0001057877-18-000109.txt : 20181101 0001057877-18-000109.hdr.sgml : 20181101 20181101081241 ACCESSION NUMBER: 0001057877-18-000109 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 77 CONFORMED PERIOD OF REPORT: 20180930 FILED AS OF DATE: 20181101 DATE AS OF CHANGE: 20181101 FILER: COMPANY DATA: COMPANY CONFORMED NAME: IDACORP INC CENTRAL INDEX KEY: 0001057877 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 820505802 STATE OF INCORPORATION: ID FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-14465 FILM NUMBER: 181152103 BUSINESS ADDRESS: STREET 1: 1221 WEST IDAHO STREET CITY: BOISE STATE: ID ZIP: 83702-5627 BUSINESS PHONE: 2083882200 MAIL ADDRESS: STREET 1: PO BOX 70 STREET 2: 1221 WEST IDAHO STREET CITY: BOISE STATE: ID ZIP: 83702-5627 FILER: COMPANY DATA: COMPANY CONFORMED NAME: IDAHO POWER CO CENTRAL INDEX KEY: 0000049648 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 820130980 STATE OF INCORPORATION: ID FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-03198 FILM NUMBER: 181152102 BUSINESS ADDRESS: STREET 1: 1221 W IDAHO ST STREET 2: PO BOX 70 CITY: BOISE STATE: ID ZIP: 83702 BUSINESS PHONE: 2083882200 MAIL ADDRESS: STREET 1: PO BOX 70 STREET 2: 1221 W IDAHO STREET CITY: BOISE STATE: ID ZIP: 83702-5627 10-Q 1 ida9301810q.htm 10-Q Document
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
(Mark One)
X
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
 
 
EXCHANGE ACT OF 1934
 
 
For the quarterly period ended September 30, 2018
 
 
OR
 
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
 
 
EXCHANGE ACT OF 1934
 
 
For the transition period from __________ to __________
 
 
Exact name of registrants as specified
I.R.S. Employer
Commission File
in their charters, address of principal
Identification
Number
executive offices, zip code and telephone number
Number
1-14465
IDACORP, Inc.
82-0505802
1-3198
Idaho Power Company
82-0130980
 
1221 W. Idaho Street
 
 
 
Boise, Idaho 83702-5627
 
 
 
(208) 388-2200
 
 
 
State of Incorporation: Idaho
 
 
 
None
 
 
Former name, former address and former fiscal year, if changed since last report.

Indicate by check mark whether the registrants (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrants were required to file such reports), and (2) have been subject to such filing requirements for the past 90 days. 
IDACORP, Inc.: Yes  X   No __    Idaho Power Company: Yes  X   No __
 
Indicate by check mark whether the registrants have submitted electronically and posted on their corporate Web sites, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrants were required to submit and post such files). 
IDACORP, Inc.: Yes X No __      Idaho Power Company: Yes X   No __

Indicate by check mark whether the registrants are large accelerated filers, accelerated filers, non-accelerated filers, smaller reporting companies, or emerging growth companies.  See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act:

IDACORP, Inc.:                                
Large accelerated filer X Accelerated filer __ Non-accelerated  filer __
Smaller reporting company __
Emerging growth company __

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange
Act. __

Idaho Power Company:                                
Large accelerated filer __ Accelerated filer __ Non-accelerated  filer X
Smaller reporting company __
Emerging growth company __

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange
Act. __



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

Number of shares of common stock outstanding as of October 26, 2018:     
IDACORP, Inc.:        50,392,789
Idaho Power Company:    39,150,812, all held by IDACORP, Inc.

This combined Form 10-Q represents separate filings by IDACORP, Inc. and Idaho Power Company.  Information contained herein relating to an individual registrant is filed by that registrant on its own behalf.  Idaho Power Company makes no representations as to the information relating to IDACORP, Inc.’s other operations.
 
Idaho Power Company meets the conditions set forth in General Instruction (H)(1)(a) and (b) of Form 10-Q and is therefore filing this report on Form 10-Q with the reduced disclosure format.

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TABLE OF CONTENTS
 
Page
Commonly Used Terms
Cautionary Note Regarding Forward-Looking Statements
 
 
Part I. Financial Information
 
 
 
 
 
Item 1. Financial Statements (unaudited)
 
 
 
IDACORP, Inc.:
 
 
 
 
Condensed Consolidated Statements of Income
 
 
 
Condensed Consolidated Statements of Comprehensive Income
 
 
 
Condensed Consolidated Balance Sheets
 
 
 
Condensed Consolidated Statements of Cash Flows
 
 
 
Condensed Consolidated Statements of Equity
 
 
Idaho Power Company:
 
 
 
 
Condensed Consolidated Statements of Income
 
 
 
Condensed Consolidated Statements of Comprehensive Income
 
 
 
Condensed Consolidated Balance Sheets
 
 
 
Condensed Consolidated Statements of Cash Flows
 
 
Notes to Condensed Consolidated Financial Statements
 
 
Reports of Independent Registered Public Accounting Firm
 
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
 
Item 3. Quantitative and Qualitative Disclosures About Market Risk
 
Item 4. Controls and Procedures
 
 
 
 
 
Part II. Other Information
 
 
 
 
 
Item 1. Legal Proceedings
 
Item 1A. Risk Factors
 
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
 
Item 3. Defaults Upon Senior Securities
 
Item 4. Mine Safety Disclosures
 
Item 5. Other Information
 
Item 6. Exhibits
 
 
 
Signatures


3

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COMMONLY USED TERMS
 
The following select abbreviations, terms, or acronyms are commonly used or found in multiple locations in this report:
 
 
 
ADITC
-
Accumulated Deferred Investment Tax Credits
AFUDC
-
Allowance for Funds Used During Construction
AOCI
-
Accumulated Other Comprehensive Income
ASU
-
Accounting Standards Update
BCC
-
Bridger Coal Company, a joint venture of IERCo
BLM
-
U.S. Bureau of Land Management
CWA
-
Clean Water Act
FASB
-
Financial Accounting Standards Board
FCA
-
Fixed Cost Adjustment
FERC
-
Federal Energy Regulatory Commission
FPA
-
Federal Power Act
HCC
-
Hells Canyon Complex
IDACORP
-
IDACORP, Inc., an Idaho corporation
Idaho Power
-
Idaho Power Company, an Idaho corporation
Idaho ROE
-
Idaho-jurisdiction return on year-end equity
Ida-West
-
Ida-West 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
MD&A
-
Management’s Discussion and Analysis of Financial Condition and Results of Operations
MW
-
Megawatt
MWh
-
Megawatt-hour
O&M
-
Operations and Maintenance
OATT
-
Open Access Transmission Tariff
OPUC
-
Public Utility Commission of Oregon
PCA
-
Idaho-Jurisdiction Power Cost Adjustment
PURPA
-
Public Utility Regulatory Policies Act of 1978
SEC
-
U.S. Securities and Exchange Commission
SMSP
-
Security Plan for Senior Management Employees
Valmy Plant
-
North Valmy coal-fired power plant
Western EIM
-
Energy imbalance market implemented in the western United States
WPSC
-
Wyoming Public Service Commission

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

In addition to the historical information contained in this report, this report contains (and oral communications made by IDACORP, Inc. (IDACORP) and Idaho Power Company (Idaho Power) may contain) statements that relate to future events and expectations, such as statements regarding projected or future financial performance, cash flows, capital expenditures, dividends, capital structure or ratios, strategic goals, challenges, objectives, and plans for future operations. Such statements constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Any statements that express, or involve discussions as to, expectations, beliefs, plans, objectives, assumptions, or future events, or performance, often, but not always, through the use of words or phrases such as "anticipates," "believes," "continues," "could," "estimates," "expects," "guidance," "intends," "potential," "plans," "predicts," "projects," "may result," "may continue," or similar expressions, are not statements of historical facts and may be forward-looking. Forward-looking statements are not guarantees of future performance and involve estimates, assumptions, risks, and uncertainties. Actual results, performance, or outcomes may differ materially from the results discussed in the statements. In addition to any assumptions and other factors and matters referred to specifically in connection with such forward-looking statements, factors that could cause actual results or outcomes to differ materially from those contained in forward-looking statements include those factors set forth in this report, IDACORP's and Idaho Power's Annual Report on Form 10-K for the year ended December 31, 2017, particularly Part I, Item 1A - "Risk Factors" and Part II, Item 7 - "Management’s Discussion and Analysis of Financial Condition and Results of Operations" of that report, subsequent reports filed by IDACORP and Idaho Power with the U.S. Securities and Exchange Commission, and the following important factors:

decisions by the Idaho and Oregon public utilities commissions and the Federal Energy Regulatory Commission, which impact Idaho Power's ability to recover costs and earn a return on investment;
the expense and risks associated with capital expenditures for utility infrastructure, and the timing and availability of cost recovery for such expenditures through customer rates, including the potential for the write-down or write-off of expenditures if not deemed prudent by regulators;
changes in residential, commercial, and industrial growth and demographic patterns within Idaho Power's service area, the loss or change in the business of significant customers, or the addition of new customers and their associated impacts on loads and load growth, and the availability of regulatory mechanisms that allow for timely cost recovery through customer rates in the event of those changes;
the impacts of economic conditions, including inflation, interest rates, authorized regulatory returns on equity, supply costs, population growth or decline in Idaho Power's service area, changes in customer demand for electricity, revenue from sales of excess power, credit quality of counterparties and suppliers, and the collection of receivables;
unseasonable or severe weather conditions, wildfires, drought, and other natural phenomena and natural disasters, including conditions and events associated with climate change, which affect customer demand, hydroelectric generation levels, repair costs, liability for damage caused by utility property, and the availability and cost of fuel for generation plants or purchased power to serve customers;
advancement of self-generation and storage and energy efficiency technologies that may affect Idaho Power's sales or delivery of electric power;
changes in tax laws or related regulations or new interpretations of applicable laws by federal, state, or local taxing jurisdictions, the availability of tax credits, and the tax rates payable by IDACORP shareholders on common stock dividends;
adoption of, changes in, and costs of compliance with laws, regulations, and policies relating to the environment, natural resources, and threatened and endangered species, and the ability to recover resulting increased costs through rates;
variable hydrological conditions and/or over-appropriation of surface and groundwater in the Snake River Basin, which may impact the amount of power generated by Idaho Power's hydroelectric facilities;
the ability to acquire fuel, power, and transmission capacity under reasonable terms, particularly in the event of unanticipated power demands, lack of physical availability, transportation constraints, or a credit downgrade;
accidents, fires (either at or caused by Idaho Power's facilities or infrastructure), explosions, and mechanical breakdowns that may occur while operating and maintaining Idaho Power's assets, which can cause unplanned outages, reduce generating output, damage the companies’ assets, operations, or reputation, subject the companies to third-party claims for property damage, personal injury, or loss of life, or result in the imposition of civil, criminal, and regulatory fines and penalties, for which the companies may have inadequate insurance coverage;
the increased purchased power costs and operational challenges associated with purchasing and integrating intermittent renewable energy sources into Idaho Power's resource portfolio;

