(Dollar amounts and Megawatt-hours (MWh) are in thousands unless otherwise indicated).

INTRODUCTION:

In Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A), the general financial condition and results of operations for IDACORP, Inc. and its subsidiaries (collectively, IDACORP) and Idaho Power Company and its subsidiary (collectively, IPC) are discussed.

IDACORP is a holding company formed in 1998 whose principal operating subsidiary is IPC. IDACORP is subject to the provisions of the Public Utility Holding Company Act of 2005, which provides certain access to books and records to the Federal Energy Regulatory Commission (FERC) and state utility regulatory commissions and imposes certain record retention and reporting requirements on IDACORP.

IPC is an electric utility with a service territory covering approximately 24,000 square miles in southern Idaho and eastern Oregon. IPC is regulated by the FERC and the state regulatory commissions of Idaho and Oregon. IPC is the parent of Idaho Energy Resources Co., (IERCo) a joint venturer in Bridger Coal Company, which supplies coal to the Jim Bridger generating plant owned in part by IPC.

IDACORP's other subsidiaries include:

• IDACORP Financial Services, Inc. (IFS), an investor in affordable housing and other real estate investments;

• Ida-West Energy Company (Ida-West), an operator of small hydroelectric generation projects that satisfy the requirements of PURPA; and

• IDACORP Energy (IE), a marketer of energy commodities, which wound down operations in 2003.

On July 20, 2006, IDACORP completed the sale of all of the outstanding common stock of ITI to IdaTech UK Limited, a wholly-owned subsidiary of Investec Group Investments (UK) Limited. On February 23, 2007, IDACORP completed the sale of all of the outstanding common stock of IDACOMM to American Fiber Systems, Inc.

While reading the MD&A, please refer to the accompanying Consolidated Financial Statements of IDACORP and IPC, which present the financial position at December 31, 2008 and 2007, and the results of operations and cash flows for each company for the years ended December 31, 2008, 2007 and 2006.

FORWARD-LOOKING INFORMATION:

In connection with the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, IDACORP and IPC are hereby filing cautionary statements identifying important factors that could cause actual results to differ materially from those projected in forward-looking statements, as such term is defined in the Reform Act, made by or on behalf of IDACORP or IPC in this Annual Report on Form 10-K, in presentations, in response to questions or otherwise. Any statements that express, or involve discussions as to expectations, beliefs, plans, objectives, assumptions or future events or performance, often, but not always, through the use of words or phrases such as "anticipates," "believes," "estimates," "expects," "intends," "plans," "predicts," "projects," "may result," "may continue" or similar expressions, are not statements of historical facts and may be forward-looking. Forward-looking statements involve estimates, assumptions and uncertainties and are qualified in their entirety by reference to, and are accompanied by, the following important factors, which are difficult to predict, contain uncertainties, are beyond IDACORP's or IPC's control and may cause actual results to differ materially from those contained in forward-looking statements:
The effect of regulatory decisions by the Idaho Public Utilities Commission, the Oregon Public Utility Commission and the Federal Energy Regulatory Commission affecting our ability to recover costs and/or earn a reasonable rate of return including, but not limited to, the disallowance of costs that have been deferred;

• Changes in and compliance with state and federal laws, policies and regulations, including new interpretations by oversight bodies, which include the Federal Energy Regulatory Commission, the North American Electric Reliability Corporation, the Western Electricity Coordinating Council, the Idaho Public Utilities Commission and the Oregon Public Utility Commission, of existing policies and regulations that affect the cost of compliance, investigations and audits, penalties and costs of remediation that may or may not be recoverable through rates;

• Changes in tax laws or related regulations or new interpretations of applicable law by the Internal Revenue Service or other taxing jurisdiction;

• Litigation and regulatory proceedings, including those resulting from the energy situation in the western United States, and penalties and settlements that influence business and profitability;

• Changes in and compliance with laws, regulations and policies including changes in law and compliance with environmental, natural resources, endangered species and safety laws, regulations and policies and the adoption of laws and regulations addressing greenhouse gas emissions, global climate change, and energy policies;

• Global climate change and regional weather variations affecting customer demand and hydroelectric generation;

• Over-appropriation of surface and groundwater in the Snake River Basin resulting in reduced generation at hydroelectric facilities;

• Construction of power generation, transmission and distribution facilities, including an inability to obtain required governmental permits and approvals, rights-of-way and siting, and risks related to contracting, construction and start-up;

