ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
In MD&A in this report, the general financial condition and results of operations for IDACORP and its subsidiaries and Idaho Power Company and its subsidiary are discussed. While reading this MD&A, please refer to the accompanying condensed consolidated financial statements of IDACORP and Idaho Power. Also refer to "Cautionary Note Regarding Forward-Looking Statements" in this report for important information regarding forward-looking statements made in this MD&A and elsewhere in this report. This discussion updates the MD&A included in the 2023 Annual Report, and should also be read in conjunction with the information in that report. The results of operations for an interim period generally will not be indicative of results for the full year, particularly in light of the seasonality of Idaho Power's sales volumes, as discussed below.
INTRODUCTION
IDACORP is a holding company formed in 1998 whose principal operating subsidiary is Idaho Power. IDACORP’s common stock is listed and trades on the New York Stock Exchange under the trading symbol "IDA". Idaho Power is an electric utility whose rates and other matters are regulated by the IPUC, OPUC, and FERC. Idaho Power generates revenues and cash flows primarily from the sale and distribution of electricity to customers in its Idaho and Oregon service areas, as well as from the wholesale sale and transmission of electricity. Idaho Power experiences its highest retail energy sales during the summer irrigation and cooling season, with a lower peak in the winter that generally results from heating demand.
Idaho Power is the parent of IERCo, a joint-owner of BCC, which mines and supplies coal to the Jim Bridger plant owned in part by Idaho Power. IDACORP’s other notable subsidiaries include IFS, an investor in affordable housing and other real estate tax credit investments, and Ida-West, an operator of small PURPA-qualifying hydropower generation projects.
EXECUTIVE OVERVIEW
Management's Outlook and Company Objectives
In the 2023 Annual Report, IDACORP's and Idaho Power's management included a summary of their business objectives for the companies for 2024 and beyond, under the heading "Executive Overview" in the MD&A. As of the date of this report, management's outlook and strategy remain consistent with that discussion, as updated by some of the discussion in this MD&A. Some notable developments that have occurred since that report include the following:
•Idaho Power continues to focus on timely recovery of costs and earning a reasonable return on investment. In May and June 2024, Idaho Power, the Staff of the OPUC, and certain intervening parties reached three partial settlement stipulations related to Idaho Power's Oregon general rate case filing that was made in December 2023. In addition, on May 31, 2024, Idaho Power filed a limited issue rate case in Idaho. These filings are described more fully in Note 3 - "Regulatory Matters" to the condensed consolidated financial statements included in this report.
•Idaho Power continues to expect positive customer growth in its service area. During the first six months of 2024, Idaho Power's customer count grew by over 7,500 customers, and for the twelve months ended June 30, 2024, the customer growth rate was 2.6 percent. Idaho Power reached a new summer peak demand of 3,793 MW on July 22, 2024. The prior highest summer peak demand was 3,751 MW, reached in June 2021.
•To help meet peak capacity and energy needs in 2026 and beyond,
◦in March 2024, as part of a competitive RFP process, Idaho Power entered into an energy and capacity market purchase agreement with an energy marketer for the right to acquire 200 MW on a daily basis during summer months beginning in 2026 for a term of at least five years, and requested approval of the agreement from the IPUC; and
◦in April 2024, Idaho Power filed a request for a CPCN in its Idaho jurisdiction for the acquisition of 150 MW of new battery storage assets with an expected in-service date in 2026.
As of the date of this report, IPUC decisions regarding these requests are pending.
•To help address the additional capacity deficits projected for 2026 and 2027, Idaho Power continues to evaluate the short-list of projects submitted in response to its RFP for additional energy and capacity resources. Idaho Power also has in-process RFPs under Oregon's competitive bidding rules for resources intended to be in-service in 2028 or later, to address energy and capacity deficits Idaho Power anticipates in those years.
Summary of Financial Results
The following is a summary of Idaho Power's net income, net income attributable to IDACORP, and IDACORP's earnings per diluted share for the three and six months ended June 30, 2024 and 2023 (in thousands, except earnings per share amounts):
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| | Three months ended
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| | | 2024 | | 2023 | | 2024 | | 2023 |
| Idaho Power net income | | $ | 87,388 | | | $ | 67,080 | | | $ | 134,690 | | | $ | 122,790 | |
| Net income attributable to IDACORP, Inc. | | $ | 89,520 | | | $ | 68,574 | | | $ | 137,693 | | | $ | 124,672 | |
| Weighted average outstanding shares – diluted | | 52,236 | | | 50,758 | | | 51,519 | | | 50,741 | |
| IDACORP, Inc. earnings per diluted share | | $ | 1.71 | | | $ | 1.35 | | | $ | 2.67 | | | $ | 2.46 | |
The table below provides a reconciliation of net income attributable to IDACORP for the three and six months ended June 30, 2024, from the same periods in 2023 (items are in millions and are before related income tax impact unless otherwise noted):
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| | Three months ended | | Six months ended |
| Net income attributable to IDACORP, Inc. - June 30, 2023 | | | | $ | 68.6 | | | | | $ | 124.7 | |
Increase (decrease) in Idaho Power net income: | | | | | | | | |
Retail revenues per MWh, net of associated power supply costs and power cost adjustment and FCA mechanisms | | 19.6 | | | | | 24.4 | | | |
Customer growth, net of associated power supply costs and power cost adjustment mechanisms | | 5.1 | | | | | 9.8 | | | |
Usage per retail customer, net of associated power supply costs and power cost adjustment mechanisms | | 6.2 | | | | | (3.8) | | | |
| | | | | | | | |
| Transmission wheeling-related revenues | | (2.5) | | | | | (3.5) | | | |
| Other O&M expenses | | (13.8) | | | | | (27.6) | | | |
Depreciation expense | | (7.6) | | | | | (16.2) | | | |
Other changes in operating revenues and expenses, net | | 13.9 | | | | | 18.6 | | | |
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| Increase in Idaho Power operating income | | 20.9 | | | | | 1.7 | | | |
| Non-operating expense, net | | (0.4) | | | | | (2.3) | | | |
| Additional ADITC amortization | | 3.8 | | | | | 12.5 | | | |
| Income tax expense, excluding additional ADITC amortization | | (4.0) | | | | | — | | | |
| Total increase in Idaho Power net income | | | | 20.3 | | | | | 11.9 | |
Other IDACORP changes (net of tax) | | | | 0.6 | | | | | 1.1 | |
| Net income attributable to IDACORP, Inc. - June 30, 2024 | | | | $ | 89.5 | | | | | $ | 137.7 | |
Net Income - Second Quarter 2024
IDACORP's net income increased $20.9 million for the second quarter of 2024 compared with the second quarter of 2023, due primarily to higher net income at Idaho Power.
The net increase in retail revenues per MWh, net of associated power supply costs and power cost adjustment and FCA mechanisms, increased operating income by $19.6 million in the second quarter of 2024 compared with the second quarter of 2023. This benefit was due primarily to an overall increase in Idaho base rates, effective January 1, 2024, per the terms of the 2023 Settlement Stipulation. For more information on the 2023 Settlement Stipulation, see Note 3 - "Regulatory Matters" to the consolidated financial statements included in the 2023 Annual Report.
At Idaho Power, customer growth increased operating income by $5.1 million in the second quarter of 2024 compared with the second quarter of 2023, as the number of Idaho Power customers grew by approximately 16,200, or 2.6 percent, during the twelve months ended June 30, 2024. Usage per retail customer increased operating income by $6.2 million in the second quarter of 2024 compared with the second quarter of 2023. While there was an increase in usage per customer for all retail customer classes, usage per irrigation customer increased most significantly at 17 percent, as higher temperatures compared with last year's more moderate second quarter weather led irrigation customers to run irrigation pumps more frequently.
Transmission wheeling-related revenues, net of PCA impacts, decreased $2.5 million during the second quarter of 2024 compared with the second quarter of 2023. This decrease was due primarily to the inclusion of financial settlement of transmission line losses in the PCA mechanism, effective January 1, 2024, as approved in the 2023 Settlement Stipulation, resulting in a smaller contribution of those revenues to net income compared with the second quarter of 2023 when the financial settlement of transmission line losses was not subject to the PCA mechanism.
Total other O&M expenses in the second quarter of 2024 were $13.8 million higher than in the second quarter of 2023, primarily related to approximately $4 million of increased pension-related expenses and approximately $8 million of increase in wildfire mitigation program and related insurance expenses. Both of these increases in expenses were partially offset by increases in retail revenues, as more costs are now recovered in base rates pursuant to the 2023 Settlement Stipulation. However, revenues related to these increased costs are not collected at the same rate that the expenses are incurred in the interim periods throughout the year due to the impact of volume-based rates and associated revenues. Inflationary pressures on labor-related costs also contributed to the increase in other O&M expenses.
Depreciation expense increased $7.6 million in the second quarter of 2024 compared with the second quarter of 2023 due primarily to an increase in plant-in-service.
Other changes in operating revenues and expenses, net, increased operating income by $13.9 million in the second quarter of 2024 compared with the second quarter of 2023, due primarily to the timing of recording and adjusting regulatory accruals and deferrals. In addition, a decrease in net power supply expenses that were not deferred for future recovery in rates through Idaho Power's power cost adjustment mechanisms increased operating revenues and expenses, net, compared with the same period in 2023. More moderate wholesale natural gas and power market prices in the western United States and increased wholesale energy sales decreased Idaho Power's net power supply expenses in the second quarter of 2024 compared with the second quarter of 2023.
Non-operating expense, net, increased $0.4 million in the second quarter of 2024 compared with the second quarter of 2023. Interest expense on long-term debt was higher in the second quarter of 2024 compared with the second quarter of 2023, due primarily to an increase in long-term debt. This increase was partially offset by an increase in AFUDC, as the average construction work in progress balance was higher. Also, interest income increased due to higher interest rates and higher average cash and cash equivalent balances.
The increase in income tax expense was principally the result of higher income before income taxes, partially offset by an increase in additional ADITC amortization. Based on Idaho Power's current expectations of full-year 2024 results, Idaho Power recorded $7.5 million of additional ADITC amortization under its Idaho regulatory settlement stipulation during the second quarter of 2024, but only recorded $3.75 million of additional ADITC amortization during the same period in 2023.
Net Income - Year-To-Date 2024
IDACORP's net income increased $13.0 million for the first six months of 2024 compared with the first six months of 2023, due primarily to higher net income at Idaho Power.
The net increase in retail revenues per MWh, net of associated power supply costs and power cost adjustment and FCA mechanisms, increased operating income by $24.4 million in the first six months of 2024 compared with the first six months of 2023. This benefit was due primarily to an overall increase in Idaho base rates, effective January 1, 2024, per the terms of the 2023 Settlement Stipulation.
At Idaho Power, customer growth increased operating income by $9.8 million in the first six months of 2024 compared with the first six months of 2023. The benefit from customer growth was partially offset by a decrease in usage per retail customer of $3.8 million in the first six months of 2024 compared with the first six months of 2023. While there was a reduction in usage per customer for most retail customer classes, usage per residential customer decreased most significantly, as more moderate temperatures from January through May 2024 led residential customers to use less energy for heating purposes. However, warmer weather in June 2024 led to an increase in energy usage per residential customer for cooling purposes, as well as an increase in energy usage per irrigation customer, which partially offset the decrease in usage per residential customer from January through May 2024.
