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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

Form 10-Q

 

(Mark One)

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

 

 

FOR THE QUARTERLY PERIOD ENDED March 31, 2024 OR

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

 

 

FOR THE TRANSITION PERIOD FROM TO

 

Commission file number 1-3701

 

 

AVISTA CORPORATION

(Exact name of Registrant as specified in its charter)

 

Washington

 

91-0462470

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer
Identification No.)

 

1411 East Mission Avenue, Spokane, Washington 99202-2600

(Address of principal executive offices, including zip code)

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

None

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

 

Title of Each Class

 

Trading Symbol(s)

 

Name of Each Exchange on Which Registered

Common Stock

 

AVA

 

New York Stock Exchange

 

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 ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes ☐ No

As of April 26, 2024, 78,188,832 shares of Registrant’s Common Stock, no par value (the only class of common stock), were outstanding.

 


Table of Contents

 

AVISTA CORPORATION

 

AVISTA CORPORATION

INDEX

Item No.

 

 

Page No.

 

 

 

 

 

Acronyms and Terms

 

iii

 

Forward-Looking Statements

 

1

 

Available Information

 

5

Part I. Financial Information

 

 

Item 1.

Condensed Consolidated Financial Statements (unaudited)

 

6

 

Condensed Consolidated Statements of Income -
Three Months Ended March 31, 2024 and 2023

 

6

 

Condensed Consolidated Statements of Comprehensive Income -
Three Months Ended March 31, 2024 and 2023

 

7

 

Condensed Consolidated Balance Sheets -
March 31, 2024 and December 31, 2023

 

8

 

Condensed Consolidated Statements of Cash Flows -
Three Months Ended March 31, 2024 and 2023

 

9

 

Condensed Consolidated Statements of Equity -
Three Months Ended March 31, 2024 and 2023

 

11

 

Notes to Condensed Consolidated Financial Statements (unaudited)

 

12

 

Note 1. Summary of Significant Accounting Policies

 

12

 

Note 2. New Accounting Standards

 

13

 

Note 3. Balance Sheet Components

 

14

 

Note 4. Revenue

 

17

 

Note 5. Derivatives and Risk Management

 

20

 

Note 6. Pension Plans and Other Postretirement Benefit Plans

 

23

 

Note 7. Income Taxes

 

24

 

Note 8. Short-Term Borrowings

 

24

 

Note 9. Long-Term Debt

 

26

 

Note 10. Long-Term Debt to Affiliated Trusts

 

26

 

Note 11. Fair Value

 

26

 

Note 12. Accumulated Other Comprehensive Loss

 

31

 

Note 13. Earnings per Common Share

 

31

 

Note 14. Commitments and Contingencies

 

31

 

Note 15. Information by Business Segments

 

36

 

Report of Independent Registered Public Accounting Firm

 

37

 

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

38

 

Business Segments

 

38

 

Executive Overview

 

38

 

Regulatory Matters

 

39

 

Results of Operations - Overall

 

41

 

Non-GAAP Financial Measures

 

42

 

Results of Operations - Avista Utilities

 

43

 

Results of Operations - Alaska Electric Light and Power Company

 

50

i


 

Results of Operations - Other Businesses

 

50

 

Critical Accounting Policies and Estimates

 

50

 

Liquidity and Capital Resources

 

50

 

Overall Liquidity

 

50

 

Review of Consolidated Cash Flow Statement

 

50

 

Capital Resources

 

51

 

Capital Expenditures

 

52

 

Pension Plan

 

53

 

Environmental Issues and Contingencies

 

53

 

Enterprise Risk Management

 

54

 

 

 

 

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

 

55

 

 

 

 

Item 4.

Controls and Procedures

 

55

 

 

 

 

Part II. Other Information

 

 

Item 1.

Legal Proceedings

 

57

 

 

 

 

Item 1A.

Risk Factors

 

57

 

 

 

 

Item 5.

Other Information

 

57

 

 

 

 

Item 6.

Exhibits

 

58

 

 

 

 

 

Signature

 

59

 

 

 

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AVISTA CORPORATION

 

ACRONYMS AND TERMS

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

 

Acronym/Term

Meaning

aMW

-

Average Megawatt - a measure of the average rate at which a particular generating source produces energy over a period of time

AEL&P

-

Alaska Electric Light and Power Company, the primary operating subsidiary of AERC, which provides electric services in Juneau, Alaska

AERC

-

Alaska Energy and Resources Company, the Company's wholly-owned subsidiary based in Juneau, Alaska

AFUDC

-

Allowance for Funds Used During Construction; represents the cost of both the debt and equity funds used to finance utility plant additions during the construction period

ASC

-

Accounting Standards Codification

ASU

-

Accounting Standards Update

Avista Capital

-

Parent company to the Company’s non-utility businesses, with the exception of AJT Mining Properties, Inc., which is a subsidiary of AERC.

Avista Corp.

