Q1 2024 IDACORP Inc Earnings Call
Operator: Welcome to Idacorp's first quarter 2024 earnings conference call. Today's call is being recorded, and a replay will be available later today and for the next 12 months on the Idacorp website. If you need assistance at any time during the presentation, please press star zero on your phone. I will now turn the call over to Amy Shaw, Vice President of Finance, Compliance, and Risk.
Will it come through I had of course first quarter earnings Conference call. Today's call is being recorded in our webcast you desire.
Amy I. Shaw: They will be available later today and for the next 12 months on the Ida Corp website.
Amy I. Shaw: That's just us at any time during the presentation. Please press star zero on your phone.
Operator: No threat to call over to Amy Shaw, Vice President of Finance compliance and Rich. Please go ahead.
Amy I. Shaw: Thank you. Good afternoon, everyone.
Amy I. Shaw: Thank you good afternoon, everyone. We appreciate you joining our call. This morning, we issued and posted to Idaho's website, our first quarter 2024 earnings release and the Form 10-Q. The slides we will reference during today's call are available at <unk> website.
Amy I. Shaw: We appreciate you joining our call. This morning, we issued and posted to Idacorp's website our first quarter 2024 earnings release and the Form 10-Q. The slides we will reference during today's call are available on Idacorp's website. As noted on slide 2, our discussion today includes forward-looking statements, including earnings guidance, spending forecasts, and regulatory plans that reflect our current views on what the future holds but are subject to risks and uncertainties. These risks and uncertainties may cause actual results to differ materially from statements made today, and we caution against placing undue reliance on any forward-looking statements.
Amy I. Shaw: As noted on slide two our discussion today includes forward looking statements, including earnings guidance spending forecast and regulatory plan that reflect our current views on what the future holds but are subject to risks and uncertainties. These risks and uncertainties may cause actual results to differ materially from statements made today and we caution against placing.
Amy I. Shaw: Undue reliance on any forward looking statements. This cautionary note is included in more detail for your review in our filings with the Securities and Exchange Commission.
Amy I. Shaw: This cautionary note is included in more detail for your review in our filings with the Securities and Exchange Commission. As shown on slide 3, Lisa Grow, Idacorp's President and CEO, and Brian Buckham, Idacorp's Senior Vice President, CFO, and Treasurer, will be presenting today. In addition to Lisa and Brian, we have other members of our management team available for a Q&A session following our prepared remarks.
Amy I. Shaw: Slide four shows our first quarter financial results. Idacorp's first quarter 2024 diluted earnings per share were 95 cents compared with $1.11 for last year's first quarter. Our key metrics and guidance for 2024 remain unchanged except for our hydropower generation forecast, which has improved. We're reaffirming our full year Idacorp earnings guidance range in the range of 525 to 545 diluted earnings per share. This includes our existing expectation that Idaho Power will use 35 to 60 million of additional tax credits available to support earnings at the 9.12% return on equity in the Idaho jurisdiction. These estimates assume historically normal weather conditions and normal power supply expenses for the remainder of the year. Now, I'll turn the call over to Lisa.
Amy I. Shaw: As shown on slide three Lisa grow Edwards, President and CEO, and Brian bucket them Edwards Senior Vice President CFO and Treasurer will be presenting today. In addition to Lisa and Brian We have other members of our management team available for Q&A session. Following our prepared remarks.
Lisa: Slide four shows our first quarter financials.
Lisa: I just want to first quarter 2024 diluted earnings per share were 95 cents compared with $1 11 for last year's first quarter, our key metrics and guidance for 'twenty 'twenty four remain unchanged, except for our hydropower generation forecast, which has improved we're reaffirming our full year, Idaho, earning guidance range in the range of $5 20.
Lisa: Five to $5 45 diluted earnings per share. This includes our existing expectation that Idaho power will use $35 million to $60 million of additional tax credits available to support earnings at the 91, 2% return on equity in the Idaho jurisdiction. These estimates assume historically normal weather conditions and no.
Amy I. Shaw: Our supply expenses for the remainder of the year now I will turn the call over to Lisa Thanks, Amy and thanks to everyone for joining us.
Lisa A. Grow: Thanks Amy and thanks to everyone for joining us. We're off to a good start in 2024. We had some great spring skiing this year with late storms and snow in the mountains, which has the added benefit of setting us up nicely from a hydro generation perspective. Overall, despite some good snowstorms, weather was generally mild to start the year, and we saw that in our financial results compared to last year. Still, our first quarter results were on plan and we were on target for the remainder of the year on our financial guidance, as Amy mentioned.
Lisa: We're off to a good start in 2024, we had some great spring skiing. This year was late storms and snow in the mountains, which has the added benefit of setting us up nicely from hydro generation perspective overall.
Lisa A. Grow: Overall, despite some good snow storm, whether it was generally mild to start the year and we saw that in our financial results compared to last year still.
Lisa A. Grow: Still our first quarter results were on plan and we're on target for the remainder of the year on our financial guidance as Amy mentioned.
Lisa A. Grow: Me.
Lisa A. Grow: Our first quarter isn't typically one of our largest revenue quarters due to seasonality, but it does help set us up for the year. Brian will address the financial drivers for the quarter and a financial look ahead in a few minutes.
Lisa A. Grow: Our first quarter is it typically one of our largest revenue quarters due to seasonality, but it does help set us up for the year.
Lisa A. Grow: Brian will address the financial drivers for the quarter and a financial look ahead in a few minutes.
