10-Q
Table of Contents

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 September 30, 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 October 23, 2015:     
IDACORP, Inc.:        50,340,688
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

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


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Table of Contents

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
CAA
-
Clean Air Act
CSPP
-
Cogeneration and Small Power Production
CWA
-
Clean Water Act
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

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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," "guidance," "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 and the loss or change in the business of significant customers, and their associated impacts on loads and load growth;
the impacts of 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 the collection 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 or sale of electric power;
adoption of, changes in, and costs of compliance with laws, regulations, and policies relating to the environment, natural resources, and threatened and endangered species, and the ability to recover increased costs through rates;
variable hydrological conditions and over-appropriation of surface and groundwater in the Snake River Basin, which impact the amount of power generated by Idaho Power's hydroelectric facilities;
the ability to purchase fuel, power, and transmission capacity under reasonable terms, 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, and regulatory fines and penalties;
the increased costs and operational challenges associated with purchasing and integrating intermittent renewable energy sources into Idaho Power's resource portfolio;
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 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;
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;

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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.


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PART I – FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

IDACORP, Inc.
Condensed Consolidated Statements of Income
(unaudited)
 
 
 
Three months ended
September 30,
 
Nine months ended
September 30,
 
 
2015
 
2014
 
2015
 
2014
 
 
(thousands of dollars, except for per share amounts)
Operating Revenues:
 
 
 
 
 
 
 
 
Electric utility:
 
 
 
 
 
 
 
 
General business
 
$
340,796

 
$
347,838

 
$
897,943

 
$
874,817

Off-system sales
 
6,487

 
15,449

 
23,335

 
56,390

Other revenues
 
21,234

 
17,424

 
61,334

 
58,479

Total electric utility revenues
 
368,517

 
380,711

 
982,612

 
989,686

Other
 
648

 
1,490

 
2,277

 
3,017

Total operating revenues
 
369,165

 
382,201

 
984,889

 
992,703

Operating Expenses:
 
 
 
 
 
 
 
 
Electric utility:
 
 
 
 
 
 
 
 
Purchased power
 
71,890

 
75,058

 
166,191

 
181,291

Fuel expense
 
66,385

 
67,088

 
144,262

 
156,859

Power cost adjustment
 
(11,914
)
 
(668
)
 
26,372

 
23,496

Other operations and maintenance
 
83,972

 
84,236

 
255,329

 
252,208

Energy efficiency programs
 
7,645

 
5,537

 
19,854

 
17,881

Depreciation
 
34,639

 
33,476

 
102,996

 
99,304

Taxes other than income taxes
 
8,286

 
8,340

 
24,999

 
24,685

Total electric utility expenses
 
260,903

 
273,067

 
740,003

 
755,724

Other
 
3,598

 
3,412

 
11,340

 
10,869

Total operating expenses
 
264,501

 
276,479

 
751,343

 
766,593

Operating Income
 
104,664

 
105,722

 
233,546

 
226,110

Allowance for Equity Funds Used During Construction
 
5,654

 
4,645

 
16,219

 
13,182

Earnings of Unconsolidated Equity-Method Investments
 
5,527

 
6,414

 
8,636

 
8,908

Other Income, Net
 
1,222

 
1,193

 
5,054

 
4,733

Interest Expense:
 
 
 
 
 
 
 
 
Interest on long-term debt
 
20,614

 
20,141

 
62,443

 
60,423

Other interest
 
2,256

 
1,908

 
6,484

 
5,714

Allowance for borrowed funds used during construction
 
(2,593
)
 
(2,178
)
 
(7,550
)
 
(6,287
)
Total interest expense, net
 
20,277

 
19,871

 
61,377

 
59,850

Income Before Income Taxes
 
96,790

 
98,103

 
202,078

 
193,083

Income Tax Expense
 
23,523

 
10,869

 
39,276

 
33,968

Net Income
 
73,267

 
87,234

 
162,802

 
159,115

Adjustment for loss (income) attributable to noncontrolling interests
 
69

 
(345
)
 
45

 
(283
)
Net Income Attributable to IDACORP, Inc.
 
$
73,336

 
$
86,889

 
$
162,847

 
$
158,832

Weighted Average Common Shares Outstanding - Basic (000’s)
 
50,219

 
50,129

 
50,221

 
50,131

Weighted Average Common Shares Outstanding - Diluted (000’s)
 
50,324

 
50,220

 
50,282

 
50,184

Earnings Per Share of Common Stock:
 
 
 
 
 
 
 
 
Earnings Attributable to IDACORP, Inc. - Basic
 
$
1.46

 
$
1.73

 
$
3.24

 
$
3.17

Earnings Attributable to IDACORP, Inc. - Diluted
 
$
1.46

 
$
1.73

 
$
3.24

 
$
3.16

Dividends Declared Per Share of Common Stock
 
$
0.47

 
$
0.43

 
$
1.41

 
$
1.29


The accompanying notes are an integral part of these statements.

