UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): October 21, 2004

AVISTA CORPORATION

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

Table of Contents

Section 2 — Financial Information

Item 2.02 Results of Operations and Financial Condition.

The information in this report shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, nor shall it be incorporated by reference in any filing under the Securities Act of 1933, except as shall be expressly set forth by specific reference in such filing.

On October 21, 2004, Avista Corporation (Avista Corp.) issued a press release announcing 2004 third quarter and year-to-date earnings. A copy of the press release is furnished as Exhibit 99(a).

Neither the furnishing of any press release as an exhibit to this Current Report nor the inclusion in such press releases of a reference to Avista Corp.’s Internet address shall, under any circumstances, be deemed to incorporate the information available at such Internet address into this Current Report. The information available at Avista Corp.’s Internet address is not part of this Current Report or any other report furnished or filed by Avista Corp. with the Securities and Exchange Commission.

Section 9 — Financial Statements and Exhibits

Item 9.01 Financial Statements and Exhibits.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		Exhibit 99(a)

News Release

Avista Corp. Reports Q3 2004 Earnings

Spokane, Wash.: Avista Corp. (NYSE: AVA) today reported a consolidated net loss of $9.8 million, or a loss of $0.20 per diluted share for the third-quarter 2004. Year-to-date consolidated net income available for common stock is $12.6 million or $0.26 per diluted share.

     “Results for the third quarter 2004 were dominated by disallowances of past costs ordered by the Idaho Public Utilities Commission in our general rate case. It is our intent to seek reconsideration of some portions of the commission’s order,” said Avista Board Chairman, President and Chief Executive Officer Gary G. Ely. “The Energy Marketing segment’s third quarter results were below plan, yet, excluding the Idaho disallowances, the quarter’s earnings for both Avista Utilities and Avista Advantage were solid and slightly above our plan. Our guidance for 2005 earnings reflects the company’s improving performance, as is described in this release.”

     Results for third quarter 2004, and year-to-date 2004, compared to 2003:

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Page 2 Avista Reports Q3 2004 Earnings

Regulatory Issues

     The Idaho Public Utilities Commission (IPUC) issued the final order in Avista’s general electric and natural gas rate case on Oct. 8, 2004. When filed in February 2004, Avista requested annual electric and natural gas rate increases designed to result in additional revenues of $40 million. In testimony filed in July 2004, the company revised downward the electric and natural gas revenue requirement to $35.2 million. The final IPUC order authorizes a combined electric and natural gas increase of $28 million. This includes an increase in base electric rates of 16.9 percent, which is designed to increase annual revenues by $24.7 million. This will be largely offset by a reduction in the power cost adjustment surcharge and will result in a net electric rate increase to customers of 1.9 percent. The commission also authorized an increase of approximately 6.4 percent in natural gas rates, which is designed to increase annual revenues by $3.3 million.

     However, the IPUC order requires Avista to take write-offs totaling $14.7 million. The write-offs are related to the disallowance of deferred costs, including associated interest, for natural gas contracts entered into by Avista to provide fuel for its thermal generating facilities and the disallowance of certain capitalized utility plant costs from rate base. The company believes the natural gas and generation-construction costs disallowed by the commission were prudently incurred. Avista intends to file a petition for reconsideration of certain portions of the final order issued by the IPUC.

     “We understand the challenge the commission faced in balancing the financial needs of our company with the impact of price increases on our customers,” said Scott Morris, president of Avista Utilities. “We are disappointed in some portions of the commission’s ruling, but the net increase in annual electric and natural gas revenue is a positive step toward Avista’s goals of improving cash flow and regaining its investment grade corporate credit rating.”

     In Washington, Avista has reached a settlement with three of the five parties that would provide early resolution to its natural gas general rate case, which the company filed in August 2004. The settlement, which must still be approved by the Washington Utilities and Transportation Commission (WUTC), would increase rates by 3.9 percent and is designed to increase annual revenues by $5.4 million. Avista originally requested an overall rate increase of 6.2 percent, or $8.6 million. Implementation of the rate adjustment on Nov. 1, 2004, would correspond with the proposed effective date of the company’s pending purchased gas cost adjustment (PGA).

Avista Utilities

     Avista Utilities had a net loss of $0.15 per diluted share in the third quarter 2004, compared to its contribution of $0.02 per diluted share in the same period last year. The loss was due to IPUC-related write-offs referred to above which, net of taxes, reduced Avista Utilities’ contribution by $0.20 per diluted share.

