UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF |
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THE SECURITIES EXCHANGE ACT OF 1934 |
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For the fiscal year ended December 31, 2008 |
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF |
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THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period
from ................... to .................................................................
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Exact name of registrants as specified in |
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Commission |
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their charters, address of principal executive |
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IRS Employer |
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File Number |
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offices, zip code and telephone number |
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Identification Number |
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1-14465 |
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IDACORP, Inc. |
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82-0505802 |
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1-3198 |
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Idaho Power Company |
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82-0130980 |
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1221 W. Idaho Street |
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Boise, ID 83702-5627 |
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(208) 388-2200 |
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State of incorporation: Idaho |
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Websites: www.idacorpinc.com and www.idahopower.com |
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Name of exchange on |
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SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: |
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which registered |
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IDACORP, Inc.: |
Common Stock, without par value |
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New York |
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SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: |
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Idaho Power Company: |
Preferred Stock |
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Indicate by check mark
whether the registrants are well-known seasoned issuers, as defined in Rule 405
of the Securities Act.
IDACORP, Inc. |
Yes |
( X ) |
No |
( ) |
Idaho Power Company |
Yes |
( ) |
No |
( X ) |
Indicate by check mark if the
registrants are not required to file reports pursuant to Section 13 or Section
15(d) of the Act.
IDACORP, Inc. |
Yes |
( ) |
No |
( X ) |
Idaho Power Company |
Yes |
( ) |
No |
( X ) |
Indicate by check mark
whether the registrants (1) have filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrants were required to file
such reports), and (2) have been subject to such filing requirements for the
past 90 days.
Yes ( X ) No ( )
Indicate by check mark if
disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not
contained herein, and will not be contained, to the best of registrants
knowledge, in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this Form 10-K. (X
)
Indicate by check mark whether the registrants are large
accelerated filers, accelerated filers, non-accelerated filers, or smaller
reporting companies.
IDACORP, Inc.: |
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Large accelerated |
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Accelerated |
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Non-accelerated |
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Smaller reporting |
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filer |
( X ) |
filer |
( ) |
filer |
( ) |
company |
( ) |
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Idaho Power Company: |
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Large accelerated |
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Accelerated |
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Non-accelerated |
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Smaller reporting |
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filer |
( ) |
filer |
( ) |
filer |
( X ) |
company |
( ) |
Indicate by check mark whether the registrants are shell
companies (as defined in Rule 12b-2 of the Act).
IDACORP, Inc. |
Yes |
( ) |
No |
( X ) |
Idaho Power Company |
Yes |
( ) |
No |
( X ) |
Aggregate market value of voting
and non-voting common stock held by nonaffiliates (June 30, 2008):
IDACORP, Inc.: |
$1,299,654,720 |
Idaho Power Company: |
None |
Number of shares of common
stock outstanding at January 31, 2009:
IDACORP, Inc.: |
46,909,973 |
Idaho Power Company: |
39,150,812 all held by IDACORP, Inc. |
Documents Incorporated by Reference: |
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Part III, Items 10 - 14 |
Portions of IDACORP, Inc.s definitive proxy statement to be filed pursuant to |
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Regulation 14A for the 2009 Annual Meeting of Shareholders to be held on |
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May 21, 2009. |
This combined Form 10-K
represents separate filings by IDACORP, Inc. and Idaho Power Company.
Information contained herein relating to an individual registrant is filed by
that registrant on its own behalf. Idaho Power Company makes no representation
as to the information relating to IDACORP, Inc.s other operations.
Idaho Power Company meets the
conditions set forth in General Instruction (I)(1)(a) and (b) of Form 10-K and
is therefore filing this Form with the reduced disclosure format.
COMMONLY USED TERMS |
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AFUDC |
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Allowance for Funds Used During Construction |
APCU |
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Annual Power Cost Update |
Cal ISO |
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California Independent System Operator |
CalPX |
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California Power Exchange |
CAMP |
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Comprehensive Aquifer Management Plan |
CO 2 |
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Carbon Dioxide |
cfs |
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Cubic feet per second |
EIS |
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Environmental impact statement |
EPS |
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Earnings per share |
ESA |
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Endangered Species Act |
ESPA |
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Eastern Snake Plain Aquifer |
FASB |
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Financial Accounting Standards Board |
FERC |
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Federal Energy Regulatory Commission |
FIN |
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Financial Accounting Standards Board Interpretation |
Fitch |
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Fitch, Inc. |
FPA |
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Federal Power Act |
GAAP |
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Generally Accepted Accounting Principles |
HCC |
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Hells Canyon Complex |
Ida-West |
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Ida-West Energy, a subsidiary of IDACORP, Inc. |
IDWR |
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Idaho Department of Water Resources |
IE |
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IDACORP Energy, a subsidiary of IDACORP, Inc. |
IERCo |
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Idaho Energy Resources Co., a subsidiary of Idaho Power Company |
IFS |
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IDACORP Financial Services, a subsidiary of IDACORP, Inc. |
IPC |
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Idaho Power Company, a subsidiary of IDACORP, Inc. |
IPUC |
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Idaho Public Utilities Commission |
IRP |
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Integrated Resource Plan |
IWRB |
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Idaho Water Resource Board |
kW |
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Kilowatt |
LGAR |
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Load Growth Adjustment Rate |
maf |
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Million acre feet |
MD&A |
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Managements Discussion and Analysis of Financial Condition and Results of Operations |
Moodys |
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Moodys Investors Service |
MW |
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Megawatt |
MWh |
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Megawatt-hour |
NOx |
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Nitrogen Oxide |
NWRFC |
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National Weather Service Northwest River Forecast Center |
O&M |
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Operations and Maintenance |
OATT |
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Open Access Transmission Tariff |
OPUC |
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Oregon Public Utility Commission |
PCA |
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Power Cost Adjustment |
PCAM |
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Power Cost Adjustment Mechanism |
PURPA |
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Public Utility Regulatory Policies Act of 1978 |
RH BART |
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Regional Haze - Best Available Retrofit Technology |
RFP |
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Request for Proposal |
S&P |
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Standard & Poors Ratings Services |
SFAS |
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Statement of Financial Accounting Standards |
SO 2 |
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Sulfur Dioxide |
SRBA |
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Snake River Basin Adjudication |
Valmy |
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North Valmy Steam Electric Generating Plant |
VIEs |
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Variable Interest Entities |
TABLE OF CONTENTS |
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Page |
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Part I |
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Item 1 . |
Business |
1-10 |
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Item 1A . |
Risk Factors |
10-14 |
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Item 1B . |
Unresolved Staff Comments |
14 |
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Item 2 . |
Properties |
14-15 |
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Item 3 . |
Legal Proceedings |
15 |
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Item 4 . |
Submission of Matters to a Vote of Security Holders |
16 |
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Executive Officers of the Registrants |
16-17 |
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Part II |
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Item 5 . |
Market for Registrants Common Equity, Related Stockholder |
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Matters and Issuer Purchases of Equity Securities |
17-19 |
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Item 6 . |
Selected Financial Data |
19 |
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Item 7 . |
Managements Discussion and Analysis of Financial Condition and |
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Results of Operations |
20-66 |
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Item 7A . |
Quantitative and Qualitative Disclosures about Market Risk |
66-67 |
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Item 8 . |
Financial Statements and Supplementary Data |
68- 123 |
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Item 9 . |
Changes in and Disagreements with Accountants on Accounting and |
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Financial Disclosure |
123 |
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Item 9A . |
Controls and Procedures |
123-128 |
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Item 9B . |
Other Information |
128 |
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Part III |
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Item 10 . |
Directors, Executive Officers and Corporate Governance* |
128 |
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Item 11 . |
Executive Compensation* |
128 |
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Item 12 . |
Security Ownership of Certain Beneficial Owners and Management and Related |
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Stockholder Matters* |
128-129 |
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Item 13 . |
Certain Relationships and Related Transactions, and Director Independence* |
129 |
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Item 14 . |
Principal Accountant Fees and Services* |
129-130 |
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Part IV |
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Item 15 . |
Exhibits and Financial Statement Schedules |
130-1 42 |
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143-144 |
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*Except as indicated in Item 12, IDACORP, Inc. information is incorporated by reference to IDACORP, |
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Inc.s definitive proxy statement for the 2009 Annual Meeting of Shareholders. |
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SAFE HARBOR STATEMENT
This Form 10-K contains forward-looking
statements intended to qualify for the 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-K at Part II, Item 7- Managements 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, believes, estimates, expects,
intends, plans, predicts, projects, may result, may continue, or
similar expressions.
PART I - IDACORP, Inc. and Idaho Power Company
ITEM 1. BUSINESS
OVERVIEW:
IDACORP, Inc. (IDACORP) is a
holding company formed in 1998 whose principal operating subsidiary is Idaho
Power Company (IPC). IDACORP is subject to the provisions of the Public
Utility Holding Company Act of 2005, which provides certain access to books and
records to the Federal Energy Regulatory Commission (FERC) and state utility
regulatory commissions and imposes certain record retention and reporting
requirements on IDACORP.
IPC is an electric utility
engaged in the generation, transmission, distribution, sale and purchase of
electric energy and is regulated by the FERC and the state regulatory
commissions of Idaho and Oregon. IPC is the parent of Idaho Energy Resources
Co. (IERCo), a joint venturer in Bridger Coal Company (Bridger Coal), which
supplies coal to the Jim Bridger generating plant owned in part by IPC.
IDACORPs other subsidiaries
include:
IDACORP Financial Services, Inc. (IFS), an investor in affordable housing and other real estate investments;
Ida-West Energy Company (Ida-West), an operator of small hydroelectric generation projects that satisfy the requirements of the Public Utility Regulatory Policies Act of 1978 (PURPA); and
IDACORP Energy (IE), a marketer of
energy commodities, which wound down operations in 2003.
IDACORPs strategy emphasizes
IPC as IDACORPs core business. Although growth in number of customers slowed
in 2008, IPC is experiencing customer growth in its service area and must be
prepared to meet customers electricity needs in the future. IPC must make
investments in infrastructure to ensure adequate electricity supply and
reliable service. IPCs regulatory efforts have resulted in finalizing the
2007 general rate case and receiving an order in the 2008 general rate case.
IPC continues to make efforts to speed recovery of the financial and operating
costs of new facilities and system improvements. IFS and Ida-West remain
components of the corporate strategy.
On July 20, 2006, IDACORP
completed the sale of all of the outstanding common stock of IDACORP
Technologies, Inc. to IdaTech UK Limited, a wholly-owned subsidiary of Investec
Group Investments (UK) Limited, and on February 23, 2007, IDACORP completed the
sale of all of the outstanding common stock of IDACOMM, Inc. to American Fiber
Systems, Inc. IDACORPs consolidated financial statements reflect the
reclassification of the results of these businesses as discontinued operations
for all periods presented. Discontinued operations are discussed in more
detail in Note 16 to IDACORPs and IPCs Consolidated Financial Statements.
At December 31, 2008, IDACORP
had 2,073 full-time employees, 2,057 of which were employed by IPC.
IDACORPs only reportable
business segment is IPC, which contributed $94 million to income from
continuing operations in 2008.
1
IDACORP and IPC make
available free of charge their Annual Report on Form 10-K, Quarterly Reports on
Form 10-Q, Current Reports on Form 8-K and all amendments to these reports
filed or furnished pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 as soon as reasonably practicable after the reports are
electronically filed with or furnished to the Securities and Exchange
Commission, through IDACORPs website at www.idacorpinc.com and through a link
to the IDACORP website from the IPC website at www.idahopower.com.
UTILITY OPERATIONS:
IPC was incorporated under
the laws of the state of Idaho in 1989 as successor to a Maine corporation
organized in 1915. IPCs service territory covers approximately 24,000 square
miles in southern Idaho and eastern Oregon, with an estimated population of
approximately one million. IPC holds franchises in 71 cities in Idaho and nine
cities in Oregon and holds certificates from the respective public utility
regulatory authorities to serve all or a portion of 25 counties in Idaho and
three counties in Oregon. As of December 31, 2008, IPC supplied electric
energy to approximately 487,000 general business customers.
IPC is one of the nations
few investor-owned utilities with a predominantly hydroelectric generating
base. IPC owns and operates 17 hydroelectric generation developments, two
natural gas-fired plants and one diesel-powered generator and shares ownership
in three coal-fired generating plants. These generating plants and their
capacities are listed in Item 2 - Properties. IPCs coal-fired plants are in
Wyoming, Oregon and Nevada, and use low-sulfur coal from Wyoming and Utah.
The primary influences on
electricity sales are weather, customer growth and economic conditions.
Extreme temperatures increase sales to customers who use electricity for
cooling and heating, and moderate temperatures decrease sales. Increased
precipitation levels during the agricultural growing season reduce electricity
sales to customers who use electricity to operate irrigation pumps.
Variations in weather,
customer growth and economic conditions also impact power supply costs.
Drought conditions and customer growth cause a greater reliance on more
expensive thermal generation and purchased power to meet load requirements.
Favorable hydroelectric generation conditions increase production at IPCs
hydroelectric generating facilities, and reduce the need for more expensive
thermal generation and purchased power. Changes in economic conditions can
also affect the price of commodities, including fuel costs, which may impact
power supply costs.
IPCs principal commercial
and industrial customers are involved in food processing, electronics and
general manufacturing, forest products, beet sugar refining and winter
recreation. On January 26, 2009, the Idaho Public Utilities Commission (IPUC)
granted authority to temporarily amend IPCs electric service agreement with
one of its largest customers for the period January 1, 2009, through June 30,
2009, to provide the customer flexibility in restructuring its operations.
This amendment is not expected to have a significant impact on IPCs earnings.
On September 17, 2008, IPC
entered into an electric service agreement with a new customer, Hoku Materials,
Inc. (Hoku), to provide electric service to Hokus polysilicon production
facility under construction in Pocatello, Idaho. The initial term of the agreement
is four years beginning June 1, 2009, with automatic annual renewal after June
1, 2013 unless either party gives 12 months prior written notice of termination.
The agreement provides for a maximum demand obligation during the initial term
of 82 megawatts (MW). After June 1, 2013, Hoku may increase or decrease its
total demand to between 25 MW and 175 MW. The agreement was submitted to the
IPUC for approval in October 2008.
Regulation
IPC is under the regulatory jurisdiction (as to rates, service, accounting and
other general matters of utility operation) of the FERC, the IPUC and the
Oregon Public Utility Commission (OPUC). IPC is also under the regulatory
jurisdiction of the IPUC, the OPUC and the Public Service Commission of Wyoming
as to the issuance of debt and equity securities. IPCs retail rates are
established under the jurisdiction of the state regulatory commissions (see Rates
below). Pursuant to the requirements of Section 210 of PURPA, the state
regulatory commissions have each issued orders and rules regulating IPCs
purchase of power from cogeneration and small power production (CSPP)
facilities.
2
IPC is subject to
the provisions of the Federal Power Act as a public utility and as a licensee
as therein defined and is subject to regulation by the FERC. The Energy Policy
Act of 2005 (Energy Act) granted the FERC increased statutory authority to
implement mandatory transmission and reliability standards, as well as enhanced
oversight of power and transmission markets, including protection against
market manipulation. As a licensee under Part I of the FPA, IPC and its
licensed hydroelectric projects are subject to conditions set forth in the FPA
and related FERC regulations. These conditions and regulations include
provisions relating to condemnation of a project upon payment of just
compensation, amortization of project investment from excess project earnings,
possible takeover of a project after expiration of its license upon payment of
net investment, severance damages and other matters.
As a public utility under Part II of the FPA, IPC has
authority to charge market-based rates for wholesale energy sales under its
FERC tariff and to provide transmission services under its Open Access
Transmission Tariff (OATT).
The state of
Oregon has a Hydroelectric Act providing for licensing of hydroelectric
projects in that state. IPCs Brownlee, Oxbow and Hells Canyon facilities are
on the Snake River where it forms the boundary between Idaho and Oregon and
occupy lands in both states. With respect to project property located in
Oregon, these facilities are subject to the Oregon Hydroelectric Act. IPC has
obtained Oregon licenses for these facilities and these licenses are not in
conflict with the FPA or IPCs FERC licenses (see Part II, Item 7 - MD&A -
REGULATORY MATTERS - Relicensing of Hydroelectric Projects).
Rates
The rates IPC charges to its general
business customers are determined by the IPUC and the OPUC. Approximately 95
percent of IPCs general business revenue comes from customers in Idaho. IPC
has a Power Cost Adjustment (PCA) mechanism that provides for annual
adjustments to the rates charged to its Idaho retail customers. The PCA tracks
IPCs actual net power supply costs (fuel and purchased power less off-system
sales) and compares these amounts to net power supply costs currently being
recovered in retail rates. Prior to February 1, 2009, approximately 90 percent
of the difference between the actual and forecasted costs was deferred with
interest. Beginning on February 1, 2009, this percentage was increased to 95
percent.
IPC also has a power cost
recovery mechanism in Oregon with two components that became effective June 1,
2008. The annual power cost update (APCU) allows IPC to recover excess net
power supply costs in a more timely fashion than through the previous deferral
process because it reestablishes base net power supply costs annually. The
power cost adjustment mechanism (PCAM) provides for 90 percent customer sharing
of deviations in actual net power supply costs from those included in the APCU
if the deviations are outside of prescribed ranges and IPC meets a return-on-equity
test.
The rates IPC charges to its
transmission customers are determined by the FERC. IPCs OATT is a formula
rate, which allows for transmission rates to be revised each year based on financial
and operational data IPC is required to file annually with the FERC in its Form
1.
Significant rate cases and
proceedings are discussed in more detail in Part II, Item 7 - MD&A -
REGULATORY MATTERS.
Power Supply
IPC meets its system load
requirements using a combination of its own generation, mandated purchases from
private developers (see CSPP Purchases below) and purchases from other
utilities and power wholesalers. IPCs generating plants and capacities are
listed in Item 2 - Properties.
IPCs system is dual peaking,
with the larger peak demand occurring in the summer. The all-time system peak
demand is 3,214 MW, set on June 30, 2008. The previous hourly system peak of
3,193 MW was set July 13, 2007. The all-time winter peak demand is 2,464 MW
set on January 24, 2008. The previous hourly system winter peak of 2,459 MW
was set in 1998. Including the expected impact of the Hoku electric service
agreement, IPC expects total system average load to grow 2.6 percent annually
over the next three years.
3
Because
of its reliance on hydroelectric generation, IPCs generation operations can be
significantly affected by water conditions. The availability of hydroelectric
power depends on the amount of snow pack in the mountains upstream of IPCs
hydroelectric facilities, reservoir storage, springtime snow pack run-off,
river base flows, spring flows, rainfall and other weather and stream flow
management considerations. During low water years, when stream flows into IPCs
hydroelectric projects are reduced, IPCs hydroelectric generation is reduced.
This results in less generation from IPCs resource portfolio (hydroelectric,
coal-fired and gas-fired) available for off-system sales and, most likely, an
increased use of purchased power to meet load requirements. Both of these
situations - a reduction in off-system sales and an increased use of more
expensive purchased power - result in increased power supply costs.
The
following table presents IPCs system generation for the last three years:
Under
normal stream flow conditions, IPCs system generation mix is approximately 55
percent hydroelectric and 45 percent thermal.
Stream flow conditions improved slightly in 2008
resulting in an increase of 0.7 million MWh generated from IPCs hydroelectric
facilities as compared to 2007. The observed stream flow data released in
August 2008 by the U.S. Army Corps of Engineers, Northwest Division indicated
that Brownlee reservoir inflow for April through July 2008 was 4.4 million acre-feet
(maf), or 70 percent of the National Weather Service Northwest River Forecast
Center (NWRFC) average, compared to 2.8 maf, or 44 percent of the NWRFC average,
in 2007.
Storage in selected federal
reservoirs upstream of Brownlee as of February 11, 2009, was 110 percent of
average. The stream flow forecast released on February 20, 2009, by the NWRFC
predicts that Brownlee reservoir inflow for April through July 2009 will be 3.3
maf, or 53 percent of the NWRFC average.
IPCs generating facilities
are interconnected through its integrated transmission system and are operated
on a coordinated basis to achieve maximum load-carrying capability and
reliability. IPCs transmission system is directly interconnected with the
transmission systems of the Bonneville Power Administration (BPA), Avista
Corporation, PacifiCorp, NorthWestern Energy and NV Energy (formerly Sierra
Pacific Power Company). Such interconnections, coupled with transmission line
capacity made available under agreements with some of the above entities,
permit the interchange, purchase and sale of power among all major electric
systems in the west. IPC is a member of the Western Electricity Coordinating
Council, the Western Systems Power Pool, the Northwest Power Pool, the Northern
Tier Transmission Group, and the North American Energy Standards Board. These
groups have been formed to more efficiently coordinate transmission reliability
and planning throughout the western grid. See Competition - Wholesale below.
Fuel:
IPC, through its subsidiary IERCo, owns a one-third
interest in Bridger Coal, which owns the Jim Bridger mine that supplies coal to
the Jim Bridger generating plant (one-third owned by IPC) in Wyoming. The
mine, located near the Jim Bridger plant, operates under a long-term sales
agreement that provides for delivery of coal over a 51-year period ending in
2024 from surface, high-wall, and underground sources. The Jim Bridger mine
has sufficient reserves to provide coal deliveries for the term of the sales
agreement. IPC also has a coal supply contract providing for annual deliveries
of coal through 2014 from the Black Butte Coal Companys Black Butte and
Leucite Hills mines located near the Jim Bridger plant. This contract
supplements the Bridger Coal deliveries and provides another coal supply to
operate the Jim Bridger plant. The Jim Bridger plants rail load-in facility
and unit coal train allow the plant to take advantage of potentially lower-cost
coal from other mines for tonnage requirements above established contract
minimums.
4
The
Bridger Coal mine experienced difficulties in meeting its production volume and
operating cost goals during early 2008. The problems stemmed from soft floor
and roof stability issues that began in late December 2007 in the underground
longwall mining operation (longwall). The impact on December 2007 production
was relatively minor; however the problems persisted and January 2008
production volume was approximately 20 percent of forecast. Bridger Coals
overall 2008 production and cost objectives were achieved by modifying the
surface mine operation plan to offset the underground mining difficulties and
by purchasing additional Black Butte coal. As of year-end 2008, the longwall
was operating at normal production levels. IPC anticipates that budgeted
production from both the underground and surface operations will be achieved in
2009.
NV Energy, as operator of the North Valmy generating plant, has an agreement
with Arch Coal Sales Company, Inc. to supply coal to the plant through 2011.
As a 50 percent owner of the plant, IPC is obligated to purchase one-half of
the coal, ranging from 515,000 tons to 762,500 tons annually. NV Energy also
has a coal supply contract with Black Butte Coal Companys Black Butte Mine for
deliveries through 2009. IPC is obligated to purchase one-half of the coal
purchased under this agreement, ranging from 450,000 to 600,000 tons annually.
The Boardman generating plant
receives coal from the Powder River Basin through annual contracts. Portland
General Electric, as operator of the Boardman plant, had an agreement with
Buckskin Mining Company to supply all of Boardmans coal requirements through
2008 and has entered into a contract with Foundation Energy Sales, Inc. to
supply coal from 2009 through 2011. As a ten percent owner of the plant, IPC
is obligated to purchase ten percent of the coal purchased under these
agreements, which ranged from 230,000 to 270,000 tons annually under the
Buckskin agreement and ranges from 87,500 to 211,000 tons annually under the
Foundation Energy Sales contract. The Boardman partners are in the process of
securing contracts for additional coal tonnage that will be needed in 2010 and
2011.
IPC owns and operates the
Danskin and Bennett Mountain combustion turbines, which are supplied gas
through Northwest Pipeline GPs pipeline. Gas is purchased as needs are identified
for summer peaks or to meet system requirements. The gas is transported under
a long-term agreement with Northwest Pipeline GP for 24,523 million British
thermal units (MMBtu) per day. This agreement runs through February 28, 2022,
with annual extensions at IPCs sole discretion. IPC also has the ability to
flow a total of 73,569 MMBtu on an alternate firm basis without incurring a
reservation charge on the additional amount. IPC also has entered into an
agreement with Northwest Pipeline GP for 22,000 MMBtu per day of gas
transport. Gas transmission will begin November 1, 2012 and run through
November 30, 2027. In addition to this agreement, IPC has entered into a long-term
agreement with Northwest Pipeline GP for 131,453 MMBtu of total storage capacity
at the Jackson Prairie Storage Project located in Lewis County, Washington. As
the project is developed, storage capacity will be phased into service and
allocated to IPC on a monthly basis. IPCs current storage allotment is
approximately 33 percent of its total, and its full allotment is expected to be
reached by January 2011. The firm storage contract extends through November 1,
2043, with bilateral termination rights at the end of the contract. Storage
gas will be purchased and stored with the intent of fulfilling needs as
identified for summer peaks or to meet system requirements.
Water Rights:
Except as discussed below, IPC has acquired water
rights under applicable state law for all waters used in its hydroelectric
generating facilities. In addition, IPC holds water rights for domestic,
irrigation, commercial and other necessary purposes related to other land and
facility holdings within the state. The exercise and use of all of these water
rights are subject to prior rights, and with respect to certain hydroelectric
generating facilities, IPCs water rights for power generation are subordinated
to certain future upstream diversions of water for irrigation and other
recognized consumptive uses.
Over time, increased
irrigation development and other consumptive diversions have resulted in a
reduction in the stream flows available to fulfill IPCs water rights at
certain hydroelectric generating facilities. In reaction to these reductions,
IPC initiated and continues to pursue a course of action to determine and
protect its water rights. As part of this process, IPC and the state of Idaho
signed the Swan Falls agreement on October 25, 1984, which provided a level of
protection for IPCs hydropower water rights at specified plants by setting
minimum stream flows and establishing an administrative process governing the
future development of water rights that may affect IPCs hydroelectric
generation. In 1987, Congress passed, and the President signed into law, House
Bill 519. This legislation permitted implementation of the Swan Falls
agreement and further provided that during the remaining term of certain of IPCs
project licenses the relationship established by the agreement would not be
considered by the FERC as being inconsistent with the terms of IPCs project
licenses or imprudent for the purposes of determining rates under Section 205
of the FPA. The FERC entered an order implementing the legislation on March
25, 1988.
5
In addition to providing for
the protection of IPCs hydroelectric water rights, the Swan Falls agreement
contemplated the initiation of a general adjudication of all water uses within
the Snake River basin. In 1987, the director of the Idaho Department of Water
Resources filed a petition in state district court asking that the court
adjudicate all claims to water rights, whether based on state or federal law,
within the Snake River basin. The court signed a commencement order initiating
the Snake River Basin Adjudication (SRBA) on November 19, 1987. This legal
proceeding was authorized by state statute based upon a determination by the
Idaho Legislature that the effective management of the waters of the Snake
River basin required a comprehensive determination of the nature, extent and
priority of all water uses within the basin. The adjudication is proceeding
and is expected to continue for at least the next several years. IPC has filed
claims to its water rights within the basin and is actively participating in
the adjudication in an effort to ensure that its water rights and the operation
of its hydroelectric facilities are not adversely impacted. In certain
instances, the adjudication of water rights in the SRBA results in the
initiation of litigation, called subcases, to determine the scope and nature of
a particular water right. IPC is involved in subcases involving not only its
water rights but also the water rights of other claimants. One such subcase
involves IPCs water rights at the Swan Falls project on the Snake River and
several other upstream hydroelectric projects that are the subject of the Swan
Falls Agreement. IPC also has initiated legal action against the U.S. Bureau
of Reclamation (USBR) over the interpretation and effect of a 1923 contract
with the USBR on the operation of the American Falls Reservoir and the release
of water from that reservoir to be used at IPCs downstream hydroelectric
projects.
Please see further discussion
in Part II, Item 7 - MD&A - LEGAL AND ENVIRONMENTAL ISSUES - Environmental
Issues - Idaho Water Management Issues and MD&A - REGULATORY MATTERS -
Relicensing of Hydroelectric Projects.
Integrated Resource Plan
(IRP):
IPC filed its 2006 Integrated
Resource Plan (IRP) with the IPUC in September 2006 and with the OPUC in
October 2006. The 2006 IRP previewed IPCs load and resource situation for the
next twenty years, analyzed potential supply-side and demand-side options and
identified near-term and long-term actions.
The two primary goals of the
2006 IRP were to (1) identify sufficient resources to reliably serve the
growing demand for electric service within IPCs service area throughout the 20-year
planning period and (2) ensure that the portfolio of resources selected
balances cost, risk and environmental concerns.
The IPUC accepted the 2006
IRP in March 2007 and the OPUC acknowledged the 2006 IRP in September 2007.
With its acceptance of the 2006 IRP, the IPUC requested that IPC align the
submittal of its next IRP with those submitted by other Idaho utilities. To
comply with this request, IPC provided an update on the status of the 2006 IRP
to both the IPUC and OPUC in June 2008. An IRP Addendum was also filed with
the OPUC in February 2009 to address the need for the Boardman to Hemingway
Transmission Project. IPC is currently preparing the 2009 IRP, which is
scheduled to be completed in June 2009. Please see further discussion in Part
II - Item 7 - MD&A - REGULATORY MATTERS - Integrated Resource Plan.
CSPP Purchases:
As
mandated by PURPA and the adoption of avoided cost rates by the IPUC and the
OPUC, IPC has entered into contracts for the purchase of energy from a number
of private developers. Under these contracts, IPC is required to purchase all
of the output from the facilities located inside its service territory. For
projects located outside its service territory, IPC is required to purchase the
output that it has the ability to receive at the facilitys requested point of
delivery on the IPC system. The IPUC jurisdictional portion of the costs
associated with CSPP contracts are fully recovered through base rates and the
PCA. For IPUC jurisdictional contracts, projects that generate up to ten
average MW of energy monthly are eligible for IPUC Published Avoided Costs for
up to a 20-year contract term. The OPUC jurisdictional portion of the costs
associated with CSPP contracts is recovered through general rate case filings.
For OPUC jurisdictional contracts, projects with a nameplate rating of up to
ten MW of capacity are eligible for OPUC Published Avoided Costs for up to a 20-year
contract term. The Published Avoided Cost is a price established by the IPUC
and OPUC to estimate IPCs cost of developing additional generation resources.
If a PURPA project does not qualify for Published Avoided Costs, then IPC is
required to negotiate the terms, prices and conditions with the developer of
that project. These negotiations reflect the characteristics of the individual
projects (i.e., operational flexibility, location and size) and the benefits to
the IPC system and must be consistent with other similar energy alternatives.
During 2008, at the IPUCs
direction, IPC conducted workshops to review the Published Avoided Cost model
input components. A settlement stipulation was filed with the IPUC for its
consideration that, if accepted, will result in an increase in the non-fuel
component of the Published Avoided Costs.
6
As
of December 31, 2008, IPC had signed agreements to purchase energy from 92 CSPP
facilities with contracts ranging from one to 30 years. Seventy-nine of these
facilities, with a combined nameplate capacity of 267 MW, were on-line at the
end of 2008; the other 13 facilities under contract, with a combined nameplate
capacity of 190 MW, are projected to come on-line during 2009 and 2010. The
majority of the new facilities will be wind resources which will generate on an
intermittent basis. During 2008, IPC purchased 756,014 megawatt-hours (MWh)
from these projects at a cost of $45.9 million, resulting in a blended price of
6.1 cents per kilowatt hour.
Wholesale Energy Market
Activities:
Guided by a risk
management policy and frequently updated operating plans, IPC participates in
the wholesale energy market by buying power to help meet load demands and
selling power that is in excess of load demands. IPCs market activities are
influenced by its customer loads, market prices, and cost and availability of
generating resources. Some of IPCs hydroelectric generation facilities are
operated to optimize the water that is available by choosing when to run
generation units and when to store water in reservoirs. These decisions affect
the timing and volumes of market purchases and market sales. Even in below
normal water years, there are opportunities to vary water usage to maximize
generation unit efficiency, capture marketplace economic benefits and meet load
demand. Compliance factors, such as allowable river stage elevation changes
and flood control requirements, and wholesale energy market prices influence
these dispatch decisions.
IPC
has one firm wholesale power sales contract. The sales contract is with the
Raft River Electric Cooperative for up to 15 MW. This contract expires in
September 2009; however, Raft River Electric Cooperative has provided notice
that it intends to renew the contract, as allowed in the original agreement,
through September 2011.
IPC has one wholesale reserve
sales contract, with United Materials of Great Falls, Inc. (United Materials).
This agreement requires IPC to carry up to 0.45 MW of reserves associated with
an energy sales agreement dated January 2004 between IPC and United Materials
from the Horseshoe Bend Wind Farm. The term of this agreement began in January
2008, and runs seasonally through May 2013.
IPC
has four firm wholesale purchased power contracts. One contract is with PPL
Montana, LLC, now known as PPL EnergyPlus, LLC, for 83 MW per hour during heavy
load hours, to address increased demand during June, July and August. The term
of this contract began in June 2004 and runs through August 2009. IPC entered
into a second seasonal contract for 83 MW with PPL EnergyPlus, LLC that runs
from June 2010 through August 2011. In January 2008, the IPUC approved a power
purchase agreement for 13 MW (nameplate generation) from the Raft River
Geothermal Power Plant Unit #1 located in southern Idaho that converted a CSPP
contract to a purchased power contract. The contract term is through April
2033. The fourth contract is with Telocaset Wind Power Partners, LLC, a
subsidiary of Horizon Wind Energy, for 101 MW (nameplate generation) from its
Elkhorn Valley wind project located in eastern Oregon. The contract term is
through December 2027.
Transmission Services
IPC provides wholesale transmission
service and provides firm and non-firm wheeling services for eligible
transmission customers. IPCs system lies between and is interconnected with
the winter-peaking northern and summer-peaking southern regions of the western
power system. This geographic position allows IPC to provide transmission
services and to reach a broad power market.
IPC and PacifiCorp are
jointly exploring the Gateway West project to build transmission lines between
Windstar, a substation located near Douglas, Wyoming and Hemingway, a
substation located in the vicinity of Melba and Murphy, Idaho near Boise.
Initial phases of the project could be completed by 2014. Remaining phases of
the project could be constructed as demand requires.
Construction of a new 500-kV
station named Hemingway is expected to address growth, capacity and operating
constraints. The station was originally part of the Gateway West Project but
the timing of this addition was
accelerated to 2010 to help meet forecast deficits and improve reliability. As
part of the Hemingway Station Project, the Hemingway-Hubbard transmission line
is expected to provide power to the Treasure Valley area of southwest Idaho by
2010. The Hemingway-Hubbard line will consist of a new 230-kV double circuit
transmission line and convert an existing 138-kV transmission line to 230-kV.
The Boardman-Hemingway
transmission line is expected to relieve existing congestion by increasing
transmission capacity and improving reliability. It will allow for the
transfer of up to 1,500 MW of additional energy between Idaho and the
Northwest. IPC expects to seek partners for up to 50 percent of the project
when construction commences. The line has a target in-service date of June
2013.
7
These projects are discussed in
more detail in Part II - Item 7 - MD&A LIQUIDITY AND CAPITAL RESOURCES
Capital Requirements and MD&A - REGULATORY MATTERS - Transmission
Projects.
On March 28, 2008, Great Basin Transmission, LLC (Great Basin) exercised its
option to purchase the southern portion of the Southwest Intertie Project
(SWIP), which consists principally of a federal permit for a specific
transmission corridor in Nevada and Idaho and private rights-of-way in Idaho.
This sale closed during the second quarter of 2008, and resulted in a net pre-tax
gain of approximately $3 million. On December 30, 2008, IPC and Great Basin
reached an agreement on the sale of the northern portion of the SWIP, which is
expected to close in the first quarter of 2009 and result in a pre-tax gain of
$0.2 million.
Environmental Regulation
IPCs activities are subject to a
broad range of federal, state, regional and local laws and regulations designed
to protect, restore and enhance the quality of the environment. Environmental
regulation continues to impact IPCs operations due to the cost of installation
and operation of equipment and facilities required for compliance with such
regulations, and the modification of system operations to accommodate such
regulations. IPCs environmental compliance costs will continue to be
significant for the foreseeable future.
Based upon present
environmental laws and regulations, IPC estimates its 2009 capital expenditures
for environmental matters, excluding Allowance for Funds Used During
Construction (AFUDC), will total $17 million. Studies and measures related to
environmental concerns at IPCs hydroelectric facilities account for $6 million
and investments in environmental equipment and facilities at the thermal plants
account for $11 million. For 2010 and 2011, environmental-related capital
expenditures, excluding AFUDC, are estimated to be $74 million. Anticipated
expenses related to IPCs hydroelectric facilities account for $44 million, and
thermal plant expenses are expected to total $30 million.
IPC
anticipates approximately $20 million in annual operating costs for
environmental facilities during 2009. Hydroelectric facility expenses and
thermal plant expenses account for the majority of the costs at approximately
$14 million and $6 million, respectively. For 2010 and 2011, total
environmental related operating costs are estimated to be approximately $57 million.
Expenses related to the hydroelectric facilities are expected to be $43
million, and thermal plant expenses are expected to be $14 million during this
period.
Water:
As required under the Federal Water Pollution
Control Act Amendments of 1972, IPC has received necessary environmental
permits and authorizations and has prepared necessary plans relating to
operations and water quality, such as effluent discharge, spill prevention and
countermeasures, and storm water pollution prevention.
The FERC licenses issued for
IPCs American Falls and Cascade hydroelectric generating plants require
aeration of turbine water to meet dissolved oxygen standards in the tail waters
downstream from the plants. In order to comply with the licenses, IPC
installed and operates aeration equipment at both plants and submits compliance
reports to the appropriate regulatory agencies.
The FERC licenses issued for
IPCs Milner, Shoshone Falls, Twin Falls, Upper Salmon, Lower Salmon, Bliss and
CJ Strike hydroelectric projects require dissolved oxygen and temperature
monitoring and reporting. IPC submits compliance reports to the appropriate
regulatory agencies.
The FERC license for the CJ
Strike project also requires monitoring of total dissolved gas during spill
periods. IPC installs monitors during periods of spill that record gas levels
in spilled water and reports the results to the appropriate regulatory
agencies.
Hazardous/Toxic Wastes and
Substances:
Under the Toxic
Substances Control Act, the EPA has adopted regulations governing the use,
storage, inspection and disposal of electrical equipment that contains
polychlorinated biphenyls (PCBs). The regulations permit the continued use and
servicing of certain equipment (including transformers and capacitors) that contain
PCBs. IPC continues to meet federal requirements of the Toxic Substances
Control Act for the continued use of equipment containing PCBs. IPC continues
to eliminate PCBs as part of its long-term strategy. This program will reduce
costs associated with the long-term monitoring of PCB-containing equipment,
responding to spills and reporting to the EPA. In 2008, IPC spent
approximately $0.6 million identifying and eliminating PCBs.
8
Air Quality Issues:
IPC owns two natural gas combustion turbine power
plants and co-owns three coal-fired power plants that are subject to air
quality regulation. The natural gas-fired plants, Danskin and Bennett
Mountain, are located in Idaho. The coal-fired plants are: Jim Bridger
located in Wyoming; Boardman located in Oregon; and Valmy located in Nevada.
For a more detailed discussion
of these and other environmental issues, including greenhouse gases, climate
change and endangered species please see Part II, Item 7 MD&A Legal
and Environmental Issues Environmental Issues.
Energy Efficiency Programs
In 2008, IPC spent approximately
$21.2 million to promote energy efficiency and summer peak reduction through
its energy efficiency programs, which have previously been referred to as
Demand Side Management programs. Approximately $18.9 million of funding for
program development, implementation and administration comes from the Idaho and
Oregon tariff riders for energy efficiency. The balance of the funding comes
from IPC base rates and a small amount was previously obtained from residual
funds from the BPAs Conservation and Renewables Discount which was
discontinued in 2007.
Approximately $2.4 million
was spent on research, analysis and development, education, technology
evaluation, and market transformation. A portion of this activity was
accomplished in conjunction with the Northwest Energy Efficiency Alliance
(NEEA). IPC contributed $0.9 million to the NEEA.
The following energy
efficiency programs target savings across the entire year for a wide range of
customer segments with an emphasis on reducing energy during the summer peak:
Approximately $4.4 million was devoted to achieving summer peak reduction through focusing on irrigation pumping and residential air conditioning equipment control measures.
The residential energy efficiency programs targeted new and existing homes, focusing on customer education and the application of energy efficiency remediation, including energy efficient building techniques, insulation augmentation, air duct sealing, and the use of efficient lighting. This programs 2008 spending was approximately $4.2 million.
Programs for new or existing industrial and commercial facilities focus on application of energy efficient techniques and technologies as well as operational and management processes to reduce energy consumption. Approximately $8.1 million was spent on these programs.
Approximately $2.1 million was devoted to irrigation efficiency programs. Irrigation customers can receive financial incentives for either improving the energy efficiency of an irrigation system or installing a new energy efficiency system.
In 2008, IPCs energy
efficiency programs reduced energy usage by approximately 134,000 MWh and the
targeted demand reduction programs resulted in a summer peak reduction of about
54 MW.
Competition
Retail:
Electric utilities have
historically been recognized as natural monopolies and have operated in a
highly regulated environment in which they have an obligation to provide
electric service to their customers in return for an exclusive franchise within
their service territory with an opportunity to earn a regulated rate of return.
In the past, some state regulatory authorities explored changing utility
regulations in response to federal and state statutory changes, with the intent
of increasing retail competition. However, restructuring of the electric
industry has stalled at both the national level and in the Pacific Northwest.
Wholesale:
The 1992 National Energy Policy Act and the FERCs
rulemaking activities have established the regulatory framework to open the
wholesale energy market to competition. This act permits entities to develop
independent electric generating plants for sales to wholesale customers, and
authorizes the FERC to order transmission access for third parties to
transmission facilities owned by another entity. This act does not, however,
permit the FERC to require transmission access to retail customers. Open-access
transmission for wholesale customers provides energy suppliers with
opportunities to sell and deliver electricity at market-based prices. IPC
actively monitors and participates, as appropriate, in energy industry
developments, to maintain and enhance its ability to effectively participate in
wholesale energy markets in a manner consistent with its business goals. For
more information, see Part II, Item 7 - MD&A - REGULATORY MATTERS Federal
Regulatory Matters.
9
Utility Operating
Statistics
The following table presents IPCs
revenues and energy use by customer type for the last three years. IPCs
operations are discussed further in Part II, Item 7 - MD&A - RESULTS OF
OPERATIONS - Utility Operations:
|
Years Ended December 31, |
|||||||||
|
2008 |
|
2007 |
|
2006 |
|||||
Revenues (thousands of dollars) |
|
|
|
|
|
|
|
|
||
|
Residential |
$ |
353,262 |
|
$ |
308,208 |
|
$ |
299,594 |
|
|
Commercial |
|
203,035 |
|
|
170,001 |
|
|
162,391 |
|
|
Industrial |
|
122,302 |
|
|
101,409 |
|
|
102,958 |
|
|
Irrigation |
|
105,712 |
|
|
88,685 |
|
|
71,432 |
|
|
|
Total general business |
|
784,311 |
|
|
668,303 |
|
|
636,375 |
|
Off-system sales |
|
121,429 |
|
|
154,948 |
|
|
260,717 |
|
|
Other |
|
50,336 |
|
|
52,150 |
|
|
23,381 |
|
|
|
Total |
$ |
956,076 |
|
$ |
875,401 |
|
$ |
920,473 |
|
|
|
|
|
|
|
|
|
|
|
Energy use (thousands of MWh) |
|
|
|
|
|
|
|
|
||
|
Residential |
|
5,297 |
|
|
5,227 |
|
|
5,068 |
|
|
Commercial |
|
3,970 |
|
|
3,937 |
|
|
3,761 |
|
|
Industrial |
|
3,355 |
|
|
3,454 |
|
|
3,475 |
|
|
Irrigation |
|
1,922 |
|
|
1,924 |
|
|
1,635 |
|
|
|
Total general business |
|
14,544 |
|
|
14,542 |
|
|
13,939 |
|
Off-system sales |
|
2,047 |
|
|
2,744 |
|
|
5,821 |
|
|
|
Total |
|
16,591 |
|
|
17,286 |
|
|
19,760 |
|
|
|
|
|
|
|
|
|
|
IFS
:
IFS invests primarily in
affordable housing developments, which provide a return principally by reducing
federal and state income taxes through tax credits and accelerated tax
depreciation benefits. IFS generated tax credits of $11 million, $15 million
and $19 million in 2008, 2007 and 2006, respectively. IFSs portfolio also
includes historic rehabilitation projects such as, the Empire Building in
Boise, Idaho. IFS made $8 million of new investments during 2008 and will
continue to review future legislation for new opportunities for investment that
will be commensurate with the ongoing needs of IDACORP.
IFS has focused on a
diversified approach to its investment strategy in order to limit both
geographic and operational risk. Over 90 percent of IFSs investments have
been made through syndicated funds. At December 31, 2008, the gross amount of IFSs
portfolio equaled $183 million in tax credit investments. These investments
cover 49 states, Puerto Rico and the U.S. Virgin Islands. The underlying
investments include over 700 individual properties, of which all but three are
administered through syndicated funds.
IDA-WEST:
Ida-West operates and has a
50 percent interest in nine hydroelectric plants with a total generating
capacity of 45 MW. Four of the projects are located in Idaho and five are in
northern California. All nine projects are qualifying facilities under
PURPA. IPC purchased all of the power generated by Ida-Wests four Idaho
hydroelectric projects at a cost of $8 million each year in 2008, 2007 and
2006.
ITEM 1A. RISK FACTORS
The following are factors
that could have a significant impact on the operations and financial results of
IDACORP, Inc. and Idaho Power Company and could cause actual results or
outcomes to differ materially from those discussed in any forward-looking
statements:
10
Reduced hydroelectric generation can reduce revenues and increase costs. Idaho Power Company has a predominately hydroelectric generating base. Because of Idaho Power Companys heavy reliance on hydroelectric generation, water can significantly affect its operations. When hydroelectric generation is reduced, Idaho Power Company must increase its use of generally more expensive thermal generating resources and purchased power and opportunities for off-system sales are reduced, which reduces revenues. In addition, while Idaho Power Company can expect to recover a portion of the increase in its net power supply costs above the level included in its base rates, recovery of the amounts does not occur until the subsequent power cost adjustment year.
Continuing declines in stream flows and over-appropriation of water in Idaho may reduce hydroelectric generation and revenues and increase costs. The combination of declining Snake River base flows, over-appropriation of water and drought conditions have led to disputes among surface water and ground water irrigators, and the state of Idaho. Recharging the Eastern Snake Plain Aquifer, which contributes to Snake River flows, by diverting surface water to porous locations and permitting it to sink into the aquifer is one proposed solution to the dispute. Diversions from the Snake River for aquifer recharge may further reduce Snake River flows available for hydroelectric generation and reduce Idaho Power Companys revenues and increase costs. Idaho Power Company is also involved in legal actions involving the water rights it holds for hydroelectric purposes. One such action, initiated in the Snake River Basin Adjudication, involves Idaho Power Companys water rights at the Swan Falls project on the Snake River and several other upstream hydroelectric projects that are the subject of a 1984 agreement with the state of Idaho known as the Swan Falls Agreement. Idaho Power Company also has initiated legal action against the U.S. Bureau of Reclamation over the interpretation and effect of a 1923 contract with the U.S. Bureau of Reclamation on the operation of the American Falls Reservoir and the release of water from that reservoir to be used at Idaho Power Companys downstream hydroelectric projects. The resolution of these matters may affect Snake River flows available for hydroelectric generation and thereby reduce Idaho Power Company revenues and increase costs.
Load growth in Idaho Power Companys service territory exposes it to greater market and operational risk and could increase costs and reduce earnings and cash flows.
o Increases in both the number of customers and the demand for energy have resulted and may continue to result in increased reliance on purchased power to meet customer load requirements. Since the Federal Energy Regulatory Commission implemented market-based wholesale power rates in 1997, the price volatility of electricity has substantially increased from what it was at the inception of the power cost adjustment. While Idaho Power Company can expect to recover a portion of the increase in its net power supply costs above the level included in its base rates, the remaining amount is absorbed by Idaho Power Company. As Idaho Power Companys reliance on purchased power continues to increase, the risks associated with the remaining amount not recovered through the power cost adjustment could increase costs and reduce earnings and cash flows.
o Idaho Power Companys load growth adjustment rate adjusts the net power supply costs Idaho Power Company includes in its annual power cost adjustment for differences between actual load and the load used in calculating base rates. If the Idaho Public Utilities Commission increases the rate or modifies the method used to calculate the load growth adjustment rate Idaho Power Companys earnings and cash flows could be reduced.
o Increased load growth can result in the need for additional investments in Idaho Power Companys infrastructure to serve the new load. If Idaho Power Company were unable to secure timely rate relief from the Idaho Public Utilities Commission, the Oregon Public Utility Commission or the Federal Energy Regulatory Commission to recover the costs of these additional investments, the resulting regulatory lag would have a negative effect on earnings and cash flow.
o Increased and unexpected load growth can create planning and operating difficulties for Idaho Power Company that can impact its ability to reliably serve customers.
Idaho Power Companys reliance on coal and natural gas to fuel its power generation facilities exposes it to risk of increased costs and reduced earnings. In addition to hydroelectric generation, Idaho Power Company relies on coal and natural gas to fuel its generation facilities. Market price increases in coal and natural gas can result in reduced earnings. Increases in demand for natural gas, including increases in demand due to greater industry reliance on natural gas for power generation, may result in market price increases and/or supply availability issues. In addition, delivery of coal and natural gas depends upon gas pipelines, rail lines, rail cars and roadways. Any disruption in Idaho Power Companys fuel supply may require the company to find alternative fuel sources at higher costs, to produce power from higher cost generation facilities or to purchase power from other sources at higher costs.
Changes in temperature and precipitation can reduce power sales and revenues. Warmer than normal winters, cooler than normal summers and increased rainfall during the irrigation seasons will reduce retail revenues from power sales.
11
Climate change could affect customer demand and hydroelectric generation and disrupt transmission and distribution systems, reducing earnings and cash flows. Changes in temperature, precipitation and snow pack conditions will affect customer demand and the amount and timing of hydroelectric generation. Extreme weather events can disrupt transmission and distribution systems, and cause service interruptions and extended outages. Decreased customer demand and hydroelectric generation and increased operations and maintenance costs from disrupted transmission and distribution systems will reduce earnings and cash flows.
The cost of complying with environmental laws and regulations will increase capital expenditures and operating costs and may reduce Idaho Power Companys earnings and cash flows and ability to meet the electricity needs of its customers. IDACORP, Inc. and Idaho Power Company are subject to extensive federal, state and local environmental statutes, rules and regulations relating to air quality, water quality, natural resources and health and safety. Compliance with these environmental statutes, rules and regulations involves significant capital and operating expenditures. These expenditures could become even more significant in the future if legislation, regulations and enforcement policies change. For instance, considerable attention has been focused on emissions from coal-fired generating plants, including carbon dioxide, and their potential role in contributing to global warming. Proposals by Congress and the Environmental Protection Agency could lead to the adoption of a mandatory federal program to reduce carbon dioxide emissions. Such a program would raise uncertainty about the future viability of fossil fuels, specifically coal, as an economical energy source for new and existing electric generation facilities because technologies for reducing carbon dioxide emissions from coal, including carbon capture and storage, are not yet proven. The effects of mercury and other pollutant emissions from coal-fired plants are also subject to extensive regulation. The adoption of new statutes, rules and regulations to implement carbon dioxide, mercury or other emission controls will result in increased capital expenditures and could increase the cost of operating coal-fired generating plants or make them uneconomical to operate and result in reduced earnings and cash flows
The costs of complying with state or federal renewable energy portfolio standards could increase capital expenditures and operating costs and reduce earnings and cash flows. Idaho Power Companys operations in Oregon will be required to comply with a ten percent renewable energy portfolio standard beginning in 2025. The new federal administration has called on Congress to adopt a federal renewable energy portfolio standard and it is possible that Idaho and other states in which Idaho Power Company operates or sells power could adopt renewable energy portfolio standards in the future. New state or federal renewable energy portfolio standards could increase capital expenditures and operating costs and reduce earnings and cash flows.
If the Idaho Public Utilities Commission, the Oregon Public Utility Commission or the Federal Energy Regulatory Commission grant less rate recovery in rate case filings than Idaho Power Company needs to cover increased costs of providing services, earnings and cash flows may be reduced and economic expansion may be limited. If the Idaho Public Utilities Commission, the Oregon Public Utility Commission or the Federal Energy Regulatory Commission grant less rate recovery in rate case filings than Idaho Power Company needs to cover increased costs of providing services, it may have a negative effect on earnings and cash flows and could result in downgrades of IDACORP, Inc.s and Idaho Power Companys credit ratings. Failure to obtain regular and timely rate relief may limit Idaho Power Companys ability to serve additional customers.
Conditions that may be imposed in connection with hydroelectric license renewals may require large capital expenditures, increase operating costs, reduce hydroelectric production and reduce earnings and cash flows. Idaho Power Company is currently involved in renewing federal licenses for several of its hydroelectric projects. The Federal Energy Regulatory Commission may impose conditions with respect to environmental, operating and other matters in connection with the renewal of Idaho Power Companys licenses. These conditions could have a negative effect on Idaho Power Companys operations, require large capital expenditures and increase operating costs, reduce hydroelectric production and reduce earnings and cash flows.
12
IDACORP, Inc., IDACORP Energy and Idaho Power Company are subject to costs and other effects of legal and regulatory proceedings, settlements, investigations and claims. IDACORP, Inc., IDACORP Energy and Idaho Power Company are involved in a number of proceedings, including the California refund proceeding, a portion of which remains pending before the Federal Energy Regulatory Commission and the United States Court of Appeals for the Ninth Circuit; a refund proceeding affecting sellers of wholesale power in the spot market in the Pacific Northwest; and show cause proceedings originating at the Federal Energy Regulatory Commission, a portion of which remains pending in the United States Court of Appeals for the Ninth Circuit. It is possible that additional proceedings related to the western energy situation may be filed in the future against IDACORP, Inc., IDACORP Energy or Idaho Power Company. IDACORP, Inc. and Idaho Power Company are or may also be subject to costs and other effects of additional legal claims, actions and complaints, including those related to the Jim Bridger and Boardman coal-fired plants, in which Idaho Power Company holds an ownership interest. To the extent the companies are required to make payments in connection with any legal or regulatory proceeding, settlement, investigation or claim, earnings and cash flows will be negatively affected.
Idaho Power Companys business is subject to substantial governmental regulation and may be adversely affected by increased costs resulting from, or liability under, existing or future regulations or requirements. Idaho Power Company is subject to extensive federal and state laws, policies, and regulations, as well as regulatory actions and regulatory audits, including those of the Federal Energy Regulatory Commission, the Environmental Protection Agency, the North American Electric Reliability Corporation, the Western Electricity Coordinating Council and the public utility commissions in Idaho, Oregon and Wyoming. Some of these regulations are changing or subject to interpretation, and failure to comply may result in penalties or other adverse consequences. Compliance with these requirements directly influences Idaho Power Companys operating environment and may significantly increase Idaho Power Companys operating costs.
Increased capital expenditures can significantly affect liquidity. Increases in both the number of customers and the demand for energy require expansion and reinforcement of transmission and distribution systems and generating facilities. If Idaho Power Company does not receive timely regulatory recovery, Idaho Power Company will have to rely more on external financing for its future utility construction expenditures. These large planned expenditures may weaken the consolidated financial profile of IDACORP, Inc. and Idaho Power Company. Additionally, a significant portion of Idaho Power Companys facilities were constructed many years ago. Aging equipment, even if maintained in accordance with industry practices, may require significant capital expenditures. Failure of equipment or facilities used in Idaho Power Companys system could potentially increase repair and maintenance expenses, purchased power expenses and capital expenditures.
As a holding company, IDACORP, Inc. does not have its own operating income and must rely on the upstream cash flows from its subsidiaries to pay dividends and make debt payments. IDACORP, Inc. is a holding company and thus its primary assets are shares or other ownership interests of its subsidiaries, primarily Idaho Power Company. Consequently, IDACORP, Inc.s ability to pay dividends and to service its debt is dependent upon dividends and other payments received from its subsidiaries. IDACORP, Inc.s subsidiaries are separate and distinct legal entities and have no obligation to pay any amounts to IDACORP, Inc., whether through dividends, loans or other payments. The ability of IDACORP, Inc.s subsidiaries to pay dividends or make distributions to IDACORP, Inc. depends on several factors, including their actual and projected earnings and cash flow, capital requirements and general financial condition, and the prior rights of holders of their existing and future first mortgage bonds and other debt securities.
A downgrade in IDACORP, Inc.s and Idaho Power Companys credit ratings could negatively affect the companies ability to access capital, increase their cost of borrowing, and require the companies to post collateral with transaction counterparties. Credit rating agencies periodically review the corporate credit ratings and long-term ratings of IDACORP, Inc. and Idaho Power Company. IDACORP, Inc. and Idaho Power Company also have borrowing arrangements that rely on the ability of the banks to fund loans or support commercial paper. Downgrades of IDACORP, Inc.s or Idaho Power Companys credit ratings, or those affecting bond insurers or relationship banks, could limit the companies ability to access capital, including the commercial paper markets, require IDACORP, Inc. and Idaho Power Company to pay a higher interest rate on their debt and require the companies to post collateral with transaction counterparties.
Volatility and decreased lending capacity in the financial markets may negatively affect IDACORP, Inc.s and Idaho Power Companys ability to access capital and/or increase their cost of borrowing. IDACORP, Inc. and Idaho Power Company require liquidity to pay operating expenses and principal of and interest on debt and to finance capital expenditures. Financial markets have recently experienced extreme volatility and disruption, causing the cost of borrowing to rise and the availability of liquidity and credit for borrowers to decrease; actions taken by the United States Government, the Federal Reserve and other governmental and regulatory bodies may not be sufficient to stabilize these markets. As a result, IDACORP, Inc. and Idaho Power Company may experience higher interest costs and/or be unable to access capital, including the commercial paper markets. These conditions may adversely affect IDACORP, Inc.s and Idaho Power Companys results of operations, financial condition and cash flows.
13
IDACORP and Idaho Power Company may incur losses on their investments or be unable to sell their investments when they desire to do so, which could adversely affect their liquidity and financial condition. IDACORP and Idaho Power Company invest cash in short-term interest bearing accounts, including money market funds. Volatility in the financial markets has resulted in a lack of liquidity and declines in value of some money market funds. The companies may realize additional losses on some or all of their invested funds or be unable to sell their investments when they desire to do so. This could adversely affect IDACORPs and Idaho Power Companys liquidity and financial condition.
National and regional economic conditions may cause increased late payments and uncollectible accounts, which would reduce earnings and cash flows. Recent concerns over inflation, energy costs, the availability and cost of credit, declining business and increased unemployment have contributed to a recession. These factors have resulted, and may continue to result, in an increase in late payments and uncollectible accounts and reduce IDACORP Inc.s and Idaho Power Companys earnings and cash flows.
Terrorist threats and activities could result in reduced revenues and increased costs. IDACORP, Inc. and Idaho Power Company are subject to direct and indirect effects of terrorist threats and activities. Potential targets include generation and transmission facilities. The effects of terrorist threats and activities could prevent Idaho Power Company from purchasing, generating or transmitting power and result in reduced revenues and increased costs.
Adverse results of income tax audits could reduce earnings and cash flows. The outcome of ongoing and future income tax audits could differ materially from the amounts currently recorded, and the difference could reduce IDACORPs and Idaho Power Companys earnings and cash flows.
Employee workforce factors could increase costs and reduce earnings. Idaho Power Company is subject to workforce factors, including loss or retirement of key personnel, availability of qualified personnel, and an aging workforce. The costs of attracting and retaining appropriately qualified employees to replace an aging workforce could reduce earnings and cash flows.
ITEM
1B. UNRESOLVED STAFF COMMENTS
None
ITEM 2. PROPERTIES
IPCs system is comprised of
17 hydroelectric generating plants located in southern Idaho and eastern
Oregon, two natural gas-fired plants located in southern Idaho and interests in
three coal-fired steam electric generating plants located in Wyoming, Nevada
and Oregon. The system also includes approximately 4,752 miles of high-voltage
transmission lines, 23 step-up transmission substations located at power
plants, 22 transmission substations, eight switching stations, 223 energized
distribution substations (excluding mobile substations and dispatch centers)
and approximately 65,045 miles of distribution lines.
14
IPC holds FERC licenses for
all of its hydroelectric projects that are subject to federal licensing. These
projects and the other generating stations and their nameplate capacities are
listed below:
Relicensing of IPCs
hydroelectric projects is discussed in Part II, Item 7 - MD&A - REGULATORY
MATTERS - Relicensing of Hydroelectric Projects.
At December 31, 2008, the
composite average ages of the principal parts of IPCs system, based on dollar
investment, were: production plant, 25 years; transmission lines and
substations, 25 years; and distribution lines and substations, 21 years. IPC
considers its properties to be well-maintained and in good operating condition.
IPC owns in fee all of its
principal plants and other important units of real property, except for
portions of certain projects licensed under the FPA and reservoirs and other
easements. IPCs property is also subject to the lien of its Mortgage and Deed
of Trust and the provisions of its project licenses. In addition, IPCs
property is subject to minor defects common to properties of such size and
character that do not materially impair the value to, or the use by, IPC of
such properties.
IERCo owns a one-third interest in Bridger Coal Company and coal leases near
the Jim Bridger generating plant in Wyoming from which coal is mined and supplied
to the plant.
Ida-West holds 50 percent
interests in nine operating hydroelectric plants with a total generating
capacity of 45 MW. These plants are located in Idaho and California.
ITEM 3. LEGAL PROCEEDINGS
15
Please see Note 7 to IDACORPs
and IPCs Consolidated Financial Statements.
ITEM 4. SUBMISSION OF
MATTERS TO A VOTE OF SECURITY HOLDERS
None
EXECUTIVE
OFFICERS OF THE REGISTRANTS
The names, ages and positions
of all of the executive officers of IDACORP, Inc. and Idaho Power Company are
listed below along with their business experience during the past five years.
Mr. J. LaMont Keen and Mr. Steven R. Keen are brothers. There are no other
family relationships among these officers, nor is there any arrangement or
understanding between any officer and any other person pursuant to which the
officer was elected.
J. LAMONT KEEN President and
Chief Executive Officer, appointed July 1, 2006. Mr. Keen also serves as
President and Chief Executive Officer of Idaho Power Company, appointed November
17, 2005. Mr. Keen was Executive Vice President of IDACORP, Inc., from March
1, 2002, to July 1, 2006, and President and Chief Operating Officer of Idaho
Power Company from March 1, 2002, to November 17, 2005. Mr. Keen was Senior
Vice President Administration and Chief Financial Officer of IDACORP, Inc.
and Idaho Power Company from May 5, 1999, to March 1, 2002. Mr. Keen also
serves on the Board of Directors of both IDACORP, Inc. and Idaho Power Company.
Age 56.
DARREL T. ANDERSON Senior
Vice President - Administrative Services and Chief Financial Officer of
IDACORP, Inc. and Idaho Power Company, appointed July 1, 2004. Mr. Anderson
was Vice President, Chief Financial Officer and Treasurer of IDACORP, Inc. and
Idaho Power Company from March 1, 2002, to July 1, 2004 and Vice President
Finance and Treasurer of IDACORP Inc. and Idaho Power Company from May 5, 1999,
to March 1, 2002. Age 50.
THOMAS R. SALDIN Senior Vice
President and General Counsel of IDACORP, Inc. and Idaho Power Company,
appointed October 1, 2004. Mr. Saldin was Executive Vice President and General
Counsel of Albertsons Inc., a supermarket chain, from January 29, 1999, to his
retirement on August 31, 2001. Age 62.
JAMES C. MILLER Senior Vice
President Power Supply of Idaho Power Company, appointed July 1, 2004. Mr.
Miller was Senior Vice President Delivery of Idaho Power Company from October
1, 1999, to July 1, 2004. Age 54.
DANIEL B. MINOR Senior Vice
President Delivery of Idaho Power Company, appointed July 1, 2004. Mr. Minor
was Vice President - Administrative Services & Human Resources of IDACORP,
Inc. and Idaho Power Company from November 20, 2003, to July 1, 2004, Vice
President Corporate Services of Idaho Power Company from May 15, 2003, to
November 20, 2003 and Director of Audit Services of Idaho Power Company from
July 2001 to May 15, 2003. Age 51.
STEVEN R. KEEN Vice President
and Treasurer of IDACORP, Inc. and Idaho Power Company, appointed June 1,
2006. Mr. Keen was President of IDACORP Financial Services from September 8,
1998 to May 31, 2007. Age 48.
PATRICK A. HARRINGTON
Corporate Secretary of IDACORP, Inc. and Idaho Power Company, appointed March
15, 2007. Mr. Harrington was Senior Attorney from June 7, 2003, to March 15,
2007. Age 48.
DENNIS C. GRIBBLE Vice
President and Chief Information Officer of IDACORP, Inc. and Idaho Power
Company, appointed June 1, 2006. Mr. Gribble was Vice President and Treasurer
of IDACORP, Inc. and Idaho Power Company, from July 15, 2004, to June 1, 2006
and Finance Controller of Idaho Power Company from January 1, 1997, to July 15,
2004. Age 56.
LORI D. SMITH Vice President
Corporate Planning and Chief Risk Officer of IDACORP, Inc. and Idaho Power
Company, appointed January 1, 2008. Ms. Smith was Vice President - Finance and
Chief Risk Officer of IDACORP, Inc. and Idaho Power Company from July 15, 2004,
to January 1, 2008, and Director of Strategic Analysis of Idaho Power Company
from January 1, 2000 to July 15, 2004. Age 48.
16
LUCI K. MCDONALD Vice
President - Human Resources of IDACORP, Inc. and Idaho Power Company, appointed
December 6, 2004. Ms. McDonald was Corporate Staff Director of Human Resources
of Boise Cascade Corporation, a forest products company, from September 16,
1999, to November 19, 2004. Age 51.
NAOMI SHANKEL Vice President,
Audit and Compliance of IDACORP, Inc. and Idaho Power Company, appointed
September 21, 2006. Ms. Shankel was Director, Audit Services of IDACORP, Inc.
and Idaho Power Company from July 2003, to September 21, 2006. Age 37.
JOHN
R. GALE Vice President - Regulatory Affairs of Idaho Power Company, appointed
March 15, 2001. Age 58.
LISA A. GROW Vice President
Delivery Engineering and Operations of Idaho Power Company, appointed July 20,
2005. Ms. Grow was General Manager of Grid Operations and Planning of Idaho
Power Company from October 23, 2004, to July 20, 2005, Operations Manager (Grid
Ops) of Idaho Power Company from March 2, 2002, to October 23, 2004. Age 43.
WARREN KLINE Vice President
Customer Service and Regional Operations of Idaho Power Company, appointed July
20, 2005. Mr. Kline was General Manager of Regional Operations of Idaho Power
Company from March 2, 2002, to July 20, 2005. Age 53.
JEFFREY MALMEN Vice President
Public Affairs of IDACORP, Inc. and Idaho Power Company, appointed October 1,
2008. Mr. Malmen was Senior Manager Governmental Affairs of IDACORP, Inc.
and Idaho Power Company from December 2007 to October 1, 2008, Chief of Staff
of the Office of Idaho Governor C.L. Butch Otter from January 2007 to
November 2007, and Chief of Staff of the Office of Idaho Congressman C.L. Butch
Otter from January 2001 through December 2006. Age 41.
PART II
ITEM 5. MARKET FOR REGISTRANTS
COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY
SECURITIES
IDACORPs common stock,
without par value, is traded on the New York Stock Exchange. On February 23,
2009, there were 14,266 holders of record and the stock price was $25.08 per
share.
The outstanding shares of IPCs
common stock, $2.50 par value, are held by IDACORP and are not traded. IDACORP
became the holding company of IPC on October 1, 1998.
The amount and timing of
dividends payable on IDACORPs common stock are within the sole discretion of
IDACORPs Board of Directors. The Board of Directors reviews the dividend rate
quarterly to determine its appropriateness in light of IDACORPs current and
long-term financial position and results of operations, capital requirements,
rating agency requirements, legislative and regulatory developments affecting
the electric utility industry in general and IPC in particular, competitive
conditions and any other factors the Board of Directors deems relevant. The
ability of IDACORP to pay dividends on its common stock is dependent upon
dividends paid to it by its subsidiaries, primarily IPC.
A covenant under IDACORPs
credit facility, IPCs credit facility and IPCs term loan credit agreement
described in MD&A - LIQUIDITY AND CAPITAL RESOURCES - Financing Programs
Debt Covenants requires IDACORP and IPC to maintain leverage ratios of
consolidated indebtedness to consolidated total capitalization, as defined, of
no more than 65 percent at the end of each fiscal quarter.
IPCs Revised Code of Conduct
approved by the IPUC on April 21, 2008, states that IPC will not pay any
dividends to IDACORP that will reduce IPCs common equity capital below 35
percent of its total adjusted capital without IPUC approval.
17
IPCs ability to pay
dividends on its common stock held by IDACORP and IDACORPs ability to pay
dividends on its common stock are limited to the extent payment of such
dividends would violate the covenants or IPCs Code of Conduct. At December
31, 2008, the leverage ratios for IDACORP and IPC were 52 percent and 54
percent, respectively. Based on these restrictions, IDACORPs and IPCs
dividends were limited to $536 million and $447 million, respectively, at
December 31, 2008.
IPCs articles of
incorporation contain restrictions on the payment of dividends on its common
stock if preferred stock dividends are in arrears. IPC has no preferred stock
outstanding. IPC paid dividends to IDACORP of $54 million, $53 million and $51
million in 2008, 2007 and 2006, respectively.
The following table shows the
reported high and low sales price of IDACORPs common stock and dividends paid
for 2008 and 2007 as reported in the consolidated transaction reporting system.
|
2008 Quarters |
|||||||
Common Stock, without par value: |
1 st |
|
2 nd |
|
3 rd |
|
4 th |
|
|
High |
$35.11 |
|
$33.36 |
|
$33.89 |
|
$30.66 |
|
Low |
28.74 |
|
28.55 |
|
27.96 |
|
21.88 |
|
Dividends paid per share |
0.30 |
|
0.30 |
|
0.30 |
|
0.30 |
|
|
|||||||
|
2007 Quarters |
|||||||
Common Stock, without par value: |
1 st |
|
2 nd |
|
3 rd |
|
4 th |
|
|
High |
$39.19 |
|
$35.18 |
|
$36.57 |
|
$36.72 |
|
Low |
32.00 |
|
31.22 |
|
30.07 |
|
32.36 |
|
Dividends paid per share |
0.30 |
|
0.30 |
|
0.30 |
|
0.30 |
|
|
Issuer Purchases of Equity
Securities:
None
Performance
Graph
The
following performance graph shows a comparison of the five-year cumulative
total shareholder return for IDACORP common stock, the S&P 500 Index and
the Edison Electric Institute (EEI) Electric Utilities Index. The data assumes
that $100 was invested on December 31, 2003, with beginning-of-period weighting
of the peer group indices (based on market capitalization) and monthly
compounding of returns.
18
Source: Bloomberg and Edison
Electric Institute
|
|
|
|
|
|
EEI Electric |
|
IDACORP |
S & P 500 |
Utilities Index |
|||
2003 |
$ |
100.00 |
$ |
100.00 |
$ |
100.00 |
2004 |
|
106.40 |
|
110.87 |
|
122.84 |
2005 |
|
106.25 |
|
116.31 |
|
142.56 |
2006 |
|
144.89 |
|
134.67 |
|
172.18 |
2007 |
|
136.78 |
|
142.06 |
|
200.66 |
2008 |
|
118.99 |
|
89.51 |
|
148.68 |
The foregoing performance
graph and data shall not be deemed filed as part of this Form 10-K for
purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise
subject to the liabilities of that section and should not be deemed
incorporated by reference into any other filing of IDACORP or IPC under the
Securities Act of 1933 or the Securities Exchange Act of 1934, except to the
extent IDACORP or IPC specifically incorporates it by reference into such
filing.
ITEM
6. SELECTED FINANCIAL DATA
In the second quarter of
2006, IDACORP management designated the operations of IDACORP Technologies,
Inc. and IDACOMM as assets held for sale. IDACORPs consolidated financial
statements reflect the reclassification of the results of these businesses as
discontinued operations for all periods presented. Discontinued operations are
discussed in more detail in Note 16 to IDACORPs and IPCs Consolidated
Financial Statements.
19
ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Dollar amounts and Megawatt-hours
(MWh) are in thousands unless otherwise indicated).
INTRODUCTION:
In Managements Discussion
and Analysis of Financial Condition and Results of Operations (MD&A), the
general financial condition and results of operations for IDACORP, Inc. and its
subsidiaries (collectively, IDACORP) and Idaho Power Company and its subsidiary
(collectively, IPC) are discussed.
IDACORP is a holding company
formed in 1998 whose principal operating subsidiary is IPC. IDACORP is subject
to the provisions of the Public Utility Holding Company Act of 2005, which
provides certain access to books and records to the Federal Energy Regulatory
Commission (FERC) and state utility regulatory commissions and imposes certain
record retention and reporting requirements on IDACORP.
IPC is an electric utility
with a service territory covering approximately 24,000 square miles in southern
Idaho and eastern Oregon. IPC is regulated by the FERC and the state
regulatory commissions of Idaho and Oregon. IPC is the parent of Idaho Energy
Resources Co., (IERCo) a joint venturer in Bridger Coal Company, which supplies
coal to the Jim Bridger generating plant owned in part by IPC.
IDACORPs other subsidiaries
include:
IDACORP Financial Services, Inc. (IFS), an investor in affordable housing and other real estate investments;
Ida-West Energy Company (Ida-West), an operator of small hydroelectric generation projects that satisfy the requirements of PURPA; and
IDACORP Energy (IE), a marketer of energy commodities, which wound down operations in 2003.
On July 20, 2006, IDACORP
completed the sale of all of the outstanding common stock of ITI to IdaTech UK
Limited, a wholly-owned subsidiary of Investec Group Investments (UK) Limited.
On February 23, 2007, IDACORP completed the sale of all of the outstanding
common stock of IDACOMM to American Fiber Systems, Inc.
While reading the MD&A,
please refer to the accompanying Consolidated Financial Statements of IDACORP
and IPC, which present the financial position at December 31, 2008 and 2007,
and the results of operations and cash flows for each company for the years
ended December 31, 2008, 2007 and 2006.
FORWARD-LOOKING
INFORMATION:
In connection with the safe
harbor provisions of the Private Securities Litigation Reform Act of 1995,
IDACORP and IPC are hereby filing cautionary statements identifying important
factors that could cause 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 IDACORP or IPC in this Annual Report on Form 10-K,
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, may result, may 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 IDACORPs or IPCs control and may cause actual
results to differ materially from those contained in forward-looking
statements:
The effect of regulatory decisions by the Idaho Public Utilities Commission,
the Oregon Public Utility Commission and the Federal Energy Regulatory
Commission affecting our ability to recover costs and/or earn a reasonable rate
of return including, but not limited to, the disallowance of costs that have
been deferred;
20
Changes in and compliance with state and federal laws, policies and regulations, including new interpretations by oversight bodies, which include the Federal Energy Regulatory Commission, the North American Electric Reliability Corporation, the Western Electricity Coordinating Council, the Idaho Public Utilities Commission and the Oregon Public Utility Commission, of existing policies and regulations that affect the cost of compliance, investigations and audits, penalties and costs of remediation that may or may not be recoverable through rates;
Changes in tax laws or related regulations or new interpretations of applicable law by the Internal Revenue Service or other taxing jurisdiction;
Litigation and regulatory proceedings, including those resulting from the energy situation in the western United States, and penalties and settlements that influence business and profitability;
Changes in and compliance with laws, regulations and policies including changes in law and compliance with environmental, natural resources, endangered species and safety laws, regulations and policies and the adoption of laws and regulations addressing greenhouse gas emissions, global climate change, and energy policies;
Global climate change and regional weather variations affecting customer demand and hydroelectric generation;
Over-appropriation of surface and groundwater in the Snake River Basin resulting in reduced generation at hydroelectric facilities;
Construction of power generation, transmission and distribution facilities, including an inability to obtain required governmental permits and approvals, rights-of-way and siting, and risks related to contracting, construction and start-up;
Operation of power generating facilities including performance below expected levels, breakdown or failure of equipment, availability of transmission and fuel supply;
Changes in operating expenses and capital expenditures, including costs and availability of materials, fuel and commodities;
Blackouts or other disruptions of Idaho Power Companys transmission system or the western interconnected transmission system;
Population growth rates and other demographic patterns;
Market prices and demand for energy, including structural market changes;
Increases in uncollectible customer receivables;
Fluctuations in sources and uses of cash;
Results of financing efforts, including the ability to obtain financing or refinance existing debt when necessary or on favorable terms, which can be affected by factors such as credit ratings, volatility in the financial markets and other economic conditions;
Actions by credit rating agencies, including changes in rating criteria and new interpretations of existing criteria;
Changes in interest rates or rates of inflation;
Performance of the stock market, interest rates, credit spreads and other financial market conditions, as well as changes in government regulations, which affect the amount and timing of required contributions to pension plans and the reported costs of providing pension and other postretirement benefits;
Increases in health care costs and the resulting effect on medical benefits paid for employees;
Increasing costs of insurance, changes in coverage terms and the ability to obtain insurance;
Homeland security, acts of war or terrorism;
Natural disasters and other natural risks, such as earthquake, flood, drought, lightning, wind and fire;
Adoption of or changes in critical accounting policies or estimates; and
New accounting or Securities and Exchange Commission requirements, or new interpretation or application of existing requirements.
Any forward-looking statement
speaks only as of the date on which such statement is made. New factors emerge
from time to time and it is not possible for management to predict all such
factors, nor can it assess the impact of any such factor on the business or the
extent to which any factor, or combination of factors, may cause results to
differ materially from those contained in any forward-looking statement.
21
EXECUTIVE OVERVIEW:
2008 Financial Results
IDACORPs net income and earnings per
diluted share for the last three years were as follows:
|
|
2008 |
|
2007 |
|
2006 |
|||
Net income |
|
$ |
98,414 |
|
$ |
82,339 |
|
$ |
107,403 |
Average outstanding shares - diluted (000s) |
|
|
45,332 |
|
|
44,291 |
|
|
42,874 |
Earnings per diluted share |
|
$ |
2.17 |
|
$ |
1.86 |
|
$ |
2.51 |
|
|
|
|
|
|
|
|
|
|
The key factor affecting the
change in IDACORPs net income was IPCs operating income, which increased
$34.6 million over 2007 levels. Rate increases during 2007 and 2008 increased
general business revenues in 2008 as compared to 2007. These increases
combined with more favorable hydroelectric generating conditions resulted in
improved operating income. However, increases in operating and maintenance
expenses and interest expense due to higher long-term debt balances reduced the
earnings contribution at IPC. IPC earnings in the fourth quarter were also negatively
impacted by a FERC decision that resulted in an increase to IPCs Open Access
Transmission Tariff (OATT) refund to its transmission service customers and an
impairment charge for a decline in the market value of equity securities.
The following table presents
a reconciliation of IDACORP net income for 2007 to 2008 (shown net of tax):
|
|
||
IDACORP 2007 Net Income |
$82,339 |
|
|
Increased electric utility operating income |
21,070 |
(1) |
|
Gain on sale of Southwest Intertie Project (SWIP) |
1,849 |
|
|
Decreased net income at IFS |
(3,686) |
|
|
Decreased loss at holding company |
1,585 |
|
|
Increased IPC interest expense |
(6,518) |
|
|
Impairment of equity securities |
(4,159) |
|
|
Settlement of prior years tax returns |
2,753 |
|
|
Other net increases |
3,181 |
|
|
IDACORP 2008 Net Income |
$98,414 |
|
|
|
|||
(1) |
Increased electric utility operating income includes increased general business revenue of $70.6 million, |
||
|
decreased other revenue of $4.8 million due to the OATT refund, decreased net power supply |
||
|
costs (fuel and purchased power less off-system sales) of $5.9 million, a PCA expense decrease of $44.9 |
||
|
million, and increased O&M expense of $4.6 million. |
||
|
|
||
Business Strategy
IDACORP is focusing on a strategy
that emphasizes IPC as IDACORPs core business. Although growth in number of
customers slowed in 2008, IPC is experiencing customer growth in its service
area and must be prepared to meet customers electricity needs in the future.
This corporate strategy recognizes that IPC must make investments in
infrastructure to ensure adequate supply and reliable service. IPCs
regulatory efforts have resulted in finalizing the 2007 general rate case and receiving
an order in the 2008 general rate case. IPC continues to make efforts to speed
recovery of the financial and operating costs of new facilities and system
improvements. IFS and Ida-West remain components of the corporate strategy.
Regulatory Matters
Idaho 2008 General Rate Case:
On
January 30, 2009, the IPUC issued its final order approving an average annual
increase in Idaho base rates, effective February 1, 2009, of 3.1 percent
(approximately $20.9 million annually), a return on equity of 10.5 percent and
an overall rate of return of 8.18 percent. On February 19, 2009, IPC filed a
request for reconsideration with the IPUC. In its filing, IPC asked the IPUC
to reconsider four principal areas of the order having a combined Idaho
jurisdictional revenue requirement impact of approximately $8 million annually.
The request for reconsideration is discussed in more detail in REGULATORY
MATTERS - Idaho Rate Cases - 2008 General Rate Case.
22
Idaho 2007 General Rate
Case:
On February 28, 2008, the IPUC
approved a settlement of IPCs general rate case filed in 2007, increasing base
rates for residential customers 4.7 percent and rates for the other classes of
customers 5.65 percent. The rates became effective March 1, 2008, and increased
IPCs annual revenue by $32.1 million.
Danskin CT1 Power Plant
Rate Case:
On May 30, 2008, the IPUC
authorized IPC to add to its rate base $64.2 million for the Danskin CT1 plant
and related facilities, effective June 1, 2008, resulting in a base rate
increase of 1.37 percent, or $8.9 million in annual revenues.
Power Cost Adjustment:
On May 30, 2008, the IPUC approved a $73.3 million
increase to revenues, effective June 1, 2008, which resulted in an average rate
increase to IPCs customers of 10.7 percent. The increase is net of
approximately $16.5 million of gains on sales of excess emission allowances,
including interest.
In
its order, the IPUC also directed IPC to hold workshops to address PCA-related
issues not resolved in the PCA filing. As a result of the workshops, a
settlement stipulation was filed and was approved by the IPUC on January 9,
2009. The approved stipulation changes the sharing ratio between customers and
shareholders to 95/5, adjusts the Load Growth Adjustment Rate (LGAR) to $26.52
per MWh based on the 2008 general rate case order, changes the source of the
power supply cost forecast and authorizes inclusion of third party transmission
expense in the PCA formula. The changes were effective February 1, 2009. The
stipulation is discussed in more detail in REGULATORY MATTERS - Deferred Net
Power Supply Costs Idaho PCA Workshops.
Oregon Power Cost Recovery
Mechanism:
On April 28, 2008, the
OPUC approved a power cost recovery mechanism with two components, the annual
power cost update (APCU) and the power cost adjustment mechanism (PCAM). The
combination of the APCU and the PCAM allows IPC to recover excess net power
supply costs in a more timely fashion than through the previously existing
deferral process. The APCU allows IPC to reestablish its Oregon base net power
supply costs annually, separate from a general rate case, and to forecast net
power supply costs for the upcoming water year. The PCAM is a true-up that
provides for 90 percent customer sharing of deviations in actual net power
supply costs from those included in the APCU if the deviations are outside of
prescribed ranges and IPC meets a return-on-equity test. These mechanisms are
discussed in more detail in REGULATORY MATTERS - Deferred Net Power Supply
Costs Oregon Oregon Power Cost Recovery Mechanism.
OATT:
Effective June 1, 2006, IPCs OATT was made a
formula rate based on financial and operational data IPC is required to file
annually with the FERC in its Form 1. On January 15, 2009, the FERC issued an
unfavorable order affecting the way IPC calculates its OATT. The order
requires IPC to reduce its transmission service rates to FERC jurisdictional
customers and make refunds in the total amount of $13.3 million (including $1.1
million in interest) for the period since June 2006. IPC had previously
reserved a portion of this amount, but reserved an additional $7.9 million
(including $0.7 million in interest) in the fourth quarter of 2008 to bring the
total reserve amount to $13.3 million. IPC has filed a request for rehearing
with the FERC. The OATT is discussed in more detail in REGULATORY MATTERS -
Federal Regulatory Matters - OATT.
Record system peaks
IPCs system is dual peaking, with
the larger peak demand occurring in the summer. IPC set a new system peak of
3,214 MW on June 30, 2008. The previous hourly system peak of 3,193 MW was set
on July 13, 2007. Although IPC was able to meet all of its load requirements
during this period of increased demand, all available resources of IPCs system
were fully committed.
Integrated Resource Plan
IPC filed its 2006 Integrated
Resource Plan (IRP) with the IPUC in September 2006 and with the OPUC in
October 2006. The 2006 IRP previewed IPCs load and resource situation for the
next twenty years, analyzed potential supply-side and demand-side options and
identified near-term and long-term actions.
23
Prior to filing, the IRP
requires extensive involvement by IPC, the IPUC Staff, the OPUC Staff, and
customer and environmental representatives, as well as input on the cost of
various generation technologies. The IRP is the starting point for
demonstrating prudence in IPCs resource decisions. The two primary goals of
the 2006 IRP were to (1) identify sufficient resources to reliably serve the
growing demand for electric service within IPCs service area throughout the 20-year
planning period and (2) ensure that the portfolio of resources selected
balances cost, risk and environmental concerns.
The IPUC accepted the 2006
IRP in March 2007 and the OPUC acknowledged the 2006 IRP in September 2007.
With its acceptance of the 2006 IRP, the IPUC requested that IPC align the
submittal of its next IRP with those submitted by other Idaho utilities. To
comply with this request, IPC provided updates on the status of the 2006 IRP to
both the IPUC and OPUC in June 2008 and to the OPUC in February 2009 and is
currently preparing the 2009 IRP which is scheduled to be completed in June
2009. See further discussion in REGULATORY MATTERS - Integrated Resource
Plan.
Transmission
Projects
IPC and PacifiCorp are jointly
exploring the Gateway West Project to build transmission lines between
Windstar, a substation located near Douglas, Wyoming and Hemingway, a
substation located in the vicinity of Melba and Murphy, Idaho near Boise. The
lines would be designed to increase electrical transmission capacity across
southern Idaho in response to increasing customer demand and growth, along with
other transmission service requests. IPC and PacifiCorp have a cost sharing
agreement for expenses associated with the analysis work of the initial
phases. IPCs share of the initial phase of engineering, environmental review,
permitting and rights-of-way is approximately $40 million. Initial phases of
the project could be completed by 2014 depending on the timing of rights-of-way,
acquisition, siting and permitting, and construction sequencing. If all
initial phases are constructed, IPC estimates that its share of the project
costs could range between $500 million and $600 million. Remaining phases of
the project could be constructed as demand requires.
Consistent
with the 2006 IRP and requirements and requests of other transmission
customers, IPC is exploring alternatives for the construction of a 500-kV line
between southwestern Idaho and the Northwest. The Boardman-Hemingway Line is
expected to relieve existing congestion by increasing transmission capacity and
improving reliability. It will allow for the transfer of up to 1,500 MW of
additional energy between Idaho and the Northwest. The initial project phase
estimate of $50 million will be funded by IPC and includes the engineering,
environmental review, permitting and rights-of-way. Cost estimates for the
project (including initial phase project estimate and construction costs of the
line) are approximately $600 million. IPC expects to seek partners for up to
50 percent of the project when construction commences. The line has a target
in-service date of June 2013. Please see further discussion in REGULATORY
MATTERS Transmission Projects - Boardman-Hemingway Line.
In
order to connect the Gateway West Project and the Boardman-Hemingway Line to
IPCs primary load center and also to help meet forecast deficits and improve reliability,
IPC is constructing a new 500-kV station named Hemingway. As part of the
Hemingway Station Project, the new Hemingway-Hubbard Transmission Line will
provide power to the Treasure Valley in southwest Idaho. The project is
expected to be completed by 2010. The project will include adding a 230-kV
double circuit transmission line and converting an existing 138-kV to 230-kV.
Cost estimates for the Hemingway Station Project include $52 million for the
station and $25 million for the Hemingway-Hubbard Transmission Line.
Liquidity
In the fourth quarter of 2008, the
global credit markets suffered a significant contraction, including the failure
of some large financial institutions. As a result, the U.S. government took
control of certain financial institutions, and some institutions were bought
out or declared bankruptcy. Despite the recent turmoil in the global credit
markets, IDACORP and IPC had access to the capital markets and have been able
to generate funds internally and externally to meet our capital requirements.
Our ability to attract the necessary financial capital at reasonable terms is
critical to our overall strategic plan because
IDACORP and IPC rely on access to both short-term borrowings, including the
issuance of commercial paper, and long-term capital markets as sources of
liquidity for capital requirements not satisfied by internally generated
funds. IDACORP and IPC have continued to issue commercial paper at times, but
have also made draws under their respective credit facilities when commercial
paper at desired maturities was not available. IDACORP and IPC expect that
operating cash flow, together with the revolving credit facilities and other
external financing, will be adequate to meet their operating and capital needs,
although there can be no assurance that continued or increased volatility and
disruption in the global capital and credit markets will not restrict either
companys ability to access these markets on commercially acceptable terms or
at all.
24
Pension
Plan
Financial market volatility and
disruption caused a significant decline in the value of qualified pension
assets. Current provisions of the Pension Protection Act require that if a
company does not maintain a 94 percent funding status for 2009, then the
company will need to make additional contributions to become fully funded over
a period of seven years. Based on the value of pension assets and interest
rates as of December 31, 2008, the estimated minimum required contributions
would be approximately $45 million in 2010 and $33 million for each of 2011,
2012, and 2013. These estimates reflect the initial relief measures as passed
by Congress; however, additional measures are being proposed, which may impact
immediate funding requirements.
Capital
Requirements and Cash Flows
IDACORP estimates that it will spend between $780 and $800 million for
construction related activities from 2009 to 2011, excluding any amounts from
our 2012 Baseload Resource RFP process.
Forecasts indicate that
internal cash generation after dividends will provide less than the full amount
of total capital requirements for 2009 through 2011. IDACORP and IPC expect to
continue financing the utility construction program and other capital requirements
with internally generated funds and continued reliance on externally financed
capital. Excluding the baseload resource decision, IPC expects financing needs
in 2009 to be less than 2008 levels.
The amount of internal cash
generation is dependent primarily upon IPCs cash flows from operations, which
are subject to risks and uncertainties relating to weather and water conditions
and IPCs ability to obtain rate relief to cover its operating costs and
provide a return on investment.
Equity Issuances
During 2008, IDACORP issued
approximately 1.9 million shares of common stock through its continuous equity
program (CEP), dividend reinvestment and stock purchase plan, employee savings
plan, restricted stock plan, and long-term incentive and compensation plan. Approximately
1.5 million of these shares were issued under the CEP. In 2008, 2007 and 2006,
IDACORP contributed $37 million, $51 million and $47 million, respectively, of
additional equity to IPC. No additional shares of IPC common stock were
issued.
Idaho Water Management
Issues
Power generation at the IPC
hydroelectric power plants on the Snake River is dependent upon the state water
rights held by IPC and the long-term sustainability of the Snake River,
tributary spring flows and the Eastern Snake Plain Aquifer that is connected to
the Snake River. IPC continues to participate in water management issues in
Idaho that may affect those water rights and resources with the goal to
preserve, to the fullest extent possible, the long-term availability of water
for use at IPCs hydroelectric projects on the Snake River. IPCs involvement
includes active participation in the Snake River Basin Adjudication, a judicial
action initiated in 1987 to determine the nature and extent of water use in the
Snake River basin, judicial and administrative proceedings relating to the
conjunctive management of ground and surface water rights, and management and
planning processes intended to reverse declining trends in river, spring, and
aquifer levels and address the long-term water resource needs of the state. On
occasion, resolution of these water management issues involves litigation. IPC
is involved in legal actions regarding not only its water rights but also the
water rights of others. For a further discussion of water management issues
see LEGAL AND ENVIRONMENTAL ISSUES - Environmental Issues - Idaho Water
Management Issues.
2009 Operating and Financial Metrics Outlook
The outlook for key operating and financial metrics for 2009 as compared to
actual results for 2008 is:
|
2009 |
2008 |
|
Key Operating & Financial Metrics |
Estimate |
Actual |
|
IPC Operation & Maintenance Expense (Millions) |
$280-$290 |
$294 |
|
IPC Capital Expenditures (Millions) |
$220-$230 |
$244 |
|
IPC Hydroelectric Generation (Million MWh) |
6.5-8.5 |
6.9 |
|
Non-regulated subsidiary earnings and holding company expenses (Millions) |
$0.0-$3.0 |
$4.3 |
|
Effective Tax Rates: |
|
|
|
|
IPC |
31%-35% |
29% |
|
Consolidated IDACORP |
24%-28% |
16% |
|
|
|
|
25
IPC capital expenditures exclude
costs for a baseload energy resource. IPC will seek approval from the IPUC
relating to the baseload resource during the first quarter of 2009 with a
decision from the IPUC expected later in 2009. For the three-year period 2009-2011,
IPC expects to spend between $780 million and $800 million for construction-related
activities. This amount includes expenditures for the siting and permitting of
major transmission expansions for Boardman to Hemingway, Gateway West, and for
the Hemingway station and Hemingway to Hubbard line.
As discussed above, the credit
and financial markets have recently experienced volatility and disruption. IPC
has experienced a slowdown in new customer connections and one of IPCs largest
industrial customers has announced workforce reductions. As a result, IPC and
IDACORP have reduced or delayed many capital expenditures relating to customer
growth and other non-critical projects. Additionally, hiring restrictions have
been implemented and are expected to slow the growth of operation and
maintenance spending in 2009.
The projected range for annual
hydroelectric generation is based on 2008-2009 Snake River Basin snowpack at 77
percent of average on February 17, 2009, with reservoir storage levels in
selected federal reservoirs upstream of Brownlee at approximately 110 percent
of average as of February 11, 2009. The stream flow forecast released on
February 20, 2009, by the NWRFC predicts that Brownlee reservoir inflow for
April through July 2009 will be 3.3 maf, or 53 percent of the NWRFC average.
The decrease in estimated non-regulated
subsidiary earnings from prior years is a result of expected declines in
contributions from IFS because of lower tax benefits from aging investments and
no significant new contributions expected in 2009.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES:
When preparing financial
statements in accordance with GAAP, IDACORPs and IPCs management must apply
accounting policies and make estimates that affect the reported amounts of assets,
liabilities, revenues and expenses and related disclosure of contingent assets
and liabilities. These estimates often involve judgment about factors that are
difficult to predict and are beyond managements control. Management adjusts
these estimates based on historical experience and on other assumptions and
factors that are believed to be reasonable under the circumstances. Actual
amounts could materially differ from the estimates.
Management believes the
following accounting policies and estimates are the most critical to the
portrayal of their financial condition and results of operations and require
managements most difficult, subjective or complex judgments, often as a result
of the need to make estimates about the effect of matters that are inherently
uncertain and may change in subsequent periods.
Accounting for Rate
Regulation
In order to apply the accounting
policies and practices of Statement of Financial Accounting Standards (SFAS)
71,
Accounting for the Effects of Certain Types of Regulation,
a
regulated company must satisfy the following conditions: (1) an independent
regulator must set rates; (2) the regulator must set the rates to cover
specific costs of delivering service; and (3) the service territory must lack
competitive pressures to reduce rates below the rates set by the regulator.
SFAS 71 requires companies that meet the above conditions to reflect the impact
of regulatory decisions in their consolidated financial statements and requires
that certain costs be deferred as regulatory assets until matching revenues can
be recognized. Similarly, certain items may be deferred as regulatory
liabilities and amortized to the income statement as rates to customers are
reduced.
IPC follows SFAS 71, and its
financial statements reflect the effects of the different rate making
principles followed by the jurisdictions regulating IPC. The primary effect of
this policy is that IPC has recorded $699 million of regulatory assets and $279
million of regulatory liabilities at December 31, 2008. While IPC expects to
fully recover these regulatory assets from customers through rates and refund
these regulatory liabilities to customers through rates, such recovery or
refund is subject to final review by the regulatory entities. If future
recovery or refund of these amounts ceases to be probable, or if IPC determines
that it no longer meets the criteria for applying SFAS 71, IPC would be
required to eliminate those regulatory assets or liabilities, unless regulators
specify some other means of recovery or refund. Either circumstance could have
a material effect on IPCs results of operations and financial position.
26
Asset
Impairment
Available-for-sale securities:
IPC
has investments in four mutual funds that experienced a significant decline in
fair value in 2008. SFAS 115,
Accounting for Certain Investments in Debt
and Equity Securities,
requires that these and other securities be
evaluated periodically to determine whether a decline in fair value is other
than temporary. If the decline in fair value is other than temporary, the cost
of the investment is written down to fair value and the loss is recorded as a
realized loss. Two significant factors that are considered when evaluating
investments for impairment are the length of time and the extent to which the
market value has been less than cost. IPCs investments had lost between 32
percent and 43 percent of their value, primarily during the stock market
downturn in September and October 2008 and had been in loss positions from six
to 12 months at December 31, 2008. Because of the severity of the declines in
value, IPC determined that the loss in value was other-than-temporary and
recorded a pre-tax loss of $6.8 million in the fourth quarter of 2008.
Equity-Method
Investments:
IFS has affordable
housing investments with a net book value of $75 million at December 31, 2008,
and Ida-West has investments in four joint ventures that own electric power
generation facilities. Except for one investment now consolidated in
accordance with GAAP, these investments are accounted for under the equity
method of accounting as described in Accounting Principles Board Opinion No.
(APB) 18,
The Equity Method of Accounting for Investments in Common Stock.
The standard for determining whether impairment must be recorded under APB 18
is whether the investment has experienced a loss in value that is considered an
other-than-temporary decline in value. Impairment analyses on these
investments were performed in 2008 and no impairment was noted. These
estimates required IDACORP to make assumptions about future stream flows,
revenues, cash flows and other items that are inherently uncertain. Actual
results could vary significantly from the assumptions used, and the impact of
such variations could be material.
Pension and Other
Postretirement Benefits
IPC maintains a qualified defined
benefit pension plan covering most employees, an unfunded nonqualified deferred
compensation plan for certain senior management employees and directors called
the Senior Management Security Plan (SMSP), and a postretirement medical
benefit plan.
The costs IDACORP and IPC
record for these plans depend on the provisions of the plans, changing employee
demographics, actual returns on plan assets and several assumptions used in the
actuarial valuations from which the expense is derived. The key actuarial
assumptions that affect expense are the expected long-term return on plan
assets and the discount rate used in determining future benefit obligations.
Management evaluates the actuarial assumptions on an annual basis, taking into
account changes in market conditions, trends and future expectations.
Estimates of future stock market performance, changes in interest rates and
other factors used to develop the actuarial assumptions are uncertain. Actual
results could vary significantly from the estimates.
The assumed discount rate is
based on reviews of market yields on high-quality corporate debt.
Specifically, IDACORP and IPC utilize data published in the Citigroup Pension
Liability Index and apply the rates therein against the projected cash outflows
of the plans. The discount rate used to calculate the 2009 pension expense
will be decreased to 6.1 percent from the 6.4 percent used in 2008.
Rate-of-return projections
for plan assets are based on historical risk/return relationships among asset
classes. The primary measure is the historical risk premium each asset class
has delivered versus the return on 10-year U.S. Treasury Notes. This
historical risk premium is then added to the current yield on 10-year U.S.
Treasury Notes, and the result provides a reasonable prediction of future
investment performance. Additional analysis is performed to measure the
expected range of returns, as well as worst-case and best-case scenarios.
Based on the current interest rate environment, current rate-of-return
expectations are lower than the nominal returns generated over the past 20
years when interest rates were generally much higher.
Gross pension and other
postretirement benefit expense for these plans totaled $16 million, $15
million, and $16 million for the three years ended December 31, 2008, 2007 and
2006, respectively, including amounts allocated to capitalized labor and
amounts deferred as regulatory assets. For 2009, gross pension and other
postretirement benefit costs are expected to total approximately $40 million,
which takes into account the change in the discount rate noted above, as well
as a decrease in expected return on plan assets and a new amortization of net
loss both caused by a decrease in plan assets due to poor market conditions
during 2008. No changes were made to the other key assumptions used in the
actuarial calculation.
27
Had different actuarial
assumptions been used, pension expense could have varied significantly. The
following table reflects the sensitivities associated with changes in the
discount rate and rate of return on plan assets actuarial assumptions on
historical and future pension and postretirement expense:
|
Discount rate |
Rate of return |
||||||
|
2009 |
2008 |
2009 |
2008 |
||||
|
(millions of dollars) |
|||||||
Effect of 0.5% increase |
$ |
(3.8) |
$ |
(1.4) |
$ |
(1.5) |
$ |
(2.2) |
Effect of 0.5% decrease |
|
4.1 |
|
1.7 |
|
1.5 |
|
2.2 |
|
|
|
|
|
|
|
|
|
No cash contributions were
required or made to the qualified plan from 2006 through 2008, and a $24
million contribution is calculated for 2009 (though payment is not expected
until 2010). Under the SMSP, IPC makes payments directly to participants in
the plan. Benefit payments are expected to be $3.0 million in 2009 and
averaged $2.6 million per year from 2006 to 2008. Gross postretirement plan
contributions are expected to be $4.1 million in 2009, and averaged $4.3
million from 2006 to 2008.
On
June 1, 2007, the IPUC issued an order authorizing IPC to account for its
defined benefit pension expense on a cash basis, and to defer and account for
accrued pension expense under SFAS 87,
Employers Accounting for Pensions,
as
a regulatory asset. The IPUC acknowledged
that it is appropriate for IPC to seek recovery in its revenue requirement of
reasonable and prudently incurred pension expense based on actual cash
contributions. IPC began deferring pension expense to a regulatory asset
account to be matched with revenue when future pension contributions are
recovered through rates. The deferral of pension expense began in 2007 with
$2.8 million being deferred to a regulatory asset beginning in the third
quarter. At December 31, 2008, $10.6 million of expense was deferred as a
regulatory asset. Approximately $30 million is expected to be deferred in
2009.
Please refer to Note 8 of
IDACORPs and IPCs Consolidated Financial Statements, which contains
additional information about the pension and postretirement plans.
Contingent Liabilities
Contingent liabilities are accounted
for in accordance with SFAS 5,
Accounting for Contingencies
. According
to SFAS 5, an estimated loss from a loss contingency is charged to income if
(a) it is probable that an asset had been impaired or a liability had been
incurred at the date of the financial statements and (b) the amount of the loss
can be reasonably estimated. If a probable loss cannot be reasonably estimated
no accrual is recorded but disclosure of the contingency in the notes to the
financial statements is required. Gain contingencies are not recorded until
realized.
IDACORP and IPC have a number
of unresolved issues related to regulatory and legal matters. If the
recognition criteria of SFAS 5 have been met, liabilities have been recorded.
Estimates of this nature are highly subjective and the final outcome of these
matters could vary significantly from the amounts that have been included in
the financial statements.
Income Taxes
IDACORP and IPC account for income
taxes in accordance with SFAS 109,
Accounting for Income Taxes
and FIN
48,
Accounting for Uncertainty in Income Taxes
. Judgment and estimation
are used in developing the provision for income taxes and the reporting of tax-related
assets and liabilities. The interpretation of tax laws can involve
uncertainty, since tax authorities may interpret such laws differently. Actual
income taxes could vary from estimated amounts and may result in favorable or
unfavorable impacts to net income, cash flows, and tax-related assets and
liabilities.
RESULTS OF OPERATIONS:
This section of the MD&A
takes a closer look at the significant factors that affected IDACORPs and IPCs
earnings over the last three years. In this analysis, the results of 2008 are
compared to 2007 and the results of 2007 are compared to 2006.
28
The following table presents
earnings (losses) for IDACORP and its subsidiaries:
|
2008 |
|
2007 |
|
2006 |
||||
IPC - Utility operations |
$ |
94,115 |
|
$ |
76,579 |
|
$ |
93,929 |
|
IDACORP Financial Services |
|
3,426 |
|
|
7,112 |
|
|
9,509 |
|
IDACORP Energy |
|
406 |
|
|
(171) |
|
|
5 |
|
Ida-West Energy |
|
2,353 |
|
|
2,223 |
|
|
2,564 |
|
Holding company expenses |
|
(1,886) |
|
|
(3,471) |
|
|
(5,932) |
|
Discontinued operations |
|
- |
|
|
67 |
|
|
7,328 |
|
|
Total earnings |
$ |
98,414 |
|
$ |
82,339 |
|
$ |
107,403 |
Average outstanding shares - diluted (000s) |
|
45,332 |
|
|
44,291 |
|
|
42,874 |
|
Earnings per diluted share |
$ |
2.17 |
|
$ |
1.86 |
|
$ |
2.51 |
|
|
|
|
|
|
|
|
|
|
|
Utility Operations
Operating environment:
IPC is one of
the nations few investor-owned utilities with a predominantly hydroelectric
generating base. Because of its reliance on hydroelectric generation, IPCs
generation operations can be significantly affected by water conditions. The
availability of hydroelectric power depends on the amount of snow pack in the
mountains upstream of IPCs hydroelectric facilities, springtime snow pack run-off,
river base flows, spring flows, rainfall and other weather and stream flow
management considerations. During low water years, when stream flows into IPCs
hydroelectric projects are reduced, IPCs hydroelectric generation is reduced.
This results in less generation from IPCs resource portfolio (hydroelectric,
coal-fired and gas-fired) available for off-system sales and, most likely, an
increased use of purchased power to meet load requirements. Both of these
situations - a reduction in off-system sales and an increased use of more
expensive purchased power - result in increased power supply costs. During
high water years, increased off-system sales and the decreased need for
purchased power reduce net power supply costs.
Operations plans are
developed during the year to provide guidance for generation resource
utilization and energy market activities (off-system sales and power
purchases). The plans incorporate forecasts for generation unit availability,
reservoir storage and stream flows, gas and coal prices, customer loads, energy
market prices and other pertinent inputs. Consideration is given to when to
use IPCs available resources to meet forecast loads and when to transact in
the wholesale energy market. The allocation of hydroelectric generation
between heavy load and light load hours or calendar periods is considered in
development of the operating plans. This allocation is intended to utilize the
flexibility of the hydroelectric system to shift generation to high value
periods, while operating within the constraints imposed on the system. IPCs
energy risk management policy, unit operating requirements and other
obligations provide the framework for the plans.
Stream flow conditions
improved slightly in 2008 resulting in 6.9 million MWh generated from IPCs
hydroelectric facilities, compared to 6.2 million MWh in 2007. The observed
stream flow data released in August 2008, by the U.S. Army Corps of Engineers,
Northwest Division indicated that Brownlee reservoir inflow for April through
July 2008 was 4.4 million acre-feet (maf), or 70 percent of the National
Weather Service Northwest River Forecast Center (NWRFC) average. Brownlee
reservoir inflow for 2008 totaled 10.1 maf, or 66 percent of the NWRFC average
compared to 8.5 maf in 2007. Storage in selected federal reservoirs upstream
of Brownlee as of February 11, 2009, was 110 percent of average. The stream
flow forecast released on February 20, 2009, by the NWRFC predicts that
Brownlee reservoir inflow for April through July 2009 will be 3.3 maf, or 53 percent
of the NWRFC average.
In
2008, IPC leased approximately 0.1 maf of storage water from four sources in an
effort to enhance hydroelectric generation. This water was released during the
higher demand summer and winter periods.
On December 30, 2008, IPC
issued a request for proposals (RFP) seeking to acquire additional water
through leases. Proposals were received in February 2009 and are currently
being evaluated. This action is in part to offset the impact of drought and
changing water use patterns in southern Idaho challenges diminishing the
companys ability to meet mid-summer electrical demands. Acquiring water through
lease also helps IPC improve water quality and temperature conditions in the
Snake River as part of ongoing relicensing efforts associated with the Hells
Canyon Complex. IPC plans to include these costs in its annual PCA filing.
29
IPCs
system is dual peaking, with the larger peak demand occurring in the summer.
The all-time system peak demand is 3,214 MW, set on June 30, 2008. The
previous hourly system peak of 3,193 MW was set on July 13, 2007. Although IPC
was able to meet all of its load requirements during these periods of increased
demand, all available resources of IPCs system were fully committed during
several heavy load periods. The all-time winter peak demand is 2,464 MW set on
January 24, 2008. The previous hourly system winter peak of 2,459 MW was
set in 1998. The following table
presents IPCs power supply for the last three years:
IPCs modeled median annual
hydroelectric generation is 8.5 million MWh, based on hydrologic conditions for
the period 1928 through 2007 and adjusted to reflect the current level of water
resource development.
General Business Revenue:
The primary influences on electricity sales are
weather, customer growth and economic conditions. Extreme temperatures
increase sales to customers who use electricity for cooling and heating, and
moderate temperatures decrease sales. Precipitation levels during the
agricultural growing season affect sales to customers who use electricity to
operate irrigation pumps. Increased precipitation reduces electricity usage by
these customers.
The following table presents
IPCs general business revenues, MWh sales, average number of customers and
Boise, Idaho weather conditions for the last three years:
|
2008 |
|
2007 |
|
2006 |
|||||
Revenue |
|
|
|
|
|
|
|
|
||
|
Residential |
$ |
353,262 |
|
$ |
308,208 |
|
$ |
299,594 |
|
|
Commercial |
|
203,035 |
|
|
170,001 |
|
|
162,391 |
|
|
Industrial |
|
122,302 |
|
|
101,409 |
|
|
102,958 |
|
|
Irrigation |
|
105,712 |
|
|
88,685 |
|
|
71,432 |
|
|
|
Total |
$ |
784,311 |
|
$ |
668,303 |
|
$ |
636,375 |
MWh |
|
|
|
|
|
|
|
|
||
|
Residential |
|
5,297 |
|
|
5,227 |
|
|
5,068 |
|
|
Commercial |
|
3,970 |
|
|
3,937 |
|
|
3,761 |
|
|
Industrial |
|
3,355 |
|
|
3,454 |
|
|
3,475 |
|
|
Irrigation |
|
1,922 |
|
|
1,924 |
|
|
1,635 |
|
|
|
Total |
|
14,544 |
|
|
14,542 |
|
|
13,939 |
Customers (average) |
|
|
|
|
|
|
|
|
||
|
Residential |
|
402,520 |
|
|
397,285 |
|
|
387,707 |
|
|
Commercial |
|
63,492 |
|
|
61,640 |
|
|
59,050 |
|
|
Industrial |
|
122 |
|
|
126 |
|
|
130 |
|
|
Irrigation |
|
18,401 |
|
|
18,043 |
|
|
18,081 |
|
|
|
Total |
|
484,535 |
|
|
477,094 |
|
|
464,968 |
Heating degree-days |
|
5,586 |
|
|
5,128 |
|
|
5,195 |
||
Cooling degree-days |
|
1,068 |
|
|
1,290 |
|
|
1,209 |
||
Precipitation (inches) |
|
9.3 |
|
|
8.1 |
|
|
12.1 |
||
|
|
|
|
|
|
|
|
|
Heating and cooling degree-days
are common measures used in the utility industry to analyze the demand for
electricity and indicate when a customer would use electricity for heating and
air conditioning. A degree-day measures how much the average daily temperature
varies from 65 degrees. Each degree of temperature above 65 degrees is counted
as one cooling degree-day, and each degree of temperature below 65 degrees is
counted as one heating degree-day. Normal heating degree-days and cooling
degree-days are 5,727 and 807, respectively. Normal precipitation is 12.2
inches.
30
2008 vs. 2007:
Rates: Rate changes positively impacted general business revenue by $113.5 million in 2008 as compared to 2007. PCA rate increases accounted for $82.3 million of the increases and base rate changes contributed $31.2 million of the increase. The base rate changes included a general rate increase of 5.2 percent effective March 1, 2008, and a 1.37 percent increase for the Danskin plant effective June 1, 2008;
Customers: General business customer growth of 1.6 percent increased revenue $7.8 million; and
Usage:
Changes in usage, primarily resulting from cooler
summer temperatures, decreased general business revenue $5.3 million.
