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 |
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| FOR THE QUARTERLY PERIOD ENDED March 31, |
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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| 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 |
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 | ☐ |
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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 30, 2022,2023, 72,439,91075,763,513 shares of Registrant’s Common Stock, no par value (the only class of common stock), were outstanding.
AVISTA CORPORATION
AVISTA CORPORATION
INDEX
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Item 1. |
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| Condensed Consolidated Statements of Income - |
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Condensed Consolidated Balance Sheets - | 8 | ||
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Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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| 45 | ||
Results of Operations - Alaska Electric Light and Power Company |
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Item 3. |
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Item 4. |
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Item 1. |
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Item 1A. |
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Item 6. |
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ii
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 |
Deadband or ERM | - | 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 |
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 |
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 |
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iii
AVISTA CORPORATION
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 |
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 |
iv
AVISTA CORPORATION
Forward-Looking Statements
From time to time, we make forward-looking statements such as statements regarding projected or future:
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 that are 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
Operational Risk
1
AVISTA CORPORATION
Climate Change Risk
2
AVISTA CORPORATION
Cyber and Technology Risk
2
AVISTA CORPORATION
Strategic Risk
External Mandates Risk
3
AVISTA CORPORATION
Financial Risk
3
AVISTA CORPORATION
Energy Commodity Risk
4
AVISTA CORPORATION
Compliance Risk
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 that 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 that 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/,investor.avistacorp.com, as soon as practicable after electronically filing these documents with the SEC. Except for SEC filings or portions thereof that are specifically referred to in this report, information contained on these websites is not part of this report.
45
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)
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| 2022 |
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| 2021 |
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| 2023 |
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| 2022 |
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Operating Revenues: |
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Utility revenues: |
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Utility revenues, exclusive of alternative revenue programs |
| $ | 478,703 |
| $ | 412,182 |
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| $ | 493,543 |
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| $ | 478,703 |
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Alternative revenue programs |
|
| (16,777 | ) |
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| 499 |
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| (19,038 | ) |
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| (16,777 | ) |
Total utility revenues |
| 461,926 |
| 412,681 |
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| 474,505 |
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| 461,926 |
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Non-utility revenues |
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| 120 |
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| 189 |
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| 126 |
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| 120 |
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Total operating revenues |
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| 462,046 |
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| 412,870 |
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| 474,631 |
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| 462,046 |
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Operating Expenses: |
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Utility operating expenses: |
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Resource costs |
| 186,868 |
| 134,579 |
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| 192,928 |
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| 186,868 |
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Other operating expenses |
| 94,527 |
| 87,555 |
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| 104,978 |
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| 94,527 |
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Depreciation and amortization |
| 62,577 |
| 55,221 |
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| 65,188 |
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| 62,577 |
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Taxes other than income taxes |
| 34,117 |
| 32,309 |
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| 33,894 |
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| 34,117 |
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Non-utility operating expenses: |
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Other operating expenses |
| 956 |
| 1,184 |
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| 1,011 |
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| 956 |
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Depreciation and amortization |
|
| 32 |
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| 127 |
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| 31 |
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| 32 |
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Total operating expenses |
|
| 379,077 |
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| 310,975 |
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| 398,030 |
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| 379,077 |
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Income from operations |
| 82,969 |
| 101,895 |
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| 76,601 |
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| 82,969 |
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Interest expense |
| 28,067 |
| 26,304 |
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| 35,084 |
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| 28,067 |
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Interest expense to affiliated trusts |
| 117 |
| 109 |
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| 571 |
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| 117 |
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Capitalized interest |
| (1,093 | ) |
| (1,015 | ) |
|
| (842 | ) |
|
| (1,093 | ) | ||
Other income-net |
|
| (4,851 | ) |
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| (3,684 | ) |
|
| (6,429 | ) |
|
| (4,851 | ) |
Income before income taxes |
| 60,729 |
| 80,181 |
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| 48,217 |
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| 60,729 |
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Income tax expense (benefit) |
|
| (10,836 | ) |
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| 12,164 |
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Income tax benefit |
|
| (6,628 | ) |
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| (10,836 | ) | ||||||||
Net income |
| $ | 71,565 |
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| $ | 68,017 |
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| $ | 54,845 |
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| $ | 71,565 |
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Weighted-average common shares outstanding (thousands), basic |
| 71,787 |
| 69,293 |
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| 75,169 |
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| 71,787 |
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Weighted-average common shares outstanding (thousands), diluted |
| 71,930 |
| 69,506 |
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| 75,275 |
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| 71,930 |
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Earnings per common share: |
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Basic |
| $ | 1.00 |
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| $ | 0.98 |
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| $ | 0.73 |
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| $ | 1.00 |
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Diluted |
| $ | 0.99 |
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| $ | 0.98 |
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| $ | 0.73 |
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| $ | 0.99 |
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The Accompanying Notes are an Integral Part of These Statements.
56
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Avista Corporation
For the Three Months Ended March 31
Dollars in thousands
(Unaudited)
|
| 2022 |
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| 2021 |
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Net income |
| $ | 71,565 |
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| $ | 68,017 |
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Other Comprehensive Income: |
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Change in unfunded benefit obligation for pension and other postretirement benefit plans - net of taxes of $73 and $84 respectively |
|
| 276 |
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|
| 315 |
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Total other comprehensive income |
|
| 276 |
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|
| 315 |
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Comprehensive income |
| $ | 71,841 |
|
| $ | 68,332 |
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| 2023 |
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| 2022 |
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Net income |
| $ | 54,845 |
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| $ | 71,565 |
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Other Comprehensive Income (Loss): |
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Change in unfunded benefit obligation for pension and other postretirement benefit plans - net of taxes of ($5) and $73 respectively |
|
| (18 | ) |
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| 276 |
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Total other comprehensive income (loss) |
|
| (18 | ) |
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| 276 |
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Comprehensive income |
| $ | 54,827 |
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| $ | 71,841 |
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The Accompanying Notes are an Integral Part of These Statements.
67
CONDENSED CONSOLIDATED BALANCE SHEETS
Avista Corporation
Dollars in thousands
(Unaudited)
|
| March 31, |
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| December 31, |
|
| March 31, |
|
| December 31, |
| ||||
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| 2022 |
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| 2021 |
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| 2023 |
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| 2022 |
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Assets: |
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Current Assets: |
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Cash and cash equivalents |
| $ | 203,598 |
| $ | 22,168 |
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| $ | 10,596 |
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| $ | 13,428 |
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Accounts and notes receivable-less allowances of $11,598 and $10,465, respectively |
| 193,200 |
| 203,035 |
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Materials and supplies, fuel stock and stored natural gas |
| 76,402 |
| 84,733 |
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Accounts and notes receivable-less allowances of $6,225 and $6,473, respectively |
|
| 216,567 |
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|
| 255,746 |
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Inventory |
|
| 101,775 |
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|
| 107,674 |
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Regulatory assets |
| 34,733 |
| 43,783 |
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|
| 210,097 |
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|
| 193,787 |
| |||
Other current assets |
|
| 88,143 |
|
|
| 80,754 |
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|
| 116,665 |
|
|
| 151,167 |
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Total current assets |
| 596,076 |
| 434,473 |
|
|
| 655,700 |
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|
| 721,802 |
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Net utility property |
| 5,250,277 |
| 5,225,515 |
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|
| 5,472,134 |
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|
| 5,444,709 |
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Goodwill |
| 52,426 |
| 52,426 |
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|
| 52,426 |
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|
| 52,426 |
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Non-current regulatory assets |
| 838,623 |
| 860,626 |
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|
| 839,272 |
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|
| 833,328 |
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Other property and investments-net and other non-current assets |
|
| 298,608 |
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|
| 280,543 |
|
|
| 374,394 |
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|
| 365,085 |
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Total assets |
| $ | 7,036,010 |
|
| $ | 6,853,583 |
|
| $ | 7,393,926 |
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| $ | 7,417,350 |
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Liabilities and Equity: |
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| ||||
Current Liabilities: |
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Accounts payable |
| $ | 112,126 |
| $ | 133,096 |
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| $ | 112,230 |
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| $ | 202,954 |
| |
Current portion of long-term debt |
| 250,000 |
| 250,000 |
|
|
| 13,500 |
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|
| 13,500 |
| |||
Short-term borrowings |
| 0 |
| 284,000 |
|
|
| 231,000 |
|
|
| 463,000 |
| |||
Regulatory liabilities |
| 109,278 |
| 77,149 |
|
|
| 85,462 |
|
|
| 95,665 |
| |||
Other current liabilities |
|
| 170,521 |
|
|
| 168,861 |
|
|
| 162,395 |
|
|
| 189,415 |
|
Total current liabilities |
| 641,925 |
| 913,106 |
|
|
| 604,587 |
|
|
| 964,534 |
| |||
Long-term debt |
| 2,294,179 |
| 1,898,370 |
|
|
| 2,530,009 |
|
|
| 2,281,013 |
| |||
Long-term debt to affiliated trusts |
| 51,547 |
| 51,547 |
|
|
| 51,547 |
|
|
| 51,547 |
| |||
Pensions and other postretirement benefits |
| 140,575 |
| 153,467 |
|
|
| 93,254 |
|
|
| 93,901 |
| |||
Deferred income taxes |
| 646,736 |
| 642,709 |
|
|
| 694,216 |
|
|
| 674,995 |
| |||
Non-current regulatory liabilities | �� |
| 850,702 |
| 861,515 |
|
|
| 840,211 |
|
|
| 840,837 |
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Other non-current liabilities and deferred credits |
|
| 177,046 |
|
|
| 178,125 |
|
|
| 194,791 |
|
|
| 175,855 |
|
Total liabilities |
|
| 4,802,710 |
|
|
| 4,698,839 |
|
|
| 5,008,615 |
|
|
| 5,082,682 |
|
Commitments and Contingencies (See Notes to Condensed Consolidated |
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| ||||
Equity: |
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| ||||
Shareholders’ Equity: |
|
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| ||||
Common stock, no par value; 200,000,000 shares authorized; 72,438,447 and |
| 1,418,421 |
| 1,380,152 |
| |||||||||||
Common stock, no par value; 200,000,000 shares authorized; 75,762,598 and 74,945,948 shares issued and outstanding, respectively |
|
| 1,555,651 |
|
|
| 1,525,185 |
| ||||||||
Accumulated other comprehensive loss |
| (10,763 | ) |
| (11,039 | ) |
|
| (2,076 | ) |
|
| (2,058 | ) | ||
Retained earnings |
|
| 825,642 |
|
|
| 785,631 |
|
|
| 831,736 |
|
|
| 811,541 |
|
Total shareholders’ equity |
|
| 2,233,300 |
|
|
| 2,154,744 |
|
|
| 2,385,311 |
|
|
| 2,334,668 |
|
Total liabilities and equity |
| $ | 7,036,010 |
|
| $ | 6,853,583 |
|
| $ | 7,393,926 |
|
| $ | 7,417,350 |
|
The Accompanying Notes are an Integral Part of These Statements.
78
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Avista Corporation
For the Three Months Ended March 31
Dollars in thousands
(Unaudited)
|
| 2022 |
|
| 2021 |
| ||
Operating Activities: |
|
|
|
|
|
| ||
Net income |
| $ | 71,565 |
|
| $ | 68,017 |
|
Non-cash items included in net income: |
|
|
|
|
|
| ||
Depreciation and amortization |
|
| 62,609 |
|
|
| 55,348 |
|
Deferred income tax provision and investment tax credits |
|
| (7,202 | ) |
|
| 5,966 |
|
Power and natural gas cost deferrals, net |
|
| (7,319 | ) |
|
| (7,811 | ) |
Amortization of debt expense |
|
| 540 |
|
|
| 823 |
|
Stock-based compensation expense |
|
| 1,845 |
|
|
| 626 |
|
Equity-related AFUDC |
|
| (1,946 | ) |
|
| (1,754 | ) |
Pension and other postretirement benefit expense |
|
| 5,368 |
|
|
| 7,556 |
|
Other regulatory assets and liabilities and deferred debits and credits |
|
| 4,791 |
|
|
| 1,762 |
|
Change in decoupling regulatory deferral |
|
| 16,729 |
|
|
| (682 | ) |
Realized and unrealized gain on assets and investments |
|
| (1,932 | ) |
|
| (1,728 | ) |
Other |
|
| (1,610 | ) |
|
| (1,255 | ) |
Contributions to defined benefit pension plan |
|
| (14,000 | ) |
|
| (14,000 | ) |
Cash paid for settlement of interest rate swap agreements |
|
| (17,035 | ) |
|
| — |
|
Changes in certain current assets and liabilities: |
|
|
|
|
|
| ||
Accounts and notes receivable |
|
| 7,765 |
|
|
| 6,728 |
|
Materials and supplies, fuel stock and stored natural gas |
|
| 8,331 |
|
|
| 4,291 |
|
Collateral posted for derivative instruments |
|
| 38,622 |
|
|
| 1,497 |
|
Income taxes receivable |
|
| (4,816 | ) |
|
| 5,442 |
|
Other current assets |
|
| (5,881 | ) |
|
| (260 | ) |
Accounts payable |
|
| (21,828 | ) |
|
| (2,590 | ) |
Other current liabilities |
|
| 27,254 |
|
|
| 17,114 |
|
Net cash provided by operating activities |
|
| 161,850 |
|
|
| 145,090 |
|
|
|
|
|
|
|
| ||
Investing Activities: |
|
|
|
|
|
| ||
Utility property capital expenditures (excluding equity-related AFUDC) |
|
| (95,987 | ) |
|
| (97,203 | ) |
Equity and property investments |
|
| (231 | ) |
|
| (2,340 | ) |
Proceeds from sale of investments |
|
| — |
|
|
| 801 |
|
Other |
|
| 537 |
|
|
| 2,281 |
|
Net cash used in investing activities |
|
| (95,681 | ) |
|
| (96,461 | ) |
|
| 2023 |
|
| 2022 |
| ||
Operating Activities: |
|
|
|
|
|
| ||
Net income |
| $ | 54,845 |
|
| $ | 71,565 |
|
Non-cash items included in net income: |
|
|
|
|
|
| ||
Depreciation and amortization |
|
| 65,219 |
|
|
| 62,609 |
|
Deferred income tax provision and investment tax credits |
|
| (10,155 | ) |
|
| (7,202 | ) |
Power and natural gas cost deferrals, net |
|
| (53,387 | ) |
|
| (7,319 | ) |
Amortization of debt expense |
|
| 1,128 |
|
|
| 540 |
|
Stock-based compensation expense |
|
| 2,221 |
|
|
| 1,845 |
|
Equity-related AFUDC |
|
| (1,562 | ) |
|
| (1,946 | ) |
Pension and other postretirement benefit expense |
|
| 3,407 |
|
|
| 5,368 |
|
Other regulatory assets and liabilities |
|
| (10,717 | ) |
|
| 5,234 |
|
Other deferred debits and credits |
|
| 19,759 |
|
|
| (443 | ) |
Change in decoupling regulatory deferral |
|
| 19,391 |
|
|
| 16,729 |
|
Realized and unrealized loss (gain) on assets and investments |
|
| 182 |
|
|
| (1,932 | ) |
Other |
|
| (1,157 | ) |
|
| (1,610 | ) |
Contributions to defined benefit pension plan |
|
| (3,333 | ) |
|
| (14,000 | ) |
Cash paid for settlement of interest rate swap agreements |
|
| (409 | ) |
|
| (17,035 | ) |
Cash received for settlement of interest rate swap agreements |
|
| 7,869 |
|
|
| — |
|
Changes in certain current assets and liabilities: |
|
|
|
|
|
| ||
Accounts and notes receivable |
|
| 37,743 |
|
|
| 7,765 |
|
Inventory |
|
| 5,900 |
|
|
| 8,331 |
|
Collateral posted for derivative instruments |
|
| 66,371 |
|
|
| 38,622 |
|
Income taxes receivable |
|
| 2,925 |
|
|
| (4,816 | ) |
Other current assets |
|
| (17,543 | ) |
|
| (5,881 | ) |
Accounts payable |
|
| (87,195 | ) |
|
| (21,828 | ) |
Other current liabilities |
|
| (7,256 | ) |
|
| 27,254 |
|
Net cash provided by operating activities |
|
| 94,246 |
|
|
| 161,850 |
|
|
|
|
|
|
| |||
Investing Activities: |
|
|
|
|
|
| ||
Utility property capital expenditures (excluding equity-related AFUDC) |
|
| (100,490 | ) |
|
| (95,987 | ) |
Issuance of notes receivable |
|
| (1,500 | ) |
|
| (197 | ) |
Equity and property investments |
|
| (4,781 | ) |
|
| (231 | ) |
Other |
|
| 518 |
|
|
| 734 |
|
Net cash used in investing activities |
|
| (106,253 | ) |
|
| (95,681 | ) |
The Accompanying Notes are an Integral Part of These Statements.
8
9
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
Avista Corporation
For the Three Months Ended March 31
Dollars in thousands
(Unaudited)
|
| 2022 |
|
| 2021 |
|
| 2023 |
|
| 2022 |
| ||||
Financing Activities: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net decrease in short-term borrowings |
| $ | (284,000 | ) |
| $ | (10,000 | ) |
| $ | (232,000 | ) |
| $ | (284,000 | ) |
Proceeds from issuance of long-term debt |
| 399,856 |
| — |
|
|
| 250,000 |
|
|
| 399,856 |
| |||
Maturity of long-term debt and finance leases |
| (771 | ) |
| (759 | ) |
|
| (809 | ) |
|
| (771 | ) | ||
Issuance of common stock, net of issuance costs |
| 37,886 |
| 65 |
|
|
| 29,912 |
|
|
| 37,886 |
| |||
Cash dividends paid |
| (31,969 | ) |
| (29,399 | ) |
|
| (35,029 | ) |
|
| (31,969 | ) | ||
Other |
|
| (5,741 | ) |
|
| (1,085 | ) |
|
| (2,899 | ) |
|
| (5,741 | ) |
Net cash provided by (used in) financing activities |
|
| 115,261 |
|
|
| (41,178 | ) | ||||||||
Net cash provided by financing activities |
|
| 9,175 |
|
|
| 115,261 |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net increase in cash and cash equivalents |
| 181,430 |
| 7,451 |
| |||||||||||
Net increase (decrease) in cash and cash equivalents |
|
| (2,832 | ) |
|
| 181,430 |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Cash and cash equivalents at beginning of period |
|
| 22,168 |
|
|
| 14,196 |
|
|
| 13,428 |
|
|
| 22,168 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Cash and cash equivalents at end of period |
| $ | 203,598 |
|
| $ | 21,647 |
|
| $ | 10,596 |
|
| $ | 203,598 |
|
The Accompanying Notes are an Integral Part of These Statements.
910
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
Avista Corporation
For the Three Months Ended March 31
Dollars in thousands
(Unaudited)
|
| 2022 |
|
| 2021 |
|
| 2023 |
|
| 2022 |
| ||||
Common Stock, Shares: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Shares outstanding at beginning of period |
| 71,497,523 |
| 69,238,901 |
|
|
| 74,945,948 |
|
|
| 71,497,523 |
| |||
Shares issued |
|
| 940,924 |
|
|
| 74,436 |
|
|
| 816,650 |
|
|
| 940,924 |
|
Shares outstanding at end of period |
|
| 72,438,447 |
|
|
| 69,313,337 |
|
|
| 75,762,598 |
|
|
| 72,438,447 |
|
Common Stock, Amount: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Balance at beginning of period |
| $ | 1,380,152 |
| $ | 1,286,068 |
|
| $ | 1,525,185 |
|
| $ | 1,380,152 |
| |
Equity compensation expense |
| 1,845 |
| 859 |
|
|
| 2,221 |
|
|
| 1,845 |
| |||
Issuance of common stock, net of issuance costs |
| 37,886 |
| 65 |
|
|
| 29,912 |
|
|
| 37,886 |
| |||
Payment of minimum tax withholdings for share-based payment awards |
|
| (1,462 | ) |
|
| (993 | ) |
|
| (1,667 | ) |
|
| (1,462 | ) |
Balance at end of period |
|
| 1,418,421 |
|
|
| 1,285,999 |
|
|
| 1,555,651 |
|
|
| 1,418,421 |
|
Accumulated Other Comprehensive Loss: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Balance at beginning of period |
| (11,039 | ) |
| (14,378 | ) |
|
| (2,058 | ) |
|
| (11,039 | ) | ||
Other comprehensive income |
|
| 276 |
|
|
| 315 |
| ||||||||
Other comprehensive income (loss) |
|
| (18 | ) |
|
| 276 |
| ||||||||
Balance at end of period |
|
| (10,763 | ) |
|
| (14,063 | ) |
|
| (2,076 | ) |
|
| (10,763 | ) |
Retained Earnings: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Balance at beginning of period |
| 785,631 |
| 758,036 |
|
|
| 811,541 |
|
|
| 785,631 |
| |||
Net income |
| 71,565 |
| 68,017 |
|
|
| 54,845 |
|
|
| 71,565 |
| |||
Dividends on common stock |
|
| (31,554 | ) |
|
| (29,399 | ) |
|
| (34,650 | ) |
|
| (31,554 | ) |
Balance at end of period |
|
| 825,642 |
|
|
| 796,654 |
|
|
| 831,736 |
|
|
| 825,642 |
|
Total equity |
| $ | 2,233,300 |
|
| $ | 2,068,590 |
|
| $ | 2,385,311 |
|
| $ | 2,233,300 |
|
Dividends declared per common share |
| $ | 0.44 |
|
| $ | 0.4225 |
|
| $ | 0.46 |
|
| $ | 0.44 |
|
The Accompanying Notes are an Integral Part of These Statements.
1011
AVISTA CORPORATION
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, 20222023 and March 31, 20212022 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, 2021 (20212022 (2022 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, most of whom are employees who operate the Company's Noxon Rapids generating facility.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 all of the subsidiary companies in the non-utility businesses, with the exception of AJT Mining Properties, Inc., which is a subsidiary of AERC. See Note 1617 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 resulting from its interests in jointly owned plants.
Regulation
The Company is subject to state regulation in Washington, Idaho, Montana, Oregon and Alaska. The Company is also 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 have been concluded to beare probable of recovery through future rates.
1112
AVISTA CORPORATION
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 that are 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 that is 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 that allow 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 any 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 1112 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 1516 for further discussion of the Company's commitments and contingencies.
NOTE 2. NEW ACCOUNTING STANDARDS
ThereASU 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 and (ii) the nature and remaining duration of the restrictions, and (iii) the circumstances that could cause a lapse in the restrictions. The amendments are no new accounting standardseffective on January 1, 2024, with early adoption permitted. The amendments must be applied using a materialprospective approach with any adjustments
13
AVISTA CORPORATION
from the adoption of the amendments recognized in earnings and disclosed upon adoption. The Company does not expect the impact of these amendments to the Company.be material.
