ITEM 1.  BUSINESS

OVERVIEW

IDACORP, Inc. (IDACORP) is a holding company formed in 1998 whose principal operating subsidiary is Idaho Power Company (Idaho Power).  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.

Idaho Power was incorporated under the laws of the state of Idaho in 1989 as successor to a Maine corporation organized in 1915.  Idaho Power 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.  Idaho Power 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 Idaho Power.

IDACORP’s 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.

IDACORP’s business strategy emphasizes Idaho Power as IDACORP’s core business.  Idaho Power is IDACORP’s only reportable business segment, contributing 98.6 percent of IDACORP’s income from continuing operations in 2009.  Segment data is presented in Note 17 to the consolidated financial statements.  At December 31, 2009, IDACORP had 1,994 full-time employees, 1,979 of which were employed by Idaho Power.

Idaho Power detailed a three-part strategy of responsible planning, responsible development and protection of resources, and responsible energy use to ensure adequate energy supplies.  Idaho Power continues to evaluate and refine its business strategy to ensure coordination among and integration of all functional areas of the company.  Idaho Power’s business strategy balances the interests of owners, customers and employees while maintaining the company’s financial stability and flexibility.  The strategy includes:

RESPONSIBLE PLANNING:  Idaho Power’s planning process is intended to ensure adequate generation and transmission resources to meet population growth and increasing electricity demand.  This planning process now integrates Idaho Power’s regulatory strategy and financial planning, including the consideration of regional economic development in the growing communities we serve.

RESPONSIBLE DEVELOPMENT AND PROTECTION OF RESOURCES:  Idaho Power’s business strategy has included the development and protection of generation, transmission, distribution and associated infrastructure, and the natural resources Idaho Power depends upon.  The strategy now includes specific consideration of workforce planning, development and retention related to these strategic elements.

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RESPONSIBLE ENERGY USE:  Idaho Power’s business strategy has included energy efficiency and demand response programs and preparation for potential carbon and renewable portfolio standard legislation.  The strategy now includes targeted reductions relating to carbon emission intensity and public disclosure of these reductions.

IDACORP and Idaho Power 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.  IDACORP’s website is www.idacorpinc.com and can also be accessed through a link to the IDACORP website on the Idaho Power website at www.idahopower.com.

UTILITY OPERATIONS

Idaho Power’s service territory covers approximately 24,000 square miles in southern Idaho and eastern Oregon, with an estimated population of one million.  Idaho Power 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, 2009, Idaho Power supplied electric energy to approximately 490,000 general business customers.  Idaho Power’s principal commercial and industrial customers are involved in food processing, electronics and general manufacturing, forest products, beet sugar refining and winter recreation.

Weather, customer demand and economic conditions impact electricity sales.  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.

Rates and Revenues

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.  Idaho Power is under the retail jurisdiction (as to rates, service, accounting and other general matters of utility operation) of the Idaho Public Utilities Commission (IPUC) and the Oregon Public Utility Commission (OPUC) and as a regulated electric utility, Idaho Power is generally not subject to retail competition.  The IPUC and the OPUC determine the rates that Idaho Power charges to its general business customers.  Idaho Power is also under the retail regulatory jurisdiction of the IPUC, the OPUC and the Public Service Commission of Wyoming as to the issuance of debt and equity securities.

Approximately 95 percent of Idaho Power’s general business revenue comes from customers located in Idaho.  Idaho Power uses general rate cases, power cost adjustment mechanisms, a fixed cost adjustment (FCA) mechanism, and subject-specific filings to recover its costs of providing service and to earn a return on investment.  Significant rate cases and proceedings are discussed in more detail in Note 3 to the consolidated financial statements.

Special Customer Electric Service Agreements

Micron:   The IPUC authorized Idaho Power to amend temporarily an electric service agreement with one of its largest customers, Micron Technology, Inc. (Micron) for the period January 2009 through June 2009, to provide Micron flexibility in restructuring its operations.  Subsequently, the IPUC approved an extension of the temporary amendment through December 31, 2009.  The amendments did not have a significant impact on Idaho Power’s 2009 earnings and are not expected to have a significant impact on 2010 earnings.  The IPUC approved a replacement agreement between Idaho Power and Micron on February 12, 2010, providing operating and planning benefits to Idaho Power while allowing Micron to reduce its contract demand from 85 MW to 60 MW.