• Operation of power generating facilities including performance below expected levels, breakdown or failure of equipment, availability of transmission and fuel supply;

• Changes in operating expenses and capital expenditures, including costs and availability of materials, fuel and commodities;

• Blackouts or other disruptions of Idaho Power Company's transmission system or the western interconnected transmission system;

• Population growth rates and other demographic patterns;

• Market prices and demand for energy, including structural market changes;

• Increases in uncollectible customer receivables;

• Fluctuations in sources and uses of cash;

• Results of financing efforts, including the ability to obtain financing or refinance existing debt when necessary or on favorable terms, which can be affected by factors such as credit ratings, volatility in the financial markets and other economic conditions;

• Actions by credit rating agencies, including changes in rating criteria and new interpretations of existing criteria;

• Changes in interest rates or rates of inflation;

• Performance of the stock market, interest rates, credit spreads and other financial market conditions, as well as changes in government regulations, which affect the amount and timing of required contributions to pension plans and the reported costs of providing pension and other postretirement benefits;

• Increases in health care costs and the resulting effect on medical benefits paid for employees;

• Increasing costs of insurance, changes in coverage terms and the ability to obtain insurance;

• Homeland security, acts of war or terrorism;

• Natural disasters and other natural risks, such as earthquake, flood, drought, lightning, wind and fire;

• Adoption of or changes in critical accounting policies or estimates; and

• New accounting or Securities and Exchange Commission requirements, or new interpretation or application of existing requirements.

Any forward-looking statement speaks only as of the date on which such statement is made. New factors emerge from time to time and it is not possible for management to predict all such factors, nor can it assess the impact of any such factor on the business or the extent to which any factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking statement.

EXECUTIVE OVERVIEW:

2008 Financial Results
IDACORP's net income and earnings per diluted share for the last three years
were as follows:

                                                2008       2007       2006
Net income                                    $ 98,414   $ 82,339   $ 107,403
Average outstanding shares - diluted (000s)     45,332     44,291      42,874
Earnings per diluted share                    $   2.17   $   1.86   $    2.51

The key factor affecting the change in IDACORP's net income was IPC's operating income, which increased $34.6 million over 2007 levels. Rate increases during 2007 and 2008 increased general business revenues in 2008 as compared to 2007. These increases combined with more favorable hydroelectric generating conditions resulted in improved operating income. However, increases in operating and maintenance expenses and interest expense due to higher long-term debt balances reduced the earnings contribution at IPC. IPC earnings in the fourth quarter were also negatively impacted by a FERC decision that resulted in an increase to IPC's Open Access Transmission Tariff (OATT) refund to its transmission service customers and an impairment charge for a decline in the market value of equity securities.

The following table presents a reconciliation of IDACORP net income for 2007 to 2008 (shown net of tax):

IDACORP 2007 Net Income                                            $82,339
Increased  electric utility operating income                        21,070  (1)
Gain on sale of Southwest Intertie Project (SWIP)                    1,849
Decreased net income at IFS                                         (3,686)
Decreased loss at holding company                                    1,585
Increased IPC interest expense                                      (6,518)
Impairment of equity securities                                     (4,159)
Settlement of prior years' tax returns                               2,753
Other net increases                                                  3,181
IDACORP 2008 Net Income                                            $98,414

(1)                 Increased electric utility operating income includes
                    increased general business revenue of $70.6 million,
                    decreased other revenue of $4.8 million due to the OATT
                    refund, decreased net power supply
                    costs (fuel and purchased power less off-system sales) of
                    $5.9 million, a PCA expense decrease of $44.9
                    million, and increased O&M expense of $4.6 million.

Business Strategy
IDACORP is focusing on a strategy that emphasizes IPC as IDACORP's core business. Although growth in number of customers slowed in 2008, IPC is experiencing customer growth in its service area and must be prepared to meet customers' electricity needs in the future. This corporate strategy recognizes that IPC must make investments in infrastructure to ensure adequate supply and reliable service. IPC's regulatory efforts have resulted in finalizing the 2007 general rate case and receiving an order in the 2008 general rate case. IPC continues to make efforts to speed recovery of the financial and operating costs of new facilities and system improvements. IFS and Ida-West remain components of the corporate strategy.

