Welcome to IDACORP's First Quarter 2021 Earnings Conference Call. Today's call is being recorded, and our webcast is live. A complete replay will be available later today and for the next 12 months on the IDACORP website. [Operator Instructions] I would now like to turn the call over to Justin Forsberg, Director of Investor Relations and Treasury.

Thank you, Kavita, and good afternoon, everyone. This morning, we issued and posted to IDACORP's website our first quarter 2021 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 today. As noted on Slide 2, our discussion includes forward-looking statements, including earnings guidance and spending forecast, which reflect our current views on what the future holds but are subject to several risks and uncertainties, including those related to the impact of the ongoing COVID-19 pandemic. This cautionary note is also included in more detail for your review in our filings with the Securities and Exchange Commission. 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 Lisa Grow, IDACORP's President and Chief Executive Officer; and Steven Keen, IDACORP's Senior Vice President and Chief Financial Officer. We also have other company representatives available for a Q&A session after Lisa and Steve provide updates. Slide four shows our quarterly financial results. IDACORP's 2021 first quarter earnings per diluted share were $0.89, an increase of $0.15 per share from last year's first quarter. Today, we also affirmed our full year 2021 IDACORP earnings guidance to be in the range of $4.60 to $4.80 per diluted share, with our expectation that Idaho Power will not need to utilize in 2021 any of the additional tax credits that are available to support earnings in Idaho under its regulatory settlement stipulation. These are our estimates as of today, and those estimates assume normal weather conditions over the balance of the year and include customer usage returning closer to pre-COVID-19 levels as we progress through the year. However, as you would expect, it is difficult to predict the full impact of evolving economic conditions on Idaho Power's customers and suppliers and how that could affect the upper end of the earnings guidance range or the use of tax credits. I will now turn the call over to Lisa.

Thanks, Justin, and thank you to everyone joining us on today's call. We have had a great start to 2021. As our customers and employees move closer to a more normal work environment, we are looking forward to reconnecting with many of you in person over the next year when possible. Our company has begun to resume some normal work operations in a phased, carefully planned manner, and we are hopeful health trends will continue to allow our working conditions to normalize in the coming months. For Idaho Power, as noted on Slide 5, the first quarter of this year saw a continuation of the strong customer growth. In March alone, we saw an annualized customer growth rate of 3.5%. This accelerated growth rate is challenging as we keep up with service connections, but our employees continue to prove that they are up for the task. Looking ahead, we expect robust growth to continue as Idaho's quality of life and business-friendly environment remain attractive. Other factors such as inquiries for large load projects suggests demand for our energy in our service area remains strong. On Slide 6, you'll see highlighted a few publicly announced large load expansions and projects. The economy within Idaho Power's overall service area continues to outperform national trends. Unemployment within Idaho Power's service area is now down to 3.7%, remaining well below the 6% rate reported at the national level, and total employment in our service area declined a modest 0.3% since March of last year. Moody's has strengthened its predictions for our service area, now projecting robust economic growth going forward even after our service area experienced a modest GDP decline in 2020 relative to the national average. The Moody's forecast now calls for growth of 8% in 2021, 8.1% in 2022 and continued strong…

Thank you, Lisa. Let's now move to Slide 9, where you'll see our first quarter 2021 financial results as compared to the same period in 2020. Overall, we had a strong start to the year with accelerating customer growth and positive impacts from transmission revenues. Altogether, IDACORP's first quarter 2021 net income was higher by $7.3 million. On the table of quarter-over-quarter changes, you'll see customer growth added $3.7 million to operating income. Lower usage per commercial customer down 2%, partly due to COVID-19 impact, was largely offset by higher residential usage due to colder weather this year versus last. The net result was a relatively modest $1.3 million decrease in overall usage per customer. The next change on the table shows that transmission wheeling-related revenues increased $4.1 million. This was partly due to a 20% increase in wheeling volumes as well as a 10% increase in Idaho Power's open access transmission tariff rate last October to reflect higher transmission costs. Colder winter weather in the Southwest U.S. contributed to the increased wheeling volumes this quarter. Next on the table, other operating and maintenance expenses decreased by $4.2 million. This was primarily due to the timing of cloud-seeding activities and cost-saving initiatives at our jointly owned coal plant. A portion of the savings also related to Idaho Power's exit from the Boardman plant in 2020 as both O&M costs and corresponding revenues were reduced due to the regulatory mechanism in place that's associated with its shutdown. We continue to see decreases in employee travel and training costs related to COVID-19 while our allowance for bad debt remains above recent levels and will likely take longer to collect. Our net deferral impact, however, remained nominal. We will continue to monitor the impacts by state to determine whether we ultimately seek recovery…

[Operator Instructions] And our first question comes from Ryan Greenwald with Bank of America.

