XML 54 R22.htm IDEA: XBRL DOCUMENT

Summary Of Significant Accounting Policies (Policy)

9 Months Ended

Sep. 30, 2014

Share Repurchase Program Policy [Policy Text Block]

Stock Repurchase Program

On June 13, 2014, Avista Corp.'s Board of Directors approved a program to repurchase up to 4 million shares of the Company’s outstanding common stock, assuming the closure of the Ecova transaction. Repurchases of common stock under this program commenced on July 7, 2014 and the program expires on December 31, 2014. The Company can choose to terminate the repurchase program before December 31, 2014. Repurchases are made in the open market or in privately negotiated transactions. There is no assurance that the goal of repurchasing 4 million shares will be achieved. Through October 31, 2014, the Company has repurchased 2,529,615 shares at a total cost of $79.9 million and an average cost of $31.57 per share. All repurchased shares revert to the status of authorized but unissued shares.

Dividends [Policy Text Block]

Dividends

The payment of dividends on common stock could be limited by:


•	certain covenants applicable to preferred stock (when outstanding) contained in the Company’s Restated Articles of Incorporation, as amended (currently there are no preferred shares outstanding),


•	certain covenants applicable to the Company's outstanding long-term debt and committed line of credit agreements,


•	the hydroelectric licensing requirements of section 10(d) of the FPA, and

•

certain requirements under the OPUC approval of the AERC acquisition, which does not permit one-time or special dividends from AERC to Avista Corp. and which does not permit Avista Utilities' total equity to total capitalization to be less than 40 percent, without approval from the OPUC. The OPUC approval does allow for special or one-time dividends during the first year after closing to recapitalize AERC as part of the transaction and it also allows for regular distributions of AERC earnings to Avista Corp. as long as AERC remains sufficiently capitalized and insured.

Under the covenant applicable to the Company's committed line of credit agreement, which does not permit the ratio of “consolidated total debt” to “consolidated total capitalization” to be greater than 65 percent at any time, the amount of retained earnings available for dividends at September 30, 2014 was limited to approximately $441.1 million.

Under the requirements of the OPUC approval of the AERC acquisition as outlined above, the amount available for dividends at September 30, 2014 was limited to approximately $291.0 million.

Appropriated Retained Earnings [Policy Text Block]

Appropriated Retained Earnings

In accordance with the hydroelectric licensing requirements of section 10(d) of the Federal Power Act (FPA), the Company maintains an appropriated retained earnings account for any earnings in excess of the specified rate of return on the Company's investment in the licenses for its various hydroelectric projects. The rate of return on investment is specified in the various hydroelectric licensing agreements for the Clark Fork River and Spokane River. Per section 10(d) of the FPA, the Company must maintain these excess earnings in an appropriated retained earnings account until the termination of the licensing agreements or apply them to reduce the net investment in the licenses of the hydroelectric projects at the discretion of the FERC. The Company typically calculates the earnings in excess of the specified rate of return on an annual basis, usually during the second quarter.

In addition to the hydroelectric project licenses identified above for Avista Utilities, the requirements of section 10(d) of the FPA also apply to the Lake Dorothy, the Annex Creek and the Salmon Creek licenses, which were all acquired in the AERC acquisition. The Company is still evaluating these licenses to determine an appropriate amount of appropriated retained earnings to record and this analysis is expected to be completed in 2015. The Company does not expect this to result in a material amount of appropriated retained earnings.

The appropriated retained earnings amounts included in retained earnings were as follows as of September 30, 2014 and December 31, 2013 (dollars in thousands):



	September 30,		December 31,
	2014		2013
Appropriated retained earnings	$	14,270	$	9,714

Nature Of Business

Nature of Business

Avista Corp. is primarily an electric and natural gas utility with certain other business ventures. Avista Utilities is an operating division of Avista Corp., comprising the regulated utility operations in the Pacific Northwest. Avista Utilities provides electric distribution and transmission, and natural gas distribution services in parts of eastern Washington and northern Idaho. Avista Utilities also provides natural gas distribution service in parts of northeastern and southwestern Oregon. Avista Utilities has electric generating facilities in Washington, Idaho, Oregon and Montana. Avista Utilities also supplies electricity to a small number of customers in Montana, most of whom are employees who operate Avista Utilities' Noxon Rapids generating facility.

