Avista Q2 2026 Earnings Call Transcript

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Provided by Quartr
August 3, 2026

Key Takeaways

  • Negative Sentiment: Spokane wildfires caused significant infrastructure damage, with approximately 7,300 electric and 5,300 natural-gas customers still without service. The full extent and duration of distribution-system repairs remain uncertain, creating potential cost and operational risks.
  • Neutral Sentiment: Avista said it is too early to determine wildfire cost recovery or insurance treatment; while a Washington securitization mechanism exists, management does not currently expect the event to be financially large enough to require it.
  • Positive Sentiment: Management said its wildfire-mitigation measures—including vegetation management, monitoring, operational changes, and public-safety power shutoffs—appear to have worked as intended, and crews repaired a key transmission line that reduced the risk of additional outages.
  • Neutral Sentiment: Avista continues to pause negotiations on a potential 500-megawatt data-center project while regulators and stakeholders develop stronger customer protections. The company said it will proceed only if the project provides a net benefit, preserves reliability, and does not shift costs to existing customers.
  • Negative Sentiment: Management expects volatility in nonregulated investment results; a gain anticipated next quarter from an IPO-related investment would largely reverse at current share prices, although future fund exits could provide cash-flow benefits.
AI Generated. May Contain Errors.
Earnings Conference Call
Avista Q2 2026
00:00 / 00:00

There are 9 speakers on the call.

Operator

Good day, and welcome to the Avista Corporation second quarter 2026 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, press star one one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker, Stacey Walters, Investor Relations Manager. Please go ahead.

Speaker 1

Good morning. Thank you for joining us. Joining me today is Avista Corp President and CEO, Heather Rosentrater, who will speak briefly in a few moments on current events. Senior Vice President, CFO, Treasurer, and Regulatory Affairs Officer, Kevin Christie, is also here and will be available for questions. As I'm sure you can appreciate, we are going to focus this earnings call on the fires that occurred in Spokane over the weekend. Please refer to our earnings press release and second quarter 10-Q for information that was filed pre-market this morning relating to our financial results for the quarter. You can find this information online. Heather, please go ahead.

Speaker 2

Thank you, Stacy. As you may have seen in our press release yesterday and the related Form 8-K filed this morning, multiple wildfires are burning near Spokane, Washington. Fueled by dry and windy conditions, these fires spread rapidly and have devastated our community. Thousands of people, including many of our employees, have been displaced and many are still facing great uncertainty. Our hearts are with everyone who has had to evacuate their homes, everyone who has suffered loss, and all who continue working on the front lines. Our facilities were not involved in starting any of these fires in the Spokane area. We have restored service to customers whose outages were solely related to the public safety power shutoff. However, we still have electric and natural gas outages in parts of our service territory because of damaged infrastructure, evacuation restrictions, and ongoing safety concerns associated with the fires.

Speaker 2

At this time, about 7,300 of our 429,000 electric customers are out of power, and about 5,300 of our 386,000 natural gas customers are without service. To reiterate, in areas that were part of the public safety power shutoff event, any remaining outages are no longer tied to that event. They are related to active wildfire conditions and the damage those fires caused. As a result of the fires, we have identified significant impacts to our transmission and distribution infrastructure serving parts of West Spokane. Multiple transmission lines in the area sustained damage from wildfire activity, and the transmission system was operating with reduced capacity due to the damage. I am happy to share that our crews repaired and energized a key transmission line earlier this morning that significantly reduces the risk of new customer outages due to system capacity constraints.

Speaker 2

However, we are still assessing the full extent of the damage as emergency responders provide access to impacted neighborhoods and fire conditions allow. The situation is still very dynamic, and the fires in the Spokane area have yet to be contained. We have shared as much as we currently know, right now our primary focus is on assessing damage to our facilities, planning for restoration, and supporting our customers and employees who have been impacted by this tragic event. We will work to provide additional information as it becomes available. Our first priority throughout these events is the safety of our customers, employees, contractors, and the communities we serve. We remain focused on assisting impacted communities, coordinating with emergency responders and community partners, and restoring electric and natural gas service as quickly and safely as conditions allow.

Speaker 1

At this time, we will take questions.

