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Summary Of Significant Accounting Policies (Policy)

12 Months Ended

Dec. 31, 2015

Operating Leases

The Company has multiple lease arrangements involving various assets, with minimum terms ranging from 1 to 45 years. Future minimum lease payments required under operating leases having initial or remaining noncancelable lease terms in excess of one year were not material as of December 31, 2015.

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. 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 AEL&P licenses for Lake Dorothy and Annex Creek/Salmon Creek (combined).

The appropriated retained earnings amounts included in retained earnings were as follows as of December 31 (dollars in thousands):



	2015		2014
Appropriated retained earnings	$	21,030	$	14,270

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. acquired AERC, and as of that date, AERC became a wholly-owned subsidiary of Avista Corp. The primary subsidiary of AERC is AEL&P, comprising regulated electric utility operations in Juneau, Alaska. There are no AERC earnings included in the overall results of Avista Corp. prior to July 1, 2014. See Note 4 for information regarding the acquisition of AERC.

Avista Capital, a wholly owned subsidiary of Avista Corp., is the parent company of all of the subsidiary companies in the non-utility businesses. During the first half of 2014 and prior, Avista Capital’s subsidiaries included 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 21 for business segment information.

Basis Of Reporting

Basis of Reporting

The 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 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. All tables throughout the Notes to Consolidated Financial Statements that present Consolidated Statements of Income information were revised to include only the amounts from continuing operations. Intercompany balances were eliminated in consolidation. The accompanying consolidated financial statements include the Company’s proportionate share of utility plant and related operations resulting from its interests in jointly owned plants (see Note 7).

Use Of Estimates

Use of Estimates

The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported for assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates include:


•	determining the market value of energy commodity derivative assets and liabilities,


•	pension and other postretirement benefit plan obligations,


•	contingent liabilities,


•	goodwill impairment testing,


•	recoverability of regulatory assets, and


•	unbilled revenues.

Changes in these estimates and assumptions are considered reasonably possible and may have a material effect on the consolidated financial statements and thus actual results could differ from the amounts reported and disclosed herein.

System Of Accounts

System of Accounts

The accounting records of the Company’s utility operations are maintained in accordance with the uniform system of accounts prescribed by the FERC and adopted by the state regulatory commissions in Washington, Idaho, Montana, Oregon and Alaska.

Regulation

The Company is subject to state regulation in Washington, Idaho, Montana, Oregon and Alaska. The Company is also subject to federal regulation primarily by the FERC, as well as various other federal agencies with regulatory oversight of particular aspects of its operations.

Utility Revenues

Utility revenues related to the sale of energy are recorded when service is rendered or energy is delivered to customers. Revenues and resource costs from Avista Utilities’ settled energy contracts that are “booked out” (not physically delivered) are reported on a net basis as part of utility revenues. AEL&P does not have booked out transactions. The determination of the energy sales to individual customers is based on the reading of their meters, which occurs on a systematic basis throughout the month. At the end of each calendar month, the amount of energy delivered to customers since the date of the last meter reading is estimated and the corresponding unbilled revenue is estimated and recorded. Our estimate of unbilled revenue is based on:


•	the number of customers,


•	current rates,


•	meter reading dates,


•	actual native load for electricity,


•	actual throughput for natural gas, and


•	electric line losses and natural gas system losses.

Any difference between actual and estimated revenue is automatically corrected in the following month when the actual meter reading and customer billing occurs.

Accounts receivable includes unbilled energy revenues of the following amounts as of December 31 (dollars in thousands):



	2015		2014
Unbilled accounts receivable	$	62,003	$	80,718

Non-Utility Revenues

Other Non-Utility Revenues

Revenues from the other businesses are primarily derived from the operations of AM&D, doing business as METALfx, and are recognized when the risk of loss transfers to the customer, which occurs when products are shipped. In addition, prior to Spokane Energy's dissolution in 2015, there were revenues at Spokane Energy related to a long-term fixed rate electric capacity contract. This contract was transferred to Avista Corp. during the second quarter of 2015 and the revenues from this contract are now included in utility revenues.