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Hoku:   In September 2008, Idaho Power entered into an electric service agreement with a new customer, Hoku Materials, Inc. (Hoku), to provide electric service to Hoku’s polysilicon production facility under construction in Pocatello, Idaho.  The IPUC approved the electric service agreement in March 2009.  The initial term of the agreement was four years beginning June 1, 2009, (this date was subsequently changed to December 1, 2009) with a maximum demand obligation during the initial term of 82 MW.

Hoku was still not taking service on December 1, 2009, and Idaho Power agreed to temporarily waive the minimum billed energy charge in the Hoku special contract, effective December 1, 2009.  The temporary waiver would remain in effect until the month the contract load factor first exceeds 70 percent of the total contract demand, or March 31, 2011, whichever comes first.  The IPUC has approved this waiver.  While the multi-month delay in the starting date for Hoku’s required energy purchases reduces Idaho Power’s revenues, the revenue reductions are largely offset by corresponding reductions in Idaho Power’s costs of providing service to Hoku.

Wholesale

As a public utility under Part II of the Federal Power Act (FPA), Idaho Power 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).  Idaho Power’s OATT is revised each year based on financial and operational data Idaho Power files annually with the FERC in its Form 1.  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.  Significant rate cases and proceedings are discussed in more detail in Note 3 to the consolidated financial statements.

Idaho Power has one firm wholesale power sales contract with Raft River Electric Cooperative for up to 15 MW.  This contract expires in September 2010.  However, Raft River Electric Cooperative has provided notice that is intends to renew the contract, as allowed in the original agreement, through September 2011.

Idaho Power has one wholesale reserve sales contract, with United Materials of Great Falls, Inc.  The agreement requires Idaho Power to carry reserves in association with an energy sales agreement between Idaho Power and United Materials from the Horseshoe Bend Wind Farm located in Montana.  The term of the agreement runs seasonally through May 2013.

Energy sales

The following table presents Idaho Power’s revenues and energy use by customer type for the last three years.  Idaho Power’s operations are discussed further in Part II, Item 7 - “MD&A - RESULTS OF OPERATIONS - Utility Operations:”

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Power Supply

Idaho Power primarily relies on company-owned hydroelectric, coal and gas-fired generation facilities and long-term power purchase agreements (PPAs) to supply the energy needed to serve customers.  Idaho Power’s annual hydroelectric generation varies depending on water conditions in the Snake River and market purchases and sales are used to balance supply and demand throughout the year.  Idaho Power’s low-cost hydroelectric plants are typically the company’s largest source of electricity.  Idaho Power’s generating plants and their capacities are listed in Item 2 - “Properties.”

Weather, customer growth and economic conditions impact power supply costs.  Drought conditions and customer growth cause a greater reliance on more expensive purchased power to meet load requirements.  Conversely, favorable hydroelectric generation conditions increase production at Idaho Power’s hydroelectric generating facilities and reduce the need for purchased power.  Economic conditions can affect market price of natural gas and coal, which may impact fuel expense and market prices for purchased power.

Idaho Power’s 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, and the all-time winter peak demand is 2,527 MW set on December 10, 2009.  During these and other similar heavy load periods Idaho Power’s system is fully committed to serve loads and meet required operating reserves.

The following table presents Idaho Power’s total power supply for the last three years:

Hydroelectric Generation

Idaho Power operates 17 hydroelectric projects located on the Snake River and its tributaries.  Together, these hydroelectric facilities provide a total nameplate capacity of 1,709 MW and annual generation equal to approximately 8.6 million MWh under median water conditions.

Because of its reliance on hydroelectric generation, Idaho Power’s 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 Idaho Power’s hydroelectric facilities, reservoir storage, springtime snow pack run-off, river base flows, spring flows, rainfall, amount and timing of water leases, and other weather and stream flow management considerations.  During low water years, when stream flows into Idaho Power’s hydroelectric projects are reduced, Idaho Power’s hydroelectric generation is reduced.  This results in less generation from Idaho Power’s resource portfolio (hydroelectric, coal-fired and gas-fired) available for off-system sales and, generally, 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.

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Stream flow conditions improved in 2009 resulting in an increase of 1.2 million MWh generated from Idaho Power’s hydroelectric facilities as compared to 2008.  The observed stream flow data released in August 2009 by the U.S. Army Corps of Engineers, indicated that Brownlee reservoir inflow for April through July 2009 was 5.6 million acre-feet (maf), or 89 percent of the National Weather Service Northwest River Forecast Center (NWRFC) average, compared to 4.4 maf, or 70 percent of the NWRFC average, in 2008.

