Attached files

file filename
EX-95.1 - MINE SAFETY DISCLOSURES - IDACORP INCida93017ex951-minesafety.htm
EX-32.4 - CERTIFICATION OF IDAHO POWER COMPANY CHIEF FINANCIAL OFFICER PURSUANT TO 18 U.S. - IDACORP INCida93017ex324.htm
EX-32.3 - CERTIFICATION OF IDAHO POWER COMPANY CHIEF EXECUTIVE OFFICER PURSUANT TO 18 U.S. - IDACORP INCida93017ex323.htm
EX-32.2 - CERTIFICATION OF IDACORP, INC. CHIEF FINANCIAL OFFICER PURSUANT TO 18 U.S.C. - IDACORP INCida93017ex322.htm
EX-32.1 - CERTIFICATION OF IDACORP, INC. CHIEF EXECUTIVE OFFICER PURSUANT TO 18 U.S.C. - IDACORP INCida93017ex321.htm
EX-31.4 - CERTIFICATION OF IDAHO POWER COMPANY CHIEF FINANCIAL OFFICER PURSUANT TO SECTION - IDACORP INCida93017ex314.htm
EX-31.3 - CERTIFICATION OF IDAHO POWER COMPANY CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION - IDACORP INCida93017ex313.htm
EX-31.2 - CERTIFICATION OF IDACORP, INC. CHIEF FINANCIAL OFFICER PURSUANT TO 18 U.S.C - IDACORP INCida93017ex312.htm
EX-31.1 - CERTIFICATION OF IDACORP, INC. CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 302 - IDACORP INCida93017ex311.htm
EX-15.2 - IDAHO POWER LETTER RE: UNAUDITED INTERIM FINANCIAL INFORMATION - IDACORP INCida93017ex152.htm
EX-15.1 - IDACORP, INC. LETTER RE: UNAUDITED INTERIM FINANCIAL INFORMATION - IDACORP INCida93017ex151.htm
EX-12.2 - IDAHO POWER COMPANY COMPUTATION OF EARNINGS TO FIXED CHARGES - IDACORP INCida93017ex122.htm
EX-12.1 - IDACORP, INC. COMPUTATION OF EARNINGS TO FIXED CHARGES - IDACORP INCida93017ex121.htm
EX-10.1 - SECOND AMENDMENT TO THE IDAHO POWER COMPANY EMPLOYEE SAVINGS PLAN, EXECUTED OCTO - IDACORP INCida93017ex101.htm
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, 2017
 
 
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, 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 (check one):

IDACORP, Inc.:                                
Large accelerated filer X Accelerated filer __ Non-accelerated  filer __ (Do not check if a smaller reporting company)
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 __ (Do not check if a smaller reporting company)
Smaller reporting company X
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. __



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Table of Contents                        

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 27, 2017:     
IDACORP, Inc.:        50,393,038
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 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


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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
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
CPP
-
Clean Power Plan
CWA
 
Clean Water Act
EIS
-
Environmental Impact Statement
EPA
-
U.S. Environmental Protection Agency
ESA
-
Endangered Species Act
FASB
-
Financial Accounting Standards Board
FCA
-
Fixed Cost Adjustment
FERC
-
Federal Energy Regulatory Commission
FIP
-
Federal Implementation Plan
GHG NSPS
-
Greenhouse Gas New Source Performance Standards
HCC
-
Hells Canyon Complex
IDACORP
-
IDACORP, Inc., an Idaho corporation
IBLA
-
U.S. Department of Interior Board of Land Appeals
ICE
-
Intercontinental Exchange
Idaho Power
-
Idaho Power Company, an Idaho corporation
Idaho Rider
-
Idaho Energy Efficiency Rider
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
NYMEX
-
New York Mercantile Exchange
O&M
-
Operations and Maintenance
OATT
-
Open Access Transmission Tariff
OPUC
-
Public Utility Commission of Oregon
PCA
-
Idaho Power Cost Adjustment
PURPA
-
Public Utility Regulatory Policies Act of 1978
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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Table of Contents                        

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," "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, 2016, 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, the Federal Energy Regulatory Commission, and other regulators that impact Idaho Power's ability to recover costs and earn a return, including the impact of settlement stipulations;
the expense and risks associated with capital expenditures for infrastructure, and the timing and availability of cost recovery for such expenditures through customer rates;
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, 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, 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 self-generation or energy efficiency technologies that reduce Idaho Power's 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 resulting 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 at or caused by Idaho Power's facilities), explosions, and mechanical breakdowns that may occur while operating and maintaining Idaho Power's 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;
the increased power purchased 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 system may 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 in the financial markets, interest rate fluctuations,

5

Table of Contents                        

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, increase costs of borrowing, 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;
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, 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 operational changes through insurance or rates, or from third parties;
the failure of information systems or the failure to secure 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 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.


