Avista Corp. (AVA) Q3 2026 earnings review
Avista holds its profit plan, but borrowing needs rise
Avista Corp., the electric and gas utility serving eastern Washington and northern Idaho, kept core utility profit steady while cash collection lagged. Utility profit per share, excluding one-offs, edged up 3% as operating cost cuts offset higher wholesale power prices, while a lagged venture fund gain lifted total reported profit 69%. Chief executive Heather Rosentrater held the full-year outlook at its $2.62 midpoint, which by our math leaves fourth-quarter utility profit down about 2% from a year ago.
| Utility profit per share, excluding one-offs | $0.38 +2.7% from a year ago |
|---|---|
| Reported profit per share | $0.57 +58% from a year ago on a lagged investment gain |
| Full-year utility profit outlook | Unchanged middle of the range: $2.62 (+2.7%) |
| 2027–2031 rate base growth target | 7.3% a year up from 7.0% in the 2026–2030 plan |
⚖️ Verdict: ⚪ Neutral
The story is unchanged because both sides of the case moved without settling the main December rate decision. On the positive side, rolling the construction budget to 2031 lifted projected annual asset growth to 7.3%. The bad news: delayed cost recovery from customers forced Avista to commit to a $100 million short-term loan this quarter and plan up to $110 million of stock sales in 2027.
The question now is whether Washington regulators will grant enough of Avista's four-year rate request to turn its 7.3% asset growth into profit growth without heavy share dilution. A constructive order resets the power-cost baseline and lifts 2027 earnings, while a tough order extends power-supply losses and financing strain. The Washington Utilities and Transportation Commission's final decision in mid-December 2026 will settle it.
🐂 Bull Case
Grid Spending Lifts the Five-Year Growth Target
Avista earns a regulated return on its rate base, the value of the power plants, lines and pipes it builds for customers. Expanding that asset base is the main engine for long-term profit growth.
The Spokane-based utility spent $496 million on capital projects in the first nine months of 2026. By our math, third-quarter spending reached $182 million, up 43% from a year ago. Management also rolled its five-year spending plan forward to 2031, adding a $750 million final year while evaluating "projects to address growing peak day resource needs".
- Five-year capital plan (2027–2031): $3.58 billion by our math, up from $3.44 billion for 2026–2030
- Projected annual rate base growth: 7.3% through 2031, up from 7.0% in the prior plan
- North Plains Connector transmission project: excluded because "The North Plains Connector project is not included and likely lies outside the 5-year planning horizon"
Faster construction lifts future earnings potential because regulators set customer rates as a percentage of the utility's invested capital. However, this spending only turns into profit once state commissions approve higher customer rates.
What to watch: full-year utility capital spending in the fourth-quarter report. Staying at or above the $615 million target would keep the 7.3% asset growth plan on track.
Operating Cost Cuts Offset Power Supply Pressures
Chief executive Heather Rosentrater said "Utility earnings for the third quarter remain on track for the year" and pointed to cost management. In the first half of 2026, rising employee pay and benefits had reduced utility profit per share by 11 cents.
In the third quarter, the energy provider reversed part of that drag. Lower operating and maintenance expenses added $3 million after tax, or 5 cents per share, compared with a year ago. Management also improved its full-year forecast for the Energy Recovery Mechanism (ERM), a Washington rule that forces the utility to absorb part of high wholesale power costs, from a 10-cent loss per share to a 9-cent loss.
Because the company exited the coal-fired Colstrip power plant at the start of 2026, plant operating costs fell enough in the third quarter to outweigh higher wages. That cost relief kept quarterly utility profit per share moving up to $0.38 from $0.37 a year ago.
What to watch: fourth-quarter operating and maintenance expenses. Another quarter of cost savings would allow the utility to hit its $2.62 full-year profit midpoint even if winter weather is mild.
🐻 Bear Case
Delayed Cost Recovery Forces $100M Short-Term Borrowing
While the presentation highlights a prudent balance sheet, cash collection is lagging behind spending. When Avista pays more for power or customer rebates than current rates cover, it records the gap as a regulatory deferral to collect from customers in future years.
Last quarter, the utility was only evaluating extra borrowing. Now it states that "Due to increased regulatory deferrals and delayed recovery, we plan to obtain a short-term loan of up to $100 million by the end of the fourth quarter of 2026". While the company paused stock sales in the third quarter and trimmed its 2026 share issuance plan from $90 million to $73 million by our math, it plans to sell up to $110 million of new stock in 2027.
- 2026 common stock issuance: up to $73 million ($58 million issued through September), down from $90 million planned in Q2
- 2027 common stock issuance plan: up to $110 million, a 51% increase over 2026 by our math
- 2027 long-term debt issuance plan: about $220 million, following $230 million in 2026
Selling $110 million of new shares dilutes existing owners. Share count growth has already reduced year-to-date utility profit by 6 cents per share, and a larger 2027 stock sale will make that drag heavier.
What to watch: the regulatory asset balance in the full-year report. If uncollected customer balances keep rising, the company will have to issue the full $110 million of stock in 2027.
Power Cost Sharing Still Drags on Washington Returns
Under Washington's Energy Recovery Mechanism (ERM), Avista absorbs 10% of power supply costs once they exceed the baseline set in customer rates. This rule has reduced utility earnings every year since 2024 because wholesale electricity and fuel prices sit above authorized levels.
