No CEO, no Hydro One merger, says U.S. customer group
Organization argues no progress can be made in deal until a new chief executive is hired
Can you consummate a multibilliondollar merger in the absence of a CEO? In one word, no.
That’s a distillation of the submission made Thursday by the Avista Customer Group to the Idaho Public Utilities Commission.
The customer group, you may recall, has been a burr in the side of Hydro One in its efforts to merge with Avista Corp., the U.S. utility that has operations in Idaho, Washington State, Montana, Alaska and Oregon. Representing an association of ratepayers, taxpayers and concerned citizens, the association, which was granted intervener status by the Idaho commission, remains unconvinced of the benefits of the $5.3billion (U.S.) merger, and that was before Premier Doug Ford blew up the Hydro One board and bade farewell to CEO Mayo Schmidt. The departed CEO, it’s important to recall, was the chief architect of the deal.
Idaho consumers continue to weigh in. Here’s an email to the utilities commission earlier this month: “I am appalled that anyone in control would even think of turning over control of our local utility company to a foreign entity!! This makes NO SENSE. Please keep this utility company that provides service for AMERICANS IN AMERICAN CONTROL. Honestly what is this world coming to?”
Honestly, it’s process, not emotion, that matters now. The Ford govern- ment moved swiftly to recast the Hydro One board, pressured no doubt by a commission order to provide a status update on the utility’s governance on Aug. 15.
The new board was announced Aug. 14, but as yet no new chief executive officer has been named. Hydro One’s chief financial officer, Paul Dobson, serves as acting CEO. But Dobson arrived at Hydro just this past March, eight months after the merger was announced, and thus was not participant in the takeover’s architecture nor its planned financing.
The Avista Customer Group argues that no next steps can be taken until a new board and CEO are in place. The commission seemed to indicate as much a month ago when it postponed a technical hearing that had been sched- uled to examine such matters as postmerger service rates. “We find it reasonable to postpone the technical hearing until a new CEO and executive board are in place at Hydro One,” the commission said in late July.
But Hydro is operating under government dictate to cut Hydro One salaries, which can’t make the courting of a top executive any easier. Who’s in charge? is a question any prospective CEO might ask, and U.S. regulators for that matter.
The once powerful Mayo Schmidt testified that the province has no role with the Hydro One board “in the processes of appointment, removal, replacement, and compensation relating to executive officers or over related succession planning.”
Other utility commissions have been more accommodating of the urgent desire of Hydro One and Avista to advance the deal to completion, which is not to suggest that the path ahead appears any easier. In early August, Washington’s Utilities and Transportation Commission released a new procedural schedule, beginning with supplemental testimony set for early September, followed by rebuttal testimony from the two companies in mid October.
The full evidentiary hearing is scheduled for Oct. 23. Additional evidence and comments from the public are welcome. In other words, this ain’t going to end quickly. Noted the commission: “It is unclear how these developments” — read, chaos — “may bear on our ongoing consideration of the proposed transaction.”
The Public Utility Commission of Oregon has also set a new hearing schedule, which takes hearings into mid-November, with a commission decision anticipated in mid-December.
Which takes us back to the bun fight in Idaho. Hydro One and Avista complain that the customer group is being obstructionist, stating in a filing that the group “refused to confer with the parties to establish a proposed procedural schedule.” After all, the search for a new CEO “may take some time.” One can feel the seasons change as one reads that.
There’s a slight note of panic in the communication. If Idaho fails to move ahead, getting a transaction sealed this calendar year is at risk. That argument may not play well with the regulators, who must consider whether the merger, which is really a takeover, is in the public interest. (Avista would stand as an indirect subsidiary of its new Hydro One parent.) In a conference call with analysts in mid-August, Paul Dobson set midDecember as the targeted closing date.
In their submission to the Idaho commission, the two utilities manage to make the issue of the CEO sound like an irrelevancy. The summation of their argument goes like this: “Hydro One and Avista submit that the Commission can consider and rule on Hydro One and Avista’s merger application prior to the selection of the new Hydro One CEO because the Hydro One board established Hydro One’s policies and the strategic direction of Hydro One’s management.”
We’re talking about a board that has been in place for about 10 seconds.
Avista and Hydro One have requested that a new schedule be put in place by Thursday of this week.