6

Table of Contents                        

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,
 
 
2017
 
2016
 
2017
 
2016
 
 
(in thousands, except per share amounts)
Operating Revenues:
 
 
 
 
 
 
 
 
Electric utility:
 
 
 
 
 
 
 
 
General business
 
$
373,569

 
$
341,825

 
$
938,802

 
$
885,486

Off-system sales
 
6,710

 
6,143

 
25,609

 
16,532

Other revenues
 
26,376

 
23,506

 
75,976

 
64,433

Total electric utility revenues
 
406,655

 
371,474

 
1,040,387

 
966,451

Other
 
1,669

 
571

 
3,487

 
1,986

Total operating revenues
 
408,324

 
372,045

 
1,043,874

 
968,437

Operating Expenses:
 
 
 
 
 
 
 
 
Electric utility:
 
 
 
 
 
 
 
 
Purchased power
 
75,653

 
74,448

 
186,275

 
170,675

Fuel expense
 
54,529

 
73,925

 
111,197

 
139,657

Power cost adjustment
 
10,979

 
(18,342
)
 
51,208

 
11,914

Other operations and maintenance
 
84,197

 
87,090

 
259,445

 
259,813

Energy efficiency programs
 
9,883

 
9,102

 
26,726

 
24,256

Depreciation
 
40,259

 
36,036

 
122,262

 
107,447

Taxes other than income taxes
 
8,614

 
8,287

 
26,134

 
25,228

Total electric utility expenses
 
284,114

 
270,546

 
783,247

 
738,990

Other
 
3,296

 
3,571

 
9,789

 
10,748

Total operating expenses
 
287,410

 
274,117

 
793,036

 
749,738

Operating Income
 
120,914

 
97,928

 
250,838

 
218,699

Allowance for Equity Funds Used During Construction
 
5,712

 
5,931

 
16,555

 
16,153

Earnings of Unconsolidated Equity-Method Investments
 
5,232

 
12,324

 
7,269

 
13,650

Other Income, Net
 
2,256

 
2,681

 
7,024

 
7,074

Interest Expense:
 
 
 
 
 
 
 
 
Interest on long-term debt
 
20,300

 
20,296

 
60,897

 
61,659

Other interest
 
2,827

 
2,605

 
8,298

 
7,587

Allowance for borrowed funds used during construction
 
(2,385
)
 
(2,589
)
 
(7,106
)
 
(7,226
)
Total interest expense, net
 
20,742

 
20,312

 
62,089

 
62,020

Income Before Income Taxes
 
113,372

 
98,552

 
219,597

 
193,556

Income Tax Expense
 
22,296

 
15,535

 
45,420

 
28,622

Net Income
 
91,076

 
83,017

 
174,177

 
164,934

Adjustment for (income) loss attributable to noncontrolling interests
 
(442
)
 
83

 
(610
)
 
141

Net Income Attributable to IDACORP, Inc.
 
$
90,634

 
$
83,100

 
$
173,567

 
$
165,075

Weighted Average Common Shares Outstanding - Basic
 
50,362

 
50,296

 
50,361

 
50,299

Weighted Average Common Shares Outstanding - Diluted
 
50,421

 
50,393

 
50,408

 
50,361

Earnings Per Share of Common Stock:
 
 
 
 
 
 
 
 
Earnings Attributable to IDACORP, Inc. - Basic
 
$
1.80

 
$
1.65

 
$
3.45

 
$
3.28

Earnings Attributable to IDACORP, Inc. - Diluted
 
$
1.80

 
$
1.65

 
$
3.44

 
$
3.28

Dividends Declared Per Share of Common Stock
 
$
0.55

 
$
0.51

 
$
1.65

 
$
1.53


The accompanying notes are an integral part of these statements.

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Table of Contents                        

IDACORP, Inc.
Condensed Consolidated Statements of Comprehensive Income
(unaudited)
 
 
 
Three months ended
September 30,
 
Nine months ended
September 30,
 
 
2017
 
2016
 
2017
 
2016
 
 
(in thousands)
 
 
 
 
 
 
 
 
 
Net Income
 
$
91,076

 
$
83,017

 
$
174,177

 
$
164,934

Other Comprehensive Income:
 
 
 
 
 
 
 
 
Unfunded pension liability adjustment, net of tax
  of $302, $362, $906 and $1,085
 
471

 
563

 
1,412

 
1,690

Total Comprehensive Income
 
91,547

 
83,580

 
175,589

 
166,624

Comprehensive (income) loss attributable to noncontrolling interests
 
(442
)
 
83

 
(610
)
 
141

Comprehensive Income Attributable to IDACORP, Inc.
 
$
91,105

 
$
83,663

 
$
174,979

 
$
166,765


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,
2017
 
December 31,
2016
 
 
(in thousands)
Assets
 
 
 
 
 
 
 
 
 
Current Assets:
 
 
 
 
Cash and cash equivalents
 
$
104,411

 
$
61,480

Receivables:
 
 
 
 
Customer (net of allowance of $1,195 and $968, respectively)
 
101,703

 
71,557

Other (net of allowance of $146 and $164, respectively)
 
5,399

 
15,280

Taxes receivable
 
4,648

 
12,781

Accrued unbilled revenues
 
59,697

 
80,738

Materials and supplies (at average cost)
 
58,472

 
57,858

Fuel stock (at average cost)
 
54,093

 
53,698

Prepayments
 
16,477

 
18,389

Current regulatory assets
 
52,927

 
62,570

Other
 
101

 
5,961

Total current assets
 
457,928

 
440,312

Investments
 
111,952

 
125,164

Property, Plant and Equipment:
 
 
 
 
Utility plant in service
 
5,840,848

 
5,732,044

Accumulated provision for depreciation
 
(2,086,119
)
 
(1,988,477
)
Utility plant in service - net
 
3,754,729

 
3,743,567

Construction work in progress
 
463,106

 
405,069

Utility plant held for future use
 
7,511

 
7,441

Other property, net of accumulated depreciation
 
15,597

 
15,922

Property, plant and equipment - net
 
4,240,943

 
4,171,999

Other Assets:
 
 
 
 
American Falls and Milner water rights
 
7,641

 
9,487

Company-owned life insurance
 
58,973

 
57,553

Regulatory assets
 
1,412,086

 
1,409,329

Long-term receivables (net of allowance of $402)
 
26,367

 
23,482

Other
 
51,293

 
52,571

Total other assets
 
1,556,360

 
1,552,422

Total
 
$
6,367,183

 
$
6,289,897


The accompanying notes are an integral part of these statements.

