AVISTA CORP

Overall Results

Net income increased primarily due to the effects of general rate cases. This increase in earnings was partially offset by increases in other operating expenses, depreciation and amortization expense, taxes other than income taxes and interest expense. The increase in net income was also partially offset by a $9 million refund to be issued to customers for adjustments related to Colstrip investments. See "Regulatory Matters" for further details regarding the Colstrip final order. In addition, increased investment losses associated with lower valuations of certain investments in our portfolio decreased net income at our other businesses when compared to 2024.

More detailed explanations of the fluctuations 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

Extreme weather events, both in summer and winter, have occurred in the Pacific Northwest. These events have resulted in system load peaks that were higher than anticipated. Historically, we have had excess capacity as compared to peak load, but during some extreme events, we have had to purchase short-term energy from the wholesale market to meet demand when our energy resources were not operating at full capacity or were otherwise unavailable. These weather events have highlighted the growing need for additional generating capacity both on our system and in the Pacific Northwest region.

The transition to clean energy (including the replacement of emitting facilities with non-emitting facilities, which are impacted by conditions outside of our control), and electrification, combined with expected load growth, and the transfer of our interest in Colstrip, also factor into the need for additional generation.

We also see the need for expanded transmission infrastructure to 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.

Current Hydroelectric Conditions and Outlook

Due to precipitation and warm weather, our hydroelectric generation in January and February (to date) has been above normal. Due to the warm weather, the average current level of snowpack in the areas serving our hydroelectric facilities is below normal. The amount of hydroelectric generation over the rest of the year will be affected not only by current snowpack levels but also by prevailing temperatures (which affect the timing and speed of run-off) and the volume, timing and form of precipitation. On balance, we expect the amount of hydroelectric generation for the entire year will be approximately at the normal level. While our current hydro forecast shows normal levels of generation, even if we were above or below normal, there would be no material change to our position in the ERM.

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. We selected a list of projects and will begin contract negotiations for the following:

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a self-build upgrade of our existing Natural Gas Combustion Turbines at Rathdrum CT to add 14 MW of capacity without increasing carbon emissions. This upgrade will occur in two stages with the first occurring in 2027 and the second in 2029,

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a project for 100 MW, 4-hour Battery Energy Storage System, to be built and transferred to the Company in eastern Washington with a target date in 2028,

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a PPA for approximately 200 MW of wind power from Montana that utilizes our share of the Colstrip Transmission System with a target date in 2029, and

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the addition of approximately 40 MW of Demand Response Programs that will recruit residential, commercial and industrial customers within our service territory, beginning in 2026.

See “Part 1 – Item 1. Business – Future Electric Resource Needs” for further discussion of regional resource adequacy.

2026 Customer Load

We expect a decrease in customer load from 2025 to 2026 to have a negative impact on our 2026 results. This decrease in load is associated with a large industrial customer with their own transmission rights and access to procure their own energy independently. We were notified of this customer’s intent to return to procuring their power independently in the power markets effective April 2026, which is earlier than we had expected. Net income is expected to decrease $9 million compared to if we had served their load through December 2026.

In December 2025, the WUTC issued a final order for our filed tariff rider for Colstrip and on January 1, 2026, the transaction to transfer our 15 percent ownership in Colstrip Units 3 and 4 to NorthWestern closed. See “Colstrip” section and “Note 22 of the Notes to Consolidated Financial Statements” for further details on the exit of Colstrip through an agreement with NorthWestern and "Regulatory Matters" for further details regarding the Colstrip final order.

Tariffs on Imports

The President of the United States of America has imposed tariffs on certain imported goods. 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.

In February 2026, the United States Supreme Court ruled that the legal basis cited by the President for the imposition of tariffs is not valid, and that he is restricted from imposing tariffs in the absence of a clear grant of authority from the Legislature. The impact of the Court’s ruling, both as to tariffs already collected and as to potential future tariffs, is uncertain at this time.

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 One Big Beautiful Bill Act (OBBB) was signed into law, which includes significant changes to the U.S. tax code and related laws. Key provisions include modifications and extensions to certain provisions of the Tax Cuts and Jobs Act of 2017 and updates to energy-related tax incentives, including revisions to the Clean Electricity Production Credit and the investment tax credit, as well as restrictions related to support from prohibited foreign entities. OBBB also allows for the current expensing of certain specified research and experimental (Section 174) expenditures.

The OBBB did not have a material impact on our results of operations and financial condition in 2025. We continue to monitor ongoing guidance. Any future impacts will be recognized in the period in which they become known. See "Note 13 of the Notes to Consolidated Financial Statements" for further discussion of the impact of OBBB.

Enterprise Resource Planning (ERP) Project

We are planning to implement an ERP system, replacing certain 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 requests were materially approved by the commissions.

We entered into a contract with a software provider and are in negotiations with system implementers. We expect the ERP system to be implemented in 2028. We expect capital expenditures between $100 million to $130 million.

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. See “Regulatory Matters” for additional discussion of the general rate cases.