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                                                                    Exhibit 4(b)
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                               AVISTA CORPORATION

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                              OFFICER'S CERTIFICATE

                      (Under Section 301 of the Indenture,
                           dated as of April 1, 2004)

                  Establishing Series of Securities Designated
                  Subordinated Debt Securities, Series due 2034

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                                  April 5, 2004

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                               AVISTA CORPORATION

                              OFFICER'S CERTIFICATE
                      (Under Section 301 of the Indenture,
                           dated as of April 1, 2004)

                  I, Diane C. Thoren, Assistant Treasurer of AVISTA CORPORATION
(the "Company"), in accordance with Section 301 of the Indenture, dated as of
April 1, 2004 (the "Indenture", capitalized terms used herein and not defined
herein having the meanings specified in the Indenture), of the Company to Union
Bank of California, N.A., trustee (the "Trustee"), do hereby establish a series
of Securities having the terms and characteristics set forth in this Officer's
Certificate.

                                     PART I

                  Set forth below in this Part I are the terms and
characteristics of the series of Securities established hereby referred to in
clauses (a) through (u) in the second paragraph of Section 301 of the Indenture
(the lettered clauses set forth herein corresponding to such clauses in said
Section 301).

                  (a) the title of the Securities of such series, being Series
No. 1 under the Indenture, shall be "Subordinated Debt Securities, Series due
2034" (the Securities of such series, for purposes of this Officer's
Certificate, being sometimes hereinafter called the "Notes"); the Notes are to
be issued and sold to AVA Capital Trust III; and all references herein to the
Declaration, the Institutional Trustee and the Trust Securities relate to the
Trust;

                  (b) the aggregate principal amount of Notes which may be
authenticated and delivered under the Indenture shall be limited to $61,856,000,
except as contemplated in Section 301(b) of the Indenture;

                  (c) interest on the Notes shall be payable to the Person or
Persons in whose names the Notes are registered at the close of business on the
Regular Record Date for such interest, except as otherwise expressly provided in
the form of Note attached hereto and hereby authorized and approved;

                  (d) the principal of the Notes shall be payable on April 1,
2034;

                  (e) Article 4 of the Declaration sets forth the procedures to
determine the Distribution Rate, Distribution Periods and Distribution Payment
Dates for the Preferred Securities. While the Preferred Securities are
outstanding, the Interest Rate, Interest Periods, Interest Payment Dates and
associated terms relating to the Notes shall be the same as the Distribution
Rate, Distribution Periods and Distribution Payment Dates and associated terms
relating to the Preferred Securities, respectively. If the Trust is dissolved
and the Notes are distributed to the holders of the Preferred Securities, the
interest payable, Interest Rate, Interest Periods, Interest Payment Dates and
the redemption provisions with respect to Fixed Rate Periods for the Preferred
Securities and the Remarketing Procedures shall remain the same with respect to
the Notes distributed to the holders of Preferred Securities except: (i) the
effects of the

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Declaration Events of Default will only be occasioned by the Events of Default
and (ii) the cure and waiver provisions relating to the Declaration Events of
Default will be superceded by the cure and waiver provisions relating to the
Events of Default. In addition, if the Trust is dissolved and the Notes are
distributed to the holders of the Preferred Securities, the below described
procedures will be applicable to the Notes.

                           (i) interest payments shall accrue from the date of
         original issuance until Maturity or the Redemption Date. During the
         Initial Fixed Rate Period, interest will be payable semiannually in
         arrears on April 1 and October 1 of each year, commencing on October 1,
         2004. During any Fixed Rate Period, other than the Initial Fixed Rate
         Period, interest will be payable semiannually in arrears on Interest
         Payment Dates determined based on the Remarketing Date (if the Notes
         are remarketed for a new Fixed Rate Period that begins on April 1 or
         October 1, interest will be payable on April 1 and October 1 of each
         year, and if the Notes are remarketed for a new Fixed Rate Period that
         begins on January 1 or July 1, interest will be payable on January 1
         and July 1 of each year). During any Floating Rate Period, interest
         will be payable quarterly in arrears on January 1, April 1, July 1 and
         October 1 of each year;

                           (ii) if any Interest Payment Date with respect to a
         Fixed Rate Period is not a Business Day, interest will be payable,
         without additional interest, on the immediately succeeding Business
         Day, with the same force and effect as if payment was made on the date
         such payment was originally payable (and without the accrual of any
         additional amount of interest). If any Interest Payment Date with
         respect to a Floating Rate Period is not a Business Day, then interest
         will be payable on the immediately succeeding Business Day and interest
         shall accrue to the actual payment date (except for an Interest Payment
         Date that coincides with Maturity or the Redemption Date);

                           (iii) the amount of interest payable on each Interest
         Payment Date relating to a Fixed Rate Period will be computed on the
         basis of a 360-day year of twelve 30-day months. The amount of interest
         payable on each Interest Payment Date in respect of a Floating Rate
         Period will be computed by multiplying the per annum Interest Rate in
         effect for such Interest Period by a fraction, the numerator of which
         will be the actual number of days in such Interest Period (or portion
         thereof) (determined by including the first day thereof and excluding
         the last thereof) and the denominator of which will be 360, and
         multiplying the rate so obtained by $1,000;

                           (iv) interest on the Notes will be deferred during
         any Extension Period (as defined below) but will continue to accrue.
         The payment of such interest, together with any interest thereon, will
         be distributed to the holders of Notes at the end of any Extension
         Period;

                           (v) each Note upon registration of transfer or in
         exchange for or in lieu of any other Note shall carry the rights of
         interest accrued and unpaid, and to accrue, which were carried by such
         other Note;

                           (vi) during the Initial Fixed Rate Period, the
         Interest Rate shall be the Initial Interest Rate;

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                           (vii) prior to the expiration of the Initial Fixed
         Rate Period and any subsequent Fixed Rate Period or an Interest Period
         with respect to a Floating Rate Period or an Interest Period in a Fixed
         Rate Period during a time in which the Notes are redeemable in such
         Fixed Rate Period, the Company will have the option to remarket the
         Notes to establish a new Fixed Rate for a new Fixed Rate Period (to be
         in effect after the expiration of the then current Interest Period). If
         the Company elects to conduct a Remarketing of the Notes for the
         purpose of establishing a new Fixed Rate for a new Fixed Rate Period,
         the Company shall not less than 20 nor more than 35 Business Days prior
         to the related Election Date, notify the Clearing Agency, the
         Calculation Agent, the Trustee and the Remarketing Agent. If the Notes
         are not issued in global, fully registered form to the Clearing Agency,
         such notice shall be delivered to the holders of the Notes instead of
         the Clearing Agency. Such notice shall indicate the length of the
         proposed new Fixed Rate Period, the proposed Remarketing Date and any
         redemption provisions that apply during such new Fixed Rate Period. The
         Company shall have the right to terminate a Remarketing at any time
         prior to the Election Date by notice of such termination to the
         Clearing Agency, the Remarketing Agent, the Trustee and the Calculation
         Agent;

                           (viii) if the Remarketing Agent has determined that
         it will be able to remarket all Notes tendered or deemed tendered for
         purchase in the Remarketing at a Fixed Rate and at a price of $1,000
         per Note, on such Remarketing Date, the Interest Rate for the new Fixed
         Rate Period will be the Fixed Rate determined by the Remarketing Agent,
         which will be the rate per annum (rounded to the nearest one-thousandth
         (0.001) of one percent per annum) which the Remarketing Agent
         determines, in its sole judgment, to be the lowest Fixed Rate per annum
         that will enable it to remarket all Notes tendered or deemed tendered
         for Remarketing at a price of $1,000 per Note. By approximately 4:30
         P.M., New York City time, on a Remarketing Date, the Remarketing Agent
         shall advise, by telephone: (i) the Clearing Agency, the Institutional
         Trustee, the Trustee, the Trust, the Company and the Calculation Agent
         of any new Fixed Rate established pursuant to the Remarketing, (ii)
         each purchaser of Remarketed Securities (or the Clearing Agency
         Participant thereof) of such new Fixed Rate and the number of
         Remarketed Securities such purchaser is to purchase and (iii) each
         purchaser to give instructions to its Clearing Agency Participant to
         pay the purchase price on the Remarketing Settlement Date in same day
         funds against delivery of the Remarketed Securities purchased through
         the facilities of the Clearing Agency;