-

Avista Corporation, the Company

Avista Utilities

-

Operating division of Avista Corp. (not a subsidiary) comprising the regulated utility operations in the Pacific Northwest

Capacity

-

The rate at which a particular generating source is capable of producing energy, measured in KW or MW

Cabinet Gorge

-

The Cabinet Gorge Hydroelectric Generating Project, located on the Clark Fork River in Idaho

CCA

-

Climate Commitment Act

CETA

-

Clean Energy Transformation Act

Colstrip

-

The coal-fired Colstrip Generating Plant in southeastern Montana

Cooling degree days

-

The measure of the warmness of weather experienced, based on the extent to which the average of high and low temperatures for a day exceeds 65 degrees Fahrenheit (annual degree days above historic indicate warmer than average temperatures)

COVID-19

-

Coronavirus disease 2019, a respiratory illness declared a pandemic in March 2020

Deadband or ERM
deadband

-

The first $4.0 million in annual power supply costs above or below the amount included in base retail rates in Washington under the ERM in the state of Washington

EIM

-

Energy Imbalance Market

Energy

-

The amount of electricity produced or consumed over a period of time, measured in KWh or MWh. Also, refers to natural gas consumed and is measured in dekatherms

EPA

-

Environmental Protection Agency

ERM

-

The Energy Recovery Mechanism, a mechanism for accounting and rate recovery of certain power supply costs accepted by the utility commission in the state of Washington

FASB

-

Financial Accounting Standards Board

FCA

-

Fixed Cost Adjustment, the electric and natural gas decoupling mechanism in Idaho

FERC

-

Federal Energy Regulatory Commission

GAAP

-

Generally Accepted Accounting Principles

GHG

-

Greenhouse gas

Heating degree days

-

The measure of the coldness of weather experienced, based on the extent to which the average of high and low temperatures for a day falls below 65 degrees Fahrenheit (annual degree days below historic indicate warmer than average temperatures).

IPUC

-

Idaho Public Utilities Commission

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KW, KWh

-

Kilowatt (1000 watts): a measure of generating power or capability. Kilowatt-hour (1000 watt hours): a measure of energy produced over a period of time

MPSC

-

Public Service Commission of the State of Montana

MW, MWh

-

Megawatt: 1000 KW. Megawatt-hour: 1000 KWh

Noxon Rapids

-

The Noxon Rapids Hydroelectric Generating Project, located on the Clark Fork River in Montana

OPUC

-

The Public Utility Commission of Oregon

PCA

-

The Power Cost Adjustment mechanism, a procedure for accounting and rate recovery of certain power supply costs accepted by the utility commission in the state of Idaho

PGA

-

Purchased Gas Adjustment

PPA

-

Power Purchase Agreement

RCA

-

The Regulatory Commission of Alaska

REC

-

Renewable energy credit

ROE

-

Return on equity

ROR

-

Rate of return on rate base

ROU

-

Right-of-use lease asset

SEC

-

U.S. Securities and Exchange Commission

SOFR

-

Secured Overnight Financing Rate

Talen

-

Talen Montana, LLC, an indirect subsidiary of Talen Energy Corporation.

Therm

-

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

Watt

-

Unit of measurement of electric power or capability; a watt is equal to the rate of work represented by a current of one ampere under a pressure of one volt

WUTC

-

Washington Utilities and Transportation Commission

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Forward-Looking Statements

From time to time, we make forward-looking statements such as statements regarding projected or future:

financial performance;
cash flows;
capital expenditures;
dividends;
capital structure;
other financial items;
strategic goals and objectives;
business environment; and
plans for operations.

These statements are based upon underlying assumptions (many of which are based, in turn, upon further assumptions). Such statements are made both in our reports filed under the Securities Exchange Act of 1934, as amended (including this Quarterly Report on Form 10-Q), and elsewhere. Forward-looking statements are all statements except those of historical fact including, without limitation, those identified by the use of words that include “will,” “may,” “could,” “should,” “intends,” “plans,” “seeks,” “anticipates,” “estimates,” “expects,” “forecasts,” “projects,” “predicts,” and similar expressions.

Forward-looking statements (including those made in this Quarterly Report on Form 10-Q) are subject to a variety of risks, uncertainties and other factors. Most of these factors are beyond our control and may have a significant effect on our operations, results of operations, financial condition or cash flows, which could cause actual results to differ materially from those anticipated in our statements. Such risks, uncertainties and other factors include, among others:

Utility Regulatory Risk

state and federal regulatory decisions or related judicial decisions that affect our ability to recover costs and earn a reasonable return including, but not limited to, disallowance or delay in the recovery of capital investments, operating costs, commodity costs, the ordering of refunds to customers and discretion over allowed return on investment;
the loss of regulatory accounting treatment, which could require the write-off of regulatory assets and the loss of regulatory deferral and recovery mechanisms;

Operational Risk

weather conditions, which affect both energy demand and electric generating capability, including the impact of precipitation and temperature on hydroelectric resources, the impact of wind patterns on wind-generated power, weather-sensitive customer demand, and similar impacts on supply and demand in the wholesale energy markets;
wildfires ignited, or allegedly ignited, by our equipment or facilities could cause significant loss of life and property or result in liability for resulting fire suppression costs and/or damages, thereby causing serious operational, reputational and financial harm;
severe weather or natural disasters, including, but not limited to, avalanches, wind storms, wildfires, earthquakes, extreme temperature events, snow and ice storms that could disrupt energy generation, transmission and distribution, as well as the availability and costs of fuel, materials, equipment, supplies and support services;
political unrest and/or conflicts between foreign nation-states, which could disrupt the global, national and local economy, result in increases in operating and capital costs, impact energy commodity prices or our ability to access energy resources, create disruption in supply chains, disrupt, weaken or create volatility in capital markets, and increase cyber

