(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 the Public Utility Regulatory Policies Act of 1978 (PURPA); and

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

While reading the MD&A, please refer to the accompanying Condensed Consolidated Financial Statements of IDACORP and IPC. This discussion updates the MD&A included in the Annual Report on Form 10-K for the year ended December 31, 2008, and the Quarterly Reports on Form 10-Q for the quarters ended March 31, 2009 and June 30, 2009, and should be read in conjunction with the discussions in those reports.

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 Quarterly Report on Form 10-Q, 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 jurisdictions;

• 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

• 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,

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:



Third quarter and Year-to-date 2009 Financial Results

A summary of net income attributable to IDACORP, Inc. and earnings per diluted
share is as follows:

                                             Three months ended    Nine months ended
                                                September 30,        September 30,
                                               2009       2008       2009       2008
Net income attributable to IDACORP, Inc.    $    54,478 $  51,739 $   100,837 $ 90,969
Average outstanding shares - diluted (000s)      47,141    45,246      46,999   45,149
Earnings per diluted share                  $      1.16  $   1.14  $     2.15 $   2.02

The following table presents a reconciliation of net income attributable to IDACORP, Inc. for the three and nine months ended September 30, 2008 to September 30, 2009 (in millions):

                                                  Three months      Nine months
                                                      ended            ended
September 30, 2008                                       $ 51.7           $  91.0
Change in IPC net income before taxes:
  Rate and other regulatory changes, net of PCA  $  4.3          $  20.5
  Reduced sales volumes, net of FCA deferral       (5.5)           (20.7)
  Oregon 2007 excess power cost deferral in 2009      -              6.4
  Decrease in transmission revenue                 (1.3)            (4.2)
Reduced effective income tax rate                   3.8              7.3
Other, including tax impacts of listed items        2.4              1.0
Total increase in IPC net income                            3.7              10.3
Other net decreases (net of tax)                           (0.9)             (0.5)
September 30, 2009                                       $ 54.5           $ 100.8

Changes to the Idaho power cost adjustment (PCA) mechanism and changes to base rates positively impacted net income. These changes were partially offset by the increased depreciation expense related to the Advanced Metering Infrastructure (AMI) project and increased net power supply costs. Also offsetting the changes was the effect of Idaho Public Utilities Commission (IPUC) orders that revised the allocation method for base net power supply costs in the PCA calculation over the year. The allocation method did not affect the total amount of base net power supply costs used to calculate the PCA deferral, but did affect the quarters in which the costs were allocated. This change reduced earnings by approximately $4.2 million and $1.6 million (net of tax) for the quarter and year-to-date, respectively, compared to 2008.

IPC's retail customer sales volumes decreased four percent for the quarter and five percent year-to-date, primarily due to weather fluctuations. To a lesser extent economic factors and energy efficiency contributed to the reduction in sales volume. Partially offsetting the volume decreases is the Fixed Cost Adjustment (FCA) Mechanism, which mitigates the impact of changes in sales volumes from levels included in base rates.

Increasing the 2009 year-to-date earnings is a May 2009 Oregon Public Utility Commission (OPUC) stipulation allowing the deferral for future recovery of $6.4 million of excess power supply costs incurred in 2007, the effect of which was recorded in the second quarter of 2009. This deferral is discussed in more detail in "REGULATORY MATTERS - Oregon - May-December 2007 Excess Power Costs."

Transmission revenue decreased due to a decrease in the open access transmission tariff (OATT) rates.

IPC's 2009 effective income tax rate decreased primarily due to an examination settlement, state bonus depreciation and timing and amount of other regulatory flow-through tax adjustments.

Capital Requirements

IPC has several major projects in development. These projects are summarized here and are discussed further in "LIQUIDITY AND CAPITAL RESOURCES - Capital Requirements - Major Projects."