                           (ix) if the Company does not elect to remarket the
         Notes or has terminated a Remarketing or if the Remarketing Agent is
         unable to remarket all of the Notes tendered or deemed tendered for a
         purchase price of $1,000 per Note, the Interest Rate for the next
         Interest Period shall be the Floating Rate and the new Interest Period
         shall be a Floating Rate Period;

                           (x) the Calculation Agent shall calculate the
         Floating Rate on the Floating Rate Determination Date as follows:

                                    (A) Except as provided below, the Floating
                  Rate for any Floating Rate Period for the Notes will be equal
                  to the Adjustable Rate (as defined

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                  below) plus 3.66%. The "Adjustable Rate" for any Interest
                  Period will be equal to the highest of the 3-month LIBOR Rate,
                  the 10-year Treasury CMT and the 30-year Treasury CMT (each as
                  defined below and collectively referred to as the "Benchmark
                  Rates") for such Interest Period during the Floating Rate
                  Period. In the event that the Calculation Agent determines in
                  good faith that for any reason:

                                    (1) any one of the Benchmark Rates cannot be
                                    determined for any Interest Period, the
                                    Adjustable Rate for such Interest Period
                                    will be equal to the higher of whichever two
                                    of such rates can be so determined;

                                    (2) only one of the Benchmark Rates can be
                                    determined for any Interest Period, the
                                    Adjustable Rate for such Interest Period
                                    will be equal to whichever such rate can be
                                    so determined; or

                                    (3) none of the Benchmark Rates can be
                                    determined for any Interest Period, the
                                    Adjustable Rate for the preceding Interest
                                    Period will be continued for such Interest
                                    Period.

                                    (B) The "3-month LIBOR Rate" means, for each
                  Interest Period, the arithmetic average of the two most recent
                  weekly quotes for deposits for U.S. Dollars having a term of
                  three months, as published on the first Business Day of each
                  week immediately preceding the Interest Period for which the
                  Floating Rate is being determined. Such quotes will be taken
                  from Telerate Page 3750 at approximately 11:00 a.m. London
                  time on the Floating Rate Determination Date. If such rate
                  does not appear on Telerate Page 3750 on the Floating Rate
                  Determination Date, the 3-month LIBOR Rate will be the
                  arithmetic mean of the rates quoted by three major banks in
                  New York City selected by the Calculation Agent, at
                  approximately 11:00 a.m., New York City time, on the relevant
                  date for loans in U.S. Dollars to leading European banks for a
                  period of three months.

                                    (C) The "10-year Treasury CMT" means the
                  rate determined in accordance with the following provisions:

                                    (1) With respect to any Floating Rate
                                    Determination Date and the Interest Period
                                    that begins immediately thereafter, the
                                    10-year Treasury CMT means the rate
                                    displayed on Telerate Page 7051 under the
                                    caption "...Treasury Constant
                                    Maturities...Federal Reserve Board Release
                                    H.15...Mondays Approximately 3:45 P.M.",
                                    under the column for the Designated CMT
                                    Maturity Index (as defined below).

                                    (2) If such rate is no longer displayed on
                                    the relevant page, or is not so displayed by
                                    3:00 P.M., New York City time, on the
                                    applicable Floating Rate Determination Date,
                                    then the 10-year Treasury CMT for such
                                    Floating Rate Determination Date will be

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                                    such treasury constant maturity rate for the
                                    Designated CMT Maturity Index as is
                                    published in H.15(519).

                                    (3) If such rate is no longer displayed on
                                    the relevant page, or if not published by
                                    3:00 P.M., New York City time, on the
                                    applicable Floating Rate Determination Date,
                                    then the 10-year Treasury CMT for such
                                    Floating Rate Determination Date will be
                                    such constant maturity treasury rate for the
                                    Designated CMT Maturity Index (or other
                                    United States Treasury rate for the
                                    Designated CMT Maturity Index) for the
                                    applicable Floating Rate Determination Date
                                    with respect to such interest reset date as
                                    may then be published by either the Board of
                                    Governors of the Federal Reserve System or
                                    the United States Department of the Treasury
                                    that the Calculation Agent determines to be
                                    comparable to the rate formerly displayed on
                                    the Telerate Page 7051 and published in
                                    H.15(519).

                                    (4) If such information is not provided by
                                    3:00 P.M., New York City time, on the
                                    applicable Floating Rate Determination Date,
                                    then the 10-year Treasury CMT for such
                                    Floating Rate Determination Date will be
                                    calculated by the Calculation Agent and will
                                    be a yield to maturity, based on the
                                    arithmetic mean of the secondary market
                                    offered rates as of approximately 3:30 P.M.,
                                    New York City time, on the Floating Rate
                                    Determination Date reported, according to
                                    their written records, by three leading
                                    primary United States government securities
                                    dealers in The City of New York (each, a
                                    "Reference Dealer") selected by the
                                    Calculation Agent (from five such Reference
                                    Dealers selected by the Calculation Agent
                                    and eliminating the highest quotation (or,
                                    in the event of equality, one of the
                                    highest) and the lowest quotation (or, in
                                    the event of equality, one of the lowest)),
                                    for the most recently issued direct
                                    noncallable fixed rate obligations of the
                                    United States ("Treasury Debentures") with
                                    an original maturity of approximately the
                                    Designated CMT Maturity Index and a
                                    remaining term to maturity of not less than
                                    such Designated CMT Maturity Index minus one
                                    year.

                                    (5) If the Calculation Agent is unable to
                                    obtain three such Treasury Debentures
                                    quotations, the 10-year Treasury CMT for the
                                    applicable Floating Rate Determination Date
                                    will be calculated by the Calculation Agent
                                    and will be a yield to maturity based on the
                                    arithmetic mean of the secondary market
                                    offered rates as of approximately 3:30 P.M.,
                                    New York City time, on the applicable
                                    Floating Rate Determination Date of three
                                    Reference Dealers in The City of New York
                                    (from five such Reference Dealers selected
                                    by the Calculation Agent and eliminating the
                                    highest quotation (or, in the event of
                                    equality, one of the highest) and the lowest

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                                    quotation (or, in the event of equality, one
                                    of the lowest)), for Treasury Debentures
                                    with an original maturity of the number of
                                    years that is the next highest to the
                                    Designated CMT Maturity Index and a
                                    remaining term to maturity closest to the
                                    Designated CMT Maturity Index and in an
                                    amount of at least $100 million.

                                    (6) If three or four (and not five) of such
                                    Reference Dealers are quoting as set forth
                                    above, then the 10-year Treasury CMT will be
                                    based on the arithmetic mean of the offered
                                    rates obtained and neither the highest nor
                                    lowest of such quotes will be eliminated;
                                    provided, however, that if fewer than three
                                    Reference Dealers selected by the
                                    Calculation Agent are quoting as set forth
                                    above, the 10-year Treasury CMT with respect
                                    to the applicable interest determination
                                    date will remain the 10-year Treasury CMT
                                    for the immediately preceding Interest
                                    Period. If two Treasury Debentures with an
                                    original maturity as described in the second
                                    preceding sentence have remaining terms to
                                    maturity equally close to the Designated CMT
                                    Maturity Index, then the quotes for the
                                    Treasury Debentures with the shorter
                                    remaining term to maturity will be used.

                                    (7) "Designated CMT Maturity Index" means
                                    the original period to maturity of the U.S.
                                    Treasury securities (10 years) with respect
                                    to which the 10-year Treasury CMT will be
                                    calculated.

                                    (8) "Telerate Page 3750" means the display
                                    designated on page 3750 on MoneyLine
                                    Telerate (or such other page as may replace
                                    the 3750 page on the service or such other
                                    service as may be nominated by the British
                                    Bankers' Association for the purpose of
                                    displaying London interbank offered rates
                                    for U.S. Dollars deposits).

