IDACORP, Inc. (IDA) Earnings Call Transcript & Summary

Good morning, everyone. I'm Lisa Grow, President and Chief Executive Officer of IDACORP and Idaho Power Company and a Director of both companies. On behalf of the directors, officers and employees of IDACORP and Idaho Power Company, I would like to welcome everyone to the 23rd Annual Meeting of Shareholders of IDACORP. If you are holding a meeting today for Idaho Power, this would be its 106th annual meeting. The annual meeting is being held as a virtual meeting again this year through a live webcast rather than as an in-person meeting. This format helps to provide a safe, consistent and convenient experience to all shareholders regardless of location. There will be a Q&A session at the end of our meeting today, and I and the other officers, of course, welcome questions from our shareholders outside of this meeting. It's a pleasure to have this opportunity to discuss with you our performance and the opportunities we see as we look to the future. As we get started, I would like to first recognize the Directors of our company who are all attending today's meeting. You can find information on our Directors in the proxy statement for the annual meeting, so I will not go through their biographies now. Our directors are: Darrel Anderson, Odette Bolano, Tom Carlile, Richard Dahl, Annette Elg, Ron Jibson, Judy Johansen, Dennis Johnson, Rick Navarro, Dr. Mark Peters and myself. With the exception of Darrel Anderson and myself, these directors are all outside Independent Directors. Odette Bolano and Dr. Mark Peters are the most recent additions to the IDACORP and Idaho Power Board, having been appointed since last year's annual meeting. All of the existing directors have been nominated for election at today's annual meeting. I would also like to thank retiring Director, Christine King, for her service on the IDACORP and Idaho Power Board. Chris joined the Board in 2006 and retired from the Board prior to today's annual meeting. She provided invaluable service to the Board with her strong technology and cybersecurity background, and her leadership skills were greatly appreciated as the Chair of the Compensation Committee. Her insight and experience will be missed, and we thank her for her contributions to IDACORP and Idaho Power. Before we move on, I would also like to recognize our officer team for both IDACORP and Idaho Power. I want to recognize them for their leadership and service to our organization and for their exceptional leadership through the COVID situation over the past year. I would not list their names now, but their biographies are on the company's website. We have an outstanding leadership team and one that is excited about our business and committed to serving you, our owners, as well as our customers and employees. For our agenda today, we will first conduct the formal business meeting. And then after the formal meeting adjourns, I will provide some additional comments about our company. Following that, we will be happy to answer your questions. Today's webcast is also being recorded. A complete replay will be available on our website starting tomorrow and continuing for the next 12 months. I would like to remind everyone that the presentation today contains forward-looking statements, which are statements that relate to future events or expectations. It's important to note that the company's future results could differ materially from those discussed at this meeting. A discussion of factors that could cause future results to differ materially can be found in our filings with the Securities and Exchange Commission, including our annual report on Form 10-K. I encourage you to review that document as well as the other documents we filed with the SEC and our various press releases. It is now my pleasure to officially call the 2021 Annual Meeting of the IDACORP Shareholders to order. This annual meeting is being held to address 3 items: to elect 11 directors for a 1-year term, to address an advisory resolution to approve executive compensation and to ratify the appointment of the independent registered public accounting firm for 2021. We may also transact other business as may properly come before the meeting. IDACORP has approximately 95,000 shareholders located throughout the U.S. and beyond. The results of the shareholder voting for the annual meeting are typically determined by the return of proxies from shareholders who are not present. And we have those results today. All shareholders or proxy holders who registered for this webcast, this meeting, also received a link to vote their shares for the annual meeting previously. Before moving to the business matters to be considered at this annual meeting, there are a few administrative matters that need to be addressed for conducting the meeting. First, a majority of the shareholder voting power outstanding is represented at this meeting by proxy. Therefore, a quorum exists for the transaction of business. Second, in accordance with IDACORP's bylaws, no matters other than those stated in the proxy statement or properly raised by a shareholder in accordance with the advanced notice provisions of the bylaws can be considered at this time. Finally, before I get started, note that if you have not already voted your shares or if you have previously voted and wish to revoke your proxy and vote now, you may do so by following the voting instructions provided in the virtual meeting e-mail sent to you earlier this morning. Remember, if you previously voted your shares on the proxy card or online, you need not do so again today, unless you so choose and want to change any of your prior vote. If you previously voted and revote today, this will revoke your previous vote. The voting mechanism for this virtual meeting will remain available until we complete the formal portion of this meeting. We will now proceed with the formal business of IDACORP's 2021 annual meeting. The first item for action by shareholders is the election of directors. 