| Benefit Plans | BENEFIT PLANS Idaho Power sponsors defined benefit and other postretirement benefit plans that cover the majority of its employees. Idaho Power also sponsors a defined contribution 401(k) employee savings plan and provides certain post-employment benefits. Pension Plans Idaho Power has a noncontributory defined benefit pension plan (pension plan) and two nonqualified defined benefit plans for certain senior management employees, the SMSP. Idaho Power also has a nonqualified defined benefit pension plan for directors that was frozen in 2002. Remaining vested benefits from that plan are included with the SMSP in the disclosures below. The benefits under these plans are based on years of service and the employee's final average earnings. The following table summarizes the changes in benefit obligations and plan assets of these plans (in thousands of dollars): Pension Plan SMSP 2023 2022 2023 2022 Change in projected benefit obligation: Benefit obligation at January 1 $ 953,769 $ 1,346,530 $ 99,976 $ 133,012 Service cost 29,843 52,025 612 1,185 Interest cost 51,277 39,670 5,322 3,897 Actuarial loss (gain) 41,539 (438,297) 6,518 (32,009) Plan amendment — — 11 — Benefits paid (48,412) (46,159) (6,630) (6,109) Projected benefit obligation at December 31 1,028,016 953,769 105,809 99,976 Change in plan assets: Fair value at January 1 839,728 984,464 — — Actual return on plan assets 78,197 (138,577) — — Employer contributions 48,000 40,000 — — Benefits paid (48,412) (46,159) — — Fair value at December 31 917,513 839,728 — — Funded status at end of year $ (110,503) $ (114,041) $ (105,809) $ (99,976) Amounts recognized in the balance sheet consist of: Other current liabilities $ — $ — $ (6,608) $ (6,514) Noncurrent liabilities (110,503) (114,041) (99,201) (93,462) Net amount recognized $ (110,503) $ (114,041) $ (105,809) $ (99,976) Amounts recognized in AOCI consist of: Net loss $ 108,334 $ 83,263 $ 21,074 $ 15,127 Prior service cost 31 37 2,200 2,408 Subtotal 108,365 83,300 23,274 17,535 Less amount recorded as regulatory asset (1) (108,365) (83,300) — — Net amount recognized in AOCI $ — $ — $ 23,274 $ 17,535 Accumulated benefit obligation $ 892,325 $ 837,377 $ 99,786 $ 93,995 (1) Changes in the funded status of the pension plan that would be recorded in AOCI for an unregulated entity are recorded as a regulatory asset for Idaho Power as Idaho Power believes it is probable that an amount equal to the regulatory asset will be collected through the setting of future rates. The actuarial losses reflected in the benefit obligations for the pension and SMSP plans in 2023 are due primarily to decreases in the assumed discount rates of both plans from December 31, 2022, to December 31, 2023. The actuarial gains reflected in the benefit obligations for the pension and SMSP plans in 2022 are due primarily to increases in the assumed discount rates of both plans from December 31, 2021, to December 31, 2022. For more information on discount rates, see “Plan Assumptions” below in this Note 11. As a non-qualified plan, the SMSP has no plan assets. However, Idaho Power has a Rabbi trust designated to provide funding for SMSP obligations. The Rabbi trust holds investments in marketable securities and corporate-owned life insurance. The recorded value of these investments was approximately $146.2 million and $134.2 million at December 31, 2023 and 2022, respectively, and is reflected in Investments and in Company-owned life insurance on the consolidated balance sheets. The following table shows the components of net periodic pension cost for these plans (in thousands of dollars). For purposes of calculating the expected return on plan assets, the market-related value of assets is equal to the fair value of the assets. Pension Plan SMSP 2023 2022 2021 2023 2022 2021 Service cost $ 29,843 $ 52,025 $ 54,202 $ 612 $ 1,185 $ 813 Interest cost 51,277 39,670 37,317 5,322 3,897 3,557 Expected return on assets (61,728) (72,348) (64,090) — — — Amortization of net loss — 12,273 23,796 570 4,229 4,205 Amortization of prior service cost 6 6 6 219 279 296 Net periodic pension cost 19,398 31,626 51,231 6,723 9,590 8,871 Regulatory deferral of net periodic pension cost (1) (18,553) (30,197) (48,962) — — — Previously deferred pension cost recognized (1) 17,154 17,154 17,154 — — — Net periodic pension cost recognized for financial reporting (1)(2) $ 17,999 $ 18,583 $ 19,423 $ 6,723 $ 9,590 $ 8,871 (1) Net periodic pension costs for the pension plan are recognized for financial reporting based upon the authorization of each regulatory jurisdiction in which Idaho Power operates. Under an IPUC order, the Idaho portion of net periodic pension cost is recorded as a regulatory asset and is recognized in the income statement as those costs are recovered through rates. (2) Of total net periodic pension cost recognized for financial reporting $18.2 million, $19.0 million, and $17.8 million respectively, was recognized