resource's nominal rating is the manufacturer's contractually specified capability (in MWs) under specified conditions. Net Owned Capacity indicates MidAmerican Energy's ownership of Facility Net Capacity.

The following table shows the percentages of MidAmerican Energy's total energy supplied by energy source for the years ended December 31:
 
2018
 
2017
 
2016
 
 
 
 
 
 
Coal
42
%
 
40
%
 
39
%
Nuclear
10

 
11

 
12

Natural gas
2

 
1

 
2

Wind and other(1)
36

 
38

 
35

Total energy generated
90

 
90

 
88

Energy purchased - short-term contracts and other
8

 
8

 
10

Energy purchased - long-term contracts (renewable)(1)
1

 
1

 
1

Energy purchased - long-term contracts (non-renewable)
1

 
1

 
1

 
100
%
 
100
%
 
100
%

(1)
All or some of the renewable energy attributes associated with generation from these generating facilities and purchases may be: (a) used in future years to comply with RPS or other regulatory requirements, (b) sold to third parties in the form of renewable energy credits or other environmental commodities, or (c) excluded from energy purchased.

MidAmerican Energy is required to have resources available for dispatch by MISO to continuously meet its customer needs and reliably operate its electric system. The percentage of MidAmerican Energy's energy supplied by energy source varies from year to year and is subject to numerous operational and economic factors such as planned and unplanned outages, fuel commodity prices, fuel transportation costs, weather, environmental considerations, transmission constraints, and wholesale market prices of electricity. MidAmerican Energy evaluates these factors continuously in order to facilitate economical dispatch of its generating facilities by MISO. When factors for one energy source are less favorable, MidAmerican Energy places more reliance on other energy sources. For example, MidAmerican Energy can generate more electricity using its low cost wind-powered generating facilities when factors associated with these facilities are favorable. When factors associated with wind resources are less favorable, MidAmerican Energy must increase its reliance on more expensive generation or purchased electricity. Refer to "General Regulation" in Item 1 of this Form 10-K for a discussion of energy cost recovery by jurisdiction.

Coal

All of the coal-fueled generating facilities operated by MidAmerican Energy are fueled by low-sulfur, western coal from the Powder River Basin in northeast Wyoming. MidAmerican Energy's coal supply portfolio includes multiple suppliers and mines under short-term and multi-year agreements of varying terms and quantities through 2020. MidAmerican Energy believes supplies

13


from these sources are presently adequate and available to meet MidAmerican Energy's needs. MidAmerican Energy's coal supply portfolio has substantially all of its expected 2019 requirements under fixed-price contracts. MidAmerican Energy regularly monitors the western coal market for opportunities to enhance its coal supply portfolio.

MidAmerican Energy has a multi-year long-haul coal transportation agreement with BNSF Railway Company ("BNSF"), an affiliate company, for the delivery of coal to all of the MidAmerican Energy-operated coal-fueled generating facilities other than the George Neal Energy Center. Under this agreement, BNSF delivers coal directly to MidAmerican Energy's Walter Scott, Jr. Energy Center and to an interchange point with Canadian Pacific Railway Company for short-haul delivery to the Louisa Energy Center. MidAmerican Energy has a multi-year long-haul coal transportation agreement with Union Pacific Railroad Company for the delivery of coal to the George Neal Energy Center.

Nuclear

MidAmerican Energy is a 25% joint owner of Quad Cities Generating Station Units 1 and 2 ("Quad Cities Station"), a nuclear power plant. Exelon Generation Company, LLC ("Exelon Generation"), a subsidiary of Exelon Corporation, is the 75% joint owner and the operator of Quad Cities Station. Approximately one-third of the nuclear fuel assemblies in each reactor core at Quad Cities Station is replaced every 24 months. MidAmerican Energy has been advised by Exelon Generation that the following requirements for Quad Cities Station can be met under existing supplies or commitments: uranium requirements through 2021 and partial requirements through 2025; uranium conversion requirements through 2021 and partial requirements through 2025; enrichment requirements through 2021 and partial requirements through 2025; and fuel fabrication requirements through 2022. MidAmerican Energy has been advised by Exelon Generation that it does not anticipate it will have difficulty in contracting for uranium, uranium conversion, enrichment or fabrication of nuclear fuel needed to operate Quad Cities Station during these time periods.

