20170914Schmidt Direct.pdf

ON BEIIALE OE AVISTA CORPORATION
DAVID J. MEYER
VICE PRESIDENT AND CH]EF COUNSEL FOR
REGULATORY & GOVERNMENTAL AEEAIRS
P.O. BOX 3727
747I EAST MISSION AVENUE
SPOKANE, VIASHTNGTON 99220-3121
TELEPHoNE: [phone]
FACSIMILE: [phone]
DAV] D. MEYERGAV] STACORP . COM
ON BETIALE OE HYDRO ONE IJIMITED
ELIZABETH THOMAS, PARTNER
KAR] VANDER STOEP, PARTNER
K&L GATES LLP
925 EOURTH AVENUE, SUITE 2900
SEATTLE, WA 981014-1158
TELEPHONE: [phone]
FACSIMILE: [phone]
LI Z . THOMASGKLGATES . COM
KARI . VANDERSTOEPGKLGATES . COM
BEFORE THE IDAHO PT'BLIC UTILITIES COMMISSION
IN THE MATTER OF THE JO]NT
APPLICATION OF HYDRO ONE LIM]TED
(ACTING THROUGH ITS IND]RECT
SUBSIDIARY, OLYMPUS EQU]TY LLC)
AND
AV]STA CORPORATION
EOR AN ORDER AUTHORIZING PROPOSED
TRANSACT]ON
CASE
CASE
NO.
NO.
AVU-E-17-O9
AVU-G-17-O)-
DIRECT TESTIMONY
OE
MAYO M.SCHMIDT
FOR HYDRO ONE L]M]TED
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I INTRODUCTION
A. Please state your na.me and business address.
A. My name is Mayo Schmidt, and my business address is
483 Bay Street, South Tower, Bth Eloor Reception, Toronto,
Ontario M5G 2P5.
A. By whom are you employed and in what capacity?
A. I am the President and Chief Executive Officer
(CEO) r ds well as a Director, of both Hydro One Limited
("Hydro One") and Hydro One fnc. Hydro One is a major North
10 American efectric transmission and distribution utility,
11 serving more than 1.3 mj-llion residential and business
L2 customers in Ontario, Canada
13 9. Please sununarize your education and business
L4 e:rtrrerience.
15 A. I received a B.B.A. from Vflashburn University, and
L6 an honorary Doctorate of Commerce from Vfashburn University
l1 f also have followed advanced
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University of Nebraska, and
outlining my background prior
No. 2, Schedufe 1.
study courses at U.C.L.A., the
Harvard University. My r6sum6
to joi-ning Hydro One is Exhibj-t
27 A. Wtrat position wiJ.J. you hoJ.d with Avista Corporation
22 ("Avista") after the transaction is completed?
23 A. I will be a member of the post-merger Avista Board
24 of Directors. I will continue to be President and CEO of
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Hydro One
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Hydro One.
Sumrnary gE leElillgqy
A. Iilhat is the pur?ose of your direct testimony in this
proceeding?
A. The purpose of my testimony is:
. to descri-be Hydro One and its affiliates,
. to describe the transaction,
to explain the reasons for Hydro One's proposed
purchase of Avista,
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a to describe
transaction is
Avista's
completed,
operations
and
once the
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o to demonstrate that the transaction wiII benefit
Avista's customers, employees and communities.
A. PJ.ease sr:marize your testimony.
A. My testimony demonstrates that Hydro One is wefl
suited to serve as the parent company of Avista. f al-so
explain how the transaction, if approved by state and federal
regulators, will- result in Avista's regulated electric
business becoming a new, ring-fenced, business platform under
Hydro One (the "Proposed Transaction")
My testimony explains the reasons for Hydro One's
proposed purchase of Avista: (1) growth, (2) diversificatj-on
both in terms of jurisdictions and service areas, (3)
increased scale and benefits that come from being a larger
player in the utility industry, and (4) cost savings over the
longer term.
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Hydro One
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My testimony provides evidence of the benefits to
Avista's customers, communities, and employees if the
Proposed Transaction is approved. In my testimony and that
of other Hydro One witnesses, we are offering dozens of
commitments to the benefit of the customers and communities
served by Avista.
Specifically, the benefits of the Proposed Transaction
incfude the fol-Iowing Hydro One and Avista commitments, among
others, which I detaj-I later in my testimony:
a Avista wilI provide Rate Credits totaling $31.5
mil-l-ion to its electric and natural gas customers
in Washington, Idaho, and Oregon for 10 years
beginning at the time the merger closes;
a The Proposed Transaction wifl preserve the
authority of the Avista Corporation board to
continue to make operati-ona1 decisions in the
ordinary course of business. These decisions
also include funding for innovation and economic
development j-n the communities served by Avista;
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A substanti-al contribution wilI be made
Avista's charitable foundation and programs,'
to
and
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Over time, both Avista's and Hydro One's
customers wiIl benefit from their utifities'
increased purchasing power, sharing of best
practices and economies of scale.
26 fn addition to the foregoing commitments, customers can
21 expect benefits that will result from the financial and
28 business stability associated with North American ownership
29 of Avista by Ontario's largest regulated transmission and
30 distribution company.
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Hydro One
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a. I{tro else will be providing testimony on behalf of
Hydro One?
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A. Hydro One wil-l- also of f er testimony f rom the
fol-lowj-ng witnesses :
Chris Lopez, Senior Vice President of Finance of
Hydro One, will describe the Proposed
Transaction; discuss Hydro One's corporate
structure and where Avista wilf resi-de within
that structure; discuss Hydro One's capital
structure,' describe Hydro One' s f inancing f or ,and the mechanics of , the Proposed Transaction,'
describe Avista's post-transaction access Lo
capital; enumerate certain financial,
structural, and ring-fencing commitments that
Hydro One and Avista are proposing as part of
their request for approval of the Proposed
Transaction; and describe the Rate Credits
included as part of the Proposed Transaction.
a Ferio PugIiese, Executive Vice President,
Customer Care and Corporate Affairs at Hydro One
Networks Inc., wiIl describe Hydro One Networks'
customer service philosophy and supporti-ng
programs; describe Hydro One Networks' customer
service record and improved practices that have
been deployed; describe Hydro One Networks'
experience and priorities related to providing
efectric service to the rural and remote regions
of Ontario, including Eirst Nations Communities,'
and discuss opportunities for Hydro One and
Avista to collaborate on enhancing and improving
service to the customers of Hydro One and Avista.
32 A tabl-e of contents of my testimony is as follows:
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Hydro One
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Description Paqe1
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I.
II.
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IV.
V.
vr.
