Revenue Revenue (Notes)

6 Months Ended

Jun. 30, 2019

Revenue from Contract with Customer [Abstract]

Revenue from Contract with Customer [Text Block]

REVENUE

ASC 606 defines the core principle of the revenue recognition model is that an entity should 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, revenues from the lineman training school, 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 and the deferral and amortization of refunds to customers associated with the TCJA. 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 six months ended June 30 (dollars in thousands):

	Three months ended June 30,				Six months ended June 30,
	2019		2018		2019		2018
Utility-related taxes	$	12,688	$	12,986	$	31,777	$	32,153

Non-Utility Revenues

Revenue from Contracts with Customers

Non-utility revenues from contracts with customers are primarily derived from the operations of METALfx (through the date of its sale in April 2019, see Note 18 for further discussion). The contracts associated with METALfx have one performance obligation, the delivery of a product, and revenues are recognized when the risk of loss transfers to the customer, which occurs when products are shipped.

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 and depending on the timing of the customer payments, it can result in an immaterial amount of deferred revenue or a receivable from the customer. As of June 30, 2019, the Company estimates it had unsatisfied capacity performance obligations of $7.9 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 six months ended June 30 (dollars in thousands):

	Three months ended June 30,						Six months ended June 30,
	2019			2018			2019			2018
Avista Utilities
Revenue from contracts with customers	$	231,605		$	239,113		$	585,907		$	593,275
Derivative revenues	42,128			56,357			66,255			114,749
Alternative revenue programs	9,725			3,570			5,067			(2,369		)
Deferrals and amortizations for rate refunds to customers	2,512			982			4,647			(18,840		)
Other utility revenues	3,838			2,200			5,634			4,161
Total Avista Utilities	289,808			302,222			667,510			690,976
AEL&P
Revenue from contracts with customers	8,620			10,759			19,356			25,409
Deferrals and amortizations for rate refunds to customers	(47		)	(427		)	(95		)	(1,549		)
Other utility revenues	170			150			363			285
Total AEL&P	8,743			10,482			19,624			24,145
Other
Revenue from contracts with customers	2,024			6,324			9,671			13,053
Other revenues	237			270			488			485
Total other	2,261			6,594			10,159			13,538
Total operating revenues	$	300,812		$	319,298		$	697,293		$	728,659

Utility Revenue from Contracts with Customers by Type and Service

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

	2019						2018
	Avista Utilities		AEL&P		Total Utility		Avista Utilities		AEL&P		Total Utility
Three months ended June 30:
ELECTRIC OPERATIONS
Revenue from contracts with customers
Residential	$	72,886	$	3,724	$	76,610	$	74,818	$	4,155	$	78,973
Commercial and governmental	76,375		4,837		81,212		76,462		6,541		83,003
Industrial	26,245		—		26,245		27,985		—		27,985
Public street and highway lighting	1,897		59		1,956		1,899		63		1,962
Total retail revenue	177,403		8,620		186,023		181,164		10,759		191,923
Transmission	4,250		—		4,250		4,171		—		4,171
Other revenue from contracts with customers	4,379		—		4,379		3,919		—		3,919
Total revenue from contracts with customers	$	186,032	$	8,620	$	194,652	$	189,254	$	10,759	$	200,013
NATURAL GAS OPERATIONS
Revenue from contracts with customers
Residential	$	27,937	$	—	$	27,937	$	30,767	$	—	$	30,767
Commercial	13,369		—		13,369		14,668		—		14,668
Industrial and interruptible	1,103		—		1,103		1,078		—		1,078
Total retail revenue	42,409		—		42,409		46,513		—		46,513
Transportation	2,039		—		2,039		2,221		—		2,221
Other revenue from contracts with customers	1,125		—		1,125		1,125		—		1,125
Total revenue from contracts with customers	$	45,573	$	—	$	45,573	$	49,859	$	—	$	49,859
Six months ended June 30:
ELECTRIC OPERATIONS
Residential	$	188,279	$	9,576	$	197,855	$	189,571	$	10,693	$	200,264
Commercial and governmental	155,621		9,658		165,279		155,371		14,585		169,956
Industrial	51,493		—		51,493		53,104		—		53,104
Public street and highway lighting	3,800		122		3,922		3,758		131		3,889
Total retail revenue	399,193		19,356		418,549		401,804		25,409		427,213
Transmission	9,402		—		9,402		8,001		—		8,001
Other revenue from contracts with customers	12,573		—		12,573		10,210		—		10,210
Total electric revenue from contracts with customers	$	421,168	$	19,356	$	440,524	$	420,015	$	25,409	$	445,424

	2019						2018
	Avista Utilities		AEL&P		Total Utility		Avista Utilities		AEL&P		Total Utility
NATURAL GAS OPERATIONS
Residential	$	105,272	$	—	$	105,272	$	111,421	$	—	$	111,421
Commercial	49,964		—		49,964		52,040		—		52,040
Industrial and interruptible	2,730		—		2,730		2,761		—		2,761
Total retail revenue	157,966		—		157,966		166,222		—		166,222
Transportation	4,523		—		4,523		4,788		—		4,788
Other revenue from contracts with customers	2,250		—		2,250		2,250		—		2,250
Total natural gas revenue from contracts with customers	$	164,739	$	—	$	164,739	$	173,260	$	—	$	173,260