Regulatory Matters
Idaho 2008 General Rate Case: On January 30, 2009, the IPUC issued its final order approving an average annual increase in Idaho base rates, effective February 1, 2009, of 3.1 percent (approximately $20.9 million annually), a return on equity of 10.5 percent and an overall rate of return of 8.18 percent. On February 19, 2009, IPC filed a request for reconsideration with the IPUC. In its filing, IPC asked the IPUC to reconsider four principal areas of the order having a combined Idaho jurisdictional revenue requirement impact of approximately $8 million annually. The request for reconsideration is discussed in more detail in "REGULATORY MATTERS - Idaho Rate Cases - 2008 General Rate Case."

Idaho 2007 General Rate Case: On February 28, 2008, the IPUC approved a settlement of IPC's general rate case filed in 2007, increasing base rates for residential customers 4.7 percent and rates for the other classes of customers 5.65 percent. The rates became effective March 1, 2008, and increased IPC's annual revenue by $32.1 million.

Danskin CT1 Power Plant Rate Case: On May 30, 2008, the IPUC authorized IPC to add to its rate base $64.2 million for the Danskin CT1 plant and related facilities, effective June 1, 2008, resulting in a base rate increase of 1.37 percent, or $8.9 million in annual revenues.

Power Cost Adjustment: On May 30, 2008, the IPUC approved a $73.3 million increase to revenues, effective June 1, 2008, which resulted in an average rate increase to IPC's customers of 10.7 percent. The increase is net of approximately $16.5 million of gains on sales of excess emission allowances, including interest.

In its order, the IPUC also directed IPC to hold workshops to address PCA-related issues not resolved in the PCA filing. As a result of the workshops, a settlement stipulation was filed and was approved by the IPUC on January 9, 2009. The approved stipulation changes the sharing ratio between customers and shareholders to 95/5, adjusts the Load Growth Adjustment Rate (LGAR) to $26.52 per MWh based on the 2008 general rate case order, changes the source of the power supply cost forecast and authorizes inclusion of third party transmission expense in the PCA formula. The changes were effective February 1, 2009. The stipulation is discussed in more detail in "REGULATORY MATTERS - Deferred Net Power Supply Costs - Idaho - PCA Workshops."

Oregon Power Cost Recovery Mechanism: On April 28, 2008, the OPUC approved a power cost recovery mechanism with two components, the annual power cost update (APCU) and the power cost adjustment mechanism (PCAM). The combination of the APCU and the PCAM allows IPC to recover excess net power supply costs in a more timely fashion than through the previously existing deferral process. The APCU allows IPC to reestablish its Oregon base net power supply costs annually, separate from a general rate case, and to forecast net power supply costs for the upcoming water year. The PCAM is a true-up that provides for 90 percent customer sharing of deviations in actual net power supply costs from those included in the APCU if the deviations are outside of prescribed ranges and IPC meets a return-on-equity test. These mechanisms are discussed in more detail in "REGULATORY MATTERS - Deferred Net Power Supply Costs - Oregon - Oregon Power Cost Recovery Mechanism."

OATT: Effective June 1, 2006, IPC's OATT was made a formula rate based on financial and operational data IPC is required to file annually with the FERC in its Form 1. On January 15, 2009, the FERC issued an unfavorable order affecting the way IPC calculates its OATT. The order requires IPC to reduce its transmission service rates to FERC jurisdictional customers and make refunds in the total amount of $13.3 million (including $1.1 million in interest) for the period since June 2006. IPC had previously reserved a portion of this amount, but reserved an additional $7.9 million (including $0.7 million in interest) in the fourth quarter of 2008 to bring the total reserve amount to $13.3 million. IPC has filed a request for rehearing with the FERC. The OATT is discussed in more detail in "REGULATORY MATTERS - Federal Regulatory Matters - OATT."

Record system peaks
IPC's system is dual peaking, with the larger peak demand occurring in the summer. IPC set a new system peak of 3,214 MW on June 30, 2008. The previous hourly system peak of 3,193 MW was set on July 13, 2007. Although IPC was able to meet all of its load requirements during this period of increased demand, all available resources of IPC's system were fully committed.

Integrated Resource Plan
IPC filed its 2006 Integrated Resource Plan (IRP) with the IPUC in September 2006 and with the OPUC in October 2006. The 2006 IRP previewed IPC's load and resource situation for the next twenty years, analyzed potential supply-side and demand-side options and identified near-term and long-term actions.