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IDACORP, Inc.
Condensed Consolidated Statements of Comprehensive Income
(unaudited)
 
 
 
Three months ended
September 30,
 
Nine months ended
September 30,
 
 
2015
 
2014
 
2015
 
2014
 
 
(thousands of dollars)
 
 
 
 
 
 
 
 
 
 
 
 
 
Net Income
 
$
73,267

 
$
87,234

 
$
162,802

 
$
159,115

Other Comprehensive Income:
 
 
 
 
 
 
 
 
Unfunded pension liability adjustment, net of tax
  of $428, $277, $1,284 and $832
 
667

 
432

 
2,001

 
1,296

Total Comprehensive Income
 
73,934

 
87,666

 
164,803

 
160,411

Comprehensive loss (income) attributable to noncontrolling interests
 
69

 
(345
)
 
45

 
(283
)
Comprehensive Income Attributable to IDACORP, Inc.
 
$
74,003

 
$
87,321

 
$
164,848

 
$
160,128


The accompanying notes are an integral part of these statements.
 
 


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Table of Contents

IDACORP, Inc.
Condensed Consolidated Balance Sheets
(unaudited)
 
 
 
September 30,
2015
 
December 31,
2014
 
 
(thousands of dollars)
Assets
 
 
 
 
 
 
 
 
 
Current Assets:
 
 
 
 
Cash and cash equivalents
 
$
121,260

 
$
56,808

Receivables:
 
 
 
 
Customer (net of allowance of $1,079 and $1,960, respectively)
 
91,936

 
79,083

Other (net of allowance of $220 and $144, respectively)
 
8,981

 
16,018

Taxes receivable
 
4,825

 
11,867

Accrued unbilled revenues
 
55,317

 
56,270

Materials and supplies (at average cost)
 
56,164

 
55,404

Fuel stock (at average cost)
 
56,124

 
55,171

Prepayments
 
18,870

 
18,476

Deferred income taxes
 
42,106

 
42,359

Current regulatory assets
 
38,326

 
50,042

Other
 
410

 
603

Total current assets
 
494,319

 
442,101

Investments
 
160,127

 
165,424

Property, Plant and Equipment:
 
 
 
 
Utility plant in service
 
5,376,721

 
5,248,212

Accumulated provision for depreciation
 
(1,890,374
)
 
(1,841,011
)
Utility plant in service - net
 
3,486,347

 
3,407,201

Construction work in progress
 
468,083

 
401,930

Utility plant held for future use
 
7,090

 
7,090

Other property, net of accumulated depreciation
 
16,965

 
17,256

Property, plant and equipment - net
 
3,978,485

 
3,833,477

Other Assets:
 
 
 
 
American Falls and Milner water rights
 
11,853

 
13,698

Company-owned life insurance
 
21,257

 
23,893

Regulatory assets
 
1,194,645

 
1,192,345

Long-term receivables (net of allowance of $552)
 
20,554

 
6,317

Other
 
56,746

 
39,598

Total other assets
 
1,305,055

 
1,275,851

Total
 
$
5,937,986

 
$
5,716,853


The accompanying notes are an integral part of these statements.

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IDACORP, Inc.
Condensed Consolidated Balance Sheets
(unaudited)
 
 
 
September 30,
2015
 
December 31,
2014
 
 
(thousands of dollars)
Liabilities and Equity
 
 
 
 
 
 
 
 
 
Current Liabilities:
 
 
 
 
Current maturities of long-term debt
 
$
1,064

 
$
1,064

Notes payable
 
3,600

 
31,300

Accounts payable
 
81,047

 
97,271

Taxes accrued
 
21,567

 
10,367

Interest accrued
 
24,073

 
22,630

Accrued compensation
 
38,463

 
43,774

Current regulatory liabilities
 
5,743

 
11,400

Other
 
29,775

 
23,975

Total current liabilities
 
205,332

 
241,781

Other Liabilities:
 
 
 
 
Deferred income taxes
 
1,092,372

 
1,065,290

Regulatory liabilities
 
409,277

 
390,207

Pension and other postretirement benefits
 
385,886

 
403,334

Other
 
49,111

 
44,238

Total other liabilities
 
1,936,646

 
1,903,069

Long-Term Debt
 
1,741,875

 
1,614,438

Commitments and Contingencies
 

 

Equity:
 
 
 
 
IDACORP, Inc. shareholders’ equity:
 
 
 
 
Common stock, no par value (shares authorized 120,000,000;
     50,352,051 and 50,308,702 shares issued, respectively)
 
848,003

 
845,402

Retained earnings
 
1,224,025

 
1,132,237

Accumulated other comprehensive loss
 
(22,157
)
 
(24,158
)
Treasury stock (11,363 and 38,764 shares at cost, respectively)
 
(57
)
 
(280
)
Total IDACORP, Inc. shareholders’ equity
 
2,049,814

 
1,953,201

Noncontrolling interests
 
4,319

 
4,364

Total equity
 
2,054,133

 
1,957,565

Total
 
$
5,937,986

 
$
5,716,853

 
 
 
 
 
The accompanying notes are an integral part of these statements.


