UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark One)
X |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES |
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EXCHANGE ACT OF 1934 |
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For the quarterly period ended March 31, 2010 |
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OR |
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES |
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EXCHANGE ACT OF 1934 |
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For the transition period from __________ to __________ |
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Exact name of registrants as specified |
I.R.S. Employer |
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Commission File |
in their charters, address of principal |
Identification |
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Number |
executive offices, zip code and telephone number |
Number |
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1-14465 |
IDACORP, Inc. |
82-0505802 |
|
1-3198 |
Idaho Power Company |
82-0130980 |
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1221 W. Idaho Street |
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Boise, ID 83702-5627 |
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(208) 388-2200 |
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State of Incorporation: Idaho |
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Websites: www.idacorpinc.com, www.idahopower.com |
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None |
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Former name, former address and former fiscal year, if changed since last report. |
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Indicate
by check mark whether the registrants (1) have 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 registrants were
required to file such reports), and (2) have been subject to such filing
requirements for the past 90 days. Yes X No
___
Indicate by check mark whether
the registrants have submitted electronically and posted on their corporate Web
sites, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for
such shorter period that the registrants were required to submit and post such
files). Yes ___ No ___
Indicate by check mark whether
the registrants are large accelerated filers, accelerated filers, non-accelerated
filers, or smaller reporting companies. See the definitions of large
accelerated filer, accelerated filer and smaller reporting company in Rule
12b-2 of the Exchange Act (check one):
IDACORP, Inc.: |
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Large accelerated filer |
X |
Accelerated filer |
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Non-accelerated filer |
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Smaller reporting company |
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Idaho Power Company: |
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Large accelerated filer |
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Accelerated filer |
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Non-accelerated filer |
X |
Smaller reporting company |
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Indicate by check mark whether
the registrants are shell companies (as defined in Rule 12b-2 of the Exchange
Act).
Yes ___ No X
Number of shares of Common Stock outstanding as of March 31, 2010: |
|
IDACORP, Inc.: |
48,097,763 |
Idaho Power Company: |
39,150,812, all held by IDACORP, Inc. |
This combined Form 10-Q
represents separate filings by IDACORP, Inc. and Idaho Power Company.
Information contained herein relating to an individual registrant is filed by
that registrant on its own behalf. Idaho Power Company makes no
representations as to the information relating to IDACORP, Inc.s other
operations.
Idaho Power Company meets the
conditions set forth in General Instructions H(1)(a) and (b) of Form 10-Q and
is therefore filing this Form with the reduced disclosure format.
1
COMMONLY USED TERMS |
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ADITC |
- |
Accumulated Deferred Investment Tax Credits |
AFUDC |
- |
Allowance for Funds Used During Construction |
APCU |
- |
Annual Power Cost Update |
BCC |
- |
Bridger Coal Company, a joint venture of IERCo |
Cal ISO |
- |
California Independent System Operator |
CalPX |
- |
California Power Exchange |
CAMP |
- |
Comprehensive Aquifer Management Plan |
CO2 |
- |
Carbon Dioxide |
EPS |
- |
Earnings per share |
ESA |
- |
Endangered Species Act |
ESPA |
- |
Eastern Snake Plain Aquifer |
FCA |
- |
Fixed Cost Adjustment mechanism |
FERC |
- |
Federal Energy Regulatory Commission |
Fitch |
- |
Fitch Ratings |
HCC |
- |
Hells Canyon Complex |
Ida-West |
- |
Ida-West Energy, a subsidiary of IDACORP, Inc. |
IE |
- |
IDACORP Energy, a subsidiary of IDACORP, Inc. |
IERCo |
- |
Idaho Energy Resources Co., a subsidiary of Idaho Power Company |
IFS |
- |
IDACORP Financial Services, a subsidiary of IDACORP, Inc. |
IPUC |
- |
Idaho Public Utilities Commission |
IRP |
- |
Integrated Resource Plan |
IWRB |
- |
Idaho Water Resource Board |
kW |
- |
Kilowatt |
MD&A |
- |
Managements Discussion and Analysis of Financial Condition and Results of Operations |
Moodys |
- |
Moodys Investors Service |
MW |
- |
Megawatt |
MWh |
- |
Megawatt-hour |
NOx |
- |
Nitrogen Oxide |
O&M |
- |
Operations and Maintenance |
OATT |
- |
Open Access Transmission Tariff |
OPUC |
- |
Oregon Public Utility Commission |
PCA |
- |
Power Cost Adjustment |
PCAM |
- |
Power Cost Adjustment Mechanism |
PURPA |
- |
Public Utility Regulatory Policies Act of 1978 |
REC |
- |
Renewable Energy Certificate |
RH BART |
- |
Regional Haze - Best Available Retrofit Technology |
S&P |
- |
Standard & Poors Ratings Services |
SO2 |
- |
Sulfur Dioxide |
SRBA |
- |
Snake River Basin Adjudication |
Valmy |
- |
North Valmy Steam Electric Generating Plant |
VIEs |
- |
Variable Interest Entities |
2
TABLE OF CONTENTS |
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Part I. Financial Information: |
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Item 1. Financial Statements (unaudited) |
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IDACORP, Inc.: |
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4 |
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5-6 |
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7 |
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8 |
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9 |
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Idaho Power Company: |
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10 |
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11-12 |
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13 |
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14 |
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15 |
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16-32 |
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33-34 |
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Item 2. Managements Discussion and Analysis of Financial Condition and Results of |
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Operations |
35-63 |
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Item 3. Quantitative and Qualitative Disclosures About Market Risk |
64 |
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64-65 |
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Part II. Other Information: |
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65 |
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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds |
65 |
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66 |
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66 |
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67 |
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68 |
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SAFE HARBOR STATEMENT
This Form 10-Q contains forward-looking statements intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. Forward-looking statements should be read with the cautionary statements and important factors included in this Form 10-Q at Part I, Item 2- MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - FORWARD-LOOKING INFORMATION. Forward-looking statements are all statements other than statements of historical fact, including without limitation those that are identified by the use of the words anticipates, believes, estimates, expects, intends, plans, predicts, projects, may result, may continue, or similar expressions.
3
PART I FINANCIAL
INFORMATION
Item 1. Financial Statements
IDACORP, Inc.
Condensed Consolidated Statements of Income
(unaudited)
Three months ended |
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March 31, |
||||
|
2010 |
2009 |
||
(thousands of dollars except |
||||
for per share amounts) |
||||
Operating Revenues: |
||||
Electric utility: |
||||
General business |
$ |
203,745 |
$ |
187,927 |
Off-system sales |
34,406 |
28,530 |
||
Other revenues |
14,309 |
11,572 |
||
Total electric utility revenues |
252,460 |
228,029 |
||
Other |
503 |
545 |
||
Total operating revenues |
252,963 |
228,574 |
||
Operating Expenses: |
||||
Electric utility: |
||||
Purchased power |
21,174 |
33,701 |
||
Fuel expense |
37,187 |
39,133 |
||
Power cost adjustment |
48,324 |
15,859 |
||
Other operations and maintenance |
72,094 |
68,541 |
||
Energy efficiency programs |
5,034 |
4,057 |
||
Depreciation |
28,583 |
25,963 |
||
Taxes other than income taxes |
5,680 |
5,062 |
||
Total electric utility expenses |
218,076 |
192,316 |
||
Other expense |
840 |
624 |
||
Total operating expenses |
218,916 |
192,940 |
||
Operating Income |
34,047 |
35,634 |
||
Other Income, Net |
4,481 |
6,921 |
||
(Losses) Earnings of Unconsolidated Equity-Method Investments |
(2,378) |
402 |
||
Interest Expense: |
||||
Interest on long-term debt |
19,441 |
16,639 |
||
Other interest expense, net of AFUDC |
(453) |
836 |
||
Total interest expense |
18,988 |
17,475 |
||
Income Before Income Taxes |
17,162 |
25,482 |
||
Income Tax Expense |
1,305 |
6,796 |
||
Net Income |
15,857 |
18,686 |
||
Adjustment for loss attributable to noncontrolling interests |
206 |
198 |
||
Net Income Attributable to IDACORP, Inc. |
$ |
16,063 |
$ |
18,884 |
Weighted Average Common Shares Outstanding - Basic (000s) |
47,773 |
46,831 |
||
Weighted Average Common Shares Outstanding - Diluted (000s) |
47,885 |
46,876 |
||
Earnings Per Share of Common Stock (basic and diluted): |
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Earnings Attributable to IDACORP, Inc. |
$ |
0.34 |
$ |
0.40 |
Dividends Paid Per Share of Common Stock |
$ |
0.30 |
$ |
0.30 |
The accompanying notes are an integral part of these statements. |
4
IDACORP, Inc.
Condensed Consolidated Balance Sheets
(unaudited)
March 31, |
December 31, |
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|
2010 |
2009 |
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Assets |
(thousands of dollars) |
|||
Current Assets: |
||||
Cash and cash equivalents |
$ |
41,436 |
$ |
52,987 |
Receivables: |
||||
Customer (net of allowance of $1,797 and $1,805, respectively) |
71,518 |
74,987 |
||
Other (net of allowance of $1,400 and $1,073, respectively) |
10,903 |
11,922 |
||
Accrued unbilled revenues |
40,033 |
51,272 |
||
Materials and supplies (at average cost) |
47,535 |
48,054 |
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Fuel stock (at average cost) |
25,006 |
25,634 |
||
Prepayments |
8,810 |
11,111 |
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Deferred income taxes |
31,773 |
31,773 |
||
Other |
4,413 |
2,666 |
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Total current assets |
281,427 |
310,406 |
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|
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Investments |
200,458 |
195,298 |
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|
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Property, Plant and Equipment: |
||||
Utility plant in service |
4,177,048 |
4,160,178 |
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Accumulated provision for depreciation |
(1,565,201) |
(1,558,538) |
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Utility plant in service - net |
2,611,847 |
2,601,640 |
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Construction work in progress |
323,116 |
289,188 |
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Utility plant held for future use |
7,149 |
7,151 |
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Other property, net of accumulated depreciation |
18,915 |
19,029 |
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Property, plant and equipment - net |
2,961,027 |
2,917,008 |
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|
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Other Assets: |
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American Falls and Milner water rights |
22,902 |
24,226 |
||
Company-owned life insurance |
26,866 |
26,654 |
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Regulatory assets |
684,540 |
720,401 |
||
Long-term receivables (net of allowance of $1,861 and $2,157, respectively) |
4,020 |
4,217 |
||
Other |
41,192 |
40,517 |
||
Total other assets |
779,520 |
816,015 |
||
Total |
$ |
4,222,432 |
$ |
4,238,727 |
|
||||
The accompanying notes are an integral part of these statements. |
5
IDACORP, Inc.
