20181206Supplemental Report.pdf

David J. Meyer
Chief Counsel for Regulatory and
Governmental Affairs
Avista Corporation
l4l I E. Mission Ave., MSC-27
Spokane, WA 99220-3727
[e-mail]
In the Matter of the Joint Application of
HYDRO ONE LIMITED (acting through
its indirect subsidiary Olympus Equity
LLC)
Elizabeth Thomas, Partner
Kari Vander Stoep, Partner
K&L Gates LLP
On Behalf of Hydro One Limited
Olympus Equity LLC
925 Fourth Avenue, Suite 2900
Seattle, WA 98104-l158
Liz.thom as @k I gat e s. c om
kari.vanderstoep@klgates. com
CASE NOS. AVU-E-17-09
AVU-G-17-05
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BEFORE THE
IDAHO PUBLIC UTILITIES COMMISSION
I
and SUPPLEMENTAL REPORT ON
HYDRO ONE MANAGEMENT
CHANGESAVISTA CORPORATION
For an Order Authorizing Proposed
Transaction
As required by the Idaho Public Utilities Commission's (the "Commission") July 20, 2018,
Order No. 34111 ("July 20th Order"), Hydro One Limited ("Hydro One") provides this
Supplemental Report on Hydro One Management Changes and the Proposed Transaction.
Exhibits A and B: On the evening of Friday, November 30th, the Toronto Globe & Mail
newspaper published an article (Exhibit A) related to Hydro One's CEO selection process. We
SUPPLEMENTAL REPORT ON HYDRO ONE MANAGEMENT CHANGES. I
2
3
have enclosed this article in the spirit of ensuring that the Commission is apprised of any media
activity related to our merger application. The article is based on anonymous sources who have
clearly provided inaccurate information to the media. We have elected not to comment. The
selection of the CEO is a highly confidential matter and our board of directors is in the final
stages of our CEO appointment process and does not wish to engage in a public discussion
before a candidate is selected. Our submissions and testimony continue to reflect the fact that
our board is independent and has not had any interference from the government since taking
office in August of this year, and we stand by our testimony. We are also including another
newspaper article posted on Monday, December 3, by the National Post (Exhibit B). We will
continue to notify the Commission of further media developments and would be pleased to
address any further questions.
Exhibit C: Through our proceedings at the Oregon Public Utility Commission, the Oregon
Citizens' Utility Board has requested an affidavit from the Province of Ontario ("Province"),
attesting that the Province will not exercise substantial influence over the polices and actions of
Avista Corporation ("Avista") if Avista is acquired by Hydro One. Hydro One requested an
affidavit from the Province. The Province responded with a letter. The letter is affached as
Exhibit C.
SUPPLEMENTAL REPORT ON HYDRO ONE MANAGEMENT CHANGES - 2
DATED: December 4, 2018.
K&L GATES, LLP
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AVISTA CORPORATION
BY
-C/ o,^4/\
BY:
Elizabeth Thomas, Partner (admitted pro hac vice)
Kari Vander Stoep, Partner (admitted pro hac vice)
K&L Gates LLP
On Behalf of Hydro One Limited
Olympus Equity LLC
925 Fourth Avenue, Suite 2900
Seattle, WA 98104-1158
[e-mail]
kari. vanderstoep@kl gates. com
David J. Meyer, ISB 83 17
Chief Counsel for Regulatory and
Governmental Affairs
Avista Corporation
1411 E. Mission Ave., MSC-27
Spokane, WA 99220-3727
David. meyer@avi stacorp.com
SUPPLEMENTAL REPORT ON HYDRO ONE MANAGEMENT CHANGES . 3
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Ford, Hydro One at odds over CEO
The Globe and Mail
December 1st, 2018
Author: ANDREW WlLLIS, KAREN HOWLETT
Ontario Premier Doug Ford is in a standoff with independent directors on the Hydro One board over
who will be the utility's next CEO. The outcome of the fight is expected to determine the future direction
of the company that transmits electricity in the province.
The six independent directors on Hydro One's lO-person board want to select the next boss from one of
three former senior executives at British Columbia's electrical utilities, according to government officials,
industry executives and lawyers working for Hydro One. The three candidates are all women. The
strongest contender is said to be former B.C. Transmission Corp. CEO Jane Peverett.
