FAIR VALUE (Tables)

9 Months Ended

Sep. 30, 2012

Carrying Value And Estimated Fair Value Of Financial Instruments

The following table sets forth the carrying value and estimated fair value of the Company’s financial instruments not reported at estimated fair value on the Condensed Consolidated Balance Sheets as of September 30, 2012 and December 31, 2011 (dollars in thousands):

	September 30, 2012				December 31, 2011
	Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value
Long-term debt (Level 2)	$	951,000	$	1,164,223	$	962,100	$	1,135,536
Long-term debt (Level 3)		222,000		245,995		222,000		234,226
Nonrecourse long-term debt (Level 3)		36,319		39,336		46,471		51,974
Long-term debt to affiliated trusts (Level 3)		51,547		43,686		51,547		43,810

Fair Value Of Assets And Liabilities Measured On Recurring Basis

The following table discloses by level within the fair value hierarchy the Company’s assets and liabilities measured and reported on the Condensed Consolidated Balance Sheets as of September 30, 2012 and December 31, 2011 at fair value on a recurring basis (dollars in thousands):

	Level 1		Level 2		Level 3		Counterparty and Cash Collateral Netting (1)			Total
September 30, 2012
Assets:
Energy commodity derivatives	$	—	$	76,695	$	—	$	(73,944	)	$	2,751
Level 3 energy commodity derivatives:
Power exchange agreements		—		—		366		(366	)		—
Interest rate swaps		—		5,069		—		—			5,069
Investments and funds held for clients:
Cash and cash equivalents		31,874		—		—		—			31,874
Securities available for sale:
U.S. government agency		—		63,458		—		—			63,458
Municipal		—		5,182		—		—			5,182
Corporate fixed income – financial		—		6,634		—		—			6,634
Corporate fixed income – industrial		—		4,999		—		—			4,999
Corporate fixed income – utility		—		1,068		—		—			1,068
Certificate of deposits		—		1,011		—		—			1,011
Funds held in trust account of Spokane Energy		1,600		—		—		—			1,600
Deferred compensation assets:
Fixed income securities (2)		2,148		—		—		—			2,148
Equity securities (2)		5,814		—		—		—			5,814
Total	$	41,436	$	164,116	$	366	$	(74,310	)	$	131,608
Liabilities:
Energy commodity derivatives	$	—	$	125,488	$	—	$	(83,418	)	$	42,070
Level 3 energy commodity derivatives:
Natural gas exchange agreements		—		—		3,105		—			3,105
Power exchange agreements		—		—		18,242		(366	)		17,876
Power option agreements		—		—		1,585		—			1,585
Interest rate swaps		—		3,827		—		—			3,827
Foreign currency derivatives		—		30		—		—			30
Total	$	—	$	129,345	$	22,932	$	(83,784	)	$	68,493

	Level 1		Level 2		Level 3		Counterparty and Cash Collateral Netting (1)			Total
December 31, 2011
Assets:
Energy commodity derivatives	$	—	$	80,571	$	—	$	(79,247	)	$	1,324
Level 3 energy commodity derivatives:
Natural gas exchange agreements		—		—		956		(956	)		—
Power exchange agreements		—		—		4,674		(4,674	)		—
Foreign currency derivatives		—		32		—		—			32
Investments and funds held for clients:
Cash and cash equivalents		21,957		—		—		—			21,957
Securities available for sale:
U.S. government agency		—		74,893		—		—			74,893
Municipal		—		425		—		—			425
Corporate fixed income – financial		—		11,154		—		—			11,154
Corporate fixed income – industrial		—		6,518		—		—			6,518
Corporate fixed income – utility		—		2,092		—		—			2,092
Certificate of deposits		—		1,497		—		—			1,497
Funds held in trust account of Spokane Energy		1,600		—		—		—			1,600
Deferred compensation assets:
Fixed income securities (2)		2,116		—		—		—			2,116
Equity securities (2)		5,252		—		—		—			5,252
Total	$	30,925	$	177,182	$	5,630	$	(84,877	)	$	128,860
Liabilities:
Energy commodity derivatives	$	—	$	177,743	$	—	$	(79,247	)	$	98,496
Level 3 energy commodity derivatives:
Natural gas exchange agreements		—		—		2,644		(956	)		1,688
Power exchange agreements		—		—		14,584		(4,674	)		9,910
Power option agreements		—		—		1,260		—			1,260
Interest rate swaps		—		18,895		—		—			18,895
Total	$	—	$	196,638	$	18,488	$	(84,877	)	$	130,249

(1) The Company is permitted to net derivative assets and derivative liabilities with the same counterparty when a legally enforceable master netting agreement exists. In addition, the Company nets derivative assets and derivative liabilities against any payables and receivables for cash collateral held or placed with these same counterparties.

