AVISTA CORP

Overall Results

Net income for the three and nine months ended September 30, 2025 increased compared to the three and nine months ended September 30, 2024, primarily due to the effects of our general rate cases. Partially offsetting the increase were increased operating costs, depreciation and amortization expense and income tax expense. In addition, increased investment losses associated with lower valuations of certain investments in our portfolio decreased year to date net income at our other businesses when compared to 2024.

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 Request for Proposal (RFP)

Our 2025 electric IRP was filed with the WUTC and IPUC in December 2024, and identified needs for additional generating capacity. In May 2025, we issued a request for proposal to add energy and capacity to meet projected resource needs. During the third quarter, we selected a list of projects to move to the detailed proposal stage, and expect to begin contract negotiations with final selected projects by the end of 2025. See "Future Resource Needs" for further discussion of regional resource adequacy and our RFP.

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 used additional thermal generation and 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 may 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 do not expect the impact of tariffs to be material, 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.

Enterprise Resource Planning ("ERP") Project

We are planning to implement an ERP system, replacing a variety of existing technology tools currently in use. The system will be designed to accurately maintain our financial records, enhance operational functionality, and provide timely information to our management team related to business operations. Accounting petitions were filed with the WUTC, the IPUC and the OPUC related to the project. These petitions include requesting to defer the undepreciated technology assets being replaced and a 15 year depreciable life for implementation costs. The WUTC and IPUC approved these requests, and the petition with the OPUC remains pending.

We are in negotiations with software providers and system implementers and expect the ERP system to be implemented in 2028. We expect capital expenditures between $100 million to $130 million over the life of the project.

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.