Other hopefuls include former BC Hydro executive Janet Woodruff and former BC Hydro CEO Jessica
McDonald, who is currently an independent director on the Hydro One board.
Hydro One is looking for a new leader after Mr. Ford forced out former CEO Mayo Schmidt over what
the Premier claimed was an outsized SS.Z-million annual pay package during Ontario's election
campaign last spring.
The entire Hydro One board, which included Ms. Peverett, resigned after Mr. Ford was elected. The new
board, with four members chosen by the province and six directors named by Hydro One's institutional
shareholders, was announced in August.
Mr. Ford has his own favoured candidates to lead Hydro One, including current Toronto Hydro CEO
Anthony Haines, according to government and industry sources. Hydro One executives declined to
comment on the CEO search. Mr. Ford is a former Toronto city councilor and worked closely with Mr.
Haines in the past. Mr. Haines declined comment. He has been running Toronto Hydro for nine years -
he was appointed by former Toronto mayor David Miller - and made S1.t-million last year.
Two sources familiar with the situation said Hydro One's board rejected Mr. Haines at a recent meeting,
with all six independent directors voting against and the four government-appointed directors voting in
favour. Despite the vote, the Premier's chief of staff, Dean French, continued to exert pressure on the
board to appoint Mr. Haines as CEO, according to the sources.
"As a private corporation, the board of Hydro One is responsible for their own hiring decisions," said
Simon Jefferies, the spokesman for Mr. Ford. ln an e-mail, he said: "Following years of outrageous
Liberal scandals and S6-million salaries, the government for the people has taken measures to improve
accountability and transparency at Hydro One. This includes a legislative provision to approve a
responsible and reasonable compensation package for the CEO the board selects, which we will be
proceeding with in the near future."
Tiziana Baccega Rosa, a spokeswoman for Hydro One, said the company had no comment.
Hydro One's independent directors are looking at CEO candidates with Western Canadian experience at
a time when the utility is in the midst of a Se.Z-bittion takeover of Avista Corp. The U.S. company runs
electrical and gas transmission networks in ldaho, Washington State, Oregon and Alaska, states that buy
and sell power with British Columbia. The Ontario government owns a 47-per-cent stake in Hydro One
after the utility was partly privatized by the previous Liberal regime.
Hydro One's six independent directors have hired Bay Street lawyer Vincent Mercier at law firm Davies
Ward Phillips & Vineberg LLP, to advise them on dealing with Ontario's Progressive Conservative
government. Mr. Mercier declined to comment on his role. He was also the lawyer to Hydro One's
former directors, all of whom stepped down in July following Mr. Ford's election.
ln addition to help on the CEO search, Hydro One board members want guidance on how to deal with
potential political interference, according to lawyers who work for the utility and its employees. Mr.
Ford and members of the Premier's staff are attempting to appoint a CEO and set strategy despite
legislation put in place by Ontario's previous Liberal government that explicitly states the province will
act as an investor in Hydro One and not get involved in the company's affairs.
The Progressive Conservatives have already introduced their own legislation, known as the Hydro One
Accountability Act, which gives the Premier a veto over executive pay. The act also requires the
company to disclose what it plans to pay senior executives, something the new board has not done.
Government and industry sources say anyone agreeing to be Hydro One's CEO at the current time would
be taking the job without knowing the compensation.
The PCs are said to favour offering the next Hydro One CEO a pay package in the S400,000-to-S500,000
range, according to sources in the government.
Kelly McParland: Ontario Premier Doug
Ford should focus on the deficit and leave
Hydro One alone
If Ford wants to prove allegations against him - that he's
bully who wants his own way - he couldn't do better than
to turn Hydro One into a political pawn
CIeAn up thehydro m€ss
Ontario PC Leader Doug Ford announces his intention to fire the CEO as well as the entire board of
Hydro One, in Toronto, Ont. on April 12, 2018.Stan Behal/Toronto Sun/Postmedia Network
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Kellv McParland
December 3,2018
8:39 AM EST
Ontario Premier Doug Ford has a really good chance to send his young government's reputation
and credibility straight into the dumpster. Having inherited a provincial power system that was
grossly mishandled by two previous Liberal governments, he seems intent on doing the same
with his own, young Conservative regime.