• Langley Gulch power plant (2012 baseload resource): On September 1, 2009, the IPUC issued an order granting IPC's March 6, 2009, request for a Certificate of Public Convenience and Necessity (CPCN) authorizing IPC to construct, own and operate the Langley Gulch power plant (Langley Gulch). The order also provided for cost recovery and ratemaking assurances requested by IPC related to Langley Gulch. Langley Gulch will be a natural gas-fired combined cycle combustion turbine generating plant with a summer nameplate capacity of approximately 300 MWs and a winter capacity of approximately 330 MWs. The plant will be constructed at an estimated cost of $427 million near New Plymouth, Idaho commencing in summer 2010, and is anticipated to achieve commercial operation by November 1, 2012. The plant will connect to IPC's existing grid.

• Gateway West transmission project: IPC and PacifiCorp are jointly exploring Gateway West, a 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 estimated cost for IPC's share of the project is between $500 million and $600 million. The lines will provide transmission service for existing network and native load customers and their forecasted growth and provide for existing third-party transmission service requests. This project is intended to relieve existing congestion by increasing transmission capacity and to improve reliability to comply with reliability regulations. Initial phases of the project could be completed by 2014.

• Boardman-Hemingway transmission project: IPC is also exploring alternatives for the construction of a 500-kV line between southwestern Idaho at the Hemingway substation and the Northwest at the Boardman substation. IPC estimates construction costs of $600 million and expects to seek partners for up to 50 percent of the project when construction commences. The Boardman-Hemingway Line will provide transmission service for existing network and native load customers and their forecasted growth and provides for existing third-party transmission service requests. This project is intended to relieve existing congestion by increasing transmission capacity and to improve reliability to comply with reliability regulations. IPC estimates the project will be completed in 2015.

Liquidity

Pension Plan: Provisions of the Pension Protection Act (PPA), relief provisions of the Worker, Retiree, and Employer Recovery Act (WRERA), U.S. Treasury Department (Treasury) guidance, and IRS guidance require that if a company does not meet minimum funding levels, the company must make additional contributions to improve the funded status of the plan. The funded status of IPC's pension plan at January 1, 2009, was above the minimum required funding levels as revised by the PPA, WRERA, Treasury guidance and IRS guidance. Based on the assumptions allowed under the PPA, WRERA, Treasury guidance and IRS guidance, IDACORP and IPC have not contributed and are not required to contribute to the pension plan in 2009, and estimated minimum required contributions will be approximately $6 million in 2010, $46 million in both 2011 and 2012, and $41 million in 2013.

Regulatory Matters

IPC has a number of regulatory matters in process or recently completed. These matters are summarized here and are discussed in more detail in "REGULATORY MATTERS" later in the MD&A.

Idaho 2009 General Rate Case Notice of Intent to File: On August 28, 2009, IPC filed with the IPUC a notice of intent to file a general rate case on or after October 28, 2009. The notice of intent provides IPC with a 60-day window, beginning October 28, 2009, in which it is permitted to file a new general rate case. Since filing the notice of intent, IPC has reached an agreement in principle with its customer groups and IPUC Staff regarding a number of rate issues that may avoid the anticipated general rate case filing. This agreement will be memorialized in a formal settlement stipulation and together with supporting testimony will be filed in early November with the IPUC for approval.

Oregon 2009 General Rate Case: On July 31, 2009, IPC filed an application with the OPUC requesting an average rate increase of approximately 22.6 percent, or $7.3 million annually. The application included a requested return on equity of 11.25 percent and an overall rate of return of 8.68 percent with equity at 49.8 percent of total capitalization. Oregon jurisdictional rate base included in the application is $110.8 million.

IPC filed its case based upon a 2009 test year. Based on the application of the full nine-month statutory suspension period, the new rates would become effective May 31, 2010. IPC is unable to predict what relief the OPUC will grant.

Oregon 2010 Annual Power Cost Update: On October 19, 2009, IPC filed the October Update portion of its 2010 annual power cost update (APCU). The filing reflects that revenues associated with IPC's base net power supply costs would be increased by $2.6 million over the previous October Update, an average 8.2 percent increase. The actual impact of the 2010 APCU will be determined once the March Forecast portion is filed in March 2010 and combined with the October Update. Final rates are expected to become effective on June 1, 2010.