Transmission wheeling-related revenues, net of PCA impacts, decreased $3.5 million during the first six months of 2024 compared with the first six months of 2023. Total wheeling revenues earned during the first six months of 2024 increased 21 percent compared with the same period of 2023 due primarily to an increase in wheeling volumes. However, effective January 1, 2024, financial settlement of transmission line losses are subject to the PCA mechanism, as approved in the 2023 Settlement
Stipulation, resulting in a smaller contribution of those revenues to net income compared with the first six months of 2023 when the financial settlement of transmission line losses was not subject to the PCA mechanism.
Total other O&M expenses in the first six months of 2024 were $27.6 million higher than the first six months of 2023, primarily related to approximately $9 million of increased pension-related expenses and an approximately $16 million increase in wildfire mitigation program and related insurance expenses. Both of these increases in expenses are partially offset by increases in retail revenues, as more costs are now recovered in base rates pursuant to the 2023 Settlement Stipulation; however, revenues related to these increased costs are not collected at the same rate that the expenses are incurred in the interim periods throughout the year. On a full-year basis for 2024, Idaho Power expects other O&M expenses related to its employee pension plans and its wildfire mitigation program and related insurance to increase approximately $18 million and $30 million, respectively, compared with 2023, as more costs are now recovered in base rates pursuant to the 2023 Settlement Stipulation. Inflationary pressures on labor-related costs also contributed to the increase in other O&M expenses.
Depreciation expense increased $16.2 million for the first half of 2024 compared with the first half of 2023 due primarily to an increase in plant-in-service.
Other changes in operating revenues and expenses, net, increased operating income by $18.6 million in the first six months of 2024 compared with the first six months of 2023, due primarily to the timing of recording and adjusting of regulatory accruals and deferrals. In addition, a decrease in net power supply expenses that were not deferred for future recovery in rates through Idaho Power's power cost adjustment mechanisms increased operating revenues and expenses, net, compared to the same period in 2023. More moderate wholesale natural gas and power market prices in the western United States and increased wholesale energy sales decreased Idaho Power's net power supply expenses in the first six months of 2024 compared to the first six months of 2023.
Non-operating expense, net, increased $2.3 million in the first six months of 2024 compared with the first six months of 2023. Interest expense on long-term debt was higher in the first six months of 2024 compared with the first six months of 2023, due primarily to an increase in long-term debt. This increase was partially offset by an increase in AFUDC, as the average construction work in progress balance was higher. Also, interest income increased due to higher interest rates and higher average cash and cash equivalent balances.
Income tax expense in the first six months of 2024 was consistent with the first six months of 2023 as increased taxes from higher pre-tax income was offset by $20.0 million of additional ADITC amortization. Idaho Power recorded $7.5 million of additional ADITC amortization during the same period in 2023.
Overview of General Factors and Trends Affecting Results of Operations and Financial Condition
IDACORP's and Idaho Power's results of operations and financial condition are affected by a number of factors and trends, and the impact of those factors and trends is discussed in more detail below in this MD&A. To provide context for the discussion elsewhere in this report, some of the more notable factors and trends are as follows:
•Regulation of Rates and Cost Recovery; Rate Case Filings: The prices that Idaho Power is authorized to charge for its electric and transmission service are a critical factor in determining IDACORP's and Idaho Power's results of operations and financial condition. Those rates are established by state regulatory commissions and the FERC and are intended to allow Idaho Power an opportunity to recover its expenses and earn a reasonable return on investment. Idaho Power is focused on timely recovery of its costs through filings with its regulators, working to put in place innovative regulatory mechanisms, and prudent management of expenses and investments. The 2023 Settlement Stipulation provides for the accelerated amortization of ADITC to help achieve a minimum 9.12 percent Idaho ROE. The 2023 Settlement Stipulation also provides for the potential sharing between Idaho Power and its Idaho customers of Idaho-jurisdictional earnings in excess of a 9.6 percent Idaho ROE. The specific terms of the 2023 Settlement Stipulation are described in Note 3 - "Regulatory Matters" to the consolidated financial statements included in the 2023 Annual Report.
To address the regulatory lag in recovery of costs primarily associated with Idaho Power’s current and anticipated significant infrastructure investments, including those that are intended to help meet projected near-term capacity deficits, Idaho Power filed a limited-issue rate case in Idaho on May 31, 2024. Idaho Power expects the processing of this limited-issue rate case in Idaho will span at least seven months before new rates would be in effect. In December 2023, Idaho Power made a general rate case filing in Oregon, which is described more fully in Note 3 - "Regulatory Matters" to the condensed consolidated financial statements included in this report. In May and June 2024, Idaho
Power, the Staff of the OPUC, and certain intervening parties publicly filed the 2024 Oregon Settlement Stipulations with the OPUC related to Idaho Power's Oregon general rate case filing.
•Rate Base Growth and Infrastructure Investment: The rates established by the IPUC, OPUC, and FERC are determined with the intent to provide an opportunity for Idaho Power to recover authorized operating expenses and depreciation and earn a reasonable return on “rate base.” Rate base is generally determined by reference to the original cost (net of accumulated depreciation) of utility plant in service and certain other assets, subject to various adjustments for deferred income taxes and other items. Over time, rate base is increased by additions to utility plant in service and reduced by depreciation of utility plant and write-offs as authorized by the IPUC and OPUC. Idaho Power is pursuing significant enhancements to its utility infrastructure in an effort to maintain system reliability, ensure an adequate supply of electricity, and provide service to new customers, including major ongoing transmission projects such as the B2H and GWW projects. Idaho Power's existing hydropower and thermal generation facilities also require continuing upgrades and equipment replacement, and the company is undertaking a significant relicensing effort for the HCC, its largest hydropower generation resource. Idaho Power is seeking timely inclusion of completed capital projects into rate base as part of the 2024 Idaho Limited-Issue Rate Case and intends to continue to do so in future general rate cases or other appropriate regulatory proceedings.
Idaho Power expects its capital expenditures on infrastructure investments in the next five years or more will be considerable as it works to address projected energy and capacity deficits. For more information about forecasted capital expenditures and expected rate base growth, see the "Liquidity and Capital Resources" section of this MD&A.
•Economic Conditions and Loads: Economic conditions impact consumer demand for energy, revenues, collectability of accounts, the volume of wholesale energy sales, and the need to construct and improve infrastructure, purchase power, and implement programs to meet customer load demands. In recent years, Idaho Power has seen significant growth in the number of customers in its service area. Over the twelve months ended June 30, 2024, Idaho Power's customer count grew by 2.6 percent. While recessionary or volatile economic conditions could slow the rate of customer growth, Idaho Power expects its number of customers and, to a greater extent, its load due to anticipated commercial and industrial customer growth, to increase in the foreseeable future.
Idaho Power's 2023 IRP assumed a forecasted annual growth in retail MWh sales of 5.5 percent and a forecasted annual growth in peak-hour demand of 3.7 percent over the upcoming 5-year period. For more information on the 2023 IRP, refer to "Resource Planning" in Item 1 - "Business" of the 2023 Annual Report. Customer growth has contributed to increases in peak loads experienced in recent years. For example, Idaho Power's highest all-time winter peak demand of 2,719 MW occurred on January 16, 2024 and on July 22, 2024, Idaho Power reached a new all-time summer peak demand of 3,793 MW. Idaho Power's prior all-time summer peak demand was 3,751 MW, set in June 2021. Idaho Power believes that existing and sustained growth in customers, load, and peak demand for electricity, along with changes in the regional transmission markets that have constrained the availability of transmission outside Idaho Power’s service area to import energy during peak load periods, require Idaho Power to increase its investment in capacity resources, transmission, and distribution infrastructure. This includes the B2H and GWW transmission projects, along with other capacity, energy, and transmission resource procurements, as described in "Liquidity and Capital Resources" in this MD&A.
•Weather Conditions: Weather and agricultural growing conditions have a significant impact on Idaho Power's energy sales. Relatively low winter and high summer temperatures result in greater energy use for heating and cooling, respectively. During the agricultural growing season, which in large part occurs during the second and third quarters of each year, irrigation customers use electricity to operate irrigation pumps, and weather conditions, such as a prolonged winter, can impact the timing and extent of use of those pumps. Idaho Power also has tiered rates and seasonal rates, which contribute to increased revenues during higher-load periods, most notably during the third quarter of each year when overall customer demand is highest. Much of the adverse or favorable impact of weather on sales of energy to residential and small commercial customers is mitigated through the FCA mechanism, which is described in Note 3 - "Regulatory Matters" to the condensed consolidated financial statements included in this report.
Further, as Idaho Power's hydropower facilities comprise over one-half of Idaho Power's nameplate generation capacity, precipitation levels impact the mix of Idaho Power's generation resources. When hydropower generation decreases, Idaho Power must rely on more expensive generation sources and purchased power. When favorable hydropower generating conditions exist for Idaho Power, they also may exist for other Pacific Northwest hydropower facility operators, lowering regional wholesale market prices and impacting the revenue Idaho Power receives from wholesale energy sales. Much of the adverse or favorable impact of this volatility is addressed through the Idaho and Oregon power cost adjustment mechanisms, which mitigate in large part the impact on earnings. For 2024, Idaho
Power expects generation from its hydropower resources to be in the range of 7.0 million to 8.0 million MWh, compared with actual generation of 6.5 million MWh in 2023 and a 30-year average annual total of approximately 7.6 million MWh.
•Mitigation of Impact of Fuel and Purchased Power Expense: In addition to hydropower generation, Idaho Power relies significantly on natural gas and coal to fuel its generation facilities, long-term power purchase agreements (including PURPA agreements), and power purchases in the wholesale markets. Fuel costs are impacted by electricity sales volumes, the terms and conditions of contracts for fuel, Idaho Power's generation capacity, the availability of hydropower generation resources, transmission capacity, energy market prices, and Idaho Power's hedging program for managing fuel costs. Purchased power costs are impacted by the terms and conditions of contracts for purchased power, the rate of expansion of alternative energy generation sources such as wind or solar energy, generation resource maintenance outages, wholesale energy market prices, transmission availability, and the outcome of Idaho Power's hedging programs. The Idaho and Oregon power cost adjustment mechanisms mitigate in large part the potential adverse earnings impacts to Idaho Power of fluctuations in power supply costs. However, collection from customers or return to customers of most of the difference between actual power supply costs compared with those included in retail rates is deferred to a subsequent period, which can affect Idaho Power’s operating cash flow and liquidity until those costs are recovered from or returned to customers.