Storage in selected federal reservoirs upstream of Brownlee as of February 21, 2010, was 118 percent of average.  The stream flow forecast released on February 19, 2010, by the NWRFC predicts that Brownlee reservoir inflow for April through July 2010 will be 2.9 maf, or 46 percent of the NWRFC average.

Power generation at the Idaho Power hydroelectric power plants on the Snake River also depends on the state water rights held by Idaho Power 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.  Idaho Power 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 Idaho Power’s hydroelectric projects on the Snake River.  For further information see Part II, Item 7 – “MD&A – LEGAL MATTERS – Snake River Basin Water Rights.”

Idaho Power is subject to the provisions of the Federal Power Act (FPA) as a “public utility” and as a “licensee” as therein defined and is subject to regulation by the FERC.  As a licensee under Part I of the FPA, Idaho Power 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.

Idaho Power obtains licenses for its hydroelectric projects from the FERC, similar to other utilities that operate nonfederal hydroelectric projects on qualified waterways.  These licenses last for 30 to 50 years depending on the size, complexity, and cost of the project.  Idaho Power is actively pursuing the relicensing of the Hells Canyon Complex and Swan Falls projects.  For further information on relicensing activities see Part II, Item 7 – “MD&A – RELICENSING OF HYDROELECTRIC PROJECTS.”

The state of Oregon has a Hydroelectric Act providing for licensing of hydroelectric projects in that state.  With respect to project property located in Oregon, Idaho Power’s Brownlee, Oxbow and Hells Canyon facilities are subject to the Oregon Hydroelectric Act.  Idaho Power has obtained Oregon licenses for these facilities and these licenses are not in conflict with the FPA or Idaho Power’s FERC licenses.

Coal and Natural-Gas Combustion Generation
Idaho Power co-owns three coal-fired power plants and owns two natural gas combustion turbine power plants.  The coal-fired plants are:  Jim Bridger located in Wyoming; Boardman located in Oregon; and Valmy located in Nevada.  The natural gas-fired plants, Danskin and Bennett Mountain, are located in Idaho.

Fuel supply-coal

Idaho Power, 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 Idaho Power).  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.  Idaho Power also has a coal supply contract providing for annual deliveries of coal through 2014 from the Black Butte Coal Company’s 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 plant’s 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.

NV Energy, as operator of the 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, Idaho Power is obligated to purchase one-half of the coal, Idaho Power’s portion ranging from 515,000 tons to 762,500 tons annually.  NV Energy also has a coal supply contract with Black Butte Coal Company’s Black Butte Mine for deliveries through 2015.  Idaho Power is obligated to purchase one-half of the coal purchased under this agreement ranging from as low as 44,000 to as many as 500,000 tons annually.

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The Boardman generating plant receives coal from the Powder River Basin through annual contracts.  Portland General Electric, as operator of the Boardman plant, has two agreements with Foundation Coal West, Inc. to supply all of Boardman’s coal requirements in 2010 and additional deliveries through 2011.  As a ten percent owner of the plant, Idaho Power is obligated to purchase ten percent of the coal purchased under these agreements, which cumulatively ranges from 175,000 to 225,000 tons annually.

Fuel supply-natural gas

Idaho Power owns and operates the Danskin and Bennett Mountain combustion turbines, which are supplied gas through Northwest Pipeline GP’s (Northwest) pipeline.  Gas is purchased as needs are identified for summer peaks or to meet system requirements.  Natural gas is transported under two long-term agreements with Northwest.  The first agreement, which runs into 2022, with annual extensions at Idaho Power’s sole discretion, is for 24,523 million British thermal units (MMBtu) per day.  Idaho Power also has the ability to flow a total of 78,092 MMBtu on an alternate firm basis without incurring a reservation charge on the additional amount.  The second agreement, beginning in 2012 and running through 2027, provides Idaho Power with transportation capacity for 22,000 MMBtu per day.  In addition to the two long-term gas transportation agreements, Idaho Power has entered into a long-term storage agreement with Northwest 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 Idaho Power on a monthly basis.  Idaho Power’s current storage allotment is approximately 53 percent of its total, and its full allotment is expected to be reached by January 2011.  The firm storage contract expires in 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.

Idaho Power plans to construct and operate the Langley Gulch combined-cycle natural gas power plant.  Construction is scheduled to begin during the summer of 2010 with an on-line date targeted for the summer of 2012.  Gas for Langley Gulch will be supplied through Northwest’s pipeline.  Procurement of gas will be managed to meet system requirements and fueling strategies.

