This lawsuit was filed against Hydro One Limited, Olympus Holding Corp., Olympus Corp. and Bank of America Merrill Lynch, as well as all members of the Company's Board of Directors, namely Erik Anderson, Kristianne Blake, Donald Burke, Rebecca Klein, Scott Maw, Scott Morris, Marc Racicot, Heidi Stanley, John Taylor and Janet Widmann. While Avista Corp. is not a named defendant in this lawsuit, the Company has the obligation to indemnify members of its Board of Directors.


•	Fink v. Morris, et al., No. 17203616-6 (filed September 15, 2017, amended complaint filed October 25, 2017).

The complaint generally ~~alleges~~alleged that the members of the Board of Directors of Avista Corp. breached their fiduciary duties by, among other things, conducting an allegedly inadequate sale process and agreeing to the acquisition at a price that allegedly ~~undervalues~~undervalued Avista Corporation, and that Hydro One Limited, Olympus Holding Corp., and Olympus Corp. aided and abetted those purported breaches of duty. The ~~aiding and abetting claims were brought only against Hydro One Limited, Olympus Holding Corp. and~~

~~AVISTA CORPORATION~~

~~Olympus Corp. The~~ complaint ~~seeks~~sought various remedies, including monetary damages, attorneys’ fees and expenses. ~~The complaint has been stayed by~~Subsequent to the ~~court until the closing~~termination of the transaction at which time the plaintiff will have the option to file an amended complaint within 30 days of such closing. If the amended complaint is not filed within the 30 days the suit will be dismissed.

~~All defendants deny any wrongdoing in connection with~~ the proposed acquisition ~~and plan to vigorously defend against all pending claims; however,~~in January 2019, the ~~Company cannot at this time predict~~complaint was voluntarily dismissed by the ~~eventual outcome.~~plaintiffs.

2015 Washington General Rate Cases

In January 2016, the Company received an order (Order 05) that concluded its electric and natural gas general rate cases that were originally filed with the WUTC in February 2015. New electric and natural gas rates were effective on January 11, 2016.

WUTC Order Denying Industrial Customers of Northwest Utilities / Public Counsel Joint Motion for Clarification, WUTC Staff Motion to Reconsider and WUTC Staff Motion to Reopen Record

In January 2016, the Industrial Customers of Northwest Utilities, ~~(ICNU),~~ the Public Counsel Unit of the Washington State Office of the Attorney General (PC) and the WUTC Staff, which is a separate party in the general rate case proceedings from the WUTC Advisory Staff, filed Motions for Clarification requesting the WUTC to clarify their attrition adjustment and the end result electric revenue amounts. The Motions for Clarification suggested that the electric revenue decrease should have been significantly larger than what was included in Order 05.

In February 2016, the WUTC issued an order (Order 06) denying the Motions summarized above and affirming Order 05, including an $8.1 million decrease in electric base revenue.

PC Petition for Judicial Review

In March 2016, PC filed in Thurston County Superior Court a Petition for Judicial Review of the WUTC's Order 05 and Order 06 described above. In April 2016, this matter was certified for review directly by the Court of Appeals, an intermediate appellate court in the State of Washington.

On August 7, 2018, the Court of Appeals issued a "Published Opinion" (Opinion) which concluded that the WUTC's use of an attrition allowance to calculate Avista Corp.'s rate base violated Washington law. In the Opinion, the Court stated that because the projected additions to rate base in the future were not "used and useful" for service at the time the request for the rate increase was made, they may not lawfully be included in the Company's rate base to justify a rate increase. Accordingly, the Court concluded that the WUTC erred in including an attrition allowance in the calculation of Avista Corp.’s electric and natural gas rate base. The Court noted, however, that the law does not prohibit an attrition allowance in the calculation, for ratemaking purposes, of recoverable operating and maintenance expense. Since the WUTC order provided one lump sum attrition allowance without distinguishing what portion was for rate base and which was for operating and maintenance expenses or other considerations, the Court struck all portions of the attrition allowance attributable to Avista Corp.'s rate base and reversed and remanded the case for the WUTC to recalculate Avista Corp.’s rates without including an attrition allowance in the calculation of rate base. On October 1, 2018, the Court of Appeals terminated its review of this case, remanding it back to the Thurston County Superior Court. On April 17, 2019, the Thurston County Superior Court issued a Remand Order, granting a Joint Motion of Avista Corp., PC and the WUTC to remand the case back to the WUTC.

~~The total attrition allowance approved by~~On June 20, 2019, Avista Corp. filed testimony with the WUTC in ~~Order 05~~the remand case. In Avista Corp.'s testimony, it asserted that the potential amount to return to customers is limited to the 2015 general rate cases because in subsequent Washington general rate cases (specifically those approved in December 2016), the WUTC did not include any attrition allowance on rate base. In

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the remand testimony the Company also asserted that no refund is due to customers for the 2015 general rate cases because actual 2016 electric rate base was greater than the 2016 electric rate base allowed in the general rate case, which included an attrition allowance. In addition, while 2016 actual natural gas rate base was slightly lower than the rate base allowed in the general rate case including the attrition allowance, any over-earnings were offset by the earnings sharing mechanism that allowed for a refund to customers.

Even though the Company believes the issue only relates to the 2015 general rate cases and ~~reaffirmed in Order 06 was $35.2 million, with $28.3 million related~~no refund is due to ~~electric and $6.9 million related to natural gas. The~~customers, the Company cannot predict the outcome of this matter at this time and cannot estimate how much, if any, ~~of the attrition allowance may~~it could be ~~removed from the general rate cases. The Company will participate in any regulatory process that is yet~~required to ~~be established by the WUTC.~~refund to customers.

Other Contingencies

In the normal course of business, the Company has various other legal claims and contingent matters outstanding. The Company believes that any ultimate liability arising from these actions will not have a material impact on its financial condition, results of operations or cash flows. It is possible that a change could occur in the Company’s estimates of the probability or amount of a liability being incurred. Such a change, should it occur, could be significant. See "Note 1920 of the Notes to Consolidated Financial Statements" in the ~~2017~~2018 Form 10-K for additional discussion regarding other contingencies.

NOTE 16. INFORMATION BY BUSINESS SEGMENTS

The business segment presentation reflects the basis used by the Company's management to analyze performance and determine the allocation of resources. The Company's management evaluates performance based on income (loss) from operations before income taxes as well as net income (loss) attributable to Avista Corp. shareholders. The accounting policies of the segments are

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the same as those described in the summary of significant accounting policies. Avista Utilities' business is managed based on the total regulated utility operation; therefore, it is considered one segment. AEL&P is a separate reportable business segment, as it has separate financial reports that are reviewed in detail by the Chief Operating Decision Maker and its operations and risks are sufficiently different from Avista Utilities and the other businesses at AERC that it cannot be aggregated with any other operating segments. The Other category, which is not a reportable segment, includes other investments and operations of various subsidiaries, as well as certain other operations of Avista Capital.

The following table presents information for each of the Company’s business segments (dollars in thousands):



	Avista Utilities			Alaska Electric Light and Power Company			Total Utility			Other			Intersegment Eliminations (1)			Total
For the three months ended June 30, 2019:
Operating revenues	$	289,808		$	8,743		$	298,551		$	2,261		$	—		$	300,812
Resource costs	88,506			(67		)	88,439			—			—			88,439
Other operating expenses (2)	84,602			3,129			87,731			6,332			—			94,063
Depreciation and amortization	53,070			2,409			55,479			155			—			55,634
Income (loss) from operations	40,978			3,016			43,994			(4,226		)	—			39,768
Interest expense (3)	24,316			1,595			25,911			148			(197		)	25,862
Income taxes	(2,947		)	380			(2,567		)	826			—			(1,741		)
Net income attributable to Avista Corp. shareholders	21,219			1,076			22,295			3,024			—			25,319
Capital expenditures (4)	103,297			3,076			106,373			22			—			106,395
For the three months ended June 30, 2018:
Operating revenues	$	302,222		$	10,482		$	312,704		$	6,594		$	—		$	319,298
Resource costs	103,022			2,947			105,969			—			—			105,969
Other operating expenses (2) (5)	78,848			3,213			82,061			6,543			—			88,604
Depreciation and amortization	44,186			1,465			45,651			199			—			45,850
Income (loss) from operations (5)	50,848			2,579			53,427			(148		)	—			53,279
Interest expense (3)	24,428			896			25,324			382			(234		)	25,472
Income taxes	4,735			446			5,181			28			—			5,209
Net income attributable to Avista Corp. shareholders	24,252			1,282			25,534			43			—			25,577
Capital expenditures (4)	97,963			3,352			101,315			338			—			101,653