NOTE 3. BALANCE SHEET COMPONENTS
Materials and Supplies, Fuel Stock and Stored Natural GasInventory
Inventories of materials and supplies, emissions allowances, fuel stock and stored natural gas are recorded at average cost for our regulated operations and the lower of cost or net realizable value for our non-regulated operations and consisted of the following as of March 31, 20222023 and December 31, 20212022 (dollars in thousands):
|
| March 31, |
|
| December 31, |
| ||
|
| 2022 |
|
| 2021 |
| ||
Materials and supplies |
| $ | 67,059 |
|
| $ | 62,003 |
|
Fuel stock |
|
| 4,539 |
|
|
| 5,126 |
|
Stored natural gas |
|
| 4,804 |
|
|
| 17,604 |
|
Total |
| $ | 76,402 |
|
| $ | 84,733 |
|
12
AVISTA CORPORATION
|
| March 31, |
|
| December 31, |
| ||
|
| 2023 |
|
| 2022 |
| ||
Materials and supplies |
| $ | 81,523 |
|
| $ | 75,766 |
|
Emission allowance |
|
| 13,774 |
|
|
| — |
|
Stored natural gas |
|
| 1,921 |
|
|
| 26,788 |
|
Fuel stock |
|
| 4,557 |
|
|
| 5,120 |
|
Total |
| $ | 101,775 |
|
| $ | 107,674 |
|
Other Current Assets
Other current assets consisted of the following as of March 31, 20222023 and December 31, 20212022 (dollars in thousands):
|
| March 31, |
|
| December 31, |
| ||
|
| 2022 |
|
| 2021 |
| ||
Collateral posted for derivative instruments after netting with outstanding |
| $ | 4,615 |
|
| $ | 21,477 |
|
Prepayments |
|
| 32,126 |
|
|
| 24,387 |
|
Income taxes receivable |
|
| 34,431 |
|
|
| 29,615 |
|
Derivative assets after netting with outstanding collateral |
|
| 14,084 |
|
|
| 1,398 |
|
Other |
|
| 2,887 |
|
|
| 3,877 |
|
Total |
| $ | 88,143 |
|
| $ | 80,754 |
|
|
| March 31, |
|
| December 31, |
| ||
|
| 2023 |
|
| 2022 |
| ||
Prepayments |
| $ | 47,245 |
|
| $ | 30,201 |
|
Income taxes receivable |
|
| 27,815 |
|
|
| 30,740 |
|
Derivative assets net of collateral |
|
| 871 |
|
|
| 18,198 |
|
Collateral posted for derivative instruments after netting with outstanding |
|
| 34,383 |
|
|
| 66,142 |
|
Other |
|
| 6,351 |
|
|
| 5,886 |
|
Total |
| $ | 116,665 |
|
| $ | 151,167 |
|
Net Utility Property
Net utility property, which is recorded at original cost, net of accumulated depreciation, consisted of the following as of March 31, 20222023 and December 31, 20212022 (dollars in thousands):
|
| March 31, |
|
| December 31, |
|
| March 31, |
|
| December 31, |
| ||||
|
| 2022 |
|
| 2021 |
|
| 2023 |
|
| 2022 |
| ||||
Utility plant in service |
| $ | 7,195,738 |
| $ | 7,166,580 |
|
| $ | 7,511,264 |
|
| $ | 7,561,688 |
| |
Construction work in progress |
|
| 221,905 |
|
|
| 205,405 |
|
|
| 171,785 |
|
|
| 164,147 |
|
Total |
| 7,417,643 |
| 7,371,985 |
|
|
| 7,683,049 |
|
|
| 7,725,835 |
| |||
Less: Accumulated depreciation and amortization |
|
| 2,167,366 |
|
|
| 2,146,470 |
|
|
| 2,210,915 |
|
|
| 2,281,126 |
|
Total |
| $ | 5,250,277 |
|
| $ | 5,225,515 |
|
| $ | 5,472,134 |
|
| $ | 5,444,709 |
|
14
AVISTA CORPORATION
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, 20222023 and December 31, 20212022 (dollars in thousands):
|
| March 31, |
|
| December 31, |
|
| March 31, |
|
| December 31, |
| ||||
|
| 2022 |
|
| 2021 |
|
| 2023 |
|
| 2022 |
| ||||
Equity investments |
| $ | 150,681 |
|
| $ | 147,809 |
| ||||||||
Operating lease ROU assets |
| $ | 69,673 |
| $ | 70,133 |
|
|
| 69,098 |
|
|
| 68,238 |
| |
Equity investments |
| 92,795 |
| 91,057 |
| |||||||||||
Finance lease ROU assets |
| 42,787 |
| 43,697 |
|
|
| 39,145 |
|
|
| 40,056 |
| |||
Non-utility property |
| 26,623 |
| 20,033 |
|
|
| 25,535 |
|
|
| 25,401 |
| |||
Notes receivable |
| 15,287 |
| 14,949 |
|
|
| 18,272 |
|
|
| 17,954 |
| |||
Long-term prepaid license fees |
| 13,030 |
| 8,465 |
|
|
| 17,696 |
|
|
| 17,936 |
| |||
Pension assets |
|
| 16,007 |
|
|
| 13,382 |
| ||||||||
Investment in affiliated trust |
| 11,547 |
| 11,547 |
|
|
| 11,547 |
|
|
| 11,547 |
| |||
Deferred compensation assets |
| 8,843 |
| 9,513 |
|
|
| 7,435 |
|
|
| 7,541 |
| |||
Held for sale |
|
| 3,259 |
|
|
| — |
| ||||||||
Other |
|
| 18,023 |
|
|
| 11,149 |
|
|
| 15,719 |
|
|
| 15,221 |
|
Total |
| $ | 298,608 |
|
| $ | 280,543 |
|
| $ | 374,394 |
|
| $ | 365,085 |
|
Other Current Liabilities
Other current liabilities consisted of the following as of March 31, 20222023 and December 31, 20212022 (dollars in thousands):
|
| March 31, |
|
| December 31, |
| ||
Accrued taxes other than income taxes |
| $ | 52,546 |
|
| $ | 41,706 |
|
Derivative liabilities |
|
| 3,132 |
|
|
| 28,801 |
|
Employee paid time off accruals |
|
| 29,258 |
|
|
| 27,741 |
|
Accrued interest |
|
| 31,673 |
|
|
| 17,538 |
|
Pensions and other postretirement benefits |
|
| 13,399 |
|
|
| 13,582 |
|
Other |
|
| 40,513 |
|
|
| 39,493 |
|
Total |
| $ | 170,521 |
|
| $ | 168,861 |
|
13
AVISTA CORPORATION
|
| March 31, |
|
| December 31, |
| ||
Accrued taxes other than income taxes |
| $ | 37,834 |
|
| $ | 38,568 |
|
Derivative liabilities |
|
| 10,006 |
|
|
| 26,910 |
|
Employee paid time off accruals |
|
| 30,843 |
|
|
| 29,279 |
|
Accrued interest |
|
| 34,310 |
|
|
| 20,863 |
|
Deferred wholesale revenue |
|
| — |
|
|
| 8,481 |
|
Pensions and other postretirement benefits |
|
| 14,826 |
|
|
| 15,625 |
|
Other |
|
| 34,576 |
|
|
| 49,689 |
|
Total |
| $ | 162,395 |
|
| $ | 189,415 |
|
Other Non-Current Liabilities and Deferred Credits
Other non-current liabilities and deferred credits consisted of the following as of March 31, 20222023 and December 31, 20212022 (dollars in thousands):
|
| March 31, |
|
| December 31, |
|
| March 31, |
|
| December 31, |
| ||||
Operating lease liabilities |
| $ | 66,643 |
| $ | 66,068 |
|
| $ | 66,044 |
|
| $ | 64,284 |
| |
Finance lease liabilities |
| 44,921 |
| 45,730 |
|
|
| 41,645 |
|
|
| 42,495 |
| |||
Deferred investment tax credits |
| 29,176 |
| 29,313 |
|
|
| 28,647 |
|
|
| 28,784 |
| |||
Climate Commitment Act obligations |
|
| 21,652 |
|
|
| — |
| ||||||||
Asset retirement obligations |
| 16,878 |
| 17,142 |
|
|
| 15,880 |
|
|
| 15,783 |
| |||
Derivative liabilities |
| 3,607 |
| 4,525 |
|
|
| 5,062 |
|
|
| 7,892 |
| |||
Other |
|
| 15,821 |
|
|
| 15,347 |
|
|
| 15,861 |
|
|
| 16,617 |
|
Total |
| $ | 177,046 |
|
| $ | 178,125 |
|
| $ | 194,791 |
|
| $ | 175,855 |
|
15
AVISTA CORPORATION
Regulatory Assets and Liabilities
Regulatory assets and liabilities consisted of the following as of March 31, 20222023 and December 31, 20212022 (dollars in thousands):
|
| March 31, 2022 |
|
| December 31, 2021 |
|
| March 31, 2023 |
|
| December 31, 2022 |
| ||||||||||||||||||||
|
| Current |
|
| Non-Current |
|
| Current |
|
| Non-Current |
|
| Current |
|
| Non-Current |
|
| Current |
|
| Non-Current |
| ||||||||
Regulatory Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Energy commodity derivatives |
| $ | 0 |
| $ | 0 |
| $ | 12,447 |
| $ | 2,938 |
|
| $ | 73,968 |
|
| $ | 10,769 |
|
| $ | 112,090 |
|
| $ | 18,185 |
| |||
Decoupling surcharge |
| 9,798 |
| 6,106 |
| 9,907 |
| 14,625 |
|
|
| 4,362 |
|
|
| 787 |
|
|
| 6,250 |
|
|
| 5,449 |
| |||||||
Deferred natural gas costs |
| 18,353 |
| 8,401 |
| 14,095 |
| 6,932 |
|
|
| 94,653 |
|
|
| — |
|
|
| 52,091 |
|
|
| — |
| |||||||
Deferred power costs |
| 5,978 |
| 2,089 |
| 7,334 |
| 3,501 |
|
|
| 37,114 |
|
|
| 24,143 |
|
|
| 23,356 |
|
|
| 24,043 |
| |||||||
Deferred income taxes |
|
| — |
|
|
| 237,263 |
|
|
| — |
|
|
| 240,325 |
| ||||||||||||||||
Pension and other postretirement benefit plans |
| 0 |
| 164,207 |
| 0 |
| 165,696 |
|
|
| — |
|
|
| 133,837 |
|
|
| — |
|
|
| 135,337 |
| |||||||
Interest rate swaps |
| 0 |
| 191,087 |
| 0 |
| 199,754 |
|
|
| — |
|
|
| 184,784 |
|
|
| — |
|
|
| 185,919 |
| |||||||
Deferred income taxes |
| 0 |
| 240,502 |
| 0 |
| 244,154 |
| |||||||||||||||||||||||
AFUDC above FERC allowed rate |
|
| — |
|
|
| 50,973 |
|
|
| — |
|
|
| 51,649 |
| ||||||||||||||||
Settlement with Coeur d'Alene Tribe |
| 0 |
| 38,647 |
| 0 |
| 38,926 |
|
|
| — |
|
|
| 37,530 |
|
|
| — |
|
|
| 37,809 |
| |||||||
AFUDC above FERC allowed rate |
| 0 |
| 49,522 |
| 0 |
| 48,455 |
| |||||||||||||||||||||||
Demand side management programs |
| 0 |
| 3,003 |
| 0 |
| 3,974 |
| |||||||||||||||||||||||
Utility plant to be abandoned |
| 0 |
| 26,238 |
| 0 |
| 26,771 |
| |||||||||||||||||||||||
Advanced meter infrastructure |
|
| — |
|
|
| 31,622 |
|
|
| — |
|
|
| 32,381 |
| ||||||||||||||||
Utility plant abandoned |
|
| — |
|
|
| 32,794 |
|
|
| — |
|
|
| 24,389 |
| ||||||||||||||||
Deferred Climate Commitment Act costs |
|
| — |
|
|
| 19,019 |
|
|
| — |
|
|
| — |
| ||||||||||||||||
COVID-19 deferrals |
| 0 |
| 15,117 |
| 0 |
| 13,591 |
|
|
| — |
|
|
| 9,797 |
|
|
| — |
|
|
| 9,793 |
| |||||||
Unamortized debt repurchase costs |
| 0 |
| 6,582 |
| 0 |
| 6,768 |
|
|
| — |
|
|
| 6,057 |
|
|
| — |
|
|
| 6,177 |
| |||||||
Advanced meter infrastructure |
| 0 |
| 35,101 |
| 0 |
| 36,008 |
| |||||||||||||||||||||||
Demand side management programs |
|
| — |
|
|
| 451 |
|
|
| — |
|
|
| 3,683 |
| ||||||||||||||||
Other regulatory assets |
|
| 604 |
|
|
| 52,021 |
|
|
| 0 |
|
|
| 48,533 |
|
|
| — |
|
|
| 59,446 |
|
|
| — |
|
|
| 58,189 |
|
Total regulatory assets |
| $ | 34,733 |
|
| $ | 838,623 |
|
| $ | 43,783 |
|
| $ | 860,626 |
|
| $ | 210,097 |
|
| $ | 839,272 |
|
| $ | 193,787 |
|
| $ | 833,328 |
|
Regulatory Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Income tax related liabilities |
| $ | 66,234 |
| $ | 434,525 |
| $ | 56,331 |
| $ | 458,789 |
|
| $ | 58,931 |
|
| $ | 372,765 |
|
| $ | 73,267 |
|
| $ | 390,734 |
| |||
Energy commodity derivatives |
| 23,477 |
| 1,096 |
| 0 |
| 0 |
| |||||||||||||||||||||||
Deferred power costs |
| 1,540 |
| 5,485 |
| 6,457 |
| 5,434 |
| |||||||||||||||||||||||
Decoupling rebate |
| 3,245 |
| 14,164 |
| 3,049 |
| 6,259 |
|
|
| 11,032 |
|
|
| 31,754 |
|
|
| 9,469 |
|
|
| 20,476 |
| |||||||
Utility plant retirement costs |
| 0 |
| 350,592 |
| 0 |
| 350,190 |
|
|
| — |
|
|
| 383,743 |
|
|
| — |
|
|
| 376,817 |
| |||||||
Interest rate swaps |
| 0 |
| 17,348 |
| 0 |
| 15,062 |
|
|
| — |
|
|
| 23,191 |
|
|
| — |
|
|
| 24,204 |
| |||||||
COVID-19 deferrals |
| 0 |
| 12,191 |
| 0 |
| 12,500 |
|
|
| — |
|
|
| 11,637 |
|
|
| — |
|
|
| 11,874 |
| |||||||
Other regulatory liabilities |
|
| 14,782 |
|
|
| 15,301 |
|
|
| 11,312 |
|
|
| 13,281 |
|
|
| 15,499 |
|
|
| 17,121 |
|
|
| 12,929 |
|
|
| 16,732 |
|
Total regulatory liabilities |
| $ | 109,278 |
|
| $ | 850,702 |
|
| $ | 77,149 |
|
| $ | 861,515 |
|
| $ | 85,462 |
|
| $ | 840,211 |
|
| $ | 95,665 |
|
| $ | 840,837 |
|
NOTE 4. REVENUE
Under ASC 606, the core principle of the revenue recognition model is that an entity should identify the various performance obligations in a contract, allocate the transaction price among the performance obligations and recognize revenue when (or as) the entity satisfies each performance obligation.
14
AVISTA CORPORATION
Utility Revenues
Revenue from Contracts with Customers
General
The majority of Avista Corp.’s revenue is from rate-regulated sales of electricity and natural gas to retail customers, which has two performance obligations, (1) having service available for a specified period (typically a month at a time) and (2) the delivery of energy to customers. The total energy price generally has a fixed component (basic charge) related to having service available and a usage-based component, related to the delivery and consumption of energy. The commodity is sold and/or delivered to and consumed by the customer simultaneously, and the provisions of the relevant utility commission authorization determine the charges the Company may bill the customer. Given that all revenue recognition criteria are met upon the delivery of energy to customers, revenue is recognized immediately at that time.
Revenues from contracts with customers are presented in the Condensed Consolidated Statements of Income in the line item "Utility revenues, exclusive of alternative revenue programs."
16
AVISTA CORPORATION
Non-Derivative Wholesale Contracts
The Company has certain wholesale contracts which are not accounted for as derivatives and, accordingly, are within the scope of ASC 606 and considered revenue from contracts with customers. Revenue is recognized as energy is delivered to the customer or the service is available for a specified period of time, consistent with the discussion of rate-regulated sales above.
Alternative Revenue Programs (Decoupling)
ASC 606 retained existing GAAP associated with alternative revenue programs, which specified that alternative revenue programs are contracts between an entity and a regulator of utilities, not a contract between an entity and a customer. GAAP requires that an entity present revenue arising from alternative revenue programs separately from revenues arising from contracts with customers on the face of the Condensed Consolidated Statements of Income. The Company's decoupling mechanisms (also known as a FCA in Idaho) qualify as alternative revenue programs. Decoupling revenue deferrals are recognized in the Condensed Consolidated Statements of Income during the period they occur (i.e. during the period of revenue shortfall or excess due to fluctuations in customer usage), subject to certain limitations, and a regulatory asset or liability is established that will be surcharged or rebated to customers in future periods. GAAP requires that for any alternative revenue program, like decoupling, the revenue must be expected to be collected from customers within 24 months of the deferral to qualify for recognition in the current period Condensed Consolidated Statement of Income. Any amounts included in the Company's decoupling program that are not expected to be collected from customers within 24 months are not recorded in the financial statements until the period in which revenue recognition criteria are met. The amounts expected to be collected from customers within 24 months represents an estimate that must be made by the Company on an ongoing basis due to it being based on the volumes of electric and natural gas sold to customers on a go-forward basis.
The Company records alternative program revenues under the gross method, which is to amortize the decoupling regulatory asset/liability to the alternative revenue program line item on the Condensed Consolidated Statements of Income as it is collected from or refunded to customers. The cash passing between the Company and the customers is presented in revenue from contracts with customers since it is a portion of the overall tariff paid by customers. This method results in a gross-up to both revenue from contracts with customers and revenue from alternative revenue programs, but has a net zero impact on total revenue. Depending on whether the previous deferral balance being amortized was a regulatory asset or regulatory liability, and depending on the size and direction of the current year deferral of surcharges and/or rebates to customers, it could result in negative alternative revenue program revenue during the year.
Derivative Revenue
Most wholesale electric and natural gas transactions (including both physical and financial transactions), and the sale of fuel are considered derivatives, which are specifically scoped out of ASC 606. As such, these revenues or losses are disclosed separately from revenue from contracts with customers. RevenueThe revenue or loss is recognized for these items upon the settlement/expiration of the derivative contract. Derivative revenue includes those transactions that are entered into and settled within the same month.
Other Utility Revenue
Other utility revenue includes rent, sales of materials, late fees and other charges that do not represent contracts with customers. Other utility revenue also includes the provision for earnings sharing. This revenue is scoped out of ASC 606, as this revenue does not represent items where a customer is a party that has contracted with the Company to obtain goods or services that are an output of the
15
AVISTA CORPORATION
Company’s ordinary activities in exchange for consideration. As such, these revenues are presented separately from revenue from contracts with customers.
Other Considerations for Utility Revenues
Gross Versus Net Presentation
Revenues and resource costs from Avista Utilities’ settled energy contracts that are “booked out” (not physically delivered) are reported on a net basis as part of derivative revenues.
17
AVISTA CORPORATION
Utility-related taxes collected from customers (primarily state excise taxes and city utility taxes) are taxes that are imposed on Avista Utilities as opposed to being imposed on its customers; therefore, Avista Utilities is the taxpayer and records these transactions on a gross basis in revenue from contracts with customers and operating expense (taxes other than income taxes). The utility-related taxes collected from customers at AEL&P are imposed on the customers rather than AEL&P; therefore, the customers are the taxpayers and AEL&P is acting as their agent. As such, these transactions at AEL&P are presented on a net basis within revenue from contracts with customers.
Utility-related taxes that were included in revenue from contracts with customers were as follows for the three months ended March 31 (dollars in thousands):
| 2022 |
|
| 2021 |
| ||
Utility-related taxes | $ | 22,134 |
|
| $ | 19,696 |
|
| 2023 |
|
| 2022 |
| ||
Utility-related taxes | $ | 25,739 |
|
| $ | 22,134 |
|
Significant Judgments and Unsatisfied Performance Obligations
The only significant judgments involving revenue recognition are estimates surrounding unbilled revenue and receivables from contracts with customers and estimates surrounding the amount of decoupling revenues that will be collected from customers within 24 months (discussed above).
The Company has certain capacity arrangements, where the Company has a contractual obligation to provide either electric or natural gas capacity to its customers for a fixed fee. Most of these arrangements are paid for in arrears by the customers and do not result in deferred revenue and only result in receivables from the customers. The Company does have one capacity agreement where the customer makes payments throughout the year. As of March 31, 2022,2023, the Company estimates it had unsatisfied capacity performance obligations of $16.010.2 million, which will be recognized as revenue in future periods as the capacity is provided to the customers. These performance obligations are not reflected in the financial statements, as the Company has not received payment for these services.
16
AVISTA CORPORATION
Disaggregation of Total Operating Revenue
The following table disaggregates total operating revenue by segment and source for the three months ended March 31 (dollars in thousands):
|
| 2022 |
|
| 2021 |
|
| 2023 |
|
| 2022 |
| ||||
Avista Utilities |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Revenue from contracts with customers |
| $ | 405,337 |
| $ | 358,613 |
|
| $ | 478,775 |
|
| $ | 405,337 |
| |
Derivative revenues |
| 57,373 |
| 34,981 |
|
|
| (3,062 | ) |
|
| 57,373 |
| |||
Alternative revenue programs |
| (16,777 | ) |
| 499 |
|
|
| (19,038 | ) |
|
| (16,777 | ) | ||
Deferrals and amortizations for rate refunds to customers |
| 369 |
| 3,189 |
|
|
| 417 |
|
|
| 369 |
| |||
Other utility revenues |
|
| 2,570 |
|
|
| 2,578 |
|
|
| 3,050 |
|
|
| 2,570 |
|
Total Avista Utilities |
|
| 448,872 |
|
|
| 399,860 |
|
|
| 460,142 |
|
|
| 448,872 |
|
AEL&P |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Revenue from contracts with customers |
| 12,955 |
| 12,779 |
|
|
| 14,211 |
|
|
| 12,955 |
| |||
Deferrals and amortizations for rate refunds to customers |
| (48 | ) |
| (47 | ) |
|
| — |
|
|
| (48 | ) | ||
Other utility revenues |
|
| 147 |
|
|
| 89 |
|
|
| 152 |
|
|
| 147 |
|
Total AEL&P |
|
| 13,054 |
|
|
| 12,821 |
|
|
| 14,363 |
|
|
| 13,054 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Other non-utility revenues |
|
| 120 |
|
|
| 189 |
|
|
| 126 |
|
|
| 120 |
|
Total operating revenues |
| $ | 462,046 |
|
| $ | 412,870 |
|
| $ | 474,631 |
|
| $ | 462,046 |
|
18
AVISTA CORPORATION
Utility Revenue from Contracts with Customers by Type and Service
The following table disaggregates revenue from contracts with customers associated with the Company's electric operations for the three months ended March 31 (dollars in thousands):
|
| 2022 |
|
| 2021 |
|
| 2023 |
|
| 2022 |
| ||||||||||||||||||||||||||||||||||||
|
| Avista |
|
| AEL&P |
|
| Total Utility |
|
| Avista |
|
| AEL&P |
|
| Total Utility |
|
| Avista |
|
| AEL&P |
|
| Total Utility |
|
| Avista |
|
| AEL&P |
|
| Total Utility |
| ||||||||||||
Three months ended March 31: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||
ELECTRIC OPERATIONS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Revenue from contracts with customers |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Residential |
| $ | 121,003 |
| $ | 6,461 |
| $ | 127,464 |
| $ | 113,223 |
| $ | 6,048 |
| $ | 119,271 |
|
| $ | 122,823 |
|
| $ | 6,881 |
|
| $ | 129,704 |
|
| $ | 121,003 |
|
| $ | 6,461 |
|
| $ | 127,464 |
| |||||
Commercial |
| 83,570 |
| 6,434 |
| 90,004 |
| 76,284 |
| 4,772 |
| 81,056 |
|
|
| 81,226 |
|
|
| 7,266 |
|
|
| 88,492 |
|
|
| 83,570 |
|
|
| 6,434 |
|
|
| 90,004 |
| |||||||||||
Industrial |
| 24,892 |
| — |
| 24,892 |
| 24,711 |
| 1,899 |
| 26,610 |
|
|
| 25,167 |
|
|
| — |
|
|
| 25,167 |
|
|
| 24,892 |
|
|
| — |
|
|
| 24,892 |
| |||||||||||
Public street and highway lighting |
|
| 1,864 |
|
|
| 60 |
|
|
| 1,924 |
|
|
| 1,852 |
|
|
| 60 |
|
|
| 1,912 |
|
|
| 1,955 |
|
|
| 64 |
|
|
| 2,019 |
|
|
| 1,864 |
|
|
| 60 |
|
|
| 1,924 |
|
Total retail revenue |
| 231,329 |
| 12,955 |
| 244,284 |
| 216,070 |
| 12,779 |
| 228,849 |
|
|
| 231,171 |
|
|
| 14,211 |
|
|
| 245,382 |
|
|
| 231,329 |
|
|
| 12,955 |
|
|
| 244,284 |
| |||||||||||
Transmission |
| 4,685 |
| — |
| 4,685 |
| 3,495 |
| — |
| 3,495 |
|
|
| 7,947 |
|
|
| — |
|
|
| 7,947 |
|
|
| 4,685 |
|
|
| — |
|
|
| 4,685 |
| |||||||||||
Other revenue from contracts with |
|
| 8,762 |
|
|
| — |
|
|
| 8,762 |
|
|
| 6,140 |
|
|
| — |
|
|
| 6,140 |
|
|
| 17,293 |
|
|
| — |
|
|
| 17,293 |
|
|
| 8,762 |
|
|
| — |
|
|
| 8,762 |
|
Total electric revenue from contracts |
| $ | 244,776 |
|
| $ | 12,955 |
|
| $ | 257,731 |
|
| $ | 225,705 |
|
| $ | 12,779 |
|
| $ | 238,484 |
|
| $ | 256,411 |
|
| $ | 14,211 |
|
| $ | 270,622 |
|
| $ | 244,776 |
|
| $ | 12,955 |
|
| $ | 257,731 |
|
The following table disaggregates revenue from contracts with customers associated with the Company's natural gas operations for the three months ended March 31 (dollars in thousands):
|
| 2022 |
|
| 2021 |
|
| 2023 |
|
| 2022 |
| ||||
|
| Avista Utilities |
|
| Avista Utilities |
|
| Avista Utilities |
|
| Avista Utilities |
| ||||
NATURAL GAS OPERATIONS |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Revenue from contracts with customers |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Residential |
| $ | 103,215 |
| $ | 87,501 |
|
| $ | 140,836 |
|
| $ | 103,215 |
| |
Commercial |
| 50,621 |
| 39,775 |
|
|
| 72,325 |
|
|
| 50,621 |
| |||
Industrial and interruptible |
|
| 2,962 |
|
|
| 2,224 |
|
|
| 5,528 |
|
|
| 2,962 |
|
Total retail revenue |
| 156,798 |
| 129,500 |
|
|
| 218,689 |
|
|
| 156,798 |
| |||
Transportation |
| 2,357 |
| 2,283 |
|
|
| 2,269 |
|
|
| 2,357 |
| |||
Other revenue from contracts with customers |
|
| 1,406 |
|
|
| 1,125 |
|
|
| 1,406 |
|
|
| 1,406 |
|
Total natural gas revenue from contracts with customers |
| $ | 160,561 |
|
| $ | 132,908 |
|
| $ | 222,364 |
|
| $ | 160,561 |
|
17
NOTE 5. LEASES
AVISTA CORPORATIONIn March 2023, the Company entered into an agreement with Rathdrum Power, LLC (Rathdrum) amending and restating the previously existing PPA for purchase of all the output of the Lancaster plant, a 270 MW natural gas-fired combined cycle combustion turbine. The restated agreement meets the definition of a lease under ASC 842, and all payments are variable in nature, based on capacity, usage or performance of the plant. Therefore, there is no resulting lease obligation or corresponding ROU asset recorded by the Company.
