UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1994
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-3198
IDAHO POWER COMPANY
(Exact name of registrant as specified in its charter)
Idaho 82-0130980
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
1221 W. Idaho Street, Boise, Idaho 83702-5627
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (208) 383-2200
None
Former name, former address and former fiscal year, if changed since last
report.
Indicate by check mark whether the registrant (1) has 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 registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Number of shares of Common Stock, $2.50 par value, outstanding as of
July 31, 1994 is 37,612,351.
IDAHO POWER COMPANY
Index
Part I. Financial Information: Page No
Item 1. Financial Statements
Consolidated Statements of Income - Three Months,
Six Months and Twelve Months Ended June 30, 1994
and June 30, 1993 3-5
Consolidated Balance Sheets - June 30, 1994
and December 31, 1993 6, 7
Consolidated Statements of Cash Flows -
Six Months and Twelve Months Ended June 30,
1994 and June 30, 1993 8, 9
Consolidated Statements of Capitalization -
June 30, 1994 and December 31, 1993 10
Notes to Consolidated Financial Statements 11-12
Report on Review by Independent Accountants 13
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 14-22
Part II. Other Information:
Item 6. Exhibits and Reports on Form 8-K 23-24
Signatures 25
PART I - FINANCIAL INFORMATION
IDAHO POWER COMPANY
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED JUNE 30, 1994 AND 1993
Item 1. Financial Statements
Three Months Ended
June 30, Increase
1994 1993
(Decrease)
(Thousands of Dollars)
REVENUES (Notes 1 and 4) $128,541 $129,471 $ (930)
EXPENSES (Note 1):
Operation:
Purchased power 19,927 9,872 10,055
Fuel expense 16,588 10,725 5,863
Other 25,167 36,088 (10,921)
Maintenance 11,752 12,151 (399)
Depreciation 15,527 15,492 35
Taxes other than income taxes 5,596 6,163 (567)
Total expenses 94,557 90,491 4,066
INCOME FROM OPERATIONS 33,984 38,980 (4,996)
OTHER INCOME:
Allowance for equity funds used during
construction (Note 2) 388 586 (198)
Other - Net 2,258 2,370 (112)
Total other income 2,646 2,956 (310)
INTEREST CHARGES:
Interest on long-term debt 12,795 14,307 (1,512)
Other interest 570 413 157
Total interest charges 13,365 14,720 (1,355)
Allowance for borrowed funds used
during construction and capitalized
interest (Note 2) (319) (578) 259
Net interest charges 13,046 14,142 (1,096)
INCOME BEFORE INCOME TAXES 23,584 27,794 (4,210)
INCOME TAXES 6,554 9,270 (2,716)
NET INCOME 17,030 18,524 (1,494)
Dividends on preferred stock 1,819 1,318 501
EARNINGS ON COMMON STOCK $ 15,211 $ 17,206 $ (1,995)
AVERAGE COMMON SHARES
OUTSTANDING (000) 37,523 36,566 N/A
Earnings per share of common stock $ 0.41 $ 0.47 $ (0.06)
Dividends paid per share of common stock $ 0.465 $ 0.465 $ -
<FN>
The accompanying notes are an integral part of these statements.
IDAHO POWER COMPANY
CONSOLIDATED STATEMENTS OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 1994 AND 1993
Six Months Ended
June 30, Increase
1994 1993 (Decrease)
(Thousands of Dollars)
REVENUES (Notes 1 and 4) $ 257,351 $ 270,280 $(12,929)
EXPENSES (Note 1):
Operation:
Purchased power 25,140 18,367 6,773
Fuel expense 42,074 36,709 5,365
Other 54,015 71,164 (17,149)
Maintenance 21,794 21,019 775
Depreciation 31,560 30,911 649
Taxes other than income taxes 11,375 11,652 (277)
Total expenses 185,958 189,822 (3,864)
INCOME FROM OPERATIONS 71,393 80,458 (9,065)
OTHER INCOME:
Allowance for equity funds used during
construction (Note 2) 1,114 1,381 (267)
Other - Net 4,788 5,147 (359)
Total other income 5,902 6,528 (626)
INTEREST CHARGES:
Interest on long-term debt 25,590 27,919 (2,329)
Other interest 1,290 721 569
Total interest charges 26,880 28,640 (1,760)
Allowance for borrowed funds used
during construction and capitalized
interest (Note 2) (835) (1,406) 571
Net interest charges 26,045 27,234 (1,189)
INCOME BEFORE INCOME TAXES 51,250 59,752 (8,502)
INCOME TAXES 15,960 19,880 (3,920)
NET INCOME 35,290 39,872 (4,582)
Dividends on preferred stock 3,607 2,663 944
EARNINGS ON COMMON STOCK $ 31,683 $ 37,209 $ (5,526)
AVERAGE COMMON SHARES
OUTSTANDING (000) 37,386 36,452 N/A
Earnings per share of common stock $ 0.85 $ 1.02 $ (0.17)
Dividends paid per share of common stock $ 0.93 $ 0.93 $ -
<FN>
The accompanying notes are an integral part of these statements.