11 director nominees are up for election at this meeting. Biographies for those 11 nominees are included in the proxy statement, and I read their names at the beginning of this meeting. All 11 directors have been nominated for 1-year term to expire at the 2022 Annual Meeting. The IDACORP Board of Directors has unanimously recommended a vote for the nominees. The second order of business is the advisory resolution to approve executive compensation. This advisory resolution is commonly referred to as the say-on-pay vote. The IDACORP Board of Directors has unanimously recommended a vote for this proposal. The third order of business is the ratification of the appointment of IDACORP's independent registered public accounting firm, Deloitte & Touche LLP, for 2021. The IDACORP Board -- excuse me, the IDACORP Board of Directors has unanimously recommended a for -- a vote for this proposal. I will remind at this point that you may use the virtual meeting webcast portal to vote, if you have not already voted or wish to revoke the prior vote. The IDACORP proxy committee has voted all shares represented by proxy in accordance with the instructions in each proxy on all 3 matters. Based on the proxies received prior to the start of this meeting, the preliminary results of the voting are as follows: first, each of the 11 director nominees named in the proxy statement has been elected to serve on the Board of Directors for a 1-year term; second, the advisory resolution on executive compensation has passed; and third, the ratification of the appointment of the independent registered public accounting firm for the year 2021 has passed. At this time, I now declare the polls closed. This concludes all items scheduled for action at this Annual Meeting of Shareholders. The business portion of the meeting is now adjourned, and we will now move to the informal portion of the meeting. So welcome, everybody, again, to the 2021 Annual Meeting of Shareholders. On behalf of employees, officers and Board of Directors, I appreciate your investment in our company and your attendance today. At IDACORP, we powered through together during a very challenging year and we grew because of it. While no one could have predicted the global pandemic and its time, our company still celebrated many successes. I'd like to start by sharing a few of those highlights. First and foremost, safety is paramount at IDACORP. And in 2020, we recorded the second best safety results in company history. Safety has long been a core value of our company and this year achieved such success in our safety results while our employees were working in structural unfamiliar circumstances is a huge win. We're very proud to have reported Idaho Power in 2 safest years back to back in 2019 and 2020. This success speaks to our focus on safety and raises the bar for us to continue enhancing our strong safety culture. I'd like to acknowledge our medical professionals, first responders and countless others who have helped keep us safe during this pandemic. At Idaho Power, we activated our emergency management team and organized a reconnect team to help us monitor the pandemic, keep employees informed and engaged and establishing health and safety protocols. Today, I would like to recognize these groups for their efforts. You have significantly contributed to keeping our employees safe and our business moving along with as little interruption possible. Over the course of 2020, I had the honor of awarding 8 Idaho Power employees with the President Safety Award, which recognizes outstanding examples of practicing the company's 4 vital safety behaviors; focus, assess, speak up and make the safe choice. I'd like to highlight 1 awardee today: Lineman [ Lloyd Mat ]. [ Lloyd ] and his family were out for a Sunday drive on a motorcycle carrying 2 passengers with gear, sending both riders tumbling down the road. Lloyd's Idaho Power emergency training and his experience as a long-time volunteer with Salmon's search and rescue team sent him into immediate action. He quickly secured the scene and made sure the victims were breathing. With no cellphone coverage, [ Lloyd ] used the search and rescue radio to call for help. He [indiscernible] from his car and supplies in his first aid kit to keep both victims safe, stable until an ambulance arrived nearly an hour later. [ Lloyd ] also enlisted the help of his family to direct traffic and dedicated jobs to other motorists who stopped to assist. Once the ambulance arrived, Lloyd stayed on the scene as 1 victim was transported to the hospital in Salmon and the other was flown by helicopter to a bigger hospital out of town. I'm incredibly grateful for people like Lloyd, and through daily actions, great and small, our employees take to keep