Revenue

9 Months Ended

Sep. 30, 2021

Revenue from Contract with Customer [Abstract]

Revenue

NOTE 4. REVENUE

The revenue recognition model contained in ASC 606 requires an entity to identify the various performance obligations in a contract, allocate the transaction price among the performance obligations and recognize revenue when (or as) the entity satisfies each performance obligation.

Utility Revenues

Revenue from Contracts with Customers

General

The majority of Avista Corp.’s revenue is from rate-regulated sales of electricity and natural gas to retail customers, which has two performance obligations, (1) having service available for a specified period (typically a month at a time) and (2) the delivery of energy to customers. The total energy price generally has a fixed component (basic charge) related to having service available and a usage-based component, related to the delivery and consumption of energy. The commodity is sold and/or delivered to and consumed by the customer simultaneously, and the provisions of the relevant utility commission authorization determine the charges the Company may bill the customer. Given that all revenue recognition criteria are met upon the delivery of energy to customers, revenue is recognized immediately at that time.

Revenues from contracts with customers are presented in the Condensed Consolidated Statements of Income in the line item "Utility revenues, exclusive of alternative revenue programs."

Non-Derivative Wholesale Contracts

The Company has certain wholesale contracts which are not accounted for as derivatives and, accordingly, are within the scope of ASC 606 and considered revenue from contracts with customers. Revenue is recognized as energy is delivered to the customer or the service is available for a specified period of time, consistent with the discussion of rate-regulated sales above.

Alternative Revenue Programs (Decoupling)

ASC 606 retained existing GAAP associated with alternative revenue programs, which specified that alternative revenue programs are contracts between an entity and a regulator of utilities, not a contract between an entity and a customer. GAAP requires that an entity present revenue arising from alternative revenue programs separately from revenues arising from contracts with customers on the face of the Condensed Consolidated Statements of Income. The Company's decoupling mechanisms (also known as a FCA in Idaho) qualify as alternative revenue programs. Decoupling revenue deferrals are recognized in the Condensed Consolidated Statements of Income during the period they occur (i.e. during the period of revenue shortfall or excess due to fluctuations in customer usage), subject to certain limitations, and a regulatory asset or liability is established that will be surcharged or rebated to customers in future periods. GAAP requires that for any alternative revenue program, like decoupling, the revenue must be expected to be collected from customers within 24 months of the deferral to qualify for recognition in the current period Condensed Consolidated Statement of Income. Any amounts included in the Company's decoupling program that are not expected to be collected from customers within 24 months are not recorded in the financial statements until the period in which revenue recognition criteria are met. The amounts expected to be collected from customers within 24 months represents an estimate that must be made by the Company on an ongoing basis due to it being based on the volumes of electric and natural gas sold to customers on a go-forward basis.

Derivative Revenue

Most wholesale electric and natural gas transactions (including both physical and financial transactions), and the sale of fuel are considered derivatives, which are specifically scoped out of ASC 606. As such, these revenues are disclosed separately from revenue from contracts with customers. Revenue is recognized for these items upon the settlement/expiration of the derivative contract. Derivative revenue includes those transactions that are entered into and settled within the same month.

Other Utility Revenue

Other utility revenue includes rent, sales of materials, late fees and other charges that do not represent contracts with customers. Other utility revenue also includes the provision for earnings sharing. This revenue is scoped out of ASC 606, as this revenue does not represent items where a customer is a party that has contracted with the Company to obtain goods or services that are an output of the

Company’s ordinary activities in exchange for consideration. As such, these revenues are presented separately from revenue from contracts with customers.

Other Considerations for Utility Revenues

Gross Versus Net Presentation

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 derivative revenues.

Utility-related taxes collected from customers (primarily state excise taxes and city utility taxes) are taxes that are imposed on Avista Utilities as opposed to being imposed on its customers; therefore, Avista Utilities is the taxpayer and records these transactions on a gross basis in revenue from contracts with customers and operating expense (taxes other than income taxes). The utility-related taxes collected from customers at AEL&P are imposed on the customers rather than AEL&P; therefore, the customers are the taxpayers and AEL&P is acting as their agent. As such, these transactions at AEL&P are presented on a net basis within revenue from contracts with customers.

Utility-related taxes that were included in revenue from contracts with customers were as follows for the three and nine months ended September 30 (dollars in thousands):

	Three months ended September 30,				Nine months ended September 30,
	2021		2020		2021		2020
Utility-related taxes	$	13,816	$	12,411	$	46,971	$	43,989

Significant Judgments and Unsatisfied Performance Obligations

The only significant judgments involving revenue recognition are estimates surrounding unbilled revenue and receivables from contracts with customers and estimates surrounding the amount of decoupling revenues that will be collected from customers within 24 months (discussed above).