in "Other operations and maintenance" and $6.5 million, $9.2 million, and $10.5 million respectively, was recognized in "Other (income) expense, net" on the consolidated statements of income of the companies for the twelve months ended December 31, 2023, 2022, and 2021. The following table shows the components of other comprehensive income (loss) for the plans (in thousands of dollars): Pension Plan SMSP 2023 2022 2021 2023 2022 2021 Actuarial (loss) gain during the year $ (25,071) $ 227,372 $ 91,156 $ (6,517) $ 32,009 $ (33) Plan amendment service cost — — — (11) — — Reclassification adjustments for: Amortization of net loss — 12,273 23,796 570 4,229 4,205 Amortization of prior service cost 6 6 6 219 279 296 Adjustment for deferred tax effects 6,452 (61,686) (29,590) 1,477 (9,399) (1,150) Adjustment due to the effects of regulation 18,613 (177,965) (85,368) — — — Other comprehensive income (loss) recognized related to pension benefit plans $ — $ — $ — $ (4,262) $ 27,118 $ 3,318 The following table summarizes the expected future benefit payments of these plans (in thousands of dollars): 2024 2025 2026 2027 2028 2029-2033 Pension Plan $ 49,316 $ 50,736 $ 52,275 $ 53,777 $ 55,322 $ 303,171 SMSP 6,608 6,761 6,847 6,887 6,975 36,320 Idaho Power’s funding policy for the pension plan is to contribute at least the minimum required under the Employee Retirement Income Security Act of 1974 (ERISA) but not more than the maximum amount deductible for income tax purposes. In 2023, 2022, and 2021, Idaho Power elected to contribute more than the minimum required amounts in order to bring the pension plan to a more funded position, to reduce future required contributions, and to reduce Pension Benefit Guaranty Corporation premiums. As of the date of this report, IDACORP and Idaho Power have no estimated minimum required contributions to the pension plan for 2024. Depending on market conditions and cash flow considerations in 2023, Idaho Power could contribute up to $30 million to the pension plan during 2024 in order to help balance the regulatory collection of these expenditures with the amount and timing of contributions and to mitigate the cost of being in an underfunded position. Postretirement Benefits Idaho Power maintains a defined benefit postretirement benefit plan (consisting of health care and death benefits) that covers all employees who were enrolled in the active-employee group plan at the time of retirement as well as their spouses and qualifying dependents. Retirees hired on or after January 1, 1999, have access to the standard medical option at full cost, with no contribution by Idaho Power. Benefits for employees who retire after December 31, 2002, are limited to a fixed amount, which has limited the growth of Idaho Power’s future obligations under this plan. The following table summarizes the changes in benefit obligation and plan assets (in thousands of dollars): 2023 2022 Change in accumulated benefit obligation: Benefit obligation at January 1 $ 59,099 $ 74,075 Service cost 658 1,071 Interest cost 2,980 2,112 Actuarial gain (2,004) (21,845) Benefits paid (1) (4,669) (4,379) Plan amendments — 8,065 Benefit obligation at December 31 56,064 59,099 Change in plan assets: Fair value of plan assets at January 1 28,565 41,464 Actual return on plan assets 7,219 (6,586) Employer contributions (1) 690 (1,934) Benefits paid (1) (4,670) (4,379) Fair value of plan assets at December 31 31,804 28,565 Funded status at end of year (included in noncurrent liabilities) $ (24,260) $ (30,534) (1) Contributions and benefits paid are each net of $2.6 million and $2.9 million of plan participant contributions for 2023 and 2022, respectively. Amounts recognized in AOCI consist of the following (in thousands of dollars): 2023 2022 Net gain $ (27,231) $ (20,896) Prior service cost 6,184 7,849 Subtotal (21,047) (13,047) Less amount recognized in regulatory assets 21,047 13,047 Net amount recognized in AOCI $ — $ — The net periodic postretirement benefit cost was as follows (in thousands of dollars): 2023 2022 2021 Service cost $ 658 $ 1,071 $ 1,063 Interest cost 2,980 2,112 2,059 Expected return on plan assets (1,650) (2,351) (2,395) Immediate recognition of loss from temporary deviation (1) — — 4,736 Amortization of net loss (1,237) (31) — Amortization of prior service cost 1,665 295 47 Net periodic postretirement benefit cost $ 2,416 $ 1,096 $ 5,510 (1) In 2021, a loss associated with a temporary deviation from the cost-sharing provisions of the substantive plan was recognized in "Other (income) expense, net" on the consolidated statements of income of the companies. The following table shows the components of other comprehensive income for the plan (in thousands of dollars): 2023 2022 2021 Actuarial gain during the year $ 7,572 $ 12,908 $ 9,718 Prior service cost arising during the year — (8,065) — Reclassification adjustments for: Amortization of net loss (1,237) (31) — Amortization of prior service