2007 vs. 2006:
Rates: Rate increases improved general business revenue by $3.0 million in 2007 as compared to 2006. A PCA increase on June 1, 2007, increased rates by an average of 14.5 percent, but was moderated by the prior year net effect of the 19.3 percent PCA reduction, which was partially offset by a one percent net base rate increase;
Customers: Customer growth improved general business revenue $11.7 million for the year, as IPC experienced moderate customer growth in its service territory. The general business customer base (12-month average) increased 2.6 percent over prior year; and
Usage: Weather variations positively impacted general business revenue by $17.2 million. Irrigation usage was higher due to drier than normal conditions in the summer of 2007 as compared to 2006. Residential, industrial and commercial usage was positively impacted by warmer weather conditions during the summer months.
Off-system sales:
Off-system sales consist primarily of long-term sales
contracts and opportunity sales of surplus system energy. The following table
presents IPCs off-system sales for the last three years:
|
2008 |
|
2007 |
|
2006 |
|||
Revenue |
$ |
121,429 |
|
$ |
154,948 |
|
$ |
260,717 |
MWh sold |
|
2,048 |
|
|
2,744 |
|
|
5,821 |
Revenue per MWh |
$ |
59.29 |
|
$ |
56.47 |
|
$ |
44.79 |
|
|
|
|
|
|
|
|
|
2008 vs. 2007:
Off-system sales revenue declined 22 percent in
2008. Sales volumes decreased due to changes to IPCs risk management policy
guidelines implemented in 2008 that have resulted in less forward sales
activity overall. Revenue per MWH increased due to the impact of higher energy
commodity prices through much of 2008.
2007 vs. 2006:
In 2007, the MWh volume sold decreased 53 percent
and revenues decreased 41 percent. Deteriorated stream flow conditions
throughout Southern Idaho decreased total system generation and electricity
available for surplus sales. Revenue decreases from lower volumes were
moderated by higher prices. Prior year prices were lower due to the abundance
of energy in the region.
Other revenues:
The following table presents the components of other
revenues:
|
2008 |
|
2007 |
|
2006 |
||||
Transmission services and property rental |
$ |
41,436 |
|
$ |
39,739 |
|
$ |
34,737 |
|
Provision for rate refund |
|
(9,980) |
|
|
(1,076) |
|
|
(1,211) |
|
Energy efficiency |
|
18,880 |
|
|
13,487 |
|
|
- |
|
Rate case tax settlement |
|
- |
|
|
- |
|
|
(4,745) |
|
Irrigation lost revenues |
|
- |
|
|
- |
|
|
(5,400) |
|
|
Total |
$ |
50,336 |
|
$ |
52,150 |
|
$ |
23,381 |
|
|
|
|
|
|
|
|
|
|
2008 vs. 2007 : Other revenues decreased $1.8 million due mainly to the following:
31
Provision for rate refund reduced revenues $8.9 million compared to 2007. In January 2009, the FERC issued an order finalizing an OATT rate increase that had been implemented in June 2006. IPC accrued an estimated refund pending the final rate order, but the final order requires a significantly higher refund. Of the total provision recorded in 2008, $6.0 million relates to 2008 transmission services, $2.3 million relates to 2007 and $1.7 million relates to 2006. The OATT is discussed in more detail in REGULATORY MATTERS Federal Regulatory Matters Open Access Transmission Tariff (OATT);
Wheeling revenues increased $1.7 million; and
Energy efficiency revenues increased $5.4 million. These revenues mirror program expenditures and result in a zero net impact on net income. Energy efficiency revenues and expenses have steadily increased as program activity has increased.
2007 vs. 2006 : Other revenues increased $28.8 million due mainly to the following:
Beginning in January 2007, a new IPUC accounting order became effective for the treatment of IPCs energy efficiency expenses. The $13.5 million of energy efficiency costs are recorded in Energy efficiency programs and are offset by the same amount recorded in Other revenues resulting in no net effect on earnings. See Energy efficiency;
Other revenues increased $10.1 million from the completed amortization of tax settlement and irrigation lost revenue accruals. From June 2005 to May 2006 IPC was collecting and recording in general business revenues, with a corresponding reduction to Other revenues, amounts related to a 2003 Idaho general rate case tax settlement and amounts related to an irrigation load reduction program. Revenues for the rate case tax settlement were accrued from September 2004 to May 2005 ; and
Transmission revenues increased $4.1 million primarily due to the OATT rate increase that began in June 2006.
Purchased power:
The following table presents IPCs purchased power
expenses and volumes:
|
2008 |
|
2007 |
|
2006 |
|||
Expense |
$ |
231,137 |
|
$ |
289,484 |
|
$ |
283,440 |
MWh purchased |
|
3,716 |
|
|
5,196 |
|
|
4,964 |
Cost per MWh purchased |
$ |
62.20 |
|
$ |
55.71 |
|
$ |
57.10 |
|
|
|
|
|
|
|
|
|
2008 vs. 2007
: Purchased power expense decreased $58.3 million due
to improved hydroelectric generation conditions and
more normal weather, which allowed IPC to better utilize its own generation
resources. Despite improved water conditions in the region, overall
market prices remained higher early in the year due to a gradual spring runoff
and a need to re-fill reservoirs. In addition, increases in energy commodity
prices impacted the electricity market.
2007 vs. 2006
: Purchased power expense increased $6.0 million in
2007. Deteriorated system generation, due to poor hydroelectric
generation conditions, combined with the second year in a row of record
high temperatures and demand during July and August, led to increased
purchases. This increase in purchases was partially offset by a lower overall
cost per MWh in 2007. During 2006, IPC made forward purchases in conformance
with its risk management policy in response to early water year indications
that suggested continued drought conditions. Hydroelectric generation
conditions for 2006 turned out to be more favorable than forecasted and actual
market prices ended up being lower than the prices of the forward purchases.
These higher priced forward purchases inflated the cost per MWh that IPC
realized for 2006. IPC began utilizing financial hedge instruments in 2007 in
addition to physical forward power transactions for the purpose of mitigating
price risk related to conforming to IPCs energy risk management policy,
managing IPCs energy portfolio to meet customer load, and reacting to changes
in market conditions to minimize net power supply costs.
Fuel
expense:
The following table
presents IPCs fuel expenses and generation at its thermal generating plants:
|
2008 |
|
2007 |
|
2006 |
|||
Fuel expense |
$ |
149,403 |
|
$ |
134,322 |
|
$ |
115,018 |
Thermal MWh generated |
|
7,496 |
|
|
7,367 |
|
|
7,021 |
Cost per MWh |
$ |
19.93 |
|
$ |
18.23 |
|
$ |
16.38 |
|
|
|
|
|
|
|
|
|
32
2008 vs. 2007
: Fuel expense increased $15.1 million due to higher
coal prices at the Valmy and Jim Bridger plants. Coal prices at Valmy
increased 13 percent due to higher transportation costs. Production costs at
Bridger Coal Company were 13 percent higher due to difficulties with its
underground longwall mining operation in January and February, the continued
transition to underground mining operations, and rising prices for fuel and
other commodities. The increases were partially offset by a nine percent
reduction in fuel expense at IPCs natural gas fired plants, which had
favorable market conditions in the fourth quarter due to pipeline
transportation constraints in the region.
2007
vs. 2006:
Fuel expense increased
$19.3 million in 2007. The increase is largely due to an 11 percent rise in
average prices accompanied by a five percent increase in MWh volume. Coal
costs increased $7.3 million due to higher market demand and higher rail
transportation costs. Generation from the coal fired power plants was up three
percent in 2007, attributable to fewer planned and unplanned outages at Valmy
and Boardman than the previous year. Additional generation from natural gas-fired
plants contributed $12 million to the increase in fuel expense in 2007. These
plants were readily available for dispatch in 2007 to meet peak loads and as
market conditions warranted. The Bennett Mountain plant was not available
during the summer of 2006 due to a turbine failure.
PCA:
PCA expense represents the effects of the Idaho PCA
and Oregon PCAM deferrals of net power supply costs (fuel and purchased power
less off-system sales). These mechanisms are discussed in more detail below in
REGULATORY MATTERS Deferred Net Power Supply Costs.
The following table presents
the components of the PCA:
|
2008 |
|
2007 |
|
2006 |
||||
Current year net power supply cost deferral |
$ |
(113,884) |
|
$ |
(120,844) |
|
$ |
(27,094) |
|
Amortization of prior year authorized balances |
|
66,471 |
|
|
(287) |
|
|
(2,432) |
|
|
Total power cost adjustment |
$ |
(47,413) |
|
$ |
(121,131) |
|
$ |
(29,526) |
|
|
|
|
|
|
|
|
|
|
2008 vs. 2007
: The $73.7 million decrease in 2008 PCA expense is
due primarily to higher amortization from prior year excess net power supply
costs to match increased revenues. In each year presented, net power supply
costs were higher than the amounts estimated in the annual PCA forecast,
resulting in the deferral of costs for recovery in subsequent rate years. As
the deferred costs are being recovered in rates, the deferred balances are
amortized.
2007 vs. 2006
: In 2007, net power supply costs were significantly
higher than the amounts reflected in the annual PCA forecast, while in 2006 the
deferred costs were much lower due to good hydroelectric generation.
Other operations and
maintenance (O&M) expenses:
2008 vs. 2007
: Other O&M expenses increased $7.5 million due
mainly to the following:
An increase in labor-related expenses of $10.6 million due to higher incentive-based compensation, salaries and employee count;
New water leases of $2.2 million to optimize our hydroelectric generation;
Uncollectible accounts increased $1.8 million, primarily due to deteriorating economic conditions in IPCs service area;
An increase of $2.4 million in outside services;
An increase of $2.1 million for reserves for workers compensation and legal matters;
Transmission costs decreased $3.1 million due to lower purchased power volumes;
Thermal O&M expenses decreased $3.6 million due to lower annual outages; and
FCA charges decreased $5.9 million due to a $4.6 million change in the amount deferred and a $1.3 million increase in amortization of the prior year amounts.
2007 vs. 2006 : Other O&M expenses increased $22 million due mainly to the following:
Regulatory commission expenses increased $5.1 million primarily due to the September 2006 reversal of FERC fee accruals of $3.3 million and an increase in legal fees of $1.6 million related to the OATT filing and the FERC investigation;
Transmission O&M expenses increased $3.1 million due to higher third-party transmission costs;
Outside services increased $3.1 million primarily due to an increase in intercompany allocations as well as legal fees;
Distribution O&M expense increased $2.6 million due to an increase in overhead line maintenance;
33
Thermal O&M expenses increased $2.5 million. While much of this increase was due to a planned increase in maintenance activity, the increase also occurred due to unanticipated overhaul costs during the annual outages in the first half of the year;
Hydroelectric O&M expenses increased $1.7 million due to the resumption of American Falls bond principal amortization, additional FERC hydroelectric license compliance costs, FERC required inspection costs, and general labor cost increases; and
Expense for the fixed cost adjustment mechanism, which began in 2007, was $2.6 million.
Energy efficiency:
Beginning in January 2007, a new IPUC accounting
order became effective for the treatment of IPCs energy efficiency expenses
under the energy efficiency rider. Energy efficiency costs were recorded in
Other operations and maintenance expenses and were offset by the same amount
recorded in Other revenues, resulting in no effect on earnings. Energy efficiency
expenses were $18.9 million and $13.5 million in 2008 and 2007, respectively.
Gain on the sale of
emission allowances:
Gain on sale of
emission allowances was $0.5 million, $2.8 million and $8.3 million in 2008,
2007 and 2006, respectively. The bulk of IPCs accumulated excess emission
allowances was sold from 2005 to 2007.
Non-utility Operations
IFS:
IFS contributed $3 million, $7 million and $10 million
to net income in 2008, 2007 and 2006, respectively, principally from the
generation of federal income tax credits and accelerated tax depreciation
benefits related to its investments in affordable housing and historic rehabilitation
developments.
During 2008, IFS recorded
$8.3 million in new investments. IFS generated tax credits of $11 million, $15
million and $19 million during 2008, 2007 and 2006, respectively. IFS will
continue to review new legislation for opportunities for investment that will
be commensurate with the ongoing needs of IDACORP.
Ida-West:
Ida-West recorded net income of $2 million, $2 million
and $3 million in 2008, 2007 and 2006, respectively. Ida-West continues to
hold joint venture investments in independent power projects.
Energy Marketing:
In 2003, IE wound down its power marketing
operations, closed its business locations and sold its forward book of
electricity trading contracts to Sempra Energy Trading. In 2007, all trading
contracts expired. IE has not recorded any material net income for the years
presented. Currently, IE has no operations but has been working to settle
outstanding legal matters surrounding transactions in the California energy
markets in 2000 and 2001. These matters are discussed in LEGAL AND
ENVIRONMENTAL ISSUES Legal and Other Proceedings.
Discontinued Operations:
In 2006 and 2007
IDACORP sold its investment in
two subsidiaries, IDACORP Technologies, Inc. and IDACOMM, Inc. The operations
of these entities are presented as discontinued operations in IDACORPs
financial statements. Discontinued operations had no impact on earnings in
2008.
Income
Taxes
Status of audit proceedings:
Since
2006, IPC has been disputing the Internal
Revenue Services (IRS) disallowance of IPCs use of the simplified service
cost method (SSCM) of uniform capitalization for tax years 2001-2004. The
dispute has been under review with the IRS Appeals Office. In December 2008,
the Appeals Office informed IDACORP that the SSCM settlement computations were
complete. IDACORP reviewed the final computations and agreed to the result.
In January 2009 the settlement was submitted to the U.S. Congress Joint
Committee on Taxation (JCT) for review.
In
November 2006, IDACORP made a $44.9 million refundable tax deposit with the IRS
related to the disputed income tax assessment for SSCM. In May 2008, IDACORP
withdrew $20 million from the deposit. Approximately $21 million from the
deposit was applied to the settled income tax deficiency and interest charges
with the remaining balance refunded to IDACORP.
34
The
IRS completed its examination of IDACORPs 2004 tax year in August 2008 and its
2005 tax year in October 2008. The 2004 examination report was submitted for
JCT review as part of the SSCM settlement and the 2005 report was submitted in
November 2008. IDACORP expects the JCT review process for 2001-2005 to be
completed in 2009. The settlement of these years resulted in a net income tax
benefit of $2.8 million for 2008 at both IDACORP and IPC.
In
December 2008 the IRS began its examination of IDACORPs and IPCs 2006 tax
year. IDACORP and IPC are unable to predict the outcome of this examination.
LIQUIDITY AND CAPITAL RESOURCES:
Operating Cash Flows
IDACORPs and IPCs operating cash flows for
the year ended December 31, 2008 were $137 million and $120 million,
respectively. These amounts were an increase of $56 million and $38 million,
respectively, compared to the year ended December 31, 2007. The following are
significant items that affected operating cash flows in 2008:
The increases in IDACORPs and IPCs operating cash inflows were primarily the result of a $66 million increase in the collection of previously deferred net power supply costs as compared to 2007.
Income tax payments increased $17
million and $33 million for IDACORP and IPC, respectively, due to the timing of
and increases in taxable income.
IDACORPs and IPCs operating
cash flows for 2007 were both $81 million. These amounts were a decrease of
$89 million and $50 million, respectively, compared to 2006. The following are
significant items that affected operating cash flows in 2007:
The decreases in IDACORPs and IPCs operating cash inflows were primarily the result of a $111 million increase in the amount of net power supply costs deferred in 2007 as compared to 2006.
Income tax payments decreased $52
million and $83 million for IDACORP and IPC, respectively, due to the timing of
and decreases in taxable income.
IDACORPs operating cash
flows are driven principally by IPC. General business revenues and the costs
to supply power to general business customers have the greatest impact on IPCs
operating cash flows, and are subject to risks and uncertainties relating to
weather and water conditions and IPCs ability to obtain rate relief to cover
its operating costs and provide a return on investment.
Investing Cash Flows
IPCs construction expenditures were
$244 million, $287 million and $222 million in 2008, 2007 and 2006,
respectively. IPC is experiencing a cycle of heavy infrastructure investment
needed to address customer growth, peak demand growth, and aging plant and
equipment.
Net proceeds from the sales
of emission allowances provided investing cash of approximately $3 million, $20
million and $11 million in 2008, 2007 and 2006, respectively. The changes were
primarily caused by changes in the number of allowances sold each year as well
as changes in market prices. Sales of emission allowances are discussed
further in REGULATORY MATTERS Emission Allowances.
In
November 2006, IDACORP made a refundable deposit of $45 million with the IRS
related to a disputed income tax assessment. In August 2007, IPC reimbursed
IDACORP for the refundable tax deposit IDACORP made on IPCs behalf. In May
2008, IPC withdrew $20 million from the deposit and in December 2008 the
remainder of the deposit was applied to accrued taxes and interest. Income tax
matters are discussed further in Note 2 to IDACORPs and IPCs Consolidated
Financial Statements.
Additionally
in 2008, IPC had a cash inflow of $5.7 million from the sale of SWIP rights-of-way
and IDACORP made an $8.3 million investment in affordable housing through its
subsidiary, IFS.
Financing
Cash Flows
Debt issuances:
On April 1, 2008,
IPC entered into a $170 million Term Loan Credit Agreement, of which $166.1
million was used to purchase pollution control revenue refunding bonds. On
February 4, 2009, IPC entered into a new $170 million Term Loan Credit
Agreement to replace this term loan credit agreement. See Term Loan Credit
Agreement below for further discussion of these agreements.
35
On
July 10, 2008, IPC issued $120 million of its 6.025% First Mortgage Bonds,
Secured Medium-Term Notes, Series H, due July 15, 2018. On October 18, 2007, IPC
issued $100 million of 6.25% First Mortgage Bonds, Secured Medium-Term Notes,
Series G, due October 15, 2037. On June 22, 2007, IPC issued $140 million of
6.30% First Mortgage Bonds, Secured Medium-Term Notes, Series F, due June 15,
2037. These issuances were used to retire short-term debt and long-term debt
and finance capital expenditures:
Equity
issuances:
On December 15, 2005,
IDACORP entered into a Sales Agency Agreement (2005 Agency Agreement) with BNY
Capital Markets, Inc. (BNYCM), as IDACORPs agent, for the offer and sale by
IDACORP of up to 2,500,000 shares of its common stock from time to time in at-the-market
offerings. IDACORP issued 881,337 shares under the 2005 Agency Agreement in
2007 at an average price of $28.72. In 2008, IDACORP sold the remaining
1,082,145 shares of common stock under the 2005 Agency Agreement at an average
price of $28.56, including 879,145 shares in the fourth quarter 2008 at an
average price of $28.11 per share.
On
December 5, 2008, IDACORP entered into a new Sales Agency Agreement (2008
Agency Agreement) with BNY Mellon Capital Markets, LLC (BNYMCM), as IDACORPs
agent, for the offer and sale of up to 3,000,000 shares of its common stock
from time to time in at-the-market offerings. In December 2008, IDACORP sold
371,822 shares under the 2008 Agency Agreement at an average price of $29.18
per share.
Under
these programs IDACORP received $41.7 million from the issuance of 1,453,967
shares in 2008 and $28.5 million from the issuance of 881,337 shares in 2007. As
of December 31, 2008, 2,628,178 shares were available to be issued under the
2008 Agency Agreement.
IDACORP uses original issue
common stock for its Dividend Reinvestment and Stock Purchase Plan and 401(k)
plan for the purpose of adding additional common equity to its capital
structure. Under these plans, IDACORP issued 280,250 shares in 2008 and
250,020 shares in 2007, for proceeds of $8.4 million in both years.
IDACORP issued 30,700 shares
in 2008 and 10,070 shares in 2007 in connection with the exercise of stock
options, for proceeds of $0.9 million and $0.3 million, respectively.
IDACORP made capital
contributions of $37 million and $51 million to IPC in 2008 and 2007,
respectively.
Discontinued operations
Cash flows from discontinued
operations are included with the cash flows from continuing operations in
IDACORPs Consolidated Statements of Cash Flows. The cash flows of IDACORPs
discontinued operations have reduced net cash provided by operating activities
and increased net cash used in investing activities, except for the cash
received from the sales of ITI and IDACOMM. The absence of cash flows from
these discontinued operations has positively impacted liquidity and capital
resources.
Financing Programs
IDACORPs consolidated capital structure
consisted of common equity of 48 percent and debt of 52 percent at December 31,
2008. IPCs consolidated capital structure consisted of common equity of 46
percent and debt of 54 percent at December 31, 2008.
Shelf Registrations
: IDACORP currently has approximately $588 million
remaining on its shelf registration statement that can be used for the issuance
of debt securities and common stock. IPC currently has $230 million remaining
on its shelf registration statement that can be used for the issuance of first
mortgage bonds and unsecured debt. Please see Note 4 to IDACORPs and IPCs
Consolidated Financial Statements for more information regarding long-term
financing arrangements.
Credit Facilities:
The following table outlines available liquidity as
of December 31, 2008 and 2007.
36
On April 25, 2007, IDACORP entered
into an Amended and Restated Credit Agreement (IDACORP Facility) with Wachovia
Bank, National Association, as administrative agent, swingline lender and LC
issuer, JPMorgan Chase Bank, N.A., as syndication agent, Keybank National
Association, Wells Fargo Bank, N.A. and Bank of America, N.A., as documentation
agents, Wachovia Capital Markets, LLC and J.P. Morgan Securities Inc., as joint
lead arrangers and joint book runners, and the other financial institutions
party thereto, as lenders.
The Amended and Restated
IDACORP Facility is a $100 million five-year credit agreement that terminates
on April 25, 2012. The IDACORP Facility, which is used for general corporate
purposes and commercial paper back-up, provides for the issuance of loans and
standby letters of credit not to exceed the aggregate principal amount of $100
million, including swingline loans in an aggregate principal amount at any time
outstanding not to exceed $10 million. IDACORP has the right to request an
increase in the aggregate principal amount of the IDACORP Facility to $150
million and to request one-year extensions of the then existing termination
date. At December 31, 2008, $25 million in loans were outstanding on IDACORPs
Facility and $13 million of commercial paper was outstanding. At February 23,
2009, no loans and $35 million of commercial paper was outstanding.
On April 25, 2007, IPC
entered into an Amended and Restated Credit Agreement (IPC Facility) with
Wachovia Bank, National Association, as administrative agent, swingline lender
and LC issuer, JPMorgan Chase Bank, N.A., as syndication agent, Keybank
National Association, US Bank National Association and Bank of America, N.A.,
as documentation agents, Wachovia Capital Markets, LLC and J.P. Morgan
Securities Inc. as joint lead arrangers and joint book runners, and the other
financial institutions party thereto, as lenders.
The Amended and Restated IPC
Facility is a $300 million five-year credit agreement that terminates on April
25, 2012. The IPC Facility, which will be used for general corporate purposes
and commercial paper back-up, provides for the issuance of loans and standby
letters of credit not to exceed the aggregate principal amount of $300 million,
including swingline loans in an aggregate principal amount at any time
outstanding not to exceed $30 million. IPC has the right to request an
increase in the aggregate principal amount of the IPC Facility to $450 million
and to request one-year extensions of the then existing termination date. At
December 31, 2008, no loans were outstanding on IPCs Facility and $109 million
of commercial paper was outstanding. At February 23, 2009, no loans and $119
million of commercial paper was outstanding.
Both the IDACORP Facility and
the IPC Facility have similar terms and conditions. Under the terms of the
facilities IDACORP and IPC may borrow floating rate advances and Eurodollar
rate advances. The floating rate is equal to the higher of (i) the prime rate
announced by Wachovia Bank or its parent and (ii) the sum of the federal funds
effective rate for such day plus 0.50 percent per annum, plus, in each case, an
applicable margin. The Eurodollar rate is based upon the British Bankers
Association interest settlement rate for deposits in U.S. dollars published on
the REUTERS 01 (Telerate Page 3750 successor) as adjusted by the applicable
reserve requirement for Eurocurrency liabilities imposed under Regulation D of
the Board of Governors of the Federal Reserve System, for periods of one, two,
three or six months plus the applicable margin. The margin is based on the
applicable companys rating for senior unsecured long-term debt securities
without third-party credit enhancement as provided by Moodys Investors Service
(Moodys) and Standard & Poors Ratings Services (S&P), based on the
higher of the two ratings. If the ratings are split between Moodys and
S&P and the differential is two levels or more, the intermediate rating at
the midpoint will apply. If there is no midpoint, the higher of the two
intermediate ratings will apply. The margin for the floating rate advances is
zero percent unless the applicable companys rating falls below Baa3 from Moodys
or BBB- from S&P, at which time it would equal 0.50 percent. The margin
for Eurodollar rate advances ranges from 0.15 percent to 0.575 percent
depending upon the credit rating. In addition to the margin, if the
outstanding aggregate credit exposure exceeds 50 percent of the facility
amount, IDACORP or IPC, as applicable, would pay a utilization fee ranging from
0.05 percent to 0.10 percent on outstanding loans depending on the credit
rating. At December 31, 2008, the applicable margin under the IDACORP Facility
and the IPC Facility was zero percent for floating rate advances and 0.28
percent for IPC and 0.36 percent for IDACORP for Eurodollar rate advances. The
utilization fee was 0.05 percent for both companies. A facility fee, payable
quarterly, is calculated on the average daily aggregate commitment of the
lenders under the relevant credit facility and is also based on the applicable
companys rating from Moodys or S&P as indicated above. At December 31,
2008, the facility fee under the IDACORP and IPC Facilities was 0.09 percent
and 0.07 percent, respectively.
37
In
connection with the issuance of letters of credit, IDACORP and IPC, as
applicable, must pay (i) a fee equal to the applicable margin for Eurodollar
rate advances on the average daily undrawn stated amount under such letters of
credit, payable quarterly in arrears, (ii) a fronting fee at a per annum rate
of 0.125 percent on the average daily undrawn stated amount under each letter
of credit, payable quarterly in arrears and (iii) documentary and processing
charges in accordance with the letter of credit issuers standard schedule for
such charges.
A ratings downgrade would
result in an increase in the cost of borrowing and of maintaining letters of
credit, but would not result in any default or acceleration of the debt under
either the IDACORP Facility or the IPC Facility.
The events of default under
both the IDACORP Facility and the IPC Facility include:
(i) nonpayment of principal when due and nonpayment of reimbursement obligations under letters of credit within one business day after becoming due and nonpayment of interest or other fees within five days after becoming due;
(ii) materially false representations or warranties made on behalf of the applicable company or any of its subsidiaries on the date as of which made;
(iii) breach of covenants, subject in some instances to grace periods;
(iv) voluntary and involuntary bankruptcy of the applicable company or any material subsidiary;
(v) the non-consensual appointment of a receiver or similar official for the applicable company or any of its material subsidiaries or any substantial portion (as defined in the applicable facility) of its property;
(vi) condemnation of all or any substantial portion of the property of the applicable company and its subsidiaries;
(vii) default in the payment of indebtedness in excess of $25 million or a default by the applicable company or any of its subsidiaries under any agreement under which such debt was created or governed which will cause or permit the acceleration of such debt or if any of such debt is declared to be due and payable prior to its stated maturity;
(viii) the applicable company or any of its subsidiaries not paying, or admitting in writing its inability to pay, its debts as they become due;
(ix) the applicable company or any of its subsidiaries failing to pay certain judgments;
(x) the acquisition by any person or two or more persons acting in concert of beneficial ownership (within the meaning of Rule 13d-3 of the Securities Exchange Act of 1934) of 20 percent or more of the outstanding shares of voting stock of the applicable company;
(xi) the failure of IDACORP to own free and clear of all liens, all of the outstanding shares of voting stock of IPC;
(xii) unfunded liabilities of all single employer plans under the Employee Retirement Income Security Act of 1974 exceeding $75 million; and
(xiii)
the applicable company or any subsidiary
being subject to any proceeding or investigation pertaining to the release of
any toxic or hazardous waste or substance into the environment or any violation
of any environmental law (as defined in the applicable facility) which could
reasonably be expected to have a material adverse effect (as defined in the
applicable facility).
A
default or an acceleration of indebtedness of IDACORP or IPC in excess of $25
million, including indebtedness under the applicable facility, will result in a
cross default under the other Facility.
Upon any event of default
relating to the voluntary or involuntary bankruptcy of IDACORP or IPC or the
appointment of a receiver, the obligations of the lenders to make loans under
the facility and of the letter of credit issuer to issue letters of credit will
automatically terminate and all unpaid obligations will become due and
payable. Upon any other event of default, the lenders holding 51 percent of
the outstanding loans or 51 percent of the aggregate commitments (required
lenders) or the administrative agent with the consent of the required lenders
may terminate or suspend the obligations of the lenders to make loans under the
facility and of the letter of credit issuer to issue letters of credit under
the facility or declare the obligations to be due and payable. IDACORP and IPC
will also be required to deposit into a collateral account an amount equal to
the aggregate undrawn stated amount under all outstanding letters of credit and
the aggregate unpaid reimbursement obligations thereunder.
38
If there is a ratings
downgrade below investment grade (BBB- or higher by S&P and Baa3 or higher
by Moodys), then IPCs authority for continuing borrowings under its
regulatory approvals issued by the IPUC and the OPUC must be extended or
renewed during the occurrence of the ratings downgrade. The Oregon statutes,
however, permit the issuance or renewal of indebtedness maturing not more than
one year after the date of such issue or renewal without approval of the OPUC.
The IPUC order provides that IPCs authority will not terminate but will
continue for a period of 364 days from any downgrade below investment grade provided
that IPC notifies the IPUC promptly and files a supplemental application with
the IPUC within 7 days requesting a supplemental order to continue its original
authority to borrow under the order.
During 2008, bankruptcies and
other significant financial difficulties impacted the ability of some banks to
continue fulfilling their commitments under established credit facilities.
These issues did not impact either the IDACORP or IPC credit facilities. While
some consolidation occurred within the credit facility bank group, no banks
limited or reduced their commitments under our Facilities.
Term
Loan Credit Agreement:
IPC entered
into a $170 million Term Loan Credit Agreement, dated as of April 1, 2008, with
JPMorgan Chase Bank, N.A., as administrative agent and lender, and Bank of
America, N.A., Union Bank of California, N.A., and Wachovia Bank, National
Association, as lenders. The Term Loan Credit Agreement provided for the
issuance of term loans by the lenders to IPC on April 1, 2008, in an aggregate
principal amount of $170 million. The loans were due on March 31, 2009 and
could be prepaid but not reborrowed. IPC used the proceeds to effect a
mandatory purchase on April 3, 2008, of the pollution control bonds (as
discussed below in Pollution Control Revenue Refunding Bonds), and to pay
interest, fees and expenses incurred in connection with the Pollution Control
Bonds and the Term Loan Credit Agreement.
On February 4, 2009, IPC entered into a new $170
million Term Loan Credit Agreement with JPMorgan Chase Bank, N.A., as
administrative agent and lender, Bank of America, N.A., Union Bank, N.A. and
Wachovia Bank, National Association, as lenders. IPC used the proceeds to repay
the above mentioned Term Loan Credit Agreement. The loans are due on February
3, 2010, but are subject to earlier payment if IPC remarkets the pollution control
revenue refunding bonds discussed below. The loans may be prepaid but may not
be reborrowed.
The loans bear interest at either a floating rate or a
Eurodollar rate. The floating rate is equal to (i) the highest of (a) the prime
rate announced by JPMorgan Chase Bank on such day, (b) the sum of (1) the
federal funds effective rate in effect on such day plus (2) 0.5 percent per
annum and (c) an amount equal to (1) the LIBO Reference Rate on such day plus
(2) 1 percent plus (ii) the applicable margin. The Eurodollar rate is (i) the
rate published on the Reuters BBA Libor Rates Page 3750 (or on any successor or
substitute page) for dollar deposits with a comparable maturity plus (ii) the
applicable margin. The LIBO Reference Rate is the rate appearing on the Reuters
BBA Libor Rates Page 3750 (or on any successor or substitute page) as the rate
for United States dollar deposits for a one month interest period. The
applicable margin is currently 2 percent for Eurodollar advances and 1 percent
for floating rate advances, but may be increased or decreased based upon the
ratings assigned to IPCs senior unsecured debt by Moodys and S&P.
The
events of default under the Term Loan Credit Agreement are the same as those
under the IPC Facility discussed above.
Without
additional approval from the Idaho Public Utilities Commission, the Public
Utility Commission of Oregon and the Public Service Commission of Wyoming, the
aggregate amount of borrowings by IPC under the Term Loan Credit Agreement
together with any other short-term borrowings at any one time outstanding may
not exceed $450 million.
Pollution Control Revenue
Refunding Bonds:
Two series of bonds
have been issued for the benefit of IPC and are each supported by a financial
guaranty insurance policy issued by Ambac Assurance Corporation (Ambac). The
two series are the $116.3 million aggregate principal amount of Pollution
Control Revenue Refunding Bonds (Idaho Power Company Project) Series 2006
issued by Sweetwater County, Wyoming due 2026 (Sweetwater bonds) and the $49.8
million aggregate principal amount of Pollution Control Revenue Refunding Bonds
(Idaho Power Company Project) Series 2003 issued by Humboldt County, Nevada due
2024 (Humboldt bonds).
39
On
April 3, 2008, IPC made a mandatory purchase of the pollution control bonds.
IPC initiated this transaction in order to adjust the interest rate period of
the pollution control bonds from an auction interest rate period to a weekly
interest rate period, effective April 3, 2008. This change was made to
mitigate the higher-than-anticipated interest costs in the auction mode, which
was a result of Ambacs credit ratings deterioration. IPC is the current
holder of the bonds, but ultimately expects to remarket the bonds to investors.
Debt Covenants: The IDACORP Facility, the IPC Facility and the Term Loan Credit Agreement each contain a covenant requiring the company to maintain a leverage ratio of consolidated indebtedness to consolidated total capitalization of no more than 65 percent as of the end of each fiscal quarter. At December 31, 2008, the leverage ratio for IDACORP and IPC was 52 and 54 percent, respectively. At December 31, 2008, IDACORP was in compliance with all other covenants of the IDACORP Facility and IPC was in compliance with all other covenants of the IPC Facility and the Term Loan Credit Agreement. The IDACORP Facility, the IPC Facility and the Term Loan Credit Agreement each contain additional covenants including:
(i) prohibitions against: investments and acquisitions by the applicable company or any subsidiary without the consent of the required lenders subject to exclusions for investments in cash equivalents or securities of the applicable company; investments by the applicable company and its subsidiaries in any business trust controlled, directly or indirectly, by the applicable company to the extent such business trust purchases securities of the applicable company; investments and acquisitions related to the energy business or other business of the applicable company and its subsidiaries not exceeding $750 million in the aggregate at any one time outstanding (provided that investments in non-energy related businesses do not exceed $150 million); and investments by the applicable company or a subsidiary in connection with a permitted receivables securitization (as defined in the facility);
(ii) prohibitions against the applicable company or any material subsidiary merging or consolidating with any other person or selling or disposing of all or substantially all of its property to another person without the consent of the required lenders, subject to exclusions for mergers into or dispositions to the applicable company or a wholly owned subsidiary and dispositions in connection with a permitted receivables securitization;
(iii) restrictions on the creation of certain liens by the applicable company or any material subsidiary subject to exceptions, including the lien of IPCs first mortgage indebtedness; and
(iv)
prohibitions on any material
subsidiary of the applicable company entering into any agreement restricting
its ability to declare or pay dividends to the applicable company except
pursuant to a permitted receivables securitization.
Credit
Ratings
Access to capital markets at a
reasonable cost is determined in large part by credit quality. The following
table outlines the current S&P, Moodys and Fitch Ratings, Inc. (Fitch)
ratings of IDACORPs and IPCs securities:
|
S&P |
Moodys |
Fitch |
|||
|
IPC |
IDACORP |
IPC |
IDACORP |
IPC |
IDACORP |
Corporate Credit Rating |
BBB |
BBB |
Baa 1 |
Baa 2 |
None |
None |
Senior Secured Debt |
A- |
None |
A3 |
None |
A- |
None |
Senior Unsecured Debt |
BBB |
BBB- |
Baa 1 |
Baa 2 |
BBB+ |
BBB |
Short-Term Tax-Exempt Debt |
BBB-/A-2 |
None |
Baa 1/ |
None |
None |
None |
|
|
|
VMIG-2 |
|
|
|
Commercial Paper |
A-2 |
A-2 |
P-2 |
P-2 |
F-2 |
F-2 |
Credit Facility |
None |
None |
Baa 1 |
Baa 2 |
None |
None |
Rating Outlook |
Stable |
Stable |
Negative |
Negative |
Negative |
Negative |
|
|
|
|
|
|
|
These security ratings
reflect the views of the rating agencies. An explanation of the significance
of these ratings may be obtained from each rating agency. Such ratings are not
a recommendation to buy, sell or hold securities. Any rating can be revised
upward or downward or withdrawn at any time by a rating agency if it decides
that the circumstances warrant the change. Each rating should be evaluated
independently of any other rating.
40
Capital Requirements
IPC is experiencing a cycle of
heavy infrastructure investment needed to address continued customer growth,
peak demand growth, and aging plant and equipment. IPCs aging hydroelectric
and thermal facilities require continuing upgrades and component replacement.
In addition, costs related to relicensing hydroelectric facilities and
complying with the new licenses are substantial. IPC must also add to its
transmission system and distribution facilities to provide new service and to
maintain reliability. As a result, IPC expects to spend between $780 and $800
million for construction related activities from 2009 to 2011, excluding any
amounts from our 2012 Baseload Resource RFP process.
The following table presents
IPCs estimated cash requirements for construction, excluding AFUDC, for 2009
through 2011:
|
2009 |
|
2010 2011 |
|
Ongoing Capital Expenditures |
$ |
150-155 |
$ |
400-410 |
Advanced Metering Infrastructure (AMI) |
|
20-22 |
|
40-50 |
Major Projects (detailed below) |
|
50-53 |
|
95-105 |
Minimum Transmission for Baseload Resource |
|
- |
|
20-25 |
Total |
$ |
220-230 |
$ |
555-590 |
|
|
Major Projects:
Hemingway Station:
Construction of a
new 500-kV station named Hemingway is expected to address growth, capacity and
operating constraints. The station was originally part of the Gateway West
Project but the timing of this addition
was accelerated to 2010 to help meet forecast deficits and improve reliability.
Cost estimates for the project, including rights-of-way, permitting and
substation interconnections, are included in the above table and total approximately
$52 million.
Hemingway-Hubbard Transmission
Line:
As part of the Hemingway
Station Project, the Hemingway-Hubbard transmission line is expected to provide
power to the Treasure Valley in southwest Idaho by 2010. The Hemingway-Hubbard
line will consist of a new 230-kV double circuit transmission line and convert
an existing 138-kV transmission line to 230-kV. Cost estimates for the project
are included in the above table and total approximately $25 million.
Boardman-Hemingway Line:
The Boardman-Hemingway Line is expected to relieve existing
congestion by increasing transmission capacity and improving reliability. It
will allow for the transfer of up to 1,500 MW of additional energy between
Idaho and the Northwest. The initial project phase estimate of $50 million will
be funded by IPC and includes the engineering, environmental review, permitting
and rights of way. Cost estimates for the 2009-2011 timeframe of the initial
phase are included in the above table. Cost estimates for the project
(including initial phase project estimate and construction costs of the line)
are approximately $600 million. IPC expects to seek partners for up to 50
percent of the project when construction commences. The line has a target in-service
date of June 2013. Construction costs are currently not included in IPCs 2009
to 2011 forecast. Please see further discussion in REGULATORY MATTERS
Boardman-Hemingway Line.
Gateway West Project:
IPC and PacifiCorp are jointly exploring the Gateway
West project to build transmission lines between Windstar, a substation located
near Douglas, Wyoming and Hemingway, a substation located in the vicinity of
Melba and Murphy, Idaho near Boise. IPC and PacifiCorp have a cost sharing
agreement for expenses associated with the analysis work of the initial
phases. IPCs share of the initial phase of engineering, environmental review,
permitting and rights of way is approximately $40 million and cost estimates
for the 2009-2011 timeframe of the initial phase are included in the above
table.. Construction costs are currently not included in our 2009 to 2011
forecast. Initial phases of the project could be completed by 2014 depending
on the timing of rights-of-way acquisition, siting and permitting, and
construction sequencing. If all initial phases are constructed, IPC estimates
that its share of project costs could range between $500 million and $600
million. Remaining phases of the project could be constructed as demand
requires.
41
2012 Baseload Resource:
IPC issued an RFP in 2008 for a resource to meet
energy needs identified during its IRP process. IPC prepared a self-build proposal for a combined-cycle combustion
turbine, which serves as a benchmark resource and is competing in the RFP
evaluation process. Proposals were received in October 2008 and are currently
being evaluated. This addition is expected to come online in 2012 to meet
forecast deficits as described in the 2006 IRP and the 2008 IRP update. Transmission
interconnection and network upgrade costs of approximately $22 million will be
incurred by IPC under any scenario. IPC expects to request approval from the
IPUC relating to the base load resource during the first quarter of 2009, with
an IPUC decision expected later this year.
Other capital requirements:
IDACORPs non-regulated capital
expenditures are expected to be $15 million in 2009 and $5 million for 2010.
These expenditures primarily relate to IFSs tax advantaged investments.
Internal cash generation after dividends is expected to provide less than the
full amount of total capital requirements for 2009 through 2010. IDACORP and
IPC expect to continue financing capital requirements with internally generated
funds and externally financed capital.
Contractual Obligations
The following table presents IDACORPs
and IPCs contractual cash obligations for the respective periods in which they
are due:
|
Payment Due by Period |
|
|||||||||||||
|
Total |
2009 |
2010-2011 |
2012-2013 |
Thereafter |
|
|||||||||
|
(millions of dollars) |
|
|||||||||||||
IPC: |
|
|
|
|
|
|
|
|
|
|
|
||||
Long-term debt (a) |
$ |
1,261 |
$ |
81 |
$ |
122 |
$ |
172 |
$ |
886 |
|
||||
Future interest payments (b) |
|
1,137 |
|
70 |
|
121 |
|
105 |
|
841 |
|
||||
Operating leases (c) |
|
35 |
|
3 |
|
5 |
|
4 |
|
23 |
|
||||
Uncertain tax positions |
|
4 |
|
4 |
|
- |
|
- |
|
- |
|
||||
Purchase obligations: |
|
|
|
|
|
|
|
|
|
|
|
||||
|
Cogeneration and small power |
|
|
|
|
|
|
|
|
|
|
|
|||
|
|
production |
|
1,772 |
|
74 |
|
172 |
|
192 |
|
1,334 |
|
||
|
Fuel supply agreements |
|
227 |
|
66 |
|
54 |
|
17 |
|
90 |
|
|||
|
Purchased power & transmission (d) |
|
133 |
|
84 |
|
34 |
|
5 |
|
10 |
|
|||
|
Other (e) |
|
173 |
|
83 |
|
53 |
|
11 |
|
26 |
|
|||
|
|
Total purchase obligations |
|
4,742 |
|
465 |
|
561 |
|
506 |
|
3,210 |
|
||
Pension and postretirement plans (g) |
|
220 |
|
7 |
|
92 |
|
80 |
|
41 |
|
||||
Other long-term liabilities - IPC |
|
3 |
|
3 |
|
- |
|
- |
|
- |
|
||||
Total IPC |
|
4,965 |
|
475 |
|
653 |
|
586 |
|
3,251 |
|
||||
Other: |
|
|
|
|
|
|
|
|
|
|
|
||||
Long-term debt (a)(f) |
|
33 |
|
30 |
|
3 |
|
- |
|
- |
|
||||
Operating leases (f) |
|
1 |
|
- |
|
- |
|
- |
|
1 |
|
||||
Total IDACORP |
$ |
4,999 |
$ |
505 |
$ |
656 |
$ |
586 |
$ |
3,252 |
|
||||
(a) |
For additional information, see Note 4 to IDACORPs and IPCs Consolidated Financial Statements. |
|
|||||||||||||
(b) |
Future interest payments are calculated based on the assumption that all debt is outstanding until maturity. For debt instruments with variable rates, interest is calculated for all future periods using the rates in effect at December 31, 2008. |
|
|||||||||||||
(c) |
Approximately $23 million of the obligations included in operating leases have contracts that do not specify terms |
|
|||||||||||||
|
|
related to expiration. As these contracts are presumed to continue indefinitely, 10 years of information, estimated based on |
|
||||||||||||
|
|
current contract terms, have been included in the table for presentation purposes. |
|
||||||||||||
(d) |
Approximately $11 million of the obligations included in purchased power and transmission have contracts that do |
|
|||||||||||||
|
|
not specify terms related to expiration. As these contracts are presumed to continue indefinitely, 10 years of information, |
|
||||||||||||
|
|
estimated based on current contract terms, have been included in the table for presentation purposes. |
|
||||||||||||
(e) |
Approximately $48 million of the amounts in other purchase obligations are contracts that do not specify terms related to |
|
|||||||||||||
|
|
expiration. As these contracts are presumed to continue indefinitely, 10 years of information, estimated based on current |
|
||||||||||||
|
|
contract terms, have been included in the table for presentation purposes. |
|
||||||||||||
(f) |
Amounts include the obligations of IDACORPs subsidiaries other than IPC, which is shown separately. |
|
|||||||||||||
(g) |
IPC estimates pension contributions based on actuarial data. IPC cannot estimate contributions beyond 2013 at this time. |
|
|||||||||||||
|
|
|
|||||||||||||
In
accordance with the Pension Protection Act of 2006 (PPA), companies are
required to be 94 percent funded for their outstanding qualified pension
obligations as of January 1, 2009, in order to avoid a scheduled series of
required annual contributions. As of December 31, 2007, qualified pension
liabilities were nearly fully funded; however, recent stock market performance
has reduced the value of pension assets during 2008. IPC will need to make
additional contributions to become fully funded over a period of seven years.
Based on the value of pension assets and interest rates as of December 31,
2008, the estimated minimum required contributions would be approximately $45
million in 2010 and $33 million in each of 2011, 2012, and 2013. These
estimates reflect the initial PPA relief measures as passed by Congress,
however, additional measures are being proposed that may impact immediate
funding requirements.
42
Environmental Regulation
Costs:
IPC anticipates approximately
$20 million in annual operating costs for environmental facilities during
2009. Hydroelectric facility expenses and thermal plant expenses account for
the majority of the costs at approximately $14 million and $6 million, respectively.
From 2010 through 2011, total environmental related operating costs are
estimated to be approximately $57 million. Expenses related to the
hydroelectric facilities are expected to be $43 million and thermal plant
expenses are expected to total $14 million during this period. These amounts
do not include costs related to possible changes in the environmental
legislation and enforcement policies that may be enacted in response to issues
such as climate change and other pollutant emissions from coal-fired generation
plants.
Off-Balance Sheet
Arrangements
The federal Surface Mining Control
and Reclamation Act of 1977 and similar state statutes establish operational,
reclamation and closure standards that must be met during and upon completion
of mining activities. These obligations mandate that mine property be restored
consistent with specific standards and the approved reclamation plan. The
mining operations at the Bridger Coal Company are subject to these reclamation
and closure requirements. IPC has agreed to guarantee the performance of
reclamation activities at Bridger Coal, of which IERCo owns a one-third
interest. This guarantee, which is renewed each December, was $60 million at
December 31, 2008. Bridger Coal has a reclamation trust fund set aside
specifically for the purpose of paying the reclamation costs and expects that
the fund will be sufficient to cover all such costs. Because of the existence
of the fund, the estimated fair value of this guarantee is minimal.
REGULATORY MATTERS:
Idaho Rate Cases
2008 General Rate Case:
On June 27,
2008, IPC filed an application with the IPUC requesting an average rate
increase of approximately 9.9 percent. IPCs proposal would have increased its
revenues $67 million annually. The application included a requested return on
equity of 11.25 percent and an overall rate of return of 8.55 percent. IPC
filed its case based upon a 2008 forecast test year.
On January 30, 2009, the IPUC
issued an order approving an average annual increase in Idaho base rates,
effective February 1, 2009, of 3.1 percent (approximately $20.9 million
annually), a return on equity of 10.5 percent and an overall rate of return of
8.18 percent. The order authorized IPC to include in rates approximately $6.8
million of 2009 AFUDC relating to the Hells Canyon Complex relicensing
project. Typically AFUDC is not included in rates until a project is in use
and benefitting customers, but the IPUC determined that including this amount
in current rates is in the public interest.
On February 19, 2009, IPC
filed a request for reconsideration with the IPUC. In its filing, IPC asked
the IPUC to reconsider four principal areas of the order. Together, the four
areas have a combined Idaho jurisdictional revenue requirement impact of approximately
$8 million annually.
Two of the four areas involve
reconciling the calculation of IPCs revenue requirement with the order. These
items (approximately $7.2 million in annual revenues) relate to the annual
amount of labor expense to be included in rates. IPC believes that some
aspects of calculation of the revenue requirement with respect to these items
were inconsistent with the language of the order.
The third area relates to a
$3.3 million expense credit received in 2006 as a result of successful
litigation with the FERC and other federal agencies (FERC Credit). In the
order, the IPUC directed IPC to refund the FERC Credit to customers over a five
year period, thereby reducing IPCs annual revenue requirement by approximately
$0.7 million during such period. IPC believes that this was contrary to Idaho
law. If IPC is unsuccessful in its challenge of the IPUCs ruling on the FERC Credit,
it will recognize a loss for some or all of this amount.
The fourth area involves the
use of purchasing cards (P-Cards), which IPC issues to a number of its
employees to efficiently process high volume, low value purchases. In its
order, the IPUC accepted the IPUC Staffs recommendation to remove
approximately $0.9 million of P-Card expenses from IPCs revenue requirement
because the IPUC Staff believed this amount was excessive. IPC believes that
the IPUCs decision to deny recovery of $0.9 million of P-Card purchases was
not supported by evidence in the record.
The IPUC has 28 days in which
to decide whether to grant IPCs petition. If the petition is granted, then
the matter must be reheard, or written briefs filed, within 13 weeks after the
petition filing date, and the IPUC will then have 28 days to issue its order.
Other parties may also file petitions or cross-petitions for reconsideration.
43
2007 General Rate Case:
On June 8, 2007, IPC filed an application with the
IPUC requesting an average rate increase of 10.35 percent ($63.9 million
annually). On February 28, 2008, the IPUC approved a settlement stipulation
that included an average increase in base rates of 5.2 percent (approximately
$32.1 million annually), effective March 1, 2008. The settlement did not
specify an overall rate of return or a return on equity.
Forecast Test-Year Workshop:
On March 12, 2008, IPC, the IPUC
Staff, and other parties to the 2007 general rate case conducted a workshop to
discuss the appropriate approach to the development of a forecast test year.
IPC described a method that would start with historical, regulatory-adjusted
financial information that could be audited by the IPUC Staff and others. That
information would be escalated under commonly accepted methods into the
forecast test year for revenues, expenses and rate base. IPC would support the
historical information, the adjustments, and the escalation methods as part of
its general rate case filing. The parties to the workshop expressed general
agreement to this approach and also agreed that no further workshops would be
necessary. IPC developed the 2008 test year using this method in its 2008
general rate case filing made on June 27, 2008 and approved on January 30,
2009, as discussed above.
Danskin CT1 Power Plant
Rate Case:
On March 7, 2008, IPC
filed an application with the IPUC requesting recovery of construction costs
associated with the gas-fired Danskin CT1 plant located near Mountain Home,
Idaho. Danskin CT1 began commercial operations on March 11, 2008. IPC
requested adding to rate base approximately $65 million attributable to the cost
of constructing the generating facility and the related transmission and
interconnection facilities, which would have resulted in a base rate increase
of 1.39 percent, or approximately $9 million in annual revenues.
On May 30, 2008, the IPUC
authorized IPC to add to its rate base $64.2 million for the Danskin CT1 plant
and related facilities, effective June 1, 2008, resulting in a base rate
increase of 1.37 percent, or $8.9 million in annual revenues. Costs not
approved in this order will be included in future filings.
Deferred Net Power Supply
Costs
IPCs deferred net power supply costs
consisted of the following at December 31 (in thousands of dollars):
|
2008 |
|
2007 |
|||
Idaho PCA current year: |
|
|
|
|
|
|
|
Deferral for the 2008-2009 rate year (1) |
$ |
- |
|
$ |
85,732 |
|
Deferral for the 2009-2010 rate year |
|
93,657 |
|
|
- |
Idaho PCA true-up awaiting recovery: |
|
|
|
|
|
|
|
Authorized May 2007 |
|
- |
|
|
6,591 |
|
Authorized May 2008 |
|
47,164 |
|
|
- |
Oregon deferral: |
|
|
|
|
|
|
|
2001 costs |
|
1,663 |
|
|
2,993 |
|
2006 costs |
|
1,215 |
|
|
2,107 |
|
2008 PCAM |
|
5,400 |
|
|
- |
|
Total deferral |
$ |
149,099 |
|
$ |
97,423 |
|
||||||
(1) The 2008-2009 PCA deferral balance is reduced by $16.5 million of emission allowance sales in 2007. |
Idaho:
IPC has a PCA mechanism that provides for annual
adjustments to the rates charged to its Idaho retail customers. The PCA tracks
IPCs actual net power supply costs (fuel and purchased power less off-system
sales) and compares these amounts to net power supply costs currently being
recovered in retail rates.
The annual adjustments are
based on two components:
A forecast component, based on a forecast of net power supply costs in the coming year as compared to net power supply costs in base rates; and
A true-up component, based on the
difference between the previous years actual net power supply costs and the
previous years forecast. This component also includes a balancing mechanism
so that, over time, the actual collection or refund of authorized true-up
dollars matches the amounts authorized. The true-up component is calculated
monthly, and interest is applied to the balance.
44
Prior to February 1, 2009,
the PCA mechanism provided that 90 percent of deviations in power supply costs
were to be reflected in IPCs rates for both the forecast and the true-up
components.
2008-2009 PCA:
On May 30, 2008, the IPUC approved IPCs 2008-2009
PCA and an increase to existing revenues of $73.3 million, effective June 1,
2008, which resulted in an average rate increase to IPCs customers of 10.7
percent. The IPUCs order adopted an IPUC Staff proposal to use a normal
forecast for power supply costs. The revenue increase is net of $16.5 million
of gains from the 2007 sale of excess SO
2
emission allowances,
including interest, which the IPUC ordered be applied against the PCA.
PCA Workshops:
In its May 30, 2008 order approving IPCs 2008-2009
PCA, the IPUC also directed IPC to set up workshops with the IPUC Staff and
several of IPCs largest customers (together, the Parties) to address PCA-related
issues not resolved in the PCA filing. Consensus was reached on all items
except allocation of the PCA among customer classes, which will be re-examined
following the conclusion of the 2008 general rate case. A settlement
stipulation was filed with the IPUC and approved on January 9, 2009.
The following changes were
effective as of February 1, 2009:
PCA Sharing Methodology of 95/5 - the PCA sharing methodology allocates the costs and benefits of net power supply expenses between customers (95 percent) and shareholders (5 percent). The previous sharing ratio was 90/10.
Load Growth Adjustment Rate (LGAR) of $26.52 per MWh - the LGAR is an element of the PCA formula that is intended to eliminate recovery of power supply expenses associated with load growth resulting from changing weather conditions, a growing customer base, or changing customer use patterns. The 2007 general rate case reset the LGAR from $29.41 to $62.79 per MWh, but applied that rate to only 50 percent of the load growth beginning in March 2008. In the stipulation, the Parties agreed on a formula that, based on filed data from the 2008 general rate case, would have produced an LGAR of $28.14 per MWh. While not quantified in the 2008 general rate case order, IPC believes that the LGAR methodology approved in the stipulation results in a LGAR of $26.52 per MWh. In its request for reconsideration of the IPUCs general rate case order, IPC also requested that the IPUC confirm this amount is correct.
Use of IPCs Operation Plan Power Supply Cost Forecast - the operation plan forecast may better match current collections with actual net power supply costs in the year they are incurred and result in smaller amounts being included in the following years true-up rate. This new methodology will be used to prepare IPCs next PCA filing in April 2009.
Inclusion of Third-Party Transmission Expense - transmission expenses paid to third parties to facilitate wholesale purchases and sales of energy, including losses, are a necessary component of net power supply costs. Deviation in these types of costs from levels included in base rates is now reflected in PCA computations.
Adjusted Distribution of Base Net Power Supply Costs - base net power supply costs are distributed throughout the year based upon the monthly shape of normalized revenues for purposes of the PCA deferral calculation.
2007-2008
PCA:
On May 31, 2007, the IPUC
approved IPCs 2007-2008 PCA filing. The filing increased the PCA component of
customers rates from the then-existing level, which was $46.8 million below
base rates, to a level that was $30.7 million above those base rates. This
$77.5 million increase was net of $69.1 million of proceeds from sales of
excess SO
2
emission allowances. The new rates became effective June
1, 2007.
Emission Allowances:
During 2007, IPC sold 35,000 SO
2
emission
allowances for a total of $19.6 million. The sales proceeds allocated to the
Idaho jurisdiction were approximately $18.5 million. On April 14, 2008, the
IPUC ordered that $16.4 million of these proceeds, including interest, be used
to help offset the PCA true-up balances from the 2007-2008 PCA. The order also
provided that $0.5 million may be used to fund an energy education program.
45
In 2005 and early 2006, IPC
sold 78,000 SO
2
emission allowances for a total of $81.6 million.
The sales proceeds allocated to the Idaho jurisdiction were approximately $76.8
million. On May 12, 2006, the IPUC approved a stipulation that allowed IPC to
retain ten percent as a shareholder benefit with the remaining 90 percent plus
a carrying charge recorded as a customer benefit. This customer benefit was
used to partially offset the PCA true-up balance and was reflected in PCA rates
in effect from June 1, 2007, to May 31, 2008.
The bulk of IPCs accumulated excess emission allowances were sold during the
2005-2007 period. IPC anticipates realizing approximately 14,500 excess SO
2
emission allowances annually for the near future. Tighter emission
restrictions are expected in the long term which may cause IPC to use more
emission allowances for its own requirements and reduce the annual amount of
excess emission allowances.
Oregon:
On April 30, 2007, IPC filed for an accounting order
with the OPUC to defer net power supply costs for the period from May 1, 2007,
through April 30, 2008, in anticipation of higher than normal (higher than
base) power supply expenses. In the filing, IPC included a forecast of Oregons
jurisdictional share of excess power supply costs of $5.7 million. A hearing
is set for April 16, 2009.
On
April 28, 2006, IPC filed for an accounting order with the OPUC to defer net
power supply costs for the period of May 1, 2006, through April 30, 2007. A
settlement agreement was reached with the OPUC Staff and the Citizens Utility
Board in the amount of $2 million, which was approved by the OPUC on December
13, 2007.
The
timing of future recovery of Oregon power supply cost deferrals is subject to
an Oregon statute that specifically limits rate amortizations of deferred costs
to six percent of gross Oregon revenue per year. IPC is currently amortizing
through rates power supply costs associated with the western energy situation
of 2000 and 2001, which is discussed further under LEGAL AND ENVIRONMENTAL
ISSUES - Western Energy Proceeding at the FERC. Full recovery of the 2001
deferral is not expected until 2009. The 2006-2007 and the 2007-2008 deferrals
would have to be amortized sequentially following the full recovery of the 2001
deferral.
Oregon Power Cost Recovery
Mechanism:
On August 17, 2007, IPC
filed an application with the OPUC requesting the approval of a power cost
recovery mechanism similar to the Idaho PCA. A joint stipulation was filed
with the OPUC on March 14, 2008, and the OPUC approved the stipulation on April
28, 2008.
The stipulation and OPUC
order established a power cost recovery mechanism with two components: the
annual power cost update (APCU) and the power cost adjustment mechanism
(PCAM). The combination of the APCU and the PCAM allows IPC to recover excess
net power supply costs in a more timely fashion than through the previously
existing deferral process.
APCU: The APCU allows IPC to
reestablish its Oregon base net power supply costs annually, separate from a
general rate case, and to forecast net power supply costs for the upcoming
water year. The APCU has two components: the October Update, where each
October IPC calculates its estimated normalized net power supply expenses for
the following April through March test period, and the March Forecast, where
each March IPC files a forecast of its expected net power supply expenses for
the same test period, updated for a number of variables including the most
recent stream flow data and future wholesale electric prices. On June 1 of
each year, rates are adjusted to reflect costs calculated in the APCU.
On October 29, 2007, IPC
filed the October Update portion of its 2008 APCU with the OPUC reflecting the
estimated net power supply expenses for the April 2008 through March 2009 test
period. On March 24, 2008, IPC submitted testimony to the OPUC revising its
calculation of the October Update to conform to the methodology agreed to by
the parties in the stipulation. IPC also submitted the March Forecast,
reflecting expected hydroelectric generating conditions and forward prices for
the April 2008 through March 2009 test period. The expected power supply costs
of $150 million represented an increase of approximately $23 million over the
October Update.
On May 20, 2008, the OPUC
approved IPCs 2008 APCU (comprising both the October Update and the March
Forecast) with the new rates effective June 1, 2008. The approved APCU resulted
in a $4.8 million, or 15.69 percent, increase in Oregon revenues.
On October 23, 2008, IPC
filed the October Update portion of its 2009 APCU with the OPUC. The filing,
combined with supplemental testimony filed on December 1, 2008, reflects that
revenues associated with IPCs base net power supply costs would be increased
by $1.6 million over the previous October Update, an average 4.55 percent
increase. The October Update will be combined with the March Forecast portion
of the 2009 APCU, with final rates expected to become effective on June 1,
2009.
46
PCAM: The PCAM is a true-up
to be filed annually in February. The filing calculates the deviation between
actual net power supply expenses incurred for the preceding calendar year and
the net power supply expenses recovered through the APCU for the same period.
Under the PCAM, IPC is subject to a portion of the business risk or benefit
associated with this deviation through application of an asymmetrical deadband (or
range of deviations) within which IPC absorbs cost increases or decreases. For
deviations in actual power supply costs outside of the deadband, the PCAM
provides for 90/10 sharing of costs and benefits between customers and IPC.
However, a collection will occur only to the extent that it results in IPCs
actual return on equity (ROE) for the year being no greater than 100 basis
points below IPCs last authorized ROE. A refund will occur only to the extent
that it results in IPCs actual ROE for that year being no less than 100 basis
points above IPCs last authorized ROE. The PCAM rate is then added to or
subtracted from the APCU rate, with new combined rates effective each June 1.
On
October 6, 2008, the OPUC provided an order clarifying that the PCAM is a
deferral under the Oregon statute. IPC expects that deferrals under the PCAM
component will be subject to the six percent limitation on annual amortization
discussed above. IPC had $5.4 million deferred under the PCAM as of December
31, 2008.
IPC
expects to make its first PCAM filing on February 27, 2009.
Fixed Cost Adjustment Mechanism (FCA)
On March 12, 2007, the IPUC approved the
implementation of a FCA mechanism pilot program for IPCs residential and small
general service customers. The FCA is a rate mechanism designed to remove IPCs
disincentive to invest in energy efficiency programs by separating (or
decoupling) the recovery of fixed costs from the variable kilowatt-hour charge
and linking it instead to a set amount per customer. In the FCA, for each
customer class, the number of customers is multiplied by a fixed cost per
customer. The cost per customer is based on IPCs revenue requirement as
established in a general rate case. This authorized fixed cost recovery amount
is compared to the amount of fixed costs actually recovered by IPC. The amount
of over- or under-recovery is then returned to or collected from customers in a
subsequent rate adjustment. The pilot program began on January 1, 2007, and
runs through 2009, with the first rate adjustment occurring on June 1, 2008,
and subsequent rate adjustments occurring on June 1 of each year during its
term.
On March 14, 2008, IPC filed
an application requesting a $2.4 million rate reduction under the FCA pilot
program for the net over-recovery of fixed costs during 2007. On May 30, 2008,
the IPUC approved the rate reduction of $2.4 million to be distributed to
residential and small general service customer classes equally on an energy
used basis during the June 1, 2008, through May 31, 2009, FCA year. IPC
deferred $2.5 million of FCA net under-recovery of fixed costs during 2008.
Idaho Energy Efficiency Rider
On March 14, 2008, IPC filed an application
with the IPUC requesting an increase to its Energy Efficiency Rider (Rider),
which is the chief funding mechanism for IPCs investment in conservation,
energy efficiency and demand response programs. IPC proposed an increase from
1.5 percent to 2.5 percent of base revenues, or to approximately $17 million
annually, effective June 1, 2008. The application also sought authorization to
eliminate the current funding caps for residential and irrigation customers,
which is expected to result in more equitable cost recovery between customer
classes, and authorization to utilize Rider funding to support customer
programs aimed at the installation of small-scale renewable energy projects.
On May 30, 2008, the IPUC
approved IPCs application to increase the Rider from 1.5 percent to 2.5
percent of base revenues, effective June 1, 2008, and approved IPCs request to
eliminate the caps on the Rider for residential and irrigation customers. The
IPUC denied IPCs request to utilize Rider funding to support customer programs
aimed at the installation of small-scale renewable energy projects, but
directed IPC to work with the IPUC Staff and other interested parties to
develop a renewable energy program and submit it to the IPUC for approval.
Prudency Review:
In the 2008 general rate case, IPC requested that
the IPUC explicitly find that IPCs expenditures between 2002 and 2007 of $29
million of funds obtained from the Rider were prudently incurred and would,
therefore, no longer be subject to potential disallowance. The IPUC Staff
recommended that the IPUC defer a prudency determination for these expenditures
until IPC was able to provide a comprehensive evaluation package of its
programs and efforts. IPC contended that sufficient information had already
been provided to the IPUC Staff for review.
47
On February 18, 2009, IPC
filed a stipulation with the IPUC reflecting an agreement with the IPUC Staff
on $14.3 million of the Rider funds. The IPUC Staff agreed that this portion
of the Rider expenditures were prudently incurred. IPC and the IPUC Staff agreed
to continue to exchange information and discuss settlement with regard to the
remaining $14.7 million, and IPC will file a pleading with the IPUC by April 1,
2009 seeking a prudency determination on the remainder. If resolution with
respect to the remaining $14.7 million cannot be reached in the proceedings
stemming from the April 1, filing, IPC and the IPUC Staff will recommend a
procedure to allow the IPUC to make such a determination.
Depreciation Filings
On September 12, 2008, the IPUC approved a
revision to IPCs depreciation rates, retroactive to August 1, 2008. The new
rates are based on a settlement reached by IPC and the IPUC Staff, and result
in an annual reduction of depreciation expense of $8.5 million ($7.9 million
allocated to Idaho) based upon December 31, 2006, depreciable electric plant in
service.
On October 3, 2008, IPC filed
an application with the OPUC requesting that the new depreciation rates
approved in IPCs Idaho jurisdiction be authorized for IPCs Oregon
jurisdiction as well. The result for the Oregon jurisdiction would be a
decrease in annual depreciation expense and rates of $0.4 million. This matter
is pending and no order has been issued. This request was filed in conjunction
with the October 3, 2008, application discussed below in Advanced Metering
Infrastructure (AMI).
On October 22, 2008, IPC
filed an application with the FERC requesting that IPCs revised depreciation
rates as approved by the IPUC also be accepted for use in future rate filings
made with the FERC. The FERC approved IPCs application on December 3, 2008.
The new depreciation accrual rates will be reflected in IPCs OATT rates
beginning October 1, 2009.
Advanced Metering Infrastructure (AMI)
The AMI project provides the means to
automatically retrieve energy consumption information, eliminating manual meter
reading expense. In the future, the system will support enhancements to allow
for time-variant rates, perform remote connects and disconnects, and collect
system operations data enhancing outage management, reliability efforts and
demand-side management options.
IPC filed AMI evaluation and
deployment reports with the IPUC on May 1 and August 31, 2007, in compliance
with an IPUC order. Consistent with the implementation plan contained in those
reports, IPC has entered into a number of contracts for materials and resources
that allowed for the AMI implementation to commence in late 2008. IPC intends
to install this technology for approximately 99 percent of its customers by the
end of 2011. The executed contracts do not obligate IPC for any level of
purchases and specifically allow IPC to cancel the contracts in the event that
appropriate regulatory treatment regarding cost recovery is not granted.
Idaho:
On August 5, 2008, IPC filed an application with the
IPUC requesting a Certificate of Public Convenience and Necessity for the
deployment of AMI technology and approval of accelerated depreciation for the
existing metering equipment. The IPUC approved IPCs application on February
12, 2009. In its application, IPC estimated the three year investment in AMI
to be $71 million. The 2009 revenue requirement impact of the AMI deployment
is estimated to be $12.2 million. The effect on rates will be addressed in
subsequent proceedings.
Oregon:
On October 3, 2008, IPC filed an application with
the OPUC requesting authority to accelerate the depreciation and recovery of
existing meters in the Oregon jurisdiction over an 18-month period beginning
January 2009. The OPUC approved IPCs request on December 30, 2008. IPCs AMI
deployment schedule calls for the replacement of the Oregon service-territory
meters around October 2010. The existing meters will be fully depreciated
prior to their removal from service. The estimated balance of plant in service
at December 31, 2008, attributable to the existing meters is $1.4 million. The
approval of this application results in an increase of $0.8 million for 2009 in
both rates and depreciation expense. This increase will be partially offset by
the request for revised depreciation rates filed in the same application and
discussed above in Depreciation Filings, subject to true-up if the
depreciation rates the OPUC ultimately approves differ from those that were
approved by the IPUC.
48
Idaho Pension Expense Order
In the 2003 Idaho general rate case, the IPUC
disallowed recovery of pension expense because there were no current cash
contributions being made to the pension plan. On March 20, 2007, IPC requested
that the IPUC clarify that IPC can consider future cash contributions made to
the pension plan a recoverable cost of service. On June 1, 2007, the IPUC
issued an order authorizing IPC to account for its defined benefit pension
expense on a cash basis, and to defer and account for pension expense under SFAS
87,
Employers Accounting for Pensions
, as a regulatory asset. The IPUC
acknowledged that it is appropriate for IPC to seek recovery in its revenue
requirement of reasonable and prudently incurred pension expense based on
actual cash contributions. The regulatory asset created by this order is
expected to be amortized to expense to match the revenues received when future
pension contributions are recovered through rates. The deferral of pension
expense did not begin until $4.1 million of past contributions still recorded
on the balance sheet at December 31, 2006, were expensed. For 2007,
approximately $2.8 million was deferred to a regulatory asset beginning in the
third quarter. In 2008, $7.9 million of pension expense was deferred. IPC did
not request a carrying charge on the deferral balance.
Federal Regulatory Matters
On May 3, 2007, the U.S.
Court of Appeals for the Ninth Circuit ruled that the settlement agreements
entered into between the BPA and the IOUs (including IPC) are inconsistent with
the Northwest Power Act. On May 21, 2007, the BPA notified IPC and six other
IOUs that it was immediately suspending the Residential Exchange Program
payments that the utilities pass through to their residential and small farm
customers in the form of electricity bill credits. IPC took action with both
the IPUC and the OPUC to reduce the level of credit on its customers bills to
zero, effective June 1, 2007.
Since that time IPC has been
working with the other northwest IOUs and consumer-owned utilities, northwest
state public utility commissions and the BPA to craft an agreement so that
residential and small farm customers of IPC can resume sharing in the benefits
of the federal Columbia River power system. However, the matter has yet to be
resolved. The BPA has initiated several public processes, which ultimately
will determine whether benefits will be restored to IPC customers. The most
significant of these processes are the establishment of new residential
purchase and sales agreements (RPSAs) and the WP-07 supplemental rate case. The
RPSAs are intended to replace the settlement agreements invalidated by the
court and to provide the structure through which benefits will be shared with
the residential and small farm customers of IOUs. The WP-07 case addresses the
calculation of overpayment (if any) of benefits to customers of the IOUs under
the settlement agreements and whether those overpayments must be repaid by a
reduction to future benefits.
The BPA issued a Final Record
of Decision (ROD) on September 4, 2008 to establish new RPSAs and another ROD on
September 22, 2008 in the WP-07 case. Together the RODs continue to reflect no
residential exchange benefits for IPCs residential and small farm customers in
the foreseeable future. IPC has filed petitions for review in the U.S. Court
of Appeals for the Ninth Circuit challenging both RODs - the RPSAs on November
26, 2008 and the WP-07 case on December 16, 2008.
A mediation process within
the Ninth Circuit Court has been initiated in an attempt to settle Residential
Exchange Program issues. The appeals proceedings are being held in abeyance
during the mediation process. A meeting was held on February 12, 2009 between
the BPA, IOUs and consumer-owned utilities to determine if there is common
ground for an overall settlement of the Residential Exchange Program. Two
additional meetings are scheduled for March 2009. If mediation is
unsuccessful, briefing schedules will be set.
IPC will continue its efforts
to secure future benefits for its customers. Since these benefits were passed
through to IPCs customers, the outcome of this matter is not expected to have
an effect on IPCs financial condition or results of operations.
49
OATT:
On March 24, 2006, IPC submitted a revised OATT
filing with the FERC requesting an increase in transmission rates. In the
filing, IPC proposed to move from a fixed rate to a formula rate, which allows
for transmission rates to be updated each year based on financial and
operational data IPC is required to file annually with the FERC in its Form 1.
The formula rate request included a rate of return on equity of 11.25 percent.
IPCs filing was opposed by several affected parties. Effective June 1, 2006,
the FERC accepted IPCs proposed new rates, subject to refund pending the
outcome of the hearing and settlement process.
On August 8, 2007, the FERC
approved a settlement agreement by the parties on all issues except the
treatment of contracts for transmission service that contain their own terms,
conditions and rates that were in existence before the implementation of OATT
in 1996 (Legacy Agreements). This settlement reduced IPCs proposed new rates
and, as a result, approximately $1.7 million collected in excess of the
settlement rates between June 1, 2006, and July 31, 2007, was refunded with
interest in August 2007. As part of the settlement agreement, the FERC
established an authorized rate of return on equity of 10.7 percent.
On August 31, 2007, the FERC
Presiding Administrative Law Judge (ALJ) issued an initial decision (Initial
Decision) with respect to the treatment of the Legacy Agreements, which would
have further reduced the new transmission rates. IPC, as well as the opposing
parties, appealed the Initial Decision to the FERC. If implemented, the
Initial Decision would have required IPC to make additional refunds, including
interest, of approximately $5.4 million (including $0.4 million of interest)
for the June 1, 2006, through December 31, 2008, period. IPC previously
reserved this entire amount.
On January 15, 2009, the FERC
issued an Order on Initial Decision (FERC Order), which upheld the Initial
Decision of the ALJ in most respects, but modified the Initial Decision in one
respect that is unfavorable to IPC. The decision requires IPC to reduce its
transmission service rates to FERC jurisdictional customers. Furthermore, IPC
is required to make refunds to FERC jurisdictional transmission customers in
the total amount of $13.3 million (including $1.1 million in interest) for the
period since the new rates went into effect in June 2006. Based on the FERC
Order IPC reserved an additional $7.9 million (including $0.7 million in
interest) in the fourth quarter of 2008, bringing the total reserve amount to
$13.3 million. Prior to the FERC Order, the FERC jurisdictional transmission
revenues (net of the $5 million reserve) recorded in the last seven months of
2006, all of 2007 and 2008 were $8.1 million, $13.3 million and $15.8 million, respectively.
Under the FERC Order, the transmission revenues would have been $6.4 million in
the last seven months of 2006, $11 million in 2007 and $12.6 million in 2008.
Refunds were made on February 25, 2009.
IPC filed a request for
rehearing with the FERC on February 17, 2009. IPC believes that the treatment
of the Legacy Agreements conflicts with precedent. The rehearing request
asserts that the FERC order is in error by: (1) requiring IPC to include the
contract demands associated with the Legacy Agreements in the OATT formula rate
divisor rather than crediting the revenue from the Legacy Agreements against
IPCs transmission revenue requirement; (2) concluding that IPC must include
the contract demands associated with the Legacy Agreements rather than the
customers coincident peak demands; (3) concluding that the transmission rate
contained in one or more of the Legacy Agreements was not a discounted rate;
(4) failing to consider the non-monetary benefits received by IPC from the
Legacy Agreements; (5) concluding that the services provided under the Legacy
Agreements are firm services and therefore should be handled for rate purposes
in the same manner as firm services under the OATT; and (6) failing to affirm
the rate treatment that has been used for the Legacy Agreements for
approximately 30 years. IPC cannot predict when the FERC will rule on the
request for rehearing or the outcome of this matter.
On August 28, 2008, IPC filed
its informational filing with the FERC that contains the annual update of the
formula rate based on the 2007 test year. The new rate included in the filing
is $18.88 per kW-year, a decrease of $0.85 per kW-year, or 4.3 percent. The
impact of this rate decrease on IPCs revenues will depend on transmission
volume sold, which can be highly variable. New rates were effective October 1,
2008. IPC has adjusted its rates to $13.81 per kW-year in compliance with the
January 15, 2009 order.
Transmission Projects
50
Gateway West Project:
IPC and PacifiCorp are jointly exploring the Gateway
West Project to build transmission lines between Windstar, a substation located
near Douglas, Wyoming and Hemingway, a substation located in the vicinity of
Melba and Murphy, Idaho near Boise. The lines would be designed to increase
electrical transmission capacity across southern Idaho in response to
increasing customer demand and growth, along with other transmission service
requests. IPC and PacifiCorp have a cost sharing agreement for expenses
associated with the analysis work of the initial phases. IPCs share of the
initial phase of engineering, environmental review, permitting and rights-of-way
is approximately $40 million. Initial phases of the project could be completed
by 2014 depending on the timing of rights-of-way, acquisition, siting and
permitting, and construction sequencing. If all initial phases are
constructed, IPC estimates that its share of the project costs could range
between $500 million and $600 million. Remaining phases of the project could
be constructed as demand requires.
Boardman-Hemingway Line:
Consistent with the 2006 IRP and requirements and
requests of other transmission customers, IPC is exploring alternatives for the
construction of a 500-kV line between southwestern Idaho and the Northwest.
The Boardman-Hemingway Line is expected to relieve existing congestion by
increasing transmission capacity and improving reliability. It will allow for
the transfer of up to 1,500 MW of additional energy between Idaho and the
Northwest. The initial project phase estimate of $50 million will be funded by
IPC and includes the engineering, environmental review, permitting and rights-of-way.
Cost estimates for the project (including initial phase project estimate and
construction costs of the line) are approximately $600 million. IPC expects to
seek partners for up to 50 percent of the project when construction commences.
The line has a target in-service date of June 2013. The existing transmission
station at the Boardman power plant in Oregon will serve as the northwest
terminal of the project. The Idaho terminal is the Hemingway substation. IPC
and a number of other utilities with proposed regional transmission projects in
the Northwest have signed a letter agreeing to coordinate technical studies,
which have begun. The Comprehensive Progress Report has been submitted to the
WECC for review as part of the ratings process. On August 28, 2008, IPC filed
a notice of intent (NOI) with the Oregon Department of Energy to apply for a
site certificate for the proposed line. On October 3, 2008, IPC filed a
project proposal with the Northern Tier Transmission Group Cost Allocation
Committee requesting approval of the allocation of costs and benefits for the
project. IPC does not expect any recommendation or approval by the NTTG until
the second half of 2009. Other planning and project management activities are
underway.
On
October 22, 2008, IPC and Portland General Electric (PGE) signed a memorandum
of understanding (MOU) as the basis for cooperation on the Boardman-Hemingway
Line and PGEs proposed Southern Crossing 500kV project. The MOU provides the
two utilities an opportunity to integrate a portion of the proposed
transmission lines if both projects move forward.
Hemingway Station:
Construction of a new 500-kV station named Hemingway
is expected to address growth, capacity and operating constraints. The station
was originally part of the Gateway West Project but the timing of this addition was accelerated to 2010 to
help meet forecast deficits and improve reliability. Cost estimates for the
project, including rights-of-way, permitting and substation interconnections,
are approximately $52 million.
Hemingway-Hubbard
Transmission Line:
As part of the
Hemingway Station Project, the Hemingway-Hubbard transmission line is expected
to provide power to the Treasure Valley in southwest Idaho by 2010. The
Hemingway-Hubbard line will consist of a new 230-kV double circuit transmission
line and convert an existing 138-kV transmission line to 230-kV. Cost
estimates for the project are approximately $25 million.
Public Utility Regulatory
Policies Act of 1978
51
Ongoing social and political
pressure to increase the use of renewable energy is continuing to fuel
expansion of renewable energy incentive programs at both the state and federal
level. In addition, it is expected that in early 2009, the Published Avoided
Costs will be increased by both the IPUC and the OPUC, which will result in the
continuation of a favorable climate for PURPA project development and may
require IPC to enter into additional PURPA agreements. The requirement to
enter into additional PURPA agreements may result in IPC acquiring energy at
above wholesale market prices, thus increasing costs to its customers. It is
highly likely that the requirement to enter into additional PURPA agreements
will add to IPCs surplus during certain times of the year, which could also
increase costs to IPCs customers.
As of December 31, 2008, IPC
had signed agreements to purchase energy from 92 CSPP facilities with contracts
ranging from one to 30 years. Seventy-nine of these facilities, with a combined
nameplate capacity of 267 MW, were on-line at the end of 2008; the other 13
facilities, with a combined nameplate capacity of 190 MW, are projected to come
on-line in 2009 and 2010. The majority of the new facilities will be wind
resources which will generate on an intermittent basis. During 2008, IPC
purchased 756,014 MWh from these projects at a cost of $45.9 million, resulting
in a blended price of 6.1 cents per kilowatt hour.
Integrated Resource Plan
During the time between
resource plan filings, the public and regulatory oversight of the activities
identified in the IRP allows for discussion and adjustment of the IRP as
warranted. IPC continues to analyze and evaluate the resource plan and make
periodic adjustments and corrections to reflect changes in technology, economic
conditions, anticipated resource development and regulatory requirements. Each
of the sections below provides an update of items identified in the resource
planning process.
Peaking Resource:
The construction of a new simple cycle combustion
turbine resource at the Danskin plant near Mountain Home, Idaho was completed
in the first quarter of 2008 and the new generating unit was available during
IPCs 2008 summer peak load period. The combustion turbine provides approximately 166 MW of capacity during the
summer and up to 200 MW in the winter.
Geothermal RFPs:
An RFP for geothermal-powered generation was
released in June 2006. IPC identified U.S. Geothermal, Inc. as the successful
bidder in March 2007 based on a proposal to supply 45.5 MW of geothermal
energy. In January 2008, the IPUC approved a power purchase agreement for 13
MW (nameplate generation) from the Raft River Geothermal Power Plant Unit #1
located in southern Idaho. This project began operating in October 2007.
Contract negotiations for the remaining 32.5 MW continued throughout 2008,
however uncertainty in the development schedule and final cost made it
impossible for the parties to agree on contract terms and conditions and the
negotiation process came to a close in late 2008.
In January 2008, IPC released
an RFP for 50 to 100 MW of geothermal energy. Proposals were due in March 2008
and as the evaluation process proceeded, all but one of the respondents
withdrew their proposals. IPC completed the RFP evaluation process on the
remaining response, however it was not selected due to the economics and timing
of the presented project.
While the results of the
geothermal RFP processes have been disappointing, IPC is continuing to work
with project developers capable of delivering energy to its service area. IPC
also continues to monitor developments in geothermal technology and is hopeful
geothermal energy will become an economic and readily available resource for
its customers.
52
2012 Baseload Resource
RFP:
In light of a decision to no
longer pursue a conventional coal resource in 2013 as identified in the 2006
IRP, IPC issued an RFP in 2008 for 300 MW of dispatchable, physically delivered
firm or unit contingent energy to be acquired under power purchase or tolling
agreements. A tolling agreement is an arrangement where one party owns,
operates and maintains the generating facility and the other party provides
fuel, pays capacity charges and receives the contracted output from the project
including energy, capacity and ancillary services. IPC prepared a self-build
proposal for a combined-cycle combustion turbine, which serves as a benchmark
resource and is competing in the RFP evaluation process. Proposals were
received in October 2008 and are currently being evaluated. This addition is
expected to come online in 2012 to meet forecast deficits as described in the
2006 IRP and the 2008 IRP update. IPC expects to request approval from the
IPUC relating to the base load resource during the first quarter of 2009, with
an IPUC decision expected later this year.
Combined Heat and Power
(CHP) RFP:
The 2006 IRP included 50
MW of CHP coming on-line in 2010. In April 2008, IPC solicited its large
industrial customers to determine the level of interest in CHP development.
While the level of interest in CHP development has been less than anticipated
in the 2006 IRP, IPC continues to work with parties to explore CHP development
opportunities.
Relicensing
of Hydroelectric Projects
The
relicensing costs are recorded and held in construction work in progress until
new multi-year licenses are issued by the FERC, at which time the charges will
be transferred to electric plant in service. Relicensing costs and costs
related to new licenses will be submitted to regulators for recovery through
the ratemaking process. Relicensing costs of $105 million and $4 million for
HCC and Swan Falls, respectively, were included in construction work in
progress at December 31, 2008.
Hells Canyon Complex:
The most significant ongoing relicensing effort is
the HCC, which provides approximately two-thirds of IPCs hydroelectric
generating capacity and 40 percent of its total generating capacity. In July
2003, IPC filed an application for a new license in anticipation of the July
2005 expiration of the then-existing license. IPC is currently operating under
an annual license issued by the FERC and expects to continue operating under
annual licenses until the new license is issued.
Consistent with the
requirements of the National Environmental Policy Act of 1969, as amended
(NEPA), the FERC Staff issued on August 31, 2007, a final environmental impact
statement (EIS) for the HCC, which the FERC will use to determine whether, and
under what conditions, to issue a new license for the project. The purpose of
the final EIS is to inform the FERC, federal and state agencies, Native
American tribes and the public about the environmental effects of IPCs
proposed operation of the HCC. IPC is reviewing the final EIS and expects to
file comments with the FERC in 2009.
In conjunction with the
issuance of the final EIS, on September 13, 2007, the FERC requested formal
consultation under the Endangered Species Act (ESA) with the National Marine
Fisheries Service (NMFS) and the U.S. Fish and Wildlife Service (USFWS)
regarding the effect of HCC relicensing on several aquatic and terrestrial
species listed as threatened under the ESA. However, formal consultation has
not yet been initiated and NMFS and USFWS continue to gather and consider
information relative to the effect of relicensing on relevant species. IPC
continues to cooperate with the USFWS, the NMFS and the FERC in an effort to
address ESA concerns.
Because the HCC is located on
the Snake River where it forms the border between Idaho and Oregon, IPC has
filed Water Quality Certification Applications, required under section 401 of
the Clean Water Act, with the States of Idaho and Oregon requesting that each
state certify that any discharges from the project comply with applicable state
water quality standards. IPC continues to work with Idaho and Oregon to ensure
that any discharges from the HCC will comply with the necessary state water
quality standards so that appropriate water quality certifications can be
issued for the project.
The FERC is expected to issue a license order for the HCC
once the ESA consultation and the section 401 certification processes are
completed.
53
Swan
Falls Project:
The license for the
Swan Falls hydroelectric project expires in June 2010. On September 21, 2007,
IPC submitted its draft license application to the FERC for public review and
comment. The draft contained project-specific information and the results of
environmental studies designed to determine project effects. Comments were
received from the agencies and one Native American tribe and on February 19,
2008, a joint meeting was held to address the comments and attempt to resolve
areas of disagreement over study results and proposed mitigation measures. On
June 26, 2008, IPC filed a final license application with the FERC. On July 9,
2008, in conformance with applicable regulations, the FERC issued a Notice of
Application Tendered for Filing with the Commission, Soliciting Additional
Study Requests, and Establishing Procedural Schedule for Relicensing and a
Deadline for Submission of Final Amendments. Pursuant to that notice, state
and federal resource agencies, Native American tribes or other interested
parties were to file additional study requests with the FERC by August 26,
2008. Additional study requests were filed by the Shoshone-Bannock Tribes and
the USFWS. IPC filed responses to these requests on September 26 and 29, 2008,
respectively. The FERC is still considering the requests from the Shoshone-Bannock
Tribes and the USFWS. On October 7, 2008, IPC received a request from the FERC
to provide clarification and additional information on the Swan Falls license
application. IPC will submit responses to this request by April 7, 2009. The
FERC notified IPC on December 4, 2008, that the final license application had
been officially accepted for filing.
Shoshone
Falls Expansion:
On August 17, 2006,
IPC filed a license amendment application with the FERC, which would allow IPC
to upgrade the Shoshone Falls project from 12.5 MW to 62.5 MW. The license
amendment is expected to be issued in 2009. In conjunction with the license
amendment application, IPC has filed a water rights application which is
currently being reviewed by the Idaho Department of Water Resources (IDWR).
FERC Market-Based Rate
Authority
LEGAL AND ENVIRONMENTAL ISSUES:
Western Energy Proceedings at the FERC:
Throughout this report, the term western
energy situation is used to refer to the California energy crisis that
occurred during 2000 and 2001, and the energy shortages, high prices and
blackouts in the western United States. High prices for electricity in
California and in western wholesale markets during 2000 and 2001 caused
numerous purchasers of electricity in those markets to initiate proceedings
seeking refunds. Some of these proceedings (the western energy proceedings)
remain pending before the FERC or on appeal to the United States Court of
Appeals for the Ninth Circuit (Ninth Circuit).
There are pending in the Ninth Circuit approximately 200 petitions
for review of numerous FERC orders regarding the western energy situation,
including the California refund proceeding, show cause orders with respect to
contentions of market manipulation, and the Pacific Northwest proceedings.
Decisions in these appeals may have implications with respect to other pending
cases, including those to which IDACORP, IPC or IE are parties. IDACORP, IPC
and IE intend to vigorously defend their positions in these proceedings, but
are unable to predict the outcome of these matters, except as otherwise stated
below, or estimate the impact they may have on their consolidated financial
positions, results of operations or cash flows.
California Refund:
This proceeding originated with an effort by agencies of the
State of California and investor owned utilities in California to obtain
refunds for a portion of the spot market sales from sellers of electricity into
California markets from October 2, 2000, through June 20, 2001. In April 2001,
the FERC issued an order stating that it was establishing a price mitigation
plan for sales in the California wholesale electricity market. The FERCs
order also included the potential for directing electricity sellers into
California from October 2, 2000, through June 20, 2001, to refund portions of
their spot market sales prices if the FERC determined that those prices were
not just and reasonable. In July 2001, the FERC initiated the California
refund proceeding including evidentiary hearings to determine the scope and
methodology for determining refunds. After evidentiary hearings, the FERC
issued an order on refund liability on March 26, 2003, and later denied the
numerous requests for rehearing. The FERC also required the California
Independent System Operator (Cal ISO) to make a compliance filing calculating
refund amounts. That compliance filing has been delayed on a number of
occasions and has not yet been filed with the FERC.
54
IE and other parties petitioned the Ninth
Circuit for review of the FERCs orders on California refunds. As additional
FERC orders have been issued, further petitions for review have been filed by
potential refund payors, including IE, potential refund recipients and
governmental agencies. These cases have been consolidated before the Ninth
Circuit. Since the initiation of these cases, the Ninth Circuit has convened a
series of case management proceedings to organize these complex cases, while
identifying and severing discrete cases that can proceed to briefing and
decision and staying action on all of the other consolidated cases.
In
its October 2005 decision in the first of the severed cases, the Ninth Circuit
concluded that the FERC lacked refund authority over wholesale electrical
energy sales made by governmental entities and non-public utilities. In its
August 2006 decision in the second severed case, the Ninth Circuit ruled that
all transactions that occurred within the California Power Exchange (CalPX) and
the Cal ISO markets were proper subjects of the refund proceeding, refused to
expand the proceedings into the bilateral market, approved the refund effective
date as October 2, 2000, and required the FERC to consider claims that some
market participants had violated governing tariff obligations at an earlier
date than the refund effective date and expanded the scope of the refund
proceeding to include transactions within the CalPX and Cal ISO markets outside
the limited 24-hour spot market and energy exchange transactions. These latter
aspects of the decision exposed sellers to increased claims for potential
refunds.
In
2005, the FERC established a framework for sellers wanting to demonstrate that
the generally applicable FERC refund methodology interfered with the recovery
of costs. IE and IPC made such a cost filing but it was rejected by the FERC
in March 2006. IE and IPC requested rehearing of that rejection and that
request remains pending before the FERC. IE and IPC are unable to predict how
or when the FERC might rule on the request for rehearing, but its effect is
confined to the minority of market participants that opted not to join the
settlement described below. Accordingly, IE and IPC believe
this matter will not have a material adverse effect on their consolidated
financial positions, results of operations or cash flows.
On
February 17, 2006, IE and IPC jointly filed with the California Parties
(Pacific Gas & Electric Company, San Diego Gas & Electric Company,
Southern California Edison Company, the California Public Utilities Commission,
the California Electricity Oversight Board, the California Department of Water
Resources and the California Attorney General) an Offer of Settlement at the
FERC settling matters encompassed by the
California refund proceeding, as well as other FERC proceedings and
investigations relating to the western energy matters, including IEs and IPCs
cost filing and refund obligation. A number of other parties, representing a
small minority of potential refund claims, chose to opt out of the settlement.
Under the terms of the settlement, IE and IPC assigned $24.25 million of the
rights to accounts receivable from the Cal ISO and CalPX to the California
Parties to pay into an escrow account for refunds to settling parties. Amounts
from that escrow not used for settling parties and $1.5 million of the
remaining IE and IPC receivables that are to be retained by the CalPX are
available to fund, at least partially, payment of the claims of any non-settling
parties if they prevail in the remaining litigation of this matter. Any excess
funds remaining at the end of the case are to be returned to IPC and IE.
Approximately $10.25 million of the remaining IE and IPC receivables was paid
to IE and IPC under the settlement. In addition, the California Parties released
IE and IPC from other claims stemming from the western energy market
dysfunctions. The FERC approved the Offer of
Settlement on May 22, 2006.
On October 24, 2006, the Port of Seattle petitioned the Ninth
Circuit for review of the FERC orders approving the settlement. On October 25,
2007, the Ninth Circuit lifted the stay as to the Port of Seattles appeal
along with two other cases and severed the three cases from the remainder of
the consolidated cases. On December 2, 2008, the Ninth Circuit filed an order
dismissing the Port of Seattle petitions for review. That dismissal order is
now final.
55
Market Manipulation:
As part of the California refund proceeding discussed above and
the Pacific Northwest refund proceeding discussed below, the FERC issued an
order permitting discovery and the submission of evidence regarding market
manipulation by sellers during the western energy situation.
On June 25, 2003, the FERC ordered more than 50
entities that participated in the western wholesale power markets between
January 1, 2000, and June 20, 2001, including IPC, to show cause why certain
trading practices did not constitute gaming (gaming) or other forms of
proscribed market behavior in concert with another party (partnership) in
violation of the Cal ISO and CalPX Tariffs. In 2004, the FERC dismissed the partnership
show cause proceeding against IPC. The order dismissing IPC from the partnership
proceedings was not the subject of rehearing requests and is now final. Later
in 2004, the FERC approved a settlement of the gaming proceeding without
finding of wrongdoing by IPC. The Port of Seattle was the only party to appeal
the FERC orders approving the gaming settlement. On December
8, 2008, the Ninth Circuit issued an order dismissing that appeal. The
dismissal order is now final.
The
orders establishing the scope of the show cause proceedings are presently the
subject of review petitions in the Ninth Circuit. In addition to the two show
cause orders, on June 25, 2003, the FERC also issued an order instituting an
investigation of anomalous bidding behavior and practices in the western
wholesale markets for the time period May 1, 2000, through October 1, 2000, to
enable it to review evidence of economic withholding of generation. IPC, along
with more than 60 other market participants, responded to the FERC data
requests. The FERC terminated its investigations as to IPC on May 12, 2004.
Although California government agencies and California investor-owned utilities
have appealed the FERCs termination of this investigation as to IPC and more
than 30 other market participants, the claims regarding the conduct encompassed
by these investigations were released by these parties in the California refund
settlement discussed above. IE and IPC are unable to predict the outcome of
these matters, but believe that the releases govern any potential claims that
might arise and that this matter will not have a
material adverse effect on their consolidated financial positions, results of
operations or cash flows.
Pacific Northwest Refund:
On July 25, 2001, the FERC issued an order establishing a
proceeding separate from the California refund proceeding to determine whether
there may have been unjust and unreasonable charges for spot market sales in
the Pacific Northwest during the period December 25, 2000, through June 20,
2001, because
the spot market in the
Pacific Northwest was affected by the dysfunction in the California market. In late 2001, a FERC Administrative Law Judge concluded
that the contracts at issue were governed by the substantially more strict
Mobile-Sierra
standard of review rather than the just and reasonable standard, that the
Pacific Northwest spot markets were competitive and that refunds should not be
allowed. After the Judges recommendation was issued, the FERC reopened the
proceeding to allow the submission of additional evidence directly to the FERC
related to alleged manipulation of the power market by market participants. In
2003, the FERC terminated the proceeding and declined to order refunds.
Multiple parties filed petitions for review in the Ninth Circuit and in 2007
the Ninth Circuit issued an opinion, remanding to the FERC the orders that
declined to require refunds. The Ninth Circuits opinion instructed the FERC
to consider whether evidence of market manipulation would have altered the
agencys conclusions about refunds and directed the FERC to include sales to
the California Department of Water Resources proceeding. A number of parties
have sought rehearing of the Ninth Circuits decision. IE and IPC intend to
vigorously defend their positions in this proceeding, but are unable to predict
the outcome of this matter or estimate the impact it may have on their
consolidated financial positions, results of operations or cash flows.
In separate western energy proceedings, the Ninth Circuit issued
two decisions on December 19, 2006, regarding the FERCs decision not to
require repricing of certain long-term contracts. Those cases originated with
individual complaints against specified sellers that did not include IE or
IPC. The Ninth Circuit remanded to the FERC for additional consideration the
agencys use of restrictive standards of contract review. In its decisions,
the Ninth Circuit also questioned the validity of the FERCs administration of
its market-based rate regime. On June 26, 2008, the U.S. Supreme Court issued
a decision in one of these cases, Morgan Stanley Capital Group Inc. v. Public
Utility District No. 1 of Snohomish County (No. 06-1457) (Snohomish), and
revisited and clarified the
Mobile-Sierra
doctrine in the context of
fixed-rate, forward power contracts. At issue was whether, and under what
circumstances, the FERC could modify the rates in such contracts on the grounds
that there was a dysfunctional market at the time the contracts were executed.
In its decision, the Supreme Court disagreed with many of the conclusions
reached by the Ninth Circuit and upheld the application of the
Mobile-Sierra
doctrine even in cases in which it is alleged that the markets were
dysfunctional. The Supreme Court nonetheless directed the return of the case
to the FERC to (i) consider whether the challenged rates in the case
constituted an excessive burden on consumers either at the time the contracts
were formed or during the term of the contracts relative to the rates that
could have been obtained after elimination of the dysfunctional market and (ii)
clarify whether it found the evidence inadequate to support a claim that one of
the parties to a contract under consideration engaged in unlawful market
manipulation that altered the playing field for the particular contract
negotiations - that is, whether there was a causal connection between allegedly
unlawful activity and the contract rate. On November 3, 2008, the Ninth
Circuit vacated its earlier decision and remanded the case to the FERC for
further proceedings consistent with the Supreme Courts decision. On December
18, 2008, the FERC issued its order on remand, establishing settlement
proceedings and paper hearing procedures to supplement the record and permit it
to respond to the questions specified by the Supreme Court.
56
This decision is expected to have general implications for
contracts in the wholesale electric markets regulated by the FERC, and particular
implications for forward power contracts in such markets. The Snohomish
decision upholds the application of the
Mobile-Sierra
doctrine to fixed-rate,
forward power contracts even in allegedly dysfunctional markets.
IPC and IE have
asserted the
Mobile-Sierra
doctrine in the Pacific Northwest proceeding,
involving spot market contracts in an allegedly dysfunctional market. IDACORP,
IPC and IE are unable to predict how the FERC will rule on Snohomish on remand
or how this decision will affect the outcome of the Pacific Northwest
proceeding.
Sierra Club Lawsuit-Bridger:
In February 2007, the Sierra Club and
the Wyoming Outdoor Council filed a complaint against PacifiCorp in federal
district court in Cheyenne, Wyoming alleging violations of air quality opacity
standards at the Jim Bridger coal-fired plant in Sweetwater County, Wyoming.
Opacity is an indication of the amount of light obscured by the flue gas of a
power plant. A formal answer to the complaint was filed by PacifiCorp on April
2, 2007, in which PacifiCorp denied almost all of the allegations and asserted
a number of affirmative defenses. IPC is not a party to this proceeding but
has a one-third ownership interest in the plant. PacifiCorp owns a two-thirds
interest in and is the operator of the plant. The complaint alleges thousands
of opacity permit limit violations by PacifiCorp and seeks a declaration that
PacifiCorp has violated opacity limits, a permanent injunction ordering
PacifiCorp to comply with such limits, civil penalties of up to $32,500 per day
per violation, and reimbursement of the plaintiffs costs of litigation,
including reasonable attorney fees.
Discovery
in the matter was completed on October 15, 2007. Also in October 2007, the
plaintiffs and defendant filed cross-motions for summary judgment on the
alleged opacity compliance status of the plant. The court has not yet ruled on
these motions. On July 7, 2008, the plaintiffs filed a motion requesting the
court to schedule a date for oral argument on the pending motions for summary
judgment. On July 17, 2008, PacifiCorp filed an opposition to plaintiffs
motion based on the courts order on Initial Pretrial Conference, which stated
that dispositive motions will be decided on the briefs without oral argument.
On November 19, 2008, the plaintiffs filed a motion to refer the pending
motions for summary judgment to magistrate judge for recommendation decision.
On December 2, 2008, PacifiCorp filed an opposition to plaintiffs motion. The
court has yet to rule on either motion filed by the plaintiffs. IPC continues
to monitor the status of this matter but is unable to predict the outcome of
this matter or estimate the impact it may have on its consolidated financial
position, results of operations or cash flows.
Sierra Club Lawsuit Boardman:
On September 30, 2008, Sierra Club and
four other non-profit corporations filed a complaint against Portland General
Electric Company (PGE) in the U.S. District Court for the District of Oregon
alleging opacity permit limit violations at the Boardman coal-fired power plant
located in Morrow County, Oregon. The complaint also alleges violations of the
Clean Air Act, related federal regulations and the Oregon State Implementation
Plan relating to PGEs construction and operation of the plant. The complaint
seeks a declaration that PGE has violated opacity limits, a permanent
injunction ordering PGE to comply with such limits, injunctive relief requiring
PGE to remediate alleged environmental damage and ongoing impacts, civil penalties
of up to $32,500 per day per violation and the plaintiffs cost of litigation,
including reasonable attorney fees. IPC is not a party to this proceeding but
has a 10 percent ownership interest in the Boardman plant. PGE owns 65 percent
and is the operator of the plant.
On December 5, 2008, PGE filed a motion to
dismiss nine of the twelve claims asserted by plaintiffs in their complaint,
alleging among other arguments that certain claims are barred by the statute of
limitations or fail to state a claim upon which the court can grant relief.
Plaintiffs response to the motion is due March 6, 2009, and PGEs reply is due
April 3, 2009. IPC intends to monitor the status of this matter but is unable
to predict its outcome or what effect this matter may have on its consolidated
financial position, results of operations or cash flows.
Oregon Trail Heights Fire:
On August 25, 2008, a fire ignited beneath an IPC
distribution line in Boise, Idaho. It was fanned by high winds and spread
rapidly, resulting in one death, the destruction of 10 homes and damage or
alleged fire related losses to approximately 30 others. Following the
investigation, the Boise Fire Department determined that the fire was linked to
a piece of line hardware on one of IPCs distribution poles and that high winds
contributed to the fire and its resultant damage.
57
IPC has received notice of claims from a number of the homeowners
and their insurers and is continuing its investigation of these claims. IPC is
insured up to policy limits against liability for claims in excess of its self-insured
retention. IPC has accrued a reserve for any loss that is probable and
reasonably estimable, including insurance deductibles, and believes this matter
will not have a material adverse effect on its consolidated financial position,
results of operations or cash flows.
Other
Legal Proceedings:
From time to time
IDACORP and IPC are parties to legal claims, actions and complaints in addition
to those discussed above and in Note 7 to IDACORPs and IPCs Consolidated
Financial Statements. Although they will vigorously defend against them, they
are unable to predict with certainty whether or not they will ultimately be
successful. However, based on the companies evaluation, they believe that the
resolution of these matters, taking into account existing reserves, will not
have a material adverse effect on IDACORPs or IPCs consolidated financial
positions, results of operations or cash flows.
Environmental Issues
Idaho Water Management
Issues:
Since 2000 Idaho has
experienced below normal precipitation and stream flows which have exacerbated
a developing water shortage in Idaho, manifested by a number of water issues
including declining Snake River base flows and declining levels in the Eastern
Snake Plain Aquifer (ESPA), a large underground aquifer that has been estimated
to hold between 200 - 300 million acre feet (maf) of water. These issues are
of interest to IPC because of their potential impacts on generation at IPCs
hydroelectric projects.
As
a result of declines in river flows, in 2003 several surface water users filed
delivery calls with the IDWR, demanding that it manage ground water withdrawals
pursuant to the prior appropriation doctrine of first in time is first in
right and curtail junior ground water rights that are depleting the aquifer
and affecting flows to senior surface water rights. These delivery calls have
resulted in several administrative actions before the IDWR to enforce senior
water rights as well as judicial actions before the state court challenging the
constitutionality of state regulations used by the IDWR to conjunctively
administer ground and surface water rights. Because IPC holds water rights
that are dependent on the Snake River, spring flows and the overall condition
of the ESPA, IPC continues to monitor and participate in these actions, as
necessary, to protect its water rights.
One such action relates to
the Milner hydroelectric project which is owned by the North Side Canal Company
(NSCC) and the Twin Falls Canal Company (TFCC). In 1990, IPC entered into a
contract with the owners relating to the construction and operation of a power
plant at Milner Dam. To facilitate the rehabilitation of the Milner dam, IPC
and NSCC/TFCC jointly filed for, and were issued, a FERC license for a
hydroelectric project at the dam. IPC constructed and operates the project,
and participated in the financing of the dam rehabilitation. NSCC and TFCC
filed an application for a water right for the project and were issued an
approved water right permit by the IDWR in 1993. The permit contained a
condition subordinating the water right to all consumptive beneficial uses of
water, other than hydropower and groundwater recharge. Since the issuance of
the permit, the NSCC and TFCC have delivered water to and IPC has operated the
Milner project under the FERC license. On October 20, 2008, the IDWR issued a
water right license for the project that changed the subordination condition in
the permit by deleting the reference to groundwater recharge, thereby
subordinating the water right to groundwater recharge. On November 4, 2008,
NSCC and TFCC filed a petition for hearing with IDWR contesting the change in
the subordination condition. The IDWR has appointed a hearing officer and
several parties have petitioned to intervene in the case. A hearing date has
not been set on the petition. IPC is monitoring but is unable to predict the
outcome of the administrative action.
58
IPC, together with other
interested water users and state interests, also continues to explore and
encourage the development of a long-term management plan that will protect the
ESPA and the Snake River from further depletion. On February 14, 2007, the
Idaho Water Resource Board (IWRB) presented the framework for an ESPA management
plan to the Idaho Legislature recommending the development of a Comprehensive
Aquifer Management Plan (CAMP). The proposed goal of the CAMP is to sustain
the economic viability and social and environmental health of the ESPA by
adaptively managing a balance between water use and supplies. Through House
Concurrent Resolution 28 and House Bill 320, the 2007 Idaho Legislature
appropriated funds and directed the IWRB to proceed with the development of the
CAMP. Pursuant to the IWRB recommendation in the CAMP Framework, an advisory
committee has been established to make recommendations to the IWRB on the
development of the CAMP. IPC sits on the CAMP advisory committee. In December
2008, the CAMP Advisory Committee submitted a draft CAMP to the IWRB for
consideration. The IWRB took public comments on the draft CAMP and by
resolution dated January 29, 2009 adopted the CAMP and submitted it to the
Idaho Legislature for approval. IPC submitted comments to the IWRB supporting
the CAMP. If the Legislature approves and funds implementation of the CAMP,
IPC will serve on the CAMP Implementation Committee and assist with the
development and implementation of CAMP projects that provide benefits to Snake
River water quality and flows through the maintenance and enhancement of
aquifer and spring levels.
IPC is also engaged in the
Snake River Basin Adjudication (SRBA), a general stream adjudication, commenced
in 1987, to define the nature and extent of water rights in the Snake River
basin in Idaho, including the water rights of IPC. The initiation of the SRBA
resulted from the Swan Falls Agreement, an agreement entered into by IPC and
the Governor and Attorney General of Idaho in October 1984 to resolve
litigation relating to IPCs water rights at its Swan Falls project. IPC has
filed claims to its water rights for hydropower and other uses in the SRBA.
Other water users in the basin have also filed claims to water rights. Parties
to the SRBA may file objections to water right claims that adversely affect or
injure their claimed water rights and the Idaho District Court for the Fifth
Judicial District, which has jurisdiction over SRBA matters, then adjudicates
the claims and objections and enters a decree defining a partys water rights.
IPC has filed claims for all of its hydropower water rights in the SRBA, is
actively protecting those water rights, and is objecting to claims that may
potentially injure or affect those water rights. One such claim involves a
notice of claim of ownership filed on December 22, 2006, by the State of Idaho,
for a portion of the water rights held by IPC that are subject to the Swan
Falls Agreement.
On May 10, 2007, in order to
protect its claims and the availability of water for power purposes at its
facilities, and in response to the claim of ownership filed by the State of
Idaho, IPC filed a complaint and petition for declaratory and injunctive relief
regarding the status and nature of IPCs water rights and the respective rights
and responsibilities of the parties under the Swan Falls Agreement. The
complaint was filed in the Idaho District Court for the Fifth Judicial
District, the court with jurisdiction over the SRBA, against the State of
Idaho, the Governor, the Attorney General, the IDWR and the Director of the
IDWR.
In conjunction with the
filing of the complaint and petition, IPC filed motions with the court to stay
all pending proceedings involving the water rights of IPC and to consolidate
those proceedings into a single action where all issues relating to the Swan Falls
Agreement can be determined.
IPC alleged in the complaint,
among other things, that contrary to the parties belief at the time the Swan
Falls Agreement was entered into in 1984, the Snake River basin above Swan
Falls was over-appropriated and as a consequence there was not in 1984, and
there currently is not, water available for new upstream uses over and above
the minimum flows established by the Swan Falls Agreement; that because of this
mutual mistake of fact relating to the over-appropriation of the basin, the
Swan Falls Agreement should be reformed; that the states December 22, 2006,
claim of ownership to IPCs water rights should be denied; and that the Swan
Falls Agreement did not subordinate IPCs water rights to aquifer recharge.
On April 18, 2008, the court
issued a Memorandum Decision and Order on Cross-Motions for Summary Judgment
upholding the Swan Falls Agreement. Under the Swan Falls Agreement, water
rights in excess of the minimum flows established by the agreement are held in
trust by the State of Idaho for the use and benefit of IPC and the people of
the State of Idaho. Water above these minimum flows is available for
subsequent consumptive beneficial uses that are approved in accordance with
state law. The court further held that to the extent that the state is not
meeting the minimum flows or it is anticipated that the minimum flows will not
be met, IPCs water rights that are held in trust are not available for
subsequent appropriations and that any appropriations already in place may be
subject to curtailment in order to meet the minimum flows. The court found
that it was not necessary to address the issue of mutual mistake of fact
relating to the over-appropriation of the basin because it found that it was
water rights that were the subject of the trust arrangement and not the water
itself. The court also stated that issues relating to water availability
relate to the administration of water rights and should be addressed, as
necessary, in an administrative action before the IDWR.
59
The court did not decide the
issue of whether the Swan Falls Agreement subordinated IPCs water rights to
groundwater recharge. The State of Idaho and IPC filed summary judgment
motions on the recharge issue and completed briefing on the issue. The court
held a hearing on December 4, 2008 on the summary judgment motions. After
argument, the court took the matter under advisement. IPC is unable to predict
how the court will rule on the issue of whether the Swan Falls Agreement
subordinated IPCs water rights to groundwater recharge. Based upon recent
developments, however, resolution of that issue is not expected to have a
significant effect on the availability of water to IPCs hydropower
facilities. IPC is cooperating with the State of Idaho and other water users
through an advisory committee in the development of the CAMP to protect and
enhance water levels in the ESPA and the connected Snake River. While many
CAMP committee members had early expectations that groundwater recharge would
be a significant component of the plan and believe that groundwater recharge is
a very high-priority issue, further study and review has revealed that
significant groundwater recharge is not feasible due to the complex
hydrogeology of the ESPA, the lack of infrastructure, and the requirement of
compliance with water quality and other environmental standards. IPC is
currently engaged in a three to five year pilot study, in cooperation with IDWR
and various water users, to determine the temporal and spatial impacts and/or
benefits of recharging a maximum of 30,000 acre-feet of water downstream of
American Falls Reservoir on the ESPA and the Snake River.
