UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1999March 31, 2000
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.
Commission in their charters, state of EmployerI.R.S.
File Number incorporation, address of IdentificationEmployer
Number principal executive offices, Identification
and Number telephone number Number
1-14465 IDACORP, Inc. 82-0505802
1-3198 Idaho Power Company 82-0130980
1221 W. Idaho Street
Boise, ID 83702-5627
Telephone: (208) 388-2200
State of Incorporation: Idaho
Web site: www.idacorpinc.com
None
Former name, former address and former fiscal year, if
changed since last report.
Indicate by check mark whether the registrant (1) has 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 registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
Number of shares of Common Stock outstanding as of September
30, 1999:March
31, 2000:
IDACORP, Inc.: 37,612,351
Idaho Power Company: 37,612,351 shares, all of which are held by
IDACORP, Inc.
INDEX
Page
Definitions 2
Part I. Financial Information:
Item 1. Financial Statements
IDACORP, Inc.:
Consolidated Statements of Income 3-43
Consolidated Balance Sheets 5-64-5
Consolidated Statements of Capitalization 76
Consolidated Statements of Cash Flows 87
Consolidated Statements of Comprehensive 98
Income
Notes to Consolidated Financial Statements 10-149-13
Independent Accountants' Report 1514
Idaho Power Company:
Consolidated Statements of Income 16-1715
Consolidated Balance Sheets 18-1916-
17
Consolidated Statements of Capitalization 2018
Consolidated Statements of Cash Flows 2119
Consolidated Statements of Comprehensive 2220
Income
Notes to Consolidated Financial Statements 23-2421-22
Independent Accountants' Report 2523
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 26-3324-28
Part II. Other Information:
Item 6. Exhibits and Reports on Form 8-K 34-3729-32
Signatures 38-3933-34
DEFINITIONS
FASB - Financial Accounting Standards Board
FERC - Federal Energy Regulatory Commission
IPUC - Idaho Public Utilities Commission
KWhkWh - kilowatt-hour
MAF - Million Acre-Feet
MMbtu - Million British Thermal Units
MWh - Megawatt-hour
OPUC - Oregon Public UtilitiesUtility Commission
PCA - Power Cost Adjustment
PUCN - Public Utility Commission of Nevada
REA - Rural Electrification Administration
SFAS - Statement of Financial Accounting
Standards
FORWARD LOOKING INFORMATION
This Form 10-Q contains "forward-looking statements" intended to
qualify for safe harbor from liability established by the Private
Securities Litigation Reform Act of 1995. Forward-looking
statements should be read with the cautionary statements and
important factors included in this Form 10-Q at Part I, Item 2.
Management's Discussion and Analysis of Financial Condition and
Results of Operations-Forward-Looking Information. Forward-
looking statements are all statements other than statements of
historical fact, including without limitation those that are
identified by the use of the words "anticipates," "estimates,"
"expects," "intends," "plans," "predicts," and similar
expressions and include, but are not limited to, statements under
the heading "Other Matters" concerning the outcome of IDACORP,
Inc.'s and Idaho Power Company's Year 2000 efforts.expressions.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
IDACORP, Inc.
Consolidated Statements of Income
Three Months Ended
September 30,March 31,
2000 1999 1998
(Thousands of Dollars except
for per share amounts)
REVENUES:
General business $137,193 $ 149,411
Off-system123,213 $ 129,692
Off system sales 19,078 74,56035,925 37,510
Other revenues 5,707 6,2297,195 6,947
Total revenues 161,978 230,200166,333 174,149
EXPENSES:
Operations:Operation:
Purchased power 41,088 92,88512,890 17,888
Fuel expense 23,523 25,05424,659 22,020
Power cost adjustment (14,774) (1,338)3,258 9,007
Other 36,615 34,45535,236 32,767
Maintenance 10,903 10,7099,010 7,883
Depreciation 19,511 19,14019,887 19,171
Taxes other than income taxes 5,170 5,2585,427 5,584
Total expenses 122,036 186,163110,367 114,320
INCOME FROM OPERATIONS 39,942 44,03755,966 59,829
OTHER INCOME:
Allowance for equity funds
used during Construction 322 46construction 456 157
Gain on sale of asset 14,000 -
Energy tradingmarketing activities -
Net 6,802 2,0428,523 748
Other - Net 2,098 5,0373,430 2,235
Total other income 9,222 7,12526,409 3,140
INTEREST EXPENSE AND OTHER:
Interest on long-term debt 13,078 13,10613,162 13,395
Other interest 2,339 2,2232,697 2,229
Allowance for borrowed funds
used during Construction (247) (274)construction (487) (224)
Preferred dividends of Idaho
Power Company 1,401 1,4101,428 1,368
Total interest expense and
16,571 16,465
other 16,800 16,768
INCOME BEFORE INCOME TAXES 32,593 34,69765,575 46,201
INCOME TAXES 10,574 12,39223,496 16,700
NET INCOME $22,019 $ 22,30542,079 29,501
AVERAGE COMMON SHARES
OUTSTANDING (000) 37,612 37,612
(000)
EARNINGS PER SHARE OF
COMMON STOCK (basic and
diluted) $ 0.591.12 $ 0.59
The accompanying notes are an integral part of these statements.
IDACORP, Inc.
Consolidated Statements of Income
Nine Months Ended
September 30,
1999 1998
(Thousands of Dollars
except for per share
amounts)
REVENUES:
General business $396,415 $ 382,631
Off-system sales 86,109 162,204
Other revenues 18,676 23,411
Total revenues 501,200 568,246
EXPENSES:
Operations:
Purchased power 81,503 145,862
Fuel expense 64,398 60,077
Power cost adjustment 424 12,951
Other 110,579 106,008
Maintenance 30,285 31,262
Depreciation 58,087 57,080
Taxes other than income taxes 16,429 16,103
Total expenses 361,705 429,343
INCOME FROM OPERATIONS 139,495 138,903
OTHER INCOME:
Allowance for equity funds used
during
Construction 710 71
Energy trading activities - Net 14,646 4,911
Other - Net 6,224 10,643
Total other income 21,580 15,625
INTEREST EXPENSE AND OTHER:
Interest on long-term debt 40,231 39,204
Other interest 6,768 6,368
Allowance for borrowed funds
used during
Construction (605) (714)
Preferred dividends of Idaho
Power
Company 4,121 4,232
Total interest expense and 50,515 49,090
other
INCOME BEFORE INCOME TAXES 110,560 105,438
INCOME TAXES 37,799 34,730
NET INCOME $ 72,761 $ 70,708
AVERAGE COMMON STOCK OUTSTANDING 37,612 37,612
(000)
EARNINGS PER SHARE OF COMMON STOCK
(basic and
diluted) $ 1.93 $ 1.880.78
The accompanying notes are an integral part of these
statements.
IDACORP, Inc.
Consolidated Balance Sheets
Assets
SeptemberMarch 31, December 30, 31,
2000 1999 1998
(Thousands of Dollars)
ELECTRIC PLANT:
In service (at original cost) $2,710,168 $ 2,659,441$2,738,386 $2,726,026
Accumulated provision for
depreciation (1,060,783) (1,009,387)(1,091,961) (1,073,722)
In service - Net 1,649,385 1,650,0541,646,425 1,652,304
Construction work in progress 77,224 59,717100,642 91,637
Held for future use 1,742 1,7381,742
Electric plant - Net 1,728,351 1,711,5091,748,809 1,745,683
INVESTMENTS AND OTHER PROPERTY 140,267 129,437154,074 146,019
CURRENT ASSETS:
Cash and cash equivalents 17,207 22,86739,693 111,338
Receivables:
Customer 102,901 81,245103,700 98,923
Allowance for uncollectible
accounts (1,397) (1,397)
accounts
Natural gas 36,124 21,426
Notes 4,747 4,6436,941 4,353
Employee notes 4,412 4,5104,298 4,105
Other 6,449 6,0596,525 7,764
Energy tradingmarketing assets 50,715 -105,800 37,398
Accrued unbilled revenues 26,224 34,61026,206 31,994
Materials and supplies (at
32,127 30,157
average cost) 31,519 29,611
Fuel stock (at average cost) 8,281 7,0968,693 9,329
Prepayments 14,414 16,04217,715 16,097
Regulatory assets associated
with income Taxes 2,965 2,965taxes 4,723 893
Total current assets 305,169 230,223354,416 350,408
DEFERRED DEBITS:
American Falls and Milner water
rights 31,585 31,830
rights31,585
Company-owned life insurance 43,368 35,14939,046 40,480
Regulatory assets associated 208,341 214,782
with income Taxes 202,153 201,465taxes
Regulatory assets - other 54,190 62,01347,996 52,759
Other 50,520 49,99455,905 55,277
Total deferred debits 381,816 380,451382,873 394,883
TOTAL $2,555,603 $ 2,451,620$2,640,172 $2,636,993
The accompanying notes are an integral part of these
statements.
IDACORP, Inc.
Consolidated Balance Sheets
Capitalization and Liabilities
SeptemberMarch 31, December 30, 31,
2000 1999 1998
(Thousands of Dollars)
CAPITALIZATION:
Common stock equity:
Common stock without par
value (shares Authorizedauthorized
120,000,000; shares
Outstandingoutstanding - 37,612,351) $ 451,112451,121 $ 451,564451,343
Retained earnings 298,973 278,607324,716 300,093
Accumulated other
(686) 226
comprehensive income 1,671 1,534
Total common stock equity 749,399 730,397777,508 752,970
Preferred stock of Idaho Power
105,856 105,968
Company 105,667 105,811
Long-term debt 741,849 815,937824,142 821,558
Total capitalization 1,597,104 1,652,3021,707,317 1,680,339
CURRENT LIABILITIES:
Long-term debt due within one
88,026 6,029
year 8,125 89,101
Notes payable 11,630 38,52411,929 19,757
Accounts payable 97,818 73,499
Accounts payable - natural gas 48,530 28,476127,214 145,737
Energy tradingmarketing liabilities 54,569 -98,245 33,814
Taxes accrued 31,075 24,78545,784 21,313
Interest accrued 15,853 18,36518,339 19,126
Deferred income taxes 2,965 2,9654,723 893
Other 13,259 12,27516,021 16,696
Total current liabilities 363,725 204,918330,380 346,437
DEFERRED CREDITS:
Regulatory liabilities associated
with deferred investment
tax 67,961 69,396
credits 67,087 67,433
Deferred income taxes 422,356 422,196423,677 430,468
Regulatory liabilities
associated with income taxes 28,075 28,07534,785 33,817
Regulatory liabilities - other 3,996 4,1613,365 3,363
Other 72,386 70,57273,561 75,136
Total deferred credits 594,774 594,400602,475 610,217
COMMITMENTS AND CONTINGENT
LIABILITIES
TOTAL $2,555,603 $ 2,451,620$2,640,172 $2,636,993
The accompanying notes are an integral part of these
statements.
IDACORP, Inc.
