IDACORP INC - FORM 10-Q

Attached files

file	filename
EX-95.1 - MINE SAFETY DISCLOSURES - IDACORP INC	ida33118ex951-minesafety.htm
EX-32.4 - CERTIFICATION OF IDAHO POWER COMPANY CHIEF FINANCIAL OFFICER PURSUANT TO 18 U.S. - IDACORP INC	ida33118ex324.htm
EX-32.3 - CERTIFICATION OF IDAHO POWER COMPANY CHIEF EXECUTIVE OFFICER PURSUANT TO 18 U.S. - IDACORP INC	ida33118ex323.htm
EX-32.2 - CERTIFICATION OF IDACORP, INC. CHIEF FINANCIAL OFFICER PURSUANT TO 18 U.S.C. - IDACORP INC	ida33118ex322.htm
EX-32.1 - CERTIFICATION OF IDACORP, INC. CHIEF EXECUTIVE OFFICER PURSUANT TO 18 U.S.C. - IDACORP INC	ida33118ex321.htm
EX-31.4 - CERTIFICATION OF IDAHO POWER COMPANY CHIEF FINANCIAL OFFICER PURSUANT TO 302 - IDACORP INC	ida33118ex314.htm
EX-31.3 - CERTIFICATION OF IDAHO POWER COMPANY CHIEF EXECUTIVE OFFICER PURSUANT TO 302 - IDACORP INC	ida33118ex313.htm
EX-31.2 - CERTIFICATION OF IDACORP, INC. CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 302 - IDACORP INC	ida33118ex312.htm
EX-31.1 - CERTIFICATION OF IDACORP, INC. CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 302 - IDACORP INC	ida33118ex311.htm
EX-15.2 - IDAHO POWER LETTER RE: UNAUDITED INTERIM FINANCIAL INFORMATION - IDACORP INC	ida33118ex152.htm
EX-15.1 - IDACORP, INC. LETTER RE: UNAUDITED INTERIM FINANCIAL INFORMATION - IDACORP INC	ida33118ex151.htm
EX-12.2 - IDAHO POWER COMPANY COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES - IDACORP INC	ida33118ex122.htm
EX-12.1 - IDACORP, INC. COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES - IDACORP INC	ida33118ex121.htm
EX-10.4 - THIRD AMENDMENT TO THE IDAHO POWER COMPANY EMPLOYEE SAVINGS PLAN - IDACORP INC	ida33118ex104.htm

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)



X	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
	EXCHANGE ACT OF 1934
	For the quarterly period ended March 31, 2018
	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 X (Do not check if a smaller reporting company)

Smaller reporting company __

Emerging growth company __

Act. __

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Indicate by check mark whether the registrants are shell companies (as defined in Rule 12b-2 of the Exchange Act).

IDACORP, Inc.: Yes __ No X Idaho Power Company: Yes __ No X

Number of shares of common stock outstanding as of April 27, 2018:

IDACORP, Inc.: 50,391,950

Idaho Power Company: 39,150,812, all held by IDACORP, Inc.

This combined Form 10-Q represents separate filings by IDACORP, Inc. and Idaho Power Company. Information contained herein relating to an individual registrant is filed by that registrant on its own behalf. Idaho Power Company makes no representations as to the information relating to IDACORP, Inc.’s other operations.

Idaho Power Company meets the conditions set forth in General Instruction (H)(1)(a) and (b) of Form 10-Q and is therefore filing this report on Form 10-Q with the reduced disclosure format.

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TABLE OF CONTENTS
				Page
Commonly Used Terms				4
Cautionary Note Regarding Forward-Looking Statements				5

Part I. Financial Information

	Item 1. Financial Statements (unaudited)
		IDACORP, Inc.:
			Condensed Consolidated Statements of Income	7
			Condensed Consolidated Statements of Comprehensive Income	8
			Condensed Consolidated Balance Sheets	9
			Condensed Consolidated Statements of Cash Flows	11
			Condensed Consolidated Statements of Equity	12
		Idaho Power Company:
			Condensed Consolidated Statements of Income	13
			Condensed Consolidated Statements of Comprehensive Income	14
			Condensed Consolidated Balance Sheets	15
			Condensed Consolidated Statements of Cash Flows	17
		Notes to Condensed Consolidated Financial Statements		18
		Reports of Independent Registered Public Accounting Firm		36
	Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations			38
	Item 3. Quantitative and Qualitative Disclosures About Market Risk			58
	Item 4. Controls and Procedures			60

Part II. Other Information

	Item 1. Legal Proceedings			61
	Item 1A. Risk Factors			61
	Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			61
	Item 3. Defaults Upon Senior Securities			61
	Item 4. Mine Safety Disclosures			61
	Item 5. Other Information			61
	Item 6. Exhibits			62

Signatures				63

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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
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 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

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

In addition to the historical information contained in this report, this report contains (and oral communications made by IDACORP, Inc. (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, 2017, 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, interest rates, supply costs, population growth or decline in the service area, 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, 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 or energy efficiency technologies that reduce Idaho Power's sale of electric power;


•	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 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 purchased power costs and operational challenges associated with purchasing and integrating intermittent renewable energy sources into Idaho Power's resource portfolio;

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•	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, 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;


•	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 or regulations, security breaches, or the direct or indirect effect on the companies' business, operations or reputation resulting from cyber-attacks or related litigation, 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.

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PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

IDACORP, Inc.

Condensed Consolidated Statements of Income

(unaudited)



	Three months ended March 31,
	2018			2017
	(in thousands, except per share amounts)
Operating Revenues:
Electric utility revenues	$	309,461		$	301,964
Other	646			580
Total operating revenues	310,107			302,544

Operating Expenses:
Electric utility:
Purchased power	61,928			49,116
Fuel expense	27,735			36,252
Power cost adjustment	25,538			23,487
Other operations and maintenance	86,198			86,991
Energy efficiency programs	7,597			6,327
Depreciation	40,068			36,763
Taxes other than income taxes	9,277			8,678
Total electric utility expenses	258,341			247,614
Other	1,177			1,303
Total operating expenses	259,518			248,917

Operating Income	50,589			53,627

Allowance for Equity Funds Used During Construction	6,033			5,232

Earnings of Equity-Method Investments	4,015			1,445

Other Expense, Net	(459		)	(415		)

Interest Expense:
Interest on long-term debt	20,688			20,298
Other interest	2,958			2,714
Allowance for borrowed funds used during construction	(2,473		)	(2,312		)
Total interest expense, net	21,173			20,700

Income Before Income Taxes	39,005			39,189

Income Tax Expense	2,894			6,183

Net Income	36,111			33,006
Adjustment for loss attributable to noncontrolling interests	31			96
Net Income Attributable to IDACORP, Inc.	$	36,142		$	33,102
Weighted Average Common Shares Outstanding - Basic	50,425			50,356
Weighted Average Common Shares Outstanding - Diluted	50,463			50,397
Earnings Per Share of Common Stock:
Earnings Attributable to IDACORP, Inc. - Basic	$	0.72		$	0.66
Earnings Attributable to IDACORP, Inc. - Diluted	$	0.72		$	0.66
Dividends Declared Per Share of Common Stock	$	0.59		$	0.55

The accompanying notes are an integral part of these statements.