INTRODUCT ]ON
HYDRO ONE AND ]TS BUSINESS ACTIVITIES
THE PROPOSED TRANSACT]ON...........
HYDRO ONE'S REASONS EOR ACQUIR]NG AVISTA....
AVTSTA' S POST-TRANSACTION OPERAT]ONS
PROPOSED TRANSACT]ON BENEFITS
A. Are you sponsoring exhibits with your testinony?
A. Yes. Attached to my testimony are:
a Exhibit No. 2, Schedufe 1: Mayo Schmidt R6sum6,
and
a Exhibit No. 2, Schedule 2: Exhibits A and B to
Merger Agreement ("Delegation of Authority") .
II.HYDRO ONE AI.ID ITS BUSINESS ACTMTIES
9. Wtro is Hydro One and what areas does it serve?
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79 transmission and distribution utility headquartered in
20 Toronto, Ontario, Canada.l Through its subsidiaries, Hydro
27 One provides electric distribution service to more than 1.3
22 million retail end-use customers, as welf as electric
23 transmission service to many Iocal distribution companies and
A. Hydro One is an investor-owned electric
Please see Appendix 9 for j-dentification of the officers, Executive
Leadership Team and SVP of Flnance of Hydro One.
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Hydro One
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large industrial customers. We have approximately 5r400 fulI-
time employees and 3r 300 casual and temporary employees (not
includi-ng external contractors). Hydro One has over C$6.5
bil-Iion in annual revenues and approximately C914 billion in
markeL capitalization.
A. Please e:q>Iaj.n the business activities of Hydro
One.
A. Hydro One was established in 7906 as the Ontario-
owned Hydro-EIectric Power Commission of Ontarj-o (Iater
renamed Ontario Hydro). Until- 2075, Hydro One was owned by
the Province of Ontario. Today, Hydro One is a public company
traded on the Toronto Stock Exchange under the ticker symbol
B
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13 "H." Hydro One is the sole owner of Hydro One
sole shareholder
Inc. , which,
of two rate-among other things, is the
regulated businesses: Hydro One Networks Tnc. and Hydro One
businesses16 Remote Communities Inc. These rate-regu1ated
71 produce approximately 9BU of Hydro One Limited's revenue.
18 Hydro One also is the sole indirect owner of Hydro One Telecom
19 Inc., which is not regulated by the Ontario Energy Board and
20 is registered with the Canadj-an Radio-televi-sion and
2I Telecommunications Commission as a non-dominant, facilities-
22 based telecommunications carrier. The following corporate
23 orqanLzational chart depicts these rel-ationships:
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Hydro One
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Illustration No. 1:
Current Corporate Structure
The diagram below depicts the current relationship of Hydro One Limited and its primary
operatins subsidiaries that are referenced in the Joint Application.
Public Company
(TSX: H)
too%tooo/.
Public Debt lssuer
LOO%too%
10 Rate Regulated Businesses
(98% of Revenues)
Non-Rate-Regulated Business
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12 A. PJ.ease discuss the restructuring of Ontario Hydro
13 that Ied to the creation of Hydro One Inc.
L4 A. f n 1-999 , Ontario Hydro was restructurea into f ive
15 separate entities, including Hydro One Inc. as the successor
76 to its transmission and distribution business, and Ontario
l1 Power Generation Inc., as the successor to its generation
18 business. Hydro One Inc., Hydro One's wholly-owned
19 subsidiary, was incorporated on December 7, 1998 under the
20 Business Corporations Act (Ontario) as a separate corporation
27 providing transmission and distribution services, with the
22 Province of Ontario as its sole shareholder. Hydro One was
23 incorporated by the Province of Ontarj-o on August 31, 201-5,
24 under the Business Corporations Act (Ontario). On October
Schmidt, Di
Hydro One
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Hydro One Limited
Hydro One lnc.2486267 Ontario lnc.
Hydro One Networks
lnc.
Hydro One Remote
Communities lnc.
Hydro One Telecom
lnc.
1 30, 2015, Hydro One's articles of incorporatj-on were amended
2 Lo authorize the creation of an unl-imited number of Seri-es 1
3 preferred shares and an unlimited number of Series 2 preferred
4 shares, with the Series 1 preferred shares to be issued to
5 the Province. On October 31, 2075, a1I of the issued and
6 outstanding shares of Hydro One fnc. were acquired by Hydro
7 One from the Province in exchange for the issuance to the
B Provj-nce of common shares and Series 1 preferred shares of
9 Hydro One. On November 4, 2075, the articles of Hydro One
10 were amended to author:-ze the consolidatj-on of its outstanding
1l- common shares such that 595,000r 000 common shares of Hydro
72 One were issued and outstanding. The preferred shares continue
13 to be outstanding. On November 5, 2075, Hydro One completed
14 its initial- public offering on the Toronto Stock Exchange by
15 way of secondary offering of common shares by the Province of
76 Ontario, with the goal that, over time, approximately 60% of
L1 Hydro One would be hefd by private investors.
18 A. What is the current ownership interest of the
19 Province in Hydro One?
20 A. As of July 31, 20L'7, the Province owned 49.92 of
2I Hydro One's shares with the remainder of shares hel-d by
22 private investors. Based on facts known today and assuming
23 the Proposed Transaction is completed, the Province's leveI
24 of ownership of Hydro One will decline to below 45%. In
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1 addition, the Ontario ETectricity Act, 7998 restricts the
2 Province from selling voting securities (including conrmon
3 shares of Hydro One) if it would own l-ess than 40% of the
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outstanding number of voting securities of that class or
If as a result of the issuance ofseries after the sale.
additional voting securities of any cl-ass or series by Hydro
One, the Province would own less than 40% of the outstanding
number of voting securities of that class or series, then the
Province shall-, subject to certain requirements, take steps
to acquire as many voting securities of that class or series
of voting securities as are necessary to increase the
Province's ownership to not fess than 40% of the outstanding
number of voting securities of that class or series.
In order to assist the Provj-nce j-n meeting its ownership
obligations under the Electricity Act, 7998, under the
governance agreement with the Province, Hydro One has granted
the Province a pre-emptive right to subscribe for and purchase
up to 45% of any proposed issuance by Hydro One of voting
securities or securities that are convertible or exchangeable
into voting securities (other than certain specifi-ed excluded
issuances). Any offered securities not subscribed for and
purchased by the Province pursuant to its pre-emptive right
may be issued to any other person pursuant to the proposed
offering.
