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IDACORP Inc. (NYSE:IDA)

Q3 2013 Earnings Call

November 5, 2013 5:00 PM ET

Executives

Lawrence Spencer – Director, IR

Darrel Anderson – EVP-Administrative Services and CFO; President and CFO, Idaho Power

Steve Keen – VP-Finance and Treasurer; SVP-Finance and Treasurer, Idaho Power

LaMont Keen – President and CEO; CEO, Idaho Power

Greg Said – VP, Regulatory Affairs

Ken Petersen – Corporate Controller and Chief Accounting Officer

Analysts

Paul Ridzon – KeyBanc

Brian Russo – Ladenburg Thalmann & Company

Sarah Akers – Wells Fargo Securities

Ashar Khan – Visium

Operator

Good day, and welcome everyone to the IDACORP Third Quarter 2013 Conference Call. Today’s call is being recorded and webcast live. A complete replay will also be available from the end of the day for a period of 12 months on the company’s website at www.idacorpinc.com. (Operator Instructions)

At this time, I would like to turn the call over to the Director of Investor Relations, Mr. Lawrence Spencer. Please go ahead, sir.

Lawrence Spencer

Thank you, Jackie and good afternoon everyone. Welcome to our third quarter 2013 earnings release conference call. We issued our earnings release before the markets opened today and that document along with our SEC Form 10-Q is now posted to our website at www.idacorpinc.com. We will be using a few slides to supplement today’s call, and these are also located on our website. We will refer to specific slide numbers as we work our way through today’s presentation.

On Slide 2, we show the presenters on today’s call. LaMont Keen, IDACORP’s President and Chief Executive Officer; Darrel Anderson, Idaho Power’s President and Chief Financial Officer; and Steve Keen, Idaho Power’s Senior Vice President, Finance and Treasurer. We also have other individuals available to help answer your questions during the Q&A period.

Before turning the presentation over to Darrel, I’ll cover a few details with you. First, our Safe Harbor statement is on Slide 3. Our presentation today contains forward-looking statements. While these forward-looking statements represent our current judgment or opinion of what the future holds, these statements are subject to risks and uncertainties that may cause actual results to differ materially from statements made today. As a result, we caution you against placing undue reliance on these forward-looking statements. A discussion of factors and events that could cause future results to differ materially from those included in forward-looking statements can be found on Slide 3 and in our filings with the Securities and Exchange Commission, which we encourage you to review.

On Slide 4, we present the quarterly and year-to-date financial results. As you can see, IDACORP’s third quarter 2013 earnings per share were $1.43, a decrease of $0.41 per share from last year’s third quarter. Year-to-date 2013 earnings per share were $3.01 compared with $3.05 per share for the first nine months of 2012.

I’ll now like to turn the presentation over to Darrel.

Darrel Anderson

Thanks, Larry and good afternoon everyone. IDACORP and Idaho Power had another strong third quarter. The positive operating results which included historically strong loads due impart to a second straight year of hot and dry weather as well as solid customer growth were offset by tax items including an unplanned tax charge in the third quarter.

On Slide 5, we present a reconciliation of earnings from the third quarter of 2012 to the third quarter of 2013. The year-to-date reconciliation table is included in the Form 10-Q we filed this morning. While net income decreased, we believe two primary factors should be considered when comparing performance for the period both of which are shown in the reconciliation table.

The first factor was higher operating income due to less revenue sharing in 2013 versus 2012. Idaho Power operating income improved $7.1 million over the third quarter 2012, the combination of the increased power supply costs and reductions in sales volumes attributable to lower usage per customer were partially offset by an increase in sales volume attributable to customer growth.

Weather conditions for the quarter is measured by cooling degrees day were similar to the third quarter 2012 conditions. Both of which were greater than normal. We did achieve a new system peak of 3,407 megawatts on July 2nd, up from a peak we set in 2012, a 3,245 megawatts. The reduction revenue sharing cost in third quarter 2013 compared to the same period in 2012 resulted in an $8.7 million increase in operating income. The other factor was the offsetting impact of income tax method changes and other income tax items recorded in 2013 and 2012. Steve will review the tax method changes in a little more detail when I complete my comments.

Now moving to Slide 6, I want to expand on our improved operating income in the last three years. The three and nine months ended September 30, 2011, 2012, 2013 show an improvement that we believe is reflective of the strength of our core business. But 2011 and 2012 relied in varying degrees on beneficial tax method changes and tax settlements to reach our reported earnings per share. 2013 core utility operations continued to make a meaningful contribution to our growing bottom line.

