| IDACORP INC ITEM 1A RISK FACTORS The following are factors that could have a significant impact on the operations and financial results of IDACORP, Inc |
| and Idaho Power Company and could cause actual results or outcomes to differ materially from those discussed in any forward-looking statements: Reduced hydroelectric generation can reduce revenues and increase costs |
| Idaho Power Company has a predominately hydroelectric generating base |
| Because of Idaho Power Companyapstas heavy reliance on hydroelectric generation, the weather can significantly affect its operations |
| Idaho Power Company experienced its sixth consecutive year of below normal water conditions in 2005 |
| When hydroelectric generation is reduced, Idaho Power Company must increase its use of more expensive thermal generating resources and purchased power |
| Through its power cost adjustment in Idaho, Idaho Power Company can expect to recover approximately 90 percent of the increase in its Idaho jurisdictional net power supply costs, which are fuel and purchased power less off-system sales, above the level included in its base rates |
| The power cost adjustment recovery includes both a forecast and deferrals that are subject to the regulatory process |
| However, recovery of amounts above forecast in one power cost adjustment year does not occur until the subsequent power cost adjustment year |
| The non-Idaho net power supply costs are subject to periodic recovery from the Oregon and Federal Energy Regulatory Commission jurisdictional customers |
| Continuing declines in stream flows and over-appropriation of water in Idaho will reduce hydroelectric generation and revenues and increase costs |
| The combination of declining Snake River base flows, over-appropriation of water and continuing drought conditions have led to disputes among surface water and ground water irrigators, and the State of Idaho |
| Recharging the Eastern Snake Plain Aquifer, which contributes to Snake River flows, by diverting surface water to porous locations and permitting it to sink into the aquifer is one proposed solution to the dispute |
| Idaho Power Company believes diversions from the Snake River for aquifer recharge may further reduce Snake River flows available for hydroelectric generation and reduce Idaho Power Company revenues and increase costs |
| Changes in temperature and precipitation can reduce power sales and revenues |
| Warmer than normal winters, cooler than normal summers and increased rainfall during the irrigation seasons will reduce retail revenues from power sales |
| If the Idaho Public Utilities Commission, the Oregon Public Utility Commission or the Federal Energy Regulatory Commission grant less rate relief than requested in rate case filings, it will reduce Idaho Power Companyapstas earnings and cash flows |
| If the Idaho Public Utilities Commission, the Oregon Public Utility Commission or the Federal Energy Regulatory Commission were to grant less rate relief than Idaho Power Company requests in its rate case filings, it could have a negative effect on earnings and cash flow and result in future downgrades of IDACORP, Inc |
| Conditions that may be imposed in connection with hydroelectric license renewals may require large capital expenditures and reduce earnings and cash flows |
| Idaho Power Company is currently involved in renewing federal licenses for several of its hydroelectric projects |
| Conditions with respect to environmental, operating and other matters that the Federal Energy Regulatory Commission may impose in connection with the renewal of Idaho Power Companyapstas licenses could have a negative effect on Idaho Power Companyapstas operations, require large capital expenditures and reduce earnings and cash flows |
| The cost of complying with environmental regulations can reduce earnings and cash flows |
| IDACORP, Inc |
| and Idaho Power Company are subject to extensive federal, state and local environmental statutes, rules and regulations relating to air quality, water quality, natural resources and health and safety |
| Compliance with these environmental statutes, rules and regulations involves significant capital, operating and other costs, and those costs could be even more significant in the future as a result of changes in legislation and enforcement policies |
| For instance, considerable attention has been focused on carbon dioxide emissions from coal-fired generating plants and their potential role in contributing to global warming |
| Mercury emissions from coal-fired plants are also being discussed |
| The adoption of new laws and regulations to implement carbon dioxide, mercury or other emission controls could increase the cost of operating coal-fired generating plants and reduce earnings and cash flows |
| IDACORP, Inc, IDACORP Energy and Idaho Power Company are subject to costs and other effects of legal and regulatory proceedings, settlements, investigations and claims, including those that have arisen out of the western energy situation |
| IDACORP, Inc, IDACORP Energy and Idaho Power Company are involved in a number of proceedings including a cross-action wholesale electric antitrust case against various sellers and generators of power in California and the California refund proceeding at the Federal Energy Regulatory Commission |