Lisa A. Grow: I want to spend some time discussing growth, project development, our regulatory strategy, and the investments we're making in our system. It's an understatement to say this is an exciting time for our company, and we're energized to address the challenges and capitalize on our opportunities. We continue to see customer growth and economic expansion across the Idaho Power Service Area. As shown on slide 5, our customer base has grown 2.5% since last year's first quarter.
Lisa A. Grow: I wanted to spend some time discussing growth project development or regulatory strategy and investments, we're making in our system.
Lisa A. Grow: It's an understatement to say this is an exciting time for our company and we're energized to address the challenges and capitalize on our opportunities.
Lisa A. Grow: We continue to see customer growth and economic expansion across Idaho power service area.
Lisa A. Grow: On slide five our customer base has grown two 5% since last year's first quarter.
Lisa A. Grow: Moody's is forecasting GDP growth in our region of 4.6% in 2024 and 3.6% in 2025. We believe our low electric rates and reliability continue to help our regional economy outperform national trends. As evidence of that, in its recent Best States ranking, U.S. News and World Report ranked Idaho in the top three for growth and economic climate.
Lisa A. Grow: Moody's is forecasting GDP growth in our region of four 6% in 2024 and three 6% in 2025.
Lisa A. Grow: We believe our low electric rates and reliability continue to help our regional economy outperformed national trends.
Lisa A. Grow: As evidence of that in its recent that states ranking U S News and World report ranked Idaho in the top three for growth and economic climate.
Lisa A. Grow: Idaho Power continues to see significant interest from large projects. In terms of scale, several of them are well over 100 megawatts, and our pipeline of prospective customers is as robust as ever and on a multiple gigawatt scale. This is a great time for our economy and for our company as we work to serve incremental loads of that potential magnitude, particularly when considering our already high customer and load growth rate. Our challenge is to balance realistic timelines for building infrastructure with customers' desired in-service dates. Given the permitting and supply chain constraints the industry has been experiencing,
Lisa A. Grow: Idaho power continues to see significant interest from large projects in terms of scale several of them are well over 100 megawatts and our pipeline of prospective customers is as robust as ever and on a multiple gigawatt scale.
Lisa A. Grow: This is a great time for our economy and for our company as we work to serve incremental loads of that potential magnitude, particularly when considering our already high customer and load growth rate.
Lisa A. Grow: Our challenge is to balance realistic timelines for building infrastructure with customers' desired in service date, given the permitting and supply chain constraints the industry has been experiencing.
Lisa A. Grow: As we build infrastructure to reliably meet our growing customer base, we're also focused on maintaining affordability for our customers. For example, some potential new large load customers have recently paid for their construction studies. Those studies help ensure incremental loads bear the cost of new interconnection facilities required to serve them, which helps facilitate the growth-pays-for-growth approach that helps from an affordability perspective for all of our customers. As noted on slide 6, we've had productive conversations with Oregon Commission staff and with other key stakeholders as part of our general rape case in Oregon. We recently filed a motion to suspend the case as we have reached a settlement in principle with the Oregon Commission staff and other parties to the case. Details of the settlement aren't public yet.
Lisa A. Grow: As we build infrastructure to reliably meet our growing customer base. We're also focused on maintaining affordability for our customers.
Lisa A. Grow: Some potential new large load customers have recently paid for their construction study those studies help ensure incremental loads bear the cost of new interconnection facilities required to serve them, which helps facilitate the growth pace for growth approach that helps from an affordability perspective for all of our customers.
Lisa A. Grow: As noted on slide six we've had productive conversations with Oregon Commission staff and with other key stakeholders as part of our general rate case in Oregon, We recently filed a motion to suspend the case as we have reached a settlement in principle with the Oregon Commission staff and other parties to the case.
Lisa A. Grow: Details of the settlement are public yet we continue to expect the resulting price changes to go into effect. This October.
Lisa A. Grow: We continue to expect the resulting price changes to go into effect this October. Additionally, during our last call, I mentioned our notice of intent to file for a rate case proceeding in Idaho in 2024. After what I describe as positive discussions with the Idaho Commission staff and other key stakeholders, Idaho Power has decided to file a limited-scope rate case on May 31st that will only look at capital additions through the end of 2024 plus labor increases. Also, on the regulatory front, our annual spring rate adjustments call for price decreases in both Idaho and Oregon, mostly due to lower actual and forecasted power supply costs.
Lisa A. Grow: During our last call I mentioned, our notice of intent to file for a rate case proceeding in Idaho in 2024.
Lisa A. Grow: After what I describe as positive discussions with the Idaho Commission staff and other key stakeholders, Idaho power has decided to file a limited scope rate case on May 31.
Lisa A. Grow: That will only look at capital additions through the end of 2024 plus labor increases.
Lisa A. Grow: Also on the regulatory front, our annual spring rate adjustments call for price decreases in both Idaho, and Oregon, mostly due to lower actual and forecasted power supply costs.
Lisa A. Grow: We continue to acquire new resources to meet future demands. Turning to slide seven, as part of our 2026-2027 RFP process. We procured energy through a long-term purchase agreement, and we recently filed for a Certificate of Public Convenience and Necessity for a large, Idaho Power-owned battery storage project. Beyond this, we continue to work through the process to negotiate with a short list of bidders, including our own submission.
Lisa A. Grow: We continue to acquire new resources to meet future demand.
Lisa A. Grow: Turning to slide seven as part of our 2026 2027 RFP process, we procured energy through a long term purchase agreement and we recently filed for a certificate of public convenience and necessity for our large.