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IDACORP, Inc.
Condensed Consolidated Balance Sheets
(unaudited)
 
 
 
September 30,
2017
 
December 31,
2016
 
 
(in thousands)
Liabilities and Equity
 
 
 
 
 
 
 
 
 
Current Liabilities:
 
 
 
 
Current maturities of long-term debt
 
$

 
$
1,064

Notes payable
 
2,425

 
21,800

Accounts payable
 
72,153

 
106,194

Taxes accrued
 
57,902

 
11,348

Interest accrued
 
21,406

 
22,377

Accrued compensation
 
39,903

 
45,787

Current regulatory liabilities
 
2,296

 
9,944

Advances from customers
 
20,607

 
21,438

Other
 
9,100

 
9,763

Total current liabilities
 
225,792

 
249,715

Other Liabilities:
 
 
 
 
Deferred income taxes
 
1,241,091

 
1,244,250

Regulatory liabilities
 
466,162

 
436,845

Pension and other postretirement benefits
 
391,579

 
411,523

Other
 
44,651

 
45,084

Total other liabilities
 
2,143,483

 
2,137,702

Long-Term Debt
 
1,745,746

 
1,744,614

Commitments and Contingencies
 

 

Equity:
 
 
 
 
IDACORP, Inc. shareholders’ equity:
 
 
 
 
Common stock, no par value (120,000,000 shares authorized; 50,420,017 shares issued)
 
855,043

 
851,833

Retained earnings
 
1,413,387

 
1,323,198

Accumulated other comprehensive loss
 
(19,470
)
 
(20,882
)
Treasury stock (26,979 and 23,244 shares at cost, respectively)
 
(1,368
)
 
(243
)
Total IDACORP, Inc. shareholders’ equity
 
2,247,592

 
2,153,906

Noncontrolling interests
 
4,570

 
3,960

Total equity
 
2,252,162

 
2,157,866

Total
 
$
6,367,183

 
$
6,289,897

 
 
 
 
 
The accompanying notes are an integral part of these statements.


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Table of Contents                        

IDACORP, Inc.
Condensed Consolidated Statements of Cash Flows
(unaudited)
 
 
Nine months ended
September 30,
 
 
2017
 
2016
 
 
(in thousands)
Operating Activities:
 
 
 
 
Net income
 
$
174,177

 
$
164,934

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

 
 

Depreciation and amortization
 
125,051

 
110,161

Deferred income taxes and investment tax credits
 
(195
)
 
30,077

Changes in regulatory assets and liabilities
 
61,968

 
13,502

Pension and postretirement benefit plan expense
 
21,687

 
22,175

Contributions to pension and postretirement benefit plans
 
(45,158
)
 
(43,851
)
Earnings of unconsolidated equity-method investments
 
(7,269
)
 
(13,650
)
Distributions from unconsolidated equity-method investments
 
18,350

 
17,114

Allowance for equity funds used during construction
 
(16,555
)
 
(16,153
)
Other non-cash adjustments to net income, net
 
5,220

 
3,876

Change in:
 
 

 
 

Accounts receivable
 
(20,520
)
 
(12,435
)
Accounts payable and other accrued liabilities
 
(32,494
)
 
(10,033
)
Taxes accrued/receivable
 
54,687

 
8,490

Other current assets
 
18,736

 
7,343

Other current liabilities
 
(3,010
)
 
(5,451
)
Other assets
 
(5,357
)
 
(1,277
)
Other liabilities
 
(494
)
 
595

Net cash provided by operating activities
 
348,824

 
275,417

Investing Activities:
 
 

 
 

Additions to property, plant and equipment
 
(207,340
)
 
(199,966
)
Payments received from transmission project joint funding partners
 
5,934

 
6,853

Proceeds from the sale of emission allowances and renewable energy certificates
 
1,892

 
969

Purchase of available-for-sale securities
 
(3,248
)
 
(9,843
)
Proceeds from the sale of available-for-sale securities
 
3,755

 
14,453

Purchase of life insurance investment
 

 
(10,000
)
Other
 
183

 
(9
)
Net cash used in investing activities
 
(198,824
)
 
(197,543
)
Financing Activities:
 
 

 
 

Issuance of long-term debt
 

 
120,000

Retirement of long-term debt
 
(1,064
)
 
(101,064
)
Dividends on common stock
 
(83,441
)
 
(77,350
)
Net change in short-term borrowings
 
(19,375
)
 
(14,600
)
Acquisition of treasury stock
 
(3,189
)
 
(3,287
)
Make-whole premium on retirement of long-term debt
 

 
(13,895
)
Other
 

 
(1,684
)
Net cash used in financing activities
 
(107,069
)
 
(91,880
)
Net increase (decrease) in cash and cash equivalents
 
42,931

 
(14,006
)
Cash and cash equivalents at beginning of the period
 
61,480

 
114,802

Cash and cash equivalents at end of the period
 
$
104,411

 
$
100,796

Supplemental Disclosure of Cash Flow Information:
 