Natural Gas

MidAmerican Energy uses natural gas and oil as fuel for intermediate and peak demand electric generation, igniter fuel, transmission support and standby purposes. These sources are presently in adequate supply and available to meet MidAmerican Energy's needs.

Wind and Other

MidAmerican Energy owns more wind-powered generating capacity than any other United States rate-regulated electric utility and believes wind-powered generation offers a viable, economical and environmentally prudent means of supplying electricity and complying with laws and regulations. Pursuant to ratemaking principles approved by the IUB, all of MidAmerican Energy's wind-powered generating facilities in-service at December 31, 2018, are authorized to earn over their regulatory lives a fixed rate of return on equity ranging from 11.0% to 12.2% on the depreciated cost of their original construction, which excludes the cost of later replacements, in any future Iowa rate proceeding. MidAmerican Energy's wind-powered generating facilities, including those facilities where a significant portion of the equipment was replaced, commonly referred to as repowered facilities, are eligible for federal renewable electricity production tax credits for 10 years from the date the facilities are placed in-service. Production tax credits are earned as energy from qualifying wind-powered generating facilities is produced and sold. Production tax credits for MidAmerican Energy's wind-powered generating facilities currently in-service, began expiring in 2014, with final expiration in 2028. MidAmerican Energy has repowered, or plans to repower, all but 50 MWs of wind-powered generating facilities for which production tax credits have expired or will expire by the end of 2022. MidAmerican Energy anticipates energy generation from the repowered facilities will increase, on average, by approximately 19 to 30% depending upon the technology being repowered.

Of the 5,215 MWs (nominal ratings) of wind-powered generating facilities in-service as of December 31, 2018, 4,551 MWs were generating production tax credits, including 636 MWs for facilities repowered in 2017 and 2018. Of those facilities currently not generating production tax credits, 614 MWs are scheduled to be repowered by the end of 2020. Production tax credits earned by MidAmerican Energy's wind-powered generating facilities placed in-service prior to 2013, except for facilities that have been repowered, are included in energy adjustment clauses, through which MidAmerican Energy is allowed to recover fluctuations in its electric retail energy costs. Facilities earning production tax credits that currently benefit customers through energy adjustment clauses totaled 1,000 MWs (nominal ratings) as of December 31, 2018. The eligibility for earning production tax credits will expire for these facilities by the end of 2022. MidAmerican Energy earned production tax credits totaling $308 million and $287 million in 2018 and 2017, respectively, of which 33% and 47%, respectively, were included in energy adjustment clauses.


14


Regional Transmission Organizations

MidAmerican Energy sells and purchases electricity and ancillary services related to its generation and load in wholesale markets pursuant to the tariffs in those markets. MidAmerican Energy participates predominantly in the MISO energy and ancillary service markets, which provide MidAmerican Energy with wholesale opportunities over a large market area. MidAmerican Energy can enter into wholesale bilateral transactions in addition to market activity related to its assets. MidAmerican Energy is authorized to participate in the Southwest Power Pool, Inc. and PJM Interconnection, L.L.C. ("PJM") markets and can contract with several other major transmission-owning utilities in the region. MidAmerican Energy can utilize both financial swaps and physical fixed-price electricity sales and purchases contracts to reduce its exposure to electricity price volatility.

MidAmerican Energy's total net generating capability accredited by the MISO for the summer of 2018 was 5,137 MWs compared to a 2018 summer peak demand of 5,051 MWs. Accredited net generating capability represents the amount of generation available to meet the requirements of MidAmerican Energy's retail customers and consists of MidAmerican Energy-owned generation, certain customer private generation that MidAmerican Energy is contractually allowed to dispatch and the net amount of capacity purchases and sales. Accredited capacity may vary from the nominal, or design, capacity ratings, particularly for wind turbines whose output is dependent upon wind levels at any given time. Additionally, the actual amount of generating capacity available at any time may be less than the accredited capacity due to regulatory restrictions, transmission constraints, fuel restrictions and generating units being temporarily out of service for inspection, maintenance, refueling, modifications or other reasons. MidAmerican Energy's accredited capability currently exceeds the MISO's minimum requirements.