IPC
has also filed an action in federal court against the United States Bureau of
Reclamation to enforce a contract right for delivery of water to its hydropower
projects on the Snake River. In 1923, IPC and the United States entered into a
contract that facilitated the development of the American Falls Reservoir by
the United States on the Snake River in southeast Idaho. This 1923 contract
entitles IPC to 45,000 acre-feet of primary storage capacity in the reservoir
and 255,000 acre-feet of secondary storage that was to be available to IPC
between October 1 of any year and June 10 of the following year as necessary to
maintain specified flows at IPCs Twin Falls power plant below Milner Dam. IPC
believes that the United States has failed to deliver this secondary storage,
at the specified flows, since 2001. As a result, IPC filed an action in the
U.S. District Court of Federal Claims in Washington, D.C. on October 15, 2007
to recover damages from the United States for the lost generation resulting
from the reduced flows. On September 30, 2008, IPC filed an amended complaint
in which IPC seeks, in addition to damages for breach of the 1923 contract, a
prospective declaration of contractual rights so as to prevent the United
States from continued failure to fulfill its contractual and fiduciary duties
to IPC. On October 2, 2008, the court set a discovery schedule requiring that
discovery be completed and pre-trial motions filed by October 1, 2009. The
court will then set the matter for trial. IPC is unable to predict the outcome
of this action.
Air Quality Issues
National Ambient Air Quality Standards
: In July 1997, the EPA adopted new NAAQS for ozone
(8-hour ozone standard) and fine particulate matter of less than 2.5
micrometers in diameter (PM2.5 standard). Regulations promulgated by the EPA
to implement these NAAQS have been challenged and portions have been remanded
back to the EPA for reconsideration. The EPA and state efforts to implement
the NAAQS adopted in 1997 are ongoing. For example, on May 8, 2008, the EPA
issued a final rule implementing the NSR program for emissions of PM2.5. This
rule establishes the framework for requiring preconstruction permit review of
PM2.5 emissions from new or modified major stationary sources such as the power
plants owned by IPC. All of the counties in Idaho, Oregon, Nevada and Wyoming
where IPCs power plants operate currently are designated as meeting attainment
with 8-hour ozone and PM2.5 standards adopted by the EPA in 1997.
60
In
December 2006, the EPA revised the NAAQS for PM2.5. This new standard has been
challenged by a number of groups in the U.S. Court of Appeals for the D.C.
Circuit. On December 22, 2008, the EPA designated areas as attainment,
nonattainment and unclassifiable for the revised PM2.5 NAAQS. All of the
counties in Idaho, Nevada, Oregon and Wyoming where IPCs power plants operate
were designated as meeting attainment with the revised PM2.5 NAAQS. The impact
of the new standard will not be known until the judicial appeals are completed
and the associated regulatory programs are promulgated and implemented.
In
March 2008, the EPA promulgated a final regulation which revised the 8-hour
ozone NAAQS. For the primary (health-based) standard, the EPA lowered the
standard from 0.08 parts per million (ppm) to 0.075 ppm. Under the EPAs final
rule, states must make recommendations to the EPA by March 2009 for areas to be
designated attainment, nonattainment and unclassifiable. Several states,
environmental organizations and private parties have challenged the EPAs
regulation. The impact of the revised standard will not be known until data is
collected, analyzed, and released to the public, the judicial appeals are
completed and the associated regulatory programs are promulgated and
implemented. The EPA is expected to make final air quality designations by
March 2010.
Clean
Air Mercury Rule:
The CAMR, issued
by the EPA on March 15, 2005, limits mercury emissions from new and existing
coal-fired power plants and creates a market-based cap-and-trade program that
will permanently cap utility mercury emissions. On February 8, 2008, the U.S.
Court of Appeals for the D.C. Circuit vacated the CAMR and remanded it back to
the EPA for reconsideration consistent with the courts interpretation of the
Clean Air Act. The EPA and an industry trade association subsequently filed
requests with the U.S. Supreme Court to review the D.C. Circuits decision. On
February 6, 2009, the EPA filed a motion with the Court to withdraw its request
and on February 23, 2009, the Court denied the industry trade associations
request. It is possible that the decision to remand the CAMR back to the EPA
for reconsideration could result in the EPA developing maximum achievable
control technology standards for mercury emissions from coal-fired power
plants. It also is possible that the courts decision could result in changes
to the mercury reductions required by the states in which IPC has partial
ownership interests in coal-fired power plants. In 2008, the State of Oregon
adopted a mercury rule requiring Boardman to reduce mercury emissions by 90
percent or meet an emission rate of 0.6 lbs/trillion BTU by July 2012. The
state is now considering allowing up to a two year extension. IPC continues to
monitor Wyoming and Nevada actions on mercury emissions. IPC is unable to
predict at this time what actions the EPA or the other states may take in
response to the courts decision or any resulting impacts to IPC.
Clean
Air Interstate Rule (CAIR):
The
CAIR, issued by the EPA on March 10, 2005, establishes a permanent cap on
emissions of NOx and SO
2
primarily from power plants in 28 eastern
states and the District of Columbia. While the CAIR does not apply to any of
the power plants owned by IPC, it is an important rule for the electric utility
industry because of its broad applicability and its close relation to the
CAMR. The CAIR was subjected to legal challenges by a number of states,
industry, and environmental groups. On July 11, 2008, the U.S. Court of
Appeals for the D.C. Circuit vacated the CAIR. On December 23, 2008, the U.S.
Court of Appeals for the D.C. Circuit issued an order reinstating the CAIR for
a temporary period of time until the EPA can address the legal defects
identified in the courts July 11, 2008 decision. While reinstating the CAIR
will temporarily allow the CAIR to remain in effect, the full impacts of this
court ruling will not be fully understood until any future appeals are resolved
or until such time as the EPA and/or individual states respond to the courts
ruling.
Regional
Haze Best Available Retrofit Technology:
In accordance with federal regional haze rules, the Wyoming Department of Environmental Quality (WDEQ) and
the Oregon Department of Environmental Quality (ODEQ) are conducting an
assessment of emission sources pursuant to a RH BART process. Coal-fired
utility boilers are subject to RH BART if they were built between 1962 and 1977
and affect any Class I areas. This includes all four units at the Jim Bridger
plant and the Boardman plant. The two units at the Valmy plant were constructed
after 1977 and are not subject to the federal regional haze rule. The states
are also working on reasonable progress towards a long term strategy to reduce
regional haze in Class I areas to natural conditions by the year 2064.
61
PacifiCorp
submitted the RH BART application for the Jim Bridger plant in January 2007.
The WDEQ is still evaluating the application and will request public comment.
If there are no appeals to the application, the WDEQ will prepare a State
Implementation Plan (SIP) to present to the Wyoming Environmental Quality
Council for approval and submittal to the EPA. The plant is already in the
process of installing low NOx burners and scrubber upgrades that are proposed
in the application. Over the next four years, IPCs share of these upgrade
expenditures are currently estimated at $23.9 million, with a total upgrade
expenditures estimated at $34.3 million. IPC and Pacificorp have been meeting
with the WDEQ to discuss the potential for additional RH BART and reasonable
progress requirements for the Jim Bridger plant. It is possible that
additional capital expenditures would be required to satisfy these additional
requirements, however, IPC is not able to quantify these expenditures at this
time.
On August 20, 2008, the ODEQ issued a draft RH BART proposal
for the Boardman plant that, if adopted, would require the installation of
significant emission controls beginning in 2011. The pollution control
requirements proposed by the ODEQ for RH BART and the long term strategy are
estimated to cost approximately $59 million (IPC share). IPCs share of the
cost to comply with the proposal would be approximately $38 million by 2014
with an additional $21 million by 2017.
Installation
of this pollution control equipment would require extended maintenance
outages. On December 17, 2008, PGE proposed amendments to the ODEQ proposal,
including an alternative of decommissioning the coal-fired unit at the Boardman
plant subject to RH BART by the end of 2020 in lieu of installing SO
2
emissions controls by 2014. PGE also proposed including an alternative that
would allow it to decommission the same unit in 2029 in lieu of installing
additional NOx emission controls by 2017. The ODEQ is expected to finalize its
RH BART determination in April 2009. PGE has indicated that the costs required
pursuant to RH BART, together with any taxes, emission fees and other costs
that may be imposed under future laws related to climate change could require
an investment in excess of what the plant can economically support.
Greenhouse
Gases:
IPC continues to monitor and
evaluate national, regional, or state greenhouse gas (GHG) proposals and
programs as well as judicial decisions that would affect electric utilities.
At the federal level, numerous GHG bills were introduced in the U.S. Senate and
House of Representatives during 2008, including the Climate Security Act of
2008 (S. 3036), which was debated on the Senate floor in June 2008 but not
voted on. The new administration has requested the development of new federal
proposals by Congress and the EPA that could lead to the adoption of a
mandatory program to reduce GHG emissions through, for example, an economy-wide
cap-and-trade program, a carbon tax or a combination of both. Debate continues
on the direction, scope and timing of U.S. policy on the regulation of GHG
emissions.
The
states of Arizona, California, Montana, New Mexico, Oregon, Utah and
Washington, along with the provinces of British Columbia, Manitoba, Ontario and
Quebec, Canada, have formed the Western Regional Climate Action Initiative
(WCI). On August 22, 2007, the WCI partners released their regional goal to
collectively reduce GHGs 15 percent below 2005 levels by 2020. The WCI
partners have agreed to design a regional market-based multi-sector mechanism
to help achieve the goal. On September 23, 2008, the WCI issued its design
recommendations to reduce GHG emissions from the electricity generating
industry. The recommendations by the WCI include a cap-and-trade program for
the electricity generating industry which would apply to in-state electricity
generators and the first jurisdictional deliverer of electricity into a WCI
partner state. The states of Idaho, Nevada and Wyoming have not joined the
WCI. It is possible that these states in which IPC owns fossil fuel-fired
electricity generation facilities or sells electricity could join the WCI in
the future.
Oregon
passed the Global Warming Integration Act in June 2007, which among other
things, established the Oregon Global Warming Commission and state-wide GHG
emission reduction goals. On May 3, 2007, Washington enacted legislation
creating GHG emission reduction and clean energy goals. Emission performance
standards affecting electric utility contracts and power plant projects are
included. On September 27, 2006, Californias governor signed into law the
Global Warming Solutions Act of 2006 (AB32), which established GHG reduction
goals and a framework for achieving these goals. On December 11, 2008, the
California Air Resources Board (CARB) approved a scoping plan that provides a
framework for implementing a cap-and-trade program for the electricity
generating sector pursuant to AB 32. The scoping plan subjects the electricity
generating sector, including electricity imports from out-of-state generation,
to an emissions cap beginning in 2012. Based on the requirements of AB32,
regulations to implement that cap-and-trade program need to be developed by
January 1, 2011. Other regional and state GHG initiatives appear likely,
although the states of Idaho, Nevada, and Wyoming have not adopted GHG
legislation.
62
In
April 2007, the U.S. Supreme Court issued its decision in
Massachusetts v.
Environmental Protection Agency
, a case involving the EPAs authority to
regulate carbon dioxide (CO
2
)
emissions from motor
vehicles under the Clean Air Act. The Court held that, with respect to mobile
sources, the EPA has authority under the Clean Air Act to regulate CO
2
as a pollutant and that the EPA has a duty to determine whether CO
2
emissions contribute to climate change or provide some reasonable explanation
why it will not exercise its authority. The decision, combined with stimulus
from state, regional and federal legislative and regulatory initiatives,
judicial decisions and other factors may lead to a determination by the EPA to
regulate CO
2
emissions from stationary sources, including
electricity generators. On March 27, 2008, the EPA announced that it would
issue an advanced notice of proposed rulemaking (ANPR) to solicit public input
on whether GHG emissions should be regulated from both mobile and stationary
sources under the Clean Air Act. On June 26, 2008, the U.S. Court of Appeals
for the D.C. Circuit denied the request of Attorneys General from 17 states to
require the EPA to rule within 60 days on whether CO
2
is a danger to
public health or welfare and, therefore, subject to regulation under the Clean
Air Act. On July 11, 2008, the EPA released its ANPR inviting public comment
on the benefits and ramifications of regulating GHGs under the Clean Air Act.
Environmental groups contend that CO
2
is subject to regulation under
the Clean Air Act and that preconstruction permitting requirements must be
applied to CO
2
emissions prior to the construction of new power
plants or the modification of existing power plants. Specifically, in
In re
Deseret Power Electric Cooperative
, PSD Appeal No. 07-03, the Sierra Club
argued to the EPAs Environmental Appeals Board (EAB) that Best Available
Control Technology (BACT) is required to reduce CO
2
emissions from
coal-fired power plants prior to the issuance of a preconstruction permit under
the Clean Air Acts NSR program. On November 13, 2008 the EAB remanded the
appeal back to EPA Region 8 to reconsider whether a CO
2
BACT limit
should be imposed in the permit. EPA Region 8 has not yet responded to the EABs
remand. On December 18, 2008, however, the EPA Administrator issued an
interpretive memorandum stating that CO
2
is not a regulated
pollutant under the EPAs NSR program. Environmental groups filed a request
with the EPA to reconsider the conclusions reached in the December 18, 2008
interpretive memorandum, which was granted by the EPA on February 17, 2009.
Information about IDACORPs CO
2
emissions
is included in the report
Benchmarking Air Emissions of the 100 Largest
Electric Power Producers in the United States 2008.
This report was
released by the Ceres Investor Coalition, the Natural Resources Defense
Council, the Public Service Enterprise Group Inc. and PG&E Corporation in
May 2008. The report lists IDACORPs 2006 CO
2
emissions at 937.9
lbs/MWh, as compared to the reported average for the 100 largest power
producers of 1,343.6 lbs/MWh. IPCs CO
2
emissions on an lbs/MWh
basis fluctuate with the amount of hydroelectric generation.
In 2008, IPCs CO
2
emissions from IPCs
electric power generation facilities were approximately 7.9 million tons, or
1,097 lbs/MWh (adjusted to reflect IPCs partial ownership in the Jim Bridger,
Boardman and Valmy facilities). The EPA is developing a mandatory GHG
reporting rule that would require reporting of GHG emissions from large
sources. The emission information collected would be used by the EPA to
develop comprehensive and accurate data relevant to future climate policy
decisions, including potential future regulation of GHG emissions. The final
reporting rule is scheduled to be finalized by June 2009.
IPC will continue to monitor
and evaluate federal, regional or state GHG programs and proposals and judicial
and administrative decisions that would affect electric utilities as these
programs could increase IPCs capital expenditures and operating costs and
reduce earnings and cash flows. At this time, however, IPC is unable to
estimate the costs of compliance with potential national, regional or state GHG
emissions reduction legislation, regulations or initiatives because these
programs and proposals are in the early stages of development and any final
program or programs, if adopted, could vary from current proposals. The
majority of current national, regional and state initiatives regarding GHG
emissions contemplate market-based compliance programs. A determination by the
EPA to regulate GHG emissions under the Clean Air Act could result in GHG
emission limits on stationary sources that do not provide market-based
compliance options such as cap-and-trade programs or emission offsets. Such a
program could raise uncertainty about the future viability of fossil fuels,
specifically coal as an economical energy source for new and existing electric
generation facilities because new technologies for reducing CO
2
emissions from coal, including carbon capture and storage, are still in the
development stage and are not yet proven. The actual impact of future
regulation of GHG emissions on IPCs financial performance will depend on a
number of factors, including but not limited to: (1) the geographic scope of
any legislation or regulation (e.g., federal, regional, state); (2) the
enactment date of the legislation or regulation and the compliance deadlines; (3)
the type of any legislation or regulation (e.g., cap-and-trade, carbon tax, GHG
emission limits); (4) the level of GHG reductions required and the year
selected as a baseline for determining the amount or percentage of mandated GHG
reductions; (5) the extent to which market-based compliance options are
available; (6) the extent to which a facility would be entitled to receive GHG
emissions allowances without having to purchase them in an auction or on the
open market and the price and availability of offsets in the secondary market
and (7) the availability and cost of carbon control technology.
63
As part of IPCs resource planning protocol, the IRP process
considers potential GHG emissions regulation and other environmental factors
when evaluating potential portfolios.
The
2006 IRP included a risk analysis of the costs associated with the regulation
of CO
2
emissions by analyzing low, expected and high cases of $0,
$14 and $50 respectively, per ton of CO
2
emitted. Environmental impacts have been and will continue to be
integral components of IPCs resource decisions.
Due
to escalating construction costs, potential permitting issues, and continued
uncertainty surrounding future GHG laws and regulations, IPC has determined
that coal-fired generation is not the best technology to meet its resource
needs in 2013. IPC has shifted its focus to the development of a combined-cycle
natural gas-fired resource located closer to its load center in southern
Idaho. Also, IPC added 101 MW of contracted wind generation in December 2007
bringing IPCs total to 121 MW. Another 69 MW of contracted wind generation is
under construction. IPC has added 13 MW of geothermal generation. Additional
wind and geothermal generation is anticipated through CSPP and RFP-driven
contracts.
Climate
Change:
IPCs substantial
hydroelectric generation resources neither burn nor consume fossil fuels to
produce electric energy to meet the needs of its customers. Given the debate
concerning climate change, consensus is growing that broad steps should be
taken in all sectors of the nations economy to carefully consider ways of
limiting and/or reducing greenhouse gas emissions and mitigating climate change
impacts while still providing necessary services in a cost-effective manner.
IPC intends to continue to add renewable resources to its resource portfolio
and will continue to monitor the climate change debate, current climate change
research, and recently enacted as well as proposed legislation to identify the
potential impacts of global climate change on all aspects of its business.
Long-term climate change could significantly affect IPCs business in a variety
of ways, including but not limited to, the following: (a) changes in
temperature, precipitation and snow pack conditions could affect customer
demand and the amount and timing of hydroelectric generation and extreme
weather events could increase service interruptions, outages, and maintenance
costs; and (b) legislative and/or regulatory developments related to climate
change could affect plans and operations in various ways including placing
restrictions on the construction of new generation resources, the expansion of
existing resources, or the operation of generation resources in general. IPC
cannot, however, quantify the potential impact of climate change on its
business at this time.
Renewable
Portfolio Standards:
IPCs
operations in Oregon will be required to comply with a ten percent renewable
energy portfolio standard beginning in 2025. The new federal administration
has called on Congress to adopt a federal renewable energy portfolio standard
and it is possible that Idaho and other states in which IPC operates or sells
power could adopt renewable energy portfolio standards in the future. New
state or federal renewable energy portfolio standards could increase capital
expenditures and operating costs and reduce earnings and cash flows.
New
Source Review:
EPA Region 8 began
reviewing PacifiCorp operations, including the Jim Bridger plant (of which IPC
is a one-third owner) for compliance with NSR and New Source Performance
Standards (NSPS) through a Clean Air Act Section 114 information request sent
in May 2003. PacifiCorp completed its phased response to the Section 114
request in February 2004 with the submission of documents to the EPA relating
to historical activities at Bridger and other PacifiCorp power plants. A
number of utilities that have also been the subject of EPA NSR information
requests have engaged in settlement negotiations with the EPA to resolve
allegations of NSR and NSPS noncompliance. Prior settlements reached between
the EPA and utility companies around the country to resolve these issues have
resulted in commitments by the utility companies to install additional
pollution control equipment and to pay civil penalties. Negotiations are
continuing between the EPA and PacifiCorp on this issue. IPC cannot predict
the outcome of this matter at this time.
Endangered
Species
64
On
September 5, 2007, the species of snail that had been listed as the Idaho
Springsnail was delisted by the USFWS. The delisting decision was based on
recent studies that indicated the species was synonymous with another common
species. On December 21, 2006, IPC and the Governor of Idaho submitted a
petition to the USFWS to de-list the threatened Bliss Rapids snail. The
petition was supported with data collected by IPC over the past 14 years. The
snail, which lives throughout the middle Snake River, springs, and tributaries
between Niagara Springs and King Hill, was listed as threatened under the
Endangered Species Act in 1992. As of December 31, 2008, no decision on the
delisting petition had been issued by the USFWS.
Pursuant to FERC License 1971, IPC owns and finances
the operation of anadromous fish hatcheries and related facilities to mitigate
the effects of its hydroelectric dams on fish populations. In connection with
its fish facilities, IPC sponsors ongoing programs for the control of fish
disease, improvement of fish production, and evaluation of hatchery
performance. IPCs anadromous fish facilities at Hells Canyon, Oxbow, Rapid
River, Pahsimeroi and Niagara Springs continue to be operated by the Idaho
Department of Fish and Game. At December 31, 2008, the investment in these
facilities was $24 million and the annual cost
of operation was $4 million.
OTHER MATTERS:
Southwest Intertie Project
(SWIP)
Adopted Accounting
Pronouncements
SFAS 159:
IDACORP and IPC adopted the provisions of SFAS 159,
The
Fair Value Option for Financial Assets and Financial Liabilities - Including an
Amendment of FASB Statement 115
(SFAS 159) on January 1, 2008. SFAS 159
permits an entity to choose to measure many financial instruments and certain
other items at fair value. Most of the provisions in SFAS 159 are elective;
however, the amendment to SFAS 115, Accounting for Certain Investments in Debt
and Equity Securities, applies to all entities with available-for-sale and
trading securities. IDACORP and IPC did not elect the fair value option for
any existing eligible items, thus the adoption of SFAS 159 did not have a
material effect on IDACORPs or IPCs consolidated financial statements.
FSP
FIN 39-1:
IDACORP and IPC adopted
FASB Staff Position FIN 39-1 (FSP FIN 39-1),
Amendment of FASB
Interpretation No. 39
(FIN 39) on January 1, 2008. FSP FIN 39-1 modifies
FIN 39,
Offsetting of Amounts Related to Certain Contracts
, and permits
reporting entities to offset receivables or payables recognized upon payment or
receipt of cash collateral against fair value amounts recognized for derivative
instruments that have been offset under a master netting arrangement. IDACORP
and IPC have elected to offset these positions, which resulted in an immaterial
net decrease to total assets and liabilities at December 31, 2008.
EITF Issue No. 06-11:
IDACORP and IPC adopted Emerging Issues Task Force
Issue No. 06-11,
Accounting for Income Tax Benefits of Dividends on Share-Based
Payment Awards
(EITF 06-11) on January 1, 2008. EITF 06-11 requires income
tax benefits from dividends or dividend equivalents that are charged to
retained earnings and are paid to employees for equity classified awards and
outstanding equity share options to be recognized as an increase in additional
paid-in capital and to be included in the pool of excess tax benefits available
to absorb potential future tax deficiencies on share-based payment awards. The
adoption of EITF 06-11 did not have a material impact on IDACORPs or IPCs
consolidated financial statements.
65
New Accounting
Pronouncements
Inflation
The Bonneville Power Administration Residential Exchange Program:
The Pacific Northwest Electric Power Planning and
Conservation Act of 1980, through the Residential Exchange Program, has
provided access to the benefits of low-cost federal hydroelectric power to
residential and small farm customers of the regions investor-owned utilities
(IOUs). The program is administered by the Bonneville Power Administration
(BPA). Pursuant to agreements between the BPA and IPC, benefits from the BPA
were passed through to IPCs Idaho and Oregon residential and small farm
customers in the form of electricity bill credits.
The transmission projects discussed below will be used both by wholesale
transmission customers and to serve native load consistent with IPCs OATT.
These facilities will be subject to both the FERC and state public utility
commission regulation and ratemaking policies.
As mandated by the enactment of PURPA
and the adoption of avoided cost rates by the IPUC and the OPUC, IPC has
entered into contracts for the purchase of energy from a number of private
developers. Under these contracts, IPC is required to purchase all of the
output from the facilities located inside the IPC service territory. For
projects located outside the IPC service territory, IPC is required to purchase
the output that IPC has the ability to receive at the facilitys requested
point of delivery on the IPC system. The IPUC jurisdictional portion of the
costs associated with CSPP contracts are fully recovered through base rates and
the PCA. For IPUC jurisdictional contracts, projects that generate up to ten
average MW of energy on a monthly basis are eligible for IPUC Published Avoided
Costs for up to a 20-year contract term. The OPUC jurisdictional portion of
the costs associated with CSPP contracts is recovered through general rate case
filings. For OPUC jurisdictional contracts, projects with a nameplate rating
of up to ten MW of capacity are eligible for OPUC Published Avoided Costs for
up to a 20-year contract term. The Published Avoided Cost is a price
established by the IPUC and the OPUC to estimate IPCs cost of developing
additional generation resources. If a PURPA project does not qualify for
Published Avoided Costs, then IPC is required to negotiate the terms, prices
and conditions with the developer of that project. These negotiations reflect
the characteristics of the individual projects (i.e., operational flexibility,
location and size) and the benefits to the IPC system and must be consistent
with other similar energy alternatives.
IPCs integrated resource planning
process forecasts IPCs load and resource situation for the next twenty years,
analyzes potential supply-side and demand-side options and identifies near-term
and long-term actions. The IRP is typically updated every two years, however
with its acceptance of the 2006 IRP, the IPUC requested that IPC align the
submittal of its next IRP with those submitted by other Idaho utilities. To
comply with this request IPC provided an update on the status of the IRP to
both the IPUC and OPUC in June 2008. An IRP Addendum was also filed with the
OPUC in February 2009, which specifically addressed the need for the Boardman
to Hemingway Transmission Project. IPC is currently preparing the 2009 IRP,
which is expected to be completed in June 2009.
IPC, like other utilities that
operate nonfederal hydroelectric projects on qualified waterways, obtains
licenses for its hydroelectric projects from the FERC. These licenses last for
30 to 50 years depending on the size, complexity, and cost of the project. IPC
is actively pursuing the relicensing of the Hells Canyon Complex (HCC) and Swan
Falls projects.
IPC has FERC-approved market-based
rate authority, which permits IPC to sell electric energy at market-based rates
rather than being limited to cost-based rates. Every three years, the FERC
requires IPC to submit a triennial filing providing for a review of the
conditions under which this market-based rate authority was granted to ensure
that the rates charged thereunder are just and reasonable. On March 21, 2008,
IPC submitted a filing to FERC showing that IPC continued to meet FERCs market-based
rate tests. On June 24, 2008, FERC accepted IPCs filing, which allowed IPC to
continue to maintain market-based rate authority. IPCs next market-based
rates triennial filing is due on June 30, 2010.
IPC owns two natural
gas combustion turbine power plants and co-owns three coal-fired power plants
that are subject to air quality regulation. The natural gas-fired plants,
Danskin and Bennett Mountain, are located in Idaho. The coal-fired plants
are: Jim Bridger (33 percent interest) located in Wyoming; Boardman (ten
percent interest) located in Oregon; and Valmy (50 percent interest) located in
Nevada. The Clean Air Act establishes controls on the emissions from
stationary sources like those owned by IPC. The Environmental Protection
Agency (EPA) adopts many of the standards and regulations under the Clean Air
Act, while states have the primary responsibility for implementation and
administration of these air quality programs. IPC continues to actively
monitor, evaluate and work on air quality issues pertaining to the Clean Air
Mercury Rule (CAMR), possible legislative amendment of the Clean Air Act,
emerging greenhouse gas and climate change programs at the federal, regional
and state levels, New Source Review (NSR) permitting, National Ambient Air Quality
Standards (NAAQS), and Regional Haze Best Available Retrofit Technology (RH
BART). Installation of low nitrogen oxide (NOx) burner technology and over-fired
upgrades has been completed at the Valmy plant. Installation of low NOx
burners on all four coal-fired units at the Jim Bridger plant is in progress.
Sulfur dioxide (SO
2
) scrubber upgrade projects also have started on
unit four at the Jim Bridger plant and scrubber upgrade projects on the other
three units at the plant will occur over the next three years. Mercury
continuous emission monitoring systems (mercury CEMS) have been installed on
all of the coal-fired units at the Jim Bridger, Boardman and Valmy plants and
tests to confirm the accuracy of the data being collected are currently underway.
In December 1992, the USFWS listed
several species of fish and five species of snails
living within IPCs operating area as threatened or
endangered species under the Endangered Species Act. IPC continues to review
and analyze the effect such designation has on its operations and is
cooperating with governmental agencies to resolve issues related to these
species.
On March 28, 2008, Great Basin
Transmission, LLC (Great Basin) exercised its option to purchase the southern
portion of the Southwest Intertie Project (SWIP), which consists principally of
a federal permit for a specific transmission corridor in Nevada and Idaho and
private rights-of-way in Idaho. This sale closed during the second quarter of
2008, and resulted in a net pre-tax gain of approximately $3 million. On
December 30, 2008, IPC and Great Basin reached an agreement on the sale of the
northern portion of the SWIP, which is expected to close in the first quarter
of 2009 and result in a pre-tax gain of $0.2 million.
SFAS 157:
IDACORP and IPC partially
adopted the provisions of SFAS 157,
Fair Value Measurements
(SFAS 157)
on January 1, 2008. SFAS 157 defines fair value, establishes a framework for
measuring fair value, establishes a fair value hierarchy based on the quality
of inputs used to measure fair value and enhances disclosure requirements for
fair value measurements. FASB Staff Position 157-2 (FSP FAS 157-2) delayed the
implementation of SFAS 157 for nonfinancial assets and nonfinancial
liabilities, except for items that are recognized or disclosed at fair value in
the financial statements on a recurring basis (at least annually). The delay
is intended to allow the FASB and constituents additional time to consider the
effect of various implementation issues that have arisen, or that may arise,
from the application of SFAS 157. In accordance with FSP FAS 157-2, IPC did
not apply the provisions of SFAS 157 to asset retirement obligations. On
October 10, 2008, the FASB issued FSP FAS 157-3,
Determining the Fair Value
of a Financial Asset When the Market for That Asset Is Not Active,
which
clarifies the application of SFAS 157, in a market that is not active and
provides an example to illustrate key considerations in determining the fair
value of a financial asset when the market for that financial asset is not
active. This FSP was effective upon issuance, including prior periods for
which financial statements had not been issued. The adoption of SFAS 157 and
its related pronouncements did not have a material effect on IDACORPs or IPCs
consolidated financial statements.
See Note 1 to IDACORPs and IPCs
Consolidated Financial Statements for a discussion of recently issued
accounting pronouncements.
IDACORP and IPC believe that
inflation has caused and may continue to cause increases in certain operating
expenses and the replacement of assets at higher costs. Inflation affects the
cost of labor, products and services required for operations and maintenance
and capital expenditures. While inflation has not had a significant impact on
IDACORPs or IPCs operations, increases in utility expenses due to inflation
could have an adverse effect on earnings because of the need to obtain
regulatory approval to recover such increased expenses.
ITEM
7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
IDACORP and IPC are exposed
to market risks, including changes in interest rates, changes in commodity
prices, credit risk and equity price risk. The following discussion summarizes
these risks and the financial instruments, derivative instruments and
derivative commodity instruments sensitive to changes in interest rates,
commodity prices and equity prices that were held at December 31, 2008.
Interest Rate Risk
IDACORP and IPC manage interest
expense and short- and long-term liquidity through a combination of fixed rate
and variable rate debt. Generally, the amount of each type of debt is managed
through market issuance, but interest rate swap and cap agreements with highly
rated financial institutions may be used to achieve the desired
combination.
Variable Rate Debt:
As of December 31, 2008, IDACORP and IPC had $337
million and $302 million, respectively, in net floating rate debt. Assuming no
change in financial structure for either company, if variable interest rates
were one percentage point higher than the rates in effect on December 31, 2008,
interest rate expense would increase and pre-tax earnings would decrease by
approximately $3.4 million for IDACORP and $3.0 million for IPC.
Fixed Rate Debt:
As of December 31, 2008, IDACORP and IPC had
outstanding fixed rate debt of $1,083 million and $1,075 million, respectively,
and the fair market value of this debt was $1,005 million and $997 million,
respectively. These instruments are fixed rate and, therefore, do not expose
the companies to a loss in earnings due to changes in market interest rates.
However, the fair value of these instruments would increase by approximately
$82 million for IDACORP and IPC if interest rates were to decline by one
percentage point from their December 31, 2008 levels.
Commodity Price Risk
Utility:
IPCs exposure to changes
in commodity price is related to its ongoing utility operations producing
electricity to meet the demand of its retail electric customers. The weather
is a major uncontrollable factor affecting the local and regional demand for
electricity and the availability and price of production. The objective of IPCs
energy purchase and sale activity is to meet the demand of retail electric
customers, maintain appropriate physical reserves to ensure reliability, and
make economic use of temporary surpluses that may develop.
IPCs
exposure to commodity price risk is largely offset by the previously discussed
PCA mechanism. IPC has adopted a risk management program designed to reduce
exposure to power supply cost-related uncertainty, further mitigating commodity
price risk. This program has been reviewed and accepted by the IPUC. IPCs
Energy Risk Management Policy (the Policy) describes a collaborative process
with customers and regulators via a committee called the Customer Advisory
Group (CAG). The Risk Management Committee (RMC), comprised of selected IPC
officers and other senior staff, oversees the risk management program. The RMC
is responsible for communicating the status of risk management activities to
the IPC Board of Directors, and to the CAG.
66
The Policy requires
monitoring monthly volumetric electricity position and total monthly dollar
(net power supply cost) exposure on a rolling 18-month forward view. The Power
Supply business unit produces and evaluates projections of the operating plan
and orders risk mitigating actions dictated by the limits stated in the
Policy. The RMC evaluates the actions initiated by Power Supply for
consistency and compliance with the Policy. IPC representatives meet with the
CAG at least annually to assess effectiveness of the limits. Changes to the
limits can be endorsed by the CAG and referred to the Board of Directors for
approval. The primary tools for risk mitigation are physical and financial
forward power transactions and fueling alternatives for utility-owned
generation resources.
Credit Risk
Utility:
IPC is subject to credit
risk based on its activity with market counterparties. IPC is exposed to this
risk to the extent that a counterparty may fail to fulfill a contractual
obligation to provide energy, purchase energy or complete financial settlement
for market activities. IPC mitigates this exposure by actively establishing
credit limits, measuring, monitoring, reporting, using appropriate contractual
arrangements and transferring of credit risk through the use of financial guarantees,
cash or letters of credit. A current list of acceptable counterparties and
credit limits is maintained.
The use of performance
assurance collateral in the form of cash, letters of credit, or guarantees is
common industry practice. IPC maintains margin agreements that allow
performance assurance collateral to be requested and/or posted with certain
counterparties. As of December 31, 2008, IPC had posted approximately $0.9
million of assurance collateral. Should IPC experience a reduction in its credit
rating on IPCs unsecured debt to below investment grade, IPC could be subject
to additional requests by its wholesale counterparties to post additional
performance assurance collateral. Based upon IPCs current energy and fuel
portfolio and current market conditions as of December 31, 2008, the
approximate amount of additional collateral that could be requested upon a
downgrade is approximately $28 million. IPC actively monitors the portfolio
exposure and the potential exposure to additional requests for performance
assurance collateral calls, through sensitivity analysis, to minimize capital
requirements.
Credit risk for IPCs retail
customers is managed by credit and collection policies that are governed by
rules issued by the IPUC. IPC is obligated to provide service to all electric
customers within its service area. IPC records a provision for uncollectible
accounts, based upon historical experience, to provide for the potential loss
from nonpayment by these customers. IPC will continue to monitor the impact of
the current economic conditions on nonpayment from customers and will make any
necessary adjustments to its provision for uncollectible accounts.
Idaho
administrative code for utility customer relations rules prohibits IPC from
terminating electric service during the months of December through February to
any residential customer who declares that he or she is unable to pay in full
for utility service and whose household includes children, elderly or infirm
persons. IPCs provision for uncollectible accounts could be affected by
changes in future prices as well as changes in IPUC regulations.
Equity Price Risk
IDACORP and IPC are exposed to price
fluctuations in equity markets, primarily through their pension plan assets, a
mine reclamation trust fund owned by an equity-method investment of IPC and
other equity investments at IPC. As a result of recent market declines, the
fair value of the pension plans assets has decreased resulting in an increase
in future amounts required to be contributed to the plan. Based on current
laws, IPC estimates that the minimum contribution to IPCs pension plan for
2009, which may be made as late as 2010, will be $24 million.
A hypothetical ten percent
decrease in equity prices would result in an approximate $1.4 million decrease
in the fair value of financial instruments that are classified as available-for-sale
securities.
67
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
|
PAGE |
|
Consolidated Financial Statements: |
|
|
IDACORP, Inc. |
|
|
Consolidated Statements of Income for the Years Ended December 31, 2008, 2007 and 2006 |
69 |
|
Consolidated Balance Sheets as of December 31, 2008 and 2007 |
70-71 |
|
Consolidated Statements of Cash Flows for the Years Ended December 31, 2008, 2007 and 2006 |
72 |
|
Consolidated Statements of Shareholders Equity for the Years Ended December 31, 2008, 2007 |
|
|
|
and 2006 |
73 |
Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2008, |
|
|
|
2007 and 2006 |
74 |
|
|
|
Idaho Power Company |
|
|
Consolidated Statements of Income for the Years Ended December 31, 2008, 2007 and 2006 |
75 |
|
Consolidated Balance Sheets as of December 31, 2008 and 2007 |
76-77 |
|
Consolidated Statements of Capitalization as of December 31, 2008 and 2007 |
78 |
|
Consolidated Statements of Cash Flows for the Years Ended December 31, 2008, 2007 and 2006 |
79 |
|
Consolidated Statements of Retained Earnings for the Years Ended December 31, 2008, 2007 |
|
|
|
and 2006 |
80 |
Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2008, |
|
|
|
2007 and 2006 |
80 |
|
|
|
81-120 |
||
121-122 |
||
|
|
|
Supplemental Financial Information and Consolidated Financial Statement Schedules |
|
|
123 |
||
|
|
|
Financial Statement Schedules for the Years Ended December 31, 2008, 2007 and 2006: |
|
|
Schedule I - Condensed Financial Information of Registrant-IDACORP, Inc. |
138-140 |
|
Schedule II -Consolidated Valuation and Qualifying Accounts-IDACORP, Inc. |
141 |
|
Schedule II -Consolidated Valuation and Qualifying Accounts-Idaho Power Company |
142 |
|
|
|
68
IDACORP, Inc.
Consolidated Statements of Income
69
IDACORP, Inc.
Consolidated Balance Sheets
|
December 31, |
|||
|
2008 |
2007 |
||
Assets |
(thousands of dollars) |
|||
Current Assets: |
||||
Cash and cash equivalents |
$ |
8,828 |
$ |
7,966 |
Receivables: |
||||
Customer |
64,733 |
69,160 |
||
Allowance for uncollectible accounts |
(1,724) |
(7,505) |
||
Employee notes |
179 |
2,128 |
||
Other |
10,260 |
10,957 |
||
Taxes receivable |
18,111 |
- |
||
Accrued unbilled revenues |
43,934 |
36,314 |
||
Materials and supplies (at average cost) |
50,121 |
43,270 |
||
Fuel stock (at average cost) |
16,852 |
17,268 |
||
Prepayments |
10,059 |
9,371 |
||
Deferred income taxes |
37,550 |
25,672 |
||
Refundable income tax deposit |
- |
46,083 |
||
Other |
7,381 |
6,023 |
||
Total current assets |
266,284 |
266,707 |
||
|
||||
Investments |
198,552 |
201,085 |
||
|
||||
Property, Plant and Equipment: |
||||
Utility plant in service |
4,030,134 |
3,796,339 |
||
Accumulated provision for depreciation |
(1,505,120) |
(1,468,832) |
||
Utility plant in service - net |
2,525,014 |
2,327,507 |
||
Construction work in progress |
207,662 |
257,590 |
||
Utility plant held for future use |
6,318 |
3,366 |
||
Other property, net of accumulated depreciation |
19,171 |
28,089 |
||
Property, plant and equipment - net |
2,758,165 |
2,616,552 |
||
|
||||
Other Assets: |
||||
American Falls and Milner water rights |
26,332 |
29,501 |
||
Company-owned life insurance |
29,482 |
30,842 |
||
Regulatory assets |
696,332 |
449,668 |
||
Long-term receivables (net of allowance of $2,478 and $1,878, respectively) |
4,012 |
3,583 |
||
Employee notes |
54 |
2,325 |
||
Other |
43,632 |
53,045 |
||
Total other assets |
799,844 |
568,964 |
||
Total |
$ |
4,022,845 |
$ |
3,653,308 |
|
||||
The accompanying notes are an integral part of these statements. |
70
IDACORP, Inc.
Consolidated Balance Sheets
|
December 31, |
|||
|
2008 |
2007 |
||
Liabilities and Shareholders Equity |
(thousands of dollars) |
|||
Current Liabilities: |
||||
Current maturities of long-term debt |
$ |
86,528 |
$ |
11,456 |
Notes payable |
151,250 |
186,445 |
||
Accounts payable |
96,785 |
85,116 |
||
Taxes accrued |
- |
8,492 |
||
Interest accrued |
16,727 |
18,913 |
||
Uncertain tax positions |
4,119 |
26,764 |
||
Other |
40,259 |
38,129 |
||
Total current liabilities |
395,668 |
375,315 |
||
|
||||
Other Liabilities: |
||||
Deferred income taxes |
515,719 |
466,182 |
||
Regulatory liabilities |
276,266 |
274,204 |
||
Other |
349,304 |
173,412 |
||
Total other liabilities |
1,141,289 |
913,798 |
||
|
||||
Long-Term Debt |
1,183,451 |
1,156,880 |
||
|
||||
Commitments and Contingencies (Note 7) |
||||
Shareholders Equity: |
||||
Common stock, no par value (shares authorized 120,000,000; |
||||
46,929,203 and 45,063,107 shares issued, respectively) |
729,576 |
675,774 |
||
Retained earnings |
581,605 |
537,699 |
||
Accumulated other comprehensive loss |
(8,707) |
(6,156) |
||
Treasury stock (9,022 and 380 shares at cost, respectively) |
(37) |
(2) |
||
Total shareholders equity |
1,302,437 |
1,207,315 |
||
|
|
|||
Total |
$ |
4,022,845 |
$ |
3,653,308 |
The accompanying notes are an integral part of these statements. |
71
IDACORP, Inc.
Consolidated Statements of Cash Flows
Year Ended December 31, |
||||||
|
2008 |
2007 |
2006 |
|||
Operating Activities: |
(thousands of dollars) |
|||||
Net income |
$ |
98,414 |
$ |
82,339 |
$ |
107,403 |
Adjustments to reconcile net income to net cash provided by |
||||||
operating activities: |
||||||
Depreciation and amortization |
122,440 |
120,368 |
122,641 |
|||
Deferred income taxes and investment tax credits |
4,661 |
11,026 |
(17,332) |
|||
Changes in regulatory assets and liabilities |
(64,068) |
(128,089) |
(17,133) |
|||
Non-cash pension expense |
3,513 |
6,868 |
- |
|||
Undistributed earnings of subsidiaries |
(7,423) |
(6,273) |
(9,553) |
|||
Gain on sale of assets |
(3,446) |
(4,758) |
(25,658) |
|||
Impairment of long-lived asset |
- |
- |
2,047 |
|||
Other non-cash adjustments to net income |
9,008 |
(2,915) |
(3,395) |
|||
Excess tax benefit from share-based payment arrangements |
(149) |
(68) |
(1,411) |
|||
Change in: |
||||||
Accounts receivable and prepayments |
(1,725) |
(10,284) |
24,304 |
|||
Accounts payable and other accrued liabilities |
16,248 |
2,206 |
6,725 |
|||
Taxes accrued |
(26,454) |
(9,466) |
(24,099) |
|||
Other current assets |
(14,056) |
(11,159) |
(4,829) |
|||
Other current liabilities |
(6,130) |
15,551 |
(3,465) |
|||
Other assets |
1,498 |
2,157 |
3,334 |
|||
Other liabilities |
4,182 |
13,098 |
10,199 |
|||
Net cash provided by operating activities |
136,513 |
80,601 |
169,778 |
|||
Investing Activities: |
||||||
Additions to property, plant and equipment |
(243,544) |
(287,219) |
(221,840) |
|||
Proceeds from the sale of ITI |
- |
- |
21,469 |
|||
Proceeds from the sale of IDACOMM |
- |
7,283 |
- |
|||
Proceeds from the sale of non-utility assets |
5,847 |
- |
146 |
|||
Investments in affordable housing |
(8,314) |
348 |
(5,059) |
|||
Proceeds from the sale of emission allowances |
2,959 |
19,846 |
11,323 |
|||
Investments in unconsolidated affiliates |
(3,038) |
(8,535) |
(16,030) |
|||
Purchase of available-for-sale securities |
- |
(24,349) |
(17,979) |
|||
Proceeds from the sale of available-for-sale securities |
- |
26,110 |
20,778 |
|||
Purchase of held-to-maturity securities |
(4,248) |
(3,116) |
(2,730) |
|||
Maturity of held-to-maturity securities |
6,060 |
3,317 |
4,647 |
|||
Withdrawal (refundable deposit) for tax related liabilities |
44,903 |
- |
(44,903) |
|||
Other |
(3,449) |
(795) |
(2,862) |
|||
Net cash used in investing activities |
(202,824) |
(267,110) |
(253,040) |
|||
Financing Activities: |
||||||
Increase in term loans |
170,000 |
- |
- |
|||
Issuance of long-term debt |
120,000 |
240,000 |
116,300 |
|||
Retirement of long-term debt |
(11,349) |
(95,033) |
(132,642) |
|||
Purchase of pollution control bonds |
(166,100) |
- |
- |
|||
Dividends on common stock |
(54,239) |
(53,012) |
(51,272) |
|||
Net change in short-term borrowings |
(39,095) |
57,445 |
68,900 |
|||
Issuance of common stock |
50,863 |
37,181 |
41,465 |
|||
Acquisition of treasury stock |
(304) |
(346) |
(213) |
|||
Excess tax benefit from share-based payment arrangements |
149 |
68 |
1,411 |
|||
Other |
(2,752) |
(1,720) |
(3,151) |
|||
Net cash provided by financing activities |
67,173 |
184,583 |
40,798 |
|||
Net increase (decrease) in cash and cash equivalents |
862 |
(1,926) |
(42,464) |
|||
Cash and cash equivalents at beginning of the year |
7,966 |
9,892 |
52,356 |
|||
Cash and cash equivalents at end of the year |
$ |
8,828 |
$ |
7,966 |
$ |
9,892 |
Supplemental Disclosure of Cash Flow Information: |
||||||
Cash paid during the year for: |
||||||
Income taxes |
$ |
20,407 |
$ |
3,021 |
$ |
54,522 |
Interest (net of amount capitalized) |
$ |
67,027 |
$ |
62,031 |
$ |
60,353 |
Non-cash investing activities |
||||||
Additions to property, plant and equipment in accounts payable |
$ |
14,194 |
$ |
13,210 |
$ |
8,299 |
The accompanying notes are an integral part of these statements. |
72
IDACORP, Inc.
Consolidated Statements of Shareholders Equity
Accumulated |
|||||||||||||
Other |
|||||||||||||
Comprehensive |
|||||||||||||
Common Stock |
Retained |
Income |
Treasury Stock |
Total |
|||||||||
|
Shares |
Amount |
Earnings |
(Loss) |
Shares |
Amount |
Amount |
||||||
(thousands) |
|||||||||||||
Balance at January 1, 2006 |
42,656 |
$ |
598,706 |
$ |
437,284 |
$ |
(3,425) |
239 |
$ |
(7,314) |
$ |
1,025,251 |
|
Net Income |
- |
- |
107,403 |
- |
- |
- |
107,403 |
||||||
Common stock dividends ($1.20 per share) |
- |
- |
(51,323) |
- |
- |
- |
(51,323) |
||||||
Issued |
1,188 |
41,465 |
- |
- |
(11) |
348 |
41,813 |
||||||
Acquired |
- |
- |
- |
- |
6 |
(213) |
(213) |
||||||
Other |
61 |
(1,372) |
(1) |
- |
(162) |
4,937 |
3,564 |
||||||
Unrealized loss on securities (net of tax) |
- |
- |
- |
(1,414) |
- |
- |
(1,414) |
||||||
Minimum pension liability adjustment (net of tax) |
- |
- |
- |
2,118 |
- |
- |
2,118 |
||||||
Adjustment upon adoption of SFAS 158 (net of tax) |
- |
- |
- |
(3,016) |
- |
- |
(3,016) |
||||||
Balance at December 31, 2006 |
43,905 |
638,799 |
493,363 |
(5,737) |
72 |
(2,242) |
1,124,183 |
||||||
Net Income |
- |
- |
82,339 |
- |
- |
- |
82,339 |
||||||
Common stock dividends ($1.20 per share) |
- |
- |
(53,138) |
- |
- |
- |
(53,138) |
||||||
Issued |
1,142 |
37,181 |
- |
- |
(12) |
330 |
37,511 |
||||||
Acquired |
- |
- |
- |
- |
10 |
(346) |
(346) |
||||||
Other |
16 |
(206) |
(1) |
- |
(70) |
2,256 |
2,049 |
||||||
Unrealized loss on securities (net of tax) |
- |
- |
- |
(743) |
- |
- |
(743) |
||||||
Unfunded pension liability adjustment (net of tax) |
- |
- |
- |
324 |
- |
- |
324 |
||||||
Adjustment upon adoption of FIN 48 |
- |
- |
15,136 |
- |
- |
- |
15,136 |
||||||
Balance at December 31, 2007 |
45,063 |
675,774 |
537,699 |
(6,156) |
- |
(2) |
1,207,315 |
||||||
Net Income |
- |
- |
98,414 |
- |
- |
- |
98,414 |
||||||
Common stock dividends ($1.20 per share) |
- |
- |
(54,508) |
- |
- |
- |
(54,508) |
||||||
Issued |
1,765 |
50,863 |
- |
- |
(15) |
99 |
50,962 |
||||||
Acquired |
- |
- |
- |
- |
10 |
(304) |
(304) |
||||||
Other |
101 |
2,939 |
- |
- |
14 |
170 |
3,109 |
||||||
Unrealized loss on securities (net of tax) |
- |
- |
- |
(568) |
- |
- |
(568) |
||||||
Unfunded pension liability adjustment (net of tax) |
- |
- |
- |
(1,983) |
- |
- |
(1,983) |
||||||
Balance at December 31, 2008 |
46,929 |
$ |
729,576 |
$ |
581,605 |
$ |
(8,707) |
9 |
$ |
(37) |
$ |
1,302,437 |
|
The accompanying notes are an integral part of these statements. |
|||||||||||||
73
IDACORP, Inc.
Consolidated Statements of Comprehensive Income
Year Ended December 31, |
||||||
|
2008 |
2007 |
2006 |
|||
(thousands of dollars) |
||||||
Net Income |
$ |
98,414 |
$ |
82,339 |
$ |
107,403 |
Other Comprehensive Income (Loss): |
||||||
Unrealized gains (losses) on securities: |
||||||
Unrealized holding (losses) gains arising during the year, |
||||||
net of tax of ($3,034), $114 and $1,471 |
(4,727) |
179 |
2,355 |
|||
Reclassification adjustment for losses (gains) included |
||||||
in net income, net of tax of $2,670, ($592) and ($2,250) |
4,159 |
(922) |
(3,769) |
|||
Net unrealized losses |
(568) |
(743) |
(1,414) |
|||
Unfunded pension liability adjustment, net of tax |
||||||
of ($1,273), $208 and $1,359 |
(1,983) |
324 |
2,118 |
|||
Total Comprehensive Income |
$ |
95,863 |
$ |
81,920 |
$ |
108,107 |
The accompanying notes are an integral part of these statements. |
74
Idaho Power Company
Consolidated Statements of Income
Year Ended December 31, |
||||||
|
2008 |
2007 |
2006 |
|||
(thousands of dollars) |
||||||
Operating Revenues: |
||||||
General business |
$ |
784,311 |
$ |
668,303 |
$ |
636,375 |
Off-system sales |
121,429 |
154,948 |
260,717 |
|||
Other revenues |
50,336 |
52,150 |
23,381 |
|||
Total operating revenues |
956,076 |
875,401 |
920,473 |
|||
Operating Expenses: |
||||||
Operation: |
||||||
Purchased power |
231,137 |
289,484 |
283,440 |
|||
Fuel expense |
149,403 |
134,322 |
115,018 |
|||
Power cost adjustment |
(47,413) |
(121,131) |
(29,526) |
|||
Other |
225,390 |
218,347 |
200,090 |
|||
Energy efficiency programs |
18,880 |
13,487 |
- |
|||
Gain on sale of emission allowances |
(504) |
(2,754) |
(8,257) |
|||
Maintenance |
68,639 |
68,163 |
64,720 |
|||
Depreciation |
102,086 |
103,072 |
99,824 |
|||
Taxes other than income taxes |
19,083 |
17,634 |
18,661 |
|||
Total operating expenses |
766,701 |
720,624 |
743,970 |
|||
Income from Operations |
189,375 |
154,777 |
176,503 |
|||
Other Income (Expense): |
||||||
Allowance for equity funds used during construction |
3,141 |
5,995 |
6,092 |
|||
Earnings of unconsolidated equity-method investments |
6,772 |
5,553 |
9,347 |
|||
Other income |
8,174 |
12,636 |
10,578 |
|||
Other expense |
(6,262) |
(8,215) |
(8,701) |
|||
Total other income |
11,825 |
15,969 |
17,316 |
|||
Interest Charges: |
||||||
Interest on long-term debt |
66,145 |
58,097 |
53,744 |
|||
Other interest |
10,420 |
8,281 |
6,211 |
|||
Allowance for borrowed funds used during construction |
(7,080) |
(7,597) |
(4,026) |
|||
Total interest charges |
69,485 |
58,781 |
55,929 |
|||
Income Before Income Taxes |
131,715 |
111,965 |
137,890 |
|||
Income Tax Expense |
37,600 |
35,386 |
43,961 |
|||
Net Income |
$ |
94,115 |
$ |
76,579 |
$ |
93,929 |
The accompanying notes are an integral part of these statements. |
75
Idaho Power Company
Consolidated Balance Sheets
|
December 31, |
|||
|
2008 |
2007 |
||
Assets |
(thousands of dollars) |
|||
Electric Plant: |
||||
In service (at original cost) |
$ |
4,030,134 |
$ |
3,796,339 |
Accumulated provision for depreciation |
(1,505,120) |
(1,468,832) |
||
In service - net |
2,525,014 |
2,327,507 |
||
Construction work in progress |
207,662 |
257,590 |
||
Held for future use |
6,318 |
3,366 |
||
Electric plant - net |
2,738,994 |
2,588,463 |
||
|
||||
Investments and Other Property |
106,057 |
105,074 |
||
|
||||
Current Assets: |
||||
Cash and cash equivalents |
3,141 |
5,347 |
||
Receivables: |
||||
Customer |
64,433 |
62,122 |
||
Allowance for uncollectible accounts |
(1,724) |
(1,305) |
||
Employee notes |
179 |
2,128 |
||
Other |
7,768 |
8,122 |
||
Taxes receivable |
41,363 |
- |
||
Accrued unbilled revenues |
43,934 |
36,314 |
||
Materials and supplies (at average cost) |
50,121 |
43,270 |
||
Fuel stock (at average cost) |
16,852 |
17,268 |
||
Prepayments |
9,865 |
9,120 |
||
Deferred income taxes |
3,852 |
4,074 |
||
Refundable income tax deposit |
- |
44,316 |
||
Other |
4,968 |
1,067 |
||
Total current assets |
244,752 |
231,843 |
||
Deferred Debits: |
||||
American Falls and Milner water rights |
26,332 |
29,501 |
||
Company-owned life insurance |
29,482 |
30,842 |
||
Regulatory assets |
696,332 |
449,668 |
||
Employee notes |
54 |
2,325 |
||
Other |
42,853 |
51,800 |
||
Total deferred debits |
795,053 |
564,136 |
||
Total |
$ |
3,884,856 |
$ |
3,489,516 |
The accompanying notes are an integral part of these statements. |
76
Idaho Power Company
Consolidated Balance Sheets
|
December 31, |
|||
|
2008 |
2007 |
||
Capitalization and Liabilities |
(thousands of dollars) |
|||
Capitalization: |
||||
Common stock equity: |
||||
Common stock, $2.50 par value (50,000,000 shares |
||||
authorized; 39,150,812 shares outstanding) |
$ |
97,877 |
$ |
97,877 |
Premium on capital stock |
618,758 |
581,758 |
||
Capital stock expense |
(2,097) |
(2,097) |
||
Retained earnings |
482,047 |
442,300 |
||
Accumulated other comprehensive loss |
(8,707) |
(6,156) |
||
Total common stock equity |
1,187,878 |
1,113,682 |
||
Long-term debt |
1,180,691 |
1,141,508 |
||
Total capitalization |
2,368,569 |
2,255,190 |
||
|
||||
Current Liabilities: |
||||
Long-term debt due within one year |
81,064 |
1,064 |
||
Notes payable |
112,850 |
136,585 |
||
Accounts payable |
96,268 |
84,457 |
||
Notes and accounts payable to related parties |
768 |
724 |
||
Taxes accrued |
- |
2,403 |
||
Interest accrued |
16,675 |
18,761 |
||
Uncertain tax positions |
4,119 |
26,764 |
||
Other |
39,155 |
36,907 |
||
Total current liabilities |
350,899 |
307,665 |
||
|
||||
Deferred Credits: |
||||
Deferred income taxes |
547,159 |
488,768 |
||
Regulatory liabilities |
276,266 |
274,204 |
||
Other |
341,963 |
163,689 |
||
Total deferred credits |
1,165,388 |
926,661 |
||
|
||||
Commitments and Contingencies (Note 7) |
||||
Total |
$ |
3,884,856 |
$ |
3,489,516 |
The accompanying notes are an integral part of these statements. |
77
Idaho Power Company
Consolidated Statements of Capitalization
December 31, |
December 31, |
|||||
|
2008 |
% |
2007 |
% |
||
(thousands of dollars) |
||||||
Common Stock Equity: |
||||||
Common stock |
$ |
97,877 |
$ |
97,877 |
||
Premium on capital stock |
618,758 |
581,758 |
||||
Capital stock expense |
(2,097) |
(2,097) |
||||
Retained earnings |
482,047 |
442,300 |
||||
Accumulated other comprehensive loss |
(8,707) |
|
(6,156) |
|
||
Total common stock equity |
1,187,878 |
50 |
1,113,682 |
49 |
||
Long-Term Debt: |
||||||
First mortgage bonds: |
||||||
7.20% Series due 2009 |
80,000 |
80,000 |
||||
6.60% Series due 2011 |
120,000 |
120,000 |
||||
4.75% Series due 2012 |
100,000 |
100,000 |
||||
4.25% Series due 2013 |
70,000 |
70,000 |
||||
6.025% Series due 2018 |
120,000 |
- |
||||
6 % Series due 2032 |
100,000 |
100,000 |
||||
5.50% Series due 2033 |
70,000 |
70,000 |
||||
5.50% Series due 2034 |
50,000 |
50,000 |
||||
5.875% Series due 2034 |
55,000 |
55,000 |
||||
5.30% Series due 2035 |
60,000 |
60,000 |
||||
6.30% Series due 2037 |
140,000 |
140,000 |
||||
6.25% Series due 2037 |
100,000 |
|
100,000 |
|
||
Total first mortgage bonds |
1,065,000 |
|
945,000 |
|
||
Amount due within one year |
(80,000) |
|
- |
|
||
Net first mortgage bonds |
985,000 |
|
945,000 |
|
||
Pollution control revenue bonds: |
||||||
Variable Rate Series 2003 due 2024 |
49,800 |
49,800 |
||||
Variable Rate Series 2006 due 2026 |
116,300 |
116,300 |
||||
Variable Rate Series 2000 due 2027 |
4,360 |
4,360 |
||||
Total pollution control revenue bonds |
170,460 |
|
170,460 |
|
||
American Falls bond guarantee |
19,885 |
19,885 |
||||
Milner Dam note guarantee |
9,573 |
10,636 |
||||
Note guarantee due within one year |
(1,064) |
(1,064) |
||||
Unamortized premium/discount - net |
(3,163) |
(3,409) |
||||
Term Loan Credit Facility |
166,100 |
- |
||||
Purchase of pollution control revenue bonds |
(166,100) |
|
- |
|
||
Total long-term debt |
1,180,691 |
50 |
1,141,508 |
51 |
||
Total Capitalization |
$ |
2,368,569 |
100 |
$ |
2,255,190 |
100 |
The accompanying notes are an integral part of these statements. |
78
Idaho Power Company
Consolidated Statements of Cash Flows
79
Idaho Power Company
Consolidated Statements of Retained Earnings
Year Ended December 31, |
||||||
|
2008 |
2007 |
2006 |
|||
(thousands of dollars) |
||||||
Retained Earnings, Beginning of Year |
$ |
442,300 |
$ |
404,076 |
$ |
361,256 |
Net Income |
94,115 |
76,579 |
93,929 |
|||
Cumulative effect of accounting change (adoption of FIN 48) |
- |
15,136 |
- |
|||
Dividends on common stock |
(54,368) |
(53,491) |
(51,109) |
|||
Retained Earnings, End of Year |
$ |
482,047 |
$ |
442,300 |
$ |
404,076 |
The accompanying notes are an integral part of these statements. |
Idaho Power Company
Consolidated Statements Comprehensive Income
Year Ended December 31, |
||||||
|
2008 |
2007 |
2006 |
|||
(thousands of dollars) |
||||||
Net Income |
$ |
94,115 |
$ |
76,579 |
$ |
93,929 |
Other Comprehensive Income (Loss): |
||||||
Unrealized gains (losses) on securities: |
||||||
Unrealized holding (losses) gains arising during the year, |
||||||
net of tax of ($3,034), $114 and $1,471 |
(4,727) |
179 |
2,355 |
|||
Reclassification adjustment for losses (gains) included |
||||||
in net income, net of tax of $2,670, ($592) and ($2,250) |
4,159 |
(922) |
(3,769) |
|||
Net unrealized losses |
(568) |
(743) |
(1,414) |
|||
Unfunded pension liability adjustment, net of tax |
||||||
of ($1,273), $208 and $1,359 |
(1,983) |
324 |
2,118 |
|||
Total Comprehensive Income |
$ |
91,564 |
$ |
76,160 |
$ |
94,633 |
The accompanying notes are an integral part of these statements. |
80
IDACORP, INC. AND IDAHO POWER COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
This Annual Report on Form 10-K
is a combined report of IDACORP, Inc. (IDACORP) and Idaho Power Company (IPC).
Therefore, the Notes to the Consolidated Financial Statements apply to both
IDACORP and IPC. However, IPC makes no representation as to the information
relating to IDACORPs other operations.
Nature of Business
IDACORP is a holding company formed
in 1998 whose principal operating subsidiary is IPC. IDACORP is subject to the
provisions of the Public Utility Holding Company Act of 2005, which provides
certain access to books and records to the Federal Energy Regulatory Commission
(FERC) and state utility regulatory commissions and imposes certain record
retention and reporting requirements on IDACORP.
IPC is an electric utility
with a service territory covering approximately 24,000 square miles in southern
Idaho and eastern Oregon. IPC is regulated by the FERC and the state
regulatory commissions of Idaho and Oregon. IPC is the parent of Idaho Energy
Resources Co. (IERCo), a joint venturer in Bridger Coal Company, which supplies
coal to the Jim Bridger generating plant owned in part by IPC.
IDACORPs other subsidiaries
include:
IDACORP Financial Services, Inc. (IFS), an investor in affordable housing and other real estate investments;
Ida-West Energy Company (Ida-West), an operator of small hydroelectric generation projects that satisfy the requirements of the Public Utility Regulatory Policies Act of 1978 (PURPA); and
IDACORP Energy (IE), a marketer of energy commodities, which wound down operations in 2003.
In the second quarter of
2006, IDACORP management designated the operations of IDACORP Technologies,
Inc. (ITI) and IDACOMM, Inc. as assets held for sale, as defined by Statement
of Financial Accounting Standards No. 144,
Accounting for the Impairment or
Disposal of Long-Lived Assets
(SFAS 144). On July 20, 2006, IDACORP
completed the sale of all of the outstanding common stock of ITI to IdaTech UK
Limited, a wholly-owned subsidiary of Investec Group Investments (UK) Limited.
On February 23, 2007, IDACORP completed the sale of all of the outstanding
common stock of IDACOMM, Inc. to American Fiber Systems, Inc. IDACORPs
consolidated financial statements reflect the reclassification of the results
of these businesses as discontinued operations for all periods presented.
Additional information about discontinued operations is presented in Note 16.
Principles of
Consolidation
IDACORPs and IPCs consolidated
financial statements include the accounts of each company, the subsidiaries
that the companies control, and any variable interest entities (VIEs) for which
the companies are the primary beneficiaries. All intercompany balances have
been eliminated in consolidation. Investments in subsidiaries that the
companies do not control and investments in VIEs for which the companies are
not the primary beneficiaries, but have the ability to exercise significant
influence over operating and financial policies, are accounted for using the
equity method of accounting.
The entities that IDACORP and
IPC consolidate consist primarily of the wholly-owned subsidiaries discussed
above. In addition, IDACORP consolidates one VIE, Marysville Hydro Partners
(Marysville), which is a joint venture owned 50 percent by Ida-West.
Marysville has approximately $21 million of assets, primarily a hydroelectric
plant, and approximately $17 million of intercompany long-term debt, which is
eliminated in consolidation. For this joint venture, Ida-West is considered
the primary beneficiary because the ownership of the intercompany note results
in it absorbing a majority of the expected losses of the entity.
81
Prior to October 2008,
IDACORP also consolidated IFS limited partnership investment in Empire
Development Company, LLC, (Empire) an entity that earned historic tax credits
through the rehabilitation of the Empire Building in Boise, Idaho. In 2008 the
partnership agreement for Empire was amended and as a result of the amendment
Empire no longer met the criteria to be a VIE. Empire was deconsolidated and
is now accounted for under the equity method of accounting, resulting in an
increase in investments of $2 million and reductions of $9 million of other
property, plant and equipment and $7 million in long-term debt.
Through IFS, IDACORP also
holds variable interests in VIEs for which it is not the primary beneficiary.
These VIEs are historic rehabilitation and affordable housing developments in
which IFS holds limited partnership interests ranging from five to 99 percent.
IFS does not absorb a majority of the expected losses of these entities, either
because of specific provisions in the partnership agreements or due to not
owning a majority interest. These investments were acquired between 1996 and
2008. IFSs maximum exposure to loss in these developments is limited to its
net carrying value, which was $75 million at December 31, 2008.
Management Estimates
Management makes estimates and
assumptions when preparing financial statements in conformity with accounting
principles generally accepted in the United States of America. These estimates
and assumptions include those related to rate regulation, retirement benefits,
contingencies, litigation, asset impairment, income taxes, unbilled revenues
and bad debt. These estimates and assumptions affect the reported amounts of
assets and liabilities and the disclosure of contingent assets and liabilities
at the date of the financial statements, and the reported amounts of revenues
and expenses during the reporting period. These estimates involve judgments
with respect to, among other things, future economic factors that are difficult
to predict and are beyond managements control. As a result, actual results
could differ from those estimates.
System of Accounts
The accounting records of IPC conform
to the Uniform System of Accounts prescribed by the FERC and adopted by the
public utility commissions of Idaho, Oregon and Wyoming.
Regulation of Utility
Operations
IPC follows SFAS 71,
Accounting
for the Effects of Certain Types of Regulation,
and its financial
statements reflect the effects of the different ratemaking principles followed
by the jurisdictions regulating IPC. The application of SFAS 71 sometimes
results in IPC recording expenses in a different period than when an
unregulated enterprise would record the expenses. In these circumstances, the
expenses are deferred as regulatory assets on the balance sheet and recorded on
the income statement when recovered in rates. Additionally, regulators can
impose regulatory liabilities upon a regulated company for amounts previously collected
from customers and for amounts that are expected to be refunded to customers.
The effects of applying SFAS 71 are discussed in more detail in Note 6.
Cash and Cash Equivalents
Cash and cash equivalents include
cash on hand and highly liquid temporary investments with maturity dates at
date of acquisition of three months or less.
Derivative Financial
Instruments
Financial instruments such as
commodity futures, forwards, options and swaps are used to manage exposure to
commodity price risk in the electricity market. The objective of the risk
management program is to mitigate the risk associated with the purchase and
sale of electricity and natural gas. The accounting for derivative financial
instruments that are used to manage risk is in accordance with the concepts
established by SFAS 133,
Accounting for Derivative Instruments and Hedging
Activities,
as amended.
Property, Plant and
Equipment and Depreciation
The cost of utility plant in service
represents the original cost of contracted services, direct labor and material,
Allowance for Funds Used During Construction (AFUDC) and indirect charges for
engineering, supervision and similar overhead items. Repair and maintenance
costs associated with planned major maintenance are expensed as the costs are
incurred, as are maintenance and repairs of property and replacements and
renewals of items determined to be less than units of property. For utility
property replaced or renewed, the original cost plus removal cost less salvage
is charged to accumulated provision for depreciation, while the cost of related
replacements and renewals is added to property, plant and equipment.
All utility plant in service
is depreciated using the straight-line method at rates approved by regulatory
authorities. Annual depreciation provisions as a percent of average
depreciable utility plant in service approximated 2.73 percent in 2008, 2.95
percent in 2007 and 2.75 percent in 2006.
82
Long-lived assets are
periodically reviewed for impairment when events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable as
prescribed under SFAS 144. SFAS 144 requires that if the sum of the
undiscounted expected future cash flows from an asset is less than the carrying
value of the asset, impairment must be recognized in the financial statements.
There were no impairments of long-lived assets in 2008.
Allowance for Funds Used
During Construction
AFUDC represents the cost of
financing construction projects with borrowed funds and equity funds. While
cash is not realized currently from such allowance, it is realized under the
rate-making process over the service life of the related property through
increased revenues resulting from a higher rate base and higher depreciation
expense. The component of AFUDC attributable to borrowed funds is included as
a reduction to interest expense, while the equity component is included in
other income. IPCs weighted-average monthly AFUDC rates for 2008, 2007 and
2006 were 5.2 percent, 6.8 percent and 7.6 percent, respectively. IPCs
reductions to interest expense for AFUDC were $7 million for 2008, $8 million
for 2007 and $4 million for 2006. Other income included $3 million, $6 million
and $6 million of AFUDC for 2008, 2007 and 2006, respectively.
Revenues
Operating revenues for IPC related to
the sale of energy are generally recorded when service is rendered or energy is
delivered to customers. IPC accrues
unbilled revenues for electric services delivered to customers but not yet
billed at period-end. IPC collects franchise fees and similar taxes related to
energy consumption. These amounts are recorded as liabilities until paid to
the taxing authority. None of these collections are reported on the income
statement as revenue or expense.
Income Taxes
IDACORP and IPC account for income
taxes under the asset and liability method, which requires the recognition of
deferred tax assets and liabilities for the expected future tax consequences of
events that have been included in the financial statements. Under this method,
deferred tax assets and liabilities are determined based on the differences
between the financial statements and tax basis of assets and liabilities using
enacted tax rates in effect for the year in which the differences are expected
to reverse. The effect of a change in tax rates on deferred tax assets and
liabilities is recognized in income in the period that includes the enactment
date.
Consistent with orders and
directives of the Idaho Public Utilities Commission (IPUC), the regulatory
authority having principal jurisdiction, IPCs deferred income taxes (commonly
referred to as normalized accounting) are provided for the difference between
income tax depreciation and straight-line depreciation computed using book
lives on coal-fired generation facilities and properties acquired after 1980.
On other facilities, deferred income taxes are provided for the difference
between accelerated income tax depreciation and straight-line depreciation
using tax guideline lives on assets acquired prior to 1981. Deferred income
taxes are not provided for those income tax timing differences where the
prescribed regulatory accounting methods do not provide for current recovery in
rates. Regulated enterprises are required to recognize such adjustments as
regulatory assets or liabilities if it is probable that such amounts will be
recovered from or returned to customers in future rates.
The state of Idaho allows a
three-percent investment tax credit on qualifying plant additions. Investment
tax credits earned on regulated assets are deferred and amortized to income
over the estimated service lives of the related properties. Credits earned on
non-regulated assets or investments are recognized in the year earned.
Income taxes are discussed in
more detail in Note 2.
83
Earnings Per Share
The following table presents the
computation of IDACORPs basic and diluted earnings per common share (in
thousands, except for per share amounts):
|
|
Year ended December 31, |
||||||||||
|
|
2008 |
|
2007 |
|
2006 |
||||||
Numerator: |
|
|
|
|
|
|
|
|
|
|||
|
Income from continuing operations |
|
$ |
98,414 |
|
$ |
82,272 |
|
$ |
100,075 |
||
Denominator: |
|
|
|
|
|
|
|
|
|
|||
|
Weighted-average shares outstanding - basic* |
|
|
45,147 |
|
|
44,151 |
|
|
42,713 |
||
|
Effect of dilutive securities: |
|
|
|
|
|
|
|
|
|
||
|
|
Options |
|
|
37 |
|
|
45 |
|
|
93 |
|
|
|
Restricted Stock |
|
|
148 |
|
|
95 |
|
|
68 |
|
|
|
|
Weighted-average shares outstanding diluted |
|
|
45,332 |
|
|
44,291 |
|
|
42,874 |
|
|
|
|
|
|
|
|
|
|
|||
Basic earnings per share from continuing operations |
|
$ |
2.18 |
|
$ |
1.86 |
|
$ |
2.34 |
|||
Diluted earnings per share from continuing operations |
|
$ |
2.17 |
|
$ |
1.86 |
|
$ |
2.34 |
|||
|
|
|
|
|
|
|
|
|
|
|||
*Weighted average shares outstanding-basic excludes non-vested shares issued under stock compensation plans. |
||||||||||||
|
||||||||||||
The diluted EPS computation
excluded 556,518 options in 2008, 487,100 options in 2007 and 538,950 options
in 2006, because the options exercise prices were greater than the average
market price of the common stock during those years. In total, 783,985 options
were outstanding at December 31, 2008, with expiration dates between 2010 and
2015.
Comprehensive Income
Comprehensive income includes net
income, unrealized holding gains and losses on available-for-sale marketable
securities and amounts related to a deferred compensation plan for certain
senior management employees and directors called the Senior Management Security
Plan (SMSP). The following table presents IDACORPs and IPCs accumulated
other comprehensive loss balance at December 31 (net of tax):
|
2008 |
|
2007 |
|||
|
(thousands of dollars) |
|||||
Unrealized holding gains on available-for-sale securities |
$ |
- |
|
$ |
568 |
|
SMSP |
|
(8,707) |
|
|
(6,724) |
|
|
Total |
$ |
(8,707) |
|
$ |
(6,156) |
|
|
|
|
|
|
|
Other
Accounting Policies
Debt discount, expense and premium
are deferred and being amortized over the terms of the respective debt issues.
Reclassifications and
Revision
Certain items previously reported for
years prior to 2008 have been reclassified to conform to the current years
presentation. The reclassifications that were made to prior year amounts are
as follows: Non-utility additions were reclassified to other from additions to
property, plant and equipment, and proceeds from the sale of non-utility assets
were moved from other to their own line in the investing section of IDACORPs
consolidated statements of cash flows; other assets was combined with other in
the financing section of IDACORPs and IPCs consolidated statements of cash
flows; and notes receivable was combined with other receivables in the current
assets section of IPCs consolidated balance sheets. The Demand-side
management line title was changed to Energy efficiency programs to reflect
the terminology commonly used for these programs. Net income and shareholders
equity were not affected by these reclassifications and revision.
84
New Accounting
Pronouncements
SFAS 141(R):
In December 2007, the
FASB issued SFAS 141(R),
Business Combinations (Revised December 2007)
.
SFAS 141(R) establishes principles and requirements for how an acquirer in a
business combination: (1) recognizes and measures in its financial statements
the identifiable assets acquired, the liabilities assumed, and any
noncontrolling interest in the acquiree; (2) recognizes and measures the
goodwill acquired in the business combination or a gain from a bargain
purchase; and (3) determines what information to disclose to enable users of
the financial statements to evaluate the nature and financial effects of the
business combination. SFAS 141(R) applies prospectively to business
combinations for which the acquisition date is on or after the beginning of the
first annual reporting period beginning on or after December 15, 2008. An
entity may not apply it before that date. The adoption of SFAS 141(R) did not
have a material impact on the consolidated financial statements of IDACORP and
IPC.
SFAS 160:
In December 2007, the FASB issued SFAS 160,
Noncontrolling
Interests in Consolidated Financial Statements.
Among other things, SFAS
160 establishes a standard for the way noncontrolling interests (also called
minority interests) are presented in consolidated financial statements and
standards for accounting for changes in ownership interests. SFAS 160 is
effective for fiscal years beginning on or after December 15, 2008. An entity
may not apply it before that date. The adoption of SFAS 160 did not have a
material impact on the consolidated financial statements of IDACORP and IPC.
SFAS 161:
In March 2008, the FASB issued SFAS 161,
Disclosures
about Derivative Instruments and Hedging Activitiesan amendment of FASB
Statement No. 133
. SFAS 161 encourages, but does not require, comparative
disclosures for earlier periods at initial adoption. SFAS 161 changes the
disclosure requirements for derivative instruments and hedging activities.
Entities are required to provide enhanced disclosures about (1) how and why an
entity uses derivative instruments, (2) how derivative instruments and related
hedged items are accounted for under Statement 133 and its related
interpretations, and (3) how derivative instruments and related hedged items
affect an entitys financial position, financial performance, and cash flows.
SFAS 161 is effective for financial statements issued for fiscal years and
interim periods beginning after November 15, 2008, with early application
encouraged. The adoption of SFAS 161 did not have a material impact on the
consolidated financial statements of IDACORP and IPC.
SFAS 163:
In May 2008, the FASB issued SFAS 163,
Accounting
for Financial Guarantee Insurance Contractsan interpretation of FASB Statement
No. 60.
SFAS 163 is generally effective for financial statements issued
for fiscal years beginning after December 15, 2008. SFAS 163 did not impact
the consolidated financial statements of IDACORP and IPC.
FSP EITF 03-6-1:
In June 2008, the FASB issued FSP EITF 03-6-1,
Determining
Whether Instruments Granted in Share-Based Payment Transactions Are
Participating Securities
. Under the guidance in FSP EITF 03-6-1, unvested
share-based payment awards that contain non-forfeitable rights to dividends or
dividend equivalents (whether paid or unpaid) are participating securities and
shall be included in the computation of earnings per share pursuant to the two-class
method described in SFAS No. 128,
Earnings per Share.
FSP EITF 03-6-1
is effective for financial statements issued for fiscal years beginning after
December 15, 2008. All prior-period earnings per share data presented must be
adjusted retrospectively, and early application is not permitted. The adoption
of EITF 03-6-1 did not have a material impact on the consolidated financial
statements of IDACORP and IPC.
FSP FAS 142-3:
In April 2008, the FASB issued FSP FAS 142-3,
Determination of the Useful
Life of Intangible Assets.
FSP FAS 142-3 removes the requirement of SFAS
142,
Goodwill and Other Intangible Assets,
for an entity to consider,
when determining the useful life of an acquired intangible asset, whether the
intangible asset can be renewed without substantial cost or material
modifications to the existing terms and conditions associated with the
intangible asset. FSP FAS 142-3 replaces the previous useful-life assessment
criteria with a requirement that an entity consider its own experience in
renewing similar arrangements. If the entity has no relevant experience, it
would consider market participant assumptions regarding renewal. FSP FAS 142-3
is effective for financial statements issued for fiscal years beginning after
December 15, 2008. The adoption of FSP FAS 142-3 did not have a material
impact on the consolidated financial statements of IDACORP and IPC.
85
2. INCOME TAXES:
The
components of the net deferred tax liability are as follows:
|
IDACORP |
|
IPC |
||||||||||
|
2008 |
|
2007 |
|
2008 |
|
2007 |
||||||
|
(thousands of dollars) |
||||||||||||
Deferred tax assets: |
|
|
|
|
|
|
|
|
|
|
|
||
|
Regulatory liabilities |
$ |
44,341 |
|
$ |
42,968 |
|
$ |
44,341 |
|
$ |
42,968 |
|
|
Advances for construction |
|
9,305 |
|
|
10,172 |
|
|
9,305 |
|
|
10,172 |
|
|
Deferred compensation |
|
17,811 |
|
|
17,800 |
|
|
17,052 |
|
|
16,423 |
|
|
Emission allowances |
|
- |
|
|
6,921 |
|
|
- |
|
|
6,921 |
|
|
Partnership investments |
|
1,255 |
|
|
572 |
|
|
1,255 |
|
|
572 |
|
|
Tax credits |
|
76,597 |
|
|
53,770 |
|
|
- |
|
|
- |
|
|
Retirement benefits |
|
85,034 |
|
|
20,753 |
|
|
85,034 |
|
|
20,753 |
|
|
Other |
|
15,871 |
|
|
10,853 |
|
|
15,029 |
|
|
8,810 |
|
|
|
Total |
|
250,214 |
|
|
163,809 |
|
|
172,016 |
|
|
106,619 |
Deferred tax liabilities: |
|
|
|
|
|
|
|
|
|
|
|
||
|
Property, plant and equipment |
|
246,424 |
|
|
227,337 |
|
|
246,424 |
|
|
227,337 |
|
|
Regulatory assets |
|
333,882 |
|
|
308,290 |
|
|
333,882 |
|
|
308,290 |
|
|
Conservation programs |
|
1,902 |
|
|
3,169 |
|
|
1,902 |
|
|
3,169 |
|
|
PCA |
|
62,820 |
|
|
45,008 |
|
|
62,820 |
|
|
45,008 |
|
|
Partnership investments |
|
13,060 |
|
|
13,006 |
|
|
- |
|
|
- |
|
|
Retirement benefits |
|
69,334 |
|
|
6,945 |
|
|
69,334 |
|
|
6,945 |
|
|
Other |
|
961 |
|
|
564 |
|
|
961 |
|
|
564 |
|
|
|
Total |
|
728,383 |
|
|
604,319 |
|
|
715,323 |
|
|
591,313 |
Net deferred tax liabilities |
$ |
478,169 |
|
$ |
440,510 |
|
$ |
543,307 |
|
$ |
484,694 |
||
|
|
|
|
|
|
|
|
|
|
|
|
A
reconciliation between the statutory federal income tax rate and the effective
tax rate is as follows:
87
|
|
IDACORP |
|
IPC |
|||||||||||
|
|
2008 |
|
2007 |
|
2006 |
|
2008 |
|
2007 |
|
2006 |
|||
|
|
(thousands of dollars) |
|||||||||||||
Federal income tax expense at |
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
35% statutory rate |
$ |
41,165 |
$ |
33,601 |
$ |
40,408 |
$ |
46,100 |
$ |
39,188 |
$ |
48,262 |
||
Change in taxes resulting from: |
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
AFUDC |
|
(3,577) |
|
(4,757) |
|
(3,542) |
|
(3,577) |
|
(4,757) |
|
(3,542) |
||
|
Capitalized interest |
|
1,729 |
|
2,289 |
|
1,394 |
|
1,729 |
|
2,289 |
|
1,394 |
||
|
Investment tax credits |
|
(3,490) |
|
(3,578) |
|
(3,513) |
|
(3,490) |
|
(3,578) |
|
(3,513) |
||
|
Repair allowance |
|
(2,450) |
|
(2,450) |
|
(2,450) |
|
(2,450) |
|
(2,450) |
|
(2,450) |
||
|
Removal costs |
|
(2,954) |
|
(3,787) |
|
(1,912) |
|
(2,954) |
|
(3,787) |
|
(1,912) |
||
|
Pension accrual |
|
- |
|
1,022 |
|
1,902 |
|
- |
|
1,022 |
|
1,902 |
||
|
Capitalized overhead costs |
|
(4,200) |
|
(4,200) |
|
(2,940) |
|
(4,200) |
|
(4,200) |
|
(2,940) |
||
|
Tax accounting method change |
|
- |
|
- |
|
6,122 |
|
- |
|
- |
|
6,122 |
||
|
Uncertain tax positions |
|
1,280 |
|
(3,586) |
|
- |
|
1,280 |
|
(3,586) |
|
- |
||
|
Settlement of prior years tax |
|
|
|
|
|
|
|
|
|
|
|
|
||
|
|
returns |
|
(2,753) |
|
- |
|
(7,465) |
|
(2,761) |
|
- |
|
(8,144) |
|
|
State income taxes, net of |
|
|
|
|
|
|
|
|
|
|
|
|
||
|
|
federal benefit |
|
3,842 |
|
5,810 |
|
6,606 |
|
4,601 |
|
6,618 |
|
7,820 |
|
|
Depreciation |
|
5,562 |
|
7,576 |
|
5,757 |
|
5,562 |
|
7,576 |
|
5,757 |
||
|
Affordable housing tax credits |
|
(11,437) |
|
(14,541) |
|
(19,218) |
|
- |
|
- |
|
- |
||
|
Other, net |
|
(3,517) |
|
332 |
|
(5,772) |
|
(2,240) |
|
1,051 |
|
(4,795) |
||
Total income tax expense |
$ |
19,200 |
$ |
13,731 |
$ |
15,377 |
$ |
37,600 |
$ |
35,386 |
$ |
43,961 |
|||
|
Effective tax rate |
|
16.3% |
|
14.3% |
|
13.3% |
|
28.5% |
|
31.6% |
|
31.9% |
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
The
items comprising income tax expense are as follows:
|
|
IDACORP |
|
IPC |
||||||||||
|
|
2008 |
|
2007 |
|
2006 |
|
2008 |
|
2007 |
|
2006 |
||
|
|
(thousands of dollars) |
||||||||||||
Income taxes currently payable: |
|
|
|
|
|
|
|
|
|
|
|
|
||
|
Federal |
$ |
13,801 |
$ |
9,573 |
$ |
28,712 |
$ |
16,390 |
$ |
8,916 |
$ |
52,142 |
|
|
State |
|
1,541 |
|
(3,105) |
|
4,254 |
|
(3,602) |
|
(6,202) |
|
5,293 |
|
|
|
Total |
|
15,342 |
|
6,468 |
|
32,966 |
|
12,788 |
|
2,714 |
|
57,435 |
Income taxes deferred: |
|
|
|
|
|
|
|
|
|
|
|
|
||
|
Federal |
|
18,709 |
|
8,035 |
|
(17,379) |
|
33,224 |
|
28,148 |
|
(14,161) |
|
|
State |
|
(3,645) |
|
926 |
|
(537) |
|
2,794 |
|
6,223 |
|
360 |
|
|
|
Total |
|
15,064 |
|
8,961 |
|
(17,916) |
|
36,018 |
|
34,371 |
|
(13,801) |
Uncertain tax positions: |
|
|
|
|
|
|
|
|
|
|
|
|
||
|
Federal |
|
(12,763) |
|
(3,345) |
|
- |
|
(12,763) |
|
(3,345) |
|
- |
|
|
State |
|
(712) |
|
(241) |
|
- |
|
(712) |
|
(241) |
|
- |
|
|
|
Total |
|
(13,475) |
|
(3,586) |
|
- |
|
(13,475) |
|
(3,586) |
|
- |
Investment tax credits: |
|
|
|
|
|
|
|
|
|
|
|
|
||
|
Deferred |
|
5,759 |
|
5,466 |
|
3,840 |
|
5,759 |
|
5,465 |
|
3,840 |
|
|
Restored |
|
(3,490) |
|
(3,578) |
|
(3,513) |
|
(3,490) |
|
(3,578) |
|
(3,513) |
|
|
|
Total |
|
2,269 |
|
1,888 |
|
327 |
|
2,269 |
|
1,887 |
|
327 |
Total income tax expense |
$ |
19,200 |
$ |
13,731 |
$ |
15,377 |
$ |
37,600 |
$ |
35,386 |
$ |
43,961 |
||
|
|
|
|
|
|
|
|
|
|
|
|
|
IDACORPs tax allocation
agreement provides that each member of its consolidated group compute its
income taxes on a separate company basis. Amounts payable or refundable are
settled through IDACORP.
Tax
Credits Carryforwards
As of December 31, 2008, IDACORP had $57.9
million of general business credit carryforward for federal income tax
purposes, and $18.7 million of Idaho investment tax credit carryforward. The
general business credit carryforward period expires from 2025 to 2028, and the
Idaho investment tax credit expires from 2019 to 2022.
FIN
48
IDACORP and IPC adopted FASB
Interpretation No. 48,
Accounting for Uncertainty in Income Taxes an
interpretation of FASB Statement No. 109
(FIN 48) on January 1, 2007, as
required. IPC recorded an increase of $15.1 million to 2007 opening retained
earnings for the cumulative effect of adopting FIN 48. A reconciliation of the
beginning and ending amount of unrecognized tax benefits is as follows (in
thousands of dollars):
|
|
2008 |
|
2007 |
Balance at January 1, |
$ |
17,594 |
$ |
21,180 |
Additions for tax positions of prior years |
|
1,280 |
|
848 |
Reductions for tax positions of prior years |
|
(10,426) |
|
(4,434) |
Settlements with taxing authorities |
|
(4,329) |
|
- |
Balance at December 31, |
$ |
4,119 |
$ |
17,594 |
|
|
|
|
|
If
recognized, the $4.1 million balance of unrecognized tax benefits would affect IDACORPs
and IPCs effective tax rates.
Since
2006, IPC has been disputing the Internal Revenue Services (IRS) disallowance
of IPCs use of the simplified service cost method (SSCM) of uniform
capitalization for tax years 2001-2004. The dispute has been under review with
the IRS Appeals Office. In December 2008, the Appeals Office informed IDACORP
that the SSCM settlement computations were complete. IDACORP reviewed the final
computations and agreed to the result. The settlement was submitted to the
U.S. Congress Joint Committee on Taxation (JCT) for review in January 2009.
88
In
November 2006, IDACORP made a $44.9 million refundable tax deposit with the IRS
related to the disputed income tax assessment for SSCM. In May 2008, IDACORP
withdrew $20 million from the deposit. Approximately $21 million from the
deposit was applied to the settled income tax deficiency and interest charges
with the remaining balance refunded to IDACORP.
The
IRS completed its examination of IDACORPs 2004 tax year in August 2008 and its
2005 tax year in October 2008. The 2004 examination report was submitted for
JCT review as part of the SSCM settlement and the 2005 report was submitted in
November 2008. IDACORP expects the JCT review process for 2001-2005 to be
completed in 2009. As of December 31, 2008, all uncertain tax positions
related to tax years 2001-2005 were considered effectively settled.
The IRS began examining IPCs
current method of uniform capitalization in December 2008. IDACORP expects
that the examination will be completed during 2009. Resolution would result in
a decrease to IPCs unrecognized tax benefits of $4.1 million.
IDACORP and IPC recognize
interest accrued related to unrecognized tax benefits as interest expense and
penalties as other expense. During the years ended December 31, 2008 and 2007,
IPC recognized a net reduction in interest expense of $0.1 million and $1
million, respectively. IPC had accrued interest of $0.2 million and $5.5
million as of December 31, 2008 and 2007, respectively. No penalties are
accrued.
IDACORP and IPC are subject
to examination by their major tax jurisdictions U.S. federal and state of
Idaho. The open tax years for federal and Idaho are 2006-2008 and 2005-2008,
respectively. The IRS began its examination of 2006 in December 2008. IDACORP
and IPC are unable to predict the outcome of this examination.
3. COMMON STOCK AND STOCK-BASED COMPENSATION:
IDACORP Common Stock
The following table summarizes common
stock issued and reserved:
|
Shares issued |
Shares reserved at |
|||
|
2008 |
2007 |
2006 |
December 31, 2008 |
|
Dividend reinvestment and stock purchase plan |
169,229 |
150,458 |
145,508 |
3,113,319 |
|
Employee savings plan |
111,021 |
99,562 |
99,248 |
1,970,716 |
|
Restricted stock plan |
16,149 |
- |
- |
297,965 |
|
Long-term incentive and compensation plan |
115,730 |
26,292 |
467,791 |
2,403,404 |
|
Continuous equity program |
1,453,967 |
881,337 |
536,518 |
2,628,178 |
|
|
Total |
1,866,096 |
1,157,649 |
1,249,065 |
10,413,582 |
|
|
|
|
|
|
On December 15, 2005, IDACORP
entered into a Sales Agency Agreement (2005 Agency Agreement) with BNY Capital
Markets, Inc. (BNYCM), as IDACORPs agent, for the offer and sale by IDACORP of
up to 2,500,000 shares of its common stock from time to time in at-the-market
offerings. IDACORP issued 881,337 shares under the 2005 Agency Agreement in
2007 for proceeds of $28.5 million. In 2008, IDACORP sold the remaining
1,082,145 shares of common stock under the 2005 Agency Agreement at an average
price of $28.56, including 879,145 shares in the fourth quarter 2008 at an
average price of $28.11 per share.
On December 5, 2008, IDACORP
entered into a new Sales Agency Agreement (2008 Agency Agreement) with BNY
Mellon Capital Markets, LLC (BNYMCM), as IDACORPs agent, for the offer and
sale of up to 3,000,000 shares of its common stock from time to time in at-the-market
offerings. In December 2008, IDACORP sold 371,822 shares under the 2008 Agency
Agreement at an average price of $29.18 per share.
Dividend Restrictions:
IPCs articles of incorporation contain restrictions
on the payment of dividends on its common stock if preferred stock dividends
are in arrears. IPC has no outstanding preferred stock. Also, certain
provisions of credit facilities contain restrictions on the ratio of debt to
total capitalization.
IPC must obtain the approval
of the Oregon Public Utility Commission (OPUC) before it could directly or
indirectly loan funds or issue notes or give credit on its books to IDACORP.
89
IPC Common Stock
In 2008, 2007 and 2006, IDACORP
contributed $37 million, $51 million and $47 million respectively, of
additional equity to IPC. No additional shares of IPC common stock were
issued.
Rights Agreement
On September 10, 2008, the Rights
Agreement between IDACORP and Wells Fargo Bank, N. A., as successor to The Bank
of New York, as rights agent, dated as of September 10, 1998, as amended
(Rights Agreement), and the preferred share purchase rights (rights) issued
thereunder expired in accordance with their terms. As a result, shares of
IDACORP common stock are no longer accompanied by a right to purchase, under
certain circumstances, one one-hundredth of a share of IDACORPs A Series
Preferred Stock. IDACORP common shareholders were not entitled to any payment
as a result of the expiration of the Rights Agreement and the rights issued
thereunder.
Stock-Based Compensation
IDACORP has three share-based
compensation plans. IDACORPs employee plans are the 2000 Long-Term Incentive
and Compensation Plan (LTICP) and the 1994 Restricted Stock Plan (RSP). These
plans are intended to align employee and shareholder objectives related to
IDACORPs long-term growth. IDACORP also has one non-employee plan, the
Director Stock Plan (DSP). The purpose of the DSP is to increase directors
stock ownership through stock-based compensation.
The LTICP for officers, key
employees and directors permits the grant of nonqualified stock options,
incentive stock options, stock appreciation rights, restricted stock,
restricted stock units, performance units, performance shares and other
awards. The RSP permits only the grant of restricted stock or performance-based
restricted stock. At December 31, 2008, the maximum number of shares available
under the LTICP and RSP were 1,568,551 and 68,027, respectively.
The following table shows the
compensation cost recognized in income and the tax benefits resulting from
these plans, as well as the amounts allocated to IPC for those costs associated
with IPCs employees (in thousands of dollars):
|
IDACORP |
IPC |
||||||||||
|
2008 |
2007 |
2006 |
2008 |
2007 |
2006 |
||||||
Compensation cost |
$ |
3,897 |
$ |
2,745 |
$ |
2,692 |
$ |
3,683 |
$ |
2,473 |
$ |
1,458 |
Income tax benefit |
$ |
1,524 |
$ |
1,073 |
$ |
1,053 |
$ |
1,440 |
$ |
967 |
$ |
570 |
|
|
|
|
|
|
|
|
|
|
|
|
|
No equity compensation costs
have been capitalized.
Stock awards:
Restricted stock awards have vesting periods of up to
four years. Restricted stock awards entitle the recipients to dividends and
voting rights, and unvested shares are restricted to disposition and subject to
forfeiture under certain circumstances. The fair value of restricted stock
awards is measured based on the market price of the underlying common stock on
the date of grant and charged to compensation expense over the vesting period
based on the number of shares expected to vest.
Performance-based restricted
stock awards have vesting periods of three years. Performance awards entitle
the recipients to voting rights, and unvested shares are restricted to
disposition, subject to forfeiture under certain circumstances, and subject to
meeting specific performance conditions. Based on the attainment of the
performance conditions, the ultimate award can range from zero to 150 percent
of the target award. For awards granted prior to 2006, dividends were paid to
recipients at the time they were paid on the common stock. Beginning with the
2006 awards, dividends are accumulated and will be paid out only on shares that
eventually vest.
The performance goals for the
2008 awards are independent of each other and equally weighted, and are based on
two metrics, cumulative earnings per share (CEPS) and total shareholder return
(TSR) relative to a peer group. The fair value of the CEPS portion is based on
the market value at the date of grant, reduced by the loss in time-value of the
estimated future dividend payments, using an expected quarterly dividend of
$0.30. The fair value of the TSR portion is estimated using a statistical
model that incorporates the probability of meeting performance targets based on
historical returns relative to the peer group. Both performance goals are
measured over the three-year vesting period and are charged to compensation
expense over the vesting period based on the number of shares expected to vest.
90
A summary of restricted stock
and performance share activity is presented below. IPC share amounts represent
the portion of IDACORP amounts related to IPC employees:
|
IDACORP |
IPC |
||||
|
|
Weighted- |
|
Weighted- |
||
|
|
average |
|
Average |
||
|
Number of |
Grant Date |
Number of |
Grant Date |
||
|
Shares |
Fair Value |
Shares |
Fair Value |
||
Nonvested shares at January 1, 2008 |
263,642 |
$ |
28.17 |
243,496 |
$ |
28.20 |
Shares granted |
127,538 |
|
25.35 |
124,031 |
|
25.35 |
Shares forfeited |
(40,619) |
|
29.12 |
(40,024) |
|
29.11 |
Shares vested |
(24,768) |
|
31.21 |
(24,246) |
|
31.21 |
Nonvested shares at December 31, 2008 |
325,793 |
$ |
26.72 |
303,257 |
$ |
26.68 |
|
|
|
|
|
|
|
The total fair value of
shares vested during the years ended December 31, 2008, 2007 and 2006 was $0.8
million, $0.9 million and $0.6 million, respectively. At December 31, 2008,
IDACORP had $2.7 million of total unrecognized compensation cost related to
nonvested share-based compensation that was expected to vest. IPCs share of
this amount was $2.5 million. These costs are expected to be recognized over a
weighted-average period of 1.70 years. IDACORP uses original issue and/or
treasury shares for these awards.
Stock options:
Stock option awards are granted with exercise prices
equal to the market value of the stock on the date of grant. The options have
a term of 10 years from the grant date and vest over a five-year period. The
fair value of each option is amortized into compensation expense using graded-vesting.
Beginning in 2006, stock options are not a significant component of share-based
compensation awards under the LTICP.
The fair values of all stock
option awards have been estimated as of the date of the grant by applying a
binomial option pricing model. The application of this model involves
assumptions that are judgmental and sensitive in the determination of
compensation expense. The following key assumptions were used in determining
the fair value of options granted:
|
2008 |
2007 |
2006 |
Dividend yield, based on current dividend and stock price on grant date |
- |
- |
3.7% |
Expected stock price volatility, based on IDACORP historical volatility |
- |
- |
18% |
Risk-free interest rate based on U.S. Treasury composite rate |
- |
- |
4.92% |
Expected term based on the SEC simplified method |
- |
- |
6.50 years |
The following table presents
information about options granted and exercised (in thousands of dollars,
except for weighted-average amounts):
|
IDACORP |
IPC |
||||||||||||||||
|
2008 |
|
2007 |
|
2006 |
2008 |
|
2007 |
|
2006 |
|
|||||||
Weighted-average grant-date fair value |
$ |
- |
|
$ |
- |
|
$ |
9.96 |
$ |
- |
|
$ |
- |
|
$ |
- |
|
|
Fair value of options vested |
|
435 |
|
|
737 |
|
|
2,191 |
|
353 |
|
|
579 |
|
|
1,275 |
|
|
Intrinsic value of options exercised |
|
182 |
|
|
79 |
|
|
3,771 |
|
182 |
|
|
11 |
|
|
2,883 |
|
|
Cash received from exercises |
|
707 |
|
|
281 |
|
|
11,937 |
|
707 |
|
|
40 |
|
|
9,614 |
|
|
Tax benefits realized from exercises |
|
71 |
|
|
31 |
|
|
1,474 |
|
71 |
|
|
4 |
|
|
1,127 |
|
|
As of December 31, 2008,
there was less than $0.1 million of total unrecognized compensation cost
related to stock options. These costs are expected to be recognized over a
weighted average period of 0.6 years. IDACORP uses original issue and/or
treasury shares to satisfy exercised options.
91
IDACORPs and IPCs stock
option transactions are summarized below. IPC share amounts represent the
portion of IDACORP amounts related to IPC employees:
92
4. LONG-TERM DEBT
The following table
summarizes long-term debt at December 31:
|
2008 |
|
2007 |
||||||
|
(thousands of dollars) |
||||||||
First mortgage bonds: |
$ |
|
|
$ |
|
||||
|
7.20% Series due 2009 |
|
80,000 |
|
|
80,000 |
|||
|
6.60% Series due 2011 |
|
120,000 |
|
|
120,000 |
|||
|
4.75% Series due 2012 |
|
100,000 |
|
|
100,000 |
|||
|
4.25% Series due 2013 |
|
70,000 |
|
|
70,000 |
|||
|
6.025% Series due 2018 |
|
120,000 |
|
|
- |
|||
|
6% Series due 2032 |
|
100,000 |
|
|
100,000 |
|||
|
5.50% Series due 2033 |
|
70,000 |
|
|
70,000 |
|||
|
5.50% Series due 2034 |
|
50,000 |
|
|
50,000 |
|||
|
5.875% Series due 2034 |
|
55,000 |
|
|
55,000 |
|||
|
5.30% Series due 2035 |
|
60,000 |
|
|
60,000 |
|||
|
6.30% Series due 2037 |
|
140,000 |
|
|
140,000 |
|||
|
6.25% Series due 2037 |
|
100,000 |
|
|
100,000 |
|||
|
|
Total first mortgage bonds |
|
1,065,000 |
|
|
945,000 |
||
Pollution control revenue bonds: |
|
|
|
|
|
||||
|
Variable Rate Series 2003 due 2024 (1) |
|
49,800 |
|
|
49,800 |
|||
|
Variable Rate Series 2006 due 2026 (1) |
|
116,300 |
|
|
116,300 |
|||
|
Variable Rate Series 2000 due 2027 |
|
4,360 |
|
|
4,360 |
|||
|
|
Total pollution control revenue bonds |
|
170,460 |
|
|
170,460 |
||
American Falls bond guarantee |
|
19,885 |
|
|
19,885 |
||||
Milner Dam note guarantee |
|
9,573 |
|
|
10,636 |
||||
Unamortized discount - net |
|
(3,163) |
|
|
(3,409) |
||||
Debt related to investments in affordable housing |
|
8,224 |
|
|
18,438 |
||||
Other subsidiary debt |
|
- |
|
|
7,326 |
||||
Term Loan Credit Facility |
|
166,100 |
|
|
- |
||||
Purchase of pollution control revenue bonds |
|
(166,100) |
|
|
- |
||||
|
Total |
|
1,269,979 |
|
|
1,168,336 |
|||
Current maturities of long-term debt |
|
(86,528) |
|
|
(11,456) |
||||
|
|
|
|
|
|
||||
|
|
Total long-term debt |
$ |
1,183,451 |
|
$ |
1,156,880 |
||
|
|
|
|
|
|
|
|
||
(1) |
Humboldt County and Sweetwater County Pollution Control Revenue bonds are secured by first mortgage bonds, bringing the |
||||||||
|
|
total first mortgage bonds outstanding at December 31, 2008, to $1.231 billion. |
|||||||
|
|
||||||||
At December 31, 2008, the
maturities for the aggregate amount of long-term debt outstanding were (in
thousands of dollars):
|
2009 |
2010 |
2011 |
2012 |
2013 |
Thereafter |
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
IPC |
$ |
81,064 |
$ |
1,064 |
$ |
121,064 |
$ |
101,064 |
$ |
71,064 |
$ |
886,435 |
|
Other subsidiary debt |
|
5,464 |
|
2,760 |
|
- |
|
- |
|
- |
|
- |
|
|
Total |
$ |
86,528 |
$ |
3,824 |
$ |
121,064 |
$ |
101,064 |
$ |
71,064 |
$ |
886,435 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2008 and
2007, the overall effective cost of IPCs outstanding debt was 5.59 percent and
5.72 percent, respectively.
93
Long-Term
Financing
On November 20, 2008, IDACORP filed a
registration statement for debt securities and common stock. In this filing,
the Company was not registering additional securities, but rather was replacing
two prior shelf registration statements that had been effective for more than
three years. IDACORP has approximately $588 million remaining on the new shelf
registration statement that can be used for the issuance of debt securities or
common stock.
On
April 3, 2008, IPC entered into a Selling Agency Agreement with each of Banc of
America Securities LLC, BNY Capital Markets, Inc., J.P. Morgan Securities Inc.,
KeyBanc Capital Markets Inc., Lazard Capital Markets LLC, Piper Jaffray &
Co., RBC Capital Markets Corporation, SunTrust Robinson Humphrey, Inc., Wachovia
Capital Markets, LLC, Wedbush Morgan Securities Inc. and Wells Fargo
Securities, LLC in connection with the issuance and sale by IPC from time to
time of up to $350 million aggregate principal amount of First Mortgage Bonds,
Secured Medium-Term Notes, Series H. On July 10, 2008, IPC issued $120 million
of its 6.025% First Mortgage Bonds, Secured Medium-Term Notes, Series H, due
July 15, 2018. IPC used the net proceeds to pay down short-term debt. As of
December 31, 2008, IPC has $230 million remaining on a shelf registration
statement that can be used for the issuance of first mortgage bonds and
unsecured debt.
In January 2007, the IPC
Board of Directors approved an increase of the maximum amount of first mortgage
bonds issuable by IPC to $1.5 billion. The amount issuable is also restricted
by property, earnings and other provisions of the mortgage and supplemental
indentures to the mortgage. IPC may amend the indenture and increase this
amount without consent of the holders of the first mortgage bonds. The
indenture requires that IPCs net earnings must be at least twice the annual
interest requirements on all outstanding debt of equal or prior rank, including
the bonds that IPC may propose to issue. Under certain circumstances, the net
earnings test does not apply, including the issuance of refunding bonds to
retire outstanding bonds that mature in less than two years or that are of an
equal or higher interest rate, or prior lien bonds.
As of December 31, 2008, IPC
could issue under the mortgage approximately $528 million of additional first
mortgage bonds based on unfunded property additions and $532 million of
additional first mortgage bonds based on retired first mortgage bonds. These
amounts are further limited by the $1.5 billion restriction discussed above. At
December 31, 2008, unfunded property additions were approximately $880 million.
The mortgage requires IPC to
spend or appropriate 15 percent of its annual gross operating revenues for
maintenance, retirement or amortization of its properties. IPC may, however,
anticipate or make up these expenditures or appropriations within the five
years that immediately follow or precede a particular year.
The
mortgage secures all bonds issued under the indenture equally and ratably,
without preference, priority or distinction. IPC may issue additional first
mortgage bonds in the future, and those first mortgage bonds will also be
secured by the mortgage. The lien of the indenture constitutes a first
mortgage on all the properties of IPC, subject only to certain limited
exceptions including liens for taxes and assessments that are not delinquent
and minor excepted encumbrances. Certain of the properties of IPC are subject
to easements, leases, contracts, covenants, workmens compensation awards and
similar encumbrances and minor defects and clouds common to properties. The
mortgage does not create a lien on revenues or profits, or notes or accounts
receivable, contracts or choses in action, except as permitted by law during a
completed default, securities or cash, except when pledged, or merchandise or
equipment manufactured or acquired for resale. The mortgage creates a lien on
the interest of IPC in property subsequently acquired, other than excepted
property, subject to limitations in the case of consolidation, merger or sale
of all or substantially all of the assets of IPC.
At
December 31, 2008, IFS had $8 million of debt related to investments in
affordable housing. This debt had interest rates ranging from 3.65 percent to
8.17 percent and is due between 2009 and 2010. This debt is collateralized by
investments in affordable housing developments with a net book value of $36
million at December 31, 2008. Of this $8 million in debt, $5 million is non-recourse
to both IFS and IDACORP and the remainder is recourse only to IFS.
94
Pollution
Control Revenue Refunding Bonds
On April 3, 2008, IPC made a
mandatory purchase of the $49.8 million Humboldt County, Nevada Pollution
Control Revenue Refunding Bonds (Idaho Power Company Project) Series 2003 and
the $116.3 million Sweetwater County, Wyoming Pollution Control Revenue
Refunding Bonds (Idaho Power Company Project) Series 2006 (together, the
Pollution Control Bonds). IPC initiated this transaction in order to adjust
the interest rate period of the pollution control bonds from an auction
interest rate period to a weekly interest rate period, effective April 3,
2008. The pollution control bonds remain outstanding and have not been retired
or cancelled. The maximum interest rate is 14 percent for the Sweetwater bonds
and at specified rates capped at 12 percent for the Humboldt bonds.
The
regularly scheduled principal and interest payments on the Series 2006 bonds
and principal and interest payments on the bonds upon mandatory redemption on
determination of taxability are insured by a financial guaranty insurance
policy issued by Ambac Assurance Corporation.
Term
Loan Credit Agreement
IPC entered into a $170 million Term
Loan Credit Agreement, dated as of April 1, 2008, with JPMorgan Chase Bank,
N.A., as administrative agent and lender, and Bank of America, N.A., Union Bank
of California, N.A. and Wachovia Bank, National Association, as lenders. The
Term Loan Credit Agreement provided for the issuance of term loans by the
lenders to IPC on April 1, 2008, in an aggregate principal amount of $170
million. The loans were due on March 31, 2009 and could be prepaid but not
reborrowed. IPC used $166.1 million of the proceeds from the loans to effect
the mandatory purchase on April 3, 2008, of the Pollution Control Bonds (as
discussed above under Pollution Control Revenue Refunding Bonds) and $3.9
million to pay interest, fees and expenses incurred in connection with the
Pollution Control Bonds and the Term Loan Credit Agreement.
On
February 4, 2009, IPC entered into a new $170 million Term Loan Credit
Agreement with JPMorgan Chase Bank, N.A., as administrative agent and lender,
Bank of America, N.A., Union Bank, N.A. and Wachovia Bank, National
Association, as lenders. IPC used the proceeds to repay the above mentioned
Term Loan Credit Agreement. The loans are due on February 3, 2010, but are
subject to earlier payment if IPC remarkets the pollution control revenue
refunding bonds discussed below. The loans may be prepaid but may not be
reborrowed.
The loans bear interest at
either a floating rate or a Eurodollar rate. The floating rate is equal to (i)
the highest of (a) the prime rate announced by JPMorgan Chase Bank on such day,
(b) the sum of (1) the federal funds effective rate in effect on such day plus
(2) 0.5 percent per annum and (c) an amount equal to (1) the LIBO Reference
Rate on such day plus (2) 1 percent plus (ii) the applicable margin. The
Eurodollar rate is (i) the rate published on the Reuters BBA Libor Rates Page
3750 (or on any successor or substitute page) for dollar deposits with a
comparable maturity plus (ii) the applicable margin. The LIBO Reference Rate is
the rate appearing on the Reuters BBA Libor Rates Page 3750 (or on any
successor or substitute page) as the rate for United States dollar deposits for
a one month interest period. The applicable margin is currently 2 percent for
Eurodollar advances and 1 percent for floating rate advances, but may be
increased or decreased based upon the ratings assigned to IPCs senior
unsecured debt by Moodys and S&P.
The new Term Loan Credit
Agreement is a short-term arrangement; however, $166.1 million was classified
as long-term debt as allowed by SFAS No. 6
Classification of Short-Term
Obligations Expected to Be Refinanced
. IPC has the ability to refinance
the loans on a long-term basis by utilizing its credit facility, provided that
the aggregate of the commitments utilizing the credit facility and commercial
paper outstanding does not exceed $300 million. The remaining $3.9 million of
the loans is classified as short-term debt.
