IDACORP, Inc.

later today and for the next 12 months on the IDACorp website. If you need assistance at any time during the presentation today, please press star zero on your phone. I would now like to turn the call over to Amy Shaw, Vice President of Finance, Compliance and Risk.

Thank you. Good afternoon, everyone. We appreciate you joining our call. This morning, we issued and posted to IDACorp's website our second 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 two, 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, and those are all 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. Our cautionary note on forward-looking statements and various risk factors are included in more detail for your review in our filings with the Securities and Exchange Commission. As shown on slide three, we have Lisa Groh, IdaCorp's President and CEO, and Brian Buckham, IdaCorp's Senior Vice President, CFO, and Treasurer presenting today. We also have other members of our management team available for a Q&A session following our prepared remarks. Slide four shows a summary of our financial results. Idaho's second quarter 2024 diluted earnings per share were 171 compared with 135 for last year's second quarter. In the second quarter of this year, we recorded 7.5 million of additional tax credit amortization under the Idaho regulatory stipulation, compared to 3.75 million in the second quarter of last year. For the first half of the year, earnings per diluted share were 267 compared with 246 during the first half of last year. Those results include additional tax credit amortization of $20 million for the first half of 2024 compared to $7.5 million during the first half of last year. Today, we updated certain key metrics and guidance for 2024. We raised the lower end of our previously reported full-year 2024 earnings guidance by 5 cents to the range of $5.30 to $5.45 per diluted share. We also improved the top end of our expectation of additional tax credits Idaho Power will use to support earnings at the 9.12% return on equity in the Idaho jurisdiction to a range of $35 to $50 million. Previously, the top end of that range was $60 million. We're pleased to see our strong operating performance reduce our estimate on tax credit usage. 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.

