20180907Staff 17-42 to Avista.pdf

BRANDON KARPEN
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
(208) 334-03s7
IDAHO BAR NO. 7956
RECEIVED
?I}l$ $i:r -7 PH 3: 27
r-, I ..r i'i.l,li"lC'l ;,: , l-lr. i,1i,ii,-lsl0N
Street Address for Express Mail
472W. WASHINGTON
BOISE, IDAHO 83702-5918
Attorney for the Commission Staff
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE JOINT
APPLICATION OF HYDRO ONE LIMITED
AND AVISTA CORPORATION FOR
APPROVAL OF MERGER AGREEMENT
FOURTH PRODUCTION
REQUEST OF THE
COMMISSION STAFF TO
AVISTA CORPORATION
The Staff of the Idaho Public Utilities Commission requests that Avista Corporation
(Company) provide the following documents and information as soon as possible, by FRIDAY,
SEPTEMBER 28,2018.
This Production Request is continuing, and the Company is requested to provide, by way
of supplementary responses, additional documents that it or any person acting on its behalf may
later obtain that will augment the documents produced.
Please provide answers to each question, supporting workpapers that provide detail or are
the source of information used in calculations. The Company is reminded that responses
pursuant to Commission Rules of Procedure must include the name and phone number of the
person preparing the document, and the name, location and phone number of the record holder
and if different the witness who can sponsor the answer at hearing if need be. Reference IDAPA
3t.0t.01.228.
FOURTH PRODUCTION REQUEST
TO AVISTA
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CASE NO. AVU.E-17-09
AVU-G-17-05
1 SEPTEMBER 7,2018
In addition to the written copies provided as response to the questions, please provide all
Excel and electronic files on CD with formulas activated.
REQUEST NO. 17: In its Joint Application, Avista and Hydro One maintained that
Hydro One is not controlled by and functions independently from the government of the
Province of Ontario. However, the newly elected government of the Province of Ontario
removed the CEO and the Board of Directors. Further, Hydro One has agreed to consult with the
Province in future matters of executive compensation. Please explain how these recent
developments align with the claim that Hydro One operates independently and as a separate
entity from the Province of Ontario.
REQUEST NO. 18: The Joint Application states that Hydro One has 15 directors.
Please reconcile with the update filed on August 15,2018, that states that Hydro One's Board of
Directors consists of 10 people and will be increased to 11 people.
REQUEST NO. 19: Please explain the decision to increase the Hydro One Board of
Directors from 10 to I I people. In this explanation, please explain:
a. If this was at the direction of the Province of Ontario.
b. Who or what entity will appoint the additional director.
c. If this additional director is appointed by the Province of Ontario, please identify
the percentage of directors that will be appointed by the Province of Ontario.
Please specify whether this percentage includes or does not include the CEO as a
member of the Board.
REQUEST NO.20: Please explain Hydro One's understanding about why its fifth
largest shareholder did not participate as a member of the Ad Hoc Nominating Committee,
which was tasked with selecting members for the interim Board of Directors.
REQUEST NO. 21: Please identify all Board members who have previously held
positions with or worked for the Province of Ontario. Please provide the name of each board
FOURTH PRODUCTION REQUEST
TO AVISTA 2 SEPTEMBER 7, 2018
member, the position[s] they held with the Province of Ontario, and the amount of time they held
each position.
REQUEST NO.22: While Hydro One and Avista have provided detailed information
on the selection process for the new Board of Directors, far less specificity about the selection
process for the new CEO has been provided. Please describe in detail the Hydro One CEO
selection process, including:
a. Who or what entity directs the process,
b. Identify all steps in the process, and specific which of those steps require input,
participation, and/or approval from the Province of Ontario,
c. The expected timeline for filling the CEO position.
REQUEST NO. 23: Please identify Hydro One's ten largest shareholders, including the
Province of Ontario, and the percentage of Hydro One each shareholder owns.
REQUEST NO.24: The Joint Application states that "As of July 31,2017,the Province
owned 49.9% of Hydro One's shares with the remainder of shares held by private investors.
Based on facts known today and assuming the Proposed Transaction is completed, the Province's
level of ownership of Hydro One will decline to below 45oA," please describe if this continues to
be accurate, including discussion about any agreements regarding the Province of Ontario's
future stake in Hydro One.
REQUEST NO.25: Hydro One and Avista's stock value fell and its credit rating was
downgraded after the CEO and Board of Directors resignations were announced. Please explain
if or how Hydro One's compromised financial position affects its ability to f,rnance the merger.
FOURTH PRODUCTION REQUEST
TO AVISTA 3 SEPTEMBER 7,2018
REQUEST NO. 26: Please explain how the proposed Hydro One rate reduction and
newly compromised financial position might affect the ability of Hydro One to:
a. Operate and maintain Avista operations in Idaho, and
b. Enact the rate credits and contributions stipulated in the settlement agreement.