themselves each other and our customers safe. Second, I'd like to talk about reliability. We maintained excellent system reliability throughout 2020, keeping the lights on 99.96% of the time. Given the circumstances, this is an incredible achievement, one that highlights the resiliency of both our people and our infrastructure. If our customers face the uncertainty of the pandemic, our role as an essential service provider was more important than ever. I'm glad we were able to be there for our customers by powering their home, lives, businesses with reliable energy. With an eye towards continued reliability as our service areas grow, our company continues to strengthen its breadth. Ongoing projects include building the substations, building and upgrading transmission and distribution lines and implementing actions in our Wildfire Mitigation Plan. We expect that existing and sustained future customer growth will require that Idaho Power procure other resources of energy and capacity to [indiscernible] as well as to maintain system reliability. We are in the process of analyzing options for potential energy and capacity resource procurement, while at the same time, working on our 2021 integrated resource plan in conjunction with the IRP advisory capital. I can't talk about the reliability without acknowledging our outstanding employees to maintain power quality and reliability round the clock, opting in challenging circumstances. On top of pandemic safety protocols this past year, our [indiscernible] of weather-related challenges. In July, a big storm damaged equipment located on an island in Snake River. With no road access, crews used the helicopter to shuttle materials and equipment to the island, working long hours to safely restore power. Other nature, Delta is another challenge in September when a fire destroyed 50 power poles in Hells Canyon. While lines [indiscernible] work to replace the poles and restore power, our maintenance team protected our facility by creating fire brace and clearing brush around the pole. Things like these truly require all hands on deck from lineman working around and solving all conditions to customer service representatives responding to customer needs. You will be hard-pressed to find a better team than our Idaho Power employees. Third, IDACORP enjoyed another year of financial success. We achieved our 13th consecutive year of earnings growth, a feat we believe is unprecedented among investor-owned utilities in the U.S. We also preserved the full $45 million of tax credits available under our Idaho regulatory stipulation for future earnings support. And we increased the quarterly dividend on IDACORP common stock for the ninth consecutive year. Strong customer growth and effective cost management remain key contributors to our financial success and stability. Idaho was once again fastest-growing state in the U.S. in 2020. And Idaho Power experienced 2.7% customer growth across the service area. That growth continues to accelerate as we experienced 3.5% growth this March. Efforts to control costs are also paying off. As our employees were to stay within budget, our 2020 operations and maintenance expenses were down compared to 2019. Of course, limited travel because of the pandemic also played a role in this savings. Finally, I'd like to highlight how we supported our community. Corporate citizenship has always been important to Idaho Power, and our role in the community has been even greater importance in 2020. As many of our friends and neighbors were impacted by the pandemic, our company donated more than $1 million to charitable organization, connected our communities with bill assistance programs and temporarily suspended disconnection. Much of our giving was directed at food pantries, shelters, senior centers and other pandemic relief programs. Our employees also provided many hours of community services and volunteerism. As always, matching funds from IDACORP shareowners help maximize the impact of our corporate giving. I'd like to share one of the many stories that show how much our employees care for their community. When the pandemic hit, one of our customer service representatives, [ Lisa Modest ], pushed her team and talent -- time and talent be used by selling dozens of masks for local hospitals, animal shelters and those who couldn't afford to purchase their own. She even took a thing to step further, creating clear-windowed masks after receiving a request from a local speech therapy clinic, that either a way to communicate with patients while staying safe. Then during her regular job, [ Lisa ] happened to be on the phone with a customer who needed medical assistance. Lisa recognized the need, spoke up, and contacted the police to complete a wellness check on the customer. We later received a letter from the customer thanking [ Lisa ], who we recognized with the President Safety Award for permitting efforts to keep our customers and team be safe. This is the kind of people we employ at Idaho Power, and I couldn't be prouder to be their leader. In addition to many efforts in the communities we serve, our focus on the customer experience continues to make an impact on 2020. Idaho Power received some of the highest overall customer satisfaction scores ever achieved. And at 86%, our 2020 customer relationship index was the second highest ever achieved in the calendar