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Hydro One
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1 Over the past two years, the Province of Ontario has
2 divested a majority stake in Hydro One. In November 2015,
3 Hydro One debuted on the Toronto Stock Exchange with a 15%
4 initial public offering (IPO by way of secondary offering of
5 approximately 15% of the issued and outstanding common shares,
6 followed by subsequent secondary offerings of the issued and
7 outstanding shares in April 2076 (approximately 15%) and May
8 2Ol1 (approximately 202) ). Hydro One is now governed by an
9 independent board, other than myself as CEO, and a governance
10 agreement that ensures autonomous commercial- operations, with
11 the Province of Ontario as an investor and not a manager.
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A. Does the Province of Ontario's continued ownership
of Hydro One stock mean that Hydro One's business and
operations are controlled by the provincial grovernment?
A. No. The Province of Ontario is a shareholder and
pursuant to its governance agreement with Hydro One it does
not hold or exercise any manageri-al oversight over Hydro One.
Of Hydro One's 15 directors, all- are independent of the
Provj-nce within the meaning of Canadian securities Iaws, and,
with the exception of the President and CEO, al-I of Hydro
One's directors are independent of Hydro One. The governance
agreement and Hydro One's independent board ensure that Hydro
One's business and operations are completely independent from
the government of the Province of Ontario.
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Hydro One' s Transmission Business:
A. Please e:qrand on the nature of Hydro One's regulated
transmission business .
A.
owning,
which
Hydro One's
operating and
accounts for
transmission business consists of
maintaining its transmission system,
approximately 9BZ of Ontario's
transmj-ssion capacity. Hydro One's transmission business is
a rate-regulated business that receives revenues from
charging transmission rates approved by the OEB. Hydro One's
transmission business accounted for approximately 51% of
Hydro One' s total- assets on December 31, 201,6, and
approximately 51% of its total revenues, net of purchased
power, j-n 20L6. The following map depicts the transmission
network:
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1 I].Iustration No. 2
Electricity Transmission System Map
Hydro One Networks, as depicted in lllustration No. 2 above,
is invol-ved in the planning, construction, operation, and
maintenance of our transmission and distribution network. Our
transmission system carries electricity from generating
stations to l-ocal- distribution companies and large industrial-
customers through our high-voltage network of transformer
stations, transmissi-on towers and wires. Through its wholly-
owned subsidiary, Hydro One Inc., Hydro One owns and operates
9Bt of the transmissj-on system in Ontario with over 30,000 km
of high-voltage transmj-ssion l-ines (approximately L9,000
mil-es) and an approximately 123,000 circuit km (approximately
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11,000 miles) of low-voltage distribution network. The
Company's transmission system is interconnected to systems in
Manitoba, Michigan, Minnesota, New York and Quebec and is part
of the North Ameri-can electrici-ty grid's Eastern
Interconnection .
AII of Hydro One's transmission business is carried out
by its whol1y-owned subsidiary Hydro One Inc., through its
whoIly-owned subsidj-ary Hydro One Networks fnc. and through
other whoJ-Iy-owned subsidiaries of Hydro One Inc. Hydro One's
distributj-on system delivers electricity at lower voltages to
homes, farms and businesses through our network of poles and
power lines, mostly in rural areas.
Hydro One's core competency rests with its construction
and operation of its significant transmission and
distribution system. In particular, Hydro One has deep
experience with buildj-ng transmission and distribution,
partj-cularly j-n ruraf and remote areas. We have a helicopter
fleet with expertise in constructing and maintaining our
transmission system. We also have significant development
20 experience, having designed and built substantially afI of
Iarge portion of its
the Bruce to MiIton
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distribution system.
transmission project,
project in Ontario
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the Iargest transmission infrastructure
in over 20 years. It involved the
system and a
This includes
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construction of approximately 700 transmission towers and 180
km (approximately 110 mifes) of double circuit lines. More
recentlyr we were se.l-ected to develop the Northwest Bulk
transmission line, another large scale transmission project
that if approved by the Ontario Energy Board, would reinforce
the connection between Thunder Bay and Dryden (a dj-stance of
approximately 1300 km or 800 miles).
A. You mentioned that Hydro One's transmission system
is interconnected to systems in l{anitoba, Michigan,
Minnesota, New York and Quebec and is part of the North
American electricity grid's Eastern Interconnection. Can you
describe in further detail Hydro One's interconnections with
utilities in the United States?
A. Hydro One has a number of j-nterconnections with the
states of Michigan and New York that provide for a significant
transfer of power between Ontario and the U.S. With Michigan,
there are 4 tie Iines, three at 230kV and one at 345kV.
Collectively these interties provide a transfer capability of
approximately 1r700 MW. With New York, there are 6 tie lines,
four at 230kV and two at 345kV. Coll-ectively these interties
provide a transfer capability of approximately 2,000 MW. The
ability to exchange significant amounts of electricity with
other jurisdictions facilitates a more competi-tive
marketplace in both Ontario and the U.S.
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Hydro One
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1 These interties al-so connect Ontario to a larger North
2 American system known as the Eastern Interconnection. The
3 Eastern Interconnection is a contiguous electricity
4 transmission system that extends from Manitoba to Florida and
5 from east of the Rocky Mountains to the North American east
6 coast. Being part of the Eastern Interconnection provides
7 benefits to Ontario, such as greater security and stability
B for Ontario's power system and emergency support when there
9 are generati-on constraints or shortages in Ontario. fn a
10 reciprocal manner, Ontario can provide support to other
11 jurisdictions in the Eastern Interconnection.
72 A. Please provide sorre insight into Hydro One's
13 philosophy regarding operations of transmission and
14 distribution facilities.
15 A. Hydro One Inc. is a pure-play electric transmission
76 and distribution utility. As a result, we are highly focused
71 on ensuring that we maintain and expand our transmission and
1B distribution systems to ensure our customers receive the best
19 possible service. Between 2077 and 2021, we are planning
20 projects that are intended to renew and modern:. ze the grid,
27 incl-udinq upgrading and replacing infrastructure nearing the
22 end of its lifespan, with a corresponding projected capital
23 investment of approximately $9.7 biIIion.
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A. PJ.ease relate Hydro One's recent experience with
maintaining and upgrading its transmission system
A. Two recent medium-scale capital projects are
Hydro One makes in itsrepresentative of the investments
transmission system:
Clarington Transmission Station: This $261 mil-11on
project consists of two 75OMVA, 500/230 kV transformers
and associated termination facilities. The Clarington
Transmission Station wilf connect Hydro One's bulk
transmission network to Eastern Ontario upon
retirement of the Pickering Nuclear Generation
Station. The station's anticipated in-service date is
20L8.
