20080822Letter to Counsel, Parties.pdf

STATE OF IDAHO
OFFICE OF THE ATTORNEY GENERAL
LAWRENCE G. WASDEN
August 22, 2008
David J. Meyer
Vice President, Chief Counsel,
Reg. & Gov't Affairs
A vista Corporation
PO Box 3727
Spokane, WA 99220-3727
Conley E. Ward
Givens Pursley LLP
601 W. Bannock Street (83702)
PO Box 2720
Boise, ID 83701-2720
Kelly Norwood
Vice President - State & Federal Regulation
A vista Utilities
PO Box 3727
Spokane, WA 99220-3727
Dennis E. Peseau, Ph.D.
Utilty Resources, Inc.
i 500 Libert Street SE, Suite 250
Salem, OR 97302
Brad M. Purdy
Attorney at Law
2019 N. i th Street
Boise, ID 83702
Re:Case Nos. A VU-E-08-01 and A VU-G-08-01
Dear Counsel and Parties:
In anticipation of your technical hearing next week regarding the proposed settlement, this letter is to advise
you that the Commission may ask questions or seek comments of the parties regarding the two documents
enclosed. First, is the Spokesman Review's aricle entitled "Avista Profits Jump 72 Percent" on page A6 of
the paper for July 3 1,2008. Second, is the underlying news release issued by Avista Corporation on July 30,
2008.
Parties should be prepared to comment on these two documents and to answer Commission questions
concerning these two documents.
Enclosure
cc: Scott Woodbury
Randy Lobb
Commissioners
blslL:AVU-E-08-01_AVU-G-08-01_sw
Contracts & Administrative Law Division, Idaho Public Utilties Commission
P.O. Box 83720, Boise, Idaho 83720-0074, Telephone: [phone], FAX: [phone], E-mail: Ipuc(§puc.state.id.us
Located at 472 West Washington St., Boise, Idaho 83702
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\
Avista MediaRoorn - News Releases
Home
) About Avista ) Investors ) Avista Companies .Newsroom
Welcome to Avista,
providing energy and energy-related services..
welcome
Outage Updates Newsroom
News Releases News Releases
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Resource Center
Page 1 of8
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-c -c LBaçktQNewsReleases)
Avista Corp. Reports Results for the Second
Quarter and Year-to-Date 2008
In the News
SPOKANE, Wash" July 30 /PRNewswire-FirstCall/ .- Avista Corp. (NYSE:
AVA) today reported net income of $23.5 millon, or $0.44 per diluted
share, for the second quarter of 2008, an increase compared to net
income of $14,2 million, or $0,26 per diluted share, for the second
quarter of 2007. For the six months ended June 30, 2008, Avista Corpo's
net income was $48.8 millon, or $0.91 per diluted share, an increase
compared to net income of $28,3 milion, or $0.53 per diluted share, for
the six months ended June 30,2007, The primary reason for the increase
in cgnsolidated results on both a quarterly and year-to-date basis was
increased earnings at Avista Utilities and the 2007 net loss from Avista
Energy prior to the sale of the majority of the contract and ongoing
operations of the business on June 30, 2007,
Email and RSS Feeds
Avista Multimedia, Logos,
Photos, Graphics
Polls and Surveys
(Logo: httP.;1I1N,ww~,newsçQm,çQmlcg¡::bInlprnhûQQ4.QJ4SlSFWQ_~U,.Q,G.Q)
"Our results for the first half of 2008 have positioned us well to meet our
earnings targets for the year, Unusual weather patterns with colder than
normal temperatures and a late spring runoff resulted in higher than
expected resource costs. However, the cold weather increased retail
natural gas loads, and we should recover a portion of the resource costs
absorbed during the first half of the year primarily due to above normal
hydroelectric generation for July," said Avista Chairman, President and
Chief Executive Officer Scott L. Morris,
Results for the second quarter of 2008 and the six months ended June
30, 2008 (YTD), as compared to the respective periods of 2007:
($ in thousands, except
per-share data) Q2 2008
Operating Revenues $350,310
Income from Operations $56,490Net Income $23,545
Net Income (Loss) by
Business Segment:Avista Utili ties
AC\vantage IQ
Other*
Contribution to earnings
per diluted share by
Business Segment:Avista Utili ties
Advantage IQ
Other*
Total earnings per
diluted share
$22,026
$1,579
$ (60)
$0.41
$0.03
$-
$0.44
1ittn'l/inri"ti:~()rn mp.ni ::ronm ~oml1nnex. nhn?~F41&item=84 1
Q2 2007$304,005
$40,218
$14,183
YTD 2008
$846,617
$115,551
$48,776
YTD 2007
$763,192
$79,155
$28,277
$17,257
$1,310
$ (4, 384)
$37,184
$2,894
$(11,80i)
$45,340
$3,345