Lisa A. Grow: Or a large Idaho power owned battery storage project.
Lisa A. Grow: Beyond this we continue to work through the process to negotiate with a shortlist of bidders, including our own submissions.
Lisa A. Grow: As we look beyond 2027, we've initiated the RFP process for 2028 resources, and additional RFP processes will likely be necessary to fill future anticipated deficits and potentially to incorporate additional new large loads. Transmission remains vital to helping us meet demand, improve reliability, and optimize the movement of energy in the West. However, we've experienced regulatory permitting delays on the Boardman to Hemingway project that will likely push the in-service date to 2027.
Lisa A. Grow: As we look beyond 2027, we've initiated the RFP process for 2028 resources and additional RFP processes will likely be necessary to build future anticipated deficit and potentially to incorporate additional new large loads.
Lisa A. Grow: Transmission remains vital to helping us meet demand improve reliability and optimize the movement of energy in the west.
Lisa A. Grow: We've experienced regulatory permitting delays on the Boardman to Hemingway project that will likely push the in service date to 2027.
Lisa A. Grow: We're continuing to work with our Gateway West partner on the timing and allocation of some segments and the overall configuration of the project. We're also pursuing an arrangement with interested parties in the Southwest Intertide Project, which would create additional transmission capacity to the desert southwest. As we continue to work on these projects, we are evaluating the need for a dispatchable resource to address load growth. In addition, Idaho Power is planning to convert its remaining coal-fired units to natural gas, which will reduce the carbon emissions of those units by about half while maintaining their generating capacity.
Lisa A. Grow: We're continuing to work with our gateway west partner on the timing and allocation of some segments and the overall configuration of the project.
Lisa A. Grow: We're also pursuing an arrangement with interested parties in the southwest Intertype project, which would create additional transmission capacity to the desert southwest.
Lisa A. Grow: As we continue to work on these projects we are evaluating the need for a dispatch will resource to address load growth in.
Lisa A. Grow: In addition, Idaho power is planning to convert its remaining coal fired units to natural gas, which will reduce the carbon emissions of those units by about half while maintaining their generating capacity.
Lisa A. Grow: We recently completed the conversion of two units at the Jim Bridger Power Plant in Wyoming. Those units are operational and will be available to help us serve peak load this summer. We're working with our partners to convert Balmy and address the remaining Bridger units over the next several years. This is a low-cost solution that reduces our carbon emissions while keeping dispatchable energy resources available to serve our customers. Of course, we are hard at work digesting the EPA's final rules issued last week and will evaluate their impacts in our analysis. It's early, and we expect the rules will face legal challenges.
Lisa A. Grow: We recently completed the conversion of two units at the Jim Bridger power plant in Wyoming. Those units are operational and will be available to help us serve peak load. This summer.
Lisa A. Grow: We're working with our partners to convert balmy and address the remaining bridger units over the next several years.
Lisa A. Grow: This is a low cost solution that reduces our carbon emissions, while keeping dispatch of all energy resources available to serve our customers.
Lisa A. Grow: Of course, we're hard at work digesting the Epa's final rules issued last week, and we will evaluate the impacts in our analysis.
Lisa A. Grow: It's early and we expect the rules will face legal challenges.
Lisa A. Grow: Battery storage has already started to help us maintain reliability and affordability. The 100-megawatt Franklin Solar Project in southern Idaho is scheduled to come online soon, and it will include an additional 60 megawatts of company-owned battery storage. These batteries, along with the 36 megawatts of batteries coming online soon at the Hemingway substation, will add to our portfolio of storage projects, which are already instrumental in integrating intermittent renewable resources into our system. In closing, I'll point out that as warmer weather approaches, our team and system are ready to respond.
Lisa A. Grow: Battery storage has already started to help us maintain reliability and affordability the.
Lisa A. Grow: The 100 megawatt Franklin Solar project in Southern Idaho is scheduled to come online soon and it will include an additional 60 megawatts of company owned battery storage.
Lisa A. Grow: These batteries along with the 36 megawatts of batteries coming online soon at the Hemingway substation will add to our portfolio of storage projects, which are already instrumental in integrating intermittent renewable resources onto our system.
Lisa A. Grow: In closing I'll point out that as warmer weather approaches our team and system are ready to respond protecting our existing system is essential to maintaining safety reliability and resilience.
Lisa A. Grow: Protecting our existing system is essential to maintaining safety, reliability, and resilience. As highlighted on slide 8, our wildfire mitigation plan is helping us harden our system, expand our situational awareness capabilities, and enhance our vegetation management program. This year, we've expanded our Public Safety Power Shutoff Program Zone and enhanced how we alert customers and communities about wildfire risk. We're proud of our mitigation program, and we're continuing to continuously make improvements.
Lisa A. Grow: As highlighted on slide eight our wildfire mitigation plan is helping us harden our system expand our situational awareness capabilities and enhance our vegetation management program.
Lisa A. Grow: This year, we've expanded our public safety power Shutoff program zone.
Lisa A. Grow: An enhanced how we alert customers and communities about wildfire risk.
Lisa A. Grow: We're proud of our mitigation program and we're continuing to continuously we're continuously making improvements.
Lisa A. Grow: We also continue to work with the industry Federal state and local partners.
Lisa A. Grow: In that journey.