Oregon Excess Power Cost Deferrals - May-December 2007 Excess Power Costs: On May 28, 2009, the OPUC adopted a stipulation allowing IPC to defer excess net power supply costs of $6.4 million (including interest through the date of the order) for the period May 1 through December 31, 2007. IPC recorded this deferral in the second quarter of 2009. The amount to be recovered was reduced by $0.9 million of emission allowance sales previously deferred, resulting in an approved deferral balance of $5.5 million.

Idaho and Oregon Rate Orders: IPC received five additional rate orders from the IPUC and the OPUC at the end of May 2009. The IPUC rate orders are for the Fixed Cost Adjustment mechanism, Idaho Energy Efficiency Rider, Advanced Metering Infrastructure (AMI), and PCA, and the OPUC rate order is for the Annual Power Cost Update. Each of these orders increases rates, but only the AMI order, relating to the installation of new meters, increases IPC's rate base.

Deferred Pension Expense: On October 20, 2009, IPC filed an application with the IPUC requesting the implementation of a pension recovery method for cash contributions made to the pension plan.

Idaho OATT Shortfall Filing: On July 20, 2009, IPC filed a request with the IPUC for authorization to defer $8.1 million associated with shortfalls in the amount of OATT revenues that IPC will receive between March 2008 and May 2010. On September 29, 2009, the IPUC Staff filed comments. Both parties have agreed to reduce the calculation of the total deferral from $8.1 million to $4.7 million to reflect transmission rate increases that became effective after IPC filed its application.

OATT Amended Legacy Agreements: In April and June 2009 IPC submitted filings to the FERC to increase rates under agreements IPC has with PacifiCorp. The revised agreements would increase annual transmission revenues approximately $7.1 million. On August 18, 2009, the FERC accepted one of IPC's filings for a net transmission revenue increase of $3.2 million and suspended it, setting it for settlement judge procedures and hearing. A settlement conference was held on October 7, 2009 and another is scheduled for November 18, 2009 with settlement discussions ongoing. IPC is collecting the new rates subject to refund and has reserved the entire increase pending settlement.

Integrated Resource Plan (IRP): IPC is currently preparing the 2009 IRP, which it expects to file in December 2009.

Environmental Issues

Climate Change: Climate change regulations are expected to have major implications for IPC and the energy industry. On September 17, 2009, IDACORP's and IPC's Board of Directors approved guidelines that established a goal to reduce the carbon dioxide (CO2) emission intensity of IPC's utility operations. The guidelines are intended to further prepare IPC for potential legislative and/or regulatory restrictions on greenhouse gas (GHG) emissions while minimizing the costs of complying with such restrictions on IPC's customers. These issues are discussed in more detail in "LEGAL AND ENVIRONMENTAL ISSUES - Environmental Issues."

Idaho Water Management Issues: Power generation at the IPC hydroelectric power plants on the Snake River depends on 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. On March 25, 2009, IPC and the State of Idaho entered into a settlement agreement with respect to the 1984 Swan Falls Agreement and IPC's water rights under the Swan Falls Agreement, which settlement agreement is subject to certain conditions. The settlement agreement will also resolve litigation between IPC and the State of Idaho relating to the Swan Falls Agreement that was filed by IPC on May 10, 2007, with the Idaho District Court for the Fifth Judicial Circuit, which has jurisdiction over Snake River Basin Adjudication (SRBA) matters. Settlement is pending approval by the court. For a further discussion of water management issues see "LEGAL AND ENVIRONMENTAL ISSUES - Environmental Issues - Idaho Water Management Issues."

