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 June 30, 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 |
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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). IDACORP, Inc.: Yes X No ___ Idaho Power
Company: 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 July 31, 2010: |
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IDACORP, Inc.: |
48,184,956 |
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.
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 |
EIS |
- |
Environmental Impact Statement |
EPA |
- |
Environmental Protection Agency |
EPS |
- |
Earnings per share |
ESA |
- |
Endangered Species Act |
ESPA |
- |
Eastern Snake Plain Aquifer |
FCA |
- |
Fixed Cost Adjustment mechanism |
FERC |
- |
Federal Energy Regulatory Commission |
GHG |
- |
Greenhouse gas |
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 |
IRS |
- |
Internal Revenue Service |
IWRB |
- |
Idaho Water Resource Board |
kW |
- |
Kilowatt |
MD&A |
- |
Managements Discussion and Analysis of Financial Condition and Results of Operations |
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 |
RPS |
- |
Renewable Portfolio Standards |
SEC |
- |
Securities and Exchange Commission |
SO2 |
- |
Sulfur Dioxide |
SRBA |
- |
Snake River Basin Adjudication |
Valmy |
- |
North Valmy Steam Electric Generating Plant |
VIEs |
- |
Variable Interest Entities |
WECC |
- |
Western Electricity Coordinating Council |
2
TABLE OF CONTENTS |
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Page |
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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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16-36 |
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37-38 |
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Item 2. Managements Discussion and Analysis of Financial Condition and Results of |
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Operations |
39-74 |
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Item 3. Quantitative and Qualitative Disclosures About Market Risk |
75 |
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76 |
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Part II. Other Information: |
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76 |
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76-78 |
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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds |
78-79 |
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80 |
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81 |
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82 |
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SAFE HARBOR STATEMENT
This report on 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, and Part II, Item 1A RISK FACTORS, and in
IDACORP Inc.s and Idaho Power Companys Annual Report on Form 10-K for the
year ended December 31, 2009, at Part I, Item 1A- RISK FACTORS. 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 |
Six months ended |
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June 30, |
June 30, |
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|
2010 |
2009 |
2010 |
2009 |
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(thousands of dollars except for per share amounts) |
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Operating Revenues: |
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Electric utility: |
|||||||||
General business |
$ |
204,277 |
$ |
198,215 |
$ |
408,022 |
$ |
386,142 |
|
Off-system sales |
17,769 |
26,667 |
52,175 |
55,198 |
|||||
Other revenues |
18,744 |
17,636 |
33,053 |
29,207 |
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Total electric utility revenues |
240,790 |
242,518 |
493,250 |
470,547 |
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Other |
963 |
1,116 |
1,466 |
1,661 |
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Total operating revenues |
241,753 |
243,634 |
494,716 |
472,208 |
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Operating Expenses: |
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Electric utility: |
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Purchased power |
30,349 |
26,867 |
51,523 |
60,568 |
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Fuel expense |
27,558 |
24,475 |
64,744 |
63,608 |
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Power cost adjustment |
28,071 |
26,762 |
76,395 |
42,621 |
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Other operations and maintenance |
75,125 |
74,593 |
147,219 |
143,133 |
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Energy efficiency programs |
8,765 |
8,673 |
13,799 |
12,731 |
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Depreciation |
28,726 |
26,832 |
57,309 |
52,795 |
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Taxes other than income taxes |
5,805 |
5,088 |
11,485 |
10,150 |
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Total electric utility expenses |
204,399 |
193,290 |
422,474 |
385,606 |
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Other expense |
749 |
872 |
1,590 |
1,495 |
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Total operating expenses |
205,148 |
194,162 |
424,064 |
387,101 |
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Operating Income |
36,605 |
49,472 |
70,652 |
85,107 |
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Other Income, Net |
3,012 |
4,058 |
7,493 |
10,979 |
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Earnings (Losses) of Unconsolidated Equity- |
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Method Investments |
380 |
(2,620) |
(1,998) |
(2,218) |
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Interest Expense: |
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Interest on long-term debt |
19,427 |
18,282 |
38,868 |
34,922 |
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Other interest expense, net of AFUDC |
(2,038) |
(117) |
(2,491) |
719 |
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Total interest expense |
17,389 |
18,165 |
36,377 |
35,641 |
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Income Before Income Taxes |
22,608 |
32,745 |
39,770 |
58,227 |
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Income Tax (Benefit) Expense |
(16,629) |
5,175 |
(15,324) |
11,970 |
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Net Income |
39,237 |
27,570 |
55,094 |
46,257 |
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Adjustment for (income) loss attributable to |
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noncontrolling interests |
(28) |
(95) |
178 |
102 |
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Net Income Attributable to IDACORP, Inc. |
$ |
39,209 |
$ |
27,475 |
$ |
55,272 |
$ |
46,359 |
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Weighted Average Common Shares Outstanding- |
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Basic (000s) |
47,888 |
46,958 |
47,831 |
46,895 |
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Weighted Average Common Shares Outstanding- |
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Diluted (000s) |
48,048 |
46,977 |
47,966 |
46,927 |
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Earnings Per Share of Common Stock: |
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Earnings Attributable to IDACORP, Inc.-Basic |
$ |
0.82 |
$ |
0.59 |
$ |
1.16 |
$ |
0.99 |
|
Earnings Attributable to IDACORP, Inc.-Diluted |
$ |
0.82 |
$ |
0.58 |
$ |
1.15 |
$ |
0.99 |
|
Dividends Declared Per Share of Common Stock |
$ |
0.30 |
$ |
0.30 |
$ |
0.60 |
$ |
0.60 |
|
The accompanying notes are an integral part of these statements. |
4
IDACORP,
Inc.