Purchased Power Agreements

Idaho Power has four firm wholesale purchased power contracts.  The first contract is with PPL Energy Plus, LLC, for 83 MW per hour during heavy load hours, to address increased demand during June, July and August.  The contract term is through August 2011.  The second contract is with Raft River Energy I, LLC for 13 MW (nameplate generation) from its Raft River Geothermal Power Plant Unit #1 located in southern Idaho.  The contract term is through April 2033.  The third contract is with Telocaset Wind Power Partners, LLC, for 101 MW (nameplate generation) from its Elkhorn Valley wind project located in eastern Oregon.  The contract term is through 2027.  A fourth contract is currently before the IPUC for authorization.  This contract is with USG Oregon LLC for 22 MW (estimated average annual output) from its to-be-constructed Neal Hot Springs #1 geothermal power plant located near Vale, Oregon.  The contract term is 25 years with an option to extend.  Commercial operation is expected in late 2012.

Idaho Power has an exchange agreement with Clatskanie People’s Utility.  The agreement is for the exchange of up to 18 MWs of energy from the Arrowrock Project in southern Idaho for energy from Idaho Power’s system or power purchased at the Mid-Columbia trading hub.  The initial term of the agreement is January 1, 2010, through December 31, 2015.  Idaho Power has the right to renew the agreement for two additional five-year terms.  Idaho Power also has an exchange agreement with NV Energy that is pending approval from the Public Utilities Commission of Nevada.  The term of the agreement is one business day following the Public Utilities Commission of Nevada’s approval, and continuing for two consecutive years, and provides for the exchange of up to 45 MW of energy hourly.

CSPP Purchases

Pursuant to the requirements of Section 210 of PURPA, the state regulatory commissions have each issued orders and rules regulating Idaho Power’s purchase of power from cogeneration and small power production (CSPP) facilities.  A key component of the PURPA contracts is the energy price contained within the agreements.  The PURPA regulations specify that a utility must pay energy prices based on the utility’s avoided costs.  The Published Avoided Cost is a price established by the IPUC and OPUC to estimate Idaho Power’s cost of developing additional generation resources.  The IPUC and OPUC have established specific rules and regulations to calculate the published avoided cost that Idaho Power is required to include in the PURPA contracts.

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Idaho Power has contracts for the purchase of energy from a number of private developers.  Under these contracts:

•   Idaho Power is required to purchase all of the output from the facilities located inside its service territory.

•   Idaho Power is required to purchase the output of projects located outside its service territory if it has the ability to receive at the facility’s requested point of delivery on the Idaho Power system.

•   The IPUC jurisdictional portion of the costs associated with CSPP contracts is fully recovered through base rates and the PCA; the OPUC jurisdictional portion is recovered through general rate case filings and the Oregon power cost mechanism.

•   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.

•   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.

•   If a PURPA project does not qualify for Published Avoided Costs, Idaho Power is required to negotiate the terms, prices and conditions with the developer.  These negotiations reflect the characteristics of the individual projects (i.e., operational flexibility, location and size) and the benefits to the Idaho Power system and must be consistent with other similar energy alternatives.

On March 12, 2009, the IPUC increased the Published Avoided Cost rates.  For example, the rate for a 20-year levelized 2009 contract increased from $69.54/MWh to $88.92/MWh.  This increase continues a favorable climate for PURPA project development and may lead to additional PURPA agreements.  Those agreements may result in Idaho Power acquiring energy at above wholesale market prices and at times when a surplus already exists as well as requiring additional operational integration costs, thus increasing costs to its customers.  As noted above, substantially all CSPP costs are recovered through base rates and Idaho Power’s power supply cost mechanisms.

As of December 31, 2009, Idaho Power had signed agreements to purchase energy from 96 CSPP facilities with contracts originally ranging from one to 35 years.  Eighty of these facilities, with a combined nameplate capacity of 298 MW, were on-line at the end of 2009; the other 16 facilities under contract, with a combined nameplate capacity of 266 MW, are projected to come on-line during 2010 and 2011.  The majority of the new facilities will be wind resources which will generate on an intermittent basis.  During 2009, Idaho Power purchased 970,419 megawatt-hours (MWh) from CSPP facilities at a cost of $59 million, resulting in a blended price of 6.1 cents per kilowatt hour.

Wholesale Competition

The 1992 National Energy Policy Act and the FERC’s rulemaking activities have established the regulatory framework to open the wholesale energy market to competition.  Open-access transmission for wholesale customers provides energy suppliers with opportunities to sell and deliver electricity at market-based prices.  Idaho Power 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.

