Avista(AVA) - 2025 Q2 - Quarterly Report

Form 10-Q Filing Information This section provides essential identification details for Avista Corporation's Form 10-Q filing for the quarter ended June 30, 2025 Registrant Information This section details Avista Corporation's identification for its Form 10-Q filing, including legal name, incorporation state, address, and stock exchange listing for the quarter ended June 30, 2025 - Avista Corporation (Registrant) filed a Quarterly Report on Form 10-Q for the period ended June 30, 2025[1][2] - The registrant is classified as a 'Large accelerated filer' and is not a 'shell company'[4][5] Registrant Information | Detail | Value | | :--- | :--- | | Registrant Name | AVISTA CORPORATION | | State of Incorporation | Washington | | Commission File Number | 1-3701 | | Trading Symbol | AVA | | Exchange | New York Stock Exchange | | Common Stock Outstanding (as of July 31, 2025) | 81,110,750 shares | Table of Contents This section lists all major sections and subsections of the Form 10-Q, facilitating navigation and comprehensive review Acronyms and Terms This section defines key acronyms and terms used throughout the report, essential for understanding the company's operations, regulatory environment, and financial reporting Key Acronyms and Terms This section defines key acronyms and terms used in the report, crucial for understanding company operations and regulatory environment - The report includes a glossary of acronyms and terms to clarify company-specific and industry-standard terminology[10][11][12] Acronyms and Terms | Acronym/Term | Meaning | | :--- | :--- | | AEL&P | Alaska Electric Light and Power Company | | AERC | Alaska Energy and Resources Company | | AFUDC | Allowance for Funds Used During Construction | | Avista Utilities | Operating division of Avista Corp. comprising regulated utility operations in the Pacific Northwest | | ERM | Energy Recovery Mechanism (Washington) | | FCA | Fixed Cost Adjustment (Idaho decoupling mechanism) | | FERC | Federal Energy Regulatory Commission | | GAAP | Generally Accepted Accounting Principles | | IPUC | Idaho Public Utilities Commission | | OPUC | The Public Utility Commission of Oregon | | PCA | Power Cost Adjustment mechanism (Idaho) | | PGA | Purchased Gas Adjustment | | ROE | Return on equity | | ROR | Rate of return on rate base | | WUTC | Washington Utilities and Transportation Commission | Forward-Looking Statements This section outlines forward-looking statements on future performance and strategy, emphasizing inherent risks and uncertainties Forward-Looking Statements and Associated Risks This section details forward-looking statements on future performance and strategy, highlighting inherent risks from regulatory, operational, climate, cybersecurity, and financial factors - Forward-looking statements cover projected financial performance, cash flows, capital expenditures, dividends, capital structure, strategic goals, business environment, and operational plans[13][16] - Key risks include regulatory decisions impacting cost recovery and returns, operational risks from weather and infrastructure, and financial risks from financing and commodity volatility[14][17][25][28] - Emerging risks encompass climate change impacts, cybersecurity threats to systems, and technology risks from new or obsolete technologies, including generative AI[19][20][21] - The company does not undertake to update any forward-looking statements to reflect events or circumstances occurring after the statement date[29] Available Information This section directs readers to the company's public filings, including annual, quarterly, and current reports, available on SEC and investor relations websites Access to Public Filings This section directs readers to the company's public filings, including annual, quarterly, and current reports, available on the SEC and investor relations websites - The company files annual, quarterly, and current reports and proxy statements with the SEC, available on **www.sec.gov**[30](index=30&type=chunk) - These documents are also available on the company's investor relations website, **https://investor.avistacorp.com**[30](index=30&type=chunk) Part I. Financial Information This part presents the company's unaudited condensed consolidated financial statements and management's discussion and analysis of financial condition and results Item 1. Condensed Consolidated Financial Statements This section presents Avista Corporation's unaudited condensed consolidated financial statements, including income, balance sheet, cash flow, and equity, with detailed notes - The interim financial statements are unaudited and prepared in accordance with GAAP for interim financial information, reflecting all necessary normal recurring adjustments[42] - The company changed its financial statement presentation from thousands to millions starting with the 2024 Form 10-K, with no material impact on previously reported information[46] Condensed Consolidated Statements of Income and Comprehensive