20181116First Amendment to Stipulation and Settlement.pdf

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David J. Meyer, Esq.
Vice President and Chief Counsel of
Regulatory and Governmental Aflairs
Avista Corporation
I41l E. Mission Avenue
P.O.Box3727
Spokane, Washington 99220
Phone: [phone], Fax: [phone]
Brandon Karpen
Deputy Attorney General
Idaho Public Utilities Commission StafT
P.O. Box 83720
Boise.lD 83720-0074
Phone: [phone], F ax: (208) 334-37 62
IN THE MATTER OF THE JOTNT )
APPLTCATTON OF HYDRO ONE )
LIMITED AND AVISTA CORPORATION )
FOR APPROVAL OI-- MERGER )AGREEMENT )
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
', ' l ':,, l - f:l iElizabcth'l'homas,Partner' ' ' iJ i"I )
Kari Vander Stoep, Paftner
K&L Gatcs LLP
On Behalf of Hydro One Limited
Olympus Equity Ll.C
925 Fourth Avenue. Suite 2900
Seattle, WA 98104-1158
Liz.thomas@kl gates.com
kari. v anderstoep@,k I gate s. c om
AVU-E-17-09
AVU-G-17-05
iQ
CASE NO
FIRST AMENDMENT TO
STIPULATION AND SETTLEMENT
This First Amendment to Stipulation and Settlement (hereinafter "First Amendment") is
entered into by and among the fbllowing parties in this case: Signatories include: Hydro One
Limited ("Hydro One"), acting through its indirect, wholly-owned subsidiary Olympus Equity
LLC, and Avista Corporation ("Avista") (sometimes hereafter jointly referred to as "Joint
Applicants" or the "Companies"), the Staff of the Idaho Public Utilitics Commission ("Staff').
Clearwater Paper Corporation ("Clearwater"), Idaho Forest Group, LLC ("ldaho Forest Group").
Idaho Conservation League ("lCL"), the Community Action Partnership Association of ldaho
('CAPAI") and, the Washington and Northern Idaho District Council of Laborers ("WNIDCL"),
These entities are collectively referred to as the "Signatories". The Signatories undersland this First
FIRST AMENDMENT TO STIPULATION AND SETTI,EMENT _ AVU.E,-17-09 & AVU.G-17-05 Page 1
Amendment is subject to approval by the Idaho Public Utilities Commission ("IPUC" or the
"Commission").
l. On April 13,2018, all parties (excluding the Idaho Department of Water Resources
("IDWR") and the "Avista Customer Group" ("ACG')l) entered into. and filed. a Stipulation and
Settlement meant to resolve all issues in this proceeding and recommending approval of the Joint
Applicants' Application to exercise substantial influence over Avista (hereinafter referred to as the
"rnerger lransaction").
2. Attached to the April 13th Stipulation and Settlement as Exhibit A, were a set of
agreed-upon commitments, numbering 73 in total, that allowed all parties (excluding IDWR and
the ACG, who had not yet intervened), to support the Stipulation and Settlement.
3. Hydro One entered into an agreement with the Province of Ontario datedJuly 11,2018
for the purpose of the orderly replacement of the Board of Drectors of Hydro One and the
retirement of Mayo Schmidt as the chief executive officer (hereinafter referred to as "management
changes").
4. The technical hearing previously scheduled for July 23,2018 was vacated, in light of
the news of the management changes.
5. On August 15, 2018, the Joint Applicants notified the Commission that the members
of the new Hydro One Board of Directors had been named, and the Joint Applicants requested that
the Cornmission direct the parties to meet and confer about re-establishing a case schedule. On
Seplember 10,2018, the parties met (including ACG and IDWR) and agreed upon a proposed
I IDWR and thc ACG were late intervenors in the Case. IDWR petitioned to intervene and was granted intervention
on Jufy 20,2018. The ACG petitioned to intervene and was granted intervention on .luly 19, 2018.
FIRST AMENDMENT 'fO STIPULATION AND SETTLEMENT - AVU-D-17.09 & AVT]-G.17-05 Page 2
schedule, which was later approved by the Commission on September 20,2018, with technical
hearings set for November 26,2018, carrying over to November 27 ,2018, if nccdcd.
6. Based on supplemental testirnony submitted by the parties, as well as continuing
discussions among all parties, the Signatories have reached an agreement on revisions/additions to
the commitments originally attached as Exhibit A to the April 13th Stipulation and Settlement.
'fhese revisions/additions address the impact of the managemenl changes and the potential for
Provincial involvement in the affairs of Hydro One and Avista, as well as addressing concerns by
the IDWR. Thcsc revised commitments are attached as Revised Exhibit A to this First
Amendment. This revised list of commitments should supplant, in its entirety, the list of
commitments previously attached as Exhibit A to the April l3tl'stipulation and Settlement. In all
other respects, the provisions of the April 13ti' Stipulation and Settlement remain in full force and
effect.
7. Revised Exhibit A to this First Amendment consolidates all commitments into final
form and is attached. (Staff Witness Carlock is spbnsoring as Exhibit 101, this revised set of
cornmitments.)
8. Exhibit B to this First Amendment shows in redlined forrn the changes that have been
made to the oriqinal Exhibit A to the April 13th Stipulation, for ease of comparison, and is also
attached.
DATED this 14th day of November. 2018.
FIRST AMENDMENT TO STIPULATION AND SE,TTLEMENT _ AVU-E-17.09 & AVU-C-17-05 Page 3
HYDRO ONE LIMITEI)
By:
Elizabeth'fhomas, Parlner, K&L Gatcs LLP
Kari Vander Stoep, Partner, K&L Oates LLP
On Bchalf of l{ydro One Limitcd and
Olympus Equity LLC
STAF'F'OT THE IDAHO PUBLIC
ISSTON
IDAHO tr'OREST GROUP, LLC
Ron L. Williams
Attomey for Idaho Forcst Croup, LLC
WASHINGTON AND NORTIIERN
IDAHO DTSTRICT COUNCIL OF
LABORERS
By:
Danielle Franco-Malone
Schwerin Campbell Bamard lglitz.in & Lavitt,
LLP
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AVISTA CORPORATION
By
Davitl.ffiycr- " 'ZAttomcy for Avista Corporation
CLEARWATER PAPER
CORPORA.TION
Peter Richardson I Grcg Adams
Attorncys for Clcarwater Paper
IDAHO CONSERVATION LEAGUE
Bcnjamin Otto
Idaho Conscrvation Lcague
COMMUNITY ACTION PARTNERSHIP
ASSOCIATION OF IDAHO
Brad Purdy
Attorncy for CAPAI
FIRST AMENDMEN'T'fO SI'IPULATION AND SEfiLEMENT _ AVU-E-I7-09 & AVU-G-17-05 Page 4
HYDRO ONE LIMITEI)AVISTA CORPORATION
4-7rwox tll n*7 ta
By;l)aviM,Mdycr u /
Attorncy for Avista CorporationElizabeth'l-homas, Paflner, K&L Gatcs LLP
Kari Vander Stoep. Pafiner, K&[, Gates LLP
On Bchalf of l{ydro One Limited and
Olympus [quity t,l,Cl
STAFF OF THE TDAHO PUBLIC
UTILITIES COMMTSSION
CLEARWATER PAPIIR
CORPORATION
,
By:
tlv
lc / Grcg AdamsBrandon Karpen
Deputy Atlorney General
Attorneys lbr Clcarwater Paper
IDAHO CONSERVATION LEAGUEIDAHO FOREST (}ROUP, LLC
By:
By:
Ron L. Williams
Attorney fbr Idaho Forcst Croup, [,LC
Benjamin Otto
ldaho Conservation l,cague
WASHINGTON AND NORTHERN
IDAHO DISTRICT CO{"INCIL OF
LABORERS
COMMUNITY ACTION PARTNERSHIP
ASSOCIATION OF IDAHO
By
By:
Daniel le Franco- Malone
Schwerin Campbell Barnard lglitzin &Lavitt,
t,I,P
Brad Purdy
Attorney fbr CAPAI
FIRST AMENDMIN]' 'I'O S]'IPULATION ANI) SE'TTLEMENT - AVU.E,-17.09 & AVU-G.17-05 page 4
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Elizabeth'lhomas. Parlner. K&L Cutcs l.LP
Kari Vander Stoep. Partner. K&1. Catcs I.l.P
On llchalf ol'l lvdro Onc Linritccl and
Oll,rnpus lieluity l,,l.C
Attorncy for Avista Corporalion
S'l',l't'F Of''l'HE ll)i\l I0 PLl l.il.l('
UTILITI ES CON,I},IISSIO\
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Brandon Karpen
Deputl, Attonrcv Gencml
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Atlornels lirr Clcaru'alcr Pirpcr
ID,\HO C'Olt{Sn R\/Al' t0N l.t,:A(; t I t'.
TDAIIO F'OREST (;ROIIP. I.I,('
fl,^ilil'*ts1
By:Bcnjanrirr Otto
Idaho Conscn'ltirrn l.cagucRon 1.. \\'illianrs
Attornel lbr ldaho ljorcst (iroup. LL(
\\'ASt I tN(;TON AN l) )-Oltl'l I ti Rr
IDAI{O DTSTITICT COL]NCIL OF
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Il)';Bracl Purdl'
r\ltonrcl' tor ('AP;\lDaniel le Francr:- [t,lalone
Schucrin Canrphell lJrrnard lglitzin & l-n'itt.
i.I.P
FIRST AMENDMENT TO S]'tPt'LATION AND SETTI.EMIINT - AVI I.F".I7.IIq & AVIi.(i-17-05 l'agc .l
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HYDRO ONE LIMITET)
/4'7ow*g
By
Elizabeth Thomas, Parlner, K&L Gates I.LP
Kari Vander Stoep, Partner, K&L Gates LLP
On Behalf of Hydro One Limited and
Olympus Equity LI,C
STAFF OF THE IDAHO PUBLIC
UTILITIES COMMISSION
By:
Brandon Karpen
Deputy Attorney General
IDAHO FOREST GROUP, LLC
By:
Ron L. Williams
Attomey for Idaho Forest Group, LLC
WASHIN(;TON AND NORTHERN
IDAHO DISTRICT COUNCIL OF
LABORERS
By
AVISTA CORPORATION
l4c--7
Attorney for Avista Corporation
CLEARWATER PAPER
CORPORATION
llv
Peter Richardson i Creg Adams
Attorneys for Clearwater Paper
IDAHO CONSERVATTON LEAGUE
By
Benjamin Otto
Idaho Conservation
COMMUNITY ACTION PARTNERSHIP
ASSOCIATION OF IDAHO
Ilv
Brad Pwdy
Attomey for CAPAIDanielle Franco-Malone
Schwerin Campbell Barnard Igliuin & Lavitt,
LLP
FIRST AMENDMENT TO STIPULATION AND SETTLEMENT - AVU.E.I7.Og & AVU-G-17-05 Page 4
By:/2
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HYDRO ONE LIMITED AVISTA CORPORATION
of.bn4dx oal,rBy:
By:oiaviH,*€yer e /
Attorney for Avista CorporationElizabeth Thomas, Partner, K&L Gates LLP
Kari Vander Stoep, Partner, K&L Gates LLP
On Behalf of Hydro One Limited and
Olympus Equity LLC
STAFF OF THE IDAHO PUBLIC
UTILITIES COMMISSION
CLEARWATER PAPtrR
CORPORATION
By
Brandon Karpen
Deputy Attorney General
Peter Richardson / Greg Adams
Attorneys for Clearwater Paper
IDAHO CONSERVATION LEAGUE
IDAHO FOREST GROUP, LLC
B
By Benjamin Otto
Idaho Conscrvation LcagueRon L. Williams
Attomey for Idaho Forest Group, LLC
WASHINGTON AND NORTHERN
IDAHO DISTRICT COUNCIL OF
LABORERS
COMMUNITY ACTION PARTNERSHIP
ASSOCIATION OF IDAHO
By:
By:Brad Purdy
Attorney for CAPAIDanielle Franco-Malone
Schwerin Campbell Bamard Iglitzin &Lavitt,
I,I.P
FIRST AMENDMENT TO STTPULATION AND SETTLEMENT _ AVU-E-I7-09 & AVU-G-17-05 Page 4
/n
HYDRO ONE LIMITEI'
By:
Elizabeth'[homas, Panncr, K&L Gatcs LLP
Kari VanderStoep, Partncr, K&L Gates LLP
On Bchalf of l{ydro One Limited and
Olympus Equity LLC
STA['[' O[' THE IDAHO PUBLIC
UTI ON
IDAHO FOREST CROUP, LLC
Ron L. Williams
Attomey for Idaho Forcst Oroup, LLC
WASHINGTON AND NORTIIERN
IDAHO I}ISTRICT COUNCIL OF
LABORERS
By:
Danielle Franco-Malone
Schwcrin Campbell Barnard lgliuin & Lavitt,
LLP
//2 %Zrwa-q fltaBy:
AVTSTA CORPORATION
DwiH.,6yir u /r
Attomcy for Avista Corporation
CLEARWATER PAPER
CORPORATION
Peter Richardson / Grcg Adams
Attorncys for Clcarwater Paper
IDAHO CONSIIRVATION LEAGUE
Bcnjamin Otto
Idaho Conscrvation Lcague
COMMUNITY ACTION PARTNERSHIP
ASSOCIATION OT IDAHO
rle 0 Esrt=O
Brad Purdy
Attorncy for CAPAI
FIRST AMENDMENT'I'O STIPULATION AND SETTLEMENT _ AVU.E.I7.Og & AVU.G-17-05 Page4
Revised Exhibit A to First Amendment to Stipulation and Settlement
MASTER LIST OF COMMITMENTS IN IDAHO
Table of Contents
Page
Reservation of Certain Authority to the Avista Board of Directors .........................................5
l. Authority Reserved:
2. Executive Management:................
3. Board ofDirectors: .......................
4. Avista's Brand and Plan for the Operation of the Business
5. Capital Investment for Economic Development:.................6
.66. Continued Innovation: ........
7. Union Relationshipsr...........
8. Compensation and Benefits:
9. Avista's Headquarters:
10. Local Staffing:
I I . Community Contributions: ....................
12. Community Involvement: ......................
I 3. Economic Development:..............
I 4. Membership Organizations:......
15. Safety and Reliability Standards and Service Quality Measures:..
Rate Commitments
16. Treatment of Net Cost Savings:................
17. Treatment of Transaction Costs
18. Travel Expenses:.........................9
.........................919. Rate Credits
5
5
5
6
7
7
7
7
7
7
7
8
8
.8
.8
.8
Regulatory Commitments .............
20. State Regulatory Authority and Jurisdiction:......
21. Compliance with Existing Commission Orders:.
22. Separate Books and Records
23. Audit, Access to and Maintenance of Books and Records il
l0
l0
...........1 I
...........1I
24. Cost Allocations Related to Corporate Structure and Affiliate Interests:..........................12
Revised Exhibit A to First Amendment to Stipulation and Settlement
25. Ratemaking Cost of Debt and Equity: .....................
26. Avista Capital Structure:...........
27. FERC Reporting Requirements:
28. Participation in National and Regional Forums:.................. ........14
29. Treatment of Confidential Information:...............
.........1 3
,......,,14
,,,......14
30. Commission Enforcement of Commitments:......
31. Submittal to State Court Jurisdiction for Enforcement of Commission Orders:
32. Annual Report on Commitments:
33. Commitments 8indingt...............
14
14
t4
t4
l5
17
Financial Integrity Commitments ...............................15
34. Capital Structure Support:..... .................15
35. Utility-Level Debt and Preferred Stock: ...................15
Continued Credit Ratings:.....
Credit Ratings Notifi cation : .................
Restrictions on Upward Dividends and Distributions: ...............
36.
37.
38.
....... I 5
....... I 5
....... I 6
39. Pension Funding:
40. SEC Reporting Requirements:
41. Compliance with the Sarbanes-Oxley Act:
.........17
.,.,.....17
.................17
.................17
................. I 8
Ring-Fencing Commitments 7
43. Independent Directors:.........
44. Non-Consolidation Opinion:
45. Olympus Equity LLC
46. Restriction on Pledge of Utility Assets: ....................18
47 . Hold Harmless; Notice to Lenders; Restriction on Acquisitions and Dispositions:..........18
48. Olympus Holding Corp. and Olympus Equity LLC Sub-entities 20
50. No Inter Company Debt:20
51. No Inter Company Lending:.................20
Resource Planning Commitments............. ........................20
52. Renewable Energy Resources:. ..............20
Revised Exhibit A to First Amendment to Stipulation and Settlement
53. Regulatory Integrated Resource Planning (IRP) Sideboards:
54. Energy Imbalance Market ("EIM")
55. Transport Electrification:...............
Environmental Commitments......
56. Greenhouse Gas and Carbon Initiatives:..
57. Greenhouse Gas Inventory Report:..
.21
.21
.21
.................22
.22
.22
))Energy Efficiency, Weatherization, Community and Low-Income Assistance
Commitments ......................
58. Funding for Energy Efficiency, Weatherization, Conservation, and Low-lncome
Assistance Programs: ..................22
59. Clearwater Paper DSM Assistance:
Idaho Forest Group (IFG) DSM Assistance:.......,
Community Contributions: .............
Addressing Other Low-lncome Customer Issues:
63. Fee Free Payment Program:.........
64. Improve Penetration of Low-lncome Programs: ...........
65. Tribal Communities: ..............
Miscellaneous Commitments
66. Sources of Funds for Hydro One Commitments:
67. Service Rules for Gas Utilities
68. Meters:
69. Colstrip Planning:
70. Montana Community Transition Fund
71. Colstrip Transmission Planning:.........
72. Contract
73. Most Favored Nations
74. Notice and Petition to Alter or Amend:
75. North American Free Trade Agreement (NAFTA):
76. Venue for and Resolution of Disputes:..........
77 . Environmental Liabilities of Parent: ..............
7 8. Foreign Exchange and Hedging:....................
60.
61.
62.
23
.23
.24
.24
.24
.24
.24
.25
.25
.2s
.25
.27
.28
.28
Water Rights and Facilities..............
..28
..28
,R
Revised Exhibit A to First Amendment to Stipulation and Settlement
79. Subordination of Water Rights: .............28
MODTFICATION TO DELEGATION OF AUTHORITY, CLAUSE 3................................28
Revised Exhibit A to First Amendment to Stipulation and Settlement
Reservation of Certain Authority to the Avista Board of Directors
Authoritv Reserved: Consistent with and subject to the terms of Exhibits A and B
to the Merger Agreement (referred to as "Delegation of Authority") contained in
Appendix 5 of the Joint Application, decision-making authority over commitments 2-
l5 below is reserved to the Board of Directors of Avista Corporation ("Avb!a") and
not to Hydro One. Any change to the policies stated in commitments 2-15, plus 30
(Commission Enforcement of Commitments), 37 (Credit Ratings Notification), 38
(Restrictions on Upward Dividends and Distributions), 43 (lndependent Directors),
49 (No Amendment), 74 (Notice and Petition to Amend or Alter), 75 (North
American Free Trade Agreement), and 76 (Venue for and Resolution of Disputes),
requires a two-thirds (213) vote of the Avista Board, provided that Avista must obtain
approval for such changes from all regulatory bodies with jurisdiction over the
Commitments before such changes can go into effect, and provide written notice to
all parties to Case No. AVU-E- 1 7-09IAVU-G- I 7-05 of such request for approval:
Governance
3.
l.
