Hydro One Limited and Avista Corporation have announced the achievement of an important milestone in the regulatory approval process of their proposed merger.
The companies have filed an all-parties, all-issues settlement agreement in the merger proceeding before the Washington Utilities and Transportation Commission (the "Commission").
This represents a full settlement which all parties, including Commission Staff, have agreed is in the public interest and should be accepted by the Commission.
"I would like to thank all the parties that worked together to reach this significant milestone," said Mayo Schmidt, President and CEO, Hydro One. "This positive step forward speaks to the long-term benefits of the union of Hydro One and Avista for customers, communities, employees and shareholders."
"We believe this settlement agreement represents a positive outcome that is broadly supported by the parties and meets the net benefit standard for approval in Washington," Avista chairman and chief executive officer Scott L. Morris said.
"The settlement agreement reinforces the commitments we've made to our stakeholders to keep our headquarters in Spokane, maintain local decision-making, increase our charitable contributions and continue to support economic development, innovation and community involvement.
"The partnership with Hydro One will not result in the elimination of jobs or other cost-cutting that may affect customer service. We're confident this settlement agreement enhances our ability to provide exceptional service and support to our customers and communities well into the future."
The settlement includes financial and non-financial commitments. No costs associated with the transaction will be recovered from Avista or Hydro One customers.
The September 2017 applications for state regulatory approval of the merger included a rate credit of approximately $32 million over a 10-year period across Washington, Oregon and Idaho. This amounted to an allocation of an approximately $20 million rate credit in Washington. The settlement, if approved, would result in the allocation to Washington of a rate credit of approximately $31 million over a 5-year period.
In the settlement, Hydro One and Avista have also agreed to a number of other financial commitments, such as funding for low income participation in new renewables and the replacement of manufactured homes. As a result of the settlement, financial commitments in Washington total approximately $44 million.
While negotiations with parties in the other states are still underway and will be resolved on a state-by-state basis, if the financial commitments in the Washington settlement were to be proportionally allocated to the other states, the total amount of financial commitments would be approximately $74 million which includes a commitment to an additional $1 million rate credit in Alaska.
The settlement agreement is subject to Commission approval. The Commission Staff's recommendation that the Commission approve the settlement agreement is not binding on the Commission itself.
In addition to Hydro One, Avista and Commission Staff, the parties to the merger proceeding include the Public Counsel Unit of the Washington Office of Attorney General, The Energy Project, NW Energy Coalition, Renewable Northwest, Natural Resources Defense Council, Sierra Club, the Washington and Northern Idaho District Council of Laborers, the Northwest Industrial Gas Users and the Industrial Customers of Northwest Utilities.
The transaction received approval from the Federal Energy Regulatory Commission on January 16, 2018 and from Avista shareholders on November 21, 2017. Hydro One and Avista continue to anticipate closing the transaction in the second half of 2018.
Applications for regulatory approval of the transaction are still pending with utility commissions in Washington, Idaho, Oregon, Montana and Alaska. Approval must be obtained from the Federal Communications Commission.
Also required is clearance by the Committee on Foreign Investment in the United States, and compliance with applicable requirements under the U.S. Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, as well as the satisfaction of other customary closing conditions.