Welcome to the Q1 2017 earnings conference call. My name is Ali, and I will be your operator for today's call. [Operator Instructions]. Please note that this conference is being recorded. I will now turn the call over to Lauren Pendergraft. Lauren, you may begin.

Thank you, Ali. Good morning, everyone, and welcome to Avista's First Quarter 2017 Earnings Conference Call. Our earnings and our first quarter 10-Q were released premarket this morning, and they both are available on our website at avistacorp.com. Joining me this morning are Avista Corp. Chairman of the Board, President and CEO, Scott Morris; Senior Vice President and CFO, Mark Thies; Senior Vice President and the President of Avista Utilities, Dennis Vermillion; Vice President, State and Federal Regulation, Kelly Norwood; and Vice President and Controller, Ryan Krasselt. I would like to remind everyone that some of the statements that will be 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 2016 and 10-Q for the first quarter of 2017, 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 first quarter of 2017 were $0.96 per diluted share compared to $0.92 for the first quarter of 2016. Now I'll turn this discussion over to Scott.

Well, thank you, Lauren, and good morning, everyone. We're off to a good start in 2017 with consolidated earnings above our expectations. Our higher earnings in the first quarter were mainly from increased hydroelectric generation, which put us in a benefit position in the Energy Recovery Mechanism in Washington, and lower-than-expected operating expenses. During the first quarter, we experienced a high amount of precipitation in our area. In fact, March was the second-wettest March on record in Spokane. And since October 1, 2016, the Spokane area has seen almost double the normal precipitation for that time period. Wet weather also occurred in the Upper Clark Fork area, and this has led to the fourth-highest amount of hydroelectric generation that we have experienced during the first quarter since 1989. Going forward, we expect slightly above average hydroelectric generation for the remainder of the year. AEL&P had another solid first quarter with earnings slightly above our expectations, primarily due to increased electric loads from colder-than-normal weather. One of the operating highlights of our first quarter was we received the Edison Electric Institute's 2017 National Key Accounts Award for Outstanding Customer Service. The award is given to electric companies that provide superior service to national, multisite energy customers. Avista was 1 of only 8 recipients chosen by customers in a nationwide open ballot process. We're proud to be one of the few utilities in the country to receive this award, and this is an acknowledgment of the incredible service our employees provide to our customers. Looking forward to the rest of 2017. Our focus continues to be on regulatory matters. During the first quarter, we had constructive meetings with members of the Washington commission regarding our continued investment in our utility infrastructure and expectations for future general rate cases. We intend to address their concerns by filing a general rate case with 3-year rate plans for electric and natural gas in the second quarter. We also plan to file a separate request to update Washington power supply cost, requesting approximately a $15 million revenue increase. We are requesting that the power supply update become effective in the third quarter of this year in order to begin recovering our power supply cost for 2017 under normal operating conditions. In Idaho, we intend to file electric and natural gas general rate cases during the second quarter. In Oregon, we've reached a settlement in principle to our 2016 general rate case. A settlement agreement will be filed with the Oregon Public Utility Commission in the next few weeks. Based on our earnings for the first quarter of 2017 and our expectations for the remainder of the year, we are confirming our earnings guidance range. So at this time, I'll turn the presentation over to Mark.

Thank you, Scott. Good morning, everyone. We had a great quarter, off to a good start, like Scott said. But I do have some sad news to report, my Blackhawks got swept. So I'll be grouchy through the rest of the call because the Hawks are out of the Stanley Cup Playoffs. For the first quarter, Avista Utilities contributed $0.90 per diluted share compared to $0.88 last year. And the increase in earnings is due to general rate increases in Idaho and Oregon, customer growth and lower operating expenses, partially offset by expected increases in depreciation and interest expense. On a capital expense basis, we continue to be committed, as Scott said, to investing the capital on our utility infrastructure, and we expect our capital expenditures to total about $405 million at Avista Utilities in 2017 and about $7 million at AEL&P for 2017. We continue to have strong liquidity as we have a $253 million of available liquidity under Avista's committed credit line and $25 million of availability under AEL&P's committed credit line. In the second half of 2017, we expect to issue up to $110 million of long-term debt and up to $70 million of common stock in order to fund our planned capital budget and maintain an appropriate capital structure for the year. Moving on to earnings guidance. As Scott said, we are confirming our earnings guidance to be in a range of $1.80 to $2 per share at Avista Corp. We expect Avista Utilities to contribute in the range of $1.71 to $1.85 per diluted share for 2017. The midpoint of our guidance range does include approximately $0.07 of expense under the Energy Recovery Mechanism, which is within the 90-10 customer and shareholder-sharing band. As Scott mentioned, we had stronger hydro. And so our expectations for…

Thanks, Mark. Ali, we would like to open this call up to questions now.

