HomeMy WebLinkAbout20140530Application.pdf3Effi*.
An IDACORP Company
LISA D. NORDSTROM
Lead Gounsel
RECEIVE N
t0lq ilAY 30 pH ?t Za
,r,tl?ffin tu*l*is*,0,,
May 30, 2014
VIA HAND DELIVERY
Jean D. Jewe!|, Secretary
ldaho Public Utilities Commission
472 West Washington Street
Boise, ldaho 83702
Re: Case No. !PC-E-14-14
Extension of Accumulated Deferred lnvestment Tax Credits/Revenue
Sharing Mechanism - ldaho Power Company's Application
Dear Ms. Jewell:
Enclosed for filing please find an original and seven (7) copies of ldaho Power
Company's Application in the above matter.
Very truly yours,
6*P.%*Ean-)Lisa D. Nordstrom
LDN:csb
Enclosures
1221 W. ldaho St. (83702)
P.O. Box 70
Boise, lD 83707
LISA D. NORDSTROM (lSB No. 5733)
ldaho Power Company
1221West ldaho Street (83702)
P.O. Box 70
Boise, ldaho 83707
Telephone: (208) 388-5825
Facsimile: (208) 388-6936
lnordstrom@idahopower. co m
Attomey for ldaho Power Company
IN THE MATTER OF THE APPLICATION OF
IDAHO POWER COMPANY'S REQUEST TO
EXTEND ITS ACCUMULATED DEFERRED
I NVESTMENT TAX CREDITS/REVENUE
SHARING MECHANISM BEYOND 2014.
REC HIVfi I]
u r tI ?#i0ctYJiil I U*, * uu
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
NfrW GA$H
CASE NO. |PC-E-14-14
APPLICAT!ON
Idaho Power Company ("ldaho Powe/' or "Company") hereby requests that the
ldaho Public Utilities Commission ("Commission") issue an order extending the terms
set forth in the settlement stipulation ("Stipulation") approved by Order No.32424 under
which ldaho Power is authorized to either (1) amortize additional accumulated deferred
investment tax credits ("AD|TC") or (2) share a portion of revenues with its ldaho
customers. lnstead of allowing the terms of the Stipulation to expire at the end of 2014,
ldaho Power requests that the Commission allow the terms of the Stipulation to remain
in effect until the Company has accelerated the amortization of a total of $45 million in
ADITC or until the terms of the Stipulation are otherwise modified or terminated by a
Commission order.
APPLICATION - 1
I. BACKGROUND
1. On December 27, 2011, the Commission issued Order No. 32424 in Case
No. IPC-E-11-22 approving a three-year mechanism (2012-2014) with the following
structure:
a. ADITC Provisions. lf in any year of the mechanism's existence the
ldaho jurisdictional annual return on equity ("ROE') is less than 9.5 percent, the
Company is allowed to amortize an additional amount of ADITC up to $45 million to
achieve an actual ROE up to a maximum of 9.5 percent.l No more than $45 million
could be used over the life of the mechanism.
b. Revenue Sharino Provisions. lf in any year of the mechanism's
existence the ldaho jurisdictional annual ROE is greater than 10 percent up to and
including 10.5 percent, the earnings will be shared equally between ldaho customers
and the Company. Idaho earnings above a 10.5 percent ROE will also be shared, with
customers receiving 75 percent of the earnings applied as an offset in the pension
balancing account.2 There is no upper bound on shared earnings.
c. Other Provisions. lf a new ROE level is established by the
Commission in a general rate case, the thresholds will be automatically adjusted
proportionally on a prospective basis. The Stipulation uses 10 percent as the ROE level
for the threshold adjustments. The new ADITC threshold would be 95 percent of the
t ln 2012, the Company would have been permitted to use a maximum level of $25 million in
additionalAD|TC amortization. However, no additionalADlTC amortization was required.
2 A one-time adjustment to the sharing portion of the previous ADITC/revenue sharing
mechanism (established by Order No. 30978 in Case No. IPC-E-09-30) was applied in 2011 to allow one-
half of the Company's share of the ldaho jurisdictional return in excess of 10.5 percent to be provided as
a customer benefit in the form of a reduction in rates or an offset to amounts that would otherwise be
collected from future rates.
APPLICATION - 2
newly established ROE, and the sharing thresholds would be set at the new ROE for 50
percent sharing and at 105 percent of the new ROE for 75 percent sharing.