Other Issues

American Recovery and Reinvestment Act of 2009: The American Recovery and Reinvestment Act of 2009 (ARRA), enacted on February 17, 2009, includes tax and appropriation benefits to the utility industry. IPC submitted a grant application to the Department of Energy (DOE) on August 6, 2009, requesting matching funds for the $47 million of currently budgeted project funds IPC would invest towards the Smart Grid as well as incremental projects that would be funded if awarded a DOE matching grant. On October 27, 2009, IPC received notice that its application was selected. IPC continues to evaluate additional opportunities under ARRA.

2009 Operating and Financial Metrics Outlook



The outlook for key operating and financial metrics for 2009 is:

                                                            2009 Estimates
                                                        Current        Previous
IPC Operation & Maintenance Expense (Millions)         No change      $280 - $290
IPC Capital Expenditures (Millions)(1)                 $255-$270      $220 - $230
IPC Hydroelectric Generation (Million MWh) (2)          8.0-8.5        7.5 - 8.5
Non-regulated Subsidiary Earnings and Holding
Company
       Expenses (Millions)                             No change      $0.0 - $3.0
Effective Tax Rates:
       IPC                                             No change       26% - 31%
       Consolidated - IDACORP                          No change       19% - 24%

(1) The revised range of capital expenditures reflects the 2009 estimate for Langley Gulch power plant construction expenditures of $50 million to $55 million, offset by lower estimated ongoing capital expenditures. For the three-year period, 2009-2011, IPC expects to spend approximately $975 million to $1 billion. This amount includes Langley Gulch power plant and expenditures for the siting and permitting of major transmission expansions for Boardman to Hemingway transmission line, Gateway West transmission project, and the Hemingway-Bowmont transmission line and the Hemingway Station.
(2) The range of estimated hydroelectric generation includes actual generation through September and estimated ranges of generation for the reminder of the year. Year-to-date performance reflects the impact of above normal precipitation and higher reservoir storage releases.

RESULTS OF OPERATIONS:

This section of the MD&A takes a closer look at the significant factors that affected IDACORP's and IPC's earnings during the three and nine months ended September 30, 2009. In this analysis, the results for 2009 are compared to the same periods in 2008.

The following table presents net income (losses) for IDACORP and its subsidiaries:

                                               Three months ended    Nine months ended
                                                  September 30,        September 30,
                                                 2009       2008       2009      2008
IPC - Utility operations                      $   51,057  $ 47,405  $  96,667  $ 86,404
IDACORP Financial Services                           245       710        574     2,212
Ida-West Energy                                    1,208     1,208      2,780     2,171
IDACORP Energy                                      (125)      (55)      (176)      (78)
Holding company                                    2,093     2,471        992       260
   Net income attributable to IDACORP, Inc.   $   54,478  $ 51,739  $ 100,837  $ 90,969
Average common shares outstanding (diluted)       47,141    45,246     46,999    45,149
Earnings per diluted share                    $     1.16  $   1.14  $    2.15  $   2.02

Utility Operations

Operating environment: IPC is one of the nation's few investor-owned utilities with a predominantly hydroelectric generating base. Because of its reliance on hydroelectric generation, IPC's generation operations can be significantly affected by water conditions. The availability of hydroelectric power depends on the amount of snow pack in the mountains upstream of IPC's hydroelectric facilities, springtime snow pack run-off, river base flows, spring flows, rainfall and other weather and stream flow management considerations. During low water years, when stream flows into IPC's hydroelectric projects are reduced, IPC's hydroelectric generation is reduced. This results in less generation from IPC's resource portfolio (hydroelectric, coal-fired and gas-fired) available for off-system sales and, most likely, an increased use of purchased power to meet load requirements. Both of these situations - a reduction in off-system sales and an increased use of more expensive purchased power - result in increased power supply costs. During high water years, increased off-system sales and the decreased need for purchased power reduce net power supply costs.

Operations plans are developed during the year to provide guidance for generation resource utilization and energy market activities (off-system sales and power purchases). The plans incorporate forecasts for generation unit availability, reservoir storage and stream flows, gas and coal prices, customer loads, energy market prices and other pertinent inputs. Consideration is given to when to use IPC's available resources to meet forecast loads and when to . . .