The future of Avista’s sale to Hydro One was unclear Wednesday evening, after the Canadian utility’s CEO was ousted Wednesday by Ontario’s new premier, and the entire board of directors submitted resignations.
The Toronto-based utility had planned to purchase Avista in a $5.3 billion deal expected to close later this year.
Premier Doug Ford, who took office June 29, campaigned on a platform to replace Hydro One CEO Mayo Schmidt and the utility’s board of directors. He called Schmidt the “$6 million man” during his campaign, channeling customers’ anger over high electric bills amid what Ford said was excessive executive pay.
“I said over and over and over again on the campaign trail the CEO of Hydro One and the board will be gone,” The Canadian Press quoted Ford as saying Wednesday at a news conference.
Under an agreement between Ford’s government and Hydro One, Schmidt retired and the board of directors resigned and will be replaced.
The province of Ontario is Hydro One’s largest shareholder, with a 47 percent stake in the utility. The province has the ability to remove the board of directors.
Avista issued a short statement, but didn’t comment on the sale.
“We are surprised by the news regarding the retirement of Hydro One’s CEO and the agreement to replace its board of directors,” Avista spokeswoman Casey Fielder said. “We are monitoring developments at Hydro One and wish Mayo Schmidt well.”
For Avista’s sale to go through, the deal must win approval from regulators in states where Avista operates. Montana and Alaska have given their approval. Decisions are pending in Washington, Idaho and Oregon.
Fielder said Avista will continue to move forward with the states’ regulatory review.
Avista and Hydro One announced plans for the merger in July 2017. At the time, Avista Chairman and CEO Scott Morris said the Spokane-based utility had found the right partner in Hydro One, Ontario’s largest electricity transmission and distribution company.
Avista – founded as Washington Water Power Co. in 1889 – would keep its Spokane headquarters and operate as a subsidiary of Hydro One. Morris said Avista ranks among the smallest publicly traded utilities and would benefit from being part of a larger company.
Schmidt was pivotal to the deal. He’s a dual U.S.-Canadian citizen, who spent part of his career working for General Mills in Montana.
He’s “a wonderful man who shares our values,” Morris said when he introduced Schmidt to company employees in September. “He’s somebody that could absolutely work here at Avista.”
During a hearing in late May, however, members of the Washington Utilities and Transportation Commission grilled Schmidt about the upcoming legislative election in Ontario.
The future of Hydro One “seems to be a major election issue,” UTC Chairman David Danner said at the time, asking how “the potential volatility” would affect Avista ratepayers if the sale goes through. State regulators must determine whether the proposed sale is in the best interest of Avista customers.
Schmidt said the “province is a shareholder, not a manager of the business.” To date, “the province has been exemplary in not involving themselves in the business of the organization,” he told the UTC in May.
During a hearing in Coeur d’Alene last month, some Avista ratepayers said they were uncomfortable with Hydro One’s partial government ownership.
“Tumultuous dealings with Hydro One are not new. I’m concerned that they’ll be picking Avista’s board of directors,” Hayden resident Larry Spencer said at the hearing.
Hydro One’s new board of directors will be chosen by Aug. 15, according to a news release. The procedure follows agreements put in place when the province of Ontario sold its controlling interest in the utility in late 2015.
The province will nominate four replacement directors, and the remaining six nominees will be identified through a committee made up of representatives of Hydro One’s other large shareholders.
Prior agreements allow the boards of directors at Avista and Hydro One to mutually decide to terminate the sale. In addition, either party can back out if the sale isn’t finalized by Sept. 30, although an option exists for extending the sale deadline to March 31.
Under specific circumstances, either Avista or Hydro One could be required to pay a $103 million termination fee.
Hydro One’s new board will be responsible for appointing a new CEO. The utility will consult with the province on executive compensation in the future, a new release said.
Subscribe to the Morning Review newsletter
Get the day’s top headlines delivered to your inbox every morning by subscribing to our newsletter