Avista
Utilities
Alaska Electric Light and Power Company Total Utility Other
Intersegment
Eliminations
(1)
Total
For the three months ended September 30, 2018:
Operating revenues $ 279,549
$ 9,570
$ 289,119
$ 6,894
$ —
$ 296,013
Resource costs 98,461
3,058
101,519
—
—
101,519
Other operating expenses (2) 76,355
3,005
79,360
7,347
—
86,707
Depreciation and amortization 44,569
1,466
46,035
207
—
46,242
Income (loss) from operations 35,317
1,787
37,104
(660 ) —
36,444
Interest expense (3) 23,560
896
24,456
462
(313 ) 24,605
Income taxes 2,564
188
2,752
(1,204 ) —
1,548
Net income (loss) attributable to Avista Corp. shareholders 11,935
824
12,759
(2,640 ) —
10,119
Capital expenditures (4) 108,907
4,176
113,083
257
—
113,340
For the three months ended September 30, 2017:
Operating revenues $ 280,776
$ 10,864
$ 291,640
$ 5,456
$ —
$ 297,096
Resource costs 104,516
4,052
108,568
—
—
108,568
Other operating expenses (2) (5) 79,188
3,469
82,657
6,598
—
89,255
Depreciation and amortization 41,516
1,452
42,968
137
—
43,105
Income (loss) from operations (5) 32,880
1,298
34,178
(1,279 ) —
32,899
Interest expense (3) 23,132
895
24,027
215
(71 ) 24,171
Income taxes 5,972
44
6,016
(863 ) —
5,153
Net income (loss) attributable to Avista Corp. shareholders 5,419
427
5,846
(1,395 ) —
4,451
Capital expenditures (4) 109,066
1,073
110,139
1,050
—
111,189
For the nine months ended September 30, 2018:
Operating revenues $ 970,525
$ 33,715
$ 1,004,240
$ 20,432
$ —
$ 1,024,672
Resource costs 353,148
8,958
362,106
—
—
362,106
Other operating expenses (2) 230,342
9,049
239,391
20,714
—
260,105
Depreciation and amortization 132,022
4,397
136,419
587
—
137,006
Income (loss) from operations 174,310
10,488
184,798
(869 ) —
183,929
Interest expense (3) 71,953
2,686
74,639
1,179
(712 ) 75,106
Income taxes 17,716
2,098
19,814
(2,347 ) —
17,467
Net income (loss) attributable to Avista Corp. shareholders 91,727
5,878
97,605
(7,019 ) —
90,586
Capital expenditures (4) 288,046
8,169
296,215
809
—
297,024

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	Avista Utilities		Alaska Electric Light and Power Company			Total Utility		Other			Intersegment Eliminations (1)			Total
For the six months ended June 30, 2019:
Operating revenues	$	667,510	$	19,624		$	687,134	$	10,159		$	—		$	697,293
Resource costs	227,218		(1,432		)	225,786		—			—			225,786
Other operating expenses (2)	185,185		6,188			191,373		13,687			—			205,060
Depreciation and amortization	99,577		4,816			104,393		364			—			104,757
Income (loss) from operations	101,202		9,529			110,731		(3,892		)	—			106,839
Interest expense (3)	48,580		3,191			51,771		736			(637		)	51,870
Income taxes	25,597		1,743			27,340		936			—			28,276
Net income attributable to Avista Corp. shareholders	133,120		4,628			137,748		3,365			—			141,113
Capital expenditures (4)	195,606		4,382			199,988		184			—			200,172
For the six months ended June 30, 2018:
Operating revenues	$	690,976	$	24,145		$	715,121	$	13,538		$	—		$	728,659
Resource costs	254,687		5,900			260,587		—			—			260,587
Other operating expenses (2)	153,987		6,044			160,031		13,367			—			173,398
Depreciation and amortization	87,453		2,931			90,384		380			—			90,764
Income (loss) from operations	138,993		8,701			147,694		(209		)	—			147,485
Interest expense (3)	48,393		1,790			50,183		717			(399		)	50,501
Income taxes	15,152		1,910			17,062		(1,143		)	—			15,919
Net income (loss) attributable to Avista Corp. shareholders	79,792		5,054			84,846		(4,379		)	—			80,467
Capital expenditures (4)	179,139		3,993			183,132		552			—			183,684
Total Assets:
As of June 30, 2019:	$	5,520,529	$	277,934		$	5,798,463	$	107,753		$	(28,288	)	$	5,877,928
As of December 31, 2018:	$	5,458,104	$	272,950		$	5,731,054	$	87,050		$	(35,528	)	$	5,782,576

Avista
Utilities
Alaska Electric Light and Power Company Total Utility Other
Intersegment
Eliminations
(1)
Total
For the nine months ended September 30, 2017:
Operating revenues $ 992,904
$ 38,002
$ 1,030,906
$ 17,161
$ —
$ 1,048,067
Resource costs 366,590
10,315
376,905
—
—
376,905
Other operating expenses (2) (5) 225,980
9,236
235,216
19,863
—
255,079
Depreciation and amortization 123,249
4,347
127,596
482
—
128,078
Income (loss) from operations 199,376
12,080
211,456
(3,184 ) —
208,272
Interest expense (3) 68,641
2,684
71,325
558
(112 ) 71,771
Income taxes 49,881
3,582
53,463
(1,915 ) —
51,548
Net income (loss) attributable to Avista Corp. shareholders 85,623
5,961
91,584
(3,246 ) —
88,338
Capital expenditures (4) 283,081
4,772
287,853
1,219
—
289,072
Total Assets:
As of September 30, 2018: $ 5,223,031
$ 280,826
$ 5,503,857
$ 79,426
$ (25,885 ) $ 5,557,398
As of December 31, 2017: $ 5,177,878
$ 278,688
$ 5,456,566
$ 73,241
$ (15,075 ) $ 5,514,732


(1)	Intersegment eliminations reported as interest expense represent intercompany interest.

(2)

Other operating expenses for Avista Utilities for the three and ~~nine~~six months ended ~~September~~June 30, 2019 and 2018 include ~~acquisition~~merger transaction costs ~~of $1.0 million and $2.6 million, respectively,~~ which are separately disclosed on the Condensed Consolidated Statements of Income. ~~The three and nine months ended September 30, 2017 include acquisition costs of $6.7 million and $8.0 million, respectively, which are also separately disclosed.~~


(3)	Including interest expense to affiliated trusts.


(4)	The capital expenditures for the other businesses are included in other investing activities on the Condensed Consolidated Statements of Cash Flows.

~~(5)~~

Effective January 1, 2018, the Company adopted ASU No. 2017-07, which resulted in a $1.9 million and $5.7 million reclassification of the non-service cost component of pension and other postretirement benefit costs for the three and nine months ended September 30, 2017, respectively. The costs were reclassified from utility other operating expenses to other expense (income) - net on the Condensed Consolidated Statements of Income.

NOTE 17. ~~PENDING~~TERMINATION OF PROPOSED ACQUISITION BY HYDRO ONE

On July 19, 2017, Avista Corp. entered into a Merger Agreement by and among Hydro One, Olympus Holding Corp., a wholly owned subsidiary of Hydro One (US parent), and Olympus Corp., a wholly owned subsidiary of US parent (Merger Sub). Subject to the terms and conditions of the Merger Agreement, Merger Sub will be merged with and intothat provided for Avista Corp.~~, with Avista Corp. surviving as~~ to become an indirect, wholly-owned subsidiary of Hydro ~~One.~~One, subject to the satisfaction or waiver of specified closing conditions, including approval by regulatory agencies. Hydro One, based in Toronto, is Ontario’s largest electricity transmission and distribution provider.

AtTermination of the Merger Agreement

Due to the denial of the proposed merger by certain of the Company's regulatory commissions, on January 23, 2019, Avista Corp., Hydro One and certain subsidiaries thereof, entered into a Termination Agreement indicating their mutual agreement to terminate the Merger Agreement, effective ~~time~~immediately. Pursuant to the terms of the Termination Agreement, Hydro One paid Avista Corp. a $103 million termination fee on January 24, 2019. The termination fee was used for reimbursing the Company's transaction costs incurred from 2017 to 2019. The balance of the termination fee remaining after payment of 2019 transaction costs and applicable income taxes was used for general corporate purposes and reduced the Company's need for external financing. The 2019 costs totaled $19.7 million pre-tax and included financial advisers' fees, legal fees, consulting fees and employee time.

Other Information Related to the Terminated Acquisition

Due to the termination of the acquisition, ~~each share of Avista Corp. common stock issued and outstanding, other than shares of Avista Corp. common stock~~all the financial commitments that ~~are owned by Hydro One, US Parent (as defined~~were included in the ~~Merger Agreement) or Merger Sub or any of their respective subsidiaries, will be converted automatically into the right to receive an amount in cash equal to $53, without interest.~~

~~Hydro One Leadership Changes~~

~~The following disclosure is based upon information provided by Hydro One. On July 11, 2018, Hydro One announced that it had entered into an agreement~~various settlement agreements with the ~~Province of Ontario (“Province”), which is Hydro One's largest shareholder (owning approximately 47 percent of the outstanding shares of common stock)~~commissions for the ~~purpose of the orderly replacement of the board of directors of Hydro One and Hydro One Inc. and the retirement of the chief executive officer effective July 11, 2018.~~ proposed acquisition will not be required to be performed or observed.

~~Other key highlights of the agreement with the Province included:~~

~~Each of the directors of Hydro One in place at the time of the agreement resigned and were replaced by nominees identified as set out below.~~

The new board of directors initially consists of 10 members. The Province nominated four directors and the remaining six nominees were identified through an ad hoc nominating committee comprised of representatives from four of the

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five largest Hydro One shareholders other than the Province. The new board of directors was announced on August 14, 2018, and is expected to serve until Hydro One's next annual meeting or until they otherwise cease to hold office.

~~The new board of directors is responsible for appointing a new chief executive officer who will also be appointed as the eleventh member of the board of directors.~~

~~Hydro One has agreed to consult with the Province in respect of future matters of executive compensation.~~

~~Hydro One's chief financial officer was appointed as acting chief executive officer until such time as the board of directors can appoint a new chief executive officer.~~

The leadership changes described above, in and of themselves, do not directly relate to or affect the obligations of any party under the Merger Agreement. Upon entering their board of director positions, the new board adopted a resolution reaffirming Hydro One's commitment to the merger and the related regulatory commitments described below. See further discussion below regarding developments with respect to the regulatory proceedings to approve the transaction.

