Idacorp Inc (IDA) 2007 Q2 法說會逐字稿

Good day and welcome, everyone, to the IDACORP Second Quarter 2007 Conference Call. Today's call is being presented live via webcast and is being recorded. 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.

Thank you, Kimberly, and good afternoon, everyone. Welcome to our August 8th Second Quarter Earnings Release Conference Call. We issued our earnings release before the markets opened today. That document is now posted to our corporate website. We filed a Form 10-Q with the SEC earlier today and that document has also been posted to our IDACORP website.

Included on the call today are LaMont Keen, IDACORP and Idaho Power President and CEO; and Darrel Anderson, IDACORP and Idaho Power Senior Vice President of Administrative Services and CFO. We also have other officers here today to help answer questions during the Q&A period.

Our presentation today may contain forward-looking statements and it is important to note that the corporation's future results could differ materially from those discussed. A full discussion of the factors that could cause future results to differ materially can be found in our filings with the Securities and Exchange Commission.

Before turning the presentation over to LaMont, I'll briefly recap the financial results presented in today's earnings press release.

IDACORP's second quarter earnings report shows net income of $18.5 million, down $1.4 million from last year's second quarter. Earnings decreased by $0.05 per diluted share to $0.42 per diluted share quarter-over-quarter. Our chief subsidiary, Idaho Power, had earnings of $0.37 per diluted share for the quarter, down $0.14 per diluted share from last year.

With that, I'll turn the presentation over to LaMont.

Thank you, Larry, and greetings to all of you joining us on the call today. And Larry has summarized our results for the quarter and you also have them from this morning's release, so I'm not going to revisit them here.

From an overall perspective, we continue to make progress on virtually all of our resource cornerstones and are making significant improvements to our transmission and distribution systems as well. To support this, we have an active regulatory agenda. We currently have open dockets in Idaho and in Oregon and with the FERC to keep our regulatory cost structures consistent with our expanded systems and operations. We have also launched a public relations campaign to help keep our customers and others informed about issues impacting the company, supported by a new website, it's getpluggedin.com, that I would encourage you all to visit.

The company's people and facilities have also held up well during some challenging operating conditions which have been outside our planning criteria both during the second quarter and into July, and despite these conditions, we are meeting our customers' satisfaction and reliability metrics while operating very safely.

The operating challenges have been significant from both a supply and demand perspective. Our integrated resource planning process is based upon 70th percentile resources and loads. Simply put, this means we plan for both below-normal water and above-normal loads. The both have been beyond the 70th percentile this year, and wildfires have been rampant in and around our service territory this year as well.

Beginning with water conditions, inflows into Brownlee Reservoir, our largest reservoir storage facility and a good barometer of overall water conditions, during the April through July runoff period, were only 2.8 million acre feet this year, about 44% of average. During the second quarter, our hydro plants generated about half what they did last year when we had a good snow pack and stream flows. We're picking up the slack with increased generation at our coal-fired and natural gas-fired power plants and from off-system purchases.

Temperatures in our service area have been very hot. July was the hottest month ever in Boise, supplanting the previous record set in 1874. Accordingly, our residential air conditioning and irrigation customer demand also have reached record levels. We set three new all-time peaks between July 5 and 13, with the peak on the 13th of 3,193 megawatts. Last year, we set the previous all-time peak record of 3,084 megawatts on July 24, 2006. The heat this year has been sustained and we approached peak levels on many days in July. Our thermal system has performed well during that period, and we have been fortunate to have the transmission capacity to access the wholesale electricity markets during this time.

Unfortunately, these hot and dry weather conditions also spawn one other natural phenomena we could do without, and that's wildfires. Our transmission lines stretch over thousands of miles of high plains, mountains and deserts, and this year, the vegetation is tinder dry. Wildfires can be part of a typical year here in the west, but this summer's arrived earlier than most.

Thus far, our employees have done a great job of keeping the system going, and we have absorbed the net impact of the fires within our current O&M and capital budgets by reallocating resources and working to prevent incremental increases in O&M and capital costs for the year.