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IDACORP, Inc.
Condensed Consolidated Statements of Cash Flows
(unaudited)
 
 
Nine months ended
September 30,
 
 
2015
 
2014
 
 
(thousands of dollars)
Operating Activities:
 
 
 
 
Net income
 
$
162,802

 
$
159,115

Adjustments to reconcile net income to net cash provided by operating activities:
 
 

 
 

Depreciation and amortization
 
106,304

 
102,366

Deferred income taxes and investment tax credits
 
25,265

 
25,355

Changes in regulatory assets and liabilities
 
25,776

 
36,595

Pension and postretirement benefit plan expense
 
22,668

 
20,927

Contributions to pension and postretirement benefit plans
 
(41,660
)
 
(32,533
)
Earnings of unconsolidated equity-method investments
 
(8,636
)
 
(8,908
)
Distributions from unconsolidated equity-method investments
 
9,352

 
5,820

Allowance for equity funds used during construction
 
(16,219
)
 
(13,182
)
Other non-cash adjustments to net income, net
 
1,444

 
4,417

Change in:
 
 

 
 

Accounts receivable
 
(14,704
)
 
4,372

Accounts payable and other accrued liabilities
 
(12,210
)
 
(3,359
)
Taxes accrued/receivable
 
19,845

 
14,066

Other current assets
 
(178
)
 
2,089

Other current liabilities
 
7,874

 
7,258

Other assets
 
2,468

 
(2,970
)
Other liabilities
 
629

 
(5,601
)
Net cash provided by operating activities
 
290,820

 
315,827

Investing Activities:
 
 

 
 

Additions to property, plant and equipment
 
(235,890
)
 
(200,928
)
Proceeds from the sale of emission allowances and RECs
 
1,855

 
2,923

Distributions from affordable housing investments
 
240

 
1,048

Other
 
883

 
4,335

Net cash used in investing activities
 
(232,912
)
 
(192,622
)
Financing Activities:
 
 

 
 

Issuance of long-term debt
 
250,000

 

Retirement of long-term debt
 
(121,064
)
 
(1,064
)
Dividends on common stock
 
(71,225
)
 
(64,958
)
Net change in short-term borrowings
 
(27,700
)
 
(22,950
)
Issuance of common stock
 

 
160

Acquisition of treasury stock
 
(3,277
)
 
(2,737
)
Make-whole premium on retirement of long-term debt
 
(17,872
)
 

Other
 
(2,318
)
 
1,220

Net cash provided by (used in) financing activities
 
6,544

 
(90,329
)
Net increase in cash and cash equivalents
 
64,452

 
32,876

Cash and cash equivalents at beginning of the period
 
56,808

 
78,162

Cash and cash equivalents at end of the period
 
$
121,260

 
$
111,038

Supplemental Disclosure of Cash Flow Information:
 
 

 
 

Cash paid during the period for:
 
 

 
 
Income taxes
 
$
4,442

 
$
4,686

Interest (net of amount capitalized)
 
$
57,630

 
$
55,743

Non-cash investing activities:
 
 
 
 
Additions to property, plant and equipment in accounts payable
 
$
12,606

 
$
19,375


The accompanying notes are an integral part of these statements.

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IDACORP, Inc.
Condensed Consolidated Statements of Equity
(unaudited)
 
 
 
Nine months ended
September 30,
 
 
2015
 
2014
 
 
(thousands of dollars)
Common Stock
 
 
 
 
Balance at beginning of period
 
$
845,402

 
$
839,750

Issued
 

 
160

Other
 
2,601

 
3,253

Balance at end of period
 
848,003

 
843,163

Retained Earnings
 
 
 
 
Balance at beginning of period
 
1,132,237

 
1,027,461

Net income attributable to IDACORP, Inc.
 