~~Closing Conditions, Required Approvals~~

Consummation of the acquisition is subject to the satisfaction or waiver, if permissible under applicable law, of specified closing conditions, including, but not limited to, (i) the approval of the acquisition by the holders of a majority of the outstanding shares of Avista Corp. Common Stock, (ii) the receipt of regulatory approvals required to consummate the acquisition, including approval from the FERC, the Committee on Foreign Investment in the United States (CFIUS), the Federal Communications Commission (FCC), the WUTC, IPUC, MPSC, OPUC, and the RCA, and (iii) meeting the requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (HSR Act), as amended. Under the HSR Act and the rules and regulations promulgated thereunder, the acquisition may not be completed until notification and report forms have been filed with the U.S. Department of Justice (DOJ) and the Federal Trade Commission (FTC) and the applicable waiting period has expired or been terminated.

~~The transaction is expected to close in the fourth quarter of 2018 subject to remaining referenced approvals and the satisfaction or waiver of other specified conditions.~~

The Merger Agreement may be terminated by each of the Company and US Parent under certain circumstances, including if the acquisition is not consummated by September 30, 2018, (subject to an extension of up to six months by either party, if all of the conditions to closing, other than the conditions related to obtaining required regulatory approvals, the absence of a law or injunction preventing the consummation of the acquisition and the absence of a Burdensome Condition, as defined in the Merger Agreement, in any required regulatory approval, have been satisfied). On September 19, 2018, Avista Corp. provided notice to Hydro One of its election to extend the Merger Agreement end date to March 29, 2019, and Hydro One acknowledged receipt of such notice.

The table below presents the approvals required for the consummation of the acquisition by Hydro One, as well as the date the Company filed an approval request and the current status of each required approval.



~~Required Approval~~	~~Approval Request Filing Date~~	~~Status~~
~~Avista Corp. shareholder approval~~	~~October 2, 2017~~	~~Approved November 21, 2017, no further action~~
~~FERC~~	~~September 14, 2017~~	~~Approved January 16, 2018, no further action~~
~~HSR Act~~	~~March 6, 2018~~	~~Approved April 6, 2018, no further action~~
~~CFIUS~~	~~February 9, 2018~~	~~Approved May 18, 2018, no further action~~
~~FCC~~	~~April 13, 2018~~	~~Approved May 4, 2018; approval extended through April 13, 2019~~	~~(a)~~
~~WUTC~~	~~September 14, 2017~~	~~Settlement agreement filed with WUTC~~	~~(b)~~
~~IPUC~~	~~September 14, 2017~~	~~Settlement agreement filed with IPUC~~	~~(c)~~
~~OPUC~~	~~September 14, 2017~~	~~Settlement agreement filed with OPUC~~	~~(d)~~
~~RCA~~	~~November 21, 2017~~	~~Approved June 4, 2018~~	~~(e)~~
~~MPSC~~	~~September 14, 2017~~	~~Approved July 10, 2018~~	~~(f)~~


~~(a)~~	~~FCC~~ - The transaction was approved by the FCC on May 4, 2018; however, this approval expired on November 5, 2018. Since the acquisition was not completed by the expiration date, the Company filed an extension request with the FCC. On October 3, 2018, the FCC granted the Company's extension request through April 13, 2019.


~~(b)~~	~~Washington~~ - On March 27, 2018, Avista Corp. and Hydro One filed an all-parties, all-issues settlement agreement with the WUTC recommending approval of the acquisition of the Company by Hydro One. This represents a full settlement

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~~that all parties, including the WUTC Staff, have agreed results in a net benefit to the Company's Washington customers. The settlement agreement is subject to WUTC approval.~~

The settlement includes financial and non-financial commitments by the Company. The settlement, if approved, would result in a rate credit of approximately $31 million over a 5-year period. In the settlement, Hydro One and Avista Corp. also agreed to a number of other financial commitments, including providing funding for low income participation in new renewable energy and replacing certain manufactured homes. If the settlement is approved, the Company's financial commitments in Washington would total approximately $42 million, including the rate credits. As a result of settlement agreements in Washington, Oregon and Idaho and final approvals in Alaska and Montana, the total financial commitment across all states, if approved, would be approximately $78.6 million. No costs associated with the transaction will be recovered from Avista Corp. or Hydro One customers.

The settlement agreement also provides for the use of a portion of Avista Corp.’s excess deferred federal income taxes for the purpose of accelerating the depreciation schedule for Colstrip Units 3 & 4 to reflect a remaining useful life of those units through December 31, 2027. In addition, included in the financial commitments described above is funding toward a Colstrip community transition fund which is intended to help the Colstrip community transition from coal-fired generation in the event of a future closure. The settlement does not reflect any agreement with respect to the ultimate closure of Colstrip Units 3 & 4 as that decision would be made in conjunction with the other owners of Colstrip.

In response to the developments regarding the change in the leadership and board of Hydro One, on July 20, 2018, the WUTC issued a Notice of Extension of Time for Process and Deliberation. Under state law, the WUTC extended the time allowed for it to enter an order in the proceeding by up to four months, until December 14, 2018.

~~(c)~~

~~Idaho~~ -On April 13, 2018, Avista Corp. and Hydro One filed an all-issues settlement agreement with the IPUC recommending approval of the acquisition of the Company by Hydro One. The settlement agreement is subject to IPUC approval. Subsequent to the filing of the settlement agreement with the IPUC, a new intervenor, the Avista Customer Group, was allowed into the case and it is not part of the original settlement agreement.

The settlement agreement reflects similar financial and non-financial commitments that align in value with those agreed to in Washington. The Idaho portion of the shareholder-funded rate credits is approximately $16 million over a 5-year period. The total amount of financial commitments for Idaho, including the rate credit, is approximately $21 million.

The settlement agreement in Idaho does not address Colstrip in the same manner as Washington; rather the parties to the settlement agreement have recommended that Colstrip be addressed in a separate filing requesting revised depreciation rates. The Company will be proposing that a portion of the benefits from the TCJA be set aside for the purpose of accelerating the depreciation schedule for Colstrip Units 3 & 4 to reflect a remaining useful life of those units through December 31, 2027.

In response to the developments regarding the change in the leadership and board of Hydro One, the IPUC adopted a new procedural schedule, which calls for a technical hearing on November 26, 2018. The parties, including Hydro One and Avista Corp., requested a December 14, 2018 target date for the final order; however, there is no statutory deadline in Idaho and an order may not be received by the requested date.

~~(d)~~

~~Oregon~~ - On May 25, 2018, Avista Corp. and Hydro One filed an all-parties, all-issues settlement agreement with the OPUC related to the Oregon merger proceeding. The settlement agreement is subject to review and approval by the OPUC. Subsequent to the filing of the settlement agreement with the OPUC, the Citizens' Utility Board requested to be removed from the settlement agreement due to the Hydro One leadership changes described above.

The settlement agreement in Oregon includes financial and non-financial commitments. Under the settlement agreement, customers in Oregon would receive benefits in the form of a rate credit of approximately $8 million over a 5-year period, along with additional safeguards to assure the continued financial well-being of Avista Corp. The total amount of financial commitments for Oregon, including the rate credit, is approximately $10 million.

Also, as part of the commitments included in the Oregon settlement agreement, Avista Corp. has agreed that the base rates established on November 1, 2017 as part of its latest Oregon natural gas general rate case will remain in effect until at least January 1, 2020.

In response to the developments regarding the change in the leadership and board of Hydro One, on July 25, 2018, the OPUC held a Prehearing Conference and adopted a new Procedural Schedule which calls for additional pre-filed testimony, with a placeholder for a potential hearing, should the OPUC request it. The parties, including Hydro One and Avista Corp., requested a December 14, 2018 target date for the final order and the OPUC adopted this target date.


~~(e)~~	~~Alaska~~ -On June 4, 2018, Avista Corp. and Hydro One received approval from the RCA on the proposed merger with financial and non-financial commitments. The commitments included among other items, that AEL&P's capital structure

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is maintained at its previously ordered 46 percent debt and 54 percent equity levels and that the parties adhere to all commitments filed with the RCA on April 3, 2018, which included enhanced community giving and provides a $1 million rate credit over five years for AEL&P’s customers. This rate credit period would begin at the close of the transaction.

~~(f)~~

~~Montana~~ - On July 10, 2018, Avista Corp. and Hydro One received approval from the MPSC on the proposed merger, with conditions. The MPSC did not accept, for ratemaking purposes in Montana, an accelerated 2027 depreciation schedule for Colstrip, as otherwise agreed to by the parties in Washington. On May 10, 2018, Avista and Hydro One signed a Memorandum of Agreement with the City of Colstrip, whereby Avista and Hydro One agreed that upon the completion of the transaction, $4.5 million of funding would be made available to assist the community of Colstrip in meeting its immediate and future needs.

~~Avista Corp. and Hydro One intend to continue to work with the various commissions, their staff and other parties to try and satisfy any concerns associated with the proposed transaction.~~

~~Other Information Related to the Acquisition~~

The Merger Agreement also contains customary representations, warranties and covenants of Avista Corp., Hydro One, US Parent and Merger Sub. These covenants include, among others, an obligation on behalf of Avista Corp. to operate its business in the ordinary course until the acquisition is consummated, subject to certain exceptions. In addition, the parties are required to use reasonable best efforts to obtain any required regulatory approvals.