IDAHO POWER COMPANY
CONSOLIDATED STATEMENTS OF INCOME
FOR THE TWELVE MONTHS ENDED JUNE 30, 1994 AND 1993
Twelve Months Ended
June 30, Increase
1994 1993 (Decrease)
(Thousands of Dollars)
REVENUES (Notes 1 and 4) $527,473 $529,264 $ (1,791)
EXPENSES (Note 1):
Operation:
Purchased power 52,134 48,291 3,843
Fuel expense 93,221 91,554 1,667
Other 104,103 123,041 (18,938)
Maintenance 43,911 39,315 4,596
Depreciation 59,373 61,000 (1,627)
Taxes other than income taxes 21,852 22,050 (198)
Total expenses 374,594 385,251 (10,657)
INCOME FROM OPERATIONS 152,879 144,013 8,866
OTHER INCOME:
Allowance for equity funds used during
construction (Note 2) 2,794 2,734 60
Other - Net 9,564 9,948 (384)
Total other income 12,358 12,682 (324)
INTEREST CHARGES:
Interest on long-term debt 51,378 54,958 (3,580)
Other interest 3,317 1,322 1,995
Total interest charges 54,695 56,280 (1,585)
Allowance for borrowed funds used
during construction and capitalized
interest (Note 2) (1,894) (2,651) 757
Net interest charges 52,801 53,629 (828)
INCOME BEFORE INCOME TAXES 112,436 103,066 9,370
INCOME TAXES 32,553 28,976 3,577
NET INCOME 79,883 74,090 5,793
Dividends on preferred stock 6,954 5,355 1,599
EARNINGS ON COMMON STOCK $ 72,929 $ 68,735 $ 4,194
AVERAGE COMMON SHARES
OUTSTANDING (000) 37,141 36,219 N/A
Earnings per share of common stock $ 1.96 $ 1.90 $ 0.06
Dividends paid per share of common stock $ 1.86 $ 1.86 $ -
<FN>
The accompanying notes are an integral part of these statements.
IDAHO POWER COMPANY
CONSOLIDATED BALANCE SHEETS
ASSETS
June 30, December 31,
1994 1993
(Thousands of Dollars)
ELECTRIC PLANT:
In service (at original cost) $2,341,161 $2,249,723
Less accumulated provision for
depreciation 753,093 728,979
In service - Net 1,588,068 1,520,744
Construction work in progress 49,186 92,682
Held for future use 2,958 2,958
Electric plant - Net 1,640,212 1,616,384
INVESTMENTS AND OTHER PROPERTY 19,807 20,772
CURRENT ASSETS:
Cash and cash equivalents 5,659 8,228
Receivables:
Customer 26,965 29,741
Less allowance for uncollectible accounts (1,400) (1,377)
Notes 4,629 5,616
Employee notes receivable 5,752 5,909
Other 4,223 1,858
Accrued unbilled revenues (Note 1) 26,349 25,583
Materials and supplies (at average cost) 24,662 23,372
Fuel stock (at average cost) 10,721 11,553
Prepayments 20,057 20,975
Regulatory assets associated with income taxes 5,572 4,914
Total current assets 133,189 136,372
DEFERRED DEBITS:
American Falls and Milner water rights 32,605 32,755
Company owned life insurance 45,434 45,294
Regulatory assets associated with income taxes 174,359 171,569
Regulatory assets - other 46,613 35,036
Other 39,458 39,235
Total deferred debits 338,469 323,889
TOTAL $2,131,677 $2,097,417
<FN>
The accompanying notes are an integral part of these statements.
IDAHO POWER COMPANY
CONSOLIDATED BALANCE SHEETS
CAPITALIZATION & LIABILITIES
June 30, December 31,
1994 1993
(Thousands of Dollars)
CAPITALIZATION (See Page 10):
Common stock equity - $2.50 par value (shares
authorized 50,000,000; shares outstanding
June 30, 1994 - 37,612,351; December 31,
1993 - 37,085,055) $ 672,891 $ 662,367
Preferred stock 132,544 132,751
Long-term debt (Note 5) 693,643 693,780
Total capitalization 1,499,078 1,488,898
CURRENT LIABILITIES:
Long-term debt due within one year 467 466
Notes payable 20,000 4,000
Accounts payable 29,012 31,912
Taxes accrued 13,934 15,452
Interest accrued 14,824 14,920
Other 12,255 13,731
Total current liabilities 90,492 80,481
DEFERRED CREDITS:
Accumulated deferred investment tax credits 71,543 72,013
Accumulated deferred income taxes 368,083 358,280
Regulatory liabilities associated with income
taxes 34,920 34,968
Regulatory liabilities - other 2,148 4,235
Other 65,413 58,542
Total deferred credits 542,107 528,038
COMMITMENTS AND CONTINGENT LIABILITIES (Note 3)
TOTAL $2,131,677 $2,097,417
<FN>
The accompanying notes are an integral part of these statements.
IDAHO POWER COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1994 AND 1993
Six Months Ended
June 30,
1994 1993
(Thousands of Dollars)
OPERATING ACTIVITIES:
Cash received from operations:
Retail revenues $219,526 $223,086
Wholesale revenues 33,167 43,680
Other revenues 11,276 11,035
Fuel paid (44,577) (37,542)
Purchased power paid (17,486) (22,031)
Other operation & maintenance paid (87,212) (79,039)
Interest paid (includes long and
short-term debt only) (25,860) (30,161)
Income taxes paid (11,750) (17,738)
Taxes other than income taxes paid (8,816) (9,153)
Other operating cash receipts and payments-Net (6,604) (724)
Net cash provided by operating activities 61,664 81,413
FINANCING ACTIVITIES:
First mortgage bonds issued - 158,286
PC bond fund requisitions/other long-term debt - 5,454
Common stock issued 13,398 13,183
Short-term borrowings 16,000 (6,000)
Long-term debt retirement (33) (161,443)
Preferred stock retirement (122) (47)
Dividends on preferred stock (3,658) (2,553)
Dividends on common stock (34,615) (33,771)
Net cash - financing activities (9,030) (26,891)
INVESTING ACTIVITIES:
Additions to utility plant (54,061) (51,244)
Conservation (2,980) (2,938)
Other 1,839 2,280
Net cash - investing activities (55,202) (51,902)
Change in cash and cash equivalents (2,569) 2,620
Cash and cash equivalents beginning of period 8,228 4,966
Cash and cash equivalents end of period $ 5,659 $ 7,586
RECONCILIATION OF NET INCOME TO NET CASH
PROVIDED BY OPERATING ACTIVITIES:
Net Income $ 35,290 $ 39,872
Adjustments to reconcile net income to net cash:
CSPP-Net amortization/(deferral) - (519)
Depreciation 31,560 30,911
Deferred income taxes 6,901 3,321
Investment tax credit-Net (1,119) (374)
Allowance for funds used during construction (1,949) (2,787)
Postretirement benefits funding (excl pensions) (1,280) (625)
Changes in operating assets and liabilities:
Accounts receivable 6,618 7,521
Fuel inventory (2,503) (833)
Accounts payable 7,655 (3,145)
Taxes payable 1,005 1,718
Interest payable 795 (1,599)
Other - Net (21,309) 7,952
Net cash provided by operating activities $ 61,664 $ 81,413
<FN>
The accompanying notes are an integral part of these statements.
