“If something drastic, if the province or governmental entity in Canada were to take an action that would have a drastic impact on the company and potentially the ratepayers … how does this protect ratepayers from the potential impact?”
What commissioner Ann Rendahl is getting at there — and boy, we sympathize — is how can Washington ratepayers be reassured that there won’t be any more surprises in the proposed takeover of Avista Corp. by Hydro One? And how to calm the jitters of those consumers who remain unconvinced that the takeover is in their long-term interest?
Last week’s marathon hearing before the Washington Utilities and Transportation Commission (UTC) drew a heavy focus on the potential for the government of Ontario to act up again, and little wonder given the past fulminations of Premier Doug Ford, the sudden exit last July of Hydro CEO Mayo Schmidt (Mr. $6 Million) and the departure of the entire slate of directors. The madness left the state UTC flatfooted and perplexed.
Turning to the governance agreement between the two parties, Rendahl asked this of Chris McGuire, the commission’s assistant director, energy regulation: “Don’t you agree that it shows that there’s a risk of political intervention by the province in Hydro One’s corporate affairs?”
To which McGuire responded: “I agree, yes, that there is a risk of that type of interference.”
Did he think the risk was greater than that expressed in the previous testimony of Schmidt himself? McGuire wasn’t sure about that. Here’s a line plucked from Schmidt’s direct testimony last April: “The Province does not have a role with the Hydro One Board in the processes of appointment, removal, replacement, and compensation relating to executive officers or over related succession planning.” And even more clearly: “the Province cannot interfere in the management or operations of Hydro One.”
I suspect the commissioners can’t quite believe they are still dealing with this file. At the time of Schmidt’s testimony, the $5.3-billion (U.S.) deal was billed by the Hydro executive team as a “confederation transaction,” which would not result in the consolidation of the two companies (the usual head count reduction and blending of headquarters, etc.), but see Avista retain what Schmidt called “a high degree of control” through its own board and management, remaining headquartered in Spokane.
Understandably, the UTC is now alert to how tricky language can be.
Consumers in the Pacific Northwest have concerns. In announcing the close of public comment a week ago, UTC administrative law judge Dennis Moss sounded weary. “We’ve got four volumes already,” he informed those gathered at the hearing, then wondered whether that would grow to five. Total comments as of the close of business Oct. 23 had reached 448. Those in favour: 13. Those opposed: 365. Undecided: 70.
Remember that the history of Avista, which traces its roots to Washington Water Power Co. and the first generators harnessing the Spokane River in 1886, runs as deep in the psyches of consumers over there as Ontario Hydro runs through the psyches of consumers here.
Avista customers in opposition fear rate hikes, are wary of smart meters, don’t like the idea of a foreign control, are concerned about potential political risks, to name a few. The rate concerns are well-founded, given Premier Ford’s own comments about customers in Ontario struggling to pay their bills.
Here’s William McInerney: “Hydro One’s purchase of Avista is a great deal for (CEO) Scott Morris and his top executives and shareholders. It will be at the expense of all the ratepayers. Hydro One has nothing but problems north of the border. Look at their history.” Here’s Barry Remboldt: “I am a business owner in Spokane, I am animatedly opposed to a Canadian company owning Avistacorp.” And Dianne Schaefer: “Avista is our only power source & it is our rivers that provide that power. Why do we want Canada to dictate how that power is to be used & the cost of that power?”
You get the gist.
Hydro has promised benefits. Rate credits, for one. Home energy audits for 2,000 homes. A one-time $7-million donation to Avista’s charitable foundation. A further $4-million commitment to “low-income weatherization funding.”
One Spokane customer did some math subsequent to a presentation by a Hydro executive: “In the hour-long presentation and question-and-answer session he was unable to articulate any genuine benefit apart from $78 million over a five-year period in refunds to ratepayers, coming out to about a paltry $1.36 a month along with a few other small projects.”
Commissioner Rendahl was sensibly focused on what recourse would be available to ratepayers, or the commission for that matter, should the merger turn out to be a dud. “How can we un-ring a bell?” she asked.
The states of Oregon and Idaho have not yet rendered a decision on the merger. The Montana Public Service Commission voted in favour in June.
Spokane holds the heart of the story. The Washington state commissioners are due to release their decision Dec. 14.
Jennifer Wells is a business columnist based in Toronto. Reach her on email: firstname.lastname@example.org