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Leases | 12 Months Ended
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Dec. 31, 2023
Leases [Abstract] |
Leases | NOTE 5. LEASES The core principle of lease accounting is that an entity should recognize the ROU assets and liabilities from leases on the balance sheet and depreciate or amortize the asset and liability over the term of the lease, as well as provide disclosure to enable users of the consolidated financial statements to assess the amount, timing, and uncertainty of cash flows from leases. Significant Judgments and Assumptions The Company determines if an arrangement is a lease, as well as its classification, at its inception. ROU assets represent the Company's right to use an underlying asset for the lease term, and lease liabilities represent the Company's obligation to make lease payments. Operating and finance lease ROU assets and lease liabilities are recognized at the commencement date of the agreement based on the present value of lease payments over the lease term. As most of the Company's leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at the commencement date to determine the present value of lease payments. The implicit rate is used when it is readily determinable. The operating and finance lease ROU assets also includes lease payments made and exclude lease incentives, if any, that accrue to the benefit of the lessee. Lease terms may include options to extend or terminate the lease when it is reasonably certain the Company will exercise that option. Lease expense is recognized on a straight-line basis over the lease term. The difference between lease expense and cash paid for leased assets is recognized as a regulatory asset or regulatory liability. Description of Leases Operating Leases The Company's most significant operating lease is with the State of Montana associated with submerged land around the Company's hydroelectric facilities in the Clark Fork River basin, which expires in 2046. The terms of this lease are subject to adjustment - depending on the outcome of ongoing litigation between the State of Montana and NorthWestern. In addition, the State of Montana and Avista Corp. were engaged in litigation regarding lease terms, including how much money, if any, the State of Montana should return to Avista Corp.; however, that litigation was dismissed as premature pending the outcome of the ongoing litigation between the State of Montana and NorthWestern. Any reduction in future lease payments or the return to Avista Corp. of amounts previously paid will be included in the future ratemaking process. In addition to the lease with the State of Montana, the Company has other operating leases for land associated with its utility operations, as well as communication sites which support network and radio communications within its service territory. The Company's leases have remaining terms of 1 to 70 years. Most of the Company's leases include options to extend the lease term for periods of 5 to 50 years. Options are exercised at the Company's discretion. Certain of the Company's lease agreements include rental payments which are periodically adjusted over the term of the agreement based on the consumer price index. The Company's lease agreements do not include material residual value guarantees or material restrictive covenants. In March 2023, the Company entered into an agreement with Rathdrum Power, LLC amending and restating a PPA for the output of the Lancaster Plant. The restated PPA meets the accounting definition of a lease, and all payments are variable in nature, based on capacity, usage, or performance of the plant. Therefore, there is no lease obligation or corresponding ROU asset recorded by the Company related to this agreement. The variable lease costs related to this agreement are included in resource costs on the Consolidated Statements of Income. Avista Corp. does not record leases with a term of 12 months or less in the Consolidated Balance Sheets. Total short-term lease costs for the year ended December 31, 2023 are immaterial. Finance Lease AEL&P has a PPA which is a finance lease for accounting purposes related to the Snettisham hydroelectric project, which expires in 2034. For ratemaking purposes, this lease is an operating lease with a constant level of annual rental expense (straight line rent expense). Because of this regulatory treatment, differences between the operating lease expense for ratemaking purposes and the expenses recognized under GAAP (interest expense and amortization of the finance lease ROU asset) are recorded as a regulatory asset and amortized during the later years of the lease when the finance lease expense is less than the operating lease expense included in base rates. The amortization of the ROU asset is included in depreciation and amortization and the interest associated with the lease liability is included in interest expense on the Consolidated Statements of Income. The components of lease expense were as follows for the year ended December 31 (dollars in thousands):
