WASHINGTON WATER POWER CO, 10-K405, 1995-03-07

WASHINGTON WATER POWER CO
10-K405, 1995-03-07
ELECTRIC & OTHER SERVICES COMBINED

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<PAGE> 1

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K
(Mark One)
/x/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED] FOR THE FISCAL YEAR ENDED
DECEMBER 31, 1994 OR

/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED] FOR THE TRANSITION PERIOD
FROM _____ TO _______

COMMISSION FILE NUMBER 1-3701

THE WASHINGTON WATER POWER COMPANY
(Exact name of Registrant as specified in its charter)

Washington 91-0462470
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

1411 East Mission Avenue, Spokane, Washington 99202-2600
- --------------------------------------------- -------------------
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code: 509-489-0500

SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:

Name of Each Exchange
Title of Class on Which Registered
--------------------------------------------------- -----------------------
Common Stock, no par value, together with New York Stock Exchange
Preferred Share Purchase Rights appurtenant thereto Pacific Stock Exchange

SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:

Title of Class
--------------
Preferred Stock, Cumulative, Without Par Value

Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days:

Yes [X] No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (Section 229.405 of this chapter) is not contained herein,
and will not be contained, to the best of Registrant's knowledge, in
definitive proxy or information statements incorporated by reference in
Part III of this Form 10-K or any amendment to this Form 10-K. [X]

The aggregate market value of the Registrant's outstanding Common Stock, no
par value (the only class of voting stock), held by non-affiliates is
$818,412,855.00, based on the last reported sale price thereof on the
consolidated tape on February 28, 1995.

At February 28, 1995, 54,560,857 shares of Registrant's Common Stock, no par
value (the only class of common stock), were outstanding.

Documents Incorporated By Reference
-----------------------------------
Part of Form 10-K into Which
Document Document is Incorporated
- ---------------------------------------- ----------------------------
Proxy Statement to be filed in Part III, Items 10, 11,
connection with the annual meeting 12 and 13
of shareholders to be held May 11, 1995
<PAGE> 2
THE WASHINGTON WATER POWER COMPANY

INDEX
<TABLE>
<CAPTION>
ITEM PAGE
NO. NO.
- ---- -----
<S> <C> <C>
Acronyms and Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III

Part I

1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Company Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Merger Agreement Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Utility Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Non-Utility Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Electric Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Competition and Business Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Electric System . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Electric Regulatory Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Electric Operating Statistics . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Natural Gas Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Competition and Business Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Natural Gas System . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Natural Gas Regulatory Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Natural Gas Operating Statistics . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Environmental Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Non-Utility Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Electric Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Natural Gas Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
4. Submission of Matters to a Vote of Security Holders . . . . . . . . . . . . . . . . . . 15

Part II

5. Market for Registrant's Common Equity and Related Stockholder Matters . . . . . . . . . 16
6. Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
7. Management's Discussion and Analysis of Financial Condition and Results of Operations . . 18
Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Liquidity and Capital Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Future Outlook . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
8. Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . 28
Independent Auditors' Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure . . *

Part III

10. Directors and Executive Officers of the Registrant . . . . . . . . . . . . . . . . . . . 53
11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
12. Security Ownership of Certain Beneficial Owners and Management . . . . . . . . . . . . . 54
13. Certain Relationships and Related Transactions . . . . . . . . . . . . . . . . . . . . . 54

Part IV

14. Financial Statements, Financial Statement Schedules, Exhibits and Reports on Form 8-K . 55
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Independent Auditors' Consent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Exhibit Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
</TABLE>

* = Not an applicable item in the 1994 calendar year for the Company

ii
<PAGE> 3
THE WASHINGTON WATER POWER COMPANY

ACRONYMS AND TERMS
(The following acronyms and terms are found
in multiple locations within the document)

<TABLE>
<CAPTION>
Acronym/Term Meaning
- ------------ -------
<S> <C>
aMW - Average Megawatt - a measure of electrical energy over time

BPA - Bonneville Power Administration

Capacity - a measure of the rate at which a particular generating source produces electricity

Centralia - the coal fired Centralia Power Plant in western Washington State

Colstrip - the coal fired Colstrip Generating Project in southeastern Montana

CPUC - California Public Utilities Commission

CT - combustion turbine; a natural gas fired unit used primarily for peaking needs

DSM - Demand Side Management - the process of helping customers manage
their use of energy resources

Energy - a measure of the amount of electricity produced from a particular generating
source over time

FERC - Federal Energy Regulatory Commission

IPUC - Idaho Public Utilities Commission

IRP - Integrated Resource Planning

KW, KWH - Kilowatt, kilowatthour, 1000 watts or 1000 watt hours

MW, MWH - Megawatt, megawatthour, 1000 kw or 1000 kwh

MPSC - Montana Public Service Commission

OPUC - Public Utility Commission of Oregon

Pentzer - Pentzer Corporation, a wholly-owned subsidiary of the Company which is the
parent company to the majority of the Company's non-utility businesses

PSCN - Public Service Commission of Nevada

Therm - Unit of measurement for natural gas; a therm is equal to one hundred cubic feet
(volume) or 100,000 BTUS (energy)

Watt - Unit of measurement for electricity; a watt is equal to the rate of work represented
by a current of one ampere under a pressure of one volt

WIDCo - Washington Irrigation & Development Company, a wholly-owned non-utility
subsidiary of the company

WPNG - WP Natural Gas, the operating division for the Company's natural gas business
in Oregon and California (the natural gas distribution assets purchased from
CP National in 1991)

WUTC - Washington Utilities and Transportation Commission

WWP - The Washington Water Power Company, the Company; in the context of the
Company's natural gas business, refers to Washington and Idaho natural gas
distribution assets
</TABLE>

iii

<PAGE> 4
THE WASHINGTON WATER POWER COMPANY

PART I

ITEM 1. BUSINESS

COMPANY OVERVIEW

The Washington Water Power Company (WWP, the Company), which was incorporated
in the State of Washington in 1889, primarily operates in the electric and
natural gas utility businesses. As of January 1, 1995, the Company provides
electricity and natural gas in a 26,000 square mile area in eastern Washington
and northern Idaho with a population of approximately 765,000. The Company's
electric service territory now includes Bonner County in northern Idaho as a
result of the acquisition of electric properties from PacifiCorp, which was
finalized on December 30, 1994. See Note 14 to Financial Statements for
additional information. Through a separate operating division called WP
Natural Gas (WPNG), the Company also provides natural gas service in northeast
and southwest Oregon and in the South Lake Tahoe region of California with a
population of approximately 460,000.

The Company's wholesale and retail utility businesses include the generation,
purchase, transmission, distribution and sale of electric energy plus the
purchase, transportation, distribution and sale of natural gas. In addition to
its utility businesses, the Company owns Pentzer Corporation (Pentzer), parent
company to the majority of the Company's non-utility businesses.

At December 31, 1994, the Company's employees included 1,420 people in its
utility operations and 775 people in its majority-owned non-utility businesses.
The Company's corporate headquarters are in Spokane, Washington (Spokane),
which serves as the Inland Northwest's center for manufacturing,
transportation, health care, education, communication, agricultural and service
businesses.

For the twelve months ended December 31, 1994, 1993 and 1992, respectively, the
Company derived operating revenues and income from operations in the following
proportions:

<TABLE>
<CAPTION>
Operating Revenues Income from Operations
------------------ ----------------------
1994 1993 1992 1994 1993 1992
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Electricity 67% 73% 76% 81% 80% 87%
Natural Gas 24% 21% 18% 15% 15% 10%
Non-Utility 9% 6% 6% 4% 5% 3%
</TABLE>

MERGER AGREEMENT OVERVIEW

In June 1994, the Company, Sierra Pacific Resources (SPR), Sierra Pacific Power
Company (SPPC), a subsidiary of SPR, and Resources West Energy Corporation, a
newly formed subsidiary of the Company (Resources West), entered into an
Agreement and Plan of Reorganization and Merger, as subsequently amended
(Merger Agreement), which provides for the merger of WWP, SPR and SPPC into
Resources West. SPR and SPPC are both Nevada corporations with headquarters in
Reno, Nevada (Reno). The Merger Agreement provides that after the effective
date of the Merger, Resources West's corporate headquarters offices and
principal executive offices will be located in Spokane and that the
headquarters of its Washington Water Power and Sierra Pacific operating
divisions will be in Spokane and Reno, respectively. As a result of the Merger
Agreement, holders of WWP Common Stock would receive one share and holders of
SPR Common Stock would receive 1.44 shares of Resources West Common Stock,
respectively. Each outstanding share of Preferred Stock of WWP and SPPC,
respectively, will be converted into the right to receive one share of
Resources West Preferred Stock with equal stated value and dividends and like
redemption provisions and rights upon liquidation.

WWP, SPR and SPPC believe that the proposed merger offers significant strategic
and financial benefits to each of the companies and to their respective
stakeholders including an enhanced competitive position, a larger and more
diverse service territory, an expanded resource base, improved resource
planning and coordination, and cost savings. The cost savings for the new
company are estimated to approximate $450 million, net of merger transaction
and transition costs, over the 10 years following the consummation of the
merger. The cost savings should be achieved from, among other things, the
integration of corporate management and administrative functions, the
consolidation of distribution operations, the integration of gas purchasing
requirements, the reduction of capacity requirements, the reduction of non-firm
transmission expense, the avoidance of expenditures for operating systems, and
the streamlining of inventories and purchasing economies.

See Item 4. Submission of Matters to a Vote of Security Holders, Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations: Future Outlook and Note 15 to Financial Statements for additional
information.

1
<PAGE> 5
THE WASHINGTON WATER POWER COMPANY

UTILITY OPERATIONS OVERVIEW

The Company owns and operates nine hydroelectric projects in addition to a
wood-waste fueled generating station. The Company also owns a 15% share in two
coal-fired generating facilities, one in western Washington State and one in
southeastern Montana. In addition the Company owns one natural gas combustion
turbine (CT) peaking unit located near Spokane and completed the construction
of two additional natural gas CT peaking units in northern Idaho in early
January 1995. The Company contracts with five natural gas pipeline companies
for access to domestic and Canadian natural gas supplies. With this diverse
energy resource portfolio, the Company remains one of the nation's lowest-cost
producers and sellers of energy services.

At December 31, 1994, electric service was supplied to approximately 275,000
customers in eastern Washington and northern Idaho. The Company's average
hourly load for 1994 was 886 aMW. The Company's annual peak load, including
firm contractual obligations, was 2,233 MW. This peak occurred on February 8,
1994, at which time the maximum capacity available from the Company's
generating facilities, in addition to firm and non-firm purchases, was 2,468
MW.

At December 31, 1994, the Company's natural gas operations served approximately
212,000 customers in its natural gas service territory located in parts of four
states. The peak load in 1994 occurred on February 7, 1994 when 2.7 million
therms were required. During that peak 3.5 million therms were available under
firm transportation and storage contracts.

NON-UTILITY OVERVIEW

The Company's principal subsidiary is Pentzer, a wholly-owned private
investment company whose current portfolio of investments includes companies
involved in consumer product promotion, specialty tool manufacturing, financial
services, industrial real estate development and electronic technology.

Pentzer's business strategy is to acquire controlling interest in a broad range
of middle-market companies, to help these companies grow through internal
development and strategic acquisitions, and to sell the portfolio investments
to the public or to strategic buyers. Pentzer's objective is to produce
current returns from its portfolio investments that are higher than that of the
utility operations and to supplement these current returns by generating
transactional gains through the sale of portfolio investments when
appropriate.

As of December 31, 1994, Pentzer had approximately $167 million in total assets
or about 8% of the Company's consolidated assets.

2
<PAGE> 6
THE WASHINGTON WATER POWER COMPANY

ELECTRIC SERVICE

COMPETITION AND BUSINESS RISK

Regulatory, economic and technological changes have brought about the
accelerating transformation of the electric utility industry from a vertically
integrated monopoly to a business that is much more market driven in each
segment of its business. The Company believes that it is well positioned to
meet the challenges of increased competition due to its low production costs,
close proximity to major transmission lines, active participation in wholesale
power markets and its dedication to high levels of customer satisfaction, cost
reduction and continuous improvement of work processes.

The Company continues to compete for new retail electric customers with various
rural electric cooperatives and public utility districts in and adjacent to its
service territories. Challenges facing the electric retail business include
evolving technologies which provide alternate energy supplies, reduced energy
consumption and the cost of the energy supplied, self-generation and fuel
switching by commercial and industrial customers, the potential for retail
wheeling (described below), the costs of increasingly stringent environmental
laws and the potential for stranded or nonrecoverable utility assets. If
electric utility companies are eventually required to provide retail wheeling
service, which is the transmission by an electric utility of electric power
from another supplier to a customer located within such utility's service area,
the Company believes it will be in a position to benefit since it is committed
to remaining one of the country's lowest-cost providers of electric energy.
Similarly the Company believes it faces minimal risk for stranded generation,
transmission or distribution assets due to its low cost structure.

The National Energy Policy Act (NEPA) enacted in 1992 addresses a wide range of
issues affecting the wholesale electric business. NEPA gives the FERC expanded
authority to order electric utilities (a) to transmit electric power to or for
wholesale purchasers and sellers if the result would not unreasonably impair
the continuing reliability of the affected electric systems and (b) to increase
transmission capacity to provide access for wholesale purchasers and sellers of
electric power at prices that permit the recovery by the utility of all costs
incurred in connection with the transmission services. NEPA also created a new
exception from the provisions of the Holding Company Act for Exempt Wholesale
Generators (EWG). Subject to satisfying various regulatory requirements, EWGs
may own generating facilities and make wholesale sales. The Company believes
NEPA provides future transmission, energy production and sales opportunities to
the Company and complements the Company's commitment to the wholesale electric
business. The Company has filed for open access transmission tariffs with the
FERC and is exploring options as a member of the newly forming Regional
Transmission Groups, which are designed to enable the market for electric power
to operate in a more competitive and efficient manner.

The Company continues to compete in the wholesale electric market with other
western utilities, including the Bonneville Power Administration (BPA) which is
forecasting significant price increases in the near future. Business
challenges affecting the wholesale electric business include new entrants in
the wholesale market, such as power brokers and marketers, competition from low
cost generation being developed by independent power producers and declining
margins. However, the Company's wholesale electric business remains an
important part of the Company's overall business strategy. Since 1987 the
Company has entered into a number of long-term firm power sales contracts that
have increased its wholesale electric business and the Company intends to
continue active pursuit of electric wholesale business opportunities. In 1994,
29% of total KWH sales were to wholesale customers with 53% of these sales
under firm contracts.

ELECTRIC SYSTEM

Hydroelectric Resources. Hydroelectric generation is the Company's lowest cost
source of electricity and the availability of hydroelectric generation has a
significant effect on the Company's total power costs. The Company expects to
meet about 49% of its total system requirements with its own hydroelectric
generation and long-term hydroelectric contracts in normal water years. The
streamflows in the Company's drainage systems were 65%, 86% and 64% of normal
in 1994, 1993 and 1992, respectively. For the years 1994, 1993 and 1992,
respectively, 38%, 43% and 40% of the Company's total system requirements were
met by these hydroelectric resources.

Thermal Resources. The Company has a 15% interest in two coal-fired facilities
- - the Centralia Power Plant (Centralia) in western Washington and Units 3 and 4
of the Colstrip Generating Project (Colstrip) in southeastern Montana. In
addition, the Company owns a woodwaste-fired facility known as the Kettle Falls
Generating Station (Kettle Falls) in northeastern Washington and a natural
gas-fired combustion turbine (CT) in Spokane; the Company also completed the
construction of two additional natural gas CT units in northern Idaho in early
January 1995. The CTs are primarily used for peaking needs. Company-owned
thermal facilities provided 32%, 25% and 31% of the Company's total electricity
requirements for the years 1994, 1993 and 1992, respectively.

3
<PAGE> 7
THE WASHINGTON WATER POWER COMPANY

Centralia, which is operated by PacifiCorp, is supplied with coal under both a
fuel supply agreement in effect through December 2020 and various spot market
purchases. In 1994, 1993 and 1992 Centralia provided approximately 42%, 46%
and 40%, respectively, of the Company's thermal generation.

Colstrip is supplied with fuel under coal supply and transportation agreements
in effect through December 2019, from adjacent coal reserves owned and
controlled by Entech, Inc. (Entech). Entech is a wholly-owned subsidiary of
The Montana Power Company, which is the operator of Colstrip. In 1994, 1993
and 1992 Colstrip provided approximately 48%, 43%, and 51% of the Company's
thermal generation, respectively.

Kettle Falls' primary fuel is wood-waste generated as a by-product of forest
industry operations within one hundred miles of the plant. Natural gas may be
used as an alternate fuel. The cost of wood-waste fuel is heavily influenced
by operations of the forest products industry as well as transportation costs
and, therefore, is subject to significant price variations. Even with the
increased competition for wood-waste, a combination of long-term contracts
already in place plus spot purchases allow the Company the flexibility to meet
all expected future fuel requirements for the plant. In 1994, 1993 and 1992
Kettle Falls provided approximately 10%, 11% and 9% of the Company's thermal
generation, respectively.

Purchases, Exchanges and Sales. In addition to the Company-owned hydroelectric
projects, long-term hydroelectric contracts and thermal generating resources
discussed above, total system requirements are met with other purchases and
exchanges of power. Other power purchases and exchanges for the years 1994,
1993 and 1992 provided approximately 30%, 32% and 29%, respectively, of the
Company's total system requirements.

The following table summarizes the Company's major long-term wholesale power
agreements as of December 31, 1994 (1):

<TABLE>
<CAPTION>
Contracts Expiring between: Purchases (MW) Exchanges (MW) Sales (MW)
--------------------------- -------------- -------------- ----------
<S> <C> <C> <C>
1995 and 2003 90 146 350
2004 and 2013 167 50 50
2014 and 2023 30 82 150
--- --- ---
Total 287 278 550

1994 Revenues (Expenses) ($14 million) ($25 million) $57 million
</TABLE>

(1) Available capacity may vary pursuant to the provisions of the specific
contracts. See Note 13 to Financial Statements for additional
information.

Under PURPA, the Company is required to purchase generation from qualifying
facilities, including small hydroelectric and cogeneration projects, at avoided
cost rates adopted by the Washington Utilities and Transportation Commission
(WUTC) and the Idaho Public Utilities Commission (IPUC). The Company purchased
approximately 612 million KWH, or about 6% of the Company's total energy
requirements, from these sources at a cost of approximately $25 million in
1994. Current avoided costs range from 2.2 to 5.5 cents per KWH in Washington,
depending on the terms and length of the contract in addition to the period in
which the project commences delivery of power to the Company. Avoided cost
rates ranging from 1.9 to 3.7 cents per KWH in Idaho were proposed in an
amended filing made to the IPUC in early March 1995.

The largest such contract is a ten-year power purchase contract between the
Company and Potlatch, one of the Company's major industrial customers, which
became effective on January 1, 1992. Under the terms of the agreement, the
Company purchases 50-55 aMW of Potlatch's electric generation and makes
available approximately 95 aMW of firm energy for sale. In addition, the
Company makes available 25 aMW of interruptible energy and Potlatch provides an
equivalent amount of reserve generation capacity in case of interruption.

ELECTRIC REGULATORY ISSUES

The Company, as a public utility, is currently subject to regulation by state
utility commissions with respect to rates, accounting, the issuance of
securities and other matters. The electric retail operations are subject to
the jurisdiction of the WUTC and IPUC. The Company is also subject to the
jurisdiction of the FERC for its accounting procedures and its wholesale
transmission rates.

In each regulatory jurisdiction, the price the Company may charge for utility
services (other than certain wholesale sales and specially negotiated retail
rates for industrial or large commercial customers) is currently determined on
a "cost of service" basis and is designed to provide, after recovery of
allowable operating expenses, an opportunity to earn a reasonable return on
"rate base" or assets employed in the business. "Rate base" is generally
determined by reference to the original cost (net of accumulated depreciation)
of utility plant in service, subject to various adjustments for deferred taxes
and other items.

4
<PAGE> 8
THE WASHINGTON WATER POWER COMPANY

Over time, rate base is increased by additions to utility plant in service and
reduced by depreciation and retirements of utility plant from service.

The Company is a licensee under the Federal Power Act and its licensed projects
are subject to the provisions of Part I of that Act. These provisions include
payment for headwater benefits, condemnation of licensed projects upon payment
of just compensation and take-over of such projects after the expiration of the
license upon payment of the lesser of "net investment" or "fair value" of the
project, in either case plus severance damages. See Item 2. Properties -
Electric Properties for additional information.

General Rate Cases

The Company does not currently plan to file for any general electric rate
increases in 1995. See Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations: Future Outlook for additional
information regarding rate freezes related to the proposed merger between the
Company and SPPC. The following table summarizes information for the Company's
most recent general electric rate cases:

<TABLE>
<CAPTION>
Approved Effective Change
------------------------------ ------------------------------
Jurisdiction Effective Date ROE Amount (1) %
------------ -------------- ------ ---------- ------
(000's)
<S> <C> <C> <C> <C>
WUTC 3-87 12.90% $15,527 8.90%
IPUC (2) 9-86 12.90 3,680 4.30
</TABLE>

(1) Anticipated annual revenue effect.
(2) The IPUC has approved an indefinite extension of the power cost
adjustment (PCA) mechanism.

Integrated Resource Planning (IRP) IRP is a process required by both the WUTC
and IPUC and represents the Company's responsibility to meet customer demand
for reliable energy services at the lowest total cost to both the Company and
its customers. The process entails (1) the forecasting of future energy needs,
(2) the assessment of energy supplies, conservation options, customer costs,
and social and environmental impacts and (3) the development of action plans
which support a least cost resource strategy. Both the WUTC and IPUC
acknowledge the plans as part of a public hearing process but do not approve
the resource plans due to concerns about pre-approval outside of actual rate
cases. The state commissions place an emphasis on the IRP as an informational
tool for long-term planning. As discussed below, the WUTC has issued a Notice
of Inquiry to, in part, determine if the IRP rule should be modified in light
of the changing electric industry. The Company is required to file an updated
IRP every two years and will be filing with both the WUTC and IPUC in April
1995.

Notice of Inquiry (NOI) In December 1994, the WUTC initiated an NOI entitled,
"Examining Regulation of Electric Utilities in the Face of Change in the
Electric Industry." The NOI seeks comments on the structural change in the
electric industry, the implications of industry changes for utility regulation,
and recommendations concerning specific rules and regulations currently used by
the WUTC. The WUTC states that it will use the information generated by the
inquiry to "review and, if necessary, revise regulatory procedures and rules
concerning least-cost planning, competitive bidding for utility resources, and
review of the prudence of utility expenditures." Comments were submitted in
February 1995 with technical workshops planned for later in 1995. To date
there has been no similar plan initiated by the IPUC.

Demand Side Management (DSM) Programs The WUTC and IPUC approved as filed,
effective January 1, 1995, the Company's proposed electric and natural gas DSM
programs for a two year period ending December 31, 1996. The Company's DSM
programs focus on both the continuation of selected existing programs available
to broad customer classes and the development of specifically structured
programs to influence market demand. The Company's programs, while maintaining
a residential electric weatherization program and fuel efficiency awareness
programs, now places a greater emphasis on commercial and industrial programs.

DSM Riders In a two year experimental program the WUTC approved the Company's
requested DSM Tariff Rider as filed, effective January 1, 1995. The tariff
rider is a separate revenue source and represents a 1.55% electric revenue
increase and a 0.52% natural gas increase. The revenues will be used to fund
the Company's 1995 and 1996 DSM program expenditures. Under previous
accounting treatment, DSM investments, including the applicable interest charge
known as Allowance for Funds Used to Conserve Energy (AFUCE), were recorded as
deferred assets until an application was made in a future general rate case.
The new treatment will treat 1995 and 1996 DSM expenditures as operating
expenses during the two year experimental period. The IPUC approved a similar
proposal on March 3, 1995.

5
<PAGE> 9
THE WASHINGTON WATER POWER COMPANY

Power Cost Adjustment (PCA) In 1989 the IPUC approved the Company's filing for
a PCA whereby the Company is allowed to modify electric rates to recover or
rebate a portion of the difference between actual and allowed net power supply
costs. In July of 1994, the IPUC approved an indefinite extension of the
Company's proposed modifications to the PCA. The modified PCA tracks changes
in hydroelectric generation, secondary prices, related changes in thermal
generation and PURPA contracts but it no longer tracks changes in revenues or
costs associated with other wheeling or power contracts. On January 1, 1995, a
$2.2 million, or 2.5%, surcharge was implemented for the next twelve months to
recover costs resulting from low streamflow conditions during 1994. Since its
implementation the PCA has triggered two surcharges and two rebates. See Note
1 to Financial Statements for additional details.

Northern Idaho Acquisition On December 30, 1994, the IPUC approved the
transfer of ownership of all PacifiCorp's electric properties in northern Idaho
to the Company for the purchase price of approximately $33 million, subject to
customary closing adjustments. The purchase adds about 9,800 electric
customers to the 82,000 electric customers already served by the Company in
Idaho. The purchase will not require major changes in the Company's
transmission system and the Company has the generating resources to meet the 54
megawatt peak load. The Company has reduced most customers' energy prices to
1% below PacifiCorp's previous rates and has instituted a rate freeze until
January 1, 1999. At the end of the four-year rate freeze, energy prices will
be adjusted to the levels then in effect in the Company's other service areas
in northern Idaho. See Note 14 to Financial Statements for additional details.

6
<PAGE> 10
THE WASHINGTON WATER POWER COMPANY

ELECTRIC OPERATING STATISTICS (1)

<TABLE>
<CAPTION>
Years Ended December 31,
------------------------------
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
ENERGY RESOURCES (thousand MWh):
Hydro generation (from Company facilities)......... 2,904 3,548 2,969
Thermal generation (from Company facilities)....... 3,427 2,791 3,310
Purchased power - long-term hydro.................. 1,177 1,117 1,276
Purchased power - other............................ 3,146 3,492 2,975
Power exchanges.................................... (24) 81 72
-------- -------- --------
Total power resources............................ 10,630 11,029 10,602
Energy losses and Company use...................... (504) (598) (534)
-------- -------- --------
Total energy resources (net of losses)........... 10,126 10,431 10,068
======== ======== ========

ENERGY REQUIREMENTS (thousand MWh):
Residential........................................ 3,035 3,134 3,024
Commercial......................................... 2,477 2,373 2,299
Industrial......................................... 1,705 1,644 1,563
Public street and highway lighting................. 22 22 20
-------- -------- --------
Total retail requirements........................ 7,239 7,173 6,906
Firm wholesale..................................... 1,523 1,798 2,020
Non-firm wholesale................................. 1,364 1,460 1,142
-------- -------- --------
Total energy requirements........................ 10,126 10,431 10,068
======== ======== ========

RESOURCE AVAILABILITY at time of system peak (MW):
Total requirements (winter) (2).................... 2,233 2,126 2,018
Total resource availability (winter)............... 2,468 2,335 2,280
Total requirements (summer) (3).................... 1,793 1,682 1,686
Total resource availability (summer)............... 2,392 2,206 2,138

ELECTRIC OPERATING REVENUES (Thousands of Dollars):
Residential........................................ $146,894 $153,929 $146,073
Commercial......................................... 131,254 126,256 121,277
Industrial......................................... 57,438 57,133 50,934
Public street and highway lighting................. 3,108 3,022 2,891
-------- -------- --------
Total retail revenue............................. 338,694 340,340 321,175
Firm wholesale..................................... 64,890 65,420 66,484
Non-firm wholesale................................. 26,496 43,214 25,307
-------- -------- --------
Total energy revenues............................ 430,080 448,974 412,966
Miscellaneous revenues............................. 21,211 15,201 11,447
-------- -------- --------
Total electric revenues.............................. $451,291 $464,175 $424,413
======== ======== ========

Income from electric operations - After income tax... $92,918 $92,850 $98,365
======== ======== ========
NUMBER OF ELECTRIC CUSTOMERS (Average for Period):
Residential........................................ 239,733 233,795 227,575
Commercial......................................... 29,402 28,678 27,781
Industrial......................................... 999 963 974
Public street and highway lighting................. 325 308 302
-------- -------- --------
Total retail customers........................... 270,459 263,744 256,632
Wholesale customers................................ 27 28 26
-------- -------- --------
Total electric customers......................... 270,486 263,772 256,658
======== ======== ========
ELECTRIC RESIDENTIAL SERVICE AVERAGES:
Annual use per customer (KWh)...................... 12,661 13,406 13,287
Revenue per KWh (in cents)......................... 4.84 4.91 4.83
Annual revenue per customer........................ $612.74 $658.39 $641.87
</TABLE>

(1) None of the statistics include data from the acquisition of the northern
Idaho properties from PacifiCorp as the Company did not begin operations
of the properties until January, 1995.
(2) Includes firm contract obligations of 539 MW, 485 MW and 462 MW and 242 MW,
120 MW and 63 MW of non-firm sales in 1994, 1993 and 1992, respectively.
(3) Includes firm contract obligations of 509 MW, 610 MW and 468 MW in 1994,
1993 and 1992, respectively, and non-firm sales in 1994 of 1 MW. There were
no non-firm sales in 1993 or 1992 during the summer system peak period.

7
<PAGE> 11
THE WASHINGTON WATER POWER COMPANY

NATURAL GAS SERVICE

COMPETITION AND BUSINESS RISK

Natural gas remains competitively priced compared to other alternative fuel
sources for residential, commercial and industrial customers and is projected
to remain so well into the future due to increasing supplies and competition.
The Company continues to advise electricity customers as to the cost advantages
of converting space and water heating needs to natural gas. Significant growth
has occurred in the Company's natural gas business in recent years due to these
conversions and increased demand for natural gas in new construction. The
Company also makes sales or provides transportation service directly to large
natural gas customers.

Challenges facing the Company's natural gas business include the continuing
potential for customers to by-pass the Company's natural gas system. Since
1988 two of the Company's large industrial customers have built their own
pipeline interconnection. However, these customers continue to purchase
natural gas services from the Company. To reduce the potential for such
by-pass, the Company prices its natural gas services, including transportation
contracts, competitively and has varying degrees of flexibility to price its
transportation and delivery rates by means of special contracts. The Company
has also signed long-term transportation contracts with two of its largest
industrial customers which minimizes the chances of these customers by-passing
the Company's system in the foreseeable future.

Order 636B adopted by FERC in 1992 provides the Company more flexibility in
optimizing its natural gas transportation and supply portfolios. While rate
design changes have increased the costs of firm transportation to low
load-factor pipeline customers such as the Company, flexible receipt and
delivery points and capacity releases allow temporarily under-utilized
transportation to be released to others when not needed to serve the Company's
customers. The Company is also able to optimize its natural gas portfolio by
engaging in some off-system sales.

NATURAL GAS SYSTEM

The Company's natural gas operations are operated as separate divisions, with
the WWP service territory including the Washington and Idaho properties and the
WPNG service territory including Oregon and California properties.

Natural Gas Supply The Company has access to five natural gas pipelines,
Northwest Pipeline Company (NWP), Pacific Gas Transmission (PGT), Paiute
Pipeline (Paiute), NOVA Pipeline, Ltd. (NOVA) and Alberta Natural Gas Co. Ltd.
(ANG), which provide the Company access to both domestic and Canadian natural
gas supplies. Due to this resource portfolio, the Company remains one of the
nation's lowest-cost local distribution companies.

Both WWP and WPNG contract with NWP for three types of firm service
(transportation, liquefied natural gas storage and underground storage) and
with PGT, NOVA and ANG for firm transportation only. The Company contracted
with NOVA, ANG and PGT for additional transportation capacity to be available
by November 1995 for service in its Washington, Idaho and Oregon natural gas
properties. WPNG also contracts with Paiute for firm transportation and
liquefied natural gas storage to deliver natural gas to its California
customers.

Firm natural gas supplies are purchased by the Company through negotiated
agreements having terms ranging between one month and ten years with a variety
of natural gas suppliers. As a result of FERC Order 636B, WWP has completed
the process of converting its NWP natural gas sales to firm transportation and
assuming its share of NWP's natural gas supply contracts.

Jackson Prairie Natural Gas Storage Project (Storage Project) The Company owns
a one-third interest in the Storage Project, which is an underground natural
gas storage field located near Chehalis, Washington. Under FERC's open access
policy the role of the Storage Project in providing flexible natural gas
supplies is increasingly important to the Company's natural gas operations.
The Storage Project enables the Company to place natural gas into storage when
prices are low or to meet minimum natural gas purchasing requirements, as well
as to withdraw natural gas from storage when spot prices are high or as needed
to meet high demand periods. The Company, together with the other owners, is
pursuing alternatives to increase the potential for both capacity and
deliverability at the Storage Project.

The Company has contracted to release some of its Storage Project capacity to
two other utilities until mid-1995 and 1996, respectively, with a provision
under one of the releases to partially recall the released capacity if the
Company determines additional natural gas is required for its own system
supply. The Company is currently negotiating the extension of these contracts
until 1998 and 2001, respectively.

8
<PAGE> 12
THE WASHINGTON WATER POWER COMPANY

Natural Gas Transportation Services The Company provides transportation
service to customers who obtain their own natural gas supplies. Transportation
service continued to be a significant component of the Company's total system
deliveries in 1994. The competitive nature of the spot natural gas market
results in savings in the cost of purchased natural gas, which encourages large
customers with fuel-switching capabilities to continue to utilize natural gas
for their energy needs. The total volume transported on behalf of
transportation customers was approximately 195.5 million therms in 1994. This
total volume represented approximately 39% of the Company's total system
deliveries in 1994.

NATURAL GAS REGULATORY ISSUES

The Company, as a public utility, is currently subject to regulation by several
state utility commissions with respect to rates, accounting, the issuance of
securities and other matters. The natural gas operations are subject to the
jurisdiction of the WUTC, IPUC, OPUC and CPUC in addition to the jurisdiction
of FERC with respect to natural gas rates charged for the release of capacity
from the Storage Project.

General Rate Cases

The Company has no current plans to file for any natural gas general rate cases
in 1995. See Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations: Future Outlook for additional information
regarding rate freezes related to the proposed merger with SPPC. The following
table summarizes information for the Company's most recent general natural gas
rate cases (1):

<TABLE>
<CAPTION>
Approved Effective Change
------------------------------ ------------------------------
Jurisdiction Effective Date ROE Amount (2) %
------------ -------------- ------ ---------- ------
(000's)
<S> <C> <C> <C> <C>
WUTC 8-90 12.90% $1,131 2.58%
IPUC 10-89 12.75 (579) (3.66)
Reconsideration 2-90 12.75 135 0.86
</TABLE>

(1) In addition, the Company from time to time, upon request, receives
regulatory approval from the WUTC, the IPUC, the OPUC and the CPUC
to adjust rates to reflect changes in the cost of purchased natural
gas between general rate cases.
(2) Anticipated annual revenue effect.

In September 1991, the Company commenced operations in both California and
Oregon upon the acquisition of the natural gas properties of CP National. The
conditions of the CPUC order approving the acquisition included an exemption
from filing a general rate case until January 1, 1994 and a rate freeze until
January 1, 1995. On February 8, 1995, the CPUC granted an additional one year
extension to January 1, 1996 before the Company is required to file a general
rate case. As a result, the existing rate freeze will continue until at least
January 1, 1997. The OPUC also authorized a general rate freeze which extends
to December 31, 1995. Purchased natural gas costs will continue to be tracked
through to customers in both jurisdictions during the rate freeze period.

Integrated Resource Planning (IRP) See Electric Service - Electric Regulatory
Issues for a detailed description of the IRP process. The natural gas IRP is a
process required by the WUTC, IPUC and the OPUC. The 1995 natural gas IRP
reports were submitted to these commissions in January 1995 with
acknowledgments anticipated by the end of 1995. The natural gas IRP is
provided to the CPUC for informational purposes only.