5

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disruptions or outages of Idaho Power's generation or transmission systems or of any interconnected transmission system that cause Idaho Power to incur repair costs or purchase replacement power at increased costs;
the ability to obtain debt and equity financing or refinance existing debt when necessary and on favorable terms, which can be affected by factors such as credit ratings, volatility or disruptions in the financial markets, interest rate fluctuations, decisions by the Idaho or Oregon public utility commissions, and the companies' past or projected financial performance;
reductions in credit ratings, which could adversely impact access to debt and equity markets, increase borrowing costs, and would require the posting of additional collateral to counterparties pursuant to credit and contractual arrangements;
the ability to enter into financial and physical commodity hedges with creditworthy counterparties to manage price and commodity risk, and the failure of any such risk management and hedging strategies to work as intended;
changes in actuarial assumptions, changes in interest rates, and the return on plan assets for pension and other post-retirement plans, which can affect future pension and other postretirement plan funding obligations, costs, and liabilities;
the ability to continue to pay dividends based on financial performance and in light of contractual covenants and restrictions and regulatory limitations;
employee workforce factors, including the operational and financial costs of unionization or the attempt to unionize all or part of the companies' workforce, the impact of an aging workforce and retirements, the cost and ability to attract and retain skilled workers, and the ability to adjust the labor cost structure when necessary;
failure to comply with state and federal laws, regulations, and orders, including new interpretations and enforcement initiatives by regulatory and oversight bodies, which may result in penalties and fines and increase the cost of compliance, the nature and extent of investigations and audits, and the cost of remediation;
the inability to obtain or cost of obtaining and complying with required governmental permits and approvals, licenses, rights-of-way, and siting for transmission and generation projects and hydroelectric facilities;
the cost and outcome of litigation, dispute resolution, and regulatory proceedings, and the ability to recover those costs or the costs of operational changes through insurance or rates, or from third parties;
the failure of information systems or the failure to secure data, failure to comply with privacy laws or regulations, security breaches, or the direct or indirect effect on the companies' business, operations or reputation resulting from cyber-attacks or related litigation, terrorist incidents or the threat of terrorist incidents, and acts of war;
unusual or unanticipated changes in normal business operations, including unusual maintenance or repairs, or the failure to successfully implement new technology solutions; and
adoption of or changes in accounting policies and principles, changes in accounting estimates, and new U.S. Securities and Exchange Commission or New York Stock Exchange requirements, or new interpretations of existing requirements.

Any forward-looking statement speaks only as of the date on which such statement is made. New factors emerge from time to time and it is not possible for management to predict all such factors, nor can it assess the impact of any such factor on the business or the extent to which any factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking statement. IDACORP and Idaho Power disclaim any obligation to update publicly any forward-looking information, whether in response to new information, future events, or otherwise, except as required by applicable law.


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PART I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS

IDACORP, Inc.
Condensed Consolidated Statements of Income
(unaudited)
 
 
Three months ended
September 30,
 
Nine months ended
September 30,
 
 
2018
 
2017
 
2018
 
2017
 
 
(in thousands, except per share amounts)
Operating Revenues:
 
 
 
 
 
 
 
 
Electric utility revenues
 
$
407,355

 
$
406,655

 
$
1,055,515

 
$
1,040,387

Other
 
1,446

 
1,669

 
3,345

 
3,487

Total operating revenues
 
408,801

 
408,324

 
1,058,860

 
1,043,874

 
 
 
 
 
 
 
 
 
Operating Expenses:
 
 
 
 
 
 
 
 
Electric utility:
 
 
 
 
 
 
 
 
Purchased power
 
92,393

 
75,653

 
217,301

 
186,275

Fuel expense
 
53,623

 
54,529

 
102,873

 
111,197

Power cost adjustment
 
(5,075
)
 
10,979

 
40,427

 
51,208

Other operations and maintenance
 
91,563

 
83,445

 
270,075

 
257,167

Energy efficiency programs
 
9,309

 
9,883

 
25,708

 
26,726

Depreciation
 
41,668

 
40,259

 
123,084

 
122,262

Taxes other than income taxes
 
8,911

 
8,614

 
27,306

 
26,134

Total electric utility expenses
 
292,392

 
283,362

 
806,774

 
780,969

Other
 
1,176

 
1,255

 
3,430

 
3,666

Total operating expenses
 
293,568

 
284,617

 
810,204

 
784,635

 
 
 
 
 
 
 
 
 
Operating Income
 
115,233

 
123,707

 
248,656

 
259,239

 
 
 
 
 
 
 
 
 
Allowance for Equity Funds Used During Construction
 
6,047

 
5,712

 
18,065

 
16,555

 
 
 
 
 
 
 
 
 
Earnings of Equity-Method Investments
 
6,665

 
5,232

 
12,218

 
7,269

 
 
 
 
 
 
 
 
 
Other Income (Expense), Net
 
350

 
(537
)
 
199

 
(1,377
)
 
 
 
 
 
 
 
 
 
Interest Expense:
 
 
 
 
 
 
 
 
Interest on long-term debt
 
21,153

 
20,300

 
63,252

 
60,897

Other interest
 
3,189

 
2,827

 
8,310

 
8,298

Allowance for borrowed funds used during construction
 
(2,506
)
 
(2,385
)
 
(7,584
)
 
(7,106
)
Total interest expense, net
 
21,836

 
20,742

 
63,978

 
62,089

 
 
 
 
 
 
 
 
 
Income Before Income Taxes
 
106,459

 
113,372

 
215,160

 
219,597

 
 
 
 
 
 
 
 
 
Income Tax Expense
 
3,868

 
22,296

 
13,866

 
45,420

 
 
 
 
 
 
 
 
 
Net Income
 
102,591

 
91,076

 
201,294

 
174,177

Adjustment for income attributable to noncontrolling interests
 
(360
)
 
(442
)
 
(633
)
 
(610
)
Net Income Attributable to IDACORP, Inc.
 
$
102,231

 
$
90,634

 
$
200,661

 
$
173,567

Weighted Average Common Shares Outstanding - Basic
 
50,434

 
50,362

 
50,431

 
50,361

Weighted Average Common Shares Outstanding - Diluted
 
50,565

 
50,421

 
50,503

 
50,408

Earnings Per Share of Common Stock:
 
 
 
 
 
 
 
 
Earnings Attributable to IDACORP, Inc. - Basic
 
$
2.03

 
$
1.80

 
$
3.98

 
$
3.45

Earnings Attributable to IDACORP, Inc. - Diluted
 
$
2.02

 
$
1.80

 
$
3.97

 
$
3.44

Dividends Declared Per Share of Common Stock
 
$
0.59

 
$
0.55

 
$
1.77

 
$
1.65


The accompanying notes are an integral part of these statements.

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IDACORP, Inc.
Condensed Consolidated Statements of Comprehensive Income
(unaudited)
 
 
 
Three months ended
September 30,
 
Nine months ended
September 30,
 
 
2018
 
2017
 
2018
 
2017
 
 
(in thousands)
 
 
 
 
 
 
 
 
 
Net Income
 
$
102,591

 
$
91,076

 
$
201,294

 
$
174,177

Other Comprehensive Income:
 
 
 
 
 
 
 
 
Unfunded pension liability adjustment, net of tax of $250, $302, $750, and $906
 
721

 
471

 
2,164

 
1,412

Total Comprehensive Income
 
103,312

 
91,547

 
203,458

 
175,589

Comprehensive income attributable to noncontrolling interests
 
(360
)
 
(442
)
 
(633
)
 
(610
)
Comprehensive Income Attributable to IDACORP, Inc.
 
$
102,952

 
$
91,105

 
$
202,825

 
$
174,979


The accompanying notes are an integral part of these statements.
 
 

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IDACORP, Inc.
Condensed Consolidated Balance Sheets
(unaudited)
 
 
 
September 30,
2018
 
December 31,
2017
 
 
(in thousands)
Assets
 
 
 
 
 
 
 
 
 
Current Assets:
 
 
 
 
Cash and cash equivalents
 
$
261,250

 
$
76,649

Receivables:
 
 
 
 
Customer (net of allowance of $1,657 and $2,013, respectively)
 
93,138

 
75,249

Other (net of allowance of $242 and $180, respectively)
 
5,987

 
30,438

Taxes receivable
 

 
8,147

Accrued unbilled revenues
 
59,645

 
75,120

Materials and supplies (at average cost)
 
58,391

 
55,745

Fuel stock (at average cost)
 
57,769

 
56,638

Prepayments
 
14,998

 
16,984

Current regulatory assets
 
30,638

 
48,613

Other
 
902

 
18

Total current assets
 
582,718

 
443,601

Investments
 
101,853

 
115,698

Property, Plant and Equipment:
 
 
 
 
Utility plant in service
 
6,043,460

 
5,906,162

Accumulated provision for depreciation
 
(2,192,315
)
 
(2,098,274
)
Utility plant in service - net
 
3,851,145

 
3,807,888

Construction work in progress
 
478,973

 
452,424

Utility plant held for future use
 
4,726

 
8,075

Other property, net of accumulated depreciation
 
17,799

 
15,488

Property, plant and equipment - net
 
4,352,643

 
4,283,875

Other Assets:
 
 
 
 
Company-owned life insurance
 
61,033

 
59,323

Regulatory assets
 
1,127,668

 
1,083,483

Other
 
62,721

 
59,425

Total other assets
 
1,251,422

 
1,202,231

Total
 
$
6,288,636

 
$
6,045,405


The accompanying notes are an integral part of these statements.