On Slide 7, we present our 2003 (sic) 2013 key operating and financial metrics which indicates no changes from our prior estimates we shared with you in August. Due to the results so far, we are increasing the lower end of the earnings guidance range of $3.40 to $3.55 per share to the range of $3.45 to $3.55 per share.

With the updated range, we anticipate being in a position to achieve our sixth consecutive year of earnings growth. The new range incorporates the impact of the Idaho sharing mechanism under Idaho Power December 2011 Regulatory Settlement Agreement. The sharing mechanism reduces the rate of earnings growth within the range as earnings move from the 50% sharing level to the 75% sharing level. The 50% sharing level is triggered by 10% return on year end equity in the Idaho jurisdiction and the 75% sharing level kicks in at 10.5% return on year-end equity in the Idaho jurisdiction.

The midpoint of our updated earnings guidance puts us into the threshold of the 75% sharing level. To the end of the third quarter, we estimate we’ll share $6.2 million with customers under the Idaho sharing mechanism and we recorded that amount for the first three quarters of 2013.

I will now turn the presentation over to Steve to discuss the tax method changes, our liquidity position and a recent filing with the Idaho Commission.

Steve Keen

Thanks, Darrel and good afternoon, everyone. I’ll first discuss Idaho Power’s current tax method change. Idaho Power has benefited in recent years from the impacts of tax method changes as well as increased flow through deductions annually relating to tax deductions for capitalized repair cost. In 2010, Idaho Power adopted a new income tax method of accounting for capitalized repairs that resulted in a $41.5 million tax method change benefit. In the third quarter of 2012, an additional benefit related to repairs tax method change was recognized, resulting in a $7.8 million benefit. The 2012 change was a result of our alignment with an IRS Safe Harbor methodology established specifically for transmission and distribution assets.

On September 30, 2013, the U.S. Treasury Department and IRS issued final regulations addressing the deduction of capitalization of expenditures related to tangible property for tax years on/or after January 1, 2014. A revenue procedure was also issued this year that prescribes Safe Harbor unit of property definition specifically for electric generation property. Due to this most recent change in tax law and Safe Harbor guidance, Idaho Power assessed and estimated the impact of the method change relating to electric generation property.

Based on that assessment, Idaho Power does intend to make this method change specifically for generation property and therefore, recorded $4.6 million of tax expense in the third quarter of 2013. This amount relates to the cumulative method change adjustment for years 2012 and prior. Idaho Power does not expect the method change for generation assets to materially impact the ongoing capitalized repairs deduction included in this 2013 income tax provision or in future periods.

With the tax benefit at $7.8 million recorded in the third quarter of 2012 and the tax expense of $4.6 million recorded in the third quarter of 2013. The combined impact resulted in the $12.4 million decrease in Idaho Power’s quarterly net income on a comparative basis. Predicting these impacts on a quarterly basis has been challenging, but we are not currently aware of any anticipated additional guidance to be issued by the U.S. Treasury or the IRS relating to this issue. A more lengthy discussion of this tax method changes is included in the Form 10-Q we filed this morning and footnote to income taxes and in MD&A.

Now, moving to Slide 8, we showed IDACORP year-to-date operating cash flows and liquidity position at September 30. Cash flow from operations for the first nine months of 2013 was $247.6 million, an increase of $66.1 million over the first nine months of 2012. The majority of the increase results from a $34 million improvement in income before income taxes.

Additionally, smaller defined benefit pension plan contributions in 2013 improved operating cash flows by $14 million, also a reduction of non-cash earnings associated with the collection of AFUDC increased cash flow by $8 million of capital projects moved from their construction phase into rate phase. Remaining increases resulted from a combination of changes in working capital and other items.

IDACORP and Idaho Power currently have in place credit facilities of $125 million and $300 million respectively. In October, we successfully extended determination dates of both credit facilities from October of 2017 to October of 2018. After considering commercial paper balances and other obligation at September 30, IDACORP and Idaho Power had $72 million and $275.8 million respectively in available liquidity under the credit facilities. Also as of September 30, there were $3 million IDACORP common shares available for issuance under IDACORP’s continuous equity program. No shares have been issued during 2013; we do not expect to issue any shares during the remainder of the year.