 

 
 

Cash paid during the period for:
 
 

 
 
Income taxes
 
$
1,702

 
$
2,187

Interest (net of amount capitalized)
 
$
60,257

 
$
60,224

Non-cash investing activities:
 
 
 
 
Additions to property, plant and equipment in accounts payable
 
$
23,502

 
$
21,583


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,
 
 
2017
 
2016
 
 
(in thousands)
Common Stock
 
 
 
 
Balance at beginning of period
 
$
851,833

 
$
849,112

Cumulative effect of change in accounting principle
 

 
234

Other
 
3,210

 
1,352

Balance at end of period
 
855,043

 
850,698

Retained Earnings
 
 
 
 
Balance at beginning of period
 
1,323,198

 
1,230,105

Cumulative effect of change in accounting principle
 

 
(234
)
Net income attributable to IDACORP, Inc.
 
173,567

 
165,075

Common stock dividends ($1.65 and $1.53 per share)
 
(83,378
)
 
(77,214
)
Balance at end of period
 
1,413,387

 
1,317,732

Accumulated Other Comprehensive (Loss) Income
 
 
 
 
Balance at beginning of period
 
(20,882
)
 
(21,276
)
Unfunded pension liability adjustment (net of tax)
 
1,412

 
1,690

Balance at end of period
 
(19,470
)
 
(19,586
)
Treasury Stock
 
 
 
 
Balance at beginning of period
 
(243
)
 
(57
)
Issued
 
2,063

 
3,143

Acquired
 
(3,188
)
 
(3,287
)
Balance at end of period
 
(1,368
)
 
(201
)
Total IDACORP, Inc. shareholders’ equity at end of period
 
2,247,592

 
2,148,643

Noncontrolling Interests
 
 
 
 
Balance at beginning of period
 
3,960

 
4,160

Net income (loss) attributable to noncontrolling interests
 
610

 
(141
)
Balance at end of period
 
4,570

 
4,019

Total equity at end of period
 
$
2,252,162

 
$
2,152,662


The accompanying notes are an integral part of these statements.

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Idaho Power Company
Condensed Consolidated Statements of Income
(unaudited)
 
 
 
Three months ended
September 30,
 
Nine months ended
September 30,
 
 
2017
 
2016
 
2017
 
2016
 
 
(in thousands)
Operating Revenues:
 
 
 
 
 
 
 
 
General business
 
$
373,569

 
$
341,825

 
$
938,802

 
$
885,486

Off-system sales
 
6,710

 
6,143

 
25,609

 
16,532

Other revenues
 
26,376

 
23,506

 
75,976

 
64,433

Total operating revenues
 
406,655

 
371,474

 
1,040,387

 
966,451

Operating Expenses:
 
 
 
 
 
 
 
 
Operation:
 
 
 
 
 
 
 
 
Purchased power
 
75,653

 
74,448

 
186,275

 
170,675

Fuel expense
 
54,529

 
73,925

 
111,197

 
139,657

Power cost adjustment
 
10,979

 
(18,342
)
 
51,208

 
11,914

Other operations and maintenance
 
84,197

 
87,090

 
259,445

 
259,813

Energy efficiency programs
 
9,883

 
9,102

 
26,726

 
24,256

Depreciation
 
40,259

 
36,036

 
122,262

 
107,447

Taxes other than income taxes
 
8,614

 
8,287

 
26,134

 
25,228

Total operating expenses
 
284,114

 
270,546

 
783,247

 
738,990

Income from Operations
 
122,541

 
100,928

 
257,140

 
227,461

Other Income (Expense):
 
 
 
 
 
 
 
 
Allowance for equity funds used during construction
 
5,712

 
5,931

 
16,555

 
16,153

Earnings of unconsolidated equity-method investments
 
4,151

 
11,121

 
5,068

 
11,528

Other expense, net
 
(408
)
 
(328
)
 
(1,178
)
 
(1,845
)
Total other income
 
9,455

 
16,724

 
20,445

 
25,836

Interest Charges:
 
 
 
 
 
 
 
 
Interest on long-term debt
 
20,300

 
20,296

 
60,897

 
61,659

Other interest
 
2,811

 
2,546

 
8,249

 
7,397

Allowance for borrowed funds used during construction
 
(2,385
)
 
(2,589
)
 
(7,106
)
 
(7,226
)
Total interest charges
 
20,726

 
20,253

 
62,040

 
61,830

Income Before Income Taxes
 
111,270

 
97,399

 
215,545

 
191,467

Income Tax Expense
 
22,941

 
17,370

 
46,353

 
31,097

Net Income
 
$
88,329

 
$
80,029

 
$
169,192

 
$
160,370


The accompanying notes are an integral part of these statements.

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Idaho Power Company
Condensed Consolidated Statements of Comprehensive Income
(unaudited)
 
 
 
Three months ended
September 30,
 
Nine months ended
September 30,
 
 
2017
 
2016
 
2017
 
2016
 
 
(in thousands)
 
 
 
 
 
 
 
 
 
Net Income
 
$
88,329

 
$
80,029

 
$
169,192

 
$
160,370

Other Comprehensive Income:
 
 
 
 
 
 
 
 
Unfunded pension liability adjustment, net of tax
  of $302, $362, $906 and $1,085
 
471

 
563

 
1,412

 
1,690

Total Comprehensive Income
 
$
88,800

 
$
80,592

 
$
170,604

 
$
162,060


The accompanying notes are an integral part of these statements.
 