$91
$0.32
$0.02
$ (0.08)
$0,85
$0,06
$-
$0,70
$0.05
$ (0,22)
$0,26 $0.91 $0.53
8/2212008
A vista MediaRoom - News Releases Page 2 of 8
* Results for Q2 2007 include a net loss from Avista Energy of
$3,9 million, or $0.07 per diluted share, Results for YTD 2007 incl
a net loss from Avista Energy of $11,6 million, or $0.22 per dilutedshare,
Second Quarter and Year-to-date 2008 Highlights
Avista Utilties: The increase in our utilty net income for both the quarter
and year-to-date periods was primarily due to an increase in gross
margin (operating revenues less resource costs), The increase in gross
margin was primarily due to the implementation of the general rate
increase in Washington effective Jan, 1, 2008. The increase in utilty net
income on a year-to-date basis was also partially due to a decrease in
interest expense, ThiS was partially offset by an increase in other
operating expenses,
Due to colder than normal weather and later than expected runoff, we
absorbed $4,0 millon of costs in the second quarter of 2008 and $7.4
millon for the first half of 2008 uiider the Energy Recovery Mechanism
(ERM) in Washington. In addition to lower than normal hydroelectric
generation, fuel and purchased power costs were higher than expected to
meet increased demand,
Partially offsetting the negative effect of the costs absorbed under the
ERM were higher than expected retail natural gas loads due to colder than
normal weather.
Primarily as a result of the costs absorbed under the ERM, our utility
earnings were slightly lower than planned for the second quarter and first
half of 2008. It is important to note that the amounts recognized under
the ERM can vary significantly from quarter to quarter due to a variety of
factors including the level of hydroelectric generation, as well as changes
in purchased power and fuel costs.
As previously reported, we filed requests for increases in electric and
natural gas general rates in Washington in March 2008 and in Idaho in
April 2008. Any rate adjustments, if approved by the regulatory
commissions, would most likely become effective in late 2008 or in 2009,
Advantage IQ: As previously reported, Advantage IQ acquired Cadence
Network, Inc. (Cadence Network), a Cincinnati-based energy and expense
management company, effective July 2, 2008, As consideration, the
previous owners of Cadence Network received a 25 percent ownership
interest in Advantage IQ. While we anticipate an increase in annual
revenues as a result of the acquisition, the transaction is expected to be
slightly dilutive to Avista Corp.'s consolidated earnings in 2008 by one to
two cents per share due to transaction costs and the decrease in Avista
Corp,'s, ownership of the subsidiary.
"Advantage IQ's acquisition of Cadence Network is another step in our
plans to grow Advantage IQ and bring increased value to our
shareholders and its clients," said Avista's Morris,
Advantage IQ's revenues for the first half of 2008 increased 11 percent as
compared to the prior year and totaled $24.9 millon. In the first half of
2008, Advantage IQ processed bills totaling $6.9 bilion, an increase of 17
percent, as compared to the first half of 2007.
Net income from Advantage IQ for the second quarter and year-to-date
2008 increased as compared to the respective periods of the prior year
primarily due to an increase in operating revenues as a result of customer
growth, This was partially offset by a decrease in interest earnings on
funds held for customers and increased operating expenses from
expanding operations.
httn'l/::ii ~t~~om ,11ec1i::ioom .com/index. nhn ?s=4 3&item=841 8/22/2008
Avista MediaRoom - News Releases Page 3 of8
Other Businesses: Results from our other businesses improved as
compared to the second quarter and year-to-date 2007 primarily due to
the net loss at Avista Energy in the prior year. The remaining activities of
Avista Energy are no longer a reportable business segment and are
included in "Other" for segment reporting purposes,
Liquidity and Capital Resources: In April 2008, we issued $250 milion of
5.95 percent First Mortgage Bonds due in 2018, The net proceeds from
the issuance, together with other available funds, were used to fund debt
maturities of $293,5 milion (the majority being the $273 milion of 9,75
percent Unsecured Senior Notes that matured on June 1, 2008).
