Welcome to IDACORP’s Third Quarter 2019 Earnings Conference Call. Today’s call is being recorded and webcast live. A complete replay will be available from the end of the day for a period of 12 months on the company’s website at idacorpinc.com. [Operator instructions] Now, I will turn the call over to Justin Forsberg, Director of Investor Relations And Treasury. Please go ahead.

Good afternoon, everyone. Before the markets opened this morning, we issued and posted to IDACORP’s website both our third quarter 2019 earnings release and Form 10-Q. The slides that accompany today’s call are also available on our website. We’ll refer to those slides by number throughout the call. As noted on Slide 2, our discussion today includes forward-looking statements, including earnings guidance, which reflect our current views on what the future holds. These forward-looking statements are subject to risks – to several risks and uncertainties, some of which are listed on Slide 2. This cautionary note is also included in more detail in our filings with the Securities and Exchange Commission, which you should review. 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. As shown on Slide 3, on today’s call, we have Darrel Anderson, IDACORP’s President and Chief Executive Officer; Lisa Grow, President of Idaho Power Company; and Steve Keen, Senior Vice President, Chief Financial Officer, and Treasurer. We also have other company representatives available to help answer any questions you may have after Steve, Lisa, and Darrel provide updates. On Slide 4, we present our quarterly financial results. IDACORP’s 2019 third quarter earnings per diluted share were $1.78, a decrease of $0.24 per share over last year’s third quarter. IDACORP’s earnings per diluted share for the first nine months of 2019 were $3.68, a decrease of $0.29 per share over the first nine months of 2018. Year-to-date, IDACORP’s earnings are the second highest achieved in its history, exceeded only by last year’s record results. Today, we raised the bottom end of our full-year 2019 earnings guidance estimate to the range of $4.40 to $4.50 per diluted share. We also decreased both ends of the range of our estimate of operating and maintenance expenses by $5 million. I will now turn the call over to Steve.

Thanks, Justin, and Happy Halloween, everyone. Overall, despite some challenging weather, we saw operating income relatively flat to last year’s third quarter. The nonrecurring effects of income tax reform and other positive tax return adjustments last year led to our lower net income. With that, I’ll walk you through the drivers quarter over quarter on Slide 5. Customer growth has continued to rise in Idaho Power service area at a rate of 2.6% over the last 12 months. This growth, along with lower expenses, nearly offset the decrease in retail and transmission revenues resulting from the combination of milder regional weather and greater precipitation in our service area. Net customer growth added $5.5 million to operating income in the quarter. An overall decrease in usage per customer, mostly related to lower irrigation sales and weather, decreased operating income by $8.6 million. An increase of $1.7 million in fixed cost adjustment revenues, next on the table, offsets most of the lower usage per customer in the residential and small general service categories. Precipitation in the Boise area for the quarter went from about 0.1 of an inch last year to nearly a full inch this year. In addition, overall cooling degree days were 7% below last year. Next on the table, net retail revenues per megawatt hour decreased operating income by $1 million. The settlement stipulations associated with the income tax reform reduced revenues more significantly this year, as anticipated. These items together net to a $2.4 million decrease to operating income. Transmission wheeling-related revenues were down about 24% or $5.1 million. Lower hydropower generation in the Pacific Northwest and more moderate temperatures throughout the region resulted in lower wheeling volumes this year. In addition, the open-access tariff rates declined by about 11% over the comparable period. The tariff rate filed…

Thanks, Steve, and thanks to everyone for joining today’s call. I will break format a little bit today and begin my remarks by acknowledging some organizational changes that reflect our long-term succession planning efforts. As we announced in September, and we show on Slide 8, Idaho Power’s Board of Directors named Lisa Grow as President effective October 1st. Lisa brings a tremendous level of leadership to this role and has a deep passion for our company, as she has demonstrated during an outstanding 32-year career with Idaho Power. Her deep industry experience has been key during a time of unprecedented operational and financial success. I continue as CEO of Idaho Power and President and CEO of IDACORP. Lisa has held many important roles over the years, primarily in leadership positions within engineering and operations. Most recently, she served as Idaho Power’s Senior Vice President and Chief Operating Officer. With Lisa’s promotion to President, the board also named Adam Richins as Idaho Power’s new Senior Vice President and Chief Operating Officer. Adam brings a unique background in both engineering and law to his new role. He joined the company as legal counsel in 2011 and has since served in several key leadership positions, most recently as Vice President of Customer Operations and Business Development. Lisa and Adam’s promotions were among several changes to our executive team effective on October 1. These changes are highlighted on Slide 8, and more details are posted on IDACORP’s and Idaho Power’s websites. With that, I would like now to turn the next portion of the call over to Idaho Power’s new President, Lisa Grow.

