20180620Comments.pdf

Benjamin l. Otto (lSB No. 8292)
710 N 6'h Street
Boise,ID 83701
Ph: [phone]x12
Fax [phone]
[e-mail]
Attorney for the Idaho Conservation League
IN THE MATTER OF THE JOINT
APPTICATION OF HYDRO ONE
LIMITED AND AVISTA
CORPORATION FOR APPROVAT OF
MERGER AGREEMENT
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BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
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CASE NO. AVU-E-17-09
AVU-G-17-0s
IDAHO CONSERVATION LEAGUE
COMMENTS
The Idaho Conservation League (ICL) recommends the Idaho Public Utilities Commission
approve this merger agreement. ICL, alongside the PUC Staff, Clearwater Paper, and Idaho
Forest Group, reviewed the filings in the case and participated in the settlement negotiations that
resulted in the merger agreement. Based on this engagement, ICL believes this merger meets the
criteria in Idaho Code 61-328.
1) The transaction is in the public interest because it maintains local oversight of the utilities
while delivering immediate benefits to customers, as well as additional commitments by
utility shareholders to further invest in local communities;
2) Because of the monthly rate credits and other protections, the costs and rates for service
will not increase due to this transaction;
3) Hydro One, as the acquiring entity, has made specific commitments that establish a bona
fide intent and ability to continue to operate and maintain Avista service to Idahoans.
This merger agreement combines two utilities - each primary owned by private shareholders -
into a single utility owned primary by private shareholders, Hydro One. Importantly the utilities
make specific commitments in the merger agreement to ensure the Idaho Commission retains
the same ability and authority to oversee Avista in Idaho regardless of which shareholders own
the utility. Because the utilities have made specific commitments to meet the criteria in Idaho
Code 6l-328, and because the utilities promise to make substantial investments in energy
conservation for Idahoans, ICL recommends the Commission approve this merger.
AVU-E-17-09
ICL Comments
I Iune 20, 2018
The Commission and ldaho Stakeholders Retain Full Oversight of Avista
As Avista customers and Idahoans, ICL and our individual members have a strong
interest in retaining oversight of Avista utilities. We have consistently used the tools and forum
offered by the PUC to engage with Avista to achieve our members goals - ensure reliable,
affordable service that protects Idaho's air and water quality. ICL intervened in this merger
docket to ensure that Idahoans retain full authority to review Avista's rates, conservation
programs, and plans for clean energy options.
ICL notes the merger agreement includes specific commitments to ensure Idaho retains
oversight authority:
. Commitment 20, 30, 31- submission to Idaho Commission and State Court
jurisdiction for disputes and enforcement of orders.
. Commitment 21 - agree to comply with existing Commission orders.
. Commitment 22, 23, and 24 - promises to make accounting details available and
transparent.
Another aspect of retaining local influence is whether Avista managers and executives
maintain a local connection to the communities they serve. ICL notes the merger agreement
contains specific commitments to retain a local connection with Avista, including:
. Commitment 9 and I0 - Avista will maintain the same headquarters and local
offices, as well as the local staffing levels necessary to maintain service quality.
. Commitment 7,2, 3, and 4- the majority of the seats of the Avista Board will be
residents of the northwest region and have authority to manage the utility; Avista
will strive to maintain executive managers; these local leaders will maintain the
brand and establish the plan of operations for Avista.
. Commitments 5, 12, 13, and 14- Avista will maintain current levels of local
economic development and community engagement.
ICL acknowledges the public comments that express concerns about losing oversight of
Avista's rates, services, and local engagement as a result of this merger. As Idahoans and Avista
customers, ICL shares these concerns. At the same time, we acknowledge that as private
companies Avista and Hydro One have the right to pursue economic decisions as long as they
comply with Idaho law. The commitments in the merger agreement, and the authority and ability
AVU-E-17-09
ICL Comments
2 fune 20, 2018
for the Idaho Commission to exercise continuing oversight of Avista, effectively address this
concern.
The Merger Delivers Immediate Benefits to Idahoans.
Before approving the merger agreement, the Idaho Commission must find the transaction
is in the public interest and not cause rates to increase. Idaho Code 6l-328(3). This merger
agreement includes specific commitments that will produce immediate benefits for customers
and ensure continued access to affordable capital for the utilities.
. Commitment 16 and 19- promise to pass on cost savings to customers including an
immediate $15.3 million over five years in credits on month energy bills.
. Commitment -15 - promise to maintain service quality metrics and performance as
determined in concert with the Idaho PUC Staff.
. Commitments 25, 34, and 38- promise to maintain current costs of debt and equity
included in rates, enable Avista to access capital on reasonable terms, and limit the return
of earnings to shareholders.
The merger agreement also includes specific commitments to make long-term investments in
Idaho communities. These commitments ensure the transaction is in the longer-term public
interest.
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Commitment 11 and 61 - $20 million over five years of community donations though the
Avista Foundation, including an effort to apportion awards in Idaho according to our
share of the overall service territory.
Commitment 58 - $5.3 million over 10 years for new investments in energy conservation,
weatherization, and low-income needs as determined by a group of Idaho stakeholders.
ICL, as aparty to this merger is a member of this stakeholder group. We envision inviting
additional stakeholders to join this effort to ensure the resulting investments benefit local
communities.