Demand Side Management (DSM) See Electric Service - Electric Regulatory Issues
regarding the WUTC and IPUC DSM applications. In 1993 the OPUC authorized the
Company to defer revenue requirements associated with its WPNG DSM investments,
and established an annual rate adjustment mechanism to reflect the deferred
costs on a timely basis. Under this authorization, the Company files annually,
concurrent with the Company's annual natural gas tracker filing, a rate
adjustment to recover DSM program costs and margin losses. On December 1, 1994
the OPUC approved the Company's annual tracker increase which included such a
rate adjustment.

Natural Gas Trackers Natural gas trackers are designed to pass through changes
in purchased natural gas costs and do not result in any changes in net income
to the Company. In mid-July, the Company filed a natural gas tracker with the
WUTC primarily to reflect changes in the cost of purchased natural gas during
the past year. At the same time a natural gas tracker was filed with the IPUC
for a decrease primarily due to a change in cost determination methodology.
The trackers in Washington and Idaho were both approved effective September 1,
1994 and authorized a $5.7 million or 8.75% increase and a $1.0 million or
3.98% decrease, respectively, in the two jurisdictions. The annual Oregon
natural gas tracker became

9
<PAGE> 13
THE WASHINGTON WATER POWER COMPANY

effective on December 1, 1994, which authorized a $2.4 million or 5.74%
increase. A Purchased Gas Adjustment (PGA) or natural gas tracker filing was
approved by the CPUC effective January 5, 1995 which authorized a $0.8 million
or 7.71% increase in California.

10
<PAGE> 14
THE WASHINGTON WATER POWER COMPANY

NATURAL GAS OPERATING STATISTICS

<TABLE>
<CAPTION>
Years Ended December 31,
-------------------------------
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
SOURCES OF SUPPLY (Thousands of Therms):
Purchases............................................... 335,780 300,572 232,726
Storage - injections.................................... (20,518) (26,398) (5,478)
Storage - withdrawals................................... 19,053 20,153 17,229
Natural gas for transportation.......................... 195,543 197,499 181,145
Distribution system gains (losses)...................... 1,471 7,416 (2,663)
--------- -------- --------
Total supply.......................................... 531,329 499,242 422,959
======== ======== ========
THERMS DELIVERED (Thousands of Therms):
Residential............................................. 150,106 151,261 117,660
Commercial.............................................. 120,901 114,793 95,624
Industrial - firm....................................... 15,614 19,035 15,822
Industrial - interruptible.............................. 12,801 15,747 12,350
--------- -------- --------
Total retail sales.................................... 299,422 300,836 241,456
Off-system sales........................................ 36,107 - -
Transportation.......................................... 195,543 197,499 181,145
Company use............................................. 257 907 358
--------- -------- --------
Total therms - sales and transportation............... 531,329 499,242 422,959
======== ======== ========
NET SYSTEM MAXIMUM CAPABILITY (Thousands of Therms):
Net system maximum demand (winter)...................... 2,686 2,651 2,277
Net system maximum firm contractual capacity (winter)... 3,523 3,523 3,786

NATURAL GAS OPERATING REVENUES (Thousands of Dollars):
Residential............................................. $ 76,597 $ 68,137 $ 48,395
Commercial.............................................. 50,981 43,542 31,984
Industrial - firm....................................... 5,642 6,089 4,506
Industrial - interruptible.............................. 3,570 4,784 3,204
--------- -------- --------
Total retail revenues................................. 136,790 122,552 88,089
Off-system sales........................................ 5,098 - -
Transportation.......................................... 11,140 10,923 8,663
Miscellaneous revenues.................................. 3,748 4,072 3,818
--------- -------- --------
Total natural gas revenues............................ $156,776 $137,547 $100,570
======== ======== ========
Income from natural gas operations - After income tax... $ 18,495 $ 19,406 $ 12,570
======== ======== ========
NUMBER OF NATURAL GAS CUSTOMERS (Average for Period):
Residential............................................. 179,176 162,400 148,242
Commercial.............................................. 23,466 22,526 21,816
Industrial - firm....................................... 264 268 266
Industrial - interruptible.............................. 33 39 29
--------- -------- --------
Total retail customers................................ 202,939 185,233 170,353
Off-system sales........................................ 1 - -
Transportation.......................................... 60 56 60
--------- -------- --------
Total natural gas customers........................... 203,000 185,289 170,413
======== ======== ========
NATURAL GAS RESIDENTIAL SERVICE AVERAGES:
WWP
Annual use per customer (therms)...................... 899 1,025 864
Revenue per therm (in cents).......................... 47.46 41.55 37.05
Annual revenue per customer........................... $426.83 $425.82 $319.99
WPNG
Annual use per customer (therms)...................... 731 775 679
Revenue per therm (in cents).......................... 58.62 52.78 49.64
Annual revenue per customer........................... $428.64 $409.11 $337.06

HEATING DEGREE DAYS:
Spokane, WA
Actual................................................ 6,225 7,224 6,134
30 year average....................................... 6,842 6,882 6,882
% of average.......................................... 91.0 105.0 89.1
Medford, OR
Actual................................................ 4,348 4,396 3,653
30 year average....................................... 4,611 4,798 4,798
% of average.......................................... 94.3 91.6 76.1
</TABLE>

<PAGE> 15
THE WASHINGTON WATER POWER COMPANY

ENVIRONMENTAL ISSUES

The Company is subject to environmental regulation by federal, state and local
authorities. The generation, transmission, distribution, service and storage
facilities in which the Company has an ownership interest have been designed to
comply with all environmental laws presently applicable. Furthermore the
Company conducts vigilant and periodic reviews of all its facilities and
operations to anticipate emerging environmental issues.

Air Quality. The Company continues to assess both the potential and actual
impact of the 1990 Clean Air Act Amendments (CAAA) on the thermal generating
plants in which it maintains an ownership interest. Centralia, which is
operated by PacifiCorp, is classified as a "Phase II" coal-fired plant under
the CAAA and as such, will be required to reduce sulfur dioxide (SO2) emissions
by approximately 40% by the year 2000. Several methods to meet CAAA SO2
reduction standards are being evaluated and a plan is expected to be completed
by the operator by mid-1995. The alternatives most likely to be used in
meeting the compliance standards will be some combination of lower sulfur coal,
SO2 reduction through clean coal technology and SO2 allowances either purchased
or pooled, if available, among the Centralia owners. The anticipated share of
costs for SO2 compliance are not expected to have a major economic impact on
the Company.

Colstrip, which is also a "Phase II" coal-fired plant and is operated by
Montana Power, is not expected to be required to implement any additional SO2
mitigation in the foreseeable future in order to continue operations.
Reduction in nitrogen oxides (NOX) will be required at both Centralia and
Colstrip prior to the year 2000. The anticipated share of costs for NOX
compliance are not expected to have a major economic impact on the Company.

The Company's other thermal projects also are subject to various CAAA
standards. Every five years each project requires an updated operating permit
(known as a Title V permit) which addresses, among other things, the compliance
of the plant with the CAAA. Permit applications for the Company's Kettle Falls
plant and the Northeast CT are due in June of 1995. The new Rathdrum CT in
northern Idaho has an operating permit application currently under
consideration. The Company expects to be able to obtain these permits under
the CAAA. See Electric Service - Electric System for additional information.

Superfund Sites. The Company was named a potentially responsible party under
the Comprehensive Environmental Response, Compensation, and Liability Act of
1980 ("CERCLA" or "Superfund") at the Coal Creek site in Chehalis, Washington.
The clean-up is now essentially complete, with the exception of some long-term
maintenance efforts, at a cost of approximately $14 million. This cost was
shared by approximately 90 utilities and the Company's portion, which has
already been paid, was about $1.1 million.

In 1993 the EPA referred a matter to the U.S. Justice Department requesting the
Company and other potentially responsible parties to enter into negotiations
for the recovery of costs incurred by EPA and for initiation of action in
connection with the clean-up at the Spokane Junk Yard Site located in Spokane,
Washington. If an action is commenced, the claim is expected to be for $2.7
million in initial clean-up and site stabilization costs plus additional costs
including attorneys' fees and further site rehabilitation costs. The Company
has no records showing that any Company equipment was ever deposited at the
Spokane Junk Yard Site or that PCB contaminated equipment was delivered to any
company which disposed of materials at the site. In consultations with the
EPA, the Company is continuing to evaluate its potential liability, if any,
with respect to this site.

Refer to Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations: Future Outlook and Note 11 to Financial Statements
for additional information.

NON-UTILITY BUSINESS

The majority of all of the non-utility businesses are owned by Pentzer, a
wholly owned subsidiary of the Company. As of December 31, 1994, the Company
had an equity investment of approximately $114 million in non-utility
businesses, of which about $107 million was invested in Pentzer. The remainder
was invested in three other subsidiaries, the largest of which is Washington
Irrigation and Development Company (WIDCo), which maintains a small investment
portfolio.

As of December 31, 1994, Pentzer had approximately $167 million in total
assets, or about 8% of the Company's consolidated assets. Pentzer's portfolio
of investments includes companies involved in consumer product promotion,
specialty tool manufacturing, financial services, industrial real estate
development and electronic technology.

Pentzer's current investment profile focuses on manufacturers and distributors
of industrial and consumer products as well as service businesses. The Company
seeks businesses with above average records of earnings growth in industries
that are not cyclical or dependent upon high levels of research and
development. Emphasis is placed on leading companies with strong market
franchises, dominant or proprietary product lines or other significant
competitive advantages. Pentzer is particularly

12
<PAGE> 16
THE WASHINGTON WATER POWER COMPANY

interested in companies serving niche markets. Total investment in any one
company is generally limited to $15 million, and control of the acquired
company's board of directors is generally required.

Pentzer's business strategy is to acquire controlling interest in a broad range
of middle market companies, to help these companies grow through internal
development and strategic acquisitions, and to sell the portfolio investments
to the public or to strategic buyers. Pentzer's objective is to produce
current returns from its portfolio investments that are higher than that of the
utility operations and to supplement these current returns by generating
transactional gains through the sale of portfolio investments when appropriate.
From time to time, a significant portion of Pentzer's earnings contributions
may be the result of transactional gains. Accordingly, although the income
stream is expected to be positive, it may be uneven from year to year.

Refer to Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations: Results of Operations: Non-Utility Operations and
Notes 1, 10 and 14 to Financial Statements for additional information.

<PAGE> 17
THE WASHINGTON WATER POWER COMPANY

ITEM 2. PROPERTIES

ELECTRIC PROPERTIES

The Company's electric properties, located in the States of Washington, Idaho
and Montana, include the following:

Generating Plant
<TABLE>
<CAPTION>
Nameplate Present Year of
No. of Rating Capability FERC License
Units (MW)(1) (MW)(2) Expiration
----- ------ --------- ------------
<S> <C> <C> <C> <C>
Hydroelectric Generating Stations (River)
Washington:
Long Lake (Spokane) 4 70.0 72.0 2007
Little Falls (Spokane) 4 32.0 36.0 N/A (3)
Nine Mile (Spokane) 4 26.4 29.0 2007
Upper Falls (Spokane) 1 10.0 10.2 2007
Monroe Street (Spokane) 1 14.8 13.0 2007
Meyers Falls (Colville) 2 1.2 1.3 2023
Idaho:
Cabinet Gorge (Clark Fork) 4 221.9 236.0 2001(4)
Post Falls (Spokane) 6 14.8 18.0 2007
Montana:
Noxon Rapids (Clark Fork) 5 466.7 554.0 2005(4)
------- -------
Total Hydroelectric 857.8 969.5

Thermal Generating Stations
Washington:
Centralia(5) 2 199.5 201.0
Kettle Falls 1 50.7 47.0
Northeast CT(6) 2 61.2 69.0
Idaho:
Rathdrum CT(6),(7) 2 166.5 176.0
Montana:
Colstrip (Units 3 and 4)(5) 2 233.4 216.0
------- -------
Total Thermal 711.3 709.0

Total Generation 1,569.1 1,678.5
======= =======
</TABLE>

N/A Not applicable.
(1) Nameplate Rating, also referred to as "installed capacity", is the
manufacturer's assigned power rating under specified conditions.
(2) Capability is the maximum generation of the plant without exceeding
approved limits of temperature, stress and environmental conditions.
(3) See Note 11 to Financial Statements for additional information.
(4) The formal relicensing process will begin in mid-1995 for Cabinet Gorge
and in 2000 for Noxon Rapids.
(5) Jointly-owned; data above refers to Company's respective 15% interests.
(6) Used primarily for peaking needs.
(7) Construction completed in January 1995; see Note 9 to Financial
Statements regarding long-term lease financing.

Distribution and Transmission Plant

The Company operates approximately 11,350 miles of primary and secondary
distribution lines in its electric system in addition to a transmission system
of approximately 550 miles of 230 KV line and 1,530 miles of 115 KV line.
These electric system mileages do not yet include the properties recently
acquired from PacifiCorp in Bonner County in northern Idaho. The Company also
owns a 10% interest in 495 miles of a 500 KV line from Colstrip, Montana and a
15% interest in 3 miles of a 500 KV line from Centralia, Washington to the
nearest BPA interconnections.

The 230 KV lines are used primarily to transmit power from the Company's Noxon
Rapids and Cabinet Gorge hydroelectric generating stations to major load
centers in the Company's service area. The 230 KV lines also transmit to
points of

14
<PAGE> 18
THE WASHINGTON WATER POWER COMPANY

interconnection with adjoining electric transmission systems for bulk
power transfers. These lines interconnect with BPA at five locations and at
one location each with PacifiCorp, Montana Power and Idaho Power Company. The
BPA interconnections serve as points of delivery for power from the Colstrip
and Centralia generating stations as well as for the interchange of power with
the Southwest. The interconnection with PacifiCorp is the point of delivery
for power purchased by the Company from Mid-Columbia projects' hydroelectric
generating stations.

The 115 KV lines provide for transmission of energy as well as providing for
the integration of the Spokane River hydroelectric and Kettle Falls wood-waste
generating stations with service area load centers. These lines interconnect
with BPA at nine locations, Grant County PUD, Seattle City Light and Tacoma
City Light at two locations and one interconnect location each with Chelan
County PUD, PacifiCorp, and Montana Power.

See Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations - Future Outlook for additional information regarding the
potential transmission interconnections between the Company and SPPC.

NATURAL GAS PROPERTIES

The WWP and WPNG service territories' natural gas properties have natural gas
distribution mains of approximately 3,100 miles and 1,500 miles, respectively,
as of December 31, 1994.

The Company, NWP and Washington Natural Gas Company each own a one-third
undivided interest in the Storage Project. The Storage Project has a total
peak day deliverability of 4.6 million therms, with a total working natural gas
inventory of 155.2 million therms.

ITEM 3. LEGAL PROCEEDINGS

Refer to Note 11 to Financial Statements.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

A Special Meeting of Shareholders of the Company was held on November 18, 1994.
The only matter voted upon at the meeting was the approval of the Agreement and
Plan of Reorganization and Merger dated as of June 27, 1994, as amended October
4, 1994, by and among the Company, SPR, SPPC and Resources West, and the
transactions contemplated thereby (Merger Proposal), pursuant to which, among
other things, each of the Company, SPR and SPPC will be merged with and into
Resources West.

As of September 22, 1994, the record date for determining shareholders entitled
to notice of and to vote at the meeting, 54,017,035 shares of Common Stock of
the Company and 850,500 shares of Preferred Stock of the Company were issued
and outstanding, with 43,088,852 shares of Common Stock and 641,686 shares of
Preferred Stock represented at said meeting. Approval of the Merger Proposal
required the affirmative vote of (i) not less than two thirds of all votes
entitled to be cast by all holders of Company Common Stock and (ii) not less
than two-thirds of all votes entitled to be cast by all holders of Company
Preferred Stock, in each case voting separately as a class. The Merger
Proposal was approved by the requisite shareholder votes. The details of the
voting are shown below:

<TABLE>
<CAPTION>
Against
For or Withheld Abstain
---------- ----------- ---------
<S> <C> <C> <C>
Common Stock 39,879,477 1,775,872 1,433,503

Preferred Stock 641,686 0 0
</TABLE>

See Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations: Future Outlook and Note 15 to Financial Statements for
additional details relating to the terms of the proposed merger.

15
<PAGE> 19
THE WASHINGTON WATER POWER COMPANY

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Outstanding shares of Common Stock are listed on the New York and Pacific Stock
Exchanges. As of February 28, 1995, there were approximately 34,155 registered
shareholders of the Company's no par value Common Stock.

It is the intention of the Board of Directors to continue to pay dividends
quarterly on the Common Stock, but the amount of such dividends is dependent on
future earnings, the financial position of the Company and other factors.

Refer to Notes 1, 8 and 17 to Financial Statements for additional information.

<PAGE> 20
THE WASHINGTON WATER POWER COMPANY

ITEM 6. SELECTED FINANCIAL DATA

On November 9, 1993, the Company distributed, to shareholders of record on
October 25, 1993, shares of its common stock, without par value, under a
two-for-one stock split effected in the form of a 100% stock dividend. All
references to number of shares and per share information have been adjusted to
reflect the common stock split on a retroactive basis.

In 1992, Pentzer's common stock ownership in ITRON was reduced from
approximately 60% to approximately 40% as a result of the issuance of common
stock by ITRON in an acquisition. Accordingly, beginning in 1992, Pentzer's
share of ITRON's earnings was accounted for by the equity method and was
included in Other Income-Net and its investment in ITRON was reflected on the
balance sheet under Other Property and Investments. ITRON's initial public
offering in November 1993 and Pentzer's sales of ITRON stock during 1993 and
1994 resulted in a reduction in Pentzer's ownership interest to approximately
14%. As a result, Pentzer's investment in ITRON, beginning in December 1994,
is accounted for by the cost method. Therefore, income from ongoing ITRON
operations will no longer be recorded by Pentzer.

The Company purchased natural gas distribution properties in Oregon and
California from CP National Corporation on September 30, 1991. The 1991
financial information reflects three months of operations of these properties.
Total assets for 1994 include the northern Idaho electric properties purchased
by the Company from PacifiCorp on December 30, 1994.

On July 31, 1990, WIDCo sold its 50% interest in its coal mining properties.
The consolidated financial statements, notes and selected financial data have
been reclassified to reflect the continuing operations of the Company. The
revenues, expenses, assets and liabilities of the discontinued operations have
been reclassified from those categories and netted into single line items in
the income statements and balance sheets.

<TABLE>
<CAPTION>
Years Ended December 31,
---------------------------------------------------------
1994 1993 1992 1991 1990
---- ---- ---- ---- ----
(Thousands of Dollars except Per Share Data and Ratios)
<S> <C> <C> <C> <C> <C>
Operating Revenues:
Utility . . . . . . . . . . . . $608,067 $601,722 $524,983 $485,075 $470,655
Non-Utility . . . . . . . . . . 62,698 38,877 32,775 81,732 83,786
------ ------ ------ ------ ------
Total . . . . . . . . . . . . . 670,765 640,599 557,758 566,807 554,441
AFUDC/AFUCE . . . . . . . . . . 4,949 4,964 3,751 1,999 645

Net Income:
Utility . . . . . . . . . . . . 63,567 69,510 63,975 69,211 71,463
Non-Utility . . . . . . . . . . 13,630 13,266 8,292 1,420 684
Discontinued Operations . . . . - - 2,403 1,553 15,457
------ ----- ----- ----- ------
Total . . . . . . . . . . . . . 77,197 82,776 74,670 72,184 87,604

Preferred Stock Dividend
Requirements. . . . . . . . . . 8,656 8,335 6,817 9,292 8,419
Income Available for Common
Stock . . . . . . . . . . . . . 68,541 74,441 67,853 62,892 79,185
Outstanding Common Stock (000s):
Weighted Average . . . . . . . 53,538 51,616 49,550 46,916 45,723
Year-End . . . . . . . . . . . 54,421 52,758 50,888 47,902 46,424
Book Value per Share . . . . . . . $12.19 $12.02 $11.54 $11.11 $10.84

Earnings per Share:
Utility . . . . . . . . . . . . 1.03 1.19 1.15 1.28 1.38
Non-Utility . . . . . . . . . . .25 .25 .17 .03 .01
Discontinued operations . . . . - - .05 .03 .34
----- ----- --- --- ---
Total . . . . . . . . . . . . . 1.28 1.44 1.37 1.34 1.73
Dividends Paid per Common
Share . . . . . . . . . . . . 1.24 1.24 1.24 1.24 1.24

Total Assets at Year-End:
Utility . . . . . . . . . . . . 1,820,671 1,701,652 1,424,812 1,394,800 1,275,122
Non-Utility................... 173,582 136,186 109,203 126,713 130,889
-------- ------- ------- ------- ---------
Total . . . . . . . . . . . . . 1,994,253 1,837,838 1,534,015 1,521,513 1,406,011

Long-term Debt at Year-End.. . . . 721,146 647,229 596,897 633,434 561,197
Preferred Stock Subject to
Mandatory Redemption at
Year-End . . . . . . . . . . . 85,000 85,000 85,000 50,000 50,000

Ratio of Earnings to Fixed
Charges . . . . . . . . . . . . 3.24 3.45 3.08 2.96 2.79
Ratio of Earnings to Fixed
Charges and Preferred
Dividend Requirements . . . . . 2.59 2.77 2.57 2.35 2.31
</TABLE>

17
<PAGE> 21
THE WASHINGTON WATER POWER COMPANY

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

The Company is primarily engaged as a utility in the generation, purchase,
transmission, distribution and sale of electric energy and the purchase,
transportation, distribution and sale of natural gas. Natural gas operations
are affected to a significant degree by weather conditions and customer growth.
The Company's electric operations are highly dependent upon hydroelectric
generation for its power supply. As a result, the electric operations of the
Company are significantly affected by weather and streamflow conditions and, to
a lesser degree, by customer growth. Revenues from the sale of surplus energy
to other utilities and the cost of power purchases vary from year to year
depending on streamflow conditions and the wholesale power market. The
wholesale power market in the Northwest region is affected by several factors,
including the availability of water for hydroelectric generation, the
availability of base load plants in the region and the demand for power in the
Southwest region. Other factors affecting the wholesale power market include
new entrants in the wholesale market, such as power brokers and marketers,
competition from low cost generation being developed by independent power
producers and declining margins. Usage by retail customers varies from year to
year primarily as a result of weather conditions, the economy in the Company's
service area, customer growth, conservation, appliance efficiency and other
technology.

The Company intends to continue to emphasize the efficient use of energy by its
customers, increase efforts to grow its customer base, especially natural gas,
and continue to manage its operating costs, increase revenues and improve
margins. The Company also intends to pursue resource opportunities through
system upgrades, purchases, demand side management and other options that will
result in obtaining electric power and natural gas supplies at the lowest
possible cost.

RESULTS OF OPERATIONS

OVERALL OPERATIONS

Overall earnings per share for 1994 were $1.28, compared to $1.44 in 1993 and
$1.37 in 1992. The 1994 results include $8.0 million of gains recorded by
Pentzer Corporation (Pentzer) primarily as a result of the sale of stock in
ITRON, Inc. (ITRON). The 1993 results include gains totaling $12.8 million
recorded by Pentzer as a result of the sale of several investments in its
portfolio and the sale of stock in the initial public offering by ITRON in
November 1993. The 1992 results include gains of $4.4 million, or $0.09 per
share, due to the issuance of common stock by ITRON in an acquisition and $1.2
million due to the sale of Pentzer's interest in a company involved in power
plant maintenance. Discontinued coal mining operations contributed $2.4
million to net income, or $0.05 per share, in 1992.

Utility income available for common stock decreased $6.3 million, or 10.2%, in
1994 after increasing $4.0 million, or 7.0%, in 1993. Utility income available
for common stock contributed $1.03 to earnings per share in 1994, compared to
$1.19 in 1993 and $1.15 in 1992. Non-utility income available for common stock
from continuing operations increased $0.4 million in 1994 and $5.0 million in
1993 and contributed $0.25 to earnings per share in both 1994 and 1993 and
$0.17 in 1992.

Weather that was 9% warmer than normal during 1994 reduced residential usage
for both electric and natural gas customers. Income from electric operations
decreased $0.6 million in 1994 over 1993 primarily as a result of a $12.9
million decline in revenues due to decreased KWh sales that was nearly offset
by decreased purchased power expense. Income from natural gas operations
decreased $0.2 million in 1994, as compared to 1993, due primarily to increased
purchased gas costs that were offset substantially by increased revenues due to
customer growth. Slightly colder-than-normal weather during 1993 affected both
electric and natural gas operations as compared to 1992. Income from electric
operations decreased $5.4 million in 1993, as compared to 1992, primarily as a
result of increases in purchased power costs due to thermal plant outages, a
significant short-term sale of wholesale energy, lower hydroelectric generation
due to below normal streamflows and increases in other operating and
maintenance expenses. Income from natural gas operations increased $6.7
million in 1993 over 1992 due primarily to increased customer usage from the
colder weather and customer growth.

18
<PAGE> 22
THE WASHINGTON WATER POWER COMPANY

Interest expense increased $2.9 million in 1994 after a decrease of $3.4
million in 1993. In 1994, $88.0 million in long-term debt was issued, while
$7.5 million of long-term debt matured or was redeemed. At December 31, 1994,
long-term debt outstanding was $73.9 million higher than at December 31, 1993.
In 1993, $274.1 million of long-term debt matured or was redeemed, while only
$254.1 million was issued.

Preferred stock dividend requirements increased $0.3 million in 1994, primarily
due to higher dividend rates on the Company's Auction Preferred Stock, and $1.5
million, or 22.3%, in 1993 due to the issuance of preferred stock in late 1992.
A redemption of preferred stock in early 1992, which was not replaced until an
issuance later in the year was the primary reason for the reduced preferred
dividend requirement in 1992.

UTILITY OPERATIONS

ELECTRIC OPERATIONS

<TABLE>
<CAPTION>
Electric Operating Income Summary
1994 VS 1993 1993 VS 1992
ELECTRIC OPERATIONS ------------------- -----------------
(DOLLARS IN THOUSANDS) 1994 INCR(DECR) % 1993 INCR(DECR) % 1992
-------------------- -------- --------- ---- -------- --------- ---- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Operating Revenues............. $451,291 $(12,884) (3) $464,175 $39,762 9 $424,413
Operating Expenses:
Purchased Power.............. 106,277 (12,532) (11) 118,809 27,100 30 91,709
Fuel for generation.......... 39,176 4,943 14 34,233 (2,863) (8) 37,096
Other Operatng & Maintenance.. 61,268 (7,299) (11) 68,567 10,709 19 57,858
Administrative & General..... 35,190 2,814 9 32,376 1,393 4 30,983
Depreciation & Amortization.. 48,233 1,230 3 47,003 4,961 12 42,042
Taxes Other than Income...... 36,022 1,001 3 35,021 587 2 34,434
--------- --------- -------- ------- --------
Total Operating Expenses.. 326,166 (9,843) (3) 336,009 41,887 14 294,122
--------- --------- -------- ------- --------
Income from Operations........ 125,125 (3,041) (2) 128,166 (2,125) (2) 130,291
Electric Operations Income
Taxes..................... 32,207 (3,109) (9) 35,316 3,390 11 31,926
--------- --------- -------- ------- --------
Net Operating Income(1)....... $ 92,918 $ 68 - $ 92,850 $(5,515) (6) $ 98,365
======== ========= ======== ======= ========

</TABLE>

(1) Does not include interest expense or other income.

Electric revenues decreased by 3% in 1994, as compared to 1993, due to a
combination of decreased residential sales and wholesale sales, partially
offset by increased commercial sales and higher wheeling revenues. Residential
revenues decreased by $7.0 million, despite a 3% increase in customers, due to
warm weather throughout most of 1994. Residential usage was also affected by
new appliance efficiency and other technology which has decreased customers'
base load requirements. Commercial revenues increased $5.0 million, or 4%, in
1994, as compared to 1993, due to 3% customer growth and the slightly
warmer-than-normal weather which increased air conditioning load. Commercial
customers tend to use air conditioning systems at much cooler temperatures than
residential customers, with the result that air conditioning load can be up
within the commercial sector and not within the residential sector, as during
the fall of 1994. Wholesale revenues decreased $17.2 million during 1994,
compared to 1993, primarily due to a significant short-term sale of wholesale
energy in 1993 which increased wholesale revenues in that period, low
streamflow conditions during 1994 which led to decreased KWh sales and lower
wholesale prices.

Electric revenues increased in all classes for 1993, as compared to 1992, as a
result of customer growth, increased wholesale sales and a slight increase in
customer usage due to colder than normal weather. As the Company's Demand Side
Management programs have grown, the electric load has become less
weather-sensitive as a result of the shifting of a greater portion of the heat
load to natural gas. Residential and commercial revenues increased by $12.8
million, primarily as a result of a 3% growth in customers in 1993. Industrial
sales during 1993 increased by $6.2 million, or 12%, primarily due to increased
KWh sales under a sales agreement with a large customer. Wholesale revenues
increased by $16.8 million, or 18%, due primarily to a significant sale of
wholesale energy over a six-week period in the first quarter of 1993.

19
<PAGE> 23
THE WASHINGTON WATER POWER COMPANY

Electric Revenues, KWh Sales, and Customers by Service Class
<TABLE>
<CAPTION>
1994 vs 1993 1993 vs 1992
(Revenues in thousands, ----------------- ------------------
KWh sales in millions 1994 Incr(Decr) % 1993 Incr(Decr) % 1992
- ----------------------- --------- ---------- ----- -------- ----------- ----- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Electric Revenues:
Residential.................... $146,894 $ (7,035) (5) $153,929 $ 7,856 5 $146,073
Commercial..................... 131,254 4,998 4 126,256 4,979 4 121,277
Industrial..................... 57,438 305 1 57,133 6,199 12 50,934
Wholesale...................... 91,386 (17,248) (16) 108,634 16,843 18 91,791

Electric KWh Sales:
Residential.................... 3,035 (99) (3) 3,134 110 4 3,024
Commercial..................... 2,477 104 4 2,373 74 3 2,299
Industrial..................... 1,705 61 4 1,644 81 5 1,563
Wholesale...................... 2,887 (371) (11) 3,258 96 3 3,162

Electric Customers (average):
Residential.................... 239,733 5,938 3 233,795 6,220 3 227,575
Commercial..................... 29,402 724 3 28,678 897 3 27,781
Industrial..................... 999 36 4 963 (11) (1) 974
Wholesale...................... 27 (1) (4) 28 2 8 26

</TABLE>

Warmer-than-normal weather and below-normal streamflow conditions affected 1994
electric operating results. Hydroelectric generation was 23% below normal,
caused by streamflows which were 65% of normal in 1994. Fuel costs increased
$4.9 million over 1993 due to increased thermal generation as a result of the
low streamflows in 1994 and shutdowns at thermal plants during 1993 which
decreased fuel expense for that year. Purchased power costs in 1994 decreased
$12.5 million, or 11%, over levels incurred during 1993, primarily due to
increased purchases during 1993 to complete a significant short-term sale of
wholesale energy and to replace lost thermal generation due to plant outages.
Transmission and distribution costs, which decreased $1.0 million and $2.3
million, respectively, contributed to the $7.3 million, or 11%, decrease in
other operating and maintenance expenses. Transmission expenses decreased in
1994 over 1993 due to decreased wholesale KWh sales and the associated wheeling
costs. Distribution expense was lower in 1994, compared to 1993, due to
increased expenses during 1993 for repairs at thermal plants. In October 1989,
the Idaho Public Utilities Commission (IPUC) approved the Company's filing for
a Power Cost Adjustment (PCA) designed to allow the Company to change rates to
recover or rebate a portion of the difference between actual and allowed net
power supply costs. Net PCA adjustments, resulting from low hydroelectric
conditions, accounted for $4.1 million of the decrease in other operating and
maintenance expenses from 1993. Administrative and general expenses increased
by $2.8 million in 1994, compared to 1993, primarily due to labor-related
costs.

Below-normal streamflow conditions and thermal plant outages significantly
affected 1993 electric operating results. Hydroelectric generation was 11%
below normal, caused by streamflows which were 86% of normal. Purchased power
increased by $27.1 million, or 30%, in 1993 primarily due to reduced
hydroelectric generation early in the year, a significant sale of wholesale
energy in the first quarter and to replace lost thermal generation due to plant
outages. Net PCA adjustments accounted for $4.6 million of the increase in
other operating and maintenance expenses from 1992. Higher levels of purchased
power resulted in higher transmission costs which also contributed to the
increase in other operating and maintenance expenses in 1993 over 1992.
Shutdowns at thermal generation plants and improved streamflows in the latter
part of 1993 were the primary reasons for the $2.9 million decrease in fuel
costs, and repairs at the plants resulted in an increase of nearly $2.0 million
in other operating and maintenance expenses.

20
<PAGE> 24
THE WASHINGTON WATER POWER COMPANY

NATURAL GAS OPERATIONS

Natural Gas Operating Income Summary

<TABLE>
1994 vs. 1993 1993 vs. 1992
Natural Gas Operations --------------- ---------------
(dollars in thousands) 1994 Incr(Decr) % 1993 Incr(Decr) % 1992
- ------------------------ -------- ---------- -- -------- ---------- -- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Operating Revenues $156,776 $19,229 14 $137,547 $36,977 37 $100,570
Operating Expenses:
Natural Gas Purchased 91,277 19,410 27 71,867 23,652 49 48,215
Other Operating & Maintenance 14,297 11 - 14,286 594 4 13,692
Administrative & General 10,944 875 9 10,069 434 5 9,635
Depreciation & Amortization 8,199 (271) (3) 8,470 593 8 7,877
Taxes Other than Income 8,133 220 3 7,913 2,090 36 5,823
-------- ------- -------- ------- -------
Total Operating Expenses 132,850 20,245 18 112,605 27,363 32 85,242
-------- ------- -------- ------- -------
Income from Operations 23,926 (1,016) (4) 24,942 9,614 63 15,328
Natural Gas Oper. Income Taxes 5,431 (105) (2) 5,536 2,778 101 2,758
-------- ------- -------- ------- -------
Net Operating Income(1) $ 18,495 $ (911) (5) $ 19,406 $ 6,836 54 $12,570
======== ======= ======== ======= =======
</TABLE>

(1) Does not include interest expense or other income.

The Company's natural gas business experienced the effects of weather on
operating results in both 1994 and 1993. In 1994, weather in the Washington
and Idaho service territory was 9% warmer than normal, compared to 5% colder
than normal in 1993. The Oregon service territory experienced temperatures 6%
warmer than normal in 1994, compared to 8% warmer in 1993. The 8% growth in
customers in 1994 helped offset the impact of the weather. Substantial
customer growth of 9% in 1993, along with colder weather, contributed to
increased revenues.

Total natural gas revenues increased in all customer classes except industrial
in 1994 from 1993. WPNG revenues accounted for an increase of $4.6 million in
overall natural gas operating revenues, as compared to 1993. In 1994, natural
gas revenues from WWP residential and commercial customers rose by $5.2 million
and $5.9 million, respectively. The increased revenues were due to customer
growth and higher average prices than in 1993, which were offset in part by
lower usage per customer as a result of warm temperatures. Much of the
customer growth in the WWP service area during the early part of 1994 was the
result of the Company's emphasis on conversions from electric service to
natural gas. Recent revisions in the Company's Demand Side Management programs
may lessen the pace of conversions in the future. During 1994, the Company
sold natural gas on an off-system sales basis. The revenues from these sales
were offset by like increases in purchased gas expense. Margins from these
transactions will be credited back to customers through rate changes for the
cost of gas.

Total natural gas revenues increased $37.0 million, or 37%, in 1993. WPNG
revenues accounted for an increase of $10.1 million, while WWP revenues
increased $26.9 million. Total therm sales increased by 18% in 1993 due to
customer growth in all service classes except transportation and higher
customer usage due to colder weather in 1993 as compared to 1992.
Approximately 40% of the customer growth in the WWP service area during 1993
was the result of the Company's emphasis on conversion from electric space and
water heating to natural gas through Demand Side Management programs.

