Summary Of Significant Accounting Policies | 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 the 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 Avista Utilities' Noxon Rapids generating facility. 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, which is a subsidiary of AERC. See Note 21 for business segment information. On July 19, 2017, Avista Corp. entered into an Agreement and Plan of Merger (Merger Agreement) to become a wholly-owned subsidiary of Hydro One. Consummation of the pending acquisition is subject to a number of approvals and the satisfaction or waiver of other specified conditions. The transaction is expected to close in the second half of 2018. See Note 4 for additional information. Basis of Reporting The 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. The amounts included in discontinued operations in the Consolidated Statements of Income for 2015 relate to the disposition of Ecova on June 30, 2014. See Note 5 for further information regarding the disposition of Ecova. Intercompany balances were eliminated in consolidation. The accompanying consolidated financial statements include the Company’s proportionate share of utility plant and related operations resulting from its interests in jointly owned plants (see Note 7). Use of Estimates The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported for assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates include: • determining the market value of energy commodity derivative assets and liabilities, • pension and other postretirement benefit plan obligations, • contingent liabilities, • goodwill impairment testing, • recoverability of regulatory assets, and • unbilled revenues. Changes in these estimates and assumptions are considered reasonably possible and may have a material effect on the consolidated financial statements and thus actual results could differ from the amounts reported and disclosed herein. System of Accounts The accounting records of the Company’s utility operations are maintained in accordance with the uniform system of accounts prescribed by the FERC and adopted by the state regulatory commissions in Washington, Idaho, Montana, Oregon and Alaska. 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. Utility Revenues Utility revenues related to the sale of energy are recorded when service is rendered or energy is delivered to customers. 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 utility revenues. The determination of the energy sales to individual customers is based on the reading of their meters, which occurs on a systematic basis throughout the month. At the end of each calendar month, the amount of energy delivered to customers since the date of the last meter reading is estimated and the corresponding unbilled revenue is estimated and recorded. Our estimate of unbilled revenue is based on: • the number of customers, • current rates, • meter reading dates, • actual native load for electricity, • actual throughput for natural gas, and • electric line losses and natural gas system losses. Any difference between actual and estimated revenue is automatically corrected in the following month when the actual meter reading and customer billing occurs. Accounts receivable includes unbilled energy revenues of the following amounts as of December 31 (dollars in thousands): 2017 2016 Unbilled accounts receivable $ 68,641 $ 72,377 Other Non-Utility Revenues Revenues from the other businesses are primarily derived from the operations of AM&D, doing business as METALfx, and are recognized when the risk of loss transfers to the customer, which occurs when products are shipped. In addition, prior to Spokane Energy's dissolution in 2015, there were revenues at Spokane Energy related to a long-term fixed rate electric capacity contract. This contract was transferred to Avista Corp. during the second quarter of 2015 and the revenues from this contract subsequent to the transfer are included in utility revenues. Depreciation For utility operations, depreciation expense is estimated by a method of depreciation accounting utilizing composite rates for utility plant. Such rates are designed to provide for retirements of properties at the expiration of their service lives. For utility operations, the ratio of depreciation provisions to average depreciable property was as follows for the years ended December 31 : 2017 2016 2015 Avista Utilities Ratio of depreciation to average depreciable property 3.12 % 3.11 % 3.09 % Alaska Electric Light and Power Company Ratio of depreciation to average depreciable property 2.43 % 2.39 % 2.42 % The average service lives for the following broad categories of utility plant in service are (in years): Avista Utilities Alaska Electric Light and Power Company Electric thermal/other production 41 41 Hydroelectric production 78 42 Electric transmission 57 41 Electric distribution 35 40 Natural gas distribution property 42 N/A Other shorter-lived general plant 10 16 Taxes Other Than Income Taxes Taxes other than income taxes include state excise taxes, city occupational and franchise taxes, real and personal property taxes and certain other taxes not based on income. These taxes are generally based on revenues or the value of property. Utility- related taxes collected from customers (primarily state excise taxes and city utility taxes) are recorded as operating revenue and expense. Taxes other than income taxes consisted of the following items for the years ended December 31 (dollars in thousands): 2017 2016 2015 Utility-related taxes $ 64,012 $ 57,745 $ 59,173 Property