Avista Corporation

Good day. Thank you for standing by, and welcome to the Avista Corporation Q2 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you will need to press star 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star 0. I would now like to hand the conference over to your speaker today. John Wilcox, thank you. Please go ahead.

Good morning, everyone, and welcome to Avista's second quarter 2021 earnings conference call. Our earnings were released pre-market this morning and are available on our website. Joining me this morning are Avista Corp President and CEO Dennis Vermillion, Executive Vice President, Treasurer, and CFO Mark Theis, Senior Vice President, External Affairs and Chief Customer Officer, Kevin Christie, and Vice President, Controller, and Principal Accounting Officer, Ryan Crasselt. I would like to remind everyone that some of the statements that we made today are forward-looking statements that involve assumptions, risks, and uncertainties which are subject to change. For reference to the various factors which could cause actual results to differ materially from those discussed in today's call, please refer to our 10-K for 2020 and 10Q for the second quarter of 2021, which are available on our website. To begin this presentation, I would like to recap the financial results presented in today's press release. Our consolidated earnings for the second quarter of 2021 were 20 cents per diluted share, compared to 26 cents for the second quarter of 2020. For the year to date, consolidated earnings were $1.18 per diluted share for 2021, compared to 98 cents last year. Now I'll turn the discussion over to Dennis.

Well, thanks John and good morning everyone. I hope your summer is going well and that you're staying safe. On June 30th, Washington state officially listed most of the remaining restrictions that have been in place during the pandemic. We're excited to see our local economies continue to recover. We're experiencing increased loads and customer growth is steady. Like many other businesses, we continue to monitor the pandemic very closely and watch what's happening with variants and case count in our communities. We're ready and able to successfully adjust our business as needed and also continue to provide care and compassion for those who are struggling. Now let's look at some highlights from our second quarter. We had a challenging second quarter. which included an unprecedented heat wave that brought with it several consecutive days of triple-digit, record-breaking temperatures across the region. On June 29th, Spokane temperatures soared to 109 degrees, setting a new record high temperature, and it was even higher in many of our neighborhoods. That same day, Avista experienced a major increase in customer usage, which resulted in the highest energy usage in our company's 132 units. 132-year history. The intense temperatures combined with record high usage strained parts of our electrical system and caused some of the equipment that runs our electric grid to overheat. Six of our 140 distribution substations were impacted. To prevent the equipment from overloading and to avoid extensive and costly damage to our electric system, we implemented protective outages for customers served by the equipment that was most impacted by the heat. Over the course of the event, we were able to reduce the impact to customers through system modifications. We appreciate our customers' patience for those who experienced outages. Higher customer loads related to the extended heat wave were the primary driver for an increase in net power supply costs to serve our customers. which negatively affected the energy recovery mechanism, or ERM. Overall, we've experienced hotter and drier than normal weather across the Pacific Northwest, which contributed to lower than normal hydroelectric generation and increased power prices. For these reasons, we had to rely on thermal generation and purchased power at higher prices to serve those additional loads. As a result, Abyss Utilities' earnings were below expectations for the second quarter. AEL&P's earnings met expectations for the second quarter, and they are on track to meet the full-year guidance. It was a strong quarter for our other businesses, which exceeded expectations due to gains on our investments and the sale of certain subsidiary assets associated with Spokane STEAM plans. Wildfire resiliency continues to be a focus for Avista. Our region has experienced extremely dry conditions all spring and summer, and combined with high temperatures, wildfire risk is high. In response to these conditions, Avista has been operating in what we call dryland mode since late June, and dryland mode decreases the potential for wildfires that could occur when re-energizing a power line. Under normal conditions, these lines located in rural and or forested areas are generally re-energized automatically. However, during the current dry weather conditions, Avista's line personnel physically patrol an outage area before a line is placed back into service. This can require more time to restore service, but it decreases a potential fire danger. This practice is in line with Avista's wildfire resiliency plan. which was released last year, building on prevention and response strategies that have been in place for many years. VISTA has committed to a comprehensive 10-year wildfire resiliency plan that includes improved defense strategies and operating practices for a more resilient system. In regards to regulatory matters, we are pleased to have reached an all-party settlement in our Idaho general rate case, The new rates are fair and reasonable for our customers, the company, and our shareholders, and will allow Avista to continue receiving a fair return in Idaho. Our Washington general rate cases continue to work their way through the regulatory process. Our hearings have been held and we expect a decision by the end of September. In Oregon, we expect to file a rate case in the fourth quarter of 2021. We are confirming our 2021 earnings guidance with a consolidated range of $1.96 to $2.16 per diluted share. While we are confirming our consolidated range, we are adjusting our 2021 segment ranges to lower Avista utilities by 10 cents per diluted share and raise other by 10 cents per diluted share. For 2022, we are lowering consolidated earnings guidance by 15 cents per diluted share to a range of $2.03 to $2.23 per diluted share. For 2023, we are confirming our earnings guidance with a consolidated range of $2.42 to $2.62 per diluted share. Although we expect to experience headwinds in 2022 from regulatory lag, we are confident that we can meet our earnings guidance for 2023 and earn our allowed return. Looking ahead, we'll continue focusing on our utility operations while prudently investing in the necessary capital to maintain and update our infrastructure to provide safe, reliable, and affordable energy to our customers and our communities. Now, I'll turn this presentation over to Mark.