21
<PAGE> 25
THE WASHINGTON WATER POWER COMPANY

Natural Gas Revenues, Therm Sales, and Customers by Service Class
<TABLE>
<CAPTION>
1994 vs 1993 1993 vs 1992
(Revenues in thousands, ----------------- ------------------
therm sales in thousands) 1994 Incr(Decr) % 1993 Incr(Decr) % 1992
- ------------------------- --------- ---------- ----- -------- ----------- ----- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Natural Gas Revenues:
Residential...................... $ 76,597 $ 8,460 12 $ 68,137 $19,742 41 $ 48,395
Commercial....................... 50,981 7,439 17 43,542 11,558 36 31,984
Industrial--firm................. 5,642 (447) (7) 6,089 1,583 35 4,506
Industrial--interruptible........ 3,570 (1,214) (25) 4,784 1,580 49 3,204
Off-system sales................. 5,098 5,098 - - - - -
Transportation................... 11,140 217 2 10,923 2,260 26 8,663

Natural Gas Therm Sales:
Residential...................... 150,106 (1,155) (1) 151,261 33,601 29 117,660
Commercial....................... 120,901 6,108 5 114,793 19,169 20 95,624
Industrial--firm................. 15,614 (3,421) (18) 19,035 3,213 20 15,822
Industrial--interruptible........ 12,801 (2,946) (19) 15,747 3,397 28 12,350
Off-system sales................. 36,107 36,107 - - - - -
Transportation................... 195,543 (1,956) (1) 197,499 16,354 9 181,145

Natural Gas Customers (average):
Residential...................... 179,176 16,776 10 162,400 14,158 10 148,242
Commercial....................... 23,466 940 4 22,526 710 3 21,816
Industrial--firm................. 264 (4) (1) 268 2 1 266
Industrial--interruptible........ 33 (6) (15) 39 10 34 29
Off-system sales................. 1 1 - - - - -
Transportation................... 60 4 7 56 (4) (7) 60
</TABLE>

A large portion of purchased gas expense is variable costs, with the result
that increases in revenues are offset by like increases in purchased gas
expense. Natural gas purchased expense increased $19.4 million in 1994 from
1993, primarily due to the increase in therm sales of 32.1 million, or 6%.
Administrative and general expenses increased by $0.9 million in 1994, compared
to 1993, primarily due to labor-related costs.

Natural gas purchased expense increased $23.7 million, or 49%, in 1993 as
compared to 1992, primarily as a result of an increase in therm sales of 76.3
million, or 18%, across all customer classes due to customer growth and colder
weather. Taxes other than income and income taxes also increased substantially
in 1993 due to increased revenues and income.

NON-UTILITY OPERATIONS

Non-Utility Operations Summary

<TABLE>
<CAPTION>
1994 vs 1993 1993 vs 1992
Non-Utility Operations ----------------- ------------------
(dollars in thousands) 1994 Incr(Decr) % 1993 Incr(Decr) % 1992
- ----------------------- --------- ---------- ----- -------- ----------- ----- ----------
<S> <C> <C> <C> <C> <C> <C> <C>

Operating revenues............... $ 62,698 $ 23,821 61 $ 38,877 $6,102 19 $ 32,775
Operating expenses............... 56,291 25,156 81 31,135 3,366 12 27,769
-------- -------- -------- ------- --------
Operating income................. 6,407 (1,335) (17) 7,742 2,736 55 5,006
Other income - net............... 14,175 4,740 50 9,435 1,345 17 8,090
-------- -------- -------- ------- --------
Income before income taxes....... 20,582 3,405 20 17,177 4,081 31 13,096
Income tax provision............. 6,952 3,041 78 3,911 (893) (19) 4,804
-------- -------- -------- ------- --------
Net income....................... $ 13,630 $ 364 3 $ 13,266 $4,974 60 $ 8,292
======== ======== ======== ======= ========
</TABLE>

Non-utility operations include the results of Pentzer and three other
subsidiary companies. Pentzer's business strategy is to acquire controlling
interest in a broad range of middle-market companies, to help these companies
grow through internal development and strategic acquisitions, and to sell the
portfolio investments to the public or to strategic buyers. Pentzer's
objective is to produce current returns from its portfolio investments that are
higher than that of the utility operations and to supplement these current
returns by generating transactional gains through the sale of portfolio
investments when appropriate. From time to time, a significant portion of
Pentzer's earnings

22
<PAGE> 26
THE WASHINGTON WATER POWER COMPANY

contributions may be the result of transactional gains. Accordingly, although
the income stream is expected to be positive, it may be uneven from year to
year.

Non-utility net income for 1994 was $13.6 million, which was a 3% increase over
1993. The 1993 net income of $13.3 million was a 60% increase over 1992. The
increase in 1993 over 1992 was primarily due to transactional gains recorded by
Pentzer during 1993.

Transactional gains of $8.0 million in 1994 declined by $4.8 million as
compared to 1993. The 1994 transactional gains were primarily the result of
gains of $7.7 million from the sale of ITRON stock. The 1993 transactional
gains included gains of $7.1 million from the sale of companies involved in
telecommunications, technology and energy and a transactional gain of $5.7
million from the sale of ITRON stock.

Excluding transactional gains, earnings of $5.7 million in 1994 from Pentzer
operations exceeded 1993 earnings by $5.8 million. For the year ended December
31, 1993, Pentzer had consolidated earnings of $19.7 million before provision
for possible losses. At the end of the year, Pentzer established a $7.0
million provision for possible write-off of a portion of its investment
portfolio. The provision was recorded based on the determination that future
cashflows may be lower than expected, impairing the value of certain
investments. After deducting this provision, Pentzer reported consolidated
earnings of $12.7 million, which represents a 50% increase over Pentzer's 1992
earnings of $8.5 million. Transactional gains during 1993 totalled $12.8
million compared to $5.6 million in 1992. In addition to the transactional
gains from ITRON in 1993, Pentzer also recorded a $3.0 million increase in net
income as a result of improved earnings at ITRON and recognized an income tax
benefit of $2.2 million due to tax loss carryforwards in a subsidiary.
Pentzer's return on invested capital increased from 12% in 1992 to 17% in 1993
due, in part, to transactional gains.

Non-utility operating revenues and expenses increased substantially in 1994 as
compared to 1993, and to a lesser degree in 1993 as compared to 1992. These
increases in both revenues and expenses have been the result of the
acquisitions by Pentzer in 1994 and 1993. Pentzer acquired two companies in
1994 and three companies in 1993. Income taxes also increased substantially in
1994 due to increased revenues and income.

23
<PAGE> 27
THE WASHINGTON WATER POWER COMPANY

LIQUIDITY AND CAPITAL RESOURCES

UTILITY

The Company funds capital expenditures with a combination of
internally-generated cash and external financing. The level of cash generated
internally and the amount that is available for capital expenditures fluctuates
annually. Cash provided by operating activities remains the Company's primary
source of funds for operating needs, dividends and construction expenditures.

Operating Activities Cash from operating activities less cash dividends paid
provided 66% of utility capital expenditures in 1994 as compared to 67% in 1993
and 82% in 1992. Cash available from operating activities in 1994 declined
from 1993 primarily due to both a reduction in operating income related to
warmer than normal weather and an increase in various working capital
components. The decline was partially offset by the positive effect of the PCA
mechanism in 1994. See Note 1 to Financial Statements for additional
information.

Investing Activities Cash used in investing activities increased in 1994 over
1993, despite a 14% decrease in construction expenditures, primarily due to the
acquisition of the northern Idaho properties of PacifiCorp for $33 million.
See Note 14 to Financial Statements for additional information. Utility
capital expenditures, excluding Allowance for Funds Used During Construction
(AFUDC) and Allowance for Funds Used to Conserve Energy (AFUCE, a carrying
charge similar to AFUDC for conservation-related capital expenditures), were
$356 million for the 1992-1994 period.

Financing Activities During the 1992-1994 period, $60 million of long-term
debt matured and $352 million of higher-cost debt and preferred stock was
redeemed and refinanced at lower cost. In January 1994, the Company received
authorization to issue $250 million in First Mortgage Bonds which are being
issued in the form of Secured Medium Term Notes, Series B (Series B Notes).
During 1994, $7.5 million of long-term debt, with an average interest rate of
8.93% and an average maturity of 5 years, were redeemed and $88 million of
secured long-term debt were issued at an average interest rate of 7.99% and an
average maturity of 9 years. On March 6, 1995, $15 million of Series B Notes
were issued with an average interest rate of 7.60% and an average maturity of 6
years. As of March 6, 1995, $157 million of Series B Notes remained to be
issued.

Capital expenditures are financed on an interim basis with notes payable (due
within one year). The Company has $160 million in committed lines of credit.
In addition, the Company may borrow up to $60 million through other borrowing
arrangements with banks. As of December 31, 1994, $25 million was outstanding
under the committed lines of credit and $33 million was outstanding under other
short-term borrowing arrangements. In the fourth quarter of 1994, the Company
eliminated its commercial paper program.

From time to time the Company enters into sale/leaseback arrangements for
various long-term assets which provide additional sources of funds. See Note 9
to Financial Statements for additional information.

The Company's total common equity increased by $29 million during the year to
$663 million at the end of 1994. The 1994 increase was primarily due to the
issuance of 1.7 million shares of common stock through both the Dividend
Reinvestment Plan and the Investment and Employee Stock Ownership Plan for
proceeds of $26 million. No shares were issued under the Company's Periodic
Offering Program in 1994. The utility capital structure at December 31, 1994,
was 50% debt, 10% preferred stock and 40% common equity as compared to 49%
debt, 10% preferred stock and 41% common equity at year-end 1993.

The Company is restricted under various agreements as to the additional
securities it can issue. Under the most restrictive test of the Company's
Mortgage, an additional $464 million of First Mortgage Bonds could be issued as
of December 31, 1994. As of December 31, 1994, under its Restated Articles of
Incorporation, approximately $469 million of additional preferred stock could
be issued at an assumed dividend rate of 9.00%.

During the 1995-1997 period, utility capital expenditures are expected to be
$228 million, and $132 million will be required for long-term debt maturities
and preferred stock sinking fund requirements. During this three-year period,
the Company estimates that internally-generated funds will average 90% of the
funds needed for its capital expenditure program. External financing will be
required to fund maturing long-term debt, preferred stock sinking fund
requirements and the remaining portion of capital expenditures. These
projections relate to the Company on a stand-alone basis and do not reflect any
adjustment for the effects of the proposed merger of the Company, Sierra
Pacific Resources (SPR) and Sierra Pacific Power Company (SPPC) with and into
Resources West Energy Corporation (Resources West). See below for details.

24
<PAGE> 28
THE WASHINGTON WATER POWER COMPANY

See Note 4, 5, 6, 7, 8 and 9 to Financial Statements for additional details
related to financing activities.

NON-UTILITY

Capital expenditures for the non-utility operations were $16 million for the
1992-1994 period. During this period, $1 million of debt was repaid and
capital expenditures were partially financed by the $9 million in proceeds from
new long-term debt.

The non-utility operations have $43 million in borrowing arrangements ($22
million outstanding as of December 31, 1994) to fund corporate requirements on
an interim basis. At December 31, 1994, the non-utility operations had $34
million in cash and marketable securities with $13 million in long-term debt
outstanding.

The 1995-1997 non-utility capital expenditures are expected to be $5 million,
and $7 million in debt maturities will also occur. During the next three
years, internally-generated cash and other debt obligations are expected to
provide the majority of the funds for the non-utility capital expenditure
requirements.

TOTAL COMPANY CASH REQUIREMENTS
<TABLE>
<CAPTION>
(Millions of Dollars) Actual (1) Projected (2)
--------------------------- ---------------------------
1992 1993 1994 1995 1996 1997
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Capital Expenditures (3):
Utility:
Electric $ 48 $ 60 $ 57 $40 $47 $42
Natural gas 28 26 27 26 23 22
All other 22 49 39 10 9 9
-- ---- ---- --- --- ---
Total Utility 98 135 123 76 79 73
Non-Utility 4 3 9 2 2 1
---- ---- ---- --- --- ---
Total Company $102 $138 $132 $78 $81 $74
==== ==== ==== === === ===
Debt and Preferred Stock Maturities
Redemptions & Sinking Fund
Requirements (Consolidated) (4): $130 $274 $8 $48 $47 $44
</TABLE>

(1) Excludes $66 million for the combustion turbine project located in
Rathdrum, Idaho for which the Company has obtained separate long-term lease
financing; see Note 9 to Financial Statements for additional information.
Also excludes $33 million for the acquisition of the northern Idaho
electric properties of Pacific Power and Light, an operating division of
PacifiCorp; see Note 14 to Financial Statements for additional information.
(2) These projections relate to the Company on a stand-alone basis and do not
reflect any adjustment for the effects of the proposed merger of the
Company, SPR and SPPC with and into Resources West (see below).
(3) Excludes AFUDC and AFUCE.
(4) Excludes notes payable (due within one year).

FUTURE OUTLOOK

Merger

In June 1994, the Company, Sierra Pacific Resources (SPR), Sierra Pacific Power
Company (SPPC), a subsidiary of SPR, and Resources West Energy Corporation, a
newly formed subsidiary of the Company (Resources West), entered into an
Agreement and Plan of Reorganization and Merger, as subsequently amended
(Merger Agreement), which provides for the merger of WWP, SPR and SPPC into
Resources West. SPR and SPPC are both Nevada corporations with headquarters in
Reno. The Merger Agreement provides that after the effective date of the
merger, Resources West's corporate headquarters offices and principal executive
offices will be located in Spokane and that the headquarters of its Washington
Water Power and Sierra Pacific operating divisions will be in Spokane and Reno,
respectively. As a result of the Merger Agreement, holders of WWP Common Stock
would receive one share and holders of SPR Common Stock would receive 1.44
shares of Resources West Common Stock, respectively. Each outstanding share of
Preferred Stock of WWP and SPPC, respectively, will be converted into the right
to receive one share of Resources West Preferred Stock with equal stated value
and dividends and like redemption provisions and rights upon liquidation.

Approval of the proposed merger was obtained from WWP, SPR and SPPC
shareholders at meetings held on November 18, 1994. The Merger Agreement is
also subject to certain customary closing conditions, including,

25
<PAGE> 29
THE WASHINGTON WATER POWER COMPANY

without limitation, the receipt of all necessary governmental approvals,
including approval of the Federal Energy Regulatory Commission (FERC) and the
state utility commissions of California (CPUC), Idaho (IPUC), Montana (MPSC),
Nevada (PSCN), Oregon (OPUC) and Washington (WUTC). Applications were filed
with each of the state commissions and the FERC in the third quarter of 1994.
An order was issued by the MPSC on October 17, 1994, stating that they would
not exercise jurisdiction over the proposed merger. Each of the other five
states has set a separate calendar for filings and hearings. The FERC has not
yet established a procedural schedule for this proposed merger but it is
expected to be within the same timeframes as the state commissions. A number
of entities have intervened or expressed their intent to intervene either at
the Federal level or before the various state commissions. However, the
Company anticipates receiving final orders from all jurisdictions and closing
the merger transaction by the end of 1995.

WWP, SPR and SPPC believe that the proposed merger offers significant strategic
and financial benefits to each of the companies and to their respective
stakeholders including an enhanced competitive position, a larger and more
diverse service territory, an expanded resource base, improved resource
planning and coordination, and cost savings. Specifically, the Board of
Directors of the Company believes that the merger would afford the following
distinct benefits to the Company and its shareholders over the long term: (i)
the potential for higher growth in revenues and earnings due to the higher load
growth forecast in SPPC's retail electric service territory in comparison to
the load growth forecast for the area now served by the Company, (ii)
transmission access to additional western markets which would offer increased
opportunities for wholesale power sales, (iii) moderation of future rate
increases through estimated cost savings and increased retail and wholesale
sales, (iv) a significant increase in the proportion of net income available
for common stock represented by core utility cash earnings as opposed to
non-utility earnings and non-cash items, and (v) a lower dividend payout ratio
than the Company might be able to achieve on a stand-alone basis.

The cost savings are estimated to approximate $450 million, net of merger
transaction and transition costs, over a 10 year period following the
consummation of the merger. The cost savings should be achieved from, among
other things, the integration of corporate management and administrative
functions, the consolidation of distribution operations, the integration of
natural gas purchasing requirements, the reduction of capacity requirements,
the reduction of non-firm transmission expense, the avoidance of expenditures
for operating systems, and the streamlining of inventories and purchasing
economies. Since there will be an integration of corporate management and
administrative functions, severance options and a voluntary early retirement
plan are being offered to employees of the Company.

The analyses employed in order to develop estimates of specific amounts of
savings to be achieved as a result of the merger were necessarily based upon
various assumptions which involve judgments with respect to, among other
things, future national and regional economic and competitive conditions,
inflation rates, regulatory treatment, weather conditions, financial market
conditions, interest rates, future business decisions, and other uncertainties,
all of which are difficult to predict, and many of which are beyond the control
of the Company, SPR, SPPC and Resources West. The Company believes that these
assumptions are reasonable for the purpose of the development of estimates of
cost savings but there is no assurance that such assumptions will approximate
actual experience or that all such savings will be realized. Additionally, the
treatment of the benefits and cost savings will depend on the terms of the
regulatory approvals received in the various jurisdictions in which the Company
and SPPC operate their businesses.

The regulatory plan proposed by the Company and SPPC includes a commitment to
freeze base rates at their current levels in each jurisdiction until at least
December 31, 1999, except for commodity cost increases and a small general
increase in Nevada in 1997 for capital additions previously approved for SPPC
by the PSCN. Ratemaking and regulation, in general, are anticipated to
continue as before the merger with resources, costs and benefits allocated to
each jurisdiction according to allocation methodologies agreed upon with each
state commission. If the merger were consummated, the Company would avoid
having to request retail rate increases effective between now and January 2000.
These filings would otherwise be anticipated to request additional annual
revenues of approximately $20 million. Resources West plans to develop, with
its respective regulatory commissions, a longer-term regulatory plan for
continued merger benefit savings commencing January 2000.

The service territories of WWP and SPPC are not physically connected. The only
overlap in service territories is the South Lake Tahoe area in California where
the Company provides natural gas service and SPPC provides the electric
service. Both companies are jointly pursuing transmission access options and
contracts, including Regional Transmission Groups, which will provide for the
necessary interconnections to realize a portion of the expected merger-related
savings. In February 1995, the Company and SPPC completed negotiations and
have entered into letters of intent with the Idaho Power Company and Bonneville
Power Administration (BPA) to acquire transmission rights between the two
companies. The letters of intent contemplate new firm transmission purchases
with Resources West having flexibility to exercise certain options in the
future to expand its use of the transmission capabilities. The

26
<PAGE> 30
THE WASHINGTON WATER POWER COMPANY

actual cost of the transmission rights will not vary significantly from that
assumed in the original estimate of merger costs and benefits. Operational
transmission interconnections are expected to be in place by the time the
proposed merger is effective.

In the event that the merger is not completed due to circumstances beyond the
Company's control, the Company would continue to operate as a separate utility
and expense the merger costs that were incurred. The Merger Agreement does
provide for the payment of a $25 million termination fee plus expenses to be
made in certain circumstances where one party accepts another business
combination proposal and, as a result, the Merger Agreement is terminated.

See Note 15 to Financial Statements for additional details.

Competition and Business Risk

The electric and natural gas utility businesses continue to undergo numerous
transformations and are becoming increasingly competitive as a result of
economic, regulatory and technological changes. The Company believes that it
is well positioned to meet future challenges due to its low production costs,
close proximity to major transmission lines and natural gas pipelines, active
participation in the wholesale electric market and its commitment to high
levels of customer satisfaction, cost reduction and continuous improvement of
work processes. Additionally the Company continually evaluates merger and
acquisition opportunities that will allow it to expand its economies of scale
and diversify its risk posed by weather and economic conditions.

The Company continues to compete for new retail electric customers with various
rural electric cooperatives and public utility districts in and adjacent to its
service territories. Challenges facing the electric retail business include
evolving technologies which provide alternate energy supplies, reduced energy
consumption and the cost of the energy supplied, self-generation and fuel
switching by commercial and industrial customers, the potential for retail
wheeling, the costs of increasingly stringent environmental laws and the
potential for stranded or nonrecoverable utility assets. If electric utility
companies are eventually required to provide retail wheeling service, which is
the transmission by an electric utility of electric power from another supplier
to a customer located within such utility's service area, the Company believes
it will be in a position to benefit since it is committed to remaining one of
the country's lowest-cost providers of electric energy. Similarly the Company
does not believe it has much risk for stranded generation, transmission or
distribution assets due to its low cost structure.

The National Energy Policy Act (NEPA) enacted in 1992 addresses a wide range of
issues affecting the wholesale electric business. The Company believes NEPA
provides future transmission, energy production and sales opportunities to the
Company and complements the Company's commitment to the wholesale electric
business.

The Company continues to compete in the wholesale electric market with other
western utilities, including the BPA. Business challenges affecting the
wholesale electric business include new entrants in the wholesale market, such
as power brokers and marketers, competition from low cost generation being
developed by independent power producers and declining margins. However, the
Company's wholesale electric business remains an important part of the
Company's overall business strategy.

Natural gas remains priced competitively compared to other alternative fuel
sources for residential, commercial and industrial customers and is projected
to remain so well into the future due to increasing supplies and competition.
Challenges facing the Company's natural gas business include the potential for
customers to by-pass the Company's natural gas system. Since 1988 two of the
Company's large industrial customers have built their own pipeline
interconnection. However, these customers continue to purchase natural gas
services from the Company. To reduce the potential for such by-pass, the
Company prices its natural gas services, including transportation contracts,
competitively and has varying degrees of flexibility to price its
transportation and delivery rates by means of special contracts. The Company
has also signed long-term transportation contracts with two of its largest
industrial customers which minimizes the risks of these customers by-passing
the Company's system in the foreseeable future.

Order 636B adopted by FERC provides the Company more flexibility in optimizing
its natural gas transportation and supply portfolios. While rate design
changes have increased the costs of firm transportation to low load factor
pipeline customers such as the Company, flexible receipt and delivery points
and capacity releases allow temporarily under-utilized transportation to be
released to others when not needed to serve the Company's customers. The
Company is also able to optimize its natural gas supply portfolio by engaging
in some off-system sales.

Resource planning for both the electric and natural gas businesses has been
integrated so that the Company's customers are provided the most efficient and
cost-effective products possible for all their energy requirements. The

27
<PAGE> 31
THE WASHINGTON WATER POWER COMPANY

Company's need for future electric resources to serve retail loads is expected
to remain very minimal. The Company will be filing electric integrated
resource plans with both the WUTC and IPUC in April 1995. The switching of
electric heating customers to natural gas requires increased efforts on the
Company's part in negotiating and securing competitively-priced natural gas
supplies for the future. The 1995 natural gas integrated resource plan reports
were submitted to the WUTC, IPUC and OPUC in January 1995 with acceptance
anticipated by the end of 1995. The natural gas integrated resource plan is
provided to the CPUC for informational purposes only.

Economic and Load Growth

The Company expects economic growth to increase in its eastern Washington and
northern Idaho service area. The Company, along with others in the service
area, continues its efforts to expand existing businesses and attract new
businesses to the Inland Northwest. In the past, agriculture, mining and
lumber have been the primary industries. However, health care, electronic and
other manufacturing, tourism and the service sectors have become increasingly
important industries that operate in the Company's service area. In addition,
the Company also anticipates strong economic growth to continue in its Oregon
and South Lake Tahoe, California service areas.

The Company anticipates electric retail load growth to average approximately
1.0% annually for the next five years primarily due to increases in both
population and the number of businesses in its service territory. Although the
number of electric customers is expected to increase, the average annual usage
by residential customers is expected to continue to decline on a
weather-adjusted basis due to newer technologies, construction and appliance
efficiency standards and continued conversions to natural gas where available.

The Company anticipates natural gas load growth, including transportation
volumes, in its Washington and Idaho service area to average approximately 3.1%
annually for the next five years. The Oregon and South Lake Tahoe, California
service areas are anticipated to realize 5.1% growth annually during that same
period. These growth forecasts have increased from the forecasts issued last
year primarily due to fuel switching to natural gas necessitated by more
stringent environmental laws that are being enacted.

Environmental Issues

Since December 1991, a number of species of fish in the Northwest, including
the Snake River sockeye salmon and chinook salmon, the Kootenai River white
sturgeon and the bull trout have either been added to the endangered species
list under the Federal Endangered Species Act (ESA), listed as "threatened"
under the ESA or been petitioned for listing under the ESA. Thus far, measures
which have been adopted and implemented to save both the Snake River sockeye
salmon and chinook salmon have not directly impacted generation levels at any
of the Company's hydroelectric dams. The Company does, however, purchase power
from four projects on the Columbia River that are being directly impacted by
these ongoing mitigation measures. The reduction in generation at these
projects is relatively minor, resulting in minimal economic impact on the
Company at this time. Future actions to save these, and other as yet
unidentified fish or wildlife species, could further impact the Company's
operations or the operations of some of its major customers. However, it is
currently impossible to predict likely economic costs to the Company resulting
from these actions.

Electro-magnetic field (EMF) exposure, and its potential health hazards,
continues to be an evolving issue facing electrical utilities. Studies are
continuing by dozens of governmental and scientific agencies but the results to
date are at best conflicting. Public concerns regarding EMF may cause the
siting and construction of new power lines and substations to be more
expensive. The Company is unable to determine at this time whether its
operations may be adversely impacted by EMF issues.

See Note 11 to Financial Statements for additional information.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The Independent Auditor's Report and Financial Statements begin on the next
page.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

Not applicable.

28
<PAGE> 32
INDEPENDENT AUDITORS' REPORT

The Washington Water Power Company
Spokane, Washington

We have audited the accompanying consolidated balance sheets and statements of
capitalization of The Washington Water Power Company and subsidiaries (the
Company) as of December 31, 1994 and 1993, and the related consolidated
statements of income and retained earnings, cash flows, and the schedules of
information by business segments for each of the three years in the period
ended December 31, 1994. These financial statements and schedules are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements and schedules based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
schedules are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and schedules. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement and schedule presentation. We
believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements and schedules present
fairly, in all material respects, the financial position of the Company and its
subsidiaries at December 31, 1994 and 1993, and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1994, in conformity with generally accepted accounting principles. In
addition, the schedules referred to above present fairly in all material
respects, the segment information of the Company and its subsidiaries in
accordance with generally accepted accounting principles.

As discussed in Notes 2 and 3 to the financial statements, the Company changed
its methods of accounting for other post-employment benefits and income taxes
effective January 1, 1993, to conform with Statements of Financial Accounting
Standards No. 106 and 109.

Deloitte & Touche LLP

Seattle, Washington
January 27, 1995 (February 2, 1995 as to Note 11)

29
<PAGE> 33

CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS

The Washington Water Power Company
For the Years Ended December 31
Thousands of Dollars

<TABLE>
<CAPTION>
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
OPERATING REVENUES..................................................... $670,765 $640,599 $557,758
-------- -------- --------
OPERATING EXPENSES:
Operations and maintenance............................................ 350,703 322,117 262,031
Administrative and general............................................ 59,645 55,083 50,016
Depreciation and amortization......................................... 59,479 58,354 53,422
Taxes other than income taxes......................................... 45,480 44,195 41,664
-------- -------- --------
Total operating expenses............................................. 515,307 479,749 407,133
-------- -------- --------
INCOME FROM OPERATIONS................................................. 155,458 160,850 150,625
-------- -------- --------
INTEREST EXPENSE AND (OTHER INCOME):
Interest expense...................................................... 53,077 50,133 53,541
Interest capitalized and AFUCE (Note 1)............................... (3,687) (3,027) (2,359)
Net gain on subsidiary transactions (Note 14)......................... (11,519) (9,915) (6,685)
Other (income) deductions-net (Note 1)................................ (4,306) (1,620) (7,469)
-------- -------- --------
Total interest expense and other income-net.......................... 33,565 35,571 37,028
-------- -------- --------
INCOME BEFORE INCOME TAXES............................................. 121,893 125,279 113,597
INCOME TAXES (Notes 1 & 3)............................................. 44,696 42,503 41,330
-------- -------- --------
INCOME FROM CONTINUING OPERATIONS.................................. 77,197 82,776 72,267
Discontinued coal mining operations-net of income taxes (Note 10) - - 2,403
-------- -------- --------
NET INCOME............................................................. 77,197 82,776 74,670
DEDUCT-Preferred stock dividend requirements........................... 8,656 8,335 6,817
-------- -------- --------
INCOME AVAILABLE FOR COMMON STOCK...................................... $ 68,541 $ 74,441 $ 67,853
======== ======== ========
Average common shares outstanding (thousands).......................... 53,538 51,616 49,550

EARNINGS PER SHARE OF COMMON STOCK:
From continuing operations (after preferred dividends)................ $ 1.28 $ 1.44 $ 1.32
From discontinued coal mining operations (Note 10).................... - - 0.05
-------- -------- --------
EARNINGS PER SHARE OF COMMON STOCK..................................... $ 1.28 $ 1.44 $ 1.37
======== ======== ========
Dividends paid per common share........................................ $ 1.24 $ 1.24 $ 1.24
RETAINED EARNINGS, JANUARY 1........................................... $112,424 $101,644 $ 95,047
NET INCOME............................................................. 77,197 82,776 74,670
DIVIDENDS DECLARED:
Preferred stock (Note 7).............................................. (8,823) (8,219) (6,968)
Common stock.......................................................... (66,378) (64,209) (61,525)
ESOP dividend tax savings.............................................. 428 432 420
-------- -------- --------
RETAINED EARNINGS, DECEMBER 31......................................... $114,848 $112,424 $101,644
======== ======== ========
</TABLE>

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.

30
<PAGE> 34
CONSOLIDATED BALANCE SHEETS

The Washington Water Power Company
At December 31
Thousands of Dollars

<TABLE>
<CAPTION>
1994 1993
---------- ----------
<S> <C> <C>
ASSETS:
UTILITY PLANT-Original Cost (Notes 1 and 16):
Electric-net..................................................................... $1,477,998 $1,409,309
Natural Gas...................................................................... 316,974 277,503
Common plant..................................................................... 34,624 36,157
---------- ----------
Utility plant................................................................... 1,829,596 1,722,969
Less accumulated depreciation and amortization:
Electric........................................................................ 394,559 375,692
Natural Gas..................................................................... 97,217 84,701
Common plant.................................................................... 8,775 8,585
---------- ----------
Net utility plant............................................................... 1,329,045 1,253,991
---------- ----------
OTHER PROPERTY AND INVESTMENTS:
Investment in exchange power-net................................................. 88,615 94,383
Other-net (Note 16).............................................................. 114,145 79,376
---------- ----------
Total other property and investments............................................ 202,760 173,759
---------- ----------
CURRENT ASSETS:
Cash and cash equivalents........................................................ 5,178 11,201
Temporary cash investments....................................................... 27,928 22,517
Accounts and notes receivable-net (Note 6)....................................... 74,524 63,649
Materials and supplies, fuel stock and natural gas stored (average cost)......... 21,384 19,548
Prepayments and other............................................................ 7,552 5,832
---------- ----------
Total current assets............................................................ 136,566 122,747
---------- ----------
DEFERRED CHARGES:
Regulatory assets for deferred income tax (Note 3)............................... 174,349 177,786
Conservation programs............................................................ 66,511 47,612
Other-net (Note 1)............................................................... 85,022 61,943
---------- ----------
Total deferred charges.......................................................... 325,882 287,341
---------- ----------
TOTAL.......................................................................... $1,994,253 $1,837,838
========== ==========
CAPITALIZATION AND LIABILITIES:
CAPITALIZATION (See Consolidated Statements of Capitalization).................... $1,533,640 $1,416,608
---------- ----------
CURRENT LIABILITIES:
Accounts payable................................................................. 46,217 33,840
Taxes accrued (Note 3)........................................................... 17,977 19,959
Interest accrued................................................................. 10,954 10,046
Other............................................................................ 57,369 51,163
---------- ----------
Total current liabilities....................................................... 132,517 115,008
---------- ----------
DEFERRED CREDITS:
Investment tax credits (Note 1).................................................. 2,358 2,456
Deferred income taxes (Note 3)................................................... 310,167 288,905
Other (Note 1)................................................................... 14,399 13,838
---------- ----------
Total deferred credits.......................................................... 326,924 305,199
---------- ----------
MINORITY INTEREST................................................................. 1,172 1,023
---------- ----------
COMMITMENTS AND CONTINGENCIES (Notes 11, 14 and 15)

TOTAL.......................................................................... $1,994,253 $1,837,838
========== ==========
</TABLE>

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.

31
<PAGE> 35
CONSOLIDATED STATEMENTS OF CAPITALIZATION

The Washington Water Power Company
At December 31
Thousands of Dollars

<TABLE>
<CAPTION>
1994 1993
---------- ----------
<S> <C> <C>
COMMON EQUITY:
Common stock, no par value; 200,000,000 shares authorized:
shares outstanding: 1994-54,420,696; 1993-52,757,545 (Note 8)...................... $ 570,603 $ 544,609
Note receivable from employee stock ownership plan (Note 8)......................... (12,267) (12,756)
Capital stock expense and other paid in capital..................................... (10,031) (9,898)
Unrealized investment gain-net (Note 1)............................................. 14,341 -
Retained Earnings................................................................... 114,848 112,424
---------- ----------
Total common equity................................................................ 677,494 634,379
---------- ----------
PREFERRED STOCK-CUMULATIVE: (Note 7)
10,000,000 shares authorized:
Not subject to mandatory redemption:
Flexible Auction Series J; 500 shares outstanding ($100,000 stated value).......... 50,000 50,000
---------- ----------
Total not subject to mandatory redemption......................................... 50,000 50,000
---------- ----------
Subject to mandatory redemption:
$8.625 Series I; 500,000 shares outstanding ($100 stated value).................... 50,000 50,000
$6.95 Series K; 350,000 shares outstanding ($100 stated value)..................... 35,000 35,000
---------- ----------
Total subject to mandatory redemption............................................. 85,000 85,000
---------- ----------
LONG-TERM DEBT: (Note 4)
First Mortgage Bonds:
4 5/8% due March 1, 1995........................................................... 10,000 10,000
7 1/8% due December 1, 2013........................................................ 66,700 66,700
7 2/5% due December 1, 2016........................................................ 17,000 17,000
Secured Medium-Term Notes:
Series A - 4.72% to 8.06% due 1996 through 2023................................... 250,000 225,000
Series B - 7.52% to 8.25% due 1997 through 2006................................... 63,000 -
---------- ----------
Total first mortgage bonds........................................................ 406,700 318,700
---------- ----------
Pollution Control Bonds:
6% Series due 2023................................................................. 4,100 4,100

Unsecured Medium-Term Notes:
Series A - 7.94% to 9.58% due 1995 through 2007.................................... 92,500 100,000
Series B - 5.50% to 8.55% due 1995 through 2023.................................... 150,000 150,000
---------- ----------
Total unsecured medium-term notes................................................. 242,500 250,000
---------- ----------
Notes payable (due within one year) and commercial paper to be
refinanced (Note 5)................................................................ 58,000 68,001
Other (Note 4)...................................................................... 9,846 6,428
---------- ----------
Total long-term debt............................................................... 721,146 647,229
---------- ----------
TOTAL CAPITALIZATION................................................................. $1,533,640 $1,416,608
========== ==========
</TABLE>

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.

