Idaho regulators question if Canadian politics could hurt Avista if sale to Hydro One is approved

Hydro One Ltd.’s independence was on the stand Monday as Idaho attorneys grilled executives about the Ontario government’s influence on the utility trying to buy Avista Corp.

Most of the discussion in the Idaho Public Utilities Commission’s 6 1/2-hour hearing revolved around whether the Canadian province acts primarily as an investor in Hydro One or whether it meddles in management.

About 47 percent of Hydro One’ s stock is owned by the province of Ontario. In July, newly elected Premier Doug Ford called for the resignation of Hydro One’s board of directors and the retirement of its chief executive officer. Hydro One’s credit rating dropped as a result of the sudden ouster, which company executives said was politically driven.

“Avista is fairly well run. They’ve got good credit ratings and they’ve got some of the happiest customers in the state,” Kristine Raper, one of the three public utilities commissioners, told Hydro One executives. “They’re asking us – you’re asking us – to approve a merger.”

Raper said she was concerned about the province making “a political game” out of Hydro One that would further damage the company’s financial standing and, by default, Avista’s. The Spokane-based utility serves electric and natural gas customers in northern Idaho.

Hydro One Chairman Tom Woods spent nearly 2 1/2 hours on the stand answering questions. He said the actions taken by Premier Ford were unusual. Since the ouster, a new board of directors has been put in place, with four of the 10 members chosen by the provincial government and six picked by other major shareholders.

Woods said relations between Hydro One’s new management and the Ford administration have been cooperative and he doubts the premier would take an action like replacing the board again.

“The premier has been quite vocal in saying the government of Ontario is open for business,” Woods said. Further interference by the government “might be viewed negatively in terms of being open for business,” he said.

Paul Kjellander, the Public Utilities Commission’s president, pressed Woods about how the new board would react in the event of pressure from the province.

“If you consult with the province and if it wants to go a different direction than what you’re bringing to them, don’t you risk reprisals if you ignore their advice?” Kjellander said.

Woods said board members were tasked with acting in the best interests of all shareholders.

Norman Semanko, an attorney for the Idaho Customer Group, which opposes the $5.3 billion sale, asked if the province could pass legislation that would give it a bigger role in Hydro One.

“The premier is elected every five years, so things could change in 4 1/2 years,” he said.

The province “can issue legislation anytime they want,” Woods acknowledged. However, “I’m assured that the province has no legal right to legislate anything related to Avista.”

Avista would operate as a subsidiary of Hydro One but retain a high degree of autonomy, Woods said.

Rates for Avista customers would continue to be set by public utilities commissions in each state, he said, and Avista would maintain a separate credit rating.

During Monday’s hearing, the commission also heard opinions on whether a section of Idaho law would prevent the sale of Avista’s property in the state to Hydro One.

“I will be asking for legal briefs,” Kjellander said. “It’s important for the commission to fully understand that section of Idaho statute before we deliberate.”

The hearing continues Tuesday in Boise.