Changing tracks a little bit, we added 2,981 new general business customers during the second quarter, bringing our total customer account to 4,776,789. While this is slower growth than we've experienced over the past few years, it is still significant and in the 2 to 3% range that our energy plan for the future forecasts. We obviously continuously monitor economic growth in our service territory in order to adjust our capital plans to meet our customers' needs.

On June 1, we implemented a 14.5% average rate increase through the Power Cost Adjustment because of significantly below winter precipitation and deteriorated stream flow conditions. The PCA varies annually depending on snowpack in the Snake River Basin and resulting stream flow conditions. When hydro conditions are poor, as they are this year, we have to rely more heavily on coal and natural gas plants, and we buy more energy from the wholesale electricity markets. If you remember last year, the PCA reduced rates 19.3% on June 1 because we had a good snow pack.

On June 8, we filed an application for an average base rate increase of 10.35% in Idaho and, if approved as proposed, revenues would increase $63.9 million annually and would become effective in January. This filing is based upon a 2007 forecast test year and is designed to shorten the timeframe between when we make investments or incur expenses and when they are included in our regulatory rate structure.

And with that, I'll now turn it over to Darrel who will discuss our financial results.

Thanks, Lamont, and good afternoon, everyone.

Today I will review some of the key drivers to the second quarter 2007 results. I will also update you on IDACORP and Idaho Power's liquidity, equity and debt financings completed during the quarter, and then finish with a brief discussion of our 2007 key operating and financial metrics. After that, we look forward to answering your questions.

As Larry mentioned earlier, net income declined by $1.4 million, or $0.05 per diluted share, as compared to second quarter 2006 results. The decrease in net income is a combination of increases in gross margin at Idaho Power Company, which was more than offset by increases in utility operations and maintenances expenses, coupled with the elimination of losses from discontinued operations.

Gross margin, which we define as general business revenues and off-system sales less resource costs and rate-related amortizations, increased $4.2 million over the second quarter. The increase was driven by warmer and drier conditions that led to higher irrigation loads compared to last year, combined with a 3% increase in general business customers. The benefits from the increased load were partially offset by the impact of increased costs to supply the energy to meet the load.

Poor hydroelectric generating conditions in the second quarter of this year increased Idaho Power's reliance on typically more expensive thermal generation and purchase power and reduced wholesale sale.

For the three-month period ended June 30, 2007, our hydro facilities generated 1.5 million megawatt hours, compared to slightly over 3 million megawatt hours for the same period in 2006.

Other operation and maintenance expenses increased quarter-over-quarter, primarily due to higher third-party transmission costs, labor-related expenses, maintenance expenses for Idaho Power's coal-fired generation and distribution facilities and increases in legal, regulatory and compliance expenses. While expenses have increased over the prior year, to date they are in line with our expectations.

During the second quarter of this year, we sold 4,000 excess SO2 allowances and realized a net gain of approximately $500,000. This compares to the recognition of a net gain on sales of allowances of $4.7 million in the second quarter of 2006. We have sold and expect to sell additional allowances in the second half of the year. However, we do not expect the net gain on these sales to have a material impact on earnings in the second half of the year.

Overall earnings also benefited from the elimination of the $0.06-per-diluted-share loss from discontinued operations that was incurred in 2006 and did not reoccur in 2007.

Turning to cash flow, cash flow from operations decreased by more than $100 million in the first sixth months, compared to 2006, because of PCA rate differences, less favorable hydro electric operating conditions and changes in working capital items.

In the second quarter of 2006, we had PCA rates above base rates in effect and favorable hydro generation conditions, which both provided positive cash flow. This year, we have experienced just the reverse. In April and May of 2007, we had PCA rates below base rates in effect because of last year's favorable hydro conditions, while currently experiencing actual hydro conditions far below normal that had a negative impact on cash flow. The decrease caused by the changes in hydro electric generating conditions was partially offset by a decrease in cash paid for income taxes.