9

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IDACORP, Inc.
Condensed Consolidated Balance Sheets
(unaudited)
 
 
 
September 30,
2018
 
December 31,
2017
 
 
(in thousands)
Liabilities and Equity
 
 
 
 
 
 
 
 
 
Current Liabilities:
 
 
 
 
Accounts payable
 
$
75,654

 
$
90,277

Taxes accrued
 
47,797

 
11,075

Interest accrued
 
21,722

 
22,379

Accrued compensation
 
47,761

 
47,018

Current regulatory liabilities
 
25,487

 
1,404

Advances from customers
 
23,049

 
18,414

Other
 
8,936

 
10,182

Total current liabilities
 
250,406

 
200,749

Other Liabilities:
 
 
 
 
Deferred income taxes
 
630,460

 
660,940

Regulatory liabilities
 
740,937

 
698,044

Pension and other postretirement benefits
 
415,619

 
438,869

Other
 
43,315

 
44,566

Total other liabilities
 
1,830,331

 
1,842,419

Long-Term Debt
 
1,834,422

 
1,746,123

Commitments and Contingencies
 

 

Equity:
 
 
 
 
IDACORP, Inc. shareholders’ equity:
 
 
 
 
Common stock, no par value (120,000 shares authorized; 50,420 shares issued)
 
861,515

 
857,207

Retained earnings
 
1,537,332

 
1,426,528

Accumulated other comprehensive loss
 
(28,800
)
 
(30,964
)
Treasury stock (27 shares and 28 shares, respectively, at cost)
 
(1,932
)
 
(1,386
)
Total IDACORP, Inc. shareholders’ equity
 
2,368,115

 
2,251,385

Noncontrolling interests
 
5,362

 
4,729

Total equity
 
2,373,477

 
2,256,114

Total
 
$
6,288,636

 
$
6,045,405

 
 
 
 
 
The accompanying notes are an integral part of these statements.


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IDACORP, Inc.
Condensed Consolidated Statements of Cash Flows
(unaudited)
 
 
Nine months ended
September 30,
 
 
2018
 
2017
 
 
(in thousands)
Operating Activities:
 
 
 
 
Net income
 
$
201,294

 
$
174,177

Adjustments to reconcile net income to net cash provided by operating activities:
 
 

 
 

Depreciation and amortization
 
125,966

 
125,051

Deferred income taxes and investment tax credits
 
(19,497
)
 
(195
)
Changes in regulatory assets and liabilities
 
51,173

 
61,968

Pension and postretirement benefit plan expense
 
21,033

 
21,687

Contributions to pension and postretirement benefit plans
 
(45,236
)
 
(45,158
)
Earnings of equity-method investments
 
(12,218
)
 
(7,269
)
Distributions from equity-method investments
 
21,750

 
18,350

Allowance for equity funds used during construction
 
(18,065
)
 
(16,555
)
Other non-cash adjustments to net income, net
 
6,866

 
5,220

Change in:
 
 

 
 

Accounts receivable
 
(12,976
)
 
(23,480
)
Accounts payable and other accrued liabilities
 
(6,497
)
 
(32,494
)
Taxes accrued/receivable
 
44,869

 
54,687

Other current assets
 
12,616

 
18,736

Other current liabilities
 
1,619

 
(3,010
)
Other assets
 
(5,504
)
 
(5,256
)
Other liabilities
 
(1,250
)
 
(494
)
Net cash provided by operating activities
 
365,943

 
345,965

Investing Activities:
 
 

 
 

Additions to property, plant and equipment
 
(197,975
)
 
(207,340
)
Payments received from transmission project joint funding partners
 
21,046

 
5,934

Proceeds from the sale of emission allowances and renewable energy certificates
 
2,562

 
1,892

Purchase of equity securities
 
(1,172
)
 
(3,248
)
Proceeds from the sale of equity securities
 
3,772

 
3,755

Other
 
1,288

 
3,042

Net cash used in investing activities
 
(170,479
)
 
(195,965
)
Financing Activities:
 
 

 
 

Issuance of long-term debt
 
220,000

 

Retirement of long-term debt
 
(130,000
)
 
(1,064
)
Dividends on common stock
 
(89,674
)
 
(83,441
)
Net change in short-term borrowings
 

 
(19,375
)
Acquisition of treasury stock
 
(3,614
)
 
(3,189
)
Make-whole premium on retirement of long-term debt
 
(4,607
)
 

Debt issuance costs and other
 
(2,968
)
 

Net cash used in financing activities
 
(10,863
)
 
(107,069
)
Net increase in cash and cash equivalents
 
184,601

 
42,931

Cash and cash equivalents at beginning of the period
 
76,649

 
61,480

Cash and cash equivalents at end of the period
 
$
261,250

 
$
104,411

Supplemental Disclosure of Cash Flow Information:
 
 

 
 

Cash paid during the period for:
 
 

 
 
Income taxes
 
$

 
$
1,702

Interest (net of amount capitalized)
 
$
61,832

 
$
60,257

Non-cash investing activities:
 
 
 
 
Additions to property, plant and equipment in accounts payable
 
$
22,715

 
$
23,502


The accompanying notes are an integral part of these statements.

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IDACORP, Inc.
Condensed Consolidated Statements of Equity
(unaudited)
 
 
 
Nine months ended
September 30,
 
 
2018
 
2017
 
 
(in thousands)
Common Stock
 
 
 
 
Balance at beginning of period
 
$
857,207

 
$
851,833

Share-based compensation expense and other
 
4,308

 
3,210

Balance at end of period
 
861,515

 
855,043

Retained Earnings
 
 
 
 
Balance at beginning of period
 
1,426,528

 
1,323,198

Net income attributable to IDACORP, Inc.
 
200,661

 
173,567

Common stock dividends ($1.77 and $1.65 per share)
 
(89,857
)
 
(83,378
)
Balance at end of period
 
1,537,332

 
1,413,387

Accumulated Other Comprehensive (Loss) Income
 
 
 
 
Balance at beginning of period
 
(30,964
)
 
(20,882
)
Unfunded pension liability adjustment (net of tax)
 
2,164

 
1,412

Balance at end of period
 
(28,800
)
 
(19,470
)
Treasury Stock
 
 
 
 
Balance at beginning of period
 
(1,386
)
 
(243
)
Issued
 
3,068

 
2,063

Acquired
 
(3,614
)
 
(3,188
)
Balance at end of period
 
(1,932
)
 
(1,368
)
Total IDACORP, Inc. shareholders’ equity at end of period
 
2,368,115

 
2,247,592

Noncontrolling Interests
 
 
 
 
Balance at beginning of period
 
4,729

 
3,960

Net income attributable to noncontrolling interests
 
633

 
610

Balance at end of period
 
5,362

 
4,570

Total equity at end of period
 
$
2,373,477

 
$
2,252,162


The accompanying notes are an integral part of these statements.

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Idaho Power Company
Condensed Consolidated Statements of Income
(unaudited)
 
 
 
Three months ended
September 30,
 
Nine months ended
September 30,
 
 
2018
 
2017
 
2018
 
2017
 
 
(in thousands)
 
 
 
 
 
 
 
 
 
Operating Revenues
 
$
407,355

 
$
406,655

 
$
1,055,515

 
$
1,040,387

 
 
 
 
 
 
 
 
 
Operating Expenses:
 
 
 
 
 
 
 
 
Operation:
 
 
 
 
 
 
 
 
Purchased power
 
92,393

 
75,653

 
217,301

 
186,275

Fuel expense
 
53,623

 
54,529

 
102,873

 
111,197

Power cost adjustment
 
(5,075
)
 
10,979

 
40,427

 
51,208

Other operations and maintenance
 
91,563

 
83,445

 
270,075

 
257,167

Energy efficiency programs
 
9,309

 
9,883

 
25,708

 
26,726

Depreciation
 
41,668

 
40,259

 
123,084

 
122,262

Taxes other than income taxes
 
8,911

 
8,614

 
27,306

 
26,134

Total operating expenses
 
292,392

 
283,362

 
806,774

 
780,969

 
 
 
 
 
 
 
 
 
Income from Operations
 
114,963

 
123,293

 
248,741

 
259,418

 
 
 
 
 
 
 
 
 
Other Income (Expense):
 
 
 
 
 
 
 
 
Allowance for equity funds used during construction
 
6,047

 
5,712

 
18,065

 
16,555

Earnings of equity-method investments
 
5,564

 
4,151

 
10,390

 
5,068

Other expense, net
 
(398
)
 
(1,160
)
 
(1,917
)
 
(3,456
)
Total other income
 
11,213

 
8,703

 
26,538

 
18,167

 
 
 
 
 
 
 
 
 
Interest Expense:
 
 
 
 
 
 
 
 
Interest on long-term debt
 
21,153

 
20,300

 
63,252

 
60,897

Other interest
 
3,174

 
2,811

 
8,268

 
8,249

Allowance for borrowed funds used during construction
 
(2,506
)
 
(2,385
)
 
(7,584
)
 
(7,106
)
Total interest expense, net
 
21,821

 
20,726

 
63,936

 
62,040

 
 
 
 
 
 
 
 
 
Income Before Income Taxes
 
104,355

 
111,270

 
211,343

 
215,545

 
 
 
 
 
 
 
 
 
Income Tax Expense
 
4,161

 
22,941

 
14,656

 
46,353

 
 
 
 
 
 
 
 
 
Net Income
 
$
100,194

 
$
88,329

 
$
196,687

 
$
169,192


The accompanying notes are an integral part of these statements.

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Idaho Power Company
Condensed Consolidated Statements of Comprehensive Income
(unaudited)
 
 
 
Three months ended
September 30,
 
Nine months ended
September 30,
 
 
2018
 
2017
 
2018
 
2017
 
 
(in thousands)
 
 
 
 
 
 
 
 
 
Net Income
 
$
100,194

 
$
88,329

 
$
196,687

 
$
169,192

Other Comprehensive Income:
 
 
 
 
 
 
 
 
Unfunded pension liability adjustment, net of tax of $250, $302, $750, and $906
 
721

 
471

 
2,164

 
1,412

Total Comprehensive Income
 
$
100,915

 
$
88,800

 
$
198,851

 
$
170,604


The accompanying notes are an integral part of these statements.
 
