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Avista to Challenge Costly Conditions on Coeur d'Alene
Proposed Conditions Are Unreasonable and Burdensome to Customers

SPOKANE, Wash., Aug. 17 // -- Avista (NYSE: AVA) has requested a hearing with the U.S. Department of Interior (DOI) to challenge proposed mandatory conditions for relicensing Post Falls Dam. Avista believes that the conditions are unreasonable and burdensome for customers.

(Logo: http://www.newscom.com/cgi-bin/prnh/20040128/SFW031LOGO )

DOI filed preliminary mandatory conditions for the Post Falls Project with the Federal Energy Regulatory Commission (FERC) on July 18, 2006. The mandatory conditions would apply to the portion of the project on the Coeur d'Alene Indian Reservation. DOI also proposed a number of recommended conditions for measures that extend beyond the Coeur d'Alene Indian Reservation.

Avista contends that DOI's conditions are not supported by the facts. DOI claims that operating the Post Falls Dam to maintain summer levels on Lake Coeur d'Alene has seriously harmed the environment and Avista disagrees.

Avista's license for Post Falls and four other Spokane River dams expires in August 2007. The company has been engaged in a multi-year collaborative process with stakeholders to develop reasonable terms and conditions for a new license.

DOI has submitted conditions that go well beyond what was proposed by Avista in its July 2005 license application to FERC.

"We believe that our license application represents a reasonable and effective package that addresses the impacts of our Post Falls Hydroelectric Project and enhances resources associated with Coeur d'Alene Lake and the Spokane River," said Bruce Howard, Avista's Spokane River license manager. "The additional conditions from DOI ask us to deal with issues that are not caused by the operation of the dam."

For example, added Howard, a number of the conditions are based on DOI's view that operating the Post Falls Project to maintain summer Lake levels has significantly harmed cutthroat trout and mountain white fish. "Based on that assumption, DOI seeks to require Avista to restore habitat on streams where the Post Falls Project has no adverse impact."

Avista estimates that the cost of the proposed mandatory and recommended conditions, coupled with the proposals in Avista's license application, could total as much as $400-500 million over the life of a 50-year license. Typically, new license costs are ultimately borne by customers through rate increases.

The trial-type hearing process is a relatively new procedure created by the Energy Policy Act of 2005 and the hearing will focus on whether DOI's conditions are supported by the facts. Avista hopes to resolve these issues through this process and be able to continue Post Falls operations, including maintaining summer Lake levels, with reasonable terms and conditions.

Avista has also filed proposed alternative mandatory conditions with the DOI. These alternatives are based on Avista's evaluation of the impacts of the Post Falls Project on the Coeur d'Alene Indian Reservation. They provide a more cost-effective alternative to addressing the concerns raised by DOI. This filing is also based on the provisions of the Energy Policy Act of 2005.

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 a company operating division that provides service to 339,000 electric and 298,000 natural gas customers in three Western states. Avista's non-regulated subsidiaries include Advantage IQ and Avista Energy. Avista Corp.'s stock is traded under the ticker symbol "AVA." For more information about Avista, please visit http://www.avistacorp.com/.

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

This news release contains forward-looking statements, including statements regarding the estimated costs of proposed mandatory and recommended conditions for relicensing the Post Falls Hydroelectric Project. 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 June 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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SOURCE: Avista Corp.

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