We are planning to issue long-term debt during the second half of 2008
to fund other maturing debt, as well as to provide additional funding for
capital expenditures and other corporate purposes.
Avista has a sales agency agreement to issue up to 2 million shares of
common stock from time to time. We are planning to begin issuing
common stock under this sales agency agreement during the second half
of 2008.
in the second quarter of 2008, we completed the acquisition of a wind
generation site. We expect to construct a 50 MW generation facilty at a
total estimated cost of over $125 millon to be completed in 2011,
Utilty capital expenditures were $90 millon for the first half of 2008. We
expect utility capital expenditures to be approximately $200 milion for
the full year of 2008 and over $200 millon in each of 2009 and 2010.
These estimates do not include any costs associated with the wind
generation project,
Earnings Guidance and Outlook
We are confirming our guidance for 2008, with consolidated earnings
expected to be in the range of $1.35 to $1.55 per diluted share, We
expect Avista Utilties to contribute in the range of $1.20 to $1.40 per
diluted share for 2008. Our outlook for Avista Utilities assumes, among
other variables, normal precipitation, temperatures and hydroelectric
generation for the remainder of the year. Our guidance for Advantage IQ
continues to be a range of $0.10 to $0,12 per diluted share. We expect
the other businesses to be between break-even and a loss of $0.03 perdiluted share, '
NOTE: We will host a conference call with financial analysts and investors
on July 30, 2008, at 10:30 a,m. EDT to discuss this news release. The call
is available at [phone], passcode: 25635502. A simultaneous
webcast of the call is available on our website,
http;/lwww.avistacorp.cOrril, A replay of the conference call wil be
available through Wednesday, August 6, 2008. Call [phone],
passcode 30896634 to listen to the replay,
Avista Corp. is an energy company involved in the production,
transmission and distribution of energy as well as other energy-related
businesses. Avista Utilities is our operating division that provides service
to 351,000 electric and 310,000 natural gas customers in three Western
states. Avista's primary, non-regulated subsidiary is Advantage IQ. Our
stock is traded under the ticker symbol "AVA". For more information
about Avista, please visit hl;P:/lwww.ayistacorp.com/.
Avista Corp. and the Avista Corp, logo are trademarks of Avista
Corporation.
The attached condensed consolidated statements of income, condensed
consolidated balance sheets, and financial and operating highlights are
integral parts of this earnings release,
httn:/ /¡:¡i stacorn. mediaroom . com/index. nhn ?s=4 3 &item=841 8/22/2008
A vista MediaRoorn - News Releases Page 4 of8
This news release contains forward-looking statements, including
statements regarding our current expectations for future financial
performance and cash flows, capital expenditures, financing plans, our
current plans or objectives for future operations and other factors, which
may affect the company in the future. Such statements are subject to a
variety of risks, uncertainties and other factors, most of which are beyond
our control and many of which could have significant impact on our
operations, results of operations, financial condition or cash flows and
could cause actual results to differ materially from those anticipated in
such statements.
The following are among the important factors that could cause actual
results to differ materially from the forward-looking statements: weather
conditions and their effect on energy demand and generation, including
the effect of precipitation and temperatures on the availability of
hydroelectric resources and the effect of temperatures on customer
demand; changes in wholesale energy prices that can affect, among other
things, cash needed to purchase electricity, natural gas for our retail
customers and natural gas fuel for electric generation, and the value of
surplus energy sold; volatilty and illquidity in wholesale energy markets,
including the availability of wiling buyers and sellers and prices of
purchased energy and demand for energy sales; the effect of state and
federal regulatory decisions affecting our ability to recover costs and/or
earn a reasonable return including, but not limited to, the disallowance of
costs that we have deferred; the potential effects of legislation or
administrative rulemaking, including the possible adoption of national or
state laws requiring resources to meet certain standards and placing
restrictions on greenhouse gas emissions to mitigate concerns over global