Thank you, Amy, and thanks to everyone joining us today. I'll start off with some highlights. We had strong financial results during the second quarter, driven by continued customer growth, higher than expected customer usage, and the revenue benefits of our January 1 rate changes in our Idaho jurisdiction. We've had an exceptionally hot summer so far, especially during the last part of June and most of July, setting us up for a strong third quarter. As Amy mentioned, this allowed us to raise the lower end of our earnings guidance range and improve the top end of our ADITC guidance range for this year. I'm also excited to announce that we hit a record peak load of 3,793 megawatts on July 22nd, and in fact broke the prior record for three consecutive hours that day. Next, I want to talk about four things. Customer growth, our regulatory filings, the status of major projects, and how we're serving new record peak loads. We continue to see robust customer growth and economic expansion across Idaho Power Service Area. As shown on slide five, our customer base has grown 2.6% since last year's second quarter and 2.8% for residential customers. Moody's is forecasting robust GDP growth in our area of 4.3% in 2024 and 3.8% in 2025, outperforming national trends. We see increasing interest from projects evaluating Idaho power service area. Actual and prospective projects are coming from a variety of industries, including manufacturing, food processing, and of course data centers. And they are exploring both rural and urban sites. For energy intensive projects, Idaho Power has its potential customers invest in studies to ensure we can provide an accurate cost estimate and timeline to serve their needs. So we have a couple of those studies in process now. Serving that growing load requires infrastructure, and we continue to be ahead of our construction schedules to support two of our largest customer projects, the Meta Data Center in CUNA and the Micron expansion in Boise. Of note, the first transformer for the new 15-acre chip substation being built for Micron arrived at the end of June. We also recently joined Lamb Weston in celebrating their successful completion of a $415 million expansion at its facility in American Falls. which made it one of the largest frozen potato processing facilities in the world. As noted on slide six, our regulatory filings in Idaho and Oregon continue to move forward. In our Oregon general rate case, we reached a settlement that, if approved, would result in an overall rate increase of $6.7 million, or around 12%, effective this October. The main driver in that case is the significant investment we've made in the grid to serve our customers' growing energy needs since our last Oregon general rate case in 2011. In Idaho, we've requested an increase of $99 million, or 7.3%, through a limited scope case that focuses on recovering only the infrastructure investment and labor expenses not included in our last general rate case. The limited scope case is in the early stages and we're awaiting the procedural schedule. We suspect settlement procedures or proceedings could start in late September or early October. We're working hard to acquire new resources to meet current and future demand. Turning to slide seven, as part of our RFP process, we selected a 200 megawatt battery storage system to be owned by Idaho Power. We're also negotiating for additional resources to come online in summer 2026. For 2027 capacity and energy deficits, we're still working through the short list in negotiating with bidders. As we look beyond 2027, we've initiated an all-source RFP for resource needs in 2028 or later. We believe we'll need more dispatchable resources in the future. It continues to be an all-hands-on-deck effort. Transmission remains key to meeting demand, improving reliability, and optimizing the movement of energy in the West. As I mentioned during our last call, delays in the final stages of permitting on the Boardman to Hemingway project have likely pushed the in-service date to no earlier than 2027. We're disappointed in the delays, of course, but we're working through the process. On Gateway West, our second major transmission line project, We're continuing to work with our partner Pacificor on the timing and configuration of that line and hope to get started on our segment soon. We're also in discussions with the developer of the Southwest Intertide project, a third major transmission line, which would add capacity to the desert southwest. In addition to these transmission projects, we plan to convert our remaining coal-fired units to natural gas. which reduces the carbon emissions of those units by about half, but maintains their generating capacity. We've already successfully converted two units at the Jim Bridger plant, which have been helping us serve peak load during the summer heat waves. This is a low-cost solution that reduces carbon emissions while keeping dispatchable energy resources available, and we plan to convert our remaining coal-fired units at Bridger and Balmy over the next few years. In June, we signed an agreement with Nevada Energy, NV Energy, to convert the two units at the North Valley plant to natural gas by the end of 2025. Our hydropower outlook remains strong thanks to a good water supply. We have almost all of our hydro units available because of the multi-year efforts we've made to refurbish our hydro fleet. Another growing piece of our resource portfolio is battery storage. The 100 megawatt Franklin solar project in southern Idaho came online in June, accompanied by 60 megawatts of company-owned batteries that came online in July. We also have 36 megawatts of batteries at the Hemingway Station that are scheduled to come online in August. These batteries are instrumental in improving the reliability and resilience of our system and meeting increasing load demands. Wildfire season has been very active in the West, including within our own service area. Fires are not a new phenomenon, and for many years, we've focused on increased investments in system resiliency and mitigation efforts. We've done a lot to harden our system. However, fires can still cause outages and require infrastructure replacement. Working with first responders, we've been able to keep our community safe. I'm so impressed by our employees across our company for their dedication and ability to work through the many challenges that accompany wildfires. They've been quick to safely replace poles and restore service to our customers. In addition, I want to thank the firefighters and our public safety partners for the hard work they are doing to contain these fires. We've had a public safety power shutoff plan for several years now. We used it for the first time this year when rare 60 mile per hour winds briefly came across the Boise Front Range and a few other areas. We proactively de-energized our lines in certain areas following public communications, and patrolled them as quickly as possible after the storm passed through. Our protocols worked as planned, and most customer comments were supportive of our proactive approach. I'll close with another look at the weather, which has been some of the hottest on record for most much of Idaho Power Service area. Temperatures in and around Boise have been above 100 degrees for most of July, and they are continuing into August. Our system reliability has been strong despite the heat wave and peak loads. I again want to express how much I appreciate our amazing employees for the work they are doing to safely serve our customers in these challenging conditions. And with that, I will turn the time over to Brian.