REQUEST NO. 27: Please provide the date of and an electronic link to Hydro One's
most recent SEC filing.
a. Please explain the drivers or requirements behind the most recent SEC filing.
b. Please identify and explain all material changes from Hydro One's last SEC filing
and its latest SEC filing.
REQUEST NO. 28: Please provide the Governance Agreement signed between the
Province of Ontario and Hydro One on July I I , 20 1 8.
a. Please explain who or what drove the need for the Governance Agreement.
b. Please identify and explain any impact the Governance Agreement will or may
have on Avista's employees.
c. Please identify and explain any impact the Governance Agreement will or may
have on the Merger Agreement between Avista and Hydro One.
d. Please identify and explain any impact the Governance Agreement will or may
have on the Settlement Stipulation signed by parties.
REQUEST NO. 29: Please provide a copy of the Hydro One Accountability Act of
2018. Please identify:
a. The date it became law.
b. Please explain the driving force behind this Act.
c. Please explain how the Act changed the Province of Ontario's relationship with
Hydro One.
d. Please identify and explain any impact the Act will or may have on the Merger
Agreement between Avista and Hydro One.
FOURTH PRODUCTION REQUEST
TO AVISTA 4 SEPTEMBER 7,20I8
Please identify and explain any impact the Act will or may have on the Settlement Stipulation
signed by parties.
REQUEST NO. 30: In its Joint Application, Avista and Hydro One state that "The
Province of Ontario is a shareholder and pursuant to its governance agreement with Hydro One,
it does not hold or exercise any managerial oversight over Hydro One." However, Hydro One's
most recent SEC filing includes the new Governance Agreement which changes Hydro One's
governance and management structure and includes new merger terms for Avista executives.
Please explain how the revised Governance Agreement and merger terms for Avista align with
the claim that the Province of Ontario does not exercise any managerial oversight over Hydro
One.
REQUEST NO. 31: Did the Province of Ontario previously have the ability to remove
or otherwise force the retirement of the CEO and Directors of the Board? Please provide a
detailed explanation. Please explain how the Hydro One Accountability Act, the July 11, 2018,
Governance Agreement, or another recent action relates to this power/authority.
REQUEST NO. 32: Staff understands that this is the second time in 16 years that the
entire Hydro One Board has resigned. Please fully explain the circumstances under which the
Board previously resigned.
REQUEST NO. 33: During the recent political campaign, the newly elected Premier of
Ontario pledged to remove the CEO and Board of Directors at Hydro One and reduce electric
rates by 12 percent.
a. Please confirm when or deny that Hydro One was aware of these campaign
pledges.
b. Please confirm when or deny that Avista was aware of these campaign pledges.
FOURTH PRODUCTION REQUEST
TO AVISTA 5 SEPTEMBER 7,20I8
REQUEST NO. 34: Please explain why Avista and Hydro One did not reveal that
Hydro One and its executive management, executive compensation, and rates were major issues
in the most recent Province of Ontario election.
REQUEST NO. 35: After the election, the new government of the Province of Ontario
stated that it "is committed to reducing residential hydro rates by 12 percent."
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governance-best-practi ces-onterio- goverrunent
a. Please explain in detail the authority held by the Premier and the Province of
Ontario regarding electric rate changes.
b. Please disclose and describe any discussions Hydro One has had with the
Province of Ontario regarding rate changes.
REQUEST NO. 36: Please explain if the newly elected government of the Province of
Ontario supports or opposes Hydro One's acquisition of Avista. Please explain Hydro One's
understanding of the basis for this support or opposition.
REQUEST NO. 37: Please explain if the acquisition of Avista by Hydro One was
intended to provide a revenue stream to supplement Hydro One's constrained ability to raise or
maintain current rates in its service territory.
REQUEST NO. 38: Staff understands that Hydro One has been a perennial political
issue in Ontario and that this situation appears to have become more fraught since Hydro One
pivatization in 2015 and the subsequent significant increase in electric rates. Please explain
how Avista's acquisition by a company repeatedly affected by unstable political circumstances is
in the public interest of Avista's Idaho customers.
REQUEST NO.39: Staff understands that Chapter I I of the North American Free
Trade Agreement (NAFTA) allows investors to petition for private arbitration against a state
FOURTH PRODUCTION REQUEST
TO AVISTA 6 SEPTEMBER 7,2018
based on international trade law. Staff is concerned that the international arbitration could
overrule or impede the Idaho Commission's authority.
a. Please confirm or clarify that Staff s understanding of Chapter I I NAFTA aligns
with Hydro One's understanding.
b. Please confirm or clarify that Staff s understanding of Chapter 11 NAFTA aligns
with Avista's understanding.
c. Please explain Hydro One's understanding of how Chapter 11 NAFTA could
impact Avista's Idaho customers.
d. Please explain Avista's understanding of how Chapter 11 NAFTA could impact
Avista's Idaho customers.