                                    (9) "Telerate Page 7051" means the display
                                    on MoneyLine Telerate (or any successor
                                    service), on such page (or any other page as
                                    may replace such page on that service), for
                                    the purpose of displaying Treasury Constant
                                    Maturities as reported in H.15(519).

                                    (10) "30-year Treasury CMT" has the meaning
                                    specified under the definition of 10-year
                                    Treasury CMT, except that the Designated CMT
                                    Maturity Index for the 30-year Treasury CMT
                                    shall be 30 years.

                                    (D) The 3-month LIBOR Rate, the 10-year
                  Treasury CMT and the 30-year Treasury CMT shall each be
                  rounded to the nearest hundredth of a percent.

                                    (E) The Floating Rate with respect to each
                  Floating Rate Period will be calculated as promptly as
                  practicable by the Calculation Agent according

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                  to the appropriate method described above.

                           (xi) if the Company elects to defer interest during a
         Fixed Rate Period, interest will continue to accrue and be compounded
         semiannually at the Fixed Rate until the expiration of the Fixed Rate
         Period. Prior to the expiration of such Fixed Rate Period and any
         subsequent Fixed Rate Period during the Extension Period, the Company
         will have the option to remarket the Notes for a new Fixed Rate Period
         (to take effect upon expiration of such Fixed Rate Period). If the
         Company does not remarket the Notes, the Floating Rate during the
         Extension Period shall be determined as provided herein, but shall not
         be less than the Fixed Rate for the Fixed Rate Period just ended. If
         the Company elects to defer interest during a Floating Rate Period,
         interest will continue to accrue and be compounded quarterly at the
         applicable Floating Rate, reset quarterly, subject to the right of the
         Company to remarket the Notes prior to any Interest Payment Date in
         order to establish a new Fixed Rate for a new Fixed Rate Period in
         accordance with the Remarketing Procedures;

                           (xii) in accordance with Part II, clause (b) of this
         Officer's Certificate and the Remarketing Procedures, the Company may,
         prior to the expiration of the Initial Fixed Rate Period and any
         subsequent Fixed Rate Period, prior to any Interest Payment Date during
         a time in which the Notes are redeemable in any Fixed Rate Period or
         prior to any Interest Payment Date with respect to a Floating Rate
         Period, elect to remarket the Notes to establish a new Fixed Rate for a
         new Fixed Rate Period (to be in effect after the then current Interest
         Period). A Fixed Rate Period must be for a duration of at least six
         months, may not extend beyond the Maturity of the Notes and may not end
         on a day other than a day immediately preceding an Interest Payment
         Date. If a new Fixed Rate for a new Fixed Rate Period is set in a
         Remarketing, a new Fixed Rate Period shall commence following the
         expiration of the then current Interest Period. If a new Fixed Rate for
         a new Fixed Rate Period is not set, for any reason, including after the
         expiration of the Initial Fixed Rate Period, a Floating Rate Period,
         and the Floating Rate reset quarterly shall be in effect until the
         Company remarkets the Notes and sets a new Fixed Rate for a new Fixed
         Rate Period in accordance with the Remarketing Procedures;

                           (xiii) so long as no Event of Default has occurred
         and is continuing, the Company has the right at any time, and from time
         to time, to defer payments of interest on the Notes by extending the
         interest payment period (an "Extension Period"). During an Extension
         Period, interest will continue to accrue on the Notes. If the Company
         decides to defer interest payments on the Notes, the Extension Period
         shall not exceed five consecutive years. An Extension Period shall not
         extend beyond the Maturity of the Notes. Prior to the termination of
         any Extension Period, the Company may further defer payments of
         interest provided that the Extension Period, together with all previous
         and further extensions thereof, may not exceed five consecutive years.
         There could be multiple Extension Periods of varying lengths throughout
         the term of the Notes. Upon the termination of any such Extension
         Period and upon the payment of all accrued and unpaid interest then
         due, the Company may select a new Extension Period, subject to the
         above limitations and requirements. Upon the termination of any
         Extension Period, which termination shall be on an Interest Payment
         Date, the Company shall pay all Deferred Interest on the next
         succeeding Interest Payment Date to the Person in whose

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         name the Notes are registered on the Regular Record Date for such
         Interest Payment Date, provided that Deferred Interest payable at
         Maturity or on any Redemption Date will be paid to the Person to whom
         principal is payable. The Company shall give the Holder or Holders of
         the Notes, the Trustee, the Remarketing Agent and the Calculation
         Agent, notice as provided in Sections 105 and 106, respectively, of the
         Indenture of its selection or extension of an Extension Period at least
         one Business Day prior to the earlier of (i) the Regular Record Date
         relating to the Interest Payment Date on which the Extension Period is
         to commence or relating to the Interest Payment Date on which an
         Extension Period that is being extended would otherwise terminate, or
         (ii) the date the Company or the Trust is required to give notice to
         any applicable self-regulatory organization of the record date or the
         date such distributions are payable. The Company shall cause the Trust
         to give notice of the Company's selection of such Extension Period to
         Holders of the Trust Securities, the Calculation Agent and the
         Remarketing Agent.

                  (f) the corporate trust office of Union Bank of California,
N.A. in Los Angeles, California shall be the place at which (i) the principal
of, premium, if any, and interest, if any, on the Notes at Maturity shall be
payable upon presentment and interest prior to Maturity shall be payable as
specified in the form of Note attached hereto, (ii) registration of transfer of
the Notes may be effected, (iii) exchanges of Notes may be effected and (iv)
notices and demands to or upon the Company in respect of the Notes and the
Indenture may be served; and Union Bank of California, N.A. shall be the
Security Registrar and a Paying Agent for the Notes; provided, however, that the
Company reserves the right to change, by one or more Officer's Certificates
supplemental to this Officer's Certificate, any such place or the Security
Registrar or such Paying Agent; and provided, further, that the Company reserves
the right to designate, by one or more Officer's Certificates supplemental to
this Officer's Certificate, its principal corporate office in Spokane,
Washington as any such place or itself as the Security Registrar;

                  (g)      (i) the Notes shall be subject to redemption, in
whole but not in part, at the election of the Company on the last Interest
Payment Date relating to the Initial Fixed Rate Period, on such dates with
respect to any other Fixed Rate Period as the Company and the Trust may
determine prior to the remarketing establishing such Fixed Rate Period or on any
Interest Payment Date relating to a Floating Rate Period, at a Redemption Price
equal to 100% of the principal amount to be redeemed plus accrued but unpaid
interest to the Redemption Date;

                           (ii) the Notes shall be subject to redemption, in
         whole but not in part, at the election of the Company, on any date
         within 90 days of the occurrence, and during the continuation of, a
         Special Event (as defined herein) at a redemption price equal to 100%
         of the principal amount thereof plus accrued interest, if any to the
         date fixed for redemption;

                           "Special Event" means an "Investment Company Act
         Event" or "Tax Event";

                           "Investment Company Act Event" means the receipt by
         the Company and the Regular Trustees of an Opinion of Counsel to the
         Company experienced in these matters to the effect that, as a result of
         the occurrence of a change in law or regulation or

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         a written change (including any announced prospective change) in
         interpretation or application of law or regulation by any legislative
         body, court, governmental agency or regulatory authority, there is more
         than an insubstantial risk that the Trust is or will be considered an
         "investment company" that is required to be registered under the
         Investment Company Act of 1940, as amended, which change or prospective
         change becomes effective or would become effective, as the case may be,
         after the date of the issuance by the Trust of the Preferred
         Securities.

