Concerns over the future of a state-owned hydro facility at first appeared to be an obstacle to Hydro One Ltd.'s plans to acquire Avista Corp. But a settlement and state regulatory safeguards smoothed the way for Alaska to become the first state to approve the merger.
Regulatory approvals for the transaction still are pending with utility commissions in Washington, Idaho, Oregon and Montana. However, the Regulatory Commission of Alaska, or RCA, on June 4 signed off on the proposed merger. With the RCA's order, the merger needs no further approvals from Alaska, Hydro One and Avista said.
Hydro One and Avista needed the RCA's approval because Avista owns Alaska Electric Light and Power Co., or AEL&P, which serves about 17,000 retail electric customers in Juneau, Alaska.
In the 1960s, the Alaska Industrial Development and Export Authority, a state agency, used $100 million in tax-exempt bond financing to buy the Snettisham Hydroelectric Project from the federal government to serve customers of Juneau. AEL&P currently operates and maintains the hydropower facilities under a state contract that gives the utility the option to acquire the Snettisham assets once the bonds are paid.
Various parties protested the deal, including U.S. Rep. Don Young, R-Alaska, who expressed concern that the Snettisham project ultimately could fall into the hands of Canadian utility Hydro One as a result of the merger. But the companies addressed that concern by agreeing that they would not alter any rights or obligations concerning the ownership of the Snettisham Hydroelectric Project and would not transfer Snettisham's contractual rights or interest to Hydro One.
"The RCA's decision affirms the commitments we've made to the residents of Juneau, who can expect their utility to continue to operate as it does today," Avista Chairman and CEO Scott Morris said.
Alaska regulators approved the proposed merger subject to certain conditions, which include the following:
* AEL&P's capital structure must be maintained at its previously ordered levels of 46% debt and 54% equity.
* No transaction costs or premiums associated with the acquisition will be recovered from Alaska customers through rates.
* Assignment of costs related to services between Avista and AEL&P will be subject to review and approval by the RCA.
* AEL&P must continue to be operated independently under its existing management team.
As for the other states, settlements resolving all relevant parties' issues were filed in March, April and May, respectively, with the Washington Utilities and Transportation Commission, Idaho Public Utilities Commission and the Oregon Public Utility Commission. A settlement with the City of Colstrip, Mont., was filed with the Montana Public Service Commission on May 15 concerning community funding in the event the Colstrip coal-fired plant is shut. Avista owns part of that plant.
The U.S. Department of The Treasury's Committee on Foreign Investment in the United States completed its review of the proposed merger on May 18, concluding that no unresolved national security concerns with respect to the transaction exist, Hydro One and Avista said.