[Operator Instructions]. And our first question comes from Julien Dumoulin-Smith from UBS.

So I'd love to hear how some of the initial conversations and reactions with the different parties in Washington have transpired of late in these last few months. What exactly has changed? What did you learn through the course of those conversations? And what gives you the confidence that at this point in time you can turn it around in terms of the next filing? If you could elaborate a little bit on your opening comments.

Julien, this is Kelly Norwood. The commission's last order on reconsideration came out February 27. So immediately following that, once the case was finished then we were open to be able to go in and have a conversation with the commissioners and the commission staff. And we have had multiple conversations individually with not only the commissioners, but the commission policy staff and then also the commission energy staff, which is a separate party in the case. So we've had multiple conversations as well as had a meeting with all the parties in our most recent case. And all of that is really designed to gain a better understanding of what the commissioners' interests are and what their needs and expectations are going forward. And so those meetings, I would say, have been very constructive. If you look at the last order, the commission indicated an interest in multiyear rate plans, and so that will be our plan moving forward is to file a multiyear rate plan. As we talked with them about other concerns that were expressed in the order, one in particular was capital investment. And what we've learned there is -- we've told them clearly what we're planning to do. They're looking for more information about why we're doing what we're doing in terms of capital investment. And so that was also helpful as we go forward. So then as we look at other issues that were raised in the case, one is advanced metering infrastructure. In the order, they indicated they were open to an accounting petition to allow us to set aside those costs for future recovery. And so we filed earlier this week a petition with the Washington commission to set aside the costs associated with our investment in advanced metering infrastructure. And of…

Excellent. I still have a quick second question, if I can follow up with that, separate distinct subject. I'd love to hear your thoughts more broadly on nonregulated activities. I suppose discussion of retail has been out there a little bit. I'd love to hear how you guys are thinking about the strategic direction of the company and the desirability to revisit something like but not necessarily Ecova as a complementary effort to your business.

So Julien, as we well know, there's lots of things happening in the electric industry around distributed energy, around storage, around digitizing the grid, around sensor technology. We were 1 of 10 cities designated as a smart city by the feds. What we're doing is what we've traditionally always done around innovation, which is a big piece of our company and our culture, what we're doing is we're leaning in. We've got some -- our best and brightest engineers who are looking at things in our Urbanova smart city around what we can do there. We're doing a lot of interesting things as we start to deploy AMI and what does that mean. The new Itron meter is very unique. It’s -- we’ll be the first utility putting that meter in, which is in essence like a smartphone going on a residence or a business. We're continuing to explore our storage that we have in Pullman. We're continuing to digitize not just Spokane, but across our electric system and upgrading. And we're doing some work on sensor. So I guess, what I would tell you is by doing all of that and having that traditional history of innovation here, I don't know if we're going to come up with an Itron. That really isn't necessary our plan. But what our plan is, is to make sure that we are being progressive and innovative and looking at opportunities to better serve our customers. When we have started successful nonregulated businesses, our history is we started them because we solved a customer issue and provide better service. So whether it was Ecova or whether it was Avista Energy or whether it was Itron, it was all around meeting our customer needs. So we're going to do that. And if something happens because of that, we have a history of being able to monetize that. But again, we're not going to force the issue or do something where we're going to overly get aggressive here. So I hope that answers your question.

Well, I suppose this is a follow-up. In terms of desirability of retail specifically, that's something that we've seen elsewhere in the space. But I'd just be curious on the palatability of that specific niche on the nonregulated side. And then also maybe if you could define your efforts to lean in here. How meaningful of an earnings driver and when could that be an earnings driver as you kind of think about that side of the business?