On July 1, 2014, Avista Corp. completed its acquisition of Alaska Energy and Resources Company (AERC), and as of that date, AERC is a wholly-owned subsidiary of Avista Corp. The primary subsidiary of AERC is Alaska Electric Light and Power Company (AEL&P), comprising the regulated utility operations in Alaska. Beginning with the three months ended September 30, 2014, the results of AERC are included in the overall results of Avista Corp. See Note 4 for information regarding the acquisition of AERC.

Avista Capital, Inc. (Avista Capital), a wholly owned subsidiary of Avista Corp., is the parent company of all of the subsidiary companies in the non-utility businesses, except Spokane Energy, LLC (Spokane Energy). During the first half of the year, Avista Capital’s subsidiaries included Ecova, Inc. (Ecova), which was an 80.2 percent owned subsidiary prior to its disposition on June 30, 2014. Ecova was a provider of energy efficiency and other facility information and cost management programs and services for multi-site customers and utilities throughout North America. See Note 5 for information regarding the disposition of Ecova and Note 13 for business segment information.

Basis Of Reporting

Basis of Reporting

The condensed consolidated financial statements include the assets, liabilities, revenues and expenses of the Company and its subsidiaries and other majority owned subsidiaries and variable interest entities for which the Company or its subsidiaries are the primary beneficiaries. Ecova's revenues and expenses are included in the Condensed Consolidated Statements of Income in discontinued operations; however, as of June 30, 2014 and for all subsequent reporting periods there are no balance sheet amounts included for Ecova. Intercompany balances were eliminated in consolidation. The accompanying condensed consolidated financial statements include the Company’s proportionate share of utility plant and related operations resulting from its interests in jointly owned plants.

Taxes Other Than Income Taxes

Taxes other than income taxes include state excise taxes, city occupational and franchise taxes, real and personal property taxes and certain other taxes not based on net income. These taxes are generally based on revenues or the value of property. Utility related taxes collected from customers (primarily state excise taxes and city utility taxes) are recorded as operating revenue and expense and totaled the following amounts for the three and nine months ended September 30 (dollars in thousands):



	Three months ended September 30,				Nine months ended September 30,
	2014		2013		2014		2013
Utility taxes	$	11,716	$	10,901	$	43,923	$	41,045

Other Income - Net

Other Income-Net

Other income-net consisted of the following items for the three and nine months ended September 30 (dollars in thousands):



	Three months ended September 30,						Nine months ended September 30,
	2014			2013			2014		2013
Interest income	$	154		$	124		$	678	$	620
Interest income on regulatory deferrals	59			27			154		48
Equity-related AFUDC	2,189			1,595			6,426		4,341
Net gain/(loss) on investments	(27		)	(1,299		)	118		(1,543		)
Other income	233			41			887		973
Total	$	2,608		$	488		$	8,263	$	4,439

Materials And Supplies, Fuel Stock And Natural Gas Stored

Materials and Supplies, Fuel Stock and Natural Gas Stored

Inventories of materials and supplies, fuel stock and natural gas stored are recorded at average cost for our regulated operations and the lower of cost or market for our non-regulated operations and consisted of the following as of September 30, 2014 and December 31, 2013 (dollars in thousands):



	September 30,		December 31,
	2014		2013
Materials and supplies	$	31,226	$	28,747
Fuel stock	5,170		3,170
Natural gas stored	33,545		13,029
Total	$	69,941	$	44,946

Investments And Funds Held For Clients And Client Fund Obligations

Investments and Funds Held for Clients and Client Fund Obligations

In connection with its bill paying services, Ecova collected funds from its clients and remitted the funds to the appropriate utility or other service provider. Some of the funds collected were invested by Ecova and classified as investments and funds held for clients, and a related liability for client fund obligations was recorded. Investments and funds held for clients included cash and cash equivalent investments, money market funds and investment securities classified as available for sale. Ecova did not invest the funds directly for the clients' benefit; therefore, Ecova bore the risk of loss associated with the investments. As of June 30, 2014 and for all subsequent reporting periods there are no longer any investments and funds held for clients due to the disposition of Ecova.