Condensed Consolidated Balance Sheets
(unaudited)
March 31, |
December 31, |
|||
|
2010 |
2009 |
||
Liabilities and Equity |
(thousands of dollars) |
|||
Current Liabilities: |
||||
Current maturities of long-term debt |
$ |
131,951 |
$ |
9,340 |
Notes payable |
26,100 |
53,750 |
||
Accounts payable |
53,040 |
83,818 |
||
Taxes accrued |
40,118 |
10,184 |
||
Interest accrued |
25,682 |
20,056 |
||
Other |
51,325 |
41,081 |
||
Total current liabilities |
328,216 |
218,229 |
||
|
||||
Other Liabilities: |
||||
Deferred income taxes |
565,990 |
574,450 |
||
Regulatory liabilities |
284,408 |
287,780 |
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Other |
346,626 |
346,994 |
||
Total other liabilities |
1,197,024 |
1,209,224 |
||
|
||||
Long-Term Debt |
1,290,243 |
1,409,730 |
||
|
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Commitments and Contingencies |
||||
Equity: |
||||
IDACORP, Inc. shareholders equity: |
||||
Common stock, no par value (shares authorized 120,000,000; |
||||
48,097,763 and 47,925,882 shares issued, respectively) |
759,786 |
756,475 |
||
Retained earnings |
650,834 |
649,180 |
||
Accumulated other comprehensive loss |
(7,674) |
(8,267) |
||
Treasury stock (0 and 29,191 shares at cost, respectively) |
- |
(53) |
||
Total IDACORP, Inc. shareholders equity |
1,402,946 |
1,397,335 |
||
Noncontrolling interest |
4,003 |
4,209 |
||
Total equity |
1,406,949 |
1,401,544 |
||
Total |
$ |
4,222,432 |
$ |
4,238,727 |
The accompanying notes are an integral part of these statements. |
6
IDACORP, Inc.
Condensed Consolidated Statements of Cash Flows
(unaudited)
|
Three months ended |
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|
March 31, |
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|
2010 |
2009 |
||
Operating Activities: |
(thousands of dollars) |
|||
Net income |
$ |
15,857 |
$ |
18,686 |
Adjustments to reconcile net income to net cash provided by |
|
|
||
operating activities: |
|
|
||
Depreciation and amortization |
30,435 |
28,280 |
||
Deferred income taxes and investment tax credits |
(23,118) |
14,675 |
||
Changes in regulatory assets and liabilities |
52,036 |
16,405 |
||
Non-cash pension expense |
1,235 |
697 |
||
Losses (earnings) of unconsolidated equity-method investments |
2,378 |
(402) |
||
Distributions from unconsolidated equity-method investments |
- |
3,390 |
||
Gain on sale of assets |
(40) |
(382) |
||
Other non-cash adjustments to net income, net |
(3,148) |
28 |
||
Change in: |
|
|
||
Accounts receivable and prepayments |
4,629 |
(8,119) |
||
Accounts payable and other accrued liabilities |
(29,144) |
(41,655) |
||
Taxes accrued |
29,706 |
8,553 |
||
Other current assets |
12,385 |
8,436 |
||
Other current liabilities |
13,733 |
11,952 |
||
Other assets |
(1,782) |
(1,332) |
||
Other liabilities |
(4,712) |
(14,859) |
||
Net cash provided by operating activities |
100,450 |
44,353 |
||
Investing Activities: |
|
|
||
Additions to property, plant and equipment |
(69,029) |
(49,592) |
||
Proceeds from the sale of non-utility assets |
- |
250 |
||
Investments in affordable housing |
(2,480) |
(850) |
||
Sales of emission allowances and renewable energy certificates |
666 |
2,341 |
||
Investments in unconsolidated affiliates |
(2,200) |
- |
||
Proceeds from the sale of available-for-sale securities |
- |
4,845 |
||
Other |
2,265 |
2,385 |
||
Net cash used in investing activities |
(70,778) |
(40,621) |
||
Financing Activities: |
|
|
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Issuance of long-term debt |
- |
100,000 |
||
Retirement of long-term debt |
(1,064) |
(8,735) |
||
Dividends on common stock |
(14,475) |
(14,353) |
||
Net change in short-term borrowings |
(27,650) |
(550) |
||
Issuance of common stock |
3,130 |
2,469 |
||
Acquisition of treasury stock |
(829) |
(1,408) |
||
Other |
(335) |
(870) |
||
Net cash (used in) provided by financing activities |
(41,223) |
76,553 |
||
Net (decrease) increase in cash and cash equivalents |
(11,551) |
80,285 |
||
Cash and cash equivalents at beginning of the period |
52,987 |
8,828 |
||
Cash and cash equivalents at end of the period |
$ |
41,436 |
$ |
89,113 |
Supplemental Disclosure of Cash Flow Information: |
|
|
||
Cash (received) paid during the period for: |
|
|
||
Income taxes |
$ |
(1,367) |
$ |
(13,060) |
Interest (net of amount capitalized) |
$ |
13,021 |
$ |
9,535 |
Non-cash investing activities |
|
|
||
Additions to property, plant and equipment in accounts payable |
$ |
17,882 |
$ |
4,975 |
Investments in affordable housing |
$ |
4,828 |
$ |
- |
The accompanying notes are an integral part of these statements. |
7
IDACORP, Inc.
Condensed Consolidated Statements of
Comprehensive Income
(unaudited)
Three months ended |
||||
March 31, |
||||
|
2010 |
2009 |
||
(thousands of dollars) |
||||
Net Income |
$ |
15,857 |
$ |
18,686 |
Other Comprehensive Income (Loss): |
||||
Net unrealized holding gains (losses) arising during the period, |
||||
net of tax of $267 and ($570) |
416 |
(887) |
||
Unfunded pension liability adjustment, net of tax |
||||
of $114 and $87 |
177 |
136 |
||
Total Comprehensive Income |
16,450 |
17,935 |
||
Comprehensive loss attributable to noncontrolling interests |
206 |
198 |
||
Comprehensive Income Attributable to IDACORP, Inc. |
$ |
16,656 |
$ |
18,133 |
The accompanying notes are an integral part of these statements. |
8
IDACORP, Inc.
Condensed Consolidated Statements of Equity
(unaudited)
Three months ended |
||||
March 31, |
||||
|
2010 |
2009 |
||
|
(thousands of dollars) |
|||
Common Stock |
||||
Balance at beginning of period |
$ |
756,475 |
$ |
729,576 |
Issued |
3,130 |
2,469 |
||
Other |
181 |
(289) |
||
Balance at end of period |
759,786 |
731,756 |
||
|
|
|||
Retained Earnings |
||||
Balance at beginning of period |
649,180 |
581,605 |
||
Net Income Attributable to IDACORP, Inc. |
16,063 |
18,884 |
||
Common stock dividends ($0.30 per share) |
(14,409) |
(14,081) |
||
Balance at end of period |
650,834 |
586,408 |
||
|
|
|||
Accumulated Other Comprehensive Income (Loss) |
||||
Balance at beginning of period |
(8,267) |
(8,707) |
||
Unrealized gain (loss) on securities (net of tax) |
416 |
(887) |
||
Unfunded pension liability adjustment (net of tax) |
177 |
136 |
||
Balance at end of period |
(7,674) |
(9,458) |
||
|
|
|||
Treasury Stock |
||||
Balance at beginning of period |
(53) |
(37) |
||
Issued |
882 |
1,425 |
||
Acquired |
(829) |
(1,408) |
||
Balance at end of period |
- |
(20) |
||
Total IDACORP, Inc. shareholders equity at end of period |
1,402,946 |
1,308,686 |
||
|
|
|||
Noncontrolling interests |
||||
Balance at beginning of period |
4,209 |
4,434 |
||
Net loss attributed to noncontrolling interest |
(206) |
(198) |
||
Other |
- |
(249) |
||
Balance at end of period |
4,003 |
3,987 |
||
Total equity at end of period |
$ |
1,406,949 |
$ |
1,312,673 |
The accompanying notes are an integral part of these statements. |
9
Idaho Power
Company
Condensed Consolidated Statements of Income
(unaudited)
Three months ended |
||||
March 31, |
||||
|
2010 |
2009 |
||
(thousands of dollars) |
||||
Operating Revenues: |
||||
General business |
$ |
203,745 |
$ |
187,927 |
Off-system sales |
34,406 |
28,530 |
||
Other revenues |
14,309 |
11,572 |
||
Total operating revenues |
252,460 |
228,029 |
||
Operating Expenses: |
||||
Operation: |
||||
Purchased power |
21,174 |
33,701 |
||
Fuel expense |
37,187 |
39,133 |
||
Power cost adjustment |
48,324 |
15,859 |
||
Other operations and maintenance |
72,094 |
68,541 |
||
Energy efficiency programs |
5,034 |
4,057 |
||
Depreciation |
28,583 |
25,963 |
||
Taxes other than income taxes |
5,680 |
5,062 |
||
Total operating expenses |
218,076 |
192,316 |
||
Income from Operations |
34,384 |
35,713 |
||
Other Income: |
||||
Allowance for equity funds used during construction |
3,659 |
764 |
||
Earnings of unconsolidated equity-method investments |
348 |
3,302 |
||
Other income, net |
239 |
6,297 |
||
Total other income |
4,246 |
10,363 |
||
Interest Charges: |
||||
Interest on long-term debt |
19,441 |
16,567 |
||
Other interest |
854 |
1,578 |
||
Allowance for borrowed funds used during construction |
(2,192) |
(1,126) |
||
Total interest charges |
18,103 |
17,019 |
||
Income Before Income Taxes |
20,527 |
29,057 |
||
Income Tax Expense |
2,306 |
9,773 |
||
Net Income |
$ |
18,221 |
$ |
19,284 |
The accompanying notes are an integral part of these statements. |
10
Idaho Power
Company
Condensed Consolidated Balance Sheets
(unaudited)
March 31, |
December 31, |
|||
|
2010 |
2009 |
||
Assets |
(thousands of dollars) |
|||
Electric Plant: |
||||
In service (at original cost) |
$ |
4,177,048 |
$ |
4,160,178 |
Accumulated provision for depreciation |
(1,565,201) |
(1,558,538) |
||
In service - net |
2,611,847 |
2,601,640 |
||
Construction work in progress |
323,116 |
289,188 |
||
Held for future use |
7,149 |
7,151 |
||
Electric plant - net |
2,942,112 |
2,897,979 |
||
|
||||
Investments and Other Property |
110,118 |
108,299 |
||
|
||||
Current Assets: |
||||
Cash and cash equivalents |
38,055 |
21,625 |
||
Receivables: |
||||
Customer (net of allowance of $1,797 and $1,805, respectively) |
71,518 |
74,987 |
||
Other (net of allowance of $181 and $185, respectively) |
9,525 |
10,463 |
||
Taxes receivable |
- |
3,585 |
||
Accrued unbilled revenues |
40,033 |
51,272 |
||
Materials and supplies (at average cost) |
47,535 |
48,054 |
||
Fuel stock (at average cost) |
25,006 |
25,634 |
||
Prepayments |
8,574 |
10,960 |
||
Deferred income taxes |
7,887 |
7,887 |
||
Other |
3,855 |
2,115 |
||
Total current assets |
251,988 |
256,582 |
||
Deferred Debits: |
||||
American Falls and Milner water rights |
22,902 |
24,226 |
||
Company-owned life insurance |
26,866 |
26,654 |
||
Regulatory assets |
684,540 |
720,401 |
||
Other |
39,968 |
39,249 |
||
Total deferred debits |
774,276 |
810,530 |
||
Total |
$ |
4,078,494 |
$ |
4,073,390 |
The accompanying notes are an integral part of these statements. |
11
Idaho Power
Company
Condensed Consolidated Balance Sheets
(unaudited)
March 31, |
December 31, |
|||
|
2010 |
2009 |
||
Capitalization and Liabilities |
(thousands of dollars) |
|||
Capitalization: |
||||
Common stock equity: |
||||
Common stock, $2.50 par value (50,000,000 shares |