II. BENEFITS FROM THE MECHANISM AND ITS PREDECESSOR
2. To date, the provisions of the mechanism and its predecessor (established
by Order No. 30978 in Case No. IPC-E-09-30) have provided significant financial
benefits to customers. During the existence of the mechanism and its predecessor
(2009-2013), customers have received more than $93 million in benefits as either a
direct offset to rates or as an offset to amounts that would otherwise be collected in
future rates. During that same period of time, the Company has not used any of the $45
million of available ADITC. The Company's ldaho jurisdictional earnings in 201 1,2012,
and 2013 triggered the revenue sharing provisions of the mechanism. The chart below
details the results of the mechanism and its predecessor.
ldaho
Jurisdictional ReductionROE to Rates
Offset to
Pension
BalancingAccount Total
2009
2010
2011
2012
2013
9.75%
10.37o/o
12.55o/o
11j8%
11.22o/o
No Action - ROE within the deadband
No Action - ROE within the deadband
$27,098,897 $20,324,173 $47,423,070
$7,151,221 $14,618,532 $21,769,753
$7,602,043 $16,512,853 $24,114,896
Grand Total $93J07J19
3. The direct financial benefits that customers have received to date under
the mechanism are evident; however, it is important to recognize other benefits that
customers and the Company have derived from this mechanism. ldaho Power's ability
to utilize additional ADITC when ldaho jurisdictional earnings fall below a 9.5 percent
ROE (although unutilized to date) has provided comfort to investors and credit rating
agencies in that the Company has had a greater opportunity to achieve earnings near
APPLICATION - 3
the Commission-authorized rate of return in years when revenue from rates alone would
not have otherwise provided that same opportunity. ln fact, in its latest Credit Opinion
included as Attachment 1 to this Application, Moody's Investors Service states:
This settlement stipulation is also viewed positively from a
credit perspective, since it provides a good amount of
certainty that the company will actually achieve an ROE that
compares well relative to allowed ROEs and utility earnings
in neighboring jurisdictions, in recent years.'
The Company's credit ratings directly impact the availability and cost of capital, which in
turn affects the rates that customers pay when new rates are determined. Banks and
fixed income investors rely on a company's credit ratings to determine its return-a
lower credit rating means more risk and therefore a higher return (interest rate) is
necessary to attract investors. Credit ratings also affect access to working capital
needed for shortterm financing needs.
III. PROPOSED EXTENSION AND MODIFICATIONS TO THE
ADITC/REVENUE SHARING MEGHANISM
4. The Company has used none of the $45 million available ADITC to date.
At the time of this filing, the Company expects to use less than $5 million of additional
ADITC tn 2O14. lf the Company's forecasted level of additional ADITC amortization in
2014 is correct, more than $40 million in additional ADITC will remain unused from the
original $+S million level set aside under the Stipulation. Because the current
ADITC/revenue sharing mechanism has been beneficial for both customers and the
Company and because the Company expects a significant portion of the ADITC set
aside under the Stipulation to still be available for future amortization at the end of 2014,
3 Moody's lnvestors Service - Credit Opinion: ldaho Power Company, February 7,2014, p.2.
APPLICATION - 4
ldaho Power proposes to extend the mechanism approved by Order No.32424 beyond
2014.
5. ldaho Power requests that the mechanism be extended until the Company
has accelerated the amortization of up to a total of $45 million in additional ADITC
(including any ADITC applied toward 2014) or until the terms are othenruise modified or
terminated by a Commission order. The Company believes that because there is now
an adequate level of familiarity with the mechanism combined with the demonstrated
benefits to customers and the Company, it is appropriate to extend the provisions of the
Stipulation beyond 2014 without modification. Therefore, the Company proposes that
the Commission issue an order extending the terms set forth in the Stipulation approved
by Order No. 32424 as described in paragraph 1 of this Application.
IV. COMMUNICATIONS
6. Communications and service of pleadings with reference to this
Application should be sent to the following:
Lisa D. Nordstrom
Regulatory Dockets
ldaho Power Company
P.O. Box 70
Boise, ldaho 83707
I nord strom @id a hopower. co m
dockets@ idahopower. co m
Timothy E. Tatum
ldaho Power Company
P.O. Box 70
Boise, ldaho 83707
ttatu m@ id ahopower. com
V. MODIFIED PROCEDURE
7. ldaho Power believes that a technical hearing is not necessary to consider
the issues presented herein and respectfully requests that this Application be processed
under Modified Procedure; i.e., by written submissions rather than by hearing. RP 201
APPLICATION - 5
ef seg. ln order for the mechanism to remain in effect for 2015, the Company requests
a Commission order no later than December 31,2014.