Thanks, Lisa, and hi, everyone. Thanks for tuning in today. We're glad you're here. I'm going to start on slide eight with our reconciliation of the second quarter's results. IdaCorp's net income increased almost $21 million for the second quarter compared with the second quarter of last year. I'll attribute that increase primarily to three different things. One was higher than expected usage per customer across all of our customer classes. The second one was continued customer growth. And the third was higher revenue from rate changes that went into effect at the start of this year. The net increase in retail revenues per megawatt hour that you see in the table increased operating income by nearly $20 million in the second quarter of this year. And that was due mostly to the increase in base rates from the Idaho general rate case settlement, which was effective at the beginning of this year. It was a notable improvement in this line over what we saw in the first quarter of this year, which makes sense when much of our revenue recovery is from volumetric rates. Typically, the third quarter is the more significant contributor in this area, given the outsized volumes of sales that we usually see in the third quarter. But it was also a large contributor in this second quarter's results this year. Next up, Lisa already talked about customer growth, and that growth increased operating income by $5.1 million in the second quarter this year. Usage per retail customer increased operating income by $6.2 million in the second quarter. While there was an increase in usage per customer for all retail customer classes, usage for irrigation customer increased most significantly, 17% higher year-to-date than last year. As higher temperatures and the timing of precipitation compared with last year's more moderate second quarter, led our irrigation customers to run irrigation pumps more frequently. In the second quarter, we saw an increase in cooling degree days of about 45% compared to normal. And those same high temperatures and lack of precipitation we saw for much of June continued through almost the entire month of July. Transmission wheeling-related revenues, net of power cost adjustment impacts decreased $2.5 million on a relative basis, despite a volume increase. We expected this change. a result of the terms of the settlement stipulation from our 2023 Idaho general rate case. We now track revenue from the financial settlement of transmission line losses and the power cost adjustment mechanism, making it subject to sharing with our customers. And this resulted in a much smaller overall contribution of transmission revenues to net income compared with the second quarter of last year. Total other O&M expenses increased $13.8 million in the second quarter this year. Again, not a surprise because most of that increase related to amortization of around $4 million of increased pension-related expenses and $8 million of increased wildfire mitigation program and related insurance expenses. And that was all per the Idaho general rate case settlement. Both of these increases in expenses were mostly offset by increases in retail revenues because more costs are now recovered in base rates from the 2023 Idaho general rate case settlement. 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 for this year, the pension and wildcard mitigation increases we're now recovering in revenues. And as a reminder, the collection of those elements of O&M is based largely on volumetric rates, but we record the expenses straight line during the year. In the second quarter with higher volumes, we offset more of the expense amortization with revenues than we did in the first quarter. Aside from that, inflationary pressures on labor-related costs also contributed to the increase in other O&M expenses. Depreciation expense increased $7.6 million for the quarter. This increase was from ongoing system investments we made last year and into this year to meet our continued customer and load growth. Other net changes in operating revenues and expenses increased operating income by $13.9 million. That increase was due primarily to the timing of recording and adjusting regulatory accruals and deferrals and from power supply expenses. The decrease in net power supply expenses that were not deferred for future recovery and rates through power cost adjustment mechanisms increased operating revenues and expenses. And that's a good news story. More moderate wholesale natural gas and power market prices in the western U.S., along with increased wholesale energy sales volumes, decreased Idaho Power's net power supply expenses. reducing both Idaho powers and our customers' share of those costs. And that also had a cash flow benefit that I'll talk about later today. Non-operating expense on a net basis was relatively flat. Interest expense on long-term debt was higher in the second quarter compared with the second quarter of last year, really the predictable result of an increase in long-term debt year over year. The interest expense increase was partially offset by an increase in AFUDC because our average construction work in progress balance was higher due to increased capital spending. You can see a notable increase in QIP on our balance sheet awaiting conversion to plant-in service. Also, interest income increased due to higher interest rates and higher average cash and cash equivalent balances. As I talked about last quarter, there's regulatory lag in recovery on our interest expense to finance our CapEx and in recovery of our higher depreciation expense on increased plant and service. The lag results largely from the historic averaging on rate base in our 2023 Idaho general rate case. We've proposed to mitigate that lag in part with our pending limited scope case in Idaho that focuses on year-end rate base. The increase in income tax expense was mostly the result of higher income before income taxes. partially offset by an increase in additional ADITC amortization. Remember that there's a timing component here. We record our additional investment tax credit amortization ratably per quarter based on our expectation for the full year. And based on our current expectations for full year results this year, we recorded $7.5 million of additional ADITC amortization for Idaho Power during the second quarter. By contrast, we only recorded $3.75 million of additional ADITC amortization during the second quarter last year. Year-to-date, we've recorded $20 million of additional ADITCs based on our current estimate of $40 million of ADITC usage for the full year versus $7.5 million at the same time last year based on the then-current full-year estimate of $15 million of additional ADITCs for that year. On the capital side, we've seen some of the results from our 2026 to 2027 RFP process. We were hoping to have enough details to provide a refreshed update on our CapEx forecast today. But as Lisa noted, we're still negotiating with bidders on the last few projects on the short list. We're close, but we're not quite there yet. What I can say at this point, just reiterating what I noted last quarter, there's potential for a meaningful increase in our total five-year CapEx figure compared to what we forecasted in February of this year and shared on that call. That, of course, depends on RFP results. It depends on the timing of starting and completing projects and on regulatory outcomes, and all of those are moving targets. 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, if not earlier. So stay tuned for an update there. On the financing side, in May we drew down around $230 million from the equity forward that ID Corp did in November of last year, now leaving over $60 million to be drawn under that transaction before its anniversary. That issuance was to fund our growing CapEx. and part of our goal of maintaining our capital structure and managing dilution while we fund our growth. We're still planning to use a blend of debt and equity to fund our growth, and we want to retain a debt equity ratio of at least 50-50, or slightly higher on the equity side potentially. In the past, we've had a higher equity percentage, and right now Idaho Power is sitting at 52%. We have a strong balance sheet, and we intend to keep it that way through this cycle. And to fund our equity and debt needs, all options are really on the table. To maintain that flexibility, in May, we put an ATM program in place, so we haven't issued any shares to date under the program. We think our load growth and rate-based profile, premised on a conservative view of only signed and committed loads and known projects, also a track record of 16 consecutive years of earnings growth, and a track record of operating efficiently and keeping rates affordable, are some of the factors that make IdaCorp an attractive company in the capital markets. And we want to really keep our options open on sources of debt and equity to fund our growth going forward. And our ATM is an important part of that. Turning to slide nine, as we expected, cash flow from operations improved substantially from last year. We saw close to a net $250 million comparative increase in operating cash flow in the first half of the year. The June 2023 power supply cost rate change that was included in customer rates for the first half of the year along with the revenue benefit of the January 2024 rate changes from the Idaho general rate case and the notable moderation in power supply costs all combined to help in that regard. Slide 10 shows our updated full year earnings guidance and key operating metrics. After a generally on-plan start to the year in the first quarter, we saw a notable improvement in our results in the second quarter. From that, as Amy noted, We updated our expectation of IdaCorp's earnings this year to be in the range of $5.30 to $5.45 per diluted share, which is an increase to the lower end of our guidance range. This assumes that Idaho Power will use between $35 and $50 million of additional investment tax credit amortization, an improvement from our initial estimate of $35 to $60 million. Our forecast ranges for O&M and CapEx for this year are currently unchanged. And then finally, in another piece of good news, we've raised the lower end of our hydropower generation forecast. We now expect hydropower generation to be within the range of 7 to 8 million megawatt hours for the year. We have solid carryover from the prior year, and we had a relatively strong snowpack this year, and the right weather conditions to set us up for a good generation year through our hydro facilities. And with that, we're happy to take your questions.

