Document
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
|
| | | | |
X | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES | |
| EXCHANGE ACT OF 1934 | |
| For the quarterly period ended March 31, 2019 | |
| 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 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, smaller reporting companies, or emerging growth companies. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act:
IDACORP, Inc.:
Large accelerated filer X Accelerated filer __ Non-accelerated filer __
Smaller reporting company __
Emerging growth company __
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange
Act. __
Idaho Power Company:
Large accelerated filer __ Accelerated filer __ Non-accelerated filer X
Smaller reporting company __
Emerging growth company __
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange
Act. __
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
Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:
|
| | |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Common Stock | IDA | New York Stock Exchange |
Number of shares of common stock outstanding as of April 26, 2019:
IDACORP, Inc.: 50,385,432
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.
|
| | | | |
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 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 | |
|
| | |
COMMONLY USED TERMS |
|
The following select abbreviations, terms, or acronyms are commonly used or found in multiple locations in this report: |
| | |
2018 Annual Report | - | IDACORP's and Idaho Power's Annual Report on Form 10-K for the year ended December 31, 2018 |
ADITC | - | Accumulated Deferred Investment Tax Credits |
AFUDC | - | Allowance for Funds Used During Construction |
AOCI | - | Accumulated Other Comprehensive Income |
ASU | - | Accounting Standards Update |
BCC | - | Bridger Coal Company, a joint venture of IERCo |
BLM | - | U.S. Bureau of Land Management |
CWA | - | Clean Water Act |
FASB | - | Financial Accounting Standards Board |
FCA | - | Fixed Cost Adjustment |
FERC | - | Federal Energy Regulatory Commission |
FPA | - | Federal Power Act |
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 |
IFS | - | IDACORP Financial Services, a subsidiary of IDACORP, Inc. |
IPUC | - | Idaho Public Utilities Commission |
IRP | - | Integrated Resource Plan |
MD&A | - | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
MW | - | Megawatt |
MWh | - | Megawatt-hour |
O&M | - | Operations and Maintenance |
OATT | - | Open Access Transmission Tariff |
OPUC | - | Public Utility Commission of Oregon |
PCA | - | Idaho-Jurisdiction Power Cost Adjustment |
PURPA | - | Public Utility Regulatory Policies Act of 1978 |
SEC | - | U.S. Securities and Exchange Commission |
SMSP | - | Security Plan for Senior Management Employees |
Valmy Plant | - | North Valmy coal-fired power plant |
Western EIM | - | Energy imbalance market implemented in the western United States |
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. (IDACORP) and Idaho Power Company (Idaho Power) 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," "could," "estimates," "expects," "guidance," "intends," "potential," "plans," "predicts," "projects," "may result," "may continue," 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, 2018, 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 U.S. Securities and Exchange Commission, and the following important factors:
| |
• | the effect of decisions by the Idaho and Oregon public utilities commissions and the Federal Energy Regulatory Commission that impact Idaho Power's ability to recover costs and earn a return on investment; |
| |
• | the expense and risks associated with capital expenditures for utility infrastructure, and the timing and availability of cost recovery for such expenditures through customer rates, including the potential for the write-down or write-off of expenditures if not deemed prudent by regulators; |
| |
• | 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, or the addition of new customers, and their associated impacts on loads and load growth, and the availability of regulatory mechanisms that allow for timely cost recovery through customer rates in the event of those changes; |
| |
• | the impacts of economic conditions, including inflation, interest rates, regulatory authorized returns on equity, supply costs, population growth or decline in Idaho Power's service area, changes in customer demand for electricity, revenue from sales of excess power, credit quality of counterparties and suppliers, and the collection of receivables; |
| |
• | unseasonable or severe weather conditions, wildfires, drought, and other natural phenomena and natural disasters, including conditions and events associated with climate change, which affect customer demand, hydroelectric generation levels, repair costs, liability for damage caused by utility property, and the availability and cost of fuel for generation plants or purchased power to serve customers; |
| |
• | advancement of self-generation, energy storage, grid-connected devices, and energy efficiency technologies that may affect Idaho Power's sale or delivery of electric power or introduce new cyber security risks; |
| |
• | 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; |
| |
• | 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 associated increased costs through rates; |
| |
• | variable hydrological conditions and over-appropriation of surface and groundwater in the Snake River Basin, which may impact the amount of power generated by Idaho Power's hydroelectric facilities; |
| |
• | the ability to acquire 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 (either affecting or caused by Idaho Power facilities or infrastructure), explosions, and mechanical breakdowns that may occur while operating and maintaining Idaho Power assets, 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 for which the companies may have inadequate insurance coverage; |
| |
• | the increased purchased power costs and operational challenges associated with purchasing and integrating intermittent renewable energy sources into Idaho Power's resource portfolio; |
| |
• | disruptions or outages of Idaho Power's generation or transmission systems or of any interconnected transmission systems may constrain resources or cause Idaho Power to incur repair costs or purchase replacement power at increased costs; |
| |
• | 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 or disruptions 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 debt and equity markets, increase borrowing costs, and 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; |
| |
• | 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 and the companies' cash flows; |
| |
• | the ability to continue to pay dividends based on financial performance and in light of contractual covenants and restrictions and regulatory limitations; |
| |
• | 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 attract and retain skilled workers, and the ability to adjust the labor cost structure when necessary; |
| |
• | failure to comply with state and federal laws, regulations, and orders, 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 resulting operational changes through insurance or rates, or from third parties; |
| |
• | the companies' failure to secure data or to comply with privacy laws or regulations, security breaches, or the disruption or damage to the companies' business, operations, or reputation resulting from cyber-attacks or related litigation or penalties, terrorist incidents or the threat of terrorist incidents, or other malicious acts, 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 U.S. 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, |
| | 2019 | | 2018 |
| | (in thousands, except per share amounts) |
Operating Revenues: | | | | |
Electric utility revenues | | $ | 349,771 |
| | $ | 309,461 |
|
Other | | 548 |
| | 646 |
|
Total operating revenues | | 350,319 |
| | 310,107 |
|
| | | | |
Operating Expenses: | | | | |
Electric utility: | | | | |
Purchased power | | 62,831 |
| | 61,928 |
|
Fuel expense | | 51,870 |
| | 27,735 |
|
Power cost adjustment | | 26,225 |
| | 25,538 |
|
Other operations and maintenance | | 88,906 |
| | 86,198 |
|
Energy efficiency programs | | 10,112 |
| | 7,597 |
|
Depreciation | | 42,234 |
| | 40,068 |
|
Taxes other than income taxes | | 8,859 |
| | 9,277 |
|
Total electric utility expenses | | 291,037 |
| | 258,341 |
|
Other | | 1,163 |
| | 1,177 |
|
Total operating expenses | | 292,200 |
| | 259,518 |
|
| | | | |
Operating Income | | 58,119 |
| | 50,589 |
|
| | | | |
Allowance for Equity Funds Used During Construction | | 6,356 |
| | 6,033 |
|
| | | | |
Earnings of Unconsolidated Equity-Method Investments | | 2,381 |
| | 4,015 |
|
| | | | |
Other Income (Expense), Net | | 2,114 |
| | (459 | ) |
| | | | |
Interest Expense: | | | | |
Interest on long-term debt | | 21,154 |
| | 20,688 |
|
Other interest | | 3,453 |
| | 2,958 |
|
Allowance for borrowed funds used during construction | | (2,590 | ) | | (2,473 | ) |
Total interest expense, net | | 22,017 |
| | 21,173 |
|
| | | | |
Income Before Income Taxes | | 46,953 |
| | 39,005 |
|
| | | | |
Income Tax Expense | | 4,316 |
| | 2,894 |
|
| | | | |
Net Income | | 42,637 |
| | 36,111 |
|
Loss attributable to noncontrolling interests | | 49 |
| | 31 |
|
Net Income Attributable to IDACORP, Inc. | | $ | 42,686 |
| | $ | 36,142 |
|
Weighted Average Common Shares Outstanding - Basic | | 50,509 |
| | 50,425 |
|
Weighted Average Common Shares Outstanding - Diluted | | 50,518 |
| | 50,463 |
|
Earnings Per Share of Common Stock: | | | | |
Earnings Attributable to IDACORP, Inc. - Basic | | $ | 0.85 |
| | $ | 0.72 |
|
Earnings Attributable to IDACORP, Inc. - Diluted | | $ | 0.84 |
| | $ | 0.72 |
|
The accompanying notes are an integral part of these statements.