cost 1,665 295 47 Immediate recognition of loss from temporary deviation (1) — — 4,736 Adjustment for deferred tax effects (2,059) (1,315) (2,514) Adjustment due to the effects of regulation (5,941) (3,792) (11,987) Other comprehensive income related to postretirement benefit plans $ — $ — $ — (1) In 2021, a loss associated with a temporary deviation from the cost-sharing provisions of the substantive plan was recognized in "Other (income) expense, net" on the consolidated statements of income of the companies. The following table summarizes the expected future benefit payments of the postretirement benefit plan (in thousands of dollars): 2024 2025 2026 2027 2028 2028-2032 Expected benefit payments $ 4,909 $ 4,734 $ 4,556 $ 4,386 $ 4,277 $ 19,988 Plan Assumptions The following table sets forth the weighted-average assumptions used at the end of each year to determine benefit obligations for all Idaho Power-sponsored pension and postretirement benefits plans: Pension Plan SMSP Postretirement 2023 2022 2023 2022 2023 2022 Discount rate 5.10 % 5.45 % 5.20 % 5.50 % 5.15 % 5.45 % Rate of compensation increase (1) 4.43 % 4.49 % 4.75 % 4.75 % — — Medical trend rate — — — 7.1 % 6.7 % Dental trend rate — — — 3.5 % 3.5 % Measurement date 12/31/2023 12/31/2022 12/31/2023 12/31/2022 12/31/2023 12/31/2022 (1) The 2023 rate of compensation increase assumption for the pension plan includes an inflation component of 2.40% plus a 2.03% composite merit increase component that is based on employees' years of service. Merit salary increases are assumed to be 10.6% for employees in their first year of service and scale down to 3.4% for employees in their fortieth year of service and beyond. The following table sets forth the weighted-average assumptions used to determine net periodic benefit cost for all Idaho Power-sponsored pension and postretirement benefit plans: Pension Plan SMSP Postretirement 2023 2022 2021 2023 2022 2021 2023 2022 2021 Discount rate 5.45 % 3.05 % 2.80 % 5.50 % 3.00 % 2.70 % 5.45 % 2.95 % 2.70 % Expected long-term rate of return on assets 7.40 % 7.40 % 7.40 % — — — 6.00 % 6.00 % 6.00 % Rate of compensation increase 4.49 % 4.49 % 4.49 % 4.75 % 4.75 % 4.75 % — — % — % Medical trend rate — — — — — — 6.7 % 5.8 % 6.3 % Dental trend rate — — — — — — 3.5 % 3.5 % 3.5 % The assumed health care cost trend rate used to measure the expected cost of health benefits covered by the postretirement plan was 6.7 percent in 2023 and is assumed to increase to 7.1 percent in 2024, 6.5 percent in 2025, decrease to 5.8 percent in 2026, and to gradually decrease to 3.8 percent by 2074. The assumed dental cost trend rate used to measure the expected cost of dental benefits covered by the plan was 3.5 percent, or equal to the medical trend rate if lower, for all years. Plan Assets Pension Asset Allocation Policy: The target allocation and actual allocations at December 31, 2023, for the pension asset portfolio by asset class is set forth below: Asset Class Target Actual Debt securities 25 % 24 % Equity securities 56 % 60 % Real estate 8 % 8 % Other plan assets 11 % 8 % Total 100 % 100 % Assets are rebalanced as necessary to keep the portfolio close to target allocations. The plan’s principal investment objective is to maximize total return (defined as the sum of realized interest and dividend income and realized and unrealized gain or loss in market price) consistent with prudent parameters of risk and the liability profile of the portfolio. Emphasis is placed on preservation and growth of capital along with adequacy of cash flow sufficient to fund current and future payments to plan participants. The three major goals in Idaho Power’s asset allocation process are to: • determine if the investments have the potential to earn the rate of return assumed in the actuarial liability calculations; • match the cash flow needs of the plan. Idaho Power sets debt security allocations sufficient to cover approximately five years of benefit payments. Idaho Power then utilizes growth instruments (equities, real estate, venture capital) to fund the longer-term liabilities of the plan; and • maintain a prudent risk profile consistent with ERISA fiduciary standards. Allowable plan investments include stocks and stock funds, investment-grade bonds and bond funds, real estate funds, private infrastructure funds, private direct lending funds, private equity funds, and cash and cash equivalents. With the exception of real estate holdings, private infrastructure holdings, private direct lending loans, and private equity, investments must be readily marketable so that an entire holding can be disposed of quickly with only a minor effect upon market price. Rate-of-return projections for plan assets are based on historical risk/return relationships among asset classes. The primary measure is the historical risk premium each asset class has delivered versus the yield on the Moody's AA Corporate Bond Index. This historical risk premium