Ford might not be premier if not for the inability of premiers Dalton McGuinty and Kathleen
Wynne to keep their fingers out of the affairs of the electricity business. McGuinty saddled it
with a great heaping mountain of bad environmental ideas, which continue to siphon money
from the pockets over overcharged Ontarians. Wynne went further, mismanaging its affairs
directly from the office of the responsible minister, then selling off majority ownership in Hydro
One in a deal that sacrificed rich annual payments for a one-time sum the government could
immediately spend on voter-friendly projects.
The uproar over Hydro One contributed substantially to the collapse of Wynne's public support
and the annihilation of the Liberals in June, when they fell from 55 seats to seven and Ford
marched into ofTice after just a few weeks as Tory leader. Bizarrely, he seems to have interpreted
the result as evidence that voters weren't opposed to the meddling, just the meddler.
A report Friday indicated that Ford and Dean French - the chief of staff whose heavy-handed
tactics have already won him an usly reputation - are butting heads with the Hydro One board
over who gets to be the next chief executive. Six independent board members reportedly want
one of three women who each have extensive experience in British Columbia, deemed important
because Hydro One is in the midst of buying a U.S. power company with extensive activities in
the U.S. west. Ford, via the four board members appointed by the province, wants someone else,
possibly Anthony Haines, chief executive of Toronto Hydro.
If Ford deliberately set out to prove all the worst allegations against him by his most vociferous
opponents - that he's a stubborn, impulsive bully who wants his own way no matter how ill-
considered or under-informed - he couldn't do better than to turn Hydro One into a political
pawn to be jerked around by a bunch of appointees linked to the premier's office.
He's already wandered a considerable distance down that path by allegedly allowing French to
throw his weight around with all the subtlety of a crowbar. Alykhan Velshi, a former chief of
staff to Patrick Brown, Ford's predecessor as Tory leader, was hired in September as a vice-
president at Ontario Power Generation, the utility that produces the power Hydro One
distributes. On his first day at work he was informed he'd been fired, and officially left the job
on Friday, reputedly at the insistence of French. Though Ford denied media reports of French's
involvement, no alternative explanation has been offered, or details on the hefty severance
Velshi is said to be due for a few weeks' work.
"As a private corporation, the board of Hydro One is responsible for their own hiring decisions,"
a spokesman for Ford insisted, though the premier says he hasn't asked French about the claims.
If Velshi's main crime was his association with Brown it would surprise no one. Ford is not fond
of Brown, who was forced from the leadership after allegations of sexual misconduct he denies.
When Brown tried for a quick political comeback with a run for office in Peel Region, Ford
cancelled the vote. Instead Brown ran for mayor of Brampton, a thriving municipality west of
Toronto, and won an upset victorlz in October. Just days after the election he publicly berated the
premier for spiking a planned construction project in Brampton as part of the province's efforts
to reduce spending.
If it all sounds like the plot line of a Netflix political intrigue, perhaps it's not a surprise. Ford
came to office amid assertions - both from media and opponents - that he had little
understanding of the office or the job, and was too used to getting his way. As a wealthy
businessman in a family firm, he wasn't accustomed to being challenged, or listening to advice
outside his circle of comfoft. His short stint as a Toronto city councillor did little to challenge
that view.
Treating Hydro One like an offshoot of caucus would go a long way to confirming the charges.
Though the province owns a large minority share and has four seats on the lO-seat board, the
utility is meant to operate independently, as well it should. Ford attacked it relentlessly
throughout last spring's campaign, focusing his complaints on chief executive Mayo Schmidt,
who he dubbed "the six million dollar man" over his healthy pay package. Axins Schmidt was
one of his earliest actions as premier.
Schmidt served as proxy for Ontarians' belief that the power business had careened out of
control after years of political meddling. The Liberals weren't the first to interfere with Hydro
One and OPG, but they took the practice to new levels, with ambitious green energy plans that
proved ill-considered and immensely costly, pushing up bills to thousands of customers. Ford is
badly mistaken, though, if he thinks voters wanted to replace Liberal interference with Tory
interference. What they want is a well-run, independent, professional operation that makes
decisions based on the best and most effective means of providing affordable power. They don't
want a premier who thinks he knows more about power generation than the people who spend
their lives in the business.