Wholesale Energy Market Activities

Idaho Power participates in the wholesale energy market by buying power to help meet load demands and selling power that is in excess of load demands.  Idaho Power’s market activities are guided by a risk management policy and frequently updated operating plans and influenced by customer loads, market prices, and cost and availability of generating resources.  Some of Idaho Power’s 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.  Wholesale energy market prices and compliance factors, such as allowable river stage elevation changes and flood control requirements, influence these dispatch decisions.

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Idaho Power’s generating facilities are interconnected through its integrated transmission system and are operated on a coordinated basis to achieve maximum load-carrying capability and reliability.  Idaho Power’s transmission system is directly interconnected with the transmission systems of the Bonneville Power Administration (BPA), Avista Corporation, PacifiCorp, NorthWestern Energy and NV Energy.  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 interconnecting with the winter-peaking northern and summer-peaking southern regions of the western power system.  Idaho Power provides wholesale transmission service and provides firm and non-firm wheeling services for eligible transmission customers.  Idaho Power 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.

Resource Planning

Idaho Power filed its 2009 Integrated Resource Plan (IRP) with the IPUC and OPUC in December 2009.  Idaho Power updates the IRP every two years.  The IRP forecasts Idaho Power’s load and resource situation for the next 20 years, analyzes potential supply-side and demand-side options and identifies near-term and long-term actions.

The four primary goals of the IRP are to:

(1) identify sufficient resources to reliably serve the growing demand for energy within Idaho Power’s service area throughout the 20-year planning period;

(2) ensure the selected resource portfolio balances cost, risk and environmental concerns;

(3) give equal and balanced treatment to both supply-side resources and demand-side measures; and

(4) involve the public in the planning process in a meaningful way.

The 2009 IRP analyzed supply-side resources, demand-side management programs, and transmission options taking into account many factors including the estimated costs of complying with potential carbon legislation as part of determining the preferred resource portfolio.  The preferred portfolio positions Idaho Power for compliance with anticipated carbon regulations and a federal Renewable Electricity Standard (RES).  Due to the uncertainty regarding future carbon regulations, no new conventional coal resources were selected in the preferred portfolio.

During the development of the 2009 IRP, Idaho Power conducted regular public meetings with the IRP Advisory Council (IRPAC).  The IRPAC members include the IPUC, the OPUC, political, environmental, and customer representatives and representatives of other public interest groups.  IRPAC meetings also serve as the primary forum for involving the public in the planning process.

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.  Idaho Power makes periodic adjustments and corrections to the resource plan to reflect changes in technology, economic conditions, anticipated resource development and regulatory requirements.

Supply-side Resource s

The foundation of Idaho Power’s energy resources is its company-owned generation facilities including 17 hydroelectric plants, two gas-fired plants and co-ownership in three coal-fired plants (discussed in “ITEM 2 PROPERTIES”).  To balance out its resource needs, Idaho Power also utilizes long-term PPA’s  to supply the energy needed to serve customers.

Idaho Power also has projects identified for construction that including  the 300-MW Langley Gulch combined-cycle power plant, and a 49 MW expansion of the Shoshone Falls hydroelectric facility.  Idaho Power is also planning the Boardman to Hemingway and the Gateway West transmission lines and constructing the Hemingway substation to improve reliability, relieve congestion and provide system flexibility (for more information see “ITEM 7 MD&A – LIQUIDITY AND CAPITAL RESOURCES – Capital Requirements – Major Projects”).  The IRP also included discussion related to the following resources:

Geothermal RFPs

Although the results of previously conducted geothermal request for proposal (RFP) processes have been disappointing, Idaho Power continues to work with project developers capable of delivering energy to the company’s service area.  Idaho Power has included two 20-MW increments of geothermal energy in the 2009 IRP preferred portfolio, one in 2012 and one in 2016.

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Wind RFP

The 2009 IRP preferred portfolio includes 150 MW of wind generation coming on-line in 2012.  In May 2009, Idaho Power issued an RFP for up to 150 MW of wind generation to come on-line no later than the end of 2012.  Idaho Power accelerated the release of the wind RFP to take advantage of the benefits offered in the American Recovery and Reinvestment Act of 2009 (ARRA or the economic stimulus package).  Proposals were received in June 2009 and Idaho Power expects to submit a contract to the IPUC for approval in the first half of 2010.