REQUEST NO. 40: Staff understands that NAFTA is currently being re-negotiated and
Canada has yet to sign the new proposed agreement.
a. Please explain Hydro One's understanding about the extent to which the concepts
addressed in Chapter 1l will be included, modified, or removed in the re-
negotiated version of NAFTA.
b. Please explain Avista's understanding about the extent to which the concepts
addressed in Chapter l l will be included, modified, or removed in the re-
negotiated version of NAFTA.
c. Please support your explanations with relevant evidence.
REQUEST NO. 41: Please provide specific examples of ring-fencing provisions
adopted or suggested in other jurisdictions or by Hydro One and Avista in this case that could
insulate Avista's customers in Idaho from the effects of international arbitration.
REQUEST NO. 42: Please provide specific examples of ring-fencing provisions
adopted or suggested in other jurisdictions or by Hydro One and Avista in this case that could
insulate Avista's customers in Idaho from the effects of political, management, or rate changes at
Hydro One.
FOURTH PRODUCTION REQUEST
TO AVISTA 7 SEPTEMBER 7,2018
Dated at Boise, Idaho, this 7+ day of September 2018.
Karpen
i : umisc:prodreq/avue I 7.9_avug 1 7. 5bksd prod req3
FOURTH PRODUCTION REQUEST
TO AVISTA 8 SEPTEMBER 7,2018
CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 7TH DAY OF SEPTEMBER 20T8,
SERVED THE FOREGOING FOURTH PRODUCTION REQUEST OF THE
COMMISSION STAFF TO AVISTA CORPORATION, IN CASE NOS.
AVU-E-I7-09/AVU.G.I7-05, BY E-MAILING AND MAILING A COPY THEREOF,
POSTAGE PREPAID, TO THE FOLLOWING:
DAVID J MEYER
VP & CHIEF COLINSEL
AVISTA CORPORATION
PO BOX3727
SPOKANE W A 99220-3727
E-MAIL:.com
av i stadockets (r?avistacorp. com
ELIZABETH THOMAS
KARI VANDER STOEP
DIRK MIDDENTS
K&L GATES LLP
925 FOURTH AVE STE 29OO
SEATTLE WA 98104-1I58
E-MAIL: liz.com
kari. vanderstoep@kl gates. com
dirk.middents@,kl eates. com
RONALD L WILLIAMS
WILLIAMS BRADBURY
PO BOX 388
BOISE ID 83701
E-MAIL: [e-mail]
ELECTRONIC ONLY
DEAN J MILLER
E-MAIL: [e-mail]
PETER J RICHARDSON
RICHARDSON ADAMS PLLC
5I5 N 27TH STREET
BOISE TD 83702
E-MAIL : [e-mail]
ELECTRONIC ONLY
PATRICK EHRBAR DIR
AVISTA CORPORATION
E-MAIL: [e-mail]
LARRY A CROWLEY
THE ENERGY STRATEGIES INSTITUTE
5549 S CLIFFSEDGE AVENUE
BOISE ID 837I6
E-MAIL: [e-mail]
DR DON READING
6070 HILL ROAD
BOISE ID 83703
E-MAIL: [e-mail]
CERTIFICATE OF SERVICE
ELECTRONIC ONLY
JAMES SCARLETT
HYDRO ONE
E-MAIL: [e-mail]
ELECTRONIC ONLY
CLEARWATER PAPER CORP.
carol.hau gen@clearwaterpaper. com
[e-mail]
i ohn j aco b s@ c learwaterpaper. com
david.wren@ clearwaterpaper. com
nathan. smith@clearwaterpaper. com
BENJAMIN J OTTO
ID CONSERVATION LEAGUE
710 N 6TH STREET
BOISE TD 83702
E-MAIL: [e-mail]
NORMAN M SEMANKO
PARSON BEHLE & LATIMER
8OO W MAIN ST STE I3OO
BOISE ID 83702
E-MAIL: [e-mail]
ec f(E oarsons behl e. com
BRAD M PURDY
ATTORNEY AT LAW
2019 N 17TH STREET
BOISE ID 83702
E-MAIL: bmpurdy@.hotmail.com
DANIELLE FRANCO-MALONE
SCHWERIN CAMPBELL BARNARD
IGLITZIN & LAVITT LLP
18 W MERCER ST STE 4OO
SEATTLE WA 98I19.3971
E-MAIL: [e-mail]
GARRICK L BAXTER, DEPUTY
ID ATTORNEY GENERAL
ID DEPT OF WATER RESOURCES
PO BOX 83720
BOrSE rD 83720-0098
E-MAIL: [e-mail]. gov
SECRE
CERTIFICATE OF SERVICE
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