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AVISTA CORPORATION

 

and physical security risks. In addition, any of these factors could negatively impact our liquidity and limit our access to capital, among other implications;
explosions, fires, accidents, mechanical breakdowns or other incidents that could impair assets and may disrupt operations of our generation facilities, transmission, and electric and natural gas distribution systems or other operations and may require us to purchase replacement power or incur costs to repair our facilities;
interruptions in the delivery of natural gas by our suppliers, including physical problems with pipelines themselves, can disrupt our service of natural gas to our customers and/or impair our ability to operate gas-fired electric generating facilities;
explosions, fires, accidents or other incidents arising from or allegedly arising from our operations that could cause injuries to the public or property damage;
blackouts or disruptions of interconnected transmission systems (the regional power grid);
terrorist attacks, cyberattacks or other malicious acts that could disrupt or cause damage to our utility assets or to the national or regional economy in general, including effects of terrorism, cyberattacks, ransomware, or vandalism that damage or disrupt information technology systems;
pandemics, which could disrupt our business, as well as the global, national and local economy, resulting in a decline in customer demand, deterioration in the creditworthiness of our customers, increases in operating and capital costs, workforce shortages, losses or disruptions in our workforce due to vaccine mandates, delays in capital projects, disruption in supply chains, and disruption, weakness and volatility in capital markets. In addition, any of these factors could negatively impact our liquidity and limit our access to capital, among other implications;
work-force issues, including changes in collective bargaining unit agreements, strikes, work stoppages, the loss of key executives, availability of workers in a variety of skill areas, and our ability to recruit and retain employees;
changes in the availability and price of purchased power, fuel and natural gas, as well as transmission capacity;
increasing costs of insurance, more restrictive coverage terms and our ability to obtain insurance;
delays or changes in construction costs, and/or our ability to obtain required permits and materials for present or prospective facilities;
increasing health care costs and cost of health insurance provided to our employees and retirees;
increasing operating costs, including effects of inflationary pressures;
third party construction of buildings, billboard signs, towers or other structures within our rights of way, or placement of fuel containers within close proximity to our transformers or other equipment, including overbuilding atop natural gas distribution lines;
the loss of key suppliers for materials or services or other disruptions to the supply chain;
adverse impacts to our Alaska electric utility (AEL&P) that could result from an extended outage of its hydroelectric generating resources or their inability to deliver energy, due to their lack of interconnectivity to other electrical grids and the availability or cost of replacement power (diesel);
changing river or reservoir regulation or operations at hydroelectric facilities not owned by us, which could impact our hydroelectric facilities downstream;

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Climate Change Risk

increasing frequency and intensity of severe weather or natural disasters resulting from climate change, that could disrupt energy generation, transmission and distribution, as well as the availability and costs of fuel, materials, equipment, supplies and support services;
change in the use, availability or abundancy of water resources and/or rights needed for operation of our hydroelectric facilities, including impacts resulting from climate change;
changes in the long-term climate and weather could materially affect, among other things, customer demand, the volume and timing of streamflows required for hydroelectric generation, costs of generation, transmission and distribution. Increased or new risks may arise from severe weather or natural disasters, including wildfires as well as their increased occurrence and intensity related to changes in climate;

Cybersecurity Risk

cyberattacks on the operating systems used in the operation of our electric generation, transmission and distribution facilities and our natural gas distribution facilities, and cyberattacks on such systems of other energy companies with which we are interconnected, which could damage or destroy facilities or systems or disrupt operations for extended periods of time and result in the incurrence of liabilities and costs;
cyberattacks on the administrative systems used in the administration of our business, including customer billing and customer service, accounting, communications, compliance and other administrative functions, and cyberattacks on such systems of our vendors and other companies with which we do business, resulting in the disruption of business operations, the release of private information and the incurrence of liabilities and costs;

Technology Risk

changes in costs that impede our ability to implement new information technology systems or to operate and maintain current production technology;
changes in technologies, possibly making some of the current technology we utilize obsolete or introducing new cyber security risks and other new risks inherent in the use, by either us or our counterparties, of new technologies in the developmental stage including, without limitation, generative artificial intelligence;
changes in the use, perception, or regulation of generative artificial intelligence technologies, which could limit our ability to utilize such technology, create risk of enhanced regulatory scrutiny, generate uncertainty around intellectual property ownership, licensing or use, or which could otherwise result in risk of damage to our business, reputation or financial results;
insufficient technology skills, which could lead to the inability to develop, modify or maintain our information systems;

Strategic Risk

growth or decline of our customer base due to new uses for our services or decline in existing services, including, but not limited to, the effect of the trend toward distributed generation at customer sites;
the potential effects of negative publicity regarding our business practices, whether true or not, which could hurt our reputation and result in litigation or a decline in our common stock price;
changes in our strategic business plans, which could be affected by any or all of the foregoing, including the entry into new businesses and/or the exit from existing businesses and the extent of our business development efforts where potential future business is uncertain;

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wholesale and retail competition including alternative energy sources, growth in customer-owned power resource technologies that displace utility-supplied energy or may be sold back to the utility, and alternative energy suppliers and delivery arrangements;
non-regulated activities may increase earnings volatility and result in investment losses;
the risk of municipalization or other forms of service territory reduction;

External Mandates Risk

changes in environmental laws, regulations, decisions and policies, including, but not limited to, regulatory responses to concerns regarding climate change, efforts to restore anadromous fish in areas currently blocked by dams, more stringent requirements related to air quality, water quality and waste management, present and potential environmental remediation costs and our compliance with these matters;
the potential effects of initiatives, legislation or administrative rulemaking at the federal, state or local levels, including possible effects on our generating resources, prohibitions or restrictions on new or existing services, or restrictions on greenhouse gas emissions to mitigate concerns over climate changes, including future limitations on the usage and distribution of natural gas;
political pressures or regulatory practices that could constrain or place additional cost burdens on our distribution systems through accelerated adoption of distributed generation or electric-powered transportation or on our energy supply sources, such as campaigns to halt fossil fuel-fired power generation and opposition to other thermal generation, wind turbines or hydroelectric facilities;
failure to identify changes in legislation, taxation and regulatory issues that could be detrimental or beneficial to our overall business;
policy and/or legislative changes in various regulated areas, including, but not limited to, environmental regulation, healthcare regulations and import/export regulations;