year. Satisfaction among all customers was consistently high throughout 2020 with large commercial and irrigation customer satisfaction scores at or near all-time record by year-end. While 2020 included many success stories for IDACORP and Idaho Power, it also highlighted how our business is evolving. As the energy landscape shifts, we believe our adaptability and focus on sustainability will position us for continued success. I want to touch on a few of those areas today. First, we will continue modernizing our business. The energy industry faces the balance of adopting new technologies and a clean energy future while maintaining reliability and affordability. We are fortunate, thanks largely to our hydroelectric system, Idaho Power already has a very clean energy mix and prices among the lowest in the nation. So how do we build on this foundation? Strengthening the grid is key. One of the tough lessons energy companies learned in 2020 and into 2021, was how difficult prolonged outages can be for utilities and their customers. We continue to enhance our grid by integrating new technologies, strengthening physical and cybersecurity and emphasizing the role of transmission in maintaining reliability and affordability as we move toward our goal of 100% clean energy by 2045. As we modernize our business, digitalization provides adaptability. One of my favorite takeaways from 2020 was how much we accomplished and how little was interrupted with so many of our employees working remotely. The circumstances were not ideal. But technology allowed us to stay connected to our work, our customers and each other. We are doing more focused digitalization work, enhancing areas ranging from our customers' experience to how we operate the grid. As technology evolves, electrification is coming, exciting advances in technology like electric vehicles providing many benefits. Powered homes, businesses and transportation with electricity provides cleaner, more cost-effective solutions than gas and other fuels. In addition to electrifying our own fleet, Idaho Power is working with customers and communities to add EV charging stations and continue moving electrification forward. Second, I'd like to talk about how environmental sustainability guides our work. Clean energy remains a top-of-mind issue for our company. We are striving to reach our goal of 100% clean energy by 2045, and the Boardman coal-fired plant closed in 2020. We also continue to work with businesses in cities on reaching their own clean energy goals. We understand the path towards the clean energy future won't always be a straight line, especially as we balance price and reliability. But we are committed to the journey. Our environmental work extends beyond clean energy. There are lots of exciting things happening in our Snake River stewardship, fish management and raptor protection program. Notably, Idaho Power received the Idaho chapter American Fisheries Society Aquatic Habitat Award for our Bayha Island Research Project. We were nominated for the award by the Idaho Fish and Game. Hydroelectricity remains Idaho Power's largest energy resource in 2020, and we continue to utilize long-term purchases of energy from additional clean resources -- clean resources, including wind, solar and hydro. I encourage our owners to check out our 2020 ESG report, which was issued today and is available on the IDACORP website. This robust document formerly known as the sustainability report covers many areas that may be of interest to investors, including our carbon emissions data, our clean energy goal and Idaho Power's energy mix. In addition to sustainability, our company is committed to diversity and inclusion. We live in a divisive time. All different beliefs and views are often a source of friction. We at Idaho Power believes in an inclusive environment where we are all valued, respected and given equal consideration for our contribution. We won't always agree with one another, but we are a stronger company when we stand together and embrace our differences. This commitment extends to our community. Idaho Power recently donated $15,000 to the Wassmuth Center for Human Rights, home of the Anne Frank Memorial in Boise. The donation is earmarked for an electronic kiosk in the new human rights education center, intended to better serve Idaho's classrooms and community and to support the center's mission, to promote respect for human dignity and diversity through education and to foster individual responsibility to work for justice and peace. As we prepare to return to the office and our new normal later this year, I look forward to continuing to build upon our strong company culture of diversity, inclusion and respect for all. Customer growth has been a reoccurring theme over the past several years and we expect this to continue. Despite the impact of COVID-19, Idaho Power's service area remains one of the fastest growing in the U.S. The influx of business and residential customers continues to benefit our company. Our employees have worked hard to accommodate this work often through long nights and weekends. And we are preparing for a future that includes continued growth and electrification, which take additional investment by Idaho Power. In doing so, we will keep our eye on our 100% clean energy strategy as we advance projects by Boardman-to-Hemingway transmission line to transport