ASSET RETIREMENT OBLIGATIONS

12 Months Ended

Dec. 31, 2011

ASSET RETIREMENT OBLIGATIONS [Abstract]

Asset Retirement Obligation Disclosure

ASSET RETIREMENT OBLIGATIONS (ARO)

The guidance relating to accounting for AROs requires that legal obligations associated with the retirement of property, plant and equipment be recognized as a liability at fair value when incurred and when a reasonable estimate of the fair value of the liability can be made.  Under the guidance, when a liability is initially recorded, the entity increases the carrying amount of the related long-lived asset to reflect the future retirement cost.  Over time, the liability is accreted to its present value and paid, and the capitalized cost is depreciated over the useful life of the related asset.  If, at the end of the asset’s life, the recorded liability differs from the actual obligations paid, a gain or loss would be recognized.  As a rate-regulated entity, Idaho Power records regulatory assets or liabilities instead of accretion, depreciation, and gains or losses, as approved by Order No. 29414 from the IPUC.  The regulatory assets recorded under this order do not earn a return on investment.

Idaho Power’s recorded AROs relate to the removal of polychlorinated biphenyls-contaminated equipment at its distribution facilities and the reclamation and removal costs at its jointly owned coal-fired generation facilities.  In 2011, changes in estimates at its distribution facilities and at the coal-fired generation facilities resulted in a net increase of $3.9 million in the recorded AROs. The primary cause of the increase in the AROs was the decision to decommission the Boardman generating facility at December 31, 2020. A decommissioning study was performed, and now that a removal date has been determined and the fair value of the associated liabilities can be estimated, ARO amounts related to the Boardman decommissioning are being recognized in the consolidated financial statements.

Idaho Power also has additional AROs associated with its transmission system, hydroelectric facilities, and jointly owned coal-fired generation facilities; however, due to the indeterminate removal date, the fair value of the associated liabilities currently cannot be estimated and no amounts are recognized in the consolidated financial statements.

The regulated operations of Idaho Power also collect removal costs in rates for certain assets that do not have associated AROs.  Idaho Power is required to redesignate these removal costs as regulatory liabilities.  See Note 3 for the costs recorded as regulatory liabilities on IDACORP’s and Idaho Power’s Consolidated Balance Sheets as of December 31, 2011 and 2010.

The following table presents the changes in the carrying amount of AROs (in thousands of dollars): 

	2011			2010
Balance at beginning of year	$	16,952		$	16,240
Accretion expense	936			819
Revisions in estimated cash flows	3,930			929
Liability settled	(451		)	(1,036		)
Balance at end of year	$	21,367		$	16,952