Financial Risk

our ability to obtain financing through the issuance of debt and/or equity securities and access to our funds held with financial institutions, which could be affected by various factors including our credit ratings, interest rates, other capital market conditions and global economic conditions;
changes in interest rates that affect borrowing costs, variable interest rate borrowing and the extent to which we recover interest costs through retail rates collected from customers;
volatility in energy commodity markets that affect our ability to effectively hedge energy commodity risks, including cash flow impacts and requirements for collateral;
volatility in the carbon emissions allowances market that could result in increased compliance costs;
changes in actuarial assumptions, interest rates and the actual return on plan assets for our pension and other postretirement benefit plans, which could affect future funding obligations, pension and other postretirement benefit expense and the related liabilities;
the outcome of legal proceedings and other contingencies;
economic conditions in our service areas, including the economy's effects on customer demand for utility services;
economic conditions nationally may affect the valuation of our unregulated portfolio companies;

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declining electricity demand related to customer energy efficiency, conservation measures and/or increased distributed generation and declining natural gas demand related to customer energy efficiency, conservation measures and/or increased electrification;
industry and geographic concentrations which could increase our exposure to credit risks due to counterparties, suppliers and customers being similarly affected by changing conditions;
deterioration in the creditworthiness of our customers;
activist shareholders may result in additional costs and resources required in response to activist actions;

Energy Commodity Risk

volatility and illiquidity in wholesale energy markets, including exchanges, the availability of willing buyers and sellers, changes in wholesale energy prices that could affect operating income, cash requirements to purchase electricity and natural gas, value received for wholesale sales, collateral required of us by individual counterparties and/or exchanges in wholesale energy transactions and credit risk from such transactions, and the market value of derivative assets and liabilities;
default or nonperformance on the part of parties from whom we purchase and/or sell capacity or energy;
potential environmental regulations or lawsuits affecting our ability to utilize or resulting in the obsolescence of our power supply resources;
explosions, fires, accidents, pipeline ruptures or other incidents that could limit energy supply to our facilities or our surrounding territory, which could result in a shortage of commodities in the market that could increase the cost of replacement commodities from other sources;

Compliance Risk

changes in laws, regulations, decisions and policies at the federal, state or local levels, which could materially impact both our electric and gas operations and costs of operations; and
the ability to comply with the terms of the licenses and permits for our hydroelectric or thermal generating facilities at cost-effective levels.

Our expectations, beliefs and projections are expressed in good faith. We believe they are reasonable based on, without limitation, an examination of historical operating trends, our records and other information available from third parties. There can be no assurance our expectations, beliefs or projections will be achieved or accomplished. Furthermore, any forward-looking statement speaks only as of the date on which such statement is made. We undertake no obligation to update any forward-looking statement or statements to reflect events or circumstances that occur after the date on which such statement is made or to reflect the occurrence of unanticipated events. New risks, uncertainties and other factors emerge from time to time, and it is not possible for us to predict all such factors, nor can we assess the effect of each such factor on our business or the extent any such factor or combination of factors may cause actual results to differ materially from those contained in any forward-looking statement.

Available Information

We file annual, quarterly and current reports and proxy statements with the SEC. The SEC maintains a website that contains these documents at www.sec.gov. We make annual, quarterly and current reports and proxy statements available on our website, https://investor.avistacorp.com, as soon as practicable after electronically filing these documents with the SEC. Except for SEC filings or portions thereof specifically referred to in this report, information contained on these websites is not part of this report.

5


PART I. Financial Information

Item 1. Condensed Consolidated Financial Statements

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

Avista Corporation

 

For the Three Months Ended March 31

Dollars in thousands, except per share amounts

(Unaudited)

 

 

 

2024

 

 

2023

 

Operating Revenues:

 

 

 

 

 

 

Utility revenues:

 

 

 

 

 

 

Utility revenues, exclusive of alternative revenue programs

 

$

606,511

 

 

$

493,543

 

Alternative revenue programs

 

 

2,883

 

 

 

(19,038

)

Total utility revenues

 

 

609,394

 

 

 

474,505

 

Non-utility revenues

 

 

22

 

 

 

126

 

Total operating revenues

 

 

609,416

 

 

 

474,631

 

Operating Expenses:

 

 

 

 

 

 

Utility operating expenses:

 

 

 

 

 

 

Resource costs

 

 

293,117

 

 

 

192,928

 

Other operating expenses

 

 

111,249

 

 

 

104,978

 

Depreciation and amortization

 

 

67,927

 

 

 

65,188

 

Taxes other than income taxes

 

 

35,688

 

 

 

33,894

 

Non-utility operating expenses

 

 

319

 

 

 

1,042

 

Total operating expenses

 

 

508,300

 

 

 

398,030

 

Income from operations

 

 

101,116

 

 

 

76,601

 

Interest expense

 

 

36,904

 

 

 

35,084

 

Interest expense to affiliated trusts

 

 

657

 

 

 

571

 

Capitalized interest

 

 

(961

)

 

 

(842

)

Other income-net

 

 

(9,285

)

 

 

(6,429

)

Income before income taxes

 

 

73,801

 

 

 

48,217

 

Income tax expense (benefit)

 

 

2,306

 

 

 

(6,628

)

Net income

 

$

71,495

 

 

$

54,845

 

Weighted-average common shares outstanding (thousands), basic

 

 

78,161

 

 

 

75,169

 

Weighted-average common shares outstanding (thousands), diluted

 

 

78,211

 

 

 

75,275

 

 

 

 

 

 

 

Earnings per common share:

 

 

 

 

 

 

Basic

 

$

0.91

 

 

$

0.73

 

Diluted

 

$

0.91

 

 

$

0.73

 

 

The Accompanying Notes are an Integral Part of These Statements.

