HomeMy WebLinkAbout20031210Attachment II.pdfIDAHO POWER COMPANY
O. BOX 70
BOISE, IDAHO B3707
An IDACORP Company
PATRICK A. HARRINGTON
Attorney
December 8 2003 Idaho Pubiic Utiiities Commission
Office of the SecretaryRECEIVED
DEC - 9 2003
Ms. Jean D. Jewell
Secretary
Idaho Public Utilities Commission
Statehouse
Boise, Idaho 83720
Boise. Idaho
Re:In the Matter of the Application of Idaho Power Company for an order authorizing the
issuance and sale of up to $40 000 000 of Common Stock
Case No. IPC-03- 18
Dear Ms. Jewell:
Enclosed herewith for filing with the Commission are five (5) copies of
Attachment ll, Financial Statements, to the above referenced application
Please contact me at 388-2878 if you have any questions regarding this filing.
Sincerely,
vlflffla m -
Patrick A. Harrington/
D.T. Anderson
c. Gribble
Terri Carlock
Telephone (208) 388-2878 Fax (208) 388-6936
Idaho Public Utilities Commission
Office of the SecretaryRECEIVED
DEC - 9 2003
Boise. Idaho
TT ACHMENT I(
ATTACHMENT lea)
IDAHO POWER COMPANY
BALANCE SHEET
As of September 30, 2003
ASSETS
Electric Plant:
In service (at original cost)..............................................................
Accumulated provision for depreciation......................................
In service - Net..........................................................................
Construction work in progress........................................................
Held for future use..........................................................................
Electric plant - Net.....................................................................
Investments and Other Property:
Nonutility property..........................................................................
Investment in subsidiary companies ..............................................
rnhoc.............................................................................................
Total investments and other property..............................................
Current Assets:
Cash and cash equivalents (A).......................................................
Receivables:
Customer..................................................................................
Allowance for uncollectible accounts..........................................
~es........................................................................................
Employee notes ........................................................................
Related party.............................................................................
Other.........................................................................................
Accrued unbilled revenues..............................................................
Materials and supplies (at average cost).........................................
Fuel stock (at average cost)............................................................
Prepayments..................................................................................
Regulatory assets ..........................................................................
Total current assets...................................................................
Deferred Debits:
American Falls and Milner water rights...........................................
Company owned life insurance.......................................................
Regulatory assets associated with income taxes.............................
Regulatory assets - PCA.................................................................
Regulatory assets - other................................................................
Other................................................."""""""""""""""""""""'"
Total deferred debits...................................................................
Total........................................................................... ...................
(A) See Statement of Adjusting Journal Entries.
Actual
164 211 851
363 764 942
800,446 909
106 930 302
704,480
910 081.691
Adiustments
000 000
000 000
000 000 $
The accompanying Notes to Financial Statements are an integral part of this statement
c:\docume-1\pah2878\locals-\temp\balance sheetxls
828 832
748 173
20.946,910
523 915
219 707
832 045
312 080)
908 799
112 567
565 274
273 275
28,455 783
626 198
386 663
28,487 726
017 311
181 573 268
585 000
748 353
317 526 848
841 621
592 245
51,893 581
544,187,648
680 366 522 $
After
Adjustments
164 211 851
363 764 942
800,446 909
106 930 302
704,480
910,081,691
828 832
748 173
946 910
523 915
219 707
832 045
312 080)
908 799
112 567
565 274
273 275
28,455 783
626 198
386 663
28,487 726
017 311
221 573 268
585 000
748 353
317 526 848
841 621
592 245
893 581
544.187.648
720 366 522
IDAHO POWER COMPANY
BALANCE SHEET
As of September 30, 2003
CAPITALIZATION AND LIABILITIES
Common Shares
Authorized
Common Shares
Outstanding
Equity Capital: 000 000 612 351
Common stock (A).........................................................................
Preferred stock ..............................................................................
Premium on capital stock...............................................................
Capital stock expense...................................................................Retained .earnings.........................................................................
Accummulated other comprehensive income..................................
Total equity capitaL...................................................................
Long- Term Debt:
First mortgage bonds ....................................................................
Pollution control revenue bonds .....................................................
Other long-term debt.....................................................................
American Falls bond and Milner note guarantees ...........................
Unamortized discount on long-term debt (Dr)..................................
Total long-term debt.................................................................
Current Liabilities:
Long-term debt due within one year................................................
Notes payable................................................................................
Accounts payable ..........................................................................
Notes and accounts payable to related parties................................
Taxes accrued................................................................................
Interest accrued..............................................................................
Deferred income taxes....................................................................
rnhoc.............................................................................................
Total current liabilities................................................................
Deferred Credits:
Regulatory liabilities associated with accumulated deferred
investment tax credits ...............................................................
Deferred income taxes....................................................................
Regulatory liabilities associated with income taxes ........................
Regulatory liabilities-other..............................................................
rnhoc.............................................................................................
Total deferred credits.................................................................
TotaL.........................................................................................
(A) See Statement of Adjusting Journal Entries.
After
Actual ustments ustments
030 878 000 000 134 030 878
52,483 600 52,483 600
362 057 833 362 057 833
688 806)688 806)
317 628 113 317 628 113
734 300)734 300)
818 777 318 000 000 858 777 318
680 000 000 680 000 000
170,460 000 170,460 000
048 211 048 211
585 000 585 000
257 525)257 525)
880 835 686 880 835 686
076 844 076 844
000 000 000 000
309 746 309 746
582 163 582 163
744 394 744 394
571,449 571,449
785 252 785 252
756 874 756 874
250 826 722 250 826 722
328,486 328,486
526 411,489 526,411,489
745 235 745 235
052 626 052 626
388 960 388 960
729 926 796 729 926,796
680 366 522 000 000 720 366 522
The accompanying Notes to Financial Statements are an integral part of this statement
c:\docume-1\pah2878\1ocals-1\temp\balance sheetxls
IDAHO POWER COMPANY
STATEMENT OF ADJUSTING JOURNAL ENTRIES
As of September 30 , 2003
Giving Effect to the Proposed issuance of
Common Stock
Entry No.
Cash.............................................................................................000 000
Common Stock................................................................................................
Premium on Capital Stock.............................................................................
To record the proposed issuance of common stock.
(Number of shares to be issued to be determined and
allocation between Common Stock and Pemium on
Capital Stock will be made at that time).
c:\docume-1\pah2878\1ocals-1\temp\adjusting entries.xls
000 000
IDAHO POWER COMPANY
NOTES TO FINANCIAL STATEMENTS
As of September 30 , 2003
1. Property Plant and Equipment:
The cost of utility plant in service represents the original cost of contracted services, direct labor and
material, allowance for funds used during construction and indirect charges for engineering, supervision
and similar overhead items. Maintenance and repairs of property and replacements and renewals of
items determined to be less than units of property are expensed to operations. Repair and
maintenance costs associated with planned major maintenance are recorded as these costs are
incurred. For utility property replaced or renewed, the original cost plus removal cost less salvage is
charged to accumulated provision for depreciation , while the cost of related replacements and renewals
is added to property, plant and equipment.
2. Depreciation:
All utility plant in service is depreciated using the straight-line method at rates approved by regulatory
authorities.
3. Revenues:
In order to match revenues with associated expenses, Idaho Power Company (IPC) accrues unbilled
revenues for electric services delivered to customers but not yet billed at month-end.
4. Cash and Cash Equivalents:
Cash and cash equivalents include cash on hand and highly liquid temporary investments with maturity
dates at date of acquisition of three months or less.
5. Requlation of Utility Operations:
IPC follows Statement of Financial Accounting Standards (SFAS) 71
, "
Accounting for the Effects of
Certain Types of Regulation " and its financial statements reflect the effects of the different rate making
principles followed by the various jurisdictions regulating IPC. The economic effects of regulation can
result in regulated companies recording costs that have been or are expected to be allowed in the
ratemaking process in a period different from the period in which the cost would be charged to expense
by an unregulated enterprise. When this occurs, costs are deferred as regulatory assets in the balance
sheet and recorded as expenses in the periods when those same amounts are reflected in rates.
Additionally, regulators can impose liabilities upon a regulated company for amounts previously
collected from customers and for amounts that are expected to be refunded to customers (regulatory
liabilities).