     On a 2004 year-to-date basis, Avista Utilities’ contribution per diluted share was $0.26 as compared to

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Page 3 Avista Reports Q3 2004 Earnings

$0.39 for the same period in 2003, with the decrease being attributable to the IPUC-related write-offs. Excluding these write-offs, Avista Utilities’ results improved compared to the prior year.

     Avista is pleased to note that the Coyote Springs 2 facility has been fully operational since Sept. 7, with the repaired transformer and the entire plant performing to expectations. A back-up transformer has been built and shipped by the manufacturer, and it is expected to be delivered to the site in November 2004.

     Avista has entered into an agreement to purchase Mirant’s 50 percent ownership interest in the Coyote Springs 2 gas-fired generating facility. Because Mirant and certain of its affiliates are currently in bankruptcy, the agreement will be subject to a competitive auction. In addition, a number of approvals are required to complete the transaction, including those of the U.S. Bankruptcy Court and the Federal Energy Regulatory Commission (FERC). The agreement also must meet a number of other federal and state regulatory requirements. The transaction could be completed by the end of 2004 or in early 2005. The proposed purchase price is $62.5 million. If the transaction is completed as proposed, Avista would own the entire facility and an additional 140 megawatts of generating capacity to serve its customers’ future energy needs. Avista plans to request inclusion of the additional interest in the Coyote Springs 2 facility in rate base.

     The proposal for the sale of Avista’s South Lake Tahoe, Calif., natural gas distribution properties to Southwest Gas has been filed with the California Public Utilities Commission. The South Lake Tahoe properties, which were acquired by Avista as part of its acquisition of certain assets of CP National Corporation, are isolated from the rest of Avista’s service territory, and it is the only area served by Avista in California. Sale of the properties would eliminate service by Avista in the California jurisdiction. The sale is expected to be completed early in 2005.

     Hydroelectric generation and streamflow conditions for calendar year 2004 continue to be below normal, but they improved slightly with the rainfall the region experienced in September. Hydroelectric generation for 2004 is now projected to be 508 average megawatts or nearly 92 percent of normal, as compared to 483 average megawatts or approximately 88 percent of normal forecasted last quarter.

Energy Marketing and Resource Management

     The Energy Marketing and Resource Management business segment completed the third quarter of 2004 with a net loss of $0.03 per diluted share, primarily due to an impairment charge amounting to $0.07 per diluted share, related to a generating asset owned by Avista Power. Avista Energy’s earnings contribution of $0.04 per diluted share in the third quarter of 2004 was positive for the 18th consecutive quarter, but below internal expectations. This was due primarily to sharp increases in natural gas prices during the latter part of the third quarter that were unfavorable for some short-term positions.

Avista Advantage

     Avista Advantage contributed $0.01 to earnings per diluted share in the third quarter 2004. This is the first positive earnings quarter for Advantage, marking a milestone for this growing business. In the past 30 days

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Page 4 Avista Reports Q3 2004 Earnings

Advantage has signed over 23,000 new accounts which are ready to go live over the next four to six weeks. Included in this number are completed contracts with three of the top 20 national retailers, representing the automotive, video rental and electronics sectors. The company’s positive trends in results are due to continued focus on operational cost efficiencies, new services for current and renewing clients, and new client growth.

Outlook and Earnings Guidance

     Avista’s corporate consolidated earnings guidance for 2004, given from time to time during the year, has been between $1.00 and $1.20 per diluted share, which was based on expectations for Avista Utilities contributing in the range of $0.75 to $0.90 per diluted share, excluding the impact of regulatory disallowances; the Energy Marketing and Resource Management segment contributing in the range of $0.25 to $0.35 per diluted share; Avista Advantage contributing $0.00 per diluted share; and the Other segment showing a loss amounting to less than the $0.10 per diluted share recorded in 2003. Based on current results and the outlook for the remainder of the year, the 2004 earnings guidance is revised as follows:

     Avista Utilities is expected to contribute to earnings at the upper end of previous expectations, before taking into account the impact of regulatory disallowances. Therefore, guidance for its 2004 earnings contribution is raised to between $0.85 and $0.95, before the impact of regulatory disallowances, and between $0.65 and $0.75 after such disallowances. The below-target performance in the Energy Marketing and Resource Management segment is causing the company to lower its expectations for the earnings contribution from that segment to between $0.10 and $0.15 per diluted share for this year, after taking into account the impact of the asset impairment at Avista Power. Expectations for Avista Advantage and the Other segment are unchanged. Accordingly, Avista’s revised 2004 consolidated corporate earnings guidance is $0.90 to $1.05 per diluted share, before the $0.20 per share impact of regulatory disallowances and between $0.70 and $0.85 per diluted share, after the impact of the Idaho disallowances of $0.20 per diluted share.