•Regulatory and Environmental Compliance Costs; Coal Plant Retirements: Idaho Power is subject to extensive federal and state laws, policies, and regulations, as well as regulatory actions and audits by agencies and quasi-governmental agencies, including the FERC, the North American Electric Reliability Corporation, and the Western Electricity Coordinating Council. Compliance with these requirements directly influences Idaho Power's operating environment and affects Idaho Power's operating costs. Moreover, environmental laws and regulations may increase the cost of constructing new facilities, may increase the cost of operating generation plants, may require that Idaho Power install additional pollution control devices at existing generating plants, may result in penalties for non-compliance, even where inadvertent, or may require that Idaho Power curtail or cease operating certain generation plants. Idaho Power expects to spend significant amounts on environmental compliance and controls for the foreseeable future. Due to economic factors in part associated with the costs of compliance with environmental regulation, Idaho Power accelerated the retirement date of its jointly-owned coal-fired generating plant in North Valmy, Nevada (North Valmy plant), ceasing coal-fired operations at one unit in 2019 and planning to cease its participation in coal-fired operations at the remaining unit by year-end 2025. Idaho Power's jointly-owned coal plant in Boardman, Oregon, ceased operations as planned in October 2020. In 2022, the IPUC approved Idaho Power's request to allow the coal-related assets at the Jim Bridger plant to be fully depreciated and recovered by end-of-year 2030. Idaho Power's 2023 IRP identified a preferred resource portfolio and action plan that includes the conversion from coal to natural gas of two units at the Jim Bridger plant in 2024, the two units at the North Valmy plant in 2026, and the remaining two units at the Jim Bridger plant in 2030. Units 1 and 2 at the Jim Bridger plant were successfully converted to natural gas in the second quarter of 2024 and, in June 2024, Idaho Power executed an agreement with its co-owner to facilitate the planned conversion of the two units at the North Valmy plant from coal to natural gas by mid-2026. For more information on the 2023 IRP, refer to "Resource Planning" in Item 1 – "Business" of the 2023 Annual Report.
•Water Management and Relicensing of Hydropower Projects: Because of Idaho Power's reliance on stream flow in the Snake River and its tributaries, Idaho Power participates in numerous proceedings and venues that may affect its water rights, seeking to preserve the long-term availability of its rights for its hydropower projects. Also, Idaho Power is involved in renewing its long-term federal licenses for the HCC, its largest hydropower generation source, and for American Falls, its second largest hydropower generation source. Given the number of parties involved, Idaho Power's relicensing costs have been and are expected to continue to be substantial. As of the date of this report, Idaho Power cannot determine the ultimate terms of, and costs associated with, any resulting long-term licenses for the HCC or American Falls hydropower facilities.
•Wildfire Mitigation Efforts: In recent years, the western United States has experienced an increasing number of wildfires of unprecedented severity. A variety of factors have contributed to this trend including climate change, increased wildland-urban interfaces, historical land management practices, and overall wildland and forest health. While Idaho Power has not experienced to-date the extent of catastrophic wildfires within its service area that have occurred in the western United States and elsewhere, Idaho Power is taking a proactive approach to wildfire risk in its service area and transmission corridors. Idaho Power has adopted a WMP that outlines actions Idaho Power is taking or is working to implement to reduce wildfire risk and to strengthen the resiliency of its transmission and distribution system to wildfires. Idaho Power's approach to achieve these objectives includes identifying areas subject to elevated risk; system hardening programs, vegetation management, and field personnel practices to mitigate wildfire risk;
incorporating current and forecasted weather and field conditions into operational practices; public safety power shutoff protocols; and evaluating the performance and effectiveness of the strategies identified in the WMP through metrics and monitoring. Idaho Power has a regulatory mechanism that allows the company to defer, for future amortization, the Idaho jurisdictional share of certain actual incremental O&M expenses necessary to implement the WMP. In January 2024, the OPUC authorized Idaho Power's request to defer the Oregon jurisdictional share of costs associated with the WMP for the 12-month period beginning December 29, 2022, and ending on December 28, 2023. The WMP regulatory deferrals are described in more detail in Note 3 - "Regulatory Matters" to the consolidated financial statements included in the 2023 Annual Report.
RESULTS OF OPERATIONS
This section of MD&A takes a closer look at the significant factors that affected IDACORP’s and Idaho Power’s earnings during the three months and six months ended June 30, 2024. In this analysis, the results for the three months and six months ended June 30, 2024, are compared with the same periods in 2023.
The table below presents Idaho Power’s energy sales and supply (in thousands of MWh) for the three months and six months ended June 30, 2024 and 2023.
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| | | 2024 | | 2023 | | 2024 | | 2023 |
| Retail energy sales | | 3,903 | | | 3,694 | | | 7,502 | | | 7,385 | |
| Wholesale energy sales | | 825 | | | 330 | | | 1,229 | | | 538 | |
| Energy sales bundled with renewable energy credits | | 272 | | | 429 | | | 959 | | | 782 | |
| Total energy sales | | 5,000 | | | 4,453 | | | 9,690 | | | 8,705 | |
| Hydropower generation | | 2,661 | | | 2,430 | | | 4,410 | | | 3,805 | |
Steam generation(1) | | 301 | | | 180 | | | 816 | | | 608 | |
| Natural gas and other generation | | 512 | | | 307 | | | 1,561 | | | 1,187 | |
| Total system generation | | 3,474 | | | 2,917 | | | 6,787 | | | 5,600 | |
| Purchased power | | 1,823 | | | 1,856 | | | 3,527 | | | 3,756 | |
| Line losses | | (297) | | | (320) | | | (624) | | | (651) | |
| Total energy supply | | 5,000 | | | 4,453 | | | 9,690 | | | 8,705 | |
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(1) "Steam generation" is composed of generation from steam plants that are fueled only by coal or by both coal and natural gas.
Weather-related information for Boise, Idaho, for the three months and six months ended June 30, 2024 and 2023, is presented in the table below. While Boise, Idaho weather conditions are not necessarily representative of weather conditions throughout Idaho Power's service area, the greater Boise area has the majority of Idaho Power's customers and is included for illustrative purposes.
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| | Three months ended
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| | 2024 | | 2023 | | Normal (2) | | 2024 | | 2023 | | Normal (2) |
Heating degree-days(1) | | 640 | | | 577 | | | 685 | | | 2,904 | | | 3,169 | | | 3,087 | |
Cooling degree-days(1) | | 272 | | | 246 | | | 188 | | | 272 | | | 246 | | | 188 | |
| Precipitation (inches) | | 4.4 | | | 3.0 | | | 3.4 | | | 10.9 | | | 6.7 | | | 7.2 | |
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(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 cooling. 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.
(2) Normal heating degree-days and cooling degree-days elements are, by convention, the arithmetic mean of the elements computed over 30 consecutive years. The normal amounts are the sum of the monthly normal amounts. These normal amounts are computed by the National Oceanic and Atmospheric Administration.
Sales Volume and Generation: Retail sales volumes increased 6 percent and 2 percent in the second quarter and first six months of 2024, respectively, compared with the same periods in 2023, primarily due to growth in the number of Idaho Power
customers and, in the second quarter of 2024, an increase in usage per irrigation customer. The number of Idaho Power's customers grew by 2.6 percent over the prior twelve months and higher temperatures in the second quarter of 2024 compared with last year's more moderate second quarter weather led irrigation customers to run irrigation pumps more frequently, contributing to the higher volumes.
Total system generation increased 19 percent for the second quarter and 21 percent in the first six months of 2024 compared with the same periods in 2023, which consists of an increase in hydropower generation, steam generation, and natural gas generation. For more information on the changes in generation, see the "Operating Expenses" section below in this MD&A.
The financial impacts of fluctuations in wholesale energy sales, purchased power, fuel expense, and other power supply-related expenses are addressed in Idaho Power's Idaho and Oregon power cost adjustment mechanisms, which are described below in "Power Cost Adjustment Mechanisms."
Operating Revenues
Retail Revenues: The table below presents Idaho Power’s retail revenues (in thousands) and MWh sales volumes (in thousands) for the three months and six months ended June 30, 2024 and 2023, and the number of customers as of June 30, 2024 and 2023.
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| | Three months ended
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| | | 2024 | | 2023 | | 2024 | | 2023 |
| Retail revenues: | | | | | | | | |
Residential (includes $(2,102), $5,678, $(2,789), and $14,587, respectively, related to the FCA)(1) | | $ | 145,763 | | | $ | 134,885 | | | $ | 330,062 | | | $ | 323,422 | |
Commercial (includes $(38), $296, $(92), and $572, respectively, related to the FCA)(1) | | 96,012 | | | 87,677 | | | 190,709 | | | 175,507 | |
| Industrial | | 66,876 | | | 58,245 | | | 132,082 | | | 113,789 | |
| Irrigation | | 80,771 | | | 62,781 | | | 81,809 | | | 63,713 | |
| | | | | | | | |
Deferred revenue related to HCC relicensing AFUDC(2) | | (1,948) | | | (1,927) | | | (4,031) | | | (4,046) | |
| | | | | | | | |
| Total retail revenues | | $ | 387,474 | | | $ | 341,661 | | | $ | 730,631 | | | $ | 672,385 | |
| Volume of retail sales (MWh) | | | | | | | | |
| Residential | | 1,231 | | | 1,195 | | | 2,855 | | | 2,927 | |
| Commercial | | 1,016 | | | 990 | | | 2,080 | | | 2,062 | |
| Industrial | | 890 | | | 858 | | | 1,791 | | | 1,735 | |
| Irrigation | | 766 | | | 651 | | | 776 | | | 661 | |
| Total retail MWh sales | | 3,903 | | | 3,694 | | | 7,502 | | | 7,385 | |
| Number of retail customers at period end | | | | | | | | |
| Residential | | 538,970 | | | 524,191 | | | | | |
| Commercial | | 79,060 | | | 77,817 | | | | | |
| Industrial | | 139 | | | 132 | | | | | |
| Irrigation | | 22,526 | | | 22,309 | | | | | |
| Total customers | | 640,695 | | | 624,449 | | | | | |
| | | | | | | | |
(1) The FCA mechanism is an alternative revenue program in the Idaho jurisdiction and does not represent revenue from contracts with customers.
(2) The IPUC allows Idaho Power to recover a portion of the AFUDC on construction work in progress related to the HCC relicensing process, even though the relicensing process is not yet complete and the costs have not been moved to utility plant in service. Idaho Power is collecting approximately $8.8 million annually in the Idaho jurisdiction but is deferring revenue recognition of the amounts collected until the license is issued and the accumulated license costs approved for recovery are placed in service.
Changes in rates, changes in customer demand, customer growth, and changes in FCA mechanism revenues are the primary reasons for fluctuations in retail revenues from period to period. The primary influences on customer demand of electricity are weather, economic conditions, and energy efficiency. Extreme temperatures increase sales to customers who use electricity for cooling and heating, while moderate temperatures decrease sales. Precipitation levels and the timing of precipitation during the agricultural growing season also affect sales to customers who use electricity to operate irrigation pumps. Rates are also seasonally adjusted, providing for higher rates during peak load periods, and residential customer rates are tiered, providing for higher rates based on higher levels of usage. The seasonal and tiered rate structures contribute to seasonal fluctuations in revenues and earnings.
Retail revenues increased $45.8 million and $58.2 million during the second quarter and first six months of 2024, respectively, compared with the same periods in 2023. The factors affecting retail revenues during the periods are discussed below.
•Rates: Average customer rates, excluding amounts related to the power cost adjustment mechanisms, increased retail revenues by $28.8 million and $42.4 million, respectively, for the three and six months ended June 30, 2024, compared with the same periods in 2023, due primarily to the January 1, 2024, rate increase for Idaho Power's retail customers related to the 2023 Settlement Stipulation. Customer rates also include the collection from customers of amounts related to the power cost adjustment mechanisms, which increased revenues by $6.9 million and $22.5 million in the second quarter and first six months of 2023, respectively, compared with the same periods of 2024. The amount collected from customers in rates under the power cost adjustment mechanisms has relatively little effect on operating income as a corresponding amount is recorded as expense in the same period it is collected through rates. FCA revenue accrued in the three and six months ended June 30, 2024, decreased by $8.1 million and $18.0 million compared with the same periods in 2023, respectively, as the 2023 Settlement Stipulation moved a greater portion of recovery of fixed costs into customer base rates.