IDAHO POWER COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE TWELVE MONTHS ENDED JUNE 30, 1994 AND 1993
Twelve Months Ended
June 30,
1994 1993
(Thousands of Dollars)
OPERATING ACTIVITIES:
Cash received from operations:
Retail revenues $431,065 $444,375
Wholesale revenues 74,212 63,738
Other revenues 23,652 26,530
Fuel paid (90,920) (91,436)
Purchased power paid (45,700) (56,161)
Other operation & maintenance paid (170,186) (153,670)
Interest paid (includes long and
short-term debt only) (52,047) (56,974)
Income taxes paid (26,524) (25,236)
Taxes other than income taxes paid (21,829) (22,364)
Other operating cash receipts and payments-Net 2,265 (4,878)
Net cash provided by operating activities 123,988 123,924
FINANCING ACTIVITIES:
First mortgage bonds issued 29,850 158,286
PC bond fund requisitions/other long-term debt 140 10,947
Common stock issued 26,996 56,981
Preferred stock issued 24,781 -
Short-term borrowings 19,860 -
Long-term debt retirement (30,468) (161,443)
Preferred stock retirement (140) (109)
Dividends on preferred stock (7,020) (5,108)
Dividends on common stock (68,802) (67,101)
Net cash - financing activities (4,803) (7,547)
INVESTING ACTIVITIES:
Additions to utility plant (125,766) (114,283)
Conservation (6,730) (6,187)
Other 11,385 4,802
Net cash - investing activities (121,111) (115,668)
Change in cash and cash equivalents (1,927) 709
Cash and cash equivalents beginning of period 7,586 6,877
Cash and cash equivalents end of period $ 5,659 $ 7,586
RECONCILIATION OF NET INCOME TO NET CASH
PROVIDED BY OPERATING ACTIVITIES:
Net income $ 79,883 $ 74,090
Adjustments to reconcile net income to net cash:
CSPP-Net amortization/(deferral) - (2,672)
Depreciation 59,373 61,000
Deferred income taxes 10,270 5,264
Investment tax credit-Net (2,328) (1,228)
Allowance for funds used during construction (4,688) (5,385)
Postretirement benefits funding (excl pensions) (8,135) (8,673)
Changes in operating assets and liabilities:
Accounts receivable 1,457 5,379
Fuel inventory 2,301 118
Accounts payable 6,433 (5,198)
Taxes payable (1,854) (547)
Interest payable 1,384 (924)
Other - Net (20,108) 2,700
Net cash provided by operating activities $123,988 $123,924
<FN>
The accompanying notes are an integral part of these statements.
IDAHO POWER COMPANY
CONSOLIDATED STATEMENTS OF CAPITALIZATION
June 30, December 31,
1994 1993
(Thousands of Dollars)
COMMON STOCK EQUITY:
Common stock (Note 5) $ 94,031 $ 92,713
Premium on capital stock 363,021 350,882
Capital stock expense (4,129) (4,128)
Retained earnings 219,968 222,900
Total common stock equity 672,891 44.9% 662,367 44.5%
PREFERRED STOCK, cumulative,
($100 par or stated value):
4% preferred stock (authorized 215,000;
shares outstanding: 1994-175,444;
1993-177,506) 17,544 17,751
Serial preferred stock, authorized
150,000 shares:
7.68% Series, outstanding
150,000 shares 15,000 15,000
Serial preferred stock, without
par value, authorized 3,000,000
shares:
8.375% Series (authorized and
outstanding 250,000 shares) 25,000 25,000
Auction Rate Preferred Series A
(authorized and outstanding 500
shares) 50,000 50,000
7.07% Series (authorized and
outstanding 250,000 shares) 25,000 25,000
Total preferred stock 132,544 8.8 132,751 8.9
LONG-TERM DEBT (Note 5):
First mortgage bonds:
5 1/4% Series due 1996 20,000 20,000
5.33 % Series due 1998 30,000 30,000
8.65 % Series due 2000 80,000 80,000
6.40 % Series due 2003 80,000 80,000
8 % Series due 2004 50,000 50,000
9.50% Series due 2021 75,000 75,000
7.50% Series due 2023 80,000 80,000
8 3/4% Series due 2027 50,000 50,000
9.52% Series due 2031 25,000 25,000
Total first mortgage bonds 490,000 490,000
Pollution control revenue bonds:
5.90 % Series due 2003 25,050* 25,050*
6 % Series due 2007 24,000 24,000
7 1/4% Series due 2008 4,360 4,360
7 5/8% Series 1983-1984 due 2013-2014 68,100 68,100
8.30 % Series 1984 due 2014 49,800 49,800
Total pollution control
revenue bonds 171,310 171,310
*Less amount due within one year (400) (400)
Net pollution control revenue bonds 170,910 170,910
REA Notes 1,801 1,834
Less amount due within one year (67) (66)
Net REA Notes 1,734 1,768
American Falls bond guarantee 20,905 21,055
Milner Dam note guarantee 11,700 11,700
Unamortized premium/discount - Net (1,606) (1,653)
Total long-term debt 693,643 46.3 693,780 46.6
TOTAL CAPITALIZATION $1,499,078 100.0% $1,488,898 100.0%
<FN>
The accompanying notes are an integral part of these statements.