2.Executive Management: Avista will seek to retain all current executive
management of Avista, subject to voluntary retirements that may occur. This
commitment will not limit Avista's ability to determine its organizational structure
and select and retain personnel best able to meet Avista's needs over time. The Avista
board retains the ability to dismiss executive management of Avista and other Avista
personnel for standard corporate reasons. Any decision to hire, dismiss or replace the
Chief Executive Officer of Avista shall be within the discretion of the Avista Board
of Directors, and shall not require any approvalof Hydro One Limited ("Hydro One")
or any of its afTiliates (other than Avista), notwithstanding anything to the contrary in
the merger agreement, and its exhibits and attachments, between Hydro One and
Avista.
Avista Employee Compensation: Any decisions regarding Avista employee
compensation shall be made by the Avista Board consistent with the terms of the
Merger Agreement between Hydro One and Avista, and current market standards and
prevailing practices of relevant U.S. electric and gas utility benchmarks. The
determination of the level of any compensation (including equity awards) approved
by the Avista Board with respect to any employee in accordance with the foregoing
shall not be subject to change by Hydro One or the Hydro One Board.
Board of Directors: After the closing of the Proposed Transaction, Avista's board
will consist of nine (9) members, determined as follows: (i) two (2) directors
designated by Hydro One who are executives of Hydro One or any of its subsidiaries;
(ii) three (3) directors who meet the standards for "independent directors" - under
section 303A.02 of the New York Stock Exchange Listed Company Manual (the
"Independent Directors") and who are citizens of the United States and are and have
been residents of the Pacific Northwest region for at least two years, to be designated
by Hydro One (collectively, the directors designated in clauses (i) and (ii) hereof the
"Hydro One Designees"), subject to the provisions of Clause 2 of Exhibit A to the
Revised Exhibit A to First Amendment to Stipulation and Settlement
Merger Agreement; (iii) three (3) directors who as of immediately prior to the closing
of the Proposed Transactionl are members of the Board of Directors of Avista,
including the Chairman of Avista's Board of Directors (if such person is different
from the Chief Executive Officer of Avista); and (iv) Avista's Chief Executive
Officer (collectively, the directors designated in clauses (iii) and (iv) hereof, the
"Avista Designees"). Avista and Hydro One shall consult with each other prior to
the designation of any Independent Directors. The initial Chairman of Avista's post-
closing Board of Directors shall be the Chief Executive Officer of Avista as of the
time immediately prior to closing for a one year term. If any Avista Designee
resigns, retires or otherwise ceases to serve as a director of Avista for any reason, the
remaining Avista Designees shall have the sole right to nominate a replacement
director to fill such vacancy, and such person shall thereafter become an Avista
Designee.
The term "Pacific Northwest region" means the Pacific Northwest states in which
Avista serves retail electric or natural gas customers, currently Alaska, Idaho,
Montana, Oregon and Washington.
The Independent Directors will have no material relationship with Hydro One and its
subsidiaries and affiliated entities, the Province of Ontario, or Avista and its
subsidiaries and affiliated entities currently or within the previous 3 years. Former
directors of Avista who otherwise meet these qualifications qualify as Independent
Directors.
Business Operations
Avista's Brand and Plan for the Operation of the Business: Avista will maintain
Avista's brand and Avista will establish the plan for the operation of the business and
its Subsidiaries;
Capital Investment for Economic Development: Avista will maintain its existing
levels of capital allocations for capital investment in strategic and economic
development items, including property acquisitions in the university district, support
of local entrepreneurs and seed-stage investments;
6.Continued Innovation: Avista will continue development and funding of its and its
subsidiaries' innovation activities;
I "Proposed Transaction" means the transaction proposed in the Joint Application of Avista and Hydro One filed on
September 14,2017.
4.
5.
Revised Exhibit A to First Amendment to Stipulation and Settlement
Union Relationshins: Avista will honor its labor contracts and has the authority to
negotiate, enter into, modify, amend, terminate or agree to changes in any collective
bargaining agreement or any of Avista's other material contracts with any labor
organizations, union employees or their representatives;
Compensation and Benefits: Avista will maintain compensation and benefits
related practices consistent with the requirements of the Merger Agreement;
Local Presence/Community Involvement
Avista's Headquarters: Avista will, and Hydro One agrees Avista will, maintain (a)
its headquarters in Spokane, Washington; (b) Avista's office locations in each of its
other service territories, and (c) no less of a significant presence in the immediate
location of each of such office locations than what Avista and its subsidiaries
maintained immediately prior to completion of the Proposed Transaction;
10.Local Staffine: Avista will maintain Avista Utilities' staffing and presence in the
communities in which Avista operates at levels sufficient to maintain the provision of
safe and reliable service and cost-effective operations and consistent with pre-
acquisition levels;
I l.Communitv Contributions: For five years after the close of the Proposed
Transaction, Avista will maintain a $4,000,000 annual budget for charitable
contributions (funded by both Avista and the Avista Foundation) and additionally, a
52,000,000 annual contribution will be made to Avista's charitable foundation. No
approval from any regulatory bodies with jurisdiction over the Commitments is
required for any changes to this commitment from and after the sixth year following
closing; however any such changes will continue to require a two-thirds (2/3) vote of
the Avista Board. Avista agrees it will endeavor, over time, to distribute this annual
budget across the service territory in proportion to each state's portion of the system;2
Communitv Involvement: Avista will maintain at least Avista's existing levels of
community involvement and support initiatives in its service territories; including
involvement with low-income service agencies and support initiatives;
Economic Development: Avista will maintain at least Avista's existing levels of
economic development, including the ability of Avista to spend operations and
2 Note that Commitment 6l contains an additional commitment relating to charitable contributions; pursuant to that
commitment Hydro One will cause Avista to make a one-time contribution of $7,000,000 to Avista's charitable
foundation at or promptly following closing of the Proposed Transaction.
7
8.
9,
12.
13.
14.
Revised Exhibit A to First Amendment to Stipulation and Settlement
maintenance funds3 to support regional economic development and related strategic
opportunities in a manner consistent with Avista's past practices;
Membershio Orsanizations: Avista will maintain the dues paid by it to various
industry trade groups and membership organizations; and
15. Safetv and Reliabilitv Stand and Service Oualitv Measures: Avista has
established Service Quality Performance Standards, Customer Guarantees and a
Service Quality Measure Report Card for its customers in Washington. Avista is
currently working with the Idaho Commission Staff to develop similar performance
standards, customer guarantees and a reporting mechanism for its customers in ldaho.
Following Idaho Commission approval of such standards, customer guarantees and a
reporting mechanism, Avista will not seek, and Hydro One agrees Avista will not
seek, to remove or reduce any associated penalty provisions for ten (10) years after
the date of the merger.
Rate Commitments
16.Treatment of Net Cost Savings: Hydro One commits that Avista customer rates
will not increase as a result of the Proposed Transaction. Hydro One will hold Avista
customers harmless from any such rate increase. Further, any net cost savings that
Avista may achieve as a result of the Proposed Transaction will be reflected in
subsequent rate proceedings, as such savings materialize. To the extent the savings
are reflected in base retail rates they will offset the Rate Credit to customers, up to the
offsetable portion of the Rate Credit.
17. Treatment of Transaction Costs:
a. Costs associated with the Proposed Transaction will be separately tracked as non-
utility costs with no charges, either allocated or direct, to be recovered from
Avista customers. After the consummation of the Proposed Transaction, any
remaining transaction costs or other costs of Olympus Holding Corp. or Hydro
One will not appear on Avista's utility books, i.e. such costs will be recorded as
non-utility. Avista shall furnish the Commission with journal entries and
supporting detail showing the nature and amount of all costs of the Proposed
Transaction (including but not limited to management time, BOD time, in-house
and outside counsel time, any consultants engaged, etc.) since the Proposed
Transaction was first contemplated, as well as the accounts charged, within 120
days of a Commission order in this docket.
3 Operations and maintenance funds dedicated to economic development and non-utilify strategic opportunities will
be recorded below-the-line to a nonoperating account.
Revised Exhibit A to First Amendment to Stipulation and Settlement
b. Avista will exclude, and Hydro One agrees Avista will exclude, from Avista
general rate cases, or any other method of cost recovery, all costs related to the
Proposed Transaction including but not limited to: (i) all legal work from in-house
counsel and outside counsel; (ii) any financial advisory fees associated with the
Proposed Transaction; (iii) the acquisition premium; (iv) costs related to M&A
consulting and advice (v) preparation of and materials for presentations relating to
the Proposed Transaction (vi) any senior executive compensation or any Avista
board of director time tied to a change of control of Avista; and (vii) any other
costs directly related to the Proposed Transaction.
c. Technology expenditures and investments related to software and hardware
compatibility issues between Avista and Hydro One and its affiliates shall not be
recovered from Idaho ratepayers except to the extent such costs are offset by
savings over time.
Travel Expenses: Avista's corporate travel expenses recovered in rates, including
variable costs of flying the Avista corporate jet and commercial travel for all directors
and executives, shall not exceed 105Yo of 2017 expenses, adjusted annually for
inflation.
19. Rate Credits:
18.
Avista and Hydro One will flow through to Avista's retail customers in Idaho a Rate
Credit of approximately $15.8 million" over a 5-year period, beginning at the time the
merger closes.
Rate Credit Proposal
Idaho Annual
Credit Years 1-5 Idaho Total Credit
Total Credit $3.2 Million $15.8 Million
Offsetable Credit S527,510 $2.6 Million
The Total Rate Credit to customers for the five years following the closing will be
approximately $3.2 millions per year. A portion of the annual total Rate Credit will
aTheexactagreed-uponfigureis$l5,8ll,050,whichisequalto 5%oofthe Idahobaserevenueasof02/01/18.
Idaho electric base revenue is $259,473,000, and Idaho natural gas base revenue (including natural gas costs -
Schedules 150/155) is $56,748,000. Five percent of those revenues ue $12,973,650 (electric) and $2,837,400
(natural gas).
5 The exact amount agreed upon is $3,162,21 0 per yetu. The annual Idaho electric Rate Credit for each of the five
years is $2,594,730. The annual Idaho natural gas Rate Credit for each ofthe five years is $567,480.
Revised Exhibit A to First Amendment to Stipulation and Settlement
be offsetable, in the amount of $527,5106. During the S-year period the financial
benefits will be flowed through to customers either through the separate Rate Credit
described above or through a reduction to the underlying cost of service as these
benefits are reflected in the test period numbers used for ratemaking. At the time of
the close, the S3.2 million benefit will be provided to customers through a separate
Rate Credit, as long as the reduction in costs (of up to 5527,510 annually) has not
already been reflected in base retail rates for Avista's customers.
To the extent Avista demonstrates in a future rate proceeding that cost savings, or
benefits, directly related to the Proposed Transaction are already being flowed
through to customers through base retail rates, the separate Rate Credit to customers
would be reduced by an amount up to the offsetable Rate Credit amount. The portion
of the total Rate Credit that is not offsetable effectively represents acceptance by
Hydro One of a lower rate of return during the 5-year period.
The $15.8 million represents the "floor" of benefits that will be flowed through to
Avista's customers, either through the Rate Credit or through benefits otherwise
included in base retail rates. To the extent the identifiable benefits exceed the annual
offsetable Rate Credit amounts, these additional benefits will be flowed through to
customers in base retail rates in general rate cases as they occur. Avista and Hydro
One believe additional efficiencies (benefits) will be realized over time from the
sharing of best practices, technology and innovation between the two companies. It
will take time, however, to identify and capture these benefits. The level of annual
net cost savings (and/or net benefits) will be tracked and reported on an annual basis,
and compared against the offsetable level of savings.
Any application of offsetable savings will be reviewed by the Commission before the
offset is applied, and Avista bears the burden of proof to prove that savings have
materialized and the offset to rate credits should apply.
Regulatory Commitments
20. State Resulatorv Authoritv and Jurisdiction: Hydro One and its subsidiaries,
including Avista, as applicable and as appropriate, will comply with all applicable
laws, including those pertaining to transfers of property, affiliated interests, and
securities and the assumption of obligations and liabilities. As required by and
consistent with applicable laws, venue for resolution of proceedings related to these
matters will be at the appropriate state utility commission(s). Hydro One and its
subsidiaries, including Avista, will make their employees and officers available to
6 The offsetable portion of the Rate Credit is calculated using a pro rata share of the jurisdictional total of the rate
credit (i.e. Idaho's share of the total system offsetable Rate Credit is 31.03%, therefore Idaho's share of the $1.7
million offsetable portion is $527,510).
21.
Revised Exhibit A to First Amendment to Stipulation and Settlement
testify before the Commission at the Commission's request to provide information
relevant to the matters within its jurisdiction.
Compliance with Existins Commission Orders: Hydro One and its subsidiaries,
including Avista, acknowledge that all existing orders issued by the Commission with
respect to Avista or its predecessor, Washington Water Power Co., will remain in
effect, and are not modified or otherwise affected by the Proposed Transaction.
Hydro One and its subsidiaries, including Avista, as applicable and as appropriate,
will comply with all applicable future Commission orders that remain in force.
Separate Books and Records: Avista will maintain separate books and records from
its affiliates.
Audit. Access to and Maintenance of Books and Records:
Nothing in the Proposed Transaction and corporate structure thereafter will limit or
affect the Commission's rights with respect to inspection of Avista's and Olympus
Holding Corp.'s accounts, books, papers and documents pursuant to and in
compliance with all applicable Idaho laws and administrative rules.
Hydro One, Olympus Holding Corp. and its subsidiaries, including Avista, will
provide reasonable access to Avista's books and records; access to financial
information and filings; access rights with respect to the documents supporting any
costs that may be allocable to Avista; and access to Avista's board minutes, audit
reports, and information provided to credit rating agencies pertaining to Avista.
Hydro One, Olympus Holding Corp. and its subsidiaries, including Avista, will
maintain the necessary books and records so as to provide documents relating to all
corporate, affiliate, or subsidiary transactions with Avista, or that result in costs that
may be allocable to Avista.
The Proposed Transaction will not result in reduced access to the necessary books
and records that relate to transactions with Avista, or that result in costs that may be
allocable to Avista. Avista will provide the Commission, its agents, Commission
Staff and other parties to regulatory proceedings reasonable access to books and
records (including those of Hydro One, Olympus Holding Corp. or any affiliate or
subsidiary companies) required to verify or examine transactions with Avista, or that
result in costs that may be allocable to Avista.
Nothing in the Proposed Transaction will limit or affect the Commission's rights with
respect to inspection of Avista's accounts, books, papers and documents in
compliance with all applicable laws. Nothing in the Proposed Transaction will limit
or affect the Commission's rights with respect to inspection of Hydro One and
Olympus Holding Corp.'s accounts, books, papers and documents pursuant to all
applicable laws; provided, that such right to inspection shall be limited to Hydro One
22.
23.
24.
Revised Exhibit A to First Amendment to Stipulation and Settlement
and Olympus Holding Corp.'s accounts, books, papers and documents that pertain
solely to transactions affecting Avista's regulated utility operations.
Hydro One and its affiliates agree that the Commission may have access to all the
accounting records of Hydro One and its affiliates that are the bases for charges to
Avista, to determine the reasonableness of the costs and the allocation factors used by
Hydro One and its affiliates, or its subdivisions to assign costs to Avista and amounts
subject to allocation or direct charges. Hydro One and its affiliates agree that they
will not raise lack ofjurisdiction as a means of denying such access, and agree to
cooperate fully with such Commission investigations. Furthermore, any party may
recommend that the Commission deny recovery of any costs assigned or charged to
Avista by Hydro One or its affiliates if that party believes that Hydro One or its
affiliates have failed to provide sufficient access to records relating to the costs at
issue.
Cost Allocations Related to Corporate Structure and Affiliate Interests: Avista
agrees to provide, and Hydro One agrees Avista will provide, cost allocation
methodologies used to allocate to Avista any costs related to Hydro One or its other
affiliates and subsidiaries, and commits that there will be no cross-subsidization by
Avista customers of unregulated activities.
Avista will not charge to customers expenses allocated or directly assigned by Hydro
One except as specifically authorized for recovery in rates by the Commission. The
cost-allocation methodology provided pursuant to this commitment will be a generic
methodology that does not require Commission approval prior to it being proposed
for specific application in a general rate case or other proceeding affecting rates. The
cost-allocation methodology provided pursuant to this commitment also will establish
a procedure for ensuring that additional costs or revenues resulting from changing
curency exchange rates will not be reflected in rates charged to Idaho customers.
Avista will bear the burden of proof in any general rate case that any corporate and
affiliate cost allocation methodology is reasonable for ratemaking purposes. Neither
Avista nor Hydro One or its affiliates and subsidiaries will contest the Commission's
authority to disallow, for retail ratemaking purposes in a general rate case,
unreasonable, or misallocated costs from or to Avista or Hydro One or its other
affi liates and subsidiaries.
With respect to the ratemaking treatment of affiliate transactions affecting Avista,
Hydro One, and Olympus Holding Corp. and its subsidiaries, as applicable, will
comply with the Commission's then-existing practice; provided, however, that
Olympus Holding Corp. and its subsidiaries, including Avista, will provide the
Commission with access to written information provided by and to credit rating
agencies that pertains to Avista. Olympus Holding Corp. and each of its subsidiaries
will also provide the Commission with access to written information provided by and
to credit rating agencies that pertains to Olympus Holding Corp.'s subsidiaries to the
extent such information may affect Avista.
25.
Revised Exhibit A to First Amendment to Stipulation and Settlement
nothing in this commitment limits Avista from also proposing a different ratemaking
treatment for the Commission's consideration, or limit the positions any other party
may take with respect to ratemaking treatment.
Avista will notify the Commission of any change in corporate structure that affects
Avista's corporate and affiliate cost allocation methodologies. Avista will propose
revisions to such cost allocation methodologies to accommodate such changes.
Avista will not take the position that compliance with this provision constitutes
approval by the Commission of a particular methodology for corporate and affiliate
cost allocation.
Avista will notify the Commission prior to the implementation of plans by Avista or
Hydro One or any of Hydro One's affiliates:
a. To form an affiliate for the purposes of transacting business with Avista's
regulated operations;
b. To commence new business transactions between an existing affiliate and Avista;
or
c. To dissolve an affiliate that has transacted substantial business with Avista.
Ratemaking Cost of Debt and Equitv: Avista will not advocate for, and Hydro One
agrees Avista will not advocate for, a higher cost of debt or equity capital as
compared to what Avista's cost of debt or equity capital would have been absent
Hydro One's ownership.
For future ratemaking purposes:
a. Determination of Avista's debt costs will be no higher than such costs would have
been assuming Avista's credit ratings had not been affected by the Proposed
Transaction, and applying those credit ratings to then-current debt;
b. Avista bears the burden to prove prudent in a future general rate case any pre-
payment premium or increased cost of debt associated with existing Avista debt
retired, repaid, or replaced as a part ofthe Proposed Transaction; and
c. Determination of the allowed return on equity in future general rate cases will
include selection and use of one or more proxy group(s) of companies engaged in
businesses substantially similar to Avista, without any limitation related to
Avista's ownership structure.
d. Avista and Parent agree that Avista's Cost of Capital, including Avista's Rate of
Return (ROR), common equity, and Long-Term Debt, shall not be more costly
after the close of Proposed Transaction than they would have been absent the
Proposed Transaction. Avista bears the burden of proving that increases in
Avista's Cost of Capital, including Avista's ROR, common equity, and Long-
28.