                           "Tax Event" means the receipt by the Company and the
         Regular Trustees of an opinion from independent tax counsel experienced
         in such matters (which may be counsel to the Company) to the effect
         that, as a result of (a) any amendment to, or change (including any
         announced proposed change) in, the laws (or any regulations thereunder)
         of the United States or any political subdivision or taxing authority
         thereof or therein or (b) any amendment to, or change in, an
         interpretation or application of such laws or regulations, there is
         more than an insubstantial risk that (i) the Trust would be subject to
         United States federal income tax with respect to income accrued or
         received on the Notes; (ii) interest payable on the Notes would not be
         deductible, in whole or in part, by the Company for United States
         federal income tax purposes; or (iii) the Trust would be subject to
         more than a de minimis amount of other taxes, duties or other
         governmental charges, which change or amendment becomes effective on or
         after the date of issuance by the Trust of the Preferred Securities.

                  (h) inapplicable;

                  (i) the Notes shall be issued in denominations of $1,000 and
any integral multiple thereof;

                  (j) inapplicable;

                  (k) inapplicable;

                  (l) inapplicable;

                  (m) inapplicable;

                  (n) inapplicable;

                  (o) inapplicable;

                  (p) inapplicable;

                  (q) inapplicable;

                  (r) inapplicable;

                  (s) (i) the Notes are to be initially registered in the name
of Union Bank of California, N.A., as Institutional Trustee of the Trust. The
Notes shall not be transferable, nor shall any purported transfer be registered,
except (A) to a nominee of such Institutional Trustee,

                                       9
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to such Institutional Trustee by such nominee, by such Institutional Trustee to
another nominee, by any such nominee to a successor nominee or by such
Institutional Trustee or any nominee thereof to a successor Institutional
Trustee or a nominee thereof or (B) to the holders of Trust Securities in the
event of the dissolution of the Trust in accordance with the provisions of the
Declaration;

                           (ii) no service charge shall be made for the
registration of transfer or exchange of the Notes; provided, however, that,
after the distribution of the Notes contemplated in clause (i)(B) above, the
Company may require payment of a sum sufficient to cover any tax or other
governmental charge payable in connection with the exchange and transfer;

                  (t) reference is made to clause (e)(ii) above; and

                  (u) the notes are to be issued and sold to the Trust.

                                    PART II

                  Set forth below in this Part II are additional terms of the
series of Notes established hereby, as contemplated by clause (v) in the second
paragraph of Section 301 of the Indenture.

                  (a) the Notes shall have such further terms as are set forth
in the form of Note attached hereto; provided, however, that if the Trust is
dissolved and the Notes are distributed to the holders of the Preferred
Securities, the form of Note may, at the election of the Company, be revised to
specifically include the provisions of the determination of the interest rate
thereon, as set forth in this Officer's Certificate;

                  (b) Article 10 of the Declaration sets forth the Remarketing
Procedures to determine the applicable Fixed Rate from time to time for the
Preferred Securities. If the Trust is dissolved and the Notes are distributed to
the holders of the Preferred Securities, the below described Remarketing
Procedures will be applicable to the Notes;

                           (i) if the Company elects to conduct a Remarketing,
         the Company, not less than 20 nor more than 35 Business Days prior to
         the related Election Date, is required to give the written notice of
         proposed Remarketing of the Notes to the Clearing Agency, the Trustee,
         the Calculation Agent and the Remarketing Agent. If the Notes are not
         issued in global, fully registered form, such notice shall be delivered
         to the holders of the Notes instead of the Clearing Agency. Such notice
         will describe the Remarketing and will indicate the length of the
         proposed new Fixed Rate Period, the proposed Remarketing Date and any
         redemption provisions that apply during such new Fixed Rate Period. At
         any time prior to the Election Date, the Company may elect to terminate
         a Remarketing by giving the Clearing Agency (or the Holders as
         applicable), the Remarketing Agent, the Trustee and the Calculation
         Agent written notice of such termination;

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                           (ii) not later than 4:00 p.m., New York City time, on
         an Election Date, each Holder of Notes may give a written notice to the
         Trustee of its election ("Notice of Election") (i) to retain and not to
         have all or any portion of the Notes owned by it remarketed in the
         Remarketing, or (ii) to tender all or any portion of such Notes for
         purchase in the Remarketing (such portion, in either case, is required
         to be in the Liquidation Amount of $1,000 or any integral multiple
         thereof). Any Notice of Election given to the Trustee will be
         irrevocable and may not be conditioned upon the level at which the
         Fixed Rate is established in the Remarketing. Promptly after 4:30 p.m.,
         New York City time, on such Election Date, the Trustee, based on the
         Notices of Election received by it through the Clearing Agency prior to
         such time, will notify the Company and the Remarketing Agent of the
         number of Notes to be retained by holders of Notes and the number of
         Notes tendered for purchase in the Remarketing;

                           (iii) if any holder of Notes gives a Notice of
         Election to tender Notes as described above, the Notes so subject to
         such Notice of Election will be deemed tendered for purchase in the
         Remarketing, notwithstanding any failure by such holder to deliver or
         properly deliver such Notes to the Remarketing Agent for purchase. If
         any holder of Notes fails timely to deliver a Notice of Election, as
         described above, such Notes will be deemed tendered for purchase in
         such Remarketing, notwithstanding such failure or the failure by such
         holder to deliver or properly deliver such Notes to the Remarketing
         Agent for purchase;

                           (iv) the right of each holder of Notes to have Notes
         tendered for purchase in the Remarketing shall be limited to the extent
         that (i) the Remarketing Agent conducts a Remarketing pursuant to the
         terms of the Remarketing Agreement; (ii) the Notes tendered have not
         been called for redemption; (iii) the Remarketing Agent is able to find
         a purchaser or purchasers for tendered Notes at a Fixed Rate; and (iv)
         such purchaser or purchasers deliver the purchase price therefor to the
         Remarketing Agent;

                           (v) any holder of Notes that desires to continue to
         retain a number of Notes, but only if the Fixed Rate is not less than a
         specified rate per annum, shall submit a Notice of Election pursuant to
         this clause (b) to tender such Notes and separately notify the
         Remarketing Agent of its interest at the telephone number set forth in
         the notice of Remarketing. If such holder so notifies the Remarketing
         Agent, the Remarketing Agent will give priority to such holder's
         purchase of such number of Notes in the Remarketing, providing that the
         Fixed Rate is not less than such specified rate;

                           (vi) if holders submit Notices of Election to retain
         all of the Notes then outstanding, the Fixed Rate will be the rate
         determined by the Remarketing Agent, in its sole discretion, as the
         rate that would have been established had a Remarketing been held on
         the related Remarketing Date;

                           (vii) on any Remarketing Date on which the
         Remarketing is to be conducted, the Remarketing Agent will use
         commercially reasonable efforts to remarket, at a price equal to 100%
         of the principal amount thereof, Notes tendered or deemed tendered for
         purchase. Except as provided in the previous paragraph of this clause
         (b), if, as a result of such efforts, on any Remarketing Date, the
         Remarketing Agent has

                                       11
<PAGE>

         determined that it will be able to remarket all Notes tendered or
         deemed tendered for purchase in the Remarketing at a Fixed Rate and at
         a price of $1,000 per Note, prior to 4:00 p.m., New York City time, on
         such Remarketing Date, the Remarketing Agent will determine the Fixed
         Rate, which will be the rate per annum (rounded to the nearest
         one-thousandth (0.001) of one percent per annum) which the Remarketing
         Agent determines, in its sole judgment, to be the lowest Fixed Rate per
         annum that will enable it to remarket all Notes tendered or deemed
         tendered for Remarketing at a price of $1,000 per Note. By
         approximately 4:30 P.M., New York City time, on a Remarketing Date, the
         Remarketing Agent shall advise, by telephone: (i) the Clearing Agency,
         the Institutional Trustee, the Trustee, the Trust, the Company and the
         Calculation Agent of any new Fixed Rate established pursuant to the
         Remarketing, (ii) each purchaser of Remarketed Securities (or the
         Clearing Agency Participant thereof) of such new Fixed Rate and the
         number of Remarketed Securities such purchaser is to purchase and (iii)
         each purchaser to give instructions to its Clearing Agency Participant
         to pay the purchase price on the Remarketing Settlement Date in same
         day funds against delivery of the Remarketed Securities purchased
         through the facilities of the Clearing Agency;