The Company previously had a variable interest in Rathdrum through the PPA, however did not consider itself the primary beneficiary of the entity. As a result of entering the amended and restated PPA, the Company reconsidered whether Rathdrum is a variable interest entity, concluding Rathdrum no longer meets the definition of a variable interest entity. This conclusion does not materially impact the Company's financial statements.
NOTE 5.6. DERIVATIVES AND RISK MANAGEMENT
Energy Commodity Derivatives
Avista Corp. is exposed to market risks relating to changes in electricity and natural gas commodity prices and certain other fuel prices. Market risk is, in general, the risk of fluctuation in the market price of the commodity being traded and is influenced primarily by supply and demand. Market risk includes the fluctuation in the market price of associated derivative commodity instruments. Avista Corp. utilizes derivative instruments, such as forwards, futures, swap derivatives and options, in order to manage the various risks relating to these commodity price exposures. Avista Corp. has an energy resources risk policy and control procedures to manage these risks.
19
AVISTA CORPORATION
As part of Avista Corp.'s resource procurement and management operations in the electric business, Avista Corp. engages in an ongoing process of resource optimization, which involves the economic selection from available energy resources to serve Avista Corp.'s load obligations and the use of these resources to capture available economic value through wholesale market transactions. These include sales and purchases of electric capacity and energy, fuel for electric generation, and derivative contracts related to capacity, energy and fuel. Such transactions are part of the process of matching resources with load obligations and hedging a portion of the related financial risks. These transactions range from terms of intra-hour up to multiple years.
As part of its resource procurement and management of its natural gas business, Avista Corp. makes continuing projections of its natural gas loads and assesses available natural gas resources including natural gas storage availability. Natural gas resource planning typically includes peak requirements, low and average monthly requirements and delivery constraints from natural gas supply locations to Avista Corp.’s distribution system. However, daily variations in natural gas demand can be significantly different than monthly demand projections. On the basis of these projections, Avista Corp. plans and executes a series of transactions to hedge a portion of its projected natural gas requirements through forward market transactions and derivative instruments. These transactions may extend as much as three natural gas operating years (November through October) into the future. Avista Corp. also leaves a significant portion of its natural gas supply requirements unhedged for purchase in short-term and spot markets.
Avista Corp. plans for sufficient natural gas delivery capacity to serve its retail customers for a theoretical peak day event. Avista Corp. generally has more pipeline and storage capacity than what is needed during periods other than a peak-day. Avista Corp. optimizes its natural gas resources by using market opportunities to generate economic value that mitigates the fixed costs. Avista Corp. also optimizes its natural gas storage capacity by purchasing and storing natural gas when prices are traditionally lower, typically in the summer, and withdrawing during higher priced months, typically during the winter. However, if market conditions and prices indicate that Avista Corp. should buy or sell natural gas at other times during the year, Avista Corp. engages in optimization transactions to capture value in the marketplace. Natural gas optimization activities include, but are not limited to, wholesale market sales of surplus natural gas supplies, purchases and sales of natural gas to optimize use of pipeline and storage capacity, and participation in the transportation capacity release market.
The following table presents the underlying energy commodity derivative volumes as of March 31, 2022 that are2023 expected to be delivered or mature in eachthe respective yearyears shown (in thousands of MWhs and mmBTUs):
|
| Purchases |
|
| Sales |
|
| Purchases |
|
| Sales |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||
|
| Electric Derivatives |
|
| Gas Derivatives |
|
| Electric Derivatives |
|
| Gas Derivatives |
|
| Electric Derivatives |
|
| Gas Derivatives |
|
| Electric Derivatives |
|
| Gas Derivatives |
| ||||||||||||||||||||||||||||||||||||||||
Year |
| Physical |
|
| Financial |
|
| Physical |
|
| Financial |
|
| Physical |
|
| Financial |
|
| Physical |
|
| Financial |
|
| Physical |
|
| Financial |
|
| Physical |
|
| Financial |
|
| Physical |
|
| Financial |
|
| Physical |
|
| Financial |
| ||||||||||||||||
Remainder 2022 |
| 93 |
| 0 |
| 5,225 |
| 46,743 |
| 202 |
| 671 |
| 5,676 |
| 22,843 |
| |||||||||||||||||||||||||||||||||||||||||||||||
2023 |
| 0 |
| 0 |
| 603 |
| 37,935 |
| 0 |
| 216 |
| 1,360 |
| 13,920 |
| |||||||||||||||||||||||||||||||||||||||||||||||
Remainder 2023 |
|
| 10 |
|
|
| 30 |
|
|
| 19,923 |
|
|
| 63,125 |
|
|
| 249 |
|
|
| 1,430 |
|
|
| 667 |
|
|
| 16,425 |
| ||||||||||||||||||||||||||||||||
2024 |
| 0 |
| 0 |
| 380 |
| 6,690 |
| 0 |
| 0 |
| 1,370 |
| 1,525 |
|
|
| — |
|
|
| — |
|
|
| 1,448 |
|
|
| 38,810 |
|
|
| — |
|
|
| — |
|
|
| 1,370 |
|
|
| 9,745 |
| |||||||||||||||
2025 |
| 0 |
| 0 |
| 225 |
| 0 |
| 0 |
| 0 |
| 1,115 |
| 0 |
|
|
| — |
|
|
| — |
|
|
| 2,640 |
|
|
| 5,795 |
|
|
| — |
|
|
| — |
|
|
| 1,115 |
|
|
| 1,125 |
| |||||||||||||||
2026 |
|
| — |
|
|
| — |
|
|
| 450 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
As of March 31, 2022,2023, there are 0no expected deliveries of energy commodity derivatives after 2025.26.
18The following table presents the underlying energy commodity derivative volumes as of December 31, 2022 expected to be delivered or mature in the respective years shown (in thousands of MWhs and mmBTUs):
|
| Purchases |
|
| Sales |
| ||||||||||||||||||||||||||
|
| Electric Derivatives |
|
| Gas Derivatives |
|
| Electric Derivatives |
|
| Gas Derivatives |
| ||||||||||||||||||||
Year |
| Physical |
|
| Financial |
|
| Physical |
|
| Financial |
|
| Physical |
|
| Financial |
|
| Physical |
|
| Financial |
| ||||||||
2023 |
|
| 5 |
|
|
| — |
|
|
| 19,140 |
|
|
| 79,253 |
|
|
| 136 |
|
|
| 1,011 |
|
|
| 4,145 |
|
|
| 29,473 |
|
2024 |
|
| — |
|
|
| — |
|
|
| 533 |
|
|
| 30,658 |
|
|
| — |
|
|
| — |
|
|
| 1,370 |
|
|
| 9,668 |
|
2025 |
|
| — |
|
|
| — |
|
|
| 450 |
|
|
| 4,895 |
|
|
| — |
|
|
| — |
|
|
| 1,115 |
|
|
| 1,125 |
|
20
AVISTA CORPORATION
The following table presents the underlying energy commodity derivative volumes as of December 31, 2021 that are expected to be delivered in each respective year (in thousands of MWhs and mmBTUs):
|
| Purchases |
|
| Sales |
| ||||||||||||||||||||||||||
|
| Electric Derivatives |
|
| Gas Derivatives |
|
| Electric Derivatives |
|
| Gas Derivatives |
| ||||||||||||||||||||
Year |
| Physical |
|
| Financial |
|
| Physical |
|
| Financial |
|
| Physical |
|
| Financial |
|
| Physical |
|
| Financial |
| ||||||||
2022 |
|
| 129 |
|
|
| 0 |
|
|
| 7,114 |
|
|
| 61,405 |
|
|
| 234 |
|
|
| 452 |
|
|
| 3,933 |
|
|
| 31,485 |
|
2023 |
|
| 0 |
|
|
| 0 |
|
|
| 378 |
|
|
| 23,218 |
|
|
| 0 |
|
|
| 0 |
|
|
| 1,360 |
|
|
| 9,323 |
|
2024 |
|
| 0 |
|
|
| 0 |
|
|
| 228 |
|
|
| 3,413 |
|
|
| 0 |
|
|
| 0 |
|
|
| 1,370 |
|
|
| 228 |
|
2025 |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 1,115 |
|
|
| 0 |
|
As of December 31, 2021,2022, there arewere 0no expected deliveries of energy commodity derivatives after 2025.
The electric and natural gas derivative contracts above will be included in either power supply costs or natural gas supply costs during the period they are scheduled to be delivered and will be included in the various deferral and recovery mechanisms (ERM, PCA and PGAs), or in the general rate case process, and are expected to be collected through retail rates from customers.
Foreign Currency Exchange Derivatives
A significant portion of Avista Corp.’s natural gas supply (including fuel for power generation) is obtained from Canadian sources. Most of those transactions are executed in U.S. dollars, which avoids foreign currency risk. A portion of Avista Corp.’s short-term natural gas transactions and long-term Canadian transportation contracts are committed based on Canadian currency prices. The short-term natural gas transactions are settled within 60 days with U.S. dollars. Avista Corp. hedges a portion of the foreign currency risk by purchasing Canadian currency exchange derivatives when such commodity transactions are initiated. The foreign currency exchange derivatives and the unhedged foreign currency risk have not had a material effect on Avista Corp.’s financial condition, results of operations or cash flows and these differences in cost related to currency fluctuations are included with natural gas supply costs for ratemaking.
The following table summarizes the foreign currency exchange derivatives that Avista Corp. has outstanding as of March 31, 20222023 and December 31, 20212022 (dollars in thousands):
|
| March 31, |
|
| December 31, |
|
| March 31, |
|
| December 31, |
| ||||
|
| 2022 |
|
| 2021 |
|
| 2023 |
|
| 2022 |
| ||||
Number of contracts |
| 25 |
| 25 |
|
|
| 24 |
|
|
| 19 |
| |||
Notional amount (in United States dollars) |
| $ | 10,037 |
| $ | 8,571 |
|
| $ | 4,865 |
|
| $ | 8,563 |
| |
Notional amount (in Canadian dollars) |
| 12,725 |
| 10,957 |
|
|
| 6,643 |
|
|
| 11,659 |
|
Interest Rate Swap Derivatives
Avista Corp. is affected by fluctuating interest rates related to a portion of its existing debt, and future borrowing requirements. Avista Corp. hedges a portion of its interest rate risk with financial derivative instruments, which may include interest rate swap derivatives. These interest rate swap derivatives are considered economic hedges against fluctuations in future cash flows associated with anticipated debt issuances.
19
AVISTA CORPORATION
The following table summarizes the unsettled interest rate swap derivatives that Avista Corp. has outstanding as of March 31, 20222023 and December 31, 20212022 (dollars in thousands):
Balance Sheet Date |
| Number of |
|
| Notional |
|
| Mandatory | ||
March 31, 2022 |
|
| 2 |
|
|
| 20,000 |
|
| 2023 |
|
|
| 1 |
|
|
| 10,000 |
|
| 2024 |
December 31, 2021 |
|
| 13 |
|
| $ | 140,000 |
|
| 2022 |
|
|
| 2 |
|
|
| 20,000 |
|
| 2023 |
|
|
| 1 |
|
|
| 10,000 |
|
| 2024 |
Balance Sheet Date |
| Number of |
|
| Notional |
|
| Mandatory | ||
March 31, 2023 |
|
| 2 |
|
| $ | 20,000 |
|
| 2024 |
December 31, 2022 |
|
| 4 |
|
| $ | 40,000 |
|
| 2023 |
|
| 1 |
|
|
| 10,000 |
|
| 2024 |
See Note 910 for discussion of the issuance of first mortgage bonds and the related settlement of interest rate swaps in connection with the pricing of the bonds in March 2022.2023.
The fair value of outstanding interest rate swap derivatives can vary significantly from period to period depending on the total notional amount of swap derivatives outstanding and fluctuations in market interest rates compared to the interest rates fixed by the swaps. Avista Corp. is required to make cash payments to settle the interest rate swap derivatives when the fixed rates are higher than prevailing market rates at the date of settlement. Conversely, Avista Corp. receives cash to settle its interest rate swap derivatives when prevailing market rates at the time of settlement exceed the fixed swap rates.
21
AVISTA CORPORATION
Summary of Outstanding Derivative Instruments
The amounts recorded on the Condensed Consolidated Balance Sheet as of March 31, 20222023 and December 31, 20212022 reflect the offsetting of derivative assets and liabilities where a legal right of offset exists.
The following table presents the fair values and locations of derivative instruments recorded on the Condensed Consolidated Balance Sheet as of March 31, 20222023 (in thousands):
|
| Fair Value |
| |||||||||||||
Derivative and Balance Sheet Location |
| Gross |
|
| Gross |
|
| Collateral |
|
| Net Asset |
| ||||
Foreign currency exchange derivatives |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Other current assets |
| $ | 146 |
|
| $ | — |
|
| $ | — |
|
| $ | 146 |
|
Interest rate swap derivatives |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Other property and investments-net and other non-current assets |
|
| 3,801 |
|
|
| — |
|
|
| — |
|
|
| 3,801 |
|
Energy commodity derivatives |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Other current assets |
|
| 61,362 |
|
|
| (34,754 | ) |
|
| (12,670 | ) |
|
| 13,938 |
|
Other property and investments-net and other non-current assets |
|
| 9,168 |
|
|
| (4,465 | ) |
|
| — |
|
|
| 4,703 |
|
Other current liabilities |
|
| — |
|
|
| (3,132 | ) |
|
| — |
|
|
| (3,132 | ) |
Other non-current liabilities and deferred credits |
|
| 188 |
|
|
| (3,795 | ) |
|
| — |
|
|
| (3,607 | ) |
Total derivative instruments recorded on the balance sheet |
| $ | 74,665 |
|
| $ | (46,146 | ) |
| $ | (12,670 | ) |
| $ | 15,849 |
|
20
AVISTA CORPORATION
|
| Fair Value |
| |||||||||||||
Derivative and Balance Sheet Location |
| Gross |
|
| Gross |
|
| Collateral |
|
| Net Asset |
| ||||
Foreign currency exchange derivatives |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Other current assets |
| $ | 45 |
|
| $ | — |
|
| $ | — |
|
| $ | 45 |
|
Interest rate swap derivatives |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Other property and investments-net and other non-current assets |
|
| 2,455 |
|
|
| — |
|
|
| — |
|
|
| 2,455 |
|
Other non-current liabilities and deferred credits |
|
| — |
|
|
| (247 | ) |
|
| — |
|
|
| (247 | ) |
Energy commodity derivatives |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Other current assets |
|
| 965 |
|
|
| (142 | ) |
|
| 3 |
|
|
| 826 |
|
Other property and investments-net and other non-current assets |
|
| 189 |
|
|
| (106 | ) |
|
| — |
|
|
| 83 |
|
Other current liabilities |
|
| 36,683 |
|
|
| (111,475 | ) |
|
| 64,786 |
|
|
| (10,006 | ) |
Other non-current liabilities and deferred credits |
|
| 3,788 |
|
|
| (14,641 | ) |
|
| 6,038 |
|
|
| (4,815 | ) |
Total derivative instruments recorded on the balance sheet |
| $ | 44,125 |
|
| $ | (126,611 | ) |
| $ | 70,827 |
|
| $ | (11,659 | ) |
The following table presents the fair values and locations of derivative instruments recorded on the Condensed Consolidated Balance Sheet as of December 31, 20212022 (in thousands):
|
| Fair Value |
|
| Fair Value |
| ||||||||||||||||||||||||||
Derivative and Balance Sheet Location |
| Gross |
|
| Gross |
|
| Collateral |
|
| Net Asset |
|
| Gross |
|
| Gross |
|
| Collateral |
|
| Net Asset |
| ||||||||
Foreign currency exchange derivatives |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Other current assets |
| $ | 43 |
|
| $ | — |
|
| $ | — |
|
| $ | 43 |
| ||||||||||||||||
Other current liabilities |
| $ | — |
| $ | (19 | ) |
| $ | — |
| $ | (19 | ) |
|
| — |
|
|
| (3 | ) |
|
| — |
|
|
| (3 | ) | ||
Interest rate swap derivatives |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Other current assets |
|
| 8,536 |
|
|
| — |
|
|
| — |
|
|
| 8,536 |
| ||||||||||||||||
Other property and investments-net and other non-current assets |
| 1,149 |
| — |
| — |
| 1,149 |
|
|
| 2,648 |
|
|
| — |
|
|
| — |
|
|
| 2,648 |
| |||||||
Other current liabilities |
| 1,170 |
| (25,196 | ) |
| — |
| (24,026 | ) |
|
| — |
|
|
| (52 | ) |
|
| — |
|
|
| (52 | ) | ||||||
Other non-current liabilities and deferred credits |
| — |
| (78 | ) |
| — |
| (78 | ) | ||||||||||||||||||||||
Energy commodity derivatives |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Other current assets |
| 1,506 |
| (107 | ) |
| — |
| 1,399 |
|
|
| 32,257 |
|
|
| (22,638 | ) |
|
| — |
|
|
| 9,619 |
| ||||||
Other property and investments-net and other non-current assets |
| 6,844 |
| (5,335 | ) |
| — |
| 1,509 |
|
|
| 312 |
|
|
| (16 | ) |
|
| — |
|
|
| 296 |
| ||||||
Other current liabilities |
| 25,771 |
| (39,616 | ) |
| 9,089 |
| (4,756 | ) |
|
| 107,902 |
|
|
| (229,607 | ) |
|
| 94,850 |
|
|
| (26,855 | ) | ||||||
Other non-current liabilities and deferred credits |
|
| 141 |
|
|
| (4,589 | ) |
|
| — |
|
|
| (4,448 | ) |
|
| 6,049 |
|
|
| (24,530 | ) |
|
| 10,589 |
|
|
| (7,892 | ) |
Total derivative instruments recorded on the balance sheet |
| $ | 36,581 |
|
| $ | (74,940 | ) |
| $ | 9,089 |
|
| $ | (29,270 | ) |
| $ | 157,747 |
|
| $ | (276,846 | ) |
| $ | 105,439 |
|
| $ | (13,660 | ) |
Exposure to Demands for Collateral
Avista Corp.'s derivative contracts often require collateral (in the form of cash or letters of credit) or other credit enhancements, or reductions or terminations of a portion of the contract through cash settlement. In the event of a downgrade in Avista Corp.'s credit ratings or changes in market prices, additional collateral may be required. In periods of price volatility, the level of exposure can change significantly. As a result, sudden and significant demands may be made against Avista Corp.'s credit facilities and cash. Avista Corp. actively monitors the exposure to possible collateral calls and takes steps to mitigate capital requirements.
22
AVISTA CORPORATION
The following table presents Avista Corp.'s collateral outstanding related to its derivative instruments as of March 31, 20222023 and December 31, 20212022 (in thousands):
|
| March 31, |
|
| December 31, |
|
| March 31, |
|
| December 31, |
| ||||
|
| 2022 |
|
| 2021 |
|
| 2023 |
|
| 2022 |
| ||||
Energy commodity derivatives |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Cash collateral posted |
| $ | 4,615 |
| $ | 30,567 |
|
| $ | 105,210 |
|
| $ | 171,581 |
| |
Letters of credit outstanding |
| 25,000 |
| 34,000 |
|
|
| 24,000 |
|
|
| 49,425 |
| |||
Balance sheet offsetting |
| 12,670 |
| 9,089 |
|
|
| 70,827 |
|
|
| 105,439 |
|
There was 0no cash collateral or letters of credit outstanding related to interest rate swap derivatives as of March 31, 20222023 and December 31, 2021.2022.
Certain of Avista Corp.’s derivative instruments contain provisions that require Avista Corp. to maintain an "investment grade" credit rating from the major credit rating agencies. If Avista Corp.’s credit ratings were to fall below "investment grade," it would be in violation of these provisions, and the counterparties to the derivative instruments could request immediate payment or demand immediate and ongoing collateralization on derivative instruments in net liability positions.
The following table presents the aggregate fair value of all derivative instruments with credit-risk-related contingent features that are in a liability position and the amount of additional collateral Avista Corp. could be required to post as of March 31, 20222023 and December 31, 20212022 (in thousands):
|
| March 31, |
|
| December 31, |
|
| March 31, |
|
| December 31, |
| ||||
|
| 2022 |
|
| 2021 |
|
| 2023 |
|
| 2022 |
| ||||
Interest rate swap derivatives |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Liabilities with credit-risk-related contingent features |
| 0 |
| 25,274 |
|
| $ | 247 |
|
| $ | 52 |
| |||
Additional collateral to post |
| 0 |
| 25,274 |
|
|
| 247 |
|
|
| 52 |
|
21
AVISTA CORPORATION
NOTE 6.7. PENSION PLANS AND OTHER POSTRETIREMENT BENEFIT PLANS
Avista Utilities
Avista Utilities’ maintained the same pension and other postretirement plans during the three months ended March 31, 2022 as those described as of December 31, 2021. The Company contributed $14.03.3 million in cash to the pension plan for the three months ended March 31, 2022,2023, and expects to contribute a total of $42.010.0 million in 2022.2023.
The Company uses a December 31 measurement date for its defined benefit pension and other postretirement benefit plans. The following table sets forth the components of net periodic benefit costs for the three months ended March 31 (dollars in thousands):
|
| Pension Benefits |
|
| Other Postretirement Benefits |
|
| Pension Benefits |
|
| Other Postretirement Benefits |
| ||||||||||||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||||||
Three months ended March 31: |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
Service cost |
| $ | 5,771 |
| $ | 6,246 |
| $ | 1,063 |
| $ | 1,008 |
|
| $ | 4,894 |
|
| $ | 5,771 |
|
| $ | 818 |
|
| $ | 1,063 |
| |||
Interest cost |
| 6,907 |
| 6,580 |
| 1,440 |
| 1,376 |
|
|
| 7,232 |
|
|
| 6,907 |
|
|
| 1,044 |
|
|
| 1,440 |
| |||||||
Expected return on plan assets |
| (10,951 | ) |
| (9,775 | ) |
| (700 | ) |
| (675 | ) |
|
| (10,922 | ) |
|
| (10,951 | ) |
|
| (891 | ) |
|
| (700 | ) | ||||
Amortization of prior service cost |
| 75 |
| 75 |
| (275 | ) |
| (275 | ) |
|
| 123 |
|
|
| 75 |
|
|
| (263 | ) |
|
| (275 | ) | ||||||
Net loss recognition |
|
| 1,148 |
|
|
| 1,823 |
|
|
| 890 |
|
|
| 1,173 |
|
|
| 839 |
|
|
| 1,148 |
|
|
| 533 |
|
|
| 890 |
|
Net periodic benefit cost |
| $ | 2,950 |
|
| $ | 4,949 |
|
| $ | 2,418 |
|
| $ | 2,607 |
|
| $ | 2,166 |
|
| $ | 2,950 |
|
| $ | 1,241 |
|
| $ | 2,418 |
|
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.
The non-service portion of costs in the table above are recorded to other expense below income from operations in the Condensed Consolidated Statements of Income or capitalized as a regulatory asset. Approximately 40 percent of the costs are capitalized to regulatory assets and 60 percent is expensed to the income statement.
23
AVISTA CORPORATION
NOTE 7.8. INCOME TAXES
In accordance with interim reporting requirements, the Company uses an estimated annual effective tax rate for computing its provisions for income taxes. An estimate of annual income tax expense (or benefit) is made each interim period using estimates for annual pre-tax income, income tax adjustments, and tax credits. The estimated annual effective tax rates do not include discrete events such as tax law changes, examination settlements, accounting method changes, or adjustments to tax expense or benefits attributable to prior years. Discrete events are recorded in the interim period in which they occur or become known. The estimated annual tax rate is applied to year-to-date pre-tax income to determine income tax expense (or benefit) for the interim period consistent with the annual estimate. In subsequent interim periods, income tax expense (or benefit) for the period is computed as the difference between the year-to-date amount reported for the previous interim period and the current period’s year-to-date amount.