Avista Corp. has made certain additional customary covenants, including, among others, and subject to certain exceptions, a customary non-solicitation covenant prohibiting Avista Corp. from soliciting, providing non-public information or entering into discussions or negotiations concerning proposals relating to alternative business combination transactions, except as and to the extent permitted under the Merger Agreement with respect to an unsolicited written Takeover Proposal (as defined in the Merger Agreement) made prior to the approval of the acquisition by Avista Corp.'s shareholders if, among other things, Avista Corp.'s board of directors determines in good faith that such Takeover Proposal is or could be reasonably expected to lead to a Superior Proposal (as defined in the Merger Agreement) and that failure to take such actions would reasonably be expected to be inconsistent with its fiduciary duties under applicable law. No such Takeover Proposals have been received.

The Merger Agreement may be terminated by Avista Corp. and Hydro One by mutual consent and by either Avista Corp. or Hydro One under certain circumstances, including if the acquisition is not consummated by September 30, 2018, which has been extended to March 29, 2019. The Merger Agreement also provides for certain additional termination rights for each of Avista Corp. and Hydro One. Upon termination of the Merger Agreement under certain specified circumstances, including (i) termination by Avista Corp. in order to enter into a definitive agreement with respect to a Superior Proposal, or (ii) termination by Hydro One following a withdrawal by Avista Corp.'s board or directors of its recommendation of the Merger Agreement, Avista Corp. will be required to pay Hydro One the Company Termination Fee of $103.0 million. Avista Corp. will also be required to pay Hydro One the Company Termination Fee in the event Avista Corp. signs or consummates any specified alternative transaction within twelve months following the termination of the Merger Agreement under certain circumstances. In addition, if the Merger Agreement is terminated under certain circumstances due to the failure to obtain required regulatory approvals, the imposition of a Burdensome Condition with respect to a required regulatory approval, or the breach by Hydro One, US Parent or Merger Sub of their obligations in respect to obtaining regulatory approvals, Hydro One will be required to pay Avista Corp. a termination fee of $103.0 million.

The Company ~~is incurring~~incurred significant ~~acquisition~~transaction costs ~~associated with the pending Hydro One acquisition~~ consisting primarily of consulting, banking fees, legal fees and employee time, and these costs are not being passed through to customers. ~~In addition,~~When the Company was assuming the transaction was going to be completed, a significant portion of these costs ~~are~~were not deductible for income tax purposes. Now that the transaction has been terminated, the Company expects more of the previously incurred transaction costs to be deductible so it expects additional tax benefits from these costs in 2019.

See Note 15 for discussion of shareholder lawsuits filed against the Company, the Company’s directors, Hydro One, Olympus Holding Corp., and Olympus Corp. in relation to the Merger Agreement and the proposed acquisition.

NOTE 18. SALE OF METALfx

In April 2019, Bay Area Manufacturing, Inc., a non-regulated subsidiary of Avista Corp., entered into a definitive agreement to sell its interest in METALfx to an independent third party. The transaction was a stock sale for a total cash purchase price of $17.5 million plus cash on-hand, subject to customary closing adjustments. The transaction closed on April 18, 2019, and as of that date the Company has no further involvement with METALfx.

The purchase price of $17.5 million, as adjusted, was divided among the security holders of METALfx, including the minority shareholder, pro rata based on ownership (Avista Corp. owned 89.2 percent of the equity of METALfx). As required under the purchase agreement, $1.2 million (7 percent of the purchase price) will be held in escrow for 24 months from the closing of the transaction to satisfy certain indemnification obligations.

When all escrow amounts are released, the sales transaction is expected to provide cash proceeds to Avista Corp., net of payments to the minority holder, contractually obligated compensation payments and other transaction expenses, of $16.5 million and result in a net gain after-tax of $2.3 million. The Company expects to receive the full amount of its portion of the escrow accounts; therefore, the full amounts are included in the gain calculation. The gross gain is included in "Other income," the transaction expenses paid are included in "Non-utility Other operating expenses" and any taxes associated with the sale are included in "Income tax expense" on the Condensed Consolidated Statements of Income.

Prior to the completion of the sales transaction, METALfx was not a reportable business segment and was included in other in the business segment footnote at Note 16. This transaction does not meet the criteria for discontinued operations as it does not represent a strategic shift that will have a major effect on the Company's ongoing operations,

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and Board of Directors of

Avista Corporation

Spokane, Washington

Results of Review of Interim Financial Information

We have reviewed the accompanying condensed consolidated balance sheet of Avista Corporation and subsidiaries (the "Company") as of ~~September~~June 30, ~~2018,~~2019, and the related condensed consolidated statements of income, ~~and~~ comprehensive income and equity for the three-month and ~~nine-month~~six-month periods ended ~~September~~June 30, 2019 and 2018 and ~~2017,~~ the related ~~condensed consolidated statements of equity and~~ cash flows for the ~~nine-month~~six-month periods ended ~~September~~June 30, ~~2018~~2019 and ~~2017,~~2018, and the related notes (collectively referred to as the "interim financial information"). Based on our reviews, we are not aware of any material modifications that should be made to the accompanying interim financial information for it to be in conformity with accounting principles generally accepted in the United States of America.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheet of the Company as of December 31, ~~2017,~~2018, and the related consolidated statements of income, comprehensive income, equity, and cash flows for the year then ended (not presented herein); and in our report dated February ~~20, 2018,~~19, 2019, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, ~~2017,~~2018, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

Basis for Review Results

This interim financial information is the responsibility of the Company's management. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our reviews in accordance with standards of the PCAOB. A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the PCAOB, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

/s/ Deloitte & Touche LLP

Seattle, Washington

~~November~~August 6, ~~2018~~2019

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Management’s Discussion and Analysis of Financial Condition and Results of Operations has been prepared in accordance with GAAP for interim financial information and with the instructions to Form 10-Q. The interim Management’s Discussion and Analysis of Financial Condition and Results of Operations does not contain the full detail or analysis which would be included in a full fiscal year Form 10-K; therefore, it should be read in conjunction with the Company's ~~2017~~2018 Form 10-K.

Business Segments

Our business segments have not changed during the ~~nine~~six months ended ~~September~~June 30, ~~2018.~~2019. See the ~~2017~~2018 Form 10-K as well as “Note 16 of the Notes to Condensed Consolidated Financial Statements” for further information regarding our business segments.

The following table presents net income (loss) attributable to Avista Corp. shareholders for each of our business segments (and the other businesses) for the three and ~~nine~~six months ended ~~September~~June 30 (dollars in thousands):


	Three months ended September 30,						Nine months ended September 30,						Three months ended June 30,				Six months ended June 30,
	2018			2017			2018			2017			2019		2018		2019		2018
Avista Utilities	$	11,935		$	5,419		$	91,727		$	85,623		$	21,219	$	24,252	$	133,120	$	79,792
AEL&P	824			427			5,878			5,961			1,076		1,282		4,628		5,054
Other	(2,640		)	(1,395		)	(7,019		)	(3,246		)	3,024		43		3,365		(4,379		)
Net income attributable to Avista Corp. shareholders	$	10,119		$	4,451		$	90,586		$	88,338		$	25,319	$	25,577	$	141,113	$	80,467

a ~~$1.4 million~~ ~~decrease in retail electric revenue due to a decrease in total MWhs sold (decreased revenues $5.2 million), partially offset by an increase in revenue per MWh (increased revenues $3.8 million).~~


•	a $3.8 million decrease in retail electric revenue due to a decrease in total MWhs sold (decreased revenues $0.5 million) and a decrease in revenue per MWh (decreased revenues $3.3 million).

◦

The slight decrease in total retail MWhs sold was the result of ~~weather that was cooler than the prior year (which decreased electric cooling loads),~~a decrease in industrial sales volumes, partially offset by an increase in residential sales volumes and customer growth. Compared to the ~~third~~second quarter of ~~2017,~~2018, residential electric use per customer ~~decreased 7~~increased 2 percent and commercial use per customer decreased 41 percent. Heating degree days in Spokane were 23 percent below normal and consistent with the second quarter of 2018. Cooling degree days in Spokane were 442 percent ~~below~~above normal and 2962 percent ~~below~~above the ~~third~~second quarter of ~~2017.~~2018.

◦

The ~~increase~~decrease in revenue per MWh was primarily due to ~~general rate increases in Idaho (effective January 1, 2018) and Washington (effective May 1, 2018), as well as an increase~~a decrease in decoupling rates (as our decoupling surcharges were larger in prior years, which resulted in higher surcharge ~~rates. This was partially offset by rate~~rates in 2018 as compared to rebates in 2019) and decreases associated with the lower corporate tax rate. This was partially offset by general rate increases in Washington (effective May 1, 2018) and Idaho (effective January 1, 2019).

a ~~$2.4 million~~ decrease in wholesale electric revenues due to a decrease in sales prices (decreased revenues $2.7 million), partially offset by an increase in sales volumes (increased revenues $0.3 million). The fluctuation in volumes and prices was primarily the result of our optimization activities.

a ~~$1.7 million~~ decrease in sales of fuel due to a decrease in sales of natural gas fuel as part of thermal generation resource optimization activities. For the third quarter of 2018, $11.6 million of these sales were made to our natural gas operations and are included as intracompany revenues and resource costs. For the third quarter of 2017, $13.6 million of these sales were made to our natural gas operations.

a ~~$5.0 million~~ ~~increase in electric revenue due to decoupling. Weather was cooler than normal in the third quarter of 2018, which resulted in decoupling deferral surcharges related to the current year.~~

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•	a $1.9 million increase in wholesale electric revenues due to an increase in sales prices (increased revenues $6.4 million), partially offset by a decrease in sales volumes (decreased revenues $4.5 million). The fluctuation in volumes and prices was primarily the result of our optimization activities.