climate changes; the outcome of pending regulatory and legal
proceedings arising out of the "western energy crisis" of 2000 and 2001,
and including possible retroactive price caps and resulting refunds; the
outcome of legal proceedings and other contingencies; changes in, and
compliance with, environmental and endangered species laws,
regulations, decisions and policies, including present and potential
environmental remediation costs; wholesale and retail competition
including, but not limited to, electric retail wheeling and transmission
costs; the ability to relicense and maintain licenses for our hydroelectric
generating facilties at cost-effective levels with reasonable terms and
conditions; unplanned outages at any of our generating facilities or the
inabilty of facilties to operate as intended; unanticipated delays or
changes in construction costs, as well as our abilty to obtain required
operating permits for present or prospective facilities; natural disasters
that can disrupt energy production or delivery, as well as the availabilty
and costs of materials and supplies and support services; blackouts or
disruptions of interconnected transmission systems; the potential for
future terrorist attacks or other malicious acts, particularly with respect to
our utility assets; changes in the long-term climate of the Pacific
Northwest, which can affect, among other things, customer demand
patterns and the volume and timing of streamflows to our hydroelectric
resources; changes in economic conditions in our service territory and the
United States in general, including inflation or deflation; changes in
industrial, commercial and residential growth and demographic patterns
in our service territory; the loss of significant customers and/or suppliers;
default or nonperformance on the part of any parties from which we
purchase and/or sell capacity or energy; deterioration in the
creditworthiness of our customers and counterparties; our ability to
obtain financing through the issuance of debt and/or equity securities,
which can be affected by various factors including our credit ratings,
interest rates and other capital market conditions; the effect of any
change in our credit ratings; changes in actuarial assumptions, the
interest rate environment and the actual return on plan assets for our
pension plan, which can affect future funding obligations, costs and
pension plan liabilties; increasing health care costs and the resulting
effect on health insurance provided to our employees and retirees;
increasing costs of insurance, changes in coverage terms and our abilty
to obtain insurance; employee issues, including changes in collective
bargaining unit agreements, strikes, work stoppages or the loss of key
executives, as well as our ability to recruit and retain employees; the
potential effects of negative publicity regarding business practices,
httn'!!m,idllrnrn mprlillT(()m r,()m/inrlAx nhn?c:=41&itAm=R41 8/22/2008
Avista MediaRoom - News Releases
whether true or not, which could result in, among other things, costly
litigation and a decline in our common stock price; changes in
technologies, possibly making some of the current technology obsolete;
changes in tax rates and/or policies; and changes in our strategic
business plans, which may be affected by any or all of the foregoing,
including the entry into new businesses and/or the exit from existing
businesses.
For a further discussion of these factors and other important factors,
please refer to our Annual Report on Form 10-K for the year ended Dec.
31, 2007 and Quarterly Report on Form 10-Q for the quarter ended Mar,
31, 2008, The forward-looking statements contained in this news release
speak only as of the date hereof. We undertake no obligation to update
any forward-looking statement or statements to reflect events or
circumstances that occur after the date on which such statement is made
or to reflect the occurrence of unanticipated events. New factors emerge
from time to time, and it is not possible for management to predict all of
such factors, nor can it assess the impact of each such factor on our
business or the extent to which any such factor, or combination of
factors, may cause actual results to differ materially from those contained
in any forward-looking statement.
AVISTA CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(Dollars in Tbousands except Per Share Amounts)
Operating revenues
Operating expenses:
Resource costs
Other operating expenses
Depreciation and
amortization
Utility taxes other than
income taxes
Total operating expenses
Income from operations
Other income (expense):
Interest expense, net of
capi tali zed interest
Other income - net
Total other income