32
<PAGE> 36
CONSOLIDATED STATEMENTS OF CASH FLOWS
Increase (Decrease) in Cash and Cash Equivalents
The Washington Water Power Company

For the Years Ended December 31
Thousands of Dollars
<TABLE>
<CAPTION>
1994 1993 1992
--------- --------- ---------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Income from continuing operations....................................................... $ 77,197 $ 82,776 $ 72,267
NON-CASH REVENUES AND EXPENSES INCLUDED
IN INCOME FROM CONTINUING OPERATIONS:
Depreciation and amortization.......................................................... 69,895 66,593 59,802
Provision for deferred income taxes.................................................... 15,380 6,962 16,479
Allowance for equity funds used during construction.................................... (1,261) (1,666) (1,392)
Power and natural gas cost deferrals and amortizations (Note 1)........................ 6,365 (7,624) (11,523)
Deferred revenues and other-net........................................................ (4,445) (1,271) (734)
(Increase) decrease in working capital components:
Receivables and prepaid expense-net................................................... (12,458) 1,116 126
Materials & supplies, fuel stock and natural gas stored............................... (1,864) (2,001) 1,047
Payables and other accrued liabilities................................................ 4,343 (1,846) (3,575)
Other-net............................................................................. (8,309) 8,767 2,998
--------- --------- ---------
Net cash flows from continuing operations................................................ 144,843 151,806 135,495
Net cash flows from discontinued operations (Note 10)................................... - - 2,403
--------- --------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES................................................ 144,843 151,806 137,898
--------- --------- ---------
INVESTING ACTIVITIES:
Construction expenditures (excluding AFUDC-equity funds)................................ (95,815) (111,118) (90,344)
Other capital requirements.............................................................. (21,603) (30,216) (11,640)
(Increase) decrease in other noncurrent balance sheet items-net......................... (21,686) (1,063) 9,723
Assets acquired and investments in subsidiaries (Note 14)............................... (43,823) 2,725 (17,438)
--------- --------- ---------
NET CASH USED IN INVESTING ACTIVITIES.................................................... (182,927) (139,672) (109,699)
--------- --------- ---------
FINANCING ACTIVITIES:
Increase (decrease) in commercial paper, notes payable
and bank borrowings-net................................................................ (10,001) 64,001 (42,000)
Sale of unsecured medium-term notes..................................................... - 25,000 113,000
Redemption and maturity of unsecured medium-term notes.................................. (7,500) (70,000) (30,000)
Sale of secured medium-term notes (a series of
first mortgage bonds).................................................................. 88,000 225,000 -
Redemption of mortgage bonds............................................................ - (200,000) (75,000)
Sale of pollution control bonds......................................................... - 4,100 -
Redemption of pollution control bonds................................................... - (4,100) -
Issuance of preferred stock............................................................. - - 35,000
Redemption of preferred stock........................................................... - - (25,000)
Redemption premiums..................................................................... - (9,595) (2,956)
Sale of common stock (Note 8)........................................................... 14,934 25,899 39,233
Miscellaneous-net....................................................................... 10,051 (7,819) 12,254
--------- --------- ---------
NET FINANCING ACTIVITIES BEFORE CASH DIVIDENDS........................................... 95,484 52,486 24,531
Less cash dividends paid............................................................... (63,423) (61,773) (57,229)
--------- --------- ---------
NET CASH PROVIDED BY/(USED IN) FINANCING ACTIVITIES...................................... 32,061 (9,287) (32,698)
--------- --------- ---------

NET INCREASE (DECREASE) IN CASH & CASH EQUIVALENTS....................................... (6,023) 2,847 (4,499)
CASH & CASH EQUIVALENTS AT BEGINNING OF PERIOD........................................... 11,201 8,354 12,853
--------- --------- ---------
CASH & CASH EQUIVALENTS AT END OF PERIOD................................................. $ 5,178 $ 11,201 $ 8,354
========= ========= =========

SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period:
Interest............................................................................... $ 46,861 $ 47,854 $ 48,516
Income Taxes........................................................................... $ 34,094 $ 35,649 $ 28,317
Noncash financing and investing activities.............................................. $ 25,891 $ 13,327 $ 12,865
</TABLE>

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.

33
<PAGE> 37
SCHEDULE OF INFORMATION BY BUSINESS SEGMENTS
The Washington Water Power Company

For the Years Ended December 31
Thousands of Dollars

<TABLE>
<CAPTION>
1994 1993 1992
--------- --------- ---------
<S> <C> <C> <C>
OPERATING REVENUES:
Electric............................................. $451,291 $464,175 $424,413
Natural Gas.......................................... 156,776 137,547 100,570
Non-utility (Note 14)................................ 62,698 38,877 32,775
-------- -------- --------
Total operating revenues............................ $670,765 $640,599 $557,758
======== ======== ========
OPERATIONS AND MAINTENANCE EXPENSES:
Electric:
Power purchased..................................... $106,277 $118,809 $91,709
Fuel for generation................................. 39,176 34,233 37,096
Other electric...................................... 61,268 68,567 57,858
Natural Gas:
Natural gas purchased for resale.................... 91,277 71,867 48,215
Other natural gas................................... 14,297 14,286 13,692
Non-utility (Note 14)................................ 38,408 14,355 13,461
-------- -------- --------
Total operations and maintenance expenses........... $350,703 $322,117 $262,031
======== ======== ========
ADMINISTRATIVE AND GENERAL EXPENSES:
Electric............................................. $35,190 $32,376 $30,983
Natural Gas.......................................... 10,944 10,069 9,635
Non-utility (Note 14)................................ 13,511 12,638 9,398
-------- -------- --------
Total administrative and general expenses........... $59,645 $55,083 $50,016
======== ======== ========
DEPRECIATION AND AMORTIZATION EXPENSES:
Electric............................................. $48,233 $47,003 $42,042
Natural Gas.......................................... 8,199 8,470 7,877
Non-utility (Note 14)................................ 3,047 2,881 3,503
-------- -------- --------
Total depreciation and amortization expenses........ $59,479 $58,354 $53,422
======== ======== ========
INCOME FROM OPERATIONS:
Electric............................................. $125,125 $128,166 $130,291
Natural Gas.......................................... 23,926 24,942 15,328
Non-utility (Note 14)................................ 6,407 7,742 5,006
-------- -------- --------
Total income from operations........................ $155,458 $160,850 $150,625
======== ======== ========
INCOME AVAILABLE FOR COMMON STOCK:
Utility operations................................... $54,911 $61,175 $57,158
Non-utility operations (Note 14)..................... 13,630 13,266 8,292
Discontinued coal mining operations (Note 10)........ - - 2,403
-------- -------- --------
Total income available for common stock ............ $68,541 $74,441 $67,853
======== ======== ========
ASSETS:
Electric............................................. $1,441,643 $1,372,128 $1,157,071
Natural Gas.......................................... 247,060 220,253 176,203
Common plant......................................... 25,849 27,572 25,231
Other utility assets................................. 106,118 81,699 66,307
Non-utility assets (Note 14)......................... 173,583 136,186 109,203
---------- ---------- ----------
Total assets........................................ $1,994,253 $1,837,838 $1,534,015
========== ========== ==========
CAPITAL EXPENDITURES (excluding AFUDC/AFUCE):
Electric............................................. $70,791 $84,277 $57,138
Natural Gas.......................................... 32,682 30,774 29,314
Common plant......................................... 19,262 19,801 11,255
Non-utility.......................................... 8,701 3,452 3,642
-------- -------- --------
Total capital expenditures.......................... $131,436 $138,304 $101,349
======== ======== ========
</TABLE>

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.

34
<PAGE> 38
THE WASHINGTON WATER POWER COMPANY

NOTES TO FINANCIAL STATEMENTS

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

SYSTEM OF ACCOUNTS
The accounting records of The Washington Water Power Company (Company) utility
operations are maintained in accordance with the uniform system of accounts
prescribed by the Federal Energy Regulatory Commission (FERC) and adopted by
the appropriate state regulatory commissions.

BASIS OF REPORTING
The financial statements are presented on a consolidated basis and, as such,
include the assets, liabilities, revenues and expenses of the Company and its
wholly owned subsidiaries, Pentzer Corporation (Pentzer), Washington Irrigation
and Development Company (WIDCo), The Limestone Company and WP Finance Company.
All material intercompany transactions that are not allowed recovery under
regulation have been eliminated in the consolidation. As discussed in Note 14,
the 1993 and 1994 operating results for ITRON are no longer consolidated and
were accounted for on the equity method, and as of December 31, 1994 are now
accounted for on the cost method.

The accompanying financial statements include the Company's proportionate share
of utility plant and related operations resulting from its interests in jointly
owned plants (See Note 12).

The financial activity of each of the Company's segments is reported in the
"Schedule of Information by Business Segments." Such information is an
integral part of these financial statements.

RECLASSIFICATIONS
Certain prior year amounts related to segment information have been
reclassified due to a current year change in the allocation method for common
plant, plant-related costs and administrative and general expenses.

UTILITY PLANT
The cost of additions to utility plant, including internally developed
information systems, an allowance for funds used during construction and
replacements of units of property and betterments, is capitalized. Maintenance
and repairs of property and replacements determined to be less than units of
property are charged to operating expenses. Costs of depreciable units of
property retired plus costs of removal less salvage are charged to accumulated
depreciation.

ALLOWANCE FOR FUNDS USED DURING CONSTRUCTION
The Allowance for Funds Used During Construction (AFUDC) represents the cost of
both the debt (Interest Capitalized) and equity funds used to finance utility
plant additions during the construction period. In accordance with the uniform
system of accounts prescribed by regulatory authorities, AFUDC is capitalized
as a part of the cost of utility plant and is credited currently as a noncash
item to Other Income and Interest Capitalized (see Other Income below). The
Company generally is permitted, under established regulatory rate practices, to
recover the capitalized AFUDC and a fair return thereon through its inclusion
in rate base and the provision for depreciation after the related utility plant
has been placed in service. Cash inflow related to AFUDC does not occur until
the related utility plant is placed in service.

The effective AFUDC rate was 10.67% in 1994, 1993 and 1992. The Company's
AFUDC rates do not exceed the maximum allowable rates as determined in
accordance with the requirements of regulatory authorities.

ALLOWANCE FOR FUNDS USED TO CONSERVE ENERGY
The Allowance for Funds Used to Conserve Energy (AFUCE) rate recovers carrying
costs associated with Demand Side Management (DSM) program expenditures until
such investment is included in rate base or amortized into rates. AFUCE is
capitalized as a part of the cost of the DSM investment and is credited
currently as a noncash item to Other Income and Interest Capitalized. The
AFUCE rate in effect is the last authorized, or otherwise stipulated, rate of
return from the Company's proceeding for natural gas or electric operations.
The rate for Washington is adjusted for the tax effect of interest. Cash
inflow related to AFUCE does not occur until the related DSM investment is
placed in service.

35
<PAGE> 39
THE WASHINGTON WATER POWER COMPANY

DEFERRED CHARGES AND CREDITS
The Company prepares its financial statements in accordance with the
provisions of FAS No. 71, "Accounting for the Effects of Certain Types of
Regulation." FAS No. 71 requires a cost-based, rate-regulated company to
reflect the impact of regulatory decisions in its financial statements. In
certain circumstances, certain costs and obligations, such as incurred costs
not currently recovered through rates but expected to be recovered in the
future, must be reflected in a deferred account in the balance sheet and not be
reflected in income until matching revenues are recognized.

The primary regulatory assets include Investment in Exchange Power, Demand Side
Management costs, the FAS 109 income tax deferral, the provision for FAS 106,
and unrecovered purchased gas costs. Included in Deferred Charges, Other are
debt issuance and redemption costs, which are amortized over the terms of the
respective debt issues. Deferred credits include the gain on the general office
building sale/leaseback being amortized over the life of the lease.

DEPRECIATION
For utility operations, depreciation provisions are computed by a method of
depreciation accounting utilizing unit rates for hydroelectric plants and
composite rates for other properties. Such rates are designed to provide for
retirements of properties at the expiration of their service lives. The rates
for hydroelectric plants include annuity and interest components, in which the
interest component is 6%. For utility operations, the ratio of depreciation
provisions to average depreciable property was 2.56% in 1994, 2.68% in 1993
and 2.37% in 1992.

POWER AND NATURAL GAS COST ADJUSTMENT PROVISIONS
In 1989, the Idaho Public Utilities Commission (IPUC) approved the Company's
filing for a power cost adjustment mechanism (PCA). The PCA is designed to
allow the Company to change electric rates to recover or rebate a portion of
the difference between actual and allowed net power supply costs. In 1994 and
1992, the Company deferred $4.1 million and $3.3 million, respectively, of net
power supply costs, which resulted in like decreases in electric operating
expenses. In 1993, the Company deferred $4.6 million of net power supply cost
savings, which resulted in like increases in electric operating expenses. Rate
changes are triggered when the deferred balance reaches $2.2 million. On
January 1, 1995, a $2.2 million surcharge was implemented for the next twelve
months to recover costs resulting from low streamflow conditions during 1994.
A rate increase was also implemented in November 1992 to pass through
accumulated costs. As of December 31, 1994, $1.4 million of costs not yet
subject to a rate increase had accumulated in the PCA deferral account. On
July 18, 1994, the IPUC approved an indefinite extension of the PCA.

Under established regulatory practices, the Company is also allowed to adjust
its natural gas rates from time to time to reflect increases or decreases in
the cost of natural gas purchased. Differences between actual natural gas
costs and the natural gas costs allowed in rates are deferred and charged or
credited to expense when regulators approve inclusion of the cost changes in
rates.

OPERATING REVENUES
The Company accrues estimated unbilled revenues for services provided through
month-end.

INCOME TAXES
The Company and its eligible subsidiaries file consolidated federal income tax
returns. Subsidiaries are charged or credited with the tax effects of their
operations on a stand alone basis. The Company's federal income tax returns
have been examined with all issues resolved, and all payments made, through the
1990 return.

EARNINGS PER SHARE
Earnings per share have been computed based on the weighted average number of
common shares outstanding during the period. On November 9, 1993, the Company
distributed, to shareholders of record on October 25, 1993, shares of its
common stock, without par value, under a two-for-one stock split effected in
the form of a 100% stock dividend. All references to number of shares and per
share information have been adjusted to reflect the common stock split on a
retroactive basis.

CASH
For the purposes of the Consolidated Statements of Cash Flows, the Company
considers all temporary investments with an initial maturity of three months or
less to be cash equivalents.

36
<PAGE> 40
THE WASHINGTON WATER POWER COMPANY

DERIVATIVE FINANCIAL INSTRUMENTS
The Company's one involvement with derivative financial instruments is an
interest rate cap agreement effective January 1995, for a three-year period,
that sets a ceiling on the interest rate associated with a lease. Payments
made under this agreement are being amortized to rent expense.

OTHER INCOME -- NET
Other income-net is composed of the following items:

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------
1994 1993 1992
---- ---- ----
(Thousands of Dollars)
<S> <C> <C> <C>
Interest income $3,535 $ 4,058 $ 5,566
Gain (loss) on property dispositions 738 (1,370) 2,405
Minority interest (289) (1,273) 36
AFUDC (equity) 1,261 1,666 1,392
Miscellaneous (939) (1,461) (1,930)
------ ------- -------
Total $4,306 $ 1,620 $ 7,469
====== ======= =======
</TABLE>

NEW ACCOUNTING STANDARDS
Effective January 1, 1994, the Company adopted FAS No. 115, entitled
"Accounting for Certain Investments in Debt and Equity Securities." Under FAS
No. 115, investments in debt and marketable equity securities are classified as
"available for sale" and are recorded at fair value. Investments totalling
$34.1 million and $27.9 million are included on the Consolidated Balance Sheets
as other property and investments and current assets, respectively. Unrealized
investment gains, net of taxes, added $14.3 million to the Consolidated
Statements of Capitalization as of December 31, 1994 as a separate component of
shareholders' equity.

NOTE 2. RETIREMENT PLANS AND OTHER POSTRETIREMENT BENEFITS

Effective January 1, 1993, the Company adopted FAS No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions." FAS No. 106
requires the Company to accrue the estimated cost of postretirement benefit
payments during the years the employee provides services. The Company
previously expensed the cost of these benefits, which are principally health
care, as claims were incurred. FAS No. 106 allows recognition of the
unrecognized transition obligation in the year of adoption or the amortization
of such obligation over a period of up to twenty years. The Company elected to
amortize this obligation of approximately $34,500,000 over a period of twenty
years.

The Company has received accounting orders from the Washington Utilities and
Transportation Commission (WUTC) and the IPUC allowing the current deferral of
expense accruals under this Statement as a regulatory asset for future
recovery. At such time that rate recovery is requested and allowed, cumulative
deferrals will be amortized over the remainder of the twenty-year amortization
period. The Company expects to be able to recover the amortized amounts.
Therefore, the Company's cash flows and income from operations are not affected
by implementation of this Statement.

The Company provides certain health care and life insurance benefits for
substantially all of its retired employees. In 1994, 1993 and 1992, the
Company recognized $1,270,000, $1,250,000 and $1,290,000, respectively, as an
expense for postretirement health care and life insurance benefits. The
following table sets forth the health care plan's funded status at December 31,
1994 and 1993.

37
<PAGE> 41
THE WASHINGTON WATER POWER COMPANY

Accumulated postretirement benefit obligation (thousands of dollars):

<TABLE>
<CAPTION>
1994 1993
------- -------
<S> <C> <C>
Retirees 506 509
Fully eligible plan participants 1,340 1,341
Other active plan participants 110 111
----- -------
Total participants 1,956 1,961

Fair value of plan assets $32 $636
Accumulated postretirement benefit obligations
in excess of plan assets $34,468 $38,964
Unrecognized transition obligation $33,548 $38,413
Accrued postretirement benefit cost $2,966 $3,981
</TABLE>

Net postretirement benefit cost for 1994 and 1993 consisted of the following
components (thousands of dollars):

<TABLE>
<CAPTION>
1994 1993
------ -------
<S> <C> <C>
Service cost - benefits earned during the period $475 $776
Return on the plan assets (if any) - -
Interest cost on accumulated postretirement benefit obligation $1,539 $2,018
Amortization of transition obligation $952 $1,187
</TABLE>

The currently assumed health care cost trend rate used in measuring the
accumulated postretirement benefit obligation is 12% for 1994, decreasing
linearly each successive year until it reaches 7% in 1998. A
one-percentage-point increase in the assumed health care cost trend rate for
each year would increase the accumulated postretirement benefit obligation as
of December 31, 1994 and net postretirement health care cost by approximately
$1,552,000. The assumed discount rate used in determining the accumulated
postretirement benefit obligation was 8.5%.

The Company has a pension plan covering substantially all of its regular
full-time employees. Some of the Company's subsidiaries also participate in
this plan. Individual benefits under this plan are based upon years of service
and the employee's average compensation as specified in the Plan. The
Company's funding policy is to contribute annually an amount equal to the net
periodic pension cost, provided that such contributions are not less than the
minimum amounts required to be funded under the Employee Retirement Income
Security Act, nor more than the maximum amounts which are currently deductible
for tax purposes. Pension fund assets are invested primarily in marketable
debt and equity securities. The Company also has another plan which covers the
executive officers.

<TABLE>
<CAPTION>
Net pension credit for 1994, 1993 and 1992 is summarized as follows: 1994 1993 1992
---- ---- ----
(Thousands of Dollars)
<S> <C> <C> <C>
Service cost-benefits earned during the period . . . . . . . . . . . . $ 4,323 $ 3,150 $ 2,846
Interest cost on projected benefit obligation . . . . . . . . . . . . . 8,523 7,771 7,390
Actual return on plan assets . . . . . . . . . . . . . . . . . . . . . (248) (15,108) (12,257)
Net amortization and deferral . . . . . . . . . . . . . . . . . . . . . (11,553) 3,717 886
------- -------- --------
Net periodic pension cost (income) . . . . . . . . . . . . . . . . . 1,045 (470) (1,135)
Less amounts charged (credited) to construction and other accounts . . - - (24)
------- -------- --------
Net pension cost credited to operating expenses . . . . . . . . . . $ 1,045 $ (470) $ (1,111)
======= ======== ========
</TABLE>

38
<PAGE> 42
THE WASHINGTON WATER POWER COMPANY

The funded status of the Plan and the pension liability at December 31, 1994,
1993 and 1992, are as follows:

<TABLE>
<CAPTION>
1994 1993 1992
--------- --------- --------
(Thousands of dollars)
<S> <C> <C> <C>
Actuarial present value of benefit obligations:
Accumulated benefit obligations (including vested benefits of
$(88,596,000), $(84,531,000) and $(76,226,000), respectively) . . . $ (90,341) $ (85,368) $(76,853)
========= ========= ========
Projected benefit obligation for service rendered to date . . . . $(107,540) $(104,025) $(95,446)
Plan assets at fair value . . . . . . . . . . . . . . . . . . . . 119,706 126,879 118,883
--------- --------- --------
Plan assets in excess of projected benefit obligation . . . . . . 12,166 22,854 23,437
Unrecognized net gain from returns different than assumed . . . . (17,939) (21,503) (19,733)
Prior service cost not yet recognized in pension cost . . . . . . 14,803 7,983 8,568
Unrecognized net asset at year-end (being amortized over
11 to 19 years) . . . . . . . . . . . . . . . . . . . . . . . (11,359) (12,445) (13,531)
Regulatory deferrals (1). . . . . . . . . . . . . . . . . . . . . . (1,841) (3,256) (1,381)
--------- -------- --------
Pension liability . . . . . . . . . . . . . . . . . . . . . . . . $ (4,170) $ (6,367) $ (2,640)
========= ======== ========

Assumptions used in calculations were:
Discount rate at year-end . . . . . . . . . . . . . . . . . . . . 8.5% 7.5% 8.5%
Rate of increase in future compensation level . . . . . . . . . . 4.0% 4.0% 5.0%
Expected long-term rate of return on assets . . . . . . . . . . . 9.0% 9.0% 9.0%
</TABLE>
(1) The Company has received accounting orders from regulatory authorities
requiring the Company to defer the difference between pension cost as
determined under FAS 87 and that determined for ratemaking purposes.

NOTE 3. ACCOUNTING FOR INCOME TAXES

The Company adopted Statement of Financial Accounting Standards (FAS) No. 109,
"Accounting for Income Taxes," effective January 1, 1993, which supersedes
Accounting Principles Board Opinion 11 previously adopted by the Company. FAS
No. 109 establishes revised financial accounting and reporting standards for
the effects of income taxes.

As of December 31, 1994 and 1993, respectively, the Company had recorded net
regulatory assets of $174,349,000 and $177,786,000 related to the probable
recovery of FAS No. 109 deferred tax liabilities from customers through future
rates. Such net regulatory assets will be adjusted by amounts recovered through
rates.

Deferred income taxes reflect the net tax effects of (a) temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes, and (b) tax credit
carryforwards. The net deferred federal income tax liability consists of the
following (thousands of dollars):

<TABLE>
<CAPTION>
1994 1993
-------- --------
<S> <C> <C>
Deferred tax liabilities:
Differences between book and tax bases of utility plant $317,991 $297,175
Loss on reacquired debt 8,216 9,243
Deferred natural gas credits 1,095 2,679
Other 8,957 5,575
-------- --------
Total deferred tax liabilities 336,259 314,672
-------- --------

Deferred tax assets:
Reserves not currently deductible 14,429 14,486
Contributions in aid of construction 3,710 2,975
Gain on sale of office building 1,555 1,647
Other 6,398 6,659
-------- --------
Total deferred tax assets 26,092 25,767
-------- --------
Net deferred tax liability $310,167 $288,905
======== ========
</TABLE>

39
<PAGE> 43
THE WASHINGTON WATER POWER COMPANY

A reconciliation of federal income taxes derived from statutory tax rates
applied to income from continuing operations and federal income tax as set
forth in the accompanying Consolidated Statements of Income and Retained
Earnings is as follows (the current and deferred effective tax rates are
approximately the same during all periods):

<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
---------------------------------------
1994 1993 1992
---- ---- ----
(Thousands of Dollars)
<S> <C> <C> <C>
Computed federal income taxes at statutory rate $41,983 $43,363 $38,296
Increase (decrease) in tax resulting from:
Accelerated tax depreciation . . . . . . . . . . . . 1,725 (2,229) 1,784
Sale of software rights . . . . . . . . . . . . . . 5,168 - -
Equity earnings in affiliates . . . . . . . . . . . (497) (560) 509
Other . . . . . . . . . . . . . . . . . . . . . . . (6,488) 1,684 (1,628)
------- ------- -------
Total federal income tax expense* . . . . . . . . . . . . $41,891 $42,258 $38,961
======= ======= =======

INCOME TAX EXPENSE CONSISTS OF THE FOLLOWING:
Federal taxes currently provided . . . . . . . . . . . . $32,334 $34,749 $25,708
Deferred income taxes . . . . . . . . . . . . . . . . . . 9,557 7,509 13,253
------- ------- -------
Total federal income tax expense . . . . . . . . . . . . 41,891 42,258 38,961
State income tax expense . . . . . . . . . . . . . . 2,805 245 2,369
------- ------- -------
Federal and state income taxes . . . . . . . . . . . . . $44,696 $42,503 $41,330
======= ======= =======
*Federal Income Tax Expense:
Utility . . . . . . . . . . . . . . . . . . . . . . $35,513 $36,385 $34,372
Non-utility . . . . . . . . . . . . . . . . . . . . 6,378 5,873 4,589
------- ------- -------
Total Federal Income Tax Expense . . . . . . . . . . . . $41,891 $42,258 $38,961
======= ======= =======

Federal statutory rate . . . . . . . . . . . . . . . . . 35% 35% 34%
</TABLE>

40
<PAGE> 44
THE WASHINGTON WATER POWER COMPANY

NOTE 4. LONG-TERM DEBT

The annual sinking fund requirements and maturities for the next five years for
First Mortgage Bonds and Medium-Term Notes outstanding at December 31, 1994 are
as follows:

<TABLE>
<CAPTION>
YEAR ENDED SINKING FUND
DECEMBER 31 MATURITIES REQUIREMENTS <TOTAL
----------- ---------- ------------
(Thousands of Dollars)
<S> <C> <C> <C>
1995................ $45,000 $3,967 $48,967
1996................ 35,000 3,767 38,767
1997................ 31,000 3,657 34,657
1998................ 10,000 3,657 13,657
1999................ 47,500 3,447 50,947
</TABLE>

The sinking fund requirements may be met by certification of property additions
at the rate of 167% of requirements. All of the utility plant is subject to
the lien of the Mortgage and Deed of Trust securing outstanding First Mortgage
Bonds.

In 1993 and 1992, $25,000,000 and $113,000,000, respectively, of unsecured
Medium-Term Notes, Series A and B were issued. At December 31, 1994, the
Company had outstanding $242,500,000 of such notes with maturities between 1
and 29 years and with interest rates varying between 5.50% and 9.58%.

In 1994 and 1993, $88,000,000 and $225,000,000, respectively, of Secured
Medium-Term Notes, Series A and B were issued. At December 31, 1994, the
Company had outstanding $313,000,000 of such notes with maturities between 2
and 29 years and with interest rates varying between 4.72% and 8.25%. As of
December 31, 1994, the Company had remaining authorization to issue up to
$187,000,000 of such notes of the $250,000,000 originally authorized.

At December 31, 1994, the Company had $58,000,000 outstanding under borrowing
arrangements which will be refinanced in 1995. See Note 5 for details of
credit agreements.

Included in other long-term debt are the following
items related to non-utility operations:

<TABLE>
<CAPTION>
OUTSTANDING AT DECEMBER 31
--------------------------
1994 1993
------- ------
(Thousands of Dollars)
<S> <C> <C>
Notes payable - variable rates through 1999 . . . . . . . $12,313 $6,635
Industrial revenue bonds - variable rate through 2003 . . 450 500
Capital lease obligations . . . . . . . . . . . . . . . . 16 22
------- ------
Total non-utility . . . . . . . . . . . . . . . . . 12,779 7,157
Less: current portion . . . . . . . . . . . . . . . . . 2,868 57
------- ------
Net non-utility long-term debt . . . . . . . . . . . $ 9,911 $7,100
======= ======
</TABLE>

In accordance with FAS No. 107 "Disclosures About Fair Value of Financial
Instruments," the fair value of the Company's long-term debt at December 31,
1994 and 1993 is estimated to be $673.0 million, or 93% of the carrying value
and $690.0 million, or 107% of the carrying value, respectively. These
estimates are based on available market information and appropriate valuation
methodologies.

41
<PAGE> 45
THE WASHINGTON WATER POWER COMPANY

NOTE 5. BANK BORROWINGS AND COMMERCIAL PAPER

At December 31, 1994, the Company maintained total lines of credit with various
banks under two separate credit agreements amounting to $160,000,000. The
Company has a revolving line of credit expiring December 9, 1997, which
provides a total credit commitment of $70,000,000. The second revolving credit
agreement is composed of two tranches totaling $90,000,000. The one-year
tranche is renewable each year through 1995 and provides for up to $50,000,000
of notes to be outstanding at any one time. The three-year tranche expires
September 30, 1995, and provides for up to $40,000,000 of notes to be
outstanding at any one time. The Company pays commitment fees of up to 0.1875%
per annum on the average daily unused portion of each credit agreement.

In addition, under various agreements with banks, the Company can have up to
$60,000,000 in loans outstanding at any one time, with the loans available at
the banks' discretion. These arrangements provide, if funds are made
available, for fixed-term loans for up to 180 days at a fixed rate of interest.
In December 1994, the Company terminated its commercial paper program.

Balances and interest rates of bank borrowings under these arrangements were as
follows:

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------
1994 1993
------- -------
(Dollars in thousands)
<S> <C> <C>
BALANCE OUTSTANDING AT END OF PERIOD:
Fixed-term loans............................. $33,000 $44,001
Commercial paper............................. - 20,000
Revolving credit agreement................... 25,000 4,000

MAXIMUM BALANCE DURING PERIOD:
Fixed-term loans............................. $52,000 $69,000
Commercial paper............................. 20,000 20,000
Revolving credit agreement................... 32,000 28,000

AVERAGE DAILY BALANCE DURING PERIOD:
Fixed-term loans............................. $29,373 $24,499
Commercial paper............................. - 7,791
Revolving credit agreement................... 10,941 5,030

AVERAGE ANNUAL INTEREST RATE DURING PERIOD:
Fixed-term loans............................. 4.64% 3.38%
Commercial paper............................. - 3.46
Revolving credit agreement................... 4.49 3.49

AVERAGE ANNUAL INTEREST RATE AT END OF PERIOD:
Fixed-term loans............................. 6.28% 3.55%
Commercial paper............................. - 3.58
Revolving credit agreement................... 6.28 3.65
</TABLE>

Non-utility operations have $43 million of credit arrangements available. At
December 31, 1994 and 1993, $22.3 million and $19.7 million, respectively, were
outstanding.

NOTE 6. ACCOUNTS RECEIVABLE SALE

The Company has entered into an agreement whereby it can sell, on a revolving
basis, up to $40,000,000 of interests in certain accounts receivable, both
billed and unbilled. The Company is obligated to pay fees which approximate
the purchaser's cost of issuing commercial paper equal in value to the
interests in receivables sold. The amount of such fees is included in
operating expenses. At both December 31, 1994 and 1993, $40,000,000 in
receivables had been sold pursuant to the agreement.

42
<PAGE> 46
THE WASHINGTON WATER POWER COMPANY

NOTE 7. PREFERRED STOCK

CUMULATIVE PREFERRED STOCK NOT SUBJECT TO MANDATORY REDEMPTION:
The dividend rate on Flexible Auction Preferred Stock, Series J is reset every
49 days based on an auction. During 1994, the dividend rate varied from 3.000%
to 4.950% and at December 31, 1994, was 4.950%. Series J is subject to
redemption at the Company's option at a redemption price of 100% per share plus
accrued dividends.

CUMULATIVE PREFERRED STOCK SUBJECT TO MANDATORY REDEMPTION:

Redemption requirements:
$8.625, Series I - On June 15, 1996, 1997, 1998, 1999 and 2000, the
Company must redeem 100,000 shares at $100 per share plus accumulated
dividends. The Company may, at its option, redeem up to 100,000
shares in addition to the required redemption on any redemption date.

$6.95, Series K - On September 15, 2002, 2003, 2004, 2005 and 2006,
the Company must redeem 17,500 shares at $100 per share plus
accumulated dividends through a mandatory sinking fund. Remaining
shares must be redeemed on September 15, 2007. The Company has the
right to redeem an additional 17,500 shares on each September 15
redemption date.

There are $40 million in mandatory redemption requirements during the 1995-1999
period.

In accordance with FAS No. 107 "Disclosures About Fair Value of Financial
Instruments," the fair value of the Company's preferred stock at December 31,
1994 and 1993 is estimated to be $135.1 million, or 100% of the carrying value
and $93.8 million, or 110% of the carrying value, respectively. These
estimates are based on available market information and appropriate valuation
methodologies.

NOTE 8. COMMON STOCK

In April 1990, the Company sold 1,000,000 shares of its common stock to the
Trustee of the Investment and Employee Stock Ownership Plan for Employees of
the Company (Plan) for the benefit of the participants and beneficiaries of the
Plan. In payment for the shares of Common Stock, the Trustee issued a
promissory note payable to the Company in the amount of $14,125,000. Dividends
paid on the stock held by the Trustee, plus Company contributions to the Plan,
if any, are used by the Trustee to make interest and principal payments on the
promissory note. The balance of the promissory note receivable from the
Trustee ($12,266,750 at December 31, 1994) is reflected as a reduction to
common equity. The shares of Common Stock are allocated to the accounts of
participants in the Plan as the note is repaid. During 1994, the cost recorded
for the Plan was $2,724,000. This included the cost for an additional 272,278
shares which were issued for ongoing employee and Company contributions to the
Plan. Interest on the note payable, cash and stock contributions to the Plan
and dividends on the shares held by the Trustee were $1,195,000, $2,264,000 and
$1,224,000, respectively.

In February 1990, the Company adopted a shareholder rights plan, which was
subsequently amended, pursuant to which holders of Common Stock outstanding on
March 2, 1990, or issued thereafter, have been granted one preferred share
purchase right ("Right") on each outstanding share of Common Stock. Each
Right, initially evidenced by and traded with the shares of Common Stock,
entitles the registered holder to purchase one two-hundredth of a share of
Preferred Stock of the Company, without par value, at an exercise price of $40,
subject to certain adjustments, regulatory approval and other specified
conditions. The Rights will be exercisable only if a person or group acquires
10% or more of the Common Stock or announces a tender offer, the consummation
of which would result in the beneficial ownership by a person or group of 10%
or more of the Common Stock. The Rights may be redeemed, at a redemption price
of $0.005 per Right, by the Board of Directors of the Company at any time until
any person or group has acquired 10% or more of the Common Stock. The Rights
will expire on the earlier of February 16, 2000 and the effective time of the
merger with SPR, SPPC and Resources West.

43
<PAGE> 47
THE WASHINGTON WATER POWER COMPANY

In November 1991, the Company received authorization to issue from time to time
1,500,000 shares of Common Stock under a Periodic Offering Program (POP).
During 1992, the remaining 1,107,600 shares of the first POP were issued under
this program for net proceeds of $18.0 million. In the second half of 1992,
the Company received authorization to issue a second 1,500,000 shares of common
stock under the POP. Through December 31, 1994, 927,600 shares of the second
POP were issued for net proceeds of $17.3 million.

The Company has a Dividend Reinvestment and Stock Purchase Plan under which the
Company's stockholders may automatically reinvest their dividends and make
optional cash payments for the purchase of the Company's Common Stock.