Thank you, and 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 followed by the number one on your phone. Please ensure that your mute function is turned off before you ask your question. We'll take as many questions as time permits on a first come basis. Once again, that is star followed by the number one on your phone to ask a question, and we'll pause for just a second. Our first question is from the line of Shar Perez with Guggenheim Partners. Hey, guys.

Good afternoon.

Hey, guys.

Hi, Shar. Good afternoon. Just real quick, with sort of the settlement now working through the process, I guess, how are you sort of thinking about the timing of the next rate case and then just concurrently the timing of the capital plan and any guidance around rate-based banks?

Are you talking about the Oregon case or the Idaho case or both?

Both, please.

Okay. So, we're hopeful that we will have the approval of the Oregon case soon. We are, again, thinking that would go into effect in October. And then, for the Idaho rate case, thinking the settlements, as I mentioned, could start. We don't have the procedural calendar yet, but we're hopeful that we could start settlement discussions sometime in September, October range. And then as far as ongoing rate cases, you know, we've been pretty clear that, you know, with the capital program that we have, you know, the regulatory lag, we're going to do as much as we can to reduce that as we go forward.

Got it. Sorry, just on the timing of just the capital plan and the guidance around rate base as you guys are getting through these settlements.

Oh, that should be around the third quarter.

Okay. All right. Perfect. That was the question. And then just around the financing, the $300 million ATM, I couldn't get a sense from your preparers, but are you planning on tapping it, or are you sort of looking at other traditional means like straight equity or junior subordinates, forwards, et cetera? Couldn't get a sense on which way you're leaning.