6. Manaqement Estimates:
Management makes estimates and assumptions when preparing financial statements in conformity with
accounting principles generally accepted in the United States of America. These estimates and
assumptions affect the reported amounts of assets and liabilities and the disclosure of contingent
assets and liabilities at the date of the financial statements, and the reported amounts of revenues and
expenses during the reporting period. These estimates involve judgments with respect to, among other
things , future economic factors that are difficult to predict and are beyond management's control. As a
result, actual results could differ from those estimates.
7. Financinq:
On March 14, 2003, IPC filed a $300 million shelf registration statement that could be used for first
mortgage bonds (including medium-term notes), unsecured debt and preferred stock. On May 8,2003
IPC issued $140 million of secured medium-term notes, which were divided into two series. The first
was $70 million First Mortgage Bonds 4.25% Series due 2013 and the second was $70 million First
Mortgage Bonds 5.50% Series due 2033. Proceeds were used to pay down IPC short-term borrowings
incurred from the maturity and payment of $80 million First Mortgage Bonds 6.40% Series due 2003
and the early redemption of $80 million First Mortgage Bonds 7.50% Series due 2023, on May 1 , 2003.
NOTES TO FINANCIAL STATEMENTS (Continued)
At September 30, 2003, $160 million remained available to be issued on this shelf registration
statement.
At September 30, 2003, IPC had regulatory authority to incur up to $250 million of short-term
indebtedness. IPC has a $200 million credit facility that expires on March 17 2004. Under this facility
IPC pays a facility fee on the commitment, quarterly in arrears , based on IPC's corporate credit rating.
IPC's commercial paper may be issued up to the amounts supported by the bank credit facilities. At
September 30,2003, IPC's short-term borrowings totaled $14 million.
On October 22 2003, Humboldt County, Nevada issued , for the benefit of IPC, $49.8 million Pollution
Control Revenue Refunding Bonds (Idaho Power Company Project) Series 2003 due December 1
2024. IPC borrowed the proceeds from the issuance pursuant to a Loan Agreement with Humboldt
County and is responsible for payment of principal , premium , if any, and interest on the bonds. The
bonds are secured , as to principal and interest , by IPC first mortgage bonds and as to principal and
interest when due , by an insurance policy issued by Ambac Assurance Corporation. The bonds were
issued in an auction rate mode under which the interest rate is reset every 35 days. The initial auction
rate was set at 0.95 percent. Proceeds from this issuance together with other funds provided by IPC
will be used to redeem the outstanding $49.8 million Pollution Control Revenue Bonds (Idaho Power
Company Project) 8.3% Series 1984 due 2014 , which have been called for redemption on December 1
2003, at 103%.
8. Income Taxes:
The liability method of computing deferred taxes is used on all temporary differences between the book
and tax basis of assets and liabilities and deferred tax assets and liabilities are adjusted for enacted
changes in tax laws or rates. Consistent with orders and directives of the Idaho Public Utilities
Commission (IPUC), the regulatory authority having principal jurisdiction , IPC's deferred income taxes
(commonly referred to as normalized accounting) are provided for the difference between income tax
depreciation and straight-line depreciation computed using book lives on coal-fired generation facilities
and properties acquired after 1980. On other facilities, deferred income taxes are provided for the
difference between accelerated income tax depreciation and straight-line depreciation using tax
guideline lives on assets acquired prior to 1981. Deferred income taxes are not provided for those
income tax timing differences where the prescribed regulatory accounting methods do not provide for
current recovery in rates. Regulated enterprises are required to recognize such adjustments as
regulatory assets or liabilities if it is probable that such amounts will be recovered from or returned to
customers in future rates.
The State of Idaho allows a three percent investment tax credit (ITC) upon certain qualifying plant
additions. lTC's earned on regulatory assets are deferred and amortized to income over the estimated
service lives of the related properties. Credits earned on non-regulated assets or investments are
recognized in the year earned.
IPC uses an estimated annual effective tax rate to compute its provision for income taxes on an interim
basis. IPC's effective tax rate for the nine months ended September 30, 2003 was 33.2 percent
compared with an effective tax rate of negative 12.0 percent for the nine months ended September 30
2002. The increase in the 2003 estimated tax rate , compared with 2002, is due primarily to the
adoption of a tax accounting method change during the third quarter of 2002 that provided a decrease
to income tax expense of $31 million. Had this benefit been excluded, the tax rate for the nine months
ended September 30, 2002 would have been 33.6 percent.
NOTES TO FINANCIAL STATEMENTS (Continued)
9. Allowance For Funds Used Durinq Construction:
Allowance for Funds Used During Construction (AFDC) represents the cost of financing construction
projects with borrowed funds and equity funds. While cash is not realized currently from such
allowance, it is realized under the rate making process over the service life of the related property
through increased revenues resulting from higher rate base and higher depreciation expense. The
component of AFDC attributable to borrowed funds is included as a reduction to interest expense, while
the equity component is included in other income.
10. Requlatorv Issues:
Wind Down of Energy Marketing
IDACORP announced in 2002 that IE would wind down its energy marketing operations. In connection
with the wind down , certain matters were identified that required resolution with the FERC and the
IPUC. IE and IPC voluntarily contacted the FERC in September 2002 to discuss these matters.
The FERC matters have been resolved by the issuance of two FERC orders:
On February 26, 2003, the FERC issued an order approving the assignment of certain
wholesale power and transmission services agreements from IPC to IE. The FERC also found
that IPC violated Section 203 of the FPA by assigning the agreements in June 2001 without
seeking prior approval from the FERC. The FERC noted that noncompliance with Section 203
of the FPA may prompt the FERC in certain instances to impose remedies as a condition of its
approval; however, no such remedies were imposed in this order.
On May 16, 2003, the FERC issued an order approving a stipulation and consent agreement
resolving issues regarding access to IPC's transmission system , IPC's noncompliance with
Sections 203 and 205 of the FPA, standards of conduct and codes of conduct. The order
provided for (1) the refund of $0.3 million to certain counterparties associated with the
inappropriate use of native load priority and for failure to obtain FERC approval prior to
assigning certain contracts from IPC to IE, (2) the transfer of $5.8 million in benefits from IE to
IPC as the result of certain transactions between the affiliates that were not properly filed with
the FERC and (3) the implementation of certain compliance and auditing programs to ensure
future compliance with FERC requirements.
In an IPUC proceeding that has been underway since May 2001 , IPC, the IPUC staff and several
interested customer groups have been working to determine the appropriate compensation IE should
provide to IPC for certain transactions between the affiliates. The IPUC has issued several orders
since then regarding these matters. Order No. 28852 issued on September 28, 2001 covered the time
period prior to February 2001. Order No. 29026 covered the time period from March 2001 through
March 2002. The IPUC also approved IPC's ongoing hedging and risk management strategies in Order
No. 29102 issued on August 28, 2002. This order formalized IPC's agreement to implement a number
of changes to its existing practices for managing risk and initiating hedging purchases and sales. In the
same order, the IPUC directed IPC to present a resolution or a status report to the IPUC on additional
compensation due to the utility for the use of its transmission system and other capital assets by IE and
any remaining transfer pricing issues. Status reports were filed with the IPUC on December 20, 2002
March 20, 2003 and May 13, 2003 and settlement discussions were initiated. The $5.8 million in
benefits related to the FERC settlement have been included in the Power Cost Adjustment (PCA) and
credited to Idaho retail customers in accordance with the PCA methodology. The parties to the
proceeding have reached a verbal agreement that an additional $5.5 million will be flowed through the
PCA mechanism to the Idaho retail customers from April 2003 through December 2005. This
agreement is subject to approval by the IPUC. The settlement should resolve all remaining
compensation issues.
NOTES TO FINANCIAL STATEMENTS (Continued)
IDACORP and IPC do not believe that resolution of these transactions will have a material adverse
effect on their consolidated financial positions, results of operations or cash flows.
Federal Energy Regulatory Commission
As previously disclosed, the FERC filing made on May 14, 2001 , with respect to the pricing of real-time
energy transactions between IPC and IE, is still under review by the FERC. For the period June 2001
through March 2002, IE paid IPC approximately $6 million, which was calculated based upon the
pricing methodology for the entire period that was most favorable to IPC. This amount was credited to
Idaho retail customers through the PCA. An additional $1 million has been paid to IPC for the period
April 2002 through July 2002 based upon the same pricing methodology. However, until the FERC
takes final action on this filing, rates for real-time transactions between IE and IPC are subject to
adjustment.