Consolidated Statements of Capitalization
SeptemberMarch 31, December 30, 31,
2000 % 1999 %
1998 %
(Thousands(ThousandS of Dollars)
COMMON STOCK EQUITY:
Common stock $451,112 $ 451,564451,121 $ 451,343
Retained earnings 298,973 278,607324,716 300,093
Accumulated other comprehensive
(686) 226
income 1,671 1,534
Total common stock equity 749,399 47 730,397 44777,508 46 752,970 45
PREFERRED STOCK OF IDAHO POWER
COMPANY:
4% preferred stock 15,856 15,96815,667 15,811
7.68% Series, serial preferred
stock 15,000 15,000
stock
7.07% Series, serial preferred
stock 25,000 25,000
stock
Auction rate preferred stock 50,000 50,000
Total preferred stock 105,856 7 105,968 7105,667 6 105,811 6
LONG-TERM DEBT OF IDAHO POWER
COMPANY:DEBT:
First mortgage bonds:
8.65% Series8.65 %Series due 2000 - 80,000
80,000
6.93% Series6.93 %Series due 2001 30,000 30,000
6.85% Series6.85 %Series due 2002 27,000 27,000
6.40% Series6.40 %Series due 2003 80,000 80,000
8 % Series%Series due 2004 50,000 50,000
5.83% Series5.83 %Series due 2005 60,000 60,000
7.2 %Series due 2009 80,000 80,000
Maturing 2021 through 2031
with rates ranging
from 7.5% to 9.52% 230,000 230,000
Total first mortgage bonds 557,000 557,000637,000
Amount due within one (80,000)year - year(80,000)
Net first mortgage 477,000bonds 557,000 bonds557,000
Pollution control revenue
bonds:
7 1/4%Series due 2008 4,360 4,360
8.30% Series8.30 %Series 1984 due 2014 49,800 49,800
6.05% Series6.05 %Series 1996A due 2026 68,100 68,100
Variable Rate Series 1996B
due 2026 24,200 24,200
2026
Variable Rate Series 1996C
due 2026 24,000 24,000
2026
Total pollution control
revenue bonds 170,460 170,460
revenue bonds
REA notes 1,433 1,4891,396 1,415
Amount due within one year (75) (74)(77) (76)
Net REA notes 1,358 1,4151,319 1,339
American Falls bond guarantee 19,885 20,13019,885
Milner Dam note guarantee 11,700 11,700
Unamortized premium/discount -
Net (1,420) (1,441)
Debt related to investments in
affordable housing with
rates ranging from 6.03% -
8.77% due 2000 to 8.59% due 1999 to 2009 70,411 62,1032010 72,782 71,183
Amount due within one year (7,951) (5,955)(8,048) (9,025)
Net affordable housing debt 62,460 56,148
Unamortized premium/discount - (1,466) (1,539)
Net
Net Idaho Power Company64,734 62,158
Other subsidiary debt 741,397 815,314
OTHER SUBSIDIARY DEBT 452 623464 457
Total long-term debt 741,849 46 815,937824,142 48 821,558 49
TOTAL CAPITALIZATION $1,597,104$1,707,317 100 $ 1,652,302$1,680,339 100
The accompanying notes are an integral part of these
statements.
IDACORP, Inc.
Consolidated Statements of Cash Flows
NineThree Months Ended
September
30,March 31,
2000 1999 1998
(Thousands of Dollars)
OPERATING ACTIVITIES:
Net income $ 72,76142,079 $ 70,70829,501
Adjustments to reconcile net
income to net cash provided
by operating activities:
Unrealized gains from (3,971) (3,199)
energy marketing
activities
Gain on sale of asset (14,000) -
Depreciation and amortization 68,913 62,89524,144 23,383
Deferred taxes and investment
tax Credits (1,963) (656)credits 182 (489)
Accrued PCA costs 243 12,7433,112 12,185
Change in:
Accounts receivable and
(35,122) (56,060)
prepayments (7,937) (26,640)
Accrued unbilled revenue 8,386 6,8475,788 7,874
Materials and supplies and
fuel Stock (3,155) 284stock (1,272) (3,029)
Accounts payable 44,373 45,741(18,523) (6,715)
Taxes accrued 6,290 3,18724,471 19,718
Other current assets and
2,326 (5,327)
liabilities (1,462) 939
Other - net 5,701 (9,751)(5,681) (6,408)
Net cash provided by operating
Activities 168,753 130,611activities 46,930 47,120
INVESTING ACTIVITIES:
Additions to utility plant (73,113) (60,136)(24,826) (21,637)
Investments in affordable
(17,556) (19,139)
housing projects (6,817) (2,906)
Proceeds from sale of asset 17,500 -
Investments in company-owned (6,462)Company - owned
life insurance 183 (7,332)
Other - net (5,510) (7,486)(551) 5,317
Net cash used in investing
(102,641) (86,761)
activities (14,511) (26,558)
FINANCING ACTIVITIES:
Proceeds from issuance of:
Long-term debt related to 4,335 -
affordable housing projects
14,582 15,088Retirement of:
Long-term debt related to
affordable housing projects (2,736) -
First mortgage bonds (80,000) - 60,000
Retirement of subsidiary long- (6,446) (3,316)
term debt
Retirement of first mortgage - (30,000)
bonds
Dividends on common stock (52,395) (52,399)(17,456) (17,468)
Decrease in short-term
(26,894) (35,077)
borrowings (7,828) (11,812)
Other - net (619) (135)(379) (1,279)
Net cash used in financing
(71,772) (45,839)
activities (104,064) (30,559)
Net decrease in cash and cash
(5,660) (1,989)
equivalents (71,645) (9,997)
Cash and cash equivalents at
beginning 22,867 6,905 of period 111,338 22,867
Cash and cash equivalents at end
of period $ 17,20739,693 $ 4,916
period12,870
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION:
Cash paid during the period
for:
Income taxes $ 34,0172,424 $ 44,773514
Interest (net of amount
capitalized) $ 46,83616,075 $ 40,712
capitalized)14,844
The accompanying notes are an integral part of these
statements.statements
IDACORP, Inc.
Consolidated Statements of Comprehensive Income
Three Months Ended
September 30,March 31,
2000 1999 1998
(Thousands of Dollars)
NET INCOME $ 22,01942,079 $ 22,30529,501
OTHER COMPREHENSIVE INCOME:
Unrealized gains (losses) on securities
(net of tax of ($688)) (912)$90) 138 -
TOTAL COMPREHENSIVE INCOME $ 21,10742,217 $ 22,305
Nine Months Ended
September 30,
1999 1998
(Thousands of Dollars)
NET INCOME $ 72,761 $ 70,708
OTHER COMPREHENSIVE INCOME:
Unrealized gains (losses) on
securities
(net of tax of ($688) and (912) 1,915
$1,229)
Minimum pension liability
adjustment
(net of tax of $1,159) - (1,805)
TOTAL COMPREHENSIVE INCOME $ 71,849 $ 70,81829,501
The accompanying notes are an integral part of these statements.statements
IDACORP, Inc.
Notes to Consolidated Financial Statements
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Nature of Business
IDACORP, Inc. (IDACORP or the Company), is a holding company
whose principal operating subsidiary is Idaho Power Company
(IPC). On October 1, 1998 IPC's outstanding common stock was
converted on a share-for-share basis into common stock of
IDACORP. However, IPC's preferred stock and debt securities
outstanding were unaffected and remain with IPC.
IPC, a public utility, represents over 90% of the consolidated
total assets of the Company and is its principal operating
subsidiary. IPC is regulated by the FERC and the state regulatory
commissioncommissions of Idaho, Oregon, Nevada and Wyoming and is engaged
in the generation, transmission, distribution, sale and purchase
of electric energy.
Financial Statements
In the opinion of the Company, the accompanying unaudited
consolidated financial statements contain all adjustments
necessary to present fairly its consolidated financial
position as of September 30, 1999,March 31, 2000, and its consolidated results
of operations for the three and nine months ended September 30,March 31, 2000 and
1999
and 1998 and cash flows for the ninethree months ended September 30,
1999March 31,
2000 and 1998.1999. 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 therefore they should
be read in conjunction with the Company's audited
consolidated financial statements included in the Company's
Annual Report on Form 10-K for the year ended December 31,
1998.1999. The results of operations for the interim periods are
not necessarily indicative of the results to be expected for
the full year.
Principles of Consolidation
The consolidated financial statements include the accounts
of the Company and its wholly-owned or controlled
subsidiaries. All significant intercompany transactions and
balances have been eliminated in consolidation. Investments
in business entities in which the Company and its
subsidiaries do not have control, but have the ability to
exercise significant influence over operating and financial
policies, are accounted for using the equity method.
Accounting for Contracts Involved in Energy Trading and Risk
Management Activities
The Company adopted Emerging Issues Task Force 98-10 "Accounting
for Contracts Involved in Energy Trading Activities," (EITF 98-
10) effective January 1, 1999. The consensus establishes
standards for designating between energy contracts and energy
trading contracts and accounting for each. Energy trading
contracts are reported at fair value as of the balance sheet date
with the resulting gains and losses reported in the income
statement. The resulting impact of adoption on net income was
immaterial. Related to the adoption of EITF 98-10, the Company
has begun reporting electricity trading activity net (netting
revenues and expenses) in "Other Income-Energy trading activities-
net" on the Consolidated Statements of Income. Prior periods
have been reclassified to conform with the current period's
presentation with no impact to net income.
Derivative Financial Instruments
The Company uses financial instruments such as commodity
futures, forwards, futures, options and swaps to hedge againstmanage exposure to
commodity price risk in the electricity and natural gas
marketsmarkets. The objective of the Company's risk management
program is to mitigate the risk associated with the purchase
and sale of electricity and natural gas as well as to
optimize its energy tradingmarketing portfolio. The accounting for
derivative financial instruments that are used to manage
risk is in accordance with the concepts established in SFAS
NO.No. 80, "Accounting for Futures Contracts," American
Institute of Certified Public Accountants Statement of
Position 86-2, "Accounting for Options," and recently issuedEmerging Issues
Task Force (EITF) 98-10, "Accounting for Contracts Involved
in Energy Trading Activities." EITF 98-10.
Gains and losses from derivative instruments designed98-10 was adopted
effective January 1, 1999 resulting in an adjustment to hedge
energynet
income that was not material.
Energy trading contracts as defined by EITF 98-10 are
recognized
in incomereported at fair value on a current basis alongthe balance sheet with the
resulting gains and losses ofreported on the hedged transaction. Additionally, gains and losses on
derivative transactions not qualifying as a hedge are recognized
currently in income.income statement.
Cash flows from derivativesenergy trading contracts are recognized in
the statement of cash flows as an operating activity.
Reclassifications
Certain items previously reported for periods prior to September
30, 1999March
31, 2000 have been reclassified to conform with the current
period's presentation. Net income was not affected by these
reclassifications.
2. INCOME TAXES
The Company's effective tax rate for the first ninethree months
increaseddecreased from 32.936.2 percent in 19981999 to 34.235.8 percent in 1999.2000.
Reconciliations between the statutory income tax rate and
the effective rates for the nine-month periods ended September 30,
1999 and 1998 are as follows:follows (in thousands of
dollars):
Three Months Ended March 31,
2000 1999 1998
Amount Rate Amount Rate
Computed income taxes based on
statutory federal income
tax rate $ 38,69622,951 35.0% $ 36,90316,170 35.0 %
Changes in taxes resulting from:
CurrentInvestment tax credits (771) (1.2) (739) (1.6)
Repair allowance (700) (1.1) (525) (1.1)
Pension expense (479) (0.7) 21 0.1
State income taxes 2,993 4.6 2,438 5.3
Depreciation 1,693 2.6 1,360 2.9
Affordable housing tax credits (2,539) (3.9) (2,272) (4.9)
Preferred dividends of IPC 500 0.8 479 1.0
Other (152) (0.3) (232) (0.5)
Total provision for federal and
state income taxes 5,964 5.4 5,106 4.8
Net depreciation 3,952 3.6 4,005 3.8
Investment tax credits restored (2,221) (2.0) (2,197) (2.1)
Removal costs (612) (0.6) (1,037) (1.0)
Repair allowance (2,066) (1.9) (2,346) (2.2)
Affordable housing credits (6,958) (6.3) (5,160) (4.9)
Preferred dividends 1,442 1.3 1,482 1.4
Settlement of prior year tax
returns - - (1,500) (1.4)
Other (398) (0.3) (526) (0.5)
Total $ 37,799 34.2%23,496 35.8% $ 34,730 32.916,700 36.2 %
3. PREFERRED STOCK OF IDAHO POWER COMPANY:
The number of shares of IPC preferred stock outstanding were
as follows:
SeptemberMarch 31, December 30, 31,
2000 1999 1998
Cumulative, $100 par value:
4% preferred stock (authorized 215,000
158,562 159,680
shares) 156,674 158,112
Serial preferred stock, 7.68% Series
(authorized 150,000 shares) 150,000 150,000
Serial preferred stock, cumulative, without
par value; total of 3,000,000 shares
authorized:
7.07% Series, $100 stated value,
(authorized 250,000 shares) 250,000 250,000
Auction rate preferred stock, $100,000
stated value, (authorized 500 shares) 500 500
4. FINANCING:
The Company currently has a $300.0 million shelf
registration statement that can be used for the issuance of
unsecured debt securities and preferred or common stock. At
September 30, 1999,March 31, 2000, none had been issued.
