20250530Direct Thompson.pdf

RECEIVED
May 30, 2025
IDAHO PUBLIC
UTILITIES COMMISSION
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION )
OF IDAHO POWER COMPANY FOR ) CASE NO. IPC-E-25-16
AUTHORITY TO INCREASE ITS RATES )
AND CHARGES FOR ELECTRIC SERVICE )
IN THE STATE OF IDAHO AND )
AUTHORITY TO IMPLEMENT CERTAIN )
MEASURES TO MITIGATE THE IMPACT )
OF REGULATORY LAG. )
IDAHO POWER COMPANY
DIRECT TESTIMONY
OF
DR. JOHN THOMPSON

TABLE OF CONTENTS
I . INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
II . Return on equity for Idaho Power . . . . . . . . . . . . . . . . . . . . . 4
A. Importance of Financial Strength . . . . . . . . . . . . . . . . . . . 5
B. Conclusions and Recommendations . . . . . . . . . . . . . . . . . . . . 8
III . Economic principles and regulatory standards . . . . . . 10
A. Economic Principles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
B. Regulatory Standards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
C. Practical Considerations . . . . . . . . . . . . . . . . . . . . . . . . . . 17
IV. fundamental analyses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
A. Idaho Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
B. Utility Group Selection . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
C. Relative Risks of the Utility Group and Idaho Power29
i . Operating Risks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
ii . Financial Risks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
iii . Regulatory Mechanisms . . . . . . . . . . . . . . . . . . . . . . . . . . 39
V. Capital Market Estimates . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
A. Outlook for Capital Costs . . . . . . . . . . . . . . . . . . . . . . . . . 43
B. Discounted Cash Flow Analysis . . . . . . . . . . . . . . . . . . . . . 50
C . Capital Asset Pricing Model . . . . . . . . . . . . . . . . . . . . . . . 60
D. Utility Risk Premium . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
E . Flotation Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
F. Recommended ROE for Idaho Power . . . . . . . . . . . . . . . . . . . 77
VI . Benchmark Analyses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
VII . Capital Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
EXHIBIT DESCRIPTION
5 ROE Analysis—Summary of Results
6 Regulatory Mechanisms—Utility Group
7 DCF Model—Utility Group
8 br + sv Growth Rate
9 CAPM
10 Utility Risk Premium
11 Flotation Cost Study
12 Expected Earnings Benchmark
13 DCF Model—Non-Utility Group
14 Capital Structure

1 I . INTRODUCTION
2 Q. Please state your name and business address .
3 A. John S . Thompson, 2020 Sager Drive, Austin,
4 Texas, 78741 .
5 Q. In what capacity are you employed?
6 A. I am Principal at Thompson Advisory, LLC, a firm
7 providing financial and economic consulting services .
8 Q. Please describe your educational background and
9 qualifications .
10 A. I hold a Ph. D. in Economics and a B. S . in
11 Accounting, and have been consulting for approximately twelve
12 years, including at the firms Thompson Advisory, LLC; FINCAP,
13 Inc. ; EmployStats and Econ One Research. I consult and sponsor
14 testimony in the regulated utility sector on financial topics
15 such as cost of capital, which require the application of
16 financial models in order to estimate reasonable returns on
17 equity for regulated utilities . I have performed quantitative
18 analyses, critiqued other experts' analyses, prepared written
19 testimony, and given oral testimony in numerous state and
20 federal cases . Previously, I taught for approximately
21 seventeen years at the university level, most recently in the
22 McCombs School of Business and the Department of Economics at
23 the University of Texas, where I taught in the MBA and
24 Executive MBA programs . As part of this teaching, I lectured
25 on economic topics including revenue and cost structure,
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I contribution margins, market structure and competition,
2 opportunity cost and economic profits; financial topics such
3 as risk and return, discounted cash flows, discount rates and
4 the cost of capital; and statistical and econometric topics
5 such as sampling, OLS regression, and econometric modeling. I
6 also taught undergraduates and MBAs in the Krannert School of
7 Management at Purdue University.
8 Q. What is the purpose of your direct testimony in
9 this case?
10 A. The purpose of my testimony is to present to the
11 Idaho Public Utilities Commission ("IPUC" or "Commission") my
12 independent assessment of the just and reasonable return on
13 equity ("ROE") for the jurisdictional utility operations of
14 Idaho Power Company ("Idaho Power" or the "Company") . In
15 addition, I also examine the reasonableness of Idaho Power' s
16 common equity ratio, considering both the specific risks faced
17 by the Company and other industry guidelines .
18 Q. Please summarize the information and materials
19 you rely on to support the opinions and conclusions contained
20 in your testimony.
21 A. To prepare my testimony, I use information from
22 a variety of sources that would normally be relied upon by a
23 person in my capacity. I am familiar with the organization,
24 finances, and operations of Idaho Power based on discussions
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1 with Company personnel and my review of documents related to
2 Idaho Power.
3 In connection with this filing, I consider and rely
4 upon corporate disclosures, publicly available financial
5 reports and filings, and other published information relating
6 to the Company. I also review information relating generally
7 to capital market conditions and specifically to investor
8 perceptions, requirements and expectations for utilities .
9 These sources, coupled with my experience in the fields of
10 finance, economics and utility regulation, have given me a
11 working knowledge of the issues relevant to investors'
12 required return for Idaho Power, and they form the basis of my
13 analyses and conclusions .
14 Q. How is your testimony organized?
15 A. After summarizing my findings and conclusions, I
16 discuss important economic and legal foundations that are
17 relevant to my analyses . I then briefly review Idaho Power' s
18 operations and finances . Next, I explain the development of
19 the proxy group of electric utilities that I use as the basis
20 for my quantitative analyses, followed by an evaluation of the
21 Company' s relative risks . I then discuss current conditions
22 in the capital markets and their implications in evaluating a
23 just and reasonable return for Idaho Power. With this as a
24 background, I discuss well-accepted quantitative analyses to
25 estimate the current cost of equity for the proxy group of
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1 utilities . These include the Discounted Cash Flow ("DCF")
2 model, the Capital Asset Pricing Model ("CAPM") , and an equity
3 risk premium approach based on allowed equity returns, which
4 are all methods that are commonly relied on in regulatory
5 proceedings . I then discuss Idaho Power' s requested ROE in
6 the context of my findings, and I conclude that an ROE range
7 of 10 . 2 percent to 11 . 2 percent is just and reasonable for
8 Idaho Power in today' s capital markets .' This determination
9 takes into account the specific risks for the Company' s
10 utility operations in Idaho and their requirements for
11 financial strength. I then corroborate the results of my
12 utility quantitative analyses with reference to an expected
13 earnings benchmark. Further, consistent with the fact that
14 utilities must compete for capital with firms outside their
15 own industry, I apply the DCF model to a group of low-risk
16 non-utility firms, which serves as an additional benchmark.
17 My testimony concludes with a discussion of capital structure .
18 II . RETURN ON EQUITY FOR IDAHO POWER
19 Q. What is the purpose of this section?
20 A. This section summarizes the findings supporting
21 my conclusion that a just and reasonable estimate of
22 investors' required rate of return on equity for Idaho Power' s
23 electric utility operations is in a range of 10 . 2 percent to
1 This reasonable range includes a 9 basis point adjustment to account for
flotation costs.
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1 11 .2 percent. This section also discusses the relationship
2 between the ROE and preservation of a utility' s financial
3 integrity and the ability to attract capital .
4 A. Importance of Financial Strength
5 Q. Throughout your testimony you refer repeatedly
6 to the concepts of "financial strength, " "financial
7 integrity, " and "financial flexibility. " would you briefly
8 describe what you mean by these terms?
9 A. These terms are generally synonymous and refer
10 to the utility' s ability to attract and retain the capital
11 that is necessary to provide service at reasonable cost,
12 consistent with the U. S . Supreme Court standards . Idaho Power
13 continues to make capital investments to preserve and enhance
14 service reliability for its customers . The Company must
15 generate adequate cash flow from operations to fund these
16 requirements and for repayment of maturing debt, together with
17 access to capital from external sources under reasonable
18 terms, on a sustainable basis .
19 Rating agencies and potential debt investors tend to
20 place significant emphasis on maintaining strong financial
21 metrics and credit ratings that support access to debt capital
22 markets under reasonable terms . This emphasis on financial
23 metrics and credit ratings is shared by equity investors who
24 also focus on cash flows, capital structure and liquidity,
25 much like debt investors . Investors understand the important
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1 role that a supportive regulatory environment plays in
2 establishing a sound financial profile that will permit the
3 utility access to debt and equity capital markets on
4 reasonable terms in both favorable financial markets and
5 during times of potential disruption and crisis .
6 Q. What part does regulation play in ensuring that
7 Idaho Power has access to capital under reasonable terms and
8 on a sustainable basis?
9 A. Regulatory signals are a major driver of
10 investors' risk assessment for utilities . Investors recognize
11 that constructive regulation is a key ingredient in supporting
12 utility credit ratings and financial integrity. Security
13 analysts study commission orders and regulatory policy
14 statements to advise investors about where to put their money.
15 As Moody' s noted, "The regulatory framework is important
16 because it provides the basis for decisions that affect
17 utilities, including rate-setting as well as consistency and
18 predictability of regulatory decision-making. "2 Similarly,
19 S&P observed that, "Regulatory advantage is the most heavily
20 weighted factor when S&P Global Ratings analyzes a regulated
21 utility' s business risk profile. "3 More recently, S&P
22 confirmed that " [u] tility regulation, no matter where on the
2 Moody's Investors Service, Rating Methodology, Regulated Electric and Gas
Utilities (Aug. 6, 2024) .
3 S&P Global Ratings, Assessing U.S. Investors-Owned Utility Regulatory
Environments, RatingsExpress (Aug. 10, 2016) .
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I continuum of our assessments, strengthens a utility' s business
2 risk profile, and generally underpins our ratings . 114 The
3 Value Line Investment Survey ("Value Line") summarizes these
4 sentiments :
5 As we often point out, the most important
6 factor in any utility' s success, whether it
7 provides electricity, gas, or water, is the
8 regulatory climate in which it operates .
9 Harsh regulatory conditions can make it nearly
10 impossible for the best run utilities to earn
11 a reasonable return on their investment. 5
12 In addition, the ROE set by regulators impacts investor
13 confidence in the jurisdictional utility, which ultimately
14 impacts its ability to raise common equity capital from
15 investors .
16 Q. Do customers benefit when a utility' s financial
17 flexibility is enhanced?
18 A. Yes . Providing a ROE that is sufficient to
19 maintain the Company' s ability to attract capital under
20 reasonable terms, even in times of financial and market
21 stress, is not only consistent with the economic requirements
22 embodied in the U. S . Supreme Court' s Hope and Bluefield
23 decisions, it is also in customers' best interests .
24 Regulatory policies that support the utility' s financial
25 strength ultimately benefit customers through lower interest
4 S&P Global Ratings, North American Utility Regulatory Jurisdictions: Some
Notable Developments (Nov. 10, 2023) .
5 Value Line Investment Survey, Water Utility Industry (Jan. 13, 2017) at
p. 1780.
THOMPSON, DI 7
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I rates on debt securities and by maintaining the liquidity
2 required to ensure safe and reliable service .
3 B. Conclusions and Recommendations
4 Q. What are your findings regarding the fair ROE
5 for Idaho Power?
6 A. Considering the economic requirements necessary
7 to support continuous access to capital under reasonable terms
8 and the results of my analysis, I recommend a 10 . 2 percent to
9 11 .2 percent reasonable ROE range for Idaho Power' s electric
10 utility operations, with a midpoint of 10 . 7 percent, which is
11 consistent with the case-specific evidence presented in my
12 testimony. With this in mind, I consider Idaho Power' s
13 requested ROE of 10 . 4 percent to be conservative .
14 Q. How did you reach that conclusion?
15 A. In order to reflect the risks and prospects
16 associated with Idaho Power' s electric utility operations, my
17 analyses focus on a comparable risk proxy group of nineteen
18 other electric utilities .
19 • Because investors' required ROE is
20 unobservable and no single method should be
21 viewed in isolation, I apply the DCF, CAPM,
22 and risk premium methods to estimate a just
23 and reasonable ROE for Idaho Power.
24 • As summarized on Exhibit 5, considering the
25 results of these analyses, and giving less
26 weight to extremes at the high and low ends of
27 the range, I conclude that the cost of equity
28 for a regulated electric utility comparable in
29 risk to Idaho Power is in the 10 . 1 percent to
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1 11 . 1 percent range prior to consideration of
2 flotation costs .
3 • My evaluation of a fair ROE also incorporated
4 an upward adjustment of 9 basis points to
5 account for flotation costs, which are a
6 legitimate cost incurred to raise equity
7 capital supporting Idaho Power' s investment in
8 utility infrastructure . Incorporating this
9 flotation cost adjustment resulted in my
10 recommended ROE range of 10 . 2 percent to 11 . 2
11 percent.
12 Q. What did your expected earnings benchmark and
13 the DCF results for your select group of non-utility firms
14 indicate with respect to your evaluation?
15 A. An expected earnings analysis for the proxy
16 group of electric utilities, which can be referenced in
17 Exhibit 12, yields an 11 . 0 percent ROE. Meanwhile, average
18 DCF estimates for a low-risk group of firms in the competitive
19 sector of the economy ranged from 9 . 9 percent to 10 . 8
20 percent . 6 A summary of these DCF results is shown in Exhibit
21 13 . Considering the clear risk differences between the
22 Company and this low-risk group of firms in the competitive
23 sector, these results confirm that an ROE range of 10 . 2
24 percent to 11 . 2 percent is reasonable for Idaho Power.
25 Q. What is your conclusion as to the reasonableness
26 of Idaho Power' s requested capital structure?
6 As discussed in my testimony, these non-utility companies have long
corporate histories and an overall risk profile that is more conservative
than the Company or the electric utilities in the proxy group.
THOMPSON, DI 9
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1 A. Based on my evaluation, I conclude that the
2 Company' s requested capital structure, consisting of
3 approximately 51 . 0 percent common equity financing, represents
4 a reasonable basis on which to establish Idaho Power' s return.
5 III . ECONOMIC PRINCIPLES AND REGULATORY STANDARDS
6 Q. What is the purpose of this section?
7 A. This section outlines and discusses the economic
8 principles and regulatory standards that underpin my analyses
9 and the conclusions I reach in my testimony. This section
10 also discusses some of the challenges and practical
11 considerations in determining a just and reasonable ROE for
12 regulated utilities .
13 A. Economic Principles
14 Q. What is ROE, and how does it relate to
15 utilities?
16 A. The ROE is the cost to a firm of attracting and
17 retaining common equity investment in that firm. Like most
18 firms, utilities require common equity investment in order to
19 partially finance their assets . ' This investment is necessary
20 to finance the asset base the utility requires in order to
21 provide utility service. A given utility competes with other
22 firms for equity capital in capital markets, and these firms
23 make up the demand side of these markets . Investors commit
7 It is also common for firms to partially finance their assets through
debt. Utilities are no exception, as almost all utilities finance their
assets through a blend of various debt and equity sources.
THOMPSON, DI 10
Idaho Power Company

I capital in capital markets only if they expect to earn a
2 return on their investment commensurate with returns available
3 from alternative investments with comparable risks, and such
4 investors make up the supply side of these markets . In well-
5 functioning capital markets, the ROE is akin to a market
6 clearing price, as it ensures that the supply of equity
7 capital is equal to the demand, and that there is no surplus
8 or shortage of equity capital .
9 Q. Generally speaking, how are utilities regulated?
10 A. Utilities are regulated such that they
11 ultimately are required to price their utility service based
12 on their cost of service, earning a return that is competitive
13 with other similar risk enterprises . Because direct price
14 regulation is unfeasible, utility regulation allows for a
15 "just and reasonable" (i .e. , competitive) ROE to attract
16 capital for utility investment. Under accepted regulatory
17 standards, utilities are allowed to price their utility
18 service such that they recover the cost to serve their
19 customers and have the opportunity to earn competitive ROES,
20 allowing for differences in risk.
21 Q. What fundamental economic principle underlies
22 the cost of equity concept?
23 A. The fundamental economic principle underlying
24 the cost of equity concept is the notion that investors are
25 risk averse. In capital markets where relatively risk-free
THOMPSON, DI 11
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1 assets are available (e. g. , U. S . Treasury securities) ,
2 investors can be induced to hold riskier assets only if they
3 are offered a premium, or additional return, above the rate of
4 return on a risk-free asset. Because all assets in capital
5 markets compete with each other for investor funds, riskier
6 assets must yield a higher expected rate of return than safer
7 assets to induce investors to invest and hold them.
8 Given this risk-return tradeoff, the required rate of
9 return (k) from an asset (i) can generally be expressed as :
10 ki = Rf + RPi
11 where : Rf = Risk-free rate of return, and
12 RPi = Risk premium required to hold riskier
13 asset i .
14 Thus, the required rate of return for a particular
15 asset at any time is a function of: (1) the yield on risk-free
16 assets, and (2) the asset' s relative risk, with investors
17 demanding correspondingly larger risk premiums for bearing
18 greater risk.
19 Q. Is there evidence that the risk-return tradeoff
20 principle actually operates in capital markets?
21 A. Yes . The risk-return tradeoff can be readily
22 documented in segments of the capital markets where required
23 rates of return can be directly inferred from market data and
24 where generally accepted measures of risk exist. Bond yields,
25 for example, reflect investors' expected rates of return, and
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1 bond ratings measure the risk of individual bond issues .
2 Comparing the observed yields on government securities, which
3 are considered free of default risk, to the yields on bonds of
4 various rating categories demonstrates that the risk-return
5 tradeoff does, in fact, exist.
6 Q. Does the risk-return tradeoff observed with
7 fixed income securities extend to common stocks and other
8 assets?
9 A. Yes . It is widely accepted that the risk-return
10 tradeoff evidenced with long-term debt extends to all assets .
11 Documenting the risk-return tradeoff for assets other than
12 fixed income securities, however, is complicated by two
13 factors . First, there is no standard measure of risk
14 applicable to all assets . Second, for most assets, including
15 common stock, the required rates of return cannot be directly
16 observed. Yet, there is every reason to believe that
17 investors exhibit risk aversion in deciding whether or not to
18 hold common stocks and other assets, just as when choosing
19 among fixed-income securities .
20 Q. Does the risk-return tradeoff only occur between
21 firms?
22 A. No. The risk-return tradeoff principle applies
23 not only to investments in different firms, but also to
24 different securities issued by the same firm. The securities
25 issued by a utility vary considerably in risk because they
THOMPSON, DI 13
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1 have different characteristics and priorities . Long-term debt
2 is senior among all capital in its claim on a utility' s net
3 revenues and is, therefore, the least risky. The last
4 investors in line are common shareholders : they share in the
5 net earnings, if any, remaining after all other claimants have
6 been paid. As a result, the rate of return that investors
7 require from a utility' s common stock, the most junior and
8 riskiest of its securities, must be considerably higher than
9 the yield offered by the utility' s senior, long-term debt.
10 B. Regulatory Standards
11 Q. What is the foundation for a just and reasonable
12 ROE?
13 A. A just and reasonable ROE is integral in meeting
14 sound regulatory economics and the standards set forth by the
15 U. S . Supreme Court in two landmark cases, Bluefield and Hope.
16 The Bluefield case set the standard against which just and
17 reasonable rates are measured:
18 A public utility is entitled to such rates as
19 will permit it to earn a return on the value
20 of the property which it employs for the
21 convenience of the public equal to that
22 generally being made at the same time and in
23 the same general part of the country on
24 investments in other business undertakings
25 which are attended by corresponding risks and
26 uncertainties.... The return should be
27 reasonable, sufficient to assure confidence in
28 the financial soundness of the utility, and
29 should be adequate, under efficient and
30 economical management, to maintain and support
31 its credit and enable it to raise money
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1 necessary for the proper discharge of its
2 public duties . $
3 The Hope case expanded on the guidelines as to a
4 reasonable ROE, reemphasizing the findings in Bluefield and
5 establishing that the rate-setting process must produce an
6 end-result that allows the utility a reasonable opportunity to
7 cover its capital costs . The Court stated:
8 From the investor or company point of view it
9 is important that there be enough revenue not
10 only for operating expenses but also for the
11 capital costs of the business . These include
12 service on the debt and dividends on the
13 stock.... By that standard, the return to the
14 equity owner should be commensurate with
15 returns on investments in other enterprises
16 having corresponding risks . That return,
17 moreover, should be sufficient to assure
18 confidence in the financial integrity of the
19 enterprise, so as to maintain credit and
20 attract capital . 9
21 In summary, the Supreme Court' s findings in Bluefield
22 and Hope established that a just and reasonable ROE must be
23 sufficient to 1) fairly compensate the utility' s investors, 2)
24 enable the utility to offer a return adequate to attract new
25 capital on reasonable terms, and 3) maintain the utility' s
26 financial integrity. These standards should allow the utility
27 to fulfill its obligation to provide reliable service while
28 meeting the needs of customers through necessary system
8 Bluefield Water Works & Improvement Co. v. Pub. Serv. Comm'n, 262 U.S.
679 (1923) ("Bluefield") .
9 Fed. Power Comm'n v. Hope Natural Gas Co. , 320 U.S. 591 (1944) ("Hope") .
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I replacement and expansion, but the Supreme Court' s
2 requirements can only be met if the utility has a reasonable
3 opportunity to actually earn its allowed ROE.
4 Q. How does a utility' s authorized ROE help to
5 maintain regulatory standards?
6 A. The authorized ROE acts as a price signal in
7 capital markets, and it informs investors about the return
8 they may receive if they allocate equity capital to a
9 particular investment, allowing them to make informed
10 judgements about how best to allocate their capital .
11 Investors will commit money to a particular investment only if
12 they expect it to produce a return at least commensurate with
13 those from other investments with comparable risks . To
14 maintain regulatory standards, the ROE must be sufficient to
15 compensate common equity investors for the use of their
16 capital and support the utility' s financial integrity and
17 ongoing ability to finance the plant and equipment necessary
18 to provide utility service.
19 Q. Is it widely accepted that a utility' s ability
20 to attract capital must be considered in establishing a fair
21 rate of return?
22 A. Yes . This is a fundamental standard underlying
23 the regulation of public utilities . The Supreme Court' s
24 Bluefield and Hope decisions established that a regulated
25 utility' s authorized returns on capital must be sufficient to
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1 assure investors' confidence and that, if the utility is
2 efficient and prudent on a prospective basis, it will be able
3 to maintain and support its credit and have the opportunity to
4 raise necessary capital . lo
5 C. Practical Considerations
6 Q. What are the challenges in determining a just
7 and reasonable ROE for a regulated enterprise?
8 A. The actual return investors require is
9 unobservable. Different methodologies have been developed to
10 estimate investors expected and required return on capital,
11 but these theoretical tools produce a range of estimates based
12 on different assumptions and inputs . The DCF method, which is
13 frequently referenced and relied on by regulators at least in
14 part, is only one theoretical approach to gain insight into
15 the return investors require. There are a number of other
16 accepted methodologies for estimating the cost of equity and
17 the ranges produced by these approaches can vary widely.
18 Q. Do Bluefield and Hope require a particular
19 method to be followed in order to establish a just and
20 reasonable ROE?
21 A. No. While the Bluefield and Hope decisions did
22 not establish a particular method to be followed in
10 Bluefield; Hope.
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1 determining the allowed ROE (or in fixing rates) , 11 these and
2 subsequent cases enshrined the importance of an end result
3 that meets the opportunity cost standard of finance . Under
4 this doctrine, the required return is established by investors
5 in the capital markets based on expected returns available
6 from other comparable risk investments . Coupled with modern
7 financial theory, which has led to the development of formal
8 risk-return models (e .g. , DCF and CAPM) , practical application
9 of the Bluefield and Hope standards involves the independent,
10 case-by-case consideration of a firm' s risk along with current
11 capital market data in order to evaluate a ROE that will
12 produce a balanced and fair end result for investors and
13 customers .
14 Q. Is it customary to consider the results of
15 multiple approaches when evaluating a just and reasonable ROE?
16 A. Yes . In my experience, financial analysts and
17 regulators routinely consider the results of alternative
18 approaches in evaluating a fair ROE. It is widely recognized
19 that no single method can be regarded as failsafe; with all
20 approaches having advantages and shortcomings . As the Federal
21 Energy Regulatory Commission ("FERC") has noted, " [t] he
22 determination of rate of return on equity starts from the
23 premise that there is no single approach or methodology for
11 Id. at 602 (finding, "the Commission was not bound to the use of any
single formula or combination of formulae in determining rates." and,
" [I]t is not theory but the impact of the rate order which counts.")
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1 determining the correct rate of return. ­12 Similarly, a
2 publication of the Society of Utility and Regulatory Financial
3 Analysts concluded that:
4 Each model requires the exercise of judgment
5 as to the reasonableness of the underlying
6 assumptions of the methodology and on the
7 reasonableness of the proxies used to validate
8 the theory. Each model has its own way of
9 examining investor behavior, its own premises,
10 and its own set of simplifications of reality.
11 Each method proceeds from different
12 fundamental premises, most of which cannot be
13 validated empirically. Investors clearly do
14 not subscribe to any singular method, nor does
15 the stock price reflect the application of any
16 one single method by investors . 13
17 As this treatise succinctly observed, "no single model
18 is so inherently precise that it can be relied on solely to
19 the exclusion of other theoretically sound models . "14
20 Similarly, New Regulatory Finance concluded that:
21 There is no single model that conclusively
22 determines or estimates the expected return
23 for an individual firm. Each methodology
24 possesses its own way of examining investor
25 behavior, its own premises, and its own set of
26 simplifications of reality. Each method
27 proceeds from different fundamental premises
28 that cannot be validated empirically.
29 Investors do not necessarily subscribe to any
30 one method, nor does the stock price reflect
31 the application of any one single method by
32 the price-setting investor. There is no
33 monopoly as to which method is used by
34 investors . In the absence of any hard
12 Northwest Pipeline Co., Opinion No. 396-C, 81 FERC 1 61,036 at 4 (1997) .
13 David C. Parcell, The Cost of Capital - A Practitioner's Guide, Society
of Utility and Regulatory Financial Analysts (2010) at 84.
14 Id.
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1 evidence as to which method outdoes the other,
2 all relevant evidence should be used and
3 weighted equally, in order to minimize
4 judgmental error, measurement error, and
5 conceptual infirmities . 15
6 Thus, while the DCF model is a recognized approach to
7 estimating the ROE, it is not without shortcomings and does
8 not otherwise eliminate the need to ensure that the "end
9 result" is fair . The Indiana Utility Regulatory Commission
10 has also recognized this principle:
11 There are three principal reasons for our
12 unwillingness to place a great deal of weight
13 on the results of any DCF analysis . One is .
14 . . the failure of the DCF model to conform to
15 reality. The second is the undeniable fact
16 that rarely if ever do two expert witnesses
17 agree on the terms of a DCF equation for the
18 same utility - for example, as we shall see in
19 more detail below, projections of future
20 dividend cash flow and anticipated price
21 appreciation of the stock can vary widely.
22 And, the third reason is that the unadjusted
23 DCF result is almost always well below what
24 any informed financial analysis would regard
25 as defensible, and therefore require an upward
26 adjustment based largely on the expert
27 witness' s judgment. In these circumstances,
28 we find it difficult to regard the results of
29 a DCF computation as any more than
30 suggestive . 16
31 More recently, FERC recognized the potential for any
32 application of the DCF model to produce unreliable results . 17
15 Roger A. Morin, New Regulatory Finance, Pub. Utils. Reports, Inc. (2006)
at 429.
16 Ind. Michigan Power Co., Cause No. 38728, 116 PUR4th, 1, 17-18 (IURC
8/24/1990) .
17 Coakley v. Bangor Hydro-Elec. Co. , Opinion No. 531, 147 FERC 1 61,234 at
P 41 (2014) .
THOMPSON, DI 20
Idaho Power Company