162,847

 
158,832

Common stock dividends ($1.41 and $1.29 per share)
 
(71,059
)
 
(64,903
)
Balance at end of period
 
1,224,025

 
1,121,390

Accumulated Other Comprehensive (Loss) Income
 
 
 
 
Balance at beginning of period
 
(24,158
)
 
(16,553
)
Unfunded pension liability adjustment (net of tax)
 
2,001

 
1,296

Balance at end of period
 
(22,157
)
 
(15,257
)
Treasury Stock
 
 
 
 
Balance at beginning of period
 
(280
)
 
(8
)
Issued
 
3,500

 
2,465

Acquired
 
(3,277
)
 
(2,737
)
Balance at end of period
 
(57
)
 
(280
)
Total IDACORP, Inc. shareholders’ equity at end of period
 
2,049,814

 
1,949,016

Noncontrolling Interests
 
 
 
 
Balance at beginning of period
 
4,364

 
4,090

Net (loss) income attributable to noncontrolling interests
 
(45
)
 
283

Balance at end of period
 
4,319

 
4,373

Total equity at end of period
 
$
2,054,133

 
$
1,953,389


The accompanying notes are an integral part of these statements.

11

Table of Contents


Idaho Power Company
Condensed Consolidated Statements of Income
(unaudited)
 
 
 
Three months ended
September 30,
 
Nine months ended
September 30,
 
 
2015
 
2014
 
2015
 
2014
 
 
(thousands of dollars)
Operating Revenues:
 
 
 
 
 
 
 
 
General business
 
$
340,796

 
$
347,838

 
$
897,943

 
$
874,817

Off-system sales
 
6,487

 
15,449

 
23,335

 
56,390

Other revenues
 
21,234

 
17,424

 
61,334

 
58,479

Total operating revenues
 
368,517

 
380,711

 
982,612

 
989,686

Operating Expenses:
 
 
 
 
 
 
 
 
Operation:
 
 
 
 
 
 
 
 
Purchased power
 
71,890

 
75,058

 
166,191

 
181,291

Fuel expense
 
66,385

 
67,088

 
144,262

 
156,859

Power cost adjustment
 
(11,914
)
 
(668
)
 
26,372

 
23,496

Other operations and maintenance
 
83,972

 
84,236

 
255,329

 
252,208

Energy efficiency programs
 
7,645

 
5,537

 
19,854

 
17,881

Depreciation
 
34,639

 
33,476

 
102,996

 
99,304

Taxes other than income taxes
 
8,286

 
8,340

 
24,999

 
24,685

Total operating expenses
 
260,903

 
273,067

 
740,003

 
755,724

Income from Operations
 
107,614

 
107,644

 
242,609

 
233,962

Other Income (Expense):
 
 
 
 
 
 
 
 
Allowance for equity funds used during construction
 
5,654

 
4,645

 
16,219

 
13,182

Earnings of unconsolidated equity-method investments
 
4,334

 
5,180

 
6,992

 
7,148

Other expense, net
 
(1,755
)
 
(1,538
)
 
(4,216
)
 
(3,556
)
Total other income
 
8,233

 
8,287

 
18,995

 
16,774

Interest Charges:
 
 
 
 
 
 
 
 
Interest on long-term debt
 
20,614

 
20,141

 
62,443

 
60,423

Other interest
 
2,204

 
1,859

 
6,311

 
5,547

Allowance for borrowed funds used during construction
 
(2,593
)
 
(2,178
)
 
(7,550
)
 
(6,287
)
Total interest charges
 
20,225

 
19,822

 
61,204

 
59,683

Income Before Income Taxes
 
95,622

 
96,109

 
200,400

 
191,053

Income Tax Expense
 
23,895

 
11,509

 
40,872

 
35,899

Net Income
 
$
71,727

 
$
84,600

 
$
159,528

 
$
155,154


The accompanying notes are an integral part of these statements.

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Table of Contents

Idaho Power Company
Condensed Consolidated Statements of Comprehensive Income
(unaudited)
 
 
 
Three months ended
September 30,
 
Nine months ended
September 30,
 
 
2015
 
2014
 
2015
 
2014
 
 
(thousands of dollars)
 
 
 
 
 
 
 
 
 
Net Income
 
$
71,727

 
$
84,600

 
$
159,528

 
$
155,154

Other Comprehensive Income:
 
 
 
 
 
 
 
 
Unfunded pension liability adjustment, net of tax
  of $428, $277, $1,284 and $832
 
667

 
432

 
2,001

 
1,296

Total Comprehensive Income
 
$
72,394

 
$
85,032

 
$
161,529

 
$
156,450


The accompanying notes are an integral part of these statements.
 