5. NOTES PAYABLE:
IDACORP has a $100 million
credit facility and IPC has a $300 million credit facility each of which
expires on April 25, 2012. Commercial paper may be issued up to the amounts
supported by the bank credit facilities. Under these facilities the companies
pay a facility fee on the commitment, quarterly in arrears, based on its rating
for senior unsecured long-term debt securities without third-party credit
enhancement as provided by Moodys and S&P.
At December 31, 2008, $25
million in loans were outstanding on IDACORPs facility and no loans were
outstanding on IPCs facility.
95
At December 31, 2008, IPC had
regulatory authority to incur up to $450 million of short-term indebtedness.
Balances and interest rates of IDACORPs short-term borrowings were as follows
at December 31 (in thousands of dollars):
|
IDACORP |
IPC |
Total |
|
||||
|
2008 |
2007 |
2008 |
2007 |
2008 |
2007 |
||
|
(thousands of dollars) |
|||||||
Balances: |
|
|
|
|
|
|
||
At the end of year |
$38,400 |
$49,860 |
$112,850 |
$136,585 |
$151,250 |
$186,445 |
||
Average during the year |
$57,734 |
$44,773 |
$151,192 |
$96,890 |
$208,927 |
$141,663 |
||
Weighted-average interest rate: |
|
|
|
|
|
|
||
At the end of year |
4.29% |
5.45% |
4.89% |
5.56% |
4.74% |
5.53% |
||
Average during the year |
3.70% |
5.44% |
3.97% |
5.54% |
3.90% |
5.51% |
||
|
|
|
|
|
|
|
||
6. REGULATORY MATTERS:
Regulatory Assets and
Liabilities
The following is a breakdown of IPCs
regulatory assets and liabilities (in thousands of dollars):
|
|
|
|
Total |
Total |
||||||
|
Remaining |
|
Not |
as of |
as of |
||||||
|
Amortization |
Earning |
Earning |
December |
December |
||||||
Description |
Period |
a Return |
a Return |
31, 2008 |
31, 2007 |
||||||
Regulatory Assets: |
|
|
|
|
|
|
|
|
|
||
|
Income Taxes |
|
$ |
- |
$ |
335,644 |
$ |
335,644 |
$ |
309,902 |
|
|
Benefit Plans (1) |
|
|
- |
|
177,348 |
|
177,348 |
|
17,765 |
|
|
Deferred Pension Costs (1) |
|
|
- |
|
10,583 |
|
10,583 |
|
2,797 |
|
|
Conservation |
2010 |
|
3,942 |
|
4,864 |
|
8,806 |
|
8,107 |
|
|
PCA Deferral |
2009 |
|
140,821 |
|
- |
|
140,821 |
|
92,323 |
|
|
FCA Deferral |
|
|
2,721 |
|
- |
|
2,721 |
|
- |
|
|
Oregon Deferral (2) |
|
|
2,878 |
|
- |
|
2,878 |
|
5,100 |
|
|
Oregon PCAM Deferral (3) |
|
|
5,400 |
|
- |
|
5,400 |
|
- |
|
|
Asset Retirement Obligations (4) |
|
|
- |
|
10,907 |
|
10,907 |
|
12,188 |
|
|
Grid West Loans |
2013 |
|
65 |
|
922 |
|
987 |
|
1,108 |
|
|
Mark-to-Market Liabilities |
|
|
- |
|
3,074 |
|
3,074 |
|
171 |
|
|
Other |
2010 |
|
77 |
|
160 |
|
237 |
|
379 |
|
|
|
Total (5) |
|
$ |
155,904 |
$ |
543,502 |
$ |
699,406 |
$ |
449,840 |
|
|
|
|
|
|
|
|
|
|
|
|
Regulatory Liabilities: |
|
|
|
|
|
|
|
|
|
||
|
Income Taxes |
|
$ |
- |
$ |
46,102 |
$ |
46,102 |
$ |
44,580 |
|
|
Conservation |
|
|
197 |
|
2 |
|
199 |
|
1,893 |
|
|
FCA Accrual (prior year) |
2009 |
|
- |
|
1,105 |
|
1,105 |
|
2,145 |
|
|
Removal Costs (4) |
|
|
- |
|
156,837 |
|
156,837 |
|
155,314 |
|
|
Deferred ITC |
|
|
- |
|
73,270 |
|
73,270 |
|
71,001 |
|
|
Mark-to-Market Assets |
|
|
- |
|
652 |
|
652 |
|
586 |
|
|
Other |
|
|
- |
|
514 |
|
514 |
|
851 |
|
|
|
Total (6) |
|
$ |
197 |
$ |
278,482 |
$ |
278,679 |
$ |
276,370 |
|
|
|
|
|
|
|
|
|
|
||
(1) See Note 8. |
|||||||||||
(2) Amortization capped at 10 percent of gross Oregon revenue per year. |
|||||||||||
(3) Amortization capped at 6 percent of gross Oregon revenue per year beginning after the Oregon Deferral amortization is completed. |
|||||||||||
(4) See Note 12. |
|||||||||||
(5) Includes $3,074 and $172 for 2008 and 2007, respectively, reported in other current assets on the balance sheets. |
|||||||||||
(6) Includes $2,413 and $2,166 for 2008 and 2007, respectively, reported in other current liabilities on the balance sheets. |
96
In the event that recovery of
costs through rates becomes unlikely or uncertain, SFAS 71 would no longer
apply. If IPC were to discontinue application of SFAS 71 for some or all of
its operations, then these items may represent stranded investments. If IPC is
not allowed recovery of these investments, it would be required to write off
the applicable portion of regulatory assets and the financial effects could be
significant.
Idaho
Rate Cases
2008 General Rate Case:
On January
30, 2009, the IPUC issued an order approving an average annual increase in
Idaho base rates, effective February 1, 2009, of 3.1 percent (approximately
$20.9 million annually), a return on equity of 10.5 percent and an overall rate
of return of 8.18 percent. On February 19, 2009, IPC filed a request for
reconsideration with the IPUC. In its filing, IPC asked the IPUC to reconsider
four areas having a Idaho jurisdictional combined revenue requirement impact of
approximately $8 million annually. Included in these areas is an item that
relates to a $3.3 million expense credit received in 2006 as a result of
successful litigation with the FERC and other federal agencies (FERC Credit).
In the order, the IPUC directed IPC to refund the FERC Credit to customers over
a five year period, thereby reducing IPCs annual revenue requirement by
approximately $0.7 million during such period. IPC believes that this was
contrary to Idaho law. If IPC is unsuccessful in its challenge of the IPUCs
ruling on FERC fees, it will recognize a loss for some or all of this amount.
2007
General Rate Case:
On June 8, 2007,
IPC filed an application with the IPUC requesting an average rate increase of
10.35 percent ($63.9 million annually). On February 28, 2008, the IPUC
approved a settlement stipulation that included an average increase in base
rates of 5.2 percent (approximately $32.1 million annually), effective March 1,
2008. The settlement did not specify an overall rate of return or a return on
equity.
Danskin
CT1 Power Plant Rate Case:
On March
7, 2008, IPC filed an application with the IPUC requesting recovery of construction
costs associated with the gas-fired Danskin CT1 plant located near Mountain
Home, Idaho. Danskin CT1 began commercial operations on March 11, 2008. IPC
requested adding to rate base approximately $65 million attributable to the
cost of constructing the generating facility and the related transmission and
interconnection facilities, which would have resulted in a base rate increase
of 1.39 percent, or approximately $9 million in annual revenues.
On May 30, 2008, the IPUC
authorized IPC to add to its rate base $64.2 million for the Danskin CT1 plant
and related facilities, effective June 1, 2008, resulting in a base rate
increase of 1.37 percent, or $8.9 million in annual revenues. Costs not
approved in this order will be included in future filings.
Deferred Net Power Supply
Costs
IPCs deferred net power supply costs
consisted of the following at December 31 (in thousands of dollars):
|
2008 |
|
2007 |
|||
Idaho PCA current year: |
|
|
|
|
|
|
|
Deferral for the 2008-2009 rate year (1) |
$ |
- |
|
$ |
85,732 |
|
Deferral for the 2009-2010 rate year |
|
93,657 |
|
|
- |
Idaho PCA true-up awaiting recovery: |
|
|
|
|
|
|
|
Authorized May 2007 |
|
- |
|
|
6,591 |
|
Authorized May 2008 |
|
47,164 |
|
|
- |
Oregon deferral: |
|
|
|
|
|
|
|
2001 costs |
|
1,663 |
|
|
2,993 |
|
2006 costs |
|
1,215 |
|
|
2,107 |
|
2008 PCAM |
|
5,400 |
|
|
- |
|
Total deferral |
$ |
149,099 |
|
$ |
97,423 |
|
||||||
(1) The 2008-2009 PCA deferral balance is reduced by $16.5 million of emission allowance sales in 2007. |
Idaho:
IPC has a PCA mechanism that provides for annual
adjustments to the rates charged to its Idaho retail customers. The PCA tracks
IPCs actual net power supply costs (fuel and purchased power less off-system
sales) and compares these amounts to net power supply costs currently being
recovered in retail rates.
97
The annual adjustments are
based on two components:
A forecast component, based on a forecast of net power supply costs in the coming year as compared to net power supply costs in base rates; and
A true-up component, based on the difference between the previous years actual net power supply costs and the previous years forecast. This component also includes a balancing mechanism so that, over time, the actual collection or refund of authorized true-up dollars matches the amounts authorized. The true-up component is calculated monthly, and interest is applied to the balance.
Prior to February 1, 2009,
the PCA mechanism provided that 90 percent of deviations in power supply costs
were to be reflected in IPCs rates for both the forecast and the true-up
components.
2008-2009 PCA:
On May 30, 2008, the IPUC approved IPCs 2008-2009
PCA and an increase to existing revenues of $73.3 million, effective June 1,
2008, which resulted in an average rate increase to IPCs customers of 10.7
percent. The IPUCs order adopted an IPUC Staff proposal to use a normal
forecast for power supply costs. The revenue increase is net of $16.5 million
of gains from the 2007 sale of excess SO
2
emission allowances,
including interest, which the IPUC ordered be applied against the PCA.
2007-2008 PCA:
On May 31, 2007, the IPUC approved IPCs 2007-2008 PCA filing. The filing
increased the PCA component of customers rates from the then-existing level,
which was $46.8 million below base rates, to a level that is $30.7 million
above those base rates. This $77.5 million increase was net of $69.1 million
of proceeds from sales of excess SO
2
emission allowances. The new
rates became effective June 1, 2007.
Emission
Allowances:
During 2007, IPC sold
35,000 SO
2
emission allowances for a total of $19.6 million. The
sales proceeds allocated to the Idaho jurisdiction were approximately $18.5
million. On April 14, 2008, the IPUC ordered that $16.4 million of these
proceeds, including interest, be used to help offset the PCA true-up balances
from the 2007-2008 PCA. The order also provided that $0.5 million may be used
to fund an energy education program.
In 2005 and early 2006, IPC
sold 78,000 SO
2
emission allowances for a total of $81.6 million.
The sales proceeds allocated to the Idaho jurisdiction were approximately $76.8
million. On May 12, 2006, the IPUC approved a stipulation that allowed IPC to
retain ten percent as a shareholder benefit with the remaining 90 percent plus
a carrying charge recorded as a customer benefit. This customer benefit was used
to partially offset the PCA true-up balance and was reflected in PCA rates in
effect from June 1, 2007, to May 31, 2008.
Oregon:
On April 30, 2007, IPC filed for an accounting order
with the OPUC to defer net power supply costs for the period from May 1, 2007,
through April 30, 2008, in anticipation of higher than normal (higher than
base) power supply expenses. In the filing, IPC included a forecast of Oregons
jurisdictional share of excess power supply costs of $5.7 million. A hearing
is set for April 16, 2009.
On April 28, 2006, IPC filed
for an accounting order with the OPUC to defer net power supply costs for the
period of May 1, 2006, through April 30, 2007. A settlement agreement was
reached with the OPUC Staff and the Citizens Utility Board in the amount of $2
million, which was approved by the OPUC on December 13, 2007.
The timing of future recovery
of Oregon power supply cost deferrals is subject to an Oregon statute that
specifically limits rate amortizations of deferred costs to six percent of
gross Oregon revenue per year. IPC is currently amortizing through rates power
supply costs associated with the western energy situation of 2000 and 2001,
which is discussed further under Note 7 - LEGAL AND ENVIRONMENTAL ISSUES -
Western Energy Proceeding at the FERC. Full recovery of the 2001 deferral is
not expected until 2009. The 2006-2007 and the 2007-2008 deferrals would have
to be amortized sequentially following the full recovery of the 2001 deferral.
Oregon Power Cost Recovery
Mechanism:
On August 17, 2007, IPC
filed an application with the OPUC requesting the approval of a power cost
recovery mechanism similar to the Idaho PCA. A joint stipulation was filed
with the OPUC on March 14, 2008, and the OPUC approved the stipulation on April
28, 2008.
98
The stipulation and OPUC
order established a power cost recovery mechanism with two components: the annual
power cost update (APCU) and the power cost adjustment mechanism (PCAM). The
combination of the APCU and the PCAM allows IPC to recover excess net power
supply costs in a more timely fashion than through the previously existing
deferral process.
APCU: The APCU allows IPC to
reestablish its Oregon base net power supply costs annually, separate from a
general rate case, and to forecast net power supply costs for the upcoming
water year. The APCU has two components: the October Update, where each
October IPC calculates its estimated normalized net power supply expenses for
the following April through March test period, and the March Forecast, where
each March IPC files a forecast of its expected net power supply expenses for
the same test period, updated for a number of variables including the most
recent stream flow data and future wholesale electric prices. On June 1 of each
year, rates are adjusted to reflect costs calculated in the APCU.
On October 29, 2007, IPC
filed the October Update portion of its 2008 APCU with the OPUC reflecting the
estimated net power supply expenses for the April 2008 through March 2009 test
period. On March 24, 2008, IPC submitted testimony to the OPUC revising its
calculation of the October Update to conform to the methodology agreed to by
the parties in the stipulation. IPC also submitted the March Forecast,
reflecting expected hydroelectric generating conditions and forward prices for
the April 2008 through March 2009 test period. The expected power supply costs
of $150 million represented an increase of approximately $23 million over the
October Update.
On May 20, 2008, the OPUC
approved IPCs 2008 APCU (comprising both the October Update and the March
Forecast) with the new rates effective June 1, 2008. The approved APCU
resulted in a $4.8 million, or 15.69 percent, increase in Oregon revenues.
On October 23, 2008, IPC
filed the October Update portion of its 2009 APCU with the OPUC. The filing,
combined with supplemental testimony filed on December 1, 2008, reflects that
revenues associated with IPCs base net power supply costs would be increased
by $1.6 million over the previous October Update, an average 4.55 percent
increase. The October Update will be combined with the March Forecast portion
of the 2009 APCU, with final rates expected to become effective on June 1,
2009.
PCAM: The PCAM is a true-up
to be filed annually in February. The filing calculates the deviation between
actual net power supply expenses incurred for the preceding calendar year and
the net power supply expenses recovered through the APCU for the same period.
Under the PCAM, IPC is subject to a portion of the business risk or benefit
associated with this deviation through application of an asymmetrical deadband (or
range of deviations) within which IPC absorbs cost increases or decreases. For
deviations in actual power supply costs outside of the deadband, the PCAM
provides for 90/10 sharing of costs and benefits between customers and IPC.
However, a collection will occur only to the extent that it results in IPCs
actual return on equity (ROE) for the year being no greater than 100 basis
points below IPCs last authorized ROE. A refund will occur only to the extent
that it results in IPCs actual ROE for that year being no less than 100 basis
points above IPCs last authorized ROE. The PCAM rate is then added to or
subtracted from the APCU rate, with new combined rates effective each June 1.
On October 6, 2008, the OPUC
provided an order clarifying that the PCAM is a deferral under the Oregon
statute. IPC expects that deferrals under the PCAM component will be subject
to the six percent limitation on annual amortization discussed above. IPC had
$5.4 million deferred under the PCAM as of December 31, 2008.
Fixed Cost Adjustment
Mechanism (FCA)
On March 12, 2007, the IPUC approved
the implementation of a FCA mechanism pilot program for IPCs residential and small
general service customers. The FCA is a rate mechanism designed to remove IPCs
disincentive to invest in energy efficiency programs by separating (or
decoupling) the recovery of fixed costs from the variable kilowatt-hour charge
and linking it instead to a set amount per customer. In the FCA, for each
customer class, the number of customers is multiplied by a fixed cost per
customer. The cost per customer is based on IPCs revenue requirement as
established in a general rate case. This authorized fixed cost recovery amount
is compared to the amount of fixed costs actually recovered by IPC. The amount
of over- or under-recovery is then returned to or collected from customers in a
subsequent rate adjustment. The pilot program began on January 1, 2007, and
runs through 2009, with the first rate adjustment occurring on June 1, 2008,
and subsequent rate adjustments occurring on June 1 of each year during its
term.
99
On March 14, 2008, IPC filed
an application requesting a $2.4 million rate reduction under the FCA pilot
program for the net over-recovery of fixed costs during 2007. On May 30, 2008,
the IPUC approved the rate reduction of $2.4 million to be distributed to
residential and small general service customer classes equally on an energy
used basis during the June 1, 2008, through May 31, 2009, FCA year. IPC
deferred $2.5 million of FCA net under-recovery of fixed costs during 2008.
Idaho Energy Efficiency
Rider (Rider) Prudency Review
IPCs Rider is the chief funding mechanism for IPCs investment in
conservation, energy efficiency and demand response programs. Effective June
1, 2008, IPC collects 2.5 percent of base revenues, or approximately $17
million annually, under the Rider. Prior to that date, IPC collected 1.5
percent of base revenues, with funding caps for residential and irrigation
customers.
In the 2008 general rate
case, IPC requested that the IPUC explicitly find that IPCs expenditures
between 2002 and 2007 of $29 million of funds obtained from the Rider were
prudently incurred and would, therefore, no longer be subject to potential disallowance.
The IPUC Staff recommended that the IPUC defer a prudency determination for
these expenditures until IPC was able to provide a comprehensive evaluation
package of its programs and efforts. IPC contended that sufficient information
had already been provided to the IPUC Staff for review.
On February 18, 2009, IPC
filed a stipulation with the IPUC reflecting an agreement with the IPUC Staff
on $14.3 million of the Rider funds. The IPUC Staff agreed that this portion
of the Rider expenditures were prudently incurred. IPC and the IPUC Staff agreed
to continue to exchange information and discuss settlement with regard to the
remaining $14.7 million, and IPC will file a pleading with the IPUC by April 1,
2009 seeking a prudency determination on the remainder. If resolution with
respect to the remaining $14.7 million cannot be reached in the proceedings
stemming from the April 1 filing, IPC and the IPUC Staff will recommend a
procedure to allow the IPUC to make such a determination.
Open Access Transmission
Tariff (OATT)
On March 24, 2006, IPC submitted a
revised OATT filing with the FERC requesting an increase in transmission
rates. In the filing, IPC proposed to move from a fixed rate to a formula
rate, which allows for transmission rates to be updated each year based on financial
and operational data IPC files annually with the FERC in its Form 1. The
formula rate request included a rate of return on equity of 11.25 percent. IPCs
filing was opposed by several affected parties. Effective June 1, 2006, the
FERC accepted IPCs proposed new rates, subject to refund pending the outcome
of the hearing and settlement process.
On August 8, 2007, the FERC
approved a settlement agreement by the parties on all issues except the
treatment of contracts for transmission service that contain their own terms,
conditions and rates that were in existence before the implementation of OATT
in 1996 (Legacy Agreements). This settlement reduced IPCs proposed new rates
and, as a result, approximately $1.7 million collected in excess of the
settlement rates between June 1, 2006, and July 31, 2007, was refunded with
interest in August 2007. As part of the settlement agreement, the FERC
established an authorized rate of return on equity of 10.7 percent.
On August 31, 2007, the FERC
Presiding Administrative Law Judge (ALJ) issued an initial decision (Initial
Decision) with respect to the treatment of the Legacy Agreements, which would
have further reduced the new transmission rates. IPC, as well as the opposing
parties, appealed the Initial Decision to the FERC. If implemented, the
Initial Decision would have required IPC to make additional refunds, including
interest, of approximately $5.4 million (including $0.4 million of interest)
for the June 1, 2006, through December 31, 2008, period. IPC previously
reserved this entire amount.
100
On January 15, 2009, the FERC
issued an Order on Initial Decision (FERC Order), which upheld the Initial
Decision of the ALJ in most respects, but modified the Initial Decision in one
respect that is unfavorable to IPC. The decision requires IPC to reduce its
transmission service rates to FERC jurisdictional customers. Furthermore, IPC
is required to make refunds to FERC jurisdictional transmission customers in
the total amount of $13.3 million (including $1.1 million in interest) for the
period since the new rates went into effect in June 2006. Based on the FERC
Order IPC has reserved an additional $7.9 million (including $0.7 million in
interest) in the fourth quarter of 2008, bringing the total reserve amount to
$13.3 million. Prior to the FERC Order, the FERC jurisdictional transmission
revenues (net of the $5 million reserve) recorded in the last seven months of
2006, all of 2007 and 2008 were $8.1 million, $13.3 million and $15.8 million,
respectively. Under the FERC Order, the transmission revenues would have been
$6.4 million in the last seven month of 2006, $11 million in 2007 and $12.6
million in 2008. Refunds were made on February 25, 2009.
IPC filed a request for
rehearing with the FERC on February 17, 2009. IPC believes that the treatment
of the Legacy Agreements conflicts with precedent. The rehearing request
asserts that the FERC order is in error by: (1) requiring IPC to include the
contract demands associated with the Legacy Agreements in the OATT formula rate
divisor rather than crediting the revenue from the Legacy Agreements against
IPCs transmission revenue requirement; (2) concluding that IPC must include
the contract demands associated with the Legacy Agreements rather than the
customers coincident peak demands; (3) concluding that the transmission rate
contained in one or more of the Legacy Agreements was not a discounted rate;
(4) failing to consider the non-monetary benefits received by IPC from the
Legacy Agreements; (5) concluding that the services provided under the Legacy
Agreements are firm services and therefore should be handled for rate purposes
in the same manner as firm services under the OATT; and (6) failing to affirm
the rate treatment that has been used for the Legacy Agreements for
approximately 30 years.
Pension Expense
In the 2003 Idaho general rate case,
the IPUC disallowed recovery of pension expense because there were no current
cash contributions being made to the pension plan. On March 20, 2007, IPC
requested that the IPUC clarify that IPC can consider future cash contributions
made to the pension plan a recoverable cost of service. On June 1, 2007, the
IPUC issued an order authorizing IPC to account for its defined benefit pension
expense on a cash basis, and to defer and account for pension expense under
SFAS 87,
Employers Accounting for Pensions
, as a regulatory asset. The
IPUC acknowledged that it is appropriate for IPC to seek recovery in its
revenue requirement of reasonable and prudently incurred pension expense based
on actual cash contributions. The regulatory asset created by this order is
expected to be amortized to expense to match the revenues received when future
pension contributions are recovered through rates. The deferral of pension
expense did not begin until $4.1 million of past contributions still recorded
on the balance sheet at December 31, 2006, were expensed. For 2007,
approximately $2.8 million was deferred to a regulatory asset beginning in the
third quarter. In 2008, $7.9 million of pension expense was deferred. IPC did
not request a carrying charge on the deferral balance.
7. COMMITMENTS AND CONTINGENCIES:
Purchase Obligations:
As of December 31, 2008, IPC had
signed agreements to purchase energy from 92 CSPP facilities with contracts ranging
from one to 30 years. Seventy-nine of these facilities, with a combined
nameplate capacity of 267 megawatts (MW), were on-line at the end of 2008; the
other 13 facilities under contract, with a combined nameplate capacity of 190
MW, are projected to come on-line during 2009 and 2010. The majority of the
new facilities will be wind resources which will generate on an intermittent
basis. During 2008, IPC purchased 756,014 megawatt-hours (MWh) from these
projects at a cost of $45.9 million, resulting in a blended price of 6.1 cents
per kilowatt hour. IPC purchased 777,147 megawatt-hours at a cost of $45
million in 2007 and 911,132 MWh at a cost of $54 million in 2006.
At December 31, 2008, IPC had
the following long-term commitments relating to purchases of energy, capacity,
transmission rights and fuel:
|
2009 |
2010 |
2011 |
2012 |
2013 |
Thereafter |
||||||||
|
(thousands of dollars) |
|||||||||||||
Cogeneration and small |
|
|
|
|
|
|
|
|
|
|
|
|
||
|
power production |
$ |
73,684 |
$ |
76,150 |
$ |
95,579 |
$ |
97,234 |
$ |
94,888 |
$ |
1,334,434 |
|
Power and transmission |
|
|
|
|
|
|
|
|
|
|
|
|
||
|
rights |
|
84,040 |
|
19,013 |
|
15,035 |
|
2,655 |
|
2,655 |
|
10,455 |
|
Fuel |
|
65,808 |
|
27,179 |
|
26,891 |
|
6,895 |
|
9,664 |
|
90,320 |
||
|
|
|
|
|
|
|
|
|
|
|
|
|
||
101
In addition, IDACORP has the
following long-term commitments for lease guarantees, equipment, maintenance
and services, and industry related fees.
|
2009 |
2010 |
2011 |
2012 |
2013 |
Thereafter |
|||||||||||||
|
(thousands of dollars) |
||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Operating leases |
$ |
3,132 |
$ |
2,785 |
$ |
2,327 |
$ |
1,799 |
$ |
1,795 |
$ |
24,054 |
|
||||||
Equipment, maintenance, |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
and service agreements |
|
82,075 |
|
23,284 |
|
21,820 |
|
1,783 |
|
1,724 |
|
6,896 |
|
|||||
FERC and other industry |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
related fees |
|
3,922 |
|
3,922 |
|
3,922 |
|
3,922 |
|
3,922 |
|
19,612 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
IDACORPs expense for
operating leases was approximately $3 million in 2008, $3 million in 2007 and
$4 million in 2006.
Guarantees
IPC has agreed to guarantee the
performance of reclamation activities at Bridger Coal Company of which Idaho
Energy Resources Co., a subsidiary of IPC, owns a one-third interest. This
guarantee, which is renewed each December, was $60 million at December 31,
2008. Bridger Coal Company has a reclamation trust fund set aside specifically
for the purpose of paying these reclamation costs. Bridger Coal Company and
IPC expect that the fund will be sufficient to cover all such costs. Because
of the existence of the fund, the estimated fair value of this guarantee is
minimal.
Legal
Proceedings
Western Energy Proceedings at the FERC:
Throughout this report, the term western energy situation
is used to refer to the California energy crisis that occurred during 2000 and
2001, and the energy shortages, high prices and blackouts in the western United
States. High prices for electricity in California and in western wholesale
markets during 2000 and 2001 caused numerous purchasers of electricity in those
markets to initiate proceedings seeking refunds. Some of these proceedings
(the western energy proceedings) remain pending before the FERC or on appeal to
the United States Court of Appeals for the Ninth Circuit (Ninth Circuit).
There are pending in the Ninth Circuit approximately 200 petitions
for review of numerous FERC orders regarding the western energy situation,
including the California refund proceeding, show cause orders with respect to
contentions of market manipulation, and the Pacific Northwest proceedings.
Decisions in these appeals may have implications with respect to other pending
cases, including those to which IDACORP, IPC or IE are parties. IDACORP, IPC
and IE intend to vigorously defend their positions in these proceedings, but
are unable to predict the outcome of these matters, except as otherwise stated
below, or estimate the impact they may have on their consolidated financial
positions, results of operations or cash flows.
California Refund:
This proceeding originated with an effort by agencies of the
State of California and investor owned utilities in California to obtain
refunds for a portion of the spot market sales from sellers of electricity into
California markets from October 2, 2000, through June 20, 2001. In April 2001,
the FERC issued an order stating that it was establishing a price mitigation
plan for sales in the California wholesale electricity market. The FERCs
order also included the potential for directing electricity sellers into
California from October 2, 2000, through June 20, 2001, to refund portions of
their spot market sales prices if the FERC determined that those prices were
not just and reasonable. In July 2001, the FERC initiated the California
refund proceeding including evidentiary hearings to determine the scope and
methodology for determining refunds. After evidentiary hearings, the FERC
issued an order on refund liability on March 26, 2003, and later denied the
numerous requests for rehearing. The FERC also required the California
Independent System Operator (Cal ISO) to make a compliance filing calculating
refund amounts. That compliance filing has been delayed on a number of
occasions and has not yet been filed with the FERC.
102
IE and other parties petitioned the Ninth
Circuit for review of the FERCs orders on California refunds. As additional
FERC orders have been issued, further petitions for review have been filed by
potential refund payors, including IE, potential refund recipients and
governmental agencies. These cases have been consolidated before the Ninth
Circuit. Since the initiation of these cases, the Ninth Circuit has convened a
series of case management proceedings to organize these complex cases, while
identifying and severing discrete cases that can proceed to briefing and
decision and staying action on all of the other consolidated cases.
In
its October 2005 decision in the first of the severed cases, the Ninth Circuit
concluded that the FERC lacked refund authority over wholesale electrical
energy sales made by governmental entities and non-public utilities. In its
August 2006 decision in the second severed case, the Ninth Circuit ruled that
all transactions that occurred within the California Power Exchange (CalPX) and
the Cal ISO markets were proper subjects of the refund proceeding, refused to
expand the proceedings into the bilateral market, approved the refund effective
date as October 2, 2000, and required the FERC to consider claims that some
market participants had violated governing tariff obligations at an earlier
date than the refund effective date and expanded the scope of the refund
proceeding to include transactions within the CalPX and Cal ISO markets outside
the limited 24-hour spot market and energy exchange transactions. These latter
aspects of the decision exposed sellers to increased claims for potential
refunds.
In
2005, the FERC established a framework for sellers wanting to demonstrate that
the generally applicable FERC refund methodology interfered with the recovery
of costs. IE and IPC made such a cost filing but it was rejected by the FERC
in March 2006. IE and IPC requested rehearing of that rejection and that
request remains pending before the FERC. IE and IPC are unable to predict how
or when the FERC might rule on the request for rehearing, but its effect is
confined to the minority of market participants that opted not to join the
settlement described below. Accordingly, IE and IPC believe
this matter will not have a material adverse effect on their consolidated
financial positions, results of operations or cash flows.
On
February 17, 2006, IE and IPC jointly filed with the California Parties
(Pacific Gas & Electric Company, San Diego Gas & Electric Company,
Southern California Edison Company, the California Public Utilities Commission,
the California Electricity Oversight Board, the California Department of Water
Resources and the California Attorney General) an Offer of Settlement at the
FERC settling matters encompassed by the
California refund proceeding, as well as other FERC proceedings and
investigations relating to the western energy matters, including IEs and IPCs
cost filing and refund obligation. A number of other parties, representing a
small minority of potential refund claims, chose to opt out of the settlement.
Under the terms of the settlement, IE and IPC assigned $24.25 million of the
rights to accounts receivable from the Cal ISO and CalPX to the California
Parties to pay into an escrow account for refunds to settling parties. Amounts
from that escrow not used for settling parties and $1.5 million of the
remaining IE and IPC receivables that are to be retained by the CalPX are
available to fund, at least partially, payment of the claims of any non-settling
parties if they prevail in the remaining litigation of this matter. Any excess
funds remaining at the end of the case are to be returned to IPC and IE.
Approximately $10.25 million of the remaining IE and IPC receivables was paid
to IE and IPC under the settlement. In addition, the California Parties
released IE and IPC from other claims stemming from the western energy market
dysfunctions. The FERC approved the Offer of
Settlement on May 22, 2006.
On October 24, 2006, the Port of Seattle petitioned the Ninth
Circuit for review of the FERC orders approving the settlement. On October 25,
2007, the Ninth Circuit lifted the stay as to the Port of Seattles appeal
along with two other cases and severed the three cases from the remainder of
the consolidated cases. On December 2, 2008, the Ninth Circuit filed an order
dismissing the Port of Seattle petitions for review. That dismissal order is
now final.
Market
Manipulation:
As part of
the California refund proceeding discussed above and the Pacific Northwest
refund proceeding discussed below, the FERC issued an order permitting
discovery and the submission of evidence regarding market manipulation by
sellers during the western energy situation.
On June 25, 2003, the FERC ordered more than 50 entities that
participated in the western wholesale power markets between January 1, 2000,
and June 20, 2001, including IPC, to show cause why certain trading practices
did not constitute gaming (gaming) or other forms of proscribed market
behavior in concert with another party (partnership) in violation of the Cal
ISO and CalPX Tariffs. In 2004, the FERC dismissed the partnership show
cause proceeding against IPC. The order dismissing IPC from the partnership
proceedings was not the subject of rehearing requests and is now final. Later
in 2004, the FERC approved a settlement of the gaming proceeding without
finding of wrongdoing by IPC. The Port of Seattle was the only party to appeal
the FERC orders approving the gaming settlement. On December
8, 2008, the Ninth Circuit issued an order dismissing that appeal. The
dismissal order is now final.
103
The
orders establishing the scope of the show cause proceedings are presently the
subject of review petitions in the Ninth Circuit. In addition to the two show
cause orders, on June 25, 2003, the FERC also issued an order instituting an
investigation of anomalous bidding behavior and practices in the western
wholesale markets for the time period May 1, 2000, through October 1, 2000, to
enable it to review evidence of economic withholding of generation. IPC, along
with more than 60 other market participants, responded to the FERC data
requests. The FERC terminated its investigations as to IPC on May 12, 2004.
Although California government agencies and California investor-owned utilities
have appealed the FERCs termination of this investigation as to IPC and more
than 30 other market participants, the claims regarding the conduct encompassed
by these investigations were released by these parties in the California refund
settlement discussed above. IE and IPC are unable to predict the outcome of
these matters, but believe that the releases govern any potential claims that
might arise and that this matter will not have a
material adverse effect on their consolidated financial positions, results of
operations or cash flows.
Pacific Northwest Refund:
On July 25, 2001, the FERC issued an order establishing a
proceeding separate from the California refund proceeding to determine whether
there may have been unjust and unreasonable charges for spot market sales in
the Pacific Northwest during the period December 25, 2000, through June 20,
2001, because
the spot market in the
Pacific Northwest was affected by the dysfunction in the California market. In late 2001, a FERC Administrative Law Judge concluded
that the contracts at issue were governed by the substantially more strict
Mobile-Sierra
standard of review rather than the just and reasonable standard, that the
Pacific Northwest spot markets were competitive and that refunds should not be
allowed. After the Judges recommendation was issued, the FERC reopened the
proceeding to allow the submission of additional evidence directly to the FERC
related to alleged manipulation of the power market by market participants. In
2003, the FERC terminated the proceeding and declined to order refunds.
Multiple parties filed petitions for review in the Ninth Circuit and in 2007
the Ninth Circuit issued an opinion, remanding to the FERC the orders that
declined to require refunds. The Ninth Circuits opinion instructed the FERC
to consider whether evidence of market manipulation would have altered the agencys
conclusions about refunds and directed the FERC to include sales to the
California Department of Water Resources proceeding. A number of parties have
sought rehearing of the Ninth Circuits decision. IE and IPC intend to
vigorously defend their positions in this proceeding, but are unable to predict
the outcome of this matter or estimate the impact it may have on their
consolidated financial positions, results of operations or cash flows.
In separate western energy proceedings,
the Ninth Circuit issued two decisions on December 19, 2006, regarding the FERCs
decision not to require repricing of certain long-term contracts. Those cases
originated with individual complaints against specified sellers which did not
include IE or IPC. The Ninth Circuit remanded to the FERC for additional
consideration the agencys use of restrictive standards of contract review. In
its decisions, the Ninth Circuit also questioned the validity of the FERCs
administration of its market-based rate regime. On June 26, 2008, the U.S.
Supreme Court issued a decision in one of these cases, Morgan Stanley Capital
Group Inc. v. Public Utility District No. 1 of Snohomish County (No. 06-1457)
(Snohomish), and revisited and clarified the
Mobile-Sierra
doctrine in
the context of fixed-rate, forward power contracts. At issue was whether, and
under what circumstances, the FERC could modify the rates in such contracts on
the grounds that there was a dysfunctional market at the time the contracts
were executed. In its decision, the Supreme Court disagreed with many of the
conclusions reached by the Ninth Circuit and upheld the application of the
Mobile-Sierra
doctrine even in cases in which it is alleged that the markets were
dysfunctional. The Supreme Court nonetheless directed the return of the case
to the FERC to (i) consider whether the challenged rates in the case
constituted an excessive burden on consumers either at the time the contracts
were formed or during the term of the contracts relative to the rates that
could have been obtained after elimination of the dysfunctional market and (ii)
clarify whether it found the evidence inadequate to support a claim that one of
the parties to a contract under consideration engaged in unlawful market
manipulation that altered the playing field for the particular contract
negotiations-that is, whether there was a causal connection between allegedly
unlawful activity and the contract rate. On November 3, 2008, the Ninth
Circuit vacated its earlier decision and remanded the case to the FERC for
further proceedings consistent with the Supreme Courts decision. On December
18, 2008, the FERC issued its order on remand, establishing settlement
proceedings and paper hearing procedures to supplement the record and permit it
to respond to the questions specified by the Supreme Court.
104
This decision is expected to have general implications for
contracts in the wholesale electric markets regulated by the FERC, and
particular implications for forward power contracts in such markets. The
Snohomish decision upholds the application of the
Mobile-Sierra
doctrine
to fixed-rate, forward power contracts even in allegedly dysfunctional markets.
IPC and IE have asserted the
Mobile-Sierra
doctrine in the
Pacific Northwest proceeding, involving spot market contracts in an allegedly
dysfunctional market. IDACORP, IPC and IE are unable to predict how the FERC
will rule on Snohomish on remand or how this decision will affect the outcome
of the Pacific Northwest proceeding.
Western Shoshone National
Council:
On April 10, 2006, the
Western Shoshone National Council (which purports to be the governing body of
the Western Shoshone Nation) and certain of its individual tribal members filed
a First Amended Complaint and Demand for Jury Trial in the U.S. District Court
for the District of Nevada, naming IPC and other unrelated entities as
defendants. Plaintiffs allege that IPCs ownership interest in certain land,
minerals, water or other resources was converted and fraudulently conveyed from
lands in which the plaintiffs had historical ownership rights and Indian title
dating back to the 1860s or before.
On May 31, 2007, the U.S. District Court granted the defendants motion to
dismiss stating that the plaintiffs claims are barred by the finality
provision of the Indian Claims Commission Act. Plaintiffs filed a motion for
reconsideration which the District Court denied. On January 25, 2008, the
District Court entered judgment in favor of IPC. Plaintiffs filed a Notice of
Appeal to the Ninth Circuit. The parties have filed briefs on appeal. Oral
argument on the appeal has not yet been scheduled. IPC intends to vigorously
defend its position in this proceeding, but is unable to predict the outcome of
this matter or estimate the impact it may have on IPCs consolidated financial
position, results of operations or cash flows.
Sierra Club Lawsuit-Bridger:
In February 2007, the Sierra Club and the Wyoming
Outdoor Council filed a complaint against PacifiCorp in federal district court
in Cheyenne, Wyoming alleging violations of air quality opacity standards at
the Jim Bridger coal fired plant in Sweetwater County, Wyoming. Opacity is an
indication of the amount of light obscured in the flue gas of a power plant. A
formal answer to the complaint was filed by PacifiCorp on April 2, 2007, in
which PacifiCorp denied almost all of the allegations and asserted a number of
affirmative defenses. IPC is not a party to this proceeding but has a one-third
ownership interest in the Plant. PacifiCorp owns a two-thirds interest and is
the operator of the Plant. The complaint alleges thousands of opacity permit
limit violations by PacifiCorp and seeks a declaration that PacifiCorp has
violated opacity limits, a permanent injunction ordering PacifiCorp to comply
with such limits, civil penalties of up to $32,500 per day per violation, and
reimbursement of the plaintiffs costs of litigation, including reasonable
attorney fees.
Discovery
in the matter was completed on October 15, 2007. Also in October 2007, the
plaintiffs and defendant filed cross-motions for summary judgment on the
alleged opacity compliance status of the Plant. The court has not yet ruled on
these motions. On July 7, 2008, the plaintiffs filed a motion requesting the
court to schedule a date for oral argument on the pending motions for summary
judgment. On July 17, 2008, PacifiCorp filed an opposition to plaintiffs
motion based on the courts order on Initial Pretrial Conference, which stated
that dispositive motions will be decided on the briefs without oral argument.
On November 19, 2008, the plaintiffs filed a motion to refer the pending
motions for summary judgment to magistrate judge for recommendation decision.
On December 2, 2008, PacifiCorp filed an opposition to plaintiffs motion. The
court has yet to rule on either motion filed by plaintiffs. IPC continues to
monitor the status of this matter but is unable to predict the outcome of this
matter or estimate the impact it may have on its consolidated financial
position, results of operations or cash flows.
Sierra Club Lawsuit Boardman:
On September 30, 2008, Sierra Club and
four other non-profit corporations filed a complaint against Portland General
Electric Company (PGE) in the U.S. District Court for the District of Oregon
alleging opacity permit limit violations at the Boardman coal-fired power plant
located in Morrow County, Oregon. The complaint also alleges violations of the
Clean Air Act, related federal regulations and the Oregon State Implementation
Plan relating to PGEs construction and operation of the plant. The complaint
seeks a declaration that PGE has violated opacity limits, a permanent
injunction ordering PGE to comply with such limits, injunctive relief requiring
PGE to remediate alleged environmental damage and ongoing impacts, civil
penalties of up to $32,500 per day per violation and the plaintiffs cost of
litigation, including reasonable attorney fees. IPC is not a party to this
proceeding but has a 10 percent ownership interest in the Boardman plant. PGE
owns 65 percent and is the operator of the plant.
105
On December 5, 2008, PGE filed a motion to
dismiss nine of the twelve claims asserted by plaintiffs in their complaint,
alleging among other arguments that certain claims are barred by the statute of
limitations or fail to state a claim upon which the court can grant relief.
Plaintiffs response to the motion is due March 6, 2009, and PGEs reply is due
April 3, 2009. IPC intends to monitor the status of this matter but is unable
to predict its outcome or what effect this matter may have on its consolidated
financial position, results of operations or cash flows.
Snake River Basin Adjudication:
IPC is engaged in the Snake River Basin
Adjudication (SRBA), a general stream adjudication, commenced in 1987, to
define the nature and extent of water rights in the Snake River basin in Idaho,
including the water rights of IPC. The initiation of the SRBA resulted from
the Swan Falls Agreement, an agreement entered into by IPC and the Governor and
Attorney General of Idaho in October 1984 to resolve litigation relating to IPCs
water rights at its Swan Falls project. IPC has filed claims to its water
rights for hydropower and other uses in the SRBA. Other water users in the
basin have also filed claims to water rights. Parties to the SRBA may file
objections to water right claims that adversely affect or injure their claimed
water rights and the Idaho District Court for the Fifth Judicial District,
which has jurisdiction over SRBA matters, then adjudicates the claims and objections
and enters a decree defining a partys water rights. IPC has filed claims for
all of its hydropower water rights in the SRBA, is actively protecting those
water rights, and is objecting to claims that may potentially injure or affect
those water rights. One such claim involves a notice of claim of ownership
filed on December 22, 2006, by the State of Idaho, for a portion of the water
rights held by IPC that are subject to the Swan Falls Agreement.
On May 10, 2007, in order to protect its claims and the
availability of water for power purposes at its facilities, and in response to
the claim of ownership filed by the State of Idaho, IPC filed a complaint and
petition for declaratory and injunctive relief regarding the status and nature
of IPCs water rights and the respective rights and responsibilities of the
parties under the Swan Falls Agreement. The complaint was filed in the Idaho
District Court for the Fifth Judicial District, the court with jurisdiction
over the SRBA, against the State of Idaho, the Governor, the Attorney General,
the Idaho Department of Water Resources (IDWR) and the Director of the IDWR.
In conjunction with the filing of the complaint and petition, IPC
filed motions with the court to stay all pending proceedings involving the
water rights of IPC and to consolidate those proceedings into a single action
where all issues relating to the Swan Falls Agreement can be determined.
IPC alleged in the complaint, among other things, that contrary to
the parties belief at the time the Swan Falls Agreement was entered into in
1984, the Snake River basin above Swan Falls was over-appropriated and as a
consequence there was not in 1984, and there currently is not, water available
for new upstream uses over and above the minimum flows established by the Swan
Falls Agreement; that because of this mutual mistake of fact relating to the
over-appropriation of the basin, the Swan Falls Agreement should be reformed;
that the states December 22, 2006, claim of ownership to IPCs water rights
should be denied; and that the Swan Falls Agreement did not subordinate IPCs
water rights to aquifer recharge.
On April 18, 2008, the court issued a Memorandum Decision and
Order on Cross-Motions for Summary Judgment upholding the Swan Falls Agreement.
Under the Swan Falls Agreement, water rights in excess of the minimum flows
established by the agreement are held in trust by the State of Idaho for the
use and benefit of IPC and the people of the State of Idaho. Water above these
minimum flows is available for subsequent consumptive beneficial uses that are
approved in accordance with state law. The court further held that to the
extent that the state is not meeting the minimum flows or it is anticipated
that the minimum flows will not be met, IPCs water rights that are held in
trust are not available for subsequent appropriations and that any
appropriations already in place may be subject to curtailment in order to meet
the minimum flows. The court found that it was not necessary to address the
issue of mutual mistake of fact relating to the over-appropriation of the basin
because it found that it was water rights that were the subject of the trust
arrangement and not the water itself. The court also stated that issues
relating to water availability relate to the administration of water rights and
should be addressed, as necessary, in an administrative action before the IDWR.
106
The court did not decide the
issue of whether the Swan Falls Agreement subordinated IPCs water rights to
groundwater recharge. The State of Idaho and IPC filed summary judgment
motions on the recharge issue and completed briefing on the issue. The court
held a hearing on December 4, 2008 on the summary judgment motions. After
argument, the court took the matter under advisement. IPC is unable to predict
how the court will rule on the issue of whether the Swan Falls Agreement
subordinated IPCs water rights to groundwater recharge. Based upon recent
developments, however, resolution of that issue is not expected to have a
significant effect on the availability of water to IPCs hydropower
facilities. IPC is cooperating with the State of Idaho and other water users
through an advisory committee in the development of the CAMP to protect and
enhance water levels in the Eastern Snake Plain Aquifer (ESPA) and the
connected Snake River. Many CAMP committee members had early expectations that
groundwater recharge would be a significant component of the plan and while
many believe that groundwater recharge is a very high-priority issue, further
study and review has revealed that significant groundwater recharge is not
feasible due to the complex hydrogeology of the ESPA, the lack of
infrastructure, and the requirement of compliance with water quality and other
environmental standards. IPC is currently engaged in a 3 to 5 year pilot
study, in cooperation with IDWR and water users, to determine the temporal and
spatial impacts and/or benefits of recharging, a maximum of 30,000 acre-feet of
water downstream of American Falls Reservoir on the ESPA Aquifer and the Snake
River.
IPC has also filed an action in federal court against the United
States Bureau of Reclamation to enforce a contract right for delivery of water
to its hydropower projects on the Snake River. In 1923, IPC and the United States
entered into a contract that facilitated the development of the American Falls
Reservoir by the United States on the Snake River in southeast Idaho. This
1923 contract entitles IPC to 45,000 acrefeet of primary storage capacity in
the reservoir and 255,000 acre-feet of secondary storage that was to be
available to IPC between October 1 of any year and June 10 of the following
year as necessary to maintain specified flows at IPCs Twin Falls power plant
below Milner Dam. IPC believes that the United States has failed to deliver
this secondary storage, at the specified flows, since 2001. As a result, IPC
filed an action in the U.S. District Court of Federal Claims in Washington,
D.C. on October 15, 2007 to recover damages from the United States for the lost
generation resulting from the reduced flows. On September 30, 2008, IPC filed
an amended complaint in which IPC seeks, in addition to damages for breach of
the 1923 contract, a prospective declaration of contractual rights so as to
prevent the United States from continued failure to fulfill its contractual and
fiduciary duties to IPC. On October 2, 2008, the court set a discovery
schedule requiring that discovery be completed and pre-trial motions filed by
October 1, 2009. The court will then set the matter for trial. IPC is unable
to predict the outcome of this action or what effect this matter may have on
its consolidated financial position, results of operations or cash flows.
Renfro Dairy:
On September 28, 2007, the principals of Renfro Dairy
in Canyon County, Idaho filed a lawsuit in the District Court of the Third
Judicial District of the State of Idaho against IDACORP and IPC. The
plaintiffs complaint asserts claims for negligence, negligence
per se
,
gross negligence, nuisance, and fraud. The claims are based on allegations
that from 1972 until at least March 2005, IPC discharged stray voltage from
its electrical facilities that caused physical harm and injury to the
plaintiffs dairy herd. Plaintiffs seek compensatory damages of not less than
$1 million.
On
June 9, 2008, IDACORP and IPC filed a motion to dismiss the complaint,
contending that the court lacks jurisdiction over the matter because plaintiffs
have failed to exhaust administrative remedies before the IPUC. The motion to
dismiss was argued and submitted on September 25, 2008. On October 30, 2008,
the court issued a decision granting the motion to dismiss. On November 13,
2008, plaintiffs filed a motion to reconsider the courts decision. On
December 22, 2008, the court denied the plaintiffs motion to reconsider. On
February 20, 2009, plaintiffs filed a notice of appeal of the courts dismissal
of the action. The companies intend to vigorously defend their position in
this proceeding and believe this matter will not have a material adverse effect
on their consolidated financial positions, results of operations or cash flows.
Oregon Trail Heights Fire:
On August 25, 2008, a fire ignited beneath an IPC
distribution line in Boise, Idaho. It was fanned by high winds and spread
rapidly, resulting in one death, the destruction of 10 homes and damage or
alleged fire related losses to approximately 30 others. Following the
investigation, the Boise Fire Department determined that the fire was linked to
a piece of line hardware on one of IPCs distribution poles and that high winds
contributed to the fire and its resultant damage.
IPC has received claims from a number of the homeowners and their
insurers and is continuing its investigation of these claims. IPC is insured
up to policy limits against liability for claims in excess of its self-insured
retention. IPC has accrued a reserve for any loss that is probable and
reasonably estimable, including insurance deductibles, and believes this matter
will not have a material adverse effect on its consolidated financial position,
results of operations or cash flows.
107
Other
Legal Proceedings:
From time to time
IDACORP and IPC are parties to legal claims, actions and complaints in addition
to those discussed above. Although they will vigorously defend against them,
they are unable to predict with certainty whether or not they will ultimately
be successful. However, based on the companies evaluation, they believe that
the resolution of these matters, taking into account existing reserves, will
not have a material adverse effect on IDACORPs or IPCs consolidated financial
positions, results of operations or cash flows.
8. BENEFIT PLANS:
SFAS 158
In
December 2006, IDACORP and IPC adopted the recognition provisions of Statement
of Financial Accounting Standards No. 158,
Employers Accounting for Defined
Benefit Pension Plans and Other Postretirement Plans - an amendment of FASB
Statements No. 87, 88, 106, and 132(R).
The
measurement provisions of SFAS 158 were adopted as of January 1, 2008 and
require that IPC measure its plan assets and benefit obligations as of its
balance sheet date. IPC already used a December 31 measurement date for its
plans, so adoption of the measurement provisions of SFAS 158 did not have any
effect on IDACORPs or IPCs results of operations or cash flows.
Pension
Plans
IPC has a noncontributory defined
benefit pension plan covering most employees. The benefits under the plan are
based on years of service and the employees final average earnings. IPCs
policy is to fund, with an independent corporate trustee, at least the minimum
required under the Employee Retirement Income Security Act of 1974 (ERISA) but
not more than the maximum amount deductible for income tax purposes. IPC was
not required to contribute to the plan in 2008, 2007 or 2006. The market-related
value of assets for the plan is equal to the fair value of the assets. Fair value
is determined by utilizing publicly quoted market values and independent
pricing services depending on the nature of the asset, as reported by the
trustee/custodian of the plan.
In
addition, IPC has a nonqualified, deferred compensation plan for certain senior
management employees and directors called the Senior Management Security Plan
(SMSP). At December 31, 2008 and 2007, approximately $39.9 million and $48.2
million, respectively, of life insurance policies and investments in marketable
securities, all of which are held by a trustee, were designated to satisfy the
projected benefit obligation of the plan but do not qualify as plan assets in
the actuarial computation of the funded status.
108
The following table
summarizes the changes in benefit obligations and plan assets of these plans:
The
following table shows the components of net periodic benefit cost for these
plans:
|
Pension Plan |
SMSP |
|||||||||||
|
2008 |
2007 |
2006 |
2008 |
2007 |
2006 |
|||||||
|
(thousands of dollars) |
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost |
$ |
14,920 |
$ |
15,213 |
$ |
14,476 |
$ |
1,278 |
$ |
1,409 |
$ |
1,473 |
|
Interest cost |
|
26,393 |
|
24,457 |
|
22,340 |
|
2,669 |
|
2,372 |
|
2,327 |
|
Expected return on assets |
|
(34,112) |
|
(33,387) |
|
(30,817) |
|
- |
|
- |
|
- |
|
Amortization of net loss |
|
- |
|
- |
|
129 |
|
489 |
|
566 |
|
844 |
|
Amortization of prior service cost |
|
650 |
|
650 |
|
664 |
|
192 |
|
173 |
|
245 |
|
|
Net periodic pension cost |
$ |
7,851 |
$ |
6,933 |
$ |
6,792 |
$ |
4,628 |
$ |
4,520 |
$ |
4,889 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prior to the adoption of SFAS
158, changes in the SMSP minimum liability increased other comprehensive income
by $2 million in 2006.
In 2009, IDACORP and IPC
expect to recognize as components of net periodic benefit cost $10 million from
amortizing amounts recorded in accumulated other comprehensive income (or as a
regulatory asset for the pension plan) as of December 31, 2008, relating to the
pension and SMSP plans. This amount consists of $8.5 million of net loss and
$0.6 million of prior service cost for the pension plan and $0.7 million of net
loss and $0.2 million of prior service cost for the SMSP.
109
The following table
summarizes the expected future benefit payments of these plans:
|
|
2009 |
|
2010 |
|
2011 |
|
2012 |
|
2013 |
|
2014-2017 |
|
|
(thousands of dollars) |
||||||||||
Pension Plan |
$ |
17,616 |
$ |
18,968 |
$ |
20,525 |
$ |
22,464 |
$ |
24,655 |
$ |
157,832 |
SMSP |
$ |
2,963 |
$ |
3,122 |
$ |
3,165 |
$ |
3,276 |
$ |
3,473 |
$ |
19,863 |
Postretirement Benefits
IPC maintains a defined benefit
postretirement plan (consisting of health care and death benefits) that covers
all employees who were enrolled in the active group plan at the time of
retirement as well as their spouses and qualifying dependents. Benefits for
employees who retire after December 31, 2002, are limited to a fixed amount,
which will limit the growth of IPCs future obligations under this plan.
The
net periodic postretirement benefit cost was as follows (in thousands of
dollars):
|
2008 |
|
2007 |
|
2006 |
|||
Service cost |
$ |
1,154 |
|
$ |
1,368 |
|
$ |
1,463 |
Interest cost |
|
3,498 |
|
|
3,512 |
|
|
3,426 |
Expected return on plan assets |
|
(2,899) |
|
|
(2,777) |
|
|
(2,523) |
Amortization of unrecognized transition obligation |
|
2,040 |
|
|
2,040 |
|
|
2,040 |
Amortization of prior service cost |
|
(535) |
|
|
(535) |
|
|
(535) |
Amortization of net loss |
|
- |
|
|
403 |
|
|
812 |
Net periodic postretirement benefit cost |
$ |
3,258 |
|
$ |
4,011 |
|
$ |
4,683 |
|
|
|
|
|
|
|
|
|
The
following table summarizes the changes in benefit obligation and plan assets
(in thousands of dollars):
110
In
2009, IDACORP and IPC expect to recognize as components of net periodic benefit
cost $2.3 million from amortizing amounts recorded in accumulated other
comprehensive income as of December 31, 2008 relating to the postretirement
plan. This amount consists of ($0.5) million of prior service cost, $0.8
million of net loss and $2.0 million of transition obligation.
Medicare
Act:
The Medicare Prescription Drug,
Improvement and Modernization Act of 2003 (Medicare Act) was signed into law in
December 2003 and established a prescription drug benefit, as well as a federal
subsidy to sponsors of retiree health care benefit plans that provide a
prescription drug benefit that is at least actuarially equivalent to Medicares
prescription drug coverage.
The
following table summarizes the expected future benefit payments of the
postretirement benefit plan and expected Medicare Part D subsidy receipts (in
thousands of dollars):
The
assumed health care cost trend rate used to measure the expected cost of health
benefits covered by the plan was 10 percent and 6.75 percent in 2008 and 2007,
respectively. The assumed health care cost trend rate for 2008 is assumed to
decrease gradually to 5 percent over ten years, and remain at that level. The
assumed dental cost trend rate used to measure the expected cost of dental
benefits covered by the plan was 5 percent and 6.75 percent in 2008 and 2007,
respectively. A 1-percentage point change in the assumed health care cost
trend rate would have the following effect (in thousands of dollars):
|
1-Percentage-Point |
||||
|
Increase |
|
Decrease |
||
|
|
|
|
|
|
Effect on total of cost components |
$ |
245 |
|
$ |
(187) |
Effect on accumulated postretirement benefit obligation |
$ |
2,136 |
|
$ |
(1,700) |
The
following table sets forth the weighted-average assumptions used at the end of
each year to determine benefit obligations for all IPC-sponsored pension and postretirement
benefits plans:
The
following table sets forth the weighted-average assumptions used to determine
net periodic benefit cost for all IPC-sponsored pension and postretirement
benefit plans:
111
|
|
Pension |
Postretirement |
||
|
|
Benefits |
Benefits |
||
|
|
2008 |
2007 |
2008 |
2007 |
Discount rate |
|
6.4% |
5.85% |
6.4% |
5.85% |
Expected long-term rate of return on assets |
|
8.5% |
8.5% |
8.5% |
8.5% |
Rate of compensation increase |
|
4.5% |
4.5% |
- |
- |
Medical trend rate |
|
- |
- |
10.0% |
6.75% |
Dental trend rate |
|
- |
- |
5.0% |
6.75% |
Plan Asset Allocations:
IPCs pension plan and postretirement benefit plan
weighted average asset allocations at December 31, 2008 and 2007, by asset
category are as follows:
Pension Asset Allocation
Policy:
The target allocations for
the portfolio by asset class are as follows:
Large-Cap Growth Stocks |
10% |
International Growth Stocks |
7% |
Large-Cap Core Stocks |
11% |
International Value Stocks |
7% |
Large-Cap Value Stocks |
10% |
Intermediate-Term Bonds |
13% |
Small-Cap Growth Stocks |
5% |
Short-Term Bonds |
10% |
Small-Cap Value Stocks |
5% |
Core Real Estate |
9% |
Micro-Cap Stocks |
3% |
Absolute Return |
4% |
Cash and Cash Equivalents |
3% |
Private Equity |
3% |
Assets
are rebalanced as necessary to keep the portfolio close to target allocations.
The
plans principal investment objective is to maximize total return (defined as
the sum of realized interest and dividend income and realized and unrealized
gain or loss in market price) consistent with prudent parameters of risk and
the liability profile of the portfolio. Emphasis is placed on preservation and
growth of capital along with adequacy of cash flow sufficient to fund current
and future payments to pensioners.
There are three major goals
in IPCs asset allocation process:
Determine if the investments have the potential to earn the rate of return assumed in the actuarial liability calculations.
Match the cash flow needs of the plan. IPC sets cash allocations sufficient to cover the current year benefit payments and bond allocations sufficient to cover at least five years of benefit payments. IPC then utilizes growth instruments (equities, real estate, venture capital) to fund the longer-term liabilities of the plan.
Maintain a prudent risk profile consistent with ERISA fiduciary standards.
Allowable
plan investments include stocks and stock funds, investment-grade bonds and
bond funds, core real estate funds, private equity funds, and cash and cash
equivalents. With the exception of real estate holdings and private equity,
investments must be readily marketable so that an entire holding can be
disposed of quickly with only a minor effect upon market price.
Rate-of-return projections for
plan assets are based on historical risk/return relationships among asset
classes. The primary measure is the historical risk premium each asset class
has delivered versus the return on 10-year U.S. Treasury Notes. This
historical risk premium is then added to the current yield on 10-year U.S.
Treasury Notes, and the result provides a reasonable prediction of future
investment performance. Additional analysis is performed to measure the
expected range of returns, as well as worstcase and best-case scenarios.
Based on the current low interest rate environment, current rate-of-return
expectations are lower than the nominal returns generated over the past 20
years when interest rates were generally much higher.
112
IPCs asset modeling process
also utilizes historical market returns to measure the portfolios exposure to
a worst-case market scenario, to determine how much performance could vary
from the expected average performance over various time periods. This worst-case
modeling, in addition to cash flow matching and diversification by asset class
and investment style, provides the basis for managing the risk associated with
investing portfolio assets.
Employee
Savings Plan
IPC has an Employee Savings Plan that
complies with Section 401(k) of the Internal Revenue Code and covers
substantially all employees. IPC matches specified percentages of employee
contributions to the plan. Matching contributions amounted to $5 million, $5
million, and $4 million in 2008, 2007 and 2006, respectively.
Postemployment Benefits
IPC provides certain benefits to
former or inactive employees, their beneficiaries and covered dependents after
employment but before retirement. These benefits include salary continuation,
health care and life insurance for those employees found to be disabled under
IPCs disability plans and health care for surviving spouses and dependents.
IPC accrues a liability for such benefits. The post employment benefit amounts
included in other deferred credits on IDACORPs and IPCs consolidated balance
sheets at December 31, 2008 and 2007 are $3.7 million and $3.5 million,
respectively.
Pension Protection Act
In 2006, the Pension Protection Act
of 2006 (the Act), which affects the manner in which many companies, including
IDACORP and IPC, administer their pension plans was signed into law. The Act
made changes to a variety of rules that apply to employee benefit plans,
including those dealing with minimum funding requirements of defined benefit
pension plans and plan investments of defined contribution pension plans. The
Act also permanently extended the pension law changes made by the Economic
Growth and Tax Relief Reconciliation Act of 2001, which had been scheduled to
sunset on December 31, 2010. This legislation became effective on January 1,
2008.
In accordance with the Act,
companies are required to be 94 percent funded for their outstanding qualified
pension obligations as of January 1, 2009, in order to avoid a scheduled series
of required annual contributions. As of December 31, 2007, qualified pension
liabilities were nearly fully funded; however, recent stock market performance
has reduced the value of pension assets during 2008. Therefore, under current
provisions of the Act, IPC will need to make additional contributions to become
fully funded over a period of seven years. Based on the value of pension
assets and interest rates as of December 31, 2008, the estimated contributions
would be approximately $45 million in 2010 and $33 million for each of 2011,
2012, and 2013. These estimates reflect the initial relief measures as passed
by Congress; however, additional measures are being proposed, which may impact
immediate funding requirements.
9. PROPERTY PLANT AND EQUIPMENT AND JOINTLY-OWNED PROJECTS:
The following table presents
the major classifications of IPCs utility plant in service, annual
depreciation provisions as a percent of average depreciable balance and
accumulated provision for depreciation for the years 2008 and 2007 (in
thousands of dollars):
|
2008 |
|
2007 |
|||||||
|
Balance |
|
Avg Rate |
|
Balance |
|
Avg Rate |
|||
Production |
$ |
1,736,670 |
|
2.34% |
|
$ |
1,639,710 |
|
2.52% |
|
Transmission |
|
742,871 |
|
2.11 |
|
|
684,399 |
|
2.13 |
|
Distribution |
|
1,254,048 |
|
2.50 |
|
|
1,175,429 |
|
2.58 |
|
General and Other |
|
296,545 |
|
7.53 |
|
|
296,801 |
|
8.29 |
|
|
Total in service |
|
4,030,134 |
|
2.73% |
|
|
3,796,339 |
|
2.95% |
Accumulated provision for depreciation |
|
(1,505,120) |
|
|
|
|
(1,468,832) |
|
|
|
|
In service - net |
$ |
2,525,014 |
|
|
|
$ |
2,327,507 |
|
|
|
|
|
|
|
|
|
|
|
|
IPC has interests in three
jointly-owned generating facilities. Under the joint operating agreements,
each participating utility is responsible for financing its share of
construction, operating and leasing costs. IPCs proportionate share of direct
operation and maintenance expenses applicable to the projects is included in
the Consolidated Statements of Income.
113
These
facilities, and the extent of IPCs participation, were as follows at December
31, 2008 (in thousands of dollars):
IPCs wholly-owned subsidiary
IERCo, is a joint venturer in Bridger Coal Company, which operates the mine
supplying coal to the Jim Bridger generating plant. IPCs coal purchases from
the joint venture were $63 million, $51 million and $52 million in 2008, 2007
and 2006, respectively.
IPC has contracts to purchase
the energy from four PURPA qualified facilities that are 50 percent owned by
Ida-West. IPCs power purchases from these facilities were $8 million in 2008,
2007 and 2006.
See Note 1 for a discussion
of the property of IDACORPs consolidated VIE.
10. INVESTMENTS:
The
following table summarizes IDACORPs and IPCs investments as of December 31
(in thousands of dollars):
|
2008 |
|
2007 |
|||||
IPC Investments: |
|
|
|
|
|
|||
|
Equity method investment |
$ |
86,433 |
|
$ |
76,451 |
||
|
Available-for-sale equity securities |
|
14,451 |
|
|
21,445 |
||
|
Executive deferred compensation |
|
4,679 |
|
|
6,627 |
||
|
Other investments |
|
948 |
|
|
5 |
||
|
|
Total IPC investments |
|
106,511 |
|
|
104,528 |
|
Investments in affordable housing |
|
74,951 |
|
|
77,608 |
|||
Equity method investments |
|
10,030 |
|
|
9,550 |
|||
Held-to-maturity debt securities |
|
9,424 |
|
|
11,248 |
|||
Executive deferred compensation |
|
1,225 |
|
|
3,431 |
|||
Other investments |
|
66 |
|
|
- |
|||
|
Total IDACORP investments |
$ |
202,207 |
|
$ |
206,365 |
||
|
|
|
|
|
|
|||
Equity Method Investments
IPC, through its subsidiary IERCo, is
a 33 percent owner of Bridger Coal Company, which supplies coal to the Jim
Bridger generating plant owned in part by IPC. Ida-West, through separate
subsidiaries, owns 50 percent of each of the following electric generation
projects: South Forks Joint Venture; Hazelton/Wilson Joint Venture and Snow
Mountain Hydro LLC.
IFS invests in affordable
housing developments that are accounted for in accordance with APB 18,
The
Equity Method of Accounting for Investments in Common Stock,
and Emerging
Issues Task Force Issue 94-1,
Accounting for Tax Benefits Resulting from
Investments in Affordable Housing Projects,
and are presented as Investments
on the Consolidated Balance Sheets. All projects are reviewed periodically for
impairment.
The following table presents
IDACORPs and IPCs earnings (loss) of unconsolidated equity-method investments
(in thousands of dollars):
114
|
2008 |
|
2007 |
|
2006 |
||||
Bridger Coal Company (IPC) |
$ |
6,772 |
|
$ |
5,553 |
|
$ |
9,347 |
|
Ida-West projects |
|
1,830 |
|
|
1,820 |
|
|
2,341 |
|
IFS affordable housing projects |
|
(12,599) |
|
|
(12,197) |
|
|
(14,601) |
|
|
Total |
$ |
(3,997) |
|
$ |
(4,824) |
|
$ |
(2,913) |
|
|
|
|
|
|
|
|
|
|
The following table presents summarized
income statement information for Bridger Coal Company (in thousands of
dollars):
|
2008 |
|
2007 |
|
2006 |
||||
Operating revenues |
$ |
187,560 |
|
$ |
153,126 |
|
$ |
154,910 |
|
Operating expenses |
|
167,245 |
|
|
136,468 |
|
|
126,869 |
|
|
Net Income |
$ |
20,315 |
|
$ |
16,658 |
|
$ |
28,041 |
|
|
|
|
|
|
|
|
|
|
The following table presents
summarized balance sheet information for Bridger Coal Company (in thousands of
dollars):
|
2008 |
|
2007 |
||||
Assets |
|
|
|
|
|
||
|
Current assets |
$ |
64,569 |
|
$ |
58,672 |
|
|
Noncurrent assets |
|
318,266 |
|
|
330,583 |
|
|
|
Total Assets |
$ |
382,835 |
|
$ |
389,255 |
|
|
|
|
|
|
||
Liabilities |
|
|
|
|
|
||
|
Current liabilities |
$ |
25,182 |
|
$ |
25,372 |
|
|
Noncurrent liabilities |
|
98,355 |
|
|
134,529 |
|
|
|
Total Liabilities |
|
123,537 |
|
|
159,901 |
|
Joint venture capital |
|
259,298 |
|
|
229,353 |
|
|
|
Total Liabilities and Joint Venture Capital |
$ |
382,835 |
|
$ |
389,254 |
|
|
|
|
|
|
|
|
Investments
in Debt and Equity Securities
Investments in debt and equity
securities are accounted for in accordance with SFAS 115,
Accounting for
Certain Investments in Debt and Equity Securities.
Those investments
classified as available-for-sale securities are reported at fair value, using
either specific identification or average cost to determine the cost for
computing gains or losses. Any unrealized gains or losses on available-for-sale
securities are included in other comprehensive income.
Investments
classified as held-to-maturity securities are reported at amortized cost. Held-to-maturity
securities are investments in debt securities for which the company has the
positive intent and ability to hold the securities until maturity. These debt
securities have maturities ranging from 2009 through 2025.
The
following table summarizes investments in debt and equity securities (in
thousands of dollars):
|
2008 |
2007 |
|||||||||||
|
Gross |
Gross |
|
Gross |
Gross |
|
|||||||
|
Unrealized |
Unrealized |
Fair |
Unrealized |
Unrealized |
Fair |
|||||||
|
Gain |
Loss |
Value |
Gain |
Loss |
Value |
|||||||
Available-for-sale |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
securities (IPC) |
$ |
- |
$ |
- |
$ |
14,451 |
$ |
1,059 |
$ |
128 |
$ |
21,445 |
Held-to-maturity debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
securities (IFS) |
|
3 |
|
25 |
|
9,448 |
|
15 |
|
5 |
|
11,245 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table
summarizes sales of available-for-sale securities (in thousands of dollars):
|
2008 |
|
2007 |
|
2006 |
|||
|
|
|
|
|
|
|
|
|
Proceeds from sales |
$ |
- |
|
$ |
26,110 |
|
$ |
20,778 |
Gross realized gains from sales |
|
- |
|
|
2,093 |
|
|
3,774 |
Gross realized losses from sales |
|
- |
|
|
762 |
|
|
280 |
115
Additionally,
these investments are evaluated to determine whether they have experienced a
decline in market value that is considered other-than-temporary. IDACORP and
IPC analyze securities in loss positions as of the end of each reporting
period. Due to recent market conditions IDACORP and IPC reviewed securities in
a loss position and determined that due to the severity of the losses and the
volatility of the market an other-than-temporary impairment should be
recorded. At December 31, 2008, four available-for-sale and six held-to-maturity
securities were in an unrealized loss position. The available-for-sale equity
securities in unrealized loss positions are in broadly diversified index funds
used to fund IPCs SMSP. The held-to-maturity debt securities in unrealized
loss positions are bonds, whose market values fluctuate based on the interest
rate environment. The available-for-sale securities were in unrealized loss
positions of at least 32 percent and were deemed other-than-temporarily
impaired and written down $6.8 million to fair market value at December 31,
2008. IDACORP and IPC did not recognize any other-than-temporary impairments
in 2007 or 2006.
The
following table summarizes information regarding securities that were in an
unrealized loss position at the end of each year, but for which no other-than-temporary
impairment was recognized (in thousands of dollars).
|
Less than 12 months |
12 months or longer |
||||||||
|
Aggregate |
|
Aggregate |
Aggregate |
|
Aggregate |
||||
|
Unrealized |
|
Related Fair |
Unrealized |
|
Related Fair |
||||
|
Loss |
|
Value |
Loss |
|
Value |
||||
2008: |
|
|
|
|
|
|
|
|
|
|
Held to maturity debt securities (IFS) |
$ |
- |
|
$ |
- |
$ |
25 |
|
$ |
3,975 |
|
|
|
|
|
|
|
|
|
|
|
2007: |
|
|
|
|
|
|
|
|
|
|
Available-for-sale equity securities (IPC) |
$ |
128 |
|
$ |
1,059 |
$ |
- |
|
$ |
- |
Held to maturity debt securities (IFS) |
|
- |
|
|
- |
|
5 |
|
|
642 |
11. FAIR VALUE MEASUREMENTS:
IDACORP and IPC partially
adopted the provisions of SFAS 157,
Fair Value Measurements
(SFAS 157)
on January 1, 2008. SFAS 157 defines fair value,
establishes a framework for measuring fair value, establishes a fair value
hierarchy based on the quality of inputs used to measure fair value and
enhances disclosure requirements for fair value measurements.
FASB Staff Position
157-2,
Effective Date of FASB Statement No. 157
(FSP 157-2) delayed the
implementation of SFAS 157 for nonfinancial assets and nonfinancial
liabilities, except for items that are recognized or disclosed at fair value in
the financial statements on a recurring basis (at least annually). The delay
is intended to allow the Board of Directors and constituents additional time to
consider the effect of various implementation issues that have arisen, or that
may arise, from the application of SFAS 157. In accordance with FSP 157-2, IPC
did not apply the provisions of SFAS 157 to asset retirement obligations.
116
The following tables present
information about IDACORPs and IPCs assets and liabilities measured at fair
value on a recurring basis as of December 31, 2008 (in thousands of dollars).
IDACORPs and IPCs assessment of the significance of a particular input to the
fair value measurement requires judgment and may affect the valuation of fair
value assets and liabilities and their placement within the fair value
hierarchy.
|
Quoted Prices in |
Significant |
Significant |
|
|||||||
|
Active Markets |
Other |
Unobservable |
|
|||||||
|
for Identical |
Observable |
Inputs |
|
|||||||
|
Assets (Level 1) |
Inputs (Level 2) |
(Level 3) |
Total |
|||||||
IDACORP |
|
|
|
|
|
|
|
|
|||
Assets: |
|
|
|
|
|
|
|
|
|||
|
Derivatives |
$ |
652 |
$ |
- |
$ |
- |
$ |
652 |
||
|
Money market funds |
|
4,610 |
|
- |
|
- |
|
4,610 |
||
|
Trading securities |
|
5,904 |
|
- |
|
- |
|
5,904 |
||
|
Available-for-sale securities |
|
14,451 |
|
- |
|
- |
|
14,451 |
||
Liabilities: |
|
|
|
|
|
|
|
|
|||
|
Derivatives |
$ |
- |
$ |
(2,653) |
$ |
- |
$ |
(2,653) |
||
IPC |
|
|
|
|
|
|
|
|
|||
Assets: |
|
|
|
|
|
|
|
|
|||
|
Derivatives |
$ |
652 |
$ |
- |
$ |
- |
$ |
652 |
||
|
Money market funds |
|
1,224 |
|
- |
|
- |
|
1,224 |
||
|
Trading securities |
|
4,679 |
|
- |
|
- |
|
4,679 |
||
|
Available-for-sale securities |
|
14,451 |
|
- |
|
- |
|
14,451 |
||
|
|
|
|
|
|
|
|
|
|
||
Liabilities: |
|
|
|
|
|
|
|
|
|||
|
Derivatives |
$ |
- |
$ |
(2,653) |
$ |
- |
$ |
(2,653) |
||
|
|
|
|
|
|
|
|
|
|||
In
accordance with SFAS 157, IDACORP and IPC have categorized their financial
instruments, based on the priority of the inputs to the valuation technique,
into a three-level fair value hierarchy. The fair value hierarchy gives the
highest priority to quoted prices in active markets for identical assets or
liabilities (Level 1) and the lowest priority to unobservable inputs (Level
3). If the inputs used to measure the financial
instruments fall within different levels of the hierarchy, the categorization
is based on the lowest level input that is significant to the fair value
measurement of the instrument.
Financial assets and liabilities recorded on the Consolidated Balance
Sheets are categorized based on the inputs to the valuation techniques as
follows:
Level 1: Financial assets
and liabilities whose values are based on unadjusted quoted prices for
identical assets or liabilities in an active market that IDACORP and IPC has
the ability to access.
Level 2: Financial assets and liabilities whose values are based on the following:
a) Quoted prices for similar assets or liabilities in active markets;
b) Quoted prices for identical or similar assets or liabilities in non-active markets;
c) Pricing models whose inputs are observable for substantially the full term of the asset or liability;
d)
Pricing models whose inputs are
derived principally from or corroborated by observable market data through
correlation or other means for substantially the full term of the asset or
liability.
IDACORP and IPC Level 2
inputs are based on quoted market prices adjusted for location using
corroborated, observable market data.
Level
3: Financial assets and liabilities whose values are based on prices or
valuation techniques that require inputs that are both unobservable and
significant to the overall fair value measurement. These inputs reflect
managements own assumptions about the assumptions a market participant would
use in pricing the asset or liability.
117
IPCs derivatives are
contracts entered into as part of our management of loads and resources.
Electricity swaps are valued on the Intercontinental Exchange with quoted
prices in an active market. Natural gas derivative valuations are performed
using New York Mercantile Exchange (NYMEX) pricing, adjusted for basis
location, which are also quoted under NYMEX. Trading securities consists of
employee-directed investments held in a Rabbi Trust and are related to an
executive deferred compensation plan. Available-for-sale securities are related
to the SMSP and are held in a Rabbi Trust and are actively traded money market
and equity funds with quoted prices in active markets.
The
following tables present the carrying value and estimated fair value of other
financial instruments that are not reported at fair value, using available
market information and appropriate valuation methodologies. The use of
different market assumptions and/or estimation methodologies may have a material
effect on the estimated fair value amounts. Cash and cash equivalents,
deposits, customer and other receivables, notes payable, accounts payable,
interest accrued and taxes accrued are reported at their carrying value as
these are a reasonable estimate of their fair value. The estimated fair values
for notes receivable and long-term debt are based upon quoted market prices of
the same or similar issues or discounted cash flow analyses as appropriate.
|
December 31, 2008 |
|
December 31, 2007 |
||||||||
|
Carrying |
|
Estimated |
|
Carrying |
|
Estimated |
||||
|
Amount |
|
Fair Value |
|
Amount |
|
Fair Value |
||||
|
(thousands of dollars) |
||||||||||
IDACORP |
|
|
|
|
|
|
|
|
|
|
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
Notes receivable |
$ |
5,703 |
|
$ |
5,726 |
|
$ |
8,073 |
|
$ |
8,121 |
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
Long-term debt |
$ |
1,277,042 |
|
$ |
1,199,699 |
|
$ |
1,171,745 |
|
$ |
1,348,944 |
|
|
|
|
|
|
|
|
|
|
|
|
IPC |
|
|
|
|
|
|
|
|
|
|
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
Notes receivable |
$ |
259 |
|
$ |
282 |
|
$ |
4,859 |
|
$ |
4,907 |
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
Long-term debt |
$ |
1,268,818 |
|
$ |
1,191,476 |
|
$ |
1,145,981 |
|
$ |
1,272,627 |
|
|
|
|
|
|
|
|
|
|
|
|
IDACORP
and IPC adopted the provisions of SFAS 159,
The Fair Value Option for
Financial Assets and Financial Liabilities - Including an Amendment of FASB
Statement 115
(SFAS 159) on January 1, 2008
.
SFAS 159 permits an
entity to choose to measure many financial instruments and certain other items
at fair value. Most of the provisions in SFAS 159 are elective; however, the
amendment to SFAS 115,
Accounting for Certain Investments in Debt and Equity
Securities,
applies to all entities with available-for-sale and trading
securities. The fair value option established by SFAS 159 permits all entities
to choose to measure eligible items at fair value at specified election dates.
A business entity reports unrealized gains and losses on items for which the fair
value option has been elected in earnings at each subsequent reporting date.
The fair value option: (a) may be applied instrument by instrument, with a few
exceptions, such as investments otherwise accounted for by the equity method;
(b) is irrevocable (unless a new election date occurs); and (c) is applied only
to entire instruments and not to portions of instruments. IDACORP and IPC did
not elect the fair value option for any existing eligible items, but may
consider the fair value option on a case-by-case basis in the future.
12. ASSET RETIREMENT OBLIGATIONS (ARO):
SFAS 143,
Accounting for
Asset Retirement Obligations,
as amended and interpreted, requires that
legal obligations associated with the retirement of property, plant and
equipment be recognized as a liability at fair value when incurred and when a
reasonable estimate of the fair value of the liability can be made. Under SFAS
143, when a liability is initially recorded, the entity increases the carrying
amount of the related long-lived asset to reflect the future retirement cost.
Over time, the liability is accreted to its present value and paid, and the
capitalized cost is depreciated over the useful life of the related asset. If,
at the end of the assets life, the recorded liability differs from the actual
obligations paid, a gain or loss would be recognized. As a rate-regulated
entity, IPC records regulatory assets or liabilities instead of accretion,
depreciation and gains or losses, as approved by Order No. 29414 from the
IPUC. The regulatory assets recorded under this order do not earn a return on
investment.
118
IPCs recorded AROs relate to
the removal of Polychlorinated biphenyls-contaminated equipment at its
distribution facilities and the reclamation and removal costs at its jointly
owned coal-fired generation facilities. In 2008, changes in estimates for both
of these facilities resulted in a net decrease of $2.6 million in the recorded
ARO.
IPC also has AROs associated
with its transmission system and hydroelectric facilities; however, due to the
indeterminate removal date, the fair value of the associated liabilities
currently cannot be estimated and no amounts are recognized in the consolidated
financial statements.
The regulated operations of
IPC also collect removal costs in rates for certain assets that do not have
associated AROs. The adoption of SFAS 143 required IPC to redesignate these removal
costs as regulatory liabilities. Costs recorded as regulatory liabilities on
IDACORPs and IPCs Consolidated Balance Sheets as of December 31, 2008 and
2007, were $157 million and $155 million, respectively.
The following table presents
the changes in the carrying amount of AROs (in thousands of dollars):
|
IDACORP |
IPC |
|||||||||
|
2008 |
|
2007 |
2008 |
|
2007 |
|||||
Balance at beginning of year |
$ |
14,515 |
|
$ |
13,388 |
$ |
14,515 |
|
$ |
12,911 |
|
Accretion expense |
|
701 |
|
|
695 |
|
701 |
|
|
692 |
|
Revisions in estimated cash flows |
|
(2,627) |
|
|
920 |
|
(2,627) |
|
|
920 |
|
Liability settled |
|
(174) |
|
|
(488) |
|
(174) |
|
|
(8) |
|
|
Balance at end of year |
$ |
12,415 |
|
$ |
14,515 |
$ |
12,415 |
|
$ |
14,515 |
|
|
|
|
|
|
|
|
|
|
|
|
13. SEGMENT INFORMATION:
IDACORPs
only reportable segment is utility operations. The utility operations segments
primary source of revenue is the regulated operations of IPC. IPCs regulated
operations include the generation, transmission, distribution, purchase and
sale of electricity. This segment also includes income from IERCo, a wholly-owned
subsidiary of IPC that is also subject to regulation and is a one-third owner
of Bridger Coal Company, an unconsolidated joint venture.
IDACORPs other operating segments are below the quantitative thresholds for reportable segments and are included in the All Other category. This category is comprised of IFSs investments in affordable housing developments and historic rehabilitation projects, Ida-Wests joint venture investments in small hydroelectric generation projects, the remaining activities of energy marketer IE, which wound down its operations in 2003, and IDACORPs holding company expenses.
119
The
following table summarizes the segment information for IDACORPs utility
operations and the total of all other segments, and reconciles this information
to total enterprise amounts (in thousands of dollars):
14. RELATED PARTY
TRANSACTIONS (IPC):
IDACORP
IPC performs corporate functions such
as financial, legal and management services for IDACORP and its subsidiaries.
IPC charges IDACORP for the costs of these services based on service agreements
and other specifically identified costs. For these services IPC billed IDACORP
$1 million, $2 million and $4 million in 2008, 2007 and 2006, respectively.
Ida-West
IPC purchases all of the power
generated by four of Ida-Wests hydroelectric projects located in Idaho. IPC
paid $8 million in 2008, 2007 and 2006.
120
15. OTHER INCOME AND
EXPENSE:
The following table presents
the components of Other income and Other expense (in thousands of dollars):
|
2008 |
|
2007 |
|
2006 |
||||
Other income: |
|
|
|
|
|
|
|
|
|
Allowance for funds used during construction-equity |
$ |
3,141 |
|
$ |
5,995 |
|
$ |
6,092 |
|
Investment income, net |
|
(5,273) |
|
|
6,855 |
|
|
8,489 |
|
Carrying charges |
|
6,709 |
|
|
3,437 |
|
|
1,040 |
|
Other |
|
7,284 |
|
|
4,237 |
|
|
2,574 |
|
|
Total |
$ |
11,861 |
|
$ |
20,524 |
|
$ |
18,195 |
|
|
|
|
|
|
|
|
|
|
Other expense: |
|
|
|
|
|
|
|
|
|
SMSP expense |
$ |
4,628 |
|
$ |
4,520 |
|
$ |
4,889 |
|
Other |
|
3,233 |
|
|
3,914 |
|
|
3,670 |
|
|
Total |
$ |
7,861 |
|
$ |
8,434 |
|
$ |
8,559 |
|
|
|
|
|
|
|
|
|
16. DISCONTINUED OPERATIONS:
On July 20, 2006, IDACORP
completed the sale of all of the outstanding common stock of ITI to IdaTech UK
Limited, a wholly-owned subsidiary of Investec Group Investments (UK) Limited.
IDACORP recorded a gain of $11.5 million net-of-tax from this transaction in
2006.
On February 23, 2007, IDACORP
completed the sale of all of the outstanding common stock of IDACOMM to
American Fiber Systems, Inc.
The operating results of
these businesses have been separately classified and reported as discontinued
operations on IDACORPs consolidated statements of income. A summary of
discontinued operations is as follows (in thousands of dollars):
|
|
2008 |
|
2007 |
|
2006 |
|||
Revenues |
|
$ |
- |
|
$ |
1,278 |
|
$ |
12,882 |
Operating expenses |
|
|
- |
|
|
(1,309) |
|
|
(21,369) |
Other (expense) income |
|
|
- |
|
|
(25) |
|
|
354 |
(Loss) gain on disposal |
|
|
- |
|
|
(2,877) |
|
|
14,476 |
Pre-tax (losses) income |
|
|
- |
|
|
(2,933) |
|
|
6,343 |
Income tax benefit |
|
|
- |
|
|
3,000 |
|
|
985 |
Income from discontinued operations |
|
$ |
- |
|
$ |
67 |
|
$ |
7,328 |
|
|
|
|
|
|
|
|
|
|
The results of operations for
the years ended December 31, 2007 and 2006 do not include depreciation expense
of approximately $0.3 million and $1.2 million, respectively, that would be
recorded if the related assets were classified as held and used.
121
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To
the Board of Directors and Shareholders of IDACORP, Inc.
Boise, Idaho
We have audited the
accompanying consolidated balance sheets of IDACORP, Inc. and subsidiaries (the
Company) as of December 31, 2008 and 2007, and the related consolidated
statements of income, comprehensive income, shareholders equity, and cash
flows for each of the three years in the period ended December 31, 2008. Our
audits also included the consolidated financial statement schedules listed in
the Index at Item 8. These financial statements and financial statement
schedules are the responsibility of the Companys management. Our
responsibility is to express an opinion on the financial statements and
financial statement schedules based on our audits.
We conducted our audits in
accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In
our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of IDACORP, Inc. and subsidiaries at
December 31, 2008 and 2007, and the results of their operations and their cash
flows for each of the three years in the period ended December 31, 2008, in
conformity with accounting principles generally accepted in the United States
of America. Also, in our opinion, such consolidated financial statement
schedules, when considered in relation to the basic consolidated financial
statements taken as a whole, present fairly, in all material respects, the
information set forth therein.
As
discussed in Note 2 to the consolidated financial statements, the Company
adopted Financial Accounting Standards Board Interpretation No. 48,
Accounting
for Uncertainty in Income Taxes - an interpretation of FASB Statement No.
109,
on January 1, 2007 and as discussed in Note 8 to the consolidated financial
statements, the Company adopted Statement of Financial Accounting Standards No.
158,
Employers Accounting for Defined Benefit Pension and Other
Postretirement Plans - an amendment of FASB Statements No. 87, 88, 106, and
132(R),
as of December 31, 2006.
We
have also audited, in accordance with the standards of the Public Company
Accounting Oversight Board (United States), the Companys internal control over
financial reporting as of December 31, 2008, based on the criteria established
in
Internal Control-Integrated Framework
issued by the Committee of
Sponsoring Organizations of the Treadway Commission and our report dated
February 25, 2009 expressed an unqualified opinion on the Companys internal
control over financial reporting.
/s/
DELOITTE & TOUCHE LLP
Boise, Idaho
February 25, 2009
122
REPORT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
To
the Board of Directors and Shareholder of Idaho Power Company
Boise, Idaho
We
have audited the accompanying consolidated balance sheets and statements of
capitalization of Idaho Power Company and subsidiary (the Company) as of
December 31, 2008 and 2007, and the related consolidated statements of income,
comprehensive income, retained earnings, and cash flows for each of the three
years in the period ended December 31, 2008. Our audits also included the
consolidated financial statement schedule listed in the Index at Item 8. These
financial statements and financial statement schedule are the responsibility of
the Companys management. Our responsibility is to express an opinion on the
financial statements and financial statement schedule based on our audits.
We conducted our audits in
accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In
our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Idaho Power Company and subsidiary
at December 31, 2008 and 2007, and the results of their operations and their
cash flows for each of the three years in the period ended December 31, 2008,
in conformity with accounting principles generally accepted in the United
States of America. Also, in our opinion, such consolidated financial statement
schedule, when considered in relation to the basic consolidated financial
statements taken as a whole, presents fairly, in all material respects, the
information set forth therein.
As
discussed in Note 2 to the consolidated financial statements, the Company
adopted Financial Accounting Standards Board Interpretation No. 48,
Accounting
for Uncertainty in Income Taxes - an interpretation of FASB Statement No.
109,
on January 1, 2007 and as discussed in Note 8 to the consolidated financial
statements, the Company adopted Statement of Financial Accounting Standards No.
158,
Employers Accounting for Defined Benefit Pension and Other
Postretirement Plans - an amendment of FASB Statements No. 87, 88, 106, and
132(R),
as of December 31, 2006.
We
have also audited, in accordance with the standards of the Public Company
Accounting Oversight Board (United States), the Companys internal control over
financial reporting as of December 31, 2008, based on the criteria established
in
Internal Control-Integrated Framework
issued by the Committee of
Sponsoring Organizations of the Treadway Commission and our report dated
February 25, 2009 expressed an unqualified opinion on the Companys internal
control over financial reporting.
/s/
DELOITTE & TOUCHE
LLP
Boise, Idaho
February 25, 2009
123
SUPPLEMENTAL FINANCIAL INFORMATION, UNAUDITED
QUARTERLY FINANCIAL DATA:
The
following unaudited information is presented for each quarter of 2008 and 2007
(in thousands of dollars except for per share amounts). In the opinion of each
company, all adjustments necessary for a fair statement of such amounts for
such periods have been included. The results of operations for the interim
periods are not necessarily indicative of the results to be expected for the
full year. Accordingly, earnings information for any three-month period should
not be considered as a basis for estimating operating results for a full fiscal
year. Amounts are based upon quarterly statements and the sum of the quarters
may not equal the annual amount reported.
|
Quarter Ended |
|||||||
|
March 31 |
June 30 |
September 30 |
December 31 |
||||
IDACORP, Inc. |
|
|
|
|
||||
2008 |
|
|
|
|
||||
Revenues |
$ |
213,440 |
$ |
230,226 |
$ |
299,716 |
$ |
217,032 |
Operating income |
44,756 |
40,529 |
81,577 |
23,805 |
||||
Net income |
21,716 |
17,515 |
51,739 |
7,444 |
||||
Basic earnings per share |
0.48 |
0.39 |
1.15 |
0.16 |
||||
Diluted earnings per share |
0.48 |
0.39 |
1.14 |
0.16 |
||||
|
|
|
|
|
||||
2007 |
|
|
|
|
||||
Revenues |
$ |
206,711 |
$ |
213,772 |
$ |
261,463 |
$ |
197,446 |
Operating income |
43,779 |
36,572 |
47,930 |
23,795 |
||||
Income from continuing operations |
24,580 |
18,465 |
28,931 |
10,295 |
||||
Income from discontinued operations, net |
67 |
- |
- |
- |
||||
Net income |
24,647 |
18,465 |
28,931 |
10,295 |
||||
Basic and diluted earnings per share |
0.56 |
0.42 |
0.65 |
0.23 |
||||
|
|
|
|
|
||||
Idaho Power Company |
|
|
|
|
||||
2008 |
|
|
|
|
||||
Revenues |
$ |
212,796 |
$ |
228,945 |
$ |
298,107 |
$ |
216,228 |
Income from operations |
45,160 |
40,388 |
81,112 |
22,715 |
||||
Net income |
21,271 |
17,728 |
47,405 |
7,711 |
||||
|
|
|
|
|
||||
2007 |
|
|
|
|
||||
Revenues |
$ |
205,928 |
$ |
212,526 |
$ |
260,516 |
$ |
196,431 |
Income from operations |
45,584 |
35,908 |
48,596 |
24,689 |
||||
Net income |
23,331 |
16,164 |
24,108 |
12,976 |
||||
|
|
|
|
|
Operating income and Net
income were decreased in the fourth quarter of 2008 by $7.4 million following a
decision received from the FERC increasing the OATT refund, and $6.8 million
other-than-temporary impairment of diversified index funds used to fund IPCs
Senior Management Security Plan due to the decline in market value.
ITEM 9. CHANGES IN AND
DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None
ITEM 9A. CONTROLS AND PROCEDURES
Disclosure controls and
procedures:
124
IDACORP:
The Chief Executive Officer
and Chief Financial Officer of IDACORP, based on their evaluation of IDACORPs
disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e))
as of December 31, 2008, have concluded that IDACORPs disclosure controls and
procedures are effective.
IPC:
The Chief Executive Officer and Chief
Financial Officer of IPC, based on their evaluation of IPCs disclosure
controls and procedures (as defined in Exchange Act Rule 13a-15(e)) as of
December 31, 2008, have concluded that IPCs disclosure controls and procedures
are effective.
Internal control over
financial reporting:
IDACORP:
Managements Annual Report
on Internal Control Over Financial Reporting
The management of IDACORP is
responsible for establishing and maintaining adequate internal control over
financial reporting for IDACORP. Internal control over financial reporting is
defined in Rule 13a-15(f) promulgated under the Securities Exchange Act of 1934
as a process designed by, or under the supervision of, the companys principal
executive and principal financial officers and effected by the companys board
of directors, management and other personnel, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with accounting
principles generally accepted in the United States of America and includes
those policies and procedures that:
Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company;
Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America, and that receipts and expenditures of the company are being made only in accordance with the authorizations of management and directors of the company; and
Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the companys assets that could have a material effect on the financial statements.
Because of its inherent
limitations, internal control over financial reporting may not prevent or
detect misstatements. Projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become inadequate because of
changes in conditions, or that the degree of compliance with the policies or
procedures may deteriorate.
IDACORPs management assessed
the effectiveness of the companys internal control over financial reporting as
of December 31, 2008. In making this assessment, the companys management used
the criteria set forth by the Committee of Sponsoring Organizations of the
Treadway Commission in
Internal Control-Integrated Framework
.
Based on its assessment,
management believes that, as of December 31, 2008 IDACORPs internal control
over financial reporting is effective based on those criteria.
IDACORPs independent
registered public accounting firm has audited the financial statements included
in this Annual Report on Form 10-K for the year ended December 31, 2008 and
issued a report, which appears on the next page and expresses an unqualified
opinion on the effectiveness of IDACORPs internal control over financial
reporting as of December 31, 2008.
February 25, 2009
125
REPORT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and
Shareholders of IDACORP, Inc.
Boise, Idaho
We have audited the internal
control over financial reporting of IDACORP, Inc. and subsidiaries (the Company)
as of December 31, 2008, based on the criteria established in
Internal
Control-Integrated Framework
issued by the Committee of Sponsoring
Organizations of the Treadway Commission. The Companys management is
responsible for maintaining effective internal control over financial reporting
and for its assessment of the effectiveness of internal control over financial
reporting, included in the accompanying
Managements Annual Report on
Internal Control over Financial Reporting
. Our responsibility is to
express an opinion on the Companys internal control over financial reporting
based on our audit.
We conducted our audit in
accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether effective internal control over
financial reporting was maintained in all material respects. Our audit
included obtaining an understanding of internal control over financial
reporting, assessing the risk that a material weakness exists, testing and
evaluating the design and operating effectiveness of internal control based on
the assessed risk, and performing such other procedures as we considered
necessary in the circumstances. We believe that our audit provides a
reasonable basis for our opinion.
A companys internal control
over financial reporting is a process designed by, or under the supervision of,
the companys principal executive and principal financial officers, or persons
performing similar functions, and effected by the companys board of directors,
management, and other personnel to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements
for external purposes in accordance with generally accepted accounting
principles. A companys internal control over financial reporting includes
those policies and procedures that (1) pertain to the maintenance of records
that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (2) provide reasonable assurance
that transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and
that receipts and expenditures of the company are being made only in accordance
with authorizations of management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the companys assets that could have a
material effect on the financial statements.
Because of the inherent
limitations of internal control over financial reporting, including the
possibility of collusion or improper management override of controls, material
misstatements due to error or fraud may not be prevented or detected on a
timely basis. Also, projections of any evaluation of the effectiveness of the
internal control over financial reporting to future periods are subject to the
risk that the controls may become inadequate because of changes in conditions,
or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, the Company
maintained, in all material respects, effective internal control over financial
reporting as of December 31, 2008, based on the criteria established in
Internal
Control-Integrated Framework
issued by the Committee of Sponsoring
Organizations of the Treadway Commission.
We have also audited, in
accordance with the standards of the Public Company Accounting Oversight Board
(United States), the consolidated financial statements and financial statement
schedules as of and for the year ended December 31, 2008 of the Company and our
report dated February 25, 2009 expressed an unqualified opinion on those
financial statements and financial statement schedules and included an
explanatory paragraph regarding the Companys adoption of Statement of
Financial Accounting Standards No. 158 and Financial Accounting Standards Board
Interpretation No. 48.
/s/
DELOITTE & TOUCHE
LLP
Boise, Idaho
February 25, 2009
126
Idaho Power Company:
Managements Annual Report
on Internal Control Over Financial Reporting
The management of Idaho Power Company
(IPC) is responsible for establishing and maintaining adequate internal control
over financial reporting of IPC. Internal control over financial reporting is
defined in Rule 13a-15(f) promulgated under the Securities Exchange Act of 1934
as a process designed by, or under the supervision of, the companys principal
executive and principal financial officers and effected by the companys board
of directors, management and other personnel, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with accounting
principles generally accepted in the United States of America and includes
those policies and procedures that:
Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company;
Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America, and that receipts and expenditures of the company are being made only in accordance with the authorizations of management and directors of the company; and
Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the companys assets that could have a material effect on the financial statements.
Because of its inherent
limitations, internal control over financial reporting may not prevent or
detect misstatements. Projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become inadequate because of
changes in conditions, or that the degree of compliance with the policies or
procedures may deteriorate.
IPCs management assessed the
effectiveness of the companys internal control over financial reporting as of
December 31, 2008. In making this assessment, the companys management used
the criteria set forth by the Committee of Sponsoring Organizations of the
Treadway Commission in
Internal Control-Integrated Framework
.
Based on its assessment,
management believes that, as of December 31, 2008, IPCs internal control over
financial reporting is effective based on those criteria.
IPCs independent registered
public accounting firm has audited the financial statements included in this
Annual Report on Form 10-K for the year ended December 31, 2008 and issued a
report, which appears on the next page and expresses an unqualified opinion on
the effectiveness of IPCs internal control over financial reporting as of
December 31, 2008.
February 25, 2009
127
REPORT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and
Shareholder of Idaho Power Company
Boise, Idaho
We have audited the internal
control over financial reporting of Idaho Power Company and subsidiary (the Company)
as of December 31, 2008, based on the criteria established in
Internal
Control-Integrated Framework
issued by the Committee of Sponsoring
Organizations of the Treadway Commission. The Companys management is
responsible for maintaining effective internal control over financial reporting
and for its assessment of the effectiveness of internal control over financial
reporting, included in the accompanying
Managements Annual Report on
Internal Control over Financial Reporting
. Our responsibility is to
express an opinion on the Companys internal control over financial reporting
based on our audit.
We conducted our audit in
accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether effective internal control over
financial reporting was maintained in all material respects. Our audit
included obtaining an understanding of internal control over financial
reporting, assessing the risk that a material weakness exists, testing and evaluating
the design and operating effectiveness of internal control based on the
assessed risk, and performing such other procedures as we considered necessary
in the circumstances. We believe that our audit provides a reasonable basis
for our opinion.
A companys internal control
over financial reporting is a process designed by, or under the supervision of,
the companys principal executive and principal financial officers, or persons
performing similar functions, and effected by the companys board of directors,
management, and other personnel to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements
for external purposes in accordance with generally accepted accounting
principles. A companys internal control over financial reporting includes
those policies and procedures that (1) pertain to the maintenance of records
that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (2) provide reasonable assurance
that transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and
that receipts and expenditures of the company are being made only in accordance
with authorizations of management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the companys assets that could have a
material effect on the financial statements.
Because of the inherent
limitations of internal control over financial reporting, including the
possibility of collusion or improper management override of controls, material
misstatements due to error or fraud may not be prevented or detected on a
timely basis. Also, projections of any evaluation of the effectiveness of the
internal control over financial reporting to future periods are subject to the
risk that the controls may become inadequate because of changes in conditions,
or that the degree of compliance with the policies or procedures may
deteriorate.
In our opinion, the Company
maintained, in all material respects, effective internal control over financial
reporting as of December 31, 2008, based on the criteria established in
Internal
Control-Integrated Framework
issued by the Committee of Sponsoring
Organizations of the Treadway Commission.
We have also audited, in
accordance with the standards of the Public Company Accounting Oversight Board
(United States), the consolidated financial statements and financial statement
schedule as of and for the year ended December 31, 2008 of the Company and our
report dated February 25, 2009 expressed an unqualified opinion on those
financial statements and financial statement schedule and included an
explanatory paragraph regarding the Companys adoption of Statement of
Financial Accounting Standards No. 158 and Financial Accounting Standards Board
Interpretation No. 48.
/s/
DELOITTE & TOUCHE
LLP
Boise, Idaho
February 25, 2009
128
Changes in Internal Control Over Financial Reporting
There have been no changes in IDACORPs or IPCs internal control over
financial reporting during the quarter ended December 31, 2008, requiring
disclosure that have materially affected, or are reasonably likely to
materially affect, IDACORPs or IPCs internal control over financial
reporting.
ITEM
9B. OTHER INFORMATION
None
PART III
ITEM
10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The portion of IDACORPs
definitive proxy statement appearing under the captions Proposal No. 1:
Election of Directors - Nominees for Election - Terms Expire 2012, Nominee
for Election - Term Expires 2011, Continuing Directors Terms Expire 2011, Continuing
Directors - Terms Expire 2010, Section 16(a) Beneficial Ownership Reporting
Compliance, Corporate Governance - Corporate Governance Committee Report -
Process for Shareholders to Recommend Candidates for Director paragraph 1, Corporate
Governance - Audit Committee, paragraph 1 and Corporate Governance - Code of
Ethics, to be filed pursuant to Regulation 14A for the 2009 Annual Meeting of
Shareholders to be held on May 21, 2009 is hereby incorporated by reference.
ITEM
11. EXECUTIVE COMPENSATION
The portion of IDACORPs
definitive proxy statement appearing under the caption Executive Compensation
to be filed pursuant to Regulation 14A for the 2009 Annual Meeting of
Shareholders to be held on May 21, 2009 is hereby incorporated by reference.
ITEM
12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
The portion of IDACORPs
definitive proxy statement appearing under the caption Security Ownership of
Directors, Executive Officers and Five Percent Shareholders to be filed
pursuant to Regulation 14A for the 2009 Annual Meeting of Shareholders to be
held on May 21, 2009 is hereby incorporated by reference.
The following table includes
information as of December 31, 2008, with respect to equity compensation plans
where equity securities of IDACORP may be issued. These plans are the 1994
Restricted Stock Plan (RSP), the IDACORP 2000 Long-Term Incentive and
Compensation Plan (LTICP) and the Non-Employee Director Stock Compensation Plan
(DSP).
129
Equity Compensation Plans
Not Approved by IDACORP Shareholders:
The DSP was adopted by the Board of
Directors effective May 17, 1999. The purpose of the DSP is to increase
directors stock ownership through stock-based compensation. The DSP provides
for an annual stock grant valued at $45,000.
ITEM
13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The portion of IDACORPs
definitive proxy statement appearing under the captions Related Person
Transaction Disclosure and Corporate Governance Director Independence paragraphs
1 and 2 to be filed pursuant to Regulation 14A for the 2009 Annual Meeting of
Shareholders to be held on May 21, 2009 is hereby incorporated by reference.
ITEM
14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
IDACORP:
The portion of IDACORPs definitive
proxy statement appearing under the caption Independent Accountant Billings
in the proxy statement to be filed pursuant to Regulation 14A for the 2009
Annual Meeting of Shareholders to be held on May 21, 2009 is hereby
incorporated by reference.
IPC:
The following table presents fees
billed for professional services rendered by Deloitte & Touche LLP, the
member firms of Deloitte Touche Tohmatsu, and their respective affiliates
(collectively, Deloitte Entities), for IPC for the fiscal years ended December
31, 2008 and 2007.
|
2008 |
|
2007 |
|
|||
Audit fees |
$ |
1,037,923 |
|
$ |
1,148,354 |
|
|
Audit-related fees (1) |
|
59,800 |
|
|
62,520 |
|
|
Tax fees (2) |
|
138,606 |
|
|
114,486 |
|
|
All other fees (3) |
|
2,000 |
|
|
- |
|
|
Total |
$ |
1,238,329 |
|
$ |
1,325,360 |
|
|
|
|
|
|
|
|
|
|
(1) |
Includes fees for audits of IPCs benefit plans and agreed upon procedures at a subsidiary. |
||||||
(2) |
Includes fees for tax consulting in connection with 263A settlement guidelines, uniform capitalization issues and benefit plan filings. |
||||||
(3) |
Accounting research tool subscription. |
||||||
Policy on Audit Committee
Pre-Approval
IPC and the Audit Committee are
committed to ensuring the independence of the independent registered public
accounting firm, both in fact and in appearance. In this regard, on February
4, 2004, the Audit Committee established a pre-approval policy in accordance
with applicable securities rules. All fees were pre-approved by the Audit
Committee in 2007 and 2008.
In addition to the audits of
IPCs consolidated financial statements, the independent public accounting firm
may be engaged to provide certain audit-related, tax and other services. The
Audit Committee must pre-approve all services performed by the independent
public accounting firm to assure that the provision of those services does not
impair the public accounting firms independence. The services that the Audit
Committee will consider include audit services such as attest services, changes
in the scope of the audit of the financial statements, and the issuance of
comfort letters and consents in connection with financings; audit-related
services such as internal control reviews and assistance with internal control
reporting requirements; attest services related to financial reporting that are
not required by statute or regulation, and accounting consultations and audits
related to proposed transactions and new or proposed accounting rules,
standards and interpretations; and tax compliance and planning services.
Unless a type of service to be provided by the independent public accounting
firm has received general pre-approval, it will require specific pre-approval
by the Audit Committee. In addition, any proposed services exceeding pre-approved
cost levels will require specific pre-approval by the Audit Committee. Under
the pre-approval policy, the Audit Committee has delegated to the Chairman of
the Audit Committee pre-approval authority for proposed audit and audit-related
services. The Chairman must report any pre-approval decisions to the Audit
Committee at its next scheduled meeting.
130
Any request to engage the
independent public accounting firm to provide a service which has not received
general pre-approval must be submitted as a written proposal to IPCs Chief
Financial Officer with a copy to the General Counsel. The request must include
a detailed description of the service to be provided, the proposed fee and the
business reasons for engaging the independent public accounting firm to provide
the service. Upon approval by the Chief Financial Officer, the General Counsel
and the independent public accounting firm that the proposed engagement
complies with the terms of the pre-approval policy and the applicable rules and
regulations, the request will be presented to the Audit Committee or the
Committee Chairman, as the case may be, for pre-approval.
In determining whether to pre-approve
the engagement of the independent public accounting firm, the Audit Committee
or the Committee Chairman, as the case may be, must consider, among other
things, the pre-approval policy, applicable rules and regulations and whether
the nature of the engagement and the related fees are consistent with the
following principles, as stated in the SECs adopting release for the rules on
auditor independence:
the independent public accounting firm cannot function in the role of management of IPC;
the independent public accounting firm cannot audit its own work; and
the independent public accounting
firm cannot serve in any advocacy role on behalf of IPC.
The appendices to the pre-approval
policy describe the specific audit, audit related, tax and other services that
have the general pre-approval of the Audit Committee. The term of any pre-approval
is 12 months from the date of pre-approval, unless the Audit Committee
specifically provides for a different period. The Audit Committee will
periodically revise the list of pre-approved services, based on subsequent
determinations.
PART IV
ITEM
15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(1) and (2) Please refer to
Part II, Item 8 - Financial Statements and Supplementary Data for a complete
listing of all consolidated financial statements and financial statement
schedules.
(3) Exhibits.
*Previously Filed and
Incorporated Herein by Reference
131
135
IDACORP, Inc.
SCHEDULE
I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
CONDENSED STATEMENTS OF
INCOME
|
Year Ended December 31, |
|||||
|
2008 |
2007 |
2006 |
|||
|
(thousands of dollars) |
|||||
Income: |
|
|
|
|||
Equity in income from continuing operations of subsidiaries |
$ |
100,303 |
$ |
85,742 |
$ |
106,006 |
Investment income (losses) |
(131) |
1,363 |
854 |
|||
Total income |
100,172 |
87,105 |
106,860 |
|||
|
|
|
|
|||
Expenses: |
|
|
|
|||
Operating expenses |
1,088 |
3,253 |
7,080 |
|||
Interest expense |
3,250 |
4,143 |
4,225 |
|||
Other expense |
126 |
70 |
120 |
|||
Total expenses |
4,464 |
7,466 |
11,425 |
|||
|
|
|
|
|||
Income from Continuing Operations Before Income Taxes |
95,708 |
79,639 |
95,435 |
|||
|
|
|
|
|||
Income Tax Benefit |
(2,706) |
(2,633) |
(4,640) |
|||
|
|
|
|
|||
Income from Continuing Operations |
98,414 |
82,272 |
100,075 |
|||
|
|
|
|
|||
Income from Discontinued Operations, net of tax |
- |
67 |
7,328 |
|||
|
|
|
|
|||
Net income |
$ |
98,414 |
$ |
82,339 |
$ |
107,403 |
|
|
|
|
|||
The accompanying note is an integral part of these statements. |
136
IDACORP, Inc.
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
CONDENSED BALANCE SHEETS
|
December 31, |
||||
|
2008 |
2007 |
|||
|
(thousands of dollars) |
||||
Assets |
|
|
|||
|
|
|
|||
Current Assets: |
|
|
|||
Cash and cash equivalents |
$ |
3,541 |
$ |
1,300 |
|
Receivables |
3,211 |
2,741 |
|||
Refundable income tax deposit |
- |
45,695 |
|||
Deferred income taxes |
33,693 |
53,770 |
|||
Other |
755 |
773 |
|||
Total current assets |
41,200 |
104,279 |
|||
|
|
|
|||
Investment in subsidiaries |
1,305,873 |
1,227,981 |
|||
|
|
|
|||
Other Assets |
|
|
|||
Deferred income taxes |
44,500 |
1,828 |
|||
Other |
1,094 |
2,541 |
|||
Total other assets |
45,594 |
4,369 |
|||
|
|
|
|||
Total |
$ |
1,392,667 |
$ |
1,336,629 |
|
|
|
|
|||
|
|
|
|||
Liabilities and Shareholders Equity |
|
|
|||
|
|
|
|||
Current Liabilities: |
|
|
|||
Notes payable |
$ |
38,400 |
$ |
49,860 |
|
Accounts payable |
5,701 |
4,478 |
|||
Taxes accrued |
22,485 |
47,733 |
|||
Other |
541 |
177 |
|||
Total current liabilities |
67,127 |
102,248 |
|||
|
|
|
|||
Other Liabilities: |
|
|
|||
Intercompany notes payable |
19,855 |
22,652 |
|||
Other |
3,247 |
4,414 |
|||
Total other liabilities |
23,102 |
27,066 |
|||
|
|
|
|||
Shareholders Equity |
1,302,438 |
1,207,315 |
|||
|
|
|
|||
Total |
$ |
1,392,667 |
$ |
1,336,629 |
|
|
|
|
|||
The accompanying note is an integral part of these statements. |
|||||
137
IDACORP, Inc.