||||
authorized; 39,150,812 shares outstanding) |
$ |
97,877 |
$ |
97,877 |
Premium on capital stock |
638,758 |
638,758 |
||
Capital stock expense |
(2,097) |
(2,097) |
||
Retained earnings |
551,539 |
547,695 |
||
Accumulated other comprehensive loss |
(7,674) |
(8,267) |
||
Total common stock equity |
1,278,403 |
1,273,966 |
||
Long-term debt |
1,288,734 |
1,409,730 |
||
Total capitalization |
2,567,137 |
2,683,696 |
||
|
||||
Current Liabilities: |
||||
Long-term debt due within one year |
121,064 |
1,064 |
||
Accounts payable |
52,642 |
83,128 |
||
Notes and accounts payable to related parties |
607 |
1,736 |
||
Taxes accrued |
27,991 |
- |
||
Interest accrued |
25,682 |
20,056 |
||
Other |
50,286 |
40,002 |
||
Total current liabilities |
278,272 |
145,986 |
||
|
||||
Deferred Credits: |
||||
Deferred income taxes |
604,200 |
611,749 |
||
Regulatory liabilities |
284,408 |
287,780 |
||
Other |
344,477 |
344,179 |
||
Total deferred credits |
1,233,085 |
1,243,708 |
||
|
||||
Commitments and Contingencies |
||||
Total |
$ |
4,078,494 |
$ |
4,073,390 |
The accompanying notes are an integral part of these statements. |
12
Idaho Power
Company
Condensed Consolidated Statements of
Capitalization
(unaudited)
March 31, |
December 31, |
|||
|
2010 |
2009 |
||
(thousands of dollars) |
||||
Common Stock Equity: |
||||
Common stock |
$ |
97,877 |
$ |
97,877 |
Premium on capital stock |
638,758 |
638,758 |
||
Capital stock expense |
(2,097) |
(2,097) |
||
Retained earnings |
551,539 |
547,695 |
||
Accumulated other comprehensive loss |
(7,674) |
(8,267) |
||
Total common stock equity |
1,278,403 |
1,273,966 |
||
Long-Term Debt: |
||||
First mortgage bonds: |
||||
6.60% Series due 2011 |
120,000 |
120,000 |
||
4.75% Series due 2012 |
100,000 |
100,000 |
||
4.25% Series due 2013 |
70,000 |
70,000 |
||
6.025% Series due 2018 |
120,000 |
120,000 |
||
6.15% Series due 2019 |
100,000 |
100,000 |
||
4.50% Series due 2020 |
130,000 |
130,000 |
||
6 % Series due 2032 |
100,000 |
100,000 |
||
5.50% Series due 2033 |
70,000 |
70,000 |
||
5.50% Series due 2034 |
50,000 |
50,000 |
||
5.875% Series due 2034 |
55,000 |
55,000 |
||
5.30% Series due 2035 |
60,000 |
60,000 |
||
6.30% Series due 2037 |
140,000 |
140,000 |
||
6.25% Series due 2037 |
100,000 |
100,000 |
||
Total first mortgage bonds |
1,215,000 |
1,215,000 |
||
Amount due within one year |
(120,000) |
- |
||
Net first mortgage bonds |
1,095,000 |
1,215,000 |
||
Pollution control revenue bonds: |
||||
5.15% Series due 2024 |
49,800 |
49,800 |
||
5.25% Series due 2026 |
116,300 |
116,300 |
||
Variable Rate Series 2000 due 2027 |
4,360 |
4,360 |
||
Total pollution control revenue bonds |
170,460 |
170,460 |
||
American Falls bond guarantee |
19,885 |
19,885 |
||
Milner Dam note guarantee |
7,446 |
8,509 |
||
Note guarantee due within one year |
(1,064) |
(1,064) |
||
Unamortized premium/discount - net |
(2,993) |
(3,060) |
||
Total long-term debt |
1,288,734 |
1,409,730 |
||
Total Capitalization |
$ |
2,567,137 |
$ |
2,683,696 |
The accompanying notes are an integral part of these statements. |
13
Idaho Power Company
Condensed
Consolidated Statements of Cash Flows
(unaudited)
|
Three months ended |
|||
|
March 31, |
|||
|
2010 |
2009 |
||
|
(thousands of dollars) |
|||
Operating Activities: |
|
|
||
Net income |
$ |
18,221 |
$ |
19,284 |
Adjustments to reconcile net income to net cash provided by |
|
|
||
operating activities: |
|
|
||
Depreciation and amortization |
30,278 |
28,002 |
||
Deferred income taxes and investment tax credits |
(22,207) |
8,881 |
||
Changes in regulatory assets and liabilities |
52,036 |
16,405 |
||
Non-cash pension expense |
1,235 |
697 |
||
Earnings of unconsolidated equity-method investments |
(348) |
(3,302) |
||
Distributions from unconsolidated equity-method investments |
- |
3,390 |
||
Gain on sale of assets |
(40) |
(382) |
||
Other non-cash adjustments to net income |
(4,709) |
(1,088) |
||
Change in: |
|
|
||
Accounts receivables and prepayments |
3,549 |
(7,550) |
||
Accounts payable |
(28,851) |
(42,182) |
||
Taxes receivable/accrued |
31,368 |
28,746 |
||
Other current assets |
12,385 |
8,436 |
||
Other current liabilities |
13,732 |
11,862 |
||
Other assets |
(1,782) |
(1,332) |
||
Other liabilities |
(4,067) |
(14,809) |
||
Net cash provided by operating activities |
100,800 |
55,058 |
||
Investing Activities: |
|
|
||
Additions to utility plant |
(69,029) |
(49,592) |
||
Sales of emission allowances and renewable energy certificates |
666 |
2,341 |
||
Investments in unconsolidated affiliates |
(2,200) |
- |
||
Other |
1,736 |
(1,761) |
||
Net cash used in investing activities |
(68,827) |
(49,012) |
||
Financing Activities: |
|
|
||
Issuance of long-term debt |
- |
100,000 |
||
Retirement of long-term debt |
(1,064) |
(1,064) |
||
Dividends on common stock |
(14,377) |
(14,228) |
||
Net change in short term borrowings |
- |
(10,300) |
||
Other |
(102) |
(646) |
||
Net cash (used in) provided by financing activities |
(15,543) |
73,762 |
||
Net increase in cash and cash equivalents |
16,430 |
79,808 |
||
Cash and cash equivalents at beginning of the period |
21,625 |
3,141 |
||
Cash and cash equivalents at end of the period |
$ |
38,055 |
$ |
82,949 |
Supplemental Disclosure of Cash Flow Information: |
|
|
||
Cash (received) paid during the period for: |
|
|
||
Income taxes |
$ |
(2,934) |
$ |
(24,481) |
Interest (net of amount capitalized) |
$ |
12,136 |
$ |
9,150 |
Non-cash investing activities: |
|
|
||
Additions to property, plant and equipment in accounts payable |
$ |
17,882 |
$ |
4,975 |
The accompanying notes are an integral part of these statements. |
14
Idaho Power
Company
Condensed Consolidated Statements of Comprehensive
Income
(unaudited)
Three months ended |
||||
March 31, |
||||
|
2010 |
2009 |
||
(thousands of dollars) |
||||
Net Income |
$ |
18,221 |
$ |
19,284 |
Other Comprehensive Income (Loss): |
||||
Net unrealized holding gains (losses) arising during the period, |
||||
net of tax of $267 and ($570) |
416 |
(887) |
||
Unfunded pension liability adjustment, net of tax |
||||
of $114 and $87 |
177 |
136 |
||
Total Comprehensive Income |
$ |
18,814 |
$ |
18,533 |
The accompanying notes are an integral part of these statements. |
15
IDACORP, INC. AND IDAHO POWER COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
This Quarterly
Report on Form 10-Q is a combined report of IDACORP, Inc. (IDACORP) and Idaho
Power Company (Idaho Power). Therefore, the Notes to the condensed
consolidated financial statements apply to both IDACORP and Idaho Power.
However, Idaho Power makes no representation as to the information relating to
IDACORPs other operations.
Nature of Business
IDACORP is a
holding company formed in 1998 whose principal operating subsidiary is Idaho
Power. IDACORP is subject to the provisions of the Public Utility Holding
Company Act of 2005, which provides certain access to books and records to the
Federal Energy Regulatory Commission (FERC) and state utility regulatory
commissions and imposes certain record retention and reporting requirements on
IDACORP.
Idaho Power is
an electric utility with a service territory covering approximately 24,000
square miles in southern Idaho and eastern Oregon. Idaho Power is regulated by
the FERC and the state regulatory commissions of Idaho and Oregon. Idaho Power
is the parent of Idaho Energy Resources Co. (IERCo), a joint venturer in
Bridger Coal Company (BCC), which supplies coal to the Jim Bridger generating
plant owned in part by Idaho Power.
IDACORPs
other subsidiaries include IDACORP Financial Services, Inc. (IFS), an investor
in affordable housing and other real estate investments; Ida-West Energy
Company (Ida-West), an operator of small hydroelectric generation projects that
satisfy the requirements of the Public Utility Regulatory Policies Act of 1978
(PURPA); and IDACORP Energy (IE), a marketer of energy commodities, which wound
down operations in 2003.
Principles of Consolidation
IDACORPs and
Idaho Powers consolidated financial statements include the accounts of each
company, the subsidiaries that the companies control, and any variable interest
entities (VIEs) for which the companies are the primary beneficiaries. All
significant intercompany balances have been eliminated in consolidation.
Investments in subsidiaries that the companies do not control and investments
in VIEs for which the companies are not the primary beneficiaries, but have the
ability to exercise significant influence over operating and financial
policies, are accounted for using the equity method of accounting.
In January
2010, IDACORP and Idaho Power adopted amendments to prior consolidation
guidance. The amendments affected the overall consolidation analysis of VIEs
and required IDACORP and Idaho Power to reconsider their previous conclusions
relating to the consolidation of VIEs, including (1) whether an entity is a
VIE, (2) whether either IDACORP or Idaho Power are the VIEs primary beneficiary,
and (3) what type of financial statement disclosures are required. The
adoption of this guidance did not change the entities that IDACORP or Idaho
Power consolidate.
The entities
that IDACORP and Idaho Power consolidate consist primarily of the wholly-owned
subsidiaries discussed above. In addition, IDACORP consolidates one VIE,
Marysville Hydro Partners (Marysville), which is a joint venture owned 50
percent by Ida-West and 50 percent by Environmental Energy Company (EEC).
Marysville has approximately $25 million of assets, primarily a hydroelectric
plant, and approximately $17 million of intercompany long-term debt, which is
eliminated in consolidation. EEC has borrowed amounts from Ida-West to fund a
portion of its required capital contributions to Marysville. The loans are
payable from EECs share of distributions and are secured by the stock of EEC
and EECs interest in Marysville. Ida-West is the primary beneficiary because
the ownership of the intercompany note and the EEC note result in it
controlling the entity. Creditors of Marysville have no recourse to the
general credit of IDACORP and there are no other arrangements that could
require IDACORP to provide financial support to Marysville or expose IDACORP to
losses.