Thank you, Darrel. I’m excited to be here with everyone today, and I’m thrilled and honored to serve as the President of Idaho Power. With Darrel, our Board of Directors, and the entire executive team, our company has an outstanding leadership group, and I am grateful for the opportunity to serve them – serve with them. I would like to walk through some of the high-level trends that are helping drive our business. Customer growth is at the forefront, as shown on Slide 9. As Steve noted, growth continued upward with a customer growth rate of 2.6% over the past 12 months. It continues to be an exciting time to live and work in Idaho, with new customers of all kinds moving into and expanding in our service area. We hear many of these customers – we hear from many of these customers that the reliable, affordable, clean energy that Idaho Power provides is one of the key drivers for the economic decisions they are making in our region. As far as the activity from large business customers goes, particularly the food processing, manufacturing and distribution sectors, I have a few to highlight today. Notable large load projects that came online during the third quarter include an expansion to the Tamarack Mill in the Northern part of our service area and a large expansion of Idaho milk products in the agricultural area located in South Central Idaho that continues to see major growth. Some of you might not be aware, but Idaho is actually the third largest milk-producing state in the country. We also have several large industrial and commercial projects scheduled to begin taking service later in 2019 and beyond, including a recently announced 650,000 square foot Amazon distribution center in the Boise Valley. The center, which is expected…

Thank you, Lisa. Steve and Lisa’s remarks here today have done a good job outlining some of the opportunities our company is facing, as well as the excellent job our employees are doing to help ensure our continued financial and operational success. I want to briefly return to the dividend topic. As Steve mentioned, and as you can see on Slide 12, our customer growth and financial success has enabled us to more than double the quarterly dividend since 2011. We continue to expect to stay near the upper end of our current target dividend payout range of between 50% and 60% of sustainable IDACORP earnings. We expect to further discuss with the board the appropriate target payout ratio in mid-November. We recognize that when we began raising the dividend about eight years ago, we set the target payout ratio with the median of our utility peers in mind. We also recognize that many of our peers have increased their target payout ratios over the years and the median is now higher than the level we currently target. This fact will inform our discussion with the board at its meeting next month as we consider a potential increase to the recommended target payout ratio range. Since it is Halloween, we think it is only appropriate to end with 13 slides, and I will use the 13th slide for a look at the projected weather outlook. The National Oceanic and Atmospheric Administration currently suggests an equal chance of above or below normal precipitation levels throughout most of Idaho Power’s service area and a 40% to 50% chance of above-normal temperatures into the early winter months. Of note, our early look at October weather statistics indicate it was the coldest October since 1985, with heating degree days showing about 50% above normal for the month. It looks to be a brisk evening tonight for those trick or treaters in our service area. Reservoir storage levels continuing into this year’s snow season should continue to provide favorable conditions for generation of low-cost hydropower next year. As a reminder, our power cost adjustment mechanisms in Idaho and Oregon significantly reduce earnings volatility related to changes in our resource mix and associated power supply costs that can fluctuate greatly due to weather. In addition, the fixed cost adjustment mechanism in Idaho reduces some of the volatility of temperature changes for residential and small commercial customer classes. With that, Steve, Lisa and I, and others on the call will be happy to answer questions you may have.

Thank you. [Operator instructions] The first question is from Brian Russo with Sidoti. Please go ahead.

Hi. Good afternoon.

Hey, Brian. Good to hear from you.

Hi, Brian.

Yes, yes. Thanks. Just – are there any more PCB remarketing opportunities that we should be aware of?