(expense) - net
Income before income taxes
Income taxes
Net income
Weighted-average common shares
outstanding (thousands),
basic
Weighted-average common sharesoutstanding (thousands),diluted
Total earnings per common
share, basic
Total earnings per commonshare, diluted
Dividends paid per common
share
httn:/lavistacorn.mediaroom.comJindex, nhn ?s=4 3&item=84 i
Second Quarter2008 2007
$350,310
188,610
67,020
22,967
15,223
293,820
56,490
(21,361)1,721
(19,640)
36,850
13,305
$23,545
53,301
53,704
$0.44
$0,44
$0,165
$304,005
153,906
72,363
22,468
15,050
263,787
40,218
(20,793)3,547
(17,246)
22,972
8,789
$14,183
52,775
53,313
$0.27
$0.26
$0.150
Page 5 of8
Six, Months Ended
June 30,2008 2007
$846,617
512,756
132,584
45,418
40,308
731,066
115,551
(41,145)
2,764
(38,381)
77,170
28,394
$48,776
53,160
53,543
$0.92
$0,91
$0.330
$763,19
461,61
138,54
44,83
39,04
684,03
79,15
(41,867,25
(34,60
44,55
16,27
$28,27
52,73
53,32
$0.5
$0,5
$0.29
8/22/2008
Avista MediaRoorn - News Releases
Issued July 30, 2008
Page 6of8
AVISTA CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(Dollars in Thousands)
Assets
Cash and cash equivalents
Accounts and notes receivable
Current utility energy commodity
derivative assets
Funds held for customersOther Current assets
Total net utility property
Other property and investments
Regulatory assets for deferred
income taxes
Regulatory assets for pensions and
other postretirement benefitsOther regulatory assets
Non-current utility energy commodity
deri vati ve assets
Power and natural gas deferrals
Unamortized debt expense
Other deferred charges
Total Assets
Liabili ties and stockholders' Equity
Accounts payable
Current portion of long-term debt
Short-term borrowings
Customer fund obligations
Deposi ts from counterparties
Current regulatory liability for
utili ty deri vati ves
Other current liabilities
Long-term debt
Long-term debt to affiliated trusts
Regulatory liability for utility
plant retirement costs
Pensions and other postretirementbenefits
Deferred income taxes
Non-current regulatory liability for
utility derivatives
Other non-current liabilities anddeferred credits
Total Liabilities
Common stock - net (53,495,520 and
52,909.013 outstanding shares)
Retained earnings and accumulated
other comprehensive loss
Total Stockholders 'Equi ty
Total Liabilities and
Stockholders' Equity
Issued July 30, 2008
June 30,
2008
December 3
2007
$5,384 $11,839
149,379 105,440
98,438 12,078
90,574 89,885
103,263 112,943
2,398,913 2,351,342
120,173 116,157
114,441 117,461
48,737 51,006
37,917 43,004
117,322 55,313
74,320 85,885
32,383 32,542
8,625 4,902
$3,399,869 $3,189,797
$86,740 $117,546
110,383 427,344
48,500
90,574 89,885
79,240 12,510
76,613
123,976 116,364
778,328 521,489
113,403 113,403
212,246 209,357
79,595 90,555
444,557 440,918
115,060 53,414
74,833 83,046
2,434,048 2,275,831
733,583 726,933
232,238 187,033
965,821 913,966
$3,399,869 $3,189,797
AVISTA CORPORATION
FINANCIAL AND OPERATING HIGHLIGHTS
(Dollars in Thousands)
httn://avistacorn.rnediaroorn, com/index, nhn?s=4 3&itern=841 8/22/2008
Avista MediaRoorn - News Releases
Second Quarter2008 2007
Avista Utili ties
Retail electric revenues $138,185
Retail kWh sales (inmillions) 2,026Retail electric
customers at end ofperiod 350,635
Wholesale electric
revenues
Wholesale kWh sales (inmillions)
Sales of fuel
Other electric revenues
Retail natural gas
revenues
Wholesale natural gasrevenues
Transportation and other
natural gas revenues
Total therms delivered
(in thousands)
Retail natural gas
customers at end of
period
Income from operations
(pre-tax)
Net income
AdvantageIQ
Revenues
InCome from operations
(pre-tax)
Net income
Other
Revenues
Income (loss) from
operations (pre-tax)
Net income (loss)
Issued July 30, 2008
$'38,219
700
$409
$3,859 '
$75,303
$67,433
$3,237
156,424
310,266
$53,913
$22,026
$12,401
$2,563
$1,579
$11,264
$14
$ (60)
Photo: NewsCom :i:tiP;l/www,newsçQm,çOmlçgi:
,bi,n/pini:/?QQ4,Qi?s/s,FWQ~,iLQGQ
AP Archive: http://pl1otoarchive.ap.org/
PRN Photo Desk, photodesk(§prnewswire.com
SOURCE: Avistá Corp,
Page 7 of8
Six Months Ende
June 30,2008 200
$126,612 $315,872
1,999 4,523
344,928 350,635
$32,790
$6
$4,401
$63,564
$37,757
$2,867
137,173
304,444
$45,938
$17,257
$11,415
$2,185
$1,310
$24,593
$(7,905)
$ (4, 384)
$68,895
677 1,010
$14,987
$7,155
$259,636
$126,294
$6,078
420,087
310,266
$109,713
$45,340
$24,921
$5,568
$3,345
$22,779
$270
$91
CONTACT: Avista 2417 Media Access, [phone]; or Media, Jessie
Wuerst, + 1-509-495-8578, jessie.wuerst(§avistacorp.com, or Investors,
Jason
Lang, [phone] jason.lang(§avistacorp,com, both ofAvista, Corp.
Web site: http://www.avistacorp.com/
Print
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R/22/2008