Condensed Consolidated Balance Sheets
(unaudited)
June 30, |
December 31, |
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|
2010 |
2009 |
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Assets |
(thousands of dollars) |
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Current Assets: |
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Cash and cash equivalents |
$ |
29,488 |
$ |
52,987 |
Receivables: |
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Customer (net of allowance of $1,311 and $1,805, respectively) |
64,216 |
74,987 |
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Other (net of allowance of $1,457 and $1,073, respectively) |
23,171 |
11,922 |
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Taxes receivable |
1,874 |
- |
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Accrued unbilled revenues |
51,399 |
51,272 |
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Materials and supplies (at average cost) |
47,436 |
48,054 |
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Fuel stock (at average cost) |
29,206 |
25,634 |
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Prepayments |
10,340 |
11,111 |
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Deferred income taxes |
31,817 |
31,773 |
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Other |
5,917 |
2,666 |
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Total current assets |
294,864 |
310,406 |
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Investments |
197,657 |
195,298 |
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Property, Plant and Equipment: |
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Utility plant in service |
4,212,394 |
4,160,178 |
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Accumulated provision for depreciation |
(1,586,118) |
(1,558,538) |
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Utility plant in service- net |
2,626,276 |
2,601,640 |
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Construction work in progress |
363,982 |
289,188 |
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Utility plant held for future use |
7,106 |
7,151 |
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Other property, net of accumulated depreciation |
18,807 |
19,029 |
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Property, plant and equipment- net |
3,016,171 |
2,917,008 |
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Other Assets: |
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American Falls and Milner water rights |
22,641 |
24,226 |
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Company-owned life insurance |
27,079 |
26,654 |
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Regulatory assets |
676,820 |
720,401 |
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Long-term receivables (net of allowance of $1,861 and $2,157, respectively) |
3,993 |
4,217 |
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Other |
41,562 |
40,517 |
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Total other assets |
772,095 |
816,015 |
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Total |
$ |
4,280,787 |
$ |
4,238,727 |
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The accompanying notes are an integral part of these statements. |
5
IDACORP,
Inc.
Condensed Consolidated Balance Sheets
(unaudited)
June 30, |
December 31, |
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|
2010 |
2009 |
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Liabilities and Equity |
(thousands of dollars) |
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Current Liabilities: |
||||
Current maturities of long-term debt |
$ |
129,800 |
$ |
9,340 |
Notes payable |
17,500 |
53,750 |
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Accounts payable |
78,075 |
83,818 |
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Taxes accrued |
21,456 |
10,184 |
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Interest accrued |
21,821 |
20,056 |
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Other |
70,323 |
41,081 |
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Total current liabilities |
338,975 |
218,229 |
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Other Liabilities: |
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Deferred income taxes |
559,862 |
574,450 |
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Regulatory liabilities |
301,568 |
287,780 |
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Other |
357,740 |
346,994 |
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Total other liabilities |
1,219,170 |
1,209,224 |
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Long-Term Debt |
1,288,802 |
1,409,730 |
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Commitments and Contingencies |
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Equity: |
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IDACORP, Inc. shareholders equity: |
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Common stock, no par value (120,000,000 shares authorized; |
||||
48,164,439 and 47,925,882 shares issued, respectively) |
762,903 |
756,475 |
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Retained earnings |
675,601 |
649,180 |
||
Accumulated other comprehensive loss |
(8,678) |
(8,267) |
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Treasury stock (7,365 and 29,191 shares at cost, respectively) |
(17) |
(53) |
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Total IDACORP, Inc. shareholders equity |
1,429,809 |
1,397,335 |
||
Noncontrolling interest |
4,031 |
4,209 |
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Total equity |
1,433,840 |
1,401,544 |
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Total |
$ |
4,280,787 |
$ |
4,238,727 |
The accompanying notes are an integral part of these statements. |
6
IDACORP,
Inc.
Condensed Consolidated Statements of Cash Flows
(unaudited)
|
Six months ended |
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June 30, |
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|
2010 |
2009 |
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Operating Activities: |
(thousands of dollars) |
|||
Net income |
$ |
55,094 |
$ |
46,257 |
Adjustments to reconcile net income to net cash provided by |
|
|
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operating activities: |
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|
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Depreciation and amortization |
61,023 |
55,434 |
||
Deferred income taxes and investment tax credits |
(19,726) |
7,548 |
||
Changes in regulatory assets and liabilities |
78,974 |
38,358 |
||
Non-cash pension expense |
2,952 |
2,209 |
||
Losses of unconsolidated equity-method investments |
1,998 |
2,218 |
||
Distributions from unconsolidated equity-method investments |
- |
7,710 |
||
Allowance for other funds used during construction |
(8,020) |
(2,498) |
||
Other non-cash adjustments to net income, net |
(148) |
1,728 |
||
Change in: |
|
|
||
Accounts receivable and prepayments |
6,613 |
(8,869) |
||
Accounts payable and other accrued liabilities |
(8,495) |
(28,293) |
||
Taxes accrued/receivable |
9,279 |
18,155 |
||
Other current assets |
(3,081) |
(11,940) |
||
Other current liabilities |
18,215 |
(1,464) |
||
Other assets |
(2,512) |
(1,831) |
||
Other liabilities |
(4,951) |
(14,090) |
||
Net cash provided by operating activities |
187,215 |
110,632 |
||
Investing Activities: |
|
|
||
Additions to property, plant and equipment |
(166,687) |
(100,271) |
||
Proceeds from the sale of utility assets |
19,230 |
- |
||
Proceeds from the sale of non-utility assets |
- |
2,250 |
||
Investments in affordable housing |
(6,147) |
(6,174) |
||
Proceeds from the sale of emission allowances and renewable energy certificates |
3,497 |
2,341 |
||
Investments in unconsolidated affiliates |
(2,020) |
- |
||
Proceeds from the sale of available-for-sale securities |
- |
8,965 |
||
Other |
3,468 |
(3,319) |
||
Net cash used in investing activities |
(148,659) |
(96,208) |
||
Financing Activities: |
|
|
||
Issuance of long-term debt |
- |
100,000 |
||
Retirement of long-term debt |
(1,064) |
(8,735) |
||
Dividends on common stock |
(28,830) |
(28,230) |
||
Net change in short-term borrowings |
(36,250) |
(72,151) |
||
Issuance of common stock |
5,299 |
4,927 |
||
Acquisition of treasury stock |
(846) |
(1,408) |
||
Other |
(364) |
(1,653) |
||
Net cash used in financing activities |
(62,055) |
(7,250) |
||
Net (decrease) increase in cash and cash equivalents |
(23,499) |
7,174 |
||
Cash and cash equivalents at beginning of the period |
52,987 |
8,828 |
||
Cash and cash equivalents at end of the period |
$ |
29,488 |
$ |
16,002 |
Supplemental Disclosure of Cash Flow Information: |
|
|
||
Cash (received) paid during the period for: |
|
|
||
Income taxes |
$ |
(3,387) |
$ |
(11,785) |
Interest (net of amount capitalized) |
$ |
33,662 |
$ |
32,956 |
Non-cash investing activities |
|
|
||
Additions to property, plant and equipment in accounts payable |
$ |
21,435 |
$ |
5,578 |
Investments in affordable housing |
$ |
3,168 |
$ |
6,000 |
The accompanying notes are an integral part of these statements. |
7
IDACORP,
Inc.