 


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Idaho Power Company
Condensed Consolidated Balance Sheets
(unaudited)
 
 
 
September 30,
2017
 
December 31,
2016
 
 
(in thousands)
Assets
 
 
 
 
 
 
 
 
 
Electric Plant:
 
 
 
 
In service (at original cost)
 
$
5,840,848

 
$
5,732,044

Accumulated provision for depreciation
 
(2,086,119
)
 
(1,988,477
)
In service - net
 
3,754,729

 
3,743,567

Construction work in progress
 
463,106

 
405,069

Held for future use
 
7,511

 
7,441

Electric plant - net
 
4,225,346

 
4,156,077

Investments and Other Property
 
94,497

 
107,379

Current Assets:
 
 
 
 
Cash and cash equivalents
 
101,766

 
44,140

Receivables:
 
 
 
 
Customer (net of allowance of $1,195 and $968, respectively)
 
101,703

 
71,557

Other (net of allowance of $146 and $164, respectively)
 
5,294

 
7,555

Taxes receivable
 

 
23,334

Accrued unbilled revenues
 
59,697

 
80,738

Materials and supplies (at average cost)
 
58,472

 
57,858

Fuel stock (at average cost)
 
54,093

 
53,698

Prepayments
 
16,362

 
18,270

Current regulatory assets
 
52,927

 
62,570

Other
 
101

 
5,962

Total current assets
 
450,415

 
425,682

Deferred Debits:
 
 
 
 
American Falls and Milner water rights
 
7,641

 
9,487

Company-owned life insurance
 
58,973

 
57,553

Regulatory assets
 
1,412,086

 
1,409,329

Other
 
72,959

 
71,237

Total deferred debits
 
1,551,659

 
1,547,606

Total
 
$
6,321,917

 
$
6,236,744



The accompanying notes are an integral part of these statements.

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Idaho Power Company
Condensed Consolidated Balance Sheets
(unaudited)
 
 
 
September 30,
2017
 
December 31,
2016
 
 
(in thousands)
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
 
1,297,262

 
1,211,547

Accumulated other comprehensive loss
 
(19,470
)
 
(20,882
)
Total common stock equity
 
2,085,830

 
1,998,703

Long-term debt
 
1,745,746

 
1,744,614

Total capitalization
 
3,831,576

 
3,743,317

Current Liabilities:
 
 
 
 
Current maturities of long-term debt
 

 
1,064

Notes payable
 

 
21,800

Accounts payable
 
71,951

 
105,846

Accounts payable to affiliates
 
48,329

 
1,056

Taxes accrued
 
23,981

 
11,348

Interest accrued
 
21,406

 
22,377

Accrued compensation
 
39,744

 
45,622

Current regulatory liabilities
 
2,296

 
9,944

Advances from customers
 
20,607

 
21,438

Other
 
8,568

 
9,103

Total current liabilities
 
236,882

 
249,598

Deferred Credits:
 
 
 
 
Deferred income taxes
 
1,351,966

 
1,351,415

Regulatory liabilities
 
466,162

 
436,845

Pension and other postretirement benefits
 
391,579

 
411,523

Other
 
43,752

 
44,046

Total deferred credits
 
2,253,459

 
2,243,829

 
 
 
 
 
Commitments and Contingencies
 

 

 
 
 
 
 
Total
 
$
6,321,917

 
$
6,236,744

 
 
 
 
 
The accompanying notes are an integral part of these statements.

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Idaho Power Company
Condensed Consolidated Statements of Cash Flows
(unaudited)
 
 
Nine months ended
September 30,
 
 
2017
 
2016
 
 
(in thousands)
Operating Activities:
 
 
 
 
Net income
 
$
169,192

 
$
160,370

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

 
 

Depreciation and amortization
 
124,599

 
109,704

Deferred income taxes and investment tax credits
 
1,972

 
12,679

Changes in regulatory assets and liabilities
 
61,965

 
13,502

Pension and postretirement benefit plan expense
 
21,704

 
22,191

Contributions to pension and postretirement benefit plans
 
(45,174
)
 
(43,867
)
Earnings of unconsolidated equity-method investments
 
(5,068
)
 
(11,528
)
Distributions from unconsolidated equity-method investments
 
17,500

 
16,264

Allowance for equity funds used during construction
 
(16,555
)
 
(16,153
)
Other non-cash adjustments to net income, net
 
12

 
(571
)
Change in:
 
 

 
 

Accounts receivable
 
(27,369
)
 
(12,319
)
Accounts payable
 
14,155

 
(10,016
)
Taxes accrued/receivable
 
35,967

 
8,172

Other current assets
 
18,732

 
7,326

Other current liabilities
 
(3,004
)
 
(5,451
)
Other assets
 
(5,358
)
 
(1,277
)
Other liabilities
 
(354
)
 
789

Net cash provided by operating activities
 
362,916

 
249,815

Investing Activities:
 
 

 
 

Additions to utility plant
 
(207,327
)
 
(199,964
)
Payments received from transmission project joint funding partners
 
5,934

 
6,853

Proceeds from the sale of emission allowances and renewable energy certificates
 
1,892

 
969

Purchase of available-for-sale securities
 
(3,248
)
 
(9,843
)
Proceeds from the sale of available-for-sale securities
 
3,755

 
14,453

Purchase of life insurance investment
 

 
(10,000
)
Other
 
46

 
(108
)
Net cash used in investing activities
 
(198,948
)
 