Hi, good morning everyone. Appreciate the time. So maybe to start, just kind of coming off a strong quarter here, seasonality would imply you're comfortably kind of above guidance, and you got this accelerating customer growth and things starting to normalize a bit seemingly. Can you guys just kind of talk about the puts and takes of the remaining quarters and the decision to keep guidance intact at this range?

Sure, Ryan. If you look at our historic earnings and it -- the pattern varies a little bit quarter by quarter, but the pattern has always been that third quarter is our biggest quarter. Second quarter often leads into it a bit, and so you get better timing. So while we're happy with a good first quarter from a weather perspective and things that we maybe don't control so much, we really need to get into summer before we have a lot of confidence that all of that holds together. So it's pretty normal for us to be waiting on boldness that way until we get into summer.

Got it. And then I know it's a bit early, but in terms of potential for additional energy procurement against the back half of this robust growth, can you guys kind of dive a bit deeper in terms of how you're thinking about potential time line of opportunities and potential to rate base and magnitude of what would come in the years ahead?

Yes. Why don't we -- this is Lisa. Adam, why don't you take that question?

Sounds good. Ryan, you mentioned that significant growth is a big part of it. One of the things we're also seeing is some transmission constraints outside our borders. And I think based on what we know today, it appears these two things will likely cause us to have to need some generation resources earlier than we expected in the 2019 IRP. We're still running the models, so this is not a for-sure thing. But additional generation sources maybe in the 24 range, it looks like it may occur. With the transmission constraints, we're also continuing to see the need for transmission investments like B2H and Gateway West. So we're keeping an eye on those. Right now, B2H is scheduled for 2026, as you know. And again, we'll just keep an eye on growth in some of these transmission constraints to see if we need a resource earlier.

Yes. Ryan, because our last IRP really just got finalized a year ago, you may not be thinking that -- our new IRP will be out later this year, and I think it's not that far away before we have probably more firm numbers that we can rely on to give you a better estimate.

Great. Thanks for the time.

And our next question comes from Chris Ellinghaus with Siebert Williams.

Hey, what caused the sort of further acceleration in customer growth in March versus the earlier part of the quarter?

Boy, I wish we knew. I think a lot of it -- there's been a lot -- what the in-migration is driven by has been several things. Some of it is business climate, getting away from somewhere. We estimate or have been told that maybe it's some political refugees that are moving out of somewhere, coming to Idaho. The nicer weather, it might -- people that were sort of waiting to make a move, it's certainly easier, not in the middle of winter. So I think there's just a combination of things. And then, of course, just having COVID, the numbers going down, schools reopening. I think some of that might have influenced timing of people actually making a move. It's been just an incredible thing to watch though. I don't -- we haven't seen anything like this that I can think of in my time. So it's been exciting and challenging for sure.

Yes. Chris, this is an anecdotal comment, but I've talked to a few people who had moved in, say, 6, eight months ago and now have relatives or friends that are coming. And I think the cost of living is pretty dramatic from some of those areas. And so they find out they can come here -- they can make a nice profit where they're at, come here and have extra dollars and have maybe a lot nicer place than they had where they sold. It just seemed to be that this person was really spreading the news to family and friends of what he found to be a really nice place to come to. So I think it could be a little magnification from word of mouth, too.

Sure, yes. I think growth was happening pre COVID as well. And so I think -- yes, I think all of those things combined.

Okay. The cloud-seeding aspect of the O&M reduction for the quarter, can we assume that that's something that gets picked up in the second quarter, particularly with sort of the dry forecast?

No, that only happens in the winter. So we don't seed unless there's possibility for snow.