1 The Maryland Public Service Commission echoed this sentiment
2 in a recent rate case, stating, "We have repeatedly stated
3 that we are unwilling to rule that there can be only one
4 correct method for calculating ROE. 1'18
5 As this discussion indicates, consideration of the
6 results of alternative approaches reduces the potential for
7 error associated with any single quantitative method. Just as
8 investors inform their decisions using a variety of
9 methodologies, my evaluation of a fair ROE for Idaho Power
10 considered the results of multiple financial models .
11 Q. How do you approach the task of evaluating a
12 just and reasonable ROE for Idaho Power in the context of
13 Bluefield and Hope?
14 A. The goal is to generate the best estimate of the
15 Company' s ROE in today' s capital markets . My testimony
16 presents an analysis of investors' expectations and
17 requirements using commonly referenced and theoretically sound
18 financial models, reasonable assumptions about rational
19 investor behavior, and data inputs that are consistent with
20 the assumptions underlying financial models that I utilize,
21 all within a consideration of broader capital market
22 conditions and recent economic trends . Each of the approaches
23 1 use to estimate Idaho Power' s ROE has its own strengths and
18 Maryland Public Service Commission Order 88033, Case No. 9424 (ML No. 16
212676) .
THOMPSON, DI 21
Idaho Power Company

1 weaknesses, and all involve some degree of judgment. None of
2 the models I use are inherently superior to any of the other
3 models, and all of them are accepted methodologies for
4 estimating the cost of equity in today' s capital markets .
5 IV. FUNDAMENTAL ANALYSES
6 Q. What is the purpose of this section?
7 A. This section briefly reviews the operations and
8 finances of Idaho Power, and it examines conditions in the
9 capital markets and the general economy. An understanding of
10 the fundamental factors driving the risks and prospects of
11 electric utilities is essential in developing an informed
12 opinion of investors' expectations and requirements that are
13 the basis of a fair rate of return.
14 A. Idaho Power
15 Q. Briefly describe Idaho Power and its utility
16 operations .
17 A. Idaho Power is a wholly-owned subsidiary of
18 IDACORP, Inc. (""IDACORP") and is principally engaged in
19 providing integrated retail electric utility service to more
20 than 650, 000 customers in a 24, 000 square mile area in
21 southern Idaho and eastern Oregon. Approximately 95 percent
22 of Idaho Power' s retail revenue is attributable to customers
23 located in Idaho. During 2024, Idaho Power' s energy
24 deliveries totaled 17 . 6 million megawatt-hours ("MWh") . Sales
25 to residential customers comprised 41 percent of operating
THOMPSON, DI 22
Idaho Power Company

1 revenues in 2024, with 35 percent to commercial, and 16
2 percent to industrial end-users . Idaho Power also
3 participates in the wholesale power market, with wholesale
4 energy sales accounting for 8 percent of operating revenues
5 during 2024 . At year-end 2024, Idaho Power had total assets
6 of $9 . 1 billion, with total revenues amounting to
7 approximately $1 . 7 billion.
8 In addition to its three natural gas-fired generating
9 facilities in southern Idaho and interests in two coal-fired
10 plants located in Wyoming and Nevada, Idaho Power' s existing
11 generating units include 17 hydroelectric generating plants
12 located in southern Idaho and eastern Oregon with a nameplate
13 capacity of 1, 818 Megawatts ("MW") , or 51 . 9 percent of
14 Company-owned generating capacity. The electrical output of
15 these hydro plants, which has a significant impact on total
16 energy costs, is dependent on stream flows . The Company has
17 experienced prolonged periods of persistent below-normal water
18 conditions in recent years, with hydroelectric generation
19 supplying approximately 31 percent of total energy needs in
20 2022, versus an average of about 43 percent over the 2017 to
21 2021 period. Additionally, Idaho Power has undertaken a
22 substantial capital program for new capacity and energy
23 resources . For example, in November 2024 the IPUC approved
24 the Company' s application to acquire utility-scale battery
25 storage of 150 MW, and in December 2024 Idaho Power filed an
THOMPSON, DI 23
Idaho Power Company

1 application with the IPUC to acquire two additional battery
2 storage facilities with 100 MW operating capacity.
3 Idaho Power' s retail electric operations are subject to
4 the jurisdiction of the IPUC and the Oregon Public Utilities
5 Commission ("OPUC") , with the interstate jurisdiction
6 regulated by FERC. Additionally, Idaho Power' s hydroelectric
7 facilities are subject to licensing under the Federal Power
8 Act, which is administered by FERC, as well as the Oregon
9 Hydroelectric Act. Relicensing is not automatic under federal
10 law, and Idaho Power must demonstrate that it has operated its
11 facilities in the public interest, which includes adequately
12 addressing environmental concerns .
13 Q. Where does Idaho Power obtain the capital used
14 to finance its investment in electric utility plant?
15 A. As a wholly-owned subsidiary of IDACORP, the
16 Company obtains common equity capital solely from its parent,
17 whose common stock is publicly traded on the New York Stock
18 Exchange ("NYSE") . Idaho Power also issues debt securities
19 directly under its own name. Moody' s has assigned the Company
20 an issuer rating of Baal, while S&P has assigned a corporate
21 credit rating of BBB to Idaho Power.
22 Q. Has Idaho Power made significant capital
23 investments in its system?
24 A. Yes . Idaho Power has made significant new
25 investments to maintain and modernize its utility
THOMPSON, DI 24
Idaho Power Company

I infrastructure, and to otherwise meet customer demand and
2 provide adequate and reliable service. Since its last
3 litigated rate case in 2011, Idaho Power' s rate base has
4 increased by approximately two-thirds . 19
5 Q. Does Idaho Power anticipate the need for capital
6 going forward?
7 A. Yes . The Company must undertake investments for
8 necessary replacement and expansion of its electric utility
9 system as it continues to provide safe and reliable service to
10 its customers . A recent investor presentation documented that
11 for 2025, Idaho Power is anticipating capital expenditures in
12 range of $1 . 0 to $1 . 1 billion, as compared to $943 million in
13 2024 .20 With regard to longer term capital expenditures,
14 Moody' s recently noted that " [t] he utility' s five year capital
15 expenditure program (2025-2029) totals roughly $5 . 6 billion or
16 an average of $1 . 13 billion annually, "21 while the Company
17 estimates five year capex to be in a range of $5 . 4 billion to
18 $6 . 1 billion.22 This represents a significant increase over
19 previous years .
19 Idaho Power's rate base was $2.8 billion in 2011, and $4.7 billion in
2024. IDACORP, Inc. , Spring 2023 Investor Outreach, Investor Information
(February/March 2023) at 6; IDACORP, Inc. , Investor Outreach (March 2025)
at 14, https://s26.g4cdn.com/720254477/files/doc presentations/IDACORP-
Investor-Outreach-March-2025-FINAL-Updated.pdf (last visited Apr. 18,
2025) .
20 Id. at 5.
21 Moody's Ratings, Idaho Power Company - Update to credit analysis, Credit
Opinion (Mar. 14, 2025) .
22 Idaho Power, Form 10-K for the fiscal year ended Dec. 31, 2024 at 42.
THOMPSON, DI 25
Idaho Power Company

1 Q. Did Idaho Power recently detail its significant
2 capital expenditure plans?
3 A. Yes . In testimony recently filed with the IPUC,
4 Mr. Brian Buckham23 made the following observations :
5 Idaho Power expects its net investment in
6 utility plant to grow at a 13 . 4 percent annual
7 rate over the next five years .24
8 ... this is by far the fastest organic growth
9 rate of any investor-owned utility in the
10 United States, and in the last few decades, is
11 unprecedented.25
12 Idaho Power estimates that its five- year
13 capital expenditures will nearly triple from
14 around $ 387 million per year for the previous
15 five years to a significantly higher
16 approximately $ 1 . 17 billion per year on
17 average from 2024 to 2028 .26
18 In addition substantial debt and equity issuances to
19 help finance these capital expenditures, the Company remains
20 obligated to repay maturing long-term debt. Continued support
21 for Idaho Power' s financial integrity and flexibility will be
22 instrumental in attracting the capital necessary to fund these
23 projects in an effective manner.
23 Mr. Buckham currently serves as IDACORP' s Senior Vice President and
Chief Financial Officer.
24 Idaho Public Utilities Commission, In the Matter of the Application of
Idaho Power Company for Authority to Increase Rates for Electric Service
to Recover Costs Associated with Incremental Capital Investments and
Certain Ongoing Operations and Maintenance Expenses, Rebuttal Testimony of
Brian R. Buckham, Case No. IPC-E-24-07 (Nov. 27, 2024) at 11.
25 Id.
26 Id. at 12.
THOMPSON, DI 26
Idaho Power Company

1 B. Utility Group Selection
2 Q. What is the purpose of this section of your
3 testimony?
4 A. The cost of equity estimates developed later in
5 my testimony are predicated on the investment risk associated
6 with the utilities in the proxy group ("Utility Group") . This
7 section discusses how the comparable risk Utility Group was
8 selected.
9 Q. How do you implement quantitative methods to
10 estimate the cost of common equity for Idaho Power?
11 A. Application of quantitative methods to estimate
12 the cost of common equity requires observable capital market
13 data, such as stock prices and beta values . Moreover, even
14 for a firm with publicly traded stock, the cost of common
15 equity can only be estimated. As a result, applying
16 quantitative models using observable market data only produces
17 an estimate of investors' expected return. Thus, the accepted
18 approach to increase confidence in the results is to apply
19 quantitative methods to a proxy group of publicly traded
20 companies that investors regard as risk comparable . While the
21 proxy group provides a starting point in evaluating the cost
22 of equity for Idaho Power, as noted earlier, economic and
23 regulatory standards require that the Company' s unique
24 circumstances and specific risks must be considered.
25 Accordingly, the cost of equity determined for the proxy group
THOMPSON, DI 27
Idaho Power Company

1 must be adjusted to properly reflect differences in risk when
2 evaluating a fair ROE for Idaho Power.
3 Q. How do you identify the proxy group of electric
4 utilities used in your analyses?
5 A. To reflect the risks and prospects associated
6 with Idaho Power' s jurisdictional electric operations, I begin
7 with the following criteria to identify a proxy group of
8 utilities :
9 1 . Included in the Electric Utility Industry groups
10 compiled by Value Line.
11 2 . Paid common dividends over the past six months and
12 have not announced a dividend cut since that time .
13 3 . No ongoing involvement in a major merger or
14 acquisition that would distort quantitative
15 results .
16 4 . Assigned a Value Line Safety Rank of "1" or "2 . "
17 5 . Assigned a Value Line Financial Strength Rating of
18 "B++" or higher.
19 In addition, my analysis also considered credit ratings
20 from Moody' s and S&P in evaluating relative risk.
21 Specifically, I excluded any companies with ratings more than
22 one "notch" higher or lower than Idaho Power' s issuer credit
23 ratings of Baal and BBB assigned by Moody' s and S&P,
24 respectively. These criteria result in a proxy group composed
25 of nineteen companies, which I refer to as the "Utility
26 Group. "
THOMPSON, DI 28
Idaho Power Company

1 C. Relative Risks of the Utility Group and Idaho Power
2 Q. What is the purpose of this section of your
3 testimony?
4 A. The cost of equity estimates developed later in
5 my testimony are predicated on the investment risk associated
6 with the utilities in the proxy group. This section compares
7 the risks of the Utility Group with those that investors would
8 associate with Idaho Power.
9 Q. How do you evaluate the risks of the Utility
10 Group relative to Idaho Power?
11 A. My evaluation of relative risk considers five
12 published benchmarks that are widely relied on by investors-
13 Value Line' s Safety Rank, Financial Strength Rating, and beta
14 values, along with credit ratings from Moody' s and S&P. Value
15 Line' s primary risk indicator is its Safety Rank, which ranges
16 from "1" (Safest) to "5" (Riskiest) . This overall risk
17 measure is intended to capture the total risk of a stock and
18 incorporates elements of stock price stability and financial
19 strength. The Financial Strength Rating is designed as a guide
20 to overall financial strength and creditworthiness, with the
21 key inputs including financial leverage, business volatility
22 measures, and company size. Value Line' s Financial Strength
23 Ratings range from "A++" (strongest) down to "C" (weakest) in
24 nine steps . Value Line is one of the most widely available
25 sources of investment advisory information and these
THOMPSON, DI 29
Idaho Power Company

1 objective, published indicators provide useful guidance
2 regarding the risk perceptions of investors .
3 Meanwhile, beta measures a utility' s stock price
4 volatility relative to the market as a whole and reflects the
5 tendency of a stock' s price to follow changes in the market. A
6 stock that tends to respond less to market movements has a
7 beta less than 1 . 00, while stocks that tend to move more than
8 the market have betas greater than 1 . 00 . Beta is the only
9 relevant measure of investment risk under modern capital
10 market theory and is widely cited in academics and in the
11 investment industry as a guide to investors' risk perceptions .
12 Moreover, in my experience Value Line is the most widely
13 referenced source for beta in regulatory proceedings . As
14 noted in New Regulatory Finance:
15 Value Line is the largest and most widely
16 circulated independent investment advisory
17 service, and influences the expectations of a
18 large number of institutional and individual
19 investors . ... Value Line betas are computed on
20 a theoretically sound basis using a broadly
21 based market index, and they are adjusted for
22 the regression tendency of betas to converge
23 to 1 . 00 .27
24 Finally, credit ratings are assigned by independent
25 rating agencies for the purpose of providing investors with a
26 broad assessment of the creditworthiness of a firm. Ratings
27 Roger A. Morin, New Regulatory Finance, Pub. Utils. Reports (2006) at
71.
THOMPSON, DI 30
Idaho Power Company

1 generally extend from triple-A (the highest) to D (in
2 default) . Other symbols (e. g. , "+" or "-") are used to show
3 relative standing within a category. Because the rating
4 agencies' evaluation includes all of the factors normally
5 considered important in assessing a firm' s relative credit
6 standing, corporate credit ratings provide a broad, objective
7 measure of overall investment risk that is readily available
8 to investors . Widely cited in the investment community and
9 referenced by investors, credit ratings are also frequently
10 used as a primary risk indicator in establishing proxy groups
11 to estimate the cost of common equity.
12 Q. What do these measures indicate with respect to
13 the overall risks of the Utility Group and Idaho Power?
14 A. Table 1 compares the Utility Group to the
15 Company across the five key indices of investment risk
16 discussed above. Because Idaho Power has no publicly traded
17 common stock, the Value Line risk measures shown reflect those
18 published for its parent, IDACORP.
19 TABLE 1
20 Comparison of Risk Indicators
Value Line
Safety Financial Credit Rating
Rank Strength Beta Moody' s S&P
Utility Group 2 A 0 . 80 Baa2 BBB+
Idaho Power 1 A 0 . 75 Baal BBB
Note: Idaho Power's Value Line risk indicators are for its parent
company, IDACORP.
THOMPSON, DI 31
Idaho Power Company

1 As shown above, Idaho Power' s Value Line Safety Rank
2 and beta value indicate slightly less risk than the Utility
3 Group, while the Financial Strength ranking corresponding to
4 the Company is identical to the average for the Utility Group.
5 Idaho Power' s Moody' s rating is one notch higher than the
6 average for the Utility Group, while the Company' s S&P rating
7 is one notch lower. Considered together, a comparison of
8 these objective measures, which incorporate a broad spectrum
9 of risks, including financial and business position, relative
10 size, and exposure to company specific factors, indicates that
11 investors would likely conclude that the overall investment
12 risks for Idaho Power are generally comparable to those of the
13 firms in the Utility Group .
14 i . Operating Risks
15 Q. Are there any risks inherent to the Company' s
16 Idaho operations that investors would likely consider?
17 A. Yes . Idaho Power experiences heightened
18 wildfire risk, and the Company' s relatively high dependence on
19 hydroelectric generation increases their exposure to climate
20 related risks along with potentially volatile purchased power
21 markets . High capital expenditures and increasing debt have
22 recently worsened Idaho Power' s financial profile, and the
23 Company' s operations are also subject to comparatively few
24 regulatory mechanisms .
THOMPSON, DI 32
Idaho Power Company

1 Q. How has climate change impacted investors'
2 assessment of Idaho Power' s exposure to wildfire risk?
3 A. Climate change has increased wildfire risk for
4 utilities in the Northwestern states, such as Idaho Power.
5 For example, Moody' s recently observed that, "climate change
6 has increased wildfire risk by making it easier for fires to
7 start and spread and by making trees more vulnerable to
8 diseases and insect infestation, " and that wildfire risks "are
9 further heightened by severe windstorm events . "28
10 With regard to Idaho Power specifically, Moody' s listed
11 "Heightened wildfire risk" as one of the Company' s credit
12 challenges, and further observed that, "IPC ' s credit profile
13 is further pressured by wildfire risk in its service
14 territory. "29 Moody' s went on to note that although Idaho
15 Power has managed its wildfire risk in recent years, "the
16 utility remains exposed to litigation risk that could lead to
17 court decisions that result in severe losses to the company. 1130
18 Meanwhile, S&P has also taken notice of the wildfire risk
19 faced by utilities, with the rating agency recently noting
20 that " [f] or investor-owned regulated utilities (IOUs) based in
21 high-risk wildfire areas, particularly in the western U. S . ,
28 Moody's Ratings, Idaho Power Company - Update to credit analysis, Credit
Opinion (Mar. 14, 2025) .
29 Id.
30 Id.
THOMPSON, DI 33
Idaho Power Company

1 the potential for further credit deterioration is a growing
2 reality. "31
3 Q. How does Idaho Power' s generating resource mix
4 affect investors' risk perceptions?
5 A. Because a significant portion of Idaho Power' s
6 total energy requirements is provided by hydroelectric
7 facilities, the Company is exposed to a level of uncertainty
8 not faced by most utilities . While hydropower confers
9 advantages in terms of fuel cost savings and diversity,
10 reduced hydroelectric generation due to below-average water
11 conditions could force the Company to rely more heavily on
12 wholesale power markets to meet its resource needs . As S&P
13 explained:
14 A reduction in hydro generation typically
15 increases an electric utility' s costs by requiring
16 it to buy replacement power or run more expensive
17 generation to serve customer loads . Low hydro
18 generation can also reduce utilities' opportunity
19 to make off-system sales . At the same time, low
20 hydro years increase regional wholesale power
21 prices, creating potentially a double impact -
22 companies have to buy more power than under normal
23 conditions, paying higher prices .32
24 With respect to Idaho Power' s experience in recent years, S&P
25 observed:
26 The company relies heavily on hydropower
27 generation and purchased power. Low-cost
31 S&P Global Ratings, Wildfire-Exposed U.S. Investor-Owned Utilities Face
Increasing Credit Risks Without Comprehensive Solutions (Nov. 6, 2024) .
32 Standard & Poor's Corporation, Pacific Northwest Hydrology And Its
Impact On Investor-Owned Utilities' Credit Quality, RatingsDirect (Jan.
28, 2008) .
THOMPSON, DI 34
Idaho Power Company

1 hydropower provides more than 500 of the company' s
2 generation under normal water-level conditions,
3 leading to lower electricity rates . However, when
4 hydroelectric generation is low, the company
5 relies on more expensive purchased power, which
6 exposes the company to the volatile spot power
7 market . Idaho Power saw reduced hydropower
8 generation in both 2021 and 2020 due to
9 precipitation and snow conditions .33
10 Q. How has climate change impacted Idaho Power' s
11 risk exposure in the eyes of investors?
12 A. The risk posed by climate-related weather events
13 has served to magnify concerns over Idaho Power' s exposure to
14 below-average water conditions in recent years . For example,
15 only several years ago S&P concluded that "water-intensive
16 assets like power plants [are] especially vulnerable in the
17 absence of adaptation, " and concluded that Idaho Power had the
18 highest exposure to water stress of any U. S . utility. 34 While
19 noting that the risks of such events are generally manageable
20 under recovery mechanisms that allow related costs to be
21 recuperated, S&P also observed that:
22 In the most extreme events, including those of
23 late, utility companies ' exposure to acute and
24 chronic climate risks can damage assets or
25 disrupt supplies, which can weaken their
26 financial position and ultimately credit
27 quality.35
33 S&P Global Ratings, Idaho Power Co., RatingsDirect (May 26, 2022) .
34 S&P Global Ratings, Keeping The Lights On: U.S. Utilities' Exposure To
Physical Climate Risks, RatingsDirect (Sep. 16, 2021) .
35 Id.
THOMPSON, DI 35
Idaho Power Company

