UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549FORM 10-K

(Mark One)
| X      | ANNUAL REPORT  PURSUANT TO SECTION 13 OR 15 (d) OF |
|--------|----------------------------------------------------|
|   | THE SECURITIES  EXCHANGE ACT OF 1934               |
|   |                                               |
|   | For the  fiscal year ended December 31, 2009       |

 

OR

 
|   | TRANSITION REPORT  PURSUANT TO SECTION 13 OR 15(d) OF |
|--------|-------------------------------------------------------|
|   | THE SECURITIES  EXCHANGE ACT OF 1934                  |

 

For the transition period from ................... to .................................................................
|                                                         | Exact name of  registrants as specified in      |                   |
|--------------------------------------------------------------|-------------------------------------------------|------------------------|
| Commission                                                   | their charters,  address of principal executive | IRS Employer           |
| File Number                                                  | offices, zip code  and telephone number         | Identification  Number |
| 1-14465                                                      | **IDACORP, Inc.**                               | 82-0505802             |
| 1-3198                                                       | **Idaho Power  Company**                        | 82-0130980             |
|                                                         | 1221 W. Idaho  Street                           |                   |
|                                                         | Boise, ID  83702-5627                           |                   |
|                                                         | (208) 388-2200                                  |                   |
|                                                         |
| State of  incorporation:  Idaho                         |
| Websites:  www.idacorpinc.com  and www.idahopower.com   |
|                                                         |
|                                                         | Name of exchange on                             |
| SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE  ACT: | which registered                                |
| IDACORP, Inc.:  Common Stock, without par value         | New York                                        |
|                                                         |
| SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE  ACT: |
| Idaho Power Company:  Preferred Stock                   |

 

Indicate by check mark whether the registrants arewell-known seasoned issuers, as defined in Rule 405 of the Securities Act.
| IDACORP, Inc. | Yes | ( X ) | No | (  ) | Idaho Power Company | Yes | (  ) | No | ( X ) |
|---------------|-----|-------|----|-----------|---------------------|-----|-----------|----|-------|

 

Indicate by check mark if the registrants are not requiredto file reports pursuant to Section 13 or Section 15(d) of the Act.
| IDACORP, Inc. | Yes | (  ) | No | ( X ) | Idaho Power Company | Yes | (  ) | No | ( X ) |
|---------------|-----|-----------|----|-------|---------------------|-----|-----------|----|-------|

 

Indicate by check mark whether the registrants (1) havefiled all reports required to be filed by Section 13 or 15(d) of the SecuritiesExchange Act of 1934 during the preceding 12 months (or for such shorter periodthat the registrants were required to file such reports), and (2) have beensubject to such filing requirements for the past 90 days.  Yes  ( X )  No  (  )

Indicate by check mark whether the registrant has submittedelectronically and posted on its corporate Web site, if any, every InteractiveData File required to be submitted and posted pursuant to Rule 405 ofRegulation S-T during the preceding 12 months (or for such shorter period thatthe registrant was required to submit and post such files).  Yes ___No ___

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Indicate by check mark if disclosure of delinquent filerspursuant to Item 405 of Regulation S-K is not contained herein, and will not becontained, to the best of registrants’ knowledge, in definitive proxy orinformation statements incorporated by reference in Part III of this Form 10-Kor any amendment to this Form 10-K.  ( X )

Indicate by check mark whether the registrants are largeaccelerated filers, accelerated filers, non-accelerated filers, or smallerreporting companies.
| IDACORP, Inc.:       |
|----------------------|
|                 | Large accelerated filer | ( X ) | Accelerated filer | (  ) | Non-accelerated filer | (  ) | Smaller reporting company | (  ) |
|                 |
| Idaho Power Company: |
|                 | Large accelerated filer | (  ) | Accelerated filer | (  ) | Non-accelerated filer | ( X ) | Smaller reporting company | (  ) |

 

Indicate by check mark whether the registrants are shellcompanies (as defined in Rule 12b-2 of the Act).
| IDACORP, Inc. | Yes | (    ) | No | ( X ) | Idaho Power Company | Yes | (    ) | No | ( X ) |
|---------------|-----|-----------------------|----|-------|---------------------|-----|-----------------------|----|-------|

 

Aggregate market value of voting and non-voting common stockheld by nonaffiliates (June 30, 2009):
| IDACORP, Inc.: | $1,224,885,216 | Idaho Power Company: | None |
|----------------|----------------|----------------------|------|

 

Number of shares of common stock outstanding at January 31,2010:
| IDACORP, Inc.:       | 47,951,829                           |
|----------------------|--------------------------------------|
| Idaho Power Company: | 39,150,812 all held by IDACORP, Inc. |

 
| **Documents Incorporated by Reference:** |
|------------------------------------------|
|                                     |
| Part III, Items 10 - 14                  | Portions  of IDACORP, Inc.’s definitive proxy statement to be filed pursuant to  Regulation 14A for the Annual Meeting of Shareholders to be held on May 20,  2010. |
|                                     |
|                                     |

 

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

Idaho Power Company meets the conditions set forth inGeneral Instruction (I)(1)(a) and (b) of Form 10-K and is therefore filing thisForm with the reduced disclosure format.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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| **COMMONLY USED  TERMS** |
|--------------------------|
| ** **               |
| AFUDC                    | - | Allowance for Funds Used During Construction |
| APCU                     | - | Annual Power Cost Update |
| Cal ISO                  | - | California Independent System Operator |
| CalPX                    | - | California Power Exchange |
| CAMP                     | - | Comprehensive Aquifer Management Plan |
| CO2                      | - | Carbon Dioxide |
| cfs                      | - | Cubic feet per second |
| EIS                      | - | Environmental impact statement |
| EPS                      | - | Earnings per share |
| ESA                      | - | Endangered Species Act |
| ESPA                     | - | Eastern Snake Plain Aquifer |
| FASB                     | - | Financial Accounting Standards Board |
| FCA                      |   | Fixed Cost Adjustment mechanism |
| FERC                     | - | Federal Energy Regulatory Commission |
| FIN                      | - | Financial Accounting Standards Board Interpretation |
| Fitch                    | - | Fitch, Inc. |
| FPA                      | - | Federal Power Act |
| GAAP                     | - | Generally Accepted Accounting Principles |
| HCC                      | - | Hells Canyon Complex |
| Ida-West                 | - | Ida-West Energy, a subsidiary of IDACORP, Inc. |
| IDWR                     | - | Idaho Department of Water Resources |
| IE                       | - | IDACORP Energy, a subsidiary of IDACORP, Inc. |
| IERCo                    | - | Idaho Energy Resources Co., a subsidiary of Idaho Power  Company |
| IFS                      | - | IDACORP Financial Services, a subsidiary of IDACORP, Inc. |
| IPUC                     | - | Idaho Public Utilities Commission |
| IRP                      | - | Integrated Resource Plan |
| IWRB                     | - | Idaho Water Resource Board |
| kW                       | - | Kilowatt |
| LGAR                     | - | Load Growth Adjustment Rate |
| maf                      | - | Million acre feet |
| MD&A                 | - | Management’s Discussion and Analysis of Financial  Condition and Results of Operations |
| Moody’s             | - | Moody’s Investors Service |
| MW                       | - | Megawatt |
| MWh                      | - | Megawatt-hour |
| NOx                      | - | Nitrogen Oxide |
| NWRFC                    | - | National Weather Service Northwest River Forecast Center |
| O&M                  | - | Operations and Maintenance |
| OATT                     | - | Open Access Transmission Tariff |
| OPUC                     | - | Oregon Public Utility Commission |
| PCA                      | - | Power Cost Adjustment |
| PCAM                     | - | Power Cost Adjustment Mechanism |
| PURPA                    | - | Public Utility Regulatory Policies Act of 1978 |
| RH BART                  | - | Regional Haze - Best Available Retrofit Technology |
| RFP                      | - | Request for Proposal |
| S&P                  | - | Standard & Poor’s Ratings Services |
| SFAS                     | - | Statement of Financial Accounting Standards |
| SO2                      | - | Sulfur Dioxide |
| SRBA                     | - | Snake River Basin Adjudication |
| Valmy                    | - | North Valmy Steam Electric Generating Plant |
| VIEs                     | - | Variable Interest Entities |
| WECC                     | - | Western Electricity Coordinating Council |

 

 

 

 

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| **TABLE OF  CONTENTS** |
|------------------------|
|                   | **Page** |
| **Part I**             |
|                   |
|                   | Item 1. | Business | 5-14 |
|                   | Item 1A. | Risk Factors | 15-19 |
|                   | Item 1B. | Unresolved Staff Comments | 19 |
|                   | Item 2. | Properties | 20-21 |
|                   | Item 3. | Legal Proceedings | 21 |
|                   | Item 4. | Submission of Matters to a Vote of Security Holders | 21 |
|                   |
|                   | Executive Officers of the  Registrants | 21-22 |
|                   |
| **Part II**            |
| ** **             |
|                   | Item 5. | Market for Registrant’s Common Equity, Related Stockholder |   |
|                   |   |   | Matters and Issuer Purchases of Equity Securities | 23-24 |
|                   | Item 6. | Selected Financial Data | 25 |
|                   | Item 7. | Management’s Discussion and Analysis of Financial  Condition and |   |
|                   |   |   | Results of Operations | 25-61 |
|                   | Item 7A. | Quantitative and Qualitative Disclosures about Market Risk | 61-62 |
|                   | Item 8. | Financial Statements and Supplementary Data | 63 |
|                   | Item 9. | Changes in and Disagreements with Accountants on  Accounting and |   |
|                   |   |   | Financial Disclosure | 121 |
|                   | Item 9A. | Controls and Procedures | 121-126 |
|                   | Item 9B. | Other Information | 126 |
| ** **             |
| **Part III**           |
| ** **             |
|                   | Item 10. | Directors, Executive Officers and Corporate Governance* | 126 |
|                   | Item 11. | Executive Compensation* | 126 |
|                   | Item 12. | Security Ownership of Certain Beneficial Owners and  Management and Related |   |
|                   |   |   | Stockholder Matters* | 127 |
|                   | Item 13. | Certain Relationships and Related Transactions, and  Director Independence* | 127 |
|                   | Item 14. | Principal Accountant Fees and Services* | 127-129 |
|                   |
| **Part IV**            |
| ** **             |
|                   | Item 15. | Exhibits and Financial Statement Schedules | 129-141 |
|                   |
|                   | Signatures | 142-143 |
|                   |
|                   |   |   |
|                   |
|                   | *Except as indicated in Item 12, IDACORP, Inc. information  is incorporated by reference to IDACORP, |
|                   |   | Inc.’s definitive proxy statement for the 2010 Annual  Meeting of Shareholders. |
|                        |  |  |  |  |  |

 

 

 

 

 

 

 

 

 

 

 

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SAFE HARBORSTATEMENT

 

This Form 10-K contains “forward-looking statements”intended to qualify for the safe harbor from liability established by thePrivate Securities Litigation Reform Act of 1995.  Forward-looking statementsshould be read with the cautionary statements and important factors included inthis Form 10-K at Part II, Item 7- “Management’s Discussion and Analysis ofFinancial Condition and Results of Operations - FORWARD-LOOKING INFORMATION.” Forward-looking statements are all statements other than statements ofhistorical fact, including without limitation those that are identified by theuse of the words “anticipates,” “believes,” “estimates,” “expects,” “intends,”“plans,” “predicts,” “projects,” “may result,” “may continue,” or similarexpressions.

PART I - IDACORP,INC. AND IDAHO POWER COMPANY

 

ITEM 1.  BUSINESS

 

OVERVIEW

 

IDACORP, Inc. (IDACORP) is a holding company formed in 1998whose principal operating subsidiary is Idaho Power Company (Idaho Power). IDACORP is subject to the provisions of the Public Utility Holding Company Actof 2005, which provides certain access to books and records to the FederalEnergy Regulatory Commission (FERC) and state utility regulatory commissionsand imposes certain record retention and reporting requirements on IDACORP.

Idaho Power was incorporated under the laws of the state ofIdaho in 1989 as successor to a Maine corporation organized in 1915.  IdahoPower is an electric utility engaged in the generation, transmission,distribution, sale and purchase of electric energy and is regulated by the FERCand the state regulatory commissions of Idaho and Oregon.  Idaho Power is theparent of Idaho Energy Resources Co. (IERCo), a joint venturer in Bridger CoalCompany (Bridger Coal), which supplies coal to the Jim Bridger generating plantowned in part by Idaho Power.

IDACORP’s other subsidiaries include:

•  IDACORP Financial Services, Inc. (IFS), an investor in affordablehousing and other real estate investments;

•  Ida-West Energy Company (Ida-West), an operator of smallhydroelectric generation projects that satisfy the requirements of the PublicUtility Regulatory Policies Act of 1978 (PURPA); and

•  IDACORP Energy (IE), a marketer of energy commodities, whichwound down operations in 2003.

IDACORP’s business strategy emphasizes Idaho Power asIDACORP’s core business.  Idaho Power is IDACORP’s only reportable businesssegment, contributing 98.6 percent of IDACORP’s income from continuingoperations in 2009.  Segment data is presented in Note 17 to the consolidatedfinancial statements.  At December 31, 2009, IDACORP had 1,994 full-timeemployees, 1,979 of which were employed by Idaho Power.

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

RESPONSIBLE PLANNING:  Idaho Power’s planning process isintended to ensure adequate generation and transmission resources to meetpopulation growth and increasing electricity demand.  This planning process nowintegrates Idaho Power’s regulatory strategy and financial planning, includingthe consideration of regional economic development in the growing communitieswe serve.

RESPONSIBLE DEVELOPMENT AND PROTECTION OF RESOURCES:  IdahoPower’s business strategy has included the development and protection ofgeneration, transmission, distribution and associated infrastructure, and thenatural resources Idaho Power depends upon.  The strategy now includes specificconsideration of workforce planning, development and retention related to thesestrategic elements.

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RESPONSIBLE ENERGY USE:  Idaho Power’s business strategy hasincluded energy efficiency and demand response programs and preparation forpotential carbon and renewable portfolio standard legislation.  The strategynow includes targeted reductions relating to carbon emission intensity and publicdisclosure of these reductions.

IDACORP and Idaho Power make available free of charge theirAnnual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports onForm 8-K and all amendments to these reports filed or furnished pursuant toSection 13(a) or 15(d) of the Securities Exchange Act of 1934 as soon asreasonably practicable after the reports are electronically filed with orfurnished to the Securities and Exchange Commission.  IDACORP’s website is www.idacorpinc.comand can also be accessed through a link to the IDACORP website on the IdahoPower website at www.idahopower.com.

UTILITY OPERATIONS

Idaho Power’s service territory covers approximately 24,000square miles in southern Idaho and eastern Oregon, with an estimated populationof one million.  Idaho Power holds franchises in 71 cities in Idaho and ninecities in Oregon and holds certificates from the respective public utilityregulatory authorities to serve all or a portion of 25 counties in Idaho andthree counties in Oregon.  As of December 31, 2009, Idaho Power suppliedelectric energy to approximately 490,000 general business customers.  IdahoPower’s principal commercial and industrial customers are involved in foodprocessing, electronics and general manufacturing, forest products, beet sugarrefining and winter recreation.

Weather, customer demand and economic conditions impactelectricity sales.  Extreme temperatures increase sales to customers who useelectricity for cooling and heating, and moderate temperatures decrease sales. Increased precipitation levels during the agricultural growing season reduceelectricity sales to customers who use electricity to operate irrigation pumps.

**Rates and Revenues**

 

**Retail**

Electric utilities have historically been recognized asnatural monopolies and have operated in a highly regulated environment in whichthey have an obligation to provide electric service to their customers inreturn for an exclusive franchise within their service territory with anopportunity to earn a regulated rate of return.  Idaho Power is under theretail jurisdiction (as to rates, service, accounting and other general mattersof utility operation) of the Idaho Public Utilities Commission (IPUC) and theOregon Public Utility Commission (OPUC) and as a regulated electric utility,Idaho Power is generally not subject to retail competition.  The IPUC and theOPUC determine the rates that Idaho Power charges to its general businesscustomers.  Idaho Power is also under the retail regulatory jurisdiction of theIPUC, the OPUC and the Public Service Commission of Wyoming as to the issuanceof debt and equity securities.

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

Special Customer Electric Service Agreements

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

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

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

**Wholesale**

As a public utility under Part II of the Federal Power Act(FPA), Idaho Power has authority to charge market-based rates for wholesaleenergy sales under its FERC tariff and to provide transmission services underits Open Access Transmission Tariff (OATT).  Idaho Power’s OATT is revised eachyear based on financial and operational data Idaho Power files annually with theFERC in its Form 1.  The Energy Policy Act of 2005 (Energy Act) granted theFERC increased statutory authority to implement mandatory transmission andreliability standards, as well as enhanced oversight of power and transmissionmarkets, including protection against market manipulation.  Significant ratecases and proceedings are discussed in more detail in Note 3 to theconsolidated financial statements.

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

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

**Energy sales**

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

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|                            | **Years Ended  December 31,**            |
|---------------------------------|------------------------------------------|
|                            | **2009**                                 | **2008** | **2007** |
| Revenues (thousands of dollars) |                                     |   |   |   |   |   |
|                            | Residential                              | $ | 409,479  | $ | 353,262 | $ | 308,208 |
|                            | Commercial                               |   | 232,816  |   | 203,035 |   | 170,001 |
|                            | Industrial                               |   | 141,530  |   | 122,302 |   | 101,409 |
|                            | Irrigation                               |   | 109,655  |   | 105,712 |   | 88,685 |
|                            | Deferred revenue related to Hells Canyon |   |   |   |   |   |   |
|                            |                                     | relicensing AFUDC |   | (9,715) |   | - |   | - |
|                            |                                     | Total general business |   | 883,765  |   | 784,311 |   | 668,303 |
|                            | Off-system sales                         |   | 94,373  |   | 121,429 |   | 154,948 |
|                            | Other                                    |   | 67,858  |   | 50,336 |   | 52,150 |
|                            |                                     | Total | $ | 1,045,996  | $ | 956,076 | $ | 875,401 |
|                            |                                     |   |   |   |   |   |   |
| Energy use (thousands of MWh)   |                                     |   |   |   |   |   |
|                            | Residential                              |   | 5,300  |   | 5,297 |   | 5,227 |
|                            | Commercial                               |   | 3,858  |   | 3,970 |   | 3,937 |
|                            | Industrial                               |   | 3,140  |   | 3,355 |   | 3,454 |
|                            | Irrigation                               |   | 1,650  |   | 1,922 |   | 1,924 |
|                            |                                     | Total general business |   | 13,948  |   | 14,544 |   | 14,542 |
|                            | Off-system sales                         |   | 2,836  |   | 2,048 |   | 2,744 |
|                            |                                     | Total |   | 16,784  |   | 16,592 |   | 17,286 |
|                            |                                     |   |   |   |   |   |   |
|                                 |                                          |  |  |  |  |  |  |  |  |

 

**Power Supply**

 

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

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

Idaho Power’s system is dual peaking, with the larger peakdemand occurring in the summer.  The all-time system peak demand is 3,214 MW,set on June 30, 2008, and the all-time winter peak demand is 2,527 MW set onDecember 10, 2009.  During these and other similar heavy load periods IdahoPower’s system is fully committed to serve loads and meet required operatingreserves.

The following table presents IdahoPower’s total power supply for the last three years:
|                                | **MWh**                       | **Percent  of total generation** |
|-------------------------------------|-------------------------------|----------------------------------|
|                                | **2009**                      | **2008**                         | **2007** | **2009** | **2008** | **2007** |
|                                | **(thousands  of MWhs)**      | ** **                       |
| Hydroelectric plants                | 8,096                         | 6,908                            | 6,181 | 53% | 48% | 46% |
| Coal-fired plants                   | 6,941                         | 7,279                            | 7,144 | 45% | 50% | 52% |
| Natural gas fired plants            | 242                           | 217                              | 223 | 2% | 2% | 2% |
|                                | Total system generation       | 15,279                           | 14,404 | 13,548 | 100% | 100% | 100% |
| Purchased power - cogeneration  and |                          |                             |   |   |   |   |
|                                | small power production (CSPP) | 970                              | 757 | 777 |   |   |   |
| Purchased power - Other             | 1,942                         | 2,960                            | 4,419 |   |   |   |
|                                | Total purchased power         | 2,912                            | 3,717 | 5,196 |   |   |   |
|                                |                          | Total power supply               | 18,191 | 18,121 | 18,744 |   |   |   |
|                                |                          |                             |   |   |   |   |   |   |
|                                     |                               |                                  |  |  |  |  |  |  |  |

 

**Hydroelectric Generation**

Idaho Power operates 17hydroelectric projects located on the Snake River and its tributaries. Together, these hydroelectric facilities provide a total nameplate capacity of1,709 MW and annual generation equal to approximately 8.6 million MWh undermedian water conditions.

Because of its reliance onhydroelectric generation, Idaho Power’s generation operations can besignificantly affected by water conditions.  The availability of hydroelectricpower depends on the amount of snow pack in the mountains upstream of IdahoPower’s hydroelectric facilities, reservoir storage, springtime snow packrun-off, river base flows, spring flows, rainfall, amount and timing of waterleases, and other weather and stream flow management considerations.  Duringlow water years, when stream flows into Idaho Power’s hydroelectric projectsare reduced, Idaho Power’s hydroelectric generation is reduced.  This resultsin less generation from Idaho Power’s resource portfolio (hydroelectric,coal-fired and gas-fired) available for off-system sales and, generally, an increaseduse of purchased power to meet load requirements.  Both of these situations - areduction in off-system sales and an increased use of more expensive purchasedpower - result in increased power supply costs.

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

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

Power generation at the Idaho Power hydroelectric powerplants on the Snake River also depends on the state water rights held by IdahoPower and the long-term sustainability of the Snake River, tributary springflows and the Eastern Snake Plain Aquifer that is connected to the SnakeRiver.  Idaho Power continues to participate in water management issues inIdaho that may affect those water rights and resources with the goal topreserve, to the fullest extent possible, the long-term availability of waterfor use at Idaho Power’s hydroelectric projects on the Snake River.  Forfurther information see Part II, Item 7 – “MD&A – LEGAL MATTERS – SnakeRiver Basin Water Rights.”

Idaho Power is subject to the provisions of the FederalPower Act (FPA) as a “public utility” and as a “licensee” as therein definedand is subject to regulation by the FERC.  As a licensee under Part I of theFPA, Idaho Power and its licensed hydroelectric projects are subject toconditions set forth in the FPA and related FERC regulations.  These conditionsand regulations include provisions relating to condemnation of a project uponpayment of just compensation, amortization of project investment from excessproject earnings, possible takeover of a project after expiration of itslicense upon payment of net investment, severance damages and other matters.

Idaho Power obtains licenses for its hydroelectric projectsfrom the FERC, similar to other utilities that operate nonfederal hydroelectricprojects on qualified waterways.  These licenses last for 30 to 50 yearsdepending on the size, complexity, and cost of the project.  Idaho Power isactively pursuing the relicensing of the Hells Canyon Complex and Swan Fallsprojects.  For further information on relicensing activities see Part II, Item7 – “MD&A – RELICENSING OF HYDROELECTRIC PROJECTS.”

The state of Oregon has a Hydroelectric Act providing forlicensing of hydroelectric projects in that state.  With respect to projectproperty located in Oregon, Idaho Power’s Brownlee, Oxbow and Hells Canyonfacilities are subject to the Oregon Hydroelectric Act.  Idaho Power hasobtained Oregon licenses for these facilities and these licenses are not inconflict with the FPA or Idaho Power’s FERC licenses.

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

Fuel supply-coal

Idaho Power, through its subsidiary IERCo, owns a one-thirdinterest in Bridger Coal, which owns the Jim Bridger mine that supplies coal tothe Jim Bridger generating plant (one-third owned by Idaho Power).  The mine,located near the Jim Bridger plant, operates under a long-term sales agreementthat provides for delivery of coal over a 51-year period ending in 2024 fromsurface, high-wall, and underground sources.  The Jim Bridger mine hassufficient reserves to provide coal deliveries for the term of the salesagreement.  Idaho Power also has a coal supply contract providing for annualdeliveries of coal through 2014 from the Black Butte Coal Company’s Black Butteand Leucite Hills mines located near the Jim Bridger plant.  This contractsupplements the Bridger Coal deliveries and provides another coal supply tooperate the Jim Bridger plant.  The Jim Bridger plant’s rail load-in facilityand unit coal train allow the plant to take advantage of potentially lower-costcoal from other mines for tonnage requirements above established contractminimums.

NV Energy, as operator of the Valmy generating plant, has anagreement with Arch Coal Sales Company, Inc. to supply coal to the plantthrough 2011.  As a 50 percent owner of the plant, Idaho Power is obligated topurchase one-half of the coal, Idaho Power’s portion ranging from 515,000 tonsto 762,500 tons annually.  NV Energy also has a coal supply contract with BlackButte Coal Company’s Black Butte Mine for deliveries through 2015.  Idaho Poweris obligated to purchase one-half of the coal purchased under this agreementranging from as low as 44,000 to as many as 500,000 tons annually.

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The Boardman generating plant receives coal from the PowderRiver Basin through annual contracts.  Portland General Electric, as operatorof the Boardman plant, has two agreements with Foundation Coal West, Inc. tosupply all of Boardman’s coal requirements in 2010 and additional deliveries through2011.  As a ten percent owner of the plant, Idaho Power is obligated topurchase ten percent of the coal purchased under these agreements, whichcumulatively ranges from 175,000 to 225,000 tons annually.

Fuel supply-natural gas

Idaho Power owns and operates the Danskin and BennettMountain combustion turbines, which are supplied gas through Northwest PipelineGP’s (Northwest) pipeline.  Gas is purchased as needs are identified for summerpeaks or to meet system requirements.  Natural gas is transported under twolong-term agreements with Northwest.  The first agreement, which runs into2022, with annual extensions at Idaho Power’s sole discretion, is for 24,523million British thermal units (MMBtu) per day.  Idaho Power also has theability to flow a total of 78,092 MMBtu on an alternate firm basis withoutincurring a reservation charge on the additional amount.  The second agreement,beginning in 2012 and running through 2027, provides Idaho Power withtransportation capacity for 22,000 MMBtu per day.  In addition to the twolong-term gas transportation agreements, Idaho Power has entered into along-term storage agreement with Northwest for 131,453 MMBtu of total storagecapacity at the Jackson Prairie Storage Project located in Lewis County, Washington. As the project is developed, storage capacity will be phased into service andallocated to Idaho Power on a monthly basis.  Idaho Power’s current storageallotment is approximately 53 percent of its total, and its full allotment isexpected to be reached by January 2011.  The firm storage contract expires in2043, with bilateral termination rights at the end of the contract.  Storagegas will be purchased and stored with the intent of fulfilling needs asidentified for summer peaks or to meet system requirements.

Idaho Power plans to construct and operate the Langley Gulchcombined-cycle natural gas power plant.  Construction is scheduled to beginduring the summer of 2010 with an on-line date targeted for the summer of2012.  Gas for Langley Gulch will be supplied through Northwest’s pipeline. Procurement of gas will be managed to meet system requirements and fuelingstrategies.

**Purchased Power Agreements**

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

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

CSPP Purchases

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

 

 

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

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

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

•  The IPUC jurisdictional portion of the costs associated with CSPPcontracts is fully recovered through base rates and the PCA; the OPUCjurisdictional portion is recovered through general rate case filings and theOregon power cost mechanism.

•  For IPUC jurisdictional contracts, projects that generate up toten average MW of energy monthly are eligible for IPUC Published Avoided Costsfor up to a 20-year contract term.

•  For OPUC jurisdictional contracts, projects with a nameplaterating of up to ten MW of capacity are eligible for OPUC Published AvoidedCosts for up to a 20-year contract term.

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

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

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

Wholesale Competition

The 1992 National Energy Policy Act and the FERC’srulemaking activities have established the regulatory framework to open thewholesale energy market to competition.  Open-access transmission for wholesalecustomers provides energy suppliers with opportunities to sell and deliverelectricity at market-based prices.  Idaho Power actively monitors andparticipates, as appropriate, in energy industry developments, to maintain andenhance its ability to effectively participate in wholesale energy markets in amanner consistent with its business goals.

Wholesale Energy Market Activities

Idaho Power participates in the wholesale energy market bybuying power to help meet load demands and selling power that is in excess ofload demands.  Idaho Power’s market activities are guided by a risk managementpolicy and frequently updated operating plans and influenced by customer loads,market prices, and cost and availability of generating resources.  Some ofIdaho Power’s hydroelectric generation facilities are operated to optimize thewater that is available by choosing when to run generation units and when tostore water in reservoirs.  These decisions affect the timing and volumes ofmarket purchases and market sales.  Even in below normal water years, there areopportunities to vary water usage to maximize generation unit efficiency,capture marketplace economic benefits and meet load demand.  Wholesale energymarket prices and compliance factors, such as allowable river stage elevationchanges and flood control requirements, influence these dispatch decisions.****

 

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Idaho Power’s generating facilities are interconnected throughits integrated transmission system and are operated on a coordinated basis toachieve maximum load-carrying capability and reliability.  Idaho Power’stransmission system is directly interconnected with the transmission systems ofthe Bonneville Power Administration (BPA), Avista Corporation, PacifiCorp,NorthWestern Energy and NV Energy.  Such interconnections, coupled withtransmission line capacity made available under agreements with some of theabove entities, permit the interchange, purchase, and sale of power among allmajor electric systems in the west interconnecting with the winter-peakingnorthern and summer-peaking southern regions of the western power system. Idaho Power provides wholesale transmission service and provides firm and non-firmwheeling services for eligible transmission customers.  Idaho Power is a memberof the Western Electricity Coordinating Council, the Western Systems PowerPool, the Northwest Power Pool, the Northern Tier Transmission Group, and theNorth American Energy Standards Board.  These groups have been formed to moreefficiently coordinate transmission reliability and planning throughout thewestern grid.****

**Resource Planning**

 

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

The four primary goals of the IRP are to:

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

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

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

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

The 2009 IRP analyzed supply-side resources, demand-sidemanagement programs, and transmission options taking into account many factorsincluding the estimated costs of complying with potential carbon legislation aspart of determining the preferred resource portfolio.  The preferred portfoliopositions Idaho Power for compliance with anticipated carbon regulations and afederal Renewable Electricity Standard (RES).  Due to the uncertainty regardingfuture carbon regulations, no new conventional coal resources were selected inthe preferred portfolio.

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

During the time between resource plan filings, the publicand regulatory oversight of the activities identified in the IRP allows fordiscussion and adjustment of the IRP as warranted.  Idaho Power makes periodicadjustments and corrections to the resource plan to reflect changes intechnology, economic conditions, anticipated resource development andregulatory requirements.

**Supply-side Resource**s

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

Idaho Power also has projectsidentified for construction that including  the 300-MW Langley Gulchcombined-cycle power plant, and a 49 MW expansion of the Shoshone Fallshydroelectric facility.  Idaho Power is also planning the Boardman to Hemingwayand the Gateway West transmission lines and constructing the Hemingwaysubstation to improve reliability, relieve congestion and provide systemflexibility (for more information see “ITEM 7 MD&A – LIQUIDITY AND CAPITALRESOURCES – Capital Requirements – Major Projects”).  The IRP also includeddiscussion related to the following resources:

Geothermal RFPs

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

 

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Wind RFP

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

Combined Heat and Power (CHP) RFP

CHP resources were not included in the 2009 IRP preferredportfolio because of the level of uncertainty in being able to successfullydevelop a CHP project.  However, Idaho Power continues to work with largecustomers and other parties to explore CHP development opportunities.

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

**Demand-Side Management Programs**

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

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

•  irrigation demand response and irrigation efficiency programstarget irrigation customers with financial incentives for allowing Idaho Powerto interrupt service to their irrigation pumps, and for either improving theenergy efficiency of an irrigation system or installing a new energy efficiencysystem;

•  residential air conditioning equipment control measures;

•  residential energy efficiency programs targeted at new andexisting homes, focusing on customer education and the application of energyefficiency remediation, including energy efficient building techniques,insulation augmentation, air duct sealing, and the use of efficient lighting;and

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

 

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

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

Approximately $3 million of energy efficiency spending wasrelated to research, analysis and development, education, technologyevaluation, and market transformation.  Some of this activity was done inconjunction with the Northwest Energy Efficiency Alliance (NEEA).  Idaho Powercontributed $1 million to the NEEA in 2009.

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

**Environmental Regulation**

 

Idaho Power’s activities are subject to a broad range offederal, state, regional and local laws and regulations designed to protect,restore and enhance the quality of the environment including air, water, andsolid waste.  Environmental regulation continues to impact Idaho Power’soperations due to the cost of installation and operation of equipment andfacilities required for compliance with such regulations, and the modification ofsystem operations to accommodate such regulations.  In addition to generallyapplicable regulations, the FERC licenses issued for Idaho Power’shydroelectric generating plants have environmental requirements such asaeration of turbine water to meet dissolved gas and temperature standards inthe tail waters downstream from the plants.  Idaho Power monitors these issuesand reports the results to the appropriate regulatory agencies.

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

Idaho Power’s environmental compliance costs will continueto be significant for the foreseeable future especially with potentialadditional regulation under discussion at the state and federal level.  For amore detailed discussion of these and other environmental issues, please seePart II, Item 7 – “MD&A – ENVIRONMENTAL ISSUES.”

Idaho Power estimates its environmental expenditures, basedupon present environmental laws and regulations, will be as follows, excludingAllowance for Funds Used During Construction (AFUDC) (in millions of dollars):
|                                                                                     | **2010**                              | **2011 – 2012** |
|-------------------------------------------------------------------------------------|---------------------------------------|----------------------|
| Studies and measures related  to environmental concerns at hydroelectric facilities | $                                     | 6                    | $ | 21 |
| Investments in environmental  equipment and facilities at thermal plants            |                                  | 12                   |   | 41 |
|                                                                                     | **Total capital  expenditures**       | **$**                | 18 | **$** | 62 |
|                                                                                     |                                  |                      |   |  |
| Operating costs for  environmental facilities - Hydroelectric                       | $                                     | 16                   | $ | 41 |
| Operating costs for environmental  facilities - Thermal                             |                                  | 8                    |   | 19 |
| ** **                                                                          | **Total operations and  maintenance** | **$**                | 24 | **$** | 60 |
| ** **                                                                          | ** **                            |                 | ** ** |   |

 

IFS

 

IFS invests primarily in affordable housing developments,which provide a return principally by reducing federal and state income taxesthrough tax credits and accelerated tax depreciation benefits.  IFS generatedtax credits of $8 million, $11 million and $15 million in 2009, 2008 and 2007,respectively.  IFS’s portfolio also includes historic rehabilitation projectssuch as the Empire Building in Boise, Idaho.  IFS made $14 million and $8million of new investments during 2009 and 2008, respectively, and willcontinue to review future legislation for new opportunities for investment thatwill be commensurate with the ongoing needs of IDACORP.

IFS has focused on a diversified approach to its investmentstrategy in order to limit both geographic and operational risk.  Over 90percent of IFS’s investments have been made through syndicated funds.  AtDecember 31, 2009, the gross amount of IFS’s portfolio equaled $197 million intax credit investments.  These investments cover 49 states, Puerto Rico and theU.S. Virgin Islands.  The underlying investments include over 700 individualproperties, of which all but three are administered through syndicated funds.

**IDA-WEST**

 

Ida-West operates and has a 50 percent interest in ninehydroelectric plants with a total generating capacity of 45 MW.  Four of theprojects are located in Idaho and five are in northern California.  All nineprojects are “qualifying facilities” under PURPA.  Idaho Power purchased all ofthe power generated by Ida-West’s four Idaho hydroelectric projects at a costof $9 million in 2009 and $8 million in both 2008 and 2007.

 

 

 

 

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ITEM 1A.  RISKFACTORS

 

The following are factors that could have a significantimpact on the operations and financial results of IDACORP, Inc. and Idaho PowerCompany and could cause actual results or outcomes to differ materially fromthose discussed in any forward-looking statements:

•  **Reduced hydroelectric generation can reduce revenues andincrease costs, and reduce earnings and cash flows.**  Idaho Power Companyhas a predominately hydroelectric generating base.  Because of Idaho PowerCompany’s heavy reliance on hydroelectric generation, water can significantlyaffect its operations.  When hydroelectric generation is reduced, Idaho PowerCompany must increase its use of generally more expensive thermal generatingresources and purchased power and opportunities for off-system sales arereduced, which reduces revenues.  In addition, while Idaho Power Company canexpect to recover the majority of the net power supply costs above the levelincluded in its rates, recovery of the excess amounts does not occur until thesubsequent power cost adjustment year.

•  **Continuing declines in stream flows and over-appropriation ofwater in Idaho may reduce hydroelectric generation and revenues and increasecosts. **The combination of declining Snake River base flows,over-appropriation of water and drought conditions have led to disputes amongsurface water and ground water irrigators, and the state of Idaho.  Rechargingthe Eastern Snake Plain Aquifer, which contributes to Snake River flows, bydiverting surface water to porous locations and permitting it to sink into theaquifer is one proposed solution to the dispute.  Diversions from the SnakeRiver for aquifer recharge may further reduce Snake River flows available forhydroelectric generation and reduce Idaho Power Company’s revenues and increasecosts.  Idaho Power Company’s recent settlement agreement with the state ofIdaho resolves litigation regarding certain Idaho Power Company water rights onthe Snake River and provides for ongoing Snake River water issues to beaddressed in the comprehensive aquifer management plan process.  However, thereis no assurance that this process will lead to increased Snake River streamflows for Idaho Power Company’s hydroelectric projects.  Idaho Power Companyalso has initiated legal action against the U.S. Bureau of Reclamation over theinterpretation and effect of a 1923 contract with the U.S. Bureau ofReclamation on the operation of the American Falls Reservoir and the release ofwater from that reservoir to be used at Idaho Power Company’s downstreamhydroelectric projects.  The comprehensive aquifer management plan process andthe resolution of the litigation may affect Snake River flows available forhydroelectric generation and thereby reduce Idaho Power Company revenues andincrease costs.

•  **Idaho Power Company’s reliance on coal and natural gas to fuelits power generation facilities exposes it to risk of increased costs andreduced earnings. **In addition to hydroelectric generation, Idaho PowerCompany relies on coal and natural gas to fuel its generation facilities. Market price increases in coal and natural gas can result in reduced earnings. Increases in demand for natural gas, including increases in demand due togreater industry reliance on natural gas for power generation, may result inmarket price increases, short-term price volatility and/or supply availabilityissues.  In addition, delivery of coal and natural gas depends upon gaspipelines, rail lines, rail cars and roadways.  Any disruption in Idaho PowerCompany’s fuel supply may require the company to find alternative fuel sourcesat higher costs, to produce power from higher cost generation facilities or topurchase power from other sources at higher costs.

•  **Load growth in Idaho Power Company’s service territory exposesit to greater market and operational risk and could increase costs and reduceearnings and cash flows.**

o   Increases in both the number of customers and the demand forenergy have resulted and may continue to result in increased reliance onpurchased power to meet customer load requirements.  The price volatility ofelectricity has substantially increased from what it was at the inception ofthe power cost adjustment.  While Idaho Power Company can expect to recover themajority of the net power supply costs above the amounts included in its rates,recovery of the excess amounts does not occur until the subsequent power costadjustment year, and the remaining amount is absorbed by Idaho Power Companywhich could increase costs and reduce earnings and cash flows.

o   Load growth can result in the need for additional investments inIdaho Power Company’s infrastructure to serve the new load.  If Idaho PowerCompany were unable to secure timely rate relief from the Idaho PublicUtilities Commission, the Oregon Public Utility Commission or the FederalEnergy Regulatory Commission to recover the costs of these additionalinvestments, the resulting regulatory lag would have a negative effect onearnings and cash flows.

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o   Load growth can create planning and operating difficulties for IdahoPower Company that can negatively impact its ability to reliably servecustomers.

•  **Weather can reduce power sales and revenues and reduceearnings and cash flows.**  Warmer than normal winters, cooler than normalsummers and increased rainfall during the irrigation seasons will reduce retailrevenues from power sales and may impact the amount and timing of hydroelectricgeneration.  Extreme weather events can disrupt transmission and distributionsystems and cause service interruptions and extended outages, and potentiallyinterrupt use of generation resources.  Disruption in transmission anddistribution systems increases operations and maintenance expenses and reducesearnings and cash flows.

•  **Idaho Power Company’s risk management policy and programs relatingto hedging power and gas exposures and counterparty creditworthiness may notalways perform as intended, and we may suffer economic losses.**  Idaho PowerCompany actively manages the market risk inherent in its energy relatedactivities and counterparty credit positions.  Idaho Power Company hasprocedures that monitor compliance with our risk management policies andprograms, including verification of transactions, regular portfolio reportingof various risk management metrics and daily counterparty credit riskanalysis.  However, actual hydroelectric and thermal generation, transmissionavailability and market prices may be significantly different than thoseoriginally planned for when we enter into our risk management positions.  Thehigh volatility of these items creates uncertainty in the appropriate amount ofhedging activity to pursue.  Forecasts of future loads and available resourcesto meet those loads are inherently uncertain and may cause Idaho Power Companyto over- or under-hedge actual resource needs, exposing the company to marketrisk on the over- or under-hedged position.  Changes in market prices are alsounpredictable and can at times result in Idaho Power Company’s hedged positionsperforming less favorably than unhedged positions.  In addition, Idaho PowerCompany’s counterparty credit policies may not prevent counterparties fromfailing to perform, forcing the company to replace forward contracts withtransactions in the open market.  As a result, risk management decisions mayhave significant impacts if actual events result in greater losses or costs indelivering energy to customers and could negatively affect financial condition,results of operations or cash flows.

•  **Increased capital expenditures can significantly affectliquidity.**  Increases in both the number of customers and the demand forenergy require expansion and reinforcement of transmission and distributionsystems and generating facilities.  If Idaho Power Company does not receivetimely regulatory recovery, Idaho Power Company will have to rely more onexternal financing for its future utility construction expenditures.  Theselarge planned expenditures may weaken the consolidated financial profile ofIDACORP, Inc. and Idaho Power Company.  Additionally, a significant portion ofIdaho Power Company’s facilities were constructed many years ago.  Agingequipment, even if maintained in accordance with industry practices, mayrequire significant capital expenditures.  Failure of equipment or facilitiesused in Idaho Power Company’s system could potentially increase repair andmaintenance expenses, purchased power expenses and capital expenditures.

•  **If the Idaho Public Utilities Commission, the Oregon PublicUtility Commission or the Federal Energy Regulatory Commission grant less raterecovery in rate case filings than Idaho Power Company needs to cover increasedcosts of providing services, earnings and cash flows may be reduced**.  Ifthe Idaho Public Utilities Commission, the Oregon Public Utility Commission orthe Federal Energy Regulatory Commission grant less rate recovery in rate casefilings than Idaho Power Company needs to cover increased costs of providingservices, it may have a negative effect on earnings and cash flows and couldresult in downgrades of IDACORP, Inc.’s and Idaho Power Company’s creditratings.

•  **Climate change could affect customer demand and hydroelectricgeneration and disrupt transmission and distribution systems, reducing earningsand cash flows.**  Long-term climate change could affect Idaho Power Company’sbusiness in a variety of ways, including: (i) changes in temperature andprecipitation could affect customer demand, (ii) extreme weather events couldincrease service interruptions, outages, and maintenance costs; (iii) changesin the amount and timing of snowpack and stream flows could adversely affecthydroelectric generation, and (iv) legislative and/or regulatory developmentsrelated to climate change could affect plans and operations including placingrestrictions on the construction of new generation resources, the expansion ofexisting resources, or the operation of generation resources in general, and(v) consumer preference for, and resource planning decisions requiring,renewable or low GHG-emitting sources of energy could impact demand from existingsources and require significant investment in new generation and transmissionresources.  Any of these effects of climate change could reduce Idaho PowerCompany’s earnings and cash flows.

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•  **Complying with environmental laws and regulations will increasecapital expenditures and operating costs and may reduce Idaho Power Company’searnings and cash flows and ability to meet the electricity needs of itscustomers.**  Idaho Power Company is subject to extensive federal, state andlocal environmental statutes, rules and regulations relating to air quality,water quality, natural resources and health and safety.  Compliance with theseenvironmental statutes, rules and regulations involves significant capital andoperating expenditures.  Congress is considering legislation to limit andreduce greenhouse gas emissions, and the Environmental Protection Agency istaking action to address climate change and regulate greenhouse gas emissions,including the adoption of new reporting requirements that apply to Idaho PowerCompany’s facilities.  The Environmental Protection Agency has also made an“endangerment finding” for greenhouse gas emissions from motor vehicles and hasindicated that the Clean Air Act will require it to regulate carbon dioxide andother greenhouse gas emissions from major stationary sources, including IdahoPower Company’s thermal facilities, once it adopts greenhouse gas emissionstandards for motor vehicles.  The adoption of a mandatory federal program toreduce carbon dioxide and other greenhouse gas emissions would raiseuncertainty about the future viability of fossil fuels, specifically coal, asan economical energy source for new and existing electric generationfacilities.  Mercury and other pollutant emissions from Idaho Power Company’s thermalfacilities are also subject to extensive regulation.  The adoption of newstatutes, rules and regulations to reduce emissions, including controls toreduce carbon dioxide, greenhouse gas, mercury or other pollutant emissionswill result in increased capital expenditures and could increase the cost ofoperating coal-fired generating plants or make them uneconomical to operate andresult in reduced earnings and cash flows.

•  **Complying with state or federal renewable energy portfoliostandards could increase capital expenditures and operating costs and reduceearnings and cash flows.**  A number of states have adopted renewable energyportfolio standards.  Idaho Power Company’s operations in Oregon will berequired to comply with a ten percent renewable energy portfolio standardbeginning in 2025, and it is possible that Idaho and other states in whichIdaho Power Company operates or sells power could adopt renewable energyportfolio standards in the future.  A bill passed by the U.S. House ofRepresentatives on June 26, 2009, would, if enacted, require utilities toobtain as much as 20 percent of their electricity from renewable sources by2020 and reduce demand by an additional 5 percent through conservation andincreased energy efficiency.  A bill pending in the U.S. Senate would require15 percent of electricity from renewable sources by 2021.  New state or federalrenewable energy portfolio standards could increase capital expenditures andoperating costs and reduce earnings and cash flows.

•  **The listing as threatened or endangered under the EndangeredSpecies Act of fish, wildlife or plant species that are found in the areas ofIdaho Power Company’s generation facilities or transmission lines may requiremitigation, affect the location of a project or the ability to construct aproject and result in increased capital expenditures and operating costs.** Relicensing of the Hells Canyon and Swan Falls hydroelectric projects and theconstruction of Langley Gulch and the Gateway West and Boardman to Hemingwaytransmission lines require consultation under the Endangered Species Act todetermine the effects of these projects on any listed species within theproject areas.  The recent listing of slickspot peppergrass as a threatenedspecies will require an Endangered Species Act consultation for thetransmission and water lines for Langley Gulch as well as for the Gateway Westand Boardman to Hemingway transmission lines.  This listing may also affectIdaho Power Company’s ability to purchase wind power from any wind power farmsthat were to be built in these areas.  Any negative effects of the listing ofslickspot peppergrass or any other species under the Endangered Species Act mayrequire mitigation, cause a delay in relicensing or construction of projects,affect the location or ability to construct a project and increase the costs ofconstruction and operations.

•  **Conditions that may be imposed in connection withhydroelectric license renewals may require large capital expenditures, increaseoperating costs, reduce hydroelectric production and reduce earnings and cashflows.**  Idaho Power Company is currently involved in renewing federallicenses for several of its hydroelectric projects.  The Federal EnergyRegulatory Commission may impose conditions with respect to environmental,operating and other matters in connection with the renewal of Idaho PowerCompany’s licenses.  These conditions could have a negative effect on IdahoPower Company’s operations, require large capital expenditures and increaseoperating costs, reduce hydroelectric production and reduce earnings and cashflows.

17

 

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•  **Idaho Power Company’s business is subject to substantialgovernmental regulation and may be adversely affected by increased costsresulting from, or liability under, existing or future regulations orrequirements.**  Idaho Power Company is subject to extensive federal andstate laws, policies, and regulations, as well as regulatory actions andregulatory audits, including those of the Federal Energy Regulatory Commission,the Environmental Protection Agency, the North American Electric ReliabilityCorporation, the Western Electricity Coordinating Council and the publicutility commissions in Idaho, Oregon and Wyoming.  Some of these regulationsare changing or subject to interpretation, and failure to comply may result inpenalties or other adverse consequences.  Idaho Power Company has reportedcompliance issues to the Federal Energy Regulatory Commission, and the WesternElectricity Coordinating Council has recently completed an audit of reliabilitystandards.  Compliance with these requirements directly influences Idaho PowerCompany’s operating environment and may significantly increase Idaho PowerCompany’s operating costs.

•  **IDACORP, Inc., its affiliate IDACORP Energy and Idaho PowerCompany are subject to costs and other effects of legal and regulatoryproceedings, settlements, investigations and claims.**  IDACORP, Inc.,IDACORP Energy and Idaho Power Company are involved in a number of proceedings,including the California refund proceeding, a portion of which remains pendingbefore the Federal Energy Regulatory Commission and  the United States Court ofAppeals for the Ninth Circuit; a refund proceeding affecting sellers ofwholesale power in the spot market in the Pacific Northwest; and show causeproceedings originating at the Federal Energy Regulatory Commission, a portionof which remains pending in the United States Court of Appeals for the NinthCircuit.  It is possible that additional proceedings related to the westernenergy situation may be filed in the future against IDACORP, Inc., IDACORPEnergy or Idaho Power Company.  IDACORP, Inc. and Idaho Power Company are ormay also be subject to costs and other effects of additional legal claims,actions and complaints, including those related to the Jim Bridger, Valmy andBoardman coal-fired plants, in which Idaho Power Company holds an ownershipinterest.  State attorneys general have brought actions against companies,seeking additional disclosure of climate change-related risks and impacts, andprivate parties have brought tort actions against companies relating to theiralleged contribution to climate change.  If IDACORP, Inc., IDACORP Energy orIdaho Power Company are required to make payments in connection with any legalor regulatory proceeding, settlement, investigation or claim, earnings and cashflows could be negatively affected.

•  **As a holding company, IDACORP, Inc. does not have its ownoperating income and must rely on the upstream cash flows from its subsidiariesto pay dividends and make debt payments.**  IDACORP, Inc. is a holdingcompany and thus its primary assets are shares or other ownership interests ofits subsidiaries, primarily Idaho Power Company.  Consequently, IDACORP, Inc.’sability to pay dividends and to service its debt is dependent upon dividendsand other payments received from its subsidiaries.  IDACORP, Inc.’ssubsidiaries are separate and distinct legal entities and have no obligation topay any amounts to IDACORP, Inc., whether through dividends, loans or other payments. The ability of IDACORP, Inc.’s subsidiaries to pay dividends or makedistributions to IDACORP, Inc. depends on several factors, including theiractual and projected earnings and cash flow, capital requirements and generalfinancial condition, regulatory restrictions, and the prior rights of holdersof their existing and future first mortgage bonds and other debt securities.

•  **A downgrade in IDACORP, Inc.’s and Idaho Power Company’scredit ratings could negatively affect the companies’ ability to accesscapital, increase their cost of borrowing, and require the companies to postcollateral with transaction counterparties.**  Credit rating agenciesperiodically review the corporate credit ratings and long-term ratings ofIDACORP, Inc. and Idaho Power Company.  IDACORP, Inc. and Idaho Power Companyalso have borrowing arrangements that rely on the ability of the banks to fundloans or support commercial paper.  Downgrades of IDACORP, Inc.’s or IdahoPower Company’s credit ratings, or those affecting relationship banks, couldlimit the companies’ ability to access capital, including the commercial papermarkets, require the companies to pay a higher interest rate on their debt andrequire the companies to post collateral with transaction counterparties.

•  **Volatility and decreased lending capacity in the financialmarkets may negatively affect IDACORP, Inc.’s and Idaho Power Company’s abilityto access capital and/or increase their cost of borrowing.**  IDACORP, Inc.and Idaho Power Company require liquidity to pay operating expenses andprincipal of and interest on debt and to finance capital expenditures. Financial markets have experienced extreme volatility and disruption, causingthe cost of borrowing to rise and the availability of liquidity and credit forborrowers to decrease; As a result, IDACORP, Inc. and Idaho Power Company mayexperience higher interest costs and/or be unable to access capital, includingthe commercial paper markets.  These conditions may adversely affect IDACORP,Inc.’s and Idaho Power Company’s results of operations, financial condition andcash flows.

18

 

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•  **One or more of the banks participating in IDACORP, Inc.’s andIdaho Power Company’s credit facilities could default on their obligations tofund loans requested by the companies or could withdraw from participation inthe credit facilities, which could negatively affect cash flows and the abilityto meet capital requirements.**  IDACORP, Inc. and Idaho Power Company have$100 million and $300 million multi-year revolving credit facilities,respectively, with a group of lender banks that expire in April 2012.  Thesefacilities supplement operating cash flow and provide a primary source ofliquidity.  The facilities are also used as backup for commercial paperborrowings and are available for general corporate purposes.  IDACORP, Inc. andIdaho Power Company are subject to the risk that one or more of theparticipating banks may default on their obligations to make loans under thecredit facilities.  IDACORP, Inc. and Idaho Power Company’s inability to obtainloans under their respective credit facilities as needed could negativelyaffect cash flows and the ability to meet capital requirements.

•  **IDACORP and Idaho Power Company may incur losses on theirinvestments or be unable to sell their investments when they desire to do so,which could adversely affect their liquidity and financial condition.** IDACORP and Idaho Power Company invest cash in short-term interest bearingaccounts, including money market funds.  Volatility in the financial marketsmay result in a lack of liquidity and declines in value of some money marketfunds.  The companies may realize additional losses on some or all of theirinvested funds or be unable to sell their investments when they desire to doso.  This could adversely affect IDACORP’s and Idaho Power Company’s liquidityand financial condition.

•  **National and regional economic conditions may cause increasedlate payments and uncollectible accounts, which would reduce earnings and cashflows.**  Recent concerns over energy costs, the availability and cost ofcredit, declining business and increased unemployment have contributed to arecession.  These factors have resulted, and may continue to result, in anincrease in late payments and uncollectible accounts and reduce IDACORP Inc.’sand Idaho Power Company’s earnings and cash flows.

•  **National and regional economic conditions, in conjunction withincreased electric rates, may reduce energy consumption, which may reducerevenues and future growth.**  The present economic recession and increasedrates may reduce the amount of energy our customers consume, result in a lossof customers and reduce customer growth.  A decrease in overall customer usagemay reduce revenues, earnings, and future growth.

•  **Adverse results of income tax audits could reduce earnings andcash flows.**  The outcome of ongoing and future income tax audits coulddiffer materially from the amounts currently recorded, and the difference couldreduce IDACORP’s and Idaho Power Company’s earnings and cash flows.

•  **Employee workforce factors could increase costs and reduceearnings.**  Idaho Power Company is subject to workforce factors, including,but not limited to, loss or retirement of key personnel, availability ofqualified personnel, an aging workforce, and impacts of efforts to organizeworkforce, including the possible unionization of one or more segments of theworkforce.  The costs of attracting and retaining appropriately qualifiedemployees to replace an aging workforce could reduce earnings and cash flows.

•  **Terrorist threats and activities could result in reducedrevenues and increased costs.**  IDACORP, Inc. and Idaho Power Company aresubject to direct and indirect effects of terrorist threats and activities. Potential targets include generation and transmission facilities.  The effectsof terrorist threats and activities could prevent Idaho Power Company frompurchasing, generating or transmitting power and result in reduced revenues andincreased costs.

•  **IDACORP, Inc. and Idaho Power Company could be vulnerable tosecurity breaches or other similar events that could disrupt their operations,require significant capital expenditures and/or result in claims against thecompanies.**  In the normal course of business, Idaho Power Company collects,processes and retains sensitive and confidential customer and proprietaryinformation.  Despite the security measures in place, Idaho Power Company’sfacilities and systems, and those of third-party service providers, could bevulnerable to security breaches or other similar events that could interruptoperations, resulting in a shutdown of service and expose Idaho Power Companyto liability.  In addition, Idaho Power Company may be required to expendsignificant capital and other resources to protect against security breaches orto alleviate problems caused by security breaches.

 

**ITEM 1B.  UNRESOLVED STAFF COMMENTS**

 

None

 

 

 

 

 

 

 

 

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ITEM 2.  PROPERTIES

 

Idaho Power’s system is comprised of 17 hydroelectricgenerating plants located in southern Idaho and eastern Oregon, two naturalgas-fired plants located in southern Idaho and interests in three coal-firedsteam electric generating plants located in Wyoming, Nevada and Oregon.  Thesystem also includes approximately 4,796 pole miles of high-voltagetransmission lines, 23 step-up transmission substations located at powerplants, 22 transmission substations, eight switching stations, 223 energizeddistribution substations (excluding mobile substations and dispatch centers)and approximately 26,675 pole miles of distribution lines.

Idaho Power holds FERC licenses for all of its hydroelectricprojects that are subject to federal licensing.  These projects and the othergenerating stations and their nameplate capacities are listed below:
| ** **                                                                                                                                                                             | **Nameplate**                            | ** **            |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------------------------------------|-----------------------|
| ** **                                                                                                                                                                             | **Capacity**                             | **License**           |
| **Project**                                                                                                                                                                            | **(kW)**                                 | **Expiration**        |
| **Hydroelectric Developments:**                                                                                                                                                        | ** **                               | ** **            | ** ** |
|                                                                                                                                                                                   | Properties subject to federal  licenses: |                  |   |   |
|                                                                                                                                                                                   | Lower Salmon                             | 60,000                | 2034 |   |
|                                                                                                                                                                                   | Bliss                                    | 75,000                | 2034 |   |
|                                                                                                                                                                                   | Upper Salmon                             | 34,500                | 2034 |   |
|                                                                                                                                                                                   | Shoshone Falls                           | 12,500                | 2034 |   |
|                                                                                                                                                                                   | CJ Strike                                | 82,800                | 2034 |   |
|                                                                                                                                                                                   | Upper Malad - Lower Malad                | 21,770                | 2035 |   |
|                                                                                                                                                                                   | Brownlee - Oxbow - Hells Canyon          | 1,166,900             | 2005 | (1) |
|                                                                                                                                                                                   | Swan Falls                               | 27,170                | 2010 |   |
|                                                                                                                                                                                   | American Falls                           | 92,340                | 2025 |   |
|                                                                                                                                                                                   | Cascade                                  | 12,420                | 2031 |   |
|                                                                                                                                                                                   | Milner                                   | 59,448                | 2038 |   |
|                                                                                                                                                                                   | Twin Falls                               | 52,897                | 2040 |   |
|                                                                                                                                                                                   | Other Hydroelectric:                     |                  |   |   |
|                                                                                                                                                                                   | Clear Lakes - Thousand Springs           | 11,300                |   |   |
|                                                                                                                                                                                   |                                     | Total Hydroelectric   | 1,709,045 |   |   |
| **Steam and Other Generating  Plants:**                                                                                                                                                |                                     | ** **            | ** ** |
|                                                                                                                                                                                   | Jim Bridger (coal-fired) (2)             | 770,501               |   |   |
|                                                                                                                                                                                   | Valmy (coal-fired) (2)                   | 283,500               |   |   |
|                                                                                                                                                                                   | Boardman (coal-fired) (2)                | 64,200                |   |   |
|                                                                                                                                                                                   | Danskin (gas-fired)                      | 270,900               |   |   |
|                                                                                                                                                                                   | Salmon (diesel-internal combustion)      | 5,000                 |   |   |
|                                                                                                                                                                                   | Bennett Mountain (gas-fired)             | 172,800               |   |   |
|                                                                                                                                                                                   |                                     | Total Steam and Other | 1,566,901 |   |   |
|                                                                                                                                                                                   |                                     | Total Generation      | 3,275,946 |   |   |
|                                                                                                                                                                                   |
| (1) Licensed on an annual  basis while application for new multi-year license is pending.                                                                                              |
| (2) Idaho Power’s ownership  interests are 33 percent for Jim Bridger, 50 percent for Valmy and 10 percent  for Boardman.  Amounts shown represent Idaho Power’s share. |
|                                                                                                                                                                                   |
|                                                                                                                                                                                        |                                          |                       |  |  |  |  |  |

 

Relicensing of Idaho Power’s hydroelectric projects isdiscussed in Part II, Item 7 - “MD&A – RELICENSING OF HYDROELECTRICPROJECTS.”

Idaho Power owns in fee all of its principal plants andother important units of real property, except for portions of certain projectslicensed under the FPA and reservoirs and other easements.  Idaho Power’s propertyis also subject to the lien of its Mortgage and Deed of Trust and theprovisions of its project licenses.  In addition, Idaho Power’s property issubject to minor defects common to properties of such size and character thatdo not materially impair the value to, or the use by, Idaho Power of suchproperties.  Idaho Power considers its properties to be well-maintained and ingood operating condition.

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IERCo owns a one-third interest in Bridger Coal Company andcoal leases near the Jim Bridger generating plant in Wyoming from which coal ismined and supplied to the plant.

Ida-West holds 50 percent interests in nine operatinghydroelectric plants with a total generating capacity of 45 MW.  These plantsare located in Idaho and California.

**ITEM3.  LEGAL PROCEEDINGS**

 

Please see Note 10 to IDACORP’s and Idaho Power’sconsolidated financial statements.

**ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OFSECURITY HOLDERS**

 

None

**EXECUTIVE OFFICERS OF THE REGISTRANTS**

 

The names, ages and positions of all of the executiveofficers of IDACORP, Inc. and Idaho Power Company are listed below along withtheir business experience during the past five years.  Mr. J. LaMont Keen andMr. Steven R. Keen are brothers.  There are no other family relationships amongthese officers, nor is there any arrangement or understanding between anyofficer and any other person pursuant to which the officer was elected.