Sales of Common Stock for 1994 and 1993 are summarized below (in thousands of
dollars):

<TABLE>
<CAPTION>
1994 1993
----------------------- -----------------------
Shares Amount Shares Amount
---------- -------- ---------- --------
<S> <C> <C> <C> <C>
Balance at January 1 52,757,545 $544,609 50,888,130 $508,202
---------- -------- ---------- --------
Employee Investment Plan (401-K)...... 272,278 4,302 165,335 3,216
Dividend Reinvestment Plan............ 1,390,873 21,692 1,127,680 21,779
Periodic Offering..................... - - 576,400 11,412
---------- -------- ---------- --------
Total Issues.......................... 1,663,151 25,994 1,869,415 36,407
---------- -------- ---------- --------
Balance at December 31................... 54,420,696 $570,603 52,757,545 $544,609
========== ======== ========== ========
</TABLE>

NOTE 9. LEASES

The Company has entered into several lease arrangements involving various
assets, with minimum terms ranging from eleven months to seventeen years and
expiration dates from 1995 to 2011. The lease provisions obligate the Company
to sell on behalf of the lessor or purchase the associated asset at a specified
percentage of the asset's fair value if the lease is not renewed. Rent expense
for the years ended December 31, 1994, 1993 and 1992 was $2.3 million, $1.9
million and $1.8 million, respectively. Future minimum lease payments
(thousands of dollars) required under operating leases that have initial or
remaining noncancelable lease terms in excess of one year as of December 31,
1994 are estimated as follows:

<TABLE>
<S> <C>
Year ending December 31:
1995 $ 8,424
1996 7,283
1997 6,872
1998 1,847
1999 2,257
Later years 27,086
-------
Total minimum payments required $53,769
=======
</TABLE>

The Company also has various other operating leases, which are charged to
operating expense, consisting of a large number of small, relatively
short-term, renewable agreements for various items, such as office equipment
and office space.

NOTE 10. DISCONTINUED COAL MINING OPERATIONS

Washington Irrigation & Development Company (WIDCo) owned an undivided one-half
interest in coal mining properties near Centralia, Washington, which it
operated and which supplied coal to the Centralia Steam Electric Generating
Plant owned 15% by the Company. On July 31, 1990, WIDCo sold its 50% interest
in the Centralia coal mining properties for $40.8 million. Net income of $2.4
million in 1992 resulted from accounting adjustments and a refund of federal
income taxes for years prior to the sale. The consolidated financial
statements have been reclassified to reflect the continuing operations of the
Company. The revenues, expenses, assets and liabilities of the discontinued
operations have been reclassified from those categories and netted into single
line items for discontinued operations in the Balance Sheets and Income
Statements.

44
<PAGE> 48
THE WASHINGTON WATER POWER COMPANY WASHINGTON WATER POWER COMPANY

NOTE 11. COMMITMENTS AND CONTINGENCIES

SUPPLY SYSTEM PROJECT 3

In 1985, the Company and the Bonneville Power Administration (BPA) reached a
settlement surrounding litigation related to the suspension of construction of
Washington Public Power Supply System (Supply System) Project 3. Project 3 is
a partially constructed 1,240 MW nuclear generating plant in which the Company
has a 5% interest. Under the settlement agreement, the Company receives power
deliveries from BPA from 1987 to 2017 in proportion to the Company's investment
in Project 3.

The only material claim against the Company arising out of the Company's
involvement in Project 3, which has been pending since October 1982 in the
United States District Court for the Western District of Washington (District
Court), is the claim of Chemical Bank, as bond fund trustee for Supply System
Projects 4 and 5, against all owners of Projects 1, 2 and 3 for unjust
enrichment in the allocation of certain costs of common services and facilities
among the Supply System's five nuclear projects. Projects 4 and 5 were being
constructed adjacent to Projects 1 and 3, respectively, under a plan to share
certain costs. Chemical Bank was seeking a reallocation of $495 million in
costs (plus interest since commencement of construction in 1976) originally
allocated to Projects 4 and 5.

On January 24, 1995, the Company executed a Memorandum of Understanding (MOU)
which is intended to settle all remaining claims in the "cost sharing"
litigation. The other parties to the MOU are expected to include Chemical
Bank, as trustee for the holder of Supply System Projects 4 and 5 bonds; the
Supply System; BPA; certain public utility participants in those projects; and
Puget Sound Power & Light Company (Puget), and Portland General Electric
Company (PGE), Puget and PGE being two of the other three investor-owned
utilities which held minority ownership interests in Project 3.

The MOU provides for the Company to pay $500,000 in settlement of all claims,
and as part of a total $55,000,000 payment to Chemical Bank. In the MOU, the
Company also agrees to give up any claims relating to the Company's bridge
loans made to the Supply System in 1981. In exchange, the Company would be
released from all pending cost-sharing litigation claims. The MOU contemplates
and provides agreement on consolidation of the Project 5 and Project 3 sites
for site restoration purposes, if BPA and the Supply System decide to thus
consolidate the site. In the event that occurs, the Company would be
completely indemnified from any additional costs by a separate agreement with
BPA. Under the MOU, the Company's payment to Chemical Bank is due in July,
1995, and it is expected that a final settlement agreement and dismissal of the
litigation will occur before or contemporaneously with that payment.

NEZ PERCE TRIBE

On December 6, 1991, the Nez Perce Tribe filed an action against the Company in
U. S. District Court for the District of Idaho alleging, among other things,
that two dams formerly operated by the Company, the Lewiston Dam on the
Clearwater River and the Grangeville Dam on the South Fork of the Clearwater
River, provided inadequate passage to migrating anadromous fish in violation of
rights under treaties between the Tribe and the United States made in 1855 and
1863. The Lewiston and Grangeville Dams, which had been owned and operated by
other utilities under hydroelectric licenses from the Federal Power Commission
(the "FPC", predecessor of the FERC) prior to acquisition by the Company, were
acquired by the Company in 1937 with the approval of the FPC, but were
dismantled and removed in 1973 and 1963, respectively. The Tribe initially
indicated through expert opinion disclosures that they were seeking actual and
punitive damages of $208 million. However, supplemental disclosures reflect
allegations of actual loss under different assumptions of between $425 million
and $650 million.

Discovery had been stayed pending a decision by the Court on a case involving
some similar issues brought by the Tribe against Idaho Power Company. The
Court has since decided these issues and has dismissed all claims against Idaho
Power. The Idaho Power case has now been appealed by the Nez Perce Tribe to
the Ninth Circuit Court of Appeals. On November 21, 1994, the Company filed
its Motion and Brief in Support of Summary Judgment of Dismissal. The Nez
Perce Tribe has filed a reply brief, and has requested oral argument. No
hearing on the Company's Motion for Summary Judgment has been scheduled by the
Court and the matter is not set for trial. The Company is presently unable to
assess the likelihood of an adverse outcome in this litigation, or estimate an
amount or range of potential loss in the event of an adverse outcome.

45
<PAGE> 49
THE WASHINGTON WATER POWER COMPANY

LITTLE FALLS PROJECT

Pending before the U. S. District Court in the Eastern District of Washington
is the case of Spokane Tribe of Indians v. WWP, which was filed in 1982. This
matter involves a claim of the Spokane Tribe of Indians for damages arising out
of the Company's Little Falls Hydroelectric Development that was constructed on
the Spokane River pursuant to a 1905 Act of Congress. The Tribe claimed the
Company's dam interfered with Indian fishing rights and sought a declaratory
judgment and quiet title to part of the property comprising the Little Falls
Hydroelectric Development. However, the Company, the Tribe and the Bureau of
Indian Affairs signed a settlement agreement on September 9, 1994. The
Secretary of the Interior and the Tribe have executed an irrevocable easement
and license to WWP to the property comprising the Little Falls Hydroelectric
Development. The lawsuit has been dismissed with prejudice. The settlement
agreement provides for an initial payment of $1.0 million to the Tribe plus an
additional $3.2 million to be paid over the next five years for fish and
wildlife enhancement projects. An accrual of $4.2 million was made during June
1994 and is reflected in the Company's financial statements. Annual payments
will also be made to the Tribe, which will be tied to generation at the Little
Falls Project and escalate at the rate of 4.1 percent per year, with the first
installment of $375,000 expected to be paid by mid-April 1995.

OIL SPILL

The Company recently completed an updated investigation of an oil spill that
occurred several years ago in downtown Spokane at the site of the Company's
steam heat plant. The Company purchased the plant in 1916 and operated it as a
non-regulated plant until it was deactivated in 1986 in a business decision
unrelated to the spill. After the Bunker C fuel oil spill, initial studies
suggested that the oil was being adequately contained by both geological
features and man-made structures. The Washington State Department of Ecology
(DOE) concurred with these findings. However, more recent tests confirm that
the oil has migrated approximately one city block beyond the steam plant
property. On December 6, 1993, the Company asked the DOE to enter into
negotiations for a Consent Decree which will provide for additional remedial
investigation and a feasibility study. The Consent Decree, entered on November
8, 1994, provided for 22 additional soil borings to be made around the site,
which have been completed. In December 1993, the Company established a reserve
of $2.0 million, and in December 1994 increased it to $3.1 million based on
more current estimates.

FIRESTORM

On October 16, 1991, gale-force winds struck a five-county area in eastern
Washington and a seven-county area in northern Idaho. These winds were
responsible for causing 92 separate wildland fires, resulting in two deaths and
the loss of 114 homes and other structures, some of which were located in the
Company's service territory. Four separate class action lawsuits were filed
against the Company by private individuals in the Superior Court of Spokane
County on October 13, 1993. These suits concern fires identified as Midway,
Golden Cirrus, Nine Mile and Chattaroy. All of these suits were certified as
class actions on September 16, 1994, and bifurcated for trial of liability and
damage issues by order of the same date. The Company's Motion for
Reconsideration was denied on October 21, 1994, and a Motion for Discretionary
Review of the Court's decision on certification of class actions was timely
filed with the Washington Court of Appeals (Division III) on November 14, 1994.

The Company was also served with two suits in Spokane County Superior Court
filed on April 20, 1994 and on September 15, 1994, both of which sought
individual damages from separate fires within the Chattaroy Fire complex. Five
additional and separate suits were brought by Grange Insurance Company, and
were filed in Spokane County Superior Court on October 10, 1994, for
approximately $2.2 million paid to Grange insureds for the same fire areas.
Two additional class action suits were also filed - one in Lincoln County
Superior Court, filed on October 14, 1994, for a fire known as "Nine Mile West"
(previously included in the Spokane County Nine Mile suit certified as a class
action), and the second in Spokane County Superior Court, filed on October 14,
1994, for the Ponderosa Fire area (which had not been the subject of previous
suit). Neither of these suits has yet been certified as a class action,
although the Lincoln County suit has been transferred to Spokane County
pursuant to decision of the Lincoln County Superior Court on February 21, 1995.

Complainants in all cases allege various theories of tortious conduct,
including negligence, creation of a public nuisance, strict liability and
trespass; in most cases, complainants allege that fires were caused by electric
distribution lines downed by the wind. The lawsuits seek recovery for property
damage, emotional and mental distress, lost income and punitive damages, but do
not specify the amount of damages being sought. Since little discovery has
been conducted and the classes are not yet formed, the Company is presently
unable to assess the

46
<PAGE> 50
THE WASHINGTON WATER POWER COMPANY

likelihood of an adverse outcome or estimate an amount or range of potential
loss in the event of an adverse outcome. The Company was previously presented
with a claim from the Washington State Department of Natural Resources (DNR)
for fire suppression costs associated with five of these fires in eastern
Washington. The total of the DNR claim was $1.0 million. On July 22, 1993,
the Company entered into a settlement with the DNR whereby the Company agreed
to pay $200,000 to DNR in full settlement of any and all DNR claims; however,
there was no admission of liability on the part of the Company.

WILLIAMS LAKE LAWSUIT

On February 2, 1995, a lawsuit was commenced in Spokane County Superior Court
against the Company and its subsidiary, Pentzer, by Tondu Energy Systems, Inc.
and T.E.S. Williams Lake Partnership alleging contract violations, conspiracy,
misrepresentation and breach of fiduciary duties in regard to the 1993 sale of
Pentzer Energy Services, Inc. to B.C. Gas, Inc. The suit claims damages in
excess of $10 million, plus exemplary damages, prejudgment interest, costs and
attorneys' fees. Also named as defendants are B.C. Gas, Inc., Inland Pacific
Energy (Williams Lake) Corp. and the former Pentzer Energy Services, Inc.,
subsidiaries involved in the sale, WP Energy Company, WP Energy Canada, Ltd.
and WP Energy Canada (Williams Lake) Ltd. The claims involve an alleged first
right to purchase interests in the Williams Lake, British Columbia wood-fired
generating station. Discovery with regard to the lawsuit has not yet
commenced. The Company and Pentzer intend to vigorously defend against all of
the claims.

OTHER CONTINGENCIES

The Company has long-term contracts related to the purchase of fuel for thermal
generation, natural gas and hydroelectric power. Terms of the natural gas
purchase contracts range from one month to five years and the majority provide
for minimum purchases at the then effective market rate. The Company also has
various agreements for the purchase, sale or exchange of power with other
utilities, cogenerators, small power producers and government agencies. For
information relating to certain long-term purchased power contracts, see Note
13.

NOTE 12. JOINTLY-OWNED ELECTRIC FACILITIES

The Company is involved in several jointly owned generating plants. Financing
for the Company's ownership in the projects is provided by the Company. The
Company's share of related operating and maintenance expenses for plants in
service is included in corresponding accounts in the Consolidated Statements of
Income. The following table indicates the Company's percentage ownership and
the extent of the Company's investment in such plants at December 31, 1994:
<TABLE>
<CAPTION>
COMPANY'S CURRENT SHARE OF
-----------------------------------------------------------------
KW of Construction
Installed Fuel Ownership Plant in Accumulated Net Plant Work in
Project Capacity Source (%) Service Depreciation In Service Progress
- --------- --------- ------ --------- -------- ------------ ---------- ------------
(Thousands of Dollars)
<S> <C> <C> <C> <C> <C> <C> <C>
Centralia 1,330,000 Coal 15% $ 55,112 $31,173 $ 23,939 $930
Colstrip 3 & 4 1,556,000 Coal 15 269,460 80,181 189,279 -
</TABLE>

47
<PAGE> 51
THE WASHINGTON WATER POWER COMPANY

NOTE 13. LONG-TERM PURCHASED POWER CONTRACTS WITH REQUIRED MINIMUM PAYMENTS

Under fixed contracts with Public Utility Districts, the Company has agreed to
purchase portions of the output of certain generating facilities. Although the
Company has no investment in such facilities, these contracts provide that the
Company pay certain minimum amounts (which are based at least in part on the
debt service requirements of the supplier) whether or not the facility is
operating. The cost of power obtained under the contracts, including payments
made when a facility is not operating, is included in operations and
maintenance expense in the Consolidated Statements of Income. Information as
of December 31, 1994, pertaining to these contracts is summarized in the
following table:

<TABLE>
<CAPTION>
COMPANY'S CURRENT SHARE OF
----------------------------------------------------------------
Contract
Debt Revenue Expira-
Kilowatt Annual Service Bonds tion
Output Capability Costs(2) Costs(3) Outstanding Date
------- ---------- -------- -------- ----------- --------
PUBLIC UTILITY DISTRICT (Thousands of Dollars)
<S> <C> <C> <C> <C> <C> <C>
(PUD) CONTRACTS:
Chelan County PUD:
Lake Chelan Project 100.0%(1) 58,000 $3,089 $ 310 $ 7,628 1995
Rocky Reach Project 2.9 37,000 1,093 584 4,354 2011
Grant County PUD:
Priest Rapids Project 6.1 55,000 1,470 1,043 8,001 2005
Wanapum Project 8.2 75,000 2,088 1,575 15,287 2009
Douglas County PUD:
Wells Project 3.9 30,000 977 609 7,617 2018
------- ------ ------ -------
255,000 $8,717 $4,121 $42,887
======= ====== ====== =======
</TABLE>

(1) The Company purchases 100% of the Lake Chelan Project output and sells back
to the PUD about 40% of the output to supply local service area
requirements.
(2) The annual costs will change in proportion to the percentage of output
allocated to the Company in a particular year. Amounts represent the
operating costs for the year 1994.
(3) Included in annual costs.

Actual expenses for payments made under the above contracts for the years 1994,
1993 and 1992, were $8,717,000 $8,721,000 and $8,433,000, respectively. The
estimated aggregate amounts of required minimum payments (the Company's share
of debt service costs) under the above contracts for the next five years are
$3,829,000 in 1995, $3,750,000 in 1996, $3,616,000 in 1997, $5,355,000 in 1998
and $5,392,000 in 1999 (minimum payments thereafter are dependent on then
market conditions). In addition, the Company will be required to pay its
proportionate share of the variable operating expenses of these projects.

NOTE 14. ACQUISITIONS AND DISPOSITIONS

During 1994, Pentzer acquired two companies, one involved in bindery services
for the advertising, printing, publishing and direct mail industries and the
other in the design and manufacture of panel saws, panel routers and
accessories. During 1993, Pentzer acquired three companies, two involved in
financial services and one in point-of-purchase display manufacturing. Sales
of companies involved in telecommunications, technology and energy services
resulted in transactional gains of $7.1 million in 1993. At December 31, 1994,
Pentzer had approximately $167 million in assets compared to $130 million at
the end of 1993.

48
<PAGE> 52
THE WASHINGTON WATER POWER COMPANY

On December 30, 1994, the IPUC approved the transfer of ownership of all
PacifiCorp's electric properties in northern Idaho to the Company. The cash
purchase price was approximately $33 million. The Company commenced operations
of the properties on January 1, 1995. The purchase adds approximately 9,800
customers. The Company reduced most customers' rates to 1% below PacifiCorp's
current rates and instituted a four-year rate freeze. At the end of the rate
freeze, rates will be adjusted to the levels then in effect in the Company's
other service areas in northern Idaho. The Company believes this acquisition
will not have a material impact on its operating revenues or its results of
operations.

NOTE 15. PROPOSED MERGER

In June 1994, the Company, Sierra Pacific Resources (SPR), Sierra Pacific Power
Company, a subsidiary of SPR (SPPC), and Resources West Energy Corporation, a
newly formed subsidiary of the Company (Resources West) entered into an
Agreement and Plan of Reorganization and Merger, dated as of June 27, 1994, as
amended October 4, 1994 which provides for the merger of the Company, SPR and
SPPC with and into Resources West. The merger is designed to qualify as a
pooling-of-interests for accounting and financial reporting purposes. Under
this method of accounting, the recorded assets and liabilities of WWP, SPR and
SPPC will be carried forward to the consolidated financial statements of
Resources West at their recorded amounts; income of Resources West will include
income of WWP, SPR and SPPC for the entire fiscal year in which the merger
occurs; and the reported income of the separate corporations for prior periods
will be combined and restated as income of Resources West.

The cost savings from the merger are estimated to approximate $450 million, net
of merger transaction and transition costs, over a 10 year period following the
consummation of the merger.

The following pro forma condensed financial information combines the
historical consolidated balance sheets and statements of income of WWP and SPR
after giving effect to the merger. The unaudited pro forma condensed
consolidated balance sheet at December 31, 1994 gives effect to the merger as
if it had occurred at December 31, 1994. The unaudited pro forma condensed
consolidated statements of income for each of the three years in the period
ended December 31, 1994 give effect to the merger as if it had occurred at
January 1, 1992. These statements are prepared on the basis of accounting for
the merger as a pooling-of-interests and are based on the assumptions set forth
in the paragraph below. The pro forma condensed financial information has been
prepared from, and should be read in conjunction with the Company's historical
consolidated audited financial statements and related notes thereto of which
this note is a part and SPR's historical consolidated audited financial
statements and related notes thereto included in reports filed by SPR pursuant
to the Securities Exchange Act, as amended. The information contained herein
with respect to SPR and its subsidiaries has been supplied by SPR. The
information is not necessarily indicative of the financial position or
operating results that would have occurred had the merger been consummated on
the date, or at the beginning of the periods, for which the merger is being
given effect, nor is it necessarily indicative of future operating results or
financial position.

Intercompany transactions (including purchased and exchanged power
transactions) between WWP and SPR during the periods presented were not
material and, accordingly, no pro forma adjustments were made to eliminate such
transactions. For comparative purposes, certain historical amounts have been
reclassified to conform to the pro forma condensed financial statement format.
The $450 million net cost savings estimated to be achieved by the merger are
not reflected in the pro forma financial statements. All references to per
share information for WWP have been adjusted to reflect the two-for-one common
stock split which became effective on November 9, 1993. Pro forma per share
data and common shares outstanding for Resources West give effect to the
conversion of each share of WWP Common Stock into one share of Resources West
Common Stock and the conversion of each share of SPR Common Stock into 1.44
shares of Resources West Common Stock.

49
<PAGE> 53
THE WASHINGTON WATER POWER COMPANY

Pro Forma Condensed Consolidated Balance Sheet (in thousands of dollars):

At December 31, 1994
--------------------
<TABLE>
<CAPTION>
WWP SPR PRO FORMA
---------- ---------- ----------
(unaudited)
<S> <C> <C> <C>
Assets
------
Utility plant in service-net.......................... $1,802,280 $1,760,941 $3,563,221
Construction work in progress......................... 27,316 74,893 102,209
---------- ---------- ----------
Total.............................................. 1,829,596 1,835,834 3,665,430
Accumulated depreciation and
amortization....................................... 500,551 504,356 1,004,907
---------- ---------- ----------
Net utility plant.................................. 1,329,045 1,331,478 2,660,523
Other property and investments........................ 202,760 17,006 219,766
Current assets........................................ 136,566 126,296 262,862
Deferred charges...................................... 325,882 157,923 483,805
---------- ---------- ----------
Total assets....................................... $1,994,253 $1,632,703 $3,626,956
========== ========== ==========

Capitalization and Liabilities
------------------------------
Common stock and additional paid-in
capital............................................ $ 570,603 $ 450,660 $1,021,263
Other shareholders equity............................. 106,891 58,062 164,953
Preferred stock....................................... 135,000 93,515 228,515
Long-term debt........................................ 721,146 561,909 1,283,055
---------- ---------- ----------
Total capitalization............................... 1,533,640 1,164,146 2,697,786
Current liabilities................................... 132,517 145,528 278,045
Deferred income taxes................................. 310,167 156,958 467,125
Other deferred credits................................ 16,757 166,071 182,828
Minority interest..................................... 1,172 - 1,172
---------- ---------- ----------
Total capitalization and liabilities............... $1,994,253 $1,632,703 $3,626,956
========== ========== ==========
Common shares outstanding (thousands)................. 54,421 29,405 96,764
</TABLE>

Pro Forma Condensed Consolidated Statements of Income (in thousands of dollars,
except per share amounts):

1994
----
<TABLE>
<CAPTION>
WWP SPR PRO FORMA
---------- ---------- ----------
(unaudited)
<S> <C> <C> <C>
Operating revenues................................... $670,765 $626,312 $1,297,077
Operating expenses................................... 515,307 498,860 1,014,167
Income from operations............................... 155,458 127,452 282,910
Income from continuing operations
before preferred dividends........................ 77,197 60,300 137,497
Income available for common stock.................... 68,541 52,366 120,907

Average common shares outstanding.................... 53,538 29,219 95,613
Earnings per share................................... $1.28 $1.79 $1.26
</TABLE>

1993
----
<TABLE>
<CAPTION>
WWP SPR PRO FORMA
---------- ---------- ----------
(unaudited)
<S> <C> <C> <C>
Operating revenues................................... $640,599 $528,075 $1,168,674
Operating expenses................................... 479,749 415,286 895,035
Income from operations............................... 160,850 112,789 273,639
Income from continuing operations
before preferred dividends........................ 82,776 53,151 135,927
Income available for common stock.................... 74,441 44,890 119,331

Average common shares outstanding.................... 51,616 26,895 90,345
Earnings per share................................... $1.44 $1.67 $1.32
</TABLE>

50
<PAGE> 54
THE WASHINGTON WATER POWER COMPANY

1992
<TABLE>
<CAPTION>
WWP SPR PRO FORMA
-------- -------- -----------
(unaudited)
<S> <C> <C> <C>
Operating revenues................................. $557,758 $481,810 $1,039,568
Operating expenses................................. 407,133 394,568 801,701
Income from operations............................. 150,625 87,242 237,867
Income from continuing operations
before preferred dividends..................... 72,267 33,789 106,056
Income available for common stock.................. 65,450 28,149 93,599

Average common shares outstanding.................. 49,550 25,709 86,571
Earnings per share................................. $1.32 $1.09 $1.08
</TABLE>

NOTE 16. PROPERTY, PLANT AND EQUIPMENT

The year-end balances of the major classifications of property, plant and
equipment are detailed in the following table (dollars in thousands):

<TABLE>
<CAPTION>
At December 31,
---------------------------------
1994 1993
---------- -----------
<S> <C> <C>
Electric:
Production ...................................... $ 678,356 $ 643,437
Transmission .................................... 238,912 228,180
Distribution .................................... 458,867 433,003
CWIP and other .................................. 101,863 104,689
---------- ----------
Electric total ................................ 1,477,998 1,409,309
---------- ----------
Natural Gas:
Underground storage ............................. 14,946 14,686
Transmission .................................... 3,090 3,060
Distribution .................................... 253,830 226,894
CWIP and other .................................. 45,108 32,863
---------- ----------
Natural Gas total ............................. 316,974 277,503
---------- ----------
Common plant (including CWIP) ..................... 34,624 36,157
---------- ----------
Total utility ................................. 1,829,596 1,722,969
Non-utility ....................................... 56,466 46,387
---------- ----------
Total $1,886,062 $1,769,356
========== ==========
</TABLE>

51
<PAGE> 55
THE WASHINGTON WATER POWER COMPANY

NOTE 17. SELECTED QUARTERLY INFORMATION (UNAUDITED)

The Company's electric and natural gas operations are significantly affected by
weather conditions. Consequently, there can be large variances in revenues,
expenses and net income between quarters based on seasonal factors such as
temperatures and streamflow conditions.

A summary of quarterly operations (in thousands of dollars except for per share
amounts) for 1994 and 1993 follows. All references to number of shares and per
share information have been adjusted to reflect the common stock split on a
retroactive basis.

<TABLE>
<CAPTION>
THREE MONTHS ENDED
---------------------------------------------------------------
MARCH JUNE SEPTEMBER DECEMBER
31 30 30 31
--------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
1994
Operating revenues..................... $190,871 $147,173 $142,334 $190,552
Operating income....................... 51,948 34,015 22,973 46,782
Net income............................. 26,691 15,696 8,104 26,705
Income available for common stock...... 24,621 13,547 5,918 24,455
Outstanding common stock (000s):
Weighted average..................... 52,911 53,316 53,751 54,158
Year-end............................. 53,140 53,584 54,017 54,421
Earnings per share:
Continuing utility operations........ $0.43 $0.21 $0.05 $0.34
Continuing non-utility operations.... 0.03 0.04 0.06 0.12
----- ----- ----- -----
Total................................ $0.46 $0.25 $0.11 $0.46
Dividends paid per common share........ $0.31 $0.31 $0.31 $0.31

Trading price range per share:
High................................. $18 7/8 $17 7/8 $16 1/4 $14 7/8
Low.................................. $16 5/8 $14 1/4 $14 1/4 $13 5/8

1993
Operating revenues..................... $212,978 $126,876 $123,507 $177,238
Operating income....................... 67,410 30,232 20,403 42,805
Net income............................. 36,031 15,765 7,394 23,586
Income available for common stock...... 33,932 13,686 5,312 21,511
Outstanding common stock (000s):
Weighted average..................... 51,071 51,492 51,997 51,892
Year-end............................. 51,300 51,768 52,298 52,758
Earnings per share:
Continuing utility operations........ $0.61 $0.19 $0.07 $0.32
Continuing non-utility operations.... 0.05 0.08 0.03 0.09
----- ----- ----- -----
Total................................ $0.66 $0.27 $0.10 $0.41

Dividends paid per common share........ $0.31 $0.31 $0.31 $0.31

Trading price range per share:
High................................. $19 3/8 $20 $21 $20 7/16
Low.................................. $17 3/8 $18 7/8 $19 3/4 $18 1/8

</TABLE>

52
<PAGE> 56
THE WASHINGTON WATER POWER COMPANY

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Information regarding the directors of the Registrant has been omitted pursuant
to General Instruction G to Form 10-K. Reference is made to the Registrant's
Proxy Statement to be filed with the Securities and Exchange Commission in
connection with the Registrant's annual meeting of shareholders to be held on
May 11, 1995.

Executive Officers of the Registrant

<TABLE>
<CAPTION>
Name Age Business Experience During Past 5 Years
- ---- --- ---------------------------------------
<S> <C> <C>
Paul A. Redmond 58 Chairman of the Board, President and Chief Executive Officer
since February 1994; Chairman of the Board and Chief Executive
Officer May 1988 - February 1994.

W. Lester Bryan 54 Senior Vice President - Rates & Resources since May 1992;
Vice President - Power Supply August 1983 - May 1992.

Jon E. Eliassen 47 Vice President - Finance and Chief Financial Officer
since February 1986.

Gary G. Ely 47 Vice President - Natural Gas since February 1991; Vice
President - Marketing & Gas Supply May 1989 - February 1991;
Vice President - Marketing May 1986 - May 1989.

Robert D. Fukai 45 Vice President - Human Resources, Corporate Services &
Marketing since January 1993 Vice President - Corporate
Services & Human Resources October 1992 - December 1992;
Vice President - Operations May 1986 - October 1992.

JoAnn G. Matthiesen 54 Vice President - Organization Effectiveness, Public Relations &
Assistant to the Chairman since January 1993; Vice President -
Marketing, Public Relations & Assistant to the Chairman February
1991 - January 1993; Manager - Public Relations & Assistant to the
Chairman August 1990 - February 1991; prior to employment with
the Registrant in August 1990: Chief Operating Officer - Dominican
Outreach Services and President - Dominican Outreach Foundation (a non-profit
fund raiser for low income women with children) May 1988 - July 1990.

Lawrence J. Pierce 42 Vice President - Business Analysis since August 1994; Director - Business
Analysis February 1992 - August 1994; Treasurer February 1986 - February 1992.

Nancy J. Racicot 47 Vice President - Operations since October 1992; Vice President - Corporate
Services March 1990 - October 1992; Manager - Administrative Services
April 1988 - March 1990.

Ronald R. Peterson 42 Treasurer since February 1992; Manager - Customer Information
Services March 1991 - February 1992; Supervisor - Corporate
Accounting March 1987 - March 1991.

John W. Buergel 51 Controller since May 1990; Manager - Operations April 1988 - May 1990.

Terry L. Syms 46 Corporate Secretary & Manager - Shareholder Services since March 1988.
</TABLE>

All of the Company's executive officers, with the exception of Messrs. Bryan,
Ely, and Buergel and Ms. Racicot, were officers or directors of one or more of
the Company's subsidiaries in 1994.

Executive officers are elected annually by the Board of Directors.

53
<PAGE> 57
THE WASHINGTON WATER POWER COMPANY

ITEM 11. EXECUTIVE COMPENSATION

Information regarding executive compensation has been omitted pursuant to
General Instruction G to Form 10-K. Reference is made to the Registrant's
Proxy Statement to be filed with the Securities and Exchange Commission in
connection with the Registrant's annual meeting of shareholders to be held on
May 11, 1995.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

(a) Security ownership of certain beneficial owners (owning 5% or more of
Registrant's voting securities):

None.

(b) Security ownership of management:

Information regarding security ownership of management has been
omitted pursuant to General Instruction G to Form 10-K. Reference is
made to the Registrant's Proxy Statement to be filed with the
Securities and Exchange Commission in connection with the Registrant's
annual meeting of shareholders to be held on May 11, 1995.

None.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Information regarding certain relationships and related transactions has been
omitted pursuant to General Instruction G to Form 10-K. Reference is made to
the Registrant's Proxy Statement to be filed with the Securities and Exchange
Commission in connection with the Registrant's annual meeting of shareholders
to be held on May 11, 1995.

54
<PAGE> 58
THE WASHINGTON WATER POWER COMPANY

PART IV

ITEM 14. FINANCIAL STATEMENTS, FINANCIAL STATEMENT SCHEDULES, EXHIBITS AND
REPORTS ON FORM 8-K

(a) 1. Financial Statements (Included in Part II of this report):

Independent Auditors' Report

Consolidated Statements of Income and Retained Earnings for the
Years Ended December 31, 1994, 1993 and 1992

Consolidated Balance Sheets, December 31, 1994 and 1993

Consolidated Statements of Capitalization, December 31, 1994 and
1993

Consolidated Statements of Cash Flows for the Years Ended December
31, 1994, 1993 and 1992

Schedule of Information by Business Segments for the Years Ended
December 31, 1994, 1993 and 1992

Notes to Financial Statements

(a) 2. Financial Statement Schedules:

None

(a) 3. Exhibits:

Reference is made to the Exhibit Index commencing on page 58. The
Exhibits include the management contracts and compensatory plans or
arrangements required to be filed as exhibits to this Form 10-K by Item
601(10)(iii) of Regulation S-K.

(b) Reports on Form 8-K:

Dated June 27, 1994, regarding the Merger Agreement between the
Company, Sierra Pacific Resources and Sierra Pacific Power
Company.

Dated November 18, 1994 regarding the approval of the Merger
Proposal by the shareholders of the Company.

55
<PAGE> 59
THE WASHINGTON WATER POWER COMPANY

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.

THE WASHINGTON WATER POWER COMPANY

<TABLE>
<S> <C>
March 7, 1995 By /s/ PAUL A. REDMOND
-------------------------- -----------------------------------------------------------------------------
Date Paul A. Redmond
Chairman of the Board, President and Chief Executive Officer
</TABLE>

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.

<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
Principal Executive
/s/ PAUL A. REDMOND Officer and Director March 7, 1995
- --------------------------------------------------
Paul A. Redmond (Chairman of the Board,
President and Chief Executive Officer)
Principal Financial
/s/ J. E. ELIASSEN and Accounting Officer March 7, 1995
- -------------------------------------------------
J. E. Eliassen (Vice President - Finance
and Chief Financial Officer)

/s/ DAVID A. CLACK Director March 7, 1995
- --------------------------------------------------
David A. Clack

/s/ DUANE B. HAGADONE Director March 7, 1995
- --------------------------------------------------
Duane B. Hagadone

/s/ ROBERT S. JEPSON, JR. Director March 7, 1995
- --------------------------------------------------
Robert S. Jepson, Jr.

/s/ EUGENE W. MEYER Director March 7, 1995
- --------------------------------------------------
Eugene W. Meyer

/s/ H. NORMAN SCHWARZKOPF Director March 7, 1995
- --------------------------------------------------
General H. Norman Schwarzkopf

/s/ B. JEAN SILVER Director March 7, 1995
- --------------------------------------------------
B. Jean Silver

/s/ LARRY A. STANLEY Director March 7, 1995
- --------------------------------------------------
Larry A. Stanley

/s/ R. JOHN TAYLOR Director March 7, 1995
- --------------------------------------------------
R. John Taylor

/s/ EUGENE THOMPSON Director March 7, 1995
- --------------------------------------------------
Eugene Thompson
</TABLE>

56
<PAGE> 60
INDEPENDENT AUDITORS' CONSENT

We consent to the incorporation by reference in Registration Statement No.
2-81697 on Form S-8, in Registration Statement No. 2-94816 on Form S-8, in
Registration Statement No. 33-49662 on Form S-3, in Registration Statement No.
33-51669 on Form S-3, in Registration Statement No. 33- 53655 on Form S-3 and
in Registration Statement No. 33-54791 on Form S-8 of our report dated January
27, 1995 (February 2, 1995 as to Note 11) appearing in this Annual Report on
Form 10-K of The Washington Water Power Company for the year ended December 31,
1994.

Deloitte & Touche LLP

Seattle, Washington
March 7, 1995

57
<PAGE> 61
EXHIBIT INDEX

<TABLE>
<CAPTION>
Previously Filed*
--------------------------------------
With
Registration As
Exhibit Number Exhibit
- ------- ------------ -------
<S> <C> <C> <C>
2 1-3701 (with Form 8-K 2(a) Agreement and Plan of Reorganization and Merger, dated
dated June 27, 1994) as of June 27, 1994, by and among the Company, Sierra
Pacific Resources, Sierra Pacific Power Company, and
Resources West Energy Corporation.