6


CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Avista Corporation

For the Three Months Ended March 31

Dollars in thousands

(Unaudited)

 

 

 

2024

 

 

2023

 

Net income

 

$

71,495

 

 

$

54,845

 

Other Comprehensive Loss:

 

 

 

 

 

 

Change in unfunded benefit obligation for pension and other postretirement benefit plans - net of taxes of ($2) and ($5), respectively

 

 

(9

)

 

 

(18

)

Total other comprehensive loss

 

 

(9

)

 

 

(18

)

Comprehensive income

 

$

71,486

 

 

$

54,827

 

 

The Accompanying Notes are an Integral Part of These Statements.

7


CONDENSED CONSOLIDATED BALANCE SHEETS

Avista Corporation

Dollars in thousands

(Unaudited)

 

 

 

March 31,

 

 

December 31,

 

 

 

2024

 

 

2023

 

Assets:

 

 

 

 

 

 

Current Assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

12,274

 

 

$

35,003

 

Accounts and notes receivable-less allowances of $5,038 and $4,987, respectively

 

 

217,974

 

 

 

216,744

 

Inventory

 

 

163,709

 

 

 

159,984

 

Regulatory assets

 

 

84,590

 

 

 

146,327

 

Other current assets

 

 

83,398

 

 

 

103,784

 

Total current assets

 

 

561,945

 

 

 

661,842

 

Net utility property

 

 

5,748,295

 

 

 

5,700,056

 

Goodwill

 

 

52,426

 

 

 

52,426

 

Non-current regulatory assets

 

 

887,621

 

 

 

894,168

 

Other property and investments-net and other non-current assets

 

 

398,697

 

 

 

393,985

 

Total assets

 

$

7,648,984

 

 

$

7,702,477

 

Liabilities and Equity:

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

 

Accounts payable

 

$

102,886

 

 

$

143,262

 

Current portion of long-term debt

 

 

15,000

 

 

 

15,000

 

Short-term borrowings

 

 

212,155

 

 

 

349,000

 

Regulatory liabilities

 

 

62,679

 

 

 

76,007

 

Other current liabilities

 

 

187,560

 

 

 

191,936

 

Total current liabilities

 

 

580,280

 

 

 

775,205

 

Long-term debt

 

 

2,597,791

 

 

 

2,515,358

 

Long-term debt to affiliated trusts

 

 

51,547

 

 

 

51,547

 

Pensions and other postretirement benefits

 

 

88,568

 

 

 

89,830

 

Deferred income taxes

 

 

712,275

 

 

 

718,318

 

Non-current regulatory liabilities

 

 

864,661

 

 

 

856,666

 

Other non-current liabilities and deferred credits

 

 

233,362

 

 

 

210,230

 

Total liabilities

 

 

5,128,484

 

 

 

5,217,154

 

Commitments and Contingencies (See Notes to Condensed Consolidated
   Financial Statements)

 

 

 

 

 

 

Equity:

 

 

 

 

 

 

Shareholders’ Equity:

 

 

 

 

 

 

Common stock, no par value; 200,000,000 shares authorized; 78,187,093 and 78,074,587 shares issued and outstanding, respectively

 

 

1,645,208

 

 

 

1,644,327

 

Accumulated other comprehensive loss

 

 

(366

)

 

 

(357

)

Retained earnings

 

 

875,658

 

 

 

841,353

 

Total shareholders’ equity

 

 

2,520,500

 

 

 

2,485,323

 

Total liabilities and equity

 

$

7,648,984

 

 

$

7,702,477

 

 

The Accompanying Notes are an Integral Part of These Statements.

8


CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Avista Corporation

For the Three Months Ended March 31

Dollars in thousands

(Unaudited)

 

 

 

2024

 

 

2023

 

Operating Activities:

 

 

 

 

 

 

Net income

 

$

71,495

 

 

$

54,845

 

Non-cash items included in net income:

 

 

 

 

 

 

Depreciation and amortization

 

 

67,930

 

 

 

65,219

 

Deferred income tax provision

 

 

(18,971

)

 

 

(10,155

)

Power and natural gas cost deferrals, net

 

 

42,701

 

 

 

(53,387

)

Amortization of debt expense

 

 

507

 

 

 

1,128

 

Stock-based compensation expense

 

 

2,351

 

 

 

2,221

 

Equity-related AFUDC

 

 

(1,753

)

 

 

(1,562

)

Pension and other postretirement benefit expense

 

 

3,032

 

 

 

3,407

 

Other regulatory assets and liabilities

 

 

(9,596

)

 

 

(10,717

)

Other deferred debits and credits

 

 

18,959

 

 

 

19,759

 

Change in decoupling regulatory deferral

 

 

(2,597

)

 

 

19,391

 

Realized and unrealized loss (gain) on assets and investments

 

 

(2,374

)

 

 

182

 

Other

 

 

(1,384

)

 

 

(1,157

)

Contributions to defined benefit pension plan

 

 