At June 30, 2007, IDACORP had $65 million of commercial paper outstanding, while Idaho Power had $22 million of outstanding commercial paper.

Now turning to financing activities during the second quarter. In late June, Idaho Power issued $140 million in 30-year first mortgage bonds with a coupon rate of 6.30%. Idaho Power used the proceeds to pay down a portion of outstanding commercial paper that had been used to fund capital expenditures. In June and early July, IDACORP issued 500,000 shares of new common stock under our continuous equity program. Net proceeds were approximately $16 million, of which these proceeds will be used to fund ongoing capital expenditures at Idaho Power Company.

I will now update you on the key operating and financial metrics for 2007. These are also shown in the earnings press release we released earlier in the day. The only change to our previous estimates for key operating metrics relates to our reduced estimate for hydro electric generation at Idaho Power Company. We have narrowed the range to between 6.0 and 6.5 million megawatt hours for the year now that we have moved through the critical April-through-July runoff period.

That concludes our prepared remarks and we would like to respond to your questions.

Thank you, sir. (OPERATOR INSTRUCTIONS) We will take our first question from Neil Kalton at A.G. Edwards.

Good afternoon. I just want to clarify something on the base rate case. What's the forecast period you're proposing for items such as O&M? Is it the calendar year '07 or is it something different?

Neil, this is Darrel. I'm going to have Ric Gale, who heads up our regulatory side -- I'll have him talk to you about where we're going with the rate case.

Hi, Neil. Ric Gale. It is a forecast of the 2007 year.

Okay. So you're using -- so it's calendar year '07.

Correct.

Okay. I had been under the impression previously that you had thought about looking forward by a few months. What's changed your thought process there? Or has it changed?

Well, you may have been thinking of our last two cases where we have filed a split test year where we get halfway through a year with actuals and then forecast the back half. We did that in 2003 and 2005 and, at this point, we want to address regulatory lag, so we were a little more ambitious with our forecast period.

Okay. And then would you expect in future rate cases -- if this is received well, would you perhaps look forward even further in future -- the cases over the next few years?

We have to digest what happens here, but as a rate maker or rate analyst -- a regulatory guy -- I would tell you that the ideal would be get your process through and rates in place so they correspond with the cost period, so we still have a ways to go.

Okay. Thanks.

Thank you. From Key Banc, Paul Ridzon will have our next question.

Good afternoon. You've talked about reallocating some of your O&M spending. Is that going to entail deferring any activity until '08 or -- just kind of with the wildfires, how were you able to contain O&M within the original budget?

A lot of it -- the dollars that are being spent related to our restoration work related to the fires -- a lot of that ends up being capital dollars, and so to date it's either rebuilding the lines the [fault] lines that were very old lines, but replacing those lines as it is important [were burned], so a lot of those dollars are actually ending up in the capital bucket. We're not seeing a lot of O&M dollars as it stands today. We're still in the process of accumulating all of those costs as it stands right now, but as it stands right now, we are looking to absorb those O&M costs in our current budget by reallocating some things. On the capital side, when we had to pull those crews off of other projects, we had basically moved them on to the restoration work there, and so they moved off of the jobs they might otherwise have been working on.

And the lower tax rate this quarter -- that's just taxes moving around because the forecast tax rate for the year is still good?

That's correct.

What was driving the -- specifically, the lower tax in this quarter?

I'll have -- Gene Marchioro is our Tax Director. I'll have him address the tax question.

Yes. Our forecasted tax rate, of course, is based on an annual look for the year, and there were no particular tax items that drove the forecast lower than the year before, just the results projected for this year.

Okay. Thank you.

Thank you. Moving on, we'll take our next question from Ashar Khan with S.A.C. Capital.

Good afternoon. How are you guys doing? Can I ask you, what is this rate case filing? What -- has there been any [problems] from the staff? They're fine with the new process with a little bit more forecast?