J. LAMONT KEEN, 57

•  President and Chief Executive Officer of IDACORP, Inc., July 1,2006 – present.

•  President and Chief Executive Officer of Idaho Power Company,November 17, 2005 – present.

•  Executive Vice President of IDACORP, Inc., March 1, 2002 – July1, 2006.

•  President and Chief Operating Officer of Idaho Power Company,March 1, 2002 – November 17, 2005.

•  Senior Vice President – Administration and Chief FinancialOfficer of IDACORP, Inc. and Idaho Power Company, May 1999 – March 2002.

•  Member of the Boards of Directors of both IDACORP, Inc. and IdahoPower Company.

DARREL T. ANDERSON, 51

•  Executive Vice President – Administrative Services and ChiefFinancial Officer of IDACORP, Inc. and Idaho Power Company, October 1, 2009 –present.

•  Senior Vice President – Administrative Services and ChiefFinancial Officer of IDACORP, Inc. and Idaho Power Company, July 1, 2004 –October1, 2009.

•  Vice President, Chief Financial Officer and Treasurer of IDACORP,Inc. and Idaho Power Company, March 2002 – July 2004

•  Vice President – Finance and Treasurer of IDACORP, Inc. and IdahoPower Company, May 1999 – March 2002.

DANIEL B. MINOR, 52

•  Executive Vice President – Operations of Idaho Power Company,October 1, 2009 – present.

•  Senior Vice President – Delivery of Idaho Power Company, July 1,2004 – October 1, 2009.

•  Vice President – Administrative Services & Human Resources ofIDACORP, Inc. and Idaho Power Company, November 2003, – July 2004

•  Vice President - Corporate Services of Idaho Power Company, May2003 – November 2003 

•  Director of Audit Services of Idaho Power Company, July 2001 –May 2003.

REX BLACKBURN, 54

•  Senior Vice President and General Counsel, IDACORP, Inc. andIdaho Power Company, April 1, 2009 – present.

•  Lead Counsel of Idaho Power Company, January 1, 2008 – March 31,2009.

•  Lawyer at Blackburn and Jones, LLP, January 2003 – December 31,2007.

LISA A. GROW, 44

•  Senior Vice President – Power Supply of Idaho Power Company,October 1, 2009 – present.

•  Vice President – Delivery Engineering and Operations of IdahoPower Company, July 20, 2005 – September 30, 2009

•  General Manager of Grid Operations and Planning of Idaho PowerCompany, October 2004 – July 20, 2005

•  Operations Manager (Grid Ops) of Idaho Power Company, March 2002– October 2004.

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STEVEN R. KEEN, 49

•  Vice President and Treasurer of IDACORP, Inc. and Idaho PowerCompany, June 1, 2006 – present.

•  President of IDACORP Financial Services, September 1998 – May 31,2007.

PATRICK A. HARRINGTON, 49

•  Corporate Secretary of IDACORP, Inc. and Idaho Power Company,March 15, 2007 – present.

•  Senior Attorney, June 2003 – March 15, 2007.

DENNIS C. GRIBBLE, 57

•  Vice President and Chief Information Officer of IDACORP, Inc. andIdaho Power Company, June 1, 2006 – present.

•  Vice President and Treasurer of IDACORP, Inc. and Idaho PowerCompany, July 2004 – June 1, 2006.

LORI D. SMITH, 49

•  Vice President – Corporate Planning and Chief Risk Officer of IDACORP,Inc. and Idaho Power Company, January 1, 2008 – present.

•  Vice President – Finance and Chief Risk Officer of IDACORP, Inc.and Idaho Power Company, July 2004 – January 1, 2008.

LUCI K. MCDONALD, 52

•  Vice President – Human Resources of IDACORP, Inc. and Idaho PowerCompany, December 2004 – present.

•  Corporate Staff Director of Human Resources of Boise CascadeCorporation, September 1999 – November 2004.

NAOMI SHANKEL, 38

•  Vice President, Audit and Compliance of IDACORP, Inc. and IdahoPower Company, September 21, 2006 – present.

•  Director, Audit Services of IDACORP, Inc. and Idaho PowerCompany, July 2003 – September 21, 2006.

JEFFREY MALMEN, 42

•  Vice President – Public Affairs of IDACORP, Inc. and Idaho PowerCompany, October 1, 2008 – present.

•  Senior Manager – Governmental Affairs of IDACORP, Inc. and IdahoPower Company, December xx, 2007 – October 1, 2008

•  Chief of Staff of the Office of Idaho Governor C.L. “Butch”Otter, January 2007 – November 2007

•  Chief of Staff of the Office of Idaho Congressman C.L. “Butch”Otter, January 2001 – December 2006.

JOHN R. GALE, 59

•  Vice President – Regulatory Affairs of Idaho Power Company, March2001 – present.

WARREN KLINE, 54

•  Vice President – Customer Service and Regional Operations ofIdaho Power Company, July 20, 2005 – present.

•  General Manager of Regional Operations of Idaho Power Company,March 2002 – July 20, 2005.

N. VERN PORTER, 50

•  Vice President – Delivery Engineering and Operations, Idaho PowerCompany, October 1, 2009 – present.

•  General Manager of Power Production of Idaho Power Company, April22, 2006 – October1, 2009.

•  Senior Manager of Power Supply Operations of Idaho Power Company,August 2003 – April 22, 2006.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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PART II

 

ITEM 5.  MARKET FOR REGISTRANT’S COMMON EQUITY, RELATEDSTOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

 

IDACORP’s common stock, without par value, is traded on theNew York Stock Exchange.  On February 19, 2010, there were 13,803 holders ofrecord and the stock price was $33.02 per share.

The outstanding shares of Idaho Power’s common stock, $2.50par value, are held by IDACORP and are not traded.  IDACORP became the holdingcompany of Idaho Power on October 1, 1998.

The amount and timing of dividends paid on IDACORP’s commonstock are within the sole discretion of IDACORP’s Board of Directors.  TheBoard of Directors reviews the dividend rate quarterly to determine itsappropriateness in light of IDACORP’s current and long-term financial positionand results of operations, capital requirements, rating agency requirements,legislative and regulatory developments affecting the electric utility industryin general and Idaho Power in particular, competitive conditions and any otherfactors the Board of Directors deems relevant.  The ability of IDACORP to pay dividendson its common stock is dependent upon dividends paid to it by its subsidiaries,primarily Idaho Power.

A covenant under IDACORP’s credit facility and Idaho Power’scredit facility described in “MD&A - LIQUIDITY AND CAPITAL RESOURCES -Financing Programs – Credit Facilities” requires IDACORP and Idaho Power tomaintain leverage ratios of consolidated indebtedness to consolidated totalcapitalization, as defined, of no more than 65 percent at the end of eachfiscal quarter.

Idaho Power’s Revised Code of Conduct approved by the IPUCon April 21, 2008, states that Idaho Power will not pay any dividends toIDACORP that will reduce Idaho Power’s common equity capital below 35 percentof its total adjusted capital without IPUC approval.  Idaho Power must obtainapproval of the OPUC before it could directly or indirectly loan funds or issuenotes or give credit on its books to IDACORP.

Idaho Power’s ability to pay dividends on its common stockheld by IDACORP and IDACORP’s ability to pay dividends on its common stock arelimited to the extent payment of such dividends would violate the covenants orIdaho Power’s Code of Conduct.  At December 31, 2009, the leverage ratios forIDACORP and Idaho Power were 51 percent and 53 percent, respectively.  Based onthese restrictions, IDACORP’s and Idaho Power’s dividends were limited to $608million and $514 million, respectively, at December 31, 2009.

Idaho Power’s articles of incorporation contain restrictionson the payment of dividends on its common stock if preferred stock dividendsare in arrears.  Idaho Power has no preferred stock outstanding.  IDACORP andIdaho Power paid dividends of $57 million, $54 million and $53 million in 2009,2008 and 2007, respectively.

The following table shows the reported high and low salesprice of IDACORP’s common stock and dividends paid for 2009 and 2008 asreported in the consolidated transaction reporting system.
|                              | **Quarters**             |
|-----------------------------------|--------------------------|
| Common Stock, without par  value: | **1st**                  | **2nd** | **3rd** | **4th** |
| **2009**                          |                     |   |   |   |
|                              | High                     | $ | 30.47 | $ | 26.20 | $ | 29.56 | $ | 32.83 |
|                              | Low                      |   | 20.91 |   | 22.22 |   | 24.68 |   | 27.71 |
|                              | Dividends paid per share |   | 0.30 |   | 0.30 |   | 0.30 |   | 0.30 |
| **2008**                          | ** **               | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
|                              | High                     | $ | 35.11 | $ | 33.36 | $ | 33.89 | $ | 30.66 |
|                              | Low                      |   | 28.74 |   | 28.55 |   | 27.96 |   | 21.88 |
|                              | Dividends paid per share |   | 0.30 |   | 0.30 |   | 0.30 |   | 0.30 |
|                              |                     |   |   |   |   |   |   |   |   |

 

**Issuer Purchases of Equity Securities:**

 

23

 

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None

**Performance Graph**

 

The following performance graphshows a comparison of the five-year cumulative total shareholder return forIDACORP common stock, the S&P 500 Index and the Edison Electric Institute(EEI) Electric Utilities Index.  The data assumes that $100 was invested onDecember 31, 2004, with beginning-of-period weighting of the peer group indices(based on market capitalization) and monthly compounding of returns.

Source: Bloomberg and Edison Electric Institute
| ** ** | ** **  | ** **        | **EEI Electric**    |
|------------|-------------|-------------------|---------------------|
| ** ** | **IDACORP** | **S & P 500** | **Utilities Index** |
| 2004       | $           | 100.00            | $                   | 100.00 | $ | 100.00 |
| 2005       |        | 99.86             |                | 104.91 |   | 116.05 |
| 2006       |        | 136.18            |                | 121.46 |   | 140.14 |
| 2007       |        | 128.56            |                | 128.13 |   | 163.34 |
| 2008       |        | 111.83            |                | 80.73 |   | 121.03 |
| 2009       |        | 126.99            |                | 102.10 |   | 133.99 |
|       |        |              |                |   |   |   |

 

The foregoing performance graph and data shall not be deemed“filed” as part of this Form 10-K for purposes of Section 18 of the SecuritiesExchange Act of 1934 or otherwise subject to the liabilities of that sectionand should not be deemed incorporated by reference into any other filing ofIDACORP or Idaho Power under the Securities Act of 1933 or the SecuritiesExchange Act of 1934, except to the extent IDACORP or Idaho Power specificallyincorporates it by reference into such filing.

 

 

 

 

 

 

 

 

 

 

 

 

 

24

 

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ITEM 6.  SELECTED FINANCIALDATA

 
| **IDACORP, Inc.**                                                                                                                                                                                                                                                                    |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| **SUMMARY OF OPERATIONS**                                                                                                                                                                                                                                                            |
| **(thousands of dollars  except per share amounts)**                                                                                                                                                                                                                                 |
|                                                                                                                                                                                                                                                                                 |   | **2009** | ** ** | **2008** | ** ** | **2007** | ** ** | **2006** | ** ** | **2005** |
| Operating revenues                                                                                                                                                                                                                                                                   | $ | 1,049,800 | $ | 960,414 | $ | 879,394 | $ | 926,291 | $ | 842,864 |
| Operating income                                                                                                                                                                                                                                                                     |   | 203,583 |   | 190,667 |   | 152,078 |   | 169,704 |   | 154,653 |
| Income from continuing  operations                                                                                                                                                                                                                                                   |   | 124,375 |   | 98,245 |   | 81,803 |   | 100,075 |   | 85,716 |
| Diluted earnings per share  from                                                                                                                                                                                                                                                     |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                 | continuing operations |   | 2.64 |   | 2.17 |   | 1.86 |   | 2.34 |   | 2.02 |
| Dividends declared per share                                                                                                                                                                                                                                                         |   | 1.20 |   | 1.20 |   | 1.20 |   | 1.20 |   | 1.20 |
| ** **                                                                                                                                                                                                                                                                           |   |   |   |   |   |   |   |   |   |   |
| **Financial Condition:**                                                                                                                                                                                                                                                             |   |   |   |   |   |   |   |   |   |   |
| Total assets                                                                                                                                                                                                                                                                         | $ | 4,238,727 | $ | 4,022,845 | $ | 3,653,308 | $ | 3,445,130 | $ | 3,364,126 |
| Long-term debt (including  current portion)                                                                                                                                                                                                                                          |   | 1,419,070 |   | 1,269,979 |   | 1,168,336 |   | 1,023,773 |   | 1,039,852 |
|                                                                                                                                                                                                                                                                                 |   |   |   |   |   |   |   |   |   |   |
| **Financial Statistics:**                                                                                                                                                                                                                                                            |   |   |   |   |   |   |   |   |   |   |
| Times interest charges  earned:                                                                                                                                                                                                                                                      |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                 | Before tax (1) |   | 2.88    |   | 2.47    |   | 2.35    |   | 2.78    |   | 2.65    |
|                                                                                                                                                                                                                                                                                 | After tax (2) |   | 2.59    |   | 2.23    |   | 2.16    |   | 2.54    |   | 2.37    |
| Book value per share (3)                                                                                                                                                                                                                                                             | $ | 29.23    | $ | 27.85    | $ | 26.89    | $ | 25.76    | $ | 23.96    |
| Market-to-book ratio (4)                                                                                                                                                                                                                                                             |   | 109% |   | 106% |   | 131% |   | 151% |   | 121% |
| Payout ratio (5)                                                                                                                                                                                                                                                                     |   | 45% |   | 55% |   | 65% |   | 48% |   | 79% |
| Return on year-end common  equity(6)                                                                                                                                                                                                                                                 |   | 8.9% |   | 7.5% |   | 6.8% |   | 9.5% |   | 6.2% |
|                                                                                                                                                                                                                                                                                 |   |   |   |   |   |   |   |   |   |   |
| The financial statistics listed above are calculated  in the following manner:                                                                                                                                                                                                       |
| (1) The  sum of interest on long-term debt, other interest expense excluding the  allowance for funds used during construction credits (AFUDC),and income  before income taxes divided by the sum of interest on long-term debt and  other interest expense excluding AFUDC credits. |
| (2) The  sum of interest on long-term debt, other interest expense excluding AFUDC  credits, and income from continuing operations divided by the sum of interest  on long-term debt and other interest expense excluding AFUDC credits.                                             |
| (3) Total  equity at the end of the year divided by shares outstanding at the end of the  year.                                                                                                                                                                                      |
| (4) The  closing price of IDACORP stock on the last day of the year divided by the  book value per share, which is described in (3) above                                                                                                                                            |
| (5)  Dividends paid per common share for the year divided by earnings per diluted  share of the year.                                                                                                                                                                                |
| (6) Net  income divided by total equity at the end of the year.                                                                                                                                                                                                                      |
|                                                                                                                                                                                                                                                                                 |

 

In the second quarter of 2006, IDACORP management designatedthe operations of two subsidiaries, IDACORP Technologies, Inc. and IDACOMM asassets held for sale, and the companies were sold in July 2006 and February2007, respectively.  IDACORP’s consolidated financial statements reflect the reclassificationof the results of these businesses as discontinued operations for all periodspresented.  Beginning January 1, 2009, noncontrolling interests (previouslyknown as minority interests) were required to be classified as equity. IDACORP’s consolidated financial statements reflect the reclassification ofnoncontrolling interests to equity for all periods presented.

ITEM 7.  MANAGEMENT’S DISCUSSION AND ANALYSIS OFFINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

(Dollar amounts and Megawatt-hours (MWh) are in thousandsunless otherwise indicated).

**INTRODUCTION:**

 

In Management’s Discussion and Analysis of FinancialCondition and Results of Operations (MD&A), the general financial conditionand results of operations for IDACORP, Inc. and its subsidiaries (collectively,IDACORP) and Idaho Power Company and its subsidiary (collectively, Idaho Power)are discussed.

IDACORP is a holding company formed in 1998 whose principaloperating subsidiary is Idaho Power.  IDACORP is subject to the provisions of thePublic Utility Holding Company Act of 2005, which provides certain access tobooks and records to the Federal Energy Regulatory Commission (FERC) and stateutility regulatory commissions and imposes certain record retention andreporting requirements on IDACORP.

 

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Idaho Power is an electric utility with a service territorycovering approximately 24,000 square miles in southern Idaho and easternOregon.  Idaho Power is regulated by the FERC and the state regulatorycommissions of Idaho and Oregon.  Idaho Power is the parent of Idaho EnergyResources Co., (IERCo) a joint venturer in Bridger Coal Company, which suppliescoal to the Jim Bridger generating plant owned in part by Idaho Power.

IDACORP’s other subsidiaries include:

•  IDACORP Financial Services, Inc. (IFS), an investor in affordablehousing and other real estate investments;

•  Ida-West Energy Company (Ida-West), an operator of smallhydroelectric generation projects that satisfy the requirements of PURPA; and

•  IDACORP Energy (IE), a marketer of energy commodities, whichwound down operations in 2003.

 

On February 23, 2007, IDACORP completed the sale of all ofthe outstanding common stock of IDACOMM to American Fiber Systems, Inc.

While reading the MD&A, please refer to the accompanyingconsolidated financial statements of IDACORP and Idaho Power, which present thefinancial position at December 31, 2009 and 2008, and the results of operationsand cash flows for each company for the years ended December 31, 2009, 2008 and2007.

**FORWARD-LOOKING INFORMATION:**

 

In connection with the safe harbor provisions of the PrivateSecurities Litigation Reform Act of 1995, IDACORP and Idaho Power are herebyfiling cautionary statements identifying important factors that could causeactual results to differ materially from those projected in forward-lookingstatements, as such term is defined in the Reform Act, made by or on behalf ofIDACORP or Idaho Power in this Annual Report on Form 10-K, in presentations, inresponse to questions or otherwise.  Any statements that express, or involvediscussions as to expectations, beliefs, plans, objectives, assumptions orfuture events or performance, often, but not always, through the use of wordsor phrases such as “anticipates,” “believes,” “estimates,” “expects,”“intends,” “plans,” “predicts,” “projects,” “may result,” “may continue” orsimilar expressions, are not statements of historical facts and may beforward-looking.  Forward-looking statements involve estimates, assumptions anduncertainties and are qualified in their entirety by reference to, and areaccompanied by, the following important factors, which are difficult topredict, contain uncertainties, are beyond IDACORP’s or Idaho Power’s controland may cause actual results to differ materially from those contained inforward-looking statements:

•  The effect of regulatory decisions by the Idaho Public UtilitiesCommission, the Oregon Public Utility Commission and the Federal EnergyRegulatory Commission affecting our ability to recover costs and/or earn areasonable rate of return including, but not limited to, the disallowance ofcosts that have been deferred;

•  Changes in and compliance with state and federal laws, policiesand regulations, including new interpretations by oversight bodies, whichinclude the Federal Energy Regulatory Commission, the North American ElectricReliability Corporation, the Western Electricity Coordinating Council, theIdaho Public Utilities Commission and the Oregon Public Utility Commission, ofexisting policies and regulations that affect the cost of compliance,investigations and audits, penalties and costs of remediation that may or maynot be recoverable through rates;

•  Changes in tax laws or related regulations or new interpretationsof applicable law by the Internal Revenue Service or other taxing jurisdiction;

•  Litigation and regulatory proceedings, including those resultingfrom the energy situation in the western United States, and penalties andsettlements that influence business and profitability;

•  Changes in and compliance with laws, regulations and policiesincluding changes in law and compliance with environmental, natural resourcesand endangered species laws, regulations and policies and the adoption of lawsand regulations addressing greenhouse gas emissions, global climate change, andenergy policies;

•  Global climate change and regional weather variations affectingcustomer demand and hydroelectric generation;

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•  Over-appropriation of surface and groundwater in the Snake RiverBasin resulting in reduced generation at hydroelectric facilities;

•  Construction of power generation, transmission and distributionfacilities, including an inability to obtain required governmental permits andapprovals, rights-of-way and siting, and risks related to contracting,construction and start-up;

•  Operation of power generating facilities including performancebelow expected levels, breakdown or failure of equipment, availability oftransmission and fuel supply;

•  Changes in operating expenses and capital expenditures, includingcosts and availability of materials, fuel and commodities;

•  Blackouts or other disruptions of Idaho Power Company’stransmission system or the western interconnected transmission system;

•  Population growth rates and other demographic patterns;

•  Market prices and demand for energy, including structural marketchanges;

•  Increases in uncollectible customer receivables;

•  Fluctuations in sources and uses of cash;

•  Results of financing efforts, including the ability to obtainfinancing or refinance existing debt when necessary or on favorable terms,which can be affected by factors such as credit ratings, volatility in thefinancial markets and other economic conditions;

•  Actions by credit rating agencies, including changes in ratingcriteria and new interpretations of existing criteria;

•  Changes in interest rates or rates of inflation;

•  Performance of the stock market, interest rates, credit spreadsand other financial market conditions, as well as changes in governmentregulations, which affect the amount and timing of required contributions to pensionplans and the reported costs of providing pension and other postretirementbenefits;

•  Increases in health care costs and the resulting effect onmedical benefits paid for employees;

•  Increasing costs of insurance, changes in coverage terms and theability to obtain insurance;

•  Homeland security, acts of war or terrorism;

•  Natural disasters and other natural risks, such as earthquake,flood, drought, lightning, wind and fire;

•  Adoption of or changes in critical accounting policies orestimates; and

•  New accounting or Securities and Exchange Commissionrequirements, or new interpretation or application of existing requirements.

 

Any forward-looking statement speaks only as of the date onwhich such statement is made.  New factors emerge from time to time and it isnot possible for management to predict all such factors, nor can it assess theimpact of any such factor on the business or the extent to which any factor, orcombination of factors, may cause results to differ materially from thosecontained in any forward-looking statement.

**EXECUTIVE OVERVIEW:**

 

**Business Strategy**

IDACORP’s business strategy emphasizes Idaho Power asIDACORP’s core business.  Idaho Power detailed a three-part strategy ofresponsible planning, responsible development and protection of resources, andresponsible energy use to ensure adequate energy supplies.  Idaho Powercontinues to evaluate and refine its business strategy to ensure coordinationand integration with all functional areas of the company.  Idaho Power’sbusiness strategy balances the interest of owners, customers and employeeswhile maintaining the company’s financial stability and flexibility.  Thestrategy includes:

RESPONSIBLE PLANNING:  Idaho Power’s planning process isintended to ensure adequate generation and transmission resources to meetpopulation growth and increasing electricity demand.  This planning process nowintegrates Idaho Power’s regulatory strategies and financial planning,including the consideration of regional economic development in the growingcommunities we serve.

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RESPONSIBLE DEVELOPMENT AND PROTECTION OF RESOURCES: IdahoPower’s business strategy has included the development and protection ofgeneration, transmission, distribution and associated infrastructure, andnatural resources Idaho Power depends upon.  The strategy now includesconsideration of workforce planning, development and retention related to thesestrategic elements.

RESPONSIBLE ENERGY USE: Idaho Power’s business strategy hasincluded energy efficiency and demand response programs and preparation forpotential carbon and renewable portfolio standard legislation.  The strategynow includes targeted reductions relating to carbon emission intensity and publicdisclosure of reporting these reductions.

**2009 Financial Results**

IDACORP’s net income and earnings per diluted share for thelast three years were as follows:
|                                        | **2009** | **2008** | **2007** |
|---------------------------------------------|----------|----------|----------|
| Net Income Attributable to IDACORP, Inc.    | $        | 124,350  | $        | 98,414 | $ | 82,339 |
| Average outstanding shares - diluted (000s) |     | 47,182   |     | 45,379 |   | 44,365 |
| Earnings per diluted share                  | $        | 2.64     | $        | 2.17 | $ | 1.86 |
|                                        |     |     |     |   |   |   |

 

The following table presents a reconciliation of IDACORP netincome for 2008 to 2009 (in millions):
| **Net Income Attributable to IDACORP, Inc. - 2008**  |                                                                 |      | $          | 98.4  |
|------------------------------------------------------|----------------------------------------------------------------------|-----------|------------|------------|
| Change in Idaho Power net income before taxes:       |                                                                 |      |       |       |
|                                                 | Rate and other regulatory changes, net of PCA and FCA  mechanisms    | $         | 48.8  |       |   |
|                                                 | Reduced sales volumes                                                |      | (23.3)     |       |   |
|                                                 | Increase in other operations and maintenance expense,  excluding FCA |      | (2.8)      |       |   |
|                                                 | Increase in depreciation expense                                     |      | (8.5)      |       |   |
|                                                 | 2008 OATT rate refund                                                |      | 5.0   |       |   |
|                                                 | 2008 investment impairment                                           |      | 6.8   |       |   |
|                                                 | Other net increases                                                  |      | 0.3   |       |   |
| Decrease in income tax expense                       |                                                                 | 2.1  |       |       |
| ** **                                           | **Total increase in Idaho Power net income**                         |      |       |       | 28.4  |
| Decreased net income at IFS (net of tax)             |                                                                 |      |       | (2.9)      |
| Decrease in expenses at holding company (net of tax) |                                                                 |      |       | 0.7   |
| Other net decreases (net of tax)                     |                                                                 |      |       | (0.2)      |
| ** **                                           | **Net Income Attributable to IDACORP, Inc. - 2009**                  |      |       | $          | 124.4  |
|                                                 |                                                                 |      |       |       |

 

Changes to the Idaho power cost adjustment (PCA)mechanism and base rate increases that both took effect in the first quarter of2009, positively impacted net income as did decreased net power supply costs. Earnings in 2009 also increased due to a May 2009 Oregon Public UtilityCommission (OPUC) stipulation allowing the deferral for future recovery of $6.4million of excess power supply costs incurred in 2007.

Idaho Power’s retail customer sales volumes decreasedfour percent in 2009 as compared to 2008.  Irrigation usage decreased 14percent primarily due to increased precipitation.  Economic factors and energyconservation also contributed to the reduction in sales volume.

Other O&M expense increased due to an increase inpayroll related expenses and uncollectible accounts and was partially offset bydecreases in outside services and other office expenses.  Depreciation expenseincreased mainly due to the accelerated depreciation of the existing meterinfrastructure.  Two items that positively impacted the comparison of 2009 to2008 results relate to 2008 activities that did not recur in 2009; an OATT raterefund ordered by the FERC that reduced transmission revenue and an impairmentof investments.

Idaho Power’s 2009 effective income tax rate decreasedprimarily due to examination settlements and the timing and amount of otherregulatory flow-through tax adjustments, partially offset by the tax expense onhigher pre-tax income.

There was no accelerated amortization of deferredinvestment tax credits during 2009 as the Idaho jurisdictional earningsexceeded 9.5 percent of the Idaho retail common equity, as permitted by theIdaho 2009 settlement agreement.

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**Regulatory Matters**

Idaho Power has a number of pending or recently completedregulatory filings.  Regulatory matters are discussed in more detail later inthe MD&A.

**Idaho 2009 Settlement Agreement: **In January 2010,the IPUC approved a settlement agreement among Idaho Power, several of IdahoPower’s customers, the IPUC staff and others with respect to rates for 2009 –2011.  The settlement contains four important elements:  (1) a general rate freezeuntil January 1, 2012, with some exceptions; (2) a specified distribution ofthe expected 2010 PCA decrease to directly reduce customer rates, providingsome general rate relief to Idaho Power and resetting base level power supplycosts for the PCA going forward; (3) use of investment tax credits to get to a9.5 percent return on equity in the Idaho jurisdiction; and (4) an equalsharing of any Idaho earnings exceeding the authorized level of 10.5 percent.

**Oregon 2009 General Rate Case:**  In December 2009,Idaho Power filed a Joint Stipulation and testimony in support of a stipulationthat would settle the revenue requirement issues surrounding the general ratecase filed on July 31, 2009.  If approved by the OPUC, the Joint Stipulationwould result in a $5 million, or 15.4 percent, increase to base rates.  The newrates reflect a return on equity of 10.175 percent and an overall rate ofreturn of 8.061 percent.  The requested effective date for new rates is March1, 2010.

**Oregon 2010 Annual Power Cost Update:**  In October2009, Idaho Power filed the October Update portion of its 2010 annual powercost update (APCU).  The filing reflects that revenues associated with IdahoPower’s base net power supply costs would increase $2.6 million over theprevious October Update, an average 8.2 percent increase.  The actual impact ofthe 2010 APCU will be determined once the March Forecast portion is filed inMarch 2010 and combined with the October Update.  Final rates are expected tobecome effective on June 1, 2010.

**Oregon Excess Power Cost Deferrals – May-December 2007Excess Power Costs:**  In May 2009, the OPUC adopted a stipulation allowingIdaho Power to defer excess net power supply costs of $6.4 million (includinginterest through the date of the order) for the period May 1 through December31, 2007.  Idaho Power recorded this deferral in the second quarter of 2009.

**Idaho and Oregon Rate Orders:**  Idaho Power receivedfive additional rate orders from the IPUC and the OPUC at the end of May 2009. The IPUC rate orders are for the Fixed Cost Adjustment mechanism, Idaho EnergyEfficiency Rider, Advanced Metering Infrastructure (AMI), and PCA, and the OPUCrate order is for the Annual Power Cost Update.  Each of these orders increasesrates, but only the AMI order, relating to the installation of new meters,increases Idaho Power’s rate base.

**Open Access Transmission Tariff (OATT) Amended LegacyAgreements:**  In 2009, Idaho Power submitted filings to the FERC to increaserates under two agreements Idaho Power has with PacifiCorp and to terminatecertain contract services, replacing them with OATT service.  The FERC acceptedone of Idaho Power’s filings, effective June 13, 2009, for a net annualizedrevenue increase of $3.2 million.  The FERC accepted the second filing andsuspended the rates, setting the case for settlement judge procedures andhearing.  Idaho Power began collecting the new rates effective August 19, 2009,with a net annualized revenue increase of $3.7 million.  Settlement discussionsare ongoing.  The impact of these revised agreements on 2010 transmissionrevenue is expected to be a $3.8 million increase as compared with 2009.

**Integrated Resource Plan (IRP):**  Idaho Power filedthe 2009 IRP with the IPUC and OPUC in December, 2009.  The IRP addressesavailable supply-side and demand-side resource options, planning period loadforecasts, potential resource portfolios, a risk analysis and near-term andlong-term action plans.

**Liquidity**

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IDACORP and Idaho Power expect to continue financing capitalrequirements with a combination of internally generated funds and externallyfinanced capital.  In 2009, IDACORP issued 489,360 common stock shares throughits continuous equity program at an average price of $28.79 per share forproceeds of $14 million.  In March 2009, Idaho Power issued $100 million of its6.15% First Mortgage Bonds and in November 2009, Idaho Power issued $130million of its 4.5% First Mortgage Bonds.  In December 2009, Idaho Power repaid$80 million of its 7.2% First Mortgage Bonds.  These matters are discussed inmore detail in “LIQUIDITY AND CAPITAL RESOURCES” later in the MD&A.**Capital Requirements:**  Idaho Power has several major projects in development. The most significant projects are summarized here and are discussed further in“LIQUIDITY AND CAPITAL RESOURCES – Capital Requirements – Major Projects.”

•  **Langley Gulch power plant:**  Langley Gulch will be anatural gas-fired combined cycle combustion turbine (CCCT) generating plantwith a summer nameplate capacity of approximately 300 MWs and a winter capacityof approximately 330 MWs.  The plant will be constructed at an estimated costof $427 million near New Plymouth, Idaho commencing in summer 2010, and isanticipated to achieve commercial operation by November 1, 2012.  Contractincentives may advance the commercial operation date to July 1, 2012.  IdahoPower received cost recovery and ratemaking assurances from the IPUC for thisproject.

•  **Transmission Projects:**  The Boardman-Hemingway Line is aproposed 500-kV line between a substation near Boardman, Oregon and theHemingway substation.  Idaho Power estimates total construction costs of $600million and expects its share of the project to be between 30 and 50 percent. Idaho Power estimates the project will be completed in 2015.  Idaho Power andPacifiCorp are jointly exploring Gateway West, a project to build transmissionlines between Windstar, a substation located near Douglas, Wyoming and Hemingwaysubstation.  The current estimated cost for Idaho Power’s share of the projectis between $300 million and $500 million.  Initial phases of the project couldbe completed by 2014.  Idaho Power’s share may change and the timing of theprojects segments may be deferred and constructed as demand requires.

**Pension Plan:**  As Idaho Power’s pension plan is belowthe minimum required funding levels at January 1, 2010, future minimumcontributions are required.  Based on the assumptions allowed under the PPA,WRERA, Treasury guidance and IRS guidance, IDACORP and Idaho Power were notrequired to contribute to the pension plan in 2009, and estimated minimumrequired contributions will be approximately $6 million in 2010, $44 million in2011, $47 million in 2012, $39 million in 2013, and $40 million in 2014.  OnOctober 20, 2009, Idaho Power filed an application with the IPUC requesting theclarification of a pension recovery method for cash contributions made to thepension plan.  On February 17, 2010, the IPUC approved a recovery methodologythat would permit Idaho Power to include in future rate cases a reasonableamortization and recovery of cash contributions.  The amortization of deferredpension costs is expected to match the revenues received as future pensioncontributions are recovered through rates.  Approximately $29 million, $8million and $3 million of pension expenses were deferred as a regulatory assetin 2009, 2008, and 2007, respectively.

**Other Issues**

**Water Management Issues**:  Power generation at theIdaho Power hydroelectric power plants on the Snake River depends on the statewater rights held by Idaho Power and the long-term sustainability of the SnakeRiver, tributary spring flows and the Eastern Snake Plain Aquifer that isconnected to the Snake River.  Idaho Power continues to participate in watermanagement issues in Idaho that may affect those water rights and resourceswith the goal to preserve, to the fullest extent possible, the long-termavailability of water for use at Idaho Power’s hydroelectric projects on theSnake River.  For a further discussion of water management issues see “LEGALMATTERS –Snake River Basin Water Rights.”

**Environmental Issues:**  Long-term climate change couldsignificantly affect Idaho Power’s business and climate change regulations areexpected to have major implications for Idaho Power and the energy industry. On September 17, 2009, IDACORP’s and Idaho Power’s Board of Directors approvedguidelines that established a goal to reduce the carbon dioxide (CO2)emission intensity of Idaho Power’s utility operations.  The guidelines areintended to further prepare Idaho Power for potential legislative and/orregulatory restrictions on greenhouse gas (GHG) emissions while minimizing thecosts of complying with such restrictions on Idaho Power’s customers.

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Idaho Power, along with its partners in its coal plants, isrequired to monitor and report quarterly to the Environmental Protection Agency(EPA) their GHG emissions beginning January 1, 2010.  The EPA has indicatedthat it will begin to regulate GHG emissions from stationary sources, includingIdaho Power’s facilities, through its new source review and operating permitprograms when the regulations relating to GHG emissions from motor vehicles arefinalized.  Idaho Power’s thermal facilities are also subject to EPA and/orstate-promulgated (i) national ambient air quality standards including thosefor ozone and fine particulate matter, (ii) laws and regulations limitingmercury emissions, (iii) regional haze – best available retrofit technologyrequirements and (iv) new source review and performance standards.  IdahoPower’s environmental compliance costs will continue to be significant for theforeseeable future, particularly in light of possible additional regulation atthe federal and state levels.  These issues are discussed in more detail in“ENVIRONMENTAL ISSUES.”**Boardman Coal Plant: **On January 14, 2010, Portland General Electricannounced that it intended to pursue an alternative operating plan, subject toregulatory approval for its Boardman coal-fired electricity generation plant. Under the plan, near-term expenditures for pollution control equipment would besignificantly reduced and the plant would either cease to operate in 2020, orit would discontinue the use of coal as a fuel source.  Idaho Power is a tenpercent owner of the plant, representing 64,200 kW of nameplate capacity.  AtDecember 31, 2009, Idaho Power’s net book value in the Boardman plant was $20million with annual depreciation of approximately $1.2 million.****

**American Recovery and Reinvestment Act of 2009:** Under the ARRA, Idaho Power submitted a grant application to the Department ofEnergy (DOE) in August 2009, requesting $47 million.  This grant would match a$47 million investment by Idaho Power in Smart Grid technology as well as otherincremental projects.  In October 2009, Idaho Power received notice that itsapplication was selected for negotiation.  Negotiations with the DOE on thegrant agreement terms are expected to be completed in the first quarter of2010.

**Key Operating and Financial Metrics**

 
| ** **                                                                 | **2010**                    | **2009**   |
|----------------------------------------------------------------------------|-----------------------------|------------|
| ** **                                                                 | **Estimate**                | **Actual** |
| Idaho Power Operation &  Maintenance Expense (Millions)                | $295-$305                   | $293       |
| Idaho Power Capital  Expenditures (Millions)                               | $355-$365                   | $273       |
| Idaho Power Hydroelectric  Generation (Million MWh)                        | 6.5-8.5                     | 8.1        |
| Non-regulated subsidiary  earnings and holding company expenses (Millions) | $0-$3.0                     | $1.8       |
| Effective Income Tax Rates:                                                |                        |       |
|                                                                       | Idaho Power                 | 13% - 17%  | 23% |
|                                                                       | Consolidated – IDACORP | 6% - 10%   | 15% |
|                                                                       |                        |       |   |

 

The range for capital expenditures includes amounts forLangley Gulch power plant, the Hemingway-Bowmont transmission line, theHemingway substation and expenditures for the siting and permitting of majortransmission expansions for the Boardman to Hemingway and Gateway Westtransmission projects.

The projected range for annual hydroelectric generation isbased on 2009-2010 Snake River Basin snowpack at 60 percent of average onFebruary 21, 2010, with reservoir storage levels in selected federal reservoirsupstream of Brownlee at approximately 118 percent of average as of February 21,2010.

The effective income tax rate ranges include the utilizationof up to $25 million of additional deferred investment tax credit (ADITC)amortization at Idaho Power.  The rates do not reflect discrete events such asexamination settlements or method changes.

RESULTS OF OPERATIONS:

 

This section of the MD&A takes a closer look at thesignificant factors that affected IDACORP’s and Idaho Power’s earnings over thelast three years.  In this analysis, the results of 2009 are compared to 2008and the results of 2008 are compared to 2007.

The following table presents earnings (losses) for IDACORPand its subsidiaries:

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| ** **                                  | **2009**                                 | **2008**      | **2007**      |
|---------------------------------------------|------------------------------------------|---------------|---------------|
| Idaho Power                                 | $                                        | 122,559  | $             | 94,115  | $ | 76,579  |
| IDACORP Financial Services                  |                                     | 521      |          | 3,426  |   | 7,112  |
| IDACORP Energy                              |                                     | (238)         |          | 406  |   | (171) |
| Ida-West Energy                             |                                     | 2,727    |          | 2,353  |   | 2,223  |
| Holding company expenses                    |                                     | (1,219)       |          | (1,886) |   | (3,471) |
| Discontinued operations                     |                                     | -        |          | -  |   | 67  |
|                                        | Net Income Attributable to IDACORP, Inc. | $             | 124,350  | $ | 98,414  | $ | 82,339  |
| Average outstanding shares - diluted (000s) |                                     | 47,182   | $             | 45,379  |   | 44,365  |
| Earnings per diluted share                  | $                                        | 2.64     |          | 2.17  | $ | 1.86  |
|                                        |                                     |          |          |   |   |   |
|                                             |                                          |               |               |  |  |  |  |

**Utility Operations**

**Operating environment: **Idaho Power primarily usesits hydroelectric and coal-fired generation facilities and long-term powerpurchase agreements to supply the energy needed to serve customers.  Regionalenergy market purchases and sales are used to balance supply and demandthroughout the year.

Idaho Power develops operation plans during the year toprovide guidance for generation resource utilization and energy marketactivities.  Idaho Power’s energy risk management policy and unit operatingrequirements provide the framework for the plans.  The plans incorporateforecasts for generation unit availability, reservoir storage and stream flows,gas and coal prices, customer loads and energy market prices.

In developing its plans, Idaho Power determines to whatextent its own resources can be used to meet forecast loads and when totransact in the regional energy market.  The allocation of hydroelectricgeneration between heavy load and light load hours or calendar periods is alsoa consideration.  This allocation is intended to utilize the flexibility of thehydroelectric system to shift generation to high value periods, while operatingwithin the constraints imposed on the system.

Hydroelectric generation depends on stream flows in theSnake River, on which most of Idaho Power’s hydroelectric facilities arebuilt.  Stream flows are dependent on the amount of snow pack in the mountainsupstream of Idaho Power’s hydroelectric facilities, springtime snow packrun-off, river base flows, spring flows, rainfall and other weather and streamflow management considerations.  Idaho Power also leases water from thirdparties to augment stream flows and increase its ability to meet mid-summerelectricity demands with lower-cost hydroelectric generation and to offset theimpact of drought and changing water use patterns in southern Idaho.

When hydroelectric generation is reduced, Idaho Power hasless electricity available for off-system sales and, most likely, will increaseits use of purchased power to meet load requirements, resulting in increasedpower supply costs.  During good water years, increased off-system sales andthe decreased need for purchased power reduce power supply costs.

Regional energy market prices can also be affected byhydroelectric generating conditions.  In times with high hydroelectricgeneration the availability of abundant energy tends to reduce wholesaleprices, and during low hydroelectric generation wholesale prices tend to behigher.

A combination of increased precipitation, higher reservoirstorage releases and the purchase of leased water resulted in 8.1 million MWhgenerated from Idaho Power’s hydroelectric facilities in 2009, compared to 6.9million MWh in 2008 and 6.2 million in 2007.  Hydroelectric generation was99percent of the 30-year average in 2009.  The observed stream flow data releasedin August 2009, by the U.S. Army Corps of Engineers, Northwest Divisionindicated that Brownlee reservoir inflow for April through July 2009 was 5.6million acre-feet (maf), compared to 4.4 maf in April-July 2008.  AnnualBrownlee reservoir inflow for 2009 was 11.3 maf, or 70 percent of the NWRFCaverage compared to 10.1 maf in 2008 and 8.5 maf in 2007.  Storage in selectedfederal reservoirs upstream of Brownlee as of February 21, 2010, was 118percent of average.  The stream flow forecast released on February 19, 2010, bythe NWRFC predicts that Brownlee reservoir inflow for April through July 2010will be 2.9 maf, or 46 percent of the NWRFC average.

The following table presentsIdaho Power’s energy sales and supply (in MWhs) for the last three years:

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|                             | **2009**                    | **2008**     | **2007**     |
|----------------------------------|-----------------------------|--------------|--------------|
| General business sales           |                        | 13,948  |         | 14,544  |   | 14,542  |
| Off-system sales                 |                        | 2,836   |         | 2,048  |   | 2,744  |
| ** **                       | **Total energy sales**      |         | 16,784  |   | 16,592  |   | 17,286  |
| Hydroelectric generation         |                        | 8,096   |         | 6,908  |   | 6,181  |
| Coal generation                  |                        | 6,941   |         | 7,279  |   | 7,145  |
| Natural gas and other generation |                        | 242     |         | 217  |   | 222  |
| ** **                       | **Total system generation** |         | 15,279  |   | 14,404  |   | 13,548  |
| Purchased power                  |                        | 2,912   |         | 3,716  |   | 5,196  |
| Line losses                      |                        | (1,407)      |         | (1,528) |   | (1,458) |
| ** **                       | **Total energy supply**     |         | 16,784  |   | 16,592  |   | 17,286  |
|                             |                        |         |         |   |   |   |

 

Idaho Power’s modeled medianannual hydroelectric generation is 8.6 million MWh, based on hydrologicconditions for the period 1928 through 2009 and adjusted to reflect the currentlevel of water resource development.

**General Business Revenue:**  Rate actions havesignificantly impacted general business revenue over the last three years.  Thefollowing table presents significant rate increases during that period.  Theseand other rate actions are discussed further in “REGULATORY MATTERS” and inNote 3 to the consolidated financial statements.
| ** **                   | ** **         | **Percentage** | **Annualized $**         |
|------------------------------|--------------------|----------------|--------------------------|
| **Description**              | **Effective Date** | **Increase**   | **increase  (millions)** |
| 2007-2008 PCA                | 6/1/2007           | 14.5           | $                        | 78 |
| 2007 Idaho general rate case | 3/1/2008           | 5.2            |                     | 32 |
| 2008-2009 PCA                | 6/1/2008           | 10.7           |                     | 73 |
| Danskin Plant                | 6/1/ 2008          | 1.37           |                     | 9 |
| 2008 Idaho general rate case | 2/1/2009           | 3.1            |                     | 21 |
| 2008 Idaho general rate case | 3/19/2009          | 0.9            |                     | 6 |
| 2009-2010 PCA                | 6/1/2009           | 10.2           |                     | 84 |
| AMI                          | 6/1/2009           | 1.8            |                     | 11 |
|                         |               |           |                     |   |

 

The primary influences on electricity sales volumes areweather, customer demand and economic conditions.  Extreme temperaturesincrease sales to customers who use electricity for cooling and heating, andmoderate temperatures decrease sales.  Precipitation levels during theagricultural growing season affect sales to customers who use electricity tooperate irrigation pumps.  Increased precipitation reduces electricity usage bythese customers.  The following table presents Boise, Idaho weather conditionsfor the last three years:
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            | **2009** | **2008** | **2007** | **Normal** |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------|----------|----------|------------|
| Heating degree-days (1)                                                                                                                                                                                                                                                                                                                                                                                                                                                                         | 5,612    | 5,586    | 5,128    | 5,727      |
| Cooling degree-days (1)                                                                                                                                                                                                                                                                                                                                                                                                                                                                         | 1,188    | 1,068    | 1,290    | 807        |
| Precipitation (inches)                                                                                                                                                                                                                                                                                                                                                                                                                                                                          | 11.3     | 9.3      | 8.1      | 12.1       |
| (1)  Heating and cooling degree-days are common measures used in the utility  industry to analyze the demand for electricity and indicate when a customer  would use electricity for heating and air conditioning.  A degree-day  measures how much the average daily temperature varies from 65 degrees.  Each  degree of temperature above 65 degrees is counted as one cooling degree-day,  and each degree of temperature below 65 degrees is counted as one heating  degree-day. |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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The following table presents Idaho Power’s general businessrevenues, MWh sales and average and year-end number of customers for the lastthree years:
|                 | **2009**                                                    | **2008** | **2007**      |
|----------------------|-------------------------------------------------------------|----------|---------------|
| Revenue              |                                                        |     |          |   |   |   |
|                 | Residential                                                 | $        | 409,479  | $ | 353,262  | $ | 308,208  |
|                 | Commercial                                                  |     | 232,816  |   | 203,035  |   | 170,001  |
|                 | Industrial                                                  |     | 141,530  |   | 122,302  |   | 101,409  |
|                 | Irrigation                                                  |     | 109,655  |   | 105,712  |   | 88,685  |
|                 | Deferred revenue related to  Hells Canyon relicensing AFUDC |     | (9,715)       |   | -  |   | -  |
|                 |                                                        | Total    | $             | 883,765  | $ | 784,311  | $ | 668,303  |
| MWh                  |                                                        |     |          |   |   |   |
|                 | Residential                                                 |     | 5,300    |   | 5,297  |   | 5,227  |
|                 | Commercial                                                  |     | 3,858    |   | 3,970  |   | 3,937  |
|                 | Industrial                                                  |     | 3,140    |   | 3,355  |   | 3,454  |
|                 | Irrigation                                                  |     | 1,650    |   | 1,922  |   | 1,924  |
|                 |                                                        | Total    |          | 13,948  |   | 14,544  |   | 14,542  |
| Customers (average)  |                                                        |     |          |   |   |   |
|                 | Residential                                                 |     | 405,144  |   | 402,520  |   | 397,285  |
|                 | Commercial                                                  |     | 64,151   |   | 63,492  |   | 61,640  |
|                 | Industrial                                                  |     | 127      |   | 122  |   | 126  |
|                 | Irrigation                                                  |     | 18,753   |   | 18,401  |   | 18,043  |
|                 |                                                        | Total    |          | 488,175  |   | 484,535  |   | 477,094  |
| Customers (year-end) |                                                        |     |          |   |   |   |
|                 | Residential                                                 |     | 406,631  |   | 404,373  |   | 400,637  |
|                 | Commercial                                                  |     | 64,349   |   | 64,125  |   | 62,765  |
|                 | Industrial                                                  |     | 129      |   | 125  |   | 123  |
|                 | Irrigation                                                  |     | 18,818   |   | 18,542  |   | 18,126  |
|                 |                                                        | Total    |          | 489,927  |   | 487,165  |   | 481,651  |
|                 |                                                        |     |          |   |   |   |   |   |

 

2009 vs. 2008:

•     **Rates:**  Rate changes positively impacted general businessrevenue by $128 million in 2009 as compared to 2008.  PCA rate increasesaccounted for $79 million of the increases and base rate changes contributed$49 million.  Also, a new tiered rate structure for residential and smallcommercial customers was implemented February 1, 2009, as part of the generalrate case.  The table below presents the residential rates by tier.
| **Idaho Residential Rate Structure** |
|--------------------------------------|
| **February 1, 2008**                 | **Summer** | **Non-Summer** | **February 1, 2009** | **Summer** | **Non-Summer** |
| 0-300 kWh                            | 5.6973 cents | 5.6973 cents | 0-800 kWh | 5.9750 cents | 5.5792 cents |
| Above 300 kWh                        | 6.4125 cents | 5.6973 cents | 801-2,000 kWh | 7.2798 cents | 6.1991 cents |
|                                 |   |   | Above 2,000 kWh | 8.7358 cents | 7.1290 cents |

 

•     **Customers: **General business revenues increased $10million due to customer growth of one percent.

•     **Usage: **Changes in usage decreased general businessrevenue $38 million.  Irrigation usage decreased 14 percent primarily due toincreased precipitation.  Commercial and industrial usage also declined due toa weaker economy and increased energy efficiency.  Idaho Power does have inplace the Load Growth Adjustment Rate (LGAR) and FCA mechanisms, both of whichdiminish the impact of changes in sales volumes from levels included in base rates.

2008 vs. 2007:

•     **Rates:**  Rate changes positively impacted general businessrevenue by $114 million in 2008 as compared to 2007.  PCA rate increasesaccounted for $82 million of the increases and base rate changes contributed$31 million of the increase.

•     **Customers: **General business customer growth of twopercent increased revenue $8 million.

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•     **Usage: **Changes in usage, primarily resulting from coolersummer temperatures, decreased general business revenue $5 million.

**Off-system sales:** Off-system sales consist primarilyof long-term sales contracts and opportunity sales of surplus system energy. The following table presents Idaho Power’s off-system sales for the last threeyears:
| ** **      | **2009**   | **2008** | **2007**   |
|-----------------|------------|----------|------------|
| Revenue         | $          | 94,373   | $          | 121,429 | $ | 154,948 |
| MWh sold        |       | 2,836    |       | 2,048 |   | 2,744 |
| Revenue per MWh | $          | 33.28    | $          | 59.29 | $ | 56.47 |
|            | ** ** |     | ** ** |   | ** ** |   |

 

2009 vs. 2008:  Off-system sales revenue declined 22percent in 2009 due to lower market prices, partially offset by increasedsales.  Prices for wholesale power in the Northwest were much lower than in2008 due to an abundance of energy in the region during the spring and fall anddue to lower energy commodity prices.  Improved hydroelectric generatingconditions and lower system load increased the amount of electricity availablefor sale.

The off-system sales revenue per MWh is nearly 40 percentlower than the purchased power cost per MWh.  In accordance with Idaho Power’srisk management policy, Idaho Power made forward purchases of energy fordelivery in the third quarter of 2009.  Most of the purchases were identifiedand made months in advance when market prices were higher.  In the thirdquarter, reduced demand and improved generating conditions caused regionalenergy market prices to drop and Idaho Power to have additional surplus energyavailable for sale off-system into that lower price energy market.

2008 vs. 2007:  Off-system sales revenue declined 22percent in 2008.  Sales volumes decreased due to changes to Idaho Power’s riskmanagement policy guidelines implemented in 2008 that resulted in less forwardsales activity.  Revenue per MWh increased due to the impact of higher energycommodity prices through much of 2008.

**Other revenues:**  The following table presents thecomponents of other revenues:
| ** **                                | **2009** | **2008** | **2007** |
|-------------------------------------------|----------|----------|----------|
| Transmission services and property rental | $        | 36,037   | $        | 31,456  | $ | 38,663  |
| Energy efficiency                         |     | 31,821   |     | 18,880  |   | 13,487  |
|                                      | Total    | $        | 67,858   | $ | 50,336  | $ | 52,150  |
|                                      |     |     |     |   |   |   |
|                                           |          |          |          |  |  |  |  |

 

2009 vs. 2008:  Other revenues increased $18 milliondue mainly to the following:

•  Transmission revenues increased $5 million due primarily to OATTrate refunds ordered by the FERC reducing 2008 revenues.  Idaho Power recordedapproximately $4 million of refunds related to transmission sales from prioryears.  The OATT is discussed in more detail in Note 3 to the consolidatedfinancial statements; and

•  Energy efficiency revenues increased $13 million.  These revenuesmirror program expenditures and result in a zero net impact on net income. Energy efficiency revenues and expenses have steadily increased as programactivity has increased.

2008 vs. 2007:  Other revenues decreased $2 milliondue mainly to the following:

•  Transmission revenues decreased $7 million, due primarily to theaforementioned OATT rate refunds and to OATT rate decreases; and

•  Energy efficiency revenues increased $5 million.

 

Energy efficiency activities are funded through a ridermechanism on customer bills.  Energy efficiency program expenditures arereported as an operating expense with an equal amount of revenues recorded inother revenues, resulting in no net impact on earnings.  The cumulativevariance between expenditures and amounts collected through the rider isrecorded as a regulatory asset or liability pending future collection from orobligation to customers.  An asset balance indicates that Idaho Power has spentmore than it has collected and a liability balance indicates that Idaho Powerhas collected more than it has spent.  At December 31, 2009, Idaho Power’srider balance was a regulatory asset of $11 million.

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**Purchased power:**The following table presents IdahoPower’s purchased power expenses and volumes:
| ** **             | **2009** | **2008** | **2007** |
|------------------------|----------|----------|----------|
| Expense                | $        | 160,569  | $        | 231,137 | $ | 289,484 |
| MWh purchased          |     | 2,912    |     | 3,716 |   | 5,196 |
| Cost per MWh purchased | $        | 55.14    | $        | 62.20 | $ | 55.71 |
|                   |     |     |     |   |   |   |

 

2009 vs. 2008:  Purchased power expense decreased $71million due to lower system load and more favorable hydroelectric generatingconditions, which decreased the amount of purchased power Idaho Power needed toserve loads.

2008 vs. 2007:  Purchased power expense decreased $58million due to improved hydroelectric generationconditions and more normal weather, which allowed Idaho Power to better utilizeits own generation resources.  Despite improved water conditions in theregion, overall market prices remained higher early in the year due to agradual spring runoff and a need to re-fill reservoirs.  In addition, increasesin energy commodity prices impacted the electricity market.

**Fuel expense:**  The following table presents IdahoPower’s fuel expenses and generation at its coal and natural gas generatingplants:
|          | **2009**                      | **2008**            | **2007** |
|---------------|-------------------------------|---------------------|----------|
| Expense       |                          |                |     |   |   |   |
|          | Coal                          | $                   | 130,234  | $ | 132,015 | $ | 114,837 |
|          | Natural gas and other         |                | 19,332   |   | 17,388 |   | 19,485 |
|          |                          | Total fuel expense  | $        | 149,566 | $ | 149,403 | $ | 134,322 |
| MWh generated |                          |                |     |   |   |   |
|          | Coal                          |                | 6,941    |   | 7,279 |   | 7,145 |
|          | Natural gas and other         |                | 242      |   | 217 |   | 222 |
|          |                          | Total MWh generated |     | 7,183 |   | 7,496 |   | 7,367 |
| Cost per MWh  |                          |                |     |   |   |   |
|          | Coal                          | $                   | 18.76    | $ | 18.14 | $ | 16.07 |
|          | Natural gas                   | $                   | 79.88    | $ | 80.13 | $ | 87.77 |
|          | Weighted average, all sources | $                   | 20.82    | $ | 19.93 | $ | 18.23 |
|          |                          |                |     |   |   |   |

 

2009 vs. 2008:  Fuel expense remained nearly the samedue to offsetting variances.  The decrease in generation is due to lower systemloads and lower wholesale energy prices, which resulted in reduced dispatch dueto economics, and an unplanned mid-year maintenance outage at Boardman.  Coalprices were higher in 2009 due to an increase in operating costs at BridgerCoal Company, which supplies coal to the Jim Bridger plant, as well as higherprices for coal delivered to the Boardman plant.

2008 vs. 2007:  Fuel expense increased $15 milliondue to higher coal prices at the Valmy and Jim Bridger plants.  Coal prices atValmy increased 13 percent due to higher transportation costs.  Productioncosts at Bridger Coal Company were 13 percent higher due to difficulties withits underground longwall mining operation in January and February, thecontinued transition to underground mining operations, and rising prices forfuel and other commodities.  The increases were partially offset by a ninepercent reduction in fuel expense at Idaho Power’s natural gas fired plants,which had favorable market conditions in the fourth quarter due to pipelinetransportation constraints in the region.

**PCA:**  PCA expense represents the effects of the Idahoand Oregon power supply costs deferral mechanisms, which are discussed in moredetail below in “REGULATORY MATTERS – Power Supply Cost Deferrals.”  In eachyear presented, net power supply costs were higher than the amounts estimatedin the annual PCA forecast, resulting in the deferral of costs for recovery insubsequent rate years.  As the deferred costs are recovered in rates, thedeferred balances are amortized.

 

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The following table presents the components of the PCA:
| ** **                                     | **2009**                    | **2008**      | **2007**     |
|------------------------------------------------|-----------------------------|---------------|--------------|
| Idaho power supply cost deferral               | $                           | (42,533)      | $            | (108,688) | $ | (118,850) |
| Oregon power supply cost deferral              |                        | 184      |         | (5,196) |   | (1,994) |
| Oregon 2007 excess power cost order            |                        | (6,358)       |         | -  |   | -  |
| Amortization of prior year authorized balances |                        | 115,417  |         | 66,471  |   | (287) |
|                                           | Total power cost adjustment | $             | 66,710  | $ | (47,413) | $ | (121,131) |
|                                           |                        |          |         |   |   |   |
|                                                |                             |               |              |  |  |  |  |

 

2009 vs. 2008:  The $114 million change in the PCA isdue primarily to lower deferral of power supply costs and higher amortizationof previously deferred power supply costs.  In addition, an order from the OPUCthat allows Idaho Power to defer for future recovery $6 million of costsincurred in 2007 was recorded in May 2009.

2008 vs. 2007:  The $74 million change in 2008 PCAexpense is due primarily to higher amortization from prior year excess netpower supply costs to match increased revenues.

**Other operations and maintenance (O&M) expenses:**2009 vs. 2008:  Other O&M expenses increased $6 million dueprimarily to an $8 million increase in labor related charges and a $2 millionincrease in charges for uncollectible accounts, partially offset by decreasesof $4 million in legal, other contracted services and office supplies due tocost containment measures.

The deterioration of the economy across Idaho Power’sservice area led to an increase in uncollectible accounts to approximately $5million representing approximately a half percent of general business revenuesfor 2009.  The reserve for uncollectible accounts has also increased over 2008levels most notably the residential and commercial reserves.

2008 vs. 2007:  Other O&M expenses increased $8million due mainly to an $11 million increase in labor related charges, a $2million increase due to new water leases, a $2 million increase in uncollectibleaccounts due to economic conditions, and an increase of $4 million for workers’compensation, legal and other outside services.  The increases were partiallyoffset by a $6 million decrease in FCA charges, a $3 million decrease intransmission costs due to lower purchased power volumes and lower thermalO&M expense of $4 million due to lower annual outage costs.

**Energy efficiency:**  Energy efficiency activities arefunded through a rider mechanism on customer bills.  Energy efficiency programexpenditures are reported as an operating expense with an equal amount ofrevenues recorded in other revenues, resulting in no net impact on earnings. Energy efficiency expenses were $32 million, $19 million and $14 million in2009, 2008 and 2007, respectively.

**Gain on the sale of emission allowances:**  Gain onsale of emission allowances was $0.3 million, $0.5 million and $3 million in2009, 2008 and 2007, respectively.  The bulk of Idaho Power’s accumulatedexcess emission allowances were sold from 2005 to 2007.

**Non-utility Operations**

 

**IFS:**IFS contributed $1 million, $3 million and $7million to net income in 2009, 2008 and 2007, respectively; principally fromthe generation of federal income tax credits and accelerated tax depreciationbenefits related to its investments in affordable housing and historicrehabilitation developments.

IFS made $14 million in new investments in 2009 and $8million in 2008.  IFS generated tax credits of $8 million, $11 million and $15million during 2009, 2008 and 2007, respectively.  IFS will continue to pursuenew opportunities for investment commensurate with the ongoing needs ofIDACORP.

**Ida-West: **Ida-West had net income of $3 million in2009 and $2 million in 2008 and 2007.  Ida-West continues to hold joint ventureinvestments in independent power projects.

 

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**Energy Marketing:**  In 2003, IE wound down its powermarketing operations, closed its business locations and sold its forward bookof electricity trading contracts to Sempra Energy Trading.  In 2007, alltrading contracts expired.  IE has not recorded any material net income for theyears presented.  Currently, IE has no operations but has been working tosettle outstanding legal matters surrounding transactions in the Californiaenergy markets in 2000 and 2001.

**Discontinued Operations**:  Discontinued operationspresents the results of operations of IDACOMM, Inc. prior to its sale in early2007.

