20180516notice_of_proposed_settlement_order_no_34061.pdf

Office of the Secretary
Service Date
May 16,2018
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE JOINT )CASE NOS.AVU-E-17-09
APPLICATION OF HYDRO ONE LIMITED )AVU-G-17-05
AND AVISTA CORPORATION FOR )APPROVAL OF MERGER AGREEMENT )NOTICE OF PROPOSED
)SETTLEMENT
)NOTICE OF
)MODIFIED PROCEDURE
)NOTICE OF PUBLIC HEARINGS
)NOTICE OF AMENDED
)SCHEDULE
)ORDER NO.34061
On July 19,2017,Avista announced that it had entered into a merger agreement with
Hydro One ("Applicants").On September 14,2017,the Applicants filed the above captioned
joint application for approval of the merger.Approval of the Application would result in Avista
becoming a wholly owned subsidiary of a Hydro One holding company.Idaho Forest Group,
Clearwater Paper,Idaho Conservation League (ICL),the Community Action Partnership
Association of Idaho,and the Washington and Northern Idaho District Council of Laborers
intervened as parties.The Commission set deadlines for the parties to file testimony,scheduled a
public workshop,and set a technical hearing date of June 27,2018.See Order No.33950.
On April 4,2018,the parties engaged in settlement discussions at the Commission
Office.On April 13,2018,the Applicants filed a Motion for Approval of Stipulation notifying
the Commission that the parties had reached a full settlement.
NOTICE OF PROPOSED SETTLEMENT
YOU ARE HEREBY NOTIFIED that,in summary,the Stipulation and Settlement
proposes to fully resolve the case as follows:
1.Governance and OperationalCommitments
All decision-making authority over Avista operations will belong to the Board of
Directors of the Avista Corporation,and not to Hydro One.Any change in this authority will
require a two-thirds vote of the Avista Board,and approval of local regulatory agencies.Avista
NOTICE OF PROPOSED SETTLEMENT
NOTICE OF MODIFIED PROCEDURE
NOTICE OF PUBLIC HEARINGS
NOTICE OF AMENDED SCHEDULE
ORDER NO.34061 1
will retain all current executive management of Avista,subject to voluntary retirements,and
standard business rationale.
Followingapproval of the merger,the Avista Board will consist of nine members:
two designated by Hydro One;three independentdirectors who reside in the Pacific Northwest;'
three current members of Avista's current board;and Avista's current CEO will remain and
serve as chairman of the board followingclosing.
Avista will maintain branding,and the Avista headquarters will remain in Spokane.
Avista offices will remain in their current territory locations.Avista will maintain or expand
capital investments for communityeconomic development.The Company will further maintain
its current workforce,with the same compensation and benefits.
2.Rate Commitments
There will be no rate increase because of the merger.Rather,Avista's Idaho
customers will receive a $15.8 million rate credit over a five-year period,or $3.2 million per
year.All costs associated with the transaction will be tracked separately and will not appear on
Avista's utility books.Customers will not pay for any transaction or transition cost,including all
legal work,advisory fees,acquisition premiums,documentation and materials,executive
compensation,and any cost directly related to the transaction.Any technology expenditures
required for compatibilitywithin the merged entitywill be excluded from rates.
3.RegulatoryCommitments
Hydro One and its subsidiaries recognize the authority of Idaho,and the Idaho
Commission,and have committed to comply,as required,will all applicable Idaho laws and
Commission orders.Further,Hydro One and its subsidiaries commit to maintain and make
available all books,records,and financial information to the Commission.Avista will maintain
separate books and records.Hydro One committed to not use lack of jurisdictionto deny access
to any records.
4.Financial IntegrityCommitments
Hydro One will provide equity to support Avista's capital structure,and Avista will
maintain separate debt to support its utility operations.Avista will maintain its pension funding
'The Pacific Northwest is defined as Alaska,Idaho,Montana,Oregon,and Washington State.
NOTICE OF PROPOSED SETTLEMENT
NOTICE OF MODIFIED PROCEDURE
NOTICE OF PUBLIC HEARINGS
NOTICE OF AMENDED SCHEDULE
ORDER NO.34061 2
policy,and Hydro One will not seek to change it.Avista will comply with all Securities
Exchange Commission and Sarbanes-Oxley reporting requirements,as required by law.
5.RingFencing Provisions
Applicants agree to several provisions aimed at shielding Avista from any negative
potential fmancial issues of Hydro One.These include authority over possible bankruptcy
proceedings,a non-consolidation proviso that a bankruptcy court would not order the substantive
consolidation of the assets and liabilities of Avista with Hydro One,and that Hydro One would
not seek to include Avista in a potential bankruptcy without the consent of two-thirds of Avista's
board.Additionally,the Applicants agree that Avista's assets will not be pledged by Avista or
any of its affiliates,includingHydro One,for the benefit of any entity besides Avista.
Hydro One agreed to a "hold harmless"provision,under which Hydro One will hold
Avista's customers harmless from any business and financial risk exposures associated with
Hydro One,and any Hydro One affiliate.The hold harmless provision states that in any
proceeding before the Commission involvingrates,the rate of return will be determinedwithout
regard to unregulated activities.Additionally,Avista will not enter into an inter-company debt
transaction,or lend money to Hydro One without prior Commission approval.