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Richview Transmission Station: This $103 million
project replaces end-of-life equipment at the Richview
Transformer Station to ensure secure and reliabfe power
supply to the City of Toronto and surrounding
communities. The anticipated in-service date is 2019.
19 Hydro One's Distribution :
dro One's distribution business consists of owning,20 Hy
27 operating and maintaining its distribution system. Hydro
22 One's distribution system is the largest in Ontario, and
23 principally serves rural communities. Hydro One's
24 distribution business is a rate-regulated business that
25 receives revenues by charging distribution rates that are
26 approved by the OEB. Hydro One's distribution business
21 accounted for approximately 31% of its total assets on
28 December 37, 2076, and approximately 412 of its total
29' revenues, net of purchased power, in 2076. The following
30 map depicts the distribution footprint of Hydro One:
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Hydro One
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I].].ustration No. 3
EJ.ectricity Distribution Snstem I'Iap
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74 Hydro One has more than 1.3 mil-Iion end-use customers,
and has deployed smart meters to nearly aII of its customers.
Hydro One has more than 10 years of experience working with
automated metering infrastructure ("AMf," also known as smart
meters). As part of its industry leadership in the deployment
of smart meters, Hydro One received the Utllities Telecom
Council Apex Award for demonstrating excellence and
innovation in developj-ng telecommunications solutions for
Hydro One's rural utility Smart Grid Project.
A. Given Hydro One's dispersed servicc! area throughout
Ontario, what is its e:<trrerienee in stor:a recovery efforts?
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Hydro One
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Dirrib.nix
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A. Hydro One has developed an award-winning team
responsible for speedy storm recovery. Indeed, Hydro One
prides itsel-f in having a longstanding history of responding
to emergencies. We are an active member in the Edj-son
Electric Institute Mutual Aid Agreement and are often caffed
upon to assist with storm restoration efforts j-n the U.S. fn
the past, Hydro One has sent crews to Massachusetts, Michigan,
Fl-or j-da, Ohio, Vermont, Washington, D. C. , and the Carolinas .
In July 2072, Hydro One dispatched 200 employees to
Washington, Baltimore and Vj-rginia afLer a devastating wind
storm knocked out power to more than three miflion homes and
businesses. A few months l-ater, in November 2072t 225 Hydro
One employees travel-l-ed to Long Island, N. Y. , to assist in
the Hurricane Sandy restoration efforts. Hydro One was
awarded EEI's prestigious Emergency Assistance Award for
supporting the June 2072 Mid-Atlantj-c and Midwest derecho and
Hurrj-cane Sandy recovery efforts.
9. Does llydro One own or operate any generation assets?
A. As explained further below, Hydro One Networks Inc.
and Hydro One Remote Communities Inc. are two regulated
subsidiaries. The largest, Hydro One Networks, does not own
or operate any generation assets; it is so1ely a transmission
and distribution utility. Hydro One Remote Communities fnc.
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Hydro One
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1 owns a de minimis portfolio of generation assets to serve
2 remote communities in Ontario.2
3 9. P1ease describe Hydro One Remote Cormrunities Ine.
4 and Hydro One Telecon Inc.
5 A. Hydro One Remote Communities Inc. is another
6 regulated subsidi-ary of Hydro One. Through Hydro One Remote
7 Communities Inc., Hydro One operates and maj-ntains the
B generation and distribution assets used to supply electricity
9 to approximately 21 communities across northern Ontario that.
10 are not connected to the province's electri-city grid, 15 of
11 which are First Nations reserves.
12 Hydro One Tel-ecom fnc. is an indirect subsidiary of Hydro
13 One that markets dark and lit fiber optic capacity to
14 telecommunications carriers and commerciaf customers. This
15 business, which is not regulated by the Ontario Energy Board,
76 generated more than $85 mil1ion in revenue in 20!6. Hydro
Ll One Telecom leverages Hydro One's network fiber assets used
18 to monitor and manage power grid circuitry. Hydro One
19 Telecom's customers include data centers, cloud service
20 providers, enterprises, internet service providers (ISPs),
2l other telcos and public sector entities.
2 Hydro One Remote Communities has a maximum generation capacity of 31.6
MW.
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A. Wtrat previous acquisitions has
undertaken in the energy industry?
A. As the largest distributor in
has been an active consolidator of
companies ("LDCs") By the early 2000s,
BB individual LDCs in Ontario, which
Hydro One Limited
Ontario, Hydro One
local- distribution
10
integrated into Hydro One's distribution
Hydro One acquired
were subsequently
business.3 More
recently, w€ strengthened our capabilities to acquire and
integrate LDCs, thereby positioning Hydro One for future
earnings growth having completed the acquisitions of
Woodstock Hydro Services fnc. (October 2075), Haldimand
County Hydro (June 2015), and Norfolk Power (August 2014) .
In 2076r w€ acquired Great Lakes Power Transmission for
approximately $370 million, increasing Hydro one's
transmission market share in Ontario to 98%.
A. Please discuss Hydro One's e:<tr>erience with energ'y
efficiency programs and Dernand Side I'tanagement (DSM)
progrErms.
A. Hydro One currently provides Conservation and
Demand Management (CDM) programs, covering aI1 of its customer
segments; from residential to agricul-ture and small- business
to Iarge industrial. Employing online, self-serve tools and
3 With the exception of Hydro One Brampton Networks fnc., which was
operated as a stand-al-one entity.
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Hydro One
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in field tablet enrollment processes, Hydro One has endeavored
to make participation in its CDM programs effortless and
seamless. Endeavoring to promote local business development
in the many communities that Hydro One serves, one such
program employs over 15 0 Iocal- el-ectrical- contracting
companies working in our communities. One CDM program is the
Small Business Lighting Program. This direct
has retrofitted over 39,000 businesses since
instafl program
its inceptj-on in
bilI savi-ngs
customers.
2009, and generates over $24 miffion in annual
10 for participating Hydro One smalI business
11 Overall, conservation and demand management programs have
saved approximately 395 Giga-Watt hours.
A. What has been the oqrerience of Hydro One regarding
environmental s tewardship?
A. Hydro One is one of only four utilities in Canada
to achieve the Sustainabl-e Energy Company designation from
the Canadian Electrical Association. Hydro One transmits and
distributes some of the cleanest electrical power in North
America. VrIe are committed to managing our facilities and
operatj-ons through a risk-based approach that avoids and,/or
minimizes our impact on the environment and supports ecosystem
protection and conservation of biological diversity. In
addition, w€ have taken steps to mitigate greenhouse gas
emissj-ons from our facilities and operations and adapt to the
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Hydro One
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adverse effects of climate change on electrici-ty
infrastructure.