The final topic, I would like to discuss is our regulatory filing with the Idaho Commission regarding base level net power supply cost. On November 1, 2013, Idaho Power filed an application with the Idaho Public Utilities Commission requesting an approval of new normalized or base level power supply expense, which if approved would reflect in base rate of approximately $106 million of net power supply expenses and allow the Idaho jurisdictional portion of those expenses to be collected through base rates, rather than through the power cost adjustment mechanism.

This $106 million of ongoing and permanent costs are the result of a number of factors including, the increased mandated energy purchases pursuant to the Public Utility Regulatory Policies Act of 1978, reduced surplus energy sales revenue due to lower energy market prices and the elimination of previously anticipated revenues from the Hoku Materials, Inc. special contract.

While approval of the application would result in no net change in the amount collected through base rates and the PCA in aggregates. It would decrease the amount of any base rate increase requested in Idaho Power’s next Idaho general rate case application. We view this as a positive step that more appropriately aligned, cash flows from base rates with normal power supply expenses.

Now, I’ll turn the discussion over to LaMont.

LaMont Keen

Thanks, Steve and good afternoon everyone. I want to focus my portion of the call on growth from several perspectives.

As indicated on Slide 9, Idaho Power believes its service area has many characteristics that make it desirable for the expansion of existing businesses in residential customers. In the recent years, we have seen growth in our customer account and associated positive impacts on the company’s revenue.

I would like to highlights some accolade our state and company have recently received for business friendliness. On September 25th, Forbes magazine named Idaho as the ninth best state for future job growth. With this ranking, Idaho is in good company with states including Arizona, Texas and Colorado, posting a projected annual job growth, a rate of 2.2%. The Forbes ranking looks at 35 factors to determine the best in all States including projected employment. Additionally, Idaho ranked number 18 for the second year in a row on the tax foundations, 2014 State Business Tax Climate Index. A rating of one means that the State Tax Climate is most favorable to business and a rating of 50 means it is least favorable. So Idaho placed approximately in the top third for favorability.

And speaking of favorable environments, the City of Boise ranked number 11 in livability.com list 100 best places to live. Further, according to an October 29, 2013 CNN Money Article, Boise is listed as one of the 10 best places to retire. I also want to share with you an exciting announcement recently made in Idaho Power service area. California based energy power manufacturer Clif Bar signed a development deal on October 17 that paves the way for them to begin construction on a 300,000 square foot bakery in Twin Falls in April 2015.

Clif Bar announced that it anticipates the Bakery will be operational by the end of 2016 and intends to invest a total of $160 million in the project. Clif Bar also announced that it expects about 250 full time jobs to be created initially and then if market conditions allow, that number could increase to 450.

Idaho Power also projects customer growth will continue in a more positive direction than previously reported in the company’s 2013 IRP. The company recently prepared updated customer and load forecast based on observations of positive economic activity in our service territory and more robust forecast of near term economic conditions. Based on these updates, the company projects a 2.1% five year annual compound growth rate for residential customers and a 1.4% five-year annual compound growth rate for residential load. This is an increase from figures published in the company’s 2013 IRP which for the same period forecast compound annual growth rates for residential customers and load of 1.8% and 1.1% respectively.

Future anticipated infrastructure projects including those identified in the 2013 IRP are intended to help ensure Idaho Power continues to provide reliable service to existing customers while meeting expected future customer growth. The 500,000 kV Boardman to Hemingway line shown on Slide 10 is important to this initiative and also supports expansion of the transmission system in an effort to enhance system reliability and access to wholesale markets. However, the environmental requirements for an application of environmental regulations to the citing process have changed significantly since the start of the project. Making identification of a suitable route for the transmission line more challenging. This has resulted in project delays an increased permitting costs.

In light of those delays and current and future citing impediments or potential impediments, Idaho Power now expects the in-service day for the line will be in 2020 or beyond. Given project delays, Idaho Power is conducting an enhanced review of other power supply resource options to cover potential resource gaps as a continues progress on the Boardman to Hemingway line.

On another resource front this week, we began the hearings of the Idaho Public Utility Commission or IPUC regarding the request for a certificate of public convenience and necessity related to the selective catalectic reduction or SCR equipment to reduce nitrogen oxide emissions at the Jim Bridger coal plant. We estimate that the total cost for Idaho Power share of the upgrades for units three and four is approximately $130 million including AFUDC. Our application request the IPUC to provide Idaho Power with authorization and a binding commitment to provide rate base treatment for Idaho Power share of the capital investment with approximately $63 million authorized for recovery on/or after January 1, 2016 and approximately $67 million authorized for cost recovery on/or after January 1, 2017. We have requested the IPUC issuant order by the end of November 2013.

