Fair Value

3 Months Ended

Mar. 31, 2025

Fair Value Disclosures [Abstract]

Fair Value

NOTE 10. FAIR VALUE

The carrying values of cash and cash equivalents, accounts and notes receivable, accounts payable, and short-term borrowings as shown on the Condensed Consolidated Balance Sheets are reasonable estimates of their fair values. The carrying values of long-term debt (including current portion and material finance leases) and long-term debt to affiliated trusts as shown on the Condensed Consolidated Balance Sheets may be different from the estimated fair value. See below for the estimated fair value of long-term debt and long-term debt to affiliated trusts.

The fair value hierarchy prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to fair values derived from unobservable inputs (Level 3 measurements).

The three levels of the fair value hierarchy are defined as follows:

Level 1 – Quoted prices are available in active markets for identical assets or liabilities. Active markets are those in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.

Level 2 – Pricing inputs are other than quoted prices in active markets included in Level 1, but which are either directly or indirectly observable as of the reporting date. Level 2 includes financial instruments valued using models or other valuation methodologies. These models are primarily industry-standard models that consider various assumptions, including quoted forward prices for commodities, time value, volatility factors, and current market and contractual prices for the underlying instruments, as well as other relevant economic measures. Substantially all of these assumptions are observable in the marketplace throughout the full term of the instrument, can be derived from observable data or are supported by observable levels at which transactions are executed in the marketplace.

Level 3 – Pricing inputs include significant inputs generally unobservable from objective sources. These inputs may be used with internally developed methodologies that result in management’s best estimate of fair value.

Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment, and may affect the valuation of fair value assets and liabilities and their placement within the fair value hierarchy levels. The determination of the fair values incorporates various factors including the credit standing of the counterparties involved and the impact of credit enhancements (such as cash deposits and letters of credit), and the impact of Avista Corp.’s nonperformance risk on its liabilities.

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 March 31, 2025 and December 31, 2024 (dollars in millions):

	March 31, 2025				December 31, 2024
	Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value
Long-term debt (Level 2)	$	1,100	$	949	$	1,100	$	938
Long-term debt (Level 3)		1,534		1,193		1,534		1,163
Snettisham finance lease obligation (Level 3)		38		35		39		35
Long-term debt to affiliated trusts (Level 3)		52		47		52		47

These estimates of fair value of long-term debt and long-term debt to affiliated trusts were primarily based on available market information, which generally consists of estimated market prices from third party brokers for debt with similar risk and terms. The price ranges obtained from the third party brokers consisted of market prices of 59.48 percent to 107.73 percent of the principal amount, where 100.0 percent of the principal amount (adjusted for unamortized discount or premium) represents the carrying value recorded on the Condensed Consolidated Balance Sheets. Level 2 long-term debt represents publicly issued bonds with quoted market prices; however, due to their limited trading activity, they are classified as Level 2 because brokers must generate quotes and make estimates if there is no trading activity near a period end. Level 3 long-term debt consists of private placement bonds and debt to affiliated trusts, which typically have no secondary trading activity. Fair values in Level 3 are estimated based on market prices from third party brokers using secondary market quotes for debt with similar risk and terms to generate quotes for Avista Corp. bonds. Due to the unique nature of the Snettisham finance lease obligation, the estimated fair value of these items was determined based on a discounted cash flow model using available market information. The Snettisham finance lease obligation fair value is determined using the Morgan Markets A Ex-Fin discount rate as published on March 31, 2025 and December 31, 2024.

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 March 31, 2025 and December 31, 2024 at fair value on a recurring basis (dollars in millions):

	Level 1		Level 2		Level 3		Counterparty and Cash Collateral Netting (1)			Total
March 31, 2025
Assets:
Energy commodity derivatives	$	—	$	37	$	—	$	(23	)	$	14
Interest rate swap derivatives		—		1		—		—			1
Equity Investments		—		—		52		—			52
Deferred compensation assets
Mutual Funds:
Fixed income securities (3)		3		—		—		—			3
Equity securities (3)		6		—		—		—			6
Total	$	9	$	38	$	52	$	(23	)	$	76
Liabilities:
Energy commodity derivatives (2)	$	—	$	35	$	13	$	(22	)	$	26
Total	$	—	$	35	$	13	$	(22	)	$	26
December 31, 2024
Assets:
Energy commodity derivatives (2)	$	—	$	23	$	—	$	(13	)	$	10
Interest rate swap derivatives		—		1		—		—			1
Equity Investments		—		—		53		—			53
Deferred compensation assets
Mutual Funds:
Fixed income securities (3)		2		—		—		—			2
Equity securities (3)		7		—		—		—			7
Total	$	9	$	24	$	53	$	(13	)	$	73
Liabilities:
Energy commodity derivatives (2)	$	—	$	61	$	3	$	(37	)	$	27
Total	$	—	$	61	$	3	$	(37	)	$	27

(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)The Level 3 energy commodity derivative balances are associated with a natural gas exchange agreement.

(3)Included in other property and investments-net and other non-current assets on the Condensed Consolidated Balance Sheets.

The difference between the amount of derivative assets and liabilities disclosed in respective levels in the table above and the amount of derivative assets and liabilities disclosed on the Condensed Consolidated Balance Sheets is due to netting arrangements with certain counterparties. See Note 5 for additional discussion of derivative netting.

To establish fair value for energy commodity derivatives, the Company uses quoted market prices and forward price curves to estimate the fair value of energy commodity derivative instruments included in Level 2. Electric derivative valuations are performed using market quotes, adjusted for periods in between quotable periods. Natural gas derivative valuations are estimated using New York Mercantile Exchange pricing for similar instruments, adjusted for basin differences, using market quotes. Where observable inputs are available for substantially the full term of the contract, the derivative asset or liability is included in Level 2.