 


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Idaho Power Company
Condensed Consolidated Balance Sheets
(unaudited)
 
 
 
September 30,
2018
 
December 31,
2017
 
 
(in thousands)
Assets
 
 
 
 
 
 
 
 
 
Electric Plant:
 
 
 
 
In service (at original cost)
 
$
6,043,460

 
$
5,906,162

Accumulated provision for depreciation
 
(2,192,315
)
 
(2,098,274
)
In service - net
 
3,851,145

 
3,807,888

Construction work in progress
 
478,973

 
452,424

Held for future use
 
4,726

 
8,075

Electric plant - net
 
4,334,844

 
4,268,387

Investments and Other Property
 
89,298

 
99,904

Current Assets:
 
 
 
 
Cash and cash equivalents
 
186,227

 
44,646

Receivables:
 
 
 
 
Customer (net of allowance of $1,657 and $2,013, respectively)
 
93,138

 
75,249

Other (net of allowance of $242 and $180, respectively)
 
5,853

 
30,274

Taxes receivable
 

 
26,492

Accrued unbilled revenues
 
59,645

 
75,120

Materials and supplies (at average cost)
 
58,391

 
55,745

Fuel stock (at average cost)
 
57,769

 
56,638

Prepayments
 
14,887

 
16,866

Current regulatory assets
 
30,638

 
48,613

Other
 
902

 
18

Total current assets
 
507,450

 
429,661

Deferred Debits:
 
 
 
 
Company-owned life insurance
 
61,033

 
59,323

Regulatory assets
 
1,127,668

 
1,083,483

Other
 
58,084

 
54,677

Total deferred debits
 
1,246,785

 
1,197,483

Total
 
$
6,178,377

 
$
5,995,435



The accompanying notes are an integral part of these statements.

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Idaho Power Company
Condensed Consolidated Balance Sheets
(unaudited)
 
 
 
September 30,
2018
 
December 31,
2017
 
 
(in thousands)
Capitalization and Liabilities
 
 
 
 
 
 
 
 
 
Capitalization:
 
 
 
 
Common stock equity:
 
 
 
 
Common stock, $2.50 par value (50,000 shares authorized; 39,151 shares outstanding)
 
$
97,877

 
$
97,877

Premium on capital stock
 
712,258

 
712,258

Capital stock expense
 
(2,097
)
 
(2,097
)
Retained earnings
 
1,415,532

 
1,308,702

Accumulated other comprehensive loss
 
(28,800
)
 
(30,964
)
Total common stock equity
 
2,194,770

 
2,085,776

Long-term debt
 
1,834,422

 
1,746,123

Total capitalization
 
4,029,192

 
3,831,899

Current Liabilities:
 
 
 
 
Accounts payable
 
75,440

 
89,978

Accounts payable to affiliates
 
2,207

 
57,562

Taxes accrued
 
30,575

 
10,904

Interest accrued
 
21,722

 
22,379

Accrued compensation
 
47,583

 
46,832

Current regulatory liabilities
 
25,487

 
1,404

Advances from customers
 
23,049

 
18,414

Other
 
8,198

 
9,556

Total current liabilities
 
234,261

 
257,029

Deferred Credits:
 
 
 
 
Deferred income taxes
 
715,873

 
725,942

Regulatory liabilities
 
740,937

 
698,044

Pension and other postretirement benefits
 
415,619

 
438,869

Other
 
42,495

 
43,652

Total deferred credits
 
1,914,924

 
1,906,507

 
 
 
 
 
Commitments and Contingencies
 

 

 
 
 
 
 
Total
 
$
6,178,377

 
$
5,995,435

 
 
 
 
 
The accompanying notes are an integral part of these statements.

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Idaho Power Company
Condensed Consolidated Statements of Cash Flows
(unaudited)
 
 
Nine months ended
September 30,
 
 
2018
 
2017
 
 
(in thousands)
Operating Activities:
 
 
 
 
Net income
 
$
196,687

 
$
169,192

Adjustments to reconcile net income to net cash provided by operating activities:
 
  

 
 

Depreciation and amortization
 
125,516

 
124,599

Deferred income taxes and investment tax credits
 
(567
)
 
1,972

Changes in regulatory assets and liabilities
 
51,174

 
61,965

Pension and postretirement benefit plan expense
 
21,018

 
21,704

Contributions to pension and postretirement benefit plans
 
(45,220
)
 
(45,174
)
Earnings of equity-method investments
 
(10,390
)
 
(5,068
)
Distributions from equity-method investments
 
20,900

 
17,500

Allowance for equity funds used during construction
 
(18,065
)
 
(16,555
)
Other non-cash adjustments to net income, net
 
(446
)
 
12

Change in:
 
 

 
 

Accounts receivable
 
(13,089
)
 
(30,329
)
Accounts payable
 
(61,682
)
 
14,155

Taxes accrued/receivable
 
46,163

 
35,967

Other current assets
 
12,609

 
18,732

Other current liabilities
 
1,627

 
(3,004
)
Other assets
 
(5,505
)
 
(5,257
)
Other liabilities
 
(1,155
)
 
(354
)
Net cash provided by operating activities
 
319,575

 
360,057

Investing Activities:
 
 

 
 

Additions to utility plant
 
(197,957
)
 
(207,327
)
Payments received from transmission project joint funding partners
 
21,046

 
5,934

Proceeds from the sale of emission allowances and renewable energy certificates
 
2,562

 
1,892

Purchase of equity securities
 
(1,172
)
 
(3,248
)
Proceeds from the sale of equity securities
 
3,772

 
3,755

Other
 
1,182

 
2,905

Net cash used in investing activities
 
(170,567
)
 
(196,089
)
Financing Activities:
 
 

 
 

Issuance of long-term debt
 
220,000

 

Retirement of long-term debt
 
(130,000
)
 
(1,064
)
Dividends on common stock
 
(89,857
)
 
(83,478
)
Net change in short term borrowings
 

 
(21,800
)
Make-whole premium on retirement of long-term debt
 
(4,607
)
 

Debt issuance costs
 
(2,963
)
 

Net cash used in financing activities
 
(7,427
)
 
(106,342
)
Net increase in cash and cash equivalents
 
141,581

 
57,626

Cash and cash equivalents at beginning of the period
 
44,646

 
44,140

Cash and cash equivalents at end of the period
 
$
186,227

 
$
101,766

Supplemental Disclosure of Cash Flow Information:
 
 

 
 

Cash paid to (received from) IDACORP related to income taxes
 
$
35,505

 
$
(27,556
)
Cash paid for interest (net of amount capitalized)
 
$
61,790

 
$
60,208

Non-cash investing activities:
 
 
 
 
Additions to property, plant and equipment in accounts payable
 
$
22,715

 
$
23,502


The accompanying notes are an integral part of these statements.

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IDACORP, INC. AND IDAHO POWER COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
This Quarterly Report on Form 10-Q is a combined report of IDACORP, Inc. (IDACORP) and Idaho Power Company (Idaho Power). Therefore, these Notes to Condensed Consolidated Financial Statements apply to both IDACORP and Idaho Power.  However, Idaho Power makes no representation as to the information relating to IDACORP’s other operations.

Nature of Business
 
IDACORP is a holding company formed in 1998 whose principal operating subsidiary is Idaho Power. Idaho Power is an electric utility engaged in the generation, transmission, distribution, sale, and purchase of electric energy and capacity with a service area covering approximately 24,000 square miles in southern Idaho and eastern Oregon. Idaho Power is regulated primarily by the state utility regulatory commissions of Idaho and Oregon and the Federal Energy Regulatory Commission (FERC). Idaho Power is the parent of Idaho Energy Resources Co. (IERCo), a joint venturer in Bridger Coal Company (BCC), which mines and supplies coal to the Jim Bridger generating plant owned in part by Idaho Power (Jim Bridger plant).
 
IDACORP’s significant other wholly-owned subsidiaries include IDACORP Financial Services, Inc. (IFS), an investor in affordable housing and other real estate investments, and Ida-West Energy Company (Ida-West), an operator of small hydroelectric generation projects that satisfy the requirements of the Public Utility Regulatory Policies Act of 1978 (PURPA).

Regulation of Utility Operations
 
As a regulated utility, many of Idaho Power's fundamental business decisions are subject to the approval of governmental agencies, including the prices that Idaho Power is authorized to charge for its electric service. These approvals are a critical factor in determining IDACORP's and Idaho Power's results of operations and financial condition.

IDACORP's and Idaho Power's financial statements reflect the effects of the different ratemaking principles followed by the jurisdictions regulating Idaho Power. The application of accounting principles related to regulated operations sometimes results in Idaho Power recording expenses and revenues in a different period than when an unregulated enterprise would record such expenses and revenues. In these instances, the amounts are deferred or accrued as regulatory assets or regulatory liabilities on the balance sheet. Regulatory assets represent incurred costs that have been deferred because it is probable they will be recovered from customers through future rates. Regulatory liabilities represent obligations to make refunds to customers for previous collections, or represent amounts collected in advance of incurring an expense. The effects of applying these regulatory accounting principles to Idaho Power's operations are discussed in more detail in Note 3 - "Regulatory Matters."

Financial Statements
 
In the opinion of management of IDACORP and Idaho Power, the accompanying unaudited condensed consolidated financial statements contain all adjustments necessary to present fairly each company's consolidated financial position as of September 30, 2018, consolidated results of operations for the three and nine months ended September 30, 2018 and 2017, and consolidated cash flows for the nine months ended September 30, 2018 and 2017. These adjustments are of a normal and recurring nature. These financial statements do not contain the complete detail or footnote disclosure concerning accounting policies and other matters that would be included in full-year financial statements and should be read in conjunction with the audited consolidated financial statements included in IDACORP’s and Idaho Power’s Annual Report on Form 10-K for the year ended December 31, 2017. The results of operations for the interim period are not necessarily indicative of the results to be expected for the full year. A change in management's estimates or assumptions could have a material impact on IDACORP's or Idaho Power's respective financial condition and results of operations during the period in which such change occurred.
 
Management Estimates
 
Management makes estimates and assumptions when preparing financial statements in conformity with generally accepted accounting principles. These estimates and assumptions include those related to rate regulation, retirement benefits, contingencies, asset impairment, income taxes, unbilled revenues, and bad debt. These estimates and assumptions affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. These estimates involve judgments

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with respect to, among other things, future economic factors that are difficult to predict and are beyond management's control. Accordingly, actual results could differ from those estimates.