(197,640
)
Financing Activities:
 
 

 
 

Issuance of long-term debt
 

 
120,000

Retirement of long-term debt
 
(1,064
)
 
(101,064
)
Dividends on common stock
 
(83,478
)
 
(77,365
)
Net change in short term borrowings
 
(21,800
)
 

Make-whole premium on retirement of long-term debt
 

 
(13,895
)
Other
 

 
(1,671
)
Net cash used in financing activities
 
(106,342
)
 
(73,995
)
Net increase (decrease) in cash and cash equivalents
 
57,626

 
(21,820
)
Cash and cash equivalents at beginning of the period
 
44,140

 
110,756

Cash and cash equivalents at end of the period
 
$
101,766

 
$
88,936

Supplemental Disclosure of Cash Flow Information:
 
 

 
 

Cash (received from) paid to IDACORP related to income taxes
 
$
(27,556
)
 
$
19,796

Cash paid for interest (net of amount capitalized)
 
$
60,208

 
$
60,034

Non-cash investing activities:
 
 
 
 
Additions to property, plant and equipment in accounts payable
 
$
23,502

 
$
21,583


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 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 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, 2017, consolidated results of operations for the three and nine months ended September 30, 2017 and 2016, and consolidated cash flows for the nine months ended September 30, 2017 and 2016. 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, 2016. 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

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Table of Contents                        

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.

Reclassifications
 
In these consolidated financial statements, certain immaterial amounts in prior periods' footnotes are reclassified to conform with the current period presentation.

New and Recently Adopted Accounting Pronouncements

Recent Accounting Pronouncements Not Yet Adopted

In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers (Topic 606). ASU 2014-09 is intended to enable users of financial statements to better understand and consistently analyze an entity's revenue across industries, transactions, and geographies. Under the ASU, recognition of revenue occurs when a customer obtains control of promised goods or services. In addition, the ASU requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The FASB amended certain aspects of ASU 2014-09 to clarify the implementation guidance, including clarifications related to principal versus agent considerations, licensing and identifying performance obligations, narrow scope improvements, and practical expedients. The companies have assessed the impacts of ASU 2014-09 on their financial statements and do not expect the new guidance to affect the timing and amount of revenue recognized. However, the presentation and disclosure requirements of the standard will result in a change in the presentation of revenue on the companies' consolidated statements of income as well as expanded disclosures around the disaggregation of revenue. The guidance in ASU 2014-09 is effective for interim and annual reporting periods beginning after December 15, 2017. The guidance permits two implementation approaches, one requiring retrospective application of the new standard with restatement of prior years (full retrospective approach) and the other requiring prospective application of the new standard including a cumulative-effect adjustment with disclosure of results under previous standards (modified-retrospective approach). IDACORP and Idaho Power plan to adopt ASU 2014-09 on January 1, 2018, using the modified-retrospective approach.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), intended to improve financial reporting on leasing transactions. The ASU significantly changes the accounting model used by lessees to account for leases, requiring that all material leases be presented on the balance sheet. Under the current model, some leases are classified as capital leases and recorded on the balance sheet while other leases are classified as operating leases and are not recognized on the balance sheet. The new standard is effective for interim and annual reporting periods beginning after December 15, 2018, with early adoption permitted. The standard must be adopted using a modified retrospective approach. IDACORP and Idaho Power are evaluating the impact of ASU 2016-02 on their financial statements. Specifically, the companies are considering whether the new guidance will affect their accounting for purchase power agreements, easements and rights-of-way, utility pole attachments, and other utility industry-related arrangements. At this time, the companies do not know, and cannot reasonably estimate, the dollar impact of the adoption.

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230), which amends ASC 230 to clarify guidance on the classification of certain cash receipts and payments in the statement of cash flows. The FASB issued the ASU with the intent of reducing diversity in practice with respect to eight types of cash flows. The companies expect the ASU to affect the classification of proceeds from the settlement of corporate-owned life insurance policies and related costs, which will be classified as investing activities under the new guidance. The companies already present debt prepayment and extinguishment costs, proceeds from the settlement of insurance claims (other than corporate-owned life insurance), and distributions received from equity-method investments in accordance with the new guidance. ASU 2016-15 is effective for interim and annual reporting periods beginning after December 15, 2017. The standard must be adopted retrospectively to all periods presented, unless impracticable to do so. At this time, IDACORP and Idaho Power do not believe the adoption will have a material impact on their financial statements.


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Table of Contents                        

In March 2017, the FASB issued ASU 2017-07, Compensation -- Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost, which requires employers to disaggregate the service cost component from other components of net periodic benefit costs and to disclose the amounts of net periodic benefit costs that are included in each income statement line item. The standard requires employers to present the service cost component in the same line item as other compensation costs and to present the other components of net periodic benefit costs (which include interest costs, expected return on plan assets, amortization of prior service cost or credits and actuarial gains and losses) separately and outside a subtotal of operating income. In addition, only the service cost component is eligible for capitalization. Idaho Power currently capitalizes amounts of pension or postretirement costs that are insignificant to the consolidated financial statements. The amendments in ASU 2017-07 are effective for interim and annual reporting periods beginning after December 15, 2017. Entities must use (1) a retrospective transition method to adopt the requirement for separate presentation in the income statement of service costs and other components and (2) a prospective transition method to adopt the requirement to limit the capitalization of benefit costs to the service cost component. IDACORP and Idaho Power are evaluating the impact of ASU 2017-07 on their 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 nine months ended September 30 (in thousands): 
 