8. To facilitate broad participation in these discussions, ldaho Power has
served this Application upon parties to its last general rate case, Case No. IPC-E-11-08.
VI. REQUEST FOR RELIEF
Idaho Power requests that the Commission issue its order approving a modified
accounting order authorizing the Company to extend the mechanism under the
provisions described herein and authorizing this proceeding to be processed such that a
final Commission order will be issued no later than December 31,2014.
Respectfully submitted this 30th day of May 2014.
Power Company
APPLICATION - 6
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on this 30th day of May 2014 t served a true and correct
copy of the within and foregoing APPLICATION upon the following named parties by the
method indicated below, and addressed to the following:
Commission Staff
Donald L. Howell, II
Karl T. Klein
Deputy Attorneys General
ldaho Public Utilities Commission
47 2 W est Wash i ngton (83702)
P.O. Box 83720
Boise, ldaho 83720-007 4
lndustrial Customers of Idaho Power
Peter J. Richardson
Gregory M. Adams
RICHARDSON ADAMS, PLLC
515 North 27th Street (83702)
P.O. Box 7218
Boise, ldaho 83707
Dr. Don Reading
6070 Hill Road
Boise, Idaho 83703
ldaho lrrigation Pumpers Association, lnc.
Eric L. Olsen
RACINE, OLSON, NYE, BUDGE &
BAILEY, CHARTERED
201 East Center
P.O. Box 1391
Pocatello, ldaho 83204-1 391
Anthony Yanke!
29814 Lake Road
Bay Village, Ohio 44140
Hand Delivered
U.S. Mail
Overnight Mail
FAX
Email Don.Howell@puc.idaho.qov
Karl. Klein@puc. idaho.qov
Hand Delivered
U.S. Mail
Overnight Mai!
FAX
Email peter@richardsonadams.com
q reo@ richa rd so nadams. co m
Hand Delivered
U.S. Mail
Overnight Mail
FAX
Email dreadinq@mindsprinq.com
Hand Delivered
U.S. Mail
Overnight Mail
FAXX Emai! elo@racinelaw.net
Hand Delivered
U.S. Mail
Overnight Mail
FAX
Email tonv@vankel.net
APPLICATION - 7
The Kroger Go.
Kurt J. Boehm
BOEHM, KURTZ & LOWRY
36 East Seventh Street, Suite 1510
Cincinnati, Ohio 45202
Kevin Higgins
Energy Strategies, LLC
215 South State Street, Suite 200
Salt Lake City, Utah 84111
Micron Technology, lnc.
Mary V. York
HOLLAND & HART, LLP
101 South Capital Boulevard, Suite 1400
Boise, ldaho 83702
Richard E. Malmgren
Senior Assistant General Counsel
Micron Technology, lnc.
800 South FederalWay
Boise, ldaho 83716
The United States Department of Energy
Arthur Perry Bruder, Attorney-Advisor
United States Department of Energy
1 000 lndependence Avenue SW
Washington, DC 20585
Dwight D. Etheridge
Exeter Associates, lnc.
10480 Little Patuxent Parkway, Suite 300
Columbia, Maryland 21044
Hand Delivered
U.S. Mail
Overnight Mail
FAXX Email kboehm@BKllawfirm.com
irh@battfisher.com
Hand Delivered
U.S. Mail
Overnight Mail
FAXX Email khiqqins@enerqvstrat.com
_Hand Delivered
U.S. Mail
Overnight Mail
FAX
Email mvork@hollandhart.com
tnelson@hol land ha rt. com
madavidson@holland hart.com
fsch midt@hol land ha rt. com
lnbuchanan@holland hart.com
Hand Delivered
U.S. Mail
Overnight Mail
FAXX Email remalmgren@micron.com
Hand Delivered
U.S. Mai!
Overnight Mail
FAXX Email Arthur.bruder@hq.doe.qov
Steven. porter@ hq. d oe. qov
Hand Delivered
U.S. Mail
Overnight Mail
FAX
Email detheridqe@exeterassociates.com
APPLICATION - 8
Community Action Partnership
Association of ldaho
Brad M. Purdy
Attorney at Law
2019 North 17th Street
Boise, ldaho 83702
ldaho Conservation League
Benjamin J. Otto
Idaho Conservation League
710 North Sixth Street (83702)
P.O. Box 844
Boise, ldaho 83701
Snake River Alliance
Ken Miller
Snake River Alliance
P.O. Box 1731
Boise, ldaho 83701
NW Energy Goalition
Nancy Hirsh, Policy Director
NW Energy Coalition
811 First Avenue, Suite 305
Seattle, Washington 981 04
Hand Delivered
U.S. Mail
Overnight Mail
FAXX Emai! bmpurdv@hotmail.com
Hand Delivered
U.S. Mail
Overnight Mai!