IDAHO POWER COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF ACCOUNTING POLICIES:
Financial Statements
In the opinion of the Company, the accompanying unaudited
financial statements contain all adjustments necessary to
present fairly the consolidated financial position as of June
30, 1994 and the consolidated results of operation for the three
months, six months and twelve months ended June 30, 1994 and
1993 and the consolidated cash flows for the six months and
twelve months ended June 30, 1994 and 1993. These condensed
financial statements do not contain the complete detail or
footnote disclosure concerning accounting policies and other
matters which would be included in full year financial
statements and therefore they should be read in conjunction with
the Company's audited financial statements included in the
Company's Annual Report on Form 10-K for the year ended December
31, 1993. The results of operation for the interim periods are
not necessarily indicative of the results to be expected for the
full year.
Principles of Consolidation
The consolidated financial statements include the accounts of
the Company and its wholly-owned subsidiaries, Idaho Energy
Resources Co (IERCo), Idaho Utility Products Company (IUPCO),
IDACORP, INC. and Ida-West Energy Company (Ida-West). All
significant intercompany transactions and balances have been
eliminated in consolidation.
Revenues
In order to match revenues with associated expenses, the Company
accrues unbilled revenues for electric services delivered to
customers but not yet billed at month-end.
Cash Flows
For purposes of reporting cash flows, cash and cash equivalents
include cash on hand and highly liquid temporary investments
with original maturity dates of three months or less.
Reclassifications
Certain items previously reported for periods prior to 1994 have
been reclassified to conform with the current year's
presentation. Net income was not affected by these
reclassifications.
2. ALLOWANCE FOR FUNDS USED DURING CONSTRUCTION (AFDC):
The allowance, a non-cash item, represents the composite
interest costs of debt, shown as a reduction to interest
charges, and a return on equity funds, shown as an addition to
other income, used to finance construction. While cash is not
realized currently from such allowance, it is realized under the
rate making process over the service life of the related
property through increased revenues resulting from higher rate
base and higher depreciation expense. Based on the uniform
formula adopted by the Federal Energy Regulatory Commission, the
Company's weighted average monthly AFDC rate for the six months
ended June 30, 1994, was 9.1 percent and was 9.6 percent for the
entire year of 1993.
3. COMMITMENTS AND CONTINGENT LIABILITIES:
Commitments under contracts and purchase orders relating to the
Company's program for construction and operation of facilities
amounted to approximately $17,700,000 at June 30, 1994. The
commitments are generally revocable by the Company subject to
reimbursement of manufacturers' expenditures incurred and/or
other termination charges.
The Company is party to various legal claims, actions and
complaints, certain of which involve material amounts. Although
the Company is unable to predict with certainty whether or not
it will ultimately be successful in these legal proceedings or,
if not, what the impact might be, based upon the advice of legal
counsel, management presently believes that disposition of these
matters will not have a material adverse effect on the Company's
financial position, results of operations or cash flows.
4. POWER COST ADJUSTMENT:
The Company has in place, in its Idaho jurisdiction, a Power
Cost Adjustment (PCA) mechanism which allows the customer's
rates to be adjusted annually to reflect the Company's
forecasted net power supply costs. Deviations from forecasted
costs are deferred with interest and then adjusted (trued-up) in
the subsequent year. At June 30, 1994, the Company had recorded
$5.3 million of power supply costs above those projected in the
1994 forecast. The current balance is adjusted monthly as
actual conditions are compared to the forecasted net power
supply costs.
5. FINANCING:
(a) Debt:
The Company currently has a $200,000,000 shelf registration
statement which can be used for both First Mortgage Bonds
(including Medium Term Notes) and Preferred Stock.
(b) Stock:
In June 1994, the Company discontinued issuing original issue
shares of its common stock through its Employee Savings,
Dividend Reinvestment and Stock Purchase, and Employee Stock
Ownership Plans. For these plans the shares are purchased on the
open market. During the first six months of 1994, the Company
issued 527,296 original issue shares, producing about $13.4
million in proceeds.
INDEPENDENT ACCOUNTANTS' REPORT
Idaho Power Company
Boise, Idaho
We have reviewed the accompanying consolidated balance sheet and
statement of capitalization of Idaho Power Company and subsidiaries
as of June 30, 1994 and the related consolidated statements of
income for the three-month, six-month and twelve-month periods
ended June 30, 1994 and 1993 and consolidated statements of cash
flows for the six-month and twelve-month periods ended June 30,
1994 and 1993. These financial statements are the responsibility
of the Company's management.
We conducted our review in accordance with standards established by
the American Institute of Certified Public Accountants. A review of
interim financial information consists principally of applying
analytical procedures to financial data and making inquiries of
persons responsible for financial and accounting matters. It is
substantially less in scope than an audit in accordance with
generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements
taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications
that should be made to such consolidated financial statements for
them to be in conformity with generally accepted accounting
principles.
We have previously audited, in accordance with generally accepted
auditing standards, the consolidated balance sheet and statement of
capitalization of Idaho Power Company and subsidiaries as of
December 31, 1993 and the related consolidated statements of
income, retained earnings, and cash flows for the year then ended
(not presented herein), and in our report dated January 31, 1994,
we expressed an unqualified opinion on those consolidated financial
statements (which includes an explanatory paragraph relating to a
change in the Company's method of accounting for income taxes and
postretirement benefits in the year ended December 31, 1993). In
our opinion, the information set forth in the accompanying
consolidated balance sheet and statement of capitalization as of
December 31, 1993 is fairly stated, in all material respects, in
relation to the consolidated balance sheet and statement of
capitalization from which it has been derived.