| Other cases that are the direct or indirect result of the western energy situation include a refund proceeding affecting sellers of wholesale power in the spot market in the Pacific Northwest, in which the Federal Energy Regulatory Commission directed that no refunds be paid, but which is now pending on appeal before the United States Court of Appeals for the Ninth Circuit; efforts by other parties to reform or terminate contracts for the purchase of power from IDACORP Energy or claiming violations of state and federal antitrust acts and dysfunctional energy markets as the result of market manipulation; show cause proceedings at the Federal Energy Regulatory Commission, which have been settled but are the subject of motions for rehearing or have been appealed; claims pending before the United States Court of Appeals for the Ninth Circuit that the Federal Energy Regulatory Commission-ordered refund period should have been expanded to include a longer time period, and the reversal by the United States Court of Appeals for the Ninth Circuit of Federal Energy Regulatory Commission rulings that market-based sellers &apos transactional reports satisfy the Federal Energy Regulatory Commissionapstas filed-rate doctrine requirements as a means of expanding refunds from all sellers of wholesale power, which rulings remain pending before the United States Court of Appeals for the Ninth Circuit on rehearing |
| To the extent the companies are required to make payments, earnings will be negatively affected |
| It is possible that additional proceedings related to the western energy situation may be filed in the future against IDACORP, Inc, IDACORP Energy or Idaho Power Company |
| Pending shareholder litigation could be costly, time consuming and, if adversely decided, result in substantial liabilities |
| Two securities shareholder lawsuits consolidated by order dated August 31, 2004 have been filed against IDACORP, Inc |
| and four of its officers and directors |
| Securities litigation can be costly, time-consuming and disruptive to normal business operations |
| Costs below a self-insured retention are not covered by insurance policies |
| While IDACORP, Inc |
| cannot predict the outcome of these matters and these matters will take time to resolve, damages arising from these lawsuits if resolved against IDACORP, Inc |
| or in connection with any settlement, absent insurance coverage or damages in excess of insurance coverage, could have a material adverse effect on the financial position, results of operations or cash flows of IDACORP, Inc |
| Increased capital expenditures can significantly affect liquidity |
| Increases in both the number of customers and the demand for energy require expansion and reinforcement of transmission, distribution and generating systems |
| If Idaho Power Company does not receive timely regulatory relief, Idaho Power Company will have to rely more on external financing for its planned utility construction expenditures from 2006 through 2008; these large planned expenditures may weaken the consolidated financial profile of Idaho Power Company and IDACORP, Inc |
| Additionally, a significant portion of Idaho Power Companyapstas facilities were constructed many years ago |
| Aging equipment, even if maintained in accordance with good engineering practices, may require significant capital expenditures |
| Failure of equipment or facilities used in Idaho Power Companyapstas systems could potentially increase repair and maintenance expenses, purchased power expenses and capital expenditures |
| If losses at the non-regulated subsidiaries continue and if they are unable to obtain financing, this may reduce IDACORP, Inc |
| IdaTech and IDACOMM have experienced operating losses and it is not certain that they will achieve or sustain profitability in the future |
| If these non-regulated subsidiaries do not achieve profitability or are unable to obtain financing to fund their operations, this could increase the need for IDACORP, Inc |
| to provide liquidity in the form of capital contributions or loans and/or increase the need for IDACORP to pursue other strategic alternatives including possible sale, merger or dissolution |
| Any of these actions could have a negative impact on IDACORP, Inc |
| In addition, if the value of these subsidiaries declines, IDACORP, Inc |
| may need to evaluate for possible asset impairment charges |
| A downgrade in IDACORP, Inc |
| apstas and Idaho Power Companyapstas credit ratings could negatively affect the companies &apos ability to access capital |
| On November 29, 2004, Standard & Poorapstas Ratings Services, on December 3, 2004, Moodyapstas Investors Service, and on January 24, 2005, Fitch, Inc |
| each downgraded IDACORP, Inc |
| These downgrades and any future downgrades of IDACORP, Inc |
| apstas or Idaho Power Companyapstas credit ratings could limit the companies &apos ability to access the capital markets, including the commercial paper markets |
| In addition, IDACORP, Inc |
| and Idaho Power Company would likely be required to pay a higher interest rate on existing short-term and variable rate debt and in future financings |
| Terrorist threats and activities could result in reduced revenues and increased costs |
| and Idaho Power Company are subject to direct and indirect effects of terrorist threats and activities |
| Potential targets include generation and transmission facilities |
| The effects of terrorist threats and activities could prevent Idaho Power Company from purchasing, generating or transmitting power and result in reduced revenues and increased costs |
| Adverse results of income tax audits could reduce earnings and cash flows |
| In March 2005, the Internal Revenue Service began its examination of IDACORPapstas 2001 through 2003 tax years |
| On October 24, 2005, the Idaho State Tax Commission also began its examination of the same tax years |
| Outcome of the audits could differ materially from the amounts currently recorded, and the difference could reduce IDACORPapstas and Idaho Power Companyapstas earnings and cash flows |