is then added to the current yield on the Moody's AA Corporate Bond Index. Additional analysis is performed to measure the expected range of returns, as well as worst-case and best-case scenarios. Based on the current interest rate environment, current rate-of-return expectations are lower than the nominal returns generated over the past 30 years when interest rates were generally higher. Idaho Power’s asset modeling process also utilizes historical market returns to measure the portfolio’s exposure to a “worst-case” market scenario, to determine how much performance could vary from the expected “average” performance over various time periods. This “worst-case” modeling, in addition to cash flow matching and diversification by asset class and investment style, provides the basis for managing the risk associated with investing portfolio assets. Fair Value of Plan Assets: Idaho Power classifies its pension plan and postretirement benefit plan investments using the three-level fair value hierarchy described in Note 16 - "Fair Value Measurements." The following table presents the fair value of the plans' investments by asset category (in thousands of dollars). Level 1 Level 2 Level 3 Total Assets at December 31, 2023 Cash and cash equivalents $ 28,830 $ — $ — $ 28,830 Intermediate bonds 35,747 182,280 — 218,027 Equity Securities: Large-Cap 93,879 — — 93,879 Equity Securities: Mid-Cap 105,700 — — 105,700 Equity Securities: Small-Cap 75,596 — — 75,596 Equity Securities: Micro-Cap 37,759 — — 37,759 Equity Securities: Global and International 58,401 — — 58,401 Equity Securities: Emerging Markets 7,850 — — 7,850 Plan assets measured at NAV (not subject to hierarchy disclosure) Commingled Fund: Equity Securities: Global and International 131,921 Commingled Fund: Equity Securities: Emerging Markets 40,398 Direct Lending Fund: Fixed Income 2,970 Real estate 74,426 Private market investments 41,756 Total $ 443,762 $ 182,280 $ — $ 917,513 Postretirement plan assets (1) $ 1,726 $ 30,078 $ — $ 31,804 Level 1 Level 2 Level 3 Total Assets at December 31, 2022 Cash and cash equivalents $ 11,679 $ — $ — $ 11,679 Intermediate bonds 33,305 166,530 — 199,835 Equity Securities: Large-Cap 85,617 — — 85,617 Equity Securities: Mid-Cap 90,049 — — 90,049 Equity Securities: Small-Cap 65,505 — — 65,505 Equity Securities: Micro-Cap 33,438 — — 33,438 Equity Securities: Global and International 52,876 — — 52,876 Equity Securities: Emerging Markets 6,964 — — 6,964 Plan assets measured at NAV (not subject to hierarchy disclosure) Commingled Fund: Equity Securities: Global and International 117,631 Commingled Fund: Equity Securities: Emerging Markets 42,119 Real estate 83,676 Private market investments 50,339 Total $ 379,433 $ 166,530 $ — $ 839,728 Postretirement plan assets (1) $ 2,009 $ 26,556 $ — $ 28,565 (1) The postretirement benefits assets are primarily life insurance contracts. For the years ended December 31, 2023 and 2022, there were no material transfers into or out of Levels 1, 2, or 3. Fair Value Measurement of Level 2 Plan assets and Plan assets measured at NAV: Level 2 Bonds : These investments represent United States government, agency bonds, and corporate bonds. The United States government and agency bonds, as well as the corporate bonds, are not traded on an exchange and are valued utilizing market prices for similar assets or liabilities in active markets. Level 2 Postretirement Asset: This asset represents an investment in a life insurance contract and is recorded at fair value, which is the cash surrender value, less any unpaid expenses. The cash surrender value of this insurance contract is contractually equal to the insurance contract's proportionate share of the market value of an associated investment account held by the insurer. The investments held by the insurer's investment account are all instruments traded on exchanges with readily determinable market prices. Commingled Funds : These funds, made up of global, international and emerging markets equity securities are measured at NAV, are not publicly traded, and therefore no publicly quoted market price is readily available. The values of the commingled funds are presented at estimated fair value, which is determined based on the unit value of the fund. The values of these investments are calculated by the custodian for the fund company on a monthly or more frequent basis, and are based on market prices of the assets held by each of the commingled funds divided by the number of fund shares outstanding for the respective fund. The investments in commingled funds have redemption limitations that permit monthly redemption following notice requirements of 5 to 7 days. Direct Lending Funds : Direct lending strategies are closed-end funds that provide senior secured loans primarily to private, non-investment-grade companies. Direct lending fund investments are valued by the fund companies, or an independent external advisor based on the estimated