•Customers: Customer growth of 2.6 percent during the twelve months ended June 30, 2024, increased retail revenues by $7.6 million and $16.4 million in the second quarter and first six months of 2024, respectively, compared with the same periods of 2023.
•Usage: Higher usage (on a per customer basis) in all customer classes increased retail revenues by $10.6 million for the second quarter of 2024 compared with the same period in 2023. Warmer summer weather in June 2024 led to a 17 percent increase in energy usage per irrigation customer to run irrigation pumps during the three months ended June 30, 2024, compared with the same period in 2023. During the first six months of 2024, lower usage in most customer classes reduced retail revenues by $5.1 million compared with the same period in 2023. Usage per residential customer decreased most significantly, as more moderate temperatures from January through May 2024 led residential customers to use less energy for heating purposes. However, warmer weather in June 2024 led to an increase in energy usage per residential customer for cooling purposes, and an increase in energy usage per irrigation customer, which partially offset the decrease in usage per residential customer from January through May 2024.
Wholesale Energy Sales: Wholesale energy sales consist primarily of long-term sales contracts, sales of surplus system energy, and sales into the energy imbalance market in the western United States, and do not include derivative transactions. The table below presents Idaho Power’s wholesale energy sales for the three and six months ended June 30, 2024 and 2023 (in thousands, except for revenue per MWh amounts).
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| | Three months ended
June 30, | Six months ended
June 30, |
| | | 2024 | | 2023 | 2024 | | 2023 |
| Wholesale energy revenues | | $ | 20,744 | | | $ | 15,201 | | $ | 58,813 | | | $ | 45,397 | |
| Wholesale MWh sold | | 825 | | | 330 | | 1,229 | | | 538 | |
| Wholesale energy revenues per MWh | | $ | 25.14 | | | $ | 46.06 | | $ | 47.85 | | | $ | 84.38 | |
In the second quarter and during the first six months of 2024, wholesale energy revenues increased $5.5 million and $13.4 million, respectively, compared with the same periods of 2023, as higher wholesale energy sales volumes were partially offset by lower wholesale market prices. Wholesale energy prices were lower during the first six months of 2024 compared with 2023 as more moderate winter and spring weather resulted in lower demand and lower natural gas fuel costs in the wholesale markets in the region. The financial impacts of fluctuations in wholesale energy sales are largely mitigated by Idaho Power's Idaho and Oregon power cost adjustment mechanisms, which are described below in this section of the MD&A under "Power Cost Adjustment Mechanisms."
Transmission Wheeling-Related Revenues: Transmission wheeling-related revenues decreased $3.5 million, or 17 percent, and $0.9 million, or 2 percent, during the second quarter and first six months of 2024, respectively, compared with the same periods of 2023, primarily due to lower energy prices in the western United States. Also, Idaho Power's OATT rates were approximately 2 percent lower in the first half of 2024 compared to the first half of 2023. Effective January 1, 2024, financial settlement of transmission line losses are subject to the PCA mechanism, as approved in the 2023 Settlement Stipulation.
Operating Expenses
Purchased Power: The table below presents Idaho Power’s purchased power expenses and volumes for the three months and six months ended June 30, 2024 and 2023 (in thousands, except for per MWh amounts).
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| | Three months ended
June 30, | | Six months ended
June 30, |
| | | 2024 | | 2023 | | 2024 | | 2023 |
| Purchased power expense | | $ | 95,383 | | | $ | 91,460 | | | $ | 207,282 | | | $ | 262,554 | |
| MWh purchased | | 1,823 | | | 1,856 | | | 3,527 | | | 3,756 | |
| Average cost per MWh | | $ | 52.32 | | | $ | 49.28 | | | $ | 58.77 | | | $ | 69.90 | |
Purchased power expense increased $3.9 million, or 4 percent, in the second quarter of 2024 compared with the second quarter of 2023, due primarily to an increase in the average purchased power prices compared with the second quarter of 2023. Purchased power expense decreased $55.3 million, or 21 percent, in the first six months of 2024 compared with the same period of 2023, due primarily to lower wholesale energy prices in the western United States.
Fuel Expense: The table below presents Idaho Power’s fuel expenses and thermal generation for the three months and six months ended June 30, 2024 and 2023 (in thousands, except for per MWh amounts).
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| | Three months ended
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June 30, |
| | | 2024 | | 2023 | | 2024 | | 2023 |
| Expense | | | | | | | | |
Steam(1) | | $ | 10,081 | | | $ | 8,665 | | | $ | 38,046 | | | $ | 25,729 | |
| Natural gas | | 12,618 | | | 22,448 | | | 76,894 | | | 94,465 | |
| Total fuel expense | | $ | 22,699 | | | $ | 31,113 | | | $ | 114,940 | | | $ | 120,194 | |
| MWh generated | | | | | | | | |
Steam(1) | | 301 | | | 180 | | | 816 | | | 608 | |
| Natural gas | | 512 | | | 307 | | | 1,561 | | | 1,187 | |
| Total MWh generated | | 813 | | | 487 | | | 2,377 | | | 1,795 | |
| Average cost per MWh - Steam | | $ | 33.49 | | | $ | 48.14 | | | $ | 46.63 | | | $ | 42.32 | |
| Average cost per MWh - Natural gas | | $ | 24.64 | | | $ | 73.12 | | | $ | 49.26 | | | $ | 79.58 | |
| Weighted average, all sources | | $ | 27.92 | | | $ | 63.89 | | | $ | 48.36 | | | $ | 66.96 | |
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(1) "Steam" is composed of expenses and generation from steam plants that are fueled only by coal or by both coal and natural gas.
The majority of the coal for Idaho Power’s jointly-owned plants is purchased through long-term contracts, including purchases from BCC, a one-third owned investment of IERCo. The price of coal from BCC is subject to fluctuations in mine operating expenses, geologic conditions, and production levels. BCC supplies the majority of the coal used by the Jim Bridger plant and BCC does not have significant sales to third parties. Natural gas is mainly purchased on the regional wholesale spot market at published index prices. In addition to commodity (variable) costs, both natural gas and coal expenses include costs that are more fixed in nature for items such as capacity charges, transportation, and fuel handling. Period to period variances in fuel expense per MWh are noticeably impacted by these fixed charges when generation output is substantially different between the periods.
Fuel expense decreased $8.4 million, or 27 percent, and $5.3 million, or 4 percent, in the second quarter and first six months of 2024, respectively, compared with the same periods of 2023. The decreases in fuel expense were primarily due to lower natural gas market prices in 2024, which resulted in a decrease in the average cost per MWh of natural gas generation.
Included in fuel expense are losses and gains on settled financial gas hedges entered into in accordance with Idaho Power's energy risk management policy. For the second quarters of 2024 and 2023, and the first six months of 2024, losses on financial gas hedges of $1.0 million, $11.4 million, and $25.1 million, respectively, increased natural gas fuel expense, while in the first six months of 2023 gains on financial gas hedges of $12.1 million reduced natural gas fuel expense. Most of these realized hedging losses and gains are passed on to customers through the power cost adjustment mechanisms described below.
Power Cost Adjustment Mechanisms: Idaho Power's power supply costs (primarily purchased power and fuel expense, less wholesale energy sales) can vary significantly from year to year. Volatility of power supply costs arises from factors such as weather conditions, wholesale market prices, volumes of power purchased and sold in the wholesale markets, Idaho Power's hydropower and thermal generation volumes and fuel costs, generation plant availability, and retail loads. To address the volatility of power supply costs, Idaho Power's power cost adjustment mechanisms in the Idaho and Oregon jurisdictions allow Idaho Power to recover from customers, or refund to customers, most of the fluctuations in power supply costs. In the Idaho jurisdiction, the PCA includes a cost or benefit sharing ratio that allocates the deviations in net power supply expenses between customers (95 percent) and Idaho Power (5 percent), with the exception of PURPA power purchases and demand response program incentives, which are allocated 100 percent to customers. The Idaho deferral period, or PCA year, runs from April 1 through March 31. Amounts deferred or accrued during the PCA year are primarily recovered or refunded during the subsequent June 1 through May 31 period. However, the IPUC directed Idaho Power to spread recovery of the March 31, 2023, PCA deferral balance over a two-year period from June 1, 2023, to May 31, 2025. Because of the power cost adjustment mechanisms, the primary financial impact of power supply cost variations is that cash is paid out but recovery from customers does not occur until a future period, or cash that is collected is refunded to customers in a future period, resulting in fluctuations in operating cash flows from year to year.
The table that follows presents the components of the Idaho and Oregon power cost adjustment mechanisms for the three months and six months ended June 30, 2024 and 2023 (in thousands).
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| | Three months ended
June 30, | | Six months ended
June 30, |
| | | 2024 | | 2023 | | 2024 | | 2023 |
| Idaho power supply cost accrual (deferral) | | $ | 32,599 | | | $ | 34,917 | | | $ | 33,521 | | | $ | (25,351) | |
| Oregon power supply cost accrual | | 2,881 | | | 312 | | | 2,353 | | | 336 | |
| Amortization of prior year authorized balances | | 23,676 | | | 14,400 | | | 45,645 | | | 23,307 | |
| Total power cost adjustment (income statement) | | $ | 59,156 | | | $ | 49,629 | | | $ | 81,519 | | | $ | (1,708) | |
The power supply accruals (deferrals) represent the portion of the power supply cost fluctuations accrued (deferred) under the power cost adjustment mechanisms. When actual power supply costs are lower than the amount forecasted in power cost adjustment rates, most of the difference is accrued as an increase to a regulatory liability or decrease to a regulatory asset. When actual power supply costs are higher than the amount forecasted in power cost adjustment rates, most of the difference is deferred as an increase to a regulatory asset or decrease to a regulatory liability. During the second quarter and first six months of 2024, purchased power costs led to lower actual power supply costs compared with the forecasted amount, which resulted in an accrual of power supply costs by the mechanism. The amortization of the prior year’s balances represents the offset to the amounts being collected or refunded in the current power cost adjustment year that were deferred or accrued in the prior PCA year (the balancing adjustment component of the power cost adjustment mechanism).
Other O&M Expenses: Total other O&M expenses increased $13.8 million and $27.6 million in the second quarter and first six months of 2024, respectively, compared with the same periods of 2023, primarily related to approximately $4 million and $9 million, respectively, of increased pension-related expenses and approximately $8 million and $16 million, respectively, of increased wildfire mitigation program and related insurance expenses. Both of these increases in expenses are partially offset by increases in retail revenues, as more costs are now recovered in base rates pursuant to the 2023 Settlement Stipulation. However, revenues related to these increased costs are not collected at the same rate that the expenses are incurred in the interim periods throughout the year due to the impact of volume-based rates and associated revenues. Inflationary pressures on labor-related costs also contributed to the increase in other O&M expenses in the second quarter and first six months of 2024, compared with the same periods of 2023.
