Dear Friends,

Chairman/CEO

Imagine a time and place where sustainability isn’t a buzzword or a mandate

But it’s a critical part of what and who a company is. We had that vision – starting with our founding in 1889 – and today we continue our long tradition of commitment to environmental stewardship, economic development and social responsibility through everything we do.

We are working daily for the health and continued viability of the rivers, the natural resources and the environment where we do business throughout our three-state service area. We are investing in the safety and well-being of our employees and their families. And we are active participants in the lives and prosperity of the communities we serve. Not just for today, but for generations to come. We take these responsibilities very seriously, because we believe it’s the right thing to do.

Our long-standing commitment to sustainability in our business practices is strengthened by the relationships we’ve developed with local, state and federal agencies, non-governmental groups, civic and educational organizations, and concerned individuals.

Facing today’s challenges

The utility industry is changing faster than ever before. It’s a new world when it comes to state and federal mandates, including potential climate change legislation. In the state of Washington, where we serve roughly two-thirds of our customers, a renewable portfolio standard (RPS), passed three years ago, calls for us to provide 15 percent of our power from qualified renewable sources by 2020. While we currently derive over 50 percent of our power generation from clean, renewable hydroelectric and biomass sources, these megawatts do not count toward the RPS goals. We are on track, however, to meet the Washington state standards through qualifying upgrades to our hydro plants and other renewable opportunities.

Additional forces impacting our operations include requirements for environmental, financial and safety compliance, along with stricter reliability standards. Dynamic world markets for copper, steel and concrete are causing our costs for replacing equipment to increase dramatically, while the natural gas commodity costs for generation and customers’ direct use continue to shift.

The faces of our employee groups are changing, as the largest generation of all time – the Baby Boomer generation – is retiring. Over the next five to ten years, a quarter to a half of our work force will be eligible for retirement. But as they remain in place, we’ll also see our healthcare costs continue to rise, as they have over the past few years, at about 7 percent annually. We’ve planned for this shift in our demographics, and we will continue to effectively manage these costs and develop our workforce to keep ideas fresh and leadership strong.

The impacts of the economic recession have been very difficult for many families and businesses in our region. Our company and our employees are working with our customers and community agencies to promote financial stability and opportunity through support of energy assistance programs, food and clothing banks, job training, affordable housing initiatives, and other local and regional programs.

Designing our future

In the near term, we know that the cleanest, greenest and lowest-cost new energy resource is the one you don’t have to build – it’s energy efficiency. We’ve been helping our customers understand and use energy efficiently for more than 30 years. And in 2009, they once again showed us that they care deeply about their energy use and costs by exceeding the annual energy savings targets. We know they are serious about this and so are we.

At the same time, we’re installing new technologies through two matching smart grid grants we received in late 2009 under the American Recovery and Reinvestment Act. Understanding how new technologies will impact our company and our customers will help us reduce costs and increase efficiencies while making the best long-term use of all our resources.

Innovation is a hallmark of Avista. Our talented employees are working to find ways to further streamline operations. They are resourceful in recycling and reusing materials to ensure the least possible impact on our environment. And they are implementing creative ideas to enhance productivity and keep costs under control.

This is certainly a time of many changes and challenges both in our industry and in our country. We know that changing customer expectations along with new technologies and requirements will truly make a difference in our future. We’re taking an active role in the ongoing conversations about these topics.

We are and we will continue to be focused on delivering an essential service to our customers safely, reliably and in a cost-effective way. We are committed to controlling our own destiny in ways that will preserve the opportunity for future generations to do the same.

 

Scott Morris
Chairman, President and Chief Executive Officer
Avista Corp.