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IDACORP, Inc.

Condensed Consolidated Statements of Comprehensive Income

(unaudited)



	Three months ended March 31,
	2018		2017
	(in thousands)

Net Income	$	36,111	$	33,006
Other Comprehensive Income:
Unfunded pension liability adjustment, net of tax of $250 and $302	721		471
Total Comprehensive Income	36,832		33,477
Comprehensive loss attributable to noncontrolling interests	31		96
Comprehensive Income Attributable to IDACORP, Inc.	$	36,863	$	33,573

The accompanying notes are an integral part of these statements.

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IDACORP, Inc.

Condensed Consolidated Balance Sheets

(unaudited)



	March 31, 2018			December 31, 2017
	(in thousands)
Assets

Current Assets:
Cash and cash equivalents	$	307,277		$	76,649
Receivables:
Customer (net of allowance of $2,318 and $2,013 respectively)	84,000			75,249
Other (net of allowance of $177 and $180, respectively)	6,983			30,438
Taxes receivable	2,944			8,147
Accrued unbilled revenues	57,786			75,120
Materials and supplies (at average cost)	58,346			55,745
Fuel stock (at average cost)	63,321			56,638
Prepayments	18,666			16,984
Current regulatory assets	38,498			48,613
Other	83			18
Total current assets	637,904			443,601
Investments	109,990			115,698
Property, Plant and Equipment:
Utility plant in service	5,934,476			5,906,162
Accumulated provision for depreciation	(2,134,871		)	(2,098,274		)
Utility plant in service - net	3,799,605			3,807,888
Construction work in progress	477,635			452,424
Utility plant held for future use	8,049			8,075
Other property, net of accumulated depreciation	15,382			15,488
Property, plant and equipment - net	4,300,671			4,283,875
Other Assets:
Company-owned life insurance	59,901			59,323
Regulatory assets	1,095,354			1,083,483
Other	57,858			59,425
Total other assets	1,213,113			1,202,231
Total	$	6,261,678		$	6,045,405

The accompanying notes are an integral part of these statements.

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IDACORP, Inc.

Condensed Consolidated Balance Sheets

(unaudited)



	March 31, 2018			December 31, 2017
	(in thousands)
Liabilities and Equity

Current Liabilities:
Current maturities of long-term debt	$	130,000		$	—
Accounts payable	68,880			90,277
Taxes accrued	21,098			11,075
Interest accrued	21,820			22,379
Accrued compensation	32,395			47,018
Current regulatory liabilities	22,803			1,404
Advances from customers	23,541			18,414
Other	11,300			10,182
Total current liabilities	331,837			200,749
Other Liabilities:
Deferred income taxes	647,437			660,940
Regulatory liabilities	708,090			698,044
Pension and other postretirement benefits	434,533			438,869
Other	44,339			44,566
Total other liabilities	1,834,399			1,842,419
Long-Term Debt	1,833,576			1,746,123
Commitments and Contingencies
Equity:
IDACORP, Inc. shareholders’ equity:
Common stock, no par value (120,000 shares authorized; 50,420 shares issued)	857,533			857,207
Retained earnings	1,432,584			1,426,528
Accumulated other comprehensive loss	(30,243		)	(30,964		)
Treasury stock (28 shares, at cost)	(2,706		)	(1,386		)
Total IDACORP, Inc. shareholders’ equity	2,257,168			2,251,385
Noncontrolling interests	4,698			4,729
Total equity	2,261,866			2,256,114
Total	$	6,261,678		$	6,045,405

The accompanying notes are an integral part of these statements.

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IDACORP, Inc.

Condensed Consolidated Statements of Cash Flows

(unaudited)



	Three months ended March 31,
	2018			2017
	(in thousands)
Operating Activities:
Net income	$	36,111		$	33,006
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	41,028			37,728
Deferred income taxes and investment tax credits	(4,907		)	4,394
Changes in regulatory assets and liabilities	30,000			33,049
Pension and postretirement benefit plan expense	7,034			7,340
Contributions to pension and postretirement benefit plans	(11,852		)	(2,105		)
Earnings of equity-method investments	(4,015		)	(1,445		)
Distributions from equity-method investments	8,000			10,600
Allowance for equity funds used during construction	(6,033		)	(5,232		)
Other non-cash adjustments to net income, net	2,687			2,921
Change in:
Accounts receivable	(4,922		)	494
Accounts payable and other accrued liabilities	(25,656		)	(48,935		)
Taxes accrued/receivable	15,226			8,264
Other current assets	6,309			29,952
Other current liabilities	5,156			6,447
Other assets	(1,933		)	(2,043		)
Other liabilities	(495		)	(739		)
Net cash provided by operating activities	91,738			113,696
Investing Activities:
Additions to property, plant and equipment	(67,026		)	(73,904		)
Payments received from transmission project joint funding partners	19,770			701
Proceeds from the sale of emission allowances and renewable energy certificates	1,520			873
Purchase of equity securities	(95		)	(2,771		)
Proceeds from the sale of equity securities	1,224			1,120
Other	(86		)	(72		)
Net cash used in investing activities	(44,693		)	(74,053		)
Financing Activities:
Issuance of long-term debt	220,000			—
Retirement of long-term debt	—			(1,064		)
Dividends on common stock	(30,209		)	(28,087		)
Net change in short-term borrowings	—			(21,800		)
Acquisition of treasury stock	(3,557		)	(3,162		)
Other	(2,651		)	—
Net cash provided by (used in) financing activities	183,583			(54,113		)
Net increase (decrease) in cash and cash equivalents	230,628			(14,470		)
Cash and cash equivalents at beginning of the period	76,649			61,480
Cash and cash equivalents at end of the period	$	307,277		$	47,010
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for:
Income taxes	$	—		$	2
Interest (net of amount capitalized)	$	20,820		$	20,738
Non-cash investing activities:
Additions to property, plant and equipment in accounts payable	$	20,130		$	20,416

The accompanying notes are an integral part of these statements.