Julien, I don't really see it as being anything near term at all. Let me remind you a couple of things, when we did Ecova, it took us a decade to earn $0.01 a share. So these kind of -- not necessarily that it is something that maybe the next one would be different. But as you know, these take a lot of time, they take a lot of capital. And fortunately, utilities can be patient capital. Let me remind you, we also have -- we're looking at new technologies. We invested in that -- we put $25 million into that technology fund. So we're having great insights into other technologies that are happening in the space. So again, I just want to say is that we do not have in our forecast any retail revenue coming from nonreg businesses. That's not what we're going to do. But again, we lean in, we look, and I like our track record. So if something did happen, we would have the courage to step out, but we don't see anything near term doing that. But we're going to continue to lean in and let our engineers do what they've always done, which is innovate.

Got it. And so retail is not necessarily something that you're looking at either?

No.

And our next question comes from Paul Ridzon from KeyBanc.

If you get your power supply cost revisited, how much of the headwind could that alleviate?

Well, if so, we expect to file $15 million. And as Kelly said, we expect it to go in the third quarter. If it went in, say, September 1, for example, and the commission approved it -- and we still have to go through that process of demonstrating to the commission. But if they approved it, it would be about a $0.05. You’d get about 1/3 of that for the rest of the year. And then the difference also would be what changes from there forward to your power supply cost because you've reset your ERM. So that I can't predict because I don't know what the change would be. So it would be up to a $0.05 a share for this year. But the thing that it helps, Paul, is as Kelly said, is that goes into next year and alleviates some of the request that we have to make next year in our -- that we would file at the same time, but it would alleviate some of that request for the general 3-year rate case.

How much of a headwind was it in the first quarter?

How much of a headwind was it? I mean, it's no different than what we've said in the past, the whole not getting our -- any rate relief in our last case was $0.20 to $0.30. That still remains. That's all built into our expectations, and that's from that prior case. So this is attempting to chip away a little bit at that with means that we can do. And then as Kelly said, we've held constructive discussions. And we will file our next case, and you'll see that when we file that later in this quarter.

And then I saw in the release there was an issue with you had some decoupling revenues hit this quarter from prior year periods. How big was that?

It was pretty small, $0.01 -- $0.01 or $0.02, not very big.

Okay. And then any correlation between hydro conditions you're seeing and what they're seeing in Alaska?

No. Alaska has a decent hydro year. We may be a little bit higher from a water perspective. Dennis, do you want to talk about?

Yes. I mean, as Scott mentioned, our start of the year is pretty phenomenal, really, from a hydro perspective with all the precip that we've received, and we still have a snowpack in our drainages that is over 100% of normal for this time of year. So our hydro is looking good. In Alaska, it's a little -- it's more towards normal. I would say it's less than it was last year for them. But they're still in good shape. They expect to be able to continue to serve their interruptible customers with hydro for the remainder of the year. That could change. But as of now, they're on target.

And our next question comes from Shar Pourreza from Guggenheim Partners.

Just one follow-up question on Washington. At this point, has all the dialogue ceased? Or is there any other open issues prior to filing this rate case?

This is Kelly. I would say that we've covered the issues actually multiple times. Ann Rendahl, one of the commissioners; and Brian Thomas, the Director of the Policy Staff, is actually coming to our offices later this week. So that's a continuation of the dialogue. The new commissioner, Jay Balasbas, who started May 1, is coming over also next week. And so we're continuing the dialogue and then starting the dialogue with him actually with him being a new commissioner. So I'd say that the dialogue is not over. We've covered the issues. But as long as we have time and opportunity to discuss the next case, then we will do that.

Got it. And then just remind us if you do -- if you file in the second quarter. And assuming this is a fully litigated case, when do you expect the final order?

If we file second quarter, then the -- if they take the full statutory period 11 months, which they typically do, then you're going to end up in the early second quarter of 2018. But with the power cost update, we've indicated that if we're successful there, we'll get part of the increase that we need in the third quarter of this year. And we've indicated that's roughly 50%, and then the balance then would come in the second quarter of 2018.

Got it. And then just lastly, as far as thinking about your 2018 outlook, will you withhold issuing guidance for 2018 until you get a final order in this case?

We'll have to look at that. We haven't -- we'll have to consider where we are. We'll have a lot of discussions. So that will come. We'll make that decision probably early next year as to how contentious or where we think any of the issues are and if we're comfortable putting guidance out or if we're going to wait. So we'll just have to see where that -- where we progress as we go forward.

[Operator Instructions]. And we have no further questions. Lauren, if you have any closing remarks.

Thank you. Thank you to everyone for joining us today. We certainly appreciate your interest in our company. We hope you have a great day.

Thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating. You may now disconnect.