New and Recently Adopted Accounting Pronouncements

Recently Adopted Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers (Topic 606). ASU 2014-09 is intended to enable users of financial statements to better understand and consistently analyze an entity's revenue across industries, transactions, and geographies. Under the ASU, recognition of revenue occurs when a customer obtains control of promised goods or services. In addition, the ASU requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The FASB amended certain aspects of ASU 2014-09 to clarify the implementation guidance, including clarifications related to principal versus agent considerations, licensing and identifying performance obligations, narrow scope improvements, and practical expedients. IDACORP and Idaho Power adopted ASU 2014-09 on January 1, 2018, using the modified-retrospective approach as provided for in the standard. The adoption did not change the timing or amounts of revenue currently recognized by the companies, so no cumulative-effect adjustment was required. The adoption did change presentation of revenues on the condensed consolidated statements of income and also added disclosures. To conform with current period presentation, electric utility revenues on IDACORP's and Idaho Power's condensed consolidated statements of income for the three and nine months ended September 30, 2018 and 2017, which had previously been reported separately as "General business," "Off-system sales," and "Other revenues," are no longer reported separately. See Note 4 - "Revenues" for additional information on the disaggregation of revenue and additional disclosures.

In January 2016, the FASB issued ASU 2016-01, Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities, which revises the accounting related to the classification and measurement of investments in equity securities and the presentation of certain fair value changes for financial liabilities measured at fair value. It also amends certain disclosure requirements associated with the fair value of financial instruments. The new standard is effective for fiscal years beginning after December 15, 2017, including interim periods. IDACORP and Idaho Power adopted ASU 2016-01 on January 1, 2018. The adoption did not have a material impact on the companies' financial statements as the companies previously elected the fair value option and reported available-for-sale securities at fair value.

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230) Classification of Certain Cash Receipts and Cash Payments, to reduce diversity in practice in how certain cash receipts and cash payments are classified in the statement of cash flows. The companies' classification of proceeds from the settlement of corporate-owned life insurance policies and related costs will be classified as investing activities under the new guidance. The new guidance did not affect the companies' presentation of debt prepayment and extinguishment costs, proceeds from the settlement of insurance claims (other than corporate-owned life insurance), and distributions received from equity-method investments. IDACORP and Idaho Power adopted ASU 2016-15 on January 1, 2018, using the retrospective approach as provided for in the standard. To conform with current period presentation, the companies reclassified $3.0 million of company-owned life insurance proceeds received, for the nine months ended September 30, 2017, from "Change in accounts receivable" and $0.1 million of prepaid insurance premiums paid, for the nine months ended September 30, 2017, from “Change in other current assets” (net reclassification of $2.9 million) within "Operating Activities" to "Other" within "Investing Activities" on the condensed consolidated statement of cash flows.


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In March 2017, the FASB issued ASU 2017-07, Compensation -- Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost, which requires employers to disaggregate the service cost component from other components of net periodic benefit costs and to disclose the amounts of net periodic benefit costs that are included in each income statement line item. The standard requires employers to present the service cost component in the same line item as other compensation costs and to present the other components of net periodic benefit costs (which include interest costs, expected return on plan assets, amortization of prior service cost or credits, and actuarial gains and losses) separately and outside a subtotal of operating income. In addition, only the service cost component is eligible for capitalization. Idaho Power capitalizes amounts of pension or postretirement costs that are insignificant to the consolidated financial statements. The amendments in ASU 2017-07 are effective for interim and annual reporting periods beginning after December 15, 2017. Entities must use (1) a retrospective transition method to adopt the requirement for separate presentation in the income statement of service costs and other components and (2) a prospective transition method to adopt the requirement to limit the capitalization of benefit costs to the service cost component. IDACORP and Idaho Power adopted ASU 2017-07 on January 1, 2018, and accordingly, have retrospectively adjusted prior periods to reflect the disaggregation of service cost from other components of net periodic benefit costs. The adoption did not have a material impact on the companies' financial statements nor did it affect net income for the three and nine months ended September 30, 2018. For IDACORP, for the three and nine months ended September 30, 2017, $0.8 million and $2.3 million, respectively, were reclassified out of "Other operations and maintenance" and $2.0 million and $6.1 million, respectively, were reclassified out of "Other" operating expenses for a total of $2.8 million and $8.4 million, respectively, reclassified to "Other Income (Expense), Net" to conform to current period presentation. For Idaho Power, for the three and nine months ended September 30, 2017, $0.8 million and $2.3 million, respectively, were reclassified from "Other operations and maintenance" to "Other expense, net" to conform to current period presentation.

Recent Accounting Pronouncements Not Yet Adopted

In August 2018, the FASB issued ASU 2018-15, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract,
to provide guidance on implementation costs incurred in a cloud computing arrangement that is a service contract. ASU 2018-15 aligns the accounting for such costs with the guidance on capitalizing costs associated with developing or obtaining internal-use software. The new standard is effective for interim and annual reporting periods beginning after December 15, 2019, with early adoption permitted. IDACORP and Idaho Power are evaluating the impact of ASU 2018-15 on their respective financial statements.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), intended to improve financial reporting on leasing transactions. The ASU requires lessees to recognize a right-of-use asset and lease liability on the balance sheet for most leases. In addition, the ASU revises the definition of a lease in regards to when an arrangement conveys the right to control the use of the identified asset under the arrangement, which may result in changes to the classification of an arrangement as a lease. IDACORP and Idaho Power expect to adopt ASU 2016-02 on January 1, 2019. The standard must be adopted using a modified retrospective approach, but entities may elect not to recast the comparative periods. IDACORP and Idaho Power continue to finalize the process of identifying lease contracts and evaluating current business processes relating to leases, but the companies do not believe the adoption of ASU 2016-02 will have a material impact on their respective financial statements. The companies also continue to monitor utility industry lease implementation guidance and interpretation that may affect existing and future judgments relating to lease classification.

Reclassifications

In these condensed consolidated financial statements, certain amounts in prior periods’ consolidated financial statements have been reclassified to conform with current period presentation. On IDACORP's and Idaho Power's December 31, 2017 condensed consolidated balance sheets, the "Long-term receivables" balances of $4.3 million and $0.5 million, respectively, which had previously been reported separately, were reclassified to "Other" within "Other Assets" and "Deferred Debits," respectively.

2.  INCOME TAXES
 
In accordance with interim reporting requirements, IDACORP and Idaho Power use an estimated annual effective tax rate for computing their provisions for income taxes. An estimate of annual income tax expense (or benefit) is made each interim period using estimates for annual pre-tax income, income tax adjustments, and tax credits. The estimated annual effective tax rates do not include discrete events such as tax law changes, examination settlements, accounting method changes, or adjustments to tax expense or benefits attributable to prior years. Discrete events are recorded in the interim period in which they occur or become known. The estimated annual effective tax rate is applied to year-to-date pre-tax income to determine income tax expense (or

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benefit) for the interim period consistent with the annual estimate. In subsequent interim periods, income tax expense (or benefit) for the period is computed as the difference between the year-to-date amount reported for the previous interim period and the current period's year-to-date amount.

Income Tax Expense

The following table provides a summary of income tax expense for the nine months ended September 30 (in thousands): 
 
 
IDACORP
 
Idaho Power
 
 
2018
 
2017
 
2018
 
2017
Income tax at statutory rates (federal and state)
 
$
55,219

 
$
85,624

 
$
54,400

 
$
84,278

First mortgage bond redemption costs
 
(1,261
)
 

 
(1,261
)
 

Share-based compensation
 
(1,053
)
 
(1,587
)
 
(1,040
)
 
(1,558
)
Remeasurement of deferred taxes
 
(5,411
)
 

 
(5,664
)
 

Other(1)
 
(33,628
)
 
(38,617
)
 
(31,779
)
 
(36,367
)
Income tax expense
 
$
13,866

 
$
45,420

 
$
14,656

 
$
46,353

Effective tax rate
 
6.5
%
 
20.7
%
 
6.9
%
 
21.5
%
(1) "Other" is primarily comprised of the net tax effect of Idaho Power's regulatory flow-through tax adjustments.

The decreases in income tax expense for the nine months ended September 30, 2018, compared with the same period in 2017, were primarily due to lower statutory tax rates and a flow-through income tax benefit related to the tax deduction for bond redemption costs incurred in the second quarter of 2018. The decrease in statutory rates was due to the Tax Cuts and Jobs Act, which reduced the U.S. federal corporate income tax rate from 35 percent to 21 percent, and Idaho House Bill 463, which lowered the Idaho state corporate income tax rate from 7.4 percent to 6.925 percent. The federal and Idaho state income tax rate changes were effective January 1, 2018. The remeasurement of deferred taxes resulted from the federal and Idaho income tax rate change on the adjustment of temporary differences related to IDACORP’s 2017 consolidated income tax returns filed during the third quarter of 2018. On a net basis, Idaho Power’s estimate of its annual 2018 regulatory flow-through tax adjustments is comparable to 2017.

3. REGULATORY MATTERS
 
Included below is a summary of Idaho Power's most recent general rate cases and base rate changes, as well as other recent or pending notable regulatory matters and proceedings.

Idaho and Oregon General Rate Cases

Idaho Power's current base rates are a result of orders from the Idaho Public Utilities Commission (IPUC) and Public Utility Commission of Oregon (OPUC). The commissions approve settlement stipulations that generally provide for cost recovery and an authorized rate of return on their respective Idaho-jurisdiction and Oregon-jurisdiction rate bases. Idaho Power's most recent general rate cases in Idaho and Oregon were filed during 2011, and Idaho Power filed a large single-issue rate case for the Langley Gulch power plant in Idaho and Oregon in 2012. These significant rate cases resulted in the resetting of base rates in both Idaho and Oregon during 2012. In 2014, Idaho Power reset its base-rate power supply expenses in the Idaho jurisdiction for purposes of updating the collection of costs through retail rates, but without a resulting net increase in rates.

