20240820AVU to Staff 1 Attachment B.pdf

AVISTA CORPORATION
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholders and the Board of Directors of Avista Corporation
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Avista Corporation and subsidiaries(the"Company")as of December 31,2023 and
2022,the related consolidated statements of income,comprehensive income,equity,and cash flows,for each of the three years in the period ended
December 31,2023,and the related notes(collectively referred to as the"financial statements").In our opinion,the financial statements present fairly,in all
material respects,the financial position of the Company as of December 31,2023 and 2022,and the results of its operations and its cash flows for each of
the three years in the period ended December 31,2023,in conformity with accounting principles generally accepted in the United States of America.
We have also audited,in accordance with the standards of the Public Company Accounting Oversight Board(United States)(PCAOB),the Company's
internal control over financial reporting as of December 31,2023,based on criteria established in Internal Control—Integrated Framework(2013)issued
by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 20,2024,expressed an unqualified opinion on
the Company's internal control over financial reporting.
Basis for Opinion
These financial statements are the responsibility of the Company's management.Our responsibility is to express an opinion on the Company's financial
statements based on our audits.We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the
Company in accordance with the U.S.federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the
PCAOB.
We conducted our audits in accordance with the standards of the PCAOB.Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement,whether due to error or fraud.Our audits included performing
procedures to assess the risks of material misstatement of the financial statements,whether due to error or fraud,and performing procedures that respond to
those risks.Such procedures included examining,on a test basis,evidence regarding the amounts and disclosures in the financial statements.Our audits
also included evaluating the accounting principles used and significant estimates made by management,as well as evaluating the overall presentation of the
financial statements.We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or
required to be communicated to the audit committee and that(1)relate to accounts or disclosures that are material to the financial statements and(2)
involved our especially challenging,subjective,or complex judgments.The communication of critical audit matters does not alter in any way our opinion
on the financial statements,taken as a whole,and we are not,by communicating the critical audit matters below,providing separate opinions on the critical
audit matters or on the accounts or disclosures to which they relate.
Regulatory Matters-Refer to Notes 1,22,and 23 to the financial statements
Critical Audit Matter Description
The Company accounts for its regulated operations in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic
980,Regulated Operations("ASC 980").The provisions of this accounting guidance require,among other things,that financial statements of a rate-
regulated enterprise reflect the actions of regulators,where appropriate.These actions may result in the recognition of revenues and expenses in time
periods that are different than non-rate-regulated enterprises.When this occurs,costs are deferred as assets in the balance sheet(regulatory assets)and
recorded as expenses when those amounts are reflected in rates.Also,regulators can impose liabilities upon a regulated company for amounts previously
collected from customers and for recovery of costs that are expected to be incurred in the future(regulatory liabilities).
The Company is subject to regulation by the Washington Utilities and Transportation Commission,the Idaho Public Utilities Commission,the Public
Utility Commission of Oregon,the Public Service Commission of the State of Montana and the Regulatory Commission of Alaska(collectively,the
"Commissions"),which have jurisdiction with respect to,among other things,the rates of electric and natural gas distribution companies in Washington,
Idaho,Oregon,Montana,and Alaska,respectively.Accounting for the economics of rate regulation has an impact on certain financial statement line items
and disclosures.
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AVISTA CORPORATION
The Company's rates are subject to the rate-setting processes of the Commissions and,in certain jurisdictions,annual earnings oversight.Rates are
determined and approved in regulatory proceedings based on analyses of the Company's costs to provide utility service and are designed to recover the
Company's prudently incurred investments in the utility business and provide a return thereon.Decisions to be made by the Commissions in the future will
impact the accounting for regulated operations under ASC 980 as described above.While the Company has indicated that it expects to recover costs from
customers through regulated rates,there is a risk that the Commissions will not approve(1)full recovery of the costs of providing utility service or(2)full
recovery of all amounts invested in the utility business and a reasonable return on that investment.
We identified the impact of rate regulation as a critical audit matter due to the significant judgments made by management to support its assertions about
affected account balances and disclosures and the high degree of subjectivity involved in assessing the impact of future regulatory orders on the financial
statements.Management judgments include assessing the likelihood of(1)recovery in future rates of incurred costs,(2)a disallowance of part of the cost
of recently completed plant or plant under construction and(3)refunds to customers.Given that management's accounting judgments are based on
assumptions about the outcome of future decisions by the Commissions,auditing these judgments required specialized knowledge of accounting for rate
regulation and the rate setting process due to its inherent complexities.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the uncertainty of future decisions by the Commissions included the following procedures,among others:
• We tested the effectiveness of management's controls over the evaluation of the likelihood of(1)the recovery in future rates of costs incurred
and deferred as regulatory assets and(2)a refund or a future reduction in rates that should be reported as regulatory liabilities.We also tested
the effectiveness of management's controls over the initial recognition of amounts as property,plant and equipment;regulatory assets or
liabilities;and the monitoring and evaluation of regulatory developments that may affect the likelihood of recovering costs in future rates or
of a future reduction in rates.
• We evaluated the Company's disclosures related to the impacts of rate regulation,including the balances recorded and regulatory
developments.
• We read relevant regulatory orders issued by the Commissions for the Company and other public utilities in the Company's jurisdictions,
regulatory statutes,interpretations,procedural memorandums,filings made by interveners,and other publicly available information to assess
the likelihood of recovery in future rates or of a future reduction in rates based on the precedents of the Commissions'treatment of similar
costs under similar circumstances.We evaluated the external information and compared it to management's recorded regulatory asset and
liability balances for completeness.
• We inspected the Company's filings with the Commissions and the filings with the Commissions by intervenors that may impact the
Company's future rates,evaluating the evidence in relation to management's assertions,as applicable.
• We inquired of management about property,plant,and equipment that may be abandoned.We inspected the capital-projects budget and
construction-work-in-process listings and inquired of management to identify projects that are designed to replace assets that may be retired
prior to the end of their useful life.We inspected minutes of the Board of Directors and regulatory orders and other filings with the
Commissions,evaluating the evidence in relation to management's assertions,as applicable,regarding probability of an abandonment.
• We obtained an analysis from management regarding probability of recovery for regulatory assets or probability of either refund or future
reduction in rates for regulatory liabilities not yet addressed in a regulatory order in order to assess management's assertion that amounts are
probable of recovery and/or that a future refund or reduction in rates is not probable.
/s/Deloitte&Touche LLP
Portland,Oregon
February 20,2024
We have served as the Company's auditor since 1933.
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