Transmission and Distribution

MidAmerican Energy's transmission and distribution systems included 4,000 miles of transmission lines in four states, 38,300 miles of distribution lines and 380 substations as of December 31, 2018. Electricity from MidAmerican Energy's generating facilities and purchased electricity is delivered to wholesale markets and its retail customers via the transmission facilities of MidAmerican Energy and others. MidAmerican Energy participates in the MISO capacity, energy and ancillary services markets as a transmission-owning member and, accordingly, operates its transmission assets at the direction of the MISO. The MISO manages its energy and ancillary service markets using reliability-constrained economic dispatch of the region's generation. For both the day-ahead and real-time (every five minutes) markets, the MISO analyzes generation commitments to provide market liquidity and transparent pricing while maintaining transmission system reliability by minimizing congestion and maximizing efficient energy transmission. Additionally, through its FERC-approved OATT, the MISO performs the role of transmission service provider throughout the MISO footprint and administers the long-term planning function. MISO and related costs of the participants are shared among the participants through a number of mechanisms in accordance with the MISO tariff.

Regulated Natural Gas Operations

MidAmerican Energy is engaged in the procurement, transportation, storage and distribution of natural gas for customers in its service territory. MidAmerican Energy purchases natural gas from various suppliers and contracts with interstate natural gas pipelines for transportation of the gas to MidAmerican Energy's service territory and for storage and balancing services. MidAmerican Energy sells natural gas and delivery services to end-use customers on its distribution system; sells natural gas to other utilities, municipalities and energy marketing companies; and transports natural gas through its distribution system for end-use customers who have independently secured their supply of natural gas. During 2018, 54% of the total natural gas delivered through MidAmerican Energy's distribution system was associated with transportation service.

Natural gas property consists primarily of natural gas mains and service lines, meters, and related distribution equipment, including feeder lines to communities served from natural gas pipelines owned by others. The natural gas distribution facilities of MidAmerican Energy included 24,000 miles of natural gas main and service lines as of December 31, 2018.


15


Customer Usage and Seasonality

The percentages of natural gas sold to MidAmerican Energy's retail customers by jurisdiction for the years ended December 31 were as follows:
 
2018
 
2017
 
2016
 
 
 
 
 
 
Iowa
76
%
 
76
%
 
76
%
South Dakota
13

 
13

 
13

Illinois
10

 
10

 
10

Nebraska
1

 
1

 
1

 
100
%
 
100
%
 
100
%

The percentages of natural gas sold to MidAmerican Energy's retail and wholesale customers by class of customer, total Dth of natural gas sold, total Dth of transportation service and the average number of retail customers for the years ended December 31 were as follows:
 
2018
 
2017
 
2016
 
 
 
 
 
 
Residential
43
%
 
41
%
 
41
%
Commercial(1)
21

 
20

 
21

Industrial(1)
5

 
4

 
4

Total retail
69

 
65

 
66

Wholesale(2)
31

 
35

 
34

 
100
%
 
100
%
 
100
%
 
 
 
 
 
 
Total Dth of natural gas sold (in thousands)
126,272

 
114,298

 
113,294

Total Dth of transportation service (in thousands)
102,198

 
92,136

 
83,610

Total average number of retail customers (in thousands)
759

 
751

 
742


(1)
Commercial and industrial customers are classified primarily based on the nature of their business and natural gas usage. Commercial customers are non-residential customers that use natural gas principally for heating. Industrial customers are non-residential customers that use natural gas principally for their manufacturing processes.
(2)
Wholesale sales are generally made to other utilities, municipalities and energy marketing companies for eventual resale to end-use customers.

There are seasonal variations in MidAmerican Energy's regulated natural gas business that are principally due to the use of natural gas for heating. Typically, 50-60% of MidAmerican Energy's regulated natural gas revenue is reported in the months of January, February, March and December.

On January 29, 2019, MidAmerican Energy recorded its all-time highest peak-day delivery through its distribution system of 1,314,526 Dth. This preliminary peak-day delivery consisted of 68% traditional retail sales service and 32% transportation service.

Fuel Supply and Capacity

MidAmerican Energy uses several strategies designed to maintain a reliable natural gas supply and reduce the impact of volatility in natural gas prices on its regulated retail natural gas customers. These strategies include the purchase of a geographically diverse supply portfolio from producers and third-party energy marketing companies, the use of interstate pipeline storage services and MidAmerican Energy's LNG peaking facilities, and the use of financial derivatives to fix the price on a portion of the anticipated natural gas requirements of MidAmerican Energy's customers. Refer to "General Regulation" in Item 1 of this Form 10-K for a discussion of the purchased gas adjustment clauses ("PGA").