1 Q. Have utilities and their customers recently
2 experienced increased uncertainty in energy markets?
3 A. Yes . The onset of military conflict in Ukraine
4 led to a dramatic rise in energy market volatility. As with
5 major weather events, market conditions that lead to
6 significant spikes in energy prices can place extraordinary
7 pressure on liquidity as utilities seek to fund higher
8 procurement costs and maintain service to customers . With
9 respect to Idaho Power specifically, the Pacific Northwest
10 faced a dramatic increase in gas costs . As the Energy
11 Information Administration reported:
12 On December 21, 2022, daily natural gas spot
13 prices at three major trading hubs in the
14 western United States—Pacific Gas & Electric
15 ("PG&E") Citygate, Sumas on the Canada-
16 Washington border, and Malin, Oregon—settled
17 higher than $50 . 00 per million British thermal
18 units ("MMBtu") , the highest level of any
19 other market and an average of $48 . 12/MMBtu
20 above Henry Hub, the national benchmark
21 natural gas price.36
22 While prices have since moderated, investors recognize
23 that volatile energy markets, unpredictable stream flows, and
24 Idaho Power' s reliance on wholesale purchases to meet a
25 significant portion of its resource needs can expose the
26 Company to the risk of reduced cash flows and unrecovered
36 Energy Information Administration, Natural Gas Weekly Update (Dec. 22,
2022) .
https://www.eia.gov/naturalgas/weekly/archivenew ngwu/2022/12 22/#itn-
tabs-1 (last visited Apr. 25, 2023) .
THOMPSON, DI 36
Idaho Power Company

1 power supply costs . The Company' s reliance on purchased power
2 to meet shortfalls in hydroelectric generation magnifies the
3 importance of strengthening financial flexibility, which is
4 essential to guarantee access to the cash resources and
5 interim financing required to cover inadequate operating cash
6 flows .
7 ii. Financial Risks
8 Q. How do financial pressures associated with Idaho
9 Power' s planned capital expenditures impact investors' risk
10 assessment?
11 A. Idaho Power' s customer growth and regional
12 transmission constraints are driving the need for additional
13 resources to meet projected energy and capacity deficits,
14 which in turn is pressuring the Company' s credit metrics . For
15 example, Value Line recently took note of the Company' s
16 "rising customer counts" and involvement in major transmission
17 projects'37 while Moody' s recently observed that "Credit
18 metrics [for Idaho Power] are likely to weaken due to a
19 sizeable capital expenditure program. "38 As noted earlier,
20 Idaho Power' s capital additions are expected to total
21 approximately $1 . 13 billion annually over the 2025 to 2029
22 period.
37 The Value Line Investment Survey, IDACORP, Inc. (Apr. 18, 2025) .
38 Moody's Ratings, Idaho Power Company - Update to credit analysis, Credit
Opinion (Mar. 14, 2025) .
THOMPSON, DI 37
Idaho Power Company

1 In addition, Idaho Power remains obligated to repay
2 maturing long-term debt, which rose significantly in 2023 and
3 again in 2024 after declining from 2020 to 2022 . As Mr.
4 Buckham noted in his recent testimony before the IPUC, "Idaho
5 Power issued a record $872 million of long-term debt" during
6 2023, and had already issued $300 million in long-term debt in
7 2024 .39 Mr. Buckham further detailed his expectation for the
8 Company to undertake "an unprecedented amount of financing"
9 over the 2025 to 2028 time period, including "over $ 2 . 0
10 billion in debt securities to fund expected capital
11 expenditures and cover operating costs . "ao
12 Q. How has Idaho Power' s financial profile been
13 characterized recently by the investment community?
14 A. The investment community has recently taken note
15 of Idaho Power' s worsening financial status . For example,
16 Moody' s recently commented that "IPC ' s financial profile has
17 declined due to a combination of high capital expenditures,
18 slow cash flow growth and the lack of general rate cases (GRC)
19 filed for several years prior to June 2023, " adding that "We
20 expect IPC' s credit metrics to continue to be pressured due to
21 a sizeable capital expenditure program that will necessitate
39 Idaho Public Utilities Commission, In the Matter of the Application of
Idaho Power Company for Authority to Increase Rates for Electric Service
to Recover Costs Associated with Incremental Capital Investments and
Certain Ongoing Operations and Maintenance Expenses, Rebuttal Testimony of
Brian R. Buckham, Case No. IPC-E-24-07 (Nov. 27, 2024) at 13.
ao Id.
THOMPSON, DI 38
Idaho Power Company

I additional debt. "41 Moody" s further noted that " [t] he negative
2 outlook reflects these weak credit metrics that ... may not
3 improve due to the higher capital expenditures ... and limited
4 equity issuance to offset higher debt levels . 1142 Continued
5 support for the Company' s financial strength and flexibility
6 would be viewed positively by investors, and would enhance
7 Idaho Power' s ability to attract the capital necessary to fund
8 these projects as well as their debt repayments effectively.
9 iii. Regulatory Mechanisms
10 Q. Would investors also consider the implications
11 of regulatory mechanisms in evaluating Idaho Power' s relative
12 risks?
13 A. Yes . In response to the increasing sensitivity
14 over fluctuations in costs and the importance of advancing
15 other public interest goals such as reliability, energy
16 conservation and safety, utilities and their regulators have
17 sought to mitigate cost recovery uncertainty and align the
18 interest of utilities and their customers . As a result,
19 adjustment mechanisms, cost trackers, and future test years
20 have become increasingly prevalent, along with alternatives to
21 traditional ratemaking such as formula rates and multi-year
22 rate plans . RRA Regulatory Focus concluded in its most recent
23 review of adjustment clauses that:
41 Moody's Ratings, Idaho Power Company - Update to credit analysis, Credit
Opinion (Mar. 14, 2025) .
42 Id.
THOMPSON, DI 39
Idaho Power Company

1 More recently and with greater frequency,
2 commissions have approved mechanisms that
3 permit the costs associated with the
4 construction of new generation or delivery
5 infrastructure to be used, effectively
6 including these items in rate base without the
7 need for a full rate case . In some instances,
8 these mechanisms may even provide the
9 utilities a cash return on construction work
10 in progress .
11 ... [C] ertain types of adjustment clauses are
12 more prevalent than others . For example,
13 those that address electric fuel and gas
14 commodity charges are in place in all
15 jurisdictions . Also, about two-thirds of all
16 utilities have riders in place to recover
17 costs related to energy efficiency programs,
18 and roughly half of the utilities have some
19 type of decoupling mechanism in place. 43
20 As shown on Exhibit 6, and reflective of this trend,
21 the companies in the Utility Group operate under a wide
22 variety of cost adjustment mechanisms, which encompass revenue
23 decoupling and adjustment clauses designed to address rising
24 capital investment outside of a traditional rate case, as well
25 as riders to recover the cost of environmental compliance
26 measures, transmission-related charges, and other costs .
27 Q. What regulatory mechanisms are applicable to
28 Idaho Power' s utility operations?
29 A. In addition to a mechanism that accounts for
30 changes in power supply costs ("PCA") , Idaho Power operates
31 under the Fixed Cost Adjustment mechanism ("FCA") , which is a
43 S&P Global Market Intelligence, Adjustment Clause: A state-by-state
overview, RRA Regulatory Focus (Jul. 18, 2022) .
THOMPSON, DI 40
Idaho Power Company

1 form of "decoupling" that is designed to break the link
2 between a utility' s revenues and the energy usage of
3 residential and small commercial customers . The IPUC has also
4 authorized a rider to collect most of the Company' s energy
5 efficiency program costs and a deferral account for wildfire
6 resiliency costs . Most recently the IPUC approved a
7 modification to the PCA to capture fluctuations in third-party
8 wheeling revenues between rate cases .44
9 Meanwhile, under the PCA that currently governs
10 recovery of electric supply costs for the Company' s Idaho-
11 jurisdictional electric utility operations, 95 percent of the
12 difference between actual costs and base level costs are
13 passed through to customers, with 5 percent absorbed/retained
14 by shareholders . 45 Thus, in addition to the fact that recovery
15 is deferred when power costs rise above the level included in
16 current retail rates, investors recognize that this sharing
17 mechanism exposes the Company to unrecovered electric supply
18 costs . Both of these considerations can adversely affect
19 Idaho Power' s operating cash flow and liquidity.
20 Q. How do the regulatory mechanisms approved for
21 Idaho Power compare to other firms operating in the utility
22 industry?
44 Case No. IPC-E-24-38, Order No. 36502
45 Amounts related to power supplied by Qualifying Facilities are not
subject to cost sharing under the PCA.
THOMPSON, DI 41
Idaho Power Company

1 A. In contrast to many of the specific operating
2 companies associated with the firms in the Utility Group,
3 Idaho Power does not have approved cost tracking mechanisms to
4 address ongoing investment in new generation capacity.
5 Further, the Idaho jurisdiction has routinely relied on a
6 historical test year approach, which also creates a lag in
7 cost recovery. Thus, while investors would consider Idaho
8 Power' s regulatory mechanisms to be supportive of the
9 Company' s financial integrity, they are more limited than
10 those approved for other firms in the industry.
11 Q. Has the investment community taken note of Idaho
12 Power' s relative lack of regulatory mechanisms?
13 A. Yes . For example, Moody' s recently observed
14 that the Company' s "cash flow recovery could be delayed
15 because Idaho ' s regulatory framework lacks mechanisms that
16 could help expedite cash flow collection, " listing this factor
17 as one of Idaho Power' s "Credit challenges . 1146 It is
18 reasonable to conclude that investors are aware of the
19 Company' s relative lack of cost recovery mechanisms .
20 V. CAPITAL MARKET ESTIMATES
21 Q. What is the purpose of this section?
22 A. This section presents capital market estimates
23 of the ROE. First, I discuss the current outlook for capital
46 Moody's Ratings, Idaho Power Company - Update to credit analysis, Credit
Opinion (Mar. 14, 2025) .
THOMPSON, DI 42
Idaho Power Company

1 costs, including expectations for interest rates . Next, I
2 address the concept of the cost of common equity, along with
3 the risk-return tradeoff principle fundamental to capital
4 markets . I then describe the DCF, CAPM and risk premium
5 analyses conducted to estimate the cost of common equity for
6 the Utility Group. Finally, I comment on expected earnings
7 and non-utility DCF benchmarks .
8 A. Outlook for Capital Costs
9 Q. Please summarize current economic and capital
10 market conditions .
11 A. Following the economic contraction stemming from
12 the COVID-19 pandemic in 2020, U. S . real GDP improved
13 significantly in 2021, with GDP growing at a pace of 5 . 7
14 percent . 47 Economic growth was more subdued in subsequent
15 years, falling in a range of 2 . 5 percent to 2 . 9 percent
16 between 2022 and 2024 . 48 Meanwhile, indicators of employment
17 have been weakening somewhat, with the national unemployment
18 rate rising slightly to 4 . 2 percent in February 2025 . 49
19 The underlying risk and price pressures associated with
20 the COVID-19 pandemic were overshadowed by a dramatic increase
47 U.S. Dep't of Commerce, Bureau of Economic Analysis,
https://www.bea.gov/news/2022/gross-domestic-product-fourth-quarter-and-
year-2021-second-estimate (last visited Mar. 25, 2025) .
48 U.S. Dep't of Commerce, Bureau of Economic Analysis,
https://www.bea.gov/data/gdp/gross-domestic-product (last visited Mar. 25,
2025) .
49 News Release, U.S. Dep't of Labor, Bureau of Labor Statistics, The
Employment Situation March 2025 (Apr. 4, 2025) ,
https://www.bls.gov/news.release/pdf/empsit.pdf (last visited Apr. 24,
2025) .
THOMPSON, DI 43
Idaho Power Company

1 in global uncertainties following Russia' s invasion of Ukraine
2 in February 2022 . Geopolitical risks were compounded by the
3 resurgence of conflict in the Middle East, which are ongoing.
4 Apart from disrupting global trade, the potential for
5 escalation prompted concerns over potential constraints to
6 crude oil supplies and resulting supply-side price shocks that
7 could reignite inflation.
8 Stimulative monetary and fiscal policies, coupled with
9 supply-chain disruptions and rapid price rises in the energy
10 and commodities markets, led to increasing concern that
11 inflation would remain significantly above the Federal
12 Reserve' s longer-run benchmark of 2 percent. CPI inflation
13 peaked in June 2022 at 9 . 1 percent, its highest level since
14 November 1981 . CPI inflation has moderated significantly
15 since then, but remained at 2 . 4 percent in March 2025, 50 which
16 exceeds the Federal Reserve' s 2 . 0 percent target. The so-
17 called "core" price index, which excludes more volatile energy
18 and food costs, rose at an annual rate of 2 . 8 percent in March
19 2025 .51 PCE inflation rose 2 . 5 percent in February 2025, or
20 2 . 8 percent after excluding more volatile food and energy
21 costs .52
50 U.S. Dept of Labor, Bureau of Labor Statistics, Consumer Price Index
Summary (Apr. 10, 2025) , https://www.bls.gov/news.release/cpi.nrO.htm
(last visited Apr. 24, 2025) .
51 Id.
52 Bureau of Economic Analysis, Personal Income and Outlays, February 2025,
BEA 25-11 (Mar. 28, 2025) , https://www.bea.gov/news/2025/personal-income-
and-outlays-february-2025 (last visited Apr. 24, 2025) .
THOMPSON, DI 44
Idaho Power Company

1 The investment community has recently expressed growing
2 concern that rising import tariffs and the prospect of a
3 global trade conflict may reignite inflation and lead to
4 economic recession. The introduction of President Trump' s
5 aggressive tariff regime in early April sparked a significant
6 stock market selloff and fueled volatility in global equity
7 markets, with Moody' s recently noting that "The global trade
8 war has taken a dark turn. 1153 Investors continue to face the
9 prospect of heightened market volatility as capital markets
10 respond to these uncertainties .
11 Q. Have these developments impacted the risks faced
12 by utilities and their investors?
13 A. Yes . In February 2024, S&P revised its outlook
14 for the utility sector to "negative, " noting that:
15 Credit quality for North American investor-
16 owned regulated utilities has weakened over
17 the past four years, with downgrades outpacing
18 upgrades by more than three times . We expect
19 downgrades to again surpass upgrades in 2024
20 for the fifth consecutive year. 54
21 S&P affirmed their negative outlook later in 2024,
22 citing to rising physical risks, as well as weakening
23 financial measures due to "record-breaking capital spending"
24 and cash flow deficits, and noting "the industry' s high
53 Moody's Investors Service, U.S. Outlook: Trade War Scenarios, Moody's
Analytics Economic View (Apr. 21, 2025) .
54 S&P Global Ratings, Rising Risks: Outlook For North American Investor-
Owned Regulated Utilities Weakens, Criteria Corporates (Feb. 14, 2024) .
THOMPSON, DI 45
Idaho Power Company

1 percentage of companies ... that operate with only minimal
2 financial cushion from their downgrade threshold. 1155 More
3 recently, S&P confirmed their negative outlook for the utility
4 sector, noting that "Rising capital spending, higher cash flow
5 deficits, and increased wildfire risks led to downgrades
6 outpacing upgrades for the fifth consecutive year. 1156
7 Meanwhile, Moody' s cautioned that widening cash flow
8 deficits in the utility industry were placing increasing
9 negative pressure on financial credit metrics, concluding that
10 credit pressure "will likely continue to lead to negative
11 rating actions if not sufficiently mitigated. "57
12 Utilities are also exposed to supply chain risk and
13 procurement cost management associated with increasing tariff
14 barriers to trade. In 2024, China accounted for over 50
15 percent of low-voltage transformer imports, while Mexico is
16 the largest trading partner for medium and high-voltage
17 transformers . 58 Utilities in the U. S . also rely heavily on
18 imports from China, Canada, and Mexico for breakers and
55 S&P Global Ratings, Regulated Utilities: Credit risks are rising,
Industry Credit Outlook Update - North America (Jul. 18, 2024) .
56 S&P Global Ratings, North American Regulated Utilities: Capex and
climate change pressures credit quality, Industry Credit Outlook 2025
(Jan. 14, 2025) .
57 Moody's Investors Service, Electric and Gas Utilities - US, Sector In-
Depth (Oct. 21, 2024) .
58 Wood MacKenzie, Navigating the impact of President Trump's tariffs on
utility supply chains (Jan. 16, 2025) .
https://www.woodmac.com/news/opinion/the-impact-of-proposed-tariffs-on-
utility-supply-chains/ (last visited Mar. 17, 2025) .
THOMPSON, DI 46
Idaho Power Company

1 switchgear. Wood Mackenzie, a global data and analytics
2 provider for the energy industry, noted that:
3 This critical path aspect of transmission and
4 distribution projects has already faced
5 tremendous security of supply and cost
6 pressure the past five years with increased
7 competition for the materials with the rise of
8 renewables and transmission & distribution
9 construction, increased storm response and
10 volatile metals markets . . . . The additional
11 cost pressure from tariffs coupled with supply
12 pressure via new electric generation assets to
13 support AI data centres, and a shift of
14 federal investments from renewables builds to
15 T&D infrastructure may exacerbate what the
16 last five years have been. 59
17 Apart from contributing to higher prices for materials
18 and equipment, supply chain disruptions and shortages have the
19 potential to delay necessary construction and maintenance of
20 utility infrastructure.
21 Q. Do recent trends indicate that the cost of
22 equity has increased relative to the recent past?
23 A. Yes . While the cost of equity is not
24 observable, interest rates provide a gauge for the direction
25 of capital costs, including required returns on common stocks .
26 Table 2 below compares widely referenced capital market
27 benchmarks in March 2025 with average levels for 2021 .
59 Id.
THOMPSON, DI 47
Idaho Power Company

1 TABLE 2
2 Capital Market Benchmarks
March Change
Series 2021 2025 (bps)
10-Year Treasury Bonds 1 . 44% 4 . 28% 284
30-Year Treasury Bonds 2 . 05% 4 . 60% 255
Baa Utility Bonds 3 . 35% 5 . 91% 256
Prime Loan Rate 3 . 25% 7 . 50% 425
Federal Funds Rate 0 . 13% 4 . 38% 425
Source: https://fred.stlouisfed.org; Moody's Credit Trends.
3 As shown above, trends in bond yields since 2021
4 document a substantial increase in the returns on long-term
5 capital demanded by investors . With respect to utility bond
6 yields, which are the most relevant indicator for the
7 Company' s common equity investors, the average yield in March
8 2025 is more than 250 basis points above the level prevailing
9 during 2021 .
10 Q. Do investors anticipate that these higher bond
11 yields will be sustained?
12 A. Yes . As illustrated in Figure 1 below, the most
13 recent long-term consensus projections from top economists
14 published by Blue Chip document that long-term bond yields are
15 expected to remain elevated when compared to recent historical
16 levels .
THOMPSON, DI 48
Idaho Power Company

1 FIGURE 1
2 Interest Rate Trends
6.0%
5.0%
4.0%
3.0%
2.0%
1.0%
2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
�Baa Utility �Aaa Corporate �30-Yr. Treasury �10-Yr. Treasury
Source: Moody's Investors Service; https://fred.stlouisfed.org/; Wolters Kluwer, Blue Chip
Financial Forecasts (Nov. 27, 2024) .
3 This evidence shows that long-term capital costs-
4 including the ROE—have increased substantially since 2021, and
5 that investors expect these higher capital costs to be
6 sustained at least through 2030 .
7 Q. What implications do these trends have in
8 evaluating a just and reasonable ROE for Idaho Power?
9 A. The upward move in interest rates suggests that
10 long-term capital costs, including the cost of equity, have
11 increased significantly in recent years . Exposure to higher
12 interest rates, inflation, and capital expenditure
13 requirements also reinforce the importance of buttressing the
14 Company' s credit standing. Considering the potential for
THOMPSON, DI 49
Idaho Power Company

1 financial market instability, competition with other
2 investment alternatives, and investors' sensitivity to risk
3 exposures in the utility industry, credit strength is a key
4 ingredient in maintaining access to capital at reasonable
5 cost .
6 If the upward shift in investors' risk perceptions and
7 required rates of return for long-term capital is not
8 incorporated in the allowed ROE, the results will fail to meet
9 the comparable earnings standard that is fundamental in
10 determining the cost of capital . From a more practical
11 perspective, failing to provide investors with the opportunity
12 to earn a rate of return commensurate with Idaho Power' s risks
13 will weaken its financial integrity and undermine its ability
14 to attract necessary capital .
15 B. Discounted Cash Flow Analysis
16 Q. How is the DCF model used to estimate the cost
17 of common equity?
18 A. DCF models are based on the assumption that the
19 price of a share of common stock is equal to the present value
20 of the expected cash flows (i .e. , future dividends and stock
21 price) that will be received while holding the stock,
22 discounted at investors' required rate of return. Rather than
23 developing annual estimates of cash flows into perpetuity, the
24 DCF model can be simplified to a "constant growth" form:
THOMPSON, DI 50
Idaho Power Company

ke P1 +g
1
2 where : ke = Cost of equity;
3 Di = Expected dividend per share in the coming year;
4 Po = Current price per share; and,
5 g = Investors' long-term growth expectations .
6 This constant growth form of the DCF model recognizes
7 that the rate of return to stockholders consists of two parts :
8 1) dividend yield (Di/Po) ; and 2) growth (g) . In other words,
9 investors expect to receive a portion of their total return in
10 the form of current dividends and the remainder through price
11 appreciation.
12 Q. What steps are required to apply the constant
13 growth DCF model?
14 A. The first step is to determine the expected
15 dividend yield (D1/Po) for the firm in question. This is
16 usually calculated based on an estimate of dividends to be
17 paid in the coming year divided by the current price of the
18 stock. The second, and more controversial, step is to estimate
19 investors' long-term growth expectations (g) for the firm. The
20 final step is to add the firm' s dividend yield and estimated
21 growth rate to arrive at an estimate of its cost of common
22 equity.
23 Q. How do you determine the dividend yields for the
24 Utility Group?
THOMPSON, DI 51
Idaho Power Company

1 A. Estimates of dividends to be paid by each of
2 these utilities over the next twelve months, obtained from
3 Value Line, served as Di . This annual dividend is then
4 divided by a 30-day average stock price for each utility to
5 arrive at the expected dividend yield. The expected
6 dividends, stock prices, and resulting dividend yields for the
7 firms in the Utility Group are presented on page 1 of Exhibit
8 7 . As shown there, dividend yields for the firms in the
9 Utility Group range from 2 . 6 percent to 5 . 1 percent and
10 averaged 3 . 7 percent .
11 Q. What is the next step in applying the constant
12 growth DCF model?
13 A. The next step is to evaluate long-term growth
14 expectations, or "g", for the firm in question. In constant
15 growth DCF theory, earnings, dividends, book value, and market
16 price are all assumed to grow in lockstep, and the growth
17 horizon of the DCF model is infinite. But implementation of
18 the DCF model is not a theoretical exercise; it is an attempt
19 to replicate the mechanism investors used to arrive at
20 observable stock prices . A wide variety of techniques can be
21 used to derive growth rates, but the only "g" that matters in
22 applying the DCF model is the forward-looking expectations of
23 real-world investors .
24 Q. What are investors most likely to consider in
25 developing their long-term growth expectations?
THOMPSON, DI 52
Idaho Power Company

1 A. In the case of utilities, dividend growth rates
2 are not likely to provide a meaningful guide to investors'
3 current growth expectations . Utility dividend policies reflect
4 the need to accommodate business risks and investment
5 requirements in the industry, as well as potential
6 uncertainties in the capital markets . As a result, dividend
7 growth in the utility industry generally lags growth in
8 earnings as utilities conserve financial resources .
9 A measure that plays a pivotal role in determining
10 investors' long-term growth expectations is future trends in
11 earnings per share ("EPS") , which provide the source for
12 future dividends and ultimately support share prices . The
13 importance of earnings in evaluating investors' expectations
14 and requirements is well accepted in the investment community,
15 and surveys of analytical techniques relied on by professional
16 analysts indicate that growth in earnings is far more
17 influential than trends in dividends per share ("DPS") .
18 The availability of projected EPS growth rates also is
19 key to investors relying on this measure as compared to future
20 trends in DPS . Apart from Value Line, investment advisory
21 services do not generally publish comprehensive DPS growth
22 projections, and this scarcity of dividend growth rates
23 relative to the abundance of earnings forecasts attests to
24 their relative influence . The fact that securities analysts
25 focus on EPS growth, and that DPS growth rates are not
THOMPSON, DI 53
Idaho Power Company