Investments and funds held for clients as of December 31, 2013 were as follows (dollars in thousands):



	Amortized Cost (1)		Unrealized Gain (Loss)			Fair Value
Cash and cash equivalents	$	16,147	$	—		$	16,147
Money market funds	11,180		—			11,180
Securities available for sale:
U.S. government agency	63,633		(2,555		)	61,078
Municipal	3,497		21			3,518
Corporate fixed income – financial	3,000		—			3,000
Corporate fixed income – industrial	753		12			765
Certificates of deposit	1,000		—			1,000
Total securities available for sale	71,883		(2,522		)	69,361
Total investments and funds held for clients	$	99,210	$	(2,522	)	$	96,688


(1)	Amortized cost represents the original purchase price of the investments, plus or minus any amortized purchase premiums or accreted purchase discounts.

Investments and funds held for clients were classified as a current asset since these funds were held for the purpose of satisfying the client fund obligations. As of December 31, 2013, approximately 95 percent of the investment portfolio was rated AA-, Aa3 and higher by nationally recognized statistical rating organizations. All fixed income securities were rated as investment grade as of December 31, 2013.

Ecova management reviewed its investments continuously for indicators of other-than-temporary impairment. To make this determination, management employed a methodology that considers available quantitative and qualitative evidence in evaluating potential impairment of its investments. If the cost of an investment exceeded its fair value, management evaluated, among other factors, general market conditions, credit quality of instrument issuers, the length of time and extent to which the fair value was less than cost, and whether it had plans to sell the security or it was more-likely-than not that the Company would be required to sell the security before recovery. Management also considered specific adverse conditions related to the financial health of and specific prospects for the issuer as well as other cash flow factors. Once a decline in fair value was determined to be other-than-temporary, an impairment charge was recorded in earnings and a new cost basis in the investment was established. Based on management’s analysis, securities available for sale did not meet the criteria for other-than-temporary impairment as of December 31, 2013.

The following is a summary of the disposition of available-for-sale securities for the three and nine months ended September 30 (dollars in thousands):



	Three months ended September 30,				Nine months ended September 30,
	2014		2013		2014			2013
Proceeds from sales, maturities and calls	$	—	$	1,825	$	14,612		$	16,955
Gross realized gains	—		2		3			20
Gross realized losses (1)	—		—		(735		)	—


(1)	The gross realized losses for the nine months ended September 30, 2014 were included in the determination of the gain on the disposal of Ecova and were not the result of selling any individual securities.

Contractual maturities of securities available for sale as of December 31, 2013 are as follows (dollars in thousands):



	Due within 1 year	After 1 but within 5 years	After 5 but within 10 years	After 10 years	Total
December 31, 2013	5,382	12,745	48,310	2,924	69,361

Actual maturities may differ due to call or prepayment rights and the effective maturity was 3.0 years as of December 31, 2013.

Goodwill

Goodwill arising from acquisitions represents the excess of the purchase price over the estimated fair value of net assets acquired. The Company evaluates goodwill for impairment using a combination of the discounted cash flow model and a market approach on at least an annual basis or more frequently if impairment indicators arise. The Company completed its annual evaluation of goodwill for potential impairment as of December 31, 2013 for Ecova and as of November 30, 2013 for the other businesses and determined that goodwill was not impaired at that time. Avista Corp. will use November 30, 2014 for its annual evaluation of goodwill related to AEL&P and the other businesses for 2014.