Yeah, Char, this is Brian. Thanks for the question. You know, the equity financing we did last year was intended to finance 2024 and actually partially into 2025 potentially. So as we look at the ATM program, we do have it in place as a financing tool. We don't really have an equity need that we see this year, but as we work our way through the RFP process, look at power supply costs, some of those things, we do see the ATM as a tool that we could use as we see fluctuations. We could also use it as a great tool to match up payment obligations with the timing of that need so the atm is an important tool for us it doesn't foreclose any other options that we have on the equity side some of it depends on the magnitude of the equity needs that will be out there which again depends a lot on cash flow and the rfp outcomes but for right now the atm does offer us a great tool to keep our capital ratio where we need but i would not suggest that it's a secondary offerings block trades as well.

Got it. And the reason why I ask is the RFP outcomes could be a little bit lumpy, right, depending on the timing, et cetera, which is why I asked on the 18th.

Yeah, sure. Yeah, sure, absolutely. Two different ways. One is the magnitude of the capex. The other aspect of that is the timing of the payment obligations. Some of the projects could be relatively substantial, and depending on BTAs or self-bills, times matters on when those payment obligations come due, and we'll have to have a financing plan that matches the timing of those payment obligations.

Okay, perfect. And just lastly for me on the O&M side, no change from the prior guide. I mean, we've seen a little bit of pressure with peers on that O&M side. I guess, what's your ability to sustain with growth kind of accelerating there? Can you kind of maintain that 1% you guys guide forward?

That's certainly our intention. That is something that's really kind of in our DNA. We work really hard at that and have for over a decade where we're really looking for ways to innovate, reduce waste, automate things, deploy technology, replacing things that have become very high in O&M costs, and really being thoughtful about our workforce Obviously, the system is growing, so we're going to need more people to help us care for the system, but we're very, very thoughtful about how we spend those dollars. Brian, what would you add?

Yeah, so I'll add just a couple points on that. Reiterate what Lisa said about the mindset and the cultural approach we have to O&M, but when we set the budget each year, I look at the people around the table and we actually apply that culture And there may be some groaning from time to time because we operate with a mindset of efficiency and the idea of looking at things differently each year when we sit down to look at our costs. And some of that is to innovate where we can. I was on a panel a couple weeks ago for an LP investment we have at IdaCorp where we talked about innovation in the utility space. And one of the things I talked about was this concept of innovation by constraint. It's this idea that when the budget is set tight, people find a way within reasonable limits to do that. And some of that takes innovation We don't shortchange things like maintenance and safety. Those always get priority and they always get spent and performed. But we do look at things like automation. Just as examples, we were an early adopter of AMI meters. We've done some AI implementation at the company. We also put a lot of effort into our contract negotiations, RFPs, making sure we're getting good pricing from our vendors. We also see O&M benefits from regulatory mechanisms. where we see some escalating costs. I think the best example of that is the wildfire mitigation deferral that currently includes vegetation management and insurance costs. We did some averaging on facility maintenance in our last case. I think that helps out from an O&M perspective, taking out some of the volatility. But I know Adam, our COO, he's got a team that's focused on grant opportunities, and so we've been able to harvest some grant funding and cost-sharing opportunities out there. A lot of the pressure is on the labor side at this point. We've got a really great workforce, and we want to retain our people and make sure they're paid. I mentioned we operate efficiently, and that's on the backs of our employees. The success in that area has been thanks to the efforts of our strong people, so making sure that we keep our labor costs at the right level is important to us.

SHAR, this is Adam. Just to give you an example, Brian and I were in a meeting earlier today. It was a capital budgeting meeting. we get absolutely into the details of everything we're spending in that company, in the company. And I think people get surprised by that sometimes in these meetings, but every dollar matters for our customers and for our shareholders. And so we really do scrutinize every line item of everything that's spent. Sometimes Brian mentioned to the chagrin of others in the meeting, but it's really important to us that that continued focus.

And the final thing that I'll say, which is probably way more than you wanted to know, Char, but when you pull the – Adam was talking about capital, Brian was talking about O&M, but it all kind of rolls up to just the reality of affordability as we go through these times of exciting building infrastructure, which we like to do. We're an infrastructure company, but we have to really be careful about the impact to our customers in the affordability realm.

Got it. Perfect. Thanks, guys. I appreciate it. And congrats on the execution. It's pretty notable. Appreciate it.