taxes 40,074 38,505 35,948 Other taxes 2,666 2,485 2,536 Total $ 106,752 $ 98,735 $ 97,657 Allowance for Funds Used During Construction AFUDC represents the cost of both the debt and equity funds used to finance utility plant additions during the construction period. As prescribed by regulatory authorities, AFUDC is capitalized as a part of the cost of utility plant. The debt component of AFUDC is credited against total interest expense in the Consolidated Statements of Income in the line item “capitalized interest.” The equity component of AFUDC is included in the Consolidated Statement of Income in the line item “other income-net.” The Company is permitted, under established regulatory rate practices, to recover the capitalized AFUDC, and a reasonable return thereon, through its inclusion in rate base and the provision for depreciation after the related utility plant is placed in service. Cash inflow related to AFUDC does not occur until the related utility plant is placed in service and included in rate base. The effective AFUDC rate was the following for the years ended December 31 : 2017 2016 2015 Avista Utilities Effective AFUDC rate 7.29 % 7.29 % 7.32 % Alaska Electric Light and Power Company Effective AFUDC rate 9.48 % 9.40 % 9.31 % Income Taxes Deferred income tax assets represent future income tax deductions the Company expects to utilize in future tax returns to reduce taxable income. Deferred income tax liabilities represent future taxable income the Company expects to recognize in future tax returns. Deferred tax assets and liabilities arise when there are temporary differences resulting from differing treatment of items for tax and accounting purposes. A deferred income tax asset or liability is determined based on the enacted tax rates that will be in effect when the temporary differences between the financial statement carrying amounts and tax basis of existing assets and liabilities are expected to be reported in the Company’s consolidated income tax returns. The deferred income tax expense for the period is equal to the net change in the deferred income tax asset and liability accounts from the beginning to the end of the period. The effect on deferred income taxes from a change in tax rates is recognized in income in the period that includes the enactment date unless a regulatory order specifies deferral of the effect of the change in tax rates over a longer period of time. The Company establishes a valuation allowance when it is more likely than not that all, or a portion, of a deferred tax asset will not be realized. Deferred income tax liabilities and regulatory assets are established for income tax benefits flowed through to customers. The Company's largest deferred income tax item is the difference between the book and tax basis of utility plant. This item results from the temporary difference on depreciation expense. In early tax years, this item is recorded as a deferred income tax liability that will eventually reverse and become subject to income tax in later tax years. See Note 11 for discussion of the TCJA and its impacts on the Company's financial statements during 2017, as well as a tabular presentation of all the Company's deferred tax assets and liabilities. The Company did not incur any penalties on income tax positions in 2017 , 2016 or 2015 . The Company would recognize interest accrued related to income tax positions as interest expense and any penalties incurred as other operating expense. Stock-Based Compensation The Company currently issues three types of stock-based compensation awards - restricted shares, market-based awards and performance-based awards. Historically, these stock compensation awards have not been material to the Company's overall financial results. Compensation cost relating to share-based payment transactions is recognized in the Company’s financial statements based on the fair value of the equity or liability instruments issued and recorded over the requisite service period. The Company recorded stock-based compensation expense (included in other operating expenses) and income tax benefits in the Consolidated Statements of Income of the following amounts for the years ended December 31 (dollars in thousands): 2017 2016 2015 Stock-based compensation expense $ 7,359 $ 7,891 $ 6,914 Income tax benefits (1) 2,576 2,762 2,420 Excess tax benefits on settled share-based employee payments (2) 2,348 1,597 — (1) Income tax benefits were calculated using a 35 percent income tax rate; however, as of December 31, 2017, due to the TCJA enactment, deferred tax assets associated with stock compensation were revalued to 21 percent . Beginning on January 1, 2018 income tax benefits will be calculated using the new 21 percent tax rate. (2) Beginning in 2016, excess tax benefits associated with the settlement of share-based employee payments are recognized in the Statements of Income due to the adoption of ASU 2016-09, effective January 1, 2016. See Note 2 for further discussion. Restricted share awards vest in equal thirds each year over a three -year period and are payable in Avista Corp. common stock at the end of each year if the service condition is met. In addition to the service condition, the Company must meet a return on equity target in order for the Chief Executive Officer's restricted shares to vest. Restricted stock is valued at the close of market of the Company’s common stock on the grant date. Total Shareholder Return (TSR) awards are market-based awards and Cumulative Earnings Per Share (CEPS) awards are performance awards. CEPS awards were first granted