**Income Taxes**Idaho Power is currently evaluating a tax accounting method change thatwould allow a current income tax deduction for repair related expenditures onits utility assets that are currently capitalized for book and tax purposes. The deduction would be computed for tax years 1999 and forward.  Idaho Powerhas the ability to apply for this method change following the automatic consentprocedures and could make such application with the filing of IDACORP’s 2009consolidated federal income tax return in September 2010.  Idaho Power’sprescribed regulatory accounting treatment requires immediate incomerecognition for temporary tax differences of this type.  A regulatory asset isestablished to reflect Idaho Power’s ability to recover increased income taxexpense when such temporary differences reverse.****

**Status of audit proceedings: **In December 2008, the IRS began its examination of IDACORP’s 2006 taxyear.  The 2006 exam was completed in May 2009.  The IRS began its examinationof IDACORP’s 2007-2008 tax years in July 2009 and completed the exam inDecember.  The 2006 examination report was submitted to the U.S. Congress JointCommittee on Taxation (JCT) for review in June 2009 and was accepted withoutchange in July.  Tax years 2007-2008 did not require JCT review.  Thesettlement of these years resulted in a net income tax benefit of $4 millionfor 2009 at both IDACORP and Idaho Power.

In May 2009, IDACORP formallyentered the IRS Compliance Assurance Process (CAP) program for its 2009 taxyear.  The CAP program provides for IRS examination throughout the year.  The2009 examination is expected to be completed in 2010.  In January 2010, IDACORPwas accepted into CAP for its 2010 tax year.  IDACORP and Idaho Power areunable to predict the outcome of these examinations.

Specifically within the 2009 CAP examination, the IRS beganits audit of Idaho Power’s current method of uniform capitalization.  InSeptember 2009, the IRS issued Industry Director Directive #5 (IDD) whichdiscusses the IRS’s compliance priorities and audit techniques related to theallocation of mixed service costs in the uniform capitalization methods ofelectric utilities.  The IRS and Idaho Power are jointly evaluating the impactthe IDD guidance has on Idaho Power’s uniform capitalization method.  IdahoPower expects that the examination will be completed during 2010.

**LIQUIDITY AND CAPITAL RESOURCES:**

 

**Operating Cash Flows**

IDACORP’s operating cash flows are driven principally byIdaho Power.  General business revenues and the costs to supply power togeneral business customers are factors that have the greatest impact on IdahoPower’s operating cash flows, and are subject to risks and uncertaintiesrelating to weather and water conditions and Idaho Power’s ability to obtainrate relief to cover its operating costs and provide a return on investment.

IDACORP’s and Idaho Power’s operating cash inflows for theyear ended December 31, 2009, were $284 million and $272 million,respectively.  These amounts were an increase of $148 million and $153 million,respectively, compared to the year ended December 31, 2008.  The following aresignificant items that affected operating cash flows in 2009:

•  In 2009, PCA rates more closely matched actual net power supplycosts than in 2008.  This more timely recovery of current costs improved cashflows by approximately $65 million compared to 2008.  In addition, thecollection of deferred net power supply costs increased $49 million compared to2008.

•  Changes in net cash paid and refunded for income taxes improvecash flows by $42 million and $50 million at IDACORP and Idaho Power,respectively, primarily due to audit settlements.

 

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•  A refund of $13 million was made to Idaho Power’s transmissioncustomers upon a final order from the FERC on Idaho Power’s OATT.  The OATT isdiscussed further in Note 3 to the consolidated financial statements.

•  Net income increased by approximately $26 million and $28 millionat IDACORP and Idaho Power, respectively, compared to 2008.

IDACORP’s and IdahoPower’s operating cash flows for the year ended December 31, 2008 were $137million and $120 million, respectively.  These amounts were an increase of $56million and $38 million, respectively, compared to the year ended December 31,2007.  The following are significant items that affected operating cash flowsin 2008:

•  Collection of previously deferred net power supply costsincreased $66 million compared to 2007.

•  Income tax payments increased $17 million and $33 million forIDACORP and Idaho Power, respectively, due to the timing of and increases intaxable income.

 

**Investing Cash Flows**

Idaho Power’s construction expenditures were $252 million,$244 million and $287 million in 2009, 2008 and 2007, respectively.  IdahoPower is experiencing a cycle of heavy infrastructure investment needed toaddress customer growth, peak demand growth, and aging plant and equipment.

Net proceeds from the sales of emission allowances providedinvesting cash of approximately $2 million, $3 million and $20 million in 2009,2008 and 2007, respectively.  The changes were primarily caused by changes inthe number of allowances sold each year as well as changes in market prices.

In August 2007, Idaho Powerreimbursed IDACORP for the $44 million refundable tax deposit IDACORP made onIdaho Power’s behalf with the IRS related to a disputed income tax assessment. In May 2008, Idaho Power withdrew $20 million from the deposit and in December2008 the remainder of the deposit was applied to accrued taxes and interest. Income tax matters are discussed further in Note 2 to the consolidatedfinancial statements.

In 2009 and 2008, Idaho Power had cash inflows of $2 millionand $5.7 million, respectively, from the sale of Southwest Intertie Projectrights-of-way.  IDACORP made cash investments in affordable housing through IFSof $6 million and $8 million in 2009 and 2008, respectively.  In 2009, IFSreceived $9 million from the sale of investments.

**Financing Cash Flows**

**Debt:**  On December 1, 2009, Idaho Power repaid $80million of its 7.2% First Mortgage Bonds.  On November 20, 2009, Idaho Powerissued $130 million of its 4.5% First Mortgage Bonds, Secured Medium TermNotes, Series H, due March 1, 2020.  On August 20, 2009, Idaho Power completedthe remarketing of its $166.1 million Pollution Control Revenue Refunding Bondsand on August 25, 2009, Idaho Power used the proceeds from the remarketed bondsplus other funds to prepay its $170 million Term Loan Credit Agreement.  ThePollution Control Revenue Refunding Bonds and Term Loan Credit Agreement arediscussed further in Note 4 to the consolidated financial statements.  On March30, 2009, Idaho Power issued $100 million of its 6.15% First Mortgage Bonds,Secured Medium-Term Notes, Series H, due April 1, 2019.  On February 27, 2009,IFS repaid $7 million of its outstanding debt.  IDACORP and Idaho Power reducedshort-term debt by $94 million and $109 million, respectively.

On July 10, 2008, Idaho Power issued $120 million of its6.025% First Mortgage Bonds, Secured Medium-Term Notes, Series H, due July 15,2018.  On October 18, 2007, Idaho Power issued $100 million of 6.25% FirstMortgage Bonds, Secured Medium-Term Notes, Series G, due October 15, 2037.  OnJune 22, 2007, Idaho Power issued $140 million of 6.30% First Mortgage Bonds,Secured Medium-Term Notes, Series F, due June 15, 2037.  These issuances wereused to retire short-term and long-term debt and finance capital expenditures.

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**Equity:**  IDACORP has entered into Sales AgencyAgreements as a means of selling its common stock from time to time inat-the-market offerings.  Under these agreements IDACORP sold 881,337 shares in2007 at an average price of $32.32.  In 2008, IDACORP sold 1,453,967 shares anaverage price of $28.72.  In 2009, IDACORP received $14 million, net of agent’sfees, from the issuance of 489,360 shares.  The average price of the sharessold was $28.79.  IDACORP’s current Sales Agency Agreement is with BNY MellonCapital Markets, LLC.  As of December 31, 2009, there were 2.1 million sharesremaining on the current agency agreement.IDACORP uses original issue common stock for its Dividend Reinvestment andStock Purchase Plan and 401(k) plan for the purpose of adding additional commonequity to its capital structure.  Under these plans, IDACORP issued 366,673shares in 2009, 280,250 shares in 2008 and 250,020 shares in 2007, for proceedsof $9.6 million, $8.4 million and $8.4 million, respectively.

IDACORP issued 25,800 shares in 2009, 30,700 shares in 2008and 10,070 shares in 2007, in connection with the exercise of stock options,for proceeds of $0.6 million, $0.9 million and $0.3 million, respectively.

IDACORP and Idaho Power paid dividends of $57 million, $54million and $53 million in 2009, 2008 and 2007, respectively.  IDACORP madecapital contributions of $20 million, $37 million and $51 million to IdahoPower in 2009, 2008 and 2007, respectively.

**Financing Programs**

IDACORP’s consolidated capital structure consisted of commonequity of 49 percent and debt of 51 percent at December 31, 2009.  IdahoPower’s consolidated capital structure consisted of common equity of 47 percentand debt of 53 percent at December 31, 2009.

**Shelf Registrations**:  IDACORP currently hasapproximately $574 million remaining on its shelf registration statement thatcan be used for the issuance of debt securities and common stock.  Effectivewith the November 20, 2009, issuance noted above, Idaho Power has no securitiesremaining registered on its shelf registration statement.  Idaho Power intendsto file a new shelf registration statement that can be used for the issuance offirst mortgage bonds and unsecured debt.  Please see Note 4 to IDACORP’s andIdaho Power’s consolidated financial statements for more information regardinglong-term financing arrangements.

**Credit Facilities:**  IDACORP and Idaho Power each havea five-year credit agreement that terminates on April 25, 2012, which is usedfor general corporate purposes and commercial paper back-up and provides forthe issuance of loans and standby letters of credit.  IDACORP’s facilitypermits borrowings of up to $100 million at any one time outstanding, which maybe increased upon request to $150 million.  Idaho Power’s facility permitsborrowings of up to $300 million at any one time outstanding, which may beincreased upon request to $450 million.  Each company may request one-yearextensions of the then existing termination date.  Interest on borrowings underthe facilities is a Eurodollar rate or a floating rate, plus a margindetermined by the company’s ratings on its senior unsecured long-term debtsecurities.  The companies also pay a utilization fee and a facility fee.

Each facility contains a covenant requiring a leverage ratioof consolidated indebtedness to consolidated total capitalization of no morethan 65 percent as of the end of each fiscal quarter.  At December 31, 2009,the leverage ratio for IDACORP was 51 percent and for Idaho Power was 53percent.  There are additional covenants, subject to exceptions, that prohibitor restrict: certain investments or acquisitions; mergers or sale ordisposition of property without consent; the creation of certain liens; and anyagreements restricting dividend payments to the company from any materialsubsidiary.  At December 31, 2009, IDACORP and Idaho Power were in compliancewith all facility covenants.

The events of default under the facilities include: nonpaymentof principal, interest and fees, when due or subject to a grace period;materially false representations or warranties; breach of covenants, subject insome instances to grace periods; bankruptcy or insolvency-related events;default in the payment of indebtedness in excess of $25 million, defaults thatwill permit acceleration of such debt, or the acceleration of any of such debt;the acquisition of 20 percent of the outstanding voting shares of the company;the failure of IDACORP to own all of the outstanding voting stock of IdahoPower; unfunded liabilities of all single employer plans under the EmployeeRetirement Income Security Act of 1974 (ERISA) exceeding $75 million; andenvironmental proceedings, investigations or violations of law, which couldreasonably be expected to have a material adverse effect.

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The facilities were amended effective February 2, 2010 atthe request of IDACORP and Idaho Power because of their concern aboutcontinuing compliance with the unfunded liability provisions.  The amendmentsremoved representations and default provisions relating to unfunded liabilitiesof all single employer plans in excess of $75 million and replaced them withrepresentations and default provisions relating to meeting the minimum fundingstandards and not requesting a funding waiver under the Internal Revenue Codeor ERISA.  Unfunded liabilities will now be relevant and measured only uponnotice of termination of a plan and will then constitute a default only if theyexceed $75 million.

A default or an acceleration of indebtedness of IDACORP orIdaho Power in excess of $25 million, including indebtedness under theapplicable facility, will result in a cross default under the other facility. Upon any bankruptcy or insolvency-related event of default, the obligations ofthe lenders to make loans under the facility will automatically terminate andall unpaid obligations will become due and payable.  Upon any other event ofdefault, the lenders holding 51 percent of the outstanding loans or of the aggregatecommitments may terminate or suspend the obligations to make loans or declarethe obligations to be due and payable.

A ratings downgrade would result in an increase in the costof borrowing, but would not result in a default or acceleration of the debtunder the facilities.  If Idaho Power’s ratings are downgraded below investmentgrade, Idaho Power must extend or renew its authority for borrowings under itsIPUC and OPUC regulatory orders.  The IPUC order provides that Idaho Power’sauthority will continue for 364 days from such downgrade, if Idaho Powerpromptly notifies the IPUC and files to continue its original authority toborrow.  The Oregon statutes permit the issuance of short-term debt withoutapproval of the OPUC.

Without additional approval from the IPUC, the OPUC and thePublic Service Commission of Wyoming, the aggregate amount of short-termborrowings by Idaho Power at any one time outstanding may not exceed $450million.

The following table outlines available liquidity as ofDecember 31, 2009 and 2008.
| ** **                                                                              | **IDACORP**(2) | **Idaho Power** |
|-----------------------------------------------------------------------------------------|----------------|-----------------|
| ** **                                                                              | **2009**       | **2008**        | **2009** | **2008** |
| ** **                                                                              | ** **     |
| Revolving credit facility                                                               | $              | 100,000    | $ | 100,000  | $ | 300,000  | $ | 300,000  |
| Commercial paper outstanding                                                            |           | (53,750)        |   | (13,400) |   | -  |   | (108,950) |
| Floating rate draw                                                                      |           | -          |   | (25,000) |   | -  |   | -  |
| Identified for other use (1)                                                            |           | -          |   | -  |   | (24,245) |   | (24,245) |
| Net balance available                                                                   | $              | 46,250     | $ | 61,600  | $ | 275,755  | $ | 166,805  |
| (1)  Port of Morrow and American Falls bonds that  holders may put to Idaho Power. |
| (2)  Holding company only.                                                         |
|                                                                                    |

 

At February 19, 2010, IDACORP had no loans and $25 millionof commercial paper outstanding and Idaho Power had no loans and no commercialpaper outstanding.

Certain of Idaho Power’s derivative instruments containprovisions that require Idaho Power’s unsecured debt to maintain an investmentgrade credit rating from each of the major credit rating agencies.  If IdahoPower’s unsecured debt were to fall below investment grade, it would be inviolation of these provisions, and the counterparties to the derivativeinstruments could request immediate payment or demand immediate and ongoingfull daily collateralization on derivative instruments in net liabilitypositions.  Credit-contingent features are also discussed in Note 15 to theconsolidated financial statements.

**Credit Ratings**

Access to capital markets at areasonable cost is determined in large part by credit quality.  The followingtable outlines the current S&P, Moody’s and Fitch Ratings, Inc. (Fitch)ratings of IDACORP’s and Idaho Power’s securities:

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| ** **                 | **S&P**     | **Moody’s** | **Fitch**       |
|----------------------------|-----------------|------------------|-----------------|
| ** **                 | **Idaho Power** | **IDACORP**      | **Idaho Power** | **IDACORP** | **Idaho Power** | **IDACORP** |
| Corporate Credit Rating    | BBB             | BBB              | Baa 1           | Baa 2 | None | None |
| Senior Secured Debt        | A-              | None             | A3              | None | A- | None |
| Senior Unsecured Debt      | BBB             | BBB-             | Baa 1           | Baa 2 | BBB+ | BBB |
| Short-Term Tax-Exempt Debt | BBB-/A-2        | None             | Baa 1/          | None | None | None |
|                       |            |             | VMIG-2          |   |   |   |
| Commercial Paper           | A-2             | A-2              | P-2             | P-2 | F-2 | F-2 |
| Credit Facility            | None            | None             | Baa 1           | Baa 2 | None | None |
| Rating Outlook             | Stable          | Stable           | Negative        | Negative | Negative | Negative |

These security ratings reflect the views of the ratingagencies.  An explanation of the significance of these ratings may be obtainedfrom each rating agency.  Such ratings are not a recommendation to buy, sell orhold securities.  Any rating can be revised upward or downward or withdrawn atany time by a rating agency if it decides that the circumstances warrant thechange.  Each rating should be evaluated independently of any other rating.

**Capital Requirements**

Idaho Power is experiencing a cycle of heavy infrastructureinvestment, adding capacity to its baseload generation, transmission system anddistribution facilities to ensure adequate supply of electricity, to provideservice to new customers and to maintain system reliability.  Idaho Power’saging hydroelectric and thermal generation facilities require continuingupgrades and component replacement, and the costs related to relicensinghydroelectric facilities and complying with the new licenses are substantial. Due to the heavy infrastructure requirements from 2010-2012, Idaho Power willcontinue to focus on critical infrastructure needs that relate to systemreliability and resource adequacy and has reduced ongoing capital expendituresand major projects from prior estimates.  The table below presents the low andhigh ranges of the capital expenditure categories.  Idaho Power expects thattotal capital expenditures will be at or slightly above $1 billion from2010-2012.  Internal cash generation after dividends is expected to provideless than the full amount of total capital requirements for 2010 through 2012. While IDACORP and Idaho Power expect minimal need for external financing in2010, except for issuances under the dividend reinvestment and employee-relatedplans, and potential pre-funding of 2011 debt maturities should IDACORP andIdaho Power decide to access the capital markets, IDACORP has access to itsregistered securities including its Continuous Equity Program (CEP) which hasapproximately 2.1 million shares of common stock available and Idaho Powerintends to file a new shelf registration statement that can be used for theissuance of first mortgage bonds and unsecured debt.  IDACORP and Idaho Powerexpect to continue financing capital requirements with a combination ofinternally generated funds and externally financed capital.

The following table presents Idaho Power’s estimated cashrequirements for construction, excluding AFUDC, for 2010 through 2012 (inmillions of dollars):
| ** **                                 | **2010** | **2011-2012** |
|--------------------------------------------|----------|---------------|
| Ongoing capital expenditures               | $        | 155-160       | $ | 352-380 |
| Advanced Metering Infrastructure (AMI)     |     | 23-25         |   | 23-25 |
| Langley Gulch Power Plant (detailed below) |     | 138-140       |   | 175-180 |
| Other major projects                       |     | 39-40         |   | 90-95 |
|                                       | Total    | $             | 355-365 | $ | 640-680 |
|                                       |     |          |   |   |
|                                            |          |               |  |  |  |

 

**Major Projects:**

**AMI: **The AMI project provides the means toautomatically retrieve energy consumption information, eliminating manual meterreading expense.  Idaho Power intends to install this technology forapproximately 99 percent of its customers and is on pace to complete theinstallations by the end of 2011.  The total cost estimates for the project areapproximately $74 million.  Idaho Power has expended approximately $24 millionof the total costs as of December 31, 2009.  The remaining costs are includedin the table above.

**Langley Gulch Power Plant:**On September 1, 2009, theIPUC issued an order granting Idaho Power’s March 6, 2009, request for a CPCNauthorizing Idaho Power to construct, own and operate the Langley Gulch powerplant.  Langley Gulch will be a natural gas-fired CCCT generating plant with asummer nameplate capacity of approximately 300 MWs and a winter capacity ofapproximately 330 MWs.  The plant will be constructed near New Plymouth, Idaho,commencing in summer 2010, and is anticipated to achieve commercial operationby November 1, 2012.  Contract incentives may advance the commercial operationdate to July 1, 2012.  The total cost estimate for the project including AFUDCis $427 million, $54 million of which Idaho Power incurred as of December 31,2009.  The remaining costs are included in the table above.  The plant willconnect to Idaho Power’s existing grid.

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Idaho Power requested in its application that the IPUCprovide Idaho Power with assurances of future ratemaking treatment forconstruction costs up to Idaho Power’s cost estimate.  In the order, the IPUCfound that Idaho Power had satisfied statutory requirements that would entitleIdaho Power to receive such ratemaking assurances.  The order grants IdahoPower assurance and pre-approval to include $396.6 million of constructioncosts in Idaho Power’s rate base when Langley Gulch achieves commercialoperation.  The order contemplates that Idaho Power may request recovery ofadditional costs if they exceed $396.6 million provided that Idaho Power isable to demonstrate that the additional costs were reasonably and prudentlyincurred.

Idaho Power is responsible for specific portions of theLangley Gulch Project, which include permitting the site under the PayetteCounty planning and zoning ordinance, design and construction of the coolingwater pump station and pipeline from the Snake River to the site, design andconstruction of the gas pipeline from the Williams Northwest Pipeline to thesite, and design and construction of the new electric transmission lines to theexisting grid.  The cost of these activities are included in the $427 millionestimated total cost for Langley Gulch.

**Other Major Projects:**

Hemingway Station:  Construction is underway for thenew 500-kV Hemingway station, located near Boise, Idaho.  This station willrelieve capacity and operating constraints to ensure reliable service to IdahoPower’s network and native load customers.  The station was originally part ofthe Gateway West Project, but construction was accelerated to help meetforecast deficits and improve reliability.  The station is expected to be inservice by summer 2010 at a total cost of approximately $57 million.  The 2010cost estimate for the project, including substation interconnections, is $20million and is included in the above table.

Hemingway-Bowmont Transmission Line:  A part of theHemingway Station Project, the Hemingway-Bowmont transmission line, currentlyunder construction, is 12 miles of new 230-kV double circuit transmission linethat will provide power to the Treasure Valley in southwest Idaho.  The projectis scheduled to be in service by summer 2010 at a total cost of approximately$16 million.  The 2010 cost estimate for the project is $6.5 million and isincluded in the above table.

Boardman-Hemingway Line:  The Boardman-Hemingway Lineis a proposed 500-kV transmission project between a substation near Boardman,Oregon and the Hemingway station.  This line will provide transmission servicefor existing network and native load customers and other requests pursuant toIdaho Power’s OATT, and will improve reliability and relieve existingcongestion.  The line will allow for the transfer of up to 1,500 MW ofadditional energy between Idaho and the Northwest, depending on the outcome ofWECC rating studies to determine project capacity limits.  On March 9, 2009,Idaho Power initiated a community advisory project to engage the public inroute selection alternatives.  Idaho Power’s preferred route selection will beprocessed in compliance with the National Environmental Policy Act and OregonEnergy Facility Siting Council requirements.  The initial phase of the project,estimated at $50 million, will be funded primarily by Idaho Power and includesthe engineering, environmental review, permitting and rights-of-way.  Costestimates for the 2010-2012 timeframe of the initial phase are included in thetable above.  Total cost estimates for the project (including initial phaseproject estimate and construction costs of the line) are approximately $600million.  Idaho Power expects its share of the project to be between 30 and 50percent, to meet needs identified in the 2009 IRP and forecast growth ofnetwork customers.  Idaho Power and PacifiCorp are exploring potential jointdevelopment and ownership opportunities regarding the Boardman-Hemingwayproject.  The Bonneville Power Administration is also currently investigating whetherparticipation in project may be feasible.  This project is expected to becompleted in 2015 subject to siting, permitting and regulatory approvals. Construction costs beyond the initial phase are not included in Idaho Power’s2010 to 2012 forecast.

Gateway West Project:  Idaho Power and PacifiCorp arejointly exploring the Gateway West project to build transmission lines betweenWindstar, a substation located near Douglas, Wyoming and the Hemingwaystation.  This project will provide transmission service for existing networkand native load customers, forecasted growth and requests pursuant to IdahoPower’s OATT transmission obligations.  The project is expected to improvereliability and relieve existing congestion.  Idaho Power and PacifiCorp have acost sharing agreement for expenses incurred for analysis work of the initialphases.

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Idaho Power’s share of the initial phase of engineering,environmental review, permitting and rights-of-way is approximately $40 millionand cost estimates for the 2010-2012 timeframe of the initial phase areincluded in the above table.  Construction costs are not included in IdahoPower’s 2010 to 2012 forecast.  Initial phases of the project could becompleted by 2014 depending on the timing of rights-of-way acquisition, sitingand permitting, and construction sequencing.  Idaho Power’s share will vary bysegment across the project and the current estimated cost for its share is between$300 million and $500 million.  However, based on the 2009 IRP and thewithdrawal of some third-party transmission service requests, Idaho Power’sshare may change and the timing of the projects segments may be deferred andconstructed as demand requires.  The Bureau of Land Management has indicatedthe draft environmental impact statement is expected to be issued during thesummer of 2010.

For a discussion of environmental considerations relating tothe above projects, see “ENVIRONMENTAL ISSUES – Endangered Species.”****

Hydroelectric projects:** **In the table aboveIdaho Power has included costs relating to the relicensing of hydroelectricfacilities and complying with the renewed licenses.  These costs totalapproximately $25 million for the three year period.  An additional $12 millionrelating to future hydroelectric projects is also included in the table.

Environmental Regulation Costs*:*** **IdahoPower anticipates approximately $42 million in annual capital and operatingcosts for environmental facilities during 2010.  Hydroelectric facilityexpenses including costs for relicensing Hells Canyon and thermal plantexpenses account for approximately $22 million and $20 million, respectively. From 2011 through 2012, total environmental related operating and capital costsare estimated to be approximately $122 million.  Expenses related to thehydroelectric facilities are expected to be $62 million and include costsassociated with the relicensing of Hells Canyon.  Thermal plant expenses areexpected to total $60 million during this period.  These amounts are includedin the table above but do not include costs related to possible changes in theenvironmental laws or regulations and enforcement policies that may be enactedin response to issues such as climate change and other pollutant emissions fromcoal-fired generation plants.

**Other capital requirements:**  IDACORP’s non-regulatedcapital expenditures are expected to be $7 million in 2010 and primarily relateto IFS’s tax-structured investments.  Currently there are no expendituresanticipated for 2011 or 2012.

**American Recovery and Reinvestment Act of 2009**

Under the ARRA, Idaho Power submitted a grant application tothe Department of Energy (DOE) in August 2009, requesting $47 million.  Thisgrant would match a $47 million investment by Idaho Power in Smart Gridtechnology as well as other incremental projects.  In October 2009, Idaho Powerreceived notice that its application was selected for negotiation. Negotiations with the DOE on the grant agreement terms are expected to becomplete in the first quarter of 2010.

**Off-Balance Sheet Arrangements**

Idaho Power has agreed to guarantee the performance ofreclamation activities at Bridger Coal Company of which IERCo owns a one-thirdinterest.  This guarantee, which is renewed each December, was $63 million atDecember 31, 2009.  Bridger Coal Company has a reclamation trust fund set asidespecifically for the purpose of paying these reclamation costs.  At this timeBridger Coal Company is revising their estimate of future reclamation costs. To ensure that the reclamation trust fund maintains adequate reserves, BridgerCoal Company has the ability to add a per ton surcharge if it is determinedthat future liabilities exceed the trust’s assets.  Because of the existence ofthe fund and the ability to apply a per ton surcharge, the estimated fair valueof this guarantee is minimal.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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**Contractual Obligations**

The following table presents IDACORP’s and Idaho Power’scontractual cash obligations for the respective periods in which they are due:
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      | **Payment  Due by Period**              |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------------------------------------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      | **Total**                               | **2010** | **2011-2012** | **2013-2014** | **Thereafter** |
| ** **                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                | **(millions  of dollars)**              |
| **Idaho Power:**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                                    |   |   |   |   |   |   |   |   |   |
| Long-term debt (1)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        | $                                       | 1,414 | $ | 1 | $ | 222 | $ | 72 | $ | 1,119 |
| Future interest payments (2)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |                                    | 1,256 |   | 77 |   | 146 |   | 129 |   | 904 |
| Operating leases                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                                    | 15 |   | 3 |   | 3 |   | 3 |   | 6 |
| Purchase obligations:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |                                    |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      | Cogeneration and small power            |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |                                    | production |   | 2,214 |   | 83 |   | 222 |   | 229 |   | 1,680 |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      | Large power production (3)              |   | 260 |   | 128 |   | 132 |   | - |   | - |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      | Fuel supply agreements                  |   | 383 |   | 64 |   | 117 |   | 107 |   | 95 |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      | Purchased power &  transmission (4) |   | 89 |   | 44 |   | 31 |   | 6 |   | 8 |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      | Other (5)                               |   | 149 |   | 65 |   | 36 |   | 21 |   | 27 |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |                                    | Total purchase obligations |   | 5,780 |   | 465 |   | 909 |   | 567 |   | 3,839 |
| Pension and postretirement  plans (6)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |                                    | 256 |   | 13 |   | 106 |   | 95 |   | 42 |
| Other long-term liabilities -  Idaho Power                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |                                    | 4 |   | 3 |   | 1 |   | - |   | - |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      | Total Idaho Power                       |   | 6,040 |   | 481 |   | 1,016 |   | 662 |   | 3,881 |
| **Other:**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |                                    |   |   |   |   |   |   |   |   |   |
| Long-term debt (1)(7)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |                                    | 9 |   | 8 |   | - |   | - |   | 1 |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      | Total IDACORP                           | $ | 6,049 | $ | 489 | $ | 1,016 | $ | 662 | $ | 3,882 |
| (1)  For additional information, see Note 4 to IDACORP’s  and Idaho Power’s Consolidated Financial Statements.                                                                                                                                                                                                                                                                                                                                                                                                             |
| (2)  Future interest payments are calculated based on  the assumption that all debt is outstanding until maturity.  For debt  instruments with variable rates, interest is calculated for all future  periods using the rates in effect at December 31, 2009.                                                                                                                                                                                                                                                                   |
| (3)  Large power production relates to the Langley Gulch  power plant and includes two contracts with Siemens Energy, Inc. relating to  the purchase of a gas turbine and the purchase of a steam turbine and an  Engineering, Procurement and Construction Services Agreement with Boise Power  Partners Joint Venture, a joint venture consisting of Kiewit Power Engineers  Co. and TIC-The Industrial Company, for design, engineering, procurement,  construction management and construction services for Langley Gulch.  |
| (4)  Approximately $21 million of the obligations  included in purchased power and transmission have contracts that do not  specify terms related to expiration.  As these contracts are presumed to  continue indefinitely, 10 years of information estimated based on current  contract terms, have been included in the table for presentation purposes.                                                                                                                                                                     |
| (5)  Approximately $51 million of the amounts in other  purchase obligations are contracts that do not specify terms related to  expiration.  As these contracts are presumed to continue indefinitely, 10  years of information, estimated based on current contract terms, have been  included in the table for presentation purposes.                                                                                                                                                                                        |
| (6)  Idaho Power estimates pension contributions based  on actuarial data.  Idaho Power cannot estimate pension contributions beyond  2014 at this time.  For more information on pension, please refer to Note 11  of IDACORP’s and Idaho Power’s Consolidated Financial Statements.                                                                                                                                                                                                                            |
| (7)  Amounts include the obligations of IDACORP’s  subsidiaries other than Idaho Power, which is shown separately.                                                                                                                                                                                                                                                                                                                                                                                                              |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |

 

**REGULATORY MATTERS:**

 

Rate changes and regulatory decisions have a significantimpact on results of operations and cash flows.  This section discusses severalimportant rate matters that have affected results during the past two years, aswell as significant pending regulatory issues.  Regulatory matters and thefinancial impact of rate decisions are also discussed in Note 3 to theconsolidated financial statements.

 

 

 

 

 

 

 

 

 

 

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Idaho Power has continued to focus on timely recovery of itscosts through filings with the IPUC and OPUC.  The table below summarizes themost significant base rate changes during the last two years.
| ** **                    | ** **         | **Annualized** | ** **                        |
|-------------------------------|--------------------|----------------|-----------------------------------|
| ** **                    | **Effective**      | **$ Impact**   | ** **                        |
| **Description**               | **Date**           | **(millions)** | **Notes**                         |
| **Base rate increases**       |               |           |                              |   |
| **Idaho**                     |               |           |                              |   |
| 2007 general rate case        | 3/1/2008           | $              | 32.1                         | No rates of return were specified in the settlement |
| Danskin power plant           | 6/1/2008           |           | 8.9                          | Adds $64.2 million to rate base for this project |
| 2008 general rate case        | 2/1/2009 3/19/2009 |           | 20.9     6.1  | Provides a return on equity of 10.5 percent and overall  rate of return of 8.18 percent.  Approximately $15 million related to  increases in base net power supply costs.  Allowed Idaho Power to include in  rates approximately $10.6 million relating to AFUDC on the Hells Canyon  Complex relicensing project. |
| AMI                           | 6/1/2009           |           | 10.5                         | Order is based on Idaho Power’s projected investment in  AMI through December 31, 2009.  Allowed Idaho Power to begin three-year  accelerated depreciation of existing metering equipment on June 1, 2009.  The  associated increase in annualized depreciation expense is $9.2 million. |
| **Oregon**                    |               |           |                              |   |
| 2008 annual power cost update | 6/1/2008           |           | 4.8                          | Represents a 15.7 percent increase in Oregon rates. |
| Depreciation filing           | 1/1/2009           |           | (0.4)                             |   |
| AMI                           | 6/1/2009           |           | 0.8                          | Authorizes accelerated  depreciation and recovery of existing meters in the Oregon jurisdiction over  an 18-month period beginning January 2009.  The associated increase in annual depreciation expense is $0.8 million |
| 2009 annual power cost update | 6/1/2009           |           | 3.9                          | Represents an 11.5 percent increase in Oregon rates. |
|                          |               |           |                              |   |

 

**2009 Idaho Settlement Agreement**

On January 13, 2010, the IPUC approved a settlementagreement among Idaho Power, several of Idaho Power’s customers, the IPUC staffand others.  Significant elements of the settlement agreement include:

•  A general rate moratorium in effect until January 1, 2012.  Themoratorium does not apply to other specified revenue requirement proceedings,such as the PCA, the FCA, pension funding, AMI, energy efficiency rider, andgovernment imposed fees.

•  A specified distribution of the expected 2010 PCA.  Thisdistribution is intended to reduce customer rates, provide some general raterelief to Idaho Power and reset base power supply costs for the PCA.  Theassociated rate change is expected to become effective June 1, 2010.  Thisprovision is in anticipation of a significant reduction in PCA rates for the 2010-2011PCA year.  The PCA reduction will be allocated as follows:

o   The first $40 million will be allocated equally between customersand Idaho Power.  Idaho Power’s share would be applied to increase permanentbase rates on a uniform percentage basis to all customer classes and contractcustomers.  The customers’ share would be a direct PCA rate reduction.

o   All of the next $20 million will be allocated to customers as adirect PCA rate reduction.

o   PCA reductions in excess of $60 million will be applied to absorbany increase in the base level of net power supply expenses.

o   If the PCA reduction exceeds $60 million plus the increase inbase net power supply expenses, the next $10 million will be allocated equallybetween Idaho Power and customers.

o   Any remainder will go entirely to customers.

•  A provision to share earnings with customers if Idaho Power’sactual rate of return on equity is more than 10.5 percent in any calendar yearfrom 2009 to 2011 in its Idaho jurisdiction.  Idaho Power will share with Idahocustomers 50 percent of any returns in excess of 10.5 percent.

 

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•  A provision to allow the accelerated amortization of accumulateddeferred investment tax credits (ADITC) if Idaho Power’s actual rate of returnon equity is below 9.5 percent in any calendar year from 2009 to 2011 in itsIdaho jurisdiction.  Idaho Power would be permitted to amortize additionalADITC in an amount up to $45 million over the three-year period, but could useno more that $15 million in any one year unless there is a carryover.  Carryoveramounts are added to the $15 million annual allowance up to a maximumamortization of $25 million in any one year.

 

Because Idaho Power’s Idaho-jurisdiction return on equitywas between 9.5 and 10.5 percent, the sharing and accelerated amortization provisionswere not triggered in 2009.

The settlement agreement also included a provision toreestablish the base level for net power supply costs effective with the June1, 2010, PCA rate change.  On January 19, 2010, Idaho Power filed with the IPUCa request to increase base net power supply costs by $74.8 million in the Idahojurisdiction.  This amount, which is subject to approval by the IPUC, reflectsthe maximum increase to Idaho Power’s base net power supply costs, which wouldbe used for both base rates and PCA calculations.  The actual change in netpower supply costs for rate purposes will depend upon the amount approved bythe IPUC as well as the amount of any PCA decrease determined for the 2010-2011PCA year.  Written comments or protests with respect to Idaho Power’sapplication are due March 11, 2010.

**2009 Oregon Rate Case:**  On December 16, 2009, IdahoPower filed a Joint Stipulation and testimony in support of a stipulation thatwould settle the revenue requirement issues surrounding the general rate casefiled on July 31, 2009.  If approved by the OPUC, the Joint Stipulation wouldresult in a $5 million, or 15.4 percent, increase to base rates.  The new ratesreflect a return on equity of 10.175 percent and an overall rate of return of8.061 percent.  The requested effective date for new rates is March 1, 2010.

**Power Supply Cost Deferrals**

Idaho Power’s power supply costs can vary significantly fromyear to year, primarily because of weather, loads and commodity markets.  IdahoPower has power cost adjustment mechanisms in both Idaho and Oregon.  Thesemechanisms allow Idaho Power to recover from or refund to customers a majorityof the fluctuations in power supply costs.  Because of these mechanisms, theprimary financial impacts of power supply cost variations is that cash is paidout but recovery from customers does not occur until a future period, resultingin fluctuations in operating cash flows from year to year.

The following table summarizes Idaho Power’s deferred powersupply cost activity during the last two years.
|                                                                                                                                                                                                                                                                                                                                                                                                                                                | **Idaho** | **Oregon (1)**   | **Total** |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------|------------------|-----------|
| Balance at January 1, 2008                                                                                                                                                                                                                                                                                                                                                                                                                          | $         | 92,322      | $         | 5,100  | $ | 97,422  |
| Costs deferred through PCA  and PCAM                                                                                                                                                                                                                                                                                                                                                                                                                |      | 108,688     |      | 5,196  |   | 113,884  |
| Prior costs expensed and  recovered through rates                                                                                                                                                                                                                                                                                                                                                                                                   |      | (64,030)         |      | (2,441) |   | (66,471) |
| SO2 allowances  credited to account (2)                                                                                                                                                                                                                                                                                                                                                                                                             |      | (2,184)          |      | (175) |   | (2,359) |
| Interest and other                                                                                                                                                                                                                                                                                                                                                                                                                                  |      | 6,025       |      | 598  |   | 6,623  |
| Balance at December 31, 2008                                                                                                                                                                                                                                                                                                                                                                                                                        | $         | 140,821     | $         | 8,278  | $ | 149,099  |
| Costs deferred through PCA  and PCAM                                                                                                                                                                                                                                                                                                                                                                                                                |      | 42,533      |      | (184) |   | 42,349  |
| Prior costs expensed and recovered  through rates                                                                                                                                                                                                                                                                                                                                                                                                   |      | (113,134)        |      | (2,283) |   | (115,417) |
| SO2 allowances  credited to account(2                                                                                                                                                                                                                                                                                                                                                                                                               |      | (2,034)          |      | (83) |   | (2,117) |
| Interest and other                                                                                                                                                                                                                                                                                                                                                                                                                                  |      | 3,226       |      | 1,135  |   | 4,361  |
| 2007 Excess power costs  order                                                                                                                                                                                                                                                                                                                                                                                                                      |      | -           |      | 6,358  |   | 6,358  |
| **Balance at December 31,  2009**                                                                                                                                                                                                                                                                                                                                                                                                                   | **$**     | **71,412 ** | **$**     | **13,221 ** | **$** | **84,633 ** |
| (1)   Oregon power supply cost deferrals are subject to a statute that specifically  limits rate amortizations of deferred costs to six percent of gross Oregon  revenue per year (approximately $2 million).  Deferrals are amortized  sequentially.                                                                                                                                                                                     |
| (2) The  IPUC has allowed Idaho Power to retain its PCA sharing percentage of the gain  from sales of SO2 allowances as a shareholder benefit with the remainder recorded as a customer  benefit, substantially all of which was used to reduce the PCA.  Proceeds from  the sale of renewable energy certificates (RECs) are also expected to reduce  the PCA.  RECs are acquired by Idaho Power through purchases of renewable  energy. |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                |

 

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PCA Workshops:  In its order approving Idaho Power’s2008-2009 PCA, the IPUC directed Idaho Power to set up workshops with the IPUCStaff and several of Idaho Power’s largest customers to address issues notresolved in that PCA filing.  The workshops resulted in the following changesto the PCA mechanism, effective February 1, 2009:

•  PCA sharing ratio – the PCA allocates the deviations in net powersupply expenses between customers (95 percent) and shareholders (5 percent). The previous sharing ratio was 90/10.

•  LGAR – the LGAR is an element of the PCA formula that is intendedto eliminate recovery of power supply expenses associated with load growthresulting from changing weather conditions, a growing customer base, orchanging customer use patterns.  The 2007 general rate case reset the LGAR from$29.41 to $62.79 per MWh, but applied that rate to only 50 percent of the loadgrowth beginning in March 2008.  The stipulation agreed on a new formula forcalculating the LGAR.  Based on the final rates approved by the IPUC in the2008 general rate case and the supporting data, the current LGAR is $26.63 perMWh, effective February 1, 2009.

•  Use of Idaho Power’s operation plan power supply cost forecast –the operation plan forecast may better match current collections with actualnet power supply costs in the year they are incurred and result in smalleramounts being included in the following year’s “true-up” rate, beginning withthe 2009-2010 PCA filing.

•  Inclusion of third-party transmission expense – transmissionexpenses paid to third parties to facilitate wholesale purchases and sales ofenergy, including losses, are a necessary component of net power supply costs. Deviation in these costs from levels included in base rates is now reflected inPCA computations.

•  Adjusted distribution of base net power supply costs – base netpower supply costs are distributed throughout the year based upon the monthlyshape of normalized revenues for purposes of the PCA deferral calculation.

**Fixed Cost Adjustment Mechanism (FCA)**

The FCA mechanism began as a pilot program for Idaho Power’sIdaho residential and small general service customers, running from 2007through 2009.  The FCA is a rate mechanism designed to remove Idaho Power’sdisincentive to invest in energy efficiency programs by separating (ordecoupling) the recovery of fixed costs from the variable kilowatt-hour chargeand linking it instead to a set amount per customer.  On October 1, 2009, IdahoPower filed an application with the IPUC to make the FCA mechanism permanentbeginning January 1, 2010.  The application is being processed under modifiedprocedure.

Idaho Power accrued $6.6 million related to the FCA in 2009;subject to IPUC approval, recovery should begin June 1, 2010.  The IPUCapproved a rate increase effective June 1, 2009, through May 31, 2010, torecover $2.7 million of fixed costs under-recovered during 2008.  The IPUCapproved a rate reduction, effective June 1, 2008 through May 31, 2009, toreturn $2.4 million of fixed costs over-recovered in 2007.

**Langley Gulch Power Plant Ratemaking Treatment**

On September 1, 2009, the IPUC issued an order providingcost recovery and ratemaking assurances related to Idaho Power’s Langley Gulchproject.  The IPUC found that Idaho Power had satisfied statutory requirementsthat would entitle Idaho Power to receive such ratemaking assurances andgranted Idaho Power assurance and pre-approval to include $396.6 million ofconstruction costs in Idaho Power’s rate base when Langley Gulch achievescommercial operation.  The order contemplates that Idaho Power may requestrecovery of additional costs if they exceed $396.6 million; provided that IdahoPower is able to demonstrate that the additional costs were reasonably andprudently incurred.  Please see further discussion of the Langley Gulch projectin “LIQUIDITY AND CAPITAL RESOURCES - Major Projects - Langley Gulch PowerPlant.”

**Pension Expense**

In the 2003 Idaho general rate case, the IPUC disallowedrecovery of pension expense because there were no current cash contributionsbeing made to the pension plan.  On June 1, 2007, the IPUC issued an orderauthorizing Idaho Power to account for its defined benefit pension expense on acash basis.  The IPUC acknowledged that it is appropriate for Idaho Power toseek recovery in its revenue requirement of reasonable and prudently incurredpension expense based on actual cash contributions.  Idaho Power deferredapproximately $29 million, $8 million and $3 million of pension expense to aregulatory asset in 2009, 2008, and 2007 respectively.  Idaho Power does not receivea carrying charge on the current deferral balance.

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On October 20, 2009, Idaho Power filed an application withthe IPUC to implement a mechanism to track and recover annually cashcontributions made to the pension plan.  Estimated minimum requiredcontributions will be approximately $6 million in 2010, $44 million in 2011 $47million in 2012, $39 million in 2013, and $40 million in 2014.  In itscomments, the IPUC Staff recommended against establishing an annual trackingmechanism but supported allowing the inclusion in a future rate case ofreasonable amortization of cash contributions.  Idaho Power met with the IPUCStaff to clarify its understanding of their recommendation.  As a result of themeeting, Idaho Power filed reply comments with the IPUC stating that is was notopposed to the Staff’s recommendation with the clarification that the IPUC willapprove amortization of future deferred cash contributions at the same time andin the same amounts as will be approved for recovery.  On February 17, 2010, theIPUC issued its order approving the recovery methodology agreed to by IdahoPower and the IPUC Staff as clarified in Idaho Power’s reply comments.  TheIPUC also approved a carrying charge on the difference between actual contributionsand the recovery of these amounts in rates.

Idaho Power recovers pension expense in its Oregonjurisdiction on the accrual basis.

**Idaho Energy Efficiency Rider (Rider)**

Idaho Power’s Rider is the chief funding mechanism for IdahoPower’s investment in energy efficiency, conservation, and demand responseprograms.  Effective June 1, 2009, Idaho Power collects 4.75 percent of baserevenues, or approximately $29-$33 million annually, under the Rider.

In the 2008 general rate case, Idaho Power requested thatthe IPUC explicitly find that Idaho Power’s expenditures between 2002 and 2007of $29 million of funds obtained from the Rider were prudently incurred and nolonger subject to potential disallowance.  In 2009, the IPUC approved astipulation identifying $14.3 million of Rider funding as prudent, and onJanuary 25, 2010, Idaho Power and the IPUC Staff filed a stipulation forapproval by the IPUC to find the remaining expenditures through 2007 wereprudently incurred.

On October 5, 2009, Idaho Power and other investor-ownedelectric utilities serving in Idaho began a series of informal public workshopwith the IPUC Staff to discuss how energy efficiency evaluation and prudencywill be determined on a prospective basis.  As a result a Memorandum of Understanding(MOU) written by Staff, Idaho Power and other investor-owned electric utilitiesin Idaho has been signed outlining a process for future energy expenditureapproval.  This document was filed with the IPUC on January 25, 2010.

In the first quarter of 2010, Idaho Power expects to requesta similar prudency determination from the IPUC for Rider expenditures in 2008and 2009.  Idaho Power spent approximately $19 million in 2008 and $33 millionin 2009 for rider-funded energy efficiency and demand response initiatives inits Idaho and Oregon jurisdictions combined.  The increase in spending in 2009reflects Idaho Power’s growing emphasis on these programs, such asimplementation of a revised irrigation peak rewards program and commercialdemand response program in 2009.

**FERC OATT Proceeding:**  In 2006, Idaho Power movedfrom a fixed rate to a formula rate for its open access transmission tariff(OATT), which allows transmission rates to be updated each year.  The FERCaccepted Idaho Power’s new formula rates, effective June 1, 2006, subject torefund pending the outcome of a hearing and settlement process.

While the majority of issues related to Idaho Power’s 2006revised OATT filing have been resolved, Idaho Power is awaiting an order uponreconsideration from the FERC regarding the treatment of “Legacy Agreements.” These agreements are contracts for transmission service that were in existencebefore the implementation of the OATT in 1996.  The impact of FERC’s ruling isbeing mitigated by revising certain of the Legacy Agreements as provided for inthe agreements.  Revisions are expected to increase annual transmission revenueby approximately $3.8 million in 2010 compared to 2009.

Idaho Power’s OATT is discussed further in Note 3 to theconsolidated financial statements.

**FERC Compliance Program:**  The FERC issued PolicyStatements on Enforcement in 2005 and 2008 and a Policy Statement on Compliancein 2008.  These statements encourage companies to self-report to the FERCmatters that constitute or may constitute violations of the Federal Power Act(FPA), the Natural Gas Act, the Natural Gas Policy Act and the requirements ofFERC rules, regulations, orders and tariffs.  The Policy Statements identifyself-reporting as a factor the FERC will consider in determining the properremedy for a violation and emphasize the role compliance programs play inidentifying and correcting violations and in evaluating whether and the extentto which penalties may be imposed.

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Idaho Power has implemented a compliance program to ensurethat its operations conform to the FERC’s requirements and to provide a meansof identifying, correcting and if warranted, self-reporting any such matters tothe FERC.  Idaho Power also self-reports matters relating to transmission reliabilitystandards to the WECC.  In 2007, FERC Order No. 693 approved mandatoryreliability standards developed by the North American Electric ReliabilityCorporation.  In 2008, FERC Order No. 706 also approved Critical InfrastructureProtection Reliability Standards (CIP) developed by the North American ElectricReliability Corporation.  The WECC, a regional electric reliabilityorganization, has responsibility for compliance and enforcement of thesestandards.  As part of its compliance program, Idaho Power has reportedcompliance issues relating to the FERC’s Standards of Conduct and Idaho Power’sOATT to the FERC, as well as matters relating to CIP and other reliabilitystandards to the WECC.  Some of these matters have been resolved, while othersare being reviewed by the FERC or the WECC.  Those matters that have beenresolved to date have resulted in no material impact to Idaho Power.  IdahoPower is unable to predict what action if any the FERC or the WECC will takewith regard to the unresolved matters.  Idaho Power plans to continue itspolicy of using its compliance program to reduce potential violations and toself-report matters to the FERC and the WECC.

**Bonneville Power Administration Residential ExchangeProgram:**  The Pacific Northwest Electric Power Planning and ConservationAct of 1980 (the Act), through the Residential Exchange Program (REP), hasprovided access to the benefits of low-cost federal hydroelectric power toresidential and small farm customers of the region’s investor-owned utilities(IOUs).  The REP is administered by the Bonneville Power Administration (BPA). Pursuant to agreements between the BPA and Idaho Power, benefits from the BPAwere passed through to Idaho Power’s residential and small farm customersthrough electricity bill credits.

On May 3, 2007, the U.S. Court of Appeals for the NinthCircuit ruled that the agreements entered into between the BPA and the IOUs(including Idaho Power) are inconsistent with the Act and shortly thereaftersuspended REP payments to Idaho Power and the IOUs.  Effective June 1, 2007,Idaho Power eliminated the credit on its customers’ bills.  Subsequent BPAfilings and decisions have provided no REP benefits to Idaho Power’s customersand Idaho Power has filed petitions for review of these decisions with the U.S.Court of Appeals for the Ninth Circuit.

Idaho Power has been working with the other northwest IOUsand consumer-owned utilities, northwest state public utility commissions andthe BPA to resolve these issues.

Settlement efforts took place from August through Novemberof 2009 and parties in the case have agreed to the selection of a mediator,with sessions expected to begin in the spring of 2010.  Since these benefitswere passed through to Idaho Power’s customers, the outcome of this matter isnot expected to have an effect on Idaho Power’s financial condition or resultsof operations.

**Relicensing ofHydroelectric Projects****:**

 

Idaho Power, like other utilities that operate nonfederalhydroelectric projects on qualified waterways, obtains licenses for itshydroelectric projects from the FERC.  These licenses last for 30 to 50 yearsdepending on the size, complexity, and cost of the project.  Idaho Power isactively pursuing the relicensing of the Hells Canyon Complex (HCC) and Swan Fallsprojects.

The relicensing costs are recorded in construction work inprogress until new multi-year licenses are issued by the FERC, at which timethe charges will be transferred to electric plant in service.  Relicensingcosts and costs related to new licenses will be submitted to regulators forrecovery through the ratemaking process.  Relicensing costs of $117 million and$4 million for HCC and Swan Falls, respectively, were included in constructionwork in progress at December 31, 2009.

The IPUC authorized Idaho Power to include in ratesapproximately $6.8 million annually ($10.6 million grossed up for income taxes)of AFUDC relating to the HCC relicensing project.  This became effectiveFebruary 1, 2009, and Idaho Power collected approximately $9.7 million in2009.  Collecting these amounts in current rates will reduce the relicensingamount submitted to regulators for recovery through the ratemaking process.

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**Hells Canyon Complex:** The most significant ongoingrelicensing effort is the HCC, which provides approximately 68 percent of IdahoPower’s hydroelectric generating nameplate capacity and 36 percent of its totalgenerating nameplate capacity.  In July 2003, Idaho Power filed an applicationfor a new license in anticipation of the July 2005 expiration of thethen-existing license.  Idaho Power is currently operating under an annuallicense issued by the FERC and expects to continue operating under annuallicenses until the new license is issued.

Consistent with the requirements of the National EnvironmentalPolicy Act of 1969, as amended (NEPA), the FERC Staff issued on August 31,2007, a final environmental impact statement (EIS) for the HCC, which the FERCwill use to determine whether, and under what conditions, to issue a newlicense for the project.  The purpose of the final EIS is to inform the FERC,federal and state agencies, Native American tribes and the public about theenvironmental effects of Idaho Power’s proposed operation of the HCC.  IdahoPower has reviewed the final EIS and is developing comments for filing with theFERC.  However, certain portions of the final EIS, involve issues that may beinfluenced by the water quality certifications for the project under section401 of the Clean Water Act and formal consultations under the EndangeredSpecies Act (ESA), which remain unresolved.  Idaho Power anticipates filingcomments to the final EIS as the section 401 and ESA processes progress and themanner in which they may affect pending issues becomes certain.

In conjunction with the issuance of the final EIS, onSeptember 13, 2007, the FERC requested formal consultation under the ESA withthe National Marine Fisheries Service (NMFS) and the U.S. Fish and WildlifeService (USFWS) regarding the effect of HCC relicensing on several aquatic andterrestrial species listed as threatened under the ESA.  However, formalconsultation has not yet been initiated and NMFS and USFWS continue to gatherand consider information relative to the effect of relicensing on relevantspecies.  Idaho Power continues to cooperate with the USFWS, the NMFS and theFERC in an effort to address ESA concerns.

Because the HCC is located onthe Snake River where it forms the border between Idaho and Oregon, Idaho Powerhas filed Water Quality Certification Applications, required under section 401of the Clean Water Act, with the States of Idaho and Oregon requesting thateach state certify that any discharges from the project comply with applicablestate water quality standards.  Temperature and other water quality issues areof interest to various federal and state agencies, Native American tribes, andother parties who may provide input to the states’ certification process. Section 401 of the Clean Water Act requires that a state either approve or denya 401 water quality certification application within one-year of the filing ofthe application or the state may be considered to have waived its certificationauthority under the Act. As a consequence, Idaho Power has been filing andwithdrawing its section 401 certification applications with Oregon and Idaho onan annual basis while it has been working through water quality certificationissues with the states.  Most recently, on December 23, 2009, Idaho Powerwithdrew the 401 certification applications filed with Oregon and Idaho, andimmediately refiled the applications, in order to allow Idaho Power additionaltime to address unresolved issues associated with water quality certificationfor the project.  One such issue involves the Temperature EnhancementManagement Program that Idaho Power proposed in its application and whetherthat program provides reasonable assurance that discharges from the HCC willadequately address fall temperature water quality criteria below Hells CanyonDam.  Idaho Power is continuing to work with Idaho and Oregon to ensure thatany discharges from the HCC will comply with the temperature and otherapplicable necessary state water quality standards so that appropriate waterquality certifications can be issued for the project.

The FERC is expected to issue a license order for the HCConce the ESA consultation and the section 401 certification processes arecompleted.

**Swan Falls Project:**  The license for the Swan Fallshydroelectric project expires in June 2010.  In June 2008, Idaho Power filed alicense application with the FERC.  On January 9, 2009, the FERC issued ascoping document giving notice of scheduled scoping meetings, solicitingscoping comments and of its intent to prepare an EIS pursuant to the NEPA. FERC held scoping meetings on February 10 and 11, 2009.  On May 5, 2009, FERCissued Scoping Document 2 for the project, advising that based on the scopingmeetings and comments received that staff will prepare an EIS, which the FERCwill use to determine whether, and under what conditions, to issue a newhydropower license for the project.  On June 16, 2009, FERC issued its Noticeof Application Ready for Environmental Analysis and Soliciting Comments,Recommendations, Terms and Conditions, and Prescriptions.  The deadline forfiling comments, recommendations, terms and conditions, and prescriptions wasAugust 15, 2009.  Filings were made by the USFWS and state of Idaho.  The FERCexpects to complete the EIS in 2010.

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On June 6, 2008, Idaho Power filed an application with theIdaho Department of Environmental Quality (IDEQ) for section 401 water qualitycertification.  On April 1, 2009, the IDEQ issued public notice, seeking publiccomment on a draft section 401 certification for the project.  No publiccomments were submitted and the IDEQ issued the section 401 certification onMay 4, 2009.

**Shoshone Falls Expansion:**  On August 17, 2006, IdahoPower filed a license amendment application with the FERC, which would allowIdaho Power to upgrade the Shoshone Falls project from 12.5 MW to 62.5 MW.  Thelicense amendment is expected to be issued in 2010.  In conjunction with thelicense amendment application, Idaho Power has filed a water rights applicationwith the Idaho Department of Water Resources (IDWR).

LEGAL MATTERS:

 

**Western Energy Proceedings at the FERC:**  Idaho Power and IE are parties to proceedings atthe FERC arising from the “western energy situation” – the California energycrisis that occurred during 2000 and 2001, and the energy shortages, highprices and blackouts in the western United States.  High prices for electricityin California and in western wholesale markets during 2000 and 2001 causednumerous purchasers of electricity in those markets to initiate proceedingsseeking refunds or other forms of relief.

The three major setsof cases arising out of the western energy situation relate to (i) pricing ofsales in the California Independent System Operator (Cal ISO) and CaliforniaPower Exchange (CalPX) markets (the California refund proceeding); (ii) claimsof market manipulation and tariff violations in those markets, some of whichhave been the subject of FERC show cause orders (the market manipulationcases); and (iii) pricing of sales in the spot power markets in the PacificNorthwest (the Pacific Northwest refund proceeding).

Proceedings in allthree sets of cases remain pending before the FERC.  In addition, there arepending in the United States Court of Appeals for the Ninth Circuit (NinthCircuit) approximately 200 petitions for review of numerous FERC ordersregarding the western energy situation, including the California refundproceeding and the market manipulation cases.  Decisions in these appeals mayhave implications with respect to other pending cases, including those to whichIdaho Power or IE are parties.

Idaho Power and IEhave reached settlements with the principal parties to the California refundproceeding and the market manipulation cases, but there remain claims byparties that have not settled that represent a small minority of potentialrefunds in those proceedings.  Idaho Power and IE are unable to predict theoutcome of these matters, but believe that the settlement releases they haveobtained will restrict potential claims that might result from the dispositionof these two sets of proceedings and that these matters will not have amaterial adverse effect on their consolidated financial positions, results ofoperations or cash flows.

In the Pacific Northwest refund proceeding, after reviewingthe FERC’s 2003 decision declining to order refunds, the Ninth Circuit remandedthe case to the FERC on April 16, 2009 to consider whether evidence of marketmanipulation would have altered the agency’s conclusions about refunds and toinclude sales to the California Department of Water Resources (CDWR) in theproceedings.  Although the FERC has not yet acted on the remand from the NinthCircuit, in separate filings the California Parties (Pacific Gas & ElectricCompany, San Diego Gas & Electric Company, Southern California EdisonCompany, the California Public Utilities Commission, the California Departmentof Water Resources and the California Attorney General) and the City of Tacoma,Washington and the Port of Seattle, Washington asked the FERC to take actionsto reorganize and restructure the case so that they may pursue claims that allspot market sales in the Cal ISO and CalPX markets and in the Pacific Northwestfrom January 1, 2000 through June 20, 2001 should be repriced, and therebybecome subject to refund, because market manipulation and tariff violationsaffected spot market prices.  This would expand the scope of the refund periodin the Pacific Northwest proceeding from the December 25, 2000 through June 20,2001 period previously considered by the FERC.  In May 2009, the CaliforniaParties requested that the FERC sever the CDWR sales from the Pacific Northwestproceeding and consolidate the CDWR sales portion with ongoing proceedings incases that Idaho Power and IE have settled, as well as with a new complaintfiled on May 22, 2009 by the California Attorney General against some sellers,but not including Idaho Power and IE.  In August 2009, the City of Tacoma,Washington and the Port of Seattle, Washington requested the FERC, either on asummary basis or after new evidentiary hearings, to require refunds from allsellers in the Pacific Northwest spot markets for the expanded period (January1, 2000 through June 21, 2000).  Idaho Power and IE are unable to predict theoutcome of these matters or estimate the impact they may have on theirconsolidated financial positions, results of operations or cash flows.

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**Sierra Club Lawsuits at the Bridger and Boardman coalfired plants in which Idaho Power has ownership interests:**  In February2007, the Sierra Club and the Wyoming Outdoor Council filed a complaint againstPacifiCorp in the U.S. District Court in Cheyenne, Wyoming, alleging violationsof air quality opacity standards at the Jim Bridger coal-fired plant inSweetwater County, Wyoming.  Opacity is an indication of the amount of lightobscured by the flue gas of a power plant.  The complaint alleged thousands ofopacity permit violations by PacifiCorp and sought a declaration thatPacifiCorp had violated opacity limits, a permanent injunction orderingPacifiCorp to comply with such limits, civil penalties of up to $32,500 per dayper violation, and reimbursement of plaintiffs’ costs of litigation, includingreasonable attorneys’ fees.  Idaho Power is not a party to this proceeding buthas a one-third ownership interest in the plant.  PacifiCorp owns a two-thirdsinterest in and is the operator of the plant.  On February 10, 2010, PacifiCorpand plaintiffs reached an agreement in principle to the settlement of thelawsuit in its entirety.  The settlement is subject to the approval of theEnvironmental Protection Agency and the court.  If approved, the settlementwill not have a material adverse effect on Idaho Power’s consolidated financialpositions, results of operations or cash flows.

In September 2008, the Sierra Club and four other non-profitcorporations filed a complaint against Portland General Electric Company (PGE)in the U.S. District Court for the District of Oregon alleging opacity permitlimit violations at the Boardman coal-fired plant located in Morrow County,Oregon.  The complaint also alleged violations of the Clean Air Act, relatedfederal regulations and the Oregon State Implementation Plan relating to PGE’sconstruction and operation of the plant.  The complaint sought a declarationthat PGE had violated opacity limits, a permanent injunction ordering PGE tocomply with such limits, injunctive relief requiring PGE to remediate allegedenvironmental damage and ongoing impacts, civil penalties of up to $32,500 perday per violation, and reimbursement of plaintiffs’ costs of litigation,including reasonable attorneys’ fees.  Idaho Power is not a party to thisproceeding but has a 10 percent ownership interest in the Boardman plant.  PGEowns 65 percent and is the operator of the plant.  PGE has stated that itcannot determine with certainty the total amount of monetary penalties anddamages asserted, but based solely on the complaint, the estimated amount is$60 million.