On March 23, 2000, IPC currently hasfiled a $200.0 million shelf
registration statement with a balance of $83.0 million remaining to be issued. Thisthat can be used for first mortgage
bonds (including medium term notes), unsecured debt, or
preferred stock.
On January 1, 2000, IPC redeemed at maturity, $80.0 million
8.65% First Mortgage Bonds using funds from issuance of
$80.0 million Secured Medium Term Notes, Series B, 7.20%
issued on November 23, 1999.
On April 26, 2000, IPC issued $19.9 million of variable rate
bonds due February 1, 2025. Proceeds from this issuance
were used to retire $19.9 million of the American Falls bond
guarantee debt.
5. COMMITMENTS AND CONTINGENT LIABILITIES:
Commitments under contracts and purchase orders relating to
the Company's program for construction and operation of
facilities amounted to approximately $5.7$8.8 million at September 30, 1999.March
31, 2000. The commitments are generally revocable by the
Company subject to reimbursement of manufacturers'
expenditures incurred and/or other termination charges.
The Company is party to various legal claims, actions, and
complaints, certain of which involve material amounts.
Although the Company is unable to predict with certainty
whether or not it will ultimately be successful in these
legal proceedings, or, if not, what the impact might be,
based upon the advice of legal counsel, management presently
believes that disposition of these matters will not have a
material adverse effect on the Company's financial position,
results of operation, or cash flows.
6. REGULATORY ISSUES:
Power Cost Adjustment (PCA)
IPC has a PCA mechanism that provides for annual adjustments
to the rates charged to Idaho retail customers. These
adjustments, which take effect annually on May 16, are based
on forecasts of net power supply costs and the true-up of
the prior year's forecast. The difference between the
actual costs incurred and the forecasted costs is deferred,
with interest, and trued-up in the next annual rate
adjustment.
TheIPC has filed its request to implement its May 16, 19992000 rate
adjustment, reducedwhich, if approved, will increase Idaho general
business customer rates by 9.29.5 percent. The decrease was a result ofincrease
results from projected above-averagebelow-average hydroelectric
generating conditions and
the true-up of the 1998-99 rate period.conditions. Overall, IPC's annual general
business revenues are expected to decreaseincrease by $40.4$38.0 million
during the 1999-20002000-2001 PCA rate period.
For the 1999-2000 PCA rate period, actual power supply costs
have been greaterless than forecast, due to actual hydroelectric
generating conditions being lessmore favorable than forecast.
To account for these higher-than-expectedlower-than-expected costs, IPC has
recorded an
increase ina regulatory assetsasset with a credit balance of $4.2$5.0
million as of September 30,
1999.March 31, 2000.
Regulatory Settlement
Under the terms of an IPUC Settlement in effect through 1999,
when earnings in IPC's Idaho jurisdiction exceed an 11.75 percent
return on year-end common equity, 50 percent of the excess is set
aside for the benefit of Idaho retail customers.
On April 7, 1999March 28, 2000 IPC submitted the 19981999 annual earnings
sharing compliance filing to the IPUC. This filing
indicated that there was almost $6.4$9.7 million in 1999
earnings before authorized deductions,
or $3.3and $2.7 million after authorized deductions,in unused 1998 balances available
for the benefit of IPC's Idaho customers.
On June 16,December 30, 1999, IPC filed a supplementwith the IPUC to the April 7, 1999
annual earnings sharing compliance filing requesting that the
$3.3set aside
$5.4 million of remaining 1997
and 19981999 revenue sharing be refundeddollars to its customers. On July
19, 1999continue
participation in Northwest Energy Efficiency Alliance (NEEA)
for the years 2000 - 2004. The IPUC issuedapproved the continued
participation by Order No. 28099 in Case IPC-E-99-2,
refunding $0.7 million28333, and ordered IPC to special contract and large customers.
The remaining balance of $2.6 million has been deferred with
interest until May 2000.
For the nine month period ending September 30, 1999, the Company
has set
aside $4.5 million for the benefit of its Idaho retail
customers.funds in a reserve until payments are required.
DSM (Conservation) Expenses
IPC has obtained changes to the regulatory treatment of
previously deferred DSM expenses in both Idaho and Oregon.
In Idaho, IPC requested that the IPUC allow for the recovery
of post-1993 DSM expenses and acceleration of the recovery
of DSM expenditures authorized in the last general rate
case. In its Order No. 27660 issued on July 31, 1998, the
IPUC set a new amortization period of 12 years instead of
the 24-year period previously adopted. The IPUC order
reflects an increase in annual Idaho retail revenue
requirements of $3.1 million for 12
years.
Per Order No. 27660 issued July 31, 1998, IPC funded the 1998
annual revenue requirements with 1997 revenue sharing amounts
from July 1998 until May 16, 1999.million. A group of industrial
customers has appealed the IPUC order to the Idaho Supreme
Court. Oral argument before theThe Idaho Supreme Court has been set for
December 8, 1999.
In December 1998, IPC filed withissued its opinion on April
17, 2000 affirming the IPUC order. If the Court does not
receive a request to recover
remaining deferred DSM expenditures of approximately $2.1
million. IPC requested that the amount be applied against 1998
earnings sharing amounts. On May 11, 1999 IPC received Order No.
28041 allowing recovery of $1.5 million of existing and future
DSM expenditures as partpetition for reconsideration within 21 days of the
authorized deductions fromissuance of the 1998 revenue sharing funds of $6.4 million (as noted above).opinion, the opinion will be final.
In Oregon, the OPUC authorized a five-year amortization of
the Oregon-allocated share of DSM expenditures incurred
through 1997. The DSM charge replaces an expiring rate surcharge related to
extraordinary power supply costs associated with past drought
conditions. IPC anticipates that the charge will recovercommenced in 1998 and recovers
approximately $540,000 per year.
7. NEW ACCOUNTING PRONOUNCEMENT:
In June 1998 the FASB issued SFAS No. 133 "Accounting for
Derivative Instruments and Hedging Activities." This
statement establishes accounting and reporting standards for
derivative financial instruments and other similar
instruments and for hedging activities. It was originally
effective for fiscal years beginning after June 15, 1999.
In June 1999 the FASB issued SFAS No. 137 "Accounting for
Derivative Instruments and Hedging Activities - Deferral of
the Effective Date of FASB Standard No. 133", which defers
the effective date of SFAS No. 133 one year. The Company is
reviewing SFAS No. 133 to determine its effects on the
Company's financial position and results of operations. The
Company expects to adopt this standard by January 1, 2001.
8. DERIVATIVE FINANCIAL INSTRUMENTS:
The following table shows a summary of the notional amountamounts
of open commodity derivative positionsthe Company's forward exposure as of September 30, 1999 was a net long electricityMarch 31, 2000. The
maximum term related to any forward position is five
years.
Gas Electricity
MMBTU's MWh's
Payable 74,176 7,834
Receivable 77,190 9,094
Swaps 80,678 -
The following table displays the fair values of 427 MWthe
Company's energy marketing assets and a net short natural gas position of 111 BCF.
The loss in fair value of commodity derivative positions
(including natural gasliabilities at March
31, 2000, and electricity forwards, futures, options
and swaps) included in income before income taxesthe average values for the nine
monthsquarter ended September 30, 1999 was $(3.9) million.March
31, 2000 (in thousands of dollars):
Balance at 1st Quarter
March 31, 2000 Average Balance
Assets Liabilities Assets Liabilities
Gas $ 42,414 $ 42,586 $ 23,618 $ 23,583
Electricity 63,386 55,659 45,670 39,250
Total $105,800 $ 98,245 $ 69,288 $ 62,833
Notional amounts listed above reflect the volume of energy
related to transactions with counterparties, but do not
measure exposure to market or credit risks. The maximum
term detailed above also is not indicative of likely future
cash flows as positions may be offset in the markets at any
time to meet risk management guidelines.
9. INDUSTRY SEGMENT INFORMATION:
IDACORP's dominantprincipal operating segment is the regulated
utility operations of IPC. IDACORP's non-utility operating segments do
not individually constitute more than 10% of enterprise
revenues, income or assets, nor in aggregate do they comprise
more than 25% of enterprise revenues, income or assets. IPC's primary business is the
generation, transmission, distribution, purchase and sale of
electricity. Substantially all of the Company's revenue
comes from the sale of electricity and related services,
predominately in the United States.
The Company also sellsmarkets electricity and natural gas, renewable energy
related products and services, clean-energy products,
including fuel cell and photovoltaic systems, and other miscellaneous services. Revenues from these
operations are not significant.home
security, internet and satellite television services, and
manages and develops independent power projects.
The following table summarizes theIDACORP's segment information for IPC
utility operations, with a reconciliation to total enterprise
information:
IPC Total
Utility Other Enterprise
(Thousands of Dollars)
Three months ended
September
30,March 31, 2000:
Revenues $ 166,333 $ - $ 166,333
Net income 24,993 17,086 42,079
Total assets at March
31, 2000 2,317,980 322,192 2,640,172
Three months ended
March 31, 1999:
Revenues $ 161,978174,149 $ - $ 161,978174,149
Net income 16,836 5,183 22,019
Three months ended September
30, 1998:
Revenues $ 230,200 $ - $ 230,200
Net income 20,858 1,447 22,305
IPC Total
Utility Other Enterprise
(Thousands of Dollars)
Nine months ended September
30, 1999:
Revenues $ 501,200 $ - $ 501,200
Net income 62,933 9,828 72,761
Total assets at September 30,
1999 2,333,301 222,302 2,555,603
Nine months ended September
30, 1998:
Revenues $ 568,246 $ - $ 568,246
Net income 67,513 3,195 70,70826,754 2,747 29,501
Total assets at
December 31, 1998 2,310,322 141,298 2,451,6201999 2,355,907 281,086 2,636,993
INDEPENDENT ACCOUNTANTS' REPORT
IDACORP, Inc.
Boise, Idaho
We have reviewed the accompanying consolidated balance sheet
and statement of capitalization of IDACORP, Inc. and
subsidiaries as of September 30, 1999,March 31, 2000, and the related
consolidated statements of income, and comprehensive income, for the three and nine month
periods ended September 30, 1999 and 1998 and the consolidated
statements of
cash flows for the nine monththree-month periods ended September 30, 1999March 31, 2000
and 1998.1999. These financial statements are the responsibility
of the Company's management.
We conducted our review in accordance with standards
established by the American Institute of Certified Public
Accountants. A review of interim financial information
consists principally of applying analytical procedures to
financial data and of making inquiries of persons
responsible for financial and accounting matters. It is
substantially less in scope than an audit conducted in
accordance with auditing standards generally accepted auditing
standards,in the
United States of America, the objective of which is the
expression of an opinion regarding the financial statements
taken as a whole. Accordingly, we do not express such an
opinion.
Based on our review, we are not aware of any material
modifications that should be made to such consolidated
financial statements for them to be in conformity with
accounting principles generally accepted accounting principles.in the United
States of America.
We have previously audited, in accordance with auditing
standards generally accepted auditing standards,in the United States of
America, the consolidated balance sheet and statement of
capitalization of IDACORP, Inc. and subsidiaries as of
December 31, 1998,1999, and the related consolidated statements
of income, comprehensive income, retained earnings, and cash
flows for the year then ended (not presented herein); and in
our report dated January 29, 1999,31, 2000, we expressed an
unqualified opinion on those consolidated financial
statements. In our opinion, the information set forth in
the accompanying consolidated balance sheet and statement of
capitalization as of December 31, 19981999 is fairly stated, in
all material respects, in relation to the consolidated
balance sheet and statement of capitalization from which it
has been derived.