                           (viii) if the Remarketing Agent is unable to remarket
         by 4:00 p.m., New York City time on the third Business Day prior to the
         Remarketing Settlement Date, all Notes tendered or deemed tendered for
         a purchase at a price of $1,000 per Note, the Interest Rate for the
         next Interest Period shall be the Floating Rate and the new Interest
         Period shall be a Floating Rate Period. In such case, no Notes will be
         sold in the Remarketing and each holder will continue to hold its Notes
         at the Floating Rate during such Floating Rate Period;

                           (ix) all Notes tendered or deemed tendered in the
         Remarketing will be automatically delivered to the account of the
         Remarketing Agent through the facilities of the Clearing Agency against
         payment of the purchase price therefor on the Remarketing Settlement
         Date. The Remarketing Agent will make payment to the Clearing Agency
         Participant of each tendering holder of Notes in the Remarketing
         through the facilities of the Clearing Agency by the close of business
         on the Remarketing Settlement Date;

                           (x) in accordance with the Clearing Agency's normal
         procedures, on the Remarketing Settlement Date, the transaction
         described above with respect to each Note tendered for purchase and
         sold in the Remarketing, will be executed through the Clearing Agency
         Participants, will be debited and credited and such Notes delivered by
         book entry as necessary to effect purchases and sales of such Notes.
         The Clearing Agency is expected to make payment in accordance with its
         normal procedures;

                           (xi) if any holder selling Notes in the Remarketing
         fails to deliver such Notes, the Clearing Agency Participant of such
         selling holder and of any other person that was to have purchased Notes
         in the Remarketing may deliver to any such other person a number of
         Notes that is less than the number of Notes that otherwise was to be
         purchased by such person. In such event, the number of Notes to be so
         delivered will be determined by such Clearing Agency Participant and
         delivery of such lesser number of Notes will constitute good delivery;

                                       12
<PAGE>

                           (xii) the Remarketing Agent is not obligated to
         purchase any Notes that would otherwise remain unsold in a Remarketing.
         Neither the Trustee, the Company nor the Remarketing Agent shall be
         obligated in any case to provide funds to make payment upon tender of
         Notes for Remarketing;

                           (xiii) prior to the issuance of the Notes, the
         Company and the Trust will enter into the Remarketing Agreement with
         the Remarketing Agent, providing, among other things, that the
         Remarketing Agent will follow the Remarketing Procedures for the
         purposes of determining the applicable Fixed Rate. The Company will pay
         the Remarketing Agent compensation for its services under the
         Remarketing Agreement;

                  (c) if the Company shall make any deposit of money and/or
Government Obligations with respect to any Notes, or any portion of the
principal amount thereof, as contemplated by Section 601 of the Indenture, the
Company shall not deliver an Officer's Certificate described in clause (z) in
the first paragraph of said Section 601 unless the Company shall also deliver to
the Trustee, together with such Officer's Certificate, either:

                           (i) an instrument wherein the Company,
         notwithstanding the satisfaction and discharge of its indebtedness in
         respect of the Notes, shall assume the obligation (which shall be
         absolute and unconditional) to irrevocably deposit with the Trustee or
         Paying Agent such additional sums of money, if any, or additional
         Government Obligations (meeting the requirements of Section 601), if
         any, or any combination thereof, at such time or times, as shall be
         necessary, together with the money and/or Government Obligations
         theretofore so deposited, to pay when due the principal of and premium,
         if any, and interest due and to become due on such Notes or portions
         thereof, all in accordance with and subject to the provisions of said
         Section 601; provided, however, that such instrument may state that the
         obligation of the Company to make additional deposits as aforesaid
         shall be subject to the delivery to the Company by the Trustee of a
         notice asserting the deficiency accompanied by an opinion of an
         independent public accountant of nationally recognized standing showing
         the calculation thereof (which opinion shall be obtained at the expense
         of the Company); or

                           (ii) an Opinion of Counsel to the effect that the
         Holders of such Notes, or portions of the principal amount thereof,
         will not recognize income, gain or loss for United States federal
         income tax purposes as a result of the satisfaction and discharge of
         the Company's indebtedness in respect thereof and will be subject to
         United States federal income tax on the same amounts, at the same times
         and in the same manner as if such satisfaction and discharge had not
         been effected;

                  (d) if the Company engages in a conveyance or transfer of
property as contemplated in Section 1005 of the Indenture, the Company will not
be released and discharged from all obligations under the Indenture and the
Notes unless the Company shall deliver to the Trustee an Opinion of Counsel to
the effect that the Holders of such Notes, or portions of the principal amount
thereof, will not recognize income, gain or loss for United States federal
income tax purposes as a result of conveyance or transfer and will be subject to
United States federal income tax on the same amounts, at the same times and in
the same manner as if such conveyance or transfer had not been effected;

                                       13
<PAGE>

                  (e) for so long as the Notes are outstanding, the Company
shall not consolidate with or merge into any other Person, or convey or
otherwise transfer, or lease, all of its properties, as or substantially as an
entirety, as contemplated by Section 1001 of the Indenture, to any Person if
such person is organized and existing under the laws of Canada or any Province
thereof.

                  (f) if at any time the Notes are to be held by a securities
depository, the Company may at such time establish the matters contemplated in
clause (q) in the second paragraph of Section 301 of the Indenture in an
Officer's Certificate supplemental to this Officer's Certificate; and

                  (g) For all purposes of this Officer's Certificate, except as
otherwise expressly provided or unless the context otherwise requires:

                           "Calculation Agent" means Union Bank of California,
         N.A., or its successor appointed by the Company, acting as calculation
         agent.

                           "Clearing Agency" means an organization registered as
         a "clearing agency" pursuant to Section 17A of the Securities Exchange
         Act of 1934, as amended.

                           "Clearing Agency Participant" means a broker, dealer,
         bank, other financial institution or other Person for whom from time to
         time a Clearing Agency effects book-entry transfers and pledges of
         securities deposited with the Clearing Agency.

                           "Declaration" means the AVA Capital Trust III Amended
         and Restated Declaration of Trust dated as of April 5, 2004 among the
         Company, the trustees named therein, and the holders of undivided
         beneficial interests in the assets of the Trust.

                           "Declaration Event of Default" means an "Event of
         Default" under the Declaration.

                           "Deferred Interest" means each installment of
         interest not paid during any Extension Period, and interest thereon.
         Deferred installments of interest shall bear interest at the rate of
         the prevailing Interest Rate per annum from the applicable Interest
         Payment Date to the date of payment, compounded on each Interest
         Payment Date.

                           "Definitive Preferred Securities Certificates" means
         Preferred Securities Certificates issued in certificated, fully
         registered form as provided in the Declaration.

                           "Distribution Payment Date" means each day on which
         Distributions are payable on the Trust Securities determined based on
         the prevailing Distribution Rate.

                           "Distribution Period" means each semiannual period in
         a Fixed Rate Period and each quarterly period in a Floating Rate Period
         for which Distributions are payable on the Trust Securities.

                           "Distribution Rate" means the rate at which
         Distributions will accrue on the Trust Securities.

                                       14
<PAGE>

                           "Distributions" means amounts payable in respect of
         the Trust Securities pursuant to Section 4.01 of the Declaration.

                           "Election Date" means a date that is no later than
         the fifth Business Day prior to the proposed Remarketing Date.

                           "Extension Period" means any period during which the
         Company has elected to defer payments of interest on the Notes, which
         deferral may be for a period of up to five years.

                           "Fixed Rate" means the Distribution Rate (or Interest
         Rate with respect to the Notes) during a Fixed Rate Period.

                           "Fixed Rate Period" means the Initial Fixed Rate
         Period and each period set by the Company and, if applicable, the
         Regular Trustees during a Remarketing for which the Fixed Rate
         determined in such Remarketing will apply; provided, however, that a
         Fixed Rate Period must be for a duration of at least six months, may
         not extend beyond the Maturity of the Notes and may not end on a day
         other than a day immediately preceding a Distribution Payment Date (or
         Interest Payment Date with respect to the Notes).

                           "Floating Rate" has the meaning set forth in Part I,
         clause (e).

