IDA 3.31.15 10Q
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 March 31, 2015 | |
| 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, Idaho 83702-5627 | | |
| (208) 388-2200 | | |
| State of Incorporation: Idaho | | |
| 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.
IDACORP, Inc.: Yes X No __ Idaho Power Company: 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 X 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).
IDACORP, Inc.: Yes No X Idaho Power Company: Yes No X
Number of shares of common stock outstanding as of April 24, 2015:
IDACORP, Inc.: 50,347,339
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 Instruction (H)(1)(a) and (b) of Form 10-Q and is therefore filing this report on Form 10-Q with the reduced disclosure format.
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| | | | |
TABLE OF CONTENTS |
| Page |
Commonly Used Terms | |
Cautionary Note Regarding Forward-Looking Statements | |
| |
Part I. Financial Information | |
| | |
| Item 1. Financial Statements (unaudited) | |
| | IDACORP, Inc.: | |
| | | Condensed Consolidated Statements of Income | |
| | | Condensed Consolidated Statements of Comprehensive Income | |
| | | Condensed Consolidated Balance Sheets | |
| | | Condensed Consolidated Statements of Cash Flows | |
| | | Condensed Consolidated Statements of Equity | |
| | Idaho Power Company: | |
| | | Condensed Consolidated Statements of Income | |
| | | Condensed Consolidated Statements of Comprehensive Income | |
| | | Condensed Consolidated Balance Sheets | |
| | | Condensed Consolidated Statements of Cash Flows | |
| | Notes to the Condensed Consolidated Financial Statements | |
| | Reports of Independent Registered Public Accounting Firm | |
| Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations | |
| Item 3. Quantitative and Qualitative Disclosures About Market Risk | |
| Item 4. Controls and Procedures | |
| | | | |
Part II. Other Information: | |
| | |
| Item 1. Legal Proceedings | |
| Item 1A. Risk Factors | |
| Item 2. Unregistered Sales of Equity Securities and Use of Proceeds | |
| Item 3. Defaults Upon Senior Securities | |
| Item 4. Mine Safety Disclosures | |
| Item 5. Other Information | |
| Item 6. Exhibits | |
| | |
Signatures | |
| |
Exhibit Index | |
|
| | |
COMMONLY USED TERMS |
|
The following select abbreviations, terms, or acronyms are commonly used or found in multiple locations in this report: |
| | |
ADITC | - | Accumulated Deferred Investment Tax Credits |
AFUDC | - | Allowance for Funds Used During Construction |
BCC | - | Bridger Coal Company, a joint venture of IERCo |
BLM | - | U.S. Bureau of Land Management |
CSPP | - | Cogeneration and Small Power Production |
EIS | - | Environmental Impact Statement |
EPA | - | U.S. Environmental Protection Agency |
FCA | - | Fixed Cost Adjustment |
FERC | - | Federal Energy Regulatory Commission |
HCC | - | Hells Canyon Complex |
IDACORP | - | IDACORP, Inc., an Idaho corporation |
Idaho Power | - | Idaho Power Company, an Idaho corporation |
Idaho ROE | - | Idaho-jurisdiction return on year-end equity |
Ida-West | - | Ida-West Energy, a subsidiary of IDACORP, Inc. |
IERCo | - | Idaho Energy Resources Co., a subsidiary of Idaho Power Company |
IESCo | - | IDACORP Energy Services Co., a subsidiary of IDACORP, Inc. |
IFS | - | IDACORP Financial Services, a subsidiary of IDACORP, Inc. |
IPUC | - | Idaho Public Utilities Commission |
IRP | - | Integrated Resource Plan |
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 | - | Public Utility Commission of Oregon |
PCA | - | Power Cost Adjustment |
PURPA | - | Public Utility Regulatory Policies Act of 1978 |
REC | - | Renewable Energy Certificate |
SCR | - | Selective Catalytic Reduction |
SEC | - | U.S. Securities and Exchange Commission |
SMSP | - | Security Plan for Senior Management Employees |
WPSC | - | Wyoming Public Service Commission |
|
| | |
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS |
In addition to the historical information contained in this report, this report contains (and oral communications made by IDACORP, Inc. and Idaho Power Company may contain) statements that relate to future events and expectations, such as statements regarding projected or future financial performance, cash flows, capital expenditures, dividends, capital structure or ratios, strategic goals, challenges, objectives, and plans for future operations. Such statements constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Any statements that express, or involve discussions as to, expectations, beliefs, plans, objectives, assumptions, or future events or performance, often, but not always, through the use of words or phrases such as "anticipates," "believes," "continues," "estimates," "expects," "intends," "plans," "predicts," "projects," "may result," or similar expressions, are not statements of historical facts and may be forward-looking. Forward-looking statements are not guarantees of future performance and involve estimates, assumptions, risks, and uncertainties. Actual results, performance, or outcomes may differ materially from the results discussed in the statements. In addition to any assumptions and other factors and matters referred to specifically in connection with such forward-looking statements, factors that could cause actual results or outcomes to differ materially from those contained in forward-looking statements include those factors set forth in this report, IDACORP's and Idaho Power's Annual Report on Form 10-K for the year ended December 31, 2014, particularly Part I, Item 1A - “Risk Factors” and Part II, Item 7 - “Management’s Discussion and Analysis of Financial Condition and Results of Operations" of that report, subsequent reports filed by IDACORP and Idaho Power with the Securities and Exchange Commission, and the following important factors:
| |
• | the effect of decisions by the Idaho and Oregon public utilities commissions, the Federal Energy Regulatory Commission, and other regulators that impact Idaho Power's ability to recover costs and earn a return; |
| |
• | changes in residential, commercial, and industrial growth and demographic patterns within Idaho Power's service area, the loss or change in the business of significant customers, and the availability and use of demand-side management programs, and their associated impacts on loads and load growth; |
| |
• | the impacts of changes in economic conditions, including the potential for changes in customer demand for electricity, revenue from sales of excess power, financial soundness of counterparties and suppliers, and collections of receivables; |
| |
• | unseasonable or severe weather conditions, wildfires, drought, and other natural phenomena and natural disasters, which affect customer demand, hydroelectric generation levels, repair costs, and the availability and cost of fuel for generation plants or purchased power to serve customers; |
| |
• | advancement of technologies that reduce loads or reduce the need for Idaho Power's generation of electric power; |
| |
• | adoption of, changes in, and costs of compliance with, laws, regulations, and policies relating to the environment, natural resources, and endangered species, and the ability to recover those costs through rates; |
| |
• | the ability to obtain debt and equity financing or refinance existing debt when necessary and on favorable terms, which can be affected by factors such as credit ratings, volatility in the financial markets, interest rate fluctuations, decisions by the Idaho or Oregon public utility commissions, and the companies' past or projected financial performance; |
| |
• | reductions in credit ratings, which could adversely impact access to capital markets and would require the posting of additional collateral to counterparties pursuant to credit and contractual arrangements; |
| |
• | variable hydrological conditions and over-appropriation of surface and groundwater in the Snake River basin, which impact the amount of generation from Idaho Power's hydroelectric facilities; |
| |
• | the ability to purchase fuel and power on favorable payment terms and prices, particularly in the event of unanticipated power demands, lack of physical availability, transportation constraints, or a credit downgrade; |
| |
• | accidents, fires, explosions, and mechanical breakdowns that may occur while operating and maintaining an electric system, which can cause unplanned outages, reduce generating output, damage the companies’ assets, operations, or reputation, subject the companies to third-party claims for property damage, personal injury, or loss of life, or result in the imposition of civil, criminal, or regulatory fines or penalties; |
| |
• | the ability to buy and sell power, transmission capacity, and fuel in the markets; |
| |
• | the ability to enter into financial and physical commodity hedges with creditworthy counterparties to manage price and commodity risk, and the failure of any such risk management and hedging strategies to work as intended; |
| |
• | administration of Federal Energy Regulatory Commission and other mandatory reliability, security, and other requirements for system infrastructure, which could result in penalties and increase costs; |
| |
• | disruptions or outages of Idaho Power's generation or transmission systems or of any interconnected transmission system; |
| |
• | the increased costs and operational challenges associated with purchasing and integrating intermittent renewable energy sources into Idaho Power's resource portfolio; |
| |
• | changes in actuarial assumptions, changes in interest rates, and the return on plan assets for pension and other post-retirement plans, which can affect future pension and other postretirement plan funding obligations, costs, and liabilities; |
| |
• | the ability to continue to pay dividends based on financial performance, and in light of contractual covenants and restrictions and regulatory limitations; |
| |
• | changes in tax laws or related regulations or new interpretations of applicable laws by federal, state, or local taxing jurisdictions, the availability of tax credits, and the tax rates payable by IDACORP shareholders on common stock dividends; |
| |
• | employee workforce factors, including the operational and financial costs of unionization or the attempt to unionize all or part of the companies' workforce, the impact of an aging workforce and retirements, the cost and ability to retain skilled workers, and the ability to adjust the labor cost structure when necessary; |
| |
• | failure to comply with state and federal laws, policies, and regulations, including new interpretations and enforcement initiatives by regulatory and oversight bodies, which may result in penalties and fines and increase the cost of compliance, the nature and extent of investigations and audits, and the cost of remediation; |
| |
• | the inability to obtain or cost of obtaining and complying with required governmental permits and approvals, licenses, rights-of-way, and siting for transmission and generation projects and hydroelectric facilities; |
| |
• | the cost and outcome of litigation, dispute resolution, and regulatory proceedings, and the ability to recover those costs or the costs of operational changes through insurance or rates, or from third parties; |
| |
• | the failure of information systems or the failure to secure information system data, failure to comply with privacy laws, security breaches, or the direct or indirect effect on the companies' business or operations resulting from cyber attacks, terrorist incidents or the threat of terrorist incidents, and acts of war; |
| |
• | unusual or unanticipated changes in normal business operations, including unusual maintenance or repairs, or the failure to successfully implement new technology solutions; and |
| |
• | adoption of or changes in accounting policies and principles, changes in accounting estimates, and new Securities and Exchange Commission or New York Stock Exchange requirements, or new interpretations of existing requirements. |
Any forward-looking statement speaks only as of the date on which such statement is made. New factors emerge from time to time and it is not possible for management to predict all such factors, nor can it assess the impact of any such factor on the business or the extent to which any factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking statement. IDACORP and Idaho Power disclaim any obligation to update publicly any forward-looking information, whether in response to new information, future events, or otherwise, except as required by applicable law.
