Idaho regulators deny sale of Avista to Canadian utility

Avista Corp.’s proposed $5.3 billion sale to a Canadian utility took another hit Thursday when a second state moved to block the sale.

The Idaho Public Utilities Commission said Avista’s sale to Toronto-based Hydro One Ltd. would violate a state law preventing the sale of electric utility assets to other governments.

In its 15-page decision, the three-member commission referred to a provision in Idaho code preventing the transfer of assets from a regulated electric utility to an entity that is “owned or controlled, directly or indirectly, by … any other state.”

Commissioners said the meaning of “state” is broad enough to include the province of Ontario, which owns 47 percent of Hydro One’s stock and has significant influence and control over the utility.

Hydro One’s lack of independence “dictates our decision to reject the proposed merger,” according to the order, which was signed by all three commissioners.

“Hydro One is not purely a private, publicly traded corporation,” the commission said. “The management of Hydro One is subject to the Province’s political pressure, legislative power, and special governance agreements. …We cannot approve the proposed transfer of Avista’s assets to Hydro One. ”

Thursday’s action in Idaho follows a similar decision last month by the Washington Utilities and Transportation Commission, which also denied the sale.

In its ruling, the Washington commission said the sale wasn’t in the best interest of Avista or its customers, citing the Ontario premier’s politically motivated actions in July to abruptly remove Hydro One’s board of directors and its chief executive officer.

Several analysts concluded the sale was likely dead after the Washington ruling, although the companies have asked for a reconsideration. Avista and Hydro One face a difficult path for “rescuing this deal,” Rob Rains, senior energy analyst for Washington Analysis LLC, wrote in a research note last month.

For the sale to go through, public utility commissions in each of five states where Avista has operations must approve it. Montana and Alaska commissions approved the sale last year, and Oregon is still deliberating.

The Idaho commission received more than 600 public comments on the sale – nearly all in opposition. Some opponents formed the Avista Customer Group and hired an attorney to fight the sale.

“Avista customers have feared from the beginning that foreign government control – exercised from Toronto, Canada – could result in big rate increases and other adverse impacts to Avista customers, with no real avenue for recourse,” Norman Semanko, Avista Customer Group’s attorney, said in a statement. “The Commission correctly recognized that Idaho law forbids this kind of control over electric utility services by a foreign government.”

Avista Customer Group was “the only party who made this argument to the Commission and we are glad to see that it prevailed,” Semanko said.

In testimony to the Idaho commission, Avista’s attorneys argued the law preventing the transfer of utility assets to a government was intended to block public utility districts in Washington from acquiring Avista’s Idaho properties during the 1950s.

Avista and Hydro One can ask the commission to reconsider the decision, as they did in Washington. The companies have a Jan. 24 deadline for making that request. If a request for reconsideration is turned down, the parties also can appeal to Idaho’s Supreme Court.

The two companies said in a joint statement they were disappointed by Thursday’s ruling. They indicated they would review the order in detail before deciding how to proceed.