The changes in the carrying amount of goodwill are as follows (dollars in thousands):



	Ecova			AEL&P		Other		Accumulated Impairment Losses			Total
December 31, 2013	$	71,011		$	—	$	12,979	$	(7,733	)	$	76,257
Adjustments	112			—		—		—			112
Goodwill sold during the year	(71,123		)	—		—		—			(71,123		)
Goodwill acquired during the year	—			50,631		—		—			50,631
Balance as of September 30, 2014	$	—		$	50,631	$	12,979	$	(7,733	)	$	55,877

Accumulated impairment losses are attributable to the other businesses. The goodwill sold during the year relates to the Ecova disposition, which occurred on June 30, 2014. See Note 5 for information regarding this sales transaction. The goodwill acquired during the year relates to the acquisition of AERC and the goodwill associated with this acquisition is not deductible for tax purposes. See Note 4 for information regarding this business acquisition and Note 13 regarding the Company's reportable segments.

Other Intangibles

Intangible Assets

Amortization expense related to intangible assets was as follows for the three and nine months ended September 30 (dollars in thousands):



	Three months ended September 30,				Nine months ended September 30,
	2014		2013		2014		2013
Intangible asset amortization	$	—	$	2,765	$	5,898	$	8,442

All of the intangible assets were related to Ecova, which was disposed of as of June 30, 2014. As such, there are no intangible assets remaining as of September 30, 2014 and there is no amortization expense expected for the remainder of the year and in future years. The amortization expense disclosed in the table above is included in discontinued operations for all periods presented. See Note 5 for information regarding the Ecova sales transaction.

The gross carrying amount and accumulated amortization of intangible assets as of December 31, 2013 are as follows (dollars in thousands):



	Estimated	December 31,
	Useful Lives	2013
Client relationships	2 - 12 years	$	33,562
Software development costs	3 - 7 years	39,327
Other	1 - 10 years	3,321
Total intangible assets		76,210
Client relationships accumulated amortization		(12,336		)
Software development costs accumulated amortization		(21,861		)
Other accumulated amortization		(2,437		)
Total accumulated amortization		(36,634		)
Total intangible assets - net		$	39,576

Derivative Assets And Liabilities

Derivative Assets and Liabilities

Derivatives are recorded as either assets or liabilities on the Condensed Consolidated Balance Sheets measured at estimated fair value. In certain defined conditions, a derivative may be specifically designated as a hedge for a particular exposure. The accounting for a derivative depends on the intended use of such derivative and the resulting designation.

The Washington Utilities and Transportation Commission (UTC) and the Idaho Public Utilities Commission (IPUC) issued accounting orders authorizing Avista Utilities to offset energy commodity derivative assets or liabilities with a regulatory asset or liability. This accounting treatment is intended to defer the recognition of mark-to-market gains and losses on energy commodity transactions until the period of delivery. The orders provide for Avista Utilities to not recognize the unrealized gain or loss on utility derivative commodity instruments in the Condensed Consolidated Statements of Income. Realized gains or losses are recognized in the periods of delivery, subject to approval for recovery through retail rates. Realized gains and losses, subject to regulatory approval, result in adjustments to retail rates through purchased gas cost adjustments, the Energy Recovery Mechanism (ERM) in Washington, the Power Cost Adjustment (PCA) mechanism in Idaho, and periodic general rates cases. Regulatory assets are assessed regularly and are probable for recovery through future rates.

Substantially all forward contracts to purchase or sell power and natural gas are recorded as derivative assets or liabilities at estimated fair value with an offsetting regulatory asset or liability. Contracts that are not considered derivatives are accounted for on the accrual basis until they are settled or realized, unless there is a decline in the fair value of the contract that is determined to be other-than-temporary.

For interest rate swap agreements, each period Avista Utilities records all mark-to-market gains and losses for its interest rate swaps agreements as assets and liabilities and records offsetting regulatory assets and liabilities, such that there is no income statement impact. This is similar to the treatment of energy commodity derivatives described above. Upon settlement of interest rate swaps, the regulatory asset or liability (included as part of long-term debt) is amortized as a component of interest expense over the term of the associated debt.

Fair Value Measurements

Fair value represents the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the measurement date. Energy commodity derivative assets and liabilities, investments and funds held for clients, deferred compensation assets, as well as derivatives related to interest rate swap agreements and foreign currency exchange contracts, are reported at estimated fair value on the Condensed Consolidated Balance Sheets. See Note 10 for the Company’s fair value disclosures.