Between general rate cases, Idaho Power relies upon customer growth, a fixed cost adjustment mechanism, power cost adjustment mechanisms, tariff riders, and other mechanisms to reduce the impact of regulatory lag, which refers to the period of time between making an investment or incurring an expense and recovering that investment or expense and earning a return. For more information on the Idaho and Oregon general rate cases and base rate adjustments, refer to Note 3 - "Regulatory Matters" to the consolidated financial statements included in IDACORP's and Idaho Power's Annual Report on Form 10-K for the year ended December 31, 2017.


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Idaho Settlement Stipulations

In October 2014, the IPUC issued an order approving an extension, with modifications, of the terms of a December 2011 Idaho settlement stipulation for the period from 2015 through 2019, or until the terms are otherwise modified or terminated by order of the IPUC (October 2014 Idaho Earnings Support and Sharing Settlement Stipulation). The provisions of the October 2014 Idaho Earnings Support and Sharing Settlement Stipulation are described in the table included under "Income Tax Reform - Regulatory Treatment" below.

Based on its estimate of full-year 2018 return on year-end equity in the Idaho jurisdiction (Idaho ROE), in the third quarter of 2018, Idaho Power recorded a $1.5 million provision against current revenues for sharing of earnings with customers for 2018 under the October 2014 Idaho Earnings Support and Sharing Settlement Stipulation. During the first nine months of 2017, Idaho Power recorded no sharing of earnings with customers.

Income Tax Reform - Regulatory Treatment

In December 2017, the Tax Cuts and Jobs Act was signed into law, which, among other things, lowered the corporate federal income tax rate from 35 percent to 21 percent and modified or eliminated certain federal income tax deductions for corporations. In March 2018, Idaho House Bill 463 was signed into law reducing the Idaho state corporate income tax rate from 7.4 percent to 6.925 percent.

In January 2018, the IPUC issued an order requiring utilities within its jurisdiction, including Idaho Power, to file a report with the IPUC, identifying and quantifying the financial impact of the income tax reform changes on the utility, along with proposed tariff schedule changes that would adjust the utility's rates and corresponding revenues to reflect the utility's modified federal tax obligations under the Tax Cuts and Jobs Act. The IPUC order required Idaho Power to estimate the income tax reform changes by comparing actual 2017 federal income tax components with what those federal income tax components would have been if the Tax Cuts and Jobs Act had been effective for the full-year 2017.

In March 2018, Idaho Power made a filing with the IPUC providing the results of its pro forma analysis indicating pro forma annual income tax reform expense reductions, composed of a current income tax expense reduction and a deferred income tax expense reduction. In May 2018, the IPUC issued an order approving a settlement stipulation (May 2018 Idaho Tax Reform Settlement Stipulation) related to income tax reform. Beginning June 1, 2018, the settlement stipulation provides an annual (a) $18.7 million reduction to Idaho customer base rates and (b) $7.4 million amortization of existing regulatory deferrals for specified items or future amortization of other existing or future unspecified regulatory deferrals that would otherwise be a future liability recoverable from Idaho customers. Additionally, a one-time benefit of a $7.8 million rate reduction is being provided to Idaho customers through the Idaho-jurisdiction power cost adjustment (PCA) mechanism for the period from June 1, 2018 through May 31, 2019, for the income tax reform benefits accrued from January 1, 2018 to May 31, 2018, and the income tax reform benefits related to Idaho Power's open access transmission tariff (OATT). The amount provided via the PCA mechanism will decrease to $2.7 million on June 1, 2019, for income tax reform benefits related to Idaho Power's OATT and will cease on June 1, 2020, to reflect the impact of a full year of reduced OATT third-party transmission revenues.

The May 2018 Idaho Tax Reform Settlement Stipulation also provides for the indefinite extension of the October 2014 Idaho Earnings Support and Sharing Settlement Stipulation beyond its termination date of December 31, 2019.


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The table below summarizes and compares the terms of the October 2014 Idaho Earnings Support and Sharing Settlement Stipulation with the terms in the May 2018 Idaho Tax Reform Settlement Stipulation that will be applicable commencing on January 1, 2020.

October 2014 Idaho Earnings Support and Sharing Settlement Stipulation
(Effective through December 31, 2019)
 
May 2018 Idaho Tax Reform Settlement Stipulation
(Effective beginning January 1, 2020, with no defined end date)
If Idaho Power's actual annual Idaho ROE in any year is less than 9.5 percent, then Idaho Power may record additional accumulated deferred investment tax credits (ADITC) amortization up to $25 million to help achieve a 9.5 percent Idaho ROE for that year, and may record additional ADITC amortization up to a total of $45 million over the 2015 through 2019 period. If the $45 million of ADITC are completely amortized, the revenue sharing provisions below would no longer be applicable.
 
If Idaho Power's actual annual Idaho ROE in any year is less than 9.4 percent, then Idaho Power may amortize up to $25 million of additional ADITC to help achieve a 9.4 percent Idaho ROE for that year, so long as the cumulative amount of ADITC used does not exceed $45 million (Idaho Power will have available and may continue to use any unused portion of the $45 million of additional ADITC from the October 2014 Idaho Earnings Support and Sharing Settlement Stipulation); however, Idaho Power may seek approval from the IPUC to replenish the total amount of ADITC it is permitted to amortize. If there are no remaining amounts of ADITC authorized to be amortized, the revenue sharing provisions below would not be applicable until ADITC is replenished.
If Idaho Power's annual Idaho ROE in any year exceeds 10.0 percent, the amount of earnings exceeding a 10.0 percent Idaho ROE and up to and including a 10.5 percent Idaho ROE will be allocated 75 percent to Idaho Power's Idaho customers as a rate reduction to be effective at the time of the subsequent year's PCA, and 25 percent to Idaho Power.
 
If Idaho Power's annual Idaho ROE in any year exceeds 10.0 percent, the amount of earnings exceeding a 10.0 percent Idaho ROE and up to and including a 10.5 percent Idaho ROE will be allocated 80 percent to Idaho Power's Idaho customers as a rate reduction to be effective at the time of the subsequent year's PCA, and 20 percent to Idaho Power.
If Idaho Power's annual Idaho ROE in any year exceeds 10.5 percent, the amount of earnings exceeding a 10.5 percent Idaho ROE will be allocated 50 percent to Idaho Power's Idaho customers as a rate reduction to be effective at the time of the subsequent year's PCA, 25 percent to Idaho Power's Idaho customers in the form of a reduction to the pension regulatory asset balancing account (to reduce the amount to be collected in the future from Idaho customers), and 25 percent to Idaho Power.
 
If Idaho Power's annual Idaho ROE in any year exceeds 10.5 percent, the amount of earnings exceeding a 10.5 percent Idaho ROE will be allocated 55 percent to Idaho Power's Idaho customers as a rate reduction to be effective at the time of the subsequent year's PCA, 25 percent to Idaho Power's Idaho customers in the form of a reduction to the pension regulatory asset balancing account (to reduce the amount to be collected in the future from Idaho customers), and 20 percent to Idaho Power.
In the event the IPUC approves a change to Idaho Power's allowed annual Idaho ROE as part of a general rate case proceeding before December 31, 2019, the Idaho ROE thresholds will be adjusted on a prospective basis as follows: (a) the Idaho ROE under which Idaho Power will be permitted to amortize an additional amount of ADITC will be set at 95 percent of the newly authorized Idaho ROE, (b) sharing with customers on an 75 percent basis as a customer rate reduction will begin at the newly authorized Idaho ROE, and (c) sharing with customers on a 75 percent basis but allocated 50 percent to a rate reduction, and 25 percent to a pension expense deferral regulatory asset, will begin at 105 percent of the newly authorized Idaho ROE.
 
In the event the IPUC approves a change to Idaho Power's allowed annual Idaho ROE as part of a general rate case proceeding effective on or after January 1, 2020, the Idaho ROE thresholds will be adjusted on a prospective basis as follows: (a) the Idaho ROE under which Idaho Power will be permitted to amortize an additional amount of ADITC will be set at 95 percent of the newly authorized Idaho ROE, (b) sharing with customers on an 80 percent basis as a customer rate reduction will begin at the newly authorized Idaho ROE, and (c) sharing with customers on an 80 percent basis but allocated 55 percent to a rate reduction, and 25 percent to a pension expense deferral regulatory asset, will begin at 105 percent of the newly authorized Idaho ROE.

Neither the October 2014 Idaho Earnings Support and Sharing Settlement Stipulation nor the May 2018 Idaho Tax Reform Settlement Stipulation impose a moratorium on Idaho Power filing a general rate case or other form of rate proceeding in Idaho during their respective terms.

Also in May 2018, the OPUC issued an order approving a settlement stipulation that provides for an annual $1.5 million reduction to Oregon customer base rates beginning June 1, 2018, through May 31, 2020, related to income tax reform. Unless resolved in a regulatory proceeding before, the settlement stipulation requires Idaho Power to file a deferral request with the OPUC by December 31, 2019, to begin tracking tax reform benefits beginning January 1, 2020, at which time Idaho Power, the OPUC staff, and other interested parties will discuss the methodology to quantify potential future tax reform benefits. The settlement stipulation also deemed prudent Idaho Power's decision to pursue the end of its participation in coal-fired operations of Unit 1 at Idaho Power's jointly-owned Valmy Plant and approved Idaho Power's request to recover annual incremental accelerated depreciation of $2.5 million relating to Unit 1, beginning June 1, 2018, and ending December 31, 2019.

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Hells Canyon Complex Relicensing Costs Settlement Stipulation

In December 2016, Idaho Power filed an application with the IPUC requesting a determination that Idaho Power's expenditures of $220.8 million through year-end 2015 on relicensing of the Hells Canyon Complex (HCC) were prudently incurred, and thus eligible for inclusion in retail rates in a future regulatory proceeding. In December 2017, Idaho Power filed with the IPUC a settlement stipulation signed by Idaho Power, the IPUC staff, and a third party intervenor, recognizing that a total of $216.5 million in HCC relicensing expenditures and other related costs were reasonably incurred, and therefore should be eligible for inclusion in customer rates at a later date. As a result of filing the settlement stipulation, Idaho Power recorded a $5.0 million pre-tax charge in the fourth quarter of 2017, which included $4.3 million for costs incurred through 2015, as well as $0.7 million related to associated costs incurred in 2016 and 2017. In April 2018, the IPUC issued an order approving the settlement stipulation as filed with the IPUC and determined the $216.5 million of associated costs to be reasonably and prudently incurred.