The following table summarizes the significant factors impacting the difference between ourthe Company's effective tax rate and the federal statutory rate for the three months ended March 31 (dollars in thousands):
|
| 2022 |
|
| 2021 |
| ||||||||||
Federal income taxes at statutory rates |
| $ | 12,753 |
|
|
| 21.0 | % |
| $ | 16,838 |
|
|
| 21.0 | % |
Increase (decrease) in tax resulting from: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Flow through related to deduction of meters |
|
| (17,434 | ) |
|
| (28.7 | ) |
|
| — |
|
|
| — |
|
Tax effect of regulatory treatment of utility |
|
| (6,322 | ) |
|
| (10.4 | ) |
|
| (5,966 | ) |
|
| (7.4 | ) |
State income tax expense |
|
| 823 |
|
|
| 1.4 |
|
|
| 478 |
|
|
| 0.6 |
|
Settlement of equity awards |
|
| (19 | ) |
|
| — |
|
|
| 930 |
|
|
| 1.2 |
|
Other |
|
| (637 | ) |
|
| (1.1 | ) |
|
| (116 | ) |
|
| (0.2 | ) |
Total income tax expense (benefit) |
| $ | (10,836 | ) |
|
| (17.8 | )% |
| $ | 12,164 |
|
|
| 15.2 | % |
22
AVISTA CORPORATION
|
| 2023 |
|
| 2022 |
| ||||||||||
Federal income taxes at statutory rates |
| $ | 10,126 |
|
|
| 21.0 | % |
| $ | 12,753 |
|
|
| 21.0 | % |
Increase (decrease) in tax resulting from: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Flow through related to deduction of meters |
|
| (13,523 | ) |
|
| (28.0 | ) |
|
| (17,434 | ) |
|
| (28.7 | ) |
Tax effect of regulatory treatment of utility |
|
| (3,687 | ) |
|
| (7.7 | ) |
|
| (6,322 | ) |
|
| (10.4 | ) |
State income tax expense |
|
| 566 |
|
|
| 1.2 |
|
|
| 823 |
|
|
| 1.4 |
|
Settlement of equity awards |
|
| — |
|
|
| — |
|
|
| (19 | ) |
|
| — |
|
Other |
|
| (110 | ) |
|
| (0.2 | ) |
|
| (637 | ) |
|
| (1.1 | ) |
Total income tax benefit |
| $ | (6,628 | ) |
|
| (13.7 | )% |
| $ | (10,836 | ) |
|
| (17.8 | )% |
NOTE 8. COMMITTED LINES OF CREDIT9. SHORT-TERM BORROWINGS
Avista Corp.
Lines of Credit
Avista Corp. has a committed line of credit with various financial institutions in the total amount of $400.0400 million. The committed line of credit has anwith expiration date of June 2026, with. Avista Corp. has the option to extend for an additional one year period (subject to customary conditions). The committed line of credit is secured by non-transferable first mortgage bonds of the CompanyAvista Corp. issued to the agent bank that would only become due and payable in the event, and then only to the extent, that the CompanyAvista Corp. defaults on its obligations under the committed line of credit.
Balances outstanding and interest rates ofon borrowings (excluding letters of credit) under the Company’sAvista Corp.’s $400 million revolving committed line of credit were as follows as of March 31, 20222023 and December 31, 20212022 (dollars in thousands):
|
| March 31, |
|
| December 31, |
| ||
|
| 2022 |
|
| 2021 |
| ||
Balance outstanding at end of period (1) |
| $ | — |
|
| $ | 284,000 |
|
Letters of credit outstanding at end of period |
| $ | 29,288 |
|
| $ | 34,000 |
|
Average interest rate at end of period |
|
| — |
|
|
| 1.11 | % |
|
| March 31, |
|
| December 31, |
| ||
|
| 2023 |
|
| 2022 |
| ||
Borrowings outstanding at end of period |
| $ | 231,000 |
|
| $ | 313,000 |
|
Letters of credit outstanding at end of period |
|
| 4,638 |
|
|
| 35,563 |
|
Average interest rate on borrowings at end of period |
|
| 5.79 | % |
|
| 5.31 | % |
(1)In 2022, Avista Corp. entered into a revolving credit agreement in the amount of $
24
AVISTA CORPORATION
The borrowings outstanding under Avista Corp.'s committed lines of credit were classified as short-term borrowings on the Company issuedCondensed Consolidated Balance Sheets.
2022 Term Loan
Avista Corp. had a term loan agreement in the amount of $400.0150 million with a maturity date of March 30, 2023. Avista Corp. borrowed the entire $150 million available under the agreement in 2022, and repaid the entire outstanding balance in March 2023.
2022 Letter of Credit Facility
In December 2022, Avista Corp. entered into a continuing letter of credit agreement in the aggregate amount of $50 million. Either party may terminate the agreement at any time.
As of March 31, 2023, Avista Corp. had $24.0 million in first mortgage bonds whichletters of credit outstanding under this agreement. Letters of credit are not reflected on the Condensed Consolidated Balance Sheets. If a letter of credit were useddrawn upon by the holder, we would have an immediate obligation to repayreimburse the outstanding balancebank that issued the letter.
Covenants and Default Provisions
The short-term borrowing agreements contain customary covenants and default provisions, including a change in control (as defined in the agreements). The events of default under each of the committed line of credit. See Note 9 for further discussioncredit facilities also include a cross default from other indebtedness (as defined) and in some cases other obligations. Most of the bond issuance.short-term borrowing agreement also include a covenant which does not permit the ratio of “consolidated total debt” to “consolidated total capitalization” of Avista Corp. to be greater than
AEL&P
AEL&P has a committed line of credit in the amount of $25.0 million that expires in November 2024. There were 0no borrowings or letters of credit outstanding under this agreement as of March 31, 20222023 and December 31, 2021.2022. The committed line of credit is secured by non-transferable first mortgage bonds of AEL&P issued to the agent bank that would only become due and payable in the event, and then only to the extent, that AEL&P defaults on its obligations under the committed line of credit.
NOTE 9.10. LONG-TERM DEBT
In March 2022,2023, the Company issued and sold $400.0250.0 millionmillion of 4.005.66 percent first mortgage bonds due in 20522053 through a public offering.with institutional investors in the private placement market. In connection with the pricing of the first mortgage bonds in March 2022,2023, the Company cash-settled 13four interest rate swap derivatives (notional aggregate amount of $140.040.0 million) and paidreceived a net amount of $17.07.5 million, which will be amortized as a component of interest expense over the life of the debt. See Note 56 for a discussion of interest rate swap derivatives.
The totalA portion of the net proceeds from the sale of these bonds will be used for the new bondsconstruction or improvement of utility facilities, and a portion was used to repayrefinance existing indebtedness, including the borrowings outstanding under the Company’srepayment of Avista Corp.'s $400.0150 million committed line of credit in March 2022. In April 2022, the Company used the remainder of the proceeds, as well as borrowings on committed line of credit to pay off $250.0 million of maturing debt.term loan.
23
AVISTA CORPORATION
NOTE 10.11. LONG-TERM DEBT TO AFFILIATED TRUSTS
In 1997, the Company issued Floating Rate Junior Subordinated Deferrable Interest Debentures, Series B, with a principal amount of $51.5 million to Avista Capital II, an affiliated business trust formed by the Company. Avista Capital II issued $50.0 million of Preferred Trust Securities with a floating distribution rate of LIBOR plus 0.875 percent, calculated and reset quarterly. Effective July 3, 2023, the reference to LIBOR in the formulation for the distribution rate on these securities will be replaced, by operation of law, with three-month CME Term Secured Overnight Financing Rate (SOFR), as calculated and published by CME Group Benchmark
25
AVISTA CORPORATION
Administration, Ltd. (a successor administrator), plus a tenor spread adjustment of 0.26 percent. Accordingly, the distribution rate on the Preferred Trust Securities will then be the three-month CME Term SOFR plus 1.137 percent calculated and reset quarterly.
The distribution rates paid were as follows during the three months ended March 31, 20222023 and the year ended December 31, 2021:2022:
|
| March 31, |
|
| December 31, |
|
| March 31, |
|
| December 31, |
| ||||
|
| 2022 |
|
| 2021 |
|
| 2023 |
|
| 2022 |
| ||||
Low distribution rate |
| 1.05 | % |
| 0.99 | % |
|
| 5.64 | % |
|
| 1.05 | % | ||
High distribution rate |
| 1.40 | % |
| 1.10 | % |
|
| 5.84 | % |
|
| 5.64 | % | ||
Distribution rate at the end of the period |
| 1.40 | % |
| 1.05 | % |
|
| 5.84 | % |
|
| 5.64 | % |
Concurrent with the issuance of the Preferred Trust Securities, Avista Capital II issued $1.5 million of Common Trust Securities to the Company. The Preferred Trust Securities may be redeemed at the option of Avista Capital II at any time and mature on June 1, 2037. In December 2000, the Company purchased $10.0 million of these Preferred Trust Securities.
The Company owns 100 percent of Avista Capital II and has solely and unconditionally guaranteed the payment of distributions on, and redemption price and liquidation amount for, the Preferred Trust Securities to the extent that Avista Capital II has funds available for such payments from the respective debt securities. Upon maturity or prior redemption of such debt securities, the Preferred Trust Securities will be mandatorily redeemed. The Company does not include these capital trusts in its condensed consolidated financial statements as Avista Corp. is not the primary beneficiary. As such, the sole assets of the capital trusts are $51.5 million of junior subordinated deferrable interest debentures of Avista Corp., which are reflected on the Condensed Consolidated Balance Sheets. Interest expense to affiliated trusts in the Condensed Consolidated Statements of Income represents interest expense on these debentures.
NOTE 11.12. FAIR VALUE
The carrying values of cash and cash equivalents, accounts and notes receivable, accounts payable, and short-term borrowings as shown on the Condensed Consolidated Balance Sheets are reasonable estimates of their fair values. Long-termThe carrying values of long-term debt (including current portion and material finance leases) and long-term debt to affiliated trusts are reported at their carrying valueas shown on the Condensed Consolidated Balance Sheets which may be different from the estimated fair value. See below for the estimated fair value of long-term debt and long-term debt to affiliated trusts.
The fair value hierarchy prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to fair values derived from unobservable inputs (Level 3 measurement).
The three levels of the fair value hierarchy are defined as follows:
Level 1 – Quoted prices are available in active markets for identical assets or liabilities. Active markets are those in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.
Level 2 – Pricing inputs are other than quoted prices in active markets included in Level 1, but which are either directly or indirectly observable as of the reporting date. Level 2 includes those financial instruments that are valued using models or other valuation methodologies. These models are primarily industry-standard models that consider various assumptions, including quoted forward prices for commodities, time value, volatility factors, and current market and contractual prices for the underlying instruments, as well as other relevant economic measures. Substantially all of these assumptions are observable in the marketplace throughout the full term of the instrument, can be derived from observable data or are supported by observable levels at which transactions are executed in the marketplace.
Level 3 – Pricing inputs include significant inputs that are generally unobservable from objective sources. These inputs may be used with internally developed methodologies that result in management’s best estimate of fair value.
Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment,
24
AVISTA CORPORATION
and may affect the valuation of fair value assets and liabilities and their placement within the fair value hierarchy levels. The
26
AVISTA CORPORATION
determination of the fair values incorporates various factors that not only includeincluding the credit standing of the counterparties involved and the impact of credit enhancements (such as cash deposits and letters of credit), but alsoand the impact of Avista Corp.’s nonperformance risk on its liabilities.
The following table sets forth the carrying value and estimated fair value of the Company’s financial instruments not reported at estimated fair value on the Condensed Consolidated Balance Sheets as of March 31, 20222023 and December 31, 20212022 (dollars in thousands):
|
| March 31, 2022 |
|
| December 31, 2021 |
|
| March 31, 2023 |
|
| December 31, 2022 |
| ||||||||||||||||||||
|
| Carrying |
|
| Estimated |
|
| Carrying |
|
| Estimated |
|
| Carrying |
|
| Estimated |
|
| Carrying |
|
| Estimated |
| ||||||||
Long-term debt (Level 2) |
| $ | 1,363,500 |
| $ | 1,467,773 |
| $ | 963,500 |
| $ | 1,157,651 |
|
| $ | 1,113,500 |
|
| $ | 1,024,858 |
|
| $ | 1,113,500 |
|
| $ | 966,881 |
| |||
Long-term debt (Level 3) |
| 1,200,000 |
| 1,158,204 |
| 1,200,000 |
| 1,366,619 |
|
|
| 1,450,000 |
|
|
| 1,167,273 |
|
|
| 1,200,000 |
|
|
| 881,480 |
| |||||||
Snettisham finance lease obligation (Level 3) |
| 48,044 |
| 50,100 |
| 48,815 |
| 54,000 |
|
|
| 44,921 |
|
|
| 41,800 |
|
|
| 45,730 |
|
|
| 41,700 |
| |||||||
Long-term debt to affiliated trusts (Level 3) |
| 51,547 |
| 43,299 |
| 51,547 |
| 43,299 |
|
|
| 51,547 |
|
|
| 42,238 |
|
|
| 51,547 |
|
|
| 42,836 |
|
These estimates of fair value of long-term debt and long-term debt to affiliated trusts were primarily based on available market information, which generally consists of estimated market prices from third party brokers for debt with similar risk and terms. The price ranges obtained from the third party brokers consisted of market prices of 82.5862.52 percent to 124.27109.53 percent of the principal amount, where a market price of 100.0 percent of the principal amount (adjusted for unamortized discount or premium) represents the carrying value recorded on the Condensed Consolidated Balance Sheets. Level 2 long-term debt represents publicly issued bonds with quoted market prices; however, due to their limited trading activity, they are classified as Level 2 because brokers must generate quotes and make estimates if there is no trading activity near a period end. Level 3 long-term debt consists of private placement bonds and debt to affiliated trusts, which typically have no secondary trading activity. Fair values in Level 3 are estimated based on market prices from third party brokers using secondary market quotes for debt with similar risk and terms to generate quotes for Avista Corp. bonds. Due to the unique nature of the Snettisham finance lease obligation, the estimated fair value of these items was determined based on a discounted cash flow model using available market information. The Snettisham finance lease obligation was discounted to present value using the Morgan Markets A Ex-Fin discount rate as published on March 31, 20222023 and December 31, 2021.2022.
2527
AVISTA CORPORATION
The following table discloses by level within the fair value hierarchy the Company’s assets and liabilities measured and reported on the Condensed Consolidated Balance Sheets as of March 31, 20222023 and December 31, 20212022 at fair value on a recurring basis (dollars in thousands):
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Counterparty |
|
| Total |
| |||||
March 31, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Energy commodity derivatives |
| $ | — |
|
| $ | 70,539 |
|
| $ | — |
|
| $ | (51,898 | ) |
| $ | 18,641 |
|
Level 3 energy commodity derivatives: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Natural gas exchange agreement |
|
| — |
|
|
| — |
|
|
| 179 |
|
|
| (179 | ) |
|
| — |
|
Foreign currency exchange derivatives |
|
| — |
|
|
| 146 |
|
|
| — |
|
|
| — |
|
|
| 146 |
|
Interest rate swap derivatives |
|
| — |
|
|
| 3,801 |
|
|
| — |
|
|
| — |
|
|
| 3,801 |
|
Deferred compensation assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Mutual Funds: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Fixed income securities (2) |
|
| 1,658 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1,658 |
|
Equity securities (2) |
|
| 7,032 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 7,032 |
|
Total |
| $ | 8,690 |
|
| $ | 74,486 |
|
| $ | 179 |
|
| $ | (52,077 | ) |
| $ | 31,278 |
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Energy commodity derivatives |
| $ | — |
|
| $ | 39,770 |
|
| $ | — |
|
| $ | (39,228 | ) |
| $ | 542 |
|
Level 3 energy commodity derivatives: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Natural gas exchange agreement |
|
| — |
|
|
| — |
|
|
| 6,376 |
|
|
| (179 | ) |
|
| 6,197 |
|
Total |
| $ | — |
|
| $ | 39,770 |
|
| $ | 6,376 |
|
| $ | (39,407 | ) |
| $ | 6,739 |
|
December 31, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Energy commodity derivatives |
| $ | — |
|
| $ | 34,119 |
|
| $ | — |
|
| $ | (31,211 | ) |
| $ | 2,908 |
|
Level 3 energy commodity derivatives: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Natural gas exchange agreement |
|
| — |
|
|
| — |
|
|
| 143 |
|
|
| (143 | ) |
|
| — |
|
Interest rate swap derivatives |
|
| — |
|
|
| 2,319 |
|
|
| — |
|
|
| (1,170 | ) |
|
| 1,149 |
|
Deferred compensation assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Mutual Funds: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Fixed income securities (2) |
|
| 1,809 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1,809 |
|
Equity securities (2) |
|
| 7,594 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 7,594 |
|
Total |
| $ | 9,403 |
|
| $ | 36,438 |
|
| $ | 143 |
|
| $ | (32,524 | ) |
| $ | 13,460 |
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Energy commodity derivatives |
| $ | — |
|
| $ | 41,733 |
|
| $ | — |
|
| $ | (40,300 | ) |
| $ | 1,433 |
|
Level 3 energy commodity derivatives: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Natural gas exchange agreement |
|
| — |
|
|
| — |
|
|
| 7,914 |
|
|
| (143 | ) |
|
| 7,771 |
|
Foreign currency exchange derivatives |
|
| — |
|
|
| 19 |
|
|
| — |
|
|
| - |
|
|
| 19 |
|
Interest rate swap derivatives |
|
| — |
|
|
| 25,274 |
|
|
| — |
|
|
| (1,170 | ) |
|
| 24,104 |
|
Total |
| $ | — |
|
| $ | 67,026 |
|
| $ | 7,914 |
|
| $ | (41,613 | ) |
| $ | 33,327 |
|
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Counterparty |
|
| Total |
| |||||
March 31, 2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Energy commodity derivatives (2) |
| $ | — |
|
| $ | 41,447 |
|
| $ | 178 |
|
| $ | (40,716 | ) |
| $ | 909 |
|
Foreign currency exchange derivatives |
|
| — |
|
|
| 45 |
|
|
| — |
|
|
| — |
|
|
| 45 |
|
Interest rate swap derivatives |
|
| — |
|
|
| 2,455 |
|
|
| — |
|
|
| — |
|
|
| 2,455 |
|
Equity Investments |
|
| — |
|
|
| — |
|
|
| 51,014 |
|
|
| — |
|
|
| 51,014 |
|
Deferred compensation assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Mutual Funds: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Fixed income securities (3) |
|
| 1,231 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1,231 |
|
Equity securities (3) |
|
| 6,051 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 6,051 |
|
Total |
| $ | 7,282 |
|
| $ | 43,947 |
|
| $ | 51,192 |
|
| $ | (40,716 | ) |
| $ | 61,705 |
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Energy commodity derivatives (2) |
| $ | — |
|
| $ | 115,124 |
|
| $ | 11,240 |
|
| $ | (111,543 | ) |
| $ | 14,821 |
|
Interest rate swap derivatives |
|
| — |
|
|
| 247 |
|
|
| — |
|
|
| — |
|
|
| 247 |
|
Total |
| $ | — |
|
| $ | 115,371 |
|
| $ | 11,240 |
|
| $ | (111,543 | ) |
| $ | 15,068 |
|
December 31, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Energy commodity derivatives (2) |
| $ | — |
|
| $ | 146,232 |
|
| $ | 288 |
|
| $ | (136,605 | ) |
| $ | 9,915 |
|
Foreign currency exchange derivatives |
|
| — |
|
|
| 43 |
|
|
| — |
|
|
| — |
|
|
| 43 |
|
Interest rate swap derivatives |
|
| — |
|
|
| 11,184 |
|
|
| — |
|
|
| — |
|
|
| 11,184 |
|
Equity Investments |
|
| — |
|
|
| — |
|
|
| 54,284 |
|
|
| — |
|
|
| 54,284 |
|
Deferred compensation assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Mutual Funds: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Fixed income securities (3) |
|
| 1,267 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1,267 |
|
Equity securities (3) |
|
| 6,132 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 6,132 |
|
Total |
| $ | 7,399 |
|
| $ | 157,459 |
|
| $ | 54,572 |
|
| $ | (136,605 | ) |
| $ | 82,825 |
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Energy commodity derivatives (2) |
| $ | — |
|
| $ | 258,769 |
|
| $ | 18,022 |
|
| $ | (242,044 | ) |
| $ | 34,747 |
|
Foreign currency exchange derivatives |
|
| — |
|
|
| 3 |
|
|
| — |
|
|
| — |
|
|
| 3 |
|
Interest rate swap derivatives |
|
| — |
|
|
| 52 |
|
|
| — |
|
|
| — |
|
|
| 52 |
|
Total |
| $ | — |
|
| $ | 258,824 |
|
| $ | 18,022 |
|
| $ | (242,044 | ) |
| $ | 34,802 |
|
2628
AVISTA CORPORATION
The difference between the amount of derivative assets and liabilities disclosed in respective levels in the table above and the amount of derivative assets and liabilities disclosed on the Condensed Consolidated Balance Sheets is due to netting arrangements with certain counterparties. See Note 56 for additional discussion of derivative netting.
To establish fair value for energy commodity derivatives, the Company uses quoted market prices and forward price curves to estimate the fair value of energy commodity derivative instruments included in Level 2. In particular, electric derivative valuations are performed using market quotes, adjusted for periods in between quotable periods. Natural gas derivative valuations are estimated using New York Mercantile Exchange pricing for similar instruments, adjusted for basin differences, using market quotes. Where observable inputs are available for substantially the full term of the contract, the derivative asset or liability is included in Level 2.
To establish fair values for interest rate swap derivatives, the Company uses forward market curves for interest rates for the term of the swaps and discounts the cash flows back to present value using an appropriate discount rate. The discount rate is calculated by third party brokers according to the terms of the swap derivatives and evaluated by the Company for reasonableness, with consideration given to the potential non-performance risk by the Company. Future cash flows of the interest rate swap derivatives are equal to the fixed interest rate in the swap compared to the floating market interest rate multiplied by the notional amount for each period.
To establish fair value for foreign currency derivatives, the Company uses forward market curves for Canadian dollars against the US dollar and multiplies the difference between the locked-in price and the market price by the notional amount of the derivative. Forward foreign currency market curves are provided by third party brokers. The Company's credit spread is factored into the locked-in price of the foreign exchange contracts.
Deferred compensation assets and liabilities represent funds held by the Company in a Rabbi Trust for an executive deferral plan. These funds consist of actively traded equity and bond funds with quoted prices in active markets.
Level 3 Fair Value
Natural Gas Exchange Agreement
For the natural gas commodity exchange agreement, the Company uses the same Level 2 market quotes described above; however, the Company also estimates the purchase and sales volumes (within contractual limits) as well as the timing of those transactions. Changing the timing of volume estimates changes the timing of purchases and sales, impacting which brokered quote is used. Because the brokered quotes can vary significantly from period to period, the unobservable estimates of the timing and volume of transactions can have a significant impact on the calculated fair value. The Company currently estimates volumes and timing of transactions based on a most likely scenario using historical data. Historically, the timing and volume of transactions are not highly correlated with market prices and market volatility.
The following table presents the quantitative information which was used to estimate the fair values of the Level 3 assets and liabilities above as of March 31, 20222023 (dollars in thousands):
|
| Fair Value |
|
| Valuation |
| Unobservable |
| Range and Weighted | |
|
| March 31, |
|
| Technique |
| Input |
| Average Price | |
Natural gas exchange agreement |
| $ | ( | ) |
| Internally derived weighted average cost of gas |
| Forward purchase prices |
| $ |
|
|
|
|
|
| Forward sales prices |
| $ | ||
|
|
|
|
|
| Purchase volumes |
| 130,000 - | ||
|
|
|
|
|
| Sales volumes |
| 75,000 - 310,000 mmBTUs |
29
AVISTA CORPORATION
The valuation methods, significant inputs and resulting fair values described above were developed by the Company's management and are reviewed on at least a quarterly basis to ensure they provide a reasonable estimate of fair value each reporting period.
Equity Investments
The Company has two equity investments measured at fair value on a recurring basis. For one investment, fair value is determined using a market approach, starting with enterprise values from recent market transaction data for comparable companies with similar equity instruments. The market transaction data was used to estimate an enterprise value of the underlying investment and that value was allocated to the various classes of equity via an option pricing model and a waterfall approach. The selection of appropriate comparable companies and the expected time to a liquidation event requires management judgment. The significant assumptions in the analysis include the comparable market transactions and related enterprise values, time to liquidity event and the market discount for lack of liquidity. In the event there are relevant market transactions for the same or similar securities of the subject company or there is the reasonable possibility of a transaction occurring, those transactions are utilized as an input to the valuation with a probability weight applied the valuation.