Lisa A. Grow: We also continue to work with industry, federal, state, and local partners on that journey. The summer brings our highest demand days of the year, and with current hydro conditions, our balanced generation portfolio, our enhanced wildfire mitigation plan, and our talented employees, we feel ready to safely and reliably serve our customers with the energy they rely on. With that, I'll hand the presentation over to Brian for an
Lisa A. Grow: The summer brings our highest demand days of the year and with current hydro conditions, our balanced generation portfolio, our enhanced wildfire mitigation plan and our talented employees, we feel ready to safely and reliably serve our customers with the energy they rely on with that I'll hand, the presentation over to Bryan for an <unk>.
Brian: Overview of our financial results and some additional commentary.
Brian R. Buckham: Hey, thanks, Lisa. Hi, everybody.
Brian: Hi, everybody. Thanks for tuning in for the call, but as usual I'll start on slide nine as our reconciliation.
Brian R. Buckham: Thanks for tuning in for the call. Like usual, I'll start on slide nine, which has our reconciliation. Idacorp's net income decreased $7.9 million in the first quarter of this year compared to the first quarter of last year. Recall that last year's first quarter was a record quarter, and it was bolstered by weather-related higher usage and from atypically high transmission line loss revenues. Next, customer growth increased operating income by $4.7 million in the first quarter. Lisa noted that Idaho Power's customer count grew by 2.5% over the past 12 months.
Brian R. Buckham: Net income decreased $7 9 million in the first quarter of this year compared to the first quarter of last year recall that last year's first quarter was a record quarter and it was bolstered by weather related to higher usage and from a typically higher transmission line loss revenues.
Brian R. Buckham: Next customer growth increased operating income by $4 7 million in the first quarter. We have noted that Idaho powers customer count grew by two 5% over the past 12 months.
Brian R. Buckham: I'll add that the residential customer growth rate was a robust 2.8% over that period as well. We're seeing the impact of industrial growth on our system, having hit a new winter peak load in January and seeing weather-normalized quarter over quarter growth in industrial sales volumes of 3.4%, and that's despite a notable temporary decrease from one special contract customer during the quarter. Also, the net increase in retail revenues per megawatt hour, net of the various adjustments and mechanisms shown on the slide, increased operating income by $4.5 million compared to the first quarter of last year.
Brian R. Buckham: Residential customer growth rate was a robust two 8% over that period as well, we're seeing the impact of industrial growth on our system, having hit a new winter peak load in January and seeing whether normalized quarter over quarter growth in industrial sales volume of three 4% and thats. Despite a notable temporary decrease from one special contract.
Brian R. Buckham: Customer during the quarter.
Brian R. Buckham: Although the net increase in retail revenues per megawatt hour net of the various adjustments and mechanisms shown on the slide increased operating income by $4 5 million compared to the first quarter of last year. This benefit was mostly due to the increase in base rates from the 2023, Idaho General rate case settlement, which was effective on January one.
Brian R. Buckham: This benefit was mostly due to the increase in base rates from the 2023 Idaho General Rate Case Settlement, which was effective on January 1st of this year. But going the other way, the benefit from customer growth was offset by a $9.1 million decrease in usage per retail customer, which is about 19 cents of EPS compared with the first quarter of last year. While some customer classes saw a reduction in usage, usage per residential customer decreased most significantly, as more moderate temperatures led residential customers to use less energy for heating purposes.
Brian R. Buckham: Of this year.
Brian R. Buckham: So going the other way the benefit from customer growth was offset by a $9 $1 million decrease in usage per retail customer, which is about 19 cents of EPS compared with the first quarter of last year.
Brian R. Buckham: While some customer class and saw a reduction in usage usage per residential customer decreased most significantly as.
Brian R. Buckham: More moderate temperatures led residential customers to use less energy for heating purposes and for some context on the heating degree days were 6% below normal for the period and about 13% lower compared to last year's first quarter. So the bulk of the 19th comparable decline is weather related.
Brian R. Buckham: And for some context on that, heating degree days were 6% below normal for the period and about 13% lower compared to last year's first quarter. So the bulk of the $0.19 comparable decline is weather-related. Next up, transmission wheeling-related revenues, net of the power cost adjustment impacts, decreased $2.8 million on a relative basis. However, total revenues earned during the first quarter of this year increased 12% compared with last year, which was mostly due to an increase in wheeling volume.
Brian R. Buckham: Next up transmission Wheeling related revenues net of the power cost adjustment impacts decreased $2 $8 million on a relative basis total revenues earned during the first quarter of this year increased 12% compared with last year, which was mostly due to an increase in wheeling volumes.
Brian R. Buckham: However, effective January 1st, financial settlement of transmission line losses is subject to the PCA mechanism by virtue of the Idaho General Rate Pay Settlement, and that results in a smaller overall contribution of transmission revenues to net income compared with the first quarter of last year.
Brian R. Buckham: However, effective January one financial settlement of transmission line losses is subject to the PCA mechanism by virtue of the Idaho General rate case settlement and that results in a smaller overall contribution of transmission revenue and net income compared with the first quarter of last year.
Brian R. Buckham: Total other O&M expenses increased $13.8 million in the first quarter of 2024 compared with the first quarter of last year. Initially, this would seem high, but the increase was mostly related to about $4 million of increased straight-line amortization of pension-related expenses and about $8 million of increases in wildfire mitigation program and related insurance expenses. These increases are in large part offset by increases in retail revenues as more costs are now recovered in base rates from the 2023 EIDO General Rate Case Settlement.