Idaho Power is unable to predict the outcome of this matteror estimate the impact it may have on its consolidated financial positions,results of operations or cash flows.

**Snake River Basin Water Rights: **Idaho Power isengaged in the Snake River Basin Adjudication (SRBA), general streamadjudication, commenced in 1987, to define the nature and extent of waterrights in the Snake River basin in Idaho, including the water rights of IdahoPower.

On March 25, 2009, Idaho Power and the State of Idaho(State) entered into a settlement agreement with respect to the 1984 Swan FallsAgreement and Idaho Power’s water rights under the Swan Falls Agreement, whichsettlement agreement is subject to certain conditions discussed below.  Thesettlement agreement will also resolve litigation between Idaho Power and theState relating to the Swan Falls Agreement that was filed by Idaho Power on May10, 2007, with the Idaho District Court for the Fifth Judicial Circuit, whichhas jurisdiction over SRBA matters including the Swan Falls case.

The settlement agreement resolves the pending litigation byclarifying that Idaho Power’s water rights in excess of minimum flows at itshydroelectric facilities between Milner Dam and Swan Falls Dam are subordinateto future upstream beneficial uses, including aquifer recharge.  The agreementcommits the State and Idaho Power to further discussions on important watermanagement issues concerning the Swan Falls Agreement and the management ofwater in the Snake River Basin.  It also recognizes that water managementmeasures that enhance aquifer levels, springs and river flows, such as aquiferrecharge projects, benefit both agricultural development and hydropowergeneration and deserve study to determine their economic potential, theirimpact on the environment and their impact on hydropower generation.  Thesewill be a part of the Comprehensive Aquifer Management Plan (CAMP), approved bythe Idaho Water Resource Board (IWRB) for the Eastern Snake Plain Aquifer(ESPA), which includes limits on the amount of aquifer recharge.  Idaho Poweris a member of the ESPA CAMP advisory committee and implementation committee.

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On April 24, 2009, the Governor of Idaho signed into lawlegislation approving provisions contained in the settlement agreement.  On May6, 2009, as part of the settlement, Idaho Power, the Governor of Idaho and theIWRB executed a memorandum of agreement relating to future aquifer rechargeefforts and further assurances as to limitations on the amount of aquiferrecharge.  Idaho Power and the State also filed a joint motion to the SRBAcourt to dismiss the Swan Falls case and enter the stipulated water rightdecrees set forth in the settlement agreement.  Parties representinggroundwater users in the ESPA objected to some of the language proposed byIdaho Power and the State relating to water rights in the decrees to be enteredby the SRBA court as contemplated by the settlement agreement.  Specifically,the concerns relate to the language describing the subordination of the rightsand its interplay with the original Swan Falls settlement document andimplementing legislation.  On January 4, 2010, the court issued an orderapproving the overall settlement subject to certain modifications to the draftwater right decrees proposed by the company and the state.  The company isworking with the state and the parties to reach agreement consistent with thecourt’s order regarding the language of the decrees.

Idaho Power has also filed an action in the U.S. DistrictCourt of Federal Claims in Washington, D.C. in October, 2007 against the U.S.Bureau of Reclamation relating to a contract right for delivery of water to itshydropower projects on the Snake River to recover damages from the U.S. Bureauof Reclamation for the lost generation resulting from reduced flows and aprospective declaration of contractual rights so as to prevent the U.S. Bureauof Reclamation from continued failure to fulfill its contractual and fiduciaryduties to Idaho Power.  Trial of the matter has not been scheduled.

Idaho Power is unable to predict the outcome of thesematters or estimate the impact either may have on its consolidated financialpositions, results of operations or cash flows.

For further information regarding legal proceedings, seeNote 10 to the consolidated financial statements.

ENVIRONMENTAL ISSUES:

 

**Global Climate Change:**

Long-term climate change could significantly affect IdahoPower’s business in a variety of ways, including the following: (i) changes intemperature and precipitation could affect customer demand, (ii) extremeweather events could increase service interruptions, outages, and maintenancecosts; (iii) changes in the amount and timing of snowpack and stream flowscould adversely affect hydroelectric generation, and (iv) legislative and/orregulatory developments related to climate change could affect plans andoperations including placing restrictions on the construction of new generationresources, the expansion of existing resources, or the operation of generationresources in general, and (v)consumer preference for, and resource planning decisions requiring, renewableor low GHG-emitting sources of energy could impact demand from existing sourcesand require significant investment in new generation and transmissionresources.

**Greenhouse Gas Emission Reduction Goals:**  InSeptember 2009, IDACORP’s and Idaho Power’s Board of Directors approvedguidelines that established a goal to reduce the carbon dioxide (CO2)emission intensity of Idaho Power’s utility operations.  Idaho Power’s goal isto reduce its resource portfolio’s average CO2 emission intensityfor the 2010 through 2013 time period to a level of 10 to 15 percent belowIdaho Power’s 2005 CO2 emission intensity of 1,194 lbs CO2/MWh.

Since Idaho Power’s CO2 emission intensityfluctuates with stream flows and production levels of anticipated renewableresource additions, Idaho Power believes an average intensity reduction goal tobe achieved over several years is appropriate.  Generation from IdahoPower-owned and any renewable resources under contract for which Idaho Powerhas long-term rights to the Renewable Energy Credits (RECs) will be included inthe denominator of this calculation.  Idaho Power’s progress toward achievingthis intensity reduction goal, as well as additional information on IdahoPower’s CO2 emissions, will be reported on Idaho Power’s website. The guidelines are intended to reduce Idaho Power’s average CO2 emissionintensity in a manner that minimizes the costs of those reductions to IdahoPower’s customers.

In 2006 Idaho Power’s and Ida-West ranked as one of the 30lowest emitters of CO2/MWh produced among the nation’s 100 largestelectricity producers, according to a collaborative report from CERES, thenatural Resources Defense Council, Public Service Enterprise Group and PG&ECorporation using publicly reported 2006 generation and emissions data.

In May 2009, Idaho Power submitted information to the CarbonDisclosure Project (CDP), an independent, not-for-profit organization thatclaims the largest database of corporate climate change information in theworld.  The CDP posted responding companies’ information at its website inSeptember 2009.  Idaho Power’s estimated CO2 emission intensity(Lbs/MWh) from its generation facilities as submitted to the CDP was 1,150 and1,097 for 2007 and 2008, respectively.  Idaho Power estimates that its CO2emission intensity from Idaho Power-owned generation facilities for 2009 was1,003 Lbs CO2/MWh.

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**Regulation of Greenhouse Gas Emissions:**  The AmericanClean Energy and Security Act of 2009, H.R. 2454, Passed the U.S. House ofRepresentatives on June 26, 2009.  Senate Environment and Public Works ChairmanBarbara Boxer (D-CA) and Senator John Kerry (D-MA) introduced a climate changebill on the Senate floor on September 30, 2009.  The timeline for action on theSenate floor remains unclear and debate continues on the direction, scope andtiming of federal legislation to reduce GHG emissions.  There are also stateand regional initiatives (including the western Regional Climate ActionInitiative) considering regional market-based mechanisms to reduce GHGemissions.

Oregon enacted legislation in August 2007 establishingeconomy-wide goals for the reduction of greenhouse gas emissions.  Oregon’sgoals seek to (i) by 2010, cease the growth of Oregon greenhouse gas emission;(ii) by 2020, reduce greenhouse gas levels to 10 percent below 1990 levels; and(iii) by 2050, reduce greenhouse gas levels to at least 75 percent below 1990levels.  The legislation also calls for state government-developed policyrecommendations in the future to assist in the monitoring and achievement ofthese goals.  The impact of the enacted legislation on Idaho Power cannot bedetermined at this time.

On January 14, 2010, Portland General Electric announcedthat it intended to pursue an alternative operating plan for its Boardman powerplant.  Under the alternative operating plan, near-term expenditures forpollution control equipment would be significantly reduced and Boardman wouldeither cease to operate in 2020, or it would discontinue the use of coal as afuel source.  Idaho Power is a ten percent owner of the plant, representing64,200 kW of nameplate capacity.

In support of international efforts to reduce GHG emissions,in January 2010, President Obama pledged to cut GHG emissions in the UnitedStates from 2005 levels by 17 percent by 2020 and 80 percent by 2050.  Anyinternational treaty creating mandatory GHG emission reduction requirements inthe United States would need to be ratified by the U.S. Senate and implementedthrough legislation adopted by the U.S. Congress.

In September 2009, the EPA issued a final rule that requiresmonitoring and reporting of GHG emissions by a number of entities beginning onJanuary 1, 2010.  Most facilities will be required to report annually. Electric generation facilities (including Idaho Power’s facilities) alreadyreporting CO2 emissions under the Clean Air Act (CAA) Acid RainProgram must report CO2, nitrous oxide and methane emissions to theEPA on a quarterly basis.

In December 2009, the EPA issued an “endangermentfinding” for GHG emissions from motor vehicles which has been appealed to theU.S. Court of Appeals for the District of Columbia Circuit.  The “endangermentfinding” is required for the EPA and the Department of Transportation NationalHighway Traffic Safety Administration to finalize their September 2009 proposalto adopt national GHG emission standards for motor vehicles.  On September 30,2009, the EPA acknowledged that the CAA will require it to regulate GHGemissions from stationary sources (including Idaho Power’s thermal facilities)through both its preconstruction and operating permit programs when itfinalizes its proposal to adopt national GHG emission standards for motorvehicles.  Under this proposed rule, EPA is seeking to establish anapplicability threshold of 25,000 tons of GHGs per year (CO2 equivalent)for such programs.

Idaho Power will continue to monitor and evaluate anyproposed international, federal, state or regional GHG legislation orinitiatives as well as any judicial decisions that could affect its generatingfacilities.  The majority of current initiatives regarding GHG emissionscontemplate market-based compliance programs.  The regulation of GHG emissionsunder the CAA could result in GHG emission limits on stationary sources that donot provide market-based compliance options such as cap-and-trade programs oremission offsets.  Such a program could raise uncertainty about the futureviability of fossil fuels, specifically coal, as an economical energy sourcefor new and existing electric generation facilities because new technologiesfor reducing CO2 emissions from coal, including carbon capturestorage, are still in the development stage and are not yet proven.  At thistime, however, Idaho Power is unable to estimate the costs of compliance withany such legislation or initiatives because they are in the early stages ofdevelopment and final legislation, if adopted, could vary from currentproposals.  In the 2009 IRP, Idaho Power did not include any new conventionalcoal resources in the resource portfolio due to the uncertainty regardingfuture carbon regulations.

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**Renewable Portfolio Standards (RPS):**  The AmericanClean Energy and Security Act of 2009 as passed in the U.S. House ofRepresentatives on June 26, 2009, would require utilities to obtain 20 percentof their electricity from renewable sources by 2020, and reduce demand anadditional five percent through conservation and increased energy efficiency. The Senate version would require electric utilities to meet 15 percent of theirelectricity sales through renewable sources of energy or energy efficiency by2021.  Resources eligible to meet these standards include wind, solar,geothermal, biomass, landfill gas, ocean, and incremental hydropower(efficiency improvements or new capacity).  Both bills recognize the benefitsof existing hydroelectric generation by allowing utilities to subtractgeneration from existing hydroelectric projects from their total sales baseprior to calculating the percentage requirement.  Idaho Power will be requiredto comply with a ten percent RPS in Oregon beginning in 2025.  Idaho Powerexpects to meet these requirements with the REC’s from the Elkhorn Valley windproject.  No RPS requirement currently exists in Idaho.  Idaho Power continuesto monitor proposed federal RPS legislation, which if passed could increasecapital expenditures and operating costs and reduce earnings and cash flows.

Idaho Power is currently purchasing energy from sevenwind projects with a combined nameplate rating of 192 MW.  Idaho Power also hasan additional 275 MW of wind generation with signed and IPUC approved contractsthat have not yet been constructed; Because of IPUC rules related to PURPAcontracts and the IPUC order for Idaho Power to sell some of its near-termRECs, Idaho Power does not hold the ‘green tags’ or RECs associated with all ofthese projects.  Idaho Power continues to pursue additional geothermal, wind,and combined heat and power (CHP) generation resources with individualdevelopers.  Other renewable generation resources anticipated from future CSPPcontracts include solar, biomass, CHP and additional wind projects.  Foradditional discussion of how Idaho Power is preparing for potential RPSrequirements, see “Item 1 BUSINESS –Utility Operations – Resource Planning.”

**Air Quality**

 Idaho Power co-owns three coal-fired power plants andowns two natural gas combustion turbine power plants that are subject to airquality regulation.  The coal-fired plants are:  Jim Bridger (33 percentinterest) located in Wyoming; Boardman (ten percent interest) located inOregon; and Valmy (50 percent interest) located in Nevada.  The naturalgas-fired plants, Danskin and Bennett Mountain, are located in Idaho.  The CAAestablishes controls on the emissions from stationary sources like those ownedby Idaho Power.  The EPA adopts many of the standards and regulations under theCAA, while states have the primary responsibility for implementation andadministration of these air quality programs.  In February 2010, a bill wasintroduced in the Senate to impose limits on SO2 and NOxemissions from power plants starting in 2012 and to require at least a 90percent reduction in mercury emissions from coal-fired generation.  Idaho Powercontinues to actively monitor, evaluate and work on air quality issuespertaining to federal and state mercury emission rules, possible legislativeamendment of the CAA as discussed above, National Ambient Air Quality Standards(NAAQS), and Regional Haze – Best Available Retrofit Technology (RH BART) andNew Source Review (NSR) permitting.

**Mercury Emissions:**  Mercury continuous emissionmonitoring systems have been installed on all of the coal-fired units at theJim Bridger, Boardman and Valmy plants and tests to confirm the accuracy of thedata being collected are currently underway.  The EPA has announced that it isdeveloping maximum achievable control technology standards to reduce mercuryemissions from coal-fired power plants.  In 2008, the State of Oregon adopted amercury rule requiring Boardman to reduce mercury emissions by 90 percent ormeet an emission rate of 0.6 lbs/trillion BTU by July 2012.  The state is nowconsidering allowing up to a two year extension.  Idaho Power continues tomonitor Wyoming and Nevada actions related to mercury emissions.  Idaho Poweris unable to predict at this time what actions the EPA or the other states maytake to reduce mercury emissions from its coal-fired power plants.

**National Ambient Air Quality Standards**:  In July1997, the EPA adopted new NAAQS for ozone (8-hour ozone standard) and fineparticulate matter of less than 2.5 micrometers in diameter (PM2.5 standard). Regulations promulgated by the EPA to implement these NAAQS have beenchallenged and portions have been remanded back to the EPA forreconsideration.  The EPA and state efforts to implement the NAAQS adopted in1997 are ongoing.  All of the counties in Idaho, Oregon, Nevada and Wyomingwhere Idaho Power’s power plants operate currently are designated as meetingattainment with 8-hour ozone and PM2.5 standards adopted by the EPA in 1997.

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In December 2006, the EPA revised the NAAQS for PM2.5. This new standard was challenged by a number of groups in the U.S. Court ofAppeals for the District of Columbia Circuit and the court remanded thestandard back to the EPA in February 2009.  All of the counties in Idaho,Nevada, Oregon and Wyoming where Idaho Power’s power plants operate currentlywere designated as meeting attainment with the revised PM2.5 NAAQS.  The impactof the new standard will not be known until the judicial appeals are completedand the associated regulatory programs are promulgated and implemented.

In March 2008, the EPA promulgated a final regulationwhich revised the 8-hour ozone NAAQS, and on January 19, 2010, the EPA proposedto adopt a more stringent 8-hour ozone NAAQS.  Idaho Power is unable to predictwhat impact the adoption of this standard may have on its operations.

On January 22, 2010, the EPA adopted a new NAAQS for NO2at a level of 100 parts per billion averaged over a 1-hour period.  The EPA hasnot yet designated areas as attaining or not attaining the new NAAQS.  Inaddition, on November 16, 2009, the EPA proposed a more stringent NAAQS for SO2to a level between 50 and 100 parts per billion averaged over a 1-hour period. Idaho Power is unable to predict what impact the adoption and implementation ofthese standards may have on its operations.

**Regional Haze – Best Available Retrofit Technology:** In accordance with federal regional haze rules, coal-fired utility boilers aresubject to RH BART if they were built between 1962 and 1977 and affect anyClass I areas.  This includes all four units at the Jim Bridger plant and theBoardman plant.  The two units at the Valmy plant were constructed after 1977and are not subject to the federal regional haze rule.  The Wyoming Departmentof Environmental Quality (WDEQ) and the Oregon Department of EnvironmentalQuality (ODEQ) are conducting an assessment of emission sources pursuant to anRH BART process.  The states are also working on reasonable progress toward along term strategy beyond RH BART to reduce regional haze in Class I areas tonatural conditions by the year 2064.

PacifiCorp submitted an RHBART application for the Jim Bridger plant in January 2007.  On June 3, 2009,WDEQ issued a public notice requesting comment from the public on the draft RHBART State Implementation Plan (SIP) arising out of the application.  WDEQ hasproposed to issue an RH BART air quality permit for modification of Bridgerrequiring installation of low-NOx burners with separated over-fireair for NOx reduction, and flue gas conditioning to enhanceperformance of the electrostatic precipitator particulate controls.  Accordingto WDEQ, these controls will allow Bridger to meet the EPA’s presumptive RHBART emission limits.  The plant is already in the process of installing low NOxburners and SO2 scrubber upgrades that are proposed in theapplication.  The SO2 scrubber upgrade project has been completed onUnits 2 and 4 and is expected to be completed on the other two units by the endof 2011.  Idaho Power expects to spend approximately $22 million between 2009and 2012 to complete these projects.  WDEQ is further proposing to requireBridger Units 3 and 4 to be equipped with selective catalytic reduction (SCR)NOx controls before December 31, 2015 and December 31, 2016,respectively.  WDEQ is requiring installation of the two SCR units as part ofits long-term strategy in the regional haze SIP.  Idaho Power’s estimated shareof the cost to install the two SCRs is $120 million.  Installation of this SCRpollution control equipment could require extended maintenance outages.  In addition,WDEQ has proposed to require PacifiCorp to submit an application by January 15,2015, to install add-on NOx controls at Bridger Units 1 and 2 byDecember 31, 2023.  Design and cost estimates for meeting this proposedrequirement are not yet available.  The comment period on the draft RH BART SIPended on August 4, 2009.  WDEQ will finalize the SIP and submit it to the EPAfor approval.  Legal challenges or appeals of the final SIP are possible. Idaho Power will continue to monitor this process.

In August 2008, the ODEQ issued a draft RH BART proposalfor the Boardman plant.  The RH BART proposal was approved by the OregonEnvironmental Quality Commission in June 2009.  The pollution controlrequirements for RH BART and the long-term strategy are estimated to costbetween approximately $52 million and $56 million (Idaho Power share) basedupon current market conditions for air quality control equipment. Approximately three-quarters of the costs will be incurred by 2014 with theremainder incurred by 2017.  Installation of this pollution control equipmentcould require extended maintenance outages.  On January 14, 2010, PGE announcedthat it intended to pursue an alternative operating plan for its Boardmanplant.  Under the alternative operating plan, near-term expenditures forpollution control equipment would be significantly reduced and Boardman wouldeither cease to operate in 2020, or it would discontinue the use of coal as afuel source.  Idaho Power does not yet know what impact this decision will haveon the ODEQ proposal.

While not required under RH BART, installation of low NOxburners and over-fired upgrades has been completed at the Valmy plant.

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**New Source Review:** Since 1999, the EPA and the U.S. Department of Justice have been pursuing anational enforcement initiative focused on the compliance status of coal-firedpower plants with the New Source Review (NSR) permitting requirements and NewSource Performance Standards (NSPS) of the CAA.  This initiative has resultedin both enforcement litigation and significant settlements with a large numberof public utilities and other owners of coal-fired power plants across thecountry.  The administration has indicated an intention to continue this NSRenforcement initiative.  The EPA sent information requests under section 114 ofthe CAA, requesting information relevant to NSR and NSPS compliance to the JimBridger plant in 2003, the Valmy plant in 2009 and the Boardman plant in 2008with a follow up request for information in 2009.  Idaho Power is a co-owner ofthese plants, but does not operate the plants.  A number of utilities that havereceived section 114 information requests have engaged in negotiations with theEPA to address any allegations of non-compliance with NSR and NSPS requirements. In some cases, such negotiations have resulted in settlements requiring thepayment of civil penalties, installation of additional pollution controls, thesurrender of emission allowances, and the completion of supplementalenvironmental projects.  Idaho Power cannot predict the outcome of theseinvestigatory matters at this time.

The EPA has announced its intention to propose newregulations pursuant to the Resource Conservation and Recovery Act governingthe management and storage of coal ash waste, and to determine whether todesignate coal ash as a hazardous waste.

**Endangered Species:**

**SlickspotPeppergrass:**  This southwestern Idaho plant species was listed asthreatened by the U. S. Fish and Wildlife Service (USFWS) effective December2009.  While, critical habitat for the plant was not designated at the time oflisting, approximately 98% of the plant species is located on federal landowned by the Bureau of Land Management (BLM) and the Department of Defense. Parts of the Gateway West and Boardman to Hemingway 500 kV transmission linesand the Langley Gulch transmission and water lines will cross BLM land.  Thislisting will add an additional requirement and species for consideration in theEndangered Species Act (ESA) section 7 consultation.  A section 7 consultationis a process used to determine a proposed action’s effects on any ESA-listedspecies that may be within the project area.  This listing may impact theexpense and timing of permitting for these projects.

**Sage Grouse**: The sage grouse has been proposed forlisting under the ESA.  If the sage grouse is listed, this will add anadditional requirement and species for consideration in ESA section 7consultations for the Gateway West and Boardman to Hemingway 500-kVtransmission lines and the Langley Gulch transmission and water lines andwinter habitat may impact the expense and timing for these projects.

**Hells Canyon Project:** In 2007 FERC requested initiation of formal consultation under the EndangeredSpecies Act (ESA) with the National Marine Fisheries Service (NMFS) and the(USFWS regarding potential effects of HCC relicensing on several listed aquaticand terrestrial species.  Formal consultation has not yet been initiated andNMFS and USFWS continue to gather and consider information relative to theeffects of relicensing on relevant species.  Idaho Power continues to cooperatewith the USFWS, the NMFS and the FERC in an effort to address ESA concerns. Idaho Power may be required to modify operations pursuant to the BiologicalOpinion that will result from formal consultation.  However, the issuance of afinal Biological Opinion within the next 18 to 24 months is unlikely.

**Bliss and Lower Salmon Falls Projects:**  IdahoPower is finalizing a Snail Protection Plan (Plan) in cooperation with theUSFWS.  If the Plan is approved by the FERC, Idaho Power will file applicationswith the FERC to amend the licenses for the Bliss and Lower Salmon Fallsprojects that will maintain operating flexibility at both projects for theremainder of their licenses.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES:

 

When preparing financial statements in accordance withgenerally accepted accounting principles (GAAP), IDACORP’s and Idaho Power’smanagement must apply accounting policies and make estimates that affect thereported amounts of assets, liabilities, revenues and expenses and relateddisclosure of contingent assets and liabilities.  These estimates often involvejudgment about factors that are difficult to predict and are beyondmanagement’s control.  Management adjusts these estimates based on historicalexperience and on other assumptions and factors that are believed to bereasonable under the circumstances.  Actual amounts could materially differfrom the estimates.

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Management believes the following accounting policies andestimates are the most critical to the portrayal of their financial conditionand results of operations and require management’s most difficult, subjectiveor complex judgments, often as a result of the need to make estimates about theeffect of matters that are inherently uncertain and may change in subsequentperiods.

**Accounting for Rate Regulation**

GAAP requires entities that meet specific conditions toreflect the impact of regulatory decisions in their consolidated financial statementsand requires that certain costs be deferred as regulatory assets until matchingrevenues can be recognized.  Similarly, certain items may be deferred asregulatory liabilities.  Idaho Power must satisfy the following conditions toapply regulatory accounting: (1) an independent regulator must set rates; (2)the regulator must set the rates to cover specific costs of delivering service;and (3) the service territory must lack competitive pressures to reduce ratesbelow the rates set by the regulator.

Idaho Power’s has determined that it meets these conditionsand its financial statements reflect the effects of the different rate makingprinciples followed by the jurisdictions regulating Idaho Power.  The primaryeffect of this policy is that Idaho Power has recorded $721 million ofregulatory assets and $297 million of regulatory liabilities at December 31,2009.  Idaho Power expects to recover these regulatory assets from customersthrough rates and refund these regulatory liabilities to customers throughrates, but recovery or refund is subject to final review by the regulatorybodies.  If future recovery or refund of these amounts ceases to be probable,or if Idaho Power determines that it no longer meets the criteria for applyingregulatory accounting, Idaho Power would be required to eliminate thoseregulatory assets or liabilities, unless regulators specify some other means ofrecovery or refund.  Either circumstance could have a material effect on IdahoPower’s results of operations and financial position.

**Asset Impairment**

**Available-for-sale securities:**Idaho Power hasinvestments in four mutual funds that experienced a significant decline in fairvalue in 2008.  Idaho Power is**required to evaluate these and othersecurities periodically to determine whether a decline in fair value is otherthan temporary.  If the decline in fair value is other than temporary, the costof the investment is written down to fair value and the loss is recorded as arealized loss.  Two significant factors that are considered when evaluatinginvestments for impairment are the length of time and the extent to which themarket value has been less than cost.  Idaho Power’s investments had lostbetween 32 percent and 43 percent of their value, primarily during the stock marketdownturn in September and October 2008 and had been in loss positions from sixto 12 months at December 31, 2008.  Because of the severity of the declines invalue, Idaho Power determined that the loss in value was other-than-temporaryand recorded a pre-tax loss of $6.8 million in the fourth quarter of 2008.  AtDecember 31, 2009, the fair value of these investments was above their new costbasis and no impairment was recorded.

**Equity-Method Investments: **IFS has affordablehousing investments with a net book value of $78 million at December 31, 2009,and Ida-West has investments in four joint ventures that own electric powergeneration facilities.  Except for one investment which is consolidated, theseinvestments are accounted for under the equity method of accounting*.* The standard for determining whether impairment must be recorded for theseinvestments is whether the investment has experienced a loss in value that isconsidered an other-than-temporary decline in value.  Impairment analyses on theseinvestments were performed in 2009 and an immaterial impairment was recorded onone of the Ida-West joint ventures.  These estimates required IDACORP to makeassumptions about future stream flows, revenues, cash flows and other itemsthat are inherently uncertain.  Actual results could vary significantly fromthe assumptions used, and the impact of such variations could be material.

**Pension and Other Postretirement Benefits**

Idaho Power maintains a qualified defined benefit pensionplan covering most employees, an unfunded nonqualified deferred compensationplan for certain senior management employees and directors called the SeniorManagement Security Plan (SMSP), and a postretirement medical benefit plan.

The costs IDACORP and Idaho Power record for these plansdepend on the provisions of the plans, changing employee demographics, actualreturns on plan assets and several assumptions used in the actuarial valuationsfrom which the expense is derived.  The key actuarial assumptions that affectexpense are the expected long-term return on plan assets and the discount rateused in determining future benefit obligations.  Management evaluates theactuarial assumptions on an annual basis, taking into account changes in marketconditions, trends and future expectations.  Estimates of future stock marketperformance, changes in interest rates and other factors used to develop theactuarial assumptions are uncertain.  Actual results could vary significantlyfrom the estimates.

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The assumed discount rate is based on reviews of marketyields on high-quality corporate debt.  Specifically, IDACORP and Idaho Powerutilize data published in the Citigroup Pension Liability Index and apply therates therein against the projected cash outflows of the plans.  The discount rateused to calculate the 2010 pension expense will be decreased to 5.9 percentfrom the 6.1 percent used in 2009.

Rate-of-return projections for plan assets are based onhistorical risk/return relationships among asset classes.  The primary measureis the historical risk premium each asset class has delivered versus the returnon 10-year U.S. Treasury Notes.  This historical risk premium is then added tothe current yield on 10-year U.S. Treasury Notes, and the result provides areasonable prediction of future investment performance.  Additional analysis isperformed to measure the expected range of returns, as well as worst-case andbest-case scenarios.  Based on the current interest rate environment, currentrate-of-return expectations are lower than the nominal returns generated overthe past 20 years when interest rates were generally much higher.

Gross pension and other postretirement benefit expense forthese plans totaled $40 million, $16 million, and $15 million for the threeyears ended December 31, 2009, 2008 and 2007, respectively, including amountsallocated to capitalized labor and amounts deferred as regulatory assets.  For2010, gross pension and other postretirement benefit costs are expected tototal approximately $41 million, which takes into account the change in thediscount rate noted above, as well as a decrease in expected return on planassets.  No changes were made to the other key assumptions used in theactuarial calculation.

Had different actuarial assumptions been used, pensionexpense could have varied significantly.  The following table reflects thesensitivities associated with changes in the discount rate and rate-of-returnon plan assets actuarial assumptions on historical and future pension andpostretirement expense:
| ** **              | **Discount rate**          | **Rate of return** |
|-------------------------|----------------------------|--------------------|
| ** **              | **2010**                   | **2009**           | **2010** | **2009** |
| ** **              | **(millions of  dollars)** |
| Effect of 0.5% increase | $                          | (4.1)              | $ | (3.8) | $ | (1.7) | $ | (1.5) |
| Effect of 0.5% decrease |                       | 4.5           |   | 4.1  |   | 1.7  |   | 1.5  |
|                    |                       |               |   |   |   |   |   |   |

 

No cash contributions were required or made to the qualifiedplan in 2007 or 2008.  A $6 million contribution for 2009 is due in calendaryear 2010, and estimated payments of $44 million, $47 million, $39 million, and$40 million are due in 2011, 2012, 2013, and 2014, respectively.  Under theSMSP, Idaho Power makes payments directly to participants in the plan.  Benefitpayments are expected to be $3.3 million in 2010 and averaged $2.8 million peryear from 2007 to 2009.  Gross postretirement plan contributions are expectedto be $4.2 million in 2010, and averaged $5.2 million from 2007 to 2009.

The IPUC has authorized Idaho Power to account for itsdefined benefit pension expense on a cash basis, and to defer and account foraccrued pension expense**as a regulatory asset.  The IPUC acknowledgedthat it is appropriate for Idaho Power to seek recovery in its revenuerequirement of reasonable and prudently incurred pension expense based onactual cash contributions.  Idaho Power began deferring pension expense to aregulatory asset account to be matched with revenue when future pensioncontributions are recovered through rates.  The deferral of pension expensebegan in 2007.  At December 31, 2009, $38 million of expense was deferred as aregulatory asset.  Approximately $30 million is expected to be deferred in2010.

Please refer to Note 11 of the consolidated financialstatements, which contains additional information about the pension andpostretirement plans.

**Contingent Liabilities**

An estimated loss from a loss contingency is charged toincome if (a) it is probable that a liability had been incurred at the date ofthe financial statements and (b) the amount of the loss can be reasonablyestimated.  If a probable loss cannot be reasonably estimated, no accrual isrecorded but disclosure of the contingency in the notes to the financialstatements is required.  Gain contingencies are not recorded until realized.

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IDACORP and Idaho Power have a number of unresolved issuesrelated to regulatory and legal matters.  If the recognition criteria have beenmet, liabilities have been recorded.  Estimates of this nature are highlysubjective and the final outcome of these matters could vary significantly fromthe amounts that have been included in the financial statements.

**Income Taxes**

IDACORP and Idaho Power use judgment and estimation indeveloping the provision for income taxes and the reporting of tax-relatedassets and liabilities.  The interpretation of tax laws can involveuncertainty, since tax authorities may interpret such laws differently.  Actualincome taxes could vary from estimated amounts and may result in favorable orunfavorable impacts to net income, cash flows, and tax-related assets andliabilities.

**RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS**

 

See Note 1 to the consolidated financial statements for adiscussion of recently issued accounting pronouncements.

**INFLATION**

 

IDACORP and Idaho Power believe that inflation has causedand may continue to cause increases in certain operating expenses and thereplacement of assets at higher costs.  Inflation affects the cost of labor,products and services required for operations and maintenance and capitalexpenditures.  While inflation has not had a significant impact on IDACORP’s orIdaho Power’s operations, increases in utility expenses due to inflation couldhave an adverse effect on earnings because of the need to obtain regulatoryapproval to recover such increased expenses.

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURESABOUT MARKET RISK

 

IDACORP and Idaho Power are exposed to market risks,including changes in interest rates, changes in commodity prices, credit riskand equity price risk.  The following discussion summarizes these risks and thefinancial instruments, derivative instruments and derivative commodityinstruments sensitive to changes in interest rates, commodity prices and equityprices that were held at December 31, 2009.

**Interest Rate Risk**

IDACORP and Idaho Power manage interest expense and short-and long-term liquidity through a combination of fixed rate and variable ratedebt.  Generally, the amount of each type of debt is managed through marketissuance, but interest rate swap and cap agreements with highly****ratedfinancial institutions may be used to achieve the desired combination.

**Variable Rate Debt:**  As of December 31, 2009, IDACORPand Idaho Power had $43 million and $5 million, respectively, in floating ratedebt net of temporary cash investments.  Assuming no change in financialstructure for either company, if variable interest rates were one percentagepoint higher than the rates in effect on December 31, 2009, interest rateexpense would increase and pre-tax earnings would decrease by approximately$0.4 million for IDACORP and $0.1 million for Idaho Power.

**Fixed Rate Debt:**  As of December 31, 2009, IDACORPand Idaho Power each had $1.4 billion in fixed rate debt, with a fair marketvalue also equal to $1.4 billion.  These instruments are fixed rate and,therefore, do not expose the companies to a loss in earnings due to changes inmarket interest rates.  However, the fair value of these instruments wouldincrease by approximately $131 million for both IDACORP and Idaho Power ifinterest rates were to decline by one percentage point from their December 31,2009 levels.

**Commodity Price Risk**

**Utility:** Idaho Power’s exposure to changes incommodity price is related to its ongoing utility operations producingelectricity to meet the demand of its retail electric customers.  The weatheris a major uncontrollable factor affecting the local and regional demand forelectricity and the availability and cost of production.  The objective ofIdaho Power’s energy purchase and sale activity is to meet the demand of retailelectric customers, maintain appropriate physical reserves to ensurereliability, and make economic use of temporary surpluses that may develop.

61

 

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Idaho Power’s exposure to commodity price risk is largelyoffset by the previously discussed power cost adjustment mechanisms in Idahoand Oregon.  Idaho Power has adopted a risk management program designed toreduce exposure to power supply cost-related uncertainty, further mitigatingcommodity price risk.  This program has been reviewed and accepted by theIPUC.  Idaho Power’s Energy Risk Management Policy (the Policy) describes acollaborative process with customers and regulators via a committee called theCustomer Advisory Group (CAG).  The Risk Management Committee (RMC), comprisedof selected Idaho Power officers and other senior staff, oversees the riskmanagement program.  The RMC is responsible for communicating the status ofrisk management activities to the Idaho Power Board of Directors, and to theCAG.

The Policy requires monitoring monthly volumetricelectricity position and total monthly dollar (net power supply cost) exposureon a rolling 18-month forward view.  The Power Supply business unit producesand evaluates projections of the operating plan and orders risk mitigatingactions dictated by the limits stated in the Policy.  The RMC evaluates theactions initiated by Power Supply for consistency and compliance with thePolicy.  Idaho Power representatives meet with the CAG at least annually toassess effectiveness of the limits.  Changes to the limits can be endorsed bythe CAG and referred to the Board of Directors for approval.  The primary toolsfor risk mitigation are physical and financial forward power transactions andfueling alternatives for utility-owned generation resources.

**Credit Risk**

**Utility:**  Idaho Power is subject to credit risk basedon its activity with market counterparties.  Idaho Power is exposed to thisrisk to the extent that a counterparty may fail to fulfill a contractualobligation to provide energy, purchase energy or complete financial settlementfor market activities.  Idaho Power mitigates this exposure by activelyestablishing credit limits, measuring, monitoring, reporting, using appropriatecontractual arrangements and transferring of credit risk through the use offinancial guarantees, cash or letters of credit.  A current list of acceptablecounterparties and credit limits is maintained.

The use of performance assurance collateral in the form ofcash, letters of credit, or guarantees is common industry practice.  Idaho Powermaintains margin agreements that allow performance assurance collateral to berequested and/or posted with certain counterparties.  As of December 31, 2009,Idaho Power had posted approximately $1.3 million of assurance collateral. Should Idaho Power experience a reduction in its credit rating on Idaho Power’sunsecured debt to below investment grade, Idaho Power could be subject toadditional requests by its wholesale counterparties to post additionalperformance assurance collateral.  Counterparties to derivative instrumentscould request immediate payment or demand immediate ongoing full dailycollateralization on derivative instruments in net liability positions.  Basedupon Idaho Power’s current energy and fuel portfolio and current marketconditions as of December 31, 2009, the approximate amount of additionalcollateral that could be requested upon a downgrade is approximately $16million.  Idaho Power actively monitors the portfolio exposure and thepotential exposure to additional requests for performance assurance collateralcalls, through sensitivity analysis, to minimize capital requirements.

Credit risk for Idaho Power’s retail customers is managed bycredit and collection policies that are governed by rules issued by the IPUC. Idaho Power is obligated to provide service to all electric customers withinits service area.  Idaho Power records a provision for uncollectible accounts,based upon historical experience, to provide for the potential loss fromnonpayment by these customers.  Idaho Power will continue to monitor the impactof the current economic conditions on nonpayment from customers and will makeany necessary adjustments to its provision for uncollectible accounts.

Idaho administrative code for utility customer relationsrules prohibits Idaho Power from terminating electric service during the monthsof December through February to any residential customer who declares that heor she is unable to pay in full for utility service and whose householdincludes children, elderly or infirm persons.  Idaho Power’s provision foruncollectible accounts could be affected by changes in future prices as well aschanges in IPUC regulations.

**Equity Price Risk**

IDACORP and Idaho Power are exposed to price fluctuations inequity markets, primarily through their pension plan assets, a mine reclamationtrust fund owned by an equity-method investment of Idaho Power and other equityinvestments at Idaho Power.  As a result of market increases in 2009, the fairvalue of the pension plan’s assets increased; however, increases in the benefitobligation were greater than the increases in the pension plan’s assets,therefore resulting in an increase in future amounts required to be contributedto the plan.  Based on current laws, Idaho Power estimates that the minimumcontribution to Idaho Power’s pension plan in 2010 will be $5.8 million.

A hypothetical ten percent decrease in equity prices wouldresult in an approximate $1.9 million decrease in the fair value of financialinstruments that are classified as available-for-sale securities.

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ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

 

INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENTSCHEDULES

 
|                                                                                         | **PAGE**      |
|----------------------------------------------------------------------------------------------|---------------|
| **Consolidated Financial  Statements:**                                                      |          |
|                                                                                         |          |
| IDACORP, Inc.                                                                                |          |
| Consolidated Statements of Income for the  Years Ended December 31, 2009, 2008 and 2007      | 64            |
| Consolidated  Balance Sheets as of December 31, 2009 and 2008                                | 65-66         |
| Consolidated  Statements of Cash Flows for the Years Ended December 31, 2009, 2008 and  2007 | 67            |
| Consolidated Statements of Equity for  the Years Ended December 31, 2009, 2008               |          |
|                                                                                         | and 2007      | 68 |
| Consolidated Statements of Comprehensive  Income for the Years Ended December 31, 2009,      |          |
|                                                                                         | 2008 and 2007 | 69 |
| ** **                                                                                   |          |
| Idaho Power Company                                                                          |          |
| Consolidated  Statements of Income for the Years Ended December 31, 2009, 2008 and 2007      | 70            |
| Consolidated  Balance Sheets as of December 31, 2009 and 2008                                | 71-72         |
| Consolidated  Statements of Capitalization as of December 31, 2009 and 2008                  | 73            |
| Consolidated  Statements of Cash Flows for the Years Ended December 31, 2009, 2008 and  2007 | 74            |
| Consolidated  Statements of Retained Earnings for the Years Ended December 31, 2009,  2008   |          |
|                                                                                         | and 2007      | 75 |
| Consolidated Statements of Comprehensive  Income for the Years Ended December 31, 2009,      |          |
|                                                                                         | 2008 and 2007 | 75 |
|                                                                                         |          |
| Notes  to the Consolidated Financial Statements                                              | 76-118        |
| Reports of  Independent Registered Public Accounting Firm                                    | 119-120       |
| ** **                                                                                   |          |
| ** **                                                                                   |          |
| **Supplemental Financial Information and Consolidated  Financial Statement Schedules**       |          |
|                                                                                         |          |
| Supplemental  Financial Information (Unaudited)                                              | 121           |
|                                                                                         |          |
| Financial Statement Schedules  for the Years Ended December 31, 2009, 2008 and 2007:         |          |
| Schedule  I - Condensed Financial Information of Registrant-IDACORP, Inc.                    | 137-139       |
| Schedule  II-Consolidated Valuation and Qualifying Accounts-IDACORP, Inc.                    | 140           |
| Schedule  II-Consolidated Valuation and Qualifying Accounts-Idaho Power Company              | 141           |
|                                                                                         |          |

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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**IDACORP, Inc.**

**ConsolidatedStatements of Income**
|                                                                         | ** Year Ended December 31,**      |
|-------------------------------------------------------------------------|----------------------------------------|
| ** **                                                              | ** 2009**                         | **2008** | **2007** |
|                                                                         | ** (thousands of dollars except** |
|                                                                         | ** for per share amounts)**       |
| **Operating Revenues:**                                                 |                                        |  |  |
| Electric utility:                                                       |                                        |  |  |
| General  business                                                       |  $                                | 883,765  |  $ | 784,311  |  $ | 668,303  |
| Off-system  sales                                                       | 94,373                            | 121,429  | 154,948  |
| Other  revenues                                                         | 67,858                            | 50,336  | 52,150  |
| Total  electric utility revenues                                        | 1,045,996                         | 956,076  | 875,401  |
| Other                                                                   | 3,804                             | 4,338  | 3,993  |
| Total  operating revenues                                               | 1,049,800                         | 960,414  | 879,394  |
| **Operating Expenses:**                                                 |                                        |  |  |
| Electric utility:                                                       |                                        |  |  |
| Purchased  power                                                        | 160,569                           | 231,137  | 289,484  |
| Fuel  expense                                                           | 149,566                           | 149,403  | 134,322  |
| Third-party  transmission expense                                       | 6,629                             | 7,250  | 10,470  |
| Power  cost adjustment                                                  | 66,710                            | (47,413) | (121,131) |
| Other  operations and maintenance                                       | 293,111                           | 286,779  | 276,040  |
| Energy  efficiency programs                                             | 31,821                            | 18,880  | 13,487  |
| Gain  on sale of emission allowances                                    | (298)                                  | (504) | (2,754) |
| Depreciation                                                            | 110,626                           | 102,086  | 103,072  |
| Taxes  other than income taxes                                          | 21,069                            | 19,083  | 17,634  |
| Total  electric utility expenses                                        | 839,803                           | 766,701  | 720,624  |
| Other expense                                                           | 6,414                             | 3,046  | 6,692  |
| Total  operating expenses                                               | 846,217                           | 769,747  | 727,316  |
| **Operating Income (Loss):**                                            |                                        |  |  |
| Electric utility                                                        | 206,193                           | 189,375  | 154,777  |
| Other                                                                   | (2,610)                                | 1,292  | (2,699) |
| Total  operating income                                                 | 203,583                           | 190,667  | 152,078  |
| **Other Income**                                                        | 21,064                            | 11,861  | 20,524  |
| **Losses of Unconsolidated  Equity-Method Investments**                 | (1,033)                                | (3,997) | (4,824) |
| **Other Expense**                                                       | 4,067                             | 8,030  | 8,903  |
| **Interest Expense:**                                                   |                                        |  |  |
| Interest on long-term debt                                              | 73,371                            | 67,251  | 59,961  |
| Other interest expense, net  of AFUDC                                   | (561)                                  | 5,805  | 3,380  |
| Total  interest expense                                                 | 72,810                            | 73,056  | 63,341  |
| **Income Before Income  Taxes**                                         | 146,737                           | 117,445  | 95,534  |
| **Income Tax Expense**                                                  | 22,362                            | 19,200  | 13,731  |
| **Income from Continuing  Operations**                                  | 124,375                           | 98,245  | 81,803  |
| **Income from Discontinued  Operations, attributable to**               |                                        |  |  |
|                                                                         | **IDACORP, Inc., net of tax**          | -  | -  | 67  |
| **Net Income**                                                          | 124,375                           | 98,245  | 81,870  |
| Adjustment  for (income) loss attributable to noncontrolling interests  | (25)                                   | 169  | 469  |
| **Net Income Attributable  to IDACORP, Inc.**                           |  $                                | 124,350  |  $ | 98,414  |  $ | 82,339  |
| Weighted Average Common  Shares Outstanding - Basic (000’s)        | 47,124                            | 45,268  | 44,291  |
| Weighted Average Common  Shares Outstanding - Diluted (000’s)      | 47,182                            | 45,379  | 44,365  |
| **Earnings Per Share of  Common Stock (basic and diluted):**            |                                        |  |  |
| Earnings Attributable to  IDACORP, Inc. Continuing Operations           |  $                                | 2.64  |  $ | 2.17  |  $ | 1.86  |
| Earnings Attributable to  IDACORP, Inc. Discontinued Operations         | -                       | -    | -    |
| Earnings  Attributable to IDACORP Inc.                                  |  $                                | 2.64  |  $ | 2.17  |  $ | 1.86  |
| **Dividends Paid Per Share  of Common Stock**                           |  $                                | 1.20  |  $ | 1.20  |  $ | 1.20  |
|                                                                         |                                        |
|  The accompanying notes are an integral part of these  statements. |                                        |
|                                                                         |                                        |  |  |  |  |  |  |

 

 

 

 

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**IDACORP, Inc.**

**Consolidated BalanceSheets**
| ** **                                                                   | ** December 31,**            |
|------------------------------------------------------------------------------|-----------------------------------|
| ** **                                                                   | **2009**                          | **2008** |
| **Assets**                                                                   | ** (thousands of  dollars)** |
|                                                                              |                                   |  |
| **Current Assets:**                                                          |                                   |  |
| Cash and cash equivalents                                                    |  $                           | 52,987  |  $ | 8,828  |
| Receivables:                                                                 |                                   |  |
| Customer                                                                     | 76,792                       | 64,733  |
| Other                                                                        | 12,995                       | 10,439  |
| Allowance for uncollectible  accounts                                        | (2,878)                           | (1,724) |
| Taxes receivable                                                             | -                            | 18,111  |
| Accrued unbilled revenues                                                    | 51,272                       | 43,934  |
| Materials and supplies (at average cost)                                     | 48,054                       | 50,121  |
| Fuel stock (at average cost)                                                 | 25,634                       | 16,852  |
| Prepayments                                                                  | 11,111                       | 10,059  |
| Deferred income taxes                                                        | 31,773                       | 37,550  |
| Other                                                                        | 2,666                        | 7,381  |
| Total current assets                                                         | 310,406                      | 266,284  |
|                                                                         |                                   |  |
| **Investments**                                                              | 195,298                      | 198,552  |
|                                                                         |                                   |  |
| **Property, Plant and Equipment:**                                           |                                   |  |
| Utility plant in service                                                     | 4,160,178                    | 4,030,134  |
| Accumulated provision for depreciation                                       | (1,558,538)                       | (1,505,120) |
| Utility plant in service - net                                               | 2,601,640                    | 2,525,014  |
| Construction work in progress                                                | 289,188                      | 207,662  |
| Utility plant held for future use                                            | 7,151                        | 6,318  |
| Other property, net of accumulated depreciation                              | 19,029                       | 19,171  |
| Property, plant and equipment -  net                                         | 2,917,008                    | 2,758,165  |
|                                                                         |                                   |  |
| **Other Assets:**                                                            |                                   |  |
| American Falls and Milner water rights                                       | 24,226                       | 26,332  |
| Company-owned life insurance                                                 | 26,654                       | 29,482  |
| Regulatory assets                                                            | 720,401                      | 696,332  |
| Long-term receivables (net of allowance of $2,157 and $2,478,  respectively) | 4,217                        | 4,012  |
| Other                                                                        | 40,517                       | 43,686  |
| Total other assets                                                           | 816,015                      | 799,844  |
|                                                                              |                                   |  |
| **Total**                                                                    |  $                           | 4,238,727  |  $ | 4,022,845  |
|                                                                         |                                   |  |
|  The accompanying  notes are an integral part of these statements.      |

 

 

 

 

 

 

 

 

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**IDACORP, Inc.**

**Consolidated Balance Sheets**
| ** **                                                              | ** December 31,**            |
|-------------------------------------------------------------------------|-----------------------------------|
| ** **                                                              | **2009**                          | **2008** |
| **Liabilities and Equity**                                              | ** (thousands of  dollars)** |
|                                                                         |                                   |  |
| **Current Liabilities:**                                                |                                   |  |
| Current maturities of long-term debt                                    |  $                           | 9,340  |  $ | 86,528  |
| Notes payable                                                           | 53,750                       | 151,250  |
| Accounts payable                                                        | 83,818                       | 96,785  |
| Taxes accrued                                                           | 10,184                       | -  |
| Interest accrued                                                        | 20,056                       | 16,727  |
| Other                                                                   | 41,081                       | 44,378  |
| Total current liabilities                                               | 218,229                      | 395,668  |
|                                                                    |                                   |  |
| **Other Liabilities:**                                                  |                                   |  |
| Deferred income taxes                                                   | 574,450                      | 515,719  |
| Regulatory liabilities                                                  | 287,780                      | 276,266  |
| Other                                                                   | 346,994                      | 344,870  |
| Total other liabilities                                                 | 1,209,224                    | 1,136,855  |
|                                                                    |                                   |  |
| **Long-Term Debt**                                                      | 1,409,730                    | 1,183,451  |
| ** **                                                              |                                   |  |
| **Commitments and Contingencies**                                       |                                   |  |
|                                                                         |                                   |  |
| **Equity:**                                                             |                                   |  |
| IDACORP, Inc. shareholders’ equity:                                |                                   |  |
| Common stock, no par value  (shares authorized 120,000,000;             |                                   |  |
| 47,925,882 and 46,929,203  shares issued, respectively)                 | 756,475                      | 729,576  |
| Retained earnings                                                       | 649,180                      | 581,605  |
| Accumulated other comprehensive  loss                                   | (8,267)                           | (8,707) |
| Treasury stock (29,191 and  9,022 shares at cost, respectively)         | (53)                              | (37) |
| Total IDACORP, Inc.  shareholders’ equity                          | 1,397,335                    | 1,302,437  |
| Noncontrolling interest                                                 | 4,209                        | 4,434  |
| Total equity                                                            | 1,401,544                    | 1,306,871  |
|                                                                         |                                   |  |
| **Total**                                                               |  $                           | 4,238,727  |  $ | 4,022,845  |
|                                                                         |                                   |  |
|  The accompanying  notes are an integral part of these statements. |

 

 

 

 

 

 

 

 

 

 

 

 

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**IDACORP, Inc.**

**Consolidated Statements ofCash Flows**

 

 

 

 

 

** **
|                                                                                    | **Year Ended December 31,** |
|------------------------------------------------------------------------------------|-----------------------------|
|                                                                               | **2009**                    | **2008** | **2007** |
| **Operating Activities:**                                                          | **(thousands of dollars)**  |
| Net income                                                                         |  $                     | 124,375  |  $ | 98,245  |  $ | 81,870  |
| Adjustments to reconcile net  income to net cash provided by operating activities: |                             |  |  |
| Depreciation  and amortization                                                     | 118,600                | 109,842  | 108,171  |
| Deferred  income taxes and investment tax credits                                  | 19,035                 | 4,661  | 11,026  |
| Changes  in regulatory assets and liabilities                                      | 57,836                 | (64,068) | (128,089) |
| Non-cash  pension expense                                                          | 4,025                  | 3,513  | 6,868  |
| Losses  of equity method investments                                               | 1,033                  | 3,997  | 4,824  |
| Distributions  from equity method investments                                      | 12,477                 | 1,178  | 1,100  |
| Gain  on sale of assets                                                            | (426)                       | (3,446) | (4,758) |
| Other  non-cash adjustments to net income, net                                     | 3,078                  | 8,859  | (2,983) |
| Change  in:                                                                        |                             |  |  |
| Accounts  receivable and prepayments                                               | (15,749)                    | (1,725) | (10,284) |
| Accounts  payable and other accrued liabilities                                    | (28,038)                    | 16,248  | 2,206  |
| Taxes  receivable (accrued)                                                        | 28,535                 | (26,454) | (9,466) |
| Other  current assets                                                              | (14,053)                    | (14,056) | (11,159) |
| Other  current liabilities                                                         | (7,485)                     | (6,130) | 15,551  |
|  Other  assets                                                                | 1,621                  | 1,498  | 2,157  |
|  Other  liabilities                                                           | (20,439)                    | 4,351  | 13,567  |
| Net  cash provided by operating activities                                         | 284,425                | 136,513  | 80,601  |
| **Investing Activities:**                                                          |                             |  |  |
| Additions to property, plant  and equipment                                        | (251,937)                   | (243,544) | (287,219) |
| Proceeds from the sale  IDACOMM                                                    | -                      | -  | 7,283  |
| Proceeds from the sale of  non-utility assets                                      | 2,250                  | 5,847  | -  |
| Investments in affordable  housing                                                 | (5,802)                     | (8,314) | -  |
| Proceeds from the sale of  emission allowances                                     | 2,382                  | 2,959  | 19,846  |
| Investments in  unconsolidated affiliates                                          | -                      | (3,038) | (8,535) |
| Purchase of  available-for-sale securities                                         | -                      | -  | (24,349) |
| Proceeds from the sale of  available-for-sale securities                           | 9,006                  | -  | 26,110  |
| Purchase of held-to-maturity  securities                                           | -                      | (4,248) | (3,116) |
| Maturity of held-to-maturity  securities                                           | 425                    | 6,060  | 3,317  |
| Withdrawal of refundable  deposit for tax related liabilities                      | -                      | 44,903  | -  |
| Other                                                                              | 1,271                  | (3,449) | (447) |
| Net  cash used in investing activities                                             | (242,405)                   | (202,824) | (267,110) |
| **Financing Activities:**                                                          |                             |  |  |
| (Decrease) increase in term  loans                                                 | (170,000)                   | 170,000  | -  |
| Issuance of long-term debt                                                         | 230,000                | 120,000  | 240,000  |
| Remarketing (purchase) of  pollution control revenue bonds                         | 166,100                | (166,100) | -  |
| Retirement of long-term debt                                                       | (89,174)                    | (11,349) | (95,033) |
| Dividends on common stock                                                          | (56,820)                    | (54,239) | (53,012) |
| Net change in short-term  borrowings                                               | (93,600)                    | (39,095) | 57,445  |
| Issuance of common stock                                                           | 24,328                 | 50,863  | 37,181  |
| Acquisition of treasury  stock                                                     | (1,441)                     | (304) | (346) |
| Other                                                                              | (7,254)                     | (2,603) | (1,652) |
| Net  cash provided by financing activities                                         | 2,139                  | 67,173  | 184,583  |
| Net increase (decrease) in  cash and cash equivalents                              | 44,159                 | 862  | (1,926) |
| Cash and cash equivalents at  beginning of the year                                | 8,828                  | 7,966  | 9,892  |
| Cash and cash equivalents at  end of the year                                      |  $                     | 52,987  |  $ | 8,828  |  $ | 7,966  |
| **Supplemental Disclosure  of Cash Flow Information:**                             |                             |  |  |
| Cash paid during the year  for:                                                    |                             |  |  |
| Income  taxes (refunded) paid                                                      |  $                     | (21,401) |  $ | 20,407  |  $ | 3,021  |
| Interest  (net of amount capitalized)                                              |  $                     | 67,039  |  $ | 67,027  |  $ | 62,031  |
| Non-cash investing  activities                                                     |                             |  |  |
| Additions  to property, plant and equipment in accounts payable                    |  $                     | 19,075  |  $ | 14,194  |  $ | 13,210  |
| Investments  in affordable housing                                                 |  $                     | 8,276  |  $ | -  |  $ | -  |
|                                                                                    |                             |
| The accompanying notes are an integral part of these  statements.                  |                             |

 

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**IDACORP, Inc.**

**Consolidated Statementsof Equity**
|                                                                   | ** Year Ended  December 31,** |
|-------------------------------------------------------------------|------------------------------------|
| ** **                                                        | **2009**                           | **2008** | **2007** |
| ** **                                                        | **(thousands of  dollars)**        |
| **Common Stock**                                                  |                                    |  |  |
| Balance  at beginning of year                                     |  $                            | 729,576  |  $ | 675,774  |  $ | 638,799  |
| Issued                                                            | 24,328                        | 50,863  | 37,181  |
| Other                                                             | 2,571                         | 2,939  | (206) |
| Balance  at end of year                                           | 756,475                       | 729,576  | 675,774  |
|                                                              |                               |  |  |
| **Retained Earnings**                                             |                                    |  |  |
| Balance  at beginning of year                                     | 581,605                       | 537,699  | 493,363  |
| Net  Income Attributable to IDACORP, Inc.                         | 124,350                       | 98,414  | 82,339  |
| Common  stock dividends ($1.20 per share)                         | (56,776)                           | (54,508) | (53,138) |
| Adjustment  upon adoption of ASC 740                              | -                   | -    | 15,136  |
| Other                                                             | 1                             | -    | (1) |
| Balance  at end of year                                           | 649,180                       | 581,605  | 537,699  |
|                                                              |                               |  |  |
| **Accumulated Other  Comprehensive Income (Loss)**                |                                    |  |  |
| Balance  at beginning of year                                     | (8,707)                            | (6,156) | (5,737) |
| Unrealized  gain (loss) on securities (net of tax)                | 1,820                         | (568) | (743) |
| Unfunded  pension liability adjustment (net of tax)               | (1,380)                            | (1,983) | 324  |
| Balance  at end of year                                           | (8,267)                            | (8,707) | (6,156) |
|                                                              |                               |  |  |
| **Treasury Stock**                                                |                                    |  |  |
| Balance  at beginning of year                                     | (37)                               | (2) | (2,242) |
| Issued                                                            | 1,425                         | 99  | 330  |
| Acquired                                                          | (1,441)                            | (304) | (346) |
| Other                                                             | -                   | 170  | 2,256  |
| Balance  at end of year                                           | (53)                               | (37) | (2) |
| Total  IDACORP, Inc. shareholders’ equity at end of year     | 1,397,335                     | 1,302,437  | 1,207,315  |
|                                                              |                               |  |  |
| **Noncontrolling interests**                                      |                                    |  |  |
| Balance  at beginning of year                                     | 4,434                         | 4,478  | 5,062  |
| Net  Income (Loss) attributed to noncontrolling interest          | 25                            | (169) | (469) |
| Other                                                             | (250)                              | 125  | (115) |
| Balance  at end of year                                           | 4,209                         | 4,434  | 4,478  |
| Total  equity at end of year                                      |  $                            | 1,401,544  |  $ | 1,306,871  |  $ | 1,211,793  |
|                                                                   |                                    |  |  |
| The accompanying notes are an integral part of these  statements. |

 

 

 

 

 

 

 

 

 

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**IDACORP, Inc.**

**ConsolidatedStatements of Comprehensive Income**
|                                                                       | **Year Ended  December 31,** |
|-----------------------------------------------------------------------|------------------------------|
|                                                                  | **2009**                     | **2008** | **2007** |
|                                                                       | **(thousands of  dollars)**  |
|                                                                       |                              |  |  |
| **Net Income**                                                        |  $                      | 124,375  |  $ | 98,245  |  $ | 81,870  |
|                                                                       |                              |  |  |
| **Other Comprehensive Income (Loss):**                                |                              |  |  |
| Unrealized gains (losses) on securities:                              |                              |  |  |
| Net unrealized holding gains  (losses) arising during the period,     |                              |  |  |
| net of tax of $1,169, ($3,034)  and $114                              | 1,820                   | (4,727) | 179  |
| Reclassification adjustment for  losses (gains) included              |                              |  |  |
| in net income, net of tax of  $0, $2,670 and ($592)                   | -                       | 4,159  | (922) |
| Net unrealized gains (losses)                                         | 1,820                   | (568) | (743) |
| Unfunded pension liability adjustment, net of tax                     |                              |  |  |
|  of ($885), ($1,273) and $208                                    | (1,380)                      | (1,983) | 324  |
| **Total Comprehensive Income**                                        | 124,815                 | 95,694  | 81,451  |
| Comprehensive (income) loss  attributable to noncontrolling interests | (25)                         | 169  | 469  |
| **Comprehensive Income attributable to IDACORP, Inc.  common**        |                              |   |  |   |  |   |
|                                                                       | **shareholders**             |  $ | 124,790  |  $ | 95,863  |  $ | 81,920  |
|                                                                       |                              |  |  |
| The accompanying  notes are an integral part of these statements.     |                              |
|                                                                       |                              |  |  |  |  |  |  |

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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**Idaho Power Company**

