20180924Sprague Supplemental Direct.pdf

ldaho Public Utilities Commission
Office of the SecretaryRECEIVED
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ON BEHALE OF AVISTA CORPORATION
DAVID J. MEYER
VICE PRESIDENT AND CHIEF COUNSEL FOR
REGULATORY & GOVERNMENTAL AFEAIRS
AVISTA CORPORATION
P.O. BOX 3121
L41.T EAST MISSION AVENUE
SPOKANE, WASHTNGTON 99220-3121
TELEPHONE: [phone]
EACSIMILE: [phone]
DAV] D . MEYERGAVI STACORP . COM
ON BEIIAIF OF HYDRO ONE LIMITED
EL]ZABETH THOMAS, PARTNER
KAR] VANDER STOEP, PARTNER
K&L GATES LLP
925 FOURTH AVENUE, SUITE 2900
SEATTLE, WA 981014-1158
TELEPHONE: [phone]
FACSIMILE: [phone]
LIZ . THOMAS GKLGATES . COM
KAR] . VANDERSTOEPGKLGATES . COM
]N THE MATTER OF THE JO]NT
APPLICATTON OE HYDRO ONE L]M]TED
(ACTING THROUGH ]TS ]ND]RECT
SUBSID]ARY, OLYMPUS EQUITY LLC)
AND
AVISTA CORPORATION
FOR AN ORDER AUTHORIZING PROPOSED
TRANSACTION
FOR AV]STA CORPORAT]ON
(ELECTRIC AND NATURAL GAS)
BEFORE THE IDAIIO PT'BLIC UTILITTES COMMISSION
CASE NO.
.A qI' I\TN
Boise, ldaho
AVU-E- 71 -09
AVU-G-17-05
K
SUPPLEMENTAL
TEST]MONY
OF
COLLINS SPRAGUE
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A. Please state your name, business address, and present
position with Avista Corp.
A. My name is Kevin "CoIIins" Sprague. My business
address j-s 7417 East Mission Avenue, Spokane, Washington. f am
employed by Avista Corporation as Senior Director of Government
Relations.
A. Did you sponsor Direct Testimony is this Case?
A. No.
A. What is your background?
A. I was qraduated by the Universj-ty of Washington with10
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11 honors in 1985. After working in state and local- (Seattle)
L2 politics, I became a contracL Iobbyist in 1987 representing
13 private and public sector clients before the Washington State
14 Legislature and executive state aqencies. I was then hired as
15 a Manager of Government Refations for the Association of
76 Washington Business, where f created the organizatj-on's
71 environmental- affairs division. I entered the employ of Avista
1B in 1990 as State Government. Relations Representative and,
19 later, made Manaqer of State Government Relations, wlth the
20 primary responsibility of representing the company in Olympia,
2l Washington. I was promoted to Director of Government Relations
22 (now Senior Dj-rector) 1n 20L2. In my current ro1e, I oversee
23 our giovernment relations activities in our five state
24 jurlsdictions and Washington, D.C. During my career, I have
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drafted, had introduced and secured enactment of numerous
pieces of legislation dealing with a range of subject maLters
I have also been involved with litigation associated with publlc
policy.
A. Iilhat is the purpose of this Supplemental Testimony?
A. My testimony wiff address the quest.ion of whether or
not Idaho Code S61-327 prohibits the Proposed Transaction with
Hydro One Limited ("Hydro One")
A. Do you have a background in Law?
10 A. No, I am not an attorney and I am not offering a legal
11 opinion. However, because of my extensive backqround 1n
72 drafting and analyzing legislatlon, T am providing my
13 perspective on Idaho Code 561-327, and why this statute is not
74 appficabl-e in this proceeding.
15 A. Are you sponsoring any exhibits in this testimony?
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A. No, f am not.
71 A. Can you sununarize the purpose of fdaho Code 561-327?
1B A. Yes. This section of ldaho law prohibits the transfer
79 of ownership in electric ut.ility properties used for servlng
20 the public in Idaho to any "public agency" (the term used in
27 the statute's headlng) that is organized or existing under the
22 l-aws of any other state (not "province").
23 a. To the best of your knowledgie, what is the origin of
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o 24 Idaho Code 561-327?
o 1 A. Idaho Code 551-327 originated as House Bill- 26 (HB
2 25), which became law in 1951-. (The law was subsequently
3 amended in L9B2 by House Bill 412; the substance of this later
4 enactment does not affect this analysj-s, ds it created an
5 exception to the statute's initial prohibition by allowing the
6 transfer of property from a "public utility" to "members of a
7 mutual non-prof it or cooperat.ive el-ectrical corporation
8 organized under the l-aws of fdaho" and subject to Commissj-on
9 approvaf.) The year 1951 is absol-utely pivotal to this analysis,
10 and why it is requires an explanation here.
