Wwp Terminates Merger Deal Company Says It Cannot Wait Another Year On Agreement It Has Spent Millions To Get

Washington Water Power Co., in a stunning turnabout, late Friday terminated its merger agreement with Sierra Pacific Resources.

The announcement came after a meeting of WWP directors on the second anniversary of the merger agreement between the Spokane- and Reno-based utilities.

It also followed a week of hearings in Washington, D.C., before an administrative law judge of the Federal Energy Regulatory Commission.

WWP spokesman Roger Woodward said company officials felt they could not wait another year for a ruling from FERC on the merger.

The commission surprised the companies in November by setting aside the deal after regulators in six states had approved the transaction.

“You just don’t know how it was going to turn out,” he said.

The company spent more than $15 million on the merger. Those expenses will be written off at no cost to WWP ratepayers, Woodward said.

But he said he did not know what effect cancellation of the merger would have on a five-year rate freeze for Washington and Idaho that was a condition of regulatory approvals in the two states.

Nor is it clear how WWP will regroup as an organization. The company, one of Spokane’s largest employers, had offered severance or early retirement to dozens of employees in anticipation of the consolidation with Sierra, only to put those actions on hold when FERC side-tracked the transaction.

WWP officials Monday expressed optimism about the outcome of the hearings in Washington. But WWP Chairman Paul Redmond said Friday circumstances had shifted during the merger’s two-year evolution.

“Because of dramatic changes in the utility industry, diminishing merger benefits and continuing uncertainty related to this merger in the regulatory area, we have determined that termination of the merger agreement at this time is in the best interests of our company’s shareholders and customers,” he said.

Sierra Chairman Walter Higgins said he regrets WWP’s action.

“Sierra Pacific believes this merger was in the best interest of our customers, shareholders and communities,” he said.

The utilities spent millions of dollars and countless hours trying to unite two different, geographically isolated operations.

WWP has an abundance of cheap hydropower, but a slow-growing service territory.

Sierra, which first approached WWP about a merger in January 1994, depends on expensive coal and other thermal power. But the Reno area is thriving economically.

Together, the companies - renamed Altus Corp. - would have provided electricity, natural gas and water to about 500,000 customers scattered from northwestern Montana to northern California.

Regulators in every state had approved the deal. But the Washington Utilities and Transportation Commission had attached conditions intended to protect low rates to WWP customers in the state.

In refusing to give their consent in November, FERC members indicated they wanted changes that might have compromised those safeguards. Despite months of discussion with FERC staff members, WWP and Sierra were not able to overcome those differences.

“We are disappointed to end a strategic partnership more than two years in the making,” Redmond said. “We have put forth great effort, time and expense to try to complete the merger with Sierra Pacific.”

, DataTimes