6.Resource Planningand Environmental Commitments
Avista will continue to offer renewable power programs in consultation with
stakeholders.However,in all resource planning and acquisition efforts,Avista will also evaluate
demand-side resources,renewable energy,Power Purchase Agreements,and all other resources
consistent with the Commission's resource evaluation rules and policies.
7.EnergyEfficiency,Weatherization,and Conservation Commitments
Hydro One will arrange fundingof $5.3 million over a ten-year period to fund energy
efficiency,weatherization,conservation,and low-income assistance programs.The funds will be
directed by the Energy Efficiency,Weatherization,Conservation,and Low-Income Assistance
Committee ("EWCL").The EWCL is a new committee consisting of Avista,Commission Staff,
the Lewiston CAP,ICL,the Idaho Forest Group,and Clearwater Paper.The EWCL will
determine if programs should receive this funding to address energy efficiency,weatherization,
conservation,and low-income needs in Avista's Idaho service territory.
NOTICE OF PROPOSED SETTLEMENT
NOTICE OF MODIFIED PROCEDURE
NOTICE OF PUBLIC HEARINGS
NOTICE OF AMENDED SCHEDULE
ORDER NO.34061 3
As part of the proposed settlement,the parties agree that Avista will work with
Clearwater and Idaho Forest Group to qualify certain projects for funding under Tariff Schedule
90 (DSM),and submit any non-qualifyingportions of those projects to the EWCL to consider for
further funding.
Hydro One and Avista will work with the Lewiston CAP to improve the penetration
of low-income programs.Avista will also work to fund bill payment assistance for low-income
customers,and will continue to offer the Fee Free Payment Program to residential customers.
8.Miscellaneous Commitments
Following closing,there will be a one-time $7 million contribution to Avista's
charitable foundation.For five-years after the close of the transaction,Avista will maintain a $4
million annual budget for charitable contributions,and will also contribute $2 million each year
to Avista's charitable foundation.Avista agrees it will work to distribute these monies across its
service territory proportionallyacross jurisdictions.
For accounting purposes,Hydro One and Avista agree to support a December 31,
2027,depreciation end of life relating to Avista's ownership in Colstrip Units 3 and 4.The
Applicants also agree that they will support accelerated depreciation in Avista's interest in
Colstrip Units 3 and 4 in Avista's pending Federal Tax Revision case,Case No.GNR-U-18-01;
Avista's Application to Change Its Electric and Natural Gas Depreciation Rate,Case Nos.AVU-
E-18-03,AVU-G-18-02;and in its 2019 Integrated Resource Plan.2
Finally,the settlement also includes a most favored nations clause that allows the
Commission to consider,and adopt in Idaho any commitments the Applicants agree to in other
jurisdictions.This provision applies even if such commitments are agreed to after the
Commission enters its order in this docket.
The parties represent that the Stipulation and Settlement in whole is in the public
interest and is fair,just and reasonable.The parties acknowledge that the Commission is not
bound by these representations and that the Commission will independently review the proposed
settlement to decide whether to approve it,reject it,or state conditions under which to accept it.
2 AVÍSÍR'S 2019 IRP will analyze multiple retirement dates for Colstrip Units 3 and 4,not limited to,the "end of
useful life"date determined in AVU-E-18-03,AVU-G-18-02.
NOTICE OF PROPOSED SETTLEMENT
NOTICE OF MODIFIED PROCEDURE
NOTICE OF PUBLIC HEARINGS
NOTICE OF AMENDED SCHEDULE
ORDER NO.34061 4
COMMISSION SETTLEMENT RULES
YOU ARE FURTHER NOTIFIED that the Commission will review the proposed
settlement consistent with Commission Rules 271-280.
YOU ARE FURTHER NOTIFIED that the Commission is not bound by the
agreement of the signing parties.The Commission will independently review the proposed
settlement to decide whether to approve it,reject it,or state conditions under which to accept it.
The proposed settlement's proponents ultimatelybear the burden to prove that it is just,fair,and
reasonable,in the public interest,or otherwise in accordance with law or regulatory policy.
YOU ARE FURTHER NOTIFIED that the Application,Settlement,and forthcoming
comments are available for public inspection during regular business hours at the Commission
offices.The Application is also available on the Commission's web site at www.puc.idaho.gov.
To access the documents,click on the "File Room"tab at the top of the Commission's webpage,
scroll down to "Open Electric Cases,"and then click on the case number as shown on the front
of this document.
NOTICE OF MODIFIED PROCEDURE
YOU ARE FURTHER NOTIFIED that the Commission has reviewed the filing in
this action,and has determined that the public interest may not require a technical hearing,and
will thus proceed under Modified Procedure pursuant to Rules 201 through 204 of the Idaho
Public Utilities Commission's Rules of Procedure,IDAPA 31.01.01.201 through .204.The
Commission notes that Modified Procedure and written comments have proven to be an effective
means for obtaining public inputand participation.