Condensed Consolidated Statements of
Comprehensive Income
(unaudited)
Three months ended |
||||
June 30, |
||||
|
2010 |
2009 |
||
(thousands of dollars) |
||||
Net Income |
$ |
39,237 |
$ |
27,570 |
Other Comprehensive Income (Loss): |
||||
Net unrealized holding (losses) gains arising during the period, |
||||
net of tax of ($758) and $734 |
(1,181) |
1,143 |
||
Unfunded pension liability adjustment, net of tax |
||||
of $114 and $87 |
177 |
136 |
||
Total Comprehensive Income |
38,233 |
28,849 |
||
Comprehensive income attributable to noncontrolling interests |
(28) |
(95) |
||
Comprehensive Income Attributable to IDACORP, Inc. |
$ |
38,205 |
$ |
28,754 |
The accompanying notes are an integral part of these statements. |
IDACORP,
Inc.
Condensed Consolidated Statements of Comprehensive Income
(unaudited)
Six months ended |
||||
June 30, |
||||
|
2010 |
2009 |
||
(thousands of dollars) |
||||
Net Income |
$ |
55,094 |
$ |
46,257 |
Other Comprehensive Income (Loss): |
||||
Net unrealized holding (losses) gains arising during the period, |
||||
net of tax of ($492) and $164 |
(765) |
256 |
||
Unfunded pension liability adjustment, net of tax |
||||
of $227 and $174 |
354 |
272 |
||
Total Comprehensive Income |
54,683 |
46,785 |
||
Comprehensive loss attributable to noncontrolling interests |
178 |
102 |
||
Comprehensive Income Attributable to IDACORP, Inc. |
$ |
54,861 |
$ |
46,887 |
The accompanying notes are an integral part of these statements. |
8
IDACORP,
Inc.
Condensed Consolidated Statements of Equity
(unaudited)
Six months ended |
||||
June 30, |
||||
|
2010 |
2009 |
||
|
(thousands of dollars) |
|||
Common Stock |
||||
Balance at beginning of period |
$ |
756,475 |
$ |
729,576 |
Issued |
5,299 |
4,927 |
||
Other |
1,129 |
377 |
||
Balance at end of period |
762,903 |
734,880 |
||
|
|
|||
Retained Earnings |
||||
Balance at beginning of period |
649,180 |
581,605 |
||
Net income attributable to IDACORP, Inc. |
55,272 |
46,359 |
||
Common stock dividends ($0.60 per share) |
(28,851) |
(28,229) |
||
Balance at end of period |
675,601 |
599,735 |
||
|
|
|||
Accumulated Other Comprehensive Income (Loss) |
||||
Balance at beginning of period |
(8,267) |
(8,707) |
||
Unrealized (loss) gain on securities (net of tax) |
(765) |
256 |
||
Unfunded pension liability adjustment (net of tax) |
354 |
272 |
||
Balance at end of period |
(8,678) |
(8,179) |
||
|
|
|||
Treasury Stock |
||||
Balance at beginning of period |
(53) |
(37) |
||
Issued |
882 |
1,424 |
||
Acquired |
(846) |
(1,408) |
||
Balance at end of period |
(17) |
(21) |
||
Total IDACORP, Inc. shareholders equity at end of period |
1,429,809 |
1,326,415 |
||
|
|
|||
Noncontrolling Interests |
||||
Balance at beginning of period |
4,209 |
4,434 |
||
Net loss attributed to noncontrolling interest |
(178) |
(102) |
||
Other |
- |
(250) |
||
Balance at end of period |
4,031 |
4,082 |
||
Total equity at end of period |
$ |
1,433,840 |
$ |
1,330,497 |
The accompanying notes are an integral part of these statements. |
9
Idaho
Power Company
Condensed Consolidated Statements of Income
(unaudited)
Three months ended |
Six months ended |
||||||||
June 30, |
June 30, |
||||||||
|
2010 |
2009 |
2010 |
2009 |
|||||
(thousands of dollars) |
|||||||||
Operating Revenues: |
|||||||||
General business |
$ |
204,277 |
$ |
198,215 |
$ |
408,022 |
$ |
386,142 |
|
Off-system sales |
17,769 |
26,667 |
52,175 |
55,198 |
|||||
Other revenues |
18,744 |
17,636 |
33,053 |
29,207 |
|||||
Total operating revenues |
240,790 |
242,518 |
493,250 |
470,547 |
|||||
Operating Expenses: |
|||||||||
Operation: |
|||||||||
Purchased power |
30,349 |
26,867 |
51,523 |
60,568 |
|||||
Fuel expense |
27,558 |
24,475 |
64,744 |
63,608 |
|||||
Power cost adjustment |
28,071 |
26,762 |
76,395 |
42,621 |
|||||
Other operations and maintenance |
75,125 |
74,593 |
147,219 |
143,133 |
|||||
Energy efficiency programs |
8,765 |
8,673 |
13,799 |
12,731 |
|||||
Depreciation |
28,726 |
26,832 |
57,309 |
52,795 |
|||||
Taxes other than income taxes |
5,805 |
5,088 |
11,485 |
10,150 |
|||||
Total operating expenses |
204,399 |
193,290 |
422,474 |
385,606 |
|||||
Income from Operations |
36,391 |
49,228 |
70,776 |
84,941 |
|||||
Other Income (Expense): |
|||||||||
Allowance for equity funds used during construction |
4,362 |
1,734 |
8,020 |
2,498 |
|||||
Earnings (losses) of unconsolidated equity-method |
|||||||||
investments |
1,987 |
(649) |
2,335 |
2,653 |
|||||
Other (expense) income, net |
(1,410) |
1,648 |
(1,171) |
7,944 |
|||||
Total other income |
4,939 |
2,733 |
9,184 |
13,095 |
|||||
Interest Charges: |
|||||||||
Interest on long-term debt |
19,427 |
18,268 |
38,868 |
34,835 |
|||||
Other interest |
1,178 |
1,350 |
2,031 |
2,929 |
|||||
Allowance for borrowed funds used during construction |
(3,287) |
(1,658) |
(5,478) |
(2,785) |
|||||
Total interest charges |
17,318 |
17,960 |
35,421 |
34,979 |
|||||
Income Before Income Taxes |
24,012 |
34,001 |
44,539 |
63,057 |
|||||
Income Tax (Benefit) Expense |
(14,816) |
7,675 |
(12,510) |
17,447 |
|||||
Net Income |
$ |
38,828 |
$ |
26,326 |
$ |
57,049 |
$ |
45,610 |
|
The accompanying notes are an integral part of these statements. |
|||||||||
10
Idaho
Power Company
Condensed Consolidated Balance Sheets
(unaudited)
June 30, |
December 31, |
|||
|
2010 |
2009 |
||
Assets |
(thousands of dollars) |
|||
Electric Plant: |
||||
In service (at original cost) |
$ |
4,212,394 |
$ |
4,160,178 |
Accumulated provision for depreciation |
(1,586,118) |
(1,558,538) |
||
In service- net |
2,626,276 |
2,601,640 |
||
Construction work in progress |
363,982 |
289,188 |
||