To establish fair values for interest rate swap derivatives, the Company uses forward market curves for interest rates for the term of the swaps and discounts the cash flows back to present value using an appropriate discount rate. The discount rate is calculated by

third party brokers according to the terms of the swap derivatives and evaluated by the Company for reasonableness, with consideration given to the potential non-performance risk by the Company. Future cash flows of the interest rate swap derivatives are equal to the fixed interest rate in the swap compared to the floating market interest rate multiplied by the notional amount for each period.

Deferred compensation assets and liabilities represent funds held by the Company in a Rabbi Trust for an executive deferral plan. These funds consist of actively traded equity and bond funds with quoted prices in active markets.

Level 3 Fair Value

Natural Gas Exchange Agreement

For the natural gas commodity exchange agreement, the Company uses the same Level 2 market quotes described above; however, the Company also estimates the purchase and sales volumes (within contractual limits) as well as the timing of those transactions. Changing the timing of volume estimates changes the timing of purchases and sales, impacting which brokered quote is used. Because the brokered quotes can vary significantly from period to period, the unobservable estimates of the timing and volume of transactions can have a significant impact on the calculated fair value. The Company currently estimates volumes and timing of transactions based on a most likely scenario using historical data. Historically, the timing and volume of transactions are not highly correlated with market prices and market volatility.

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 March 31, 2025 (dollars in millions):

	Fair Value (Net) at			Valuation	Unobservable	Range and Weighted
	March 31, 2025			Technique	Input	Average Price
Natural gas exchange agreement	$	(13	)	Internally derived weighted average cost of gas	Forward purchase prices	$2.08 - $3.30/mmBTU $2.49 Weighted Average
					Forward sales prices	$1.27 - $7.20/mmBTU $4.80 Weighted Average
					Purchase volumes	255,000 - 635,000 mmBTUs
					Sales volumes	75,000 - 312,495 mmBTUs

The valuation methods, significant inputs and resulting fair values described above were developed by the Company and are reviewed on at least a quarterly basis to ensure they provide a reasonable estimate of fair value each reporting period.

Equity Investments

The Company has two equity investments measured at fair value on a recurring basis. For one investment, fair value is determined using a market approach, starting with enterprise values from recent market transaction data for comparable companies with similar equity instruments. The market transaction data was used to estimate an enterprise value of the underlying investment and that value was allocated to the various classes of equity via an option pricing model and a waterfall approach. The selection of appropriate comparable companies and the expected time to a liquidation event requires management judgment. The significant assumptions in the analysis includes comparable market transactions and related enterprise values, time to liquidity event and the market discount for the current business stage of the company. In the event there are relevant market transactions for the same or similar securities of the subject company or there is the reasonable possibility of a transaction occurring, those transactions are utilized as an input to the valuation with a probability weight applied to the valuation.

For the second investment, the fair value is determined using an income approach utilizing a discounted cash flow model. The model is based on income statement forecasts from the underlying company to determine cash flows for the period of ownership. The model then utilizes market multiples from publicly traded comparable companies in similar industries and projects to estimate the terminal fair value. The market multiples are reduced to reflect the difference in the life cycle between the publicly traded comparable companies and the start-up nature of the investment company. The selection of appropriate comparable companies, market multiples

and the reduction to those market multiples requires management judgment. The significant assumptions in the model include the discount rate representing the risk associated with the investment, market multiples and the related reduction to those multiples, revenue forecasts, and the estimated terminal date for the investment. In the event there are relevant market transactions for the same or similar securities of the subject company or there is the reasonable possibility of a transaction occurring, those transactions are used to determine the fair value of Avista Corp.’s investment under a market approach instead of utilizing a discounted cash flow model. The market transactions are considered Level 3 inputs because they are not publicly available observable transactions.

The following table presents the quantitative information which was used to estimate the fair values of the Level 3 equity investments as of March 31, 2025 (dollars in millions):

	Fair Value at
	March 31, 2025		Valuation Technique	Unobservable Input	Range
Equity investments	$	52	Market approach	Comparable enterprise values	$130-$389 $246 Average
				Time to liquidity event	1.25 years
			Discounted cash flows	Revenue market multiples	0.33x to 3.25x Revenue 1.62x Average
				Market multiple exit reduction	50%
				Discount rate	25%
				Annual revenues	$20 - $207
				Terminal date	2029

The following table presents activity for assets and liabilities measured at fair value using significant unobservable inputs (Level 3) for the three months ended March 31 (dollars in millions):

	Natural Gas Exchange Agreement (1)			Equity Investments			Total
Three Months Ended March 31, 2025:
Beginning balance	$	(3	)	$	53		$	50
Total gains or (losses) (realized/unrealized):
Included in regulatory assets/liabilities		(9	)		—			(9	)
Recognized in net income		—			(1	)		(1	)
Settlements		(1	)		—			(1	)
Ending balance as of March 31, 2025	$	(13	)	$	52		$	39
Three Months Ended March 31, 2024:
Beginning balance	$	(8	)	$	50		$	42
Total gains or (losses) (realized/unrealized):
Included in regulatory assets/liabilities		1			—			1
Recognized in net income		—			1			1
Purchases and debt conversions		—			1			1
Ending balance as of March 31, 2024	$	(7	)	$	52		$	45

(1)There were no purchases, issuances or transfers from other categories during the periods presented in the table above.