Income This section presents the company's unaudited condensed consolidated statements of income and comprehensive income for the three and six months ended June 30, 2025 and 2024 Condensed Consolidated Statements of Income and Comprehensive Income (Three Months Ended June 30) | Metric | 2025 (Millions $) | 2024 (Millions $) | | :--- | :--- | :--- | | Total Operating Revenues | 411 | 402 | | Total Operating Expenses | 354 | 347 | | Income from Operations | 57 | 55 | | Income Before Income Taxes | 15 | 24 | | Income Tax Expense | 1 | 1 | | Net Income and Comprehensive Income | 14 | 23 | | Basic EPS | 0.17 | 0.29 | | Diluted EPS | 0.17 | 0.29 | Condensed Consolidated Statements of Income and Comprehensive Income (Six Months Ended June 30) | Metric | 2025 (Millions $) | 2024 (Millions $) | | :--- | :--- | :--- | | Total Operating Revenues | 1,028 | 1,011 | | Total Operating Expenses | 846 | 856 | | Income from Operations | 182 | 155 | | Income Before Income Taxes | 106 | 97 | | Income Tax Expense | 13 | 3 | | Net Income and Comprehensive Income | 93 | 94 | | Basic EPS | 1.15 | 1.20 | | Diluted EPS | 1.15 | 1.20 | Condensed Consolidated Balance Sheets This section presents the company's unaudited condensed consolidated balance sheets as of June 30, 2025, and December 31, 2024, detailing assets, liabilities, and equity Condensed Consolidated Balance Sheets (as of June 30, 2025 vs. December 31, 2024) | Account | June 30, 2025 (Millions $) | December 31, 2024 (Millions $) | | :--- | :--- | :--- | | Assets: | | | | Total Current Assets | 667 | 656 | | Net Utility Property | 6,133 | 5,987 | | Total Assets | 8,065 | 7,941 | | Liabilities & Equity: | | | | Total Current Liabilities | 668 | 771 | | Long-term Debt | 2,749 | 2,614 | | Total Liabilities | 5,420 | 5,350 | | Total Shareholders' Equity | 2,645 | 2,591 | | Total Liabilities and Equity | 8,065 | 7,941 | Condensed Consolidated Statements of Cash Flows This section presents the company's unaudited condensed consolidated statements of cash flows for the six months ended June 30, 2025 and 2024, categorized by operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows (Six Months Ended June 30) | Activity | 2025 (Millions $) | 2024 (Millions $) | | :--- | :--- | :--- | | Net Cash Provided by Operating Activities | 224 | 317 | | Net Cash Used in Investing Activities | (248) | (254) | | Net Cash Provided by (Used in) Financing Activities | 3 | (83) | | Net Decrease in Cash and Cash Equivalents | (21) | (20) | | Cash and Cash Equivalents at End of Period | 9 | 15 | Condensed Consolidated Statements of Equity This section presents the company's unaudited condensed consolidated statements of equity for the six months ended June 30, 2025 and 2024, detailing changes in common stock and retained earnings Condensed Consolidated Statements of Equity (Six Months Ended June 30) | Metric | 2025 (Millions $) | 2024 (Millions $) | | :--- | :--- | :--- | | Common Stock Balance (Beginning) | 1,720 | 1,644 | | Issuance of Common Stock, net | 35 | 18 | | Retained Earnings Balance (Beginning) | 871 | 841 | | Net Income | 93 | 94 | | Dividends on Common Stock | (79) | (74) | | Total Equity (End of Period) | 2,645 | 2,527 | | Dividends Declared per Common Share | 0.980 | 0.950 | Note 1. Summary of Significant Accounting Policies This note outlines the significant accounting policies applied in preparing the condensed consolidated financial statements, including the company's business segments and regulatory environment - Avista Corp. operates primarily as an electric and natural gas utility in the Pacific Northwest (Avista Utilities) and Alaska (AEL&P), with non-utility businesses under Avista Capital[43][44] - The company is subject to state regulation in Washington, Idaho, Montana, Oregon, and Alaska, and federal regulation by FERC and other agencies[47] - Derivative instruments (energy commodity, interest rate swaps) are recorded at fair value on the balance sheet, with offsetting regulatory assets/liabilities to defer income statement impact until delivery or settlement[48][49][51] Note 2. New Accounting Standards This note discusses recently issued accounting pronouncements and their expected impact on the company's financial statements, including disclosure improvements and income tax disclosures - ASU 2023-06 (Disclosure Improvements) is not expected to have a material impact on financial statements[55] - ASU 2023-09 (Income Tax Disclosures) will result in expanded income tax disclosures, effective for fiscal years beginning after December 15, 2024[56][57] - ASU 2024-03 (Disaggregation of Income Statement Expenses) is being evaluated, with no early adoption planned for 2025; effective for annual periods after December 15, 2026[58] Note 3. Balance Sheet Components This note provides detailed breakdowns of key balance sheet components, including inventory, net utility property, and regulatory assets and liabilities, as of June 30, 2025, and December 31, 2024 Inventory Composition (Millions $) | Category | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Materials and supplies | 101 | 99 | | Emission allowances | 102 | 79 | | Stored natural gas | 7 | 10 | | Fuel stock | 6 | 5 | | Total Inventory | 216 | 193 | Net Utility Property (Millions $) | Category | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Utility plant in service | 8,365 | 8,180 | | Construction work in progress | 274 | 238 | | Less: Accumulated depreciation and amortization | (2,506) | (2,431) | | Total Net Utility Property | 6,133 | 5,987 | Regulatory Assets and Liabilities (Millions $) | Category | June 30, 2025 (Current/Non-Current) | December 31, 2024 (Current/Non-Current) | | :--- | :--- | :--- | | Regulatory Assets | | | | Energy commodity derivatives | $30 / $14 | $27 / $14 | | Deferred Climate Commitment Act costs | $19 / $0 | $50 / $0 | | Total Regulatory Assets | $122 / $851 | $137 / $847 | | Regulatory Liabilities | | | | Deferred Climate Commitment Act revenues | $31 / $0 | $44 / $0 | | Utility plant retirement costs | $0 / $464 | $0 / $448 | | Total Regulatory Liabilities | $108 / $843 | $108 / $834 | Note 4. Revenue This note details the company's revenue recognition policies and disaggregates total operating revenues by segment and source for the three and six months ended June 30, 2025 and 2024 - Utility revenues from rate-regulated sales of electricity and natural gas are recognized upon energy delivery, with two performance obligations: service availability and energy delivery[68] - Alternative revenue programs (decoupling mechanisms) are recognized separately from customer contracts, with deferrals recognized in the period they occur if expected to be collected within 24 months[70] Total Operating Revenue by Segment and Source (Three Months Ended June 30, Millions $) | Segment/Source | 2025 | 2024 | | :--- | :--- | :--- | | Avista Utilities | | | | Revenue from contracts with customers | 330 | 319 | | Derivative revenues | 52 | 49 | | Alternative revenue programs | 12 | 16 | | Other utility revenues | 8 | 7 | | Total Avista Utilities | 400 | 391 | | AEL&P | | | | Revenue from contracts with customers | 11 | 11 | | Total Operating Revenues | 411 | 402 | Total Operating Revenue by Segment and Source (Six Months Ended June 30, Millions $) | Segment/Source | 2025 | 2024 | | :--- | :--- | :--- | | Avista Utilities | | | | Revenue from contracts with customers | 856 | 819 | | Derivative revenues | 113 | 138 | | Alternative revenue programs | 4 | 19 | | Other utility revenues | 33 | 10 | | Total Avista Utilities | 1,004 | 986 | | AEL&P | | | | Revenue from contracts with customers | 24 | 25 | | Total Operating Revenues | 1,028 | 1,011 | Note 5. Derivatives and Risk Management This note describes the company's use of derivative instruments to manage market risks related to commodity prices and interest rates, including fair value measurements and collateral requirements - Avista Corp. uses derivative instruments (forwards, futures, swaps, options) to manage market risks related to electricity, natural gas commodity, and fuel prices[81] - The company hedges a portion of its natural gas requirements and optimizes natural gas resources to mitigate fixed costs and capture market value[83][84] Energy Commodity Derivative Volumes (as of June 30, 2025, in thousands) | Year | Electric Purchases (MWh) | Gas Purchases (mmBTUs) | Electric Sales (MWh) | Gas Sales (mmBTUs) | | :--- | :--- | :--- | :--- | :--- | | Remainder 2025 | 4 | 36,252 | 765 | 639 | | 2026 | — | 46,599 | 680 | 1,393 | | 2027 | — | 20,706 | — | 1,393 | | 2028 | — | 3,641 | — | 1,013 | Fair Values of Derivative Instruments (as of June 30, 2025, Millions $) | Derivative Type | Gross Asset | Gross Liability | Collateral Netted | Net Asset (Liability) | | :--- | :--- | :--- | :--- | :--- | | Interest rate swap derivatives | 1 | 0 | 0 | 1 | | Energy commodity derivatives | 14 | (58) | 13 | (31) | | Total | 15 | (58) | 13 | (30) | - As of June 30, 2025, the company had $25 million in cash collateral posted and $8 million in letters of credit outstanding related to energy commodity derivatives[95] Note 6. Pension Plans and Other Postretirement Benefit Plans This note provides information on the company's pension and other postretirement benefit plans, including contributions made and the net periodic benefit cost for the six months ended June 30, 2025 and 2024 - The company contributed $7 million to its pension plan for the six months ended June 30, 2025, and expects total contributions of $10 million for 2025[98] Net Periodic Benefit Cost (Six Months Ended June 30, Millions $) | Component | Pension Benefits (2025) | Pension Benefits (2024) | Other Postretirement Benefits (2025) | Other Postretirement Benefits (2024) | | :--- | :--- | :--- | :--- | :--- | | Service cost | 8 | 8 | 1 | 1 | | Interest cost | 18 | 17 | 3 | 4 | | Expected return on plan assets | (22) | (23) | (2) | (2) | | Net loss recognition | 1 | 2 | — | — | | Net periodic benefit cost | 5 | 4 | 2 | 2 | Note 7. Income Taxes This note details the company's income tax provisions, including