16


MidAmerican Energy contracts for firm natural gas pipeline capacity to transport natural gas from key production areas and liquid market centers to its service territory through direct interconnects to the pipeline systems of several interstate natural gas pipeline systems, including Northern Natural Gas, an affiliate company. MidAmerican Energy has multiple pipeline interconnections into several larger markets within its distribution system. Multiple pipeline interconnections create competition among pipeline suppliers for transportation capacity to serve those markets, thus reducing costs. In addition, multiple pipeline interconnections increase delivery reliability and give MidAmerican Energy the ability to optimize delivery of the lowest cost supply from the various production areas and liquid market centers into these markets. Benefits to MidAmerican Energy's distribution system customers are shared among all jurisdictions through a consolidated PGA.

At times, the natural gas pipeline capacity available through MidAmerican Energy's firm capacity portfolio may exceed the requirements of retail customers on MidAmerican Energy's distribution system. Firm capacity in excess of MidAmerican Energy's system needs can be released to other companies to achieve optimum use of the available capacity. Past IUB and South Dakota Public Utilities Commission ("SDPUC") rulings have allowed MidAmerican Energy to retain 30% of the respective jurisdictional revenue on the resold capacity, with the remaining 70% being returned to customers through the PGAs.

MidAmerican Energy utilizes interstate pipeline natural gas storage services to meet retail customer requirements, manage fluctuations in demand due to changes in weather and other usage factors and manage variation in seasonal natural gas pricing. MidAmerican Energy typically withdraws natural gas from storage during the heating season when customer demand is historically at its peak and injects natural gas into storage during off-peak months when customer demand is historically lower. MidAmerican Energy also utilizes its three LNG facilities to meet peak day demands during the winter heating season. Interstate pipeline storage services and MidAmerican Energy's LNG facilities reduce dependence on natural gas purchases during the volatile winter heating season and can deliver a significant portion of MidAmerican Energy's anticipated retail sales requirements on a peak winter day. For MidAmerican Energy's 2018/2019 winter heating season preliminary peak-day of January 29, 2019, supply sources used to meet deliveries to traditional retail sales service customers included 66% from purchases delivered on interstate pipelines, 20% from interstate pipeline storage services and 14% from MidAmerican Energy's LNG facilities.

MidAmerican Energy attempts to optimize the value of its regulated transportation capacity, natural gas supply and leased storage arrangements by engaging in wholesale transactions. IUB and SDPUC rulings have allowed MidAmerican Energy to retain 50% of the respective jurisdictional margins earned on certain wholesale sales of natural gas, with the remaining 50% being returned to customers through the PGAs.

MidAmerican Energy is not aware of any factors that would cause material difficulties in meeting its anticipated retail customer demand for the foreseeable future.

Demand-side Management

MidAmerican Energy has provided a comprehensive set of DSM programs to its Iowa electric and gas customers since 1990 and to customers in its other jurisdictions since 2008. The programs are designed to reduce energy consumption and more effectively manage when energy is used, including management of seasonal peak loads. Current programs offer services to customers such as energy engineering audits and information on how to improve the efficiency of their homes and businesses. To assist customers in investing in energy efficiency, MidAmerican Energy offers rebates or incentives encouraging the purchase and installation of high-efficiency equipment such as lighting, heating and cooling equipment, weatherization, motors, process equipment and systems, as well as incentives for efficient construction. Incentives are also paid to residential customers who participate in the air conditioner load control program and nonresidential customers who participate in the nonresidential load management program. Although subject to prudence reviews, state regulations allow for contemporaneous recovery of costs incurred for the DSM programs through state-specific energy efficiency service charges paid by all retail electric and gas customers. In 2018, $154 million was expensed for MidAmerican Energy's DSM programs, which resulted in estimated first-year energy savings of 347,000 MWhs of electricity and 846,000 Dth of natural gas and an estimated peak load reduction of 385 MWs of electricity and 10,460 Dth per day of natural gas.

Employees

As of December 31, 2018, MidAmerican Funding and its subsidiaries, which includes MidAmerican Energy, had approximately 3,400 employees, of which approximately 1,500 were covered by union contracts. MidAmerican Energy has three separate contracts with locals of the International Brotherhood of Electrical Workers ("IBEW") and the United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union. A contract with the IBEW covering substantially all of the union employees expires April 30, 2022.