PART I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
IDACORP, Inc.
Condensed Consolidated Statements of Income
(unaudited)
|
| | | | | | | | |
| | Three months ended March 31, |
| | 2015 | | 2014 |
| | (thousands of dollars, except for per share amounts) |
Operating Revenues: | | | | |
Electric utility: | | | | |
General business | | $ | 248,486 |
| | $ | 244,832 |
|
Off-system sales | | 13,019 |
| | 29,210 |
|
Other revenues | | 17,269 |
| | 18,278 |
|
Total electric utility revenues | | 278,774 |
| | 292,320 |
|
Other | | 621 |
| | 399 |
|
Total operating revenues | | 279,395 |
| | 292,719 |
|
Operating Expenses: | | | | |
Electric utility: | | | | |
Purchased power | | 42,965 |
| | 43,796 |
|
Fuel expense | | 31,476 |
| | 55,327 |
|
Power cost adjustment | | 27,755 |
| | 15,023 |
|
Other operations and maintenance | | 83,515 |
| | 80,521 |
|
Energy efficiency programs | | 4,341 |
| | 4,724 |
|
Depreciation | | 34,043 |
| | 32,875 |
|
Taxes other than income taxes | | 8,520 |
| | 8,105 |
|
Total electric utility expenses | | 232,615 |
| | 240,371 |
|
Other | | 3,876 |
| | 3,770 |
|
Total operating expenses | | 236,491 |
| | 244,141 |
|
Operating Income | | 42,904 |
| | 48,578 |
|
Allowance for Equity Funds Used During Construction | | 5,187 |
| | 4,079 |
|
(Loss) Earnings of Unconsolidated Equity-Method Investments | | (160 | ) | | 983 |
|
Other Income, Net | | 1,961 |
| | 2,288 |
|
Interest Expense: | | | | |
Interest on long-term debt | | 20,773 |
| | 20,141 |
|
Other interest | | 2,029 |
| | 1,859 |
|
Allowance for borrowed funds used during construction | | (2,365 | ) | | (1,964 | ) |
Total interest expense, net | | 20,437 |
| | 20,036 |
|
Income Before Income Taxes | | 29,455 |
| | 35,892 |
|
Income Tax Expense | | 6,111 |
| | 8,707 |
|
Net Income | | 23,344 |
| | 27,185 |
|
Adjustment for loss attributable to noncontrolling interests | | 86 |
| | 219 |
|
Net Income Attributable to IDACORP, Inc. | | $ | 23,430 |
| | $ | 27,404 |
|
Weighted Average Common Shares Outstanding - Basic (000’s) | | 50,220 |
| | 50,131 |
|
Weighted Average Common Shares Outstanding - Diluted (000’s) | | 50,260 |
| | 50,175 |
|
Earnings Per Share of Common Stock: | | | | |
Earnings Attributable to IDACORP, Inc. - Basic | | $ | 0.47 |
| | $ | 0.55 |
|
Earnings Attributable to IDACORP, Inc. - Diluted | | $ | 0.47 |
| | $ | 0.55 |
|
Dividends Declared Per Share of Common Stock | | $ | 0.47 |
| | $ | 0.43 |
|
The accompanying notes are an integral part of these statements.
IDACORP, Inc.
Condensed Consolidated Statements of Comprehensive Income
(unaudited)
|
| | | | | | | | |
| | Three months ended March 31, |
| | 2015 | | 2014 |
| | (thousands of dollars) |
| | | | |
Net Income | | $ | 23,344 |
| | $ | 27,185 |
|
Other Comprehensive Income: | | | | |
Unfunded pension liability adjustment, net of tax of $428 and $278 | | 667 |
| | 432 |
|
Total Comprehensive Income | | 24,011 |
| | 27,617 |
|
Comprehensive loss attributable to noncontrolling interests | | 86 |
| | 219 |
|
Comprehensive Income Attributable to IDACORP, Inc. | | $ | 24,097 |
| | $ | 27,836 |
|
The accompanying notes are an integral part of these statements.
IDACORP, Inc.
Condensed Consolidated Balance Sheets
(unaudited)
|
| | | | | | | | |
| | March 31, 2015 | | December 31, 2014 |
| | (thousands of dollars) |
Assets | | | | |
| | | | |
Current Assets: | | | | |
Cash and cash equivalents | | $ | 317,240 |
| | $ | 56,808 |
|
Receivables: | | | | |
Customer (net of allowance of $1,318 and $1,960, respectively) | | 74,060 |
| | 79,083 |
|
Other (net of allowance of $167 and $144, respectively) | | 4,720 |
| | 16,018 |
|
Taxes receivable | | 8,748 |
| | 11,867 |
|
Accrued unbilled revenues | | 47,507 |
| | 56,270 |
|
Materials and supplies (at average cost) | | 57,325 |
| | 55,404 |
|
Fuel stock (at average cost) | | 57,171 |
| | 55,171 |
|
Prepayments | | 14,822 |
| | 18,476 |
|
Deferred income taxes | | 42,335 |
| | 42,359 |
|
Current regulatory assets | | 68,569 |
| | 50,042 |
|
Other | | 194 |
| | 603 |
|
Total current assets | | 692,691 |
| | 442,101 |
|
Investments | | 161,481 |
| | 165,424 |
|
Property, Plant and Equipment: | | | | |
Utility plant in service | | 5,262,019 |
| | 5,248,212 |
|
Accumulated provision for depreciation | | (1,860,279 | ) | | (1,841,011 | ) |
Utility plant in service - net | | 3,401,740 |
| | 3,407,201 |
|
Construction work in progress | | 438,055 |
| | 401,930 |
|
Utility plant held for future use | | 7,090 |
| | 7,090 |
|
Other property, net of accumulated depreciation | | 17,160 |
| | 17,256 |
|
Property, plant and equipment - net | | 3,864,045 |
| | 3,833,477 |
|
Other Assets: | | | | |
American Falls and Milner water rights | | 12,374 |
| | 13,698 |
|
Company-owned life insurance | | 23,807 |
| | 23,893 |
|
Regulatory assets | | 1,156,711 |
| | 1,192,345 |
|
Long-term receivables (net of allowance of $552) | | 17,646 |
| | 6,317 |
|
Other | | 42,997 |
| | 39,598 |
|
Total other assets | | 1,253,535 |
| | 1,275,851 |
|
Total | | $ | 5,971,752 |
| | $ | 5,716,853 |
|
The accompanying notes are an integral part of these statements.
IDACORP, Inc.
Condensed Consolidated Balance Sheets
(unaudited)
|
| | | | | | | | |
| | March 31, 2015 | | December 31, 2014 |
| | (thousands of dollars) |
Liabilities and Equity | | | | |
| | | | |
Current Liabilities: | | | | |
Current maturities of long-term debt | | $ | 121,064 |
| | $ | 1,064 |
|
Notes payable | | 43,400 |
| | 31,300 |
|
Accounts payable | | 65,160 |
| | 97,271 |
|
Taxes accrued | | 17,696 |
| | 10,367 |
|
Interest accrued | | 25,473 |
| | 22,630 |
|
Accrued compensation | | 29,546 |
| | 43,774 |
|
Current regulatory liabilities | | 12,244 |
| | 11,400 |
|
Other | | 32,675 |
| | 23,975 |
|
Total current liabilities | | 347,258 |
| | 241,781 |
|
Other Liabilities: | | | | |
Deferred income taxes | | 1,066,289 |
| | 1,065,290 |
|
Regulatory liabilities | | 397,161 |
| | 390,207 |
|
Pension and other postretirement benefits | | 410,091 |
| | 403,334 |
|
Other | | 50,766 |
| | 44,238 |
|
Total other liabilities | | 1,924,307 |
| | 1,903,069 |
|
Long-Term Debt | | 1,741,724 |
| | 1,614,438 |
|
Commitments and Contingencies | |
| |
|
Equity: | | | | |
IDACORP, Inc. shareholders’ equity: | | | | |
Common stock, no par value (shares authorized 120,000,000; 50,347,913 and 50,308,702 shares issued, respectively) | | 845,712 |
| | 845,402 |
|
Retained earnings | | 1,131,969 |
| | 1,132,237 |
|
Accumulated other comprehensive loss | | (23,491 | ) | | (24,158 | ) |
Treasury stock (574 and 38,764 shares at cost, respectively) | | (5 | ) | | (280 | ) |
Total IDACORP, Inc. shareholders’ equity | | 1,954,185 |
| | 1,953,201 |
|
Noncontrolling interests | | 4,278 |
| | 4,364 |
|
Total equity | | 1,958,463 |
| | 1,957,565 |
|
Total | | $ | 5,971,752 |
| | $ | 5,716,853 |
|
| | | | |
The accompanying notes are an integral part of these statements. |
IDACORP, Inc.