This is Ric Gale again, Ashar. Where we are in the process is really the parties have been established. They've been granted intervention. We're into the discovery mode. We just today got a procedural order from the Commission which lays out discovery through September 7, and ultimately, the answer's at the end of September. I think I'll go ahead and step that through. That might be useful information.

On October 19 is really when we find out when the other parties -- where the other parties and where staff is, because that's the date that they have to pre-file their testimony. In the meantime, in discovery, we are answering questions that they have about our case and trying to get staff as comfortable as we can with the way we file the case.

Okay. And so you will have a chance to, I guess, refresh these numbers, right? Am I correct, Gale -- one more time or something before you go in for a hearing, I guess, before the staff comes in with a recommendation, or no?

The company's case is what we filed, which is a forecast year, and that's -- that is our case and we will not change those numbers. What staff is trying to do is ascertain whether that's a good representation of the company's costs.

Okay. I appreciate it. Thank you.

Thank you. Moving on, we'll take our next question from Steve Gambuzza with Longbow Capital.

Good afternoon. I was wondering if you could talk about the transmission joint venture that you announced with PacifiCorp a while back and when you might be putting some more specific plans out in terms of the specific transmission lines you'd propose to build?

Sure, Steve. I'm going to -- Lisa Grow, who heads up our transmission area, is here this afternoon, and she has been very active in participating in that relationship, as well as with NTTG, and so we'll ask Lisa to respond to that.

Hi. Good afternoon. We've taken a couple of important actions. One, we filed the what we call Phase 0 of the ratings process, which is the early -- I guess, where you go out and speak to people that want to participate in the study work on getting your final rating for the line, so we're starting the ratings process, and then we are also assembling the regional coordination for the planning studies that are required through the third quarter 890 getting the regional coordination. That has been kicked off as well. We've gotten [base case] set up and so we're moving forward on that. As well, Pac and Idaho, we have -- we are working on a cost-sharing agreement to go hire consultants for the environmental impact study, so we're moving that along. We need to get through those detailed studies before we have specific projects, although if you go out to the NTTG website, there are drawings of what the proposal is today.

Okay. And is it the intention that this investment will be on the balance sheet of Idaho Power?

It's a joint project that's shared between Pac and Idaho. At this point, it's 50/50.

But in terms of your share, it's not going to be a separate legal entity. It's going to be within Idaho Power.

Correct.

Okay. And then I was wondering just on the IRP that you guys filed a while back with -- identifying the needs for base load out a couple years from now, if there's been any incremental progress or advancing on your thinking on that front?

Steve, this is Darrel. I'm going to -- Jim Miller, who heads up that area, he's here today with us also and will speak to your comment on our base load.

Couldn't hear me shake my head. We're continuing to look at that. We've identified several possible base load resources -- coal-based and we continue to revise that list. We've gotten down to a short list of outside vendors and we're also investigating expansion at Bridger with PacifiCorp. So we're not at the point where we can say anything. I guess we're continuing to look at it and hopefully we'll have an answer for the Board later this year.

And when will your next IRP be filed?

Well, actually, the formal one is in 2009. We've changed our schedule somewhat to match up with some of the other regional utilities. We'll be doing an update for the Commission in 2008, but the next formal IRP is in 2009.

I guess you expect to have some greater certainty as to what track you're going to pursue by the end of 2007?

Hopefully we're well down the road by the time the next IRP comes up.

Thanks very much.

Thank you. Moving on, James Bellessa from D.A. Davidson & Co. will have our next question.

Hello. On this rate case filing, you said that the last couple cases were filed with a split year test year. Were those accepted as the methodology that was -- and did you get a rate increase as a result?

In both cases -- again, to reiterate, we filed in late fall split years. In both cases -- in 2003, the 2003 numbers were actually trued up to actuals before the order came out, so in essence, all we did was jumpstart an historical year. In 2005, you might remember, we settled that case.