And finally, as shown on slide 11, in September IDACORP’s Board of Directors approved 13.2% increase in the regular quarterly cash dividend on IDACORP’s common stock from $0.38 to $0.43 per share or a $1.02 per share on an annualized basis. Reflecting the company’s commitment to growing the dividend, IDACORP’s management also anticipates recommending to the Board, additional annual increases to the dividend and greater than 5% until it reaches the upper end of the target annualized dividend payout ratio between 50% and 60% sustainable IDACORP earnings. And now I and others on the call are available to answer your questions.

Operator, are you there?

Question-and-Answer Session

Operator

Yes. Ladies and gentlemen, we will begin the question-and-answer session. The session will be conducted electronically. (Operator Instructions)

And your first question comes from the line of Paul Ridzon with KeyBanc. Please proceed.

Paul Ridzon – KeyBanc

Good afternoon.

Darrel Anderson

Hi, Paul.

LaMont Keen

Hi. Paul.

Paul Ridzon – KeyBanc

Do you have any latest thoughts on your aspirations for the regulatory plan post the Idaho settlement?

Darrel Anderson

Yes. Hey, Paul. This is Darrel. Hey, let me, I’ll address that before I do. Let me just correct one thing that was said as it relates to the dividend, the $0.43 does equate to an annualized rate of $1.72, just to clarify that in case it might have got misunderstood on the call. So just want to clarify that.

Paul back to your original question related to options, I believe what you’re asking for is options beyond 2014 and we are looking at all different options related to 2015 and beyond all the way from extension of our current agreement, looking at the possibility of filing another general rate case, should that be the warranted path. One other things that we would plan to do is, we’ll update to you on that. We anticipate updating you on that in our February call. As a reminder, we had this deal on place with the commission now, we going into our 5th year in essence. And over that five year period, we have yet to utilize any of the credits that we had available to us.

So we believe the mechanism has done, what we had hoped it would do. And we believe it’s also in the same time benefited the customer from a standpoint of the sharing mechanism that is there as we continue to project sharing going into 2013. So as you recall the last time, we’re able to get an agreement on extension of the deal that was really pretty much close to the end of that particular year. So if we can give you guys, some inkling or feedback on that in February which we would hope to do that obviously will be fair amount ahead of where we have been and we still have 14 months remaining on the existing agreement as we see here today.

So we are looking at that. That’s one of the challenges, we know that are out there. A lot of people wondering, what’s going to happen, when this goes away and so we are aware of that. We will give you as much information as we have as that moves forward.

The other thing that I think we want to mention along those lines is as Steve mentioned, we just filed on Friday, our net power supply cost filing and we want to make sure that has an opportunity to run its course before we are move on a next general rate sort of proceeding. So we do expect that the net power supply cost filing will work its way through the first quarter of 2014 but we hope to be able to at least give you some inkling of the direction we’re headed on our February call. I said a lot there but hopefully that made some sense.

Paul Ridzon – KeyBanc

Thank you very much. And can you comment, give some guidance what do you expect your effective tax rate to be in 2013 and 2014?

Darrel Anderson

Yes, I’d say, last time we – I went back and looked at couple of our conversations in the past calls and we were anticipating at that point in time maybe the low 20s. I would say right now that’s probably move up a little bit to mid-20s to pushing upper 20s at this point in time.

Paul Ridzon – KeyBanc

And then can you just run through some of the options given that the new delay on in Boardman to Hemingway for supply?

Darrel Anderson

You bet. We’re actively in the middle of assessing that obviously in light of the comments LaMont made regarding our changing load forecast. So, we’re going to be looking at a number of different options anywhere from a new peaking resource, market purchases, demand response programs, energy efficiency programs, all of those will be on the table to evaluate what those needs are. First and foremost, we want to make sure that our customers have a reliable energy source and so that’s where our focus is and we’re going to make sure that when as the demand grows, we’re going to be in a position to meet those demands. So, all of those are on the table Paul and as clarity comes, we will make sure that you are, you guys all are apprised of what that direction is.

Paul Ridzon – KeyBanc

Thank you very much.

