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

 

EXCHANGE ACT OF 1934

 

For the quarterly period ended June 30, 2010

 

OR

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

 

EXCHANGE ACT OF 1934

 

For the transition period from __________ to __________

 

Exact name of registrants as specified

I.R.S. Employer

Commission File

in their charters, address of principal

Identification

Number

executive offices, zip code and telephone number

Number

1-14465

IDACORP, Inc.

82-0505802

1-3198

Idaho Power Company

82-0130980

 

1221 W. Idaho Street

 

 

Boise, ID  83702-5627

 

 

(208) 388-2200

 

 

State of Incorporation:  Idaho

 

 

Websites:  www.idacorpinc.com,  www.idahopower.com

 

 

None

 

Former name, former address and former fiscal year, if changed since last report.

 

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.:

 

Large accelerated filer

X

Accelerated filer

 

Non-accelerated  filer

 

Smaller reporting company

 

Idaho Power Company:

 

Large accelerated filer

 

Accelerated filer

 

Non-accelerated  filer

X

Smaller reporting company

 

 

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:

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

 

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

-

Management’s 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

Page

Part I.  Financial Information:

 

 

 

 

Item 1.  Financial Statements (unaudited)

 

 

 

IDACORP, Inc.:

 

 

 

 

Condensed Consolidated Statements of Income

4

 

 

 

Condensed Consolidated Balance Sheets

5-6

 

 

 

Condensed Consolidated Statements of Cash Flows

7

 

 

 

Condensed Consolidated Statements of Comprehensive Income

8

 

 

 

Condensed Consolidated Statements of Equity

9

 

 

Idaho Power Company:

 

 

 

 

Condensed Consolidated Statements of Income

10

 

 

 

Condensed Consolidated Balance Sheets

11-12

 

 

 

Condensed Consolidated Statements of Capitalization

13

 

 

 

Condensed Consolidated Statements of Cash Flows

14

 

 

 

Condensed Consolidated Statements of Comprehensive Income

15

 

 

Notes to the Condensed Consolidated Financial Statements

16-36

 

 

Reports of Independent Registered Public Accounting Firm

37-38

 

 

 

 

 

Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of

 

 

 

 

Operations

39-74

 

 

 

 

 

 

Item 3.  Quantitative and Qualitative Disclosures About Market Risk

75

 

 

 

 

 

 

Item 4.  Controls and Procedures

76

 

 

 

 

 

Part II.  Other Information:

 

 

 

 

 

Item 1.  Legal Proceedings

76

 

 

 

 

Item 1A.  Risk Factors

76-78

 

 

 

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds

78-79

 

 

Item 6.  Exhibits

80

 

 

 

Signatures

81

 

 

Exhibit Index

82

 

 

 

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- “MANAGEMENT’S 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 Company’s 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

June 30,

June 30,

 

 2010

2009

 2010

2009

(thousands of dollars except for per share amounts)

Operating Revenues:

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 

Total electric utility revenues

240,790 

242,518 

493,250 

470,547 

Other

963 

1,116 

1,466 

1,661 

Total operating revenues

241,753 

243,634 

494,716 

472,208 

Operating Expenses:

Electric utility:

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 electric utility expenses

204,399 

193,290 

422,474 

385,606 

Other expense

749 

872 

1,590 

1,495 

Total operating expenses

205,148 

194,162 

424,064 

387,101 

Operating Income

36,605 

49,472 

70,652 

85,107 

Other Income, Net

3,012 

4,058 

7,493 

10,979 

Earnings (Losses) of Unconsolidated Equity-

Method Investments

380 

(2,620)

(1,998)

(2,218)

Interest Expense:

Interest on long-term debt

19,427 

18,282 

38,868 

34,922 

Other interest expense, net of AFUDC

(2,038)

(117)

(2,491)

719 

Total interest expense

17,389 

18,165 

36,377 

35,641 

Income Before Income Taxes

22,608 

32,745 

39,770 

58,227 

Income Tax (Benefit) Expense

(16,629)

5,175 

(15,324)

11,970 

Net Income

39,237 

27,570 

55,094 

46,257 

Adjustment for (income) loss attributable to

noncontrolling interests

(28)

(95)

178 

102 

Net Income Attributable to IDACORP, Inc.

 $

39,209 

 $

27,475 

 $

55,272 

 $

46,359 

Weighted Average Common Shares Outstanding-

Basic (000’s)

47,888 

46,958 

47,831 

46,895 

Weighted Average Common Shares Outstanding-

Diluted (000’s)

48,048 

46,977 

47,966 

46,927 

Earnings Per Share of Common Stock:

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,

 

2010

2009

Assets

(thousands of dollars)

Current Assets:

Cash and cash equivalents

 $

29,488 

 $

52,987 

Receivables:

Customer (net of allowance of $1,311 and $1,805, respectively)

64,216 

74,987 

Other (net of allowance of $1,457 and $1,073, respectively)

23,171 

11,922 

Taxes receivable

1,874 

- 

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

10,340 

11,111 

Deferred income taxes

31,817 

31,773 

Other

5,917 

2,666 

Total current assets

294,864 

310,406 

 