IDACORP, Inc.
Condensed Consolidated Statements of Comprehensive Income
(unaudited)
|
| | | | | | | | |
| | Three months ended March 31, |
| | 2019 | | 2018 |
| (in thousands) |
| | | | |
Net Income | | $ | 42,637 |
| | $ | 36,111 |
|
Other Comprehensive Income: | | | | |
Unfunded pension liability adjustment, net of tax of $169 and $250 | | 488 |
| | 721 |
|
Total Comprehensive Income | | 43,125 |
| | 36,832 |
|
Loss attributable to noncontrolling interests | | 49 |
| | 31 |
|
Comprehensive Income Attributable to IDACORP, Inc. | | $ | 43,174 |
| | $ | 36,863 |
|
The accompanying notes are an integral part of these statements.
IDACORP, Inc.
Condensed Consolidated Balance Sheets
(unaudited)
|
| | | | | | | | |
| | March 31, 2019 | | December 31, 2018 |
| | (in thousands) |
Assets | | | | |
| | | | |
Current Assets: | | | | |
Cash and cash equivalents | | $ | 231,342 |
| | $ | 267,492 |
|
Receivables: | | | | |
Customer (net of allowance of $2,091 and $1,725, respectively) | | 97,125 |
| | 77,178 |
|
Other (net of allowance of $320 and $264, respectively) | | 13,311 |
| | 7,476 |
|
Income taxes receivable | | — |
| | 4,356 |
|
Accrued unbilled revenues | | 54,572 |
| | 69,318 |
|
Materials and supplies (at average cost) | | 58,370 |
| | 54,987 |
|
Fuel stock (at average cost) | | 48,493 |
| | 47,979 |
|
Prepayments | | 17,615 |
| | 16,492 |
|
Current regulatory assets | | 50,645 |
| | 48,707 |
|
Other | | 4,819 |
| | 3,655 |
|
Total current assets | | 576,292 |
| | 597,640 |
|
Investments | | 94,576 |
| | 101,178 |
|
Property, Plant and Equipment: | | | | |
Utility plant in service | | 6,125,019 |
| | 6,103,856 |
|
Accumulated provision for depreciation | | (2,238,415 | ) | | (2,210,781 | ) |
Utility plant in service - net | | 3,886,604 |
| | 3,893,075 |
|
Construction work in progress | | 506,194 |
| | 480,259 |
|
Utility plant held for future use | | 4,751 |
| | 4,751 |
|
Other property, net of accumulated depreciation | | 17,538 |
| | 17,650 |
|
Property, plant and equipment - net | | 4,415,087 |
| | 4,395,735 |
|
Other Assets: | | | | |
Company-owned life insurance | | 59,106 |
| | 59,852 |
|
Regulatory assets | | 1,180,231 |
| | 1,165,467 |
|
Other | | 62,523 |
| | 62,882 |
|
Total other assets | | 1,301,860 |
| | 1,288,201 |
|
Total | | $ | 6,387,815 |
| | $ | 6,382,754 |
|
The accompanying notes are an integral part of these statements.
IDACORP, Inc.
Condensed Consolidated Balance Sheets
(unaudited)
|
| | | | | | | | |
| | March 31, 2019 | | December 31, 2018 |
| | (in thousands) |
Liabilities and Equity | | | | |
| | | | |
Current Liabilities: | | | | |
Accounts payable | | $ | 83,045 |
| | $ | 110,824 |
|
Taxes accrued | | 24,410 |
| | 12,009 |
|
Interest accrued | | 21,775 |
| | 23,622 |
|
Accrued compensation | | 32,538 |
| | 55,121 |
|
Current regulatory liabilities | | 72,600 |
| | 25,883 |
|
Advances from customers | | 26,348 |
| | 20,037 |
|
Other | | 12,750 |
| | 11,096 |
|
Total current liabilities | | 273,466 |
| | 258,592 |
|
Other Liabilities: | | | | |
Deferred income taxes | | 694,046 |
| | 699,878 |
|
Regulatory liabilities | | 727,912 |
| | 738,994 |
|
Pension and other postretirement benefits | | 427,760 |
| | 431,475 |
|
Other | | 43,838 |
| | 43,216 |
|
Total other liabilities | | 1,893,556 |
| | 1,913,563 |
|
Long-Term Debt | | 1,835,155 |
| | 1,834,788 |
|
Commitments and Contingencies | |
| |
|
Equity: | | | | |
IDACORP, Inc. shareholders’ equity: | | | | |
Common stock, no par value (120,000 shares authorized; 50,420 shares issued) | | 863,425 |
| | 863,593 |
|
Retained earnings | | 1,542,175 |
| | 1,531,543 |
|
Accumulated other comprehensive loss | | (22,356 | ) | | (22,844 | ) |
Treasury stock (35 shares and 27 shares, respectively, at cost) | | (3,008 | ) | | (1,932 | ) |
Total IDACORP, Inc. shareholders’ equity | | 2,380,236 |
| | 2,370,360 |
|
Noncontrolling interests | | 5,402 |
| | 5,451 |
|
Total equity | | 2,385,638 |
| | 2,375,811 |
|
Total | | $ | 6,387,815 |
| | $ | 6,382,754 |
|
| | | | |
The accompanying notes are an integral part of these statements. |
IDACORP, Inc.
