XML 74 R25.htm IDEA: XBRL DOCUMENT
v3.19.3.a.u2

Fair Value | 12 Months Ended
--- | ---
Dec. 31, 2019
Fair Value Disclosures [Abstract] |
Fair Value | FAIR VALUE The carrying values of cash and cash equivalents, accounts and notes receivable, accounts payable and short-term borrowings are reasonable estimates of their fair values. Long-term debt (including current portion and material capital leases) and long-term debt to affiliated trusts are reported at carrying value on the Consolidated Balance Sheets. 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 those financial instruments that are 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 that are 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 that not only include the credit standing of the counterparties involved and the impact of credit enhancements (such as cash deposits and letters of credit), but also 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 Consolidated Balance Sheets as of December 31 (dollars in thousands):
| 2019 |  | 2018
| Carrying Value |  | Estimated Fair Value |  | Carrying Value |  | Estimated Fair Value
Long-term debt (Level 2) | $ | 963,500 |  |  | $ | 1,124,649 |  |  | $ | 1,053,500 |  |  | $ | 1,142,292 |
Long-term debt (Level 3) | 947,000 |  |  | 1,048,440 |  |  | 767,000 |  |  | 734,742 |
Snettisham capital lease obligation (Level 3) | 54,550 |  |  | 58,000 |  |  | 57,210 |  |  | 55,600 |
Long-term debt to affiliated trusts (Level 3) | 51,547 |  |  | 41,238 |  |  | 51,547 |  |  | 38,145 |
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 par values of 80.00 to 134.11, where a par value of 100.00 represents the carrying value recorded on the 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 using comparable debt with similar risk and terms 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 capital lease obligation, the estimated fair value of these items was determined based on a discounted cash flow model using available market information. The Snettisham capital lease obligation was discounted to present value using the Morgan Markets A Ex-Fin discount rate as published on December 31, 2019. The following table discloses by level within the fair value hierarchy the Company’s assets and liabilities measured and reported on the Consolidated Balance Sheets as of December 31, 2019 at fair value on a recurring basis (dollars in thousands):
| Level 1 |  | Level 2 |  | Level 3 |  | Counterparty and Cash Collateral Netting (1) |  | Total
December 31, 2019 |  |  |  |  |  |  |  |  |
Assets: |  |  |  |  |  |  |  |  |
Energy commodity derivatives | $ | — |  |  | $ | 41,546 |  |  | $ | — |  |  | $ | (40,452 | ) |  | $ | 1,094 |
Level 3 energy commodity derivatives: |  |  |  |  |  |  |  |  |
Natural gas exchange agreements | — |  |  | — |  |  | 27 |  |  | (27 | ) |  | — |
Foreign currency exchange derivatives | — |  |  | 97 |  |  | — |  |  | — |  |  | 97 |
Interest rate swap derivatives | — |  |  | 1,552 |  |  | — |  |  | (963 | ) |  | 589 |
Deferred compensation assets: |  |  |  |  |  |  |  |  |
Mutual Funds: |  |  |  |  |  |  |  |  |
Fixed income securities (2) | 2,232 |  |  | — |  |  | — |  |  | — |  |  | 2,232 |
Equity securities (2) | 6,271 |  |  | — |  |  | — |  |  | — |  |  | 6,271 |
Total | $ | 8,503 |  |  | $ | 43,195 |  |  | $ | 27 |  |  | $ | (41,442 | ) |  | $ | 10,283 |
Liabilities: |  |  |  |  |  |  |  |  |
Energy commodity derivatives | $ | — |  |  | $ | 45,144 |  |  | $ | — |  |  | $ | (43,830 | ) |  | $ | 1,314 |
Level 3 energy commodity derivatives: |  |  |  |  |  |  |  |  |
Natural gas exchange agreement | — |  |  | — |  |  | 3,003 |  |  | (27 | ) |  | 2,976 |
Interest rate swap derivatives | — |  |  | 34,056 |  |  | — |  |  | (7,733 | ) |  | 26,323 |
Total | $ | — |  |  | $ | 79,200 |  |  | $ | 3,003 |  |  | $ | (51,590 | ) |  | $ | 30,613 |
The following table discloses by level within the fair value hierarchy the Company’s assets and liabilities measured and reported on the Consolidated Balance Sheets as of December 31, 2018 at fair value on a recurring basis (dollars in thousands):
| Level 1 |  | Level 2 |  | Level 3 |  | Counterparty and Cash Collateral Netting (1) |  | Total
December 31, 2018 |  |  |  |  |  |  |  |  |
Assets: |  |  |  |  |  |  |  |  |
Energy commodity derivatives | $ | — |  |  | $ | 36,252 |  |  | $ | — |  |  | $ | (35,982 | ) |  | $ | 270 |
Level 3 energy commodity derivatives: |  |  |  |  |  |  |  |  |
Natural gas exchange agreement | — |  |  | — |  |  | 31 |  |  | (31 | ) |  | — |
Interest rate swap derivatives | — |  |  | 10,566 |  |  | — |  |  | (440 | ) |  | 10,126 |
Deferred compensation assets: |  |  |  |  |  |  |  |  |
Mutual Funds: |  |  |  |  |  |  |  |  |
Fixed income securities (2) | 1,745 |  |  | — |  |  | — |  |  | — |  |  | 1,745 |
Equity securities (2) | 6,157 |  |  | — |  |  | — |  |  | — |  |  | 6,157 |
Total | $ | 7,902 |  |  | $ | 46,818 |  |  | $ | 31 |  |  | $ | (36,453 | ) |  | $ | 18,298 |
| Level 1 |  | Level 2 |  | Level 3 |  | Counterparty and Cash Collateral Netting (1) |  | Total
Liabilities: |  |  |  |  |  |  |  |  |
Energy commodity derivatives | $ | — |  |  | $ | 89,283 |  |  | $ | — |  |  | $ | (87,199 | ) |  | $ | 2,084 |
Level 3 energy commodity derivatives: |  |  |  |  |  |  |  |  |
Natural gas exchange agreement | — |  |  | — |  |  | 2,805 |  |  | (31 | ) |  | 2,774 |
Power exchange agreement | — |  |  | — |  |  | 2,488 |  |  | — |  |  | 2,488 |
Power option agreement | — |  |  | — |  |  | 1 |  |  | — |  |  | 1 |