Oregon Public Utility Commission
On April 29, 2003, the staff of the OPUC issued a report on trading activities during the western energy
crisis in 2000-2001 by regulated utilities serving customers in Oregon including Portland General
Electric , PacifiCorp and IPC. With respect to IPC, the report reviews positions IPC has taken at the
FERC on trading strategies, the FERC proceeding on market manipulation and issues voluntarily
disclosed by IE and IPC in September 2002 regarding affiliate transactions. The report acknowledges
that IE and IPC have denied participating in the trading strategies. The staff report recommended that
staff report back in 90 days regarding whether the OPUC should open a formal investigation of IPC.
On June 12 , 2003, the OPUC determined to suspend any further consideration of actions relating to
IPC until after the IPUC and FERC concluded their reviews.
Deferred Power Supply Costs
Idaho: IPC has a PCA mechanism that provides for annual adjustments to the rates charged to its
Idaho retail customers. These adjustments, which historically have taken effect in May, are based on
forecasts of net power supply expenses and the true-up of the prior year s forecast. During the year, 90
percent of the difference between the actual and forecasted costs is deferred with interest. The ending
balance of this deferral , called a true-up, is then included in the calculation of the next year s PCA.
On April 15, 2003, IPC filed its 2003-2004 PCA with the IPUC, and, with a small adjustment to the filing,
the rates were approved by the IPUC and became effective on May 16, 2003. As approved, IPC's rates
have been adjusted to collect $81 million above 1993 base rates, a $114 million reduction from the
2002-2003 PCA.
Oregon: IPC is also recovering calendar year 2001 extraordinary power supply costs applicable to the
Oregon jurisdiction. In two separate 2001 orders , the OPUC approved rate increases totaling six
percent, which was the maximum annual rate of recovery allowed under Oregon state law at that time.
These increases are recovering approximately $2 million annually. The Oregon deferred balance was
$14 million as of September 30, 2003. During the 2003 Oregon legislative session, the maximum
annual rate of recovery was raised to ten percent under certain circumstances. The higher recovery
percentage may be requested by IPC in the spring of 2004.
NOTES TO FINANCIAL STATEMENTS (Continued)
IPC's deferred power supply costs consisted of the following at (in thousands of dollars):
September 30,December 31
2003 2002
Oregon deferral 13,752 172
Idaho PCA power supply cost deferrals:
Deferral during the 2003-2004 rate year 35,006
Deferral during the 2002-2003 rate year 910
Astaris load reduction agreement 160
Idaho PCA true-up awaiting recovery:
Irrigation and small general service deferral for recovery in
the 2003-2004 rate year 049
Industrial customer deferral for recovery in the 2003-2004
rate year 744
Remaining true-up authorized May 2002 253
Remaining true-up authorized May 2003 26,084
Total deferral 842 140 288
11. Other Accountinq Policies:
Debt discount, expense and premium are being amortized over the terms of the respective debt issues.
ATTACHMENT I(b)
IDAHO POWER COMPANY
The following statement as to each class of the capital stock of applicant is as of September 30, 2003
the date of the balance sheet submitted with this application:
Common Stock
(1) Description - Common Stock, $2.50 par value; 1 vote per share
(2) Amount authorized - 50,000,000 shares ($125,000 000 par value)
(3) Amount outstanding - 37 612 351 shares
(4) Amount held as reacquired securities - None
(5) Amount pledged by applicant - None
(6) Amount owned by affiliated corporations - All
(7) Amount held in any fund - None
Applicant's Common Stock is held by IDACORP, Inc., the holding company of
Idaho Power Company. IDACORP, Inc.s Common Stock is registered
(Pursuant to Section 12(b) of the Securities Exchange Act of 1934) and is
listed on the New York and Pacific stock exchanges.
4 % Preferred Stock
(1) Description - 4% Preferred Stock, cumulative, $100 par value;
20 votes per share
(2) Amount authorized - 215 000 shares ($21 500,000 par value)
(3) Amount outstanding - 124 836 shares
(4) Amount held as reacquired securities - None
(5) Amount pledged by applicant - None
(6) Amount owned by affiliated corporations - None
(7) Amount held in any fund - None
Applicant's 4% Preferred Stock is registered as part of a class pursuant to
Section 12(g) of the Securities Exchange Act of 1934.
Series Serial Preferred Stock, $100 Par Value
(1) Description - 7.68% Series Serial Preferred Stock, cumulative
$100 par value; 1 vote per share
(2) Amount authorized - 150,000 shares ($15,000 000 par value)
(3) Amount outstanding - 150,000 shares
(4) Amount held as reacquired securities - None
(5) Amount pledged by applicant - None
(6) Amount owned by affiliated corporations - None
(7) Amount held in any fund - None
Applicant's 7.68% Series Serial Preferred Stock is registered as part of a class
pursuant to Section 12(g) of the Securities Exchange Act of 1934.
Serial Preferred Stock, Without Par Value
(1) Description - Serial Preferred Stock, without par value
(2) Amount authorized - 3,000,000 shares
Amount outstanding - Amount outstanding - 250,000 shares, 7.07% Series, cumulative
$100 stated value, non-voting shares
(4) Amount held as reacquired securities - None
(5) Amount pledged by applicant - None
(6) Amount owned by affiliated corporation - None
(7) Amount held in any fund - None
Applicant's Serial Preferred Stock is registered as part of a class pursuant to
Section 12(g) of the Securities Exchange Act of 1934.
Provisions of the Articles of Incorporation authorize the Board of Directors to fix
dividend rates and redemption prices for the authorized but unissued Serial
Preferred Stock.
For a full statement concerning the terms and provisions relating to the Common , 4% Preferred and
Serial Preferred Stocks of Applicant, reference is made to the Applicant's Articles of Incorporation presently on
file with the Commission.
IDAHO POWER COMPANY
The following statement as to funded debt of applicant is as of September 30, 2003, the date of the
balance sheet submitted with this application.
First Mortgage Bonds
(1 )
Description
FIRST MORTGAGE BONDS:
8 % Series due 2004, dated as of Mar 25, 1992, due Mar 15, 2004
83 % Series due 2005, dated as of Sep 9, 1998, due Sep 9, 2005
38 % Series due 2007, dated as of Dec 1 2000, due Dec 1 2007
20 % Series due 2009, dated as of Nov 23, 1999, due Dec 1 , 2009
60 % Series due 2011 , dated as of Mar 2, 2001 , due Mar 2, 2011
75 % Series due 2012, dated as of Nov 15, 2002 , due Nov 15, 2012
25 % Series due 2013, dated as of May 13, 2003, due October 1 , 2013
6 % Series due 2032, dated as of Nov 15, 2002 , due Nov 15, 2032
50 % Series due 2033, dated as of May 13, 2003, due April 1 , 2033
(2) Amount authorized - Limited within the maximum of $1 100 000 000
(or such other maximum amount as may be fixed by supplemental
indenture) and by property, earnings, and other provisions of
the Mortgage.
(4) Amount held as reacquired securities - None
(5) Amount pledged - None
(6) Amount owned by affiliated corporations - None
(7) Amount of sinking or other funds - None
(3)
Amount
Outstanding
000 000
000 000
000 000
80,000 000
120,000,000
100 000 000
000 000
100,000 000
70,000 000
$730,000,000
For a full statement of the terms and provisions relating to the respective Series and amounts of
applicant's outstanding First Mortgage Bonds above referred to, reference is made to the Mortgage and Deed of
Trust dated as of October 1 , 1937, and First to Thirty-Ninth Supplemental Indentures thereto, by Idaho Power
Company to Deutsche Bank Trust Company Americas (formerly known as Bankers Trust Company) and R. G.
Page (Stanley Burg, successor individual trustee), Trustees , presently on file with the Commission , under which
said bonds were issued.
IDAHO POWER COMPANY
Pollution Control Revenue Bonds
(A) Variable Rate Series 2000 due 2027:
(1) Description - Pollution Control Revenue Bonds, Variable Rate Series due 2027, Port of
Morrow, Oregon , dated as of May 17, 2000, due February 1 2027.