Condensed Consolidated Statements of Cash Flows
(unaudited)
|
| | | | | | | | |
| | Three months ended March 31, |
| | 2015 | | 2014 |
| | (thousands of dollars) |
Operating Activities: | | | | |
Net income | | $ | 23,344 |
| | $ | 27,185 |
|
Adjustments to reconcile net income to net cash provided by operating activities: | | |
| | |
|
Depreciation and amortization | | 35,057 |
| | 33,888 |
|
Deferred income taxes and investment tax credits | | 1,260 |
| | (9,928 | ) |
Changes in regulatory assets and liabilities | | 28,065 |
| | 21,479 |
|
Pension and postretirement benefit plan expense | | 7,618 |
| | 6,998 |
|
Contributions to pension and postretirement benefit plans | | (1,632 | ) | | (1,349 | ) |
Losses (earnings) of unconsolidated equity-method investments | | 160 |
| | (983 | ) |
Distributions from unconsolidated equity-method investments | | 2,204 |
| | 594 |
|
Allowance for equity funds used during construction | | (5,187 | ) | | (4,079 | ) |
Other non-cash adjustments to net income, net | | (494 | ) | | 771 |
|
Change in: | | |
| | |
|
Accounts receivable | | 6,794 |
| | (2,842 | ) |
Accounts payable and other accrued liabilities | | (34,742 | ) | | (27,097 | ) |
Taxes accrued/receivable | | 12,181 |
| | 25,811 |
|
Other current assets | | 8,655 |
| | 21,686 |
|
Other current liabilities | | 15,998 |
| | 7,531 |
|
Other assets | | (206 | ) | | 1,748 |
|
Other liabilities | | 6,370 |
| | (4,475 | ) |
Net cash provided by operating activities | | 105,445 |
| | 96,938 |
|
Investing Activities: | | |
| | |
|
Additions to property, plant and equipment | | (78,431 | ) | | (59,192 | ) |
Proceeds from the sale of emission allowances and RECs | | 782 |
| | 1,274 |
|
Distributions from affordable housing investments | | 50 |
| | 795 |
|
Other | | 1,008 |
| | 1,836 |
|
Net cash used in investing activities | | (76,591 | ) | | (55,287 | ) |
Financing Activities: | | |
| | |
|
Issuance of long-term debt | | 250,000 |
| | — |
|
Retirement of long-term debt | | (1,064 | ) | | (1,064 | ) |
Dividends on common stock | | (24,054 | ) | | (21,879 | ) |
Net change in short-term borrowings | | 12,100 |
| | (7,450 | ) |
Issuance of common stock | | — |
| | 160 |
|
Acquisition of treasury stock | | (3,222 | ) | | (2,464 | ) |
Other | | (2,182 | ) | | 1,149 |
|
Net cash provided by (used in) financing activities | | 231,578 |
| | (31,548 | ) |
Net increase in cash and cash equivalents | | 260,432 |
| | 10,103 |
|
Cash and cash equivalents at beginning of the period | | 56,808 |
| | 78,162 |
|
Cash and cash equivalents at end of the period | | $ | 317,240 |
| | $ | 88,265 |
|
Supplemental Disclosure of Cash Flow Information: | | |
| | |
|
Cash paid during the period for: | | |
| | |
Income taxes | | $ | 2 |
| | $ | 20 |
|
Interest (net of amount capitalized) | | $ | 16,913 |
| | $ | 17,223 |
|
Non-cash investing activities: | | | | |
Additions to property, plant and equipment in accounts payable | | $ | 15,494 |
| | $ | 19,846 |
|
The accompanying notes are an integral part of these statements.
IDACORP, Inc.
Condensed Consolidated Statements of Equity
(unaudited)
|
| | | | | | | | |
| | Three months ended March 31, |
| | 2015 | | 2014 |
| | (thousands of dollars) |
Common Stock | | | | |
Balance at beginning of period | | $ | 845,402 |
| | $ | 839,750 |
|
Issued | | — |
| | 160 |
|
Other | | 310 |
| | 562 |
|
Balance at end of period | | 845,712 |
| | 840,472 |
|
Retained Earnings | | | | |
Balance at beginning of period | | 1,132,237 |
| | 1,027,461 |
|
Net income attributable to IDACORP, Inc. | | 23,430 |
| | 27,404 |
|
Common stock dividends ($0.47 and $0.43 per share) | | (23,698 | ) | | (21,640 | ) |
Balance at end of period | | 1,131,969 |
| | 1,033,225 |
|
Accumulated Other Comprehensive (Loss) Income | | | | |
Balance at beginning of period | | (24,158 | ) | | (16,553 | ) |
Unfunded pension liability adjustment (net of tax) | | 667 |
| | 432 |
|
Balance at end of period | | (23,491 | ) | | (16,121 | ) |
Treasury Stock | | | | |
Balance at beginning of period | | (280 | ) | | (8 | ) |
Issued | | 3,497 |
| | 2,451 |
|
Acquired | | (3,222 | ) | | (2,464 | ) |
Balance at end of period | | (5 | ) | | (21 | ) |
Total IDACORP, Inc. shareholders’ equity at end of period | | 1,954,185 |
| | 1,857,555 |
|
Noncontrolling Interests | | | | |
Balance at beginning of period | | 4,364 |
| | 4,090 |
|
Net loss attributable to noncontrolling interests | | (86 | ) | | (219 | ) |
Balance at end of period | | 4,278 |
| | 3,871 |
|
Total equity at end of period | | $ | 1,958,463 |
| | $ | 1,861,426 |
|
The accompanying notes are an integral part of these statements.
Idaho Power Company
Condensed Consolidated Statements of Income
(unaudited)
|
| | | | | | | | |
| | Three months ended March 31, |
| | 2015 | | 2014 |
| | (thousands of dollars) |
Operating Revenues: | | | | |
General business | | $ | 248,486 |
| | $ | 244,832 |
|
Off-system sales | | 13,019 |
| | 29,210 |
|
Other revenues | | 17,269 |
| | 18,278 |
|
Total operating revenues | | 278,774 |
| | 292,320 |
|
Operating Expenses: | | | | |
Operation: | | | | |
Purchased power | | 42,965 |
| | 43,796 |
|
Fuel expense | | 31,476 |
| | 55,327 |
|
Power cost adjustment | | 27,755 |
| | 15,023 |
|
Other operations and maintenance | | 83,515 |
| | 80,521 |
|
Energy efficiency programs | | 4,341 |
| | 4,724 |
|
Depreciation | | 34,043 |
| | 32,875 |
|
Taxes other than income taxes | | 8,520 |
| | 8,105 |
|
Total operating expenses | | 232,615 |
| | 240,371 |
|
Income from Operations | | 46,159 |
| | 51,949 |
|
Other Income (Expense): | | | | |
Allowance for equity funds used during construction | | 5,187 |
| | 4,079 |
|
Earnings of unconsolidated equity-method investments | | 128 |
| | 1,246 |
|
Other expense, net | | (1,144 | ) | | (428 | ) |
Total other income | | 4,171 |
| | 4,897 |
|
Interest Charges: | | | | |
Interest on long-term debt | | 20,773 |
| | 20,141 |
|
Other interest | | 1,978 |
| | 1,798 |
|
Allowance for borrowed funds used during construction | | (2,365 | ) | | (1,964 | ) |
Total interest charges | | 20,386 |
| | 19,975 |
|
Income Before Income Taxes | | 29,944 |
| | 36,871 |
|
Income Tax Expense | | 6,482 |
| | 8,971 |
|
Net Income | | $ | 23,462 |
| | $ | 27,900 |
|
The accompanying notes are an integral part of these statements.
Idaho Power Company
Condensed Consolidated Statements of Comprehensive Income
(unaudited)
|
| | | | | | | | |
| | Three months ended March 31, |
| | 2015 | | 2014 |
| | (thousands of dollars) |
| | | | |
Net Income | | $ | 23,462 |
| | $ | 27,900 |
|
Other Comprehensive Income: | | | | |
Unfunded pension liability adjustment, net of tax of $428 and $278 | | 667 |
| | 432 |
|
Total Comprehensive Income | | $ | 24,129 |
| | $ | 28,332 |
|
The accompanying notes are an integral part of these statements.