•	a $9.7 million decrease in sales of fuel due to a decrease in sales of natural gas fuel as part of thermal generation resource optimization activities.


•	a $2.8 million increase in electric decoupling revenue. Weather was warmer than normal in the second quarter of 2019, reducing the demand for electric heating, which resulted in decoupling deferral surcharges related to the current year. There was also the amortization of decoupling rebates from prior years.

•

the $2.7 million increase in other electric revenues was primarily related to federal income tax law changes that lowered the corporate tax rate from 35 percent to 21 percent. As our customers' rates had the 35 percent corporate tax rate built in from prior general rate cases, we deferred the impact of the change in the first quarter of 2018. Effective May 1, 2018 in Washington and June 1, 2018 in Idaho, base rates reflect the lower 21 percent corporate tax.

The following graphs present Avista Utilities' natural gas operating revenues and therms delivered for the three months ended ~~September~~June 30 (dollars in millions and therms in thousands):


(1)	This balance includes interruptible and industrial revenues, which are considered part of retail natural gas revenues, and deferrals/amortizations to customers related to federal income tax law changes.

Total natural gas operating revenues in the graph above include intracompany sales of $6.5 million and $7.3 million for the three months ended June 30, 2019 and June 30, 2018, respectively.

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The following table presents the current year deferrals and the amortization of prior year decoupling balances that are reflected in utility natural gas operating revenues for the three months ended ~~September~~June 30 (dollars in thousands):

Natural Gas Operating
Revenues
2018 2017
Current year decoupling deferrals (a) $ 1,619
$ 600
Amortization of prior year decoupling deferrals (b) (969 ) (325 )
Total natural gas decoupling revenue $ 650
$ 275

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~~AVISTA CORPORATION~~



	Natural Gas Decoupling Revenues
	2019		2018
Current year decoupling deferrals (a)	$	3,138	$	2,458
Amortization of prior year decoupling deferrals (b)	895		(1,767		)
Total natural gas decoupling revenue	$	4,033	$	691


(a)	Positive amounts are increases in decoupling revenue in the current year and will be surcharged to customers in future years. Negative numbers are decreases in decoupling revenue in the current year and will be rebated to customers in future years.

(b)

Positive amounts are increases in decoupling revenue in the current year and are related to the amortization of rebate balances that resulted in prior years and are being refunded to customers (causing a corresponding decrease in retail revenue from customers) in the current year. Negative numbers are decreases in decoupling revenue in the current year and are related to the amortization of surcharge balances that resulted in prior years and are being surcharged to customers (causing a corresponding increase in retail revenue from customers) in the current year.

Total natural gas revenues decreased ~~$8.7~~$3.2 million for the ~~third~~second quarter of ~~2018~~2019 as compared to the ~~third~~second quarter of ~~2017~~2018 primarily due to the following:

a ~~$1.6~~$4.1 million decrease in natural gas retail revenues due to lower retail rates (decreased revenues ~~$2.1~~$4.9 million), partially offset by ~~a slight~~an increase in volumes (increased revenues ~~$0.5~~$0.8 million).

◦

We sold ~~slightly~~ more retail natural gas in the ~~third~~second quarter of ~~2018~~2019 as compared to the ~~third~~second quarter of ~~2017. Retail natural gas loads~~2018 primarily due to customer growth as use per customer decreased slightly due to warmer weather. Compared to second quarter of 2018, residential use per customer decreased 2 percent and ~~changes~~commercial use per customer decreased 1 percent. Heating degree days in ~~customer usage during~~Spokane were 23 percent below normal, and consistent with the ~~third~~second quarter ~~are typically not significant to~~of 2018. Heating degree days in Medford were 24 percent below normal, and 1 percent below the ~~full year.~~second quarter of 2018.

◦

Lower retail rates were due to PGAs and rate decreases associated with the lower corporate tax rate and decoupling rate decreases (as our decoupling surcharges were larger in prior years, which resulted in higher surcharge rates in 2018 as compared to rebates in 2019), partially offset by general rate increases in ~~Oregon~~Washington (effective ~~October~~May 1, 2018) and ~~November 1, 2017),~~ Idaho (effective January 1, ~~2018) and Washington (effective May 1, 2018)~~2019).

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•

a $2.2 million decrease in wholesale natural gas revenues due to a decrease in prices (decreased revenues $6.7 million), ~~as well as~~partially offset by an increase in ~~decoupling surcharge rates.~~volumes (increased revenues $4.5 million). Differences between revenues and costs from sales of resources in excess of retail load requirements and from resource optimization are accounted for through the PGA mechanisms.

an ~~$8.5 million~~ ~~decrease in wholesale natural gas revenues due to~~ a ~~decrease in prices (decreased revenues $2.9 million) and a decrease in volumes (decreased revenues $5.6 million). In the~~ ~~third quarter~~ of ~~2018~~, ~~$12.4 million~~ ~~of these sales were made to our electric generation operations and are included as intracompany revenues and resource costs. In the~~ ~~third quarter~~ of ~~2017~~, ~~$17.0 million~~ of these sales were made to our electric generation operations. Differences between revenues and costs from sales of resources in excess of retail load requirements and from resource optimization are accounted for through the PGA mechanisms.

~~a $0.4~~$3.4 million increase in natural gas ~~revenue due~~decoupling revenue. Weather was warmer than normal in the second quarter of 2019, reducing the demand for natural gas heating, which resulted in decoupling deferral surcharges related to ~~decoupling.~~the current year. There was also the amortization of decoupling rebates from prior years.

The following table presents Avista Utilities' average number of electric and natural gas retail customers for the three months ended ~~September~~June 30:

Electric
Customers

Natural Gas
Customers
2018 2017 2018 2017
Residential 339,765
334,274
313,922
306,706
Commercial 42,396
42,241
35,200
35,087
Interruptible —
—
39
37
Industrial 1,317
1,336
245
253
Public street and highway lighting 593
577
—
—
Total retail customers 384,071
378,428
349,406
342,083

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~~AVISTA CORPORATION~~



	Electric Customers		Natural Gas Customers
	2019	2018	2019	2018
Residential	344,342	339,010	321,136	313,782
Commercial	42,922	42,539	35,835	35,480
Interruptible	—	—	48	39
Industrial	1,307	1,312	241	246
Public street and highway lighting	606	594	—	—
Total retail customers	389,177	383,455	357,260	349,547

Utility Resource Costs

The following graphs present Avista Utilities' resource costs for the three months ended ~~September~~June 30 (dollars in millions):

Total electric resource costs in the graph above include intracompany resource costs of ~~$12.4~~$6.5 million and ~~$17.0~~$7.3 million for the three months ended ~~September~~June 30, 2019 and June 30, 2018, ~~and September 30, 2017,~~ respectively.

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AVISTA CORPORATION

Total natural gas resource costs in the graph above include intracompany resource costs of ~~$11.6~~$6.0 million and ~~$13.6~~$2.0 million for the three months ended ~~September~~June 30, ~~2018~~2019 and ~~September~~June 30, ~~2017,~~2018, respectively.

Total electric resource costs decreased ~~$2.0~~$10.2 million for the ~~third~~second quarter of ~~2018~~2019 as compared to the ~~third~~second quarter of ~~2017~~2018 primarily due to the following:

a ~~$7.6~~$3.7 million increase in purchased power costs due to ~~an increase in the volume of power purchases (increased costs $1.8 million) and~~ an increase in wholesale prices (increased costs ~~$5.8~~$8.0 million), partially offset by a decrease in the volume of power purchases (decreased costs $4.3 million). The fluctuation in volumes and prices was primarily the result of our optimization activities during the quarter.

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•
~~AVISTA CORPORATION~~ a $0.7 million decrease in fuel for generation primarily due to a slight decrease in thermal generation volumes.

a ~~$7.2 million~~ ~~decrease in fuel for generation primarily due to a decrease in thermal generation (due to~~ an ~~outage at Colstrip), as well as a decrease in natural gas fuel prices.~~

~~a $4.3~~$8.3 million decrease in other fuel costs. This represents fuel and the related derivative instruments that were purchased for generation but were later sold when conditions indicated that it was more economical to sell the fuel as part of the resource optimization process. When the fuel or related derivative instruments are sold, that revenue is included in sales of fuel.

a ~~$0.4~~$6.2 million decrease from net amortizations and deferrals of power costs.

a ~~$2.1~~$1.2 million net increase from other regulatory amortizations and other electric resource costs.

Total natural gas resource costs decreased $~~10.5~~1.0 million for the ~~third~~second quarter of ~~2018~~2019 as compared to the ~~third~~second quarter of ~~2017~~2018 primarily due to the following:

a ~~$8.9~~$0.3 million decrease in natural gas purchased due to a decrease in the price of natural gas (decreased costs ~~$3.9~~$5.9 million) ~~and a decrease~~, partially offset by an increase in total therms purchased ~~(decreased~~(increased costs ~~$5.0~~$5.6 million).

a ~~$1.5~~$1.1 million decrease from net amortizations and deferrals of natural gas costs.

a $0.4 million increase from other regulatory amortizations.