Brian R. Buckham: Total other O&M expenses increased $13 8 million in the first quarter of 2024 compared with the first quarter last year. Initially this would seem high but the increase was mostly related to about $4 million of increased straight line amortization of pension related expenses and about $8 million of increases in wildfire mitigation.
Brian R. Buckham: Ma'am and related insurance expenses.
Brian R. Buckham: These increases are in large part offset by increases in retail revenues as more costs are now recovered and base rates from the 2023, Idaho General rate case settlement.
Brian R. Buckham: We effectively converted a portion of those expenses from regulatory deferrals to O&M expenses. But with offsetting revenues this year as part of that settlement, we have an existing regulatory mechanism in place to recover the increased cost.
Brian R. Buckham: We effectively converted a portion of those expenses from regulatory deferrals to O&M expenses, but with offsetting revenue. This year as part of that settlement, we have an existing regulatory mechanism in place to recover the increased cost.
Brian R. Buckham: Remember that our full-year O&M guidance range is $40 to $50 million higher than last year's actual O&M results, and that includes, as O&M, the pension and wildfire mitigation amortizations we're now recovering in revenue. I think it's also important to realize that, mechanically, the revenues related to these increased costs are not collected at the same rate as the expenses are recorded in the interim periods throughout the year. There is a disconnect between the timing of recovery and the intended earnings impact.
Brian R. Buckham: Remember that our full year O&M guidance range is $40 million to $50 million higher than last year's actual loan and our result, and that includes as O&M. The pension in wildfire mitigation Amortizations, we're now recovering and revenues.
Brian R. Buckham: I think it's also important to realize that mechanically the revenues related to these increased costs are not collected at the same rate as the expenses are recorded in the interim periods throughout the year.
Brian R. Buckham: Disconnect and timing of recovery with an attendant earnings impact.
Brian R. Buckham: And that's because collection on those elements of O&M is based largely on volumetric rates, meaning a disproportionate amount of revenue to cover the cost should show up in the third quarter, whereas we record the expenses straight-line during the year. For the last five years, on average, the first quarter of the year has only provided about 18% of our annual earnings due to seasonality.
Brian R. Buckham: And that's because collection on those elements of O&M is based largely on volumetric rates meeting a disproportionate amount of revenue to cover the costs should show up in the third quarter, whereas we record the expenses straight line during the year.
Brian R. Buckham: For the last five years on average the first quarter of the year has only provided about 18% of our annual earnings due to seasonality.
Brian R. Buckham: Higher labor costs are the other notable area I'd mention as a contributor to higher O&M expenses in the first quarter. Depreciation expense increased $8.6 million, which was due primarily to an increase in plant and service. With the level of CapEx we had in 2023 and into this year, the magnitude of this increase is something we expected. Moving on, other net changes in operating revenues and expenses increased operating income by $5.9 million. This was primarily due to a decrease in net power supply expenses that were not deferred for future recovery and raised through power cost adjustment mechanisms.
Brian R. Buckham: Higher labor cost as the other notable area I had mentioned as a contributor to higher O&M expenses in the first quarter.
Brian R. Buckham: Depreciation expense increased $8 6 million, which was due primarily to an increase in plant in service with a level of Capex. We added in 2023 and into this year. The magnitude of this increase is something we expected.
Brian R. Buckham: Moving on in the table other net changes in operating revenues and expenses increased operating income by $5 9 million.
Brian R. Buckham: This was primarily due to a decrease in net power supply expenses that were not deferred for future recovery in rates through power cost adjustment mechanisms think of that as Idaho powers, 5% share of the power supply cost subject to the PCA mechanism in Idaho, turning out much more favorable this year than last year.
Brian R. Buckham: Think of that as Idaho Power's 5% share of the power supply cost subject to the PCA mechanism in Idaho, turning out much more favorable this year than last year. More moderate wholesale natural gas and power market prices in the western U.S. and increased wholesale energy sales fortunately decreased Idaho Power's net power supply expenses in the first quarter this year. That benefit, along with continued collection on the existing PCA deferral, had a notable cash flow benefit that I'll get to shortly.
Brian R. Buckham: More moderate wholesale natural gas and power market prices in the Western U S and increased wholesale energy sales Fortunately decrease Idaho Power's net power supply expenses in the first quarter of this year.
Brian R. Buckham: That benefit along with continued collection on the existing PCA deferral had a notable cash flow benefit that I'll get to shortly.
Brian R. Buckham: Non-operating expense on a net basis increased $1.8 million. Not surprisingly, with last year's debt issuances, interest expense on long-term debt was higher in the first quarter of this year compared with last year's first quarter. The increase was partially offset by an increase in AFUDC. The average construction work-in-progress balance was higher from our elevated cap rate. Interest income also increased due to higher interest rates and higher average cash and
Brian R. Buckham: Nonoperating expense on a net basis increased $1 8 million.
Brian R. Buckham: Not surprisingly with last year's debt issuances interest expense on long term debt was higher in the first quarter this year compared with last year's first quarter.
Brian R. Buckham: The increase was partially offset by an increase in <unk>.
Brian R. Buckham: Average construction work in progress balance was higher from our elevated capex.
Brian R. Buckham: Interest income also increased due to higher interest rates and higher average cash and cash equivalent balances.
Brian R. Buckham: There's a regulatory lag in recovery on our interest expense to finance our CapEx and in recovery over a higher depreciation expense. That lag results largely from a historic averaging on rate base in our Idaho 2023 rate case. As Lisa noted... Our upcoming limited-issue rate case in Idaho is one where we intend to use year-end rate base to help mitigate that lag from both depreciation and interest expense. It's the next iteration of our regulatory approach, and our intent in the case is to better match resources that are in service with collection through rates on those resources. The decrease in income tax expense was the result of lower income before income taxes and an $8.8 million increase in additional investment tax credit amortization.