DELOITTE & TOUCHE
Portland, Oregon
July 29, 1994
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion relates to Idaho Power Company and its
four consolidated, wholly-owned subsidiaries: Idaho Energy
Resources Company (IERCo), Ida-West Energy Company (Ida-West),
IDACORP, Inc., and Idaho Utility Products Company (IUPCO). Idaho
Power Company and its subsidiaries are collectively referred to
here as the Company.
Because the Company is primarily a hydroelectric utility, its
operational results, like those of other utilities in the
Northwest, are significantly affected by weather and streamflow
conditions. In addition, the amount of energy used by general
business consumers varies from season to season - and from month to
month within each season - due primarily to seasonal weather. Non-
firm (or off-system) energy sales also vary, by quarters and by
years, as a result of hydro conditions and energy demand from other
utilities. Finally, operating costs fluctuate during periods when
reduced hydroelectric generating capability or strong non-firm
energy market conditions increase the Company's reliance on thermal
generation or purchases of power from other utilities. The
Company's Power Cost Adjustment (PCA) mechanism, approved by the
Idaho Public Utilities Commission (IPUC) and implemented in 1993,
includes a major portion of those operating expenses that have the
greatest potential for variation. When the PCA is fully implemented
in Idaho, the Company's operating and earnings per share results
will be more closely aligned with general regulatory, economic, and
temperature-related weather conditions, and will be less dependent
on variable precipitation and streamflow conditions.1
Earnings Per Share
Earnings per share of common stock were $.41 for the quarter, a
decrease of $.06 (or 12.8 percent) from the same quarter last year.
Year-to-date, earnings per share were $.85, a decrease of $.17
(16.7 percent), and the twelve months ended June 30, 1994 showed
earnings of $1.96 per share, an increase of $.06 (3.2 percent). The
twelve-month earnings represent a 10.8 percent earned return on
year-end (June 30) common equity, compared to last year's 10.7
percent return. The Board of Directors reaffirmed the dividend at
$0.465 per share ($1.86 annually). In the Company's current rate
filing, the allowed return on equity, among other things, will be
subject to review. Allowed returns on common equity granted
nationally have declined over the last few years as a result of a
lower interest rate environment. This has created a contrast for
some utilities with dividend payout levels set during periods of
higher allowed returns. The Company has requested an allowed return
on equity above its present dividend yield on year-end book value
sufficient to provide, among other things, current earnings to
cover dividend payments, but cannot predict the final outcome of
such rate proceedings.
RESULTS OF OPERATIONS
Precipitation and Streamflows
The Company's service territory continued to experience lower than
normal precipitation and higher than normal temperatures during the
second quarter. As of June 1, 1994, reservoir storage above
Brownlee Reservoir (water source for the Hells Canyon hydroelectric
complex) was at 81 percent of capacity and 79 percent of average,
compared to 90 percent of capacity at this time last year. Given
the present precipitation, storage, and ground water conditions,
the Company expects streamflows into Brownlee to be 2.8 million
acre-feet (MAF) for the April-July period (which includes flow
augmentation for the downstream migration of anadromous fish),
approximately 52 percent of the 65-year median amount of 4.8 MAF.
These conditions mirror the drought years of 1990, 1991 and 1992
and that have continued to plague the Company's service territory
seven out of the last eight years.
Energy Requirements
For the first six months of 1994, the Company's total energy
requirements were met by hydro generation (46 percent), thermal
generation (44 percent), and purchased power and other interchanges
(10 percent). During the same period of 1993, these percentages
were: 60 percent hydro, 34 percent thermal, and 6 percent purchased
power and other interchanges. With precipitation and streamflows
below normal, the Company estimates that it will derive 43 percent
of its total 1994 energy requirements from hydro generation, 46
percent from thermal generation, and 11 percent from purchased
power and other interchanges. Under normal conditions, these
percentages would be closer to 58 percent hydro, 36 percent
thermal, and 6 percent purchased power and other interchanges.
Power Cost Adjustment
The Company's PCA mechanism currently allows it to collect, or
refund, 60 percent of the difference between actual net power
supply costs and those allowed in the Company's Idaho base rates.
Deviations from forecasted costs are deferred with interest and
trued up the following year. At June 30, 1994, the Company had
recorded $5.3 million of power supply costs above those projected
in the 1994 forecast. This current balance will be adjusted monthly
as actual conditions are compared to the forecasted net power
supply costs. The final cumulative amount will be included in the
1995 true-up adjustment. Once the Company's pending general revenue
requirement case is resolved, the PCA will be raised to 90 percent
of net power supply cost deviations. The Company filed its 1994 PCA
application on April 15, 1994, requesting an increase in base rates
for the Idaho jurisdiction. The approved increase over last year's
PCA adjustment (in effect from May 16, 1994 through May 15, 1995)
is approximately $9.8 million, or 2.5 percent. This figure includes
last year's true-up and other adjustments.
Revenues
General business revenues were up for both the quarter ($12.2
million or 12.2 percent), and the first six months of 1994 ($1.2
million or 0.6 percent), but were lower for the twelve months
ending June 30, 1994 ($7.0 million or 1.6 percent).
The quarterly increase reflects a $10.2 million (59.9 percent)
increase in irrigation sales over 1993 sales, as well as an
increase in the number of customers served in the small commercial
class. Large industrial loads were about the same, even with
reduced demand caused by changes in operations at FMC Corporation.
The total number of general business customers served rose by
11,972, a 3.8 percent increase over the same period last year.
Some of the same factors also account for the year-to-date increase
in revenues, including increased 1994 irrigation loads caused by
below normal spring precipitation and warmer summer temperatures.