Condensed Consolidated Statements of Cash Flows
(unaudited)
|
| | | | | | | | |
| | Three months ended March 31, |
| | 2019 | | 2018 |
| | (in thousands) |
Operating Activities: | | | | |
Net income | | $ | 42,637 |
| | $ | 36,111 |
|
Adjustments to reconcile net income to net cash provided by operating activities: | | |
| | |
|
Depreciation and amortization | | 43,362 |
| | 41,028 |
|
Deferred income taxes and investment tax credits | | (4,291 | ) | | (4,907 | ) |
Changes in regulatory assets and liabilities | | 19,540 |
| | 30,000 |
|
Pension and postretirement benefit plan expense | | 6,965 |
| | 7,034 |
|
Contributions to pension and postretirement benefit plans | | (12,410 | ) | | (11,852 | ) |
Earnings of equity-method investments | | (2,381 | ) | | (4,015 | ) |
Distributions from equity-method investments | | 7,700 |
| | 8,000 |
|
Allowance for equity funds used during construction | | (6,356 | ) | | (6,033 | ) |
Other non-cash adjustments to net income, net | | 2,913 |
| | 2,687 |
|
Change in: | | |
| | |
|
Accounts receivable | | (25,235 | ) | | (4,922 | ) |
Accounts payable and other accrued liabilities | | (44,733 | ) | | (25,656 | ) |
Taxes accrued/receivable | | 16,757 |
| | 15,226 |
|
Other current assets | | 9,112 |
| | 6,309 |
|
Other current liabilities | | 3,737 |
| | 5,156 |
|
Other assets | | (957 | ) | | (1,933 | ) |
Other liabilities | | 639 |
| | (495 | ) |
Net cash provided by operating activities | | 56,999 |
| | 91,738 |
|
Investing Activities: | | |
| | |
|
Additions to property, plant and equipment | | (61,330 | ) | | (67,026 | ) |
Payments received from transmission project joint funding partners | | 695 |
| | 19,770 |
|
Proceeds from the sale of emission allowances and renewable energy certificates | | 2,915 |
| | 1,520 |
|
Purchase of equity securities | | (240 | ) | | (95 | ) |
Proceeds from the sale of equity securities | | 1,313 |
| | 1,224 |
|
Other | | (85 | ) | | (86 | ) |
Net cash used in investing activities | | (56,732 | ) | | (44,693 | ) |
Financing Activities: | | |
| | |
|
Issuance of long-term debt | | — |
| | 220,000 |
|
Dividends on common stock | | (32,290 | ) | | (30,209 | ) |
Acquisition of treasury stock | | (4,107 | ) | | (3,557 | ) |
Debt issuance costs and other | | (20 | ) | | (2,651 | ) |
Net cash (used in) provided by financing activities | | (36,417 | ) | | 183,583 |
|
Net (decrease) increase in cash and cash equivalents | | (36,150 | ) | | 230,628 |
|
Cash and cash equivalents at beginning of the period | | 267,492 |
| | 76,649 |
|
Cash and cash equivalents at end of the period | | $ | 231,342 |
| | $ | 307,277 |
|
Supplemental Disclosure of Cash Flow Information: | | |
| | |
|
Cash paid during the period for: | | |
| | |
Income taxes | | $ | — |
| | $ | — |
|
Interest (net of amount capitalized) | | 22,889 |
| | 20,820 |
|
Non-cash investing activities: | | | | |
Additions to property, plant and equipment in accounts payable | | $ | 23,690 |
| | $ | 20,130 |
|
The accompanying notes are an integral part of these statements.
IDACORP, Inc.
Condensed Consolidated Statements of Equity
(unaudited)
|
| | | | | | | | |
| | Three months ended March 31, |
| | 2019 | | 2018 |
| | (in thousands) |
Common Stock | | | | |
Balance at beginning of period | | $ | 863,593 |
| | $ | 857,207 |
|
Share-based compensation expense | | 2,837 |
| | 2,541 |
|
Treasury shares issued | | (3,031 | ) | | (2,237 | ) |
Other | | 26 |
| | 22 |
|
Balance at end of period | | 863,425 |
| | 857,533 |
|
Retained Earnings | | | | |
Balance at beginning of period | | 1,531,543 |
| | 1,426,528 |
|
Net income attributable to IDACORP, Inc. | | 42,686 |
| | 36,142 |
|
Common stock dividends ($0.63 and $0.59 per share, respectively) | | (32,054 | ) | | (30,086 | ) |
Balance at end of period | | 1,542,175 |
| | 1,432,584 |
|
Accumulated Other Comprehensive (Loss) Income | | | | |
Balance at beginning of period | | (22,844 | ) | | (30,964 | ) |
Unfunded pension liability adjustment (net of tax) | | 488 |
| | 721 |
|
Balance at end of period | | (22,356 | ) | | (30,243 | ) |
Treasury Stock | | | | |
Balance at beginning of period | | (1,932 | ) | | (1,386 | ) |
Issued | | 3,031 |
| | 2,237 |
|
Acquired | | (4,107 | ) | | (3,557 | ) |
Balance at end of period | | (3,008 | ) | | (2,706 | ) |
Total IDACORP, Inc. shareholders’ equity at end of period | | 2,380,236 |
| | 2,257,168 |
|
Noncontrolling Interests | | | | |
Balance at beginning of period | | 5,451 |
| | 4,729 |
|
Net loss attributable to noncontrolling interests | | (49 | ) | | (31 | ) |
Balance at end of period | | 5,402 |
| | 4,698 |
|
Total equity at end of period | | $ | 2,385,638 |
| | $ | 2,261,866 |
|
The accompanying notes are an integral part of these statements.
Idaho Power Company
Condensed Consolidated Statements of Income
(unaudited)
|
| | | | | | | | |
| | Three months ended March 31, |
| | 2019 | | 2018 |
| | (in thousands) |
| | | | |
Operating Revenues | | $ | 349,771 |
| | $ | 309,461 |
|
| | | | |
Operating Expenses: | | | | |
Operation: | | | | |
Purchased power | | 62,831 |
| | 61,928 |
|
Fuel expense | | 51,870 |
| | 27,735 |
|
Power cost adjustment | | 26,225 |
| | 25,538 |
|
Other operations and maintenance | | 88,906 |
| | 86,198 |
|
Energy efficiency programs | | 10,112 |
| | 7,597 |
|
Depreciation | | 42,234 |
| | 40,068 |
|
Taxes other than income taxes | | 8,859 |
| | 9,277 |
|
Total operating expenses | | 291,037 |
| | 258,341 |
|
| | | | |
Income from Operations | | 58,734 |
| | 51,120 |
|
| | | | |
Other Income (Expense): | | | | |
Allowance for equity funds used during construction | | 6,356 |
| | 6,033 |
|
Earnings of unconsolidated equity-method investments | | 2,231 |
| | 4,142 |
|
Other income (expense), net | | 922 |
| | (1,128 | ) |
Total other income | | 9,509 |
| | 9,047 |
|
| | | | |
Interest Charges: | | | | |
Interest on long-term debt | | 21,154 |
| | 20,688 |
|
Other interest | | 3,429 |
| | 2,945 |
|
Allowance for borrowed funds used during construction | | (2,590 | ) | | (2,473 | ) |
Total interest charges | | 21,993 |
| | 21,160 |
|
| | | | |
Income Before Income Taxes | | 46,250 |
| | 39,007 |
|
| | | | |
Income Tax Expense | | 4,666 |
| | 3,150 |
|
| | | | |
Net Income | | $ | 41,584 |
| | $ | 35,857 |
|
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, |
| | 2019 | | 2018 |
| (in thousands) |
| | | | |
Net Income | | $ | 41,584 |
| | $ | 35,857 |
|
Other Comprehensive Income: | | | | |
Unfunded pension liability adjustment, net of tax of $169 and $250 | | 488 |
| | 721 |
|
Total Comprehensive Income | | $ | 42,072 |
| | $ | 36,578 |
|
The accompanying notes are an integral part of these statements.
