Avista, Hydro One say Washington regulators erred by blocking $5.3 billion sale

December 18, 2018

Washington regulators erred when they blocked Avista Corp.’s sale to Hydro One Ltd., of Toronto, by exaggerating the political risks to Avista’s customers from the province of Ontario’s ownership in Hydro One, the two companies argued Monday.

In a request for reconsideration, the companies said the state Utilities and Transportation Commission failed to specify “how Provincial actions could actually impact Avista” and downplayed the benefits of the sale to the Spokane-based utility’s customers.

The three-member UTC has 20 days to act on the request for reconsideration. The companies asked the UTC to finish any additional reviews of the sale by the end of January.

Avista and Hydro One have a March 29 deadline to conclude the sale, and Hydro One’s funding for the purchase expires shortly afterward.

The companies face a difficult path for “rescuing this deal,” Rob Rains, senior energy analyst for Washington Analysis LLC, wrote in a research note.

The province of Ontario’s 47 percent ownership in Hydro One was a key consideration during the review of the sale. In its Dec. 5 ruling, the three-member UTC said Hydro One lacks sufficient independence from the province to be an appropriate merger partner for Avista.

In its 44-page ruling, the UTC cited Premier Doug Ford’s politically motivated decision to seek removal of Hydro One’s board of directors and its chief executive officer shortly after he was sworn into office last summer. Hydro One’s credit rating dropped as a result of the sudden ouster. Stock prices also dropped for Avista and Hydro One.

“In particular, the Commission calls Hydro One a ‘different company’ than the one that agreed to buy Avista in 2017,” Rains wrote. Ford’s “ongoing efforts to exert control over Hydro One” were problematic for the commission and “should not inspire confidence of a comeback for this merger,” he said.

Rains said UTC members might be reassured if the premier sent them a letter, assuring that his efforts to modify Hydro One are finished. “But we do not see much reason for him to take such a step at this time,” he said.

Hydro One hired Seattle law firm K&L Gates to submit the 36-page request for reconsideration.

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