Held for future use |
7,106 |
7,151 |
||
Electric plant- net |
2,997,364 |
2,897,979 |
||
|
||||
Investments and Other Property |
108,921 |
108,299 |
||
|
||||
Current Assets: |
||||
Cash and cash equivalents |
25,118 |
21,625 |
||
Receivables: |
||||
Customer (net of allowance of $1,311 and $1,805, respectively) |
64,216 |
74,987 |
||
Other (net of allowance of $202 and $185, respectively) |
21,810 |
10,463 |
||
Taxes receivable |
21,640 |
3,585 |
||
Accrued unbilled revenues |
51,399 |
51,272 |
||
Materials and supplies (at average cost) |
47,436 |
48,054 |
||
Fuel stock (at average cost) |
29,206 |
25,634 |
||
Prepayments |
10,141 |
10,960 |
||
Deferred income taxes |
7,931 |
7,887 |
||
Other |
5,409 |
2,115 |
||
Total current assets |
284,306 |
256,582 |
||
Deferred Debits: |
||||
American Falls and Milner water rights |
22,641 |
24,226 |
||
Company-owned life insurance |
27,079 |
26,654 |
||
Regulatory assets |
676,820 |
720,401 |
||
Other |
40,384 |
39,249 |
||
Total deferred debits |
766,924 |
810,530 |
||
Total |
$ |
4,157,515 |
$ |
4,073,390 |
The accompanying notes are an integral part of these statements. |
11
Idaho
Power Company
Condensed Consolidated Balance Sheets
(unaudited)
June 30, |
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 |
648,758 |
638,758 |
||
Capital stock expense |
(2,097) |
(2,097) |
||
Retained earnings |
575,876 |
547,695 |
||
Accumulated other comprehensive loss |
(8,678) |
(8,267) |
||
Total common stock equity |
1,311,736 |
1,273,966 |
||
Long-term debt |
1,288,802 |
1,409,730 |
||
Total capitalization |
2,600,538 |
2,683,696 |
||
|
||||
Current Liabilities: |
||||
Long-term debt due within one year |
121,064 |
1,064 |
||
Accounts payable |
77,564 |
83,128 |
||
Notes and accounts payable to related parties |
1,473 |
1,736 |
||
Taxes accrued |
9,366 |
- |
||
Interest accrued |
21,821 |
20,056 |
||
Other |
69,252 |
40,002 |
||
Total current liabilities |
300,540 |
145,986 |
||
|
||||
Deferred Credits: |
||||
Deferred income taxes |
599,328 |
611,749 |
||
Regulatory liabilities |
301,568 |
287,780 |
||
Other |
355,541 |
344,179 |
||
Total deferred credits |
1,256,437 |
1,243,708 |
||
|
||||
Commitments and Contingencies |
||||
Total |
$ |
4,157,515 |
$ |
4,073,390 |
The accompanying notes are an integral part of these statements. |
12
Idaho
Power Company
Condensed Consolidated Statements of
Capitalization
(unaudited)
June 30, |
December 31, |
|||
|
2010 |
2009 |
||
(thousands of dollars) |
||||
Common Stock Equity: |
||||
Common stock |
$ |
97,877 |
$ |
97,877 |
Premium on capital stock |
648,758 |
638,758 |
||
Capital stock expense |
(2,097) |
(2,097) |
||
Retained earnings |
575,876 |
547,695 |
||
Accumulated other comprehensive loss |
(8,678) |
(8,267) |
||
Total common stock equity |
1,311,736 |
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 |
(2,925) |
(3,060) |
||
Total long-term debt |
1,288,802 |
1,409,730 |
||
Total Capitalization |
$ |
2,600,538 |
$ |
2,683,696 |
The accompanying notes are an integral part of these statements. |
13
Idaho Power Company
Condensed Consolidated Statements of Cash Flows
(unaudited)
|
Six months ended |
|||
|
June 30, |
|||
|
2010 |
2009 |
||
Operating Activities: |
(thousands of dollars) |
|||
Net income |
$ |
57,049 |
$ |
45,610 |
Adjustments to reconcile net income to net cash provided by |
|
|
||
operating activities: |
|
|
||
Depreciation and amortization |
60,709 |
55,030 |
||
Deferred income taxes and investment tax credits |
(17,559) |
3,354 |
||
Changes in regulatory assets and liabilities |
78,974 |
38,358 |
||
Non-cash pension expense |
2,952 |
2,209 |
||
Earnings of unconsolidated equity-method investments |
(2,335) |
(2,653) |
||
Distributions from unconsolidated equity-method investments |
- |
7,460 |
||
Allowance for other funds used during construction |
(8,020) |
(2,498) |
||
Other non-cash adjustments to net income |
(2,474) |
736 |
||
Change in: |
|
|
||
Accounts receivables and prepayments |
6,250 |
(8,665) |
||
Accounts payable |
(8,315) |
(29,800) |
||
Taxes accrued/receivable |
(8,791) |
34,350 |
||
Other current assets |
(3,081) |
(11,940) |
||
Other current liabilities |
18,211 |
(1,234) |
||
Other assets |
(2,512) |
(1,831) |
||
Other liabilities |
(4,309) |
(14,094) |
||
Net cash provided by operating activities |
166,749 |
114,392 |
||
Investing Activities: |
|
|
||
Additions to utility plant |
(166,687) |
(100,271) |
||
Proceeds from the sale of utility assets |
19,230 |
- |
||
Proceeds from the sale of non-utility assets |
- |
2,250 |
||
Proceeds from the sale of emission allowances and renewable energy certificates |
3,497 |
2,341 |
||
Investments in unconsolidated affiliates |
(2,020) |
- |
||
Other |
2,890 |
(3,359) |
||
Net cash used in investing activities |
(143,090) |
(99,039) |
||
Financing Activities: |
|
|
||
Issuance of long-term debt |
- |
100,000 |
||
Retirement of long-term debt |
(1,064) |
(1,064) |
||
Dividends on common stock |
(28,869) |
(28,376) |
||
Net change in short term borrowings |
- |
(76,120) |
||
Capital contribution from parent |
10,000 |
- |
||
Other |
(233) |
(1,411) |
||
Net cash used in financing activities |
(20,166) |
(6,971) |
||
Net increase in cash and cash equivalents |
3,493 |
8,382 |
||
Cash and cash equivalents at beginning of the period |
21,625 |
3,141 |
||
Cash and cash equivalents at end of the period |
$ |
25,118 |
$ |
11,523 |
Supplemental Disclosure of Cash Flow Information: |
|
|
||
Cash paid (received) during the period for: |
|
|
||
Income taxes |
$ |
15,335 |
$ |
(18,286) |
Interest (net of amount capitalized) |
$ |
32,706 |
$ |
32,380 |
Non-cash investing activities: |