 


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Table of Contents

Idaho Power Company
Condensed Consolidated Balance Sheets
(unaudited)
 
 
 
September 30,
2015
 
December 31,
2014
 
 
(thousands of dollars)
Assets
 
 
 
 
 
 
 
 
 
Electric Plant:
 
 
 
 
In service (at original cost)
 
$
5,376,721

 
$
5,248,212

Accumulated provision for depreciation
 
(1,890,374
)
 
(1,841,011
)
In service - net
 
3,486,347

 
3,407,201

Construction work in progress
 
468,083

 
401,930

Held for future use
 
7,090

 
7,090

Electric plant - net
 
3,961,520

 
3,816,221

Investments and Other Property
 
138,853

 
142,825

Current Assets:
 
 
 
 
Cash and cash equivalents
 
110,099

 
46,695

Receivables:
 
 
 
 
Customer (net of allowance of $1,079 and $1,960, respectively)
 
91,936

 
79,083

Other (net of allowance of $220 and $144, respectively)
 
8,873

 
15,890

Taxes receivable
 
5,617

 
20,428

Accrued unbilled revenues
 
55,317

 
56,270

Materials and supplies (at average cost)
 
56,164

 
55,404

Fuel stock (at average cost)
 
56,124

 
55,171

Prepayments
 
18,760

 
18,356

Current regulatory assets
 
38,326

 
50,042

Other
 
410

 
603

Total current assets
 
441,626

 
397,942

Deferred Debits:
 
 
 
 
American Falls and Milner water rights
 
11,853

 
13,698

Company-owned life insurance
 
21,257

 
23,893

Regulatory assets
 
1,194,645

 
1,192,345

Other
 
71,252

 
39,753

Total deferred debits
 
1,299,007

 
1,269,689

Total
 
$
5,841,006

 
$
5,626,677



The accompanying notes are an integral part of these statements.

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Table of Contents

Idaho Power Company
Condensed Consolidated Balance Sheets
(unaudited)
 
 
 
September 30,
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
 
1,121,663

 
1,033,350

Accumulated other comprehensive loss
 
(22,157
)
 
(24,158
)
Total common stock equity
 
1,907,544

 
1,817,230

Long-term debt
 
1,741,875

 
1,614,438

Total capitalization
 
3,649,419

 
3,431,668

Current Liabilities:
 
 
 
 
Current maturities of long-term debt
 
1,064

 
1,064

Accounts payable
 
80,523

 
96,499

Accounts payable to affiliates
 
1,143

 
2,027

Taxes accrued
 
21,703

 
10,329

Interest accrued
 
24,073

 
22,630

Accrued compensation
 
38,344

 
43,410

Current regulatory liabilities
 
5,743

 
11,400

Other
 
34,868

 
29,476

Total current liabilities
 
207,461

 
216,835

Deferred Credits:
 
 
 
 
Deferred income taxes
 
1,141,044

 
1,141,755

Regulatory liabilities
 
409,277

 
390,207

Pension and other postretirement benefits
 
385,886

 
403,334

Other
 
47,919

 
42,878

Total deferred credits
 
1,984,126

 
1,978,174

 
 
 
 
 
Commitments and Contingencies
 

 

 
 
 
 
 
Total
 
$
5,841,006

 
$
5,626,677

 
 
 
 
 
The accompanying notes are an integral part of these statements.

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Table of Contents

Idaho Power Company
Condensed Consolidated Statements of Cash Flows
(unaudited)
 
 
Nine months ended
September 30,
 
 
2015
 
2014
 
 
(thousands of dollars)
Operating Activities:
 
 
 
 
Net income
 
$
159,528

 
$
155,154

Adjustments to reconcile net income to net cash provided by operating activities:
 
  

 
 

Depreciation and amortization
 
105,848

 
101,925

Deferred income taxes and investment tax credits
 
(5,307
)
 
14,087

Changes in regulatory assets and liabilities
 
25,776

 
36,595

Pension and postretirement benefit plan expense
 
22,646

 
20,903

Contributions to pension and postretirement benefit plans
 
(41,638
)
 
(32,509
)
Earnings of unconsolidated equity-method investments
 
(6,992
)
 
(7,148
)
Distributions from unconsolidated equity-method investments
 
8,502

 
4,970

Allowance for equity funds used during construction
 
(16,219
)
 
(13,182
)
Other non-cash adjustments to net income, net
 
(969
)
 
1,188

Change in:
 
 

 
 

Accounts receivable
 
(17,363
)
 
3,818

Accounts payable
 
(11,967
)
 
(3,336
)
Taxes accrued/receivable
 
27,942

 
12,160

Other current assets
 
(189
)
 
2,069

Other current liabilities
 
7,917

 
7,288

Other assets
 
2,468

 
(2,970
)
Other liabilities
 
800

 
(5,106
)
Net cash provided by operating activities
 
260,783

 
295,906

Investing Activities:
 
 

 
 

Additions to utility plant
 
(235,841
)
 
(200,778
)
Proceeds from the sale of emission allowances and RECs
 
1,855

 
2,923

Other
 
883

 
4,335

Net cash used in investing activities
 
(233,103
)
 
(193,520
)
Financing Activities:
 
 

 
 