DELOITTE & TOUCHE LLP
Boise, Idaho
October 29, 1999April 28, 2000
Idaho Power Company
Consolidated Statements of Income
Three Months Ended
September
30,March 31,
2000 1999 1998
(Thousands of Dollars)
REVENUES:
General business $137,193 $ 149,411
Off-system123,213 $ 129,692
Off system sales 19,078 74,56035,925 37,510
Other revenues 5,707 6,2297,195 6,947
Total revenues 161,978 230,200166,333 174,149
EXPENSES:
Operations:Operation:
Purchased power 41,088 92,88512,890 17,888
Fuel expense 23,523 25,05424,659 22,020
Power cost adjustment (14,774) (1,338)3,258 9,007
Other 36,615 34,45535,236 32,767
Maintenance 10,903 10,7099,010 7,883
Depreciation 19,511 19,14019,887 19,171
Taxes other than income taxes 5,170 5,2585,427 5,584
Total expenses 122,036 186,163110,367 114,320
INCOME FROM OPERATIONS 39,942 44,03755,966 59,829
OTHER INCOME:
Allowance for equity funds used
during construction 322 46456 157
Energy tradingmarketing activities -
Net 7,266 2,0427,724 726
Other - Net 1,064 5,0374,726 1,952
Total other income 8,652 7,12512,906 2,835
INTEREST CHARGES:
Interest on long-term debt 13,041 13,10613,132 13,360
Other interest 2,010 2,2231,478 2,162
Allowance for borrowed funds
used during construction (247) (274)(487) (224)
Total interest expense and 14,804 15,055
othercharges 14,123 15,298
INCOME BEFORE INCOME TAXES 33,790 36,10754,749 47,366
INCOME TAXES 10,419 12,39221,024 16,582
NET INCOME 23,371 23,71533,725 30,784
Dividends on preferred stock 1,401 1,4101,428 1,368
EARNINGS ON COMMON STOCK $ 21,97032,297 $ 22,305
The accompanying notes are an integral part of these statements.
Idaho Power Company
Consolidated Statements of Income
Nine Months Ended September
30,
1999 1998
(Thousands of Dollars)
REVENUES:
General business $396,415 $ 382,631
Off-system sales 86,109 162,204
Other revenues 18,676 23,411
Total revenues 501,200 568,246
EXPENSES:
Operations:
Purchased power 81,503 145,862
Fuel expense 64,398 60,077
Power cost adjustment 424 12,951
Other 110,579 106,008
Maintenance 30,285 31,262
Depreciation 58,087 57,080
Taxes other than income taxes 16,429 16,103
Total expenses 361,705 429,343
INCOME FROM OPERATIONS 139,495 138,903
OTHER INCOME:
Allowance for equity funds used
during
construction 710 71
Energy trading activities - Net 15,852 4,911
Other - Net 3,802 10,643
Total other income 20,364 15,625
INTEREST CHARGES:
Interest on long-term debt 40,120 39,204
Other interest 5,913 6,368
Allowance for borrowed funds
used during
construction (605) (714)
Total interest charges 45,428 44,858
INCOME BEFORE INCOME TAXES 114,431 109,670
INCOME TAXES 37,480 34,730
NET INCOME 76,951 74,940
Dividends on preferred stock 4,121 4,232
EARNINGS ON COMMON STOCK $ 72,830 $ 70,70829,416
The accompanying notes are an integral part of these
statements.
Idaho Power Company
Consolidated Balance Sheets
Assets
SeptemberMarch 31, December 30, 31,
2000 1999 1998
(Thousands of Dollars)
ELECTRIC PLANT:
In service (at original cost) $2,710,168 $ 2,659,441$2,738,386 $2,726,026
Accumulated provision for
depreciation (1,060,783) (1,009,387)(1,091,961) (1,073,722)
In service - Net 1,649,385 1,650,0541,646,425 1,652,304
Construction work in progress 75,011 58,904100,629 88,348
Held for future use 1,742 1,7381,742
Electric plant - Net 1,726,138 1,710,6961,748,796 1,742,394
INVESTMENTS AND OTHER PROPERTY 113,923 105,60026,601 117,759
CURRENT ASSETS:
Cash and cash equivalents 9,400 20,0296,612 95,038
Receivables:
Customer 101,586 81,22790,813 83,412
Allowance for uncollectible (1,397) (1,397)
accounts
Natural gas - 21,426
Notes 355 4672,856 345
Employee notes 4,412 4,5104,298 4,105
Related parties - 195
Other (including $3,164 from
related
Parties at 12/31/98) 7,188 8,5023,866 7,095
Energy tradingmarketing assets 35,625 -63,385 29,096
Accrued unbilled revenues 26,224 34,61026,206 31,994
Materials and supplies (at
31,716 30,143
average cost) 27,125 28,960
Fuel stock (at average cost) 8,281 7,0968,693 9,329
Prepayments 14,393 16,01117,556 16,054
Regulatory assets associated
with income taxes 2,965 2,9654,723 893
Total current assets 240,748 225,589254,736 305,119
DEFERRED DEBITS:
American Falls and Milner water
rights 31,585 31,830
rights31,585
Company-owned life insurance 43,368 35,14939,046 40,480
Regulatory assets associated
with income taxes 202,153 201,465208,341 214,782
Regulatory assets - other 54,190 62,01347,996 52,759
Other 49,903 49,44853,061 54,496
Total deferred debits 381,199 379,905380,029 394,102
TOTAL $2,462,008 $ 2,421,790$2,410,162 $2,559,374
The accompanying notes are an integral part of these
statements.
Idaho Power Company
Consolidated Balance Sheets
Capitalization and Liabilities
SeptemberMarch 31, December 30, 31,
2000 1999 1998
(Thousands of Dollars)
CAPITALIZATION:
Common stock equity:
Common stock, $2.50 par
value (50,000,000 shares
authorized; 37,612,351
shares outstanding) $ 94,031 $ 94,031
outstanding)
Premium on capital stock 362,189 362,156362,251 362,203
Capital stock expense (3,820) (3,823)(3,816) (3,819)
Retained earnings 272,524 252,137266,932 274,181
Accumulated other
(686) 226
comprehensive income 1,671 1,534
Total common stock equity 724,238 704,727721,069 728,130
Preferred stock 105,856 105,968105,667 105,811
Long-term debt 741,849 815,937758,944 821,558
Total capitalization 1,571,943 1,626,6321,585,680 1,655,499
CURRENT LIABILITIES:
Long-term debt due within one 88,026 6,02977 89,101
year
Notes payable 10,165 38,50810,950 19,757
Accounts payable (including $88
from78,549 95,125
Notes and accounts payable to 6,555 10,076
related parties
at 9/30/99) 98,010 72,660
Accounts payable - natural gas - 28,476
Energy tradingmarketing liabilities 40,408 -55,660 25,594
Taxes accrued 31,606 25,16443,350 21,773
Interest accrued 15,842 18,36415,339 19,122
Deferred income taxes 2,965 2,9654,723 893
Other 12,575 12,11715,537 16,069
Total current liabilities 299,597 204,283230,740 297,510
DEFERRED CREDITS:
Regulatory liabilities
associated with deferred
investment tax 67,961 69,396
credits 67,087 67,433
Deferred income taxes 420,586 420,268417,208 428,923
Regulatory liabilities
associated with income taxes 28,075 28,07534,785 33,817
Regulatory liabilities - other 3,996 4,1613,365 3,363
Other 69,850 68,97571,297 72,829
Total deferred credits 590,468 590,875593,742 606,365
COMMITMENTS AND CONTINGENT
LIABILITIES
TOTAL $2,462,008 $ 2,421,790$2,410,162 $2,559,374
The accompanying notes are an integral part of these
statements.
Idaho Power Company
Consolidated Statements of Capitalization
SeptemberMarch 31, December 30, 31,
19992000 % 19981999 %
(Thousands of Dollars)
COMMON STOCK EQUITY:
Common stock $ 94,031 $ 94,031
Premium on capital stock 362,189 362,156362,251 362,203
Capital stock expense (3,820) (3,823)(3,816) (3,819)
Retained earnings 272,524 252,137266,932 274,181
Accumulated other 1,671 1,534
comprehensive (686) 226 income
Total common stock equity 724,238 46 704,727 43721,069 45 728,130 44
PREFERRED STOCK:
4% preferred stock 15,856 15,96815,667 15,811
7.68% Series, serial preferred 15,000 15,000
preferred stock
7.07% Series, serial preferred 25,000 25,000
preferred stock
Auction rate preferred stock 50,000 50,000
Total preferred stock 105,856105,667 7 105,968 7105,811 6
LONG-TERM DEBT:
First mortgage bonds:
8.65%8.65 % Series due 2000 - 80,000
80,000
6.93%6.93 % Series due 2001 30,000 30,000
6.85%6.85 % Series due 2002 27,000 27,000
6.40%6.40 % Series due 2003 80,000 80,000
8 % Series due 2004 50,000 50,000
5.83%5.83 % Series due 2005 60,000 60,000
7.20 % Series due 2009 80,000 80,000
Maturing 2021 through 2031
with rates ranging
from 7.5% to 9.52% 230,000 230,000
Total first mortgage bonds 557,000 557,000637,000
Amount due within one (80,000)year - year(80,000)
Net first mortgage 477,000bonds 557,000 bonds557,000
Pollution control revenue
bonds:
7 1/4% Series due 2008 4,360 4,360
8.30%8.30 % Series 1984 due 2014 49,800 49,800
6.05%6.05 % Series 1996A due 2026 68,100 68,100
Variable Rate Series 1996B due 24,200 24,200
due 2026
Variable Rate Series 1996C due 24,000 24,000
due 2026
Total pollution control 170,460 170,460
revenue bonds
REA notes 1,433 1,4891,396 1,415
Amount due within one year (75) (74)(77) (76)
Net REA notes 1,358 1,4151,319 1,339
American Falls bond guarantee 19,885 20,13019,885
Milner Dam note guarantee 11,700 11,700
Debt related to investments
in affordable housing with
rates ranging from 6.03%6.97% - 71,183
to 8.59%8.77% due 19992000 to 2009 70,411 62,1032010
Amount due within one year (7,951) (5,955)- (9,025)
Net affordable housing - 62,158
debt 62,460 56,148
Other subsidiary debt 452 623- 457
Unamortized premium/discount (1,420) (1,441)
- (1,466) (1,539) Net
Total long-term debt 741,849 47 815,937758,944 48 821,558 50
TOTAL CAPITALIZATION $1,571,943$1,585,680 100 $ 1,626,632$1,655,499 100
The accompanying notes are an integral part of these
statements.
Idaho Power Company
Consolidated Statements of Cash Flows
NineThree Months Ended
September
30,March 31,
2000 1999 1998
(Thousands of
Dollars)
OPERATING ACTIVITIES:
Net income $ 76,95133,725 $ 74,94030,784
Adjustments to reconcile net
income to net cash provided by operating
activities:cash:
Unrealized gains (losses)
from energy marketing
activities (4,223) 623
Depreciation and amortization 68,711 62,89522,638 23,339
Deferred taxes and investment
tax credits (1,805) (656)(34) (294)
Accrued PCA costs 243 12,7433,112 12,185
Change in:
Accounts receivable and
4,209 (56,060)
prepayments (10,435) 30,224
Accrued unbilled revenue 8,386 6,8475,788 7,874
Materials and supplies and fuel
stock (2,758) 284(484) (2,955)
Accounts payable (3,126) 45,741(14,226) (55,905)
Taxes accrued 6,442 3,18722,041 19,813
Other current assets and
2,719 (5,327)
liabilities (2,483) 905
Other - net 5,874 (9,751)(7,230) (5,416)
Net cash provided by operating
activities 165,846 134,84348,189 61,177
INVESTING ACTIVITIES:
Additions to utility plant (71,713) (60,136)(24,826) (21,057)
Investments in affordable (17,556) (19,139)
housing
projects - (2,906)
Investments in company-owned (6,462)Company - owned
life insurance 183 (7,332)
Net cash of affiliates
transferred to parent (4,737) -
Other - net (3,842) (7,486)(222) 5,032
Net cash used in investing
(99,573) (86,761)
activities (29,602) (26,263)
FINANCING ACTIVITIES:
Proceeds from issuance of:
Long-term debt related to
affordable
housing projects 14,582 15,088
First mortgage bonds - 60,000
Retirement of subsidiary long- (6,446) (3,316)
term debt
Retirement of first mortgage
- (30,000)
bonds (80,000) (877)
Dividends on common stock (52,443) (52,399)(17,456) (17,490)
Dividends on preferred stock (4,121) (4,232)(1,428) (1,368)
Decrease in short-term (28,343) (35,077)(8,017) (27,806)
borrowings
Other - net (131) (135)(112) (21)
Net cash used in financing (76,902) (50,071)(107,013) (47,562)
activities
Net decrease in cash and cash (10,629) (1,989)(88,426) (12,648)
equivalents
Cash and cash equivalents at 95,038 20,029
beginning of period 20,029 6,905
Cash and cash equivalents at end of period $ 9,4006,612 $ 4,9167,381
period
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid during the period for:
Income taxes (including
amounts paid
to parent) $ 34,2432,424 $ 44,7739
Interest (net of amount
capitalized) $ 45,83716,026 $ 40,712
capitalized)14,810
Net assets of affiliates
transferred to parent $ 22,090 $ -
The accompanying notes are an integral part of these
statements.