Yes. I think it's -- I do think we think it's going to work itself out over the course of the year on that piece. Yes, there's a piece of that savings that I wouldn't attribute as we're going to hang on to that. And I think it has to do a little bit with some of the ins and outs of expenses. And then we get -- we have others that pay for some of the cloud seeding. And I think it was just a timing issue, to some extent, of how the inflows match the outflows. So it's not a major shift in the plan or anything.

Okay. So the precipitation in the quarter was actually above normal, but Lisa, you mentioned that the snowpack was not. So how do we think about with your reservoir system looking at precipitation and sort of comparing the actual, say, rainfall that gets captured by your reservoirs versus the snowpack when we think about sort of where you are in the hydro -- or the hydrological sort of situation that you're in?

Yes, another great question. So we actually had a really dry March and April. And so that -- we didn't get the additional sort of precipitation in the form of rain that we often do. And so how the snow comes off, that's a function of mother nature as well. Right now, it really -- it got cold, and so the snow that we had didn't come off as quickly. So when it got dry, the irrigation picked up, and we saw reductions in flows because we did -- the snow was still up in the hills, if you will. So how that all sort of timing -- or will come off in real time, we're still watching. But we do, again, have that reservoir storage, so we're grateful for that. And I think we'll see what the rest of the period brings. There's certainly been times when May comes in and it's super wet and kind of saves the day, but it's -- we're not optimistic. That's just my -- that's my hopeful. I'm putting it out in the universe and hoping for that. But right now, we're just really preparing for a dry season with lower hydro and making the adjustments that are necessary to how we serve our customers.

Okay. One last.

Chris, I know you've focused a lot on our irrigation side. But from that perspective, then needing to pump the water, pull it out of the reserves is actually the part that usually gives us some lift in the summer. So it's setting up right now. It doesn't appear that short -- that it would be shortages for them, that they wouldn't get water. Certainly can't say for sure how the rest of the spring rolls out. But assuming there's plenty there, they should be using water hopefully earlier than some years. We've had a couple of kind of disappointing seasons where they really didn't start irrigating until June, and it's not looking like that this year.

Okay. Yes, I was going to ask you about this. Ag prices are quite extraordinary at the moment. So I assume that farmers are being aggressive in their planting and with the dry outlook. Is there any reason we shouldn't expect irrigation to be strong again for the summer?

We certainly think it's shaping up that way.

Yes. That's -- we've been disappointed. Occasionally, we'll have May that it rains from the start to the end. And then when it falls from the sky, they don't need a pump that's powered with electricity. But we'll see. It doesn't feel like that right now. It feels like a -- kind of back to normal really. We have had a couple of kind of wet springs that slowed us down. And I think this feels like it's a dry spring, and often springs are beautiful in Idaho where it feels like summer, San Diego.

One more thing. Last year, the first quarter was kind of a weak transmission wheeling quarter, and you did end up getting some kind of benefit from the February storminess. But they sort of seem to offset a little bit. Would you call this quarter normal for transmission wheeling? Or do you think it was extraordinary?

Maybe not extraordinary, that would probably be too much to say. But Adam and I visited about this just yesterday, I believe. And it feels like every year, there's been something. So there is another thing this year. It was kind of that imbalance that happened when Texas had its issues, the really cold weather down there. And when it happens, people see differences in prices in different areas, they decide to move that power, and that's when we get some business out of that we maybe didn't plan. But it's kind of feeling like there's something most years, I guess. So maybe we just don't know for sure what this new normal is. But at least for the last like three years, there's been different sorts of interruptions that have caused us to show up somewhere during the year.

Yes. So it's really hard to say whether it's a fundamental or is that driven.

All right. Thank you. Appreciate it.

Yes.

Chris, this is Adam. The only thing I might add, too, is it's difficult to tell what will happen to the volumes. But we have experienced an increase for the last five summers in this area, so it seems to be a trend that's at least going in the right direction from our perspective. But we'll see how it goes moving forward.

Okay. Thanks.

And what we -- the other thing I would add is that, that is a signal as to why we're bullish on transmission in general.

Right, okay. Thanks so much.

Thank you.

And our next question comes from Brian Russo with Sidoti.