FAXX Email botto@idahoconservation.orq
Hand Delivered
U.S. Mai!
Overnight Mail
FAXX Email kmiller@snakeriveralliance.org
Hand Delivered
U.S. Mail
Overnight Mail
FAX
Email nancv@nwenergv.orq
sta Bearry, Legal Assista
APPLICATION - 9
BEFORE THE
IDAHO PUBLIC UTILITIES COMMISSION
GASE NO. IPC-E-14-14
IDAHO POWER GOMPANY
ATTACHMENT 1
Moopv's
INVESTORS SERV!CE
Credit Opinion: ldaho Power Company
Global Credit Research - 07 Feb2014
Boise, ldaho, United States
Ratiqgs
Category
Outlook
lssuer Rating
First Mortgage Bonds
Senior Secured
Commercial Paper
Parent IDACORP, lnc.
Outlook
lssuer Rating
Senior Unsecured Shelf
Commercial Paper
Contiacts :
Analyst
Ryan Wobbrock/New York City
William L. Hess/New York City
Key lrdicators
[1]ldaho Porer Company
CFO pre-WC + lnterest / lnterest
CFO pre-WC / Debt
CFO pre-WC - Dividends / Debt
Debt / Capitalization
9/3U20r3G) 1213',u2012 121311m113.Sr 3.&( 40x1450/o 14.4% 15.6io/o10.7% 10.8% 12.?/o42.4% 41.80/" 42.*/"
1213112010 12t31t200p.46( 4.}x18.8% 18.?/o15.60lo A.e/o
6.7oh 6.20/0
Moody's Rating
Stable
A3
A1
A1
P-2
Stable
Baal
(P)Baal
P-2
Phone
212.553.71M
212.553.3837
[1] All ratios are based on'Adjusted'financial data and incorporate Moody's Global Standard Adjustments for Non-
Financial Corporations. Source: Moody's Financial Metrics
Note: For definitions of Moody's mosf common ratio terms p/ease see fhe accompanying User's Guide.
Opinion
Rating Drivers
Strong regulatory support and cost recovery provisions
Weak financial metrics expected to improve with pension adjustments
Considerable capital expenditures continue over intermediate-term
lncreasing dividend payout toward industry averages
Corporate Profile
ldaho Power Company (lPC) is a vertically integrated electric utility and principal wholly-owned subsidiary of
IDACORP, lnc. (lDA). IPC's service territory encompasses southern ldaho (which constitutes approximately 95%
of rate base) and eastern Oregon and its rates are regulated by the ldaho Public Utilities Commission (IPUC) and
the Oregon Public Utility Commission (OPUC), while the Federal Energy Regulatory Commission (FERC)
regulates its transmission operations. IDA's holdings, on a revenue basis, are nearly 100% regulated.
SU MMARY RATING RATIONALE
IPC's A3 senior unsecured rating reflects its low-risk utility operations in an above average regulatory
environment. We view the regulatory support that IPC receives as a key component in offsetting weak financial
metrics, given its rating category. The company benefits from an impressive suite of cost recovery provisions,
which helps to lower IPC's business risk and results in highly stable and predictable cash flow from operations
year-over-year. The rating also considers a dividend policy that will increase the amount of negative free cash flow
that the company produces over the next several years, as the company targets a 5Oo/o - 60% payout ratio in the
presence of an increasing capex plan.
Recent Developrnents
On 30 January , 2014 we upgraded the ratings of IDA to Baal from Baa2 and IPC to A3 from Baal . The primary
driver of the rating action was Moody's more favorable view of the relative credit supportiveness of the US
regulatory framework, as detailed in our September 23,2013 Request for Comment: "Proposed Refinements to the
Regulated Utilities Rating Methodology and our Evolving View of US Utility Regulation.'
Factors supporting this view include better cost recovery provisions, reduced regulatory lag, and generally fair and
open relationships between utilities and regulators. The US utility secto/s low number of defaults, high recovery
rates, and generally strong financial metrics from a global perspective provide additional corroboration for these
upgrades.