Idaho Power Company
Condensed Consolidated Balance Sheets
(unaudited)
|
| | | | | | | | |
| | March 31, 2019 | | December 31, 2018 |
| | (in thousands) |
Assets | | | | |
| | | | |
Electric Plant: | | | | |
In service (at original cost) | | $ | 6,125,019 |
| | $ | 6,103,856 |
|
Accumulated provision for depreciation | | (2,238,415 | ) | | (2,210,781 | ) |
In service - net | | 3,886,604 |
| | 3,893,075 |
|
Construction work in progress | | 506,194 |
| | 480,259 |
|
Held for future use | | 4,751 |
| | 4,751 |
|
Electric plant - net | | 4,397,549 |
| | 4,378,085 |
|
Investments and Other Property | | 83,731 |
| | 90,019 |
|
Current Assets: | | | | |
Cash and cash equivalents | | 131,121 |
| | 165,460 |
|
Receivables: | | | | |
Customer (net of allowance of $2,091 and $1,725, respectively) | | 97,125 |
| | 77,178 |
|
Other (net of allowance of $320 and $264, respectively) | | 12,990 |
| | 7,206 |
|
Income taxes receivable | | — |
| | 11,829 |
|
Accrued unbilled revenues | | 54,572 |
| | 69,318 |
|
Materials and supplies (at average cost) | | 58,370 |
| | 54,987 |
|
Fuel stock (at average cost) | | 48,493 |
| | 47,979 |
|
Prepayments | | 17,478 |
| | 16,374 |
|
Current regulatory assets | | 50,645 |
| | 48,707 |
|
Other | | 4,819 |
| | 3,655 |
|
Total current assets | | 475,613 |
| | 502,693 |
|
Deferred Debits: | | | | |
Company-owned life insurance | | 59,106 |
| | 59,852 |
|
Regulatory assets | | 1,180,231 |
| | 1,165,467 |
|
Other | | 57,959 |
| | 58,284 |
|
Total deferred debits | | 1,297,296 |
| | 1,283,603 |
|
Total | | $ | 6,254,189 |
| | $ | 6,254,400 |
|
The accompanying notes are an integral part of these statements.
Idaho Power Company
Condensed Consolidated Balance Sheets
(unaudited)
|
| | | | | | | | |
| | March 31, 2019 | | December 31, 2018 |
| | (in thousands) |
Capitalization and Liabilities | | | | |
| | | | |
Capitalization: | | | | |
Common stock equity: | | | | |
Common stock, $2.50 par value (50,000 shares authorized; 39,151 shares outstanding) | | $ | 97,877 |
| | $ | 97,877 |
|
Premium on capital stock | | 712,258 |
| | 712,258 |
|
Capital stock expense | | (2,097 | ) | | (2,097 | ) |
Retained earnings | | 1,418,775 |
| | 1,409,245 |
|
Accumulated other comprehensive loss | | (22,356 | ) | | (22,844 | ) |
Total common stock equity | | 2,204,457 |
| | 2,194,439 |
|
Long-term debt | | 1,835,155 |
| | 1,834,788 |
|
Total capitalization | | 4,039,612 |
| | 4,029,227 |
|
Current Liabilities: | | | | |
Accounts payable | | 82,921 |
| | 110,597 |
|
Accounts payable to affiliates | | 2,914 |
| | 2,088 |
|
Taxes accrued | | 16,723 |
| | 11,750 |
|
Interest accrued | | 21,775 |
| | 23,622 |
|
Accrued compensation | | 32,431 |
| | 54,910 |
|
Current regulatory liabilities | | 72,600 |
| | 25,883 |
|
Advances from customers | | 26,348 |
| | 20,037 |
|
Other | | 12,114 |
| | 10,198 |
|
Total current liabilities | | 267,826 |
| | 259,085 |
|
Deferred Credits: | | | | |
Deferred income taxes | | 748,024 |
| | 753,239 |
|
Regulatory liabilities | | 727,912 |
| | 738,994 |
|
Pension and other postretirement benefits | | 427,760 |
| | 431,475 |
|
Other | | 43,055 |
| | 42,380 |
|
Total deferred credits | | 1,946,751 |
| | 1,966,088 |
|
| | | | |
Commitments and Contingencies | |
| |
|
| | | | |
Total | | $ | 6,254,189 |
| | $ | 6,254,400 |
|
| | | | |
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, |
| | 2019 | | 2018 |
| | (in thousands) |
Operating Activities: | | | | |
Net income | | $ | 41,584 |
| | $ | 35,857 |
|
Adjustments to reconcile net income to net cash provided by operating activities: | | |
| | |
|
Depreciation and amortization | | 43,212 |
| | 40,878 |
|
Deferred income taxes and investment tax credits | | (4,137 | ) | | (4,853 | ) |
Changes in regulatory assets and liabilities | | 19,540 |
| | 30,000 |
|
Pension and postretirement benefit plan expense | | 6,965 |
| | 7,034 |
|
Contributions to pension and postretirement benefit plans | | (12,410 | ) | | (11,852 | ) |
Earnings of equity-method investments | | (2,231 | ) | | (4,142 | ) |
Distributions from equity-method investments | | 7,700 |
| | 8,000 |
|
Allowance for equity funds used during construction | | (6,356 | ) | | (6,033 | ) |
Other non-cash adjustments to net income, net | | 77 |
| | 145 |
|
Change in: | | |
| | |
|
Accounts receivable | | (24,378 | ) | | (4,613 | ) |
Accounts payable | | (44,631 | ) | | (25,459 | ) |
Taxes accrued/receivable | | 16,802 |
| | 15,221 |
|
Other current assets | | 9,132 |
| | 6,329 |
|
Other current liabilities | | 3,843 |
| | 5,228 |
|
Other assets | | (957 | ) | | (1,933 | ) |
Other liabilities | | 692 |
| | (371 | ) |
Net cash provided by operating activities | | 54,447 |
| | 89,436 |
|
Investing Activities: | | |
| | |
|
Additions to utility plant | | (61,330 | ) | | (67,020 | ) |
Payments received from transmission project joint funding partners | | 695 |
| | 19,770 |
|
Proceeds from the sale of emission allowances and renewable energy certificates | | 2,915 |
| | 1,520 |
|
Purchase of equity securities | | (240 | ) | | (95 | ) |
Proceeds from the sale of equity securities | | 1,313 |
| | 1,224 |
|
Other | | (85 | ) | | (86 | ) |
Net cash used in investing activities | | (56,732 | ) | | (44,687 | ) |
Financing Activities: | | |
| | |
|
Issuance of long-term debt | | — |
| | 220,000 |
|
Dividends on common stock | | (32,054 | ) | | (30,087 | ) |
Debt issuance costs | | — |
| | (2,644 | ) |
Net cash (used in) provided by financing activities | | (32,054 | ) | | 187,269 |
|
Net (decrease) increase in cash and cash equivalents | | (34,339 | ) | | 232,018 |
|
Cash and cash equivalents at beginning of the period | | 165,460 |
| | 44,646 |
|
Cash and cash equivalents at end of the period | | $ | 131,121 |
| | $ | 276,664 |
|
Supplemental Disclosure of Cash Flow Information: | | |
| | |
|
Cash paid to (received from) IDACORP related to income taxes | | $ | — |
| | $ | — |
|
Cash paid for interest (net of amount capitalized) | | 22,866 |
| | 20,807 |
|
Non-cash investing activities: | | | | |
Additions to property, plant and equipment in accounts payable | | $ | 23,690 |
| | $ | 20,130 |
|
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 (Jim Bridger plant).