So just back on the potential need for new energy resource. Is it too early to discuss what size of a resource you might need? And if Boardman to Hemingway keeps getting pushed out, does that need in size grow?

I think I will have Adam take this one as well as he's -- the IRP is under his...

Absolutely. Brian, it feels a little bit early. Like I said, we're still running through the 2021 IRP. But at this point, it feels like the need is there. The determination of the size might depend on a couple of different things. One is, again, we're seeing this significant load growth. So does that continue? I think the other thing is one of the things we tend to do is we rely on imports during the summer to help meet our peak. And what we're seeing in the transmission market is that those -- the transmission lines and the ability to import energy into our borders is decreasing because of scarcity. So we're going to test the market, see what transmission is available, and then based on that, we'll have a good understanding of what size we'll need moving forward. If B2H were to move out, yes, that would increase our need in a generation resource.

Okay. Great. And then just back on the transmission question. You mentioned the dynamics, obviously, the higher tariff rate, the volumes and wheeling power into the Southwest. Is there a scenario with dry, hot conditions west of you, in California, that you could set up a same sort of dynamic this summer where you transport power west and volumes can increase? And did that happen last summer?

I'm happy to answer that.

Yes, go ahead.

That did happen last summer from our perspective. You had the heat wave kind of in the August time frame. And when you have those high market prices and a spread between the Southern market, which is the Palo Verde market, and the MidC, people tend to use our transmission to sell between those markets. So if you saw some extreme heat again this summer, some dry conditions, it feels like, again, our transmission system would be pretty valuable for people to trade between the two markets.

Okay. Great. And then lastly, just on the guidance again. With accelerating load growth, you reaffirmed your O&M expense guidance. It looks like it's -- at least the forecast is for dry and hot. Is the only variable that holding you back right now from adjusting your guidance is weather?

Brian, that's probably the biggest one, I would say. I mean when you think about the third quarter being -- typically, it's half of our earnings. So it all -- I mean that one quarter is a crucial quarter. Some of it's irrigation, some of it is just the load. Now granted that I think we may sit here and think all this in-migration could show up in a good way there because there's more people if it happens to be hot and warm, that will have a positive impact if they're in higher tiers because they're air conditioning a lot. But it is such a dramatic impact that if it goes the other way and it can -- I wish we could predict the weather but haven't been that great at it over time. So that is the reason for this quarter -- if you go back and probably just look at the sizing of the quarters, one and four usually are not pushing the answer for us. So we're usually not jumping out just on a positive first quarter. So that is the main reason. I think you can throw in the pandemic this year, too. In the -- it looks good right now. And things are kind of improving and opening up. And all of that feels really good, but we didn't see the first change coming and who knows. So I think it's just -- we got a good one under our belt, and we're going to hope we get three more.

Yes. And it's in our nature to try to be conservative.

Exactly, yes.

Okay. Understood. And then just lastly, you mentioned you were bullish on transmission earlier. You have B2H in development, Gateway West obviously longer term. Is it a long shot to ask is there anything in pending infrastructure build that could potentially accelerate the development or ease of permitting on Boardman to Hemingway and/or Gateway West?

Potentially, certainly, having ITCs make it interesting. I don't know if the permitting will necessarily change, although there's some discussion that maybe it could. For the most part, we're getting to the end of that process anyway, so it wouldn't make a significant change to the timing based on permitting. So we're -- I like the fact that so many policymakers are now waking up to the fact that transmission is going to absolutely be needed to get to the clean futures that everybody desires and certainly this administration desires. And so I think that part is really good. And I'm hopeful that it will facilitate some of these projects that we have permitted or nearly permitted. And then whether or not there's other projects that we would take a look at, we certainly -- we don't have those indicated in the IRP at the moment, but you never know.

Great. Thank you very much.

[Operator Instructions] And that concludes the question-and-answer session for today. Ms. Grow, I will turn the conference back over to you.

Great. Thank you. Well, we thank all of you for the interest -- continued interest in IDACORP and Idaho Power, and I wish you all my very best. We're certainly enjoying a beautiful spring day here in Boise, which means it will snow tomorrow. But I hope you are enjoying whatever season you're having where you are. So thank you very much.

And that concludes today’s conference call. Thank you for your participation.