Brian R. Buckham: There is regulatory lag in recovery on our interest expense to finance, our capex and in recovery over a higher depreciation expense.
Brian R. Buckham: <unk> results largely from a historic averaging on rate base in our Idaho 2023 rate cases.
Brian R. Buckham: As Lisa noted our upcoming limited issue rate case in Idaho was one where we intend to use the year end rate base to help mitigate that lag from both depreciation and interest expense. It's the next iteration of our regulatory approach and our intent in the cases to better match resources that are in service with collection through rates on those resources.
Brian R. Buckham: The decrease in income tax expense was the result of lower income before income taxes, and an $8 $8 million increase in additional investment tax credit amortization.
Brian R. Buckham: Remember, we record our additional investment tax credit amortization radically per quarter based on our expectations for the year. So we recorded twelve and a half million dollars of additional investment tax credit amortization under the Idaho Regulatory Settlement stipulation during the first quarter. And last year, we recorded three point eight million dollars of additional amortization in the first quarter.
Brian R. Buckham: Remember we report our additional investment tax credit amortization ratably per quarter based on our expectation for the year. So we recorded $12 5 million of additional investment tax credit amortization under the Idaho regulatory settlement stipulation during the first quarter and last year, we reported $3 $8 million of additional amortization in the first quarter.
Brian R. Buckham: As Lisa mentioned, we're beginning to see the results of our 2026 to 2027 RFP process. We were hoping to have enough detail to provide a new update on our CapEx forecast today, both in terms of the timing of currently planned projects and the size of potential capital additions from new projects. But at this point, we're planning to get further into the RFP process before we provide that update. What I can say at this point is that there's a high potential for a considerable increase in our total 5-year capex figure compared to what we forecasted in February of this year.
Brian R. Buckham: As Lisa mentioned, we are beginning to see the results of our 2026% to 227 RFP process, we were hoping to have enough detail to provide a new update on our capex forecast today. Both in terms of the timing of currently planned projects on the size of the potential capital additions from New project, but at this point, we are planning to get further into the RFP process.
Brian R. Buckham: Before we provide that update.
Brian R. Buckham: But I can say at this point there is a high potential for a considerable increase in our total five year capex figure compared to what we forecasted in February of this year.
Brian R. Buckham: That, of course, depends on RFP results, on the timing of projects, and regulatory outcomes, all of which are moving targets, but they're becoming more... So it's potentially a sizable increase on an already large CapEx spend, and we hope to have more details and a better quantification by our next quarterly call. Maintaining our capital structure and managing dilution to fund our creative growth investments is top of mind, and it's paramount to our financial strength.
Brian R. Buckham: That of course depends on RFP results on the timing of project regulatory outcomes, all of which are moving targets, but they are becoming more certain.
Brian R. Buckham: Potentially a sizable increase on an already large capex spend and we hope to have more details on the better quantification by our next quarterly call.
Brian R. Buckham: Maintaining our capital structure and managing dilution to fund our accretive growth investments is top of mind, then it's paramount to our financial strength.
Brian R. Buckham: We're still planning to finance our CapEx with a blend of debt and equity issuances to stay at a 50-50 capital structure. We're fortunate that we don't have any sizable debt maturities to address in the next few years, and in fact, nothing of magnitude in any given year until 2037, which helps on the credit side. Also, as of today, we've yet to draw down any of the funds from our November 2020 free forward equity offering, but we expect to issue it all this year.
Brian R. Buckham: We're still planning to finance, our capex with a blended debt equity issuances to stay at a 50 50 capital structure.
Brian R. Buckham: Fortunate that we don't have any sizable debt maturity to address in the next few years and in fact nothing of magnitude in any given year until 2037, which helps on the credit side.
Brian R. Buckham: Also as of today, we've yet to draw any of the funds from our November 2023 forward equity offering, but we expect to issue at all this year as we've previously discussed we also plan to put in place an ATM program to help with equity needs on a go forward basis to support our ongoing capital plan timing wise it will likely be it some.
Brian R. Buckham: As we've previously discussed, we also plan to put in place an ATM program to help with equity needs on a go-forward basis to support our ongoing capital plan. Timing-wise, it will likely be at some point in the second quarter.
Brian R. Buckham: In the second quarter.
Brian R. Buckham: We plan to incorporate a forward sale option on the ATM program like we did with our November secondary offering last year. Turning to slide 10, as we expected, cash flow from operations improved pretty dramatically for the first quarter of 2024 compared to last year. We actually saw a net $200 million comparative increase in operating cash flow. The June 2023 power supply cost rate change, along with the January 2024 general rate case change, helped in that regard, so did a substantial moderation in power supply cost volatility compared to last year.
Brian R. Buckham: We plan to incorporate a forward sale option on the ATM program like we did on our November secondary offering last year.
Brian R. Buckham: Turning to slide 10, as we expected cash flow from operations improved pretty dramatically for the first quarter of 2024 compared to last year, we actually saw a net $200 million of comparative increase in operating cash flow. The June 2023 power supply cost rate change along with the January 2024 General rate case change helped.
Brian R. Buckham: In that regard.
Brian R. Buckham: So did a substantial moderation in power supply cost volatility compared to last year.