DETAILED RATING CONSIDERANONS
IPUC SUPPORT IS FUNDAMENTAL TO RATING
We view the suite of cost recovery provisions allowed by the IPUC to be well above average compared to the
other states across the US. These mechanisms provide a good amount of certainty to cash flow generation in any
given year, with any variances typically due to hydro conditions that average out over time. Some of the more
important credit positive features of IPUC regulation include: 1) a relatively swift 7-month statutory period
governing rate cases and partially forecast test years to reduce regulatory lag; 2) frequent decisions based on
settlements instead of litigated proceedings; 3) reasonable allowed returns on equity; 4) reliance on various cost
tracking mechanisms (e.9., the annual power cost adjustment, or PCA, which reconciles forecasted purchased
power costs in rates to the actual amount spent on a95%15% customer/shareholder basis) 5) pre-approval of
future rate treatment for certain capital investments allowed under ldaho state law (i.e., Senate Bill 1123 which
grants the IPUC pre-approval of rate treatment for certain capex); 6) legislatively available inclusion of CWIP in
rate base allowed under ldaho state law; and 7) a decoupling mechanism via the fixed cost adjustment (FCA;
which allows IPC to recover up to 3% of base revenues in the current year, with any excess recovered in
subsequent years).
IPC is currently operating under a 201 1 regulatory settlement stipulation in its ldaho jurisdiction. The settlement
expires at year-end 2014 and allows the company to amortize additional Accumulated Deferred lnvestment Tax
Credits in an aggregate amount up to $45 million should its ROE fall below 9.5% in its ldaho jurisdiction. IPC did
not need to use any additional ADITC in2012 or 2013 to earn this return.
The rate settlement stipulation also details earnings sharing between IPC and customers, on a 50/50 basis (via
customer refunds), when IPC's actual earned ROE in the ldaho jursidiction falls between 10.0% and 10.5%.
Furthermore, if jurisdictional eamings exceed a1O.So/o ROE, the additional earnings are shared with customers on
a 75% customers I 25o/o IPC basis, in the form of a reduction to its pension regulatory asset.
This setflement stipulation is also viewed positively from a credit perspective, since it provides a good amount of
certainty that the company will actually achieve an ROE that compares well relative to allowed ROEs and utility
earnings in neighboring jurisdictions, in recent years. The fact that IPC has not needed to use the ADITC
amortization is also viewed positively, since it gives the company additional support should they run into
operational challenges or poor hydro conditions, the latter of which is more likely since over half of the company's
power supply is hydro based.
The IPUC has recently approved the recovery of over $46 million of efficiency and demand side management
costs for lPC, through an energy efficiency rider or through the PCA as well as approval to invest around $130
million for environmental upgrades (i.e., installation of selective catalytic reduction, "SCR," equipment to minimize
nitrogen oxide emissions) atthe Jim Bridger coal plant (lPC owns approximately 33% of the roughly 2,100 MW
Wyoming facility). The IPUC did, however, refrain from granting IPC a binding commitment for rate base treatment
of the investment. We view these developments as further evidence of IPUC support for the company's credit
profile.
WEAK FINANCIAL PROFILE DESPITE COST RECOVERY FEATURES
Despite strong regulatory support through rate increases, a relatively high ROE and an impressive suite of cost
recovery provisions, IPC has produced weak financial metrics for its rating category over the past several years.
For LTM 3Q13 the company's cash flow before working capital (CFO preWC) to debt was 15.0%. This level has
remained steady since 201 1, but is lower than vertically integrated A3 peers, who have averaged 19% over that
same period. lmportantly, these metrics include the one-time benefits of bonus depreciation that have inflated the
industry's cash flow to debt metrics by around 200-300 basis points since 2010. We typically adjust these
amounts out for ratings purposes and doing so would maintain IPC's relation to peers, but would support a
financial profile that is more in-line with Baa3 rating levels according to our ratings methodology.
While the strong support of the IPUC and very stable and predictable cash flow generation have been the offset to
these weak financial metrics in the past, the company is likely to beneflt from anticipated improvements in pension
funding levels, which will in-turn improve IPC's cash flow to debt metrics. The impact for IPC is likely to be twofold,
in regard to pension funding: 1) Moody's standard adjustments impute pension liabilities as debt. As interest rates
rise and increase pension discount rates, the amount of underfunded pension and Moody's adjusted debt will
decline. 2) IPC has been contributing significant amounts to the pension in recent years (i.e., $44 million in2012
and $30 million as of September 2013), which should reduce the amount of CFO reduction as the funded status
improves.