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
CONDENSED STATEMENTS OF
CASH FLOWS
|
Year Ended December 31, |
|||||
|
2008 |
2007 |
2006 |
|||
|
(thousands of dollars) |
|||||
Operating Activities: |
|
|
|
|||
Net cash provided by operating activities |
$ |
56,912 |
$ |
39,332 |
$ |
41,196 |
|
|
|
|
|||
Investing Activities: |
|
|
|
|||
Contributions to subsidiaries |
(37,000) |
(51,000) |
(64,533) |
|||
Change in intercompany notes receivable |
- |
880 |
4,196 |
|||
Purchase of investments |
(364) |
- |
- |
|||
Sale of investments |
287 |
- |
- |
|||
Sale of ITI |
- |
- |
21,548 |
|||
Sale of IDACOMM |
- |
7,858 |
- |
|||
Reimbursement by subsidiary of refundable tax deposit |
- |
43,927 |
- |
|||
Net cash provided by (used in) investing activities |
(37,077) |
1,665 |
(38,789) |
|||
|
|
|
|
|||
Financing Activities: |
|
|
|
|||
Issuance of common stock |
50,863 |
37,181 |
41,465 |
|||
Dividends on common stock |
(54,240) |
(53,012) |
(51,272) |
|||
Increase (decrease) in short-term borrowings |
(11,460) |
(26,940) |
16,700 |
|||
Change in intercompany notes payable |
(2,092) |
(626) |
(6,814) |
|||
Other |
(665) |
(1,024) |
1,004 |
|||
Net cash provided by (used in) financing activities |
(17,594) |
(44,421) |
1,083 |
|||
Net increase (decrease) in cash and cash equivalents |
2,241 |
(3,424) |
3,490 |
|||
Cash and cash equivalents at beginning of year |
1,300 |
4,724 |
1,234 |
|||
Cash and cash equivalents at end of year |
$ |
3,541 |
$ |
1,300 |
$ |
4,724 |
|
|
|
|
|||
The accompanying note is an integral part of these statements. |
IDACORP, Inc.
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
NOTES TO CONDENSED
FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION |
|
Pursuant to rules and regulations of the Securities and Exchange Commission, the unconsolidated condensed financial statements of IDACORP, Inc. do not reflect all of the information and notes normally included with financial statements prepared in accordance with accounting principles generally accepted in the United States of America. Therefore, these financial statements should be read in conjunction with the consolidated financial statements and related notes included in the 2008 Form 10-K, Part II, Item 8. |
|
Accounting for subsidiaries |
IDACORP has accounted for the earnings of its subsidiaries under the equity method in the unconsolidated condensed financial statements. Included in net cash provided by operating activities in the condensed statements of cash flows are dividends of $56,868, $58,990, and $74,609 that IDACORP subsidiaries paid to IDACORP in 2008, 2007 and 2006, respectively. |
138
IDACORP, Inc.
SCHEDULE II - CONSOLIDATED VALUATION AND
QUALIFYING ACCOUNTS
Years Ended December 31, 2008, 2007 and 2006
Column A |
Column B |
Column C |
Column D |
Column E |
||||||||
|
|
Additions |
|
|
||||||||
|
|
|
Charged |
|
|
|||||||
|
Balance at |
Charged |
(Credited) |
|
Balance at |
|||||||
|
Beginning |
to |
to Other |
Deductions |
End |
|||||||
Classification |
of Period |
Income |
Accounts |
(1) |
of Period |
|||||||
|
(thousands of dollars) |
|||||||||||
|
|
|||||||||||
2008: |
|
|
|
|
|
|
|
|
|
|
||
Reserves Deducted From |
|
|
|
|
|
|
|
|
|
|
||
|
Applicable Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Reserve for uncollectible accounts |
$ |
7,505 |
$ |
3,661 |
$ |
(5,947) |
$ |
3,495 |
$ |
1,724 |
|
|
Reserve for uncollectible notes |
|
1,879 |
|
- |
|
- |
|
- |
|
1,879 |
Other Reserves: |
|
|
|
|
|
|
|
|
|
|
||
|
Rate refunds |
|
2,397 |
|
10,948 |
|
- |
|
- |
|
13,345 |
|
|
Injuries and damages reserve |
|
661 |
|
1,437 |
|
- |
|
133 |
|
1,965 |
|
|
Miscellaneous operating reserves |
|
4 |
|
- |
|
- |
|
4 |
|
- |
|
2007: |
|
|
|
|
|
|
|
|
|
|
||
Reserves Deducted From |
|
|
|
|
|
|
|
|
|
|
||
|
Applicable Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Reserve for uncollectible accounts |
$ |
7,168 |
$ |
2,093 |
$ |
- |
$ |
1,756 |
$ |
7,505 |
|
|
Reserve for uncollectible notes |
|
1,879 |
|
- |
|
- |
|
- |
|
1,879 |
|
|
Deferred tax assets |
|
1,565 |
|
- |
|
- |
|
1,565 |
|
- |
Other Reserves: |
|
|
|
|
|
|
|
|
|
|
||
|
Rate refunds |
|
1,227 |
|
2,893 |
|
- |
|
1,723 |
|
2,397 |
|
|
Injuries and damages reserve |
|
666 |
|
2,457 |
|
- |
|
2,462 |
|
661 |
|
|
Miscellaneous operating reserves |
|
6 |
|
3 |
|
- |
|
5 |
|
4 |
|
2006: |
|
|
|
|
|
|
|
|
|
|
||
Reserves Deducted From |
|
|
|
|
|
|
|
|
|
|
||
|
Applicable Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Reserve for uncollectible accounts |
$ |
33,078 |
$ |
3,079 |
$ |
- |
$ |
28,989 |
$ |
7,168 |
|
|
Reserve for uncollectible notes |
|
1,879 |
|
- |
|
- |
|
- |
|
1,879 |
|
|
Deferred tax assets |
|
1,565 |
|
- |
|
- |
|
- |
|
1,565 |
Other Reserves: |
|
|
|
|
|
|
|
|
|
|
||
|
Rate refunds |
|
- |
|
1,227 |
|
- |
|
- |
|
1,227 |
|
|
Injuries and damages reserve |
|
1,638 |
|
1,914 |
|
- |
|
2,886 |
|
666 |
|
|
Miscellaneous operating reserves |
|
36 |
|
- |
|
- |
|
30 |
|
6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes: (1) Represents deductions from the reserves for purposes for which the reserves were created. In the case of uncollectible accounts |
||||||||||||
|
and notes reserves, includes reversals of amounts previously written off. |
139
IDAHO POWER COMPANY
SCHEDULE II - CONSOLIDATED VALUATION AND
QUALIFYING ACCOUNTS
Years Ended December 31, 2008, 2007, 2006
Column A |
Column B |
Column C |
Column D |
Column E |
||||||||
|
|
Additions |
|
|
||||||||
|
|
|
Charged |
|
|
|||||||
|
Balance at |
Charged |
(Credited) |
|
Balance at |
|||||||
|
Beginning |
to |
to Other |
Deductions |
End |
|||||||
Classification |
of Period |
Income |
Accounts |
(1) |
of Period |
|||||||
|
(thousands of dollars) |
|||||||||||
|
|
|||||||||||
2008: |
|
|
|
|
|
|
|
|
|
|
||
Reserves Deducted From |
|
|
|
|
|
|
|
|
|
|
||
|
Applicable Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Reserve for uncollectible accounts |
$ |
1,305 |
$ |
3,661 |
$ |
253 |
$ |
3,495 |
$ |
1,724 |
Other Reserves: |
|
|
|
|
|
|
|
|
|
|
||
|
Rate refunds |
|
2,397 |
|
10,948 |
|
- |
|
- |
|
13,345 |
|
|
Injuries and damages reserve |
|
661 |
|
1,437 |
|
- |
|
133 |
|
1,965 |
|
|
Miscellaneous operating reserves |
|
4 |
|
- |
|
- |
|
4 |
|
- |
|
2007: |
|
|
|
|
|
|
|
|
|
|
||
Reserves Deducted From |
|
|
|
|
|
|
|
|
|
|
||
|
Applicable Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Reserve for uncollectible accounts |
$ |
968 |
$ |
2,093 |
$ |
- |
$ |
1,756 |
$ |
1,305 |
Other Reserves: |
|
|
|
|
|
|
|
|
|
|
||
|
Rate refunds |
|
1,227 |
|
2,893 |
|
- |
|
1,723 |
|
2,397 |
|
|
Injuries and damages reserve |
|
665 |
|
1,210 |
|
- |
|
1,214 |
|
661 |
|
|
Miscellaneous operating reserves |
|
6 |
|
3 |
|
- |
|
5 |
|
4 |
|
2006: |
|
|
|
|
|
|
|
|
|
|
||
Reserves Deducted From |
|
|
|
|
|
|
|
|
|
|
||
|
Applicable Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Reserve for uncollectible accounts |
$ |
833 |
$ |
3,079 |
$ |
- |
$ |
2,944 |
$ |
968 |
Other Reserves: |
|
|
|
|
|
|
|
|
|
|
||
|
Rate refunds |
|
- |
|
1,227 |
|
- |
|
- |
|
1,227 |
|
|
Injuries and damages reserve |
|
1,191 |
|
1,445 |
|
- |
|
1,971 |
|
665 |
|
|
Miscellaneous operating reserves |
|
36 |
|
- |
|
- |
|
30 |
|
6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes: (1) Represents deductions from the reserves for purposes for which the reserves were created. In the case of uncollectible accounts |
||||||||||||
|
includes reversals of amounts previously written off. |
140
SIGNATURES
Pursuant to the requirements
of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant
has caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
IDACORP,
Inc.
(Registrant)
February 26, 2009
By:
/s/
J.
LaMont Keen
J. LaMont Keen
President and Chief Executive Officer
Pursuant to the requirements
of the Securities Exchange Act of 1934, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and on
the dates indicated.
By: |
|
/s/Jon H. Miller |
|
|
Chairman of the Board |
February 26, 2009 |
|
|
Jon H. Miller |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
By: |
|
/s/J. LaMont Keen |
|
|
President and Chief Executive |
|
|
|
J. LaMont Keen |
|
|
Officer and Director |
|
|
|
|
|
|
(Principal Executive Officer) |
|
|
|
|
|
|
|
|
By: |
|
/s/Darrel T. Anderson |
|
|
Senior Vice President - Administrative |
|
|
|
Darrel T. Anderson |
|
|
Services and Chief Financial Officer |
|
|
|
|
|
|
(Principal Financial Officer) |
|
|
|
|
|
|
(Principal Accounting Officer) |
|
|
|
|
|
|
|
|
By: |
|
/s/Richard J. Dahl |
By: |
|
/s/Jan B. Packwood |
|
|
|
Richard J. Dahl |
|
|
Jan B. Packwood |
|
|
|
Director |
|
|
Director |
|
|
|
|
|
|
|
|
By: |
|
/s/Judith A. Johansen |
By: |
|
/s/Richard G. Reiten |
|
|
|
Judith A. Johansen |
|
|
Richard G. Reiten |
|
|
|
Director |
|
|
Director |
|
|
|
|
|
|
|
|
By: |
|
/s/Christine King |
By: |
|
/s/Joan H. Smith |
|
|
|
Christine King |
|
|
Joan H. Smith |
|
|
|
Director |
|
|
Director |
|
|
|
|
|
|
|
|
By: |
|
/s/Gary G. Michael |
By: |
|
/s/Robert A. Tinstman |
|
|
|
Gary G. Michael |
|
|
Robert A. Tinstman |
|
|
|
Director |
|
|
Director |
|
|
|
|
|
|
|
|
By: |
|
/s/Peter S. ONeill |
By: |
|
/s/Thomas J. Wilford |
|
|
|
Peter S. ONeill |
|
|
Thomas J. Wilford |
|
|
|
Director |
|
|
Director |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
143
SIGNATURES
Pursuant to the requirements
of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant
has caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
IDAHO
POWER COMPANY
(Registrant)
February 26, 2009
By:
/s/
J. LaMont Keen
J. LaMont Keen
President and Chief Executive Officer
Pursuant to the requirements
of the Securities Exchange Act of 1934, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and on
the dates indicated.
By: |
|
/s/Jon H. Miller |
|
|
Chairman of the Board |
February 26, 2009 |
|
|
Jon H. Miller |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
By: |
|
/s/J. LaMont Keen |
|
|
President and Chief Executive |
|
|
|
J. LaMont Keen |
|
|
Officer and Director |
|
|
|
|
|
|
(Principal Executive Officer) |
|
|
|
|
|
|
|
|
By: |
|
/s/Darrel T. Anderson |
|
|
Senior Vice President - Administrative |
|
|
|
Darrel T. Anderson |
|
|
Services and Chief Financial Officer |
|
|
|
|
|
|
(Principal Financial Officer) |
|
|
|
|
|
|
(Principal Accounting Officer) |
|
|
|
|
|
|
|
|
By: |
|
/s/Richard J. Dahl |
By: |
|
/s/Jan B. Packwood |
|
|
|
Richard J. Dahl |
|
|
Jan B. Packwood |
|
|
|
Director |
|
|
Director |
|
|
|
|
|
|
|
|
By: |
|
/s/Judith A. Johansen |
By: |
|
/s/Richard G. Reiten |
|
|
|
Judith A. Johansen |
|
|
Richard G. Reiten |
|
|
|
Director |
|
|
Director |
|
|
|
|
|
|
|
|
By: |
|
/s/Christine King |
By: |
|
/s/Joan H. Smith |
|
|
|
Christine King |
|
|
Joan H. Smith |
|
|
|
Director |
|
|
Director |
|
|
|
|
|
|
|
|
By: |
|
/s/Gary G. Michael |
By: |
|
/s/Robert A. Tinstman |
|
|
|
Gary G. Michael |
|
|
Robert A. Tinstman |
|
|
|
Director |
|
|
Director |
|
|
|
|
|
|
|
|
By: |
|
/s/Peter S. ONeill |
By: |
|
/s/Thomas J. Wilford |
|
|
|
Peter S. ONeill |
|
|
Thomas J. Wilford |
|
|
|
Director |
|
|
Director |
|
|
|
|
|
|
|
|
144
EXHIBIT INDEX
Exhibit Number
145
IDAHO POWER COMPANY
SECURITY PLAN FOR
SENIOR MANAGEMENT EMPLOYEES I
Amended and Restated
Effective December 31, 2004
TABLE OF CONTENTS
ARTICLE I PURPOSE; EFFECTIVE DATE ................................................................................................................ 1
ARTICLE II DEFINITIONS ............................................................................................................................................. 2
2.1 Actuarial Equivalent ............................................................................................................................................... 2
2.2 Administrative Committee .................................................................................................................................... 2
2.3 Affiliate ..................................................................................................................................................................... 2
2.4 Beneficiary ............................................................................................................................................................... 3
2.5 Board ......................................................................................................................................................................... 3
2.6 Change in Control .................................................................................................................................................. 3
2.7 Change in Control Period ..................................................................................................................................... 4
2.8 Company ................................................................................................................................................................... 4
2.9 Compensation Committee ..................................................................................................................................... 5
2.10 Compensation .......................................................................................................................................................... 5
2.11 Disability .................................................................................................................................................................. 5
2.12 Early Retirement Date ........................................................................................................................................... 5
2.13 Employer ................................................................................................................................................................... 5
2.14 Final Average Monthly Compensation ................................................................................................................ 6
2.15 Frozen Retirement Benefit .................................................................................................................................... 7
2.16 Frozen Survivor Benefit ......................................................................................................................................... 8
2.17 Normal Form of Benefit ......................................................................................................................................... 8
2.18 Normal Retirement Assumed Years of Participation .......................................................... ............................ 8
2.19 Normal Retirement Date ....................................................................................................................................... 8
2.20 Participant ............................................................................................................................................................... 8
2.21 Plan Year ................................................................................................................................................................. 8
2.22 Retirement .............................................................................................................................................................. 9
2.23 Retirement Plan .................................................................................................................................................... 9
2.24 Security Plan Retirement Benefit ...................................................................................................................... 9
2.25 Target Retirement Percentage ........................................................................................................................... 9
2.26 Termination Date ................................................................................................................................................... 9
2.27 Years of Participation ......................................................................................................................................... 10
ARTICLE III PARTICIPATION AND VESTING ..................................................................................................... 11
3.1 Eligibility and Participation .............................................................................................................................. 11
3.2 Vesting .................................................................................................................................................................. 11
3.3 Change in Employment Status .......................................................................................................................... 11
3.4 Non-Participating Affiliate ............................................................................................................................... 12
ARTICLE IV BENEFIT ELECTION ............................................................................................................................ 13
4.1 Benefit Election ................................................................................................................................................... 13
4.2 Commencement of Benefits .............................................................................................................................. 13
ARTICLE V SURVIVOR BENEFITS ........................................................................................................................ 14
5.1 Pre-retirement Survivor Benefits ................................................................................................................... 14
5.2 Post-termination Survivor Benefit .................................................................................................................. 15
5.3 Survivor Benefit Election for Participants Prior to December 1, 1994 . .................................................. 16
5.4 Suicide .................................................................................................................................................................. 16
ARTICLE VISECURITY PLAN RETIREMENT BENEFITS ........................................................................ ............... 17
6.1 Normal Retirement Benefit ............................................................................................................................... 17
6.2 Early Retirement Benefit ................................................................................................................................... 18
6.3 Early Retirement Factor .................................................................................................................................... 18
6.4 Early Termination Benefits .............................................................................................................................. 19
6.5 Termination After Change in Control ................................................................................................................... 20
6.6 Form of Payment ........................................................................................................................................................ 20
ARTICLE VII OTHER RETIREMENT PROVISIONS ............................................................................. .............. 21
7.1 Disability ..................................................................................................................................................................... 21
7.2 Withholding Payroll Taxes ..................................................................................................................................... 21
7.3 Payment to Guardian ................................................................................................................................... ............ 21
7.4 Accelerated Distribution ......................................................................................................................................... 22
ARTICLE VIII BENEFICIARY DESIGNATION ............................................................................................... ....... 23
8.1 Beneficiary Designation for Participant Not Eligible for Frozen Survivor Benefit .............................. ... 23
8.2 Beneficiary Designation for Participant Eligible for Frozen Survivor Benefit ......................................... 24
8.3 Beneficiary Designation at Commencement of Benefits .................................................................................. 26
8.4 Effect of Payment ...................................................................................................................................................... 26
ARTICLE IX ADMINISTRATION ................................................................................................................................... 27
9.1 Administrative Committee Duties ........................................................................................................................ 27
9.2 Indemnity of Administrative Committee ............................................................................................................. 28
ARTICLE X CLAIMS PROCEDURE ............................................................................................................................ 29
10.1 Claim ......................................................................................................................................................................... 29
10.2 Denial of Claim ........................................................................................................................................................ 29
10.3 Review of Claim ....................................................................................................................................................... 29
10.4 Final Decision .......................................................................................................................................................... 30
ARTICLE XI TERMINATION, SUSPENSION OR AMENDMENT ..................................................................... .. 31
11.1 Termination, Suspension or Amendment of Plan ............................................................................................. 31
11.2 Change in Control .................................................................................................................................................. 32
ARTICLE XII MISCELLANEOUS ..............................................................................................................................32
12.1 Unfunded Plan ..........................................................................................................................................................32
12.2 Unsecured General Creditor ................................................................................................................................ 32
12.3 Trust Fund ................................................................................................................................................................ 33
12.4 Nonassignability ...................................................................................................................................................... 33
12.5 Not a Contract of Employment ............................................................................ ................................................. 33
12.6 Governing Law ......................................................................................................................................................... 34
12.7 Validity ...................................................................................................................................................................... 34
12.8 Notice ......................................................................................................................... ............................................... 34
12.9 Successors ................................................................................................................................................................ 34
12.10 Section 409A ............................................................................................................................................................. 35
IDAHO POWER COMPANY
SECURITY PLAN FOR SENIOR MANAGEMENT EMPLOYEES I
AMENDED AND RESTATED
EFFECTIVE NOVEMBER 20, 2008
ARTICLE I
PURPOSE; EFFECTIVE DATE
The purpose of this Security Plan for Senior Management Employees I (the "Plan") is to provide supplemental retirement benefits for certain key employees of Idaho Power Company, its subsidiaries and affiliates. It is intended that the Plan will aid in attracting individuals of exceptional ability and retain those critical to the operation of the Company by providing them with these benefits. The effective date of this restatement shall be November 20, 2008.
PAGE 1 SECURITY PLAN FOR SENIOR MANAGEMENT EMPLOYEES
ARTICLE II
DEFINITIONS
As used in this Plan, the following terms shall be defined as stated in this Article, as interpreted by the Administrative Committee pursuant to its authority granted by Section 9.1 of this Plan.
2.1 Actuarial Equivalent . "Actuarial Equivalent" shall mean equivalence in value between two (2) or more forms and/or times of payment based on a determination by an actuary chosen by the Company using generally accepted actuarial assumptions, methods and factors as used in the Retirement Plan which may be amended from time to time.
For purposes of Section 7.4, Actuarial Equivalent shall be calculated using the Pension Benefit Guaranty Immediate Rate as of the month preceding distribution plus 1% and the mortality table specified in the Retirement Plan which may be amended from time to time.
2.2 Administrative Committee . "Administrative Committee" shall mean the Administrative Committee appointed by the Compensation Committee pursuant to Section 9.1 hereof to administer the Plan.
2.3 Affiliate . Affiliate shall mean a business entity that is affiliated in ownership with the Company or an Employer and is recognized as an Affiliate by the Company for the purposes of this Plan.
PAGE 2 SECURITY PLAN FOR SENIOR MANAGEMENT EMPLOYEES
2.4 Beneficiary . "Beneficiary" shall mean the person, persons or entity designated by the Participant pursuant to Article VIII to receive any benefits payable under the Plan. Each such designation shall be made in a written instrument filed with the Administrative Committee and shall become effective only when received, accepted and acknowledged in writing by the Administrative Committee or its designee.
2.5 Board . "Board" shall mean the Board of Directors of the Company.
2.6 Change in Control . "Change in Control" shall mean any of the following events:
(a) any person, or more than one person acting as a group, acquires ownership of stock of IDACORP, Inc. that, together with all other stock held by such person or persons, constitutes more than 50% of the total fair market value or total voting power of the stock of IDACORP, Inc.
(b) any person, or more than one person acting as a group, acquires (or has acquired during the 12 month period ending on the date of the most recent acquisition by such person or persons) ownership of thirty-five percent (35%) or more of the voting stock of IDACORP, Inc.
PAGE 3 SECURITY PLAN FOR SENIOR MANAGEMENT EMPLOYEES
(c) any person, or more than one person acting as a group, other than an Affiliate of IDACORP (as such term is defined in Rule 12b-2 of the Securities Exchange Act of 1934), acquires (or has acquired during the 12 month period ending on the date of the most recent acquisition by such person or persons) assets from IDACORP, Inc. that have a total fair market value equal to or more than forty percent (40%) of the total gross fair market value of all the assets of the corporation immediately prior to such acquisition or acquisitions. (For this purpose, gross fair market value means the value of the assets of the corporation, or the value of the assets being disposed of, determined without regard to any liabilities associated with such assets).
(d) a majority of members of the Board of Directors of IDACORP, Inc. is replaced during any twelve (12) month period, such that, individuals who at the beginning of such period constitute the Board of IDACORP, Inc. cease for any reason to constitute a majority thereof, unless the appointment or election of each new director was endorsed by a majority of the directors in office prior to such appointment or election.
(e) any event described in (a) through (d) above occurs with respect to the Company, except that IDACORP, Inc. and its Affiliates shall not be considered persons for purposes of determining whether there has been a change in control.
2.7 Change in Control Period . "Change in Control Period" shall mean the period beginning with a Change in Control as defined in Section 2.6 and ending with the earlier of: (i) Termination Date of the Change in Control as determined by the Compensation Committee or (ii) 24 months following the consummation of a Change in Control.
2.8 Company . "Company" shall mean the Idaho Power Company, an Idaho corporation, its successors and assigns.
PAGE 4 SECURITY PLAN FOR SENIOR MANAGEMENT EMPLOYEES
2.9 Compensation Committee . "Compensation Committee" shall mean the Board committee assigned responsibility for administering executive compensation.
2.10 Compensation . "Compensation" shall mean the base salary and annual bonus (not to exceed one (1) times base salary for the year in which the bonus was paid) paid to a Participant and considered to be "wages" for purposes of federal income tax withholding. Compensation shall be calculated before reduction for any amounts deferred by the Participant pursuant to any plan sponsored by the Employer which permits deferral of current compensation. Compensation does not include long-term incentive compensation in any form, expense reimbursements, or any form of non-cash compensation or benefits.
2.11 Disability . "Disability" shall mean that a Participant is eligible to receive benefits under the Long-Term Disability Program maintained by the Employer.
2.12 Early Retirement Date . "Early Retirement Date" shall mean a Participant's Termination Date, if such termination occurs on or after such Participant's:
(i) attainment of age fifty-five (55); or
(ii) completion of thirty (30) years of Credited Service under the Retirement Plan
but prior to Participant's Normal Retirement Date.
2.13 Employer . "Employer" shall mean the Company and any business affiliated with the Company that employs persons who are approved by the Board or the Administrative Committee for participation in this Plan.
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2.14 Final Average Monthly Compensation . "Final Average Monthly Compensation" shall mean the Compensation received by the Participant during any sixty (60) consecutive months (during the last ten (10) years of employment) for which the Participant's compensation was the highest divided by sixty (60). In determining Final Average Monthly Compensation, annual bonuses shall be allocated equally to the months in which they were paid. Final Average Monthly Compensation shall not include any Compensation payable to a Participant pursuant to a written severance agreement with the Employer. Notwithstanding the foregoing, because the benefits payable under this Plan are frozen as of December 31, 2004, Compensation paid after that date shall not be taken into account.
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2.15 Frozen Retirement Benefit . "Frozen Retirement Benefit" shall mean the benefit accrued as of November 30, 1994, under the Idaho Power Company Security Plan for Senior Management Employees as amended and restated May 1, 1990. The Frozen Retirement Benefit shall be calculated using compensation through November 30, 1994, and actual age at commencement of benefits. All Participants are 100% vested in their Frozen Retirement Benefit as of November 30, 1994. The Frozen Retirement Benefit shall be paid in the form and manner set forth in this Plan prior to the November 30, 1994 amendment including the early retirement reduction factors in effect under the May 1, 1990 restatement. The Frozen Retirement Benefit shall include the Participant's salary reduction with interest as provided in Section 5.5 of the Idaho Power Company Security Plan for Senior Management Employees as amended and restated May 1, 1990. In addition, the Frozen Retirement Benefit shall also include any benefit payable from the Idaho Power Company Supplemental Employee Retirement Plan (SERP) before August 1, 1996 Restatement. The Participants age, service and compensation at August 1, 1996, shall be used in determining this additional Frozen Retirement Benefit from the SERP. Effective November 30, 1994, there shall be no additional employee contributions or salary reductions under this Plan. The Frozen Retirement Benefit accrued shall not be reduced due to the failure to complete salary reductions for the final benefit class if such failure resulted from removing the salary reduction requirement from the Plan effective November 30, 1994.
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2.16 Frozen Survivor Benefit . "Frozen Survivor Benefit" shall mean the survivor benefit accrued as of November 30, 1994, under Article IV of the Idaho Power Company Security Plan for Senior Management Employees as amended and restated May 1, 1990. The Frozen Survivor Benefit shall be calculated using compensation through November 30, 1994. All Participants are 100% vested in their Frozen Survivor Benefit as of November 30, 1994. The Frozen Survivor Benefit shall be paid in the form and manner set forth in this Plan prior to the November 30, 1994 amendment. The Frozen Survivor Benefit shall include the Participant's salary reduction with interest as provided in Section 5.5 of the Idaho Power Company Security Plan for Senior Management Employees as amended and restated May 1, 1990. Effective November 30, 1994, there shall be no additional employee contributions or salary reductions under this Plan. In addition, the Frozen Survivor Benefit shall also include any benefit payable from the Idaho Power Company Supplemental Employee Retirement Plan (SERP) before August 1, 1996 Restatement. The Participants age, service and compensation at termination shall be used in determining this additional Frozen Survivor Benefit from the SERP. The Frozen Survivor Benefit accrued shall not be reduced due to the failure to complete salary reductions for the final benefit class if such failure resulted from removing the salary reduction requirement from the Plan effective November 30, 1994.
2.17 Normal Form of Benefit . "Normal Form of Benefit" shall mean the normal form of monthly retirement benefit provided under Section 3.01 of the Retirement Plan.
2.18 Normal Retirement Assumed Years of Participation . Normal Retirement Assumed Years of Participation shall be twelve (12) month periods, and portions thereof, which shall begin on the earlier of the date an individual, who has been designated by the Employer, is approved by the Administrative Committee, pursuant to Section 3.1, or the date designated by the Administrative Committee, and shall end on the date the Participant would attain age sixty-two (62).
2.19 Normal Retirement Date . "Normal Retirement Date" shall mean a Participants Termination Date if the termination occurs on or after the date the Participant attains age sixty-two (62).
2.20 Participant . "Participant" shall mean any individual who is participating in or has participated in this Plan as provided in Article III.
2.21 Plan Year . "Plan Year" shall mean the calendar year effective November 30, 1994.
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2.22 Retirement . "Retirement" shall mean termination of a Participant's employment with the Employer at the Participant's Early Retirement Date or Normal Retirement Date, as applicable.
2.23 Retirement Plan . "Retirement Plan" shall mean The Retirement Plan of Idaho Power Company as may be amended from time to time.
2.24 Security Plan Retirement Benefit . "Security Plan Retirement Benefit" shall mean the benefit determined under Article VI of this Plan.
2.25 Target Retirement Percentage . "Target Retirement Percentage" shall equal six percent (6%) for each of the first ten (10) Years of Participation plus an additional one percent (1%) for each Year of Participation, exceeding ten (10). The maximum Target Retirement Percentage shall be seventy-five percent (75%).
2.26 Termination Date . "Termination Date" shall mean the actual date a Participants employment with the Employer terminates by resignation, discharge, death, Retirement or by any other method.
PAGE 9 SECURITY PLAN FOR SENIOR MANAGEMENT EMPLOYEES
2.27 Years of Participation . "Years of Participation" shall be twelve (12) month periods, and portions thereof, which shall begin on the earlier of the date an individual, who has been designated by the Employer, is approved by the Administrative Committee, pursuant to Section 3.1, or the date designated by the Administrative Committee, and shall end on the earliest of a Participants Termination Date, the date the Participant experiences a change in status, as provided in Sections 3.3 and 3.4, or December 31, 2004. Partial Years of Participation, if any, shall be used in determining benefits under this Plan.
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ARTICLE III
PARTICIPATION AND VESTING
3.1 Eligibility . Eligibility to participate in this Plan is limited to those key employees of the Employer who are designated, from time to time, by the Employer subject to approval of the Administrative Committee.
3.2 Vesting . A Participant shall be one hundred percent (100%) immediately vested.
3.3 Change in Employment Status . If the Employer determines that a Participant's employment performance or classification is no longer at a level which deserves participation in this Plan, but does not terminate the Participant's employment with the Employer, participation herein and eligibility to receive benefits hereunder shall be limited to the Participant's accrued benefit as of the date of the change in employment status. In such an event, the benefits payable to the Participant shall be based solely on the Participant's Years of Participation and Final Average Monthly Compensation as of such date. The benefit shall be calculated under the early retirement provisions pursuant to Sections 6.2 and 6.3(a), with commencement of benefit not earlier than the later of the Termination Date or the Participants Early Retirement Date.
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3.4 Non-Participating Affiliate . A Participant, who subsequently is transferred to an affiliated company that does not provide for participation in this Plan, may be allowed to continue participation under the Plan subject to the approval of the Administrative Committee. A Participant who is not allowed to continue participation in this Plan will not have benefits determined nor receive benefits under Article VI until his or her Termination Date.
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ARTICLE IV
BENEFIT ELECTION
4.1 Benefit Election . Participants in this Plan prior to December 1, 1994 or, if the Participant is deceased, the Beneficiary of such Participant, must elect to receive in the 30-day period immediately prior to receipt of any benefits under this Plan, (a) the Frozen Benefit (the Frozen Retirement Benefit or Frozen Survivor Benefit); or (b) the benefit accrued under this Plan as in effect after November 30, 1994.
A Participant may at any time prior to death or commencing benefits elect pursuant to Section 5.3(b) that upon their death before commencing benefits, the Frozen Survivor Benefit be paid to the designated Beneficiaries. This election may be revoked by the Participant at any time. This election requires spousal consent if the Participant is married.
4.2 Commencement of Benefits . A Participant or a Beneficiary shall determine the date when benefits shall commence within the time authorized by the Plan.
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ARTICLE V
SURVIVOR BENEFITS
5.1 Pre-retirement Survivor Benefits . If a Participant dies while employed by the Employer, the Employer shall pay a survivor benefit to such Participant's Beneficiary as follows:
(a) Amount . The pre-termination survivor benefit shall be equal to sixty-six and two-thirds percent (66 2/3%) of the retirement benefit calculated under Article VI assuming retirement occurred at the later of age sixty-two (62) or date of death. Final Average Monthly Compensation shall be determined as of the date of the Participant's death. For purposes of this section (a),the Retirement Plan benefit shall be the vested accrued benefit determined as of December 31, 2004.
(b) Payment . If the Participant is married on the date of death, the benefits shall be paid to the spouse of the Participant for the life of the spouse beginning on the first day of the month coincident with or following the date of death. If the spouse's date of birth is more than ten (10) years after the Participant's date of birth, the monthly benefit shall be reduced using the Actuarial Equivalent factors to reflect the number of years over ten (10) the spouse is younger than the Participant. If the Participant is unmarried on the date of death, the benefit shall be paid to the Participant's Beneficiary in a lump sum that is the Actuarial Equivalent of the value of a death benefit payable to an assumed spouse the same age as the Participant.
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5.2 Post-termination Survivor Benefit .
(a) Death Prior to Commencement of Benefits . If a Participant dies prior to commencement of benefits but after reaching a Termination Date:
(i) Amount . The amount of the post-termination survivor benefit shall be equal to sixty-six and two thirds percent (66 2/3%) of the retirement benefit payable to the Participant.
(ii) Payment . If the Participant is married on the date of death, the benefits shall be paid to the spouse of the Participant for the life of the spouse beginning on the first day of the month coincident with or following the date of death. If the spouse's date of birth is more than ten (10) years after the Participant's date of birth, the monthly benefit shall be reduced using Actuarial Equivalent factors to reflect the number of years over ten (10) the spouse is younger than the Participant. If the Participant is unmarried on the date of death, the benefit shall be paid to the Participant's Beneficiary in a lump sum that is the Actuarial Equivalent of the value of a death benefit payable to an assumed spouse the same age as the Participant.
(b) Death After Commencement of Benefits . If a Participant dies after commencement of benefits, a survivor benefit will be paid only if, and to the extent provided for, under the form of benefit elected by the Participant pursuant to Sections 6.6.
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5.3 Survivor Benefit Election for Participants Prior to December 1, 1994 .
(a) Death Prior to Commencing Benefits and Making Frozen Survivor Benefit Election . As described in Section 4.1, if a Participant who participated in this Plan prior to December 1, 1994 dies prior to commencing benefits, the Beneficiary of the Participant must elect to receive (a) the Frozen Survivor Benefit; or (b) the benefit accrued under Section 5.1 of this plan as in effect after November 30, 1994. If the Participant was unmarried at the time of the Participant's death and more than one primary Beneficiary has been designated, the Beneficiaries shall be deemed to have elected the benefit of highest value based on the Actuarial Equivalent basis specified in Section 2.1 of this Plan.
(b) Election of Frozen Survivor Benefit Prior to Commencing Benefits . A Participant may at any time prior to commencing benefits elect that, upon their death before commencing benefits, the Frozen Survivor Benefit be paid to the designated Beneficiary(ies). This election, including the Beneficiary(ies) designation, requires spousal consent if married. This election may be revoked by the Participant at any time. If this election is made and the Participant dies before commencing benefits, the Frozen Survivor Benefit shall be paid to the Beneficiary(ies) in lieu of the survivor benefits described in Sections 5.1 and 5.2.
5.4 Suicide . In the event a Participant commits suicide within one (1) year of initially entering this Plan, no benefits shall be payable hereunder to the Participant's Beneficiaries.
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ARTICLE VI
SECURITY PLAN RETIREMENT BENEFITS
6.1 Normal Retirement Benefit . If a Participants employment with the Employer terminates at a Normal Retirement Date, the Employer shall pay to the Participant a monthly Security Plan Retirement Benefit beginning the first day of the month following the Normal Retirement Date. Payment of this benefit cannot be deferred. The monthly Security Plan Retirement Benefit shall equal the Target Retirement Percentage multiplied by the Participant's Final Average Monthly Compensation, less the amount of the Participant's vested accrued retirement benefit as of December 31, 2004 under the Retirement Plan Normal Form of Benefit regardless of the form actually selected by the Participant under the Retirement Plan.
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6.2 Early Retirement Benefit . If a Participants employment with the Employer terminates at an Early Retirement Date, the Employer shall pay to the Participant a monthly Security Plan Retirement Benefit beginning the first day of the month following the Early Retirement Date. Payment of this benefit cannot be deferred. The monthly Security Plan Retirement Benefit shall be equal to the Target Retirement Percentage, multiplied by the Early Retirement Factor and by the Participant's Final Average Monthly Compensation, less the amount of the Participant's vested accrued retirement benefit as of December 31, 2004 under the Retirement Plan Normal Form of Benefit payable at the Participants Early Retirement Date.
6.3 Early Retirement Factor . If a Participants employment with an Employer terminates before the Participant's Normal Retirement Date, the Target Retirement Percentage shall be multiplied by one (1) of the following Early Retirement Factors.
(a) If termination occurs with approval or if the Participants employment with the Employer terminates within a Change in Control Period, the Early Retirement Factor shall be as described below:
Exact Age When Payments Begin |
Early Retirement Factor |
62 |
100% |
61 |
96% |
60 |
92% |
59 |
87% |
58 |
82% |
57 |
77% |
56 |
72% |
55 |
67% |
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Early Retirement Factors will be prorated to reflect retirement based upon completed months rather than an exact age.
(b) If termination occurs without approval and the Participant has not terminated within a Change in Control Period, the Early Retirement Factor shall be the factor described in (a) above, times a fraction equal to the Participant's Years of Participation at termination divided by the Participants Normal Retirement Assumed Years of Participation.
(c) Authorization to grant approval for early retirement is vested with the Compensation Committee for elected officers of the Employer and with the Chief Executive Officer of the Employer for non-officers.
6.4 Early Termination Benefits . If a Participants employment with the Employer terminates prior to his or her death, prior to his or her Early Retirement Date, and not within a Change in Control Period, the Employer shall pay to the Participant, commencing on the first day of the month following the Participants fifty-fifth (55th) birthday, the Security Plan Retirement Benefit as determined under this section.
(a) The Target Retirement Percentage shall be calculated based upon the Years of Participation and then multiplied by a fraction equal to the Participant's actual Years of Participation divided by the Participants Normal Retirement Assumed Years of Participation. The adjusted Target Retirement Percentage shall be multiplied by the factor described in Section 6.3(a) for each month between the Participant's benefits commencement date (age 55) and age sixty-two (62).
PAGE 19 SECURITY PLAN FOR SENIOR MANAGEMENT EMPLOYEES
(b) The Early Termination Benefit shall be offset by the Retirement Plan Normal Form of Benefit , determined as of December 31, 2004 payable on the date of benefit commencement (age 55) regardless of service.
6.5 Termination After Change in Control . If a Participants employment terminates within the Change in Control Period prior to his or her Normal Retirement Date, the Participant shall receive, beginning on the later of the attainment of age fifty-five (55) or the Participant's actual termination date, the Early Retirement Benefit calculated with the Early Retirement Factors set forth in 6.3(a).
6.6 Form of Payment . The Security Plan Retirement Benefit shall be paid as a single life annuity for the lifetime of the Participant.
(a) The Participant may also elect to receive Actuarial Equivalent payments in one of the forms of benefit listed below:
(i) A joint and survivor annuity with payments continued to the surviving spouse at an amount equal to two-thirds (2/3) of the Participant's benefit.
(ii) A joint and survivor annuity with payments continued to the surviving spouse at an amount equal to the Participant's benefit.
(iii) A single life annuity, if the Participant had previously elected one of the joint and survivor annuity options listed above.
PAGE 20 SECURITY PLAN FOR SENIOR MANAGEMENT EMPLOYEES
ARTICLE VII
OTHER RETIREMENT PROVISIONS
7.1 Disability . During a period of Disability, a Participant will continue to accrue Years of Participation, and Compensation shall be credited to a Participant who is receiving Disability benefits at the full time equivalent rate of pay that was being earned immediately prior to becoming disabled.
7.2 Withholding Payroll Taxes . The Employer shall withhold from payments made hereunder any taxes required to be withheld from a Participant's wages under federal, state or local law.
7.3 Payment to Guardian . If a Plan benefit is payable to a minor or a person declared incompetent or to a person incapable of handling the disposition of property, the Administrative Committee may direct payment of such Plan benefit to the guardian, legal representative or person having the care and custody of the minor, incompetent or incapable person. The Administrative Committee may require proof of incompetence, minority, incapacity or guardianship, as it may deem appropriate, prior to distribution of the Plan benefit. The distribution shall completely discharge the Administrative Committee and the Employer from all liability with respect to such benefit.
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7.4 Accelerated Distribution . Notwithstanding any other provision of the Plan, a Participant shall be entitled to receive, upon written request to the Administrative Committee, a lump sum distribution equal to ninety percent (90%) of the Actuarial Equivalent accrued Security Plan Retirement Benefit, as of the date thirty (30) days after notice is given to the Administrative Committee. The remaining balance of ten percent (10%) shall be forfeited by the Participant. The amount payable under this section shall be paid in a lump sum with ten (10) days following the thirty (30) day period outlined above. If a Participant requests and obtains an accelerated distribution under this Section 7.4 and remains employed by the Employer, participation will cease and there will be no future benefit accruals under this Plan. Following the death of a Participant, the Beneficiary may, at any time, request an accelerated distribution under this section. If the deceased Participant named multiple Beneficiaries, then all named Beneficiaries must consent to and request an accelerated distribution. The benefit payable to the Beneficiary shall be equal to ninety percent (90%) of the Actuarial Equivalent of the Security Plan Retirement Benefit payable to the Beneficiary. Payment of an accelerated distribution pursuant to this Section 7.4 shall completely discharge the Employer's obligation to the Participant and any Beneficiaries under this Plan. Distribution of the Frozen Retirement Benefit and the Frozen Survivor Benefit may not be accelerated.
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ARTICLE VIII
BENEFICIARY DESIGNATION
8.1 Beneficiary Designation for Participant Not Eligible for Frozen Survivor Benefit . If the Participant is married, the Beneficiary shall be the Participant's spouse. Each unmarried Participant shall have the right, at any time, to designate any person or persons as Beneficiary or Beneficiaries (both primary as well as contingent) to whom payment under this Plan shall be made in the event of the Participant's death prior to the discharge of the Employer's obligation under this plan.
Any Beneficiary designation may be changed by a Participant by the filing of a written form prescribed by the Administrative Committee. The filing of a new Beneficiary designation form will cancel all Beneficiary designations previously filed. Any finalized divorce or marriage (other than common law) of a Participant subsequent to the date of filing of a Beneficiary designation form shall automatically revoke the prior designation. If a Participant fails to designate a Beneficiary as provided above, or if the Beneficiary designation is revoked by marriage or divorce, without execution of a new designation, or if all designated Beneficiaries predecease the Participant or die prior to complete distribution of the Participant's benefits, then Participant's designated Beneficiary shall be deemed to be the person or persons surviving the Participant in the first of the following classes in which there is a survivor, share and share alike:
PAGE 23 SECURITY PLAN FOR SENIOR MANAGEMENT EMPLOYEES
(a) the Participant's surviving spouse;
(b) the Participant's children, except that if any of the children predecease the Participant but leave issue surviving, the issue shall take by right of representation;
(c) the Participant's personal representative (executor or administrator).
8.2 Beneficiary Designation for Participant Eligible for Frozen
Survivor Benefit .
(a) Frozen Survivor Benefit Elected . If the Participant elects the Frozen Survivor Benefit pursuant to Section 5.3(b), the Participant shall designate any person or persons as Beneficiary or Beneficiaries (both primary as well as contingent) to whom payment of the Frozen Survivor Benefit shall be made in the event of the Participant's death prior to commencement of benefits under this Plan. If the Participant is married, designation of a Beneficiary other than the spouse shall require spousal consent. Any future change in Beneficiary shall also require spousal consent.
(b) F rozen Survivor Benefit Not Elected by Married Participant . If the Participant does not elect the Frozen Survivor Benefit pursuant to Section 5.3(b) and the Participant is married, the Participant's spouse shall be the Beneficiary to whom payment of the Frozen Survivor Benefit shall be made in the event of the Participant's death prior to the commencement of benefits under the Plan.
PAGE 24 SECURITY PLAN FOR SENIOR MANAGEMENT EMPLOYEES
(c) Frozen Survivor Benefit Not Elected by Unmarried Participant . If the Participant does not elect the Frozen Survivor Benefit pursuant to Section 5.3(b) and the Participant is unmarried, the Participant shall designate any person or persons as Beneficiary(ies) (both primary as well as contingent) to whom payment of the Frozen Survivor Benefit shall be made in the event of the Participant's death prior to the commencement of benefits under this Plan.
Any Beneficiary designation may be changed by a Participant by filing a written form prescribed by the Administrative Committee. The filing of a new Beneficiary designation form will cancel all Beneficiary designations previously filed.
Any finalized divorce or marriage (other than common law) of a Participant subsequent to the date of filing a Beneficiary designation form shall automatically revoke the prior designation unless the Frozen Survivor Benefit has been elected pursuant to Section 5.3(b) and a nonspouse beneficiary designated. If a Participant fails to designate a Beneficiary as provided above, or if the Beneficiary designation is revoked by marriage or divorce, without execution of a new designation, or if all designated Beneficiaries predecease the Participant or die prior to complete distribution of the Participant's benefits, then Participant's designated Beneficiary shall be deemed to be the person or persons surviving the Participant in the first of the following classes in which there is a survivor, share and share alike:
(a) the Participant's surviving spouse;
(b) the Participant's children, except that if any of the children predecease the Participant but leave issue surviving, the issue shall take by right of representation;
(c) the Participant's personal representative (executor or administrator).
PAGE 25 SECURITY PLAN FOR SENIOR MANAGEMENT EMPLOYEES
8.3 Beneficiary Designation at Commencement of Benefits . Notwithstanding any Beneficiary designation made pursuant to Sections 8.1. and 8.2, a Participant who commences retirement benefits under Article VI shall:
(a) If they elect the Frozen Retirement Benefit, designate a Beneficiary or Beneficiaries (primary as well as contingent) to whom any remainder of the payments shall be made in the event of their death prior to receiving 180 payments.
(b) If they elect the benefit accrued under Article VI as in effect after November 30, 1994, the Beneficiary shall be the spouse pursuant to an election under Section 6.6. If no election has been made under Section 6.6(b), no benefits are payable upon the Participant's death.
8.4 Effect of Payment . The payment to the Beneficiary shall completely discharge Employer's obligations under this Plan.
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ARTICLE IX
ADMINISTRATION
9.1 Administrative Committee Duties . This Plan shall be administered by an Administrative Committee, which shall be the Chief Executive Officer of the Company and the Fiduciary Committee approved by the Compensation Committee. The Administrative Committee shall have the authority to make, amend, interpret and enforce all appropriate rules and regulations for the administration of this Plan and decide or resolve any and all questions including interpretations of this Plan, as may arise in connection with the Plan. A majority vote of the Administrative Committee members shall control any decision.
In the administration of this Plan, the Administrative Committee may, from time to time, employ agents and delegate to them such administrative duties as it sees fit and may from time to time consult with counsel who may be counsel to the Employer.
Subject to Article X, the decision or action of the Administrative Committee in respect of any questions arising out of, or in connection with, the administration, interpretation and application of the Plan and the rules and regulations promulgated hereunder shall be final and conclusive and binding upon all persons having any interest in the Plan.
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9.2 Indemnity of Administrative Committee . To the extent permitted by applicable law, the Employer shall indemnify, hold harmless and defend the Administrative Committee against any and all claims, loss, damage, expense or liability arising from any action or failure to act with respect to this Plan, provided that the Administrative Committee was acting in accordance with the applicable standard of care. The indemnity provisions set forth in this Article shall not be deemed to restrict or diminish in any way any other indemnity available to the Administrative Committee members in accordance with the Articles or By-laws of the Company.
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ARTICLE X
CLAIMS PROCEDURE
10.1 Claim . Any person claiming a benefit, requesting an interpretation or ruling under the Plan, or requesting information under the Plan shall present the request in writing to the Administrative Committee who shall respond in writing as soon as practicable.
10.2 Denial of Claim . If the claim or request is denied, the written notice of denial shall state:
(a) the reason for denial, with specific reference to the Plan provisions where applicable on which the denial is based;
(b) a description of any additional material or information required and an explanation of why it is necessary; and
(c) an explanation of the Plan's claims review procedure.
10.3 Review of Claim . Any person whose claim or request is denied or who has not received a response within thirty (30) days may request a review by notice given in writing to the Administrative Committee. The claim or request shall be reviewed by the Administrative Committee who may, but shall not be required to, grant the claimant a hearing. On review, the claimant may have representation, examine pertinent documents, and submit issues and comments in writing.
PAGE 29 SECURITY PLAN FOR SENIOR MANAGEMENT EMPLOYEES
10.4 Final Decision . The decision on review shall normally be made within sixty (60) days. If an extension of time is required for a hearing or other special circumstances, the claimant shall be notified and the time limit shall be one hundred twenty (120) days. The decision shall be in writing and shall state the reason and any relevant Plan provisions. All decisions on review shall be final and bind all parties concerned.
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ARTICLE XI
TERMINATION, SUSPENSION OR AMENDMENT
11.1 Termination, Suspension or Amendment of Plan . The Board may, in its sole discretion, terminate or suspend this Plan at any time or from time to time, in whole or in part. The Compensation Committee may amend this Plan at any time or from time to time. Any amendment may provide different benefits or amounts of benefits from those herein set forth. However, no such termination, suspension or amendment or other action with respect to the Plan shall adversely affect the benefits of Participants which have accrued prior to such action, the benefits of any Participant who has previously retired, or the benefits of any Beneficiary of a Participant who has previously died. Furthermore, no termination, suspension or amendment shall alter the applicability of the vesting schedule in Section 3.2 with respect to a Participant's accrued benefit at the time of such termination, suspension or amendment.
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11.2 Change in Control . Notwithstanding Section 11.1 above, during a Change in Control Period, neither the Board nor the Administrative Committee may terminate this Plan with regard to accrued benefits of current Participants. No amendment may be made to the Plan during a Change in Control Period which would adversely affect the accrued benefits of current Participants, the benefits of any Participant who has retired, or the Beneficiary of any Participant who has died. The Plan shall continue to operate and be effective with regard to all current or retired Participants and their Beneficiaries during any Change in Control Period.
ARTICLE XII
MISCELLANEOUS
12.1 Unfunded Plan . This Plan is intended to be an unfunded plan maintained primarily to provide deferred compensation benefits for a select group of "management or highly compensated employees" within the meaning of Sections 201, 301 and 401 of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and therefore to be exempt from the provisions of Parts 2, 3 and 4 of Title I of ERISA.
12.2 Unsecured General Creditor . Participants and their Beneficiaries, heirs, successors and assigns shall have no legal or equitable rights, interest or claims in any property or asset of the Employer, nor shall they be Beneficiaries of, or have any rights, claims or interests in any life insurance policies, annuity contracts or the proceeds therefrom owned or which may be acquired by the Employer. Except as may be provided in Section 12.3, such policies, annuity contracts or other assets of the Employer shall not be held under any trust for the benefit of Participants, their Beneficiaries, heirs, successors or assigns, or held in any way as collateral security for the fulfilling of the obligation of the Employer under this Plan. Any and all of the Employer's assets and policies shall be, and remain, the general, unpledged, unrestricted assets of the Employer. The Employer's obligation under the Plan shall be that of an unfunded and unsecured promise to pay money in the future.
PAGE 32 SECURITY PLAN FOR SENIOR MANAGEMENT EMPLOYEES
12.3 Trust Fund . The Employer shall be responsible for the payment of all benefits provided under the Plan. At its discretion, the Employer may establish one or more trusts, with such trustees as the Board may approve, for the purpose of providing for the payment of such benefits. Such trust or trusts may be irrevocable, but the assets thereof shall be subject to the claims of the Employer's creditors. To the extent any benefits provided under the Plan are actually paid from any such trust, the Employer shall have no further obligation with respect thereto, but to the extent not so paid, such benefits shall remain the obligation of, and shall be paid by, the Employer.
12.4 Nonassignability . Neither a Participant nor any other person shall have any right to commute, sell, assign, transfer, pledge, anticipate, mortgage or otherwise encumber, transfer, hypothecate or convey in advance of actual receipt the amounts, if any, payable hereunder, or any part thereof, which are, and all rights to which are, expressly declared to be unassignable and nontransferable. No part of the amount payable shall, prior to actual payment, be subject to seizure or sequestration for the payment of any debts, judgments, alimony or separate maintenance owed by a Participant or any other person, nor be transferable by operation of law in the event of Participant's or any other person's bankruptcy or insolvency.
12.5 Not a Contract of Employment . The terms and conditions of this Plan shall not be deemed to constitute a contract of employment between the Employer and the Participant, and the Participant (or Participant's Beneficiary) shall have no rights against the Employer except as may otherwise be specifically provided herein. Moreover, nothing in this Plan shall be deemed to give a Participant the right to be retained in the service of the Employer or to interfere with the right of the Employer to discipline or discharge the Participant at any time.
PAGE 33 SECURITY PLAN FOR SENIOR MANAGEMENT EMPLOYEES
12.6 Governing Law . The provisions of this Plan shall be construed, interpreted and governed in all respects in accordance with the applicable federal law and, to the extent not preempted by such federal law, in accordance with the laws of the State of Idaho without regard to the principles of conflicts of laws.
12.7 Validity . If any provision of this Plan shall be held illegal or invalid for any reason, the remaining provisions shall nevertheless continue in full force and effect without being impaired or invalidated in any way.
12.8 Notice . Any notice or filing required or permitted to be given under the Plan shall be sufficient if in writing and hand delivered, or sent by registered or certified mail or fax. The notice shall be deemed given as of the date of delivery or, if delivery is made by mail, as of the date shown on the postmark on the receipt for registration or certification.
12.9 Successors . Subject to Section 11.1, the provisions of this Plan shall bind and inure to the benefit of the Employer and its successors and assigns. The term successors as used herein shall include any corporate or other business entity which shall, whether by merger, consolidation, purchase or otherwise acquire all or substantially all of the business and assets of the Employer, and successors of any such corporation or other business entity.
PAGE 34 SECURITY PLAN FOR SENIOR MANAGEMENT EMPLOYEES
12.10 Section 409A . Notwithstanding anything to the contrary contained herein, (a) the Frozen Retirement Benefit and the Frozen Survivor Benefit may not be elected after December 31, 2004, and (b) the amount payable to a Participant or Beneficiary under the Plan shall in no event exceed an amount equal to (x) plus (y), where (x) equals the present value of the amount to which the Participant would have been entitled under the Plan if the Participant's Termination Date had been December 31, 2004, and the Participant had received (i) a payment of the benefits available from the Plan on the earliest possible date allowed under the Plan to receive a payment of benefits following the Termination Date and (ii) the benefits in the form with the maximum value, determined using reasonable actuarial assumptions and methods (the "Grandfathered Benefit") and (y) equals any increase, due solely to the passage of time, in the present value of the future payments to which the Participant has obtained a legally binding right, the present value of which constituted the Grandfathered Benefit. Thus, for each year, there will be an increase (determined using the same interest rate used to determine the Grandfathered Benefit) resulting from the shortening of the discount period before the future payments are made, plus, if applicable, an increase in the present value resulting from the Participant's survivorship during the year. For avoidance of doubt, in no event shall the Grandfathered Benefit be increased based on increases in Compensation after December 31, 2004, changes in the Participant's Early Retirement Factor after December 31, 2004 or the occurrence of a Change in Control after December 31, 2004. It is intended that the benefits payable under this Plan be exempt from Section 409A of the Code as amounts deferred before January 1, 2005, and this Section 12.10 shall be interpreted accordingly.
PAGE 35 SECURITY PLAN FOR SENIOR MANAGEMENT EMPLOYEES
IDAHO POWER COMPANY
SECURITY PLAN FOR
SENIOR MANAGEMENT EMPLOYEES II
Effective January 1, 2005
(Amended and Restated November 20, 2008)
table of contents
Page
ARTICLE I......... PURPOSE; EFFECTIVE DATE..................................................................... 1
ARTICLE II........ DEFINITIONS............................................................................................... 1
2.1...... Actuarial Equivalent.............................................................................................. 1
2.2...... Administrative Committee..................................................................................... 1
2.3...... Affiliate................................................................................................................ 1
2.4...... Beneficiary........................................................................................................... 1
2.5...... Board.................................................................................................................. 2
2.6...... Change in Control................................................................................................ 2
2.7...... Change in Control Period..................................................................................... 3
2.8...... Code................................................................................................................... 3
2.9...... Company............................................................................................................. 3
2.10.... Compensation Committee.................................................................................... 3
2.11.... Compensation..................................................................................................... 3
2.12.... Disability.............................................................................................................. 3
2.13.... Early Retirement Date........................................................................................... 3
2.14.... Employer.............................................................................................................. 4
2.15.... Final Average Monthly Compensation................................................................... 4
2.16.... Normal Form of Benefit........................................................................................ 4
2.17.... Normal Retirement Date....................................................................................... 4
2.18.... Participant............................................................................................................ 4
2.19.... Plan Year............................................................................................................. 4
2.20.... Retirement................................................................ ........................................... 4
2.21.... Retirement Plan.................................................................................................... 4
2.22.... Security Plan Retirement Benefit........................................................................... 4
2.23.... Separation from Service....................................................................................... 4
2.24.... Target Retirement Percentage............................................................................... 4
2.25.... Termination Date.................................................................................................. 4
2.26.... Years of Participation........................................................................................... 4
ARTICLE III...... PARTICIPATION AND VESTING...................... ........................................ 5
3.1...... Eligibility.............................................................................................................. 5
3.2...... Vesting................................................................................................................ 5
i
table of
contents
(Continued)
Page
3.3...... Change in Employment Status............................................................................... 5
3.4...... Non-Participating Affiliate..................................................................................... 5
ARTICLE IV...... SURVIVOR BENEFITS................................................................................. 5
4.1...... Pre-termination Survivor Benefits.......................................................................... 5
4.2...... Post-termination Survivor Benefit.......................................................................... 6
ARTICLE V........ SECURITY PLAN RETIREMENT BENEFITS.................... ........................ 7
5.1...... Normal Retirement Benefit.................................................................................... 7
5.2...... Early Retirement Benefit........................................................................................ 7
5.3...... Early Retirement Factor......................................................................................... 8
5.4...... Early Termination Benefits............................................................ ........................ 8
5.5...... Separation from Service After Change in Control........................... .. ................... 9
5.6...... Form of Payment............................................................................. .................... 9
5.7...... Code Section 162(m) Delay............................................................................... 10
5.8...... Payment to Specified Employees........................................................................ 10
ARTICLE VI...... OTHER RETIREMENT PROVISIONS........................................ .............. 10
6.1...... Disability........................................................................................................... 10
6.2...... Withholding Payroll Taxes................................................................................. 10
6.3...... Payment to Guardian......................................................................................... 10
ARTICLE VII..... BENEFICIARY DESIGNATION................................................... ........... 11
7.1...... Beneficiary Designation...................................................................................... 11
7.2...... Effect of Payment.............................................................................................. 11
ARTICLE VIII... ADMINISTRATION.................................................................................... 11
8.1...... Administrative Committee Duties........................................................................ 11
8.2...... Indemnity of Administrative Committee.................................................... ........ 12
ARTICLE iX...... CLAIMS PROCEDURE............................................................................... 12
9.1...... Claim................................................................................................................. 12
9.2...... Denial of Claim.................................................................................................. 12
9.3...... Review of Claim.................................................................................... ........... 12
9.4...... Final Decision................................................................................................... 13
ARTICLE X........ TERMINATION, SUSPENSION OR AMENDMENT.................... ......... 13
10.1.... Termination, Suspension or Amendment of Plan........................................ ........ 13
ii
table of
contents
(Continued)
Page
10.2.... Change in Control............................................................................................... 13
ARTICLE XI...... MISCELLANEOUS...................................................................................... 13
11.1.... Unfunded Plan.................................................................................................... 13
11.2.... Unsecured General Creditor............................................................................... 13
11.3.... Trust Fund.......................................................................................................... 14
11.4.... Nonassignability.................................................................................................. 14
11.5.... Not a Contract of Employment........................................................................... 14
11.6.... Governing Law................................................................................................... 14
11.7.... Validity............................................................................................................... 14
11.8.... Notice................................................................................................................. 14
11.9.... Successors........................................................................................................... 14
iii
IDAHO POWER COMPANY
SECURITY PLAN FOR SENIOR MANAGEMENT EMPLOYEES II
EFFECTIVE JANUARY 1, 2005
(Amended and Restated November 20, 2008)
ARTICLE I
PURPOSE; EFFECTIVE DATE
The purpose of this Security Plan for Senior Management Employees II (the "Plan") is to provide supplemental retirement benefits for certain key employees of Idaho Power Company, its subsidiaries and affiliates. It is intended that the Plan will aid in attracting individuals of exceptional ability and retain those critical to the operation of the Company, by providing them with these benefits. The effective date of this Plan is January 1, 2005. It is intended to be compliant with Section 409A of the Internal Revenue Code, which was added by the American Jobs Creation Act of 2004, effective January 1, 2005. It continues the program of supplemental retirement benefits provided under the Security Plan for Senior Management Employees I, which provides benefits that are grandfathered under Section 409A of the Internal Revenue Code.
As used in this Plan, the following terms shall be defined as stated in this Article, as interpreted by the Administrative Committee pursuant to its authority granted by Section 8.1 of this Plan.
1
2.5 Board . "Board" shall mean the Board of Directors of the Company.
2.6 Change in Control . "Change in Control" shall mean any of the following events:
2.6.1 any person (as such term is defined in Section 3(a)(9) of the Securities Exchange Act of 1934 (the "Exchange Act") and as used in Section 13(d) of the Exchange Act, excluding (a) IDACORP, Inc. or any Subsidiary, (b) a corporation or other entity owned, directly or indirectly, by the stockholders of IDACORP, Inc. immediately prior to the transaction in substantially the same proportions as their ownership of stock of IDACORP, Inc., (c) an employee benefit plan (or related trust) sponsored or maintained by IDACORP, Inc. or any Subsidiary or (d) an underwriter temporarily holding securities pursuant to an offering of such securities ("Exchange Act Person")) is the beneficial owner (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of 20% or more of the combined voting power of the then outstanding voting securities eligible to vote generally in the election of directors of IDACORP, Inc.; provided, however, that no Change in Control will be deemed to have occurred as a result of a change in ownership percentage resulting solely from an acquisition of securities by IDACORP, Inc.;
2.6.2 consummation of a merger, consolidation, reorganization or share exchange, or sale of all or substantially all of the assets, of IDACORP, Inc. or the Company (a "Qualifying Transaction"), unless, immediately following such Qualifying Transaction, all of the following have occurred: (a) all or substantially all of the beneficial owners of IDACORP, Inc. immediately prior to such Qualifying Transaction beneficially own in substantially the same proportions, directly or indirectly, more than 50% of the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors of the corporation or other entity resulting from such Qualifying Transaction (including, without limitation, a corporation or other entity which, as a result of such transaction, owns IDACORP, Inc. or all or substantially all of IDACORP, Inc.'s assets either directly or through one or more subsidiaries) (as the case may be, the "Successor Entity"), (b) no Exchange Act Person is the beneficial owner (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of 20% or more of the combined voting power of the then outstanding voting securities eligible to vote generally in the election of directors of the Successor Entity and (c) at least a majority of the members of the board of directors of the Successor Entity are Incumbent Directors;
2.6.3 a complete liquidation or dissolution of IDACORP, Inc. or the Company; or
2
2.6.4 within a 24-month period, individuals who were directors of the Board of Directors of IDACORP, Inc. (the "IDACORP Board of Directors") immediately before such period ("Incumbent Directors") cease to constitute at least a majority of the directors of the IDACORP Board of Directors; provided, however, that any director who was not a director of the IDACORP Board of Directors at the beginning of such period shall be deemed to be an Incumbent Director if the election or nomination for election of such director was approved by the vote of at least two-thirds of the directors of the IDACORP Board of Directors then still in office (a) who were in office at the beginning of the 24-month period or (b) whose election or nomination for election was so approved, in each case, unless such individual was elected or nominated as a result of an actual or threatened election contest or as a result of an actual or threatened solicitation of proxies or consents by or on behalf of any Exchange Act Person other than the IDACORP Board of Directors.
For avoidance of doubt, transactions for the purpose of dividing the Company's assets into separate distribution, transmission or generation entities or such other entities as IDACORP, Inc. or the Company may determine shall not constitute a Change in Control unless so determined by the IDACORP Board of Directors. For purposes of this definition, the term "Subsidiary" shall mean any corporation of which more than 50% of the outstanding stock having ordinary voting power to elect a majority of the board of directors of such corporation is now or hereafter owned, directly or indirectly, by IDACORP, Inc.
2.8 Code . "Code" shall mean the Internal Revenue Code of 1986, as amended.
2.9 Company . "Company" shall mean the Idaho Power Company, an Idaho corporation, its successors and assigns.
2.11 Compensation . "Compensation" shall mean the base salary and annual bonus (not to exceed one (1) times base salary for the year in which the bonus was paid) paid to a Participant and considered to be "wages" for purposes of federal income tax withholding. Compensation shall be calculated before reduction for any amounts deferred by the Participant pursuant to any plan sponsored by the Employer which permits deferral of current compensation. Compensation does not include long-term incentive compensation in any form, expense reimbursements, or any form of non-cash compensation or benefits. A Participant who elects an accelerated distribution under the Security Plan for Senior Management Employees I, shall not be credited with any additional Compensation under this Plan beginning on the effective date of the accelerated distribution.
2.13.1 attainment of age fifty-five (55); or
2.13.2 completion of thirty (30) years of Credited Service under the Retirement Plan but prior to Participant's Normal Retirement Date.
3
2.14 Employer . "Employer" shall mean the Company and any business affiliated with the Company that employs persons who are designated by the Board or the Administrative Committee for participation in this Plan.
2.19 Plan Year . "Plan Year" shall mean the calendar year.
2.24 Target Retirement Percentage . "Target Retirement Percentage" shall equal six percent (6%) for each of the first ten (10) Years of Participation plus an additional one percent (1%) for each Year of Participation, exceeding ten (10). The maximum Target Retirement Percentage shall be seventy-five percent (75%).
4
2.26 Years of Participation . "Years of Participation" shall be twelve (12) month periods, and portions thereof, which shall begin on the earlier of the date an individual, who has been designated by the Employer, is approved by Administrative Committee pursuant to Section 3.1, or the date designated by the Administrative Committee, and shall end on the earlier of a Participant's death, Termination Date, or the date the Participant experiences a change in status, as provided in Sections 3.3 and 3.4. Partial Years of Participation, if any, shall be used in determining benefits under this Plan. Years of Participation under the Security Plan for Senior Management Employees I, if any, shall be included in determining the total Years of Participation. A Participant who elects an accelerated distribution under the Security Plan for Senior Management Employees I, shall cease to earn Years of Participation under this Plan on the effective date of the accelerated distribution.
ARTICLE III
PARTICIPATION AND VESTING
3.1 Eligibility . Eligibility to participate in the Plan is limited to those key employees of the Employer who are designated, from time to time, by the Employer subject to approval of the Administrative Committee. Key employees who as of January 1, 2005 are participants in the Security Plan for Senior Management Employees I, shall be Participants in this Plan on January 1, 2005, the effective date of this Plan.
3.2 Vesting . A Participant shall be one hundred percent (100%) immediately vested.
SURVIVOR BENEFITS
5
4.1.1 Amount. The pre-termination survivor benefit shall be an Actuarial Equivalent amount (determined pursuant to Section 4.1.2) equal to sixty-six and two-thirds percent (66 2/3%) of the retirement benefit calculated under Section 5.1 assuming retirement occurred at the later of age sixty-two (62) or date of death. Final Average Monthly Compensation and the Retirement Plan benefit shall be determined as of the date of the Participant's death. For purposes of this Section 4.1.1, the Retirement Plan benefit shall be the accrued benefit determined as of the date of death as defined in the Retirement Plan.
4.1.2 Payment. The pre-termination survivor benefit shall be paid in a lump sum to the spouse of the Participant or, if the Participant is unmarried on the date of death, to the Participant's Beneficiary (other than the Participant's spouse). Payment shall be made as soon as practicable (but in all events within 90 days) after the Participant's death. If the payment is to the Participant's spouse, the lump sum payment shall be the Actuarial Equivalent of the monthly payments that would have been made assuming the spouse received the pre-termination survivor benefit for the life of the spouse beginning on the first day of the month coincident with or following the date of death; provided, however, that if the spouse's date of birth is more than ten (10) years after the Participant's date of birth, the assumed monthly benefit shall be reduced using the Actuarial Equivalent factors to reflect the number of years over ten (10) the spouse is younger than the Participant. If the payment is to the Participant's Beneficiary (other than the Participant's spouse), the lump sum payment shall be the Actuarial Equivalent of the monthly payments that would have been made assuming an individual the same age as the Participant had received the pre-termination survivor benefit for the life of the individual beginning on the first day of the month coincident with or following the date of death.
4.2 Post-termination Survivor Benefit .
4.2.1 Death Prior to Commencement of Benefits. If a Participant dies prior to commencement of benefits but on or after his or her Termination Date:
(a) Amount. The amount of the post-termination survivor benefit shall be an Actuarial Equivalent amount (determined pursuant to Section 4.2.1(b)) equal to sixty-six and two thirds percent (66 2/3%) of the retirement benefit payable to the Participant.
6
(b) Payment. The post-termination survivor benefit shall be paid in a lump sum to the spouse of the Participant or, if the Participant is unmarried on the date of death, to the Participant's Beneficiary (other than the Participant's spouse). Payment shall be made as soon as practicable (but in all events within 90 days) after the Participant's death. If the payment is to the Participant's spouse, the lump sum payment shall be the Actuarial Equivalent of the monthly payments that would have been made assuming the spouse received the post-termination survivor benefit for the life of the spouse beginning on the first day of the month coincident with or following the date of death; provided, however, that if the spouse's date of birth is more than ten (10) years after the Participant's date of birth, the assumed monthly benefit shall be reduced using the Actuarial Equivalent factors to reflect the number of years over ten (10) the spouse is younger than the Participant. If the payment is to the Participant's Beneficiary (other than the Participant's spouse), the lump sum payment shall be the Actuarial Equivalent of the monthly payments that would have been made assuming an individual the same age as the Participant had received the post-termination survivor benefit for the life of the individual beginning on the first day of the month coincident with or following the date of death.
4.2.2 Death After Commencement of Benefits. If a Participant dies after commencement of benefits, a survivor benefit will be paid only if, and to the extent provided for, under the form of benefit elected by the Participant pursuant to Section 5.6.
ARTICLE V
SECURITY PLAN RETIREMENT BENEFITS
(a) the Participant's retirement benefit, if any, under the Retirement Plan, assuming such retirement benefit were paid as a single life annuity commencing when payments commence under this Plan (regardless of the form of benefit actually selected by the Participant and regardless of when benefits actually commence under the Retirement Plan) and
(b) the Participant's retirement benefit (before any adjustment due to an accelerated distribution pursuant to Section 7.4 thereof), if any, under the Security Plan for Senior Management Employees I, assuming such retirement benefit were paid as a single life annuity commencing when payments commence under this Plan (regardless of the form of benefit actually selected by the Participant and regardless of when benefits actually commence under the Security Plan for Senior Management Employees I).
(a) the Participant's retirement benefit, if any, under the Retirement Plan, assuming such retirement benefit were paid as a single life annuity commencing when payments commence under this Plan (regardless of the form of benefit actually selected by the Participant and regardless of when benefits actually commence under the Retirement Plan) and
7
(b) the Participant's retirement benefit (before any adjustment due to an accelerated distribution pursuant to Section 7.4 thereof), if any, under the Security Plan for Senior Management Employees I, assuming such retirement benefit were paid as a single life annuity commencing when payments commence under this Plan (regardless of the form of benefit actually selected by the Participant and regardless of when benefits actually commence under the Security Plan for Senior Management Employees I).
Exact Age When Payments Begin |
Early Retirement Factor |
62 |
100% |
61 |
96% |
60 |
92% |
59 |
87% |
58 |
82% |
57 |
77% |
56 |
72% |
55 |
67% |
54 |
62% |
53 |
57% |
52 |
52% |
51 |
47% |
50 |
42% |
49 |
38% |
48 |
34% |
Early Retirement Factors will be prorated to reflect retirement based on completed months rather than exact age.
5.4.1 The Target Retirement Percentage shall be calculated based upon the Participant's Years of Participation and then multiplied by a fraction equal to the Participant's Years of Participation divided by the Years of Participation the Participant would have had at the Normal Retirement Date if the Participant had continued to be employed by the Employer to age sixty-two (62). The adjusted Target Retirement Percentage shall be multiplied by the factor described in Section 5.3 for each month between the Participant's benefits commencement date (age 55) and age sixty-two (62).
5.4.2 The Early Termination Benefit shall be reduced by
8
(a) the Participant's retirement benefit, if any, under the Retirement Plan, assuming such retirement benefit were paid as a single life annuity commencing when payments commence under this Plan (regardless of the form of benefit actually selected by the Participant and regardless of when benefits actually commence under the Retirement Plan) and
(b) the Participant's retirement benefit (before any adjustment due to an accelerated distribution pursuant to Section 7.4 thereof), if any, under the Security Plan for Senior Management Employees I, assuming such retirement benefit were paid as a single life annuity commencing when payments commence under this Plan (regardless of the form of benefit actually selected by the Participant and regardless of when benefits actually commence under the Security Plan for Senior Management Employees I).
5.5 Separation from Service After Change in Control . If a Participant's Separation from Service occurs within the Change in Control Period prior to his or her Normal Retirement Date, the Participant shall receive the Early Retirement Benefit calculated with the Early Retirement Factors set forth in 5.3. If the Separation from Service occurs on or after an Early Retirement Date, the Early Retirement Benefit shall commence on the first day of the month following the Early Retirement Date. If the Separation from Service occurs prior to an Early Retirement Date, the Early Retirement Benefit shall commence on the first day of the month following the Participant's fifty-fifth (55 th ) birthday. Payment of this benefit cannot be deferred.
5.6.1 The Participant may also elect to receive Actuarial Equivalent payments in one of the forms of benefit listed below:
(a) A joint and survivor annuity with payments continued to the surviving spouse at an amount equal to two-thirds (2/3) of the Participant's benefit.
(b) A joint and survivor annuity with payments continued to the surviving spouse at an amount equal to the Participant's benefit.
(c) A single life annuity, if the Participant had previously elected one of the joint and survivor annuity options listed above.
5.6.2 If the Actuarial Equivalent of the Security Plan Retirement Benefit is less than $10,000 (or, if less, the then applicable dollar amount under Section 402(g)(1)(B) of the Code), the Administrative Committee may direct that the Participant's benefit be paid as a lump sum as soon as practicable (but in all events within 90 days) after the Participant's Termination Date.
5.6.3 The election to receive benefits in a different form of payment may be made at any time prior to commencement of payment.
9
5.7 Code Section 162(m) Delay . If the Administrative Committee reasonably anticipates that the Company's deduction with respect to a payment would be limited or eliminated by application of Code Section 162(m) if the payment were made as scheduled, the Administrative Committee may unilaterally delay the time of the making or commencement of payment, provided such payment will be made either during the first year in which the Administrative Committee reasonably anticipates (or should reasonably anticipate) that if the payment is made during such year the deduction of the payment will not be barred by application of Code Section 162(m) or during the period beginning with the date of the Participant's Separation from Service and ending on the later of the last day of the Companys tax year in which the Separation from Service occurs or the 15 th day of the third month following the date of the Separation from Service; provided, further, that the provisions of this Section 5.7 shall be applied in accordance with the rules relating to delay of payments subject to Code Section 162(m) as contained in Treasury Regulation Section 1.409A-2(b)(7)(i). No election may be provided to the Participant with respect to the timing of a payment pursuant to this Section 5.7.
5.8 Payment to Specified Employees . Notwithstanding anything to the contrary contained herein, if a Participant is deemed on his or her Termination Date to be a specified employee (as that term is used in Code Section 409A(a)(2)(B)), as determined under the Company's policy for determining specified employees, no payments shall be made under the Plan due to the Participant's Separation from Service before the date that is 6 months following the Participant's Separation from Service or, if earlier, the date of the Participant's death, and any amounts accumulated during such period shall be paid in a lump sum payment to the Participant on the first business day following the date that is six months after the Participant's Separation from Service or, if the Participant dies during such six month period, to the Participant's Beneficiary within 60 days after the date of the Participant's death. Any remaining payments and benefits due under the Plan shall be paid or provided in accordance with the normal payment dates specified for them herein.
ARTICLE VI
OTHER RETIREMENT PROVISIONS
10
ARTICLE
VII
BENEFICIARY DESIGNATION
Any Beneficiary designation may be changed by a Participant by the filing of a written form prescribed by the Administrative Committee. The filing of a new Beneficiary designation form will cancel all Beneficiary designations previously filed. Any finalized divorce or marriage (other than common law) of a Participant subsequent to the date of filing of a Beneficiary designation form shall automatically revoke the prior designation. If a Participant fails to designate a Beneficiary as provided above, or if the Beneficiary designation is revoked by marriage or divorce, without execution of a new designation, or if all designated Beneficiaries predecease the Participant or die prior to complete distribution of the Participant's benefits, then Participant's designated Beneficiary shall be deemed to be the person or persons surviving the Participant in the first of the following classes in which there is a survivor, share and share alike:
7.1.1 the Participant's surviving spouse;
7.1.2 the Participant's children, except that if any of the children predecease the Participant but leave issue surviving, the issue shall take by right of representation;
7.1.3 the Participant's personal representative (executor or administrator).
In the administration of this Plan, the Administrative Committee may, from time to time, employ agents and delegate to them such administrative duties as it sees fit and may from time to time consult with counsel who may be counsel to the Employer.
11
Subject to Article IX, the decision or action of the Administrative Committee in respect of any questions arising out of, or in connection with, the administration, interpretation and application of the Plan and the rules and regulations promulgated hereunder shall be final and conclusive and binding upon all persons having any interest in the Plan.
9.2 Denial of Claim . If the claim or request is denied, the written notice of denial shall state:
9.2.1 the reason for denial, with specific reference to the Plan provisions where applicable on which the denial is based;
9.2.2 a description of any additional material or information required and an explanation of why it is necessary; and
9.2.3 an explanation of the Plan's claims review procedure.
12
ARTICLE
X
TERMINATION, SUSPENSION OR AMENDMENT
13
11.3 Trust Fund . The Employer shall be responsible for the payment of all benefits provided under the Plan. At its discretion, the Employer may establish one or more trusts, with such trustees as the Board may approve, for the purpose of providing for the payment of such benefits. Such trust or trusts may be irrevocable, but the assets thereof shall be subject to the claims of the Employer's creditors. To the extent any benefits provided under the Plan are actually paid from any such trust, the Employer shall have no further obligation with respect thereto, but to the extent not so paid, such benefits shall remain the obligation of, and shall be paid by, the Employer.
11.6 Governing Law . The provisions of this Plan shall be construed, interpreted and governed in all respects in accordance with the applicable federal law and, to the extent not preempted by such federal law, in accordance with the laws of the State of Idaho without regard to the principles of conflicts of laws.
14
IDAHO POWER COMPANY
By:
Chief Executive Officer
By:
Secretary
Dated:
Adopted effective as of January 1, 2005
Amended by the Board July 20, 2006
Amended by the Board November 20, 2008
15
Exhibit 10.21
IDACORP, INC.
NON-EMPLOYEE DIRECTORS STOCK COMPENSATION PLAN
I. Purpose
The purpose of the IDACORP, Inc. Non-Employee Directors Stock Compensation Plan is to provide ownership of the Company's stock to non-employee members of the Board of Directors and to strengthen the commonality of interest between directors and shareholders.
II. Definitions
When used herein, the following terms shall have the respective meanings set forth below:
"Annual Retainer" means the annual retainer payable by the Company to Non-Employee Directors and shall include, for purposes of this Plan, meeting fees, cash retainers and any other cash compensation payable to Non-Employee Directors by the Company for services as a director.
"Annual Meeting of Shareholders" means the annual meeting of shareholders of the Company at which directors of the Company are elected.
"Board" or "Board of Directors" means the Board of Directors of the Company.
NON-EMPLOYEE DIRECTORS STOCK COMPENSATION PLAN - 1
"Change in Control" means the earliest of the following to occur: (a) any person (which shall not include the Company, any Subsidiary or any employee benefit plan of the Company or of any Subsidiary) ("Person") or group (as that term is defined in Treasury Regulation Section 1.409A-3(i)(5)(v)(B)) acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such Person or Persons) ownership of stock of the Company possessing 30% or more of the total voting power of the stock of the Company; (b) any Person or group (as that term is defined in Treasury Regulation Section 1.409A-3(i)(5)(v)(B)) acquires ownership of the stock of the Company that, together with stock held by such Person or group, constitutes more than 50% of the total fair market value or total voting power of the stock of the Company (this part (b) applies only when there is a transfer of stock of the Company and the Company's stock remains outstanding after the transaction); (c) a majority of the members of the Board is replaced during any 12-month period by directors whose appointment or election is not endorsed by a majority of the members of the Board; or (d) any Person or group (as that term is defined in Treasury Regulation Section 1.409A-3(i)(5)(v)(B)) acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such Person or Persons) assets from the Company that have a gross fair market value equal to or more than 40% of the total gross fair market value of all of the assets of the Company immediately before such acquisition or acquisitions.
Notwithstanding anything contained herein to the contrary, no transaction or event shall constitute a Change in Control for purposes of the Plan unless the transaction or event constitutes a change in the ownership of a corporation (as defined in Treasury Regulation Section 1.409A-3(i)(5)(v)), a change in effective control of a corporation (as defined in Treasury Regulation Section 1.409A-3(i)(5)(vi)) or a change in the ownership of a substantial portion of the assets of a corporation (as defined in Treasury Regulation Section 1.409A-3(i)(5)(vii)) and the term Change in Control shall be interpreted in a manner consistent with the proper interpretation of the similar provisions in the Section 409A Treasury Regulations.
"Code" means the Internal Revenue Code of 1986, as amended.
"Committee" means the Compensation Committee of the Board of Directors.
"Common Stock" means the common stock, without par value, of the Company.
"Company" means IDACORP, Inc., an Idaho corporation, and any successor corporation.
"Deferral Account" means an account maintained by the Company in the name of a Participant that is used to track the Deferred Stock Units of a Participant who elects to defer receipt of his or her Stock Payments pursuant to Section VI hereof.
"Deferral Election" means a Participant's deferral election, as defined in Section VI(A) hereof.
"Deferred Stock Unit" means a notional entry in a Participant's Deferral Account representing one share of Common Stock.
"Effective Date" means May 17, 1999.
"Employee" means any officer or other common law employee of the Company or of any Subsidiary.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Non-Employee Director" or "Participant" means any person who is elected or appointed to the Board of Directors of the Company and who is not an Employee.
"Plan" means the Company's Non-Employee Directors Stock Compensation Plan, adopted by the Board on May 5, 1999, as it may be amended from time to time.
NON-EMPLOYEE DIRECTORS STOCK COMPENSATION PLAN - 2
"Separation from Service" means a Participant's separation from service (as that term is used in Section 409A(a)(2)(A)(i) of the Code) with the Company.
"Stock Payment" means that portion of the Annual Retainer to be paid to Non-Employee Directors in shares of Common Stock rather than cash for services rendered as a director of the Company, as provided in Section V hereof.
"Subsidiary" means any corporation (other than the Company) in an unbroken chain of corporations beginning with the Company if each of the corporations other than the last corporation in the unbroken chain owns stock possessing 50 percent or more of the total combined voting power of all classes of stock in one of the other corporations in such chain.
III. Shares of Common Stock Subject to the Plan
Subject to Section VII below, the maximum aggregate number of shares of Common Stock that may be delivered under the Plan is 100,000 shares. The Common Stock to be delivered under the Plan will be made available from treasury stock or shares of Common Stock purchased on the open market.
IV. Administration
The Plan shall be administered by the Compensation Committee of the Board of Directors. The Company shall pay all costs of administration of the Plan. Subject to and not inconsistent with the express provisions of the Plan, the Committee has and may exercise such powers and authority of the Board as may be necessary or appropriate for the Committee to carry out its functions under the Plan. Without limiting the generality of the foregoing, the Committee shall have full power and authority (i) to determine all questions of fact that may arise under the Plan, (ii) to interpret the Plan and to make all other determinations necessary or advisable for the administration of the Plan and (iii) to prescribe, amend and rescind rules and regulations relating to the Plan, including, without limitation, any rules which the Committee determines are necessary or appropriate to ensure that the Company and the Plan will be able to comply with all applicable provisions of any federal, state or local law. All interpretations, determinations and actions by the Committee will be final and binding upon all persons, including the Company, the Participants and their estates and beneficiaries.
V. Determination of Annual Retainer and Stock Payments
A. Annual Retainer
The Board shall determine the Annual Retainer payable to all Non-Employee Directors of the Company.
B. Stock Payments
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Subject to the provisions of Section V(C) below, each director who is a Non-Employee Director on March 1 of each year shall receive, on March 1 or the first business day thereafter, as a portion of the Annual Retainer, a Stock Payment of $45,000 in value of Common Stock. Non-Employee Directors may elect to defer receipt of the Stock Payment in accordance with the provisions of Section VI hereof. The number of shares granted (or credited as Deferred Stock Units pursuant to a Deferral Election in accordance with Section VI hereof) shall be determined based on (i) for shares granted from treasury stock and Deferred Stock Units, the closing price of the Common Stock on the consolidated transaction reporting system on the business day immediately preceding the date paid to the Non-Employee Director or credited to his or her Deferral Account, as the case may be, and (ii) for open market purchases, the actual price paid to purchase the shares.
Non-Employee Directors who are initially elected to the Board after March 1 in any year shall receive a prorated Stock Payment on the first business day of the month following the effective date of their election to the Board, but in no event later than March 15 of the year following the year in which they are initially elected to the Board. The Stock Payment will be prorated by multiplying $45,000 by a fraction, the numerator of which equals the number of months (with a partial month counted as a full month) remaining in the calendar year and the denominator of which is twelve.
At the time of payment (or, if applicable, at the time of distribution of any shares of Common Stock pursuant to Section VI hereof), a certificate evidencing the shares of Common Stock shall be registered in the name of the Participant and issued to the Participant.
C. Non-Employee Directors on April 1, 2007 and Thereafter
A Non-Employee Director initially elected to the Board effective on or after April 1, 2007 shall receive, on March 1 or the first business day thereafter, a prorated Stock Payment if the Board is aware on March 1 that the Non-Employee Director will not continue to serve on the Board for the entire year. The number of shares granted (or credited as Deferred Stock Units pursuant to a Deferral Election) shall be calculated by multiplying $45,000 by a fraction, the numerator of which is the number of actual or expected months (with a partial month counted as a full month) of service on the Board during the year and the denominator of which is twelve. If the Board is not aware on March 1 that a Non-Employee Director initially elected to the Board effective on or after April 1, 2007 will not serve on the Board for the entire year, such Non-Employee Director shall receive a full Stock Payment and shall not be required to forfeit or otherwise return any shares of Common Stock granted as a Stock Payment or credited as Deferred Stock Units pursuant to the Plan notwithstanding any change in status of such Non-Employee Director which renders him or her ineligible to continue as a Participant in the Plan.
D. Non-Employee Directors Prior to April 1, 2007
NON-EMPLOYEE DIRECTORS STOCK COMPENSATION PLAN - 4
A Non-Employee Director initially elected to the Board effective prior to April 1, 2007 will not receive a prorated Stock Payment as set forth in the immediately preceding Section V(C), but rather will receive a full Stock Payment on March 1 or the first business day thereafter, notwithstanding the fact that the Board may be aware that the Non-Employee Director will not continue to serve on the Board for the entire year. The number of shares granted (or credited as Deferred Stock Units pursuant to a Deferral Election) shall be calculated in the manner set forth in Section V(B) hereof. No Non-Employee Director who was a member of the Board effective prior to April 1, 2007 shall be required to forfeit or otherwise return any shares of Common Stock granted as a Stock Payment or credited as Deferred Stock Units pursuant to the Plan notwithstanding any change in status of such Non-Employee Director which renders him or her ineligible to continue as a Participant in the Plan.
VI. Deferral of Stock Payment
A. Deferral Elections
A Participant may elect to defer receipt of his or her Stock Payment by timely filing a deferral election (a "Deferral Election") in accordance with such procedures as may from time to time be prescribed by the Committee. A Deferral Election shall be valid only if it is delivered prior to the first day of the calendar year in which the services giving rise to the Stock Payment being deferred are to be performed.
A Participant's Deferral Election shall become irrevocable as of the last date the Deferral Election could be delivered or such earlier date as may be established by the Committee. A Participant may revoke or change a Deferral Election at any time prior to the date the election becomes irrevocable, subject to such restrictions as the Committee may establish from time to time. Any such revocation or change shall be in a form and manner determined by the Committee. A Participant's Deferral Election shall remain in effect and will apply to Stock Payments in future years (beyond the first year to which it relates) unless and until the Participant revokes the Deferral Election. The deadline for revocation of a Deferral Election for this purpose shall be the same as the deadline for delivering a Deferral Election with respect to the year or such earlier date as may be established by the Committee. Revocation shall be effected by the Participant's delivery of a Termination of Deferral Election Agreement or such other document as the Committee may prescribe for such purpose.
If a valid Deferral Election is timely filed by a Participant, a Deferral Account shall be established for the Participant and credited with a number of Deferred Stock Units equal to the number of shares of Common Stock that would have been received by the Participant pursuant to Section V hereof absent the Deferral Election.
B. Dividends
NON-EMPLOYEE DIRECTORS STOCK COMPENSATION PLAN - 5
If dividends are paid on shares of Common Stock, a Participant's Deferral Account shall be credited on the dividend payment date with a number of additional Deferred Stock Units (and/or fraction thereof) determined by dividing (i) the dividends that would have been paid on the Deferred Stock Units held in the Participant's Deferral Account as of the dividend record date as if they were actual shares of Common Stock by (ii) the closing price of the Common Stock on the consolidated transaction reporting system on the dividend payment date.
C. Deferred Stock Units
Amounts in a Participant's Deferral Account shall remain denominated in the form of Deferred Stock Units until distributed.
D. Time of Distribution
Deferral Accounts shall be distributed (or, in the case of installments, distributions shall commence) upon Separation from Service. Participants shall elect in their Deferral Elections whether distributions shall be in a lump sum or in installments, subject to such terms and conditions as the Committee may from time to time prescribe. In the case of a Participant's death, whether before or after distributions have commenced, the Participant's Deferral Account balance shall be distributed in a lump sum as soon as practicable (but in all events within 90 days) thereafter to the Participant's estate or, if applicable, designated beneficiary.
Upon a Change in Control, the Participant's Deferral Account balance shall be distributed in a lump sum as soon as practicable (but in all events within 90 days) thereafter to the Participant.
E. Beneficiaries
A Participant may designate a beneficiary or beneficiaries (which may be an entity other than a natural person) to receive any payments to be made under Section VI hereof upon the Participant's death. At any time, and from time to time, any such designation may be changed or canceled by the Participant without the consent of any beneficiary. Any such designation, change or cancellation must be by written notice filed with the Secretary of the Company and shall not be effective until received by the Secretary of the Company. If a Participant designates more than one beneficiary, any payments under Section VI hereof to such beneficiaries shall be made in equal amounts unless the Participant has designated otherwise, in which case the payments shall be made in the amounts designated by the Participant. If no beneficiary has been designated by the Participant, or the designated beneficiaries have predeceased the Participant, payment shall be made to the Participant's estate. If any dispute shall arise as to the entitlement of any person to any portion of the Participants Deferral Account balance, the Company's obligations under this Plan will be satisfied if it makes payment to the Participant's estate.
F. Distribution of Deferral Accounts
NON-EMPLOYEE DIRECTORS STOCK COMPENSATION PLAN - 6
Distribution shall be in shares of Common Stock, with each Deferred Stock Unit equal to one share of Common Stock and any fractional shares paid in cash.
G. Section 409A
To the extent applicable, it is intended that this Plan will comply with Section 409A of the Code and any regulations and guidance issued thereunder, and the Plan shall be interpreted accordingly.
VII. Adjustments in Authorized Shares and Deferred Stock Units
In the event of any equity restructuring (within the meaning of Financial Accounting Standards No. 123(R)), such as a stock dividend, stock split, spinoff, rights offering or recapitalization through a large, nonrecurring cash dividend, the Committee shall cause an equitable adjustment to be made in (i) the number and kind of shares of Common Stock that may be delivered under the Plan and (ii) the number and kind of Deferred Stock Units in Participants' Deferral Accounts, in either case to prevent dilution or enlargement of rights. In the event of any other change in corporate capitalization, such as a merger, consolidation or liquidation, the Committee may, in its sole discretion, cause an equitable adjustment as described in the foregoing sentence to be made, to prevent dilution or enlargement of rights. The maximum number of shares issuable under the Plan and the number of Deferred Stock Units allocated to a Participant's Deferral Account as a result of any such adjustment shall be rounded down to the nearest whole share or unit. Adjustments made by the Committee pursuant to this Section VII shall be final, binding and conclusive.
VIII. Amendment and Termination of Plan
The Board will have the power, in its discretion, to amend, suspend or terminate the Plan at any time, subject to the satisfaction of all obligations under the Plan to Participants (and Participants' estates and beneficiaries). However, no such termination, suspension or amendment or other action with respect to the Plan shall adversely affect the Participants' Deferral Account balances which have accrued prior to such action.
IX. Effective Date and Duration of the Plan
The Plan will become effective upon the Effective Date and shall remain in effect, subject to the right of the Board of Directors to terminate the Plan at any time pursuant to Section VIII, until all shares subject to the Plan have been granted or distributed according to the Plan's provisions.
X. Miscellaneous Provisions
A. Continuation of Directors in Same Status
NON-EMPLOYEE DIRECTORS STOCK COMPENSATION PLAN - 7
Nothing in the Plan or any action taken pursuant to the Plan shall be construed as creating or constituting evidence of any agreement or understanding, express or implied, that the Company will retain a Non-Employee Director as a director or in any other capacity for any period of time or at a particular retainer or other rate of compensation, as conferring upon any Participant any legal or other right to continue as a director or in any other capacity, or as limiting, interfering with or otherwise affecting the right of the Company to terminate a Participant in his or her capacity as a director or otherwise at any time for any reason, with or without cause, and without regard to the effect that such termination might have upon him or her as a Participant under the Plan.
B. Compliance with Government Regulations
Neither the Plan nor the Company shall be obligated to issue any shares of Common Stock pursuant to the Plan at any time unless and until all applicable requirements imposed by any federal and state securities and other laws, rules and regulations, by any regulatory agencies or by any stock exchanges upon which the Common Stock may be listed have been fully met. As a condition precedent to any issuance of shares of Common Stock pursuant to the Plan, the Board or the Committee may require a Participant to take any such action and to make any such covenants, agreements and representations as the Board or the Committee, as the case may be, in its discretion deems necessary or advisable to ensure compliance with such requirements. The Company shall in no event be obligated to register the shares of Common Stock deliverable under the Plan pursuant to the Securities Act of 1933, as amended, or to qualify or register such shares under any securities laws of any state upon their issuance under the Plan or at any time thereafter, or to take any other action in order to cause the issuance and delivery of such shares under the Plan or any subsequent offer, sale or other transfer of such shares to comply with any such law, regulation or requirement. Participants are responsible for complying with all applicable federal and state securities and other laws, rules and regulations in connection with any offer, sale or other transfer of the shares of Common Stock issued under the Plan or any interest therein including, without limitation, compliance with the registration requirements of the Securities Act of 1933, as amended (unless an exemption therefrom is available), or with the provisions of Rule 144 promulgated thereunder, if applicable, or any successor provisions. Certificates for shares of Common Stock may be legended as the Committee shall deem appropriate.
C. Nontransferability of Rights
No Participant shall have the right to assign the right to receive any Stock Payment or any other right or interest under the Plan, contingent or otherwise, or to cause or permit any encumbrance, pledge or charge of any nature to be imposed on any such Stock Payment or any such right or interest (prior to the issuance of stock certificates evidencing such Stock Payment).
D. Successor Entities
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All obligations of the Company or any Subsidiary under the Plan shall be binding on any successor to the Company or any Subsidiary, respectively, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, reorganization or other transaction involving all or substantially all of the business and/or assets of the Company or any Subsidiary. References to the Company or Subsidiary in the Plan shall be deemed to refer to the successors thereto, as applicable.
E. Severability
In the event that any provision of the Plan is held invalid, void or unenforceable, the same shall not affect, in any respect whatsoever, the validity of any other provision of the Plan.
F. Governing Law
To the extent not preempted by Federal law, the Plan and all rights and obligations hereunder shall be governed by and interpreted in accordance with the laws of the State of Idaho, without regard to conflicts of law provisions.
G. No Right to Company Assets
Nothing in this Plan shall be construed as giving the Participant, Participant's beneficiaries or any other person any equity or interest of any kind in the assets of the Company or creating a trust of any kind or a fiduciary relationship of any kind between the Company and any such person. As to any claim for payments due under the provisions of this Plan, the Participant, Participant's beneficiaries and any other persons having a claim for payments shall be unsecured creditors of the Company.
Amended as of September 20, 2007 to add proration
Amended as of November 15, 2007 to increase stock payment from $40,000 to $45,000 effective January 1, 2008
Amended as of November 20, 2008 to permit deferrals
NON-EMPLOYEE DIRECTORS STOCK COMPENSATION PLAN - 9
Exhibit 10.24
AMENDED AND RESTATED CHANGE IN CONTROL AGREEMENT
BETWEEN IDACORP, INC.
AND
______________________
THIS AMENDED AND RESTATED CHANGE IN CONTROL AGREEMENT (the "Agreement"), is by and between IDACORP, Inc., an Idaho corporation (the "Corporation") and __________________ (the "Executive") and is effective on the date established pursuant to Section 15 of this Agreement (the "Effective Date").
W I T N E S S E T H:
WHEREAS, the Executive is a valuable employee of the Corporation or a Subsidiary of the Corporation, an integral part of its management, and a key participant in the decision-making process relative to short-term and long-term planning and policy for the Corporation; and
WHEREAS, the Corporation wishes to encourage the Executive to continue his career and services with the Corporation or a Subsidiary, as the case may be, following a Change in Control; and
WHEREAS, the Executive and the Corporation are parties to a Change in Control Agreement dated [ ] (the "Prior Agreement"), and the Executive and the Corporation desire to change certain terms of the Prior Agreement to address changes in tax laws and to revise and clarify certain other terms of the Prior Agreement; and
WHEREAS, the Executive and the Corporation have agreed that this Agreement shall supersede and replace the Prior Agreement; and
WHEREAS, the Board has determined that it would be in the best interests of the Corporation and its shareholders to assure continuity in the management of the Corporation's, including Subsidiaries', administration and operations in the event of a Change in Control by entering into this Agreement with the Executive;
NOW THEREFORE, it is hereby agreed by and between the parties hereto as follows:
1. Definitions.
a. "Board" shall mean the Board of Directors of the Corporation.
b. "Cause" shall mean the Executive's fraud or dishonesty which has resulted or is likely to result in material economic damage to the Corporation or a Subsidiary of the Corporation, as determined in good faith by a vote of at least two-thirds of the non-employee directors of the Corporation at a meeting of the Board at which the Executive is provided an opportunity to be heard.
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c. "Change in Control" shall mean:
(i) any person (as such term is defined in Section 3(a)(9) of the Securities Exchange Act of 1934 (the "1934 Act") and as used in Section 13(d) of the 1934 Act), excluding (A) the Corporation or any Subsidiary, (B) a corporation or other entity owned, directly or indirectly, by the stockholders of the Corporation immediately prior to the transaction in substantially the same proportions as their ownership of stock of the Corporation, (C) an employee benefit plan (or related trust) sponsored or maintained by the Corporation or any Subsidiary or (D) an underwriter temporarily holding securities pursuant to an offering of such securities ("Person")) is the beneficial owner (as defined in Rule 13d-3 under the 1934 Act), directly or indirectly, of 20% or more of the combined voting power of the then outstanding voting securities eligible to vote generally in the election of directors of the Corporation; provided, however, that no Change in Control will be deemed to have occurred as a result of a change in ownership percentage resulting solely from an acquisition of securities by the Corporation;
(ii) any Person has commenced a tender or exchange offer to acquire any stock of the Corporation (or securities convertible into stock) for cash, securities or any other consideration provided that, after the closing of the offer with full shareholder subscription, such Person would be the beneficial owner (as defined in Rule 13d-3 under the 1934 Act), directly or indirectly, of 20% or more of the combined voting power of the then outstanding voting securities eligible to vote generally in the election of directors of the Corporation (calculated as provided in Paragraph (d) of Rule 13d-3 under the 1934 Act in the case of rights to acquire stock);
(iii) all required shareholder approvals have been obtained for a merger, consolidation, reorganization or share exchange, or sale of all or substantially all of the assets, of the Corporation or Idaho Power Company (a "Qualifying Transaction"), unless, immediately following such Qualifying Transaction, all of the following have occurred: (A) all or substantially all of the beneficial owners of the Corporation immediately prior to such Qualifying Transaction will beneficially own in substantially the same proportions, directly or indirectly, more than 50% of the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors of the corporation or other entity resulting from such Qualifying Transaction (including, without limitation, a corporation or other entity which, as a result of such transaction, owns the Corporation or all or substantially all of the Corporation's assets either directly or through one or more subsidiaries) (as the case may be, the "Successor Entity"), (B) no Person will be the beneficial owner (as defined in Rule 13d-3 under the 1934 Act), directly or indirectly, of 20% or more of the combined voting power of the then outstanding voting securities eligible to vote generally in the election of directors of the Successor Entity and (C) at least a majority of the members of the board of directors of the Successor Entity will be Incumbent Directors;
(iv) shareholder approval of a complete liquidation or dissolution of the Corporation or Idaho Power Company; or
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(v) within a 24-month period, individuals who were directors of the Board immediately before such period ("Incumbent Directors") cease to constitute at least a majority of the directors of the Board; provided, however, that any director who was not a director of the Board at the beginning of such period shall be deemed to be an Incumbent Director if the election or nomination for election of such director was approved by the vote of at least two-thirds of the directors of the Board then still in office (A) who were in office at the beginning of the 24-month period or (B) whose election or nomination for election was so approved, in each case, unless such individual was elected or nominated as a result of an actual or threatened election contest or as a result of an actual or threatened solicitation of proxies or consents by or on behalf of any Person other than the Board; or
(vi) consummation of any transaction described in Section 1(c)(iii) or 1(c)(iv) if such transaction was not approved by shareholders.
For avoidance of doubt, transactions for the purpose of dividing Idaho Power Company's assets into separate distribution, transmission or generation entities or such other entities as the Corporation or Idaho Power Company may determine shall not constitute a Change in Control unless so determined by the Board.
Upon the Board's determination that (x) a tender offer that constituted a Change in Control under Section 1(c)(ii) will not result in a Person becoming the beneficial owner (as defined in Rule 13d-3 under the 1934 Act), directly or indirectly, of 20% or more of the combined voting power of the then outstanding voting securities eligible to vote generally in the election of directors of the Corporation or (y) the Qualifying Transaction described in Section 1(c)(iii) will not be closed or (z) a complete liquidation or dissolution of the Corporation or Idaho Power Company that was approved by shareholders, as described in Section 1(c)(iv), will not occur, a Change in Control shall be deemed not to have occurred from such date of determination forward, and this Agreement shall continue in effect as if no Change in Control had occurred except to the extent a Separation from Service requiring payments under this Agreement occurs prior to such Board determination.
d. "Code" shall mean the Internal Revenue Code of 1986, as amended.
e. "Compensation" shall mean the sum of (i) the Executive's annual base salary at the time of Separation from Service (or, if greater, at the time of a termination of employment that does not constitute a Separation from Service) and (ii) the Executive's target annual incentive award in the year of the Separation from Service (or, if greater, at the time of a termination of employment that does not constitute a Separation from Service) (or, if as of the date of the Separation from Service (or termination of employment, as the case may be) no target annual incentive award has yet been determined for the year of the Separation from Service, the target annual incentive award for the prior year).
f. "Constructive Discharge" shall mean any of the following:
(i) any material failure by the Corporation to comply with any of the provisions of this Agreement;
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(ii) the Corporation or a Subsidiary of the Corporation requiring the Executive to be based at any office or location more than 50 miles from the location at which the Executive was based on the day prior to the Change in Control;
(iii) a reduction which is more than de minimis in (A) the Executive's annual rate of base salary or maximum annual incentive award opportunity, (B) the long-term incentive compensation the Executive has the opportunity to earn, determined in the aggregate if multiple long-term incentive opportunities exist or (C) the combined annual benefit accrual rate under the Corporation's qualified defined benefit pension plan and/or the Idaho Power Company Security Plan for Senior Management Employees, as in effect immediately prior to the Change in Control (except if such reduction is a part of a reduction for all executive officers);
(iv) the Corporation's failure to require a successor entity to assume and agree to perform the Corporation's obligations pursuant to Section 9; or
(v) a reduction which is more than de minimis in the long term disability and life insurance coverage provided to the Executive under the Corporation's life insurance and long term disability plans as in effect immediately prior to the Change in Control.
No such event described hereunder shall constitute Constructive Discharge unless the Executive has given written notice to the Corporation specifying the event constituting such Constructive Discharge within 90 days of the initial existence of such event (but in no event later than the Ending Date) and the Corporation has not remedied such within 30 days of receipt of such notice. The Corporation and Executive, upon mutual written agreement, may waive any of the foregoing provisions which would otherwise constitute a Constructive Discharge.
g. "Coverage Period" shall begin on the Starting Date and end on the Ending Date.
h. "Disability" shall mean an injury or illness which permanently prevents the Executive from performing services to the Corporation and which qualifies the Executive for payments under the Corporation's long term disability plan, which for purposes of this Agreement shall be the Idaho Power Company Long Term Disability Plan.
i. "Ending Date" shall be the date which is 36 full calendar months following the date on which a Change in Control occurs or if the Change in Control is shareholder approval pursuant to Section 1(c)(iii) or 1(c)(iv), the date which is 36 months following the consummation of the transaction subject to such shareholder approval.
j. "Separation from Service" shall mean "separation from service," as that term is used in Code Section 409A(a)(2)(A)(i).
k. "Starting Date" shall be the date on which a Change in Control occurs.
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l. "Subsidiary" means any corporation of which more than 50% of the outstanding stock having ordinary voting power to elect a majority of the board of directors of such corporation is now or hereafter owned, directly or indirectly, by the Corporation.
2. Term.
This Agreement shall be effective as of the Starting Date and shall continue thereafter until the 36 month anniversary of the later of (i) such date or (ii) if the Change in Control causing the Agreement to be effective is shareholder approval pursuant to Section 1(c)(iii) or 1(c)(iv), the date of the consummation of the transaction subject to such shareholder approval; provided, however, the Corporation's obligations, if any, to provide payments and/or benefits pursuant to Section 3 of this Agreement and the obligations of the Corporation and the Executive under Section 5 of this Agreement shall survive the termination of this Agreement.
3. Severance Benefits.
a. If the Executive experiences a Separation from Service effected by the Corporation (and/or, if the Executive is employed by one or more Subsidiaries, effected by the Corporation and/or such Subsidiary or Subsidiaries) for any reason other than Cause (and not due to death or Disability) (for avoidance of doubt, transfer of employment between or among the Corporation and any of its Subsidiaries shall not constitute a Separation from Service effected by the Corporation or a Subsidiary for purposes of this Agreement), or effected by the Executive in the event of a Constructive Discharge, in either case at any time during the Coverage Period, then,
(i) the Corporation shall pay or cause to be paid to the Executive (or if the Executive dies after Separation from Service but before receiving all payments to which he has become entitled hereunder, to the estate of the Executive) the following amounts:
(A) accrued but unpaid salary and accrued but unused vacation and sick time in accordance with the Corporation's or a Subsidiary's, as the case may be, Flexible Time Off or similar program, as may be amended from time to time, with such payment to be made within five business days after such Separation from Service; and
(B) subject to Section 17, a lump sum cash amount equal to two and one-half times the Executive's Compensation (the "Severance Payment"), with such payment to be made on the first business day that is 60 days after such Separation from Service, subject to the provisions of Section 19 hereof; and
(ii) subject to Section 17, the Executive shall be entitled to the following additional severance benefits:
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(A) notwithstanding anything in any other award notice or agreement providing otherwise, as applicable, (1) all of the Executive's outstanding stock options and stock appreciation rights shall become vested and exercisable as of the date Severance Payments are paid; (2) all of the Executive's outstanding shares of restricted stock and restricted stock units shall become vested in full (at target levels for any performance-based restricted stock or restricted stock units) as of the date Severance Payments are paid and shall be paid on the date the Severance Payments are paid; and (3) the target payout opportunity under all of the Executive's outstanding performance units or performance shares (or other similar awards with performance-based vesting) shall become vested at target levels as of the date Severance Payments are paid and shall be paid on the date the Severance Payments are paid;
(B) outplacement services commencing within 12 months of the date of the Separation from Service and extending for a period of not more than 12 months, the scope and provider of which shall be selected by the Executive in his sole discretion (but at a total cost to the Corporation of not more than $12,000); and
(C) continued coverage for Executive and, as applicable, the Executive's covered dependents under the Corporation's group health plans and other welfare benefit plans (within the meaning of Section 3(1) of the Employee Retirement Income Security Act of 1974, as amended) to the extent the Executive elects to receive such coverage and pays a monthly premium equal to the COBRA premium for such group health coverage and the full monthly cost for such other welfare benefits (the "Elected Continuation Coverage"). Any such Elected Continuation Coverage shall be provided, to the extent the Company is able to provide it or to arrange for the provision of such benefits from another provider, on the same basis (excluding premiums) as is provided to the Corporation's actively employed executives and their dependents, as applicable, until the earlier of (i) twenty-four (24) months after the Executive's Separation from Service or (ii) the date the Executive is first eligible for comparable coverage with a subsequent employer. As a separate payment under this Agreement, for each month such Elected Continuation Coverage continues under this Section 3(a)(ii)(C), the Corporation shall pay to the Executive a monthly reimbursement payment so that, after withholding of all applicable taxes on such reimbursement payment, the Executive retains an amount equal to the excess of the COBRA premium and the full monthly cost for such Elected Continuation Coverage over the active employee cost for such coverage.