1 routinely published, indicates that projected EPS growth rates
2 are likely to provide a superior indicator of the future long-
3 term growth expected by investors .
4 Q. Do the growth rate projections of security
5 analysts also consider historical trends?
6 A. Yes . Professional security analysts study
7 historical trends extensively in developing their projections
8 of future earnings . To the extent there is any useful
9 information in historical patterns, that information is
10 incorporated into analysts' growth forecasts .
11 Q. What are security analysts currently projecting
12 in the way of growth for the firms in the Utility Group?
13 A. The earnings growth projections for each of the
14 firms in the Utility Group reported by Value Line, IBES, 60 and
15 Zacks Investment Research ("Zacks") are displayed on page 2 of
16 Exhibit 7 .
17 Q. How else are investors' expectations of future
18 long-term growth prospects sometimes estimated when applying
19 the constant growth DCF model?
20 A. In constant growth theory, growth in book equity
21 will be equal to the product of the earnings retention ratio
22 (one minus the dividend payout ratio) and the earned rate of
23 return on book equity. Furthermore, if the earned rate of
60 Formerly I/B/E/S International, Inc. , IBES growth rates are now compiled
and published by LSEG.
THOMPSON, DI 54
Idaho Power Company

1 return and the payout ratio are constant over time, growth in
2 earnings and dividends will be equal to growth in book value .
3 Despite the fact that these conditions are never met in
4 practice, this "sustainable growth" approach may provide a
5 rough guide for evaluating a firm' s growth prospects and is
6 frequently proposed in regulatory proceedings .
7 The sustainable growth rate is calculated by the
8 formula, g = br+sv, where "b" is the expected retention ratio,
9 "r" is the expected earned return on equity, "s" is the
10 percent of common equity expected to be issued annually as new
11 common stock, and "v" is the equity accretion rate . Under DCF
12 theory, the "sv" factor is a component of the growth rate
13 designed to capture the impact of issuing new common stock at
14 a price above, or below, book value. The sustainable, "br+sv"
15 growth rates for each firm in the proxy group are summarized
16 on page 2 of Exhibit 7, with the underlying details being
17 presented on Exhibit 8 .
18 The sustainable growth rate analysis shown on Exhibit 8
19 incorporates an "adjustment factor" because Value Line' s
20 reported returns are based on year-end book values . Since
21 earnings is a flow over the year while book value is
22 determined at a given point in time, the measurement of
23 earnings and book value are distinct concepts . It is this
24 fundamental difference between a flow (earnings) and point
25 estimate (book value) that makes it necessary to adjust to
THOMPSON, DI 55
Idaho Power Company

1 mid-year in calculating the ROE. Given that book value will
2 increase or decrease over the year, using year-end book value
3 (as Value Line does) understates or overstates the average
4 investment that corresponds to the flow of earnings . To
5 address this concern, earnings must be matched with a
6 corresponding representative measure of book value, or the
7 resulting ROE will be distorted. The adjustment factor
8 determined in Exhibit 8 is solely a means of converting Value
9 Line' s end-of-period values to an average return over the
10 year, and the formula for this adjustment is supported in
11 recognized textbooks and has been adopted by other
12 regulators . 61
13 Q. Are there significant shortcomings associated
14 with the "br+sv" growth rate?
15 A. Yes . First, in order to calculate the
16 sustainable growth rate, it is necessary to develop estimates
17 of investors' expectations for four separate variables;
18 namely, "b", "r", "s", and "v. " Given the inherent difficulty
19 in forecasting each parameter and the difficulty of estimating
20 the expectations of investors, the potential for measurement
21 error is significantly increased when using four variables, as
22 opposed to referencing a direct projection for EPS growth.
23 Second, empirical research in the finance literature indicates
61 See, Roger A. Morin, New Regulatory Finance, Pub. Utils. Reports, Inc.
(2006) at 305-306; Bangor Hydro-Electric Co. et al. , 122 FERC 1 61,265 at
n.12 (2008) .
THOMPSON, DI 56
Idaho Power Company

1 that sustainable growth rates are not as significantly
2 correlated to measures of value, such as share prices, as are
3 analysts' EPS growth forecasts . 62 The "sustainable growth"
4 approach is included for completeness, but evidence indicates
5 that analysts' forecasts provide a superior and more direct
6 guide to investors' growth expectations . Accordingly, I give
7 less weight to cost of equity estimates based on br+sv growth
8 rates in evaluating the results of the DCF model .
9 Q. What cost of common equity estimates are implied
10 for the Utility Group using the DCF model?
11 A. After combining the dividend yields and
12 respective growth projections for each utility, the resulting
13 cost of common equity estimates are shown on page 3 of Exhibit
14 7 .
15 Q. In evaluating the results of the constant growth
16 DCF model, is it appropriate to eliminate illogical estimates?
17 A. Yes . It is essential that the cost of equity
18 estimates produced by quantitative methods pass fundamental
19 tests of reasonableness and economic logic. Accordingly, DCF
20 estimates that are implausibly low or high should be
21 eliminated.
22 Q. How do you evaluate DCF estimates at the low end
23 of the range?
62 Roger A. Morin, New Regulatory Finance, Pub. Util. Reports, Inc. (2006)
at 307.
THOMPSON, DI 57
Idaho Power Company

1 A. I base my evaluation of DCF estimates at the low
2 end of the range on the fundamental risk-return tradeoff,
3 which holds that investors will only take on more risk if they
4 expect to earn a higher rate of return to compensate them for
5 the greater uncertainty. Because common stocks lack the
6 protections associated with an investment in long-term bonds,
7 a utility' s common stock imposes far greater risks on
8 investors . As a result, the rate of return that investors
9 require from a utility' s common stock is considerably higher
10 than the yield offered by senior, long-term debt. Consistent
11 with this principle, DCF results that are not sufficiently
12 higher than the yield available on less risky utility bonds
13 must be eliminated.
14 Q. Have similar tests been applied by regulators?
15 A. Yes . FERC has noted that adjustments are
16 justified where applications of the DCF approach and other
17 methods produce illogical results . FERC evaluates low-end DCF
18 results against observable yields on long-term public utility
19 debt and has recognized that it is appropriate to eliminate
20 estimates that do not sufficiently exceed this threshold. 63
21 FERC' s current practice is to exclude low-end cost of
22 estimates that fall below the six-month average yield on Baa-
23 rated utility bonds, plus 20 percent of the CAPM market risk
63 See, Assn of Bus. Advocating Tariff Equity v. Midcontinent Indep. Sys.
Operator, Inc. , 169 FERC 1 61,129 at PP 387, 388 (2019) .
THOMPSON, DI 58
Idaho Power Company

1 premium. 64 In addition, FERC also excludes estimates that are
2 "irrationally or anomalously high. "65
3 Q. Do you exclude any estimates at the low or high
4 end of the range of DCF results?
5 A. Yes . As highlighted on page 3 of Exhibit 7, I
6 eliminate six low-end DCF estimates ranging from 5 . 9 percent
7 to 7 . 1 percent, as well as two high-end DCF results of 18 . 5
8 percent and 26 . 1 percent. After removing these illogical
9 values, the lower end of the DCF results is set by a cost of
10 equity estimate of 7 . 6 percent, while the upper end is
11 established by a cost of equity estimate of 12 . 4 percent.
12 While a 12 . 4 percent cost of equity estimate may exceed the
13 other values, retained low-end DCF estimates in the 7 . 6
14 percent to 8 . 2 percent range are assuredly far below
15 investors' required rate of return. Taken together and
16 considered along with the balance of the results, the
17 remaining values provide a reasonable basis on which to frame
18 the range of plausible DCF estimates and evaluate investors'
19 required rate of return.
20 Q. What ROE estimates are implied by your DCF
21 results for the Utility Group?
54 Based on the six-month average yield at March 2025 of 5.84 percent and
the 7. 6 percent market risk premium shown on Exhibit 13, this implies a
current low-end threshold of approximately 7.4 percent.
65 Ass'n of Bus. Advocating Tariff Equity v. Midcontinent Indep. Sys.
Operator, Inc. , 171 FERC 1 61,154 at P 152 (2020) .
THOMPSON, DI 59
Idaho Power Company

1 A. As shown on page 3 of Exhibit 7 and summarized
2 in Table 3, below, after eliminating illogical values,
3 application of the constant growth DCF model resulted in the
4 following ROE estimates :
5 TABLE 3
6 DCF Results - Utility Group
Growth Rate Average
Value Line 9 . 4%
IBES 10 . 7%
Zacks 10 . 4%
br + sv 8 . 9%
7 C. Capital Asset Pricing Model
8 Q. Please describe the CAPM.
9 A. The CAPM is a theory of market equilibrium that
10 measures risk using the beta coefficient. Assuming investors
11 are fully diversified, the relevant risk of an individual
12 asset (e . g. , common stock) is its volatility relative to the
13 market as a whole, with beta reflecting the tendency of a
14 firm' s stock price to follow changes in the market. A stock
15 that tends to respond less to market movements has a beta of
16 less than 1 . 0, while stocks that tend to move more than the
17 market have betas greater than 1 . 0 . The CAPM is mathematically
18 expressed as :
THOMPSON, DI 60
Idaho Power Company

1 Rj = Rf +pj (Rm - Rf)
2 where : Rj = required rate of return for stock j ;
3 Rf = risk-free rate;
4 R,,, = expected return on the market portfolio; and,
5 Rj = beta, or systematic risk, for stock j .
6 Under the CAPM formula above, a stock' s required return
7 is a function of the risk-free rate (Rf) , plus a risk premium
8 that is scaled to reflect the relative volatility of a firm' s
9 stock price, as measured by beta (P) . Like the DCF model, the
10 CAPM is an ex-ante, or forward-looking model based on
11 expectations of the future. As a result, in order to produce
12 a meaningful estimate of investors' required rate of return,
13 the CAPM must be applied using estimates that reflect the
14 expectations of actual investors in the market, not with
15 backward-looking, historical data.
16 Q. Why is the CAPM approach relevant when
17 evaluating the cost of equity for Idaho Power?
18 A. The CAPM approach is generally considered to be
19 the most widely referenced method for estimating the cost of
20 equity among academicians and professional practitioners, with
21 the pioneering researchers of this method receiving the Nobel
22 Prize in 1990 . Because this is the dominant model for
23 estimating the cost of equity outside the regulatory sphere,
24 the CAPM provides important insight into investors' required
25 rate of return for utility stocks .
THOMPSON, DI 61
Idaho Power Company

1 Q. How do you apply the CAPM to estimate the ROE?
2 A. Application of the CAPM to the Utility Group
3 based on a forward-looking estimate for investors' required
4 rate of return from common stocks is presented in Exhibit 9 .
5 In order to capture the expectations of today' s investors in
6 current capital markets, the expected market rate of return is
7 estimated by conducting a DCF analysis on the dividend paying
8 firms in the S&P 500 .
9 The dividend yield for each firm is obtained from Value
10 Line, and the growth rate is equal to the average of the
11 earnings growth projections for each firm published by IBES,
12 Value Line, and Zacks, with each firm' s dividend yield and
13 growth rate being weighted by its proportionate share of total
14 market value. After removing companies with growth rates that
15 were negative or greater than 20 percent, the weighted average
16 of the projections for the individual firms implies an average
17 growth rate over the next five years of 10 . 5 percent.
18 Combining this average growth rate with a year-ahead dividend
19 yield of 1 . 7 percent results in a current cost of common
20 equity estimate for the market as a whole (Rm) of 12 .2
21 percent . Subtracting a 4 . 6 percent risk-free rate based on
22 the average yield on 30-year Treasury bonds for the six-months
23 ending March 2025 produces a market equity risk premium of 7 . 6
24 percent.
THOMPSON, DI 62
Idaho Power Company

1 Q. What is the source of the beta values you use to
2 apply the CAPM?
3 A. As indicated earlier in my discussion of risk
4 measures for the proxy group, I relied on the beta values
5 reported by Value Line, which in my experience is the most
6 widely referenced source for beta in regulatory proceedings .
7 Q. What else should be considered in applying the
8 CAPM?
9 A. Financial research indicates that the CAPM does
10 not fully account for observed differences in rates of return
11 attributable to firm size. Accordingly, a modification is
12 required to account for this size effect. As explained by
13 Morningstar:
14 One of the most remarkable discoveries of
15 modern finance is the finding of a
16 relationship between firm size and return. On
17 average, small companies have higher returns
18 than large ones.... The relationship between
19 firm size and return cuts across the entire
20 size spectrum; it is not restricted to the
21 smallest stocks . 66
22 According to the CAPM, the expected return on a
23 security should consist of the riskless rate, plus a premium
24 to compensate for the systematic risk of the particular
25 security. The degree of systematic risk is represented by the
26 beta coefficient. The need for the size adjustment arises
66 Morningstar, 2015 Ibbotson SBBI Classic Yearbook, at 99.
THOMPSON, DI 63
Idaho Power Company

1 because differences in investors' required rates of return
2 that are related to firm size are not fully captured by beta.
3 To account for this, researchers have developed size premiums
4 that need to be added to account for the level of a firm' s
5 market capitalization in determining the CAPM cost of equity. 67
6 Accordingly, my CAPM analysis also incorporates an adjustment
7 to recognize the impact of size distinctions, as measured by
8 the market capitalization for the firms in the Utility Group.
9 Q. What is the basis for the size adjustment?
10 A. The size adjustment required in applying the
11 CAPM is based on the finding that, after controlling for risk
12 differences as measured by beta, the CAPM overstates returns
13 to companies with larger market capitalizations and
14 understates returns for relatively smaller firms . The size
15 adjustments utilized in my analysis are sourced from Kroll,
16 who now publish the well-known compilation of capital market
17 series originally developed by Professor Roger G. Ibbotson of
18 the Yale School of Management. Calculation of the size
19 adjustments involve the following steps :
20 1 . Divide all stocks traded on the NYSE, NYSE MKT,
21 and NASDAQ indices into deciles based on their
22 market capitalization.
67 Originally compiled by Ibbotson Associates and published in their annual
yearbook entitled, Stocks, Bonds, Bills and Inflation, these size premia
are now developed by Kroll and presented in its Cost of Capital Navigator.
THOMPSON, DI 64
Idaho Power Company

1 2 . Using the average beta value for each decile,
2 calculate the implied excess return over the risk-
3 free rate using the CAPM.
4 3 . Compare the calculated excess returns based on the
5 CAPM to the actual excess returns for each decile,
6 with the difference being the increment of return
7 that is related to firm size, or "size
8 adjustment. "
9 New Regulatory Finance observed that "small market-cap
10 stocks experience higher returns than large market-cap stocks
11 with equivalent betas, " and concluded that "the CAPM
12 understates the risk of smaller utilities, and a cost of
13 equity based purely on a CAPM beta will therefore produce too
14 low an estimate. "68 As FERC has recognized, " [t] his type of
15 size adjustment is a generally accepted approach to CAPM
16 analyses . "69
17 Q. Is this size adjustment related to the relative
18 size of Idaho Power as compared to the proxy group?
19 A. No. The size adjustments used in my application
20 of the CAPM do not relate to Idaho Power; rather, they are
21 based on the market capitalization of the firms in the Utility
22 Group. The size adjustments are specific to the CAPM and
23 merely correct for an observed inability of the beta measure
24 to fully reflect the risks perceived by investors for the
25 firms in the proxy group.
68 Roger A. Morin, New Regulatory Finance, Pub. Utils. Reports, Inc. (2006)
at 187.
69 Martha Coakley et al. v. Bangor Hydro-Elec. Co. et al. , Opinion No. 531-
B, 150 FERC 1 61, 165 at P 117 (2015) .
THOMPSON, DI 65
Idaho Power Company

1 Q. What is the implied ROE for the Utility Group
2 using the CAPM approach?
3 A. As shown on Exhibit 9, the CAPM approach implies
4 an average ROE for the Utility Group of 10 . 7 percent, or 11 . 1
5 percent after adjusting for the impact of firm size .
6 D. Utility Risk Premium
7 Q. Briefly describe the risk premium method.
8 A. The risk premium method extends the risk-return
9 tradeoff observed with bonds to estimate investors' required
10 rate of return on common stocks . The cost of equity is
11 estimated by first determining the additional return investors
12 require to forgo the relative safety of bonds and to bear the
13 greater risks associated with common stock, and then adding
14 this equity risk premium to the current yield on bonds . Like
15 the DCF model, the risk premium method is capital market
16 oriented. However, unlike DCF models, which indirectly impute
17 the cost of equity, risk premium methods directly estimate
18 investors' required rate of return by adding an equity risk
19 premium to observable bond yields .
20 Q. Is the risk premium approach a widely accepted
21 method for estimating the cost of equity?
22 A. Yes . The risk premium approach is based on the
23 fundamental risk-return principle that is central to finance,
24 which holds that investors will require a premium in the form
25 of a higher return in order to assume additional risk. This
THOMPSON, DI 66
Idaho Power Company

1 method is routinely referenced by the investment community and
2 in academia and regulatory proceedings and provides an
3 important tool in estimating a fair ROE for Idaho Power.
4 Q. How do you implement the risk premium method?
5 A. Estimates of equity risk premiums for utilities
6 are based on surveys of previously authorized ROES .
7 Authorized ROES presumably reflect regulatory commissions'
8 best estimates of the cost of equity, however determined, at
9 the time they issued their final order. Such ROES should
10 represent a balanced and impartial outcome that considers the
11 need to maintain a utility' s financial integrity and ability
12 to attract capital . Moreover, allowed returns are an
13 important consideration for investors and have the potential
14 to influence other observable investment parameters, including
15 credit ratings and borrowing costs . Thus, when considered in
16 the context of a complete and rigorous analysis, this data
17 provides a logical and frequently referenced basis for
18 estimating equity risk premiums for regulated utilities .
19 Q. How do you calculate the equity risk premiums
20 based on allowed returns?
21 A. The ROEs authorized for electric utilities by
22 regulatory commissions across the U. S . are compiled by S&P
23 Global Market Intelligence and published in its RRA Regulatory
24 Focus report. On page 2 of Exhibit 10, the average yield on
25 public utility bonds is subtracted from the average allowed
THOMPSON, DI 67
Idaho Power Company

1 ROE for electric utilities to calculate equity risk premiums
2 for each year between 1974 and 2024 . 70 As shown there, over
3 this period these equity risk premiums for electric utilities
4 averaged 3 . 90 percent, and the yields on public utility bonds
5 averaged 7 . 74 percent.
6 Q. Is there any capital market relationship that
7 must be considered when implementing the risk premium method?
8 A. Yes . Equity risk premiums are not constant and
9 tend to move inversely with interest rates . In other words,
10 when interest rate levels are relatively high, equity risk
11 premiums narrow, and when interest rates are relatively low,
12 equity risk premiums widen . The implication of this inverse
13 relationship is that the cost of equity does not move as much
14 as, or in lockstep with, interest rates . Accordingly, for a 1
15 percent increase or decrease in interest rates, the cost of
16 equity may only rise or fall some fraction of 1 percent. When
17 implementing the risk premium method, adjustments are required
18 to incorporate this inverse relationship if the current
19 interest rate is different from the average interest rate over
20 the study period.
21 Current bond yields are lower than those prevailing
22 over the risk premium study period. Given that equity risk
23 premiums move inversely with interest rates, these lower bond
70 My analysis encompasses the entire period for which published data is
available.
THOMPSON, DI 68
Idaho Power Company

1 yields also imply an increase in the equity risk premium. In
2 other words, higher required equity risk premiums offset the
3 impact of declining interest rates on the ROE .
4 Q. Is this inverse relationship confirmed by
5 published financial research?
6 A. Yes . The inverse relationship between equity
7 risk premiums and interest rates has been widely reported in
8 the financial literature. As summarized by New Regulatory
9 Finance:
10 Published studies by Brigham, Shome, and
11 Vinson (1985) , Harris (1986) , Harris and
12 Marston (1992, 1993) , Carleton, Chambers, and
13 Lakonishok (1983) , Morin (2005) , and McShane
14 (2005) , and others demonstrate that, beginning
15 in 1980, risk premiums varied inversely with
16 the level of interest rates - rising when
17 rates fell and declining when rates rose. 71
18 Other regulators have also recognized that, while the
19 cost of equity trends in the same direction as interest rates,
20 these variables do not move in lock-step. 72 This relationship
21 is illustrated in the figure on page 3 of Exhibit 10 .
22 Q. What ROE is implied by the risk premium method
23 using surveys of allowed returns?
71 Roger A. Morin, New Regulatory Finance, Pub. Utils. Reports (2006) at
128.
72 See, e.g., California Public Utilities Commission, Decision 08-05-035
(May 29, 2008) ; Entergy Mississippi Formula Rate Plan FRP-7,
https://cdn.entergy-
mississippi.com/userfiles/content/price/tariffs/eml_frp.pdf (last visited
Mar. 13, 2025) ; Martha Coakley et al. v. Bangor Hydro-Elec. Co. et al. ,
147 FERC 1 61,234 at P 147 (2014) .
THOMPSON, DI 69
Idaho Power Company

1 A. Based on the regression output between the
2 interest rates and equity risk premiums displayed on page 3 of
3 Exhibit 10, the equity risk premium for electric utilities
4 increases by approximately 42 basis points for each percentage
5 point drop in the yield on average public utility bonds . As
6 illustrated on page 1 of Exhibit 10 with an average yield on
7 public utility bonds for the six-months ending March 2025 of
8 5 . 67 percent, this implies a current equity risk premium of
9 4 . 77 percent for electric utilities . Adding this equity risk
10 premium to the average yield on Baa-rated utility bonds
11 implies a current ROE of 10 . 61 percent.
12 E. Flotation Costs
13 Q. What other consideration is relevant in setting
14 the return on equity for a utility?
15 A. The common equity used to finance the investment
16 in utility assets is provided from either the sale of stock in
17 the capital markets or from retained earnings not paid out as
18 dividends . When equity is raised through the sale of common
19 stock, there are costs associated with "floating" the new
20 equity securities . These flotation costs include services such
21 as legal, accounting, and printing, as well as the fees and
22 discounts paid to compensate brokers for selling the stock to
23 the public . Also, some argue that the "market pressure" from
24 the additional supply of common stock and other market factors
THOMPSON, DI 70
Idaho Power Company

1 may further reduce the amount of funds a utility nets when it
2 issues common equity.
3 Q. Is there an established mechanism for a utility
4 to recognize equity issuance costs?
5 A. No. While debt flotation costs are recorded on
6 the books of the utility, amortized over the life of the
7 issue, and thus increase the effective cost of debt capital,
8 there is no similar accounting treatment to ensure that equity
9 flotation costs are recorded and ultimately recognized. No
10 rate of return is authorized on flotation costs necessarily
11 incurred to obtain a portion of the equity capital used to
12 finance plant. In other words, equity flotation costs are not
13 included in a utility' s rate base because neither that portion
14 of the gross proceeds from the sale of common stock used to
15 pay flotation costs is available to invest in plant and
16 equipment, nor are flotation costs capitalized as an
17 intangible asset. Unless some provision is made to recognize
18 these issuance costs, a utility' s revenue requirements will
19 not fully reflect all of the costs incurred for the use of
20 investors' funds . Because there is no accounting convention to
21 accumulate the flotation costs associated with equity issues,
22 they must be accounted for indirectly, with an upward
23 adjustment to the cost of equity being the most appropriate
24 mechanism.
THOMPSON, DI 71
Idaho Power Company

1 Q. Is there academic evidence that supports a
2 flotation cost adjustment?
3 A. Yes . The financial literature and evidence in
4 this case provides a sound theoretical and practical basis to
5 include consideration of flotation costs for Idaho Power. An
6 adjustment for flotation costs associated with past sales of
7 common stock is appropriate, even when the utility is not
8 contemplating any new sales of common stock. The need for a
9 flotation cost adjustment to compensate for past common stock
10 offerings has been recognized in the financial literature . In
11 a Public Utilities Fortnightly article, for example, Brigham,
12 Aberwald, and Gapenski demonstrated that even if no further
13 stock issues are contemplated, a flotation cost adjustment in
14 all future years is required to keep shareholders whole, and
15 that the flotation cost adjustment must consider total equity,
16 including retained earnings . 73 Similarly, New Regulatory
17 Finance contains the following discussion:
18 Another controversy is whether the flotation
19 cost allowance should still be applied when
20 the utility is not contemplating an imminent
21 common stock issue . Some argue that flotation
22 costs are real and should be recognized in
23 calculating the fair rate of return on equity,
24 but only at the time when the expenses are
25 incurred. In other words, the flotation cost
26 allowance should not continue indefinitely,
27 but should be made in the year in which the
28 sale of securities occurs, with no need for
29 continuing compensation in future years . This
73 E. F. Brigham, D. A. Aberwald, and L. C. Gapenski, Common Equity
Flotation Costs and Rate Making, Pub. Util. Fortnightly (May 2, 1985) .
THOMPSON, DI 72
Idaho Power Company

1 argument implies that the company has already
2 been compensated for these costs and/or the
3 initial contributed capital was obtained
4 freely, devoid of any flotation costs, which
5 is an unlikely assumption, and certainly not
6 applicable to most utilities . ... The flotation
7 cost adjustment cannot be strictly forward-
8 looking unless all past flotation costs
9 associated with past issues have been
10 recovered.74
11 Q. Can you illustrate why investors will not have
12 the opportunity to earn their required ROE unless a flotation
13 cost adjustment is included?
14 A. Yes . Assume a utility sells $10 worth of common
15 stock at the beginning of year 1 . If the utility incurs
16 flotation costs of $0 . 48 (5 percent of the net proceeds) , then
17 only $9 . 52 is available to invest in rate base. Assume that
18 common shareholders' required rate of return is 10 . 5 percent,
19 the expected dividend in year 1 is $0 . 50 (i . e. , a dividend
20 yield of 5 percent) , and that growth is expected to be 5 . 5
21 percent annually. As developed in Table 4 below, if the
22 allowed rate of return on common equity is only equal to the
23 utility' s 10 . 5 percent "bare bones" cost of equity, common
24 stockholders will not earn their required rate of return on
25 their $10 investment, since growth will only be 5 . 25 percent,
26 instead of 5 . 5 percent:
74 Roger A. Morin, New Regulatory Finance, Pub. Util. Reports, Inc. (2006)
at 335.
THOMPSON, DI 73
Idaho Power Company

1 TABLE 4
2 No Flotation Cost Adjustment
Common Retained Total Market M/B Allowed Payout
Year Stock Earnings Equity Price Ratio ROE EPS DPS Ratio
1 $9.52 $ - $ 9.52 $10.00 1.050 10.50% $1.00 $0.50 50.0%
2 $9.52 $0.50 $10.02 $10.52 1.050 10.50% $1.05 $0.53 50.0%
3 $9.52 $0.53 $10.55 $11.08 1.050 10.50% $1.11 $0.55 50.0%
Growth 5.25% 5.25% 5.25% 5.25%
3 The reason that investors never really earn 10 . 5
4 percent on their investment in the above example is that the
5 $0 . 48 in flotation costs initially incurred to raise the
6 common stock is not treated like debt issuance costs (i . e. ,
7 amortized into interest expense and therefore increasing the
8 embedded cost of debt) , nor is it included as an asset in rate
9 base .
10 Including a flotation cost adjustment allows investors
11 to be fully compensated for the impact of these costs . One
12 commonly referenced method for calculating the flotation cost
13 adjustment is to multiply the dividend yield by a flotation
14 cost percentage. Thus, with a 5 percent dividend yield and a
15 5 percent flotation cost percentage, the flotation cost
16 adjustment in the above example would be approximately 25
17 basis points . As shown in Table 5 below, by allowing a rate
18 of return on common equity of 10 . 75 percent (a 10 . 5 percent
19 cost of equity plus a 25 basis point flotation cost
20 adjustment) , investors earn their 10 . 5 percent required rate
21 of return, since actual growth is now equal to 5 . 5 percent:
THOMPSON, DI 74
Idaho Power Company

1 TABLE 5
2 Including Flotation Cost Adjustment
Common Retained Total Market M/B Allowed Payout
Year Stock Earnings Equity Price Ratio ROE EPS DPS Ratio
1 $9.52 $ - $ 9.52 $10.00 1.050 10.75% $1.02 $0.50 48.9%
2 $9.52 $0.52 $10.04 $10.55 1.050 10.75% $1.08 $0.53 48.9%
3 $9.52 $0.55 $10.60 $11.13 1.050 10.75% $1.14 $0.56 48.9%
Growth 5.50% 5.50% 5.50% 5.50%
3 The only way for investors to be fully compensated for
4 issuance costs is to include an ongoing adjustment to account
5 for past flotation costs when setting the return on common
6 equity. This is the case regardless of whether the utility is
7 expected to issue additional shares of common stock in the
8 future .
9 Q. What is the magnitude of the adjustment to the
10 "bare bones" cost of equity to account for issuance costs?
11 A. The most common method used to account for
12 flotation costs in regulatory proceedings is to apply an
13 average flotation-cost percentage to a utility' s dividend
14 yield. In Exhibit 11, I present a survey of recent open-
15 market common stock issues for each company in Value Line' s
16 electric and gas utility industries . For electric utilities,
17 flotation costs averaged 2 . 5 percent. Applying the average
18 2 . 5 percent expense percentage for electric utilities to the
19 Utility Group dividend yield of 3 . 7 percentage produces a
20 flotation cost adjustment on the order of 9 basis points .
21 Q. Have regulators recognized flotation costs in
22 evaluating a fair and reasonable ROE?
THOMPSON, DI 75
Idaho Power Company

1 A. Yes . For example, In Case No . INT-G-16-02 the
2 IPUC staff noted that applying a flotation cost percentage to
3 the dividend yield "is referred to as the `conventional'
4 approach. Its use in regulatory proceedings is widespread,
5 and the formula is outlined in several corporate finance
6 textbooks . "75
7 The Wyoming Office of Consumer Advocate, an independent
8 division of the Wyoming Public Service Commission, has also
9 included flotation costs in evaluating a fair ROE. 76
10 Similarly, the South Dakota Public Utilities Commission has
11 recognized the impact of issuance costs, concluding that,
12 "recovery of reasonable flotation costs is appropriate . 1177
13 Another example of a regulator that approves common stock
14 issuance costs is the Mississippi Public Service Commission,
15 which routinely includes a flotation cost adjustment in its
16 Rate Stabilization Adjustment Rider formula. 78 The Public
17 Utilities Regulatory Authority of Connecticut, 79 the Minnesota
75 Idaho Public Utilities Commission, Case No. INT-G-16-02, Direct
Testimony of Mark Rogers (Dec. 16, 2016) at 18.
76 Wyoming Public Service Commission, Docket No. 30011-97-GR-17, Pre-Filed
Direct Testimony of Anthony J. Ornelas (May 1, 2018) at 52-53
(recommending a 10 basis point flotation cost adjustment) .
77 South Dakota Public Utilities Commission, Northern States Power Co,
EL11-019, Final Decision and Order at P 22 (2012) .
78 See, e.g., Entergy Mississippi Formula Rate Plan FRP-7,
https://cdn.entergy-
mississippi.com/userfiles/content/price/tariffs/eml_frp.pdf (last visited
Apr. 29, 2025) .
79 See, e.g., The Public Utilities Regulatory Authority of Connecticut,
Docket No. 14-05-06, Decision (Dec. 17, 2014) at 133-134.
THOMPSON, DI 76
Idaho Power Company

1 Public Utilities Commission, 80 and the Virginia State
2 Corporation Commission81 have also recognized that flotation
3 costs are a legitimate expense worthy of consideration in
4 setting a fair and reasonable ROE.
5 F. Recommended ROE for Idaho Power
6 Q. Please summarize the results of your ROE
7 analyses .
8 A. Based on the results of the DCF, CAPM and risk
9 premium analyses discussed above, I conclude that 10 . 1 percent
10 to 11 . 1 percent represents a reasonable cost of equity range
11 for a hypothetical utility that is similar in overall
12 investment risk to the Utility Group, or a 10 . 2 percent to
13 11 .2 percent ROE range after accounting for flotation
14 costs . These results, when considered with Idaho Power' s
15 wildfire risk, hydroelectric exposure, considerable debt load,
16 and relative lack of regulatory mechanisms, lead me to
17 conclude that the Company' s requested ROE of 10 . 4 percent is
18 conservative.
19 Q. What other factors should be considered in
20 evaluating a fair ROE for Idaho Power?
21 A. Apart from the results of the quantitative
22 methods summarized above, it is crucial to recognize the
81 See, e.g. , Minnesota Public Utilities Commission, Docket No. E001/GR-10-
276, Findings of Fact, Conclusions, and Order at 9.
81 Virginia State Corporation Commission, Roanoke Gas Company, Case No.
PUR-2018-00013, Final Order, (Jan. 24, 2020) at 6.
THOMPSON, DI 77
Idaho Power Company

I importance of supporting Idaho Power' s financial position so
2 that the Company remains prepared to respond to unforeseen
3 events that may materialize in the future. Past challenges in
4 the capital markets and ongoing economic uncertainties
5 highlight the benefits of continuing to support Idaho Power' s
6 financial strength to ensure that the Company can attract the
7 capital needed to maintain reliable service at a lower cost
8 for customers .
9 VI . BENCHMARK ANALYSES
10 Q. Do you also consider an expected earnings
11 benchmark in evaluating your ROE results?
12 A. Yes . Reference to rates of return available
13 from alternative investments of comparable risk can provide an
14 important benchmark in assessing the return necessary to
15 assure confidence in the financial integrity of a firm and its
16 ability to attract capital . This expected earnings approach
17 is consistent with the economic underpinnings for a just and
18 reasonable rate of return established by the U. S . Supreme
19 Court in Bluefield and Hope.74 Moreover, it avoids the
20 complexities and limitations of capital market methods and
21 instead focuses on the returns earned on book equity, which
22 are readily available to investors . This analysis is not
23 relied on to arrive at my recommended ROE range of
24 reasonableness; however, it is my opinion that this is a
THOMPSON, DI 78
Idaho Power Company

I relevant consideration in evaluating a just and reasonable ROE
2 for the Company' s electric utility operations .
3 Q. What economic premise underlies the expected
4 earnings approach?
5 A. The expected earnings approach is based on the
6 concept that investors compare each investment alternative
7 with the next best opportunity. If the utility is unable to
8 offer a return similar to that available from other
9 opportunities of comparable risk, investors will become
10 unwilling to supply the capital on reasonable terms . For
11 existing investors, denying the utility an opportunity to earn
12 what is available from other similar risk alternatives
13 prevents them from earning their opportunity cost of
14 capital . While I am not a lawyer and do not offer a legal
15 opinion, from my position as a financial economist such an
16 outcome would violate the Hope and Bluefield standards and
17 undermine the utility' s access to capital on reasonable
18 terms .
19 Q. How is the expected earnings approach typically
20 implemented?
21 A. The traditional comparable earnings test
22 identifies a group of companies that are believed to be
23 comparable in risk to the utility. The actual earnings of
24 those companies on the book value of their investment are then
25 compared to the allowed return of the utility. While the
THOMPSON, DI 79
Idaho Power Company

I traditional comparable earnings test is implemented using
2 historical data taken from the accounting records, it is also
3 common to use projections of returns on book investment, such
4 as those published by recognized investment advisory
5 publications (e. g. , Value Line) . Because these returns on
6 book value equity are analogous to the allowed return on a
7 utility' s rate base, this measure of opportunity costs results
8 in a direct, "apples to apples" comparison.
9 Q. What other consideration supports reference to
10 expected returns on book value?
11 A. Regulators do not set the returns that investors
12 earn in the capital markets, which are a function of dividend
13 payments and fluctuations in common stock prices - both of
14 which are outside their control . Regulators can only
15 establish the allowed ROE, which is applied to the book value
16 of a utility' s investment in rate base, as determined from its
17 accounting records . This is analogous to the expected
18 earnings approach, which measures the return that investors
19 expect the utility to earn on book value. As a result, the
20 expected earnings approach provides a meaningful guide to
21 ensure that the allowed ROE is similar to what other utilities
22 of comparable risk will earn on invested capital . This
23 expected earnings test does not require theoretical models to
24 indirectly infer investors' perceptions from stock prices or
25 other market data. As long as the proxy companies are similar
THOMPSON, DI 80
Idaho Power Company

1 in risk, their expected earned returns on invested capital
2 provide a direct benchmark for investors' opportunity costs
3 that is independent of fluctuating stock prices, market-to-
4 book ratios, debates over DCF growth rates, or the limitations
5 inherent in any theoretical model of investor behavior.
6 Q. What ROE benchmark is indicated for Idaho Power
7 based on the expected earnings approach?
8 A. For the firms in the proxy group, the year-end
9 returns on common equity projected by Value Line over its
10 forecast horizon are shown on Exhibit 12 . As I explained
11 earlier in my discussion of the br+sv growth rates used in
12 applying the DCF model, Value Line' s returns on common equity
13 are calculated using year-end equity balances, which
14 understates the average return earned over the
15 year.75 Accordingly, these year-end values were converted to
16 average returns using the same adjustment factor discussed
17 earlier and developed on Exhibit 8 . As shown on Exhibit 12,
18 Value Line' s projections suggest an average ROE of 11 . 0
19 percent for the Utility Group.
20 Q. What other proxy group do you consider in
21 evaluating a ROE for Idaho Power?
22 A. Consistent with underlying economic and
23 regulatory standards, I also apply the DCF model to a
24 reference group of low-risk companies in the non-utility
25 sector of the economy. I refer to this group as the "Non-
THOMPSON, DI 81
Idaho Power Company

1 Utility Group. " Like the expected earnings benchmark, this
2 analysis is not directly relied on to arrive at my recommended
3 ROE range of reasonableness .
4 Q. Do utilities have to compete with non-regulated
5 firms for capital?
6 A. Yes . The cost of capital is an opportunity cost
7 based on the returns that investors could realize by putting
8 their money in other alternatives . Clearly, the total capital
9 invested in utility stocks is only a small fraction of total
10 common stock investment, and there is an abundance of other
11 alternatives available to investors . Utilities must compete
12 for capital, not just against firms in their own industry, but
13 with other investment opportunities of comparable risk. This
14 understanding is consistent with modern portfolio theory,
15 which assumes that rational investors will hold a diverse
16 portfolio of stocks and not just companies in a single
17 industry.
18 Q. Is it consistent with the Bluefield and Hope
19 cases to consider investors' required ROE for non-utility
20 companies?
21 A. Yes . The cost of equity capital in the
22 competitive sector of the economy forms the very underpinning
23 for utility ROES because regulation purports to serve as a
24 substitute for the actions of competitive markets . The
25 Supreme Court has recognized that it is the degree of risk,
THOMPSON, DI 82
Idaho Power Company

1 not the nature of the business, which is relevant in
2 evaluating an allowed ROE for a utility. The Bluefield case
3 refers to "business undertakings attended with comparable
4 risks and uncertainties . " It does not restrict consideration
5 to other utilities . Similarly, the Hope case states :
6 By that standard the return to the equity
7 owner should be commensurate with returns on
8 investments in other enterprises having
9 corresponding risks . 76
10 As in the Bluefield decision, there is nothing to
11 restrict "other enterprises" solely to the utility
12 industry.
13 Q. What criteria do you apply to develop the Non-
14 Utility Group?
15 A. My comparable risk proxy group was composed of
16 those United States companies followed by Value Line that:
17 l . pay common dividends;
18 2 . have a Safety Rank of "1";
19 3 . have a Financial Strength Rating of "A" or
20 greater;
21 4 . have a beta value of 0 . 95 or less; and
22 5 . have investment grade credit ratings from Moody' s
23 and S&P.
24 Q. How do the overall risks of this Non-Utility
25 Group compare with the Utility Group?
THOMPSON, DI 83
Idaho Power Company

1 A. Table 6 compares the Non-Utility Group with the
2 Utility Group and Idaho Power across the measures of
3 investment risk discussed earlier.
4 TABLE 6
5 Comparison of Risk Indicators
Value Line
Safety Financial Credit Rating
Rank Strength Beta Moody' s S&P
Non-Utility Group 1 A+ 0 . 76 A2 A
Utility Group 2 A 0 . 80 Baa2 BBB+
Idaho Power 1 A 0 . 75 Baal BBB
Note: Idaho Power's Value Line risk indicators are for its parent
company, IDACORP.
6 As shown above, the risk indicators for the Non-
7 Utility Group generally suggest less risk than for the Utility
8 Group or for Idaho Power.
9 The companies that make up the Non-Utility Group are
10 shown on Exhibit 13 . These companies are representative of
11 the pinnacle of corporate America, and they include household
12 names such as Coca-Cola, Procter & Gamble, and Walmart. The
13 companies that form the Non-Utility Group have long corporate
14 histories, well-established track records, and exceedingly
15 conservative risk profiles . Many of these companies pay
16 dividends on a par with utilities, with the average dividend
17 yield for the group of 2 . 1 percent.82 Moreover, because of
18 their significance and name recognition, these companies
82 Exhibit 13, page 1.
THOMPSON, DI 84
Idaho Power Company

1 receive intense scrutiny by the investment community, which
2 increases confidence that published growth estimates are
3 representative of the consensus expectations reflected in
4 common stock prices .
5 Q. What are the results of your DCF analysis for
6 the Non-Utility Group?
7 A. I applied the DCF model to the Non-Utility Group
8 using the same analysts' EPS growth projections described
9 earlier for the Utility Group. The results of my DCF analysis
10 for the Non-Utility Group are presented in Exhibit 13 . As
11 summarized in Table 7, after eliminating illogical values,
12 application of the constant growth DCF model resulted in the
13 following cost of equity estimates :
14 TABLE 7
15 DCF Results - Non-Utility Group
Growth Rate Average
Value Line 10 . 80
IBES 10 . 10
Zacks 9 . 90
16 As discussed earlier, reference to the Non-Utility
17 Group is consistent with established regulatory
18 principles . Required returns for utilities should be in line
19 with those of non-utility firms of comparable risk operating
20 under the constraints of free competition. Because the actual
21 cost of equity is unobservable, and DCF results inherently
22 incorporate a degree of error, cost of equity estimates for
THOMPSON, DI 85
Idaho Power Company

1 the Non-Utility Group provide an important benchmark in
2 evaluating a just and reasonable ROE for Idaho Power.
3 VII . CAPITAL STRUCTURE
4 Q. Is an evaluation of a utility' s capital
5 structure relevant in assessing its return on equity?
6 A. Yes . Other things equal, a higher debt ratio and
7 lower common equity ratio, translates into increased financial
8 risk for all investors . A greater amount of debt means more
9 investors have a senior claim on available cash flow, thereby
10 reducing the certainty that each will receive their
11 contractual payments . This increases the risks to which
12 lenders are exposed, and they require correspondingly higher
13 rates of interest. From common shareholders' standpoint, a
14 higher debt ratio means that there are proportionately more
15 investors ahead of them, thereby increasing the uncertainty as
16 to the amount of cash flow that will remain.
17 Q. What common equity ratio is implicit in Idaho
18 Power' s capital structure?
19 A. As discussed in the direct testimony of Company
20 Witness Mr. Brian R. Buckham, the capital structure used to
21 compute the overall rate of return for Idaho Power includes
22 51 . 0 percent common equity.
23 Q. Is this consistent with industry benchmarks for
24 other utility operating companies?
THOMPSON, DI 86
Idaho Power Company

1 A. Yes . Because this proceeding focuses on the ROE
2 for the regulated utility operations of Idaho Power, the
3 capital structures of other regulated utility operating
4 companies provide a consistent basis of comparison. As shown
5 on pages 1 and 2 of Exhibit 14, common equity ratios for the
6 operating subsidiaries owned by the firms in the Utility Group
7 ranged from 43 . 1 percent to 57 . 4 percent at year-end 2024 and
8 averaged 51 . 4 percent. Meanwhile, page 3 of Exhibit 14 shows
9 that the Utility Group maintained equity ratios ranging from
10 33 . 8 percent to 63 . 9 percent, with an average of 43 . 1 percent,
11 while the three-to-five year forecasts published by Value Line
12 result in common equity ratios ranging from 36 . 5 percent to
13 57 . 5 percent, with an average of 44 . 2 percent. Idaho Power' s
14 requested common equity ratio of 51 . 0 percent falls well
15 within these ranges of recent historic and projected equity
16 ratios for the proxy group and their operating companies .
17 Q. What other evidence supports the reasonableness
18 of the Company' s requested capital structure?
19 A. Reference to recent findings for electric
20 utilities in other regulatory proceedings also supports the
21 reasonableness of Idaho Power' s 51 . 0 percent common equity
22 ratio . The table below presents the range of common equity
23 ratios approved for electric utilities over the past eight
24 quarters, as reported by RRA:
THOMPSON, DI 87
Idaho Power Company

1 TABLE 8
2 Electric Utility Allowed Common Equity Ratios
Electric
Low High Average
Q2-23 49 . 00% -- 52 . 50% 50 . 96%
Q3-23 48 . 00% -- 60 . 70% 52 . 25%
Q4-23 48 . 00% -- 56 . 06% 51 . 51%
Q1-24 41 . 25% -- 53 . 72% 49 . 68%
Q2-24 44 . 36% -- 52 . 26% 49 . 77%
Q3-24 45 . 57% -- 52 . 83% 50 . 27%
Q4-24 42 . 50% -- 56 . 54% 51 . 29%
Q1-25 41 . 73% -- 57 . 00% 48 . 28%
Average 45 . 53% -- 54 . 94% 50 . 82%
Source: S&P Global Market Intelligence, Major
Rate Case Decisions, RRA Regulatory Focus
(Feb. 6, 2024; Feb. 4 and Apr. 25, 2025) .
Excludes limited issue riders, and capital
structures that include cost-free items.
3 As demonstrated in the table above, the Company' s
4 requested 51 . 0 percent common equity ratio is within the range
5 of capital structures recently approved for other electric
6 utilities and is slightly below the average allowed common
7 equity ratio of 50 . 82 percent.
8 Q. Do ongoing economic and capital market
9 uncertainties also influence the appropriate capital structure
10 for Idaho Power?
11 A. Yes . Financial flexibility plays a crucial role
12 in ensuring the wherewithal of a utility to meet funding
13 needs . Utilities with higher financial leverage may be
14 foreclosed from or have limited access to additional
THOMPSON, DI 88
Idaho Power Company

1 borrowing, especially during times of financial market stress .
2 As Moody' s observed:
3 Utilities are among the largest debt issuers
4 in the corporate universe and typically
5 require consistent access to capital markets
6 to assure adequate sources of funding and to
7 maintain financial flexibility. During times
8 of distress and when capital markets are
9 exceedingly volatile and tight, liquidity
10 becomes critically important because access to
11 capital markets may be difficult. 83
12 More recently, Moody' s emphasized that the utility
13 sector "is likely to continue to generate negative free cash
14 flow and credit quality is likely to suffer unless utilities
15 fund this negative free cash flow appropriately with a balance
16 of debt and equity financing. 1184 S&P reiterated these
17 concerns, noting that:
18 Because of the industry' s high capital
19 spending and consistent dividends, negative
20 discretionary cashflow is regularly more than
21 $100 billion annually. To fund this large
22 deficit, the industry requires consistent
23 access to the capital markets . Rising
24 interest rates, decreasing equity prices, and
25 inflation could hamper consistent access to
26 the capital markets, potentially pressuring
27 credit quality. 85
83 Moody's Investors Service, FAQ on credit implications of the coronavirus
outbreak, Sector Comment (Mar. 26, 2020) .
84 Moody's Investors Service, Regulated Electric and Gas Utilities - US,
Rising capital expenditures will require higher annual equity funding,
Sector In-Depth (Nov. 8, 2023) .
85 S&P Global Ratings, North American Regulated Utilities, The industry's
outlook remains negative, Industry Top Trends (Jan. 23, 2023) .
THOMPSON, DI 89
Idaho Power Company

1 As a result, the Company' s capital structure must
2 maintain adequate equity to preserve the flexibility necessary
3 to maintain continuous access to capital even during times of
4 unfavorable energy or financial market conditions .
5 Q. What does this evidence suggest with respect to
6 Idaho Power' s proposed capital structure?
7 A. Based on my evaluation, I conclude that Idaho
8 Power' s requested capital structure represents a reasonable
9 mix of capital sources from which to calculate the Company' s
10 overall rate of return. While industry averages provide one
11 benchmark for comparison, each firm must select its
12 capitalization based on the risks and prospects it faces, as
13 well its specific needs to access the capital markets . A
14 public utility with an obligation to serve must maintain ready
15 access to capital under reasonable terms so that it can meet
16 the service requirements of its customers . Financial
17 flexibility plays a crucial role in ensuring the wherewithal
18 to meet the needs of customers, and utilities with higher
19 leverage may be foreclosed from additional borrowing under
20 reasonable terms, especially during times of stress .
21 Idaho Power' s capital structure is consistent with the
22 range of equity ratios maintained by the parent firms in the
23 Utility Group and their operating subsidiaries, and reflects
24 the challenges posed by its resource mix, the burden of
25 significant capital spending requirements, and the Company' s
THOMPSON, DI 90
Idaho Power Company

1 ongoing efforts to strengthen its credit standing and support
2 access to capital on reasonable terms . The reasonableness of
3 a 51 . 0 percent common equity capital structure for Idaho Power
4 is reinforced by the importance of supporting continued
5 investment in system improvements even during times of adverse
6 capital market conditions .
7 Q. Does this conclude your direct testimony in this
8 case?
9 A. Yes, it does .
10
11
THOMPSON, DI 91
Idaho Power Company

1 DECLARATION OF DR. JOHN THOMPSON
2 I, Dr. John Thompson, declare under penalty of
3 perjury under the laws of the state of Idaho:
4 1 . My name is John S . Thompson. I am Principal
5 at Thompson Advisory, LLC.
6 2 . On behalf of Idaho Power, I present this
7 pre-filed direct testimony and Exhibit Nos . 5 through 14 in
8 this matter.
9 3 . To the best of my knowledge, my pre-filed
10 direct testimony and exhibits are true and accurate .
11 I hereby declare that the above statement is true to
12 the best of my knowledge and belief, and that I understand
13 it is made for use as evidence before the Idaho Public
14 Utilities Commission and is subject to penalty for perjury.
15 SIGNED this 27th day of May 2025, at Austin, Texas .
16
17 Signed:
18 Dr. John Thompson
THOMPSON, DI 92
Idaho Power Company

BEFORE THE
IDAHO PUBLIC UTILITIES COMMISSION
CASE NO. IPC-E-25-16
IDAHO POWER COMPANY
THOMPSON , DI
TESTIMONY
EXHIBIT NO. 5

ROE ANALYSIS Exhibit 5
Page 1 of 1
SUMMARY OF RESULTS
Method Result
DCF
Value Line 9 . 4%
IBES 10 . 7%
Zacks 10 . 4%
Internal br + sv 8 . 9%
CAPM 11 . 1%
Utility Risk Premium 10 . 6%
ROE Recommendation
Cost of Equity
Range 10 . 1% -- 11 . 1%
Flotation Costs
Utility Group Dividend Yield (a) 3 . 7%
Average Expense Factor (b) 2 . 5%
Flotation Cost Adjustment 0 . 09%
Flotation Costs
Range 10 .2% -- 11 .2%
Midpoint 10.7%
(a) Exhibit 10.
(b) Exhibit 14.
Exhibit No. 5
Case No. IPC-E-25-16
J.Thompson, IPC
Page 1 of 1

BEFORE THE
IDAHO PUBLIC UTILITIES COMMISSION
CASE NO. IPC-E-25-16
IDAHO POWER COMPANY
THOMPSON , DI
TESTIMONY
EXHIBIT NO. 6

REGULATORY MECHANISMS Exhibit 6
Page 1 of 4
UTILITY GROUP
Type of Adjustment Clause (a) (b) (C)
Cons. New Capital Future Formula
Fuel/ Prog. Decoupling Trad. Renew./ Deliv. Environ. Trans. Test Rates/
Company PPA Exp. Full Part. Gen. Non-Trad. Infra. Compl. Costs Year MRP
1 Alliant Energy ✓ ✓ -- -- -- ✓ -- ✓ ✓ C J
2 Ameren Corp. ✓ ✓ -- ✓ -- ✓ ✓ ✓ ✓ O,P J
3 American Elec Pwr ✓ ✓ -- ✓ ✓ ✓ ✓ ✓ ✓ C,O,P J
4 Black Hills Corp. ✓ ✓ -- ✓ ✓ ✓ -- ✓ ✓ 0 J
5 CMS Energy Corp. ✓ ✓ -- -- -- ✓ -- -- ✓ C --
6 Dominion Energy ✓ ✓ -- -- ✓ ✓ ✓ ✓ ✓ -- J
7 DTE Energy Co. ✓ ✓ -- -- -- ✓ -- -- ✓ C --
8 Duke Energy Corp. ✓ ✓ -- ✓ ✓ ✓ ✓ ✓ ✓ C,O,P J
9 Entergy Corp. ✓ ✓ -- ✓ ✓ ✓ ✓ ✓ ✓ O,P J
10 Evergy Inc. ✓ ✓ -- ✓ -- ✓ ✓ ✓ ✓ P --
11 Eversource Energy ✓ ✓ ✓ ✓ -- ✓ ✓ -- ✓ C ✓
12 IDACORP, Inc. ✓ ✓ ✓ -- -- -- -- -- -- C,P --
13 NorthWestern Energy Grp. ✓ ✓ -- -- -- -- -- -- -- -- --
14 Otter Tail Corp. ✓ ✓ -- -- ✓ ✓ ✓ ✓ ✓ C,0 ✓
15 Pinnacle West Capital ✓ ✓ -- ✓ -- ✓ -- ✓ ✓ -- ✓
16 Portland General Elec. ✓ ✓ -- -- ✓ ✓ -- ✓ ✓ C --
17 Pub Sv Enterprise Grp. D ✓ -- ✓ -- -- ✓ ✓ -- P --
18 Sempra ✓ ✓ ✓ -- -- -- ✓ -- ✓ C ✓
19 Xcel Energy Inc. ✓ ✓ -- ✓ ✓ ✓ ✓ ✓ ✓ C,0 ✓
Notes
D - Delivery-only utility.
C - Fully-forecasted test years commonly used in the state listed for this operating company.
0 - Fully-forecasted test years occasionally used in the state listed for this operating company.
P - Partially-forecasted test years commonly or occasionally used in the state listed for this operating company.
Source: Exhibit 6, pages 2-4, contain operating company data that are aggregated into the parent company data on this page.
Exhibit No.6
Case No.IPC-E-25-16
J.Thompson,IPC
Page 1 of 4

REGULATORY MECHANISMS
UTILITY GROUP OPERATING SUBSIDIARIES
Type of Adjustment Clause (a) (b) (c)
Cons. New Capital Future Formula
Fuel/ Prog. Decoupling Trad. Renew./ Deliv. Environ. Trans. Test Rates/
Company State PPA Exp. Full Part. Gen. Non-Trad. infra. Compl. Costs Year MRP
Exhibit 6
1 ALLIANT ENERGY CORP. Page 2 of 4
Interstate Power & Light Co. IA ✓ ✓ -- -- -- ✓ -- ✓ ✓ -- ✓
Wisconsin Power & Light Co. WI ✓ * -- * -- -- -- * -- -- * -- -- C --
2 AMEREN CORP.
Ameren Illinois Co. IL D * ✓ -- ✓ * -- ✓ -- ✓ * ✓ 0 ✓
Union Electric Co. MO ✓ ✓ * -- ✓ * -- J * ✓ * -- * ✓ * P --
3 AMERICAN ELEC PWR
Southwestern Electric Power Co. AR ✓ ✓ -- ✓ * ✓ -- -- ✓ ✓ P --
Indiana Michigan Power Co. IN ✓ ✓ -- ✓ * -- ✓ J * ✓ * ✓ -- J
Kentucky Power Co. KY ✓ ✓ -- ✓ * -- -- -- ✓ -- 0 --
Southwestern Electric Power Co. LA ✓ ✓ * -- ✓ * -- -- -- -- -- 0 J
Indiana Michigan Power Co. MI ✓ ✓ -- ✓ * -- ✓ -- -- -- C --
Ohio Power Co. OH D * ✓ * -- ✓ * -- ✓ ✓ * -- J P J
Public Service Co. of Oklahoma OK ✓ ✓ * -- ✓ * -- ✓ * ✓ -- * J -- --
Kingsport Power Co. TN ✓ -- -- -- -- -- -- -- -- C J
AEP Texas Inc. TX D * ✓ -- -- -- -- ✓ -- J -- J
Southwestern Electric Power Co. TX ✓ * ✓ -- -- -- -- ✓ -- J -- J
Appalachian Power Co. VA ✓ ✓ -- -- ✓ -- -- ✓ J -- J
Appalachian Pwr. Co./Wheeling Pwr. Co. WV ✓ ✓ -- -- -- -- -- * J -- -- --
4 BLACK HILLS CORP.
Black Hills Colorado Electric Inc. CO ✓ J -- -- ✓ * ✓ -- -- J -- J
Black Hills Power Inc. SD ✓ -- -- -- -- -- -- J * J * --
Cheyenne Light Fuel & Power Co. WY ✓ J -- ✓ * -- -- -- -- -- 0 --
5 CMS ENERGY
Consumers Energy Co. MI ✓ ✓ -- * -- -- ✓ -- -- ✓ * C --
6 DOMINION ENERGY
Virginia Electric & Power Co. NC ✓ ✓ * -- -- * -- ✓ * -- J -- -- --
Dominion Energy South Carolina SC ✓ J -- -- ✓ * -- -- ✓ -- -- ✓
Virginia Electric & Power Co. VA ✓ ✓ -- -- ✓ ✓ ✓ ✓ ✓ -- ✓
7 DTE ENERGY CO.
DTE Electric Co. MI J J -- * -- -- ✓ -- -- ✓ * C --
Exhibit No.6
Case No.IPC-E-25-16
J.Thompson,IPC
Page 2 of 4

REGULATORY MECHANISMS
UTILITY GROUP OPERATING SUBSIDIARIES
Type of Adjustment Clause (a) (b) (c)
Cons. New Capital Future Formula
Fuel/ Prog. Decoupling Trad. Renew./ Deliv. Environ. Trans. Test Rates/
Company State PPA Exp. Full Part. Gen. Non-Trad. infra. Compl. Costs Year MRP
Exhibit 6
S DUKE ENERGY Page 3 of 4
Duke Energy Florida LLC FL ✓ ✓ -- -- ✓ * ✓ * -- * ✓ -- C ✓
Duke Energy Indiana LLC IN ✓ ✓ -- ✓ * -- ✓ ✓ * ✓ * ✓ -- ✓
Duke Energy Kentucky Inc. KY ✓ ✓ -- ✓ * -- -- -- ✓ -- 0
Duke Energy Carolinas LLC NC ✓ ✓ * -- -- * -- ✓ * -- ✓ -- --
Duke Energy Progress LLC NC ✓ ✓ * -- -- * -- ✓ * -- ✓ -- -- --
Duke Energy Ohio Inc. OH D * ✓ * -- ✓ * -- ✓ ✓ * -- ✓ P ✓
Duke Energy Progress LLC SC ✓ ✓ -- -- -- * -- -- ✓ -- -- ✓
Duke Energy Carolinas LLC SC ✓ ✓ -- -- -- * -- -- ✓ -- -- ✓
9 ENTERGY CORP.
Entergy Arkansas LLC AR ✓ ✓ -- ✓ * ✓ * ✓ * ✓ * -- ✓ P ✓
Entergy New Orleans LLC LA ✓ ✓ -- -- -- ✓ -- ✓ * ✓ * 0 ✓
Entergy Louisiana LLC LA ✓ ✓ * -- ✓ * -- -- -- ✓ -- 0 ✓
Entergy Mississippi LLC MS ✓ -- -- ✓ * -- -- -- -- ✓ 0 ✓
Entergy Texas Inc. TX ✓ * ✓ -- -- ✓ * -- ✓ -- ✓ -- ✓
10 ENERGY, INC.
Evergy Kansas Central Inc. KS ✓ ✓ * -- ✓ * -- ✓ -- ✓ ✓ -- --
Evergy Kansas South Inc. KS ✓ ✓ * -- ✓ * -- ✓ -- ✓ ✓ -- --
Evergy Metro Inc. KS ✓ ✓ * -- -- -- -- ✓ * -- ✓ -- --
Evergy Metro Inc. MO ✓ ✓ * -- ✓ * -- -- * ✓ * -- * ✓ * P --
Evergy Missouri West Inc. MO ✓ ✓ * -- ✓ * -- ✓ * ✓ * -- * ✓ * P --
11 EVERSOURCE ENERGY
Connecticut Light and Power Co. CT D * ✓ ✓ * -- -- -- * ✓ * -- ✓ C ✓
NSTAR Electric Co. MA D * ✓ * ✓ -- -- ✓ * ✓ * -- ✓ -- --
Public Service Co. of New Hampshire NH ✓ * -- -- ✓ * -- -- ✓ * -- ✓ -- ✓
12 IDACORP
Idaho Power Co. ID ✓ * ✓ ✓ * -- -- -- -- -- -- P --
Idaho Power Co. OR ✓ ✓ -- -- -- -- -- -- -- C --
13 NORTHWESTERN CORP.
NorthWestern Corp. MT ✓ * ✓ -- -- -- -- -- -- -- -- --
NorthWestern Corp. SD ✓ ✓ -- -- -- -- -- -- -- -- --
Exhibit No.6
Case No.IPC-E-25-16
J.Thompson,IPC
Page 3 of 4

REGULATORY MECHANISMS
UTILITY GROUP OPERATING SUBSIDIARIES
Type of Adjustment Clause (a) (b) (C)
Cons. New Capital Future Formula
Fuel/ Prog. Decoupling Trad. Renew./ Deliv. Environ. Trans. Test Rates/
Company State PPA Exp. Full Part. Gen. Non-Trad. Infra. Compl. Costs Year MRP
Exhibit 6
14 OTTER TAIL CORP. Page 4 of 4
Otter Tail Power Co. MN ✓ ✓ -- -- -- ✓ -- ✓ ✓ C --
Otter Tail Power Co. ND ✓ -- -- -- ✓ * ✓ * ✓ * ✓ * ✓ * 0 ✓
Otter Tail Power Corp. SD ✓ ✓ -- -- ✓ * -- ✓ ✓ -- -- --
15 PINNACLE WEST CAPITAL
Arizona Public Service Co. AZ ✓ ✓ -- ✓ * -- ✓ -- ✓ ✓ -- ✓
16 PORTLAND GENERAL ELECTRIC
Portland General Electric Co. OR ✓ ✓ -- -- ✓ * ✓ * -- ✓ * ✓ C --
17 PUB SV ENTERPRISE GRP
Public Service Electric & Gas Co. NJ D * ✓ * -- ✓ * -- -- ✓ * ✓ * -- P --
18 SEMPRA ENERGY
San Diego Gas & Electric Co. CA ✓ -- ✓ -- -- -- -- -- -- C ✓
Oncor Electric Delivery Co. TX D * ✓ -- -- -- -- ✓ -- ✓ -- ✓
19 XCEL ENERGY, INC.
Public Service Co. of Colorado CO ✓ ✓ -- ✓ * -- ✓ -- -- ✓ -- ✓
Northern States Power Co. - Minnesota MN ✓ ✓ -- ✓ * -- ✓ -- ✓ ✓ C ✓
Southwestern Public Service Co. NM ✓ ✓ -- -- -- ✓ -- -- -- 0 --
Northern States Power Co. - Minnesota ND ✓ -- -- -- -- ✓ * ✓ * -- * ✓ * 0 ✓
Northern States Power Co. - Minnesota SD ✓ ✓ * -- ✓ * ✓ * -- ✓ * ✓ ✓ -- --
Southwestern Public Service Co. TX ✓ * ✓ -- -- -- * -- -- -- ✓ -- ✓
Northern States Power Co. - Wisconsin WI ✓ * -- * -- -- -- * -- -- * -- -- C --
(a) S&P Global Market Intelligence, Adjustment clauses: A state by state overview, Regulatory Focus Topical Special Report (Jul. 18, 2022).
(b) Edison Electric Institute, Alternative Regulation for Emerging Utility Challenges: 2015 Update (Nov. 11, 2015).
(c) Formula rates and Multiyear Rate plans approved in the state listed for this operating company. See, U.S. Department of Energy, State Performance-Based Regulation Using Multiyear Rate Plans for
U.S. Electric Utilities,GRID Modernization Laboratory Consortium (Jul. 2017); The Brattle Group, Exploring the Use of Alternative Regulatory Mechanisms to Establish New Base Rates, Joint
Utilities of Maryland (Mar. 29, 2018).
Notes
D - Delivery-only utility.
C - Fully-forecasted test years commonly used in the state listed for this operating company.
0 - Fully-forecasted test years occasionally used in the state listed for this operating company.
P - Partially-forecasted test years commonly or occasionally used in the state listed for this operating company.
* For additional context around the specific recovery mechanisms available to the particular operating companies in each state, see the source document.
Exhibit No.6
Case No.IPC-E-25-16
J.Thompson,IPC
Page 4 of 4

BEFORE THE
IDAHO PUBLIC UTILITIES COMMISSION
CASE NO. IPC-E-25-16
IDAHO POWER COMPANY
THOMPSON , DI
TESTIMONY
EXHIBIT NO. 7

DCF MODEL - UTILITY GROUP Exhibit 7
Page 1 of 3
DIVIDEND YIELD
(a) (b)
Company Price Dividends Yield
1 Alliant Energy $ 62 . 61 $ 1 . 92 3 . 10
2 Ameren Corp. $ 98 . 55 $ 2 . 85 2 . 9%
3 American Elec Pwr $ 105 . 02 $ 3 . 80 3 . 6%
4 Black Hills Corp . $ 59 . 66 $ 2 . 70 4 . 50
5 CMS Energy Corp . $ 72 . 92 $ 2 . 17 3 . 0%
6 Dominion Energy $ 54 . 17 $ 2 . 67 4 . 9%
7 DTE Energy Co. $ 133 . 73 $ 4 . 36 3 . 3%
8 Duke Energy Corp . $ 118 . 49 $ 4 . 22 3 . 60
9 Entergy Corp. $ 83 . 08 $ 2 . 40 2 . 90
10 Evergy Inc. $ 66 . 92 $ 2 . 71 4 . 0%
11 Eversource Energy $ 59 . 79 $ 3 . 03 5 . 1%
12 IDACORP, Inc . $ 115 . 30 $ 3 . 44 3 . 0%
13 NorthWestern Energy Grp . $ 56 . 08 $ 2 . 65 4 . 70
14 Otter Tail Corp . $ 80 . 34 $ 2 . 10 2 . 6%
15 Pinnacle West Capital $ 92 . 57 $ 3 . 61 3 . 9%
16 Portland General Elec . $ 43 . 70 $ 2 . 12 4 . 90
17 Pub Sv Enterprise Grp . $ 81 . 10 $ 2 . 56 3 . 20
18 Sempra $ 69 . 41 $ 2 . 58 3 . 7%
19 Xcel Energy Inc. $ 69 . 27 $ 2 . 32 3 . 3%
Average 3 . 7%
(a) Average of closing prices for 30 trading days ended Apr. 14, 2025.
(b) The Value Line Investment Survey, Summary & Index (Apr. 18, 2025) .
Exhibit No. 7
Case No. IPC-E-25-16
J.Thompson, IPC
Page 1 of 3

DCF MODEL - UTILITY GROUP Exhibit 7
Page 2 of 3
GROWTH RATES
(a) (b) (c) (d)
Earnings Growth br+sv
Company V Line IBES Zacks Growth
1 Alliant Energy 6 . 0% 6 . 4% 6 . 7% 5 . 8%
2 Ameren Corp. 6 . 5% n/a 7 . 0% 7 . 6%
3 American Elec Pwr 6 . 5% 6 . 8% 6 . 3% 6 . 1%
4 Black Hills Corp. 3 . 5% 5 . 3% 5 . 3% 4 . 2%
5 CMS Energy Corp. 6 . 0% 7 . 8% 7 . 7% 6 . 0%
6 Dominion Energy 3 . 5% 21 . 2% 13 . 6% 5 . 0%
7 DTE Energy Co . 4 . 5% 8 . 9% 7 . 6% 6 . 9%
8 Duke Energy Corp. 6 . 0% n/a 6 . 3% 4 . 1%
9 Entergy Corp. 3 . 0% 9 . 5% 9 . 5% 3 . 9%
10 Energy Inc . 7 . 5% 6 . 0% 5 . 7% 3 . 7%
11 Eversource Energy 5 . 5% n/a 5 . 7% 5 . 4%
12 IDACORP, Inc . 6 . 0% n/a 8 . 5% 4 . 6%
13 NorthWestern Energy Grp. 4 . 5% 6 . 9% 6 . 1% 3 . 0%
14 Otter Tail Corp. 4 . 5% n/a n/a 4 . 4%
15 Pinnacle West Capital 5 . 0% 2 . 2% 2 . 1% 4 . 1%
16 Portland General Elec . 6 . 5% 3 . 4% 3 . 4% 4 . 4%
17 Pub Sv Enterprise Grp. 6 . 0% 8 . 9% 7 . 2% 5 . 2%
18 Sempra 5 . 5% 6 . 0% 7 . 9% 5 . 6%
19 Xcel Energy Inc . 7 . 0% 7 . 8% 6 . 9% 5 . 4%
(a) The Value Line Investment Survey (Feb. 7, Mar. 7 and Apr. 18, 2025) .
(b) IBES growth rates from LSEG, as provided by www.fidelity.com (retreived Apr.
15, 2025) .
(c) www.zacks.com (retrieved Apr. 15, 2025) .
(d) See Exhibit 8.
Exhibit No. 7
Case No. IPC-E-25-16
J.Thompson, IPC
Page 2 of 3

DCF MODEL - UTILITY GROUP Exhibit 7
Page 3 of 3
COST OF EQUITY ESTIMATES
(a) (a) (a) (a)
br+sv
Company V Line IBES Zacks Growth
1 Alliant Energy 9 . 10 9 . 50 9 . 80 8 . 90
2 Ameren Corp. 9 . 4% n/a 9. 80 10 . 50
3 American Elec Pwr 10 . 10 10 . 40 9. 90 9 . 70
4 Black Hills Corp. 8 . 0% 9. 80 9. 80 8 . 80
5 CMS Energy Corp. 9 . 0% 10 . 80 10 . 70 8 . 90
6 Dominion Energy 8 . 40 26. 10 18 . 50 10 . 0%
7 DTE Energy Co. 7 . 8% 12 .2% 10 . 80 10 . 2%
8 Duke Energy Corp. 9 . 6% n/a 9. 90 7 . 70
9 Entergy Corp. 5 . 90 12 . 40 12 . 30 6. 80
10 Evergy Inc. 11 . 50 10 . 0% 9. 70 7 . 80
11 Eversource Energy 10 . 6% n/a 10 . 70 10 . 5%
12 IDACORP, Inc. 9. 0% n/a 11 . 50 7 . 60
13 NorthWestern Energy Grp. 9.20 11 . 60 10 . 90 7 . 80
14 Otter Tail Corp. 7 . 10 n/a n/a 7 . Oo
15 Pinnacle West Capital 8 . 90 6. 10 6. Oo 8 . 0%
16 Portland General Elec. 11 . 40 8 . 30 8 .20 9. 30
17 Pub Sv Enterprise Grp. 9.20 12 . 10 10 . 40 8 . 30
18 Sempra 9.20 9. 70 11 . 70 9. 30
19 Xcel Energy Inc. 10 . 30 11 . 10 10 . 30 8 . 80
Average (b) 9.4% 10.7% 10 . 4% 8 . 9%
(a) Sum of dividend yield (Exhibit 7, p. 1) and respective growth rate (Exhibit 7, p.
2) .
(b) Excludes highlighted values.
Exhibit No. 7
Case No. IPC-E-25-16
J.Thompson, IPC
Page 3 of 3

BEFORE THE
IDAHO PUBLIC UTILITIES COMMISSION
CASE NO. IPC-E-25-16
IDAHO POWER COMPANY
THOMPSON , DI
TESTIMONY
EXHIBIT NO. 8

BR+SV GROWTH RATE Exhibit 8
Page 1 of 2
UTILITY GROUP
(a) (a) (a) (b) (c) (d) (e) (f) (g)
2029 Adjustment Adjusted "sv" Factor
Company EPS DPS BVPS b r Factor r br s v sv br + si
1 Alliant Energy $4.25 $2.43 $31.90 42.80 13.3`0 1.0156 13.5`0 5.8`0 0.0005 0.5600 0.030 5.8`0
2 Ameren Corp. $6.50 $3.57 $52.65 45.10 12.3`0 1.0217 12.6`0 5.7`0 0.0326 0.5950 1.940 7.6`0
3 American Elec Pwr $7.50 $4.31 $60.90 42.50 12.3`0 1.0119 12.5`0 5.3`0 0.0140 0.5489 0.770 6.1`0
4 Black Hills Corp. $5.00 $3.10 $56.00 38.0% 8.90 1.0267 9.20 3.5`0 0.0273 0.2774 0.760 4.2`0
5 CMS Energy Corp. $4.20 $2.50 $30.75 40.50 13.7`0 1.0146 13.9`0 5.6`0 0.0057 0.6273 0.360 6.0`0
6 Dominion Energy $4.25 $2.67 $38.00 37.20 11.2`0 1.0253 11.5`0 4.3`0 0.0168 0.4571 0.770 5.0`0
7 DTE Energy Co. $9.60 $5.15 $63.10 46.40 15.2`0 1.0114 15.4`0 7.1`0 (0.0031) 0.6342 -0.20`0 6.9`0
8 Duke Energy Corp. $8.00 $5.00 $76.25 37.50 10.5`0 1.0202 10.7`0 4.0`0 0.0021 0.4352 0.090 4.1`0
9 Entergy Corp. $4.20 $3.00 $43.45 28.60 9.70 1.0302 10.0`0 2.8`0 0.0246 0.4394 1.080 3.9`0
10 Evergy Inc. $5.00 $3.25 $47.50 35.0% 10.5`0 1.0124 10.7`0 3.7`0 0.0004 0.4571 0.020 3.7`0
11 Eversource Energy $5.90 $3.76 $53.25 36.30 11.1`0 1.3029 14.4`0 5.2`0 0.0048 0.4395 0.210 5.4`0
12 IDACORP, Inc. $7.10 $4.20 $74.00 40.80 9.60 1.0222 9.80 4.0`0 0.0136 0.4519 0.610 4.6`0
13 NorthWestern Energy Grp. $4.30 $2.80 $53.55 34.90 8.0% 1.0186 8.20 2.9`0 0.0104 0.1762 0.180 3.0`0
14 Otter Tail Corp. $4.20 $2.36 $44.25 43.80 9.50 1.0081 9.60 4.2`0 0.0052 0.3897 0.200 4.4`0
15 Pinnacle West Capital $6.25 $3.85 $70.00 38.40 8.90 1.0262 9.20 3.5`0 0.0156 0.3778 0.590 4.1`0
16 Portland General Elec. $4.00 $2.60 $42.25 35.0% 9.50 1.0287 9.70 3.4`0 0.0289 0.3500 1.01% 4.4`0
17 Pub Sv Enterprise Grp. $5.25 $3.24 $42.50 38.30 12.4`0 1.0289 12.7`0 4.9`0 0.0053 0.5526 0.300 5.2`0
18 Sempra $6.30 $3.28 $59.50 47.90 10.6`0 1.0343 11.0`0 5.2`0 0.0077 0.4333 0.330 5.6`0
19 Xcel Energy Inc. $5.00 $3.00 $43.70 40.0% 11.4`0 1.0283 11.8`0 4.7`0 0.0142 0.5006 0.710 5.4`0
Exhibit No.8
Case No.IPC-E-25-16
J.Thompson,IPC
Page 1 of 2

BR+SV GROWTH RATE Exhibit 8
Page 2 of 2
UTILITY GROUP
(a) (a) (h) (a) (a) (h) (i) (a) (a) (j) (a) (a) (i)
2024 2029 Chg 2024 Common Shares
v Company Eg Ratio Tot Cao Com Ea Eg Ratio Tot Cav Com Ea Equity High Low Avg. M/B 2024 2029 Growth
1 Alliant Energy 44.7% $15,681 $7,009 48.0% $17,070 $8,194 3.2% $80.0 $65.0 $72.5 2.273 256.69 257.00 0.02%
2 Ameren Corp. 45.3`0 $25,432 $11,521 48.5`0 $29,500 $14,308 4.4`0 $145.0 $115.0 $130.0 2.469 266.93 285.00 1.32%
3 American Elec Pwr 42.4% $67,528 $28,632 42.5% $75,900 $32,258 2.4% $150.0 $120.0 $135.0 2.217 532.90 550.00 0.63%
4 Black Hills Corp. 43.5`0 $7,752 $3,372 44.5`0 $9,900 $4,406 5.5`0 $90.0 $65.0 $77.5 1.384 69.84 77.00 1.97`0
5 CMS Energy Corp. 34.0`0 $23,536 $8,002 37.5`0 $24,700 $9,263 3.0% $95.0 $70.0 $82.5 2.683 298.80 302.00 0.21`0
6 Dominion Energy 44.0% $59,125 $26,015 42.0% $79,800 $33,516 5.2% $80.0 $60.0 $70.0 1.842 841.00 880.00 0.91%
7 DTE Energy Co. 38.2`0 $29,328 $11,203 39.0`0 $32,200 $12,558 2.3`0 $200.0 $145.0 $172.5 2.734 207.17 206.00 -0.11%
8 Duke Energy Corp. 38.0% $127,650 $48,507 37.0% $160,500 $59,385 4.1% $155.0 $115.0 $135.0 1.770 772.50 777.00 0.12%
9 Entergy Corp. 36.0`0 $41,917 $15,090 36.5`0 $55,915 $20,409 6.2`0 $85.0 $70.0 $77.5 1.784 429.58 460.00 1.38`0
10 Evergy Inc. 48.0`0 $20,019 $9,609 46.5`0 $23,400 $10,881 2.5`0 $100.0 $75.0 $87.5 1.842 229.73 230.00 0.02`0
11 Eversource Energy 38.5% $2,250 $866 38.0% $52,000 $19,760 86.9% $110.0 $80.0 $95.0 1.784 367.00 372.00 0.27%
12 IDACORP, Inc. 52.2`0 $6,385 $3,333 57.0`0 $7,300 $4,161 4.5`0 $150.0 $120.0 $135.0 1.824 53.96 56.00 0.74%
13 NorthWestern Energy Grp. 51.4% $5,555 $2,855 49.5% $6,950 $3,440 3.8% $75.0 $55.0 $65.0 1.214 61.32 64.00 0.86%
14 Otter Tail Corp. 58.5`0 $2,288 $1,338 57.5`0 $2,525 $1,452 1.6`0 $85.0 $60.0 $72.5 1.638 41.83 42.50 0.32`0
15 Pinnacle West Capital 45.6`0 $14,813 $6,755 45.0`0 $19,500 $8,775 5.4`0 $130.0 $95.0 $112.5 1.607 119.10 125.00 0.97`0
16 Portland General Elec. 45.0% $8,424 $3,791 42.0% $12,025 $5,051 5.9% $75.0 $55.0 $65.0 1.538 109.34 120.00 1.88%
17 Pub Sv Enterprise Grp. 45.5`0 $35,425 $16,118 44.0`0 $48,900 $21,516 5.9`0 $105.0 $85.0 $95.0 2.235 499.00 505.00 0.24`0
18 Sempra 48.3% $62,800 $30,332 45.0% $95,000 $42,750 7.1% $120.0 $90.0 $105.0 1.765 650.63 665.00 0.44%
19 Xcel Energy Inc. 41.7`0 $46,838 $19,531 39.0`0 $66,500 $25,935 5.8`0 $100.0 $75.0 $87.5 2.002 574.37 595.00 0.71`0
(a) The Value Line Investment Survey (Feb. 7, Mar. 7 and Apr. 18, 2025).
(b) "b" is the retention ratio, computed as (EPS-DPS)/EPS.
(c) is the rate of return on book equity, computed as EPS/BVPS.
(d) Computed using the formula 2*(1+5-Yr. Change in Equity)/(2+5 Yr. Change in Equity).
(e) Product of average year-end "r" for 2029 and Adjustment Factor.
(f) Product of change in common shares outstanding and M/B Ratio.
(g) Computed as 1 - B/M Ratio.
(h) Product of total capital and equity ratio.
(i) Five-year rate of change.
(j) Average of High and Low expected market prices divided by 2029 BVPS.
Exhibit No.8
Case No.IPC-E-25-16
J.Thompson,IPC
Page 2 of 2

BEFORE THE
IDAHO PUBLIC UTILITIES COMMISSION
CASE NO. IPC-E-25-16
IDAHO POWER COMPANY
THOMPSON , DI
TESTIMONY
EXHIBIT NO. 9

CAPM Exhibit 9
Page 1 of 1
UTILITY GROUP
(a) (b) (c) (d) (e) (f)
Market Return (R.)
Div Proj . Risk-Fret Risk Unadjustec Market Size Adjusted
Company Yield Growth R(m) Rate Premium Beta CAPM Cap Adjustment CAPM
1 Alliant Energy 1.7% 10.5% 12.2% 4.6% 7.6% 0.80 10.7% $16,300 0.49% 11.2%
2 Ameren Corp. 1.7% 10.5% 12.2% 4.6% 7.6% 0.80 10.7% $22,000 0.33% 11.0%
3 American Elec Pwr 1.7% 10.5% 12.2% 4.6% 7.6% 0.70 9.9% $52,700 -0.01% 9.9%
4 Black Hills Corp. 1.7% 10.5% 12.2% 4.6% 7.6% 0.90 11.4% $4,100 0.74% 12.2%
5 CMS Energy Corp. 1.7% 10.5% 12.2% 4.6% 7.6% 0.70 9.9% $20,800 0.33% 10.3%
6 Dominion Energy 1.7% 10.5% 12.2% 4.6% 7.6% 0.75 10.3% $50,400 -0.01% 10.3%
7 DTE Energy Co. 1.7% 10.5% 12.2% 4.6% 7.6% 0.85 11.1% $25,800 0.33% 11.4%
8 Duke Energy Corp. 1.7% 10.5% 12.2% 4.6% 7.6% 0.70 9.9% $90,400 -0.01% 9.9%
9 Entergy Corp. 1.7% 10.5% 12.2% 4.6% 7.6% 0.80 10.7% $32,700 0.33% 11.0%
10 Evergy Inc. 1.7% 10.5% 12.2% 4.6% 7.6% 0.75 10.3% $13,600 0.49% 10.8%
11 Eversource Energy 1.7% 10.5% 12.2% 4.6% 7.6% 0.80 10.7% $23,800 0.33% 11.0%
12 IDACORP, Inc. 1.7% 10.5% 12.2% 4.6% 7.6% 0.75 10.3% $6,100 0.74% 11.0%
13 NorthWestern Energy Grp. 1.7% 10.5% 12.2% 4.6% 7.6% 0.80 10.7% $3,400 1.00% 11.7%
14 Otter Tail Corp. 1.7% 10.5% 12.2% 4.6% 7.6% 0.90 11.4% $3,800 1.00% 12.4%
15 Pinnacle West Capital 1.7% 10.5% 12.2% 4.6% 7.6% 0.80 10.7% $10,600 0.49% 11.2%
16 Portland General Elec. 1.7% 10.5% 12.2% 4.6% 7.6% 0.80 10.7% $4,500 0.74% 11.4%
17 Pub Sv Enterprise Grp. 1.7% 10.5% 12.2% 4.6% 7.6% 0.90 11.4% $45,000 0.33% 11.8%
18 Sempra 1.7% 10.5% 12.2% 4.6% 7.6% 0.90 11.4% $41,600 0.33% 11.8%
19 Xcel Energy Inc. 1.7% 10.5% 12.2% 4.6% 7.6% 0.75 10.3% $38,500 0.33% 10.6%
Average 10.7% 11.1%
(a) Weighted average for dividend-paying stocks in the S&P 500 based on data from www.valueline.com (retrieved Mar 31, 2025) .
(b) Average of weighted average earnings growth rates from IBES, Value Line, and Zacks for dividend-paying stocks in the S&P 500 based on data from
LSEG, as provided by www.fidelity.com (retrieved Mar 31, 2025), www.valueline.com (retrieved Mar 31, 2025), and www.zacks.com (retrieved Mar 31,
2025) . Eliminated growth rates that were greater than 200, as well as all negative values.
(c) Average yield on 30-year Treasury bonds for six-months ending Mar. 2025 based on data from https://fred.stlouisfed.org/.
(d) The Value Line Investment Survey, Summary & Index (Apr. 18, 2025) .
(e) The Value Line Investment Survey (Feb. 7, Mar. 7 and Apr. 18, 2025) .
(f) Kroll, 2024 CRSP Deciles Size Premium, Cost of Capital Navigator (2025) .
Exhibit No.9
Case No.IPC-E-25-16
J.Thompson,IPC
Page 1 of 1

BEFORE THE
IDAHO PUBLIC UTILITIES COMMISSION
CASE NO. IPC-E-25-16
IDAHO POWER COMPANY
THOMPSON , DI
TESTIMONY
EXHIBIT NO. 10

UTILITY RISK PREMIUM Exhibit 10
Page 1 of 3
COST OF EQUITY ESTIMATE
Current Equity Risk Premium
(a) Avg. Yield over Study Period 7 . 740
(b) Average Utility Bond Yield 5 . 670
Change in Bond Yield -2 . 070
(c) Risk Premium/Interest Rate Relationship -0 . 4212
Adjustment to Average Risk Premium 0 . 870
(a) Average Risk Premium over Study Period 3 . 90%
Adjusted Risk Premium 4 .77%
Implied Cost of Equity
(b) Baa Utility Bond Yield 5 . 840
Adjusted Equity Risk Premium 4 . 770
Risk Premium Cost of Equity 10 . 61%
(a) Exhibit 10, page 2.
(b) Average bond yield on all utility bonds and 'Baa' subset for six-months
ending Mar. 2025 based on data from Moody's Investors Service at
www.credittrends.com.
(c) Exhibit 10, page 3.
Exhibit No. 10
Case No. IPC-E-25-16
J.Thompson, IPC
Page 1 of 3

UTILITY RISK PREMIUM Exhibit 10
Page 2 of 3
AUTHORIZED RETURNS
(a) (b) (a) (b)
Average Average
Allowed Utility Risk Allowed Utility Risk
Year ROE Bond Yield Premium Year ROE Bond Yield Premium
1974 13. 10% 9.27% 3. 83% 2000 11.58% 8 . 09% 3.49%
1975 13.20% 9.88% 3.32% 2001 11.07% 7 .72% 3.35%
1976 13. 10% 9.17% 3. 93% 2002 11.21% 7 .53% 3. 68%
1977 13.30% 8.58% 4 .72% 2003 10. 96% 6. 61% 4 .35%
1978 13.20% 9.22% 3. 98% 2004 10.81% 6.20% 4 . 61%
1979 13.50% 10.39% 3. 11% 2005 10.51% 5. 67% 4 .84%
1980 14 .23% 13.15% 1 . 08% 2006 10.34% 6. 08% 4 .26%
1981 15.22% 15. 62% -0 .40% 2007 10.32% 6. 11% 4 .21%
1982 15.78% 15.33% 0 .45% 2008 10.37% 6. 65% 3.72%
1983 15.36% 13.31% 2 . 05% 2009 10.52% 6.28% 4 .24%
1984 15.32% 14 .03% 1 .29% 2010 10.29% 5.56% 4 . 73%
1985 15.20% 12 .29% 2 . 91% 2011 10.19% 5. 13% 5 . 06%
1986 13. 93% 9.46% 4 .47% 2012 10.02% 4 .26% 5 . 76%
1987 12 . 99% 9. 98% 3. 01% 2013 9.82% 4 .55% 5.27%
1988 12 .79% 10.45% 2 .34% 2014 9.76% 4 .41% 5.35%
1989 12 . 97% 9. 66% 3.31% 2015 9. 60% 4 .37% 5.23%
1990 12 .70% 9.76% 2 . 94% 2016 9. 60% 4 . 11% 5.49%
1991 12 .54% 9.21% 3.33% 2017 9. 68% 4 . 07% 5. 61%
1992 12 . 09% 8.57% 3.52% 2018 9.56% 4 .34% 5.22%
1993 11 .46% 7 .56% 3. 90% 2019 9. 65% 3. 86% 5.79%
1994 11 .21% 8.30% 2 . 91% 2020 9.39% 3. 07% 6.32%
1995 11 .58% 7 . 91% 3. 67% 2021 9.39% 3. 14% 6.25%
1996 11 . 40% 7 .74% 3. 66% 2022 9.58% 4 .76% 4 .82%
1997 11 .33% 7 . 63% 3.70% 2023 9. 66% 5. 60% 4 .06%
1998 11 .77% 7 .00% 4 . 77% 2024 9.78% 5.57% 4 .21%
1999 10 .72% 7 .55% 3. 17% Average 11.64% 7.74% 3.90%
Exhibit No.10
Case No.IPC-E-25-16
(a) S&P Global Market Intelligence, Major Rate Case Decisions, RRA Regulatory Focus; UtilityScope Regulatory J.Thompson,I PC
Service, Argus. Data for "general" rate cases (excluding limited-issue rider cases) beginning in 2006 (the Page 2of3
first year such data presented by RRA) .
(b) Moody's Investors Service.

UTILITY RISK PREMIUM Exhibit 10
Page 3 of 3
REGRESSION RESULTS
Authorized Equity Risk Premiums vs. Utility Interest
Rates
(1974-2024)
7%
6%
5% ♦ •
N 4% : �♦ 4•
a •♦
x
3% ♦ • •
N •
H 2%
1% y = -0.4212x + 0.0716 •
•J R2 = 0.8772 •
0
w •
-1%
3% 4% 5% 6% 7% 8% 9% 10% 11% 12% 13% 14% 15% 16%
Average Utility Bond Yield
Exhibit No. 10
Case No. IPC-E-25-16
J.Thompson, IPC
Page 3 of 3

BEFORE THE
IDAHO PUBLIC UTILITIES COMMISSION
CASE NO. IPC-E-25-16
IDAHO POWER COMPANY
THOMPSON , DI
TESTIMONY
EXHIBIT NO. 11

FLOTATION COST STUDY Exhibit 11
Page 1 of 1
ELECTRIC & GAS UTILITIES
(1) (2) (3) (4) (5) (6) (7) (8) (9)
Underwriting Total Gross Proceeds Flotation
Shares Offering Discount Underwriting Offering Flotation Before Flot. Cost
No. Sym Company Date Issued Price (per share) Discount Expense Costs Costs ($)
1 LNT Alliant Energy 11/14/2019 3,717,502 $52.63 $0.39500 $1,468,413 $500,000 $1,968,413 $195,652,130 1.006%
2 AEE Ameren Corp. 8/5/2019 7,549,205 $74.30 $0.12000 $905,905 $750,000 $1,655,905 $560,905,932 0.295%
3 AEP American Elec Pwr 4/2/2009 69,000,000 $24.50 $0.73500 $50,715,000 $400,000 $51,115,000 $1,690,500,000 3.024%
4 AVA Avista Corp. 12/13/2006 3,162,500 $25.05 $0.48000 $1,518,000 $300,000 $1,818,000 $79,220,625 2.295%
5 BKH Black Hills Corp. 2/25/2020 1,222,942 $81.77 $0.73590 $899,963 $230,000 $1,129,963 $99,999,967 1.130%
6 CNP CenterPoint Energy 8/8/2024 9,754,194 $25.63 $0.27000 $2,633,632 $400,000 $3,033,632 $249,999,992 1.213%
7 CMS CMS Energy Corp. 3/31/2005 23,000,000 $12.25 $0.42880 $9,862,400 $325,000 $10,187,400 $281,750,000 3.616%
8 ED Consolidated Edison (a) 12/9/2029 7,000,000 $96.66 $0.87000 $6,090,000 $450,000 $6,540,000 $676,620,000 0.967%
Con Ed "Follow-On Offering" (a) 3/5/2025 6,300,000 $100.21 $1.93900 $12,215,700 $400,000 $12,615,700 $631,329,300 1.998%
9 D Dominion Energy (a) 3/29/2018 20,000,000 $67.33 $1.89420 $37,884,000 $450,000 $38,334,000 $1,346,516,000 2.847%
10 DTE DTE Energy Co. 10/29/2019 2,400,000 $126.00 $3.15000 $7,560,000 $300,000 $7,860,000 $302,400,000 2.599%
11 DUK Duke Energy Corp. (a) 11/18/2019 25,000,000 $85.99 $2.66000 $66,500,000 $592,000 $67,092,000 $2,149,750,000 3.121%
12 EIX Edison International 5/13/2020 14,181,882 $56.41 $0.98718 $14,000,000 $1,000,000 $15,000,000 $799,999,964 1.875%
13 ETR Entergy Corp. 6/8/2018 13,289,037 $75.25 $0.80000 $10,631,230 $650,000 $11,281,230 $1,000,000,034 1.128%
14 EVRG Evergy Inc. N/A
15 ES Eversource Energy (a) 6/12/2020 6,000,000 $84.91 $1.35000 $8,100,000 $600,000 $8,700,000 $509,460,000 1.708%
16 EXC Exelon Corp. (a) 8/8/2022 11,300,000 $43.32 $0.99000 $11,187,000 $900,000 $12,087,000 $489,516,000 2.469%
17 FE FirstEnergy Corp. 9/15/2003 32,200,000 $30.00 $0.97500 $31,395,000 $423,000 $31,818,000 $966,000,000 3.294%
18 PIS Fortis Inc. N/A
19 HE Hawaiian Elec. 9/24/2024 # 54,054,054 $9.25 $0.27750 $15,000,000 $650,000 $15,650,000 $500,000,000 3.130%
20 IDA IDACORP, Inc. 12/10/2004 4,025,000 $30.00 $1.20000 $4,830,000 $300,000 $5,130,000 $120,750,000 4.248%
21 MGEE MGE Energy 5/14/2020 1,300,000 $56.00 $2.38000 $3,094,000 $500,000 $3,594,000 $72,800,000 4.937%
22 NEE NextEra Energy, Inc. (a) 11/3/2016 13,800,000 $124.00 $1.89000 $26,082,000 $750,000 $26,832,000 $1,711,200,000 1.568%
23 NWE Northwestern Energy Group 11/18/2021 6,074,767 $53.50 $1.60500 $9,750,001 $900,000 $10,650,001 $325,000,035 3.277%
24 OGE OGE Energy Corp. 8/22/2003 5,324,074 $21.60 $0.79000 $4,206,018 $325,000 $4,531,018 $114,999,998 3.940%
25 OTTR Otter Tail Corp. N/A
26 PCG PG&E Corp. 12/3/2024 48,661,801 $20.55 $0.39045 $19,000,000 $750,000 $19,750,000 $1,000,000,011 1.975%
27 PNW Pinnacle West Capital 3/l/2024 9,774,436 $66.50 $1.99500 $19,500,000 $550,000 $20,050,000 $649,999,994 3.085%
28 POR Portland General Elec. 10/27/2022 10,100,000 $43.00 $1.23625 $12,486,125 $515,000 $13,001,125 $434,300,000 2.994%
29 PPL PPL Corp. 5/10/2018 55,000,000 $27.00 $0.29430 $16,186,500 $1,000,000 $17,186,500 $1,485,000,000 1.157%
30 PEG Pub Sv Enterprise Grp. 10/2/2003 9,487,500 $41.75 $1.25250 $11,883,094 $350,000 $12,233,094 $396,103,125 3.088%
31 SEE Sempra Energy 11/8/2023 17,142,858 $70.00 $1.15500 $19,800,001 $600,000 $20,400,001 $1,200,000,060 1.700%
32 SO Southern Company (a) 8/18/2016 32,500,000 $49.30 $1.66000 $53,950,000 $557,000 $54,507,000 $1,602,250,000 3.402%
33 PNM TXNM Energy (a) 1/7/2020 5,375,000 $47.21 $1.99000 $10,696,250 $750,000 $11,446,250 $253,753,750 4.511%
34 WEC WEC Energy Group N/A
35 XEL Xcel Energy Inc. (a) 11/5/2024 18,320,610 $65.50 $1.06440 $19,500,457 $1,200,000 $20,700,457 $1,199,999,955 1.725%
Average 2.479%
1 ATO Atmos Energy Corp. 11/30/2018 7,008,087 $92.75 $0.97690 $6,846,200 $1,000,000 $7,846,200 $650,000,069 1.207%
2 CPK Chesapeake Utilities 11/14/2023 3,859,649 $85.50 $2.77875 $10,725,000 $1,000,000 $11,725,000 $329,999,990 3.553%
3 NJR New Jersey Resources 12/4/2019 5,700,000 $41.25 $1.23750 $7,053,750 $500,000 $7,553,750 $235,125,000 3.213%
4 NI NiSource Inc. 5/3/2017 N/A N/A N/A $10,000,000 $57,950 $10,057,950 $500,000,000 2.012%
5 NWN Northwest Nat. Holding Co. 3/30/2022 2,500,000 $50.00 $1.62500 $4,062,500 $450,000 $4,512,500 $125,000,000 3.610%
6 OGS ONE Gas, Inc. N/A
7 SWX Southwest Gas 3/9/2023 3,576,180 $60.12 $2.02910 $7,256,427 $538,000 $7,794,427 $214,999,942 3.625%
8 SR Spire Inc. 6/15/2023 1,744,549 $64.20 $0.60000 $1,046,729 $450,000 $1,496,729 $112,000,046 1.336%
Average 2.651%
Average - Electric & Gas 2.510%
Column Notes:
(1-4) SEC Form 424B for each company (through Mar 17, 2025).
(5) Column (2) * Column (4)
(6) SEC Form 424B for each company (through Mar 17, 2025).
(7) Column (5) + Column (6)
(8) Column (2) * Column (3)
Exhibit No.11
(9) Column (7) / Column (8)
Note (a): Underwriting discount computed as the difference between the current market price and the price offered to the issuing company by the underwriters. Case No.IPC-E-25-16
J.Thompson,IPC
Page 1 of 1