Commitment 55 - convene an Idaho stakeholders group to explore opportunities for
beneficial transportation electrification. Idaho currently imports 100 o/o of our vehicle
fuels and has some of the highest gasoline prices in the country. ICL strongly supports
electrifring transportation as an opportunity to invest in our local communities by
redirecting fuel dollars to locally produced fuel sources.
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AVU-E-17-09
ICL Comments
aJ June 20,2018
Importantly for ICL and our members, the merger agreement includes specific commitments
to address the outstanding liability of Colstrip and plan for a reliable, affordable clean energy
future. ICL notes the commitments in the merger agreement create a pathway to address this
transition and the Commission and others have opportunities to engage in specific resource
decisions along this pathway.
. Commitment 69- promise to support2027 as the end of life for deprecation purposes in
three subsequent dockets that will focus on the plant costs, the options to recoup this
costs, and the integrated resource plan to consider replacement options. ICL supports this
commitment because it creates a predictable pathway to resolve this issue.
. Commitment 52, 5j, and 71- improvements to the Integrated Resource Planning process
to ensure accurate data on clean energy options, include power purchase agreements as a
resource options, and focus on the transmission impacts of retiring Colstrip. ICL
supports these commitments because they will help create a more accurate and robust
assessment of clean energy replacement options.
The primary reason ICL supports this merger agreement is because of the direct benefits
to Idahoans. The rate credits deliver immediate benefits to all Avista customers. Idaho
stakeholders will guide the future investments to ensure long-term benefits to customers. And the
pathway for a clean, affordable energy future provides Idahoans with a means to resolve a major
outstanding liability in the Colstrip plant. As a package, the merger agreement serves the public
interest and will not cause rates to increase.
The Merger Agreement Demonstrates Hydro One Intends and is Able to Maintain Service
The final criteria the Commission must consider is whether the acquiring entity has the
"bona fide intent and financial ability to operate and maintain said property in the public
interest." Idaho Code 6l-328 (3). ICL interprets this prong to include operational and planning
efforts covered by the commitments noted above, along with additional commitments to "ring
fence" Avista from Hydro One. ICL notes the merger agreement includes specific commitments
to prevent Hydro One from draining the finances of Avista.
. Commitment 42 - creating a "Golden Share", a sophisticated legal tool that limits
the ability of shareholders to force a company into involuntary bankruptcy by
providing a neutral, third party trustee with voting powers regarding bankruptcy
filing.
AVU-E-17-09
ICL Comments
4 Iune 20, 2018
Commitment 44 - providing a non-consolidation opinion that shows the corporate
structure insulates Avista from implications of a possible Hydro One bankruptcy.
Commitment 46- promise by Hydro One not to use Avista assets to acquire loans
or benefits for Hydro One.
Commitment 47 - promise by Hydro One to "hold Avista customers harmless
from any business and financial risk exposure" associated with Hydro One and its
affiliates.
Commitments 50 and 5l - requiring Commission approval before issuing any
debt or lending between the utilities.
ICL acknowledges that establishing bona fide intent for future actions can be difficult. In
our experience engaging with the utilities in this docket, ICL has the distinct impression the
companies fully intend to meet these commitments. Tangibly, the utilities made specific legal,
financial, and reporting commitments that enable this Commission to monitor and enforce the
utilities' intent and ability to maintain service for Idahoans.
Conclusion
It is an important event to have one of Idaho's major utilities acquired by a company new
to our region. As Idahoans and Avista customers, ICL engaged in this docket to ensure broad
public benefits and continue to promote our member's interest in an affordable, reliable, and
clean energy future. Based on our review of the case, negotiations with the parties, and the
specific commitments by the utilities ICL recommends Commission approve this settlement.
Respectfully submitted this 2O'h day of fune 2018,
J. Otto
Idaho Conservation League
AVU-E-17-09
ICL Comments
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5 )une 20, 2018
CERTIFICATE OF SERVICE
I certifr that on the 20th day of fune 2018, I delivered true and correct copies of the foregoing
COMMENTS to the following via the service method noted:// <-
Hand delivery:
Diane Hanian
Commission Secretary (Original and seven copies provided)
Idaho Public Utilities Commission
427 W. Washington St.
Boise,ID 83702-5983
Electronic Mail only:
Benjamin I. Otto
Clearwater Paper
Peter I. Richardson
Richardson & Adams, PLLC
[e-mail]
Dr. Don Reading
dreading@mindspring. com
Community Action P artnership Asso ciation
Brad M Purdy
Attorney At Law
[e-mail]
Washington and Northern ldaho District
Council of Laborers
Danielle Franco-Malone
Schwerin Campbell Barnard Iglitzin & Lavitt
LLP.
[e-mail]
Iune 20, 2018
Avista
David ]. Meyer, Esq.
Patrick Ehrbar
Avista Corporation
David. meyer@avistacorp. com
Patrick. ehrbar@avistacorp. com
Hydro One
)ames Scarlett
Hydro One
[e-mail]
Elizabeth Thomas, Partner
Kari VanderStoep, Partner
K&L Gates, LLP.
Liz.thomas@klgates. com
[e-mail]
[e-mail]
Idaho Forest Group
Ronald L. Williams
Williams Bradbury, P.C.
[e-mail]
Dean I. Miller
deanj [e-mail]
Larry A Crowley
The Energy Strategies Institute, Inc.
[e-mail]
AVU-E-17-09
CERTIFICATE OF SERVICE