Depreciation

For utility operations, depreciation expense is estimated by a method of depreciation accounting utilizing composite rates for utility plant. Such rates are designed to provide for retirements of properties at the expiration of their service lives. For utility operations, the ratio of depreciation provisions to average depreciable property was as follows for the years ended December 31:



	2015		2014		2013
Avista Utilities
Ratio of depreciation to average depreciable property	3.09	%	2.97	%	2.90	%
Alaska Electric Light and Power Company
Ratio of depreciation to average depreciable property	2.42	%	2.43	%	N/A

The average service lives for the following broad categories of utility plant in service are (in years):



	Avista Utilities	Alaska Electric Light and Power Company
Electric thermal/other production	40	36
Hydroelectric production	79	45
Electric transmission	57	39
Electric distribution	36	38
Natural gas distribution property	45	N/A

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 years ended December 31 (dollars in thousands):



	2015		2014		2013
Utility taxes	$	59,173	$	58,250	$	55,565

Allowance For Funds Used During Construction

Allowance for Funds Used During Construction

The AFUDC represents the cost of both the debt and equity funds used to finance utility plant additions during the construction period. As prescribed by regulatory authorities, AFUDC is capitalized as a part of the cost of utility plant and the debt component is credited against total interest expense in the Consolidated Statements of Income in the line item “capitalized interest.” The equity component of AFUDC is included in the Consolidated Statement of Income in the line item “other income-net.” The Company is permitted, under established regulatory rate practices, to recover the capitalized AFUDC, and a reasonable return thereon, through its inclusion in rate base and the provision for depreciation after the related utility plant is placed in service. Cash inflow related to AFUDC does not occur until the related utility plant is placed in service and included in rate base. The effective AFUDC rate was the following for the years ended December 31:



	2015		2014		2013
Avista Utilities
Effective AFUDC rate	7.32	%	7.64	%	7.64	%
Alaska Electric Light and Power Company
Effective AFUDC rate	9.31	%	10.37	%	N/A

Income Taxes

A deferred income tax asset or liability is determined based on the enacted tax rates that will be in effect when the differences between the financial statement carrying amounts and tax basis of existing assets and liabilities are expected to be reported in the Company’s consolidated income tax returns. The deferred income tax expense for the period is equal to the net change in the deferred income tax asset and liability accounts from the beginning to the end of the period. The effect on deferred income taxes from a change in tax rates is recognized in income in the period that includes the enactment date. Deferred income tax liabilities and regulatory assets are established for income tax benefits flowed through to customers. The Company recognizes the effect of state tax credits, which are generated from utility plant, as they are utilized. The Company did not incur any penalties on income tax positions in 2015, 2014 or 2013. The Company would recognize interest accrued related to income tax positions as interest expense and any penalties incurred as other operating expense.

Stock-Based Compensation

The Company currently issues three types of stock-based compensation awards - restricted shares, market-based awards and performance-based awards. Historically, these stock compensation awards have not been material to the Company's overall financial results. Compensation cost relating to share-based payment transactions is recognized in the Company’s financial statements based on the fair value of the equity or liability instruments issued and recorded over the requisite service period.

Other Income - Net

Other Income - net consisted of the following items for the years ended December 31 (dollars in thousands):



	2015			2014		2013
Interest income	$	653		$	987	$	754
Interest on regulatory deferrals	48			220		126
Equity-related AFUDC	8,331			8,808		6,066
Net gain (loss) on investments	(637		)	276		(3,378		)
Other income	905			1,055		1,599
Total	$	9,300		$	11,346	$	5,167

Earnings Per Common Share Attributable To Avista Corporation Shareholders

Earnings per Common Share Attributable to Avista Corporation Shareholders

Basic earnings per common share attributable to Avista Corp. shareholders is computed by dividing net income attributable to Avista Corp. shareholders by the weighted average number of common shares outstanding for the period. Diluted earnings per common share attributable to Avista Corp. shareholders is calculated by dividing net income attributable to Avista Corp. shareholders (adjusted for the effect of potentially dilutive securities issued to noncontrolling interests by the Company's subsidiaries) by diluted weighted average common shares outstanding during the period, including common stock equivalent shares outstanding using the treasury stock method, unless such shares are anti-dilutive. Common stock equivalent shares include shares issuable upon exercise of stock options and contingent stock awards. See Note 18 for earnings per common share calculations.

Cash And Cash Equivalents

Cash and Cash Equivalents

For the purposes of the Consolidated Statements of Cash Flows, the Company considers all temporary investments with a maturity of three months or less when purchased to be cash equivalents.

Allowance For Doubtful Accounts

Allowance for Doubtful Accounts

The Company maintains an allowance for doubtful accounts to provide for estimated and potential losses on accounts receivable. The Company determines the allowance for utility and other customer accounts receivable based on historical write-offs as compared to accounts receivable and operating revenues. Additionally, the Company establishes specific allowances for certain individual accounts. The following table presents the activity in the allowance for doubtful accounts during the years ended December 31 (dollars in thousands):



	2015			2014			2013
Allowance as of the beginning of the year	$	4,888		$	44,309		$	44,155
Additions expensed during the year	5,802			5,296			5,099
Net deductions (1)	(6,160		)	(44,717		)	(4,945		)
Allowance as of the end of the year	$	4,530		$	4,888		$	44,309

(1)

During the second quarter of 2014, the Company received $15.0 million in gross proceeds related to the settlement of its California wholesale power markets litigation. The gross proceeds effectively settled all outstanding receivables and payables at Avista Energy (which had been fully reserved against since 2001). As a result of the settlement, the Company reversed $15.0 million of the allowance, which was recorded as a reduction to non-utility other operating expenses on the Consolidated Statements of Income, and the remainder of the receivables, payables and allowance of $24.5 million were removed from the Consolidated Balance Sheets (and had no effect on net income).