Through IERCo,
Idaho Power holds a variable interest in BCC, a VIE for which it is not the
primary beneficiary. IERCo is not the primary beneficiary because the power to
direct the activities that most significantly impact the economic performance
of BCC is shared with the joint venture partner. IERCos carrying value is $87
million and its maximum exposure to loss at BCC is the carrying value, any
additional future contributions to the mine and the $63 million guarantee for
reclamation costs at the mine which is discussed further in Note 8
Commitments.
16
Through IFS,
IDACORP also holds variable interests in VIEs for which it is not the primary
beneficiary. These VIEs are historic rehabilitation and affordable housing
developments in which IFS holds limited partnership interests ranging from five
to 99 percent. As a limited partner, IFS does not control these entities and
they are not consolidated. These investments were acquired between 1996 and
2010. IFSs maximum exposure to loss in these developments is limited to its
net carrying value, which was $82 million at March 31, 2010.
Financial Statements
In the opinion
of IDACORP and Idaho Power, the accompanying unaudited condensed consolidated
financial statements contain all adjustments necessary to present fairly their
consolidated financial positions as of March 31, 2010, and consolidated results
of operations for the three months ended March 31, 2010, and 2009, and
consolidated cash flows for the three months ended March 31, 2010, and 2009.
These adjustments are of a normal and recurring nature. These financial
statements do not contain the complete detail or footnote disclosure concerning
accounting policies and other matters that would be included in full-year
financial statements and should be read in conjunction with the audited
consolidated financial statements included in IDACORPs and Idaho Powers
Annual Report on Form 10-K for the year ended December 31, 2009. The results
of operations for the interim periods are not necessarily indicative of the results
to be expected for the full year.
Use of Estimates
The
preparation of condensed consolidated financial statements in accordance with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent liabilities, as of the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results experienced could differ materially from
those estimates.
Reclassifications
Certain prior
year amounts have been reclassified to conform to the current year
presentation. The reclassifications did not impact IDACORPs and Idaho Powers
net income or total equity, and include the following:
Third-party transmission expense was combined with purchased power in IDACORP and Idaho Powers condensed consolidated statements of income as the balance of the third party transmission expense alone is immaterial;
Gain on sale of emission allowances was combined with other operations and maintenance in IDACORP and Idaho Powers condensed consolidated statements of income as the balance of gain on sale of emission allowances alone is immaterial;
Other operations and maintenance in the operating expenses section of Idaho Powers condensed consolidated statements of income were combined to be consistent with presentation in IDACORPs condensed consolidated statements of income;
Allowance for uncollectible accounts was offset against associated accounts receivable and presented in a parenthetical notation in IDACORP and Idaho Powers condensed consolidated balance sheets;
Excess tax benefit from share-based payment arrangements was combined with other non-cash adjustments to net income in the operating section and with other in the financing section of IDACORPs condensed consolidated statements of cash flows; and
Amortization of affordable housing was removed from depreciation and amortization and combined with undistributed earnings of unconsolidated subsidiaries, the total of which was then separated into losses (earnings) of unconsolidated equity-method investments and distributions from unconsolidated equity method investments in the operating section of IDACORPs condensed consolidated statements of cash flows.
2. INCOME TAXES:
In accordance with interim
reporting requirements, IDACORP and Idaho Power use an estimated annual
effective tax rate for computing provisions for income taxes. An estimate of
annual income tax expense (or benefit) is made each interim period using
estimates for annual pre-tax income, income tax adjustments and tax credits.
The estimated annual effective tax rates do not include discrete events such as
tax law changes, examination settlements or method changes. Discrete events
are recorded in the period in which they occur.
17
The estimated annual effective tax
rate is applied to year-to-date pre-tax income to achieve income tax expense
(or benefit) for the interim period consistent with the annual estimate. In
subsequent interim periods, income tax expense (or benefit) for the period is
computed as the difference between the year-to-date amount reported for the
previous interim period and the current periods year-to-date amount.
An analysis of income tax expense
for the three months ending March 31 is as follows (in thousands of dollars):
|
IDACORP |
Idaho Power |
|||||||
|
2010 |
2009 |
2010 |
2009 |
|||||
Income tax provision |
$ |
4,914 |
$ |
6,796 |
$ |
5,915 |
$ |
9,773 |
|
ADITC amortization |
|
(4,512) |
|
- |
|
(4,512) |
|
- |
|
Medicare Part D subsidy |
|
903 |
|
- |
|
903 |
|
- |
|
|
Income tax expense |
$ |
1,305 |
$ |
6,796 |
$ |
2,306 |
$ |
9,773 |
|
|
|
|
|
|
|
|
|
|
Effective tax rate |
|
7.5% |
|
26.5% |
|
11.2% |
|
33.6% |
|
The decrease in the 2010 estimated
annual effective tax rates from 2009 is primarily due to lower pre-tax earnings
at IDACORP and Idaho Power and Idaho Powers additional amortization of
accumulated deferred investment tax credits (ADITC), partially offset by a
charge related to the federal health care legislation enacted in the first
quarter of 2010. Regulatory flow-through tax adjustments at Idaho Power and
tax credits at IFS were comparable quarter-over-quarter. For further
information regarding ADITC amortization, see Note 3 REGULATORY MATTERS -
Idaho Settlement Agreement.
The Patient Protection and
Affordable Care Act and the Health Care and Education Reconciliation Act were
enacted in March 2010. One provision of this legislation eliminates the
deductibility of employer health care costs for retiree prescription drug
expenses that are covered by federal subsidy payments equivalent to Medicare
Part D. While this provision is not effective until 2013, relevant income tax
accounting guidance requires recognition of the future effects of new law in
the period of enactment. Due to the regulatory treatment of postretirement
benefit costs, the increase in certain postretirement costs relating to the legislation
is deferred as a regulatory asset. Accordingly, Idaho Power reduced its
deferred tax asset related to future deductible retiree prescription drug
expenses by $2.3 million, increased regulatory assets by $2.4 million,
increased deferred tax liabilities by $1 million and incurred a charge of $0.9
million for the three months ended March 31, 2010.
Status of Audit Proceedings
In May 2009,
IDACORP formally entered the Internal Revenue Service (IRS) Compliance
Assurance Process (CAP) program for its 2009 tax year. The CAP program
provides for IRS examination throughout the year. The 2009 examination is
expected to be completed in 2010. In January 2010, IDACORP was accepted into
CAP for its 2010 tax year. IDACORP and Idaho Power are unable to predict the
outcome of these examinations.
Specifically within the 2009 CAP
examination, the IRS began its audit of Idaho Powers current method of uniform
capitalization. In September 2009, the IRS issued Industry Director Directive
#5 (IDD), which discusses the IRSs compliance priorities and audit techniques
related to the allocation of mixed service costs in the uniform capitalization
methods of electric utilities. The IRS and Idaho Power are jointly working
through the impact the IDD guidance has on Idaho Powers uniform capitalization
method. Idaho Power expects that the examination will be completed during
2010. Resolution of this matter would result in a decrease to Idaho Powers
unrecognized tax benefits for its 2009 uniform capitalization deduction by $1.1
million, may reduce Idaho Powers need to amortize additional ADITC in 2010 and
is not expected to have an adverse effect on Idaho Powers financial position,
results of operations, or cash flows.
3. REGULATORY MATTERS:
Idaho Settlement Agreement
On January 13, 2010, the Idaho
Public Utilities Commission (IPUC) approved a settlement agreement among Idaho
Power, several of Idaho Powers customers, the IPUC Staff and others.
Significant elements of the settlement agreement include:
A general rate moratorium in effect until January 1, 2012. The moratorium does not apply to other specified revenue requirement proceedings, such as the power cost adjustment (PCA), the fixed cost adjustment (FCA), pension funding, advanced metering infrastructure (AMI), energy efficiency rider, and government imposed fees.
18
A specified distribution of the expected reduction in 2010 PCA rates that would reduce customer rates, provide some general rate relief to Idaho Power and reset base power supply costs for the PCA. This provision anticipated a significant reduction in PCA rates for the 2010-2011 PCA year. The PCA reduction and base rate adjustment is discussed in 2010 PCA filing below.
A provision to share with Idaho customers 50 percent of any Idaho-jurisdictional earnings in excess of a 10.5 percent return on equity in any calendar year from 2009 to 2011.
A provision to allow additional amortization of ADITC if Idaho Powers actual return on equity in its Idaho jurisdiction is below 9.5 percent in any calendar year from 2009 to 2011. Idaho Power is permitted to amortize additional ADITC in an amount up to $45 million over the three-year period, but could use no more that $15 million in any one year unless there is a carryover. Carryover amounts are added to the $15 million annual allowance up to a maximum amortization of $25 million in any one year.
Because Idaho Powers 2009 Idaho-jurisdiction
return on equity was between 9.5 and 10.5 percent, the sharing and additional
amortization provisions were not triggered, and the ADITC available for
additional amortization in 2010 is $25 million. For the three months ended
March 31, 2010, Idaho Power recorded additional ADITC amortization of $4.5
million as a result of including an estimated annual amount in its effective
tax rate. The actual amount of additional ADITC recorded in the full year 2010
will depend on Idaho Powers annual return on year-end equity, and the amounts
recorded in each quarter will vary and may ultimately be reversed.
The agreement also included a
provision to reestablish the base level for net power supply costs effective
with the June 1, 2010, PCA rate change. On April 13, 2010, the IPUC approved
an increase of up to $63.7 million for such base net power supply costs,
deferring final calculation to Idaho Powers 2010 PCA case. The open issue
relates to Idaho Powers proposed increase of $25 million in coal supply costs
for the Jim Bridger plant. The increase in base net power supply costs is
expected to bring Idaho Powers total base net power supply costs closer to its
actual net power supply costs, and therefore reduce the magnitude of Idaho
Powers future annual PCA adjustments.
2010 PCA Filing
On April 15, 2010, Idaho Power made
its annual PCA filing with the IPUC, requesting approval of its 2010 PCA and an
increase in base rates pursuant to the terms of the settlement agreement. As
filed, these two rate adjustments would be a $146.7 million 2010 PCA reduction
and an $88.7 million increase to base rates, both to become effective June 1,
2010. The base rate increase includes the $63.7 million increase in Idaho
Powers annual base net power supply costs, and a $25 million general increase
in Idaho Powers annual base rates.
Other Idaho 2010 Filings
Rate Filings: In March
2010, Idaho Power made the following three rate filings with the IPUC, each
with a requested effective date of June 1, 2010:
Fixed Cost Adjustment: Idaho Powers FCA filing for the 2009 calendar year proposes to collect $6.3 million for one year, a $3.6 million annual increase over current rates. The $6.3 million reflects amounts accrued in 2009 under the mechanism.