Prior to filing, the IRP requires extensive involvement by IPC, the IPUC Staff, the OPUC Staff, and customer and environmental representatives, as well as input on the cost of various generation technologies. The IRP is the starting point for demonstrating prudence in IPC's resource decisions. The two primary goals of the 2006 IRP were to (1) identify sufficient resources to reliably serve the growing demand for electric service within IPC's service area throughout the 20-year planning period and (2) ensure that the portfolio of resources selected balances cost, risk and environmental concerns.

The IPUC accepted the 2006 IRP in March 2007 and the OPUC acknowledged the 2006 IRP in September 2007. With its acceptance of the 2006 IRP, the IPUC requested that IPC align the submittal of its next IRP with those submitted by other Idaho utilities. To comply with this request, IPC provided updates on the status of the 2006 IRP to both the IPUC and OPUC in June 2008 and to the OPUC in February 2009 and is currently preparing the 2009 IRP which is scheduled to be completed in June 2009. See further discussion in "REGULATORY MATTERS - Integrated Resource Plan."

Transmission Projects
IPC and PacifiCorp are jointly exploring the Gateway West Project to build transmission lines between Windstar, a substation located near Douglas, Wyoming and Hemingway, a substation located in the vicinity of Melba and Murphy, Idaho near Boise. The lines would be designed to increase electrical transmission capacity across southern Idaho in response to increasing customer demand and growth, along with other transmission service requests. IPC and PacifiCorp have a cost sharing agreement for expenses associated with the analysis work of the initial phases. IPC's share of the initial phase of engineering, environmental review, permitting and rights-of-way is approximately $40 million. Initial phases of the project could be completed by 2014 depending on the timing of rights-of-way, acquisition, siting and permitting, and construction sequencing. If all initial phases are constructed, IPC estimates that its share of the project costs could range between $500 million and $600 million. Remaining phases of the project could be constructed as demand requires.

Consistent with the 2006 IRP and requirements and requests of other transmission customers, IPC is exploring alternatives for the construction of a 500-kV line between southwestern Idaho and the Northwest. The Boardman-Hemingway Line is expected to relieve existing congestion by increasing transmission capacity and improving reliability. It will allow for the transfer of up to 1,500 MW of additional energy between Idaho and the Northwest. The initial project phase estimate of $50 million will be funded by IPC and includes the engineering, environmental review, permitting and rights-of-way. Cost estimates for the project (including initial phase project estimate and construction costs of the line) are approximately $600 million. IPC expects to seek partners for up to 50 percent of the project when construction commences. The line has a target in-service date of June 2013. Please see further discussion in "REGULATORY MATTERS - Transmission Projects - Boardman-Hemingway Line."

In order to connect the Gateway West Project and the Boardman-Hemingway Line to IPC's primary load center and also to help meet forecast deficits and improve reliability, IPC is constructing a new 500-kV station named Hemingway. As part of the Hemingway Station Project, the new Hemingway-Hubbard Transmission Line will provide power to the Treasure Valley in southwest Idaho. The project is expected to be completed by 2010. The project will include adding a 230-kV double circuit transmission line and converting an existing 138-kV to 230-kV. Cost estimates for the Hemingway Station Project include $52 million for the station and $25 million for the Hemingway-Hubbard Transmission Line.

Liquidity
In the fourth quarter of 2008, the global credit markets suffered a significant contraction, including the failure of some large financial institutions. As a result, the U.S. government took control of certain financial institutions, and some institutions were bought out or declared bankruptcy. Despite the recent turmoil in the global credit markets, IDACORP and IPC had access to the capital markets and have been able to generate funds internally and externally to meet our capital requirements. Our ability to attract the necessary financial capital at reasonable terms is critical to our overall strategic plan because IDACORP and IPC rely on access to both short-term borrowings, including the issuance of commercial paper, and long-term capital markets as sources of liquidity for capital requirements not satisfied by internally generated funds. IDACORP and IPC have continued to issue commercial paper at times, but have also made draws under their respective credit facilities when commercial paper at desired maturities was not available. IDACORP and IPC expect that operating cash flow, together with the revolving credit facilities and other external financing, will be adequate to meet their operating and capital needs, although there can be no assurance that continued or increased volatility and disruption in the global capital and credit markets will not restrict either company's ability to access these markets on commercially acceptable terms or at all.

