Hydro One - Avista Merger: Improvement Needed
Posted on March 22, 2018 by Will Gehrke
Tags, Energy
In December we told you about the proposed merger of Hydro One, a utility based out of Ontario Canada, and Washington-based Avista. Avista’s service territory includes parts of Oregon as well as Alaska and Idaho; in order to merge with Avista, Hydro One has to demonstrate to each of these states’ regulators, including the Oregon Public Utility Commission (PUC), that customers are provided a net benefit.
CUB has reviewed Hydro One’s application to acquire Avista and has addressed some of our concerns in recently filed testimony. In CUB’s opinion, Hydro One’s current filing does not meet a net benefit standard for Oregon customers. One of the big issues is that Avista provides Oregon customers with natural gas, while Hydro One is an electric-only distribution utility. The concern is that Hydro One does not have the expertise necessary to provide least-cost, least-risk natural gas service.
Hydro One was originally a state-owned corporation, but was privatized in 2015. It’s important to note that, post-privatization, the government of Ontario still owns a plurality of shares in Hydro One, which exposes the company to the whims of the Ontario Legislative assembly. The Liberal Party of Ontario is currently the majority party in the province, and while they appear to support Hydro One’s current strategic direction, the New Democratic Party wants to nationalize Hydro One. A nationalized Hydro One would have little incentive to own a foreign utility and would likely divest itself of Avista. This is a problem because it is important to Oregon consumers that Avista has stable, long-term ownership.
The North American Free Trade Agreement, a treaty between Canada, Mexico, and the United States, is meant to allow free trade and investment to flow between the three countries. NAFTA gives investor rights to foreign owners of American corporations. Unfortunately, these investor rights would enable Hydro One to sue the United States government in a private arbitration tribunal. For example, the Investor rights clause was used by the Trans-Canada Corporation to seek $15 billion in damages from the United States federal government when it rejected bids to build the Keystone XL pipeline in 2015. Oregon’s utility landscape is rapidly changing and in fact, the Oregon Legislature considered carbon pricing legislation in our most recent session. If (or when) Oregon implements a carbon tax, Hydro One could theoretically sue the United States government due to a change in the regulatory environment.
In order to balance the risks from Hydro One’s ownership, the company has proposed rate credits for Avista’s customers. In our opinion, that is not enough; CUB is seeking a greater benefit for customers. Last week, CUB attended a settlement conference in Salem with Hydro One and Avista and we will continue to be involved in settlement discussions to ensure customers are not harmed by this acquisition.
To keep up with CUB, like us on Facebook and follow us on Twitter!
03/22/18 | 0 Comments | Hydro One - Avista Merger: Improvement Needed