Operator

Thank you. As a reminder, to ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, press star one one again. One moment while we compile the Q&A roster. Our first question will come from the line of Shar Pourreza with Wells Fargo Securities. Your line is open.

Speaker 3

Good morning, team. This is Whitney with Telema on for Shar.

Speaker 2

Hi, Whitney.

Speaker 1

Hello, Whitney.

Speaker 3

Yes, definitely our thoughts are with the Spokane people. Can you give us a sense of the extent of the damage to the transmission system? How are you thinking about the cost recovery and insurance treatment while this cause is still under investigation?

Speaker 2

I can talk about the extent of the damage. We have had repairs, like I said, to one of the critical lines, then a couple other lines that were damaged we've been able to repair, but we still have a couple lines that are out. We do have access to the areas now, our crews are starting that repair on the transmission system. That shouldn't take as long as the repair likely to the distribution system. That damage is still being assessed, and we'll know more in the upcoming days the extent of that damage and how long it will take.

Speaker 4

I'll build on that, Whitney. Of course, many of these assets are long-lived assets, from a regulatory lag perspective, there shouldn't be significant impact there. As we look forward and once the assessment is complete, we can make some determination of whether we file a petition with the UTC. If that ends up making sense, we'll let you know.

Speaker 3

Well said. Thank you.

Operator

Thank you. One moment for our next question. That will come from the line of Michael Lonegan with Barclays. Your line is open.

Speaker 5

Hi. Thanks for taking my questions. On the wildfires, I was going back to the cost recovery. I was just wondering, legislation in the state allows for securitization of wildfire-related costs, correct? Just wondering, anything you could share about that would be helpful.

Speaker 4

Yes. In the two legislative sessions ago, there was a bill that was passed that ultimately allows for securitization. Again, we've said it's too early to assess. Securitization would be for, I would say, much more impactful events than what we're experiencing now. Of course, I don't want it to seem like it's not impactful to all of us that have been involved in the fires or having the fires around us, but from a sheer monetary perspective on the infrastructure, I wouldn't see us being anywhere remotely close to that need.

Speaker 5

Okay. Thank you. Shifting to the data center negotiation pause, just wondering if there's anything you could talk about whether there's been any progress that you're addressing customer, community member, and local leader concerns. I know the MOU remains in place, but you removed the 500 MW project as upside to your capital plan. Anything you could share there would be helpful. Thank you.

Speaker 2

Yeah. I appreciate the question. I know there's a lot of questions about the data centers, and I want to take the opportunity to just be clear in how we're viewing it. I do appreciate that customer affordability is a shared priority with our investors, our customers, and ourselves. That shared interest to support affordability has been front and center to our response to these data requests that we've received. As we've consistently communicated, we will not move forward with a new large data center customer unless we're confident that they will make significant contributions to support affordability for existing customers. We won't move forward with them unless we are confident that our current customers' reliability will be maintained or enhanced.

Speaker 2

We expect that there needs to be a net benefit for our current customers, and we want to ensure that there are protections in place for our current customers. Those things have guided the conversations that we have been having internally related to potential updates to our internal processes. They've guided the conversations that we've had externally with those other stakeholders because as we shared, we know that we are just one part of multiple entities that are required to consider these kinds of requests. We have been participating in a broader process, engaging with regulators. There's workshops going on in the Washington regulators. Commissioners are holding those. We've been engaging with local partners who are also working through just appropriate new considerations for planning and coordination because the scale of these projects is so unprecedented. We've appreciated the customer questions that we've gotten.

Speaker 2

As you noted, that pause in the MOU has helped us to have more time to explore those internal and external processes. We are also working on related to ensuring, providing the appropriate assurances for customers that existing customers will not cover any costs. We're considering updates to potential tariffs, hybrid tariffs, special contract potentially at the regulatory level that we think could provide additional assurances to customers and potentially working at the state level, through policy that has already been brought up last year and will likely be brought up this year. We think it's a good thing to have those assurances for our customers. Those are the kinds of things, kinds of conversations we're having that will inform how we might move forward with any of those large data center requests that we have.