YOU ARE FURTHER NOTIFIED that any party desiring to state a position in
support of this Application may file a written comment with the Commission no later than June
20,2018.The comment must contain a statement of reasons supporting the comment.Persons
desiring a hearing must specifically request a hearing in their written comments.
YOU ARE FURTHER NOTIFIED that any non-party,member of the public may file
comments with the Commission no later than June 27,2018.The Company may file reply
comments,if necessary,by June 27,2018.Written comments concerning this Application shall
be mailed to the Commission and the Applicants at the addresses reflected below:
NOTICE OF PROPOSED SETTLEMENT
NOTICE OF MODIFIED PROCEDURE
NOTICE OF PUBLIC HEARINGS
NOTICE OF AMENDED SCHEDULE
ORDER NO.34061 5
Commission Secretary
Idaho Public Utilities Commission
PO Box 83720
Boise,ID 83720-0074
Street Address for Express Mail:
472 W.Washington Street
Boise,ID 83702-5918
YOU ARE FURTHER NOTIFIED that the following persons are designated as
Avista's representatives in this matter:
David J.Meyer
Vice President &Chief Counsel,Reg.&Gov't Affairs
Avista Corporation
PO Box 3727
1411 East Mission Avenue
Spokane,WA 99220-3727
E-mail:[e-mail]
YOU ARE FURTHER NOTIFIED that the followingpersons are designated as
Hydro One's representatives in this matter:
Elizabeth Thomas,Partner
Kari Vander Stoep,Partner
K&L Gates LLP
925 Fourth Avenue,Suite 2900
Seattle,WA 98104-1158
E-mail:[e-mail]
E-mail:[e-mail]
Comments should contain the case caption and case number shown on the first page of this
document.Persons desiring to submit comments via e-mail may do so by accessing the
Commission's home page located at www.puc.idaho.gov.Click the "Case Comment or Question
Form"under the "Consumers"tab,and complete the comment form using the case number as it
appears on the front of this document.
NOTICE OF PUBLIC HEARINGS
YOU ARE HEREBY NOTIFIED that the Commission will conduct three public
hearings in this matter:
NOTICE OF PROPOSED SETTLEMENT
NOTICE OF MODIFIED PROCEDURE
NOTICE OF PUBLIC HEARINGS
NOTICE OF AMENDED SCHEDULE
ORDER NO.34061 6
1.June 12,2018 Public Hearing at 1912 Center,412 E.3rd SG
Moscow,Idaho,6:00-8:00 PM (PDT).
2.June 13,2018 Sandpoint High School,410 S.Division Ave.,
Sandpoint,Idaho,6:00-8:00 PM (PDT).
3.June 14,2018 Midtown Meeting Center,1505 North Fifth St.,
Coeur D'Alene,Idaho,6:00-8:00 PM (PDT).
YOU ARE FURTHER NOTIFIED that all proceedings will be held pursuant to the
Commission's jurisdiction under Title 61 of the Idaho Code.The Commission may enter any
final Order consistent with its authority under Title 61.All proceedings will be conducted
pursuant to the Commission's Rules of Procedure,IDAPA 31.01.01.000,et seq.
NOTICE OF AMENDED SCHEDULE
YOU ARE FURTHER NOTIFIED that the Commission vacates the existing case
schedule,and replaces it with the followingamended schedule:
DATE ACTIVITY
June 12,2018 Public Hearing at 1912 Center,412 E.3rd SL
Moscow,Idaho,6:00-8:00 PM (PDT)
June 13,2018 Sandpoint High School,410 S.Division Ave.,
Sandpoint,Idaho,6:00-8:00 PM (PDT)
June 14,2018 Midtown Meeting Center,1505 North Fifth St.,
Coeur D'Alene,Idaho,6:00-8:00 PM (PDT)
June 20,2018 Deadline for comments in support of the stipulation
June 27,2018 Deadline for public comments and reply comments,
if any
ORDER
IT IS HEREBY ORDERED that the proposed settlement be processed by Modified
Procedure.Parties interested in submitting written comments in support of the proposed
settlement may do so no later than June 20,2018.
NOTICE OF PROPOSED SETTLEMENT
NOTICE OF MODIFIED PROCEDURE
NOTICE OF PUBLIC HEARINGS
NOTICE OF AMENDED SCHEDULE
ORDER NO.34061 7
IT IS FURTHER ORDERED that all public comment,and Company reply
comments,if any,may be filed no later than June 27,2018.
IT IS FURTHER ORDERED that Commission will conduct three public hearings on
June 12,13,and 14,2018,as described above.
DONE by Order of the Idaho Public Utilities Commission at Boise,Idaho this
day of May 2018.
PAUL K T
KRIŠTINE PER M IONER
ERIC ANDERSON,COMMISSIONER
Diane M.Hanian
Commission Secretary
AVUEl709 AVUGl705_bk(order3)
NOTICE OF PROPOSED SETTLEMENT
NOTICE OF MODIFIED PROCEDURE
NOTICE OF PUBLIC HEARINGS
NOTICE OF AMENDED SCHEDULE
ORDER NO.34061 8