|  | 2023 |  |  | 2022 |  |  | 2021 |
Operating lease cost: |  |  |  |  |  |  |  |  |
Fixed lease cost (Other operating expenses) |  | $ | 5,096 |  |  | $ | 4,986 |  |  | $ | 4,970 |
Variable lease cost (Other operating expenses and Resource costs) |  |  | 24,628 |  |  |  | 1,567 |  |  |  | 1,180 |
Total operating lease cost |  | $ | 29,724 |  |  | $ | 6,553 |  |  | $ | 6,150 |
Finance lease cost: |  |  |  |  |  |  |  |  |
Amortization of ROU asset (Depreciation and amortization) |  | $ | 3,641 |  |  | $ | 3,641 |  |  | $ | 3,641 |
Interest on lease liabilities (Interest expense) |  |  | 2,221 |  |  |  | 2,375 |  |  |  | 2,522 |
Total finance lease cost |  | $ | 5,862 |  |  | $ | 6,016 |  |  | $ | 6,163 |
Supplemental cash flow information related to leases was as follows for the year ended December 31 (dollars in thousands):
|  | 2023 |  |  | 2022 |  |  | 2021 |
Cash paid for amounts included in the measurement of lease liabilities: |  |  |  |  |  |  |  |  |
Operating cash outflows: |  |  |  |  |  |  |  |  |
Operating lease payments |  | $ | 4,960 |  |  | $ | 4,828 |  |  | $ | 4,805 |
Interest on finance lease |  |  | 2,221 |  |  |  | 2,375 |  |  |  | 2,522 |
Total operating cash outflows |  | $ | 7,181 |  |  | $ | 7,203 |  |  | $ | 7,327 |
Finance cash outflows: |  |  |  |  |  |  |  |  |
Principal payments on finance lease |  | $ | 3,235 |  |  | $ | 3,085 |  |  | $ | 2,935 |
Supplemental balance sheet information related to leases was as follows for December 31 (dollars in thousands):
|  | December 31, |  |  | December 31, |
|  | 2023 |  |  | 2022 |
Operating Leases |  |  |  |  |  |
Operating lease ROU assets (Other property and investments-net and other non-current assets) |  | $ | 67,585 |  |  | $ | 68,238 |
Other current liabilities |  | $ | 4,490 |  |  | $ | 4,349 |
Other non-current liabilities and deferred credits |  |  | 63,559 |  |  |  | 64,284 |
Total operating lease liabilities |  | $ | 68,049 |  |  | $ | 68,633 |
Finance Leases |  |  |  |  |  |
Finance lease ROU assets (Other property and investments-net and other non-current assets) |  | $ | 36,414 |  |  | $ | 40,056 |
Other current liabilities |  | $ | 3,400 |  |  | $ | 3,235 |
Other non-current liabilities and deferred credits |  |  | 39,095 |  |  |  | 42,495 |
Total finance lease liabilities |  | $ | 42,495 |  |  | $ | 45,730 |
Weighted Average Remaining Lease Term |  |  |  |  |  |
Operating leases |  | 22.28 years |  |  | 23.28 years |
Finance leases |  | 4.53 years |  |  | 5.42 years |
Weighted Average Discount Rate |  |  |  |  |  |
Operating leases |  |  | 4.29 | % |  |  | 4.28 | %
Finance leases |  |  | 3.77 | % |  |  | 4.07 | %
Maturities of lease liabilities (including principal and interest) were as follows as of December 31, 2023 (dollars in thousands):
|  | Operating Leases |  |  | Finance Leases |
2024 |  | $ | 4,988 |  |  | $ | 5,459 |
2025 |  |  | 4,984 |  |  |  | 5,454 |
2026 |  |  | 4,981 |  |  |  | 5,456 |
2027 |  |  | 5,007 |  |  |  | 5,458 |
2028 |  |  | 4,992 |  |  |  | 5,456 |
Thereafter |  |  | 83,532 |  |  |  | 27,292 |
Total lease payments |  | $ | 108,484 |  |  | $ | 54,575 |
Less: imputed interest |  |  | (40,435 | ) |  |  | (12,080 | )
Total |  | $ | 68,049 |  |  | $ | 42,495 |
Maturities of lease liabilities (including principal and interest) were as follows as of December 31, 2022 (dollars in thousands):
|  | Operating Leases |  |  | Finance Leases |
2023 |  | $ | 4,850 |  |  | $ | 5,456 |
2024 |  |  | 4,877 |  |  |  | 5,459 |
2025 |  |  | 4,884 |  |  |  | 5,454 |
2026 |  |  | 4,869 |  |  |  | 5,456 |
2027 |  |  | 4,880 |  |  |  | 5,458 |
Thereafter |  |  | 86,991 |  |  |  | 32,748 |
Total lease payments |  | $ | 111,351 |  |  | $ | 60,031 |
Less: imputed interest |  |  | (42,718 | ) |  |  | (14,301 | )
Total |  | $ | 68,633 |  |  | $ | 45,730 |

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