29.
30.
Revised Exhibit A to First Amendment to Stipulation and Settlement
Term Debt, is caused by circumstances or developments that are unrelated to the
financial risks or other characteristics of the Proposed Transaction.
26.Avista Capital Structure: At all times following the closing of the Proposed
Transaction, Avista's actual common equity ratio will be maintained at a level no less
than 44 percent. This commitment does not restrict the Commission from ordering a
hypothetical capital structure.
27.FERC Reportinq Requirements: Avista will continue to meet all the applicable
FERC reporting requirements with respect to annual and quarterly reports (e.g.,
FERC Forms 1,2,3q) after closing of the Proposed Transaction.
Participation in National and Resional Forums: Avista will continue to
participate, where appropriate, in national and regional forums regarding transmission
issues, pricing policies, siting requirements, and interconnection and integration
policies, when necessary to protect the interest of its customers.
Treatment of Confidential Information: Nothing in these commitments will be
interpreted as a waiver of Hydro One's, its subsidiaries', or Avista's rights to request
confidentialtreatment of information that is the subject of any of these commitments.
Commission Enforcement of Commitments: Hydro One and its subsidiaries,
including Avista, understand and agree that the Commission has authority to enforce
these commitments in accordance with their terms. If there is a violation of the terms
of these commitments, then the offending party may, at the discretion of the
Commission, have a period of thirty (30) calendar days to cure such violation.
The scope of this commitment includes the authority of the Commission to compel
the attendance of witnesses from Olympus Holding Corp. and its affiliates, including
Hydro One, with pertinent information on matters affecting Avista. Hydro One and
Olympus Holding Corp. and its subsidiaries waive their rights to interpose any legal
objection they might otherwise have to the Commission's jurisdiction to require the
appearance of any such witnesses.
31. Submittal to State Court Jurisdiction for Enforcement of Commission Orders:
Hydro One, on behalf of itself and its subsidiaries in the post-close corporate structure
between Hydro One and Avista (as those companies in between may change over
time), and Avista willjointly file with the Commission prior to closing the Proposed
Transaction an affidavit affirming that they will submit to the jurisdiction of Idaho
courts for enforcement of the Commission's orders adopting the commitments made
by and binding upon them and their affiliates where noted, and subsequent orders,
and will agree to the application of ldaho law with respect to such matters.
32. Annual Report on Commitments: By May 1,2019 and each May 1 thereafter
through May l, 2029, Avista will file, and Hydro One agrees Avista will file, a report
with the Commission regarding the status of compliance with each of the
commitments as of December 3l of the preceding year. The report will, at a
Revised Exhibit A to First Amendment to Stipulation and Settlement
minimum, provide a description of the performance of each of the commitments, will
be filed in Case No. AVU-E-17-09|AVU-G-17-05 and served to all parties to the
docket. If any commitment is not being met, relative to the specific terms of the
commitment, the report must provide proposed corrective measures and target dates
for completion of such measures. Avista will make publicly available at the
Commission non-confidential portions of the report.
33.Commitments Bindins: Hydro One, its subsidiaries in the post-close corporate
structure between Hydro One and Avista (as those companies in between may change
over time) and Avista, acknowledge that the commitments being made by them are
fully binding upon them and upon their affiliates where specifically noted and their
successors in interest. Hydro One and Avista are not requesting in this proceeding a
determination of the prudence, just and reasonable character, rate or ratemaking
treatment, or public interest of the investments, expenditures or actions referenced in
the commitments, and the parties in appropriate proceedings may take such positions
regarding the prudence, just and reasonable character, rate or ratemaking treatment, or
public interest of the investments, expenditures or actions as they deem appropriate.
If Hydro One or any other entity in the chain of Avista's ownership determines that
Avista or any other entity has failed to comply with an applicable Commitment, the
entity making such determinations shall take all appropriate actions to achieve
compliance with the Commitment.
Financial Integrity Commitments
34. Capital Structure Support: Hydro One will provide equity to support Avista's
capital structure that is designed to allow Avista access to debt financing under
reasonable terms and on a sustainable basis.
Utility-Level Debt and Preferred Stock: Avista will maintain separate debt and
preferred stock, if any, to support its utility operations.
Continued Credit Ratings: Each of Hydro One and Avista will continue to be rated
by at least one nationally recognized statistical "Rating Agency." Hydro One and
Avista will use reasonable best efforts to obtain and maintain a separate credit rating
for Avista from at least one Rating Agency within the ninety (90) days following the
closing of the Proposed Transaction. If Hydro One and Avista are unable to obtain or
maintain the separate rating for Avista, they will make a filing with the Commission
explaining the basis for their failure to obtain or maintain such separate credit rating
for Avista, and parties to this proceeding will have an opportunity to participate and
propose additional commitments.
37 Credit Ratines Notification: Hydro One and Avista agree to notify the Commission
within two business days of any proposed or actual downgrade of Avista's
credit rating by S&P, Moody's, or any other such ratings agency that issues
such ratings with respect to Avista.
35.
36.
Revised Exhibit A to First Amendment to Stipulation and Settlement
If Avista or Hydro One anticipates or is notified of a proposed or actual
downgrade of Avista's credit rating to a non-investment grade status, then
Avista and Hydro One will:
a. Within 30 days of providing notice, provide a plan and timeline ("Compliance
Plan") that is subject to Commission review, modification, rejection, or approval
for maintaining Avista's investment grade status or restoring Avista's investment
grade status.
b. Subsequent to the filing of the Compliance Plan, Avista shall file progress
reports every 90 calendar days detailing its effons for maintaining Avista's
investment grade status or restoring Avista's investment grade status, in addition
to detailing how Avista has met each requirement in the Compliance Plan.
38. Restrictions on Upward Dividends and Distributions:
a. If either (i) Avista's corporate credit/issuer rating as determined by both
Moody's and S&P, or their successors, is investment grade, or (ii) the ratio of
Avista's EBITDA to Avista's interest expense is greater than or equal to 3.0, then
distributions from Avista to Olympus Equity LLC shall not be limited so long as
Avista's equity ratio is equal to or greater than 44 percent (the "Minimum Equity
Ratio") on the date of such Avista distribution after giving effect to such Avista
distribution. Under any other circumstances, distributions from Avista are
allowed only with prior Commission approval. The Minimum Equity Ratio is
subject to change as set forth in subparagraph b. below. Both the EBITDA and
equity ratio shall be calculated on the same basis that such calculations would be
made for ratemaking purposes for regulated utility operations.
b. If a proposal is made, or if the Commission determines, in an Avista rate case
that Avista's rates should be based on a common equity ratio of less than 44
percent, the Parties agree that the Commission should consider and determine,
either in the rate case or in a separate proceeding, whether the Minimum Equity
Ratio for purposes of subparagraph a. above should be adjusted in light of any
adjustment to the common equity ratio for ratemaking purposes. In addition,
Avista may at any time upon a showing of good cause petition the Commission
for a change to the Minimum Equity Ratio, and no party to the Settlement
Stipulation will oppose the initiation of such a proceeding.
c. If Avista does not have an investment-grade rating from both Moody's and
S&P, or from one of these entities, or its successor, if only one issues ratings with
respect to Avista, and the ratio of EBITDA to Avista's interest expense is less
than 3.0, no dividend distribution to Olympus Equity LLC or its successors will
occur.
d. Avista commits, and Hydro One agrees, that prior to upward dividends from
Avista, Avista cash flows will not be comingled in common accounts with cash
Revised Exhibit A to First Amendment to Stipulation and Settlement
flows for other purposes at either of Olympus Equity, LLC or Hydro One,
including all Hydro One subdivisions and affiliates. Hydro One will ensure that
all of the Parent's corporate entities maintain accounts and subaccounts that are
separate from Avista accounts and subaccounts, sufficient to cause handling of
cash flows to be entirely consistent with Avista's corporate purposes.
Pension Fundins: Avista will maintain its pension funding policy in accordance
with sound actuarial practice. Hydro One will not seek to change Avista's pension
funding policy.
SEC Reporting lRtqu[euea]tsi Following the closing of the Proposed Transaction,
Avista will file required repofts with the SEC
Compliance with the Sarbanes-Oxlev Act: Following the closing of the Proposed
Transaction, Avista will comply with applicable requirements of the Sarbanes-Oxley
Act.
Ring-Fencing Commitments
42. Golden Share: Entering into voluntary bankruptcy shall require the affirmative vote
of a "Golden Share" of Avista stock. The Golden Share shall mean the sole share of
Preferred Stock of Avista as authorized by the Commission. This share of Preferred
Stock must be in the custody of an independent third-party, where the third-party has
no financial stake, affiliation, relationship, interest, or tie to Avista or any of its
affiliates, or any lender to Avista, or any of its affiliates. This requirement does not
preclude the third-party from holding an index fund or mutual fund with negligible
interests in Avista or any of its affiliates. In matters of voluntary bankruptcy, this
Golden Share will override all other outstanding shares of all types or classes of
stock.
43.Independent Directors: At least one of the nine members of the board of directors
of Avista will be an Independent Director who, consistent with Commitment 3, meets
the standards under 303A.02 of the New York Stock Exchange Listed Company
Manual. At least one of the members of the board of directors of Olympus Equity
LLC will be an Independent Director who, consistent with Commitment 3, meets the
standards under 303A.02 of the New York Stock Exchange Listed Company Manual.
The same individual may serve as an Independent Director of both Avista and
Olympus Equity LLC. The organizational documents for Avista will not permit
Avista, without the consent of a two-thirds majority of all its directors, including the
affirmative vote of the Independent Director at Avista (or if at that time Avista has
more than one Independent Director, the affirmative vote of at least one of Avista's
Independent Directors), to consent to the institution of bankruptcy proceedings or the
inclusion of Avista in bankruptcy proceedings. In addition to an affirmative vote of
this Independent Director, the vote of the Golden Share shall also be required for
Avista to enter into a voluntary bankruptcy.
39.
40.
41.
44. Non-Consolidation Opinion:
Revised Exhibit A to First Amendment to Stipulation and Settlement
a. Within ninety (90) days of the Proposed Transaction closing, Avista and Olympus
Holding Corp. will file, and Hydro One agrees they will file, a non-consolidation
opinion with the Commission which concludes, subject to customary assumptions
and exceptions, that the ring-fencing provisions are sufficient that a bankruptcy
court would not orderthe substantive consolidation of the assets and liabilities of
Avista with those of Olympus Holding Corp. or its affiliates or subsidiaries (other
than Avista and its subsidiaries).
b. Hydro One and Olympus Holding Corp. must file an affidavit with the
Commission stating that neither Hydro One, Olympus Holding Corp. nor any of
their subsidiaries, will seek to include Avista in a bankruptcy without the consent
of a two-thirds majority of Avista's board of directors including the affirmative
vote of one of Avista's independent director, and the Avista Golden Shareholder.
c. If the ring-fencing provisions in these commitments are not sufficient to obtain a
non-consolidation opinion, Olympus Holding Corp. and Avista agree to promptly
undertake, and Hydro One agrees to cause them to undertake, the following
actions:
i. Notifu the Commission of this inability to obtain a non-consolidation
opinion.
Propose and implement, upon Commission approval, such additional ring-
fencing provisions around Avista as are sufficient to obtain a non-
consolidation opinion subject to customary assumptions and exceptions.
iii. Obtain a non-consolidation opinion.
45.Olvmpus Equitv LLC: Olympus Holding Corp.'s indirect subsidiaries will include
Olympus Equity LLC and Avista. See the post-acquisition organizational chart in
Attachment C to the Master List of Commitments in Idaho. Following closing of the
Proposed Transaction, all of the common stock of Avista will be owned by Olympus
Equity LLC, a new Delaware limited liability company. Olympus Equity LLC will be
a bankruptcy-remote special purpose entity, and will not have debt.
46.Restriction on Pledee of Utilitv Assets: Avista agrees to, and Hydro One will cause
Avista to agree to, prohibitions against loans or pledges of utility assets to Hydro
One, Olympus Holding Corp., or any of their subsidiaries or affiliates, without
Commission approval. In addition, the Applicants agree that Avista's assets will not
be pledged by Avista or any of its affiliates, including Hydro One and Olympus
Holding Corp. and any of their subsidiaries or affiliates, forthe benefit of any entity
other than Avista.
ll.
47. Hold Harmless: Notice to Lenders: Restriction on Acquisitions and Dispositions:
Revised Exhibit A to First Amendment to Stipulation and Settlement
a. Hydro One, its affiliates, and subsidiaries including Avista will hold Avista
customers harmless from any business and financial risk exposures associated
with Olympus Holding Corp., Hydro One, and Hydro One's other affiliates.
b. Pursuant to this commitment, Avista will file, and Hydro One agrees Avista will
file, with the Commission, prior to closing of the Proposed Transaction, a form of
notice to prospective lenders describing the ring-fencing provisions included in
these commitments stating that these provisions provide no recourse to Avista
assets as collateral or security for debt issued by Hydro One or any of its
subsidiaries, other than Avista.
c. In furtherance of this commitment:
Hydro One, its affiliates, and subsidiaries including Avista commit that
Avista's regulated utility customers will be held harmless from the liabilities
of any unregulated activity of Avista or Hydro One and its affiliates. In any
proceeding before the Commission involving rates of Avista, the fair rate of
return for Avista will be determined without regard to any adverse
consequences that are demonstrated to be attributable to unregulated
activities. Measures providing for separate financial and accounting
treatment will be established for each unregulated activity.
Il.Hydro One, its affiliates, and subsidiaries including Avista will notify the
Commission promptly after Hydro One's, its affiliates', or subsidiaries'
including Avista's board approval but contemporaneously with any public
announcement of: (l) any acquisition by Hydro One, its affiliates, and
subsidiaries including Avista of a regulated or unregulated business that is
equivalent to five (5) percent or more of Hydro One's capitalization; or (2)
any change in control or ownership of Avista. Should there be a change only
to the upstream ownership of Avista or Olympus Holding Corp. among
wholly owned subsidiaries of Hydro One, notice of such a change will be
provided in either an updated organizational chart, or in a separate notice
filing prior to the change taking place. Notice pursuant to this provision is
not and will not be deemed an admission orexpansion of the Commission's
authority or jurisdiction over any transaction or in any matter or proceeding
whatsoever.
Within sixty (60) days following the notice required by this subsection
(c)(ii)(2), and prior to completion of any transfer, Avista and Olympus
Holding Corp. or its affiliates, as appropriate, will seek Commission
approval of any sale or transfer of any material part of Avista, or of any
transaction or series of transactions, regardless of size, that would result in a
person or entity, other than a wholly owned subsidiary of Hydro One,
directly or indirectly, acquiring a controlling interest in Avista or Olympus
Holding Corp. The term "material part of Avista" means any sale or transfer
of stock representing ten percent (l0o/o) or more of the equity ownership of
Avista.
Revised Exhibit A to First Amendment to Stipulation and Settlement
iii. Hydro One, Olympus Holding Corp. and Avista will provide notification of
and obtain Commission approval of the divestiture, spin-offi or sale of any
integral Avista asset, including power plants, as required by Idaho law. This
notification and approval requirement does not limit any jurisdiction that the
Commission may have.
lv Neither Avista nor Hydro One will assert in any future proceedings that, by
virtue of the Proposed Transaction and the resulting corporate structure, the
Commission is without jurisdiction over any transaction that results in a
change of control of Avista.
d. If and when any non-regulated subsidiary of Avista becomes a subsidiary of
Hydro One or one of its subsidiaries other than Avista, Avista and Hydro One will
so advise the Commission within thirty (30) days and will submit to the
Commission a written document setting forth Avista's proposed corporate and
affi liate cost allocation methodologies.
Olvmpus Holdins Corp. and Olvmnus Equitv LLC Sub-entities: Olympus
Holding Corp. will not operate or own any business and will limit its activities to
investing in and attending to its shareholdings in Olympus Equity LLC, which, in
turn, will not operate or own any business and will limit its activities to investing in
and attending to its shareholdings in Avista.
No Amendment: Hydro One, Olympus Holding Corp. and Avista commit that no
amendments, revisions or modifications will be made to these regulatory
commitments without prior Commission approval.
No Inter Companv Debt: Avista will notify the Commission before entering into
any inter-company debt transactions with Olympus Holding Corp., Hydro One, or any
of their subsidiaries or affiliates. Avista shall comply with Idaho law for any debt
transactions over a one year term.
No Inter Companv Lending: Without prior Commission approval, Avista will not
lend money to Olympus Holding Co.p., Hydro One, or any of their subsidiaries or
affiliates.
Resource Plannin g Commitments
52. Renewable Enerw Resources: Avista will continue to offer renewable power
programs in consultation with stakeholders.
Communications with customers shall accurately reflect the environmental attributes
associated with power delivered to such customers. Hydro One and Avista
acknowledge that Avista retains the burden of proof to demonstrate the prudence of
any resource acquisition.
48.
51.
49.
50.
Revised Exhibit A to First Amendment to Stipulation and Settlement
Nothing in this Commitment prohibits Avista from selling renewable energy credits
that arise from resources included in base rates applicable in Idaho.
Hydro One acknowledges Avista's obligations under applicable renewable portfolio
standards, and Avista will continue to comply with such obligations.
53.Resulatorv Intesrated Resource Plannins (IRP) Sideboards: Avista and its
afliliates agree to consider in all resource planning and acquisition efforts both
demand-side and renewable energy resources that are consistent with the Idaho
Commission's resource evaluation and acquisition rules and policies.
Avista and its affiliates agree that o'Resources" to be considered in all IRPs include
Power Purchase Agreements ("PPAs").
Avista commits to calculating a variable generation resource's contribution to
capacity in terms of that resource's contribution to resource adequacy and that
resource's ability to reduce the loss of load probability in some or all hours or days
utilizing the Effective Load Carrying Capability ("ELCC") methodology or an
appropriate approximation.
Avista will work with an independent third-party consultant, with expertise in
renewable energy resources, to ensure that the utility has up-to-date resource cost and
performance assumptions, as well as the appropriate learning curves, for use in the
2019 IRP process.
Unless it conflicts with any instructions contained in the Commission's
acknowledgement letter in response to Avista's current integrated resource plan
(IRP), beginning with the next IRP, Avista commits to modeling a range of potential
costs for greenhouse gas emissions, and will work with its IRP Advisory Group to
determine the appropriate values to model.
54.Energv Imbalance Market ("EIM"): Avista is currently refreshing its EIM
analysis and will release it publicly by the end of 2018. Avista commits to hold
workshops with the Commission and interested stakeholders to review the analysis
and discuss the prudent next steps.
The goal is to convene the workshop within 30 days of the release of the EIM
analysis.
55. Transport Xleetrifiealieri Avista commits, and Hydro One agrees that Avista
commits, to initiate a stakeholder process within 60 days of the close of the Proposed
Transaction to explore opportunities for transpoft electrification that benefits all Idaho
customers.