 
IDACORP
 
Idaho Power
 
 
2017
 
2016
 
2017
 
2016
Income tax at statutory rates (federal and state)
 
$
85,624

 
$
75,736

 
$
84,278

 
$
74,864

Additional accumulated deferred investment tax credits (ADITC) amortization
 

 
(1,500
)
 

 
(1,500
)
First mortgage bond redemption costs
 

 
(5,583
)
 

 
(5,583
)
Share-based compensation
 
(1,587
)
 
(1,754
)
 
(1,558
)
 
(1,720
)
Other(1)
 
(38,617
)
 
(38,277
)
 
(36,367
)
 
(34,964
)
Income tax expense
 
$
45,420

 
$
28,622

 
$
46,353

 
$
31,097

Effective tax rate
 
20.7
%
 
14.8
%
 
21.5
%
 
16.2
%
(1) "Other" is primarily comprised of the net tax effect of Idaho Power's regulatory flow-through tax adjustments. These adjustments 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, 2016.

The increases in income tax expense for the nine months ended September 30, 2017, compared with the same period in 2016, were primarily due to greater pre-tax income, the flow-through income tax benefit related to the tax deduction for bond redemption costs incurred in the second quarter of 2016, and tax benefits from distributions from fully-amortized affordable housing investments that were recorded in the third quarter of 2016. On a net basis, Idaho Power’s estimate of its annual 2017 regulatory flow-through tax adjustments is comparable to 2016.

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.


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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. In June 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. In September 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.

In March 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 Idaho power cost adjustment (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 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 record additional ADITC amortization up to $25 million to help achieve a 9.5 percent Idaho ROE for that year, and may record additional ADITC amortization up to a total of $45 million 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 PCA 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 PCA, 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 amortization contemplated by the settlement stipulation has been recorded 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, prorated for intra-year rate changes.

Under the October 2014 settlement stipulation, Idaho Power recorded no additional ADITC amortization during the first nine months of 2017, based on Idaho Power's estimate of Idaho ROE for the full-year 2017. During the first nine months of 2016, Idaho Power recorded $1.5 million of additional ADITC amortization, which was reversed later in 2016 as actual financial results exceeded Idaho Power's early estimates.

Valmy Rate Base Adjustment Settlement Stipulations

In May 2017, the IPUC approved a settlement stipulation allowing accelerated depreciation and cost recovery for Idaho Power’s jointly-owned North Valmy coal-fired power plant (Valmy Plant). The settlement stipulation provides for an increase in

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Idaho jurisdictional revenues of $13.3 million per year, and (1) levelized collections and associated cost recovery through December 2028, (2) accelerated depreciation on unit 1 through 2019 and unit 2 through 2025, (3) Idaho Power to use prudent and commercially reasonable efforts to end its participation in the operation of unit 1 by the end of 2019 and unit 2 by the end of 2025, and (4) a filing no later than 2020 that would include actual and planned incremental investments in unit 2, including updated financial analysis regarding the lowest costs options for unit 2. The costs intended to be recovered by the increased revenue requirement include current investments as of May 31, 2017, in both units, forecasted unit 1 investments from 2017 through 2019, and forecasted decommissioning costs for unit 1 and unit 2, offset by forecasted operation and maintenance costs savings. The settlement stipulation also provides for the regulatory deferral of the difference between actual revenue requirements and levelized collections, and provides for the regulatory deferral of the difference between actual costs incurred (including accelerated depreciation expense on unit 1 through 2019 and unit 2 through 2025) compared with costs permitted to be recovered during the cost recovery period specified in the settlement stipulation (including depreciation expense through 2028). If actual costs incurred differ from forecasted amounts included in the settlement stipulation, collection or refund of any differences would be subject to regulatory approval.

In June 2017, the OPUC also approved a settlement stipulation allowing for accelerated depreciation of units 1 and 2 through December 31, 2025, cost recovery of incremental Valmy Plant investments through May 31, 2017, and forecasted decommissioning costs. The settlement stipulation provides for an increase in the Oregon jurisdictional revenue requirement of $1.1 million, effective July 1, 2017, with yearly adjustments to the level of decommissioning cost recovery, if warranted, until decommissioning activities are concluded.

For both the three and nine month periods ended September 30, 2017, the settlement stipulations increased general business revenue collections, general business revenue accruals, net depreciation expense, and income tax expense, including plant-related flow-through tax adjustments. Idaho Power expects the ongoing annual benefit to net income from the Valmy Plant settlement stipulations to decline slightly each year through 2028, primarily due to the annual decline in Valmy Plant-related rate base, which is expected to be fully depreciated by December 31, 2028. Compared with Idaho Power’s estimate of what ongoing net income would have been without the settlement stipulations, the settlement stipulations increased after-tax net income for the first nine months of 2017 by $3.8 million, of which $1.3 million was recorded during the third quarter of 2017.

Depreciation Rate Settlement Stipulations

In May 2017, the IPUC and OPUC approved settlement stipulations related to revised depreciation rates for Idaho Power's electric plant in service other than the Valmy Plant, and adjusted base rates in Oregon to reflect the revised depreciation rates applied to electric plant-in-service based on balances from the most recent general rate case. These settlement stipulations provided for new depreciation rates to go into effect on June 1, 2017, with no significant resulting increase in revenue.

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 off-system 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.