Idaho Power Company
Condensed Consolidated Balance Sheets
(unaudited)
|
| | | | | | | | |
| | March 31, 2015 | | December 31, 2014 |
| | (thousands of dollars) |
Assets | | | | |
| | | | |
Electric Plant: | | | | |
In service (at original cost) | | $ | 5,262,019 |
| | $ | 5,248,212 |
|
Accumulated provision for depreciation | | (1,860,279 | ) | | (1,841,011 | ) |
In service - net | | 3,401,740 |
| | 3,407,201 |
|
Construction work in progress | | 438,055 |
| | 401,930 |
|
Held for future use | | 7,090 |
| | 7,090 |
|
Electric plant - net | | 3,846,885 |
| | 3,816,221 |
|
Investments and Other Property | | 139,883 |
| | 142,825 |
|
Current Assets: | | | | |
Cash and cash equivalents | | 312,501 |
| | 46,695 |
|
Receivables: | | | | |
Customer (net of allowance of $1,318 and $1,960, respectively) | | 74,060 |
| | 79,083 |
|
Other (net of allowance of $167 and $144, respectively) | | 4,595 |
| | 15,890 |
|
Taxes receivable | | — |
| | 20,428 |
|
Accrued unbilled revenues | | 47,507 |
| | 56,270 |
|
Materials and supplies (at average cost) | | 57,325 |
| | 55,404 |
|
Fuel stock (at average cost) | | 57,171 |
| | 55,171 |
|
Prepayments | | 14,677 |
| | 18,356 |
|
Current regulatory assets | | 68,569 |
| | 50,042 |
|
Other | | 194 |
| | 603 |
|
Total current assets | | 636,599 |
| | 397,942 |
|
Deferred Debits: | | | | |
American Falls and Milner water rights | | 12,374 |
| | 13,698 |
|
Company-owned life insurance | | 23,807 |
| | 23,893 |
|
Regulatory assets | | 1,156,711 |
| | 1,192,345 |
|
Other | | 54,519 |
| | 39,753 |
|
Total deferred debits | | 1,247,411 |
| | 1,269,689 |
|
Total | | $ | 5,870,778 |
| | $ | 5,626,677 |
|
The accompanying notes are an integral part of these statements.
Idaho Power Company
Condensed Consolidated Balance Sheets
(unaudited)
|
| | | | | | | | |
| | March 31, 2015 | | December 31, 2014 |
| | (thousands of dollars) |
Capitalization and Liabilities | | | | |
| | | | |
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 | | 712,258 |
| | 712,258 |
|
Capital stock expense | | (2,097 | ) | | (2,097 | ) |
Retained earnings | | 1,032,958 |
| | 1,033,350 |
|
Accumulated other comprehensive loss | | (23,491 | ) | | (24,158 | ) |
Total common stock equity | | 1,817,505 |
| | 1,817,230 |
|
Long-term debt | | 1,741,724 |
| | 1,614,438 |
|
Total capitalization | | 3,559,229 |
| | 3,431,668 |
|
Current Liabilities: | | | | |
Current maturities of long-term debt | | 121,064 |
| | 1,064 |
|
Accounts payable | | 64,419 |
| | 96,499 |
|
Accounts payable to affiliates | | 953 |
| | 2,027 |
|
Taxes accrued | | 21,523 |
| | 10,329 |
|
Interest accrued | | 25,473 |
| | 22,630 |
|
Accrued compensation | | 29,332 |
| | 43,410 |
|
Current regulatory liabilities | | 12,244 |
| | 11,400 |
|
Other | | 38,569 |
| | 29,476 |
|
Total current liabilities | | 313,577 |
| | 216,835 |
|
Deferred Credits: | | | | |
Deferred income taxes | | 1,141,105 |
| | 1,141,755 |
|
Regulatory liabilities | | 397,161 |
| | 390,207 |
|
Pension and other postretirement benefits | | 410,091 |
| | 403,334 |
|
Other | | 49,615 |
| | 42,878 |
|
Total deferred credits | | 1,997,972 |
| | 1,978,174 |
|
| | | | |
Commitments and Contingencies | |
| |
|
| | | | |
Total | | $ | 5,870,778 |
| | $ | 5,626,677 |
|
| | | | |
The accompanying notes are an integral part of these statements. |
Idaho Power Company
Condensed Consolidated Statements of Cash Flows
(unaudited)
|
| | | | | | | | |
| | Three months ended March 31, |
| | 2015 | | 2014 |
| | (thousands of dollars) |
Operating Activities: | | | | |
Net income | | $ | 23,462 |
| | $ | 27,900 |
|
Adjustments to reconcile net income to net cash provided by operating activities: | | |
| | |
|
Depreciation and amortization | | 34,903 |
| | 33,745 |
|
Deferred income taxes and investment tax credits | | (1,078 | ) | | (10,489 | ) |
Changes in regulatory assets and liabilities | | 28,065 |
| | 21,479 |
|
Pension and postretirement benefit plan expense | | 7,612 |
| | 6,991 |
|
Contributions to pension and postretirement benefit plans | | (1,626 | ) | | (1,341 | ) |
Earnings of unconsolidated equity-method investments | | (128 | ) | | (1,246 | ) |
Distributions from unconsolidated equity-method investments | | 2,204 |
| | 594 |
|
Allowance for equity funds used during construction | | (5,187 | ) | | (4,079 | ) |
Other non-cash adjustments to net income, net | | (796 | ) | | 71 |
|
Change in: | | |
| | |
|
Accounts receivable | | 4,029 |
| | (4,470 | ) |
Accounts payable | | (34,628 | ) | | (27,075 | ) |
Taxes accrued/receivable | | 33,304 |
| | 27,694 |
|
Other current assets | | 8,679 |
| | 21,691 |
|
Other current liabilities | | 16,068 |
| | 7,588 |
|
Other assets | | (206 | ) | | 1,747 |
|
Other liabilities | | 6,584 |
| | (3,928 | ) |
Net cash provided by operating activities | | 121,261 |
| | 96,872 |
|
Investing Activities: | | |
| | |
|
Additions to utility plant | | (78,411 | ) | | (59,190 | ) |
Proceeds from the sale of emission allowances and RECs | | 782 |
| | 1,274 |
|
Other | | 1,008 |
| | 1,837 |
|
Net cash used in investing activities | | (76,621 | ) | | (56,079 | ) |
Financing Activities: | | |
| | |
|
Issuance of long-term debt | | 250,000 |
| | — |
|
Retirement of long-term debt | | (1,064 | ) | | (1,064 | ) |
Dividends on common stock | | (23,855 | ) | | (21,694 | ) |
Other | | (3,915 | ) | | — |
|
Net cash provided by (used in) financing activities | | 221,166 |
| | (22,758 | ) |
Net increase in cash and cash equivalents | | 265,806 |
| | 18,035 |
|
Cash and cash equivalents at beginning of the period | | 46,695 |
| | 66,535 |
|
Cash and cash equivalents at end of the period | | $ | 312,501 |
| | $ | 84,570 |
|
Supplemental Disclosure of Cash Flow Information: | | |
| | |
|
Cash (received) paid during the period for: | | |
| | |
|
Income taxes | | $ | (18,413 | ) | | $ | (1,040 | ) |
Interest (net of amount capitalized) | | $ | 16,862 |
| | $ | 17,162 |
|
Non-cash investing activities: | | | | |
Additions to property, plant and equipment in accounts payable | | $ | 15,494 |
| | $ | 19,846 |
|
The accompanying notes are an integral part of these statements.
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, these Notes to 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. Idaho Power is an electric utility engaged in the generation, transmission, distribution, sale, and purchase of electric energy and capacity with a service area covering approximately 24,000 square miles in southern Idaho and eastern Oregon. Idaho Power is regulated primarily by the state utility regulatory commissions of Idaho and Oregon and the Federal Energy Regulatory Commission (FERC). 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 wholly-owned 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 Services Co. (IESCo), which is the former limited partner of, and current successor by merger to, IDACORP Energy L.P. (IE), a marketer of energy commodities that wound down operations in 2003.
Regulation of Utility Operations
IDACORP's and Idaho Power's financial statements reflect the effects of the different ratemaking principles followed by the jurisdictions regulating Idaho Power. The application of accounting principles related to regulated operations sometimes results in Idaho Power recording expenses and revenues in a different period than when an unregulated enterprise would record such expenses and revenues. In these instances, the amounts are deferred as regulatory assets or regulatory liabilities on the balance sheet and recorded on the income statement when recovered or returned through rates. Additionally, regulators can impose regulatory liabilities upon a regulated company for amounts previously collected from customers that are expected to be refunded. The effects of applying these regulatory accounting principles to Idaho Power's operations are discussed in more detail in Note 3.
Financial Statements
In the opinion of management of IDACORP and Idaho Power, the accompanying unaudited condensed consolidated financial statements contain all adjustments necessary to present fairly each company's consolidated financial position as of March 31, 2015, consolidated results of operations for the three months ended March 31, 2015 and 2014, and consolidated cash flows for the three months ended March 31, 2015 and 2014. 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, 2014. The results of operations for the interim period are not necessarily indicative of the results to be expected for the full year. A change in management's estimates or assumptions could have a material impact on IDACORP's or Idaho Power's respective financial condition and results of operations during the period in which such change occurred.
Management Estimates
Management makes estimates and assumptions when preparing financial statements in conformity with generally accepted accounting principles. These estimates and assumptions include those related to rate regulation, retirement benefits, contingencies, litigation, asset impairment, income taxes, unbilled revenues, and bad debt. These estimates and assumptions affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. These estimates involve judgments with respect to, among other things, future economic factors that are difficult to predict and are beyond management's control. Accordingly, actual results could differ from those estimates.
Asset Retirement Obligations
In December 2014, the U.S. Environmental Protection Agency signed a final rule relating to the disposal of coal combustion residuals (CCRs), which was published in the Federal Register on April 17, 2015. The rule adds several regulations relating to the disposal and ongoing monitoring of CCRs. Idaho Power and its co-owners of coal-fired units continue to perform engineering and cost studies to determine the financial and operational impacts of the rule. Based on the effective date of the final rule, Idaho Power expects to record an increase in its asset retirement obligation and corresponding regulatory asset in the second quarter of 2015; however, as of the date of this report, Idaho Power is unable to estimate the amount it will record as a result of the final rule.
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, accounting method changes, or adjustments to tax expense or benefits attributable to prior years. Discrete events are recorded in the interim period in which they occur or become known. The estimated annual effective tax rate is applied to year-to-date pre-tax income to determine 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.