(2) Amount authorized - $4 360,000
(3) Amount outstanding - $4 360,000
(4) Amount held as reacquired securities - None
(5) Amount pledged - None
(6) Amount owned by affiliated corporations - None
(7) Amount in sinking or other funds - None
(B) 8.30% Series 1984 due 2014:
(1) Description - Pollution Control Revenue Bonds, 8.30% Series
due 2014, County of Humboldt, Nevada , dated as of
December 20, 1984 due December 1 , 2014 (secured by
First Mortgage Bonds , Pollution Control Series A)
(2) Amount authorized - $49,800 000
(3) Amount outstanding - $49,800 000
(4) Amount held as reacquired securities - None
(5) Amount pledged - None
(6) Amount owned by affiliated corporations - None
(7) Amount in sinking or other funds - None
(C) 6.05% Series 1996A due 2026:
(1) Description - Pollution Control Revenue Bonds, 6.05% Series 1996A
due 2026, County of Sweetwater, Wyoming,
dated as of July 15, 1996, due July 15, 2026
(2) Amount authorized - $68 100 000
(3) Amount outstanding - $68 100 000
(4) Amount held as reacquired securities - None
(5) Amount pledged - None
(6) Amount owned by affiliated corporations - None
(7) Amount in sinking or other funds - None
(D) Variable Rate Series 1996B due 2026:
(1) Description - Pollution Control Revenue Bonds, Variable Rate 1996B
Series due 2026, County of Sweetwater, Wyoming, dated
as of July 15, 1996, due July 15, 2026.
(2) Amount authorized - $24 200 000
(3) Amount outstanding - $24 200,000
(4) Amount held as reacquired securities - None
(5) Amount pledged - None
(6) Amount owned by affiliated corporations - None
(7) Amount in sinking or other funds - None
IDAHO POWER COMPANY
Pollution Control Revenue Bonds
(E) Variable Rate Series 1996C due 2026:
(1) Description - Pollution Control Revenue Bonds, Variable Rate 1996C
Series due 2026, County of Sweetwater, Wyoming, dated
as of July 15, 1996, due July 15, 2026.
(2) Amount authorized - $24 000,000
(3) Amount outstanding - $24 000,000
(4) Amount held as reacquired securities - None
(5) Amount pledged - None
(6) Amount owned by affiliated corporations - None
(7) Amount in sinking or other funds - None
For a full statement of the terms and provisions relating to the outstanding Pollution Control Revenue
Bonds above referred to, reference is made to (A) copies of Trust Indenture by Port of Morrow, Oregon, to the
Bank One Trust Company, N. A., Trustee, and Loan Agreement between Port of Morrow, Oregon and Idaho
Power Company, both dated May 17 , 2000, under which the Variable Rate Series 2000 bonds were issued, (B)
copies of Loan Agreement between Idaho Power Company and Humboldt County, Nevada; Indenture of Trust
between Humboldt County, Nevada and Morgan Guaranty Trust Company of New York; Escrow Agreement
between Humboldt County, Nevada and Bankers Trust Company and Idaho Power Company; Placement
Agreement between Humboldt County, Nevada and Bankers Trust Company; all dated December 1 , 1984;
agreement among Idaho Power Company, Bankers Trust Company, as Remarketing Agent, Goldman, Sachs &
Co., and Kidder, Peabody & Co. Inc. dated May 20, 1986; Pledge Agreement between Idaho Power Company
and Morgan Guaranty Trust Company of New York dated May 1 , 1986; under which the 8.30% Series bonds
were issued and (C) (D) (E) copies of Indentures of Trust by Sweetwater County, Wyoming, to the First National
Bank of Chicago, Trustee, and Loan Agreements between Idaho Power Company and Sweetwater County,
Wyoming, all dated July 15, 1996, under which the 6.05% Series 1996A bonds , Variable Rate Series 1996B
bonds and Variable Rate Series 1996C bonds were issued.
IDAHO POWER COMPANY
Rural Electrification Association Notes
(A) 2.0% and 5.0% Series due 1998-2023:
(1) Description - REA Notes, 2.0% and 5.0% interest
rate with various maturity dates (secured by
property).
(2) Amount authorized - Various Amounts
(3) Amount outstanding - $1 125,055
(4) Amount held as reacquired securities - None
(5) Amount pledged - None
(6) Amount owned by affiliated corporations - None
(7) Amount in sinking or other funds - None
For a full statement of the terms and provisions relating to the outstanding Rural Electrification
Association Notes above referred to, reference is made to the Restated Mortgage and Security Agreement dated
as of May 1 , 1992, and Agreement between the United States of America and Idaho Power Company dated May
, 1992.
ATTACHMENT I(e)
IDAHO POWER COMPANY
Commitments and Continqent Liabilities:
IPC is currently purchasing energy from 67 on-line cogeneration and small power production facilities with
contracts ranging from one to 30 years. Under these contracts IPC is required to purchase all of the output from
these facilities. During the year ended December 31 , 2002, IPC purchased 692,414 MWh at a cost of $44
million.
From time to time IPC is a party to various other legal claims , actions and complaints not discussed below. IPC
believes that it has defenses to all lawsuits and legal proceedings in which it is a defendant and will vigorously
defend against them although IPC is unable to predict with certainty whether or not it will ultimately be
successful. However, based on its evaluation , IPC believes that the resolution of these matters will not have a
material adverse effect on its consolidated financial position , results of operations or cash flows.
Legal Proceedings
Truckee-Donner Public Utility District: In 2002, IE received notice from the Truckee-Donner Public Utility
District (Truckee), located in California, asserting that IE was in purported breach of , and that Truckee has the
right to renegotiate certain terms of , the Agreement for the Sale and Purchase of Firm Capacity and Energy in
place between the two entities. Generally, the terms of the contract provide for IE to sell to Truckee 10 MW light
load energy and 20 MW heavy load energy for the term January 1 , 2002 through December 31 , 2002 at $72 per
MWh and 25 MW flat energy for the term January 1 , 2003 through December 31 , 2009 at $72 per MWh.
On May 30, 2002, IE filed a lawsuit against Truckee in the Idaho State District Court in and for the County of Ada.
This lawsuit was later removed to the United States District Court for the District of Idaho.
On July 23 2002, Truckee filed a complaint against IPC, IE and IDACORP with the FERC seeking relief under its
long-term power contract for the purchase of wholesale electric power from IPC and IE.
On January 3, 2003, the companies and Truckee reached a settlement of all proceedings pending between the
parties. Pursuant to the settlement, Truckee paid IE $26 million in April 2003. Incident to the settlement, IE also
entered into an Interim Power Sales Agreement with Truckee that replaced the original long-term power contract
and ended on March 31 2003.
United Systems, Inc., f/k/a Commercial Building Services, Inc.On March 18 2002, United Systems, Inc.
(United Systems) filed a complaint in Idaho State District Court in and for the County of Ada against IDACORP
Services Co., a subsidiary of IDACORP, dba IDACORP Solutions. United Systems is a heating, ventilation
refrigeration and plumbing contracting company that entered into a contract with IDACORP Services in
December 2000.
Under the terms of the contract, IDACORP Services authorized United Systems to do business as "IDACORP
Solutions." The contract was to be effective from January 2001 through December 2005.
In November 2001 , IDACORP Services notified United Systems that IDACORP Services was terminating the
contract for convenience. The contract allowed for such termination but required the terminating party
compensate the other party for all costs incurred in preparation for, and in performance of the contract, and for
reasonable net profit for the remaining term of the contract. United Systems claims $7 million in net profits lost
and costs incurred.
IDACORP Services asserts that termination related compensation owed to United Systems, if any, is
substantially less than the amount claimed by United Systems.
On August 8, 2002 , United Systems filed an amended complaint adding IDACORP, IE and IPC as additional
defendants claiming they should be held jointly and severally liable for any judgment entered against IDACORP
Services Co. On September 9, 2002, all defendants moved to bifurcate the piercing of the corporate veil claims
from the remainder of plaintiff's claims. On October 4, 2002, United Systems filed a Motion for Partial Summary
Judgment as to their damages. On July 9, 2003, the Court denied Plaintiff's Motion for Partial Summary
Judgment and granted Defendants' Motion to Bifurcate. On October 29, 2003, IDACORP agreed to pay
$712 500 to settle this dispute with United Systems in return for dismissal of the proceeding with prejudice. The
settlement is expected to be final on or before November 28, 2003.