1l- A. What was the political context for the ldaho
72 Legislature's enactment of Idaho Code 561-327?
13 A. Identifying the political context for Idaho Code 561-
L4 321 is critical- for understanding its scope and intended
15 meaning. Oddly enouqh, factors in Washington State appear to
L6 have underpinned the text of HB 26 and motivated the Idaho
71 Legislature to enact it.
18 Pubfic utility districts (PUDs) in the State of Washington
19 are "municipal corporations" (see Idaho Code S61-327 for cross-
20 reference) which operate in a proprietary capacity as electric
21, utilities under Washington l-aw. (Idaho l-aw has no equivafent to
22 Washington's public utility districts. ) The formation of PUDs
23 was authorized through passage of a bal-lot measure (Initiatlve
24 1) in 1931. Initiative l- conferred on these municipal
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2 broad powers of eminent domain. Voter approval of Initiative 1
3 l-ed to the creation of PUDs across the State of Washington.
4 Through the threat and exercise of their powers of eminent
5 domain, PUDs in eastern and central Washington acquired certain
6 generation, transmission and distributed assets owned by The
7 Washington Water Power Company (now Avista).
B In the 1940s, The Washington Water Power Company (the
9 "Company") was owned by American Power and Light Company (AP&L),
10 a holding company. When the Securities and Exchange Commissi-on
11 directed AP&L to divest of its utility holdings, a consortium
1,2 of three public utility districts 1n centra1 and easLern
13 Washington sought to buy the stock of the Company from AP&L,
74 with the plan, had they been successful, of spinning-off the
15 Company's Idaho properties to a non-profit cooperative. l
16 According to PeopLe, PoTitics and Publ-ic Power, " (t) his
17 arrangement unl-eashed legislative fights in both Idaho and
1B Washington, SEC rulings, and federal appellate court figthts."z
1,9 This effort. precipitated enactment of HB 26 by the Idaho
20 Legj-slature. *With active negotiations going on for three
2l eastern Washington PUDs to acquire the cofirmon stock of
22 Washington Water Power from AP&L, the Idaho Legislature rushed
1 People, Pol-itics and Pubfic
Utj-J-1ty Districts Association,
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Ken Billington, Washington Public
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a law through, under private power urging, making it ilIegal
for any PUD to own property in that state. "3 The author of t.his
publication, Mr. Ken Billington, who had begun his career in
1951 as an employee of the Washington Public Utility Districts
Association, thus accurately summarized the thrust of HB 26 and
what exists today as the substance of ldaho Code 561-327.
The historical- context for Idaho Code S61-327 is important
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B because it indicates that the Legisl-ature did not introduce and
9 enact HB 26 to target any private companj-es or with any
10 "province" in mind. Eurthermore, and central- to this analysis,
11 Idaho's Legislature did not intend for the law to apply to a
12 private company "organized or existing" under the laws of any
13 other state (or province) . The Legislature's clear intent was
14 to prevent certain municipal corporations -- PUDs 1n Washington
15 from acquiring the properties of the Company that were
L6 located in Idaho.
71 A. Do you have additional thoughts about the distinction
18 between "state" and "province" in Idaho law?
L9 A. Yes. Looking at other ldaho laws, it is evident that
20 the Legislature is cognizant of, and very deliberate in making,
27 distinctions between "state" and "province" in Idaho Code.
22 There are examples 1n faw where the Legislature has referenced
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Canadian Provinces as being distinct from a "state. " For
instance, Idaho Code S67-7801 (Pacific Northwest Economic
Region) references both "states and provinces. "
a. Erom your perspective, does Idaho Code 561-327
prohibit the Proposed Transaction?
A. No. Under the plain and ordinary meaning of the
statute, Idaho Code S61-327 is not applicable to t.he parties
Lo, or circumstances of, the Proposed Transaction for two
important reasons: Hydro One 1s not a government or municipal
10 corporation; rather it is an j-nvestor-owned utility. Moreover,
11 the statute has no application to entities formed out.side the
12 United States.o 13 The operative portlon of the l-aw warranting examinatlon
74 for its application, or not, Lo Hydro One is as fol-l-ows:
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". any g1overnaent oz murticipal coza>oratiott, quasi-
rutnicipal cozporatiott, or groveznmental or political
urtit, subdivision or cozporation, org'anized or
existing under the laws of any other state; or any
person, f:-rm, associatlon, corporation or
organization acting as trustee, nominee, agent or
represenLative for, or j-n concert or arrangement wit.h,
any such government or municipal corporation, quasi-
municipal corporation r or governmental or political
unit, subdivision or corporation; or any company,
association, organization or corporation, organizedor existing under the l-aws of this state or any other
state whose issued capital stock, or other evj-dence
of ownership, membership or other interest therein,or in the property thereof, is owned or controlled,
directly or indlrectly, by any such government or
municlpal corporation, quasi-municipal corporation,
or governmental or politicaf unit, subdivision or
corporation; or any company, association,
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organization or corporation/ organized under the laws
of any other state . " (Emphasis added. )
This provision embodies two distinct and relevant
elements. The first entail-s a compendium of different lega1
forms of governmental entities, and the second concerns the
phrase "organized or existing under the laws of any other state"
and assocj-ated cross-references to that. phrase with such
These two aspects
10 of the statute control its application to persons and
11 clrcumstances. An interpretation of those controlJ-ing
72 at.tributes leads to a conclusion that the law does not and
13 cannot prohibit the Proposed Transactj-on because it doesn'toL4 apply in this instance.