     For 2005, the company anticipates consolidated earnings to be in the range of $1.20 to $1.35 per diluted share, with the outlook for Avista Utilities to contribute in the range of $0.95 to $1.10 per diluted share. The 2005 outlook for the other business segments calls for the Energy Marketing and Resource Management segment to contribute in the range of $0.20 to $0.30 per diluted share, Avista Advantage to contribute $0.05 per diluted share, and for the Other segment to lose $0.05 per diluted share. This guidance is excluding the impact of regulatory disallowances, if any.

     Plans call for the continuation of current business strategies, focusing on improving cash flows and earnings, and controlling costs, while working to restore investment-grade credit ratings. The company expects the utility business to continue its modest, yet steady, combined growth of electric and natural gas customers of 2 to 3 percent per year.

     Avista Corp. is an energy company involved in the production, transmission and distribution of energy

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Page 5 Avista Reports Q3 2004 Earnings

as well as other energy-related businesses. Avista Utilities is a company operating division that provides service to 325,000 electric and 300,000 natural gas customers in four 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. All other trademarks mentioned in this document are the property of their respective owners.

NOTE: Avista Corp. will host an investor conference call and webcast on Oct. 21, 2004, at 10:30 a.m. EDT. To listen, call (888) 482-0024 approximately five minutes in advance to ensure you are connected. The passcode is 12508636. A replay of the conference call will be available from 12 p.m. EDT on Oct. 21 through 11:59 p.m. EDT Oct. 28. Call (888) 286-8010, passcode 21268797 to listen to the replay.

     A webcast of this investor conference call will occur simultaneously. To register for the webcast, please go to the Avista Corp. website at www.avistacorp.com. A webcast replay will be archived for one year at www.avistacorp.com.

The attached income statement, balance sheet, and financial and operating highlights are an integral part of this earnings release.

     This news release contains forward-looking statements, including statements regarding Avista Corp.’s current expectations for future financial performance, the company’s current plans or objectives for future operations, future stream flow projections and other factors which may affect the company in the future. 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 in such statements.

     The following are among the important factors that could cause actual results to differ materially from the forward-looking statements: changes in the utility regulatory environment; the impact of regulatory and legislative decisions; the potential effects of any legislation or administrative rule-making passed into law; the impact from the potential formation of a Regional Transmission Organization and/or an Independent Transmission Company; the impact from the implementation of the FERC’s proposed wholesale power market rules; the ability to relicense the Spokane River Project at a cost-effective level; volatility and illiquidity in wholesale energy markets; wholesale and retail competition; future streamflow conditions that affect the availability of hydroelectric resources; outages at any company-owned generating facilities; unanticipated delays or changes in construction costs; changes in weather conditions; changes in industrial, commercial and residential growth and demographic patterns; the loss of significant customers and/or suppliers; failure to deliver on the part of any parties from which the company purchases and/or sells capacity or energy; changes in the creditworthiness of customers and energy trading counterparties; the company’s ability to obtain financing; changes in future economic conditions in the company’s service territory and the United States in general;the impact of any potential change in the company’s credit ratings; the potential for future terrorist attacks; changes in tax rates and/or policies; changes in, and compliance with, environmental and endangered species laws, regulations, decisions and policies; the outcome of legal and regulatory proceedings concerning the

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Page 6 Avista Reports Q3 2004 Earnings

company or affecting its operations; employee issues, including changes in collective bargaining unit agreements, strikes, work stoppages or the loss of key executives; changes in actuarial assumptions and the return on assets with respect to the company’s pension plan; increasing health care costs and the resulting effect on health insurance premiums; and increasing costs of insurance, changes in coverage terms and the ability to obtain insurance.

     For a further discussion of these factors and other important factors, please refer to Avista Corp.’s Annual Report on Form 10-K for the year ended Dec. 31, 2003 and the company’s quarterly report on Form 10-Q for the quarter ended June 30, 2004. 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 anticipated in any forward-looking statement.

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AVISTA CORPORATION
CONSOLIDATED COMPARATIVE STATEMENTS OF INCOME (UNAUDITED)
(Dollars in Thousands except Per Share Amounts)

     Issued October 21, 2004

AVISTA CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(Dollars in Thousands)

     Issued October 21, 2004

AVISTA CORPORATION
FINANCIAL AND OPERATING HIGHLIGHTS
(Dollars in Thousands)

     Issued October 21, 2004