IDACORP’s significant other wholly-owned subsidiaries include IDACORP Financial Services, Inc. (IFS), an investor in affordable housing and other real estate investments, and 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).
Regulation of Utility Operations
As a regulated utility, many of Idaho Power's fundamental business decisions are subject to the approval of governmental agencies, including the prices that Idaho Power is authorized to charge for its electric service. These approvals are a critical factor in determining IDACORP's and Idaho Power's results of operations and financial condition.
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 or accrued as regulatory assets or regulatory liabilities on the balance sheet. Regulatory assets represent incurred costs that have been deferred because it is probable they will be recovered from customers through future rates. Regulatory liabilities represent obligations to make refunds to customers for previous collections, or represent amounts collected in advance of incurring an expense. The effects of applying these regulatory accounting principles to Idaho Power's operations are discussed in more detail in Note 3 - "Regulatory Matters."
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, 2019, consolidated results of operations for the three months ended March 31, 2019 and 2018, and consolidated cash flows for the three months ended March 31, 2019 and 2018. These adjustments are of a normal and recurring nature. These financial statements do not contain the complete detail or note 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, 2018 (2018 Annual Report). 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, 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.
New and Recently Adopted Accounting Pronouncements
Recently Adopted Accounting Pronouncements
In February 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-02, Leases (Topic 842), intended to improve financial reporting on leasing transactions. The ASU requires lessees to recognize a right-of-use asset and lease liability on the balance sheet for most leases. In addition, the ASU revises the definition of a lease in regards to when an arrangement conveys the right to control the use of the identified asset under the arrangement. IDACORP and Idaho Power adopted ASU 2016-02 on January 1, 2019. The adoption did not have a material impact on their respective financial statements. Neither IDACORP nor Idaho Power has material agreements that meet the definition of a lease under ASU 2016-02.
Recent Accounting Pronouncements Not Yet Adopted
In August 2018, the FASB issued ASU 2018-15, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract,
to provide guidance on implementation costs incurred in a cloud computing arrangement that is a service contract. ASU 2018-15 aligns the accounting for such costs with the guidance on capitalizing costs associated with developing or obtaining internal-use software. The new standard is effective for interim and annual reporting periods beginning after December 15, 2019, with early adoption permitted. IDACORP and Idaho Power are evaluating the impact of ASU 2018-15 on their respective financial statements.
2. INCOME TAXES
In accordance with interim reporting requirements, IDACORP and Idaho Power use an estimated annual effective tax rate for computing their provisions for income taxes. An estimate of annual income tax expense (or benefit) is made each interim period using estimates for annual pre-tax income, income tax adjustments, and tax credits. The estimated annual effective tax rates do not include discrete events such as tax law changes, examination settlements, 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, 2019 and 2018 (in thousands):
|
| | | | | | | | | | | | | | | | |
| | IDACORP | | Idaho Power |
| | 2019 | | 2018 | | 2019 | | 2018 |
Income tax at statutory rates (federal and state) | | $ | 12,098 |
| | $ | 10,048 |
| | $ | 11,905 |
| | $ | 10,040 |
|
Additional accumulated deferred investment tax credits (ADITC) amortization | | — |
| | (500 | ) | | — |
| | (500 | ) |
Excess deferred income tax reversal | | (1,631 | ) | | (1,940 | ) | | (1,631 | ) | | (1,940 | ) |
Other(1) | | (6,151 | ) | | (4,714 | ) | | (5,608 | ) | | (4,450 | ) |
Income tax expense | | $ | 4,316 |
| | $ | 2,894 |
| | $ | 4,666 |
| | $ | 3,150 |
|
Effective tax rate | | 9.2 | % | | 7.4 | % | | 10.1 | % | | 8.1 | % |
(1) "Other" is primarily comprised of the net tax effect of Idaho Power's regulatory flow-through tax adjustments.
The increase in income tax expense for the three months ended March 31, 2019, compared with the same period in 2018, was primarily due to greater pre-tax income. On a net basis, Idaho Power’s estimate of its annual 2019 regulatory flow-through tax adjustments is comparable to 2018.
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
Idaho Power's current base rates are a result of orders from the Idaho Public Utilities Commission (IPUC) and Public Utility Commission of Oregon (OPUC). The commissions approve settlement stipulations that generally provide for cost recovery and an authorized rate of return on their respective Idaho-jurisdiction and Oregon-jurisdiction rate bases. Idaho Power's most recent general rate cases in Idaho and Oregon were filed during 2011, and Idaho Power filed a large single-issue rate case for the Langley Gulch power plant in Idaho and Oregon in 2012. These significant rate cases resulted in the resetting of base rates in both Idaho and Oregon during 2012. In 2014, Idaho Power reset its base-rate power supply expenses in the Idaho jurisdiction for purposes of updating the collection of costs through retail rates, but without a resulting net increase in rates.
Between general rate cases, Idaho Power relies upon customer growth, a fixed cost adjustment mechanism, power cost adjustment mechanisms, tariff riders, and other mechanisms to reduce the impact of regulatory lag, which refers to the period of time between making an investment or incurring an expense and recovering that investment or expense and earning a return. Also, Idaho Power may seek approval for additions to rate base or changes to base rates through other regulatory proceedings outside of a general rate case. For more information on the Idaho and Oregon general rate cases and base rate adjustments, refer to Note 3 - "Regulatory Matters" to the consolidated financial statements included in the 2018 Annual Report.
Idaho Settlement Stipulations
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 (October 2014 Idaho Earnings Support and Sharing Settlement Stipulation). A May 2018 Idaho settlement stipulation related to tax reform (May 2018 Idaho Tax Reform Settlement Stipulation) provides for the extension of the October 2014 Idaho Earnings Support and Sharing Settlement Stipulation beyond the initial termination date of December 31, 2019, with modified terms related to the ADITC and revenue sharing mechanism to become effective beginning January 1, 2020. The October 2014 Idaho Earnings Support and Sharing Settlement Stipulation and the May 2018 Idaho Tax Reform Settlement Stipulation are described in Note 3 - "Regulatory Matters" to the consolidated financial statements included in the 2018 Annual Report and include provisions for the accelerated amortization of ADITC to help achieve a minimum 9.5 percent (9.4 percent after 2019) return on year-end equity in the Idaho jurisdiction (Idaho ROE). The settlement stipulations also provide for the potential sharing between Idaho Power and customers of Idaho-jurisdictional earnings in excess of 10.0 percent of Idaho ROE.