Idaho Power Company
Consolidated Statements of Comprehensive Income
Three Months Ended
September 30,March 31,
2000 1999 1998
(Thousands of Dollars)
NET INCOME $ 23,371 $ 23,715$33,725 $30,784
OTHER COMPREHENSIVE INCOME:
Unrealized gains (losses) on securities 138 -
(net of tax of ($688)) (912) -$90)
TOTAL COMPREHENSIVE INCOME $ 22,459 $ 23,715
Nine Months Ended
September 30,
1999 1998
(Thousands of Dollars)
NET INCOME $ 76,951 $ 74,940
OTHER COMPREHENSIVE INCOME:
Unrealized gains (losses) on
securities
(net of tax of ($688) and (912) 1,915
$2,185)
Minimum pension liability
adjustment
(net of tax of $1,159) - (1,805)
TOTAL COMPREHENSIVE INCOME $ 76,039 $ 75,050$33,863 $30,784
The accompanying notes are an integral part of these
statements.statements
Idaho Power Company
Notes to the Consolidated Financial Statements
On October 1, 1998, IDACORP, Inc. (IDACORP) became the
parent of Idaho Power Company and its subsidiaries (IPC). At that timeOn
January 1, 2000 IPC's ownership interests in two
subsidiaries were transferred to IDACORP at book value.
IPC's Consolidated Statementconsolidated balance sheet as of IncomeDecember 31, 1999
included total assets of $108 million and net assets of $22
million, and the consolidated income statement for the
nine months ending September 30, 1998quarter ended March 31, 1999 includes $2.7
millionnet income of net income$315
thousand attributable to the transferred subsidiaries.
In 1999 the gas trading operations of IPC were transferred to
another subsidiary of IDACORP. The subsidiary assumed the
accounts receivable and accounts payable related to gas trading
operations, and IPC recorded the transfer as a reduction of
accounts receivable from the subsidiary. IPC's Consolidated
Balance Sheet as of December 31, 1998 included $21.4 million of
assets and $28.4 million of liabilities related to gas
operations.
Except as modified below, the Notes to the Consolidated
Financial Statements of IDACORP also contained in this Form
10-Q Report are incorporated herein by reference insofar as they
relate to IPC.
Note 1 - Summary of Significant Accounting
Policies
Note 3 - Preferred Stock of Idaho Power Company
Note 4 - Financing
Note 5 - Commitments and Contingent Liabilities
Note 6 - Regulatory Issues
Note 7 - New Accounting Pronouncement
2. INCOME TAXES:
IPC's effective tax rate for the first ninethree months
increased from 31.735.0 percent in 19981999 to 32.838.4 percent in 1999.2000.
Reconciliations between the statutory income tax rate and
the effective rates for
the nine-month periods
ended September 30, 1999 and 1998 are as follows:follows (in thousands of
dollars):
Three Months Ended March 31,
2000 1999 1998
Amount Rate Amount Rate
Computed income taxes based on
statutory federal income tax
rate $ 40,05119,162 35.0% $ 38,38516,578 35.0 %
Changes in taxes resulting from:
CurrentInvestment tax credits (771) (1.4) (739) (1.6)
Repair allowance (700) (1.3) (525) (1.1)
Pension expense (479) (0.9) 21 0.0
State income taxes 2,508 4.6 2,438 5.1
Depreciation 1,693 3.1 1,360 2.9
Affordable housing tax credits - - (2,272) (4.8)
Other (389) (0.7) (279) (0.5)
Total provision for federal and
state income taxes 5,964 5.2 5,106 4.7
Net depreciation 3,952 3.5 4,005 3.6
Investment tax credits restored (2,221) (1.9) (2,197) (2.0)
Removal costs (612) (0.5) (1,037) (0.9)
Repair allowance (2,066) (1.8) (2,346) (2.1)
Affordable housing credits (6,958) (6.1) (5,160) (4.7)
Settlement of prior year tax
returns - - (1,500) (1.4)
Other (630) (0.6) (526) (0.5)
Total $ 37,480 32.8%21,024 38.4% $ 34,730 31.716,582 35.0 %
8. DERIVATIVE FINANCIAL INSTRUMENTS:
The following table shows a summary of the notional amountamounts
of open commodity derivative positionsIPC's forward exposure as of September 30, 1999 was a net long electricityMarch 31, 2000. The maximum
term related to any forward position of 427 MW.is five years.
Electricity
MWh's
Payable 7,834
Receivable 9,094
The loss infollowing table displays the fair value of commodity derivative positions
(including electricity forwards, futures, optionsIPC's energy
marketing assets and swaps)
included in income before income taxesliabilities (all electricity) at March
31, 2000, and the average values for the nine monthsquarter ended September 30, 1999 was $5.0 million.March
31, 2000 (in thousands of dollars):
Balance at March 31, 1st Quarter Average
2000 Balance
Assets Liabilities Assets Liabilities
$ 63,385 $ 55,660 $ 45,670 $ 39,250
9. INDUSTRY SEGMENT INFORMATION:
IPC's dominant operating segment is its regulated utilityelectric
operations. IPC's non-utility operating segments do not
individually constitute more than 10%10 percent of enterprise
revenues, net income or total assets, nor in aggregate do
they comprise more than 25%25 percent of enterprise revenues,
net income or total assets.
IPC's primary business is the generation, transmission,
distribution, purchase and sale of electricity.
Substantially all of IPC's revenue comes from the sale of
electricity and related services, predominately in the
United States. IPC subsidiaries also sell renewable energy productsmarkets electricity and systems, and
miscellaneousprovides
other energy-related services. These revenues, however, are not
significant.
The following table summarizes theIPC's segment information for
the regulated electric operations, with a reconciliation to
total enterprise information:
Regulated
Electric Total
Operations Other Enterprise
(Thousands of Dollars)
Three months ended September
30,March 31,
2000:
Revenues $ 166,333 $ - $ 166,333
Net income 26,421 7,304 33,725
Total assets at March 31, 2000 2,317,980 91,595 2,409,575
Three months ended March 31,
1999:
Revenues $ 161,978174,149 $ - $ 161,978174,149
Net income 16,836 6,535 23,371
Three months ended September
30, 1998:
Revenues $ 230,200 $ - $ 230,200
Net income 20,858 2,857 23,715
Regulated
Electric Total
Operations Other Enterprise
(Thousands of Dollars)
Nine months ended September
30, 1999:
Revenues $ 501,200 $ - $ 501,200
Net income 62,933 14,018 76,951
Total assets at September 30,
1999 2,333,301 128,707 2,462,008
Nine months ended September
30, 1998:
Revenues $ 568,246 $ - $ 568,246
Net income 67,513 7,427 74,94028,122 2,662 30,784
Total assets at December 31,
1998 2,312,919 108,871 2,421,7901999 2,355,907 203,467 2,559,374
INDEPENDENT ACCOUNTANTS' REPORT
Idaho Power Company
Boise, Idaho
We have reviewed the accompanying consolidated balance sheet
and statement of capitalization of Idaho Power Company and
subsidiaries as of September 30, 1999,March 31, 2000, and the related
consolidated statements of income, and comprehensive income, for
the three and nine month periods ended September 30, 1999 and
1998 and the consolidated statements of
cash flows for the nine
monththree-month periods ended September 30, 1999March 31, 2000
and 1998.1999. These financial statements are the responsibility
of the Company's management.
We conducted our review in accordance with standards
established by the American Institute of Certified Public
Accountants. A review of interim financial information
consists principally of applying analytical procedures to
financial data and of making inquiries of persons
responsible for financial and accounting matters. It is
substantially less in scope than an audit conducted in
accordance with auditing standards generally accepted auditing
standards,in the
United States of America, the objective of which is the
expression of an opinion regarding the financial statements
taken as a whole. Accordingly, we do not express such an
opinion.
Based on our review, we are not aware of any material
modifications that should be made to such consolidated
financial statements for them to be in conformity with
accounting principles generally accepted accounting principles.in the United
States of America.
We have previously audited, in accordance with auditing
standards generally accepted auditing standards,in the United States of
America, the consolidated balance sheet and statement of
capitalization of Idaho Power Company and subsidiaries as of
December 31, 1998,1999, and the related consolidated statements
of income, comprehensive income, retained earnings, and cash
flows for the year then ended (not presented herein); and in
our report dated January 29, 1999,31, 2000, we expressed an
unqualified opinion on those consolidated financial
statements. In our opinion, the information set forth in
the accompanying consolidated balance sheet and statement of
capitalization as of December 31, 19981999 is fairly stated, in
all material respects, in relation to the consolidated
balance sheet and statement of capitalization from which it
has been derived.
DELOITTE & TOUCHE LLP
Boise, Idaho
October 29, 1999April 28, 2000
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERTIONS
In Management's Discussion and Analysis we explain the
general financial condition and results of operations for
IDACORP, Inc. and subsidiaries (IDACORP or the Company) and
for Idaho Power Company and subsidiaries (IPC). IPC, an
electric utility, is IDACORP's principal operating
subsidiary, accounting for over 90
percent of IDACORP's assets, revenue and net income. Unlesssubsidiary. Except where we indicate otherwise, this
discussion explains the material changes in results of
operations and the financial condition of both the Company
and IPC. This discussion should be read in conjunction with
the accompanying consolidated financial statements of both
IDACORP and IPC.
This discussion updates the discussion that we included in
our Annual Report on Form 10-K for the year ended December
31, 1998.1999. This discussion should be read in conjunction
with the discussion in the annual report.
We have reclassified our electricity trading activities from "Off-
system sales" and "Purchased power" to "Energy trading activities
- - net" on the Consolidated Statements of Income for all periods
presented. This change was made to more clearly report the
results of our utility operations and our energy trading
activities.
FORWARD-LOOKING INFORMATION:
In connection with the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995 (Reform Act), we
are hereby filing cautionary statements identifying
important factors that could cause our actual results to
differ materially from those projected in forward-looking
statements (as such term is defined in the Reform Act) made
by or on behalf of the Company and IPC in this quarterly
report on Form 10-Q, in presentations, in response to
questions or otherwise. 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", "estimates", "expects",
"intends", "plans", "predicts", projects", "will likely
result", "will continue", or similar expressions) are not
statements of historical facts and may be forward-looking.
Forward-looking statements involve estimates, assumptions,
and uncertainties and are qualified in their entirety by
reference to, and are accompanied by, the following
important factors, which are difficult to predict, contain
uncertainties, are beyond our control and may cause actual
results to differ materially from those contained in forward-lookingforward-
looking statements:
- -
prevailing governmental policies and regulatory
actions, including those of the FERC, the IPUC, the OPUC,
and the PUCN, with respect to allowed rates of return,
industry and rate structure, acquisition and disposal of
assets and facilities, operations and construction of plant
facilities, recovery of purchased power and other capital
investments, and present or prospective wholesale and retail
competition (including but not limited to retail wheeling
and transmission costs);
- - economic and geographic factors including political and
economic risks;
- -
changes in and compliance with environmental and safety
laws and policies;
- - weather conditions;
- -
population growth rates and demographic patterns;
- - competition for retail and wholesale customers;
- - Year 2000 issues;
- - pricing and transportation of commodities;
- -
market demand, including structural market changes;
- -
changes in tax rates or policies or in rates of
inflation;
- - changes in project costs;
- -
unanticipated changes in operating expenses and capital
expenditures;
- - capital market conditions;
- -
competition for new energy development opportunities;
and
- -
legal and administrative proceedings (whether civil or
criminal) and settlements that influence the business and
profitability of the Company.