Environmental Commitments
Greenhouse Gas and Carbon Initiatives: Hydro One acknowledges Avista's
Greenhouse Gas and Carbon Initiatives contained in its current Integrated Resource
Plan, and Avista will continue to work with interested parties on such initiatives.
Greenhouse Gas Inventory Report: Avista will report greenhouse gas emissions as
required.
Energy Efficiency, Weatherization, Community and Low-Income Assistance Commitments
Fundins for Energy Efficiency. Weatherization. Conservation. and Low-Income
Assistance Prosrams: Hydro One will arrange funding of $5,308,847 over a lO-year
period to fund energy efficiency, weatherization, conservation, and low-income
assistance programs. The funding will be disbursed as directed by the Energy
Efficiency, Weatherization, Conservation, and Low-lncome Assistance Committee
("EWCL"), a new committee of stakeholders tasked with determining which existing
or new programs should receive this funding to address energy efficiency,
weatherization, conservation, and low-income needs in Avista's Idaho service
territory. The committee will initially consist of representatives from the following
stakeholders: Avista, Commission staff, the Lewiston CAP, Idaho Conservation
League, the Idaho Forest Group, and Clearwater Paper. The Committee may add
members at its discretion. The EWCL will consider the needs of all parties and
remain flexible on the timing of any disbursements.
The EWCL will convene within 90 days after the close of the Proposed Transaction,
will present a 10-year funding plan to Avista by June 1,2019 and will revise this plan
periodically as needed.
59.Clearwater Paper DSM Assistance: Avista agrees to work with Clearwater Paper to
attempt to qualify the following projects for DSM funding under Tariff Schedule 90,
upon closing of the Proposed Transaction:
. Variable speed drives on the No. I paper machine hydropulper. Variable speed drives on the No. 4 power boiler demineralized water pumps. Energy efficient chillers and compressors for the Lurgi system. A variable speed drive on the No.1 paper machine white water system. Variable speed drives on the two waste water outfall pumps
The total estimated cost of the projects is $750,000. Tariff Schedule 90 allows for
possible DSM funding of up to 70%o of the cost of the project, subject to meeting
certain specified cost-effectiveness criteria. The portion of the estimated cost of these
identified projects that is not reimbursed under Schedule 90 will be considered for
funding through Commitment 58. The EWCL will consider the needs of all parties
and remain flexible on the timing of any disbursements.
56.
57.
58.
Revised Exhibit A to First Amendment to Stipulation and Settlement
Revised Exhibit A to First Amendment to Stipulation and Settlement
60. Idaho Forest Group (IFG) DSM Assistance: Avista agrees to work with Idaho
Forest Group (lFG) to attempt to qualify the following projects for DSM funding
under Tariff Schedule 90, upon closing of the Proposed Transaction:
a
a
Installation of information technology to gather plant information data (PI
Data) on energy usage at IFG's Lewiston plant, and through an installed
interface, transmit real time energy load information data for each operating
station to IFG and Avista. This may serve as a useful demonstration project
for data interfaces with other customers on Avista's system. The total
estimated cost is S300,000.
Replacement of aging compressors, saws and other equipment with state of
the art machinery at IFG's Lewiston and Grangeville plants, in order to
increase productivity and energy efficiency.
Tariff Schedule 90 allows for possible DSM funding of up to 70%o of the cost of the
project, subject to meeting certain specified cost-effectiveness criteria. The portion
of the estimated cost of these identified projects that is not reimbursed under
Schedule 90 will be considered for funding through Commitment 58. The EWCL
will consider the needs of all parties and remain flexible on the timing of any
disbursements.
Communitv Contributions: Hydro One will arrange funding for a one-time
57,000,000 contribution to Avista's charitable foundation at or promptly following
closing.T
Addressing Other Low-Income Customer Issues: Avista will continue to work
with low-income agencies to address other issues of low-income customers, including
funding for bill payment assistance.
Fee Free Pavment Program: Avista will continue to offer the Fee Free Payment
Program to its residential customers.
Improve Penetration of Low-Income Programs: Hydro One and Avista will work
with the Lewiston CAP to undertake a targeted effort with a goal of improving the
penetration rate of low-income programs with a focus on underserved, vulnerable,
and high energy burden households. This commitment may include expanding
marketing, outreach, and data analysis as appropriate.
Tribal Communities: In implementing these conditions, Avista will reach out to
tribal communities to encourage participation of members of such communities in
receiving the benefits of this settlement.
61.
62.
63.
64.
65.
7 Note that Commitment I I contains additional provisions relating to Avista's charitable contributions
Revised Exhibit A to First Amendment to Stipulation and Settlement
Miscellaneous Commitments
66. Sources of Funds for Hydro One Commi Throughout this list of merger
commitments, any commitment that states Hydro One will arrange funding is not
contingent on Hydro One's ability to arrange funding, particularly from outside
sources, but is a firm commitment to provide the dollar amount specified over the
time period specified and for the purposes specified. To the extent Avista has retained
earnings that are available for payment of dividends to Olympus Equity LLC
consistent with the ring fencing provisions of this list of merger commitments, such
retained earnings may be used. Funds available from other Hydro One affiliates may
be used without limitation. Avista will not seek cost recovery for any of the
commitments funded or arranged by Hydro One in this list of merger commitments.
Hydro One will not seek cost recovery for such funds from ratepayers in Canada or
the United States.
67 Service Rules for Gas Utilities: Avista will meet with Commission Staff to review
the Commission's Service Rules for Gas Utilities (IDAPA 31.31.01) to determine
which provisions should be retained and/or modified, and, if the participants agree,
incorporate those changes into Avista's tariff.
Meters: Avista will meet with Commission Staff to review its meter placement and
protection policies and practices and determine, if the participants agree, what
additional steps should be taken to revise Avista's current policies and practices.
Colstrip Planning: Hydro One and Avista agree to support a December 31,2027,
end of life for depreciation purposes in the processes described below. Hydro One
and Avista also agree that issues relating to the potential accelerated depreciation of
Avista's interest in Colstrip Units 3 and 4 and related matters should be addressed in
three existing, interrelated Commission proceedings as follows:
a GNR-U-18-01 -- Investigation Into the Impact of Federal Tax Code Revisions
on Utility Costs and Ratemoking: As part of this docket, not less than $12.0
Million regulatory liability should be created using the unprotected Excess
DFIT/Deferral of January - May 2018 tax credit. This $12.0 Million
regulatory liability would then be available to offset costs associated with
accelerated depreciation of Colstrip Units 3 and 4 or other use as determined
appropriate in AVU-E-l 8-03/AVU-G-l 8-02.
a AVU-E-18-03 / AVU-G-18-02 -- Avista Corporation's Application to Change
Its Electric andNatural Gas Depreciation Rates: As part of this docket, the
Commission will determine whether, as proposed by Hydro One and Avista,
December 31,2027, should be set as the "useful life" for Colstrip Units 3 and
4 for depreciation purposes. The Parties will work towards resolution of this
proceeding by April I ,2019.
Avista's Application 2019 Electric Integrated Resource Plan (IRP): Avista's
2019 IRP will analyze multiple retirement dates for Colstrip Units 3 and 4,
68.
69.
a
70.
71.
Revised Exhibit A to First Amendment to Stipulation and Settlement
including but not limited to, the "end of useful life" date determined in AVU-
E-18-03/AVU-G-18-02. The other retirement dates analyzed, as well as the
method, inputs, and assumptions for those scenarios planning analyses, will be
determined with input from the IRP stakeholder advisory group. Avista
anticipates that the first draft of its 201 9 IRP will be released in May 2019 and
its second draft will be released in August 2019.
Montana Communitv Transition Fund: Hydro One will affange funding of $3.0
Million (on a system basis) towards a Colstrip community transition fund.
Colstrip Transmission Planning: Avista will work with the other Path 8 (MT-to-
NW) owners (Northwestern Energy and BPA) to resolve questions surrounding the
ability of new generation to use the Colstrip line once Colstrip Units 1 and 2 retire,
and also when Units 3 and 4 retire.
At least one year prior to any closure of Colstrip Units 3 and 4, Avista will develop a
transition plan for its Colstrip transmission assets. Avista will hold at least one
workshop with Commission Staff and stakeholders to determine the transition plan's
impacts to Idaho ratepayers.
Avista will work with stakeholders and Commission Staff and file this transition plan
with the Commission. In developing this transition plan, to the extent practicable,
Avista should participate in l) the workshops on this topic that PSE and the
Commission will be holding in 2018 (per the PSE GRC settlement), and 2) the
BPA/Governor Bullock Transmission Task Force that commenced work on
December 8, 2017 , and will work through the middle of 20 I 8.
Hydro One agrees Avista will conduct the activities described in the foregoing
paragraphs.
Contract Labor: The parties agree that employees, contractors, and subcontractors
of Avista shall be paid a fair and competitive wage, and that Avista shall utilize
principles of fairness in bidding and contracting work in the state of Idaho. Avista
agrees to employ highly skilled and trained workers. Such training and education can
be obtained through college programs, technical schools, apprenticeships, or union
hall programs, including those of the Washington and Northern Idaho District
Council of Laborers. The parties recognize that no employee, contractor, or
subcontractor of the Company is required or prohibited from participation in any
labor organization. The Parties agree that Commitment 72 is severable, and if this
provision is declared void, invalid, or unenforceable in whole or in part, such
declaration shall not affect the remaining provisions of this Commitment List.
Most Favored Nations: The Applicants agree that upon the joint request of the Non-
Applicant Parties, or a request of less than all Non-Applicant Parties which is
unopposed by any Non-Applicant, the Commission shall have an opportunity and the
authority to consider and adopt in Idaho any commitments to which the Applicants
agree in other jurisdictions, even if such commitments are agreed to after the
72
73.
Commission enters its order in this docket. To facilitate the Commission's
consideration and possible adoption of the commitments from other jurisdictions, the
Parties recommend that the Commission issue an order accepting this Stipulation as
soon as practical, but to reserve in such order the explicit right to re-open to add
commitments accepted in another state jurisdiction.
The Applicants further agree that upon the request of any Non-Applicant Party prior
to the Commission's action on this Stipulation, if Applicants agree with any
commitments in other jurisdictions, within five days of such a request, Applicants
will meet and confer with the Non-Applicant Parties to discuss whether such
commitments should be added to the existing list of commitments already agreed to
by the Parties in this Stipulation.
Process for Consideration:
Within five calendar days after Applicants file a stipulation with new or amended
commitments with a commission in another state jurisdiction, Applicants will send a
copy of the stipulation and commitments to the Non-Applicant Parties.
Within five calendar days after a commission in another state jurisdiction issues an
order that accepts a stipulation to which Applicants are a party and imposes new or
modified commitments, that order, together with all commitments of any type agreed
to by Applicants in such other state, will be filed with the Commission and served on
all parties to this docket by the most expeditious means practical.
Within fourteen (14) calendar days after the last such filing from the other states
("Final Filing"), the Non-Applicant Parties may file with the Commission any
response they wish to make, including their position as to whether any of the
covenants, commitments and conditions from the other jurisdictions (without
modification of the language thereof except such non-substantive changes as are
necessary to make the commitment or condition applicable to Idaho) should be
adopted in ldaho.
a
a
a
a
a
Within five calendar days after any such response filing, the Applicants may file a
reply with the Commission.
Ifany ofthe dates above fall on Saturday, Sunday, or a holiday, the next business day
will be considered as the due date.
The Parties agree to support in their filings the issuance by the Commission of an
order regarding the adoption of such commitments as soon as practical thereafter,
recognizing that the Proposed Transaction cannot close until final state orders have
been issued approving the Proposed Transaction.
Revised Exhibit A to First Amendment to Stipulation and Settlement
a
Revised Exhibit A to First Amendment to Stipulation and Settlement
Limitations on Adj ustment:
Only commitments specific to gas service may form the basis for adjustments specific
to gas service.
Only commitments specific to electric service may form the basis for adjustments
specific to electric service.
Any commitments relating to support of communities in Montana are not subject to
this provision.
As Avista does not operate as a utility in Alaska, any commitments made in Alaska
are not subject to this provision.
For purposes of financial commitments or commitments having a financial impact,
commitments should be proportionate to Avista's corresponding business function in
Idaho in relation to its corresponding total company business function. Accordingly,
commitments should be allocated among Avista's WA, ID and OR jurisdictions based
on the following: 1) Rate Credit is allocated based on base revenues; 2) all other
financial commitments are allocated using the Company's jurisdictional "four factor"
allocation methodology, routinely employed for purposes of allocating common
costs, as discussed in Mr. Ehrbar's testimony in this proceeding. For purposes of this
provision, "financial commitments or commitments having a financial impact" do not
include ring fencing provisions.
Notice and Petition to Alter or Amend: If any event occurs that would have an
effect on Avista's operations and/or customer rates because of Avista's corporate
relationship with Hydro One, or affects Hydro One's compliance with any
commitment in this stipulation (an "Event"), any of the parties to this proceeding may
petition the Commission at any time to alter or amend the final order in Case Nos.
AVU-E-17-09 and AVU-G-17-05, and neither Hydro One nor any of its subsidiaries,
including Avista, will oppose initiation of such a proceeding. Hydro One or Avista
will report to the Commission any material Event as soon as practicable. For
purposes of the Commitment 74, a material event means (i) an event that a properly
informed person would reasonably conclude would have a significant effect on
Avista's operations or customers' rates; or (ii) making it more probable than not that
Hydro One would be out of compliance with any Commitment herein. Nothing in
this Commitment 74 shall be interpreted to limit the positions or arguments that
Avista or Hydro One may take or advance in any such proceeding, including the right
to argue that a petition presents insufficient grounds or evidence. Prior to filing a
petition with the Commission under this Commitment 74, a party must provide Hydro
One and Avista at least 30 days advance written notice and an opportunity to meet
and confer about resolutions other than filing with the Commission under this
commitment. Nothing in this commitment is intended to restrict the rights of the
parties to petition the Commission concerning its order(s) in this docket, or to limit
the authority of the Commission.
a
a
a
a
74.
Revised Exhibit A to First Amendment to Stipulation and Settlement
75.North American Free Trade Asreement (NAFTA): Hydro One and Avista
commit to forego their rights to bring any claim under NAFTA, or similar provision
of the United States Mexico Canada Agreement (USMCA) challenging, or seeking
monetary damages related to, any regulations, laws, orders or actions passed or taken
by the State of Idaho or any instrumentality thereof or the government of the United
States in relation to the production, transmission or distribution of electric power,
natural gas or other energy sources by Avista. In the event that such a claim is
brought under NAFTA (or the USMCA) that involves or impacts Avista, Hydro One
commits that it will not voluntarily participate in, support or otherwise encourage
such action. Hydro One will indemnifu Avista from any damages payable by Avista
in respect of any such claim as determined by a finalnon-appealable judicialorder.
76.Venue for and Resolution of Disputes: Avista and Parent agree that the venue for
disputes regarding the operation and/or customer rates of Avista will be in state and
U.S. federal regulatory bodies or courts of competent jurisdiction, as applicable, in
Oregon, Washington, Idaho, Montana or Alaska.
77. Environmental Liabilities of Parent:Hydro One will hold Avista and Avista
ratepayers harmless from any environmental obligations or liabilities of Hydro One or
its affiliates other than Avista, including those associated with harmful substances
such as asbestos or polychlorinated biphenyls (PCBs) and environmental cleanup and
restoration.
78.Foreign Exchange and Hedginq: Avista and Parent agree that Avista ratepayers
will be held harmless from any currency exchange or related cash flow smoothing or
hedging costs pertaining to activities beyond Avista's Idaho utility operations and/or
customer rates and not usual and customary prior to close of the Proposed
Transaction.
Water Rights and Facilities
79. Subordination of Water Riehts:
Hydro One and Avista shall abide by the terms of the luly 25,2018 Agreement with the
Idaho Department of Water Resources regarding Avista's Hydroelectric Facility Water
Rights. The July 25, 2018 Agreement is Attachment I to this Master List of
Commitments.
MODIFICATION TO DELEGATION OF AUTHORITY, CLAUSE 3 (see below for
defined terms)
Shareholder shall have the unfettered right to designate, remove and replace the
Shareholder Designees as directors of the Surviving Corporation with or without cause or
notice at its sole discretion, subject to the requirement that: (i) two (2) of such directors
are executives of Parent or any of its Subsidiaries and (ii) three (3) of such directors are
Independent Directors who are citizens of the United States and are and have been
residents of the Pacific Northwest Region for at least two years, while such requirement
Revised Exhibit A to First Amendment to Stipulation and Settlement
is in effect (subject in the case of clause (ii) hereof to Shareholder determining, in good
faith, that it is not able to appoint an Independent Director who is a citizen of the United
States, and resident of the Pacific Northwest Region in a timely manner, in which case
Shareholder may replace any such director with any person who is a citizen of the United
States, excluding any employee or executive of Parent or any of its Subsidiaries other
than Avista, on an interim basis, not exceeding six months, after which time Shareholder
shall replace any such interim director with an Independent Director who is a citizen of
the United States and is and has been a resident of the Pacific Northwest Region for at
least two years). If, at any time a circumstance arises, and during the pendency of any
such circumstance, whereby the Province of Ontario ("Ontario") exercises its rights as a
shareholder of Hydro One, uses legislative authority or acts in any other manner
whatsoever, that results, or would result, in Ontario appointing nominees to the board of
directors of Hydro One that constitute, or would constitute a majority of the directors of
such board, then Hydro One's authority to replace an Independent Director on an interim
basis is suspended for the pendency of such circumstance.
For purposes of this modification to the Delegation of Authority, the following
definitions, which are set forth in the Delegation of Authority and Merger
Agreement, will apply: "lndependent Directors" means any director of the Surviving
Corporation who (i) meets the standards for "independent director" under section
303A.02 of the New York Stock Exchange Listed Company Manual with respect to
Parent and its Subsidiaries, including the Surviving Corporation, (ii) has no material
relationship with Parent, its Subsidiaries or affiliated entities currently or in the prior
three years, and (iii) if and to the extent required with respect to a specific director, who
meets such other qualifications as may be required by any applicable state utility
regulatory authority for an independent director. Notwithstanding anything to the
contrary in this definition of "lndependent Director," (a) a director who also serves as an
independent director of the Surviving Corporation or any of its Subsidiaries or the
Shareholder and who otherwise satisfies the criteria set forth above for an "lndependent
Director," may still be considered independent within the meaning hereof and (b) former
officers of the Company or the Surviving Corporation, who otherwise satisfy the criteria
set forth above for an "lndependent Director," may still be considered independent within
the meaning hereof.
"Pacific Northwest R " means the Pacific Northwest states in which the Surviving
Corporation seryes retail electric or natural gas customers, currently Alaska, Idaho,
Montana, Oregon and Washington.
6'Parent" shall mean Hydro One Limited, a corporation organized under the laws of the
Province of Ontario.
"Shareholdel'shall mean Olympus Equity LLC, a Delaware limited liability company.