(3,333

)

 

 

(3,333

)

Cash paid for settlement of interest rate swap agreements

 

 

 

 

 

(409

)

Cash received for settlement of interest rate swap agreements

 

 

4,397

 

 

 

7,869

 

Changes in certain current assets and liabilities:

 

 

 

 

 

 

Accounts and notes receivable

 

 

(3,813

)

 

 

37,743

 

Inventory

 

 

(3,725

)

 

 

5,900

 

Collateral for derivative instruments

 

 

21,853

 

 

 

66,371

 

Income taxes receivable

 

 

20,506

 

 

 

2,925

 

Other current assets

 

 

(3,556

)

 

 

(17,543

)

Accounts payable

 

 

(27,029

)

 

 

(87,195

)

Other current liabilities

 

 

14,547

 

 

 

(7,256

)

Net cash provided by operating activities

 

 

190,147

 

 

 

94,246

 

 

 

 

 

 

 

Investing Activities:

 

 

 

 

 

 

Utility property capital expenditures (excluding equity-related AFUDC)

 

 

(118,709

)

 

 

(100,490

)

Issuance of notes receivable

 

 

 

 

 

(1,500

)

Equity and property investments

 

 

(1,776

)

 

 

(4,781

)

Other

 

 

2,385

 

 

 

518

 

Net cash used in investing activities

 

 

(118,100

)

 

 

(106,253

)

 

The Accompanying Notes are an Integral Part of These Statements.

 

9


CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)

Avista Corporation

For the Three Months Ended March 31

Dollars in thousands

(Unaudited)

 

 

 

2024

 

 

2023

 

Financing Activities:

 

 

 

 

 

 

Net decrease in short-term borrowings

 

$

(54,000

)

 

$

(232,000

)

Proceeds from issuance of long-term debt

 

 

 

 

 

250,000

 

Maturity of long-term debt and finance leases

 

 

(850

)

 

 

(809

)

Issuance of common stock, net of issuance costs

 

 

115

 

 

 

29,912

 

Cash dividends paid

 

 

(37,817

)

 

 

(35,029

)

Other

 

 

(2,224

)

 

 

(2,899

)

Net cash provided by (used in) financing activities

 

 

(94,776

)

 

 

9,175

 

 

 

 

 

 

 

Net decrease in cash and cash equivalents

 

 

(22,729

)

 

 

(2,832

)

 

 

 

 

 

 

Cash and cash equivalents at beginning of period

 

 

35,003

 

 

 

13,428

 

 

 

 

 

 

 

Cash and cash equivalents at end of period

 

$

12,274

 

 

$

10,596

 

 

The Accompanying Notes are an Integral Part of These Statements.

10


CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

Avista Corporation

For the Three Months Ended March 31

Dollars in thousands

(Unaudited)

 

 

 

2024

 

 

2023

 

Common Stock, Shares:

 

 

 

 

 

 

Shares outstanding at beginning of period

 

 

78,074,587

 

 

 

74,945,948

 

Shares issued

 

 

112,506

 

 

 

816,650

 

Shares outstanding at end of period

 

 

78,187,093

 

 

 

75,762,598

 

Common Stock, Amount:

 

 

 

 

 

 

Balance at beginning of period

 

$

1,644,327

 

 

$

1,525,185

 

Equity compensation expense

 

 

2,351

 

 

 

2,221

 

Issuance of common stock, net of issuance costs

 

 

115

 

 

 

29,912

 

Payment of minimum tax withholdings for share-based payment awards

 

 

(1,585

)

 

 

(1,667

)

Balance at end of period

 

 

1,645,208

 

 

 

1,555,651

 

Accumulated Other Comprehensive Loss:

 

 

 

 

 

 

Balance at beginning of period

 

 

(357

)

 

 

(2,058

)

Other comprehensive loss

 

 

(9

)

 

 

(18

)

Balance at end of period

 

 

(366

)

 

 

(2,076

)

Retained Earnings:

 

 

 

 

 

 

Balance at beginning of period

 

 

841,353

 

 

 

811,541

 

Net income

 

 

71,495

 

 

 

54,845

 

Dividends on common stock

 

 

(37,190

)

 

 

(34,650

)

Balance at end of period

 

 

875,658

 

 

 

831,736

 

Total equity

 

$

2,520,500

 

 

$

2,385,311

 

Dividends declared per common share

 

$

0.475

 

 

$

0.46

 

 

The Accompanying Notes are an Integral Part of These Statements.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

The accompanying condensed consolidated financial statements of Avista Corp. as of and for the interim periods ended March 31, 2024 and March 31, 2023 are unaudited; however, in the opinion of management, the statements reflect all adjustments necessary for a fair statement of the results for the interim periods. All such adjustments are of a normal recurring nature. The condensed consolidated financial statements have been prepared in accordance with GAAP for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. The Condensed Consolidated Statements of Income for the interim periods are not necessarily indicative of the results to be expected for the full year. These condensed consolidated financial statements do not contain the detail or footnote disclosure concerning accounting policies and other matters which would be included in full fiscal year consolidated financial statements; therefore, they should be read in conjunction with the Company's audited consolidated financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2023 (2023 Form 10-K).

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Business

Avista Corp. is primarily an electric and natural gas utility with certain other business ventures. Avista Utilities is an operating division of Avista Corp., comprising its regulated utility operations in the Pacific Northwest. Avista Utilities provides electric distribution and transmission, and natural gas distribution services in parts of eastern Washington and northern Idaho. Avista Utilities also provides natural gas distribution service in parts of northeastern and southwestern Oregon. Avista Utilities has electric generating facilities in Washington, Idaho, Oregon and Montana. Avista Utilities also supplies electricity to a small number of customers in Montana.