Investments

197,657 

195,298 

 

Property, Plant and Equipment:

Utility plant in service

4,212,394 

4,160,178 

Accumulated provision for depreciation

(1,586,118)

(1,558,538)

Utility plant in service- net

2,626,276 

2,601,640 

Construction work in progress

363,982 

289,188 

Utility plant held for future use

7,106 

7,151 

Other property, net of accumulated depreciation

18,807 

19,029 

Property, plant and equipment- net

3,016,171 

2,917,008 

 

Other Assets:

American Falls and Milner water rights

22,641 

24,226 

Company-owned life insurance

27,079 

26,654 

Regulatory assets

676,820 

720,401 

Long-term receivables (net of allowance of $1,861 and $2,157, respectively)

3,993 

4,217 

Other

41,562 

40,517 

Total other assets

772,095 

816,015 

Total

 $

4,280,787 

 $

4,238,727 

 

 The accompanying notes are an integral part of these statements.

 

5

 

 

 

 

 

 

IDACORP, Inc.
Condensed Consolidated Balance Sheets
(unaudited)

June 30,

December 31,

 

2010

2009

Liabilities and Equity

(thousands of dollars)

Current Liabilities:

Current maturities of long-term debt

 $

129,800 

 $

9,340 

Notes payable

17,500 

53,750 

Accounts payable

78,075 

83,818 

Taxes accrued

21,456 

10,184 

Interest accrued

21,821 

20,056 

Other

70,323 

41,081 

Total current liabilities

338,975 

218,229 

 

Other Liabilities:

Deferred income taxes

559,862 

574,450 

Regulatory liabilities

301,568 

287,780 

Other

357,740 

346,994 

Total other liabilities

1,219,170 

1,209,224 

 

Long-Term Debt

1,288,802 

1,409,730 

 

Commitments and Contingencies

Equity:

IDACORP, Inc. shareholders’ equity:

Common stock, no par value (120,000,000 shares authorized;

48,164,439 and 47,925,882 shares issued, respectively)

762,903 

756,475 

Retained earnings

675,601 

649,180 

Accumulated other comprehensive loss

(8,678)

(8,267)

Treasury stock (7,365 and 29,191 shares at cost, respectively)

(17)

(53)

Total IDACORP, Inc. shareholders’ equity

1,429,809 

1,397,335 

Noncontrolling interest

4,031 

4,209 

Total equity

1,433,840 

1,401,544 

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

 

June 30,

 

2010

2009

 Operating Activities:

(thousands of dollars)

Net income

 $

55,094 

 $

46,257 

Adjustments to reconcile net income to net cash provided by

 

 

operating activities:

 

 

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 IDACORP’s 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.

IDACORP’s 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

 

IDACORP’s and Idaho Power’s 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 VIE’s 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 EEC’s share of distributions and are secured by the stock of EEC and EEC’s 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.  IERCo’s 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.  IFS’s 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 IDACORP’s and Idaho Power’s 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 IDACORP’s and Idaho Power’s net income or total equity, and include the following:

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 IDACORP’s and Idaho Power’s 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 period’s 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 Power’s 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 IDACORP’s 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 Power’s prescribed regulatory accounting treatment requires immediate income recognition for temporary tax differences of this type.  A regulatory asset is established to reflect Idaho Power’s 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 IDACORP’s 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 Power’s current method of uniform capitalization.  In September 2009, the IRS issued Industry Director Directive #5 (IDD), which discusses the IRS’s 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 Power’s 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 Power’s 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 Power’s customers, the IPUC Staff, and other parties.  Significant elements of the settlement agreement include:

 

Because Idaho Power’s 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 Power’s 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 Power’s 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 Power’s 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 Power’s 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 Power’s 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 Power’s 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 Power’s 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 Moody’s Investors Service and Standard & Poor’s Ratings Services.

At June 30, 2010, no loans were outstanding on either IDACORP’s facility or Idaho Power’s 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 IDACORP’s 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 IDACORP’s credit facility and Idaho Power’s 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 Power’s 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 Power’s common equity capital below 35 percent of its total adjusted capital without IPUC approval.

Idaho Power’s ability to pay dividends on its common stock held by IDACORP and IDACORP’s 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 Power’s 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, IDACORP’s and Idaho Power’s 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 Power’s 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.

 

 

 

 

 

 

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7.  EARNINGS PER SHARE:

 

The following table presents the computation of IDACORP’s 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 Power’s 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,

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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 Power’s 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 FERC’s 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.

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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 IE’s and Idaho Power’s 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 court’s decision.

On November 19, 2009, the FERC issued an order to implement the Ninth Circuit’s 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 FERC’s 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 FERC’s 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 FERC’s 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 Circuit’s opinion instructed the FERC to consider whether evidence of market manipulation would have altered the agency’s 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. 

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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 Power’s 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 PGE’s 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 PGE’s 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

 

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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 Power’s 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 court’s 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 Power’s 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 IDACORP’s or Idaho Power’s 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 employee’s 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