Income Tax Expense
The following table provides a summary of income tax expense for the three months ended March 31 (in thousands of dollars):
|
| | | | | | | | | | | | | | | | |
| | IDACORP | | Idaho Power |
| | 2015 | | 2014 | | 2015 | | 2014 |
Three months ended March 31, | | | | | | | | |
Income tax at statutory rates (federal and state) | | $ | 11,551 |
| | $ | 14,119 |
| | $ | 11,708 |
| | $ | 14,417 |
|
Additional accumulated deferred investment tax credit amortization | | — |
| | (950 | ) | | — |
| | (950 | ) |
Affordable housing tax credits | | (808 | ) | | (1,268 | ) | | — |
| | — |
|
Affordable housing investment amortization, net of statutory taxes | | 400 |
| | 704 |
| | — |
| | — |
|
Other(1) | | (5,032 | ) | | (3,898 | ) | | (5,226 | ) | | (4,496 | ) |
Income tax expense | | $ | 6,111 |
| | $ | 8,707 |
| | $ | 6,482 |
| | $ | 8,971 |
|
Effective tax rate | | 20.7 | % | | 24.1 | % | | 21.6 | % | | 24.3 | % |
(1) "Other" is primarily comprised of the net tax effect of Idaho Power's regulatory flow-through tax adjustments. These adjustments, which include the capitalized repairs deduction, are each listed in the rate reconciliation table in Note 2 to the consolidated financial statements included in IDACORP's and Idaho Power's Annual Report on Form 10-K for the year ended December 31, 2014.
The reductions in income tax expense for the three months ended March 31, 2015, as compared to the same period in 2014, were primarily due to lower Idaho Power pre-tax earnings in 2015. On a net basis, Idaho Power’s estimate of its annual 2015 regulatory flow-through tax adjustments is comparable to 2014; additionally, the 2015 capitalized repairs deduction estimate is slightly greater than the prior year estimate.
3. REGULATORY MATTERS
Included below is a summary of Idaho Power's most recent general rate cases and base rate changes, as well as other recent or pending notable regulatory matters and proceedings.
Idaho and Oregon General Rate Cases and Base Rate Adjustments
Effective January 1, 2012, Idaho Power implemented new Idaho base rates resulting from its receipt of an order from the Idaho Public Utilities Commission (IPUC) approving a settlement stipulation that provided for a 7.86 percent authorized rate of return on an Idaho-jurisdiction rate base of approximately $2.36 billion. The settlement stipulation resulted in a $34.0 million overall increase in Idaho Power's annual Idaho-jurisdictional base rate revenues. Neither the IPUC's order nor the settlement stipulation specified an authorized rate of return on equity.
Effective March 1, 2012, Idaho Power implemented new Oregon base rates resulting from its receipt of an order from the Public Utility Commission of Oregon (OPUC) approving a settlement stipulation that provided for a $1.8 million base rate revenue increase, a return on equity of 9.9 percent, and an overall rate of return of 7.757 percent in the Oregon jurisdiction.
Idaho and Oregon base rates were subsequently adjusted again in 2012, in connection with Idaho Power's completion of the Langley Gulch power plant. On June 29, 2012, the IPUC issued an order approving a $58.1 million increase in annual Idaho-jurisdiction base rate revenues, effective July 1, 2012, for inclusion of the investment and associated costs of the plant in rates. The order also provided for a $335.9 million increase in Idaho rate base. On September 20, 2012, the OPUC issued an order approving a $3.0 million increase in annual Oregon jurisdiction base rate revenues, effective October 1, 2012, for inclusion of the investment and associated costs of the plant in Oregon rates.
On March 21, 2014, the IPUC issued an order approving Idaho Power's application requesting an increase of approximately $106 million in the normalized or "base level" net power supply expense on a total-system basis to be used to update base rates and in the determination of the PCA rate that became effective June 1, 2014. Approval of the order removed the Idaho-jurisdictional portion of those expenses (approximately $99 million) from collection via the Idaho PCA mechanism and instead results in collecting that portion through base rates.
Idaho Settlement Stipulation — Investment Tax Credits and Sharing Mechanism
In October 2014, the IPUC issued an order approving an extension, with modifications, of the terms of a December 2011 Idaho settlement stipulation for the period from 2015 through 2019, or until the terms are otherwise modified or terminated by order of the IPUC. The provisions of the October 2014 settlement stipulation are as follows:
| |
• | If Idaho Power's annual return on year-end equity in the Idaho jurisdiction (Idaho ROE) in any year is less than 9.5 percent, then Idaho Power may amortize up to $25 million of additional accumulated deferred investment tax credits (ADITC) to help achieve a 9.5 percent Idaho ROE for that year, and may amortize up to a total of $45 million of additional ADITC over the 2015 through 2019 period. |
| |
• | If Idaho Power's annual Idaho ROE in any year exceeds 10.0 percent, the amount of earnings exceeding a 10.0 percent Idaho ROE and up to and including a 10.5 percent Idaho ROE will be allocated 75 percent to Idaho Power's Idaho customers as a rate reduction to be effective at the time of the subsequent year's power cost adjustment and 25 percent to Idaho Power. |
| |
• | If Idaho Power's annual Idaho ROE in any year exceeds 10.5 percent, the amount of earnings exceeding a 10.5 percent Idaho ROE will be allocated 50 percent to Idaho Power's Idaho customers as a rate reduction to be effective at the time of the subsequent year's power cost adjustment, 25 percent to Idaho Power's Idaho customers in the form of a reduction to the pension regulatory asset balancing account (to reduce the amount to be collected in the future from Idaho customers), and 25 percent to Idaho Power. |
| |
• | If the full $45 million of additional ADITC contemplated by the settlement stipulation has been amortized the sharing provisions would terminate. |
| |
• | In the event the IPUC approves a change to Idaho Power's Idaho-jurisdictional allowed return on equity as part of a general rate case proceeding seeking a rate change effective prior to January 1, 2020, the Idaho ROE thresholds (9.5 percent, 10.0 percent, and 10.5 percent) will be adjusted prospectively. |
In the first quarter of 2015, Idaho Power recorded no additional ADITC amortization or provision for sharing with customers based on its estimate of Idaho ROE for full-year 2015. In the first quarter of 2014, Idaho Power recorded $950 thousand in additional ADITC amortization for that period based on its estimate of Idaho ROE for full-year 2014, under the prior December 2011 settlement stipulation. The amount recorded for the first quarter of 2014 was subsequently reversed in the second quarter of 2014 based on a then-current estimate of full year 2014 Idaho ROE.
Idaho Power Cost Adjustment Mechanism Annual Filing
In both its Idaho and Oregon jurisdictions, Idaho Power's PCA mechanisms address the volatility of power supply costs and provide for annual adjustments to the rates charged to its retail customers. The PCA mechanisms compare Idaho Power's actual and forecast net power supply costs (primarily fuel and purchased power less off-system sales) against net power supply costs currently being recovered in retail rates. Under the PCA mechanisms, certain differences between actual net power supply costs incurred by Idaho Power and the costs included in retail rates are recorded as a deferred charge or credit on the balance sheets for future recovery or refund through retail rates. The power supply costs deferred primarily result from changes in contracted
power purchase prices and volumes, changes in wholesale market prices and transaction volumes, fuel prices, and the levels of Idaho Power's own generation.
On April 15, 2015, Idaho Power filed an application with the IPUC requesting a $10.1 million net decrease in Idaho PCA rates, effective for the 2015-2016 PCA collection period from June 1, 2015 to May 31, 2016. The requested net decrease in Idaho PCA rates included the application of a customer rate credit of $8.0 million for sharing with customers pursuant to the terms of the December 2011 settlement stipulation. An order from the IPUC is pending. Previously, on May 30, 2014, the IPUC issued an order approving Idaho Power's April 15, 2014 application requesting an $11.1 million net increase in Idaho PCA rates, effective for the 2014-2015 PCA collection period from June 1, 2014 to May 31, 2015. The $11.1 million PCA rate increase was net of (a) $20.0 million of surplus Idaho energy efficiency rider funds, (b) $7.6 million of customer revenue sharing for the year 2013 under the December 2011 settlement stipulation, and (c) the shifting of $99.3 million in power supply expense from collection via the PCA mechanism to collection via base rates.
Idaho Fixed Cost Adjustment Mechanism Annual Filing
The fixed cost adjustment (FCA) is designed to remove Idaho Power’s financial disincentive to invest in energy efficiency programs by separating (or decoupling) the recovery of fixed costs from the variable kilowatt-hour charge and linking it instead to a set amount per customer. The FCA is adjusted each year to recover or refund the difference between the amount of fixed costs authorized in Idaho Power's most recent general rate case and the amount of fixed costs recovered by Idaho Power based upon weather-normalized energy sales. On March 13, 2015, Idaho Power filed its annual FCA update with the IPUC, requesting an increase of $2.0 million in the FCA from $14.9 million to $16.9 million, with new rates effective for the period from June 1, 2015 through May 31, 2016. Previously, on May 30, 2014, the IPUC issued an order approving Idaho Power's March 14, 2014 application requesting a $6.0 million increase in the FCA recovery from $8.9 million to $14.9 million, effective for the period from June 1, 2014 through May 31, 2015.
