Hydro One /Avista Merger Rejected – Oregon Suspends Proceeding

*Editor’s Update: on Wednesday January 23, 2019, Avista Corp. issued a notice to the Oregon PUC that its merger agreement with Hydro One had been terminated. The docket is closed and Avista will continue to operate as an independent utility service provider.

The attempt by Canadian utility Hydro One to purchase Avista is all but dead. Washington and Idaho rejected the merger and Oregon subsequently suspended any further action on the deal.

Hydro One, a utility based in Ontario, was attempting to buy Avista Utilities, a regional electric and gas utility in the Pacific Northwest, for $5.3 billion. For a while, the merger seemed to be moving along. Hydro One offered a series of concessions, such as rate credits, to customers and picked up support from CUB and nearly every stakeholder in the three states. Then, last summer, Ontario had a Provincial election. Ontario elected a new government, led by Doug Ford, who had vowed to fire the Hydro One CEO if elected. Shortly after taking office Premier Ford demanded and got the resignation of the Hydro One Board of Directors and the CEO. Ford was able to do this because the Province of Ontario owns 47 percent of the utility. Up until that time, Hydro One had told parties not to be concerned with the provincial ownership because Ontario acted only as a passive investor.

This caused concern by stakeholders in the merger review proceedings. After considering the implications of Ontario’s interference with the utility, CUB withdrew its support – becoming the only major stakeholder in the three states to oppose the deal. From CUB’s perspective there is no way to protect Oregon ratepayers from the effects of political interference by Ontario.

In December, Washington regulators rejected the deal citing the same concerns CUB raised in Oregon. Hydro One and Avista quickly announced that they would ask Washington regulators to reconsider their decision.

Earlier this month, Idaho regulators weighed in and also rejected the merger. Interestingly, Idaho rejected it because it violated a narrow Idaho anti-public power statue, which prohibits public takeovers of investor-owned utilities. Idaho found that Ontario’s direct and indirect control of Hydro One made it a publicly-owned utility that, under Idaho law, cannot buy an investor-owned utility’s assets. Later in January, Washington regulators declined Hydro One’s request to reconsider their decision. The deal was officially killed in two of Avista’s largest service territories.

This week, Oregon regulators finally weighed in with an order stating that, due to the rejection of the deal in Washington and Idaho, there was nothing to resolve in Oregon. The Commission stated that they would hold the docket in abeyance until notified by Hydro One and Avista that they are seeking to reverse the decision in the other states.

While Hydro One and Avista could appeal the decisions by Washington and Idaho in state courts, it is very unlikely they will do so. The merger was supposed to close and be finalized this Spring and navigating the legal appeal process will take several months (or years). In addition, when courts find that state PUCs have made errors, the court normally will remand the decision back to the PUC and order the PUC to resolve the error and issue a new order. The PUCs would then have to allow all the stakeholders to submit new testimony and make new recommendations as to how regulators should adjust their order in light of the court’s finding. On top of that, courts grant a tremendous amount of deference to PUC decisions, and will only remand a decision if the court finds that the PUC made an error of law or fact, or in other rare circumstances.

In other words, in order to continue this deal, Hydro One would have to keep the $5.3 billion financing in place for at least another year, while it tries to win two court challenges, that would then allow it to try to get approval from three states. If it lost any of these five proceedings the deal would be dead.

It is time to move on. This one is over.

To keep up with CUB, like us on Facebook and follow us on Twitter!

• Share this post on Facebook.
• Share this post on LinkedIn.
• Share this post with email.

« Back