"Shareholder Desi " shall mean (i) two (2) directors designated by Shareholder who
are executives of Parent or any of its Subsidiaries; (ii) three (3) Independent Directors
who are residents of the Pacific Northwest Region, to be designated by Shareholder (the
"shareholder Independent Directors"). [Note: for purposes of this modification to the
Revised Exhibit A to First Amendment to Stipulation and Settlement
DoA, "Shareholder Designees" has the same meaning as "Hydro One Designees" in
Commitment No. 3.1
"Subsj1ljarles" when used with respect to any party hereto, shall mean any corporation,
limited liability company, partnership, association, trust or other entity of which
securities or other ownership interests representing more than 50Yo of the equity and
more than 50Yo of the ordinary voting power (or, in the case of a limited partnership,
more than 50%o of the general partnership interests) are, as of such date, owned by such
party or one or more Subsidiaries of such party or by such party and one or more
Subsidiaries of such party.
"Surviving Corporation" shall mean Avista Corporation, a Washington corporation.
Revised Exhibit A to First Amendment to Stipulation and Settlement
State of ltlaho
DEPARTMENT OF WATER RESOURCES
322 East Front Slrecl . P.O. Box E3?30'Boise, Idaho 83720,009E
Phone: (2fi8) :81-48fi0 . Fax: (208) 2E?-6?00 . trVebslte: rvww.ldrvr.ldaho.gov
C.L. "BU'TCATF OTTTR
GoYcmc
G,ARY SPACX-IVIAN
Dlrcctor
August l0,20lt
Transmitted Yia Hand Delivery and by E-mail
Paul Kjellander, President
Kristine Raper, Commissioner
Eric Anderson, Commissioner
C/O Diane Hanian, Commission Secretary
Idatro Public Utilities Commission
472W. Washinglon St.
Boise,Idaho E3702
Re: Case Nos. AVU-E-17-09 and AVU-G-17-05
Dear Commissioners,
I am writing to update you regarding discussions between the tdaho Department of Water
Resources (*IDWR") and Avista Corporation ("Avista"). Since early 2018, IDWR and Avista have been
discussing Avista's water right claims in the Coeur d'Alene-Spokane River Basin Adjudication
('CSRBA"). The main focus of our discussions has been Avisk's hydropower water rights at the three
dams and power plant at Post Falls ("Post Falls dam"). The State of ldaho has a history of disputes over
hydropower water rights. The Swan Falls controversy of the early 1980s involving ldaho Power's
hydropower water rights at Swan Falls dam led to thc commeneement of the Snake River Basin
Adjudication ('SRBA") in 1987. Litigation in the SRBA related to Idaho Power's Swan Falls water
rights did not conclude until 2012. A main reason for engaging with Avista early in the CSRBA was to
avoid extended litigation over Avista's hydropower water rights, especially over the issue of
subordination to existing and future waler rights.
In July of 20 I 8, IDWR was notified of the Joint Application for an Oder Authorizing Proposed
Transaction ("Joint Application") filed with the Idaho Public Utilities Commission (*PUC") by Avista
and Hydro One Limited ("Hydro One"). The Joint Application sought the PUC's approval of a planned
m€rger between Avista and Hydro One pursuant to ldaho Code $ 6l-328. Immediately, IDWR was
concerned the merger would disrupt the adjudication claim discussions and might impede or prevent
resolution of the issues. Furthermore, IDWR was concerned the merger could result in a change in the
use of water authorized by Avista's hydropower water rights. To ensure that the public interest, as it
pertains to Avista's use of water under its hydropower water rights, would not be adversely affected,
IDWR moved to intervene in the PUC proceeding. The PUC subsequently granted IDWR's petition to
intcrvene.
While IDWR's petition to intervene was pending before the PUC, IDWR and Avista continued
discussing Avista's hydropower water rights at Post Falls dam. We are pleased to inform you that IDWR
and Avista reached an agreement that addresses IDWR's concerns. Specifically, IDWR and Avista have
Revised Exhibit A to First Amendment to Stipulation and Settlement
August I 0, 201 I
Letter to Commissioners
Page2
reached an agtreement regarding subordination of Avista's water rights consistent with the historical
operations at Post Falls dam. IDWR and Avista have agreed that Avista's water right claim nos. 95-4518,
95-91 15, and 95-91l9 shall be recommended in the CSRBA with the following subordination language:
The use of water confirmed in this right shall be junior and subordinate to permits, licenses, or
decrees for all uses within the State of Idaho with a priority date of, or earlier than, July 25, 2018,
diverted upstrcam from allthree points of diversion for this right.
The use of water confirmed in this right shall be junior and subordinate to permits, licenses, or
decrees for all uses, except for permits, Iicenses, or decrees for inigation storage or power
purposes. within the State of Idaho with a priority date later than July 25, 201 8, diverted upstream
from all thrte points of diversion for this right.
The use of water confirmed in this right shall not be subordinate to permits, license, or decrees
within ths State of Idaho diverted downstream from all three points of diversion for this right
The agreement ensures that the public interect, as il reletes to Aviste's water use pursuant
to its wster righta, will not be adversely affected by the proposed transactior between Avistt aad
Hydro One, The agreement safeguards existing and future water users from changes in historical
operations, helps protect the summer lake level of Coeur d'Alene Lake, and supports the ongoing
operations of Post Falls dam in a manner consistpnt with prior agreements and the ldaho Department of
Environmental Quality 40 I Certifi cation.
A copy of the agreemcnt between IDWR and Avista is attached to this lctter. To ensure
documentation of the agre€ment before the PUC, IDWR requests that if the PUC approves the pending
transaction between Avista and Hydro One, the PUC include the agreement as an attachment or exhibit to
any such order so that the resolution of this issue is documented in the order.
Sincerely,
Director
Attachment: Agreement Regarding Subondination of Avista's Post Falls Hydroelectric Facility \ilater
Rights
Cc: All parties
Revised Exhibit A to First Amendment to Stipulation and Settlement
CERTITICATE OF SERVICE
I HEREBY CERTIFY that on this 10ft &y of August 2018, I served a true and conect
copy of the foregoing document on the following by the method(s) indicated.
IDAHO PUC
Idaho Public Utilities Commissioners
C/O Diane Hanian
Commission Secretary
Idaho Public Utilities Commission
472W. Washin$on St.
Boise,Idaho 83702
d [e-mail]. gov
David Meyer
Vice President and Chief Counsel of
Regulatory & Governmental Affairs
Avista Corporation
P.O. Box 3727
Spokane, WA99220-3727
David. [e-mail]
Patrick Ehrbar
Director of Rates
State & Federal Regulation
Avista Corporation
[e-mail]
Elisabeth Thomas
Kari Vander Stoep
Dirk Middents
K&L Gates LLP
925 Fourth Avenue, Suite 2900
Seattle, WA 98104-1158
I iz.thomas@.k I sates.corn
kari.vanderstoep@kl gates.com
d i rk. m i ddents@.kl gates, com
James Scarlett
Executive Vice President & Chief
Legal Officer
Hydro One Limited
i scarlett (@h vdroone. con r
f] u.s. Mait, postage prepaid
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AVISTA CORPORATION
[l U.S. Mail, postage prepaidtrtrtra
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HYDRO ONE LIMITED
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Revised Exhibit A to First Amendment to Stipulation and Settlement
COMMISSIONSTAFF
B U.S. Mail, postage prepaid
f] UanA Delivery
Brandon Karpen
Deputy Attomey General
Idatro Fublic Utilities Commission
472W. Washington
P.O. Box 83720
Boise, lD 83720-0074
brandon.karpen@nuc. idalto. eov
Ronald Williams
Williams Bradbury, PC
P.O. Box 388
Boise,lD 83701
ronrDwi I I ianrsbradburv.com
Larry A. Crowley, Director
The Energy Strategies Institute, Inc.
5549 S. Cliffsedge Ave.
Boise,ID 83716
[e-mail]
Dean J. Miller
deanjmi [e-mail]
Dr. Don Reading
5070 Hill Road
Boise,ID 83703
[e-mail]
carol.hauenAclearwaterpaper.conr
[e-mail]
i ohn j acobs@c learwatemaper.com
dav i d. wren(Ocl earwaterpaper.cont
nat han. sm ithfdcl earwaterBaper.com
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IDAHO FOREST GROUP, LLCatrnntr
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fl u.s. Mail postage prepaidfl Uana fleliveryfl overnight Mailn Facsimilefi rmail
CLEARWATER PAPER CORPORATION
Peter J. Richardson E U.S.Mail, postage prepaid
Richardson Adams, PLLC I gana Delivery
SiiN-. Zifr St. ! ovemight Mail
Boise,ID 83702 H ;H:lI'"
oe t erlD ri c h ard sonad am s. c o m
I u.s. Mail, postage prepaid
I Hana Deliveryfl ovemightMailI Facsimile
El amait
El Email
E email
EX Email
I Email
I emait
Revised Exhibit A to First Amendment to Stipulation and Settlement
COMMUNTTY
Brady M. Purdy
Attorney at Law
2019N. l7h St.
Boise, ID 83702
bnrpurd v(0thotmgi l.com
Benjamin J. Otto
Idaho Conservation League
710 N. 6s St.
Boise, lD 83702
botto@idahoconservati on. or,I
Norman M. Semanko
Parsons Behle & Latimer
800 West Main Street, Ste. 1300
Boise, Idaho 83702
nsemanko6lnarsonsbeh le.conl
ACTION PARTNERSHTPE ASSOCIATION OF IDAHO
U.S. Mail, postage prepaid
Hand Delivery
Overnight Mail
Facsimile
Email
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Hand Delivery
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Facsimils
Email
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Hand Delivery
ovcrnight Mail
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L. Baxter
IDAHO CONSERVATION LEAGUE
Enntrtr
WASHINGTON AND NORTHERN IDAHO DISTRJCT COUNCIL OF LABORERS
Danielle Franco-Malone EI U.S. Mait, postage prepaid
Schwerin Campbell Bamard I uano Delivery
Iglitzin & Lavitt LLP I overnight Mail
l&West Mercer Street, Suite 400 H [ffii"'"Seattle, WA 98119-3971
Iianco@workerl aw,corn
AVISTA CUSTOMER GROUP
BntrfI
EX
Revised Exhibit A to First Amendment to Stipulation and Settlement
Agreement Regarding Subordination of Avista's Post Falls Hydroelectric Facility Water Rights
Purpose
This Agreement, reached hetween Avista Corporation, a Washington corporation ("Avista") and the
ldaho Department of Water Resour€es ("lDWR") (collectively the "Parties), is lntended to capture the
m utual understanding of the Parties regarding su bordination of Avista's Post Falls water rights, of record
with IDWR as Avista's claim nos. 95-4518, 95-9115, and 95-9119 (hereafter "Avista's water riBhts"). This
Agreernent guides the Parties' actions in settings including, but not lirnited to, the Coeur d'Alene-
Spokane River Basin Adjudication ("CSRBA") and the currently pending proceeding before the ldaho
Public Utilities Commission ("PUC") related to the proposed merger of Avista and Hydro One Limited
(aairg through its indirect subsidiary Olympus Equity LLC)("Hydro One").
This Agreement is built upon several interests of the Parties:o To protect the summer lake level of Coeur d'Alene Lake;e To ensure the public interest, as it relates to the use of water by Avista, will not be adversely
affected by the proposed transaction between Avista and Hydro One; andr To support the ongoing operations of the three dams and power plant at Post Falls ("Post Falls
darn") in a manner consistent with prior agreements and as referenced by the ldaho
Department of Environmental Quality 401 Certification ("401Certification")for Post Falls dam
and the Federal Energy Regulatory Cornmission's License for the Spokane River Project #2545
("FERC license"),
Subordination of Avista's water rights
The Parties agree that Avista's water rights are subordinated consistent with the following language, and
the following language will be included in the CSRBA claims for Avista's water rights and will be
incorporated in IDWR's recommendations of Avista's water rights in the CSRBA Director's Report for
Basin 95 ("Directo/s Report"):
The use of water confirmed in this right shall be junior and subordinate to permits,
licenses, or decrees for all uses within the state of ldaho with a prioraty date of, or
earlier than, July 25, 2018, diverted upstream from all three points of diversion for this
right.
The use of water confirmed in this right shall be junior and subordinate to permits,
licenses, or decrees for all uses, except for permits, licenses, or decrees for irrigation
storage or power purposes, within the State of ldaho with a priority date later than July
25, 2018, diverted upstream from all three points of diversion for this right.
The use of water confirrned in this right shall not be subordinate to permits, license, or
decrees within the State of ldaho diverted downstream from all three points of
diversion for this right.
Agreed Actions by the Parties
1. Upon both Partles' slgnature to this Agreement, IDWR will convey to the PUC a copy of thls
Agreement along with a letter stating that if the PUC approves the pending transactaon between
Avista and Hydro One, the PUC shall reference this Agreement in any such order. The letter will
I
Revised Exhibit A to First Amendment to Stipulation and Settlement
also explain that with this Agreement, IDWR is satisfied that the proposed merger, with resp€ct
to Avista's water rights, will not be adverse to the public interest;
2. Avista will not object to the terms of subordination described above which will be included in
the Direstor's Report for Avista's water rights, and wlll support those terms in the CSRBA;
3. The Parties agree on dismissal or withdrawal, as appropriate, of Avista's federal water right
claims in the CSRBA, numbered 95-16653 and 95-16654; and
4- Avista also owns certain water rights for power purposes at Cabinet Gorge dam, of record with
IDWR as water right nos. 96-4565,95-2179,96-2180, and95-2269. IDWR and Avista agree to
worlc, in good faith, toward reaching an agreernent regarding subordination of Avista's water
rights at Cablnet Gorge dam.
General Terms
1. Consideratio4.. The Parties acknowledge receiving sufficient consideration forthe commitments
contained in this Agreement and waive any argument that they might have in any judlcial
proceeding that no consideration exists to support this A6reement or that the consideration
received is not sufficient.
2- Bindine Effect of Asreement, This Agreement is intended to be a final and binding agreement
between IDWR and Avasta, jointly and severally, and inures to the benefit of, and is binding
upon, the successors in interest and assigns of each entity. The Parties further agree that this
Agreement is not contingent upon approval of the pending PUC merger case between Avista
and Hydro One.
3. CapaeitvtoExecuteAEr . ThePartieswarrantandrepresentthatthe personexecuting
this Agreement on its behalf is ernpowered to do so and thereby binds it by signing this
ABreement.
4. Waivers. The failure to object to any breach of any term or condition in this Agreement shall
not constitute a waiver, and no failure to object shall be deemed a waiver of any prior or
subsequent breach.
5. Entiretv of Agreement. This Agreement represents the entire and integrated agreement
between the Parties with respect to the subject matter hereof. No prom'se or inducernent has
been offered or made except as herein set forth, and this Agreement is executed by each party
without reliance upon any statement or representation by any other party or its agent.
5. Modification, To the extent this Agreement may be amended or modified, it shall be only by a
written agreement signed by each of the parties to this Agreement.
7. Disoute Eesolution. The Parties agree to meet and discuss informally, in good faith, before filing
an action arising from the Agreement,
8. Execution of ARre_gment in Parts.. Due to time constraints, the parties acknowledge that it is not
possibletohaveall PartiessignthesamecopyofthisAgreernent. Therefore,thepartiesaBree
that this Agreement may be executed in any number of counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the same instrument.
2
Revised Exhibit A to First Amendment to Stipulation and Settlement
9. Signatures. ln witness whereof, the parties to this Agreement through their duly authorized
representatives have executed this Agreemem and certify that they have read, understood, and
agreed to the terms and conditions of this Agreement as set forth herein.
4greed to, the 25s ofJuly, 2018.
Avista Corp
Bruce Howard, 5r. Director
Rea! Estate and Envlronmental Affairs
For IDWR
Gary Spackman, Director
ldaho Department of Water Resources
3
Revised Exhibit A to First Amendment to Stipulation and Settlement
ACKNOWLEDGEMENTS
srArE o, gCashi*s{o.
Y"(*^r ss.
COUNTY OF
On this35 dayof Juh,2018, before me,?.oJ Pcic<
A notary public of the State of [,r]"sh,+n*o-. , personally appeared Rf.:uc FLrut*fd*
s Sr, T)', r€.(-+or of Avista Corporation, known or identified to me to
be the Frson who executed the foregoing instrument on behalf of Avista Corporation, and he/she
acknowledged to me that he/she executed the same.
NOTARY
Reslding
PUBLIC
"y
Sfov&6e- r LJrA
My cornmission expires: a{n traU
STATE OF
COUNTY OF
-
On this _ day of July, 2018, before me, ,
A notary public of the State of ldaho, personally appeared GARY SPACKMAN, the Director of the ldaho
Department of Water Resources, known or identified to me to be the person who executed the
foregoing instrument on behalf of the ldaho tlepartment of Water Resources, and he acknowledged to
me that he executed the same.
NOTARY PUBLIC
Resldlng at
My commisslon expires:
ss.
4
Revised Exhibit A to First Amendment to Stipulation and Settlement
9. SEnglrcE ln wltness whereof, thc partlcs ttt thls Agreement through theirduly authortsed
reprEentatlues hae executed thls Agreement and certlfy that they hrve read, understood, and
agreed to the terms and condltlons of thls Aefeemcnt as set foith herein.
Agreed to. the 2srh of July, 2018.
For Avista Corp
Bruce Howard, Sr. Director
Rcal Estate and EnvironmGntal Affairi
Gary Director
ldaho Department of Water Rercurces
For
3
Revised Exhibit A to First Amendment to Stipulation and Settlement
ACKNOWLEDGEMEITITS
SIATE OF
COUNWOF
On this
-
day of July, 2018, before ne , - ,
A notary public of the State of personally appeared
a-ofAvistacorporation.knownoridentifiedtometo
be the person who executed the foregoing instrument on behalf of Avista Corporation, and he/she
acknowledged to me that he/she executed the same.
NOTARY PUBLIC
Residing at;
Mycommission "*pir"rZ
sTArE orHda.r-^
COUNTY OF $rat .-
On thisSayof July,2O18, before me,gi*. lL r-'\r^;+6-
A notary public of the State of ldaho, personally appeared GARY SPACKMAN, the Director of the ldaho
Department of Water Resources, known or identified to me to be the person who executed the
foregoing instrument on behalf of th€ ldaho Department of Water Resources, and he acknowledged to
me that he executed the same.