(2) These assets are trading securities and are included in other intangibles, property and investments-net on the Condensed Consolidated Balance Sheets.

Schedule Of Quantitative Information Used For Estimation Of Fair Value Of Level 3

The following table presents the quantitative information which was used to estimate the fair values of the Level 3 assets and liabilities above as of September 30, 2012 (dollars in thousands):

	Fair Value (Net) at September 30, 2012			Valuation Technique	Unobservable Input	Range
Power exchange agreements	$	(17,876	)	Surrogate facility pricing	O&M charges	$30.49 - $53.82/MWh (1)
					Escalation factor	5% - 2012 to 2015
						3% - 2016 to 2019
					Transaction volumes	361,630 - 379,156 MWhs
Power option agreements		(1,585	)	Black-Scholes-Merton	Strike price	$41.84/MWh - 2012
						$78.21/MWh - 2019
					Delivery volumes	157,517 - 287,147 MWhs
					Volatility rates	0.20 (2)
Natural gas exchange agreements		(3,105	)	Internally derived weighted average cost of gas	Forward purchase prices	$3.53 - $3.69/mmBTU
					Forward sales prices	$3.70 - $4.65/mmBTU
					Purchase volumes	135,000 - 465,000 mmBTUs
					Sales volumes	140,010 - 310,000 mmBTUs

(1) The average O&M charges for 2012 were $40.87 per MWh.

(2) The estimated volatility rate of 0.20 is compared to actual known volatility rates of 0.34 for 2012 to 0.24 in October 2015.

Reconciliation For Energy Commodity Derivative Assets (Liabilities Measured At Fair Value On A Recurring Basis Using Significant Unobservable Input (Level 3))

The following table presents activity for net energy commodity derivative assets (liabilities) measured at fair value using significant unobservable inputs (Level 3) for the three and nine months ended September 30, 2012 and 2011 (dollars in thousands):

	Natural Gas Exchange Agreements			Power Exchange Agreements			Power Option Agreements			Total
Three months ended September 30, 2012:
Balance as of July 1, 2012	$	(2,727	)	$	(10,438	)	$	(1,756	)	$	(14,921	)
Total gains or losses (realized/unrealized):
Included in net income		—			—			—			—
Included in other comprehensive income		—			—			—			—
Included in regulatory assets/liabilities (1)		(377	)		(7,438	)		171			(7,644	)
Purchases		—			—			—			—
Issuances		—			—			—			—
Settlements		(1	)		—			—			(1	)
Transfers to other categories		—			—			—			—
Ending balance as of September 30, 2012	$	(3,105	)	$	(17,876	)	$	(1,585	)	$	(22,566	)
Nine months ended September 30, 2012:
Balance as of January 1, 2012	$	(1,688	)	$	(9,910	)	$	(1,260	)	$	(12,858	)
Total gains or losses (realized/unrealized):
Included in net income		—			—			—			—
Included in other comprehensive income		—			—			—			—
Included in regulatory assets/liabilities (1)		(364	)		(12,216	)		(325	)		(12,905	)
Purchases		—			—			—			—
Issuances		—			—			—			—
Settlements		(1,053	)		4,250			—			3,197
Transfers to other categories		—			—			—			—
Ending balance as of September 30, 2012	$	(3,105	)	$	(17,876	)	$	(1,585	)	$	(22,566	)
Three months ended September 30, 2011:
Balance as of July 1, 2011	$	(4,404	)	$	13,058		$	(1,309	)	$	7,345
Total gains or losses (realized/unrealized):
Included in net income		—			—			—			—
Included in other comprehensive income		—			—			—			—
Included in regulatory assets/liabilities (1)		2,138			(8,962	)		(281	)		(7,105	)
Purchases		—			—			—			—
Issuances		—			—			—			—
Settlements		—			—			—			—
Transfers to other categories		—			—			—			—
Ending balance as of September 30, 2011	$	(2,266	)	$	4,096		$	(1,590	)	$	240
Nine months ended September 30, 2011:
Balance as of January 1, 2011	$	—		$	15,793		$	(2,334	)	$	13,459
Total gains or losses (realized/unrealized):
Included in net income		—			—			—			—
Included in other comprehensive income		—			—			—			—
Included in regulatory assets/liabilities (1)		2,138			(13,642	)		744			(10,760	)
Purchases		—			—			—			—
Issuances		—			—			—			—
Settlements		—			1,945			—			1,945
Transfers to other categories		(4,404	)		—			—			(4,404	)
Ending balance as of September 30, 2011	$	(2,266	)	$	4,096		$	(1,590	)	$	240

(1) The WUTC and the IPUC issued accounting orders authorizing Avista Utilities to offset 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 settlement. 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 period of settlement, 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.