Idaho Power Cost Adjustment Mechanisms

In both its Idaho and Oregon jurisdictions, Idaho Power's power cost adjustment mechanisms address the volatility of power supply costs and provide for annual adjustments to the rates charged to its retail customers. The power cost adjustment mechanisms compare Idaho Power's actual net power supply costs (primarily fuel and purchased power less wholesale energy sales) against net power supply costs being recovered in Idaho Power's retail rates. Under the power cost adjustment mechanisms, certain differences between actual net power supply costs incurred by Idaho Power and costs being recovered in retail rates are recorded as a deferred charge or credit on the balance sheet for future recovery or refund. The power supply costs deferred primarily result from changes in contracted power purchase prices and volumes, changes in wholesale market prices and transaction volumes, fuel prices, and the levels of Idaho Power's own generation.

In June 2018, the IPUC issued an order approving a $22.6 million net decrease in PCA rates, effective for the 2018-2019 PCA collection period from June 1, 2018, to May 31, 2019. The net decrease in PCA rates is primarily due to better-than-expected actual water conditions for the 2017-2018 PCA year, which resulted in additional low-cost hydroelectric generation available to reduce net power supply costs. Previously, in May 2017, the IPUC issued an order approving a $10.6 million net increase in PCA rates, effective for the 2017-2018 PCA collection period from June 1, 2017, to May 31, 2018. The net increase in PCA rates was primarily due to expected higher power supply costs resulting from new renewable energy power purchase agreements under PURPA and higher coal-fired generation costs, combined with the effect of lower-than-expected actual hydroelectric generation for the 2016-2017 PCA year. The net increase included an offsetting $13.0 million one-time refund of previously collected Idaho energy efficiency rider funds.

Idaho Fixed Cost Adjustment Mechanism

The Idaho jurisdiction fixed cost adjustment (FCA) mechanism is designed to remove a portion of Idaho Power’s financial disincentive to invest in energy efficiency programs by separating (or decoupling) the recovery of fixed costs from the variable kilowatt-hour charge and instead linking it to a set amount per customer. The FCA mechanism, applicable to residential and small commercial customers, is adjusted each year to accrue, or defer, the difference between the authorized fixed-cost recovery amount per customer and the actual fixed costs per customer recovered by Idaho Power during the year. In May 2018, the IPUC issued an order approving a decrease of $19.4 million in the FCA from $35.0 million to $15.6 million, with new rates effective for the period from June 1, 2018, to May 31, 2019. Previously, in May 2017, the IPUC issued an order approving an increase of $6.9 million in the FCA from $28.1 million to $35.0 million, with rates effective for the period from June 1, 2017, to May 31, 2018.

Western Energy Imbalance Market Costs
Idaho Power's participation in the energy imbalance market implemented in the western United States (Western EIM) commenced on April 4, 2018. The Western EIM aims to reduce the power supply costs to serve customers through more efficient dispatch within the hour of a larger and more diverse pool of resources, to integrate intermittent power from renewable generation sources more effectively, and to enhance reliability.


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In January 2017, the IPUC issued an order authorizing deferral accounting treatment for costs associated with joining the Western EIM. In November 2017, Idaho Power filed an application with the IPUC requesting authorization to establish an interim method of recovery for costs associated with participation in the Western EIM. Through March 2018, Idaho Power had deferred $1.0 million of incremental other operations and maintenance (O&M) costs. In the second quarter of 2018, Idaho Power amortized those costs in accordance with the provisions of the May 2018 Idaho Tax Reform Settlement Stipulation discussed above.

In July 2018, the IPUC issued an order approving a settlement stipulation that provides for recovery of ongoing Western EIM-related costs through Idaho Power's PCA mechanism, beginning April 2018. The recovery mechanism provides for monthly incremental revenue, which includes a return on and return of Western EIM-related capital costs and recovery of ongoing Western EIM operating costs. As of April 1, 2018, Idaho Power ceased deferring incremental Western EIM participation O&M start-up costs, and began recognizing the monthly incremental revenue associated with Western EIM participation. During the three and nine months ended September 30, 2018, Idaho Power recorded $0.7 million and $1.4 million of revenue, respectively, relating to Western EIM participation and deferred the same amount to the PCA deferral account.

4. REVENUES
 
On January 1, 2018, IDACORP and Idaho Power adopted ASU 2014-09 using the modified retrospective method. The adoption did not change the timing or amounts of revenue recognized by IDACORP or Idaho Power and, therefore, the companies recorded no cumulative-effect adjustment. The following table provides a summary of electric utility operating revenues for IDACORP and Idaho Power for the three and nine months ended September 30, 2018 and 2017 (in thousands):
 
 
Three months ended
September 30,
 
Nine months ended
September 30,
 
 
2018
 
2017
 
2018
 
2017
Electric utility operating revenues:
 
 
 
 
 
 
 
 
Revenue from contracts with customers
 
$
398,798

 
$
405,697

 
$
1,019,668

 
$
1,025,779

Alternative revenue programs and other revenues
 
8,557

 
958

 
35,847

 
14,608

Total electric utility operating revenues
 
$
407,355

 
$
406,655

 
$
1,055,515

 
$
1,040,387


Revenues from Contracts with Customers

Revenues from contracts with customers are primarily related to Idaho Power’s regulated tariff-based sales of energy or related services. Generally, tariff-based sales do not involve a written contract, but are classified as revenues from contracts with customers under ASU 2014-09. Idaho Power assesses revenues on a contract-by-contract basis to determine the nature, amount, timing, and uncertainty, if any, of revenues being recognized. The following table presents revenues from contracts with

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customers disaggregated by revenue source for the three and nine months ended September 30, 2018 and 2017 (in thousands):
 
 
Three months ended
September 30,
 
Nine months ended
September 30,
 
 
2018
 
2017
 
2018
 
2017
Revenues from contracts with customers:
 
 
 
 
 
 
 
 
Retail revenues:
 
 
 
 
 
 
 
 
Residential (includes $4,789, ($264), $23,841, and $8,068, respectively, related to the FCA(1))
 
$
137,177

 
$
145,555

 
$
393,014

 
$
410,246

Commercial (includes $305, $220, $958, and $606, respectively, related to the FCA(1))
 
85,936

 
89,305

 
237,127

 
242,564

Industrial
 
50,292

 
52,771

 
144,951

 
147,995

Irrigation
 
88,934

 
89,370

 
154,406

 
146,363

Provision for sharing
 
(1,500
)
 

 
(1,500
)
 

Deferred revenue related to HCC relicensing AFUDC(2)
 
(2,815
)
 
(3,432
)
 
(6,861
)
 
(8,366
)
Total retail revenues
 
358,024

 
373,569

 
921,137

 
938,802

Less: FCA mechanism revenues(1)
 
(5,094
)
 
44

 
(24,799
)
 
(8,674
)
Wholesale energy sales
 
12,408

 
5,101

 
35,093

 
18,061

Transmission services (wheeling) revenues
 
17,640

 
10,805

 
43,839

 
32,637

Energy efficiency program revenues
 
9,309

 
9,883

 
25,708

 
26,726

Other revenues from contracts with customers
 
6,511

 
6,295

 
18,690

 
18,227

Total revenues from contracts with customers
 
$
398,798

 
$
405,697

 
$
1,019,668

 
$
1,025,779

(1) The FCA mechanism is an alternative revenue program and does not represent revenue from contracts with customers.
(2) As part of its January 30, 2009 general rate case order, the IPUC is allowing Idaho Power to recover a portion of the allowance for funds used during construction (AFUDC) on construction work in progress related to the HCC relicensing process, even though the relicensing process is not yet complete and the costs have not been moved to electric plant in service. Idaho Power is collecting $8.8 million annually in the Idaho jurisdiction but is deferring revenue recognition of the amounts collected until the license is issued and the accumulated license costs approved for recovery are placed in service. Prior to the May 2018 Idaho Tax Reform Settlement Stipulation described in Note 3 - "Regulatory Matters," Idaho Power was collecting $10.7 million annually.

Retail Revenues: Idaho Power’s retail revenues primarily relate to the sale of electricity to customers based on regulated tariff-based prices. Idaho Power recognizes retail revenues in amounts for which it has the right to invoice the customer in the period when energy is delivered or services are provided to customers. The total energy price generally has a fixed component related to having service available and a usage-based component related to the demand, delivery, and consumption of energy. The revenues recognized reflect the consideration Idaho Power expects to be entitled to in exchange for that energy or those services. Retail customers are classified as residential, commercial, industrial, or irrigation. Approximately 95 percent of Idaho Power's retail revenue originates from customers located in Idaho, with the remainder originating from customers located in Oregon. Idaho Power’s retail customer rates are based on Idaho Power’s cost of service and are determined through general rate case proceedings, settlement stipulations, and other filings with the IPUC and OPUC. Changes in rates and changes in customer demand are typically the primary causes of fluctuations in retail revenue from period to period. The primary influences on changes in customer demand for electricity are weather, economic conditions (including growth in the number of Idaho Power customers), and energy efficiency. Idaho Power's utility revenues are not earned evenly during the year.

Retail revenues are billed monthly based on meter readings taken throughout the month. Payments for amounts billed are generally due from the customer within 15 days of billing. Idaho Power accrues estimated unbilled revenues for energy or related services delivered to customers but not yet billed at period-end based on actual meter readings at period-end and estimated rates.

Credit losses recorded on receivables arising from Idaho Power’s contracts with customers were $1.2 million and $3.0 million for the three and nine months ended September 30, 2018, respectively, and $1.2 million and $3.7 million for the three and nine months ended September 30, 2017, respectively.

Residential Customers: Idaho Power’s energy sales to residential customers typically peak during the winter heating season and summer cooling season. Extreme temperatures increase sales to residential customers who use electricity for cooling and heating, compared with normal temperatures. Idaho Power's rate structure provides for higher rates during the summer when overall system loads are at their highest, and includes tiers such that rates increase as a customer's consumption level increases. These seasonal and tiered rate structures contribute to the seasonal fluctuations in revenues and earnings. Economic and demographic conditions can also affect residential customer demand; strong job growth and population growth in Idaho

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Power’s service area have led to increasing customer growth rates in recent years. Residential demand is also impacted by energy efficiency initiatives. Idaho Power’s FCA mechanism mitigates some of the fluctuations caused by weather and energy efficiency initiatives.