Any forward-looking statement speaks only as of the date on
which such statement is made, and we undertake no obligation
to update any forward-looking statement to reflect events or
circumstances after the date on which such statement is made
or to reflect the occurrence of unanticipated events. 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.
RESULTS OF OPERATIONS:
Earnings per Share and Book Value of IDACORP Common Stock:
Earnings per share (EPS) of IDACORP common stock (basic and
diluted) was $0.59$1.12 for the quarter ended September 30, 1999, the same as the amount
reported forMarch 31, 2000, an
increase of $0.34 over the same quarter of 1998. Year-to-date, earnings
were $1.93 per share, $0.05 (2.7 percent) above last year. The
increase in EPS was due primarily to two factors, the sale
of the Hermiston Power Project, which increased EPS
approximately $0.22 and improved results from energy
marketing activities, which increased EPS approximately
$0.13. These factors are discussed below in "Other Income."
At September 30, 1999,March 31, 2000, the book value per share of IDACORP
common stock was $19.92,$20.67, compared to $19.41$20.02 at the same date in 1998.December 31,
1999.
General Business Revenue
Our general business revenue is dependent on many factors,
including the number of customers we serve, the rates we
charge, and economic and weather conditions (temperature and
precipitation) in our service territory.
Compared to the same periodsperiod in 1998,1999, the number of general
business customers we served increased 2.9 percent for the second
quarter and 3.0 percent year-to-date.2.8 percent. This
increase was due primarily to economic growth in our service
territory.
Our revenue per MWh decreased 10.77.8 percent for the quarter and
0.5 percent year-to-date, compared to 1998.1999.
Changes in revenue per MWh result primarily from the annual
rate adjustments authorized by regulatory authorities.
These adjustments are discussed below in "PCA" and
"Regulatory Settlement."
DryChanges in weather conditions during the growing season contributed to
increaseddid not significantly affect
sales of energy. MWh sales to irrigation customers
increased 13.2 percent for the quarter and year-to date over 1998
amounts.
Temperatures also affected sales during thethis quarter. Combined,
heatingHeating degree-days, and cooling degree-days,a common measuresmeasure
used in the utility industry to analyze demand, were below
19981999 levels by 23.72.5 percent.
Sales (in MWhs) to commercial and industrial customers
increased 5.1 percent for the quarter. Comparedquarter, due primarily to
1998, the average
kWh's sold per general business customer (excluding irrigation)
decreased 3.1 percent for the quarter.economic factors.
The combination of these factors resulted in a decrease in
general business revenue decreases of $12.2$6.5 million (8.2 percent)compared to 1999.
Power Supply
Power supply components of income from operations include
off-system sales and purchased power, fuel, and PCA
expenses. There has been a reduction in both the off-system
sales and purchased power components of power supply,
primarily as a result of less hydro energy available for
the quartersale, general business load growth and increases of $13.8 million (3.6 percent) year-to-date
compared to 1998.
Off-System Salesin thermal
production.
Off-system sales, which consistconsisting primarily of long-term sales
contracts and opportunity sales of surplus system energy
decreased by $55.5$1.6 million (74.4 percent) for the quarterfrom last year and $76.1 million
(46.9 percent) year-to-date. The decreased sales are primarily a
result of lower market prices and less surplus system energy available
for sale in 1999.
Expenses
Purchasedpurchased power
expenses decreased $51.8$5.0 million.
Fuel expenses increased $2.6 million, (55.8 percent) for
the quarter and $64.4 million (44.1 pecent) year-to-date, due primarily to decreases in MWhs purchased of 49.3 percent for the quarter and 39.6
percent year-to-date, and to favorable market prices. The decreased
quantities are due primarily to reductions in system requirements in
1999.
Fuel expenses decreased $1.5 million (6.1 percent) for the
quarter and increased $4.3 million (7.2 percent) year-to-date.
The decrease for the quarter is due primarily to lower coal
prices, offset by a 2.215
percent increase in MWhs generated at our coal firedcoal-fired plants. The year-to-date increase is due primarily to
a 10.1 percent increase in MWhs generated, offset by lower coal
prices.
The PCA component of expenses decreased $13.4 million for the
quarter and $12.5 million year-to-date.$5.7 million. The
PCA expense component is related to our PCA regulatory
mechanism, which increases expense when actual power supply
costs are below the costs forecasted in the annual PCA
filing, and decreases expense when actual power supply costs
are above the forecast. In the third
quarter ofboth 1999 and 2000, actual power
supply costs were above what had
been forecast,less than forecasted, resulting in a large PCA
credit. The 1999
forecast used to set the 1999-2000 PCA rate adjustment
anticipated better than normal streamflow conditions. Actual
conditions have not been as favorable as forecasted and are
discussed below in "Streamflow Conditions."expenses. We discuss the PCA in more detail below in "PCA."
The impact of these changes in net power supply costs is a
decrease in net expense in 2000 of $8.1 million.
Other expenses
Other operating expenses increased $2.2 million (6.3 percent) for
the quarter and $4.6 million (4.3 percent) year-to-date.$2.5 million. The
increase for the quarter is due primarily to increases in
administration expenses and costs of generation at our coal-fired
generating facilities, offset by a decrease in costs for
electricity transmitted by others. The year-to-date
increase is due primarily to increases in payroll and
related expenses, electricity wheeling expenses, and
amortization of DSM costs, of generation atoffset by a reduction in pension
costs for our coal-
fired generating facilities.defined benefit pension plan.
Other Otherincome
IDACORP's other income increased for the quarter, and year-to-date, due
primarily to the sale of our interest in the Hermiston Power
Project, a 536 MW, gas-fired cogeneration project located
near Hermiston, Oregon. We recorded a pre-tax gain of $14.0
million on this transaction. This item does not affect
IPC's financial statements because Ida-West, the developer
of the Hermiston project, is a subsidiary of IDACORP, and
not IPC.
In addition, improved results from energy marketing
activities.
Theactivities increased IDACORP's other income by $7.8 million
and IPC's other income by $7.0 million. This increase for 1999 over 1998 was reducedis
due to a one-time
demand side management accounting adjustment, madean increase in the third
quarter 1998, for carrying charges for the 1994-97 period. Other
income for IDACORP was also decreased by costs incurred by new
subsidiaries and other diversified business operations.volumes over last year as well as
favorable market conditions.
Income taxes
decreasedIncome taxes increased for the quarter, and increased year-to-
date. These changes were due primarily to changesthe
increases in net income before taxes, the impacttaxes. IPC's effective tax
rate also increased because of a reduction of affordable
housing tax settlement that reduced
expenses in 1998, and changescredits. On January 1, 2000, IPC transferred
its IDACORP Financial Services (IFS) subsidiary to IDACORP.
IFS invests in affordable housing projects for which the tax
credits.credits are earned.
LIQUIDITY AND CAPITAL RESOURCES:
Cash Flow
For the ninethree months ended September 30, 1999,March 31, 2000, IDACORP generated
$168.8$46.9 million in net cash from operations. After deducting
for common stock dividends, net cash generation from
operations provided approximately $116.4$29.5 million for our
construction program and other capital requirements.
Cash Expenditures
We estimate that our total cash construction expenditures
for 19992000 will be approximately $105$121 million. This estimate
is subject to revision in light of changing economic,
regulatory, and environmental factors. During the first
ninethree months of 1999,2000, we spent approximately $73.1$24.8 million
for construction. Our primary financial commitments and
obligations are related to contracts and purchase orders
associated with ongoing construction programs. To the
extent required, we expect to finance these commitments and
obligations by using both internally generated funds and
externally financed capital. At September 30, 1999,March 31, 2000, our short-termshort-
term borrowings totaled $11.6$11.9 million.
Financing Program
IDACORP has a $300.0 million shelf registration statement
that can be used for the issuance of unsecured debt
securities and preferred or common stock. At September 30, 1999,March 31,
2000, none had been issued.
On March 23, 2000, IPC hasfiled a $200.0 million shelf
registration statement that can be used for both First
Mortgage bondsBonds (including Medium Term Notes)
and, Preferred
Stock, and unsecured debt. At March 31, 2000, none had been
issued.
On April 26, 2000, IPC issued $19.9 million of which $83.0variable
rate bonds due February 1, 2025. Proceeds from this
issuance were used to retire $19.9 million remains available at
September 30, 1999.of the American
Falls bond guarantee debt.
REGULATORY ISSUES:
Power Cost Adjustment (PCA)
IPC has a PCA mechanism that provides for annual adjustments
to the rates we chargecharged to our Idaho retail electric customers.
These adjustments, which take effect annually on May 16, are
based on forecasts of net power supply costs, and the true-uptrue-
up of the prior year's forecast. The difference between the
actual costs incurred and the forecasted costs is deferred,
with interest, and trued-up in the next annual rate
adjustment.
Our May 16, 1999 rate adjustment reduced Idaho general
business customer rates by 9.2 percent. The decrease was
the result of projected above-average hydroelectric
generating conditions and the true-up of the 1998-99 rate
period. Overall, IPC's annual general business revenues
arewere expected to decrease by $40.4$40 million during the 1999-
2000 PCA rate period.
In April 2000 we filed our proposed May 16, 2000 PCA
adjustment, which, if approved, will increase Idaho general
business customer rates by 9.5 percent. The increase
results from projected below-average hydroelectric
generating conditions (see "Streamflow Conditions" below)
and the true-up of the 1999-2000 rate period. Overall,
IPC's annual general business revenues are expected to
increase by $38 million during the 2000-2001 rate period.
For the 1999 - 2000 PCA rate year, actual power supply costs
have been greaterless than forecast, due to actual hydroelectric
generating conditions being lessmore favorable than forecast.
To account for these higher-than-expectedlower-than-expected costs, we have
recorded a regulatory asset with a credit balance of $4.2$5.0
million as of September 30, 1999.March 31, 2000.
Regulatory Settlement
IPC hashad a settlement agreement with the IPUC that remains in
effect throughexpired at
the end of 1999. Under the terms of the settlement, when
earnings in our Idaho jurisdiction exceedexceeded an 11.75 percent
return on year-end common equity, we set aside 50 percent of
the excess for the benefit of our Idaho retail customers.
On April 7, 1999In March 2000 we submitted our 19981999 annual earnings sharing
compliance filing to the IPUC. This filing indicated that
there was almost $6.4$9.7 million in 1999 earnings before authorized deductions,
or $3.3and $2.7
million after authorized deductions,in unused 1998 reserve balances available for the
benefit of our Idaho customers.
On June 16,In December 1999 we filed with the IPUC to set aside $5.4
million of 1999 revenue sharing dollars to continue
participation in Northwest Energy Efficiency Alliance (NEEA)
for the years 2000 - 2004. The IPUC approved the continued
participation by Order No. 28333, and ordered IPC filedto set
aside the funds in a supplementreserve until payments are required.
DSM (Conservation) Expenses
In Idaho, IPC requested that the IPUC allow for the recovery
of post-1993 DSM expenses and acceleration of the recovery
of DSM expenditures authorized in the last general rate
case. In its Order No. 27660 issued on July 31, 1998, the
IPUC set a new amortization period of 12 years instead of
the 24-year period previously adopted. The IPUC order
reflects an increase in annual Idaho retail revenue
requirements of $3.1 million. A group of industrial
customers has appealed the IPUC order to the Idaho Supreme
Court. The Idaho Supreme Court issued its opinion on April
7, 1999
annual earnings sharing compliance filing requesting that the
$3.3 million of remaining 1997 and 1998 revenue sharing be
refunded to its customers. On July 19, 199917, 2000 affirming the IPUC issued
Order No. 28099 in Case IPC-E-99-2, refunding $0.7 million to
special contract and large customers. The remaining balance of
$2.6 million has been deferred with interest until May 2000.
Fororder. If the nine month period ending September 30, 1999, we have set
aside $4.5 millionCourt does not
receive a petition for reconsideration within 21 days, the
benefit of our Idaho retail customers.opinion will be final.