Given the scale of our operations, and in particul-ar the
size of our transmission system, we are keenly aware of our
responsibility to help build a low carbon economy. We do this
by supporting the provincj-al and federal governments as they
address climate change, by preserving IocaI habitats and
protecting biodiversity, and by continuously }ooking for ways
to reduce our own carbon footprint.
Our operations are highly regulated from an
environmental perspectj-ve. There are financial and
reputational risks associated with the safe transportation,
storage and disposal of waste and polychlorinated biphenyl
(PCBs). SimiIarly, preserving and protecting Iocal species at
risk, managing potential 1and contaminations, responding to
spills and managing greenhouse gas emissions are al-1 critical-
aspects of our environmental responsibility mandate.
To assess and mitigate these rj-sks, Hydro One has an
integrated Health, Safety, and Environmental Management
System (HSEMS) that is a1i-gned with the ISO 14001
Environmental Management Systems framework. Each line of
business at Hydro One is expected to identify high
environmental risks in its area of operation and assign teams
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Hydro One
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1 As the owner of thousands of kilometers of transmission
2 gri-d corridor fands in Ontario, Hydro One is particularly
3 focused on managing these corridor Iands to ensure habitat
4 preservation and protection of species at risk. Hydro One uses
5 a multj-faceted approach to biodiversity management, combining
6 regulatory requirements with government priorities wherever
7 possible. Our Biodiversity Advisory Committee (BAC) has
B representatives from relevant l-ines of business and is
9 mandated to develop, review and recommend strategies to
10 improve performance while ensuring we respond to provincial
11 acts such as the Endangered Species Act, Migratory Bird
!2 Conventj-on Act, Eish and V{ildlife Conservation Act, and the
13 Invasive Species Act, among others. Hydro One's new Clarington
74 Transformer Station is an example of Hydro One's approach to
15 biodiversity preservation and protection. After undertaking
16 a Class EA (environmental assessment), Hydro One committed to
I1 creating habitats on excess property at the site to offset
18 the project's impacts.
19 A. Wtrat has been Hydro One's e:rperience with its
20 utility workforce?
2l A. Hydro One believes in maintaining constructive
22 relationships with its unions. VrIe have a strong partnership
23 with our unions on heafth and safety and continued improvement
24 in this area. We have structured committees for exchanging
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Hydro One
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dialogue and resolving issues, which include the union and
company executive. We have innovative dispute resolution
forums that ensure the timely resolution of disputes when they
arise and minimize time and expense for the company and the
union.
III.THE PROPOSED TRiAI.ISACTION
A. Please describe Hydro One's proposed acquisition of
Avista.
A. The boards of directors for Hydro One and Avista
unanimously approved an aII-cash transaction through which
Avista shareholders will receive US$53 per common share,
13 representing a 24%
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on
premium to Avista's fast sale price of
July 18, 20L1. Avista shareholders wifl$42.14 per share
together receive
$3.4 billion.
cash consideration totaling approximately
shown in the organizational chart j-n fllustration No
Schmidt, Di
Hydro One
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77 Together, Hydro One and Avista will service more than
two million retail end-use customers and we wiIl operate1B
79 across multiple North American juri-sdictions, including
Montana and Al-aska.20 Ontario, Washington, Oregon, Idaho,
))
9. Please describe Hydro One's corporate org'anization
structure after the proposed merger with Avista.
A. Upon completion of the Proposed Transaction, Avista
will- be an indirect, wholly-owned subsidiary of Hydro One as
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much as it is today, and it wil-I continue to be headquartered
in Spokane, Vlashington .
A. Does Hydro One view Avista as a short-term or long-
tercn investment?
A. Hydro One plans to be a long-term partner. This is
the first time that Hydro One has embarked on the acquisition
of a U.S. utility. As a utility that serves more than 1.3
million customers, Hydro One is focused on long-term
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Hydro One
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Hydro One
Limited (Ontario
Corporation)
Hydro One lnc.2486267
Ontario lnc.
Hydro One
Networks lnc.
Hydro One
Remote
Communities lnc.
Olympus 1 LLC
(Delaware Limited
Liability Company)
Olympus 2 LLC
(Delaware Limited
Avista Corporation
(Washington
(Ontario
Corp. (Delaware Hydro One
Telecom lnc.
Olympus Equity LLC
(Delaware Limited
Avista Corporation
Subsidiaries
1 opportunities that are beneficiaf to customers, employees,
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shareholders, and the communities we serve.
IV HYDRO ONE' S REjASONS EOR ACAUIRING AVTSTA
A. Please describe the reasons for Hydro One's
proposed acquisition of Avista.
A. For more than 100 years and until just two years
dgo, Hydro One, and its predecessor Ontario Hydro, was owned
solely by the Province of Ontario. In 2015, Hydro One became
a commercially operated investor owned utility. Over the10
11 years, Hydro One had acquired a number of LDCs in Ontario to
72 increase its distribution footprint. Since 7998, Hydro One
13 has successfully acquired and integrated approximately 90
l4 separate
bene fits
LDCs. Hydro One continues to pursue growth and the
15 that will accrue to its customers, communities and
16 sharehol-ders f rom that growth.
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Hydro One is
utility located
areas. The Proposed Transaction with
goals by expanding Hydro One into the U
and expanding its operations to natural
a pure-p1ay transmissj-on and distribution
soleJ-y within Ontario.It seeks
19 diversification both in terms of jurisdictions and service
20
21,
22 gas distribution and
23 electric Aeneration. The Proposed Transaction with Avista
24 wil-I del-iver the increased scal-e and benefits that come from
Avista achieves both
S. Pacific Northwest
25 being a larger player in the utility industry.
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Hydro One
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The utility industry
deployment of distributed
and the ever increasing
Avista and Hydro One
participate in these
larger utj-Ij-tj-es due
dramatically, with the
and storage resources,
generation.
is changing
generation
rel-iance on renewable
customer bases. Combined, however, Avista
become more competitive by creating
efficiencies over time. Hydro One and
actj-ng separately will be challenged to
innovations on a scale similar to the
to the size of their balance sheets and
and Hydro One will
scale and cost
Avista intend to
10 continue investing in innovation.Together, with nearly two
some of these costs over11can spread
I2
13 and Avista bel-ieve that the Proposed
74 Transaction will deliver cost savings over the longer term.
15 While Hydro One and Avista cannot quantify those savings at
L6 this time, the companies should achieve savings over time
tl through scale and coll-aboration in supply chain activity, IT
1B development and implementation, innovation, and potentially
l-9 other areas.