Ford has his hands full trying to wrestle down the mammoth deficit he inherited. The outcry that
has met his first few modest attempts demonstrates how tough it will be. He'd be better off
focusing on the job he was elected for, rather than messing with utility that needs to be left to get
on with the job.
Ministry of Energy,
Northern Development
and Mines
Office of the Deputy Minister of Energy
Hearst Block,4rh Floor
900 Bay Street
Toronto, ON M7A 2E1
Tel. [phone]
Fa\: 416-327-6755
Ministdre de l'Energie,
du D6veloppement du Nord
et des Mines
Bureau du sous+ninistre de I'Energie
Edifice Hearst, 4' 6tage
900, rue Bay
Toronto, ON M7A 2E1T6l.: 416-327-6758
T6l6c.: 416-327$755
Ontario
Re:
November 29,2018
Tom Woods
Chair, Hydro One Ltd.
483 Bay Street,
8th Floor, South Tower
Toronto, ON MsG 2P5
Dear Mr. Woods,
Proceeding before the Public Utility.Commission of Oregon regarding the
proposed acquisition of Avista Gorporation ("Avista") by Hydro One Limited
("Hydro One") - Request for Affidavit from the Province of Ontario
I am sending this in response to email correspondence I received from you on November 6,
2018. I understand that Hydro One is requesting that the Province of Ontario, as represented by
the Minister of Energy, Northern Development and Mines ("Province"), provide a sworn affidavit
to be filed in support of the.ongoing proceedings before the Public Utility Commission of Oregon
('OPUC") related to the proposed acquisition of Avista by Hydro One ("OPUC Proceedings"). A
draft copy of the proposed affidavit, as well as a briefing note on this matter, was included in
your emailto me.
I understand that the purpose of the proposed affidavit would be to provide assurance that the
Province will not exercise any substantial influence over the policies and actions of Avista after
the company has been acquired by Hydro One. You advised that there may be a Goncern
amongst the parties to the OPUC Proceeding regarding the Province's potential influence over
Avista after it has been acquired by Hydro One.
I understand that Hydro One has already indicated to OPUC that there are a number of factors
that mitigate against the risk that the Province might be able to exercise a substantial influence
over Avista after the transaction is completed. First, the rights that the Province might normally
be able to exercise as the largest shareholder of Hydro One are significantly limited by the
terms of the Governance Agreement. lt/oreover, all of the directors on Hydro One's Board (and
all of Hydro One's subsidiary boards) are independent of the Province and there are no
provincial nominees or representatives among the corporation's senior management team.
Finally, Hydro One has already made a series of governance and ring-fencing settlement
commitments that are intended to insulate Avista's business operations after Avista has been
acquired by Hydro One.
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I also understand thatAvista and Hydro One have proposed a series of further stipulated
commitments that would facilitate immediate intervention by the OPUC in the event that (1)
Avista's CEO or any other member of the Avista board believes the Province is directly or
indirectly exercising substantial influence over Avista's policies or actions; or, (2) the Hydro One
Board or any member thereof becomes aware of a proposalto amend, effectively modify, or
eliminate the Governance Agreement. I have been advised that these additional stipulations
should provide the OPUC with direct avenues for any regulatory action it considers appropriate
should either of these circumstances arise.
ln light of the factors set out above, the affidavit Hydro One has requested from the Province
does not appear.to be necessary for the purposes of the OPUC Proceedings. The evidence
already provided by Hydro One should be sufficient to address any concerns that the parties to
the OPUC Proceeding may have with respect to the Province's relationship with Hydro One. ln
addition, as you know, there are significant restrictions on the legal authority of government
officials to bind the future exercise of legislative and regulatory powers and any affidavit would
need to be carefully tailored with these restrictions in mind. We are of the view that it would be
preferable that Hydro One not offer to provide any such affidavit to OPUC.
I want to reiterate the ttlinistry's commitment to supporting Hydro One in its efforts to complete
the Avista acquisition.
Should you have any further questions, please feelfree to contact me.
Sincerely,
Stephen Rhodes
Deputy Minister, Energy
Ministry of Energy, Northern Development and Mines (ENDM)
cc:Nina Chiarelli - Chief of Staff, Minister of ENDM
Carolyn Calwell- ADIvl, Strategic, Network and Agency Policy Division, ENDM
Maud Murray - Legal Director, Energy