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IDACORP, Inc.

Condensed Consolidated Statements of Equity

(unaudited)



	Three months ended March 31,
	2018			2017
	(in thousands)
Common Stock
Balance at beginning of period	$	857,207		$	851,833
Share-based compensation expense and other	326			830
Balance at end of period	857,533			852,663
Retained Earnings
Balance at beginning of period	1,426,528			1,323,198
Net income attributable to IDACORP, Inc.	36,142			33,102
Common stock dividends ($0.59 and $0.55 per share)	(30,086		)	(27,811		)
Balance at end of period	1,432,584			1,328,489
Accumulated Other Comprehensive (Loss) Income
Balance at beginning of period	(30,964		)	(20,882		)
Unfunded pension liability adjustment (net of tax)	721			471
Balance at end of period	(30,243		)	(20,411		)
Treasury Stock
Balance at beginning of period	(1,386		)	(243		)
Issued	2,237			1,813
Acquired	(3,557		)	(3,162		)
Balance at end of period	(2,706		)	(1,592		)
Total IDACORP, Inc. shareholders’ equity at end of period	2,257,168			2,159,149
Noncontrolling Interests
Balance at beginning of period	4,729			3,960
Net loss attributable to noncontrolling interests	(31		)	(96		)
Balance at end of period	4,698			3,864
Total equity at end of period	$	2,261,866		$	2,163,013

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 March 31,
	2018			2017
	(in thousands)

Operating Revenues	$	309,461		$	301,964

Operating Expenses:
Operation:
Purchased power	61,928			49,116
Fuel expense	27,735			36,252
Power cost adjustment	25,538			23,487
Other operations and maintenance	86,198			86,991
Energy efficiency programs	7,597			6,327
Depreciation	40,068			36,763
Taxes other than income taxes	9,277			8,678
Total operating expenses	258,341			247,614

Income from Operations	51,120			54,350

Other Income (Expense):
Allowance for equity funds used during construction	6,033			5,232
Earnings of equity-method investments	4,142			1,254
Other expense, net	(1,128		)	(1,297		)
Total other income	9,047			5,189

Interest Charges:
Interest on long-term debt	20,688			20,298
Other interest	2,945			2,698
Allowance for borrowed funds used during construction	(2,473		)	(2,312		)
Total interest charges	21,160			20,684

Income Before Income Taxes	39,007			38,855

Income Tax Expense	3,150			6,373

Net Income	$	35,857		$	32,482

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 March 31,
	2018		2017
	(in thousands)

Net Income	$	35,857	$	32,482
Other Comprehensive Income:
Unfunded pension liability adjustment, net of tax of $250 and $302	721		471
Total Comprehensive Income	$	36,578	$	32,953

The accompanying notes are an integral part of these statements.

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Idaho Power Company

Condensed Consolidated Balance Sheets

(unaudited)



	March 31, 2018			December 31, 2017
	(in thousands)
Assets

Electric Plant:
In service (at original cost)	$	5,934,476		$	5,906,162
Accumulated provision for depreciation	(2,134,871		)	(2,098,274		)
In service - net	3,799,605			3,807,888
Construction work in progress	477,635			452,424
Held for future use	8,049			8,075
Electric plant - net	4,285,289			4,268,387
Investments and Other Property	94,817			99,904
Current Assets:
Cash and cash equivalents	276,664			44,646
Receivables:
Customer (net of allowance of $2,318 and $2,013, respectively)	84,000			75,249
Other (net of allowance of $177 and $180, respectively)	6,831			30,274
Taxes receivable	18,732			26,492
Accrued unbilled revenues	57,786			75,120
Materials and supplies (at average cost)	58,346			55,745
Fuel stock (at average cost)	63,321			56,638
Prepayments	18,530			16,866
Current regulatory assets	38,498			48,613
Other	83			18
Total current assets	622,791			429,661
Deferred Debits:
Company-owned life insurance	59,901			59,323
Regulatory assets	1,095,354			1,083,483
Other	53,146			54,677
Total deferred debits	1,208,401			1,197,483
Total	$	6,211,298		$	5,995,435

The accompanying notes are an integral part of these statements.

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Idaho Power Company

Condensed Consolidated Balance Sheets

(unaudited)



	March 31, 2018			December 31, 2017
	(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	1,314,472			1,308,702
Accumulated other comprehensive loss	(30,243		)	(30,964		)
Total common stock equity	2,092,267			2,085,776
Long-term debt	1,833,576			1,746,123
Total capitalization	3,925,843			3,831,899
Current Liabilities:
Current maturities of long-term debt	130,000			—
Accounts payable	68,779			89,978
Accounts payable to affiliates	57,889			57,562
Taxes accrued	18,365			10,904
Interest accrued	21,820			22,379
Accrued compensation	32,281			46,832
Current regulatory liabilities	22,803			1,404
Advances from customers	23,541			18,414
Other	10,818			9,556
Total current liabilities	386,296			257,029
Deferred Credits:
Deferred income taxes	712,987			725,942
Regulatory liabilities	708,090			698,044
Pension and other postretirement benefits	434,533			438,869
Other	43,549			43,652
Total deferred credits	1,899,159			1,906,507

Commitments and Contingencies

Total	$	6,211,298		$	5,995,435

The accompanying notes are an integral part of these statements.