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b. Notwithstanding anything to the contrary contained in this Agreement, if the Executive's Separation from Service is effected by the Executive for any reason (unless, prior to such Separation from Service, the Corporation has given notice to the Executive that it intends to effect a Separation from Service for Cause) in the first full calendar month following the one year anniversary of the Change in Control (provided, that, (i) in the case of a Change in Control under Section 1(c)(ii), the one year anniversary shall be the first anniversary of the date the tender offer is completed, provided the tender offer has resulted in a Person becoming the beneficial owner (as defined in Rule 13d-3 under the 1934 Act), directly or indirectly, of 20% or more of the combined voting power of the then outstanding voting securities eligible to vote generally in the election of directors of the Corporation and (ii) in the case of a Change in Control under Section 1(c)(iii) or 1(c)(iv), the one year anniversary shall be the first anniversary of the date of the consummation of the transaction or event constituting the Change in Control), the Corporation shall pay (or cause to be paid) to the Executive (or the Executive's estate upon death) the amounts and provide to the Executive the benefits provided under Section 3(a); provided, however, the Severance Payment calculated under Section 3(a)(i)(B) shall be multiplied by 2/3, and the continuation period specified in Section 3(a)(ii)(C) shall be for 18 months rather than 24 months.
c. (i) If Independent Tax Counsel (as that term is defined below) determines that the aggregate payments and benefits provided or to be provided to the Executive pursuant to this Agreement, and any other payments and benefits provided or to be provided to the Executive from the Corporation or any of its Subsidiaries or other affiliates or any successors thereto constitute "parachute payments" as defined in Section 280G of the Code (or any successor provision thereto) ("Parachute Payments") that would be subject to the excise tax imposed by Section 4999 of the Code (the "Excise Tax"), and if the amount of the Parachute Payments in excess of 300% of the Executive's "base amount" (as defined in Section 280G of the Code, the "Base Amount") is greater than 15% of the total value of the Parachute Payments, then the Executive shall be entitled to receive an additional payment (a "Gross-Up Payment") in an amount (determined by Independent Tax Counsel) such that after payment by the Executive of all taxes (including any Excise Tax) imposed upon the Gross-Up Payment and any interest or penalties imposed with respect to such taxes (except to the extent such interest or penalty results from the Executive's failure to act in accordance with the Corporation's or a Subsidiary's reasonable directions or the Executive's failure to exercise due care), the Executive retains from the Gross-Up Payment an amount equal to the Excise Tax imposed upon the Parachute Payments. If it is later determined that the Independent Tax Counsel's estimates of the Excise Tax owed by the Executive are less than the amount actually owed by the Executive, then, subject to the Corporation's right to contest the payment of the Excise Tax pursuant to Section 3(c)(iii), the Independent Tax Counsel shall determine the amount of the additional gross-up payment required with respect to the additional Excise Tax ("Gross-Up Underpayment"), and any such Gross-Up Underpayment shall be promptly paid by the Corporation to or for the benefit of the Executive. For purposes of this Section 3(c), "Independent Tax Counsel" shall mean a lawyer, a certified public accountant with a nationally recognized accounting firm, or a compensation consultant with a nationally recognized actuarial and benefits consulting firm with expertise in the area of executive compensation tax law, who shall be selected by the Corporation and shall be acceptable to the Executive (the Executive's acceptance not to be unreasonably withheld), and whose fees and disbursements shall be paid by the Corporation.
(ii) If Independent Tax Counsel determines that no Excise Tax is payable by the Executive, the Corporation shall so notify the Executive in writing. If, after such a determination, the Executive is subsequently required to make a payment of any Excise Tax with respect to the Parachute Payments, then the Independent Tax Counsel shall determine the amount of such Excise Tax and the required Gross-Up Payment attributable thereto, and any such Gross-Up Payment shall be promptly paid by the Corporation to or for the benefit of the Executive.
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(iii) The Executive shall notify the Corporation in writing within 30 days of any claim by the Internal Revenue Service that, if successful, would require the payment by the Executive of an Excise Tax. Except as otherwise provided in Section 3(c)(v), upon receipt of such notice, the Corporation shall, in its sole discretion, either contest such claim or provide the Executive with a Gross-Up Payment intended to reimburse the Executive for any such Excise Tax and all taxes (including any Excise Tax) imposed upon the Gross-Up Payment and any interest or penalties imposed with respect to such taxes (except to the extent such interest or penalty results from the Executive's failure to act in accordance with the Corporation's or a Subsidiary's reasonable directions or the Executive's failure to exercise due care). If the Corporation notifies the Executive in writing that it desires to contest such claim and that it will bear the costs and provide the indemnification as required by this sentence, the Executive shall:
(A) give the Corporation any information reasonably requested by the Corporation relating to such claim,
(B) take such action in connection with contesting such claim as the Corporation shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Corporation,
(C) cooperate with the Corporation in good faith in order to effectively contest the claim, and
(D) permit the Corporation to participate in any proceedings relating to the claim; provided, however, that the Corporation shall pay (or cause to be paid) directly all costs and expenses (including any interest and penalties, except to the extent such interest or penalty results from the Executive's failure to act in accordance with the Corporation's or a Subsidiary's reasonable directions or the Executive's failure to exercise due care) incurred in connection with the contest and shall indemnify and hold the Executive harmless, on an after-tax basis, for any Excise Tax or income or other tax, including interest and penalties with respect thereto (except to the extent such interest or penalty results from the Executive's failure to act in accordance with the Corporation's or a Subsidiary's reasonable directions or the Executive's failure to exercise due care), imposed as a result of such representation and payment of costs and expenses. The Corporation shall control all proceedings taken in connection with such contest; provided, however, that if the Corporation directs the Executive to pay such claim and sue for a refund, the Corporation shall, unless prohibited by law, advance (or cause to be advanced) the amount of such payment to the Executive, on an interest-free basis and shall indemnify and hold the Executive harmless, on an after-tax basis, from any Excise Tax or income or other tax, including interest or penalties with respect thereto (except to the extent such interest or penalty results from the Executive's failure to act in accordance with the Corporation's or a Subsidiary's reasonable directions or the Executive's failure to exercise due care), imposed with respect to such advance or with respect to any imputed income with respect to such advance. If the advancement described in the preceding sentence is prohibited by law, the Corporation and the Executive shall cooperate in an effort to determine an alternative approach to payment of the claim in a manner permitted by applicable law and consistent with original intent and economic benefit to the Executive of this provision.
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(iv) If, after the receipt by the Executive of a Gross-Up Payment or a Gross-Up Underpayment pursuant to Section 3(c)(i) or 3(c)(ii), or after receipt by the Executive of an amount advanced by the Corporation pursuant to Section 3(c)(iii), it is determined that the amount of the Excise Tax owed by the Executive is less than the amount previously determined by the Independent Tax Counsel upon which the Gross-up Payment or the Gross-Up Underpayment was determined, or if the Executive becomes entitled to receive a refund with respect to a payment by the Corporation with respect to a claim by the Internal Revenue Service related to the Excise Tax, the Executive shall, within 10 days after such determination of overpayment or receipt of such refund, pay to the Corporation the amount of such overpayment or refund, together with any interest paid or credited thereon after taxes applicable thereto and any Gross-Up Payment or Gross-Up Underpayment based upon the overpayment.
(v) If Independent Tax Counsel shall make a determination that Parachute Payments would be subject to the Excise Tax, but the amount of Parachute Payments in excess of 300% of the Executive's Base Amount is not greater than 15% of the total value of the Parachute Payments, then the Parachute Payments provided under this Agreement shall be reduced to the extent the Independent Tax Counsel shall determine is necessary (but not below zero) so that no portion thereof shall be subject to the Excise Tax. The determination of which payments or benefits shall be reduced to avoid the Excise Tax shall be made by the Independent Tax Counsel, provided that the Independent Tax Counsel shall reduce or eliminate, as the case may be, payments or benefits in the order that it determines will produce the required reduction in total Parachute Payments with the least reduction in economic value to the Executive of such payments. The determination of Independent Tax Counsel under this Section 3(c)(v) shall be final and binding on all parties hereto. If, after a reduction pursuant to this Section 3(c)(v), the Executive receives a claim by the Internal Revenue Service that, if successful, would require the payment by the Executive of an Excise Tax with respect to Parachute Payments, the Executive shall notify the Corporation in writing within 30 days of such claim and a further reduction of Parachute Payments shall be made pursuant to this Section 3(v) if (i) such reduction is possible and would prevent the Executive from incurring an Excise Tax and (ii) after such reduction, the aggregate amount of Parachute Payments reduced pursuant to this Section 3(c)(v) would not exceed 15% of the total value of the Parachute Payments. If such a reduction is not possible, would not prevent the Executive from incurring an Excise Tax or would cause the aggregate Parachute Payments reduced pursuant to this Section 3(c)(v) to exceed 15% of the total value of the Parachute Payments, then Section 3(c)(iii) shall be applicable and the Corporation shall, in its sole discretion, either contest such claim or provide the Executive with a Gross-Up Payment intended to reimburse the Executive for any such Excise Tax and all taxes (including any Excise Tax) imposed upon the Gross-Up Payment and any interest or penalties imposed with respect to such taxes (except to the extent such interest or penalty results from the Executive's failure to act in accordance with the Corporation's or a Subsidiary's reasonable directions or the Executive's failure to exercise due care). Except as contemplated by the preceding two sentences, no additional payments by the Corporation or return of payments by the Executive shall be required or made if a later determination based on case law, an IRS holding or otherwise would result in a recalculation of the Excise Tax implications.
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(vi) Notwithstanding anything herein to the contrary, this Section 3(c) shall be interpreted (and, if determined by the Corporation to be necessary, reformed) to the extent necessary to fully comply with the Sarbanes-Oxley Act and Section 409A of the Code; provided that the Corporation agrees to maintain, to the maximum extent practicable, the original intent and economic benefit to the Executive of the applicable provision without violating the provisions of the Sarbanes-Oxley Act and Code Section 409A.
d. In the event of any Separation from Service described in Section 3(a) or Section 3(b), the Executive shall be under no obligation to seek other employment, and there shall be no offset against amounts due the Executive under this Agreement on account of any remuneration attributable to any subsequent employment; provided, however, to the extent the Executive receives medical and health benefits from a subsequent employer, medical and health benefits provided pursuant to Section 3(a)(ii)(C) shall be secondary to those received from the subsequent employer.
e. It is intended that the payments and benefits provided under this Agreement are in lieu of, and not in addition to, severance payments and benefits provided under any severance, change in control or similar plan or policy of the Corporation or a Subsidiary or under any other severance, change in control or similar agreements with the Corporation or any Subsidiary, whether written or oral.
4. Nature of Obligation.
The Corporation shall not be required to establish a special or separate fund or other segregation of assets to assure payments under this Agreement, and, if the Corporation shall make any investments to aid it in meeting its obligations hereunder, the Executive shall have no right, title or interest in or to any such investments except as may otherwise be expressly provided in a separate written instrument relating to such investments. Nothing contained in this Agreement, and no action taken pursuant to its provisions, shall create or be construed to create a trust of any kind or a fiduciary relationship between the Corporation and the Executive or any other person. To the extent that any person acquires a right to receive payments under this Agreement such right shall be no greater than the right of an unsecured creditor.
5. Full Settlement; Litigation Expenses; Arbitration.
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a. Except as provided below, the Corporation's obligation to make or cause to be made the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Corporation or a Subsidiary may have against the Executive or others. The Corporation agrees to pay, upon written demand therefor by the Executive, all legal fees and expenses the Executive reasonably incurs during his or her lifetime as a result of any dispute or contest (regardless of the outcome thereof) by or with the Corporation or others regarding the validity or enforceability of, or liability under, any provision of this Agreement, plus in each case, interest at the applicable Federal rate provided for in Section 7872(f)(2) of the Code. Notwithstanding the foregoing, the Executive agrees to repay to the Corporation any such fees and expenses reimbursed by the Corporation if and to the extent that the Corporation or such others obtains a judgment or determination that the Executive's claim was frivolous or was without merit from the arbitrator or a court of competent jurisdiction from which no appeal may be taken, whether because the time to do so has expired or otherwise. In any such action brought by the Executive for damages or to enforce any provisions of this Agreement, he shall be entitled to seek both legal and equitable relief and remedies, including, without limitation, specific performance of the Corporation's obligations hereunder, in his sole discretion.
b. In the event of any dispute or difference between the Corporation and the Executive with respect to the subject matter of this Agreement and the enforcement of rights hereunder, either the Executive or the Corporation may, by written notice to the other, require such dispute or difference to be submitted to arbitration. The arbitrator or arbitrators shall be selected by agreement of the parties or, if they cannot agree on an arbitrator or arbitrators within 30 days after the Executive has notified the Corporation of his desire to have the question settled by arbitration, then the arbitrator or arbitrators shall be selected by the American Arbitration Association (the "AAA") upon the application of the Executive. The determination reached or award rendered in such arbitration shall be final and binding on both parties without any right of appeal or further dispute, subject to the applicable state or federal laws relating to arbitration determinations or awards. Enforcement of an arbitration award by such arbitrator may be sought in any court of competent jurisdiction. The arbitrators shall not be bound by judicial formalities and may abstain from following the strict rules of evidence and shall interpret this Agreement as an honorable engagement and not merely as a legal obligation. Unless otherwise agreed by the parties, any such arbitration shall take place in Boise, Idaho, and shall be conducted in accordance with the Rules of the AAA. The Executive's expenses for such proceeding shall be paid, or repaid to the Corporation as the case may be, as provided in subsection (a) of this Section 5.
6. Tax Withholding.
The Corporation may withhold from any payments made under this Agreement all federal, state or other taxes as shall be required pursuant to any law or governmental regulation or ruling.
7. Entire Understanding.
This Agreement contains the entire understanding between the Corporation and the Executive with respect to the subject matter hereof and supersedes any prior severance, change in control or similar agreement between the Corporation and the Executive (including, without limitation, the Prior Agreement by and between the Corporation and the Executive); provided, however, that, except as otherwise provided in this Section 7 and in Sections 3(c) and 3(e), this Agreement shall not affect or operate to reduce any benefit or compensation inuring to the Executive of any kind elsewhere provided.
8. Severability.
If, for any reason, any one or more of the provisions or part of a provision contained in this Agreement shall be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision or part of a provision of this Agreement not held so invalid, illegal or unenforceable, and each other provision or part of a provision shall to the full extent consistent with law continue in full force and effect.
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9. Consolidation, Merger, or Sale of Assets.
If the Corporation consolidates or merges into or with, or transfers all or substantially all of its assets to, another entity the term "Corporation" as used herein shall mean such other entity and this Agreement shall continue in full force and effect. In the case of any transaction in which a successor would not by the foregoing provision or by operation of law be bound by this Agreement, the Corporation shall require such successor expressly and unconditionally to assume and agree to perform the Corporation's obligations under this Agreement, in the same manner and to the same extent that the Corporation would be required to perform if no such succession had taken place.
10. Notices.
All notices, requests, demands and other communications required or permitted hereunder shall be given in writing and shall be deemed to have been duly given if delivered or mailed, postage prepaid, first class as follows:
to the Corporation:
IDACORP, Inc.
Attention: General Counsel
P.O. Box 70
Boise, Idaho 83707
to the Executive:
At the address (or to the facsimile number) last shown on the records of the Corporation.
or to such other address as either party shall have previously specified in writing to the other.
11. No Attachment.
Except as required by law, no right by the Executive or his estate to receive payments under this Agreement shall be subject to anticipation, commutation, alienation, sale, assignment, encumbrance, charge, pledge or hypothecation or to execution, attachment, levy or similar process or assignment by operation of law, and any attempt, voluntary or involuntary, to effect any such action shall be null, void and of no effect.
12. Binding Agreement.
This Agreement shall be binding upon, and shall inure to the benefit of, the Executive and the Corporation and their respective permitted successors and assigns.
13. Modification and Waiver.
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Prior to the date of a Change in Control or, if earlier, the date of a public announcement of a transaction or event which if consummated would be a Change in Control ("Pre-Change in Control Event"), this Agreement may be terminated, modified or amended by action of a majority of the members of the Board. After a Change in Control or Pre-Change in Control Event, this Agreement may not be terminated, modified or amended except by an instrument in writing signed by the parties hereto. No term or condition of this Agreement shall be deemed to have been waived, nor shall there be any estoppel against the enforcement of any provision of this Agreement, except by written instrument signed by the party charged with such waiver or estoppel. No such written waiver shall be deemed a continuing waiver unless specifically stated therein, and each such waiver shall operate only as to the specific term or condition waived and shall not constitute a waiver of such term or condition for the future or as to any act other than that specifically waived.
14. Headings of No Effect.
The section headings contained in this Agreement are included solely for convenience of reference and shall not in any way affect the meaning or interpretation of any of the provisions of this Agreement.
15. Effective Date and Executive Acknowledgments.
This Agreement shall become effective on the Starting Date. The Executive acknowledges that he has read and understands the provisions of this Agreement. The Executive further acknowledges that he has been given an opportunity for his legal counsel to review this Agreement and that the provisions of this Agreement are reasonable and that he has received a copy of this Agreement.
16. Not Compensation for Other Plans.
Except for amounts paid pursuant to Section 3(a)(i)(A) that are considered compensation, earnings or wages for purposes of any employee benefit plan of the Corporation or its Subsidiaries, it is understood by all parties hereto that amounts paid and benefits provided hereunder are not to be considered compensation, earnings or wages for purpose of any employee benefit plan of the Corporation or its Subsidiaries, including, but not limited to, the qualified retirement plan or the Idaho Power Company Security Plan.
17. Release.
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Notwithstanding any provision herein to the contrary, if (and only if), within five days following the date of the Executive's Separation from Service, the Corporation provides the Executive a release of the Corporation, its Subsidiaries and other affiliates and related parties (in such form as the Corporation may reasonably determine) of all claims against the Corporation, its Subsidiaries and other affiliates and related parties relating to the Executive's service and separation therefrom, the Corporation shall not have any obligation to pay (or cause to be paid) any amount or provide any benefit under Section 3 of this Agreement (other than those amounts provided for in Section 3(a)(i)(A)) unless the Executive executes such release and any revocation period applicable to such release has expired before the sixtieth day following the date of the Executive's Separation from Service. If the release has not been executed by the Executive and has not become irrevocable by the applicable deadline provided in the prior sentence, any amounts under Section 3 of this Agreement (other than those amounts provided for in Section 3(a)(i)(A)) shall be forfeited .
18. Governing Law.
To the extent not preempted by Federal law, this Agreement and its validity, interpretation, performance, and enforcement shall be governed by the laws of Idaho, without regard to conflicts of law provisions.
19. Code Section 409A.
a. To the extent applicable, this Agreement is intended to comply with the requirements of Section 409A of the Code and any regulations and guidance issued thereunder ("Section 409A") and shall be interpreted accordingly.
b. To the extent applicable, it is intended that all payments and benefits provided pursuant to this Agreement upon or following a Separation from Service qualify as short-term deferrals under Treasury Regulation Section 1.409A-1(b)(4) to the maximum extent possible. Any installment payments or reimbursements under this Agreement are to be treated as a series of separate payments for purposes of Section 409A. Notwithstanding any provision to the contrary in this Agreement, if it is determined that any amounts to be provided pursuant to this Agreement constitute deferred compensation for purposes of Section 409A ("Deferred Compensation Payments") and if the Executive is deemed to be a "Specified Employee" (as that term is used in Code Section 409A(a)(2)(B)) on the date of the Executive's Separation from Service, as determined under the Corporation's policy for determining specified employees, any such Deferred Compensation Payments that are deemed payable due to a Separation from Service for purposes of Section 409A and are required to be delayed until the first business day after the date that is six months following the Executive's Separation from Service (or, if earlier, until the date of the Executive's death) to comply with Code Section 409A(a)(2)(B)(i) shall be so delayed, and the accumulated amounts shall be paid in a lump sum payment to the Executive on the first business day that is after six months after the Executive's Separation from Service; provided, however, that if the Executive dies during such six month period, payment shall be made to the Executives estate within 60 days after the date of the Executives death.
c. Except as provided in Section 19(d), notwithstanding any provision to the contrary in this Agreement, any reimbursements or in-kind benefits under this Agreement that constitute Deferred Compensation Payments shall be paid or provided to the Executive in a manner consistent with Treasury Regulation Section 1.409A-3(i)(1)(iv), including the requirement that the amount of reimbursements or in-kind benefits provided during a year may not affect the expenses eligible for reimbursement or in-kind benefits provided in any other year and that any reimbursements be made on or before the last day of the year following the year in which the expense was incurred.
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d. Notwithstanding any provision to the contrary in this Agreement, any reimbursements or other payments provided under Section 3(c) that constitute Deferred Compensation Payments will only be paid to the extent such payments would not result in taxation pursuant to Section 409A and shall be paid in a manner consistent with Treasury Regulation Section 1.409A-3(i)(1)(vi), including the requirements that (i) any such amounts be paid no later than the last day of the calendar year following the calendar year in which the Executive or the Corporation remits the applicable taxes and (ii) with respect to any such payments relating to a tax audit or litigation addressing the existence or amount of a tax liability, any such amounts be paid by the end of the calendar year following the calendar year in which the taxes that are the subject of the audit or litigation are remitted to the taxing authority, or where as a result of such audit or litigation no taxes are remitted, the end of the calendar year following the calendar year in which the audit is completed or there is a final and nonappealable settlement or other resolution of the litigation.
IN WITNESS WHEREOF, the Corporation and the Executive both intending to be legally bound have duly executed and delivered this Agreement, to be effective as of the date set forth in Section 15.
IDACORP, INC.
By:_____________________________
Its President & Chief Executive Officer
Date: ___________________________
EXECUTIVE
______________________________
Date: _________________________
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Exhibit 10.25
AMENDED AND RESTATED CHANGE IN CONTROL AGREEMENT
BETWEEN IDACORP, INC.
AND
______________________
THIS AMENDED AND RESTATED CHANGE IN CONTROL AGREEMENT (the "Agreement"), is by and between IDACORP, Inc., an Idaho corporation (the "Corporation") and __________________ (the "Executive") and is effective on the date established pursuant to Section 15 of this Agreement (the "Effective Date").
W I T N E S S E T H:
WHEREAS, the Executive is a valuable employee of the Corporation or a Subsidiary of the Corporation, an integral part of its management, and a key participant in the decision-making process relative to short-term and long-term planning and policy for the Corporation; and
WHEREAS, the Corporation wishes to encourage the Executive to continue his career and services with the Corporation or a Subsidiary, as the case may be, following a Change in Control; and
WHEREAS, the Executive and the Corporation are parties to a Change in Control Agreement dated [ ] (the "Prior Agreement"), and the Executive and the Corporation desire to change certain terms of the Prior Agreement to address changes in tax laws and to revise and clarify certain other terms of the Prior Agreement; and
WHEREAS, the Executive and the Corporation have agreed that this Agreement shall supersede and replace the Prior Agreement; and
WHEREAS, the Board has determined that it would be in the best interests of the Corporation and its shareholders to assure continuity in the management of the Corporation's, including Subsidiaries', administration and operations in the event of a Change in Control by entering into this Agreement with the Executive;
NOW THEREFORE, it is hereby agreed by and between the parties hereto as follows:
1. Definitions.
a. "Board" shall mean the Board of Directors of the Corporation.
b. "Cause" shall mean the Executive's fraud or dishonesty which has resulted or is likely to result in material economic damage to the Corporation or a Subsidiary of the Corporation, as determined in good faith by a vote of at least two-thirds of the non-employee directors of the Corporation at a meeting of the Board at which the Executive is provided an opportunity to be heard.
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c. "Change in Control" shall mean:
(i) any person (as such term is defined in Section 3(a)(9) of the Securities Exchange Act of 1934 (the "1934 Act") and as used in Section 13(d) of the 1934 Act), excluding (A) the Corporation or any Subsidiary, (B) a corporation or other entity owned, directly or indirectly, by the stockholders of the Corporation immediately prior to the transaction in substantially the same proportions as their ownership of stock of the Corporation, (C) an employee benefit plan (or related trust) sponsored or maintained by the Corporation or any Subsidiary or (D) an underwriter temporarily holding securities pursuant to an offering of such securities ("Person")) is the beneficial owner (as defined in Rule 13d-3 under the 1934 Act), directly or indirectly, of 20% or more of the combined voting power of the then outstanding voting securities eligible to vote generally in the election of directors of the Corporation; provided, however, that no Change in Control will be deemed to have occurred as a result of a change in ownership percentage resulting solely from an acquisition of securities by the Corporation;
(ii) any Person has commenced a tender or exchange offer to acquire any stock of the Corporation (or securities convertible into stock) for cash, securities or any other consideration provided that, after the closing of the offer with full shareholder subscription, such Person would be the beneficial owner (as defined in Rule 13d-3 under the 1934 Act), directly or indirectly, of 20% or more of the combined voting power of the then outstanding voting securities eligible to vote generally in the election of directors of the Corporation (calculated as provided in Paragraph (d) of Rule 13d-3 under the 1934 Act in the case of rights to acquire stock);
(iii) all required shareholder approvals have been obtained for a merger, consolidation, reorganization or share exchange, or sale of all or substantially all of the assets, of the Corporation or Idaho Power Company (a "Qualifying Transaction"), unless, immediately following such Qualifying Transaction, all of the following have occurred: (A) all or substantially all of the beneficial owners of the Corporation immediately prior to such Qualifying Transaction will beneficially own in substantially the same proportions, directly or indirectly, more than 50% of the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors of the corporation or other entity resulting from such Qualifying Transaction (including, without limitation, a corporation or other entity which, as a result of such transaction, owns the Corporation or all or substantially all of the Corporation's assets either directly or through one or more subsidiaries) (as the case may be, the "Successor Entity"), (B) no Person will be the beneficial owner (as defined in Rule 13d-3 under the 1934 Act), directly or indirectly, of 20% or more of the combined voting power of the then outstanding voting securities eligible to vote generally in the election of directors of the Successor Entity and (C) at least a majority of the members of the board of directors of the Successor Entity will be Incumbent Directors;
(iv) shareholder approval of a complete liquidation or dissolution of the Corporation or Idaho Power Company; or
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(v) within a 24-month period, individuals who were directors of the Board immediately before such period ("Incumbent Directors") cease to constitute at least a majority of the directors of the Board; provided, however, that any director who was not a director of the Board at the beginning of such period shall be deemed to be an Incumbent Director if the election or nomination for election of such director was approved by the vote of at least two-thirds of the directors of the Board then still in office (A) who were in office at the beginning of the 24-month period or (B) whose election or nomination for election was so approved, in each case, unless such individual was elected or nominated as a result of an actual or threatened election contest or as a result of an actual or threatened solicitation of proxies or consents by or on behalf of any Person other than the Board; or
(vi) consummation of any transaction described in Section 1(c)(iii) or 1(c)(iv) if such transaction was not approved by shareholders.
For avoidance of doubt, transactions for the purpose of dividing Idaho Power Company's assets into separate distribution, transmission or generation entities or such other entities as the Corporation or Idaho Power Company may determine shall not constitute a Change in Control unless so determined by the Board.
Upon the Board's determination that (x) a tender offer that constituted a Change in Control under Section 1(c)(ii) will not result in a Person becoming the beneficial owner (as defined in Rule 13d-3 under the 1934 Act), directly or indirectly, of 20% or more of the combined voting power of the then outstanding voting securities eligible to vote generally in the election of directors of the Corporation or (y) the Qualifying Transaction described in Section 1(c)(iii) will not be closed or (z) a complete liquidation or dissolution of the Corporation or Idaho Power Company that was approved by shareholders, as described in Section 1(c)(iv), will not occur, a Change in Control shall be deemed not to have occurred from such date of determination forward, and this Agreement shall continue in effect as if no Change in Control had occurred except to the extent a Separation from Service requiring payments under this Agreement occurs prior to such Board determination.
d. "Code" shall mean the Internal Revenue Code of 1986, as amended.
e. "Compensation" shall mean the sum of (i) the Executive's annual base salary at the time of Separation from Service (or, if greater, at the time of a termination of employment that does not constitute a Separation from Service) and (ii) the Executive's target annual incentive award in the year of the Separation from Service (or, if greater, at the time of a termination of employment that does not constitute a Separation from Service) (or, if as of the date of the Separation from Service (or termination of employment, as the case may be) no target annual incentive award has yet been determined for the year of the Separation from Service, the target annual incentive award for the prior year).
f. "Constructive Discharge" shall mean any of the following:
(i) any material failure by the Corporation to comply with any of the provisions of this Agreement;
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(ii) the Corporation or a Subsidiary of the Corporation requiring the Executive to be based at any office or location more than 50 miles from the location at which the Executive was based on the day prior to the Change in Control;
(iii) a reduction which is more than de minimis in (A) the Executive's annual rate of base salary or maximum annual incentive award opportunity, (B) the long-term incentive compensation the Executive has the opportunity to earn, determined in the aggregate if multiple long-term incentive opportunities exist or (C) the combined annual benefit accrual rate under the Corporation's qualified defined benefit pension plan and/or the Idaho Power Company Security Plan for Senior Management Employees, as in effect immediately prior to the Change in Control (except if such reduction is a part of a reduction for all executive officers);
(iv) the Corporation's failure to require a successor entity to assume and agree to perform the Corporation's obligations pursuant to Section 9; or
(v) a reduction which is more than de minimis in the long term disability and life insurance coverage provided to the Executive under the Corporation's life insurance and long term disability plans as in effect immediately prior to the Change in Control.
No such event described hereunder shall constitute Constructive Discharge unless the Executive has given written notice to the Corporation specifying the event constituting such Constructive Discharge within 90 days of the initial existence of such event (but in no event later than the Ending Date) and the Corporation has not remedied such within 30 days of receipt of such notice. The Corporation and Executive, upon mutual written agreement, may waive any of the foregoing provisions which would otherwise constitute a Constructive Discharge.
g. "Coverage Period" shall begin on the Starting Date and end on the Ending Date.
h. "Disability" shall mean an injury or illness which permanently prevents the Executive from performing services to the Corporation and which qualifies the Executive for payments under the Corporation's long term disability plan, which for purposes of this Agreement shall be the Idaho Power Company Long Term Disability Plan.
i. "Ending Date" shall be the date which is 36 full calendar months following the date on which a Change in Control occurs or if the Change in Control is shareholder approval pursuant to Section 1(c)(iii) or 1(c)(iv), the date which is 36 months following the consummation of the transaction subject to such shareholder approval.
j. "Separation from Service" shall mean "separation from service," as that term is used in Code Section 409A(a)(2)(A)(i).
k. "Starting Date" shall be the date on which a Change in Control occurs.
l. "Subsidiary" means any corporation of which more than 50% of the outstanding stock having ordinary voting power to elect a majority of the board of directors of such corporation is now or hereafter owned, directly or indirectly, by the Corporation.
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2. Term.
This Agreement shall be effective as of the Starting Date and shall continue thereafter until the 36 month anniversary of the later of (i) such date or (ii) if the Change in Control causing the Agreement to be effective is shareholder approval pursuant to Section 1(c)(iii) or 1(c)(iv), the date of the consummation of the transaction subject to such shareholder approval; provided, however, the Corporation's obligations, if any, to provide payments and/or benefits pursuant to Section 3 of this Agreement and the obligations of the Corporation and the Executive under Section 5 of this Agreement shall survive the termination of this Agreement.
3. Severance Benefits.
a. If the Executive experiences a Separation from Service effected by the Corporation (and/or, if the Executive is employed by one or more Subsidiaries, effected by the Corporation and/or such Subsidiary or Subsidiaries) for any reason other than Cause (and not due to death or Disability) (for avoidance of doubt, transfer of employment between or among the Corporation and any of its Subsidiaries shall not constitute a Separation from Service effected by the Corporation or a Subsidiary for purposes of this Agreement), or effected by the Executive in the event of a Constructive Discharge, in either case at any time during the Coverage Period, then,
(i) the Corporation shall pay or cause to be paid to the Executive (or if the Executive dies after Separation from Service but before receiving all payments to which he has become entitled hereunder, to the estate of the Executive) the following amounts:
(A) accrued but unpaid salary and accrued but unused vacation and sick time in accordance with the Corporation's or a Subsidiary's, as the case may be, Flexible Time Off or similar program, as may be amended from time to time, with such payment to be made within five business days after such Separation from Service; and
(B) subject to Section 17, a lump sum cash amount equal to two and one-half times the Executive's Compensation (the "Severance Payment"), with such payment to be made on the first business day that is 60 days after such Separation from Service, subject to the provisions of Section 19 hereof; and
(ii) subject to Section 17, the Executive shall be entitled to the following additional severance benefits:
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(A) notwithstanding anything in any other award notice or agreement providing otherwise, as applicable, (1) all of the Executive's outstanding stock options and stock appreciation rights shall become vested and exercisable as of the date Severance Payments are paid; (2) all of the Executive's outstanding shares of restricted stock and restricted stock units shall become vested in full (at target levels for any performance-based restricted stock or restricted stock units) as of the date Severance Payments are paid and shall be paid on the date the Severance Payments are paid; and (3) the target payout opportunity under all of the Executive's outstanding performance units or performance shares (or other similar awards with performance-based vesting) shall become vested at target levels as of the date Severance Payments are paid and shall be paid on the date the Severance Payments are paid;
(B) outplacement services commencing within 12 months of the date of the Separation from Service and extending for a period of not more than 12 months, the scope and provider of which shall be selected by the Executive in his sole discretion (but at a total cost to the Corporation of not more than $12,000); and
(C) continued coverage for Executive and, as applicable, the Executive's covered dependents under the Corporation's group health plans and other welfare benefit plans (within the meaning of Section 3(1) of the Employee Retirement Income Security Act of 1974, as amended) to the extent the Executive elects to receive such coverage and pays a monthly premium equal to the COBRA premium for such group health coverage and the full monthly cost for such other welfare benefits (the "Elected Continuation Coverage"). Any such Elected Continuation Coverage shall be provided, to the extent the Company is able to provide it or to arrange for the provision of such benefits from another provider, on the same basis (excluding premiums) as is provided to the Corporation's actively employed executives and their dependents, as applicable, until the earlier of (i) twenty-four (24) months after the Executive's Separation from Service or (ii) the date the Executive is first eligible for comparable coverage with a subsequent employer. As a separate payment under this Agreement, for each month such Elected Continuation Coverage continues under this Section 3(a)(ii)(C), the Corporation shall pay to the Executive a monthly reimbursement payment so that, after withholding of all applicable taxes on such reimbursement payment, the Executive retains an amount equal to the excess of the COBRA premium and the full monthly cost for such Elected Continuation Coverage over the active employee cost for such coverage.
b. Notwithstanding anything to the contrary contained in this Agreement, if the Executive's Separation from Service is effected by the Executive for any reason (unless, prior to such Separation from Service, the Corporation has given notice to the Executive that it intends to effect a Separation from Service for Cause) in the first full calendar month following the one year anniversary of the Change in Control (provided, that, (i) in the case of a Change in Control under Section 1(c)(ii), the one year anniversary shall be the first anniversary of the date the tender offer is completed, provided the tender offer has resulted in a Person becoming the beneficial owner (as defined in Rule 13d-3 under the 1934 Act), directly or indirectly, of 20% or more of the combined voting power of the then outstanding voting securities eligible to vote generally in the election of directors of the Corporation and (ii) in the case of a Change in Control under Section 1(c)(iii) or 1(c)(iv), the one year anniversary shall be the first anniversary of the date of the consummation of the transaction or event constituting the Change in Control), the Corporation shall pay (or cause to be paid) to the Executive (or the Executive's estate upon death) the amounts and provide to the Executive the benefits provided under Section 3(a); provided, however, the Severance Payment calculated under Section 3(a)(i)(B) shall be multiplied by 2/3, and the continuation period specified in Section 3(a)(ii)(C) shall be for 18 months rather than 24 months.
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c. (i) If Independent Tax Counsel (as that term is defined below) determines that the aggregate payments and benefits provided or to be provided to the Executive pursuant to this Agreement, and any other payments and benefits provided or to be provided to the Executive from the Corporation or any of its Subsidiaries or other affiliates or any successors thereto constitute "parachute payments" as defined in Section 280G of the Code (or any successor provision thereto) ("Parachute Payments") that would be subject to the excise tax imposed by Section 4999 of the Code (the "Excise Tax"), then, except as otherwise provided in the next sentence, such Parachute Payments shall be reduced to the extent the Independent Tax Counsel shall determine is necessary (but not below zero) so that no portion thereof shall be subject to the Excise Tax. If Independent Tax Counsel determines that the Executive would receive in the aggregate greater payments and benefits on an after tax basis if the Parachute Payments were not reduced pursuant to this Section 3(c), then no such reduction shall be made; provided, however, that in such case the provisions of Sections 3(c)(ii) and 3(c)(iii) shall not be operative. The determination of which payments or benefits shall be reduced to avoid the Excise Tax shall be made by the Independent Tax Counsel, provided that the Independent Tax Counsel shall reduce or eliminate, as the case may be, payments or benefits in the order that it determines will produce the required deduction in total Parachute Payments with the least reduction in economic value to the Executive of such payments. The determination of the Independent Tax Counsel under this subsection (i) shall be final and binding on all parties hereto. For purposes of this Section 3(c), "Independent Tax Counsel" shall mean a lawyer, a certified public accountant with a nationally recognized accounting firm, or a compensation consultant with a nationally recognized actuarial and benefits consulting firm with expertise in the area of executive compensation tax law, who shall be selected by the Corporation and shall be acceptable to the Executive (the Executive's acceptance not to be unreasonably withheld), and whose fees and disbursements shall be paid by the Corporation.
(ii) The Executive shall notify the Corporation in writing within 30 days of any claim by the Internal Revenue Service that, if successful, would require the payment by the Executive of an Excise Tax. Upon receipt of such notice, the Corporation may, in its sole discretion, either contest such claim, provide the Executive with an additional payment (a "Gross-Up Payment") intended to reimburse the Executive for any such Excise Tax and all taxes (including any Excise Tax) imposed upon the Gross-Up Payment and any interest or penalties imposed with respect to such taxes (except to the extent such interest or penalty results from the Executive's failure to act in accordance with the Corporation's or a Subsidiary's reasonable directions or the Executive's failure to exercise due care) or do nothing. If the Corporation notifies the Executive in writing that it desires to contest such claim and that it will bear the costs and provide the indemnification as required by this sentence, the Executive shall:
(A) give the Corporation any information reasonably requested by the Corporation relating to such claim,
(B) take such action in connection with contesting such claim as the Corporation shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Corporation,
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(C) cooperate with the Corporation in good faith in order to effectively contest the claim, and
(D) permit the Corporation to participate in any proceedings relating to the claim; provided, however, that the Corporation shall pay (or cause to be paid) directly all costs and expenses (including any interest and penalties, except to the extent such interest or penalty results from the Executive's failure to act in accordance with the Corporation's or a Subsidiary's reasonable directions or the Executive's failure to exercise due care) incurred in connection with the contest and shall indemnify and hold the Executive harmless, on an after-tax basis, for any Excise Tax or income or other tax, including interest and penalties with respect thereto (except to the extent such interest or penalty results from the Executive's failure to act in accordance with the Corporation's or a Subsidiary's reasonable directions or the Executive's failure to exercise due care), imposed as a result of such representation and payment of costs and expenses. The Corporation shall control all proceedings taken in connection with such contest; provided, however, that if the Corporation directs the Executive to pay such claim and sue for a refund, the Corporation shall, unless prohibited by law, advance (or cause to be advanced) the amount of such payment to the Executive, on an interest-free basis and shall indemnify and hold the Executive harmless, on an after-tax basis, from any Excise Tax or income or other tax, including interest or penalties with respect thereto (except to the extent such interest or penalty results from the Executive's failure to act in accordance with the Corporation's or a Subsidiary's reasonable directions or the Executive's failure to exercise due care), imposed with respect to such advance or with respect to any imputed income with respect to such advance. If the advancement described in the preceding sentence is prohibited by law, the Corporation and the Executive shall cooperate in an effort to determine an alternative approach to payment of the claim in a manner permitted by applicable law and consistent with original intent and economic benefit to the Executive of this provision.
(iii) If, after the receipt by the Executive of an amount advanced by the Corporation pursuant to Section 3(c)(ii), the Executive becomes entitled to receive a refund with respect to a payment by the Corporation with respect to such claim, the Executive shall, within 10 days after the receipt of such refund, pay to the Corporation the amount of such refund, together with any interest paid or credited thereon after taxes applicable thereto.
(iv) Notwithstanding anything herein to the contrary, this Section 3(c) shall be interpreted (and, if determined by the Corporation to be necessary, reformed) to the extent necessary to fully comply with the Sarbanes-Oxley Act and Section 409A of the Code; provided that the Corporation agrees to maintain, to the maximum extent practicable, the original intent and economic benefit to the Executive of the applicable provision without violating the provisions of the Sarbanes-Oxley Act and Code Section 409A.
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d. In the event of any Separation from Service described in Section 3(a) or Section 3(b), the Executive shall be under no obligation to seek other employment, and there shall be no offset against amounts due the Executive under this Agreement on account of any remuneration attributable to any subsequent employment; provided, however, to the extent the Executive receives medical and health benefits from a subsequent employer, medical and health benefits provided pursuant to Section 3(a)(ii)(C) shall be secondary to those received from the subsequent employer.
e. It is intended that the payments and benefits provided under this Agreement are in lieu of, and not in addition to, severance payments and benefits provided under any severance, change in control or similar plan or policy of the Corporation or a Subsidiary or under any other severance, change in control or similar agreements with the Corporation or any Subsidiary, whether written or oral.
4. Nature of Obligation.
The Corporation shall not be required to establish a special or separate fund or other segregation of assets to assure payments under this Agreement, and, if the Corporation shall make any investments to aid it in meeting its obligations hereunder, the Executive shall have no right, title or interest in or to any such investments except as may otherwise be expressly provided in a separate written instrument relating to such investments. Nothing contained in this Agreement, and no action taken pursuant to its provisions, shall create or be construed to create a trust of any kind or a fiduciary relationship between the Corporation and the Executive or any other person. To the extent that any person acquires a right to receive payments under this Agreement such right shall be no greater than the right of an unsecured creditor.
5. Full Settlement; Litigation Expenses; Arbitration.
a. Except as provided below, the Corporation's obligation to make or cause to be made the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Corporation or a Subsidiary may have against the Executive or others. The Corporation agrees to pay, upon written demand therefor by the Executive, all legal fees and expenses the Executive reasonably incurs during his or her lifetime as a result of any dispute or contest (regardless of the outcome thereof) by or with the Corporation or others regarding the validity or enforceability of, or liability under, any provision of this Agreement, plus in each case, interest at the applicable Federal rate provided for in Section 7872(f)(2) of the Code. Notwithstanding the foregoing, the Executive agrees to repay to the Corporation any such fees and expenses reimbursed by the Corporation if and to the extent that the Corporation or such others obtains a judgment or determination that the Executive's claim was frivolous or was without merit from the arbitrator or a court of competent jurisdiction from which no appeal may be taken, whether because the time to do so has expired or otherwise. In any such action brought by the Executive for damages or to enforce any provisions of this Agreement, he shall be entitled to seek both legal and equitable relief and remedies, including, without limitation, specific performance of the Corporation's obligations hereunder, in his sole discretion.
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b. In the event of any dispute or difference between the Corporation and the Executive with respect to the subject matter of this Agreement and the enforcement of rights hereunder, either the Executive or the Corporation may, by written notice to the other, require such dispute or difference to be submitted to arbitration. The arbitrator or arbitrators shall be selected by agreement of the parties or, if they cannot agree on an arbitrator or arbitrators within 30 days after the Executive has notified the Corporation of his desire to have the question settled by arbitration, then the arbitrator or arbitrators shall be selected by the American Arbitration Association (the "AAA") upon the application of the Executive. The determination reached or award rendered in such arbitration shall be final and binding on both parties without any right of appeal or further dispute, subject to the applicable state or federal laws relating to arbitration determinations or awards. Enforcement of an arbitration award by such arbitrator may be sought in any court of competent jurisdiction. The arbitrators shall not be bound by judicial formalities and may abstain from following the strict rules of evidence and shall interpret this Agreement as an honorable engagement and not merely as a legal obligation. Unless otherwise agreed by the parties, any such arbitration shall take place in Boise, Idaho, and shall be conducted in accordance with the Rules of the AAA. The Executive's expenses for such proceeding shall be paid, or repaid to the Corporation as the case may be, as provided in subsection (a) of this Section 5.
6. Tax Withholding.
The Corporation may withhold from any payments made under this Agreement all federal, state or other taxes as shall be required pursuant to any law or governmental regulation or ruling.
7. Entire Understanding.
This Agreement contains the entire understanding between the Corporation and the Executive with respect to the subject matter hereof and supersedes any prior severance, change in control or similar agreement between the Corporation and the Executive (including, without limitation, the Prior Agreement by and between the Corporation and the Executive; provided, however, that, except as otherwise provided in this Section 7 and in Sections 3(c) and 3(e), this Agreement shall not affect or operate to reduce any benefit or compensation inuring to the Executive of any kind elsewhere provided.
8. Severability.
If, for any reason, any one or more of the provisions or part of a provision contained in this Agreement shall be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision or part of a provision of this Agreement not held so invalid, illegal or unenforceable, and each other provision or part of a provision shall to the full extent consistent with law continue in full force and effect.
9. Consolidation, Merger, or Sale of Assets.
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If the Corporation consolidates or merges into or with, or transfers all or substantially all of its assets to, another entity the term "Corporation" as used herein shall mean such other entity and this Agreement shall continue in full force and effect. In the case of any transaction in which a successor would not by the foregoing provision or by operation of law be bound by this Agreement, the Corporation shall require such successor expressly and unconditionally to assume and agree to perform the Corporation's obligations under this Agreement, in the same manner and to the same extent that the Corporation would be required to perform if no such succession had taken place.
10. Notices.
All notices, requests, demands and other communications required or permitted hereunder shall be given in writing and shall be deemed to have been duly given if delivered or mailed, postage prepaid, first class as follows:
to the Corporation:
IDACORP, Inc.
Attention: General Counsel
P.O. Box 70
Boise, Idaho 83707
to the Executive:
At the address (or to the facsimile number) last shown on the records of the Corporation.
or to such other address as either party shall have previously specified in writing to the other.
11. No Attachment.
Except as required by law, no right by the Executive or his estate to receive payments under this Agreement shall be subject to anticipation, commutation, alienation, sale, assignment, encumbrance, charge, pledge or hypothecation or to execution, attachment, levy or similar process or assignment by operation of law, and any attempt, voluntary or involuntary, to effect any such action shall be null, void and of no effect.
12. Binding Agreement.
This Agreement shall be binding upon, and shall inure to the benefit of, the Executive and the Corporation and their respective permitted successors and assigns.
13. Modification and Waiver.
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Prior to the date of a Change in Control or, if earlier, the date of a public announcement of a transaction or event which if consummated would be a Change in Control ("Pre-Change in Control Event"), this Agreement may be terminated, modified or amended by action of a majority of the members of the Board. After a Change in Control or Pre-Change in Control Event, this Agreement may not be terminated, modified or amended except by an instrument in writing signed by the parties hereto. No term or condition of this Agreement shall be deemed to have been waived, nor shall there be any estoppel against the enforcement of any provision of this Agreement, except by written instrument signed by the party charged with such waiver or estoppel. No such written waiver shall be deemed a continuing waiver unless specifically stated therein, and each such waiver shall operate only as to the specific term or condition waived and shall not constitute a waiver of such term or condition for the future or as to any act other than that specifically waived.
14. Headings of No Effect.
The section headings contained in this Agreement are included solely for convenience of reference and shall not in any way affect the meaning or interpretation of any of the provisions of this Agreement.
15. Effective Date and Executive Acknowledgments.
This Agreement shall become effective on the Starting Date. The Executive acknowledges that he has read and understands the provisions of this Agreement. The Executive further acknowledges that he has been given an opportunity for his legal counsel to review this Agreement and that the provisions of this Agreement are reasonable and that he has received a copy of this Agreement.
16. Not Compensation for Other Plans.
Except for amounts paid pursuant to Section 3(a)(i)(A) that are considered compensation, earnings or wages for purposes of any employee benefit plan of the Corporation or its Subsidiaries, it is understood by all parties hereto that amounts paid and benefits provided hereunder are not to be considered compensation, earnings or wages for purpose of any employee benefit plan of the Corporation or its Subsidiaries, including, but not limited to, the qualified retirement plan or the Idaho Power Company Security Plan.
17. Release.
Notwithstanding any provision herein to the contrary, if (and only if), within five days following the date of the Executive's Separation from Service, the Corporation provides the Executive a release of the Corporation, its Subsidiaries and other affiliates and related parties (in such form as the Corporation may reasonably determine) of all claims against the Corporation, its Subsidiaries and other affiliates and related parties relating to the Executive's service and separation therefrom, the Corporation shall not have any obligation to pay (or cause to be paid) any amount or provide any benefit under Section 3 of this Agreement (other than those amounts provided for in Section 3(a)(i)(A) unless the Executive executes such release and any revocation period applicable to such release has expired before the sixtieth day following the date of the Executive's Separation from Service. If the release has not been executed by the Executive and has not become irrevocable by the applicable deadline provided in the prior sentence, any amounts under Section 3 of this Agreement (other than those amounts provided for in Section 3(a)(i)(A)) shall be forfeited .
18. Governing Law.
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To the extent not preempted by Federal law, this Agreement and its validity, interpretation, performance, and enforcement shall be governed by the laws of Idaho, without regard to conflicts of law provisions.
19. Code Section 409A.
a. To the extent applicable, this Agreement is intended to comply with the requirements of Section 409A of the Code and any regulations and guidance issued thereunder ("Section 409A") and shall be interpreted accordingly.
b. To the extent applicable, it is intended that all payments and benefits provided pursuant to this Agreement upon or following a Separation from Service qualify as short-term deferrals under Treasury Regulation Section 1.409A-1(b)(4) to the maximum extent possible. Any installment payments or reimbursements under this Agreement are to be treated as a series of separate payments for purposes of Section 409A. Notwithstanding any provision to the contrary in this Agreement, if it is determined that any amounts to be provided pursuant to this Agreement constitute deferred compensation for purposes of Section 409A ("Deferred Compensation Payments") and if the Executive is deemed to be a "Specified Employee" (as that term is used in Code Section 409A(a)(2)(B)) on the date of the Executive's Separation from Service, as determined under the Corporation's policy for determining specified employees, any such Deferred Compensation Payments that are deemed payable due to a Separation from Service for purposes of Section 409A and are required to be delayed until the first business day after the date that is six months following the Executive's Separation from Service (or, if earlier, until the date of the Executive's death) to comply with Code Section 409A(a)(2)(B)(i) shall be so delayed, and the accumulated amounts, shall be paid in a lump sum payment to the Executive on the first business day that is after six months after the Executive's Separation from Service; provided, however, that if the Executive dies during such six month period, payment shall be made to the Executives estate within 60 days after the date of the Executives death.
c. Except as provided in Section 19(d), notwithstanding any provision to the contrary in this Agreement, any reimbursements or in-kind benefits under this Agreement that constitute Deferred Compensation Payments shall be paid or provided to the Executive in a manner consistent with Treasury Regulation Section 1.409A-3(i)(1)(iv), including the requirement that the amount of reimbursements or in-kind benefits provided during a year may not affect the expenses eligible for reimbursement or in-kind benefits provided in any other year and that any reimbursements be made on or before the last day of the year following the year in which the expense was incurred.
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d. Notwithstanding any provision to the contrary in this Agreement, any reimbursements or other payments provided under Section 3(c) that constitute Deferred Compensation Payments will only be paid to the extent such payments would not result in taxation pursuant to Section 409A and shall be paid in a manner consistent with Treasury Regulation Section 1.409A-3(i)(1)(vi), including the requirements that (i) any such amounts be paid no later than the last day of the calendar year following the calendar year in which the Executive or the Corporation remits the applicable taxes and (ii) with respect to any such payments relating to a tax audit or litigation addressing the existence or amount of a tax liability, any such amounts be paid by the end of the calendar year following the calendar year in which the taxes that are the subject of the audit or litigation are remitted to the taxing authority, or where as a result of such audit or litigation no taxes are remitted, the end of the calendar year following the calendar year in which the audit is completed or there is a final and nonappealable settlement or other resolution of the litigation.
IN WITNESS WHEREOF, the Corporation and the Executive both intending to be legally bound have duly executed and delivered this Agreement, to be effective as of the date set forth in Section 15.
IDACORP, INC.
By:_____________________________
Its President & Chief Executive Officer
Date: ___________________________
EXECUTIVE
__________________________________
Date: ________________________
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Exhibit 10.26
IDACORP, INC
.
2000 LONG-TERM INCENTIVE AND COMPENSATION PLAN
Article 1. Establishment, Purpose and Duration
1.1 Establishment of the Plan . IDACORP, Inc., an Idaho corporation (hereinafter referred to as the "Company"), hereby establishes an incentive and compensation plan for officers, key employees and directors, to be known as the "IDACORP, Inc. 2000 Long-Term Incentive and Compensation Plan" (hereinafter referred to as the "Plan"), as set forth in this document. The Plan permits the grant of nonqualified stock options (NQSO), incentive stock options (ISO), stock appreciation rights (SAR), restricted stock, restricted stock units, performance units, performance shares and other awards.
The Plan shall become effective when approved by the shareholders at the 2000 Annual Meeting of Shareholders (the "Effective Date") and shall remain in effect as provided in Section
1.3 herein.
1.2 Purpose of the Plan . The purpose of the Plan is to promote the success and enhance the value of the Company by linking the personal interests of Participants to those of Company shareholders and customers.
The Plan is further intended to provide flexibility to the Company in its ability to motivate, attract and retain the services of Participants upon whose judgment, interest and special effort the successful conduct of its operations is largely dependent.
1.3 Duration of the Plan . The Plan shall commence on the Effective Date, as described in Section 1.1 herein, and shall remain in effect, subject to the right of the Board of Directors to terminate the Plan at any time pursuant to Article 14 herein, until all Shares subject to it shall have been purchased or acquired according to the Plan's provisions.
Article 2. Definitions
Whenever used in the Plan, the following terms shall have the meanings set forth below and, when such meaning is intended, the initial letter of the word is capitalized:
2.1 Award means, individually or collectively, a grant under the Plan of NQSOs, ISOs, SARs, Restricted Stock, Restricted Stock Units, Performance Units, Performance Shares or any other type of award permitted under Article 10 of the Plan.
2.2 Award Agreement means an agreement entered into by each Participant and the Company, setting forth the terms and provisions applicable to an Award granted to a Participant under the Plan.
2.3 Base Value of an SAR shall have the meaning set forth in Section 7.1 herein.
2.4 Board or Board of Directors means the Board of Directors of the Company.
2.5 Change in Control means the earliest of the following to occur:
(a) any Person, excluding (i) the Company or any Subsidiary, (ii) a corporation or other entity owned, directly or indirectly, by the stockholders of the Company immediately prior to the transaction in substantially the same proportions as their ownership of stock of the Company, (iii) an employee benefit plan (or related trust) sponsored or maintained by the Company or any Subsidiary or (iv) an underwriter temporarily holding securities pursuant to an offering of such securities ("Change in Control Person") is the beneficial owner (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of 20% or more of the combined voting power of the then outstanding voting securities eligible to vote generally in the election of directors of the Company; provided, however, that no Change in Control will be deemed to have occurred as a result of a change in ownership percentage resulting solely from an acquisition of securities by the Company;
(b) consummation of a merger, consolidation, reorganization or share exchange, or sale of all or substantially all of the assets, of the Company or Idaho Power Company (a "Qualifying Transaction"), unless, immediately following such Qualifying Transaction, all of the following have occurred: (i) all or substantially all of the beneficial owners of the Company immediately prior to such Qualifying Transaction beneficially own in substantially the same proportions, directly or indirectly, more than 50% of the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors of the corporation or other entity resulting from such Qualifying Transaction (including, without limitation, a corporation or other entity which, as a result of such transaction, owns the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries) (as the case may be, the "Successor Entity"), (ii) no Change in Control Person is the beneficial owner (as defined in Rule 13d-3 under the 1934 Act), directly or indirectly, of 20% or more of the combined voting power of the then outstanding voting securities eligible to vote generally in the election of directors of the Successor Entity and (iii) at least a majority of the members of the board of directors of the Successor Entity are Incumbent Directors;
(c) a complete liquidation or dissolution of the Company or Idaho Power Company; or
(d) within a 24-month period, individuals who were directors of the Board immediately before such period ("Incumbent Directors") cease to constitute at least a majority of the directors of the Board; provided, however, that any director who was not a director of the Board at the beginning of such period shall be deemed to be an Incumbent Director if the election or nomination for election of such director was approved by the vote of at least two-thirds of the directors of the Board then still in office (i) who were in office at the beginning of the 24-month period or (ii) whose election or nomination for election was so approved, in each case, unless such individual was elected or nominated as a result of an actual or threatened election contest or as a result of an actual or threatened solicitation of proxies or consents by or on behalf of any Change in Control Person other than the Board.
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For avoidance of doubt, transactions for the purpose of dividing Idaho Power Company's assets into separate distribution, transmission or generation entities or such other entities as the Company or Idaho Power Company may determine shall not constitute a Change in Control unless so determined by the Board.
2.6 Code means the Internal Revenue Code of 1986, as amended from time to time.
2.7 Committee means the committee, as specified in Article 3, appointed by the Board to administer the Plan with respect to Awards.
2.8 Company means IDACORP, Inc., an Idaho corporation, or any successor thereto as provided in Article 16 herein.
2.9 Covered Employee means any Participant who would be considered a "covered employee" for purposes of Section 162(m) of the Code.
2.10 Director means any individual who is a member of the Board of Directors of the Company.
2.11 Disability means the continuous inability of an Employee because of illness or injury to engage in any occupation or employment for wage or profit with the Company or any other employer (including self-employment) for which he is reasonably qualified by education, training or experience. An Employee will not be considered disabled during any period unless he is under the regular care and attendance of a duly qualified physician.
2.12 Dividend Equivalent means, with respect to Shares subject to an Award, a right to be paid an amount equal to dividends declared on an equal number of outstanding Shares.
2.13 Eligible Person means an individual who is eligible to participate in the Plan, as set forth in Section 5.1 herein.
2.14 Employee means an individual who is paid on the payroll of the Company or of the Company's Subsidiaries, who is not covered by any collective bargaining agreement to which the Company or any of its Subsidiaries is a party, and is classified in the payroll system as a regular full-time, part-time or temporary employee. For purposes of the Plan, transfer of employment of a Participant between the Company and any one of its Subsidiaries (or between Subsidiaries) shall not be deemed a termination of employment.
2.15 Exchange Act means the Securities Exchange Act of 1934, as amended from time to time, or any successor act thereto.
2.16 Exercise Period means the period during which an SAR or Option is exercisable, as set forth in the related Award Agreement.
2.17 Fair Market Value means the fair market value of a Share as determined in good faith by the Committee or pursuant to a procedure specified in good faith by the Committee; provided, however, that if the Committee has not specified otherwise, Fair Market Value shall mean the closing price of a Share as reported in the consolidated transaction reporting system, or, if there was no such sale on the relevant date, then on the last previous day on which a sale was reported.
2.18 Freestanding SAR means an SAR that is not a Tandem SAR.
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2.19 Incentive Stock Option or ISO means an option to purchase Shares, granted under Article 6 herein, which is designated as an Incentive Stock Option and satisfies the requirements of Section 422 of the Code.
2.20 Nonqualified Stock Option or NQSO means an option to purchase Shares, granted under Article 6 herein, which is not intended to be an Incentive Stock Option under Section 422 of the Code.
2.21 Option means an Incentive Stock Option or a Nonqualified Stock Option.
2.22 Option Exercise Price means the price at which a Share may be purchased by a Participant pursuant to an Option, as determined by the Committee and set forth in the Option Award Agreement.
2.23 Participant means an Eligible Person who has outstanding an Award granted under the Plan.
2.24 Performance Goals means the performance goals established by the Committee, which shall be based on one or more of the following measures: sales or revenues, earnings per share, shareholder return and/or value, funds from operations, operating income, gross income, net income, cash flow, return on equity, return on capital, earnings before interest, operating ratios, stock price, customer satisfaction, accomplishment of mergers, acquisitions, dispositions or similar extraordinary business transactions, profit returns and margins, financial return ratios, budget achievement, performance against budget, and/or market performance. Performance goals may be measured solely on a corporate, subsidiary or business unit basis, or a combination thereof. Performance goals may reflect absolute entity performance or a relative comparison of entity performance to the performance of a peer group of entities or other external measure.
2.25 Performance Period means the time period during which Performance Unit/Performance Share Performance Goals must be met.
2.26 Performance Share means an Award described in Article 9 herein.
2.27 Performance Unit means an Award described in Article 9 herein.
2.28 Period of Restriction means the period during which the transfer of Restricted Stock or Restricted Stock Units is limited in some way, as provided in Article 8 herein.
2.29 Person shall have the meaning ascribed to such term in Section 3(a)(9) of the Exchange Act, as used in Sections 13(d) and 14(d) thereof, including usage in the definition of a "group" in Section 13(d) thereof.
2.30 Plan means the IDACORP, Inc. 2000 Long-Term Incentive and Compensation Plan, as amended from time to time.
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2.31 Qualified Restricted Stock means an Award of Restricted Stock designated as Qualified Restricted Stock by the Committee at the time of grant and intended to qualify for the exemption from the limitation on deductibility imposed by Section 162(m) of the Code that is set forth in Section 162(m)(4)(C).
2.32 Qualified Restricted Stock Unit means an Award of Restricted Stock Units designated as Qualified Restricted Stock Units by the Committee at the time of grant and intended to qualify for the exemption from the limitation on deductibility imposed by Section 162(m) of the Code that is set forth in Section 162(m)(4)(C).
2.33 Restricted Stock means an Award described in Article 8 herein.
2.34 Restricted Stock Unit means an Award described in Article 8 herein.
2.35 Retirement means a Participant's Separation from Service if (i) the Participant is age 55 or older at the time of the Separation from Service and (ii) the Committee determines that the Separation from Service constitutes Retirement for purposes of the Participant's Award.
2.36 Securities Act means the Securities Act of 1933, as amended.
2.37 Separation from Service means "separation from service" as that term is used in Section 409A(a)(2)(A)(i) of the Code.
2.38 Shares means the shares of common stock, no par value, of the Company.
2.39 Stock Appreciation Right or SAR means a right, granted alone or in connection with a related Option, designated as an SAR, to receive a payment on the day the right is exercised, pursuant to the terms of Article 7 herein. Each SAR shall be denominated in terms of one Share.
2.40 Subsidiary means any corporation (other than the Company) in an unbroken chain of corporations beginning with the Company if each of the corporations other than the last corporation in the unbroken chain owns stock possessing 50 percent or more of the total combined voting power of all classes of stock in one of the other corporations in such chain.
2.41 Tandem SAR means an SAR that is granted in connection with a related Option, the exercise of which shall require forfeiture of the right to purchase a Share under the related Option (and when a Share is purchased under the Option, the Tandem SAR shall be similarly canceled).
Article 3. Administration
3.1 The Committee . The Plan shall be administered by the Compensation Committee or such other committee (the "Committee") as the Board of Directors shall select consisting solely of two or more members of the Board. The members of the Committee shall be appointed from time to time by, and shall serve at the discretion of, the Board of Directors.
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3.2 Authority of the Committee . The Committee shall have full power except as limited by law, the Articles of Incorporation or the Bylaws of the Company, subject to such other restricting limitations or directions as may be imposed by the Board and subject to the provisions herein, to determine the Eligible Persons to receive Awards; to determine the size and types of Awards; to determine the terms and conditions of such Awards; to construe and interpret the Plan and any agreement or instrument entered into under the Plan; to establish, amend or waive rules and regulations for the Plan's administration; and (subject to the provisions of Article 14 herein) to amend the terms and conditions of any outstanding Award. Further, the Committee shall make all other determinations which may be necessary or advisable for the administration of the Plan. As permitted by law, the Committee may delegate its authorities as identified hereunder.
3.3 Restrictions on Distribution of Shares and Share Transferability . Notwithstanding any other provision of the Plan, the Company shall have no liability to deliver any Shares or benefits under the Plan unless such delivery would comply with all applicable laws (including, without limitation, the Securities Act) and applicable requirements of any securities exchange or similar entity and unless the Participant's tax obligations have been satisfied as set forth in Article 15. The Committee may impose such restrictions on any Shares acquired pursuant to Awards under the Plan as it may deem advisable, including, without limitation, restrictions to comply with applicable Federal securities laws, with the requirements of any stock exchange or market upon which such Shares are then listed and/or traded and with any blue sky or state securities laws applicable to such Shares.
3.4 Decisions Binding . All determinations and decisions (including, without limitation, all interpretations) made by the Committee pursuant to the provisions of the Plan and all related orders or resolutions of the Board shall be final, conclusive and binding on all persons, including the Company, its shareholders, Eligible Persons, Employees, Participants and their estates and beneficiaries.
3.5 Costs. The Company shall pay all costs of administration of the Plan.
Article 4. Shares Subject to the Plan
4.1 Number of Shares. Subject to Section 4.2 herein, the maximum number of Shares
available for grant under the Plan shall be 3,100,000. Shares underlying lapsed or forfeited Awards, or Awards that are not paid in Shares, may be reused for other Awards. If the Option Exercise Price is satisfied by tendering Shares, only the number of Shares issued net of the Shares tendered shall be deemed issued under the Plan, provided, however, that, as long as the Shares are listed on the New York Stock Exchange, this sentence shall only be operative for ten years following the date the Plan is last approved by stockholders in a manner that constitutes stockholder approval for purposes of New York Stock Exchange listing standards. Shares granted pursuant to the Plan may be (i) authorized but unissued Shares of common stock, (ii) treasury shares or (iii) Shares purchased on the open market.
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4.2 Adjustments in Authorized Shares and Awards . In the event of any equity restructuring (within the meaning of Financial Accounting Standards No. 123R), such as a stock dividend, stock split, spinoff, rights offering or recapitalization through a large, nonrecurring cash dividend, the Committee shall cause an equitable adjustment to be made (i) in the number and kind of Shares that may be delivered under the Plan, (ii) in the individual limitations set forth in Section 4.3 and (iii) with respect to outstanding Awards, in the number and kind of Shares subject to outstanding Awards, the Option Exercise Price, Base Value or other price of Shares subject to outstanding Awards, any performance conditions relating to Shares, the market price of Shares, or per-Share results, and other terms and conditions of outstanding Awards, in the case of (i), (ii) and (iii) to prevent dilution or enlargement of rights. In the event of any other change in corporate capitalization, such as a merger, consolidation or liquidation, the Committee may, in its sole discretion, cause an equitable adjustment as described in the foregoing sentence to be made, to prevent dilution or enlargement of rights. The number of Shares subject to any Award shall always be rounded down to a whole number when adjustments are made pursuant to this Section 4.2. Adjustments made by the Committee pursuant to this Section 4.2 shall be final, binding and conclusive.
4.3 Individual Limitations . Subject to Section 4.2 above, (i) the total number of Shares with respect to which Options or SARs may be granted in any calendar year to any Covered Employee shall not exceed 250,000 Shares; (ii) the total number of Qualified Restricted Stock Shares or Qualified Restricted Stock Units that may be granted in any calendar year to any Covered Employee shall not exceed 250,000 Shares or Units, as the case may be; (iii) the total number of Performance Shares or Performance Units that may be granted in any calendar year to any Covered Employee shall not exceed 250,000 Shares or Units, as the case may be; (iv) the total number of Shares that are intended to qualify as performance-based compensation under Section 162(m) of the Code granted pursuant to Article 10 herein in any calendar year to any Covered Employee shall not exceed 250,000 Shares; (v) the total cash Award that is intended to qualify as performance-based compensation under Section 162(m) of the Code that may be paid pursuant to Article 10 herein in any calendar year to any Covered Employee shall not exceed $500,000; and (vi) the aggregate amount of Dividend Equivalents that are intended to qualify as performance-based compensation under Section 162(m) of the Code that a Covered Employee may receive in any calendar year shall not exceed $1,000,000.
4.4 Direct Registration . Except as provided in Section 8.4 herein, Shares issued pursuant to the Plan will be recorded in the Participants direct registration account and a direct registration statement will be issued to the Participant, unless the Participant specifically requests a stock certificate.
Article 5. Eligibility and Participation
5.1 Eligibility . Persons eligible to participate in the Plan ("Eligible Persons") include all officers, key employees and directors of the Company and its Subsidiaries, as determined by the Committee.
5.2 Actual Participation . Subject to the provisions of the Plan, the Committee may, from time to time, select from all Eligible Persons those to whom Awards shall be granted.
Article 6. Stock Options
6.1 Grant of Options . Subject to the terms and conditions of the Plan, Options may be granted to an Eligible Person at any time and from time to time, as shall be determined by the Committee.
The Committee shall have complete discretion in determining the number of Shares subject to Options granted to each Eligible Person (subject to Article 4 herein) and, consistent with the provisions of the Plan, in determining the terms and conditions pertaining to such Options. The Committee may grant ISOs, NQSOs or a combination thereof.
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6.2 Option Award Agreement . Each Option grant shall be evidenced by an Option Award Agreement that shall specify the Option Exercise Price, the term of the Option, the number of Shares to which the Option pertains, the Exercise Period and such other provisions as the Committee shall determine. The Option Award Agreement shall also specify whether the Option is intended to be an ISO or a NQSO. Rights, if any, to Dividend Equivalents shall be determined by the Committee.
6.3 Option Exercise Price . Except for Options adjusted or granted pursuant to Article 4 herein, and replacement Options granted in connection with a merger, acquisition, reorganization or similar transaction, the Option Exercise Price of Options granted under the Plan shall be at least equal to the Fair Market Value of a Share on the date of grant of the Option.
6.4 Exercise of and Payment for Options . Options granted under the Plan shall be exercisable at such times and shall be subject to such restrictions and conditions as the Committee shall in each instance approve.
Options shall be exercised by the delivery of a written notice of exercise to the Company, setting forth the number of Shares with respect to which the Option is to be exercised, accompanied by provision for full payment for the Shares.
The Option Exercise Price shall be payable: (a) in cash or its equivalent, (b) by tendering (or attesting to the ownership of) previously acquired Shares having an aggregate Fair Market Value at the time of exercise equal to the total Option Exercise Price, (c) by broker-assisted cashless exercise, (d) by such other methods as the Committee may prescribe or (e) by a combination of (a), (b), (c) and/or (d).
6.5 Termination . Each Option Award Agreement shall set forth the extent to which the Participant shall have the right to exercise the Option following termination of the Participant's employment with or service on the Board of the Company and its Subsidiaries. Such provisions shall be determined in the sole discretion of the Committee (subject to applicable law), need not be uniform among all Options granted pursuant to the Plan or among Participants and may reflect distinctions based on the reasons for termination.
6.6 Transferability of Options . Except as otherwise determined by the Committee, all Options granted to a Participant under the Plan shall be exercisable during his or her lifetime only by such Participant, and no Option granted under the Plan may be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution. ISOs are not transferable other than by will or by the laws of descent and distribution.
Article 7. Stock Appreciation Rights
7.1 Grant of SARs . Subject to the terms and conditions of the Plan, an SAR may be granted to an Eligible Person at any time and from time to time as shall be determined by the Committee. The Committee may grant Freestanding SARs, Tandem SARs or any combination of these forms of SARs.
The Committee shall have complete discretion in determining the number of SARs granted to each Eligible Person (subject to Article 4 herein) and, consistent with the provisions of the Plan, in determining the terms and conditions pertaining to such SARs. Rights, if any, to Dividend Equivalents shall be determined by the Committee.
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Except for SARs adjusted or granted pursuant to Article 4 herein, and replacement SARs granted in connection with a merger, acquisition, reorganization or similar transaction, the Base Value of a Freestanding SAR shall equal the Fair Market Value of a Share on the date of grant of the SAR. The Base Value of Tandem SARs shall equal the Option Exercise Price of the related Option.
7.2 SAR Award Agreement . Each SAR grant shall be evidenced by an SAR Award Agreement that shall specify the number of SARs granted, the Base Value, the term of the SAR, the Exercise Period and such other provisions as the Committee shall determine.
7.3 Exercise and Payment of SARs . Tandem SARs may be exercised for all or part of the Shares subject to the related Option upon the surrender of the right to exercise the equivalent portion of the related Option. A Tandem SAR may be exercised only with respect to the Shares for which its related Option is then exercisable.
Notwithstanding any other provision of the Plan to the contrary, with respect to a Tandem SAR granted in connection with an ISO: (i) the Tandem SAR will expire no later than the expiration of the underlying ISO; (ii) the value of the payout with respect to the Tandem SAR may be for no more than one hundred percent (100%) of the difference between the Option Exercise Price of the underlying ISO and the Fair Market Value of the Shares subject to the underlying ISO at the time the Tandem SAR is exercised; and (iii) the Tandem SAR may be exercised only when the Fair Market Value of the Shares subject to the ISO exceeds the Option Exercise Price of the ISO.
Freestanding SARs may be exercised upon whatever terms and conditions the Committee, in its sole discretion, imposes upon them.
A Participant may exercise an SAR at any time during the Exercise Period. SARs shall be exercised by the delivery of a written notice of exercise to the Company, setting forth the number of SARs being exercised. Upon exercise of an SAR, a Participant shall be entitled to receive payment from the Company in an amount equal to the product of:
(a) the excess of (i) the Fair Market Value of a Share on the date of exercise over (ii) the Base Value multiplied by
(b) the number of Shares with respect to which the SAR is exercised.
At the sole discretion of the Committee, the payment to the Participant upon SAR exercise may be in cash, in Shares of equivalent value or in some combination thereof.
7.4 Termination . Each SAR Award Agreement shall set forth the extent to which the Participant shall have the right to exercise the SAR following termination of the Participant's employment with or service on the Board of the Company and its Subsidiaries. Such provisions shall be determined in the sole discretion of the Committee, need not be uniform among all SARs granted pursuant to the Plan or among Participants and may reflect distinctions based on the reasons for termination.
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7.5 Transferability of SARs . Except as otherwise determined by the Committee, all SARs granted to a Participant under the Plan shall be exercisable during his or her lifetime only by such Participant or his or her legal representative, and no SAR granted under the Plan may be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution.
Article 8. Restricted Stock and Restricted Stock Units
8.1 Grant of Restricted Stock and Restricted Stock Units . Subject to the terms and conditions of the Plan, Restricted Stock and/or Restricted Stock Units may be granted to an Eligible Person at any time and from time to time, as shall be determined by the Committee.
The Committee shall have complete discretion in determining the number of shares of Restricted Stock and/or Restricted Stock Units granted to each Eligible Person (subject to Article 4 herein) and, consistent with the provisions of the Plan, in determining the terms and conditions pertaining to such Awards.
In addition, the Committee may, prior to or at the time of grant, designate an Award of Restricted Stock or Restricted Stock Units as Qualified Restricted Stock or Qualified Restricted Stock Units, as the case may be, in which event it will condition the grant or vesting, as applicable, of such Qualified Restricted Stock or Qualified Restricted Stock Units, as the case may be, upon the attainment of the Performance Goals selected by the Committee.
8.2 Restricted Stock/Restricted Stock Unit Award Agreement . Each grant of Restricted Stock and/or Restricted Stock Units shall be evidenced by a Restricted Stock and/or Restricted Stock Unit Award Agreement that shall specify the number of shares of Restricted Stock and/or Restricted Stock Units granted, the initial value (if applicable), the Period or Periods of Restriction, and such other provisions as the Committee shall determine.
8.3 Transferability . Restricted Stock and Restricted Stock Units granted hereunder may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated until the end of the applicable Period of Restriction established by the Committee. During the applicable Period of Restriction, all rights with respect to the Restricted Stock and Restricted Stock Units granted to a Participant under the Plan shall be available during his or her lifetime only to such Participant or his or her legal representative.
8.4 Certificates and Account Entries . Restricted Stock shall be registered in the name of a Participant and held in the Company's custody until such time as all restrictions applicable to such Shares have been satisfied.
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8.5 Removal of Restrictions . Restricted Stock shall become freely transferable by the Participant after the last day of the Period of Restriction applicable thereto. Once Restricted Stock is released from the restrictions, the number of Shares with respect to which the restrictions have lapsed will be recorded in the Participants direct registration account and a direct registration statement will be issued to the Participant, unless the Participant specifically requests a stock certificate. Payment of Restricted Stock Units shall be made after the last day of the Period of Restriction applicable thereto. The Committee, in its sole discretion, may pay Restricted Stock Units in cash or in Shares (or in a combination thereof), which have an aggregate Fair Market Value equal to the value of the Restricted Stock Units.
8.6 Voting Rights . During the Period of Restriction, Participants may exercise full voting rights with respect to the Restricted Stock.
8.7 Dividends and Other Distributions . Subject to the Committee's right to determine otherwise, during the Period of Restriction, Participants shall receive all regular cash dividends paid with respect to the Restricted Stock while it is so held, and all other distributions paid with respect to such Restricted Stock shall be credited to Participants subject to the same restrictions on transferability and forfeitability as the Restricted Stock with respect to which they were paid and shall vest or be paid, as the case may be, to the Participant promptly after the full vesting of the Restricted Stock with respect to which such distributions were made.
Rights, if any, to Dividend Equivalents on Restricted Stock Units shall be determined by the Committee.
8.8 Termination . Each Restricted Stock/Restricted Stock Unit Award Agreement shall set forth the extent to which the Participant shall have the right to receive Restricted Stock and/or a Restricted Stock Unit payment following termination of the Participant's employment with or service on the Board of the Company and its Subsidiaries. Such provisions shall be determined in the sole discretion of the Committee, need not be uniform among all grants of Restricted Stock/Restricted Stock Units or among Participants and may reflect distinctions based on the reasons for termination.
Article 9. Performance Units and Performance Shares
9.1 Grant of Performance Units and Performance Shares . Subject to the terms and conditions of the Plan, Performance Units and/or Performance Shares may be granted to an Eligible Person at any time and from time to time, as shall be determined by the Committee.
The Committee shall have complete discretion in determining the number of Performance Units and/or Performance Shares granted to each Eligible Person (subject to Article 4 herein) and, consistent with the provisions of the Plan, in determining the terms and conditions pertaining to such Awards.
9.2 Performance Unit/Performance Share Award Agreement . Each grant of Performance Units and/or Performance Shares shall be evidenced by a Performance Unit and/or Performance Share Award Agreement that shall specify the number of Performance Units and/or Performance Shares granted, the initial value (if applicable), the Performance Period, the Performance Goals and such other provisions as the Committee shall determine. Rights, if any, to Dividend Equivalents shall be determined by the Committee.
9.3 Value of Performance Units/Performance Shares . Each Performance Unit shall have an initial value that is established by the Committee at the time of grant. In no event shall the value of a Performance Unit intended to qualify as performance-based compensation under Code Section 162(m) exceed the value of a Share. The value of a Performance Share shall be equal to the Fair Market Value of a Share. The Committee shall set Performance Goals in its discretion which, depending on the extent to which they are met, will determine the number and/or value of Performance Units/Performance Shares that will be paid out to the Participants.
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9.4 Earning of Performance Units/Performance Shares . After the applicable Performance Period has ended, the Participant shall be entitled to receive a payout with respect to the Performance Units/Performance Shares earned by the Participant over the Performance Period, to be determined as a function of the extent to which the corresponding Performance Goals have been achieved.
9.5 Form and Timing of Payment of Performance Units/Performance Shares . Payment of earned Performance Units/Performance Shares shall be made following the close of the applicable Performance Period. The Committee, in its sole discretion, may pay earned Performance Units/Shares in cash or in Shares (or in a combination thereof), which have an aggregate Fair Market Value equal to the value of the earned Performance Units/Shares at the close of the applicable Performance Period. Such Shares may be granted subject to any restrictions deemed appropriate by the Committee.
9.6 Termination . Each Performance Unit/Performance Share Award Agreement shall set forth the extent to which the Participant shall have the right to receive a Performance Unit/Performance Share payment following termination of the Participant's employment with or service on the Board of the Company and its Subsidiaries during a Performance Period. Such provisions shall be determined in the sole discretion of the Committee, need not be uniform among all grants of Performance Units/Performance Shares or among Participants and may reflect distinctions based on reasons for termination.
9.7 Transferability . Except as otherwise determined by the Committee, a Participant's rights with respect to Performance Units/Performance Shares granted under the Plan shall be available during the Participant's lifetime only to such Participant or the Participant's legal representative and Performance Units/Performance Shares may not be sold, transferred, pledged, assigned or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution.
Article 10. Other Awards
The Committee shall have the right to grant other Awards which may include, without limitation, the grant of Shares based on attainment of Performance Goals established by the Committee, the payment of Shares in lieu of cash or cash based on attainment of Performance Goals established by the Committee, and the payment of Shares in lieu of cash under other Company incentive or bonus programs. Payment under or settlement of any such Awards shall be made in such manner and at such times as the Committee may determine.
Article 11. Deferrals
The Committee may permit a Participant to defer the Participant's receipt of the payment of cash or the delivery of Shares that would otherwise be due to such Participant under the Plan. If any such deferral election is permitted, the Committee shall, in its sole discretion, establish rules and procedures for such payment deferrals.
Article 12. Rights of Participants
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12.1 Termination . Nothing in the Plan shall interfere with or limit in any way the right of the Company or any Subsidiary to terminate any Participant's employment or other relationship with the Company or any Subsidiary at any time, for any reason or no reason in the Company's or the Subsidiary's sole discretion, nor confer upon any Participant any right to continue in the employ of, or otherwise in any relationship with, the Company or any Subsidiary.
12.2 Participation . No Eligible Person shall have the right to be selected to receive an Award under the Plan, or, having been so selected, to be selected to receive a future Award.
12.3 Limitation of Implied Rights . Neither a Participant nor any other Person shall, by reason of the Plan, acquire any right in or title to any assets, funds or property of the Company or any Subsidiary whatsoever, including, without limitation, any specific funds, assets or other property which the Company or any Subsidiary, in their sole discretion, may set aside in anticipation of a liability under the Plan. A Participant shall have only a contractual right to the Shares or amounts, if any, payable under the Plan, unsecured by any assets of the Company or any Subsidiary. Nothing contained in the Plan shall constitute a guarantee that the assets of such companies shall be sufficient to pay any benefits to any Person.
Except as otherwise provided in the Plan, no Award under the Plan shall confer upon the holder thereof any right as a shareholder of the Company prior to the date on which the individual fulfills all conditions for receipt of such rights.
Article 13. Change in Control
The terms of this Article 13 shall immediately become operative, without further action or consent by any Person, upon a Change in Control, and once operative shall supersede and take control over any other provisions of this Plan.
Upon a Change in Control
(a) Any and all Options and SARs granted hereunder shall become immediately vested and exercisable;
(b) Any restriction periods and restrictions imposed on Restricted Stock, Restricted Stock Units, Qualified Restricted Stock or Qualified Restricted Stock Units shall be deemed to have expired; any Performance Goals shall be deemed to have been met at the target level; such Restricted Stock and Qualified Restricted Stock shall become immediately vested in full, and such Restricted Stock Units and Qualified Restricted Stock Units shall be paid out in cash on the date of the Change in Control or as soon as practicable (but not more than 60 days) following the date of the Change in Control;
(c) The target payout opportunity attainable under all outstanding Awards of Performance Units and Performance Shares and any Awards granted pursuant to Article 10 shall be deemed to have been fully earned for the entire Performance Period(s) as of the effective date of the Change in Control. All such Awards shall become immediately vested. All Performance Shares and other Awards granted pursuant to Article 10 denominated in Shares shall be paid out in Shares, and all Performance Units and other Awards granted pursuant to Article 10 shall be paid out in cash, in each case, on the date of the Change in Control or as soon as practicable (but not more than 60 days) following the date of the Change in Control; and
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(d) All credited but not yet paid cash dividends and Dividend Equivalents attributable to the portion of any Award that vests, is earned and/or is paid, as the case may be, pursuant to this Article 13 shall be paid in cash on the date of the Change in Control or as soon as practicable (but not more than 60 days) following the date of the Change in Control.
Notwithstanding anything contained herein or in any Award Agreement to the contrary, no payment or distribution under the Plan or pursuant to an Award that (1) is determined by the Company to be deferred compensation subject to Code Section 409A and (2) would be distributed because of a Change in Control shall be so distributed because of the Change in Control pursuant to this Article 13 unless the distribution qualifies under Code Section 409A(a)(2)(A)(v) as a distribution upon a change in ownership or effective control or a change in the ownership of a substantial portion of assets or otherwise qualifies as a permissible distribution under Code Section 409A. To the extent an amount would have been distributed pursuant to an Award because of a Change in Control pursuant to this Article 13, but the distribution is prohibited by the prior sentence, the following shall occur: (i) the Award shall nevertheless vest or be deemed earned, as the case may be, pursuant to Sections (a), (b), (c) and/or (d) of this Article 13 as of the date of the Change in Control (except to the extent it would violate Code Section 409A), but distribution of such vested or earned amounts shall not occur until the event or date distribution would have occurred absent the Change in Control and (ii) no further dividends or Dividend Equivalents shall be credited with respect to the Award after the date of the Change in Control.
In the event of a Change in Control, the Board or the board of directors of any surviving entity or acquiring entity may provide or require that the surviving or acquiring entity shall: (1) assume or continue all or any part of the Options and SARs outstanding under the Plan or (2) substitute substantially equivalent Options and SARs (including an award to acquire substantially the same consideration paid to the shareholders in the transaction by which the Change in Control occurs) for those outstanding under the Plan. In the event any surviving entity or acquiring entity refuses to assume or continue such Awards or to substitute similar awards for those outstanding under the Plan, then with respect to Awards held by Participants whose continuous service has not terminated, the Board in its sole discretion and without liability to any person may: (1) provide for the payment of a cash amount in exchange for the cancellation of an Option or SAR equal to the product of (x) the excess, if any, of the Fair Market Value per Share at such time over the Option Exercise Price or Base Value, as the case may be, if any, times (y) the total number of Shares then subject to such Award; (2) continue the Awards; or (3) notify Participants holding an Option or SAR that they must exercise or redeem any portion of such Award (including, at the discretion of the Board, any unvested portion of such Award) at or prior to the closing of the transaction by which the Change in Control occurs and that the Awards shall terminate if not so exercised or redeemed at or prior to the closing of the transaction by which the Change in Control occurs. The Board shall not be obligated to treat all Awards, even those that are of the same type, in the same manner.
Article 14. Amendment, Modification and Termination
14.1 Amendment, Modification and Termination . The Board may, at any time and from time to time, alter, amend, suspend or terminate the Plan in whole or in part.
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14.2 Awards Previously Granted . No termination, amendment or modification of the Plan shall adversely affect in any material way any Award previously granted under the Plan without the written consent of the Participant holding such Award, unless such termination, modification or amendment is required by applicable law and except as otherwise provided herein.
Article 15. Withholding
15.1 Tax Withholding . The Company shall have the power and the right to deduct or withhold, or require a Participant to remit to the Company, an amount (including any Shares withheld as provided below) sufficient to satisfy Federal, state and local taxes (including the Participant's FICA obligation) required by law to be withheld with respect to an Award made under the Plan.
15.2 Share Withholding . With respect to tax withholding required upon the exercise of Options or SARs, upon the lapse of restrictions on Restricted Stock, or upon any other taxable event arising out of or as a result of Awards granted hereunder, subject to such restrictions as the Committee may prescribe, Participants may elect to satisfy the withholding requirement, in whole or in part, by tendering Shares held by the Participant or by having the Company withhold Shares having a Fair Market Value equal to the minimum statutory tax withholding requirements. All elections shall be irrevocable, made in writing and signed by the Participant.
Article 16. Successors
All obligations of the Company under the Plan, with respect to Awards granted hereunder, shall be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation or otherwise of all or substantially all of the business and/or assets of the Company.
Article 17. Legal Construction
17.1 Gender and Number . Except where otherwise indicated by the context, any masculine term used herein also shall include the feminine, the plural shall include the singular and the singular shall include the plural.
17.2 Severability . In the event any provision of the Plan shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of the Plan, and the Plan shall be construed and enforced as if the illegal or invalid provision had not been included.
17.3 Requirements of Law . The granting of Awards and the issuance of Shares under the Plan shall be subject to all applicable laws, rules and regulations, and to such approvals by any governmental agencies or national securities exchanges as may be required.
17.4 Governing Law . To the extent not preempted by Federal law, the Plan, and all agreements hereunder, shall be construed in accordance with, and governed by, the laws of the State of Idaho without regard to any conflicts of law or choice of law rule or principle that might otherwise reference construction or interpretation of the Plan or any agreements hereunder to the substantive law of another jurisdiction.
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17.5 Section 409A . No amendment to the Plan made pursuant to the amendments approved by the Board on March 17, 2005, July 20, 2006 or November 20, 2008 shall be applicable to an Award that is not subject to Section 409A of the Code to the extent such amendment would cause the Award to become subject to Section 409A of the Code. To the extent applicable to an Award that provides for the payment of deferred compensation subject to Section 409A of the Code, it is intended that the Plan will comply with Section 409A of the Code and any regulations and guidance issued thereunder, and the Plan shall be interpreted accordingly. To the extent an Award is subject to Section 409A of the Code and payment of deferred compensation pursuant to the Award is to be made because of the Participant's termination of employment or termination of service as a Director, notwithstanding anything to the contrary contained in the Plan, the Participant's Award Agreement or any other plan or agreement that governs payment of the Award, the Participant's employment or service as a Director shall not be deemed to have terminated unless and until the Participant has experienced a Separation from Service. Notwithstanding anything contained herein or in any Award Agreement to the contrary, if it is determined that any amounts to be provided upon a Separation from Service constitute deferred compensation for purposes of Section 409A of the Code and the Participant is a specified employee, as determined under the Companys policy for determining specified employees, on the date on which the Separation from Service occurs, no such amounts shall be provided before the date that is six months following the Participants Separation from Service unless the Participant dies during such six-month period, in which case payment may be made as soon as practicable (but not more than 60 days) after the Participants death. If the Participant's Award Agreement (or any other plan or agreement that governs payment of the Award) provides for payment to occur as soon as practicable after an event, date or time period, and payment of the Award is to be made pursuant to that provision, in no event will the payment be made more than 60 days after such event, date or time period.
Adopted by the Board on January 20, 2000 Approved by the Shareholders May 11, 2000 Amended by the Board January 18, 2001
Approved by the Shareholders May 17, 2001
Amended by the Board March 17, 2005
Approved by the Shareholders May 19, 2005 Amended by the Board July 20, 2006
Amended by the Board September 20, 2007
Amended by the Board November 20, 2008
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Exhibit 10.30
IDACORP, Inc.
2000 LONG-TERM INCENTIVE AND COMPENSATION PLAN
PERFORMANCE SHARE AWARD AGREEMENT
(Performance with two goals)
[Date]
[Name]
[Address]
In accordance with the terms of the IDACORP, Inc. 2000 Long-Term Incentive and Compensation Plan (the Plan), pursuant to action of the Compensation Committee (the Committee) of the Board of Directors, IDACORP, Inc. (the Company) hereby grants to you (the Participant), subject to the terms and conditions set forth in this Performance Share Award Agreement (including Annex A hereto and all documents incorporated herein by reference), an award of shares of Company common stock that are subject to the attainment of performance target levels (Performance Shares) and an opportunity to earn additional Performance Shares of Company common stock if performance exceeds target levels, as set forth below:
THESE PERFORMANCE SHARES ARE SUBJECT TO FORFEITURE AS PROVIDED IN ANNEX A AND THE PLAN.
Further terms and conditions of the Award are set forth in Annex A hereto, which is an integral part of this Performance Share Award Agreement.
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All terms, provisions and conditions applicable to the Award set forth in the Plan and not set forth herein are hereby incorporated by reference herein. To the extent any provision hereof is inconsistent with the Plan, the Plan will govern. The Participant hereby acknowledges receipt of a copy of this Performance Share Award Agreement including Annex A hereto and a copy of the Plan and agrees to be bound by all the terms and provisions hereof and thereof.
IDACORP, Inc.
By:______________________________
Agreed
:
_________________________________
Attachment:
Annex A
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ANNEX A
TO
IDACORP, Inc.
2000 LONG-TERM INCENTIVE AND COMPENSATION PLAN
PERFORMANCE SHARE AWARD AGREEMENT
(Performance with two goals)
It is understood and agreed that the Award of Performance Shares evidenced by the Performance Share Award Agreement to which this is annexed is subject to the following additional terms and conditions:
1. Nature of Award . The Award represents the opportunity to receive shares of Company common stock (Shares) and cash dividends on those Shares. The Award consists of uncertificated Shares registered in your name as of the Date of Grant, but subject to performance-based vesting conditions (Performance Shares). Furthermore, if the combined performance results exceed target levels, additional Performance Shares are earned and distributed in proportion to this excess as determined pursuant to Section 2 hereof. The amount of dividends paid on Performance Shares shall be determined pursuant to Section 4 hereof.
2. Performance Goals and Determination of Number of Performance Shares Earned .
The number of Performance Shares earned, if any, for the Performance Period shall be determined in accordance with the following formula:
# of Shares = Combined Payout Percentage X Target Award
If the Combined Payout Percentage is not greater than 100%, the # of Shares earned relates to the number of Performance Shares subject to the Target Award that vest. To illustrate, with a Target Award of 100 Performance Shares, a 90% Combined Payout Percentage would result in 90% of the Target Award vesting (90 Performance Shares). If the Combined Payout Percentage is greater than 100%, all Performance Shares subject to the Target Award vest and additional Performance Shares equal to the # of Shares in excess of the Target Award are earned and distributed. To illustrate, with a Target Award of 100 Performance Shares, a 140% Combined Payout Percentage would result in 100% of the Performance Shares subject to the Target Award vesting and 40 additional Performance Shares earned and distributed. All Performance Shares that do not vest shall be forfeited.
A- 1
The Combined Payout Percentage is based on (i) the Companys cumulative earnings per share (CEPS) for the Performance Period as set forth in the table below, weighted 50% and (ii) the Companys total shareholder return (TSR) relative to that of the Peer Group defined herein (the Percentile Rank) for the Performance Period, determined in accordance with the table set forth below, weighted 50%:
CEPS Table and Method of Calculation:
CEPS
for
|
Payout
Percentage
|
$___ (maximum) or higher |
150% |
$___ (target) |
100% |
$___ (threshold) |
50% |
Less than $___ |
0% |
Performance results between threshold and target, and target and maximum, will be interpolated.
TSR Table and Method of Calculation:
Percentile Rank
|
Payout
Percentage
|
75 th (maximum) or higher |
150% |
55 th (target) |
100% |
40th |
50% |
Less than 40th |
0% |
Performance results between threshold and target, and target and maximum, will be interpolated.
The Percentile Rank of a given companys TSR is defined as the percentage of the Peer Group companies returns falling at or below the given companys TSR. The formula for calculating the Percentile Rank follows:
Percentile Rank = (n - r + 1)/n x 100
Where:
n = total number of companies in the Peer Group, excluding the Company
r = the numeric rank of the Companys TSR relative to the Peer Group, where the highest return in the group is ranked number 1.
A- 2
To illustrate, if the Companys TSR is the third highest in the Peer Group comprised of 29 companies, its Percentile Rank would be 93, which would result in a TSR Payout Percentage (weighted 50%) of 150%. The calculation is: (29 - 3 + 1)/29 x 100 = 93.
The Percentile Rank shall be rounded to the nearest whole percentage, with (.5) rounded up.
The Peer Group is defined as those utility companies listed in the S&P MidCap 400 Index at the end of the Performance Period.
Total shareholder return is the percentage change in the value of an investment in the common stock of a company from the initial investment made on the last trading day in the calendar year preceding the beginning of the Performance Period through the last trading day in the final year of the Performance Period. It is assumed that dividends are reinvested in additional shares of common stock at the frequency paid.
The Combined Payout Percentage is determined by dividing the sum of the CEPS and TSR Payout Percentages by 2. The total number of Shares earned shall be rounded to the nearest whole number of Shares, with (.5) rounded up.
3. Vesting of Performance Shares and Issuance of Performance Shares. Subject to Section 2 and Section 8 hereof and Article 13 of the Plan, vesting of Performance Shares subject to the Target Award shall occur (if at all) as soon as administratively practicable in the calendar year following the Performance Period to the extent the Performance Goals are met. Subject to any restrictions on issuance of Performance Shares under the Plan, and subject to Section 8 hereof and Article 13 of the Plan, the issuance of additional Performance Shares earned (if any) pursuant to Section 2 hereof shall occur as soon as administratively practicable, but no later than March 15 of the calendar year following the Performance Period.
4. Dividends. The Participant shall be entitled to cash dividends accrued during the Performance Period with respect to Performance Shares subject to the Target Award that vest and any additional Performance Shares that are earned and distributed pursuant to Section 2 hereof. Any such dividends shall be paid in cash to the Participant as soon as administratively practicable, but no later than March 15 of the calendar year following the Performance Period.
5. Forfeiture and Transfer Restrictions.
A. Forfeiture Restrictions . Except as provided otherwise in Section 6 hereof, if the Participants employment is terminated during the Performance Period, Performance Shares shall be forfeited as of the date of termination.
B. Transfer Restrictions . Performance Shares may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated during the Performance Period.
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6. Termination of Employment. If the Participants employment is terminated during the Performance Period (i) due to the Participants death or Disability or (ii) due to the Participants Retirement, the number of Performance Shares subject to the Target Award that vest (if any) and the number of additional Performance Shares earned (if any) shall be determined in accordance with the provisions of Section 2 hereof as if the Participant had remained employed through the Performance Period, but shall be reduced by multiplying the number of Performance Shares subject to the Target Award that would otherwise be vested and the total number of Performance Shares that would otherwise be earned times a fraction, the numerator of which is the total number of months (with any partial month treated as a whole month) remaining in the Performance Period as of the date of such termination of employment and the denominator of which is the total number of whole months in the Performance Period. Any such vesting of Performance Shares subject to the Target Award and any issuance of Performance Shares earned shall occur in accordance with Section 3 hereof.
7. Voting Rights and Custody . The Participant shall be entitled to vote Performance Shares subject to the Target Award during the Performance Period; provided, however, that in no event shall the Participant vote any such Performance Shares on or after the date of forfeiture. Performance Shares subject to the Target Award shall be registered in the name of the Participant and held in the Companys custody during the Performance Period. The Participant shall not be entitled to vote the Performance Shares in excess of the Target Award unless and until such Performance Shares are earned and distributed.
8. Tax Withholding. The Company may make such provisions as are necessary for the withholding of all applicable taxes on all Performance Shares vested and earned under this Award, in accordance with Article 15 of the Plan. With respect to the minimum statutory tax withholding required with respect to such Performance Shares, the Participant may elect to satisfy such withholding requirement by having the Company withhold Performance Shares from this Award.
9. Ratification of Actions . By accepting this Award or other benefit under the Plan, the Participant and each person claiming under or through him shall be conclusively deemed to have indicated the Participants acceptance and ratification of, and consent to, any action taken under the Plan or the Award by IDACORP, Inc.
10. Notices. Any notice hereunder to IDACORP, Inc. shall be addressed to its office at 1221 West Idaho Street, Boise, Idaho 83702; Attention: Corporate Secretary, and any notice hereunder to the Participant shall be addressed to him at the address specified on the Performance Share Award Agreement, subject to the right of either party to designate at any time hereafter in writing some other address.
11. Definitions . Capitalized terms not otherwise defined herein shall have the meanings given them in the Plan.
12. Governing Law and Severability . To the extent not preempted by Federal law, the Performance Share Award Agreement will be governed by and construed in accordance with the laws of the State of Idaho, without regard to conflicts of law provisions. In the event any provision of the Performance Share Award Agreement shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of the Performance Share Award Agreement, and the Performance Share Award Agreement shall be construed and enforced as if the illegal or invalid provision had not been included. A- 4
Exhibit 10.31
IDACORP, Inc.
EXECUTIVE INCENTIVE PLAN
1. PURPOSE
The purpose of the IDACORP, Inc. Executive Incentive Plan (the "Plan") is to reinforce goals for profitable growth and continuation of a sound overall financial condition of IDACORP, Inc. (the "Company") by providing incentive compensation opportunities to selected key employees. The Plan is designed to:
attract, retain and motivate key employees;
relate compensation to performance and financial results and
provide a portion of compensation in a variable rather than a fixed form.
2. DEFINITIONS
2.1 Award means, for a given calendar year, as to each Participant, an award granted under the Plan with respect to such year that provides the Participant an opportunity to earn an annual incentive payment under the Plan.
2.2 Board means the Board of Directors of the Company.
2.3 Cause means:
(a) if the Participant is party to an employment or change in control agreement that includes a definition of "Cause," the term "Cause" as defined in such agreement or
(b) if the Participant is not a party to an employment or change in control agreement that includes a definition of "Cause," a Participant's (i) willful and repeated refusal or failure to perform duties; (ii) willful or intentional act that has injured (or could reasonably be expected to injure) the reputation or business of the Company or a Subsidiary in any material respects; (iii) continued or repeated absence, unless due to serious injury or illness; (iv) conviction of (or pleading nolo contendere to) a felony; (v) commission of an act of fraud, embezzlement, theft or gross misconduct against the Company or a Subsidiary, (vi) violation of a material policy of the Company or a Subsidiary or (vii) other action or inaction that the Company deems to constitute "Cause" for purposes of the Plan.
2.4 Change in Control means the earliest of the following to occur:
(a) any Person, excluding (i) the Company or any Subsidiary, (ii) a corporation or other entity owned, directly or indirectly, by the stockholders of the Company immediately prior to the transaction in substantially the same proportions as their ownership of stock of the Company, (iii) an employee benefit plan (or related trust) sponsored or maintained by the Company or any Subsidiary or (iv) an underwriter temporarily holding securities pursuant to an offering of such securities ("Change in Control Person") is the beneficial owner (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of 20% or more of the combined voting power of the then outstanding voting securities eligible to vote generally in the election of directors of the Company; provided, however, that no Change in Control will be deemed to have occurred as a result of a change in ownership percentage resulting solely from an acquisition of securities by the Company;
(b) consummation of a merger, consolidation, reorganization or share exchange, or sale of all or substantially all of the assets, of the Company or Idaho Power Company (a "Qualifying Transaction"), unless, immediately following such Qualifying Transaction, all of the following have occurred: (i) all or substantially all of the beneficial owners of the Company immediately prior to such Qualifying Transaction beneficially own in substantially the same proportions, directly or indirectly, more than 50% of the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors of the corporation or other entity resulting from such Qualifying Transaction (including, without limitation, a corporation or other entity which, as a result of such transaction, owns the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries) (as the case may be, the "Successor Entity"), (ii) no Change in Control Person is the beneficial owner (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of 20% or more of the combined voting power of the then outstanding voting securities eligible to vote generally in the election of directors of the Successor Entity and (iii) at least a majority of the members of the board of directors of the Successor Entity are Incumbent Directors;
(c) a complete liquidation or dissolution of the Company or Idaho Power Company or
(d) within a 24-month period, individuals who were directors of the Board immediately before such period ("Incumbent Directors") cease to constitute at least a majority of the directors of the Board; provided, however, that any director who was not a director of the Board at the beginning of such period shall be deemed to be an Incumbent Director if the election or nomination for election of such director was approved by the vote of at least two-thirds of the directors of the Board then still in office (i) who were in office at the beginning of the 24-month period or (ii) whose election or nomination for election was so approved, in each case, unless such individual was elected or nominated as a result of an actual or threatened election contest or as a result of an actual or threatened solicitation of proxies or consents by or on behalf of any Change in Control Person other than the Board.
For avoidance of doubt, transactions for the purpose of dividing Idaho Power Company's assets into separate distribution, transmission or generation entities or such other entities as the Company or Idaho Power Company may determine shall not constitute a Change in Control unless so determined by the Board.
2.5 Code means the Internal Revenue Code of 1986, as amended.
2.6 Committee means the Compensation Committee of the Board.
2
2.7 Coverage Period means the period commencing on the date of a Change in Control and ending on the last day of the calendar year in which the Change in Control occurs.
2.8 Disability means termination of a Participant's employment with the Company and/or its Subsidiaries, as applicable, if the Participant is eligible to receive benefits under the Long-Term Disability Program maintained by the Company or its Subsidiaries.
2.9 Employee means an individual who is on the payroll of the Company or a Subsidiary, who is not covered by any collective bargaining agreement to which the Company or any of its Subsidiaries is a party and is classified in the payroll system as a regular, full-time, part-time or temporary employee.
2.10 Exchange Act means the Securities Exchange Act of 1934, as amended.
2.11 Participant means an Employee selected for participation in this Plan.
2.12 Person shall have the meaning ascribed to such term in Section 3(a)(9) of the Exchange Act.
2.13 Pre-Change in Control Board means the Board, as composed prior to a Change in Control.
2.14 Retirement means a Participant's termination from employment with the Company and/or its Subsidiaries, as applicable, if the date of termination occurs on or after attainment of any of the following: (a) age 62, (b) age 55 with 10 years of service or (c) 30 years of service.
2.15 Subsidiary means
(a) any corporation more than fifty (50%) percent of the outstanding securities having ordinary voting power of which shall at the time be owned or controlled, directly or indirectly, by the Company or one or more of its Subsidiaries or by the Company and one or more of its Subsidiaries or
(b) any partnership, limited liability company, association, joint venture or similar business organization more than fifty (50%) percent of the ownership interests having ordinary voting power of which shall at the time be so owned or controlled.
2.16 Target Award Amount means the amount payable if the Participant achieves target performance levels pursuant to the Plan.
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3. ADMINISTRATION
The Plan will be administered by the Committee, which is authorized to interpret the Plan, select Employees who are eligible to be Participants, establish rules and regulations necessary to administer the Plan and take all other actions it determines are required for the proper administration of the Plan; provided, however, that (a) the Committee will report on its actions to the Board and (b) all Awards and payments pursuant to Awards shall be subject to Board approval. The Committee shall make recommendations to the Board regarding the terms, conditions and amounts of Awards and any payments it determines should be made with respect to Awards.
All actions, determinations, interpretations and decisions made by the Committee and/or the Board regarding the Plan or its administration will be final, conclusive and binding upon all parties concerned. No member of the Committee or the Board shall incur any liability by reason of any action or determination made with respect to the Plan.
4. PARTICIPATION
Employees that may be selected for participation in the Plan in a given calendar year are those in a position to directly and significantly affect revenues, profits or losses or operating efficiencies of the Company and/or Subsidiaries. Participants will be notified and provided a copy of the performance goals and other criteria for Award determination.
Participants may be added to the Plan or removed from the Plan at any time during the calendar year based on participation criteria previously approved by the Committee, by virtue of promotion or new hire following the initial eligibility designation or upon approval of the Committee. Participation in the Plan during a particular calendar year shall not entitle a Participant to participation in the Plan in future years.
5. DETERMINATION OF AWARDS
Subject to the terms of the Plan, Awards will be based upon performance goals established under the Plan. Awards may provide for payment of threshold, target, maximum and/or other amounts. Performance goals may relate to the Company, Subsidiaries, business units or such other criteria as the Board shall determine. No Awards shall be paid under the Plan if Awards are not paid to employees under the IDACORP, Inc. Employee Incentive Plan for the same calendar year or if net income is less than the Board approved dividend for IDACORP common stock for the calendar year to which the Award relates. Awards need not be uniform among Participants and may vary from year to year.
As soon as practicable after the end of each calendar year, the Committee shall assess performance achievement levels relative to the pre-established performance goals and shall recommend Award payment amounts for approval by the Board. The Committee's recommendation may reflect downward adjustment of Awards (to zero) in light of such considerations as the Committee may deem relevant. An Award shall be deemed earned and vested only at such time as the Board has approved payment of the Award to the Participant.
4
When used in the attached Exhibit, the term "base salary" shall mean only the Participant's annual base salary for the calendar year to which the Award relates; the term base salary shall not include any amounts earned under any incentive, bonus or other compensation or benefit plans. If there is a change during a calendar year to a Participant's base salary and/or Target Award Amount after the Participant's base salary and/or Target Award Amount have been established for the calendar year, unless the Board specifies a different methodology, the Participant's Award for that calendar year will be determined by calculating the Participant's Award using each base salary level and target percentage, prorating each such amount based on the number of days during the calendar year that the base salary level was paid and/or Target Award Amount was applicable and adding each prorated Award amount.
6. EFFECT OF TERMINATION OF EMPLOYMENT
(a) If a Participant's employment is terminated for any reason other than Retirement, death or Disability, except as provided in Section 7 herein and unless otherwise determined by the Committee, (i) with respect to the Participant's Award relating to the calendar year in which the employment termination occurs, such Award will be cancelled and the Participant will not be eligible to receive a payment under the Plan with respect to that calendar year and (ii) with respect to the Participant's Award relating to the prior calendar year (if such Award was either not yet approved or approved but not yet paid as of the date of employment termination), such Award will remain in effect, the amount payable to the Participant (if any) shall be determined in accordance with Section 5 hereof based on actual performance through the end of the prior calendar year and any amount payable to the Participant shall be paid pursuant to Section 8 hereof at the same time such amount would have been paid had the Participant remained employed through the payment date.
(b) Except as otherwise provided in Section 7 herein, if a Participant's employment is terminated due to Retirement, death or Disability, (i) with respect to the Participant's Award relating to the calendar year in which the employment termination occurs, (A) such Award shall remain in effect, (B) the amount payable to the Participant (if any) shall be determined by multiplying (I) the amount that would have been paid if the Participant had remained employed through the payment date, determined in accordance with Section 5 hereof based on actual performance through the end of the calendar year, by (II) a fraction, the numerator of which equals the number of days the employee worked in the calendar year in which the termination of employment occurs and the denominator of which is 365 and (C) any amount payable to the Participant shall be paid pursuant to Section 8 hereof at the same time such amount(s) would have been paid had the Participant remained employed through the payment date and (ii) with respect to the Participant's Award relating to the prior calendar year (if such Award was either not yet approved or approved but not yet paid as of the date of employment termination), (A) such Award shall remain in effect, (B) the amount payable to the Participant (if any) shall be determined in accordance with Section 5 hereof based on actual performance through the end of the calendar year to which the Award relates and (C) any amount payable to the Participant shall be paid pursuant to Section 8 hereof at the same time such amount would have been paid had the Participant remained employed through the payment date.
(c) No Award shall be paid to a Participant whose employment is terminated for Cause.
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(d) For purposes of the Plan, (i) transfer of employment of a Participant between the Company and any one of its Subsidiaries (or between Subsidiaries) and transfer of employment to a Successor Entity or other successor of the Company or a Subsidiary shall not be deemed a termination of employment unless so determined by the Committee and (ii) if a Participant is employed by the Company and a Subsidiary or more than one Subsidiary, a Participant shall not be deemed to have terminated employment unless the Participant's employment with each such entity terminates.
7. CHANGE IN CONTROL
(a) If a Change in Control involving a Successor Entity occurs, the Pre-Change in Control Board may require that the Successor Entity (i) assume or otherwise continue all or any part of the Awards that are outstanding at the time of the Change in Control or (ii) substitute outstanding Awards with awards that are no less favorable to Participants (as determined in the sole discretion of the Pre-Change in Control Board).
(b) If a Successor Entity refuses to assume or continue such Awards or to provide substitute awards that are deemed acceptable by the Pre-Change in Control Board or if a Change in Control not involving a Successor Entity occurs and the Pre-Change in Control Board determines that the Change in Control would adversely affect outstanding Awards, the Pre-Change in Control Board, in its sole discretion, may (i) with respect to outstanding Awards that relate to the calendar year in which the Change in Control occurs, deem all or a portion of the outstanding Awards vested (at target or another level determined by the Pre-Change in Control Board), (ii) with respect to outstanding Awards that relate to the prior calendar year and that were either not yet approved or approved but not yet paid as of the date of the Change in Control, provide for the accelerated vesting of the outstanding Awards (at target or another level determined by the Pre-Change in Control Board) or (iii) take such other action with respect to outstanding Awards, which action need not be consistent among Participants, as it deems appropriate (including taking no action).
(c) The Pre-Change in Control Board may make or cause to be made such changes to performance goals and other terms of Awards as it may deem appropriate to reflect or adjust for changes resulting from a Change in Control.
6
(d) If a Participant's employment is terminated for any reason other than Cause during the Coverage Period, (i) with respect to outstanding Awards that relate to the calendar year in which the Change in Control occurs, the Participant shall be vested in either (A) a prorated Award determined by multiplying the Participant's Target Award Amount (or another amount determined by the Pre-Change in Control Board) by a fraction, the numerator of which equals the number of days the employee worked in the calendar year in which the termination of employment occurs and the denominator of which is 365 or (B) if so determined by the Pre-Change in Control Board, a full Award in an amount determined by the Pre-Change in Control Board and (ii) with respect to outstanding Awards that relate to the prior calendar year and that were either not yet approved or approved but not yet paid as of the date of the Change in Control, the Pre-Change in Control Board, in its sole discretion, may provide for the accelerated vesting of outstanding Awards (at target or another level determined by the Pre-Change in Control Board).