Pension: Idaho Power filed a request to recover $5.4 million of pension contributions that it expects to make in 2010. In accordance with IPUC orders, Idaho Power is deferring its Idaho-jurisdiction pension expense to a regulatory asset. On February 17, 2010, the IPUC approved a recovery methodology that would permit Idaho Power to include in future rate cases a reasonable amortization and recovery of cash contributions. Deferred pension costs are expected to be amortized to expense to match the revenues received when pension contributions are recovered through rates.
AMI: Idaho Power filed for a $2.4 million annual increase in base rates related to AMI.
Energy Efficiency Prudency
Determination: On March 15, 2010, Idaho Power filed an application with
the IPUC requesting an order designating expenditures of $50.7 million incurred
in 2008 and 2009 as prudently incurred expenses.
On April 14, 2010, the IPUC
completed its review of energy efficiency rider expenditures that Idaho Power
made during the 2002 through 2007 period and found that remaining amounts
totaling $14.7 million were prudently incurred and approved for ratemaking
purposes.
19
Oregon 2009 General Rate Case Settlement
On February 24, 2010, the Oregon
Public Utility Commission (OPUC) approved a $5 million, or 15.4 percent, increase
in base rates. The new rates were effective March 1, 2010 and are based on a
return on equity of 10.175 percent and an overall rate of return of 8.061
percent. This increase results from a joint stipulation filed by Idaho Power
that settled the revenue requirement issues surrounding a general rate case
filed by Idaho Power on July 31, 2009.
Oregon Power Cost Recovery Mechanisms
Idaho Powers
power cost recovery mechanism in Oregon went into effect in 2008. It has two
components: the annual power cost update (APCU) and the power cost adjustment
mechanism (PCAM). The combination of the APCU and the PCAM allows Idaho Power
to recover excess net power supply costs in a more timely fashion than through
the previously existing deferral process.
PCAM: On February 26, 2010, Idaho Power filed its PCAM application
for the 2009 year with the OPUC. The filing stated that actual net
power supply costs were within the deadband, which is the range of deviations
within which Idaho Power absorbs cost increases or decreases, resulting in no
request for a deferral.
APCU: On April 15, 2010,
Idaho Power filed a stipulation combining the March forecast and October update
with the OPUC. Approval of the stipulation would result in a $5.5 million
annual increase in Oregon rates, effective June 1, 2010. The target date for
an OPUC order is May 28, 2010.
Deferred Net Power Supply Costs
Changes in deferred power supply
costs during the quarter were as follows (in thousands of dollars):
|
|
Idaho |
|
Oregon(1) |
|
Total |
|
Balance at December 31, 2009 |
$ |
71,412 |
$ |
13,221 |
$ |
84,633 |
|
Impact of current period net power supply costs |
|
(19,839) |
|
(44) |
|
(19,883) |
|
Prior costs expensed and recovered through rates |
|
(27,996) |
|
(445) |
|
(28,441) |
|
SO2 allowances and REC sales credited to account |
|
(600) |
|
(28) |
|
(628) |
|
Interest and other |
|
271 |
|
220 |
|
491 |
|
Balance at March 31, 2010 |
$ |
23,248 |
$ |
12,924 |
$ |
36,172 |
|
(1) Oregon power supply cost deferrals are subject to a statute that specifically limits rate amortizations of deferred costs to six percent of gross Oregon revenue per year (approximately $2 million). Deferrals are amortized sequentially. |
|||||||
4. LONG-TERM DEBT:
As of March 31, 2010, IDACORP had
approximately $574 million remaining on a shelf registration statement that can
be used for the issuance of debt securities or common stock.
In April 2010, Idaho Power received
approval from the IPUC, the OPUC and the Public Service Commission of Wyoming
for the issuance of up to $500 million in aggregate principal amount of one or
more series of first mortgage bonds and unsecured debt securities. The order
from the IPUC approved the issuance of the securities over a two-year period,
beginning on April 19, 2010, subject to extension upon request to the IPUC.
5. NOTES PAYABLE:
Credit Facilities
IDACORP has a $100 million credit
facility and Idaho Power has a $300 million credit facility, both of which
expire on April 25, 2012. Commercial paper may be issued up to the amounts
supported by the credit facilities. Under these facilities the companies pay a
facility fee on the commitment, quarterly in arrears, based on its rating for
senior unsecured long-term debt securities without third-party credit
enhancement as provided by Moodys Investors Service and Standard & Poors
Ratings Services.
At March 31, 2010, no loans were
outstanding on either IDACORPs facility or Idaho Powers facility. At March
31, 2010, Idaho Power had regulatory authority to incur up to $450 million of
short-term indebtedness.
20
Balances and interest rates of
short-term borrowings were as follows at March 31, 2010, and December 31, 2009
(in thousands of dollars):
|
|
March 31, 2010 |
December 31, 2009 |
||||||||||
|
|
Idaho |
Idaho |
||||||||||
|
|
IDACORP |
Power |
Total |
IDACORP |
Power |
Total |
||||||
Commercial paper |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
outstanding |
$ |
26,100 |
$ |
- |
$ |
26,100 |
$ |
53,750 |
$ |
- |
$ |
53,750 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
interest rate |
|
0.35% |
|
- |
|
0.35% |
|
0.41% |
|
- |
|
0.41% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6. COMMON STOCK:
The following table summarizes
shares of IDACORP stock issued during the three months ended March 31, 2010:
|
Shares issued |
|
Balance at December 31, 2009 |
47,925,882 |
|
Dividend reinvestment and stock purchase plan |
37,829 |
|
Employee savings plan |
30,211 |
|
Long-term incentive and compensation plan (LTICP) (1) |
90,548 |
|
Restricted stock plan |
13,293 |
|
Balance at March 31, 2010 |
48,097,763 |
|
|
|
|
(1) Included in the LTICP activity are 15,800 shares that were issued pursuant to the exercise of stock options on December 30, 2009, and settled on January 4, 2010. |
||
IDACORP enters into sales agency agreements
as a means of selling its common stock from time to time. As of March 31,
2010, there were 2.1 million shares remaining available to be sold on the
current sales agency agreement.
Restrictions on Dividends
A covenant under IDACORPs credit
facility and Idaho Powers credit facility requires IDACORP and Idaho Power to
maintain leverage ratios of consolidated indebtedness to consolidated total
capitalization, as defined therein, of no more than 65 percent at the end of
each fiscal quarter.
Idaho Powers Revised Code of
Conduct approved by the IPUC on April 21, 2008, states that Idaho Power will
not pay any dividends to IDACORP that will reduce Idaho Powers common equity
capital below 35 percent of its total adjusted capital without IPUC approval.
Idaho Powers ability to pay
dividends on its common stock held by IDACORP and IDACORPs ability to pay
dividends on its common stock are limited to the extent payment of such
dividends would violate the covenants in their respective credit facilities or
Idaho Powers Revised Code of Conduct. At March 31, 2010, the leverage ratios
for IDACORP and Idaho Power were 51 percent and 52 percent, respectively.
Based on these restrictions, IDACORPs and Idaho Powers dividends were limited
to $562 million and $519 million, respectively, at March 31, 2010. There are
additional covenants, subject to exceptions, that prohibit or restrict: certain
investments or acquisitions, mergers or sale or disposition of property without
consent; the creation of certain liens; and any agreements restricting dividend
payments to the company from any material subsidiary. At March 31, 2010,
IDACORP and Idaho Power were in compliance with all facility covenants.
Idaho Powers articles of
incorporation contain restrictions on the payment of dividends on its common
stock if preferred stock dividends are in arrears. Idaho Power has no
preferred stock outstanding.
21
Idaho Power must obtain approval of
the OPUC before it could directly or indirectly loan funds or issue notes or
give credit on its books to IDACORP.
7. EARNINGS PER SHARE:
The following table presents the
computation of IDACORPs basic and diluted earnings per share (EPS) for the
three months ended March 31, 2010 and 2009 (in thousands, except for per share
amounts):
|
Three months ended |
|||||||
|
March 31, |
|||||||
|
2010 |
2009 |
||||||
Numerator: |
|
|
|
|
||||
|
Net income attributable to IDACORP, Inc. |
$ |
16,063 |
$ |
18,884 |
|||
Denominator: |
|
|
|
|
||||
|
Weighted-average common shares outstanding - basic |
|
47,773 |
|
46,831 |
|||
|
Effect of dilutive securities: |
|
|
|
|
|||
|
|
Options |
|
41 |
|
13 |
||
|
|
Restricted Stock |
|
71 |
|
32 |
||
|
|
|
Weighted-average common shares outstanding diluted |
|
47,885 |
|
46,876 |
|
Basic and diluted earnings per share |
$ |
0.34 |
$ |
0.40 |
||||
|
|
|
|
|
||||
The diluted EPS computation
excluded 346,000 options for the three months ended March 31, 2010, because the
options exercise prices were greater than the average market price of the
common stock during that period. For the same period in 2009, there were
687,485 options excluded from the diluted EPS computation for the same reason.
In total, 585,662 options were outstanding at March 31, 2010, with expiration
dates between 2010 and 2015.
8. COMMITMENTS:
Purchase Obligations
The following item is the only
material change to purchase obligations made outside of the ordinary course of
business during the first quarter of 2010:
Idaho Power entered into a purchase power agreement with USG Oregon, LLC for the purchase of energy from the Neal Hot Springs Unit #1 geothermal electric generation facility. The project will be located near Vale, Oregon and the expected output will be approximately 22 MW, with an estimated on-line date of late 2012. Idaho Powers purchases under the contract are expected to total $569 million from 2011-2037. The agreement is pending approval from the IPUC.
Guarantees
Idaho Power has agreed to guarantee the performance of reclamation
activities and obligations at BCC, of which IERCo owns a one-third interest. This
guarantee, which is renewed each December, was $63 million at March 31, 2010. BCC
has a reclamation trust fund set aside specifically for the purpose of paying
these reclamation costs. BCC continually assesses the adequacy of the
reclamation trust fund and its estimate of future reclamation costs. To ensure
that the reclamation trust fund maintains adequate reserves, BCC has the
ability to add a per-ton surcharge to coal sales. In 2010, BCC began applying
a nominal surcharge to coal sales in order to maintain adequate reserves in the
reclamation trust fund. Because of the existence of the fund and the ability
to apply a per-ton surcharge, the estimated fair value of this guarantee is
minimal.
9. CONTINGENCIES:
Western Energy Proceedings at the FERC
In this report, the term western energy situation is used to refer to the California energy crisis that occurred during 2000 and 2001, and the energy shortages, high prices and blackouts in the western United States. High prices for electricity in California and in western wholesale markets during 2000 and 2001 caused numerous purchasers of electricity in those markets to initiate proceedings seeking refunds or other forms of relief and FERC to initiate its own investigations. Some of these proceedings (the western energy proceedings) remain pending before the FERC or on appeal to the United States Court of Appeals for the Ninth Circuit (Ninth Circuit).
22
There are pending in the Ninth
Circuit approximately 200 petitions for review of numerous FERC orders
regarding the western energy situation. Decisions in these appeals may have
implications with respect to other pending cases, including those to which
Idaho Power or IE are parties. Idaho Power and IE intend to vigorously defend
their positions in these proceedings, but are unable to predict the outcome of
these matters. Except as to the matters described below under Pacific
Northwest Refund, Idaho Power and IE believe that settlement releases they
have obtained that are described below under California Refund and Market
Manipulation will restrict potential claims that might result from the
disposition of the pending Ninth Circuit review petitions and that these
matters will not have a material adverse effect on their consolidated financial
positions, results of operations or cash flows.