Darrel Anderson

Thanks Paul.

Operator

And your next question comes from the line of Brian Russo with Ladenburg Thalmann & Company. Please proceed.

Brian Russo – Ladenburg Thalmann & Company

Hi, good afternoon.

Darrel Anderson

Hi, Paul. Sorry, Brian.

Brian Russo – Ladenburg Thalmann & Company

That’s okay. Your year-to-date earnings per share was $3.01, so that implies a fourth quarter 2013 earnings of approximately $0.49 to get to your midpoint of your full year guidance and 4Q 2012 EPS was $0.33, so just curious, what’s driving the fourth quarter 2013 earnings growth versus fourth quarter 2012?

Darrel Anderson

Brian, its Darrel. I’ll take a shot it and then maybe Steve will kick in. But let me just kind of – a little bit of reflection. If you take to look over the last five years, and you take a look at where our annual earnings have been, on average we’ve done about $0.30 a share on average in the fourth quarter. And the $0.49 you referenced if you look back 10 years, that would be a tie for the highest over those last 10 years.

And I know, I guess what I would say is, as I go back to my comments in my prepared remarks as we believe that the core business is doing what we think it should be doing combining with ongoing energy sales, combining with what I would say effective cost management. It’s really kind of the combination of those two items that is allowing us. We believe to kind of provide you, first of all, the earnings range. And then also as you did the math to get to the midpoint, that’s equates to $0.49, somewhere around $0.49. That’s what we’re seeing.

And I think it comes back to – as we’re looking at it the core business. There are no crazy tax adjustments or any of those kind of things incorporated into those numbers. There is all – so it’s really is the business doing what we anticipating it to do.

Brian Russo – Ladenburg Thalmann & Company

Okay, great. And then, just that follow up on the Boardman to Hemingway delayed it to at least 2020. I think initially was for 2016 and it was delayed to 2018 and the strategy was to use short-term market purchases, energy efficiency, demand-side management to bridge, the gap from 16 to 18, what would the timing if you chose to pursue a new reserve – peaking plant, what would be the kind of the timeline for when you would actually need that?

Darrel Anderson

Brian, we just provided some updated growth numbers that LaMont referred to. We’re incorporating those numbers as we go through the update to our midterm IRP process. So as we go through that process, we will take a look at that. Our next formal IRP isn’t until 2015 in which that is probably the IRP that I would expect that you would see something in there concrete but as we go to the update process, as we go into 2014, we would, if there is something that flushes out of there that, that it makes an obvious recommendation for us. We would communicate that. But I think all those of things you just mentioned, are those things that we will be looking at.

To the point of the project though, one of the things you need, you should look forward and what we’re planning to see is a draft EIS on B-to-H coming out in the first half of next year. And that would be once you still have a chance to see that. That would help us also then determine the other likelihood of – it’s a 2020 date, we say 2020 or beyond. So we’re looking at 2020 right now. And that’s depending if it goes beyond that would may dictate a different resource.

Brian Russo – Ladenburg Thalmann & Company

And how many megawatts or capacity was B-to-H supposed to, or its designed to wheel into your service territory from the west to get a sense of how much capacity you guys actually really need?

Darrel Anderson

Our number for summer was 500 megawatts.

Brian Russo – Ladenburg Thalmann & Company

Okay, great. And then also you haven’t used any ADITCs like you mentioned earlier, but you also benefited quite significantly from weather in 2013 and 2012, I was wondering in 2013, is there any, can you quantify weather versus normal? And then secondly, if weather was normal, are you confident, you would not need the ADITCs?

Darrel Anderson

Brian, that’s a tough question because we don’t necessarily breakout the complete weather impact on, try to differentiate the weather component against all the other factors that are going on after because there is weather but there is also elasticity, there is changing demographics, all kind of things to go into that number and we look at that all the time. So, I can’t give a weather number and I really can’t take that break it out to a number that says well, we would have need ITCs or not.

As you recall, when we started out the year, we had projected utilization of a modest amount of ADITCs. And so, while we did have weather that was somewhat abnormal from the standpoint of the way summer went because cooling degree days were significantly above normal. That was predicated on a more normal forecast on weather. And so, I would say that, that would have been a modest utilization of credit possibly that’s how we started out the year. You recall that was less than 5 million.