                           "Floating Rate Determination Date" means the second
         London Business Day immediately preceding the first day of the relevant
         Distribution Period (or Interest Period with respect to the Notes) in
         the Floating Rate Period.

                           "Floating Rate Period" means any period during which
         a Floating Rate is in effect.

                           "Initial Distribution Rate" means 6.50% per annum.

                           "Initial Fixed Rate Period" means the period from the
         date of original issuance through March 31, 2009.

                           "Initial Interest Rate" means 6.50% per annum.

                           "Institutional Trustee" means the commercial bank or
         trust company identified as the "Institutional Trustee" in the
         Declaration solely in its capacity as Institutional Trustee of the
         Trust.

                           "Interest Payment Dates" means the dates on which
         interest on the Notes is payable.

                           "Interest Period" means the period for which interest
         on the Notes is payable.

                                       15
<PAGE>

                           "Interest Rate" means the rate, in effect from time
         to time, at which interest shall accrue on the Notes.

                           "Liquidation Amount" means the stated amount of
         $1,000 per Trust Security or the principal amount of the Notes.

                           "Liquidation Distribution" has the meaning specified
         in Section 9.05 of the Declaration.

                           "London Business Day" means a day that is a Business
         Day and a day on which dealings in deposits in U.S. dollars are
         transacted, or with respect to any future date are expected to be
         transacted, in the London interbank market.

                           "Preferred Security" means an undivided beneficial
         ownership interest in the assets of the Trust having a Liquidation
         Amount of $1,000 and having rights provided therefor in the
         Declaration, including the right to receive Distributions and a
         Liquidation Distribution as provided in the Declaration.

                           "Preferred Securities Certificate" means a
         certificate evidencing ownership of a Preferred Security or Securities,
         substantially in the form attached as Exhibit A to the Declaration.

                           "Regular Trustee" means each of the individuals
         identified as a "Regular Trustee" in the Declaration.

                           "Remarketing" means the conduct by which a Fixed Rate
         shall be determined in accordance with the Remarketing Procedures.

                           "Remarketing Agent" means Lehman Brothers Inc., its
         successors or assigns, or such other remarketing agent appointed to
         such capacity by the Company and, if applicable, the Administrative
         Trustees.

                           "Remarketing Agreement" means the agreement among the
         Company, the Trust and Lehman Brothers Inc., as remarketing agent,
         dated as of April 5, 2004.

                           "Remarketing Date" means any Business Day no later
         than the third Business Day prior to any Remarketing Settlement Date.

                           "Remarketing Procedures" means those procedures set
         forth in Article 10 of the Declaration and Part II, clause (b) of this
         Officer's Certificate.

                           "Remarketing Settlement Date" means, to the extent
         applicable, (i) the first Business Day of the next Distribution Period
         (or Interest Period with respect to the Notes) following the expiration
         of the Initial Fixed Rate Period and any subsequent Fixed Rate Period,
         (ii) any Distribution Payment Date (or Interest Payment Date with
         respect to the Notes) during a Floating Rate Period or (iii) any
         Distribution Payment Date (or Interest Payment Date with respect to the
         Notes) during a time in which Preferred

                                       16
<PAGE>

         Securities or Notes are redeemable in a Fixed Rate Period subsequent to
         the Initial Fixed Rate Period.

                           "Trust" means AVA Capital Trust III, a statutory
         trust formed by the Company under Delaware law to issue Trust
         Securities, the proceeds of which will be used to purchase the Notes.

                           "Trust Indenture Act" means the Trust Indenture Act
         of 1939 as in force at the date as of which this instrument was
         executed; provided, however, that in the event the Trust Indenture Act
         of 1939 is amended after such date, "Trust Indenture Act" means, to the
         extent required by any such amendment, the Trust Indenture Act of 1939
         as so amended.

                           "Trust Security" means any one of the Common
         Securities (as defined in the Declaration) or the Preferred Securities.

                                       17
<PAGE>

                  IN WITNESS WHEREOF, I have executed this Officer's Certificate
this 5th day of April, 2004.

                                                  /s/ Diane C. Thoren
                                            ------------------------------------
                                            Name: Diane C. Thoren
                                            Title: Assistant Treasurer

<PAGE>

                                                                    FORM OF NOTE

                   (See legend at the end of this Security for
                  restrictions on transfer and change of form)

                               AVISTA CORPORATION
                  Subordinated Debt Securities, Series due 2034

ORIGINAL INTEREST ACCRUAL DATE: APRIL 5, 2004   REDEEMABLE: YES [X] NO [ ]
STATED MATURITY: APRIL 1, 2034                   INITIAL REDEMPTION DATE:
INTEREST RATE: DETERMINED BY PROCEDURES          MARCH 31, 2009
SET FORTH IN THE INDENTURE                       INITIAL REDEMPTION PRICE:  100%
INTEREST PAYMENT DATES: AS DESCRIBED BELOW
REGULAR RECORD DATES: THE OPENING OF BUSINESS
ON THE BUSINESS DAY IMMEDIATELY PRECEDING
THE RELEVANT INTEREST PAYMENT DATE

                               OID: YES [ ] NO [ ]
                            TOTAL AMOUNT OF OID (%):
                             YIELD TO MATURITY (%):
                                 INITIAL ACCRUAL
                                 PERIOD OID (%):
                            (CONSTANT - YIELD METHOD)

                    This Security is not a Discount Security
              within the meaning of the within-mentioned Indenture.

Principal Amount                                   Registered No.
$                                                  CUSIP

AVISTA CORPORATION, a corporation organized and existing under the laws of the
State of Washington (herein called the "Company", which term includes any
successor corporation under the Indenture referred to below), for value
received, hereby promises to pay to

or registered assigns, the principal sum of

                                                                         DOLLARS

on the Stated Maturity specified above (or upon earlier redemption), and to pay
interest thereon from the Original Interest Accrual Date specified above or from
the most recent Interest Payment Date to which interest has been paid or duly
provided for, on each Interest Payment Date, commencing with the Interest
Payment Date next succeeding the Original Interest Accrual Date specified above,
and at Maturity (or upon earlier redemption), at the Interest Rate then in
effect, until the principal hereof and any overdue interest is paid or duly
provided for. The interest so payable, and paid or duly provided for, on any
Interest Payment Date shall, as provided in such Indenture, be paid to the
Person in whose name this Security (or one or more Predecessor Securities) is
registered at the close of business on the Regular Record Date specified above
next preceding such Interest Payment Date. Notwithstanding the foregoing,

<PAGE>

(a) if the Original Interest Accrual Date of this Security is after a Regular
Record Date and before the corresponding Interest Payment Date, interest so
payable for the period from and including the Original Interest Accrual Date to
but excluding such Interest Payment Date shall be paid on the next succeeding
Interest Payment Date to the Holder hereof on the related Regular Record Date;
and (b) interest payable at Maturity shall be paid to the Person to whom
principal shall be paid. Except as otherwise provided in said Indenture, any
such interest not so paid or duly provided for shall forthwith cease to be
payable to the Holder on such Regular Record Date and may either be paid to the
Person in whose name this Security (or one or more Predecessor Securities) is
registered at the close of business on a Special Record Date for the payment of
such Unpaid Interest to be fixed by the Trustee, notice of which shall be given
to Holders of Securities of this series not less than 15 days prior to such
Special Record Date, or be paid at any time in any other lawful manner not
inconsistent with the requirements of any securities exchange on which the
Securities of this series may be listed, and upon such notice as may be required
by such exchange, all as more fully provided in said Indenture.