Materials And Supplies, Fuel Stock And Natural Gas Stored

Materials and Supplies, Fuel Stock and Stored Natural Gas

Inventories of materials and supplies, fuel stock and stored natural gas 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 December 31 (dollars in thousands):



	2015		2014
Materials and supplies	$	37,101	$	32,483
Fuel stock	4,273		5,142
Stored natural gas	12,774		28,731
Total	$	54,148	$	66,356

Utility Plant In Service

Utility Plant in Service

The cost of additions to utility plant in service, including an allowance for funds used during construction and replacements of units of property and improvements, is capitalized. The cost of depreciable units of property retired plus the cost of removal less salvage is charged to accumulated depreciation.

Asset Retirement Obligations

The Company records the fair value of a liability for an asset retirement obligation (ARO) in the period in which it is incurred. When the liability is initially recorded, the associated costs of the ARO are capitalized as part of the carrying amount of the related long-lived asset. The liability is accreted to its present value each period and the related capitalized costs are depreciated over the useful life of the related asset. In addition, if there are changes in the estimated timing or estimated costs of the AROs, adjustments are recorded during the period new information becomes available as an increase or decrease to the liability, with the offset recorded to the related long-lived asset. Upon retirement of the asset, the Company either settles the ARO for its recorded amount or incurs a gain or loss. The Company records regulatory assets and liabilities for the difference between asset retirement costs currently recovered in rates and AROs recorded since asset retirement costs are recovered through rates charged to customers (see Note 9 for further discussion of the Company's asset retirement obligations).

The Company recovers certain asset retirement costs through rates charged to customers as a portion of its depreciation expense for which the Company has not recorded asset retirement obligations. The Company has recorded the amount of estimated retirement costs collected from customers (that do not represent legal or contractual obligations) and included them as a regulatory liability on the Consolidated Balance Sheets in the following amounts as of December 31 (dollars in thousands):



	2015		2014
Regulatory liability for utility plant retirement costs	$	261,594	$	254,140

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 discounted cash flow models 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 November 30, 2015 and determined that goodwill was not impaired at that time.

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



	Ecova			AEL&P			Other		Accumulated Impairment Losses			Total
Balance as of January 1, 2014	$	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	—			52,730			—		—			52,730
Balance as of the December 31, 2014	—			52,730			12,979		(7,733		)	57,976
Adjustments	—			(304		)	—		—			(304		)
Balance as of the December 31, 2015	$	—		$	52,426		$	12,979	$	(7,733	)	$	57,672

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

Derivative Assets And Liabilities

Derivative Assets and Liabilities

Derivatives are recorded as either assets or liabilities on the 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 UTC and the 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 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 ERM in Washington, the 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 as assets and liabilities and records offsetting regulatory assets and liabilities, such that there is no income statement impact. 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. While the Company has not received any formal accounting orders from the various state commissions allowing for the offset of interest rate swap assets and liabilities with regulatory assets and liabilities, the Company has deemed this accounting treatment appropriate and future recovery probable due to the regulatory precedents set in prior general rate cases and the fact that the state commissions view interest rate swap derivatives as risk management tools similar to energy commodity derivatives.

As of December 31, 2015, the Company has multiple master netting agreements with a variety of entities that allow for cross-commodity netting of derivative agreements with the same counterparty (i.e. power derivatives can be netted with natural gas derivatives) under ASC 815-10-45. The Company does not have any agreements which allow for cross-affiliate netting among multiple affiliated legal entities. The Company nets all derivative instruments when allowed by the agreement for presentation in the Consolidated Balance Sheets.

Fair Value Measurements

Fair value represents the price that would be received when selling 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, 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 Consolidated Balance Sheets. See Note 16 for the Company’s fair value disclosures.

Regulatory Deferred Charges And Credits

Regulatory Deferred Charges and Credits

The Company prepares its 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 Consolidated Balance Sheets. These costs and/or obligations are not reflected in the Consolidated Statements of Income until the period during which matching revenues are recognized. The Company also has decoupling revenue deferrals. As opposed to cost deferrals which are not recognized in the Consolidated Statements of Income until they are included in rates, decoupling revenue is recognized in the Consolidated Statements of Income during the period it occurs (i.e. during the period of revenue shortfall or excess due to fluctuations in customer usage), subject to certain limitations, and a regulatory asset/liability is established which will be surcharged or rebated to customers in future periods. GAAP requires that for any alternative regulatory revenue program, like decoupling, the revenue must be collected from customers within 24 months of the deferral to qualify for recognition in the current period Consolidated Statement of Income. Any amounts included in the Company's decoupling program that won't be collected from customers within 24 months are not recorded in the financial statements until the period in which revenue recognition criteria are met. This could ultimately result in more decoupling revenue being collected from customers over the life of the decoupling program than what is deferred and recognized in the current period financial statements.