Steve Keen

Brian, its Steve. It was less than $5 million. I do think that’s an important point that when we gave our guidance, we really are looking at a more normalized look at what we expect for the year and sharing has its, the mechanism has its kind of pluses and minuses, and the fact that we’re in sharing here in the third quarter with a higher target. There will be more sharing in the fourth quarter and to the extent, those dollars are going over into sharing. That kind of moves the – some of the extra benefit that might have been there from a really hot year, really shifting over into the sharing side not as much as showing up on the bottom line. So it kind of goes in reverse. You’d have to pull the weather out and go back to normal. You would be pulling a good amount of that out of the sharing side as you move down towards what the earnings impact is.

Brian Russo – Ladenburg Thalmann & Company

Okay. And my last question is what procedurally, what needs to happen with those various options, your exploring for 2015 rates, if you weren’t, if you were in discussions with the staff on any related item, I think you have to notify the commission, correct in advance?

Darrel Anderson

Right. I’m going to let Greg Said to speak to that a little bit, let me someone else speak a little bit but let him comment a little bit on procedurally what could happen. I think what he’ll do is share a little bit about how it came out the last time because it’s probably not dissimilar, I will pass it on to Greg.

Greg Said

Any of the options but Darrel discussed earlier would require a filing of some sort with the commission. Obviously, a general rate case would involve a notice of intend to file followed by a filing and then seven months of review of that application before rates could become effective.

In our last agreement to have reached a settlement that followed a general rate case application and really came in the 11th hour of the determination of that general rate case. So we had filed in June of that year and then reached settlement on that case followed by the settlement stipulation for the use of investment tax credits following the settlement of the case. So we would more than likely need a demonstration of what our future needs or revenue would be before we could reach agreement as to a mechanism to deal with the continuation of investment tax credit. So in any event, there would be a filing of some sort of before the commission.

Brian Russo – Ladenburg Thalmann & Company

Okay. So, if I’m understanding this correctly, even if you were to pursue some sort of settlement agreement or extension of the current rates, it would likely be after a notice of intend to file a rate case because you have to kind of justify any revenue requirement or needs is that accurate?

Greg Said

I think that is accurate. Generally there is a desire to see a demonstration of needs before you can enter into an agreement how to deal with that.

Brian Russo – Ladenburg Thalmann & Company

Okay, great. Thank you very much.

Darrel Anderson

Thanks Brian.

Operator

And your next question comes from the line of Sarah Akers with Wells Fargo. Please proceed.

Sarah Akers – Wells Fargo Securities

Hey, good afternoon.

Darrel Anderson

Hey Sarah.

Sarah Akers – Wells Fargo Securities

Is there a date as to when the mid-cycle IRP update would be completed?

Steve Keen

That’s a great question, Sarah. I’m looking over at Lisa Grow. And we think it’s mid-year most likely.

Sarah Akers – Wells Fargo Securities

Okay, mid-year 2014?

Steve Keen

Right.

Sarah Akers – Wells Fargo Securities

Got it. And then on a different topic, the 10-Q outlined the FERC revenue requirement, I think effective October 1st of this year, that’s about 10 million higher than the prior revenue level, so should we think about that as a $10 million base rate increase from an earning standpoint or is there something else going on there?

Steve Keen

Sarah, can you repeat that question, sorry.

Sarah Akers – Wells Fargo Securities

Sure, no problem. So, in the 10-Q, it outlined the FERC revenue requirement effective October 1st that’s about $10 million higher than the prior period. So I’m wondering if we should think about that as a $10 million base rate increase from an earning standpoint.

Steve Keen

We’re going ask Ken Petersen, our Corporate Controller will kind of respond to that one.

Ken Petersen

Hi, Sarah.

Sarah Akers – Wells Fargo Securities

Hi.

Ken Petersen

I believe without looking directly that what you’re looking at is the full amount and if you look at the FERC jurisdiction that represents about 5% of the total. So it’s not that high. It increased so it will have some impact, just not to the level that you’re looking at, I don’t believe.

Sarah Akers – Wells Fargo Securities

Okay, got it. Thank you.

Greg Said

Sarah, this is Greg. I wanted to delve back to your question about the IRP update. Typically what happens for the update is the update has a requirement to be filed 12 months after a plan is acknowledged. So it really depends on when the 2013 plan is acknowledged as setting the date for the requirement of the 2014 update.

Sarah Akers – Wells Fargo Securities

Okay. And so, has the 2013 plan not been acknowledged yet then?

Greg Said

That’s correct.