3(a) 1-3701 (with 1994 4(a) Restated Articles of Incorporation of the Company
2nd Quarter 10-Q) as filed August 4, 1994.

3(b) 1-3701 (with 1994 4(a) Bylaws of the Company, as amended, May 12, 1994.
3rd Quarter 10-Q)

4(a)-1 2-4077 B-3 Mortgage and Deed of Trust, dated as of June 1, 1939.

4(a)-2 2-9812 4(c) First Supplemental Indenture, dated as of October 1, 1952.

4(a)-3 2-60728 2(b)-2 Second Supplemental Indenture, dated as of May 1, 1953.

4(a)-4 2-13421 4(b)-3 Third Supplemental Indenture, dated as of December 1, 1955.

4(a)-5 2-13421 4(b)-4 Fourth Supplemental Indenture, dated as of March 15, 1967.

4(a)-6 2-60728 2(b)-5 Fifth Supplemental Indenture, dated as of July 1, 1957.

4(a)-7 2-60728 2(b)-6 Sixth Supplemental Indenture, dated as of January 1, 1958.

4(a)-8 2-60728 2(b)-7 Seventh Supplemental Indenture, dated as of August 1, 1958.

4(a)-9 2-60728 2(b)-8 Eighth Supplemental Indenture, dated as of January 1, 1959.

4(a)-10 2-60728 2(b)-9 Ninth Supplemental Indenture, dated as of January 1, 1960.

4(a)-11 2-60728 2(b)-10 Tenth Supplemental Indenture, dated as of April 1, 1964.

4(a)-12 2-60728 2(b)-11 Eleventh Supplemental Indenture, dated as of March 1, 1965.

4(a)-13 2-60728 2(b)-12 Twelfth Supplemental Indenture, dated as of May 1, 1966.

4(a)-14 2-60728 2(b)-13 Thirteenth Supplemental Indenture, dated as of August 1, 1966.

4(a)-15 2-60728 2(b)-14 Fourteenth Supplemental Indenture, dated as of April 1, 1970.

4(a)-16 2-60728 2(b)-15 Fifteenth Supplemental Indenture, dated as of May 1, 1973.

4(a)-17 2-60728 2(b)-16 Sixteenth Supplemental Indenture, dated as of February 1, 1975.

4(a)-18 2-60728 2(b)-17 Seventeenth Supplemental Indenture, dated as of November 1, 1976.
</TABLE>
________________

*Incorporated herein by reference.
**Filed herewith.

58
<PAGE> 62
EXHIBIT INDEX (continued)

4(a)-20 1-3701 (with 4(a)-20 Nineteenth Supplemental Indenture, dated as of January 1, 1981.
1980 Form 10-K)

4(a)-21 2-79571 4(a)-21 Twentieth Supplemental Indenture, dated as of August 1, 1982.

4(a)-22 1-3701 (with 4(a)-22 Twenty-First Supplemental Indenture,
Form 8-K dated dated as of September 1, 1983.
September 20, 1983)

4(a)-23 2-94816 4(a)-23 Twenty-Second Supplemental Indenture,
dated as of March 1, 1984.

4(a)-24 1-3701 (with 4(a)-24 Twenty-Third Supplemental Indenture,
1986 Form 10-K) dated as of December 1, 1986.

4(a)-25 1-3701 (with 4(a)-25 Twenty-Fourth Supplemental Indenture,
1987 Form 10-K) dated as of January 1, 1988.

4(a)-26 1-3701 (with 4(a)-26 Twenty-Fifth Supplemental Indenture,
1989 Form 10-K) dated as of October 1, 1989.

4(a)-27 33-51669 4(a)-27 Twenty-Sixth Supplemental Indenture,
dated as of April 1, 1993.

4(a)-28 1-3701 (with 4(a)-28 Twenty-Seventh Supplemental Indenture,
1993 Form 10-K) dated as of January 1, 1994.

4(b)-1 1-3701 (with 4(e)-1 Loan Agreement between City of Forsyth,
1989 Form 10-K) Rosebud County, and the Company, dated
as of November 1, 1989 (Series 1989 A
and 1989 B). Replaces Exhibit 4(e)-1
(agreement between the Company and
City of Forsyth, Rosebud County,
Montana, dated as of October 1, 1986)
filed with Form 10-K for 1986 and
Exhibit 4(g)-1 (agreement between the
Company and City of Forsyth, Rosebud
County, Montana, dated as of April 1,
1987) filed with Form 10-K for 1987.

4(b)-2 1-3701 (with 4(e)-2 Indenture of Trust, Pollution Control
1989 Form 10-K) Revenue Refunding Bonds (Series 1989 A
and 1989 B) between City of Forsyth
Rosebud County, Montana and Chemical
Bank, dated as of November 1, 1989.
Replaces Exhibit 4(e)-2 (Indenture
of Trust between City of Forsyth,
Rosebud County, Montana and Chemical
Bank dated as of October 1, 1986)
filed with Form 10-K for 1986 and
Exhibit 4(g)-2 (Indenture of Trust
between City of Forsyth, Rosebud
County, Montana and Chemical Bank,
dated as of April 1, 1987) filed with
Form 10-K for 1987.
</TABLE>

*Incorporated herein by reference.
**Filed herewith.

59
<PAGE> 63
EXHIBIT INDEX (continued)

<TABLE>
<CAPTION>
Previously Filed*
--------------------------------------------
With
Registration As
Exhibit Number Exhibit
- ------- ------------ -------
<S> <C> <C>
4(c)-1 1-3701 (with 4(h)-1 Indenture between the Company and
1988 Form 10-K) Chemical Bank dated as of July 1, 1988
(Series A and B Medium-Term Notes).

4(d)-1 1-3701 (with 4(j)-1 Credit Agreements between the Company and the Toronto-
1992 Form 10-K) Dominion (Texas), Inc., the Toronto-Dominion Bank
Houston Agency, The Bank of New York, CIBC, Inc. and
and Citicorp USA, Inc. with the Toronto-Dominion
(Texas), Inc. as agent, dated as of October 1, 1992.

4(e)-1 1-3701 (with 4(k)-1 Credit Agreements between the Company and Seattle-First
1992 Form 10-K) National Bank, West One Bank Idaho, N.A., First
Interstate Bank of Washington, N.A., First Security Bank
of Idaho, N.A., U.S. Bank of Washington, N.A., and
Washington Trust Bank with Seattle-First National Bank as
agent, dated as of December 10, 1992.

4(f)-1 1-3701 (with Form 8-K 4(n) Rights Agreement, dated as of February 16, 1990, between
dated February 16, 1990) the Company and the Bank of New York as successor
Rights Agent.

4(f)-2 1-3701 (with 1994 First 4(b) Amendment No. 1 to Rights Agreement, dated as of
Quarter Form 10-Q) May 10, 1994.

4(f)-3 1-3701 (with 1994 Third 4(b) Amendment No. 2 to Rights Agreement, dated as of
Quarter Form 10-Q) June 27, 1994.

10(a) 2-60728 5(b) Power Sales Contract (Lake Chelan Project) with
Public Utility District No. 1 of Chelan County,
Washington, dated as of June 21, 1955.

10(b)-l 2-13788 13(e) Power Sales Contract (Rocky Reach Project) with
Public Utility District No. 1 of Chelan County,
Washington, dated as of November 14, 1957.

10(b)-2 2-60728 10(b)-1 Amendment to Power Sales Contract (Rocky Reach
Project) with Public Utility District No. 1 of Chelan
County, Washington, dated as of June 1, 1968.

10(c)-1 2-13421 13(d) Power Sales Contract (Priest Rapids Project) with
Public Utility District No. 2 of Grant County,
Washington, dated as of May 22, 1956.

10(c)-2 2-60728 5(d)-1 Second Amendment to Power Sales Contract (Priest Rapids
Project) with Public Utility District No. 2 of Grant
County, Washington, dated as of December 19, 1977.

10(d)-1 2-60728 5(e) Power Sales Contract (Wanapum Project) with
Public Utility District No. 2 of Grant County,
Washington, dated as of June 22, 1959.
</TABLE>
________________

*Incorporated herein by reference.
**Filed herewith.

60
<PAGE> 64
EXHIBIT INDEX (continued)

<TABLE>
<CAPTION>
Previously Filed*
-------------------------------
With
Registration As
Exhibit Number Exhibit
- ------- ------------ -------
<S> <C> <C>
10(d)-2 2-60728 5(e)-1 First Amendment to Power Sales Contract (Wanapum
Project) with Public Utility District No. 2 of Grant
County, Washington, dated as of December 19, 1977.

10(d)-3 2-60728 5(f) Reserved Share Power Sales Contract (Priest Rapids
and Wanapum Projects) with Public Utility District No. 2
of Grant County, Washington, dated as of June 22, 1956.

10(d)-4 2-60728 5(f)-1 First Amendment to Reserved Share Power Sales Contract
(Priest Rapids and Wanapum Projects) with Public Utility
District No. 2 of Grant County, Washington, dated as of
December 19, 1977.

10(e)-1 2-60728 5(g) Power Sales Contract (Wells Project) with Public Utility
District No. 1 of Douglas County, Washington, dated as of
September 18, 1963.

10(e)-2 2-60728 5(g)-1 Amendment to Power Sales Contract (Wells Project)
with Public Utility District No. 1 of Douglas County,
Washington, dated as of February 9, 1965.

10(e)-3 2-60728 5(h) Reserved Share Power Sales Contract (Wells Project)
with Public Utility District No. 1 of Douglas County,
Washington, dated as of September 18, 1963.

10(e)-4 2-60728 5(h)-1 Amendment to Reserved Share Power Sales Contract
(Wells Project) with Public Utility District No. 1 of Douglas
County, Washington, dated as of February 9, 1965.

10(f) 2-60728 5(i) Canadian Entitlement Exchange Agreement executed by
Bonneville Power Administration Columbia Storage Power
Exchange and the Company, dated as of August 13, 1964.

10(g) 2-60728 5(j) Pacific Northwest Coordination Agreement,
dated as of September 15, 1964.

10(h)-1 2-60728 5(k) Ownership Agreement between the Company, Pacific
Power & Light Company, Puget Sound Power & Light
Company, Portland General Electric Company, Seattle City
Light, Tacoma City Light and Grays Harbor and Snohomish
County Public Utility Districts as owners of the Centralia
Steam Electric Generating Plant, dated as of May 15, 1969.

10(h)-3 1-3701 (with Form 10(h)-3 Centralia Fuel Supply Agreement between PacifiCorp
10-K for 1991) Electric Operations, as the Seller, and the Company, Puget
Sound Power & Light Company, Portland General Electric
Company, Seattle City Light, Tacoma City Light and Grays
Harbor and Snohomish County Public Utility Districts,
as the Buyers of coal for the Centralia Steam Electric
Generating Plant, dated as of January 1, 1991.
</TABLE>
________________

*Incorporated herein by reference.
**Filed herewith.

61
<PAGE> 65
EXHIBIT INDEX (continued)

<TABLE>
<CAPTION>
Previously Filed*
--------------------------------------------
With
Registration As
Exhibit Number Exhibit
- ------- ------------ -------
<S> <C> <C>
10(i)-l 2-47373 13(y) Agreement between the Company, Bonneville Power
Administration and Washington Public Power Supply
System for purchase and exchange of power from the Nuclear
Project No. 1 (Hanford), dated as of January 6, 1973.

10(i)-2 2-60728 5(m)-1 Amendment No. 1 to the Agreement between the Company
between the Company, Bonneville Power Administration and
Washington Public Power Supply System for purchase and
exchange of power from the Nuclear Project No. 1 (Hanford),
dated as of May 8, 1974.

10(i)-3 1-3701 (with 10(i)-3 Agreement between BPA, the Montana Power Company,
Form 10-K for PP&L, PGE, PSP&L, the Company and the Supply
1986) 1986) System for relocation costs of Nuclear Project No. 1
(Hanford) dated as of July 9, 1986.

10(j)-1 2-60728 5(n) Ownership Agreement of Nuclear Project No. 3, sponsored
by Washington Public Power Supply System, dated as of
September 17, 1973.

10(j)-2 1-3701 (with 1 Settlement Agreement and Covenant Not to Sue executed
Form 10-Q for by the United States Department of Energy acting
quarter ended by and through the Bonneville Power Administration
September 30, and the Company, dated as of September 17, 1985,
1985) describing the settlement of Project 3 litigation.

10(j)-3 1-3701 (with 2 Agreement to Dismiss Claims and Covenant
Form 10-Q for Not to Sue between the Washington Public
quarter ended Power Supply System and the Company, dated
September 30, as of September 17, 1985, describing the settlement
1985) of Project 3 litigation with the Supply System.

10(j)-4 1-3701 (with 3 Agreement among Puget Sound Power & Light
Form 10-Q for Company, the Company, Portland General Electric
quarter ended Company and PacifiCorp dba Pacific Power & Light
September 30, Company, agreeing to execute contemporaneously
1985) an irrevocable offer, to and for the benefit of the Bonneville
Power Administration, dated as of September 17, 1985.

10(k)-2 2-66184 5(r) Service Agreement (Natural Gas Storage Service), dated as
of August 27, 1979, between the Company and Northwest
Pipeline Corporation.

10(k)-3 2-60728 5(s) Service Agreement (Liquefaction-Storage Natural Gas Service),
dated as of December 7, 1977, between the Company and
Northwest Pipeline Corporation.
</TABLE>
________________

*Incorporated herein by reference.
**Filed herewith.

62
<PAGE> 66
EXHIBIT INDEX (continued)

<TABLE>
<CAPTION>
Previously Filed*
-------------------------------
With
Registration As
Exhibit Number Exhibit
- ------- ------------ -------
<S> <C> <C>
10(k)-4 1-3701 (with 10(k)-4 Amendment dated as of January 1, 1990,
1989 Form 10-K) to Firm Transportation Agreement,
dated as of June 25, 1988, between
the Company and Northwest Pipeline Corporation.

10(k)-5 1-3701 (with 10(k)-5 Service Agreement (ODL-1 Firm Service,
1989 Form 10-K) dated as of March 29, 1989, between the
Company and Northwest Pipeline Corporation

10(k)-6 1-3701 (with 10(k)-6 Firm Transportation Service Agreement, dated
1992 Form 10-K) as of April 25, 1991, between the Company
and Pacific Gas Transmission Company.

10(k)-7 1-3701 (with 10(k)-7 Service Agreement Applicable to Firm
1992 Form 10-K) Transportation Service, dated June 12, 1991,
between the Company and Alberta Natural
Gas Company Ltd.

10(k)-8 1-3701 (with 10(k)-8 Natural Gas Sale and Purchase Agreement, dated
1992 Form 10-K) October 31, 1991, between the Company and
AEC Oil and Gas Company.

10(k)-9 1-3701 (with 10(k)-9 Natural Gas Purchase Contract, dated December 11,
1992 Form 10-K) 1991, between the Company and Grand
Valley Gas Company and Amerada Hess
Canada Ltd.

10(k)-10 1-3701 (with 10(k)-10 Natural Gas Purchase Contract, dated December 13,
1992 Form 10-K) 1991, between the Company and Grand
Valley Gas Company and PanCanadian
Petroleum Limited.

10(l)-1 1-3701 (with 13(b) Letter of Intent for the Construction and Ownership
Form 8-K for of Colstrip Units No. 3 and 4, sponsored by The
August 1976) Montana Power Company, dated as of April 16, 1974.

10(l)-2 1-3701 (with 10(s)-7 Ownership and Operation Agreement for Colstrip
1981 Form 10-K) Units No. 3 and 4, sponsored by The Montana
Power Company, dated as of May 6, 1981.

10(l)-3 1-3701 (with 10(s)-2 Coal Supply Agreement for Colstrip
1981 Form 10-K) Units No. 3 and 4 between The Montana
Power Company, Puget Sound Power &
Light Company, Portland General
Electric Company, Pacific Power &
Light Company, Western Energy
Company and the Company, dated
as of July 2, 1980.
</TABLE>
________________

*Incorporated herein by reference.
**Filed herewith.

63
<PAGE> 67
EXHIBIT INDEX (continued)

<TABLE>
<CAPTION>
Previously Filed*
--------------------------------------------
With
Registration As
Exhibit Number Exhibit
- ------- ------------ -------
<S> <C> <C>
10(l)-4 1-3701 (with 10(s)-3 Amendment No. 1 to Coal Supply
1981 Form 10-K) Agreement for Colstrip Units No. 3 and 4,
dated as of July 10, 1981.

10(l)-5 1-3701 (with 10(l)-5 Amendment No. 4 to Coal Supply
1988 Form 10-K) Agreement for Colstrip Units No. 3 and 4,
dated as of January 1, 1988.

10(m)-1 1-3701 (with 10 Purchase and Sale Agreement between
Form 10-Q for the Company and General Waterworks
quarter ended Corporation, dated as of July 28, 1982,
June 30, 1982) relating to the sale of the Company's
water properties.

10(m)-2 1-3701 (with 10(n)-2 Lease Agreement between the Company and IRE-4
1986 Form 10-K) New York, Inc., dated as of December 15, 1986,
relating to the Company's central operating facility.

10(n) 1-3701 (with 10(v) Supplemental Agreement No. 2, Skagit/Hanford Project,
1983 Form 10-K) dated as of December 27, 1983, relating to the termination
of the Skagit/Hanford Project.

10(o) 1-3701 (with 10(p)-l Agreement for Purchase and Sale of Firm
1986 Form 10-K) Firm Capacity and Energy between
Puget Sound Power & Light Company
and the Company, dated as of August 1, 1986.

10(p) 1-3701 (with 10(q)-1 Electric Service and Purchase Agreement between
1991 Form 10-K) Potlatch Corporation and the Company, dated
as of January 3, 1991.

10(q) 1-3701 (with 10(r)-1 Power Sale Agreement between the Company
1992 Form 10-K) and the Northern California Power Agency
dated October 11, 1991.

10(r) 1-3701 (with 10(s)-1 Agreements for Purchase and Sale of Firm Capacity
1992 Form 10-K) between the Company and Portland General Electric
Company dated March and June 1992.

10(s)-1 ** Employment Agreement between the Company
and Paul A. Redmond. (***)

10(s)-2 ** Employment Agreement between the Company
and W. Lester Bryan. (***)
</TABLE>
________________

* Incorporated herein by reference.
** Filed herewith.
*** Management contracts or compensatory plans filed as exhibits
by reference per Item 601(10)(iii) of Regulation S-K.

64
<PAGE> 68
EXHIBIT INDEX (continued)

10(s)-4 ** Employment Agreement between the Company
and Jon E. Eliassen. (***)

10(s)-5 ** Employment Agreement between the Company
and Robert D. Fukai. (***)

10(s)-6 ** Executive Officers' 1994 Incentive Plan. (***)

10(s)-7 ** CEO 1994 Incentive Stock Plan. (***)

10(s)-8 1-3701 (with 10(t)-8 Executive Deferral Plan of the Company. (***)
1992 Form 10-K)

10(s)-9 1-3701 (with 10(t)-9 The Company's Unfunded Outside Director
1992 Form 10-K) Retirement Plan. (***)

10(s)-10 1-3701 (with 10(t)-10 The Company's Unfunded Supplemental
1992 Form 10-K) Executive Retirement Plan. (***)

10(s)-11 1-3701 (with 10(t)-11 The Company's Unfunded Supplemental
1992 Form 10-K) Executive Disability Plan. (***)

10(s)-12 1-3701 (with 10(t)-12 Income Continuation Plan of the Company. (***)
1992 Form 10-K)

10(s)-13 1-3701 (with 10(t)-13 Director Compensation Arrangements. (***)
1992 Form 10-K)

10(t)-1 ** Employment Agreement between Resources West
and Paul A. Redmond. (***)

10(t)-2 ** Employment Agreement between Resources West
and Walter M. Higgins.

12 ** Statement re computation of ratio of earnings to fixed
charges and preferred dividend requirements.

21 ** Subsidiaries of Registrant.

27 ** Financial Data Schedule
</TABLE>
________________

* Incorporated herein by reference.
** Filed herewith.
*** Management contracts or compensatory plans filed as exhibits
by reference per Item 601(10)(iii) of Regulation S-K.

<PAGE> 1
Exhibit 10(s)-1

AMENDED AND RESTATED EMPLOYMENT AGREEMENT

AMENDED AND RESTATED EMPLOYMENT AGREEMENT made and entered
into as of the 24th day of June, 1994, by and between The Washington Water
Power Company, a Washington corporation whose principal place of business is
located at 1411 East Mission Avenue, Spokane, Washington (the "Company") and
Paul A. Redmond (the "Executive");

WHEREAS, the Executive is currently serving as Chairman,
President and Chief Executive Officer of the Company, and the Company desires
to secure the continued employment of the Executive in accordance herewith;

WHEREAS, the Company entered into an Employment Agreement with
the Executive, dated August 5, 1988 (the "1988 Employment Agreement");

WHEREAS, the parties desire to enter into this Agreement
amending and restating the 1988 Employment Agreement, setting forth the terms
and conditions for the employment relationship of the Executive with the
Company during the Employment Period (as hereinafter defined);

NOW, THEREFORE, IN CONSIDERATION of the mutual promises,
covenants and agreements set forth below, it is hereby agreed as follows:

1. Employment and Term.

(a) The Company agrees to employ the Executive, and the
Executive agrees to remain in the employ of the Company, and any successor
thereto, in accordance with the terms and provisions of this Agreement for the
period set forth below (the "Employment Period").

(b) The Employment Period shall be for a term of
thirty-six (36) months, commencing on the date of this Agreement, subject,
however, to termination as provided herein.

2. Duties and Powers of Executive.

(a) Position; Location. During the Employment Period,
the Executive shall serve as the Chairman of the Board of Directors of the
Company (the "Board") (assuming the Executive has been elected to the Board),
President and Chief Executive Officer of the Company. During the Employment
Period, the Executive shall have such authority, duties and responsibilities as
are set forth in Annex A hereto. Such titles, authority, duties and
responsibilities may be changed from time to time only by mutual written
agreement of the parties. The Executive's services shall be performed at the
location where the Executive is currently employed. During the Employment
Period, the Executive shall also continue to serve as Chairman of the Board of
each of the Company's subsidiary corporations, and the Executive shall serve as
Chairman of the Executive Committee of the Board.

(b) During the Employment Period, the Company shall in
connection with any annual meeting of shareholders of the Company at which the
Executive's class of Directors is to be elected cause the Executive to be
nominated as a director of the Company.

3. Compensation and Benefits.

The Executive shall receive the following compensation and
benefits for his services hereunder to the Company:

<PAGE> 2
-2-
be necessary or desirable including without limitation adjustments in
order to reflect increases in the cost of living. Annual Base Salary
shall not be reduced after any increase thereof. Any increase in
Annual Base Salary shall not serve to limit or reduce any other
obligation of the Company under this Agreement.

(b) Incentive, Retirement and Welfare Benefit Plans. The
Executive shall be entitled to receive awards pursuant to the
Company's CEO Incentive Plan and/or Executive Incentive Compensation
Plan. The terms of such awards shall be determined by the
Compensation Committee at the time of grant.

During the Employment Period and so long as the Executive is
employed by the Company, he shall be eligible to participate in all
incentive, stock option, restricted stock, performance unit, savings,
retirement and welfare plans, practices, policies and programs
applicable generally to employees and/or other senior executives of
the Company, except with respect to any benefits under any plan,
practice, policy or program to which the Executive has waived his
rights in writing. The Executive shall be entitled to receive
pursuant to the Company's Unfunded Supplemental Executive Retirement
Plan, or otherwise, benefits in the amount and at the rate of accrual
at least as generous as that provided to him at the date hereof.

(c) Business Expenses. The Company agrees to pay or
reimburse the Executive for all expenses, including those for travel
and entertainment, properly incurred by him in the performance of his
duties hereunder in accordance with policies established from time to
time by the Board.

(d) Fringe Benefits. During the Employment Period and so
long as the Executive is employed by the Company, he shall be entitled
to the following fringe benefits: (A) the Company shall pay the annual
dues, assessments and other membership charges of the Executive with
respect to the Executive's membership in the clubs and associations of
the Executive's choice that are used for business purposes; and (B)
the Company shall provide not less than thirty-eight (38) days paid
leave for the Executive pursuant to the Company's One-Leave Program;
in the case of paragraphs (A) and (B) on a basis substantially
equivalent to such fringe benefits provided to the Executive in the
past. In addition, the Executive shall be entitled to receive fringe
benefits in accordance with the plans, practices, programs and
policies of the Company from time to time in effect, commensurate with
his position and at least comparable to those received by other senior
executives of the Company.

4. Termination of Employment.

(a) Death. The Executive's employment shall terminate
automatically upon the Executive's death during the Employment Period.

(b) By the Company for Cause. The Company may terminate
the Executive's employment during the Employment Period for Cause. For purposes
of this Agreement, "Cause" shall mean the conviction of the Executive for the
commission of a felony which, at the time of such commission, has a materially
adverse effect on the Company.

(c) By the Executive for Good Reason. The Executive may
terminate his employment during the Employment Period for Good Reason. For
purposes of this Agreement, "Good Reason" shall mean:

(i) the reduction in the Executive's Annual Base
Salary as specified in Section 3(a) of this Agreement or any
other benefit or payment described in Section 3 of this
Agreement;

(ii) the change without his consent of the
Executive's title, authority, duties or responsibilities as
specified in Section 2(a) of this Agreement;

(iii) the Company requiring the Executive without
his consent to be based at any office or location other than
the location where the Executive is currently employed; or

(iv) any breach by the Company of any other
material provision of this Agreement.
<PAGE> 3
-3-

(d) By the Company for Disability. The Company may
terminate the Executive's employment during the Employment Period in the event
of the Executive's Permanent and Total Disability ("Disability") as defined in
Section 22(e)(3) of the Internal Revenue Code of 1986, as amended (the "Code").

(e) Notice of Termination. Any termination by the
Company for Cause, by the Company for Disability or by the Executive for Good
Reason shall be communicated by Notice of Termination to the other party hereto
given in accordance with Section 10(b) of this Agreement. For purposes of this
Agreement, a "Notice of Termination" means a written notice which (i) indicates
the specific termination provision in this Agreement relied upon, (ii) to the
extent applicable, sets forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the Executive's employment under
the provision so indicated, and (iii) if the Date of Termination (as defined in
Section 4(f)) is other than the date of receipt of such notice, specifies the
termination date (which date shall be not more than thirty (30) days after the
giving of such notice). The failure by the Executive or the Company to set
forth in the Notice of Termination any fact or circumstance which contributes
to a showing of Good Reason, Disability or Cause shall not waive any right of
the Executive or the Company from asserting such fact or circumstance in
enforcing the Executive's or the Company's rights hereunder.
(f) Date of Termination. "Date of Termination" means (i)
if the Executive's employment is terminated by the Company for Cause, by the
Company for Disability, or by the Executive for Good Reason, the date of
receipt of the Notice of Termination or any later date specified therein, as
the case may be, (ii) if the Executive's employment is terminated by the
Company other than for Cause or for Disability, the Date of Termination shall
be the date on which the Company notifies the Executive of such termination,
and (iii) if the Executive's employment is terminated by reason of death, the
Date of Termination shall be the date of death.

5. Obligations of the Company Upon Termination.

(a) Termination Other Than for Cause. During the
Employment Period, if the Company shall terminate the Executive's employment
(other than in the case of a termination for Cause), or if the Executive shall
terminate his employment for Good Reason or if the Executive's employment shall
terminate by reason of death (termination in any such case referred to as
"Termination");

(i) the Company shall pay to the Executive (or
his beneficiary) a lump sum amount in cash equal to the sum of
(1) the Executive's Annual Base Salary through the Date of
Termination to the extent not theretofore paid, (2) all
incentive or other compensation, if any, awarded but not yet
paid with respect to fiscal years ending prior to the fiscal
year in which the Date of Termination occurred, (3) any
compensation previously deferred by the Executive (together
with any accrued interest or earnings thereon) and (4) any
accrued leave pursuant to the One-Leave Program, to the extent
not theretofore paid. (The amounts specified in clauses (1),
(2), (3) and (4) shall be hereinafter referred to as the
"Accrued Obligations"). The amounts specified in clauses (1),
(2) and (4) of this Section 5(a)(i) shall be paid within
thirty (30) days after the Date of Termination; the amount
referred to in clause (3), if any, will be paid pursuant to
the terms of the Executive Deferred Compensation Plan; and

<PAGE> 4
-4-

waived his rights in writing), such benefits to be in
accordance with the most favorable medical and welfare benefit
plans, practices, programs or policies (the "M&W Plans") of
the Company as in effect and applicable generally to other
senior executives of the Company and their families during the
90-day period immediately preceding the Date of Termination
or, if more favorable to the Executive and/or his spouse, as
in effect generally at any time thereafter with respect to
other senior executives of the Company and their spouses (but
on a prospective basis only unless and then only to the extent
such more favorable M&W Plans are by their terms retroactive);
provided, however, that if the Executive becomes reemployed
(or, in the case of spousal benefits, the spouse is or becomes
employed) with another employer and is eligible to receive
medical or other welfare benefits under another employer
provided plan, the benefits under the M&W Plans shall be
secondary to those provided under such other plan during such
applicable period of eligibility; provided, however, that
these provisions shall not operate to reduce any rights the
Executive may have under Section 4980B of the Code, Part 6 of
Title I of ERISA or any other state or federal legislation,
but shall be in addition to such rights; and (d) with respect
to any incentive or similar plan awards, all options shall
vest in full and become immediately exercisable, all
restrictions shall lapse with respect to restricted stock, and
any other types of awards, including but not limited to stock
appreciation rights, performance units and performance shares,
shall vest in full and become immediately exercisable or
payable; provided, however, that if the Executive's
entitlement to any of the stock options, restricted stock or
other awards referred to above is subject to fulfillment of
performance criteria, either corporate or individual, over a
performance period, then payment of such awards shall be made,
if at all, at the end of the performance period, based upon
the achievement of goals for the entire period, prorated from
the beginning of the performance period to the Date of
Termination.

(b) Termination by the Company for Cause or by the
Executive Other than for Good Reason. Subject to the provisions of Section 6
of this Agreement, if the Executive's employment shall be terminated for Cause
during the Employment Period, or if the Executive terminates employment during
the Employment Period other than a termination for Good Reason, the Company
shall have no further obligations to the Executive under this Agreement other
than the obligation to pay to the Executive Annual Base Salary through the Date
of Termination, all incentive or other compensation, if any, awarded but not
yet paid with respect to fiscal years ending prior to the fiscal year in which
the Date of Termination occurred, the amount of any compensation previously
deferred by the Executive (together with any accrued interest or earnings
thereon), any accrued leave pursuant to the One-Leave Program, and whatever
benefits the Executive may be entitled to under the Company's benefit plans, in
each case to the extent theretofore unpaid.

(c) Any payments made pursuant to this Section 5 shall be
subject to the limits, to the extent applicable, set forth in Section 10(g)
hereof.

6. Non-exclusivity of Rights.

Except as provided in Section 10(g) hereof, nothing in this
Agreement shall prevent or limit the Executive's continuing or future
participation in any benefit, plan, program, policy or practice provided by the
Company and for which the Executive may qualify (except with respect to any
benefit to which the Executive has waived his rights in writing), nor shall
anything herein limit or otherwise affect such rights as the Executive may have
under any other contract or agreement entered into after the date hereof with
the Company. Amounts which are vested benefits or which the Executive is
otherwise entitled to receive under any benefit, plan, policy, practice or
program of, or any contract or agreement entered into after the date hereof
with, the Company at or subsequent to the Date of Termination, shall be payable
in accordance with such benefit, plan, policy, practice or program or contract
or agreement except as explicitly modified by this Agreement.

<PAGE> 5
-5-

7. Full Settlement; Mitigation.

The Company's obligation to make the payments provided for in
this Agreement and otherwise to perform its obligations hereunder shall not be
affected by any set-off, counterclaim, recoupment, defense or other claim,
right or action which the Company may have against the Executive or others. In
no event shall the Executive be obligated to seek other employment or take any
other action by way of mitigation of the amounts (including amounts for damages
for breach) payable to the Executive under any of the provisions of this
Agreement and, except as provided in Section 5(a)(ii)(c) of this Agreement,
such amounts shall not be reduced whether or not the Executive obtains other
employment. If the Executive finally prevails with respect to any dispute
between the Company, the Executive or others as to the interpretation, terms,
validity or enforceability of (including any dispute about the amount of any
payment pursuant to) this Agreement, the Company agrees to pay all legal fees
and expenses which the Executive may reasonably incur as a result of any such
dispute.

8. Confidential Information.

The Executive shall hold in a fiduciary capacity for the
benefit of the Company all confidential information, knowledge or data relating
to the Company or any of its affiliated companies, and their respective
businesses, which shall have been obtained by the Executive during the
Executive's employment by the Company and that shall not have been or hereafter
have become public knowledge (other than by acts by the Executive or
representatives of the Executive in violation of this Agreement). During the
Employment Period, the Executive shall not, without the prior consent of the
Company or as may otherwise be required by law or legal process, communicate or
divulge any such information, knowledge or data to anyone other than the
Company and those designated by it.

9. Successors.

(a) This Agreement is personal to the Executive and
without the prior written consent of the Company, shall not be assignable by
the Executive otherwise than by will or laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the Executive's
legal representatives.

(b) This Agreement shall inure to the benefit of and be
binding upon the Company and its successors and assigns.

(c) The Company shall require any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to the
same extent that the Company would be required to perform it if no such
succession had taken place. As used in this Agreement, "Company" shall mean
the Company as hereinbefore defined and any successor to its businesses and/or
assets as aforesaid that assumes and agrees to perform this Agreement by
operation of law, or otherwise.

10. Miscellaneous.

(a) This Agreement shall be governed by and construed in
accordance with the laws of the State of Washington, without reference to
principles of conflict of laws. The captions of this Agreement are not part of
the provisions hereof and shall have no force or effect. This Agreement may
not be amended, modified, repealed, waived, extended or discharged except by an
agreement in writing signed by the party against whom enforcement of such
amendment, modification, repeal, waiver, extension or discharge is sought. No
person, other than pursuant to a resolution of the Board or a committee
thereof, shall have authority on behalf of the Company to agree to amend,
modify, repeal, waive, extend or discharge any provision of this Agreement or
anything in reference thereto.

(b) All notices and other communications hereunder shall
be in writing and shall be given by hand delivery to the party or by registered
or certified mail, return-receipt requested, postage prepaid, addressed as
follows:

If to the Executive:

<PAGE> 6
-6-

Paul A. Redmond
East 1411 Mission Avenue, P.O. Box 3727
Spokane, Washington 99220

If to the Company:

The Washington Water Power Company
East 1411 Mission Avenue, P.O. Box 3727
Spokane, Washington 99220

or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.

(c) The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.

(d) The Company may withhold from any amounts payable
under this Agreement such federal, state or local taxes as shall be required to
be withheld pursuant to any applicable law or regulation.

(e) The Executive's or the Company's failure to insist
upon strict compliance with any provision hereof or any other provision of this
Agreement or the failure to assert any right the Executive or the Company may
have hereunder, including, without limitation, the right of the Executive to
terminate employment for Good Reason pursuant to Section 4(c) of this
Agreement, or the right of the Company to terminate the Executive's employment
for Cause pursuant to Section 4(b) of this Agreement shall not be deemed to be
a waiver of such provision or right or any other provision or right of this
Agreement.

(f) This instrument contains the entire agreement of the
Executive and the Company with respect to the subject matter hereof, and all
promises, representations, understandings, arrangements and prior agreements
are merged herein and superseded hereby.