17


NV ENERGY (NEVADA POWER AND SIERRA PACIFIC)

General

NV Energy, an indirect wholly owned subsidiary of BHE, is an energy holding company headquartered in Nevada whose principal subsidiaries are Nevada Power and Sierra Pacific. Nevada Power and Sierra Pacific are indirect consolidated subsidiaries of Berkshire Hathaway. Nevada Power is a United States regulated electric utility company serving 0.9 million retail customers primarily in the Las Vegas, North Las Vegas, Henderson and adjoining areas. Sierra Pacific is a United States regulated electric and natural gas utility company serving 0.3 million retail electric customers and 0.2 million retail and transportation natural gas customers in northern Nevada. The Nevada Utilities are principally engaged in the business of generating, transmitting, distributing and selling electricity and, in the case of Sierra Pacific, in distributing, selling and transporting natural gas. Nevada Power and Sierra Pacific have electric service territories covering approximately 4,500 square miles and 41,200 square miles, respectively. Sierra Pacific has a natural gas service territory covering approximately 900 square miles in Reno and Sparks. Principal industries served by the Nevada Utilities include gaming, recreation, warehousing, manufacturing and governmental services. Sierra Pacific also serves the mining industry. The Nevada Utilities buy and sell electricity on the wholesale market with other utilities, energy marketing companies, financial institutions and other market participants to balance and optimize economic benefits of electricity generation, retail customer loads and wholesale transactions.

The Nevada Utilities' electric and natural gas operations are conducted under numerous nonexclusive franchise agreements, revocable permits and licenses obtained from federal, state and local authorities. The expiration of these franchise agreements ranges from 2020 through 2032 for Nevada Power and 2019 through 2049 for Sierra Pacific. The Nevada Utilities operate under certificates of public convenience and necessity as regulated by the PUCN, and as such the Nevada Utilities have an obligation to provide electricity service to those customers within their service territory. In return, the PUCN has established rates on a cost-of-service basis, which are designed to allow the Nevada Utilities an opportunity to recover all prudently incurred costs of providing services and an opportunity to earn a reasonable return on their investment.

NV Energy's monthly net income is affected by the seasonal impact of weather on electricity and natural gas sales and seasonal retail electricity prices from the Nevada Utilities'. For 2018, 81% of NV Energy annual net income was recorded in the months of June through September.

Regulated electric utility operations is Nevada Power's only segment while regulated electric utility operations and regulated natural gas operations are the two segments of Sierra Pacific.

The percentages of Sierra Pacific's operating revenue and operating income derived from the following business activities for the years ended December 31 were as follows:
 
2018
 
2017
 
2016
 
 
 
 
 
 
Operating revenue:
 
 
 
 
 
Electric
88
%
 
88
%
 
86
%
Gas
12

 
12

 
14

 
100
%
 
100
%
 
100
%
 
 
 
 
 
 
Operating income:
 
 
 
 
 
Electric
89
%
 
89
%
 
89
%
Gas
11

 
11

 
11

 
100
%
 
100
%
 
100
%

Nevada Power's principal executive offices are located at 6226 West Sahara Avenue, Las Vegas, Nevada 89146, its telephone number is (702) 402-5000 and its internet address is www.nvenergy.com. Nevada Power was incorporated in 1929 under the laws of the state of Nevada.

Sierra Pacific's principal executive offices are located at 6100 Neil Road, Reno, Nevada 89511, its telephone number is (775) 834-4011 and its internet address is www.nvenergy.com. Sierra Pacific was incorporated in 1912 under the laws of the state of Nevada.


18


Regulated Electric Operations

Customers

The Nevada Utilities' sell electricity to retail customers in a single state jurisdiction. Electricity sold to the Nevada Utilities' retail and wholesale customers by class of customer and the average number of retail customers for the years ended December 31 were as follows:
 
2018
 
2017
 
2016
Nevada Power:
 
 
 
 
 
 
 
 
 
 
 
GWhs sold:
 
 
 
 
 
 
 
 
 
 
 
Residential
9,970

 
43
%
 
9,501

 
42
%
 
9,394

 
42
%
Commercial
4,778

 
20

 
4,656

 
20

 
4,663

 
21

Industrial
5,534

 
24

 
6,201

 
28

 
7,313

 
32

Other
214

 
1

 
212

 
1

 
212

 
1

Total fully bundled
20,496

 
88

 
20,570

 
91

 
21,582

 
96

Distribution only service
2,521

 
11

 
1,830

 
8

 
662

 
3

Total retail
23,017

 
99
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