Based on its estimate of full-year 2019 Idaho ROE, in the first quarter of 2019, Idaho Power recorded no additional ADITC amortization or provision against current revenues for sharing of earnings with customers for 2019 under the October 2014 Idaho Earnings Support and Sharing Settlement Stipulation. During the first three months of 2018, Idaho Power recorded $0.5 million of additional ADITC amortization.
Idaho Power Cost Adjustment Mechanisms
In both its Idaho and Oregon jurisdictions, Idaho Power's power cost adjustment mechanisms address the volatility of power supply costs and provide for annual adjustments to the rates charged to its retail customers. The power cost adjustment mechanisms compare Idaho Power's actual net power supply costs (primarily fuel and purchased power less wholesale energy sales) against net power supply costs being recovered in Idaho Power's retail rates. Under the power cost adjustment mechanisms, certain differences between actual net power supply costs incurred by Idaho Power and costs being recovered in retail rates are recorded as a deferred charge or credit on the balance sheet for future recovery or refund. 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.
In April 2019, Idaho Power filed an application with the IPUC requesting a $50.1 million net decrease in Idaho-jurisdiction power cost adjustment (PCA) revenues, effective for the 2019-2020 PCA collection period from June 1, 2019 to May 31, 2020. The net decrease in PCA revenues reflects reduced power supply costs due to higher-than-expected wholesale energy sales and positive results from natural gas hedging activities, which combined to reduce actual net power supply costs for the 2018-2019 PCA year (April 2018 through March 2019). The net decrease in PCA revenues for the 2019-2020 PCA collection period also includes a $5.0 million credit to customers for sharing of 2018 earnings under the October 2014 Idaho Earnings Support and Sharing Settlement Stipulation and a $2.7 million credit for income tax reform benefits related to Idaho Power's open access
transmission tariff (OATT) rate under the May 2018 Idaho Tax Reform Settlement Stipulation. In addition, the net decrease in PCA revenues reflects benefits from Idaho Power's participation in the energy imbalance market implemented in the western United States (Western EIM). As of the date of this report, the IPUC has not yet issued an order on the application. Previously, in May 2018, the IPUC issued an order approving a $30.4 million net decrease in PCA rates, effective for the 2018-2019 PCA collection period from June 1, 2018, to May 31, 2019. The net decrease in PCA rates included a $7.8 million one-time benefit for income tax benefits from January 1, 2018 to May 31, 2018, and income tax reform benefits related to Idaho Power's OATT rate. The remaining net decrease in PCA rates for the 2018-2019 PCA collection period was primarily due to better-than-expected actual water conditions for the 2017-2018 PCA year (April 2017 through March 2018), which resulted in additional low-cost hydroelectric generation available to reduce net power supply costs.
Idaho Fixed Cost Adjustment Mechanism
The Idaho jurisdiction fixed cost adjustment (FCA) mechanism, applicable to Idaho residential and small commercial customers, is designed to remove a portion of 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. Under Idaho Power's current rate design, Idaho Power recovers a portion of fixed costs through the variable kilowatt-hour charge, which may result in over-collection or under-collection of fixed costs. To return over-collection to customers or to collect under-collection from customers, the FCA mechanism allows Idaho Power to accrue, or defer, the difference between the authorized fixed-cost recovery amount per customer and the actual fixed costs per customer recovered by Idaho Power during the year. Any annual increase in the FCA recovery may be capped at 3 percent of base revenue at the discretion of the IPUC, with any excess deferred for collection in a subsequent year. In March 2019, Idaho Power filed its annual FCA update with the IPUC, requesting an increase of $19.2 million in recovery from the FCA from $15.6 million to $34.8 million, with new rates effective for the period from June 1, 2019, to May 31, 2020. The $19.2 million requested increase exceeds the discretionary cap of 3 percent of base revenues by $4.9 million. As of the date of this report, the IPUC has not yet issued an order on the request. Previously, in May 2018, the IPUC issued an order approving a decrease of $19.4 million in the FCA from $35.0 million to $15.6 million, with rates effective for the period from June 1, 2018, to May 31, 2019.
Valmy Exit Agreement and Base Rate Adjustment Approval Request
In February 2019, Idaho Power reached an agreement with NV Energy that facilitates the planned end of Idaho Power's participation in coal-fired operations at units 1 and 2 of its jointly-owned North Valmy coal-fired power plant (Valmy Plant) in 2019 and 2025, respectively. In March 2019, Idaho Power requested that the IPUC approve the Valmy Plant agreement and allow Idaho Power to recover through customer rates the $1.2 million incremental annual levelized revenue requirement associated with required Valmy Plant investments and other exit costs. As of the date of this report, Idaho Power's application remains pending.
4. REVENUES
The following table provides a summary of electric utility operating revenues for IDACORP and Idaho Power for the three months ended March 31, 2019 and 2018 (in thousands):
|
| | | | | | | | |
| | Three months ended March 31, |
| | 2019 | | 2018 |
Electric utility operating revenues: | | | | |
Revenue from contracts with customers | | $ | 335,402 |
| | $ | 289,573 |
|
Alternative revenue programs and other revenues | | 14,369 |
| | 19,888 |
|
Total electric utility operating revenues | | $ | 349,771 |
| | $ | 309,461 |
|
Revenues from Contracts with Customers
The following table presents revenues from contracts with customers disaggregated by revenue source for the three months ended March 31, 2019 and 2018 (in thousands): |
| | | | | | | | |
| | Three months ended March 31, |
| | 2019 | | 2018 |
Revenues from contracts with customers: | | | | |
Retail revenues: | | | | |
Residential (includes $11,309 and $13,543, respectively, related to the FCA)(1) | | $ | 150,219 |
| | $ | 146,683 |
|
Commercial (includes $342 and $362, respectively, related to the FCA)(1) | | 73,106 |
| | 74,227 |
|
Industrial | | 45,498 |
| | 45,792 |
|
Irrigation | | 999 |
| | 407 |
|
Deferred revenue related to HCC relicensing AFUDC(2) | | (2,119 | ) | | (2,584 | ) |
Total retail revenues | | 267,703 |
| | 264,525 |
|
Less: FCA mechanism revenues(1) | | (11,651 | ) | | (13,905 | ) |
Wholesale energy sales | | 47,215 |
| | 13,766 |
|
Transmission wheeling-related revenues | | 15,728 |
| | 11,698 |
|
Energy efficiency program revenues | | 10,112 |
| | 7,597 |
|
Other revenues from contracts with customers | | 6,295 |
| | 5,892 |
|
Total revenues from contracts with customers | | $ | 335,402 |
| | $ | 289,573 |
|
(1) The FCA mechanism is an alternative revenue program in the Idaho jurisdiction and does not represent revenue from contracts with customers.