Milder temperatures earlier in the period dampened this increase in
revenues by reducing residential loads for heating and cooling. The
increase in general business customers also helped to account for
the year-to-date revenue increase.
The reduction in revenues for the twelve-month period reflects
again both reduced residential energy demands caused by variations
in weather, and the operational changes at FMC. Revenue results of
all three periods were affected by two regulatory developments.
First, the temporary, one-year drought-related rate relief approved
by the IPUC in May 1992 expired last year. Second, the PCA was
implemented in May 1993. Together, these two regulatory
developments produced a net reduction in revenues.
Earthquake damage to a central delivery point in California
prevented delivery to a firm wholesale customer. As a result, firm
sales declined slightly for the quarter. Even so, firm sales rose
$6.2 million and $12.4 million for the year-to-date and the twelve
months respectively, due to the addition of two firm contracts
signed during 1993. Surplus sales were down $14.2 million during
the second quarter, $21.8 million year-to-date, and $9.0 million
for the twelve-month period. These decreases can be traced to less
favorable hydro generation as compared to the improved hydro
generation conditions experienced during 1993.
When compared to the corresponding periods a year ago, total
operating revenues declined $0.9 million (0.7 percent) for the
second quarter of 1994, $12.9 million (4.8 percent) year-to-date,
and $1.8 million (0.3 percent) for the twelve months ended June 30,
1994.
General Revenue Requirement Case
On June 30, 1994, the Company filed a general revenue requirement
rate case with the IPUC. The proposed $37.05 million increase in
annual revenues translates to an average 9.09 percent rise in
customer rates. This filing is the Company's first requested
general rate increase since 1985, and will bring all of the
Company's cost components to a current level in response to
concerns expressed by the IPUC and various customer groups in
recent regulatory proceedings.
The Company is requesting a 12.5 percent return on common equity
applied to a 45 percent common equity component. In addition, this
request will update the base net power supply cost components
included in the PCA. When the IPUC issues a revenue requirement
order on the permanent rate request, the PCA mechanism will be
increased from the current 60 percent to 90 percent.
Since the IPUC typically suspends requests for permanent rate
increases to allow for public hearings, the Company has asked that
a portion of the proposed increase be granted as interim relief.
This interim request for an $11.5 million increase in its revenue
requirement (a 2.83 percent uniform rate increase) was proposed to
take effect August 1, 1994, allowing the Company to begin
recovering its investment in the Swan Falls Power Plant expansion
and the new construction at Milner Power Plant. Both facilities are
now in operation. The IPUC suspended the August 1, 1994 date and
held a hearing on August 2, 1994 for the interim request.
In addition, the Company filed for temporary drought rate relief
with the Oregon Public Utilities Commission (OPUC). The OPUC issued
an accounting order that grants the Company permission to begin
deferring, with interest, 60 percent of Oregon's share in the
Company's increased power supply costs incurred between May 13,
1994 and December 31, 1994. After the close of 1994 the Company is
required to file its deferred amount amortization proposal with the
OPUC.
Expenses
Total operating expenses were up $4.1 million (4.5 percent) for the
quarter, down $3.9 million (2.0 percent) year-to-date, and down
$10.7 million (2.8 percent) for the twelve months ended June 30,
1994
Purchased power and fuel expenses were higher for the three-, six-,
and twelve-month periods. These increases reflect poor hydro
conditions that increased the Company's reliance on thermal
generation and purchased power to meet customer demand. All other
operation and maintenance expenses were down $11.3 million for the
second quarter, $16.4 million year-to-date, and $14.3 million for
the twelve-month period. These decreases reflect the change as the
Company went from lower PCA costs in 1993 (due to better hydro
conditions) to higher PCA costs in 1994 (due to the return of
drought conditions). Deferral of deviations from forecasted costs
increased expenses in 1993, while lowering them in 1994. The
decrease was offset somewhat by increases in certain regulatory
commission and employee payroll and benefit expenses. Depreciation
expense increased as a result of greater plant investment.
Total interest expense decreased $1.4 million, $1.8 million, and
$1.6 million for the three-, six-, and twelve-month periods
respectively. Refinancing during 1993 reduced long-term interest
expense, while tax settlements with the Internal Revenue Service
increased other interest expenses. Income taxes decreased for the
three- and six-month periods, but increased for the twelve months
ended June 30, 1994 as a result of changes in pre-tax income.
Ida-West
This wholly-owned subsidiary of the Company owns, through various
partnerships, 50 percent of five Idaho hydroelectric projects with
a total generating capacity of approximately 34 megawatts (MW). All
of these projects are operated by various Ida-West subsidiaries.
Third parties unaffiliated with Ida-West own the remaining 50
percent of these projects, thus satisfying "qualifying facility"
status under PURPA guidelines. The partnerships have obtained
project financing (non-recourse to the Company) for each of these
facilities.
As a part of its Resource Contingency Program, the Bonneville Power
Administration (BPA) requested proposals to provide up to 800
average megawatts of energy options. Ida-West, along with two
partners, submitted a proposal for a 227 megawatt gas-fired
cogeneration project to be located near Hermiston, Oregon. This
proposed project was one of ten under final consideration by BPA.
On June 4, 1993, BPA selected three projects - including that of
the partnership - for participation in the program. The partnership
and BPA signed an option development agreement granting BPA an
option to acquire energy and capacity from the project any time
during a five-year option hold period after all option development
period tasks, including permitting, have been completed. The option
also entitles the partnership to BPA reimbursement for certain
development costs, based on achievement of certain milestones. This
option includes an exclusive right to acquire energy and capacity
from a second 233 megawatt unit at the site during the same five-
year option hold period. In March 1994, BPA and the partnership
reached an additional agreement on the power purchase contract,
setting forth the terms and conditions on which BPA will purchase
energy and capacity from the project upon exercise of the option.