On the O&M guidance that you're giving, I'm looking at last year's figures. Your O&M has been climbing now almost every quarter sequentially, but last year's third quarter just went off the chart. Is -- or at least I'm -- let me look at the right line item. Just a second. Make sure I'm looking -- it did not. I was looking at the wrong item. I'm going to retract that question.

Okay.

And then finally, this hydro generation guidance that you've given. You've indicated that you had 1.5 million megawatt hours of hydro generation in the most recent quarter, roughly half of that which you had a year earlier. If I do the arithmetic at the midpoint of your guidance for the year of 6.0 to 6.5 million megawatt hours, I come up with 24% in the second quarter. Is that normal? I have no -- is that abnormal? And what is the likely weighting usually for the second quarter and what are the likely weightings for other quarters?

Jim, you're talking to the second quarter or the second half of the year? Are you talking just specifically the second quarter?

Yes. I think you said in your narrative that you had 1.5 million megawatt hours.

Right. I'll give you some information and see if I can answer this question for you because maybe I think of where you're trying to go. We did about 1.5 million megawatt hours in the second quarter of this year. Last year, we did about 3 million megawatt hours. On a year-to-date basis, through the six months, we were at about 3.4 million megawatt hours in total. And so that puts you -- so if you take a look at that, 3.4 million, compared to our range of 6 to 6.5, what I'm trying to do is at least give you some sense as to what the balance of the year could be as compared to where we were last year, even though it was a good water year. And so if you look at that, that would suggest that we would have slightly less generation in the second half of the year than we did last year, but not significantly less because of the way the water runs through the system.

And can you remind us what the second half generation was in megawatt hours last year?

Yes. If you hang on one minute, I can. Yes. We did about 3.3 million megawatt hours last year in the second half of the year.

Okay. That's helpful. Thank you.

Thank you. We do have a follow-up question from Ashar Khan with S.A.C. Capital.

I was a little bit -- Darrel, can I -- you guys mentioned in July fires having an impact, the growth and O&M. Is that going to in any way -- what's happened in July -- going to affect the margins in any negative or positive manner versus what you had budgeted?

Right now, Ashar, we have not closed the books yet for July as it stands right now. We're right in the middle of closing the books. What we can tell you is that with the temperatures where they were, that we would expect loads to be up. Now what we have to do is get through the PCA process and all of that before we can tell you net-net what the net impact is, plusses or minuses. So we aren't in a position today to be able to tell you, but it is fair to say that loads were up and, with our risk management policy and the programs that we have in place, we anticipate most of that, and then we have to balance the rest of those demands with going to the market. So a lot of -- we just have to work it through. We have to get closed before we can tell you what the net impact on July is going to be.

Okay. So the load being up is a positive, right? But then the PCA could be a negative, right? Am I going through that in the right manner?

I think the PCA is the PCA and so we have to run all the net power supply costs through the PCA, remembering that included in the PCA is the LGAR and the [FCA], so there's a lot of components to the PCA, so it's hard to say today without us getting the books closed to tell you where that's going to be.

Okay. Thank you.

(OPERATOR INSTRUCTIONS) Our next question will come from Reza Hatefi with Polygon Investments.

Thank you. Could you -- in the rate case, I guess it's a $63 million filing. My understanding is that $33 million of it is for base fuel rate increase. So is it right to think that, other than the fuel rates going up, the $30 million is the max amount that could affect pre-tax earnings?

This is Ric Gale. I cannot confirm your breakdown of the $64 million, so I'm at a loss in assessing your comment.

Yes. I guess I was just trying to gather from -- because obviously it's a very large filing -- what portion of that filing could sort of flow down to the bottom line versus what portion is, I guess, more or so offset by costs, such as the base rate of fuel going up will be offset by -- obviously, you'll be incurring fuel costs.

I can address your concept, if that's helpful.

Sure.

To the extent that you've analyzed that a portion of the rate case is related to power supply expenses, that is a different valuation than the rest of the case in that power supply expenses, one could think you'd catch about 90% of those in Idaho in your power cost adjustment anyway. So if that's the concept, I can affirm that. What I just don't have in front of me is the breakdown of our case the way you're asking the question.