(2) As part of its January 30, 2009, general rate case order, the IPUC is allowing Idaho Power to recover a portion of the allowance for funds used during construction (AFUDC) on construction work in progress related to the Hells Canyon Complex (HCC) relicensing process, even though the relicensing process is not yet complete and the costs have not been moved to electric plant in service. Idaho Power is collecting $8.8 million annually in the Idaho jurisdiction but is deferring revenue recognition of the amounts collected until the license is issued and the accumulated license costs approved for recovery are placed in service.
Alternative Revenue Programs and Other Revenues
While revenues from contracts with customers make up most of Idaho Power’s revenues, the IPUC has authorized the use of an additional regulatory mechanism, which may increase or decrease tariff-based rates billed to customers. The Idaho FCA mechanism is described in "Note 3 - Regulatory Matters." The FCA mechanism revenues include only the initial recognition of FCA revenues when revenues meet the regulator-specified conditions for recognition. Revenue from contracts with customers excludes the portion of the tariff price representing FCA revenues that Idaho Power initially recorded in prior periods when revenues met regulator-specified conditions. When Idaho Power includes those amounts in the price of utility service billed to customers, Idaho Power records such amounts as recovery of the associated regulatory asset or liability and not as revenues.
The table below presents the FCA mechanism revenues and other revenues for the three months ended March 31, 2019 and 2018 (in thousands):
|
| | | | | | | | |
| | Three months ended March 31, |
| | 2019 | | 2018 |
Alternative revenue programs and other revenues: | | | | |
FCA mechanism revenues | | $ | 11,651 |
| | $ | 13,905 |
|
Derivative revenues | | 2,718 |
| | 5,983 |
|
Total alternative revenue programs and other revenues | | $ | 14,369 |
| | $ | 19,888 |
|
5. COMMON STOCK
IDACORP Common Stock
During the three months ended March 31, 2019, IDACORP granted 70,419 restricted stock unit awards to employees and issued 9,594 shares of common stock to directors, but made no original issuances of shares of common stock pursuant to the IDACORP, Inc. 2000 Long-Term Incentive and Compensation Plan. As directed by IDACORP, plan administrators of the IDACORP, Inc. Dividend Reinvestment and Stock Purchase Plan and Idaho Power Company Employee Savings Plan used 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 use original issuances of common stock under those plans.
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, 2019, the leverage ratios for IDACORP and Idaho Power were 44 percent and 46 percent, respectively. Based on these restrictions, IDACORP’s and Idaho Power’s dividends were limited to $1.4 billion and $1.2 billion, respectively, at March 31, 2019. 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 IDACORP and Idaho Power from any material subsidiary. At March 31, 2019, IDACORP and Idaho Power were in compliance with those financial covenants.
Idaho Power’s Revised 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, 2019, Idaho Power's common equity capital was 54 percent of its total adjusted capital. Further, Idaho Power must obtain approval from the OPUC before it can 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 (FPA) prohibits the payment of dividends from "capital accounts." The term "capital account" is undefined in the FPA 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.
6. 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, 2019 and 2018 (in thousands, except for per share amounts).
|
| | | | | | | | |
| | Three months ended March 31, |
| | 2019 | | 2018 |
Numerator: | | |
| | |
|
Net income attributable to IDACORP, Inc. | | $ | 42,686 |
| | $ | 36,142 |
|
Denominator: | | | | |
Weighted-average common shares outstanding - basic | | 50,509 |
| | 50,425 |
|
Effect of dilutive securities | | 9 |
| | 38 |
|
Weighted-average common shares outstanding - diluted | | 50,518 |
| | 50,463 |
|
Basic earnings per share | | $ | 0.85 |
| | $ | 0.72 |
|
Diluted earnings per share | | $ | 0.84 |
| | $ | 0.72 |
|
7. COMMITMENTS
Purchase Obligations
During the three months ended March 31, 2019, IDACORP's and Idaho Power's contractual obligations, outside the ordinary course of business, did not change materially from the amounts disclosed in the 2018 Annual Report, except that Idaho Power entered into new replacement contracts for four expiring power purchase agreements with hydroelectric PURPA-qualifying facilities, which increased Idaho Power's contractual purchase obligations by approximately $18 million over the 20-year terms of the contracts. Also, in March 2019, Idaho Power signed a 20-year power purchase agreement, pending regulatory approval, to buy the output from a 120 MW solar facility proposed to be constructed by a third party. The agreement would increase contractual obligations by $136 million over the 20-year term.
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 (WDEQ), was $58.3 million at March 31, 2019, representing IERCo's one-third share of BCC's total reclamation obligation of $175.0 million. BCC has a reclamation trust fund set aside specifically for the purpose of paying these reclamation costs. At March 31, 2019, the value of BCC's reclamation trust fund was $117.2 million. During the three months ended March 31, 2019, the reclamation trust fund made no distributions 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, and does, add a per-ton surcharge to coal sales, all of which are made to the Jim Bridger plant. 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, 2019, 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.
8. 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, some of which 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. 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, although there is no assurance that such recovery would be granted.
IDACORP and Idaho Power are parties to legal claims and legal and regulatory actions and proceedings in the ordinary course of business and, as noted above, record an accrual for associated loss contingencies when they are probable and reasonably estimable. In connection with its utility operations, Idaho Power is subject to claims by individuals, entities, and governmental agencies for damages for alleged personal injury, property damage, and economic losses relating to the company’s provision of electric service and the operation of its generation, transmission, and distribution facilities. Some of those claims relate to electrical contacts, service quality, property damage, and wildfires. In recent years, utilities in the western United States have
been subject to significant liability for personal injury, loss of life, property damage, trespass, and economic losses, and in some cases, punitive damages and criminal charges, associated with wildfires that originated from utility property, most commonly transmission and distribution lines. In recent years, Idaho Power has regularly received claims by both governmental agencies and private landowners for damages for fires allegedly originating from Idaho Power’s transmission and distribution system. As of the date of this report, the companies believe that resolution of existing claims will not have a material adverse effect on their respective consolidated financial statements. Idaho Power is also actively monitoring various pending environmental regulations and executive orders related to environmental matters 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.
9. BENEFIT PLANS
Idaho Power has a noncontributory defined benefit pension plan (pension plan) and two nonqualified defined benefit plans for certain senior management employees called the Security Plan for Senior Management Employees I and Security Plan for Senior Management Employees II (collectively, SMSP). Idaho Power also has a nonqualified defined benefit pension plan for directors that was frozen in 2002. Remaining vested benefits from that plan are included with the SMSP in the disclosures below. 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, 2019 and 2018 (in thousands).