Brian R. Buckham: On slide 11, maybe most notable on the slide, we expect Idacorp's devoted earnings per share this year to be squarely in the range of $5.25 to $5.45 for the full year, and that's underpinned by strong customer growth, operational efficiency, and continued cost management, a thoughtful regulatory approach, and the benefits of the ADITC mechanism. Our forecast ranges for additional investment tax credit amortization and O&M are unchanged. We do continue to anticipate spending between 925 and 975 million dollars on CapEx for 2024.
Brian R. Buckham: On slide 11, maybe most notable on the slide we expect <unk> to diluted earnings per share this year to be squarely in the range of $5 25 to $5 45 for the full year and that's underpinned by strong customer growth operational efficiency and continued cost management of offer regulatory approach and the bench.
Brian R. Buckham: <unk> of the ITC mechanism.
Brian R. Buckham: Our forecast ranges for additional investment tax credit amortization in O&M are unchanged we.
Brian R. Buckham: We do continue to anticipate spending between $925 $975 million on Capex for 2024.
Brian R. Buckham: So, as I noted earlier, looking out further, it's a moving target and biased upward over the next five years. Finally, we've raised our hydropower generation forecast. We now expect hydropower generation to be within the range of 6.5 to 8 million megawatt hours for the year, an increase from our earlier estimate of 5.5 to 7.5. We have solid carryover from the prior year, and we have a relatively strong snowpack this year, so this is good news for hydropower and for our irrigation customers. And with that, we're happy to address any questions.
Brian R. Buckham: So as I noted earlier looking out further it's a moving target and biased upward over the next five years.
Brian R. Buckham: Finally, we raised our hydropower generation forecast, we now expect hydro power generation to be within the range of six 5% to 8 million megawatt hours for the year.
Brian R. Buckham: An increase of a tightening from our earlier estimate of five 5% to seven five.
Brian R. Buckham: We have solid carryover from the prior year and we have a relatively strong snow pack. This year. So good news on hydro power and for our irrigation customers. This year.
Brian R. Buckham: With that we're happy to address questions.
Operator: We are now ready to begin the question-and-answer session for attendees who have joined on the Q&A line. If you would like to ask a question, please do so by pressing star 1 on your phone. Please ensure that your mute function is turned off before you ask your question. We will take as many questions as time permits on a first-come basis. Once again, that is star 1 on your phone to ask a question now. Your first questions come from the line of Alex Mortimer from Izuho. Please go ahead.
Speaker Change: We are now ready to begin the question and answer session for F&D Swab joined in the Q&A line as you would like to ask a question. Please do so by pressing star one on your phone.
Operator: We can assure your mute function is turned off.
Alexander Mortimer: Ask your question.
Alexander Mortimer: We will take as many questions as time permits on a first name basis. Once again that is star one on your phone to ask a question now.
Alexander Mortimer: Your first questions come from the line of Alex <unk> from Mizuho. Please go ahead.
Alexander Mortimer: Hi, how are you? Hi, good afternoon. So you've been clear in the past about your reluctance to issue an EPS CAGR, but are there any forms of additional guidance or disclosure?
Alexander Mortimer: Hi, good afternoon.
Alexander Mortimer: <unk> been clear in the past about maybe your reluctance to issue an EPS CAGR, but is there any forms of additional guidance or disclosures such as maybe.
Alexander Mortimer: Afford financing plan, you know even a range form.
Alexander Mortimer: Would you be open to initiating at some point to provide additional clarity.
Brian R. Buckham: Alex, I think one thing that we'll likely do going forward is when we update our capital plan, our CapEx forecast with the results of the RFP and other changes that we have in terms of project timing, we'll likely reissue a rate-based CAGR on that as well. And this quarter, we also included QIP so that you can see the changes in the QIP balance over time for the next five years, and you can use that with
Alexander Mortimer: Yeah, Alex I think one thing that we will likely do going forward is when we update our capital plan, our capex forecast with results of the RFP and other changes that we have in terms of project timing will likely reissue a rate base CAGR on that as well and this quarter. We also included.
Brian R. Buckham: So you can see that.
Brian R. Buckham: Changes in equipped balance over time for the next five years and you can use that with estimates of regulatory and structural lag in that order to come up with a forecast of potential growth over time in terms of an actual EPS forecast our plan is to execute well in the regulatory arena.
Brian R. Buckham: As the ore that takes us.
Alexander Mortimer: And then quickly just to tie out the CapEx updates, how should we think about the cadence of these updates? I know you mentioned the second quarter call, but should we expect that that's sort of the entire update for the year? Or I know last year you had the third quarter and then the fourth quarter update; can you just provide some sort of any clarity on what the timing of updates throughout the year might look like?
Alex: Understood and then quickly just to tie out the capex updates how should we think about the cadence of these debates now you mentioned the second quarter call should we expect that that's sort of the entire update for the year I know last year, you had the third quarter than the fourth quarter update.
Alexander Mortimer: Can you just provide sort of any clarity on what the timing of updates throughout the year might look like.
Lisa A. Grow: This is Lisa. I think it will depend on how the negotiations go from the RFPs that we're currently involved with. So our hope is that it would be available, an update would be available in the second quarter. But I don't know that we have a specific cadence that we're getting ready to...
Alexander Mortimer: This is Lisa I think it will depend on how the negotiations go from the Rfps that we're currently involved with so our hope is that it would be available as an update would be available in the second quarter, but I don't know that we have a specific cadence.
Lisa A. Grow: We're getting ready to.
Lisa A. Grow: Rollout of 2028, RFP that would be sometime.