(e) Any Award vested pursuant to this Section 7 shall be paid on the date selected by the Pre-Change in Control Board, provided that such date shall in no event be later than the earlier of (i) the date such payment would have been made in the ordinary course and (ii) 2½ months following the event triggering the payment ( i.e. , the Change in Control or termination of employment).
(f) Notwithstanding anything to the contrary contained in the Plan, no payment or distribution under the Plan or pursuant to an Award that (i) is determined by the Company to be deferred compensation subject to Section 409A of the Code and (ii) would be distributed because of a Change in Control shall be so distributed because of the Change in Control pursuant to this Section 7 unless the distribution qualifies under Section 409A(a)(2)(A)(v) of the Code as a distribution upon a change in ownership or effective control or a change in the ownership of a substantial portion of assets or otherwise qualifies as a permissible distribution under Section 409A of the Code. To the extent an amount would have been distributed because of a Change in Control pursuant to this Section 7, but the distribution is prohibited by the prior sentence, the Award shall nevertheless vest pursuant to subsection (b) of this Section 7 as of the date of the Change in Control (except to the extent it would violate Section 409A of the Code), but distribution of such vested amounts shall not occur until the event or date distribution would have occurred absent the Change in Control.
8. PAYMENT OF AWARD
Except as otherwise provided in Section 7, Awards shall be paid as promptly as practicable after the Board has approved the Award payments; provided, however, that the payment date shall in all events be between January 1 and March 15 of the calendar year following the calendar year to which the Award relates. All Award payments shall be in cash in a lump sum.
The Company or Subsidiary, as the case may be, shall deduct from all payments made under the Plan an amount necessary to satisfy federal, state and or local tax withholding requirements. Amounts paid under the Plan will be considered in the calculation of benefits under the Idaho Power Company Retirement Plan and the Idaho Power Company Employee Savings Plan for eligible participating employees.
9. PLAN IS NOT A CONTRACT
No provision of the Plan nor any document describing the Plan or establishing rules or regulations regarding the Plan's administration shall be deemed to confer on any Participant the right to continue in the Company's or Subsidiary's employ nor shall any such provision or document affect the right of the Company or any Subsidiary to terminate any Participant's employment.
10. AMENDMENT AND TERMINATION OF THE PLAN
7
The Board reserves the right to amend, suspend or terminate the Plan and any Award under the Plan at any time in whole or in part, for any reason, and without the consent of any Participant or other person; provided, however, that, except as provided in Section 7, the Plan and any Award under the Plan may not be amended, suspended or terminated during the Coverage Period without the written consent of each Participant whose Award would be affected by the amendment.
11. SECTION 409A
To the extent applicable to an Award that provides for the payment of deferred compensation subject to Section 409A of the Code, it is intended that the Plan will comply with Section 409A of the Code and any regulations and guidance issued thereunder, and the Plan shall be interpreted accordingly. To the extent an Award is subject to Section 409A of the Code and payment of deferred compensation pursuant to the Award is to be made because of the Participants termination of employment, notwithstanding anything to the contrary contained in the Plan, no payment shall be made due to Participants termination of employment unless and until Participant has experienced a separation from service, as that term is used in Section 409A(a)(2)(A)(i) of the Code (a Separation from Service) with the Company. Notwithstanding anything contained herein to the contrary, if it is determined that any payments to be made upon a Separation from Service constitute deferred compensation for purposes of Section 409A of the Code and the Participant is a specified employee, as determined under the Companys policy for determining specified employees, on the date on which the Separation from Service occurs, no such payments shall be made before the date that is six months following the Participants Separation from Service unless the Participant dies during such six-month period, in which case payment may be made as soon as practicable (but not more than 60 days) after the Participants death.
12. PLAN BINDING ON SUCCESSOR ENTITIES
All obligations of the Company or any Subsidiary under the Plan shall be binding on any successor to the Company or any Subsidiary, respectively, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, reorganization or other transaction involving all or substantially all of the business and/or assets of the Company or any Subsidiary. References to the Company or Subsidiary in the Plan shall be deemed to refer to the successors thereto, as applicable.
13. EFFECTIVE DATE
The Plan shall become effective January 1, 2007 and shall remain in effect until terminated by the Board.
8
EXHIBIT A
IDACORP, Inc. Executive Incentive Plan 2008 Goals
HOW THE PLAN WORKS
The Plan consists of a combination of Operational and Customer Service goals for Idaho Power Company, Net Income targets for Idaho Power Company and Net Income targets for IDACORP. The intent of the Plan is to focus on key areas management can impact while maintaining a means of additional profit sharing should Net Income exceed expected performance.
The weightings for the three areas are as follows:
Operational/Customer Service Goals 40%
Net Income at Idaho Power Company 40%
IDACORP Consolidated Net Income 20%
The total payout will be based on predetermined participation levels approved by the Board. The amount of incentive to be awarded each participant will be calculated by multiplying the approved incentive percentage by the combined multiplier times the base salary.
I. Operational/Customer Service Goals
A. Customer Satisfaction
The Customer Relationship Index (CRI) details the company's performance through the eyes of the customer and is based on a rolling 4-quarter average for the period beginning January 1, 2008 through December 31, 2008. The index consists of 5 specific questions asked of our customers by an independent survey company and addresses issues such as overall satisfaction, quality, value, advocacy and loyalty. The CRI goal for 2008 is as follows:
Performance Level |
CRI Goal |
Qualifying Multiplier |
Threshold |
% |
7.5% |
Target |
% |
15% |
Maximum |
% |
30% |
B. Other Operations and Maintenance Expense (Other O&M Expense)
Operational and strategic goals help management focus on effective use of assets and capital. The operational target will be to manage to budgeted levels of forecasted amounts. For 2008 the goal is as follows:
Performance Level |
Other O&M Expense |
Qualifying Multiplier |
Threshold |
$ |
7.5% |
Target |
$ |
15% |
Maximum |
$ |
30% |
Other O&M Expense will be other operation expense (excluding third party transmission expense, short-term employee and executive incentive expense and fixed cost adjustment) and maintenance expense.
C. Network Reliability
This goal will be measured using the number of interruptions greater than 5 minutes in duration experienced by Small and Large General Service Customers ("Customers"). In addition to the required performance levels below, this metric contains a hurdle of no more than 10% of Customers subjected to more than 6 interruptions. If this hurdle is not passed, the payout for the Network Reliability goal will be zero.
Performance Level |
Interruptions |
Qualifying Multiplier |
Threshold |
|
5% |
Target |
|
10% |
Maximum |
|
20% |
2
II. Idaho Power Company Net Income
Performance Level |
Idaho Power Company Net Income |
Qualifying Multiplier |
Threshold |
$ |
20% |
Target |
$ |
40% |
Maximum |
$ |
80% |
Net Income is defined as Net Income reported in the audited year-end financial statements, exclusive of short-term employee and executive incentive expense (net of tax) as a result of performance under the IDACORP Consolidated Net Income goals. The target amounts are those amounts reported after considering all applicable incentive amounts.
III. IDACORP Consolidated Net Income
Performance Level |
Consolidated IDACORP Net Income |
Qualifying Multiplier |
Threshold |
$ |
10% |
Target |
$ |
20% |
Maximum |
$ |
40% |
IDACORP Consolidated Net Income is defined as Net Income reported in the audited year-end financial statements. The target amounts are those amounts reported after considering all applicable incentive amounts.
3
IDAHO POWER COMPANY
EXECUTIVE DEFERRED COMPENSATION PLAN
Effective November 15, 2000
TABLE OF CONTENTS
Page
TABLE OF CONTENTS............................................................................................................... i
SECTION 1 DEFINITIONS.......................................................................................................... 1
1.1 "Account" 1
1.2 Affiliate................................................................................................... ......... 1
1.3 Beneficiary................................................................................................. ...... 1
1.4 Board........................................................................................................... ..... 1
1.5 Change-in-Control.......................................................................................... ... 1
1.6 Code............................................................................................................... .. 4
1.7 Committee........................................................................................................ . 4
1.8 Company.......................................................................................................... 4
1.9 Deferrable Compensation........... ...................................................................... 4
1.10 Deferral Election........................... .................................................................... 4
1.11 Disability......................................... .................................................................. 4
1.12 Employer........................................... ............................................................... 5
1.13 Event of Maturity................................. ............................................................. 5
1.14 Participant............................................. ............................................................ 5
1.15 Plan................................................................................................................... 5
1.16 Plan Year............................................... ........................................................... 5
1.17 Pre-2005 Account.................................... ......................................................... 5
1.18 Post-2004 Account.................................... ........................................................ 5
1.19 Separation from Service.............................. ...................................................... 5
1.20 Subsidiary..................................................... ................................................... 5
1.21 Termination of Employment............................. ................................................ 5
1.22 Trust................................................................................................................. 6
SECTION 2 ADMINISTRATION............................................................................................... 6
2.1 Administration...................................................................................................... 6
2.2 Rules and Regulations........................................... ............................................... 6
2.3 Books and Records............................................................................................... 7
2.4 Liability................................................................................................................ 7
2.5 Conflict of Interest................................................. .............................................. 7
2.6 Committee............................................................................................................ 7
SECTION 3 ELIGIBILITY; DEFERRAL ELECTION................................................................. 8
3.1 Eligibility.............................................................................................................. 8
3.2 Limitation on Participation........................................ ............................................ 8
3.3 Deferral Elections and Limit on Amount Deferred...... ......................................... 8
3.3.1 Initial Deferral Election.................................... ........................................ 8
3.3.2 Deferral Elections for Subsequent Years............ ...................................... 9
3.3.3 Timing of Deferral Elections............................... ..................................... 9
3.3.4 Payroll Deductions.................................................................................. 10
3.3.5 FICA Taxes........................................................................................... 10
3.3.6 No Spousal Rights............................................... ................................. 10
3.4 Part-Year Participation....................................................................................... 10
3.5 Termination of Participation................................................................................. 10
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3.6 Cancellation of 2005 Deferral Election................................................................ 10
3.7 2008 Transition Relief Elections.......................................................................... 10
SECTION 4 DEFERRED COMPENSATION ACCOUNT; TRUST.......................................... 11
4.1 Pre-2005 Account and Post-2004 Accounts......................................................... 11
4.2 Deemed Investment Options............................................................................... 11
4.2.1 Valuation of Assets................................................................................ 11
4.2.2 Deemed Investment Elections................................................................. 11
4.3 Funding of Plan.................................................................................................. 11
4.3.1 Unfunded Obligation.............................................................................. 11
4.3.2 Establishment of Trust............................................................................ 12
4.4 Assumption of Risk............................................................................................ 12
SECTION 5 PAYMENT AMOUNT, TIME AND MANNER OF PAYMENT........................... 12
5.1 Payment Amount................................................................................................ 12
5.2 Maturity.............................................................................................................. 12
5.2.1 Participants Pre-2005 Account................................................................ 12
5.2.2 Participants Post-2004 Account............................................................... 13
5.3 Time and Form of Payments................................................................................ 13
5.3.1 Participants Pre-2005 Account................................................................ 13
5.3.2 Participants Post-2004 Account............................................................... 13
5.3.3 New Designation of Form of Payment of a Participants Pre-2005 Account 14
5.3.4 New Designation of Form of Payment of a Participants Post-2004 Account 14
5.3.5 Code Section 162(m) Delay...................................................................... 15
5.4 Determination of Annual Installment Amounts............................... .................... 15
5.5 Default............................................................................................ ................... 15
5.6 Withholding.......................................................................................................... 15
SECTION 6 DEATH OR DISABILITY...................................................................................... 16
6.1 Payment.............................................................................................................. 16
6.2 Death.................................................................................................................. 16
6.3 Beneficiaries........................................................................................................ 16
6.4 Beneficiary Designation..................................................................... .................. 16
6.5 Disclaimers by Beneficiaries............................................................... ................. 16
6.6 Special Rules....................................................................................................... 17
6.7 Surviving Spouse and Installment Payments.......................................... ............... 18
6.8 Disability............................................................................................................. 18
SECTION 7 WITHDRAWALS ................................................................................................. 18
7.1 Hardship Withdrawals.......................................................................................... 18
7.1.1 Financial Hardship.................................................................................... 18
7.1.2 Withdrawal Applications............................................................ .............. 19
7.1.3 Limitations................................................................................. ............. 19
7.2 Early Distribution................................................................................................. 19
SECTION 8 AMENDMENT; TERMINATION.......................................................................... 19
8.1 Amendment and Termination Generally..................................................... .......... 19
8.2 Before a Change-in-Control.................................................................................. 20
8.2.1 Participants Who Have Experienced a Separation from Service........ ....... 20
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8.2.2 Other Participants..................................................................................... 20
8.2.3 No Acceleration........................................................................................... 20
8.3 After a Change-in-Control................................................................................ .... 20
8.3.1 Existing Participants.................................................................................. 21
8.3.2 New Participants....................................................................................... 21
8.4 No Oral Amendments........................................................................................... 20
8.5 Plan Binding on Successors............................................................................... ... 21
8.6 Payment............................................................................................................... 21
SECTION 9 CLAIMS PROCEDURE.......................................................................................... 21
9.1 Initial Claim.......................................................................................................... 21
9.2 Denial.................................................................................................................. 21
9.3 Time.................................................................................................................... 21
9.4 Appeal................................................................................................................. 22
9.5 Final Decision..................................................................................................... . 22
SECTION 10 GENERAL PROVISIONS..................................................................................... 22
10.1 Attorneys Fees.................................................................................................... 22
10.2 Notices................................................................................................................. 22
10.3 Nontransferability; Spendthrift Provisions.......... .................................................. 22
10.4 Not an Employment Contract............................... ................................................ 22
10.5 Successors............................................................................................................ 22
10.6 Incompetence....................................................................................................... 22
10.7 Expenses.............................................................................................................. 23
10.8 Governing Law..................................................................................................... 23
10.9 Unsecured General Creditor................................... .............................................. 23
10.10 Construction........................................................... ............................................. 23
10.10.1 ERISA Status .................................................................................. 23
10.10.2 IRC Status......................................................................................... 23
10.10.3 Rules of Document Construction: ........................................................ 24
10.11 Effect on Other Plans........................................................................................... 24
10.12 Effective Date...................................................................................................... 24
10.13 Section 409A........................................................................................................ 24
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IDAHO POWER COMPANY
EXECUTIVE DEFERRED COMPENSATION PLAN
IDAHO POWER COMPANY (Company) hereby establishes a nonqualified, unfunded supplemental deferred compensation plan for a select group of highly compensated employees known as the Idaho Power Company Executive Deferred Compensation Plan (Plan). The purposes of this Plan are to provide a means whereby certain amounts payable by the Company or affiliates of the Company to a select group of management or highly compensated employees may be deferred to some future period and to attract and retain certain executive employees of outstanding competence.
SECTION 1
DEFINITIONS
The following words and phrases shall have the following meanings, unless a different meaning is plainly required by the context. Any masculine terminology used in the Plan shall also include the feminine gender and the definition of any terms in the singular shall also include the plural.
1.1 Account means a Company internal bookkeeping account in the name of a Participant, representing the separate unfunded and unsecured general obligation of the Employer, to which shall be allocated amounts deferred by or otherwise allocated to the Participant under this Plan, together with investment earnings, gains and losses.
1.2 Affiliate shall mean a business entity that is affiliated in ownership with the Company or an Employer and is recognized as an Affiliate by the Company for the purposes of this Plan.
1.3 Beneficiary shall mean the person or persons designated as such by the Participant. Each such designation shall be filed with the Company in a form acceptable to the Company and shall become effective only when received by the Company. Designated persons or entities shall not be considered Beneficiaries until the death of the Participant.
1.4 Board shall mean the Board of Directors of the Company.
1.5 Change-in-Control shall mean, with respect to a Pre-2005 Account, any of the following events:
(a) the public announcement by IDACORP, Inc. or by any person (which shall not include the Company, any Subsidiary of the Company or any employee benefit plan of the Company or of any Subsidiary of the Company) (Person) that such Person, who or which, together with all Affiliates and Associates (within the meanings ascribed to such terms in Rule 12b-2 of the Securities Exchange Act of 1934, the Exchange Act) of such person, shall be the beneficial owner of twenty percent (20%) or more of the voting stock of IDACORP, Inc.;
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(b) the commencement of, or after the first public announcement of any Person to commence, a tender or exchange offer the consummation of which would result in any Person becoming the beneficial owner of voting stock aggregating thirty percent (30%) or more of the then outstanding voting stock of IDACORP, Inc.;
(c) the announcement of any transaction relating to IDACORP, Inc. required to be described pursuant to the requirements of Item 6(e) of Schedule 14A of Regulation 14A of the Securities and Exchange Commission under the Exchange Act;
(d) a proposed change in the constituency of the Board of IDACORP, Inc., such that, during any period of two (2) consecutive years, individuals who at the beginning of such period constitute the Board of IDACORP, Inc. cease for any reason to constitute at least a majority thereof, unless the election or nomination for election by the shareholders of IDACORP, Inc. of each new director was approved by a vote of at least two-thirds (2/3) of the directors then still in office who were members of the Board of IDACORP, Inc. at the beginning of the period.
(e) IDACORP, Inc. enters into an agreement of merger, consolidation, share exchange or similar transaction with any other corporation other than a transaction which would result in IDACORP, Inc.s voting stock outstanding immediately prior to the consummation of such transaction continuing to represent (either by remaining outstanding or by being converted into voting stock of the surviving entity) at least two-thirds (2/3) of the combined voting power of IDACORP, Inc.s or such surviving entitys outstanding voting stock immediately after such transaction.
(f) the Board of IDACORP, Inc. approves a plan of liquidation or dissolution of the Company or IDACORP, Inc. or an agreement for the sale or disposition by the Company or IDACORP, Inc. (in one transaction or a series of transactions) of all or substantially all of the Companys or IDACORP, Inc.s assets to a person or entity which is not an affiliate of the Company or IDACORP, Inc. other than a transaction(s) for the purpose of dividing the assets of the Company or IDACORP, Inc. into separate distribution, transmission or generation entities or such other entities as the Company or IDACORP, Inc. may determine.
(g) Any other event which shall be deemed by a majority of the Executive Committee of the Board of IDACORP, Inc. to constitute a Change in Control.
(h) The acquisition of securities of Idaho Power Company representing more than fifty percent (50%) of the combined voting power of Idaho Power Companys then outstanding securities by any unrelated entity, person or group of persons acting in concert.
Change-in-Control shall mean, with respect to a Post-2004 Account, any of the following events:
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(a) any person (as such term is defined in Section 3(a)(9) of the Exchange Act and as used in Section 13(d) of the Exchange Act, excluding (i) IDACORP, Inc. or any Subsidiary of IDACORP, Inc., (ii) a corporation or other entity owned, directly or indirectly, by the stockholders of IDACORP, Inc. immediately prior to the transaction in substantially the same proportions as their ownership of stock of IDACORP, Inc., (iii) an employee benefit plan (or related trust) sponsored or maintained by IDACORP, Inc. or any Subsidiary of IDACORP, Inc. or (iv) an underwriter temporarily holding securities pursuant to an offering of such securities (Exchange Act Person)) is the beneficial owner (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of 20% or more of the combined voting power of the then outstanding voting securities eligible to vote generally in the election of directors of IDACORP, Inc.; provided, however, that no Change in Control will be deemed to have occurred as a result of a change in ownership percentage resulting solely from an acquisition of securities by IDACORP, Inc.;
(b) consummation of a merger, consolidation, reorganization or share exchange, or sale of all or substantially all of the assets, of IDACORP, Inc. or the Company (a Qualifying Transaction), unless, immediately following such Qualifying Transaction, all of the following have occurred: (i) all or substantially all of the beneficial owners of IDACORP, Inc. immediately prior to such Qualifying Transaction beneficially own in substantially the same proportions, directly or indirectly, more than 50% of the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors of the corporation or other entity resulting from such Qualifying Transaction (including, without limitation, a corporation or other entity which, as a result of such transaction, owns IDACORP, Inc. or all or substantially all of IDACORP, Inc.s assets either directly or through one or more subsidiaries) (as the case may be, the Successor Entity), (ii) no Exchange Act Person is the beneficial owner (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of 20% or more of the combined voting power of the then outstanding voting securities eligible to vote generally in the election of directors of the Successor Entity and (iii) at least a majority of the members of the board of directors of the Successor Entity are Incumbent Directors;
(c) a complete liquidation or dissolution of IDACORP, Inc. or the Company; or
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(d) within a 24-month period, individuals who were directors of the Board of Directors of IDACORP, Inc. (the IDACORP Board of Directors) immediately before such period (Incumbent Directors) cease to constitute at least a majority of the directors of the IDACORP Board of Directors; provided, however, that any director who was not a director of the IDACORP Board of Directors at the beginning of such period shall be deemed to be an Incumbent Director if the election or nomination for election of such director was approved by the vote of at least two-thirds of the directors of the IDACORP Board of Directors then still in office (i) who were in office at the beginning of the 24-month period or (ii) whose election or nomination for election was so approved, in each case, unless such individual was elected or nominated as a result of an actual or threatened election contest or as a result of an actual or threatened solicitation of proxies or consents by or on behalf of any Exchange Act Person other than the IDACORP Board of Directors.
For avoidance of doubt, transactions for the purpose of dividing the Companys assets into separate distribution, transmission or generation entities or such other entities as IDACORP, Inc. or the Company may determine shall not constitute a Change in Control unless so determined by the IDACORP Board of Directors.
1.6 Code means the Internal Revenue Code of 1986, as amended.
1.7 Committee shall mean a Committee appointed by, or pursuant to authority of, the Board.
1.8 Company shall mean IDAHO POWER COMPANY, an Idaho corporation, or any successor corporation.
1.9 Deferrable Compensation for a Plan Year shall mean a Participants base salary (prior to 401(k) and flexible benefit plan deductions) which would otherwise be payable to the Participant in the Plan Year and/or any annual cash incentive award that would otherwise be payable to the Participant in the Plan Year. Deferrable Compensation shall not include fringe benefits, accrued but unused leave or vacation pay, severance pay, or other similar amounts not included in a Participants base salary or annual cash incentive award.
1.10 Deferral Election shall mean the agreement executed by an eligible employee whereby an eligible employee elects to defer a portion of the applicable years salary and/or annual cash incentive award and contains such other information as is required by the Committee.
1.11 Disability shall mean (a) with respect to Participants Pre-2005 Accounts, disability as that term was used in the Plan as of October 3, 2004 and (b) with respect to Participants Post-2004 Accounts, (i) the Participant is, by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, receiving income replacement benefits for a period of not less than three months under an accident and health plan covering employees of the Company and its Affiliates, (ii) the Participant is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months or (iii) the Participant is determined to be disabled under a disability insurance program maintained by the Employer or an Affiliate, provided that such disability insurance programs definition of disability complies with the requirements contained in Treasury Regulation Section 1.409A-3(i)(4).
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1.12 Employer shall mean the Company and any business affiliated with the Company that employs persons who are designated by the Board or the Committee for participation in this Plan.
1.13 Event of Maturity shall mean any of the occurrences described in Section 5.2 by reason of which a Participant or Beneficiary may become entitled to a payment from this Plan.
1.14 Participant shall mean any employee of an Employer who has been designated by the Board or the Committee as eligible to participate in the Plan and who has executed a Deferral Election and returned it to the Committee.
1.15 Plan shall mean the Idaho Power Company Executive Deferred Compensation Plan set forth herein and as may be amended from time to time.
1.16 Plan Year shall mean the calendar year, beginning on each January 1 and ending on the following December 31.
1.17 Pre-2005 Account means a subaccount to which amounts were deferred for Plan Years through 2004.
1.18 Post-2004 Account means a subaccount to which amounts are deferred for Plan Years beginning in 2005 and thereafter.
1.19 Separation from Service shall mean a separation from service, as that term is used in Code Section 409A(a)(2)(A)(i).
1.20 Subsidiary shall mean any corporation of which more than 50% of the outstanding stock having ordinary voting power to elect a majority of the board of directors of such corporation is now or hereafter owned, directly or indirectly, by the respective entity.
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1.21 Termination of Employment shall mean a complete severance of an employees employment relationship with the Employers and all Affiliates, if any, for any reason other than the employees death. Retirement constitutes a Termination of Employment. A transfer from employment with an Employer to employment with an Affiliate of an Employer shall not constitute a Termination of Employment. A decision by the Committee not to select a Participant for participation for a subsequent Plan year shall not constitute a Termination of Employment. If an Employer who is an Affiliate ceases to be an Affiliate because of a sale of substantially all of the stock or assets of the Employer, then Participants who are employed by that Employer and who cease to be employed by the Company or an Employer on account of the sale of substantially all the stock or assets of the Employer shall be deemed to have thereby had a Termination of Employment for the purpose of commencing payments from this Plan. For avoidance of doubt, it is intended that the foregoing definition apply only with respect to a Participants Pre-2005 Account. Notwithstanding anything contained in the Plan, a Deferral Election document or any other document to the contrary, with respect to any payments or benefits under the Plan that are subject to Code Section 409A and that could be paid due to a termination of employment, references to termination of the Participants employment shall be interpreted to mean the Participants Separation from Service.
1.22 Trust shall mean the trust described in Section 4.3. The Trust shall constitute an unfunded arrangement and shall not affect the status of the Plan as an unfunded plan. Participants and their beneficiaries shall have no beneficial ownership interest in any assets of any such Trust.
SECTION 2
ADMINISTRATION
2.1 Administration. This Plan shall be administered by the Committee. The Committee shall have full discretionary power and authority to administer and interpret the Plan, determine all factual and legal questions under the Plan, including but not limited to eligibility and the amount of benefits, maintain records, determine deemed investment sources and generally be responsible for seeing that the purposes of the Plan are accomplished. Determinations by the Committee shall be final and binding on all parties with respect to all matters relating to the Plan unless overridden by action of the Board. The Committee may from time to time adopt such rules and procedures as it deems appropriate to assist in the administration of the Plan. The Committee may delegate all or part of its administrative duties to one or more persons, whether or not such persons are members of the Committee or employees of the Company.
2.2 Rules and Regulations. The following general rules will apply to the administration of the Plan:
(a) No inquiry or question shall be deemed to be a claim or a request for a review of a denied claim unless made in accordance with the claims procedure. The Committee may require that any claim for benefits and any request for a review of a denied claim be filed on forms to be furnished by the Committee upon request.
(b) All decisions on claims and on requests for a review of denied claims shall be made by the Committee.
(c) The Plan Committee may, in its discretion, hold one or more hearings on a claim or a request for a review of a denied claim.
(d) A claimant may be represented by a lawyer or other representative (at the claimants own expense), but the Plan Committee reserves the right to require the claimant to furnish written authorization. A claimants representative shall be entitled, upon request, to copies of all notices given to the claimant.
(e) The decision of the Committee on a claim and on a request for a review of a denied claim shall be provided to the claimant in writing. If a decision or notice is not received by a claimant within the time specified, the claim or request for a review of a denied claim shall be deemed to have been denied.
6 |
(f) Prior to filing a claim or a request for a review of a denied claim, the claimant or his or her representative shall have a reasonable opportunity to review a copy of the Plan and all other pertinent documents in the possession of the Company.
(g) The Committee may permanently or temporarily delegate its responsibilities under this claims procedure to an individual or a committee of individuals.
2.3 Books and Records. The Committee shall maintain records of each Participants Pre-2005 Account balance and Post-2004 Account balance. A Participant shall not be entitled to examine, audit or otherwise have access to any financial statements, bookkeeping records or other records of account pertaining to the Employer or the Plan under any circumstances whatsoever.
2.4 Liability. No member of the Committee and no director, officer or member of the Board of the Company or its affiliates shall be liable to any persons for any actions taken under the Plan, or for any failure to effect any of the objectives or purposes of the Plan, by reason of insolvency or otherwise. Neither the officers nor any member of the Committee or the Board of Directors of the Company or any of its affiliates in any way secures or guarantees the payment of any benefit or amount which may become due and payable hereunder to or with respect to any Participant. Each Participant and other person entitled at any time to payments hereunder shall look solely to the assets of the Company and its affiliates for such payments as an unsecured, general creditor. Nothing herein shall be construed to give a Participant, Beneficiary or any other person or persons any right, title, interest or claim in or to any specific asset, fund, reserve, account or property of any kind whatsoever owned by the Company or in which it may have any right, title or interest now or in the future. After benefits shall have been paid to or with respect to a Participant and such payment purports to cover in full the benefit hereunder, such former Participant or other person or persons, as the case may be, shall have no further right or interest in the other assets of the Company and its affiliates in connection with this Plan.
2.5 Conflict of Interest. If any individual to whom authority has been delegated or redelegated hereunder shall also be a Participant in this Plan, such Participant shall have no authority with respect to any matter specially affecting such Participants individual interest hereunder or the interest of a person superior to him or her in the organization (as distinguished from the interests of all Participants and Beneficiaries or a broad class of Participants and Beneficiaries), all such authority being reserved exclusively to other individuals as the case may be, to the exclusion of such Participant, and such Participant shall act only in such Participants individual capacity in connection with any such matter.
2.6 Committee. The Committee shall be the Administrator for purposes of section 3(16)(A) of the Employee Retirement Income Security Act of 1974.
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SECTION 3
ELIGIBILITY; DEFERRAL ELECTION
3.1 Eligibility. The Committee will designate from time to time certain key employees of an Employer to be eligible to participate in the Plan. In selecting eligible employees, the Committee shall consider the position and responsibilities of such individuals, the value of their services to the Employer, and such other factors as the Committee deems pertinent. The Committee may rescind its designation of an eligible employee and discontinue an employees active participation in the Plan at any time; provided, however, that such a rescission shall not cause or permit the accelerated distribution of a Participants Post-2004 Account or the revocation of a Participants Deferral Election after the deadline for making the Deferral Election, unless such acceleration or revocation is determined to be permissible under Code Section 409A.
3.2 Limitation on Participation. This Plan is intended to be an unfunded plan maintained primarily to provide deferred compensation benefits for a select group of management or highly-compensated employees (a top-hat group) within the meaning of sections 201, 301 and 401 of the Employee Retirement Income Security Act of 1974 (ERISA), and therefore to be exempt from the provisions of Parts 2, 3 and 4 of Title 1 of ERISA. Participation in the Plan shall be limited to a select group of management or highly compensated employees (as that expression is used in ERISA).
3.3 Deferral Elections and Limit on Amount Deferred. An eligible employee may elect to participate for each Plan Year by completing a Deferral Election in a form prescribed by the Committee, signing it and returning it to the Committee. A Participant may not defer more than 50% of his or her base salary and a Participant may not defer more than 50% of his or her annual cash incentive award for the year.
3.3.1 Initial Deferral Election. As a condition of participation in this Plan, an eligible employee must complete such forms and make such elections as the Committee may require for the effective administration of the Plan. At a minimum, the Initial Deferral Election:
(a) shall become irrevocable on December 31 of the year prior to the year in which the services that give rise to the Deferrable Compensation being deferred are provided (or on such earlier date as the Committee may prescribe).
(b) shall authorize the Employer to withhold from the Participants Deferrable Compensation for the Plan Year a designated percentage to be deferred (but not less than $1,000 per Plan Year).
(c) shall designate the form of payment (lump sum or annual installments payable over five years), subject to the provisions of Section 5.3 hereof.
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(d) shall inform the Participant of the proper procedures, as adopted by the Committee, to designate initial deemed investments from among the deemed investment options authorized by the Committee in accordance with Section 4.2 hereof.
Only one form of payment is permitted each for a Participants Pre-2005 Account and a Participants Post-2004 Account. Therefore the Participants election as to form of payment contained in the initial Deferral Election will apply to the Participants entire Pre-2005 Account, and to the Participants entire Post-2004 Account, including amounts deferred in subsequent years and allocated to such Post-2004 Account, unless a new designation of form of payment is made in accordance with Section 5.3 hereof. Participants may change their deemed investment elections on a prospective basis in accordance with Section 4.2.
3.3.2 Deferral Elections for Subsequent Years. An employee who is eligible to continue participation in subsequent Plan Years may elect to defer compensation for a Plan Year by completing a Deferral Election in the form and manner prescribed by the Committee. At a minimum such Deferral Election:
(a) shall become irrevocable on December 31 of the year prior to the year in which the services that give rise to the Deferrable Compensation being deferred are provided (or on such earlier date as the Committee may prescribe).
(b) shall authorize the Employer to withhold from the Participants Deferrable Compensation for the Plan Year a designated percentage to be deferred (but not less than $1,000 per Plan Year).
(c) shall designate the form of payment (lump sum or annual installments payable over five years), subject to the provisions of Section 5.3 hereof.
3.3.3 Timing of Deferral Elections. With the exception of part-year participation as provided in Section 3.4 or deferral of performance-based compensation as provided in the following sentence, a Deferral Election must be returned by December 1 of the year prior to the Plan Year in which the services that give rise to the Deferrable Compensation are provided. With respect to deferrals of annual cash incentive awards that constitute performance-based compensation for purposes of Code Section 409A, the Committee may permit a Deferral Election to be returned on or before the date that is six (6) months before the end of the performance period, provided that in no event may a Participant defer a performance-based annual cash incentive award after the compensation being deferred has become readily ascertainable (as that term is used in Treasury Regulation Section 1.409A-2(a)(8)) and the Participant must have provided services continuously from the later of (i) the beginning of the performance period and (ii) the date the performance criteria are established through the date the Deferral Election is made.
3.3.4 Payroll Deductions. Each Deferral Election will authorize the Employer to withhold a percentage (in whole numbers) of a Participants Deferrable Compensation for a Plan Year.
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3.3.5 FICA Taxes. Amounts due for FICA taxes on the amounts deferred will be withheld from the Participants remaining Deferrable Compensation.
3.3.6 No Spousal Rights. No spouse, former spouse, Beneficiary, or other person shall have any right to participate in the Participants designation of the amount to be deferred, the deemed investments, the form of payment, or the time of payment.
3.4 Part-Year Participation. In the event an employee first becomes eligible to participate during a Plan Year and wishes to defer a portion of Deferrable Compensation for such calendar year, a Deferral Election must be submitted to the Committee no later than thirty (30) days after the date the employee becomes eligible to participate. Such Deferral Election will be effective only with respect to base salary for services to be performed by the Participant following the submission of the Deferral Election to the Committee.
3.5 Termination of Participation. A person shall cease to be a Participant as soon as all amounts credited to the Participants Account have been paid in full.
3.6 Cancellation of 2005 Deferral Election. Notwithstanding the provisions of Subsections 3.3.1(a) and 3.3.2(a), a Participant who has made an election to defer for the 2005 calendar year may, at any time prior to December 31, 2005, cancel such election.
3.7 2008 Transition Relief Elections. Notwithstanding anything contained in the Plan to the contrary, the Committee may allow Participants to change the time or form of distribution of their Post-2004 Accounts in 2008 pursuant to transition relief elections permitted under Code Section 409A, provided (a) such elections are made in 2008 and (b) such elections do not cause (i) amounts that would have been distributed after 2008 to be distributed in 2008 or (ii) amounts that would have been distributed in 2008 to be distributed after 2008.
SECTION 4
DEFERRED COMPENSATION ACCOUNT; TRUST
4.1 Pre-2005 Account and Post-2004 Accounts. Amounts deferred by a Participant under the Plan prior to January 1, 2005 are reflected in the Participants Pre-2005 Account. Amounts deferred by a Participant under the Plan after December 31, 2004 are reflected in the Participants Post-2004 Account. Deferred amounts are credited as of a date determined by the Committee. An amount equal to the amount deferred may be contributed in cash by the Employer to the Trust referenced in Subsection 4.3.2 hereof. A Participants Pre-2005 Account balance, if any, and Post-2004 Account balance, if any, shall be subject to adjustments pursuant to Section 4.2.
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4.2 Deemed Investment Options. From time to time, the Committee will designate the deemed investment options available under the Plan, and the procedures for Participants to make or change deemed investment elections. Initially the deemed investment options will be all of the investments permitted under the Idaho Power Company Employee Savings Plan (Employee Savings Plan). The Committee may change the deemed investment options on a prospective basis at any time. A Participants Account balance will be adjusted each business day the New York Stock Exchange is open for business for earnings, gains and losses as if it were invested in the deemed investments elected by the Participant.
4.2.1 Valuation of Assets. The market value of the assets that would have been held in each of the deemed investments shall be determined by the Committee in accordance with generally accepted valuation principles, consistently applied. In making adjustments to a Participants Account and determining the value of assets for purposes of such adjustments, the Committee shall use methods that are comparable to those used in adjusting accounts and the valuation of assets under the Employee Savings Plan, including the extent to which expenses and other charges are taken into account in making such valuations. The amount payable to a Participant or his Beneficiary pursuant to Sections 6.3, 6.4, or 6.5 shall be equal to the Participants Account balance on the date of the Event of Maturity giving rise to a distribution of the Participants Account.
4.2.2 Deemed Investment Elections. A Participant may elect deemed investments, and allocate how his or her Account shall be allocated among such deemed investments in accordance with procedures adopted by the Committee for making or changing the selection of deemed investments. Such procedures may include election via an interactive voice response (IVR) system or elections transmitted electronically. If the Participant has not made a deemed investment election, a Participants Account balance will be adjusted as determined by the Committee in its sole discretion.
4.3 Funding of Plan.
4.3.1 Unfunded Obligation. The obligation of the Employers to make payments under this Plan constitutes only the unsecured (but legally enforceable) promise of the Employers to make such payments. The Participants shall have no lien, prior claim or other security interest in any property of the Employers. Except as provided in Section 4.3.2, the Employers are not required to establish or maintain any fund, trust or account (other than a bookkeeping account or reserve) for the purpose of funding or paying the benefits promised under this Plan. If such a fund is established, the property therein shall remain the sole and exclusive property of the Employers. The Employers will pay the cost of this Plan out of their general assets. All references to accounts, accruals, gains, losses, income, expenses, payments, custodial funds and the like are included merely for the purpose of measuring the Employers obligation to Participants in this Plan and shall not be construed to impose on the Employers the obligation to create any separate fund for purposes of this Plan.
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4.3.2 Establishment of Trust. In order to provide assets from which to fulfill its obligations to the Participants and their beneficiaries under the Plan, the Company shall establish a Trust by a trust agreement with a third party (the Trustee) to which the Employers may, in their discretion, contribute cash or other property to provide for the benefit payments under the Plan. The Trust shall be a grantor trust for tax purposes. The Trustee will have the duty to invest the Trust assets and funds in accordance with the terms of the Trust. The Employers shall be entitled at any time, and from time to time, in their sole discretion, to substitute assets of at least equal fair market value for any assets held in the Trust. All rights associated with the assets of the Trust will be exercised by the Trustee or the person designated by the Trustee, and will in no event be exercisable by or rest with Participants or their beneficiaries. The Trust shall provide that any assets shall be used for the payment of benefits under the Plan and, to the extent the assets of the Trust exceed the amounts otherwise necessary for the payment of benefits (as a result of forfeitures under Section 7.2), the payment of administrative expenses of the Plan, provided, however, that in the event of the insolvency of the Company, the Trustee shall hold the assets for the benefit of the general creditors of the Company and its affiliated companies.
4.4 Assumption of Risk. The Participant, by electing to make deferrals under this Plan, assumes all risk in connection with any decrease in value of the Participants Account.
SECTION 5
PAYMENT AMOUNT, TIME AND MANNER OF PAYMENT
5.1 Payment Amount. The Payment Amount shall be the Participants Account balance as determined under Sections 4.1 and 4.2 as of the date of the Event of Maturity that gave rise to a distribution of a Participants Account.
5.2 Maturity.
5.2.1. Participants Pre-2005 Account. A Participants Pre-2005 Account shall mature and shall become payable in accordance with this Section 5 upon the earliest occurrence of any of the following events while in the employment of an Employer or an Affiliate:
(a) the Participants death, or
(b) the Participants Termination of Employment (including retirement), or
(c) the Participants Disability, or
(d) termination of this Plan.
5.2.2. Participants Post-2004 Account. A Participants Post-2004 Account shall mature and shall become payable in accordance with this Section 5 upon the earliest occurrence of any of the following events while in the employment of Employer or an Affiliate:
(a) the Participants death, or
(b) the Participants Disability, or
(c) the Participants Separation from Service.
5.3 Time and Form of Payments. Distribution of amounts withheld pursuant to a Deferral Election, as adjusted pursuant to Section 4.2, will be made either in one lump sum or in five annual installments, as selected by the Participant in the Deferral Election. Unless the Committee provides otherwise, a Participant may select a different form of payment with respect to each years deferrals.
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5.3.1 Participants Pre-2005 Account. Upon the occurrence of an Event of Maturity described in Section 5.2.1 effective as to a Participant, the Committee shall cause the Employer to commence payment of such Participants Pre-2005 Account (reduced by the amount of any applicable payroll, withholding or other taxes) in the form designated by the Participant in his or her Deferral Election. If a lump sum payment has been elected, payment of the Participants Pre-2005 Account will be made within sixty (60) days after the Event of Maturity giving rise to the distribution. If a Participant has elected annual installments, payments will commence in January of the year following the year in which the Event of Maturity occurred, or if such event occurred in December, within sixty (60) days after such event.
5.3.2 Participants Post-2004 Account. Upon the occurrence of an Event of Maturity described in Section 5.2.2 effective as to a Participant, the Committee shall cause the Employer to commence payment of such Participants Post-2004 Account (reduced by the amount of any applicable payroll, withholding or other taxes) in the form designated by the Participant in the Deferral Election or Deferral Elections pursuant to which the amounts being distributed were deferred or, in the event of the Participants death, pursuant to Section 6.2(b). If a lump sum payment has been elected, payment of the Participants Post-2004 Account will be made within sixty (60) days after the Event of Maturity giving rise to the distribution. Notwithstanding anything to the contrary contained in the Plan, if the Event of Maturity for a Participant is Separation from Service (not death or Disability) and the Participant is deemed on the date of Separation from Service to be a specified employee (as that term is used in Code Section 409A(a)(2)(B)), as determined under IDACORP, Inc.s policy for determining specified employees, payment will be made on the first business day that occurs more than six (6) months after the date of the Separation from Service, unless the Participant dies during such period, in which case payment will be made within sixty (60) days after the date of death. If a Participant has elected annual installments, payments will commence in January of the year following the year in which the Event of Maturity occurred. Notwithstanding anything to the contrary contained in the Plan, if the Event of Maturity for a Participant is Separation from Service (not death or Disability) and the Participant is deemed on the date of Separation from Service to be a specified employee (as that term is used in Code Section 409A(a)(2)(B)), as determined under IDACORP, Inc.s policy for determining specified employees, payment will commence in January of the year following the year in which the Event of Maturity occurred or, if later, the first business day that occurs more than six (6) months after the date of the Separation from Service, unless the Participant dies during such period, in which case payment will be made in a lump sum within sixty (60) days after the date of death. Except as provided in the preceding sentence, each annual installment will be paid in January of the appropriate year.
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5.3.3 New Designation of Form of Payment of a Participants Pre-2005 Account. This Section 5.3.3 shall apply with respect to Pre-2005 Accounts. At any time, and from time to time, a Participant may file with the Committee a new designation of form of payment. Each such subsequent designation shall supersede all prior designations and shall be effective as to the Participants entire Account (including the portions of the Account attributable to periods before the new designation is filed) as if the new designation had been made in writing at the time of his or her initial Deferral Election. Notwithstanding the foregoing, however, any new designation shall be disregarded as if it had never been filed (and the prior effective designation will be given effect) unless the designation:
(a) was filed with the Committee at least one year before the Event of Maturity, and
(b) was filed at least one year after any other prior designation (including the designation made on the Initial Deferral Election).
5.3.4 New Designation of Form of Payment of a Participants Post-2004 Account. This Section 5.3.4 shall apply with respect to Post-2004 Accounts. In accordance with such procedures as the Committee may prescribe, a Participant may file with the Committee a new designation of time and form of payment, subject to the following conditions:
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5.3.5 Code Section 162(m) Delay. This Section 5.3.5 shall apply only with respect to Post-2004 Accounts. If the Committee reasonably anticipates that the Companys deduction with respect to a payment would be limited or eliminated by application of Code Section 162(m) if the payment were made as scheduled, the Committee may unilaterally delay the time of the making or commencement of payment, provided such payment will be made either during the first year in which the Committee reasonably anticipates (or should reasonably anticipate) that if the payment is made during such year the deduction of the payment will not be barred by application of Code Section 162(m) or during the period beginning with the date of the Separation from Service and ending on the later of the last day of the Companys tax year in which the Separation from Service occurs or the 15 th day of the third month following the date of the Separation from Service; provided, further, that the provisions of this Section 5.3.5 shall be applied in accordance with the rules relating to delay of payments subject to Code Section 162(m) as contained in Treasury Regulation Section 1.409A-2(b)(7)(i). No election may be provided to the Participant with respect to the timing of a payment pursuant to this Section 5.3.5.
5.4 Determination of Annual Installment Amounts. If distributions are made in annual installments over a period of years, the amount of each annual installment will be determined by the Committee by dividing the portion of the Participants Pre-2005 Account balance which is payable in installments, measured immediately before an installment payment, by the number of installments remaining to be paid, and/or by dividing the portion of the Participants Post-2004 Account which is payable in installments, measured immediately before an installment payment, by the number of installments remaining to be paid.
5.5 Default. If the form of payment is not clearly designated in the Deferral Election, a designation of a single lump sum payment will be deemed to have been made.
5.6 Withholding. The Company may withhold from any payments any deductions required by law.
SECTION 6
DEATH OR DISABILITY
6.1 Payment. A Participants Payment Amount shall be payable under Sections 6.2 through 6.6 on the Participants death or Disability regardless of the provisions of Section 5, subject to the following provisions.
6.2 Death. On death, the Payment Amount shall be paid as follows:
(a) With respect to the Participants Pre-2005 Account:
(i) If the Beneficiary is the surviving spouse and the Participant had elected an installment payout, by installments, in accordance with the election, beginning in January of the year following the year of death, provided that if the death occurred in December, the first installment will be paid within 60 days of the Participants death and the remaining annual installments will be paid in January of the appropriate year.
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(ii) In all other cases, by a lump sum, payable within 60 days after the Participants death.
(b) With respect to the Participants Post-2004 Account, in a lump sum, payable within 60 days after the Participants death.
6.3 Beneficiaries. An amount payable on death of a Participant shall be paid to the Participants Beneficiary in the following order of priority:
(a) To the surviving Beneficiaries designated by the Participant in writing to the
Committee.
(b) To the Participants spouse, if living.
(c) To the Participants estate.
6.4 Beneficiary Designation. A Participant shall submit to the Company upon initial designation as an eligible employee in the Plan, and at such other times as the Participant desires, on a form provided by the Committee, a written designation of the beneficiary or beneficiaries to whom payment of the Participants Account under the Plan shall be made in the event of the Participants death. Beneficiary designations shall become effective only when received by the Company. Beneficiary designations first received by the Company after the Participants death, and any designations in effect at the time a valid subsequent designation is received by the Company, shall be invalid and have no effect.
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6.5 Disclaimers by Beneficiaries. A Beneficiary entitled to a payment of all or a portion of a deceased Participants Account may disclaim any interest therein subject to the following requirements. To be eligible to disclaim, a Beneficiary must not have received a payment of all or any portion of the Account at the time such disclaimer is executed and delivered, and, if a natural person, must have attained legal age as of the date of the disclaimer. Any disclaimer must be in writing and must be executed personally by the Beneficiary before a notary public. A disclaimer shall state that the Beneficiarys entire interest in the unpaid Account is disclaimed or shall specify what portion thereof is disclaimed. To be effective, an original executed copy of the disclaimer must be both executed and actually delivered to the Committee after the date of the Participants death but not later than nine (9) months after the date of the Participants death. A disclaimer shall be irrevocable when delivered to the Committee. A disclaimer shall be considered to be delivered to the Committee only when actually received by an officer of the Company or a member of the Committee who is familiar with the affairs of the Plan. The Committee shall be the sole judge of the content, interpretation and validity of a purported disclaimer. Upon the filing of a valid disclaimer, the Beneficiary shall be considered not to have survived the Participant as to the interest disclaimed. A disclaimer by a Beneficiary shall not be considered to be a transfer of an interest in violation of the provisions of Section 10.3. No other form of attempted disclaimer shall be recognized by the Committee. The foregoing requirements are solely for the purpose of disclaiming benefits under the Plan and compliance with these requirements does not assure that the disclaimer will be valid for tax purposes or any other purposes. It is the responsibility of the person disclaiming to assure compliance with any and all requirements to assure proper tax treatment of the disclaimer if that is intended.
6.6 Special Rules. Unless the Participant has otherwise specified in the Participants Beneficiary designation, the following rules shall apply:
(a) If there is not sufficient evidence that a Beneficiary was living at the time of the death of the Participant, it shall be deemed that the Beneficiary was not living at the time of the death of the Participant.
(b) The automatic Beneficiaries specified in Section 6.3 and the Beneficiaries designated by the Participant shall become fixed at the time of the Participants death so that, if a Beneficiary survives the Participant but dies before the receipt of all payments due such Beneficiary hereunder, such remaining payments shall be payable to the representative of such Beneficiarys estate.
(c) If the Participant designates as a Beneficiary the person who is the Participants spouse on the date of the designation, either by name or by relationship, or both, the dissolution, annulment or other legal termination of the marriage between the Participant and such person shall automatically revoke such designation. (The foregoing shall not prevent the Participant from designating a former spouse as a Beneficiary on a form executed by the Participant and received by the Committee after the date of the legal termination of the marriage between the Participant and such former spouse, and during the Participants lifetime.)
(d) Any designation of a nonspouse Beneficiary by name that is accompanied by a description of relationship to the Participant shall be given effect without regard to whether the relationship to the Participant exists either then or at the Participants death.
(e) Any designation of a Beneficiary only by statement of relationship to the Participant shall be effective only to designate the person or persons standing in such relationship to the Participant at the Participants death.
(f) A Beneficiary designation is permanently void if it either is executed or is filed by a Participant who, at the time of such execution or filing, is then a minor under the law of the state of the Participants legal residence. The Committee shall be the sole judge of the content, interpretation and validity of a purported Beneficiary designation.
6.7 Surviving Spouse and Installment Payments. If a surviving spouse, who is receiving installments from the Participants Pre-2005 Account, dies while a balance remains in the Participants Pre-2005 Account, the balance shall be paid in a lump sum to the spouses estate.
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6.8 Disability. This Section 6.8 shall apply with respect to Pre-2005 Accounts. Notwithstanding any provisions herein to the contrary, while a Participant is receiving long-term disability benefits under a plan sponsored by an Employer, no payments will be made under this Plan. If disability benefits stop and disability continues, the Payment Amount shall be paid in the manner selected under Section 5.3. If the Participant dies, the provisions applicable to death shall be followed. If the Participant ceases to be disabled and does not resume active employment, the Payment Amount shall be paid in accordance with Section 5. For avoidance of doubt, this Section 6.8 shall not apply to a Participants Post-2004 Account.
SECTION 7
WITHDRAWALS
7.1 Hardship Withdrawals. A Participant may withdraw amounts from the Participants Pre-2005 Account and from the Participants Post-2004 Account before those amounts would otherwise have been paid, if the Participant is employed by the Employer at the time of the request, and if the Participant demonstrates to the satisfaction of the Committee that the withdrawal is necessary because of an unforeseeable emergency. The withdrawal shall be limited to the amount reasonably necessary to meet the financial hardship, including any amounts necessary to pay federal, state or local income taxes reasonably anticipated to result from the payment.
7.1.1 Financial Hardship. An unforeseeable emergency is a severe financial hardship of a Participant resulting from one or more of the following causes:
(a) An illness or accident of the Participant, Participants spouse, or dependent (as defined in Section 152(a) of the Code);
(b) Loss of the Participants property due to casualty (including the need to rebuild a home following damage to a home not otherwise covered by insurance); or
(c) Other similar extraordinary and unforeseeable circumstances arising as a
result of events beyond the control of the Participant or Beneficiary.
A distribution on account of unforeseeable emergency may not be made to the extent that such emergency is or may be relieved through reimbursement or compensation from insurance or otherwise, by liquidation of the Participants assets, to the extent the liquidation of such assets would not cause severe financial hardship, or by cessation of deferrals under this Plan.
7.1.2 Withdrawal Applications. The Committee shall establish guidelines and procedures for implementing withdrawals. An application shall be written, be signed by the Participant and include a statement of facts causing the financial hardship and any other facts required by the Committee.
7.1.3 Limitations. The withdrawal date shall be fixed by the Committee. The Committee may require a minimum advance notice and may limit the amount, time and frequency of withdrawals.
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7.2 Early Distribution. Notwithstanding any other provision of the Plan, any Participant or Beneficiary may, at any time, elect to receive an early payment of the Participants Account balance, reduced by a penalty equal to ten percent (10%) of the Account balance as of the date of such election. The ten percent (10%) penalty shall be permanently forfeited and shall not be paid to, or in respect of, the Participant or Beneficiary. Any early payment under this Section 7.2 will be made as soon as administratively feasible after the Participants or Beneficiarys election. Whenever a Participant receives an early payment under this Section 7.2, the Participants participation under the Plan will terminate effective as of the date of such early payment and the Participant shall not be eligible to participate in the Plan until the third Plan Year beginning after the date of such early payment. An early distribution of a Participants Post-2004 Account balance is not permitted.
SECTION 8
AMENDMENT; TERMINATION
8.1 Amendment and Termination Generally. Subject to the limitations of Sections 8.2 and 8.3, the Plan may be amended or terminated at any time through action by the Board, or by the Committee. Upon termination, each Participant or Beneficiary, as the case may be, will receive an amount equal to such Participants Pre-2005 Account balance, less any withholding obligations, as soon as practicable following the date the Plan is terminated. Distribution of each Participants Pre-2005 Account balance shall be made in the manner determined by the Company in its sole and absolute discretion. To the extent consistent with the rules relating to plan terminations and liquidations in Treasury Regulation Section 1.409A-3(j)(4)(ix) or otherwise consistent with Section 409A of the Code, the Board may provide that each Participant or Beneficiary, as the case may be, will receive an amount equal to such Participants Post-2004 Account balance, less any withholding obligations, upon (or as soon as is permitted following) termination of the Plan. Unless so distributed, in the event of a Plan termination, the Company shall continue to maintain the Participants Accounts until distributed pursuant to the terms of the Plan and Participants shall remain 100% vested in all amounts credited to their Accounts.
8.2 Before a Change-in-Control. Prior to the occurrence of a Change-in-Control, the Board or Committee may unilaterally amend the Plan prospectively, retroactively or both, at any time and for any reason deemed sufficient by it without notice to any person affected by this Plan and may likewise terminate this Plan both with regard to persons expecting to receive benefits in the future, subject to the following.
8.2.1 Participants Who Have Experienced a Separation from Service. The benefit, if any, payable to or with respect to a Participant who has experienced a Separation from Service as of the effective date of such amendment, or the effective date of such termination, shall not be, without the knowing and voluntary written consent of the Participant, diminished or delayed by such amendment or termination (but the Committee may amend the Plan to otherwise modify the payment of any such benefit including, but not limited to, accelerating the payment of all remaining payments into a single lump sum payment).
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8.2.2 Other Participants. The benefit, if any, payable to or with respect to each other Participant determined as if such Participant had experienced a Separation from Service on the effective date of such amendment or the effective date of such termination, shall not be, without the knowing and voluntary written consent of the Participant, diminished or delayed by such amendment or termination (but the Committee may amend the Plan to otherwise modify the payment of any such benefit including, but not limited to, accelerating the payment of all remaining payments into a single lump sum payment).
8.2.3 No Acceleration. Notwithstanding the provisions of Subsections 8.2.1 and 8.2.2, no amendment may accelerate the payment of benefits to a Participant from the Participants Post-2004 Account.
8.3 After a Change-in-Control. After the occurrence of a Change-in-Control, the Committee may amend or terminate the Plan as provided in Section 8.2 but subject to the following limitations.
8.3.1 Existing Participants. After the occurrence of a Change-in-Control, the Board or Committee may only amend or terminate the Plan as applied to Participants who are Participants on the date of the Change-in-Control if:
(a) all benefits payable to or with respect to persons who were Participants as of the Change-in-Control (including benefits earned before and benefits earned after the Change-in-Control) have been paid in full prior to the adoption of the amendment or the termination, or
(b) eighty percent (80%) of all the Participants determined as of the date of the Change-in-Control give knowing and voluntary written consent to such amendment or termination.
8.3.2 New Participants. After the occurrence of a Change-in-Control, as applied to Participants who are not Participants on the date of the Change-in-Control, the Board or Committee may unilaterally amend the Plan prospectively, retroactively or both, at any time and for any reason deemed sufficient by it without notice to any person affected by this Plan and may likewise terminate this Plan.
8.4 No Oral Amendments. No modification of the terms of the Plan or termination of this Plan shall be effective unless it is in writing and signed on behalf of the Board or Committee by a person authorized to execute such writing. No oral representation concerning the interpretation or effect of the Plan shall be effective to amend the Plan nor binding on any person charged with the interpretation or application of the Plan.
8.5 Plan Binding on Successors. The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise to all or substantially all of the business and/or assets of the Employers), by agreement, to expressly assume and agree to perform this Plan in the same manner and to the same extent that the Employers would be required to perform it if no such succession had taken place.
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8.6 Payment. If the Internal Revenue Service issues a final ruling that any amounts deferred under this Plan will be subject to current income tax, all amounts to which the ruling is applicable that are in Pre-2005 Accounts shall be paid to the Participants within 30 days.
SECTION 9
CLAIMS PROCEDURE
9.1 Initial Claim. Any person claiming a benefit or requesting an interpretation, ruling or information under the Plan shall present the request in writing to the Committee, which shall respond in writing as soon as practicable.
9.2 Denial. If the claim or request is denied, the written notice of denial shall state:
(a) The reasons for denial, with specific reference to the Plan provisions on which the denial is based.
(b) A description of any additional materials or information required and an explanation of why it is necessary.
(c) An explanation of the Plans claim review procedure.
9.3 Time. The initial notice of denial shall normally be given within 90 days of receipt of the claim. If special circumstances require an extension of time, the claimant shall be so notified and the time limit shall be 180 days.
9.4 Appeal. Any person whose claim or request is denied or who has not received a response within 30 days may request a review by notice in writing to the Committee. The original decision shall be reviewed by the Committee, which may, but shall not be required to, grant the claimant a hearing. On review, whether or not there is a hearing, the claimant may have representation, examine pertinent documents and submit issues and comments in writing.
9.5 Final Decision. The decision on review shall ordinarily be made within 60 days. If an extension of time is required for a hearing or other special circumstances, the claimant shall be so notified and the time limit shall be 120 days. The decision shall be in writing and shall state the reasons and the relevant plan provisions. All decisions on review shall be final and bind all parties concerned.
SECTION 10
GENERAL PROVISIONS
10.1 Attorneys Fees. If suit or action is instituted to enforce any rights under this Plan, the prevailing party may recover from the other party reasonable attorneys fees at trial and on any appeal.
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10.2 Notices. Any notice under this Plan shall be in writing and shall be effective when actually delivered or, if mailed, when deposited as first class mail postage prepaid. Mail shall be directed to the Company at the address stated in this Plan, to the Participants last known home address shown in the Companys records, or to such other address as a party may specify by notice to the other parties. Notices to an Employer or the Committee shall be sent to the Companys address.
10.3 Nontransferability; Spendthrift Provisions. The rights of a Participant under this Plan are personal. Except for the limited provisions of Section 6, no interest of a Participant or one claiming through a Participant may be directly or indirectly assigned, alienated, pledged, transferred or encumbered and no such interest shall be subject to seizure by legal process, attachment, garnishment, execution following judgment or in any other way subjected to the claims of any creditor.
10.4 Not an Employment Contract. This Plan is not and shall not be deemed to constitute a contract of employment between the Employer and any employee or other person, nor shall anything herein contained be deemed to give any employee or other person any right to be retained in an Employers employ or in any way limit or restrict the Employers right or power to discharge any employee or other person at any time and to treat him without regard to the effect which such treatment might have upon the employee as a Participant in the Plan.
10.5 Successors. Amounts payable under this Plan shall be an obligation of the Company and the Trust. If an Employer merges, consolidates, or otherwise reorganizes or if its business or assets are acquired by another company, this Plan shall continue with respect to those eligible individuals who continue in the employ of the successor company. The transition of Employers shall not be considered a termination of employment for purposes of this Plan.
10.6 Incompetence. The Committee may decide that because of the mental or physical condition of a person entitled to payments, or because of other relevant factors, it is in the persons best interest to make payments to others for the benefit of the person entitled to payment. In that event, the Committee may in its discretion direct those payments to be made as follows:
(a) To a parent or spouse or a child of legal age;
(b) To a legal guardian; or
(c) To one furnishing maintenance, support, or hospitalization.
10.7 Expenses. All expenses and costs in connection with the adoption and administration of the Plan and Trust will be borne by the Employers.
10.8 Governing Law. Except to the extent that federal law is controlling, the Plan shall be construed and entered in accordance with and governed by the laws of the State of Idaho. Invalidation of any one of the provisions of the Plan for any reason shall in no way affect the other provisions hereof, and all such other provisions shall remain in full force and effect.
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10.9 Unsecured General Creditor. Any amount allocated to a Participants Account balance under this Plan shall be an unfunded, unsecured promise of the Employer to make payments in the future. Participants and their beneficiaries, heirs, successors and assigns shall have no legal or equitable rights, interest or claims in any property or assets of the Employer. Any and all of the Employers assets shall be, and remain, the general, unpledged, unrestricted assets of the Employer. The Employer may, but shall not be required to, establish a reserve of assets to provide funds for payments under this Plan. Such reserve may be through a trust fund, which it is intended will be established on such terms and conditions as shall prevent taxation and Participants and Beneficiaries of any amounts held in the reserve or credited to Account balances prior to the time payments are made. Establishing a reserve shall have no effect on the operation of this Plan or upon the status of Participants as unsecured general creditors of the Employer. Rights to payments will not be limited to assets held in any reserve.
10.10 Construction.
10.10.1 ERISA Status. This Plan is adopted with the understanding that it is an unfunded plan maintained primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees as provided in section 201(2), section 301(3) and section 401(a)(1) of ERISA. Each provision shall be interpreted and administered accordingly.
10.10.2 IRC Status. This Plan is intended to be a nonqualified deferred compensation arrangement. The rules of Section 409A of the Code and the regulations and guidance issued thereunder apply to all amounts deferred after December 31, 2004 under this Plan. The rules of Section 3121(v)(2) and Section 3306(r)(2) of the Code shall apply to this Plan.
10.10.3 Rules of Document Construction:
(a) Age. An individual shall be considered to have attained a given age on such individuals birthday for that age (and not on the day before). Individuals born on February 29 in a leap year shall be considered to have their birthdays on February 28 in each year that is not a leap year.
(b) Compounds. The words hereof, herein or hereunder or other similar compounds of the word here shall mean and refer to the entire Plan and not to any particular paragraph or Section of the Plan unless the context clearly indicates to the contrary.
(c) Titles. The titles given to the various Sections of the Plan are inserted for convenience of reference only and are not part of the Plan, and they shall not be considered in determining the purpose, meaning or intent of any provision hereof.
(d) References to Laws. A reference in the Plan a statute or regulation shall be considered also to mean and refer to any subsequent amendment or replacement of that statute or regulation.
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10.11 Effect on Other Plans. This Plan shall not alter, enlarge or diminish any persons employment rights or obligations or rights or obligations under any other retirement plan sponsored by an Employer.
10.12 Effective Date. This Plan shall be effective November 15, 2000.
10.13. Section 409A. It is intended that the distributions under the Plan not be subject to taxation under Section 409A of the Code and the Plan and any related Deferral Elections or other documents relating to amounts deferred under the Plan shall be interpreted accordingly. With respect to amounts in a Participant's Post-2004 Account, to the extent the terms of the Participants Deferral Election (or any other election with respect to such amounts) are inconsistent with the applicable terms of the Plan, the terms of the Plan shall govern. It is intended that amounts in Participants Pre-2005 Accounts constitute grandfathered deferrals that are not subject to Section 409A of the Code; however, if it is determined that any such amounts are subject to Section 409A of the Code, such amounts will be subject to the provisions in the Plan relating to Post-2004 Accounts rather than the provisions in the Plan relating to Pre-2005 Accounts.
IDAHO POWER COMPANY.
Date: ___________________________ By: _____________________________
______________________________________________________________________________
(1) Amended by Idaho Power Company effective October 1, 2003 to change deadline of making deferral elections and to revise hardship withdrawal provision.
(2) Amended by Idaho Power Company effective January 1, 2005 to permit cancellations of 2005 deferral elections.
(3) Amended by Idaho Power Company effective January 1, 2005 to establish grandfathered and non-grandfathered accounts and to make other Section 409A-related changes.
(4) Amended by Idaho Power Company effective July 20, 2006 to revise the change in control definition for non-grandfathered accounts.
(5) Amended by Idaho Power Company effective November 20, 2008 to make Section 409A-related changes.
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Exhibit 10.33
IDACORP,
Inc. and Idaho Power Company 2008 Compensation for
Non-Employee Directors of the Board of Directors
All directors of IDACORP also serve as directors of Idaho Power Company. The fees and other compensation discussed below is for service on both boards. Employee directors receive no compensation for service on the boards.
IDACORP and Idaho Power Company Board Fees
Annual Retainer
Chairman of the board $105,000
Chairman of audit committee $ 47,500
Chairman of compensation committee $ 45,000
Chairman of corporate governance committee $ 41,000
Other directors $ 35,000
Meeting Fees
Board meeting $1,250
Committee meeting $1,250
Shareholder meeting $1,250
The chairman of the board does not receive meeting fees.
Stock Awards
$45,000 of IDACORP common stock annually
Subsidiary Board Fees
IDACORP Financial Services and Ida-West Energy
Monthly retainer $750
Meeting fees $600
Deferral Arrangements
Directors may defer all or a portion of their annual IDACORP, Idaho Power Company, IDACORP Financial Services, Inc. and Ida-West Energy retainers and meeting fees and receive a lump-sum payment of all amounts deferred with interest or a series of up to 10 equal annual payments after they experience a separation from service with IDACORP and Idaho Power Company. Any cash fees that were deferred before 2009 will be credited with the preceding months average Moodys Long-Term Corporate Bond Yield for utilities (the Moodys Rate) plus three percent, until January 1, 2019 when the interest rate will change to the Moodys Rate. All cash fees that are deferred beginning January 1, 2009 will be credited with interest at the Moodys Rate. Interest is calculated on a pro rata basis each month using a 360-day year and the average Moodys Rate for the preceding month.
Exhibit 10.42
EXECUTION COPY
TERM LOAN CREDIT AGREEMENT
among
IDAHO POWER COMPANY ,
as Borrower,
THE LENDERS NAMED HEREIN
and
JPMORGAN CHASE BANK, N.A. ,
as Administrative Agent
J.P. MORGAN SECURITIES INC.
as
Lead Arranger and Sole Book Runner
Dated
as of February 4, 2009
Table of Contents
Page
ARTICLE 1
DEFINITIONS
1.1....... Definitions........................................................................................................................... 1
1.2....... Other Interpretive Provisions............................................................................................. 13
ARTICLE 2
THE CREDITS
2.1....... Commitments..................................................................................................................... 14
2.2....... Required Payments; Termination.............................................................................. ......... 14
2.3....... Types of Advances; Minimum Amount of Each Advance................................. .............. 14
2.4....... Fees................................................................................................................................... 15
2.5....... Reduction or Termination of Aggregate Commitment.......................................... .......... 15
2.6....... Optional Principal Payments..................................................................................... ........ 15
2.7....... Requesting Loans....................................................................................................... ...... 15
2.8....... Conversion and Continuation of Outstanding Advances..................................... .......... 16
2.9....... Changes in Interest Rate, etc.......................................................................... .................. 16
2.10..... Rates Applicable After Default........................................................................... .............. 17
2.11..... Method of Payment........................................................................................................... 17
2.12..... Noteless Agreement; Evidence of Indebtedness.................................................... ........... 17
2.13..... Telephonic Notices........................................................................................................... 18
2.14..... Interest Payment Dates; Interest and Fee Basis....................................................... ......... 18
2.15..... Notification of Advances, Interest Rates, Prepayments and Commitment Reductions. .. 19
2.16..... Lending Installations......................................................................................................... 19
2.17..... Non-Receipt of Funds by the Administrative Agent........................................................ 19
2.18..... [ Reserved. ] ......................................................................................................................20
2.19..... Replacement of Lender..................................................................................................... 20
ARTICLE 3
YIELD PROTECTION; TAXES
3.1....... Yield Protection................................................................................................................. 20
3.2....... Changes in Capital Adequacy Regulations............................................................ ........... 21
3.3....... Availability of Types of Advances........................................................................ ............ 21
3.4....... Funding Indemnification...................................................................................... ............. 22
3.5....... Taxes.................................................................................................................. ............ 22
3.6....... Alternate Lending Installation; Lender Statements; Survival of Indemnity................. .... 25
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Table of Contents
Page
ARTICLE 4
CONDITIONS PRECEDENT
4.1....... Closing Date...................................................................................................................... 25
ARTICLE 5
REPRESENTATIONS AND WARRANTIES
5.1....... Existence and Standing..................................................................................................... 26
5.2....... Authorization and Validity................................................................................................ 27
5.3....... No Conflict; Government Consent........................................................................ .......... 27
5.4....... Financial Statements........................................................................................................ 27
5.5....... Material Adverse Change................................................................................................ 27
5.6....... Taxes............................................................................................................................. 28
5.7....... Litigation and Contingent Obligations.............................................................................. 28
5.8....... Subsidiaries.................................................................................................................... 28
5.9....... ERISA........................................................................................................................... 28
5.10..... Accuracy of Information................................................................................................. 29
5.11..... Regulation U.................................................................................................................. 29
5.12..... Material Agreements...................................................................................................... 29
5.13..... Compliance With Laws.................................................................................................. 29
5.14..... Ownership of Properties................................................................................................ 29
5.15..... Plan Assets; Prohibited Transactions.............................................................................. 29
5.16..... Environmental Matters................................................................................................... 30
5.17..... Investment Company Act............................................................................................... 30
5.18..... OFAC; PATRIOT Act.................................................................................................. 30
ARTICLE 6
COVENANTS
6.1....... Financial Reporting............................................................................................................ 31
6.2....... Use of Proceeds................................................................................................................ 32
6.3....... Notice of Default, etc........................................................................................................ 32
6.4....... Conduct of Business.......................................................................................................... 32
6.5....... Taxes........................................................................................................................... .... 32
6.6....... Insurance........................................................................................................................... 33
6.7....... Compliance with Laws................................................................................................... ... 33
6.8....... Maintenance of Properties............................................................................................... .. 33
6.9....... Inspection.......................................................................................................................... 33
6.10..... Merger and Sale of Assets................................................................................................. 33
6.11..... Liens................................................................................................................................. 34
6.12..... Leverage Ratio.................................................................................................................. 35
6.13..... Investments and Acquisitions............................................................................................ 35
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Table of Contents
Page
6.14..... Subsidiary Dividend Restrictions............................................................................. ......... 36
6.15..... Affiliates............................................................................................................................ 36
6.16..... OFAC, PATRIOT Act Compliance.................................................................................. 36
ARTICLE 7
DEFAULTS
ARTICLE 8
ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES
8.1....... Acceleration....................................................................................................................... 39
8.2....... Amendments...................................................................................................................... 39
8.3....... Preservation of Rights.............................................................................................. ......... 40
ARTICLE 9
GENERAL PROVISIONS
9.1....... Survival of Representations............................................................................................... 40
9.2....... Governmental Regulation.................................................................................................. 40
9.3....... Headings.......................................................................................................................... 40
9.4....... Entire Agreement.............................................................................................................. 40
9.5....... Several Obligations; Benefits of this Agreement.......................................................... .... 40
9.6....... Expenses; Indemnification............................................................................................. ... 41
9.7....... Numbers of Documents.................................................................................................... 42
9.8....... Accounting....................................................................................................................... 42
9.9....... Severability of Provisions.................................................................................................. 42
9.10..... Nonliability of Lenders...................................................................................................... 42
9.11..... Confidentiality................................................................................................................... 42
9.12..... Nonreliance...................................................................................................................... 43
9.13..... Disclosure........................................................................................................................ 43
9.14..... PATRIOT Act Notice...................................................................................................... 43
9.15..... Counterparts.................................................................................................................... 43
ARTICLE 10
THE ADMINISTRATIVE AGENT
10.1..... Appointment; Nature of Relationship............................................................................... 44
10.2..... Powers.......................................................................................................................... 44
10.3..... General Immunity........................................................................................................... 44
10.4..... No Responsibility for Loans, Recitals, etc....................................................................... 44
10.5..... Action on Instructions of Lenders.................................................................................... 45
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Table of Contents
Page
10.6..... Employment of Administrative Agents and Counsel.................................................... .... 45
10.7..... Reliance on Documents; Counsel...................................................................................... 45
10.8..... Administrative Agents Reimbursement and Indemnification.......................................... 46
10.9..... Notice of Default........................................................................................................... . 46
10.10... Rights as a Lender........................................................................................................... 46
10.11... Lender Credit Decision................................................................................................... 47
10.12... Successor Administrative Agent....................................................................................... 47
10.13... Administrative Agent and Arranger Fees.......................................................................... 48
10.14... Delegation to Affiliates..................................................................................................... 48
10.15... Other Agents................................................................................................................... 48
ARTICLE 11
SETOFF; RATABLE PAYMENTS
11.1..... Setoff............................................................................................................................... 48
11.2..... Ratable Payments.............................................................................................................. 49
ARTICLE 12
BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS
12.1..... Successors and Assigns..................................................................................................... 49
12.2..... Participations..................................................................................................................... 50
12.3..... Assignments....................................................................................................................... 50
12.4..... Dissemination of Information.................................................................................. .......... 52
12.5..... Tax Treatment.................................................................................................................... 52
ARTICLE 13
NOTICES
13.1..... Notices............................................................................................................................... 52
13.2..... Change of Address.................................................................................................... ........ 53
ARTICLE 14
CHOICE OF LAW; CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL
14.1..... CHOICE OF LAW........................................................................................................... 53
14.2..... CONSENT TO JURISDICTION..................................................................................... 53
14.3..... WAIVER OF JURY TRIAL..................................................................................... ....... 54
iv |
Table of Contents
Page
Schedule I Commitments
Schedule 5.8 List of Subsidiaries
Schedule 5.12 Agreements which restrict Subsidiary Dividends or which could reasonably be expected to have a Material Adverse Effect
Schedule 5.14 Indebtedness and Liens
Schedule 13.1 Notice Addresses
EXHIBIT A Forms of Opinions
EXHIBIT B Form of Compliance Certificate
EXHIBIT C Form of Assignment Agreement
EXHIBIT D [ Reserved ]
EXHIBIT E Form of Note
v |
TERM LOAN CREDIT AGREEMENT
This Term Loan Credit Agreement, dated as of February 4, 2009 is made among Idaho Power Company, an Idaho corporation, the Lenders, and JPMorgan Chase Bank, N.A., as Administrative Agent for the Lenders.
In consideration of the mutual provisions, covenants and agreements herein contained, the parties hereto hereby agree as follows:
. As used in this Agreement:
Acquisition means any transaction, or any series of related transactions, consummated on or after the Closing Date, by which the Borrower or any of its Subsidiaries (i) acquires any going business or all or substantially all of the assets of any firm, corporation or limited liability company, or division thereof, whether through purchase of assets, merger or otherwise or (ii) directly or indirectly acquires (in one transaction or as the most recent transaction in a series of transactions) at least a majority (in number of votes) of the securities of a corporation which have ordinary voting power for the election of directors (other than securities having such power only by reason of the happening of a contingency) or a majority (by percentage or voting power) of the outstanding ownership interests of a partnership or limited liability company.
Administrative Agent means JPMorgan in its capacity as administrative agent (i.e., contractual representative) of the Lenders pursuant to Article 10 , and not in its individual capacity as a Lender, and any successor Administrative Agent appointed pursuant to Article 10 .
Administrative Questionnaire means an administrative questionnaire, substantially in the form supplied by the Administrative Agent, completed by a Lender and furnished to the Administrative Agent in connection with this Agreement.
Advance means the borrowing hereunder, (i) made by the Lenders on the Closing Date, or (ii) converted or continued by the Lenders on the same date of conversion or continuation and, in either case, consisting of Loans of the same Type and, in the case of Eurodollar Advances, for the same Interest Period.
Affected Lender is defined in Section 2.19 .
Affiliate of any Person means any other Person directly or indirectly controlling, controlled by or under common control with such Person. A Person shall be deemed to control another Person if the controlling Person owns 10% or more of any class of voting securities (or other ownership interests) of the controlled Person or possesses, directly or indirectly, the power to direct or cause the direction of the management or policies of the controlled Person, whether through ownership of stock, by contract or otherwise.
Aggregate Commitment means the aggregate of the Commitments of all the Lenders, as reduced from time to time pursuant to the terms hereof.
Aggregate Outstanding Credit Exposure means, at any time, the aggregate of the Outstanding Credit Exposure of all the Lenders.
Agreement means this Term Loan Credit Agreement, as amended, modified, restated or supplemented from time to time in accordance with its terms.
Agreement Accounting Principles means generally accepted accounting principles as in effect from time to time applied in a manner consistent with that used in preparing financial statements referred to in Section 5.4 .
Alternate Base Rate means, for any day, a fluctuating rate of interest per annum equal to the highest of (i) the Prime Rate in effect on such day, (ii) the sum of (a) the Federal Funds Effective Rate in effect on such day plus (b) ½% per annum and (iii) an amount equal to (a) the LIBO Reference Rate on such day (or if such day is not a Business Day, the immediately preceding Business Day), plus (b) 1%. Any change in the Alternate Base Rate due to a change in the Prime Rate, the Federal Funds Effective Rate or the LIBO Reference Rate shall be effective from and including the effective date of such change in the Prime Rate, the Federal Funds Effective Rate or the LIBO Reference Rate, respectively.
Applicable Margin means, for any day, with respect to any Floating Rate Advance or Eurodollar Advance, as the case may be, the applicable rate per annum set forth below under the caption Floating Rate Spread or Eurodollar Spread, as the case may be, based upon the ratings by Moodys and S&P, respectively, applicable on such date to the Index Debt (whether such rating is preliminary or otherwise):
Index Debt
|
Eurodollar
|
Floating Rate Spread |
Category 1
|
1. 75% |
0. 75% |
Category 2
|
2.00% |
1.00% |
Category 3
|
2.50% |
1.50% |
Category 4
|
3.00% |
2.00% |
2 |
For purposes of the foregoing, (i) if either Moodys or S&P shall not have in effect a rating for the Index Debt (other than by reason of the circumstances referred to in the last sentence of this definition), then such rating agency shall be deemed to have established a rating in Category 4; (ii) if the ratings established or deemed to have been established by Moodys and S&P for the Index Debt shall fall within different Categories, the Applicable Margin shall be based on the higher of the two ratings, unless one of the two ratings is (1) two Categories lower than the other, in which case the Applicable Margin shall be determined by reference to the Category that is the intermediate of the two ratings or (2) more than two Categories lower than the other, in which case the Applicable Margin shall be determined by reference to the Category that is the higher of the two intermediate ratings; and (iii) if the ratings established or deemed to have been established by Moodys and S&P for the Index Debt shall be changed (other than as a result of a change in the rating system of Moodys or S&P), such change shall be effective as of the date on which it is first announced by the applicable rating agency, irrespective of when notice of such change shall have been furnished by the Borrower to the Administrative Agent and the Lenders pursuant to Section 6.1 or otherwise. Each change in the Applicable Margin shall apply during the period commencing on the effective date of such change and ending on the date immediately preceding the effective date of the next such change. If the rating system of Moodys or S&P shall change, or if either such rating agency shall cease to be in the business of rating corporate debt obligations, the Borrower and the Lenders shall negotiate in good faith to amend this definition to reflect such changed rating system or the unavailability of ratings from such rating agency and, pending the effectiveness of any such amendment, the Applicable Margin shall be determined by reference to the rating most recently in effect prior to such change or cessation.
Approved Fund means any Person (other than a natural person) that is engaged in making, purchasing, holding or investing in bank loans and similar extensions of credit in the ordinary course of its business and that is administered or managed by (a) a Lender, (b) an Affiliate of a Lender or (c) an entity or an Affiliate of an entity that administers or manages a Lender.
Arranger means J.P. Morgan Securities Inc., and its successors, in its capacity as Lead Arranger and Sole Book Runner.
Authorized Officer means any of the Chief Executive Officer, President, Chief Financial Officer, Vice President or Treasurer of the Borrower, acting singly.
Borrower means Idaho Power Company, an Idaho corporation, and its successors and assigns.
Borrowing Notice is defined in Section 2.7 .
Business Day means (i) with respect to any borrowing, payment or rate selection of Eurodollar Advances, a day (other than a Saturday or Sunday) on which banks generally are open in New York, New York and London, England for the conduct of substantially all of their commercial lending activities, interbank wire transfers can be made on the Fedwire system and dealings in United States dollars are carried on in the London interbank market and (ii) for all other purposes, a day (other than a Saturday or Sunday) on which banks generally are open in New York, New York for the conduct of substantially all of their commercial lending activities and interbank wire transfers can be made on the Fedwire system.
Capitalized Lease of a Person means any lease of Property by such Person as lessee, which would be capitalized on a balance sheet of such Person prepared in accordance with Agreement Accounting Principles.
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Capitalized Lease Obligations of a Person means the amount of the obligations of such Person under Capitalized Leases which would be shown as a liability on a balance sheet of such Person prepared in accordance with Agreement Accounting Principles.
Cash Equivalent Investments means (i) short-term obligations of, or fully guaranteed by, the United States of America, (ii) commercial paper rated A-1 or better by S&P or P-1 or better by Moodys, (iii) demand deposit accounts maintained in the ordinary course of business, and (iv) certificates of deposit issued by and time deposits with commercial banks (whether domestic or foreign) having capital and surplus in excess of $100,000,000; provided in each case that the same provides for payment of both principal and interest (and not principal alone or interest alone) and is not subject to any contingency regarding the payment of principal or interest.
Change is defined in Section 3.2 .
Change in Control means the acquisition by any Person, or two or more Persons acting in concert, of beneficial ownership (within the meaning of Rule 13d-3 of the Securities and Exchange Commission under the Securities Exchange Act of 1934) of 20% or more of the outstanding shares of voting stock of the Parent.
Change in Law means any change in law or in the interpretation, administration or application thereof (including the introduction of any new law, treaty or governmental rule, regulation or order), or any determination of a court or governmental authority, in each case that becomes effective after the date hereof.
Closing Date means the first date all the conditions precedent in Section 4.1 are satisfied or waived in accordance with the terms of this Agreement.
Code means the Internal Revenue Code of 1986, as amended.
Commitment means, for each Lender, the obligation of such Lender to make Loans to the Borrower on the Closing Date in an aggregate amount not exceeding the amount set forth opposite its name on Schedule I , or, if such Lender has entered into one or more assignments that has become effective pursuant to Section 12.3(a) , the amount set forth for such Lender at such time in the Register maintained by the Administrative Agent, in either case, as such amount may be reduced from time to time pursuant to the terms hereof.
Condemnation is defined in Section 7(i) .
Consolidated Indebtedness means at any time the Indebtedness of the Borrower and its Subsidiaries calculated on a consolidated basis as of such time; provided , however that the aggregate outstanding Indebtedness evidenced by Hybrid Securities shall be excluded to the extent that the total book value of such Hybrid Securities does not exceed 15% of Consolidated Total Capitalization as of such time.
Consolidated Net Worth means at any time the consolidated stockholders equity of the Borrower and its Subsidiaries calculated on a consolidated basis as of such time.
4 |
Consolidated Total Capitalization means at any time, without duplication, the sum of (i) Consolidated Indebtedness, (ii) Consolidated Net Worth and (iii) the aggregate outstanding amount of Hybrid Securities, each calculated as of such time.
Contingent Obligation of a Person means any agreement, undertaking or arrangement by which such Person assumes, guarantees, endorses, contingently agrees to purchase or provide funds for the payment of, or otherwise becomes or is contingently liable upon, the obligation or liability of any other Person, or agrees to maintain the net worth or working capital or other financial condition of any other Person, or otherwise assures any creditor of such other Person against loss, including any comfort letter, operating agreement, take or pay contract or the obligations of any such Person as general partner of a partnership with respect to the liabilities of the partnership.
Conversion/Continuation Notice is defined in Section 2.8 .
Controlled Group means all members of a controlled group of corporations or other business entities and all trades or businesses (whether or not incorporated) under common control which, together with the Borrower or any of its Subsidiaries, are treated as a single employer under Section 414 of the Code.
Default means an event described in Article 7 .
Environmental Laws means any and all applicable federal, state, local and foreign statutes, laws, judicial decisions, regulations, ordinances, rules, judgments, orders, decrees, plans, injunctions, permits, concessions, grants, franchises, licenses, agreements and other governmental restrictions relating to (i) the protection of the environment, (ii) the effect of the environment on human health, (iii) emissions, discharges or releases of pollutants, contaminants, hazardous substances or wastes into surface water, ground water or land, or (iv) the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of pollutants, contaminants, hazardous substances or wastes or the clean-up or other remediation thereof.
ERISA means the Employee Retirement Income Security Act of 1974.
Eurodollar Advance means a Loan, or portion thereof, which, except as otherwise provided in Section 2.10 , bears interest at the applicable Eurodollar Rate.
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Eurodollar Base Rate means, with respect to any Eurodollar Advance for any Interest Period, the rate appearing on Reuters BBA Libor Rates Page 3750 (or on any successor or substitute page of such service, or any successor to or substitute for such service, providing rate quotations comparable to those currently provided on such page of such service, as determined by the Administrative Agent from time to time for purposes of providing quotations of interest rates applicable to dollar deposits in the London interbank market) at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period, as the rate for dollar deposits with a maturity comparable to such Interest Period. In the event that such rate is not available at such time for any reason, then the Eurodollar Base Rate with respect to such Eurodollar Advance for such Interest Period shall be the rate at which dollar deposits of $5,000,000 and for a maturity comparable to such Interest Period are offered by the principal London office of the Administrative Agent in immediately available funds in the London interbank market at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period.
Eurodollar Rate means, with respect to any Eurodollar Advance for any Interest Period, an interest rate per annum (rounded upwards, if necessary, to the next 1/16 of 1%) equal to the sum of (i) (a) the Eurodollar Base Rate for such Interest Period multiplied by (b) the Statutory Reserve Rate and (ii) the Applicable Margin.
Excluded Taxes means, in the case of each Lender or applicable Lending Installation and the Administrative Agent, taxes imposed on its overall net income, receipts, profits, capital, net worth, franchise taxes, branch profits or similar taxes, imposed on it, by (i) the jurisdiction under the laws of which such Lender or the Administrative Agent is incorporated or organized, (ii) the jurisdiction in which the Administrative Agents or such Lenders principal executive office or such Lenders applicable Lending Installation is located, or (iii) the jurisdiction in which the Lender, Lending Installation or the Administrative Agent carries on a trade or business.
Existing Credit Agreement means that certain Term Loan Credit Agreement, dated as of April 1, 2008, by and among the Borrower, the lenders from time to time parties thereto, and JPMorgan Chase Bank, N.A., as administrative agent.
Facility Termination Date means February 3, 2010.
Federal Funds Effective Rate means, for any day, the weighted average (rounded upwards, if necessary, to the next 1/100 of 1%) of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average (rounded upwards, if necessary, to the next 1/100 of 1%) of the quotations for such day for such transactions received by the Administrative Agent from three Federal funds brokers of recognized standing selected by it.
Fee Letter means the letter agreement dated February 4, 2009 among the Borrower, the Administrative Agent and the Arranger.
First Mortgage means that certain Mortgage and Deed of Trust, dated as of October 1, 1937, as supplemented, under which the Borrower is Mortgagor and Deutsche Bank Trust Company Americas (formerly known as Bankers Trust Company) and R.G. Page (Stanley Burg successor individual trustee) are Trustees, as it may from time to time be further amended, supplemented or otherwise modified.
Floating Rate Advance means a Loan, or portion thereof, which, except as otherwise provided in Section 2.10 , bears interest at the Alternate Base Rate plus the Applicable Margin.
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Hybrid Securities shall mean any hybrid securities, including any trust preferred securities, deferrable interest subordinated debt securities, mandatory convertible debt securities or other hybrid securities issued by the Borrower or any Subsidiary or financing vehicle of the Borrower that (i) have an original maturity of at least twenty (20) years, (ii) require, absent an event of default with respect to such securities, no repayments or prepayments and no mandatory redemptions or repurchases, in each case, prior to the date which is ninety-one (91) days after the occurrence of the Facility Termination Date and (iii) permit the Borrower or any such Subsidiary or any such financing vehicle of the Borrower, respectively, at its option, to defer certain scheduled interest payments.
Indebtedness of a Person means such Persons (i) obligations for borrowed money, (ii) obligations representing the deferred purchase price of Property or services (other than accounts payable arising in the ordinary course of such Persons business payable on terms customary in the trade), (iii) obligations, whether or not assumed, secured by Liens or payable out of the proceeds or production from Property now or hereafter owned or acquired by such Person, (iv) obligations which are evidenced by notes, acceptances, or other instruments, (v) obligations of such Person to purchase securities or other Property arising out of or in connection with the sale of the same or substantially similar securities or Property, (vi) Capitalized Lease Obligations, (vii) Contingent Obligations, (viii) obligations in respect of Letters of Credit, (ix) Rate Management Obligations, (x) preferred stock which is required by the terms thereof to be redeemed, or for which mandatory sinking fund payments are due, by a fixed date, (xi) Off-Balance Sheet Liabilities, (xii) any other obligation for borrowed money or other financial accommodation which in accordance with Agreement Accounting Principles would be shown as a liability on the consolidated balance sheet of such Person and (xiii) amounts outstanding under a Permitted Receivables Securitization. For purposes of determining Indebtedness, the principal amount of the obligations of the Borrower or any of its Subsidiaries in respect of any Rate Management Obligation at any time shall be the maximum aggregate amount (giving effect to any netting agreements) that the Borrower or such Subsidiary would be required to pay if such Rate Management Obligation were terminated at such time of determination.
Indemnitee is defined in Section 9.6(b) .
Index Debt means senior, unsecured, long-term indebtedness for borrowed money of the Borrower that is not guaranteed by any other Person or subject to any other credit enhancement.
Interest Period means, with respect to a Eurodollar Advance, a period of one, two, three or six months commencing on a Business Day selected by the Borrower pursuant to this Agreement. Each Interest Period shall end on the day which corresponds numerically to such date one, two, three or six months thereafter, provided that if any Interest Period commences on the last Business Day of a calendar month, or if there is no such numerically corresponding day in such next, second, third or sixth succeeding month, such Interest Period shall end on the last Business Day of such next, second, third or sixth succeeding month. If an Interest Period would otherwise end on a day which is not a Business Day, such Interest Period shall end on the next succeeding Business Day, provided that if said next succeeding Business Day falls in a new calendar month, such Interest Period shall end on the immediately preceding Business Day.
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Investment of a Person means any loan, advance (other than commission, travel and similar advances to officers and employees made in the ordinary course of business), extension of credit (other than accounts receivable arising in the ordinary course of business on terms customary in the trade) or contribution of capital by such Person; stocks, bonds, mutual funds, partnership interests, notes, debentures or other securities owned by such Person; any deposit accounts and certificate of deposit owned by such Person; and structured notes, derivative financial instruments and other similar instruments or contracts owned by such Person.
JPMorgan means JPMorgan Chase Bank, N.A. and its successors.
Lenders means the lending institutions listed on the signature pages of this Agreement and their respective successors and assigns.
Lending Installation means, with respect to a Lender or the Administrative Agent, the office, branch, subsidiary or Affiliate of such Lender or the Administrative Agent specified in its Administrative Questionnaire or otherwise selected by such Lender or the Administrative Agent pursuant to Section 2.16 .
Letter of Credit of a Person means a letter of credit or similar instrument which is issued upon the application of such Person or upon which such Person is an account party or for which such Person is in any way liable.
LIBO Reference Rate means, for any day, the rate appearing on Reuters BBA Libor Rates Page 3750 (or on any successor or substitute page of such service, or any successor to or substitute for such service, providing rate quotations comparable to those currently provided on such page of such service, as determined by the Administrative Agent from time to time for purposes of providing quotations of interest rates applicable to dollar deposits in the London interbank market) at approximately 11:00 a.m. London time on such day as the rate for United States dollar deposits for a one month interest period.
Lien means any lien (statutory or other), mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance or preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including the interest of a vendor or lessor under any conditional sale, Capitalized Lease or other title retention agreement).
Loans is defined in Section 2.1.
Loan Documents means this Agreement, the Fee Letter and any Notes issued pursuant to Section 2.12 .
London Business Day means a day (other than Saturday or Sunday) on which banks generally are open in London, England for the conduct of substantially all of their commercial lending activities and dealings are carried on in the London interbank market.
Material Adverse Effect means a material adverse effect on (i) the business, Property, condition (financial or otherwise), results of operations, or prospects of the Borrower and its Subsidiaries taken as a whole, (ii) the ability of the Borrower to perform its obligations under the Loan Documents, or (iii) the validity or enforceability of any of the Loan Documents or the rights or remedies of the Administrative Agent or the Lenders thereunder.
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Material Indebtedness means Indebtedness (other than Obligations) of the Borrower or any of its Subsidiaries, in an aggregate principal amount exceeding $25,000,000 (or its equivalent in any other currency).
Material Subsidiary of the Borrower means any Subsidiary (a) whose gross revenues for the fiscal year in respect of which such statements and related balance sheet were prepared (or the last full fiscal year in the case of quarterly financial statements) exceeded 10% of the consolidated gross revenue of the Borrower and all its Subsidiaries for such fiscal year or (b) whose gross assets as at the end of such fiscal year were in excess of 10% of the consolidated gross assets of the Borrower and all its Subsidiaries for such fiscal year.
Moodys means Moodys Investors Service, Inc.
Multiemployer Plan means a Plan maintained pursuant to a collective bargaining agreement or any other arrangement to which the Borrower or any member of the Controlled Group is a party to which more than one employer is obligated to make contributions.
Non-U.S. Lender is defined in Section 3.5(d) .
Note means a promissory note issued at the request of a Lender pursuant to Section 2.12(d), in substantially the form of Exhibit E hereto, evidencing the aggregate indebtedness of the Borrower to such Lender resulting from the Loans made by such Lender.
Obligations means all unpaid principal of and accrued and unpaid interest on the Loans, all accrued and unpaid fees and all expenses, reimbursements, indemnities and other obligations of the Borrower to the Lenders or to any Lender, the Administrative Agent or any indemnified party arising under the Loan Documents.
OFAC means the U.S. Department of the Treasurys Office of Foreign Assets Control, and any successor thereto.
Off-Balance Sheet Liability of a Person means, without duplication, (i) any repurchase obligation or liability of such Person with respect to accounts or notes receivable sold by such Person, (ii) any liability under any Sale and Leaseback Transaction which is not a Capitalized Lease, (iii) any liability under any so-called synthetic lease transaction entered into by such Person, or (iv) any obligation arising with respect to any other transaction which is the functional equivalent of or takes the place of borrowing but which does not constitute a liability on the balance sheets of such Person, but excluding from this clause (iv) all Operating Leases.
Operating Lease of a Person means any lease of Property (other than a Capitalized Lease) by such Person as lessee, which has an original term (including any required renewals and any renewals effective at the option of the lessor) of one year or more.
Other Taxes is defined in Section 3.5(b) .
Outstanding Credit Exposure means, as to any Lender at any time, the aggregate principal amount of all Loans made by such Lender outstanding at such time.
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Parent means IDACORP, Inc., an Idaho corporation, and its successors and assigns.
Participants is defined in Section 12.2(a) .
PATRIOT Act means the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (USA PATRIOT Act, Title III of Pub. L. 107-56 (signed into law October 26, 2001)), as amended from time to time, and any successor statute, and all rules and regulations from time to time promulgated thereunder.
Payment Date means the last day of each March, June, September and December.
PBGC means the Pension Benefit Guaranty Corporation, or any successor thereto.
Permitted Receivables Securitization means a limited recourse or non-recourse sale, assignment or contribution of accounts receivable and related records, collateral and rights of the Borrower and/or one or more of its Subsidiaries to one or more special purpose entities, in connection with the issuance of obligations by any such special purpose entity secured by such assets, the proceeds of the issuance of which obligations shall be made available, directly or indirectly, to the Borrower and/or the applicable Subsidiaries.
Person means any natural person, corporation, firm, joint venture, partnership, limited liability company, association, enterprise, trust or other entity or organization, or any government or political subdivision or any agency, department or instrumentality thereof.
Plan means an employee pension benefit plan which is covered by Title IV of ERISA or subject to the minimum funding standards under Section 412 of the Code as to which the Borrower or any member of the Controlled Group may have any liability.
Prime Rate means the per annum interest rate publicly announced from time to time by JPMorgan, to be its prime rate in effect at its principal office in New York City (which may not necessarily be its lowest or best lending rate), as adjusted to conform to changes as of the opening of business on the date any such change is publicly announced.
Property of a Person means any and all property, whether real, personal, tangible, intangible, or mixed, of such Person, or other assets owned, leased or operated by such Person.
Pro Rata Share means, with respect to a Lender, a portion equal to a fraction the numerator of which is such Lenders Commitment and the denominator of which is the Aggregate Commitment (or, if the Commitments have been terminated, a portion equal to a fraction (i) the numerator of which is equal to the principal amount of such Lenders Loans and (ii) the denominator of which is equal to the aggregate principal amount of all Loans.
Purchasers is defined in Section 12.3(a) .
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Rate Management Obligations of a Person means any and all obligations of such Person, whether absolute or contingent and howsoever and whensoever created, arising, evidenced or acquired (including all renewals, extensions and modifications thereof and substitutions therefor), under (i) any and all Rate Management Transactions, and (ii) any and all cancellations, buy backs, reversals, terminations or assignments of any Rate Management Transactions.
Rate Management Transaction means any transaction (including an agreement with respect thereto) now existing or hereafter entered into by the Borrower or the Parent which is a rate swap, basis swap, forward rate transaction, commodity swap, commodity option, equity or equity index swap, equity or equity index option, bond option, interest rate option, foreign exchange transaction, cap transaction, floor transaction, collar transaction, forward transaction, currency swap transaction, cross-currency rate swap transaction, currency option or any other similar transaction (including any option with respect to any of these transactions) or any combination thereof, whether linked to one or more interest rates, foreign currencies, commodity prices, equity prices or other financial measures.
Register is defined in Section 12.3(c) .
Regulation D means Regulation D of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor thereto or other regulation or official interpretation of said Board of Governors relating to reserve requirements applicable to member banks of the Federal Reserve System.
Regulation U means Regulation U of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor or other regulation or official interpretation of said Board of Governors relating to the extension of credit by banks for the purpose of purchasing or carrying margin stocks applicable to member banks of the Federal Reserve System.
Reportable Event means a reportable event as defined in Section 4043 of ERISA and the regulations issued under such section, with respect to a Plan, excluding, however, such events as to which the PBGC has by regulation waived the requirement of Section 4043(a) of ERISA that it be notified within thirty (30) days of the occurrence of such event, provided that a failure to meet the minimum funding standard of Section 412 of the Code and of Section 302 of ERISA shall be a Reportable Event regardless of the issuance of any such waiver of the notice requirement in accordance with either Section 4043(a) of ERISA or Section 412(d) of the Code.
Reports is defined in Section 9.6 .
Required Lenders means Lenders in the aggregate having at least a majority of the Aggregate Commitment or, if the Aggregate Commitment has been terminated, Lenders in the aggregate holding at least a majority of the Aggregate Outstanding Credit Exposure.
Risk-Based Capital Guidelines is defined in Section 3.2 .
S&P means Standard and Poors Ratings Services, a division of The McGraw Hill Companies, Inc.
Sale and Leaseback Transaction means any sale or other transfer of Property by any Person with the intent to lease such Property as lessee.
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Sanctioned Country means a country subject to a sanctions program identified on the list maintained by OFAC and available at http://www.treas.gov/offices/enforcement/ofac/sanctions/, or as otherwise published from time to time.
Sanctioned Person means (i) a Person named on the list of Specially Designated Nationals or Blocked Persons maintained by OFAC available at http://www.treas.gov/offices/enforcement/ofac/sdn/t11sdn.pdf, or as otherwise published from time to time, or (ii) (A) an agency of the government of a Sanctioned Country, (B) an organization controlled by a Sanctioned Country, or (C) a Person resident in a Sanctioned Country, to the extent subject to a sanctions program administered by OFAC.
SEC Reports means the following reports: (i) the Borrowers Quarterly Reports on Form 10-Q filed with the Securities and Exchange Commission for the quarters ended March 31, 2008, June 30, 2008 and September 30, 2008 and (ii) those certain reports of the Borrower on Form 8-K filed with or furnished to the Securities and Exchange Commission on March 3, March 26, April 2, April 3, June 4, July 1, July 8, July 30, September 16, September 19, October 3 and October 15, 2008 and January 13, January 23, and February 2, 2009.
Single Employer Plan means a Plan maintained by the Borrower or any member of the Controlled Group for employees of the Borrower or any member of the Controlled Group.
Statutory Reserve Rate means a fraction (expressed as a decimal), the numerator of which is the number one and the denominator of which is the number one minus the aggregate of the maximum reserve percentages (including any marginal, special, emergency or supplemental reserves) expressed as a decimal established by the Board of Governors of the Federal Reserve System to which the Administrative Agent is subject for eurocurrency funding (currently referred to as Eurocurrency Liabilities in Regulation D). Such reserve percentages shall include those imposed pursuant to such Regulation D. Eurodollar Advances shall be deemed to constitute eurocurrency funding and to be subject to such reserve requirements without benefit of or credit for proration, exemptions or offsets that may be available from time to time to any Lender under such Regulation D or any comparable regulation. The Statutory Reserve Rate shall be adjusted automatically on and as of the effective date of any change in any reserve percentage.
Subsidiary of a Person means (i) any corporation more than 50% of the outstanding securities having ordinary voting power of which shall at the time be owned or controlled, directly or indirectly, by such Person or by one or more of its Subsidiaries or by such Person and one or more of its Subsidiaries, or (ii) any partnership, limited liability company, association, joint venture or similar business organization more than 50% of the ownership interests having ordinary voting power of which shall at the time be so owned or controlled. Unless otherwise expressly provided, all references herein to a Subsidiary shall mean a Subsidiary of the Borrower.
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Substantial Portion means, with respect to the Property of the Borrower and its Subsidiaries, Property which (i) represents more than 10% of the consolidated assets of the Borrower and its Subsidiaries as would be shown in the consolidated financial statements of the Borrower and its Subsidiaries as of the beginning of the twelve-month period ending with the month in which such determination is made, or (ii) is responsible for more than 10% of the consolidated net sales or of the consolidated net income of the Borrower and its Subsidiaries as reflected in the financial statements referred to in clause (i) above.
Taxes means any and all present or future taxes, duties, levies, imposts, deductions, charges or withholdings, and any and all liabilities with respect to the foregoing, but excluding Excluded Taxes and Other Taxes.
Transferee is defined in Section 12.4 .
Type is defined in Section 2.3 .
Unfunded Liabilities means the amount (if any) by which the present value of all vested and unvested accrued benefits under all Single Employer Plans exceeds the fair market value of all such Plan assets allocable to such benefits, all determined as of the then most recent valuation date for such Plans using PBGC actuarial assumptions for single employer plan terminations.
Unmatured Default means an event which but for the lapse of time or the giving of notice, or both, would constitute a Default.
Wholly-Owned Subsidiary of a Person means (i) any Subsidiary all of the outstanding voting securities of which shall at the time be owned or controlled, directly or indirectly, by such Person or one or more Wholly-Owned Subsidiaries of such Person, or by such Person and one or more Wholly-Owned Subsidiaries of such Person, or (ii) any partnership, limited liability company, association, joint venture or similar business organization 100% of the ownership interests having ordinary voting power of which shall at the time be so owned or controlled.
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(c) Prior to or within one (1) Business Day of the receipt of proceeds related to the remarketing of any Bonds, the Borrower shall repay or prepay (as the case may be) the then-outstanding Loans by paying to the Administrative Agent, for the ratable account of the Lenders based upon the Lenders respective Pro Rata Shares, an amount equal to the sum of (i) the aggregate principal amount of the Bonds remarketed plus (ii) all accrued and unpaid interest on the principal amount of Loans so repaid or prepaid; provided that if a Eurodollar Advance is outstanding, and the proceeds of the remarketing of any Bonds are received prior to a date that is the end of the Interest Period for such Eurodollar Advance, the Borrower shall repay or prepay the amount set forth above within five (5) Business Days of the receipt of proceeds related to such remarketing. As used herein, Bonds shall mean (i) the $116,300,000 Sweetwater County, Wyoming Pollution Control Revenue Refunding Bonds (Idaho Power Company Project) Series 2006 and (ii) the $49,800,000 Humboldt County, Nevada Pollution Control Revenue Refunding Bonds (Idaho Power Company Project) Series 2003.
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. The Loans may be comprised of Floating Rate Advances or Eurodollar Advances (each, a Type of Advance), or a combination thereof, selected by the Borrower in accordance with Sections 2.7 and 2.8 . Each Eurodollar Advance shall be in the amount of $5,000,000 or a higher integral multiple of $100,000, and each Floating Rate Advance shall be in the amount of $5,000,000 or a higher integral multiple of $100,000.
.
The fees described in this Section 2.4 shall be fully earned when paid and shall not be refundable for any reason whatsoever.
. The Commitments shall terminate upon the earlier of (a) the funding of the Loans to the Borrower in the manner specified in Section 2.1 and (ii) 5:00 p.m. on the Closing Date.
. The Borrower may from time to time pay, without penalty or premium, all outstanding Floating Rate Advances or, in an aggregate amount of $5,000,000 or a higher integral multiple of $100,000, any portion of the outstanding Floating Rate Advances upon one (1) Business Days prior notice to the Administrative Agent. The Borrower may from time to time pay, subject to the payment of any funding indemnification amounts required by Section 3.4 but without penalty or premium, all outstanding Eurodollar Advances or, in an aggregate amount of $5,000,000 or a higher integral multiple of $100,000, any portion of the outstanding Eurodollar Advances upon three (3) Business Days prior notice to the Administrative Agent.
. In order to obtain the Loans hereunder (excluding, for the avoidance of doubt, conversions of outstanding Loans which shall be made pursuant to Section 2.8 ), the Borrower shall give the Administrative Agent irrevocable notice (the Borrowing Notice ) not later than 11:00 a.m. at least one (1) Business Day before the Closing Date to the extent such Loans will constitute a Floating Rate Advance, and one (1) Business Day before the Closing Date to the extent such Loans will constitute a Eurodollar Advance ( provided , that any request for a Eurodollar Advance shall be accompanied by a written agreement to indemnify the Lenders for loss or costs of the type described in Section 3.4 notwithstanding that this Agreement may not yet be effective), specifying:
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Not later than 1:00 p.m. on the Closing Date, each Lender shall make available its Pro Rata Share of the Loans in funds immediately available to the Administrative Agent at its address specified pursuant to Article 13 . The Administrative Agent will make the funds so received from the Lenders available to the Borrower at the Administrative Agents aforesaid address.
. Floating Rate Advances shall continue as Floating Rate Advances unless and until such Floating Rate Advances are converted into Eurodollar Advances pursuant to this Section 2.8 or are repaid in accordance with Section 2.6 or Section 2.2(c) . Each Eurodollar Advance shall continue as a Eurodollar Advance until the end of the then applicable Interest Period therefor, at which time such Eurodollar Advance shall be automatically converted into a Floating Rate Advance unless (x) such Eurodollar Advance is or was repaid in accordance with Section 2.6 or Section 2.2(c) or (y) the Borrower shall have given the Administrative Agent a Conversion/Continuation Notice (as defined below) requesting that, at the end of such Interest Period, such Eurodollar Advance continue as a Eurodollar Advance for the same or another Interest Period. Subject to Section 2.3 , the Borrower may elect from time to time to convert all or any part of a Floating Rate Advance into a Eurodollar Advance. The Borrower shall give the Administrative Agent irrevocable notice (a Conversion/Continuation Notice ) of each conversion of a Floating Rate Advance into a Eurodollar Advance or continuation of a Eurodollar Advance not later than 11:00 a.m. at least three (3) Business Days prior to the date of the requested conversion or continuation, specifying:
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. Notwithstanding anything to the contrary contained in Sections 2.7 , 2.8 or 2.9 , during the continuance of a Default the Required Lenders may, at their option, by notice to the Borrower, declare that no Advance may be made as, converted into or continued as a Eurodollar Advance. During the continuance of a Default the Required Lenders may, at their option, by notice to the Borrower, declare that (i) each Eurodollar Advance shall bear interest for the remainder of the applicable Interest Period at the rate otherwise applicable to such Interest Period plus 2% per annum and (ii) each Floating Rate Advance shall bear interest at a rate per annum equal to the Alternate Base Rate in effect from time to time plus 2% per annum; provided that during the continuance of a Default under Sections 7(g) or 7(h) , the interest rates set forth in clauses (i) and (ii) above shall be applicable to all Advances without any election or action on the part of the Administrative Agent or any Lender.
. All payments of the Obligations hereunder shall be made, without setoff, deduction, or counterclaim, in immediately available funds to the Administrative Agent at the Administrative Agents address specified pursuant to Article 13 , or at any other Lending Installation of the Administrative Agent specified in writing by the Administrative Agent to the Borrower, by 12:00 noon (local time) on the date when due and shall be applied ratably by the Administrative Agent among the Lenders. Each payment delivered to the Administrative Agent for the account of any Lender shall be delivered promptly by the Administrative Agent to such Lender in the same type of funds that the Administrative Agent received at its address specified pursuant to Article 13 or at any Lending Installation specified in a notice received by the Administrative Agent from such Lender. The Administrative Agent is hereby authorized to charge any account of the Borrower maintained with JPMorgan for each payment of principal, interest and fees as it becomes due hereunder.
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. The Borrower hereby authorizes the Lenders and the Administrative Agent to extend, convert or continue Advances, effect selections of Types of Advances and to transfer funds based on telephonic notices made by any person or persons the Administrative Agent or any Lender in good faith believes to be acting on behalf of the Borrower, it being understood that the foregoing authorization is specifically intended to allow the Borrowing Notice and Conversion/Continuation Notices to be given telephonically. The Borrower agrees to deliver promptly to the Administrative Agent a written confirmation, if such confirmation is requested by the Administrative Agent or any Lender, of each telephonic notice signed by an Authorized Officer. If the written confirmation differs in any material respect from the action taken by the Administrative Agent and the Lenders, the records of the Administrative Agent and the Lenders shall govern absent manifest error.
.
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. Promptly after receipt thereof, the Administrative Agent will notify each Lender of the contents of the Borrowing Notice and each Conversion/Continuation Notice and repayment notice received by it hereunder. The Administrative Agent will notify each Lender of the interest rate applicable to each Eurodollar Advance promptly upon determination of such interest rate and will give each Lender prompt notice of each change in the Alternate Base Rate.
. Each Lender may book its Loans at any Lending Installation selected by such Lender and may change its Lending Installation from time to time. All terms of this Agreement shall apply to any such Lending Installation and the Loans and any Notes issued hereunder shall be deemed held by each Lender for the benefit of any such Lending Installation. Each Lender may, by written notice to the Administrative Agent and the Borrower in accordance with Article 13 , designate replacement or additional Lending Installations through which Loans will be made by it and for whose account Loan payments are to be made.
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. Unless the Borrower or a Lender, as the case may be, notifies the Administrative Agent prior to the date on which it is scheduled to make payment to the Administrative Agent of (i) in the case of a Lender, the proceeds of a Loan or (ii) in the case of the Borrower, a payment of principal, interest or fees to the Administrative Agent for the account of the Lenders, that it does not intend to make such payment, the Administrative Agent may assume that such payment has been made. The Administrative Agent may, but shall not be obligated to, make the amount of such payment available to the intended recipient in reliance upon such assumption. If such Lender or the Borrower, as the case may be, has not in fact made such payment to the Administrative Agent, the recipient of such payment shall, on demand by the Administrative Agent, repay to the Administrative Agent the amount so made available together with interest thereon in respect of each day during the period commencing on the date such amount was so made available by the Administrative Agent until the date the Administrative Agent recovers such amount at a rate per annum equal to (x) in the case of payment by a Lender, the Federal Funds Effective Rate for such day for the first three (3) days and, thereafter, the interest rate applicable to the relevant Loan or (y) in the case of payment by the Borrower, the interest rate applicable to the relevant Loan.