(g) Notwithstanding any provision of this Agreement to
the contrary, in the event of any payment made to the Executive which is
contingent upon a change in the ownership or effective control of the Company,
or in the ownership of a substantial portion of the Company's assets, as
described in Section 280G of the Code, or in any regulation promulgated
thereunder, the aggregate amount of such payments, whether or not made pursuant
to the terms of this Agreement, shall not exceed an amount equal to the
Executive's Base Amount (as defined under Code Section 280G(b)(3) and the
regulations thereunder) multiplied by three (3), less one dollar ($1.00).

<PAGE> 7
-7-
IN WITNESS WHEREOF, the Executive and, pursuant to due
authorization from its Board of Directors, the Company have caused this
Agreement to be executed as of the day and year first above written.

THE WASHINGTON WATER POWER COMPANY

/s/ D. B. Hagadone
____________________
Name: D. B. Hagadone
Title: Director/Compensation Committee Chairman

EXECUTIVE

/s/ Paul A. Redmond
____________________

<PAGE> 8

Annex A
to Employment
Agreement

DUTIES OF EXECUTIVE

CHAIRMAN OF THE BOARD

The Chairman of the Board of Directors shall be a director,
shall preside at all meetings of the Board of Directors and shareholders of the
Company, shall, subject to the direction and control of the Board, be their
representative and medium of communication, and shall perform such duties as
may from time-to-time be assigned to him by the Board of Directors. The
Chairman shall direct the long-term strategic planning process of the Company.

PRESIDENT AND CHIEF EXECUTIVE OFFICER

The President and Chief Executive Officer of the Company shall
be a director and shall, subject to the authority to the Board, be in charge of
the management of the business of the Company. He shall have general and
active management direction of the affairs of the Company, shall have
supervision of all departments and of all officers of the Company, shall see
that the orders and resolutions of the Board of Directors and of the Executive
Committee are carried into effect and shall have the general power and duties
of supervision and management usually vested in the President and Chief
Executive Officer of a company. The President and Chief Executive Officer shall
submit a report of the operations of the Company for the fiscal year to the
shareholders at their annual meeting and from time-to-time shall report to the
Board of Directors all matters within his knowledge which the interests of the
Company may require be brought to their notice.

<PAGE> 1
Exhibit 10(s)-2

AMENDED AND RESTATED EMPLOYMENT AGREEMENT

AMENDED AND RESTATED EMPLOYMENT AGREEMENT made and entered
into as of the 24th day of June, 1994, by and between The Washington Water
Power Company, a Washington corporation whose principal place of business is
located at East 1411 Mission Avenue, Spokane, Washington (the "Company"), and
W. Lester Bryan (the "Executive");

WHEREAS, the Company entered into an Employment Agreement with
the Executive, dated August 5, 1988 (the "Prior Employment Agreement");

WHEREAS, the Company desires to continue the services of the
Executive for its business and the Executive is willing to continue such
employment; and

WHEREAS, the Company and the Executive desire to enter into
this Employment Agreement amending and restating the Prior Employment Agreement
and setting forth the terms and conditions of continued employment;

NOW, THEREFORE, in consideration of the mutual promises and
covenants herein contained, the sufficiency of such consideration being
expressly acknowledged by the parties, the Company hereby continues employment
of the Executive and the Executive hereby accepts employment upon the terms and
conditions hereinafter set forth:

1. Employment and Term.

(b) The Employment Period shall be for a term of
thirty-six (36) months, commencing on the date of this Agreement, subject,
however, to termination as provided herein.

2. Duties and Powers of Executive.

(a) Position; Location. During the Employment Period,
the Executive shall serve as an elected executive officer, with
<PAGE> 2
-2-
such authority, duties and responsibilities as are determined from time to time
by the Company for such position with the Company. The Executive's services
shall be performed at the location where the Executive is currently employed;
provided, however, that if the Executive is relocated, he shall be entitled to
receive all benefits and other amounts described in Section 3(e) hereof.

3. Compensation and Benefits.

The Executive shall receive the following compensation and
benefits for his services hereunder to the Company: until a termination of
employment, pursuant to Section 4, the Company will continue the Executive's
salary, benefits, and incentive award opportunities at levels not less than
those in effect on the date this Agreement was executed, subject to such
reductions as may be required to maintain qualified plan compliance with
applicable federal or state laws.

(a) Salary. The Executive's annual base salary ("Annual
Base Salary"), payable not less often than monthly in equal
installments, shall be at the annual rate of not less than that paid
on the date hereof. Such Annual Base Salary shall be reviewed at
least annually. The Board of Directors of the Company (the "Board")
may from time to time direct such upward adjustments in Annual Base
Salary as the Board deems to be necessary or desirable including
without limitation adjustments in order to reflect increases in the
cost of living. Annual Base Salary shall not be reduced after any
increase thereof. Any increase in Annual Base Salary shall not serve
to limit or reduce any other obligation of the Company under this
Agreement.

(b) Incentive, Retirement and Welfare Benefit Plans. The
Executive shall be entitled to receive awards pursuant to the
Company's Executive Incentive Compensation Plan (the "Plan"). The
terms of such awards shall be determined by the Compensation Committee
at the time of grant. The Executive shall also be entitled to receive
benefits pursuant to such supplemental executive programs as are or
may be established by the Company.

(d) Fringe Benefits. During the Employment Period, the
Executive shall be entitled to receive fringe benefits in accordance
with the plans, practices, programs and policies of the Company from
time to time in effect, commensurate with his position and at least
comparable to those received by other executives of the Company.

(e) Relocation Benefits. If during the Employment Period
the Executive is relocated, he shall be entitled to reimbursement from
the Company for reasonable expenses incurred in connection with the
relocation and as preapproved by the Chief Executive Officer or the
Chief Operating Officer of the Company.

4. Termination of Employment.

(a) Death. The Executive's employment shall terminate
automatically upon the Executive's death during the Employment Period.

(b) By the Company for Cause. The Company may terminate
the Executive's employment during the Employment Period for Cause. For purposes
of this Agreement, "Cause" for termination by the Company shall include, but is
not limited to, acts of theft, embezzlement, fraud, moral turpitude, as well as
the following conduct of the Executive:
<PAGE> 3
-3-

(i) material breach of any provision of this
Agreement, which breach shall not have been cured by the
Executive within thirty (30) days of receipt of written notice
of said breach;

(ii) misconduct as an Executive of the Company,
including but not limited to: misappropriating any funds or
property of the Company; attempting to obtain any personal
profit from any transaction in which the Executive has an
interest which is adverse to the interests of the Company; or
any other act or omission which substantially impairs the
Company's ability to conduct its ordinary business in its
usual manner;

(iii) conviction of a felony; or

(iv) any other acts or omission which subject the
Company to public disrespect, scandal, or ridicule.

(c) By the Executive for Good Reason. The Executive may
terminate his employment during the Employment Period for Good Reason. For
purposes of this Agreement, "Good Reason" shall mean:

(i) the reduction in the Executive's Annual Base
Salary as specified in Section 3(a) of this Agreement or any
other benefit or payment described in Section 3 of this
Agreement;

(ii) the Executive not receiving salary increases
and incentive awards comparable to those received by other
executives in comparable positions with comparable performance
evaluations in the current year;

(iii) the diminution without his consent of the
Executive's status, working conditions, authority, duties or
responsibilities from those in effect on the date of this
Agreement;

(iv) the Company requiring the Executive without
his consent to be based at any office or location other than
the location where the Executive is currently employed; or

(v) any breach by the Company of any other
material provision of this Agreement.

(f) Date of Termination. "Date of Termination" means (i)
if the Executive's employment is terminated by the Company for Cause, by the
Company for Disability, or by the Executive for Good Reason, the date of
receipt of the Notice of Termination or any later date specified therein, as
the case may be, (ii) if the Executive's employment is terminated by the
Company other than for Cause or for Disability, the Date of Termination shall
be the date on which the Company notifies the Executive of such termination,
and (iii) if the Executive's employment is terminated by reason of death, the
Date of Termination shall be the date of death.

5. Obligations of the Company Upon Termination.

<PAGE> 4
-4-

(ii) in the event of Termination other than by
reason of the Executive's death or Disability, then (a) the
Company shall pay to the Executive an amount in cash equal to
(1) the Annual Base Salary described in Section 3(a) of this
Agreement through the end of the Employment Period and (2) one
month's salary for each full or partial year of service with
the Company with a minimum of twelve (12) months' salary
payable under this clause (2), in each case at the rate in
effect at the time Notice of Termination is given, within
thirty (30) days of such Date of Termination, or, at the
option of the Executive, in installments over a period not to
exceed thirty-six (36) months; (b) the Company shall continue
medical and welfare benefits for the Executive for eighteen
(18) months after Termination at least equal to those which
would have been provided if the Executive's employment had not
been terminated (excluding benefits to which the Executive has
waived his rights in writing), such benefits to be in
accordance with the most favorable medical and welfare benefit
plans, practices, programs or policies (the "M&W Plans") of
the Company as in effect and applicable generally to other
executives of the Company and their families during the 90-day
period immediately preceding the Date of Termination or as in
effect generally at any time thereafter with respect to other
executives of the Company; provided, however, that if the
Executive becomes reemployed with another employer and is
eligible to receive medical or other welfare benefits under
another employer provided plan, the benefits under the M&W
Plans shall be secondary to those provided under such other
plan during such applicable period of eligibility; provided,
however, that these provisions shall not operate to reduce any
rights the Executive may have under Section 4980B of the Code,
Part 6 of Title I of ERISA or any other state or federal
legislation, but shall be in addition to such rights; and (c)
with respect to any incentive or similar plan awards, awards
shall be handled as the plan so provides; provided, however,
that if the Executive's entitlement to any plan award is
subject to fulfillment of performance criteria, either
corporate or individual, over a performance period, then
payment of such awards shall be made, if at all, at the end of
the performance period, based upon the achievement of goals
for the entire period, prorated from the beginning of the
performance period to the Date of Termination.

(c) Any payments made pursuant to this Section 5 shall be
subject to the limits, to the extent applicable, set forth in Section 10(g)
hereof.

<PAGE> 5
-5-

6. Non-exclusivity of Rights.

7. Full Settlement; Mitigation.

The Company's obligation to make the payments provided for in
this Agreement and otherwise to perform its obligations hereunder shall not be
affected by any set-off, counterclaim, recoupment, defense or other claim,
right or action which the Company may have against the Executive or others. In
no event shall the Executive be obligated to seek other employment or take any
other action by way of mitigation of the amounts (including amounts for damages
for breach) payable to the Executive under any of the provisions of this
Agreement and, except as provided in Section 5(a)(ii)(b) of this Agreement,
such amounts shall not be reduced whether or not the Executive obtains other
employment. If the Executive finally prevails with respect to any dispute
between the Company, the Executive or others as to the interpretation, terms,
validity or enforceability of (including any dispute about the amount of any
payment pursuant to) this Agreement, the Company agrees to pay all legal fees
and expenses which the Executive may reasonably incur as a result of any such
dispute.

8. Confidential Information.

9. Successors.

(a) This Agreement is personal to the Executive and
without the prior written consent of the Company shall not be assignable by the
Executive otherwise than by will or laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the Executive's
legal representatives.

(b) This Agreement shall inure to the benefit of and be
binding upon the Company and its successors and assigns.

10. Miscellaneous.

<PAGE> 6
-6-

such amendment, modification, repeal, waiver, extension or discharge is sought.
No person, other than pursuant to a resolution of the Board or a committee
thereof, shall have authority on behalf of the Company to agree to amend,
modify, repeal, waive, extend or discharge any provision of this Agreement or
anything in reference thereto.

If to the Executive:

c/o The Washington Water Power Company
East 1411 Mission Avenue, P.O. Box 3727
Spokane, Washington 99220

If to the Company:

The Washington Water Power Company
East 1411 Mission Avenue, P.O. Box 3727
Spokane, Washington 99220

or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.

(c) The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.

(d) The Company may withhold from any amounts payable
under this Agreement such federal, state or local taxes as shall be required to
be withheld pursuant to any applicable law or regulation.

<PAGE> 7
-7-

IN WITNESS WHEREOF, the Executive and, the Company have caused
this Agreement to be executed as of the day and year first above written.

THE WASHINGTON WATER
POWER COMPANY

/s/ Paul A. Redmond
-------------------------------------------
Name: Paul A. Redmond
Title: Chairman of the Board, President and
Chief Executive Officer

EXECUTIVE

/s/ W. L. Bryan
-------------------------------------------

<PAGE> 1
Exhibit 10(s)-3

AMENDED AND RESTATED EMPLOYMENT AGREEMENT

AMENDED AND RESTATED EMPLOYMENT AGREEMENT made and entered
into as of the 24th day of June, 1994, by and between The Washington Water
Power Company, a Washington corporation whose principal place of business is
located at East 1411 Mission Avenue, Spokane, Washington (the "Company"), and
Nancy J. Racicot (the "Executive");

WHEREAS, the Company entered into an Employment Agreement with
the Executive, dated May 10, 1991 (the "Prior Employment Agreement");

WHEREAS, the Company desires to continue the services of the
Executive for its business and the Executive is willing to continue such
employment; and

1. Employment and Term.

(b) The Employment Period shall be for a term of
thirty-six (36) months, commencing on the date of this Agreement, subject,
however, to termination as provided herein.

2. Duties and Powers of Executive.

(a) Position; Location. During the Employment Period,
the Executive shall serve as an elected executive officer, with
<PAGE> 2
-2-
such authority, duties and responsibilities as are determined from time to time
by the Company for such position with the Company. The Executive's services
shall be performed at the location where the Executive is currently employed;
provided, however, that if the Executive is relocated, she shall be entitled to
receive all benefits and other amounts described in Section 3(e) hereof.

3. Compensation and Benefits.

The Executive shall receive the following compensation and
benefits for her services hereunder to the Company: until a termination of
employment, pursuant to Section 4, the Company will continue the Executive's
salary, benefits, and incentive award opportunities at levels not less than
those in effect on the date this Agreement was executed, subject to such
reductions as may be required to maintain qualified plan compliance with
applicable federal or state laws.

During the Employment Period and so long as the Executive is
employed by the Company, she shall be eligible to participate in all
incentive, stock option, restricted stock, performance unit, savings,
retirement and welfare plans, practices, policies and programs
applicable generally to employees and/or other executives of the
Company, except with
<PAGE> 3
-3-

respect to any benefits under any plan, practice, policy or program to
which the Executive has waived her rights in writing.

(c) Business Expenses. The Company agrees to pay or
reimburse the Executive for all expenses, including those for travel
and entertainment, properly incurred by her in the performance of her
duties hereunder in accordance with policies established from time to
time by the Company.

(d) Fringe Benefits. During the Employment Period, the
Executive shall be entitled to receive fringe benefits in accordance
with the plans, practices, programs and policies of the Company from
time to time in effect, commensurate with her position and at least
comparable to those received by other executives of the Company.

(e) Relocation Benefits. If during the Employment Period
the Executive is relocated, she shall be entitled to reimbursement
from the Company for reasonable expenses incurred in connection with
the relocation and as preapproved by the Chief Executive Officer or
the Chief Operating Officer of the Company.

4. Termination of Employment.

(a) Death. The Executive's employment shall terminate
automatically upon the Executive's death during the Employment Period.

(i) material breach of any provision of this
Agreement, which breach shall not have been cured by the
Executive within thirty (30) days of receipt of written notice
of said breach;

<PAGE> 4
-4-

which substantially impairs the Company's ability to conduct
its ordinary business in its usual manner;

(iii) conviction of a felony; or

(iv) any other acts or omission which subject the
Company to public disrespect, scandal, or ridicule.

(c) By the Executive for Good Reason. The Executive may
terminate her employment during the Employment Period for Good Reason. For
purposes of this Agreement, "Good Reason" shall mean:

(i) the reduction in the Executive's Annual Base
Salary as specified in Section 3(a) of this Agreement or any
other benefit or payment described in Section 3 of this
Agreement;

(iii) the diminution without her consent of the
Executive's status, working conditions, authority, duties or
responsibilities from those in effect on the date of this
Agreement;

(iv) the Company requiring the Executive without
her consent to be based at any office or location other than
the location where the Executive is currently employed; or

(v) any breach by the Company of any other
material provision of this Agreement.

5. Obligations of the Company Upon Termination.

(a) Termination Other Than for Cause. During the
Employment Period, if the Company shall terminate the Executive's employment
(other than in the case of a termination for Cause), or if the Executive shall
terminate her employment for Good Reason or if the Executive's employment shall
terminate by reason of death (termination in any such case referred to as
"Termination");

(i) the Company shall pay to the Executive (or
her beneficiary) a lump sum amount in cash equal to the sum of
(1) the Executive's Annual Base Salary through the Date of

<PAGE> 5
-5-

Termination to the extent not theretofore paid, (2) all
incentive or other compensation, if any, awarded but not yet
paid with respect to fiscal years ending prior to the fiscal
year in which the Date of Termination occurred, (3) any
compensation previously deferred by the Executive (together
with any accrued interest or earnings thereon) and (4) any
accrued leave pursuant to the One-Leave Program, to the extent
not theretofore paid. (The amounts specified in clauses (1),
(2), (3) and (4) shall be hereinafter referred to as the
"Accrued Obligations"). The amounts specified in clauses (1),
(2) and (4) of this Section 5(a)(i) shall be paid within
thirty (30) days after the Date of Termination; the amount
referred to in clause (3), if any, will be paid pursuant to
the terms of the Executive Deferred Compensation Plan; and

(ii) in the event of Termination other than by reason of
the Executive's death or Disability, then (a) the Company
shall pay to the Executive an amount in cash equal to
(1) the Annual Base Salary described in Section 3(a) of this
Agreement through the end of the Employment Period and (2) one
month's salary for each full or partial year of service with
the Company with a minimum of twelve (12) months' salary
payable under this clause (2), in each case at the rate in
effect at the time Notice of Termination is given, within
thirty (30) days of such Date of Termination, or, at the
option of the Executive, in installments over a period not to
exceed thirty-six (36) months; (b) the Company shall continue
medical and welfare benefits for the Executive for eighteen
(18) months after Termination at least equal to those which
would have been provided if the Executive's employment had not
been terminated (excluding benefits to which the Executive has
waived her rights in writing), such benefits to be in
accordance with the most favorable medical and welfare benefit
plans, practices, programs or policies (the "M&W Plans") of
the Company as in effect and applicable generally to other
executives of the Company and their families during the 90-day
period immediately preceding the Date of Termination or as in
effect generally at any time thereafter with respect to other
executives of the Company; provided, however, that if the
Executive becomes reemployed with another employer and is
eligible to receive medical or other welfare benefits under
another employer provided plan, the benefits under the M&W
Plans shall be secondary to those provided under such other
plan during such applicable period of eligibility; provided,
however, that these provisions shall not operate to reduce any
rights the Executive may have under Section 4980B of the Code,
Part 6 of Title I of ERISA or any other state or federal
legislation, but shall be in addition to such rights; and (c)
with respect to any incentive or similar plan awards, awards
shall be handled as the plan so provides; provided, however,
that if the Executive's entitlement to any plan award is
subject to fulfillment of performance criteria, either
corporate or individual, over a performance period, then
payment of such awards shall be made, if at all, at the end of
the performance period, based upon the achievement of goals
for the entire period, prorated from the beginning of the
performance period to the Date of Termination.

(c) Any payments made pursuant to this Section 5 shall be
subject to the limits, to the extent applicable, set forth in Section 10(g)
hereof.

6. Non-exclusivity of Rights.

<PAGE> 6
-6-

vested benefits or which the Executive is otherwise entitled to receive under
any benefit, plan, policy, practice or program of, or any contract or agreement
entered into after the date hereof with, the Company at or subsequent to the
Date of Termination, shall be payable in accordance with such benefit, plan,
policy, practice or program or contract or agreement except as explicitly
modified by this Agreement.

7. Full Settlement; Mitigation.

The Company's obligation to make the payments provided for in
this Agreement and otherwise to perform its obligations hereunder shall not be
affected by any set-off, counterclaim, recoupment, defense or other claim,
right or action which the Company may have against the Executive or others. In
no event shall the Executive be obligated to seek other employment or take any
other action by way of mitigation of the amounts (including amounts for damages
for breach) payable to the Executive under any of the provisions of this
Agreement and, except as provided in Section 5(a)(ii)(b) of this Agreement,
such amounts shall not be reduced whether or not the Executive obtains other
employment. If the Executive finally prevails with respect to any dispute
between the Company, the Executive or others as to the interpretation, terms,
validity or enforceability of (including any dispute about the amount of any
payment pursuant to) this Agreement, the Company agrees to pay all legal fees
and expenses which the Executive may reasonably incur as a result of any such
dispute.

8. Confidential Information.

9. Successors.

(b) This Agreement shall inure to the benefit of and be
binding upon the Company and its successors and assigns.

10. Miscellaneous.

<PAGE> 7
-7-

If to the Executive:

c/o The Washington Water Power Company
East 1411 Mission Avenue, P.O. Box 3727
Spokane, Washington 99220

If to the Company:

The Washington Water Power Company
East 1411 Mission Avenue, P.O. Box 3727
Spokane, Washington 99220

or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.

(c) The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.

(d) The Company may withhold from any amounts payable
under this Agreement such federal, state or local taxes as shall be required to
be withheld pursuant to any applicable law or regulation.

<PAGE> 8
-8-

IN WITNESS WHEREOF, the Executive and, the Company have caused
this Agreement to be executed as of the day and year first above written.

THE WASHINGTON WATER
POWER COMPANY

/s/ Paul A. Redmond
----------------------------------------
Name: Paul A. Redmond
Title: Chairman of the Board, President
and Chief Executive Officer

EXECUTIVE

/s/ Nancy J. Racicot
----------------------------------------

<PAGE> 1
Exhibit 10(s)-4

AMENDED AND RESTATED EMPLOYMENT AGREEMENT

AMENDED AND RESTATED EMPLOYMENT AGREEMENT made and entered
into as of the 24th day of June, 1994, by and between The Washington Water
Power Company, a Washington corporation whose principal place of business is
located at East 1411 Mission Avenue, Spokane, Washington (the "Company"), and
Jon E. Eliassen (the "Executive");

WHEREAS, the Company entered into an Employment Agreement with
the Executive, dated August 5, 1988 (the "Prior Employment Agreement");

WHEREAS, the Company desires to continue the services of the
Executive for its business and the Executive is willing to continue such
employment; and

1. Employment and Term.

(b) The Employment Period shall be for a term of
thirty-six (36) months, commencing on the date of this Agreement, subject,
however, to termination as provided herein.

2. Duties and Powers of Executive.

(a) Position; Location. During the Employment Period,
the Executive shall serve as an elected executive officer, with
<PAGE> 2
-2-

such authority, duties and responsibilities as are determined from time to time
by the Company for such position with the Company. The Executive's services
shall be performed at the location where the Executive is currently employed;
provided, however, that if the Executive is relocated, he shall be entitled to
receive all benefits and other amounts described in Section 3(e) hereof.

3. Compensation and Benefits.

4. Termination of Employment.

(a) Death. The Executive's employment shall terminate
automatically upon the Executive's death during the Employment Period.

(i) material breach of any provision of this
Agreement, which breach shall not have been cured by the
Executive within thirty (30) days of receipt of written notice
of said breach;

(iii) conviction of a felony; or

(iv) any other acts or omission which subject the
Company to public disrespect, scandal, or ridicule.

(c) By the Executive for Good Reason. The Executive may
terminate his employment during the Employment Period for Good Reason. For
purposes of this Agreement, "Good Reason" shall mean:

(i) the reduction in the Executive's Annual Base
Salary as specified in Section 3(a) of this Agreement or any
other benefit or payment described in Section 3 of this
Agreement;

(iii) the diminution without his consent of the
Executive's status, working conditions, authority, duties or
responsibilities from those in effect on the date of this
Agreement;

(iv) the Company requiring the Executive without
his consent to be based at any office or location other than
the location where the Executive is currently employed; or

(v) any breach by the Company of any other
material provision of this Agreement.

5. Obligations of the Company Upon Termination.

<PAGE> 4
-4-

(c) Any payments made pursuant to this Section 5 shall be
subject to the limits, to the extent applicable, set forth in Section 10(g)
hereof.

<PAGE> 5
-5-

6. Non-exclusivity of Rights.

7. Full Settlement; Mitigation.

The Company's obligation to make the payments provided for in
this Agreement and otherwise to perform its obligations hereunder shall not be
affected by any set-off, counterclaim, recoupment, defense or other claim,
right or action which the Company may have against the Executive or others. In
no event shall the Executive be obligated to seek other employment or take any
other action by way of mitigation of the amounts (including amounts for damages
for breach) payable to the Executive under any of the provisions of this
Agreement and, except as provided in Section 5(a)(ii)(b) of this Agreement,
such amounts shall not be reduced whether or not the Executive obtains other
employment. If the Executive finally prevails with respect to any dispute
between the Company, the Executive or others as to the interpretation, terms,
validity or enforceability of (including any dispute about the amount of any
payment pursuant to) this Agreement, the Company agrees to pay all legal fees
and expenses which the Executive may reasonably incur as a result of any such
dispute.

8. Confidential Information.

9. Successors.

(b) This Agreement shall inure to the benefit of and be
binding upon the Company and its successors and assigns.

10. Miscellaneous.

<PAGE> 6
-6-

If to the Executive:

c/o The Washington Water Power Company
East 1411 Mission Avenue, P.O. Box 3727
Spokane, Washington 99220

If to the Company:

The Washington Water Power Company
East 1411 Mission Avenue, P.O. Box 3727
Spokane, Washington 99220

or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.

(c) The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.

(d) The Company may withhold from any amounts payable
under this Agreement such federal, state or local taxes as shall be required to
be withheld pursuant to any applicable law or regulation.

<PAGE> 7
-7-

IN WITNESS WHEREOF, the Executive and, the Company have caused
this Agreement to be executed as of the day and year first above written.

THE WASHINGTON WATER
POWER COMPANY

/s/ Paul A. Redmond
---------------------------------------
Name: Paul A. Redmond
Title: Chairman of the Board,
President and Chief Executive
Officer

EXECUTIVE

/s/ Jon E. Eliassen
---------------------------------------

<PAGE> 1
Exhibit 10(s)-5

AMENDED AND RESTATED EMPLOYMENT AGREEMENT

AMENDED AND RESTATED EMPLOYMENT AGREEMENT made and entered
into as of the 24th day of June, 1994, by and between The Washington Water
Power Company, a Washington corporation whose principal place of business is
located at East 1411 Mission Avenue, Spokane, Washington (the "Company"), and
Robert D. Fukai (the "Executive");

WHEREAS, the Company entered into an Employment Agreement with
the Executive, dated August 5, 1988 (the "Prior Employment Agreement");

WHEREAS, the Company desires to continue the services of the
Executive for its business and the Executive is willing to continue such
employment; and

1. Employment and Term.

(b) The Employment Period shall be for a term of
thirty-six (36) months, commencing on the date of this Agreement, subject,
however, to termination as provided herein.

2. Duties and Powers of Executive.

(a) Position; Location. During the Employment Period,
the Executive shall serve as an elected executive officer, with
<PAGE> 2
-2-

3. Compensation and Benefits.

4. Termination of Employment.

(a) Death. The Executive's employment shall terminate
automatically upon the Executive's death during the Employment Period.

(i) material breach of any provision of this
Agreement, which breach shall not have been cured by the
Executive within thirty (30) days of receipt of written notice
of said breach;

(iii) conviction of a felony; or

(iv) any other acts or omission which subject the
Company to public disrespect, scandal, or ridicule.

(c) By the Executive for Good Reason. The Executive may
terminate his employment during the Employment Period for Good Reason. For
purposes of this Agreement, "Good Reason" shall mean:

(i) the reduction in the Executive's Annual Base
Salary as specified in Section 3(a) of this Agreement or any
other benefit or payment described in Section 3 of this
Agreement;

(iii) the diminution without his consent of the
Executive's status, working conditions, authority, duties or
responsibilities from those in effect on the date of this
Agreement;

(iv) the Company requiring the Executive without
his consent to be based at any office or location other than
the location where the Executive is currently employed; or

(v) any breach by the Company of any other
material provision of this Agreement.

5. Obligations of the Company Upon Termination.

<PAGE> 4
-4-

(c) Any payments made pursuant to this Section 5 shall be
subject to the limits, to the extent applicable, set forth in Section 10(g)
hereof.

<PAGE> 5
-5-

6. Non-exclusivity of Rights.

7. Full Settlement; Mitigation.

The Company's obligation to make the payments provided for in
this Agreement and otherwise to perform its obligations hereunder shall not be
affected by any set-off, counterclaim, recoupment, defense or other claim,
right or action which the Company may have against the Executive or others. In
no event shall the Executive be obligated to seek other employment or take any
other action by way of mitigation of the amounts (including amounts for damages
for breach) payable to the Executive under any of the provisions of this
Agreement and, except as provided in Section 5(a)(ii)(b) of this Agreement,
such amounts shall not be reduced whether or not the Executive obtains other
employment. If the Executive finally prevails with respect to any dispute
between the Company, the Executive or others as to the interpretation, terms,
validity or enforceability of (including any dispute about the amount of any
payment pursuant to) this Agreement, the Company agrees to pay all legal fees
and expenses which the Executive may reasonably incur as a result of any such
dispute.

8. Confidential Information.

9. Successors.

(b) This Agreement shall inure to the benefit of and be
binding upon the Company and its successors and assigns.

10. Miscellaneous.

<PAGE> 6
-6-

If to the Executive:

c/o The Washington Water Power Company
East 1411 Mission Avenue, P.O. Box 3727
Spokane, Washington 99220

If to the Company:

The Washington Water Power Company
East 1411 Mission Avenue, P.O. Box 3727
Spokane, Washington 99220

or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.

(c) The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.

(d) The Company may withhold from any amounts payable
under this Agreement such federal, state or local taxes as shall be required to
be withheld pursuant to any applicable law or regulation.

<PAGE> 7
-7-

IN WITNESS WHEREOF, the Executive and, the Company have caused
this Agreement to be executed as of the day and year first above written.

THE WASHINGTON WATER
POWER COMPANY

/s/ Paul A. Redmond
---------------------------------------
Name: Paul A. Redmond
Title: Chairman of the Board,
President and Chief Executive
Officer

EXECUTIVE

/s/ R. D. Fukai
-------------------------------------

<PAGE> 1
Exhibit 10(s)-6
1994 Executive Officer Incentive Plan

GOAL 1 - EARNINGS PER SHARE (ANNUAL GOAL)

Utility only Utility Percent of base pay opportunity
Earnings per share ROE Net Income CFO/SVP VP's

$1.15 (threshold) 11.1 $61,569,000 3.3% 2.9%

$1.18 11.4 $63,174,000 6.6% 5.8%

$1.21 11.6 $64,779,000 10.0% 8.8%

$1.24 11.9 $66,399,000 13.3% 11.7%

$1.27 12.2 $67,989,000 16.6% 14.6%

$1.30 12.4 $69,595,000 20.0% 17.5%

Goal modifier: individual and team officer performance will determine actual
payout percentage. The percent achieved for EPS above will be modified on a
scale of 0-150% to reflect officer performance, including financial, customer
and employee goals.

GOAL 2 - SHAREHOLDER VALUE GOAL (LONG-TERM GOAL; 3 YEARS ENDING 12/94)

Shareholder Value goal will be achieved if Washington Water Power is within
90-110% of the median company's total return of the approximately 100 investor
owned utilities for the three year period ending 12/31/94. The calculation
measures the total return percentage and is calculated using cash dividends
paid plus market price appreciation over the three year time period for each of
the electric or combination utilities.

Goal as Compared Example with Percent of Base Pay Opportunity
to Median of Group #47 as Median CFO/SVP VP's

110% of median rank 42 (maximum) 20.0% 17.5%
108% " 43 18.2% 15.9%
106% " 44 16.4% 14.3%
104% " 45 14.5% 12.7%
102% " 46 12.7% 11.1%
100% " 47 (median) 10.9% 9.5%
98% " 48 9.1% 8.0%
96% " 49 7.3% 6.4%
94% " 50 5.5% 4.8%
92% " 51 3.6% 3.2%
90% " 52 (threshold) 1.8% 1.6%

Goal modifier: individual and team officer performance will determine actual
payout percentage. The percent achieved for SV above will be modified on a
scale of 0-150% to reflect officer performance, including financial, customer
and employee goals.

0 to 100% = Performance accountabilities are partially achieved
100% = Performance accountabilities are achieved
101 to 150% = Performance accountabilities are exceeded
CFO/SVP VP's
Maximum opportunity - Goals 1 and 2 60.0% 52.5%

Incentives are paid out as 50% cash and 50% stock

<PAGE> 1
Exhibit 10(s)-7
1994 CEO Incentive Stock Plan

The CEO of WWP will be granted 2000 shares of WWP stock for each five cents of
increased corporate earnings starting at $1.38 and going up to and including
$1.63 in earnings. When the corporate earnings reach $1.65, additional 22,000
shares of WWP stock will be granted.

Earnings must be expected to continue (e.g. a one time sale, such as WIDCo,
would be excluded). If earnings go up one year, down the next, and up again
the next year, additional shares will not be granted. Each 5-cent increment may
only be rewarded the first time it is achieved.

This incentive is for the current CEO only and may be modified by Board of
Directors as deemed necessary and appropriate.

Corporate Shares
Earnings Granted

Met '93 $1.38 2,000 Stock Split '93
Met '93 $1.43 2,000
$1.48 2,000
$1.53 2,000
$1.58 2,000
$1.63 2,000

$1.65 22,000

Maximum Opportunity 34,000 shares of stock

Example: If earnings reach $1.48 in 1994, the reward would be 2,000
shares.

If earnings reach $1.65 in 1995, the reward would be 30,000
shares.

<PAGE> 1
Exhibit 10(t)-1

AMENDED AND RESTATED EMPLOYMENT AGREEMENT

AMENDED AND RESTATED EMPLOYMENT AGREEMENT made and entered
into as of the 27th day of June, 1994, by and among The Washington Water Power
Company, a Washington corporation whose principal place of business is located
at 1411 East Mission Avenue, Spokane, Washington ("WWP"), Resources West Energy
Corporation, a Nevada corporation whose principal place of business is located
at 1411 East Mission Avenue, Spokane, Washington (the "Company"), Sierra
Pacific Resources, a Nevada corporation whose principal place of business is
located at 6100 Neil Road, Reno, Nevada ("SPR"), Sierra Pacific Power Company,
a Nevada corporation whose principal place of business is located at 6100 Neil
Road, Reno, Nevada ("SPPC") (WWP, the Company, SPR and SPPC sometimes
collectively referred to herein as the "Corporations"), and Paul A. Redmond
(the "Executive");

WHEREAS, the Executive is currently serving as Chairman,
President and Chief Executive Officer of WWP, and the Corporations desire to
secure the continued employment of the Executive in accordance herewith;

WHEREAS, WWP entered into an Amended and Restated Employment
Agreement with the Executive, dated June 24, 1994 (the "1994 Employment
Agreement");

WHEREAS, pursuant to the Agreement and Plan of Reorganization
and Merger, dated as of June 27, 1994, by and among the Corporations (the
"Merger Agreement"), WWP, SPR and SPPC have agreed to merge with and into the
Company;

WHEREAS, the parties hereto desire to further amend the 1994
Employment Agreement to conform to the terms of the Merger Agreement;

WHEREAS, the Executive is willing to commit himself to remain
in the employ of WWP and the Company, as the successor to WWP, on the terms and
conditions herein set forth and thus to forego opportunities elsewhere; and

WHEREAS, the parties desire to enter into this Agreement
further amending and restating the 1994 Employment Agreement, as of the
Effective Date (as hereinafter defined), setting forth the terms and conditions
for the employment relationship of the Executive with the Company during the
Employment Period (as hereinafter defined);
<PAGE> 2

- 2 -

NOW, THEREFORE, IN CONSIDERATION of the mutual promises,
covenants and agreements set forth below, it is hereby agreed as follows:

1. Employment and Term.

(a) The Corporations and any successor thereto, agree, on
behalf of the Company, to employ the Executive, and the Executive agrees to
remain in the employ of WWP and the Company, as the successor to WWP, in
accordance with the terms and provisions of this Agreement for the period set
forth below (the "Employment Period").