Foreign currency exchange derivatives | — |  |  | 45 |  |  | — |  |  | — |  |  | 45 |
Interest rate swap derivatives | — |  |  | 7,831 |  |  | — |  |  | (970 | ) |  | 6,861 |
Total | $ | — |  |  | $ | 97,159 |  |  | $ | 5,294 |  |  | $ | (88,200 | ) |  | $ | 14,253 |
(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) | These assets are included in other property and investments-net and other non-current assets on the 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 Consolidated Balance Sheets is due to netting arrangements with certain counterparties. See Note 7 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. In particular, 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. To establish fair value for foreign currency derivatives, the Company uses forward market curves for Canadian dollars against the US dollar and multiplies the difference between the locked-in price and the market price by the notional amount of the derivative. Forward foreign currency market curves are provided by third party brokers. The Company's credit spread is factored into the locked-in price of the foreign exchange contracts. 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. The balance disclosed in the table above excludes cash and cash equivalents of $0.4 million as of December 31, 2019 and $0.5 million as of December 31, 2018. Level 3 Fair Value Under the power exchange agreement, which expired on June 30, 2019, the Company purchased power at a price that was based on the average operating and maintenance (O&M) charges from three surrogate nuclear power plants around the country. To estimate the fair value of this agreement the Company estimated the difference between the purchase price based on the future O&M charges and forward prices for energy. The Company compared the Level 2 brokered quotes and forward price curves described above to an internally developed forward price which was based on the average O&M charges from the three surrogate nuclear power plants for the current year. The Company estimated the volumes of the transactions that would take place in the future based on historical average transaction volumes per delivery year (November to April). Significant increases or decreases in any of these inputs in isolation would result in a significantly higher or lower fair value measurement. For the natural gas commodity exchange agreement, the Company uses the same Level 2 brokered 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 have not been 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 December 31, 2019 (dollars in thousands):
|  | Fair Value (Net) at |  |  |  |  |  |
|  | December 31, 2019 |  | Valuation Technique |  | Unobservable Input |  | Range
Natural gas exchange |  | (2,976 | ) |  | Internally derived |  | Forward purchase prices |  | $1.49 - $2.38/mmBTU
agreement |  |  |  | weighted-average |  | Forward sales prices |  | $1.60 - $3.80/mmBTU
|  |  |  | cost of gas |  | Purchase volumes |  | 50,000 - 310,000 mmBTUs
|  |  |  |  |  | Sales volumes |  | 60,000 - 310,000 mmBTUs
The valuation methods, significant inputs and resulting fair values described above were developed by the Company's management and are reviewed on at least a quarterly basis to ensure they provide a reasonable estimate of fair value each reporting period. The following table presents activity for energy commodity derivative assets (liabilities) measured at fair value using significant unobservable inputs (Level 3) for the years ended December 31 (dollars in thousands):
| Natural Gas Exchange Agreement |  | Power Exchange Agreement |  | Total
Year ended December 31, 2019: |  |  |  |  |
Balance as of January 1, 2019 | $ | (2,774 | ) |  | $ | (2,488 | ) |  | $ | (5,262 | )
Total gains or (losses) (realized/unrealized): |  |  |  |  |
Included in regulatory assets/liabilities (1) | 8,175 |  |  | 435 |  |  | 8,610 |
Settlements | (8,377 | ) |  | 2,053 |  |  | (6,324 | )
Ending balance as of December 31, 2019 (2) | $ | (2,976 | ) |  | $ | — |  |  | $ | (2,976 | )
Year ended December 31, 2018: |  |  |  |  |
Balance as of January 1, 2018 | $ | (3,164 | ) |  | $ | (13,245 | ) |  | $ | (16,409 | )
Total gains or (losses) (realized/unrealized): |  |  |  |  |
Included in regulatory assets/liabilities (1) | 326 |  |  | 5,027 |  |  | 5,353 |
Settlements | 64 |  |  | 5,730 |  |  | 5,794 |
Ending balance as of December 31, 2018 (2) | $ | (2,774 | ) |  | $ | (2,488 | ) |  | $ | (5,262 | )
Year ended December 31, 2017: |  |  |  |  |
Balance as of January 1, 2017 | $ | (5,885 | ) |  | $ | (13,449 | ) |  | $ | (19,334 | )
Total gains or (losses) (realized/unrealized): |  |  |  |  |
Included in regulatory assets/liabilities (1) | 3,292 |  |  | (7,674 | ) |  | (4,382 | )
Settlements | (571 | ) |  | 7,878 |  |  | 7,307 |
Ending balance as of December 31, 2017 (2) | $ | (3,164 | ) |  | $ | (13,245 | ) |  | $ | (16,409 | )
(1) | All gains and losses are included in other regulatory assets and liabilities. There were no gains and losses included in either net income or other comprehensive income during any of the periods presented in the table above.
(2) There were no purchases, issuances or transfers from other categories of any derivatives instruments during the periods presented in the table above.

X
- References No definition available. + Details
Name: | us-gaap_FairValueDisclosuresAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=117815213&loc=d3e19207-110258 + Details
Name: | us-gaap_FairValueDisclosuresTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration