20031113Comment from Idaho Community Action Network.pdf

Jean Jewell
From:
Sent:
To:
Subject:
Ed Howell
Wednesday, November 12 20036:33 PM
Jean Jewell; Ed Howell; Gene Fadness; Tonya Clark
Comment acknowledgement
WWW Form Submission:
Wednesday, November 12 , 2003
6: 33: 10
Case: IPC-E-03-
Name: Sam Blair (on behalf of Idaho Community Action Network)
Street Address: 3450 Hill Road
City: Boise
State: ID
ZIP: 83703
Home Telephone: [phone] , x101
E-Mail: icansam~cab1eone. net
Company: Idaho Power
mai1ing 1ist yes no: yes
Comment description: On October 16 , 2003 Idaho Power Company (IPC) filed an application
wi th the Idaho Public Utili ties Commission (IPUC) to increase the company s general rates
by an average of 17.7 percent. The company s filing also includes a request for $20
million in interim rate relief. If approved , the company could begin to collect a 4.
percent uniform interim rate increase while the permanent increase is considered by theIPUC. Components of the permanent increase request include proposals to increase
customers ' monthly service charges and introduce summer and non-summer rates.
Representing low-income ratepayers , we strongly urge the IPUC to deny IPC its request for
$20 million in interim rate relief because we believe that the company s financial
stabi1i ty is not contingent on it , and as such , constitutes an unfair and unnecessary
burden for customers. Our request is based on a close analysis of the company s financial
condi tion , including proj ections about growth and profits by the company s executives aswell as industry analysts. For purposes of the interim decision , we would like to
highlight some key financial indicators and other factors that have had an impact on the
company s bottom line.
Resu1 ts Posted in Most Recent Quarterly Report - In its most recent quarterly report (Form
10-Q) filed with the Securities and Exchange Commission (SEC) on November 6 , 2003 , IDACORP
had a net income of $46.8 million on revenue of $239.2 million for the three months ended
September 30 , 2003. This represented a 27 percent gain in third quarter profits , ending a
string of three quarterly losses. Profit during last year s third quarter totaled $36.
million on revenue of $259.6 million. IDACORP' s net income for this quarter was boosted
by about $27 million in one-time gains , such as tax benefits and the sale of the company
remaining energy market contracts. But profits from continuing operations still exceeded
Wall Street expectations.
(For the nine months ended September 30 , 2003 its net income was $42.82 million.
Refocusing on IP and Winding Down IE - Until 2000 , IPC was the primary business for
IDACORP. With deregulation of the utility industry, like many of its competitors , IDACORP
formed a subsidiary IDACORP Energy (IE) to buy and sell power to the non-regulated
wholesale market. In 2001 , IE raked in so much cash from its power deals that it got its
parent listed in the Fortune 500 for the first time in the company s history. But the
Enron scandal and fallout throughout the energy industry, including a flurry of federal
and state investigations following allegations of market manipulation and violation of
laws , dimmed the prospects for energy trading and prompted IDACORP executives to sell off
its energy contracts.
IP's financial ills and IE's boom were related. The ongoing drought had forced IP to buy
e1ectrici ty at inflated prices on the wholesale market. As a result , IP was among those
bidding for electricity on the wholesale market , which in turn gave IE its higher profits.
Credit Rating - On October 3 , 2003 Standard & Poor (S&P) changed its rating outlook for
IDACORP and IPC to stable from posi ti ve. S&P stated that the stable rating outlook
reflected the belief that overall financial ratios will only meet expectations for an A-
rating over the next two to three years. S&P also changed the IDACORP business profile to
a 4 from a 5 on a 10-point scale , where 1 is the least risky. IPC' s business profile
remained at 4. During the heydays of energy trading, S&P downgraded IDACORP' s credit
rating to negative. The S&P downgrade was one of the factors cited by the company in its
decision to exit from the energy trading business.
Effecti ve Tax Rate - IDACORP has benefited significantly from annual tax credits and
favorable tax resolutions and expects to continue that trend. The company s effective tax
rate for the nine months ended September 2003 was negative 41.2 percent compared with an
effective tax rate of negative 147.3 percent for the nine months ended September 30 2002.
The negative tax rate for the nine months ended September 30 , 2002 reflected a non-
recurring tax benefit of $31 million related to a tax accounting method change adopted
during the third quarter of 2002. The negative tax rates , when adjusted to remove the
non-recurring tax benefit related to the tax accounting method change of $31 million in
2002 , for both nine month periods ended September 30 are primarily the result of the
realization of low-income housing tax credits through IDACORP Financial Services , Inc.
which is involved in low-income housing and other real estate investments. James
Be11essa , an analyst with D A. Davidson Company, said that IDACORP Financial is simply a
vehicle for the company to gain income tax credits.
Regulatory Matters - IDACORP announced in 2002 that it would wind down its energymarketing operations , IDACORP Energy (IE). In connection with this change , specific
matters required resolution by IE and IPC with the Federal Energy Regulatory Commission
(FERC) and IPUC. Some of these matters involve significant financial penal ties and fines
for violation of the Federal Power Act (FPA) and other laws. IDACORP and IPC state in
their SEC filings
, "
IDACORP and IPC do not believe that resolutions of these transactions
will have a material adverse effect on their consolidated financial positions , results of
operations or cash flows.The companies have made similar statements in relation to a
number of other significant legal and regulatory matters disclosed in its SEC filings.
Expected Growth - Compared to 2001 , general business revenue increased 19 percent in 2002.
Rate increases due to the annual Power Cost Adjustment (PCA) resulted in increased
revenues of approximately $94 million. Customer growth in IPC' s service territory
increased approximately two percent , resulting in a $10 million increase in revenues. The
company proj ects an annual growth rate of 3.4 percent for the coming year , which should
resu1 t in significant increase in revenues in the near future.
Based on the above financial indicators , we believe that IDACORP is in a position to make
capi tal improvements by refocusing on its core electricity business through IPC and
rectifying the mistakes made through IE. We see no justification for the company to pass
on the burden to ratepayers through a general rate increase , which may not be significant
for corporate executives at IDACORP and IP , but would be particularly onerous for 10w-
income customers. Finally, we strongly oppose the interim rate increase , which , even
according to company representatives , is an unusual and unprecedented request.
Transaction ID: 11121833.Referred by: http: / /www.puc. state. id. us/ scripts/po1yform. d11/ ipuc
User Address: 24.117.146.
User Hostname: 24.117.146.