OTHER MATTERS:
Energy Trading
EnergyMarketing
Over the last three years we have been implementing a
strategy to become a competitive energy provider throughout
the western markets. In order to compete as an energy
provider of choice we needed to build a foundation of an
effective and efficient trading activityoperation that competently
participates in the electricity, natural gas and other
related markets. In 1997 we opened natural gas trading
operations in Houston, Texas and in Boise, Idaho. We also
began to expand our electricity marketing, which, along with
natural gas, is reported on a fair value basis with
gains and losses recordedincluded in other income. InherentWe have seen
increasing positive results from our strategy. Our natural
gas marketing capability continues to expand as the
electricity and natural gas markets move toward convergence,
and our electricity marketing efforts have resulted in
volume and income increases each year since inception of the
strategy. While building this business capability over the
last three years, we have also been developing appropriate
controls to mitigate the operational, market and credit risks
inherent in the energy trading business are risks related to
market movements and the creditworthiness of counterparties.marketing business.
When buying and selling energy, the high volatility of
energy prices can have a significant impact on profitability
if not managed. Also, counterparty creditworthiness is key
to ensuring that transactions entered into withstand
dramatic market fluctuations. To mitigatemanage these risks while
implementing our business strategy, the Board of Directors gave approval for executive management to
formCompany has a Risk
Management Committee, composedcomprised of Company officers, of IDACORP
and subsidiaries, to
oversee athe risk management program.program as defined in the risk
management policy. The program is intended to minimize
fluctuations in earnings while managing the volatility inof
energy prices. Embedded within the
Risk Management policy and procedures is a credit policy
requiring a credit evaluation of all counterparties. The
objective of our risk management program is to mitigateprices by mitigating commodity price risk, credit
risk, and other risks related to the energy trading business.business
Streamflow Conditions
We monitor the effect of streamflow conditions on Brownlee
Reservoir, the water source for our three Hells Canyon
hydroelectric projects. In a typical year, these three
projects combine to produce about half of our generated
electricity.
Inflows into Brownlee result from a combination of
precipitation, storage, and ground water conditions. InflowsThe
National Weather Service's projected inflows into Brownlee
were 7.93.9 MAF for the 1998-92000-2001 water year, compared to the
70-year median of 4.9 MAF and 1998's 8.81999's 7.9 MAF.
Year 2000
Many existing computer systems use only two digits to identify a
year in the date field. These programs were designed and
developed without considering the impact of the upcoming change
in the century. Unless proper modifications are made, the
program logic in many of these systems will start to produce
erroneous results because, among other things, the systems will
read the date "01/01/00" as being January 1 of the year 1900 or
another incorrect date. In addition, the systems may fail to
detect that the year 2000 is a leap year. Similar problems could
arise prior to the year 2000 as dates in the next millennium are
entered into systems that are not Year 2000 compliant.
We recognize the Year 2000 problem as a serious threat to the
Company and our customers. Our Year 2000 effort has been
underway for over two years and is being addressed at the highest
levels within the Company. IPC's Vice President of Corporate
Services is responsible for coordinating the corporate effort.
IPC vice presidents and other IDACORP subsidiary presidents are
responsible for addressing the problem within their respective
business units and each has assigned a Year 2000 Project Leader
to execute the project plan. Each subsidiary president is
responsible for addressing the problem within their subsidiary in
coordination with the corporate effort. In addition, we have a
full-time Year 2000 Project Manger to direct the project.
Additional staff has been committed to complete the conversion
and implementation needed to bring non-compliant items into
compliance. At its peak, there were over 20 full-time employees
devoted to the project with dozens of others involved to varying
degrees. Third parties have completed technical and legal audits
of our plan. With respect to these audits, we have implemented
their recommendations as recommended by the Y2K Steering
Committee. The legal audit recommendations are also being
implemented.
As of September 1999 we consider ourselves ready for the Year
2000. This means that all critical systems are believed to be
capable of handling the century rollover and that we will be able
to continue servicing our customers as usual. Also, we have
identified all of the less critical systems and contingency
and/or repair plans are in place for dealing with the change of
century.
We are following a detailed project plan. The methodology is
modeled after those used by some of the top companies in the
world and has been adapted to meet our unique requirements. This
process includes all the phases and steps commonly found in such
plans, including the (i) identification and analysis of critical
systems, key manufacturers, service providers, embedded systems
and generation plants (parts of which are owned by IPC but are
operated by other electric utilities), (ii) remediation and
testing, (iii) education and awareness and (iv) contingency
planning.
We have identified the critical systems that must be Year 2000
compliant in order to continue operations. Each of these is now
Year 2000 ready. The largest of these critical systems and their
status regarding compliance are described below:
System Description Status
Business The business systems include the PeopleSoft and
Systems financial and administrative Passport are
functions common to most both compliant
companies. Business systems vendor
include accounts payable, packages.
general ledger, accounts Testing to
receivable, labor entry, verify
inventory, purchasing, cash compliance is
management, budgeting, asset complete.
management, payroll, and
financial reporting.
Customer This system is used to bill In-house
Information customers, log calls from system has
System customers and create service or been repaired.
work requests and track them Testing to
through completion, among other verify
things. At this time, the compliance is
Company uses an in-house complete.
developed, mainframe-based
Customer Information System to
accomplish these tasks.
Energy The most critical function the The packages
Management Company offers is the delivery comprising the
System of electricity from the source EMS are fully
to the consumer. This must be compliant with
done with minimal interruption the latest
in the midst of high demand, releases.
weather anomalies and equipment Testing and
failures. To accomplish this, rollout are
the Company relies on a server- now complete.
based energy management system
provided by Landis & Gyr. This
system monitors and directs the
delivery of electricity
throughout the Company's service
area.
Metering The Company relies on several In-house code
Systems processes for metering has been
electricity usage, including repaired and
some hand-held devices with tested.
embedded chips. It is critical Vendor
for metering systems to operate packages have
without interruption so as not been upgraded.
to jeopardize the Company's Testing of
revenue stream. critical
components is
complete.
Embedded There is a category of systems Testing is
Systems on which the Company is highly complete.
reliant called embedded systems.
These are typically computer
chips that provide for automated
operations within some device
other than a computer such as a
relay or a security system. The
Company is highly reliant on
these systems throughout its
generation and delivery systems
to monitor and allow manual or
automatic adjustments to the
desired devices. Those devices
with chips that were not Year
2000 compliant, where the chip
affected the application of the
device, were replaced.
Other Systems The Company also relies on a In various
number of other important stages of
systems to support engineering, repair and
human resources, safety and testing.
regulatory compliance, etc.
Regarding third parties, the plan methodology has required us to
identify those third parties with which we have a material
relationship. We have identified as material (1) our ownership
interest in thermal generating facilities which are operated and
maintained by third party electric utilities; (2) our fuel
suppliers for those thermal generating facilities; and (3) our
telecommunication providers. In addition, we have identified 93
key manufacturers that provide materials and supplies to us.
With respect to the thermal plants, fuel suppliers and
telecommunication providers, members of the Year 2000 team have
met periodically with the third parties to assess their status
and are satisfied with their efforts. Our survey of the 93 key
manufacturers has shown them to be Year 2000-ready to our
satisfaction.
Finally, we are connected to an electric grid that connects
utilities throughout the western portion of North America. This
interconnection is essential to the reliability and operational
integrity of each connected utility. This also means that
failure of one electric utility in the interconnected grid could
cause the failure of others. In the context of the Year 2000
problem, this interconnectivity compounds the challenge faced by
the electric utility industry. Our Company could do a very
thorough and effective job of becoming Year 2000 compliant and
yet encounter difficulties supplying services and energy because
another utility in the interconnected grid failed to achieve Year
2000 compliance. In this regard, we are working closely with
other electric industry organizations concerned with reliability
issues and technical collaboration. As part of this
collaboration we participated and successfully completed our
roles in nationwide Y2K drills for electric utilities, held in
April and September 1999.
Our estimate of the cost of the Year 2000 plan remains at
approximately $5.3 million. This amount includes $3.6 million of
costs already incurred and estimated costs through the year 2000.
This level of expenditure is not expected to have any material
effect on our operations or our financial position. Funds to
cover Year 2000 costs in 1999 have been budgeted by business
entity and within the Information Services Department with
approximately ten percent of the Information Services budget used
for remediation. No information services department projects
have been deferred due to the Company's year 2000 efforts.
The Year 2000 issue poses risks to our internal operations due to
the potential inability to carry on our business activities and
from external sources due to the potential impact on the ability
of our customers to continue their business activities. The
major applications that pose the greatest risks internally are
those systems, embedded or otherwise, which impact the
generation, transmission and distribution of energy and the
metering and billing systems. The potential risks related to
these systems are electric service interruptions to customers and
associated reduction in loads and revenue and interrupted data
gathering and billing and the resultant delay in receipt of
revenues. All of this would negatively impact our relationship
with our customers, which might increase the likelihood of losing
customers in a restructured industry. Externally, those
customers that inadequately prepare for the Year 2000 issue may
be unable to continue their business activities. This would
affect us in a number of ways. Our loads and revenue would be
reduced because of the lost load from discontinued business
activities, and customers who lose jobs because of discontinued
business activities may face difficulties in paying their power
bills. The impact of this on us is dependent upon the number and
size of those businesses that are forced to discontinue business
activities because of the Year 2000 issue.
The final phase of our Year 2000 Methodology is contingency
planning. The contingency planning focused on the identification
of internal risks beginning with a listing of the Company's core
business processes, prioritized in order of importance and the
identification of key sub-processes under each process for which
it was determined that a contingency plan might be necessary.
This methodology was adapted, in part, from the Company's normal
business practice where the Company maintains and periodically
initiates various contingency plans to maintain and restore its
energy services during emergency circumstances, some of which
could arise from Year 2000 related problems. In addition, the
Company is coordinating its Year 2000 readiness efforts,
including contingency planning with various trade associations
and industry groups. Contingency plans were developed for a
number of critical infrastructure areas including, but not
limited to communications, including voice, data and corporate;
generation; distribution; transmission; substations; call center,
metering and billing.
The Company believes that its contingency plans will adequately
handle problem(s) which may develop in any of our critical
infrastructure areas. The Company will continue to review its
contingency plan to identify and further enhancements or updates
related to Year 2000.
New Accounting Pronouncement
In June 1998 the FASB issued SFAS No. 133 "Accounting for
Derivative Instruments and Hedging Activities." This
statement establishes accounting and reporting standards for
derivative financial instruments and other similar
instruments and for hedging activities. In June 1999 the
FASB issued SFAS No. 137 "Accounting for Derivative
Instruments and Hedging Activities - Deferral of the
Effective Date of FASB Standard No. 133" which defers the
effective date of SFAS No. 133 until fiscal years beginning
after June 15, 2000. We are reviewing SFAS No. 133 to
determine its effects on our financial position and results
of operations. We expect to adopt this statement by January
1, 2001.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit File Number As
Exhibit
*2 333-48031 2 Agreement and Plan of Exchange
between IDACORP, Inc., and IPC
dated as of February 2, 1998.
*3(a) 33-00440 4(a)(xiii) Restated Articles of Incorporation
of IPC as filed with the Secretary
of State of Idaho on June 30, 1989.
*3(a)(i) 33-65720 4(a)(ii) Statement of Resolution
Establishing Terms of Flexible
Auction Series A, Serial Preferred
Stock, Without Par Value
(cumulative stated value of
$100,000 per share) of IPC, as
filed with the Secretary of State
of Idaho on November 5, 1991.
*3(a)(ii) 33-65720 4(a)(iii) Statement of Resolution
Establishing Terms of 7.07% Serial
Preferred Stock, Without Par Value
(cumulative stated value of $100
per share) of IPC, as filed with
the Secretary of State of Idaho on
June 30, 1993.
*3(b) 33-41166 4(b) Waiver resolution to Restated
Articles of Incorporation of IPC
adopted by Shareholders on May 1,
1991.
*3(c) 1-3198 3(c) By-laws of IPC amended on September
Form 10-Q 9, 1999, and presently in effect.
for 9/30/99
*3(d) 33-56071 3(d) Articles of Share Exchange,
of IDACORP, Inc. as
filed with the Secretary of State
of Idaho on September 29, 1998.