IPUC Review of Annual Rate Adjustment Mechanisms
PCA Mechanism -- On July 1, 2014, the IPUC opened a docket pursuant to which Idaho Power, the IPUC Staff, and other interested parties further evaluated Idaho Power's application of the true-up component of the PCA mechanism and whether a deferral balance adjustment was appropriate. The docket arose from the IPUC's May 2014 PCA order, which noted that the IPUC Staff believed that Idaho Power's application of the true-up component introduced a line-loss bias that inflated the true-up revenue it must collect. The IPUC's docket was closed via an order issued by the IPUC on August 6, 2014, with no adjustment to the PCA true-up revenue amount. Idaho Power subsequently met with the IPUC Staff to explore approaches to increasing the accuracy of the actual cost recovery under the PCA mechanism. On April 28, 2015, Idaho Power submitted a settlement stipulation to the IPUC for approval. The settlement stipulation, if approved by the IPUC, would result in the replacement of the existing load-based adjustment used for determining the power cost deferrals under the PCA mechanism with a similar sales-based adjustment. The sales-based adjustment would function in the same manner as the existing load-based adjustment, but would measure deviations between Idaho-specific test year sales and actual Idaho sales rather than deviations between test year loads and actual loads. The settlement stipulation provides that implementation of the new methodology would be effective January 1, 2015. Idaho Power has not reflected the potential impact of the new PCA mechanism methodology in its first quarter 2015 financial statements, as approval of the proposed settlement stipulation will require proceedings before the IPUC, the outcome of which is uncertain.
FCA Mechanism -- Also on July 1, 2014, the IPUC opened a docket to allow Idaho Power, the IPUC Staff, and other interested parties to further evaluate the IPUC Staff's concerns regarding the application of the FCA mechanism (including weather-normalization, customer count methodology, rate adjustment cap, and cross-subsidization issues) and whether the FCA is effectively removing Idaho Power's disincentive to aggressively pursue energy efficiency programs. On March 26, 2015, Idaho Power submitted to the IPUC a settlement stipulation that would, if approved, modify the FCA mechanism by replacing weather-normalized billed sales with actual billed sales in the calculation of the FCA, applicable for the entirety of calendar year 2015 and thereafter, with new rates effective June 1, 2016. Idaho Power has not reflected the potential impact of the new FCA mechanism methodology in its first quarter 2015 financial statements, as approval of the proposed settlement stipulation will require proceedings before the IPUC, the outcome of which is uncertain.
4. LONG-TERM DEBT
On March 6, 2015, Idaho Power issued $250 million in principal amount of 3.65% first mortgage bonds, secured medium-term notes, Series J, maturing on March 1, 2045. On March 24, 2015, Idaho Power issued a notice of redemption to redeem, prior to maturity, its $120 million in principal amount of 6.025% first mortgage bonds, medium-term notes, Series H due July 2018, with the redemption effective April 23, 2015. In accordance with the redemption provisions of the notes, the redemption
included Idaho Power's payment of a make-whole premium to the holders of the redeemed notes in the aggregate amount of approximately $17.9 million. Idaho Power used a portion of the net proceeds from the March 2015 sale of first mortgage bonds, medium-term notes to effect the redemption. As a result, the $120 million of 6.025% first mortgage bonds, medium-term notes due July 2018 are classified as current maturities of long-term debt in the condensed consolidated balance sheets at March 31, 2015.
As of March 31, 2015, $250 million in principal amount of long-term debt securities remained available for issuance under a selling agency agreement executed in July 2013 and pursuant to state regulatory authority. On April 1, 2015 the IPUC approved a two-year extension of Idaho Power's state regulatory authorization to issue debt securities and first mortgage bonds, through April 9, 2017.
5. NOTES PAYABLE
Credit Facilities
IDACORP and Idaho Power have in place credit facilities that may be used for general corporate purposes and commercial paper backup. The terms and conditions of those credit facilities are as described in IDACORP's and Idaho Power's Annual Report on Form 10-K for the year ended December 31, 2014.
At March 31, 2015, no loans were outstanding under either IDACORP's or Idaho Power's facilities. At March 31, 2015, Idaho Power had regulatory authority to incur up to $450 million in principal amount of short-term indebtedness at any one time outstanding. Balances (in thousands of dollars) and interest rates of IDACORP’s and Idaho Power's short-term borrowings were as follows at March 31, 2015 and December 31, 2014: |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | March 31, 2015 | | December 31, 2014 |
| | Idaho Power | | IDACORP | | Total | | Idaho Power | | IDACORP | | Total |
Commercial paper outstanding | | $ | — |
| | $ | 43,400 |
| | $ | 43,400 |
| | $ | — |
| | $ | 31,300 |
| | $ | 31,300 |
|
Weighted-average annual interest rate | | — | % | | 0.58 | % | | 0.58 | % | | — | % | | 0.43 | % | | 0.43 | % |
6. COMMON STOCK
IDACORP Common Stock
During the three months ended March 31, 2015, IDACORP issued 39,211 shares of common stock pursuant to the IDACORP, Inc. 2000 Long-Term Incentive and Compensation Plan. Effective July 1, 2012, IDACORP instructed the plan administrators of the IDACORP, Inc. Dividend Reinvestment and Stock Purchase Plan and Idaho Power Company Employee Savings Plan to use market purchases of IDACORP common stock, as opposed to original issuance of common stock from IDACORP, to acquire shares of IDACORP common stock for the plans. However, IDACORP may determine at any time to resume original issuances of common stock under those plans.
IDACORP enters into sales agency agreements as a means of selling its common stock from time to time pursuant to a continuous equity program. On July 12, 2013, IDACORP entered into its current Sales Agency Agreement with BNY Mellon Capital Markets, LLC (BNYMCM). IDACORP may offer and sell up to 3 million shares of its common stock from time to time in at-the-market offerings through BNYMCM as IDACORP's agent. IDACORP has no obligation to issue any minimum number of shares under the Sales Agency Agreement. As of the date of this report, no shares of IDACORP common stock have been issued under the current Sales Agency Agreement.
Restrictions on Dividends
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. 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. At March 31, 2015, the leverage ratios for IDACORP and Idaho Power were 49 percent and 51 percent, respectively. Based on these restrictions, IDACORP’s and Idaho Power’s dividends were limited to $925 million and $811 million, respectively, at March 31, 2015. There are additional facility covenants, subject to exceptions, that prohibit or restrict the sale or disposition of property without consent
and any agreements restricting dividend payments to the applicable company from any material subsidiary. At March 31, 2015, IDACORP and Idaho Power were in compliance with the financial covenants.
Idaho Power’s Revised Policy and Code of Conduct relating to transactions between and among Idaho Power, IDACORP, and other affiliates, which was approved by the IPUC in April 2008, provides 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. At March 31, 2015, Idaho Power's common equity capital was 49 percent of its total adjusted capital. Further, Idaho Power must obtain approval of the OPUC before it could directly or indirectly loan funds or issue notes or give credit on its books to IDACORP.
Idaho Power’s articles of incorporation contain restrictions on the payment of dividends on its common stock if preferred stock dividends are in arrears. As of the date of this report, Idaho Power has no preferred stock outstanding.
In addition to contractual restrictions on the amount and payment of dividends, the Federal Power Act prohibits the payment of dividends from "capital accounts." The term "capital account" is undefined in the Federal Power Act or its regulations, but Idaho Power does not believe the restriction would limit Idaho Power's ability to pay dividends out of current year earnings or retained earnings.
7. EARNINGS PER SHARE
The table below presents the computation of IDACORP’s basic and diluted earnings per share for the three months ended March 31, 2015 and 2014 (in thousands, except for per share amounts).
|
| | | | | | | | |
| | Three months ended March 31, |
| | 2015 | | 2014 |
Numerator: | | |
| | |
|
Net income attributable to IDACORP, Inc. | | $ | 23,430 |
| | $ | 27,404 |
|
Denominator: | | |
| | |
|
Weighted-average common shares outstanding - basic | | 50,220 |
| | 50,131 |
|
Effect of dilutive securities | | 40 |
| | 44 |
|
Weighted-average common shares outstanding - diluted | | 50,260 |
| | 50,175 |
|
Basic earnings per share | | $ | 0.47 |
| | $ | 0.55 |
|
Diluted earnings per share | | $ | 0.47 |
| | $ | 0.55 |
|
8. COMMITMENTS
Purchase Obligations
IDACORP's and Idaho Power's purchase obligations did not change materially, outside of the ordinary course of business, during the three months ended March 31, 2015. Subsequent to the end of the first quarter of 2015, four power purchase agreements with a solar energy developer terminated due to an uncured breach by the counterparty. Termination of the agreements reduced Idaho Power's contractual payment obligations by approximately $483 million over the 20-year lives of the terminated contracts.
Guarantees
Through a self-bonding mechanism, Idaho Power guarantees its portion of reclamation activities and obligations at BCC, of which IERCo owns a one-third interest. This guarantee, which is renewed annually with the Wyoming Department of Environmental Quality, was $70 million at March 31, 2015, representing IERCo's one-third share of BCC's total reclamation obligation. BCC has a reclamation trust fund set aside specifically for the purpose of paying these reclamation costs. At March 31, 2015, the value of the reclamation trust fund was $71 million. The reclamation trust fund did not distribute any funds during the three months ended March 31, 2015. BCC periodically 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, all of which are made to the Jim Bridger plant. Starting 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 various forms of 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 indemnification provisions 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 March 31, 2015, 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 indemnification obligations. Neither IDACORP nor Idaho Power has recorded any liability on their respective condensed consolidated balance sheets with respect to these indemnification obligations.