The partnership expects to complete development period tasks by
year-end 1995. Project financing for construction costs would be
non-recourse to the Company.
The Company's total cash investment in Ida-West is $20 million. Ida-
West continues an active search for new projects.
LIQUIDITY AND CAPITAL RESOURCES
Cash Flow
Net cash generation from operations was $61.7 million for the first
six months of 1994. After deducting common and preferred dividends,
net cash generation from operations provided approximately $23.4
million for the Company's construction program and other capital
requirements. This was a 48.1 percent decrease from the same period
of 1993.
Cash Expenditures
At present, the Company estimates that its cash construction
program for 1994 will require approximately $114.0 million.
Generating facilities account for about 33 percent of total
required cash funds, transmission for 14 percent, distribution for
39 percent, and general plant and equipment for the balance. This
estimate is subject to revision in light of changing economic,
regulatory, and environmental factors and conservation policies.
Year-to-date, the Company has expended approximately $57.0 million
for construction and conservation.
The Company's primary financial commitments and obligations are
related to contracts and purchase orders for the ongoing
construction program. They are expected to be financed with both
internally-generated funds and externally-financed capital to the
extent required. Although the Company has regulatory approval to
incur up to $150 million of bank borrowings, it presently maintains
lines of credit aggregating $70 million with various banks. These
lines of credit may be used to finance a portion of the
construction program on an interim basis. At June 30, 1994, the
Company had $5.1 million of temporary cash investments and
short-term borrowings of $20.0 million.
Financing Program
In June 1994, the Company discontinued issuing original issue
shares of its common stock through its Employee Savings, Dividend
Reinvestment and Stock Purchase, and Employee Stock Ownership
Plans. For these plans the shares are purchased on the open market.
During the first six months of 1994, the Company issued 527,296
original issue shares, producing about $13.4 million in proceeds.
In addition, the Company has on file a shelf registration statement
for the issuance of first mortgage bonds and/or preferred stock
with a total aggregate principal amount not to exceed $200 million.
The Company's current objective is to maintain capitalization
ratios of approximately 45 percent common equity, 8 to 10 percent
preferred stock, and the balance in long-term debt. Its strategy is
to achieve this target structure through accumulated earnings and
issuance of new equity. The Company continues to explore cost
savings through the economic refunding of current outstanding
issues. For the twelve months ended June 30, 1994, the Company's
consolidated pre-tax interest coverage was 3.06 times.
Construction Program
In early spring, the Company completed testing of the Swan Falls
Project, and both units were declared available for commercial
operation. Additional work to preserve the old power plant as an
historical site will be completed by the end of the year. Expansion
of the Twin Falls Project continues, with completion estimated for
mid-1995. Revised total cash expenditures for the Twin Falls
expansion are currently estimated at $39.6 million, with total
construction costs at $42.4 million, including an allowance for
funds used during construction. When completed, this project will
add 43 MW of new capacity to the Company's generation system.
In addition, the Company continues to explore the economic
feasibility of constructing the Southwest Intertie Project. The
Bureau of Land Management is expected to approve the Final
Environmental Impact Statement/Proposed Plan Amendment during the
third or fourth quarter of 1994. The Company has begun negotiations
with various utilities and electric providers for financial
participation in the project, with the intention of retaining up to
a 20 percent ownership in the line.
Competition
Competition is increasing in the electric utility industry, due to
a variety of regulatory, economic, and technological developments.
In response, the Company continues to review and proceed with a
strategic planning process designed to anticipate and fully
integrate into Company operations any legislative, regulatory,
environmental, competitive, or technological changes. With its low
energy production costs, the Company is well-positioned to succeed
in a more competitive environment and is taking action to preserve
its competitive advantage.
In September 1993, the Company submitted a detailed position paper
to its state regulators and other interested parties. This report
outlined proposed changes in the Company's resource acquisition
policy. With the potential deregulation of the electric utility
industry, and a more competitive power supply marketplace, the
Company believes that current resource acquisition policies must be
changed to avoid burdening it and its customers with unnecessary
future power supply costs. The Company believes that the
appropriate criteria for adding future supplies should be power
needs at the time of development and that the addition be the
least-cost market alternative. Therefore, the Company filed with
the IPUC in December 1993 for permission to approve lower prices
for new cogeneration and small power production (CSPP) contracts.
The IPUC found that there was good reason to believe that current
Idaho CSPP purchase rates too high and that rates contained in new
CSPP contracts would be subject to revision based on its final
outcome. The IPUC has scheduled a second pre-hearing conference in
mid-August to set schedules for hearings in this case.
Rosebud Enterprises, Inc. (Rosebud) filed a Complaint against the
Company with the IPUC, alleging that the Company refused to sign a
contract to purchase the output of a 40 MW petroleum waste-fired
generating plant that Rosebud proposes to build near Mountain Home,
Idaho. Because this facility, known as the Mountain Home Project,
is larger than 10 MW, the IPUC's established rates for small CSPP
projects are not available to Rosebud. On April 20, 1994, the IPUC
issued an Order clarifying the parameters for further negotiations
and detailing resolution procedures if the parties cannot agree on
a mutually acceptable purchase price.
On March 29, 1994 the Company filed an application with the IPUC
seeking approval of its proposed cancellation of a January 22, 1993
Firm Energy Sales Agreement (FESA) with Meridian Generating
Company, L.P. (MGC). The FESA was a 25-year agreement with MGC for
a 54 MW natural gas-fired combined cycle cogeneration facility
located in Meridian, Idaho. On June 3, 1994, the IPUC approved the
buyout and cancellation of the FESA. The Company estimates that the
revenue requirement savings, including cancellation charges paid to
MGC, are between $130 to $170 million.
Salmon Recovery Plan
Work continues on the development of a comprehensive and
scientifically credible plan to ensure the long-term survival of
anadromous fish runs on the Columbia and Lower Snake Rivers. The
Company fully supports and actively participates in this regional
effort.