Regulatory Deferred Charges And Credits

Regulatory Deferred Charges and Credits

The Company prepares its condensed consolidated financial statements in accordance with regulatory accounting practices because:


•	rates for regulated services are established by or subject to approval by independent third-party regulators,


•	the regulated rates are designed to recover the cost of providing the regulated services, and


•	in view of demand for the regulated services and the level of competition, it is reasonable to assume that rates can be charged to and collected from customers at levels that will recover costs.

Regulatory accounting practices require that certain costs and/or obligations (such as incurred power and natural gas costs not currently included in rates, but expected to be recovered or refunded in the future) are reflected as deferred charges or credits on the Condensed Consolidated Balance Sheets. These costs and/or obligations are not reflected in the Condensed Consolidated Statements of Income until the period during which matching revenues are recognized. If at some point in the future the Company determines that it no longer meets the criteria for continued application of regulatory accounting practices for all or a portion of its regulated operations, the Company could be:


•	required to write off its regulatory assets, and


•	precluded from the future deferral of costs not recovered through rates at the time such costs are incurred, even if the Company expected to recover such costs in the future.

Redeemable Noncontrolling Interests [Policy Text Block]

Redeemable Noncontrolling Interests

At December 31, 2013, certain option holders of Ecova had the right to put their shares back to Ecova at their discretion during an annual put window. Stock options and other outstanding redeemable stock were valued at their maximum redemption amount which was equal to their intrinsic value (fair value less exercise price). Due to the disposition of Ecova, as of June 30, 2014 there are no longer any redeemable noncontrolling interests.

Contingencies

The Company has unresolved regulatory, legal and tax issues which have inherently uncertain outcomes. The Company accrues a loss contingency if it is probable that a liability has been incurred and the amount of the loss or impairment can be reasonably estimated. The Company also discloses losses that do not meet these conditions for accrual, if there is a reasonable possibility that a loss may be incurred.

Accumulated Other Comprehensive Loss [Policy Text Block]

Accumulated Other Comprehensive Loss

Accumulated other comprehensive loss, net of tax, consisted of the following as of September 30, 2014 and December 31, 2013 (dollars in thousands):



	September 30,			December 31,
	2014			2013
Unfunded benefit obligation for pensions and other postretirement benefit plans - net of taxes of $(2,099) and $(2,280), respectively	$	(3,898	)	$	(4,233	)
Unrealized loss on securities available for sale - net of taxes of $0 and $(936), respectively (1)	—			(1,586		)
Total accumulated other comprehensive loss	$	(3,898	)	$	(5,819	)


(1)	This entire balance was related to Ecova, which was disposed of as of June 30, 2014.

The following table details the reclassifications out of accumulated other comprehensive loss by component for the three and nine months ended September 30 (dollars in thousands):



	Amounts Reclassified from Accumulated Other Comprehensive Loss
	Three months ended September 30,						Nine months ended September 30,
Details about Accumulated Other Comprehensive Loss Components	2014			2013			2014			2013			Affected Line Item in Statement of Income
Realized gains on investment securities	$	—		$	2		$	3		$	20		(a)
Realized losses on investment securities	—			—			(735		)	—			(a)
	—			2			(732		)	20			Total before tax
	—			(1		)	272			(8		)	Tax benefit (expense) (a)
	$	—		$	1		$	(460	)	$	12		Net of tax
Amortization of defined benefit pension items
Amortization of net loss	$	(1,951	)	$	(4,891	)	$	(5,855	)	$	(14,673	)	(b)
Adjustment due to effects of regulation	1,779			4,608			5,339			13,825			(b)
	(172		)	(283		)	(516		)	(848		)	Total before tax
	60			99			181			297			Tax benefit
	$	(112	)	$	(184	)	$	(335	)	$	(551	)	Net of tax


(a)	These amounts were included as part of net income from discontinued operations for all periods presented (see Note 5 for additional details).


(b)	These accumulated other comprehensive loss components are included in the computation of net periodic pension cost (see Note 7 for additional details).