Commercial Customers: Most businesses are included in Idaho Power's commercial customer class, as well as small industrial companies, and public street and highway lighting accounts. Idaho Power’s commercial customers are less influenced by weather conditions than residential customers, although weather does affect commercial customer energy use. Economic conditions, including manufacturing activity levels, and energy efficiency initiatives also affect energy use of commercial customers.

Industrial Customers: Industrial customers consist of large industrial companies, including special contract customers. Energy use of industrial customers is primarily driven by economic conditions, with weather having little impact on this customer class.

Irrigation Customers: Irrigation customers use electricity to operate irrigation pumps, primarily during the agricultural growing season. The amount and timing of precipitation as well as temperature levels can affect the timing and amounts of sales to irrigation customers, with increased precipitation generally resulting in decreased sales.

Provision for Sharing: Based on its estimate of full-year 2018 Idaho ROE, in the third quarter of 2018, Idaho Power recorded a $1.5 million provision against current revenues for sharing of earnings with customers for 2018 under the October 2014 Idaho Earnings Support and Sharing Settlement Stipulation. During the first nine months of 2017, Idaho Power recorded no sharing of earnings with customers. The October 2014 Idaho Earnings Support and Sharing Settlement Stipulation is described further in Note 3 - "Regulatory Matters."

Wholesale Energy Sales: As a public utility under the Federal Power Act (FPA), Idaho Power has the authority to charge market-based rates for wholesale energy sales under its FERC tariff. Idaho Power’s wholesale electricity sales are primarily to utilities and power marketers and are predominantly short-term and consist of a single performance obligation satisfied as energy is transferred to the counterparty. Idaho Power's wholesale energy sales depend largely on the availability of generation resources in excess of the amount necessary to serve customer loads as well as adequate market power prices at the time when those resources are available. A reduction in either factor may lead to lower wholesale energy sales.

Transmission Services (Wheeling) Revenues: As a public utility under the FPA, Idaho Power has the authority to provide cost-based wholesale and retail access transmission services under its OATT. Services under the OATT are offered on a nondiscriminatory basis such that all potential customers have an equal opportunity to access the transmission system. Idaho Power’s transmission revenue is primarily related to third parties reserving capacity on Idaho Power’s transmission system to transmit electricity through Idaho Power’s service area. The reservations are predominantly short-term but may be part of a long-term capacity contract, short-term contract, or on demand when available. Transmission services revenues consist of a single performance obligation satisfied as capacity on Idaho Power’s transmission system is provided to the third party. Transmission service revenues are affected by changes in Idaho Power’s OATT transmission rate and customer demand. Demand for transmission services can be affected by regional market factors, such as loads and generation of utilities in Idaho Power’s region.

Energy Efficiency Program Revenues: Idaho Power collects most of its energy efficiency program costs through an energy efficiency rider on customer bills. The rider collections are deferred until expenditures are incurred. Energy efficiency program expenditures funded through the rider are reported as an operating expense with an equal amount recorded in revenues, resulting in no net impact on earnings. Energy efficiency program revenues are recognized in the period when the related costs of the energy efficiency program are incurred by Idaho Power. The cumulative variance between expenditures and amounts collected through the rider is recorded as a regulatory asset or liability. A liability balance indicates that Idaho Power has collected more than it has spent, and an asset balance indicates that Idaho Power has spent more than it has collected. At September 30, 2018, Idaho Power's energy efficiency rider balances were a $6.8 million regulatory liability in the Idaho jurisdiction and a $6.7 million regulatory asset in the Oregon jurisdiction.

Alternative Revenue Programs and Other Revenues

While revenues from contracts with customers make up most of Idaho Power’s revenues, the IPUC has authorized the use of an additional regulatory mechanism, which may increase or decrease tariff-based rates billed to customers. The Idaho FCA mechanism, applicable to residential and small commercial customers, is designed to remove a portion of Idaho Power’s financial disincentive to invest in energy efficiency programs by separating (or decoupling) the recovery of fixed costs from the variable kilowatt-hour charge and linking it instead to a set amount per customer. Under Idaho Power's current rate design, recovery of a portion of fixed costs is included in the variable kilowatt-hour charge, which may result in overcollection or

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undercollection of fixed costs. To return overcollection to customers or to collect undercollection from customers, the FCA mechanism allows Idaho Power to accrue, or defer, the difference between the authorized fixed-cost recovery amount per customer and the actual fixed costs per customer recovered by Idaho Power during the year. Increases in FCA recovery are capped at 3 percent of base revenue annually, with any excess deferred for collection in a subsequent year.

The FCA mechanism revenues include only the initial recognition of FCA revenues when the regulator-specified conditions for recognition have been met. Revenue from contracts with customers excludes the portion of the tariff price representing FCA revenues that had been initially recorded in prior periods when regulator-specified conditions were met. When those amounts are included in the price of utility service and billed to customers, such amounts are recorded as recovery of the associated regulatory asset or liability and not as revenues.

The table below presents the FCA mechanism revenues and other revenues for the three and nine months ended September 30, 2018 and 2017 (in thousands):
 
 
Three months ended
September 30,
 
Nine months ended
September 30,
 
 
2018
 
2017
 
2018
 
2017
Alternative revenue programs and other revenues:
 
 
 
 
 
 
 
 
FCA mechanism revenues
 
$
5,094

 
(44
)
 
$
24,799

 
$
8,674

Derivative revenues
 
3,463

 
1,002

 
11,048

 
5,934

Total alternative revenue programs and other revenues
 
$
8,557

 
$
958

 
$
35,847

 
$
14,608


IDACORP's Other Revenues

IDACORP's other revenues are primarily comprised of revenues from IDACORP’s subsidiary, Ida-West. Ida-West operates small hydroelectric generation projects that satisfy the requirements of PURPA.

5. LONG-TERM DEBT

In March 2018, Idaho Power issued $220 million in principal amount of 4.20 percent first mortgage bonds, secured medium-term notes, Series K, maturing on March 1, 2048. In April 2018, Idaho Power redeemed, prior to maturity, $130 million in principal amount of 4.50 percent first mortgage bonds, medium-term notes, Series H due March 2020. In accordance with the redemption provisions of the notes, the redemption included Idaho Power's payment of a make-whole premium to the holders of the redeemed notes in the aggregate amount of $4.6 million. Idaho Power used a portion of the net proceeds from the March 2018 sale of first mortgage bonds, medium-term notes to effect the redemption.

As of September 30, 2018, $280 million in principal amount of long-term debt securities remained available for issuance under a selling agency agreement executed on September 27, 2016, and pursuant to state regulatory authority.

6. COMMON STOCK
 
IDACORP Common Stock
 
During the nine months ended September 30, 2018, IDACORP granted 75,761 restricted stock unit awards to employees and 12,950 shares of common stock to directors but made no original issuances of shares of common stock pursuant to the IDACORP, Inc. 2000 Long-Term Incentive and Compensation Plan. As directed by IDACORP, plan administrators of the IDACORP, Inc. Dividend Reinvestment and Stock Purchase Plan and Idaho Power Company Employee Savings Plan use market purchases of IDACORP common stock, as opposed to original issuance of common stock from IDACORP, to acquire shares of IDACORP common stock for the plans. However, IDACORP may determine at any time to use original issuances of common stock under those plans.

Restrictions on Dividends
 
Idaho Power’s ability to pay dividends on its common stock held by IDACORP and IDACORP’s ability to pay dividends on its common stock are limited to the extent payment of such dividends would violate the covenants in their respective credit facilities or Idaho Power’s Revised Code of Conduct. A covenant under IDACORP’s credit facility and Idaho Power’s credit facility requires IDACORP and Idaho Power to maintain leverage ratios of consolidated indebtedness to consolidated total capitalization, as defined therein, of no more than 65 percent at the end of each fiscal quarter. At September 30, 2018, the

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leverage ratios for IDACORP and Idaho Power were 44 percent and 46 percent, respectively. Based on these restrictions, IDACORP’s and Idaho Power’s dividends were limited to $1.4 billion and $1.2 billion, respectively, at September 30, 2018. There are additional facility covenants, subject to exceptions, that prohibit or restrict the sale or disposition of property without consent and any agreements restricting dividend payments to IDACORP and Idaho Power from any material subsidiary. At September 30, 2018, IDACORP and Idaho Power were in compliance with those financial covenants.
 
Idaho Power’s Revised Code of Conduct relating to transactions between and among Idaho Power, IDACORP, and other affiliates, which was approved by the IPUC in April 2008, provides that Idaho Power will not pay any dividends to IDACORP that will reduce Idaho Power’s common equity capital below 35 percent of its total adjusted capital without IPUC approval. At September 30, 2018, Idaho Power's common equity capital was 54 percent of its total adjusted capital. Further, Idaho Power must obtain approval from the OPUC before it can directly or indirectly loan funds or issue notes or give credit on its books to IDACORP.
 
Idaho Power’s articles of incorporation contain restrictions on the payment of dividends on its common stock if preferred stock dividends are in arrears. As of the date of this report, Idaho Power has no preferred stock outstanding.

In addition to contractual restrictions on the amount and payment of dividends, the FPA prohibits the payment of dividends from "capital accounts." The term "capital account" is undefined in the FPA or its regulations, but Idaho Power does not believe the restriction would limit Idaho Power's ability to pay dividends out of current year earnings or retained earnings.
 
7. EARNINGS PER SHARE

The table below presents the computation of IDACORP’s basic and diluted earnings per share for the three and nine months ended September 30, 2018 and 2017 (in thousands, except for per share amounts).
 
 
Three months ended
September 30,
 
Nine months ended
September 30,
 
 
2018
 
2017
 
2018
 
2017
Numerator:
 
 

 
 

 
 

 
 

Net income attributable to IDACORP, Inc.
 
$
102,231

 
$
90,634

 
$
200,661

 
$
173,567

Denominator:
 
 

 
 

 
 
 
 
Weighted-average common shares outstanding - basic
 
50,434

 
50,362

 
50,431

 
50,361

Effect of dilutive securities
 
131

 
59

 
72

 
47

Weighted-average common shares outstanding - diluted
 
50,565

 
50,421

 
50,503

 
50,408

Basic earnings per share
 
$