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Avista Reaches Settlement in Idaho Electric and Natural Gas General Rate Requests

Proposal Provides More Certainty for Idaho Customers Over the Next Two Years

SPOKANE, WA -- (Marketwire) -- 02/06/13 -- Avista (NYSE: AVA) and other parties involved in the company's electric and natural gas general rate filings have reached a settlement agreement that, if approved by the Idaho Public Utilities Commission (IPUC or Commission), would conclude the proceedings related to the general rate requests filed on Oct. 11, 2012. New rates would be implemented in two phases: April 1, 2013 and Oct. 1, 2013.

The settlement proposes that, effective April 1, 2013, Avista would increase base rates designed to increase its annual revenues from Idaho natural gas customers by 4.9 percent or $3.1 million. There would be no change in base rates to increase annual electric revenues on April 1. However, the settlement would provide for recovery of the costs of the Palouse Wind Project through the Power Cost Adjustment mechanism beginning April 1.

The settlement also proposes that, effective October 1, 2013, Avista would receive an additional increase in base rates designed to increase its annual revenues from Idaho natural gas customers by an overall 2.0 percent or $1.3 million. A credit resulting from deferred natural gas costs of $1.6 million would be returned to natural gas customers from Oct. 1, 2013 through Dec. 31, 2014, so the net annual average natural gas rate increase to customers effective Oct. 1, 2013 would be 0.3 percent.

If the settlement is approved, effective Oct. 1, 2013, Avista would also increase base rates designed to increase its annual revenues from Idaho electric customers by an overall 3.1 percent or $7.8 million. A $3.9 million credit resulting from a payment to be made to Avista by the Bonneville Power Administration relating to its prior use of Avista's transmission system would be returned to Idaho electric customers from Oct. 1, 2013 through Dec. 31, 2014, so the net annual average electric rate increase to customers effective Oct. 1, 2013 would be 1.9 percent.

The $1.6 million credit to natural gas customers resulting from deferred natural gas costs and the $3.9 million credit to electric customers from Bonneville Power Administration relating to the prior use of Avista's transmission system will not impact company earnings.

"The revenue increases reflected in the settlement agreement, together with our continued management of the growth in utility costs, provides a framework for positive outcomes from our Idaho operations for both our customers and our shareholders in 2013 and 2014," said Dennis Vermillion, Avista Corp. senior vice president and president of Avista Utilities. "It gives our Idaho customers more certainty in their energy rates for the next two years and keeps their energy prices at some of the lowest prices in the Northwest and the nation."

The settlement agreement states that Avista may file a general rate case in Idaho in 2014. However, any increase in base retail rates would not take effect prior to Jan. 1, 2015. This does not preclude the company from filing annual rate adjustments such as the Power Cost Adjustment (PCA) and Purchased Gas Adjustment (PGA).

The proposed settlement agreement reflects a 50% equity layer and a 9.8% return on equity (ROE).

The settlement also includes an after-the-fact earnings test for 2013 and 2014, such that if Avista, on a consolidated basis for electric and natural gas operations in Idaho, earns more than 9.8% ROE, Avista would refund to customers 50% of any earnings above the 9.8%.

The settlement agreement is supported by Commission staff and several other parties, and has been filed with the Commission with a request for approval. The agreement is subject to approval by the Commission.

Bill impacts
If the Commission approves the settlement, beginning April 1, 2013, a natural gas residential customer in Idaho using an average 60 therms per month would see a $2.82 per month increase for a revised monthly bill of $55.37. Beginning Oct. 1, 2013, that same customer would see an additional increase of $0.31 per month, for a revised monthly bill of $55.68.

If the Commission approves the settlement, beginning Oct. 1, 2013, a residential electric customer in Idaho using an average 930 kilowatt hours per month would see an increase of $2.04 for a revised monthly bill of $80.73.

Avista Corp. is an energy company involved in the production, transmission and distribution of energy as well as other energy-related businesses. Avista Utilities is our operating division that provides electric service to 361,000 customers and natural gas to 320,000 customers. Our service territory covers 30,000 square miles in eastern Washington, northern Idaho and parts of southern and eastern Oregon, with a population of 1.5 million. Avista's primary, non-utility subsidiary is Ecova, an energy and sustainability management company with over 700 expense management customers, representing more than 600,000 sites. Our stock is traded under the ticker symbol "AVA." For more information about Avista, please visit www.avistacorp.com.

This news release contains forward-looking statements regarding the company's current expectations. Forward-looking statements are all statements other than historical facts. Such statements speak only as of the date of the news release and are subject to a variety of risks and uncertainties, many of which are beyond the company's control, which could cause actual results to differ materially from the expectations. These risks and uncertainties include, in addition to those discussed herein, all of the factors discussed in the company's Annual Report on Form 10-K for the year ended Dec. 31, 2011 and the Quarterly Report on Form 10-Q for the quarter ended Sept. 30, 2012.

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