                  So long as no Event of Default shall have occurred and be
continuing, the Company has the right to defer payments of interest on this
Security by extending the interest payment period from time to time on this
Security (an "Extension Period"). If the Company decides to defer interest
payments on this Security, the Extension Period shall not exceed five
consecutive years. An Extension Period shall not extend beyond the Stated
Maturity of this Security. Prior to the termination of any Extension Period, the
Company may further defer payments of interest provided that the Extension
Period, together with all such previous and further extensions thereof, may not
exceed five consecutive years. Upon termination of any Extension Period and the
payments of all amounts then due, the Company may select a new Extension Period,
subject to the above requirements. There could be multiple Extension Periods of
varying lengths throughout the term of this Security. During an Extension
Period, Unpaid Interest (together with interest thereon) will compound on each
Interest Payment Date at the prevailing Interest Rate ("Deferred Interest").
Upon the termination of each Extension Period, which shall be an Interest
Payment Date, the Company shall pay all Deferred Interest on the next succeeding
Interest Payment Date to the Person in whose name this Security is registered at
the close of business on the Regular Record Date for such Interest Payment Date,
provided that any Deferred Interest payable at Stated Maturity or on any
Redemption Date will be paid to the Person to whom principal is payable.

                  The Company shall give the Holder of this Security, the
Trustee, the Remarketing Agent and the Calculation Agent notice of its selection
or extension of an Extension Period at least one Business Day prior to the
earlier of (i) the Regular Record Date relating to the Interest Payment Date on
which the Extension Period is to commence or relating to the Interest Payment
Date on which an Extension Period that is being extended would otherwise
terminate or (ii) the date the Company or Trust is required to give notice to
any applicable self-regulatory organization of the record date or the date
distributions are payable.

                  Payment of the principal of and premium, if any, on this
Security and interest hereon at Maturity shall be made upon presentation of this
Security at the Corporate Trust Office of Union Bank of California, N.A. in Los
Angeles, California, or at such other office or agency as may be designated for
such purpose by the Company from time to time. Payment of interest

                                        2
<PAGE>

on this Security (other than interest at Maturity) shall be made by check mailed
to the address of the Person entitled thereto as such address shall appear in
the Security Register, except that if such Person shall be a Trust or securities
depositary, such payment may be made by such other means in lieu of check, as
shall be agreed upon by the Company, the Trustee and such Person. Payment of the
principal of and premium, if any, and interest on this Security, as aforesaid,
shall be made in such coin or currency of the United States of America as at the
time of payment shall be legal tender for the payment of public and private
debts.

                  This Security is one of a duly authorized issue of securities
of the Company (herein called the "Securities"), issued and issuable in one or
more series under and equally secured by an Indenture, dated as of April 1, 2004
(such Indenture as originally executed and delivered and as supplemented or
amended from time to time thereafter, together with any constituent instruments
establishing the terms of particular Securities, being herein called the
"Indenture"), between the Company and Union Bank of California, N.A., trustee
(herein called the "Trustee," which term includes any successor trustee under
the Indenture), to which Indenture and all indentures supplemental thereto
reference is hereby made for a description of the respective rights, limitations
of rights, duties and immunities of the Company, the Trustee and the Holders of
the Securities thereunder and of the terms and conditions upon which the
Securities are, and are to be, authenticated and delivered and secured. The
acceptance of this Security shall be deemed to constitute the consent and
agreement by the Holder hereof to all terms and provisions of the Indenture.
This Security is one of the series designated above.

                  The Securities of this series are subject to redemption, in
whole but not in part, at the election of the Company on the last Interest
Payment Date relating to the Initial Fixed Rate Period, on such dates with
respect to any other Fixed Rate Period as the Company and the Trust may
determine prior to the remarketing establishing such Fixed Rate Period or on any
Interest Payment Date relating to a Floating Rate Period, at a Redemption Price
equal to 100% of the principal amount to be redeemed plus accrued but unpaid
interest to the Redemption Date

                  The Securities of this series are subject to redemption, in
whole but not in part, at the election of the Company, on any date within 90
days of the occurrence, and during the continuation of, a Special Event (as
defined herein) at a redemption price equal to 100% of the principal amount
thereof plus accrued interest, if any to the date fixed for redemption.

                  "Special Event" means an "Investment Company Act Event" or
"Tax Event".

                  "Investment Company Act Event" means the receipt by the
Company and the Regular Trustees of an Opinion of Counsel to the Company
experienced in these matters to the effect that, as a result of the occurrence
of a change in law or regulation or a written change (including any announced
prospective change) in interpretation or application of law or regulation by any
legislative body, court, governmental agency or regulatory authority, there is
more than an insubstantial risk that the Trust is or will be considered an
"investment company" that is required to be registered under the 1940 Act, which
change or prospective change becomes effective or would become effective, as the
case may be, after the date of the issuance by the Trust of the Preferred
Securities.

                  "Tax Event" means receipt by the Company and the Regular
Trustees of an

                                       3
<PAGE>

opinion from independent tax counsel experienced in such matters (which may be
counsel to the Company) to the effect that, as a result of (a) any amendment to,
or change (including any announced proposed change) in, the laws (or any
regulations thereunder) of the United States or any political subdivision or
taxing authority thereof or therein or (b) any amendment to, or change in, an
interpretation or application of such laws or regulations, there is more than an
insubstantial risk that (i) the Trust would be subject to United States federal
income tax with respect to income accrued or received on the Securities; (ii)
interest payable on the Securities would not be deductible, in whole or in part,
by the Company for United States federal income tax purposes; or (iii) the Trust
would be subject to more than a de minimis amount of other taxes, duties or
other governmental charges, which change or amendment becomes effective on or
after the date of issuance by the Trust of the Preferred Securities.

                  Notice of redemption shall be given by mail to Holders of
Securities, not less than 30 days nor more than 60 days prior the date fixed for
redemption, all as provided in the Indenture. As provided in the Indenture,
notice of redemption at the election of the Company as aforesaid may state that
such redemption shall be conditional upon the receipt by the Trustee of money
sufficient to pay the principal of and premium, if any and interest, if any, on
this Security on or prior the date fixed for such redemption; a notice of
redemption so conditioned shall be of no force or effect if such money is not so
received and, in such event, the Company shall not be required to redeem this
Security.

                  The Company also shall be obligated to pay when due and
without extension all additional amounts as may be required so that the net
amount received and retained by the Holder of this Security (if the Holder is a
Trust) after paying taxes, duties, assessments or governmental charges of any
nature (other than withholding taxes) imposed by the United States or any other
taxing authority will not be less than the amounts such Holder would have
received had no such taxes, duties, assessments or other governmental charges
been imposed.

                  If an Event of Default shall occur and be continuing, the
principal of this Security may be declared due and payable in the manner and
with the effect provided in the Indenture.

                  The indebtedness evidenced by this Security is, to the extent
provided in the Indenture, subordinated and subject in right of payment to the
prior payment in full of all Senior Indebtedness, and this Security is issued
subject to the provisions of the Indenture with respect thereto. Each Holder of
this Security, by accepting the same, (a) agrees to and shall be bound by such
provisions, (b) authorizes and directs the Trustee on his behalf to take such
action as may be necessary or appropriate to acknowledge or effectuate the
subordination so provided and (c) appoints the Trustee his attorney-in-fact for
any and all such purposes. Each Holder hereof, by his acceptance hereof, hereby
waives all notice of the acceptance of the subordination provisions contained
herein and in the Indenture by each holder of Senior Indebtedness, whether now
outstanding or hereafter incurred, and waives reliance by each such Holder upon
said provisions.

                  Each Holder hereof, by his acceptance hereof, agrees to treat
this Security as indebtedness for all United States tax purposes.