And is there any -- in this rate case -- is the LGAR or the pension dealt with in any way? Maybe you can expand on that.

The LGAR is very explicitly -- and it's required to be dealt with in the rate case and we have testimony in our filing with an LGAR recommendation, and the Commission will make a determination on that as part of their order. The pension, at this time, is not part of this case, I would say, as far as a rate recovery -- from a rate recovery aspect. You might recall -- and Ms. Smith is here to bail me out if I get too deep -- but you might recall that we are going to approach the Commission for regulatory recovery on pension at the time we start funding again.

Okay. Okay. And can you remind us -- in looking through your 10-Q, it looks like the transmission project -- if built, you would expect it to be completed between 2012 and 14, so does that sort of imply that the big CapEx years are maybe 2010, 11, 12 -- that time frame?

That's right. Out in that timeframe. And those numbers, again, could be a little lumpy, but we haven't given any updates on the timing of those expenditures, but that would be approximate timeframe.

And I'm sorry if I missed this earlier, but what is the process for getting needed approvals and the timing of these filings and approvals?

We'll have Lisa -- Lisa can reiterate those, the timing on it.

Right now, we're working with the BLM as the lead agency, so citing -- certainly we're hoping for two years, but it may take longer than that. As you know, people will voice their concerns and we'll have to deal with those. So that's kind of the plan is that we would get through citing and have the right-of-way identified, go through design and constructs that would take us out to about 2012 for construction.

Great. And what other approvals do you need besides BLM?

Well, it depends on where the exact routes would be. Beyond that, it would be the -- I think that's the only approvals that we would need. Certainly we've discussed it with the PUC and the Idaho PUC is supportive of the idea, but there's not an approval given. It's the rate recovery following.

Okay. And just finally, I also noticed in your K -- or sorry, in your 10-Q from earlier today that you have issued about 500,000 shares year to date just into the open market in order to raise some capital. Is this sort of a -- and that's besides the DRIP -- is that sort of a run rate we should look at -- maybe 2 or 300,000 shares a quarter?

We haven't made any particular forecast of when that equity gets rolled out. We do it based on what we believe our needs are going forward and in order to maintain our capital structure, and so it is periodic, but we don't have a plan out there right now that tells when we're going to do that. And just to clarify that, the half a million shares, about half of that actually is recognized in the financials you see today. The other half is -- it will be picked up in the third quarter because those -- the half that didn't get closed until early in July.

Great. Thank you very much.

Thank you. Adar Zingo with Zimmer Lucas Partners will have our next question.

Hello. I just wanted to clarify something. Your current O&M budget does include a certain amount related to the wildfires?

It is encompassed that that would be absorbed in our current range of O&M.

Can you just say how much this is?

We haven't put it out there because it, to date, hasn't been a significant or material amount from an O&M standpoint.

Okay. So it's not like you would have lowered the range otherwise?

No. We're just moving some things around and reallocating some efforts within the O&M side.

Okay. Thank you.

Thank you. At this time, we have one final question from Darin Conti with Wachovia Securities.

Hi, guys. A couple different questions for you. First, just wondering if you could quantify the impact that the higher irrigation loads had on the quarter.

We're looking around the room here, Darin. We haven't quantified it specifically because we don't break it down to the revenues less the cost of sales specifically attached to the irrigation folks. I think if you saw the 10 -- the earnings release and/or the 10-Q, we do lay out the changes obviously in the various customer classes.

Right.

And so you do see, from a volume standpoint, you see a substantial increase in volume for the irrigation customers, both when you look at it from the six months as well as three months year-to-date basis. So that's one way that we look at it is from a volume basis, but you also have to look at -- they pay a rate that's substantially less than what our residential customers pay and so there's that impact also. So the fact that we do increase revenue from them doesn't necessarily translate into a significant bottom line benefit if we have those sales increases.