Issuance of long-term debt
 
250,000

 

Retirement of long-term debt
 
(121,064
)
 
(1,064
)
Dividends on common stock
 
(71,215
)
 
(64,957
)
Make-whole premium on retirement of long-term debt
 
(17,872
)
 

Other
 
(4,125
)
 

Net cash provided by (used in) financing activities
 
35,724

 
(66,021
)
Net increase in cash and cash equivalents
 
63,404

 
36,365

Cash and cash equivalents at beginning of the period
 
46,695

 
66,535

Cash and cash equivalents at end of the period
 
$
110,099

 
$
102,900

Supplemental Disclosure of Cash Flow Information:
 
 

 
 

Cash paid during the period for:
 
 

 
 

Income taxes
 
$
28,336

 
$
19,793

Interest (net of amount capitalized)
 
$
57,457

 
$
55,576

Non-cash investing activities:
 
 
 
 
Additions to property, plant and equipment in accounts payable
 
$
12,606

 
$
19,375


The accompanying notes are an integral part of these statements.

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Table of Contents

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 September 30, 2015, consolidated results of operations for the three and nine months ended September 30, 2015 and 2014, and consolidated cash flows for the nine months ended September 30, 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.

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Table of Contents


Asset Retirement Obligations

In December 2014, the U.S. Environmental Protection Agency signed a final rule relating to the disposal of coal combustion residuals, which was published in the Federal Register on April 17, 2015. The rule adds several regulations relating to the disposal and ongoing monitoring of coal combustion residuals. Idaho Power jointly owns three coal-fired power plants that are subject to the new regulations. Together with its co-owners, Idaho Power performed engineering and cost studies to determine the financial and operational impacts of the new rule. Based on these studies, which incorporated revised assumptions about the remaining lives and operations of existing coal-combustion residual facilities, Idaho Power recorded an increase of $5 million to its asset retirement obligations and an associated $7 million increase to ARO assets and $2 million decrease to regulatory assets in the second quarter of 2015.

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 pretax 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 nine months ended September 30 (in thousands of dollars): 
 
 
IDACORP
 
Idaho Power
 
 
2015
 
2014
 
2015
 
2014
Income tax at statutory rates (federal and state)
 
$
79,030

 
$
75,385

 
$
78,356

 
$
74,702

First mortgage bond redemption costs
 
(7,210
)
 

 
(7,210
)
 

Accounting method change
 

 
(11,075
)
 

 
(11,075
)
Affordable housing tax credits
 
(2,628
)
 
(3,792
)
 

 

Affordable housing investment amortization, net of statutory taxes
 
1,025

 
2,041

 

 

Other(1)
 
(30,941
)
 
(28,591
)
 
(30,274
)
 
(27,728
)
Income tax expense
 
$
39,276

 
$
33,968

 
$
40,872

 
$
35,899

Effective tax rate
 
19.4
%
 
17.6
%
 
20.4
%
 
18.8
%
(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 increase in income tax expense for the nine months ended September 30, 2015, as compared with the same period in 2014, was primarily due to greater Idaho Power pre-tax earnings in 2015 and lower flow-through income tax benefits from discrete items. In the second quarter of 2015, Idaho Power recorded a $7.2 million income tax benefit for bond redemption costs, as compared with an $11.1 million income tax benefit recorded in the third quarter of 2014 for an income tax accounting method change related to Idaho Power's capitalized repairs deduction for generation, transmission, and distribution assets. On a net basis, Idaho Power’s estimate of its annual 2015 regulatory flow-through tax adjustments is comparable to 2014.


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Table of Contents

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 percent10.0 percent, and 10.5 percent) will be adjusted prospectively.

Idaho Power recorded no additional ADITC amortization or provision for sharing with customers during the first nine months of 2015 based on its estimate of Idaho ROE for the full-year 2015. Accordingly, the full $45 million of additional ADITC remains available for future use under the terms of the settlement stipulation.

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Table of Contents


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 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 May 28, 2015, the IPUC issued an order approving an $11.6 million net decrease in Idaho PCA rates, effective for the 2015-2016 PCA collection period from June 1, 2015 to May 31, 2016.  The net decrease in Idaho PCA rates included the application of (a) a customer rate credit of $8.0 million for sharing of revenues with customers for the year 2014 under the terms of the December 2011 settlement stipulation, (b) a $1.5 million customer benefit relating to a change to the PCA methodology described below, and (c) $4.0 million of surplus Idaho energy efficiency rider funds.