The Company has certain capacity arrangements, where the Company has a contractual obligation to provide either electric or natural gas capacity to its customers for a fixed fee. Most of these arrangements are paid for in arrears by the customers and do not result in deferred revenue and only result in receivables from the customers. The Company does have one capacity agreement where the customer makes payments throughout the year. As of September 30, 2021, the Company estimates it had unsatisfied capacity performance obligations of $18.8 million, which will be recognized as revenue in future periods as the capacity is provided to the customers. These performance obligations are not reflected in the financial statements, as the Company has not received payment for these services.

Disaggregation of Total Operating Revenue

The following table disaggregates total operating revenue by segment and source for the three and nine months ended September 30 (dollars in thousands):

	Three months ended September 30,						Nine months ended September 30,
	2021			2020			2021			2020
Avista Utilities
Revenue from contracts with customers	$	266,789		$	240,036		$	886,078		$	827,071
Derivative revenues		28,087			24,075			91,151			79,361
Alternative revenue programs		(10,499	)		(3,972	)		(13,069	)		(4,023	)
Deferrals and amortizations for rate refunds to customers		(156	)		1,742			2,664			1,216
Other utility revenues		2,531			1,683			7,348			5,484
Total Avista Utilities		286,752			263,564			974,172			909,109
AEL&P
Revenue from contracts with customers		9,065			8,797			32,331			30,900
Deferrals and amortizations for rate refunds to customers		(48	)		(48	)		(143	)		(143	)
Other utility revenues		130			66			327			257
Total AEL&P		9,147			8,815			32,515			31,014
Other revenues		108			267			445			1,345
Total operating revenues	$	296,007		$	272,646		$	1,007,132		$	941,468

Utility Revenue from Contracts with Customers by Type and Service

The following table disaggregates revenue from contracts with customers associated with the Company's electric operations for the three and nine months ended September 30 (dollars in thousands):

	2021						2020
	Avista Utilities		AEL&P		Total Utility		Avista Utilities		AEL&P		Total Utility
Three months ended September 30:
ELECTRIC OPERATIONS
Revenue from contracts with customers
Residential	$	94,803	$	3,080	$	97,883	$	85,494	$	3,150	$	88,644
Commercial		86,228		5,920		92,148		79,242		5,582		84,824
Industrial		28,843		—		28,843		28,472		—		28,472
Public street and highway lighting		1,877		65		1,942		1,845		65		1,910
Total retail revenue		211,751		9,065		220,816		195,053		8,797		203,850
Transmission		7,372		—		7,372		5,938		—		5,938
Other revenue from contracts with    customers		11,610		—		11,610		4,551		—		4,551
Total electric revenue from contracts  with customers	$	230,733	$	9,065	$	239,798	$	205,542	$	8,797	$	214,339
Nine months ended September 30:
ELECTRIC OPERATIONS
Revenue from contracts with customers
Residential	$	292,714	$	13,379	$	306,093	$	272,231	$	13,236	$	285,467
Commercial		243,370		18,768		262,138		226,876		17,479		244,355
Industrial		80,983		—		80,983		77,999		—		77,999
Public street and highway lighting		5,598		184		5,782		5,474		185		5,659
Total retail revenue		622,665		32,331		654,996		582,580		30,900		613,480
Transmission		15,668		—		15,668		14,121		—		14,121
Other revenue from contracts with    customers		24,282		—		24,282		13,256		—		13,256
Total electric revenue from contracts    with customers	$	662,615	$	32,331	$	694,946	$	609,957	$	30,900	$	640,857

The following table disaggregates revenue from contracts with customers associated with the Company's natural gas operations for the three and nine months ended September 30 (dollars in thousands):

	Three months ended September 30,				Nine months ended September 30,
	2021		2020		2021		2020
	Avista Utilities		Avista Utilities		Avista Utilities		Avista Utilities
NATURAL GAS OPERATIONS
Revenue from contracts with customers
Residential	$	21,197	$	20,835	$	142,401	$	139,833
Commercial		10,055		9,340		65,428		62,883
Industrial and interruptible		1,477		1,538		5,520		5,276
Total retail revenue		32,729		31,713		213,349		207,992
Transportation		1,921		1,656		6,177		5,747
Other revenue from contracts with customers		1,406		1,125		3,937		3,375
Total natural gas revenue from contracts with customers	$	36,056	$	34,494	$	223,463	$	217,114