Public Utility District No.1 of Grays Harbor County, Washington: On October 15, 2002, Public Utility District
No.1 of Grays Harbor County, Washington (Grays Harbor) filed a lawsuit in the Superior Court of the State of
Washington , for the County of Grays Harbor , against IDACORP, IPC and IE. On March 9, 2001 , Grays Harbor
entered into a 20 MW purchase transaction with IPC for the purchase of electric power from October 1 , 2001
through March 31 2002, at a rate of $249 per MWh. In June 2001 , with the consent of Grays Harbor, IPC
assigned all of its rights and obligations under the contract to IE. In its lawsuit, Grays Harbor alleged that the
assignment was void and unenforceable, and sought restitution from IE and IDACORP, or in the alternative,
Grays Harbor alleged that the contract should be rescinded or reformed. Grays Harbor sought as damages an
amount equal to the difference between $249 per MWh and the "fair value" of electric power delivered by IE
during the period October 1 , 2001 through March 31 , 2002.
IDACORP, IPC and IE had this action removed from the state court to the United States District Court for the
Western District of Washington at Tacoma. On November 12 , 2002, the companies filed a motion to dismiss
Grays Harbor s complaint, asserting that the Federal District Court lacked jurisdiction because the FERC has
exclusive jurisdiction over wholesale power transactions and thus the matter is preempted under the Federal
Power Act (FPA) and barred by the filed-rate doctrine. The court ruled in favor of the companies' motion to
dismiss and dismissed the case with prejudice on January 28, 2003. On February 25, 2003, Grays Harbor filed a
Notice of Appeal , appealing the final judgment of dismissal to the United States Court of Appeals for the Ninth
Circuit. Briefing on the appeal was completed in August 2003, but the court has yet to set a date for oral
argument. The companies intend to vigorously defend their position on appeal and believe this matter will not
have a material adverse effect on their consolidated financial positions , results of operations or cash flows.
State of California Attorney General: The California Attorney General (AG) filed the complaint in this case in
the California Superior Court in San Francisco on May 30, 2002. This is one of thirteen virtually identical cases
brought by the AG against various sellers of power in the California market, seeking civil penalties pursuant to
California s unfair competition law - California Business and Professions Code Section 17200. Section 17200
defines unfair competition as any "unlawful, unfair or fraudulent business act or practice. . ." The AG alleges
that IPC engaged in unlawful conduct by violating the FPA in two respects: (1) by failing to file its rates with the
FERC as required by the FPA; and (2) charging unjust and unreasonable rates in violation of the FPA. The AG
alleged that there were "thousands of . . . sales or purchases" for which IPC failed to file its rates, and that IPC
charged unjust and unreasonable rates on "thousands of occasions." Pursuant to Business and Professions
Code Section 17206, the AG seeks civil penalties of up to $2 500 for each alleged violation. On June 25, 2002
IPC removed the action to federal court, and on July 25, 2002, the AG filed a motion to remand back to state
court. On March 25, 2003, the court denied the AG's motion to remand and granted IPC's motion to dismiss the
case based upon grounds of federal preemption and the filed-rate doctrine. On March 28, 2003, the AG filed a
Notice of Appeal, appealing from the court's final judgment dismissing the action to the United States Court of
Appeals for the Ninth Circuit. The AG's opening appeal brief was filed on August 13, 2003. IPC's brief was filed
on October 14, 2003. IPC intends to vigorously defend its position on appeal and believes this matter will not
have a material adverse effect on its consolidated financial position, results of operations or cash flows.
Wholesale Electricity Antitrust Cases I & II: These cross-actions against IE and IPC emerged from multiple
California state court proceedings first initiated in late 2000 against various power generators/marketers by
various California municipalities and citizens, including California Lieutenant Governor Cruz Bustamante and
California legislator Barbara Matthews in their personal capacities. Suit was filed against entities including
Reliant Energy Services, Inc., Reliant Ormond Beach , L.L.C., Reliant Energy Etiwanda, L.L.C., Reliant Energy
Ellwood , L., Reliant Energy Mandalay, L.L.C. and Reliant Energy Coolwater, L.L.C. (collectively, Reliant);
and Duke Energy Trading and Marketing, L.L.C., Duke Energy Morro Bay, L.L.C., Duke Energy Moss Landing,
L.L.C., Duke Energy South Bay, L.L.C. and Duke Energy Oakland, L.L.C. (collectively, Duke). While varying in
some particulars, these cases made a common claim that Reliant, Duke and certain others (not including IE or
IPC) colluded to influence the price of electricity in the California wholesale electricity market. Plaintiffs asserted
various claims that the defendants violated California Antitrust Law (the Cartwright Act), Business & Professions
Code Section 16720, et seq., and California s Unfair Competition Law, Business & Professions Code Section
17200, et seq. Among the acts complained of are bid rigging, information exchanges, withholding of power and
various other wrongful acts. These actions were subsequently consolidated, resulting in the filing of Plaintiffs
Master Complaint (PMC) in San Diego Superior Court on March 8, 2002.
On April 22, 2002, more than a year after the initial complaints had been filed , two of the original defendants,
Duke and Reliant, filed separate cross-complaints against IPC and IE , and approximately 30 other cross-
defendants. Duke and Reliant's cross-complaints seek indemnity from lPG, IE and the other cross-defendants
for an unspecified share of any amounts they must pay in the underlying suits because, they allege, other market
participants like IPC and IE engaged in the same conduct at issue in the PMC. Duke and Reliant also seek
declaratory relief as to the respective liability and conduct of each of the cross-defendants in the actions alleged
in the PMC. Reliant also asserted a claim against IPC for alleged violations of the California Unfair Competition
Law, Business and Professions Code Section 17200, et seq. As a buyer of electricity in California, Reliant seeks
the same relief from the cross-defendants , including IPC, as that sought by plaintiffs in the PMC as to any power
Reliant purchased through the California markets.
Some of the newly added defendants (foreign citizens and federal agencies) removed that litigation to federal
court. IPC and IE, together with numerous other defendants added by the cross-complaints, moved to dismiss
these claims, and those motions were heard in September 2002, together with motions to remand the case back
to state court filed by the original plaintiffs. On December 13, 2002, the Federal District Court granted Plaintiffs
Motion to Remand to state court but did not issue a ruling on IPC and IE's motion to dismiss. The Ninth Circuit
has granted certain Defendants and Cross-Defendants' Motions to Stay the Remand Order while they appeal the
Order. The appeal is not yet fully briefed and the court has yet to set oral argument. As a result of the various
motions , no trial date is set. The companies intend to vigorously defend their position in this proceeding and
believe these matters will not have a material adverse effect on their consolidated financial positions, results of
operations or cash flows.
Class Action Complaint Relating to Trades on the New York Mercantile Exchange: On August 18, 2003,
Cornerstone Propane Partners, L.P. (Cornerstone), on behalf of itself and others who allegedly purchased and
sold natural gas futures and options contracts on the New York Mercantile Exchange from January 1 2000 to
December 31 , 2002 , filed a class action complaint in the United States District Court for the Southern District of
New York against over 30 defendants , including IDACORP and IPC. The complaint claims that the defendants
reported inaccurate trading information to various trade publications that compile and publish indices of natural
gas prices and that defendants engaged in various improper trades on the Enron Online internet-based trading
platform, the alleged purpose of which was to improperly inflate the prices of natural gas. Cornerstone has
sought class action certification and damages for alleged violations of the Commodity Exchange Act and for
aiding and abetting such violations.
The companies intend to vigorously defend their position in this proceeding and believe these matters will not
have a material adverse effect on their consolidated financial positions, results of operations or cash flows.
Port of Seattle: On May 21 2003, the Port of Seattle, a Washington municipal corporation , filed a lawsuit
against 20 energy firms, including IPC and IDACORP, in the United States District Court for the Western District
of Washington at Seattle. The Port of Seattle s complaint alleges fraud and violations of state and federal
antitrust law and the Racketeering Influenced and Corrupt Organization Act. All defendants, including IPC and
IDACORP, have moved to dismiss the complaint in lieu of answering it. The motions are all based on the ground
that the complaint seeks in effect to set alternative electrical rates, which are exclusively within the jurisdiction of
the FERC and are barred by the filed-rate doctrine. The motions to dismiss and all other aspects of the case
have been stayed by the judge in the Western District of Washington , pending a decision by the Panel on
Multiple District Litigation whether to transfer the case to one of several multidistrict actions currently pending in
California. A number of defendants have proposed such a transfer while two defendants and the Port of Seattle
oppose the transfer. IPC and IDACORP have taken no position with regard to the transfer. The companies
intend to vigorously defend their position in this proceeding and believe these matters will not have a material
adverse effect on their consolidated financial positions, results of operations or cash flows.