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Pension Plan | | SMSP | | Postretirement Benefits | | Total |
|
| 2019 |
| 2018 |
| 2019 |
| 2018 |
| 2019 |
| 2018 | | 2019 | | 2018 |
Service cost |
| $ | 8,714 |
|
| $ | 9,743 |
|
| $ | (45 | ) |
| $ | (79 | ) |
| $ | 231 |
|
| $ | 284 |
| | $ | 8,900 |
| | $ | 9,948 |
|
Interest cost |
| 10,596 |
|
| 9,682 |
|
| 1,143 |
|
| 1,063 |
|
| 732 |
|
| 666 |
| | 12,471 |
| | 11,411 |
|
Expected return on plan assets |
| (12,124 | ) |
| (13,055 | ) |
| — |
|
| — |
|
| (553 | ) |
| (629 | ) | | (12,677 | ) | | (13,684 | ) |
Amortization of prior service cost |
| 1 |
|
| 1 |
|
| 24 |
|
| 24 |
|
| 12 |
|
| 12 |
| | 37 |
| | 37 |
|
Amortization of net loss |
| 3,480 |
|
| 3,394 |
|
| 633 |
|
| 947 |
|
| — |
|
| — |
| | 4,113 |
| | 4,341 |
|
Net periodic benefit cost |
| 10,667 |
|
| 9,765 |
|
| 1,755 |
|
| 1,955 |
|
| 422 |
|
| 333 |
| | 12,844 |
| | 12,053 |
|
Regulatory deferral of net periodic benefit cost(1) |
| (10,167 | ) |
| (9,307 | ) |
| — |
| | — |
| | — |
| | — |
| | (10,167 | ) | | (9,307 | ) |
Previously deferred pension costs recognized(1) | | 4,288 |
| | 4,288 |
| | — |
| | — |
| | — |
| | — |
| | 4,288 |
| | 4,288 |
|
Net periodic benefit cost recognized for financial reporting(1)(2) |
| $ | 4,788 |
|
| $ | 4,746 |
|
| $ | 1,755 |
|
| $ | 1,955 |
|
| $ | 422 |
|
| $ | 333 |
| | $ | 6,965 |
| | $ | 7,034 |
|
(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, the Idaho portion of net periodic benefit cost is recorded as a regulatory asset and is recognized in the income statement as those costs are recovered through rates.
(2) Of total net periodic benefit cost recognized for financial reporting, $4.2 million and $4.1 million, respectively, were recognized in "Other operations and maintenance" and $2.8 million and $2.9 million, respectively, were recognized in "Other expense, net" on the condensed consolidated statements of income of the companies for the three months ended March 31, 2019 and 2018.
Idaho Power has no minimum contribution requirement to its defined benefit pension plan in 2019. However, during the three months ended March 31, 2019, Idaho Power made $10 million of discretionary contributions to its defined benefit pension plan, in a continued effort to balance the regulatory collection of these expenditures with the amount and timing of contributions and to mitigate the cost of being in an underfunded position. The primary impact of pension contributions is on the timing of cash flows, as the timing of cost recovery lags behind contributions.
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.
10. 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, 2019 and 2018 (in thousands).
|
| | | | | | | | | | |
| | | Gain/(Loss) on Derivatives Recognized in Income(1) |
| | Location of Realized Gain/(Loss) on Derivatives Recognized in Income | | Three months ended March 31, |
| | | 2019 | | 2018 |
Financial swaps | | Operating revenues | | $ | (3,203 | ) | | $ | 239 |
|
Financial swaps | | Purchased power | | 743 |
| | (202 | ) |
Financial swaps | | Fuel expense | | 12,395 |
| | (688 | ) |
Financial swaps | | Other operations and maintenance | | — |
| | 7 |
|
Forward contracts | | Operating revenues | | 64 |
| | 2 |
|
Forward contracts | | Purchased power | | (64 | ) | | (13 | ) |
Forward contracts | | Fuel expense | | 416 |
| | 14 |
|
(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 operating revenues 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 11 - "Fair Value Measurements" for additional information concerning the determination of fair value for Idaho Power’s assets and liabilities from price risk management activities.
Credit Risk
At March 31, 2019, 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 Idaho Power 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, 2019, was $1.4 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, 2019, Idaho Power would have been required to pay or post collateral to its counterparties up to an additional $5.5 million to cover the open liability positions as well as completed transactions that have not yet been paid.
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, 2019, and December 31, 2018 (in thousands).
|
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Asset Derivatives | | Liability Derivatives |
| | Balance Sheet Location | | Gross Fair Value | | Amounts Offset | | Net Assets | | Gross Fair Value | | Amounts Offset | | Net Liabilities |
| | | |
March 31, 2019 | | | | | | | | | | | | | | |
Current: | | | | |
| | | | | | |
| | | | |
|
Financial swaps | | Other current assets | | $ | 6,767 |
| | $ | (2,143 | ) | (1) | $ | 4,624 |
| | $ | 204 |
| | $ | (204 | ) | | $ | — |
|
Financial swaps | | Other current liabilities | | 471 |
| | (471 | ) | | — |
| | 1,115 |
| | (471 | ) | | 644 |
|
Forward contracts | | Other current assets | | 195 |
| | — |
| | 195 |
| | — |
| | — |
| | — |
|
Long-term: | | | | |
| | | | | | | | | | |
Financial swaps | | Other assets | | 122 |
| | — |
| | 122 |
| | — |
| | — |
| | — |
|
Financial swaps | | Other liabilities | | 5 |
| | (5 | ) | | — |
| | 54 |
| | (5 | ) | | 49 |
|
Total | | | | $ | 7,560 |
| | $ | (2,619 | ) | | $ | 4,941 |
| | $ | 1,373 |
| | $ | (680 | ) | | $ | 693 |
|
| | | | | | | |
| | | | | | |
December 31, 2018 | | | | | | | |
|
| | | | | | |
Current: | | | | | | | | | | |
| | | | |
Financial swaps | | Other current assets | | $ | 4,639 |
| | $ | (984 | ) | (2) | $ | 3,655 |
| | $ | 938 |
| | $ | (938 | ) | | $ | — |
|
Financial swaps | | Other current liabilities | | — |
| | — |
| | — |
| | 806 |
| | — |
| | 806 |
|
Forward contracts | | Other current liabilities | | — |
| | — |
| | — |
| | 104 |
| | — |
| | 104 |
|
Long-term: | | | | |
| | | | | | |
| | | | |
Financial swaps | | Other assets | | — |
| | — |
| | — |
| | 64 |
| | — |
| | 64 |
|
Total | | | | $ | 4,639 |
| | $ | (984 | ) | | $ | 3,655 |
| | $ | 1,912 |
| | $ | (938 | ) | | $ | 974 |
|
(1) Current asset derivative amounts offset include $1.9 million of collateral payable for the period ending March 31, 2019.
(2) Current asset derivative amounts offset include $45 thousand of collateral payable for the period ending December 31, 2018.
The table below presents the volumes of derivative commodity forward contracts and swaps outstanding at March 31, 2019 and 2018 (in thousands of units).
|
| | | | | | | | |
| | | | March 31, |
Commodity | | Units | | 2019 | | 2018 |
Electricity purchases | | MWh | | 194 |
| | 393 |
|
Electricity sales | | MWh | | 116 |
| | 168 |
|
Natural gas purchases | | MMBtu | | 9,596 |
| | 8,920 |
|
Natural gas sales | | MMBtu | | 338 |
| | 211 |
|
Diesel purchases | | Gallons | | — |
| | 678 |
|
11. 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 have 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, 2019.
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, 2019, and December 31, 2018 (in thousands).
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | March 31, 2019 | | December 31, 2018 |
| | Level 1 | | Level 2 | | Level 3 | | Total | | Level 1 | | Level 2 | | Level 3 | | Total |
Assets: | |