The Snake River Salmon Recovery Team submitted its Draft Recovery
Plan (Draft Plan) to the National Marine Fisheries Service (NMFS),
detailing its recommendations for restoring the listed Snake River
salmon runs. After reviewing the 500-page report, the Company
believes that the proposed course of action, if fully implemented,
could lead to a successful recovery. The Draft Plan details
comments regarding some institutional changes and responsibility
for management of recovery efforts. It suggests reductions in ocean
and in-river harvest rates, calls for significant improvements in
transportation and collection systems, supports flow augmentation
and habitat improvements, calls for a test drawdown of Lower
Granite Reservoir on the Snake River, and suggests habitat,
hatchery and predation improvements. The Company is closely
monitoring the finalization of this Draft Plan, due to be released
in 1994.
Pending completion of a final recovery plan by the NMFS, the U.S.
Army Corps of Engineers and other governmental agencies operating
federally-owned dams and reservoirs on the Snake and Columbia
Rivers have consulted the NMFS each year regarding federal system
operations. On March 28, 1994, Judge Malcolm Marsh of the U.S.
District Court for the District of Oregon ordered the federal
agencies to reinitiate the consultation completed for 1993
operations of the federal system. Judge Marsh concluded that the
consultations and subsequent operations were "...too heavily geared
towards a status quo that has allowed all forms of river activity
to proceed..." at the expense of fish. Although the Company
coordinates its operations to aid the federal agencies with their
salmon recovery efforts, neither the Company nor the operation of
any of its facilities were directly involved in the litigation. It
is possible that the court-ordered re-consultation could lead to
operational changes for Company facilities in 1994. At this time,
however, the Company cannot assess the impacts, if any, that might
occur as a result of any such changes.
It also is possible that the final recovery plan could have a
material impact on the Company, as well as every other person,
community and industry in the Northwest that depends on the Snake
and Columbia Rivers. The Company hopes that anadromous fish runs
can be restored to the level demanded by society without placing
undue hardship on either the Company or those who benefit from its
service.
Relicensing
The Company is vigorously pursuing the relicensing of its
hydroelectric projects, a process that will continue for the next
10 to 15 years. Although various federal requirements and issues
must be resolved through the relicensing process, the Company
anticipates that its efforts will be successful. At this point,
however, the Company cannot predict what type of environmental or
operational requirements it may face, nor can it estimate the
eventual cost of relicensing.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
File
Exhibit Number As Exhibit
*4(a) 2-3413 B-2 - Mortgage and Deed of
Trust, dated as of October 1, 1937,
between the Company and Bankers Trust
Company and R. G. Page, as Trustees.
*4(b) - Supplemental Indentures to
Mortgage and Deed of Trust:
Number Dated
1-MD B-2-a First July 1, 1939
2-5395 7-a-3 Second November 15, 1943
2-7237 7-a-4 Third February 1, 1947
2-7502 7-a-5 Fourth May 1, 1948
2-8398 7-a-6 Fifth November 1, 1949
2-8973 7-a-7 Sixth October 1, 1951
2-12941 2-C-8 Seventh January 1, 1957
2-13688 4-J Eighth July 15, 1957
2-13689 4-K Ninth November 15, 1957
2-14245 4-L Tenth April 1, 1958
2-14366 2-L Eleventh October 15, 1958
2-14935 4-N Twelfth May 15, 1959
2-18976 4-O Thirteenth November 15, 1960
2-18977 4-Q Fourteenth November 1, 1961
2-22988 4-B-16 Fifteenth September 15, 1964
2-24578 4-B-17 Sixteenth April 1, 1966
2-25479 4-B-18 Seventeenth October 1, 1966
2-45260 2(c) Eighteenth September 1, 1972
2-49854 2(c) Nineteenth January 15, 1974
2-51762 2(c)(i) Twentieth August 1, 1974
2-51722 2(c)(ii) Twenty-first October 15, 1974
2-57374 2(c) Twenty-second November 15, 1976
2-62035 2(c) Twenty-third August 15, 1978
33-34222 4(d)(iii) Twenty-fourth September 1, 1979
33-34222 4(d)(iv) Twenty-fifth November 1, 1981
33-34222 4(d)(v) Twenty-sixth May 1, 1982
33-34222 4(d)(vi) Twenty-seventh May 1, 1986
33-00440 4(c)(iv) Twenty-eighth June 30, 1989
33-34222 4(d)(vii) Twenty-ninth January 1, 1990
33-65720 4(d)(iii) Thirtieth January 1, 1991
33-65720 4(d)(iv) Thirty-first August 15, 1991
33-65720 4(d)(v) Thirty-second March 15, 1992
33-65720 4(d)(vi) Thirty-third April 1, 1993
1-3198 4 Thirty-fourth December 1, 1993
Form 8-K
Dated
12/17/93
12 - Ratio of Earnings to Fixed Charges.
12(a) - Supplemental Ratio of Earnings to
Fixed Charges.
12(b) - Ratio of Earnings to Combined Fixed
Charges and Preferred Dividend
Requirements.
12(c) - Supplemental Ratio of Earnings to
Combined Fixed Charges and Preferred
Dividend Requirements.
15 - Letter re: unaudited interim
financial information.
27 - Financial Data Schedule
(b) Reports on Form 8-K. No reports on Form 8-K were filed
for the three months ended June 30, 1994.
*Previously Filed and Incorporated Herein By Reference.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
IDAHO POWER COMPANY
(Registrant)
Date August 5, 1994 By: /s/ J LaMont Keen
J LaMont Keen
Vice President and
Chief Financial Officer
(Principal Financial Officer)
Date August 5, 1994 By: /s/ Harold J Hochhalter
Harold J Hochhalter
Controller
(Principal Accounting Officer)