9. CONTINGENCIES
IDACORP and Idaho Power 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 9. Some of these claims, controversies, disputes, and other contingent matters involve litigation and regulatory or other contested proceedings. The ultimate resolution and outcome of litigation and regulatory proceedings is inherently difficult to determine, particularly where (a) the remedies or penalties sought are indeterminate, (b) the proceedings are in the early stages or the substantive issues have not been well developed, or (c) the matters involve complex or novel legal theories or a large number of parties. In accordance with applicable accounting guidance, IDACORP and Idaho Power, as applicable, establish an accrual for legal proceedings when those matters proceed to a stage where they present loss contingencies that are both probable and reasonably estimable. In such cases, there may be a possible exposure to loss in excess of any amounts accrued. IDACORP and Idaho Power monitor those matters for developments that could affect the likelihood of a loss and the accrued amount, if any, and adjust the amount as appropriate. If the loss contingency at issue is not both probable and reasonably estimable, IDACORP and Idaho Power do not establish an accrual and the matter will continue to be monitored for any developments that would make the loss contingency both probable and reasonably estimable. As of the date of this report, IDACORP's and Idaho Power's accruals for loss contingencies are not material to their financial statements as a whole; however, future accruals could be material in a given period. IDACORP's and Idaho Power's determination is based on currently available information, and estimates presented in financial statements and other financial disclosures involve significant judgment and may be subject to significant uncertainty. For matters that affect Idaho Power’s operations, Idaho Power intends to seek, to the extent permissible and appropriate, recovery through the ratemaking process of costs incurred.
Western Energy Proceedings
High prices for electricity, energy shortages, and blackouts 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 remain pending before the FERC or are on appeal to the United States Court of Appeals for the Ninth Circuit. Idaho Power and IESCo (as successor to IDACORP Energy L.P.) believe that settlement releases they have obtained will restrict potential claims that might result from the disposition of pending proceedings and predict that these matters will not have a material adverse effect on IDACORP's or Idaho Power's results of operations or financial condition. However, the settlements and associated FERC orders have not fully eliminated the potential for so-called "ripple claims," which involve potential claims for refunds in the Pacific Northwest markets from an upstream seller of power based on a finding that its downstream buyer was liable for refunds as a seller of power during the relevant period. The FERC has characterized these ripple claims as "speculative." However, the FERC has refused to dismiss Idaho Power and IESCo from the proceedings in the Pacific Northwest and refused to approve portions of two settlements that provided for waivers of claims in those proceedings, despite only limited objections from two market participants to one of the two settlements and no objections to the other settlement. Idaho Power and IESCo have petitions for review of the FERC's decisions refusing to approve the waiver provision of the settlements, on the basis that the FERC failed to apply its established precedents and rules. The petitions for review are pending in the Ninth Circuit Court of Appeals.
Based on its evaluation of the merits of ripple claims and the inability to estimate the potential exposure should the claims ultimately have any merit, particularly in light of Idaho Power and IESCo being both purchasers and sellers in the energy market during the relevant period, Idaho Power and IESCo have no amount accrued relating to the proceedings. To the extent the availability of any ripple claims materializes, Idaho Power and IESCo will continue to vigorously defend their positions in the proceedings.
Other Proceedings
IDACORP and Idaho Power are parties to legal claims and legal and regulatory actions and proceedings in the ordinary course of business that are in addition to those discussed above and, as noted above, record an accrual for associated loss contingencies when they are probable and reasonably estimable. As of the date of this report the companies believe that resolution of those matters will not have a material adverse effect on their respective consolidated financial statements. Idaho Power is also actively monitoring various pending environmental regulations, including the U.S. Environmental Protection Agency's proposed rule under Section 111(d) of the Clean Air Act, that may have a significant impact on its future operations. Given uncertainties regarding the outcome, timing, and compliance plans for these environmental matters, Idaho Power is unable to estimate the financial impact of these regulations but does believe that future capital investment for infrastructure and modifications to its electric generating facilities to comply with these regulations could be significant.
10. BENEFIT PLANS
Idaho Power has two defined benefit pension plans - a noncontributory defined benefit pension plan (pension plan) and nonqualified defined benefit plans for certain senior management employees called the Security Plan for Senior Management Employees I and II (SMSP). The benefits under the pension plan are based on years of service and the employee’s final average earnings. Idaho Power also maintains a defined benefit postretirement benefit plan (consisting of health care and death benefits) that covers all employees who were enrolled in the active-employee group plan at the time of retirement as well as their spouses and qualifying dependents. The table below shows the components of net periodic benefit costs for the pension, SMSP, and postretirement benefits plans for the three months ended March 31, 2015 and 2014 (in thousands of dollars).
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Pension Plan | | SMSP | | Postretirement Benefits |
| | 2015 | | 2014 | | 2015 | | 2014 | | 2015 | | 2014 |
Service cost | | $ | 8,459 |
| | $ | 6,584 |
| | $ | 422 |
| | $ | 411 |
| | $ | 338 |
| | $ | 276 |
|
Interest cost | | 8,820 |
| | 8,871 |
| | 967 |
| | 964 |
| | 674 |
| | 716 |
|
Expected return on plan assets | | (10,219 | ) | | (10,321 | ) | | — |
| | — |
| | (673 | ) | | (656 | ) |
Amortization of prior service cost | | 55 |
| | 87 |
| | 46 |
| | 55 |
| | 4 |
| | 46 |
|
Amortization of net loss | | 3,546 |
| | 1,008 |
| | 1,049 |
| | 655 |
| | — |
| | — |
|
Net periodic benefit cost | | 10,661 |
| | 6,229 |
| | 2,484 |
| | 2,085 |
| | 343 |
| | 382 |
|
Adjustments due to the effects of regulation(1) | | (5,876 | ) | | (1,705 | ) | | — |
| | — |
| | — |
| | — |
|
Net periodic benefit cost recognized for financial reporting(1) | | $ | 4,785 |
| | $ | 4,524 |
| | $ | 2,484 |
| | $ | 2,085 |
| | $ | 343 |
| | $ | 382 |
|
(1) Net periodic benefit costs for the pension plan are recognized for financial reporting based upon the authorization of each regulatory jurisdiction in which Idaho Power operates. Under IPUC order, income statement recognition of pension plan costs is deferred until costs are recovered through rates.
During the three months ended March 31, 2015, Idaho Power made no contributions to its defined benefit pension plan. In April 2015, Idaho Power made a $10 million contribution to the pension plan. The company plans to contribute at least $20 million to the pension plan during 2015, including the contributions made to-date.
In October 2014, the Society of Actuaries released a new set of mortality tables referred to as RP-2014. Mortality tables are used by defined benefit plans to estimate the life expectancy of plan participants and the expected length of benefit payments in retirement. RP-2014 generally resulted in longer life expectancy than previous mortality tables. Idaho Power's measurement of its plan benefit obligations as of December 31, 2014, and its net periodic benefit cost for the quarter ended March 31, 2015, reflect the adoption of the new tables, which was not material.
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.
11. DERIVATIVE FINANCIAL INSTRUMENTS
Commodity Price Risk
Idaho Power is exposed to market risk relating to electricity, natural gas, and other fuel commodity prices, all of which are heavily influenced by supply and demand. Market risk may be influenced by market participants’ nonperformance of their contractual obligations and commitments, which affects the supply of or demand for the commodity. Idaho Power uses derivative instruments, such as physical and financial forward contracts, for both electricity and fuel to manage the risks
relating to these commodity price exposures. The primary objectives of Idaho Power’s energy purchase and sale activity are to meet the demand of retail electric customers, maintain appropriate physical reserves to ensure reliability, and make economic use of temporary surpluses that may develop.
All of Idaho Power's derivative instruments have been entered into for the purpose of economically hedging forecasted purchases and sales, though none of these instruments have been designated as cash flow hedges. Idaho Power offsets fair value amounts recognized on its balance sheet and applies collateral related to derivative instruments executed with the same counterparty under the same master netting agreement. Idaho Power does not offset a counterparty's current derivative contracts with the counterparty's long-term derivative contracts, although Idaho Power's master netting arrangements would allow current and long-term positions to be offset in the event of default. Also, in the event of default, Idaho Power's master netting arrangements would allow for the offsetting of all transactions executed under the master netting arrangement. These types of transactions may include non-derivative instruments, derivatives qualifying for scope exceptions, receivables and payables arising from settled positions, and other forms of non-cash collateral (such as letters of credit). These types of transactions are excluded from the offsetting presented in the derivative fair value and offsetting table that follows.
The table below presents the gains and losses on derivatives not designated as hedging instruments for the three months ended March 31, 2015 and 2014 (in thousands of dollars).
|
| | | | | | | | | | |
| | | Gain/(Loss) on Derivatives Recognized in Income(1) |
| | Location of Realized Gain/(Loss) on Derivatives Recognized in Income | | 2015 | | 2014 |
Financial swaps | | Off-system sales | | $ | 2,996 |
| | $ | (6,794 | ) |
Financial swaps | | Purchased power | | (635 | ) | | 1,016 |
|
Financial swaps | | Fuel expense | | (746 | ) | | 3,617 |
|
Financial swaps | | Other operations and maintenance | | (2 | ) | | 15 |
|
Forward contracts | | Off-system sales | | — |
| | 43 |
|
Forward contracts | | Purchased power | | 3 |
| | (41 | ) |
Forward contracts | | Fuel expense | | (5 | ) | | 40 |
|
(1) Excludes unrealized gains or losses on derivatives, which are recorded on the balance sheet as regulatory assets or regulatory liabilities.