the estimated annual effective tax rate and a reconciliation of income tax expense for the six months ended June 30, 2025 and 2024 - The company uses an estimated annual effective tax rate for interim income tax provisions, with discrete events recorded in the period they occur[100] Income Tax Expense Reconciliation (Six Months Ended June 30, Millions $) | Factor | 2025 (Amount / Rate) | 2024 (Amount / Rate) | | :--- | :--- | :--- | | Federal income taxes at statutory rates | $22 / 21.0% | $20 / 21.0% | | Flow through related to deduction of meters and mixed service costs | $(4) / (3.8)% | $(12) / (12.3)% | | Tax effect of regulatory treatment of utility plant differences | $(6) / (5.8)% | $(6) / (6.5)% | | State income tax expense | $1 / 0.9% | $1 / 0.7% | | Total income tax expense | $13 / 12.3% | $3 / 2.9% | - The U.S. reconciliation bill (One Big Beautiful Bill Act), enacted in July 2025, is not expected to have a material impact on financial results or the annual effective tax rate in 2025[102] Note 8. Short-Term Borrowings This note outlines the company's short-term borrowing facilities, including committed lines of credit and letters of credit, along with outstanding balances and average interest rates - Avista Corp. has a $500 million committed line of credit expiring June 2029 and a $50 million letter of credit facility[103][105] Avista Corp. Short-Term Borrowings (Millions $) | Metric | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Borrowings outstanding (committed line of credit) | 389 | 342 | | Letters of credit outstanding | 5 | 5 | | Average interest rate on borrowings | 5.42% | 5.52% | - Avista Corp. complied with its debt covenant of consolidated total debt to total capitalization not exceeding 65% as of June 30, 2025[107] - AEL&P has a $25 million committed line of credit expiring June 2028, with $16 million outstanding as of June 30, 2025, classified as long-term due to refinancing intent[108][109] Note 9. Long-Term Debt This note details recent long-term debt issuances, including Avista Corp.'s first mortgage bonds and AEL&P's term loan agreement, and their intended use of proceeds - In July 2025, Avista Corp. issued $120 million of 6.18% first mortgage bonds due 2055, using proceeds to repay short-term borrowings[110][111] - AEL&P entered a $20 million term loan agreement in July 2025 at 5.49% interest, maturing July 2030, to repay committed line of credit borrowings and fund capital expenditures[113] Note 10. Long-Term Debt to Affiliated Trusts This note describes the company's long-term debt obligations to affiliated business trusts, including the principal amount and distribution rates on preferred trust securities - The company has $52 million in Floating Rate Junior Subordinated Deferrable Interest Debentures, Series B, issued to Avista Capital II, an affiliated business trust[114][116] Distribution Rates on Preferred Trust Securities | Period | Low Distribution Rate | High Distribution Rate | Distribution Rate at Period End | | :--- | :--- | :--- | :--- | | Six months ended June 30, 2025 | 5.46% | 5.64% | 5.47% | | Year ended December 31, 2024 | 5.64% | 6.51% | 5.64% | Note 11. Fair Value This note explains the fair value measurement hierarchy and presents carrying and estimated fair values of financial instruments, including recurring assets and liabilities - Fair value measurements are categorized into a three-level hierarchy based on input observability, with Level 1 for quoted prices in active markets and Level 3 for unobservable inputs[118][119][120] Carrying Value and Estimated Fair Value of Financial Instruments Not Reported at Fair Value (Millions $) | Instrument | June 30, 2025 (Carrying Value / Estimated Fair Value) | December 31, 2024 (Carrying Value / Estimated Fair Value) | | :--- | :--- | :--- | | Long-term debt (Level 2) | $1,100 / $937 | $1,100 / $938 | | Long-term debt (Level 3) | $1,534 / $1,191 | $1,534 / $1,163 | | Snettisham finance lease obligation (Level 3) | $37 / $34 | $39 / $35 | | Long-term debt to affiliated trusts (Level 3) | $52 / $47 | $52 / $47 | Assets and Liabilities Measured at Fair Value on a Recurring Basis (June 30, 2025, Millions $) | Category | Level 1 | Level 2 | Level 3 | Total | | :--- | :--- | :--- | :--- | :--- | | Assets: | | | | | | Energy commodity derivatives | — | 14 | — | 2 | | Interest rate swap derivatives | — | 1 | — | 1 | | Equity Investments | — | — | 49 | 49 | | Deferred compensation assets (Mutual Funds) | 9 | — | — | 9 | | Total Assets | 9 | 15 | 49 | 61 | | Liabilities: | | | | | | Energy commodity derivatives | — | 43 | 15 | 33 | | Total Liabilities | — | 43 | 15 | 33 | Note 12. Common Stock This note details the issuance of common stock and the net proceeds received during the three and six months ended June 30, 2025, including shares issued through at-the-market transactions - The company issued common stock for net proceeds of $19 million during the three months ended June 30, 2025, and $35 million during the six months ended June 30, 2025[136] - Approximately 0.5 