20 Both Hydro One and Avista have similar cultures and
21- values, including a strong commitment to their respective
22 communities, which wil-l enable a seaml-ess integration. Both
high customer satisfaction,
for the environment, and
23 companies make customer service,
24 reliability, safety, respect
million customers, they
a larger base.
EinaIJ-y, Hydro One
Schmidt, Di
Hydro One
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1 reasonabl-e retaj-l rates a high priority. Because of their
2 shared cufture and val-ues, both companies have high
3 expectations that Avista's and Hydro One's objectives for the
4 Proposed Transaction will be achieved.
5 Q. Please describe the similarities between Avista's
6 and Hydro One's existing utility operations.
7 A. The opportunities for a successful transaction and
B transition are enhanced by the significant similarities
9 between Hydro One and Avista . The util-ities' simil-arities
10 include: service focused on rural- areas with just a few urban
11 centers,' revenues derived nearly excJ-usively from regulated
L2 utility businesses,' and a focus on customer satisfaction and
13 employee safety. Similar to Avista, Hydro One: (i) has
74 expertise providing servj-ce to remote communities, (ii)
15 rel- j-es extensively on hydropower generation, (iii ) has a
16 service territory that includes extensive forests and an
11 active forest products industry, and (iv) provides service to
18 rural- areas where there are more poles than customers.
19 We expect to gain operating efficiencies by extending
20 the use of technology, best practices and business processes
2l over a broader customer base and broader set of
22 infrastructure. We expect efficiencies in areas such as
ZJ procurement,
wiIl afso
IT and operations. In general, our shareholders
benefit from geographic, economic and asset
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Hydro One
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regulatory diversity that this
markets that we are entering
positive and growing customer
transaction wil-l provide. The
have expanding economies and
demographics, and they are in
geographic territories that are remarkably simil-ar to those
that we serve today in Ontario.
As a result of the uniquely simil-ar yet also
complementary profi-Ies of the two companies, once the Proposed
Transaction is complete, the
utifities wifl remain intact,
profiles of the regulated
11 enhanced by the virtue of asset and geographic
with the vast majority of
operations and further10 revenues generated by rate-regulated
L2 diversification.
v AVTSTA' S POST-TRA}ISACTTON OPERATIONS
1,6
9. How will Avista operate after completion of the
transaction?
A. Avista wiII operate very much as it does today.
Avista will become a separate indirect subsidiary under Hydro
One; it wiII not be merged with other subsidiaries. Avista
will have its own management and its own board of directors.
fn short, Avista will have the same look and feel to customers
after the merger as it has today.
A. Please describe Hydro One's and Avista's agreement
regarding decisions reserved to Avista's board.
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Hydro One
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A. One of the issues most important to Avista CEO Scott
Morris as we discussed the prospect of a merger was ensuring
that Avista customers wiII benefit in the years to come from
the unique features of this transaction: Avista wiII maintain
its existing corporate headquarters in Spokane, Washington;
a standalone utility in
and AIaska; Avista wilI
Avista will continue to operate as
Washington, Oregon,
mai-ntain its other
Idaho, Montana
areas; and Avista will- seek
locations throughout its service
to retain its existing employees
of these e.l-ements together with
offi ce
10
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and management team. Atl
other provisions embedded wj-thin the Merger Agreement were
12 specifically designed at Mr. Morris's request to ensure that
13 Avista's customers continue to receive the service they have
14 come to expect from a company that has been a leader in the
15 Pacific Northwest for more than 100 years. Essentially, Hydro
76 One gave Mr. Morris and Avista the "drafLing pen" to assure
l7 that Avista had the assurances it needed in order to enter
1B into this Proposed Transaction.
19 This effort resul-ted in the unique Delegation of
20 Authority (Exhibits A and B to the Merger Agreement, Appendix
21 5 to the Joint Application, and Exhibit No. 2, Schedul-e 2 Lo
22 my testimony) , which reserves to Avista's post-transactj-on
23 board ongoing management authority over Avista. The
24 Delegation of Authority confirms the post-transaction Avista
Schmidt, Di
Hydro One
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1 board's authority to make specified decisions without
2 obligation to obtain any separate authorization or approval
3 from the Hydro One board, subject to l-imited exceptions for
4 extraordinary itemsr ds described in the Delegation of
5 Authority.
6 Decisj-on-making authority with respect to the following
7 issues wilI remain with the Avista post-transaction board:
Keeping Avista' s headquarters l_n Spokane;
o Keeping Avista's brand the same;
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a Keeping Avista's office locations in each of its
service areas, with no less of a significant
presence in each location than that in place prior
to the merger;
Preventing workforce reductions resulting from the
Proposed Transactioni
Retaining Avista's existing management team;
Maintai-ning existing compensation and benefitpractices;
Negotiating and entering into agreements with
bargai-ning unit employees;
Maintaining Avista's safety and reliability
standards and policies and servi-ce quality measures
in a manner that is substantially comparable to, or
better than, those prior to the merger;
Maintaining Avista's conrmuni-ty involvement andsupport initj-atives at levels equal to or greater
than those prior to the merger,'
Maintaining a $4.0 milfion annual budget for
charitable contributions (funded by both Avista and
the Avista Foundation) as compared to an
approximate $2.5 mil-Iion level prior to the merger,'
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Making a $2.0 million annual contribution to the
Avista Eoundation (following an initial-
contribution to the Foundation of $7.0 million at
the time the merger closes ) ,'
Maintaining at least the level of economic
development that existed prior to the merger,
including the expenditure of funds to support
regional economic development and related strategic
opportunities consistent with past practices,'
Maintaining existing l-evel-s of capital affocations
for capital investment in strategic and economic
development, including property acquisitions in the
university district, support of local entrepreneurs
and seed-stage investments,'
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Continued development and funding of
existing and future innovatj-on activities,'
Avista's
and
Maintaining dues paid by Avista to various industry
trade groups and membership organizations.
19 A. Will Avista have its own individual. business pJ.an?
20 A. Yes. As part of the Delegation of Authority
27 described above, the Hydro One board acknowledges that the
22 post-transaction Avista board and management team, wiII plan
23 for the operation of its business. Hydro One approval woul-d
24 be required, however, for an action expected to result in a
25 materiaf change to the nature of the business of Avista or
26 Avista's subsidiaries.
21 A. Will Avista have control and responsibiJ.ity for
28 making decisions that achieve objectives such as customer
29 satisfaction, relirl.le service, erqployee safety,
30 environmental stewardship and regulatory/legislative
31 credibi1ity?
Schmidt, Di
Hydro One
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Yes.