Income Taxes
IDACORP's and Idaho Power's income tax expense decreased $12.7 million and $12.5 million, respectively, for the six months ended June 30, 2024, when compared with the same period in 2023, primarily due to increased ADITC amortization from the regulatory mechanism described in Note 3 – “Regulatory Matters” to the condensed consolidated financial statements included in this report. For information relating to IDACORP's and Idaho Power's computation of income tax expense, see Note 2 - "Income Taxes" to the condensed consolidated financial statements included in this report.
LIQUIDITY AND CAPITAL RESOURCES
Overview
Idaho Power funds its liquidity needs for capital expenditures through cash flows from operations, debt offerings, commercial paper markets, credit facilities, and capital contributions from IDACORP. Idaho Power periodically files for rate adjustments for recovery of operating costs and capital investments to provide the opportunity to align Idaho Power's earned returns with those allowed by regulators.
As of July 26, 2024, IDACORP's and Idaho Power's access to debt, equity, and credit arrangements included:
•their respective $100 million and $400 million revolving credit facilities;
•IDACORP's shelf registration statement filed with the SEC on May 16, 2022, which may be used for the issuance of debt securities and common stock, including an aggregate gross sales price of up to $300 million of shares of IDACORP common stock available for issuance through its at-the-market offering program;
•Idaho Power's shelf registration statement filed with the SEC on May 16, 2022, which may be used for the issuance of first mortgage bonds and other debt securities; $1.2 billion remains available for issuance pursuant to state regulatory authority;
•IDACORP's and Idaho Power's issuance of commercial paper, with program sizes of $100 million and $300 million, respectively. Idaho Power's commercial paper program may be increased up to the $400 million capacity of its credit facility; and
•IDACORP's FSAs, the remainder of which may be physically settled with common stock in exchange for net proceeds, which as of July 26, 2024, would have been approximately $62 million.
In January 2024, IDACORP began using original issuances of shares for the IDACORP, Inc. Dividend Reinvestment and Stock Purchase Plan and also intends to use original issuances for share purchases within the Idaho Power Company Employee Savings Plan beginning in the fourth quarter of 2024. IDACORP may discontinue using original issuances of shares for these plans at any time.
In May 2024, IDACORP received $230 million in proceeds from the partial settlement of the FSAs and contributed $200 million in capital to Idaho Power. The proceeds are expected to be used for general corporate purposes, including funding Idaho Power's capital projects.
IDACORP and Idaho Power monitor capital markets with a view toward favorable debt and equity transactions, taking into account current and potential future long-term needs. As a result, IDACORP may issue debt securities or common stock, and Idaho Power may issue first mortgage bonds or other debt securities, if the companies believe terms available in the capital markets are favorable and that issuances would be financially prudent. IDACORP may also elect to issue common stock, from time to time, under its at-the-market offering program, depending on market conditions and capital needs. Idaho Power also periodically analyzes whether partial or full early redemption of one or more existing outstanding series of first mortgage bonds is desirable, and in some cases, may refinance indebtedness with new indebtedness.
Based on planned capital expenditures and other O&M expenses, the companies believe they will be able to meet capital and debt service requirements and fund corporate expenses during at least the next twelve months and thereafter for the foreseeable future with a combination of existing cash, operating cash flows generated by Idaho Power's utility business, availability under existing credit facilities, access to commercial paper, short-term, and long-term debt markets, and equity issuances.
IDACORP and Idaho Power generally seek to maintain capital structures of approximately 50 percent debt and 50 percent equity. Maintaining this ratio influences IDACORP's and Idaho Power's debt and equity issuance decisions. As of June 30, 2024, IDACORP's and Idaho Power's capital structures, as calculated for purposes of applicable debt covenants, were as follows:
| | | | | | | | | | | | | | |
| | IDACORP | | Idaho Power |
| Debt | | 47% | | 48% |
| Equity | | 53% | | 52% |
IDACORP and Idaho Power generally maintain their cash and cash equivalents in highly liquid investments, such as U.S. Treasury Bills, money market funds, and bank deposits.
At June 30, 2024, IDACORP and Idaho Power believed they were in compliance with all credit facility and long-term debt covenants. Further, IDACORP and Idaho Power do not anticipate they will be in violation or breach of their respective debt covenants during 2024.
Operating Cash Flows
IDACORP's and Idaho Power's principal sources of cash flows from operations are Idaho Power's sales of electricity and transmission capacity. Significant uses of cash flows from operations include the purchase of fuel and power, other operating expenses, interest, income taxes, and plan contributions. Operating cash flows can be significantly influenced by factors such as weather conditions, rates and the outcome of regulatory proceedings, and economic conditions. As fuel and purchased power are significant uses of cash, Idaho Power has regulatory mechanisms in place that provide for the deferral and recovery of the majority of the fluctuation in those costs. However, if actual costs rise above the level currently allowed in retail rates, deferral balances increase (reflected as a regulatory asset), negatively affecting operating cash flows until such time as those costs, with interest, are recovered from customers.
IDACORP’s and Idaho Power’s operating cash inflows for the six months ended June 30, 2024, were $256 million and $257 million, respectively, an increase in cash flows from operations of $249 million for IDACORP and $257 million for Idaho Power, when compared with the same period in 2023. With the exception of cash flows related to income taxes, IDACORP's operating cash flows are principally derived from the operating cash flows from Idaho Power. Significant items that affected the companies' operating cash flows in the first six months of 2024 when compared with the same period in 2023 were as follows:
•a $13 million and $12 million increase in IDACORP and Idaho Power net income, respectively;
•changes in regulatory assets and liabilities, mostly related to the relative amounts of costs deferred and collected under the PCA and FCA mechanisms, increased IDACORP and Idaho Power operating cash flows by $93 million;
•changes in deferred taxes and taxes accrued and receivable combined to decrease operating cash flows for IDACORP and Idaho Power by $16 million and $12 million, respectively;
•pension and postretirement benefit plan expense and contributions to pension and postretirement benefits plans combined to increase IDACORP and Idaho Power operating cash flows by $20 million, which was primarily due to the timing and amount of funding decisions for Idaho Power's pension and other postretirement plans; and
•changes in working capital balances due primarily to timing, including fluctuations as follows:
◦the changes in materials, supplies, and fuel stock decreased operating cash flows by $9 million for IDACORP and Idaho Power, which was primarily due to an increase in material and supply inventory and the timing of purchases and consumption of coal at Idaho Power's jointly-owned coal-fired generating plants;
◦the changes in accounts and wages payable increased operating cash flows by $95 million for IDACORP and $100 million for Idaho Power, which was primarily due to a decrease in power supply costs and associated timing of payments, and includes a $5 million difference between IDACORP and Idaho Power related to intercompany estimated tax payments; and
◦the changes in other assets and liabilities increased operating cash flows by $33 million for IDACORP and Idaho Power, which was primarily related to a power purchase agreement security deposit and performance assurance collateral activity for margin agreements relating to wholesale commodity contracts.
Investing Cash Flows
Investing activities consist primarily of capital expenditures related to new construction of, and improvements to, Idaho Power’s power supply, transmission, and distribution facilities. IDACORP’s and Idaho Power’s net investing cash outflows for the six months ended June 30, 2024, increased to $558 million and $556 million, respectively, decreasing cash $295 million for IDACORP and $294 million for Idaho Power, when compared with the same period in 2023. Investing cash outflows for 2024 and 2023 were primarily for construction of utility infrastructure needed to address Idaho Power’s customer growth and peak resource needs, aging plant and equipment, and environmental and regulatory compliance requirements. This was partially offset in 2024 and 2023 by reimbursements from a B2H project joint permitting participant relating to a portion of the permitting expenditures.
Financing Cash Flows
Financing activities primarily provide supplemental cash for both day-to-day operations and capital requirements, as needed. IDACORP's and Idaho Power's net financing cash inflows for the six months ended June 30, 2024, were $145 million and $115 million, respectively, a decrease of $70 million for IDACORP and $142 million for Idaho Power, when compared with the same period in 2023. IDACORP and Idaho Power financing cash inflows for 2024 were primarily related to IDACORP's issuance of common stock and Idaho Power's receipt of a capital contribution from IDACORP, each as described above in this
"Liquidity and Capital Resources" section, offset by dividend payments. IDACORP and Idaho Power financing cash inflows for 2023 were primarily related to Idaho Power's net proceeds from issuances and repayment of long-term debt, offset by dividend payments. Idaho Power funds liquidity needs for capital investment, working capital, managing commodity price risk, dividends, and other financial commitments through cash flows from operations, debt offerings, commercial paper markets, credit facilities, and capital contributions from IDACORP. IDACORP funds its cash requirements, such as payment of taxes, payment of dividends, capital contributions to Idaho Power, and non-utility expenses allocated to IDACORP, through cash flows from operations, commercial paper markets, credit facilities, and sales of common stock.
Available Short-Term Borrowing Liquidity
The table below outlines available short-term borrowing liquidity as of the dates specified (in thousands). | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | June 30, 2024 | | December 31, 2023 |
| | | IDACORP(2) | | Idaho Power | | IDACORP(2) | | Idaho Power |
| Revolving credit facility | | $ | 100,000 | | | $ | 400,000 | | | $ | 100,000 | | | $ | 400,000 | |
| Commercial paper outstanding | | — | | | — | | | — | | | — | |
Identified for other use(1) | | — | | | (19,885) | | | — | | | (19,885) | |
| Net balance available | | $ | 100,000 | | | $ | 380,115 | | | $ | 100,000 | | | $ | 380,115 | |
(1) American Falls bonds that Idaho Power could be required to purchase prior to maturity under the optional or mandatory purchase provisions of the bonds, if the remarketing agent for the bonds were unable to sell the bonds to third parties.
(2) Holding company only.
On July 26, 2024, IDACORP and Idaho Power had no loans outstanding under their revolving credit facilities and had no commercial paper outstanding. The table below presents additional information about short-term commercial paper borrowing during the three and six months ended June 30, 2024 (in thousands, except percentages).
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| | | Three months ended
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| | | IDACORP(1) | | Idaho Power | | IDACORP(1) | | Idaho Power |
| Commercial Paper: | | | | | | | | |
| Period end: | | | | | | | | |
| Amount outstanding | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
| Weighted average interest rate | | — | % | | — | % | | — | % | | — | % |
| Daily average amount outstanding during the period | | $ | — | | | $ | 0.769 | | | $ | — | | | $ | 0.385 | |
| Weighted average interest rate during the period | | — | % | | 5.62 | % | | — | % | | 5.62 | % |
| Maximum month-end balance | | $ | — | | | $ | 10,000 | | | $ | — | | | $ | 10,000 | |
(1) Holding company only.
Impact of Credit Ratings on Liquidity and Collateral Obligations
IDACORP’s and Idaho Power’s access to capital markets, including the commercial paper market, and their respective financing costs in those markets, depend in part on their respective credit ratings. There have been no changes to IDACORP's or Idaho Power's ratings by Standard & Poor’s Ratings Services or Moody’s from those included in the 2023 Annual Report. However, 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. In April 2024, Moody's rating outlook for IDACORP and Idaho Power was modified to negative, from stable. As of the date of this report, Idaho Power's and IDACORP's issuer credit ratings at Moody's were Baa1 and Baa2, respectively. Moody's credit ratings of Baa3 and above are considered to be investment grade, or prime, ratings by Moody's. These security ratings reflect the views of Moody's. An explanation of the significance of these ratings may be obtained from Moody's. Such ratings are not a recommendation to buy, sell, or hold securities.