For the second investment, the fair value is determined using an income approach utilizing a discounted cash flow model. The model is based on income statement forecasts from the underlying company to determine cash flows for the period of ownership. The model then utilizes market multiples from publicly traded comparable companies in similar industries and projects to estimate the terminal fair value. The market multiples are reduced to reflect the difference in the life cycle between the publicly traded comparable companies and the start-up nature of the investment company. The selection of appropriate comparable companies, market multiples and the reduction to those market multiples requires management judgment. The significant assumptions in the model include the discount rate representing the risk associated with the investment, market multiples and the related reduction to those multiples, revenue forecasts, and the estimated terminal date for the investment. In the event there are relevant market transactions for the same or similar securities of the subject company, those transactions are used to determine the fair value of Avista Corp.’s investment under a market approach instead of utilizing a discounted cash flow model. The market transactions are considered Level 3 inputs because they are not publicly available observable transactions.
The following table presents the quantitative information which was used to estimate the fair values of the Level 3 equity investments as of March 31, 2023 (dollars in thousands):
|
| Fair Value at |
|
|
|
|
|
|
| |
|
| March 31, 2023 |
|
| Valuation Technique |
| Unobservable Input |
| Range | |
Equity investments |
| $ | 51,014 |
|
| Market approach |
| Comparable enterprise values |
| $130,000-$388,600 |
|
|
|
|
|
| Time to liquidity event |
| 0 to 2 years | ||
|
|
|
|
|
|
| Probability weighting |
| 75%/25% | |
|
|
|
|
| Market approach |
| Issuance price per share |
| $4.42 to $5.52 |
30
AVISTA CORPORATION
The following table presents activity for the natural gas exchange agreement derivative assets (liabilities)and liabilities measured at fair value using significant unobservable inputs (Level 3) for the three months ended March 31 (dollars in thousands):
|
| 2022 |
|
| 2021 |
| ||
Beginning balance |
| $ | (7,771 | ) |
| $ | (8,410 | ) |
Total gains (realized/unrealized): |
|
|
|
|
|
| ||
Included in regulatory assets/liabilities (1) |
|
| 2,499 |
|
|
| 3,220 |
|
Settlements |
|
| (925 | ) |
|
| (1,011 | ) |
Ending balance (2) |
| $ | (6,197 | ) |
| $ | (6,201 | ) |
|
| Natural Gas Exchange Agreement (1) |
|
| Equity Investments |
|
| Total |
| |||
Three Months Ended March 31, 2023: |
|
|
|
|
|
|
|
|
| |||
Balance as of January 1, 2023 |
| $ | (17,734 | ) |
| $ | 54,284 |
|
| $ | 36,550 |
|
Total gains or (losses) (realized/unrealized): |
|
|
|
|
|
|
|
|
| |||
Included in regulatory assets/liabilities |
|
| 6,783 |
|
|
| — |
|
|
| 6,783 |
|
Recognized in net income |
|
| — |
|
|
| (2,637 | ) |
|
| (2,637 | ) |
Purchases and debt conversions |
|
| — |
|
|
| 2,367 |
|
|
| 2,367 |
|
Settlements |
|
| (111 | ) |
|
| — |
|
|
| (111 | ) |
Other |
|
| — |
|
|
| (3,000 | ) |
|
| (3,000 | ) |
Ending balance as of March 31, 2023 |
| $ | (11,062 | ) |
| $ | 51,014 |
|
| $ | 39,952 |
|
Three Months Ended March 31, 2022: |
|
|
|
|
|
|
|
|
| |||
Balance as of January 1, 2022 |
| $ | (7,771 | ) |
| $ | — |
|
| $ | (7,771 | ) |
Total gains or (losses) (realized/unrealized): |
|
|
|
|
|
|
|
|
| |||
Included in regulatory assets/liabilities |
|
| 2,499 |
|
|
| — |
|
|
| 2,499 |
|
Settlements |
|
| (925 | ) |
|
| — |
|
|
| (925 | ) |
Ending balance as of March 31, 2022 |
| $ | (6,197 | ) |
| $ | — |
|
| $ | (6,197 | ) |
27
AVISTA CORPORATION
NOTE 12.13. COMMON STOCK
The Company issued common stock during the first quarter of 2022 for total net proceeds of $37.929.9 million.million during the three months ended March 31, 2023. Most of these issuances came through the Company's sales agency agreements under which the sales agents may offer and sell new shares of common stock from time to time. During the first quarter of 2021,Under these sales agency agreements, the Company didissued 00.7t million shares during the three months ended March 31, 2023. The Company has board and regulatory authority to issue anya maximum of 5.6 million shares under these agreements.
In April 2022, the Company completed the board and regulatory approval processes to issue an additionalagreements, of which 4.81.6 million shares.remain unissued as of March 31, 2023.
NOTE 13.14. ACCUMULATED OTHER COMPREHENSIVE LOSS
Accumulated other comprehensive loss, net of tax, consisted of the following as of March 31, 20222023 and December 31, 20212022 (dollars in thousands):
|
| March 31, |
|
| December 31, |
| ||
Unfunded benefit obligation for pensions and other postretirement benefit plans - |
| $ | 10,763 |
|
| $ | 11,039 |
|
|
| March 31, |
|
| December 31, |
| ||
Unfunded benefit obligation for pensions and other postretirement benefit plans - |
| $ | 2,076 |
|
| $ | 2,058 |
|
The following table details the reclassifications out of accumulated other comprehensive loss to net income by component for the three months ended March 31 (dollars in thousands):
|
| Amounts Reclassified from Accumulated Other |
|
| Amounts Reclassified from Accumulated Other |
| ||||||||||
Details about Accumulated Other Comprehensive Loss Components |
| 2022 |
|
| 2021 |
|
| 2023 |
|
| 2022 |
| ||||
Amortization of defined benefit pension and |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Amortization of net prior service cost (a) |
| $ | (200 | ) |
| $ | (200 | ) |
| $ | (140 | ) |
| $ | (200 | ) |
Amortization of net loss (a) |
| 2,038 |
| 3,191 |
|
|
| 1,372 |
|
|
| 2,038 |
| |||
Adjustment due to effects of regulation (a) |
|
| (1,489 | ) |
|
| (2,592 | ) |
|
| (1,255 | ) |
|
| (1,489 | ) |
Total before tax (b) |
| 349 |
| 399 |
|
|
| (23 | ) |
|
| 349 |
| |||
Tax expense (b) |
|
| (73 | ) |
|
| (84 | ) |
|
| 5 |
|
|
| (73 | ) |
Net of tax (b) |
| $ | 276 |
|
| $ | 315 |
|
| $ | (18 | ) |
| $ | 276 |
|
31
AVISTA CORPORATION
28
AVISTA CORPORATION
The following table presents the computation of basic and diluted earnings per common share for the three months ended March 31 (in thousands, except per share amounts):
|
| 2022 |
|
| 2021 |
|
| 2023 |
|
| 2022 |
| ||||
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net income |
| $ | 71,565 |
|
| $ | 68,017 |
|
| $ | 54,845 |
|
| $ | 71,565 |
|
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Weighted-average number of common shares outstanding-basic |
| 71,787 |
| 69,293 |
|
|
| 75,169 |
|
|
| 71,787 |
| |||
Effect of dilutive securities: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Performance and restricted stock awards |
|
| 143 |
|
|
| 213 |
|
|
| 106 |
|
|
| 143 |
|
Weighted-average number of common shares outstanding-diluted |
|
| 71,930 |
|
|
| 69,506 |
|
|
| 75,275 |
|
|
| 71,930 |
|
Earnings per common share: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Basic |
| $ | 1.00 |
|
| $ | 0.98 |
|
| $ | 0.73 |
|
| $ | 1.00 |
|
Diluted |
| $ | 0.99 |
|
| $ | 0.98 |
|
| $ | 0.73 |
|
| $ | 0.99 |
|
There were 0no shares excluded from the calculation because they were antidilutive.
NOTE 15.16. COMMITMENTS AND CONTINGENCIES
In the course of its business, the Company becomes involved in various claims, controversies, disputes and other contingent matters, including the items described in this Note. Some of these claims, controversies, disputes and other contingent matters involve litigation or other contested proceedings. For all such matters, the Company will vigorously protect and defend its interests and pursue its rights. However, no assurance can be given as to the ultimate outcome of any particular matter because litigation and other contested proceedings are inherently subject to numerous uncertainties. For matters that affectaffecting Avista Utilities’ or AEL&P's operations, the Company intends to seek, to the extent appropriate, recovery of incurred costs through the ratemaking process.
Collective Bargaining Agreements
The Company’s collective bargaining agreement with the IBEW represents approximately 40 percent of all of Avista Corp.’s employees. The Company’s largest represented group, representing approximately 90 percent of Avista Corp.’s bargaining unit employees in Washington and Idaho, were covered under a three-year agreement which expired in March 2021. In March 2022, a new four-year collective bargaining agreement was reached with the IBEW. The new agreement is retroactive to March 2021 and expires in March 2025.
Boyds Fire (State of Washington Department of Natural Resources (DNR) v. Avista)
In August 2019, the Company was served with a complaint, captioned “State of Washington Department of Natural Resources v. Avista Corporation,” seeking recovery of up to $4.4 million for fire suppression and investigation costs and related expenses incurred in connection with a wildfire that occurred in Ferry County, Washington in August 2018. Specifically, the complaint alleges that the fire, which became known as the “Boyds Fire,” was caused by a dead ponderosa pine tree falling into an overhead distribution line, and that Avista Corp. was negligent in failing to identify and remove the tree before it came into contact with the line. Avista Corp. disputes that the tree in question was the cause of the fire and that it was negligent in failing to identify and remove it. Additional lawsuits havewere subsequently been filed by private landowners seeking property damages, and holders of insurance subrogation claims seeking recovery of insurance proceeds paid.
The lawsuits were filed in the Superior Court of Ferry County, Washington. The Company continues to vigorously defend itself in the litigation. However, at this time the Company is unable to predict the likelihood of an adverse outcome or estimate a range of potential loss in the event of such an outcome.
Road 11 Fire
In April 2022, Avista Corp. received a notice of claim from a property ownerowners seeking damages of $5 million in connection with a fire that occurred in Douglas County, Washington, in July 2020. In June 2022, those claimants filed suit in the Superior Court of Douglas County, Washington, seeking unspecified damages. The fire, which was designated as the “Road 11 Fire,” occurred in the vicinity of an Avista Corp. 115kv line, resulting in damage to three overhead transmission structures. The fire occurred during a high
29
AVISTA CORPORATION
wind event and grew to 10,000 acres before being contained. The Company disputes that it is liable for the fire and will vigorously defend itself in any
32
AVISTA CORPORATION
the pending legal action that might be commenced in connection with the same;proceeding; however, at this time the Company is unable to predict the likelihood of an adverse outcome or estimate a range of potential loss in the event of such an outcome.
Labor Day 2020 Windstorm
General
In September 2020, a severe windstorm occurred in eastern Washington and northern Idaho. The extreme weather event resulted in customer outages and multiple wildfires in the region.
The Company has become aware of instances where, during the course of the storm, otherwise healthy trees and limbs, located in areas outside its maintenance right-of-way, broke under the extraordinary wind conditions and caused damage to its energy delivery system at or near what is believed to be the potential area of origin of a wildfire. Those instances include what has been referred to as: the Babb Road fire (near Malden and Pine City, Washington); the Christensen Road fire (near Airway Heights, Washington); and the Mile Marker 49 fire (near Orofino, Idaho); and the Kewa Field Fire (near Colville, Washington). These wildfires covered, in total, approximatelymore than 22,00025,000 acres. The Company estimates approximately 230 residential, commercial and other structures were impacted. With respect to the Christensen Road Fire, and the Mile Marker 49 Fire, and the Kewa Field Fire, the Company’s investigation determined that the primary cause of the fires was extreme high winds. To date, the Company has not found any evidence that the fires were caused by any deficiencies in its equipment, maintenance activities or vegetation management practices. See further discussion below regarding the Babb Road Fire.
In addition to the instances identified above, the Company is aware of a 5-acre fire that occurred in Colfax, Washington, which damaged several residential structures. The Company's investigation determined that the Company's facilities were not involved in the ignition of this fire.
The Company’s investigation has found no evidence of negligence with respect to any of the fires, and the Company will vigorously defend itself against any claims for damages that may be asserted against it with respect to the wildfires arising out of the extreme wind event; however, at this time the Company is unable to predict the likelihood of an adverse outcome or estimate a range of potential loss in the event of such an outcome.
Babb Road Fire
In May 2021 the Company learned that the Washington Department of Natural Resources (DNR) had completed its investigation and issued a report on the Babb Road Fire. The Babb Road fire covered approximately 15,000 acres and destroyed approximately 220 structures. There are no reports of personal injury or death resulting from the fire.
The DNR report concluded, among other things, that
The DNR report concluded as follows: “It is my opinion that because of the unusual configuration of the tree, and its proximity to the powerline, a closer inspection was warranted. A nearer inspection of the tree should have revealed the cut LBL ends and its previous failure, and necessitated determination of the failure potential of the adjacent LBL, implicated in starting the Babb Road Fire.”
The DNR report acknowledged that, other than the multi-dominant nature of the tree, the conditions mentioned above would not have been easily visible without close-up inspection of, or cutting into, the tree. The report also acknowledged that, while the presence of multiple tops would have been visible from the nearby roadway, the tree did not fail at a v-fork due to the presence of multiple tops. The Company contends that applicable inspection standards did not require a closer inspection of the otherwise healthy tree, nor was the Company negligent with respect to its maintenance, inspection or vegetation management practices.
NaN33
AVISTA CORPORATION
Nine lawsuits seeking unspecified damages have been filed in connection with the Babb Road fire. These include six subrogation actions filed by insurance companies seeking recovery for amounts paid to insureds; two actions on behalf of individual plaintiffs; and a negligence class action filedlawsuit. All proceedings were consolidated for discovery and pre-trial proceedings, are pending in the Superior Court of Spokane County Washington, on behalfand variously assert causes of approximately 44 individual plaintiffs; 3 negligence-based subrogation actions filed in the Superior Courtaction for negligence, private nuisance, trespass and inverse condemnation (a theory of Spokane on behalf of 23 insurance carriers; and a class action lawsuit filed instrict liability).
30
AVISTA CORPORATION
On September 16, 2022, the Company filed a motion in the Superior Court of Spokane County, Washington, alleging liability for negligence, private nuisanceseeking dismissal of the Plaintiffs' inverse condemnation claims as a matter of law on the grounds that they are not legally cognizable under Washington law. On October 14, 2022, the Superior Court heard oral argument on that motion. The Court concluded the Company's motion involved mixed questions of law and trespass,fact, and, as well as liability based on a theoryconsequence, could not be granted at that stage of "inverse condemnation." the proceedings; however, the Court indicated the Company could bring the issue before the Court again after discovery is completed.
The Company will vigorously defend itself in all suchthe legal proceedings; however, at this time the Company is unable to predict the likelihood of an adverse outcome or estimate a range of potential loss in the event of such an outcome.
Colstrip
Colstrip Owners Arbitration and Litigation
Colstrip Units 3 &and 4 are jointly owned by the Company, PacifiCorp, Portland General Electric (PGE), and Puget Sound Energy (PSE), Pacificorp, Portland General Electric (PGE) (collectively, the "Western Co-Owners"), as well as NorthWestern and Talen and are operated pursuant toMontana, LLC (Talen), as tenants in common under an Ownership and Operating Agreement, dated May 6, 1981, as amended (O&O Agreement). Avista Corp. is a , in the percentages set forth below:15
Co-Owner |
| Unit 3 |
|
| Unit 4 |
| ||
Avista |
|
| 15 | % |
|
| 15 | % |
PacifiCorp |
|
| 10 | % |
|
| 10 | % |
PGE |
|
| 20 | % |
|
| 20 | % |
PSE |
|
| 25 | % |
|
| 25 | % |
NorthWestern |
|
| — |
|
|
| 30 | % |
Talen |
|
| 30 | % |
|
| — |
|
percent ownerColstrip Units 1 and 2, owned by PSE and Talen, were shut down in 2020 and are in the process of being decommissioned. The co-owners of Units 3 & 4. No single owner owns more than 30 percent of either generating unit.and 4 also own undivided interests in facilities common to both Units 3 and 4, as well as in certain facilities common to all four Colstrip units.
The Washington Clean Energy Transformation Act (CETA), among other things, imposes deadlines by which each electric utility must eliminate from its electricity rates in Washington the costs and benefits associated with coal-fired resources, such as Colstrip, must be excluded from the rate baseColstrip. The practical impact of Washington utilities and by whichCETA is electricity from such resources, including Colstrip, may no longer be delivered to Washington retail customers. customers after 2025.
The co-owners of Colstrip Units 3 and 4 have differing needs for the generating capacity of these units. Accordingly, certain business disagreements have arisen among the co-owners, including, but not limited to, disagreements as to the shut-down date or dates ofrequirements for shutting down these units. These business disagreements, in turn, have ledNorthWestern has initiated arbitration pursuant to disagreements as to the interpretation of the O&O Agreement including, but not limited to what percentage voting requirement underresolve these business disagreements, and two actions have been initiated to compel arbitration of those disputes: one by Talen in the O&O Agreement (55 percent vs. 100 percent) is needed to remove one or more of the Colstrip units from service or to make a determination that the project can no longer be operated consistent with prudent utility practice or the requirements of governmental agencies having jurisdiction. These disagreements are the subject of pending litigation in Montana FederalThirteenth Judicial District Court in whichfor Yellowstone County, and one by the Western Co-Owners, are plaintiffs and NorthWestern and Talen are defendants, as well as in the Montana District for Yellowstone County, in which Talen is the plaintiff and the Western Co-Owners and NorthWestern are defendants.
In addition, there are legal proceedings pending in Montana Federal District CourtCourt. In light of the ownership transfer agreements discussed below, the Colstrip owners agreed to stay both the litigation and the arbitration through June 16, 2023, at which time the proceedings would resume absent further agreement between the owners.
Agreement Between Talen Energy and Puget Sound Energy
In September 2022, the Company received notice that PSE and Talen entered into an agreement through which PSE has agreed to transfer its 25 percent ownership in Colstrip Units 3 and 4 to Talen at the end of 2025. The terms and conditions of the agreement are similar in most respects to the NorthWestern Transaction discussed below.
Agreement Between Avista and NorthWestern
34
AVISTA CORPORATION
On January 16, 2023, the Company entered into an agreement with NorthWestern under which the Company will transfer its 15 percent ownership in Colstrip Units 3 and 4 to NorthWestern. There is no monetary exchange included in the transaction. The transaction is scheduled to close on December 31, 2025 or such other date as the parties mutually agree upon.
Under the agreement, the Company will remain obligated through the close of the transaction to pay its share of (i) operating expenses, (ii) capital expenditures, but not in excess of the portion allocable pro rata to the portion of useful life (through 2030) expired through the close of the transaction, and (iii) except for certain costs relating to post-closing activities, site remediation expenses. In addition, the Company would enter into an agreement under which it would retain its voting rights with respect to decisions relating to remediation.
The Company will retain its Colstrip transmission system assets, which are excluded from the validitytransaction.
Under the Colstrip O&O Agreement, each of the other owners of Colstrip has a 90-day period in which to evaluate the transaction and constitutionalitydetermine whether to exercise their respective rights of changesfirst refusal as to Montana law enacted in 2021 aftera portion of the foregoing disputes arose. generation being turned over to NorthWestern. That period was extended, by agreement of the Owners, through June 16, 2023.
The Western Co-Owners are plaintiffs in those proceedings and NorthWestern and Talen are defendants. The changestransaction is subject to Montana law at issue purport to (a) dictate the locationsatisfaction of customary closing conditions including the receipt of any arbitration under the O&O Agreement, overriding the express provisions of that agreement; and (b) define actions relatingrequired regulatory approvals, as well as NorthWestern's ability to closing or not operating Colstrip as violations of Montana’s Consumer Protection Act. These legal proceedings remain pending.enter into a new coal supply agreement by December 31, 2024.
The Company isdoes not ableexpect this transaction to predict the outcome, nor an amount or range of potentialhave a material impact in the event of an outcome that is adverse to the Company’s interests. However, the Company will continue to vigorously defend and protecton its interests (and those of its stakeholders) in all legal proceedings relating to Colstrip.financial results.
Burnett et al. v. Talen et al.
Multiple property owners have initiated a legal proceeding (titled Burnett et al. v. Talen et al.) in the Montana District Court for Rosebud County against Talen, PSE, Pacificorp, PGE, Avista Corp., NorthWestern, and Westmoreland Rosebud Mining. The plaintiffs allege a failure to contain coal dust in connection with the operation of Colstrip, and seek unspecified damages. The Company will vigorously defend itself in the litigation, but at this time is unable to predict the outcome, nor an amount or range of potential impact in the event of an outcome that is adverse to the Company’s interests.
Westmoreland Mine Permits
Two lawsuits have been commenced by the Montana Environmental Information Center, challenging certain permits relating to the operation of the Westmoreland Rosebud Mine, which provides coal to Colstrip. In the first, the Montana District Court for Rosebud County issued an order vacating a permit for one area of the mine. In the second, the Montana Federal District Court issued findings and recommended that a decision approving expansion of the mine into a new area should be vacated, but recommending that the decision not take effect for 365 days from the date of a final order, which order remains pending.order. Both decisions may be subject to appellate review. Avista Corp. is not a party to either of these proceedings, but is continuing to monitor the progress of both lawsuits and assess the impact, inif any, of the proceedings on Westmoreland’s ability to meet its contractual coal supply obligations.
31
AVISTA CORPORATION
National Park Service (NPS) - Natural and Cultural Damage Claim
In March 2017, the Company accessed property managed by the National Park Service (NPS) to prevent the imminent failure of a power pole that was surrounded by flood water in the Spokane River. The Company voluntarily reported its actions to the NPS several days later. Thereafter, in March 2018, the NPS notified the Company that it might seek recovery for unspecified costs and damages allegedly caused during the incident pursuant to the System Unit Resource Protection Act (SURPA), 54 U.S.C. 100721 et seq. In January 2021, the United States Department of Justice (DOJ) requested that the Company and the DOJ renew discussions relating to the matter. In July 2021, the DOJ communicated that it may seek damages of approximately $2 million in connection with the incident for alleged damage to "natural“natural and cultural resources"resources”. In addition, the DOJ indicated that it may seek treble damages under the SURPA and state law, bringing its total potential claim to approximately $6 million.
The Company disputes the position taken by the DOJ with respect to the incident, as well as the nature and extent of the DOJ’s alleged damages, and will vigorously defend itself in any litigation that may arise with respect to the matter. The Company and the DOJ have agreed to engageengaged in discussions to understand their respective positions and determine whether a resolution of the dispute may be possible. However, the Company cannot predict the outcome of the matter.
35
AVISTA CORPORATION
Rathdrum, Idaho Natural Gas Incident
In October 2021, there was an incident in Rathdrum, Idaho involving the Company’s natural gas infrastructure. The incident occurred after a third party damaged those facilities during the course of excavation work. The incident resulted in a fire which destroyed one residence and resulted in minor injuries to the occupants. No claims or proceedings have been initiated fromOn January 23, 2023, the Company was served with a lawsuit filed in the District Court of Kootenai County, Idaho by one property owner, seeking unspecified damages. The Company intends to vigorously defend itself in this incident;action.
Climate Commitment Act (CCA) Obligations
Effective January 1, 2023, the CCA went into effect in the State of Washington, requiring the Company to secure enough carbon allowances to cover its carbon emissions over a certain amount each year. The state has provided carbon allowances to cover electric retail activities, however the Company is assessing whether additional carbon allowances will vigorously defend itself againstneed to be purchased for its electric wholesale activities or if the state will provide carbon allowances at no cost. At this time, the Company estimates an additional cost of $5.9 million would have been incurred in the first quarter if these additional allowances are required to be purchased. However, given the uncertainty of the law’s application to electric wholesale operations, these additional costs are not probable at this time, and have not been recorded. The Company expects to recover any claimscosts incurred for damages that may be asserted against it.its Washington operations through the ratemaking process.
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 22 of the Notes to Consolidated Financial Statements" in the 20212022 Form 10-K for additional discussion regarding other contingencies.
NOTE 16.17. 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). The accounting policies of the segments are 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.