Previously, on May 30, 2014, the IPUC issued an order approving 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 rate 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 energy sales. On May 19, 2015, the IPUC issued an order approving 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 a $6.0 million increase in the FCA 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 -- In July 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. While the IPUC's docket was closed in August 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 May 28, 2015, the IPUC approved a settlement stipulation that resulted 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 functions in the same manner as the existing load-based adjustment, but measures deviations between Idaho-specific test year sales and actual Idaho sales rather than deviations between test year loads and actual loads. The approved settlement stipulation provided that implementation of the new methodology was effective as of January 1, 2015.

FCA Mechanism -- Also in July 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 May 6, 2015, the IPUC approved a settlement stipulation that modified 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, and reflected in FCA rates effective June 1, 2016.


20

Table of Contents

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 April 23, 2015, Idaho Power redeemed, prior to maturity, $120 million in principal amount of 6.025% first mortgage bonds, medium-term notes, Series H due July 2018. 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 of September 30, 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 September 30, 2015, no loans were outstanding under either IDACORP's or Idaho Power's facilities.  At September 30, 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 September 30, 2015 and December 31, 2014:
 
 
September 30, 2015
 
December 31, 2014
 
 
Idaho Power
 
IDACORP
 
Total
 
Idaho Power
 
IDACORP
 
Total
Commercial paper outstanding
 
$

 
$
3,600

 
$
3,600

 
$

 
$
31,300

 
$
31,300

Weighted-average annual interest rate
 
%
 
0.56
%
 
0.56
%
 
%
 
0.43
%
 
0.43
%

6.  COMMON STOCK
 
IDACORP Common Stock
 
During the nine months ended September 30, 2015, IDACORP issued 43,349 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 September 30, 2015, the

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leverage ratios for IDACORP and Idaho Power were 46 percent and 48 percent, respectively.  Based on these restrictions, IDACORP’s and Idaho Power’s dividends were limited to $1.1 billion and $965 million, respectively, at September 30, 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 September 30, 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 September 30, 2015, Idaho Power's common equity capital was 52 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 and nine months ended September 30, 2015 and 2014 (in thousands, except for per share amounts).
 
 
Three months ended
September 30,
 
Nine months ended
September 30,
 
 
2015
 
2014
 
2015
 
2014
Numerator:
 
 

 
 

 
 

 
 

Net income attributable to IDACORP, Inc.
 
$
73,336

 
$
86,889

 
$
162,847

 
$
158,832

Denominator:
 
 

 
 

 
 
 
 
Weighted-average common shares outstanding - basic
 
50,219

 
50,129

 
50,221

 
50,131

Effect of dilutive securities
 
105

 
91

 
61

 
53

Weighted-average common shares outstanding - diluted
 
50,324

 
50,220

 
50,282

 
50,184

Basic earnings per share
 
$
1.46

 
$
1.73

 
$
3.24

 
$
3.17

Diluted earnings per share
 
$
1.46

 
$
1.73

 
$
3.24

 
$
3.16



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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 nine months ended September 30, 2015, except as follows:

four power purchase agreements with a solar energy developer were 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;
the addition of seven power purchase agreements with solar and other alternative energy developers for projects with a combined nameplate capacity of approximately 45 MW. Payments pursuant to these new agreements are estimated to total $135 million from 2017 through 2036; and
Idaho Power entered into a long-term service agreement, conditioned upon the IPUC's approval of the agreement and acceptable accounting treatment, for maintenance services at three of Idaho Power's natural gas plants, with a total estimated obligation of $72 million over the term of the agreement. Idaho Power received IPUC approval of the agreement on October 5, 2015. However, Idaho Power reviewed and considered the implications of the IPUC's order, including the accounting treatment described in the order, and has requested reconsideration of certain aspects of the accounting treatment included in the IPUC's order. Accordingly, as of the date of this report the agreement has not become effective.

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 $73 million at September 30, 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 September 30, 2015, the value of the reclamation trust fund was $69 million. During the nine months ended September 30, 2015, the reclamation trust fund distributed approximately $1 million for reclamation activity costs associated with the BCC surface mine. 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 September 30, 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

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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."

Despite the speculative nature of ripple claims, 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, notwithstanding only limited objections from two market participants to one of the two settlements and no objections to the other settlement. Idaho Power and IESCo filed 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. In September 2015, the Ninth Circuit Court of Appeals held that the FERC departed from its rules and precedent without explanation, and directed the FERC to reconsider its decision on the settlement petitions and issue a decision within sixty days of the issuance of the court's mandate.

Idaho Power and IESCo cannot predict whether the FERC will approve in full the settlements under reconsideration. If the FERC does not approve in full the settlements, Idaho Power and IESCo cannot predict whether the FERC will ultimately order that any refunds be made, which contracts would be subject to refunds, how the refund amount would be calculated, which refunds would trigger ripple claims, if any, and whether any party would seek to pursue ripple claims. Based on these uncertainties and Idaho Power's and IESCo's evaluation of the merits of ripple claims, 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 are unable to estimate the possible loss or range of loss that could result from the proceedings and 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.