Speaker Change: Probably not until early next year I would imagine that we would be making announcements there anything that you would add Adam.
Brian R. Buckham: And Alex, what I'd add is our typical cadence was to do it only on the fourth quarter update. We did a third quarter update last year because the amount had increased so substantially. If you remember our CapEx adjustment, we increased our CapEx forecast by about 21% from our 2023 estimate to our 2024 estimate. So there was already a large increase. And so as we updated the 10-Q, we had a
Operator: [inaudible]
Speaker Change: And Alex what items are difficult cadence was to do it only on the fourth quarter update we did a third quarter update last year because of the amount of increase those substantially to remember our capex adjustment, we increased our capex forecast by about 21% from our 2023 estimates of our 2024 estimate so there was already a large increase.
Operator: And so as we updated the 10-Q, we added disclosure we made on the increase in Capex. There. Both the update we would make in the second quarter was one we'd hope to make earlier, but just based on the timing of Rfps don't feel comfortable doing that yet. So looking ahead I would expect that on an annual basis in the.
Operator: All of these are generally without interim updates unless there are material changes.
Operator: Our fourth quarter call generally without interim updates unless there is material changes.
Alexander Mortimer: And just one more quickly, can you provide any detail on what motivated the decision to file a limited scope case versus a full case this time around? Could we potentially see this type of approach utilized sort of more frequently in the coming years with maybe some bigger, I'll call them like quote-unquote full cases, to true up every few years or just sort of any additional detail on what the regulatory strategy might look like going forward?
Alex: Understood and just one more quickly.
Operator: Any detail on what motivated the decision to file a limited scope case versus a full case this time around could potentially see this type of approach utilized more.
Alexander Mortimer: More frequently in the coming years with maybe some bigger I'll call. My quote unquote full cases to true up every few years or just sort of any additional detail on what the regulatory strategy might look like going forward.
Lisa A. Grow: Well, we certainly take each year and look at what our needs are, but in this case, since we had just finished the 2023 rate case and used a 13-month average on the capital investments, we felt like we had to come back in to shore that up, and then, of course, like all utilities, we were seeing some upward pressure on labor, so we felt like it was more sort of a true-up, and then, of course, given the capital For more information, please visit www.cdc.gov.au
Speaker Change: Well, we certainly take each year and then look at what our needs are but in this case.
Lisa A. Grow: Since we adjust finished the 2023 rate case.
Lisa A. Grow: You said 13 months average on the on the capital investments. We we felt like we had to come back in to shore that up and then of course like all utilities, we are seeing some upward pressure on labor. So we felt like it was more sort of a true up.
Lisa A. Grow: And then of course, given the capital.
Lisa A. Grow: Plan that we have we'll evaluate what's needed in the next one.
Speaker Change: Of course.
Lisa A. Grow: It depends on.
Lisa A. Grow: Really what's going on.
Lisa A. Grow: In our jurisdictions at the time, so I don't know that we have a particular cadence.
Lisa A. Grow: One than the other it's really.
Lisa A. Grow: Situational, but we're feeling good about the.
Lisa A. Grow: Approach, we're taking and of course affordability is something that we're really thinking carefully about.
Brian R. Buckham: Yeah, Alex, what I would add to that is one thing that you've seen our track record for managing O&M. (inaudible)
Speaker Change: Yes, Alex what I would add to that is one thing that you have seen our track record of us managing O&M.
Speaker Change: Suddenly we had a 1% CAGR for quite a while and part of that is when we look at our case going forward. There is certainly incremental O&M, but our mantra is to control that going forward. So as you look at what the building blocks of the rate case would be so long as we continue to be really prudent on our O&M spending that helps with the design of the case also in <unk>.
Speaker Change: Or just regulatory lag, we're seeing it mostly in depreciation and interest expense as I mentioned, a while ago and so.
Speaker Change: So a rate base related case to focus on the assets that are in service, while they're serving customers getting recovery on those is one of our focuses for this particular case, if you remember that the outcome of our priorities, we did shore up cash quite a bit in terms of amortizing off some of the regulatory assets we had.
Speaker Change: Notably pension and the wildfire mitigation plan. So since we've shored up that cash component of the case really it becomes rate base that we're particularly focused on given the high capex that we have and then we're going to see for a long time going forward.
Brian R. Buckham: of the case, really it becomes rate-based that we're particularly focused on given the
Alexander Mortimer: All makes sense. Thank you for the update and congrats on a great quarter. Great, thank y'all. And a final opportunity; press star 1 to signal for a question.
Speaker Change: All makes sense. Thank you for the update and congrats on a great quarter.
Speaker Change: Great. Thanks Alan.
Operator: For a final opportunity, press star 1 to signal for a question, and we'll pause for just a moment. There are no further questions at this time. That concludes the question and answer session for today. Ms. Grow, I will turn the conference back to you.
Speaker Change: And our final opportunity press star one to signal for a question and we'll pause for just a moment.
Operator: Okay.
Speaker Change: There are no. Further question. This time that concludes the question and answer session for today, Mr. <unk> I will turn the conference back to you.
Lisa A. Grow: Thank you all for joining us this afternoon and for your continued interest in Idacorp. I hope you all have a great evening. Thank you.
Lisa A. Grow: Thank you all for joining us this afternoon and for your continued interest in <unk> I Hope you all have a great evening. Thank you.
Operator: That concludes today's conference. Thank you for your participation.
Lisa A. Grow: That concludes today's conference. Thank you for your participation.
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