In the third quarter, higher retail electric rates added 14 cents per share to profit, but higher purchased power prices and volumes took away the exact same 14 cents. Pre-tax ERM expense reached $10 million for the first nine months of 2026, up from $7 million at mid-year, adding $3 million of third-quarter cost by our math.
Because power supply costs eat up the revenue from rate increases, the utility cannot earn the return on equity that regulators authorize. Fixing this drag requires Washington regulators to reset the power cost baseline in the pending rate case.
What to watch: the Washington Utilities and Transportation Commission final rate order expected in mid-December 2026. A rejection of the requested power supply reset would lock in another ERM loss for 2027.
Risks this quarter didn't answer
Four standing concerns from prior quarters received no new information in the third-quarter earnings release or presentation.
- Contested Washington four-year rate case: settlement talks failed earlier this year, and the mid-December 2026 commission order will decide 2027 rates and allowed returns.
- Spokane wildfire investigations and grid repairs: the release gives no update on fire cause investigations, public safety power shutoffs, or equipment rebuilding costs after the August fires.
- Paused data-center contract and industrial load loss: a departed industrial customer hurt nine-month electric sales, and the release gives no timeline for restarting the paused data-center talks.
- Oregon natural gas rules: state rate-filing limits and climate rules remain unaddressed in the quarterly summary.
👓 Other Themes
Lagged Investment Gain Lifts Reported Profit Before Q4 Reversal
Avista holds venture fund investments outside its regulated utilities and records their value changes on a one-quarter lag. Following a June public listing in one fund, non-regulated businesses earned $16 million after tax ($0.19 per share) in the third quarter, lifting total reported profit 69% to $49 million. Because the stock price fell in July, the company previously estimated a $13 million fourth-quarter loss on the same holding.
💲 Other KPIs
Total available credit fell 13% from last quarter's $258 million and 11% from $253 million a year ago, by our math. As of September 30, the utility had $168 million left on its main credit line and $57 million on its letter of credit facility, before adding the planned $100 million fourth-quarter loan.
Lower natural gas resource costs added $31 million after tax ($0.37 per share) in the first nine months, more than offsetting a $25 million ($0.30 per share) drop in gas revenue. Both lines fell together because purchased gas adjustments and Washington climate rules pass lower fuel costs directly to customer bills.
Depreciation and amortization expense fell enough to add $6 million after tax ($0.07 per share) year to date because Avista exited the Colstrip coal plant in January. Higher borrowing costs nearly canceled out that saving, as interest expense reduced nine-month utility profit by $5 million after tax ($0.06 per share).
🔮 Guidance
Unchanged. Rosentrater said "we continue to expect to be at the midpoint of our non-GAAP utility earnings guidance for 2026", which is $2.62 per share or 2.7% above 2025. By our math, hitting $2.62 after earning $1.76 in the first nine months leaves $0.86 for the fourth quarter, down 2.3% from $0.88 a year ago. Last year, utility profit finished at $2.55, 7 cents below the initial midpoint.
Raised by 1 cent. The plan now expects Washington's power cost-sharing rule to reduce full-year utility profit by 9 cents per diluted share inside the 90% customer, 10% company sharing band, improved from the 10-cent drag expected in the first two quarters.
Unchanged. Avista kept its full-year utility construction budget at $615 million, up 11% from $553 million in 2025. After spending $496 million in the first nine months, the budget leaves $119 million for the fourth quarter by our math, down 37% from $190 million in the fourth quarter of 2025.
Cut. Having issued $58 million of common stock in the first half and none in the third quarter, the utility now plans to issue up to $15 million more in 2026. By our math, that caps full-year share sales at $73 million, down 19% from the prior $90 million ceiling.
New. Management issued its first financing targets for 2027, planning up to $110 million of common stock sales and about $220 million of long-term debt. The 2027 stock issuance cap is $37 million higher than the revised 2026 total by our math, funding the $635 million 2027 construction budget.
Unchanged. The full-year utility earnings plan continues to assume a 12% effective income tax rate, compared with 11% in 2025.
Unchanged. Management still targets 4% to 6% annual growth in utility earnings from the $2.62 midpoint of its 2025 plan. Because the 2026 midpoint is also $2.62, hitting that multi-year growth rate depends entirely on rate increases starting in 2027.
❓ Key Questions
Why is 2027 stock issuance rising to $110 million?
Avista cut its 2026 stock issuance plan by $17 million, but set its 2027 cap at $110 million. Investors need to know whether the 2027 increase is just timing shifted out of 2026 or a larger permanent need for equity.
What are the repair costs from the August wildfires?
The second-quarter call focused on wildfires around Spokane, yet the third-quarter release mentions no repair spending or investigation findings. Management should clarify how much grid rebuilding cost in the third quarter and whether any third-party claims exist.
When will Avista sell its public venture fund stake?
The public listing in Avista's investment fund added $16 million to third-quarter profit, but a lock-up period prevented a sale and the stock dropped in July. Selling the stake after lock-up could reduce that $110 million of 2027 share dilution.
Have talks restarted with the paused data-center customer?
Negotiations for a large data-center contract paused in June, while an existing industrial customer left the system in April. With the five-year capital plan now extended to 2031, investors need to know if any large-load projects remain active.