in 2014. Both types of awards vest after a period of three years and are payable in cash or Avista Corp. common stock at the end of the three-year period. The method of settlement is at the discretion of the Company and historically the Company has settled these awards through issuance of Avista Corp. common stock and intends to continue this practice. Both types of awards entitle the recipients to dividend equivalent rights, are subject to forfeiture under certain circumstances, and are subject to meeting specific market or performance conditions. Based on the level of attainment of the market or performance conditions, the amount of cash paid or common stock issued will range from 0 to 200 percent of the initial awards granted. Dividend equivalent rights are accumulated and paid out only on shares that eventually vest and have met the market and performance conditions. For both the TSR awards and the CEPS awards, the Company accounts for them as equity awards and compensation cost for these awards is recognized over the requisite service period, provided that the requisite service period is rendered. For TSR awards, if the market condition is not met at the end of the three-year service period, there will be no change in the cumulative amount of compensation cost recognized, since the awards are still considered vested even though the market metric was not met. For CEPS awards, at the end of the three-year service period, if the internal performance metric of cumulative earnings per share is not met, all compensation cost for these awards is reversed as these awards are not considered vested. The fair value of each TSR award is estimated on the date of grant using a statistical model that incorporates the probability of meeting the market targets based on historical returns relative to a peer group. The estimated fair value of the equity component of CEPS awards was estimated on the date of grant as the share price of Avista Corp. common stock on the date of grant, less the net present value of the estimated dividends over the three-year period. The following table summarizes the number of grants, vested and unvested shares, earned shares (based on market metrics), and other pertinent information related to the Company's stock compensation awards for the years ended December 31: 2017 2016 2015 Restricted Shares Shares granted during the year 57,746 58,610 58,302 Shares vested during the year (57,473 ) (52,385 ) (60,379 ) Unvested shares at end of year 106,053 109,806 106,091 Unrecognized compensation expense at end of year (in thousands) $ 1,853 $ 1,853 $ 1,705 TSR Awards TSR shares granted during the year 114,390 116,435 116,435 TSR shares vested during the year (107,649 ) (111,665 ) (171,334 ) TSR shares earned based on market metrics 158,262 132,887 222,734 Unvested TSR shares at end of year 218,507 222,228 223,697 Unrecognized compensation expense (in thousands) $ 2,849 $ 3,409 $ 3,219 CEPS Awards CEPS shares granted during the year 57,223 57,521 58,259 CEPS shares vested during the year (53,862 ) (55,835 ) — CEPS shares earned based on market metrics 41,502 90,460 — Unvested CEPS shares at end of year 108,581 110,452 111,887 Unrecognized compensation expense (in thousands) $ 1,856 $ 1,671 $ 1,840 Outstanding TSR and CEPS share awards include a dividend component that is paid in cash. This component of the share grants is accounted for as a liability award. These liability awards are revalued on a quarterly basis taking into account the number of awards outstanding, historical dividend rate, the change in the value of the Company’s common stock relative to an external benchmark (TSR awards only) and the amount of CEPS earned to date compared to estimated CEPS over the performance period (CEPS awards only). Over the life of these awards, the cumulative amount of compensation expense recognized will match the actual cash paid. As of December 31, 2017 and 2016 , the Company had recognized cumulative compensation expense and a liability of $1.5 million , respectively, related to the dividend component on the outstanding and unvested share grants. Other Income - Net Other Income - net consisted of the following items for the years ended December 31 (dollars in thousands): 2017 2016 2015 Interest income $ 2,162 $ 1,823 $ 653 Interest on regulatory deferrals 1,288 1,308 48 Equity-related AFUDC 6,669 8,475 8,331 Net loss on investments (4,160 ) (2,152 ) (637 ) Other income 1,104 624 905 Total $ 7,063 $ 10,078 $ 9,300 Earnings per Common Share Attributable to Avista Corporation Shareholders Basic earnings per common share attributable to Avista Corp. shareholders is computed by dividing net income attributable to Avista Corp. shareholders by the weighted-average number of common shares outstanding for the period. Diluted earnings per common share attributable to Avista Corp. shareholders is calculated by dividing net income attributable to Avista Corp. shareholders (adjusted for the effect of potentially dilutive securities issued to noncontrolling interests by the Company's subsidiaries) by diluted weighted-average common shares outstanding during the period, including common stock equivalent shares outstanding using the treasury stock method, unless such shares are anti-dilutive. Common stock equivalent shares include shares issuable upon exercise of stock options and contingent stock awards. See Note 18 for earnings per common share calculations. Cash and Cash Equivalents For the purposes of the Consolidated Statements of Cash Flows, the Company considers all temporary investments with a maturity of three