\Jlu*r" &
NOTARY PUBLIC
Residing at;
My cornmission t-r1\cr \.zo-r.r-
ss.
s5.
ilu-
4
*
a
Op ID r'
)
)
Exhibit B to First Amendment to Stipulation and Settlement
Bevised Exhibit A
Table of Contents
Reservation of Certain Authority to the Avista Board of Directors
l. Authority Reserved:
2. Executive Management:
3. Board of Directors:
4. Avista's Brand and Plan for the Operation of the Business:
5. Capital Investment for Economic Development: .
6. Continuedlnnovation:
8. Compensation and Benefits:
Page
4tr
fl
9. Avista's Headquarters:
10. Local Staffing:
I l. Community Contributions:
12. Community Involvemen
17. Treatment of Transaction Costs:
sz
sz
q
14. Membership Organizations:6g
15. Safety and Reliability Standards and Service Quality Measures:
Rate Commitments
16. Treatment ofNet Cost Savings:6g
6g
18. TravelExpenses:
19. Rate Credits:+g
Regulatory Commitments
20. State Regulatory Authority and Jurisdiction:elo
ell
22. Separate Books and Records:
23. Audtt Access to and Maintenance of Books and Records ell
24. Cost Allocations Related to Corporate Structure and Affiliate Interests: +412
Idaho Settlement Proposal - Master List of Commitments
Revised !!16/2019
5019!gf4 v19
Page 1 of2431
MASTER LIST OF COMMITMENTS IN IDAHO
Exhibit B to First Amendment to Stipulation and Settlement
Revised Exhibit A
25. Ratemaking Cost of Debt and Equity:
26. Avista Capital Structure:
27. FERC Reporting Requirements:
28. Participation in National and Regional Forums
29. Treatment of Confidential Information:
30. Commission Enforcement of Commitments
31. Submittal to State Court Jurisdiction for Enforcement of Commission Orders:
32. Annual Report on Commitments:
33. Commitments Binding
Financial Integrity Commitments
r+13
4315
)2A
)2U
EA
)24
$a
)214
+3r5
1315
{+li
-1315
34. Capital Structure Support:
35. Utility-Level Debt and Preferred Stock
37. Credit Ratings Notification:
38. Restrictions on Upward Dividends and Distributions
39. Pension Funding:
40. SEC Reporting Requirements: ,
41. Compliance with the Sarbanes-Oxley Act:
1316
+44
+411
+44
MURing-Fencing Commitments
42. Golden Share:
43. Independent Directors:+4A
44. Non-Consolidation Opinion:
46. Restriction on Pledge of Utility Assets:
47. Hold Harnrless; Notice to Lenders; Restriction on Acquisitions and Dispositions: -1-61!
48. Olympus Holding Corp. and Olympus Equity LLC Sub-entities:
49. NoAmendment@
50. No Inter Company Debt:
51. No Inter Company Lending:
Resource Planning Commitments
52. Renewable Energy Resources:
Idaho Settlement Proposal - Master List of Commitments
Revised 11/6/201B
50tE!_s,1ztg_9
E4
+14
+820
l8z)
1820
182I)
Page2 of24!
I
Exhibit B to First Amendment to Stipulation and Settlement
Bevised Exhibit A
53. Regulatory Integrated Resource Planning (IRP) Sideboards:
54. Energy Imbalance Market ("EIM"):
55. Transport Electrification:
Environmental Commitments
56. Greenhouse Gas and Carbon Initiatives:
57. Greenhouse Gas Inventory Report
Energy Efficiency, Weatherization, Community and Low-Income Assistance
Commitments
58. Funding for Energy Efficiency, Weatherization, Conservation, and Low-Income
Assistance Programs:tez
+e2
60. Idaho Forest Group (IFG) DSM Assistance
61. Community Contributions:
62. Addressing Other Low-Income Customer Issues
+eL
lel
+%L
+e2
59. Clearwater Paper DSM Assistance
63. Fee Free Payment Program:
64. Improve Penetration of Low-Income Programs
65. Tribal Communities:
Miscellaneous Commitments
66. Sources of Funds for Hydro One Commitments:
67. Service Rules for Gas Utilities:
68. Meters:
69. Colstrip Planning:
70. Montana Community Transition Fund:
7 L. Colstrip Transmission Planning:
72. Contract Labor:
73. Most Favored Nations:
14, Notice and Petitio
75. North American Free lffi
76. Venue for and nesolutio
71- environmentat fiabili
78. Foreisn Exchanse and Hedsins:
Idaho Settlement Proposal - Master List of Commitments
BevlEd Xl62018
50191s47tu9
2+D
z+4
?+D
2+4
ru
?+4
z+4
%ru
44
n
28
a
8
n
Page 3 ot24l
I
!
Exhibit B to First Amendment to Stipulation and Settlement
Revised Exhibit A
Water Riphts and Facilities 28
79. Subordination of Wa D
MODIFICATION TO DE D
Idaho Settlement Proposal - Master List of Commitments
Revised 1 1/6/20'18
5a-19!-54ZrrX!
Page 4 of243l
I
Exhibit B to First Amendment to Stipulation and Settlement
Revised Exhibit A
Reservation of Certain Authority to the Avista Board of Directors
1. Authority Reserved: Consistent with and subject to the terms of Exhibits A and B to the
Merger Agreement (refened to as "Delegation of Authority'') contained in Appendix 5
of the Joint Application, decision-making authority over commitments 2-15 below is
reserved to the Board of Directors of Avista Corporation ("Avlsta") and not to Hydro
One. Any change to the policies stated in commitments 2-15. plus 30 (Commission
gnforcement of Commitmen
UowarO Pividends a
emendmentl. Z+ fNotice
frade eqreement). an requires a
two-thirds (213) vote of the Avista Board, provided that Avista must obtain approval
for such changes from all regulatory bodies with jurisdiction over the Commitments
before such changes can go into effect, and provide written notice to all parties to
Case No. AVU-E-I7-09/AVU-G-17-05 of such request for approval:
Governance
2. Executive Management: Avista will seek to retain all current executive management of
Avista, subject to voluntary retirements that may occur. This commitment will not
limit Avista's ability to determine its organuatronal structure and select and retain
personnel best able to meet Avista's needs over time. The Avista board retains the
ability to dismiss executive management of Avista and other Avista personnel for
standard corporate reasons
Cnief Pxecutive Offic
Oirectors. and snalM approval of Hydro One Limited ("Hydro One") fer
nUstat. notwithstm
exnibits and attachments
eUsta gmotovee Comoens
compensation snal
tvtereer Asreement b
ueyailins Dractices of r
determination of the
the avista goard wit
not Ue suUiect to cn
3. Board of Directors: After the closing of the Proposed Transaction, Avista's board will
consist of nine (9) members, determined as follows: (i) two (2) directors designated by
Hydro One who are executives of Hydro One or any of its subsidiaries; (ii) three (3)
directors who meet the standards for "independent directors" - under section 303A.02
of the New York Stock Exchange Listed Company Manual (the "Independent
Directors") and who are citizens of the United States and are and have been residents
ofthePacificNorthwestIegion@,tobedesignatedbyHydroone
(collectively, the directors designated in clauses (i) and (ii) hereof, the "Hydro One
Idaho Settlement Proposal - Master List of Commitments
Revised 1'116/2018
5q-U-alzryrc
I
Page 5 of243l
Exhibit B to First Amendment to Stipulation and Settlement
Revised Exhibit A
Designees"), subject to the provisions of Clause 2 of Exhibit A to the Merger
Agreement; (iii) three (3) directors who as of immediately prior to the closing of the
Proposed Transactionr are members of the Board of Directors of Avista, including the
Chairman of Avista's Board of Directors (if such person is different from the Chief
Executive Officer of Avista); and (iv) Avista's Chief Executive Officer (collectively,
the directors designated in clauses (iii) and (iv) hereof, the "Avista Designees").
evista ana gvdro On
Indeoenaent Oirecton The initial Chairman of Avista's post-closing Board of
Directors shall be the Chief Executive Officer of Avista as of the time immediately
prior to closing for a one year term. If any Avista Designee resigns, retires or
otherwise ceases to serve as a director of Avista for any reason, the remaining Avista
Designees shall have the sole right to nominate a replacement director to fill such
vacancy, and such person shall thereafter become an Avista Designee.
The term "Pacific Northwest region" means the Pacific Northwest states in which
Avista serves retail electric or natural gas customers, currently Alaska, Idaho,
Montana, Oregon and Washington=
The Indenendent Directors will have no material relationshio with Hvdro One and its
suUsidiaries anO am
suUsidiaries and am
directors of Avista
Duectors.
Business Operations
4. Avista's Brand and Plan for the Operation of the Business: Avista will maintain
Avista's brand and Avista will establish the plan for the operation of the business and
its Subsidiaries;
5. Capital Investment for Economic Development: Avista will maintain its existing levels
of capital allocations for capital investment in strategic and economic development
items, including property acquisitions in the university district, support of local
entrepreneurs and seed-stage investments;
6. Continued Innovation: Avista will continue development and funding of its and its
subsidiaries' innovation activities;
I "Proposed Transaction" means the transaction proposed in the Joint Application of Avista and Hydro One filed
on September 14,2017.
Idaho Settlement Proposal - Master List of Commitments
Revised 11/6/2018
501915474 v'|9
Page 6 of24!
I
Exhibit B to First Amendment to Stipulation and Settlement
Reused Exhibit A
7.Union Relationships: Avista will honor its labor contracts and has the authority to
negotiate, enter into, modrfy, amend, terminate or agree to changes in any collective
bargaining agreement or any of Avista's other material contracts with any labor
organizations, union employee s or their repre sentatives ;
8. Compensation and Benefits: Avista will maintain compensation and benefits related
practices consistent with the requirements of the Merger Agreement;
Local Presence/Community Involvement
9. Avista's Headquarters: Avista will, and Hydro One agrees Avista will, maintain (a) its
headquarters in Spokane, Washington; (b) Avista's office locations in each of its other
service territories, and (c) no less of a significant presence in the immediate location of
each of such office locations than what Avista and its subsidiaries maintained
immediately prior to completion of the Proposed Transaction;
10. Local Stafrinq: Avista will maintain Avista Utilities' staffing and presence in the
communities in which Avista operates at levels sufficient to maintain the provision of
safe and reliable service and cost-effective operations and consistent with
pre-acquisition levels;
11. Community Co4tributiq4q! For five years after the close of the Proposed Transaction,
Avista will maintain a $4,000,000 annual budget for charitable contributions (funded
by both Avista and the Avista Foundation) and additionally, a $2,000,000 annual
contribution will be made to Avista's charitable foundation. No approval from any
regulatory bodies with jurisdiction over the Commitments is required for any changes
to this commitment from and after the sixth year following closing; however any such
changes will continue to require a two-thirds (213) vote of the Avista Board. Avista
agrees it will endeavor, over time, to distribute this annual budget across the service
territory in proportion to each state's portion of the system;2
12. Community Involvement: Avista will maintain at least Avista's existing levels of
community involvement and support initiatives in its service territories; including
involvement with low-income service agencies and support initiatives;
13. Economic Development: Avista will maintain at least Avista's existing levels of
economic development, including the ability of Avista to spend operations and
2 Note that Commitment 6l contains an additional commitment relating to charitable contributions; pursuant to
that commitment Hydro One will cause Avista to make a one-time contribution of $7,000,000 to Avista's
charitable foundation at or promptly following closing of the Proposed Transaction.
Idaho Settlement Proposal - Master List of Commitments
Bevisdlll62E!!
501915474 v'19
PageT of24L
I
Exhibit B to First Amendment to Stipulation and Settlement
Revised Exhibit A
maintenance funds3 to support regional economic development and related strategic
opportunities in a manner consistent with Avista's past practices;
14. Membership Organizations: Avista will maintain the dues paid by it to various industry
trade groups and membership organizations; and
15.and Standards and Service Avista has
established Service Quality Performance Standards, Customer Guarantees and a
Service Quality Measure Report Card for its customers in Washington. Avista is
currently working with the Idaho Commission Staff to develop similar performance
standards, customer guarantees and a reporting mechanism for its customers in Idaho.
Following Idaho Commission approval of such standards, customer guarantees and a
reporting mechanism, Avista will not seek, and Hydro One agrees Avista will not seek,
to remove or reduce any associated penalty provisions for ten (10) years after the date
of the merger.
Rate Commitments
16. Treatment of Net Cost Savings:--Aay Hvdro One commits that Av
rates witt not incre
avista customers narm net cost savings
that Avista may achieve as a result of the Proposed Transaction will be reflected in
subsequent rate proceedings, as such savings materialize. To the extent the savings are
reflected in base retail rates they will offset the Rate Credit to customers, up to the
offsetable portion of the Rate Credit.
17. Treatment of Transaction Costs:
a. Costs associated with the Proposed Transaction will be separately tracked as
non-utility costs with no charges, either allocated or direct, to be recovered from
Avista customers. After the consummation of the Proposed Transaction, any
remaining transaction costs or other costs of Olympus Holding Corp. or Hydro
One will not appear on Avista's utility books, i.e. such costs will be recorded as
non-utility. Avista shall furnish the Commission with joumal entries and supporting
detail showing the nature and amount of all costs of the Proposed Transaction
(including but not limited to management time, BOD time, in-house and outside
counsel time, any consultants engaged, etc.) since the Proposed Transaction was
first contemplated, as well as the accounts charged, within 120 days of a
Commission order in this docket.
3 Operations and maintenance funds dedicated to economic development and non-utility strategic opportunities
will be recorded below-the-line to a nonoperating account.
Idaho Settlement Proposal - Master List of Commitments
Revisecl !t!1,62E!t
501-s1-?lZl:vX!
Page 8 of243)
I
I
I
I
Exhibit B to First Amendment to Stipulation and Settlement
Revised Exhibit A
b. Avista will exclude, and Hydro One agrees Avista will exclude, from Avista
general rate cases, or any other method of cost recovery, all costs related to the
Proposed Transaction including but not limited to: (i) all legal work from in-house
counsel and outside counsel; (ii) any financial advisory fees associated with the
Proposed Transaction; (iii) the acquisition premium; (iv) costs related to M&A
consulting and advice (v) preparation of and materials for presentations relating to
the Proposed Transaction (vi) any senior executive compensation or any Avista
board of director time tied to a change of control of Avista; and (vii) any other
costs directly related to the Proposed Transaction.
c. Technology expenditures and investments related to software and hardware
compatibility issues between Avista and Hydro One and its affiliates shall not be
recovered from Idaho ratepayers except to the extent such costs are offset by
savings over time.
18. Travel Expenses: Avista's corporate travel expenses recovered in rates, including
variable costs of flying the Avista corporate jet and commercial travel for all directors
and executives, shall not exceed l05o/o of 2017 expenses, adjusted annually for
inflation.
19. Rate Credits:
Avista and Hydro One are-prepesing-teur[! flow through to Avista's retail customers
in Idaho a Rate Credit of approximately S15.8 milliona over a 5-year period, beginning
at the time the merger closes.
Rate Credit Proposal
Idaho Annual
Credit Years l-5 Idaho Total Credit
Total Credit $3.2 Million $15.8 Million
Offsetable Credit 5527,510 $2.6 Million
The Total Rate Credit to customers for the five years following the closing will be
approximately $3.2 million5 per year. A portion of the annual total Rate Credit will be
4 The exact agreed-upon figure is $15,811,050, which is equal to 5% ofthe Idaho base revenue as of02101/18.
Idaho electric base revenue is $259,473,000, and Idaho natural gas base revenue (including natural gas costs -
Schedules 150/155) is $56,748,000. Five percent ofthose revenues are$12,973,650 (electric) and $2,837,400
(natural gas).
5 The exact amount agreed upon is 53,162,210 per year. The annual Idaho electric Rate Credit for each of the five
years is 52,594,730. The annual Idaho natural gas Rate Credit for each ofthe five years is $567,480.
Idaho Settlement Proposal- Master List of Commitments
Rerisd lll6201_t!
5al9lslZtr]Il
Page 9 of 24i-L
!
Exhibit B to First Amendment to Stipulation and Settlement
Revised Exhibit A
offsetable, in the amount of $527,5106. During the 5-year period the financial benefits
will be flowed through to customers either through the separate Rate Credit described
above or through a reduction to the underlying cost of service as these benefits are
reflected in the test period numbers used for ratemaking. At the time of the close, the
$3.2 million benefit will be provided to customers through a separate Rate Credit, as
long as the reduction in costs (of up to $527,510 annually) has not already been
reflected in base retail rates for Avista's customers.
To the extent Avista demonstrates in a future rate proceeding that cost savings, or
benefits, directly related to the Proposed Transaction are already being flowed through
to customers through base retail rates, the separate Rate Credit to customers would be
reduced by an amount up to the offsetable Rate Credit amount. The portion of the
total Rate Credit that is not offsetable effectively represents acceptance by Hydro One
of a lower rate of return during the 5-year period.
The $15.8 million represents the "floor" of benefits that will be flowed through to
Avista's customers, either through the Rate Credit or through benefits otherwise
included in base retail rates. To the extent the identifiable benefits exceed the annual
offsetable Rate Credit amounts, these additional benefits will be flowed through to
customers in base retail rates in general rate cases as they occur. Avista and Hydro
One believe additional efficiencies (benefits) will be realized over time from the sharing
of best practices, technology and innovation between the two companies. It will take
time, however, to identify and capture these benefits. The level of annual net cost
savings (and/or net benefits) will be tracked and reported on an annual basis, and
compared against the offsetable level of savings.
Any application of offsetable savings will be reviewed by the Commission before the
offset is applied, and Avista bears the burden of proof to prove that savings have
materialized and the offset to rate credits should apply.
Regulatory Commitments
20. State Regulatory Authority and Jurisdiction: Hydro One and its subsidiaries,
including Avista, as applicable and as appropriate, will comply with all applicable laws,
including those pertaining to transfers of property, affiliated interests, and securities and
the assumption of obligations and liabilities. As required by and consistent with
applicable laws, venue for resolution of proceedings related to these matters will be at
the appropriate state utility commission(s). Hydro One and its subsidiaries, including
Avista, will make their employees and officers available to testify before the
6 The offsetable portion of the Rate Credit is calculated using a pro rata share of the jurisdictional total of the rate
credit (i.e. Idaho's share of the total system offsetable Rate Credit is 31.03%, therefore Idaho's share of the $1.7
million offsetable portion is $527,510).
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Commission at the Commission's request to provide information relevant to the matters
within its jurisdiction.
21. Compliance with Existing Commission Orders: Hydro One and its subsidiaries,
including Avista, acknowledge that all existing orders issued by the Commission with
respect to Avista or its predecessor, Washington Water Power Co., will remain in
effect, and are not modified or otherwise affected by the Proposed Transaction.
Hydro One and its subsidiaries, including Avista, as applicable and as appropriate, will
comply with all applicable future Commission orders that remain in force.
22. Separate Books and Records: Avista will maintain separate books and records from its
affiliates.
23. AudjL Access to and Maintenance of Books and Records:
Nothins in the Propos
atrect the Commisslon's r
Holdins Com.'s acco
compliance with all appl
Hydro One, Olympus Holding Corp. and its subsidiaries, including Avista, will provide
reasonable access to Avista's books and records; access to financial information and
filings; access rights with respect to the documents supporting any costs that may be
allocable to Avista; and access to Avista's board minutes, audit reports, and
information provided to credit rating agencies pertaining to Avista.
Hydro One, Olympus Holding Corp. and its subsidiaries, including Avista, will
maintain the necessary books and records so as to provide documents relating to all
corporate, affiliate, or subsidiary transactions with Avista, or that result in costs that
may be allocable to Avista.
The Proposed Transaction will not result in reduced access to the necessary books and
records that relate to transactions with Avista, or that result in costs that may be
allocable to Avista. Avista will provide the Commission. its as Commission Staff
and other parties to regulatory proceedings reasonable access to books and records
(including those of Hydro One, Olympus Holding Corp. or any affiliate or subsidiary
companies) required to verify or examine transactions with Avista, or that result in
costs that may be allocable to Avista.
Nothing in the Proposed Transaction will limit or affect the Commission's rights with
respect to inspection of Avista's accounts, books, papers and documents in
compliance with all applicable laws. Nothing in the Proposed Transaction will limit or
affect the Commission's rights with respect to inspection of Hydro One and Olympus
Holding Corp.'s accounts, books, papers and documents pursuant to all applicable
laws; provided, that such right to inspection shall be limited to Hydro One and
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Olympus Holding Corp.'s accounts, books, papers and documents that pertain solely
to transactions affecting Avista's regulated utility operations.
Olympus Holding Corp. and its subsidiaries, including Avista, will provide the
Commission with access to written information provided by and to credit rating
agencies that pertains to Avista. Olympus Holding Corp. and each of its subsidiaries
will also provide the Commission with access to written information provided by and
to credit rating agencies that pertains to Olympus Holding Corp.'s subsidiaries to the
extent such information may affect Avista.
Hydro One and its affiliates agree that the Commission may have access to all the
accounting records of Hydro One and its affiliates that are the bases for charges to
Avista, to determine the reasonableness of the costs and the allocation factors used by
Hydro One and its affiliates, or its subdivisions to assign costs to Avista and amounts
subject to allocation or direct charges. Hydro One and its affiliates agree that they will
not raise lack ofjurisdiction as a means of denying such access, and agree to cooperate
fully with such Commission investigations. Furthermore. anv oartv m
tnat tne Commission 0e
HvAro One or its amt
AircO to oroviAe su
24. Cost Allocations Related to Corporate Structure and Affiliate Interests: Avista
agrees to provide, and Hydro One agrees Avista will provide, cost allocation
methodologies used to allocate to Avista any costs related to Hydro One or its other
affiliates and subsidiaries, and commits that there will be no cross-subsidization by
Avista customers of unregulated activities.
evista witt not ctla
C)ne exceot as soecificallv authorized for recoverv in rates bv the Commission. The
cost-allocation methodology provided pursuant to this commitment will be a generic
methodology that does not require Commission approval prior to it being proposed for
specific application in a general rate case or other proceeding affecting rates. The
cost-allocation methodology provided pursuant to this commitment also will establish
a procedure for ensuring that additional costs or revenues resulting from changing
curency exchange rates will not be reflected in rates charged to Idaho customers.
Avista will bear the burden of proof in any general rate case that any corporate and
affiliate cost allocation methodology is reasonable for ratemaking purposes. Neither
Avista nor Hydro One or its affiliates and subsidiaries will contest the Commission's
authority to disallow, for retail ratemaking purposes in a general rate case,
unreasonable, or misallocated costs from or to Avista or Hydro One or its other
affiliates and subsidiaries.
With respect to the ratemaking treatment of affiliate transactions affecting Avista,
Hydro One, and Olympus Holding Corp. and its subsidiaries, as applicable, will
comply with the Commission's then-existing practice; provided, however, that nothing
in this commitment limits Avista from also proposing a different ratemaking treatment
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for the Commission's consideration, or limit the positions any other party may take
with respect to ratemaking treatment.
Avista will notify the Commission of any change in corporate structure that affects
Avista's corporate and affiliate cost allocation methodologies. Avista will propose
revisions to such cost allocation methodologies to accommodate such changes. Avista
will not take the position that compliance with this provision constitutes approval by
the Commission of a particular methodology for corporate and affiliate cost allocation.
Avista will notifr the Commission prior to the implementation of plans by Avista or
Hydro One or any of Hydro One's affiliates:
a. To form an affiliate for the purposes of transacting business with Avista's
regulated operations;
b. To commence new business transactions between an existing affiliate and Avista;
or
c. To dissolve an affiliate that has transacted substantial business with Avista.
25. Ratemaking Cost of Debt and Equity: Avista will not advocate for, and Hydro One
agrees Avista will not advocate for, a higher cost of debt or equity capital as compared
to what Avista's cost of debt or equity capital would have been absent Hydro One's
ownership.
For future ratemaking purposes:
a. Determination of Avista's debt costs will be no higher than such costs would have
been assuming Avista's credit ratings ing
ratings-i@had not been affected bv the Proposed
Transaction-eleses* and applying those credit ratings to then-current debh+nless
z\vista preves that a lewer eredit rating is eaused by eiretrrnstarees er
P+epese+Transaetien;
b. Avista bears the burden to prove prudent in a future general rate case any
pre-payment premium or increased cost of debt associated with existing Avista
debt retired, repaid, or replaced as a part of the Proposed Transaction; and
c. Determination of the allowed return on equity in future general rate cases will
include selection and use of one or more proxy group(s) of companies engaged in
businesses substantially similar to Avista, without any limitation related to Avista's
ownership structure.
4 Avista and Parent as
neturn fnOnt. conmon equ
ater tne cnse of Pro
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Pronosed Transaction. Avista bears the burden of orovins that increases in
Avista's Cost of Caol
Debt is caused bv circums
fmancial risks or ot
26. Avista Capital Structure: At all times following the closing of the Proposed
Transaction, Avista's actual common equity ratio will be maintained at a level no less
than 44 percent. This commitment does not restrict the Commission from ordering a
hypothetical capital structure.
27. FERC Reouirements Avista will continue to meet all the applicable FERC
reporting requirements with respect to annual and quarterly reports (e.g., FERC Forms
1,2,3q) after closing of the Proposed Transaction.
28. Participation in National and Regional Forums: Avista will continue to participate,
where appropriate, in national and regional forums regarding transmission issues,
pricing policies, siting requirements, and interconnection and integration policies,
when necessary to protect the interest of its customers.
29. Treatment of Information:Nothing in these commitments will be
interpreted as a waiver of Hydro One's, its subsidiaries', or Avista's rights to request
confidential treatment of information that is the subject of any of these commitments.
30. Commission Enforcement of Commitments: Hydro One and its subsidiaries, including
Avista, understand and aergg that the Commission has authority to enforce these
commitments in accordance with their terms. If there is a violation of the terms of
these commitments, then the offending party may, at the discretion of the Commission,
have a period of thirty (30) calendar days to cure such violation.
The scope of this commitment includes the authority of the Commission to compel the
attendance of witnesses from Olympus Holding Corp. and its affiliates, including
Hydro One, with pertinent information on matters affecting Avista. Hydro One and
Olympus Holding Corp. and its subsidiaries waive their rights to interpose any legal
objection they might otherwise have to the Commission's jurisdiction to require the
appearance of any such witnesses.
31. Submittal to State Court Jurisdiction for Enforcement of Commission Orders:
Hydro One,
oost-ctose coroora
Uetween mav chanse ov , and Avista will jointly file with the Commission prior
to closing the Proposed Transaction an affidavit affirming that they will submit to thejurisdictionof@courtsforenforcementoftheCommission's
orders adopting the commitments made by and binding upon them and their affiliates
where noted, and subsequent orders
of ldaho law with reso .
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32. Annual Report on Commitments: By May 1,2019 and each May 1 thereafter through
May l, 2029, Avista will file, and Hydro One agrees Avista will file, a report with the
Commission regarding the status of compliance with each of the commitments as of
December 3l of the preceding year. The report will, at a minimum, provide a
description of the performance of each of the commitments, will be filed in Case No.
AVU-E-17-09/AVU-G-17-05 and served to all parties to the docket. If any
commitment is not being met, relative to the specific terms of the commitment, the
report must provide proposed corrective measures and target dates for completion of
such measures. Avista will make publicly available at the Commission non-confidential
portions of the report.
33. Commitments Binding: Hydro One, its subsidiaries;
inelrlding in tne oost-ctose co
tnose comoanies ln U Avista, acknowledge that the
commitments being made by them are fu[v binding enly-upon them and upou their
affiliates where spccificallv noted; and their successors in interest. Hydro One and
Avista are not requesting in this proceeding a determination of the prudence, just and
reasonable character, rate or ratemaking treatment, or public interest of the
investments, expenditures or actions referenced in the commitments, and the parties in
appropriate proceedings may take such positions regarding the prudence, just and
reasonable character, rate or ratemaking treatment, or public interest of the
investments, expenditures or actions as they deem appropriate.
If Hydro One or any other entity in the chain of Avista's ownership determines that
Avista or any other entity has failed to comply with an applicable Commitment, the
entity making such determinations shall take all appropriate actions to achieve
compliance with the Commitment.
Financial Integrity Commitments
34. Capital Structure Support: Hydro One will provide equity to support Avista's capital
structure that is designed to allow Avista access to debt financing under reasonable
terms and on a sustainable basis.
35. Utility-Level Debt and Preferred Stock: Avista will maintain separate debt and
preferred stock, if any, to support its utility operations.
36. Continued Credit Ratings: Each of Hydro One and Avista will continue to be rated by
at least one nationally recognized statistical "Rating Agency." Hydro One and Avista
will use reasonable best efforts to obtain and maintain a separate credit rating for
Avista from at least one Rating Agency within the ninety (90) days following the
closing of the Proposed Transaction. If Hydro One and Avista are unable to obtain or
maintain the separate rating for Avista, they will make a filing with the Commission
explaining the basis for their failure to obtain or maintain such separate credit rating
for Avista, and parties to this proceeding will have an opportunity to participate and
propose additional commitments.
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37. Credit
Exhibit B to First Amendment to Stipulation and Settlement
Revised Exhibit A
Notification Hydro One and Avista agree to notify the Commission
within two business days of any Eapas€d_alagtual downgrade of Avista's credit
rating y S&P, Moody's, or any other such ratings
agency that issues such ratings with respect to Avista.
U. Subsequent to the fi
reoons everv q0 cale
investment srade s
to detailins how Avi
38. Restrictions on Upward Dividends and
e-. L If either (i) Avista's corporate credit/issuer rating as determined by both
Moody's and S&P, or their successors, is investment grade, or (ii) the ratio of
Avista's EBITDA to Avista's interest expense is greater than or equal to 3.0, then
distributions from Avista to Olympus Equrty LLC shall not be limited so long as
Avista's equity ratio is equal to or greater than44 percent (tne "tvtinimum gouitv
Ratrol on the date of such Avista distribution after giving effect to such Avistadistribution ity-+atie
OrcatemaHnfpurpeses. Under anv otner clrc
are aUowed ontv wittl o
subiect to change as . Both the EBITDA and
equity ratio shall be calculated on the same basis that such calculations would be
made for ratemaking purposes for regulated utility operations.
rre atlewee enb witn p
b. tf a orooosal is
tnat Avista's rates s
percent. the Partie
eitner in tne rate case
natio for ourooses of su
adiustment to the c
evista mav at anv tlme
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tf evista or gvdro One
downsrade of Avist to a non-investmeff s
Avista and Hvdro One will:
a. Witnin gO davs of o
Plan") tnat is subi
for maintainme Avista's inv
srade status.
Exhibit B to First Amendment to Stipulation and Settlement
Revised Exhibit A
a chanqe to the Mini
witt oooose tne init
e-e, If Avista does not have an investment-grade rating from both Moody's and
S&P, or from one of these entities, or its successor, if only one issues ratings with
respect to Avista, and the ratio of EBITDA to Avista's interest expense is less than
3.0, no dividend distribution to Olympus Equity LLC or its successors will occur.
O. Avma commits. a
Avista. Avista casn
nows for other ouroos
inctuOinq all Hvdro O
of the Parent's corDorate entities maintain accounts and subaccounts that are
seoarate tom avist
cash flows to be entire
39. Pension Fundins: Avista will maintain its pension funding policy in accordance with
sound actuarial practice. Hydro One will not seek to change Avista's pension funding
policy.
40. SEC Reporting Requirements: Following the closing of the Proposed Transaction,
Avista will file required reports with the SEC.
41. Compliance with the Sarbanes-Oxley Act: Following the closing of the Proposed
Transaction, Avista will comply with applicable requirements of the Sarbanes-Oxley
Act.
Ring-Fencing Commitments
42. Golden Share:Entering into voluntary bankruptcy shall require the affirmative vote of a
"Golden Share" of Avista stock. The Golden Share shall mean the sole share of
Preferred Stock of Avista as authorized by the Commission. This share of Preferred
Stock must be in the custody of an independent third-party, where the third-party has
no financial stake, affiliation, relationship, interest, or tie to Avista or any of its
affiliates, or any lender to Avista, or any of its affiliates. This requirement does not
preclude the third-party from holding an index fund or mutual fund with negligible
interests in Avista or any of its affiliates. In matters of voluntary bankruptcy, this
Golden Share will override all other outstanding shares of all types or classes of stock.
43. Independent Directors: At least one of the nine members of the board of directors of
Avista will be an Independent Director who, consistent with Commitment 3, meets the
standards under 303A.02 of the New York Stock Exchange Listed Company Manual.
At least one of the members of the board of directors of Olympus Equity LLC will be
an Independent Director who, consistent with Commitment 3, meets the standards
under 303A.02 of the New York Stock Exchange Listed Company Manual. The same
individual may serve as an Independent Director of both Avista and Olympus Equity
LLC. The organizational documents for Avista will not permit Avista, without the
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consent of a two-thirds majority of all its directors, including the affirmative vote of
the Independent Director at Avista (or if at that time Avista has more than one
Independent Director, the affirmative vote of at least one of Avista's Independent
Directors), to consent to the institution of bankruptcy proceedings or the inclusion of
Avista in bankruptcy proceedings. In addition to an affirmative vote of this
Independent Director, the vote of the Golden Share shall also be required for Avista to
enter into a voluntary bankruptcy.
44. Non-Consolidation Opinion:
a. Within ninety (90) days of the Proposed Transaction closing, Avista and Olympus
Holding Corp. will file, and Hydro One agrees they will file, a non-consolidation
opinion with the Commission which concludes, subject to customary assumptions
and exceptions, that the ring-fencing provisions are sufficient that a bankruptcy
court would not order the substantive consolidation of the assets and liabilities of
Avista with those of Olympus Holding Corp. or its affiliates or subsidiaries (other
than Avista and its subsidiaries).
b. Hydro One and Olympus Holding Corp. must file an affidavit with the Commission
stating that neither Hydro One, Olympus Holding Corp. nor any of their
subsidiaries, will seek to include Avista in a bankruptcy without the consent of a
two-thirds majority of Avista's board of directors including the affirmative vote of
oae_o:f Avista's independent director, oryi
i
.
If the ring-fencing provisions in these commitments are not sufficient to obtain a
non-consolidation opinion, Olympus Holding Corp. and Avista agree to promptly
undertake, and Hydro One agrees to cause them to undertake, the following
actions:
i. Notify the Commission of this inability to obtain a non-consolidation opinion.
ii. Propose and implement, upon Commission approval, such additional
ring-fencing provisions around Avista as are sufficient to obtain a
non-consolidation opinion subject to customary assumptions and exceptions.
iii. Obtain a non-consolidation opinion.
45. Olympus Equity LLC: Olympus Holding Corp.'s indirect subsidiaries will include
Olympus Equity LLC and Avista. See the post-acquisition organizational chart in
Attachment C to the Master List of Commitments in Idaho. Following closing of the
Proposed Transaction, all of the corlmon stock of Avista will be owned by Olympus
Equity LLC, a new Delaware limited liability company. Olympus Equity LLC will be a
bankruptcy-remote special purpose entity, and will not have debt.
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46. Restriction on Pledge of Utility Assets: Avista agrees to, and Hydro One will cause
Avista to agree to, prohibitions against loans or pledges of utility assets to Hydro One,
Olympus Holding Co.p., or any of their subsidiaries or affiliates, without Commission
approval. In addition, the Applicants agree that Avista's assets will not be pledged by
Avista or any of its affiliates, including Hydro One and Olympus Holding Corp. and
any of their subsidiaries or affiliates, for the benefit of any entity other than Avista.
47.Hold'HaiononAcquisitionsandDispositions:
a. Hydro One, its affiliates, and subsidiaries including Avista will hold Avista
customers harmless from any business and financial risk exposures associated with
Olympus Holding Co.p., Hydro One, and Hydro One's other affiliates.
b. Pursuant to this commitment, Avista will file, and Hydro One agrees Avista will
file, with the Commission, prior to closing of the Proposed Transaction, a form of
notice to prospective lenders describing the ring-fencing provisions included in
these commitments stating that these provisions provide no recourse to Avista
assets as collateral or security for debt issued by Hydro One or any of its
subsidiaries, other than Avista.
c. In furtherance of this commitment:
Hydro One, its affiliates, and subsidiaries including Avista commit that
Avista's regulated utility customers will be held harmless from the liabilities
of any unregulated activity of Avista or Hydro One and its affiliates. In any
proceeding before the Commission involving rates of Avista, the fair rate of
return for Avista will be determined without regard to any adverse
consequences that are demonstrated to be attributable to unregulated
activities. Measures providing for separate financial and accounting
treatment will be established for each unregulated activity.
Hydro One, its affiliates, and subsidiaries including Avista will notiff the
Commission @ Hydro One's, its affiliates', or
subsidiaries' including Avista's board approval @
any public announcement of: (1) any
acquisition by Hydro One, its affiliates, and subsidiaries including Avista of a
regulated or unregulated business that is equivalent to five (5) percent or
more of Hydro One's capitahzation; or (2) any change in control or
ownership of Avista a change qnly
to the upstream ownership of Avista or Olympus Holding Corp. among
wholly owned subsidiaries of Hydro One-may@
beprovidedineitheranupdatedorganizationalchartjffi
or in a separate notice filingjliaE
to the chanse takmg plrc. Notice pursuant to this provision is not and will
not be deemed an admission or expansion of the Commission's authority or
jurisdiction over any transaction or in any matter or proceeding whatsoever.
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Within sixty (60) days following the notice required by this subsection
(c)(ii)(2), and orior to comoletio Avista and Olympus
Holding Corp. or its affiliates, as appropriate, will seek Commission approval
of any sale or transfer of any material part of Avista, or of any transaction or
series of transactions, regardless of size, that would result in a person or
entity, other than a wholly owned subsidiary of Hydro One, directly or
indirectly, acquiring a controlling interest in Avista or Olynrpus Holding
Corp. The term "material part of Avista" means any sale or transfer of stock
representing ten percent (10%) or more of the equity ownership of Avista.
iii. Hydro One, Olympus Holding Corp. and Avista will provide notification of
and file{epbtla]g Commission approval of the divestiture, spin-ofi or sale of
any integral Avista asset, including power plants, as required by Idaho eede
$6++Zgbru. This notification and approval requirement does not limit any
jurisdiction that the Commission may have.
lv.Neither Avista nor Hydro One will assert in any future proceedings that, by
virtue of the Proposed Transaction and the resulting corporate structure, the
Commission is without jurisdiction over any transaction that results in a
change of control of Avista.
d. If and when any oon-rcgulatgd subsidiary of Avista becomes a subsidiary of Hydro
One or one of its subsidiaries other than Avista, Avista and Hydro One will so
advise the Commission within thirty (30) days and will submit to the Commission a
written document setting forth Avista's proposed corporate and affiliate cost
allocation methodologies.
48. Olvmpus Holdins Corp. and Eouitv LLC Sub-entities Olympus Holding
Corp. will not operate or own any business and will limit its activities to investing in
and attending to its shareholdings in Olympus Equity LLC, which, in turn, will not
operate or own any business and will limit its activities to investing in and attending to
its shareholdings in Avista.
49. No Amendment@: Hydro One, Olympus Holding Corp. and
Avista commit that no materialamendments, revisions or modifications will be made
to hese regulatory commitments without
prior Commission approval
@ingfrevisions.