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Idaho Power Company

Condensed Consolidated Statements of Cash Flows

(unaudited)



	Three months ended March 31,
	2018			2017
	(in thousands)
Operating Activities:
Net income	$	35,857		$	32,482
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	40,878			37,577
Deferred income taxes and investment tax credits	(4,853		)	4,021
Changes in regulatory assets and liabilities	30,000			33,049
Pension and postretirement benefit plan expense	7,034			7,340
Contributions to pension and postretirement benefit plans	(11,852		)	(2,105		)
Earnings of equity-method investments	(4,142		)	(1,254		)
Distributions from equity-method investments	8,000			10,600
Allowance for equity funds used during construction	(6,033		)	(5,232		)
Other non-cash adjustments to net income, net	145			299
Change in:
Accounts receivable	(4,613		)	(8,271		)
Accounts payable	(25,459		)	(48,727		)
Taxes accrued/receivable	15,221			31,620
Other current assets	6,329			29,970
Other current liabilities	5,228			6,498
Other assets	(1,933		)	(2,043		)
Other liabilities	(371		)	(568		)
Net cash provided by operating activities	89,436			125,256
Investing Activities:
Additions to utility plant	(67,020		)	(73,904		)
Payments received from transmission project joint funding partners	19,770			701
Proceeds from the sale of emission allowances and renewable energy certificates	1,520			873
Purchase of equity securities	(95		)	(2,771		)
Proceeds from the sale of equity securities	1,224			1,120
Other	(86		)	(72		)
Net cash used in investing activities	(44,687		)	(74,053		)
Financing Activities:
Issuance of long-term debt	220,000			—
Retirement of long-term debt	—			(1,064		)
Dividends on common stock	(30,087		)	(27,911		)
Net change in short term borrowings	—			(21,800		)
Other	(2,644		)	—
Net cash provided by (used in) financing activities	187,269			(50,775		)
Net increase in cash and cash equivalents	232,018			428
Cash and cash equivalents at beginning of the period	44,646			44,140
Cash and cash equivalents at end of the period	$	276,664		$	44,568
Supplemental Disclosure of Cash Flow Information:
Cash (received from) paid to IDACORP related to income taxes	$	—		$	(22,861	)
Cash paid for interest (net of amount capitalized)	$	20,807		$	20,721
Non-cash investing activities:
Additions to property, plant and equipment in accounts payable	$	20,130		$	20,416

The accompanying notes are an integral part of these statements.

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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. 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, 2018, consolidated results of operations for the three months ended March 31, 2018 and 2017, and consolidated cash flows for the three months ended March 31, 2018 and 2017. 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, 2017. 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

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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 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. IDACORP and Idaho Power adopted ASU 2014-09 on January 1, 2018, using the modified-retrospective approach as provided for in the standard. The adoption did not change the timing or amounts of revenue currently recognized by the companies, so no cumulative-effect adjustment was required. The adoption did change presentation of revenues on the condensed consolidated statements of income and also added disclosures. To conform with current period presentation, electric utility revenues on IDACORP's and Idaho Power's condensed consolidated statements of income for the three months ended March 31, 2017, which had previously been reported separately as "General business," "Off-system sales," and "Other revenues," are no longer reported separately. See Note 4 - "Revenues" for additional information on the disaggregation of revenue and additional disclosures.

In January 2016, the FASB issued ASU 2016-01, Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities, which revises the accounting related to the classification and measurement of investments in equity securities and the presentation of certain fair value changes for financial liabilities measured at fair value. It also amends certain disclosure requirements associated with the fair value of financial instruments. The new standard is effective for fiscal years beginning after December 15, 2017, including interim periods. IDACORP and Idaho Power adopted ASU 2016-01 on January 1, 2018. The adoption did not have a material impact on the companies' financial statements as the companies previously elected the fair value option and reported available-for-sale securities at fair value.

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 new guidance did not affect the companies' presentation of 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. 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. IDACORP and Idaho Power adopted ASU 2016-15 on January 1, 2018, using the retrospective approach as provided for in the standard. The adoption did not have a material impact on the companies' financial statements.

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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 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 adopted ASU 2017-07 on January 1, 2018, and accordingly, have retrospectively adjusted prior periods to reflect the disaggregation of service cost from other components of net periodic benefit costs. The adoption did not have a material impact on the companies' financial statements nor did it affect net income for the first quarter of 2018. For IDACORP, for the three months ended March 31, 2017, $0.8 million was reclassified out of "Other operations and maintenance" and $2.0 million was reclassified out of "Other" operating expenses for a total of $2.8 million reclassified to "Other Expense, Net" to conform to current period presentation. For Idaho Power, for the three months ended March 31, 2017, $0.8 million was reclassified from "Other operations and maintenance" to "Other expense, net" to conform to current period presentation.

Recent Accounting Pronouncements Not Yet Adopted

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.

Reclassifications

In these condensed consolidated financial statements, certain amounts in prior periods’ consolidated financial statements have been reclassified to conform with current period presentation. On IDACORP's and Idaho Power's December 31, 2017 condensed consolidated balance sheets, the "Long-term receivables" balance of $4.3 million and $0.5 million, respectively, which had previously been reported separately, was reclassified to "Other" within "Other Assets" and "Deferred Debits," respectively.

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.

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Income Tax Expense

The following table provides a summary of income tax expense for the three months ended March 31 (in thousands):



	IDACORP						Idaho Power
	2018			2017			2018			2017
Income tax at statutory rates (federal and state)	$	10,048		$	15,360		$	10,040		$	15,192
Additional accumulated deferred investment tax credits (ADITC) amortization	(500		)	(1,875		)	(500		)	(1,875		)
Share-based compensation	(1,053		)	(1,559		)	(1,040		)	(1,530		)
Other⁽¹⁾	(5,601		)	(5,743		)	(5,350		)	(5,414		)
Income tax expense	$	2,894		$	6,183		$	3,150		$	6,373
Effective tax rate	7.4		%	15.7		%	8.1		%	16.4		%

⁽¹⁾ "Other" is primarily comprised of the net tax effect of Idaho Power's regulatory flow-through tax adjustments.

The decreases in income tax expense for the three months ended March 31, 2018, as compared to the same period in 2017, were primarily due to lower statutory tax rates, net of a decrease in ADITC amortization under the regulatory mechanism described in Note 3 - "Regulatory Matters." The decrease in statutory rates was due to the Tax Cuts and Jobs Act, which reduced the U.S. federal corporate income tax rate from 35 percent to 21 percent, and Idaho House Bill 463, which lowered the Idaho state corporate income tax rate from 7.4 percent to 6.925 percent. The federal and Idaho state income tax rate changes were effective January 1, 2018. On a net basis, Idaho Power’s estimate of its annual 2018 regulatory flow-through tax adjustments is comparable to 2017.

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. Idaho Power also reset its base-rate power supply expenses in the Idaho jurisdiction for purposes of updating the collection of costs through retail rates in 2014 but without a resulting net increase in rates. Between general rate cases, Idaho Power relies upon customer growth, 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. 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 IDACORP's and Idaho Power's Annual Report on Form 10-K for the year ended December 31, 2017.

