Prepared remarks
Good day, and welcome to the Avista Corporation Second Quarter 2026 Earnings Conference Call. Operator provides instructions on how to ask questions. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker, Stacey Wenz, 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, 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 shutoffs. 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 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. 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 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.
At this time, we will take questions.
Questions and answers
Operator provides instructions on participant Q&A. Our first question will come from the line of Shar Pourreza with Wells Fargo Securities.
This is Whitney Mutalemwa on for Shar. Yes, definitely, our thoughts are with the people of Spokane. Just to start, 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 the cause is still under investigation?
I can talk about the extent of the damage. We've made repairs to one of the critical lines and repaired a couple of other damaged lines, but we still have a couple of lines that are out. We now have access to the areas, and our crews are starting repairs on the transmission system. Those transmission repairs shouldn't take as long as the repairs likely needed on the distribution system. The distribution damage is still being assessed, and we'll know more in the coming days about 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. From a regulatory lag perspective, there shouldn't be significant impact. 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. That will come from the line of Michael Lonegan with Barclays.
So on the wildfires, going back to cost recovery: the state legislation allows for securitization of wildfire-related costs, correct? Anything you can share about that would be helpful.
Yes, two legislative sessions ago there was a bill passed that allows for securitization. Again, it's too early to assess. Securitization would be for much more impactful events than what we're experiencing now. I don't want to minimize the impact on those affected by the fires, but from a monetary perspective on infrastructure, I would not see us being remotely close to needing securitization.
Okay. And then shifting to the data center negotiation pause. Is there anything you can talk about regarding progress 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 can share would be helpful.
Yes, I appreciate the question. I know there's a lot of questions about the data centers, and I want to take the opportunity to be clear in how we're viewing it. I 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 the data requests that we 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 also will not move forward unless we are confident that our current customers' reliability will be maintained or enhanced. We expect there needs to be a net benefit for our current customers, and we want to ensure there are protections in place for our current customers. Those things have guided the conversations we've been having internally related to potential updates to our internal processes. They've guided the conversations we've had externally with other stakeholders because, as we shared, 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 are workshops going on with the Washington regulators and commissioners. We've been engaging with local partners who are also working through appropriate new considerations for planning and coordination because the scale of these projects is unprecedented. We've appreciated the customer questions we've received. As you noted, the pause in the MOU has helped us to have more time to explore those internal and external processes. We are also working on providing appropriate assurances for customers that they will not cover costs for these projects. We're considering updates to potential tariffs, a hybrid tariff or 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 was brought up last year and may be brought up this year. We think that's a good thing to have for customers. So those are the kinds of conversations we're having that will inform how we might move forward with any of those large data center requests.
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 four-year plan filed in the Washington state?
Mike, thanks for the question. Yes, there are pretty fundamental differences in points of view on the term of the case. We feel strongly about the four-year plan; others, as you can see through their testimony, do not. I think that's proving out that a settlement will be quite difficult. But as we look forward and see the positions of the parties, for example, staff and where they're at, there's a discrepancy on how we got there, but they're not that far from where we are. So we think that's constructive as the commission contemplates how to resolve the case. Public counsel's position seems stark compared to ours, but the lion's share of the difference is two items: one is return. We think their return level is unacceptable and that the commission will likely see it the same way based on past practice. The other is they did not go along with any adjustment to power supply. Power supply has proven to be an issue over the last several years. With all that data in mind, I think the commission is in a good position. Staff's perspective on power supply is relatively close to where the company is at. So again, I don't believe we'll see a settlement take place. We will file our rebuttal case on the 7th, and then we'll have hearings likely September 17 through 18. The commission will consider the case and issue an order toward the middle of December. I want to reiterate that from our position and the data we've provided throughout the case and what we'll show in rebuttal, it's a strong case. The parties have a couple of key issues where they're not that far apart from us.
One moment for 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 you think it will take to normalize your infrastructure?
It's hard to tell right now. We're still getting into the areas that have been affected. Our first priority is the transmission, and we think we have a good sense of the damage there, so in the near term we should be able to get that restored. For distribution, there are significant structure losses that have been shared, and we are 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. So it's still to be determined.
Okay. Kevin, vis-à-vis the quarter, can you give us any color for the nonregulated benefit for the quarter? What was going on with presumably mostly funds?
Yes, absolutely. We had a good quarter from a nonregulated perspective, and it really gets back to what we said a year ago when we had some headwinds that materialized. We said the market needed to levelize. There's an expression we've used: to get paid a little bit to learn. Through EIP, we've been clear there's an investment within EIP that went public, and we recognized a gain leading up to that IPO. As you can see in our documents, we would expect another gain due to timing that 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 the gain we're expecting to recognize next quarter, if you look at the current stock price, would then reverse. That's just one investment within that fund; there will be gains and losses across the portfolio, so there's netting. You can take a look at ERock's stock price and get a reasonable proxy about what might happen in that fund. Net-net, it's beneficial to us when we can exit, and when EIP can exit after applicable lockups, that is beneficial from a cash flow perspective and will help to alleviate some of our equity needs.
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 they could hold this workshop?
That process has been underway for a bit. It should absolutely benefit us as we go forward. Working with the community will also be key. Historically we've used the concept of a special contract for any large load, and that has worked for us, but we need to give better clarity to others that we are properly protecting them. I think the process with the commission will define that to some extent, and if it doesn't, we will make sure we define it so everybody can have good trust in the process and protection for existing customers and benefits for existing customers. It will absolutely be helpful. We've said 'net benefit'—we've used that term in both Washington and Idaho for quite some time to describe how we view large loads and existing customers.
One moment for our next question. That will come from the line of Julien Dumoulin-Smith with Jefferies.
Most of my questions were asked and answered, but maybe you could just talk a little bit about the 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, it seems like they performed very well or as planned, etc.
Thank you. We believe our proactive measures have demonstrated value and have been effective. We know it's really difficult for the community to experience proactive outages in the public safety power shutoffs, but during patrols of those deenergized lines we found several trees that had fallen into the lines. That's one example of what our patrols and deenergization prevented from potentially starting a wildfire. We've been able to show the community why we take those actions. There's been a lot of conversation about prevention, and that's how we see PSPS—as a tool to prevent the start of wildfires. The situation could have been worse, and we appreciate the work our teams have done to put those measures in place. The work we've done around vegetation management, real-time situational awareness and operational changes does seem to be demonstrating its value.
Our next question will come from the line of Sophie Karp with KeyBanc Capital; one moment please.
This is Michael on for Sophie. Does the wildfire and related costs make you rethink seeking a four-year rate case, specifically around the difficulty with forecasting such events?
I think it's too soon to say. Based on what I know right now, the four-year plan continues to make sense for us for all the reasons we've previously elaborated. As a reminder, if an extreme event or situation arises during the four-year rate plan, we could refile and replace years three and four, which is something we would rather not do but is an option. That assumes the commission places the four-year plan in effect.
Got it. And then do you expect there will be some opportunity to introduce additional wildfire legislation in the next session?
I don't think we're actively looking at legislation this session. We will likely have opportunities to work with other utilities in the region and other stakeholders in the future. There is work at the federal level on legislation that we think could be a focus area, so near term probably not, but it's an ongoing effort to explore what might make sense.
I'm showing no further questions in the queue at this time. I would now like to turn the call over to Stacey Wenz for any closing remarks.
This does conclude our call today. Thank you all for joining us.
This concludes today's program. Thank you all for participating. You may now disconnect.