50. No Inter Company Debt: Avista will notify the Commission before entering into any
inter-company debt transactions with Olympus Holding Corp., Hydro One, or any of
their subsidiaries or affiliates. Avista shall comply with Idaho eeAe-{O+-g0tr-et
seftlaw for any debt transactions over a one year term.
51. No Inter Lendins Without prior Commission approval, Avista will not lend
money to Olympus Holding Corp., Hydro One, or any of their subsidiaries or affiliates
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Resource Planning Commitments
52. Renewable Energy Resources: Avista will continue to offer renewable power programs
in consultation with stakeholders.
Communications with customers shall accurately reflect the environmental attributes
associated with power delivered to such customers. Hydro One and Avista
acknowledge that Avista retains the burden of proof to demonstrate the prudence of
any resource acquisition.
Nothing in this Commitment prohibits Avista from selling renewable energy credits
that arise from resources included in base rates applicable in Idaho.
53. Regulatorv Integplq[Resource Plannins (IRP) Sideboards: Avista and its affiliates
agree to consider in all resource planning and acquisition efforts both demand-side and
renewable energy resources that are consistent with the Idaho Commission's resource
evaluation and acquisition rules and policies.
Avista and its affiliates agree that "Resources" to be considered in all IRPs include
Power Purchase Agreements ("PPAs").
Avista commits to calculating a variable generation resource's contribution to capacity
in terms of that resource's contribution to resource adequacy and that resource's
ability to reduce the loss of load probability in some or all hours or days utilizing the
Effective Load Carrying Capability ("ELCC") methodology or an appropriate
approximation.
Avista will work with an independent third-party consultant, with expertise in
renewable energy resources, to ensure that the utility has upto-date resource cost and
performance assumptions, as well as the appropriate learning curves, for use in the
2019 IRP process.
Unless it conflicts with any instructions contained in the Commission's
acknowledgement letter in response to Avista's current integrated resource plan (IRP),
beginning with the next IRP, Avista commits to modeling a range of potential costs for
greenhouse gas emissions, and will work with its IRP Advisory Group to determine
the appropriate values to model.
54. Energy Imbalance Market ("EIM"): Avista is currently refreshing its EIM analysis and
will release it publicly by the end of 20 I 8. Avista commits to hold workshops with the
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Hydro One acknowledges Avista's obligations under applicable renewable portfolio
standards, and Avista will continue to comply with such obligations.
I
Exhibit B to First Amendment to Stipulation and Settlement
Revised Exhibit A
Commission and interested stakeholders to review the analysis and discuss the prudent
next steps.
The goal is to convene the workshop within 30 days of the release of the EIM analysis.
55. Transport Electrification: Avista commits, and Hydro One agrees that Avista commits,
to initiate a stakeholder process within 60 days of the close of the Proposed
Transaction to explore opportunities for transport electrification that benefits all Idaho
customers.
Environmental Commitments
56. Greenhouse Gas and Carbon Initiatives: Hydro One acknowledges Avista's
Greenhouse Gas and Carbon Initiatives contained in its current Integrated Resource
Plan, and Avista will continue to work with interested parties on such initiatives.
57. Greenhouse Gas Inventory Report: Avista will report greenhouse gas emissions as
required.
Energy Efliciency, Weatherization, Community and Low-Income Assistance Commitments
58. Funding for Enerqy Efficiency, Weatherization. Conservation, and Low-Income
Assistance Programs: Hydro One will arrange funding of $5,308,847 over a l0-year
period to fund energy efficiency, weatherization, conservation, and low-income
assistance programs. The funding will be disbursed as directed by the Energy
Efficiency, Weatherization, Conservation, and Low-Income Assistance Committee
("EWCL"), a new committee of stakeholders tasked with determining which existing
or new programs should receive this funding to address energy efficiency,
weatherization, conservation, and low-income needs in Avista's Idaho service
territory. The committee will initially consist of representatives from the following
stakeholders: Avista, Commission stafi the Lewiston CAP, Idaho Conservation
League, the Idaho Forest Group, and Clearwater Paper. The Committee may add
members at its discretion. The EWCL will consider the needs of all parties and remain
flexible on the timing of any disbursements.
The EWCL will convene within 90 days after the close of the Proposed Transaction,
will present a l0-year funding plan to Avista by June 1,2019 and will revise this plan
periodically as needed.
sg.Qlea Avista agrees to work with Clearwater Paper to
attempt to qualify the following projects for DSM funding under TariffSchedule 90,
upon closing of the Proposed Transaction:
. Variable speed drives on the No. I paper machine hydropulper. Variable speed drives on the No. 4 power boiler demineralized water pumps. Energy efficient chillers and compressors for the Lurgi system. A variable speed drive on the No.1 paper machine white water system
Idaho Settlement Proposal - Master List of Commitments
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Exhibit B to First Amendment to Stipulation and Settlement
Revised Exhibit A
. Variable speed drives on the two waste water outfall pumps
The total estimated cost of the projects is $750,000. Tariff Schedule 90 allows for
possible DSM funding of up to 70o/o of the cost of the project, subject to meeting
certain specified cost-effectiveness criteria. The portion of the estimated cost of these
identified projects that is not reimbursed under Schedule 90 will be considered for
funding through Commitment 58. The EWCL will consider the needs of all parties
and remain flexible on the timing of any disbursements.
60. Idaho Forest Group (IFG) DSM Assistance: Avista agrees to work with Idaho Forest
Group (IFG) to attempt to qualify the following projects for DSM funding under
TariffSchedule 90, upon closing of the Proposed Transaction:
a
a
Installation of information technology to gather plant information data (PI
Data) on energy usage at IFG's Lewiston plant, and through an installed
interface, transmit real time energy load information data for each operating
station to IFG and Avista. This may serve as a useful demonstration project
for data interfaces with other customers on Avista's system. The total
estimated cost is $300,000.
Replacement of aging compressors, saws and other equipment with state of the
art machinery at IFG's Lewiston and Grangeville plants, in order to increase
productivity and energy efficiency.
Tariff Schedule 90 allows for possible DSM funding of up to 70%o of the cost ol the
project, subject to meeting certain specified cost-effectiveness criteria. The portion
of the estimated cost of these identified projects that is not reimbursed under
Schedule 90 will be considered for funding through Commitment 58. The EWCL
will consider the needs of all parties and remain flexible on the timing of any
disbursements.
61. Community Contributions:Hydro One will
fot a one-time $7,000,000 contribution to Avista's charitable foundation at or
promptly following closing. 7
62. Addressing Other Low-Income Customer Issues: Avista will continue to work with
low-income agencies to address other issues of low-income customers, including
funding for bill payment assistance.
63. Fee Free Payment Program: Avista will continue to offer the Fee Free Payment
Program to its residential customers.
7 Note that Commitment l1 contains additional provisions relating to Avista's charitable contributions.
Idaho Settlement Proposal - Master List of Commitments
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Exhibit B to First Amendment to Stipulation and Settlement
Revised Exhibit A
64. Improve Penetration of Low-Income Programs: Hydro One and Avista will work with
the Lewiston CAP to undertake a targeted effort with a goal of improving the
penetration rate of low-income programs with a focus on underserved, vulnerable, and
high energy burden households. This commitment may include expanding marketing,
outreach, and data analysis as appropriate.
65. Tribal Communities: In implementing these conditions, Avista will reach out to tribal
communities to encourage participation of members of such communities in receiving
the benefits of this settlement.
Miscellaneous Commitments
66. Sources of Funds for Hydro One Commitments: Throughout this list of merger
commitments, any commitment that states Hydro One will arange funding is not
contingent on Hydro One's ability to arrange funding, particularly from outside
sources, but is a firm commitment to provide the dollar amount specified over the time
period specified and for the purposes specified. To the extent Avista has retained
earnings that are available for payment of dividends to Olympus Equity LLC consistent
with the ring fencing provisions of this list of merger commitments, such retained
earnings may be used. Funds available from other Hydro One affiliates may be used
without limitation. Avista will not seek cost recovery for any of the commitments
funded or arranged by Hydro One in this list of merger commitments. Hydro One will
not seek cost recovery for such funds from ratepayers in Canada or the United States.
67. Service Rules for Gas Utilities: Avista will meet with Commission Staffto review the
Commission's Service Rules for Gas Utilities (IDAPA 31.31.01) to determine which
provisions should be retained and,/or modified, and, if the participants agree,
incorporate those changes into Avista's tariff
68. Meters: Avista will meet with Commission Staffto review its meter placement and
protection policies and practices and determine, if the participants agree, what
additional steps should be taken to revise Avista's current policies and practices.
69. Colstrip Planning: Hydro One and Avista agree to support a December 31,2027, end of
life for depreciation purposes in the processes described below. Hydro One and
Avista also agree that issues relating to the potential accelerated depreciation of
Avista's interest in Colstrip Units 3 and 4 and related matters should be addressed in
three existing, interrelated Commission proceedings as follows:
GNR-U-18-01 -- Investigation Into the Impact of Federal Tax Code Revisions
on Utility Costs and Ratemaking: As part of this docket, not less than $12.0
Million regulatory liability should be created using the unprotected Excess
DFIT/Defenal of January - May 2018 tax credit. Mantiei This $12.0 Million
regulatory liability would then be available to offset costs associated with
a
Idaho Settlement Proposal - Master List of Commitments
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a
a
Exhibit B to First Amendment to Stipulation and Settlement
Revised Exhibit A
accelerated depreciation of Colstrip Units 3 and 4 or other use as determined
appropriate in AVU-E- I 8-03/AVU-G- I 8-02.
AVU-E-18-03 / AVU-G-18-02 -- Avista Corporation's Application to Change
Its Electric and Natural Gas Depreciation Rates: As part of this docket, the
Commission will determine whether, as proposed by Hydro One and Avista,
December 31,2027, should be set as the 'hseful life" for Colstrip Units 3 and 4
for depreciation purposes. The Parties will work towards resolution of this
proceeding by Jaru*aryAprll l, 2019.
Avista's Application 2019 Electric Integrated Resource Plan (IRP): Avista's
2019 IRP will analyze multiple retirement dates for Colstrip Units 3 and 4,
including but not limited to, the "end of useful life" date determined in
AVU-E-18-03/AVU-G-18-02. The other retirement dates analyzed, as well as
the method, inputs, and assumptions for those scenarios planning analyses, will
be determined with input from the IRP stakeholder advisory group. Avista
anticipates that the first draft of its 2019 IRP will be released in May 2019 and
its second draft will be released in August 2019.
70. Montana Community Transition Fund: Hydro One an#Avistrwill arrange funding of
$3.0 Million (on a system basis) towards a Colstrip community transition fund.
71. Colstrip Transmission Planning: Avista will work with the other Path 8 (MT-to-NW)
owners (Northwestern Energy and BPA) to resolve questions surrounding the ability
of new generation to use the Colstrip line once Colstrip Units 1 and 2 retie, and also
when Units 3 and 4 retire.
At least one year prior to any closure of Colstrip Units 3 and 4, Avista will develop a
transition plan for its Colstrip transmission assets. Avista will hold at least one
workshop with Commission Staffand stakeholders to determine the transition plan's
impacts to Idaho ratepayers.
Avista will work with stakeholders and Commission Staff and file this transition plan
with the Commission. In developing this transition plan, to the extent practicable,
Avista should participate in l) the workshops on this topic that PSE and the
Commission will be holding in 2018 (per the PSE GRC settlement), and 2) the
BPA/Governor Bullock Transmission Task Force that commenced work on December
8,2017 , and will work through the middle of 2018.
Hydro One agrees Avista will conduct the activities described in the foregoing
paragraphs.
72. Contract Labor: The parties agree that employees, contractors, and subcontractors of
Avista shall be paid a fair and competitive wage, and that Avista shall utilize principles
of fairness in bidding and contracting work in the state of Idaho. Avista agrees to
employ highly skilled and trained workers. Such training and education can be
obtained through college programs, technical schools, apprenticeships, or union hall
Idaho Settlement Proposal - Master List of Commitments
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Exhibit B to First Amendment to Stipulation and Settlement
Revised Exhibit A
programs, including those of the Washington and Northern Idaho District Council of
Laborers. The parties recognize that no employee, contractor, or subcontractor of the
Company is required or prohibited from participation in any labor organization. The
Parties agree that Commitment 72 is severable, and if this provision is declared void,
invalid, or unenforceable in whole or in part, such declaration shall not affect the
remaining provisions of this Commitment List.
73. Most Favored Nations: The Applicants agree that upon the joint request of the
Non-Applicant Parties, or a request of less than all Non-Applicant Parties which is
unopposed by any Non-Applicant, the Commission shall have an opportunity and the
authority to consider and adopt in Idaho any commitments to which the Applicants
agree in other jurisdictions, even if such commitments are agreed to after the
Commission enters its order in this docket. To facilitate the Commission's
consideration and possible adoption of the commitments from other jurisdictions, the
Parties recommend that the Commission issue an order accepting this Stipulation as
soon as practical, but to reserve in such order the explicit right to re-open to add
commitments accepted in another state jurisdiction.
The Applicants further agree that upon the request of any Non-Applicant Party prior
to the Commission's action on this Stipulation, if Applicants agree with any
commitments in other jurisdictions, within five days of such a request, Applicants will
meet and confer with the Non-Applicant Parties to discuss whether such commitments
should be added to the existing list of commitments already agreed to by the Parties in
this Stipulation.
Process for Consideration:
Within five calendar days after Applicants file a stipulation with new or amended
commitments with a commission in another state jurisdiction, Applicants will send a
copy of the stipulation and commitments to the Non-Applicant Parties.
Within five calendar days after a commission in another state jurisdiction issues an
order that accepts a stipulation to which Applicants are a party and imposes new or
modified commitments, that order, together with all commitments of any tlpe agreed
to by Applicants in such other state, will be filed with the Commission and served on
all parties to this docket by the most expeditious means practical.
Within ten&urtcen_(]4 calendar days after the last such filing from the other states
("Final Filing"), the Non-Applicant Parties may file with the Commission any response
they wish to make, including their position as to whether any of the covenants,
commitments and conditions from the other jurisdictions (without modification of the
language thereof except such non-substantive changes as are necessary to make the
commitment or condition applicable to Idaho) should be adopted in Idaho.
a
a
a Within five calendar days after any such response filing, the Applicants may file a reply
with the Commission.
Idaho Settlement Proposal - Master List of Commitments
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a
I
a
a
a
a
a
a
a
Exhibit B to First Amendment to Stipulation and Settlement
Revised Exhibit A
Ifany ofthe dates above fall on Saturday, Sunday, or a holiday, the next business day
will be considered as the due date.
The Parties agree to support in their filings the issuance by the Commission of an
order regarding the adoption of such commitments as soon as practical thereafter,
recognizing that the Proposed Transaction cannot close until final state orders have
been issued approving the Proposed Transaction.
Limitations on Adjustment:
Only commitments specific to gas service may form the basis for adjustments specific
to gas service.
Only commitments specific to electric service may form the basis for adjustments
specific to electric service.
Any commitments relating to support of communities in Montana are not subject to
this provision.
As Avista does not operate as a utility in Alaska, any commitments made in Alaska are
not subject to this provision.
For purposes of financial commitments or commitments having a financial impact,
commitments should be proportionate to Avista's corresponding business function in
Idaho in relation to its corresponding total company business function. Accordingly,
commitments should be allocated among Avista's WA, ID and OR jurisdictions based
on the following: 1) Rate Credit is allocated based on base revenues; 2) all other
financial commitments are allocated using the Company's jurisdictional "four factor"
allocation methodology, routinely employed for purposes of allocating common costs,
as discussed in Mr. Ehrbar's testimony in this proceeding. For purposes of this
provision, "financial commitments or commitments having a financial impact" do not
include ring fencing provisions.
Z4 Notice ana Petitio
on evista's ooerat
retationsnm witn
commitment in tnis stl
Petition tne Commissio
aVU-e-tZ-Og and AV
inctudins Avista. wiil
witt reoort to tne Co
of tne Commitment Z+. a
Derson would reaso
ooerations or custo
One woun Ue out of c
Comrmtment Z+ snan Ue
UvAro One mav tate or
Idaho Settlement Proposal - Master List of Commitments
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Exhibit B to First Amendment to Stipulation and Settlement
Revised Exhibit A
that a oetition Dresents insufficient mounds or evidence. Prior to filins a oetition with
tne Commission under
nvista at least fO dry
about resolutions o
Notnme in this commitmen
the Commission conc
eorromrrugn.
25, Nortn American free fm
forego their rishts to
States tvtexico Cana
Oamases related to. a
State ofldaho or anv
relation to the nrodu
otner enerw sources
Neffa (or the UStUCe)
witt not votuntaritv oa
One will indemnifu evis
ctaim as aetermined bv a m
26, Venue for ana nesotu
disoutes resardins
U.S. federal resula
Oreson. Washinston. Idaho. Montana or Alaska.
TZ Environmental Lia
narmtess tom anv environmenta
otner than avista. fu
or oo tvchlorinated blpn
78. Foreisn Exchanse and Hedsinp: Avista and Parent asree that Avista rateDavers will be
nen narnless tom anv cur
costs pertainine to ac
rates and not usual and
Water Rishts and Facilities
79. SuUoraination of Wa
Uvdro One anO evista
tAaho Oepartment of
niehts. The Julv 25. 2
egrnnutments
Idaho Settlement Proposal- Master List of Commitments
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Exhibit B to First Amendment to Stipulation and Settlement
Revised Exhibit A
uronlnlclrloN ro o
tcrms)
Sharetrctder shatt tra
Shareholder Desisnees as directors of the Survivins Comoration with or without cause or
notice at its sole disc
are executives of P
Indenendent Directors who are citizens of the United States and are and have been
rcsidents of the Pacl
in etrect (subiect in tn
that it is not abte to
and resiAent of tne Pa
Snareholder mav reo
States. exctudins an
Avista. on an interm
renlace anv such interim director with an Indeoendent Director who is a citaen of the
United States and is a
two vearsi. lf at anv t
circumstance. wnere
sharenoher ot gvdr
whatsoever. that r
directors ol ftvdro O
sucn UoarO. tnen Uvd
Uasis is susnenOeO
n'or ournoses of tni
definitions. which
Asreement, will ap
Comoration wno (il
3OSA.02 of the New Y
Parent and its Subsl
retationsnio witn Pa
vears. anO (iiil lf
sucn otner ouannc
autnoritv for an inAe
aemition of "lndeo
director of tne Survi
who otherwise satis
be considered indeo
Companv or tne Survl
for an "tndenenden
herco,L
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Exhibit B to First Amendment to Stipulation and Settlement
Revised Exhibit A
Pacific Northwest neq
Corooration serves r
Montana- Oreson and Washinston.
Parent" snail mean Uvd
Proymgg_afQl[ana.
Snarenoner" sna
Sharehot0er Oesisn
are executives of Pa
wno are resiaents of
Snarenoher tnOeoe
Ooe. "SnarenoUe
Commitment No. 3..l
Subsidiaries" whe
limited tiabilitv compa
or other ownership
of the ordinarv votinq p
the seneral partners
SuUsiAiaries of su
Survivinq Comoratio
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Idaho Settlement Proposal - Master List of Commitments
Revised 11/6/2018
sOlgl-8&rrurc
Exhibit B to First Amendment to Stipulation and Settlement
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