Idaho Rivers United: On December 10, 2002, Idaho Rivers United filed a complaint against IPC in U.S. District
Court for the District of Idaho. In the complaint, Idaho Rivers United alleged that IPC violated the Clean Water
Act by discharging an amount of dredged and fill material into the navigable waters of the Snake River in excess
of that allowed by a Section 404 permit issued by the U.S. Army Corps of Engineers. The action relates to work
completed by lPG, pursuant to a Section 404 permit issued by the Corps on September 3, 1999, in the area of
the tailrace downstream of IPC's Bliss hydroelectric project on the Snake River in Idaho. Idaho Rivers United
asked the court to impose civil penalties on IPC under sections 309(d) and 505(a) of the Clean Water Act to
require IPC to pay for any remedial or restoration work necessary to amend any environmental harm caused by
the alleged violation and to pay reasonable attorney fees.
On March 28, 2003, IPC and Idaho Rivers United entered into a consent decree resolving the disputed
allegations of the complaint. Under the terms of the consent decree, IPC, without admitting liability, agreed to
contribute the sum of $86,800, in three equal annual payments, to The Nature Conservancy (TNC), an
internationally recognized non-profit organization specializing in habitat restoration and protection , to be used for
design , management and construction of TNC's proposed Blind Canyon and Thousand Springs wetlands
projects on the Snake River in Idaho. These projects have a positive impact on water quality in the Snake River
by removing sediments and nutrients from irrigation canal waters before they are returned to the river. IPC also
agreed to pay attorney fees incurred by Idaho Rivers United in the amount of $15,000.
The federal court entered the consent decree on April 26, 2003. IPC submitted the first installment of $28 933 to
TNC on May 28, 2003. Subsequent installments are due on or before January 15, 2004 and 2005.
California Energy Proceedings at the FERC:
California Power Exchanqe Charqeback
As a component of IPC's non-utility energy trading in the state of California, IPC, in January 1999, entered into a
participation agreement with the California Power Exchange (CaIPX), a California non-profit public benefit
corporation. The CaIPX , at that time, operated a wholesale electricity market in California by acting as a
clearinghouse through which electricity was bought and sold. Pursuant to the participation agreement, IPC could
sell power to the CalPX under the terms and conditions of the CalPX Tariff. Under the participation agreement , if
a participant in the CalPX exchange defaulted on a payment to the exchange, the other participants were
required to pay their allocated share of the default amount to the exchange. The allocated shares were based
upon the level of trading activity, which included both power sales and purchases, of each participant during the
preceding three-month period.
On January 18, 2001 , the CalPX sent IPC an invoice for $2 million - a "default share invoice" - as a result of an
alleged Southern California Edison (SCE) payment default of $215 million for power purchases. IPC made this
payment. On January 24 2001 , IPC terminated the participation agreement. On February 8 2001 , the CalPX
sent a further invoice for $5 million, due February 20, 2001 , as a result of alleged payment defaults by SCE
Pacific Gas and Electric Company (PG&E) and others. However, because the CalPX owed IPC $11 million for
power sold to the CalPX in November and December 2000, IPC did not pay the February 8th invoice. IPC
essentially discontinued energy trading with the CalPX and the California Independent System Operator (Cal
ISO) in December 2000.
IPC believes that the default invoices were not proper and that IPC owes no further amounts to the CaIPX. IPC
has pursued all available remedies in its efforts to collect amounts owed to it by the CaIPX. On February 20
2001 , IPC filed a petition with the FERC to intervene in a proceeding that requested the FERC to suspend the
use of the CalPX charge back methodology and provides for further oversight in the CaIPX's implementation of
its default mitigation procedures.
A preliminary injunction was granted by a Federal Judge in the Federal District Court for the Central District of
California enjoining the CalPX from declaring any CalPX participant in default under the terms of the CalPX
Tariff. On March 9, 2001 , the CalPX filed for Chapter 11 protection with the United States Bankruptcy Court
Central District of California.
In April 2001 , PG&E filed for bankruptcy. The CalPX and the CallSO were among the creditors of PG&E. To
the extent that PG&E's bankruptcy filing affects the collectibility of the receivables from the CalPX and the Cal
ISO, the receivables from these entities are at greater risk.
The FERC issued an order on April 6, 2001 requiring the CalPX to rescind all chargeback actions related to
PG&E's and SCE's liabilities. Shortly after that time, the CalPX segregated the CalPX chargeback amounts it
had collected in a separate account. The CalPX claims it is awaiting further orders of the FERC and the
bankruptcy court before distributing the funds that it collected under its chargeback tariff mechanism. Although
certain parties to the California refund proceeding urged the FERC's Presiding Administrative Law Judge (ALJ) to
consider the chargeback amounts in his determination of who owes what to whom, in his Certification of
Proposed Findings on California Refund Liability, he concluded that the matter already was pending before the
FERC for disposition.
California Refund
In April 2001 , the FERC issued an order stating that it was establishing price mitigation for sales in the California
wholesale electricity market. Subsequently, in its June 19 , 2001 order, the FERC expanded that price mitigation
plan to the entire western United States electrically interconnected system. That plan included the potential for
orders directing electricity sellers into California since October 2, 2000 to refund portions of their spot market
sales prices if the FERC determined that those prices were not just and reasonable, and therefore not in
compliance with the FPA. The June 19 order also required all buyers and sellers in the CallSO market during
the subject time-frame to participate in settlement discussions to explore the potential for resolution of these
issues without further FERC action. The settlement discussions failed to bring resolution of the refund issue and
as a result, the FERC's Chief ALJ submitted a Report and Recommendation to the FERC recommending that the
FERC adopt the methodology set forth in the report and set for evidentiary hearing an analysis of the Cal ISO'
and the CalPX's spot markets to determine what refunds may be due upon application of that methodology.
On July 25 , 2001 , the FERC issued an order establishing evidentiary hearing procedures related to the scope
and methodology for calculating refunds related to transactions in the spot markets operated by the CallSO and
the CalPX during the period October 2, 2000 through June 20 , 2001. As to potential refunds, if any, IE believes
its exposure is likely to be offset by amounts due from California entities. Multiple parties have filed requests for
rehearing and petitions for review. The latter, more than 60, have been consolidated by the United States Court
of Appeals for the Ninth Circuit and held in abeyance while the FERC continues its deliberations. The Ninth
Circuit also directed the FERC to permit the parties to adduce additional evidence respecting market
manipulation. See "Market Manipulation" below.
On March 20, 2002, the AG filed a complaint with the FERC against various sellers in the wholesale power
market, including IE and IPC , alleging that the FERC's market-based rates violate the FPA , and, even if market-
based rate requirements are valid , that the quarterly transaction reports filed by sellers do not contain the
transaction-specific information mandated by the FPA and the FERC. The complaint stated that refunds for
amounts charged between market-based rates and cost-based rates should be ordered. The FERC denied the
challenge to market-based rates and refused to order refunds, but did require sellers, including IE and IPC, to
refile their quarterly reports to include transaction-specific data. The AG appealed the FERC's decision to the
United States Court of Appeals for the Ninth Circuit. The AG contends that the failure of all market-based rate
authority sellers of power to have rates on file with the FERC in advance of sales is impermissible. The Ninth
Circuit heard oral arguments on October 9, 2003, but has not specified the date on which it will issue a decision.
The companies cannot predict the outcome of this matter.
This case had been further complicated by an August 13, 2002 FERC Staff (Staff) Report which included the
recommendation to replace the published California indices for gas prices that the FERC previously established
as just and reasonable for calculating a Mitigated Market Clearing Price (MMCP) to calculate refunds with other
published indices for producing basin prices plus a transportation allowance. The Staff's recommendation is
grounded on speculation that some sellers had an incentive to report exaggerated prices to publishers of the
indices, resulting in overstated published index prices. Staff based its speculation in large part on a statistical
correlation analysis of Henry Hub and California prices. IE, in conjunction with others, submitted comments on
the Staff recommendation - asserting that the Staff's conclusions were incorrect because the Staff's correlation
study ignored evidence of normal market forces and scarcity that created the pricing variations that the Staff
observed, rather than improper manipulation of reported prices.
The ALJ issued a Certification of Proposed Findings on California Refund Liability on December 12, 2002.
