20180126Avista to Staff_DR_140(H1).docx

HYDRO ONE LIMITED
RESPONSE TO REQUEST FOR INFORMATION
JURISDICTION:OREGONDATE PREPARED:10/11/2017
CASE NO.:UM 1897WITNESS:Mayo Schmidt
REQUESTER:PUC StaffRESPONDER: Adele PantusaTYPE:Data RequestDEPT: Law
REQUEST NO.:Staff – 140(H1)TELEPHONE:[phone]EMAIL:[e-mail]
REQUEST: Please explain how Hydro One plans to recover the cost of acquiring Avista.RESPONSE:Hydro One respectfully submits that it does not expect to recover the costs of acquiring Avista. Hydro One views this acquisition as an investment that will benefit all stakeholders in the following ways.
Following closing of the merger, Avista’s customers and the communities Avista serves will see little or no change in Avista’s operations. Avista will maintain its existing corporate headquarters in Spokane, Washington, and will continue to operate as a standalone utility in Washington, Oregon, Idaho, and Montana. Avista’s subsidiary, AEL&P, will continue to operate as a standalone utility in Alaska. Avista will maintain office locations throughout its service areas, continue to operate under the same Avista name and seek to retain its existing employees and management team. All of these features together with other provisions embedded within the Merger Agreement are designed to ensure that Avista’s customers will continue to receive the service they have come to expect from a company that has been a Pacific Northwest presence for more than 100 years. Avista will continue to have a local Board of Directors consisting primarily of either board members chosen by Avista, and/or members that reside in the Pacific Northwest. Moreover, the communities Avista serves will see increased charitable contributions and a continuation of the strong support Avista provides in economic development and innovation.
Through this unique arrangement with Hydro One, Avista’s customers can receive the benefits of scale that come with joining a larger organization while also avoiding the risk of a potential subsequent acquisition by another party that may not share Avista’s culture and values. Avista and Hydro One believe this preservation of Avista’s name and brand, its headquarters, its employees, its culture and its way of doing business is important to Avista’s customers, in that customers can continue to expect and experience reliable service and a high level of customer satisfaction.
Customers will see immediate financial benefits in the form of proposed retail rate credits beginning upon the closing of the merger. In addition, over time the merger will provide increased opportunities for innovation, research and development, and efficiencies by extending the use of technology, best practices, and business processes over a broader customer base and a broader set of infrastructure between the two companies. These immediate and longer-term benefits to Avista’s customers are benefits that will otherwise not occur absent the merger.
The merger with Hydro One will allow Avista and its customers to benefit from being part of a larger organization (the benefits of scale), while at the same time preserving local control of Avista, its commitment to community involvement, and the retention of Avista’s employees and management team, as well as its culture and its way of doing business.
Through consolidation, larger utilities have the opportunity to spread costs, especially the costs of new technology, over a broader customer base and a broader set of infrastructure, which inures to the benefit of customers.
Combined, Avista and Hydro One will become more competitive by creating scale and cost efficiencies over time. Hydro One and Avista intend to continue investing in innovation. Together, with nearly two million customers, they can spread these costs over a larger base.
Finally, Avista will not recover the following costs in rates: (i) legal and financial advisory fees associated with the merger; (ii) the acquisition premium; (iii) any senior executive compensation tied to a change of control of Avista; and (iv) any other costs directly related to the merger.