We also recognize that the company's cash position can benefit from additional unused tax benefits, although we
do not consider those as part of ongoing, core utility cash flow production.
STEP-UP IN CAPEX WITH SCR INSTALLATION
IPC expects to spend roughly $300 million in capitalexpenditures in both 2014 and 2015. The majority of these
expenditures are in maintenance of existing facilities and infrastructure, though the most significant single item is
the company's share of the SCR installation at Jim Bridger, which will be around $45 million in each of the next two
years.
There are two large, long term transmission pro,lects in the development pipeline (i.e., 500 kV Boardman-
Hemmingway estimated at around $890-$%0 million of total costs and the 500 kV Gateway West, which IPC's
share is estimated between $150 and $300 million) that involve partnerships with other utilities. These are both
currently in the permitting process and the only commitments to date have been around its share of permitting
costs. The total costs and dates of service of these projects is highly subject to change as the development
process continues. Given the persistent delay in siting and uncertainty of siting and construction, these projects
are not a material part of our credit analysis. The construction costs of these projects are not included in the
company'|s current capital expenditure estimates for 2014 and 2015.
Other potential projects include the investigation of options to ensure additional resources are available to meet
expected load growth that has recently been revised upward to five-year compound annual growth rate in
residential customers of 2.1% and residential load of 1.4%. Management has stated that these options include
anything from a new peaking resource, to market purchases, to demand response programs or energy efficiency
programs. These options will be analyzed further given continued delays in Boardman-Hemmingway, and through
the biennial integrated resource planning (lRP) process.
Liquidity Profile
IPC has reasonable liquidity supported by internally generated cash flow and its own committed bank credit
facilities. The company recently amended and restated its standalone credit facility, so that the $300 million
committed revolver now expires in October 20'18. This facility is principally used to backstop its commercial paper
program.
As of September 30, 2013, IPC had about $179 million of unrestricted cash on hand and there were no direct
borrowings under the facility and no commercial paper outstanding. There is, however, approximately $24 million
of revolver capacity unavailable as it is earmarked for American Falls and Port of Monow variable rate bonds,
maturing in 2025 and 2027 , respectively, that holders may put to ldaho Power. IPC has one financial covenant that
applies to the revolver, which limits the debt to total capitalization ratio to 65%. As of September 30, 2013, IPC's
leverage ratio was 50%, leaving ample cushion against the covenant.
During LTM 3013, IPC produced positive free cash flow - a rarity in the utility sector - with CFO of $318 million,
capital expenditures at $210 million and dividends to IDACORP of $76 million. Over the past several years, IDA
has been pursuing a policy to increase its dividend payout ratio, with a target of around 5G60%, (as reported
amounts were about 360/oin2O11,41o/oin2O12 and 46% during LTM 3Q13). While the amounts in question would
not cause any significant change in IPC's liquidity profile, the policy is likely to further exacerbate the company's
weak financial metrics, such as CFO pre.WC less dividends to debt, which was 11% through LTM 3Q13, down
from 160/o in 2010.
IPC's maturity profile appears very manageable, with $120 million maturing in July of 2018.
Rating Outlook
IPC's stable rating outlook reflects a very supportive regulatory environment which offers timely cost recovery and
constructive rate case outcomes. The outlook also incorporates a view that the company will fund capex
conservatively and manage its dividend growth strategy with an eye toward improving cash flow coverage metrics
for debt and interest. The stable outlook also incorporates our expectation that the company will be produce cash
flow to debt metrics in the mid to high teens and a dividend payout ratio of less than 60%.
What Could Change the Rating - Up
A rating upgrade is unlikely in the near-to-medium term; however, IPC's rating outlook could tum to positive if
benefits from rate relief materialize to produce metrics in the mid-20% range for CFO pre.WC to debt, on a
sustainable basis.
Wrat Could Ghange the Rating - Down
The rating would likely be revised downward if cash flow (excluding the effects of bonus depreciation) metrics
were to persist below 15% CFO Pr+WC to debt, or if IPC were to experience a decline in the level of regulatory
support for future rate filings.