clean energy across the Northwest. We are also working on other transmission resources, hydroelectric relicensing in our [indiscernible], improving the efficiency of our plants and potentially adding new resources and storage projects. As we look to the future, we have an outstanding leadership group in place at IDACORP and Idaho Power. It's a privilege to be part of such a great team and never has their knowledge, guidance and compassion lend more to me in the past years. Stepping into my new role at the height of the pandemic was a unique challenge, but having the support of my colleagues was a constant source of comfort and strength. I'm happy to introduce 2 new officers appointed in 2020. Mitch Colburn as Vice President of Planning, Engineering & Construction; and Jason Huszar as Vice President of Information Technology and Chief Information Officer. Both bring a wealth of experience to our leadership team and their input will be crucial moving forward as we capital transmission line projects and continue to modernize and digitalize our grid and our business. We also have 2 new additions to our Board of Directors: Odette Bolano, CEO of Saint Alphonsus Health System; and Dr. Mark Peters, Executive Vice President for Laboratory Operations at Battelle Memorial Institute. Odette's background in health care ties to the communities we serve, and Mark's expertise in energy technology and cybersecurity further strengthened the outstanding governance team leading our company into the future. Our company has grown in unexpected ways over the past 12 months. Our ability to take care of each other, meet financial targets, sustained earnings growth for our owners and continue to provide reliable, affordable clean energy for our customers is a testament to our great employees as well as the resiliency and adaptability of our company. The stories of 2020 are a great reminder that no matter what the challenge -- what the challenges are to come our way, IDACORP and Idaho Power are ready to adapt, adjust and power through. Thank you for your investment in IDACORP, and we look forward to sustained prosperity in 2021 and beyond. We will now be happy to respond to your questions. [Operator Instructions]

So we have a few questions that were submitted previously. And one of them is from [ Lisa Hat ], and she is asking about IDACORP's trajectory towards 0 carbon and recognizes that in our 2019 IRP, carbon emissions were projected to rise through that journey. And the question is, if Idaho Power's commitment to clean energy is real and not just greenwashing, how Idaho power demonstrate consistent progress towards this goal in 2021 IRP. And the answer to that we're saying to everyone, this is not going to be a straight line. It is over time and that's why we gave it a long 25-year runway. It's critical that we also balance reliability and affordability. And so it is not greenwashing. We, in fact, have already shut down 2 coal plants -- coal units. And so we are really making headway there. And as we work our way through it, we have to balance all 3: reliability, affordable and clean. So I'll move on to the next question. One was about the mitigation of wildfires and really asking how are we positioned related to what we've seen happening around us, certainly California, Oregon, Washington were really hit hard by fire. So while I'd say we have a very robust fire mitigation program, we are -- it includes really effective vegetation management, new equipment, such as fuses that will not expel sparks, our own practices, how we -- whether we avoid driving to [indiscernible] and how we work around that equipment. And so we feel like we are in a really good place, and we don't have some of the similar weather phenomenon that happen in California, for example, with the Santa Ana wind, but they do happen and so we really make sure that we have done everything we can to mitigate our equipment involvement as well as make sure that it won't happen either naturally or caused by someone else that our system can survive that events. And another new thing we've had is a fire sort of index. We publish it every day. So we're looking at all the conditions that exist with weather, intending storms, what have you, so that we are -- and we have special areas that we are watching. I mean across our system, we created the high-risk areas on map and know. And so we focus really a lot of the effort into those areas. And then we're watching carefully as -- in each of the zones what we see is the fire potential index. So we feel very good about where we are. Certainly, there are things that happen that are out of our control. So we work very hard to make sure we can survive it and that we can restore power if something does happen. And the second question, again, this is from [indiscernible], asking about the Hells Canyon dams are part of Congressman Simpson's proposed legislation. And no, they are not. And the dams that Congressman Simpson's bill focuses on are actually owned by Bonneville Power, the government dam. And so the bill actually suggests that we would extend our license for our Hells Canyon dam. So they are not slated to be removed, and we are certainly watching the bill carefully, but we're not exactly positioned the same as those 4 dams on the lower Snake. And then we have 1 from [indiscernible] who we all know very well, former employee. And we miss