Speaker 5

Thank you. Lastly from me, on the Washington rate case, just wondering if you could share how you're feeling coming out of staff testimony in the settlement conference, key debates, where they could head, likelihood of a settlement. Do you think it's going to be hard to reach a settlement because it's the first four-year plan filed in Washington State?

Speaker 4

Yeah. Hi, Mike. It's Kevin. Thanks for the question. Yes. We've been saying all along that there's pretty key or fundamental differences in points of view on the term of the case. We feel strongly about the four-year. Others, as you can see through their testimony, do not. I think that's proving out that settlement will be quite difficult. As we look forward and see the positions of the parties, for example, if you look at staff and where they're at, there's a discrepancy on how we got there, but they're not that far from where we're at. We think that's constructive as the commission contemplates how to resolve the case at the end of the regulatory process.

Speaker 4

Even if you look at the position of public counsel, which seems very stark when compared to where we're at The lion's share of the difference, there are two items. One is return. We think they have a return level that is unacceptable. We think the commission will likely see it the same way based on past practice or history. They also did not go along with any adjustment to power supply, which again, I think power supply is proving that over the last several years, unfortunately, we've got pretty clear knowledge of what's been going on. With all that data in mind, I think the commission is in a good spot there. Staff's perspective on power supply, again, a little bit of a discrepancy on how we get there, but is relatively close to where the company is at.

Speaker 4

Again, I don't believe we'll see a settlement take place. We will go ahead and file our rebuttal case here on the 7th, so Friday, then we'll have a hearing in September 17-18, likely. Then the Commission will think about the case, and we'll get an order towards the middle of December. Again, I just want to reiterate that I think from our position, how we positioned the case overall, the data that we've provided throughout the pendency of the case, and as we think about rebuttal and what will be publicly available to you, it's a strong case. Again, the parties, but for a couple of key issues, aren't that far apart from us.

Speaker 5

Great. Thank you very much.

Speaker 4

Thank you.

Speaker 2

Thank you.

Operator

One moment for our next question. That will come from the line of Chris Ellinghaus with Siebert Williams Shank. Your line is open.

Speaker 6

Hey, good morning, everybody.

Speaker 4

Hi, Chris

Speaker 6

briefing went quickly. Do you have any sense from what you've been able to ascertain so far how long you think it will take to normalize your infrastructure?

Speaker 2

It's hard to tell right now. Again, we're still getting into the areas that have been affected. Our first priority is the transmission, and we think that we have a good sense of the damage there. In the near term, we should be able to get that restored. With the distribution in it, there's a significant structure loss as has been shared. Working through how we support the areas that remain, that's what we're trying to understand better right now and how long that will take. It's still to be determined.

Speaker 6

Okay. Kevin, vis-a-vis the quarter, can you give us any color for the non-regulated benefit for the quarter? What was going on with presumably mostly funds?

Speaker 4

Yeah, absolutely, funds. Again, Chris, thanks. Appreciate the question. We had a good quarter from a non-regulated perspective, and it really gets back to what we said one year ago on the call where we had some headwinds that materialized for various reasons. We said that the market needed to levelize. We thought that that would likely happen. Once again, we would be, and an expression you know we've used is to get paid a little bit to learn. It's through EIP. We've been clear about that. There is an investment within EIP that went public, and so we acknowledged or had a gain leading up to that IPO. As you can see in our documents, we would expect another gain due to the lag.

Speaker 4

It would show up next quarter, and it will introduce volatility into that particular investment because that company, ERock, is publicly traded, and you can see what's transpired since then. Most of what will be the gain that we're expecting to recognize next quarter, if you look at current stock price, would then reverse. I'd also share that that's just one fund in amongst that particular or one investment within that fund, and there will be gains and losses within all of those as well. There's a netting, you can take a look at ERock stock price and get a reasonable proxy about what might happen in that fund. We do think that net is beneficial to us, obviously, when we can exit, and we can't exit, or EIP cannot exit due to the lockup that typically happens with an IPO for some time.

Speaker 4

When they can, that will be beneficial from a cash flow perspective and will help to alleviate some of our equity needs.

Speaker 6

Okay, that's helpful. Lastly, this workshop next week at the UTC, is that going to be particularly helpful to inform your MOU situation? Is that part of the reason why you withdrew so that they could hold this workshop?