In addition to the fact that you will be joining
the Avista Board of Directors, how will Avista's Board of
A
a
Directors change after
A. Avista wiII
five of whom wiII be
the merg'er?
have a nine-member Board
by Hydro One
will be chair
of Directors,
and four by
of the board;
designated
Avista. Avista CEO Scott Morris
10
one other Hydro One execut j-ve and I wilI join the Avista
additional directorswiII identify three
Pacific Northwest and who are not officers,
board. Hydro One
who reside in the
11 employees or directors (other than as a director of Avista or
L2 Olympus Equity LLC)
A. Are there
of Hydro One or its affiliates.
13 any pJ.ans for a reduction in force at
74 Avista as a result of the transaction?
15 A. No.
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A. Do you anticipate changing the existing lalror
I7 contracts as a result of the Proposed Transaction?
18 A. No. Avista will honor existing l-abor contracts,
79 and the Delegation of Authority
board's authority over labor issues.
9. Has Hydro One received
acknowfedges the Avista
20
22 comit:nent to customers, communities
recognitions for its
and employees?
history of deploying new
that our customers are
23 A. Yes. Hydro One has a long
Schmidt, Di
Hydro One
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33
1 receiving the highest quality service. Our efforts have been
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recognized on numerous occasions, examples of which follow:
a January 2001: We became the first utility outside
of the United States to receive the Edison Institute
Emergency Recovery Award for outstanding efforts in
restori-ng power to more than 500,000 customers
following four successive severe storms.
a 2008: Hydro One undertook the largest smart meter
deployment initiative in North America and was
selected as a finalist for a prestigious Pl-atts
Global Energy Award in the category of Sustainable
Energy Initiative of the Year, for work on the
meter,/network initiative and our commitment to
creating a world in which energy use and resources
are sustainable.
a September 2017. Utilimetrics awarded Hydro One with
the UtiIj-metrics Excellence in Project Management
Award for superior achievement in innovation for
the Smart Grid Program. This award recognized our
central- role in securing wirel-ess spectrum for use
by the utility sector in Canada.
a January 201-5: Hydro One received a Sustainabfe
Energy Company designation from the Canadian
Electricity Association - one of only four
companies j-n Canada Lo earn the prestig'ious award.
a December 2016: Hydro One was selected as one of
Greater Toronto's Top Employers for 201,1 by
Mediacorp Canada Inc. This designation recognizes
Hydro One as an industry leader in offering
employees an exceptional place to work.
In 2016, Hydro One received the 2016 Esource
Utility Ad Awards, 2076 Summit Creatj-ve Awards, and
Corporate Knights Canada's top uti-1ity on measures
of corporate social- responsibility.
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36 continued strong'performance by Avista in the area of customer
31 service as a consequence of the Proposed Transaction?
Schmidt, Di
Hydro One
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1 A. Yes. There wiII be a concentrated effort and
2 commitment by both Hydro One and Avista to ensure that
3 customer service wiff benefit as we share best practices.
4 9. $Iill Avista reunin in charge of assuring safe and
5 reliable service?
6 A. Yes. Under the Delegation of Authority, Avista's
7 existing executive management team will manage Avista's
B business and will- develop and execute Avista's business plan
9 under the oversight of the Avista board. The Avista
10 leadership team and board wil-l have authority to maintain
11 Avista's and its subsidiaries' safety and reliability
L2 standards and policies and service quality measures in a
13 manner that is consistent with those currently maintained at
74 the time of the merger by Avista and its subsidiaries.
15 9. Based on Hydro One's e:qrerience, how can the
16 Proposed Transaction be er<pected to affect Avista's resource
71 planning process?
1B A. V[e anticipate that the Proposed Transaction witl
19 not affect Avista's resource planning process in any of its
20 service terri-tories.
27 A. How do you eripect the Proposed T:ransaction to affect
22 Avista's conmitment to renewable generation resources?
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Hydro One
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A. We anticipate that the Proposed Transaction wiII
not affect Avista's commitment to renewable generation
resources.
A. What is Hy&o One's e:<perience with wind and
renewalrle resources?
A. As both the operator of over 98? of the transmission
system in Ontario and as the largest distributor in t.he
province, Hydro One has been at the forefront of integrating
Ontario's significant renewable generation additions over the
past decade. Since the beginning of the Province's renewable
generation Eeed-in-Tariff program, Hydro One has connected
over 72,000 renewable energy pro;ects totalj-ng over 1r200 MVI
of installed capacity to the distributj-on system and connected
over 100 projects to the transmission system equaling over
72,000 MW of installed capacity. Eurther, as much of this
renewable generation was connected j-n a short period of time,
Hydro One was forced to rise to the challenge of bringi-ng a
1B variety of renewabl-e
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projects including wind,
system. This developed
solar, hydro
unique and
Iearning in
a
20 the Company and new
2L performance and operation, and
22 customer service.
Z3 A. I[hat will Hydro One's ownership of Avista mean for
diverse experience within
system planning, system
Schmidt, Di
Hydro One
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A. The Proposed Transaction provides a big boost to
these communities. Avista will make a $2.0 millj-on annual
contribution to the Avista Foundation (following an initial
contribution to the Foundation of $7.0 million at the time
the merger closes). Under the Delegation of Authority
descrj-bed above, Avista's board has the discretion to maintain
a $4.0 mj-Ilion annual budget for charitabfe contributions
(funded by both Avista and the Avista Eoundation) as compared
to an approximate $2.5 million level prior to the merger.
A. Does Hydro One support Avista continuing its
economic development and innovation efforts in the
comunities it serves?
A. Yes. Hydro One has a long hj-story of supporting
economic development in Ontario, and specific examples are
provided below. The Delegation of Authority ensures the post-
merger Avista board has the authori-ty to maintain Avista's
and its subsidiaries' existing levels of economic
development, including the ability of Avista to spend
operations and maintenance fundsa to support regional economic
development and rel-ated strategic opportunities in a manner
conslstent with the past practices of Avista and its
subsidiaries. The Delegation of Authority also ensures the
a Operations and maintenance funds dedicated to economic development and
non-utility strategic opportunities will be recorded "befow-the-line" to
a nonoperating account.
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Hydro One
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post-merger Avi-sta board has the authorj-ty to maj-ntain
Avista' s and its subsidiaries' exi-sting Ievel-s of capital
all-ocations for capital j-nvestment j-n strategic and economic
development items, including property acquisitions in
Spokane's university district, support of local entrepreneurs
and seed-stage investments. We understand, however, that any
charitable and economj-c development expenditures are not to
be recovered from customers under current practice.
A. Please e:<pand on Hydro One, s comnitment to its
conmrunities.