No more – no, I’m sorry. Brian, that’s the end of our pollution control bonds. That is the only set that we’ve still got outstanding. So no, there won’t be another set there. I think we will continue to monitor the rest of our bond portfolio. And it’ll all depend on interest rates and where that stands, whether there’s opportunities to refinance early or not. I do think we felt like we were through the majority of those. But if interest rates continue to stay where they are, there could be opportunities.

Got it. And then your comments earlier about the solar PPA and the option to purchase it or right of first offer, I guess. Any more insight onto that actual solar project, like number of megawatts? I guess you are the off-taker, but just anything – any more detail on that would be great.

Brian, this is Darrel. It’s a 120-megawatt project. So it’s a pretty good size. It’d be the largest in Idaho.

Okay. And it needs regulatory approval so that assumes at some point, you’re going to want to add it to rate base?

Brian, it is structured as a PPA so it’s a purchase of power. I think if – as we pursue or look into whether we could be an owner, it may put us in that same position, that it would be some sort of a – it would be a pricing constructed around it, what’s in that purchase power agreement right now. I don’t really envision it becoming a true rate base asset the way it’s entered into the consideration.

It could – Brian, it could become an investment outside of Idaho Power.

Could be non-reg.

A non-reg investment for us.

Right.

Those are some of the things that we are looking at right now.

I would just say, Brian, a key component of why it’s even being considered is the pricing. And so it is – it would be around delivering that price that would make it an attractive thing that the commission might approve it. If that price – and that will be what the commission will be deciding based on other information we still need to provide them that – as to whether or not they feel like that’s a good choice to take, make an investment or a commitment, I guess, you would say, for what they believe is a lower-cost opportunity going down the road against other things that might be in the IRP. So they will have to look at that and determine if it’s prudent. They’ll probably just lock it in on a price and make it a little more of that nature of an asset than something we would put in rate base.

Got it. Understood. Okay. And then not to jump ahead too far, but the expectation for rate base, current rate base disclosures at EEI. Just curious, how are you going to treat the CWIP balance on Hells Canyon? I mean is that going to be carved out? Or just any insight there.

I think what we envision is giving you an idea of the different buckets of spend over a couple of periods of time, maybe one in the near term that’s kind of in our five-year window and some that are a little longer. That amount has largely been reviewed from the standpoint of its prudency, at least the bulk of it. We’ve continued to spend dollars. So there’s some beyond what was – what went through the prudency review. But it will need to be close to plan at some time in the future, and we’ll give you an idea of when that is without specifics because, as you know, that has been a difficult year to hit. But it isn’t – it’s nearing the window where we have to start looking at that as a likely rate base item in the near future. And it does extend beyond that. So yes. I’d say the other piece – I think the new news with that one will be once it’s closed, the obligations that come along with obtaining that license also will introduce new spending down the road, and that’s a piece I don’t think we’ve talked to you very much about.

Okay. And then lastly, just – could you just comment on your participation in the EIM? How is that going? Is it actually reducing costs? And where do you see that whole EIM construct going in the future?

So, Brian, we’re going to – Tess Park, who heads up our Power Supply group, is with us today, and she was sort of instrumental at EIM effort with her and her team. So, we will ask Tess to just briefly comment on how EIM is working for us and maybe a regional perspective.

So the EIM continues to provide benefits to Idaho Power and the region, the Cal ISO posts regional benefits for that. As always, there’s some question about the total value, but we continue to see benefits at the local level and increases in dispatch of units in our service territory supplying the market, as well as opportunities to buy at lower cost than what we could dispatch.

And, Brian, as a reminder, the benefits of the EIM end up going back to our customers, which does help us manage the price impacts to customers, which kind of – when you look at the bigger picture regulatory, that’s a real positive that way. So it’s been – today, it’s been good, and it continues to get larger with more participants coming on. And we got Bonneville now scheduled to join and some others coming on down. So it’s getting a much larger footprint.

Great. Thank you very much.

Thank you, Brian.

Thank you.

[Operator instructions] That concludes the question-and-answer session for today. Mr. Anderson, I will turn the conference back to you.

Gary, thank you so much, and thank you for all on participating on our call today. We appreciate your continued interest in our company, and we look forward to seeing many of you in Orlando at the EEI Conference in a little over a week or so. So thanks very much. Happy Halloween.

That concludes today’s conference. Thank you for your participation. You may now disconnect.