|
|||
Additions to property, plant and equipment in accounts payable |
$ |
21,435 |
$ |
5,578 |
The accompanying notes are an integral part of these statements. |
14
Idaho
Power Company
Condensed Consolidated Statements of Comprehensive
Income
(unaudited)
Three months ended |
||||
June 30, |
||||
|
2010 |
2009 |
||
(thousands of dollars) |
||||
Net Income |
$ |
38,828 |
$ |
26,326 |
Other Comprehensive Income (Loss): |
||||
Net unrealized holding (losses) gains arising during the period, |
||||
net of tax of ($758) and $734 |
(1,181) |
1,143 |
||
Unfunded pension liability adjustment, net of tax |
||||
of $114 and $87 |
177 |
136 |
||
Total Comprehensive Income |
$ |
37,824 |
$ |
27,605 |
The accompanying notes are an integral part of these statements. |
Idaho
Power Company
Condensed Consolidated Statements of Comprehensive Income
(unaudited)
Six months ended |
||||
June 30, |
||||
|
2010 |
2009 |
||
(thousands of dollars) |
||||
Net Income |
$ |
57,049 |
$ |
45,610 |
Other Comprehensive Income (Loss): |
||||
Net unrealized holding (losses) gains arising during the period, |
||||
net of tax of ($492) and $164 |
(765) |
256 |
||
Unfunded pension liability adjustment, net of tax |
||||
of $227 and $174 |
354 |
272 |
||
Total Comprehensive Income |
$ |
56,638 |
$ |
46,138 |
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 provided
electric service to 490,470 general business customers as of June 30, 2010.
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 mines and
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
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 $20 million of assets, primarily a hydroelectric
plant, and approximately $16 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.
16
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 $88
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 that is discussed further in Note 8 Commitments.
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 $79 million at June 30, 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 June 30, 2010, consolidated results of
operations for the three and six months ended June 30, 2010, and 2009, and
consolidated cash flows for the six months ended June 30, 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 Power's 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 IDACORP's 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 Power's condensed consolidated balance sheets;
Excess tax benefits 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 IDACORP's 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 of unconsolidated equity-method investments and distributions from unconsolidated equity method investments in the operating section of IDACORP's condensed consolidated statements of cash flows.
17
New Accounting Pronouncements
In July 2010, the Financial
Accounting Standards Board issued guidance that significantly expands the
required disclosures concerning the credit quality of certain types of receivables
and the allowance for credit losses. This guidance is effective for IDACORP
and Idaho Power as follows: (1) disclosures concerning end-of-period
information are effective for the December 31, 2010, financial statements; and
(2) disclosures about activity occurring during a reporting period are
effective beginning with the quarter ending March 31, 2011. Because this
guidance relates only to disclosures, it is not expected to have a material
effect on IDACORPs and Idaho Powers consolidated financial statements.
2. INCOME TAXES:
In accordance with interim
reporting requirements, IDACORP and Idaho Power use an estimated annual
effective tax rate for computing their 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.
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 ended June 30 is as follows (in thousands of dollars):
|
IDACORP |
Idaho Power |
|||||||
|
2010 |
2009 |
2010 |
2009 |
|||||
Income tax provision |
$ |
4,046 |
$ |
5,175 |
$ |
5,859 |
$ |
7,675 |
|
ADITC amortization reversal |
|
4,512 |
|
- |
|
4,512 |
|
- |
|
Accounting method change |
|
(25,187) |
|
- |
|
(25,187) |
|
- |
|
|
Income tax (benefit) expense |
$ |
(16,629) |
$ |
5,175 |
$ |
(14,816) |
$ |
7,675 |
Effective tax rate |
|
(73.6)% |
|
15.8% |
|
(61.7)% |
|
22.6% |
|
|
|
|
|
An analysis of income tax expense
for the six months ended June 30 is as follows (in thousands of dollars):
|
IDACORP |
Idaho Power |
|||||||
|
2010 |
2009 |
2010 |
2009 |
|||||
Income tax provision |
$ |
8,960 |
$ |
11,970 |
$ |
11,774 |
$ |
17,447 |
|
Accounting method change |
|
(25,187) |
|
- |
|
(25,187) |
|
- |
|
Medicare Part D subsidy |
|
903 |
|
- |
|
903 |
|
- |
|
|
Income tax (benefit) expense |
$ |
(15,324) |
$ |
11,970 |
$ |
(12,510) |
$ |
17,447 |
Effective tax rate |
|
(38.4)% |
|
20.5% |
|
(28.1)% |
|
27.7% |
|
|
|
|
|
The decrease in the 2010 estimated
annual effective tax rates as compared to the same periods of 2009 is primarily
due to Idaho Powers tax accounting method change for repair-related
expenditures (discussed below), and lower pre-tax earnings at IDACORP and Idaho
Power, 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 for the six months ended June
30, 2010 were comparable to the same period in 2009.
Based on its current estimate of
2010 return on equity, Idaho Power does not expect to amortize any additional
accumulated deferred investment tax credits (ADITC). Accordingly, the $4.5
million of additional ADITC amortization recorded in the first quarter of 2010
was reversed in the second quarter of 2010. For further information regarding
ADITC amortization, see Note 3 Regulatory Matters - Idaho Settlement
Agreement.
