AVISTA CORP

Overall Results

Net income for the three and six months ended June 30, 2025 decreased compared to the three and six months ended June 30, 2024, primarily due to losses at our other businesses associated with lower valuations of certain investments in our portfolio. At Avista Utilities, the effects of our general rate cases have increased earnings in the first half of the year, partially offset by increased operating costs, depreciation and amortization expense and income tax expense.

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.

Resource Adequacy and 2025 IRP

Our 2025 electric IRP was filed with the WUTC and IPUC in December 2024. While the IRP is subject to change from time to time due to changing circumstances, assumptions and projections, given the exit of Colstrip (222 MW) from our system by December 31, 2025 and the expected retirement of the Northeast combustion turbine (65 MW) in 2030, our preferred resource strategy includes the addition of approximately 490 MW of generating capacity by 2030 and a total addition of approximately 950 MW through 2035.

In May 2025, we issued a request for proposal to add energy and capacity of up to 415 MW for winter and 425 MW for summer to meet projected resource needs. As part of this request for proposal, we submitted self-build resource bids for consideration. Initial bids were submitted by the end of June 2025, and we expect to select a list of projects to move to the detailed proposal stage during the third quarter of 2025 and begin contract negotiations with final selected projects in the fourth quarter of 2025.

We also expect expanded transmission infrastructure will provide access to additional resources and improve reliability in our region. In November 2024, we signed a non-binding memorandum of understanding to join the North Plains Connector transmission line project, that plans to construct a transmission line from Bismarck, North Dakota to Colstrip, Montana.

For 2025, we expect generation at our hydro facilities to be approximately 85 percent of normal. To meet summer peak demands, we have used additional thermal generation or economic market purchases to offset the decrease in available hydroelectric resources.

Tariffs on Imports

The President of the United States of America has imposed tariffs on certain imported goods and has announced plans to impose tariffs on others. The imposition of tariffs would impact the cost of other equipment and materials that are critical to our business, increasing capital and operating expenses, and could create supply chain disruptions. The tariffs have not had a material impact on our operations or financial performance to date. At this time, we are unable to reasonably estimate the effects of the tariffs, and have not made any adjustments to our capital or operating budget to account for increased costs resulting from tariffs.

We import a significant amount of natural gas from Canada, both to serve our retail natural gas customers and as fuel for electric generation. We do not expect these imports to be impacted by the current trade tariffs as they are covered by the U.S.-Mexico-Canada Agreement, but the future of trade tariffs on energy commodity imports is uncertain. The impact of an increase in resource costs on our results of operations (directly or indirectly resulting from tariffs) would be substantially mitigated by various deferral and recovery mechanisms (ERM, PCA, and PGAs), but there could be an immediate impact on our cash flow.

We are closely monitoring the impacts of tariffs and the potential impact they may have on our results of operations, financial condition and cash flows.

U.S. Reconciliation Bill

In July 2025, the U.S. enacted a reconciliation bill commonly referred to as the One Big Beautiful Bill Act. We do not expect the bill to have a material impact on our financial results or annual effective tax rate for 2025. We continue to analyze provisions included in the bill, including the impact on various tax credits and the full expensing of domestic research and experimentation expenditures.

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 2023. Increased costs associated with tariffs as discussed above could result in additional regulatory lag. See “Regulatory Matters” for additional discussion of the general rate cases.