months or less when purchased to be cash equivalents. Allowance for Doubtful Accounts The Company maintains an allowance for doubtful accounts to provide for estimated and potential losses on accounts receivable. The Company determines the allowance for utility and other customer accounts receivable based on historical write-offs as compared to accounts receivable and operating revenues. Additionally, the Company establishes specific allowances for certain individual accounts. The following table presents the activity in the allowance for doubtful accounts during the years ended December 31 (dollars in thousands): 2017 2016 2015 Allowance as of the beginning of the year $ 5,026 $ 4,530 $ 4,888 Additions expensed during the year 5,317 6,053 5,802 Net deductions (5,211 ) (5,557 ) (6,160 ) Allowance as of the end of the year $ 5,132 $ 5,026 $ 4,530 Materials and Supplies, Fuel Stock and Stored Natural Gas Inventories of materials and supplies, fuel stock and stored natural gas are recorded at average cost for our regulated operations and the lower of cost or market for our non-regulated operations and consisted of the following as of December 31 (dollars in thousands): 2017 2016 Materials and supplies $ 41,493 $ 40,700 Fuel stock 4,843 4,585 Stored natural gas 11,739 8,029 Total $ 58,075 $ 53,314 Utility Plant in Service The cost of additions to utility plant in service, including an allowance for funds used during construction and replacements of units of property and improvements, is capitalized. The cost of depreciable units of property retired plus the cost of removal less salvage is charged to accumulated depreciation. Asset Retirement Obligations The Company records the fair value of a liability for an ARO in the period in which it is incurred. When the liability is initially recorded, the associated costs of the ARO are capitalized as part of the carrying amount of the related long-lived asset. The liability is accreted to its present value each period and the related capitalized costs are depreciated over the useful life of the related asset. In addition, if there are changes in the estimated timing or estimated costs of the AROs, adjustments are recorded during the period new information becomes available as an increase or decrease to the liability, with the offset recorded to the related long-lived asset. Upon retirement of the asset, the Company either settles the ARO for its recorded amount or recognizes a regulatory asset or liability for the difference, which will be surcharged/refunded to customers through the ratemaking process. The Company records regulatory assets and liabilities for the difference between asset retirement costs currently recovered in rates and AROs recorded since asset retirement costs are recovered through rates charged to customers (see Note 9 for further discussion of the Company's AROs). The Company recovers certain asset retirement costs through rates charged to customers as a portion of its depreciation expense for which the Company has not recorded asset retirement obligations. The Company has recorded the amount of estimated retirement costs collected from customers (that do not represent legal or contractual obligations) and included them as a regulatory liability on the Consolidated Balance Sheets in the following amounts as of December 31 (dollars in thousands): 2017 2016 Regulatory liability for utility plant retirement costs $ 285,786 $ 273,983 Goodwill Goodwill arising from acquisitions represents the future economic benefit arising from other assets acquired in a business combination that are not individually identified and separately recognized. The Company evaluates goodwill for impairment using a qualitative analysis (Step 0) for AEL&P and a combination of discounted cash flow models and a market approach for the other subsidiaries on at least an annual basis or more frequently if impairment indicators arise. The Company completed its annual evaluation of goodwill for potential impairment as of November 30, 2017 and determined that goodwill was not impaired at that time. There were no events or circumstances that changed between November 30, 2017 and December 31, 2017 that would more likely than not reduce the fair values of the reporting units below their carrying amounts. There were no changes in the carrying amount of goodwill during 2016 and 2017 and the balance was as follows (dollars in thousands): AEL&P Other Accumulated Impairment Losses Total Balance as of the December 31, 2016 $ 52,426 $ 12,979 $ (7,733 ) $ 57,672 Balance as of the December 31, 2017 52,426 12,979 (7,733 ) 57,672 Accumulated impairment losses are attributable to the other businesses. Derivative Assets and Liabilities Derivatives are recorded as either assets or liabilities on the 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 rates cases. The resulting regulatory assets have been concluded to be probable of recovery through future rates. 