Combined Heat and Power (CHP) RFP

CHP resources were not included in the 2009 IRP preferred portfolio because of the level of uncertainty in being able to successfully develop a CHP project.  However, Idaho Power continues to work with large customers and other parties to explore CHP development opportunities.

In November 2009, Idaho Power signed an agreement to jointly investigate a CHP project with the Idaho Office of Energy Resources (IOER) and Amalgamated Sugar, one of Idaho Power’s large industrial customers.  The agreement establishes the framework for a CHP feasibility study to be performed at Amalgamated Sugar’s Nampa, Idaho facility that could be as large as 100 MW.  IOER and Idaho Power will jointly fund the study.

Demand-Side Management Programs

In 2009, Idaho Power spent approximately $35 million on energy efficiency and targeted demand reduction programs.  Approximately $33 million of funding for these programs came from Idaho and Oregon energy efficiency tariff riders.  The balance of the funding comes from Idaho Power base rates and from the remaining funds from the BPA’s Conservation and Renewables Discount, which was discontinued in 2007.

Idaho Power has several energy efficiency programs in place and in development, targeting savings across the entire year and across a wide range of customer segments.  The emphasis of these programs is to reduce energy consumption, especially during periods of high demand and minimize or delay the need to build new supply-side alternatives.  Idaho Power’s programs include:

•   irrigation demand response and irrigation efficiency programs target irrigation customers with financial incentives for allowing Idaho Power to interrupt service to their irrigation pumps, and for either improving the energy efficiency of an irrigation system or installing a new energy efficiency system;

•   residential air conditioning equipment control measures;

•   residential energy efficiency programs targeted at 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; and

•   industrial and commercial facilities application of energy efficient techniques and technologies, operational and management processes to reduce energy consumption, and a new industrial peak reduction program.

Idaho Power’s revised Irrigation Peak Rewards program design was approved by the IPUC in January 2009.  Participating customers receive a credit on their bills in exchange for allowing Idaho Power, within specified parameters, to interrupt service to their irrigation pumps during certain peak hours in a six-week period in June and July.  The cost of the program was $10 million in 2009 and is expected to increase to $11 million by 2011.

Idaho Power’s voluntary Commercial Demand Response program is for commercial and industrial customers larger than 200 kilowatts and was approved in May 2009 by the IPUC.  Idaho Power signed a five-year contract with a third-party aggregator, EnerNOC, to operate the program and arranges with Idaho Power’s customers to achieve peak reductions.  This program is dispatchable (meaning Idaho Power will have flexibility to schedule peak reduction benefits during times of greatest need) and is expected to increase to 50 MW of summer peak demand reduction availability by 2012.  The anticipated cost of the program is approximately $12 million over its first five years.

Approximately $3 million of energy efficiency spending was related to research, analysis and development, education, technology evaluation, and market transformation.  Some of this activity was done in conjunction with the Northwest Energy Efficiency Alliance (NEEA).  Idaho Power contributed $1 million to the NEEA in 2009.

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In 2009, Idaho Power’s energy efficiency programs reduced energy usage by approximately 160,000 MWh and the targeted demand reduction programs resulted in a summer peak reduction of about 200 MW.

Environmental Regulation

Idaho Power’s 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 including air, water, and solid waste.  Environmental regulation continues to impact Idaho Power’s 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.  In addition to generally applicable regulations, the FERC licenses issued for Idaho Power’s hydroelectric generating plants have environmental requirements such as aeration of turbine water to meet dissolved gas and temperature standards in the tail waters downstream from the plants.  Idaho Power monitors these issues and reports the results to the appropriate regulatory agencies.

Idaho Power co-owns three coal-fired power plants and owns two natural gas combustion turbine power plants that are subject to a broad range of environmental requirements, including air quality regulation.

Idaho Power’s environmental compliance costs will continue to be significant for the foreseeable future especially with potential additional regulation under discussion at the state and federal level.  For a more detailed discussion of these and other environmental issues, please see Part II, Item 7 – “MD&A – ENVIRONMENTAL ISSUES.”

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 $8 million, $11 million and $15 million in 2009, 2008 and 2007, respectively.  IFS’s portfolio also includes historic rehabilitation projects such as the Empire Building in Boise, Idaho.  IFS made $14 million and $8 million of new investments during 2009 and 2008, respectively, 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 IFS’s investments have been made through syndicated funds.  At December 31, 2009, the gross amount of IFS’s portfolio equaled $197 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.  Idaho Power purchased all of the power generated by Ida-West’s four Idaho hydroelectric projects at a cost of $9 million in 2009 and $8 million in both 2008 and 2007.

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