3236
AVISTA CORPORATION
The following table presents information for each of the Company’s business segments (dollars in thousands):
|
| Avista |
|
| Alaska |
|
| Total Utility |
|
| Other |
|
| Intersegment |
|
| Total |
|
| Avista |
|
| Alaska |
|
| Total Utility |
|
| Other |
|
| Intersegment |
|
| Total |
| ||||||||||||
For the three months ended March 31, 2023: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||
Operating revenues |
| $ | 460,142 |
|
| $ | 14,363 |
|
| $ | 474,505 |
|
| $ | 126 |
|
| $ | — |
|
| $ | 474,631 |
| ||||||||||||||||||||||||
Resource costs |
|
| 192,137 |
|
|
| 791 |
|
|
| 192,928 |
|
|
| — |
|
|
| — |
|
|
| 192,928 |
| ||||||||||||||||||||||||
Other operating expenses |
|
| 101,389 |
|
|
| 3,589 |
|
|
| 104,978 |
|
|
| 1,011 |
|
|
| — |
|
|
| 105,989 |
| ||||||||||||||||||||||||
Depreciation and amortization |
|
| 62,464 |
|
|
| 2,724 |
|
|
| 65,188 |
|
|
| 31 |
|
|
| — |
|
|
| 65,219 |
| ||||||||||||||||||||||||
Income (loss) from operations |
|
| 70,559 |
|
|
| 6,958 |
|
|
| 77,517 |
|
|
| (916 | ) |
|
| — |
|
|
| 76,601 |
| ||||||||||||||||||||||||
Interest expense (2) |
|
| 34,074 |
|
|
| 1,452 |
|
|
| 35,526 |
|
|
| 347 |
|
|
| (218 | ) |
|
| 35,655 |
| ||||||||||||||||||||||||
Income taxes |
|
| (7,948 | ) |
|
| 1,539 |
|
|
| (6,409 | ) |
|
| (219 | ) |
|
| — |
|
|
| (6,628 | ) | ||||||||||||||||||||||||
Net income (loss) |
|
| 51,627 |
|
|
| 4,042 |
|
|
| 55,669 |
|
|
| (824 | ) |
|
| — |
|
|
| 54,845 |
| ||||||||||||||||||||||||
Capital expenditures (3) |
|
| 97,764 |
|
|
| 2,726 |
|
|
| 100,490 |
|
|
| 3 |
|
|
| — |
|
|
| 100,493 |
| ||||||||||||||||||||||||
For the three months ended March 31, 2022: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Operating revenues |
| $ | 448,872 |
| $ | 13,054 |
| $ | 461,926 |
| $ | 120 |
| $ | 0 |
| $ | 462,046 |
|
| $ | 448,872 |
|
| $ | 13,054 |
|
| $ | 461,926 |
|
| $ | 120 |
|
| $ | — |
|
| $ | 462,046 |
| |||||
Resource costs |
| 186,424 |
| 444 |
| 186,868 |
| 0 |
| 0 |
| 186,868 |
|
|
| 186,424 |
|
|
| 444 |
|
|
| 186,868 |
|
|
| — |
|
|
| — |
|
|
| 186,868 |
| |||||||||||
Other operating expenses |
| 90,984 |
| 3,543 |
| 94,527 |
| 956 |
| 0 |
| 95,483 |
|
|
| 90,984 |
|
|
| 3,543 |
|
|
| 94,527 |
|
|
| 956 |
|
|
| — |
|
|
| 95,483 |
| |||||||||||
Depreciation and amortization |
| 59,879 |
| 2,698 |
| 62,577 |
| 32 |
| 0 |
| 62,609 |
|
|
| 59,879 |
|
|
| 2,698 |
|
|
| 62,577 |
|
|
| 32 |
|
|
| — |
|
|
| 62,609 |
| |||||||||||
Income (loss) from operations |
| 77,779 |
| 6,058 |
| 83,837 |
| (868 | ) |
| 0 |
| 82,969 |
|
|
| 77,779 |
|
|
| 6,058 |
|
|
| 83,837 |
|
|
| (868 | ) |
|
| — |
|
|
| 82,969 |
| ||||||||||
Interest expense (2) |
| 26,572 |
| 1,487 |
| 28,059 |
| 128 |
| (3 | ) |
| 28,184 |
|
|
| 26,572 |
|
|
| 1,487 |
|
|
| 28,059 |
|
|
| 128 |
|
|
| (3 | ) |
|
| 28,184 |
| ||||||||||
Income taxes |
| (12,360 | ) |
| 1,260 |
| (11,100 | ) |
| 264 |
| 0 |
| (10,836 | ) |
|
| (12,360 | ) |
|
| 1,260 |
|
|
| (11,100 | ) |
|
| 264 |
|
|
| — |
|
|
| (10,836 | ) | |||||||||
Net income |
| 67,278 |
| 3,293 |
| 70,571 |
| 994 |
| 0 |
| 71,565 |
|
|
| 67,278 |
|
|
| 3,293 |
|
|
| 70,571 |
|
|
| 994 |
|
|
| — |
|
|
| 71,565 |
| |||||||||||
Capital expenditures (3) |
| 95,464 |
| 523 |
| 95,987 |
| 414 |
| 0 |
| 96,401 |
|
|
| 95,464 |
|
|
| 523 |
|
|
| 95,987 |
|
|
| 414 |
|
|
| — |
|
|
| 96,401 |
| |||||||||||
For the three months ended March 31, 2021: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||
Operating revenues |
| $ | 399,860 |
| $ | 12,821 |
| $ | 412,681 |
| $ | 189 |
| $ | 0 |
| $ | 412,870 |
| |||||||||||||||||||||||||||||
Resource costs |
| 133,840 |
| 739 |
| 134,579 |
| 0 |
| 0 |
| 134,579 |
| |||||||||||||||||||||||||||||||||||
Other operating expenses |
| 84,599 |
| 2,956 |
| 87,555 |
| 1,184 |
| 0 |
| 88,739 |
| |||||||||||||||||||||||||||||||||||
Depreciation and amortization |
| 52,724 |
| 2,497 |
| 55,221 |
| 127 |
| 0 |
| 55,348 |
| |||||||||||||||||||||||||||||||||||
Income (loss) from operations |
| 96,693 |
| 6,324 |
| 103,017 |
| (1,122 | ) |
| 0 |
| 101,895 |
| ||||||||||||||||||||||||||||||||||
Interest expense (2) |
| 24,800 |
| 1,525 |
| 26,325 |
| 129 |
| (41 | ) |
| 26,413 |
| ||||||||||||||||||||||||||||||||||
Income taxes |
| 10,718 |
| 1,333 |
| 12,051 |
| 113 |
| 0 |
| 12,164 |
| |||||||||||||||||||||||||||||||||||
Net income |
| 64,058 |
| 3,476 |
| 67,534 |
| 483 |
| 0 |
| 68,017 |
| |||||||||||||||||||||||||||||||||||
Capital expenditures (3) |
| 96,394 |
| 809 |
| 97,203 |
| 28 |
| 0 |
| 97,231 |
| |||||||||||||||||||||||||||||||||||
Total Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
As of March 31, 2022: |
| $ | 6,636,604 |
| $ | 267,666 |
| $ | 6,904,270 |
| $ | 133,220 |
| $ | (1,480 | ) |
| $ | 7,036,010 |
| ||||||||||||||||||||||||||||
As of December 31, 2021: |
| $ | 6,458,244 |
| $ | 265,422 |
| $ | 6,723,666 |
| $ | 132,158 |
| $ | (2,241 | ) |
| $ | 6,853,583 |
| ||||||||||||||||||||||||||||
As of March 31, 2023: |
| $ | 6,952,564 |
|
| $ | 268,746 |
|
| $ | 7,221,310 |
|
| $ | 188,075 |
|
| $ | (15,459 | ) |
| $ | 7,393,926 |
| ||||||||||||||||||||||||
As of December 31, 2022: |
| $ | 6,976,164 |
|
| $ | 264,322 |
|
| $ | 7,240,486 |
|
| $ | 187,027 |
|
| $ | (10,163 | ) |
| $ | 7,417,350 |
|
3337
AVISTA CORPORATION
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 March 31, 2022,2023, the related condensed consolidated statements of income, comprehensive income (loss), equity and cash flows for the three-month periods ended March 31, 20222023 and 2021,2022, 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, 2021,2022, 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 22, 2022,21, 2023, 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, 2021,2022, 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
Portland, Oregon
May 3, 20222, 2023
3438
AVISTA CORPORATION
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 beenwas prepared in accordance with the SEC’s Regulation S-K for interim financial information and with the instructions to Form 10-Q. This Management’s Discussion and Analysis of Financial Condition and Results of Operations does not contain the full detail or analysis, or the full discussion of trends and uncertainties, that would accompany financial statements for a full fiscal year; therefore, it should be read in conjunction with the Company's 20212022 Form 10-K.
Business Segments
Our business segments have not changed during the three months ended March 31, 2022.2023. See the 20212022 Form 10-K as well as “Note 1617 of the Notes to Condensed Consolidated Financial Statements” for further information regarding our business segments.
The following table presents net income (loss) for each of our business segments (and the other businesses) for the three months ended March 31 (dollars in thousands):
|
| 2022 |
|
| 2021 |
|
| 2023 |
|
| 2022 |
| ||||
Avista Utilities |
| $ | 67,278 |
|
| $ | 64,058 |
|
| $ | 51,627 |
|
| $ | 67,278 |
|
AEL&P |
| 3,293 |
| 3,476 |
|
|
| 4,042 |
|
|
| 3,293 |
| |||
Other |
|
| 994 |
|
|
| 483 |
|
|
| (824 | ) |
|
| 994 |
|
Net income |
| $ | 71,565 |
|
| $ | 68,017 |
|
| $ | 54,845 |
|
| $ | 71,565 |
|
Executive Overview
Overall Results
Net income for the three months ended March 31, 2022 increased2023 decreased compared to the three months ended March 31, 20212022, primarily due to Avista Utilities results, including increased operating costs and increased interest expense. Interest expense increased due to higher rates and balances outstanding as a result of capital expenditures, increased deferred resource costs and collateral requirements. Income tax benefits decreased due to tax customer credits being fully returned to customers by the end of the third quarter, and income taxes being spread throughout the year as a percentage of pre-tax income. Electric utility margin also decreased slightly due to increased net income at Avista Utilities. The increase at Avista Utilities was primarily due to benefits from our completed general rate cases in Idaho and Washington, effective September 1, 2021 and October 1, 2021, respectively. While there were base rate increases approved in each case, these base rate increases were offset by tax customer creditspower supply costs, which resulted in no increase in customer billing rates. Instead,a $7.6 million pre-tax expense under the general rate case outcomes resulted in lower income tax expense, which represents ourERM compared to a $1.9 million pre-tax benefit from these cases. See "Note 7 of the Notes to Condensed Consolidated Financial Statements" for further discussion of the lower income tax expense. Avista Utilities also had customer growth which contributed additional retail revenue.
In March we joined the EIM, which provided net benefits to mitigate net power supply costs. We should continue to have net benefits from the EIM going forward. The net revenues and resource costs associated with EIM are included in the ERM and PCA mechanisms.
These increases werefirst quarter of 2022. This decrease in margin was partially offset by higher net power supply costs, higher depreciationincreases due to customer growth and higher operating and maintenance costs.the impacts of our general rate cases.
More detailed explanations of the fluctuations in revenues and expenses are provided in the results of operations and business segment discussions (Avista Utilities, AEL&P, and the other businesses) that follow this summary.
Colstrip Exit Plans
On January 16, 2023, we entered into an agreement with NorthWestern under which, subject to the terms and conditions in the agreement, we will transfer our 15 percent ownership in Colstrip Units 3 and 4, to NorthWestern. There is no monetary exchange included in the transaction. The transaction is scheduled to close on December 31, 2025, or such other date as the parties mutually agree upon. As included in the agreement, we will retain responsibility for site remediation expenses associated with conditions existing as of the close of the transaction.
See “Note 16 of the Notes to Condensed Consolidated Financial Statements” for further discussion on Colstrip and our agreement with NorthWestern.
Washington Climate Commitment Act (CCA)
Effective January 1, 2023, the CCA went into effect in the State of Washington, requiring us to secure enough carbon allowances to cover our carbon emissions over a certain amount each year. We purchase allowances recorded as inventory, and record emissions obligations and emissions expense associated with sales. As allowances are used and retired, we remove both the inventory and
39
AVISTA CORPORATION
emissions obligation from the balance sheet. We expect to purchase allowances for our Washington natural gas and Idaho electric operations, and are assessing the need to purchase allowances for our Washington electric wholesale activity. We received regulatory approval in Washington to defer incremental costs related to complying with the CCA for our natural gas operations, and will seek approval for incremental costs associated with our electric operations. Treatment of incremental costs in Idaho is pending in our 2023 general rate case results.
Liquidity and Increased Resource Pricing
Through the winter months, natural gas and power prices where elevated due to increased loads associated with colder than normal weather throughout the region, as well as natural gas pipeline constraints due to this increased demand. These increased prices led to increased liquidity needs for purchases of physical commodities as well as significant margin calls associated with future commodity activity and hedging arrangements. That, in turn, placed pressure on our available liquidity.
In response to these increased liquidity needs, we entered into additional credit agreements during the fourth quarter of 2022. See “Note 9 of the Notes to Condensed Consolidated Financial Statements” for further discussion on these credit agreements.
Our regulatory asset balances for our ERM, PCA and PGA deferral mechanisms increased significantly as a result of these elevated prices. We expect these deferral amounts to be recovered in future customer rates through the regulatory process. See “Power Cost Deferrals and Recovery Mechanisms” for further discussion on regulatory matters, including deferral mechanisms and associated balances.
Increased borrowings funding these deferrals and margin calls, coupled with rising interest rates, also increased interest expense.
Inflation
We are experiencing inflationary pressures in multiple areas of our business, including higher labor and benefits costs and higher gasoline and diesel costs. We cannot estimate how long inflation will remain at elevated levels. In addition, our interest costs increased due to higher interest rates than those approved in our most recent general rate cases, as well as increased borrowing needs for energy commodity transactions.
Regulatory Lag
Regulatory “lag” is inherent in utility ratemaking; a result of the delay between the investment in utility plant and/or the increase in costs and the receipt of an order of a public utility commission authorizing an increase in rates sufficient to recover such investment or costs. Regulatory lag can be mitigated to some extent by the incorporation of reasonably expected forward-looking information into an authorization of increased rates. However, there is no protection against unexpected inflation and increased interest rates, as experienced in 2022 and which are continuing into 2023. While we believe the 2022 Washington general rate settlement is helpful, some increases in our operating expenses and interest costs will have to be addressed in future rate cases. See “Regulatory Matters” for additional discussion of the general rate cases.
Supply Chain Delays
We continue to experience supply chain delays due to, among other things, the combined effects of the lingering COVID-19 pandemic, inflation, and staffing shortages across multiple industries and the Ukraine/Russia conflict.industries. These various issues have impacted the delivery times of some of our materials and equipment and have made some materials and equipment difficult to acquire in the needed quantities. So far, the delays are being proactively mitigated with minimal impact, as we have modified project plans in response to extendextended lead time for our materials; and in some cases we have beenwere able to locate new suppliers in other parts of the country or internationally. However, any problems that could result from future delays couldmay affect the ability of suppliers or contractors to perform, which could increase our operating costs and delay and/or increase the costscost of our capital projects.
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AVISTA CORPORATION
Inflation
We are experiencing inflationary pressures in multiple areas of our business. Most notably, higher power and natural gas costs have impacted utility margin and higher gasoline and diesel costs have increased the cost to operate our vehicle fleet. We cannot estimate how long these ultimately will continue to increase or remain at elevated levels. However, we are mitigating these pressures as much as possible by monitoring the power and natural gas markets and following our various hedging and risk mitigation plans. We also have our Jackson Prairie natural gas storage facility which we use to optimize our system and limit our exposure to high natural gas prices. While we have various regulatory recovery mechanisms for our power and natural gas costs and we expect to ultimately recover these costs (subject to Company/customer sharing bands within the ERM, PCA and Oregon PGA), there will be a delay between the initial purchase of the commodities and recovery of these costs. To mitigate this timing delay, in April 2022, we filed out-of-cycle PGA commodity rate updates in Washington and Idaho with proposed effective dates of July 1, 2022. In addition, we expect to reset authorized power supply costs in Washington as part of our 2022 electric general rate case that would be effective in late 2022.
In addition to the above, our cost of debt has increased due to higher interest rates than those approved in our most recently completed general rate cases. This deficit is anticipated to be short-term as we expect to include changes in costs in our pending 2022 Washington general rate cases and future general rate case filings.
Our forecast for 2022 assumed inflation of just over 5 percent and we still believe we can manage our costs to this level.
Regulatory Lag
We continue to experience regulatory lag and expect this to continue through the end of 2022 due to our continued investment in utility infrastructure. Going forward, we will continue to strive to reduce the regulatory timing lag and more closely align our earned returns with those authorized by 2023. See "Regulatory Matters" for additional discussion of the general rate cases.
Climate Change
There is a trend of increasing average temperatures that has had, and maywill likely continue to have, various significant direct and indirect impacts on our business. Direct impacts include, without limitation, variations in the amount and timing of energy demand throughout the
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AVISTA CORPORATION
year, variations in the level and timing of precipitation throughout the year and reducedthe resulting impact on the availability of hydroelectric resources at times of peak demand. Indirect impacts include, without limitation, federal, state and local legislation or regulation (in effect and proposed) that limits (or eliminates) the use of fossil-fuel for electric generation, as well as the use of natural gas for heating in residential and commercial buildings. In April 2022, the Washington State Building Code approved a revised energy code that requires most new commercial buildings and large multifamily buildings to install all-electric space heating effective in July 2023. However, an amendment to the code does allow for natural gas to supplement electric heat pumps.
For additional information regarding climate change, recent effects of climate change on our operations and results of operations and legislation and regulation designed to mitigate climate change, see the 2021"Environmental Issuance and Contingencies" and our 2022 Form 10-K. See also the discussion of wildfires below.
Wildfires and Wildfire Resiliency Plan
There have been a number of wildfires in our service territory most of which have involved, individually or in combination, high draught conditions, unusually high temperatures and/or unusually high winds.
We are implementing additional measures to enhance our ability to mitigate the potential for, and impact of, wildfires within our service territories. Our 10-year Wildfire Resiliency Plan includes improved defense strategies and operating practices for a more resilient and safe system. We expect to spend approximately $330 million implementing the plan components over the life of the 10-year plan. The IPUC and WUTC have approved deferral of certain costs of the wildfire resiliency plan and we plan to seek recovery in future rate filings.
See “Note 15 of the Notes to Consolidated Financial Statements” for further discussion on wildfires and see the 2021 Form 10-K for further discussion of our Wildfire Resiliency Plan.
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AVISTA CORPORATION
Regulatory Matters
General Rate Cases
We regularly review the need for electric and natural gas rate changes in each state in which we provide service. We expect to continue to file for rate adjustments to:
With regards to the timing and plans for future filings, the assessment of our need for rate relief and the development of rate case plans takes into consideration short-term and long-term needs, as well as specific factors that can affect the timing of rate filings. Such factors include, but are not limited to, in-service dates of major capital investments and the timing of changes in major revenue and expense items.
Avista Utilities
Washington General Rate Cases
20202022 General Rate Cases
In September 2021, we receivedOn December 12, 2022, the WUTC issued an order fromapproving the WUTC that approved a partial multi-party settlement agreement filed in June 2022. The parties to the settlement agreement included, in addition to us, the Staff of the WUTC, the Alliance of Western Energy Consumers, the NW Energy Coalition, The Energy Project, Walmart, Small Business Utility Advocates and resolvedSierra Club. The Public Counsel Unit of the Washington Attorney General’s Office (Public Counsel), while a party to the rate cases, did not join in the settlement agreement. The settlement agreement was reached after negotiation of all issues but is “results-focused” -- that is, it represents agreement among all parties (except Public Counsel) as to our overall revenue requirement, without specifying the details of any component except the rate of return on rate base.
On December 22, 2022, Public Counsel filed a Petition for Reconsideration requesting the WUTC to reconsider its ruling on the settlement agreement. Public Counsel’s primary issue is related to the “results-focused” approach used by the settling parties and approved by the WUTC. Public Counsel argues the WUTC order approving this approach denied Public Counsel the right to offer evidence in opposition to a settlement or particular components, because there was no other remaining issues. way to oppose a “results-focused” revenue requirement with sufficient support. Public Counsel also argued this procedure may effectively prevent parties in future rate cases from exercising their rights to oppose settlements.
On January 30, 2023, the WUTC issued an order denying the Petition for Reconsideration, stating Public Counsel was afforded every opportunity to exercise its rights to oppose the settlement, and reiterated that the end results of the settlement produced rates that were equitable, fair, just, reasonable and sufficient.
The approved rates wereare designed to increase annual base electric revenues by $13.6$38.0 million or 2.6 percent of(or 6.9 percent), effective in December 2022, and $12.5 million (or 2.1 percent), effective in December 2023. The approved rates are also designed to increase annual base revenues, and annual natural gas base revenues by $8.1$7.5 million or 7.7 percent(or 6.5 percent), effective in December 2022, and $1.5 million (or 1.2 percent), effective in December 2023.
41
Table of base revenues, effective October 1, 2021. TheContents
AVISTA CORPORATION
To mitigate the overall impact of the revenue increases were based on customers, we will offset part of the 2022 base rate request with tax customer credits. The total estimated benefits of these credits, $27.6 million for electric customers and $12.5 million for natural gas customers, will be returned over a 9.4 percent ROE with a common equity ratio of 48.5 percent and a ROR of 7.12 percent.two-year period from December 2022 to December 2024.
While base rates increased, there was no increase in billed rates because ofIn addition, the use of offsetting tax benefits.
The WUTC's order approved recoverya separate tracking mechanism and tariff for purposes of capital additions including investments in advanced metering infrastructure, wildfire resiliency, joining the Western Energy Imbalance Market,recovering existing and other projects. The WUTC disallowed $2.5 million of costs associated withprospective Colstrip SmartBurn technology.costs.
The WUTC order also approved an ROR on rate base of 7.03 percent, but the Company's request to defer incremental wildfire expenses incurred during 2021, as well as the Company's usesettlement does not specify an explicit ROE, cost of a wildfire balancing account to track the level of expense associated with wildfire resiliency going forward.debt or capital structure.
2022These general rate cases require a subsequent review of capital projects included in rates and a refund of revenues related to imprudent expenditures or those not used and useful.
Idaho General Rate Cases
2023 General Rate Cases
In January 2022,February 2023, we filed multi-yearmultiyear electric and natural gas general rate cases with the WUTC. IPUC. If approved, new rates would be effective in September 2023 and September 2024.
The proposed rates are designed to increase annual base electric revenues by $52.9$37.5 million, (or 9.6or 13.6 percent, of base revenues), effective in December 2022,September 2023, and $17.1$13.2 million, (or 2.8or 4.2 percent, of base revenues), effective in December 2023. September 2024.
For natural gas, the proposed rates are designed to increase annual base natural gas revenues by $10.9$2.8 million, (or 9.5or 6.0 percent, of base revenues), effective in December 2022,September 2023, and $2.2$0.1 million, (or 1.7or 0.3 percent, of base revenues), effective in December 2023.
We are proposing to offset part of the base rate request with a residual tax customer credit that arose out of the Company’s Washington electric and natural gas general rate cases that went into effect on October 1, 2021. The order for those general rate cases stipulated that the residual tax customer credit was to be flowed through to customers over a 10-year period beginning in 2023; however, we are now proposing that this credit be incrementally flowed through to customers over a two-year period. The estimated benefits to customers of this credit would be $25.5 million for electric customers and $12.5 million for natural gas customers over a two-year period from December 2022 to DecemberSeptember 2024.
The proposed electric and natural gas revenue increase requests are based on a 10.25ROR of 7.59 percent, ROE with a common equity ratio of 48.550 percent and a RORROE of 7.310.25 percent. Increasing fixed expenses and ongoing
Ongoing capital investmentsinfrastructure investment (including replacement of wood poles and natural gas distribution pipe, continued investment in the wildfire resiliency plan, and technology) wereis the main driversdriver of the proposed increases.
The IPUC has up to nine months to review the general rate case filings and issue a decision.
Oregon General Rate Cases
2023 General Rate Case
In March 2023, we filed a natural gas general rate case with the OPUC. If approved, new rates would be effective on January 1, 2024.
37The proposed rates are designed to increase annual base natural gas revenues by $11.0 million (or 14.4 percent).
The proposed revenue increase request is based on a proposed ROR of 7.59 percent, with a common equity ratio of 50 percent and a ROE of 10.25 percent.
Ongoing capital infrastructure investment (including replacement and expansion of natural gas distribution pipe and technology) is the main driver of the proposed increase.
The OPUC has up to ten months to review the general rate case filing and issue a decision.
AEL&P
Alaska General Rate Case
In July 2022, AEL&P filed an electric general rate case with the Regulatory Commission of Alaska (RCA). AEL&P received approval in August 2022 for an interim base rate increase of 4.5 percent (designed to increase annual electric revenues by $1.6 million), which took effect in September 2022. AEL&P also requested a permanent base rate increase of an additional 4.5 percent (designed to increase annual electric revenues by $1.6 million), which, if approved, could take effect in October 2023. The proposed revenue increase request is based on a 13.45 percent ROE with a common equity ratio of 60.7 percent and a ROR of 10.0 percent.
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AVISTA CORPORATION
proposed increases. As a partThe RCA must rule on permanent rate increases within 450 days (approximately 15 months) from the date of the multi-year rate plan, if approved, we would not file a new general rate case for a new rate plan to be effective prior to December 2024. The WUTC has up to eleven months to review the general rate case filings and issue a decision.
