The Washington Utilities and Transportation on Dec. 5 determined that the proposed merger deal between Canada-based Hydro One Limited and Washington-based Avista Corporation does not fully protect the U.S. company or its customers from political and financial risk. After Ontario’s general election in June, an agreement between the province and Hydro One resulted in the resignation and replacement of the utility’s board of directors and the retirement of the chief executive officer. Ontario also enacted a law restricting compensation of Hydro One’s executives and allowing the involvement of the government in issues typically reserved to the executive management and board. The commission noted that the change “elevated the provincial government’s political interests” above that of stakeholders including investors who own 53 percent of the utility’s common stock. The turn of events caused credit downgrades and fall in stock values of both Hydro One and Avista. The commission subsequently extended its decision deadline to determine the implications of the leadership changes on the merger.

In March, the commission staff reached a settlement that would boost credits for Washington ratepayers to $30.7 million over five years and provide financial protections to insulate Avista from Hydro One’s financial risks. The commission determined that the financial offerings and benefits promised by the transaction are insufficient to compensate for the risks Avista’s customers would face and that the Hydro One’s proposed acquisition of Avista does not meet the net-benefit standard required by state law. The proposed deal received approval from the federal energy regulator in January and Montana commission in June. Hydro One’s leadership changes have also disrupted regulatory approval process in Oregon and Idaho. Hydro One is Ontario’s largest transmission and distribution service provider. Avista is an electricity and gas utility serving Washington, Idaho, Oregon and Montana.