AERC is a wholly-owned subsidiary of Avista Corp. The primary subsidiary of AERC is AEL&P, which comprises Avista Corp.'s regulated utility operations in Alaska.

Avista Capital, a wholly owned non-regulated subsidiary of Avista Corp., is the parent company of the subsidiary companies in the non-utility businesses, except AJT Mining Properties, Inc., which is a subsidiary of AERC. See Note 15 for business segment information.

Basis of Reporting

The condensed consolidated financial statements include the assets, liabilities, revenues and expenses of the Company and its subsidiaries and other majority owned subsidiaries and variable interest entities for which the Company or its subsidiaries are the primary beneficiaries. Intercompany balances were eliminated in consolidation. The accompanying condensed consolidated financial statements include the Company’s proportionate share of utility plant and related operations associated with its interests in jointly owned plants.

Regulation

The Company is subject to state regulation in Washington, Idaho, Montana, Oregon and Alaska. The Company is subject to federal regulation primarily by the FERC, as well as various other federal agencies with regulatory oversight of particular aspects of its operations.

Derivative Assets and Liabilities

Derivatives are recorded as either assets or liabilities on the Condensed Consolidated Balance Sheets measured at estimated fair value.

The WUTC and the IPUC issued accounting orders authorizing Avista Corp. to offset energy commodity derivative assets or liabilities with a regulatory asset or liability. This accounting treatment is intended to defer the recognition of mark-to-market gains and losses on energy commodity transactions until the period of delivery. Realized benefits and costs result in adjustments to retail rates through PGAs, the ERM in Washington, the PCA mechanism in Idaho, and periodic general rate cases. The resulting regulatory assets associated with energy commodity derivative instruments are probable of recovery through future rates.

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Substantially all forward contracts to purchase or sell power and natural gas are recorded as derivative assets or liabilities at estimated fair value with an offsetting regulatory asset or liability. Contracts not considered derivatives are accounted for on the accrual basis until they are settled or realized unless there is a decline in the fair value of the contract determined to be other-than-temporary.

For interest rate swap derivatives, Avista Corp. records all mark-to-market gains and losses in each accounting period as assets and liabilities, as well as offsetting regulatory assets and liabilities, such that there is no income statement impact. The interest rate swap derivatives are risk management tools similar to energy commodity derivatives. Upon settlement of interest rate swap derivatives, the regulatory asset or liability is amortized as a component of interest expense over the term of the associated debt. The Company records an offset of interest rate swap derivative assets and liabilities with regulatory assets and liabilities, based on the prior practice of the commissions to provide recovery through the ratemaking process.

The Company has multiple master netting agreements with a variety of entities allowing for cross-commodity netting of derivative agreements with the same counterparty (i.e. power derivatives can be netted with natural gas derivatives). In addition, some master netting agreements allow for the netting of commodity derivatives and interest rate swap derivatives for the same counterparty. The Company does not have agreements which allow for cross-affiliate netting among multiple affiliated legal entities. The Company nets all derivative instruments when allowed by the agreement for presentation in the Condensed Consolidated Balance Sheets.

Fair Value Measurements

Fair value represents the price that would be received when selling an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the measurement date. Energy commodity derivative assets and liabilities, deferred compensation assets, some equity investments, as well as derivatives related to interest rate swaps and foreign currency exchange contracts, are reported at estimated fair value on the Condensed Consolidated Balance Sheets. See Note 11 for the Company’s fair value disclosures.

Contingencies

The Company has unresolved regulatory, legal and tax issues which have inherently uncertain outcomes. The Company accrues a loss contingency if it is probable that a liability has been incurred and the amount of the loss or impairment can be reasonably estimated. The Company also discloses loss contingencies that do not meet these conditions for accrual if there is a reasonable possibility that a material loss may be incurred. See Note 14 for further discussion of the Company's commitments and contingencies.

NOTE 2. NEW ACCOUNTING STANDARDS

ASU 2022-03 "Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions"

In June 2022, the FASB issued ASU 2022-03, Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions. The purpose of this guidance is to clarify that a contractual restriction on the ability to sell an equity security is not considered part of the unit of account of the equity security, and therefore should not be considered when measuring the equity security's fair value. Additionally, an entity cannot separately recognize and measure a contractual sale restriction. This guidance also adds specific disclosures related to equity securities subject to contractual sale restrictions, including (i) the fair value of equity securities subject to contractual sale restrictions reflected in the balance sheet, (ii) the nature and remaining duration of the restrictions and (iii) the circumstances that could cause a lapse in the restrictions. The Company adopted the amendments effective January 1, 2024, with no material impacts to the Company's financial statements resulting upon adoption.

ASU 2023-06 "Disclosure Improvements - Codification Amendments in Response to the SEC's Disclosure Update and Simplification Initiative"

In October 2023, the FASB issued ASU 2023-06, which incorporates a variety of SEC required disclosures into the FASB Accounting Standards Codification (ASC). For entities subject to SEC's existing disclosure requirements, the effective date for each amendment will be the date on which the SEC removes the related disclosure from Regulation S-X or Regulation S-K, with early adoption permitted. If the SEC has not removed the applicable requirement from Regulation S-X or Regulation S-K by June 30, 2027, the

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disclosure requirements will be removed from the Codification. The requirements of the ASU will not have a material impact on the Company's financial statements.