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 Settlement Stipulation). The provisions of the October 2014 Settlement Stipulation are described in the table included under "Tax Cuts and Jobs Act" below.

Under the October 2014 Settlement Stipulation, Idaho Power recorded $0.5 million additional ADITC amortization during the first quarter of 2018, based on Idaho Power's estimate of return on year-end equity in the Idaho jurisdiction (Idaho ROE) for the full-year 2018. During the first quarter of 2017, Idaho Power recorded $1.9 million of additional ADITC amortization, which was reversed later in 2017 as actual financial results exceeded Idaho Power's early estimates.

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Tax Cuts and Jobs Act - Regulatory Treatment

On December 22, 2017, the Tax Cuts and Jobs Act was signed into law, which, among other things, lowered the corporate federal income tax rate from 35 percent to 21 percent and modified or eliminated certain federal income tax deductions for corporations. In January 2018, the IPUC issued an order requiring utilities within its jurisdiction, including Idaho Power, to (1) record a regulatory liability for the estimated Idaho-jurisdictional share of financial benefits after January 1, 2018, from the changes in federal income tax law under the Tax Cuts and Jobs Act, and (2) file a report with the IPUC by March 30, 2018, identifying and quantifying the financial impact of the income tax changes on the utility, along with proposed tariff schedule changes that would adjust the utility's rates to reflect the utility's modified federal tax obligations under the Tax Cuts and Jobs Act. The IPUC order required Idaho Power to estimate the income tax changes by comparing actual 2017 federal income tax components with what those federal income tax components would have been if the Tax Cuts and Jobs Act had been effective for the full year of 2017.

Due to the regulatory orders received from the IPUC and OPUC during the first quarter of 2018, Idaho Power recorded a $5.0 million reduction to revenue and corresponding regulatory liability for its estimate of first quarter 2018 tax benefits resulting from the changes in the federal and state income tax law that Idaho Power expects to return to Idaho and Oregon customers in the future.

In March 2018, Idaho Power made a filing with the IPUC providing the results of its pro forma analysis indicating pro forma annual income tax expense reductions, composed of a current income tax expense reduction and a deferred income tax expense reduction. In April 2018, Idaho Power filed with the IPUC a settlement stipulation (April 2018 Settlement Stipulation) signed by Idaho Power, the IPUC Staff, and a third party intervenor. Beginning June 1, 2018, the settlement stipulation, if approved, provides an annual (a) $18.7 million reduction to Idaho customer base rates and (b) amortization of $7.4 million of regulatory deferrals that would otherwise be a future liability of Idaho customers. Additionally, a one-time benefit of a $7.8 million rate reduction will be provided to Idaho customers through the Idaho-jurisdiction power cost adjustment (PCA) mechanism for the period from June 1, 2018 through May 31, 2019, for the income tax benefits accrued from January 1, 2018 to May 31, 2018, and the income tax benefits related to Idaho Power's open access transmission tariff (OATT). The amount provided via the PCA mechanism will decrease to $2.7 million on June 1, 2019, for income tax benefits related to Idaho Power's OATT and will cease on June 1, 2020, to reflect the impact of a full year of reduced OATT third-party transmission revenues.

The April 2018 Settlement Stipulation provides for the indefinite extension of the October 2014 Settlement Stipulation beyond its termination date of December 31, 2019. The table below summarizes and compares the terms of the October 2014 Settlement Stipulation with the proposed terms in the April 2018 Settlement Stipulation that would become effective January 1, 2020.

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October 2014 Settlement Stipulation		April 2018 Settlement Stipulation (Pending Approval)
The October 2014 Settlement Stipulation is effective through December 31, 2019.		If the April 2018 Settlement Stipulation is approved, the following provisions would become effective beginning January 1, 2020, with no defined end date.
If Idaho Power's actual annual 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 the $45 million of ADITC are completely amortized, the revenue sharing provisions below would no longer be applicable.		If Idaho Power's actual annual Idaho ROE in any year is less than 9.4 percent, then Idaho Power may amortize up to $25 million of additional ADITC to help achieve a 9.4 percent Idaho ROE for that year, so long as the cumulative amount of ADITC used does not exceed $45 million (Idaho Power will have available and may continue to use any unused portion of the $45 million of additional ADITC from the October 2014 Settlement Stipulation); however, Idaho Power may seek approval from the IPUC to replenish the total amount of ADITC it is permitted to amortize. If there are no remaining amounts of ADITC authorized to be amortized, the revenue sharing provisions below would not be applicable until ADITC is replenished.
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 10.0 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 80 percent to Idaho Power's Idaho customers as a rate reduction to be effective at the time of the subsequent year's PCA, and 20 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 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 55 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 20 percent to Idaho Power.
In the event the IPUC approves a change to Idaho Power's allowed annual Idaho ROE as part of a general rate case proceeding before December 31, 2019, the Idaho ROE thresholds will be adjusted on a prospective basis as follows: (a) the Idaho ROE under which Idaho Power will be permitted to amortize an additional amount of ADITC will be set at 95 percent of the newly authorized Idaho ROE, (b) sharing with customers on an 75 percent basis as a customer rate reduction will begin at the newly authorized Idaho ROE, and (c) sharing with customers on a 75 percent basis but allocated 50 percent to a rate reduction, and 25 percent to a pension expense deferral regulatory asset, will begin at 105 percent of the newly authorized Idaho ROE.		In the event the IPUC approves a change to Idaho Power's allowed annual Idaho ROE as part of a general rate case proceeding effective on or after January 1, 2020, the Idaho ROE thresholds will be adjusted on a prospective basis as follows: (a) the Idaho ROE under which Idaho Power will be permitted to amortize an additional amount of ADITC will be set at 95 percent of the newly authorized Idaho ROE, (b) sharing with customers on an 80 percent basis as a customer rate reduction will begin at the newly authorized Idaho ROE, and (c) sharing with customers on an 80 percent basis but allocated 55 percent to a rate reduction, and 25 percent to a pension expense deferral regulatory asset, will begin at 105 percent of the newly authorized Idaho ROE.

Neither the October 2014 Settlement Stipulation nor the April 2018 Settlement Stipulation impose a moratorium on Idaho Power filing a general rate case or other form of rate proceeding in Idaho during their respective terms.

As of the date of this report, Idaho Power has not received a decision from the IPUC on the April 2018 Settlement Stipulation.