Washington Engrossed Substitute Senate Bill 5295
This bill, which was signed into law and became effective in July 2021, is designed to promote multi-year rate plans and performance-based rate making for electric and natural gas utilities. The bill includes a number of provisions such as required multi-year rate plans from 2-4 years in length, methodologies the WUTC may use to minimize regulatory lag and/or adjust for under earning and starts an investigation into Performance Based Ratemaking Metrics, an initial move that may help to modify the historical test-year ratemaking construct. In October 2021, the WUTC issued a notice of opportunity to comment on a proposed work plan to be conducted in various phases between 2021 and 2025, initially focusing on Performance Based Ratemaking and identifying performance metrics. The first workshop on this matter was held on April 19, 2022. Thereafter, the WUTC will address revenue adjustment mechanisms and performance incentives in the context of multi-year rate plans. The new law leaves much to the discretion of the WUTC, and we cannot predict the extent to which the WUTC will embrace the options now permitted.
Idaho General Rate Cases
2021 General Rate Cases
In September 2021, the IPUC approved the all-party settlement agreement designed to increase annual base electric revenues by $10.6 million, or 4.3 percent of base revenues, effective September 1, 2021, and $8.0 million, or 3.1 percent of base revenues, effective September 1, 2022. For natural gas, the proposed rates under the settlement agreement were designed to decrease annual base natural gas revenues by $1.6 million, or 3.7 percent of base revenues, effective September 1, 2021, and increase annual base revenues by $0.9 million, or 2.2 percent of base revenues, effective September 1, 2022. The parties have agreed to use the tax customer credits, related to flow through of certain tax items, included in our original filing to offset overall proposed changes to electric and natural gas rates over the two-year plan.
The settlement was based on a 9.4 percent ROE with a common equity ratio of 50 percent and a ROR of 7.05 percent.
2023 General Rate Cases
We expect to file electric and natural gas general rate cases with IPUC in the first half of 2023.
Oregon General Rate Cases
2021 General Rate Case
In October 2021, we filed a natural gas general rate case with the OPUC. The proposal was designed to increase overall natural gas base revenue by $3.8 million (or 5.0 percent of base revenues) and was based on a proposed ROR of 7.35 percent with a common equity ratio of 50 percent and a 9.9 percent ROE. We proposed that the increase be fully offset for a two-year period with tax customer credits (related to the flow through of certain tax items) of the same amount.
In January 2022, a partial settlement stipulation was filed with the OPUC that addressed cost of capital issues. The parties agreed to an overall ROR of 7.05 percent based on a 50 percent common equity ratio and ROE of 9.4 percent.
In March 2022, a second settlement stipulation was filed with the OPUC that addressed, and resolved, all other remaining issues. The parties support an overall revenue increase of $1.6 million, effective August 22, 2022. The agreement is a “black box”, with the only component of the revenue requirement explicitly stated being the previously-agreed upon cost of capital. The parties also agreed that certain tax customer credits and state income tax credits of approximately $3.0 million would be passed through to customers to mitigate the base revenue increase.
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AVISTA CORPORATION
AEL&P
Alaska General Rate Case
AEL&P is required to file its next general rate case by August 30, 2022.filing.
Avista Utilities
Purchased Gas Adjustments
PGAs are designed to pass through changes in natural gas costs to customers with no change in utility margin (operating revenues less resource costs) or net income. In Oregon, we absorb (cost or benefit) 10 percent of the difference between actual and projected natural gas costs included in retail rates for supply that is not hedged. Total net deferred natural gas costs among all jurisdictions were assets of $26.8$93.1 million and $21.0$52.1 million as of March 31, 20222023 and December 31, 2021,2022, respectively. In April 2022, we filed out-of-cycle Washington and Idaho PGA adjustments to update the commodity rates to currentThe significant increase in net deferred natural gas marketcosts in the first quarter of 2023 reflects high natural gas commodity prices. If approved, the new rates will be effective on July 1, 2022.
Power Cost Deferrals and Recovery Mechanisms
The ERM is an accounting method used to track certain differences between actual power supply costs, net of the margin on wholesale sales of energy and sales of fuel, and the amount included in base retail rates for our Washington customers. Under the ERM, we make an annual filing on or before April 1 of each year to provide the opportunity for the WUTC staff and other interested parties to review the prudence of and audit the ERM deferred power cost transactions for the prior calendar year. See the 20212022 Form 10-K for a full discussion of the mechanics of the ERM and the various customer/Company sharing bands. Total net deferred power costs under the ERM were liabilitiesassets of $7.0$38.8 million and $11.9$30.5 million as of March 31, 20222023 and December 31, 2021,2022, respectively. These deferred power cost balances represent amounts due tofrom customers. Pursuant to WUTC requirements, should the cumulative deferral balance exceed $30 million in the rebate or surcharge direction, we must make a filing with the WUTC to adjust customer rates to either return the balance to customers or recover the balance from customers. Our filing with the WUTC made on March 31, 2023 contained a proposed rate surcharge to customers for a one-year period, commencing July 1, 2023.
We have a PCA mechanism in Idaho that allows us to modify electric rates on October 1 of each year with IPUC approval. Under the PCA mechanism, we defer 90 percent of the difference between certain actual net power supply expenses and the amount included in base retail rates for our Idaho customers. The October 1 rate adjustments recover or rebate power supply costs deferred during the preceding July-June twelve-month period. Total net power supply costs deferred under the PCA mechanism were assets of $8.1$22.1 million and $10.8$16.3 million as of March 31, 20222023 and December 31, 2021,2022, respectively. These deferred power cost balances represent amounts due from customers.
Decoupling Mechanisms
Decoupling (also known as an FCA in Idaho) is a mechanism designed to sever the link between a utility's revenues and consumers' energy usage. In each of our jurisdictions, electric and natural gas revenues are adjusted so as to be based on the number of customers in certain customer rate classes and assumed "normal" kilowatt hour and therm sales, rather than being based on actual kilowatt hour and therm sales. The difference between revenues based on the number of customers and "normal" sales and revenues based on actual usage is deferred and either surcharged or rebated to customers beginning in the following year. Only residential and certain commercial customer classes are included in our decoupling mechanisms. See the 20212022 Form 10-K for a discussion of the mechanisms in each jurisdiction.
Total net cumulative decoupling deferrals among all jurisdictions were regulatory liabilities of $1.5$37.6 million as of March 31, 20222023 and regulatory assets of $15.2$18.2 million as of December 31, 2021.2022. Decoupling assets represent amounts due from customers andregulatory liabilities represent amounts due to customers.
See "Results of Operations - Avista Utilities" for further discussion of the amounts recorded to operating revenues in 20222023 and 20212022 related to the decoupling mechanisms.
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AVISTA CORPORATION
Results of Operations - Overall
The following provides an overview of changes in our Condensed Consolidated Statements of Income. More detailed explanations are provided, particularly for operating revenues and operating expenses, in the business segment discussions (Avista Utilities, AEL&P, and the other businesses) that follow this section.
The balances included below for utility operations reconcile to the Condensed Consolidated Statements of Income.
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AVISTA CORPORATION
Three months ended March 31, 20222023 compared to the three months ended March 31, 20212022
The following graph shows the total change in net income for the first quarter of 20222023 compared to the first quarter of 2021,2022, as well as the various factors that caused such change (dollars in millions):
Utility revenues increased at Avista Utilities when compared to the first quarter of 2021.2022. This was primarily due to higherincreased natural gas PGAretail revenues associated with increased retail rates higher electric customer usage due to weather that was colder than the prior year,(primarily PGAs) and customer growth for both electric and natural gas. In addition, electric andusage. This was partially offset by decreased natural gas wholesale sales increased due to an increase in pricesrevenues and volumes.financial losses on our derivative contracts, which are netted with utility revenues.
Utility resource costs increased at Avista Utilities due to increased fuel for generationpurchased power and natural gas purchased (mainly due to higher natural gas market prices).prices, partially offset by decreases associated with amortizations of previously deferred costs and the deferral of increased costs in the first quarter of 2023.
Utility operating expenses increased when compared to the first quarter of 2021,2022, primarily due to higher inflation which causedinflationary pressures resulting in increased employee wageslabor and benefits and outside service expenses. We also had higher wildfire resiliency costs, and insuranceas well as increased net amortizations of previously deferred costs. See the "Executive Overview" for further discussion aroundof inflation.
Utility depreciation and amortization increased primarily due to additions to utility plant.
Interest expense increased due to higher interest rates associated with inflation, as well as increased borrowings outstanding. Borrowings increased due to capital expenditures, higher energy commodity prices and additional collateral requirements. See the "Executive Overview" for further discussion of increased resource pricing and inflation.
Income tax expensebenefit decreased primarily due to the recognitiontax customer credits offsetting the bill impact of income taxes related torate increases included in our completed2021 Washington and Idaho and Washington general rate cases in late 2021 which allowed for flow through treatment for certaincases. These tax items. Forcredits will be fully returned to customers by the fullend of the third quarter of 2023 and will no longer reduce both customer bills and income tax expense. Income tax is spread throughout the year 2022, we expect ouras a percentage of pre-tax income based on the estimated annual effective tax rate, and as a result the benefit has decreased compared to be negative 17.8 percent.the prior year. See “Note 7"Note 8 of the Notes to Condensed Consolidated Financial Statements”Statements" for further details and a reconciliation of our effective tax rate for the first quarter of 2022.rate.
The increase in other was primarily related to an increase in taxes other thanincreased interest income, taxes and higher interest costs, partially offset by an increaseinvestment losses recognized in net investment gains during the first quarter of 2022 as2023 compared to the first quarter of 2021.investment gains recognized in 2022.
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AVISTA CORPORATION
Non-GAAP Financial Measures
The following discussion for Avista Utilities includes two financial measures that are considered “non-GAAP financial measures”: electric utility margin and natural gas utility margin. In the AEL&P section, we include a discussion of utility margin, which is also a non-GAAP financial measure.
Generally, a non-GAAP financial measure is a numerical measure of a company's financial performance, financial position or cash flows that excludes (or includes) amounts that are included (excluded) in the most directly comparable measure calculated and presented in accordance with GAAP. Electric utility margin is electric operating revenues less electric resource costs, while natural gas utility margin is natural gas operating revenues less natural gas resource costs. The most directly comparable GAAP financial measure to electric and natural gas utility margin is utility operating revenues as presented in "Note 1617 of the Notes to Condensed Consolidated Financial Statements."
The presentation of electric utility margin and natural gas utility margin is intended to enhance the understanding of operating performance. We use these measures internally and believe they provide useful information to investors in their analysis of how changes in loads (due to weather, economic or other conditions), rates, supply costs and other factors impact our results of operations. Changes in loads, as well as power and natural gas supply costs, are generally deferred and recovered from customers through regulatory accounting mechanisms. Accordingly, the analysis of utility margin generally excludes most of the change in revenue resulting from these regulatory mechanisms. We present electric and natural gas utility margin separately below for Avista Utilities since each business has different cost sources, cost recovery mechanisms and jurisdictions, so we believe that separate analysis is beneficial. These measures are not intended to replace utility operating revenues as determined in accordance with GAAP as an indicator of operating performance. Reconciliations of operating revenues to utility margin are set forth below.
Results of Operations - Avista Utilities
Three months ended March 31, 20222023 compared to the three months ended March 31, 20212022
Utility Operating Revenues
The following graphs present Avista Utilities' electric operating revenues and megawatt-hour (MWh) sales for the three months ended March 31, 20222023 and 20212022 (dollars in millions and MWhs in thousands):
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AVISTA CORPORATION
Total electric operating revenues in the graph above include intracompany sales of $0.3$1.2 million and $6.0$0.3 million for the three months ended March 31, 20222023 and 2021,2022, respectively.
The following table presents the current year deferrals and the amortization of prior year decoupling balances that are reflected in utility electric operating revenues for the three months ended March 31 (dollars in thousands):
|
| Electric Decoupling Revenues |
|
| Electric Decoupling Revenues |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| 2023 |
|
| 2022 |
| ||||
Current year decoupling deferrals (a) |
| $ | (8,804 | ) |
| $ | 4,326 |
|
| $ | (2,522 | ) |
| $ | (8,804 | ) |
Amortization of prior year decoupling deferrals (b) |
|
| (2,823 | ) |
|
| (3,545 | ) |
|
| 2,723 |
|
|
| (2,823 | ) |
Total electric decoupling revenue |
| $ | (11,627 | ) |
| $ | 781 |
|
| $ | 201 |
|
| $ | (11,627 | ) |
Total electric revenues increased $10.3decreased $10.6 million for the first quarter of 20222023 as compared to the first quarter of 2021.2022. The primary fluctuationschanges that occurred during the period were as follows:
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AVISTA CORPORATION
The following graphs present Avista Utilities' natural gas operating revenues and therms delivered for the three months ended March 31, 20222023 and 20212022 (dollars in millions and therms in thousands):
Total natural gas operating revenues in the graph above include intracompany sales of $9.3$6.3 million and $12.5$9.3 million for the three months ended March 31, 20222023 and 2021,2022, respectively.
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AVISTA CORPORATION
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 March 31 (dollars in thousands):
|
| Natural Gas Decoupling Revenues |
|
| Natural Gas Decoupling Revenues |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| 2023 |
|
| 2022 |
| ||||
Current year decoupling deferrals (a) |
| $ | (4,670 | ) |
| $ | (1,543 | ) |
| $ | (15,162 | ) |
| $ | (4,670 | ) |
Amortization of prior year decoupling deferrals (b) |
|
| (480 | ) |
|
| 1,261 |
|
|
| (4,077 | ) |
|
| (480 | ) |
Total natural gas decoupling revenue |
| $ | (5,150 | ) |
| $ | (282 | ) |
| $ | (19,239 | ) |
| $ | (5,150 | ) |
Total natural gas revenues increased $29.7$19.9 million for the first quarter of 20222023 as compared to the first quarter of 2021.2022. The primary fluctuationschanges that occurred during the period were as follows:
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AVISTA CORPORATION
The following table presents Avista Utilities' average number of electric and natural gas retail customers for the three months ended March 31, 20222023 and 2021:2022:
|
| Electric Customers |
|
| Natural Gas Customers |
|
| Electric Customers |
|
| Natural Gas Customers |
| ||||||||||||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||||||
Residential |
| 360,201 |
| 354,191 |
| 335,575 |
| 330,124 |
|
|
| 364,542 |
|
|
| 360,201 |
|
|
| 339,639 |
|
|
| 335,575 |
| |||||||
Commercial |
| 44,400 |
| 43,968 |
| 36,688 |
| 36,483 |
|
|
| 45,010 |
|
|
| 44,400 |
|
|
| 37,073 |
|
|
| 36,688 |
| |||||||
Interruptible |
| — |
| — |
| 44 |
| 37 |
|
|
| — |
|
|
| — |
|
|
| 49 |
|
|
| 44 |
| |||||||
Industrial |
| 1,197 |
| 1,210 |
| 189 |
| 192 |
|
|
| 1,186 |
|
|
| 1,197 |
|
|
| 186 |
|
|
| 189 |
| |||||||
Public street and highway lighting |
|
| 666 |
|
|
| 649 |
|
|
| — |
|
|
| — |
|
|
| 687 |
|
|
| 666 |
|
|
| — |
|
|
| — |
|
Total retail customers |
|
| 406,464 |
|
|
| 400,018 |
|
|
| 372,497 |
|
|
| 366,836 |
|
|
| 411,425 |
|
|
| 406,464 |
|
|
| 376,947 |
|
|
| 372,496 |
|
48
AVISTA CORPORATION
Utility Resource Costs
The following graphs present Avista Utilities' resource costs for the three months ended March 31, 20222023 and 20212022 (dollars in millions):
Total electric resource costs in the graph above include intracompany resource costs of $9.3$6.3 million and $12.5$9.3 million for the three months ended March 31, 20222023 and 2021,2022, respectively.
Total electric resource costs increased $17.2decreased $10.3 million for the first quarter of 20222023 as compared to the first quarter of 2021.2022. The primary fluctuationschanges that occurred during the period were as follows:
45
AVISTA CORPORATION
49
AVISTA CORPORATION
Total natural gas resource costs in the graph above include intracompany resource costs of $0.3$1.2 million and $6.0$0.3 million for the three months ended March 31, 20222023 and 2021,2022, respectively.
Total natural gas resource costs increased $26.5$14.0 million for the first quarter of 20222023 as compared to the first quarter of 20212022 primarily due to the following:
46
AVISTA CORPORATION
Utility Margin
The following table reconciles Avista Utilities' operating revenues, as presented in "Note 1617 of the Notes to Condensed Consolidated Financial Statements" to the Non-GAAP financial measure utility margin for the three months ended March 31, 20222023 and 20212022 (dollars in thousands):
|
| Electric |
|
| Natural Gas |
|
| Intracompany |
|
| Total |
|
| Electric |
|
| Natural Gas |
|
| Intracompany |
|
| Total |
| ||||||||||||||||||||||||||||||||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||||||||||||||
Operating revenues |
| $ | 267,925 |
|
| $ | 257,580 |
|
| $ | 190,512 |
|
| $ | 160,796 |
|
| $ | (9,565 | ) |
| $ | (18,516 | ) |
| $ | 448,872 |
|
| $ | 399,860 |
|
| $ | 257,297 |
|
| $ | 267,925 |
|
| $ | 210,390 |
|
| $ | 190,512 |
|
| $ | (7,545 | ) |
| $ | (9,565 | ) |
| $ | 460,142 |
|
| $ | 448,872 |
|
Resource costs |
|
| 95,039 |
|
|
| 77,867 |
|
|
| 100,950 |
|
|
| 74,489 |
|
|
| (9,565 | ) |
|
| (18,516 | ) |
|
| 186,424 |
|
|
| 133,840 |
|
|
| 84,744 |
|
|
| 95,039 |
|
|
| 114,938 |
|
|
| 100,950 |
|
|
| (7,545 | ) |
|
| (9,565 | ) |
|
| 192,137 |
|
|
| 186,424 |
|
Utility margin |
| $ | 172,886 |
|
| $ | 179,713 |
|
| $ | 89,562 |
|
| $ | 86,307 |
|
| $ | — |
|
| $ | — |
|
| $ | 262,448 |
|
| $ | 266,020 |
|
| $ | 172,553 |
|
| $ | 172,886 |
|
| $ | 95,452 |
|
| $ | 89,562 |
|
| $ | — |
|
| $ | — |
|
| $ | 268,005 |
|
| $ | 262,448 |
|
Electric utility margin decreased $6.8$0.3 million and natural gas utility margin increased $3.3$5.9 million.
Electric utility margin decreased primarily due to increased net power supply costs as compared toimpacts of the prior year. ForERM, offset by customer growth and the effects of general rate cases.
In the first quarter of 2022,2023, we had a $1.9$7.6 million pre-tax benefitexpense under the ERM in Washington, compared to a $4.3$1.9 million pre-tax benefit for the first quarter of 2021. The increase in net power supply costs was primarily due to an increase in power and natural gas prices during 2022. While we are in a benefit position within the ERM for the first quarter of 2022, we expect an expense position by the end of 2022 in the 90 percent customers/10 percent Company sharing band.
Natural gas utility margin increased primarily due to customer growth and the recognitioneffects of $1.0 million in decoupling amounts from 2021 that we were unable to recognize in the prior year.general rate cases.
Intracompany revenues and resource costs represent purchases and sales of natural gas between our natural gas distribution operations and our electric generation operations (as fuel for our generation plants). These transactions are eliminated in the presentation of total
50
AVISTA CORPORATION
results for Avista Utilities and in the condensed consolidated financial statements but are included in the separate results for electric and natural gas presented above.
Results of Operations - Alaska Electric Light and Power Company
Three months ended March 31, 2022 compared toNet income for AEL&P was $4.0 million for the three months ended March 31, 2021
Net income for AEL&P was2023 and $3.3 million for the three months ended March 31, 2022 and $3.5 million for the three months ended March 31, 2021.2022.
The following table presents AEL&P's operating revenues, resource costs and resulting utility margin for the three months ended March 31, 20222023 and 20212022 (dollars in thousands):
|
| 2022 |
|
| 2021 |
|
| 2023 |
|
| 2022 |
| ||||
Operating revenues |
| $ | 13,054 |
| $ | 12,821 |
|
| $ | 14,363 |
|
| $ | 13,054 |
| |
Resource costs |
|
| 444 |
|
|
| 739 |
|
|
| 791 |
|
|
| 444 |
|
Utility margin |
| $ | 12,610 |
|
| $ | 12,082 |
|
| $ | 13,572 |
|
| $ | 12,610 |
|
Utility margin for the for the three months ended March 31 increased slightly from 2021,2022, primarily due to higher sales volumes to residential customers for 2022increased operating revenues resulting from both usage and rate increases compared to 2021. The increase in utility margin was offset by a slight increase in operating expenses.the prior year.
Results of Operations - Other Businesses
Our other businesses had a net loss of $0.8 million for the three months ended March 31, 2023 compared to net income of $1.0 million for the three months ended March 31, 2022 compared to net income of $0.5 million for the three months ended March 31, 2021.2022.
The increasedecrease in net income primarily relates to an increasedecreases in the fair value of our investments in 2023, compared to net investment gains duringrecognized in 2022. See "Note 12 of the first quarter of 2022 as comparedNotes to the first quarterCondensed Consolidated Financial Statements" for further discussion of 2021.our equity investment fair value.
47
AVISTA CORPORATION
Critical Accounting Policies and Estimates
The preparation of our condensed consolidated financial statements in conformity with GAAP requires us to make estimates and assumptions that affect amounts reported in the condensed consolidated financial statements. Changes in these estimates and assumptions are considered reasonably possible and may have a material effect on our condensed consolidated financial statements and thus, actual results could differ from the amounts reported and disclosed herein. Our critical accounting policies that require the use of estimates and assumptions were discussed in detail in the 20212022 Form 10-K and have not changed materially.
Liquidity and Capital Resources
Overall Liquidity
Our sources of overall liquidity and the requirements for liquidity have not materially changed in the three months ended March 31, 2022.2023. See the 20212022 Form 10-K for further discussion.
In March 2022,2023, we issued $400.0$250.0 million of first mortgage bonds with the proceeds being used to repay the outstanding balance under our committed line of credit. In April 2022, the remainderbonds. A portion of the proceeds as well as borrowings onfrom the committed linesale of credit werethese bonds will be used for the construction or improvement of utility facilities, and a portion was used to repay $250.0refinance existing indebtedness, including the repayment of our $150 million of maturing long-term debt.term loan.
As of March 31, 2022,2023, we had $370.7$264.4 million of available liquidity under the Avista Corp. committed linelines of credit, $26.0 million of available liquidity under our letter of credit facility, and $25.0 million under the AEL&P committed line of credit. With our $400.0existing credit facilities and our plan to increase the capacity on our committed line of credit from $400 million credit facility that expires in June 2026to $500 million during the second quarter of 2023, together with the expected issuances of common stock and AEL&P's $25.0 million credit facility that expires in November 2024,debt within the next year, we believe that we have adequate liquidity to meet our needs for the next 12 months.
51
AVISTA CORPORATION
Review of Consolidated Cash Flow Statement
Operating Activities
Net cash provided by operating activities was $94.2 million for the three months ended March 31, 2023, compared to $161.9 million for the three months ended March 31, 2022, compared to $145.1 million for the three months ended March 31, 2021.2022. The increasedecrease is primarily due to elevated commodity prices during the receipt of collateral previously postedwinter months, resulting in increased cash payments for derivative instruments,purchased power and natural gas and increases in associated power and natural gas deferral balances, which increaseddecreased operating cash flows by $38.6$53.4 million in 2022,2023 compared to an increase of $1.5$7.3 million in 2021. Cash collateral was returned2022. These decreases were partially offset by a net $7.5 million received for interest rate swap settlements during the period compared to $17.0 million paid in 2022, relatedas well as returned collateral for our derivatives resulting in a $27.7 million increase to energy derivative instruments as the fair value increasedoperating cash flows in 2023 compared to year-end due to increases in market prices compared to the prices included in our derivatives. Additionally, during the first quarter of 2022, we paid $17.0 million for the settlement of interest rate swaps related to our $400.0 million bond issuance.2022.
Investing Activities
Net cash used in investing activities was $106.3 million for the three months ended March 31, 2023, compared to $95.7 million for the three months ended March 31, 2022,2022. During the three months ended March 31, 2023, we paid $100.5 million for utility capital expenditures compared to $96.5$96.0 million for the three months ended March 31, 2021. During the three months ended March 31, 2022,2022. Additionally, we paid $96.0contributed capital of $4.8 million for utility capital expendituresto our equity and property investments, compared to $97.2$0.2 million forin the three months ended March 31, 2021.first quarter of 2022.
Financing Activities
Net cash provided by financing activities was $9.2 million for the three months ended March 31, 2023, compared to $115.3 million for the three months ended March 31, 2022, compared to net cash used of $41.2 million for the three months ended March 31, 2021.2022. In the three months ended March 31, 2022,2023, we issued $250.0 million of long-term debt. This compared to $400.0 million of bondslong-term debt issued in the first quarter of 2022, and we used thea portion of those proceeds to pay off the outstanding balance of our committed line of credit and repay $250.0 million of maturing long-term debt in April 2022. We also decreased our short-term borrowings by $232.0 million in the first quarter of 2023, compared to $284.0 million in 2022. In addition, we issued $37.9$29.9 million of common stock in 2022,2023, compared to less than $0.1$37.9 million in 2021.2022.