Sarah Akers – Wells Fargo Securities

Okay, got it. Thank you.

Operator

And your next question comes from the line of Ashar Khan with Visium. Please proceed.

Ashar Khan – Visium

Hi, good afternoon.

Darrel Anderson

Hi Ashar.

Ashar Khan – Visium

Can you just update CapEx numbers for 2014, 2015 still the same?

Darrel Anderson

Right. We have – what we’ve done in the 10-Q now on the CapEx side of things, is kind to laid it out by year, we gave you a number that kind of lays it out. And so right now the number is, we haven’t really changed those numbers at this point.

Ashar Khan – Visium

Okay.

Darrel Anderson

In and around $275 million to $290 million next year $300 million to $315 million in 2015 and those include cost associated with our SCR as LaMont referred to include them – expenditure associated with those.

Ashar Khan – Visium

Okay. So, that’s nearly like what a 4.5% increase in rate base for next year or something like that?

LaMont Keen

I would be – you have to net out depreciation that’s running as well. That’s around $120 million and –

Ashar Khan – Visium

Okay. What is your average rate base this year can I ask on which you did your 10.75?

Darrel Anderson

That actually based on year-end equity Ashar. That’s not –

Ashar Khan – Visium

Okay. That’s, oh yes. Okay. Sorry. That’s, but what is your rate base for this year?

Darrel Anderson

We don’t have an updated one at this point Ashar.

Ashar Khan – Visium

Okay.

Darrel Anderson

We have to go back and calculate that file.

Ashar Khan – Visium

Okay. Okay. Fair enough, fair enough. So, Darrel, my other question is, with regard to, I guess the other way to ask that question is what equity balance do you expect to end up the year at?

Darrel Anderson

Ashar, I think what you can do is take the quarter end balance the balance is 930 and take your estimated earnings less the dividend and you can probably get pretty much what that number is.

Ashar Khan – Visium

What that number as, okay. Okay, fair enough.

Darrel Anderson

And it does make sure your jurisdiction – depending on what it is you’re looking to calculate, if you’re looking to do the Idaho component only, make sure your jurisdictionalize it for that 95 plus, 95 or so percent that’s associated with Idaho.

Ashar Khan – Visium

With Idaho, okay. If I’m right, the cash flow is, am I right cash flow is being better than expectation for the year?

Steve Keen

Yes, cash flow was a little better this year than we had last year and I do think it’s been a – just in general, the last few years with the settlement and with a very current rate structure we’ve seen cash flow has improved.

Ashar Khan – Visium

And so, where is this excess cash being used? Can I ask is that being used to just buffer up or what are you doing with this excess cash?

LaMont Keen

For one thing – we are putting out a reasonable amount of CapEx. One of the reasons that we put the chart and kind of put some focus on it last quarter was to show that if you look back the period and then look at the average expenditures during the period when we built Langley Gulch and look ahead, the capital we’ve got projected we’re really at about that same level. So even though we’re not building a major base load facility, we’re spending a similar amount of money on another parts of the company which is really just the basic care and feeding of Idaho Power.

Ashar Khan – Visium

Okay. And I’m last question I guess, follow up that is, do we based on good cash flow this year, do we need equity next year or no in the –?

LaMont Keen

No. Ashar, we haven’t actually stated the 2014 equity outlook but if you look at the fact that we have improved our cash flow, we’ve been raising our dividends and our – we moved our ratios from really to where our equity was the low number. We were somewhere around 48% probably sub-50 equity to where now we’re north of 50% probably approaching 52, those, yes, those signals that we have strengthened our balance sheet and the cash flow has been good and it’s really been that improved cash flow I think that’s helped us be in a much better place to raise our dividends and to even put of forward signal that there is further enhancement until we approach the upper end of our guidance range on dividend.

Ashar Khan – Visium

Okay, okay. That’s great. Thank you so much.

Darrel Anderson

Thank you, Ashar.

Operator

At this moment, we have no further questions. (Operator Instructions) Well, that concludes the question-and-answer session for today. Mr. Anderson, I will turn the conference back to you.

Darrel Anderson

Thank you Jackie and thanks for all, for your participating on our call this afternoon and your continued interest in IDACORP. We hope to see many of you next week at the EEI financial conference in Florida. Thanks again.

Operator

Ladies and gentlemen that concludes today’s conference. Thank you for your participation. You may now disconnect and have a great day.

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