Pension Plan
Financial market volatility and disruption caused a significant decline in the value of qualified pension assets. Current provisions of the Pension Protection Act require that if a company does not maintain a 94 percent funding status for 2009, then the company will need to make additional contributions to become fully funded over a period of seven years. Based on the value of pension assets and interest rates as of December 31, 2008, the estimated minimum required contributions would be approximately $45 million in 2010 and $33 million for each of 2011, 2012, and 2013. These estimates reflect the initial relief measures as passed by Congress; however, additional measures are being proposed, which may impact immediate funding requirements.

Capital Requirements and Cash Flows
IDACORP estimates that it will spend between $780 and $800 million for construction related activities from 2009 to 2011, excluding any amounts from our 2012 Baseload Resource RFP process.

Forecasts indicate that internal cash generation after dividends will provide less than the full amount of total capital requirements for 2009 through 2011. IDACORP and IPC expect to continue financing the utility construction program and other capital requirements with internally generated funds and continued reliance on externally financed capital. Excluding the baseload resource decision, IPC expects financing needs in 2009 to be less than 2008 levels.

The amount of internal cash generation is dependent primarily upon IPC's cash flows from operations, which are subject to risks and uncertainties relating to weather and water conditions and IPC's ability to obtain rate relief to cover its operating costs and provide a return on investment.

Equity Issuances
During 2008, IDACORP issued approximately 1.9 million shares of common stock through its continuous equity program (CEP), dividend reinvestment and stock purchase plan, employee savings plan, restricted stock plan, and long-term incentive and compensation plan. Approximately 1.5 million of these shares were issued under the CEP. In 2008, 2007 and 2006, IDACORP contributed $37 million, $51 million and $47 million, respectively, of additional equity to IPC. No additional shares of IPC common stock were issued.

Idaho Water Management Issues
Power generation at the IPC hydroelectric power plants on the Snake River is dependent upon the state water rights held by IPC and the long-term sustainability of the Snake River, tributary spring flows and the Eastern Snake Plain Aquifer that is connected to the Snake River. IPC continues to participate in water management issues in Idaho that may affect those water rights and resources with the goal to preserve, to the fullest extent possible, the long-term availability of water for use at IPC's hydroelectric projects on the Snake River. IPC's involvement includes active participation in the Snake River Basin Adjudication, a judicial action initiated in 1987 to determine the nature and extent of water use in the Snake River basin, judicial and administrative proceedings relating to the conjunctive management of ground and surface water rights, and management and planning processes intended to reverse declining trends in river, spring, and aquifer levels and address the long-term water resource needs of the state. On occasion, resolution of these water management issues involves litigation. IPC is involved in legal actions regarding not only its water rights but also the water rights of others. For a further discussion of water management issues see "LEGAL AND ENVIRONMENTAL ISSUES - Environmental Issues - Idaho Water Management Issues."

2009 Operating and Financial Metrics Outlook The outlook for key operating and financial metrics for 2009 as compared to actual results for 2008 is:

                                                                     2009     2008
                Key Operating & Financial Metrics                  Estimate  Actual
IPC Operation & Maintenance Expense (Millions)                     $280-$290  $294
IPC Capital Expenditures (Millions)                                $220-$230  $244
IPC Hydroelectric Generation (Million MWh)                          6.5-8.5    6.9
Non-regulated subsidiary earnings and holding company expenses     $0.0-$3.0  $4.3
(Millions)
Effective Tax Rates:
      IPC                                                           31%-35%   29%
      Consolidated - IDACORP                                        24%-28%   16%

IPC capital expenditures exclude costs for a baseload energy resource. IPC will seek approval from the IPUC relating to the baseload resource during the first quarter of 2009 with a decision from the IPUC expected later in 2009. For the three-year period 2009-2011, IPC expects to spend between $780 million and $800 million for construction-related activities. This amount includes expenditures for the siting and permitting of major transmission expansions for Boardman to Hemingway, Gateway West, and for the Hemingway station and Hemingway to Hubbard line.

As discussed above, the credit and financial markets have recently experienced volatility and disruption. IPC has experienced a slowdown in new customer connections and one of IPC's largest industrial customers has announced workforce reductions. As a result, IPC and IDACORP have reduced or delayed many capital expenditures relating to customer growth and other non-critical projects. Additionally, hiring restrictions have been implemented and are expected to slow the growth of operation and maintenance spending in 2009.

The projected range for annual hydroelectric generation is based on 2008-2009 Snake River Basin snowpack at 77 percent of average on February 17, 2009, with . . .