Idaho Power maintains margin agreements relating to its wholesale commodity contracts that allow performance assurance collateral to be requested of and/or posted with certain counterparties, which are discussed further in Part I - Item 3 "Quantitative and Qualitative Disclosures About Market Risk" included in this report.
Capital Requirements
Idaho Power's cash capital expenditures, excluding AFUDC, were $593 million during the six months ended June 30, 2024. The table below presents Idaho Power's estimated accrual-basis additions to property, plant, and equipment for 2024 (including amounts incurred to-date) through 2028 (in millions of dollars). The amounts in the table exclude AFUDC but include net costs of removing assets from service that Idaho Power expects would be eligible to be included in rate base in future rate case proceedings. Given the uncertainty associated with the timing of infrastructure projects and associated expenditures, actual expenditures and their timing could deviate substantially from those set forth in the table. The timing and amount of actual constructed projects and capital expenditures could be affected by Idaho Power’s ability to timely obtain labor or materials at reasonable costs, supply chain disruptions and delays, project timing, permitting, regulatory determinations, inflationary pressures, macroeconomic conditions, or other issues, including those described below.
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| | 2024 | | 2025 | | 2026-2028 |
| Expected capital expenditures (excluding AFUDC) | | $925-$975 | | $850-$950 | | $2,000-$2,500 |
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Major Infrastructure Projects: Idaho Power is engaged in the development of a number of significant projects and has entered into arrangements with third parties concerning joint infrastructure development. The discussion below provides a summary of developments in certain of those projects since the discussion of these matters included in Part II, Item 7 - MD&A - "Capital Requirements" in the 2023 Annual Report. The discussion below should be read in conjunction with that report.
Resource Additions to Address Projected Energy and Capacity Deficits: As noted previously, Idaho Power's existing and sustained growth in customers, load, and peak demand for electricity, along with transmission constraints, has created the need for Idaho Power to acquire significant generation, transmission, and storage resources to meet energy and capacity needs over the next several years.
To help meet peak needs in 2024 through 2027, Idaho Power entered into:
•contracts or plans to purchase, own, and operate 373 MW of battery storage assets with expected useful lives of approximately 20 years;
•a 20-year agreement to purchase the storage capacity from a 150 MW battery storage facility;
•an energy and capacity market purchase agreement with an energy marketer giving Idaho Power the right to acquire 200 MW on a daily basis during summer months beginning in 2026 for a term of at least five years; and
•three power purchase agreements for the combined 425 MW output of planned third-party solar facilities with 20- to 25-year terms. Idaho Power plans to sell the output of two of these solar power purchase agreements totaling 325 MW exclusively to a large industrial customer pursuant to an agreement under Idaho Power’s Clean Energy Your Way program.
The capital requirements table above includes capital expenditures of more than $430 million from 2024 through 2026 for resource additions to address projected energy and capacity deficits in those years. To help address the additional capacity deficits projected for 2026 and 2027, Idaho Power continues to evaluate its RFP for additional resources. Depending on factors such as RFP results, the timing of project in-service dates, estimated load and resource balances and customer growth, the nature and quantity of resources owned versus acquired under power purchase agreements or similar agreements, and the outcome of regulatory proceedings, actual expenditures and their timing could deviate substantially from Idaho Power's expected expenditures.
Boardman-to-Hemingway Transmission Line: The B2H line, a planned 300-mile, high-voltage transmission project between a substation near Boardman, Oregon, and the Hemingway substation near Boise, Idaho, is expected to provide transmission service to meet future resource needs. Material procurement and construction subcontract bid events are in progress. As a result of delays in issuing notices to proceed from state and federal agencies and obtaining right-of-way easements among other items, Idaho Power expects construction will begin no sooner than late 2024. Given those delays and the construction period, Idaho Power expects the in-service date for the transmission line will be no earlier than 2027.
As more fully described in the 2023 Annual Report, Idaho Power's ownership interest in the project is approximately 45 percent. Idaho Power has spent approximately $281 million, including Idaho Power's AFUDC, on the B2H project through June 30, 2024. Pursuant to the terms of the joint funding arrangements, Idaho Power has received $164 million in reimbursement as of June 30, 2024, from project co-participants for their share of costs and continues to receive reimbursement as costs are incurred. PacifiCorp is obligated to reimburse Idaho Power for its share of project expenditures incurred by Idaho
Power under the terms of the joint funding agreement. Idaho Power and PacifiCorp operate under a construction funding agreement filed with the FERC.
The permitting phase of the B2H project was subject to federal review and approval by various federal agencies. Federal agency records of decision have been received and all lawsuits challenging the federal rights-of-way have been resolved. However, Idaho Power has not yet received the required notices to proceed from the applicable federal agencies.
In the separate State of Oregon permitting process, the state's Energy Facility Siting Council (EFSC) approved Idaho Power's site certificate in September 2022. The Oregon Department of Energy subsequently issued a final order and site certificate. Idaho Power is pursuing two amendments to the site certificate to accommodate route changes, many of which are for the benefit of landowners along the route, and to enhance constructability. In September 2023, EFSC approved Idaho Power's first amendment request. One party contested the EFSC's approval of the first amendment in Union County Circuit Court, which Idaho Power is seeking to dismiss. On July 3, 2024, the Oregon Supreme Court declined to assert jurisdiction and require the Union County Circuit Court to dismiss the proceedings in the Union County Circuit Court. Separately, the Oregon Department of Energy issued its Proposed Order in June 2024 recommending approval of the second amendment. Finally, during the second quarter of 2023, the IPUC, OPUC, and WPSC granted Idaho Power and PacifiCorp their respective CPCNs related to the construction of the B2H project.
Total cost estimates for the project are between $1.5 billion and $1.7 billion, including Idaho Power's AFUDC. The capital requirements table above includes approximately $550 million of Idaho Power's share of estimated costs (excluding AFUDC) related to the remaining permitting phase, design, material procurement, and construction phases of the project. Actual construction costs could differ from Idaho Power's estimates based upon Idaho Power's or its contractors' ability to timely obtain labor or materials at reasonable costs, supply chain disruptions and delays, inflationary pressures, macroeconomic conditions, or other issues.
Gateway West Transmission Line: Idaho Power and PacifiCorp are pursuing the joint development of the GWW project, a high-voltage transmission lines project between a substation located near Douglas, Wyoming, and the Hemingway substation located near Boise, Idaho. In 2012, Idaho Power and PacifiCorp entered into a joint funding agreement for permitting of the project. Permitting and pre-construction activities are underway for segment 8, the section of line between Hemingway and Midpoint substations. Idaho Power expects the in-service date for segment 8, or a portion of segment 8, will be 2029 or later.
Idaho Power has expended approximately $62 million, including Idaho Power's AFUDC, for its share of the permitting phase of the project through June 30, 2024. As of the date of this report, Idaho Power estimates the total cost for its share of the project (including both permitting and construction) to be between $900 million and $1.1 billion, including Idaho Power's AFUDC. The estimated cost range is based on assumptions about Idaho Power participation levels in the construction of certain project segments and any changes in those assumptions or in Idaho Power's actual participation could affect future estimates and actual project costs. The capital requirements table above includes approximately $300 million of Idaho Power's share of estimated costs (excluding AFUDC) for the permitting phase of the project and early construction costs, based on Idaho Power's current estimate that it may commence construction of some applicable segments during that time period. Actual construction costs could differ from Idaho Power's estimates based upon the ability of Idaho Power, PacifiCorp, or their respective contractors to timely obtain labor or materials at reasonable costs, supply chain disruptions and delays, inflationary pressures, macroeconomic conditions, or other issues.
The permitting phase of the GWW project was subject to review and approval of the Bureau of Land Management (BLM). The BLM has published its records of decision for all segments of the transmission line. In late 2020, PacifiCorp completed construction and commissioned a 140-mile segment of its portion of the project in Wyoming. In March 2023, PacifiCorp initiated the pre-construction phase of 620 miles of 500-kV transmission line from the Populus substation near Downey, Idaho, to the Hemingway substation near Boise, Idaho. Idaho Power and PacifiCorp continue to coordinate the timing of next steps to best meet customer and system needs including potentially modifying the ownership structure of a few segments of the project.
Defined Benefit Pension Plan Contributions
Idaho Power has no minimum contribution requirement to its defined benefit pension plan in 2024 and during the six months ended June 30, 2024, Idaho Power made no contributions. Idaho Power is considering contributing up to $30 million to its pension plan during 2024 in a continued effort to balance the regulatory collection of these expenditures with the amount and timing of contributions and to mitigate the cost of being in an underfunded position. The primary impact of pension contributions is on the timing of cash flows, as the timing of cost recovery lags behind contributions.
Contractual Obligations
IDACORP’s and Idaho Power’s contractual cash obligations have not materially changed during the six months ended June 30, 2024, except as disclosed in Note 5 – “Long-Term Debt” and Note 8 – “Commitments” to the condensed consolidated financial statements included in this report.
Dividends
The amount and timing of dividends paid on IDACORP’s common stock are within the discretion of IDACORP’s board of directors. IDACORP's board of directors reviews the dividend rate periodically to determine its appropriateness in light of IDACORP’s current and long-term financial position and results of operations, capital requirements, rating agency considerations, contractual and regulatory restrictions, legislative and regulatory developments affecting the electric utility industry in general and Idaho Power 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 generally dependent upon dividends paid to it by its subsidiaries, primarily Idaho Power.
For additional information relating to IDACORP and Idaho Power dividends, including restrictions on IDACORP’s and Idaho Power’s payment of dividends, see Note 6 - “Common Stock” to the condensed consolidated financial statements included in this report.
Off-Balance Sheet Arrangements
IDACORP's and Idaho Power's off-balance sheet arrangements have not changed materially from those reported in the MD&A in the 2023 Annual Report.
REGULATORY MATTERS
Introduction
Idaho Power is under the jurisdiction (as to rates, service, accounting, and other general matters of utility operation) of the IPUC, the OPUC, and the FERC. The IPUC and OPUC determine the rates that Idaho Power is authorized to charge to its retail customers. Idaho Power is also under the regulatory jurisdiction of the IPUC, the OPUC, and the WPSC as to the issuance of debt and equity securities. As a public utility under the Federal Power Act, Idaho Power has authority to charge market-based rates for wholesale energy sales under its FERC tariff and to provide transmission services under its OATT. Additionally, the FERC has jurisdiction over Idaho Power's sales of transmission capacity and wholesale electricity, hydropower project relicensing, and system reliability, among other items.
Idaho Power develops its regulatory filings taking into consideration short-term and long-term needs for rate relief and several other factors that can affect the structure and timing of those filings. These factors include in-service dates of major capital investments, the timing and magnitude of changes in major revenue and expense items, and customer growth rates, as well as other factors.
Idaho Power's most recently concluded general rate case in Idaho was filed during 2023. The IPUC approved the 2023 Settlement Stipulation in December 2023 for rates that went into effect for Idaho-jurisdiction customers on January 1, 2024. In May 2024, Idaho Power filed a limited-issue rate case in Idaho. Refer to Note 3 - "Regulatory Matters" to the condensed consolidated financial statements included in this report for additional information relating to the Idaho limited-issue rate case.