As of the date of this report, Idaho Power is continuing to work with the OPUC to determine how potential income tax expense reductions from the changes in federal income tax law may benefit Idaho Power customers in Oregon.

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Hells Canyon Complex Relicensing Costs Settlement Stipulation

In December 2016, Idaho Power filed an application with the IPUC requesting a determination that Idaho Power's expenditures of $220.8 million through year-end 2015 on relicensing of the Hells Canyon Complex (HCC) were prudently incurred, and thus eligible for inclusion in retail rates in a future regulatory proceeding. In December 2017, Idaho Power filed with the IPUC a settlement stipulation signed by Idaho Power, the IPUC staff, and a third party intervenor, recognizing that a total of $216.5 million in HCC relicensing expenditures and other related costs were reasonably incurred, and therefore should be eligible for inclusion in customer rates at a later date. As a result of filing the settlement stipulation, Idaho Power recorded a $5.0 million pre-tax charge in the fourth quarter of 2017, which included $4.3 million for costs incurred through 2015, as well as $0.7 million related to associated costs incurred in 2016 and 2017. In April 2018, the IPUC issued an order approving the settlement stipulation as filed with the IPUC and determined the associated costs to be reasonably and prudently incurred.

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 2018, Idaho Power filed an application with the IPUC requesting a $22.6 million net decrease in PCA rates, effective for the 2018-2019 PCA collection period from June 1, 2018, to May 31, 2019. The requested net decrease in PCA rates is primarily due to better-than-expected actual water conditions for the 2017-2018 PCA year, which resulted in additional low-cost hydroelectric generation available to reduce net power supply costs. As of the date of this report, the IPUC has not yet issued an order on the application. Previously in May 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 included an offsetting $13.0 million refund of previously collected Idaho energy efficiency rider funds.

Idaho Fixed Cost Adjustment Mechanism

The Idaho jurisdiction fixed cost adjustment (FCA) mechanism 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 instead linking it to a set amount per customer. The FCA mechanism is adjusted each year 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. In March 2018, Idaho Power filed its annual FCA update with the IPUC, requesting a decrease of $19.3 million in the FCA from $35.0 million to $15.7 million, with new requested rates effective for the period from June 1, 2018, to May 31, 2019. As of the date of this report, the IPUC has not yet issued an order on the application. Previously in May 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 rates effective for the period from June 1, 2017, to May 31, 2018.

Western Energy Imbalance Market Costs

In August 2016, Idaho Power filed an application with the IPUC requesting specified regulatory accounting treatment associated with its participation in the energy imbalance market implemented in the western United States (Western EIM). In January 2017, the IPUC issued an order authorizing Idaho Power’s requested deferral accounting treatment for costs associated with joining the Western EIM. Idaho Power can defer incremental other operations and maintenance costs incurred until the earlier of when Idaho Power begins recovery of the costs and the deferral balance or December 31, 2018. Idaho Power's participation in the Western EIM commenced on April 4, 2018. The Western EIM is intended to reduce the power supply costs to serve customers through more efficient dispatch of a larger and more diverse pool of resources, to integrate intermittent power from renewable generation sources more effectively, and to enhance reliability.

In November 2017, Idaho Power filed an application with the IPUC requesting approval to establish an interim method of recovery for costs associated with participation in the Western EIM. While the parties to this case have reached a settlement in

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principle, as of the date of this report, the parties are continuing to work to finalize and execute a settlement stipulation regarding cost recovery.

4. REVENUES

On January 1, 2018, the companies adopted ASU 2014-09 using the modified retrospective method. The adoption did not change the timing or amounts of revenue recognized by IDACORP or Idaho Power and, therefore, no cumulative-effect adjustment was recorded. The following table provides a summary of electric utility operating revenues for IDACORP and Idaho Power for the three months ended March 31 (in thousands):



	Three months ended March 31,
	2018		2017
Electric utility operating revenues:
Revenue from contracts with customers	$	289,573	$	293,892
Alternative revenue programs and other revenues	19,888		8,072
Total electric utility operating revenues	$	309,461	$	301,964

Revenues From Contracts with Customers

Revenues from contracts with customers are primarily related to Idaho Power’s regulated tariff-based sales of energy or related services. Idaho Power assesses revenues on a contract-by-contract basis to determine the nature, amount, timing and uncertainty, if any, of revenues being recognized. The following table presents our revenues from contracts with customers disaggregated by revenue source for the three months ended March 31 (in thousands):



	Three months ended March 31,
	2018			2017
Revenues from contracts with customers:
Retail revenues:
Residential(includes $13,543 and $5,126, respectively, related to the FCA⁽¹⁾)	$	148,848		$	152,155
Commercial(includes $362 and $111, respectively, related to the FCA⁽¹⁾)	75,537			74,278
Industrial	46,653			45,458
Irrigation	1,071			925
Deferred revenue related to HCC relicensing AFUDC⁽²⁾	(2,584		)	(2,584		)
Tax reform revenue accrual for future rate reduction⁽³⁾	(5,000		)	—
Total retail revenues	264,525			270,232
Less: FCA mechanism revenues⁽¹⁾	(13,905		)	(5,237		)
Wholesale energy sales	14,069			7,965
Transmission services (wheeling) revenues	11,395			8,859
Energy efficiency program revenues	7,597			6,327
Other revenues from contracts with customers	5,892			5,746
Total revenues from contracts with customers	$	289,573		$	293,892

⁽¹⁾ The FCA mechanism is an alternative revenue program 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 the allowance for funds used during construction (AFUDC) on construction work in progress related to the 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 $10.7 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.

⁽³⁾ See Note 3 - "Regulatory Matters" for additional discussion regarding Idaho Power's estimate of benefits resulting from the changes in the federal income tax law that Idaho Power expects to return to customers in the future.

Retail Revenues: Idaho Power’s retail revenues primarily relate to the sale of electricity to customers based on regulated tariff-based prices. Idaho Power recognizes retail revenues in amounts for which it has the right to invoice the customer in the period when energy is delivered or services are provided to customers. The revenues recognized reflect the consideration Idaho Power expects to be entitled to in exchange for that energy or those services. Retail customers are classified as residential, commercial, industrial, or irrigation. Approximately 95 percent of Idaho Power's retail revenue originates from customers located in Idaho,

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with the remainder originating from customers located in Oregon. Idaho Power’s retail customer rates are based on Idaho Power’s cost of service and are determined through general rate case proceedings, settlement stipulations, and other filings with the IPUC and OPUC. Changes in rates and changes in customer demand are typically the primary causes of fluctuations in retail revenue from period to period. The primary influences on changes in customer demand for electricity are weather, economic conditions (including growth in the number of Idaho Power customers), and energy efficiency. Idaho Power's utility revenues are not earned evenly during the year.