The FERC issued its Order on Proposed Findings on Refund Liability on March 26, 2003. In large part, the
FERC affirmed the recommendations of its ALJ. However, the FERC changed a component of the formula the
ALJ was to apply when it adopted findings of its staff that published California spot market prices for gas did not
reliably reflect the prices a gas market that had not been manipulated would have produced , despite the fact that
many gas buyers paid those amounts. The findings of the ALJ, as adjusted by the FERC's March 26, 2003
order, are expected to substantially increase the offsets to amounts still owed by the CallSO and the CalPX to
the companies. Calculations remain uncertain because the FERC has required the CallSO to correct a number
of defects in its calculations and because the FERC has stated that if refunds will prevent a seller from
recovering its California portfolio costs during the refund period, it will provide an opportunity for a cost showing
by such a respondent. As a result, IE is unsure of the impact this ruling will have on the refunds due from
California.
, along with a number of other parties, filed a petition with the FERC on April 25, 2003 seeking review of the
March 26, 2003 order. On October 16, 2003 , the FERC issued two orders denying rehearing of most contentions
that had been advanced and directing the CallSO to prepare its compliance filing calculating revised MMCPs
and refund amounts within five months. After that time the FERC will consider cost-based filings from sellers to
reduce their refund exposure.
In June 2001 , IPC transferred its non-utility wholesale electricity marketing operations to IE. Effective with this
transfer, the outstanding receivables and payables with the CalPX and the CallSO were assigned from IPC
IE. At September 30, 2003, with respect to the CalPX chargeback and the California Refund proceedings
discussed above, the CalPX and the CallSO owed $14 million and $30 million, respectively, for energy sales
made to them by IPC in November and December 2000. IE has accrued a reserve of $42 million against these
receivables. This reserve was calculated taking into account the uncertainty of collection, given the California
energy situation. Based on the reserve recorded as of September 30, 2003, IDACORP believes that the future
collectibility of these receivables or any potential refunds ordered by the FERC would not have a material
adverse effect on its consolidated financial position , results of operations or cash flows.
Market Manipulation
In a November 20, 2002 order the FERC permitted discovery and the submission of evidence respecting market
manipulation by various sellers during the western power crises of 2000 and 2001
On March 3, 2003, the California Parties (the investor owned utilities , the California Attorney General, the
California Electricity Oversight Board and the California Public Utilities Commission) filed voluminous
documentation asserting that a number of wholesale power suppliers, including IE and IPC had engaged in a
variety of forms of conduct that the California Parties contended were impermissible. Although the contentions of
the California Parties were contained in more than 11 compact discs of data and testimony, approximately
000 pages , IE and IPC were mentioned in limited contexts - the overwhelming majority of the claims of the
California Parties related to claims respecting the conduct of other parties.
As a consequence, the California Parties urged the FERC to apply the precepts of its earlier decision , to replace
actual prices charged in every hour starting May 1 , 2000 through the beginning of the existing refund period
(October 2 2000) with a MMCP, seeking approximately $8 billion in refunds to the CallSO and the CaIPX. On
March 20, 2003, numerous parties, including the companies, submitted briefs and responsive testimony.
In its March 26, 2003 order, discussed above, the FERC declined to generically apply its refund determinations
across the board to sales by all market participants, although it stated that it reserved the right to provide
remedies for the market against parties shown to have engaged in proscribed conduct.
On June 25, 2003, the FERC ordered over 50 entities that participated in the western wholesale power markets
between January 1 , 2000 and June 20, 2001 , including IPC, to show cause why certain trading practices did not
constitute gaming or anomalous market behavior in violation of the CallSO and the CalPX Tariffs. The CallSO
was ordered to provide data on each entity s trading practices within 21 days of the order, and each entity was to
respond explaining their trading practices within 45 days of receipt of the CallSO data. IPC submitted its
responses to the show cause orders on September 2 and 4, 2003. On October 16, 2003, IPC reached
agreement with the Staff on the two orders commonly referred to as the "gaming" and "partnership" show cause
orders. Regarding the gaming order, the Staff determined it had no basis to proceed with allegations of false
imports and paper trading and IPC agreed to pay $83,373 to settle allegations of circular scheduling. IPC
believed that it had defenses to the circular scheduling allegation but determined that the cost of settlement was
less than the cost of litigation. In the settlement, IPC did not admit any wrongdoing or violation of any law. With
respect to the "partnership" order, the Staff agreed to submit a motion to the FERC to dismiss the proceeding
because materials submitted by IPC demonstrated that IE did not use the "parking" and "lending" arrangement
with Public Service Company of New Mexico to engage in gaming or anomalous market behavior. The "gaming
settlement must be certified by an ALJ and approved by the FERC and the motion to dismiss the "partnership
proceeding must be approved by the FERC before becoming final. Any final order will be subject to appeal by
other parties in the proceeding. The California parties are attempting to persuade the FERC to delay these
proceedings and consider requests for rehearing, which would expand the scope of the conduct under
consideration.
On June 25, 2003, the FERC also issued an order instituting an internal investigation of anomalous bidding
behavior and practices in the western wholesale power markets. In this investigation, the FERC will review
evidence of alleged economic withholding of generation. The FERC has determined that all bids into the CalPX
and the CallSO markets for more than $250 per MWh for the time period May 1 , 2000 through October 1 , 2000
will be considered prima facie evidence of economic withholding. The FERC has issued data requests in this
investigation to over 60 market participants including IPC. If it is determined that IPC engaged in improper
bidding, the FERC has indicated that sanctions may include disgorgement of alleged profits and other non-
monetary actions, including possible revocation of market - based rate authority and/or additional required
provisions in codes of conduct. IPC received some information regarding these matters from the CallSO and on
July 24 2003, IPC responded to the FERC's data requests. Based on the information received to date from the
CaIISO, IDACORP and IPC believe that any potential penalties imposed by the FERC would not have a material
adverse effect on their consolidated financial positions, results of operations or cash flows.
Pacific Northwest Refund: On July 25, 2001 , the FERC issued an order establishing another proceeding to
explore whether there may have been unjust and unreasonable charges for spot market sales in the Pacific
Northwest during the period December 25, 2000 through June 20, 2001. The FERC ALJ submitted
recommendations and findings to the FERC on September 24, 2001. The ALJ found that prices should be
governed by the Mobile-Sierra standard of the public interest rather than the just and reasonable standard, that
the Pacific Northwest spot markets were competitive and that no refunds should be allowed. Procedurally, the
ALJ's decision is a recommendation to the commissioners of the FERC. Multiple parties have submitted
comments to the FERC respecting the ALJ's recommendations. The ALJ's recommended findings had been
pending before the FERC, when at the request of the City of Tacoma and the Port of Seattle on December 19,
2002, the FERC reopened the proceedings to allow the submission of additional evidence related to alleged
manipulation of the power market by Enron and others. As was the case in the California refund proceeding, at
the conclusion of the discovery period, parties alleging market manipulation were to submit their claims to the
FERC and responses were due on March 20, 2003. Grays Harbor, whose civil litigation claims were dismissed
as noted above, has intervened in this FERC proceeding, asserting on March 3, 2003 that its six month forward
contract, for which performance has been completed , should be treated as a spot market contract for purposes of
the FERC's consideration of refunds and requesting refunds from IPC of $5 million. Grays Harbor did not
suggest that there was any misconduct by the company. The company submitted responsive testimony
defending vigorously against Grays Harbor s refund claims.
In addition, the Port of Seattle, the City of Tacoma and Seattle City Light made filings with the FERC on March 3,
2003 claiming that because some market participants drove prices up throughout the west through acts of
manipulation, prices for contracts throughout the Pacific Northwest market should be re-set starting in May 2000
using the same factors the FERC would use for California markets. Although the majority of the claims of these
parties are generic, they named a number of power market suppliers, including IPC and IE, as having used
parking services provided by other parties under FERC-approved tariffs and thus as being candidates for claims
of having received incorrectly congestion revenues from the CaIISO. On June 25, 2003, after having considered
oral argument held earlier in the month, the FERC issued its Order Granting Rehearing, Denying Request to
Withdraw Complaint and Terminating Proceeding, in which it terminated the proceeding and required that no
refunds be paid. The order remains subject to rehearing by the FERC and review by appellate courts. The
companies are unable to predict the outcome of this matter.