                  The Indenture permits, with certain exceptions as therein
provided, the Trustee to enter into one or more supplemental indentures for the
purpose of adding any provisions to, or

                                       4
<PAGE>

changing in any manner or eliminating any of the provisions of, the Indenture
with the consent of the Holders of not less than a majority in aggregate
principal amount of the Securities of all series then Outstanding under the
Indenture, considered as one class; provided, however, that if there shall be
Securities of more than one series Outstanding under the Indenture and if a
proposed supplemental indenture shall directly affect the rights of the Holders
of Securities of one or more, but less than all, of such series, then the
consent only of the Holders of a majority in aggregate principal amount of the
Outstanding Securities of all series so directly affected, considered as one
class, shall be required; and provided, further, that if the Securities of any
series shall have been issued in more than one Tranche and if the proposed
supplemental indenture shall directly affect the rights of the Holders of
Securities of one or more, but less than all, of such Tranches, then the consent
only of the Holders of a majority in aggregate principal amount of the
Outstanding Securities of all Tranches so directly affected, considered as one
class, shall be required; and provided, further, that the Indenture permits the
Trustee to enter into one or more supplemental indentures for limited purposes
without the consent of any Holders of Securities. The Indenture also contains
provisions permitting the Holders of a majority in principal amount of the
Securities then Outstanding, on behalf of the Holders of all Securities, to
waive compliance by the Company with certain provisions of the Indenture and
certain past defaults under the Indenture and their consequences. Any such
consent or waiver by the Holder of this Security shall be conclusive and binding
upon such Holder and upon all future Holders of this Security and of any
Security issued upon the registration of transfer hereof or in exchange thereof
or in lieu hereof, whether or not notation of such consent or waiver is made
upon this Security.

                  As provided in the Indenture and subject to certain
limitations therein set forth, this Security or any portion of the principal
amount hereof will be deemed to have been paid for all purposes of the Indenture
and to be no longer Outstanding thereunder, and, at the election of the Company,
the Company's entire indebtedness in respect thereof will be satisfied and
discharged, if there has been irrevocably deposited with the Trustee or any
Paying Agent (other than the Company), in trust, money in an amount which will
be sufficient and/or Eligible Obligations, the principal of and interest on
which when due, without regard to any reinvestment thereof, will provide moneys
which, together with moneys so deposited, will be sufficient to pay when due the
principal of and interest on this Security when due.

                  The Indenture contains terms, provisions and conditions
relating to the consolidation or merger of the Company with or into, and the
conveyance or other transfer, or lease, of assets to, another Person, to the
assumption by such other Person, in certain circumstances, of all of the
obligations of the Company under the Indenture and on the Securities and to the
release and discharge of the Company, in certain circumstances, from such
obligation.

                  As provided in the Indenture and subject to certain
limitations therein set forth, the transfer of this Security is registrable in
the Security Register, upon surrender of this Security for registration of
transfer at the corporate trust office of Union Bank of California, N.A. in Los
Angeles, California, or such other office or agency as may be designated by the
Company from time to time, duly endorsed by, or accompanied by a written
instrument of transfer in form satisfactory to the Company and the Security
Registrar duly executed by, the Holder hereof or his attorney duly authorized in
writing, and thereupon one or more new Securities of this series of authorized
denominations and of like tenor and aggregate principal amount, will be issued
to the designated transferee or transferees.

                                       5
<PAGE>

                  If any Interest Payment Date with respect to a Fixed Rate
Period is not a Business Day, interest will be payable, without additional
interest, on the immediately succeeding Business Day, with the same force and
effect as if payment was made on the date such payment was originally payable
(and without the accrual of any additional amount of interest). If any Interest
Payment Date with respect to a Floating Rate Period is not a Business Day, then
interest will be payable on the immediately succeeding Business Day and interest
shall accrue to the actual payment date (except for an Interest Payment Date
that coincides with Maturity or the Redemption Date).

                  The Securities of this series are issuable only as registered
Securities, without coupons, and in denominations of $1,000 or any amount in
excess thereof that is an integral multiple of $1,000. As provided in the
Indenture and subject to certain limitations therein set forth, Securities of
this Series are exchangeable for a like aggregate principal amount of Securities
of the same series and Tranche, of any authorized denominations, as requested by
the Holder surrendering the same, and of like tenor upon surrender of the
Security or Securities to be exchanged at the corporate trust office of Union
Bank of California, N.A. in Los Angeles, California, or such other office or
agency as may be designated by the Company from time to time.

                  No service charge shall be made for any such registration of
transfer or exchange, but the Company may require payment of a sum sufficient to
cover any tax or other governmental charge payable in connection therewith.

                  Prior to due surrender of this Security for registration of
transfer, the Company, the Trustee and any agent of the Company or the Trustee
may treat the Person in whose name this Security is registered as the absolute
owner hereof for all purposes (subject to Section 307 of the Indenture), whether
or not this Security be overdue, and neither the Company, the Trustee nor any
such agent shall be affected by notice to the contrary.

                  The Indenture and the Securities shall be governed by and
construed in accordance with the laws of the State of New York, except to the
extent that the Trust Indenture Act shall be applicable .

                  As used herein, "Business Day" means any day, other than an
Saturday or Sunday, which is not a day on which banking institutions or trust
companies in the City of New York, New York or other city in which is located
any office or agency maintained for the payment of principal, premium, if any,
or interest on this Security, are authorized or required by law, regulation or
executive order to remain closed. All other terms used in this Security which
are defined in the Indenture shall have the meanings assigned to them in the
Indenture, any supplemental indenture, Officer's Certificate or Board Resolution
hereto.

                  As provided in the Indenture, no recourse shall be had for the
payment of the principal of or premium, if any, or interest on any Securities,
or any part thereof, or for any claim based thereon or otherwise in respect
thereof, or of the indebtedness represented thereby, or upon any obligation,
covenant or agreement under the Indenture, against, and no personal liability
whatsoever shall attach to, or be incurred by, any incorporator, shareholder,
officer or director, as such, past, present or future of the Company or of any
predecessor or successor corporation

                                       6
<PAGE>

(either directly or through the Company or a predecessor or successor
corporation), whether by virtue of any constitutional provision, statute or rule
of law, or by the enforcement of any assessment or penalty or otherwise; it
being expressly agreed and understood that the Indenture and all the Securities
are solely corporate obligations and that any such personal liability is hereby
expressly waived and released as a condition of, and as part of the
consideration for, the execution of the Indenture and the issuance of the
Securities.

                  Unless the certificate of authentication hereon has been
executed by the Trustee or an Authenticating Agent by manual signature, this
Security shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.

                                       7
<PAGE>

                  IN WITNESS WHEREOF, the Company has caused this instrument to
be duly executed.

                                    AVISTA CORPORATION

                                    By:_________________________________________
                                            [Title]

                          CERTIFICATE OF AUTHENTICATION

                  This is one of the Securities of the series designated therein
referred to in the within-mentioned Indenture.

Dated:______________________________

         ___________________________      OR     _______________________________

         ___________________________             _______________________________

         as Trustee                                        as Trustee
   By:______________________________             By: [                     ],
         Authorized Officer

                                                      AS AUTHENTICATING AGENT

                                                 By:____________________________
                                                       Authorized Officer

                                       8
<PAGE>

                  THIS SECURITY SHALL NOT BE TRANSFERABLE, NOR SHALL ANY
PURPORTED TRANSFER BE REGISTERED, EXCEPT (a) TO A NOMINEE OF UNION BANK OF
CALIFORNIA, N.A., AS INSTITUTIONAL TRUSTEE, TO SUCH INSTITUTIONAL TRUSTEE BY
SUCH NOMINEE, BY SUCH INSTITUTIONAL TRUSTEE TO ANOTHER NOMINEE, BY ANY SUCH
NOMINEE TO A SUCCESSOR NOMINEE OR BY SUCH INSTITUTIONAL TRUSTEE OR ANY NOMINEE
THEREOF TO A SUCCESSOR INSTITUTIONAL TRUSTEE OR A NOMINEE THEREOF OR (b) TO THE
HOLDERS OF TRUST SECURITIES IN THE EVENT OF THE DISSOLUTION OF THE TRUST IN
ACCORDANCE WITH THE PROVISIONS OF THE DECLARATION.

FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers unto

    _________________________________________________________________________
     [please insert social security or other identifying number of assignee]

    _________________________________________________________________________
            [please print or typewrite name and address of assignee]

    _________________________________________________________________________

the within Security of AVISTA CORPORATION and does hereby irrevocably constitute
and appoint _________________, Attorney, to transfer said Security on the books
of the within-mentioned Company, with full power of substitution in the
premises.

Dated:   ________________

Notice: The signature to this assignment must correspond with the name as
written upon the face of the Security in every particular without alteration or
enlargement or any change whatsoever.

                                       9