BEFORE THE
IDAHO PUBLIC UTILITIES COMMISSION
CASE NO. IPC-E-25-16
IDAHO POWER COMPANY
THOMPSON , DI
TESTIMONY
EXHIBIT NO. 12

EXPECTED EARNINGS BENCHMARK Exhibit 12
Page 1 of 1
UTILITY GROUP
(a) (b) (C)
Expected Adjusted
Return on Adjustment Return on
Company Common Equity Factor Common Equity
1 Alliant Energy 12.0% 1.0156 12.2%
2 Ameren Corp. 10.0% 1.0217 10.2%
3 American Elec Pwr 11.0% 1.0119 11.1%
4 Black Hills Corp. 8.5% 1.0267 8.7%
5 CMS Energy Corp. 13.5% 1.0146 13.7%
6 Dominion Energy 11.0% 1.0253 11.3%
7 DTE Energy Co. 12.5% 1.0114 12.6%
8 Duke Energy Corp. 10.5% 1.0202 10.7%
9 Entergy Corp. 9.5% 1.0302 9.8%
10 Evergy Inc. 10.0% 1.0124 10.1%
11 Eversource Energy 11.0% 1.3029 14.3%
12 IDACORP, Inc. 9.5% 1.0222 9.7%
13 NorthWestern Energy Grp. 8.0% 1.0186 8.1%
14 Otter Tail Corp. 11.5% 1.0081 11.6%
15 Pinnacle West Capital 9.0% 1.0262 9.2%
16 Portland General Elec. 9.5% 1.0287 9.8%
17 Pub Sv Enterprise Grp. 12.5% 1.0289 12.9%
18 Sempra 10.5% 1.0343 10.9%
19 Xcel Energy Inc. 11.0% 1.0283 11.3%
Average (d) 10.6% 11.0%
(a) The Value Line Investment Survey (Feb. 7, Mar. 7 and Apr. 18, 2025) .
(b) Adjustment to convert year-end return to an average rate of return from Exhibit 8.
(c) (a) x (b) .
(d) Excludes highlighted values.
Exhibit No.12
Case No.IPC-E-25-16
J.Thompson,IPC
Page 1 of 1

BEFORE THE
IDAHO PUBLIC UTILITIES COMMISSION
CASE NO. IPC-E-25-16
IDAHO POWER COMPANY
THOMPSON , DI
TESTIMONY
EXHIBIT NO. 13

DCF MODEL - NON-UTILITY GROUP Exhibit 13
Page 1 of 3
DIVIDEND YIELD
(a) (b)
Company Industry Group Price Dividends Yield
1 Abbott Labs. Med Supp Non-Invasive $129.60 $ 2.36 1.8%
2 AbbVie Inc. Drug $202.41 $ 6.56 3.2%
3 Air Products & Chem. Chemical (Diversified) $289.08 $ 7.08 2.4%
4 Alphabet Inc. Internet $163.23 $ 0.86 0.5%
5 Amdocs Ltd. IT Services $87.89 $ 1.92 2.2%
6 Amgen Biotechnology $307.65 $ 9.52 3.1%
7 Apple Inc. Computers/Peripherals $214.04 $ 1.00 0.5%
8 AptarGroup Packaging & Container $146.17 $ 1.85 1.3%
9 Becton, Dickinson Med Supp Invasive $221.86 $ 4.18 1.9%
10 Bristol-Myers Squibb Drug $58.40 $ 2.48 4.2%
11 Brown-Forman 'B' Beverage $34.43 $ 1.00 2.9%
12 Church & Dwight Household Products $107.93 $ 1.14 1.1%
13 Cisco Systems Telecom. Equipment $60.05 $ 1.64 2.7%
14 CME Group Brokers & Exchanges $260.28 $ 4.60 1.8%
15 Coca-Cola Beverage $70.29 $ 2.04 2.9%
16 Colgate-Palmolive Household Products $92.10 $ 2.00 2.2%
17 Comcast Corp. Cable TV $35.69 $ 1.24 3.5%
18 Costco Wholesale Retail Store $942.59 $ 4.92 0.5%
19 Danaher Corp. Med Supp Non-Invasive $202.75 $ 1.17 0.6%
20 Electronic Arts Entertainment Tech $140.61 $ 0.76 0.5%
21 Gallagher (Arthur J.) Financial Svcs. (Div.) $331.79 $ 2.50 0.8%
22 Gilead Sciences Drug $110.14 $ 3.16 2.9%
23 Hershey Co. Food Processing $169.94 $ 5.63 3.3%
24 Home Depot Retail Building Supply $360.46 $ 9.20 2.6%
25 Hormel Foods Food Processing $29.89 $ 1.16 3.9%
26 IDEX Corp. Machinery $179.40 $ 2.76 1.5%
27 Int'1 Business Mach. Computer Software $244.96 $ 6.72 2.7%
28 Johnson & Johnson Drug $160.29 $ 5.20 3.2%
29 Kimberly-Clark Household Products $140.26 $ 5.04 3.6%
30 Lilly (Eli) Drug $815.15 $ 6.00 0.7%
31 Lockheed Martin Aerospace/Defense $456.45 $ 13.20 2.9%
32 Marsh & McLennan Financial Svcs. (Div.) $234.86 $ 3.26 1.4%
33 McDonald's Corp. Restaurant $307.70 $ 6.40 2.1%
34 McKesson Corp. Med Supp Non-Invasive $664.50 $ 3.02 0.5%
35 Merck & Co. Drug $89.09 $ 3.24 3.6%
36 Microsoft Corp. Computer Software $383.67 $ 3.41 0.9%
37 Mondelez Int'1 Food Processing $66.07 $ 1.88 2.8%
38 NewMarket Corp. Chemical (Specialty) $546.24 $ 10.00 1.8%
39 Northrop Grumman Aerospace/Defense $497.88 $ 8.84 1.8%
40 PepsiCo, Inc. Beverage $148.75 $ 5.42 3.6%
41 Procter & Gamble Household Products $168.40 $ 4.03 2.4%
42 Progressive Corp. Insurance (Prop/Cas.) $276.61 $ 0.40 0.1%
43 Republic Services Environmental $236.61 $ 2.32 1.0%
44 Roper Tech. Computer Software $572.03 $ 3.39 0.6%
45 Thermo Fisher Sci. Med Supp Non-Invasive $494.78 $ 1.56 0.3%
46 Travelers Cos. Insurance (Prop/Cas.) $255.82 $ 4.20 1.6%
47 UnitedHealth Group Medical Services $517.87 $ 8.40 1.6%
48 Verizon Communic. Telecom. Services $43.97 $ 2.72 6.2%
49 Walmart Inc. Retail Store $87.91 $ 0.94 1.1%
50 Waste Management Environmental $227.42 $ 3.30 1.5%
2.1%
(a) Average of closing prices for 30 trading days ended Apr. 14, 2025. Exhibit No.13
(b) The Value Line Investment Survey, Summary & Index (Apr. 18, 2025)
Case No.IPC-E-25-16
J.Thompson,IPC
Page 1 of 3

DCF MODEL - NON-UTILITY GROUP Exhibit 13
Page 2 of 3
GROWTH RATES
(a) (b) (o)
Earnings Growth
Company Ticker V Line IBES Zacks
1 Abbott Labs. ABT 6.90% 10.30% 10.42%
2 AbbVie Inc. ABBV 17.60% 15.90% 11.94%
3 Air Products & Chem. APD 17.00% 6.20% 6.18%
4 Alphabet Inc. GOOG 11.50% 19.90% 15.34%
5 Amdocs Ltd. DOX 6.45% 8.10% 9.78%
6 Amgen AMGN 25.75% 5.80% 5.81%
7 Apple Inc. AAPL 11.50% 14.50% 13.16%
8 AptarGroup ATR 7.75% 6.80% 6.76%
9 Becton, Dickinson BDX 18.50% 9.20% 9.65%
10 Bristol-Myers Squibb BMY 3.90% 36.30% 4.00%
11 Brown-Forman 'B' BF/B 3.50% -2.30% 3.20%
12 Church & Dwight CHD 4.80% 8.60% 8.49%
13 Cisco Systems CSCO 5.00% 4.50% 5.10%
14 CME Group CME 11.40% 5.60% 5.85%
15 Coca-Cola KO 4.00% 6.00% 6.26%
16 Colgate-Palmolive CL 5.00% 5.40% 5.54%
17 Comcast Corp. CMCSA 6.15% 6.30% 4.98%
18 Costco Wholesale COST 26.00% 10.50% 9.34%
19 Danaher Corp. DHR 9.50% 8.60% 10.23%
20 Electronic Arts EA 7.75% 6.00% 7.70%
21 Gallagher (Arthur J.) AJG 11.50% 13.60% n/a
22 Gilead Sciences GILD 6.85% 28.60% 19.47%
23 Hershey Co. HSY 12.40% -9.30% 4.61%
24 Home Depot HD 23.35% 5.10% 7.05%
25 Hormel Foods HRL 2.25% 7.30% 6.14%
26 IDEX Corp. IEX 10.85% 12.00% 12.00%
27 Int'l Business Mach. IBM 13.00% 3.50% 4.23%
28 Johnson & Johnson JNJ 13.00% n/a 6.18%
29 Kimberly-Clark KMB 9.45% 4.00% 4.23%
30 Lilly (Eli) LLY 37.00% 41.80% 26.22%
31 Lockheed Martin LMT 50.45% 6.30% 10.59%
32 Marsh & McLennan MMC 11.75% 8.60% 8.55%
33 McDonald's Corp. MCD 18.60% 7.60% 7.97%
34 McKesson Corp. MCK 50.00% 14.10% 14.11%
35 Merck & Co. MRK 11.80% 56.30% 12.31%
36 Microsoft Corp. MSFT 20.25% 12.70% 14.42%
37 Mondelez Int'l MDLZ 4.45% 2.20% 5.22%
38 NewMarket Corp. NEU 46.30% n/a n/a
39 Northrop Grumman NOC 38.50% 5.70% 4.19%
40 PepsiCo, Inc. PEP 10.75% 4.40% 5.55%
41 Procter & Gamble PG 8.00% 5.40% 6.04%
42 Progressive Corp. PGR 20.25% 32.10% 9.62%
43 Republic Services RSG 10.45% 8.90% 9.25%
44 Roper Tech. ROP 25.50% 7.60% 10.50%
45 Thermo Fisher Sci. TMO 27.15% 6.60% 8.52%
46 Travelers Cos. TRV 28.50% 14.10% 3.05%
47 UnitedHealth Group UNH 45.00% 11.70% 12.40%
48 Verizon Communic. Vz 5.35% 2.10% 2.18%
49 Walmart Inc. WMT 4.00% 9.30% 7.13%
50 Waste Management WM 9.65% 11.00% 10.96%
(a) www.valueline.com (retrieved Apr. 15, 2025) .
(b) LSEG Stock Reports Plus, as provided by fidelity.com (retrieved Apr. 14, 2025) . Exhibit No.13
(c) www.zacks.com (retrieved Apr. 16, 2025) . Case No.IPC-E-25-16
J.Thompson,IPC
Page 2 of 3

DCF MODEL - NON-UTILITY GROUP Exhibit 13
Page 3 of 3
DCF COST OF EQUITY ESTIMATES
(a) (b) (c)
Company V Line IBES Zacks
1 Abbott Labs. 8.7% 12.1% 12.2%
2 AbbVie Inc. 20.8%
3 Air Products & Chem. 19.4% 8.6% 8.6%
4 Alphabet Inc. 12.0%
5 Amdocs Ltd. 8.6% 10.3% 12.0%
6 Amgen 28.8% 8.9% 8.9%
7 Apple Inc. 12.0% 15.0% 13.6%
8 AptarGroup 9.0% 8.1% 8.0%
9 Becton, Dickinson 20.4% 11.1% 11.5%
10 Bristol-Myers Squibb 8.1% 40.5% 8.2%
11 Brown-Forman 'B' 6.4% 0.6% 6.1%
12 Church & Dwight 5.9% 9.7% 9.5%
13 Cisco Systems 7.7% 7.2% 7.8%
14 CME Group 13.2% 7.4% 7.6%
15 Coca-Cola 6.9% 8.9% 9.2%
16 Colgate-Palmolive 7.2% 7.6% 7.7%
17 Comcast Corp. 9.6% 9.8% 8.5%
18 Costco Wholesale 26.5% 11.0% 9.9%
19 Danaher Corp. 10.1% 9.2% 10.8%
20 Electronic Arts 8.3% 6.5% 8.2%
21 Gallagher (Arthur J.) 12.3% 14.4% n/a
22 Gilead Sciences 9.7% 31.5% 22.3%
23 Hershey Co. 15.7% 6.0% 7.9%
24 Home Depot 25.9% 7.7% 9.6%
25 Hormel Foods 6.1% 11.2% 10.0%
26 IDEX Corp. 12.4% 13.5% 13.5%
27 Int'l Business Mach. 15.7% 7.0%
28 Johnson & Johnson 16.2% n/a 9.4%
29 Kimberly-Clark 13.0% 7.6% 7.8%
30 Lilly (Eli) 37.7%
31 Lockheed Martin 53.3% 9.2% 13.5%
32 Marsh & McLennan 13.1% 10.0% 9.9%
33 McDonald's Corp. 20.7% 9.7% 10.0%
34 McKesson Corp. 50.5% 14.6% 14.6%
35 Merck & Co. 15.4% 59.9% 15.9%
36 Microsoft Corp. 21.1% 13.6%
37 Mondelez Int'l 7.3% 5.0% 8.1%
38 NewMarket Corp. 1 48.1% n/a n/a
39 Northrop Grumman 40.3% 7.5% 6.0%
40 PepsiCo, Inc. 14.4% 8.0% 9.2%
41 Procter & Gamble 10.4% 7.8% 8.4%
42 Progressive Corp. 20.4% 32.2% 9.8%
43 Republic Services 11.4% 9.9% 10.2%
44 Roper Tech. 26.1% 8.2% 11.1%
45 Thermo Fisher Sci. 27.5% 6.9% 8.8%
46 Travelers Cos. 30.1% 15.7% 4.7%
47 UnitedHealth Group 46.6% 13.3% 14.0%
48 Verizon Communic. 11.5% 8.3% 8.4%
49 Walmart Inc. 5.1% 10.4% 8.2%
50 Waste Management 11.1% 12.5% 12.4%
Average (b) 10.8% 10.1% 9.9%
(a) Sum of dividend yield (p. 1) and respective growth rate (p. 2) . Exhibit No.13
(b) Excludes highlighted figures.
Case No.IPC-E-25-16
J.Thompson,IPC
Page 3 of 3

BEFORE THE
IDAHO PUBLIC UTILITIES COMMISSION
CASE NO. IPC-E-25-16
IDAHO POWER COMPANY
THOMPSON , DI
TESTIMONY
EXHIBIT NO. 14

14(1-2) Confidential Page 1
CAPITAL STRUCTURE Exhibit 14
Page 1 of 3
UTILITY GROUP OPERATING SUBSIDIARIES
Common
Operating Company Debt Preferred Equity
1 ALLIANT ENERGY CORP.
Interstate Power & Light 47.8% 0.0% 52.2%
Wisconsin Power & Light 45.1% 0.0% 54.9%
2 AMEREN CORP.
Ameren Illinois Co. 44.2% 0.4% 55.4%
Union Electric Co. 49.2% 0.5% 50.3%
3 AMERICAN ELEC PWR
AEP Texas, Inc. 56.9% 0.0% 43.1%
Appalachian Power Co. 49.6% 0.0% 50.4%
Indiana Michigan Power Co. 50.7% 0.0% 49.3%
Kentucky Power Co. 57.7% 0.0% 42.3%
Kingsport Power Co. 48.9% 0.0% 51.1%
Ohio Power Co. 48.9% 0.0% 51.1%
Public Service Co. of Oklahoma 51.5% 0.0% 48.5%
Southwestern Electric Pwr Co. 50.5% 0.0% 49.5%
Wheeling Power Co. 60.0% 0.0% 40.0%
4 BLACK HILLS CORP.
Black Hills Power (South Dakota Elec.) 47.4% 0.0% 52.6%
Cheyenne Light Fuel & Power (Wyo Elec.) 54.6% 0.0% 45.4%
Black Hills/Colorado Electric Utility Co 50.8% 0.0% 49.2%
5 CMS ENERGY
Consumers Energy Co. 51.6% 0.2% 48.3%
6 DOMINION ENERGY
Virginia Electric & Power 45.0% 0.0% 55.0%
Dominion Energy South Carolina 47.4% 0.0% 52.6%
7 DTE ENERGY CO.
DTE Electric Co. 50.9% 0.0% 49.1%
8 DUKE ENERGY
Duke Energy Carolinas 49.5% 0.0% 50.5%
Duke Energy Florida 48.5% 0.0% 51.5%
Duke Energy Indiana 46.5% 0.0% 53.5%
Duke Energy Ohio 43.3% 0.0% 56.7%
Duke Energy Progress 51.1% 0.0% 48.9%
Duke Energy Kentucky 38.5% 0.0% 61.5%
9 ENTERGY CORP.
Entergy Arkansas Inc. 53.4% 0.0% 46.6%
Entergy Louisiana LLC 46.0% 0.0% 54.0%
Entergy Mississippi Inc. 50.2% 0.0% 49.8%
Entergy New Orleans Inc. 51.3% 0.0% 48.7%
Entergy Texas Inc. 51.5% 0.6% 47.9%
Exhibit No.14
Case No.IPC-E-25-16
J.Thompson,IPC
Page 1 of 3

14(1-2) Confidential Page 2
Common
Operating Company Debt Preferred Equity
Exhibit 14
10 EVERGY, INC. Page 2 of 3
Evergy Metro 48.8% 0.0% 51.2%
Evergy Kansas Central 46.4% 0.0% 53.6%
11 EVERSOURCE ENERGY
Connecticut Light & Power 43.3% 1.0% 55.7%
NSTAR Electric Co. 42.3% 0.4% 57.4%
Public Service Co. of New Hampshire 43.2% 0.0% 56.8%
12 IDACORP
Idaho Power Co. 49.9% 0.0% 50.1%
13 NORTHWESTERN ENERGY GROUP
NorthWestern Corporation 50.3% 0.0% 49.7%
14 OTTER TAIL CORP.
Otter Tail Power Co. 43.4% 0.0% 56.6%
15 PINNACLE WEST CAPITAL
Arizona Public Service Co. 47.2% 0.0% 52.8%
16 PORTLAND GENERAL ELECTRIC
Portland General Electric 54.6% 0.0% 45.4%
17 PUB SV ENTERPRISE GRP
Pub Service Electric & Gas Co. 44.8% 0.0% 55.2%
18 SEMPRA ENERGY
San Diego Gas & Electric 48.8% 0.0% 51.2%
Oncor Electric Delivery 46.5% 0.0% 53.5%
19 XCEL ENERGY, INC.
Northern States Power Co. (MN) 47.4% 0.0% 52.6%
Northern States Power Co. (WI) 47.2% 0.0% 52.8%
Public Service Co. of Colorado 43.5% 0.0% 56.5%
Southwestern Public Service Co. 45.6% 0.0% 54.4%
Minimum (b) 38.5% 0.0% 40.0%
Maximum (b) 60.0% 1.0% 61.5%
Average (b) 48.6% 0.1% 51.4%
(a) Data from most recent SEC Form 10-K Reports and FERC Form 1 Reports.
Exhibit No.14
Case No.IPC-E-25-16
J.Thompson,IPC
Page 2 of 3

CAPITAL STRUCTURE Exhibit 14
Page 3 of 3
UTILITY GROUP
At Year-end 2024 (a) Value Line Projected (b)
Common Common
Company Debt Preferred Equity Debt Preferred Equity
1 Alliant Energy 58.4% 0.0% 41.6% 52.0% 0.0% 48.0%
2 Ameren Corp. 58.9% 0.0% 41.1% 51.0% 0.5% 48.5%
3 American Elec Pwr 61.2% 0.0% 38.8% 57.5% 0.0% 42.5%
4 Black Hills Corp. 54.2% 0.0% 45.8% 55.5% 0.0% 44.5%
5 CMS Energy Corp. 65.4% 0.9% 33.8% 61.5% 1.0% 37.5%
6 Dominion Energy 56.5% 1.4% 42.1% 56.0% 2.0% 42.0%
7 DTE Energy Co. 65.3% 0.0% 34.7% 61.0% 0.0% 39.0%
8 Duke Energy Corp. 61.2% 0.7% 38.1% 62.5% 0.5% 37.0%
9 Entergy Corp. 64.5% 0.5% 35.0% 63.5% 0.0% 36.5%
10 Evergy Inc. 55.5% 0.0% 44.5% 53.5% 0.0% 46.5%
11 Eversource Energy 64.1% 0.0% 35.9% 61.5% 0.5% 38.0%
12 IDACORP, Inc. 47.9% 0.0% 52.1% 43.0% 0.0% 57.0%
13 NorthWestern Energy Grp. 51.2% 0.0% 48.8% 50.5% 0.0% 49.5%
14 Otter Tail Corp. 36.1% 0.0% 63.9% 42.5% 0.0% 57.5%
15 Pinnacle West Capital 56.4% 0.0% 43.6% 55.0% 0.0% 45.0%
16 Portland General Elec. 56.0% 0.0% 44.0% 58.0% 0.0% 42.0%
17 Pub Sv Enterprise Grp. 56.7% 0.0% 43.3% 56.0% 0.0% 44.0%
18 Sempra 47.2% 1.3% 51.5% 54.0% 1.0% 45.0%
19 Xcel Energy Inc. 59.3% 0.0% 40.7% 61.0% 0.0% 39.0%
Minimum 36.1% 0.0% 33.8% 42.5% 0.0% 36.5%
Maximum 65.4% 1.4% 63.9% 63.5% 2.0% 57.5%
Average 56.6% 0.3% 43.1% 55.6% 0.3% 44.2%
(a) Year-end 2024 data from 10-K or 40-F (FTS) .
(b) The Value Line Investment Survey (Feb. 7, Mar. 7 and Apr. 18, 2025) .
Exhibit No.14
Case No.IPC-E-25-16
J.Thompson,IPC
Page 3 of 3