A. Hydro One has a Iong history of dedicating corporate
resources and tal-ent to support the communitj-es in which it
operates:
August 2006: The Kleinburg Training Centre openedits doors to teach Ontario's future electricityworkers. The centre not only provides vital-training to Hydro One apprenti-ces, it's a Ministryof Training, Colleges, and Universities certifiedfacility.
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November 200'7: Hydro One entered into a partnership
with four Ontario community colleges: Algonquin,
Mohawk, Georgian and Northern, to educate and
attract future employees necessary to respond to
the upcoming staff retirements in our company and
across our industry.
November 2070: Hydro One earned the Canadian
Electricity Association's (CEA) 2010 Sustaj-nable
Electricity Social Responsibility Award in
recognition of our leadership in engaging our
stakeholders.
2012:
over
Hydro One
$1,000,000
employees and pensioners raised
for the Charity Campaign,
Schmidt, Di 38
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benefiting
communities
more than 800 charities
across the province.
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Hydro One
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January 2073: Hydro One recej-ved the prestigious
Edj-son Electric Instltute's 2012 Emergency
Assistance Award for supporting the recovery
efforts in the Mid-Atfantic and Midwest storms from
Hurricane Sandy.
March 2073: Hydro One partnered with Ryerson
University, University of Ontario Institute of
Technology, the University of Waterloo and WesternUniversity to increase enrol-lment and career
opportunities for femafe students pursuing Science,
Technology, Engineering, and Mathematics.
2076: Hydro One donated $125,000 to Sunnybrook
Heafth Science Centre Eoundation for Ross TilIey
Burn Centre Tissue Research, supporting research to
better treat electrically injured patients.
2076: Hydro One partnered wj-th Frontier College to
fund its Lieutenant Governor's Aboriginal Summer
Reaching Camps, contributing $120,000 towards camps
dedicated to building literacy skills in Aboriginal
youth.
2076: Each year, Hydro One provides an in-kind
donation towards the International Plowing Match inthe form of a temporary mj-ni electrical grid for
the five-day event, a value worth approximately
$350,000.
2076: Hydro One supported the TransCanada Trail-'s
Chapter 150 Campaign with a $90,000 gi-ft to help
complete an important 11. B-kilometre link between
Barrie and Springwater in Ontario. The TransCanadaTrail- is also known as The Great Trail.
2016: Hydro One sponsored the Amici- Camping Charity
by providing $25,000 to the 50th Anniversary Heroes
Gal-a, a celebration of sending children to camp for
50 years.
2071 z Hydro One is providing a $100,000 gift over
four years to the Say "No" to "Can't Go" Capital
Campaign Project for Camp Oochigeas, a summer camp
for chil-dren suffering from cancer. Eunds wiII be
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allocated to doubl-e the current square footage of
the camp, enabling facilitators to meet current and
future demands while provi-ding a fun, safe and
accessible year-round experience to its campers.
VI PROPOSED TRA}ISACTION BENEEITS
A. T{hat irrpact would the Proposed Transaction have on
the degree of reguJ.atory oversight this Conlrrission has over
Avista?
10 A. It would have no impact. The Commission wil-l-
11 continue to exercise the same degree of regulatory oversight
12 over Avista as it does today.
13 A. Will the Proposed Transaetion provide net benefits
L4 to Idaho customers?
15 A. Yes. Customers will- see immediate financial
1,6 benefits in the form of proposed retail Rate Credj-ts beginning
1,1 at the close of the Proposed Transaction. Avista and Hydro
1B One are proposing to flow through to Avista's retail customers
L9 in Idaho, Washington, and Oregon a Rate Credit of $31.5
20 million over a 10-year peri-od, beginning at the time the
27 merger cl-oses. The Rate Credit consists of two components,
22 and reflects an increased l-evel of savings in years 6-10 as
23 i-llustrated in the table bel-ow.
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Schmidt, Di
Hydro One
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Two-Step Rate Crcdit Proposal
Annual Credit
Yean 1-5
Annual Crcdit
Yean 6-10 Total Credit
TotalCredit $2.65 Million $3.65 Millbn $31.50 Million
Offietable Credit $1.70 Million $2.70 Million $22.00 Million
10
The mechanj-cs of the Rate Credit are provided in the testimony
of Avj-sta witnesses Scott Morris and Patrick Ehrbar and Hydro
One witness Christopher Lopez.
Over time, due to the similarities between Avista and
Hydro One, the Proposed Transaction will provide
opportunities for increased 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 benefits of scale wil-] not occur in the near term
following the closing of the merger, but are expected to occur
over the Ionger term. That is al-so why the Rate Credit is
larger in years 6-70, as we begin to realize greater savings.
After all approvals are received and the companj-es merge, both
companies will work together to identify, evaluate and execute
on opportunities to reduce costs for both companies. The
benefits from these cost savings wifl be flowed through to
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Hydro One
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1 customers in future general rate cases. Areas Hydro One and
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Avista expect to prioritize in evaluating opportunities for
cost savings incfude:
Investing in innovation that could help both
Hydro One and Avista to better meet their
customers' growing expectations for choice of
energy supply and tool-s to manage energy
consumption and costs. Leveraging the
innovation, research and deveJ-opment investments
of both companies could accelerate their ability
to bring the benefits of new ideas andtechnologies to their customers.
Exercising their purchasing power at greater
scale for equipment and materials.
Providing mutual assj-stance during and after
storm and emergency events.
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a Employment of common technology platforms
outage management, distribution management
other operations.
for
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20 It wil-I take time to identify and capture all of these
27 potential- benefits. The fevel of annual net cost savings
22 (and/or net benefits) will be tracked and reported on an
23 annual basis, and compared against the offsetable level of
24 savings.
25 A. I{try do you believe the simiJ.arities between Avista
26 and Hydro One provide evidence that the Proposed Transaction
21 wiJ.J. provide net benefits to Idaho customers?
28 A. The similarities between Hydro One's and Avista's
29 service territories, culture, and values will support the
30 real-ization of the customer benefits identified above.
Schmidt, Di
Hydro One
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a. Is the Proposed Tra,nsa,ction in the public interest?
A. Yes. As described in my testimony, the Proposed
Transaction provides immediate net benefits to Avista's
customers in the form of Rate Credits. fn the long-term,
additional benefits will accrue to Avista's customers through
its combination with a larger uti-Ii-ty that wiIl provide
benefits of scale and savj-ngs in the years to come. fn
addition, the Proposed Transaction secures increased
charitable contributions and sustains economic development
investments in the communities in which Avista operates.
A. Does this conclude your pre-fiIed direct testimony?
A. Yes, it does.
Schmidt, Di
Hydro One
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