Retail revenues are billed monthly based on meter readings taken throughout the month. Idaho Power accrues estimated unbilled revenues for energy or related services delivered to customers but not yet billed at period-end based on actual meter readings at period-end and estimated rates.

Residential Customers: Idaho Power’s energy sales to residential customers typically peak during the winter heating season and summer cooling season. Extreme temperatures increase sales to residential customers who use electricity for cooling and heating, while moderate temperatures decrease sales. Idaho Power's rate structure provides for higher rates during the summer when overall system loads are at their highest, and includes tiers such that rates increase as a customer's consumption level increases. These seasonal and tiered rate structures contribute to the seasonal fluctuations in revenues and earnings. Economic and demographic conditions can also affect residential customer demand; strong job growth and population growth in Idaho Power’s service area have led to increasing customer growth rates in recent years. Residential demand is also impacted by energy efficiency initiatives. Idaho Power’s FCA mechanism mitigates some of the fluctuations caused by weather and energy efficiency initiatives.

Commercial Customers: Most businesses are included in Idaho Power's commercial customer class, as well as small industrial companies, and public street and highway lighting accounts. Idaho Power’s commercial customers are less influenced by weather conditions than residential customers, although weather does affect commercial customer energy use. Economic conditions, including manufacturing activity levels, and energy efficiency initiatives also affect energy use of commercial customers.

Industrial Customers: Industrial customers consist of large industrial companies, including special contract customers. Energy use of industrial customers is primarily driven by economic conditions, with weather having little impact on this customer class.

Irrigation Customers: Irrigation customers use electricity to operate irrigation pumps, primarily during the agricultural growing season. The amount and timing of the precipitation as well as temperature levels can affect the timing and amounts of sales to irrigation customers with increased precipitation generally resulting in decreased sales.

Wholesale Energy Sales: As a public utility under the Federal Power Act (FPA), Idaho Power has the authority to charge market-based rates for wholesale energy sales under its FERC tariff. Idaho Power’s wholesale electricity sales are primarily to utilities and power marketers and are predominantly short-term and consist of a single performance obligation satisfied as energy is transferred to the counterparty. Idaho Power's wholesale energy sales depend largely on the availability of generation resources in excess of the amount necessary to serve customer loads as well as adequate market power prices at the time when those resources are available. A reduction in either factor may lead to lower wholesale energy sales.

Transmission Services (Wheeling) Revenues: As a public utility under the FPA, Idaho Power has the authority to provide cost-based wholesale and retail access transmission services under its OATT. Services under the OATT are offered on a nondiscriminatory basis such that all potential customers have an equal opportunity to access the transmission system. Idaho Power’s transmission revenue is primarily related to third parties reserving capacity on Idaho Power’s transmission system to transmit electricity through Idaho Power’s service area. The reservations are predominantly short-term but may be part of a long-term capacity contract, short-term contract, or on demand when available. Transmission services revenues consist of a single performance obligation satisfied as capacity on Idaho Power’s transmission system is provided to the third party. Transmission service revenues are affected by changes in Idaho Power’s OATT transmission rate and customer demand. Demand for transmission services can be affected by regional market factors, such as loads and generation of utilities in Idaho Power’s region.

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Energy Efficiency Program Revenues: Idaho Power collects most of its energy efficiency program costs through an energy efficiency rider on customer bills, which is deferred until expenditures are incurred. Energy efficiency program expenditures funded through the rider are reported as an operating expense with an equal amount recorded in revenues, resulting in no net impact on earnings. Energy efficiency program revenues are recognized in the period when the related costs of the energy efficiency program are incurred by Idaho Power. The cumulative variance between expenditures and amounts collected through the rider is recorded as a regulatory asset or liability. A liability balance indicates that Idaho Power has collected more than it has spent, and an asset balance indicates that Idaho Power has spent more than it has collected. At March 31, 2018, Idaho Power's energy efficiency rider balances were a $2.2 million regulatory liability in the Idaho jurisdiction and a $6.3 million regulatory asset in the Oregon jurisdiction.

Alternative Revenue Program 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, applicable to 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. The FCA mechanism is adjusted each year 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. The annual change in the FCA recovery is capped at 3 percent of base revenue, with any excess deferred for collection in a subsequent year.

The table below presents the FCA mechanism revenues and other revenues for the three months ended March 31 (in thousands):



	Three months ended March 31,
	2018		2017
Alternative revenue programs and other revenues:
FCA mechanism revenues	$	13,905	$	5,237
Derivative revenues	5,983		2,835
Total alternative revenue programs and other revenues	$	19,888	$	8,072

IDACORP's Other Revenues

IDACORP's other revenues are primarily comprised of revenues from IDACORP’s subsidiary, Ida-West. Ida-West operates small hydroelectric generation projects that satisfy the requirements of PURPA.

5. LONG-TERM DEBT

On March 16, 2018, Idaho Power issued $220 million in principal amount of 4.20% first mortgage bonds, secured medium-term notes, Series K, maturing on March 1, 2048. On April 17, 2018, Idaho Power redeemed, prior to maturity, $130 million in principal amount of 4.50% first mortgage bonds, medium-term notes, Series H due March 2020. In accordance with the redemption provisions of the notes, the redemption included Idaho Power's payment of a make-whole premium to the holders of the redeemed notes in the aggregate amount of $4.6 million. Idaho Power used a portion of the net proceeds from the March 2018 sale of first mortgage bonds, medium-term notes to effect the redemption. As a result, $130 million of 4.50% first mortgage bonds, medium-term notes, Series H due March 2020, are classified as current maturities of long-term debt in the condensed consolidated balance sheets of the companies at March 31, 2018.

As of March 31, 2018, $280 million in principal amount of long-term debt securities remained available for issuance under a selling agency agreement executed on September 27, 2016, and pursuant to state regulatory authority.