In December 2023, Idaho Power filed a general rate case with the OPUC. In May and June 2024, Idaho Power, the Staff of the OPUC, and certain intervening parties publicly filed the 2024 Oregon Settlement Stipulations with the OPUC related to the Oregon general rate case filing. If the OPUC approves the 2024 Oregon Settlement Stipulations as filed, new rates for Oregon-jurisdiction customers are expected to become effective on October 15, 2024. Refer to Note 3 - "Regulatory Matters" to the condensed consolidated financial statements included in this report for additional information relating to the Oregon general rate case.
Between general rate cases, Idaho Power relies upon customer growth, an FCA mechanism, power cost adjustment mechanisms, tariff riders, limited issue rate proceedings, and other mechanisms to mitigate the impact of regulatory lag, which refers to the period of time between making an investment or incurring an expense and recovering that investment or expense and earning a return.
The outcomes of significant proceedings are described in part in this report and further in the 2023 Annual Report. In addition to the discussion below, which includes notable regulatory developments since the discussion of these matters in the 2023 Annual Report, refer to Note 3 - "Regulatory Matters" to the condensed consolidated financial statements included in this report for additional information relating to Idaho Power's regulatory matters and recent regulatory filings and orders.
Notable Retail Rate or Revenue Changes
During 2024, Idaho Power received orders authorizing the rate or revenue changes summarized in the table below.
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| Description | | Status | | Estimated Impact(1) | | Notes |
| PCA - Idaho | | New PCA rate became effective June 1, 2024 | | $35.7 million PCA decrease for the period from June 1, 2024, to May 31, 2025 | | The income statement impact of revenue changes associated with the PCA mechanism is largely offset by associated increases and decreases in actual power supply costs and amortization of deferred power supply costs. The rate decrease primarily reflects forecasted improved hydropower generation. |
| FCA - Idaho | | New FCA rate became effective June 1, 2024 | | $11.7 million FCA increase for the period from June 1, 2024, to May 31, 2025 | | The FCA is designed to remove a portion of Idaho Power’s financial disincentive to invest in energy efficiency programs by partially separating (or decoupling) the recovery of fixed costs from the volumetric kilowatt-hour charge and instead linking it to a set amount per customer. |
| Annual Power Cost Update - Oregon | | New APCU rate became effective June 1, 2024 | | $6.9 million APCU decrease for the period from June 1, 2024, to May 31, 2025 | | The rate decrease reflects increased hydropower generation and decreased forward market electric prices. |
(1) The annual amount collected in rates is typically not recovered on a straight-line basis (i.e., 1/12th per month), and is instead recovered in proportion to retail sales volumes.
Idaho Earnings Support and Sharing from Idaho Settlement Stipulation
A May 2018 Idaho settlement stipulation related to tax reform (2018 Settlement Stipulation) and the 2023 Settlement Stipulation are each described in Note 3 - "Regulatory Matters" to the consolidated financial statements included in the 2023 Annual Report. The 2023 Settlement Stipulation modified the 2018 Settlement Stipulation in part. IDACORP and Idaho Power believe that the terms allowing additional amortization of ADITC in the settlement stipulations provide the companies with a greater degree of earnings stability than would be possible without the terms of the stipulations in effect. Based on its estimate of full-year 2024 Idaho ROE, in the second quarter and first six months of 2024, Idaho Power recorded $7.5 million and $20.0 million, respectively, in additional ADITC amortization under the settlement stipulations. Accordingly, at June 30, 2024, approximately $65.1 million of additional ADITC remains available for future use.
Change in Deferred (Accrued) Net Power Supply Costs and the Power Cost Adjustment Mechanisms
Deferred (accrued) power supply costs represent certain differences between Idaho Power's actual net power supply costs and the costs included in its retail rates, the latter being based on annual forecasts of power supply costs. Deferred (accrued) power supply costs are recorded on the balance sheets for future recovery or refund through customer rates.
Idaho Power's power cost adjustment mechanisms in its Idaho and Oregon jurisdictions address the volatility of power supply costs and provide for annual adjustments to the rates charged to retail customers. The power cost adjustment mechanisms and associated financial impacts are described in "Results of Operations" in this MD&A and in Note 3 - "Regulatory Matters" to the condensed consolidated financial statements included in this report. With the exception of power supply expenses incurred under PURPA and certain demand response program costs that are passed through to customers substantially in full, the PCA mechanism allows Idaho Power to pass through to customers 95 percent of the differences in actual net power supply expenses as compared with base net power supply expenses, whether positive or negative. Thus, the primary financial statement impact of power supply cost deferrals or accruals is that the timing of when cash is paid out for power supply expenses differs from when those costs are recovered from customers, impacting operating cash flows from year to year.
The following table summarizes the change in deferred (accrued) net power supply costs during the six months ended June 30, 2024 (in millions).
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| | | Idaho | | Oregon | | Total |
| Balance at December 31, 2023 | | $ | 115.6 | | | $ | (1.3) | | | $ | 114.3 | |
| Current period net power supply costs (accrued) deferred | | (33.5) | | | (2.4) | | | (35.9) | |
| | | | | | |
| Prior amounts (collected) refunded through rates | | (45.3) | | | (0.4) | | | (45.7) | |
| Renewable energy certificate sales | | (10.4) | | | (0.4) | | | (10.8) | |
| Interest and other | | 2.4 | | | — | | | 2.4 | |
| Balance at June 30, 2024 | | $ | 28.8 | | | $ | (4.5) | | | $ | 24.3 | |
Open Access Transmission Tariff Draft Posting
Idaho Power uses a formula rate for transmission service provided under its OATT, which provides that transmission rates will be updated annually based primarily on financial and operational data that Idaho Power files with the FERC. The existing OATT rate in effect from October 1, 2023, to September 30, 2024, is $30.74 per kilowatt-year (kW-year) based on a net annual transmission revenue requirement of $135.7 million. In May 2024, Idaho Power publicly posted its 2024 draft transmission rate, reflecting a transmission rate of $31.59 per kW-year, to be effective for the period from October 1, 2024, to September 30, 2025. A kW-year is a unit of electrical capacity equivalent to 1 kilowatt of power used for 8,760 hours. Idaho Power's 2024 draft rate was based on a net annual transmission revenue requirement of $138.0 million.
Integrated Resource Plan and Resource Procurement Filings
Idaho Power filed its most recent IRP with the IPUC and OPUC in September 2023, as described in the 2023 Annual Report. In June 2024, the IPUC acknowledged Idaho Power's 2023 IRP.
In March and April 2024, Idaho Power filed applications with the IPUC for two of the bids from its RFP to procure resources for its anticipated energy and capacity needs in 2026 and 2027. In the March 2024 application, Idaho Power requested that the IPUC approve a market purchase agreement with an energy marketer to purchase 200 MW of firm capacity for specified periods of time. In the April 2024 application, Idaho Power applied for a CPCN to acquire and own 150 MW of battery storage with an expected useful life of 20 years. As of the date of this report, the IPUC's decisions in these matters are pending.
In addition, in February 2024, Idaho Power filed an application with the OPUC to approve an RFP to procure resources for Idaho Power's anticipated energy and capacity needs in 2028 and a request for the OPUC to partially waive certain competitive bidding rules. As of the date of this report, the OPUC's decision is pending.
Large Customer Rate Proceedings
Brisbie, LLC (Brisbie) Data Center: In May 2023, the IPUC approved a special contract (Brisbie Special Contract) between Idaho Power and a large load customer, Brisbie, a wholly-owned subsidiary of Meta Platforms, Inc., for service to a new 960,000 square-foot enterprise data center. The Brisbie Special Contract allows Idaho Power to procure enough renewable resources to provide Brisbie with 100 percent renewable energy on an annual basis for Brisbie's facility. In April 2023, Idaho Power received IPUC approval of a contract with a 200 MW solar project that is scheduled to begin operating as early as March 2025. Idaho Power will assign the cost and renewable attributes of the energy from the solar facility to Brisbie in accordance with the Brisbie Special Contract. In May 2024, Idaho Power received IPUC approval of an additional contract with a 125 MW solar project to be online in December 2026 for energy to be purchased by Brisbie.
In May 2024, Idaho Power also filed an application with the IPUC for approval of the second amendment to the Brisbie Special Contract that provides for changes in certain pricing elements under the special contract to reflect the most currently available data. As of the date of this report, the IPUC's decision is pending.
Micron Special Contract: In May 2024, Idaho Power filed an application for approval of the third amendment to the Micron Technology, Inc. (Micron) Special Contract which provides for changes in certain pricing elements under the special contract to reflect the most currently available data. As of the date of this report, the IPUC's decision is pending.
Relicensing of Hydropower Projects
HCC Relicensing: In connection with Idaho Power's major efforts to relicense the HCC, Idaho Power's largest hydropower complex, as described in more detail in the 2023 Annual Report in Part II, Item 7 - MD&A – "Liquidity and Capital Resources" and "Regulatory Matters," in July 2020, Idaho Power submitted to the FERC its supplement to the final license application, incorporating the settlement agreement reached between Idaho and Oregon on the CWA Section 401 certifications. The supplement included feedback on proposed modifications of the 2007 final EIS for the HCC, as well as an updated cost analysis of the HCC and a request that the FERC issue a 50-year license and initiate a supplemental NEPA process at the FERC. In June 2022, the FERC issued a notice of intent to prepare a supplemental EIS in accordance with NEPA. The FERC also reinstated informal consultation with the USFWS and the National Marine Fisheries Service under section 7 of the ESA. In May 2024, the FERC issued an updated schedule for the supplemental EIS, indicating that the draft and final supplemental EIS would be issued no later than July 2024 and February 2025, respectively. The FERC did not issue the draft supplemental EIS in July 2024.
Relicensing costs of $478 million (including AFUDC) for the HCC were included in construction work in progress at June 30, 2024. As of the date of this report, the IPUC authorizes Idaho Power to include in its Idaho jurisdiction rates approximately $8.8 million of AFUDC annually relating to the HCC relicensing project. Collecting these amounts currently will reduce future collections when HCC relicensing costs are approved for recovery in base rates. As of June 30, 2024, Idaho Power's regulatory liability for collection of AFUDC relating to the HCC was $239 million.
As of the date of this report, Idaho Power believes issuance of a new HCC license by the FERC will be in 2025 or thereafter. Idaho Power is unable to predict the exact timing that the FERC will issue a new license order or the ultimate capital investment and ongoing operating and maintenance costs Idaho Power will incur in complying with a new license. Idaho Power estimates that the annual costs it will incur to obtain a new long-term license for the HCC, including AFUDC but excluding costs expected to be incurred for complying with the license after issuance, are likely to range from $35 million to $45 million until issuance of the license. Upon issuance of a long-term license, Idaho Power expects that the annual capital expenditures and operating and maintenance expenses associated with compliance with the terms and conditions of the long-term license could also be substantial. In December 2016, Idaho Power filed an application with the IPUC requesting a determination that Idaho Power's expenditures of $220.8 million through year-end 2015 on relicensing of the HCC were prudently incurred, and thus eligible for future inclusion in retail rates in a future rate proceeding. In April 2018, the IPUC issued an order approving a settlement stipulation signed by Idaho Power, the IPUC staff, and a third-party intervenor recognizing that a total of $216.5 million in expenditures were reasonably incurred, and therefore should be eligible for inclusion in customer rates at a later date.