California Refund: This
proceeding originated with an effort by agencies of the State of California and
investor-owned utilities in California to obtain refunds for a portion of the
spot market sales from sellers of electricity into California markets from
October 2, 2000, through June 20, 2001. The FERC has issued numerous orders
establishing price mitigation plans for sales in the California wholesale
electricity market, including the methodology for determining refunds. IE and
numerous other parties have petitioned the Ninth Circuit for review of the FERCs
orders on California refunds. As additional FERC orders have been issued,
further petitions for review have been filed before the Ninth Circuit, which
from time to time has identified discrete cases that can proceed to briefing
and decision while it stayed action on the other consolidated cases.
On May 22, 2006, the FERC approved
an Offer of Settlement between and among IE and Idaho Power, the California
Parties (Pacific Gas & Electric Company, San Diego Gas & Electric
Company, Southern California Edison Company, the California Public Utilities
Commission, the California Electricity Oversight Board, the California
Department of Water Resources (CDWR) and the California Attorney General) and
additional parties that elected to be bound by the settlement. The settlement
disposed of matters encompassed by the California refund proceeding, as well as
market manipulation claims and investigations relating to the western energy
situation among and between the parties agreeing to be bound by it. Although
many market participants agreed to be bound by the settlement, other market
participants, representing a small minority of potential refund claims,
initially elected not to be bound by the settlement. From time to time, as the
California Parties have reached settlements with those other market
participants, they have elected to opt into the IE-Idaho Power-California
Parties settlement. The settlement provided for approximately $23.7 million
of IEs and Idaho Powers estimated $36 million rights to accounts receivable
from the California Independent System Operator (Cal ISO) and the California
Power Exchange (CalPX) to be assigned to an escrow account for refunds and for
an additional $1.5 million of accounts receivable to be retained by the CalPX
until the conclusion of the litigation. The additional $1.5 million of
accounts receivable retained by the CalPX is available to fund the claims of
non-settling parties if they prevail in the remaining litigation of these California
market matters. Any additional amounts owed to non-settling parties would be
funded by other amounts owed to IE and Idaho Power by the Cal ISO and CalPX, or
directly by IE and Idaho Power, and any excess funds remaining at the end of
the case would be returned to IE and Idaho Power. The remaining IE and Idaho
Power receivables were paid to IE and Idaho Power under the settlement.
In an August 2006 decision, the
Ninth Circuit ruled that all transactions that occurred within the CalPX and
the Cal ISO markets were proper subjects of the refund proceeding. In that
decision the Ninth Circuit refused to expand the proceedings into the bilateral
market, approved the refund effective date as October 2, 2000, required the
FERC to consider claims that some market participants had violated governing
tariff obligations at an earlier date than the refund effective date, and
expanded the scope of the refund proceeding to include transactions within the
CalPX and Cal ISO markets outside the limited 24-hour spot market and energy
exchange transactions. Parts of the decision exposed sellers to increased
claims for potential refunds. The Ninth Circuit issued its mandate on April
15, 2009, thereby officially returning the cases to the FERC for further action
consistent with the courts decision.
23
On November 19, 2009, the FERC
issued an order to implement the Ninth Circuits remand. The remand order
established a trial-type hearing in which participants will be permitted to
submit information regarding (i) specified tariff violations committed by any
public utility seller from January 1, 2000 - October 2, 2000 resulting in a
transaction that set a market clearing price for the trading period when the
violation occurred, and (ii) claims for refunds for multi-day transactions and
energy exchange transactions entered into during the refund period (October 2,
2000 June 20, 2001). Numerous parties, including IE and Idaho Power, filed
motions to clarify the FERCs order. Although IE and Idaho Power are unable to
predict when or how FERC will rule on these motions, the effect of the remand
order for IE and Idaho Power is confined to the minority of market participants
that are not bound by the IE-Idaho Power-California Parties settlement
described above. Accordingly, IE and Idaho Power believe the remanded
proceedings will not have a material adverse effect on their consolidated
financial positions, results of operations or cash flows.
In 2005, the FERC established a
framework for sellers wanting to demonstrate that the generally applicable FERC
refund methodology interfered with the recovery of costs. IE and Idaho Power
made such a cost filing, which was rejected by the FERC. On June 18, 2009,
FERC issued an order stating that it was not ruling on IEs and Idaho Powers
request for rehearing of the cost filing rejection because their request had
been withdrawn in connection with the IE-Idaho Power-California Parties
settlement. On July 8, 2009, IE and Idaho Power sought further rehearing at
the FERC because their withdrawal pertained only to the parties with whom IE
and Idaho Power had settled. On June 18, 2009, in a separate order, the FERC
ruled that only net refund recipients were responsible for the costs associated
with cost filings. While most net refund recipients are bound by the
settlement, until the Cal ISO completes its refund calculations, it is
uncertain whether there are any net refund recipients who are not bound by the
settlement. If there are no such parties, then IEs and Idaho Powers request for
rehearing will be moot. FERC has not yet ruled on the request for rehearing.
IE and Idaho Power are unable to predict how or when the FERC might rule, but
the effect of any such ruling is confined to obligations of IE and Idaho Power
to the small minority of claims of market participants that are not bound by
the settlement. Accordingly, IE and Idaho Power believe this matter will not
have a material adverse effect on their consolidated financial positions,
results of operations or cash flows.
Market Manipulation: On
June 25, 2003, the FERC ordered approximately 50 entities that participated in
the western wholesale power markets between January 1, 2000, and June 20, 2001,
including Idaho Power, to show cause why certain trading practices did not constitute
gaming or other forms of proscribed market behavior in concert with another party
(partnership) in violation of the Cal ISO and CalPX Tariffs. In 2004, the FERC
dismissed the partnership show cause proceeding against Idaho Power. Later in
2004, the FERC approved a settlement of the gaming proceeding without finding
of wrongdoing by Idaho Power.
The orders establishing the scope
of the show cause proceedings are presently the subject of review petitions in
the Ninth Circuit. On March 29, 2010, IE and Idaho Power filed a motion with
the Ninth Circuit to dismiss 11 of the 12 petitions for review of FERCs orders
establishing the scope of the show cause proceedings as they relate to IE and
Idaho Power. Although IE and Idaho Power had obtained the consent to the
motion from the 11 petitioners in those proceedings, the Ninth Circuit
misconstrued the motion and instead granted on April 1, 2010, a motion to
withdraw IE and Idaho Power interventions in the review proceedings. On April
9, 2010, with the consent of the same 11 petitioners, IE and Idaho Power filed
a motion for reconsideration with the Ninth Circuit, again requesting dismissal
of the 11 petitions as they pertain to IE and Idaho Power. Although IE and
Idaho Power are unable to predict how or when the Ninth Circuit will act on the
motion for reconsideration or the review petitions, in light of the settlement
described above, IE and Idaho Power believe this matter will not have a
material adverse effect on their consolidated financial positions, results of
operations or cash flows.
On June 25, 2003, the FERC also
issued an order instituting an investigation of anomalous bidding behavior and
practices in the western wholesale markets for the time period May 1, 2000,
through October 1, 2000, but the FERC terminated its investigations as to Idaho
Power on May 12, 2004. California government agencies and California investor-owned
utilities have appealed the FERCs termination of this investigation as to
Idaho Power and more than 30 other market participants. IE and Idaho Power are
unable to predict the outcome of these petitions for review proceedings, but
believe that the settlement releases govern any potential claims that might
arise and that this matter will not have a material adverse effect on their
consolidated financial positions, results of operations or cash flows.
Pacific Northwest Refund:
On July 25, 2001, the FERC issued an order establishing a proceeding separate
from the California refund proceeding to determine whether there may have been
unjust and unreasonable charges for spot market sales in the Pacific Northwest
during the period December 25, 2000, through June 20, 2001, because the spot
market in the Pacific Northwest was affected by the dysfunction in the
California market. In 2003, the FERC terminated the proceeding and declined to
order refunds, but in 2007 the Ninth Circuit issued an opinion, in Port of
Seattle, Washington v. FERC, remanding to the FERC the orders that declined
to require refunds. The Ninth Circuits opinion instructed the FERC to
consider whether evidence of market manipulation would have altered the agencys
conclusions about refunds and directed the FERC to include sales originating in
the Pacific Northwest to the CDWR in the scope of proceeding. The Ninth
Circuit officially returned the case to the FERC on April 16, 2009. On
September 4, 2009, IE and Idaho Power joined with a number of other parties in
a joint petition for a writ of certiorari to the U.S. Supreme Court, which was
denied on January 11, 2010.
24
In separate filings, the California
Parties, which no longer include the California Electricity Oversight Board,
and the City of Tacoma, Washington (Tacoma) and the Port of Seattle, Washington
(Port of Seattle) asked the FERC to reorganize and restructure the case to
enable them to pursue claims that all spot market sales in the Cal ISO and
CalPX markets and in the Pacific Northwest from January 1, 2000 through June
20, 2001 should be subject to refund and repriced, because market manipulation
and tariff violations affected spot market prices. Their requests would expand
the scope of the refund period in the Pacific Northwest proceeding from the
December 25, 2000 through June 20, 2001 period previously considered by the
FERC. On May 22, 2009, the California Parties filed a motion with the FERC to
sever claims regarding sales originating in the Pacific Northwest to CDWR from
the remainder of the Pacific Northwest proceedings and to consolidate their
claims regarding these sales with ongoing proceedings in cases that IE and
Idaho Power have settled, as well as with a new complaint filed on May 22, 2009
by the California Attorney General against parties with whom the California
Parties have not settled (Brown Complaint). IE and Idaho Power, along with a
number of other parties, filed their opposition to the motion of the California
Parties. Many other parties also filed responses to the motion of the
California Parties. Tacoma and the Port of Seattle jointly filed a motion on
August 4, 2009 with the FERC in connection with the California refund
proceeding, the Lockyer remand pending before the FERC (involving claims
of failure to file quarterly transaction reports with the FERC, from which IE
and Idaho Power previously were dismissed), the Brown Complaint and the Pacific
Northwest refund remand proceeding. The Tacoma and the Port of Seattle motion
asks the FERC to require refunds from all sellers in the Pacific Northwest spot
markets for the expanded period (January 1, 2000 through June 20, 2001). IE
and Idaho Power joined with a number of other sellers in the Pacific Northwest
markets during 2000 and 2001 in opposing the motion of Tacoma and the Port of
Seattle. On April 19, 2010, the California Parties filed a motion with the
FERC renewing the requests contained in their May 22, 2009, motion and on May
3, 2010, IE and Idaho Power joined with a number of other parties opposing the
renewal request. FERC has not acted on the Ninth Circuit remand or the
motions. IE and Idaho Power intend to vigorously defend their positions in
these proceedings, but are unable to predict the outcome of these matters or
estimate the impact these matters may have on their consolidated financial
positions, results of operations or cash flows.
Sierra Club Lawsuit Bridger
In
February 2007, the Sierra Club and the Wyoming Outdoor Council filed a
complaint against PacifiCorp in the U.S. District Court for the District of
Wyoming alleging thousands of violations by PacifiCorp of air quality opacity
standards at the Jim Bridger coal-fired plant in Sweetwater County, Wyoming.
