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Opponents worry about Canadian influence on Avista as regulators consider sale

UPDATED: Thu., June 28, 2018, 7:04 a.m.

Avista Corp.  CEO Scott Morris and Mayo Schmidt, right, CEO of Hydro One Ltd., address a reception of Spokane area business leaders Monday, Nov. 20, 2017, at the Davenport Hotel. (Jesse Tinsley / The Spokesman-Review)
Avista Corp. CEO Scott Morris and Mayo Schmidt, right, CEO of Hydro One Ltd., address a reception of Spokane area business leaders Monday, Nov. 20, 2017, at the Davenport Hotel. (Jesse Tinsley / The Spokesman-Review)

One by one, Avista customers stepped up to the microphone to speak out against the Spokane utility’s sale to a Canadian company.

Foreign ownership made them uneasy, they told state regulators. They worried about the potential for higher electric and gas rates. What if Canadian goals for reducing carbon emissions trickled into Avista’s utility bills?

The public hearing in Coeur d’Alene earlier this month was supposed to allow Idaho residents to sound off on Avista’s proposed $5.3 billion sale to Toronto-based Hydro One Ltd..

It also drew some Washington customers, such as Spokane Valley resident John Miller.

“Hydro One is a quasi-government corporation in a socialist country,” he told the Idaho Public Utilities Commission.

Deliberations over the sale of Avista are heading into the final stretches. By mid-August, state regulators in Washington, Idaho and Oregon are expected to decide whether the sale is in the best interest of Avista’s customers.

Customers opposed to the sale are speaking up. Some of the comments have strong political overtones, channeling President Donald Trump’s anti-globalization sentiment.

“Idaho First, America First,” Glenn Bledsoe, of Rathdrum, said during the Coeur d’Alene hearing.

Concerns about future electric and gas rates also figure prominently in their remarks.

Avista and Hydro One say the sale will benefit customers, but they haven’t indicated how costs will be allocated between the two utilities, said Norman Semanko, attorney for the newly formed Avista Customer Group, which opposes the sale.

Until those costs are spelled out, it’s impossible to show how rates for Avista’s customers would be affected, said Semanko, who represents both Washington and Idaho customers.

About 400 of Avista’s Idaho customers have weighed in on the sale. Because of the high interest, the three-member Idaho Public Utilities Commission has scheduled a July 23 technical hearing to discuss issues raised by the public.

Questions about Canadian influence

The proposed sale – announced in July 2017 – enters its final regulatory reviews amid souring relations between the U.S. and Canada.

The Coeur d’Alene hearing came a week after Trump’s showdown with Canadian Prime Minister Justin Trudeau over trade and tariffs at the G-7 Summit.

Opponents often raise the issue of the Ontario government’s partial ownership of Hydro One. The province retains a 47 percent ownership in the utility, after selling off a controlling interest in 2015.

Hydro One’s CEO Mayo Schmidt has repeatedly said the province is a shareholder, not an operator, of the utility serving 1.3 million customers in suburban and rural Ontario. Avista officials reiterated those remarks at Monday’s Spokane City Council meeting.

But a June 8 election in Ontario, which saw populist leader Doug Ford ascend to power, has raised questions about political influence.

Ford’s bombastic style is sometimes compared to Trump’s. He threatened to fire Schmidt if elected and replace Hydro One’s board of directors, according to reports in Canadian media.

Earlier this year, Washington regulators grilled Schmidt along similar lines during a hearing in Olympia.

“Mr. Schmidt, I’d like you to address this issue of concern about foreign ownership and the role of the province in having significant control of the company,” the state’s Utilities and Transportation Commissioner Ann Rendahl said during the hearing.

Questions about future rates

The cost of electricity in Ontario also has come under scrutiny during the sale’s review. Opponents quote the Frasier Institute, a Canadian think tank, which said the government of Ontario’s decision to phase out coal-fired generation contributed to soaring residential electricity costs in the province between 2008 and 2016, and burdened industrial users.

Spokane City Councilman Mike Fagan said he’s been contacted by about 50 constituents who are afraid their rates will shoot up after the sale.

“Obviously, I have not made the trip to Ontario to put eyes on it myself,” Fagan said. However, “everything I have seen up to this point kind of paints a very questionable picture.”

Hydro One’s rates include the cost of electricity and the cost of delivering it to customers, said Tiziana Baccega Rosa, the utility’s spokeswoman. Hydro One isn’t allowed to earn a profit on the electricity it buys and sells to customers. The company can earn a profit on the delivery of electricity, which is regulated, she said.

Action by the province lowered electric bills last year, particularly for residential customers in remote areas, who were paying higher delivery charges, Baccega Rosa said. Hydro One officials now say their electric rates are similar to rates in Seattle and Portland.

According to the company, Hydro One customers’ 2017 average monthly bill ranged from $76 to $82 U.S. for 750 kilowatts of electricity, depending on whether customers lived in urban or remote communities.

In Washington, a typical Avista residential customer pays about $89 per month for 938 kilowatt hours of electricity.

But Hydro One’s electric rates are immaterial to Avista customers, because they won’t influence rates here, both of the utilities say. After the sale, Avista will operate as a subsidiary of Hydro One, with rates set on the cost of providing electric and gas service in each of the five states Avista serves, said Casey Fielder, an Avista spokeswoman.

State regulators will review the costs and approve the rates in their jurisdictions, Baccega Rosa said. Regulators wouldn’t allow Avista customers to subsidize rates for Hydro One’s customers, she said.

When PacifiCorp merged with ScottishPower in 1999, Idaho regulators required the utilities to submit information on how ScottishPower would assign costs to PacifiCorp, said Semanko, attorney for the Avista Customer Group.

That information is missing from Avista’s proposed sale documents, he said. Without it, regulators can’t know whether the sale to Hydro One would result in higher costs to Washington and Idaho utility customers, Semanko said.

“The burden is on the co-applicants to demonstrate that there will be no increase in costs or rates as a result of the merger,” he said in an email. “Doing that during the next rate case is too late for consideration in the merger proceeding.”

Avista and Hydro One noted they’ve committed to rate credits over five years after the sale – worth about $1.27 per month for a typical Washington electric and gas customer and $1.38 per month in Idaho.

Any future costs that Hydro One might incur for Avista’s operations would be accounted for and billed to Avista, said Fielder, the Avista spokeswoman. Regulators would vet those expenses before deciding whether to include them in customer rates.

Customers need assurance about future rates, Cheryl Van Esch, a semiretired Athol resident told Idaho regulators at the Coeur d’Alene hearing.

“It’s cold up here,” she said. “We need affordable electricity and natural gas.”


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