American Falls Relicensing: In April 2020, the FERC formally initiated the relicensing of the American Falls hydropower facility, Idaho Power's largest hydropower facility outside of the HCC, with a nameplate generating capacity of 92.3 MW. Idaho Power owns the generation facility but not the structural dam or reservoir, which is owned by the U.S. Bureau of Reclamation. In February 2023, following the filing of a draft license application and public comment period, Idaho Power filed a final license application with the FERC, which FERC accepted for filing in July 2023. In April 2024, the FERC issued a Notice of Intent to prepare an Environmental Assessment, signaling that the FERC staff does not anticipate that licensing the project will constitute a major federal action that would significantly affect the quality of the human environment. Initiation of the relicensing process has also begun the process of informal consultation with the USFWS and other agencies. The next major milestone in relicensing is the FERC's issuance of the Environmental Assessment. In April 2024, the FERC issued a schedule indicating that the draft and final Environmental Assessments would be issued no later than October 2024 and April 2025, respectively.
In September 2023, Idaho Power filed an application for CWA Section 401 water quality certification with the IDEQ. In June 2024, the IDEQ published a draft certification, which is subject to public comment until August 10, 2024. Idaho Power's current license at American Falls expires in February 2025. As of the date of this report, Idaho Power anticipates the FERC will issue a new license for this facility in 2025. If the current license expires before the new license is issued, Idaho Power expects to continue to operate its American Falls facility on annual licenses issued by the FERC with the same conditions as the current license.
U.S. Supreme Court Decision in Loper Bright v. Raimondo
In June 2024, the U.S. Supreme Court issued a decision in the Loper Bright v. Raimondo case that overturned the long-standing federal Chevron doctrine. The Chevron doctrine set forth a test that outlined when courts should defer to an agency’s interpretation of federal law. Under the doctrine, if Congress had not spoken directly to the precise issue in question, the courts were to defer to the agency’s interpretation so long as the interpretation was reasonable. Under the Loper Bright decision,
courts are now required to exercise their independent judgment in deciding whether an agency has acted within its statutory authority and may not defer to an agency interpretation of the law simply because a statute is ambiguous.
The overturning of the Chevron doctrine is likely to result in challenges to numerous agency interpretations in various areas of law including energy, environment, taxation, and labor, among others. If these challenges are upheld, they could have both favorable and unfavorable impacts on Idaho Power, depending on whether the interpretations that are overturned were more favorable toward Idaho Power's business and operations than subsequent revised agency interpretations. The likely increase of challenges to agency actions may also increase legal costs, create delays in permitting and project development, and create less certainty around agency actions, at least in the near term.
ENVIRONMENTAL MATTERS
Overview
Idaho Power is subject to a broad range of federal, state, regional, and local laws and regulations designed to protect, restore, and enhance the environment, including the CAA, the CWA, the Resource Conservation and Recovery Act, the Toxic Substances Control Act, the Comprehensive Environmental Response, Compensation and Liability Act, and the ESA, among other laws. These laws are administered by a number of federal, state, and local agencies. In addition to imposing continuing compliance obligations and associated costs, these laws and regulations provide authority to regulators to levy substantial penalties for noncompliance, injunctive relief, and other sanctions. Idaho Power's two co-owned coal-fired power plants and three wholly-owned natural gas-fired combustion turbine power plants are subject to many of these regulations. Idaho Power's hydropower projects are also subject to a number of water discharge standards and other environmental requirements.
Compliance with current and future environmental laws and regulations may:
•increase the operating costs of generating plants;
•increase the construction costs and lead time for new facilities;
•require the modification of existing generating plants, which could result in additional costs;
•require the curtailment, fuel-switching, or shut-down of existing generating plants;
•reduce the output from current generating facilities; or
•require the acquisition of alternative sources of energy or storage technology, increased transmission wheeling, or construction of additional generating facilities, which could result in higher costs.
Current and future environmental laws and regulations could significantly increase the cost of operating fossil fuel-fired generation plants and constructing new generation and transmission facilities, in large part through the substantial cost of permitting activities and the required installation of additional pollution control devices. In many parts of the United States, some higher-cost, high-emission coal-fired plants have ceased operation or the plant owners have announced a near-term cessation of operation or conversion to natural gas, as the cost of compliance makes coal plants uneconomical to operate. The decision to cease operation of the Boardman power plant in 2020 was based in part on the significant cost of compliance with environmental laws and regulations. The decision to end participation in coal-fired operations at the North Valmy plant was also based in part on the economics of continuing coal-fired generation at the plant. Beyond increasing costs generally, these environmental laws and regulations could affect IDACORP's and Idaho Power's results of operations and financial condition if the costs associated with these environmental requirements and early plant retirements cannot be fully recovered in rates on a timely basis.
Part I - "Business - Utility Operations - Environmental Regulation and Costs" in the 2023 Annual Report includes a summary of Idaho Power's expected capital and operating expenditures for environmental matters during the period from 2024 to 2026. Given the uncertainty of future environmental regulations and technological advances, Idaho Power cannot make near-term estimates with certainty and is also unable to predict its environmental-related expenditures beyond 2026, though they could be substantial.
A summary of notable environmental matters (including conditions and events associated with climate change) impacting, or expected to potentially impact, IDACORP and Idaho Power is included in Part II, Item 7 - MD&A - "Environmental Matters" and MD&A - "Liquidity and Capital Resources - Capital Requirements - Environmental Regulation Costs" in the 2023 Annual Report. Recent developments in certain environmental matters relevant to Idaho Power are described below.
Clean Air Act Matters
Regional Haze: In April 2024, EPA proposed to approve revisions to the Wyoming Regional Haze SIP. The proposed SIP replaces Wyoming’s previously approved source-specific nitrogen oxide (NOx) determination for Idaho Power’s jointly owned Jim Bridger facility. Specifically, the SIP finds that conversion of Units 1 and 2 from coal-firing to natural gas-firing, together with NOx emission and heat input limits of 0.12 lb/MMBtu (30-day rolling average), 1,314 tons/year, and 21,900,000 MMBtu/year, respectively, allows for identical reasonable progress during the first planning period as would the installation of selective catalytic reduction controls (as required by the 2014 Wyoming SIP). The EPA comment period ended in May 2024, and Idaho Power submitted comments in support of the proposed SIP. Operations at the Jim Bridger facility have previously been modified to comply in advance with the proposed SIP. Accordingly, Idaho Power does not expect the proposed SIP, if approved, to require any additional changes to current operations at the Jim Bridger facility.
Good Neighbor Rule: On June 27, 2024, the U.S. Supreme Court issued an opinion in Ohio v. EPA that granted an application to stay the EPA’s Federal Implementation Plan (FIP) promulgated under the Good Neighbor Provision of the CAA. This action puts a hold on any related compliance obligations for the North Valmy plant, which is co-owned by Idaho Power and NV Energy and operated by NV Energy. The stay is expected to remain in place until the U.S. Court of Appeals, D.C. Circuit, reaches a decision on the applicants' challenge to the FIP.
New Section 111 Rule: In April 2024, the EPA released a final rule under Section 111 of the CAA (New Section 111 Rule) that regulates carbon dioxide emissions from coal- and natural gas-fired electric generating units. Under the final rule, applicable standards of emission reduction vary based upon the retirement date of coal units and the capacity factor of existing and new natural gas units. The EPA based some of its requirements on carbon capture and storage technology. Idaho Power, among many other parties, filed suit in May 2024 in the U.S. Court of Appeals, D.C. Circuit, to challenge the New Section 111 Rule. Idaho Power's suit was consolidated with other similar suits and remains pending.
Mercury and Air Toxic Standards: In April 2024, EPA finalized Mercury and Air Toxic Standards in Section 112 of the CAA for coal-fired power plants (MATS Rule). As applicable to Idaho Power, the MATS Rule amends the filterable particulate matter (fPM) surrogate emission standard for non-mercury metal hazardous air pollutants to existing coal-fired power plants and the fPM emission standard compliance demonstration requirements.
Clean Water Act Matters
CWA Permitting: Idaho Power's hydropower generation facilities are subject to compliance and permitting obligations under the CWA. Idaho Power has been engaged for several years with the EPA, and is now engaged with the IDEQ, regarding Idaho Power's CWA permitting obligations and compliance status for those facilities. Idaho Power has in the past, and expects in the future, to incur costs associated with those permitting and compliance obligations, but as of the date of this report, Idaho Power is unable to estimate with any reasonable certainty those costs. Idaho Power also expects to incur additional costs associated with the relicensing of its hydropower facilities, as discussed elsewhere in this report.
In June 2022, Idaho Power and the IDEQ entered into a consent judgment in the Idaho state district courts to resolve a National Pollutant Discharge Elimination System permitting issue related to 15 of Idaho Power’s hydropower projects that required Idaho Power to pay a $1.1 million fine, implement interim measures for compliance, and ultimately submit applications for new permits at each of the dams subject to the consent judgment. Due to a misinterpretation of law, the EPA cancelled water discharge permits in the mid-1990’s, which Idaho Power subsequently determined were applicable for operation of the dams. Idaho Power believes that the dams would have been in compliance with the earlier permits had they remained in place. As of the date of this report, Idaho Power has submitted new permit applications for all 15 of the dams.
Effluent Limitations: In April 2024, EPA finalized effluent limitation guidelines and standards that set new water treatment standards for coal plants. Idaho Power believes that the final rule is likely to require Idaho Power’s jointly-owned and operated coal-fired facilities to upgrade wastewater treatment systems to eliminate discharges of pollutants from wastewater generated by power plant air pollution scrubbers, water used to flush out coal ash that accumulates at the bottom of coal boilers, and coal ash ponds.
Resource Conservation and Recovery Act Matters
Under the Resource Conservation and Recovery Act, EPA finalized changes to the coal combustion residual regulations for inactive surface impoundments at inactive electric utilities. EPA is establishing groundwater monitoring, corrective action, closure and post closure care requirements for these areas. Idaho Power continues to work with the co-owners of its coal-fired
generation plants to evaluate the potential impacts of these regulations, which could affect the amount of asset retirement obligations recorded in Idaho Power's consolidated balance sheets.
OTHER MATTERS
Critical Accounting Policies and Estimates
IDACORP's and Idaho Power's discussion and analysis of their financial condition and results of operations are based upon their condensed consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires IDACORP and Idaho Power to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, and expenses and related disclosure of contingent assets and liabilities. On an ongoing basis, IDACORP and Idaho Power evaluate these estimates, including those estimates related to rate regulation, retirement benefits, contingencies, asset impairment, income taxes, unbilled revenues, and bad debt. These estimates are based on historical experience and on other assumptions and factors that are believed to be reasonable under the circumstances, and are the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. IDACORP and Idaho Power, based on their ongoing reviews, make adjustments when facts and circumstances dictate.
IDACORP’s and Idaho Power’s critical accounting policies are reviewed by the audit committees of the boards of directors. These policies have not changed materially from the discussion of those policies included under "Critical Accounting Policies and Estimates" in the 2023 Annual Report.
Recently Issued Accounting Pronouncements
For discussion of new and recently adopted accounting pronouncements, see Note 1 - "Summary of Significant Accounting Policies" to the notes to the condensed consolidated financial statements included in this report.