*3(e) 333-64737 3.1 Articles of Incorporation of
IDACORP, Inc.
*3(f) 333-64737 3.2 Articles of Amendment to Articles
of Incorporation of IDACORP, Inc.
as filed with the Secretary of
State of Idaho on March 9, 1998.
*3(g) 333-00139 3(b) Articles of Amendment to Articles
of Incorporation of IDACORP, Inc.
creating A Series Preferred Stock,
Without Par Value,without par value, as filed with
the Secretary of State of Idaho on
September 17, 19981998.
*3(h) 1-3198 3(h)1-14465 3(c) Amended By-lawsBylaws of IDACORP, Inc. as
Form 10-Q Inc. as of July 8, 1999.
for 6/30/99
*4(a)(i) 2-3413 B-2 Mortgage and Deed of Trust, dated
as of October 1, 1937, between IPC
and Bankers Trust Company and
R. G. Page, as Trustees.
*4(a)(ii) IPC Supplemental Indentures to
Mortgage and Deed of Trust:
Number Dated
1-MD B-2-a First July 1, 1939
2-5395 7-a-3 Second November 15, 1943
2-7237 7-a-4 Third February 1, 1947
2-7502 7-a-5 Fourth May 1, 1948
2-8398 7-a-6 Fifth November 1, 1949
2-8973 7-a-7 Sixth October 1, 1951
2-12941 2-C-8 Seventh January 1, 1957
2-13688 4-J Eighth July 15, 1957
2-13689 4-K Ninth November 15, 1957
2-14245 4-L Tenth April 1, 1958
2-14366 2-L Eleventh October 15, 1958
2-14935 4-N Twelfth May 15, 1959
2-18976 4-O Thirteenth November 15, 1960
2-18977 4-Q Fourteenth November 1, 1961
2-22988 4-B-16 Fifteenth September 15, 1964
2-24578 4-B-17 Sixteenth April 1, 1966
2-25479 4-B-18 Seventeenth October 1, 1966
2-45260 2(c) Eighteenth September 1, 1972
2-49854 2(c) Nineteenth January 15, 1974
2-51722 2(c)(i) Twentieth August 1, 1974
2-51722 2(c)(ii) Twenty-first October 15, 1974
2-57374 2(c) Twenty-second November 15, 1976
2-62035 2(c) Twenty-third August 15, 1978
33-34222 4(d)(iii) Twenty-fourth September 1, 1979
33-34222 4(d)(iv) Twenty-fifth November 1, 1981
33-34222 4(d)(v) Twenty-sixth May 1, 1982
33-34222 4(d)(vi) Twenty-seventh May 1, 1986
33-00440 4(c)(iv) Twenty-eighth June 30, 1989
33-34222 4(d)(vii) Twenty-ninth January 1, 1990
33-65720 4(d)(iii) Thirtieth January 1, 1991
33-65720 4(d)(iv) Thirty-first August 15, 1991
33-65720 4(d)(v) Thirty-second March 15, 1992
33-65720 4(d)(vi) Thirty-third April 16,1, 1993
1-3198 4 Thirty-fourth December 1, 1993
Form 8-K
Dated
12/17/93
*4(b) 1-3198 4(b)33-65720 10(c) Instruments relating to IPC
American Falls bond guarantee. (see
Exhibit 10(c)).
*4(c) 33-65720 4(f) Agreement of IPC to furnish Form 10-Q certain
debt instruments.
for 6/30/99
*4(c) 33-65720 4(e) Rights*4(d) 33-00440 2(a)(iii) Agreement and Plan of Merger dated
January 11, 1990,March 10, 1989, between IPCIdaho Power
Company, a Maine Corporation, and
First Chicago Trust
Company of New York, as
Rights Agent (The Bank of
New York, successor Rights
Agent).
*4(c)(i) 1-3198 4(e)(i) Amendment dated as of
Form 10-K January 30, 1998, related to
for 1997 agreement filed as Exhibit
4(c).
*4(d)Idaho Power Migrating Corporation.
*4(e) 1-14465 4 Rights Agreement, dated as of
Form 8-K of September 10, 1998, between
dated between IDACORP, Inc. and
September 15, the Bank of New
September York as 1998 Rights Agent.
15,1998
*10(a) 2-49584 5(b) Agreements, dated September 22,
1969, between IPC and Pacific
Power & Light Company relating to
the operation, construction and
ownership of the Jim Bridger
Project.
*10(a)(i) 2-51762 5(c) Amendment, dated February 1, 1974,
relating to operation agreement
filed as Exhibit 10(a).
*10(b) 2-49584 5(c) Agreement, dated as of October 11,
1973, between IPC and Pacific
Power & Light Company.
*10(c) 33-65720 10(c) Guaranty Agreement, dated March 1,
1990, between IPC and West One
Bank, as Trustee, relating to
$21,425,000 American Falls
Replacement Dam Bonds of the
American Falls Reservoir District,
Idaho.
*10(d) 2-62034 5(r) Guaranty Agreement, dated as of
August 30, 1974, between IPC and
Pacific Power & Light Company.
*10(e) 2-56513 5(i) Letter Agreement, dated January 23,
1976, between IPC and Portland
General Electric Company.
*10(e)(i) 2-62034 5(s) Agreement for Construction,
Ownership and Operation of the
Number One Boardman Station on
Carty Reservoir, dated as of
October 15, 1976, between Portland
General Electric Company and IPC.
*10(e)(ii) 2-62034 5(t) Amendment, dated September 30,
1977, relating to agreement filed
as Exhibit 10(e).
*10(e)(iii) 2-62034 5(u) Amendment, dated October 31, 1977,
relating to agreement filed as
Exhibit 10(e).
*10(e)(iv) 2-62034 5(v) Amendment, dated January 23, 1978,
relating to agreement filed as
Exhibit 10(e).
*10(e)(v) 2-62034 5(w) Amendment, dated February 15, 1978,
relating to agreement filed as
Exhibit 10(e).
*10(e)(vi) 2-68574 5(x) Amendment, dated September 1, 1979,
relating to agreement filed as
Exhibit 10(e).
*10(f) 2-68574 5(z) Participation Agreement, dated
September 1, 1979, relating to the
sale and leaseback of coal handling
facilities at the Number One
Boardman Station on Carty
Reservoir.
*10(g) 2-64910 5(y) Agreements for the Operation,
Construction and Ownership of the
North Valmy Power Plant Project,
dated December 12, 1978, between
Sierra Pacific Power Company and
IPC.
*10(h)(i)1 1-3198 10(n)(i) The Revised Security Plan for
Form 10-K for Senior Management
for 1994 Employees - a non-qualified,non-
for 1994 qualified, deferred compensation
plan effective August 1, 1996.
1 Compensatory
plan
*10(b)1996..
*10(h)(ii)1 1-3198 10(n)(ii) The Executive Annual Incentive Plan
Form 10-K Incentive Plan for senior
for 1994 management employees of
for 1994 IPC effective January 1, 1995.
*10(c)*10(h)(iii)1 1-3198 10(n)(iii) The 1994 Restricted Stock Plan for
Form 10-K Plan for officers and key executives of
for 1994 executives of IDACORP, Inc. and IPC effective
July 1, 1994.
*10(d)10(h)(iv)1 1-14465 10(h)(iv) The Revised Security Plan 1-3198 for Board
1-3198 of Directors - a non-qualified,
Form 10-K non-qualified, deferred compensation plan
for 1998 compensation plan effective August 1, 1996, revised
March 2, 1999.
*10(e)*10(h)(v)1 1-319814465 10(e) IDACORP, Inc. Non-Employee
Form 10-Q Directors Stock Compensation Plan
for 6/30/99 Plan as of May 17, 1999.
*10(f)*10(h)(vi) 1-3198 10(y) Executive Employment Agreement
Form 10-K Agreement dated November 20, for 1997 1996 between IPC
for 1997 and Richard R. Riazzi.
*10(g)*10(h)(vii) 1-3198 10(g) Executive Employment Agreement
Form 10-Q Agreement dated April 12, 1999 between IPC
for 6/30/99 1999 between IPC and Marlene Williams.
*10(h)(viii) 1-14465 10(h) Form of Change in Control Agreement between IDACORP, Inc. and
Form 10-Q Jan B. Packwood, J. LaMont Keen,
for 9/30/99 James C. Miller, Richard Riazzi,
Darrel T. Anderson, Bryan Kearney,
Cliff N. Olson, Robert W. Stahman
and Marlene K. Williams.
*10(h)(ix)1 1-14465 10(h)(ix) IDACORP, Inc. 2000 Long-Term
Form 10-K Incentive and Compensation Plan.
for 1999
*10(i) 33-65720 10(h) Framework Agreement, dated October
1, 1984, between the State of Idaho
and IPC relating to IPC's Swan
Falls and Snake River water rights.
*10(i)(i) 33-65720 10(h)(i) Agreement, dated October 25, 1984,
between the State of Idaho and IPC
relating to the agreement filed as
Exhibit 10(i).
*10(i)(ii) 33-65720 10(h)(ii) Contract to Implement, dated
October 25, 1984, between the State
of Idaho and IPC relating to the
agreement filed as Exhibit 10(i).
*10(j) 33-65720 10(m) Agreement Regarding the Ownership,
Construction, Operation and
Maintenance of the Milner
Hydroelectric Project (FERC No.
2899), dated January 22, 1990,
between IPC and the Twin Falls
Canal Company and the Northside
Canal Company Limited.
*10(j)(i) 33-65720 10(m)(i) Guaranty Agreement, dated February
10, 1992, between IPC and New York
Life Insurance Company, as Note
Purchaser, relating to $11,700,000
Guaranteed Notes due 2017 of Milner
Dam Inc.
12 Statement Re: Computation of Ratio
of Earnings to Fixed Charges.
(IDACORP, Inc.)
12(a) Statement Re: Computation of
Supplemental Ratio of Earnings to
Fixed Charges. (IDACORP, Inc.)
12(b) Statement Re: Computation of Ratio
of Earnings to Combined Fixed
Charges and Preferred Dividend
Requirements. (IDACORP, Inc.)
12(c) Statement Re: Computation of
Supplemental Ratio of Earnings to
Combined Fixed Charges and
Preferred Dividend Requirements.
(IDACORP, Inc.)
12(d) Statement Re: Computation of Ratio
of Earnings to Fixed Charges. (IPC)
12(e) Statement Re: Computation of
Supplemental Ratio of Earnings to
Fixed Charges. (IPC)
12(f) Statement Re: Computation of Ratio
of Earnings to Combined Fixed
Charges and Preferred Dividend
Requirements. (IPC)
12(g) Statement Re: Computation of
Supplemental Ratio of Earnings to
Combined Fixed Charges and
Preferred Dividend Requirements.
(IPC).
1 Compensatory plan
15 Letter Re: Unaudited
Interim Financial
Information.Independent Auditors' Consent.
21 Subsidiaries of IDACORP, Inc. and
IPC.
27(a) Financial Data Schedule for
IDACORP, Inc.
27(b) Financial Data Schedule for IPC.
_______________________________
1 Compensatory plan
(b) Reports on Form 8-K. No reports on Form 8-K were filed
during the three-month period ended September 30, 1999.March 31, 2000.
* Previously filed and Incorporated Hereinherein by Reference.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly
authorized.
IDACORP, Inc.
(Registrant)
Date NovemberMay 5, 19992000 By: /s/ J LaMont Keen
J LaMont Keen
Senior Vice President
Administration
and Chief Financial Officer
(Principal Financial Officer)
Date NovemberMay 5, 19992000 By: /s/ Darrel T Anderson
Darrel T Anderson
Vice President Finance
and Treasurer
(Principal Accounting Officer)
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly
authorized.
IDAHO POWER COMPANY
(Registrant)
Date NovemberMay 5, 19992000 By: /s/ J LaMont Keen
J LaMont Keen
Senior Vice President
Administration
and Chief Financial Officer
(Principal Financial Officer)
Date NovemberMay 5, 19992000 By: /s/ Darrel T Anderson
Darrel T Anderson
Vice President Finance
and Treasurer
(Principal Accounting Officer)