HispanicBusiness

The decrease in quarterly utility earnings was primarily due to an increase in other operating expenses (including costs under the voluntary severance incentive plan), depreciation and amortization, and interest expense. This was partially offset by a slight increase in gross margin (due to general rate increases mostly offset by warmer weather) and a decrease in taxes other than income taxes. We estimate that warmer weather, as compared to the fourth quarter of 2011, decreased our utility earnings contribution by $0.10 per diluted share, and costs under the voluntary severance incentive plan reduced earnings by $0.08 per diluted share. Other factors, with the most significant being general rate increases, partially offset by expected increases in other operating expenses, depreciation and amortization, and interest expense, had a net positive impact of $0.08 per diluted share for the fourth quarter of 2012 as compared to 2011.

The decrease in annual utility earnings was primarily due to reduced retail loads during the first and fourth quarters of the year (primarily as a result of warmer weather) and an increase in other operating expenses, and depreciation and amortization, which was partially offset by the implementation of general rate increases. We estimate that warmer weather, as compared to 2011, decreased our utility earnings contribution by $0.18 per diluted share, and costs under the voluntary severance incentive plan reduced earnings by $0.08 per diluted share. Other factors, with the most significant being general rate increases, partially offset by expected increases in other operating expenses, depreciation and amortization, and interest expense, had a net positive impact of $0.08 per diluted share for 2012 as compared to 2011.

Net income for Ecova for the fourth quarter and full year of 2012 decreased as revenue growth for the expense and data management services, and energy management services was not as high as expected and did not offset increased operating costs. In addition, Ecova's earnings were reduced by increased costs associated with completing and integrating the acquisitions of Prenova and LPB Energy Management (LPB), and an increase in depreciation and amortization.

In our other businesses, the $0.09 loss per diluted share for 2012 was due to losses on and impairments of investments of $0.04 per diluted share, strategic consulting and other corporate costs of $0.04 per diluted share and Avista Energy litigation costs of $0.03 per diluted share. These were partially offset by an earnings contribution from METALfx of $0.02 per diluted share.

We may invest incremental funds to protect our existing investments and invest in new opportunities that we believe fit with our overall corporate strategy. We are focused on discovering new ways to accelerate growth for Avista Corp. within and adjacent to our core utility business. We are planning to spend $2 million to $3 million in 2013, exploring opportunities to develop new markets and ways for customers to use electricity and natural gas for commercial productivity and transportation.

Avista Utilities: On a quarterly basis, operating revenues (exclusive of intracompany revenues between electric and natural gas of $33.6 million in 2012 and $21.4 million in 2011) decreased $20.8 million and resource costs decreased $22.4 million, which resulted in an increase of $1.7 million in gross margin. The gross margin on electric sales increased $5.7 million and the gross margin on natural gas sales decreased $4.0 million. The increase in electric gross margin was primarily due to general rate increases, partially offset by warmer weather that decreased retail electric heating loads. Gross margin on natural gas sales decreased due to warmer weather. This was partially offset by general rate increases.