18
Tax Accounting Method Change
In June 2010, Idaho Power completed
its evaluation of a tax accounting method change for its 2009 tax year that
would allow a current income tax deduction for repair-related expenditures on
its utility assets that are currently capitalized for financial reporting and
tax purposes. Idaho Power intends to make this method change following the
automatic consent procedures with the filing of IDACORPs 2009 consolidated
federal income tax return in September 2010. For the three months ended June
30, 2010, Idaho Power recorded an estimated net tax benefit of $25.2 million
related to the cumulative method change adjustment (tax years 1999 through
2009) and has included an annual deduction estimate in its 2010 income tax
provision, which resulted in a $3.6 million net tax benefit. Idaho Powers
prescribed regulatory accounting treatment requires immediate income
recognition for temporary tax differences of this type. A regulatory asset is
established to reflect Idaho Powers ability to recover increased income tax
expense when such temporary differences reverse. Idaho Power expects to
recognize cash tax benefits associated with the method change by the end of
2010 through offsets to current estimated tax payments and direct tax refunds.
In conjunction with recording the
estimated tax benefit for the method change, Idaho Power also increased its
current liability for uncertain tax positions by $10.9 million. If recognized,
the $10.9 million balance of unrecognized tax benefits would affect the
effective tax rate. The tax method is currently being audited under IDACORPs
2009 Compliance Assurance Process (CAP) examination (discussed below) and, on a
national level, aspects of the method related to electric utility transmission
and distribution property are the subject of an Internal Revenue Service (IRS)
Industry Issue Resolution program.
Status of Audit Proceedings
In May 2009,
IDACORP formally entered the IRS 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. Initial estimates indicate the potential income and cash benefits
associated with settlement of this matter to be in excess of the repairs method
change recorded in the second quarter. Idaho Power expects that the
examination of this method will be completed during the third quarter of 2010;
however, the timing of final settlement with the IRS, and thereby the
recognition of the income and cash impacts, has yet to be determined.
Resolution of this matter would also result in a $1.1 million decrease to Idaho
Powers unrecognized tax benefits for its 2009 uniform capitalization deduction.
Tax Impacts of Health Care Acts
As discussed further in Note 10 Benefit
Plans, the Patient Protection and Affordable Care Act and the Health Care and
Education Reconciliation Act were enacted in March 2010. As a result of this
legislation, in the first quarter of 2010, 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. No charges
resulting from the legislation were incurred in the second quarter of 2010.
19
3. REGULATORY MATTERS:
Deferred Net Power Supply Costs
Changes in deferred net power
supply costs for the six months ended June 30, 2010 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 |
|
(23,282) |
|
(593) |
|
(23,875) |
|
Prior costs expensed and recovered through rates |
|
(51,671) |
|
(849) |
|
(52,520) |
|
SO2 allowances and REC sales credited to account |
|
(2,307) |
|
- |
|
(2,307) |
|
Interest and other |
|
106 |
|
428 |
|
534 |
|
Balance at June 30, 2010 |
$ |
(5,742) |
$ |
12,207 |
$ |
6,465 |
|
(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. |
|||||||
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 other parties.
Significant elements of the settlement agreement include:
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. Idaho Power recorded
additional ADITC amortization of $4.5 million in the first quarter of 2010, but
reversed the entire $4.5 million in the second quarter based on updated
estimates of annual 2010 return on equity. The actual amount of additional
ADITC recorded in the full year 2010 and 2011 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 settlement agreement also
included a provision to reestablish the base level for net power supply costs
effective with the June 1, 2010, PCA rate change.
2010 Idaho PCA Filing and Order
On May 28, 2010, the IPUC issued an order approving a $146.9 million decrease in the PCA, along with a base rate increase of $88.7 million. The net effect of these two rate adjustments was an overall decrease in customer rates of $58.2 million, or 6.49 percent, effective June 1, 2010. Idaho Powers PCA application was approved as filed with the IPUC, with the exception of a $0.2 million interest expense adjustment relating to base power supply costs.
20
Other Idaho 2010 Filings and Orders
Rate Filings and Orders: On
May 28, 2010, the IPUC issued the following orders approving rate filings made
in March 2010:
Energy Efficiency Prudency
Determination: On March 15, 2010, Idaho Power filed an application with
the IPUC requesting an order designating energy efficiency expenditures of
$50.7 million incurred in 2008 and 2009 as prudently incurred expenses. A
determination and order from the IPUC is pending.
On April 14, 2010, the IPUC
completed its review of energy efficiency rider expenditures that Idaho Power
made from 2002 through 2007. All rider expenditures during that time period
were found to be prudently incurred and approved for ratemaking purposes.
Oregon Regulatory Matters
Oregon 2009 General Rate Case
Settlement: In connection with Idaho Powers general rate case filing, on
February 24, 2010, the Oregon Public Utility Commission (OPUC) approved a $5
million, or 15.4 percent, increase in Oregon 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.
Oregon
Power Cost Recovery Mechanisms: Idaho Powers power cost recovery
mechanism in Oregon has two components- the power cost adjustment mechanism
(PCAM) and the annual power cost update (APCU). 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 power supply
cost increases or decreases, resulting in no request for a deferral. On April
15, 2010, Idaho Power filed with the OPUC a stipulation combining its March
power supply cost forecast and 2009 October update. The stipulation was
approved on May 24, 2010, and resulted in an overall increase of $2.2 million,
or 5.5 percent, in Oregon rates, effective June 1, 2010.
Annual OATT Update
On June 1, 2010, Idaho Power posted its Draft Informational Filing (DIF) for its Open Access Transmission Tariff (OATT) on its Open Access Same-Time Information System (OASIS) Internet platform. The DIF is the draft computation of Idaho Powers transmission rate for service under its OATT, which is updated annually. The new draft rate submitted by Idaho Power was $19.60 per kW/yr, a 23.8 percent increase over the present rate of $15.83
21
per kW/yr. Several third parties have submitted data
requests in connection with Idaho Powers DIF, and Idaho Power is currently
responding to those data requests. If approved by the FERC, the new rates
would be effective as of October 1, 2010 for a one year period.
4. LONG-TERM DEBT:
As of June 30, 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. On
May 12, 2010, Idaho Power filed a shelf registration statement with the
Securities and Exchange Commission (SEC) for the sale of up to $500 million of
first mortgage bonds and debt securities. The SEC declared the registration
statement effective on May 25, 2010. To facilitate the issuance of the first
mortgage bonds, on June 17, 2010, Idaho Power entered into a Selling Agency
Agreement with ten banks named in the agreement in connection with the
potential issuance and sale from time to time of up to $500 million aggregate principal
amount of first mortgage bonds, secured medium term notes, Series I, under
Idaho Powers Indenture of Mortgage and Deed of Trust, dated as of October 1,
1937, as amended and supplemented. As of August 5, 2010, Idaho Power had not
sold any first mortgage bonds or debt securities under the May 2010 shelf
registration statement.