Rating Fadors
ldaho Porer Cornpany
Regulated Elecfic and Gc utilities lndustry
Grid [1][2]
Arnent LTM
s/3ryml3
Factor I : @ulatory Framarork (25old
a) Legislative and Judicial Underpinnings of
:he Regulatory Framework
r) Consistency and Predictability of
leoulation
Masure
A
A
A
A
Scoft
larlor 2: Ability to Recover Costs and Earn
Retums (25%)
a) Timeliness of Recovery of Operating and
3apital Costs
r) Sufficiencv of Rates and Returns
Aa
A
Aa
A
Factor 3 : Diversifi cation (l tPlo)
r) Market Position
r) Generation and Fuel DiversiW
Baa
A
Baa
A
4: Financial Stengffr 6ryl")
[3]Moodt/s 12-18 Morth
Fonua d MewAs of February
m14
lllleasurc
A
A
Aa
A
) CFO pre-WC + lnterest / lnterest (3 Year
) CFO pre-WC / Debt (3 Year Avg)
) CFO pr+WC - Dividends / Debt (3 Year
Year
3.9x
15.2o/o
11.60/0
41.90/o
Baa
Baa
Baa
A
3.5x - 4.0x
13o/o- 17o/o
10%- 14%
40Yo - 45Yo
Rating Before Notching
oldCo Structural Subordination Notching
) lndicated Rating from Grid
[1] All ratios are based on'Adjusted'financial data and incorporate Moody's Global Standard Adjustments for Non-
Financial Corporations. [2] As of 9/30/2013(L); Source: Moody's Financial Metrics [3] This represents Moody's
forward view; not the view of the issuer; and unless noted in the text, does not incorporate significant acquisitions
and divestitures.
MooDY's
INVESTORS SERVICE
A 20'14 Moody's Corporation, Moody's lnvestors Service, lnc., Moody's Analytics, lnc. and/or their licensors and
affiliates (collectively, "MOODY'S'). All rights reserved.
cREDtr RAnNGS ISSUED BY TUTOODYS INVESTORS SERVICE, lNC. ("MlS*) AND lTS AFFILI,ATES ARE
TTIOODYS CURRENT OPINIONS OF THE REI-ATIVE FUTURE CRED]T RISK OF ENNNES, CREDIT
CO]I,TITNiENTS, OR DEBT OR DEBT{IKE SECURINES, AND CRED]T RANNGS AND RESEARCH
PUBUCATIONS PUBUSHED BY IiIOODYS ("i,OODYS PUBUCATION') MAYINCLUDE IT OODYS
CURRENT OPINIONS OF THE REIATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITII/EiITS,
OR DEBT OR DEBT{IKE SECURITIES. TTIOODYS DEFINES GREDIT RISK AS THE RISK THAT AN
ENTITY MAY NOT MEET lTS CONTRACruAL FINANCIAL OBUGANONS AS THEY COME DUE AND ANY
ESNMATED FINANCIAL LOSS IN THE B'ENT OF DEFAULT. CRED]T RANNGS DO NOTADDRESS ANY
OTHER RISK INCLUDING BUT NOT UII,ITED TO: UQUIDITY RISK, MARKETVALUE RISK OR PRICE
VOLATIUTY. CRED]T RA]INGS AND Ii/IOODYS OPINIONS INCLUDED IN ITIOODYS PUBUCANONS ARE
NOT STATEiIENTS OF CURRENT OR HISTORICAL FACT. ]I/IOODYS PUBUCAIIONS MAYALSO
INCLUDE QUANNTATTVE II,IODEL.BASED ESNMATES OF CREDIT RISK AND REI.ATED OPINIONS OR
COMITENTARY PUBIJSHED BY niOODYS ANALYnCS, lNC. CRED]T RATINGS AND IIIOODYS
PUBUCANONS DO NOT CONSITruTE OR PROVIDE INVESTNGNT OR FINANCIAL ADVICE, AND
CRED]T RATINGS AND IT'IOODYS PUBLTCANONS ARE NOT AND DO NOT PROVIDE
RECOMITIENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. NEITHER CREDIT
RANNGS NOR II/IOODYS PUBUCATIONS COililt,ENT ON THE SUITABIUTY OF AN INVESTMENT FOR
ANY PARTICUI.AR INVESTOR II'OODYS ISSUES lTS CREDIT RATINGS AND PUBUSHES Ii,|OODYS
PUBUCATIONS VIIITH THE EXPECTATION AND UNDERSTANDING THAT EAGH INVESTOR IMLI, WTH
DUE CARE, ]UAKE lTS OWT.I SruDYAND B/ALUATION OF EACH SECURITYTHATIS UNDER
CONSIDERANON FOR PURCHASE, HOLDING, OR SALE.