Hoku Corporation Bankruptcy Claims

On June 26, 2015, the trustee in the Hoku Corporation chapter 7 bankruptcy case (In Re: Hoku Corporation, United States Bankruptcy Court, District of Idaho, Case No. 13-40838 JDP) filed a complaint against Idaho Power, alleging that specified payments made by Hoku Corporation to Idaho Power in the six years prior to Hoku Corporation's bankruptcy filing in July 2013 should be recoverable by the trustee as constructive fraudulent transfers. Hoku Corporation was the parent entity of Hoku Materials, Inc., with which Idaho Power had an electric service agreement approved by the IPUC in March 2009. Under the electric service agreement, Idaho Power agreed to provide electric service to a polysilicon production facility under construction by Hoku Materials in the state of Idaho. Idaho Power also had agreements with Hoku Materials pertaining to the design and construction of apparatus for the provision of electric service to the polysilicon plant. The trustee's complaint against Idaho Power includes alternative causes of action for constructive fraudulent transfer under the federal bankruptcy code, Idaho law, and federal law, with requests for recovery from Idaho Power in amounts up to approximately $36 million. The complaint alleges that the payments made by Hoku Corporation to Idaho Power are subject to recovery by the trustee on the basis that Hoku Corporation was insolvent at the time of the payments and did not have any legal or equitable title in the polysilicon plant or liability for Hoku Materials' debts, and thus did not receive reasonably equivalent value for the payments it made for or on behalf of Hoku Materials.


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As of the date of this report it is not possible to determine Idaho Power's potential liability, if any, or to reasonably estimate a possible loss or range of possible loss, if any, within the trustee's alternative prayers for relief. Idaho Power intends to vigorously defend against the claims.

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 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. However, Idaho Power does believe that future capital investment for infrastructure and modifications to its electric generating facilities could be significant to comply with these regulations.

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 following table shows the components of net periodic benefit costs for the pension, SMSP, and postretirement benefits plans for the three months ended September 30, 2015 and 2014 (in thousands of dollars). 
 
 
Pension Plan
 
SMSP
 
Postretirement
Benefits
 
 
2015
 
2014
 
2015
 
2014
 
2015
 
2014
Service cost
 
$
8,291

 
$
6,323

 
$
422

 
$
411

 
$
308

 
$
252

Interest cost
 
8,792

 
8,853

 
967

 
964

 
670

 
711

Expected return on plan assets
 
(10,994
)
 
(10,561
)
 

 

 
(669
)
 
(648
)
Amortization of prior service cost
 
56

 
86

 
47

 
55

 
3

 
45

Amortization of net loss
 
3,482

 
978

 
1,048

 
654

 

 

Net periodic benefit cost
 
9,627

 
5,679

 
2,484

 
2,084

 
312

 
360

Adjustments due to the effects of regulation(1)
 
(4,902
)
 
(1,140
)
 

 

 

 

Net periodic benefit cost recognized for financial reporting(1)
 
$
4,725

 
$
4,539

 
$
2,484

 
$
2,084

 
$
312

 
$
360

 (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.

The table below shows the components of net periodic benefit costs for the pension, SMSP, and postretirement benefits plans for the nine months ended September 30, 2015 and 2014 (in thousands of dollars). 
 
 
Pension Plan
 
SMSP
 
Postretirement
Benefits
 
 
2015
 
2014
 
2015
 
2014
 
2015
 
2014
Service cost
 
$
24,873

 
$
18,969

 
$
1,267

 
$
1,234

 
$
926

 
$
758

Interest cost
 
26,378

 
26,561

 
2,901

 
2,892

 
2,009

 
2,131

Expected return on plan assets
 
(31,733
)
 
(31,717
)
 

 

 
(2,010
)
 
(1,946
)
Amortization of prior service cost
 
166

 
260

 
139

 
165

 
11

 
137

Amortization of net loss
 
10,446

 
2,933

 
3,146

 
1,963

 

 

Net periodic benefit cost
 
30,130

 
17,006

 
7,453

 
6,254

 
936

 
1,080

Adjustments due to the effects of regulation(1)
 
(15,873
)
 
(3,437
)
 

 

 

 

Net periodic benefit cost recognized for financial reporting(1)
 
$
14,257

 
$
13,569

 
$
7,453

 
$
6,254

 
$
936

 
$
1,080

 (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.


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During the nine months ended September 30, 2015, Idaho Power made $39 million in contributions to its defined benefit pension plan.

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 nine months ended September 30, 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 and nine months ended September 30, 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
 
Three months ended
September 30,
 
Nine months ended
September 30,
 
 
 
 
 
 
 
2015
 
2014
 
2015
 
2014