Settlement gains and losses on electricity swap contracts are recorded on the income statement in off-system sales or purchased power depending on the forecasted position being economically hedged by the derivative contract. Settlement gains and losses on contracts for natural gas are reflected in fuel expense. Settlement gains and losses on diesel derivatives are recorded in other operations and maintenance expense. See Note 12 for additional information concerning the determination of fair value for Idaho Power’s assets and liabilities from price risk management activities.
Derivative Instrument Summary
The table below presents the fair values and locations of derivative instruments not designated as hedging instruments recorded on the balance sheets and reconciles the gross amounts of derivatives recognized as assets and as liabilities to the net amounts presented in the balance sheets at March 31, 2015 and December 31, 2014 (in thousands of dollars).
|
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Asset Derivatives | | Liability Derivatives |
| | Balance Sheet Location | | Gross Fair Value | | Amounts Offset | | Net Assets | | Gross Fair Value | | Amounts Offset | | Net Liabilities |
| | | |
March 31, 2015 | | | | | | | | | | | | | | |
Current: | | | | |
| | | | | | | | | | |
|
Financial swaps | | Other current assets | | $ | 944 |
| | $ | (825 | ) | (1) | $ | 119 |
| | $ | 320 |
| | $ | (320 | ) | | $ | — |
|
Financial swaps | | Other current liabilities | | — |
| | — |
| | — |
| | 4,882 |
| | (370 | ) | | 4,512 |
|
Forward contracts | | Other current assets | | 65 |
| | — |
| | 65 |
| | — |
| | — |
| | — |
|
Long-term: | | | | |
| | | | | | | | | | |
Financial swaps | | Other liabilities | | 2 |
| | (2 | ) | | — |
| | 912 |
| | (2 | ) | | 910 |
|
Forward contracts | | Other assets | | 64 |
| | — |
| | 64 |
| | — |
| | — |
| | — |
|
Total | | | | $ | 1,075 |
| | $ | (827 | ) | | $ | 248 |
| | $ | 6,114 |
| | $ | (692 | ) | | $ | 5,422 |
|
December 31, 2014 | | | | | | | | | | | | | | |
Current: | | | | | | | | | | |
| | | | |
Financial swaps | | Other current assets | | $ | 2,509 |
| | $ | (2,002 | ) | (1) | $ | 507 |
| | $ | 756 |
| | $ | (756 | ) | | $ | — |
|
Financial swaps | | Other current liabilities | | 379 |
| | (379 | ) | | — |
| | 4,335 |
| | (379 | ) | | 3,956 |
|
Forward contracts | | Other current assets | | 64 |
| | — |
| | 64 |
| | — |
| | — |
| | — |
|
Forward contracts | | Other current liabilities | | — |
| | — |
| | — |
| | 5 |
| | — |
| | 5 |
|
Long-term: | | | | |
| | | | | | |
| | | | |
Forward contracts | | Other assets | | 63 |
| | — |
| | 63 |
| | — |
| | — |
| | — |
|
Total | | | | $ | 3,015 |
| | $ | (2,381 | ) | | $ | 634 |
| | $ | 5,096 |
| | $ | (1,135 | ) | | $ | 3,961 |
|
(1) Current asset derivative amounts offset include $0.4 million and $1.2 million of collateral payable for the periods ending March 31, 2015 and December 31, 2014, respectively.
The table below presents the volumes of derivative commodity forward contracts and swaps outstanding at March 31, 2015 and 2014 (in thousands of units).
|
| | | | | | |
| | | | March 31, |
Commodity | | Units | | 2015 | | 2014 |
Electricity purchases | | MWh | | 442 | | 576 |
Electricity sales | | MWh | | 288 | | 492 |
Natural gas purchases | | MMBtu | | 15,775 | | 9,987 |
Natural gas sales | | MMBtu | | 852 | | 666 |
Diesel purchases | | Gallons | | 183 | | 675 |
Credit Risk
At March 31, 2015, Idaho Power did not have material credit risk exposure from financial instruments, including derivatives. Idaho Power monitors credit risk exposure through reviews of counterparty credit quality, corporate-wide counterparty credit exposure, and corporate-wide counterparty concentration levels. Idaho Power manages these risks by establishing credit and concentration limits on transactions with counterparties and requiring contractual guarantees, cash deposits, or letters of credit from counterparties or their affiliates, as deemed necessary. Idaho Power’s physical power contracts are commonly under Western Systems Power Pool agreements, physical gas contracts are usually under North American Energy Standards Board contracts, and financial transactions are usually under International Swaps and Derivatives Association, Inc. contracts. These contracts contain adequate assurance clauses requiring collateralization if a counterparty has debt that is downgraded below investment grade by at least one rating agency.
Credit-Contingent Features
Certain of Idaho Power's derivative instruments contain provisions that require Idaho Power's unsecured debt to maintain an investment grade credit rating from Moody's Investors Service and Standard & Poor's Ratings Services. If Idaho Power's unsecured debt were to fall below investment grade, it would be in violation of these provisions, and the counterparties to the derivative instruments could request immediate payment or demand immediate and ongoing full overnight collateralization on derivative instruments in net liability positions. The aggregate fair value of all derivative instruments with credit-risk-related contingent features that were in a liability position at March 31, 2015, was $6.1 million. Idaho Power posted no cash collateral related to this amount. If the credit-risk-related contingent features underlying these agreements were triggered on March 31, 2015, Idaho Power would have been required to post an additional $5.9 million of cash collateral to its counterparties.
12. FAIR VALUE MEASUREMENTS
IDACORP and Idaho Power have categorized their financial instruments into a three-level fair value hierarchy, based on the priority of the inputs to the valuation technique. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). If the inputs used to measure the financial instruments fall within different levels of the hierarchy, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.
Financial assets and liabilities recorded on the condensed consolidated balance sheets are categorized based on the inputs to the valuation techniques as follows:
• Level 1: Financial assets and liabilities whose values are based on unadjusted quoted prices for identical assets or liabilities in an active market that IDACORP and Idaho Power has the ability to access.
• Level 2: Financial assets and liabilities whose values are based on the following:
a) quoted prices for similar assets or liabilities in active markets;
b) quoted prices for identical or similar assets or liabilities in non-active markets;
c) pricing models whose inputs are observable for substantially the full term of the asset or liability; and
d) pricing models whose inputs are derived principally from or corroborated by observable market data through correlation or other means for substantially the full term of the asset or liability.
IDACORP and Idaho Power Level 2 inputs are based on quoted market prices adjusted for location using corroborated, observable market data.
• Level 3: Financial assets and liabilities whose values are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. These inputs reflect management’s own assumptions about the assumptions a market participant would use in pricing the asset or liability.
IDACORP’s and Idaho Power’s assessment of a particular input's significance to the fair value measurement requires judgment and may affect the valuation of fair value assets and liabilities and their placement within the fair value hierarchy. An item recorded at fair value is reclassified among levels when changes in the nature of valuation inputs cause the item to no longer meet the criteria for the level in which it was previously categorized. There were no transfers between levels or material changes in valuation techniques or inputs during the three months ended March 31, 2015 or the year ended December 31, 2014.
The table below presents information about IDACORP’s and Idaho Power’s assets and liabilities measured at fair value on a recurring basis as of March 31, 2015 and December 31, 2014 (in thousands of dollars).
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | March 31, 2015 | | December 31, 2014 |
| | Level 1 | | Level 2 | | Level 3 | | Total | | Level 1 | | Level 2 | | Level 3 | | Total |
Assets: | | |
| | |
| | |
| | |
| | | | | | | | |
Derivatives | | $ | 120 |
| | $ | 128 |
| | $ | — |
| | $ | 248 |
| | $ | 506 |
| | $ | 128 |
| | $ | — |
| | $ | 634 |
|
Money market funds | | 77,993 |
| | — |
| | — |
| | 77,993 |
| | 100 |
| | — |
| | — |
| | 100 |
|
Trading securities: Equity securities | | 111 |
| | — |
| | — |
| | 111 |
| | 141 |
| | — |
| | — |
| | 141 |
|
Available-for-sale securities: Equity securities | | 44,083 |
| | — |
| | — |
| | 44,083 |
| | 44,942 |
| | — |
| | — |
| | 44,942 |
|
Liabilities: | | | | | | | | | | | | | | | | |
Derivatives | | $ | 141 |
| | $ | 5,281 |
| | $ | — |
| | $ | 5,422 |
| | $ | 17 |
| | $ | 3,944 |
| | $ | — |
| | $ | 3,961 |
|
Idaho Power’s derivatives are contracts entered into as part of its management of loads and resources. Electricity derivatives are valued on the Intercontinental Exchange (ICE) with quoted prices in an active market. Natural gas and diesel derivative valuations are performed using New York Mercantile Exchange (NYMEX) and ICE pricing, adjusted for location basis, which are also quoted under NYMEX and ICE pricing. Trading securities consist of employee-directed investments held in a Rabbi Trust and are related to an executive deferred compensation plan. Available-for-sale securities are related to the SMSP, are held in a Rabbi Trust, and are actively traded money market and equity funds with quoted prices in active markets.
The table below presents the carrying value and estimated fair value of financial instruments that are not reported at fair value, as of March 31, 2015 and December 31, 2014, using available market information and appropriate valuation methodologies (in thousands of dollars).
|
| | | | | | | | | | | | | | | | |
| | March 31, 2015 | | December 31, 2014 |
| | Carrying Amount | | Estimated Fair Value | | Carrying Amount | | Estimated Fair Value |
IDACORP | | |
| | |