fair value of the underlying loans divided by the fund shares outstanding. These direct lending funds also furnish annual audited financial statements that are used to further validate the information provided. These closed-end funds are formed with a stated life of 6 to 10 years, which can be further extended with the approval of the limited partners. There are generally no redemption rights associated with these funds. The limited partner must hold the fund for the life of the fund or find a third-party buyer. Real Estate : Real estate holdings represent investments in open-end and closed-end commingled real estate funds. As the property interests held in these real estate funds are not frequently traded, establishing the market value of the property interests held by the fund, and the resulting unit value of fund shareholders, is based on unobservable inputs including property appraisals by the fund companies, property appraisals by independent appraisal firms, analysis of the replacement cost of the property, discounted cash flows generated by property rents and changes in property values, and comparisons with sale prices of similar properties in similar markets. These real estate funds also furnish annual audited financial statements that are also used to further validate the information provided. Redemptions on the open-end funds are generally available on a quarterly basis, with 10 to 35 days written notice, depending on the individual fund. If the fund has sufficient liquidity, the redemption will be processed at the fund NAV or the fund’s estimate of fair value at the end of the quarter. If the fund does not have sufficient liquidity to honor the full redemption, the remainder will be set for redemption the following quarter on a pro-rata basis with other redemption requests. This same process will repeat until the redemption request has been completed. To protect other fund holders, real estate funds have no duty to liquidate or encumber funds to meet redemption requests. The closed-end funds are formed for a stated life of 7 to 10 years. The fund can be further extended with the approval of the limited partners. There are generally no redemption rights associated with these funds. The limited partner must hold the fund for the life of the fund or find a third-party buyer. Private Market Investments : Private market investments represent two categories: venture capital funds and fund of hedge funds. These funds are valued by the fund companies based on the estimated fair values of the underlying fund holdings divided by the fund shares outstanding or multiplied by the ownership percentages of the holder. Venture capital fund investments are valued by the fund companies based on estimated fair value of the underlying fund holdings divided by the fund shares outstanding. Some venture capital investments have progressed to the point that they have readily available exchange-based market valuations. Early stage venture investments are valued based on unobservable inputs including cost, operating results, discounted cash flows, the price of recent funding events, or pending offers from other viable entities. These private market investments furnish annual audited financial statements that are also used to further validate the information provided. These funds are formed for a stated life of 10 to 15 years. The general partner can extend the fund life for 2 or 3 one-year periods. The fund can be further extended with the approval of the limited partners. There are generally no redemption rights associated with these funds. The limited partner must hold the fund for the life of the fund or find a third-party buyer. The value of the fund of hedge funds investment is the residual value of an immaterial non-liquid position in a single fund of hedge funds. Employee Savings Plan Idaho Power has a defined contribution plan designed to comply with Section 401(k) of the Internal Revenue Code and that covers substantially all employees. Idaho Power matches specified percentages of employee contributions to the plan. Matching annual contributions were approximately $9.8 million, $8.8 million, and $8.2 million in 2023, 2022, and 2021, respectively. Post-employment Benefits Idaho Power provides certain benefits to former or inactive employees, their beneficiaries, and covered dependents after employment but before retirement, in addition to the health care benefits required under the Consolidated Omnibus Budget Reconciliation Act (COBRA). These benefits include salary continuation, health care and life insurance for those employees found to be disabled under Idaho Power’s disability plans, and health care for surviving spouses and dependents. Idaho Power accrues a liability for such benefits. The post-employment benefits included in other liabilities on both IDACORP’s and Idaho Power’s consolidated balance sheets at December 31, 2023 and 2022, were approximately $3 million and $2 million. |