. If the Borrower is required pursuant to Sections 3.1, 3.2 or 3.5 to make any additional payment to any Lender or if any Lenders obligation to make or continue, or to convert Floating Rate Advances into, Eurodollar Advances shall be suspended pursuant to Section 3.3 (any Lender so affected an Affected Lender ), the Borrower may elect, if such amounts continue to be charged or such suspension is still effective, to replace such Affected Lender as a Lender party to this Agreement, provided that no Default or Unmatured Default shall have occurred and be continuing at the time of such replacement, and provided further that, concurrently with such replacement, (i) another bank or other entity which is reasonably satisfactory to the Borrower and the Administrative Agent shall agree, as of such date, to purchase for cash the Advances and other Obligations (excluding the amounts payable by the Borrower pursuant to clause (ii) of this proviso) due to the Affected Lender pursuant to an assignment substantially in the form of Exhibit C and to become a Lender for all purposes under this Agreement and to assume all obligations of the Affected Lender to be terminated as of such date and to comply with the requirements of Section 12.3 applicable to assignments, and (ii) the Borrower shall pay to such Affected Lender in same day funds on the day of such replacement (A) all interest, fees and other amounts then accrued but unpaid to such Affected Lender by the Borrower hereunder to and including the date of termination, including payments due to such Affected Lender under Sections 3.1, 3.2 or 3.5 , and (B) an amount, if any, equal to the payment which would have been due to such Lender on the day of such replacement under Section 3.4 had the Loans of such Affected Lender been prepaid on such date rather than sold to the replacement Lender.
. If, on or after the Closing Date, the adoption of any law or any governmental or quasi governmental rule, regulation, policy, guideline or directive (whether or not having the force of law), or any change in the interpretation or administration thereof by any governmental or quasi-governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Lender or applicable Lending Installation with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency:
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and the result of any of the foregoing is to increase the cost to such Lender or applicable Lending Installation of making or maintaining its Eurodollar Advances, or to reduce the return received by such Lender or applicable Lending Installation in connection with such Eurodollar Advances, then, within fifteen (15) days of demand by such Lender, the Borrower shall pay such Lender such additional amount or amounts as will compensate such Lender for such increased cost or reduction in amount received.
. If a Lender determines the amount of capital required or expected to be maintained by such Lender, any Lending Installation of such Lender, or any corporation controlling such Lender is increased as a result of a Change, then, within fifteen (15) days of demand by such Lender, the Borrower shall pay such Lender the amount necessary to compensate for any shortfall in the rate of return on the portion of such increased capital which such Lender determines is attributable to this Agreement, its Outstanding Credit Exposure or its Commitment to make Loans hereunder (after taking into account such Lenders policies as to capital adequacy). Change means (i) any change after the Closing Date in the Risk-Based Capital Guidelines, or (ii) any adoption of or change in any other law, governmental or quasi governmental rule, regulation, policy, guideline, interpretation, or directive (whether or not having the force of law) after the Closing Date which affects the amount of capital required or expected to be maintained by any Lender or any Lending Installation or any corporation controlling any Lender. Risk-Based Capital Guidelines means (i) the risk based capital guidelines in effect in the United States on the Closing Date, including transition rules, and (ii) the corresponding capital regulations promulgated by regulatory authorities outside the United States implementing the July 1988 report of the Basle Committee on Banking Regulation and Supervisory Practices Entitled International Convergence of Capital Measurements and Capital Standards, including transition rules, and any amendments to such regulations adopted prior to the Closing Date.
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. If any Lender determines that maintenance of its Eurodollar Advances at a suitable Lending Installation would violate any applicable law, rule, regulation, or directive, whether or not having the force of law, or if the Required Lenders determine that (i) deposits of a type and maturity appropriate to match fund Eurodollar Advances are not available or (ii) the interest rate applicable to Eurodollar Advances does not accurately reflect the cost of making or maintaining Eurodollar Advances, then the Administrative Agent shall suspend the availability of Eurodollar Advances and require any affected Eurodollar Advances to be repaid or converted to Floating Rate Advances, subject to the payment of any funding indemnification amounts required by Section 3.4 .
. If any payment of a Eurodollar Advance occurs on a date which is not the last day of the applicable Interest Period, whether because of acceleration, prepayment or otherwise, or a Eurodollar Advance is not made on the date specified by the Borrower for any reason other than default by the Lenders, the Borrower will indemnify each Lender for any loss or cost incurred by it resulting therefrom, including any loss or cost in liquidating or employing deposits acquired to fund or maintain such Eurodollar Advance.
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Without limiting the generality of the foregoing, in the event that the Borrower is resident for tax purposes in the United States of America, any Non-U.S. Lender shall deliver to the Borrower and the Administrative Agent (in such number of copies as shall be requested by the recipient) on or prior to the date on which such Non−U.S. Lender becomes a Lender under this Agreement (and from time to time thereafter upon the request of the Borrower or the Administrative Agent, but only if such Non−U.S. Lender is legally entitled to do so), whichever of the following is applicable:
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. To the extent reasonably possible, each Lender shall designate an alternate Lending Installation with respect to its Eurodollar Advances to reduce any liability of the Borrower to such Lender under Sections 3.1, 3.2 and 3.5 or to avoid the unavailability of Eurodollar Advances under Section 3.3, so long as such designation is not, in the judgment of such Lender, disadvantageous to such Lender. Each Lender shall deliver a written statement of such Lender to the Borrower (with a copy to the Administrative Agent) as to the amount due, if any, under Sections 3.1, 3.2, 3.4 or 3.5 . Such written statement shall set forth in reasonable detail the calculations upon which such Lender determined such amount and shall be final, conclusive and binding on the Borrower in the absence of manifest error. Determination of amounts payable under such Sections in connection with a Eurodollar Advance shall be calculated as though each Lender funded its Eurodollar Advance through the purchase of a deposit of the type and maturity corresponding to the deposit used as a reference in determining the Eurodollar Rate applicable to such Loan, whether in fact that is the case or not. Unless otherwise provided herein, the amount specified in the written statement of any Lender shall be payable on demand after receipt by the Borrower of such written statement. The obligations of the Borrower under Sections 3.1, 3.2, 3.4 and 3.5 shall survive payment of the Obligations and termination of this Agreement.
. The Lenders shall not be required to make the Loans hereunder as described in Section 2.1 , and the Closing Date shall not occur, unless:
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The Borrower represents and warrants to the Lenders that:
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. Each of the Borrower and its Subsidiaries is a corporation, partnership (in the case of Subsidiaries only) or limited liability company duly and properly incorporated or organized, as the case may be, validly existing and (to the extent such concept applies to such entity) in good standing under the laws of its jurisdiction of incorporation or organization and has all requisite authority to conduct its business in each jurisdiction in which its business is conducted, except to the extent that failure to do so could not reasonably be expected to have a Material Adverse Effect.
. The Borrower has the power and authority and legal right to execute and deliver the Loan Documents and to perform its obligations thereunder. The execution and delivery by the Borrower of the Loan Documents and the performance of its obligations thereunder have been duly authorized by proper corporate proceedings, and the Loan Documents constitute legal, valid and binding obligations of the Borrower enforceable against the Borrower in accordance with their terms, except as enforceability may be limited by bankruptcy, insolvency or similar laws affecting the enforcement of creditors rights generally.
. Neither the execution and delivery by the Borrower of the Loan Documents, nor the consummation of the transactions therein contemplated, nor compliance with the provisions thereof will violate, except to the extent that such violation, alone or in the aggregate, could not reasonably be expected to have a Material Adverse Effect, (i) any law, rule, regulation, order, writ, judgment, injunction, decree or award binding on the Borrower or any of its Subsidiaries or (ii) the Borrowers or any Subsidiarys articles or certificate of incorporation, partnership agreement, certificate of partnership, articles or certificate of organization, bylaws, or operating or other management agreement, as the case may be, or (iii) the provisions of any indenture, instrument or agreement to which the Borrower or any of its Subsidiaries is a party or is subject, or by which it, or its Property, is bound, or conflict with or constitute a default thereunder, or result in, or require, the creation or imposition of any Lien in, of or on the Property of the Borrower or a Subsidiary pursuant to the terms of any such indenture, instrument or agreement. No order, consent, adjudication, approval, license, authorization, or validation of, or filing, recording or registration with, or exemption by, or other action in respect of any governmental or public body or authority, or any subdivision thereof, which has not been obtained by the Borrower or any of its Subsidiaries, is required to be obtained by the Borrower or any of its Subsidiaries in connection with the execution and delivery of the Loan Documents, the borrowings under this Agreement, the payment and performance by the Borrower of the Obligations or the legality, validity, binding effect or enforceability of any of the Loan Documents.
. The December 31, 2007 consolidated financial statements of the Borrower and its Subsidiaries heretofore delivered to the Lenders were prepared in accordance with the Agreement Accounting Principles in effect on the date such statements were prepared and fairly present the consolidated financial condition and operations of the Borrower and its Subsidiaries at such date and the consolidated results of their operations for the period then ended.
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. Since December 31, 2007, there has been no change in the business, Property, condition (financial or otherwise) or results of operations of the Borrower and its Subsidiaries which could reasonably be expected to have a Material Adverse Effect, except as set forth in the SEC Reports.
. The Borrower and its Subsidiaries have filed all material United States federal tax returns and all other tax returns which are required to be filed and have paid all taxes due pursuant to said returns or pursuant to any assessment received by the Borrower or any of its Subsidiaries, except such taxes, if any, as are being contested in good faith and as to which adequate reserves have been provided in accordance with Agreement Accounting Principles. No tax liens have been filed and no claims are being asserted with respect to any such taxes claimed to be due and payable that would, if adversely determined, have a Material Adverse Effect. The charges, accruals and reserves for taxes on the books of the Borrower and its Subsidiaries (to the extent in excess of $5,000,000) are adequate under Agreement Accounting Principles. Notwithstanding any provision in this Agreement to the contrary, the only representations and warranties made by the Borrower with respect to matters relating to taxes shall be the representations and warranties set forth in this Section 5.6 , and this Agreement shall not be interpreted in any manner that is contrary hereto.
. Except as set forth in the most recent consolidated financial statements provided to the Administrative Agent pursuant to Section 5.4 or Section 6.1 , respectively, and the SEC Reports, there is no litigation, arbitration, governmental investigation, proceeding or inquiry pending or, to the knowledge of any of their officers, threatened against or affecting the Borrower or any of its Subsidiaries which could reasonably be expected to have a Material Adverse Effect or which seeks to prevent, enjoin or delay the making of the Loans. Other than any liability incident to any litigation, arbitration or proceeding, which, if decided adversely, would not reasonably be expected to have a Material Adverse Effect, the Borrower has no material contingent liabilities or obligations not provided for or disclosed in the most recent consolidated financial statements provided to the Administrative Agent pursuant to Section 5.4 or Section 6.1 , respectively, or the SEC Reports.
. Schedule 5.8 contains an accurate list of all Subsidiaries of the Borrower as of the Closing Date, setting forth their respective jurisdictions of organization and the percentage of their respective capital stock or other ownership interests owned by the Borrower or other Subsidiaries. All of the issued and outstanding shares of capital stock or other ownership interests of such Subsidiaries have been (to the extent such concepts are relevant with respect to such ownership interests) duly authorized and issued and are fully paid and nonassessable.
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. The Unfunded Liabilities of all Single Employer Plans do not in the aggregate exceed $75,000,000. Neither the Borrower nor any other member of the Controlled Group has incurred, or is reasonably expected to incur, any withdrawal liability to Multiemployer Plans in excess of $25,000,000 in the aggregate. Each Plan complies in all material respects with all applicable requirements of law and regulations, no Reportable Event has occurred with respect to any Plan, neither the Borrower nor any other member of the Controlled Group has withdrawn from any Plan or initiated steps to do so, and no steps have been taken to reorganize or terminate any Plan.
. No information, exhibit or report furnished by the Borrower or any of its Subsidiaries to the Administrative Agent, the Arranger or to any Lender in connection with the negotiation of, or compliance with, the Loan Documents contained any material misstatement of fact or omitted to state a material fact or any fact necessary to make the statements contained therein not misleading.
. Margin stock (as defined in Regulation U) constitutes less than 25% of the value of those assets of the Borrower and its Subsidiaries which are subject to any limitation on sale, pledge, or other restriction hereunder.
. Except as set forth in Schedule 5.12 , neither the Borrower nor any Subsidiary is a party to any agreement or instrument or subject to any charter or other corporate restriction (a) which either prohibits or restricts the ability of any Subsidiary of Borrower to declare or pay dividends to the Borrower, or (b) which could reasonably be expected to have a Material Adverse Effect. Neither the Borrower nor any Subsidiary is in default in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in (i) any agreement to which it is a party, which default could reasonably be expected to have a Material Adverse Effect or (ii) any agreement or instrument evidencing or governing Material Indebtedness, which default could reasonably be expected to have a Material Adverse Effect.
. The Borrower and its Subsidiaries have complied with all applicable statutes, rules, regulations, orders and restrictions of any domestic or foreign government or any instrumentality or agency thereof having jurisdiction over the conduct of their respective businesses or the ownership of their respective Property except for any failure to comply with any of the foregoing which could not reasonably be expected to have a Material Adverse Effect.
. Except as set forth on Schedule 5.14 , as of the Closing Date, the Borrower and its Subsidiaries will have good title, free of all Liens other than those permitted by Section 6.11 , to all of the Property and assets reflected in the Borrowers most recent consolidated financial statements provided to the Administrative Agent and the SEC Reports as owned by the Borrower and its Subsidiaries.
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. The Borrower is not an entity deemed to hold plan assets within the meaning of 29 C.F.R. § 2510.3-101 of an employee benefit plan (as defined in Section 3(3) of ERISA) which is subject to Title I of ERISA or any plan (within the meaning of Section 4975 of the Code), and neither the execution of this Agreement nor the making of the Loans hereunder gives rise to a prohibited transaction within the meaning of Section 406 of ERISA or Section 4975 of the Code.
. In the ordinary course of its business, the Borrower considers the effect of Environmental Laws on the business of the Borrower and its Subsidiaries, in the course of which it identifies and evaluates potential risks and liabilities accruing to the Borrower due to Environmental Laws. On the basis of this consideration, the Borrower has concluded that the potential risks and liabilities accruing to the Borrower due to Environmental Laws could not reasonably be expected to have a Material Adverse Effect. Neither the Borrower nor any Subsidiary has received any notice to the effect that its operations are not in material compliance with any of the requirements of applicable Environmental Laws or are the subject of any federal or state investigation evaluating whether any remedial action is needed to respond to a release of any toxic or hazardous waste or substance into the environment, which noncompliance or remedial action could reasonably be expected to have a Material Adverse Effect.
. The Borrower is not an investment company or a company controlled by an investment company, within the meaning of the Investment Company Act of 1940.
.
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During the term of this Agreement, unless the Required Lenders shall otherwise consent in writing:
. The Borrower will maintain, for itself and each Subsidiary, a system of accounting established and administered in accordance with the Agreement Accounting Principles, and furnish to the Administrative Agent in sufficient copies for each of the Lenders:
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(ix) Promptly after Moodys or S&P shall have announced a change in the rating established or deemed to have been established for the Index Debt, written notice of such rating change.
. The Borrower will, and will cause each Subsidiary to, use the proceeds of the Loans solely to repay the loans and other obligations under the Existing Credit Agreement.
The Borrower will, and will cause each Subsidiary to, give prompt notice in writing to the Lenders of the occurrence of (i) any Default or Unmatured Default and (ii) the commencement of or any ruling in any litigation, or any other development, financial or otherwise, which could reasonably be expected to have a Material Adverse Effect.
. The Borrower will, and will cause each Material Subsidiary to, carry on and conduct its business in substantially the same manner and in substantially the same fields of enterprise as it is presently conducted and do all things necessary to remain duly incorporated or organized, validly existing and (to the extent such concept applies to such entity) in good standing as a domestic corporation, partnership or limited liability company in its jurisdiction of incorporation or organization, as the case may be, and maintain all requisite authority to conduct its business in each jurisdiction in which its business is conducted, except where the failure to do so could not reasonably be expected to have a Material Adverse Effect.
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. The Borrower will, and will cause each Subsidiary to, timely file complete and correct United States federal and applicable foreign, state and local tax returns required by law and pay when due all taxes, assessments and governmental charges and levies upon it or its income, profits or Property, except those which are being contested in good faith by appropriate proceedings and with respect to which adequate reserves have been set aside in accordance with Agreement Accounting Principles.
. The Borrower will, and will cause each Subsidiary to, maintain with financially sound and reputable insurance companies insurance on all their Property in such amounts and covering such risks as is consistent with sound business practice, and the Borrower will furnish to any Lender upon request full information as to the insurance carried.
. The Borrower will, and will cause each Subsidiary to, comply in all material respects with all laws, rules, regulations, orders, writs, judgments, injunctions, decrees or awards to which it may be subject, including all Environmental Laws.
. The Borrower will, and will cause each Subsidiary to, do all things necessary to maintain, preserve, protect and keep its Property in good repair, working order and condition, and make all necessary and proper repairs, renewals and replacements so that its business carried on in connection therewith may be properly conducted at all times.
. The Borrower will, and will cause each Subsidiary to, permit the Administrative Agent and the Lenders, by their respective representatives and agents, to inspect any of the Property, books and financial records of the Borrower and each Subsidiary, to examine and make copies of the books of accounts and other financial records of the Borrower and each Subsidiary, and to discuss the affairs, finances and accounts of the Borrower and each Subsidiary with, and to be advised as to the same by, their respective officers at such reasonable times and intervals as the Administrative Agent or any Lender may designate.
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. Without the prior written consent of the Required Lenders (such consent not to be unreasonably withheld), the Borrower will not, nor will it permit any Material Subsidiary to, merge or consolidate with or into any other Person, or sell or otherwise dispose of all or substantially all of its Property to another Person except that (i) a Material Subsidiary may merge into the Borrower or a Wholly-Owned Subsidiary, (ii) a Material Subsidiary may dispose of all or substantially all of its Property to the Borrower or a Wholly-Owned Subsidiary, or (iii) the Borrower or any Subsidiary may sell, transfer, contribute, convey or dispose of accounts, general intangibles and/or chattel paper (each as defined in Article 9 of the Uniform Commercial Code) and associated collateral, lockbox and other collection accounts, records and/or proceeds in connection with a Permitted Receivables Securitization.
. The Borrower will not, nor will it permit any Material Subsidiary to, create, incur, or suffer to exist any Lien in, of or on the Property of the Borrower or any Material Subsidiary, except:
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. The Borrower will not permit the ratio, determined as of the end of each of its fiscal quarters, of (i) Consolidated Indebtedness to (ii) Consolidated Total Capitalization to be greater than 0.65 to 1.0.
. Without the prior written consent of the Required Lenders (such consent not to be unreasonably withheld), the Borrower will not, nor will it permit any Subsidiary to, make or suffer to exist any Investments (including loans and advances to, and other Investments in, Subsidiaries, or commitments therefor, or to create any Subsidiary or to become or remain a partner in any partnership or joint venture), or to make any Acquisition of any Person, except:
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. The Borrower will not, nor will it permit any Material Subsidiary to, become a party to any agreement prohibiting or restricting the ability of such Material Subsidiary to declare or pay dividends to the Borrower, except as disclosed in Schedule 5.12 , other than prohibitions or restrictions in connection with a Permitted Receivables Securitization.
. The Borrower will not, and will not permit any Subsidiary to, enter into any transaction (including the purchase or sale of any Property or service) with, or make any payment or transfer to, any Affiliate that is not a Subsidiary except in the ordinary course of business and pursuant to the reasonable requirements of the Borrowers or such Subsidiarys business and upon fair and reasonable terms no less favorable to the Borrower or such Subsidiary than the Borrower or such Subsidiary would obtain in a comparable arms-length transaction; provided , that for the avoidance of doubt, nothing contained in this Section 6.15 shall prohibit the Borrower from paying dividends to the Parent.
. The Borrower will, and will cause each of its Subsidiaries to, (i) refrain from doing business in a Sanctioned Country or with a Sanctioned Person in violation of the economic sanctions of the United States administered by OFAC, and (ii) provide, to the extent commercially reasonable, such information and take such actions as are reasonably requested by the Administrative Agent or any Lender in order to assist the Administrative Agent and the Lenders in maintaining compliance with the PATRIOT Act.
The occurrence of any one or more of the following events shall constitute a Default:
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. Neither this Agreement or any other Loan Document nor any provision hereof or thereof may be waived, amended or modified except pursuant to an agreement or agreements in writing entered into by the Borrower and the Required Lenders (or by the Administrative Agent at the direction or with the consent of the Required Lenders); provided , however , that no such agreement shall:
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. No delay or omission of the Lenders or the Administrative Agent to exercise any right under the Loan Documents shall impair such right or be construed to be a waiver of any Default or an acquiescence therein, and the making of any Loans notwithstanding the existence of a Default or the inability of the Borrower to satisfy the conditions precedent to such Loans shall not constitute any waiver or acquiescence. Any single or partial exercise of any such right shall not preclude other or further exercise thereof or the exercise of any other right, and no waiver, amendment or other variation of the terms, conditions or provisions of the Loan Documents whatsoever shall be valid unless in writing signed by the Lenders required pursuant to Section 8.2 , and then only to the extent specifically set forth in such writing. All remedies contained in the Loan Documents or by law afforded shall be cumulative and all shall be available to the Administrative Agent and the Lenders until the Obligations have been paid in full.
. All representations and warranties of the Borrower contained in this Agreement shall survive the making of the Loans herein contemplated.
. Anything contained in this Agreement to the contrary notwithstanding, no Lender shall be obligated to extend credit to the Borrower in violation of any limitation or prohibition provided by any applicable statute or regulation.
. Section headings in the Loan Documents are for convenience of reference only, and shall not govern the interpretation of any of the provisions of the Loan Documents.
. The Loan Documents embody the entire agreement and understanding among the Borrower, the Administrative Agent and the Lenders and supersede all prior agreements and understandings among the Borrower, the Administrative Agent and the Lenders relating to the subject matter thereof.
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. The respective obligations of the Lenders hereunder are several and not joint and no Lender shall be the partner or agent of any other (except to the extent to which the Administrative Agent is authorized to act as such). The failure of any Lender to perform any of its obligations hereunder shall not relieve any other Lender from any of its obligations hereunder. This Agreement shall not be construed so as to confer any right or benefit upon any Person other than the parties to this Agreement and any Person indemnified under Section 9.6 or any other provision of this Agreement, and their respective successors and assigns, provided that the parties hereto expressly agree that the Arranger shall enjoy the benefits of the provisions of Sections 9.6, 9.10 and 10.11 to the extent specifically set forth therein and shall have the right to enforce such provisions on its own behalf and in its own name to the same extent as if it were a party to this Agreement.
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. All statements, notices, closing documents, and requests hereunder shall be furnished to the Administrative Agent with sufficient counterparts so that the Administrative Agent may furnish one to each of the Lenders.
. Except as provided to the contrary herein, all accounting terms used herein shall be interpreted and all accounting determinations hereunder shall be made in accordance with Agreement Accounting Principles.
. Any provision in any Loan Document that is held to be inoperative, unenforceable, or invalid in any jurisdiction shall, as to that jurisdiction, be inoperative, unenforceable, or invalid without affecting the remaining provisions in that jurisdiction or the operation, enforceability, or validity of that provision in any other jurisdiction, and to this end the provisions of all Loan Documents are declared to be severable.
. The relationship between the Borrower on the one hand and the Lenders and the Administrative Agent on the other hand shall be solely that of borrower and lender. None of the Administrative Agent, the Arranger or any Lender shall have any fiduciary responsibilities to the Borrower. None of the Administrative Agent, the Arranger or any Lender undertakes any responsibility to the Borrower to review or inform the Borrower of any matter in connection with any phase of the Borrowers business or operations. The Borrower agrees that no Indemnitee shall have liability to the Borrower (whether sounding in tort, contract or otherwise) for losses suffered by the Borrower in connection with, arising out of, or in any way related to, the transactions contemplated and the relationship established by the Loan Documents, or any act, omission or event occurring in connection therewith, unless it is determined in a final non-appealable judgment by a court of competent jurisdiction that such losses resulted from the gross negligence or willful misconduct of the party from which recovery is sought. No Indemnitee shall have any liability with respect to, and the Borrower hereby waives, releases and agrees not to sue for, (i) any special, indirect, consequential or punitive damages suffered by the Borrower in connection with, arising out of, or in any way related to the Loan Documents or the transactions contemplated thereby, and (ii) any damages arising from the use by unintended recipients of any information or other materials distributed by it through telecommunications, electronic or other information transmission systems in connection with this Agreement or the other Loan Documents or the transactions contemplated hereby or thereby. The provisions of this Section 9.10 shall survive the termination of this Agreement.
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. Each Lender agrees to hold any confidential information which it may receive from the Borrower pursuant to this Agreement in confidence, except for disclosure (i) to its Affiliates, directors, officers, employees and agents and to other Lenders and their respective Affiliates, directors, officers, employees and agents (ii) to legal counsel, accountants, and other professional advisors to such Lender or to a Transferee, (iii) to regulatory officials having jurisdiction over such Lender or any of its Affiliates, (iv) as required by law, regulation, or legal process, (v) as required in connection with any legal proceeding to which such Lender is a party, (vi) to such Lenders actual or prospective direct or indirect contractual counterparties in Rate Management Transactions or to legal counsel, accountants and other professional advisors to such counterparties, (vii) permitted by Section 12.4, (viii) in connection with the exercise of rights or remedies hereunder or any action or proceeding relating to this agreement and (ix) to the extent, and in the manner, consented to by the Borrower. In the case of any disclosure pursuant to clause (i), (ii), (vi) or (vii) above, each Person to whom such disclosure is made will be informed of the confidential nature of such information and instructed to keep such information confidential. In the case of any requested disclosure pursuant to clause (iv) or (v) above, the applicable Lender will give prompt notice of the request to the Borrower (unless prohibited by the terms of the applicable law, regulation, subpoena or other legal process or proceeding) so that the Borrower may endeavor to obtain a protective order or other assurance of confidential treatment.
. Each Lender hereby represents that it is not relying on or looking to any margin stock (as defined in Regulation U of the Board of Governors of the Federal Reserve System) for the repayment of the Loans provided for herein.
. The Borrower and each Lender hereby acknowledge and agree that JPMorgan and/or its Affiliates from time to time may hold investments in, make other loans to or have other relationships with the Borrower and its Affiliates.
. Each Lender that is subject to the PATRIOT Act and the Administrative Agent (for itself and not on behalf of any Lender) hereby notifies the Borrower that pursuant to the requirements of the PATRIOT Act, it is required to obtain, verify and record information that identifies the Borrower, which information includes the name and address of the Borrower and other information that will allow such Lender or the Administrative Agent, as applicable, to identify the Borrower in accordance with the PATRIOT Act.
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. This Agreement may be executed in any number of counterparts, all of which taken together shall constitute one agreement, and any of the parties hereto may execute this Agreement by signing any such counterpart. This Agreement shall be effective when it has been executed by the Borrower, the Administrative Agent and the Lenders as of the Closing Date and each party has notified the Administrative Agent by facsimile transmission or telephone that it has taken such action; provided that, for the avoidance of doubt, the Commitments shall not become effective until all of the conditions set forth in Section 4.1 have been satisfied or waived in accordance with the terms hereof.
. JPMorgan is hereby appointed by each of the Lenders as its contractual representative (herein referred to as the Administrative Agent ) hereunder and under each other Loan Document, and each of the Lenders irrevocably authorizes the Administrative Agent to act as the contractual representative of such Lender with the rights and duties expressly set forth herein and in the other Loan Documents. The Administrative Agent agrees to act as such contractual representative upon the express conditions contained in this Article 10 . Notwithstanding the use of the defined term Administrative Agent , it is expressly understood and agreed that the Administrative Agent shall not have any fiduciary responsibilities to any Lender by reason of this Agreement or any other Loan Document and that the Administrative Agent is merely acting as the contractual representative of the Lenders with only those duties as are expressly set forth in this Agreement and the other Loan Documents. In its capacity as the Lenders contractual representative, the Administrative Agent (i) does not hereby assume any fiduciary duties to any of the Lenders, (ii) is a representative of the Lenders within the meaning of Section 9-105 of the Uniform Commercial Code and (iii) is acting as an independent contractor, the rights and duties of which are limited to those expressly set forth in this Agreement and the other Loan Documents. Each of the Lenders hereby agrees to assert no claim against the Administrative Agent on any agency theory or any other theory of liability for breach of fiduciary duty, all of which claims each Lender hereby waives.
. The Administrative Agent shall have and may exercise such powers under the Loan Documents as are specifically delegated to the Administrative Agent by the terms of each thereof, together with such powers as are reasonably incidental thereto. The Administrative Agent shall have no implied duties to the Lenders, or any obligation to the Lenders to take any action thereunder except any action specifically provided by the Loan Documents to be taken by the Administrative Agent.
. Neither the Administrative Agent nor any of its directors, officers, agents or employees shall be liable to the Borrower, the Lenders or any Lender for any action taken or omitted to be taken by it or them hereunder or under any other Loan Document or in connection herewith or therewith except to the extent such action or inaction is determined in a final non-appealable judgment by a court of competent jurisdiction to have arisen from the gross negligence or willful misconduct of such Person.
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Neither the Administrative Agent nor any of its directors, officers, agents or employees shall be responsible for or have any duty to ascertain, inquire into, or verify (a) any statement, warranty or representation made in connection with any Loan Document or any borrowing hereunder or the contents of any certificate, report or other document delivered hereunder or in connection with any Loan Document; (b) the performance or observance of any of the covenants or agreements of any obligor under any Loan Document, including any agreement by an obligor to furnish information directly to each Lender; (c) the satisfaction of any condition specified in Article 4 , except receipt of items required to be delivered solely to the Administrative Agent; (d) the existence or possible existence of any Default or Unmatured Default; (e) the validity, enforceability, effectiveness, sufficiency or genuineness of any Loan Document or any other instrument or writing furnished in connection therewith; (f) the value, sufficiency, creation, perfection or priority of any Lien in any collateral security; or (g) the financial condition of the Borrower or any guarantor of any of the Obligations or of any of the Borrowers or any such guarantors respective Subsidiaries. The Administrative Agent shall have no duty to disclose to the Lenders information that is not required to be furnished by the Borrower to the Administrative Agent at such time, but is voluntarily furnished by the Borrower to the Administrative Agent (either in its capacity as Administrative Agent or in its individual capacity).
. The Administrative Agent shall in all cases be fully protected in acting, or in refraining from acting, hereunder and under any other Loan Document in accordance with written instructions signed by the Required Lenders (or all of the Lenders in the event that and to the extent that this Agreement expressly requires such), and such instructions and any action taken or failure to act pursuant thereto shall be binding on all of the Lenders. The Lenders hereby acknowledge that the Administrative Agent shall be under no duty to take any discretionary action permitted to be taken by it pursuant to the provisions of this Agreement or any other Loan Document unless it shall be requested in writing to do so by the Required Lenders (or all of the Lenders in the event that and to the extent that this Agreement expressly requires such). The Administrative Agent shall be fully justified in failing or refusing to take any action hereunder and under any other Loan Document unless it shall first be indemnified to its satisfaction by the Lenders pro rata against any and all liability, cost and expense that it may incur by reason of taking or continuing to take any such action.
. The Administrative Agent may execute any of its duties as Administrative Agent hereunder and under any other Loan Document by or through directors, officers, employees, agents, and attorneys-in-fact and shall not be answerable to the Lenders (except as to money or securities received by it or its authorized agents) for the default or misconduct of any such agents or attorneys-in-fact selected by it with reasonable care. The Administrative Agent shall be entitled to advice of counsel concerning the contractual arrangement between the Administrative Agent and the Lenders and all matters pertaining to the Administrative Agents duties hereunder and under any other Loan Document.
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. The Administrative Agent shall be entitled to rely upon any note, notice, consent, certificate, affidavit, letter, telegram, statement, paper or document believed by it to be genuine and correct and to have been signed or sent by the proper person or persons, and, in respect to legal matters, upon the opinion of counsel selected by the Administrative Agent, which counsel may be employees of the Administrative Agent. Without limiting the foregoing, the Administrative Agent may consult with legal counsel (who may be counsel for the Borrower), independent accountants and other experts selected by it, and shall not be liable for any action taken or not taken by it in accordance with the advice of any such counsel, accountants or experts.
. The Lenders agree to reimburse and indemnify the Administrative Agent ratably in proportion to their respective Pro Rata Shares (i) for any amounts not reimbursed by the Borrower for which the Administrative Agent is entitled to reimbursement by the Borrower under the Loan Documents, (ii) for any other expenses incurred by the Administrative Agent on behalf of the Lenders, in connection with the preparation, execution, delivery, administration and enforcement of the Loan Documents (including for any expenses incurred by the Administrative Agent in connection with any dispute between the Administrative Agent and any Lender or between two or more of the Lenders) and (iii) for any liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind and nature whatsoever which may be imposed on, incurred by or asserted against the Administrative Agent in any way relating to or arising out of the Loan Documents or any other document delivered in connection therewith or the transactions contemplated thereby (including for any such amounts incurred by or asserted against the Administrative Agent in connection with any dispute between the Administrative Agent and any Lender or between two or more of the Lenders), or the enforcement of any of the terms of the Loan Documents or of any such other documents, provided that (x) no Lender shall be liable for any of the foregoing to the extent any of the foregoing is found in a final non-appealable judgment by a court of competent jurisdiction to have resulted from the gross negligence or willful misconduct of the Administrative Agent and (y) any indemnification required pursuant to Section 3.5(g) shall, notwithstanding the provisions of this Section 10.8 , be paid by the relevant Lender in accordance with the provisions thereof. The obligations of the Lenders under this Section 10.8 shall survive payment of the Obligations and termination of this Agreement.
. The Administrative Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Unmatured Default hereunder unless the Administrative Agent has received written notice from a Lender or the Borrower referring to this Agreement, describing such Default or Unmatured Default and stating that such notice is a notice of default. In the event that the Administrative Agent receives such a notice, the Administrative Agent shall give prompt notice thereof to the Lenders.
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. In the event the Administrative Agent is a Lender, the Administrative Agent shall have the same rights and powers hereunder and under any other Loan Document with respect to its Commitment and its Loans as any Lender and may exercise the same as though it were not the Administrative Agent, and the term Lender or Lenders shall, at any time when the Administrative Agent is a Lender, unless the context otherwise indicates, include the Administrative Agent in its individual capacity. The Administrative Agent and its Affiliates may accept deposits from, lend money to, and generally engage in any kind of trust, debt, equity or other transaction, in addition to those contemplated by this Agreement or any other Loan Document, with the Borrower or any of its Subsidiaries in which the Borrower or such Subsidiary is not restricted hereby from engaging with any other Person. The Administrative Agent, in its individual capacity, is not obligated to remain a Lender.
. Each Lender acknowledges that it has, independently and without reliance upon the Administrative Agent, the Arranger or any other Lender and based on the financial statements prepared by the Borrower and such other documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement and the other Loan Documents. Each Lender also acknowledges that it will, independently and without reliance upon the Administrative Agent, the Arranger or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement and the other Loan Documents.
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. The Administrative Agent may resign at any time by giving written notice thereof to the Lenders and the Borrower, such resignation to be effective upon the appointment of a successor Administrative Agent or, if no successor Administrative Agent has been appointed, forty-five (45) days after the retiring Administrative Agent gives notice of its intention to resign. Upon any such resignation, the Required Lenders shall have the right to appoint, on behalf of the Borrower and the Lenders, a successor Administrative Agent. If no successor Administrative Agent shall have been so appointed by the Required Lenders within thirty (30) days after the resigning Administrative Agents giving notice of its intention to resign, then the resigning Administrative Agent may appoint, on behalf of the Borrower and the Lenders, a successor Administrative Agent. Notwithstanding the previous sentence, the Administrative Agent may at any time without the consent of the Borrower or any Lender, appoint any of its Affiliates, which is a commercial bank as a successor Administrative Agent hereunder. If the Administrative Agent has resigned and no successor Administrative Agent has been appointed, the Lenders may perform all the duties of the Administrative Agent hereunder and the Borrower shall make all payments in respect of the Obligations to the applicable Lender and for all other purposes shall deal directly with the Lenders. No successor Administrative Agent shall be deemed to be appointed hereunder until such successor Administrative Agent has accepted the appointment. Any such successor Administrative Agent shall be a commercial bank having capital and retained earnings of at least $100,000,000. Upon the acceptance of any appointment as Administrative Agent hereunder by a successor Administrative Agent, such successor Administrative Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the resigning Administrative Agent. Upon the effectiveness of the resignation of the Administrative Agent, the resigning Administrative Agent shall be discharged from its duties and obligations hereunder and under the Loan Documents. After the effectiveness of the resignation of an Administrative Agent, the provisions of this Article 10 shall continue in effect for the benefit of such Administrative Agent in respect of any actions taken or omitted to be taken by it while it was acting as the Administrative Agent hereunder and under the other Loan Documents. In the event that there is a successor to the Administrative Agent by merger, or the Administrative Agent assigns its duties and obligations to an Affiliate pursuant to this Section 10.12 , then the term Prime Rate as used in this Agreement shall mean the prime rate, base rate or other analogous rate of the new Administrative Agent.
. The Borrower agrees to pay to the Administrative Agent and the Arranger, for their accounts, the fees agreed to by the Borrower, the Administrative Agent and/or the Arranger pursuant to the Fee Letter.
. The Borrower and the Lenders agree that the Administrative Agent may delegate any of its duties under this Agreement to any of its Affiliates. Any such Affiliate (and such Affiliates directors, officers, agents and employees) which performs duties in connection with this Agreement shall be entitled to the same benefits of the indemnification, waiver and other protective provisions to which the Administrative Agent is entitled under Article 9 and Article 10 .
. No Lender now or hereafter identified on the cover page, the signature pages or otherwise in this Agreement, or in any document related hereto, as being the Syndication Agent or a Documentation Agent shall have any right, power, obligation, liability, responsibility or duty under this Agreement in such capacity other than those applicable to all Lenders. Each Lender acknowledges that it has not relied, and will not rely, on any Person so identified in deciding to enter into this Agreement or in taking or refraining from taking any action hereunder or pursuant hereto.
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. In addition to, and without limitation of, any rights (including other rights of setoff) of the Lenders under applicable law, if the Borrower becomes insolvent, however evidenced, or any Default occurs, any and all deposits (including all account balances, whether provisional or final and whether or not collected or available) and any other Indebtedness at any time held or owing by any Lender or any of its respective Affiliates to or for the credit or account of the Borrower may be offset and applied toward the payment of the Obligations owing to such Lender or any such Affiliate whether or not the Obligations, or any part thereof, shall then be due. Each Lender agrees to notify the Borrower and the Administrative Agent in writing promptly after any such setoff and application; provided that the failure to give such notice shall not affect the validity of such setoff and application.
. If any Lender, whether by setoff or otherwise, has payment made to it upon its Outstanding Credit Exposure (other than payments received pursuant to Sections 3.1, 3.2, 3.4 or 3.5 ) in a greater proportion than that received by any other Lender, such Lender agrees, promptly upon demand, to purchase a portion of the Aggregate Outstanding Credit Exposure held by the other Lenders so that after such purchase each Lender will hold its Pro Rata Share of the Aggregate Outstanding Credit Exposure. If any Lender, whether in connection with setoff or amounts which might be subject to setoff or otherwise, receives collateral or other protection for its Obligations or such amounts which may be subject to setoff, such Lender agrees, promptly upon demand, to take such action necessary such that all Lenders share in the benefits of such collateral ratably in proportion to their respective Pro Rata Share of the Aggregate Outstanding Credit Exposure. In case any such payment is disturbed by legal process, or otherwise, appropriate further adjustments shall be made. If an amount to be setoff is to be applied to Indebtedness of the Borrower to a Lender other than Indebtedness comprised of the Outstanding Credit Exposure of such Lender, such amount shall be applied ratably to such other Indebtedness and to the Indebtedness comprised of such Outstanding Credit Exposure.
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. The terms and provisions of the Loan Documents shall be binding upon and inure to the benefit of the Borrower and the Lenders and their respective successors and assigns, except that (i) the Borrower shall not have the right to assign its rights or obligations under the Loan Documents without the written consent of each Lender, (ii) any assignment by any Lender must be made in compliance with Section 12.3 and (iii) any participation by any Lender must be made in compliance with Section 12.2 . The parties to this Agreement acknowledge that clause (ii) of the foregoing sentence relates only to absolute assignments and does not prohibit assignments creating security interests, including (x) any pledge or assignment by any Lender of all or any portion of its rights under this Agreement and any Note to a Federal Reserve Bank or (y) in the case of a Lender which is a fund, any pledge or assignment of all or any portion of its rights under this Agreement and any Note to its trustee in support of its obligations to its trustee; provided that no such pledge or assignment creating a security interest shall release the transferor Lender from its obligations hereunder unless and until the parties thereto have complied with the provisions of Section 12.3 . The Administrative Agent may treat the Person which made any Loan or which holds any Note as the owner thereof for all purposes hereof unless and until such Person complies with Section 12.3 ; provided that the Administrative Agent may in its discretion (but shall not be required to) follow instructions from the Person which made any Loan or which holds any Note to direct payments relating to such Loan or Note to another Person. Any assignee of the rights to any Loan or any Note agrees by acceptance of such assignment to be bound by all the terms and provisions of the Loan Documents. Any request, authority or consent of any Person, who at the time of making such request or giving such authority or consent is the owner of the rights to any Loan (whether or not a Note has been issued in evidence thereof), shall be conclusive and binding on any subsequent holder or assignee of the rights to such Loan.
50 |
51 |
. The Borrower authorizes each Lender to disclose to any Participant or Purchaser or any other Person acquiring an interest in the Loan Documents by operation of law (each a Transferee ) and any prospective Transferee any and all information in such Lenders possession concerning the creditworthiness of the Borrower and its Subsidiaries, including any information contained in any Reports; provided that each Transferee and prospective Transferee agrees to be bound by Section 9.11 of this Agreement.
. If any interest in any Loan Document is transferred to any Transferee, which is organized under the laws of any jurisdiction other than the United States or any State thereof, the transferor Lender shall cause such Transferee, concurrently with the effectiveness of such transfer, to comply with the provisions of Sections 3.5(d) and 3.5(e) and such Transferee shall not be entitled to any additional payments under Section 3.5 , (i) unless, and only to the extent, that the transferor Lender was entitled to amounts under Section 3.5 , or (ii) in the event that payments to the Transferee were not subject to any withholding at the time of transfer and became subject to withholding as a result of a Change In Law.
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. The Borrower, the Administrative Agent and any Lender may each change the address for service of notice upon it by a notice in writing to the other parties hereto.
. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL (EXCEPT AS MAY BE EXPRESSLY OTHERWISE PROVIDED IN ANY LOAN DOCUMENT) BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK (INCLUDING SECTIONS 5-1401 AND 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW, BUT EXCLUDING ALL OTHER CHOICE OF LAW AND CONFLICTS OF LAW RULES).
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. THE BORROWER HEREBY IRREVOCABLY SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK SITTING IN NEW YORK COUNTY AND OF THE UNITED STATES DISTRICT COURT OF THE SOUTHERN DISTRICT OF NEW YORK, AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO ANY LOAN DOCUMENTS AND THE BORROWER HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT AND IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT OR THAT SUCH COURT IS AN INCONVENIENT FORUM. NOTHING HEREIN SHALL LIMIT THE RIGHT OF THE ADMINISTRATIVE AGENT OR ANY LENDER TO BRING PROCEEDINGS AGAINST THE BORROWER IN THE COURTS OF ANY OTHER JURISDICTION. ANY JUDICIAL PROCEEDING BY THE BORROWER AGAINST THE ADMINISTRATIVE AGENT OR ANY LENDER OR ANY AFFILIATE OF THE ADMINISTRATIVE AGENT OR ANY LENDER INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH ANY LOAN DOCUMENT SHALL BE BROUGHT ONLY IN A COURT IN NEW YORK, NEW YORK.
. THE BORROWER, THE ADMINISTRATIVE AGENT AND EACH LENDER HEREBY WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH ANY LOAN DOCUMENT OR THE RELATIONSHIP ESTABLISHED THEREUNDER.
[ Signatures Follow ]
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IN WITNESS WHEREOF, the Borrower, the Lenders and the Administrative Agent have executed this Agreement as of the date first above written.
IDAHO POWER COMPANY , as the Borrower
By: /s/ Darrel T. Anderson
Name: Darrel T. Anderson
Title: Sr. Vice President - Administrative Services and Chief Financial Officer
Idaho Power Company Term Loan Credit Agreement
JPMORGAN CHASE BANK, N.A. , as Administrative Agent and as a Lender
By: /s/ Jennifer Fitzgerald
Name: Jennifer Fitzgerald
Title: Associate
Idaho Power Company Term Loan Credit Agreement
BANK OF AMERICA, N.A. , as a Lender
By: /s/ James J. Teichman
Name: James J. Teichman
Title: Senior Vice President
Idaho Power Company Term Loan Credit Agreement
UNION BANK, N.A. , as a Lender
By: /s/ Jesus Serrano
Name: Jesus Serrano
Title: Vice President
Idaho Power Company Term Loan Credit Agreement
WACHOVIA BANK, NATIONAL ASSOCIATION , as a Lender
By: /s/ Henry R. Biedrzycki
Name: Henry R. Biedrzycki
Title: Director
Idaho Power Company Term Loan Credit Agreement
SCHEDULE I
COMMITMENTS
Lender |
Commitment |
JPMorgan Chase Bank, N.A. |
$ 42,500,000 |
Bank of America, N.A. |
$ 42,500,000 |
Union Bank, N.A. |
$ 42,500,000 |
Wachovia Bank, National Association |
$ 42,500,000 |
TOTAL |
$170,000,000 |
I-1 |
SCHEDULE 5.8
SUBSIDIARIES AND OTHER INVESTMENTS
(As of December 31, 2008)
[Intentionally Omitted]
Schedule 5.8
SCHEDULE 5.12
MATERIAL AGREEMENTS
None.
Schedule 5.12
SCHEDULE 5.14
INDEBTEDNESS AND LIENS
Following is a list of existing liens of the Borrower and Subsidiaries:
Borrower:
Indebtedness Owed To : Bondholders pursuant to that certain Mortgage and Deed of Trust, dated as of October 1, 1937 between Borrower and Deutsche Bank Trust Company Americas (formerly Bankers Trust Company) and R.G. Page (Stanley Burg, successor individual trustee), as Trustee, as supplemented and amended.
Property Encumbered : All existing and after-acquired real and personal property of Borrower.
Amount of Indebtedness : The aggregate principal amount of Idaho Power Company First Mortgage Bonds outstanding as of December 31, 2008 was $1.231 billion. The amount of First Mortgage Bonds issuable by Borrower is limited to a maximum of $1.5 billion, but subject to increase at any time and may be further limited by property, earnings and other provisions of the Mortgage.
Schedule 5.14
SCHEDULE 13.1
NOTICE ADDRESSES
Address for notices for Borrower:
Idaho Power Company
1221 West Idaho Street
P.O. Box 70
Boise, Idaho 83707
Attention: Steven R. Keen, Vice President and Treasurer
Telephone: 208-388-2600
Fax: 208-388-2879
Email: skeen@idahopower.com
Address for notices as Administrative Agent:
JPMorgan Chase Bank, N.A.
10 South Dearborn St., Floor 07
Chicago, Illinois 60603
Attention: Walter Jones
Telephone: 312-732-5078
Fax: 312-385-7096
Email: walter.h.jones@chase.com
Address for notices for Credit Contact:
JPMorgan Chase Bank, N.A.
10 South Dearborn St., Floor 09
Chicago, Illinois 60603
Attention: Jennifer Fitzgerald
Telephone: 312-732-1754
Fax: 312-732-1762
Email: jennifer.e.fitzgerald@jpmorgan.com
Schedule 13.1
EXHIBITS A-E
[Intentionally Omitted]
Schedule 13.1
Exhibit 10.46
IDACORP, Inc.
DEFERRED COMPENSATION AGREEMENT
AGREEMENT by and between ___________________ ("Director") and IDACORP, Inc. (the "Company");
W I T N E S S E T H:
WHEREAS, Director is a member of the Board of Directors (the "Board") of the Company; and
WHEREAS, Director desires to enter into the arrangement hereinafter set forth as an alternative payment arrangement for all or a portion of Director's cash fees for services as a member of the Board;
NOW, THEREFORE, in consideration of the premises, the Company and Director hereby agree as follows:
1. Effective Date of Agreement and Elections . This Agreement and the elections set forth in Sections 2 and 3 below shall be effective upon delivery of the completed and executed Agreement to the Secretary of the Company no later than December 31, 2008.
2. Election to Defer Cash Fees . Director hereby irrevocably elects to defer receipt of the portion indicated below of the cash fees, including, without limitation, any monthly fee, Board meeting fee or committee meeting fee (the "Fees"), that Director will become entitled to receive for services as a member of the Board beginning January 1, 2009. Director shall have the option in December of each year (or at such other time prior to December as may be specified by the Compensation Committee of the Board (the "Committee")) to deliver a Termination of Deferred Compensation Agreement (or such other document as the Committee may prescribe from time to time for such purpose), which will be effective with respect to Fees earned in the calendar years following the calendar year in which the Termination of Deferred Compensation Agreement (or other document) is delivered. Unless Director so elects to deliver a Termination of Deferred Compensation Agreement (or other document), this Agreement shall remain in effect and will apply to Fees earned in subsequent calendar years. (Choose one)
(a) ___ All Fees are to be deferred. Director shall make payments by check to the Company to cover any applicable Benefit Plan costs including Medical Plan, Dental Plan, and Accidental Death and Dismemberment Insurance.
(b) ___ All Fees other than the portion thereof sufficient to cover Medical Plan, Dental Plan, and Accidental Death and Dismemberment Insurance are to be deferred.
3. Election of Method of Payment of Deferred Fees to Director . Director hereby irrevocably elects to have the deferred Fees paid to Director according to the following election: (Choose One)
(a) ___ a lump sum payment of cash as soon as practicable (but not more than 90 days) after the first business day of the calendar year following the year in which Director experiences a separation from service, as that term is used in Section 409A(a)(2)(A)(i) of the Internal Revenue Code of 1986, as amended (a "Separation from Service"), with the Company, such amount equal to the credit balance of Director's interest account as provided in Section 4 below.
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(b) ___ in a series of ____ annual cash installment payments (not more than 10) to be made on the first business day of the calendar year commencing with the calendar year following the year in which Director experiences a Separation from Service with the Company. The unpaid credit balance of the deferred Fees shall continue to be adjusted, as provided in Section 4 of this Agreement, during the period that the installment payments are being made.
Director shall have the option at any time to change the time and/or form of payment elected by Director pursuant to this Section 3 or any prior Deferred Compensation Agreement between Director and the Company that deferred payment of Director's cash fees for service on the Board by delivering an Amendment to Deferred Compensation Agreement, or such other document as the Committee may prescribe from time to time for such purpose, (an "Amendment"). Any such Amendment shall be subject to terms and conditions required for the Amendment to comply with the rules relating to changes to time and form of payment contained in Section 409A(a)(4)(C) of the Internal Revenue Code of 1986, as amended, and such other terms and conditions as the Committee may prescribe.
4. Deferred Fees Treated as if Earning Interest . All deferred Fees shall be credited to an account established and maintained to record such deferred Fees (an "interest account"). Credits will accrue to the interest account on the date such deferred Fees would otherwise have been paid to Director. Interest on Fees that Director defers for service as a member of the Board beginning January 1, 2009 will be credited based on the preceding month's average Moody's Long-Term Corporate Bond Yield for utilities (the "Moody's Rate"). Interest is calculated on a pro rata basis each month using a 360-day year and the average Moody's Rate for the preceding month.
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5. Designation of Beneficiary . Director may designate a beneficiary or beneficiaries (which may be an entity other than a natural person) to receive any payments to be made under Section 3 of this Agreement upon Director's death. At any time, and from time to time, any such designation may be changed or canceled by Director without the consent of any beneficiary. Any such designation, change or cancellation must be by written notice filed with
class=Section2the Secretary of the Company and shall not be effective until received by the Secretary of the Company. If Director designates more than one primary or secondary beneficiary, any payments under Section 3 of this Agreement to such beneficiaries shall be made in equal amounts unless Director has designated otherwise, in which case the payments shall be made in the amounts designated by the Director. If no beneficiary has been named by Director, or the designated beneficiaries have predeceased Director, payment shall be made to the Director's estate. If any dispute shall arise as to the entitlement of any person to any portion of the deferred Fees, the Company's obligations under this Agreement will be satisfied if it makes payment to Director's estate.
6. Payment of Deferred Fees in the Event of Death . In the event of the death of Director while a member of the Board or prior to the full payment to Director of the Fees deferred under this Agreement, then the credit balance remaining in Director's interest account shall be paid in a lump sum as soon as practicable (but not later than 90 days) after the death of Director.
7. No Right to Continue as a Director . Nothing in this Agreement shall be construed as conferring upon Director any right to continue as a member of the Board.
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8. No Right to Corporate Assets . Nothing in this Agreement shall be construed as giving Director, Director's beneficiaries or any other person any equity or interest of any kind in the assets of the Company or creating a trust of any kind or a fiduciary relationship of any kind between the Company and any such person. As to any claim for payments due under the provisions of this Agreement, Director, Director's beneficiaries and any other persons having a claim for payments shall be unsecured creditors of the Company.
9. No Limit on Further Corporate Action . Nothing contained in this Agreement shall be construed so as to prevent the Company from taking any corporate action which is deemed by the Company to be appropriate or in its best interests.
10. Assignment ; Successors in Interest . The rights and benefits of Director under this Agreement are personal to Director, and neither Director nor Director's beneficiaries shall have the power or right to transfer, assign, anticipate, mortgage, or otherwise encumber any payments to be made under this Agreement, except as provided in Section 5 above.
The provisions of this Agreement shall inure to the benefit of Director's beneficiaries, heirs, executors, administrators and successors in interest and to the benefit of the Company's assigns and successors in interest.
All obligations of the Company under this Agreement shall be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, reorganization or other transaction involving all or substantially all of the business and/or assets of the Company. References to the Company in this Agreement shall be deemed to refer to the successors thereto, as applicable.
11. Section 409A . To the extent applicable, it is intended that this Agreement will comply with Section 409A of the Internal Revenue Code of 1986, as amended, and any regulations and guidance issued thereunder, and this Agreement shall be interpreted accordingly.
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12. Governing Law . To the extent not preempted by Federal law, this Agreement and all rights and obligations hereunder shall be governed by and interpreted in accordance with, the laws of the State of Idaho, without regard to conflicts of law provisions.
class=Section3IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement this ____ day of December, 2008.
By _________________________________
IDACORP, Inc.
By ________________________________
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IDACORP, INC.
BENEFICIARY DESIGNATION
FOR
DEFERRED COMPENSATION AGREEMENT
IDACORP, Inc.
P. O. Box 70
Boise, Idaho 83707
Dear Sirs:
In accordance with the terms and conditions of my Deferred Compensation Agreement dated December ___, 2008, deferring, until a later date, fees I would otherwise receive for services rendered as a Director of IDACORP, I hereby, in the event of my death prior to receipt of all or any balance of such fees so accumulated, designate
Primary: ____________________________________
Secondary: ____________________________________
as my beneficiary(ies) to receive the funds so accumulated at the time in the manner provided for under such Deferred Compensation Agreement.
__________________________________
Date:______________________________
IDACORP
Exhibit 10.47
December 16, 2008
Re: Section 409A
Modifications to your Deferred Compensation
Agreement with IDACORP, Inc.
This letter agreement will serve as an amendment to your Deferred Compensation Agreement and is intended to reflect recent changes in the interest rate on deferred compensation and to bring your Deferred Compensation Agreement into documentary compliance with Section 409A of the Internal Revenue Code. Please read this letter and the attachments carefully and if you agree to the amendments reflected in Annex B, please sign where indicated and return to me as soon as possible, but in no event later than December 31, 2008.
Dear :
As part of our review of the Companys compensation plans for compliance with Section 409A of the Internal Revenue Code, we have reviewed the director deferred compensation agreements and determined that they should be amended to help ensure they comply with Section 409A. A copy of your deferred compensation agreement and any amendments thereto is attached hereto as Annex A (the Deferral Agreement).
Section 409A imposes significant, adverse taxes on individuals whose compensation is deferred (including accelerated income tax recognition and imposition of a 20% additional tax and interest) if the terms of the governing deferred compensation plan or agreement do not comply with Section 409A and related regulations by the end of 2008.
December 16, 2008
Page 2
Description of Amendments
Following are the amendments that will be made to your Deferral Agreement, together with an explanation of why the amendments are necessary.
Separation from Service. Under Section 409A, deferred compensation generally must be paid on a specified date or dates or on a payment event listed in Section 409A. A separation from service, as that term is used in Section 409A, is a permissible payment event.
Sections 3(a) and 3(b) of your Deferral Agreement provide that payments will be made (or annual installments will commence) after Director ceases to be a member of the Board. Section 3(a) is hereby amended to read instead Director experiences a separation from service, as that term is used in Section 409A(a)(2)(A)(i) of the Internal Revenue Code of 1986, as amended (Separation from Service), with the Company. Section 3(b) is hereby amended to read instead Director experiences a Separation from Service with the Company.
It is possible for a director to cease being a member of the Board, but not have a separation from service, as that term is used in Section 409A. For example, if a director were to provide substantial services to the company as a consultant after ceasing to be a member of the Board, that may not constitute a separation from service for purposes of Section 409A. Making a payment to the director in that case would violate Section 409A.
Specifying a Payment Date. As noted above, Section 409A permits payment of deferred compensation on a specified date or dates or on a payment event listed in Section 409A. A date can be a pre-specified date (such as January 1, 2012) or it can be a date that is tied to a permissible payment event (such as the first anniversary of separation from service). A specified date can also be a period within one taxable year (such as the first 90 days of 2012 or the first 90 days of the calendar year following the year of separation from service).
Lump Sum Payments. Your Deferral Agreement allowed you to elect to receive your payments either in a lump sum or in up to ten annual installments. The lump sum payment provision (Section 3(a)) states that payment will be made as soon as practicable after the first business day of the calendar year following the year the director ceases to be a member of the Board. Because making payments as soon as practicable after an event, without further limitation, may not comply with Section 409A, this provision is hereby amended to add (but not more than 90 days) after as soon as practicable.
December 16, 2008
Page 3
Installment Payments . Your Deferral Agreements installment payment provision (Section 3(b)) provides for annual cash installment payments to be made commencing on the first business day of the calendar year following the year in which you cease to be a member of the Board. This provision is hereby amended to state that each installment payment will be made on the first business day of the calendar year.
Payment Following Death. Your Deferral Agreements payment provision relating to payment at death (Section 6) provides that payment will be made as soon as practicable after the death of Director. Because providing for payment to be made as soon as practicable after an event, without further limitation, may not comply with Section 409A, this provision is hereby amended to add (but not later than 90 days) after as soon as practicable.
Annex B hereto reflects Sections 3(a), 3(b) and 6, as amended hereby.
If you have any questions, please contact me at (208) 388-2878.
Very truly yours,
Patrick A. Harrington
Corporate Secretary
AGREED:
__________________________ ____________________
Date
Attachments
ANNEX A
December 16, 2008
Page 6
ANNEX B
Section 3(a), as amended, reads as follows :
(a) ___ a payment of cash as soon as practicable (but not more than 90 days) after the first business day of the calendar year following the year in which Director [ceases to be a member of the Board] experiences a separation from service, as that term is used in Section 409A(a)(2)(A)(i) of the Internal Revenue Code of 1986, as amended (Separation from Service), with the Company, such amount equal to the credit balance of Directors interest account as provided in Section 4 below.
Section 3(b), as amended, reads as follows:
(b) ___ in a series of ____ annual cash installment payments (not more than 10) to be made [commencing] on the first business day of the calendar year commencing with the calendar year following the year in which Director [ceases to be a member of the Board] experiences a Separation from Service with the Company. The unpaid credit balance of the deferred Fees shall continue to be adjusted, as provided in Section 4 of this Agreement, during the period that Director or Directors beneficiary is receiving such installment payments.
Section 6, as amended, reads as follows:
6. Payment of Deferred Fees in the Event of Death . In the event of the death of Director while a member of the Board or prior to the full payment to Director of the Fees deferred under this Agreement then the credit balance remaining in Directors interest account shall be paid in a single lump sum payment to Directors designated beneficiary or beneficiaries. Such single sum payment shall be made as soon as practicable (but not later than 90 days) after the death of Director. If any dispute shall arise as to the entitlement of any person to any portion of the deferred Fees, the Corporations obligations under this Agreement will be satisfied if it makes payment to Directors estate.
[bracketed language in Annex B deleted]
Exhibit 10.48
AMENDMENT TO
DEFERRED COMPENSATION AGREEMENT
IDACORP, INC.
(Change to Time and/or Form of Payment)
AMENDMENT TO DEFERRED COMPENSATION AGREEMENT, by and between _______________ (Director) and IDACORP, Inc. (the Company);
W I T N E S S E T H:
WHEREAS, Director is a member of the Board of Directors (the Board) of the Company; and
WHEREAS, Director desires to change his/her prior election regarding the time and/or form of payment of his/her account under the Deferred Compensation Agreement.
NOW, THEREFORE, in consideration of the premises, Director and the Company hereby agree as follows:
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1. Subject to Section 2 below, Directors Deferred Compensation Agreement shall be amended so that the entire credit balance of Director's interest account as provided in the Deferred Compensation Agreement shall be distributed as follows:
(Choose one)
(a) ___ a lump sum cash payment as soon as practicable (but not more than 90 days) after the first business day of the 6 th calendar year [NOTE THAT THIS COULD BE ANY CALENDAR YEAR LATER THAN THE 6 TH AS WELL] following the year in which Director experiences a separation from service, as that term is used in Section 409A(a)(2)(A)(i) of the Internal Revenue Code of 1986, as amended (a Separation from Service), with the Company, such amount equal to the credit balance of Directors interest account as provided in Section 4 of the Deferred Compensation Agreement.
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(b) ___ in a series of ____ annual cash installment payments (not more than 10) to be made on the first business day of the calendar year commencing with the 6 th calendar year [NOTE THAT THIS COULD BE ANY CALENDAR YEAR LATER THAN THE 6 TH AS WELL] following the year in which Director experiences a Separation from Service with the Company. The unpaid credit balance of the deferred Fees shall continue to be adjusted, as provided in Section 4 of the Deferred Compensation Agreement, during the period that the installment payments are being made.
2. It is the intent of the Company and Director that Directors election pursuant to this Amendment to Deferred Compensation Agreement comply with the rules regarding subsequent changes in time and form of payment under Section 409A of the Internal Revenue Code of 1986, as amended, and any regulations and guidance issued thereunder, including Treas. Reg. Section 1.409A-2(b), and this Amendment to Deferred Compensation Agreement shall be interpreted accordingly. Accordingly, notwithstanding anything herein to the contrary, Directors election HEREUNDER shall not take effect until at least 12 months after the date such election is made and shall be of no force or effect IF payments are scheduled to be PAID or commence prior to the DATE SUCH ELECTION WOULD BECOME EFFECTIVE .
3. Capitalized terms not otherwise defined herein shall have the meanings given them in the Deferred Compensation Agreement.
4. All terms, provisions and conditions applicable to Director's interest account set forth in the Deferred Compensation Agreement and not set forth herein are hereby incorporated by reference herein.
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5. This Amendment to Deferred Compensation Agreement shall be irrevocable upon delivery to the Secretary of the Company.
IN WITNESS WHEREOF, the parties hereto have duly executed this Amendment to Deferred Compensation Agreement this ____ day of ______________, 20___.
By
[Name]
IDACORP, INC.
By
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Exhibit 10.49
IDACORP, INC.
TERMINATION OF
DEFERRED COMPENSATION AGREEMENT
TERMINATION OF DEFERRED COMPENSATION AGREEMENT, by and between [ ] (Director) and IDACORP, Inc. (the Company);
W I T N E S S E T H:
WHEREAS, Director is a member of the Board of Directors (the Board) of the Company; and
WHEREAS, Director has elected to defer all or a portion of Director cash fees for service as a member of the Board pursuant to [a] Deferred Compensation Agreement[s] dated __________ [and [__________] (collectively, the Deferred Compensation Agreement)][ADD THE FOLLOWING IF DIRECTOR HAS EXECUTED AN AMENDMENT TO DEFERRED COMPENSATION AGREEMENT: and an Amendment to Deferred Compensation Agreement dated _____________ (collectively, the Deferred Compensation Agreement)]; and
WHEREAS, Section 2 of the Deferred Compensation Agreement provides the Director with the option of terminating the Agreement in December of each year; and
WHEREAS, Director desires to terminate the Deferred Compensation Agreement effective December 31, [ ];
NOW, THEREFORE, in consideration of the premises, Director and the Company hereby agree to the following:
1. Pursuant to Section 2 of the Deferred Compensation Agreement, Director and the Company hereby agree that said Agreement will be terminated effective December 31, [ ], and no further deferrals will be made under the Deferred Compensation Agreement after that date.
2. All deferred Fees in Directors interest account as of December 31, [ ] will continue to accrue interest as provided in Section 4 of the Deferred Compensation Agreement and will continue to be payable to Director as provided in Section 3 of the Deferred Compensation Agreement.
3. Capitalized terms not otherwise defined herein shall have the meanings given them in the Deferred Compensation Agreement.
IN WITNESS WHEREOF, the parties hereto have duly executed this Termination of Deferred Compensation Agreement this ____ day of [ ].
By_______________________________
[Name]
IDACORP, Inc.
By_______________________________
Exhibit 10.50
IDAHO POWER COMPANY
DEFERRED COMPENSATION AGREEMENT
AGREEMENT by and between ___________________ ("Director") and Idaho Power Company (the "Company");
W I T N E S S E T H:
WHEREAS, Director is a member of the Board of Directors (the "Board") of the Company; and
WHEREAS, Director desires to enter into the arrangement hereinafter set forth as an alternative payment arrangement for all or a portion of Director's cash fees for services as a member of the Board;
NOW, THEREFORE, in consideration of the premises, the Company and Director hereby agree as follows:
1. Effective Date of Agreement and Elections . This Agreement and the elections set forth in Sections 2 and 3 below shall be effective upon delivery of the completed and executed Agreement to the Secretary of the Company no later than December 31, 2008.
2. Election to Defer Cash Fees . Director hereby irrevocably elects to defer receipt of the portion indicated below of the cash fees, including, without limitation, any monthly fee, Board meeting fee or committee meeting fee (the "Fees"), that Director will become entitled to receive for services as a member of the Board beginning January 1, 2009. Director shall have the option in December of each year (or at such other time prior to December as may be specified by the Compensation Committee of the Board (the "Committee")) to deliver a Termination of Deferred Compensation Agreement (or such other document as the Committee may prescribe from time to time for such purpose), which will be effective with respect to Fees earned in the calendar years following the calendar year in which the Termination of Deferred Compensation Agreement (or other document) is delivered. Unless Director so elects to deliver a Termination of Deferred Compensation Agreement (or other document), this Agreement shall remain in effect and will apply to Fees earned in subsequent calendar years. (Choose one)
(a) ___ All Fees are to be deferred. Director shall make payments by check to the Company to cover any applicable Benefit Plan costs including Medical Plan, Dental Plan, and Accidental Death and Dismemberment Insurance.
(b) ___ All Fees other than the portion thereof sufficient to cover Medical Plan, Dental Plan, and Accidental Death and Dismemberment Insurance are to be deferred.
3. Election of Method of Payment of Deferred Fees to Director . Director hereby irrevocably elects to have the deferred Fees paid to Director according to the following election: (Choose One)
(a) ___ a lump sum payment of cash as soon as practicable (but not more than 90 days) after the first business day of the calendar year following the year in which Director experiences a separation from service, as that term is used in Section 409A(a)(2)(A)(i) of the Internal Revenue Code of 1986, as amended (a "Separation from Service"), with the Company, such amount equal to the credit balance of Director's interest account as provided in Section 4 below.
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(b) ___ in a series of ____ annual cash installment payments (not more than 10) to be made on the first business day of the calendar year commencing with the calendar year following the year in which Director experiences a Separation from Service with the Company. The unpaid credit balance of the deferred Fees shall continue to be adjusted, as provided in Section 4 of this Agreement, during the period that the installment payments are being made.
Director shall have the option at any time to change the time and/or form of payment elected by Director pursuant to this Section 3 or any prior Deferred Compensation Agreement between Director and the Company that deferred payment of Director's cash fees for service on the Board by delivering an Amendment to Deferred Compensation Agreement, or such other document as the Committee may prescribe from time to time for such purpose, (an "Amendment"). Any such Amendment shall be subject to terms and conditions required for the Amendment to comply with the rules relating to changes to time and form of payment contained in Section 409A(a)(4)(C) of the Internal Revenue Code of 1986, as amended, and such other terms and conditions as the Committee may prescribe.
4. Deferred Fees Treated as if Earning Interest . All deferred Fees shall be credited to an account established and maintained to record such deferred Fees (an "interest account"). Credits will accrue to the interest account on the date such deferred Fees would otherwise have been paid to Director. Interest on Fees that Director defers for service as a member of the Board beginning January 1, 2009 will be credited based on the preceding month's average Moody's Long-Term Corporate Bond Yield for utilities (the "Moody's Rate"). Interest is calculated on a pro rata basis each month using a 360-day year and the average Moody's Rate for the preceding month.
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5. Designation of Beneficiary . Director may designate a beneficiary or beneficiaries (which may be an entity other than a natural person) to receive any payments to be made under Section 3 of this Agreement upon Director's death. At any time, and from time to time, any such designation may be changed or canceled by Director without the consent of any beneficiary. Any such designation, change or cancellation must be by written notice filed with
class=Section2the Secretary of the Company and shall not be effective until received by the Secretary of the Company. If Director designates more than one primary or secondary beneficiary, any payments under Section 3 of this Agreement to such beneficiaries shall be made in equal amounts unless Director has designated otherwise, in which case the payments shall be made in the amounts designated by the Director. If no beneficiary has been named by Director, or the designated beneficiaries have predeceased Director, payment shall be made to the Director's estate. If any dispute shall arise as to the entitlement of any person to any portion of the deferred Fees, the Company's obligations under this Agreement will be satisfied if it makes payment to Director's estate.
6. Payment of Deferred Fees in the Event of Death . In the event of the death of Director while a member of the Board or prior to the full payment to Director of the Fees deferred under this Agreement, then the credit balance remaining in Director's interest account shall be paid in a lump sum as soon as practicable (but not later than 90 days) after the death of Director.
7. No Right to Continue as a Director . Nothing in this Agreement shall be construed as conferring upon Director any right to continue as a member of the Board.
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8. No Right to Corporate Assets . Nothing in this Agreement shall be construed as giving Director, Director's beneficiaries or any other person any equity or interest of any kind in the assets of the Company or creating a trust of any kind or a fiduciary relationship of any kind between the Company and any such person. As to any claim for payments due under the provisions of this Agreement, Director, Director's beneficiaries and any other persons having a claim for payments shall be unsecured creditors of the Company.
9. No Limit on Further Corporate Action . Nothing contained in this Agreement shall be construed so as to prevent the Company from taking any corporate action which is deemed by the Company to be appropriate or in its best interests.
10. Assignment ; Successors in Interest . The rights and benefits of Director under this Agreement are personal to Director, and neither Director nor Director's beneficiaries shall have the power or right to transfer, assign, anticipate, mortgage, or otherwise encumber any payments to be made under this Agreement, except as provided in Section 5 above.
The provisions of this Agreement shall inure to the benefit of Director's beneficiaries, heirs, executors, administrators and successors in interest and to the benefit of the Company's assigns and successors in interest.
All obligations of the Company under this Agreement shall be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, reorganization or other transaction involving all or substantially all of the business and/or assets of the Company. References to the Company in this Agreement shall be deemed to refer to the successors thereto, as applicable.
11. Section 409A . To the extent applicable, it is intended that this Agreement will comply with Section 409A of the Internal Revenue Code of 1986, as amended, and any regulations and guidance issued thereunder, and this Agreement shall be interpreted accordingly.
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12. Governing Law . To the extent not preempted by Federal law, this Agreement and all rights and obligations hereunder shall be governed by and interpreted in accordance with, the laws of the State of Idaho, without regard to conflicts of law provisions.
class=Section3IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement this ____ day of December, 2008.
By _________________________________
___________________
IDAHO POWER COMPANY
By ________________________________
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IDAHO POWER COMPANY
BENEFICIARY DESIGNATION
FOR
DEFERRED COMPENSATION AGREEMENT
Idaho Power Company
P. O. Box 70
Boise, Idaho 83707
Dear Sirs:
In accordance with the terms and conditions of my Deferred Compensation Agreement dated December ___, 2008, deferring, until a later date, fees I would otherwise receive for services rendered as a Director of Idaho Power Company, I hereby, in the event of my death prior to receipt of all or any balance of such fees so accumulated, designate
Primary: ____________________________________
Secondary: ____________________________________
as my beneficiary(ies) to receive the funds so accumulated at the time in the manner provided for under such Deferred Compensation Agreement.
__________________________________
Date:______________________________
Idaho Power Company
Exhibit 10.51
December 16, 2008
Re: Modifications
to your Deferred Compensation
Agreement with Idaho Power Company
This letter agreement will serve as an amendment to your Deferred Compensation Agreement and is intended to reflect recent changes in the interest rate on deferred compensation and to bring your Deferred Compensation Agreement into documentary compliance with Section 409A of the Internal Revenue Code. Please read this letter and the attachments carefully and if you agree to the amendments reflected in Annex B, please sign where indicated and return to me as soon as possible, but in no event later than December 31, 2008.
Dear :
As part of our review of the Companys compensation plans for compliance with Section 409A of the Internal Revenue Code, we have reviewed the director deferred compensation agreements and determined that they should be amended to help ensure they comply with Section 409A. A copy of your deferred compensation agreement and any amendments thereto is attached hereto as Annex A (the Deferral Agreement).
Section 409A imposes significant, adverse taxes on individuals whose compensation is deferred (including accelerated income tax recognition and imposition of a 20% additional tax and interest) if the terms of the governing deferred compensation plan or agreement do not comply with Section 409A and related regulations by the end of 2008.
December 16, 2008
Page 2
Description of Section 409A Amendments
Following are the amendments that will be made to your Deferral Agreement, together with an explanation of why the amendments are necessary.
Separation from Service. Under Section 409A, deferred compensation generally must be paid on a specified date or dates or on a payment event listed in Section 409A. A separation from service, as that term is used in Section 409A, is a permissible payment event.
Sections 3(a) and 3(b) of your Deferral Agreement provide that payments will be made (or annual installments will commence) after Director ceases to be a member of the Board. Section 3(a) is hereby amended to read instead Director experiences a separation from service, as that term is used in Section 409A(a)(2)(A)(i) of the Internal Revenue Code of 1986, as amended (Separation from Service), with the Company. Section 3(b) is hereby amended to read instead Director experiences a Separation from Service with the Company.
It is possible for a director to cease being a member of the Board, but not have a separation from service, as that term is used in Section 409A. For example, if a director were to provide substantial services to the company as a consultant after ceasing to be a member of the Board, that may not constitute a separation from service for purposes of Section 409A. Making a payment to the director in that case would violate Section 409A.
Specifying a Payment Date. As noted above, Section 409A permits payment of deferred compensation on a specified date or dates or on a payment event listed in Section 409A. A date can be a pre-specified date (such as January 1, 2012) or it can be a date that is tied to a permissible payment event (such as the first anniversary of separation from service). A specified date can also be a period within one taxable year (such as the first 90 days of 2012 or the first 90 days of the calendar year following the year of separation from service).
Lump Sum Payments. Your Deferral Agreement allowed you to elect to receive your payments either in a lump sum or in up to ten annual installments. The lump sum payment provision (Section 3(a)) states that payment will be made as soon as practicable after the first business day of the calendar year following the year the director ceases to be a member of the Board. Because making payments as soon as practicable after an event, without further limitation, may not comply with Section 409A, this provision is hereby amended to add (but not more than 90 days) after as soon as practicable.
December 16, 2008
Page 3
Installment Payments . Your Deferral Agreements installment payment provision (Section 3(b)) provides for annual cash installment payments to be made commencing on the first business day of the calendar year following the year in which you cease to be a member of the Board. This provision is hereby amended to state that each installment payment will be made on the first business day of the calendar year.
Payment Following Death. Your Deferral Agreements payment provision relating to payment at death (Section 6) provides that payment will be made as soon as practicable after the death of Director. Because providing for payment to be made as soon as practicable after an event, without further limitation, may not comply with Section 409A, this provision is hereby amended to add (but not later than 90 days) after as soon as practicable.
Annex B hereto reflects Sections 3(a), 3(b) and 6, as amended hereby.
If you have any questions, please contact me at (208) 388-2878.
Very truly yours,
Patrick A. Harrington
Corporate Secretary
AGREED:
___________________________ ____________________
________________ Date
Attachments
ANNEX A
ANNEX B
Section 3(a), as amended, reads as follows :
(a) ___ a payment of cash as soon as practicable (but not more than 90 days) after the first business day of the calendar year following the year in which Director [ceases to be a member of the Board] experiences a separation from service, as that term is used in Section 409A(a)(2)(A)(i) of the Internal Revenue Code of 1986, as amended (Separation from Service), with the Company, such amount equal to the credit balance of Directors interest account as provided in Section 4 below.
Section 3(b), as amended, reads as follows:
(b) ___ in a series of ____ annual cash installment payments (not more than 10) to be made [commencing] on the first business day of the calendar year commencing with the calendar year following the year in which Director [ceases to be a member of the Board] experiences a Separation from Service with the Company. The unpaid credit balance of the deferred Fees shall continue to be adjusted, as provided in Section 4 of this Agreement, during the period that Director or Directors beneficiary is receiving such installment payments.
Section 6, as amended, reads as follows:
6. Payment of Deferred Fees in the Event of Death . In the event of the death of Director while a member of the Board or prior to the full payment to Director of the Fees deferred under this Agreement then the credit balance remaining in Directors interest account shall be paid in a single lump sum payment to Directors designated beneficiary or beneficiaries. Such single sum payment shall be made as soon as practicable (but not later than 90 days) after the death of Director. If any dispute shall arise as to the entitlement of any person to any portion of the deferred Fees, the Companys obligations under this Agreement will be satisfied if it makes payment to Directors estate.
[bracketed language in Annex B deleted]
Exhibit 10.52
AMENDMENT TO
DEFERRED COMPENSATION AGREEMENT
IDAHO POWER COMPANY
(Change to Time and/or Form of Payment)
AMENDMENT TO DEFERRED COMPENSATION AGREEMENT, by and between _______________ (Director) and Idaho Power Company (the Company);
W I T N E S S E T H:
WHEREAS, Director is a member of the Board of Directors (the Board) of the Company; and
WHEREAS, Director has elected to defer all or a portion of Director cash fees for service as a member of the Board pursuant to [a] Deferred Compensation Agreement[s] dated __________[and [__________] (collectively, the Deferred Compensation Agreement)][ADD THE FOLLOWING IF DIRECTOR HAS EXECUTED AN AMENDMENT TO DEFERRED COMPENSATION AGREEMENT: and an Amendment to Deferred Compensation Agreement dated _____________ (collectively, the Deferred Compensation Agreement)]; and
WHEREAS, Director desires to change his/her prior election regarding the time and/or form of payment of his/her account under the Deferred Compensation Agreement.
NOW, THEREFORE, in consideration of the premises, Director and the Company hereby agree as follows:
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1. Subject to Section 2 below, Directors Deferred Compensation Agreement shall be amended so that the entire credit balance of Director's interest account as provided in the Deferred Compensation Agreement shall be distributed as follows:
(Choose one)
(a) ___ a lump sum cash payment as soon as practicable (but not more than 90 days) after the first business day of the 6 th calendar year [NOTE THAT THIS COULD BE ANY CALENDAR YEAR LATER THAN THE 6 TH AS WELL] following the year in which Director experiences a separation from service, as that term is used in Section 409A(a)(2)(A)(i) of the Internal Revenue Code of 1986, as amended (a Separation from Service), with the Company, such amount equal to the credit balance of Directors interest account as provided in Section 4 of the Deferred Compensation Agreement.
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(b) ___ in a series of ____ annual cash installment payments (not more than 10) to be made on the first business day of the calendar year commencing with the 6 th calendar year [NOTE THAT THIS COULD BE ANY CALENDAR YEAR LATER THAN THE 6 TH AS WELL] following the year in which Director experiences a Separation from Service with the Company. The unpaid credit balance of the deferred Fees shall continue to be adjusted, as provided in Section 4 of the Deferred Compensation Agreement, during the period that the installment payments are being made.
2. It is the intent of the Company and Director that Directors election pursuant to this Amendment to Deferred Compensation Agreement comply with the rules regarding subsequent changes in time and form of payment under Section 409A of the Internal Revenue Code of 1986, as amended, and any regulations and guidance issued thereunder, including Treas. Reg. Section 1.409A-2(b), and this Amendment to Deferred Compensation Agreement shall be interpreted accordingly. Accordingly, notwithstanding anything herein to the contrary, Directors election HEREUNDER shall not take effect until at least 12 months after the date such election is made and shall be of no force or effect IF payments are scheduled to be PAID or commence prior to the DATE SUCH ELECTION WOULD BECOME EFFECTIVE .
3. Capitalized terms not otherwise defined herein shall have the meanings given them in the Deferred Compensation Agreement.
4. All terms, provisions and conditions applicable to Director's interest account set forth in the Deferred Compensation Agreement and not set forth herein are hereby incorporated by reference herein.
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5. This Amendment to Deferred Compensation Agreement shall be irrevocable upon delivery to the Secretary of the Company.
IN WITNESS WHEREOF, the parties hereto have duly executed this Amendment to Deferred Compensation Agreement this ____ day of ______________, 20___.
By
[Name]
IDAHO POWER COMPANY
By
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Exhibit 10.53
IDAHO POWER COMPANY
TERMINATION OF
DEFERRED COMPENSATION AGREEMENT
TERMINATION OF DEFERRED COMPENSATION AGREEMENT, by and between [ ] (Director) and IDAHO POWER COMPANY (the Company);
W I T N E S S E T H:
WHEREAS, Director is a member of the Board of Directors (the Board) of the Company; and
WHEREAS, Director has elected to defer all or a portion of Director cash fees for service as a member of the Board pursuant to [a] Deferred Compensation Agreement[s] dated __________ [and [__________] (collectively, the Deferred Compensation Agreement)][ADD THE FOLLOWING IF DIRECTOR HAS EXECUTED AN AMENDMENT TO DEFERRED COMPENSATION AGREEMENT: and an Amendment to Deferred Compensation Agreement dated _____________ (collectively, the Deferred Compensation Agreement)]; and
WHEREAS, Section 2 of the Deferred Compensation Agreement provides the Director with the option of terminating the Agreement in December of each year; and
WHEREAS, Director desires to terminate the Deferred Compensation Agreement effective December 31, [ ];
NOW, THEREFORE, in consideration of the premises, Director and the Company hereby agree to the following:
1. Pursuant to Section 2 of the Deferred Compensation Agreement, Director and the Company hereby agree that said Agreement will be terminated effective December 31, [ ], and no further deferrals will be made under the Deferred Compensation Agreement after that date.
2. All deferred Fees in Directors interest account as of December 31, [ ] will continue to accrue interest as provided in Section 4 of the Deferred Compensation Agreement and will continue to be payable to Director as provided in Section 3 of the Deferred Compensation Agreement.
3. Capitalized terms not otherwise defined herein shall have the meanings given them in the Deferred Compensation Agreement.
IN WITNESS WHEREOF, the parties hereto have duly executed this Termination of Deferred Compensation Agreement this ____ day of [ ].
By_______________________________
[Name]
IDAHO POWER COMPANY
By_______________________________
Exhibit 10.5 4
IDACORP Financial Services, Inc.
DEFERRED COMPENSATION AGREEMENT
AGREEMENT by and between __________________ ("Director") and IDACORP Financial Services, Inc. (the "Company");
W I T N E S S E T H:
WHEREAS, Director is a member of the Board of Directors (the "Board") of the Company; and
WHEREAS, Director desires to enter into the arrangement hereinafter set forth as an alternative payment arrangement for all or a portion of Director's cash fees for services as a member of the Board;
NOW, THEREFORE, in consideration of the premises, the Company and Director hereby agree as follows:
1. Effective Date of Agreement and Elections . This Agreement and the elections set forth in Sections 2 and 3 below shall be effective upon delivery of the completed and executed Agreement to the Secretary of the Company no later than December 31, [2008].
2. Election to Defer Cash Fees . Director hereby irrevocably elects to defer receipt of the portion indicated below of the cash fees, including, without limitation, any monthly fee, Board meeting fee or committee meeting fee (the "Fees"), that Director will become entitled to receive for services as a member of the Board beginning January 1, [2009]. Director shall have the option in December of each year (or at such other time prior to December as may be specified by the Compensation Committee of the Board (the "Committee")) to deliver a Termination of Deferred Compensation Agreement (or such other document as the Committee may prescribe from time to time for such purpose), which will be effective with respect to Fees earned in the calendar years following the calendar year in which the Termination of Deferred Compensation Agreement (or other document) is delivered. Unless Director so elects to deliver a Termination of Deferred Compensation Agreement (or other document), this Agreement shall remain in effect and will apply to Fees earned in subsequent calendar years. (Choose one)
(a) ___ All Fees are to be deferred. Director shall make payments by check to the Company to cover any applicable Benefit Plan costs including Medical Plan, Dental Plan, and Accidental Death and Dismemberment Insurance.
(b) ___ All Fees other than the portion thereof sufficient to cover Medical Plan, Dental Plan, and Accidental Death and Dismemberment Insurance are to be deferred.
3. Election of Method of Payment of Deferred Fees to Director . Director hereby irrevocably elects to have the deferred Fees paid to Director according to the following election: (Choose One)
(a) ___ a lump sum payment of cash as soon as practicable (but not more than 90 days) after the first business day of the calendar year following the year in which Director experiences a separation from service, as that term is used in Section 409A(a)(2)(A)(i) of the Internal Revenue Code of 1986, as amended (a "Separation from Service"), with the Company, such amount equal to the credit balance of Director's interest account as provided in Section 4 below.
2 |
(b) ___ in a series of ____ annual cash installment payments (not more than 10) to be made on the first business day of the calendar year commencing with the calendar year following the year in which Director experiences a Separation from Service with the Company. The unpaid credit balance of the deferred Fees shall continue to be adjusted, as provided in Section 4 of this Agreement, during the period that the installment payments are being made.
Director shall have the option at any time to change the time and/or form of payment elected by Director pursuant to this Section 3 or any prior Deferred Compensation Agreement between Director and the Company that deferred payment of Director's cash fees for service on the Board by delivering an Amendment to Deferred Compensation Agreement, or such other document as the Committee may prescribe from time to time for such purpose, (an "Amendment"). Any such Amendment shall be subject to terms and conditions required for the Amendment to comply with the rules relating to changes to time and form of payment contained in Section 409A(a)(4)(C) of the Internal Revenue Code of 1986, as amended, and such other terms and conditions as the Committee may prescribe.
4. Deferred Fees Treated as if Earning Interest . All deferred Fees shall be credited to an account established and maintained to record such deferred Fees (an "interest account"). Credits will accrue to the interest account on the date such deferred Fees would otherwise have been paid to Director. Interest on Fees that Director defers for service as a member of the Board beginning January 1, [2009] will be credited based on the preceding month's average Moody's Long-Term Corporate Bond Yield for utilities (the "Moody's Rate"). Interest is calculated on a pro rata basis each month using a 360-day year and the average Moody's Rate for the preceding month.
3 |
5. Designation of Beneficiary . Director may designate a beneficiary or beneficiaries (which may be an entity other than a natural person) to receive any payments to be made under Section 3 of this Agreement upon Director's death. At any time, and from time to time, any such designation may be changed or canceled by Director without the consent of any beneficiary. Any such designation, change or cancellation must be by written notice filed with
class=Section2the Secretary of the Company and shall not be effective until received by the Secretary of the Company. If Director designates more than one primary or secondary beneficiary, any payments under Section 3 of this Agreement to such beneficiaries shall be made in equal amounts unless Director has designated otherwise, in which case the payments shall be made in the amounts designated by the Director. If no beneficiary has been named by Director, or the designated beneficiaries have predeceased Director, payment shall be made to the Director's estate. If any dispute shall arise as to the entitlement of any person to any portion of the deferred Fees, the Company's obligations under this Agreement will be satisfied if it makes payment to Director's estate.
6. Payment of Deferred Fees in the Event of Death . In the event of the death of Director while a member of the Board or prior to the full payment to Director of the Fees deferred under this Agreement, then the credit balance remaining in Director's interest account shall be paid in a lump sum as soon as practicable (but not later than 90 days) after the death of Director.
7. No Right to Continue as a Director . Nothing in this Agreement shall be construed as conferring upon Director any right to continue as a member of the Board.
4 |
8. No Right to Corporate Assets . Nothing in this Agreement shall be construed as giving Director, Director's beneficiaries or any other person any equity or interest of any kind in the assets of the Company or creating a trust of any kind or a fiduciary relationship of any kind between the Company and any such person. As to any claim for payments due under the provisions of this Agreement, Director, Director's beneficiaries and any other persons having a claim for payments shall be unsecured creditors of the Company.
9. No Limit on Further Corporate Action . Nothing contained in this Agreement shall be construed so as to prevent the Company from taking any corporate action which is deemed by the Company to be appropriate or in its best interests.
10. Assignment ; Successors in Interest . The rights and benefits of Director under this Agreement are personal to Director, and neither Director nor Director's beneficiaries shall have the power or right to transfer, assign, anticipate, mortgage, or otherwise encumber any payments to be made under this Agreement, except as provided in Section 5 above.
The provisions of this Agreement shall inure to the benefit of Director's beneficiaries, heirs, executors, administrators and successors in interest and to the benefit of the Company's assigns and successors in interest.
All obligations of the Company under this Agreement shall be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, reorganization or other transaction involving all or substantially all of the business and/or assets of the Company. References to the Company in this Agreement shall be deemed to refer to the successors thereto, as applicable.
11. Section 409A . To the extent applicable, it is intended that this Agreement will comply with Section 409A of the Internal Revenue Code of 1986, as amended, and any regulations and guidance issued thereunder, and this Agreement shall be interpreted accordingly.
5 |
12. Governing Law . To the extent not preempted by Federal law, this Agreement and all rights and obligations hereunder shall be governed by and interpreted in accordance with, the laws of the State of Idaho, without regard to conflicts of law provisions.
class=Section3IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement this ____ day of [ , 200[8]].
By _________________________________
[Name]
IDACORP Financial Services, Inc.
By _________________________________
6
IDACORP FINANCIAL SERVICES, INC.
BENEFICIARY DESIGNATION
FOR
DEFERRED COMPENSATION AGREEMENT
IDACORP Financial Services, Inc.
P. O. Box 70
Boise, Idaho 83707
Dear Sirs:
In accordance with the terms and conditions of my Deferred Compensation Agreement dated [date], deferring, until a later date, fees I would otherwise receive for services rendered as a Director of IDACORP Financial Services, Inc., I hereby, in the event of my death prior to receipt of all or any balance of such fees so accumulated, designate
Primary: ____________________________________
Secondary: ____________________________________
as my beneficiary(ies) to receive the funds so accumulated at the time in the manner provided for under such Deferred Compensation Agreement.
__________________________________
[Name]
Date:______________________________
Exhibit 10.55
IDACORP Financial Services, Inc.
[Date], 2008
[Name]
[Address]
Re: Section
409A Modifications to your Deferred Compensation
Agreement with IDACORP Financial Services, Inc.
This letter agreement will serve as an amendment to your Deferred Compensation Agreement and is intended to reflect recent changes in the interest rate on deferred compensation and to bring your Deferred Compensation Agreement into documentary compliance with Section 409A of the Internal Revenue Code. Please read this letter and the attachments carefully and if you agree to the amendments reflected in Annex B, please sign where indicated and return to me as soon as possible, but in no event later than December 31, 2008.
Dear [ ]:
As part of our review of the Companys compensation plans for compliance with Section 409A of the Internal Revenue Code, we have reviewed the director deferred compensation agreements and determined that they should be amended to help ensure they comply with Section 409A. A copy of your deferred compensation agreement and any amendments thereto is attached hereto as Annex A (the Deferral Agreement).
Section 409A imposes significant, adverse taxes on individuals whose compensation is deferred (including accelerated income tax recognition and imposition of a 20% additional tax and interest) if the terms of the governing deferred compensation plan or agreement do not comply with Section 409A and related regulations by the end of 2008.
Page 2
In addition, the Compensation Committee of the Board of Directors (the Board) of the Company recently approved changes to how interest will be credited under the Deferral Agreement. Any cash director fees that you deferred before 2009 for your service as a member of the Board will continue to be credited with the preceding months average Moodys Long-Term Corporate Bond Yield for utilities (the Moodys Rate) plus three percent, as stated in the Deferral Agreement, until January 1, 2019 when the interest rate will change to the Moodys Rate. All cash fees that you defer for service as a member of the Board beginning January 1, 2009 will be credited with interest at the Moodys Rate, rather than at the Moodys Rate plus three percent. Interest is calculated on a pro rata basis each month using a 360-day year and the average Moodys Rate for the preceding month.
Description of Amendments
Following are the amendments that will be made to your Deferral Agreement, together with an explanation of why the amendments are necessary.
Separation from Service. Under Section 409A, deferred compensation generally must be paid on a specified date or dates or on a payment event listed in Section 409A. A separation from service, as that term is used in Section 409A, is a permissible payment event.
Sections 3(a) and 3(b) of your Deferral Agreement provide that payments will be made (or annual installments will commence) after Director ceases to be a member of the Board. Section 3(a) is hereby amended to read instead Director experiences a separation from service, as that term is used in Section 409A(a)(2)(A)(i) of the Internal Revenue Code of 1986, as amended (Separation from Service), with the Company. Section 3(b) is hereby amended to read instead Director experiences a Separation from Service with the Company.
It is possible for a director to cease being a member of the Board, but not have a separation from service, as that term is used in Section 409A. For example, if a director were to provide substantial services to the company as a consultant after ceasing to be a member of the Board, that may not constitute a separation from service for purposes of Section 409A. Making a payment to the director in that case would violate Section 409A.
Specifying a Payment Date. As noted above, Section 409A permits payment of deferred compensation on a specified date or dates or on a payment event listed in Section 409A. A date can be a pre-specified date (such as January 1, 2012) or it can be a date that is tied to a permissible payment event (such as the first anniversary of separation from service). A specified date can also be a period within one taxable year (such as the first 90 days of 2012 or the first 90 days of the calendar year following the year of separation from service).
Lump Sum Payments. Your Deferral Agreement allowed you to elect to receive your payments either in a lump sum or in up to ten annual installments. The lump sum payment provision (Section 3(a)) states that payment will be made as soon as practicable after the first business day of the calendar year following the year the director ceases to be a member of the Board. Because making payments as soon as practicable after an event, without further limitation, may not comply with Section 409A, this provision is hereby amended to add (but not more than 90 days) after as soon as practicable.
Page 3
Installment Payments . Your Deferral Agreements installment payment provision (Section 3(b)) provides for annual cash installment payments to be made commencing on the first business day of the calendar year following the year in which you cease to be a member of the Board. This provision is hereby amended to state that each installment payment will be made on the first business day of the calendar year.
Payment Following Death. Your Deferral Agreements payment provision relating to payment at death (Section 6) provides that payment will be made as soon as practicable after the death of Director. Because providing for payment to be made as soon as practicable after an event, without further limitation, may not comply with Section 409A, this provision is hereby amended to add (but not later than 90 days) after as soon as practicable.
Annex B hereto reflects Sections 3(a), 3(b) and 6, as amended hereby.
If you have any questions, please contact me at (208) 388-2878.
Very truly yours,
Patrick A. Harrington
Corporate Secretary
AGREED:
____________________ ____________________
[Name] Date
Attachments
ANNEX A
ANNEX B
Section 3(a), as amended, reads as follows :
(a) ___ a payment of cash as soon as practicable (but not more than 90 days) after the first business day of the calendar year following the year in which Director [ceases to be a member of the Board] experiences a separation from service, as that term is used in Section 409A(a)(2)(A)(i) of the Internal Revenue Code of 1986, as amended (Separation from Service), with the Company, such amount equal to the credit balance of Directors interest account as provided in Section 4 below.
Section 3(b), as amended, reads as follows:
(b) ___ in a series of ____ annual cash installment payments (not more than 10) to be made [commencing] on the first business day of the calendar year commencing with the calendar year following the year in which Director [ceases to be a member of the Board] experiences a Separation from Service with the Company. The unpaid credit balance of the deferred Fees shall continue to be adjusted, as provided in Section 4 of this Agreement, during the period that Director or Directors beneficiary is receiving such installment payments.
Section 6, as amended, reads as follows:
6. Payment of Deferred Fees in the Event of Death . In the event of the death of Director while a member of the Board or prior to the full payment to Director of the Fees deferred under this Agreement then the credit balance remaining in Directors interest account shall be paid in a single lump sum payment to Directors designated beneficiary or beneficiaries. Such single sum payment shall be made as soon as practicable (but not later than 90 days) after the death of Director. If any dispute shall arise as to the entitlement of any person to any portion of the deferred Fees, the Corporations obligations under this Agreement will be satisfied if it makes payment to Directors estate.
[bracketed language in Annex B deleted]
Exhibit 10.56
AMENDMENT TO
DEFERRED COMPENSATION AGREEMENT
IDACORP FINANCIAL SERVICES, INC.
(Change to Time and/or Form of Payment)
AMENDMENT TO DEFERRED COMPENSATION AGREEMENT, by and between _______________ (Director) and IDACORP Financial Services, Inc. (the Company);
W I T N E S S E T H:
WHEREAS, Director is a member of the Board of Directors (the Board) of the Company; and
WHEREAS, Director has elected to defer all or a portion of Director cash fees for service as a member of the Board pursuant to [a] Deferred Compensation Agreement[s] dated __________ [and [__________] (collectively, the Deferred Compensation Agreement)][ADD THE FOLLOWING IF DIRECTOR HAS EXECUTED AN AMENDMENT TO DEFERRED COMPENSATION AGREEMENT: and an Amendment to Deferred Compensation Agreement dated _____________ (collectively, the Deferred Compensation Agreement)]; and
WHEREAS, Director desires to change his/her prior election regarding the time and/or form of payment of his/her account under the Deferred Compensation Agreement.
NOW, THEREFORE, in consideration of the premises, Director and the Company hereby agree as follows:
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1. Subject to Section 2 below, Directors Deferred Compensation Agreement shall be amended so that the entire credit balance of Director's interest account as provided in the Deferred Compensation Agreement shall be distributed as follows:
(Choose one)
(a) ___ a lump sum cash payment as soon as practicable (but not more than 90 days) after the first business day of the 6 th calendar year [NOTE THAT THIS COULD BE ANY CALENDAR YEAR LATER THAN THE 6 TH AS WELL] following the year in which Director experiences a separation from service, as that term is used in Section 409A(a)(2)(A)(i) of the Internal Revenue Code of 1986, as amended (a Separation from Service), with the Company, such amount equal to the credit balance of Directors interest account as provided in Section 4 of the Deferred Compensation Agreement.
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(b) ___ in a series of ____ annual cash installment payments (not more than 10) to be made on the first business day of the calendar year commencing with the 6 th calendar year [NOTE THAT THIS COULD BE ANY CALENDAR YEAR LATER THAN THE 6 TH AS WELL] following the year in which Director experiences a Separation from Service with the Company. The unpaid credit balance of the deferred Fees shall continue to be adjusted, as provided in Section 4 of the Deferred Compensation Agreement, during the period that the installment payments are being made.
2. It is the intent of the Company and Director that Directors election pursuant to this Amendment to Deferred Compensation Agreement comply with the rules regarding subsequent changes in time and form of payment under Section 409A of the Internal Revenue Code of 1986, as amended, and any regulations and guidance issued thereunder, including Treas. Reg. Section 1.409A-2(b), and this Amendment to Deferred Compensation Agreement shall be interpreted accordingly. Accordingly, notwithstanding anything herein to the contrary, Directors election HEREUNDER shall not take effect until at least 12 months after the date such election is made and shall be of no force or effect IF payments are scheduled to be PAID or commence prior to the DATE SUCH ELECTION WOULD BECOME EFFECTIVE .
3. Capitalized terms not otherwise defined herein shall have the meanings given them in the Deferred Compensation Agreement.
4. All terms, provisions and conditions applicable to Director's interest account set forth in the Deferred Compensation Agreement and not set forth herein are hereby incorporated by reference herein.
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5. This Amendment to Deferred Compensation Agreement shall be irrevocable upon delivery to the Secretary of the Company.
IN WITNESS WHEREOF, the parties hereto have duly executed this Amendment to Deferred Compensation Agreement this ____ day of ______________, 20___.
By
[Name]
IDACORP, INC.
By
Exhibit 10.57
IDACORP FINANCIAL SERVICES, INC.
TERMINATION OF
DEFERRED COMPENSATION AGREEMENT
TERMINATION OF DEFERRED COMPENSATION AGREEMENT, by and between [ ] (Director) and IDACORP Financial Services, Inc. (the Company);
W I T N E S S E T H:
WHEREAS, Director is a member of the Board of Directors (the Board) of the Company; and
WHEREAS, Director has elected to defer all or a portion of Director cash fees for service as a member of the Board pursuant to [a] Deferred Compensation Agreement[s] dated __________ [and [__________] (collectively, the Deferred Compensation Agreement)][ADD THE FOLLOWING IF DIRECTOR HAS EXECUTED AN AMENDMENT TO DEFERRED COMPENSATION AGREEMENT: and an Amendment to Deferred Compensation Agreement dated _____________ (collectively, the Deferred Compensation Agreement)]; and
WHEREAS, Section 2 of the Deferred Compensation Agreement provides the Director with the option of terminating the Agreement in December of each year; and
WHEREAS, Director desires to terminate the Deferred Compensation Agreement effective December 31, [ ];
NOW, THEREFORE, in consideration of the premises, Director and the Company hereby agree to the following:
1. Pursuant to Section 2 of the Deferred Compensation Agreement, Director and the Company hereby agree that said Agreement will be terminated effective December 31, [ ], and no further deferrals will be made under the Deferred Compensation Agreement after that date.
2. All deferred Fees in Directors interest account as of December 31, [ ] will continue to accrue interest as provided in Section 4 of the Deferred Compensation Agreement and will continue to be payable to Director as provided in Section 3 of the Deferred Compensation Agreement.
3. Capitalized terms not otherwise defined herein shall have the meanings given them in the Deferred Compensation Agreement.
IN WITNESS WHEREOF, the parties hereto have duly executed this Termination of Deferred Compensation Agreement this ____ day of [ ].
By_______________________________
[Name]
IDACORP Financial Services, Inc.
By_______________________________
EXHIBIT 23
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent
to the incorporation by reference in Registration Statement Nos. 333-155498 and 333-155645 on
Form S-3 and Registration Statement Nos. 333-65406, 333-104254, 333-125259, and
333-143404 on Form S-8 of IDACORP, Inc. and Registration Statement No. 333-147807 on Form
S-3 and Registration Statement No. 333-66496 on Form S-8 of Idaho Power Company
of our reports dated February 25, 2009, relating to the consolidated financial
statements and financial statement schedules of IDACORP, Inc. and Idaho Power
Company (which reports express an unqualified opinion and include an explanatory
paragraph relating to the adoption of Statement of Financial Accounting
Standards No. 158 and Financial Accounting Standards Board Interpretation No.
48), and the effectiveness of IDACORP, Inc.s and Idaho Power Companys internal
control over financial reporting, appearing in this Annual Report on Form 10-K
of IDACORP, Inc. and Idaho Power Company for the year ended December 31, 2008.
/s/ DELOITTE & TOUCHE LLP
Boise, Idaho
February 25, 2009
Exhibit 31.1
CERTIFICATION
I, J. LaMont Keen, certify
that:
1. I have reviewed this Annual
Report on Form 10-K, of IDACORP, Inc.;
2. Based on my knowledge, this report does not contain
any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under
which such statements were made, not misleading with respect to the period
covered by this report;
3. Based on my knowledge, the financial statements,
and other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash flows
of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are
responsible for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control
over financial reporting (as defined in Exchange Act Rules 13a-15(f) and
15d-15(f)) for the registrant and we have:
a)
Designed such disclosure controls
and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to
the registrant, including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in which this
report is being prepared;
b)
Designed such internal control
over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally
accepted accounting principles;
c)
Evaluated the effectiveness of the
registrant's disclosure controls and procedures and presented in this report
our conclusions about the effectiveness of the disclosure controls and
procedures, as of the end of the period covered by this report based on such
evaluation; and
d)
Disclosed in this report any
change in the registrant's internal control over financial reporting that
occurred during the registrant's most recent fiscal quarter (the registrant's
fourth fiscal quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect the registrant's
internal control over financial reporting; and
5. The registrant's other certifying officer and I
have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant's auditors and the audit committee of
the registrant's board of directors (or persons performing the equivalent
functions):
a)
All significant deficiencies and
material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the
registrant's ability to record, process, summarize and report financial
information; and
b)
Any fraud, whether or not
material, that involves management or other employees who have a significant
role in the registrant's internal control over financial reporting.
Date: |
February 26, 2009 |
By: |
/s /J. LaMont Keen |
|
J. LaMont Keen |
||
|
President and Chief Executive Officer |
Exhibit 31.2
CERTIFICATION
I, Darrel T. Anderson,
certify that:
1. I have reviewed this Annual
Report on Form 10-K, of IDACORP, Inc.;
2. Based on my knowledge, this report does not contain
any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under
which such statements were made, not misleading with respect to the period
covered by this report;
3. Based on my knowledge, the financial statements,
and other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash flows
of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are
responsible for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control
over financial reporting (as defined in Exchange Act Rules 13a-15(f) and
15d-15(f)) for the registrant and we have:
a)
Designed such disclosure controls
and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to
the registrant, including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in which this
report is being prepared;
b)
Designed such internal control
over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally
accepted accounting principles;
c)
Evaluated the effectiveness of the
registrant's disclosure controls and procedures and presented in this report
our conclusions about the effectiveness of the disclosure controls and
procedures, as of the end of the period covered by this report based on such evaluation;
and
d)
Disclosed in this report any
change in the registrant's internal control over financial reporting that
occurred during the registrant's most recent fiscal quarter (the registrant's
fourth fiscal quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect the registrant's
internal control over financial reporting; and
5. The registrant's other certifying officer and I
have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant's auditors and the audit committee of
the registrant's board of directors (or persons performing the equivalent
functions):
a)
All significant deficiencies and
material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the
registrant's ability to record, process, summarize and report financial
information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: |
February 26, 2009 |
By: |
/s/Darrel T. Anderson |
|
|
|
Darrel T. Anderson |
|
|
|
Senior Vice President - Administrative Services |
|
|
|
and Chief Financial Officer |
Exhibit 31.3
CERTIFICATION
I, J. LaMont Keen, certify
that:
1. I have reviewed this Annual
Report on Form 10-K, of Idaho Power Company;
2. Based on my knowledge, this report does not contain
any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under
which such statements were made, not misleading with respect to the period
covered by this report;
3. Based on my knowledge, the financial statements,
and other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash flows
of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are
responsible for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control
over financial reporting (as defined in Exchange Act Rules 13a-15(f) and
15d-15(f)) for the registrant and we have:
a)
Designed such disclosure controls
and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to
the registrant, including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in which this
report is being prepared;
b)
Designed such internal control
over financial reporting, or caused such internal control over financial reporting
to be designed under our supervision, to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted
accounting principles;
c)
Evaluated the effectiveness of the
registrant's disclosure controls and procedures and presented in this report
our conclusions about the effectiveness of the disclosure controls and
procedures, as of the end of the period covered by this report based on such evaluation;
and
d)
Disclosed in this report any
change in the registrant's internal control over financial reporting that
occurred during the registrant's most recent fiscal quarter (the registrant's
fourth fiscal quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect the registrant's
internal control over financial reporting; and
5. The registrant's other certifying officer and I
have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant's auditors and the audit committee of
the registrant's board of directors (or persons performing the equivalent
functions):
a)
All significant deficiencies and
material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the
registrant's ability to record, process, summarize and report financial
information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: |
February 26, 2009 |
By: |
/s/ J. LaMont Keen |
|
|
|
|
|
J. LaMont Keen |
|
|
|
|
President and Chief Executive Officer |
Exhibit 31.4
CERTIFICATION
I, Darrel T. Anderson,
certify that:
1. I have reviewed this Annual
Report on Form 10-K, of Idaho Power Company;
2. Based on my knowledge, this report does not contain
any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under
which such statements were made, not misleading with respect to the period
covered by this report;
3. Based on my knowledge, the financial statements,
and other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash flows
of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are
responsible for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control
over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))
for the registrant and we have:
a)
Designed such disclosure controls
and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to
the registrant, including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in which this
report is being prepared;
b)
Designed such internal control
over financial reporting, or caused such internal control over financial reporting
to be designed under our supervision, to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted
accounting principles;
c)
Evaluated the effectiveness of the
registrant's disclosure controls and procedures and presented in this report
our conclusions about the effectiveness of the disclosure controls and
procedures, as of the end of the period covered by this report based on such
evaluation; and
d)
Disclosed in this report any
change in the registrant's internal control over financial reporting that
occurred during the registrant's most recent fiscal quarter (the registrant's
fourth fiscal quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect the registrant's
internal control over financial reporting; and
5. The registrant's other certifying officer and I
have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant's auditors and the audit committee of
the registrant's board of directors (or persons performing the equivalent
functions):
a)
All significant deficiencies and
material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the
registrant's ability to record, process, summarize and report financial
information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: |
February 26, 2009 |
By: |
/s/Darrel T. Anderson |
|
|
|
Darrel T. Anderson |
|
|
|
Senior Vice President - Administrative Services |
|
|
|
and Chief Financial Officer |
Exhibit 32.1
CERTIFICATION
PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of IDACORP, Inc. (the
"Company") on Form 10-K for the year ended December 31, 2008, (the
"Report"), I, J. LaMont Keen, President and Chief Executive Officer
of the Company, certify that:
(1)
The Report fully complies with the requirements of Section 13(a) of the
Securities Exchange Act of 1934; and
(2)
The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Company.
/s/J. LaMont Keen |
J. LaMont Keen |
President and Chief Executive Officer |
February 26, 2009 |
|
Exhibit 32.2
CERTIFICATION
PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of IDACORP, Inc. (the
"Company") on Form 10-K for the year ended December 31, 2008, (the
"Report"), I, Darrel T. Anderson, Senior Vice President -
Administrative Services and Chief Financial Officer of the Company, certify
that:
(1)
The Report fully complies with the requirements of Section 13(a) of the
Securities Exchange Act of 1934; and
(2)
The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Company.
/s/Darrel T. Anderson |
Darrel T. Anderson |
Senior Vice President - Administrative Services |
and Chief Financial Officer |
February 26, 2009 |
Exhibit 32.3
CERTIFICATION
PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Idaho Power Company (the "Company") on Form 10-K for the year ended December 31, 2008, (the "Report"), I, J. LaMont Keen, President and Chief Executive Officer of the Company, certify that:
(1) The Report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
/s/J. LaMont Keen |
J. LaMont Keen |
President and Chief Executive Officer |
February 26, 2009 |
|
Exhibit 32.4
CERTIFICATION
PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Idaho Power Company (the "Company") on Form 10-K for the year ended December 31, 2008, (the "Report"), I, Darrel T. Anderson, Senior Vice President - Administrative Services and Chief Financial Officer of the Company, certify that:
(1) The Report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
/s/Darrel T. Anderson |
Darrel T. Anderson |
Senior Vice President - Administrative Services |
and Chief Financial Officer |
February 26, 2009 |