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Limited Rate Increase Dampens Q2 Earnings by Associated Press Times-News, August 6, 2004

BOISE -- The holding company for Idaho's largest utility reported a fourth straight profitable quarter on Thursday, but said net income was dampened by the significantly lower-than-anticipated general rate increase approved by state regulators this spring.

IDACORP, which operates Idaho Power Co., posted second-quarter income of $13 million, or 34 cents a share, on revenues of $211.9 million. That compared with a $900,000 loss, or two cents a share, on revenues of $166.6 million a year earlier.

"Increased sales combined with higher base rates that became effective June 1, 2004, and contributions from our non-regulated businesses resulted in improved earnings," Chief Executive Jan Packwood said in a statement.

But more than a third of the profit came from one-time gains in non-utility operations from a Southern California land sale, debt retirement and a legal settlement. Without those benefits, per-share earnings fell three cents short of the expectations of the Wall Street analyst surveyed by Thomson First Call.

Still, Packwood reaffirmed the company's earnings projection for 2004 of between $1.70 and $2 per share. The outlook was compacted three weeks ago from $1.60 to $2.20 a share in response to the Public Utilities Commission decision granting Idaho Power just a third of the basic rate increase it sought.

Idaho Power provides electricity to most of Magic Valley.

Through the first half of the year, IDACORP reported earnings of $32.7 million, or 85 cents a share, on revenue of $304.5 million. From January to June 2003, the company suffered a $4 million loss, or 10 cents a share, on $341.7 million in revenue.

Although Idaho Power added another 13,000 customers since last summer and now exceeds 430,000, Packwood said revenues were still down because state regulators would not allow the utility to raise rates to offset $10 million in capital expenses.

The outlook for hydrogeneration, the company's major source of electricity, was slightly improved from early spring, Packwood said.

Flows since April into Brownlee Reservoir, which feeds Idaho Power's Hells Canyon dam complex, were barely half of average, marking five straight years that drought has significantly limited the company's hydropower supplies. That has forced it to turn to more expensive wholesale power and coal-fired power from plants it has interests in Nevada, Oregon and Wyoming.

Since granting the original base rate increase of 5.2 percent, the Public Utilities Commission has authorized another half percentage-point increase because of a mathematics miscalculation.

Regulators also agreed to reconsider their denial of the utility's proposal to bill customers for $11.5 million a year in anticipated taxes. If eventually allowed, that would add another 2 percentage points to he rate hike.

Idaho Power sought $86 million a year in additional rate payer revenue. The commission has approved $28 million so far, and the tax issue could boost that to nearly $40 million.