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 June 30, 2010, no loans were
outstanding on either IDACORPs facility or Idaho Powers facility. At June
30, 2010, Idaho Power had regulatory authority to incur up to $450 million of
short-term indebtedness.
Balances and interest rates of
IDACORPs short-term borrowings were as follows at June 30, 2010, and December
31, 2009 (in thousands of dollars).
|
|
June 30, 2010 |
December 31, 2009 |
||
IDACORP |
|
|
|
|
|
|
Commercial paper outstanding |
$ |
17,500 |
$ |
53,750 |
|
Weighted-average annual interest rate |
|
0.46% |
|
0.41% |
|
|
|
|
Idaho Power had no short-term borrowings under its facility at either date.
22
6. COMMON STOCK:
IDACORP Common Stock
The following table summarizes
shares of IDACORP common stock issued during the six months ended June 30,
2010:
|
Shares issued |
|
Balance at December 31, 2009 |
47,925,882 |
|
Dividend reinvestment and stock purchase plan |
77,273 |
|
Employee savings plan |
55,248 |
|
Long-term incentive and compensation plan (LTICP) (1) |
92,743 |
|
Restricted stock plan |
13,293 |
|
Balance at June 30, 2010 |
48,164,439 |
|
|
|
|
(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
June 30, 2010, there were 2.1 million shares remaining available to be sold
under the current sales agency agreement.
Idaho Power Common Stock
On June 28, 2010, IDACORP
contributed $10 million of additional equity to Idaho Power. No additional
shares of Idaho Power common stock were issued.
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 June 30, 2010, the leverage ratios
for IDACORP and Idaho Power were 50 percent and 52 percent, respectively.
Based on these restrictions, IDACORPs and Idaho Powers dividends were limited
to $657 million and $553 million, respectively, at June 30, 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 June 30, 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.
23
7. EARNINGS PER SHARE:
The following table presents the
computation of IDACORPs basic and diluted earnings per share (EPS) for the
three and six months ended June 30, 2010 and 2009 (in thousands, except for per
share amounts):
|
Three months ended |
Six months ended |
|||||||||
|
June 30, |
June 30, |
|||||||||
|
2010 |
2009 |
2010 |
2009 |
|||||||
Numerator: |
|
|
|
|
|
|
|
|
|||
|
Net income attributable to IDACORP, Inc. |
$ |
39,209 |
$ |
27,475 |
$ |
55,272 |
$ |
46,359 |
||
Denominator: |
|
|
|
|
|
|
|
|
|||
|
Weighted-average common shares outstanding - basic |
|
47,888 |
|
46,958 |
|
47,831 |
|
46,895 |
||
|
Effect of dilutive securities: |
|
|
|
|
|
|
|
|
||
|
|
Options |
|
41 |
|
9 |
|
41 |
|
11 |
|
|
|
Restricted Stock |
|
119 |
|
10 |
|
94 |
|
21 |
|
|
|
|
Weighted-average common shares outstanding - diluted |
|
48,048 |
|
46,977 |
|
47,966 |
|
46,927 |
Basic earnings per share |
$ |
0.82 |
$ |
0.59 |
$ |
1.16 |
$ |
0.99 |
|||
Diluted earnings per share |
$ |
0.82 |
$ |
0.58 |
$ |
1.15 |
$ |
0.99 |
|||
|
The diluted EPS computation
excludes 343,835 and 344,918 options for the three and six months ended June
30, 2010, respectively, because the options exercise prices were greater than
the average market price of the common stock during that period. For the same
periods in 2009, there were 685,581 and 686,533 options excluded from the
diluted EPS computation for the same reason. In total, 574,704 options were
outstanding at June 30, 2010, with expiration dates between 2010 and 2015.
8. COMMITMENTS:
Purchase Obligations
The following items are the only
material changes to purchase obligations made outside of the ordinary course of
business during the first six months of 2010:
Idaho Power entered into a power purchase 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 megawatts (MW), with an estimated on-line date of late 2012. Idaho Powers purchases under the contract are expected to total $569 million from 2012 to 2037. On May 20, 2010, the IPUC issued an order approving the purchase of energy under the agreement and stated that the purchases would be allowed as prudently incurred expenses for ratemaking purposes.
In the second quarter, Idaho Power entered into several purchased power agreements with wind and other alternate energy developers. These agreements are expected to total approximately $109 million from 2011 to 2031.
In April 2010, Idaho Power entered into multiple service agreements with Northwest Pipeline for rate schedule TF-1, Firm Transportation. Idaho Power estimates it will spend approximately $32 million on the firm transportation service agreements. The service agreements commence in 2011 with varying end dates ranging through 2042.
In June 2010, Idaho Power entered into a contract with Union Pacific Corporation for the transportation of coal. Idaho Power has agreed to spend approximately $47 million over the term of the contract from 2011 to 2014.
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 June 30,
24
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.
IDACORP and Idaho Power enter into
financial agreements and power purchase and sale agreements that include
indemnification provisions relating to certain claims or liabilities that may
arise from the transactions contemplated by these agreements. Generally, a
maximum obligation is not explicitly stated in the indemnification provisions
and, therefore, the overall maximum amount of the obligation under such
indemnifications cannot be reasonably estimated. IDACORP and Idaho Power
periodically evaluate the likelihood of incurring costs under such indemnities
based on their historical experience and the evaluation of the specific
indemnities. As of June 30, 2010, management believes the likelihood is remote
that IDACORP or Idaho Power would be required to perform under such
indemnification provisions or otherwise incur any significant losses with
respect to such indemnifications. Neither IDACORP nor Idaho Power has recorded
any liability on their respective condensed consolidated balance sheets with
respect to these indemnifications.
9. CONTINGENCIES:
In the course of their respective
businesses, IDACORP, Idaho Power, and their respective subsidiaries have in the
past and expect in the future to become involved in various claims,
controversies, disputes, and other contingent matters, including the items
described in this Note. Some of these claims, controversies, disputes, and
other contingent matters involve litigation or other contested proceedings.
IDACORP, Idaho Power, and their respective subsidiaries intend to vigorously
protect and defend their interests and pursue their rights. However, no
assurance can be given as to the ultimate outcome of any particular matter
because litigation and other contested proceedings are inherently subject to
numerous uncertainties. For matters that affect Idaho Powers operations,
Idaho Power intends to seek, to the extent permissible and appropriate,
recovery of incurred costs through the ratemaking process.