15 O. What is the statutory basis for your analysis?
A. My analysis beglns with the phrase, "government or
municipal corporatj-on/ quasi-municipal corporation, or
governmental- or political unit, subdivision or corporation."
With this phrase, the fdaho Legislature precfuded the PUDs and
any other governmental- entities from taking over the assets of
an i-nvestor-owned utility. Thus the Leglslature was able to
thwart the PUDs' effort to acquire the Company's stock. The
Legislature was not concerned with acquisitj-ons by private
companies of an interest in an investor-owned utility. Hydro
One, of course, is an j-nvestor-owned utility. Hydro One is not.
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a government entity, nor is it. an instrument of government, nor
are all (or even a majority) of its shares owned by a
government. It is clear that the statute is meant to apply to
g,overnment entities, their agents, or organizations that are
"representative for" such government entities.
My analysis also addresses the phrase, "any other sLate, "
which is used throughout the statute t.o define its scope. fn
particular, this analysis concentrates on t.he l-aw's reference
to state." This specific term shoul-d substantively inform the
interpretation of the statute. Idaho Code 561-327 can only be
applied to circumstances under which "titfe to or interest in
any property located in this state" and owned by an "electric
pubtic utility or efectrical- corporation," as defined under
Chapter L, Titfe 61, Idaho Code, is "transferred" to, or
acquired, directly or indirectly, by a public aqency "organized
or existing under the laws of (another) "state."
A. In your opinion, how might the phrase "any other
state" (taken in isolation) apply to the circumstances
underlying the Proposed Transaction?
A. If the Commission approves the Proposed Transaction
between Hydro One and Avi-sta, along with all other regulatory
authorities exercising jurisdiction in this matter, Olympus
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24 indirect wholIy-owned subsidiary of Hydro One, a company whose
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ownership shares are traded on the Toronto Stock Exchanqe, will
acquire all of the shares of Avista.
A plain and ordinary reading of the statute necessarily
restricts its application to an entity that is both a
governmental- entity and that is "organized or existing under
the l-aws of any other state. "
Importantly, Olympus Equity LLC is "organized" and exists
as a private, for-profit l-imited liability company under the
laws of Delaware, just as Hydro One is an investor-owned, for-
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10 profit corporati-on organized under the l-aws of Ontario. Neither
11 is incorporated as "any government or municipal corporation,
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13 subdivj-sion or corporatt-on," and both therefore fal-1 beyond the
74 scope of Idaho Code 561-327.
A. In your opinion, can Idaho Code 561-327 be construed
in any way as applying to Hydro One Limited?
A. No. Idaho Code 561-327 doesn't apply and cannot be
applied to Hydro One.
Assumingi, merely for the sake of argument that the Province
of Ontario were deemed Lo constitute a "state" under Idaho Code
S6L-321 , the statute does not affect Hydro One. Hydro One
itself is an investor-owned utitity "orqanized and existing" as
a private, publicly-traded corporation under the Ontario
Business Corporations Act. Hydro One is not, as the statute
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requires,a "government or municipal corporation, quasi-
municipal corporatj-on r or governmental- or political unit,
subdivision or corporation."
The mere fact. that Hydro One has a (foreign) government
(the Province of Ontario) as one of its shareholders is
irrel-evant because Hydro One is a distinct private, corporate
entity. (Units of government, such as CaIPERS, often hol-d
ownership interests in investor-owned utillties but that does
not affect the status of the utility asa privat.e, for-profit
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11 Pl-an InvesLment Board is among the owners of Puget Sound Energy
12 (PSE) and that together with other Canadian public pension funds
13 hold a majority interest in PSE. This fact does not al-ter the
1,4 fact that PSE is a private, investor-owned utility and subject
15 to state and federal law, accordinqly. ) Even if the presence of
16 a governmental- sharehol-der were somehow relevant, Idaho Code
Ll S61-327 woul-d require such a government be "orgiani-zed or
18 existJ-ng under the laws of any other state." (Emphasis added.)
t9 The Province of Ontario is neither a "stater " nor is it, more
20 j-mportantly for this analysis, "organized or existing under the
2l laws of any other state. "
22 Historical context, ds previously discussed, clearly
23 illustrates why the Idaho Legislature focused the statute's
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application on "public agencies" that are "organized or
existing under the laws of any other state." (Emphasis added.)
A. How would you sunumarize your analysis?
A. Based upon the plain and ordinary meaning of Idaho
Code S6L-321, the law does not apply to the Proposed
Transaction.
A. Does that conclude your Supplemental Testimony?
A. Yes, it does.
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