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Utility Margin

The following table reconciles Avista Utilities' operating revenues, as presented in "Note 16 of the Notes to Condensed Consolidated Financial Statements" to the Non-GAAP financial measure utility margin for the three months ended ~~September~~June 30 (dollars in thousands):


	Electric				Natural Gas				Intracompany						Total				Electric				Natural Gas				Intracompany						Total
	2018		2017		2018		2017		2018			2017			2018		2017		2019		2018		2019		2018		2019			2018			2019		2018
Operating revenues	$	232,448	$	231,419	$	71,189	$	79,938	$	(24,088	)	$	(30,581	)	$	279,549	$	280,776	$	229,591	$	235,558	$	72,766	$	75,946	$	(12,549	)	$	(9,282	)	$	289,808	$	302,222
Resource costs	77,576		79,598		44,973		55,499		(24,088		)	(30,581		)	98,461		104,516		65,564		75,766		35,491		36,538		(12,549		)	(9,282		)	88,506		103,022
Utility margin	$	154,872	$	151,821	$	26,216	$	24,439	$	—		$	—		$	181,088	$	176,260	$	164,027	$	159,792	$	37,275	$	39,408	$	—		$	—		$	201,302	$	199,200



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)~~	~~(Zip Code)~~



Title of Each Class	Trading Symbol(s)	Name of Each Exchange on Which Registered
Common Stock	AVA	New York Stock Exchange



Large accelerated filer	x☒	Accelerated filer	¨☐
Non-accelerated filer	¨ ~~(Do not check if a smaller reporting company)~~ ☐	Smaller reporting company	¨☐
Emerging growth company	¨☐



Item No.		Page No.

	Acronyms and Terms	iii
	Forward-Looking Statements	1
	Available Information	4
Part I. Financial Information
Item 1.	Condensed Consolidated Financial Statements	5
	Condensed Consolidated Statements of Income - Three and ~~Nine~~Six Months Ended ~~September~~June 30, ~~2018~~2019 and ~~2017~~2018	5
	Condensed Consolidated Statements of Comprehensive Income - Three and ~~Nine~~Six Months Ended ~~September~~June 30, ~~2018~~2019 and ~~2017~~2018	6
	Condensed Consolidated Balance Sheets - ~~September~~June 30, ~~2018~~2019 and December 31, ~~2017~~2018	7
	Condensed Consolidated Statements of Cash Flows - ~~Nine~~Six Months Ended ~~September~~June 30, ~~2018~~2019 and ~~2017~~2018	8
	Condensed Consolidated Statements of Equity - ~~Nine~~Three and Six Months Ended ~~September~~June 30, ~~2018~~2019 and ~~2017~~2018	10
	Notes to Condensed Consolidated Financial Statements	11
	Note 1. Summary of Significant Accounting Policies	11
	Note 2. New Accounting Standards	12
	Note 3. Balance Sheet Components	1413
	Note 4. Revenue	1615
	Note 5. ~~Derivatives and Risk Management~~Leases	2019
	Note 6. Derivatives and Risk Management	22
	Note 7. Pension Plans and Other Postretirement Benefit Plans	2426
	Note 7.8. Income Taxes
	~~Note 8. Committed Lines of Credit~~	25
	~~Note 9. Long-Term Debt and Capital Leases~~	27
	Note 9. Committed Lines of Credit	27
	Note 10. Long-Term Debt to Affiliated Trusts	28
	Note 11. Fair Value	28
	Note 12. Common Stock	32
	Note 13. Accumulated Other Comprehensive Loss	32
	Note 14. Earnings per Common Share Attributable to Avista Corporation Shareholders	33
	Note 15. Commitments and Contingencies	33
	Note 16. Information by Business Segments	35
	Note 17. ~~Pending~~Termination of Proposed Acquisition by Hydro One	36
	Note 18. Sale of METALfx	37
	Report of Independent Registered Public Accounting Firm	4138

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	4239
	Business Segments	4239
	Executive Level Summary	4239
	Regulatory Matters	40
	Results of Operations - Overall	44
	~~Results of Operations - Overall~~Non-GAAP Financial Measures	47
	~~Non-GAAP Financial Measures~~Results of Operations - Avista Utilities	4947
	~~Results of Operations - Avista Utilities~~	49
	Results of Operations - Alaska Electric Light and Power Company	60
	Results of Operations - Other Businesses	61
	~~Results of Operations - Other Businesses~~Critical Accounting Policies and Estimates	6261
	~~Critical Accounting Policies~~Liquidity and ~~Estimates~~Capital Resources	6261
	Overall Liquidity ~~and Capital Resources~~	62
	~~Overall Liquidity~~	62
	~~Review of Cash Flow Statement~~	6361



	Review of Cash Flow Statement	61
	Capital Resources	62
	Capital Expenditures	63
	~~Capital Expenditures~~Off-Balance Sheet Arrangements	63
	Pension Plan	63
	Contractual Obligations	63
	Environmental Issues and Other Contingencies	63
	Enterprise Risk Management	64
	~~Off-Balance Sheet Arrangements~~	65
	~~Pension Plan~~	65
	~~Contractual Obligations~~	65
	~~Environmental Issues and Other Contingencies~~	65
	~~Enterprise Risk Management~~Regional Energy Markets	66

Item 3.	~~Future Resource Needs~~Quantitative and Qualitative Disclosures about Market Risk	66

Item 4.	Controls and Procedures	66

Part II. Other Information
Item 1.	Legal Proceedings	67

Item 3.1A.	~~Quantitative and Qualitative Disclosures about Market~~ Risk Factors	68

~~Item 4.~~	~~Controls and Procedures~~	68

~~Part II. Other Information~~
~~Item 1.~~	~~Legal Proceedings~~	69

~~Item 1A.~~	~~Risk Factors~~	69

~~Item 2.~~	~~Unregistered Sales of Equity Securities and Use of Proceeds~~	69

~~Item 4.~~	~~Mine Safety Disclosures~~	6967

Item 6.	Exhibits	7067

	Signature	7168



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



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



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
~~ARAM~~	-	~~Average Rate Assumption Method~~
ASC	-	Accounting Standards Codification
ASU	-	Accounting Standards Update
Avista Capital	-	Parent company to the Company’s non-utility businesses
Avista Corp.	-	Avista Corporation, the Company
~~Avista Energy~~	-	~~Avista Energy, Inc., an inactive electricity and natural gas marketing, trading and resource management business, subsidiary of Avista Capital~~
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
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)
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
~~Ecology~~EIM	-	~~The state of Washington’s Department of Ecology~~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.~~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~~Heating degree days	-	~~Greenhouse gas~~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).
Hydro One	-	Hydro One Limited, based in Toronto, Ontario, Canada
IPUC	-	Idaho Public Utilities Commission
~~IRP~~	-	~~Integrated Resource Plan~~
Juneau	-	The City and Borough of Juneau, Alaska
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
SEC	-	U.S. Securities and Exchange Commission



TCJA	-	The "Tax Cuts and Jobs Act," signed into law on December 22, 2017
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 ~~for electricity;~~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


	September 30,			December 31,			June 30,			December 31,
	2018			2017			2019			2018
Assets:
Current Assets:
Cash and cash equivalents	$	21,170		$	16,172		$	17,231		$	14,656
Accounts and notes receivable-less allowances of $5,705 and $5,132, respectively	104,892			185,664
Accounts and notes receivable-less allowances of $3,415 and $5,233, respectively							115,493			165,824
Materials and supplies, fuel stock and stored natural gas	62,766			58,075			67,659			63,881
Regulatory assets	21,525			44,750			38,785			48,552
Other current assets	35,159			32,873			30,599			54,010
Total current assets	245,512			337,534			269,767			346,923
Net utility property	4,555,440			4,398,810			4,684,654			4,648,930
Goodwill	57,672			57,672			52,426			57,672
Non-current regulatory assets	576,863			619,399			630,451			614,354
Other property and investments-net and other non-current assets	121,911			101,317			240,630			114,697
Total assets	$	5,557,398		$	5,514,732		$	5,877,928		$	5,782,576
Liabilities and Equity:
Current Liabilities:
Accounts payable	$	80,892		$	107,289		$	80,619		$	108,372
Current portion of long-term debt and capital leases	2,629			277,438			104,993			107,645
Short-term borrowings	35,000			105,398			169,000			190,000
Regulatory liabilities	94,978			48,264			37,954			113,209
Other current liabilities	133,404			159,113			124,169			120,358
Total current liabilities	346,903			697,502			516,735			639,584
Long-term debt and capital leases	1,860,944			1,491,799			1,701,434			1,755,529
Long-term debt to affiliated trusts	51,547			51,547			51,547			51,547
Pensions and other postretirement benefits	191,021			203,566			214,983			222,537
Deferred income taxes	488,767			466,630			508,139			487,602
Non-current regulatory liabilities	798,440			800,089			789,655			780,701
Other non-current liabilities and deferred credits	69,425			73,115			211,401			71,031
Total liabilities	3,807,047			3,784,248			3,993,894			4,008,531
Commitments and Contingencies (See Notes to Condensed Consolidated Financial Statements)
Equity:
Avista Corporation Shareholders’ Equity:
Common stock, no par value; 200,000,000 shares authorized; 65,688,000 and 65,494,333 shares issued and outstanding, respectively	1,135,543			1,133,448
Common stock, no par value; 200,000,000 shares authorized; 66,111,317 and 65,688,356 shares issued and outstanding, respectively							1,157,024			1,136,491
Accumulated other comprehensive loss	(9,220		)	(8,090		)	(7,545		)	(7,866		)
Retained earnings	623,229			604,470			734,555			644,595
Total Avista Corporation shareholders’ equity	1,749,552			1,729,828			1,884,034			1,773,220
Noncontrolling Interests	799			656			—			825
Total equity	1,750,351			1,730,484			1,884,034			1,774,045
Total liabilities and equity	$	5,557,398		$	5,514,732		$	5,877,928		$	5,782,576