Speaker 4

Well, here's what I would say is that process has been underway for a bit, and it is something that absolutely should benefit us as we go forward. Working with the community will also be key to all of that. The commission can help. Heather highlighted the fact that we've historically used the concept of a special contract for any large load, and that has worked for us. We need to give better clarity to others that we are properly protecting them. I think the process that will happen with the commission will define that to some extent, and if it doesn't, we will make sure we define it. Everybody can have good trust in the process and the protections for existing customers and benefits for existing customers. Again, it will absolutely be helpful. We've said net benefit.

Speaker 4

I know it's a term that's used mostly in M&A, but we've been using the net benefit expression in both Washington and Idaho for quite some time about how we view large loads and existing customers.

Speaker 6

Okay, thanks. Good luck, everybody.

Speaker 4

Thank you, Chris.

Speaker 2

Thank you, Chris.

Operator

Thank you. One moment for our next question. That will come from the line of Julien Dumoulin-Smith with Jefferies. Your line is open.

Speaker 7

Yeah, hi. Good morning. It's Brian on for Julien.

Speaker 4

Hi, Brian.

Speaker 2

Hi, Brian.

Speaker 7

Most of my questions were asked and answered. Just maybe you could just talk a little bit about your wildfire mitigation plan and the initiatives and the benefits that you were able to capture and offer the community over these last couple of days. With the PSPS, seems like it performed very well or as planned, et cetera.

Speaker 2

Yep, absolutely. Thank you. Appreciate that question. That's what we've been sharing, is that we believe that our proactive measures have demonstrated that they've been providing value and have been effective. We know it's really hard for the community to be experiencing proactive outages in the public safety power shutoffs, but we did find on at least one of those lines that had been proactively de-energized, we found several trees that fell into the line during our patrol of those lines that we do on those feeders before we re-energize. That's what we've been able to share, and I think it does give our community a better understanding and appreciation. Maybe not appreciation, but a better understanding of why we're doing that.

Speaker 2

There's been a lot of conversation about prevention, and that's how we see that tool, is it's a tool to prevent the start of wildfires. That's what we've shared as the situation could have been worse. We're looking to and appreciate the work that our teams have done to put those things in place, and we do think that they were effective in this really high-risk situation. That is nice to be able to reinforce the work that we've done there. Yeah, all the work we've done around vegetation management, all the work that we've done around these real-time situational awareness and then operational changes that we've made do seem to be demonstrating their value.

Speaker 7

Okay, good to hear that. Thank you very much.

Speaker 2

Thank you.

Operator

Thank you. As a reminder, if you would like to ask a question, please press star one one. Our next question will come from the line of Sophie Karp with KeyBanc Capital. Your line is open.

Speaker 8

Good morning. This is Michael on for Sophie. Thanks for taking our questions.

Speaker 4

Hi, Michael.

Speaker 2

Hi, Michael.

Speaker 8

Does the wildfire and related cost make you rethink seeking a four-year rate case, specifically around the difficulty with forecasting such events?

Speaker 4

I think it's just too soon to say about that right now. Based on what I know, I think the four-year continues to make sense for us for all the reasons we've previously elaborated. As a reminder, if we have some kind of extreme event or situation arise during the four-year rate plan, we can. It's not something we want to do, but we can go ahead and refile and replace years three and four. If something were to occur, and I don't think it's this event, but something else were to occur, then we could go ahead and do that. That assumes the commission sides with the company and does in fact put in place the four-year.

Speaker 8

Got it. Do you expect there will be some opportunity to introduce additional wildfire legislation in the next session?

Speaker 2

I don't think we're actively looking at this session. I think we'll have the opportunity to work with our other utilities in the region and other stakeholders and maybe in the future. There is work at the federal level for legislation that we think would be likely the focus area probably, but in the near term. That's just more of an ongoing effort to explore what might make sense.

Speaker 8

That's all for me. Thank you.

Operator

Thank you.

Speaker 2

Thank you.

Operator

Showing no further questions in the queue at this time, I would now like to turn the call over to Stacey Walters for any closing remarks.

Speaker 1

This does conclude our call today. Thank you all for joining us.

Operator

This concludes today's program. Thank you all for participating. You may now disconnect.

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