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Abandoned sale bolsters Avista first-quarter earnings

The Nine Mile Dam on the Spokane River was built in 1908 and was originally constructed to supply power to 130-mile long Spokane & Inland Empire Railroad Company railway system. The dam was purchased by the company now known as Avista in 1925. An Avista earnings report for the first quarter of 2019 was depressed by below normal hydroelectric generation. (Colin Mulvany / The Spokesman-Review)
By Nicholas Deshais nickd@spokesman.com(509) 459-5440

The abandoned sale of Avista Corp. to a Canadian utility buoyed the local energy company’s first-quarter earnings, which reached $115.8 million, according to the corporate report filed Thursday with the U.S. Securities and Exchange Commission.

Compared to 2018’s first-quarter earnings of $54.9 million, and 2017’s $62.1 million, this year’s first quarter figures looked good but were below expectations, Scott Morris, the company’s chairman and CEO, said in a statement.

A significant portion of the earnings came from a termination fee from Hydro One Ltd. after Washington and Idaho regulators blocked the sale.

The Toronto-based utility paid Avista a $103 million termination fee in January after abandoning its proposed purchase, which was part of the sales agreement. The money was used to reimburse Avista for costs it incurred from 2017 to 2019 related to the abandoned transaction that amounted to $51 million. According to a statement from the company, the remaining $52 million “was used for general corporate purposes and reduced our need for external financing.”

The first-quarter earnings, which amount to $1.76 per share, were dragged down by “below normal hydroelectric generation and higher natural gas fuel prices, which caused an increase in net power supply costs,” Morris said.

Regardless, Morris said the company was “on track” to meet its financial goals for the year.

Morris pointed to an Energy Recovery Mechanism adjustment the company filed with the Washington state Utilities and Transportation Commission in March, which, if approved, would provide more than $34 million to customers over three years. Morris said Avista would be in a “benefit position” under the adjustment, with customers receiving 75%. Avista would receive the remaining 25%, equivalent to $11 million.

Also, earlier this week, Avista asked Washington regulators to approve an increase in electric and natural gas rates over the next two years. If approved by the UTC, ratepayers would see increases beginning in April 2020. For a typical household using 918 kilowatts per month, the proposal would increase electric bills by 9.8%, resulting in a more than $7 monthly increase from $81.21 to $89.14. Electric rates would rise another 3.9% in 2021.

Morris said the company would meet its earnings guidance goals of $2.78 to $2.98 per share, which includes $1.01 per share for the termination fee from Hydro One.

Avista has more than 254,000 electric and 197,000 natural-gas customers in Washington.