	June 30, 2019				December 31, 2018
	Current		Non-Current		Current		Non-Current
Regulatory Assets
Energy commodity derivatives	$	25,125	$	10,764	$	41,428	$	16,866
Decoupling surcharge	6,498		16,167		3,408		17,501
Pension and other postretirement benefit plans	—		221,454		—		228,062
Interest rate swaps	—		155,787		—		133,854
Deferred income taxes	—		95,217		—		91,188
Settlement with Coeur d'Alene Tribe	—		41,988		—		42,643
Demand side management programs	—		13,705		—		19,674
Utility plant to be abandoned	—		25,273		—		24,334
Other regulatory assets	7,162		50,096		3,716		40,232
Total regulatory assets	$	38,785	$	630,451	$	48,552	$	614,354

Regulatory Liabilities
Income tax related liabilities	$	23,079	$	418,039	$	27,997	$	425,613
Deferred natural gas costs	1,852		—		40,713		—
Deferral power costs	6,612		32,617		25,072		16,933
Decoupling rebate	437		2,861		6,782		204
Utility plant retirement costs	—		302,734		—		297,379
Interest rate swaps	—		17,659		—		28,078
Other regulatory liabilities	5,974		15,745		12,645		12,494
Total regulatory liabilities	$	37,954	$	789,655	$	113,209	$	780,701



	September 30, 2018				December 31, 2017
	Current		Non-Current		Current		Non-Current
Regulatory Assets
Energy commodity derivatives	$	19,238	$	9,555	$	24,991	$	18,967
Decoupling surcharge	2,287		18,099		19,759		2,600
Pension and other postretirement benefit plans	—		201,620		—		209,115
Interest rate swaps	—		131,972		—		169,704
Deferred income taxes	—		90,285		—		90,315
Settlement with Coeur d'Alene Tribe	—		42,971		—		43,954
Demand side management programs	—		19,774		—		24,620
Utility plant to be abandoned	—		24,158		—		24,330
Other regulatory assets	—		38,429		—		35,794
Total regulatory assets	$	21,525	$	576,863	$	44,750	$	619,399


	Three months ended			Nine months ended			Three months ended June 30,						Six months ended June 30,
	September 30, 2018			September 30, 2018			2019			2018			2019			2018
Avista Utilities
Revenue from contracts with customers	$	242,098		$	835,373		$	231,605		$	239,113		$	585,907		$	593,275
Derivative revenues	32,718			147,467			42,128			56,357			66,255			114,749
Alternative revenue programs	606			(1,763		)	9,725			3,570			5,067			(2,369		)
Deferrals and amortizations for rate refunds to customers	1,940			(16,900		)	2,512			982			4,647			(18,840		)
Other utility revenues	2,187			6,348			3,838			2,200			5,634			4,161
Total Avista Utilities	279,549			970,525			289,808			302,222			667,510			690,976
AEL&P
Revenue from contracts with customers	9,599			35,008			8,620			10,759			19,356			25,409
Deferrals and amortizations for rate refunds to customers	(156		)	(1,705		)	(47		)	(427		)	(95		)	(1,549		)
Other utility revenues	127			412			170			150			363			285
Total AEL&P	9,570			33,715			8,743			10,482			19,624			24,145
Other
Revenue from contracts with customers	6,580			19,633			2,024			6,324			9,671			13,053
Other revenues	314			799			237			270			488			485
Total other	6,894			20,432			2,261			6,594			10,159			13,538
Total operating revenues	$	296,013		$	1,024,672		$	300,812		$	319,298		$	697,293		$	728,659



	Three months ended September 30, 2018						Nine months ended September 30, 2018
	Avista Utilities		AEL&P		Total Utility		Avista Utilities		AEL&P		Total Utility
ELECTRIC OPERATIONS
Revenue from contracts with customers
Residential	$	82,470	$	2,987	$	85,457	$	272,041	$	13,680	$	285,721
Commercial and governmental	80,744		6,546		87,290		236,115		21,131		257,246
Industrial	30,806		—		30,806		83,910		—		83,910
Public street and highway lighting	1,860		66		1,926		5,618		197		5,815
Total retail revenue	195,880		9,599		205,479		597,684		35,008		632,692
Transmission	4,832		—		4,832		12,833		—		12,833
Other revenue from contracts with customers	8,564		—		8,564		18,774		—		18,774
Total revenue from contracts with customers	$	209,276	$	9,599	$	218,875	$	629,291	$	35,008	$	664,299


	2018			2017			2019			2018
Operating Activities:
Net income	$	90,729		$	88,317		$	140,897		$	80,600
Non-cash items included in net income:
Depreciation and amortization	139,738			130,803			104,757			92,584
Deferred income tax provision and investment tax credits	10,575			58,242			5,577			(1,272		)
Power and natural gas cost amortizations, net	6,315			8,416
Power and natural gas cost amortizations (deferrals), net							(47,716		)	6,701
Amortization of debt expense	2,327			2,440			1,338			1,635
Amortization of investment in exchange power	1,838			1,838			1,225			1,225
Stock-based compensation expense	5,215			5,809			7,009			3,878
Equity-related AFUDC	(4,406		)	(5,012		)	(3,253		)	(2,845		)
Pension and other postretirement benefit expense	23,980			27,816			18,040			16,025
Other regulatory assets and liabilities and deferred debits and credits	20,953			(12,683		)	1,122			21,323
Change in decoupling regulatory deferral	5,436			20,193			(5,444		)	2,226
Gain on sale of METALfx (before payment of transaction costs)							(6,477		)	—
Other	3,962			(190		)	(3,904		)	2,108
Contributions to defined benefit pension plan	(22,000		)	(22,000		)	(14,600		)	(14,600		)
Cash paid for settlement of interest rate swap agreements	(32,174		)	(11,302		)	—			(31,484		)
Cash received for settlement of interest rate swap agreements	5,594			2,479			—			5,594
Changes in certain current assets and liabilities:
Accounts and notes receivable	75,878			52,534			47,771			65,843
Materials and supplies, fuel stock and stored natural gas	(4,691		)	(12,653		)	(7,225		)	1,174
Collateral posted for derivative instruments	47,150			(1,896		)	47,352			44,080
Income taxes receivable	(5,994		)	(4,254		)
Other current assets	2,123			(16		)	(8,783		)	3,832
Accounts payable	(16,392		)	(29,992		)	(19,393		)	(21,642		)
Other current liabilities	9,639			8,624			(5,622		)	(1,560		)
Net cash provided by operating activities	365,795			307,513			252,671			275,425

Investing Activities:
Utility property capital expenditures (excluding equity-related AFUDC)	(296,216		)	(287,853		)	(199,988		)	(183,132		)
Issuance of notes receivable at subsidiaries	(2,930		)	(2,800		)	(900		)	(2,780		)
Equity and property investments made by subsidiaries	(8,629		)	(10,899		)	(6,624		)	(7,431		)
Distributions from investments	1,946			1,915
Proceeds from sale of METALfx (net of cash sold)							16,407			—
Other	(1,858		)	(2,714		)	1,072			438
Net cash used in investing activities	(307,687		)	(302,351		)	(190,033		)	(192,905		)



	Three months ended June 30, 2019		Six months ended June 30, 2019
Operating lease cost:
Fixed lease cost (Other operating expenses)	$	1,106	$	2,209
Variable lease cost (Other operating expenses)	244		487
Total operating lease cost	$	1,350	$	2,696

Finance lease cost:
Amortization of ROU asset (Depreciation and amortization)	$	910	$	1,820
Interest on lease liabilities (Interest expense)	699		1,398
Total finance lease cost	$	1,609	$	3,218



	2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash outflows:
Operating lease payments	$	4,197
Interest on finance lease	1,398
Total operating cash outflows	$	5,595

Finance cash outflows:
Principal payments on finance lease	$	1,330



	June 30,
	2019
Operating Leases
Operating lease ROU assets (Other property and investments-net and other non-current assets)	$	70,442

Other current liabilities	$	4,123
Other non-current liabilities and deferred credits	68,228
Total operating lease liabilities	$	72,351

Finance Leases
Finance lease ROU assets (Other property and investments-net and other non-current assets) (a)	$	52,800

Other current liabilities (b)	$	2,730
Other non-current liabilities and deferred credits (b)	53,150
Total finance lease liabilities	$	55,880

Weighted Average Remaining Lease Term
Operating leases	27.01 years
Finance leases	8.39 years

Weighted Average Discount Rate
Operating leases	3.82		%
Finance leases	4.88		%



	Operating Leases			Finance Leases
Remainder 2019	$	4,170		$	2,726
2020	4,364			5,462
2021	4,367			5,457
2022	4,375			5,460
2023	4,391			5,456
Thereafter	95,939			54,574
Total lease payments	$	117,606		$	79,135
Less: imputed interest	(45,255		)	(23,255		)
Total	$	72,351		$	55,880



	Purchases				Sales
	Electric Derivatives		Gas Derivatives		Electric Derivatives		Gas Derivatives
Year	Physical (1) MWh	Financial (1) MWh	Physical (1) mmBTUs	Financial (1) mmBTUs	Physical (1) MWh	Financial (1) MWh	Physical (1) mmBTUs	Financial (1) mmBTUs
Remainder 2019	1	559	5,378	61,385	82	1,330	481	26,150
2020	—	—	1,138	60,253	123	1,055	1,430	23,683
2021	—	—	—	17,640	—	246	1,049	8,575
2022	—	—	—	1,350	—	—	—	—
2023	—	—	—	—	—	—	—	—
Thereafter	—	—	—	—	—	—	—	—


(1)	Physical transactions represent commodity transactions in which Avista Corp. will take or make delivery of either electricity or natural gas; financial transactions represent derivative instruments with delivery of cash in the amount of the benefit or cost but with no physical delivery of the commodity, such as futures, swap derivatives, options, or forward contracts.



