AVISTA CORP

Resource Optimization

We engage in resource optimization, which involves the selection from available energy resources to serve our load obligations and the use of these resources to capture economic value through wholesale market transactions, which is ultimately intended to lower net power and natural gas supply costs. Our resource optimization transactions can take the form of physical sales and purchases of electric capacity and energy and fuel for electric generation, purchases and sales of natural gas to optimize use of pipeline and storage capacity, as well as financial derivative contracts related to capacity, energy, fuel and fuel transportation. See our 2024 Form 10-K for further discussion of our optimization activities.

We typically enter into multiple transactions simultaneously to capture value. Even though these transactions are considered together when determining the net impact, they are recorded in separate items within components of utility operating revenue and resource costs and can cause fluctuations in each item. Gains and losses on financial derivative contracts are included in certain line items below (such as wholesale sales and purchases of power and natural gas, sales of fuel, and other fuel costs). The ERM, PCA and PGAs are based on net supply costs and consider all transactions related to resource procurement and optimization (both physical and financial).

Three months ended March 31, 2025 compared to the three months ended March 31, 2024

Customers

The following table presents Avista Utilities' average number of electric and natural gas retail customers for the three months ended March 31, 2025 and 2024:

Utility Operating Revenues

The following graphs present Avista Utilities' electric operating revenues and megawatt-hour (MWh) sales for the three months ended March 31, 2025 and 2024 (dollars in millions and MWhs in thousands):

(1)

This balance includes public street and highway lighting, which is considered part of retail electric revenues.

Total electric operating revenues in the graph above include intracompany sales of $1 million and $2 million for the three months ended March 31, 2025 and 2024, respectively.

The following table presents the current year decoupling deferrals and the amortization of prior year decoupling deferrals reflected in utility electric operating revenues for the three months ended March 31 (dollars in millions):

(a)

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

(b)

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

Total electric revenues decreased $4 million for the first quarter of 2025 as compared to the first quarter of 2024. The primary changes that occurred during the period were as follows:

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A $40 million increase in retail electric revenue due to an increase in retail rates (increased revenues by $27 million), and an increase in MWhs sold (increased revenues by $13 million).

o

Retail rates increased mainly due to the effects of our general rate cases.

o

Retail sales volumes increased primarily due to customer and load growth. First quarter 2025 heating degree days in Spokane increased 6 percent compared to the first quarter of 2024.

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A $34 million decrease in wholesale electric revenues due to a decrease in sales prices (decreased revenues $28 million), and a decrease in sales volumes (decreased revenues $6 million). The change in volumes was due to decreased opportunities to optimize our generation assets based on market conditions.

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A $9 million decrease in electric decoupling revenue, primarily due to decreased amortizations of prior year rebate balances.

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A $1 million decrease in other electric revenues primarily resulting from decreased transmission revenues.

The following graphs present Avista Utilities' natural gas operating revenues and therms delivered for the three months ended March 31, 2025 and 2024 (dollars in millions and therms in thousands):

(1)

This balance includes interruptible and industrial revenues, which are considered part of retail natural gas revenues.

Total natural gas operating revenues in the graph above include intracompany sales of $3 million and $4 million for the three months ended March 31, 2025 and 2024, respectively.

The following table presents the current year decoupling deferrals and the amortization of prior year decoupling deferrals reflected in utility natural gas operating revenues for the three months ended March 31 (dollars in millions):

(a)

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

(b)

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

Total natural gas revenues increased $10 million for the first quarter of 2025 as compared to the first quarter of 2024. The primary changes that occurred during the period were as follows:

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A $7 million decrease in natural gas retail revenues (including industrial, which is included in other) due to a decrease in retail rates (decreased revenues $15 million), partially offset by increased sales volumes (increased revenues $8 million).

o

Retail rates decreased mainly due to PGA rate decreases (which do not impact utility margin), partially offset by the effects of our general rate cases and net rate increases associated with the CCA.

o

The increase in sales volumes was primarily due to a 3 percent increase in residential usage and a 4 percent increase in commercial usage resulting from colder weather.

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A $5 million decrease in wholesale natural gas revenues due to a decrease in prices (decreased revenues $8 million), partially offset by an increase in sales volumes (increased revenues $3 million). The increase in volumes was related to increased optimization opportunities.

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A $2 million decrease in natural gas decoupling revenues due to increased amortization of prior year surcharge balances and decreased surcharge deferrals in the current year.

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A $24 million increase in other gas revenues primarily due to the amortization of previously deferred revenues associated with the sale of CCA emissions credits. We amortize as the revenues are passed to customers through decreases in retail rates. The increase in other revenues was offset by decreased retail rates, resulting in no impact to utility margin.

Utility Resource Costs

The following graph presents Avista Utilities' electric resource costs for the three months ended March 31, 2025 and 2024 (dollars in millions):

Total electric resource costs in the graph above include intracompany resource costs of $3 million and $4 million for the three months ended March 31, 2025 and 2024, respectively.

Total electric resource costs decreased $40 million for the first quarter of 2025 as compared to the first quarter of 2024. The primary changes that occurred during the period were as follows:

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A $27 million decrease in power purchased due to a decrease in wholesale prices (decreased costs $35 million), partially offset by an increase in the volume of power purchases (increased costs $8 million). Prices during the first quarter of 2024 were elevated due to extreme cold temperatures in our region that created capacity constraints.

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An $11 million decrease in fuel for generation. This was due to a decrease in fuel prices, as well as a decrease in thermal generation compared to the first quarter of 2024.

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A $2 million decrease in other electric resource costs, primarily related to an increase in deferred costs, as well as a decrease in the amortization of previously deferred costs.

The following graph presents Avista Utilities' natural gas resource costs for the three months ended March 31, 2025 and 2024 (dollars in millions):

Total natural gas resource costs in the graph above include intracompany resource costs of $1 million and $2 million for the three months ended March 31, 2025 and 2024, respectively.

Total natural gas resource costs increased $2 million for the first quarter of 2025 as compared to the first quarter of 2024 primarily due to the following:

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A $17 million decrease in natural gas purchased due to a decrease in the price of natural gas (decreased costs $23 million), partially offset by an increase in volumes (increased costs $6 million).

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A $19 million increase in other costs primarily related to the amortization of costs associated with the CCA that were recovered from customers, resulting in no impact to utility margin. This was partially offset by a decrease in amortizations of previously deferred costs.

Utility Margin

The following table reconciles Avista Utilities' operating revenues, as presented in "Note 14 of the Notes to Condensed Consolidated Financial Statements" to the Non-GAAP financial measure utility margin for the three months ended March 31, 2025 and 2024 (dollars in millions):

Electric utility margin increased $36 million primarily due to the effects of our general rate cases and customer growth. Natural gas utility margin increased $8 million primarily due to the effects of our general rate cases.

In the first quarter of 2025, we had a $7 million pre-tax expense under the ERM in Washington, compared to a $6 million pre-tax expense for the first quarter of 2024.

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 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.