**Consolidated Statementsof Income**
|                                                                   | ** Year Ended  December 31,** |
|-------------------------------------------------------------------|------------------------------------|
| ** **                                                        | ** 2009**                     | **2008** | **2007** |
|                                                                   | ** (thousands of  dollars)**  |
| **Operating Revenues:**                                           |                                    |  |  |
| General business                                                  |  $                            | 883,765  |  $ | 784,311  |  $ | 668,303  |
| Off-system sales                                                  | 94,373                        | 121,429  | 154,948  |
| Other revenues                                                    | 67,858                        | 50,336  | 52,150  |
| Total operating revenues                                          | 1,045,996                     | 956,076  | 875,401  |
|                                                                   |                                    |  |  |
| **Operating Expenses:**                                           |                                    |  |  |
| Operation:                                                        |                                    |  |  |
| Purchased power                                                   | 160,569                       | 231,137  | 289,484  |
| Fuel expense                                                      | 149,566                       | 149,403  | 134,322  |
| Third-party transmission  expense                                 | 6,629                         | 7,250  | 10,470  |
| Power cost adjustment                                             | 66,710                        | (47,413) | (121,131) |
| Other                                                             | 223,652                       | 218,140  | 207,877  |
| Energy efficiency programs                                        | 31,821                        | 18,880  | 13,487  |
| Gain on sale of emission  allowances                              | (298)                              | (504) | (2,754) |
| Maintenance                                                       | 69,459                        | 68,639  | 68,163  |
| Depreciation                                                      | 110,626                       | 102,086  | 103,072  |
| Taxes other than income taxes                                     | 21,069                        | 19,083  | 17,634  |
| Total operating expenses                                          | 839,803                       | 766,701  | 720,624  |
|                                                                   |                                    |  |  |
| **Income from Operations**                                        | 206,193                       | 189,375  | 154,777  |
|                                                                   |                                    |  |  |
| **Other Income (Expense):**                                       |                                    |  |  |
| Allowance for equity funds used during construction               | 7,555                         | 3,141  | 5,995  |
| Earnings of unconsolidated equity-method investments              | 8,256                         | 6,772  | 5,553  |
| Other income                                                      | 13,020                        | 8,174  | 12,636  |
| Other expense                                                     | (5,012)                            | (6,262) | (8,215) |
| Total other income                                                | 23,819                        | 11,825  | 15,969  |
|                                                                   |                                    |  |  |
| **Interest Charges:**                                             |                                    |  |  |
| Interest on long-term debt                                        | 73,270                        | 66,145  | 58,097  |
| Other interest                                                    | 4,060                         | 10,420  | 8,281  |
| Allowance for borrowed funds used during construction             | (5,398)                            | (7,080) | (7,597) |
| Total interest charges                                            | 71,932                        | 69,485  | 58,781  |
|                                                                   |                                    |  |  |
| **Income Before Income Taxes**                                    | 158,080                       | 131,715  | 111,965  |
|                                                                   |                                    |  |  |
| **Income Tax Expense**                                            | 35,521                        | 37,600  | 35,386  |
|                                                                   |                                    |  |  |
| **Net Income**                                                    |  $                            | 122,559  |  $ | 94,115  |  $ | 76,579  |
|                                                                   |                                    |  |  |
| The accompanying  notes are an integral part of these statements. |

 

 

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**Idaho Power Company**

**Consolidated Balance Sheets**
|                                                                    | ** December 31,**            |
|-------------------------------------------------------------------------|-----------------------------------|
|                                                                    | **2009**                          | **2008** |
| **Assets**                                                              | ** (thousands of  dollars)** |
|                                                                         |                                   |  |
| **Electric Plant:**                                                     |                                   |  |
| In service (at original cost)                                           |  $                           | 4,160,178  |  $ | 4,030,134  |
| Accumulated provision for depreciation                                  | (1,558,538)                       | (1,505,120) |
| In service - net                                                        | 2,601,640                    | 2,525,014  |
| Construction work in progress                                           | 289,188                      | 207,662  |
| Held for future use                                                     | 7,151                        | 6,318  |
| Electric plant - net                                                    | 2,897,979                    | 2,738,994  |
|                                                                    |                                   |  |
| **Investments and Other Property**                                      | 108,299                      | 106,057  |
| ** **                                                              |                                   |  |
| **Current Assets:**                                                     |                                   |  |
| Cash and cash equivalents                                               | 21,625                       | 3,141  |
| Receivables:                                                            |                                   |  |
| Customer                                                                | 76,792                       | 64,433  |
| Other                                                                   | 10,648                       | 7,947  |
| Allowance for uncollectible  accounts                                   | (1,990)                           | (1,724) |
| Taxes receivable                                                        | 3,585                        | 41,363  |
| Accrued unbilled revenues                                               | 51,272                       | 43,934  |
| Materials and supplies (at average cost)                                | 48,054                       | 50,121  |
| Fuel stock (at average cost)                                            | 25,634                       | 16,852  |
| Prepayments                                                             | 10,960                       | 9,865  |
| Deferred income taxes                                                   | 7,887                        | 3,852  |
| Other                                                                   | 2,115                        | 4,968  |
| Total current assets                                                    | 256,582                      | 244,752  |
|                                                                         |                                   |  |
| **Deferred Debits:**                                                    |                                   |  |
| American Falls and Milner water rights                                  | 24,226                       | 26,332  |
| Company-owned life insurance                                            | 26,654                       | 29,482  |
| Regulatory assets                                                       | 720,401                      | 696,332  |
| Other                                                                   | 39,249                       | 42,907  |
| Total deferred debits                                                   | 810,530                      | 795,053  |
|                                                                         |                                   |  |
| **Total**                                                               |  $                           | 4,073,390  |  $ | 3,884,856  |
|                                                                         |                                   |  |
|  The accompanying  notes are an integral part of these statements. |

 

 

 

 

 

 

 

 

 

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**Idaho Power Company**

**Consolidated Balance Sheets**
| ** **                                                              | ** December 31,**            |
|-------------------------------------------------------------------------|-----------------------------------|
| ** **                                                              | **2009**                          | **2008** |
| **Capitalization and Liabilities**                                      | ** (thousands of  dollars)** |
|                                                                         |                                   |  |
| **Capitalization:**                                                     |                                   |  |
| Common stock equity:                                                    |                                   |  |
| Common stock, $2.50 par value  (50,000,000 shares                       |                                   |  |
| authorized; 39,150,812 shares  outstanding)                             |  $                           | 97,877  |  $ | 97,877  |
| Premium on capital stock                                                | 638,758                      | 618,758  |
| Capital stock expense                                                   | (2,097)                           | (2,097) |
| Retained earnings                                                       | 547,695                      | 482,047  |
| Accumulated other comprehensive  loss                                   | (8,267)                           | (8,707) |
| Total common stock equity                                               | 1,273,966                    | 1,187,878  |
|                                                                         |                                   |  |
| Long-term debt                                                          | 1,409,730                    | 1,180,691  |
| Total capitalization                                                    | 2,683,696                    | 2,368,569  |
|                                                                    |                                   |  |
| **Current Liabilities:**                                                |                                   |  |
| Long-term debt due within one year                                      | 1,064                        | 81,064  |
| Notes payable                                                           | -                            | 112,850  |
| Accounts payable                                                        | 83,128                       | 96,268  |
| Notes and accounts payable to related parties                           | 1,736                        | 768  |
| Interest accrued                                                        | 20,056                       | 16,675  |
| Other                                                                   | 40,002                       | 43,274  |
| Total current liabilities                                               | 145,986                      | 350,899  |
|                                                                    |                                   |  |
| **Deferred Credits:**                                                   |                                   |  |
| Deferred income taxes                                                   | 611,749                      | 547,159  |
| Regulatory liabilities                                                  | 287,780                      | 276,266  |
| Other                                                                   | 344,179                      | 341,963  |
| Total deferred credits                                                  | 1,243,708                    | 1,165,388  |
|                                                                    |                                   |  |
| **Commitments and Contingencies**                                       |                                   |  |
|                                                                         |                                   |  |
| **Total**                                                               |  $                           | 4,073,390  |  $ | 3,884,856  |
|                                                                         |                                   |  |
|  The accompanying  notes are an integral part of these statements. |

 

 

 

 

 

 

 

 

 

 

 

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**Idaho Power Company**

**ConsolidatedStatements of Capitalization**
|                                                                         | **December 31,**            |                 | **December 31,** |          |
|-------------------------------------------------------------------------|-----------------------------|-----------------|------------------|----------|
|                                                                    | **2009**                    | **%**           | **2008**         | **%**    |
|                                                                         | **(thousands of  dollars)** |
| **Common Stock Equity:**                                                |                             |                 |                  |          |
| Common stock                                                            |  $                     | 97,877     |                  |  $  | 97,877  |  |
| Premium on capital stock                                                | 638,758                |                 | 618,758     |          |
| Capital stock expense                                                   | (2,097)                     |                 | (2,097)          |          |
| Retained earnings                                                       | 547,695                |                 | 482,047     |          |
| Accumulated other comprehensive  loss                                   | (8,267)                     |            | (8,707)          |     |
| Total common stock equity                                               | 1,273,966              | 47         | 1,187,878   | 50  |
| **Long-Term Debt:**                                                     |                             |                 |                  |          |
| First mortgage bonds:                                                   |                             |                 |                  |          |
| 7.20% Series due 2009                                                   | -            |                 | 80,000      |          |
| 6.60% Series due 2011                                                   | 120,000                |                 | 120,000     |          |
| 4.75% Series due 2012                                                   | 100,000                |                 | 100,000     |          |
| 4.25% Series due 2013                                                   | 70,000                 |                 | 70,000      |          |
| 6.025% Series due 2018                                                  | 120,000                |                 | 120,000     |          |
| 6.15% Series due 2019                                                   | 100,000                |                 | -           |          |
| 4.50% Series due 2020                                                   | 130,000                |                 | -           |          |
| 6    % Series due 2032                                   | 100,000                |                 | 100,000     |          |
| 5.50% Series due 2033                                                   | 70,000                 |                 | 70,000      |          |
| 5.50% Series due 2034                                                   | 50,000                 |                 | 50,000      |          |
| 5.875% Series due 2034                                                  | 55,000                 |                 | 55,000      |          |
| 5.30% Series due 2035                                                   | 60,000                 |                 | 60,000      |          |
| 6.30% Series due 2037                                                   | 140,000                |                 | 140,000     |          |
| 6.25% Series due 2037                                                   | 100,000                |            | 100,000     |     |
| Total first mortgage bonds                                              | 1,215,000              |            | 1,065,000   |     |
| Amount due within one year                                              | -            |            | (80,000)         |     |
| Net first mortgage bonds                                                | 1,215,000              |            | 985,000     |     |
| Pollution control revenue  bonds:                                       |                             |                 |                  |          |
| 5.15% Series due 2024                                                   | 49,800                 |                 | -           |          |
| 5.25% Series due 2026                                                   | 116,300                |                 | -           |          |
| Variable Rate Series 2003 due  2024                                     | -                      |                 | 49,800      |          |
| Variable Rate Series 2006 due  2026                                     | -                      |                 | 116,300     |          |
| Variable Rate Series 2000 due  2027                                     | 4,360                  |                 | 4,360       |          |
| Total pollution control revenue  bonds                                  | 170,460                |            | 170,460     |     |
| American Falls bond guarantee                                           | 19,885                 |                 | 19,885      |          |
| Milner Dam note guarantee                                               | 8,509                  |                 | 9,573       |          |
| Note guarantee due within one  year                                     | (1,064)                     |                 | (1,064)          |          |
| Unamortized premium/discount -  net                                     | (3,060)                     |                 | (3,163)          |          |
| Term Loan Credit Facility                                               | -            |                 | 166,100     |          |
| Purchase of pollution control  revenue bonds                            | -            |            | (166,100)        |     |
| Total long-term debt                                                    | 1,409,730              | 53         | 1,180,691   | 50  |
| **Total Capitalization**                                                |  $                     | 2,683,696  | 100         |  $  | 2,368,569  | 100  |
|                                                                         |
|  The accompanying  notes are an integral part of these statements. |

 

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**Idaho Power Company**

**Consolidated Statements of CashFlows**
|                                                                   | **Year Ended December 31,** |
|-------------------------------------------------------------------|-----------------------------|
|                                                                   | **2009**                    | **2008** | **2007** |
|                                                                   | **(thousands of dollars)**  |
| **Operating Activities:**                                         |                             |  |  |
| Net income                                                        |  $                     | 122,559  |  $ | 94,115  |  $ | 76,579  |
| Adjustments to reconcile net  income to net cash provided by      |                   |  |  |
| operating  activities:                                            |                             |  |  |
| Depreciation  and amortization                                    | 117,878                | 109,047  | 107,500  |
| Deferred  income taxes and investment tax credits                 | 15,082                 | 25,614  | 36,258  |
| Changes  in regulatory assets and liabilities                     | 57,836                 | (64,068) | (128,089) |
| Non-cash  pension expense                                         | 4,025                  | 3,513  | 6,868  |
| Earnings  of equity method investments                            | (8,256)                     | (6,772) | (5,553) |
| Distributions  from equity method investments                     | 10,720                 | -  | -  |
| Gain  on sale of assets                                           | (451)                       | (3,460) | (4,589) |
| Other  non-cash adjustments to net income                         | (1,455)                     | 5,102  | (5,660) |
| Change  in:                                                       |                             |  |  |
| Accounts  receivables and prepayments                             | (14,828)                    | (2,462) | (13,298) |
| Accounts  payable                                                 | (28,212)                    | 16,728  | 3,654  |
| Taxes  receivable (accrued)                                       | 38,003                 | (43,608) | (12,862) |
| Other  current assets                                             | (14,053)                    | (14,055) | (11,234) |
| Other  current liabilities                                        | (7,438)                     | (6,130) | 15,751  |
| Other  assets                                                     | 1,475                  | 1,492  | 2,147  |
| Other  liabilities                                                | (20,521)                    | 4,487  | 14,000  |
| Net  cash provided by operating activities                        | 272,364                | 119,543  | 81,472  |
| **Investing Activities:**                                         |                             |  |  |
| Additions to utility plant                                        | (251,937)                   | (243,544) | (287,219) |
| Proceeds from the sale of  non-utility assets                     | 2,250                  | 5,785  | -  |
| Purchase of  available-for-sale securities                        | -                      | -  | (24,349) |
| Proceeds from the sale of  available-for-sale securities          | -                      | -  | 26,110  |
| Proceeds from sale of  emission allowances                        | 2,382                  | 2,959  | 19,846  |
| Investments in  unconsolidated affiliates                         | -                      | (3,210) | (8,675) |
| Withdrawal (refundable  deposit) for tax related liabilities      | -                      | 43,927  | (43,927) |
| Other                                                             | 1,171                  | (3,349) | (263) |
| Net  cash used in investing activities                            | (246,134)                   | (197,432) | (318,477) |
| **Financing Activities:**                                         |                             |  |  |
| (Decrease) increase in term  loans                                | (170,000)                   | 170,000  | -  |
| Issuance of long-term debt                                        | 230,000                | 120,000  | 240,000  |
| Remarketing (purchase) of  pollution control revenue bonds        | 166,100                | (166,100) | -  |
| Retirement of long-term debt                                      | (81,064)                    | (1,064) | (81,064) |
| Dividends on common stock                                         | (56,911)                    | (54,368) | (53,491) |
| Net change in short term  borrowings                              | (108,950)                   | (27,635) | 84,385  |
| Capital contribution from  parent                                 | 20,000                 | 37,000  | 51,000  |
| Other                                                             | (6,921)                     | (2,150) | (882) |
| Net  cash (used in) provided by financing activities              | (7,746)                     | 75,683  | 239,948  |
| Net increase (decrease) in  cash and cash equivalents             | 18,484                 | (2,206) | 2,943  |
| Cash and cash equivalents at  beginning of the year               | 3,141                  | 5,347  | 2,404  |
| Cash and cash equivalents at  end of the year                     |  $                     | 21,625  |  $ | 3,141  |  $ | 5,347  |
|                                                                   |                             |  |  |
| **Supplemental Disclosure  of Cash Flow Information:**            |                             |  |  |
| Cash paid during the year  for:                                   |                             |  |  |
| Income  taxes (received from) paid to parent                      |  $                     | (13,756) |  $ | 36,053  |  $ | 2,877  |
| Interest  (net of amount capitalized)                             |  $                     | 66,231  |  $ | 63,448  |  $ | 57,355  |
| Non-cash investing  activities:                                   |                             |  |  |
| Additions  to property, plant and equipment in accounts payable   |  $                     | 19,075  |  $ | 14,194  |  $ | 13,210  |
|                                                                   |
| The accompanying notes are an integral part of these  statements. |

 

 

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**Idaho Power Company**

**Consolidated Statementsof Retained Earnings**
|                                                                   | **Year Ended  December 31,** |
|-------------------------------------------------------------------|------------------------------|
|                                                              | **2009**                     | **2008** | **2007** |
|                                                                   | **(thousands of  dollars)**  |
|                                                                   |                              |  |  |
| **Retained Earnings, Beginning of Year**                          |  $                      | 482,047  |  $ | 442,300  |  $ | 404,076  |
|                                                                   |                              |  |  |
| **Net Income**                                                    | 122,559                 | 94,115  | 76,579  |
|                                                                   |                              |  |  |
| **Cumulative effect of accounting change (adoption of FIN  48)**  | -                       | -  | 15,136  |
|                                                                   |                              |  |  |
| **Dividends on common stock**                                     | (56,911)                     | (54,368) | (53,491) |
|                                                                   |                              |  |  |
| **Retained Earnings, End of Year**                                |  $                      | 547,695  |  $ | 482,047  |  $ | 442,300  |
|                                                                   |                              |  |  |
| The accompanying  notes are an integral part of these statements. |

 

 

 

 

**Idaho Power Company**

**ConsolidatedStatements Comprehensive Income**
|                                                                   | **Year Ended  December 31,** |
|-------------------------------------------------------------------|------------------------------|
|                                                              | **2009**                     | **2008** | **2007** |
|                                                                   | **(thousands of  dollars)**  |
|                                                                   |                              |  |  |
| **Net Income**                                                    |  $                      | 122,559  |  $ | 94,115  |  $ | 76,579  |
|                                                                   |                              |  |  |
| **Other Comprehensive Income (Loss):**                            |                              |  |  |
| Unrealized gains (losses) on securities:                          |                              |  |  |
| Net unrealized holding gains  (losses) arising during the period, |                              |  |  |
| net of tax of $1,169, ($3,034)  and $114                          | 1,820                   | (4,727) | 179  |
| Reclassification adjustment for  losses (gains) included          |                              |  |  |
| in net income, net of tax of  $0, $2,670 and ($592)               | -                       | 4,159  | (922) |
| Net unrealized gains (losses)                                     | 1,820                   | (568) | (743) |
| Unfunded pension liability adjustment, net of tax                 |                              |  |  |
|  of ($885), ($1,273) and $208                                | (1,380)                      | (1,983) | 324  |
| **Total Comprehensive Income**                                    |  $                      | 122,999  |  $ | 91,564  |  $ | 76,160  |
|                                                                   |                              |  |  |
| The accompanying  notes are an integral part of these statements. |                              |

 

 

 

 

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IDACORP, INC. AND IdahoPOWER COMPANY

NOTES TO THE CONSOLIDATEDFINANCIAL STATEMENTS

** **

1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

 

This Annual Report on Form 10-K is a combined report ofIDACORP, Inc. (IDACORP) and Idaho Power Company (Idaho Power).  Therefore, theNotes to the Consolidated Financial Statements apply to both IDACORP and IdahoPower.  However, Idaho Power makes no representation as to the informationrelating to IDACORP’s other operations.

**Nature of Business**

IDACORP is a holding company formed in 1998 whose principaloperating subsidiary is Idaho Power.  IDACORP is subject to the provisions ofthe Public Utility Holding Company Act of 2005, which provides certain accessto books and records to the Federal Energy Regulatory Commission (FERC) andstate utility regulatory commissions and imposes certain record retention andreporting requirements on IDACORP.

Idaho Power is an electric utility with a service territorycovering approximately 24,000 square miles in southern Idaho and easternOregon.  Idaho Power is regulated by the FERC and the state regulatorycommissions of Idaho and Oregon.  Idaho Power is the parent of Idaho EnergyResources Co. (IERCo), a joint venturer in Bridger Coal Company, which suppliescoal to the Jim Bridger generating plant owned in part by Idaho Power.

IDACORP’s other subsidiaries include:

•  IDACORP Financial Services, Inc. (IFS), an investor in affordablehousing and other real estate investments;

•  Ida-West Energy Company (Ida-West), an operator of smallhydroelectric generation projects that satisfy the requirements of the PublicUtility Regulatory Policies Act of 1978 (PURPA); and

•  IDACORP Energy (IE), a marketer of energy commodities, whichwound down operations in 2003.

 

In the second quarter of 2006, IDACORP management designatedthe operations of IDACOMM, Inc. (IDACOMM) as assets held for sale, as definedby accounting principles generally accepted in the United States of America(GAAP), and IDACOMM was sold in February 2007.  IDACORP’s consolidatedfinancial statements reflect the reclassification of the immaterial results ofIDACOMM as discontinued operations for all periods presented.

**Principles of Consolidation**

IDACORP’s and Idaho Power’s consolidated financialstatements include the accounts of each company, the subsidiaries that thecompanies control, and any variable interest entities (VIEs) for which thecompanies are the primary beneficiaries.  All significant intercompany balanceshave been eliminated in consolidation.  Investments in subsidiaries that thecompanies do not control and investments in VIEs for which the companies arenot the primary beneficiaries, but have the ability to exercise significantinfluence over operating and financial policies, are accounted for using theequity method of accounting.

The entities that IDACORP and Idaho Power consolidateconsist primarily of the wholly-owned subsidiaries discussed above.  Inaddition, IDACORP consolidates one VIE, Marysville Hydro Partners (Marysville),which is a joint venture owned 50 percent by Ida-West and 50 percent byEnvironmental Energy Company (EEC).  Marysville has approximately $26 millionof assets, primarily a hydroelectric plant, and approximately $17 million ofintercompany long-term debt, which is eliminated in consolidation.  EEC hasborrowed amounts from Ida-West to fund a portion of its required capitalcontributions to Marysville.  The loans are payable from EEC’s share ofdistributions and are secured by the stock of EEC and EEC’s interest inMarysville.  Ida-West is the primary beneficiary because the ownership of the intercompanynote and the EEC note result in it absorbing a majority of the expected lossesof the entity.  Creditors of Marysville have no recourse to the general creditof IDACORP and there are no other arrangements that could require IDACORP toprovide financial support to Marysville or expose IDACORP to losses.

76

 

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Prior to October 2008, IDACORP also consolidated IFS’limited partnership investment in Empire Development Company, LLC, (Empire) anentity that earned historic tax credits through the rehabilitation of theEmpire Building in Boise, Idaho.  In 2008 the partnership agreement for Empirewas amended and as a result of the amendment Empire no longer met the criteriato be a VIE.  Empire was deconsolidated and is now accounted for under theequity method of accounting.

Through IFS, IDACORP also holds variable interests in VIEsfor which it is not the primary beneficiary.  These VIEs are historicrehabilitation and affordable housing developments in which IFS holds limitedpartnership interests ranging from five to 99 percent.  IFS does not absorb amajority of the expected losses of these entities, either because of specificprovisions in the partnership agreements or due to not owning a majorityinterest.  These investments were acquired between 1996 and 2009.  IFS’smaximum exposure to loss in these developments is limited to its net carryingvalue, which was $78 million at December 31, 2009.

**Management Estimates**

Management makes estimates and assumptions when preparingfinancial statements in conformity with GAAP.  These estimates and assumptionsinclude those related to rate regulation, retirement benefits, contingencies,litigation, asset impairment, income taxes, unbilled revenues and bad debt. These estimates and assumptions affect the reported amounts of assets andliabilities and the disclosure of contingent assets and liabilities at the dateof the financial statements, and the reported amounts of revenues and expensesduring the reporting period.  These estimates involve judgments with respect to,among other things, future economic factors that are difficult to predict andare beyond management’s control.  As a result, actual results could differ fromthose estimates.

**Subsequent Events**

Subsequent events were evaluated through February 23, 2010,up to the time the financial statements were issued.

**System of Accounts**

The accounting records of Idaho Power conform to the UniformSystem of Accounts prescribed by the FERC and adopted by the public utilitycommissions of Idaho, Oregon and Wyoming.

**Regulation of Utility Operations**

IDACORP’s and Idaho Power’s financial statements reflect theeffects of the different ratemaking principles followed by the jurisdictionsregulating Idaho Power.  The application of accounting principles related toregulated operations sometimes results in Idaho Power recording expenses andrevenues in a different period than when an unregulated enterprise would.  Inthese circumstances, the amounts are deferred as regulatory assets orregulatory liabilities on the balance sheet and recorded on the incomestatement when recovered or returned in rates.  Additionally, regulators canimpose regulatory liabilities upon a regulated company for amounts previouslycollected from customers and for amounts that are expected to be refunded tocustomers.  The effects of applying these accounting principles are discussedin more detail in Note 3.

**Cash and Cash Equivalents**

Cash and cash equivalents include cash on hand and highlyliquid temporary investments that mature within three months of the date ofacquisition.

**Derivative Financial Instruments**

Financial instruments such as commodity futures, forwards,options and swaps are used to manage exposure to commodity price risk in theelectricity market.  All derivative instruments are recognized as either assetsor liabilities at fair value on the balance sheet.  Idaho Power’s physicalforward contracts qualify for the normal purchases and normal sales exceptionto derivative accounting requirements with the exception of forward contracts forthe purchase of natural gas for use at Idaho Power’s natural gas generationfacilities.  The objective of the risk management program is to mitigate therisk associated with the purchase and sale of electricity and natural gas. Because of Idaho Power’s regulatory accounting mechanisms, Idaho Power recordsthe changes in fair value of derivative instruments related to power supply asregulatory assets or liabilities.

 

77

 

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Operating revenues for Idaho Power related to the sale ofenergy are recorded when service is rendered or energy is delivered tocustomers.  Idaho Power accrues estimated unbilled revenues for electricservices delivered to customers but not yet billed at period-end.  Idaho Powercollects franchise fees and similar taxes related to energy consumption.  Theseamounts are recorded as liabilities until paid to the taxing authority.  Noneof these collections are reported on the income statement as revenue orexpense.  Beginning in February 2009, Idaho Power is collecting Allowance forFunds Used During Construction (AFUDC) in base rates for a specific capitalproject, as discussed in Note 3, “Regulatory Matters.”  Cash collected underthis ratemaking mechanism is recorded as a regulatory liability.

**Property, Plant and Equipment and Depreciation**

The cost of utility plant in service represents the originalcost of contracted services, direct labor and material, AFUDC and indirectcharges for engineering, supervision and similar overhead items.  Repair andmaintenance costs associated with planned major maintenance are expensed as thecosts are incurred, as are maintenance and repairs of property and replacementsand renewals of items determined to be less than units of property.  Forutility property replaced or renewed, the original cost plus removal cost lesssalvage is charged to accumulated provision for depreciation, while the cost ofrelated replacements and renewals is added to property, plant and equipment.

All utility plant in service is depreciated using thestraight-line method at rates approved by regulatory authorities.  Annualdepreciation provisions as a percent of average depreciable utility plant inservice approximated 2.81 percent in 2009, 2.73 percent in 2008 and 2.95percent in 2007.

Long-lived assets are periodically reviewed for impairmentwhen events or changes in circumstances indicate that the carrying amount of anasset may not be recoverable.  If the sum of the undiscounted expected futurecash flows from an asset is less than the carrying value of the asset, impairmentmust be recognized in the financial statements.  There were no materialimpairments of these assets in 2008 or 2009.

**Allowance for Funds Used During Construction**

AFUDC represents the cost of financing construction projectswith borrowed funds and equity funds.  With one exception, cash is not realizedcurrently from such allowance, it is realized under the rate-making processover the service life of the related property through increased revenuesresulting from a higher rate base and higher depreciation expense.  Thecomponent of AFUDC attributable to borrowed funds is included as a reduction tointerest expense, while the equity component is included in other income. Idaho Power’s weighted-average monthly AFUDC rates for 2009, 2008 and 2007 were6.7 percent, 5.2 percent and 6.8 percent, respectively.  Idaho Power’sreductions to interest expense for AFUDC were $5 million for 2009, $7 millionfor 2008 and $8 million for 2007.  Other income included $8 million, $3 millionand $6 million of AFUDC for 2009, 2008 and 2007, respectively.

**Income Taxes**

IDACORP and Idaho Power account for income taxes under theasset and liability method, which requires the recognition of deferred taxassets and liabilities for the expected future tax consequences of events thathave been included in the financial statements.  Under this method, deferredtax assets and liabilities are determined based on the differences between thefinancial statements and tax basis of assets and liabilities using enacted taxrates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities isrecognized in income in the period that includes the enactment date.

Consistent with orders and directives of the Idaho PublicUtilities Commission (IPUC), the regulatory authority having principaljurisdiction, Idaho Power’s deferred income taxes (commonly referred to asnormalized accounting) are provided for the difference between income taxdepreciation and straight-line depreciation computed using book lives oncoal-fired generation facilities and properties acquired after 1980.  On otherfacilities, deferred income taxes are provided for the difference betweenaccelerated income tax depreciation and straight-line depreciation using taxguideline lives on assets acquired prior to 1981 unless contrary to applicableincome tax guidance, deferred income taxes are not provided for those incometax timing differences where the prescribed regulatory accounting methods donot provide for current recovery in rates.  Regulated enterprises are requiredto recognize such adjustments as regulatory assets or liabilities if it isprobable that such amounts will be recovered from or returned to customers infuture rates.

The state of Idaho allows a three-percent investment taxcredit on qualifying plant additions.  Investment tax credits earned onregulated assets are deferred and amortized to income over the estimatedservice lives of the related properties.  Credits earned on non-regulatedassets or investments are recognized in the year earned.

Income taxes are discussed in more detail in Note 2.

 

 

78

 

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**Comprehensive Income**

Comprehensive income includes net income, unrealized holdinggains and losses on available-for-sale marketable securities and amountsrelated to a deferred compensation plan for certain senior management employeesand directors called the Senior Management Security Plan (SMSP).

The following table presents IDACORP’s and Idaho Power’saccumulated other comprehensive loss balance at December 31 (net of tax):
|                                                      | **2009**                    | **2008**    |
|-----------------------------------------------------------|-----------------------------|-------------|
|                                                      | **(thousands of  dollars)** |
| Unrealized holding gains on available-for-sale securities | $                           | 1,820  | $ | -  |
| Senior Management Security Plan                           |                        | (10,087)    |   | (8,707) |
|                                                      | Total                       | $           | (8,267) | $ | (8,707) |
|                                                      |                        |        |   |   |   |

 

**Other Accounting Policies**

Debt discount, expense and premium are deferred and beingamortized over the terms of the respective debt issues.

**Reclassifications**

Certain prior year amounts have been reclassified to conformto the current year presentation.  The reclassifications did not impactIDACORP’s and Idaho Power’s net income or total equity, and include thefollowing:

•  Third-party transmission expense was broken out from electricutility other operations and maintenance in IDACORP’s consolidated statementsof income and from other operation in Idaho Power’s consolidated statements ofincome because third-party transmission costs are now treated as a power supplycost in the power cost adjustment (PCA);

•  Employee notes – current was combined with other currentreceivables and employee notes – long-term was combined with other non-currentassets in IDACORP’s and Idaho Power’s consolidated balance sheets due to theemployee notes becoming an immaterial balance;

•  Uncertain tax positions was combined with other currentliabilities in IDACORP’s and Idaho Power’s condensed consolidated balancesheets due to the uncertain tax positions becoming an immaterial balance;

•  2007 investments in affordable housing was combined with other inthe investing section of IDACORP’s consolidated statements of cash flows;

•  Excess tax benefit from share-based payment arrangements wascombined with the change in taxes receivable (accrued) in the operating sectionand excess tax benefit from share-based payment arrangements was combined withother in the financing section of IDACORP’s consolidated statements of cashflows;

•  Amortization of affordable housing was removed from depreciationand amortization and combined with undistributed earnings of subsidiaries; thetotal of which was then separated into losses of equity method investments anddistributions from equity method investments in the operating section ofIDACORP’s consolidated statements of cash flows; and

•  Other assets was combined with other in the financing section ofIDACORP’s and Idaho Power’s consolidated statements of cash flows.

 

**New Accounting Pronouncements**

In June 2009, the FASB issued amendments to priorconsolidation guidance.  The amendments will significantly affect the overallconsolidation analysis of VIEs.  The amendments will require IDACORP and IdahoPower to reconsider their previous conclusions relating to the consolidation ofVIEs, including (1) whether an entity is a VIE, (2) whether the enterprise isthe VIE’s primary beneficiary, and (3) what type of financial statementdisclosures are required.  For IDACORP and Idaho Power, the amendments areeffective as of January 1, 2010, and early adoption is prohibited.  Theadoption of this guidance is not expected to have a material effect on theconsolidated financial statements of IDACORP and Idaho Power.

**Adopted Accounting Pronouncements**

The FASB has issued several new accounting pronouncements. IDACORP and Idaho Power adopted these pronouncements in 2009:

79

 

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** **

•  Effective for financial statements issued for interim and annualperiods ending after September 15, 2009, The FASB Accounting StandardsCodification TM became the source of authoritative U.S. GAAP recognized by theFASB to be applied to nongovernmental entities.  Rules and interpretivereleases of the Securities and Exchange Commission (SEC) under authority offederal securities laws are also sources of authoritative GAAP to SECregistrants.  On the effective date, the Codification superseded, but did notchange, all then-existing non-SEC accounting and reporting standards, and allother nongrandfathered, non-SEC accounting literature not included in theCodification became nonauthoritative.  Transition to the Codification did notaffect IDACORP’s or Idaho Power’s results of operations, cash flows or financialpositions.  This Form 10-K reflects the implementation of the Codification.

•  On January 1, 2009, IDACORP and Idaho Power adopted guidancerelated to presentation of noncontrolling interests in consolidatedsubsidiaries (previously referred to as minority interests).  This guidanceclarified that noncontrolling interests should be reported as equity on theconsolidated financial statements.  IDACORP has disclosed in its financialstatements the portion of equity and net income attributable to the noncontrollinginterests in consolidated subsidiaries and has reclassified $4 million ofnoncontrolling interests from other liabilities to equity on the December 31,2008, balance sheet.  Idaho Power does not have any noncontrolling interests. The adoption of this guidance modifies financial statement presentation, butdoes not impact financial statement results.

•  In June 2009, IDACORP and Idaho Power adopted guidance onaccounting for and disclosures of subsequent events, events that occur afterthe balance sheet date but before financial statements are issued or areavailable to be issued.  This guidance has not significantly impacted IDACORP’sor Idaho Power’s consolidated financial statements.

•  Fair Value Measurements:  In the first quarter of 2009, IDACORPand Idaho Power adopted the following fair value guidance:

o   Guidelines for making fair value measurements more consistent byproviding guidance related to determining fair values when there is no activemarket or where the price inputs being used represent distressed sales;

o   Guidance that enhances consistency in financial reporting byincreasing the frequency of fair value disclosures by requiring quarterly fairvalue disclosures for any financial instruments that are not currentlyreflected on the balance sheet of companies at fair value and requiresqualitative and quantitative information about fair value estimates for allsuch financial instruments; and 

o   Guidance on other-than-temporary impairments that brings greaterconsistency to the timing of impairment recognition, and provides greaterclarity to investors about the credit and noncredit components of impaired debtsecurities that are not expected to be sold.  The guidance also requiresincreased and timelier disclosures sought by investors regarding expected cashflows, credit losses, and the aging of securities with unrealized losses.

The adoption of this guidance didnot have a material effect on IDACORP’s or Idaho Power’s consolidated financialstatements.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

80

 

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2.  INCOME TAXES:

 

The components of the netdeferred tax liability are as follows:
| ** **                   | **IDACORP**                   | **Idaho  Power** |
|------------------------------|-------------------------------|------------------|
| ** **                   | **2009**                      | **2008**         | **2009** | **2008** |
| ** **                   | **(thousands  of dollars)**   |
| Deferred tax assets:         |                          |             |   |   |   |   |   |   |
|                         | Regulatory liabilities        | $                | 47,183 | $ | 44,341 | $ | 47,183 | $ | 44,341 |
|                         | Advances for construction     |             | 8,335 |   | 9,305 |   | 8,335 |   | 9,305 |
|                         | Deferred compensation         |             | 21,134 |   | 20,481 |   | 20,661 |   | 19,722 |
|                         | Tax credits                   |             | 81,935 |   | 76,597 |   | 2,548 |   | - |
|                         | Retirement benefits           |             | 84,019 |   | 85,034 |   | 84,019 |   | 85,034 |
|                         | Other                         |             | 9,976 |   | 14,456 |   | 9,104 |   | 13,614 |
|                         |                          | Total            |   | 252,582 |   | 250,214 |   | 171,850 |   | 172,016 |
| Deferred tax liabilities:    |                          |             |   |   |   |   |   |   |
|                         | Property, plant and equipment |             | 282,034 |   | 246,424 |   | 282,034 |   | 246,424 |
|                         | Regulatory assets             |             | 382,136 |   | 333,882 |   | 382,136 |   | 333,882 |
|                         | Conservation programs         |             | 4,772 |   | 1,902 |   | 4,772 |   | 1,902 |
|                         | PCA                           |             | 34,025 |   | 62,820 |   | 34,025 |   | 62,820 |
|                         | Partnership investments       |             | 13,396 |   | 13,060 |   | - |   | - |
|                         | Retirement benefits           |             | 65,690 |   | 69,334 |   | 65,690 |   | 69,334 |
|                         | Other                         |             | 13,206 |   | 961 |   | 7,055 |   | 961 |
|                         |                          | Total            |   | 795,259 |   | 728,383 |   | 775,712 |   | 715,323 |
| Net deferred tax liabilities | $                             | 542,677          | $ | 478,169 | $ | 603,862 | $ | 543,307 |
|                         |                          |             |   |   |   |   |   |   |

 

A reconciliation between thestatutory federal income tax rate and the effective tax rate is as follows:
|   | **IDACORP** | **Idaho Power** |  
 

**2009**

**2008**

**2007**

**2009**

**2008**

**2007**

 
 

**(thousands of dollars)**

 
Federal income tax expense  at 

 

 

 

 

 

 

 

 

 

 

 

 

 

35% statutory rate

$

51,349 

$

41,165 

$

33,601 

$

55,328 

$

46,100 

$

39,188 

Change in taxes resulting  from:

 

 

 

 

 

 

 

 

 

 

 

 

 

AFUDC

 

(4,533)

 

(3,577)

 

(4,757)

 

(4,533)

 

(3,577)

 

(4,757)

 

Capitalized interest

 

1,529 

 

1,729 

 

2,289 

 

1,529 

 

1,729 

 

2,289 

 

Investment tax credits

 

(3,404)

 

(3,490)

 

(3,578)

 

(3,404)

 

(3,490)

 

(3,578)

 

Repair allowance

 

(3,500)

 

(2,450)

 

(2,450)

 

(3,500)

 

(2,450)

 

(2,450)

 

Removal costs

 

(3,810)

 

(2,954)

 

(3,787)

 

(3,810)

 

(2,954)

 

(3,787)

 

Capitalized overhead costs

 

(3,500)

 

(4,200)

 

(4,200)

 

(3,500)

 

(4,200)

 

(4,200)

 

Uncertain tax positions

 

1,138 

 

1,280 

 

(3,586)

 

1,138 

 

1,280 

 

(3,586)

 

Settlement of prior years’  tax 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

returns

 

(4,119)

 

(2,753)

 

- 

 

(4,119)

 

(2,761)

 

- 

 

State income taxes, net of 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

federal benefit

 

1,216 

 

3,842 

 

5,810 

 

1,903 

 

4,601 

 

6,618 

 

Depreciation

 

3,895 

 

5,562 

 

7,576 

 

3,895 

 

5,562 

 

7,576 

 

Affordable housing 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

tax credits 

 

(7,870)

 

(11,437)

 

(14,541)

 

- 

 

- 

 

- 

 

Other, net

 

(6,029)

 

(3,517)

 

1,354 

 

(5,406)

 

(2,240)

 

2,073 

Total income tax expense 

$

22,362 

$

19,200 

$

13,731 

$

35,521 

$

37,600 

$

35,386 

 

Effective tax rate

 

15.2%

 

16.3%

 

14.3%

 

22.5%

 

28.5%

 

31.6%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

81

 

 

 

 

 

 

 

The items comprising income taxexpense are as follows:

 

**IDACORP**

**Idaho Power**

 

**2009**

**2008**

**2007**

**2009**

**2008**

**2007**

 

**(thousands of dollars)**

Income taxes currently payable:

 

 

 

 

 

 

 

 

 

 

 

 

 

Federal

$

6,199 

$

13,801 

$

9,573 

$

21,035 

$

16,390 

$

8,916 

 

State

 

108 

 

1,541 

 

(3,105)

 

2,385 

 

(3,602)

 

(6,202)

 

 

Total

 

6,307 

 

15,342 

 

6,468 

 

23,420 

 

12,788 

 

2,714 

Income  taxes deferred:

 

 

 

 

 

 

 

 

 

 

 

 

 

Federal

 

23,309 

 

18,709 

 

8,035 

 

20,638 

 

33,224 

 

28,148 

 

State

 

(4,509)

 

(3,645)

 

926 

 

(5,792)

 

2,794 

 

6,223 

 

 

Total

 

18,800 

 

15,064 

 

8,961 

 

14,846 

 

36,018 

 

34,371 

Uncertain  tax positions:

 

 

 

 

 

 

 

 

 

 

 

 

 

Federal

 

(2,496)

 

(12,763)

 

(3,345)

 

(2,496)

 

(12,763)

 

(3,345)

 

State

 

(485)

 

(712)

 

(241)

 

(485)

 

(712)

 

(241)

 

 

Total

 

(2,981)

 

(13,475)

 

(3,586)

 

(2,981)

 

(13,475)

 

(3,586)

Investment  tax credits:

 

 

 

 

 

 

 

 

 

 

 

 

 

Deferred

 

3,640 

 

5,759 

 

5,466 

 

3,640 

 

5,759 

 

5,465 

 

Restored

 

(3,404)

 

(3,490)

 

(3,578)

 

(3,404)

 

(3,490)

 

(3,578)

 

 

Total

 

236 

 

2,269 

 

1,888 

 

236 

 

2,269 

 

1,887 

Total  income tax expense 

$

22,362 

$

19,200 

$

13,731 

$

35,521 

$

37,600 

$

35,386 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

IDACORP’s tax allocation agreement provides that each memberof its consolidated group compute its income taxes on a separate companybasis.  Amounts payable or refundable are settled through IDACORP.

**Tax Credits Carryforwards**As of December 31, 2009, IDACORP had $61.8 million of general businesscredit carryforward for federal income tax purposes, and $20.1 million of Idahoinvestment tax credit carryforward.  The general business credit carryforwardperiod expires from 2025 to 2029, and the Idaho investment tax credit expiresfrom 2019 to 2023.

**Uncertain Tax Positions**

IDACORP and Idaho Power adopted new guidance on uncertaintax positions on January 1, 2007.  IDACORP and Idaho Power recorded an increaseof $15.1 million to 2007 opening retained earnings for the cumulative effect ofadopting this guidance.  A reconciliation of the beginning and ending amount ofunrecognized tax benefits for IDACORP and Idaho Power is as follows (inthousands of dollars):

 

**2009**

**2008**

**2007**

Balance at January 1, 

$

4,119 

$

17,594 

$

21,180 

Additions for tax positions of  prior years

 

1,138 

 

1,280 

 

848 

Reductions for tax positions  of prior years

 

(4,119)

 

(10,426)

 

(4,434)

Settlements with taxing  authorities 

 

- 

 

(4,329)

 

- 

Balance at December 31, 

$

1,138 

$

4,119 

$

17,594  

 

 

 

 

 

 

 

 

If recognized, the $1.1 millionbalance of unrecognized tax benefits would affect the effective tax rate.

Since 2006, Idaho Power had beendisputing the Internal Revenue Service’s (IRS) disallowance of Idaho Power’suse of the simplified service cost method (SSCM) of uniform capitalization fortax years 2001-2004.  The dispute had been under review with the IRS AppealsOffice.  In December 2008, the Appeals Office informed IDACORP that the SSCMsettlement computations were complete.  IDACORP reviewed the final computationsand agreed to the result.  The settlement was submitted to the U.S. CongressJoint Committee on Taxation (JCT) for review in January 2009.  In March 2009,the JCT completed its review and accepted the settlement without change.

82

 

 

 

 

 

 

In November 2006, IDACORP made a$44.9 million refundable tax deposit with the IRS related to the disputedincome tax assessment for SSCM.  In May 2008, IDACORP withdrew $20 million fromthe deposit.  Approximately $21 million from the deposit was applied to thesettled income tax deficiency and interest charges with the remaining balancerefunded to IDACORP during 2009.

The IRS completed itsexamination of IDACORP’s 2004 tax year in August 2008 and its 2005 tax year inOctober 2008.  The 2004 examination report was submitted for JCT review as partof the SSCM settlement and the 2005 report was submitted in November 2008.  TheJCT accepted both reports without change in March 2009.  As of December 31,2008, all uncertain tax positions related to tax years 2001-2005 wereconsidered effectively settled.

In December 2008, the IRS beganits examination of IDACORP’s 2006 tax year.  The 2006 exam was completed in May2009.  The IRS began its examination of IDACORP’s 2007-2008 tax years in July2009 and completed the exam in December.  The 2006 examination report wassubmitted for JCT review in June 2009 and was accepted without change in July. Tax years 2007-2008 did not require JCT review.  As of December 31, 2009, alluncertain tax positions related to tax years 2006-2008 were consideredeffectively settled.

IDACORP and Idaho Power recognize interest accrued relatedto unrecognized tax benefits as interest expense and penalties as otherexpense.  During the years ended December 31, 2009, 2008 and 2007, Idaho Powerrecognized a net reduction in interest expense of $0.2 million, $0.1 millionand $1.0 million.  Idaho Power had no accrued interest as of December 31, 2009and $0.2 million as of December 31, 2008.  No penalties are accrued.

IDACORP and Idaho Power aresubject to examination by their major tax jurisdictions – U.S. federal andstate of Idaho.  The open tax years are 2009 for federal and 2007-2009 forIdaho.  In May 2009, IDACORP formally entered the IRS Compliance AssuranceProcess (CAP) program for its 2009 tax year.  The CAP program provides for IRSexamination throughout the year.  The 2009 examination is expected to becompleted in 2010.  In January 2010, IDACORP was accepted into CAP for its 2010tax year.  IDACORP and Idaho Power are unable to predict the outcome of theseexaminations.

Specifically within the 2009 CAP examination, the IRS beganits audit of Idaho Power’s current method of uniform capitalization.  InSeptember 2009, the IRS issued Industry Director Directive #5 (IDD) whichdiscusses the IRS’s compliance priorities and audit techniques related to theallocation of mixed service costs in the uniform capitalization methods ofelectric utilities.  The IRS and Idaho Power are jointly working through theimpact the IDD guidance has on Idaho Power’s uniform capitalization method. Idaho Power expects that the examination will be completed during 2010. Resolution of this matter would result in a decrease to Idaho Power’sunrecognized tax benefits for its 2009 uniform capitalization deduction by $1.1million.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

83

 

 

 

 

 

 

3.  REGULATORY MATTERS:

 

**Regulatory Assets and Liabilities**

The following is a breakdown of Idaho Power’s regulatory assetsand liabilities (in thousands of dollars):

** **

**Remaining**

** **

**Not**

** **

** **

**Amortization**

**Earning**

**Earning**

**Total as of December 31,**

**Description**

**Period**

**a Return**

**a Return**

**2009**

**2008**

Regulatory Assets:

 

 

 

 

 

 

 

 

 

 

Income taxes

 

$

-

$

389,910

$

389,910

$

335,644

 

Unfunded postretirement  benefits (1)

 

 

-

 

168,026

 

168,026

 

177,348

 

Pension expense deferrals (2)

 

 

-

 

39,251

 

39,251

 

10,583

 

Energy efficiency program  costs (2)

2010

 

10,585

 

1,622

 

12,207

 

8,806

 

Power supply costs (2)

Varies (2)

 

84,633

 

-

 

84,633

 

149,099

 

Fixed cost adjustment (2)

2011

 

7,836

 

-

 

7,836

 

2,721

 

Asset retirement obligations  (3)

 

 

-

 

14,749

 

14,749

 

10,907

 

Mark-to-market liabilities (4)

 

 

-

 

280

 

280

 

3,074

 

Other

2010-2015

 

1,914

 

1,875

 

3,789

 

1,224

 

 

Total (5)

 

$

104,968

$

615,713

$

720,681

$

699,406

 

 

 

 

 

 

 

 

 

 

 

Regulatory Liabilities:

 

 

 

 

 

 

 

 

 

 

Income taxes

 

$

-

$

54,958

$

54,958

$

46,102

 

Removal costs (3)

 

 

-

 

155,405

 

155,405

 

156,837

 

Investment tax credits

 

 

-

 

73,506

 

73,506

 

73,270

 

Deferred revenue-AFUDC

 

 

6,096

 

3,798

 

9,894

 

-

 

Mark-to-market assets (4)

 

 

-

 

715

 

715

 

652

 

Other

2011

 

479

 

1,100

 

1,579

 

1,818

 

 

Total (6)

 

$

6,575

$

289,482

$

296,057

$

278,679

 

 

 

 

 

 

 

 

 

 

(1)  Represents  the Idaho jurisdiction unfunded obligation of Idaho Power’s pension and  postretirement plans, which are discussed in note 11.

(2)  These  items are discussed in more detail below.

(3)  Asset  retirement obligations and removal costs are discussed in Note 13

(4)  Mark-to  market assets and liabilities are discussed in Note 16

(5)  Includes  $601 and $3,074 for 2009 and 2008, respectively, reported in other current  assets on the balance sheets.

(6)  Includes  $8,972, and $2,413 for 2009 and 2008, respectively, reported in other current  liabilities on the balance sheets.

 

 

In the event that recovery of Idaho Power’s costs throughrates becomes unlikely or uncertain, regulatory accounting would no longerapply to some or all of Idaho Power’s operations and the items above mayrepresent stranded investments.  If not allowed full recovery of these items,Idaho Power would be required to write off the applicable portion, which couldhave a significant financial impact.

**Deferred Net Power Supply Costs:**

Changes in deferred power supply costs over the last twoyears were as follows:

84

 

 

 

 

 

 

 

 

**Idaho**

**Oregon (1)**

**Total**

Balance at January 1, 2008

$

92,322 

$

5,100 

$

97,422 

Costs deferred through PCA  and PCAM

 

108,688 

 

5,196 

 

113,884 

Prior costs expensed and  recovered through rates

 

(64,030)

 

(2,441)

 

(66,471)

SO2 allowances  credited to account

 

(2,184)

 

(175)

 

(2,359)

Interest and other

 

6,025 

 

598 

 

6,623 

Balance at December 31, 2008

$

140,821

$

8,278 

$

149,099 

Costs deferred through PCA  and PCAM

 

42,533 

 

(184)

 

42,349 

Prior costs expensed and  recovered through rates

 

(113,134)

 

(2,283)

 

(115,417)

SO2 allowances  credited to account

 

(2,034)

 

(83)

 

(2,117)

Interest and other

 

3,226 

 

1,135 

 

4,361 

2007 Excess power costs  order

 

- 

 

6,358 

 

6,358 

**Balance at December 31,  2009**

**$**

**71,412 **

**$**

**13,221 **

**$**

**84,633 **

(1)   Oregon power supply cost deferrals are subject to a statute that specifically  limits rate amortizations of deferred costs to six percent of gross Oregon  revenue per year (approximately $2 million).  Deferrals are amortized  sequentially.

 

 

Idaho:

Idaho Power has a PCA mechanism that provides for annualadjustments to the rates charged to its Idaho retail customers.  The PCA tracksIdaho Power’s actual net power supply costs (primarily fuel and purchased powerless off-system sales) and compares these amounts to net power supply costscurrently being recovered in retail rates.

The annual adjustments are based on two components:

•  A forecast component, based on a forecast of net power supplycosts in the coming year as compared to net power supply costs in base rates;and

•  A true-up component, based on the difference between the previousyear’s actual net power supply costs and the previous year’s forecast.  Thiscomponent also includes a balancing mechanism so that, over time, the actual collectionor refund of authorized true-up dollars matches the amounts authorized.  Thetrue-up component is calculated monthly, and interest is applied to thebalance.

The following table summarizes the PCA adjustments duringthe last three years:

**Effective**

**$ Change**

** **

**Date**

**(millions)**

**Notes**

June 1, 2009

$84.3

The IPUC’s order reflects  revised methodology discussed below in “PCA Workshops.”  The increase was net of $4.5 million of gains from sales of excess SO2emission  allowances which the IPUC ordered be applied against the PCA.  The IPUC has  allowed Idaho Power to retain its PCA sharing percentage of the gain from  sales of excess SO2 allowances as a shareholder benefit with the  remainder recorded as a customer benefit, substantially all of which was used  to reduce the PCA.  Proceeds from the sale of renewable energy certificates  (RECs) will also be used to reduce the PCA.  RECs are acquired by Idaho Power  through purchases of renewable energy.

June 1, 2008

73.3

Increase was net of $16.5  million of gains from sales of excess SO2emission allowances 

June 1, 2007

77.5

Increase was net of $69.1  million of gains from sales of excess SO2 emission allowances

 

 

PCA Workshops:  In its order approving Idaho Power’s2008-2009 PCA, the IPUC directed Idaho Power to set up workshops with the IPUCStaff and several of Idaho Power’s largest customers to address issues notresolved in that PCA filing.  The workshops resulted in the following changesto the PCA mechanism, effective February 1, 2009:

•  PCA sharing ratio – the PCA allocates the deviations in net powersupply expenses between customers (95 percent) and shareholders (5 percent). The previous sharing ratio was 90/10.

•  LGAR – the LGAR is an element of the PCA formula that is intendedto eliminate recovery of power supply expenses associated with load growthresulting from changing weather conditions, a growing customer base, orchanging customer use patterns.  The 2007 general rate case reset the LGAR from$29.41 to $62.79 per MWh, but applied that rate to only 50 percent of the loadgrowth beginning in March 2008.  The stipulation agreed on a new formula forcalculating the LGAR.  Based on the final rates approved by the IPUC in the2008 general rate case and the supporting data, the current LGAR is $26.63 perMWh, effective February 1, 2009.

•  Use of Idaho Power’s operation plan power supply cost forecast –the operation plan forecast may better match current collections with actualnet power supply costs in the year they are incurred and result in smalleramounts being included in the following year’s “true-up” rate, beginning withthe 2009-2010 PCA filing.

•  Inclusion of third-party transmission expense – transmissionexpenses paid to third parties to facilitate wholesale purchases and sales ofenergy, including losses, are a necessary component of net power supply costs. Deviation in these costs from levels included in base rates is now reflected inPCA computations.

•  Adjusted distribution of base net power supply costs – base netpower supply costs are distributed throughout the year based upon the monthlyshape of normalized revenues for purposes of the PCA deferral calculation.

 

85

 

 

 

 

 

 

Oregon

*2006-2007 Excess Power Costs*:  In December 2007, theOPUC approved the deferral for future recovery of $2 million of excess powercosts incurred from May 1, 2006, through April 30, 2007, and effectiveSeptember 2009, these costs began being collected through rates and amortized. Idaho Power expects amortization of this deferral to be completed in December2010.

*May-December 2007 Excess Power Costs*:  In May 2009,the OPUC approved the deferral for future recovery of $6.4 million, includinginterest through the date of the order, of excess net power supply costsincurred from May-December 2007.  Idaho Power recorded the $6.4 milliondeferral in the second quarter 2009 as a reduction to power cost adjustmentexpense.  The amount to be recovered was reduced by $0.9 million of previouslydeferred emission allowance sales (including interest) during the same period.

*Oregon Power Supply Cost Mechanism*:  Idaho Power’spower cost recovery mechanism in Oregon went into effect in 2008.  It has twocomponents:  the annual power cost update (APCU) and the power cost adjustmentmechanism (PCAM).  The combination of the APCU and the PCAM allows Idaho Powerto recover excess net power supply costs in a more timely fashion than throughthe previously existing deferral process.

The APCU allows Idaho Power to reestablish its Oregon basenet power supply costs annually, separate from a general rate case, and toforecast net power supply costs for the upcoming water year.  The APCU has twocomponents:  the “October Update,” Idaho Power’s calculation of estimated normalizednet power supply expenses for the following April through March test period,and the “March Forecast,” Idaho Power’s forecast of expected net power supplyexpenses for the same test period, updated for a number of variables includingthe most recent stream flow data and future wholesale electric prices.  Newbase rates are implemented each June 1 based on the APCU.

2010 APCU: Idaho Power’s October Update portion of the 2010 APCU indicates that revenuesassociated with Idaho Power’s base net power supply costs would be increased by$2.6 million over the current APCU, an average 8.2 percent increase.  Theactual impact will be determined once the March Forecast portion is filed inMarch 2010 and combined with the October Update.  Final rates are expected tobecome effective on June 1, 2010.

2009 APCU:  Arate increase of 11.5 percent, or $3.9 million annually, took effect June 1,2009.

2008 APCU:  Arate increase of 15.7 percent, or $4.8 million annually, took effect June 1,2008.

 

The PCAM is a true-up filed annually in February.  Thefiling calculates the deviation between actual net power supply expensesincurred for the preceding calendar year and the net power supply expensesrecovered through the APCU for the same period.  Under the PCAM, Idaho Power issubject to a portion of the business risk or benefit associated with thisdeviation through application of an asymmetrical deadband (or range ofdeviations) within which Idaho Power absorbs cost increases or decreases.  Fordeviations in actual power supply costs outside of the deadband, the PCAMprovides for 90/10 sharing of costs and benefits between customers and IdahoPower.  However, collection by Idaho Power will occur only to the extent thatit results in Idaho Power’s actual return on equity (ROE) for the year being nogreater than 100 basis points below Idaho Power’s last authorized ROE.  Arefund to customers will occur only to the extent that it results in IdahoPower’s actual ROE for that year being no less than 100 basis points above IdahoPower’s last authorized ROE.

*2009*PCAM: Actual net power supply costs were within the deadband, resulting in nodeferral.

2008 PCAM: Actual net power supply costs exceeded the forecast for the 2008 calendar yearby $7.7 million and, after application of the deadband, resulted in a $5.1million deferral in 2008.  The OPUC approved deferral of this amount in January2010, to be amortized sequentially after previously authorized deferrals.

**Fixed Cost Adjustment Mechanism (FCA)**

The FCA mechanism began as a pilot program for Idaho Power’sIdaho residential and small general service customers, running from 2007through 2009.  The FCA is a rate mechanism designed to remove Idaho Power’sdisincentive to invest in energy efficiency programs by separating (or decoupling)the recovery of fixed costs from the variable kilowatt-hour charge and linkingit instead to a set amount per customer.  On October 1, 2009, Idaho Power filedan application with the IPUC to make the FCA mechanism permanent beginningJanuary 1, 2010.  The application is being processed under modified procedure.

86

 

 

 

 

 

 

Idaho Power accrued $6.6 million related to the FCA in 2009;subject to IPUC approval, recovery should begin June 1, 2010.  The IPUCapproved a rate increase effective June 1, 2009, through May 31, 2010, torecover $2.7 million of fixed costs under-recovered during 2008.  In 2008, theIPUC approved a rate reduction, effective June 1, 2008 through May 31, 2009, toreturn $2.4 million of fixed costs over-recovered in 2007.

**Idaho Rate Cases**

**2009 Settlement Agreement: **On January 13, 2010, theIPUC approved a settlement agreement among Idaho Power, several of IdahoPower’s customers, the IPUC staff and others.  Significant elements of thesettlement agreement include:

•  A general rate moratorium in effect until January 1, 2012.  Themoratorium does not apply to other specified revenue requirement proceedings,such as the PCA, the FCA, pension funding, AMI, energy efficiency rider, andgovernment imposed fees.

•  A specified distribution of the expected 2010 PCA.  Thisdistribution is intended to reduce customer rates, provide some general raterelief to Idaho Power and reset base power supply costs for the PCA.  Theassociated rate change is expected to become effective June 1, 2010.  Thisprovision is in anticipation of a significant reduction in PCA rates for the2010-2011 PCA year.  The PCA reduction will be allocated as follows:

o   The first $40 million will be allocated equally between customersand Idaho Power.  Idaho Power’s share would be applied to increase permanentbase rates on a uniform percentage basis to all customer classes and contractcustomers.  The customers’ share would be a direct rate reduction through thePCA.

o   All of the next $20 million will be allocated to customers as adirect rate reduction through the PCA.

o   PCA reductions in excess of $60 million will be applied to absorbany increase in the base level of net power supply expenses.

o   If the PCA reduction exceeds $60 million plus the increase inbase net power supply expenses, the next $10 million will be allocated equallybetween Idaho Power and customers in the same manner as the first $40 million.

o   Any remainder will go entirely to customers.

•  A provision to share earnings with customers if Idaho Power’sactual rate of return on equity is more than 10.5 percent in any calendar yearfrom 2009 to 2011 in its Idaho jurisdiction.  Idaho Power will share with Idahocustomers 50 percent of any profits in excess of 10.5 percent.

•  A provision to allow the accelerated amortization of accumulateddeferred investment tax credits (ADITC) if Idaho Power’s actual rate of returnon equity is below 9.5 percent in any calendar year from 2009 to 2011 in itsIdaho jurisdiction.  Idaho Power would be permitted to amortize additionalADITC in an amount up to $45 million over the three-year period, but could useno more that $15 million in any one year unless there is a carryover. Carryover amounts are added to the $15 million annual allowance up to a maximumamortization of $25 million in any one year.

 

Because Idaho Power’s Idaho-jurisdiction return on equitywas between 9.5 and 10.5 percent, the sharing and accelerated amortizationprovisions were not triggered in 2009.

The settlement agreement also included a provision toreestablish the base level for net power supply costs effective with the June1, 2010 PCA rate change.  On January 19, 2010, Idaho Power filed with the IPUCa request to increase base net power supply costs by $74.8 million in the Idahojurisdiction.  This amount, which is subject to approval by the IPUC, reflectsthe maximum increase to Idaho Power’s base net power supply costs, which wouldbe used for both base rates and PCA calculations.  The actual change in netpower supply costs for rate purposes will depend upon the amount approved bythe IPUC as well as the amount of any PCA decrease determined for the 2010-2011PCA year.  Written comments or protests with respect to Idaho Power’sapplication are due March 11, 2010.