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6. COMMON STOCK

IDACORP Common Stock

During the three months ended March 31, 2018, IDACORP granted 75,761 restricted stock unit awards to employees and 12,950 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 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, 2018, the leverage ratios for IDACORP and Idaho Power were 46 percent and 48 percent, respectively. Based on these restrictions, IDACORP’s and Idaho Power’s dividends were limited to $1.2 billion and $1.0 billion, respectively, at March 31, 2018. 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 company from any material subsidiary. At March 31, 2018, 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, 2018, Idaho Power's common equity capital was 52 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 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.

7. EARNINGS PER SHARE

The table below presents the computation of IDACORP’s basic and diluted earnings per share for the three months ended March 31, 2018 and 2017 (in thousands, except for per share amounts).



	Three months ended March 31,
	2018		2017
Numerator:
Net income attributable to IDACORP, Inc.	$	36,142	$	33,102
Denominator:
Weighted-average common shares outstanding - basic	50,425		50,356
Effect of dilutive securities	38		41
Weighted-average common shares outstanding - diluted	50,463		50,397
Basic earnings per share	$	0.72	$	0.66
Diluted earnings per share	$	0.72	$	0.66

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8. COMMITMENTS

Purchase Obligations

IDACORP's and Idaho Power's purchase obligations did not change materially, outside of the ordinary course of business, during the three months ended March 31, 2018, except that Idaho Power entered into agreements with solar and biomass PURPA-qualifying facilities, which increased contractual payment obligations by approximately $41 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 $58.4 million at March 31, 2018, representing IERCo's one-third share of BCC's total reclamation obligation of $175.2 million. BCC has a reclamation trust fund set aside specifically for the purpose of paying these reclamation costs. At March 31, 2018, the value of BCC's reclamation trust fund was $106.3 million. During the three months ended March 31, 2018, 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, 2018, management believes the likelihood is remote that IDACORP or Idaho Power would be required to perform under such indemnification provisions or otherwise incur any significant losses with respect to such indemnification obligations. Neither IDACORP nor Idaho Power has recorded any liability on their respective condensed consolidated balance sheets with respect to these indemnification obligations.

9. CONTINGENCIES

IDACORP and Idaho Power have in the past and expect in the future to become involved in various claims, controversies, disputes, and other contingent matters, 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 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.

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10. 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 March 31, 2018 and 2017 (in thousands).



	Pension Plan						SMSP					Postretirement Benefits						Total
	2018			2017			2018			2017		2018			2017			2018			2017
Service cost	$	9,743		$	8,626		$	(79	)	$	190	$	284		$	289		$	9,948		$	9,105
Interest cost	9,682			9,763			1,063			1,078		666			690			11,411			11,531
Expected return on plan assets	(13,055		)	(11,388		)	—			—		(629		)	(570		)	(13,684		)	(11,958		)
Amortization of prior service cost	1			7			24			32		12			7			37			46
Amortization of net loss	3,394			3,383			947			741		—			—			4,341			4,124
Net periodic benefit cost	9,765			10,391			1,955			2,041		333			416			12,053			12,848
Regulatory deferral of net periodic benefit cost⁽¹⁾	(9,307		)	(9,796		)	—			—		—			—			(9,307		)	(9,796		)
Previously deferred pension costs recognized⁽¹⁾	4,288			4,288			—			—		—			—			4,288			4,288
Net periodic benefit cost recognized for financial reporting⁽¹⁾⁽²⁾	$	4,746		$	4,883		$	1,955		$	2,041	$	333		$	416		$	7,034		$	7,340

⁽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, $4.1 million and $4.5 million, respectively, was recognized in "Other operations and maintenance" and $2.9 million and $2.8 million, respectively, was recognized in "Other expense, net" on the condensed consolidated statements of income of the companies for the three months ended March 31, 2018 and 2017.

Idaho Power has no minimum contribution requirement to its defined benefit pension plan in 2018. However, during the three months ended March 31, 2018, 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.

11. DERIVATIVE FINANCIAL INSTRUMENTS

Commodity Price Risk

Idaho Power is exposed to market risk relating to electricity, natural gas, and other fuel commodity prices, all of which are heavily influenced by supply and demand. Market risk may be influenced by market participants’ nonperformance of their contractual obligations and commitments, which affects the supply of or demand for the commodity. Idaho Power uses derivative instruments, such as physical and financial forward contracts, for both electricity and fuel to manage the risks relating to these commodity price exposures. The primary objectives of Idaho Power’s energy purchase and sale activity are to meet the demand of retail electric customers, maintain appropriate physical reserves to ensure reliability, and make economic use of temporary surpluses that may develop.

All of Idaho Power's derivative instruments have been entered into for the purpose of economically hedging forecasted purchases and sales, though none of these instruments have been designated as cash flow hedges. Idaho Power offsets fair value amounts recognized on its balance sheet and applies collateral related to derivative instruments executed with the same counterparty under the same master netting agreement. Idaho Power does not offset a counterparty's current derivative contracts with the counterparty's long-term derivative contracts, although Idaho Power's master netting arrangements would allow current

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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, 2018 and 2017 (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,
			2018			2017
Financial swaps	Operating revenues		$	239		$	1,478
Financial swaps	Purchased power		(202		)	(447		)
Financial swaps	Fuel expense		(688		)	670
Financial swaps	Other operations and maintenance		7			(26		)
Forward contracts	Operating revenues		2			—
Forward contracts	Purchased power		(13		)	(1		)
Forward contracts	Fuel expense		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 revenues from contracts with customers or purchased power depending on the forecasted position being economically hedged by the derivative contract. Settlement gains and losses on contracts for natural gas are reflected in fuel expense. Settlement gains and losses on diesel derivatives are recorded in other operations and maintenance expense. See Note 12 - "Fair Value Measurements" for additional information concerning the determination of fair value for Idaho Power’s assets and liabilities from price risk management activities.

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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, 2018, and December 31, 2017 (in thousands).



		Asset Derivatives							Liability Derivatives
	Balance Sheet Location	Gross Fair Value		Amounts Offset			Net Assets		Gross Fair Value		Amounts Offset				Net Liabilities
	Balance Sheet Location	Gross Fair Value		Amounts Offset			Net Assets		Gross Fair Value		Amounts Offset				Net Liabilities
March 31, 2018
Current:
Financial swaps	Other current assets	$	99	$	(19	)	$	80	$	19	$	(19	)		$	—
Financial swaps	Other current liabilities	651		(651		)	—		3,058		(1,794		)	⁽¹⁾	1,264
Forward contracts	Other current assets	3		—			3		—		—				—
Long-term:

IDACORP INC - FORM 10-Q - May 3, 2018

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