Our next question is from the line of David Arcaro with Oregon Stanley. Your line is live.

Hi, David. Hey, David. Hey. Thanks so much for taking my question. How are you doing? Great. Thanks. I was wondering if you could... Could you touch on what you're seeing in terms of the pipeline of load looking to connect into your system? How is that trending? Is that impacting your thinking at this point for the generation needs of the system going forward?

I'll start now. I'll have Adam fill in some of the details. Again, we continue to be very active in fielding inquiries from all kinds of companies that are looking to site here as well as expand here. You know, we have a planning process where we really look at how we can serve them. Some have specific needs. Others are sort of looking for just the best place to site where they can find, you know, any kind of power. So, you know, we do have a very... robust process as we are looking at that. And they're still coming. And some of them are very large, the likes of which we've never seen in our company history. And so we're very excited about that and working with them to try and figure out how we can bring them on, when we can bring them on. But again, doing it in a way that doesn't negatively impact the customers that are already here. What would you add?

Yeah, we've mentioned this before. This is Adam. We track what we call large loading queries that That's everything from a megawatt to, frankly, 1,000 megawatts. And in 2023, we had a record amount of those inquiries. When you look at 2024, it's still very robust, not quite at the level of 2023, but certainly at the same level we saw in 2021 and 2022. And there's just a variety of different companies that are looking to cite and idle everything from data centers to dairy to biodigesters to non-food manufacturing and so it's been extremely steady. In the companies that are already here, Micron and Meta, I was in a site visit on both those facilities in April and May. They are moving. There's a ton of construction work going on. At Meta it's going vertical. At Micron I think there's up to 20 cranes now working on that project. So we're just seeing a lot of growth, not only in real time,

that we can see in terms of construction but also in these inquiries that are coming in the door over the last three four or five months uh that's great to hear um got it yeah thanks for that color um let me see you know i appreciate the comments too on on uh wildfire activity and just this season so far i was just wondering like what how would you um maybe talk about the the status of your system? How has it performed so far this year? You had a PSPS event, you know, how have things operated so far and what's been, you know, more active fire season this time around?

Yeah. And, you know, it's, it's been one of the most active in our history in terms of July. And if you look at a map, I think, I don't know anyone that does not have the watch duty app on their phone these days that lives out in the West. And it, it looks like most of the West is on fire. So we're not alone there. But I would say, you know, while, especially in the Eastern Oregon area, we had just some, you know, at one point it was the largest fire in the nation, the Durkee Fire. Excuse me, you can hear the smoke in my voice. That, you know, we did burn through several of our lines. We lost hundreds of structures. But it didn't really impact the system as a whole. We were able to, you know, adapt and redeploy resources. But our teams got those lines back up as soon as they were able to get into the areas when it was safe to do so. We do have some other fires that are burning in Idaho, but not really threatening our facilities at this point. And so we watch it carefully. We have a team that is literally monitoring 24-7. It's just really the reality of the world we live in now. And as I had mentioned, we have done just a tremendous amount of hardening, whether it is vegetation management, sectionalizing lines, fuses that don't emit. Sparks, et cetera. And so we have spent and will spend hundreds of millions of dollars in the next five years to continue to harden that system. So we work carefully with our utility partners and learn from one another and are very active at EEI, for example. We're active with the state agencies and partners there to really find a way so that we can navigate through these really critical times to make sure we're all working to keep our community safe. Adam, anything you'd add?

Maybe I'll just add on the fires that our crews did a wonderful job, and in the span of about two weeks, we've been able to replace almost 400 structures, 400 poles. On the system side of things, I've got to give our load-serving operations a ton of credit, and really the folks that looked after our generation fleet It's been pretty smooth from a generation standpoint. Every year you wonder, you know, is every facility going to run the way it should, and this year it has, and that's been a real positive for us. So, you know, we've had some transmission lines go out outside of our system. That can cause some issues with imports, but the team's been able to work around that, and it's been really successful in ensuring that our customers, you know, have air conditioning going when it's 105 degrees straight for five days, which is exactly what happened here.

Yeah, got it. Okay, that's good to hear. Thanks so much. I appreciate it.

Thank you.

Our next question is from the line of Alex Mortimer with Mizuho Securities. Your line is live.

Hi, Alex. Hi, Alex.