MOODY'S CREDIT RATINGS AND MOODY'S PUBLICATIONS ARE NOT INTENDED FOR USE BY RETAIL
INVESTORS AND ITWOULD BE RECKLESS FOR RETAIL INVESTORS TO CONSIDER MOODYS CREDIT
RATINGS OR MOODY'S PUBLICATIONS IN MAKING ANY INVESTMENT DECISION. IF IN DOUBTYOU
SHOULD CONTACTYOUR FINANCIAL OR OTHER PROFESSIONAL ADVISER.
ALL INFORMATION CONTAINED HEREIN IS PROTECTED BY LAW, INCLUDING BUT NOT LIMITED TO,
COPYRIGHT LAW, AND NONE OF SUCH INFORMATION MAY BE COPIED OR OTHERWISE
REPRODUCED, REPACKAGED, FURTHER TRANSMITTED, TRANSFERRED, DISSEMINATED,
REDISTRIBUTED OR RESOLD, OR STORED FOR SUBSEQUENT USE FOR ANY SUCH PURPOSE, IN
WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON
WITHOUT MOODYS PRIOR WRITTEN CONSENT.
All information contained herein is obtained by MOODYS ftom sources believed by it to be accurate and reliable.
Because of the possibility of human or mechanical error as well as other factors, however, all information contained
herein is provided 'AS lS. without warranty of any kind. MOODY'S adopts all necessary measures so that the
information it uses in assigning a credit rating is of sufficient quality and from sources MOODY'S considers to be
reliable including, when appropriate, independent third-party sources. However, MOODYS is not an auditor and
cannot in every instance independenfly veriff or validate information received in the rating process or in preparing
the Moody's Publications.
To the extent permitted by law, MOODY'S and its directors, officers, employees, agents, representatives, licensors
and suppliers disclaim liability to any person or entity for any indirect, special, consequential, or incidental losses or
damages whatsoever arising from or in connection with the information contained herein or the use of or inability to
use any such information, even if MOODY'S or any of its directors, officers, employees, agents, representatives,
licensors or suppliers is advised in advance of the possibility of such losses or damages, including but not limited
to: (a) any loss of present or prospective profits or (b) any loss or damage arising where the relevant financial
instrument is not the subject of a particular credit rating assigned by MOODY'S.
To the extent permitted by law, MOODY'S and its directors, officers, employees, agents, representatives, licensors
and suppliers disclaim liability for any direct or compensatory losses or damages caused to any person or entity,
including but not limited to by any negligence (but excluding fraud, willful misconduct or any other type of liability
that, for the avoidance of doubt, by law cannot be excluded) on the part of, or any contingency within or beyond the
control of, MOODYS or any of its directors, officers, employees, agents, representatives, licensors or suppliers,
arising from or in connection with the information contained herein or the use of or inability to use any such
information.
NO WARMNTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS,
MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY SUCH RATING OR OTHER
OPINION OR INFORMATION IS GIVEN OR MADE BY MOODY'S IN ANY FORM OR MANNER
WHATSOEVER.
MlS, a wholly-owned credit rating agency subsidiary of Moody's Corporation ('MCO'), hereby discloses that most
issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and
prefened stock rated by MIS have, prior to assignment of any rating, agreed to pay to MIS for appraisal and rating
services rendered by it fees ranging from $1,500 to approximately $2,500,000. MCO and MIS also maintain policies
and procedures to address the independence of MIS's ratings and rating processes. lnformation regarding certain
affiliations that may exist between directors of MCO and rated entities, and between entities who hold ratings from
MIS and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually
at www.moodvs.com under the heading "Shareholder Relations - Corporate Governance - Director and
Shareholder Affiliation Policy."
For Australia only: Any publication into Australia of this document is pursuant to the Australian Financial Services
License of MOODY'S affiliate, Moody's lnvestors Service Pty Limited ABN 61 003 399 657AFSL 336969 and/or
Moody's Analytics Australia Pty Ltd ABN 94 105 136 972 AFSL 383569 (as applicable). This document is intended
to be provided only to "wholesale clients" within the meaning of section 761G of the Corporations Act 2001 . By
continuing to access this document from within Australia, you represent to MOODY'S that you are, or are
accessing the document as a representative of, a'\arholesale client' and that neither you nor the entity you
represent will directly or indirectly disseminate this document or its contents to "retail clients'within the meaning of
section 761 G of the Corporations Act 2001. MOODY'S credit rating is an opinion as to the creditworthiness of a
debt obligation of the issuer, not on the equity securities of the issuer or any form of security that is available to
retail clients. lt would be dangerous for "retail clients" to make any investment decision based on MOODYS credit
rating. lf in doubt you should contact your financial or other professional adviser.