Hydro One chaos sure to cause jitters over U.S. mega deal
Tossing its CEO and board likely won’t help utility’s already contentious takeover of Avista
Fun quiz — name the speaker:
“Hydro One is not any more vulnerable to political change than any other investor-owned utility in Canada, or the United States for that matter.”
Or: “The province does not have a role with the Hydro One Board in the processes of appointment, removal, replacement and compensation related to executive officers or over related succession planning.”
Or how about: “The province cannot interfere in the management or opera- tions of Hydro One.”
If you guessed Mayo Schmidt, you will understand the mess of confusion in Boise and Spokane and Coeur d’Alene and, heck, a vast swath of the Pacific Northwest now that the CEO of Hydro One is out the door, the board of directors has been tossed, and yet another government in power is promising a new era of accountability and transparency at the utility.
Heard that before? Of course you have.
Bonus points if you guessed that Schmidt offered those quotes in what was meant to be reassuring testimony in April before the Washington Utilities and Transportation Commission.
So yes, as Premier Doug Ford chest thumps over the departure of Schmidt and the board from Hydro One, this column turns its attention yet again south of the border where Hydro One’s acquisition of Avista Corp. had, by mid-June, become even more contentious than it was when we last wrote about it in May.
A technical hearing, previously deemed unnecessary and vacated by the Idaho Public Utilities Commission, has been scheduled for later this month. Heated public hearings in Coeur d’Alene and Sandpoint in midJune saw a robust turnout of disaffected members of the public opposed to the takeover.
Hundreds of complaints — 400 at last count — have been received by the commission. A customer group has been launched and seeks intervener status. “Help us do battle against this foreign takeover!” is the rallying cry of ratepayers.
In petitioning for status before the commission, the group argues that Hydro One has failed to provide sufficient information as to how costs will be allocated to Avista customers, without which the commission can’t possibly determine that there will be no cost-of-service increases to consumers, as has been promised.
All this was before events of this week when Ford, in his baby Trump way, tossed a grenade into the Hydro sandbox and then moved quickly to create wreckage elsewhere.
Remember that the partial privatization gambit for Hydro was to refashion the utility as an integrated transmission and distribution business now in big boy pants, guided by Ed Clark’s advisory council on government assets. “Make Ontario’s assets work better for consumers and taxpayers!” was the government of the day’s rallying cry. Go public, go for growth and make a return to the provincial economy by driving the proceeds into infrastructure investments. Soothe the jitters of Ontarians by pledging that no single investor would own more than 10 per cent of the essential service company and that the province’s stake wouldn’t fall below 40 per cent, at least not initially.
All those decades of Hydro chaos, from governance issues to outsized executive compensation to a lack of transparency throughout, were supposed to be behind us. The acquisition of Avista, announced a year ago as a $5.3-billion (U.S.) all-cash transaction, was the new Hydro’s first big play. Sure there was the acquisition of Haldimand Hydro and Norfolk Power and others. But this big leagues deal would extend Hydro’s customer base through Washington state, northern Idaho, Montana and Oregon. Approval for the takeover is still pending with utility commissions in Oregon, Washington and Idaho.
So already the targeted midAugust approval deadline — and a September close — was looking uncertain.
Opponents in Idaho are hoping the state’s utilities commission will question whether the transaction can be deemed in the public’s interest, which is not precisely defined in state law. Post-merger service rates, the commission’s jurisdiction over Avista after the merger and Hydro One’s “intentions and financial ability” are just a few of the concerns to be addressed in the hearing scheduled for July 23. Then, boom! In commission testimony, Schmidt personally promised the seamless marriage of the two companies, calling the combination a “confederation” as opposed to an integration because Avista would still operate as a stand-alone utility, albeit one wholly owned by Hydro.
The Spokesman-Review, based in Spokane, where Avista is headquartered, says Schmidt was “pivotal” to the deal, which makes sense. In previous profiles, the Kansas-born Schmidt has spoken of his formative corporate years at General Mills and his affinity for the Midwest. According to the Spokesman, when Avista CEO Scott Morris introduced Schmidt to employees at the time of the takeover announcement, he described the acquiring CEO as “a wonderful man who shares our values.”
So whose values are going to run the transaction now?
And how will Avista, which expressed “surprise” at this week’s corporate chaos, reassure its investors that Hydro One is the right partner, confederation or not? Avista wanly offered in a statement that it was monitoring developments.
No doubt Hydro One will be working double-time trying to convince the target company of the promised “orderly transition” of the Hydro board and CEO succession.
No doubt the utilities commissions are wondering how the testimony before them turned out not to match reality.
Whose values are going to run the transaction now? And how will Avista reassure its investors that Hydro One is the right partner?