ASU 2023-07 "Segment Reporting (Topic 280) - Improvements to Reportable Segment Disclosures"

In November 2023, the FASB issued ASU 2023-07, requiring additional disclosures around reportable segment information. The additional required disclosures include significant segment expenses, an amount for other segment activity not included in the disaggregated segment amounts and a description of the activity, and the title and position of the chief operating decision maker and an explanation of how they use the reported measures of segment profit or loss in assessing segment performance and allocating resources. The ASU is effective for fiscal years beginning after December 15, 2023 and interim periods beginning after December 15, 2024, and early adoption is permitted. The Company is in the process of evaluating the impact of the ASU; however, it has determined it will not early adopt.

ASU 2023-09 "Income Taxes (Topic 740) - Improvements to Income Tax Disclosures"

In December 2023, the FASB issued ASU 2023-09, requiring additional income tax disclosures. The additional disclosures include prescribed items presented in the income tax rate reconciliation, and further disaggregation of income taxes paid amounts between federal, state and foreign taxes. The ASU is effective for fiscal years beginning after December 15, 2024 and early adoption is permitted. The Company is in the process of evaluating the impact of the ASU; however, it has determined it will not early adopt.

NOTE 3. BALANCE SHEET COMPONENTS

Inventory

Inventories of materials and supplies, emission allowances, fuel stock and stored natural gas are recorded at average cost and consisted of the following as of March 31, 2024 and December 31, 2023 (dollars in thousands):

 

 

March 31,

 

 

December 31,

 

 

 

2024

 

 

2023

 

Materials and supplies

 

$

89,956

 

 

$

81,651

 

Emission allowances

 

 

60,168

 

 

 

56,097

 

Stored natural gas

 

 

8,289

 

 

 

16,272

 

Fuel stock

 

 

5,296

 

 

 

5,964

 

Total

 

$

163,709

 

 

$

159,984

 

Other Current Assets

Other current assets consisted of the following as of March 31, 2024 and December 31, 2023 (dollars in thousands):

 

 

March 31,

 

 

December 31,

 

 

 

2024

 

 

2023

 

Prepayments

 

$

56,222

 

 

$

52,752

 

Income taxes receivable

 

 

8,727

 

 

 

29,234

 

Derivative assets net of collateral

 

 

3,597

 

 

 

11,821

 

Collateral posted for derivative instruments after netting with outstanding
   derivatives

 

 

4,314

 

 

 

 

Other

 

 

10,538

 

 

 

9,977

 

Total

 

$

83,398

 

 

$

103,784

 

 

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Net Utility Property

Net utility property, which is recorded at original cost, net of accumulated depreciation, consisted of the following as of March 31, 2024 and December 31, 2023 (dollars in thousands):

 

 

March 31,

 

 

December 31,

 

 

 

2024

 

 

2023

 

Utility plant in service

 

$

7,848,978

 

 

$

7,799,481

 

Construction work in progress

 

 

195,727

 

 

 

179,527

 

Total

 

 

8,044,705

 

 

 

7,979,008

 

Less: Accumulated depreciation and amortization

 

 

2,296,410

 

 

 

2,278,952

 

Total

 

$

5,748,295

 

 

$

5,700,056

 

Other Property and Investments-Net and Other Non-Current Assets

Other property and investments-net and other non-current assets consisted of the following as of March 31, 2024 and December 31, 2023 (dollars in thousands):

 

 

March 31,

 

 

December 31,

 

 

 

2024

 

 

2023

 

Equity investments

 

$

156,156

 

 

$

153,350

 

Operating lease ROU assets

 

 

67,407

 

 

 

67,585

 

Finance lease ROU assets

 

 

35,504

 

 

 

36,414

 

Non-utility property

 

 

33,736

 

 

 

33,813

 

Notes receivable

 

 

15,432

 

 

 

15,287

 

Long-term prepaid license fees

 

 

18,447

 

 

 

19,448

 

Pension asset

 

 

35,853

 

 

 

32,997

 

Investment in affiliated trust

 

 

11,547

 

 

 

11,547

 

Deferred compensation assets

 

 

8,484

 

 

 

7,794

 

Other

 

 

16,131

 

 

 

15,750

 

Total

 

$

398,697

 

 

$

393,985

 

Other Current Liabilities

Other current liabilities consisted of the following as of March 31, 2024 and December 31, 2023 (dollars in thousands):

 

 

March 31,
2024

 

 

December 31,
2023

 

Accrued taxes other than income taxes

 

$

38,452

 

 

$

31,928

 

Derivative liabilities

 

 

17,288

 

 

 

17,217

 

Employee paid time off accruals

 

 

33,095

 

 

 

32,072

 

Accrued interest

 

 

41,116

 

 

 

23,539

 

Climate Commitment Act obligations

 

 

 

 

 

19,081

 

Pensions and other postretirement benefits

 

 

13,280

 

 

 

14,082

 

Other

 

 

44,329

 

 

 

54,017

 

Total

 

$

187,560

 

 

$

191,936

 

 

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Other Non-Current Liabilities and Deferred Credits

Other non-current liabilities and deferred credits consisted of the following as of March 31, 2024 and December 31, 2023 (dollars in thousands):

 

 

March 31,
2024

 

 

December 31,
2023

 

Operating lease liabilities

 

$

64,377

 

 

$

63,559

 

Finance lease liabilities

 

 

38,204

 

 

 

39,095

 

Deferred investment tax credits

 

 

28,033

 

 

 

28,233

 

Climate Commitment Act obligations

 

 

60,701

 

 

 

26,026

 

Asset retirement obligations

 

 

18,175