Opacity is an indication of the amount of light obscured by the flue gas of a
power plant. The complaint sought a declaration that PacifiCorp had violated
opacity limits, a permanent injunction ordering PacifiCorp to comply with such
limits, civil penalties of up to $32,500 per day per violation, and
reimbursement of plaintiffs costs of litigation, including reasonable
attorneys fees. Idaho Power is not a party to this proceeding but has a one-third
ownership interest in the plant. PacifiCorp owns a two-thirds interest and is
the operator of the plant. On April 15, 2010, the parties jointly filed a
proposed consent decree resolving the pending litigation. The consent decree
must be reviewed by the Environmental Protection Agency and approved by the
court. Idaho Power is fully reserved for the contingency and, if approved, the
entry of the consent decree will not have a material adverse effect on Idaho
Powers consolidated financial position, results of operations or cash flows.
Sierra Club Lawsuit Boardman
In September 2008, the Sierra Club
and four other non-profit corporations filed a complaint against Portland
General Electric Company (PGE) in the U.S. District Court for the District of
Oregon alleging opacity permit limit violations at the Boardman coal-fired
plant located in Morrow County, Oregon. The complaint also alleged violations
of the Clean Air Act, related federal regulations and the Oregon State
Implementation Plan relating to PGEs construction and operation of the plant.
The complaint sought a declaration that PGE had violated opacity limits, a
permanent injunction ordering PGE to comply with such limits, injunctive relief
requiring PGE to remediate alleged environmental damage and ongoing impacts,
civil penalties of up to $32,500 per day per violation, and reimbursement of
plaintiffs costs of litigation, including reasonable attorneys fees. Idaho
Power is not a party to this proceeding but has a 10 percent ownership interest
in the Boardman plant. PGE owns 65 percent and is the operator of the plant.
On December 5, 2008, PGE filed a motion to dismiss nine of the twelve claims
asserted by the plaintiffs in their complaint, and on September 30, 2009, the
court denied most of PGEs motion to dismiss. Idaho Power continues to monitor
the status of this matter but is unable to predict its outcome or what effect
this matter may have on its consolidated financial position, results of
operations or cash flows.
25
Snake River Basin Adjudication
Idaho Power is engaged in the Snake
River Basin Adjudication (SRBA), a general stream adjudication commenced in
1987, to define the nature and extent of water rights in the Snake River Basin
in Idaho, including the water rights of Idaho Power.
On March 25, 2009, Idaho Power and the State of Idaho (State) entered into a
settlement agreement with respect to the 1984 Swan Falls Agreement and Idaho
Powers water rights under the Swan Falls Agreement, which settlement agreement
is subject to certain conditions discussed below. The settlement agreement
will also resolve litigation between Idaho Power and the State relating to the
Swan Falls Agreement that was filed by Idaho Power on May 10, 2007, with the
Idaho District Court for the Fifth Judicial Circuit, which has jurisdiction
over SRBA matters, including the Swan Falls case.
The settlement agreement resolves
the pending litigation by clarifying that Idaho Powers water rights in excess
of minimum flows at its hydroelectric facilities between Milner Dam and Swan
Falls Dam are subordinate to future upstream beneficial uses, including aquifer
recharge. The agreement commits the State and Idaho Power to further
discussions on important water management issues concerning the Swan Falls
Agreement and the management of water in the Snake River Basin. It also
recognizes that water management measures that enhance aquifer levels, springs
and river flows, such as aquifer recharge projects, benefit both agricultural
development and hydropower generation and deserve study to determine their
economic potential, their impact on the environment and their impact on
hydropower generation. These will be a part of the Comprehensive Aquifer
Management Plan (CAMP) approved by the Idaho Water Resource Board for the
Eastern Snake Plain Aquifer (ESPA), which includes limits on the amount of
aquifer recharge. Idaho Power is a member of the ESPA CAMP advisory committee
and implementation committee.
On April 24, 2009, the Governor of
Idaho signed into law legislation approving provisions contained in the
settlement agreement. On May 6, 2009, as part of the settlement, Idaho Power,
the Governor of Idaho and the Idaho Water Resource Board executed a memorandum
of agreement relating to future aquifer recharge efforts and further assurances
as to limitations on the amount of aquifer recharge. Idaho Power and the State
also filed a joint motion to the SRBA court to dismiss the Swan Falls case and
enter the stipulated water right decrees set forth in the settlement
agreement. Parties representing groundwater users in the Eastern Snake Plain
Aquifer objected to some of the language proposed by Idaho Power and the State
relating to water rights in the decrees to be entered by the SRBA court as
contemplated by the Settlement Agreement. Specifically, the concerns relate to
the language describing the subordination of the rights and its interplay with
the original Swan Falls settlement document and implementing legislation. On
January 4, 2010, the court issued an order approving the overall settlement
subject to certain modifications to the draft water right decrees proposed by
the company and the state. Idaho Power continues to work with the State and
the parties to reach agreement consistent with the courts order regarding the
language of the decrees.
U.S. Bureau of Reclamation
Idaho Power filed a complaint on
October 15, 2007, and an amended complaint on September 30, 2008, in the U.S.
District Court of Federal Claims in Washington, D.C. against the U.S. Bureau of
Reclamation. The complaint relates to a 1923 contract right for delivery of
water to Idaho Powers hydropower projects on the Snake River, to recover
damages from the U.S. for the lost generation resulting from reduced flows and
for a prospective declaration of contractual rights and obligations of the
parties. Over the past several months, Idaho Power has been working with the
U.S. and Idaho interests (including the State of Idaho and upstream water
users) in an effort to resolve certain state water right issues pending in the
SRBA that are common to both the SRBA and the pending federal case. In an
effort to promote efficiency, the parties have agreed to present certain legal
issues associated with the 1923 contract to the court in the SRBA case that are
expected to resolve issues in the pending federal case. The SRBA court has
scheduled the presentation of these issues to the court by the fall of 2010.
Idaho Power and the U.S. have agreed to stay further proceedings in the federal
case pending the resolution of these issues in the SRBA case. Idaho Power is
unable to predict the outcome of this matter.
Oregon Trail Heights Fire
On August 25, 2008, a fire
ignited beneath an Idaho Power distribution line in Boise, Idaho. It was
fanned by high winds and spread rapidly, resulting in one death, the
destruction of 10 homes and damage or alleged fire-related losses to
approximately 30 others. Following the investigation, the Boise Fire
Department determined that the fire was linked to a piece of line hardware on
one of Idaho Powers distribution poles and that high winds contributed to the
fire and its resultant damage. Idaho Power has received notice of claims from
a number of the homeowners and their insurers and while it has continued
investigation of these claims, Idaho Power has reached settlements with a
number of the individuals or their insurers who have alleged damages resulting
from the fire. Idaho Power is insured up to policy limits against liability
for claims in excess of its self-insured retention. Idaho Power has accrued a
reserve for any loss that is probable and reasonably estimable, including
insurance deductibles, and believes this matter will not have a material
adverse effect on its consolidated financial position, results of operations or
cash flows.
26
Other Legal Proceedings
IDACORP, Idaho Power and/or IE are
parties to legal claims, actions and proceedings in addition to those discussed
above. Resolution of any of these matters will take time and the companies
cannot predict the outcome of any of these proceedings. The companies believe
that their reserves are adequate for these matters and that resolution of these
matters, taking into account existing reserves, will not have a material
adverse effect on IDACORPs or Idaho Powers consolidated financial positions,
results of operations or cash flows.
10. BENEFIT PLANS:
Idaho Power has a noncontributory
defined benefit pension plan covering most employees. The benefits under the
plan are based on years of service and the employees final average earnings.
In addition, Idaho Power has a nonqualified, deferred compensation plan for
certain senior management employees and directors called the Senior Management
Security Plan (SMSP). Idaho Power also maintains a defined benefit
postretirement plan (consisting of health care and death benefits) that covers
all employees who were enrolled in the active group plan at the time of
retirement as well as their spouses and qualifying dependents. Idaho Power
also has an Employee Savings Plan that complies with Section 401(k) of the
Internal Revenue Code and covers substantially all employees. Idaho Power
matches specified percentages of employee contributions to the plan.
The following table shows the
components of net periodic benefit costs for the pension, SMSP, and
Postretirement Benefits Plans for the three months ended March 31 (in thousands
of dollars):
|
|
Senior Management |
Postretirement |
|||||||||||
|
Pension Plan |
Security Plan |
Benefits |
|||||||||||
|
2010 |
2009 |
2010 |
2009 |
2010 |
2009 |
||||||||
Service cost |
$ |
4,559 |
$ |
4,205 |
$ |
385 |
$ |
402 |
$ |
340 |
$ |
332 |
||
Interest cost |
|
7,331 |
|
6,947 |
|
751 |
|
714 |
|
898 |
|
882 |
||
Expected return on plan assets |
|
(6,300) |
|
(6,088) |
|
- |
|
- |
|
(640) |
|
(528) |
||
Amortization of transition obligation |
|
- |
|
- |
|
- |
|
- |
|
510 |
|
510 |
||
Amortization of prior service cost |
|
163 |
|
163 |
|
58 |
|
58 |
|
(134) |
|
(134) |
||
Amortization of net loss |
|
1,925 |
|
2,120 |
|
233 |
|
165 |
|
143 |
|
190 |
||
|
Net periodic benefit cost |
|
7,678 |
|
7,347 |
|
1,427 |
|
1,339 |
|
1,117 |
|
1,252 |
|
Costs not recognized due to the |
|
|
|
|
|
|
|
|
|
|
|
|
||
|
effects of regulation (1) |
|
(7,427) |
|
(7,347) |
|
- |
|
- |
|
- |
|
- |
|
|
Net periodic benefit cost |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
recognized for financial |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
reporting (2) |
$ |
251 |
$ |
- |
$ |
1,427 |
$ |
1,339 |
$ |
1,117 |
$ |
1,252 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Under IPUC order, income statement recognition of pension costs has been deferred until cash contributions are made and costs are recovered through rates. See Note 3 Regulatory Matters, for information on Idaho Powers 2010 pension rate filing. |
||||||||||||||
(2) Net periodic benefit costs are recognized for the Oregon jurisdiction and non-regulated subsidiaries. |
IDACORP and Idaho Powers minimum
required contributions to the pension plan will be approximately $6 million in
the third quarter of 2010, and $44 million, $47 million, $39 million, and $40
million in 2011, 2012, 2013, and 2014, respectively. IDACORP and Idaho Power
may elect to make contributions earlier than the required dates.
See Note 2 Income Taxes for a
summary of the impact of the Patient Protection and Affordable Care Act and the
Health Care and Education Reconciliation Act which were enacted in March 2010.
11. INVESTMENTS IN DEBT AND EQUITY SECURITIES:
Investments in debt and equity
securities classified as available-for-sale securities are reported at fair
value, using either specific identification or average cost to determine the
cost for computing gains or losses. Any unrealized gains or losses on
available-for-sale securities are included in other comprehensive income.
Investments classified as held-to-maturity
securities are reported at amortized cost. Held-to-maturity securities are
investments in debt securities for which the companies have the positive intent
and ability to hold the securities until maturity.