**Idaho 2008 General Rate Case: **On January 30, 2009,the IPUC issued an order approving an average annual increase in Idaho baserates, effective February 1, 2009, of 3.1 percent (approximately $20.9 millionannually), a return on equity of 10.5 percent and an overall rate of return of8.18 percent.  On February 19, 2009, Idaho Power filed a request forreconsideration with the IPUC and on March 19, 2009, the IPUC issued an orderthat increased Idaho Power’s Idaho revenue requirement by an additional $6.1million to approximately $27 million for this rate case, raising the averagerate increase from 3.1 percent to 4.0 percent.

87

 

 

 

 

 

 

 

The January 30, 2009 order authorized approximately $15million related to increases in base net power supply costs.  It also allowedIdaho Power to include in rates approximately $6.8 million ($10.6 millionincluding income tax gross-up) of 2009 AFUDC relating to the Hells CanyonComplex relicensing project.  Typically, AFUDC is not included in rates until aproject is in use and benefitting customers, but the IPUC determined thatincluding this amount in current rates is in the public interest.  BecauseAFUDC is already recorded on an accrual basis, this portion of the rateincrease will improve cash flows but will not have a current impact on IdahoPower’s net income.  The amounts collected are being deferred as a regulatoryliability and will be recognized in revenues over the life of the new licenseonce it has been issued.

The IPUC denied reconsideration with respect to a refund of$3.3 million of fees recovered by Idaho Power from the FERC.  On April 2, 2009,Idaho Power filed an application with the IPUC for an accounting orderapproving amortization of the fees over a five-year period beginning October2006 when Idaho Power received the FERC credit.  The IPUC approved IdahoPower’s requested amortization period in an order issued on April 28, 2009.  Inthe first quarter of 2009, Idaho Power recorded a charge of approximately $1.7million to electric utility other operations expense and a correspondingregulatory liability for the amount to be refunded from February 1, 2009,through the end of the amortization period, September 2011.  As the regulatoryliability is amortized it will reduce electric utility other operations expenseratably over the remaining amortization period.

**Idaho 2007 General Rate Case:**  On February 28, 2008,the IPUC approved a settlement stipulation that included an average increase inbase rates of 5.2 percent (approximately $32.1 million annually), effectiveMarch 1, 2008.  The settlement did not specify an overall rate of return or areturn on equity.

**Danskin CT1 Power Plant Rate Case:**  On May 30, 2008,the IPUC authorized Idaho Power to add to its rate base $64.2 million for theDanskin CT1 plant and related facilities, effective June 1, 2008, resulting ina base rate increase of 1.37 percent, or $8.9 million in annual revenues. Danskin CT1 located near Mountain Home, Idaho, began commercial operations onMarch 11, 2008.

**Oregon 2009 General Rate Case**:  On December 16, 2009,Idaho Power filed a Joint Stipulation and testimony in support of a stipulationthat would settle the revenue requirement issues surrounding the general ratecase filed on July 31, 2009.  If approved by the OPUC, the Joint Stipulationwould increase base rates $5 million, or 15.4 percent, based on a return onequity of 10.175 percent and an overall rate of return of 8.061 percent.  Therequested effective date is March 1, 2010.

**Advanced Metering Infrastructure (AMI)**

The AMI project provides the means to automatically retrieveenergy consumption information, eliminating manual meter reading expense. Idaho Power intends to install this technology for approximately 99 percent ofits customers and is on pace to complete the installations by the end of 2011.

**Idaho:**  On February 12, 2009, the IPUC approved IdahoPower’s application requesting a Certificate of Public Convenience andNecessity for the deployment of AMI technology and approval of accelerateddepreciation for the existing metering equipment.  The IPUC subsequentlyclarified that Idaho Power can expect in the ordinary course of events, toinclude in rate base the prudent capital costs of deploying AMI as it is placedin service up to the capital cost commitment estimate of $70.9 million.  TheIPUC also clarified, as requested by Idaho Power, that it does not anticipatethat the immediate savings derived from the implementation of AMI throughoutIdaho Power’s service territory will eliminate or wholly offset the increase inIdaho Power’s revenue requirement caused by the authorized depreciation period.

On May 29, 2009, the IPUC approved annual recovery of $10.5million, effective June 1, 2009.  The order was based on Idaho Power’s actualinvestment in AMI to date, annualized through December 31, 2009.  The IPUC alsoallowed Idaho Power to begin three-year accelerated depreciation of theexisting metering equipment on June 1, 2009.  The order reflects annualizeddepreciation expense relating to AMI of $9.2 million.  Actual depreciationexpense recorded over the last seven months of 2009 totaled $6.2 million.

88

 

 

 

 

 

 

**Oregon:**  The OPUC approved accelerated depreciationand recovery of existing meters in the Oregon jurisdiction over an 18-monthperiod beginning January 2009.  Idaho Power’s AMI deployment schedule calls forthe replacement of the Oregon service-territory meters around October 2010. The existing meters will be fully depreciated prior to their removal fromservice.  The approval increased both rates and depreciation expense $0.8million in 2009.****

**Depreciation Filings**

In 2008 and 2009 Idaho Power filed revisions to itsdepreciation rates with the IPUC, OPUC and FERC.  The commissions approved thenew rates, which reduce depreciation expense approximately $8.5 millionannually.  Idaho Power began applying the new depreciation rates in August2008.

**OATT**

**Formula Rates:**  In 2006, Idaho Power moved from afixed rate to a formula rate, which allows transmission rates to be updatedannually based on financial and operational data Idaho Power files with theFERC.  The FERC accepted Idaho Power’s initial formula rates effective June 1,2006, subject to refund pending the outcome of a hearing and settlementprocess.

Idaho Power and the parties whohad opposed the filing entered into a settlement agreement, which was approvedby the FERC in August 2007.  The settlement agreement reduced Idaho Power’sformula rates, established an authorized rate of return on equity of 10.7percent and resulted in a $1.7 million refund by Idaho Power.  The settlementagreement did not cover the treatment of “Legacy Agreements”, which were contractsfor transmission service that contained their own terms, conditions and ratesand were in existence before implementation of the OATT in 1996.

On January 15, 2009, the FERC issued an order that requiredIdaho Power to reduce its transmission service rates to FERC jurisdictionalcustomers and refund $13.3 million to these customers.  Based on the FERCorder, Idaho Power reserved an additional $7.9 million (including $0.7 millionof interest) in 2008 to bring its reserve to the $13.3 million ordered refunded. Idaho Power made the refunds in February 2009 and filed a request for rehearingwith the FERC.  Of the additional $7.9 million ordered refunded, $2.3 millionrelated to transmission revenues recorded in 2007 and $1.7 million related totransmission revenues recorded in 2006.  In March 2009, the FERC issued atolling order that effectively relieved it from acting for an indefinite periodof time on Idaho Power’s request for rehearing.  Idaho Power cannot predictwhen the FERC will rule on its request for rehearing or the outcome of thismatter.

As discussed below, Idaho Power received an accounting orderfrom the IPUC on October 30, 2009, authorizing it to defer for potential futurerecovery approximately $4.7 million in unrecovered transmission-relatedrevenues associated with the FERC order.

2009 OATT:  On August 28, 2009, Idaho Power filed itsinformational filing with the FERC that contains the annual update of theformula rate based on the 2008 test year.  The new rate included in the filingwas $15.83 per kW-year, an increase of $2.02 per kW-year, or 14.6 percent.  Newrates were effective October 1, 2009.

2008 OATT:  On August 28, 2008, Idaho Power filed itsinformational filing with the FERC that contained the annual update of theformula rate based on the 2007 test year.  The rate included in the filing was$18.88 per kW-year, a decrease of $0.85 per kW-year, or 4.3 percent.  New rateswere effective October 1, 2008.  Idaho Power subsequently adjusted its rates to$13.81 per kW-year in compliance with a January 15, 2009, order.

**Legacy Agreements:**  Subsequent to the January 15,2009, FERC Order, Idaho Power has sought to mitigate the resulting revenueshortfall by revising certain of the Legacy Agreements as provided for in theagreements.

The Restated Transmission Services Agreement and threelong-term service agreements with PacifiCorp were amended to replace a portionof the services provided for in the agreement with OATT service, effective June13, 2009.  As calculated in the FERC filings, the estimated net transmissionrevenue increase for the period June 13, 2009 through June 12, 2010 isapproximately $3.2 million.  These amendments are expected to increase 2010transmission revenue $1.3 million as compared to 2009.

89

 

 

 

 

 

 

Idaho Power also filed a request with the FERC on June 19,2009, for an increase in rates for the Agreement for Interconnection andTransmission Services with PacifiCorp.  As calculated in the filing, theestimated net transmission revenue increase for the period September 1, 2009through August 31, 2010, would be approximately $3.7 million.  PacifiCorp hasintervened in this case.  Idaho Power began collecting the new rates effectiveAugust 19, 2009, subject to refund pending settlement procedures and hearing. Settlement discussions are ongoing.  This revision is expected to increase 2010transmission revenue $2.5 million as compared to 2009.

**OATT Shortfall Filing**For Idaho jurisdictional revenue requirement determinations, revenues fromthird parties (non-state jurisdictional) received through the OATT, referred toas revenue credits, are a direct offset to Idaho Power’s overall revenuerequirement.  In the last two general rate cases, Idaho Power included anestimate of OATT revenues from third parties based on the forecasted OATTrate.  However, as discussed above in “OATT”, a FERC order issued on January15, 2009, significantly reduced actual third-party transmission revenues IdahoPower received from June 2006 to date, resulting in an overstatement of therevenue credits in the Idaho jurisdictional revenue requirement.

On October 30, 2009, the IPUC approved an Idaho Powerrequest for authorization to defer the difference between the revenue creditsin the last two general rate cases and the amount of OATT revenues Idaho Powerhas received since March 2008 and expects to receive through May 2010.  TheIPUC order authorizes Idaho Power to amortize the unrecovered transmissionrevenues on a straight-line basis over a three-year period beginning January 1,2011 and did not authorize a carrying charge on the balance.  Based on actualand projected transmission revenues from March 2008 through May 2010, IdahoPower recorded a $4.7 million regulatory asset in 2009 for potential futurerecovery.

Idaho Power has filed a request for rehearing of the FERCorder and is taking additional measures to address the revenue shortfall.  Ifthe FERC issues are resolved in Idaho Power’s favor, Idaho Power will reducethe deferral.

**Pension Expense**

In the 2003 Idaho general rate case, the IPUC disallowedrecovery of pension expense because there were no current cash contributionsbeing made to the pension plan.  On June 1, 2007, the IPUC issued an orderauthorizing Idaho Power to account for its defined benefit pension expense on acash basis, and to defer and account for pension expense as a regulatoryasset.  On February 17, 2010, the IPUC approved a recovery methodology thatwould permit Idaho Power to include in future rate cases a reasonable amortizationand recovery of cash contributions.  Idaho Power deferred approximately $29million, $8 million and $3 million of pension expense to a regulatory asset in2009, 2008, and 2007 respectively.  Deferred pension costs are expected to beamortized to expense to match the revenues received when future pensioncontributions are recovered through rates.  Idaho Power does not receive acarrying charge on the current deferral balance.  A carrying charge will berecorded on the difference between actual cash contributions and the recoveryof those amounts in rates.

**Idaho Energy Efficiency Rider (Rider)**

Idaho Power’s Rider is the chief funding mechanism for IdahoPower’s investment in energy efficiency, conservation, and demand responseprograms.  Effective June 1, 2009, Idaho Power collects 4.75 percent of baserevenues, or approximately $29-$33 million annually, under the Rider.  IdahoPower collected 2.5 percent of base revenues from June 2008-May 2009 and 1.5percent prior to June 2008.  Energy efficiency program expenditures arereported as an operating expense with an equal amount of revenues recorded inother revenues, resulting in no net impact on earnings.  The cumulativevariance between expenditures and amounts collected through the rider is recordedas a regulatory asset or liability pending future collection from or obligationto customers.  An asset balance indicates that Idaho Power has spent more thancollected and a liability balance indicates that Idaho Power has collected morethan it has spent.  At December 31, 2009, Idaho Power’s rider balance was aregulatory asset of $11 million.

In the 2008 general rate case, Idaho Power requested thatthe IPUC explicitly find that Idaho Power’s expenditures between 2002 and 2007of $29 million of funds obtained from the Rider were prudently incurred and nolonger subject to potential disallowance.  In 2009, the IPUC approved astipulation identifying $14.3 million of Rider funding as prudent, and onJanuary 25, 2010, Idaho Power and the IPUC staff filed a stipulation forapproval by the IPUC to find the remaining expenditures through 2007 wereprudently incurred.

On October 5, 2009, Idaho Power and other investor-ownedelectric utilities serving in Idaho began a series of many informal publicworkshops with the IPUC Staff to discuss how energy efficiency evaluation andprudency will be determined on a prospective basis.  As a result, a Memorandumof Understanding written by Staff, Idaho Power and other investor-ownedelectric utilities in Idaho has been signed outlining a process for futureenergy efficiency expenditure approval.  This document was filed with the IPUCon January 25, 2010.

 

90

 

 

 

 

 

 

 

4.  LONG-TERM DEBT

 

The following table summarizes long-term debt at December31:

 

**2009**

** **

**2008**

 

**(thousands  of dollars)**

First mortgage bonds:

$

 

 

$

 

 

7.20%    Series due 2009

 

- 

 

 

80,000 

 

6.60%    Series due 2011

 

120,000 

 

 

120,000 

 

4.75%    Series due 2012

 

100,000 

 

 

100,000 

 

4.25%    Series due 2013

 

70,000 

 

 

70,000 

 

6.025%  Series due 2018

 

120,000 

 

 

120,000 

 

6.15%    Series due 2019

 

100,000 

 

 

- 

 

4.50%    Series due 2020

 

130,000 

 

 

- 

 

6%         Series due 2032

 

100,000 

 

 

100,000 

 

5.50%    Series due 2033

 

70,000 

 

 

70,000 

 

5.50%    Series due 2034

 

50,000 

 

 

50,000 

 

5.875%  Series due 2034

 

55,000 

 

 

55,000 

 

5.30%    Series due 2035

 

60,000 

 

 

60,000 

 

6.30%    Series due 2037

 

140,000 

 

 

140,000 

 

6.25%    Series due 2037

 

100,000 

 

 

100,000 

 

 

Total first mortgage bonds

 

1,215,000 

 

 

1,065,000 

Pollution control revenue  bonds:

 

 

 

 

 

 

Variable Rate Series 2003 due  2024(1)

 

- 

 

 

49,800 

 

Variable Rate Series 2006 due  2026(1)

 

- 

 

 

116,300 

 

5.15% Series due 2024(1)

 

49,800 

 

 

- 

 

5.25% Series due 2026(1)

 

116,300 

 

 

- 

 

Variable Rate Series 2000 due  2027

 

4,360 

 

 

4,360 

 

 

Total pollution control  revenue bonds

 

170,460 

 

 

170,460 

American Falls bond guarantee

 

19,885 

 

 

19,885 

Milner Dam note guarantee

 

8,509 

 

 

9,573 

Unamortized discount - net

 

(3,060)

 

 

(3,163)

Term Loan Credit Facility

 

- 

 

 

166,100 

Purchase of pollution control  revenue bonds

 

- 

 

 

(166,100)

** **

Total Idaho Power outstanding  debt(2)

 

1,410,794 

 

 

1,261,755 

Debt related to investments in  affordable housing

 

8,276 

 

 

8,224 

 

Total IDACORP outstanding debt

 

1,419,070 

 

 

1,269,979 

Current maturities of  long-term debt

 

(9,340)

 

 

(86,528)

 

 

Total long-term debt

$

1,409,730 

 

$

1,183,451 

 

 

 

 

 

 

 

 

(1)  Humboldt County and Sweetwater County Pollution  Control Revenue bonds are secured by first mortgage bonds, bringing the total  first mortgage bonds outstanding at December 31, 2009, to $1.381 billion.

(2)  At December 31, 2009  and 2008, the overall effective cost of Idaho Power’s outstanding debt was  5.76 percent and 5.59 percent, respectively.

 

 

At December 31, 2009, the maturities for the aggregateamount of long-term debt outstanding were (in thousands of dollars):

** **

**2010**

**2011**

**2012**

**2013**

**2014**

**Thereafter**

 

 

 

 

 

 

 

 

 

 

 

 

 

Idaho Power 

$

1,064

$

121,064

$

101,064

$

71,064

$

1,064

$

1,118,534

Other subsidiary debt

 

8,276

 

-

 

-

 

-

 

-

 

-

 

Total

$

9,340

$

121,064

$

101,064

$

71,064

$

1,064

$

1,118,534

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

91

 

 

 

 

 

 

**IDACORP Long-Term Financing**

IDACORP has approximately $574million remaining on a shelf registration statement that can be used for theissuance of debt securities or common stock.  Common stock is discussed furtherin Note 6.

In February 2009, IFS repaid$7.2 million of debt related to investments in affordable housing.  The debtwas scheduled to mature in 2009 and 2010.  In 2009, IFS issued $8.3 million inequity funding obligations to finance portions of its $14 million ofinvestments in affordable housing.  The obligations are scheduled to mature in2010.

**Idaho Power Long-TermFinancing**

On March 30, 2009, Idaho Powerissued $100 million of its 6.15% first mortgage bonds, due April 1, 2019.  OnNovember 20, 2009, Idaho Power issued $130 million of its 4.5% first mortgagebonds, due March 1, 2020.  Idaho Power used the net proceeds from the two bondissuances to repay short-term debt and to repay $80 million of its 7.20 % firstmortgage bonds that matured on December 1, 2009.  As of December 31, 2009,Idaho Power had issued all securities remaining registered under its shelfregistration statement.

**Mortgage: **As of December 31, 2009, Idaho Power couldissue under the mortgage approximately $431 million of additional firstmortgage bonds based on total unfunded property additions of approximately $719million.  Idaho Power could issue an additional $612 million of first mortgagebonds based on retired first mortgage bonds.  These amounts are further limitedby the maximum amount of first mortgage bonds set forth in the mortgage discussedbelow.

The mortgage secures all bonds issued under the indentureequally and ratably, without preference, priority or distinction.  Firstmortgage bonds issued in the future will also be secured by the mortgage.  Thelien of the indenture constitutes a first mortgage on all the properties ofIdaho Power, subject only to certain limited exceptions including liens fortaxes and assessments that are not delinquent and minor excepted encumbrances. Certain of the properties of Idaho Power are subject to easements, leases,contracts, covenants, workmen’s compensation awards and similar encumbrancesand minor defects and clouds common to properties.  The mortgage does notcreate a lien on revenues or profits, or notes or accounts receivable,contracts or choses in action, except as permitted by law during a completeddefault, securities or cash, except when pledged, or merchandise or equipmentmanufactured or acquired for resale.  The mortgage creates a lien on theinterest of Idaho Power in property subsequently acquired, other than exceptedproperty, subject to limitations in the case of consolidation, merger or saleof all or substantially all of the assets of Idaho Power.  The mortgagerequires Idaho Power to spend or appropriate 15 percent of its annual grossoperating revenues for maintenance, retirement or amortization of itsproperties.  Idaho Power may, however, anticipate or make up these expendituresor appropriations within the five years that immediately follow or precede aparticular year.

On February 17, 2010, Idaho Power entered into theForty-fifth Supplemental Indenture, dated as of February 1, 2010, to theIndenture of Mortgage and Deed of Trust, dated as of October 1, 1937, betweenIdaho Power and Deutsche Bank Trust Company Americas (formerly known as BankersTrust Company) and R.G. Page, as Trustees (Stanley Burg, successor individualtrustee) for the purpose of increasing the maximum amount of first mortgagebonds issuable by Idaho Power from $1.5 to $2.0 billion.  The amountissuable is also restricted by property, earnings and other provisions of themortgage and supplemental indentures to the mortgage.  Idaho Power may amendthe indenture and increase this amount without consent of the holders of thefirst mortgage bonds.  The indenture requires that Idaho Power’s net earningsmust be at least twice the annual interest requirements on all outstanding debtof equal or prior rank, including the bonds that Idaho Power may propose toissue.  Under certain circumstances, the net earnings test does not apply,including the issuance of refunding bonds to retire outstanding bonds thatmature in less than two years or that are of an equal or higher interest rate,or prior lien bonds.

92

 

 

 

 

 

 

**Pollution Control RevenueRefunding Bonds and Term Loan Credit Agreement:**  On April 3, 2008, IdahoPower made a mandatory purchase of two series of Pollution Control RevenueRefunding Bonds issued for the benefit of Idaho Power, the $116.3 millionaggregate principal amount of Pollution Control Revenue Refunding Bonds Series2006 issued by Sweetwater County, Wyoming due 2026 and the $49.8 millionaggregate principal amount of Pollution Control Revenue Refunding Bonds Series2003 issued by Humboldt County, Nevada due 2024 (together the Pollution ControlBonds).  Idaho Power initiated this transaction in order to adjust the interestrate period of the Pollution Control Bonds from an auction interest rate periodto a weekly interest rate period, effective April 3, 2008.  This change wasmade to mitigate the higher-than-anticipated interest costs in the auctionmode, which was a result of the financial guarantor’s credit ratingsdeterioration.

On August 20, 2009, J.P. Morgan Securities Inc. as theRemarketing Agent, purchased the Pollution Control Bonds from Idaho Power forremarketing to the public.  The Humboldt County Bonds carry a 5.15 percent terminterest rate and mature on December 1, 2024.  The Sweetwater County Bondscarry a 5.25 percent term interest rate and mature on July 15, 2026.  ThePollution Control Bonds are not subject to redemption for 10 years, except forextraordinary optional and mandatory redemption prior to maturity, in each caseat 100 percent of the principal amount, plus accrued interest if any to thedate of redemption.  In connection with the remarketing of the PollutionControl Bonds, the financial guaranty insurance policies securing the PollutionControl Bonds were terminated.

On August 25, 2009, Idaho Power used proceeds from thereoffering of the Pollution Control Bonds and additional corporate funds toprepay its $170 million loan under a Term Loan Credit Agreement dated as ofFebruary 4, 2009, among JPMorgan Chase Bank, N.A., as administrative agent andlender, Bank of America, N.A., Union Bank, N.A. and Wachovia Bank, NationalAssociation, as lenders.

5.  NOTES PAYABLE:

 

IDACORP has a $100 million credit facility and Idaho Powerhas a $300 million credit facility each of which expires on April 25, 2012. Commercial paper may be issued up to the amounts supported by the bank creditfacilities.  Under these facilities the companies pay a facility fee on thecommitment, quarterly in arrears, based on its rating for senior unsecuredlong-term debt securities without third-party credit enhancement as provided byMoody’s and S&P.  At December 31, 2009, Idaho Power had regulatoryauthority to incur up to $450 million of short-term indebtedness.

At December 31, 2009, no loans were outstanding on IDACORP’sor Idaho Power’s facilities.  Balances and interest rates of IDACORP’sshort-term borrowings were as follows at December 31 (in thousands of dollars):

 

**IDACORP**

**Idaho Power**

**Total**

 

**2009**

**2008**

**2009**

**2008**

**2009**

**2008**

** **

** **

** **

** **

** **

** **

**(thousands of  dollars)**

**Balances:**

 

 

 

 

 

 

 

 

 

 

 

 

At the end of year

$

53,750

$

38,400

$

-

$

112,850

$

53,750

$

151,250

Average during the year

$

39,338

$

57,734

$

46,386

$

151,192

$

85,724

$

208,927

**Weighted-average interest rate:**

 

 

 

 

 

 

 

 

 

 

 

 

At the end of year

 

0.41%

 

4.29%

 

-

 

4.89%

 

0.41%

 

4.74%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

6.  COMMON STOCK

 

**IDACORP Common Stock**

The following table summarizes common stock transactionsduring the last three years and shares reserved at December 31, 2009:

 

**Shares issued**

**Shares reserved**

 

**2009**

**2008**

**2007**

**December 31,  2009**

Balance at beginning of year

46,929,203

45,063,107

43,905,458

 

Continuous equity program

489,360

1,453,967

881,337

2,138,818

Dividend reinvestment and stock  purchase plan

209,859

169,229

150,458

2,903,460

Employee savings plan

156,814

111,021

99,562

3,813,902

Long-term incentive and  compensation plan(1)

127,928

115,730

26,292

2,275,476

Restricted stock plan

28,518

16,149

-

269,447

Balance at end of year

47,941,682

46,929,203

45,063,107

11,401,103

 

 

 

 

 

(1)  Included in long-term incentive and compensation plan are 15,800 shares that  were issued pursuant to the exercise of stock options on December 30, 2009  and settled on January 4, 2010.

 

 

 

93

 

 

 

 

 

 

IDACORP enters into Sales Agency Agreements as a means ofselling its common stock from time to time.  Under these agreements IDACORPsold 881,337 in 2007 at an average price of $32.32.  In 2008, IDACORP sold1,453,967 shares an average price of $28.72.  In 2009, IDACORP sold 489,360shares at an average price of $28.79 per share.  IDACORP’s current Sales AgencyAgreement is with BNY Mellon Capital Markets, LLC.  As of December 31, 2009,there were 2.1 million shares remaining on the current agency agreement.

**Idaho Power Common Stock**

In 2009, 2008 and 2007, IDACORP contributed $20 million, $37million and $51 million respectively, of additional equity to Idaho Power.  Noadditional shares of Idaho Power common stock were issued.

**Dividend Restrictions**

A covenant under IDACORP’s credit facility and Idaho Power’scredit facility requires IDACORP and Idaho Power to maintain leverage ratios ofconsolidated indebtedness to consolidated total capitalization, as definedtherein, of no more than 65 percent at the end of each fiscal quarter.  IdahoPower’s Revised Code of Conduct approved by the IPUC on April 21, 2008, statesthat Idaho Power will not pay any dividends to IDACORP that will reduce IdahoPower’s common equity capital below 35 percent of its total adjusted capitalwithout IPUC approval.

Idaho Power’s ability to pay dividends on its common stockheld by IDACORP and IDACORP’s ability to pay dividends on its common stock arelimited to the extent payment of such dividends would violate the covenants orIdaho Power’s Code of Conduct.  At December 31, 2009, the leverage ratios forIDACORP and Idaho Power were 51 percent and 53 percent, respectively.  Based onthese restrictions, IDACORP’s and Idaho Power’s dividends were limited to $608million and $514 million, respectively, at December 31, 2009.

Idaho Power’s articles of incorporation contain restrictionson the payment of dividends on its common stock if preferred stock dividendsare in arrears.  Idaho Power has no preferred stock outstanding.

Idaho Power must obtain approval of the OPUC before it coulddirectly or indirectly loan funds or issue notes or give credit on its books toIDACORP.

7.  STOCK-BASED COMPENSATION

 

IDACORP has three share-based compensation plans.  IDACORP’semployee plans are the 2000 Long-Term Incentive and Compensation Plan (LTICP)and the 1994 Restricted Stock Plan (RSP).  These plans are intended to alignemployee and shareholder objectives related to IDACORP’s long-term growth. IDACORP also has one non-employee plan, the Director Stock Plan (DSP).  Thepurpose of the DSP is to increase directors’ stock ownership throughstock-based compensation.

The LTICP (for officers, key employees and directors)permits the grant of nonqualified stock options, restricted stock, performanceshares, and several other types of stock-based awards.  The RSP permits onlythe grant of restricted stock or performance-based restricted stock.  AtDecember 31, 2009, the maximum number of shares available under the LTICP andRSP were 1,602,259 and 25,515, respectively.

**Stock awards: **Restricted stock awards have three-yearvesting periods and entitle the recipients to dividends and voting rights. Unvested shares are restricted as to disposition and subject to forfeitureunder certain circumstances.  The fair value of these awards is based on themarket price of common stock on grant date and is charged to compensationexpense over the vesting period, based on the number of shares expected tovest.

Performance-based restricted stock awards have three-yearvesting periods and entitle the recipients to voting rights.  Unvested sharesare restricted as to disposition, subject to forfeiture under certaincircumstances, and subject to meeting specific performance conditions.  Basedon the attainment of the performance conditions, the ultimate award can rangefrom zero to 150 percent of the target award.  Dividends are accrued and paidout only on shares that eventually vest.

94

 

 

 

 

 

 

The performance awards are based on two metrics, cumulativeearnings per share (CEPS) and total shareholder return (TSR) relative to a peergroup.  The fair value of the CEPS portion is based on the market value at thedate of grant, reduced by the loss in time-value of the estimated futuredividend payments, using an expected quarterly dividend of $0.30.  The fairvalue of the TSR portion is estimated using a statistical model thatincorporates the probability of meeting performance targets based on historicalreturns relative to the peer group.  Both performance goals are measured overthe three-year vesting period and are charged to compensation expense over thevesting period based on the number of shares expected to vest.

A summary of restricted stock and performance share activityis presented below.  Idaho Power share amounts represent the portion of IDACORPamounts related to Idaho Power employees:

** **

**IDACORP**

**Idaho Power**

** **

** **

**Weighted-**

** **

**Weighted-**

** **

** **

**average**

** **

**Average**

** **

**Number of**

**Grant Date**

**Number of**

**Grant Date**

** **

**Shares**

**Fair Value**

**Shares**

**Fair Value**

Nonvested shares at January 1, 2009

325,793 

$

26.72

303,257 

$

26.68

Shares granted

153,196 

 

21.49

144,143 

 

21.49

Shares forfeited

(27,158)

 

23.43

(27,158)

 

23.43

Shares vested

(146,491)

 

26.29

(134,207)

 

26.42

Nonvested shares at December 31, 2009

305,340 

$

24.59

286,035 

$

24.49

 

 

 

 

 

 

 

 

The total fair value of shares vested during the years endedDecember 31, 2009, 2008 and 2007 was $3.9 million, $0.8 million and $0.9million, respectively.  At December 31, 2009, IDACORP had $3.6 million of totalunrecognized compensation cost related to nonvested share-based compensationthat was expected to vest.  Idaho Power’s share of this amount was $3.4million.  These costs are expected to be recognized over a weighted-averageperiod of 1.67 years.  IDACORP uses original issue and/or treasury shares forthese awards.

**Stock options:** Stock option awards are granted withexercise prices equal to the market value of the stock on the date of grant. The options have a term of 10 years from the grant date and vest over afive-year period.  The fair value of each option is amortized into compensationexpense using graded-vesting.  Beginning in 2006, stock options are not asignificant component of share-based compensation awards under the LTICP.  Thefollowing table presents information about options granted and exercised (inthousands of dollars, except for weighted-average amounts):

 

**IDACORP**

**Idaho Power**

** **

**2009**

**2008**

**2007**

**2009**

**2008**

**2007**

Fair value of options vested

$

266

$

435

$

737

$

208

$

353

$

579

Intrinsic value of options exercised

 

204

 

182

 

79

 

204

 

182

 

11

Cash received from exercises

 

591

 

707

 

281

 

591

 

707

 

40

Tax benefits realized from exercises

 

80

 

71

 

31

 

80

 

71

 

4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of December 31, 2009, IDACORP and Idaho Power hadrecognized all compensation cost related to stock options.  IDACORP usesoriginal issue and/or treasury shares to satisfy exercised options.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

95

 

 

 

 

 

 

IDACORP’s and Idaho Power’s stock option transactions aresummarized below.  Idaho Power share amounts represent the portion of IDACORPamounts related to Idaho Power employees:

** **

** **

** **

**Weighted**

** **

** **

** **

**Weighted-**

**Average**

**Aggregate**

** **

**Number**

**Average**

**Remaining**

**Intrinsic**

** **

**of**

**Exercise**

**Contractual**

**Value**

** **

**Shares**

**Price**

**Term**

**(000s)**

**IDACORP**

** **

** **

** **

** **

Outstanding at December 31,  2008

783,985 

$

34.84

3.57

$

641

 

Exercised

(25,800)

 

22.92

 

 

 

 

Forfeited

(3,632)

 

29.75

 

 

 

 

Expired

(138,550)

 

39.69

 

 

 

Outstanding at December 31,  2009

616,003 

$

34.27

2.74

$

965

 

 

 

 

 

 

 

Vested or expected to vest  at December 31, 2009

615,961 

$

34.27

2.74

$

965

Exercisable at December 31,  2009

597,409 

$

34.41

2.67

$

923

 

 

 

 

 

 

 

**Idaho Power**

 

 

 

 

 

 

Outstanding at December 31,  2008

576,996 

$

34.34

3.67

$

611

 

Exercised

(25,800)

 

22.92

 

 

 

 

Forfeited

(3,632)

 

29.75

 

 

 

 

Expired

(133,600)

 

39.86

 

 

 

Outstanding at December 31,  2009

413,964 

$

33.31

2.96

$

862

 

 

 

 

 

 

 

Vested or expected to vest  at December 31, 2009

413,932 

$

33.31

2.96

$

862

Exercisable at December 31,  2009

397,903 

$

33.45

2.87

$

826

 

 

 

 

 

 

 

 

**Compensation Expense:** The following table shows thecompensation cost recognized in income and the tax benefits resulting fromthese plans, as well as the amounts allocated to Idaho Power for those costsassociated with Idaho Power’s employees (in thousands of dollars):

 

**IDACORP**

**Idaho Power**

 

**2009**

**2008**

**2007**

**2009**

**2008**

**2007**

Compensation cost

$

4,199

$

3,897

$

2,745

$

3,986

$

3,683

$

2,473

Income tax benefit

$

1,642

$

1,524

$

1,073

$

1,587

$

1,440

$

967

 

 

 

 

 

 

 

 

 

 

 

 

 

 

No equity compensation costs have been capitalized.

8.  EARNINGS PER SHARE

 

The following table presents the computation of IDACORP’sbasic and diluted earnings per common share (in thousands, except for per shareamounts):

96

 

 

 

 

 

 

 

 

**Year ended  December 31,**

 

**2009**

**2008**

**2007**

Numerator:

 

 

 

 

 

 

 

Income from continuing operations attributable to IDACORP,  Inc.

$

124,350

$

98,414

$

82,272

Denominator:

 

 

 

 

 

 

 

Weighted-average shares outstanding - basic

 

47,124

 

45,268

 

44,291

 

Effect of dilutive securities:

 

 

 

 

 

 

 

 

Options

 

16

 

37

 

45

 

 

Restricted Stock

 

42

 

74

 

29

 

 

 

Weighted-average shares outstanding – diluted

 

47,182

 

45,379

 

44,365

 

 

 

 

 

 

 

Basic and diluted earnings per share from continuing  operations

$

2.64

$

2.17

$

1.86

 

The diluted EPS computation excluded 594,107 options in2009, 556,518 options in 2008 and 487,100 options in 2007 because the options’exercise prices were greater than the average market price of the common stockduring those years.  In total, 616,003 options were outstanding at December 31,2009, with expiration dates between 2010 and 2015.

In January 2009, IDACORP adopted accounting guidance thatclarified that unvested share-based payment awards that contain non-forfeitablerights to dividends or dividend equivalents (whether paid or unpaid) areparticipating securities and shall be included in the computation of EPSpursuant to the two-class method.  Adoption of this guidance did not have amaterial impact on IDACORP’s EPS.

9.  COMMITMENTS:

 

**Purchase Obligations:**

At December 31, 2009, Idaho Power had the followinglong-term commitments relating to purchases of energy, capacity, transmissionrights and fuel:

** **

**2010**

**2011**

**2012**

**2013**

**2014**

**Thereafter**

 

**(thousands of dollars)**

 

 

 

 

 

 

 

 

 

 

 

 

 

Cogeneration  and power production

$

210,999

$

229,740

$

124,051

$

113,884

$

114,850

$

1,680,001

Power  and transmission rights

 

44,298

 

21,979

 

8,699

 

3,296

 

2,404

 

7,612

Fuel

 

64,132

 

64,130

 

52,671

 

54,032

 

53,136

 

95,346

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of December 31, 2009, Idaho Power had signed agreementsto purchase energy from 96 CSPP facilities with contracts ranging from one to30 years.  Eighty of these facilities, with a combined nameplate capacity of298 MW, were on-line at the end of 2009; the other 16 facilities undercontract, with a combined nameplate capacity of 266 MW, are projected to comeon-line during 2010 and 2011.  The majority of the new facilities will be windresources which will generate on an intermittent basis.  During 2009, IdahoPower purchased 970,419 megawatt-hours (MWh) from these projects at a cost of$59 million, resulting in a blended price of 6.1 cents per kilowatt hour. Idaho Power purchased 756,014 megawatt-hours at a cost of $45.9 million in2008, and 777,147 megawatt-hours at a cost of $45 million in 2007.

In addition, IDACORP has the following long-term commitmentsfor lease guarantees, equipment, maintenance and services, and industry relatedfees.

 

**2010**

**2011**

**2012**

**2013**

**2014**

**Thereafter**

** **

**(thousands of dollars)**

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating leases

$

2,769

$

2,059

$

1,324

$

1,335

$

1,403

$

5,737

Equipment, maintenance, and service

 

 

 

 

 

 

 

 

 

 

 

 

 

agreements

 

58,491

 

14,492

 

8,357

 

7,339

 

3,296

 

6,933

FERC and other industry related fees

 

7,016

 

6,475

 

6,540

 

6,505

 

4,199

 

20,534

 

 

 

 

 

 

 

 

 

 

 

 

 

 

IDACORP’s expense for operating leases was approximately$3.5 million in 2009, $3 million in 2008 and $3 million in 2007.

**Guarantees**Idaho Power has agreed to guarantee the performance of reclamationactivities at Bridger Coal Company of which IERCo owns a one-third interest. This guarantee, which is renewed each December, was $63 million at December 31,2009.  Bridger Coal Company has a reclamation trust fund set aside specificallyfor the purpose of paying these reclamation costs.  At this time Bridger CoalCompany is revising their estimate of future reclamation costs.  To ensure thatthe reclamation trust fund maintains adequate reserves, Bridger Coal Companyhas the ability to add a per ton surcharge if it is determined that futureliabilities exceed the trust’s assets.  Because of the existence of the fundand the ability to apply a per ton surcharge, the estimated fair value of thisguarantee is minimal.

97

 

 

 

 

 

 

10.  CONTINGENCIES

 

**Legal Proceedings**

**Western Energy Proceedings at the FERC: **Throughoutthis report, the term “western energy situation” is used to refer to theCalifornia energy crisis that occurred during 2000 and 2001, and the energyshortages, high prices and blackouts in the western United States.  High pricesfor electricity in California and in western wholesale markets during 2000 and2001 caused numerous purchasers of electricity in those markets to initiateproceedings seeking refunds or other forms of relief.  Some of theseproceedings (the western energy proceedings) remain pending before the FERC oron appeal to the United States Court of Appeals for the Ninth Circuit (NinthCircuit).

There are pending in the Ninth Circuit approximately 200petitions for review of numerous FERC orders regarding the western energysituation.  Decisions in these appeals may have implications with respect toother pending cases, including those to which Idaho Power or IE are parties. Idaho Power and IE intend to vigorously defend their positions in theseproceedings, but are unable to predict the outcome of these matters.  Except asto the matters described below under “Pacific Northwest Refund,” Idaho Powerand IE believe that settlement releases they have obtained that are describedbelow under “California Refund” and “Market Manipulation” will restrictpotential claims that might result from the disposition of the pending NinthCircuit review petitions and that these matters will not have a materialadverse effect on their consolidated financial positions, results of operationsor cash flows.

California Refund:  This proceeding originated withan effort by agencies of the State of California and investor-owned utilitiesin California to obtain refunds for a portion of the spot market sales fromsellers of electricity into California markets from October 2, 2000, throughJune 20, 2001.  The FERC has issued numerous orders establishing pricemitigation plans for sales in the California wholesale electricity market,including the methodology for determining refunds.  IE and numerous otherparties have petitioned the Ninth Circuit for review of the FERC’s orders onCalifornia refunds.  As additional FERC orders have been issued, furtherpetitions for review have been filed before the Ninth Circuit, which from timeto time has identified discrete cases that can proceed to briefing and decisionwhile it stayed action on the other consolidated cases.

On May 22, 2006 the FERC approved an Offer of Settlementbetween and among IE and Idaho Power, the California Parties (Pacific Gas &Electric Company, San Diego Gas & Electric Company, Southern CaliforniaEdison Company, the California Public Utilities Commission, the CaliforniaElectricity Oversight Board, the California Department of Water Resources andthe California Attorney General) and additional parties that elected to bebound by the settlement.  The settlement disposed of matters encompassed by theCalifornia refund proceeding, as well as other claims and investigationsrelating to the western energy situation among and between the parties agreeingto be bound by it.  Although many market participants agreed to be bound by thesettlement, other market participants, representing a small minority ofpotential refund claims, initially elected not to be bound by the settlement. From time to time, as the California Parties have reached settlements withthose other market participants, they have elected to opt into the IE-IdahoPower-California Parties’ settlement.  The settlement provided forapproximately $23.7 million of IE’s and Idaho Power’s estimated $36 millionrights to accounts receivable from the Cal ISO and the California PowerExchange (CalPX) to be assigned to an escrow account for refunds and for anadditional $1.5 million of accounts receivable to be retained by the CalPXuntil the conclusion of the litigation.  The additional $1.5 million ofaccounts receivable retained by the CalPX is available to fund the claims ofnon-settling parties if they prevail in the remaining litigation of theseCalifornia market matters.  Any additional amounts owed to non-settling partieswould be funded by other amounts owed to IE and Idaho Power by the Cal ISO andCalPX, or directly by IE and Idaho Power, and any excess funds remaining at theend of the case would be returned to IE and Idaho Power.  The remaining IE andIdaho Power receivables were paid to IE and Idaho Power under the settlement.

In an August 2006 decision, the Ninth Circuit ruled that alltransactions that occurred within the CalPX and the Cal ISO markets were propersubjects of  the refund proceeding.  In that decision the Ninth Circuit refusedto expand the proceedings into the bilateral market, approved the refundeffective date as October 2, 2000, required the FERC to consider claims thatsome market participants had violated governing tariff obligations at anearlier date than the refund effective date, and expanded the scope of the refundproceeding to include transactions within the CalPX and Cal ISO markets outsidethe limited 24-hour spot market and energy exchange transactions.  Parts of thedecision exposed sellers to increased claims for potential refunds.  The NinthCircuit issued its mandate on April 15, 2009, thereby officially returning thecases to the FERC for further action consistent with the court’s decision.

98

 

 

 

 

 

 

On November 19, 2009, the FERC issued an order to implementthe Ninth Circuit’s remand.  The remand order established a trial-type hearingin which participants will be permitted to submit information regarding (i)specified tariff violations committed by any public utility seller from January1, 2000 - October 2, 2000 resulting in a transaction that set a market clearingprice for the trading period when the violation occurred and (ii) claims forrefunds for multi-day transactions and energy exchange transactions enteredinto during the refund period (October 2, 2000 – June 20, 2001).  Numerousparties including IE and Idaho Power filed motions to clarify the FERC’sorder.  Although IE and Idaho Power are unable to predict when or how FERC willrule on these motions, the effect of the remand order for IE and Idaho Power isconfined to the minority of market participants that are not bound by theIE-Idaho Power-California Parties’ settlement described above.  Accordingly, IEand Idaho Power believe the remanded proceedings will not have a materialadverse effect on their consolidated financial positions, results of operationsor cash flows.

In 2005, the FERC established a framework for sellerswanting to demonstrate that the generally applicable FERC refund methodologyinterfered with the recovery of costs.  IE and Idaho Power made such a costfiling, which was rejected by the FERC.  On June 18, 2009, FERC issued an orderstating that it was not ruling on IE’s and Idaho Power’s request for rehearingof the cost filing rejection because their request had been withdrawn inconnection with the IE-Idaho Power-California Parties’ settlement.  On July 8,2009 IE and Idaho Power sought further rehearing at the FERC because theirwithdrawal pertained only to the parties with whom IE and Idaho Power hadsettled.  On June 18, 2009, in a separate order, the FERC ruled that only net refundrecipients were responsible for the costs associated with cost filings.  Whilemost net refund recipients are bound by the settlement, until the Cal ISOcompletes its refund calculations, it is uncertain whether there are any netrefund recipients who are not bound by the settlement  If there are no suchparties, then IE’s and Idaho Power’s request for rehearing will be moot.  FERChas not yet ruled on the request for rehearing.  IE and Idaho Power are unableto predict how or when the FERC might rule, but the effect of any such rulingis confined to obligations of IE and Idaho Power to the small minority ofclaims of market participants that are not bound by the settlement. Accordingly, IE and Idaho Power believe this matter will not have a materialadverse effect on their consolidated financial positions, results of operationsor cash flows.

Market Manipulation:  On June 25, 2003, the FERCordered more than 50 entities that participated in the western wholesale powermarkets between January 1, 2000, and June 20, 2001, including Idaho Power, toshow cause why certain trading practices did not constitute gaming (“gaming”)or other forms of proscribed market behavior in concert with another party(“partnership”) in violation of the Cal ISO and CalPX Tariffs.  In 2004, theFERC dismissed the “partnership” show cause proceeding against Idaho Power. Later in 2004, the FERC approved a settlement of the “gaming” proceedingwithout finding of wrongdoing by Idaho Power.

The orders establishing the scope of the show causeproceedings are presently the subject of review petitions in the NinthCircuit.  Although IE and Idaho Power are unable to predict how or when theNinth Circuit will act on these review petitions, in light of the settlementdescribed above, IE and Idaho Power believe this matter will not have amaterial adverse effect on their consolidated financial positions, results ofoperations or cash flows.

On June 25, 2003, the FERC also issued an order institutingan investigation of anomalous bidding behavior and practices in the westernwholesale markets for the time period May 1, 2000, through October 1, 2000, butthe FERC terminated its investigations as to Idaho Power on May 12, 2004. California government agencies and California investor-owned utilities haveappealed the FERC’s termination of this investigation as to Idaho Power andmore than 30 other market participants.  IE and Idaho Power are unable topredict the outcome of these petitions for review proceedings, but believe thatthe settlement releases govern any potential claims that might arise and thatthis matter will not have a material adverse effect on their consolidatedfinancial positions, results of operations or cash flows.

99

 

 

 

 

 

 

Pacific Northwest Refund:  On July 25, 2001, the FERCissued an order establishing a proceeding separate from the California refundproceeding to determine whether there may have been unjust and unreasonablecharges for spot market sales in the Pacific Northwest during the periodDecember 25, 2000, through June 20, 2001, because the spot market in thePacific Northwest was affected by the dysfunction in the California market.  In2003, the FERC terminated the proceeding and declined to order refunds, but in2007 the Ninth Circuit issued an opinion, in *Port of Seattle, Washington v.FERC*, remanding to the FERC the orders that declined to require refunds. The Ninth Circuit’s opinion instructed the FERC to consider whether evidence ofmarket manipulation would have altered the agency’s conclusions about refundsand directed the FERC to include sales to the California Department of WaterResources (CDWR) in the scope of proceeding.  The Ninth Circuit officiallyreturned the case to the FERC on April 16, 2009.  On September 4, 2009, IE andIdaho Power joined with a number of other parties in a joint petition for awrit of certiorari to the U.S. Supreme Court, which was denied on January 11,2010.

In separate filings, the California Parties, which no longerinclude the California Electricity Oversight Board, and the City of Tacoma,Washington and the Port of Seattle, Washington asked the FERC to take actionsto reorganize and restructure the case so that they may pursue claims that allspot market sales in the Cal ISO and CalPX markets and in the Pacific Northwestfrom January 1, 2000 through June 20, 2001 should be repriced, and therebybecome subject to refund, because market manipulation and tariff violationsaffected spot market prices.  This would expand the scope of the refund periodin the Pacific Northwest proceeding from the December 25, 2000 through June 20,2001 period previously considered by the FERC.  On May 22, 2009, the CaliforniaParties filed a motion with the FERC to sever the CDWR sales from the remainderof the Pacific Northwest proceedings and to consolidate the CDWR sales portionof the Pacific Northwest case with ongoing proceedings in cases that IE andIdaho Power have settled and with a new complaint filed on May 22, 2009 by theCalifornia Attorney General against parties with whom the California Partieshave not settled (Brown Complaint).  IE and Idaho Power, along with a number ofother parties, filed their opposition to the motion of the California Parties. Many other parties also filed responses to the motion of the CaliforniaParties.  The City of Tacoma, Washington and the Port of Seattle, Washingtonfiled a motion on August 4, 2009 with the FERC in connection with theCalifornia refund proceeding, the *Lockyer* remand pending before the FERC(involving claims of failure to file quarterly transaction reports with theFERC, from which IE and Idaho Power previously were dismissed), the BrownComplaint and the Pacific Northwest refund remand proceeding.  The City ofTacoma and the Port of Seattle motion asks the FERC, either on a summary basisor after new evidentiary hearings, to require refunds from all sellers in thePacific Northwest spot markets for the expanded period (January 1, 2000 throughJune 20, 2001).  IE and Idaho Power joined with a number of other sellers inthe Pacific Northwest markets during 2000 and 2001 in opposing the motion ofthe City of Tacoma and the Port of Seattle.  IE and Idaho Power intend tovigorously defend their positions in these proceedings, but are unable topredict the outcome of these matters or estimate the impact these matters mayhave on their consolidated financial positions, results of operations or cashflows.

**Western Shoshone National Council:**  On April 10,2006, the Western Shoshone National Council (which purports to be the governingbody of the Western Shoshone Nation) and certain of its individual tribalmembers filed a First Amended Complaint and Demand for Jury Trial in the U.S.District Court for the District of Nevada, naming Idaho Power and otherunrelated entities as defendants.  Plaintiffs allege that Idaho Power’sownership interest in certain land, minerals, water or other resources wasconverted and fraudulently conveyed from lands in which the plaintiffs had historicalownership rights and Indian title dating back to the 1860’s or before.

On May 31, 2007, the U.S. District Court granted thedefendants’ motion to dismiss stating that the plaintiffs’ claims are barred bythe finality provision of the Indian Claims Commission Act, and enteredjudgment in favor of Idaho Power on January 25, 2008.  Plaintiffs appealed thedistrict court’s decision to the Ninth Circuit which affirmed the districtcourt’s dismissal of the action.  The time within which plaintiffs could pursuefurther review has expired.

**Sierra Club Lawsuit-Bridger:**  In February 2007, theSierra Club and the Wyoming Outdoor Council filed a complaint againstPacifiCorp in the U.S. District Court for the District of Wyoming allegingviolations of air quality opacity standards at the Jim Bridger coal-fired plantin Sweetwater County, Wyoming.  Opacity is an indication of the amount of lightobscured by the flue gas of a power plant.  The complaint alleged thousands ofopacity permit violations by PacifiCorp and sought a declaration thatPacifiCorp had violated opacity limits, a permanent injunction orderingPacifiCorp to comply with such limits, civil penalties of up to $32,500 per dayper violation, and reimbursement of plaintiffs’ costs of litigation, includingreasonable attorneys’ fees.  Idaho Power is not a party to this proceeding buthas a one-third ownership interest in the plant.  PacifiCorp owns a two-thirdsinterest in and is the operator of the plant.  On February 10, 2010, PacifiCorpand plaintiffs reached an agreement in principle to the settlement of thelawsuit in its entirety.  The settlement is subject to the approval of theEnvironmental Protection Agency and the court.  If approved, the settlementwill not have a material adverse effect on Idaho Power’s consolidated financialpositions, results of operations or cash flows.

100

 

 

 

 

 

 

**Sierra Club Lawsuit – Boardman:**  In September 2008,the Sierra Club and four other non-profit corporations filed a complaintagainst Portland General Electric Company (PGE) in the U.S. District Court forthe District of Oregon alleging opacity permit limit violations at the Boardmancoal-fired plant located in Morrow County, Oregon.  The complaint also allegedviolations of the Clean Air Act, related federal regulations and the OregonState Implementation Plan relating to PGE’s construction and operation of theplant.  The complaint sought a declaration that PGE had violated opacitylimits, a permanent injunction ordering PGE to comply with such limits,injunctive relief requiring PGE to remediate alleged environmental damage andongoing impacts, civil penalties of up to $32,500 per day per violation, andreimbursement of plaintiffs’ costs of litigation, including reasonableattorneys’ fees.  Idaho Power is not a party to this proceeding but has a 10percent ownership interest in the Boardman plant.  PGE owns 65 percent and isthe operator of the plant.

On December 5, 2008, PGE filed a motion to dismiss nine ofthe twelve claims asserted by plaintiffs in their complaint, alleging amongother arguments that certain claims are barred by the statute of limitations orfail to state a claim upon which the court can grant relief.  On September 30,2009, the court denied most of PGE’s motion to dismiss.  Idaho Power continuesto monitor the status of this matter but is unable to predict its outcome orwhat effect this matter may have on its consolidated financial position,results of operations or cash flows.

**Snake River Basin Adjudication:**  Idaho Power isengaged in the Snake River Basin Adjudication (SRBA), a general streamadjudication, commenced in 1987, to define the nature and extent of waterrights in the Snake River basin in Idaho, including the water rights of IdahoPower.

On March 25, 2009, Idaho Power and the State of Idaho(State) entered into a settlement agreement with respect to the 1984 Swan FallsAgreement and Idaho Power’s water rights under the Swan Falls Agreement, whichsettlement agreement is subject to certain conditions discussed below.  Thesettlement agreement will also resolve litigation between Idaho Power and theState relating to the Swan Falls Agreement that was filed by Idaho Power on May10, 2007, with the Idaho District Court for the Fifth Judicial Circuit, whichhas jurisdiction over SRBA matters including the Swan Falls case.

The settlement agreement resolves the pending litigation byclarifying that Idaho Power’s water rights in excess of minimum flows at itshydroelectric facilities between Milner Dam and Swan Falls Dam are subordinateto future upstream beneficial uses, including aquifer recharge.  The agreementcommits the State and Idaho Power to further discussions on important watermanagement issues concerning the Swan Falls Agreement and the management ofwater in the Snake River Basin.  It also recognizes that water managementmeasures that enhance aquifer levels, springs and river flows, such as aquiferrecharge projects, benefit both agricultural development and hydropowergeneration and deserve study to determine their economic potential, theirimpact on the environment and their impact on hydropower generation.  Thesewill be a part of the Comprehensive Aquifer Management Plan (CAMP), approved bythe Idaho Water Resource Board for the Eastern Snake Plain Aquifer (ESPA),which includes limits on the amount of aquifer recharge.  Idaho Power is amember of the ESPA CAMP advisory committee and implementation committee.

On April 24, 2009, the Governor of Idaho signed into lawlegislation approving provisions contained in the settlement agreement.  On May6, 2009, as part of the settlement, Idaho Power, the Governor of Idaho and theIdaho Water Resource Board executed a memorandum of agreement relating tofuture aquifer recharge efforts and further assurances as to limitations on theamount of aquifer recharge.  Idaho Power and the State also filed a jointmotion to the SRBA court to dismiss the Swan Falls case and enter thestipulated water right decrees set forth in the settlement agreement.  Partiesrepresenting groundwater users in the Eastern Snake Plain Aquifer objected tosome of the language proposed by Idaho Power and the State relating to waterrights in the decrees to be entered by the SRBA court as contemplated by theSettlement Agreement.  Specifically, the concerns relate to the languagedescribing the subordination of the rights and its interplay with the originalSwan Falls settlement document and implementing legislation.  On January 4,2010, the court issued an order approving the overall settlement subject tocertain modifications to the draft water right decrees proposed by the companyand the state.  The company is working with the state and the parties to reachagreement consistent with the court’s order regarding the language of thedecrees.

101

 

 

 

 

 

 

**U.S. Bureau of Reclamation:**  Idaho Power filed acomplaint on October 15, 2007 and an amended complaint on September 30, 2008 inthe U.S. District Court of Federal Claims in Washington, D.C. against the U.S.Bureau of Reclamation.  The complaint relates to a contract right for delivery ofwater to its hydropower projects on the Snake River to recover damages from theU.S. for the lost generation resulting from reduced flows and a prospectivedeclaration of contractual rights so as to prevent the U.S. from continuedfailure to fulfill its contractual and fiduciary duties to Idaho Power.  In1923, Idaho Power and the U.S. entered into a contract that facilitated thedevelopment of the American Falls Reservoir by the U.S. on the Snake River insoutheast Idaho.  This 1923 contract entitles Idaho Power to 45,500 acre-feetof primary storage capacity in the reservoir and 255,000 acre-feet of secondarystorage that was to be available to Idaho Power between October 1 of any yearand June 10 of the following year as necessary to maintain specified waterflows at Idaho Power’s Twin Falls power plant below Milner Dam.  Idaho Powerbelieves that the U.S. has failed to deliver this secondary storage, at thespecified flows, since 2001.  Discovery is scheduled to be completed by March3, 2010.  Trial of the matter has not beenscheduled.  Idaho Power is unable to predict the outcome of this action.

**Oregon Trail Heights Fire:**  On August 25, 2008, afire ignited beneath an Idaho Power distribution line in Boise, Idaho.  It wasfanned by high winds and spread rapidly, resulting in one death, thedestruction of 10 homes and damage or alleged fire related losses toapproximately 30 others.  Following the investigation, the Boise FireDepartment determined that the fire was linked to a piece of line hardware on oneof Idaho Power’s distribution poles and that high winds contributed to the fireand its resultant damage.

Idaho Power has received notice of claims from a number ofthe homeowners and their insurers and while it has continued investigation ofthese claims, Idaho Power has reached settlements with a number of theindividuals or their insurers who have alleged damages resulting from thefire.  Idaho Power is insured up to policy limits against liability for claimsin excess of its self-insured retention.  Idaho Power has accrued for any lossthat is probable and reasonably estimable, including insurance deductibles, andbelieves this matter will not have a material adverse effect on itsconsolidated financial position, results of operations or cash flows.

**Other Legal Proceedings:**  IDACORP, Idaho Power and/orIE are parties to legal claims, actions and proceedings in addition to thosediscussed above.  Resolution of any of these matters will take time and thecompanies cannot predict the outcome of any of these proceedings.  Thecompanies believe that their reserves are adequate for these matters and thatresolution of these matters, taking into account existing reserves, will nothave a material adverse effect on IDACORP’s or Idaho Power’s consolidated financialpositions, results of operations or cash flows.

11.  BENEFIT PLANS:

 

**Pension Plans**

Idaho Power has a noncontributory defined benefit pensionplan covering most employees.  The benefits under the plan are based on yearsof service and the employee’s final average earnings.  Idaho Power’s policy isto fund, with an independent corporate trustee, at least the minimum requiredunder the Employee Retirement Income Security Act of 1974 (ERISA) but not morethan the maximum amount deductible for income tax purposes.  Idaho Power wasnot required to contribute to the plan in 2009, 2008 or 2007.  Themarket-related value of assets for the plan is equal to the fair value of theassets.  Fair value is determined by utilizing publicly quoted market valuesand independent pricing services depending on the nature of the asset, asreported by the trustee/custodian of the plan.

In addition, Idaho Power has anonqualified, deferred compensation plan for certain senior managementemployees and directors called the Senior Management Security Plan (SMSP).  AtDecember 31, 2009 and 2008, approximately $40.3 million and $39.9 million,respectively, of life insurance policies and investments in marketablesecurities, all of which are held by a trustee, were designated to satisfy theprojected benefit obligation of the plan but do not qualify as plan assets inthe actuarial computation of the funded status.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

102

 

 

 

 

 

 

The following table summarizes the changes in benefitobligations and plan assets of these plans:

** **

**Pension Plan**

**SMSP**

** **

**2009**

**2008**

**2009**

**2008**

** **

**(thousands of dollars)**

**Change in benefit  obligation:**

 

 

 

 

 

 

 

 

 

Benefit obligation at  January 1

$

464,416 

$

420,526 

$

48,393 

$

43,153 

 

Service cost

 

16,514 

 

14,920 

 

1,610 

 

1,278 

 

Interest cost

 

27,865 

 

26,393 

 

2,854 

 

2,669 

 

Actuarial loss

 

16,193 

 

19,547 

 

3,156 

 

3,376 

 

Benefits paid

 

(18,244)

 

(16,970)

 

(3,294)

 

(2,644)

 

Plan amendments

 

- 

 

- 

 

- 

 

561 

 

Benefit obligation at  December 31

 

506,744 

 

464,416 

 

52,719 

 

48,393 

**Change in plan assets:**

 

 

 

 

 

 

 

 

 

Fair value at January 1

 

295,324 

 

407,970 

 

- 

 

- 

 

Actual return on plan assets

 

36,394 

 

(95,676)

 

- 

 

- 

 

Benefits paid

 

(18,244)

 

(16,970)

 

- 

 

- 

 

Fair value at December 31

 

313,474 

 

295,324 

 

- 

 

- 

Funded status at end of year

$

(193,270)

$

(169,092)

$

(52,719)

$

(48,393)

Amounts recognized in the  statement of

 

 

 

 

 

 

 

 

 

financial position consist  of:

 

 

 

 

 

 

 

 

Other current liabilities

$

- 

 

- 

$

(3,244)

$

(2,883)

Noncurrent liabilities (1)

 

(193,270)

 

(169,092)

 

(49,475)

 

(45,510)

Net amount recognized

$

(193,270)

$

(169,092)

$

(52,719)

$

(48,393)

Amounts recognized in  accumulated other

 

 

 

 

 

 

 

 

 

comprehensive income consist  of:

 

 

 

 

 

 

 

 

Net loss

$

150,196 

$

155,289 

$

14,585 

$

12,088 

Prior service cost

 

2,505 

 

3,155 

 

1,977 

 

2,209 

Subtotal

 

152,701 

 

158,444 

 

16,562 

 

14,297 

Less amount recorded as  regulatory asset

 

(152,701)

 

(158,444)

 

- 

 

- 

Net amount recognized in  accumulated

 

 

 

 

 

 

 

 

 

other comprehensive income

$

- 

$

- 

$

16,562 

$

14,297 

Accumulated benefit  obligation

$

425,744 

$

385,002 

$

48,563 

$

44,275 

(1)  Noncurrent liabilities are contained in IDACORP’s and Idaho Power’s  Consolidated Balance Sheets under “Other liabilities” and “Other deferred  credits,” respectively.