On May 31, 2017, the IPUC issued an order approving a $10.6 million net increase in PCA rates, effective for the 2017-2018 PCA collection period from June 1, 2017, to May 31, 2018. The net increase in PCA rates was primarily due to expected higher power supply costs resulting from new PURPA power purchase agreements and higher coal-fired generation costs, combined with the effect of lower-than-expected actual hydroelectric generation for the 2016-2017 PCA year.  The net increase includes an offsetting $13.0 million refund of previously collected Idaho energy efficiency rider funds. Previously, in May 2016, the IPUC issued an order approving a $17.3 million net increase in PCA rates, effective for the 2016-2017 PCA collection period from June 1, 2016, to May 31, 2017. The net increase in PCA rates included the application of (a) a customer rate credit of $3.2 million for sharing with customers for the year 2015 pursuant to the terms of the October 2014 settlement stipulation described above and (b) a $4.0 million reduction due to the transfer of Idaho energy efficiency rider funds.


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Idaho Fixed Cost Adjustment Mechanism

The Idaho jurisdiction fixed cost adjustment (FCA) mechanism 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 instead linking it to a set amount per customer. The FCA mechanism is adjusted each year to collect, or refund, the difference between the authorized fixed-cost recovery amount and the actual fixed costs recovered by Idaho Power during the year. On May 31, 2017, the IPUC issued an order approving Idaho Power's application requesting an increase of $6.9 million in the FCA from $28.1 million to $35.0 million, with new requested rates effective for the period from June 1, 2017, to May 31, 2018. Previously in May 2016, the IPUC issued an order approving Idaho Power's application requesting an increase of $11.2 million in the FCA from $16.9 million to $28.1 million, with new rates effective for the period from June 1, 2016, to May 31, 2017.

4. 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, 2016. At September 30, 2017, no loans were outstanding under either IDACORP's or Idaho Power's credit facilities. At September 30, 2017, 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) and interest rates of IDACORP’s and Idaho Power's short-term borrowings were as follows at September 30, 2017, and December 31, 2016:
 
 
September 30, 2017
 
December 31, 2016
 
 
IDACORP
 
Idaho Power
 
Total
 
IDACORP
 
Idaho Power
 
Total
Commercial paper outstanding
 
$
2,425

 
$

 
$
2,425

 
$

 
$
21,800

 
$
21,800

Weighted-average annual interest rate
 
1.54
%
 
%
 
1.54
%
 
%
 
1.13
%
 
1.13
%

5. COMMON STOCK
 
IDACORP Common Stock
 
During the nine months ended September 30, 2017, IDACORP granted 72,397 restricted stock unit awards to employees and 12,050 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 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 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 Policy and 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, 2017, 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 $1.3 billion and $1.1 billion, respectively, at September 30, 2017. 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, 2017, 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

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IDACORP that will reduce Idaho Power’s common equity capital below 35 percent of its total adjusted capital without IPUC approval. At September 30, 2017, Idaho Power's common equity capital was 54 percent of its total adjusted capital. Further, Idaho Power must obtain approval of 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 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.
 
6. 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, 2017 and 2016 (in thousands, except for per share amounts).
 
 
Three months ended
September 30,
 
Nine months ended
September 30,
 
 
2017
 
2016
 
2017
 
2016
Numerator:
 
 

 
 

 
 

 
 

Net income attributable to IDACORP, Inc.
 
$
90,634

 
$
83,100

 
$
173,567

 
$
165,075

Denominator:
 
 

 
 

 
 
 
 
Weighted-average common shares outstanding - basic
 
50,362

 
50,296

 
50,361

 
50,299

Effect of dilutive securities
 
59

 
97

 
47

 
62

Weighted-average common shares outstanding - diluted
 
50,421

 
50,393

 
50,408

 
50,361

Basic earnings per share
 
$
1.80

 
$
1.65

 
$
3.45

 
$
3.28

Diluted earnings per share
 
$
1.80

 
$
1.65

 
$
3.44

 
$
3.28


7. 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, 2017, except that Idaho Power entered into agreements with solar, biomass, and hydroelectric PURPA-qualifying facilities which increased contractual payment obligations by approximately $85 million over the 20-year terms of the contracts.

Guarantees
 
Through a self-bonding mechanism, Idaho Power guarantees its portion of reclamation activities and obligations at BCC, of which IERCo owns a one-third interest. This guarantee, which is renewed annually with the Wyoming Department of Environmental Quality, was $57 million at September 30, 2017, 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, 2017, the total value of BCC's reclamation trust fund was $97 million. During the nine months ended September 30, 2017, 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

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experience and the evaluation of the specific indemnities. As of September 30, 2017, 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.

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. 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 and the recently issued 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 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, 2017 and 2016 (in thousands).

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Pension Plan
 
SMSP
 
Postretirement
Benefits
 

2017

2016

2017

2016

2017

2016
Service cost

$
8,436


$
8,004


$
189


$
307


$
244


$
279

Interest cost

9,739


9,453


1,079


1,069


695


692

Expected return on plan assets

(11,285
)

(10,519
)





(576
)

(619
)
Amortization of prior service cost

7


15


31


42


11


7

Amortization of net loss

3,298


3,332


742


883





Net periodic benefit cost

10,195


10,285


2,041


2,301


374


359

Regulatory deferral of net periodic benefit cost(1)

(9,708
)

(9,826
)


 

 

 

Previously deferred pension costs recognized(1)
 
4,288

 
4,288

 

 

 

 

Net periodic benefit cost recognized for financial reporting(1