48
AVISTA CORPORATION
Capital Resources
Our consolidated capital structure, including the current portion of long-term debt and short-term borrowings consisted of the following as of March 31, 20222023 and December 31, 20212022 (dollars in thousands):
|
| March 31, 2022 |
|
| December 31, 2021 |
|
| March 31, 2023 |
|
| December 31, 2022 |
| ||||||||||||||||||||
|
| Amount |
|
| Percent |
|
| Amount |
|
| Percent |
|
| Amount |
|
| Percent |
|
| Amount |
|
| Percent |
| ||||||||
Current portion of long-term debt and leases |
| $ | 257,433 |
|
|
| 5.2 | % |
| $ | 257,386 |
|
|
| 5.4 | % |
| $ | 21,224 |
|
|
| 0.4 | % |
| $ | 21,084 |
|
|
| 0.4 | % |
Short-term borrowings |
|
| — |
|
|
| 0.0 | % |
|
| 284,000 |
|
|
| 6.0 | % |
|
| 231,000 |
|
|
| 4.3 | % |
|
| 463,000 |
|
|
| 8.8 | % |
Long-term debt to affiliated trusts |
|
| 51,547 |
|
|
| 1.0 | % |
|
| 51,547 |
|
|
| 1.1 | % |
|
| 51,547 |
|
|
| 1.0 | % |
|
| 51,547 |
|
|
| 1.0 | % |
Long-term debt and leases |
|
| 2,405,743 |
|
|
| 48.7 | % |
|
| 2,010,168 |
|
|
| 42.2 | % |
|
| 2,637,698 |
|
|
| 49.5 | % |
|
| 2,387,792 |
|
|
| 45.4 | % |
Total debt |
|
| 2,714,723 |
|
|
| 54.9 | % |
|
| 2,603,101 |
|
|
| 54.7 | % |
|
| 2,941,469 |
|
|
| 55.2 | % |
|
| 2,923,423 |
|
|
| 55.6 | % |
Total Avista Corporation shareholders’ equity |
|
| 2,233,300 |
|
|
| 45.1 | % |
|
| 2,154,744 |
|
|
| 45.3 | % | ||||||||||||||||
Total shareholders’ equity |
|
| 2,385,311 |
|
|
| 44.8 | % |
|
| 2,334,668 |
|
|
| 44.4 | % | ||||||||||||||||
Total |
| $ | 4,948,023 |
|
|
| 100.0 | % |
| $ | 4,757,845 |
|
|
| 100.0 | % |
| $ | 5,326,780 |
|
|
| 100.0 | % |
| $ | 5,258,091 |
|
|
| 100.0 | % |
Our shareholders’ equity increased $78.6$50.6 million during the first quarter of 20222023 primarily due to net income and the issuance of common stock, which was partially offset by dividends.dividends paid.
We need to finance capital expenditures and acquire additional funds for operations from time to time. The cash requirements needed to service our indebtedness, both short-term and long-term, reduce the amount of cash flow available to fund capital expenditures, purchased power, fuel and natural gas costs, dividends and other requirements.
Committed Lines of CreditShort Term Borrowings
Avista Corp.
Avista Corp. has a committed line of credit with various financial institutions in the total amount of $400.0 million and an expiration date of June 2026, with the option to extend for an additional one year period (subject to customary conditions). The committed line
52
AVISTA CORPORATION
In 2022, we entered into a revolving credit agreement in the amount of $100 million with a maturity date in November 2023.
In 2022, we entered into a term loan, in the amount of $150 million with a maturity date of March 30, 2023. In March 2023, we repaid the $150 million outstanding balance on the term loan.
In 2022, we entered into a continuing letter of credit is securedagreement in the aggregate amount of $50 million. Either party may terminate the agreement at any time.
The following table summarizes the balances outstanding and available liquidity as of March 31, 2023 (dollars in thousands):
|
| Aggregate Amount |
|
| Borrowings Outstanding |
|
| Letters of Credit Outstanding (1) |
|
| Available Liquidity |
| ||||
Line of Credit expiring June 2026 |
| $ | 400,000 |
|
| $ | 231,000 |
|
| $ | 4,638 |
|
| $ | 164,362 |
|
Line of Credit expiring November 2023 |
|
| 100,000 |
|
|
| — |
|
| N/A |
|
|
| 100,000 |
| |
Letter of Credit Facility |
|
| 50,000 |
|
| N/A |
|
|
| 24,000 |
|
|
| 26,000 |
| |
Total |
| $ | 550,000 |
|
| $ | 231,000 |
|
| $ | 28,638 |
|
| $ | 290,362 |
|
The Avista Corp. credit facility containsfacilities contain customary covenants,covenant and default provisions, including a change in control (as defined in the agreements). The events of default under each of the credit facilities also include a cross default from other indebtedness (as defined) and in some cases other obligations. Some of these agreements also include a covenant which does not permit our ratio of “consolidated total debt” to “consolidated total capitalization” to be greater than 65 percent at the end of any fiscal quarter, and customary events of default, including a Change in Control (as defined in the agreement).time. As of March 31, 2022,2023, we were in compliance with this covenant with a ratio of 54.955.2 percent.
Balances outstanding and interest rates of borrowings (excluding letters of credit) under Avista Corp.'s lines of credit were as follows as of and for the three months ended March 31 (dollars in thousands):
|
| 2023 |
|
| 2022 |
| ||
$400 million line of credit, expiring June 2026 |
|
|
|
|
|
| ||
Maximum balance outstanding during the period |
| $ | 334,500 |
|
| $ | 292,000 |
|
Average balance outstanding during the period |
|
| 314,783 |
|
|
| 223,972 |
|
Average interest rate during the period |
|
| 5.54 | % |
|
| 1.14 | % |
Average interest rate at end of the period |
|
| 5.79 | % |
| N/A |
| |
$100 million line of credit, expiring November 2023 |
|
|
|
|
|
| ||
Maximum balance outstanding during the period |
| $ | 15,000 |
|
| N/A |
| |
Average balance outstanding during the period |
|
| 500 |
|
| N/A |
| |
Average interest rate during the period |
|
| 7.75 | % |
| N/A |
| |
Average interest rate at end of the period |
| N/A |
|
| N/A |
|
AEL&P
AEL&P has a $25.0 million committed line of credit that expires in November 2024. As of March 31, 2022,2023, there were no borrowings or letters of credit outstanding under this committed line of credit.
The AEL&P credit facility contains customary covenants and default provisions including a covenant which does not permit the ratio of “consolidated total debt at AEL&P” to “consolidated total capitalization at AEL&P” (including the impact of the Snettisham obligation) to be greater than 67.5 percent at any time. As of March 31, 2022,2023, AEL&P was in compliance with this covenant with a ratio of 51.049.8 percent.
Balances outstanding and interest rates of borrowings under Avista Corp.'s committed line of credit were as follows as of and for the three months ended March 31 (dollars in thousands):
|
| 2022 |
|
| 2021 |
| ||
Borrowings outstanding at end of period |
| $ | — |
|
| $ | 93,000 |
|
Letters of credit outstanding at end of period |
| $ | 29,288 |
|
| $ | 16,618 |
|
Maximum borrowings outstanding during the period |
| $ | 292,000 |
|
| $ | 106,000 |
|
Average borrowings outstanding during the period |
| $ | 223,972 |
|
| $ | 83,956 |
|
Average interest rate on borrowings during the period |
|
| 1.14 | % |
|
| 1.19 | % |
Average interest rate on borrowings at end of period |
|
| — |
|
|
| 1.17 | % |
As of March 31, 2022,2023, Avista Corp. and its subsidiaries were in compliance with all of the covenants of their financing agreements, and none of Avista Corp.'s subsidiaries constituted a “significant subsidiary” as defined in Avista Corp.'s committed line of credit.
49Liquidity Expectations
During the first quarter of 2023, we issued $250 million of long-term debt. We do not expect to issue any additional long-term debt in 2023. We expect to issue $120 million of common stock (including $29.9 million of common stock issued during the three months ended March 31, 2023). The long-term debt and equity issuances in 2023 will be used for the construction or improvement of utility
53
AVISTA CORPORATION
Liquidity Expectations
Duringfacilities, and to decrease existing indebtedness, including the first quarterrepayment of 2022, we issuedour $150 million term loan. We also plan to increase the capacity of our $400 million of long-term debt and we do not expect any further issuances during the year. We expect to issue $120 million of common stock (including $37.9 million of common stock issued during the first quarter of 2022). The debt and equity issuances for 2022 are to repay $250 million of maturing long-term debt in April 2022 and fund capital expenditures.
After considering the expected issuances of long-term debt and common stock during 2022, we expect net cash flows from operations, together with cash available under our committed linesline of credit to provide adequate resources to fund capital expenditures, dividends, and other contractual commitments.$500 million in the second quarter of 2023.
Capital Expenditures
We are making capital investments to enhance service and system reliability for our customers and replace aging infrastructure. Our estimates for 2022We expect Avista Utilities capital expenditures to be $475 million per year in 2023 through 2024 have not materially changed during the three months ended March 31, 2022.2025. See the 20212022 Form 10-K for further information on our expected capital expenditures.
Off-Balance Sheet Arrangements
As of March 31, 2022, we had $29.3 million in letters of credit outstanding under our $400.0 million committed line of credit, compared to $34.0 million as of December 31, 2021.
Pension Plan
Avista Utilities
In the three months ended March 31, 20222023 we contributed $14.0$3.3 million to the pension plan, and we expect to contribute $42.0 million for the full year of 2022. plan. We expect to contribute a total of $82.0$50.0 million to the pension plan in the period 20222023 through 2026,2027, with an annual contribution of $42.0 million for 2022 and $10.0 million from 2023 to 2026.million.
The final determination of pension plan contributions for future periods is subject to multiple variables, most of which are beyond our control, including changes to the fair value of pension plan assets, changes in actuarial assumptions (in particular the discount rate used in determining the benefit obligation), or changes in federal legislation. We may change our pension plan contributions in the future depending on changes to any variables, including those listed above.
See "Note 67 of the Notes to Condensed Consolidated Financial Statements" for additional information regarding the pension plan.
Contractual Obligations
Our future contractual obligations have not materially changed during the three months ended March 31, 2022, except that in March 2022, we issued $400.0 million of first mortgage bonds which are due in 2052. See "Note 9 of the Notes to Condensed Consolidated Financial Statements" for further discussion.
See the 2021 Form 10-K for our contractual obligations.
Environmental Issues and Contingencies
Our environmental issues and contingencies disclosures have not materially changed during the three months ended March 31, 20222023 except as follows:
OregonWashington Climate Protection PlanCommitment Act (CCA)
The CCA establishes a cap and trade program to reduce greenhouse gas emissions and achieve the greenhouse gas limits previously established under state law. The final rules implement a cap on emissions, provide mechanisms for the sale and tracking of tradable emissions allowances and establish additional compliance and accountability measures. The state has provided allowances for our Washington retail electric operations, and as such there are no additional costs related to this activity. We are assessing the impact to our wholesale electric operations in Washington, as there may be allowances related to this activity that we need to purchase. If there are allowances required to be purchased, we will seek recovery through the ratemaking process. For our Washington natural gas operations, we expect there will be additional financial burdens associated with compliance which will be deferred in accordance with our regulatory accounting order in Washington. The CCA also has direct impacts on our Idaho electric operations as it applies to power delivered in Washington but is allocated to Idaho customers (wholesale sales) or power generated in Washington that is ultimately delivered to Idaho customers. Treatment of incremental costs in Idaho is pending in our 2023 general rate case results. See "Executive Overview" for further discussion of the CCA and the impact on our results.
Washington State Building Codes
In April 2022, the Washington State Building Code Council (SBCC) approved a revised energy code that requires most new commercial buildings and large multifamily buildings to install all-electric space heating. However, an amendment to the code allows for natural gas to supplement electric heat pumps. Additionally, in November 2022, SBCC approved new building and energy codes for residential housing, requiring new residential buildings in Washington to use electricity as the primary heating source. The State Legislature had the opportunity to reject or alter these new codes during their 2023 Regular Session. There was no action by the Legislature through the regular session that ended in April 2023, and as such the new codes will take effect in July 2023.
In March 2020, Oregon Governor Kate Brown issued Executive Order No. 20-04, “Directing2023, 23 petitioners filed suit in Washington State Agencies to Take Actions to ReduceSuperior Court challenging the validity of the building and Regulate Greenhouse Gas Emissions.”energy code changes. The Executive Order launched rulemaking proceedings for every Oregon agency with jurisdiction over greenhouse gas-related matters, with the aim of reducing Oregon’s overall GHG emissions to 80 percent belowproceeding remains pending.
5054
AVISTA CORPORATION
1990 levels by 2050. This Executive Order led toOn April 17, 2023, the Oregon Department of Environmental Quality developing cap and reduce rules known as the Climate Protection Program (CPP).
On March 18, 2022, we, along with the utilities NW Natural and Cascade Natural Gas, filedNinth Circuit issued an opinion in a lawsuit requesting judicial reviewbetween the California Restaurant Association and the City of Berkeley concerning regulation by the CPP. This actionCity prohibiting the installation of natural gas piping within newly constructed buildings. In its decision, the Court ruled, among other things, the City’s ordinance was subsequently consolidated with a lawsuit filedexpressly preempted by several other parties,the federal Energy Policy and remains pending.Conservation Act, which it held encompasses and preempts building codes that purport to regulate natural gas use by covered products. The precise impact of this decision on the code changes adopted by the SBCC and/or the pending litigation are, at this time, uncertain.
See the 20212022 Form 10-K for further discussion of our environmental issues and contingencies.
Enterprise Risk Management
The material risks to our businesses, and our mitigation process and procedures to address these risks, were discussed in our 20212022 Form 10-K and have not materially changed during the three months ended March 31, 2022.2023. See the 20212022 Form 10-K.
Financial Risk
Our financial risks have not materially changed during the three months ended March 31, 2022.2023. Refer to the 20212022 Form 10-K. The financial risks included below are required interim disclosures, even if they have not materially changed from December 31, 2021.2022.
Interest Rate Risk
We use a variety of techniques to manage our interest rate risks. We have an interest rate risk policy and have established a policy to limit our variable rate exposures to a percentage of total capitalization. Additionally, interest rate risk is managed by monitoring market conditions when timing the issuance of long-term debt and optional debt redemptions and establishing fixed rate long-term debt with varying maturities. See "Note 56 of the Notes to Condensed Consolidated Financial Statements" for a summary of our interest rate swap derivatives outstanding as of March 31, 20222023 and December 31, 20212022 and the amount of additional collateral we would have to post in certain circumstances.
Credit Risk
Under the terms of interest rate swap derivatives, that we enter into periodically, we may be required to post cash or letters of credit as collateral depending on fluctuations in the fair value of the instrument. A downgrade in our credit ratings could further impact the amount of collateral required. See “Credit Ratings” in the 20212022 Form 10-K for further information. As of March 31, 2022,2023, we had interest rate swap derivatives outstanding with a notional amount totaling $30.0$20.0 million and we had no cash deposited as collateral and no letters of credit outstanding for these interest rate swap derivatives. If our credit ratings were lowered to below “investment grade” based on our interest rate swap derivatives outstanding at March 31, 2022,2023, we would notpotentially be required to post the following additional collateral because all of our outstanding interest rate swap were in asset positions at that time.(in thousands):
March 31, 2023 | ||||
Additional collateral taking into account contractual thresholds | $ | — | ||
Additional collateral without contractual thresholds | 247 |
As of March 31, 2022,2023, we had cash deposited as collateral of $4.6$105.2 million and letters of credit of $25.0$24.0 million outstanding related to our energy contracts. Price movements and/or a downgrade in our credit ratings could impact further the amount of collateral required. See “Credit Ratings” in the 20212022 Form 10-K for further information. For example, in addition to limiting our ability to conduct transactions, if our credit ratings were lowered to below “investment grade” based on our positions outstanding at March 31, 20222023 (including contracts that are considered derivatives and those that are considered non-derivatives), we would potentially be required to post the following additional collateral (in thousands):
|
| March 31, 2022 |
|
| March 31, 2023 |
| ||
Additional collateral taking into account contractual thresholds |
| $ | 6,736 |
|
| $ | 11,724 |
|
Additional collateral without contractual thresholds |
|
| 9,296 |
|
|
| 17,230 |
|
5155
AVISTA CORPORATION
Energy Commodity Risk
Our energy commodity risks have not materially changed during the three months ended March 31, 2022.2023. See the 20202022 Form 10-K. The following table presents energy commodity derivative fair values as a net asset or (liability) as of March 31, 2022 that are2023 expected to settle in each respective year (dollars in thousands). There are no expected deliveries of energy commodity derivatives after 2025.2026.
|
| Purchases |
|
| Sales |
|
| Purchases |
|
| Sales |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||
|
| Electric Derivatives |
|
| Gas Derivatives |
|
| Electric Derivatives |
|
| Gas Derivatives |
|
| Electric Derivatives |
|
| Gas Derivatives |
|
| Electric Derivatives |
|
| Gas Derivatives |
| ||||||||||||||||||||||||||||||||||||||||
Year |
| Physical (1) |
|
| Financial (1) |
|
| Physical (1) |
|
| Financial (1) |
|
| Physical (1) |
|
| Financial (1) |
|
| Physical (1) |
|
| Financial (1) |
|
| Physical (1) |
|
| Financial (1) |
|
| Physical (1) |
|
| Financial (1) |
|
| Physical (1) |
|
| Financial (1) |
|
| Physical (1) |
|
| Financial (1) |
| ||||||||||||||||
Remainder 2022 |
| $ | (229 | ) |
| $ | — |
|
| $ | 1,661 |
|
| $ | 24,466 |
|
| $ | 397 |
|
| $ | (7,840 | ) |
| $ | (1,029 | ) |
| $ | (6,306 | ) | ||||||||||||||||||||||||||||||||
2023 |
|
| — |
|
|
| — |
|
|
| 789 |
|
|
| 19,789 |
|
|
| — |
|
|
| (372 | ) |
|
| (2,176 | ) |
|
| (3,521 | ) | ||||||||||||||||||||||||||||||||
Remainder 2023 |
| $ | 517 |
|
| $ | (62 | ) |
| $ | (1,332 | ) |
| $ | (2,784 | ) |
| $ | (2,187 | ) |
| $ | (28,342 | ) |
| $ | (1,861 | ) |
| $ | (20,804 | ) | ||||||||||||||||||||||||||||||||
2024 |
|
| — |
|
|
| — |
|
|
| 113 |
|
|
| 2,007 |
|
|
| — |
|
|
| — |
|
|
| (1,713 | ) |
|
| (191 | ) |
|
| — |
|
|
| — |
|
|
| (55 | ) |
|
| (5,739 | ) |
|
| — |
|
|
| — |
|
|
| (5,905 | ) |
|
| (11,331 | ) |
2025 |
|
| — |
|
|
| — |
|
|
| (8 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (1,265 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 102 |
|
|
| (31 | ) |
|
| — |
|
|
| — |
|
|
| (3,195 | ) |
|
| (1,733 | ) |
2026 |
|
| — |
|
|
| — |
|
|
| 6 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
The following table presents energy commodity derivative fair values as a net asset or (liability) as of December 31, 2021 that are2022 expected to be delivered in each respective year (dollars in thousands). There arewere no expected deliveries of energy commodity derivatives after 2025.
|
| Purchases |
|
| Sales |
|
| Purchases |
|
| Sales |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||
|
| Electric Derivatives |
|
| Gas Derivatives |
|
| Electric Derivatives |
|
| Gas Derivatives |
|
| Electric Derivatives |
|
| Gas Derivatives |
|
| Electric Derivatives |
|
| Gas Derivatives |
| ||||||||||||||||||||||||||||||||||||||||
Year |
| Physical (1) |
|
| Financial (1) |
|
| Physical (1) |
|
| Financial (1) |
|
| Physical (1) |
|
| Financial (1) |
|
| Physical (1) |
|
| Financial (1) |
|
| Physical (1) |
|
| Financial (1) |
|
| Physical (1) |
|
| Financial (1) |
|
| Physical (1) |
|
| Financial (1) |
|
| Physical (1) |
|
| Financial (1) |
| ||||||||||||||||
2022 |
| $ | (269 | ) |
| $ | — |
|
| $ | (260 | ) |
| $ | 6,198 |
|
| $ | 650 |
|
| $ | 1,572 |
|
| $ | (3,479 | ) |
| $ | (16,859 | ) | ||||||||||||||||||||||||||||||||
2023 |
|
| — |
|
|
| — |
|
|
| (54 | ) |
|
| 1,964 |
|
|
| — |
|
|
| — |
|
|
| (1,612 | ) |
|
| (757 | ) |
| $ | 1,120 |
|
| $ | — |
|
| $ | (33,150 | ) |
| $ | 62,753 |
|
| $ | (2,374 | ) |
| $ | (20,018 | ) |
| $ | 17,166 |
|
| $ | (137,585 | ) |
2024 |
|
| — |
|
|
| — |
|
|
| (34 | ) |
|
| 296 |
|
|
| — |
|
|
| — |
|
|
| (1,603 | ) |
|
| 5 |
|
|
| — |
|
|
| — |
|
|
| 162 |
|
|
| (3,879 | ) |
|
| — |
|
|
| — |
|
|
| (4,968 | ) |
|
| (5,790 | ) |
2025 |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (1,146 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 135 |
|
|
| (220 | ) |
|
| — |
|
|
| — |
|
|
| (2,924 | ) |
|
| (701 | ) |
2026 |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — | �� |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
The above electric and natural gas derivative contracts will be included in either power supply costs or natural gas supply costs during the period they are delivered and will be included in the various deferral and recovery mechanisms (ERM, PCA, and PGAs), or in the general rate case process, and are expected to eventually be collected through retail rates from customers.
Future Resource Needs
2023 Natural Gas Integrated Resource Plan
In March 2023, we filed our 2023 Natural Gas Integrated Resource Plan (IRP) with the WUTC, IPUC and OPUC. The state commissions review the IRPs and give the public the opportunity to comment. The state commissions do not approve or disapprove of the content in the IRPs; rather they acknowledge the IRPs are prepared in accordance with applicable standards.
Highlights of the 2023 Natural Gas IRP include the following:
We will monitor these assumptions on an on-going basis and adjust our resource requirements accordingly.
We are required to file a natural gas IRP every two years and we anticipate our next IRP to be filed in 2025.
56
AVISTA CORPORATION
Item 3. Quantitative and Qualitative Disclosures about Market Risk
The information required by this item is set forth in the Enterprise Risk Management section of "Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations" and is incorporated herein by reference.
Item 4. Controls and Procedures
Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures
The Company has disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) (Act) that are designed to ensure that information required to be disclosed in the reports it files or submits under the Act is recorded, processed, summarized and reported on a timely basis. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Act is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers, as appropriate, to allow timely decisions regarding required disclosure. With the participation of the Company’s principal executive officer and principal financial officer, the Company's management evaluated its disclosure controls and procedures as of the end of the period covered by this report. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their
52
AVISTA CORPORATION
control objectives. Based upon this evaluation, the Company’s principal executive officer and principal financial officer have concluded that the Company’s disclosure controls and procedures are effective at a reasonable assurance level as of March 31, 2022.2023.
There have been no changes in the Company's internal control over financial reporting that occurred during the first quarter of 20222023 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.
5357
AVISTA CORPORATION
PART II. Other Information
Item 1. Legal Proceedings
See “Note 1516 of Notes to Condensed Consolidated Financial Statements” in “Part I. Financial Information Item 1. Condensed Consolidated Financial Statements.”
Item 1A. Risk Factors
Refer to the 20212022 Form 10-K for disclosure of risk factors that could have a significant impact on our results of operations, financial condition or cash flows and could cause actual results or outcomes to differ materially from those discussed in our reports filed with the SEC (including this Quarterly Report on Form 10-Q), and elsewhere. These risk factors have not materially changed from the disclosures provided in the 20212022 Form 10-K.
5458
AVISTA CORPORATION
Item 6. Exhibits
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101.INS |
| Inline XBRL Instance Document. The instance document does not appear in the interactive data file because its inline XBRL tags are embedded within the inline XBRL document. |
101.SCH |
| Inline XBRL Taxonomy Extension Schema Document |
101.CAL |
| Inline XBRL Taxonomy Extension Calculation Linkbase Document |
101.LAB |
| Inline XBRL Taxonomy Extension Label Linkbase Document |
101.PRE |
| Inline XBRL Taxonomy Extension Presentation Linkbase Document |
101.DEF |
| Inline XBRL Taxonomy Extension Definition Linkbase Document |
104 |
| Cover page formatted as Inline XBRL and contained in Exhibit 101. |
|
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|
(1) |
| Filed herewith. |
(2) |
| Furnished herewith. |
|
|
5559
AVISTA CORPORATION
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
|
| AVISTA CORPORATION |
|
|
| (Registrant) |
|
|
|
|
|
|
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|
Date: | May |
| /s/ Mark T. Thies |
|
|
| Mark T. Thies |
|
|
| Executive Vice President, Chief Financial Officer, and Treasurer (Principal Financial Officer) |
5660