Hey, good afternoon. You too. So, Brian, you mentioned the finalization of the RFP shortlist decisions, you know, hopefully in the coming months. Can you give any color on your expectation for the cadence of that spend throughout the five-year plan? Is it maybe more back half skewed? Just any additional detail on how things might be shaping up?

You mean in terms of the magnitude of the spend in any given year or the shaping of the spend? Yeah. So that's a little bit difficult in light of the fact that we're still negotiating the contracts in some those provide for payment at the end. There are other types of arrangements that we might negotiate that provide for payment over time, milestone payments. So it makes the shape of the CapEx a little bit hard to determine at this point. And that's one of the reasons why I noted in our prepared remarks that we just aren't quite ready yet to give a lot of guidance on our CapEx, either in terms of magnitude or shaping. I think as you've seen now, the numbers are large. We don't necessarily want to stack a large CapEx amount in any one given year, so we do look to spread that in part from a financing perspective. But in any event, whatever that shape looks like, these are important reliability projects that serve our customers, so we will go out and procure the financing to do it.

Understood. And turning to the regulatory side, you had a little over a 4% revenue increase this year from the settlement last year. another around 7% increase requested for this year. You know, given the significant necessary investment you're anticipating undergoing in the coming years, how do you think about the trajectory of your rate requests going forward, keeping in mind, obviously, the robust load growth I would imagine allows for maybe some degree of bill headroom, and then understanding that, obviously, there are some moving targets with regards to the capital projects?

Yeah, I'll start. You know, we've used different mechanisms to help sort of smooth things, and you're right. When you have a growing load base, you've got a larger denominator. That helps. We also have a regime that is based on growth paying for growth so that it doesn't have a negative impact on the existing customers. And then, you know, we will continue to work with our regulators in helping to navigate through this time so we can continue to serve our customers safely and reliably, but also paying attention to affordability. And Tim Tatum is in here. Anything that you would add, Tim? He's our VP of Regulatory.

Yeah, thanks, Lisa. This is Tim. Hi, Alex. Yeah, I think Lisa said it well. The only thing I would add is we're working through our current case, and the outcome of that case will certainly influence the next ask. Affordability, as Lisa mentions, top of mind. I think with the revenue growth, we may be able to keep things in single-digit increases, but time will tell.

Alex, this is Brian. I'll just add a couple more things on the financial side. One is that the assets that we're putting into service generally have long lives, so they're depreciated over a longer period of time, and therefore the customer rate impact isn't necessarily as large. And also the O&M sustainability that we've talked about really helps. from a customer affordability perspective as well. And then finally, we've actually been fairly successful in the RFP process at coming in as the lowest-cost provider of some of these least-cost, least-risk resources. And that benefit ultimately flows down to our customers. And finally, I had mentioned the tax credits that are generated from the projects. Those do ultimately belong to our customers and flow down to them. So to the extent those tax credits remain an option, they will be helpful to affordability going forward.

Understood. Thank you very much for the time, and congrats on a great quarter. Thank you.

Thank you for your question. Ladies and gentlemen, final call. If you do want to ask a question today, remember it's star followed by the number one on your telephone. We have a next question here from the line of Julian Dumoulin with Jeffries. Your line is live.

Hi, Julian. Hey, good afternoon.

Yeah, likewise. Pleasure to chat with you guys. Man, you talk about all hands on deck, huh? It certainly feels that way from your comments. Look, I just want to try to get this straight if I can here, because you talk about a meaningful increase in CapEx off of having increased CapEx several times over the years, so that's not a trivial percent increase, especially off of perhaps earlier baselines. But I want to talk about the financing pieces, right? Because what strikes me here is, The rating agencies put you to negative, you raise the equity still, and now we're talking about another meaningful increase, admittedly not necessarily in the near term, but I'm just thinking through the options that you have at hand, given what you've seen some of your other, should we say, broadly defined regional peers. Some are looking at all sorts of things here to try to address, as we say, this step function higher in capital capital needs for the low growth that you at least can tangibly point to today. Forget the fact that there's some further low growth ahead or revisions ahead. So bottom line, CapEx, and how does that fit with your equity financing plans in the longer term and the rating agencies, you know, considering that they still have that negative loss?