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. See Note 19 for additional discussion regarding interest rate swaps in the Company's 2017 Washington general rate cases. As of December 31, 2017 , 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 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, as well as derivatives related to interest rate swap derivatives and foreign currency exchange derivatives, are reported at estimated fair value on the Consolidated Balance Sheets. See Note 16 for the Company’s fair value disclosures. Regulatory Deferred Charges and Credits The Company prepares its consolidated financial statements in accordance with regulatory accounting practices because: • rates for regulated services are established by or subject to approval by independent third-party regulators, • the regulated rates are designed to recover the cost of providing the regulated services, and • in view of demand for the regulated services and the level of competition, it is reasonable to assume that rates can be charged to and collected from customers at levels that will recover costs. Regulatory accounting practices require that certain costs and/or obligations (such as incurred power and natural gas costs not currently included in rates, but expected to be recovered or refunded in the future), are reflected as deferred charges or credits on the Consolidated Balance Sheets. These costs and/or obligations are not reflected in the Consolidated Statements of Income until the period during which matching revenues are recognized. The Company also has decoupling revenue deferrals. Decoupling revenue deferrals are recognized in the 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/liability is established which will be surcharged or rebated to customers in future periods. GAAP requires that for any alternative regulatory 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 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. This could ultimately result in decoupling revenue that arose during the current year being recognized in a future period. If at some point in the future the Company determines that it no longer meets the criteria for continued application of regulatory accounting practices for all or a portion of its regulated operations, the Company could be: • required to write off its regulatory assets, and • precluded from the future deferral of costs or decoupled revenues not recovered through rates at the time such amounts are incurred, even if the Company expected to recover these amounts from customers in the future. See Note 20 for further details of regulatory assets and liabilities. Unamortized Debt Expense Unamortized debt expense includes debt issuance costs that are amortized over the life of the related debt. These costs are recorded as an offset to Long-Term Debt and Capital Leases on the Consolidated Balance Sheets. Unamortized Debt Repurchase Costs For the Company’s Washington regulatory jurisdiction and for any debt repurchases beginning in 2007 in all jurisdictions, premiums paid to repurchase debt are amortized over the remaining life of the original debt that was repurchased or, if new debt is issued in connection with the repurchase, these costs are amortized over the life of the new debt. In the Company’s other regulatory jurisdictions, premiums paid to repurchase debt prior to 2007 are being amortized over the average remaining maturity of outstanding debt when no new debt was issued in connection with the debt repurchase. These costs are recovered through retail rates as a component of interest expense. Accumulated Other Comprehensive Loss Accumulated other comprehensive loss, net of tax, consisted of the following as of December 31 (dollars in thousands): 2017 2016 Unfunded benefit obligation for pensions and other postretirement benefit plans - net of taxes of $4,356 and $4,075, respectively $ 8,090 $ 7,568 The following table details the reclassifications out of accumulated other comprehensive loss by component for the years ended December 31 (dollars in thousands): Amounts Reclassified from Accumulated Other Comprehensive Loss Details about Accumulated Other Comprehensive Loss Components 2017 2016 2015 Affected Line Item in Statement of Income Amortization of defined benefit pension items Amortization of net prior service cost $ (4,381 ) $ (1,171 ) $ 31 (a) Amortization of net loss 36,833 (7,602 ) 2,623 (a) Adjustment due to effects of regulation (b) (33,255 ) 7,360 (749 ) (a) (803 ) (1,413 ) 1,905 Total before tax 281 495 (667 ) Tax benefit (expense) $ (522 ) $ (918 ) $ 1,238 Net of tax (a) These accumulated other comprehensive loss components are included in the computation of net periodic pension cost (see Note 10 for additional details). (b) The adjustment for the effects of regulation during the year ended December 31, 2016 includes approximately $2.1 million related to the reclassification of a pension regulatory asset associated with one of our jurisdictions into accumulated other comprehensive loss. Appropriated Retained Earnings In accordance with the hydroelectric licensing requirements of section 10(d) of the Federal Power Act (FPA), the Company maintains an appropriated retained earnings account for any earnings in excess of the specified rate of return on the Company's investment in the licenses for its various hydroelectric projects. Per section 10(d) of the FPA, the Company must maintain these excess earnings in an appropriated retained earnings account until the termination of the licensing agreements or apply them to reduce the net investment in the licenses of the hydroelectric projects at the discretion of the FERC. The Company calculates the earnings in excess of the specified rate of return on an annual basis, usually during the second quarter. In addition to the hydroelectric project licenses identified above for Avista Utilities, the requirements of section 10(d) of the FPA also apply to the AEL&P licenses for Lake Dorothy and Annex Creek/Salmon Creek (combined). The appropriated retained earnings amounts included in retained earnings were as follows as of December 31 (dollars in thousands): 2017 2016 Appropriated retained earnings $ 33,917 $ 25,564 Operating Leases The Company |