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 the FERC to initiate its own
investigations. Some of these proceedings (referred to in this report as 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).
There are more than 200 petitions
pending in the Ninth Circuit 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.
25
On May 22, 2006, the FERC approved
an Offer of Settlement between and among IE and Idaho Power, the California
Parties (consisting of 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 from October 2, 2000 to June 21, 2001 were proper subjects
of the refund proceeding. In that decision the Ninth Circuit refused to expand
the proceedings into the bilateral market, 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.
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 to 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 to 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 the 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. On July 16, 2010, the FERC Chief Administrative
Law Judge designated a presiding administrative law judge to establish hearing
procedures. 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 IE's and Idaho Power's 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 IE's and Idaho Power's request for rehearing will be moot. On May 18, 2010, the FERC denied rehearing. On June 25, 2010, IE and Idaho Power filed a petition for review of the pertinent FERC orders in the Ninth Circuit. IE and Idaho Power are unable to predict how or when the Ninth Circuit might rule, but the effect of any such ruling is confined to obligations of IE and Idaho Power to the small minority of
26
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 the 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. On May 28, 2010,
the Ninth Circuit denied reconsideration. Although IE and Idaho Power are
unable to predict how or when the Ninth Circuit will act on 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.
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.
27
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. On July 21, 2010, the Port of Seattle
and Tacoma once again filed a motion requesting that the FERC either summarily
dispose of the case or set it for hearing, and the California Parties,
answering a pleading in the Brown Complaint, renewed their request for
consolidation. The 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 and
reimbursement of plaintiffs costs of litigation. Idaho Power was 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, and the consent decree was entered by the court on June
8, 2010. Idaho Power is fully reserved for the contingency, and 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 of the plant 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.
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 entered into a settlement agreement with respect to the 1984 Swan Falls Agreement and Idaho Power's water rights under the Swan Falls Agreement, which settlement agreement is subject to certain conditions discussed below. The settlement agreement will also resolve litigation
28
between
Idaho Power and the State of Idaho 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 of Idaho 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
of Idaho 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
of Idaho 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 of Idaho. Idaho Power continues
to work with the State of Idaho and the parties to reach an agreement
consistent with the courts order regarding the language of the decrees.
U.S. Bureau of Reclamation Proceedings
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 (USBR). 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 USBR 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.
Current discussions primarily relate to modification to state policy and the
Idaho water plan that promote more efficient operation of the upper Snake River
reservoir system to optimize the release and shaping of Snake River flows for
hydroelectric generation downstream during the high-load winter months. 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 USBR 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 or what effect it may have on its
financial position, results of operations, or cash flows.
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 Power's 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
29
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.
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
currently 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 Employee Savings
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 June 30 (in thousands
of dollars):
|
|
Senior Management |
Postretirement |
|||||||||||
|
Pension Plan |
Security Plan |
Benefits |
|||||||||||
|
2010 |
2009 |
2010 |
2009 |
2010 |
2009 |
||||||||
Service cost |
$ |
4,277 |
$ |
4,052 |
$ |
386 |
$ |
403 |
$ |
340 |
$ |
278 |
||
Interest cost |
|
7,229 |
|
6,985 |
|
751 |
|
713 |
|
897 |
|
900 |
||
Expected return on plan assets |
|
(6,277) |
|
(5,895) |
|
- |
|
- |
|
(640) |
|
(545) |
||
Amortization of transition obligation |
|
- |
|
- |
|
- |
|
- |
|
510 |
|
510 |
||
Amortization of prior service cost |
|
162 |
|
163 |
|
58 |
|
58 |
|
(134) |
|
(133) |
||
Amortization of net loss |
|
1,913 |
|
2,308 |
|
233 |
|
165 |
|
144 |
|
231 |
||
|
Net periodic benefit cost |
|
7,304 |
|
7,613 |
|
1,428 |
|
1,339 |
|
1,117 |
|
1,241 |
|
Costs not recognized due to the |
|
|
|
|
|
|
|
|
|
|
|
|
||
|
effects of regulation (1) |
|
(6,599) |
|
(7,613) |
|
- |
|
- |
|
- |
|
- |
|
|
Net periodic benefit cost |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
recognized for financial |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
reporting (2) |
$ |
705 |
$ |
- |
$ |
1,428 |
$ |
1,339 |
$ |
1,117 |
$ |
1,241 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Under IPUC order, income statement recognition of Pension Plan costs has been deferred until costs are recovered through rates. See Note 3 - "Regulatory Matters" for information on Idaho Power's 2010 pension rate filing. | ||||||||||||||
(2) Net periodic benefit costs for the pension plan are recognized for the Oregon jurisdiction and non-regulated subsidiaries, and beginning in June 2010, for the Idaho and FERC jurisdictions. |
30
The following table shows the
components of net periodic benefit costs for the six months ended June 30 (in
thousands of dollars):
|
|
Senior Management |
Postretirement |
||||||||||||
|
Pension Plan |
Security Plan |
Benefits |
||||||||||||
|
2010 |
2009 |
2010 |
2009 |
2010 |
2009 |
|||||||||
Service cost |
$ |
8,836 |
$ |
8,257 |
$ |
771 |
$ |
805 |
$ |
680 |
$ |
610 |
|||
Interest cost |
|
14,560 |
|
13,932 |
|
1,502 |
|
1,427 |
|
1,795 |
|
1,782 |
|||
Expected return on plan assets |
|
(12,577) |
|
(11,983) |
|
- |
|
- |
|
(1,280) |
|
(1,073) |
|||
Amortization of transition obligation |
|
- |
|
- |
|
- |
|
- |
|
1,020 |
|
1,020 |
|||
Amortization of prior service cost |
|
325 |
|
326 |
|
116 |
|
116 |
|
(268) |
|
(267) |
|||
Amortization of net loss |
|
3,838 |
|
4,428 |
|
466 |
|
330 |
|
287 |
|
421 |
|||
|
Net periodic benefit cost |
|
14,982 |
|
14,960 |
|
2,855 |
|
2,678 |
|
2,234 |
|
2,493 |
||
Costs not recognized due to the |
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
effects of regulation(1) |
|
(14,026) |
|
(14,960) |
|
- |
|
- |
|
- |
|
- |
||
|
Net periodic benefit cost |
|
|
|
|
|
|
|
|
|
|
|
|
||
|
|
recognized for financial |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
reporting (2) |
$ |
956 |
$ |
- |
$ |
2,855 |
$ |
2,678 |
$ |
2,234 |
$ |
2,493 |
|
|
|
|
|
|
|
|
|
|
|