Yeah, Julian, great question. You know, when we do our financing plans, we pay a lot of attention to what the credit ratings look like. And I think if you've If you've seen our metrics in recent years, Moody's, 2023 metrics were around 14%. We actually think this year those could improve at IdaCorp and at Idaho Power, both. We target 15% CFO pre-working capital to debt at Moody's. At S&P, 2023's number, I think FFO to debt was around 14.5%. This year it could be a little lower with the CapEx, as you mentioned, but we expect that to recover over time, in part through rate cases. and eliminating some of that regulatory lag that was out there. And then hopefully moderation in some of our power supply costs will also help on the credit rating side. But at S&P, we target 15% as well. It could be a little bit lower than that in the near term, but over time improving with the rate cases that we've been filing. And then there are a lot of different options out there. We've looked at all of these financing transactions that have come out. We don't have any old code debt. We've seen hybrids and convertibles. We've seen combinations of hybrids and convertibles. There's a lot of instruments out there, but when we go out for medium-term note offerings, for example, standard secured debt at the Opco, we generally get a really good reception. And in our equity financing, we got a really good reception as well on IdaCorp Common Stock. We really do like the forward feature. We like having an ATM in place because of the ability to match the timing of costs with when we actually issue equity and and eliminating some of the earlier dilution that would otherwise result for our shareholders. But we're going to see here in the third quarter what the RFP results really look like and how to finance that. But it's, at the end of the day, going to be a blend of debt and equity. It will likely be a larger amount of debt than equity, certainly. But we do have lots of options on the table. Our balance sheet's strong. We don't have anything exotic. on our balance sheet. We don't intend to necessarily, but we think a traditional financing model is something that would work really well for us. We'll just see what our cash flow does, because cash flow will be one of the ways we finance this gap X, and we'll be looking for debt and then growth equity to finance the part that we need going forward. Hopefully by the third quarter, we'll have some more information we can share on what that specific financing plan for that growth capital would look like.

Got it. But the core of the fact that they have, you know, a negative here, you're saying, look, our metrics are where we want them to be. They'll catch up one day in terms of, you know, our view on keeping the company. And there's no intention to further improve the metrics from that, call it 14 to 15 percent range.

You know, Julian, over time, yes, we do. But when we're in this CapEx intensive period, we want to maintain our credit ratings where they are. but the improvement in the credit ratings will be later on in this capital cycle when the cash flow catches up from our regulatory cycle.

Got it. And then related here, if I can, just to push, you know, rate case cycle, you know, you've got a big quip balance standing here already over a billion dollars. And I say this, you know, obviously with something in hand already in 24 on a rate case front, but how do you think about the next big round on the rate case front, considering the quips, considering the need for cash recovery and then related, you've got a lot of spending ahead. So likely there's going to be some degree of pressure from the earlier days.

Yeah, I mean, it's true. We're going to be going in for more frequent rate cases than we have. Certainly it's not going to be another 10 years or more. And so we're just being very thoughtful about how we are spending, how we're financing, and how often we are going in for rate cases. And again, you know, we are very, very aware of the possibility of sort of rate fatigue with our customers and regulators. So we do not take that for granted and we make sure that we're, you know, communicating along the way so they know what's happening and we're doing our best.

Julian, this is Brian. What I would add is you have to recognize that QIP did increase pretty dramatically on the balance sheet, but note that a lot of that QIP is actually part of the rate case that we have in Idaho Files now, the limited scope rate case, because we're looking at a period-end planting service. So some of that are projects that are nearing completion that just haven't yet been closed to plant, and that will decrease our QIP balance fairly sizably as we move ahead. Now, there are still some large projects in QIP. You think about Those are a couple of big ones there, but that number will be declining as we put plants in service.

Got it. Okay, excellent. Thanks for clarifying that last bit. That certainly got my attention there. Good to hear it coming down a little bit. All right, guys, take care. We'll see you soon.

All right. Thanks, Julian. Thanks, Julian.

Thanks for your question, and we have no further questions at this time, so that will conclude the question and answer session for today. Ms. Groh, I will turn the conference back over to you.

Great, thank you. Thanks to everyone for joining us and for your continued interest in IDACOR, and I hope you all have a great evening. Thank you.

Thank you, and ladies and gentlemen, that will conclude today's conference. Thank you for your participation. Have a great evening.