27
The following table summarizes
investments in debt and equity securities as of March 31, 2010 and December 31,
2009 (in thousands of dollars):
|
March 31, 2010 |
December 31, 2009 |
|||||||||||
|
Gross |
Gross |
|
Gross |
Gross |
|
|||||||
|
Unrealized |
Unrealized |
Fair |
Unrealized |
Unrealized |
Fair |
|||||||
|
Gain |
Loss |
Value |
Gain |
Loss |
Value |
|||||||
Available-for-sale |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
securities (Idaho Power) |
$ |
3,671 |
$ |
- |
$ |
19,047 |
$ |
2,989 |
$ |
- |
$ |
18,842 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At the end of each reporting period, IDACORP and Idaho Power
analyze securities in loss positions to determine whether they have experienced
a decline in market value that is considered other-than-temporary. At March
31, 2010 and December 31, 2009, no securities were in an unrealized loss
position.
The following table summarizes sales of available-for-sale
securities for the three months ended March 31, 2010 and 2009 (in thousands of
dollars):
|
Three months ended March 31, |
|||||
|
2010 |
|
2009 |
|
||
|
|
|
|
|
|
|
Proceeds from sales |
$ |
- |
|
$ |
3,817 |
|
Gross realized gains from sales |
|
- |
|
|
12 |
|
Gross realized losses from sales |
|
- |
|
|
5 |
|
|
|
|
|
|
|
|
12. DERIVATIVE FINANCIAL INSTRUMENTS:
Commodity Price Risk
Idaho Power is exposed to certain
risks relating to its ongoing business operations. The primary risk managed by
using derivative instruments is commodity price risk related to Idaho Powers
ongoing utility operations providing electricity to meet the demand of its
retail customers. Physical and financial forward contracts for both
electricity and fuel used to produce electricity are entered into to manage the
price risk associated with meeting forecasted loads. The objective of Idaho
Powers energy purchase and sale activity is to meet the demand of retail
electric customers, maintain appropriate physical reserves to ensure
reliability and make economic use of temporary surpluses that may develop.
All derivative instruments are
recognized as either assets or liabilities at fair value on the balance sheet.
Idaho Powers physical forward contracts, including green tags, qualify for the
normal purchases and normal sales exception to derivative accounting
requirements with the exception of forward contracts for the purchase of
natural gas for use at Idaho Powers natural gas generation facilities.
Because of Idaho Powers power cost mechanisms, Idaho Power records the changes
in fair value of derivative instruments related to power supply as regulatory
assets or liabilities.
Idaho Power had the following
derivative commodity forward contracts, entered into for the purpose of
economically hedging forecasted purchases and sales, outstanding at March 31,
2010 and 2009:
|
March 31, |
||
Commodity |
Units |
2010 |
2009 |
Electricity purchases |
MWh |
746,650 |
591,175 |
Electricity sales |
MWh |
370,825 |
272,400 |
Natural gas purchases |
MMBtu |
1,898,750 |
82,500 |
Diesel purchases |
Gallons |
645,640 |
615,423 |
|
|
|
|
28
The following tables present the
fair values of derivatives not designated as hedging instruments recorded in
the balance sheet at March 31, 2010 and December 31, 2009 (in thousands of
dollars):
March 31, 2010 |
Asset Derivatives |
Liability Derivatives |
||||||
|
|
Balance Sheet |
Fair |
Balance Sheet |
Fair |
|||
Commodity derivatives |
Location |
Value |
Location |
Value |
||||
Current: |
|
|
|
|
|
|
||
|
Financial swaps |
Other current assets |
$ |
16 |
Other current assets |
$ |
10 |
|
|
Financial swaps |
Other current liabilities |
|
2,905 |
Other current liabilities |
|
5,256 |
|
|
Forward contracts |
Other current liabilities |
|
- |
Other current liabilities |
|
381 |
|
Long-term: |
|
|
|
|
|
|
||
|
Financial swaps |
Other assets |
|
245 |
Other assets |
|
156 |
|
|
Financial swaps |
Other liabilities |
|
- |
Other liabilities |
|
2,286 |
|
|
|
Total |
|
$ |
3,166 |
|
$ |
8,089 |
|
|
|
|
|
|
|
|
|
December 31, 2009 |
Asset Derivatives |
Liability Derivatives |
||||||
|
|
Balance Sheet |
Fair |
Balance Sheet |
Fair |
|||
Commodity derivatives |
Location |
Value |
Location |
Value |
||||
Current: |
|
|
|
|
|
|
||
|
Financial swaps |
Other current assets |
$ |
2,931 |
Other current assets |
$ |
2,087 |
|
|
Financial swaps |
Other current liabilities |
|
9 |
Other current liabilities |
|
610 |
|
|
Forward contracts |
Other current assets |
|
354 |
Other current assets |
|
- |
|
Long-term: |
|
|
|
|
|
|
||
|
Financial swaps |
Other assets |
|
442 |
Other assets |
|
229 |
|
|
|
Total |
|
$ |
3,736 |
|
$ |
2,926 |
|
|
|
|
|
|
|
|
|
The following table presents the
effect on income of derivatives not designated as hedging instruments for the
quarters ended March 31, 2010 and 2009 (in thousands of dollars):
|
Location of Gain/(Loss) |
Amount of Gain/(Loss) |
||
|
Recognized in Income on |
Recognized in Income on |
||
Commodity derivatives |
Derivative |
Derivative(1) |
||
Quarter ended March 31, 2010: |
|
|
|
|
|
Financial swaps |
Off-system sales |
$ |
456 |
|
Financial swaps |
Purchased power |
|
(162) |
Quarter ended March 31, 2009: |
|
|||
|
Financial swaps |
Purchased power |
|
(756) |
(1)Excludes changes in fair value of derivatives, which are recorded on the balance sheet as regulatory assets or regulatory liabilities. |
||||
|
Idaho Power records changes in fair
value of its derivative contracts as either regulatory assets or regulatory liabilities.
Settlement gains and losses on electricity swap contracts are recorded on the
income statement in off-system sales or purchased power depending on the
forecasted position being economically hedged by the derivative contract. Settlement
gains and losses on both financial and physical contracts for natural gas are
reflected in fuel expense. Settlement gains and losses on diesel derivatives
were immaterial for the quarter ended March 31, 2010.
29
Credit Risk
At March 31, 2010, Idaho Power does
not have material credit exposure from financial instruments, including
derivatives. Idaho Power monitors credit risk exposure through reviews of
counterparty credit quality, corporate-wide counterparty credit exposure, and
corporate-wide counterparty concentration levels. Idaho Power manages these
risks by establishing appropriate credit and concentration limits on
transactions with counterparties and requiring contractual guarantees, cash
deposits or letters of credit from counterparties or their affiliates, as
deemed necessary. The majority of Idaho Powers contracts are under the
Western Systems Power Pool agreement that provides for adequate assurances if a
counterparty has debt that is downgraded to below investment grade by at least
one rating agency. Idaho Power also requires North American Energy Standards
Board contracts as necessary for physical gas transactions, and International
Swaps and Derivatives Association, Inc. contracts as needed for financial
transactions.
Credit-Contingent Features
Certain of Idaho Powers derivative
instruments contain provisions that require Idaho Powers unsecured debt to
maintain an investment grade credit rating from each of the major credit rating
agencies. If Idaho Powers unsecured debt were to fall below investment grade,
it would be in violation of these provisions, and the counterparties to the
derivative instruments could request immediate payment or demand immediate and
ongoing full overnight collateralization on derivative instruments in net liability
positions. The aggregate fair value of all derivative instruments with credit-risk-related
contingent features that are in a liability position on March 31, 2010, was $8
million. Idaho Power has posted $4 million of collateral related to this amount.
If the credit-risk-related contingent features underlying these agreements were
triggered on March 31, 2010, Idaho Power could have been required to post $3
million of additional cash collateral to its counterparties.
13. FAIR VALUE MEASUREMENTS:
IDACORP and Idaho Power have
categorized their financial instruments, based on the priority of the inputs to
the valuation technique, into a three-level fair value hierarchy. The fair
value hierarchy gives the highest priority to quoted prices in active markets
for identical assets or liabilities (Level 1) and the lowest priority to
unobservable inputs (Level 3). If the inputs used to measure the financial
instruments fall within different levels of the hierarchy, the categorization
is based on the lowest level input that is significant to the fair value
measurement of the instrument.
Financial assets and liabilities
recorded on the condensed consolidated balance sheets are categorized based on
the inputs to the valuation techniques as follows:
Level 1: Financial assets and
liabilities whose values are based on unadjusted quoted prices for identical
assets or liabilities in an active market that IDACORP and Idaho Power has the
ability to access.
Level 2: Financial assets and
liabilities whose values are based on the following:
a) Quoted prices for similar assets or liabilities in active markets;
b) Quoted prices for identical or similar assets or liabilities in non-active markets;
c) Pricing models whose inputs are observable for substantially the full term of the asset or liability; and
d) Pricing
models whose inputs are derived principally from or corroborated by observable
market data through correlation or other means for substantially the full term
of the asset or liability.
IDACORP and Idaho Power Level 2
inputs are based on quoted market prices adjusted for location using
corroborated, observable market data.
Level 3: Financial assets and
liabilities whose values are based on prices or valuation techniques that
require inputs that are both unobservable and significant to the overall fair
value measurement. These inputs reflect managements own assumptions about the
assumptions a market participant would use in pricing the asset or liability.
Idaho Powers derivatives are
contracts entered into as part of its management of loads and resources.
Electricity swaps are valued on the Intercontinental Exchange with quoted
prices in an active market. Natural gas and diesel derivative valuations are
performed using New York Mercantile Exchange (NYMEX) pricing, adjusted for
basis location, which are also quoted under NYMEX. Trading securities consists
of employee-directed investments held in a Rabbi Trust and are related to an
executive deferred compensation plan. Available-for-sale securities are
related to the SMSP and are held in a Rabbi Trust and are actively traded money
market and equity funds with quoted prices in active markets.
30
The following table presents
information about IDACORPs and Idaho Powers assets and liabilities measured
at fair value on a recurring basis as of March 31, 2010, and December 31, 2009
(in thousands of dollars). IDACORPs and Idaho Powers assessment of the
significance of a particular input to the fair value measurement requires
judgment and may affect the valuation of fair value assets and liabilities and
their placement within the fair value hierarchy.
|
Quoted Prices in |
Significant |
Significant |
|
|
|||||
|
Active Markets |
Other |
Unobservable |
|
|
|||||
|
for Identical |
Observable |
Inputs |
|
|
|||||
|
Assets (Level 1) |
Inputs (Level 2) |
(Level 3) |
Total |
|
|||||
March 31, 2010 |
|
|
|
|
|
|
|
|
|
|
IDACORP |
|
|
|
|
|
|
|
|
|
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
Derivatives |
$ |
95 |
$ |
- |
$ |
- |
$ |
95 |
|
|
Money market funds |
|
19,126 |
|
- |
|
- |
|
19,126 |
|
|
Trading securities: Equity securities |
|
4,890 |
|
- |
|
- |
|
4,890 |
|
|
Available-for-sale securities: Equity securities |