Balance Sheet Date	Number of Contracts	Notional Amount		Mandatory Cash Settlement Date
June 30, 2019	6	$	70,000	2019
	6	60,000		2020
	3	35,000		2021
	9	100,000		2022
December 31, 2018	6	$	70,000	2019
	6	60,000		2020
	2	25,000		2021
	7	80,000		2022


	Fair Value										Fair Value
Derivative and Balance Sheet Location	Gross Asset		Gross Liability			Collateral Netted		Net Asset (Liability) on Balance Sheet			Gross Asset		Gross Liability			Collateral Netted		Net Asset (Liability) on Balance Sheet
Foreign currency exchange derivatives
Other current assets	$	26	$	—		$	—	$	26		$	33	$	—		$	—	$	33
Interest rate swap derivatives
Other property and investments-net and other non-current assets	18,029		—			—		18,029
Other current assets											771		(338		)	—		433
Other current liabilities											—		(4,771		)	—		(4,771		)
Other non-current liabilities and deferred credits	129		(4,577		)	—		(4,448		)	631		(27,309		)	5,030		(21,648		)
Energy commodity derivatives
Other current assets	904		(27		)	—		877			582		(247		)	—		335
Other property and investments-net and other non-current assets	7		—			—		7
Other current liabilities	29,992		(50,107		)	13,262		(6,853		)	26,541		(52,004		)	20,960		(4,503		)
Other non-current liabilities and deferred credits	6,854		(16,416		)	6,087		(3,475		)	3,996		(14,760		)	5,214		(5,550		)
Total derivative instruments recorded on the balance sheet	$	55,941	$	(71,127	)	$	19,349	$	4,163		$	32,554	$	(99,429	)	$	31,204	$	(35,671	)



	Pension Benefits						Other Postretirement Benefits
	2019			2018			2019			2018
Three months ended June 30:
Service cost (a)	$	4,948		$	5,450		$	753		$	804
Interest cost	7,100			6,466			1,164			1,197
Expected return on plan assets	(7,953		)	(8,250		)	(611		)	(500		)
Amortization of prior service cost	75			75			(275		)	209
Net loss recognition	2,426			1,842			1,329			562
Net periodic benefit cost	$	6,596		$	5,583		$	2,360		$	2,272
Six months ended June 30:
Service cost (a)	$	9,822		$	10,900		$	1,525		$	1,608
Interest cost	14,238			12,932			2,536			2,394
Expected return on plan assets	(15,768		)	(16,500		)	(1,329		)	(1,000		)
Amortization of prior service cost	150			150			(550		)	(606		)
Net loss recognition	4,841			3,930			2,575			2,217
Net periodic benefit cost	$	13,283		$	11,412		$	4,757		$	4,613


(a)	Total service costs in the table above are recorded to the same accounts as labor expense. Labor and benefits expense is recorded to various projects based on whether the work is a capital project or an operating expense. Approximately 40 percent of all labor and benefits is capitalized to utility property and 60 percent is expensed to utility other operating expenses.


(1)	As of ~~September~~June 30, ~~2018~~2019 and December 31, ~~2017,~~2018, the balance outstanding was classified as short-term borrowings on the Condensed Consolidated Balance Sheet.



Maturity Year	Description	Interest Rate	September 30, 2018			December 31, 2017
Avista Corp. Secured Long-Term Debt
2018	First Mortgage Bonds	5.95%	$	—		$	250,000
2018	Secured Medium-Term Notes	7.39%-7.45%	—			22,500
2019	First Mortgage Bonds	5.45%	90,000			90,000
2020	First Mortgage Bonds	3.89%	52,000			52,000
2022	First Mortgage Bonds	5.13%	250,000			250,000
2023	Secured Medium-Term Notes	7.18%-7.54%	13,500			13,500
2028	Secured Medium-Term Notes	6.37%	25,000			25,000
2032	Secured Pollution Control Bonds (1)	(1)	66,700			66,700
2034	Secured Pollution Control Bonds (1)	(1)	17,000			17,000
2035	First Mortgage Bonds	6.25%	150,000			150,000
2037	First Mortgage Bonds	5.70%	150,000			150,000
2040	First Mortgage Bonds	5.55%	35,000			35,000
2041	First Mortgage Bonds	4.45%	85,000			85,000
2044	First Mortgage Bonds	4.11%	60,000			60,000
2045	First Mortgage Bonds	4.37%	100,000			100,000
2047	First Mortgage Bonds	4.23%	80,000			80,000
2047	First Mortgage Bonds	3.91%	90,000			90,000
2048	First Mortgage Bonds (2)	4.35%	375,000			—
2051	First Mortgage Bonds	3.54%	175,000			175,000
	Total Avista Corp. secured long-term debt		1,814,200			1,711,700
Alaska Electric Light and Power Company Secured Long-Term Debt
2044	First Mortgage Bonds	4.54%	75,000			75,000
	Total secured long-term debt		1,889,200			1,786,700
Alaska Energy and Resources Company Unsecured Long-Term Debt
2019	Unsecured Term Loan	3.85%	15,000			15,000
	Total secured and unsecured long-term debt		1,904,200			1,801,700
Other Long-Term Debt Components
	Capital lease obligations		57,844			62,148
	Unamortized debt discount		(905		)	(626		)
	Unamortized long-term debt issuance costs		(13,866		)	(10,285		)
	Total		1,947,273			1,852,937
	Secured Pollution Control Bonds held by Avista Corporation (1)		(83,700		)	(83,700		)
	Current portion of long-term debt and capital leases		(2,629		)	(277,438		)
	Total long-term debt and capital leases		$	1,860,944		$	1,491,799



	June 30, 2019				December 31, 2018
	Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value
Long-term debt (Level 2)	$	1,053,500	$	1,198,009	$	1,053,500	$	1,142,292
Long-term debt (Level 3)	767,000		762,204		767,000		734,742
Snettisham finance lease obligation (Level 3)	55,880		58,200		57,210		55,600
Long-term debt to affiliated trusts (Level 3)	51,547		39,691		51,547		38,145


	Level 1		Level 2		Level 3		Counterparty and Cash Collateral Netting (1)			Total		Level 1		Level 2		Level 3		Counterparty and Cash Collateral Netting (1)			Total
September 30, 2018
June 30, 2019
Assets:
Energy commodity derivatives	$	—	$	37,735	$	—	$	(36,851	)	$	884	$	—	$	31,074	$	—	$	(30,739	)	$	335
Level 3 energy commodity derivatives:
Natural gas exchange agreement	—		—		22		(22		)	—		—		—		45		(45		)	—
Foreign currency exchange derivatives	—		26		—		—			26		—		33		—		—			33
Interest rate swap derivatives	—		18,158		—		(129		)	18,029		—		1,402		—		(969		)	433
Deferred compensation assets:
Mutual Funds:
Fixed income securities (2)	1,819		—		—		—			1,819		1,787		—		—		—			1,787
Equity securities (2)	6,712		—		—		—			6,712		6,325		—		—		—			6,325
Total	$	8,531	$	55,919	$	22	$	(37,002	)	$	27,470	$	8,112	$	32,509	$	45	$	(31,753	)	$	8,913
Liabilities:
Energy commodity derivatives												$	—	$	63,974	$	—	$	(56,913	)	$	7,061
Level 3 energy commodity derivatives:
Natural gas exchange agreement												—		—		3,037		(45		)	2,992
Interest rate swap derivatives												—		32,418		—		(5,999		)	26,419
Total												$	—	$	96,392	$	3,037	$	(62,957	)	$	36,472


(1)	The Company is permitted to net derivative assets and derivative liabilities with the same counterparty when a legally enforceable master netting agreement exists. In addition, the Company nets derivative assets and derivative liabilities against any payables and receivables for cash collateral held or placed with these same counterparties.


(2)	These assets are included in other property and investments-net and other non-current assets on the Condensed Consolidated Balance Sheets.



	Fair Value (Net) at
	June 30, 2019			Valuation Technique	Unobservable Input	Range
Natural gas exchange agreement	$	(2,992	)	Internally derived weighted average cost of gas	Forward purchase prices	$1.37 - $2.30/mmBTU
					Forward purchase prices	$1.37 - $2.30/mmBTU
					Forward sales prices	$1.45 - $3.62/mmBTU
					Purchase volumes	118,162 - 310,000 mmBTUs
					Sales volumes	60,000 - 310,000 mmBTUs



	Natural Gas Exchange Agreement			Power Exchange Agreement			Total
Three months ended June 30, 2019:
Balance as of April 1, 2019	$	(2,104	)	$	(612	)	$	(2,716	)
Total gains or (losses) (realized/unrealized):
Included in regulatory assets/liabilities (1)	(829		)	1,454			625
Settlements	(59		)	(842		)	(901		)
Ending balance as of June 30, 2019 (2)	$	(2,992	)	$	—		$	(2,992	)


(1)	All gains and losses are included in other regulatory assets and liabilities. There were no gains and losses included in either net income or other comprehensive income during any of the periods presented in the table above.


(2)	There were no purchases, issuances or transfers from other categories of any derivatives instruments during the periods presented in the table above.