million shares were issued in at-the-market transactions during the three months ended June 30, 2025, and 0.9 million shares for the six months ended June 30, 2025[136] Note 13. Earnings per Common Share This note presents the basic and diluted earnings per common share calculations for the three and six months ended June 30, 2025 and 2024, including net income and weighted-average shares outstanding Earnings Per Common Share (Three Months Ended June 30) | Metric | 2025 | 2024 | | :--- | :--- | :--- | | Net Income (Millions $) | 14 | 23 | | Weighted-average common shares outstanding-basic (thousands) | 80,715 | 78,390 | | Basic EPS | $0.17 | $0.29 | | Diluted EPS | $0.17 | $0.29 | Earnings Per Common Share (Six Months Ended June 30) | Metric | 2025 | 2024 | | :--- | :--- | :--- | | Net Income (Millions $) | 93 | 94 | | Weighted-average common shares outstanding-basic (thousands) | 80,466 | 78,276 | | Basic EPS | $1.15 | $1.20 | | Diluted EPS | $1.15 | $1.20 | Note 14. Commitments and Contingencies This note outlines the company's significant commitments and contingencies, including ongoing collective bargaining, wildfire-related litigation settlements, and the planned transfer of Colstrip ownership - Negotiations are ongoing for a new collective bargaining agreement with the IBEW, covering approximately 90% of Avista Utilities' bargaining unit employees, with a risk of operational disruptions if an agreement is not reached[139] - The company settled all claims related to the Boyds Fire for $3 million, with responsibility split between vegetation management contractors, and settled a single plaintiff claim for less than $0.1 million[141][142] - The company and CN Utility Consulting settled all Babb Road Fire lawsuits for $27 million, with the company paying $21 million, and insurance proceeds were received in July 2025[147][148] - Avista Corp. entered an agreement to transfer its 15% ownership in Colstrip Units 3 and 4 to NorthWestern by December 31, 2025, with no monetary exchange[152] Note 15. Information by Business Segments This note provides financial information by business segment, detailing net income (loss) for Avista Utilities, AEL&P, and other segments for the three and six months ended June 30, 2025 and 2024 - The company operates with two reportable segments: Avista Utilities (Pacific Northwest) and AEL&P (Alaska), plus an 'Other' non-reportable category[161] Net Income (Loss) by Business Segment (Three Months Ended June 30, Millions $) | Segment | 2025 | 2024 | | :--- | :--- | :--- | | Avista Utilities | 23 | 24 | | AEL&P | 1 | 1 | | Other Non-Reportable Segment | (10) | (2) | | Total Net Income | 14 | 23 | Net Income (Loss) by Business Segment (Six Months Ended June 30, Millions $) | Segment | 2025 | 2024 | | :--- | :--- | :--- | | Avista Utilities | 101 | 91 | | AEL&P | 4 | 5 | | Other Non-Reportable Segment | (12) | (2) | | Total Net Income | 93 | 94 | Report of Independent Registered Public Accounting Firm Deloitte & Touche LLP reviewed Avista Corporation's interim financial information, finding no material modifications needed for GAAP conformity and confirming the December 31, 2024, balance sheet's fair statement - Deloitte & Touche LLP conducted a review of the interim financial information for the periods ended June 30, 2025, and 2024[166][169] - Based on their reviews, no material modifications were identified for the interim financial information to be in conformity with GAAP[166] - The firm expressed an unqualified opinion on the consolidated financial statements for the year ended December 31, 2024, and confirmed the fair statement of the December 31, 2024, balance sheet information[167] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's analysis of the company's financial condition and results for the three and six months ended June 30, 2025, covering performance, segments, regulatory matters, and liquidity - Net income decreased for both the three and six months ended June 30, 2025, primarily due to losses in other businesses from lower investment valuations, partially offset by increased earnings at Avista Utilities from general rate cases[172][173] - The 2025 electric IRP projects adding approximately 490 MW of generating capacity by 2030 and 950 MW by 2035, with a request for proposal issued for up to 425 MW[175][176] - Regulatory lag, the delay between cost increases and rate recovery, remains an inherent challenge, potentially exacerbated by unexpected inflation and interest rates[183] Business Segments This section reviews the net income (loss) performance of the company's business segments, including Avista Utilities, AEL&P, and other segments, for the three and six months ended June 30, 2025 and 2024 - The company's business segments remained unchanged during the six months ended June 30, 2025[172] Net Income (Loss) by Business Segment (Three and Six Months Ended June 30, Millions $) | Segment | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :--- | :--- | :--- | :--- | :--- | | Avista Utilities | 23 | 24 | 101 | 91 | | AEL&P | 1 | 1 | 4 | 5 | | Other non-reportable segment loss | (10) | (2) | (12) | (2) | | Net Income | 14 | 23 | 93 | 94 | Executive Overview This section provides a high-level summary of the company's financial performance, strategic initiatives, and key operational factors, including hydro generation expectations and potential impacts of tariffs - Net income decreased in Q2 and YTD 2025 compared to 2024, primarily due to losses in other businesses from lower investment valuations, partially offset by increased earnings at Avista Utilities from general rate cases[173] - The 2025 electric IRP outlines a preferred strategy to add approximately 490 MW of generating capacity by 2030 and 950 MW by 2035, with a request for proposal issued for up to 425 MW[175][176] - The company expects 2025 hydro generation to be 85% of normal, requiring additional thermal generation or market purchases[178] - Tariffs on imported goods could increase capital and operating expenses and disrupt supply chains, though they have not had a material impact to date[179][180] Regulatory Matters This section discusses recent regulatory decisions and filings in Washington, Idaho, and Oregon, including approved rate increases, Return on Equity (ROE), and Rate of Return (ROR) for utility operations - Washington WUTC approved annual electric base revenue increases of $12 million (2.0%) for 2025 and $44 million (7.5%) for 2026, and natural gas increases of $14 million (11.2%) for 2025 and $4 million (2.8%) for 2026[187][188] - The WUTC approved a Return on Equity (ROE) of 9.8% and a Rate of Return (ROR) of 7.32% for Washington[188] - The company expects to file its next multi-year electric and natural gas general rate cases in Washington in Q1 2026[191] - Idaho IPUC settlement agreement, if approved, would increase annual electric base revenues by $20 million (6.3%) in September 2025 and $15 million (4.5%) in September 2026[195][196] - Oregon OPUC approved a settlement increasing annual base revenues by $4 million (5.0%) in September 2025, with an ROE of 9.5% and ROR of 7.22%[199] Results of Operations - Overall This section provides an overall analysis of the company's financial performance, detailing changes in net income, utility revenues, operating expenses, and income tax expense for the three and six months ended June 30, 2025 - Net income decreased by $9 million for the three months ended June 30, 2025, and by $1 million for the six months ended June 30, 2025, compared to the prior year periods[33] - For Q2 2025, electric utility revenues increased due to general rate cases and increased wholesale sales volumes, partially offset by decreased wholesale prices; natural gas revenues decreased due to lower PGA rates and sales volumes[205] - For YTD 2025, utility revenues increased from general rate cases and customer/load growth, offset by decreased wholesale revenues and natural gas PGA decreases[211] - Utility operating expenses increased in both periods due to higher employee salaries, benefits, thermal generation costs, and increased wildfire mitigation and insurance costs[206][213] - Income tax expense increased YTD 2025 primarily due to decreased tax customer credits and higher pre-tax net income[214] Non-GAAP Financial Measures This section defines and explains the use of non-GAAP financial measures, specifically electric and natural gas utility margins, for analyzing operating performance and understanding the impact of supply costs - Electric utility margin (electric operating revenues less electric resource costs) and natural gas utility margin (natural gas operating revenues less natural gas resource costs) are non-GAAP financial measures used to analyze operating performance[216][217] - These measures help understand the impact of changes in loads, rates, and supply costs, as changes in supply costs are generally deferred and recovered through regulatory mechanisms[217] Results of Operations - Avista Utilities This section analyzes the operating results of Avista Utilities, focusing on customer growth, electric and natural gas operating revenues, and utility margins for the three and six months ended June 30, 2025 - Avista Utilities' average electric retail customers increased to 423,664 in Q2 2025 (from 417,621 in Q2 2024) and 422,980 in YTD 2025 (from 417,454 in YTD 2024)[220][241] - Average natural gas retail customers increased to 383,447 in Q2 2025 (from 380,232 in Q2 2024) and 383,396 in YTD 2025 (from 380,308 in YTD 2024)[220][241] - Q2 2025 electric operating revenues increased $18 million YoY, driven by a $33 million increase in retail electric revenue (from MWhs sold and rate increases) and a $2 million increase in wholesale electric revenues, partially offset by an $11 million decrease in electric decoupling revenue[226] - YTD 2025 electric operating revenues increased $15 million YoY, primarily due to a $73 million increase in retail electric revenue (from rate increases and MWhs sold), partially offset by a $33 million decrease in wholesale electric revenues and a $20 million decrease in electric decoupling revenue[247][252] - Q2 2025 natural gas operating revenues decreased $10 million YoY, mainly due to a $17 million decrease in retail revenues (from lower rates and sales volumes), partially offset by a $7 million increase in natural gas decoupling revenues[232] - YTD 2025 natural gas operating revenues were consistent YoY, with a $24 million decrease in retail revenues (from lower rates) offset by a $24 million increase in other gas revenues (CCA emissions credits amortization)[254] Avista Utilities' Utility Margin (Three Months Ended June 30, Millions $) | Category | 2025 | 2024 | | :--- | :--- | :--- | | Electric Utility Margin | 216 | 199 | | Natural Gas Utility Margin | 55 | 49 | | Total Utility Margin | 271 | 248 | Avista Utilities' Utility Margin (Six Months Ended June 30, Millions $) | Category | 2025 | 2024 | | :--- | :--- | :--- | | Electric Utility Margin | 453 | 399 | | Natural Gas Utility Margin | 166 | 151 | | Total Utility Margin | 619 | 550 | Results of Operations - Alaska Electric Light and Power Company This section presents the net income for Alaska Electric Light and Power Company (AEL&P) for the three and six months ended June 30, 2025 and 2024 AEL&P Net Income (Millions $) | Period | 2025 | 2024 | | :--- | :--- | :--- | | Three months ended June 30 | 1 | 1 | | Six months ended June 30 | 4 | 5 | Results of Operations - Other Businesses This section details the net loss from the company's other non-reportable businesses, explaining the primary drivers behind the increased loss, including investment valuations and ownership dilution Other Businesses Net Loss (Millions $) | Period | 2025 | 2024 | | :--- | :--- | :--- | | Three months ended June 30 | (10) | (2) | | Six months ended June 30 | (12) | (2) | - The increased net loss is primarily due to higher net investment losses, with approximately 75% related to clean technology investments impacted by shifting public policy and sentiment, and 25% due to ownership dilution from new share issuances[267] Critical Accounting Policies and Estimates This section confirms that the company's critical accounting policies and estimates, which require significant management judgment, have not materially changed from the 2024 Form 10-K - Critical accounting policies and estimates, which require significant management judgment and can materially affect financial statements, have not materially changed from the 2024 Form 10-K[268] Liquidity and Capital Resources This section assesses the company's liquidity and capital resources, including available credit, cash flow from operating and financing activities, consolidated capital structure, and projected capital expenditures - As of June 30, 2025, the company had $106 million available under Avista Corp.'s committed line of credit, $42 million under its letter of credit facility, and $9 million under AEL&P's committed line of credit[270] - Net cash provided by operating activities decreased to $224 million for the six months ended June 30, 2025, from $317 million in the prior year, primarily due to changes in power and natural gas cost deferrals and amortizations[271] - Net cash provided by financing activities was $3 million for the six months ended June 30, 2025, compared to $83 million used in the prior year, driven by increased short-term borrowings and common stock issuances[273] Consolidated Capital Structure (Millions $) | Component | June 30, 2025 (Amount / % of total) | December 31, 2024 (Amount / % of total) | | :--- | :--- | :--- | | Total Debt | $3,176 / 54.6% | $3,125 / 54.7% | | Total Shareholders' Equity | $2,645 / 45.4% | $2,591 / 45.3% | | Total | $5,821 / 100.0% | $5,716 / 100.0% | - Avista Utilities' capital expenditures are projected at $525 million in 2025, $575 million in 2026, and $600 million in 2027[283] Environmental Issues and Contingencies This section discusses environmental regulations and their potential impact on the company's electric and natural gas businesses, including Washington building codes, voter initiatives, and new EPA regulations - Washington State building codes requiring all-electric space heating for most new commercial and large multifamily buildings, and electricity as the primary heat source for new residential buildings, could adversely impact the natural gas business but positively affect the electric business[288][290] - Washington voters approved Initiative 2066 to prohibit restrictions on natural gas access, but a state court ruled it invalid, with an appeal pending[289] - The EPA released new regulations for electric generation facilities, which are subject to legal challenges and Presidential executive orders, with the company assessing impacts and planning to seek cost recovery through ratemaking[291][292][293][295] Enterprise Risk Management This section outlines the company's approach to managing material business risks, including interest rate risk, credit risk, and energy commodity risks, and confirms no material changes in mitigation procedures - Material