AVISTA CORP

Colstrip is a coal-fired generating plant in southeastern Montana that includes four units and which is owned by six separate entities. We have a 15 percent ownership interest in Units 3 and 4. The owners of Units 3 and 4 share operating and capital costs pursuant to the terms of an operating agreement among them (the Ownership and Operation Agreement). In January 2023, we entered into an agreement with NorthWestern under which, subject to the terms and conditions specified in the agreement, we will transfer our ownership of Colstrip. See “Note 22 of the Notes to Consolidated Financial Statements” for further discussion of the agreement.

Coal Ash Management/Disposal

In 2015, the EPA issued a final rule regarding coal combustion residuals (CCRs), also termed coal combustion byproducts or coal ash (Colstrip produces this byproduct). The CCR rule has been the subject of ongoing litigation. In August 2018, U.S. Court of Appeals for the D.C. Circuit struck down provisions of the rule. In December 2019, a proposed revision to the rule was published in the Federal Register to address the D.C. Circuit's decision. The rule includes technical requirements for CCR landfills and surface impoundments under Subtitle D of the Resource Conservation and Recovery Act, the nation's primary law for regulating solid waste. The Colstrip owners developed a multi-year compliance plan to address the CCR requirements along with existing state obligations expressed through the 2012 Administrative Order on Consent (AOC) with Montana Department of Environmental Quality (MDEQ). These requirements continue despite the 2018 federal court ruling.

The AOC requires MDEQ to review Remedy and Closure plans for all parts of the Colstrip plant through an ongoing public process. The AOC also requires the Colstrip owners to provide financial assurance, primarily in the form of surety bonds, to secure each owner’s pro rata share of various anticipated closure and remediation obligations. We are responsible for our share of two major areas: the Plant Site Area and the Effluent Holding Pond Area. Generally, the plans include the removal of boron, chloride, and sulfate from the groundwater, closure of the existing ash storage ponds, and installation of a new water treatment system to convert the facility to a dry ash storage. Our share of the posted surety bonds is $16.8 million. This amount is updated annually, with expected obligations decreasing over time as remediation activities are completed.

Colstrip Coal Contract

Colstrip is supplied with fuel from adjacent coal reserves under coal supply and transportation agreements. Several of the co-owners of Colstrip, including us, have a coal contract that runs through December 31, 2025.

Colstrip Arbitration, Litigation, and Other Contingencies

See “Note 22 of the Notes to Consolidated Financial Statements” for disputes, arbitration, litigations and other contingencies related to Colstrip. We intend to seek recovery of costs associated with Colstrip through the ratemaking process.