very much [indiscernible] and you ask -- you did ask the question, what technologies and research contribute to reliability, resiliency and security to service to our customers. And what I am thinking of is, we are really looking hard at hydrogen, for example. I'm really excited about the possibility of over time being able to switch out natural gas for hydrogen. And there's a lot of work being done in that area, and there's a lot of buzz about it. And I think there's some great opportunities there. The other thing that I think you talked [indiscernible] is we need visibility and control of the distribution system that will really help to further optimize how we operate that system, much like we do in the bulk electric system that really can help with the addition of all distributed resources, we really are going to need to be able to operate that system differently. And so if you have any other great ideas, we're all here. And he does note in his question, he said he's not quite [ guest ], so I'm glad that if he takes. And we look forward to any other great ideas that you have. Let's see. We have another question from [ Lisa Hat ]. How will we -- how Idaho Power, excuse me, incorporate in leading towards consistently approaching 2045 clean energy goals through its operational principals and decision-making. And again, it is -- our goal is a journey to 2045. And as I mentioned a few times, not a straight line. So we are balancing reliability, affordability and clean. And so sometimes that's what makes the line straight, then another time. But it is a trend downwards. So it's always top of mind. We are looking at all the options that we have available, but again, stress the need to really balance all 3 because it's in that order. This was not reliable, nobody really cares about the rest. If you can't afford it, that puts a lot of stress on our customers. And clean is very important, but we've got to meet the other 2 as well. I see another question. How is Idaho Power building technical expertise in information and computer science in its Board executives and workforce to meet the growing demands of the world of machine intelligent grid? We -- well, I mentioned on the Board certainly adding Dr. Mark Peters was a driving force. In addition, he has access. He runs all of the national labs. So we're very excited about having access to that expertise as well. And then for our own workforce and executive, I mentioned the promotion of Jason Huszar. We continue to upskill our IT folks as we go in through digital -- more digitalization requires that kind of skill. Private security continues to be a very big focus of what we're doing. So we are making sure that we have the skills we need in cybersecurity if that remains a continued threat. And then there's another question with -- asking about how we prepare to support ransomware attack. What's the company done to keep current with the security recommendation? And I'm going to turn that one to Brian Buckham who heads up that.

Yes. Thanks [ Kerry ], for the question. This is Brian Buckham, I'm the company's General Counsel. We have a number of systems in place for cybersecurity. And those includes systems for ransomware. And that's basically been [indiscernible] always special attention or something that we had our attention on and we have a team of cyber professional tasked with our security profile and we receive threat intelligence from a number of sources, and that includes both government partners and private entities. And so that combination of people and tools and intelligent sources are how we approach our cybersecurity efforts, both for our cyber team and our IT team as well. This is reflective of the importance of this period to your company and our shareholders and other stakeholders. So we'll be doing with some information on our cybersecurity efforts in ESG report. Now we should mention that we posted on our website today. So I encourage people to take a look at that ESG report, what we talked about on the cybersecurity side.

So another question comes from [ chatwork ]. Is the company currently accounting for carbon emission intensity when meeting supply [indiscernible] best decision. For example, is carbon considered on an hourly basis whether to call on a [indiscernible] resource or to import more clean energy through the energy imbalance market. If not, is the company willing to consider incorporating the carbon intensity of its supply resource options and its dispatch decisions? And again, I'll go back to use the balance of reliability, affordability and clean. So we have a very clean portfolio to begin with. And certainly, we try to utilize as much hydro as we can. We have all the PPA contracts from other resources when they're available. And then, of course, you've got to keep the lights on, so we will supplement it with the carbon emitting resources as required. So it is certainly something that we think about. But again, balancing the 3 criteria. So everything I noted, I give [indiscernible] representative Simpson's plan is not a bill yet to the proposal. Okay. Well, we felt -- hopefully, we've answered all the questions satisfactorily. And we thank you again for having -- for attending the annual meeting and for your questions. We appreciate your investment in IDACORP and look forward to your continued participation at future annual meetings. Thank you.