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Avista Plans to Re-file for Cost Recovery
Avista evaluating options for timely cost recovery on infrastructure investments

SPOKANE, Wash. – December 27, 2006 4:30 a.m. PST: Avista (NYSE:AVA) yesterday received an order from the Washington Utilities and Transportation Commission dismissing the company’s Production Transmission Update (P/T Update) rate case request filed on Aug. 31, 2006. The order concludes that the nature of Avista’s filing is by definition a “general” rate case, but the information provided by the company does not comply with applicable rules.

Avista is disappointed in the commission’s decision. The company believes that the P/T Update request, similar in form to other requests filed with the commission, would have provided for timely review and cost recovery while resulting in smaller rate adjustments over time. Avista is evaluating its options and plans to file for rate relief in a manner that will provide for cost recovery as expeditiously as possible.

The P/T Update included investments in efficiency upgrades at several of Avista’s hydroelectric generating units and the continuing upgrades to Avista’s 230-kilovolt high voltage transmission system to increase reliability and transmission capability. Also contributing to the need for the P/T Update are higher operating costs for purchasing and generating electricity to serve Avista’s customers. Avista did not request an update to other operating, administrative and distribution costs.

“To increase system reliability and serve growing customer demand, Avista has made significant investments in generation and transmission infrastructure. As the demand for power has increased, so have the costs for purchasing and generating electricity to serve our customers,” said Scott Morris, Avista Corp. president and chief operating officer and president of Avista Utilities.

Costs associated with investments in infrastructure and growing demand are recovered through rates charged to customers. The requested P/T Update case included costs and expected customer electric demand for 2007. Avista requested an increase in electric rates for its Washington customers of an average 8.8 percent, which was intended to increase revenues by $28.9 million.

Avista’s last general rate case, approved in December 2005, was designed to reflect the costs to serve customers in 2006.

Avista is an energy company involved in the production, transmission and distribution of energy as well as other energy-related businesses. Avista Utilities is a company operating division that provides service to 341,000 electric and 298,000 natural gas customers in three western states. Avista’s non-regulated subsidiaries include Avista Advantage and Avista Energy. Avista Corp.’s stock is traded under the ticker symbol “AVA.” For more information about Avista, please visit www.avistacorp.com.

Avista Corp. and the Avista Corp. logo are trademarks of Avista Corporation.

This news release contains forward-looking statements, including statements regarding expected rates, costs and demand for electricity and natural gas. Such statements are subject to a variety of risks, uncertainties and other factors, most of which are beyond the company’s control, and many of which could have a significant impact on the company’s operations, results of operations and financial condition, and could cause actual results to differ materially from those anticipated.

For a further discussion of these factors and other important factors, please refer to the company’s Annual Report on Form 10-K for the year ended Dec. 31, 2005 and Quarterly Report on Form 10-Q for the quarter ended Sept. 30, 2006. The forward-looking statements contained in this news release speak only as of the date hereof. The company undertakes no obligation to update any forward-looking statement or statements to reflect events or circumstances that occur after the date on which such statement is made or to reflect the occurrence of unanticipated events. New factors emerge from time to time, and it is not possible for management to predict all of such factors, nor can it assess the impact of each such factor on the company’s business or the extent to which any such factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statement.

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