 

 

The following table shows thecomponents of net periodic benefit cost for these plans:

** **

**Pension Plan**

**SMSP**

** **

**2009**

**2008**

**2007**

**2009**

**2008**

**2007**

** **

**(thousands of dollars)**

 

 

 

 

 

 

 

 

 

 

 

 

 

Service cost

$

16,514 

$

14,920 

$

15,213 

$

1,610

$

1,278

$

1,409

Interest cost

 

27,865 

 

26,393 

 

24,457 

 

2,854

 

2,669

 

2,372

Expected return on assets

 

(23,965)

 

(34,112)

 

(33,387)

 

-

 

-

 

-

Amortization of net loss

 

8,857 

 

- 

 

- 

 

232

 

489

 

566

Amortization of prior  service cost

 

650 

 

650 

 

650 

 

659

 

192

 

173

 

Net periodic pension cost 

$

29,921 

$

7,851 

$

6,933 

$

5,355

$

4,628

$

4,520

 

 

 

 

 

 

 

 

 

 

 

 

 

 

In 2010, IDACORP and Idaho Power expect to recognize ascomponents of net periodic benefit cost $9.5 million from amortizing amountsrecorded in accumulated other comprehensive income (or as a regulatory assetfor the pension plan) as of December 31, 2009, relating to the pension and SMSPplans.  This amount consists of $7.7 million of amortization of net loss, and$0.7 million of amortization of prior service cost for the pension plan and$0.9 million of amortization of net loss and $0.2 million of amortization ofprior service cost for the SMSP.

 

 

 

 

103

 

 

 

 

 

 

The following table summarizes the expected future benefitpayments of these plans:

** **

** **

**2010**

** **

**2011**

** **

**2012**

** **

**2013**

** **

**2014**

** **

**2015-2019**

 

 

**(thousands of  dollars)**

Pension Plan

$

19,453

$

20,785

$

22,654

$

24,716

$

26,586

$

169,665

SMSP

$

3,332

$

3,349

$

3,483

$

3,703

$

3,890

$

21,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

**Pension Protection Act: **In accordance with thePension Protection Act of 2006 (PPA), and the relief provisions of the Worker,Retiree, and Employer Recovery Act of 2008 (WRERA), which was signed into lawon December 23, 2008, companies are required to meet minimum funding levels inorder to avoid benefit restrictions.  The WRERA also provides for assetsmoothing, which allows the use of asset averaging, including expected returns(subject to certain limitations), for a 24-month period in the determination ofthe funding requirements.  IDACORP and Idaho Power have elected to use assetsmoothing.

On March 31, 2009, the U.S. Department of the Treasury(Treasury) provided guidance on the selection of the corporate bond yield curvefor determining plan liabilities and allows companies to choose from a range ofmonths in selecting a yield curve, rather than requiring the use of prescribedrates.  The Treasury’s announcement specifically referenced 2009, but alsoindicated that technical guidance will be forthcoming to address future years. The revisions in the PPA, WRERA, Treasury guidance, and IRS guidance resultedin IDACORP and Idaho Power revising the funded status as of January 1, 2009,effectively reducing or delaying the required contributions from IDACORP andIdaho Power from what would otherwise be required, and what was previouslydisclosed.  At January 1, 2009, Idaho Power’s pension plan was above theminimum required funding levels as revised by the PPA, WRERA, Treasury guidanceand IRS guidance, but below the minimum required funding levels at January 1,2010, and is projected to stay below the minimum required funding levelsthrough 2015.  As Idaho Power’s pension plan is below the minimum requiredfunding levels at January 1, 2010, future minimum contributions are required. Based on the provisions and methodologies allowed under the PPA, WRERA,Treasury guidance and IRS guidance, IDACORP and Idaho Power were not requiredto contribute to their pension plan in 2009, and estimated minimum requiredcontributions will be approximately $6 million in 2010, $44 million in 2011 $47million in 2012, $39 million in 2013, and $40 million in 2014.  IDACORP andIdaho Power may elect to make contributions earlier than the required dates.

The IRS and Treasury have issued final regulations effectiveOctober 15, 2009 that apply to plan years beginning on or after January 1,2010.  These regulations reflect provisions added by the PPA, as amended by theWRERA.  These regulations affect sponsors, administrators, participants, andbeneficiaries of single employer defined benefit pension plans.  Theregulations provide guidance regarding the determination of the value of planassets and benefit liabilities for purposes of the funding requirements,regarding the use of certain funding balances maintained for those plans, andregarding benefit restrictions for certain underfunded defined benefit pensionplans.  These final regulations did not materially change existing estimatesrelating to pension plan contributions.

Additional legislative or regulatory measures, as well asfluctuations in financial market conditions, may impact funding requirements. IDACORP and Idaho Power continue to monitor the legislative and regulatoryenvironments for additional changes, evaluating them for their potential impacton funding requirements and strategies.

**Postretirement Benefits**Idaho Power maintains a defined benefit postretirement plan (consisting ofhealth care and death benefits) that covers all employees who were enrolled inthe active group plan at the time of retirement as well as their spouses andqualifying dependents.  Benefits for employees who retire after December 31,2002, are limited to a fixed amount, which will limit the growth of IdahoPower’s future obligations under this plan.

 

 

 

 

 

 

 

104

 

 

 

 

 

 

The following table summarizesthe changes in benefit obligation and plan assets (in thousands of dollars):

 

**2009**

**2008**

Change in accumulated  benefit obligation:

 

 

 

 

 

Benefit obligation at  January 1

$

59,648 

$

56,826 

 

Service cost

 

1,221 

 

1,154 

 

Interest cost

 

3,565 

 

3,498 

 

Actuarial loss

 

2,128 

 

1,656 

 

Benefits paid(1)

 

(3,915)

 

(3,486)

 

Benefit obligation at  December 31

 

62,647 

 

59,648 

 

 

 

 

 

Change in plan assets:

 

 

 

 

 

Fair value of plan  assets at January 1

 

25,283 

 

35,096 

 

Actual return on plan  assets

 

5,609 

 

(7,834)

 

Employer contributions

 

3,915 

 

1,507 

 

Benefits paid(1)

 

(3,915)

 

(3,486)

 

Fair value of plan  assets at December 31

 

30,892 

 

25,283 

Funded status at end  of year (included in noncurrent liabilities)(2)

$

(31,755)

$

(34,365)

(1)   Benefits paid are net of $2,731 and $1,927 of plan participant contributions,  and $385 and $421 of Medicare Part D subsidy receipts for 2009 and 2008,  respectively.

(2)  Noncurrent liabilities are contained in “Other  liabilities” for IDACORP, and “Other deferred credits” for Idaho Power.

 

Amounts recognized in accumulated other comprehensive  income consist of:

 

 

 

 

 

Net loss

$

14,112 

$

16,289 

Prior service cost (credit)

 

(1,537)

 

(2,072)

Transition obligation

 

6,120 

 

8,160 

Subtotal

 

18,695 

 

22,377 

Less amount recognized in regulatory assets

 

(15,235)

 

(18,904)

Less amount included in deferred tax assets

 

(3,460)

 

(3,473)

Net amount recognized in accumulated other comprehensive  income

$

- 

$

- 

 

 

 

 

 

 

 

The net periodic postretirement benefitcost was as follows (in thousands of dollars):

 

**2009**

**2008**

**2007**

Service cost

$

1,221 

$

1,154 

$

1,368 

Interest cost

 

3,565 

 

3,498 

 

3,512 

Expected return on plan assets

 

(2,146)

 

(2,899)

 

(2,777)

Amortization of net loss

 

842 

 

- 

 

403 

Amortization of prior service cost

 

(535)

 

(535)

 

(535)

Amortization of unrecognized transition obligation

 

2,040 

 

2,040 

 

2,040 

Net periodic postretirement benefit cost

$

4,987 

$

3,258 

$

4,011 

 

 

 

 

 

 

 

 

In 2010, IDACORP and Idaho Power expect to recognize ascomponents of net periodic benefit cost $2.1 million from amortizing amountsrecorded in accumulated other comprehensive income as of December 31, 2009relating to the postretirement plan.  This amount consists of ($0.5) million ofprior service cost, $0.6 million of net loss and $2.0 million of transitionobligation.

**Medicare Act: **TheMedicare Prescription Drug, Improvement and Modernization Act of 2003 wassigned into law in December 2003 and established a prescription drug benefit,as well as a federal subsidy to sponsors of retiree health care benefit plansthat provide a prescription drug benefit that is at least actuariallyequivalent to Medicare’s prescription drug coverage.

 

105

 

 

 

 

 

 

The following table summarizesthe expected future benefit payments of the postretirement benefit plan andexpected Medicare Part D subsidy receipts (in thousands of dollars):

 

**2010**

**2011**

**2012**

**2013**

**2014**

**2015-2019**

 

 

 

 

 

 

 

 

 

 

 

 

 

Expected benefit payments(1)

$

4,200

$

4,400

$

4,500

$

4,700

$

4,800

$

25,200

Expected Medicare Part D

 

 

 

 

 

 

 

 

 

 

 

 

 

subsidy receipts

$

500

$

500

$

600

$

600

$

700

$

4,500

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)  Expected benefit  payments are net of expected Medicare Part D subsidy receipts.

 

 

The assumed health care costtrend rate used to measure the expected cost of health benefits covered by theplan was eight percent and ten percent in 2009 and 2008, respectively.  Theassumed health care cost trend rate for 2009 is assumed to decrease graduallyto five percent by 2066.  The assumed dental cost trend rate used to measurethe expected cost of dental benefits covered by the plan was five percent inboth 2009 and 2008.  A 1-percentage point change in the assumed health carecost trend rate would have the following effects at December 31, 2009 (in thousandsof dollars):

 

**1-Percentage-Point**

 

**Increase**

** **

**Decrease**

 

 

 

 

 

Effect on total of cost  components

$

288

$

(218)

Effect on accumulated  postretirement benefit obligation

$

2,471

$

(1,949)

 

 

 

 

 

 

**Plan Assumptions**: The following table sets forth the weighted-average assumptions used at the endof each year to determine benefit obligations for all Idaho Power-sponsoredpension and postretirement benefits plans:

 

**Pension**

**Postretirement**

 

**Benefits**

**Benefits**

 

**2009**

**2008**

**2009**

**2008**

Discount rate

5.9%

6.1%

5.9%

6.1%

Rate of compensation increase

4.5%

4.5%

-   

-   

Medical trend rate

-   

-   

8.0%

10.0%

Dental trend rate

-   

-   

5.0%

5.0%

Measurement date

12/31/09

12/31/08

12/31/09

12/31/08

 

 

 

 

 

 

The following table sets forth the weighted-average assumptionsused to determine net periodic benefit cost for all Idaho Power-sponsoredpension and postretirement benefit plans:

 

**Pension**

**Postretirement**

 

**Benefits**

**Benefits**

 

**2009**

**2008**

**2009**

**2008**

Discount rate

6.1%

6.4%

6.1%

6.4%

Expected long-term rate of return on assets

8.5%

8.5%

8.5%

8.5%

Rate of compensation increase

4.5%

4.5%

-   

-   

Medical trend rate

-   

-   

8.0%

10.0%

Dental trend rate

-   

-   

5.0%

5.0%

 

 

 

 

 

 

 

 

 

 

106

 

 

 

 

 

 

**Plan Assets:**

Idaho Power’s pension plan and postretirement benefit plan assetsat December 31, by asset category, are as follows:

 

**Pension**

**Postretirement**

 

**Plan**

**Benefits**

Asset Category

**2009**

**2008**

**2009**

**2008**

Cash and cash equivalents

$

4,512

$

4,666

$

-

$

-

Short-term bonds

 

30,774

 

36,553

 

-

 

-

Core bonds

 

41,165

 

46,652

 

-

 

-

Equity securities

 

184,562

 

152,172

 

-

 

-

Real estate

 

20,783

 

37,418

 

-

 

-

Private market investments

 

20,202

 

17,863

 

-

 

-

Commodities

 

11,476

 

-

 

-

 

-

Other(1)

 

-

 

-

 

30,892

 

25,283

 

Total

$

313,474

$

295,324

$

30,892

$

25,283

(1)  The postretirement benefits assets are primarily  life insurance contracts.

 
 

 
 

**Pension Asset Allocation Policy:** The targetallocation and actual allocations at December 31, 2009 for the portfolio byasset class are as follows:

 

** **

**Actual**

 

**Target**

**Allocation**

 

**Allocation**

**December  31, 2009**

 

 

 

Large-cap core stocks

14%

12.2%

Large-cap growth stocks

7%

9.2%

Large-cap value stocks

7%

9.0%

Small-cap growth stocks

5%

4.5%

Small-cap value stocks

5%

5.3%

Micro-cap stocks

3%

3.2%

International growth stocks

7%

7.2%

International value stocks

7%

8.3%

Commodities

3%

3.7%

Private market investments 

7%

6.5%

Short-term bonds

10%

9.8%

Core bonds

13%

13.1%

Cash and cash equivalents

3%

1.4%

Real estate

9%

6.6%

 

Total

100%

100%

 

 

 

 

 

Assets are rebalanced asnecessary to keep the portfolio close to target allocations.

The plan’s principalinvestment objective is to maximize total return (defined as the sum ofrealized interest and dividend income and realized and unrealized gain or lossin market price) consistent with prudent parameters of risk and the liabilityprofile of the portfolio.  Emphasis is placed on preservation and growth ofcapital along with adequacy of cash flow sufficient to fund current and futurepayments to pensioners.

There are three major goals in Idaho Power’s assetallocation process:

•  Determine if the investments have the potential to earn the rateof return assumed in the actuarial liability calculations.

•  Match the cash flow needs of the plan.  Idaho Power sets bondallocations sufficient to cover at least five years of benefit payments andcash allocations sufficient to cover the current year benefit payments.  IdahoPower then utilizes growth instruments (equities, real estate, venture capital)to fund the longer-term liabilities of the plan.

107

 

 

 

 

 

 

•  Maintain a prudent risk profile consistent with ERISA fiduciarystandards.

•  Allowable plan investments include stocks and stock funds,investment-grade bonds and bond funds, core real estate funds, private equityfunds, and cash and cash equivalents.  With the exception of real estateholdings and private equity, investments must be readily marketable so that anentire holding can be disposed of quickly with only a minor effect upon market price.

Rate-of-return projections forplan assets are based on historical risk/return relationships among assetclasses.  The primary measure is the historical risk premium each asset classhas delivered versus the return on 10-year U.S. Treasury Notes.  Thishistorical risk premium is then added to the current yield on 10-year U.S.Treasury Notes, and the result provides a reasonable prediction of futureinvestment performance.  Additional analysis is performed to measure theexpected range of returns, as well as worst–case and best-case scenarios.  Basedon the current low interest rate environment, current rate-of-returnexpectations are lower than the nominal returns generated over the past 20years when interest rates were generally much higher.

Idaho Power’s asset modeling process also utilizeshistorical market returns to measure the portfolio’s exposure to a “worst-case”market scenario, to determine how much performance could vary from the expected“average” performance over various time periods.  This “worst-case” modeling,in addition to cash flow matching and diversification by asset class andinvestment style, provides the basis for managing the risk associated withinvesting portfolio assets.

**Fair Value of PlanAssets:**  Idaho Power classifiesits pension plan and postretirement plan investments using the followinghierarchy:

•  Level 1, which refers to securities valued using quoted pricesfrom active markets for identical assets;

•  Level 2, which refers to securities not traded on an activemarket but for which observable market inputs are readily available; and

•  Level 3, which refers tosecurities valued based on significant unobservable inputs.

If the inputs used to measure the securitiesfall within different levels of the hierarchy, the categorization is based onthe lowest level input (Level 3being the lowest) that is significant to thefair value measurement of the security.  The following table sets forth by level within the fair value hierarchya summary of the plans’ investments measured at fair value on a recurring basisat December 31.

** **

**Quoted Prices in**

**Significant**

**Significant**

** **

** **

**Active Markets**

**Other**

**Unobservable**

** **

** **

**for Identical**

**Observable**

**Inputs**

** **

** **

**Assets (Level 1)**

**Inputs (Level 2)**

**(Level 3)**

**Total**

**Assets at December 31,  2009**

 

 

 

 

 

 

 

 

Pension assets**:**

 

 

 

 

 

 

 

 

Cash and cash equivalents

$

4,512

$

-

$

-

$

4,512

Short-term bonds

 

30,774

 

-

 

-

 

30,774

Core bonds

 

41,165

 

-

 

-

 

41,165

Equity securities

 

126,049

 

58,513

 

-

 

184,562

Real estate

 

-

 

-

 

20,783

 

20,783

Private market investments

 

-

 

-

 

20,202

 

20,202

Commodities

 

-

 

11,476

 

-

 

11,476

 

Total pension assets

$

202,500

$

69,989

$

40,985

$

313,474

Postretirement assets

$

-

$

30,892

$

-

$

30,892

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

108

 

 

 

 

 

 

The following table presents a reconciliation of thebeginning and ending balances of the fair value measurements using significantunobservable inputs (Level 3):

**Private**

**Real**

** **

**Equity**

**Estate**

**Total**

Beginning balance - January  1, 2009

$

17,863 

$

37,418 

$

55,281 

Realized losses

 

(1,040)

 

(671)

 

(1,711)

Unrealized gains (losses)

 

3,103 

 

(14,912)

 

(11,809)

Purchases, issuances, and  settlements, net

 

276 

 

(1,052)

 

(776)

Ending balance - December  31, 2009

$

20,202 

$

20,783 

$

40,985 

 

 

 

 

 

**Employee Savings Plan**

Idaho Power has an Employee Savings Plan that complies withSection 401(k) of the Internal Revenue Code and covers substantially allemployees.  Idaho Power matches specified percentages of employee contributionsto the plan.  Matching contributions amounted to $5 million in each of 2009,2008 and 2007.

**Post-employment Benefits**

Idaho Power provides certain benefits to former or inactiveemployees, their beneficiaries and covered dependents after employment butbefore retirement.  These benefits include salary continuation, health care andlife insurance for those employees found to be disabled under Idaho Power’sdisability plans and health care for surviving spouses and dependents.  IdahoPower accrues a liability for such benefits.  The post employment benefitamounts included in other deferred credits on IDACORP’s and Idaho Power’s consolidatedbalance sheets at December 31, 2009 and 2008 are $5.2 million and $3.7 million,respectively.

12.  PROPERTY PLANT AND EQUIPMENT AND JOINTLY-OWNEDPROJECTS:

 

The following table presents the major classifications ofIdaho Power’s utility plant in service, annual depreciation provisions as apercent of average depreciable balance and accumulated provision fordepreciation for the years 2009 and 2008 (in thousands of dollars):

 

**2009**

**2008**

 

**Balance**

**Avg Rate**

**Balance**

**Avg Rate**

Production

$

1,758,813

2.23%

$

1,736,670 

2.34%

Transmission

 

768,260

2.07    

 

742,871 

2.11    

Distribution

 

1,331,065

2.89    

 

1,254,048 

2.50    

General and Other

 

302,040

7.88    

 

296,545 

7.53    

 

Total in service

 

4,160,178 

2.81%

 

4,030,134 

2.73%

Accumulated provision for depreciation

 

(1,558,538)

 

 

(1,505,120)

 

 

In service - net

$

2,601,640 

 

$

2,525,014 

 

 

 

 

 

 

 

 

 

Idaho Power has interests in three jointly-owned generatingfacilities included in the table above.  Under the joint operating agreements,each participating utility is responsible for financing its share ofconstruction, operating and leasing costs.  Idaho Power’s proportionate shareof direct operation and maintenance expenses applicable to the projects isincluded in the Consolidated Statements of Income.

These facilities, and the extent of Idaho Power’sparticipation, were as follows at December 31, 2009 (in thousands of dollars):

109

 

 

 

 

 

 

 

** **

** **

**Utility**

**Construction**

**Accumulated**

** **

** **

** **

** **

**Plant In**

**Work in**

**Provision for**

**Ownership**

** **

**Name of Plant**

**Location**

**Service**

**Progress**

**Depreciation**

**%**

**MW(1)**

Jim Bridger Units 1-4

Rock Springs, WY

$

505,343

$

21,922

$

274,852

33

771

Boardman

Boardman, OR

 

71,755

 

630

 

51,677

10

64

Valmy Units 1 and 2

Winnemucca, NV

 

334,152

 

6,040

 

207,808

50

284

(1)  Idaho Power share of  nameplate capacity 

 

 

Idaho Power’s wholly-owned subsidiary IERCo, is a jointventurer in Bridger Coal Company, which operates the mine supplying coal to theJim Bridger generating plant.  Idaho Power’s coal purchases from the joint venturewere $66 million, $63 million and $51 million 2009, 2008 and 2007,respectively.

Idaho Power has contracts to purchase the energy from fourPURPA qualified facilities that are 50 percent owned by Ida-West.  IdahoPower’s power purchases from these facilities were $8.7 million in 2009 and $8million in 2008 and 2007.

See Note 1 for a discussion of the property of IDACORP’sconsolidated VIE.

13.  ASSET RETIREMENT OBLIGATIONS (ARO):

 

The guidance relating to accounting for AROs requires thatlegal obligations associated with the retirement of property, plant andequipment be recognized as a liability at fair value when incurred and when areasonable estimate of the fair value of the liability can be made.  Under theguidance, when a liability is initially recorded, the entity increases thecarrying amount of the related long-lived asset to reflect the futureretirement cost.  Over time, the liability is accreted to its present value andpaid, and the capitalized cost is depreciated over the useful life of therelated asset.  If, at the end of the asset’s life, the recorded liabilitydiffers from the actual obligations paid, a gain or loss would be recognized. As a rate-regulated entity, Idaho Power records regulatory assets orliabilities instead of accretion, depreciation and gains or losses, as approvedby Order No. 29414 from the IPUC.  The regulatory assets recorded under thisorder do not earn a return on investment.

Idaho Power’s recorded AROs relate to the removal of polychlorinatedbiphenyls-contaminated equipment at its distribution facilities and thereclamation and removal costs at its jointly owned coal-fired generationfacilities.  In 2009, changes in estimates at the coal-fired generationfacilities resulted in a net increase of $3.7 million in the recorded ARO.

Idaho Power also has AROs associated with its transmissionsystem and hydroelectric facilities; however, due to the indeterminate removaldate, the fair value of the associated liabilities currently cannot beestimated and no amounts are recognized in the consolidated financialstatements.

The regulated operations of Idaho Power also collect removalcosts in rates for certain assets that do not have associated AROs.  IdahoPower is required to redesignate these removal costs as regulatoryliabilities.  Costs recorded as regulatory liabilities on IDACORP’s and IdahoPower’s Consolidated Balance Sheets as of December 31, 2009 and 2008, were $155million and $157 million, respectively.

The following table presents the changes in the carryingamount of AROs (in thousands of dollars):

** **

**IDACORP**

**Idaho Power**

** **

**2009**

**2008**

**2009**

**2008**

Balance at beginning of year

$

12,415 

$

14,515 

$

12,415 

$

14,515 

Accretion expense

 

697 

 

701 

 

697 

 

701 

Revisions in estimated cash flows

 

3,684 

 

(2,627)

 

3,684 

 

(2,627)

Liability incurred

 

139 

 

- 

 

139 

 

- 

Liability settled

 

(695)

 

(174)

 

(695)

 

(174)

 

Balance at end of year

$

16,240 

$

12,415 

$

16,240 

$

12,415 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

110

 

 

 

 

 

 

14.  INVESTMENTS:

 

The following table summarizes IDACORP’s and Idaho Power’sinvestments as of December 31 (in thousands of dollars):

 

**2009**

**2008**

Idaho Power Investments:

 

 

 

 

 

Equity method investment 

$

83,969

$

86,433

 

Available-for-sale equity securities 

 

18,842

 

14,451

 

Executive deferred compensation plan

 

5,217

 

4,679

 

Other investments 

 

267

 

948

 

 

Total Idaho Power investments 

 

108,295

 

106,511

Investments in affordable housing 

 

77,809

 

74,951

Equity method investments 

 

9,991

 

10,030

Held-to-maturity debt securities 

 

-

 

9,424

Executive deferred compensation plan

 

1,069

 

1,225

Other investments

 

18

 

66

 

Total IDACORP investments 

$

197,182

$

202,207

 

 

 

 

 

 

**Equity Method Investments**

Idaho Power, through its subsidiary IERCo, is a 33 percentowner of Bridger Coal Company, which supplies coal to the Jim Bridgergenerating plant owned in part by Idaho Power.  Ida-West, through separatesubsidiaries, owns 50 percent of three electric generation projects: SouthForks Joint Venture; Hazelton/Wilson Joint Venture and Snow Mountain HydroLLC.  IFS invests in affordable housing developments.  All projects arereviewed periodically for impairment.

The following table presents IDACORP’s and Idaho Power’searnings (loss) of unconsolidated equity-method investments (in thousands ofdollars):

 

**2009**

**2008**

**2007**

Bridger Coal Company (Idaho Power)

$

8,256 

$

6,772 

$

5,553 

Ida-West projects

 

1,933 

 

1,830 

 

1,820 

IFS affordable housing projects 

 

 

 

 

 

 

 

(excluding tax credits)

 

(11,222)

 

(12,599)

 

(12,197)

 

Total 

$

(1,033)

$

(3,997)

$

(4,824)

 

**Investments in Debt and Equity Securities**

Investments in debt and equity securities classified asavailable-for-sale securities are reported at fair value, using either specificidentification or average cost to determine the cost for computing gains or losses. Any unrealized gains or losses on available-for-sale securities are included inother comprehensive income.

Investments classified as held-to-maturity securities arereported at amortized cost.  Held-to-maturity securities are investments indebt securities for which the company has the positive intent and ability tohold the securities until maturity.

The following table summarizes investments in debt andequity securities (in thousands of dollars):

111

 

 

 

 

 

 

 

 

**2009**

**2008**

 

**Gross**

**Gross**

** **

**Gross**

**Gross**

** **

 

**Unrealized**

**Unrealized**

**Fair**

**Unrealized**

**Unrealized**

**Fair**

 

**Gain**

**Loss**

**Value**

**Gain**

**Loss**

**Value**

Available-for-sale 

 

 

 

 

 

 

 

 

 

 

 

 

 

securities (Idaho Power)

$

2,989

$

-

$

18,842

$

-

$

-

$

14,451

Held-to-maturity debt 

 

 

 

 

 

 

 

 

 

 

 

 

 

securities (IFS)

 

-

 

-

 

-

 

3

 

25

 

9,448

 

The following table summarizes sales of available-for-salesecurities (in thousands of dollars):

** **

**2009**

**2008**

**2007**

 

 

 

 

 

 

 

Proceeds from sales

$

9,006

$

-

$

26,110

Gross realized gains from sales

 

11

 

-

 

2,093

Gross realized losses from sales

 

35

 

-

 

762

 

 

 

 

 

 

 

 

These investments are evaluated to determine whether theyhave experienced a decline in market value that is other-than-temporary. IDACORP and Idaho Power analyze securities in loss positions as of the end ofeach reporting period.  At December 31, 2009, IDACORP and Idaho Power did nothave any securities that were in a loss position.  At December 31, 2008, fouravailable-for-sale and six held-to-maturity securities were in an unrealizedloss position.  The available-for-sale equity securities in unrealized losspositions were broadly diversified index funds used to fund Idaho Power’sSMSP.  Due to the severity of the losses and the volatility of the market theavailable-for-sale securities were deemed other-than-temporarily impaired andwritten down $6.8 million to fair market value at December 31, 2008.  Theheld-to-maturity debt securities were bonds with an aggregate fair value ofapproximately $4 million and an aggregate unrealized loss of $25 thousand atDecember 31, 2008.  The bonds market values fluctuated based on the interestrate environment.  IDACORP and Idaho Power did not recognize anyother-than-temporary impairments in 2007.

**15.  DERIVATIVE FINANCIAL INSTRUMENTS**

 

**Commodity Price Risk**

Idaho Power is exposed to certain risks relating to itsongoing business operations.  The primary risk managed by using derivativeinstruments is commodity price risk related to Idaho Power’s ongoing utilityoperations providing electricity to meet the demand of its retail customers. Physical and financial forward contracts for both electricity and fuel used toproduce electricity are entered into to manage the price risk associated withmeeting forecasted loads.  The objective of Idaho Power’s energy purchase andsale activity is to meet the demand of retail electric customers, maintainappropriate physical reserves to ensure reliability and make economic use oftemporary surpluses that may develop.

All derivative instruments are recognized as either assetsor liabilities at fair value on the balance sheet.  Idaho Power’s physicalforward contracts qualify for the normal purchases and normal sales exceptionto derivative accounting requirements with the exception of forward contractsfor the purchase of natural gas for use at Idaho Power’s natural gas generationfacilities.  Because of Idaho Power’s power cost mechanisms, Idaho Powerrecords the changes in fair value of derivative instruments related to powersupply as regulatory assets or liabilities.

As of December 31, 2009, Idaho Power had the followingoutstanding derivative commodity forward contracts that were entered into forthe purpose of economically hedging forecasted purchases and sales:

**Commodity**

**Number of Units**

Electricity purchases

705,625

MWh

Electricity sales

567,525

MWh

Natural gas

1,356,250

MMBtu

Diesel

901,932

gallons

 

 

 

 

 

 

 

 

 

 

 

 

112

 

 

 

 

 

 

 

The following table presents the fair values of derivativesnot designated as hedging instruments recorded in the balance sheet at December31, 2009 (in thousands of dollars):

** **

** **

**Asset Derivatives**

**Liability  Derivatives**

** **

** **

**Balance Sheet**

**Fair**

**Balance Sheet**

**Fair**

**Commodity derivatives**

**Location**

**Value**

**Location**

**Value**

Current:

 

 

 

 

 

 

 

Financial swaps

Other current assets

$

2,931

Other current assets

$

2,087

 

Financial swaps

Other current liabilities

 

9

Other current liabilities

 

610

 

Forward contracts

Other current assets

 

354

Other current assets

 

-

Long-term:

 

 

 

 

 

 

 

Financial swaps

Other assets

 

442

Other assets

 

229

 

 

Total

 

$

3,736

 

$

2,926

 

 

 

 

 

 

 

 

 

The following table presents the effect on income ofderivatives not designated as hedging instruments for the year ended December31, 2009 (in thousands of dollars):

** **

**Location of  Gain/(Loss)**

**Amount of  Gain/(Loss)**

** **

**Recognized in  Income on**

**Recognized in  Income on**

**Commodity derivatives**

**Derivative**

**Derivative(1)**

Year ended December 31, 2009:

 

 

 

 

Financial swaps

Off-system sales

$

3,245 

 

Financial swaps

Purchased power

 

(3,966)

 

Financial swaps

Fuel expense

 

(5,794)

 

Forward contracts

Fuel expense

 

(986)

**(1)**Excludes changes in fair value of derivatives, which  are recorded on the balance sheet as regulatory assets or liabilities.

 

 

Idaho Power records changes in fair value of its derivativecontracts as either regulatory assets or liabilities.  Settlement gains and losseson electricity swap contracts are recorded on the income statement inoff-system sales or purchased power depending on the forecasted position beingeconomically hedged by the derivative contract.  Settlement gains and losses onboth financial and physical contracts for natural gas are reflected in fuelexpense.  Settlement gains and losses on diesel derivatives, which wereimmaterial for all three years, are recorded in fuel inventory on the balancesheet.

**Credit Risk**

At December 31, 2009, Idaho Power does not have materialcredit exposure from financial instruments, including derivatives.  Idaho Powermonitors credit risk exposure through reviews of counterparty credit quality,corporate-wide counterparty credit exposure, and corporate-wide counterpartyconcentration levels.  Idaho Power manages these risks by establishingappropriate credit and concentration limits on transactions with counterpartiesand requiring contractual guarantees, cash deposits or letters of credit fromcounterparties or their affiliates, as deemed necessary.  The majority of IdahoPower’s contracts are under the Western Systems Power Pool agreement thatprovides for adequate assurances if a counterparty has debt that is downgradedto below investment grade by at least one rating agency.  Idaho Power alsorequires North American Energy Standards Board contracts as necessary forphysical gas transactions, and International Swaps and Derivatives Association,Inc. contracts as needed for financial transactions.

 

113

 

 
**Credit-Contingent Features**
 

 

 

 

Certain of Idaho Power’s derivative instruments containprovisions that require Idaho Power’s unsecured debt to maintain an investmentgrade credit rating from each of the major credit rating agencies.  If IdahoPower’s unsecured debt were to fall below investment grade, it would be inviolation of these provisions, and the counterparties to the derivativeinstruments could request immediate payment or demand immediate and ongoingfull overnight collateralization on derivative instruments in net liabilitypositions.  The aggregate fair value of all derivative instruments withcredit-risk-related contingent features that are in a liability position onDecember 31, 2009, is $2.9 million.  Idaho Power has posted $1.3 millioncollateral related to this amount.  If the credit-risk-related contingentfeatures underlying these agreements were triggered on December 31, 2009, IdahoPower could have been required to post $0.5 million of cash collateral to itscounterparties.

16.  FAIR VALUE MEASUREMENTS:

 

IDACORP and Idaho Power have categorized their financialinstruments, based on the priority of the inputs to the valuation technique,into a three-level fair value hierarchy.  The fair value hierarchy gives thehighest priority to quoted prices in active markets for identical assets orliabilities (Level 1) and the lowest priority to unobservable inputs (Level3).  If the inputs used to measure the financialinstruments fall within different levels of the hierarchy, the categorizationis based on the lowest level input that is significant to the fair valuemeasurement of the instrument.

Financial assets and liabilitiesrecorded on the Consolidated Balance Sheets are categorized based on the inputsto the valuation techniques as follows:

Level 1:  Financial assets and liabilities whose values arebased on unadjusted quoted prices for identical assets or liabilities in anactive market that IDACORP and Idaho Power has the ability to access.

Level 2:  Financial assets andliabilities whose values are based on the following:

a)       Quotedprices for similar assets or liabilities in active markets;

b)       Quotedprices for identical or similar assets or liabilities in non-active markets;

c)       Pricingmodels whose inputs are observable for substantially the full term of the assetor liability;

d)       Pricingmodels whose inputs are derived principally from or corroborated by observablemarket data through correlation or other means for substantially the full termof the asset or liability.

IDACORP and Idaho Power Level 2 inputs are based on quotedmarket prices adjusted for location using corroborated, observable market data.

Level 3:  Financial assets and liabilities whose values arebased on prices or valuation techniques that require inputs that are bothunobservable and significant to the overall fair value measurement.  Theseinputs reflect management’s own assumptions about the assumptions a marketparticipant would use in pricing the asset or liability.

Idaho Power’s derivatives are contracts entered into as partof our management of loads and resources.  Electricity swaps are valued on theIntercontinental Exchange with quoted prices in an active market.  Natural gasand diesel derivative valuations are performed using New York MercantileExchange (NYMEX) pricing, adjusted for basis location, which are also quotedunder NYMEX.  Trading securities consists of employee-directed investments heldin a Rabbi Trust and are related to an executive deferred compensation plan. Available-for-sale securities are related to the SMSP and are held in a RabbiTrust and are actively traded money market and equity funds with quoted pricesin active markets.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

114

 

 

 

 

 

 

The following tables present information about IDACORP’s andIdaho Power’s assets and liabilities measured at fair value on a recurringbasis (in thousands of dollars).  IDACORP’s and Idaho Power’s assessment of thesignificance of a particular input to the fair value measurement requiresjudgment and may affect the valuation of fair value assets and liabilities andtheir placement within the fair value hierarchy.  Please see Note 11 for fairvalue information regarding IDACORP’s and Idaho Power’s benefit plans.

** **

**Quoted Prices in**

**Significant**

**Significant**

** **

** **

**Active Markets**

**Other**

**Unobservable**

** **

** **

**for Identical**

**Observable**

**Inputs**

** **

** **

**Assets (Level 1)**

**Inputs (Level 2)**

**(Level 3)**

**Total**

**2009**

 

 

 

 

 

 

 

 

**IDACORP**

 

 

 

 

 

 

 

 

Assets:

 

 

 

 

 

 

 

 

 

Derivatives

$

1,056 

$

354 

$

-

$

1,410 

 

Money market funds

 

38,221 

 

- 

 

-

 

38,221 

 

Trading securities

 

6,286 

 

- 

 

-

 

6,286 

 

Available-for-sale equity  securities

 

18,842 

 

- 

 

-

 

18,842 

Liabilities:

 

 

 

 

 

 

 

 

 

Derivatives

 

(601)

 

- 

 

-

 

(601)

**Idaho Power**

 

 

 

 

 

 

 

 

Assets:

 

 

 

 

 

 

 

 

 

Derivatives

$

1,056 

$

354 

$

-

$

1,410 

 

Money market funds

 

19,364 

 

- 

 

-

 

19,364 

 

Trading securities

 

5,217 

 

- 

 

-

 

5,217 

 

Available-for-sale equity  securities

 

18,842 

 

- 

 

-

 

18,842 

Liabilities:

 

 

 

 

 

 

 

 

 

Derivatives

 

(601)

 

- 

 

-

 

(601)

 

 

 

 

 

 

 

 

 

**2008**

 

 

 

 

 

 

 

 

**IDACORP**

 

 

 

 

 

 

 

 

Assets:

 

 

 

 

 

 

 

 

 

Derivatives

$

652 

$

- 

$

-

$

652 

 

Money market funds

 

4,610 

 

- 

 

-

 

4,610 

 

Trading securities

 

5,904 

 

- 

 

-

 

5,904 

 

Available-for-sale equity  securities

 

14,451 

 

- 

 

-

 

14,451 

Liabilities:

 

 

 

 

 

 

 

 

 

Derivatives

 

- 

 

(2,653)

 

-

 

(2,653)

**Idaho Power**

 

 

 

 

 

 

 

 

Assets:

 

 

 

 

 

 

 

 

 

Derivatives

$

652 

$

- 

$

-

$

652 

 

Money market funds

 

1,224 

 

- 

 

-

 

1,224 

 

Trading securities

 

4,679 

 

- 

 

-

 

4,679 

 

Available-for-sale equity  securities

 

14,451 

 

- 

 

-

 

14,451 

Liabilities:

 

 

 

 

 

 

 

 

 

Derivatives

 

- 

 

(2,653)

 

-

 

(2,653)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

115

 

 

 

 

 

 

The following tables present the carrying value andestimated fair value of financial instruments that are not reported at fairvalue, using available market information and appropriate valuationmethodologies.  The use of different market assumptions and/or estimationmethodologies may have a material effect on the estimated fair value amounts. Cash and cash equivalents, deposits, customer and other receivables, notespayable, accounts payable, interest accrued and taxes accrued are reported attheir carrying value as these are a reasonable estimate of their fair value. The estimated fair values for notes receivable and long-term debt are basedupon quoted market prices of the same or similar issues or discounted cash flowanalyses as appropriate.

 

**December 31,  2009**

**December 31,  2008**

 

**Carrying**

**Estimated**

**Carrying**

**Estimated**

 

**Amount**

**Fair Value**

**Amount**

**Fair Value**

** **

**(thousands of  dollars)**

**IDACORP**

 

 

 

 

 

 

 

 

**Assets:**

 

 

 

 

 

 

 

 

Notes receivable

$

2,946

$

2,946

$

5,703

$

5,726

**Liabilities:**

 

 

 

 

 

 

 

 

Long-term debt

 

1,422,130

 

1,406,815

 

1,277,042

 

1,199,699

 

 

 

 

 

 

 

 

 

**Idaho Power**

 

 

 

 

 

 

 

 

**Assets:**

 

 

 

 

 

 

 

 

Notes receivable

$

-

$

-

$

259

$

282

**Liabilities:**

 

 

 

 

 

 

 

 

Long-term debt

 

1,413,854

 

1,398,681

 

1,268,818

 

1,191,476

 

 

 

 

 

 

 

 

 

 

17.  SEGMENT INFORMATION:

 

IDACORP’s only reportablesegment is utility operations.  The utility operations segment’s primary sourceof revenue is the regulated operations of Idaho Power.  Idaho Power’s regulatedoperations include the generation, transmission, distribution, purchase andsale of electricity.  This segment also includes income from IERCo, awholly-owned subsidiary of Idaho Power that is also subject to regulation andis a one-third owner of Bridger Coal Company, an unconsolidated joint venture.

IDACORP’s other operatingsegments are below the quantitative thresholds for reportable segments and areincluded in the “All Other” category.  This category is comprised of IFS’sinvestments in affordable housing developments and historic rehabilitationprojects, Ida-West’s joint venture investments in small hydroelectricgeneration projects, the remaining activities of energy marketer IE, whichwound down its operations in 2003, and IDACORP’s holding company expenses.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

116

 

 

 

 

 

 

The following table summarizesthe segment information for IDACORP’s utility operations and the total of allother segments, and reconciles this information to total enterprise amounts (inthousands of dollars):

** **

**Utility**

**All**

** **

**Consolidated**

** **

**Operations**

**Other**

**Eliminations**

**Total**

**2009**

 

 

 

 

 

 

 

 

Revenues

$

1,045,996

$

3,804 

$

- 

$

1,049,800 

Operating income

 

206,193

 

(2,610)

 

- 

 

203,583 

Other income

 

10,704

 

1,227 

 

- 

 

11,931 

Interest income

 

4,859

 

490 

 

(283)

 

5,066 

Equity method income (loss)

 

8,256

 

(9,289)

 

- 

 

(1,033)

Interest expense

 

71,932

 

1,161 

 

(283)

 

72,810 

Income (loss) before income taxes

 

158,080

 

(11,343)

 

- 

 

146,737 

Income tax expense (benefit)

 

35,521

 

(13,159)

 

- 

 

22,362 

Income attributable to IDACORP, Inc.

 

122,559

 

1,791 

 

- 

 

124,350 

Total assets

 

4,073,390

 

192,699 

 

(27,362)

 

4,238,727 

Expenditures for long-lived assets

 

251,937

 

14 

 

- 

 

251,951 

**2008**

 

 

 

 

 

 

 

 

Revenues

$

956,076

$

4,338 

$

- 

$

960,414 

Operating income

 

189,375

 

1,292 

 

- 

 

190,667 

Other income (loss)

 

2,124

 

(1,912)

 

- 

 

212 

Interest income

 

2,929

 

1,582 

 

(892)

 

3,619 

Equity method income (loss)

 

6,772

 

(10,769)

 

- 

 

(3,997)

Interest expense

 

69,485

 

4,463 

 

(892)

 

73,056 

Income (loss) before income taxes

 

131,715

 

(14,270)

 

- 

 

117,445 

Income tax expense (benefit)

 

37,600

 

(18,400)

 

- 

 

19,200 

Income attributable to IDACORP, Inc.

 

94,115

 

4,299 

 

- 

 

98,414 

Total assets

 

3,884,856

 

164,339 

 

(26,350)

 

4,022,845 

Expenditures for long-lived assets

 

243,544

 

273 

 

- 

 

243,817 

**2007**

 

 

 

 

 

 

 

 

Revenues

$

875,401

$

3,993 

$

- 

$

879,394 

Operating income (loss)

 

154,777

 

(2,699)

 

- 

 

152,078 

Other income (loss)

 

7,436

 

(368)

 

- 

 

7,068 

Interest income

 

2,980  

 

3,126 

 

(1,553)

 

4,553 

Equity method income (loss)

 

5,553

 

(10,377)

 

- 

 

(4,824)

Interest expense

 

58,781

 

6,113 

 

(1,553)

 

63,341 

Income (loss) before income taxes

 

111,965

 

(16,431)

 

- 

 

95,534 

Income tax expense (benefit)

 

35,386

 

(21,655)

 

- 

 

13,731 

Income attributable to IDACORP, Inc.

 

76,579

 

5,760 

 

- 

 

82,339 

Total assets

 

3,489,516

 

235,636 

 

(71,844)

 

3,653,308 

Expenditures for long-lived assets

 

287,219

 

46 

 

- 

 

287,265 

** **

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

117

 

 

 

 

 

 

18.  OTHER INCOME AND EXPENSE:

 

The following table presents the components of Other incomeand Other expense (in thousands of dollars):

 

**2009**

**2008**

**2007**

**Other income:**

 

 

 

 

 

 

Allowance for funds used during construction-equity

$

7,555 

$

3,141 

$

5,995 

Investment income, net

 

5,071 

 

(5,273)

 

6,855 

Carrying charges

 

4,471 

 

6,709 

 

3,437 

Other

 

3,967 

 

7,284 

 

4,237 

 

Total

$

21,064 

$

11,861 

$

20,524 

 

 

 

 

 

 

 

**Other expense:**

 

 

 

 

 

 

SMSP expense

$

5,355 

$

4,628 

$

4,520 

Life Insurance, net of proceeds

 

(4,197)

 

(381)

 

(200)

Other

 

2,909 

 

3,783 

 

4,583 

 

Total

$

4,067 

$

8,030 

$

8,903 

 

 

 

 

 

 

 

 

19.  RELATED PARTY TRANSACTIONS (Idaho Power):

 

**IDACORP**

Idaho Power performs corporate functions such as financial,legal and management services for IDACORP and its subsidiaries.  Idaho Powercharges IDACORP for the costs of these services based on service agreements andother specifically identified costs.  For these services Idaho Power billedIDACORP $0.9 million, $1 million and $2 million in 2009, 2008 and 2007,respectively.

**Ida-West**

Idaho Power purchases all of the power generated by four ofIda-West’s hydroelectric projects located in Idaho.  Idaho Power paid $8.7million in 2009 and $8 million in each of 2008 and 2007.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

118

 

 

 

 

 

 

 

 

 

REPORT OF INDEPENDENT REGISTEREDPUBLIC ACCOUNTING FIRM

 

To the Board of Directors andShareholders of IDACORP, Inc.Boise, Idaho

We have audited the accompanying consolidated balance sheetsof IDACORP, Inc. and subsidiaries (the “Company”) as of December 31, 2009 and2008, and the related consolidated statements of income, comprehensive income,equity, and cash flows for each of the three years in the period ended December31, 2009.  Our audits also included the financial statement schedules listed inthe Index at Item 8.  These financial statements and financial statementschedules are the responsibility of the Company’s management.  Ourresponsibility is to express an opinion on the financial statements andfinancial statement schedules based on our audits.

We conducted our audits in accordance with the standards ofthe Public Company Accounting Oversight Board (United States).  Those standardsrequire that we plan and perform the audit to obtain reasonable assurance aboutwhether the financial statements are free of material misstatement.  An auditincludes examining, on a test basis, evidence supporting the amounts anddisclosures in the financial statements.  An audit also includes assessing theaccounting principles used and significant estimates made by management, aswell as evaluating the overall financial statement presentation.  We believethat our audits provide a reasonable basis for our opinion.

In our opinion, suchconsolidated financial statements present fairly, in all material respects, thefinancial position of IDACORP, Inc. and subsidiaries at December 31, 2009 and2008, and the results of their operations and their cash flows for each of thethree years in the period ended December 31, 2009, in conformity withaccounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedules, when considered inrelation to the basic consolidated financial statements taken as a whole,present fairly, in all material respects, the information set forth therein.

As discussed in Note 1 to theconsolidated financial statements, the accompanying 2008 consolidated balancesheet and 2008 and 2007 consolidated statements of income have beenretrospectively adjusted for the adoption of accounting guidance fornoncontrolling interests in consolidated financial statements and as discussedin Note 2 to the consolidated financial statements, the Company adoptedguidance for accounting for uncertainty in income taxes on January 1, 2007.

We have also audited, inaccordance with the standards of the Public Company Accounting Oversight Board(United States), the Company’s internal control over financial reporting as ofDecember 31, 2009, based on the criteria established in *InternalControl-Integrated Framework* issued by the Committee of SponsoringOrganizations of the Treadway Commission and our report dated February 23, 2010expressed an unqualified opinion on the Company’s internal control overfinancial reporting.

/s/ *DELOITTE & TOUCHE LLP*

Boise, IdahoFebruary 23, 2010

 

 

 

 

 

 

 

 

 

 

 

119

 

 

 

 

 

 

 

 

 

**REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**

** **

To the Board of Directors andShareholder of Idaho Power CompanyBoise, Idaho

We have audited the accompanyingconsolidated balance sheets and statements of capitalization of Idaho PowerCompany and subsidiary (the “Company”) as of December 31, 2009 and 2008, andthe related consolidated statements of income, comprehensive income, retainedearnings, and cash flows for each of the three years in the period endedDecember 31, 2009.  Our audits also included the financial statement schedulelisted in the Index at Item 8.  These financial statements and financialstatement schedule are the responsibility of the Company’s management.  Ourresponsibility is to express an opinion on the financial statements andfinancial statement schedule based on our audits.

We conducted our audits in accordance with the standards ofthe Public Company Accounting Oversight Board (United States).  Those standardsrequire that we plan and perform the audit to obtain reasonable assurance aboutwhether the financial statements are free of material misstatement.  An auditincludes examining, on a test basis, evidence supporting the amounts anddisclosures in the financial statements.  An audit also includes assessing theaccounting principles used and significant estimates made by management, aswell as evaluating the overall financial statement presentation.  We believethat our audits provide a reasonable basis for our opinion.

In our opinion, suchconsolidated financial statements present fairly, in all material respects, thefinancial position of Idaho Power Company and subsidiary at December 31, 2009and 2008, and the results of their operations and their cash flows for each ofthe three years in the period ended December 31, 2009, in conformity withaccounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedule, when considered inrelation to the basic consolidated financial statements taken as a whole,presents fairly, in all material respects, the information set forth therein.

As discussed in Note 2 to theconsolidated financial statements, the Company adopted guidance for accountingfor uncertainty in income taxes on January 1, 2007.

We have also audited, inaccordance with the standards of the Public Company Accounting Oversight Board(United States), the Company’s internal control over financial reporting as ofDecember 31, 2009, based on the criteria established in *InternalControl-Integrated Framework* issued by the Committee of SponsoringOrganizations of the Treadway Commission and our report dated February 23, 2010expressed an unqualified opinion on the Company’s internal control overfinancial reporting.

/s/ *DELOITTE & TOUCHE LLP*

Boise, IdahoFebruary 23, 2010

 

 

 

 

 

 

 

 

 

 

 

 

 

120

 

 

 

 

 

 

SUPPLEMENTAL FINANCIAL INFORMATION, UNAUDITED

 

**QUARTERLY FINANCIAL DATA:**

 

The following unauditedinformation is presented for each quarter of 2009 and 2008 (in thousands ofdollars except for per share amounts).  In the opinion of each company, alladjustments necessary for a fair statement of such amounts for such periodshave been included.  The results of operations for the interim periods are notnecessarily indicative of the results to be expected for the full year. Accordingly, earnings information for any three-month period should not beconsidered as a basis for estimating operating results for a full fiscal year. Amounts are based upon quarterly statements and the sum of the quarters may notequal the annual amount reported.

 

**Quarter Ended**

 

**March 31**

** **

**June 30**

** **

**September 30**

** **

**December 31**

**IDACORP, Inc.**

 

 

 

 

 

 

 

 

**2009**

 

 

 

 

 

 

 

 

Revenues

$

228,574 

$

243,634 

$

324,509 

$

253,083 

Operating income

 

35,634 

 

49,472 

 

79,603 

 

38,873 

Net income

 

18,686 

 

27,570 

 

54,707 

 

23,412 

Net income  attributable to IDACORP, Inc.

 

18,884 

 

27,475 

 

54,478 

 

23,513 

Basic earnings  per share

 

0.40 

 

0.59 

 

1.16 

 

0.49 

Diluted earnings  per share

 

0.40 

 

0.58 

 

1.16 

 

0.49 

** **

 

 

 

 

 

 

 

 

**2008**

 

 

 

 

 

 

 

 

Revenues

$

213,440  

$

230,226 

$

299,716 

$

217,032 

Operating income

 

44,756  

 

40,529 

 

81,577 

 

23,805 

Net income

 

21,405 

 

17,555 

 

51,912 

 

7,373 

Net income  attributable to IDACORP, Inc.

 

21,716 

 

17,515 

 

51,739 

 

7,444 

Basic earnings  per share

 

0.48  

 

0.39 

 

1.15 

 

0.16 

Diluted earnings  per share

 

0.48 

 

0.39 

 

1.14 

 

0.16 

 

 

 

 

 

 

 

 

 

**Idaho Power Company**

 

 

 

 

 

 

 

 

**2009**

 

 

 

 

 

 

 

 

Revenues

$

228,029 

$

242,518 

$

323,128 

$

252,321 

Income from operations

 

35,713 

 

49,228 

 

80,101 

 

41,152 

Net income

 

19,284 

 

26,326 

 

51,057 

 

25,892 

 

 

 

 

 

 

 

 

 

**2008**

 

 

 

 

 

 

 

 

Revenues

$

212,796 

$

228,945 

$

298,107 

$

216,228 

Income from operations

 

45,160  

 

40,388 

 

81,112 

 

22,715 

Net income

 

21,271 

 

17,728 

 

47,405 

 

7,711 

 

 

 

 

 

 

 

 

 

 

Operating income and net income were decreased in the fourthquarter of 2008 by $7.4 million following a decision received from the FERCincreasing the OATT refund, and $6.8 million other-than-temporary impairment ofdiversified index funds due to the decline in market value.

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ONACCOUNTING AND FINANCIAL DISCLOSURE

 

None

**ITEM 9A.  CONTROLS AND PROCEDURES**

 

Disclosure controls and procedures:

 

 

121

 

 
**IDACORP:**
 

 

 

 

The Chief Executive Officer and Chief Financial Officer ofIDACORP, based on their evaluation of IDACORP’s disclosure controls andprocedures (as defined in Exchange Act Rule 13a-15(e)) as of December 31, 2009,have concluded that IDACORP’s disclosure controls and procedures are effective.

**Idaho Power:**

The Chief Executive Officer and Chief Financial Officer ofIdaho Power, based on their evaluation of Idaho Power’s disclosure controls andprocedures (as defined in Exchange Act Rule 13a-15(e)) as of December 31, 2009,have concluded that Idaho Power’s disclosure controls and procedures areeffective.

**Internal control over financial reporting:**

**IDACORP:**

 

**Management’s Annual Report on Internal Control OverFinancial Reporting**

The management of IDACORP is responsible for establishingand maintaining adequate internal control over financial reporting forIDACORP.  Internal control over financial reporting is defined in Rule13a-15(f) promulgated under the Securities Exchange Act of 1934 as a processdesigned by, or under the supervision of, the company’s principal executive andprincipal financial officers and effected by the company’s board of directors,management and other personnel, to provide reasonable assurance regarding thereliability of financial reporting and the preparation of financial statementsfor external purposes in accordance with accounting principles generallyaccepted in the United States of America and includes those policies andprocedures that:

•  Pertain to the maintenance of records that in reasonable detailaccurately and fairly reflect the transactions and dispositions of the assetsof the company;

•  Provide reasonable assurance that transactions are recorded asnecessary to permit preparation of financial statements in accordance withaccounting principles generally accepted in the United States of America, andthat receipts and expenditures of the company are being made only in accordancewith the authorizations of management and directors of the company; and

•  Provide reasonable assurance regarding prevention or timelydetection of unauthorized acquisition, use or disposition of the company’sassets that could have a material effect on the financial statements.

 

Because of its inherent limitations, internal control overfinancial reporting may not prevent or detect misstatements.  Projections ofany evaluation of effectiveness to future periods are subject to the risk thatcontrols may become inadequate because of changes in conditions, or that thedegree of compliance with the policies or procedures may deteriorate.

IDACORP’s management assessed the effectiveness of thecompany’s internal control over financial reporting as of December 31, 2009. In making this assessment, the company’s management used the criteria set forthby the Committee of Sponsoring Organizations of the Treadway Commission in *InternalControl-Integrated Framework*.

Based on its assessment, management believes that, as of December31, 2009 IDACORP’s internal control over financial reporting is effective basedon those criteria.

IDACORP’s independent registered public accounting firm hasaudited the financial statements included in this Annual Report on Form 10-Kfor the year ended December 31, 2009 and issued a report, which appears on thenext page and expresses an unqualified opinion on the effectiveness ofIDACORP’s internal control over financial reporting as of December 31, 2009.

February 23, 2010

 

 

 

 

 

 

 

 

 

 

122

 

 

 

 

 

 

 

 

 

**REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**

To the Board of Directors and Shareholders of IDACORP, Inc.Boise, Idaho

We have audited the internal control over financialreporting of IDACORP, Inc. and subsidiaries (the “Company”) as of December 31,2009, based on the criteria established in *Internal Control-IntegratedFramework* issued by the Committee of Sponsoring Organizations of theTreadway Commission.  The Company’s management is responsible for maintainingeffective internal control over financial reporting and for its assessment ofthe effectiveness of internal control over financial reporting, included in theaccompanying *Management’s Annual Report on Internal Control over FinancialReporting*.  Our responsibility is to express an opinion on the Company’sinternal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards ofthe Public Company Accounting Oversight Board (United States).  Those standardsrequire that we plan and perform the audit to obtain reasonable assurance aboutwhether effective internal control over financial reporting was maintained inall material respects.  Our audit included obtaining an understanding ofinternal control over financial reporting, assessing the risk that a materialweakness exists, testing and evaluating the design and operating effectivenessof internal control based on the assessed risk, and performing such otherprocedures as we considered necessary in the circumstances.  We believe thatour audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is aprocess designed by, or under the supervision of, the company’s principalexecutive and principal financial officers, or persons performing similarfunctions, and effected by the company’s board of directors, management, andother personnel to provide reasonable assurance regarding the reliability offinancial reporting and the preparation of financial statements for externalpurposes in accordance with generally accepted accounting principles.  Acompany’s internal control over financial reporting includes those policies andprocedures that (1) pertain to the maintenance of records that, in reasonabledetail, accurately and fairly reflect the transactions and dispositions of theassets of the company; (2) provide reasonable assurance that transactions arerecorded as necessary to permit preparation of financial statements inaccordance with generally accepted accounting principles, and that receipts andexpenditures of the company are being made only in accordance withauthorizations of management and directors of the company; and (3) providereasonable assurance regarding prevention or timely detection of unauthorizedacquisition, use, or disposition of the company’s assets that could have amaterial effect on the financial statements.

Because of the inherent limitations of internal control overfinancial reporting, including the possibility of collusion or impropermanagement override of controls, material misstatements due to error or fraudmay not be prevented or detected on a timely basis.  Also, projections of anyevaluation of the effectiveness of the internal control over financialreporting to future periods are subject to the risk that the controls maybecome inadequate because of changes in conditions, or that the degree ofcompliance with the policies or procedures may deteriorate.

In our opinion, the Company maintained, in all materialrespects, effective internal control over financial reporting as of December31, 2009, based on the criteria established in *Internal Control-IntegratedFramework* issued by the Committee of Sponsoring Organizations of theTreadway Commission.

We have also audited, in accordance with the standards ofthe Public Company Accounting Oversight Board (United States), the consolidatedfinancial statements and financial statement schedules as of and for the yearended December 31, 2009 of the Company and our report dated February 23, 2010expressed an unqualified opinion on those financial statements and financialstatement schedules and included an explanatory paragraph regarding theCompany’s adoption of accounting guidance for noncontrolling interests inconsolidated financial statements..

/s/ *DELOITTE & TOUCHE LLP*

123

 

 

 

 

 

 

Boise, IdahoFebruary 23, 2010

**Idaho Power Company:**

 

**Management’s Annual Report on Internal Control OverFinancial Reporting**

The management of Idaho Power Company (Idaho Power) isresponsible for establishing and maintaining adequate internal control overfinancial reporting of Idaho Power.  Internal control over financial reportingis defined in Rule 13a-15(f) promulgated under the Securities Exchange Act of1934 as a process designed by, or under the supervision of, the company’sprincipal executive and principal financial officers and effected by thecompany’s board of directors, management and other personnel, to providereasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance withaccounting principles generally accepted in the United States of America andincludes those policies and procedures that:

•  Pertain to the maintenance of records that in reasonable detailaccurately and fairly reflect the transactions and dispositions of the assetsof the company;

•  Provide reasonable assurance that transactions are recorded asnecessary to permit preparation of financial statements in accordance withaccounting principles generally accepted in the United States of America, andthat receipts and expenditures of the company are being made only in accordancewith the authorizations of management and directors of the company; and

•  Provide reasonable assurance regarding prevention or timelydetection of unauthorized acquisition, use or disposition of the company’sassets that could have a material effect on the financial statements.

 

Because of its inherent limitations, internal control overfinancial reporting may not prevent or detect misstatements.  Projections ofany evaluation of effectiveness to future periods are subject to the risk thatcontrols may become inadequate because of changes in conditions, or that thedegree of compliance with the policies or procedures may deteriorate.

Idaho Power’s management assessed the effectiveness of thecompany’s internal control over financial reporting as of December 31, 2009. In making this assessment, the company’s management used the criteria set forthby the Committee of Sponsoring Organizations of the Treadway Commission in *InternalControl-Integrated Framework*.

Based on its assessment, management believes that, as ofDecember 31, 2009, Idaho Power’s internal control over financial reporting iseffective based on those criteria.

Idaho Power’s independent registered public accounting firmhas audited the financial statements included in this Annual Report on Form10-K for the year ended December 31, 2009 and issued a report, which appears onthe next page and expresses an unqualified opinion on the effectiveness ofIdaho Power’s internal control over financial reporting as of December 31,2009.