business risks and mitigation procedures have not materially changed during the six months ended June 30, 2025[297] - The company manages interest rate risk through policies limiting variable rate exposures and timing long-term debt issuances[299] - Credit risk exposure includes $25 million in cash collateral and $8 million in letters of credit for energy contracts as of June 30, 2025[300] - If credit ratings fell below 'investment grade', the company could be required to post an additional $18 million in collateral (with contractual thresholds) or $36 million (without contractual thresholds)[300] - Energy commodity risks have not materially changed, with derivative contracts expected to be included in power/natural gas supply costs and recovered through retail rates[302][305] Future Resource Needs This section outlines the company's Integrated Resource Plans (IRP) for natural gas and electric resources, addressing future energy demand, emissions compliance, and varied state and federal regulations - The 2025 Natural Gas IRP outlines a preferred resource portfolio to meet forecast system energy demand and comply with emissions legislation over 20 years[307] - Customer usage forecasts are increasingly difficult due to varied state and federal rules; Washington building codes are assumed to remain in effect[311] - Oregon's preferred resource strategy assumes renewable natural gas, energy efficiency, emissions reductions, and carbon capture to meet CPP requirements[311] - Washington's strategy utilizes conventional natural gas, energy efficiency, and allowance offsets to meet CCA requirements[311] Item 3. Quantitative and Qualitative Disclosures about Market Risk This section incorporates market risk disclosures by reference from the Enterprise Risk Management section of Management's Discussion and Analysis - Information on quantitative and qualitative disclosures about market risk is incorporated by reference from the Enterprise Risk Management section of MD&A[308] Item 4. Controls and Procedures Management concluded the company's disclosure controls and procedures were effective at a reasonable assurance level as of June 30, 2025, with no material changes in internal control over financial reporting during Q2 2025 - The company's disclosure controls and procedures are designed to ensure timely and accurate reporting of information required under the Securities Exchange Act of 1934[309] - Management, including the principal executive and financial officers, concluded that disclosure controls and procedures were effective at a reasonable assurance level as of June 30, 2025[309] - No material changes in internal control over financial reporting occurred during the second quarter of 2025[310] Part II. Other Information This part contains additional information not included in the financial statements, covering legal proceedings, risk factors, other disclosures, exhibits, and the report's signature Item 1. Legal Proceedings This section incorporates detailed information on legal proceedings, commitments, and contingencies by reference from Note 14 of the Condensed Consolidated Financial Statements - Legal proceedings information is incorporated by reference from Note 14 of the Notes to Condensed Consolidated Financial Statements[313] Item 1A. Risk Factors This section references risk factors from the 2024 Form 10-K, noting no material changes but enhancing discussion on equity investment risks and their net income impact - Risk factors from the 2024 Form 10-K remain materially unchanged[313] - Enhanced discussion highlights risks inherent in equity investments, where fair values fluctuate and directly affect net income, with no assurance of eventual financial gains[313] Item 5. Other Information This section confirms no directors or officers reported adopting or terminating Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the fiscal quarter ended June 30, 2025 - No directors or officers reported adopting or terminating Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during Q2 2025[314] Item 6. Exhibits This section lists exhibits filed with the Form 10-Q, including certifications from the Chief Executive Officer and Chief Financial Officer, and XBRL-related documents Key Exhibits Filed | Exhibit No. | Description | | :--- | :--- | | 15 | Letter Re: Unaudited Interim Financial Information | | 31.1 | Certification of Chief Executive Officer | | 31.2 | Certification of Chief Financial Officer | | 32 | Certification of Corporate Officers | | 101.INS | Inline XBRL Instance Document | | 101.SCH | Inline XBRL Taxonomy Extension Schema With Embedded Linkbase Documents | | 104 | Cover page formatted as Inline XBRL | Signature The report is signed on behalf of Avista Corporation by Kevin J. Christie, Senior Vice President, Chief Financial Officer, Treasurer, and Regulatory Affairs Officer, on August 5, 2025 - The report was signed by Kevin J. Christie, Senior Vice President, Chief Financial Officer, Treasurer and Regulatory Affairs Officer, on August 5, 2025[318][319]