Washington Retail Consumer Class Action Complaint: The complaint in this case was filed on December 20
2002 in the United States District Court for the Western District of Washington at Seattle, against various entities
including IPC. The complaint was served on IPC on February 3, 2003. This action seeks class action status on
behalf of all persons and businesses residing in Washington who were purchasers of electrical and/or natural gas
energy from any period beginning in January 2000 to the present. The complaint alleges claims under the
Washington Consumer Protection Act, RCW 19.86, as well as common law claims of fraud by concealment
negligence and requests an accounting. The complaint asserts that the defendants , including IPC, engaged in
among other things, unfair and deceptive acts, in violation of the FPA, by (a) withholding the supply of energy; (b)
misrepresenting the amount of its energy supplies; (c) exercising improper control over the energy markets; and
(d) manipulating the price of energy markets resulting in energy rates being unjust, unreasonable and unlawful.
The plaintiff seeks certification of a class action , equitable and injunctive relief , an accounting, treble damages
attorneys' fees and costs. On February 3, 2003, another defendant, Reliant, moved to transfer the case to the
Judge who is presiding over Multiple District Litigation (MDL) No. 1405. The MDL rejected this request because
that Judge , as a Washington resident, is a member of the class. On March 11 2003, IPC, along with other
defendants, filed a motion with the MDL seeking to transfer the case to be consolidated with similar actions
before the Judge who is presiding over the California Attorney General Action, and other similar cases. On
March 21 , 2003, the Court granted IPC's motion for an extension of time to respond to the complaint until 30
days after the MDL panel rules. Subsequently, plaintiffs sought permission from the Court to voluntarily dismiss
their claims without prejudice, which the Court granted on May 1 , 2003.
Oregon Retail Consumer Class Action Complaint: The complaint in this case was filed on December 16
2002 in the Circuit Court of the State of Oregon for the County of Multnomah , against various entities, including
IPC. The complaint was served on IPC on February 7 2003. The case was removed by another defendant
Reliant, to the United States District Court, District of Oregon on February 4, 2003. The complaint seeks class
action status on behalf of all persons and businesses residing in Oregon who were purchasers of electrical
and/or natural gas energy from any period beginning in January 2000 to the present. The complaint alleges
claims under the Oregon Unfair Trade Practices Act, ORS 646.605 et seq. in addition to claims of fraud by
concealment, negligence and requests an accounting. The complaint asserts that the defendants, including IPC
engaged in , among other things, unfair and deceptive acts , in violation of the FPA, by (a) withholding the supply
of energy; (b) misrepresenting the amount of its energy supplies; (c) exercising improper control over the energy
markets; and (d) manipulating the price of energy markets resulting in energy rates being charged to Oregon
energy consumers that were unjust, unreasonable and unlawful. The plaintiff seeks certification of a class action
equitable and injunctive relief, an accounting, attorneys' fees and costs. The action was removed to federal
court, and on March 11 , 2003 , IPC, along with other defendants, filed a motion with the MDL seeking to transfer
the case to be consolidated with similar actions before the Judge who is presiding over the California Attorney
General Actions , and other similar cases. A stipulation has been submitted to the Court for an extension of time
to respond to the complaint, until 30 days after the MDL panel rules. Subsequently, plaintiffs sought permission
from the Court to voluntarily dismiss their claims without prejudice, which the Court granted on May 5, 2003.
Enron Bankruptcy Case: When Enron Corporation and certain of its affiliates, including Enron Power
Marketing, Inc. (EPMI) and Enron North America Corp. (ENA) (collectively, Enron) petitioned for bankruptcy
protection in December 2001 , IE and IPC exercised their rights to terminate all contracts with Enron. During
October 2002, IE submitted claims in the Enron bankruptcy proceeding for net pre-petition obligations owed by
Enron to IE of approximately $17 million , primarily for power and energy delivered prior to the Enron bankruptcy.
IE also asserted various contingent and unliquidated claims against Enron. IE acknowledged in its claims that
there are also monetary values associated with the forward contracts for post-petition deliveries that were
terminated , which, when analyzed separately, may result in a substantial net liability to Enron after setoff of such
pre-petition obligations.
On November 13, 2002, IE received demand letters from EPMI and ENA asserting that IE's net liability, including
interest, amounted to approximately $44 million to EPMI and $3 million to ENA, as of that date. IPC received a
similar demand letter from EPMI asserting a net amount owed to EPMI of approximately $1 million.
For several months, IE and IPC attempted to reach agreement with Enron , under a non-disclosure and
confidentiality agreement, on appropriate values for both the pre-petition and forward obligations in order to
calculate a net termination payment value and negotiate a mutually agreed upon net settlement value. However
on February 27 2003, IE received a complaint filed by EPMI in the U.S. Bankruptcy Court, Southern District of
New York. The complaint asserted that EPMI was entitled to a net termination payment of approximately $39
million, plus interest from the termination date. The complaint asked for declaratory relief and damages and
made objections to IE's filed claim.
During March 2003, IE and IPC reached agreement with Enron on both a settlement amount to be paid by IE and
IPC and the terms and conditions of a settlement agreement. The settlement agreement also contains certain
confidentiality requirements. IE and IPC executed and delivered the settlement agreement to Enron on March
, 2003. The settlement agreement was approved by the U.S. Bankruptcy Court on May 15, 2003, and all
payments and other actions required under the settlement agreement have been completed. Pursuant to the
settlement agreement, the Enron complaint against IE was dismissed with prejudice by order of the Bankruptcy
Court on May 15 , 2003.
As a result of the settlement, IE recognized a gain during March 2003, which was recorded in "Net (gain) loss on
legal disputes" in the Consolidated Statement of Operations for the first quarter of 2003.
ATTACHMENT I(
IDAHO POWER COMPANY
STATEMENT OF RETAINED EARNINGS
AND
UNDISTRIBUTED SUBSIDIARY EARNINGS
For the Twelve Months Ended September 30, 2003
Retained Earninqs
Retained earnings (at the beginning of period) ...............................
TotaL....................................................................
336 128 388
014 984
000 000
(33 566)
392 109 806
Balance transferred from income....................................................
Dividends received from subsidiary.................................................
Preferred Stock Redemption...........................................................
Dividends:
Preferred Stock
.....................................................................
Common Stock ......................................................................
588 568
893 125
Total.....................................................................74,481 693
Retained earnings (at end of period)...............................................317 628 113
Undistributed Subsidiary Earninqs
Balance (at beginning of period).....................................................679 509
Equity in earnings for the period..............................
...................
612 965
Dividends paid (Debit)....................................................................000 000
Balance (at end of period)..............................................................292,474
The accompanying Notes to Financial Statements are an integral part of this statement
c:\docume-1 \pah2878\locals-\temp\retained earnings .xls
ATTACHMENT I(
IDAHO POWER COMPANY
STATEMENT OF INCOME
For the Twelve Months Ended September 30 2003
Operating Revenues.........................................................................................
Operating Expenses:
Purchased power......................................................................................
FueL.........................................................................................................
Power cost adjustment.........................................................................
Other operation and maintenance expense..............................................
Depreciation expense...............................................................................
Amortization of limited-term electric plant.................................................
Taxes other than income taxes.................................................................
Income taxes - Federal.............................................................................
Income taxes - Other................................................................................
Provision for deferred income taxes.........................................................
Provision for deferred income taxes - Credit.............................................
Investment tax credit adjustment.............................................................
Total operating expenses....................................................................
Operating Income.............................................................................................
Other Income and Deductions:
Allowance for equity funds used during construction................................
Income taxes.............................................................................................
Other - Net..................................................................................,............
Net other income and deductions.............................................................
Income Before Interest Charges.......................................................................
Interest Charges:
Interest on first mortgage bonds...............................................................
Interest on other long-term debt...............................................................
Interest on short-term debt......................................................................
Amortization of debt premium , discount and
expense - Net.....................................................................................
Other interest expense..............................................................................
Total interest charges.............................................................
Allowance for borrowed funds used during construction - Credit.............
Net interest charges...............................................................,
Net Income.......................................................................................................
Actual
820 623 370
153 392,460
101 758 166
104 553 765
214 280,484
143 526
385,447
109 547
153 328
395 107
213 596
(77 387 731)
503 075
718,494 620
102 128 750
726 717
281 846
955 839
964,402
113 093 152
621 028
060,456
717 911
2,404 784
1 ,336,420
140 599
062,430
078 169
014 983
The accompanying Notes to Financial Statements are an integral part of this statement
c:\docume-1\pah2878\1ocals-1 \temp\income statement xis