February 23, 2010

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

124

 

 

 

 

 

 

 

 

 

**REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**

 

To the Board of Directors and Shareholder of Idaho PowerCompanyBoise, Idaho

We have audited the internal control over financialreporting of Idaho Power Company and subsidiary (the “Company”) as of December31, 2009, based on the criteria established in *Internal Control-IntegratedFramework* issued by the Committee of Sponsoring Organizations of theTreadway Commission.  The Company’s management is responsible for maintainingeffective internal control over financial reporting and for its assessment ofthe effectiveness of internal control over financial reporting, included in theaccompanying *Management’s Annual Report on Internal Control over FinancialReporting*.  Our responsibility is to express an opinion on the Company’sinternal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards ofthe Public Company Accounting Oversight Board (United States).  Those standardsrequire that we plan and perform the audit to obtain reasonable assurance aboutwhether effective internal control over financial reporting was maintained inall material respects.  Our audit included obtaining an understanding ofinternal control over financial reporting, assessing the risk that a materialweakness exists, testing and evaluating the design and operating effectivenessof internal control based on the assessed risk, and performing such otherprocedures as we considered necessary in the circumstances.  We believe thatour audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is aprocess designed by, or under the supervision of, the company’s principalexecutive and principal financial officers, or persons performing similarfunctions, and effected by the company’s board of directors, management, andother personnel to provide reasonable assurance regarding the reliability offinancial reporting and the preparation of financial statements for externalpurposes in accordance with generally accepted accounting principles.  Acompany’s internal control over financial reporting includes those policies andprocedures that (1) pertain to the maintenance of records that, in reasonabledetail, accurately and fairly reflect the transactions and dispositions of theassets of the company; (2) provide reasonable assurance that transactions arerecorded as necessary to permit preparation of financial statements inaccordance with generally accepted accounting principles, and that receipts andexpenditures of the company are being made only in accordance withauthorizations of management and directors of the company; and (3) providereasonable assurance regarding prevention or timely detection of unauthorizedacquisition, use, or disposition of the company’s assets that could have amaterial effect on the financial statements.

Because of the inherent limitations of internal control overfinancial reporting, including the possibility of collusion or impropermanagement override of controls, material misstatements due to error or fraudmay not be prevented or detected on a timely basis.  Also, projections of anyevaluation of the effectiveness of the internal control over financialreporting to future periods are subject to the risk that the controls maybecome inadequate because of changes in conditions, or that the degree ofcompliance with the policies or procedures may deteriorate.

In our opinion, the Company maintained, in all materialrespects, effective internal control over financial reporting as of December31, 2009, based on the criteria established in *Internal Control-IntegratedFramework* issued by the Committee of Sponsoring Organizations of theTreadway Commission.

We have also audited, in accordance with the standards ofthe Public Company Accounting Oversight Board (United States), the consolidatedfinancial statements and financial statement schedule as of and for the yearended December 31, 2009 of the Company and our report dated February 23, 2010expressed an unqualified opinion on those financial statements and financialstatement schedule.

/s/ *DELOITTE & TOUCHE LLP*

Boise, IdahoFebruary 23, 2010

125

 

 

 

 

 

 

**Changes in Internal Control Over Financial Reporting**There have been no changes in IDACORP’s or Idaho Power’s internal control overfinancial reporting during the quarter ended December 31, 2009, requiringdisclosure that have materially affected, or are reasonably likely tomaterially affect, IDACORP’s or Idaho Power’s internal control over financialreporting.

**ITEM9B.  OTHER INFORMATION**

 

On February 17, 2010, Idaho Power entered into theForty-fifth Supplemental Indenture, dated as of February 1, 2010, to theIndenture of Mortgage and Deed of Trust, dated as of October 1, 1937, betweenIdaho Power and Deutsche Bank Trust Company Americas (formerly known as BankersTrust Company) and R.G. Page, as Trustees (Stanley Burg, successor individualtrustee) for the purpose of increasing the maximum amount of first mortgagebonds issuable by Idaho Power from $1.5 to $2.0 billion.

PART III

 

**ITEM 10.  DIRECTORS, EXECUTIVE OFFICERS ANDCORPORATE GOVERNANCE**

 

The portion of IDACORP’s definitive proxystatement appearing under the captions “Proposal No. 1: Election of Directors -Nominees for Election - Terms Expire 2013,” “Continuing Directors – TermsExpire 2012,” “Continuing Directors - Terms Expire 2011,” “Section 16(a)Beneficial Ownership Reporting Compliance,” “Corporate Governance - AuditCommittee,” paragraph 1 and “Corporate Governance - Code of Ethics,” to befiled pursuant to Regulation 14A for the Annual Meeting of Shareholders to beheld on May 20, 2010 is hereby incorporated by reference.

**ITEM 11.  EXECUTIVE COMPENSATION**

 

The portion of IDACORP’s definitive proxystatement appearing under the caption “Executive Compensation” to be filedpursuant to Regulation 14A for the Annual Meeting of Shareholders to be held onMay 20, 2010 is hereby incorporated by reference.

 

126

 

 

 

 

 

 

**ITEM 12.  SECURITY OWNERSHIP OFCERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS**

 

The portion of IDACORP’s definitive proxystatement appearing under the caption “Security Ownership of Directors,Executive Officers and Five Percent Shareholders” to be filed pursuant toRegulation 14A for the Annual Meeting of Shareholders to be held on May 20,2010 is hereby incorporated by reference.

The following table includes information as ofDecember 31, 2009, with respect to equity compensation plans where equitysecurities of IDACORP may be issued.  These plans are the 1994 Restricted StockPlan (RSP), the IDACORP 2000 Long-Term Incentive and Compensation Plan (LTICP)and the Non-Employee Director Stock Compensation Plan (DSP).

** **

**(a)**

**(b)**

**(c)**

** **

** **

** **

**Number of securities**

** **

** **

** **

**remaining available for**

** **

**Number of securities to**

**Weighted-average**

**future issuance under**

** **

**be issued upon exercise**

**exercise price of**

**equity compensation**

** **

**of outstanding options,**

**outstanding options,**

**plans (excluding securities**

**Plan Category**

**warrants and rights**

**warrants and rights**

**reflected in column (a))**

Equity  compensation

 

 

 

 

 

plans approved by

 

 

 

 

 

shareholders (1)

616,003

$

34.27

1,627,774 (2)(3)

Equity  compensation

 

 

 

 

 

plans not approved

 

 

 

 

 

by shareholders(4)

-

$

-

13,927      

 

 

Total

616,003

$

34.27

 1,641,701      

(1)  Consists  of the RSP and the LTICP.

(2)  In addition to being available for future issuance  upon exercise of  options, 1,602,259 shares under the LTICP may instead be  issued in connection with stock appreciation rights, restricted stock,  restricted stock units, performance units, performance shares or other  equity-based awards.

(3)  25,515 shares remain available for future issuance  under the RSP.

(4)  Consists of shares available for future issuance  under the DSP.

 

 

**Equity Compensation Plans Not Approved byIDACORP Shareholders:**

The DSP was adopted by the Board of Directorseffective May 17, 1999.  The purpose of the DSP is to increase directors’ stockownership through stock-based compensation.  The DSP provides for an annualstock grant valued at $45,000.  Effective January 1, 2009, directors may defertheir annual stock awards, which are then held as deferred stock units withdividend equivalents reinvested in additional stock units.

**ITEM 13.  CERTAIN RELATIONSHIPS AND RELATEDTRANSACTIONS, AND DIRECTOR INDEPENDENCE**

 

The portion of IDACORP’s definitive proxystatement appearing under the captions “Related Person Transaction Disclosure” and“Corporate Governance – Director Independence” paragraphs 1 and 2 to be filedpursuant to Regulation 14A for the Annual Meeting of Shareholders to be held onMay 20, 2010 is hereby incorporated by reference.

**ITEM 14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES**

 

**IDACORP:**

The portion of IDACORP’s definitive proxystatement appearing under the caption “Independent Accountant Billings” in theproxy statement to be filed pursuant to Regulation 14A for the Annual Meetingof Shareholders to be held on May 20, 2010 is hereby incorporated by reference.

 

 

 

 

127

 

 

 

 

 

 

**Idaho Power:**

The following table presents fees billed forprofessional services rendered by Deloitte & Touche LLP, the member firmsof Deloitte Touche Tohmatsu, and their respective affiliates (collectively, DeloitteEntities), for Idaho Power for the fiscal years ended December 31, 2009 and2008.

** **

**2009**

**2008**

Audit fees

$

1,000,059

$

1,037,923

Audit-related fees (1)

 

62,790

 

59,800

Tax fees(2)

 

304,118

 

138,606

All other fees (3)

 

2,000

 

2,000

 

Total

$

1,368,967

$

1,238,329

(1)   Includes fees for audits of Idaho Power’s benefit  plans.

(2)  Includes  fees for benefit plan tax returns and consultation related to uniform  capitalization and repairs tax accounting.

(3)   Accounting research tool subscription.

 

 

**Policy on Audit Committee Pre-Approval**

Idaho Power and the Audit Committee are committedto ensuring the independence of the independent registered public accountingfirm, both in fact and in appearance.  In this regard, on February 4, 2004, theAudit Committee established a pre-approval policy in accordance with applicablesecurities rules.  All fees were pre-approved by the Audit Committee in 2008and 2009.

In addition to the audits of Idaho Power’sconsolidated financial statements, the independent public accounting firm maybe engaged to provide certain audit-related, tax and other services.  The AuditCommittee must pre-approve all services performed by the independent publicaccounting firm to assure that the provision of those services does not impairthe public accounting firm’s independence.  The services that the AuditCommittee will consider include audit services such as attest services, changesin the scope of the audit of the financial statements, and the issuance ofcomfort letters and consents in connection with financings; audit-relatedservices such as internal control reviews and assistance with internal controlreporting requirements; attest services related to financial reporting that arenot required by statute or regulation, and accounting consultations and auditsrelated to proposed transactions and new or proposed accounting rules,standards and interpretations; and tax compliance and planning services. Unless a type of service to be provided by the independent public accountingfirm has received general pre-approval, it will require specific pre-approvalby the Audit Committee.  In addition, any proposed services exceedingpre-approved cost levels will require specific pre-approval by the AuditCommittee.  Under the pre-approval policy, the Audit Committee has delegated tothe Chairman of the Audit Committee pre-approval authority for proposed tax,audit and audit-related services.  The Chairman must report any pre-approvaldecisions to the Audit Committee at its next scheduled meeting.

Any request to engage the independent publicaccounting firm to provide a service which has not received generalpre-approval must be submitted as a written proposal to Idaho Power’s ChiefFinancial Officer with a copy to the General Counsel.  The request must includea detailed description of the service to be provided, the proposed fee and thebusiness reasons for engaging the independent public accounting firm to providethe service.  Upon approval by the Chief Financial Officer, the General Counseland the independent public accounting firm that the proposed engagementcomplies with the terms of the pre-approval policy and the applicable rules andregulations, the request will be presented to the Audit Committee or theCommittee Chairman, as the case may be, for pre-approval.

In determining whether to pre-approve theengagement of the independent public accounting firm, the Audit Committee orthe Committee Chairman, as the case may be, must consider, among other things,the pre-approval policy, applicable rules and regulations and whether thenature of the engagement and the related fees are consistent with the followingprinciples, as stated in the SEC’s adopting release for the rules on auditorindependence:

•  the independent public accounting firm cannot function in therole of management of Idaho Power;

•  the independent public accounting firm cannot audit its own work;and

•  the independent public accounting firm cannot serve in anyadvocacy role on behalf of Idaho Power.

128

 

 

 

 

 

 

The appendices to the pre-approval policy describe thespecific audit, audit related, tax and other services that have the generalpre-approval of the Audit Committee.  The term of any pre-approval is 12 monthsfrom the date of pre-approval, unless the Audit Committee specifically providesfor a different period.  The Audit Committee will periodically revise the listof pre-approved services, based on subsequent determinations.

PART IV

 

**ITEM 15.  EXHIBITS AND FINANCIAL STATEMENT SCHEDULES**

 

(1) and (2)  Please refer to Part II, Item 8 - “FinancialStatements and Supplementary Data” for a complete listing of all consolidatedfinancial statements and financial statement schedules.

(3)  Exhibits.

*Previously Filed and Incorporated Herein by Reference

129

 

 

 

 

 

 

 

*2

Agreement and Plan of Exchange between IDACORP, Inc., and  Idaho Power dated as of February 2, 1998.  File number 333-48031, Form S-4,  filed on 3/16/98, as Exhibit 2.

 

 

*3.1

Restated Articles of Incorporation of Idaho Power as filed  with the Secretary of State of Idaho on June 30, 1989.  File number 33-00440,  Post-Effective Amendment No. 2 to Form S-3, filed on 6/30/89, as Exhibit  4(a)(xiii).

 

 

*3.2

Statement of Resolution Establishing Terms of Flexible  Auction Series A, Serial Preferred Stock, Without Par Value (cumulative  stated value of $100,000 per share) of Idaho Power, as filed with the  Secretary of State of Idaho on November 5, 1991.  File number 33-65720, Form  S-3, filed on 7/7/93, as Exhibit 4(a)(ii).

 

 

*3.3

Statement of Resolution Establishing Terms of 7.07% Serial  Preferred Stock, Without Par Value (cumulative stated value of $100 per  share) of Idaho Power, as filed with the Secretary of State of Idaho on June  30, 1993.  File number 33-65720, Form S-3, filed on 7/7/93, as Exhibit  4(a)(iii).

 

 

*3.4

Articles of Amendment to Restated Articles of  Incorporation of Idaho Power, as filed with the Secretary of State of Idaho  on June 15, 2000.  File number 1-3198, Form 10-Q for the quarter ended June  30, 2000, filed on 8/4/00, as Exhibit 3(a)(iii).

 

 

*3.5

Articles of Amendment to Restated Articles of  Incorporation of Idaho Power Company, as filed with the Secretary of State of  Idaho on January 21, 2005.  File number 1-3198, Form 8-K, filed on 1/26/05,  as Exhibit 4.5.

 

 

*3.6

Articles of Amendment to Restated Articles of  Incorporation of Idaho Power, as amended, as filed with the Secretary of  State of Idaho on November 19, 2007.  File number 1-3198, Form 8-K, filed on  11/19/07, as Exhibit 3.3.

 

 

*3.7

Articles of Share Exchange, as filed with the Secretary of  State of Idaho on September 29, 1998.  File number 33-56071-99,  Post-Effective Amendment No. 1 to Form S-8, filed on 10/1/98, as Exhibit  3(d).

 

 

*3.8

Amended Bylaws of Idaho Power, amended on November 15,  2007, and presently in effect.  File number 1-3198, Form 8-K, filed on  11/19/07, as Exhibit 3.2.

 

 

*3.9

Articles of Incorporation of IDACORP, Inc.  File number  333-64737, Amendment No. 1 to Form S-3, filed on 11/4/98, as Exhibit 3.1.

*3.10

Articles of Amendment to Articles of Incorporation of IDACORP,  Inc. as filed with the Secretary of State of Idaho on March 9, 1998.  File  number 333-64737, Amendment No. 1 to Form S-3, filed on 11/4/98, as Exhibit  3.2.

 

 

*3.11

Articles of Amendment to Articles of Incorporation of  IDACORP, Inc. creating A Series Preferred Stock, without par value, as filed  with the Secretary of State of Idaho on September 17, 1998.  File number  333-00139-99, Post-Effective Amendment No. 1 to Form S-3, filed on 9/22/98,  as Exhibit 3(b).

 

 

*3.12

Amended Bylaws of IDACORP, Inc., amended on November 15,  2007 and presently in effect.  File number 1-14456, Form 8-K, filed on  11/19/07, as Exhibit 3.1.

 

 

*4.1

Mortgage and Deed of Trust, dated as of October 1, 1937,  between Idaho Power and Deutsche Bank Trust Company Americas (formerly known  as Bankers Trust Company) and R. G. Page, as Trustees.  File number 2-3413,  as Exhibit B-2.

 

 

*4.2

Idaho Power Supplemental Indentures to Mortgage and Deed  of Trust:

 

File number 1-MD, as Exhibit B-2-a, First, July 1, 1939

 

File number 2-5395, as Exhibit 7-a-3, Second, November 15,  1943

 

File number 2-7237, as Exhibit 7-a-4, Third, February 1,  1947

 

File number 2-7502, as Exhibit 7-a-5, Fourth, May 1, 1948

 

File number 2-8398, as Exhibit 7-a-6, Fifth, November 1,  1949

 

File number 2-8973, as Exhibit 7-a-7, Sixth, October 1,  1951

 

File number 2-12941, as Exhibit 2-C-8, Seventh, January 1,  1957

 

File number 2-13688, as Exhibit 4-J, Eighth, July 15, 1957

 

File number 2-13689, as Exhibit 4-K, Ninth, November 15,  1957

 

File number 2-14245, as Exhibit 4-L, Tenth, April 1, 1958

 

File number 2-14366, as Exhibit 2-L, Eleventh, October 15,  1958

 

File number 2-14935, as Exhibit 4-N, Twelfth, May 15, 1959

 

File number 2-18976, as Exhibit 4-O, Thirteenth, November  15, 1960

 

File number 2-18977, as Exhibit 4-Q, Fourteenth, November  1, 1961

 

File number 2-22988, as Exhibit 4-B-16, Fifteenth,  September 15, 1964

 

File number 2-24578, as Exhibit 4-B-17, Sixteenth, April  1, 1966

 

File number 2-25479, as Exhibit 4-B-18, Seventeenth,  October 1, 1966

 

File number 2-45260, as Exhibit 2(c), Eighteenth,  September 1, 1972

 

File number 2-49854, as Exhibit 2(c), Nineteenth, January  15, 1974

 

File number 2-51722, as Exhibit 2(c)(i), Twentieth, August  1, 1974

 

File number 2-51722, as Exhibit 2(c)(ii), Twenty-first,  October 15, 1974

 

File number 2-57374, as Exhibit 2(c), Twenty-second,  November 15, 1976

 

File number 2-62035, as Exhibit 2(c), Twenty-third, August  15, 1978

 

File number 33-34222, as Exhibit 4(d)(iii), Twenty-fourth,  September 1, 1979

 

File number 33-34222, as Exhibit 4(d)(iv), Twenty-fifth,  November 1, 1981

 

File number 33-34222, as Exhibit 4(d)(v), Twenty-sixth,  May 1, 1982

 

File number 33-34222, as Exhibit 4(d)(vi), Twenty-seventh,  May 1, 1986

 

File number 33-00440, as Exhibit 4(c)(iv), Twenty-eighth,  June 30, 1989

 

File number 33-34222, as Exhibit 4(d)(vii), Twenty-ninth,  January 1, 1990

 

File number 33-65720, as Exhibit 4(d)(iii), Thirtieth,  January 1, 1991

 

File number 33-65720, as Exhibit 4(d)(iv), Thirty-first,  August 15, 1991

 

File number 33-65720, as Exhibit 4(d)(v), Thirty-second,  March 15, 1992

 

File number 33-65720, as Exhibit 4(d)(vi), Thirty-third,  April 1, 1993

 

File number 1-3198, Form 8-K, filed on 12/20/93, as  Exhibit 4, Thirty-fourth, December 1, 1993

 

File number 1-3198, Form 8-K, filed on 11/21/00, as  Exhibit 4, Thirty-fifth, November 1, 2000

 

File number 1-3198, Form 8-K, filed on 10/1/01, as Exhibit  4, Thirty-sixth, October 1, 2001

 

File number 1-3198, Form 8-K, filed on 4/16/03, as Exhibit  4, Thirty-seventh, April 1, 2003

 

File number 1-3198, Form 10-Q for the quarter ended June  30, 2003, filed on 8/7/03, as Exhibit 4(a)(iii), Thirty-eighth, May 15, 2003

 

File number 1-3198, Form 10-Q for the quarter ended  September 30, 2003, filed on 11/6/03, as Exhibit 4(a)(iii), Thirty-ninth,  October 1, 2003

 

File number 1-3198, Form 8-K filed on 5/10/05, as Exhibit  4, Fortieth, May 1, 2005

 

File number 1-3198, Form 8-K filed on 10/10/06, as Exhibit  4, Forty-first, October 1, 2006

 

File number 1-3198, Form 8-K filed on 6/4/07, as Exhibit  4, Forty-second, May 1, 2007

 

File number 1-3198, Form 8-K filed on 9/26/07, as Exhibit  4, Forty-third, September 1, 2007

 

File number 1-3198, Form 8-K filed on 4/3/08, as Exhibit  4, Forty-fourth, April 1, 2008

 

 

*4.3

Instruments relating to Idaho Power American Falls bond  guarantee (see Exhibit 10.4).  File number 1-3198, Form 10-Q for the quarter  ended June 30, 2000, filed on 8/4/00, as Exhibit 4(b).

 

 

*4.4

Agreement of Idaho Power to furnish certain debt instruments.   File number 33-65720, Form S-3, filed on 7/7/93, as Exhibit 4(f).

 

 

*4.5

Agreement of IDACORP, Inc. to furnish certain debt  instruments.  File number 1-14465, Form 10-Q for the quarter ended September  30, 2003, filed on 11/6/03, as Exhibit 4(c)(ii).

 

 

*4.6

Agreement and Plan of Merger dated March 10, 1989, between  Idaho Power Company, a Maine Corporation, and Idaho Power Migrating  Corporation.  File number 33-00440, Post-Effective Amendment No. 2 to Form  S-3, filed on 6/30/89, as Exhibit 2(a)(iii).

 

 

*4.7

Indenture for Senior Debt Securities dated as of February  1, 2001, between IDACORP, Inc. and Deutsche Bank Trust Company Americas  (formerly known as Bankers Trust Company), as trustee.  File number 1-14465,  Form 8-K, filed on 2/28/01, as Exhibit 4.1.

 

 

*4.8

First Supplemental Indenture dated as of February 1, 2001  to Indenture for Senior Debt Securities dated as of February 1, 2001 between  IDACORP, Inc. and Deutsche Bank Trust Company Americas (formerly known as  Bankers Trust Company), as trustee.  File number 1-14465, Form 8-K, filed on  2/28/01, as Exhibit 4.2.

 

 

*4.9

Indenture for Debt Securities dated as of August 1, 2001  between Idaho Power Company and Deutsche Bank Trust Company Americas  (formerly known as Bankers Trust Company), as trustee.  File number  333-67748, Form S-3, filed on 8/16/01, as Exhibit 4.13.

 

 

4.10

Forty-fifth Supplemental Indenture to Mortgage and Deed of  Trust, dated as of February 1, 2010.

 

 

*10.1

Agreements, dated September 22, 1969, between Idaho Power and  Pacific Power & Light Company relating to the operation, construction and  ownership of the Jim Bridger Project.  File number 2-49584, as Exhibit 5(b).

 

 

*10.2

Amendment, dated February 1, 1974, relating to operation  agreement filed as Exhibit 10.1.  File number 2-51762, as Exhibit 5(c).

 

 

*10.3

Agreement, dated as of October 11, 1973, between Idaho  Power and Pacific Power & Light Company.  File number 2-49584, as Exhibit  5(c).

 

 

*10.4

Guaranty Agreement, dated April 11, 2000, between Idaho  Power and Bank One Trust Company, N.A., as Trustee, relating to $19,885,000  American Falls Replacement Dam Refinancing Bonds of the American Falls  Reservoir District, Idaho.  File number 1-3198, Form 10-Q for the quarter  ended June 30, 2000, filed on 8/4/00, as Exhibit 10(c).

 

 

*10.5

Guaranty Agreement, dated as of August 30, 1974, between  Idaho Power and Pacific Power & Light Company.  File number 2-62034, Form  S-7, filed on 6/30/78, as Exhibit 5(r).

 

 

*10.6

Letter Agreement, dated January 23, 1976, between Idaho  Power and Portland General Electric Company.  File number 2-56513, as Exhibit  5(i).

*10.7

Agreement for Construction, Ownership and Operation of the  Number One Boardman Station on Carty Reservoir, dated as of October 15, 1976,  between Portland General Electric Company and Idaho Power.  File number  2-62034, Form S-7, filed on 6/30/78, as Exhibit 5(s).

 

 

*10.8

Amendment, dated September 30, 1977, relating to agreement  filed as Exhibit 10.6.  File number 2-62034, Form S-7, filed on 6/30/78, as  Exhibit 5(t).

 

 

*10.9

Amendment, dated October 31, 1977, relating to agreement  filed as Exhibit 10.6.  File number 2-62034, Form S-7, filed on 6/30/78, as  Exhibit 5(u).

 

 

*10.10

Amendment, dated January 23, 1978, relating to agreement  filed as Exhibit 10.6.  File number 2-62034, Form S-7, filed on 6/30/78, as  Exhibit 5(v).

 

 

*10.11

Amendment, dated February 15, 1978, relating to agreement  filed as Exhibit 10.6.  File number 2-62034, Form S-7, filed on 6/30/78, as  Exhibit 5(w).

 

 

*10.12

Amendment, dated September 1, 1979, relating to agreement  filed as Exhibit 10.6.  File number 2-68574, Form S-7, filed on 7/23/80, as  Exhibit 5(x).

 

 

*10.13

Participation Agreement, dated September 1, 1979, relating  to the sale and leaseback of coal handling facilities at the Number One  Boardman Station on Carty Reservoir.  File number 2-68574, Form S-7, filed on  7/23/80, as Exhibit 5(z).

 

 

*10.14

Agreements for the Operation, Construction and Ownership  of the North Valmy Power Plant Project, dated December 12, 1978, between  Sierra Pacific Power Company and Idaho Power.  File number 2-64910, Form S-7,  filed on 6/29/79, as Exhibit 5(y).

 

 

*10.151

Idaho Power Company Security Plan for Senior Management  Employees I, amended and restated effective December 31, 2004, and as further  amended November 20, 2008.  File number 1-14465, 1-3198, Form 10-K for the  year ended December 31, 2008, filed on 2/26/09, as Exhibit 10.15.

 

 

10.161

Idaho Power Company Security Plan for Senior Management  Employees II, effective January 1, 2005, as amended and restated November 19,  2009.

 

 

*10.171

IDACORP, Inc. Restricted Stock Plan, as amended and  restated September 20, 2007.  File number 1-14465, 1-3198, Form 10-Q for the  quarter ended September 30, 2007, filed on 10/31/07, as Exhibit 10(h)(iii).

 

 

*10.181

IDACORP, Inc. Restricted Stock Plan – Form of Restricted  Stock Agreement (time-vesting) (July 20, 2006).  File number 1-14465, 1-3198,  Form 10-Q for the quarter ended September 30, 2006, filed on 11/2/06, as  Exhibit 10(h)(vi).

 

 

*10.191

IDACORP, Inc. Restricted Stock Plan – Form of Performance  Stock Agreement (performance vesting) (July 20, 2006).  File number 1-14465,  1-3198, Form 10-Q for the quarter ended September 30, 2006, filed on 11/2/06,  as Exhibit 10(h)(vii).

 

 

*10.201

Idaho Power Company Security Plan for Board of Directors –  a non-qualified deferred compensation plan, as amended and restated effective  July 20, 2006.  File number 1-14465, 1-3198, Form 10-Q for the quarter ended  September 30, 2006, filed on 11/2/06, as Exhibit 10(h)(viii).

 

 

*10.211

IDACORP, Inc. Non-Employee Directors Stock Compensation  Plan, as amended November 20, 2008.  File number 1-14465, 1-3198, Form 10-K  for the year ended December 31, 2008, filed on 2/26/09, as Exhibit 10.21.

*10.221

Form of Officer Indemnification Agreement between IDACORP,  Inc. and Officers of IDACORP, Inc. and Idaho Power, as amended July 20,  2006.  File number 1-14465, 1-3198, Form 10-Q for the quarter ended September  30, 2006, filed on 11/2/06, as Exhibit 10(h)(xix).

 

 

*10.231

Form of Director Indemnification Agreement between  IDACORP, Inc. and Directors of IDACORP, Inc., as amended July 20, 2006.  File  number 1-14465, 1-3198, Form 10-Q for the quarter ended September 30, 2006,  filed on 11/2/06, as Exhibit 10(h)(xx).

 

 

*10.241

Form of Amended and Restated Change in Control Agreement  between IDACORP, Inc. and Officers of IDACORP and Idaho Power (senior vice  president and higher), approved November 20, 2008.  File number 1-14465,  1-3198, Form 10-K for the year ended December 31, 2008, filed on 2/26/09, as  Exhibit 10.24.

 

 

*10.251

Form of Amended and Restated Change in Control Agreement  between IDACORP, Inc. and Officers of IDACORP and Idaho Power (below senior  vice president), approved November 20, 2008.  File number 1-14465, 1-3198,  Form 10-K for the year ended December 31, 2008, filed on 2/26/09, as Exhibit  10.25.

 

 

*10.261

IDACORP, Inc. 2000 Long-Term Incentive and Compensation  Plan, as amended November 20, 2008.  File number 1-14465, 1-3198, Form 10-K  for the year ended December 31, 2008, filed on 2/26/09, as Exhibit 10.26.

 

 

*10.271

IDACORP, Inc. 2000 Long-Term Incentive and Compensation  Plan – Form of Stock Option Award Agreement (July 20, 2006).  File number  1-14465, 1-3198, Form 10-Q for the quarter ended September 30, 2006, filed on  11/2/06, as Exhibit 10(h)(xvi).

 

 

*10.281

IDACORP, Inc. 2000 Long-Term Incentive and Compensation  Plan – Form of Restricted Stock Award Agreement (time vesting) (July 20,  2006).  File number 1-14465, 1-3198, Form 10-Q for the quarter ended  September 30, 2006, filed on 11/2/06, as Exhibit 10(h)(xvii).

 

 

*10.291

IDACORP, Inc. 2000 Long-Term Incentive and Compensation  Plan – Form of Restricted Stock Award Agreement (performance vesting) (July  20, 2006).  File number 1-14465, 1-3198, Form 10-Q for the quarter ended  September 30, 2006, filed on 11/2/06, as Exhibit 10(h)(xviii).

 

 

*10.301

IDACORP, Inc. 2000 Long-Term Incentive and Compensation  Plan – Form of Performance Share Award Agreement (performance with two goals)  (November 20, 2008).  File number 1-14465, 1-3198, Form 10-K for the year  ended December 31, 2008, filed on 2/26/09, as Exhibit 10.30.

 

 

*10.311

IDACORP, Inc. Executive Incentive Plan, as amended  November 20, 2008.  File number 1-14465, 1-3198, Form 10-K for the year ended  December 31, 2008, filed on 2/26/09, as Exhibit 10.31.

 

 

*10.321

Idaho Power Company Executive Deferred Compensation Plan,  effective November 15, 2000, as amended November 20, 2008.  File number  1-14465, 1-3198, Form 10-K for the year ended December 31, 2008, filed on  2/26/09, as Exhibit 10.32.

 

 

10.331

IDACORP, Inc. and Idaho Power Compensation for  Non-Employee Directors of the Board of Directors, as amended January 21,  2010.

 

 

*10.34

Framework Agreement, dated October 1, 1984, between the  State of Idaho and Idaho Power relating to Idaho Power’s Swan Falls and Snake  River water rights.  File number 33-65720, Form S-3, filed on 7/7/93, as  Exhibit 10(h).

 

 

*10.35

Agreement, dated October 25, 1984, between the State of  Idaho and Idaho Power relating to the agreement filed as Exhibit 10.34.  File  number 33-65720, Form S-3, filed on 7/7/93, as Exhibit 10(h)(i).

 

 

*10.36

Contract to Implement, dated October 25, 1984, between the  State of Idaho and Idaho Power relating to the agreement filed as Exhibit  10.34.  File number 33-65720, Form S-3, filed on 7/7/93, as Exhibit  10(h)(ii).

 

 

*10.37

Agreement Regarding the Ownership, Construction, Operation  and Maintenance of the Milner Hydroelectric Project (FERC No. 2899), dated  January 22, 1990, between Idaho Power and the Twin Falls Canal Company and  the Northside Canal Company Limited.  File number 33-65720, Form S-3, filed  on 7/7/93, as Exhibit 10(m).

 

 

*10.38

Guaranty Agreement, dated February 10, 1992, between Idaho  Power and New York Life Insurance Company, as Note Purchaser, relating to  $11,700,000 Guaranteed Notes due 2017 of Milner Dam Inc.  File number  33-65720, Form S-3, filed on 7/7/93, as Exhibit 10(m)(i).

 

 

*10.39

Power Purchase Agreement between Idaho Power and PPL  Montana, LLC, dated March 1, 2003 and Revised Confirmation Agreement dated  May 9, 2003.  File number 1-3198, Form 10-Q for the quarter ended June 30,  2003, filed on 8/7/03, as Exhibit 10(k).

 

 

10.40

$100 Million Five-Year Amended and Restated Credit  Agreement, dated as of April 25, 2007, among IDACORP, Inc., various lenders,  Wachovia Bank, National Association, as administrative agent, swingline  lender and LC issuer, JPMorgan Chase Bank, N.A., as syndication agent, and  KeyBank National Association, Wells Fargo Bank, N.A. and Bank of America,  N.A., as documentation agents, and Wachovia Capital Markets, LLC and J. P.  Morgan Securities Inc., as joint lead arrangers and joint book runners.

 

 

*10.41

First Amendment to Amended and Restated Credit Agreement,  dated as of February 2, 2010, by and among IDACORP, Inc., the Lenders party  thereto and Wachovia Bank, National Association, as Administrative Agent for  the Lenders, File number 1-14465, Form 8-K, filed on 2/8/10, as Exhibit 10.1.

 

 

10.42

$300 Million Five-Year Amended and Restated Credit  Agreement, dated as of April 25, 2007, among Idaho Power Company, various  lenders, Wachovia Bank, National Association, as administrative agent,  swingline lender and LC issuer, JPMorgan Chase Bank, N.A., as syndication  agent, and KeyBank National Association, US Bank National Association and  Bank of America, N.A., as documentation agents, and Wachovia Capital Markets,  LLC and J. P. Morgan Securities Inc., as joint lead arrangers and joint book  runners.

 

 

*10.43

First Amendment to Amended and Restated Credit Agreement,  dated as of February 2, 2010, by and among Idaho Power Company, the Lenders  party thereto and Wachovia Bank, National Association, as Administrative  Agent for the Lenders, File number 1-3198, Form 8-K, filed on 2/8/10, as  Exhibit 10.2.

 

 

*10.44

Contract for Engineering, Procurement and Construction  Services, dated May 7, 2009, between Idaho Power and Boise Power Partners  Joint Venture, a joint venture consisting of Kiewit Power Engineers Co. and  TIC-The Industrial Company, for Langley Gulch Power Plant (portions of this  exhibit have been redacted and filed separately with the Securities and  Exchange Commission in connection with a request for confidential treatment  pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended).   File number 1-14465, 1-3198, Form 10-Q for the quarter ended June 30, 2009,  filed on 8/6/09 as Exhibit 10.64.

 

 

*10.45

Loan Agreement, dated October 1, 2006, between Sweetwater  County, Wyoming and Idaho Power.  File number 1-3198, Form 8-K, filed on  10/10/06, as Exhibit 10.1.

 

 

*10.46

Power Purchase Agreement between Idaho Power and PPL  EnergyPlus, LLC, dated June 2, 2008.  File number 1-14465, 1-3198, Form 10-Q  for the quarter ended June 30, 2008, filed on 8/7/08, as Exhibit 10.46.

 

 

*10.47

Amended and Restated Electric Service Agreement between  Idaho Power and Hoku Materials, Inc., dated June 19, 2009.  File number  1-14465, 1-3198, Form 10-Q for the quarter ended June 30, 2009 filed on  8/6/09, as Exhibit 10.45.

 

 

*10.481

Form of IDACORP, Inc. Director Deferred Compensation  Agreement, as amended November 20, 2008.  File number 1-14465, 1-3198, Form  10-K for the year ended December 31, 2008, filed on 2/26/09, as Exhibit  10.46.

 

 

*10.491

Form of Letter Agreement to Amend Outstanding IDACORP,  Inc. Director Deferred Compensation Agreement (November 20, 2008).  File  number 1-14465, 1-3198, Form 10-K for the year ended December 31, 2008, filed  on 2/26/09, as Exhibit 10.47.

 

 

*10.501

Form of Amendment to IDACORP, Inc. Director Deferred  Compensation Agreement, as amended November 20, 2008.  File number 1-14465,  1-3198, Form 10-K for the year ended December 31, 2008, filed on 2/26/09, as  Exhibit 10.48.

 

 

*10.511

Form of Termination of IDACORP, Inc. Director Deferred  Compensation Agreement, as amended November 20, 2008.  File number 1-14465,  1-3198, Form 10-K for the year ended December 31, 2008, filed on 2/26/09, as  Exhibit 10.49.

 

 

*10.521

Form of Idaho Power Company Director Deferred Compensation  Agreement, as amended November 20, 2008.  File number 1-14465, 1-3198, Form  10-K for the year ended December 31, 2008, filed on 2/26/09, as Exhibit  10.50.

 

 

*10.531

Form of Letter Agreement to Amend Outstanding Idaho Power  Company Director Deferred Compensation Agreement (November 20, 2008).  File  number 1-14465, 1-3198, Form 10-K for the year ended December 31, 2008, filed  on 2/26/09, as Exhibit 10.51.

 

 

*10.541

Form of Amendment to Idaho Power Company Director Deferred  Compensation Agreement, as amended November 20, 2008.  File number 1-14465,  1-3198, Form 10-K for the year ended December 31, 2008, filed on 2/26/09, as  Exhibit 10.52.

 

 

*10.551

Form of Termination of Idaho Power Company Director  Deferred Compensation Agreement, as amended November 20, 2008.  File number  1-14465, 1-3198, Form 10-K for the year ended December 31, 2008, filed on  2/26/09, as Exhibit 10.53.

 

 

*10.561

Form of IDACORP Financial Services, Inc. Director Deferred  Compensation Agreement, as amended November 20, 2008.  File number 1-14465,  1-3198, Form 10-K for the year ended December 31, 2008, filed on 2/26/09, as  Exhibit 10.54.

 

 

*10.571

Form of Letter Agreement to Amend Outstanding IDACORP  Financial Services, Inc. Director Deferred Compensation Agreement (November  20, 2008).  File number 1-14465, 1-3198, Form 10-K for the year ended  December 31, 2008, filed on 2/26/09, as Exhibit 10.55.

 

 

*10.581

Form of Amendment to IDACORP Financial Services, Inc.  Director Deferred Compensation Agreement, as amended November 20, 2008.  File  number 1-14465, 1-3198, Form 10-K for the year ended December 31, 2008, filed  on 2/26/09, as Exhibit 10.56.

 

 

*10.591

Form of Termination of IDACORP Financial Services, Inc.  Director Deferred Compensation Agreement, as amended November 20, 2008.  File  number 1-14465, 1-3198, Form 10-K for the year ended December 31, 2008, filed  on 2/26/09, as Exhibit 10.57.

 

 

*10.60

Settlement Agreement, dated March 25, 2009, between the  State of Idaho and Idaho Power relating to the agreement filed as Exhibit  10.34.  File number 1-14465, 1-3198, Form 10-Q for the quarter ended March  31, 2009, filed on 5/7/09, as Exhibit 10.58.

*10.611

Exhibit A to the IDACORP, Inc. Executive Incentive Plan,  as amended February 24, 2009.  File number 1-14465, 1-3198, Form 8-K, filed  on 3/2/09, as Exhibit 10.1.

 

 

*10.621

Consulting Agreement, dated as of April 1, 2009, by and  between Thomas R. Saldin and Idaho Power Company, including its parent  IDACORP, Inc. and all subsidiaries and affiliates.  File number 1-14465,  1-3198, Form 8-K, filed on 4/3/09, as Exhibit 10.1.

 

 

10.631

Idaho Power Company Employee Savings Plan, as amended and  restated as of January 1, 2010 (revised).

 

 

*10.641

Separation Agreement and General Release, dated as of  August 31, 2009, by and between James C. Miller and Idaho Power Company,  including all of its subsidiaries and affiliates.  File number 1-14465,  1-3198, Form 10-Q for the quarter ended September 30, 2009, filed on 10/29/09  as Exhibit 10.66.

 

 

*10. 651

Consulting Agreement, dated as of August 31, 2009, by and between  James C. Miller and Idaho Power Company, including its parent IDACORP, Inc.  and all subsidiaries and affiliates.  File number 1-14465, 1-3198, Form 10-Q  for the quarter ended September 30, 2009, filed on 10/29/09 as Exhibit 10.67.

 

 

10.661

IDACORP, Inc. and/or Idaho Power Executive Officers with  Amended and Restated Change in Control Agreements Chart, as of December 31,  2009.

 

 

12.1

Statement Re:  Computation of Ratio of Earnings to Fixed  Charges.  (IDACORP, Inc.)

 

 

12.2

Statement Re:  Computation of Supplemental Ratio of  Earnings to Fixed Charges.  (IDACORP, Inc.)

 

 

12.3

Statement Re:  Computation of Ratio of Earnings to Fixed  Charges.  (Idaho Power)

 

 

12.4

Statement Re:  Computation of Supplemental Ratio of  Earnings to Fixed Charges.  (Idaho Power)

 

 

*21

Subsidiaries of IDACORP, Inc.  File number 1-14465,  1-3198, Form 10-K for the year ended December 31, 2007, filed on 2/28/08, as  Exhibit 21.

 

 

23

Consent of Independent Registered Public Accounting Firm

 

 

31.1

IDACORP, Inc. Rule 13a-14(a) CEO certification.

 

 

31.2

IDACORP, Inc. Rule 13a-14(a) CFO certification.

 

 

31.3

Idaho Power Rule 13a-14(a) CEO certification.

 

 

31.4

Idaho Power Rule 13a-14(a) CFO certification.

 

 

32.1

IDACORP, Inc. Section 1350 CEO certification.

 

 

32.2

IDACORP, Inc. Section 1350 CFO certification.

 

 

32.3

Idaho Power Section 1350 CEO certification.

 

 

32.4

Idaho Power Section 1350 CFO certification.

 

 

99

Earnings press release for the fourth quarter 2009.

 

 

1Management contract  or compensatory plan or arrangement.

 

 

 

 

133

 

 

 

 

 

 

 

IDACORP, Inc.

**SCHEDULE I - CONDENSED FINANCIALINFORMATION OF REGISTRANT**

** **

**CONDENSED STATEMENTS OF INCOME**

 

**Year Ended  December 31,**

 

**2009**

**2008**

**2007**

 

(thousands of  dollars)

**Income:**

 

 

 

 

 

 

Equity in income from continuing operations of  subsidiaries

$

125,567 

$

100,303 

$

85,742 

Investment income (losses)

 

404 

 

(131)

 

1,363 

 

Total income

 

125,971 

 

100,172 

 

87,105 

 

 

 

 

 

 

 

**Expenses:**

 

 

 

 

 

 

Operating expenses

 

2,629 

 

1,088 

 

3,253 

Interest expense

 

919 

 

3,250 

 

4,143 

Other expense

 

66 

 

126 

 

70 

 

Total expenses

 

3,614 

 

4,464 

 

7,466 

 

 

 

 

 

 

 

**Income from Continuing Operations Before Income Taxes**

 

122,357 

 

95,708 

 

79,639 

** **

 

 

 

 

 

 

**Income Tax Benefit**

 

(1,993)

 

(2,706)

 

(2,633)

** **

 

 

 

 

 

 

**Income from Continuing Operations**

 

124,350 

 

98,414 

 

82,272 

** **

 

 

 

 

 

 

**Income from Discontinued Operations, net of tax**

 

- 

 

- 

 

67 

** **

 

 

 

 

 

 

** **

**Net Income Attributable to IDACORP, Inc.**

$

124,350 

$

98,414 

$

82,339 

 

The accompanying  note is an integral part of these statements.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

134

 

 

 

 

 

 

 

**IDACORP, Inc.**

**CONDENSED BALANCE SHEETS**

 

** December 31,**

 

**2009**

**2008**

**Assets**

(thousands of  dollars)

**Current Assets:**

 

 

 

 

Cash and cash equivalents

$

26,770

$

3,541

Receivables

 

3,004

 

3,211

Deferred income taxes

 

23,876

 

33,693

Other

 

687

 

755

 

Total current assets

 

54,337

 

41,200

 

 

 

 

 

**Investment in subsidiaries**

 

1,391,974

 

1,305,873

** **

 

 

 

 

**Other Assets**

 

 

 

 

Deferred income taxes

 

42,571

 

44,500

Other

 

1,099

 

1,094

Total other assets

 

43,670

 

45,594

 

Total

$

1,489,981

$

1,392,667

 

 

 

 

 

**Liabilities and Shareholders’ Equity**

 

 

 

 

**Current Liabilities:**

 

 

 

 

Notes payable

$

53,750

$

38,400

Accounts payable

 

5,869

 

5,701

Taxes accrued

 

13,127

 

22,485

Other

 

498

 

541

 

Total current liabilities

 

73,244

 

67,127

 

 

 

 

 

**Other Liabilities:**

 

 

 

 

Intercompany notes payable

 

16,220

 

19,855

Other

 

3,182

 

3,247

 

Total other liabilities

 

19,402

 

23,102

 

 

 

 

 

**IDACORP, Inc. Shareholders’ Equity**

 

1,397,335

 

1,302,438

 

Total

$

1,489,981

$

1,392,667

 

 

 

 

 

The accompanying  note is an integral part of these statements.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

135

 

 

 

 

 

 

 

**IDACORP, Inc.**

**SCHEDULE I - CONDENSED FINANCIAL INFORMATION OFREGISTRANT**

** **

**CONDENSED STATEMENTS OF CASH FLOWS**

** **

 

**Year Ended  December 31,**

 

**2009**

**2008**

**2007**

 

(thousands of  dollars)

**Operating Activities:**

 

 

 

 

 

 

Net cash provided by operating activities

$

65,406 

$

56,912 

$

39,332 

 

 

 

 

 

 

 

**Investing Activities:**

 

 

 

 

 

 

Contributions to subsidiaries

 

(20,000)

 

(37,000)

 

(51,000)

Change in intercompany notes receivable

 

- 

 

- 

 

880 

Purchase of investments

 

- 

 

(364)

 

- 

Sale of investments

 

48 

 

287 

 

- 

Sale of IDACOMM

 

- 

 

- 

 

7,858 

Reimbursement by subsidiary of refundable tax deposit

 

- 

 

- 

 

43,927 

Net cash (used in) provided by investing activities

 

(19,952)

 

(37,077)

 

1,665 

 

 

 

 

 

 

 

**Financing Activities:**

 

 

 

 

 

 

Issuance of common stock

 

24,328 

 

50,863 

 

37,181 

Dividends on common stock

 

(56,819)

 

(54,240)

 

(53,012)

Increase (decrease) in short-term borrowings

 

15,350 

 

(11,460)

 

(26,940)

Change in intercompany notes payable

 

(3,425)

 

(2,092)

 

(626)

Other

 

(1,659)

 

(665)

 

(1,024)

Net cash used in financing activities

 

(22,225)

 

(17,594)

 

(44,421)

Net increase (decrease) in cash and cash equivalents

 

23,229 

 

2,241 

 

(3,424)

Cash and cash equivalents at beginning of year

 

3,541 

 

1,300 

 

4,724 

Cash and cash equivalents at end of year

$

26,770 

$

3,541 

$

1,300 

 

 

 

 

 

 

 

The accompanying  note is an integral part of these statements.

 

 

**IDACORP, Inc.**

**SCHEDULE I - CONDENSED FINANCIAL INFORMATION OFREGISTRANT**

 

**NOTES TO CONDENSED FINANCIAL STATEMENTS**

 

**1.  BASIS OF PRESENTATION**

 

Pursuant to rules and regulations of the Securities andExchange Commission, the unconsolidated condensed financial statements ofIDACORP, Inc. do not reflect all of the information and notes normally includedwith financial statements prepared in accordance with accounting principlesgenerally accepted in the United States of America.  Therefore, these financialstatements should be read in conjunction with the consolidated financialstatements and related notes included in the 2009 Form 10-K, Part II, Item 8.

**Accounting for subsidiaries**

IDACORP has accounted for the earnings of its subsidiariesunder the equity method in the unconsolidated condensed financial statements. Included in net cash provided by operating activities in the condensedstatements of cash flows are dividends of $59,911; $56,868; and $58,990 thatIDACORP subsidiaries paid to IDACORP in 2009, 2008 and 2007, respectively.

 

 

136

 

 

 

 

 

 

 

IDACORP, Inc.

**SCHEDULE II - CONSOLIDATEDVALUATION AND QUALIFYING ACCOUNTS**

**Years Ended December 31, 2009, 2008 and 2007**

** **

**Column A**

**Column B**

**Column C**

**Column D**

**Column E**

** **

** **

**Additions**

** **

** **

** **

** **

** **

**Charged**

** **

** **

** **

**Balance at**

**Charged**

**(Credited)**

** **

**Balance at**

** **

**Beginning**

**to**

**to Other**

**Deductions**

**End**

**Classification**

**of Period**

**Income**

**Accounts**

**(1)**

**of Period**

 

**(thousands of dollars)**

**2009**:

 

 

 

 

 

 

 

 

 

 

Reserves deducted from  applicable assets

 

 

 

 

 

 

 

 

 

 

 

Reserve for uncollectible  accounts 

$

1,724

  $

5,314

  $

122 

  $

5,170

  $

1,990

 

Reserve for uncollectible  notes

 

1,879

 

566

 

600 

 

-

 

3,045

Other Reserves:

 

 

 

 

 

 

 

 

 

 

 

Rate refunds

 

13,345

 

-

 

- 

 

13,345

 

-

 

Injuries and damages

 

1,965

 

4,867

 

- 

 

3,419

 

3,413

 

Miscellaneous operating  reserves

 

-

 

2,926

 

- 

 

-

 

2,926

**2008**:

 

 

 

 

 

 

 

 

 

 

Reserves deducted from  applicable assets

 

 

 

 

 

 

 

 

 

 

 

Reserve for uncollectible  accounts 

$

7,505

  $

3,661

  $

(5,947)

  $

3,495

  $

1,724

 

Reserve for uncollectible  notes

 

1,879

 

-

 

- 

 

-

 

1,879

Other Reserves:

 

 

 

 

 

 

 

 

 

 

 

Rate refunds

 

2,397

 

10,948

 

- 

 

-

 

13,345

 

Injuries and damages

 

661

 

1,437

 

- 

 

133

 

1,965

 

Miscellaneous operating  reserves

 

4

 

-

 

- 

 

4

 

-

**2007**:

 

 

 

 

 

 

 

 

 

 

Reserves deducted from  applicable assets

 

 

 

 

 

 

 

 

 

 

 

Reserve for uncollectible  accounts 

$

7,168

  $

2,093

  $

- 

  $

1,756

  $

7,505

 

Reserve for uncollectible  notes

 

1,879

 

-

 

- 

 

-

 

1,879

 

Deferred tax assets

 

1,565

 

-

 

- 

 

1,565

 

-

Other Reserves:

 

 

 

 

 

 

 

 

 

 

 

Rate refunds

 

1,227

 

2,893

 

- 

 

1,723

 

2,397

 

Injuries and damages reserve

 

666

 

2,457

 

- 

 

2,462

 

661

 

Miscellaneous operating  reserves

 

6

 

3

 

- 

 

5

 

4

 

 

 

 

 

 

 

 

 

 

 

 

Notes:  (1) Represents deductions from the  reserves for purposes for which the reserves were created.  In the case of  uncollectible accounts and notes reserves, includes reversals of amounts  previously written off.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

137

 

 

 

 

 

 

 

 

**IDAHO POWER COMPANY**

**SCHEDULE II - CONSOLIDATEDVALUATION AND QUALIFYING ACCOUNTS**

**Years Ended December 31, 2009, 2008 and 2007**

** **

**Column A**

**Column B**

**Column C**

**Column D**

**Column E**

** **

** **

**Additions**

** **

** **

** **

** **

** **

**Charged**

** **

** **

** **

**Balance at**

**Charged**

**(Credited)**

** **

**Balance at**

** **

**Beginning**

**to**

**to Other**

**Deductions**

**End**

**Classification**

**of Period**

**Income**

**Accounts**

**(1)**

**of Period**

 

**(thousands of dollars)**

**2009**:

 

 

 

 

 

 

 

 

 

 

Reserves deducted from  applicable assets:

 

 

 

 

 

 

 

 

 

 

 

Reserve for uncollectible  accounts 

$

1,724

$

5,314

$

122

$

5,170

$

1,990

Other Reserves:

 

 

 

 

 

 

 

 

 

 

 

Rate refunds

 

13,345

 

-

 

-

 

13,345

 

-

 

Injuries and damages reserve

 

1,965

 

4,867

 

-

 

3,419

 

3,413

 

Miscellaneous operating  reserves

 

-

 

2,926

 

-

 

-

 

2,926

**2008**:

 

 

 

 

 

 

 

 

 

 

Reserves deducted from  applicable assets:

 

 

 

 

 

 

 

 

 

 

 

Reserve for uncollectible  accounts 

$

1,305

$

3,661

$

253

$

3,495

$

1,724

Other Reserves:

 

 

 

 

 

 

 

 

 

 

 

Rate refunds

 

2,397

 

10,948

 

-

 

-

 

13,345

 

Injuries and damages reserve

 

661

 

1,437

 

-

 

133

 

1,965

 

Miscellaneous operating  reserves

 

4

 

-

 

-

 

4

 

-

**2007**:

 

 

 

 

 

 

 

 

 

 

Reserves deducted from  applicable assets:

 

 

 

 

 

 

 

 

 

 

 

Reserve for uncollectible  accounts 

$

968

$

2,093

$

-

$

1,756

$

1,305

Other Reserves:

 

 

 

 

 

 

 

 

 

 

 

Rate refunds

 

1,227

 

2,893

 

-

 

1,723

 

2,397

 

Injuries and damages reserve

 

665

 

1,210

 

-

 

1,214

 

661

 

Miscellaneous operating  reserves

 

6

 

3

 

-

 

5

 

4

 

Notes:  (1) Represents deductions from the  reserves for purposes for which the reserves were created.  In the case of  uncollectible accounts includes reversals of amounts previously written off.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

138

 

 

 

 

 

 

 

SIGNATURES

** **

Pursuant to the requirementsof Section 13 and 15(d) of the Securities Exchange Act of 1934, the registranthas duly caused this report to be signed on its behalf by the undersigned,thereunto duly authorized.

February 23, 2010

 

 

IDACORP, INC.

Date

 

 

* *

 

 

By:

*/s/J. LaMont Keen*

 

 

 

 

J. LaMont Keen

 

 

 

 

President and Chief  Executive Officer

 

Pursuant to the requirementsof the Securities Exchange Act of 1934, this report has been signed below bythe following persons on behalf of the registrant and in the capacities and onthe dates indicated.

**Signature**

 

**Title**

**Date**

* *

 

 

 

*/s/Jon  H. Miller*

 

Chairman of the Board

February 23, 2010

Jon  H. Miller

 

 

 

 

 

 

 

*/s/J.  LaMont Keen*

 

(Principal Executive Officer)

February 23, 2010

J.  LaMont Keen

 

 

 

President  and Chief Executive Officer and Director

 

 

 

* *

 

 

 

*/s/Darrel  T. Anderson*

 

(Principal Financial Officer)

February 23, 2010

Darrel  T. Anderson

 

(Principal Accounting Officer)

 

Executive  Vice President-Administrative

 

 

 

Services  and Chief Financial Officer

 

 

 

 

 

 

 

*/s/C.  Stephen Allred*

 

Director

February 23, 2010

C.  Stephen Allred

 

 

 

 

 

 

 

*/s/Richard  J. Dahl*

 

Director

February 23, 2010

Richard  J. Dahl

 

 

 

 

 

 

 

*/s/Judith  A. Johansen*

 

Director

February 23, 2010

Judith  A. Johansen

 

 

 

 

 

 

 

*/s/Christine  King*

 

Director

February 23, 2010

Christine  King 

 

 

 

 

 

 

 

*/s/Gary  G. Michael*

 

Director

February 23, 2010

Gary  G. Michael 

 

 

 

 

 

 

 

*/s/Jan  B. Packwood*

 

Director

February 23, 2010

Jan  B. Packwood 

 

 

 

 

 

 

 

*/s/Richard  G. Reiten*

 

Director

February 23, 2010

Richard  G. Reiten

 

 

 

 

 

 

 

*/s/Joan  H. Smith*

 

Director

February 23, 2010

Joan  H. Smith

 

 

 

 

 

 

 

*/s/Robert  A. Tinstman*

 

Director

February 23, 2010

Robert  A. Tinstman

 

 

 

 

 

 

 

*/s/Thomas  J. Wilford*

 

Director

February 23, 2010

Thomas  J. Wilford

 

 

 

** **

** **

** **

** **

139

 

 

 

 

 

 

** **

**SIGNATURES**

Pursuant to the requirementsof Section 13 and 15(d) of the Securities Exchange Act of 1934, the registranthas duly caused this report to be signed on its behalf by the undersigned,thereunto duly authorized.

February 23, 2010

 

 

Idaho Power Company

Date

 

 

* *

 

 

By:

*/s/J. LaMont Keen*

 

 

 

 

J. LaMont Keen

 

 

 

 

President and Chief  Executive Officer

 

Pursuant to the requirementsof the Securities Exchange Act of 1934, this report has been signed below bythe following persons on behalf of the registrant and in the capacities and onthe dates indicated.

**Signature**

 

**Title**

**Date**

* *

 

 

 

*/s/Jon  H. Miller*

 

Chairman of the Board

February 23, 2010

Jon  H. Miller

 

 

 

 

 

 

 

*/s/J.  LaMont Keen*

 

(Principal Executive Officer)

February 23, 2010

J.  LaMont Keen

 

 

 

President  and Chief Executive Officer and Director

 

 

 

* *

 

 

 

*/s/Darrel  T. Anderson*

 

(Principal Financial Officer)

February 23, 2010

Darrel  T. Anderson

 

(Principal Accounting Officer)

 

Executive  Vice President-Administrative

 

 

 

Services  and Chief Financial Officer

 

 

 

 

 

 

 

*/s/C.  Stephen Allred*

 

Director

February 23, 2010

C.  Stephen Allred

 

 

 

 

 

 

 

*/s/Richard  J. Dahl*

 

Director

February 23, 2010

Richard  J. Dahl

 

 

 

 

 

 

 

*/s/Judith  A. Johansen*

 

Director

February 23, 2010

Judith  A. Johansen

 

 

 

 

 

 

 

*/s/Christine  King*

 

Director

February 23, 2010

Christine  King 

 

 

 

 

 

 

 

*/s/Gary  G. Michael*

 

Director

February 23, 2010

Gary  G. Michael 

 

 

 

 

 

 

 

*/s/Jan  B. Packwood*

 

Director

February 23, 2010

Jan  B. Packwood 

 

 

 

 

 

 

 

*/s/Richard  G. Reiten*

 

Director

February 23, 2010

Richard  G. Reiten

 

 

 

 

 

 

 

*/s/Joan  H. Smith*

 

Director

February 23, 2010

Joan  H. Smith

 

 

 

 

 

 

 

*/s/Robert  A. Tinstman*

 

Director

February 23, 2010

Robert  A. Tinstman

 

 

 

 

 

 

 

*/s/Thomas  J. Wilford*

 

Director

February 23, 2010

Thomas  J. Wilford

 

 

 

 

 

 

 

140

 

 

 

 

 

 

 

EXHIBIT INDEX

 

Exhibit Number

 

4.10

 

Forty-fifth Supplemental Indenture to Mortgage and Deed of  Trust dated as of February 1, 2010.

 

 

 

10.161

 

Idaho Power Company Security  Plan for Senior Management Employees II, effective January 1, 2005, as  amended and restated November 19, 2009.

 

 

 

10.331

 

IDACORP, Inc. and Idaho Power  Compensation for Non-Employee Directors of the Board of Directors, as amended  January 21, 2010.

 

 

 

10.40

 

$100 Million Five-Year Amended  and Restated Credit Agreement, dated as of April 25, 2007, among IDACORP,  Inc., various lenders, Wachovia Bank, National Association, as administrative  agent, swingline lender and LC issuer, JPMorgan Chase Bank, N.A., as  syndication agent, and KeyBank National Association, Wells Fargo Bank, N.A.  and Bank of America, N.A., as documentation agents, and Wachovia Capital  Markets, LLC and J. P. Morgan Securities Inc., as joint lead arrangers and  joint book runners.

 

 

 

10.42

 

$300 Million Five-Year Amended  and Restated Credit Agreement, dated as of April 25, 2007, among Idaho Power  Company, various lenders, Wachovia Bank, National Association, as  administrative agent, swingline lender and LC issuer, JPMorgan Chase Bank,  N.A., as syndication agent, and KeyBank National Association, US Bank  National Association and Bank of America, N.A., as documentation agents, and  Wachovia Capital Markets, LLC and J. P. Morgan Securities Inc., as joint lead  arrangers and joint book runners.

 

 

 

10.631

 

Idaho Power Company Employee Savings Plan, as amended and  restated as of January 1, 2010 (revised).

 

 

 

10.661

 

IDACORP, Inc. and/or Idaho Power Executive Officers with  Amended and Restated Change in Control Agreements Chart, as of December 31,  2009.

 

 

 

12.1

 

Statement Re:  Computation of Ratio of Earnings to Fixed  Charges.  (IDACORP, Inc.)

 

 

 

12.2

 

Statement Re:  Computation of Supplemental Ratio of  Earnings to Fixed Charges. (IDACORP, Inc.) 

 

 

 

12.3

 

Statement Re:  Computation of Ratio of Earnings to Fixed  Charges.  (Idaho Power)

 

 

 

12.4

 

Statement Re:  Computation of Supplemental Ratio of  Earnings to Fixed Charges.  (Idaho Power)

 

 

 

23

 

Consent of Independent Registered Public Accounting Firm.

 

 

 

31.1

 

IDACORP, Inc. Rule 13a-14(a) CEO certification.

 

 

 

31.2

 

IDACORP, Inc. Rule 13a-14(a) CFO certification.

 

 

 

31.3

 

Idaho Power Rule 13a-14(a) CEO certification.

 

 

 

31.4

 

Idaho Power Rule 13a-14(a) CFO certification.

 

 

 

32.1

 

IDACORP, Inc. Section 1350 CEO certification.

 

 

 

32.2

 

IDACORP, Inc. Section 1350 CFO certification.

 

 

 

32.3

 

Idaho Power Section 1350 CEO certification.

 

 

 

32.4

 

Idaho Power Section 1350 CFO certification.

 

 

 

99

 

Earnings press release for the fourth quarter 2009.

 

 

 

1 Management contract or compensatory plan or  arrangement

 
 
 

 

 

 

 

 

 

 

142

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