Okay. Okay. And then just to clarify something on the pension, and I apologize if I missed this, but I think you got the regulatory order to, I guess, defer some pension expense that used to be an earnings hit so you can kind of defer it to a regulatory asset. Can you talk about that a little bit and maybe quantify what the earnings impact would be on an annual basis?

I'll have Lori Smith, who kind of has been the point person on that issue for us will speak to that.

Hi. This is Lori. The pension filing excludes the service costs. Where we were charging that to the income statement, we now are deferring it like you mentioned. If we look at the filing for this year, we've got about a $4.8 million regulatory balance that needs to be amortized which -- then, going forward, we won't have any pension expense on the income statement.

And we can't estimate --

-- and the service cost is typically in the range of about $6 million, which is total capital and O&M.

Okay, so -- and I guess that deferral begins in Q3 of this year? Is that right?

Q4.

In Q4. Okay. So we're looking at maybe a million and a half impact this year and then the balance in '08.

Right. You will see -- going into '08, we will have completed the amortization and also then be deferring any what otherwise would be pension expense we'd be deferring until the point in time we start making contributions.

Okay. And then just one last question. On the regulatory front, has there been any thought to -- I don't think you've indicated that, in this rate case, you would approach it this way, but any thought to approaching the Commission with -- on a longer term basis with a change to how you recover your fuel costs at the 90% level. Just with some of the earnings volatility that we see with the hydro electric generation, is there any kind of change in your thought process or approach on the regulatory side?

This is Ric. We've had our IFO PCA first authorized in '92 and implemented in '93, and for the most part, view it as a very symmetrical and a very fair mechanism, and I think instrumental for us getting through the energy crisis because the Commission allowed us to funnel through almost $500 million through the PCA during the energy crisis. So we see that as a valuable mechanism from a historical perspective. There are blemishes in the mechanism and we'd like to address those as we get a chance. One of them is the load growth adjustment and that's coming up again in this rate case. As far as other aspects, I don't know that the company is in a position to suggest changes. Others have and the Commissions have, as recently as this spring, have rejected them.

I would just add that the company has changed some of its planning criteria, like LaMont mentioned at the beginning of the call, and which will ultimately accelerate base load resources and other resources as we diversify away from hydro in that planning criteria, so that's another way of reducing the exposure to hydro.

Okay. Great. Thanks for the insight.

Thank you. It does appear we have a follow-up question from Reza Hatefi with Polygon Investments.

Thank you. Just had a quick follow-up on the last question. So the pension -- you mentioned $6 million. Is the $6 million -- you mentioned capital and expense -- maybe I misunderstood, but is the $6 million a pre-tax expense that you're incurring here in 2007 that goes away in 2008?

It is -- the expense is about $4.6 million is what the expense is, and that's what will be gone in '08. We do have a portion of it in '07 as we amortize the remaining balance. We've got about -- $2.8 million that will be deferred in '07, whereas in '08, you'll have the full benefit of no service costs [in the industry].

And this pension expense of about $4.6 million that's been hurting earnings, this also occurred in 2006 and 2005, etc.?

Yes.

Okay. Great. And so it's just a straight pickup because of this new mechanism. Okay. Great. Thank you.

One thing we would just do, for those that have an interest, on page 48 of our 10-Q, assuming the pagination's correct, we have a section in there that talks about the issues around pension and what we are doing with the regulators related to pension. So in case you're looking for a little more color on it, there's a good discussion in the 10-Q around that issue.

Thank you.

And the other thing, just to clarify -- I think you were asking pre-tax, after tax. All the numbers Lori has been referring to were all pre-tax numbers.

Thank you. It does appear we have no further questions at this time. Mr. Spencer, I would like to turn the conference back over to you, sir.

Thank you, Kimberly. We'd like to thank all of you for your continued interested in IDACORP and our second quarter earnings. Good-bye.

Thanks, everybody.

Ladies and gentlemen, this does conclude today's conference call. We appreciate your participation in today's call. You may now disconnect at this time. Have a great day.