(b) The Employment Period shall commence as of the
consummation date (the "Effective Date") of the merger (the "Merger") pursuant
to the terms of the Merger Agreement and shall continue until the close of
business on January 1, 2002 or, if as set forth in Section 2(a) below the
Executive elects not to continue to serve as Chairman of the Board from and
after January 1, 1999, on January 1, 1999; provided, however, that for purposes
of determining any amounts payable to the Executive under Section 5 hereof, the
Employment Period shall be deemed to continue until the close of business on
January 1, 2002; provided, further, that if the Merger Agreement is terminated,
then, at the time of such termination, this Agreement shall be deemed canceled
and of no force or effect and the 1994 Employment Agreement shall remain in
full force and effect. For all periods prior to, but not including, the
Effective Date, the 1994 Employment Agreement shall remain in full force and
effect. As of the Effective Date, the 1994 Employment Agreement shall
terminate and be of no force and effect. As a condition to the Merger, the
parties hereto agree that the Company shall be responsible for all the
promises, covenants and agreements set forth in this Agreement.

2. Duties and Powers of Executive.

(a) Position; Location. From the Effective Date until
January 1, 1999, the Executive shall serve as the Chairman of the Board of
Directors of the Company (the "Board") (assuming the Executive has been elected
to the Board by the shareholders) and the Chief Executive Officer of the
Company; provided, however, that the Executive shall continue to serve as
Chairman of the Board and Chief Executive Officer after January 1, 1999 until
January 1, 2002 if Walter M. Higgins, who commencing on the Effective Date will
serve as Vice Chairman, President and Chief Operating Officer of the Company
and the Chief Executive Officer of the Washington Water Power and Sierra
Pacific operating divisions, does not become Chief Executive Officer of the
Company on January 1, 1999. Unless the Executive elects not to continue in the
employment of the Company, the Executive shall continue to serve as the
Chairman of the Board from January 1, 1999 until January 1, 2002 (assuming the
Executive has been elected to the Board by the shareholders). During the
Employment Period, the Executive shall have such authority, duties and
responsibilities as are set forth in Annex A hereto. Such titles, authority,
duties and responsibilities may be changed from time to time only by mutual
written agreement of the parties. The Executive's services shall be performed
at the location where the Executive is currently employed. During the
Employment Period, the Executive shall also continue to serve as Chairman of
the Board of each of the Company's subsidiary corporations.

(b) Commencing on the Effective Date until January 1,
2002 (or January 1, 1999 if the Executive elects not to continue to serve), the
Company shall in connection with any annual meeting of shareholders of the
Company at which the Executive's class of Directors is to be elected cause the
Executive to be nominated as a director of the Company.

3. Compensation and Benefits.

The Executive shall receive the following compensation and
benefits for his services hereunder to the Company:

(a) Salary. The Executive's annual base salary ("Annual
Base Salary"), payable not less often than monthly in equal
installments, shall be at the annual rate of not less than the
Executive's base salary as of the Effective Date. Such Annual Base
Salary shall be reviewed at least annually. The Board may from time to
time direct such upward adjustments in Annual Base Salary as the Board
deems to be necessary or desirable including without limitation
adjustments in order to reflect increases in the cost of living.
Annual Base Salary shall not be reduced after any increase thereof.
Any increase in Annual Base Salary shall not serve to limit or reduce
any other obligation of the Company under this Agreement.
<PAGE> 3
-3-

(b) Incentive, Retirement and Welfare Benefit Plans.
Subject to shareholder approval of the Plan, and after the Effective
Date, the Executive shall be entitled to receive awards pursuant to
the Company's Executive Long-Term Incentive Plan (the "Plan") (the
Sierra Pacific Resources Executive Long-Term Incentive Plan, adopted
in 1994, and assumed by the Company pursuant to the merger). The
terms of such awards shall be determined by the Compensation Committee
at the time of grant.

During the Employment Period and so long as the Executive is
employed by the Company, he shall be eligible to participate in all
incentive, stock option, restricted stock, performance unit or share,
savings, retirement, insurance and welfare plans, practices, policies
and programs applicable generally to employees and/or other senior
executives of the Company, except with respect to any benefits under
any plan, practice, policy or program to which the Executive has
waived his rights in writing. The Executive shall be entitled to
receive pursuant to a supplemental executive retirement plan to be
adopted by the Company, or otherwise, benefits in the amount and at
the rate of accrual at least as generous as that provided to him at
the date hereof pursuant to The Washington Water Power Company
Unfunded Supplemental Executive Retirement Plan.

(d) Fringe Benefits. During the Employment Period and so
long as the Executive is employed by the Company, he shall be entitled
to the following fringe benefits: (A) the Company shall pay the annual
dues, assessments and other membership charges of the Executive with
respect to the Executive's membership in the clubs and associations of
the Executive's choice that are used for business purposes; and (B)
the Company shall provide not less than thirty-eight (38) days paid
leave for the Executive pursuant to the Company's One-Leave Program
(The Washington Water Power One-Leave Program currently in effect and
assumed, or replaced by a similar plan, by the Company pursuant to the
Merger); in the case of paragraphs (A) and (B) on a basis
substantially equivalent to such fringe benefits provided to the
Executive in the past. In addition, the Executive shall be entitled to
receive fringe benefits in accordance with the plans, practices,
programs and policies of the Company from time to time in effect,
commensurate with his position and at least comparable to those
received by other senior executives of the Company.

4. Termination of Employment.

(a) Death. The Executive's employment shall terminate
automatically upon the Executive's death during the Employment Period.

(c) By the Executive for Good Reason. The Executive may
terminate his employment during the Employment Period for Good Reason. For
purposes of this Agreement, "Good Reason" shall mean:

(i) the reduction in the Executive's Annual Base
Salary as specified in Section 3(a) of this Agreement or any
other benefit or payment described in Section 3 of this
Agreement;

(ii) the change without his consent of the
Executive's title, authority, duties or responsibilities as
specified in Section 2(a) of this Agreement;

(iii) the Company requiring the Executive without
his consent to be based at any office or location other than
the location where the Executive is currently employed; or

(iv) any breach by the Corporations or the Company
of any other material provision of this Agreement.
<PAGE> 4
-4-

5. Obligations of the Company Upon Termination.

in effect and applicable generally to other senior executives
of the Company and their families during the 90-day period
immediately preceding the Date of Termination or, if more
favorable to the Executive and/or his spouse, as in effect
generally at any time thereafter with respect to other senior
executives of the Company and their spouses (but on a
prospective basis only unless and then only to the extent such
more favorable M&W Plans are by their terms retroactive);
provided, however, that if the Executive becomes reemployed
(or, in the case of spousal benefits, the spouse is or becomes
employed) with another employer and is eligible to receive
medical or other welfare benefits under another employer
provided plan, the benefits under the M&W Plans shall be
secondary to those provided under such other plan during such
applicable period of eligibility; provided, however, that
these provisions shall not operate to reduce any rights the
Executive may have under Section 4980B of the Code, Part 6 of
Title I of ERISA or any other state or federal legislation,
but shall be in addition to such rights; and (d) with respect
to any incentive or similar plan awards, all options shall
vest in full and become immediately exercisable, all
restrictions shall lapse with respect to restricted stock, and
any other types of awards, including but not limited to stock
appreciation rights, performance units and performance shares,
shall vest in full and become immediately exercisable or
payable; provided, however, that if the Executive's
entitlement to any of the stock options, restricted stock or
other awards referred to above is subject to fulfillment of
performance criteria, either corporate or individual, over a
performance period, then payment of such awards shall be made,
if at all, at the end of the performance period, based upon
the achievement of goals for the entire period, prorated from
the beginning of the performance period to the Date of
Termination.

(c) Any payments made pursuant to this Section 5 shall be
subject to the limits, to the extent applicable, set forth in Section 10(g)
hereof.

6. Non-exclusivity of Rights.

Except as provided in Section 10(g) hereof, nothing in this
Agreement shall prevent or limit the Executive's continuing or future
participation in any benefit, plan, program, policy or practice provided by the
Company and for which the Executive may qualify (except with respect to any
benefit to which the Executive has waived his rights in writing), nor shall
anything herein limit or otherwise affect such rights as the Executive may have
under any other contract or agreement entered into after the Effective Date
with the Company. Amounts which are vested benefits or which the Executive is
otherwise entitled to receive under any benefit, plan, policy, practice or
program of, or any contract or agreement entered into after the date hereof
with, the Company at or subsequent to the Date of Termination, shall be payable
in accordance with such benefit, plan, policy, practice or program or contract
or agreement except as explicitly modified by this Agreement.
<PAGE> 6
-6-

7. Full Settlement; Mitigation.

8. Confidential Information.

violation of this Agreement). During the Employment Period, the Executive
shall not, without the prior consent of the Company or as may otherwise be
required by law or legal process, communicate or divulge any such information,
knowledge or data to anyone other than the Company and those designated by it.

9. Successors.

(a) This Agreement is personal to the Executive and
without the prior written consent of the Corporations or the Company, as the
case may be, shall not be assignable by the Executive otherwise than by will or
laws of descent and distribution. This Agreement shall inure to the benefit of
and be enforceable by the Executive's legal representatives.

(b) This Agreement shall inure to the benefit of and be
binding upon the Corporations, the Company and their respective successors and
assigns.

10. Miscellaneous.

(a) This Agreement shall be governed by and construed in
accordance with the laws of the State of Washington, without reference to
principles of conflict of laws. The captions of this Agreement are not part of
the provisions hereof and shall have no force or effect. This Agreement may
not be amended, modified, repealed, waived, extended or discharged except by an
agreement in writing signed by the party against whom enforcement of such
amendment, modification, repeal, waiver, extension or discharge is sought. No
person, other than pursuant to a resolution of the Board or a committee
thereof, shall have authority on behalf of the Corporations or the Company to
agree to amend, modify, repeal, waive, extend or discharge any provision of
this Agreement or anything in reference thereto.

If to the Executive:

Paul A. Redmond
1411 East Mission Avenue, P.O. Box 3727
Spokane, Washington 99220

If to the Company:

Resources West Energy Corporation
1411 East Mission Avenue, P.O. Box 3727
Spokane, Washington 99220

or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.

(c) The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.

(d) The Company may withhold from any amounts payable
under this Agreement such federal, state or local taxes as shall be required to
be withheld pursuant to any applicable law or regulation.
<PAGE> 8
-8-

(f) This instrument contains the entire agreement of the
Executive, the Company and the Corporations with respect to the subject matter
hereof, and, subject to the provisions of Section 1(b) hereof, all promises,
representations, understandings, arrangements and prior agreements are merged
herein and superseded hereby.

IN WITNESS WHEREOF, the Executive and, pursuant to due authorization from their
respective Board of Directors, the Corporations have caused this Agreement to
be executed as of the day and year first above written.

THE WASHINGTON WATER
POWER COMPANY

/s/ JoAnn Matthiesen
----------------------------
Name: JoAnn Matthiesen
Title: Vice President

SIERRA PACIFIC RESOURCES

/s/ William E. Peterson
----------------------------
Name: William E. Peterson
Title: Senior Vice President/
General Counsel

SIERRA PACIFIC POWER COMPANY

/s/ William E. Peterson
----------------------------
Name: William E. Peterson
Title: Senior Vice President/
General Counsel

RESOURCES WEST ENERGY CORPORATION

/s/ Lawrence J. Pierce
---------------------------
Name: Lawrence J. Pierce
Title: Vice President

EXECUTIVE

/s/ Paul A. Redmond
---------------------------
Paul A. Redmond
<PAGE> 10
-10-

Annex A
to Employment
Agreement

DUTIES OF EXECUTIVE

CHAIRMAN OF THE BOARD

CHIEF EXECUTIVE OFFICER

The Chief Executive Officer of the Company shall be a director
and shall, subject to the authority to the Board, be in charge of the
management of the business and affairs of the Company. The President, the
Chief Financial Officer and the Internal Auditing Department of the Company and
the chief executive officer of Pentzer Corporation will report directly to the
Chief Executive Officer. The Chief Executive Officer shall submit a report of
the operations of the Company for the fiscal year to the shareholders at their
annual meeting and from time- to-time shall report to the Board of Directors
all matters within his knowledge which the interests of the Company may require
be brought to their notice.

<PAGE> 1
Exhibit 10(t)-2

EMPLOYMENT AGREEMENT

EMPLOYMENT AGREEMENT made and entered into as of the 27th day
of June, 1994, by and among The Washington Water Power Company, a Washington
corporation whose principal place of business is located at 1411 East Mission
Avenue, Spokane, Washington ("WWP"), Resources West Energy Corporation, a
Nevada corporation whose principal place of business is located at 1411 East
Mission Avenue, Spokane, Washington (the "Company"), Sierra Pacific Resources,
a Nevada corporation whose principal place of business is located at 6100 Neil
Road, Reno, Nevada ("SPR"), Sierra Pacific Power Company, a Nevada corporation
whose principal place of business is located at 6100 Neil Road, Reno, Nevada
("SPPC") (WWP, the Company, SPR and SPPC sometimes collectively referred to
herein as the "Corporations"), and Walter M. Higgins (the "Executive");

WHEREAS, the Executive is currently serving as Chairman,
President and Chief Executive Officer of SPR and SPPC, and the Corporations
desire to secure the continued employment of the Executive in accordance
herewith;

WHEREAS, the Executive is willing to commit himself to remain
in the employ of SPR, SPPC and the Company, as the successor to SPR and SPPC,
on the terms and conditions herein set forth and thus to forego opportunities
elsewhere; and

WHEREAS, the parties desire to enter into this Agreement, as
of the Effective Date (as hereinafter defined), setting forth the terms and
conditions for the employment relationship of the Executive with the Company
during the Employment Period (as hereinafter defined);

NOW, THEREFORE, IN CONSIDERATION of the mutual promises,
covenants and agreements set forth below, it is hereby agreed as follows:

1. Employment and Term.

(a) The Corporations and any successor thereto, agree, on
behalf of the Company, to employ the Executive, and the Executive agrees to
remain in the employ of SPR, SPPC and the Company, as the successor to SPR and
SPPC, in accordance with the terms and provisions of this Agreement for the
period set forth below (the "Employment Period").

(b) The Employment Period shall commence as of the
consummation date (the "Effective Date") of the merger (the "Merger") pursuant
to the terms of the Merger Agreement and shall continue until the close of
business on December 31, 2002; provided, however, that if the Merger Agreement
is terminated, then, at the time of such termination, this Agreement shall be
deemed canceled and of no force or effect. As a condition to the Merger, the
parties hereto agree that the Company shall be responsible for all the
promises, covenants and agreements set forth in this Agreement.

2. Duties and Powers of Executive.

(a) Position; Location. From the Effective Date until
January 1, 1999, the Executive shall serve as the Vice Chairman of the Board of
Directors of the Company (the "Board") (assuming the Executive has been elected
to the Board by the shareholders), President and the Chief Operating Officer of
the Company and as Chief Executive Officer of the Washington Water Power and
Sierra Pacific
<PAGE> 2
- 2 -

operating divisions. Effective January 1, 1999 (or on such earlier date as
Paul Redmond shall no longer continue to serve as Chief Executive Officer of
the Company) until January 1, 2002, the Executive shall serve as Vice Chairman
of the Board, President and Chief Executive Officer of the Company and as Chief
Executive Officer of the Washington Water Power and Sierra Pacific operating
divisions. If elected by the Board, effective January 1, 2002 until December
31, 2005, the Executive shall serve as Chairman of the Board and Chief
Executive Officer. During the Employment Period, the Executive shall have such
authority, duties and responsibilities as are set forth for the positions he
then holds in Annex A hereto. Such titles, authority, duties and
responsibilities may be changed from time to time only by mutual written
agreement of the parties. The Executive's services shall be performed at the
location where the Executive is currently employed; provided, however, that if
the Executive is relocated to Spokane, he shall be entitled to receive all
benefits and other amounts described in Section 3(e) hereof.

(b) Commencing on the Effective Date until the end of the
Employment Period, the Company shall in connection with any annual meeting of
shareholders of the Company at which the Executive's class of Directors is to
be elected cause the Executive to be nominated as a director of the Company.

3. Compensation and Benefits.

The Executive shall receive the following compensation and
benefits for his services hereunder to the Company:

(a) Salary. The Executive's annual base salary ("Annual
Base Salary"), payable not less often than monthly in equal
installments, shall be at the annual rate of not less than the
Executive's base salary as of the Effective Date. Such Annual Base
Salary shall be reviewed at least annually. The Board may from time to
time direct such upward adjustments in Annual Base Salary as the Board
deems to be necessary or desirable including without limitation
adjustments in order to reflect increases in the cost of living and
the planned increases in the Executive's responsibilities. Annual
Base Salary shall not be reduced after any increase thereof. Any
increase in Annual Base Salary shall not serve to limit or reduce any
other obligation of the Company under this Agreement.

(b) Incentive, Retirement and Welfare Benefit Plans.
During the Employment Period and so long as the Executive is employed
by the Company, he shall be eligible to participate in all incentive,
stock option, restricted stock, performance unit or share, savings,
retirement, insurance and welfare plans, practices, policies and
programs applicable generally to employees and/or other senior
executives of the Company, except with respect to any benefits under
any plan, practice, policy or program to which the Executive has
waived his rights in writing.

(d) Fringe Benefits. During the Employment Period and so
long as the Executive is employed by the Company, he shall be entitled
to the following fringe benefits: (A) the Company shall pay the annual
dues, assessments and other membership charges of the Executive with
respect to the Executive's membership in the clubs and associations of
the Executive's choice that are used for business purposes; and (B)
the Company shall provide a one-time credit for 25 days paid leave for
the Executive pursuant to the Company's One- Leave Program (The
Washington Water Power One-Leave Program currently in effect and
assumed, or replaced by a similar plan, by the Company pursuant to the
Merger), further annual paid leave to accrue in accordance with the
terms of the One-Leave Program; in the case of paragraph (A) on a
basis substantially equivalent to such fringe benefits provided to the
Executive in the past. In addition, the Executive shall be entitled
to receive fringe benefits in accordance with the plans, practices,
programs and policies of the Company from time to time in effect,
commensurate with his position and at least comparable to those
received by other senior executives of the Company.

(e) Relocation Benefits. If during the Employment Period
the Executive is relocated to Spokane, he shall be entitled to
reimbursement from the Company for reasonable expenses incurred in
connection with the relocation.

(f) Other Compensation. If as a result of the
performance of his duties hereunder, the Executive loses the right to
receive any non-qualified vested pension benefits to which he is
entitled on the date of this Agreement, the Company agrees to pay him
an amount equal to the difference between what he received from such
non-qualified pension plan and what he would have received had he not
been penalized under any such plan's covenant not to compete.
<PAGE> 3
-3-

4. Termination of Employment.

(a) Death. The Executive's employment shall terminate
automatically upon the Executive's death during the Employment Period.

(i) material breach of any provision of this
Agreement, which breach shall not have been cured by the
Executive within thirty (30) days of receipt of written notice
of said breach;

(iii) conviction of a felony; or

(iv) any other acts or omission which subject the
Company to public disrespect, scandal, or ridicule.

(c) By the Executive for Good Reason. The Executive may
terminate his employment during the Employment Period for Good Reason. For
purposes of this Agreement, "Good Reason" shall mean:

(i) the reduction in the Executive's Annual Base
Salary as specified in Section 3(a) of this Agreement or any
other benefit or payment described in Section 3 of this
Agreement;

(ii) the change without his consent of the
Executive's title, authority, duties or responsibilities, or
the timing thereof, as specified in Section 2(a) of this
Agreement;

(iii) the Company requiring the Executive without
his consent to be based at any office or location other than
the location where the Executive is currently employed or
Spokane; or

(iv) any breach by the Corporations or the Company
of any other material provision of this Agreement.

<PAGE> 4
-4-

Executive's employment is terminated by the Company other than for Cause or for
Disability, the Date of Termination shall be the date on which the Company
notifies the Executive of such termination, and (iii) if the Executive's
employment is terminated by reason of death, the Date of Termination shall be
the date of death.

5. Obligations of the Company Upon Termination.

(i) the Company shall pay to the Executive (or
his beneficiary) a lump sum amount in cash equal to the sum of
(1) the Executive's Annual Base Salary through the Date of
Termination to the extent not theretofore paid, (2) all
incentive or other compensation, if any, awarded but not yet
paid with respect to fiscal years ending prior to the fiscal
year in which the Date of Termination occurred, (3) any
compensation previously deferred by the Executive (together
with any accrued interest or earnings thereon) and (4) any
accrued leave pursuant to the One-Leave Program, to the extent
not theretofore paid. (The amounts specified in clauses (1),
(2), (3) and (4) shall be hereinafter referred to as the
"Accrued Obligations"). The amounts specified in clauses (1),
(2) and (4) of this Section 5(a)(i) shall be paid within 30
days after the Date of Termination; the amount referred to in
clause (3), if any, will be paid pursuant to the terms of the
Executive Deferred Compensation Plan; and

(ii) in the event of Termination other than by
reason of the Executive's death, then (a) the Company shall
pay to the Executive an amount in cash equal to three (3)
times the Annual Base Salary described in Section 3(a) of this
Agreement, at the rate in effect at the time Notice of
Termination is given, within thirty (30) days of such Date of
Termination or, at the option of the Executive, in
installments over a period not to exceed thirty-six (36)
months; (b) the Company shall pay to or cause to be paid to
the Executive, pursuant to the terms of the respective plans,
based on the Executive's Annual Base Salary at the time Notice
of Termination is given, the value of all benefits to which
the Executive would have been entitled had he remained in the
employment of the Company until the end of the Employment
Period, under the Company's pension plan(s), supplemental
executive retirement plan(s), disability plan(s) and such
other benefit plans as may be adopted from time to time during
the Executive's employment with the Company; (c) the Company
shall continue medical and welfare benefits to the Executive
and/or the Executive's family at least equal to those which
would have been provided if the Executive's employment had not
been terminated (excluding benefits to which the Executive has
waived his rights in writing), such benefits to be in
accordance with the most favorable medical and welfare benefit
plans, practices, programs or policies (the "M&W Plans") of
the Company as in effect and applicable generally to other
senior executives of the Company and their families during the
90-day period immediately preceding the Date of Termination
or, if more favorable to the Executive, as in effect generally
at any time thereafter with respect to other senior executives
of the Company (but on a prospective basis only unless and
then only to the extent such more favorable M&W Plans are by
their terms retroactive); provided, however, that if the
Executive becomes reemployed with another employer and is
eligible to receive medical or other welfare benefits under
another employer provided plan, the benefits under the M&W
Plans shall be secondary to those provided under such other
plan during such applicable period of eligibility; provided,
however, that these provisions shall not operate to reduce any
rights the Executive may have under Section 4980B of the Code,
Part 6 of Title I of ERISA or any other state or federal
legislation, but shall be in addition to such rights; and (d)
with respect to any incentive or similar plan awards, all
options shall vest in full and become immediately exercisable,
all restrictions shall lapse with respect to restricted stock,
and any other types of awards, including but not limited to
stock appreciation rights, performance units and performance
shares, shall vest in full and become immediately exercisable
or payable; provided, however, that if the Executive's
entitlement to any of the stock options, restricted stock or
other awards referred to above is subject to fulfillment of
performance criteria, either corporate or individual, over a
performance period, then payment of such awards shall be made,
if at all, at the end of the performance period, based upon
the achievement of goals for the entire period, prorated from
the beginning of the performance period to the Date of
Termination.

<PAGE> 5
-5-

(c) Any payments made pursuant to this Section 5 shall be
subject to the limits, to the extent applicable, set forth in Section 10(g)
hereof.

6. Non-exclusivity of Rights.

Except as provided in Section 10(g) hereof, nothing in this
Agreement shall prevent or limit the Executive's continuing or future
participation in any benefit, plan, program, policy or practice provided by the
Company and for which the Executive may qualify (except with respect to any
benefit to which the Executive has waived his rights in writing), nor shall
anything herein limit or otherwise affect such rights as the Executive may have
under any other contract or agreement entered into after the Effective Date
with the Company. Amounts which are vested benefits or which the Executive is
otherwise entitled to receive under any benefit, plan, policy, practice or
program of, or any contract or agreement entered into after the date hereof
with, the Company at or subsequent to the Date of Termination, shall be payable
in accordance with such benefit, plan, policy, practice or program or contract
or agreement except as explicitly modified by this Agreement.

7. Full Settlement; Mitigation.

8. Confidential Information.

The Executive shall hold in a fiduciary capacity for the
benefit of the Company all confidential information, knowledge or data relating
to the Company or any of its affiliated companies, and their respective
businesses, which shall have been obtained by the Executive during the
Executive's employment by the Company, the Corporations or any of their
affiliated companies and that shall not have been or hereafter have become
public knowledge (other than by acts by the Executive or representatives of the
Executive in violation of this Agreement). During the Employment Period, the
Executive shall not, without the prior consent of the Company or as may
otherwise be required by law or legal process, communicate or divulge any such
information, knowledge or data to anyone other than the Company and those
designated by it.

9. Successors.

(b) This Agreement shall inure to the benefit of and be
binding upon the Corporations, the Company and their respective successors and
assigns.

<PAGE> 6
-6-

10. Miscellaneous.

(a) This Agreement shall be governed by and construed in
accordance with the laws of the State of Nevada, without reference to
principles of conflict of laws. The captions of this Agreement are not part of
the provisions hereof and shall have no force or effect. This Agreement may
not be amended, modified, repealed, waived, extended or discharged except by an
agreement in writing signed by the party against whom enforcement of such
amendment, modification, repeal, waiver, extension or discharge is sought. No
person, other than pursuant to a resolution of the Board or a committee
thereof, shall have authority on behalf of the Corporations or the Company to
agree to amend, modify, repeal, waive, extend or discharge any provision of
this Agreement or anything in reference thereto.

If to the Executive:

Walter M. Higgins
6100 Neil Road
Reno, Nevada 89511

If to the Company:

Resources West Energy Corporation
1411 East Mission Avenue, P.O. Box 3727
Spokane, Washington 99220

or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.

(c) The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.

(d) The Company may withhold from any amounts payable
under this Agreement such federal, state or local taxes as shall be required to
be withheld pursuant to any applicable law or regulation.

(g) Notwithstanding any provision of this Agreement to
the contrary, in the event of any payment made to the Executive which is
contingent upon a change in the ownership or effective control of the

<PAGE> 7
-7-

Company, or in the ownership of a substantial portion of the Company's assets,
as described in Section 280G of the Code, or in any regulation promulgated
thereunder, the aggregate amount of such payments, whether or not made pursuant
to the terms of this Agreement, shall not exceed an amount equal to the
Executive's Base Amount (as defined under Code Section 280G(b)(3) and the
regulations thereunder) multiplied by three (3), less one dollar ($1.00).

<PAGE> 8
-8-

IN WITNESS WHEREOF, the Executive and, pursuant to due
authorization from their respective Board of Directors, the Corporations have
caused this Agreement to be executed as of the day and year first above
written.

THE WASHINGTON WATER
POWER COMPANY

/s/ JoAnn Matthiesen
----------------------------
Name: JoAnn Matthiesen
Title: Vice President

SIERRA PACIFIC RESOURCES

/s/ William E. Peterson
----------------------------
Name: William E. Peterson
Title: Senior Vice President/
General Counsel

SIERRA PACIFIC POWER COMPANY

/s/ William E.Peterson
----------------------------
Name: William E. Peterson
Title: Senior Vice President/
General Counsel

RESOURCES WEST ENERGY CORPORATION

/s/ Lawrence J. Pierce
---------------------------
Name: Lawrence J. Pierce
Title: Vice President

EXECUTIVE

/s/ Walter M. Higgins
----------------------------
Walter M. Higgins

<PAGE> 9

Annex A
to Employment
Agreement

DUTIES OF EXECUTIVE

VICE CHAIRMAN

The Vice Chairman of the Board shall be a director and shall
preside at meetings of the Board of Directors in the absence or inability to
act of the Chairman of the Board. The Vice Chairman shall perform such duties
as may from time-to-time be assigned to him by the Board of Directors.

PRESIDENT AND CHIEF OPERATING OFFICER

The President shall be a director and shall be the Chief
Operating Officer of the Company. The President shall have general and active
management and direction of the business and affairs of the Company, shall have
supervision of all departments and of all officers of the Company except those
reporting directly to the Chief Executive Officer, shall see that the orders
and resolutions of the Board of Directors are carried into effect, and shall
have the general powers and duties of supervision and management usually vested
in the office of President of a public utility company. All corporate officers
and functions except those reporting to the Chief Executive Officer shall
report directly to the President. The President and Chief Operating Officer
shall report to the Chief Executive Officer of the Company.

CHIEF EXECUTIVE OFFICER OF UTILITY OPERATING DIVISIONS

The Chief Executive Officer of any utility operating division
shall, subject to the authority of the President and Chief Operating Officer of
the Company, be in charge of the management of the business and affairs of such
utility operating division and shall supervise all officers who are part of
such utility operating division. The Chief Executive Officer of any utility
operating division shall, with respect to such division and subject to the
powers and authority of the President and Chief Operating Officer of the
Company, have the duties, powers and authority usually vested in the chief
executive officer of a public utility company. The Chief Executive Officer of
any utility operating division shall report to the President and Chief
Operating Officer of the Company unless those positions are held by the same
person, in which event such person shall report directly to the Chief Executive
Officer of the Company.

CHAIRMAN OF THE BOARD

The Chairman of the Board of Directors shall be a director and
shall preside at all meetings of the Board of Directors and shareholders of the
Company, shall, subject to the direction and control of the Board, be their
representative and medium of communication, and shall perform such duties as
may from time-to-time be assigned to him by the Board of Directors. The
Chairman shall direct the long-term strategic planning process of the Company
and shall also lend his expertise and experience to the President, as may be
requested from time-to-time by the President.

CHIEF EXECUTIVE OFFICER

<PAGE> 1
EXHIBIT 12

THE WASHINGTON WATER POWER COMPANY

Computation of Ratio of Earnings to Fixed Charges and Preferred Dividend
Requirements (1)
Consolidated
(Thousands of Dollars)

<TABLE>
<CAPTION>
Years Ended December 31
-------------------------------------------------------------------
1994 1993 1992 1991 1990
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Fixed charges, as defined:
Interest on long-term debt $ 49,566 $ 47,129 $ 51,727 $ 52,801 $ 56,202
Amortization of debt expense
and premium - net 3,511 3,004 1,814 1,751 1,558
Interest portion of rentals 1,282 924 1,105 1,018 1,012
--------- --------- --------- --------- ---------
Total fixed charges $ 54,359 $ 51,057 $ 54,646 $ 55,570 $ 58,772
========= ========= ========= ========= =========

Earnings, as defined:
Net income from continuing ops. $ 77,197 $ 82,776 $ 72,267 $ 70,631 $ 72,147
Add (deduct):
Income tax expense 44,696 42,503 41,330 38,086 33,150
Total fixed charges above 54,359 51,057 54,646 55,570 58,772
--------- --------- --------- --------- ---------
Total earnings $ 176,252 $ 176,336 $ 168,243 $ 164,287 $ 164,069
========= ========= ========= ========= =========

Ratio of earnings to fixed charges 3.24 3.45 3.08 2.96 2.79

Fixed charges and preferred
dividend requirements:
Fixed charges above $ 54,359 $ 51,057 $ 54,646 $ 55,570 $ 58,772
Preferred dividend requirements (2) 13,668 12,615 10,716 14,302 12,287
--------- --------- --------- --------- ---------
Total $ 68,027 $ 63,672 $ 65,362 $ 69,872 $ 71,059
========= ========= ========= ========= =========

Ratio of earnings to fixed charges
and preferred dividend requirements 2.59 2.77 2.57 2.35 2.31
</TABLE>

(1) Calculations have been restated to reflect the results from continuing
operations (ie. excluding discontinued coal mining operations).

(2) Preferred dividend requirements have been grossed up to their pre-tax
level.

<PAGE> 1

Exhibit 21

THE WASHINGTON WATER POWER COMPANY

SUBSIDIARIES OF REGISTRANT

<TABLE>
<CAPTION>
Subsidiary State of Incorporation
- --------------------------------------------------- ----------------------
<S> <C>
Pentzer Corporation Washington

Washington Irrigation & Development Company Washington

WP Finance Company Washington

The Limestone Company, Inc. Washington
</TABLE>

<ARTICLE> UT
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF THE WASHINGTON WATER POWER COMPANY,
INCLUDED IN THE ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1994,
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 1,329,045
<OTHER-PROPERTY-AND-INVEST> 202,760
<TOTAL-CURRENT-ASSETS> 150,246
<TOTAL-DEFERRED-CHARGES> 312,202
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 1,994,253
<COMMON> 558,336
<CAPITAL-SURPLUS-PAID-IN> 4,310
<RETAINED-EARNINGS> 114,848
<TOTAL-COMMON-STOCKHOLDERS-EQ> 677,494
85,000
50,000
<LONG-TERM-DEBT-NET> 608,225<F1>
<SHORT-TERM-NOTES> 58,000
<LONG-TERM-NOTES-PAYABLE> 9,911
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 47,784
0
<CAPITAL-LEASE-OBLIGATIONS> 9
<LEASES-CURRENT> 14
<OTHER-ITEMS-CAPITAL-AND-LIAB> 457,816<F2>
<TOT-CAPITALIZATION-AND-LIAB> 1,994,253
<GROSS-OPERATING-REVENUE> 670,765
<INCOME-TAX-EXPENSE> 44,696<F3>
<OTHER-OPERATING-EXPENSES> 515,307
<TOTAL-OPERATING-EXPENSES> 515,307
<OPERATING-INCOME-LOSS> 155,458
<OTHER-INCOME-NET> 15,825
<INCOME-BEFORE-INTEREST-EXPEN> 171,283<F4>
<TOTAL-INTEREST-EXPENSE> 49,390
<NET-INCOME> 77,197
8,656
<EARNINGS-AVAILABLE-FOR-COMM> 68,541
<COMMON-STOCK-DIVIDENDS> 66,378
<TOTAL-INTEREST-ON-BONDS> 23,261
<CASH-FLOW-OPERATIONS> 144,843
<EPS-PRIMARY> 1.28
<EPS-DILUTED> 1.28
<FN>
<F1>LONG-TERM DEBT-NET DOES NOT MATCH THE AMOUNT REPORTED ON THE COMPANY'S
CONSOLIDATED STATEMENT OF CAPITALIZATION AS LONG-TERM DEBT DUE TO THE OTHER
CATEGORIES REQUIRED BY THIS SCHEDULE.
<F2>OTHER ITEMS CAPITAL AND LIABILITIES INCLUDES THE CURRENT LIABILITIES, DEFERRED
CREDITS AND MINORITY INTEREST, LESS CERTAIN AMOUNTS INCLUDED UNDER LONG-TERM
DEBT-CURRENT PORTION AND LEASES-CURRENT, FROM THE COMPANY'S CONSOLIDATED
BALANCE SHEET.
<F3>THE COMPANY DOES NOT INCLUDE INCOME TAX EXPENSE AS AN OPERATING EXPENSE ITEM.
IT IS INCLUDED ON THE COMPANY'S STATEMENTS AS A BELOW-THE-LINE ITEM.
<F4>INCOME BEFORE INTEREST EXPENSE IS NOT A SPECIFIC LINE ITEM ON THE COMPANY'S
INCOME STATEMENTS. THE COMPANY COMBINES TOTAL INTEREST EXPENSE AND OTHER
INCOME TO CALCULATE INCOME BEFORE INCOME TAXES.
</FN>

</TABLE>