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 or decoupled revenues not recovered through rates at the time such amounts are incurred, even if the Company expected to recover these amounts from customers in the future.

See Note 20 for further details of regulatory assets and liabilities.

Investment In Exchange Power-Net

Investment in Exchange Power-Net

The investment in exchange power represents the Company’s previous investment in Washington Public Power Supply System Project 3 (WNP-3), a nuclear project that was terminated prior to completion. Under a settlement agreement with the Bonneville Power Administration in 1985, Avista Utilities began receiving power in 1987, for a 32.5-year period, related to its investment in WNP-3. Through a settlement agreement with the UTC in the Washington jurisdiction, Avista Utilities is amortizing the recoverable portion of its investment in WNP-3 (recorded as investment in exchange power) over a 32.5-year period that began in 1987. For the Idaho jurisdiction, Avista Utilities fully amortized the recoverable portion of its investment in exchange power.

Unamortized Debt Expense

Unamortized debt expense includes debt issuance costs that are amortized over the life of the related debt. See further discussion related to the Consolidated Balance Sheet classification of these costs below under reclassifications.

Unamortized Debt Repurchase Costs

For the Company’s Washington regulatory jurisdiction and for any debt repurchases beginning in 2007 in all jurisdictions, premiums paid to repurchase debt are amortized over the remaining life of the original debt that was repurchased or, if new debt is issued in connection with the repurchase, these costs are amortized over the life of the new debt. In the Company’s other regulatory jurisdictions, premiums paid to repurchase debt prior to 2007 are being amortized over the average remaining maturity of outstanding debt when no new debt was issued in connection with the debt repurchase. These costs are recovered through retail rates as a component of interest expense.

Accumulated Other Comprehensive Loss

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



	2015		2014
Unfunded benefit obligation for pensions and other postretirement benefit plans - net of taxes of $3,580 and $4,247, respectively	$	6,650	$	7,888

The following table details the reclassifications out of accumulated other comprehensive loss by component for the years ended December 31 (dollars in thousands):



	Amounts Reclassified from Accumulated Other Comprehensive Loss
Details about Accumulated Other Comprehensive Loss Components	2015			2014			Affected Line Item in Statement of Income
Realized gains on investment securities	$	—		$	3		(a)
Realized losses on investment securities	—			(735		)	(a)
	—			(732		)	Total before tax
	—			272			Tax benefit (a)
	$	—		$	(460	)	Net of tax
Amortization of defined benefit pension items
Amortization of net prior service cost	$	(31	)	$	1,094		(b)
Amortization of net loss	(2,623		)	83,301			(b)
Adjustment due to effects of regulation	749			(78,773		)	(b)
	(1,905		)	5,622			Total before tax
	667			(1,967		)	Tax expense (benefit)
	$	(1,238	)	$	3,655		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 10 for additional details).

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 material loss may be incurred. As of December 31, 2015, the Company has not recorded any significant amounts related to unresolved contingencies. See Note 19 for further discussion of the Company's commitments and contingencies.

Reclassification, Policy [Policy Text Block]

Reclassifications

Certain prior year amounts on the Company's Consolidated Balance Sheets were reclassified to conform to the current year presentation. The reclassifications related the presentation of debt issuance costs due to the retrospective adoption of FASB ASU No. 2015-03, "Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs" as of December 31, 2015. This resulted in a decrease to Other Deferred Charges and a decrease to Long-Term Debt and Capital Leases of $11.4 million as of December 31, 2014. There was no other impact on the Company's financial statements or results of operations.

Also, the Company adopted FASB ASU 2015-17 “Income Taxes (Topic 740) - Balance Sheet Classification of Deferred Taxes,” as of December 31, 2015 on a prospective basis, which resulted in all 2015 deferred income taxes being classified as noncurrent liabilities on the Consolidated Balance Sheet, compared to 2014 under the previous guidance, which required entities to separately present Deferred Tax Assets (DTAs) and Deferred Tax Liabilities (DTLs) as current and noncurrent in a classified balance sheet. This makes the 2015 presentation of deferred income taxes incomparable to the 2014 presentation of deferred income taxes.

See Note 2 of the Notes to Consolidated Financial Statements for further discussion of the adoption of both of these ASUs.