Avista Corporation (AVA) Earnings Call Transcript & Summary

Good day, and welcome to the Avista Corporation Second Quarter 2026 Earnings Conference Call. [Operator Instructions] 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.

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 premarket this morning relating to our financial results for the quarter. You can find this information online. Heather, please go ahead.

Thank you, Stacey. 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 in 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. . 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. And 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 damaged 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. 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. And right now, our primary focus is on assessing damage to our facilities, planning for restoration and supporting our customers and employees 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 are storing electric and natural gas service as quickly and safely as conditions allow.

At this time, we will take questions.

[Operator Instructions] Our first question will come from the line of Shar Purreza with Wells Fargo Securities.

This is Whitney Mutalemwa on for Shar. Yes, definitely, our thoughts are with the Spokane people. Just to -- can you give us a sense of the extent of the damage to the transmission system? How are you thinking about the cost recovery in insurance treatment while this causes still under investigation?

I can talk about the extent of the damage. We still have -- we have had repairs, like I said to one of the critical lines and then a couple of other lines that were damaged. We've been able to repair, but we still have a couple of lines that are out. And we do have access to the areas now. And so our crews are starting that repair on the transmission system that shouldn't take as long as the repair likely to the distribution system. So 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.

And then I'll build on that Whitney. Of course, many of these assets are long-lived assets. And so from a regulatory lag perspective, there shouldn't be a significant impact there and 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.

One moment for our next question and that will come from the line of Michael Lonegan with Barclays.

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

Yes. They're in the two legislative sessions ago, there was a bill that was passed that ultimately allows for securitization. And 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 sure monetary perspective on the infrastructure, I wouldn't see us being anywhere remotely close to that need.

Okay. And then 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-megawatt project as upside to your capital plan. Anything you could share there would be helpful.

Yes. I appreciate the question. And 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. And that shared interest to support of arability has been front and center to our response to these data requests that we received. And 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. And we won't move forward with them unless we are confident that our current customers' reliability will be maintained or enhanced. 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. And so 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. And so we have been participating in a broader process, engaging with regulators. There's workshops going on the Washington regulators and 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. so we've appreciated the customer questions that we've gotten. And again, as you noted, that pause in the MOU has helped us to have more time to explore those internal and external processes. And so we are also working on related to ensuring -- providing the appropriate assurances for customers that they will not. Existing customers will not cover any costs where we're considering updates to a potential tariffs, hybrid tariffs, special contracts potentially at the regulatory level that we could -- we think could provide additional assurances to customers and potentially working at the seat level through policy that has already been brought up last year and will likely be brought up this year. And we think it's a good thing to have those assurances for our customers. So 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 we have.

And then lastly for 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 4-year plan filed in Washington State?

Mike, it's Kevin. Thanks for the question. Yes, we've been saying all along that there's pretty key or fundamental differences and points of view on the term of the case. We feel strongly about the 4-year others, as you can see through their testimony do not. And so I think that's proving out that settlement will be quite difficult. But 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. And so we think that's constructive as the commission contemplates how to resolve the case in the end of the regulatory process. And 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 2 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. And then they also did not go along with any adjustment to power supply, which again, I think power supply is proving to over the last several years. Unfortunately, we've got pretty clear knowledge of what's been going on. And so with all that data in mind, I think the commission is in a good spot there. staff perspective on power supply, again, a little bit of a discrepancy on how we get there, but it's relatively close to where the company is at. So again, I don't believe we'll see a settlement take place. We will go ahead and file our rebuttal case here on the seventh to Friday. And then we'll have a hearing in September, September 17 through 18. And likely and then the commission will think about the case, and we'll get an order towards the middle of December. And 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. And again, the parties, but for a couple of key issues aren't that far apart from us.

Our next question that will come from the line of Chris Ellinghaus with Siebert Williams Shank.

Do you have any sense from what you've been able to ascertain so far? How long do you think it will take to normalize your infrastructure?