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updated 07/10/18

AVISA is selling itself to a Canadian Company – HYDRO ONE.

This is not a hostile takeover.  It is such a friendly takeover it is more like incest – giving 13 Avista executives $50.5 Million in severance benefits to share as long as they leave within 3 years after giving proper notice.  Detailed on page 63 of this Oct. 2017 SEC filing.

AVISTA is a monopoly utility service provider, you have no choice who provides your electricity and gas.  Recognizing that fact, AVISTA is regulated by State Utility Commissions.  In Washington State it is called the Utilities and Transportation Commission, UTC.  The UTC is supposed to look out for the captive customer’s interests in all things related to the monopoly utility company, such as rates and the sale of the companies.

Why should you care?  The Province of Ontario with 1/3 the population of California has twice the debt of California.  They partially privatized Hydro One to raise CASH.  Hydro One is not a charity.  When this sale was initiated their mission was to raise CASH !  for the Province of Ontario to spend on hospitals, schools and transit. 

The purchase price $5.3 Billion is about 50 times the annual net income of Avista, so their annual return on this investment, much of which is borrowed money is about 2%.  That is not enough to justify this transaction.  There is every reason to believe that this sale will soon result in a substantial increase in your power bill, divestiture of assets to generate cash or both, regardless of claims to the contrary.  Also, your power company will be subject to the whims of the major owner, the Province of Ontario, which has just now had a substantial shift in ideology of the ruling political party.

First you should know about Hydro One.  Until 2015 HYDRO ONE was wholly owned by the Province of Ontario.  After a few stock sales on the Toronto Stock Exchange, (TSX symbol H) and stock gifted to First Nations, Ontario now owns about 47% of the company.  Ontario may sell more of HYDRO ONE but will retain at least 40%, according to current law, which can be changed.

On June 7, 2018 the Ontario Liberal party, which was behind the partial privatization of Hydro One and approved of the purchase of Avista, was soundly defeated in the Ontario Provincial Parliamentary election, losing 87% of their seats, due primarily to their disastrous energy policies.

Here is a 2-minute YouTube video of former Ontario Premiere Kathleen Wynne discussing why they are selling HYDRO ONE and their plan to maintain control.  https://www.youtube.com/watch?v=ijwo2N5FWnE&t=3s

Here is a 3-1/2 minute YouTube video of former Ontario member of Parliament Daiene Vernile explaining Ontario’s sale of HYDRO ONE and Ontario’s plan to maintain control of the company:  https://www.youtube.com/watch?v=TALKLwaonfI

Next you should know about the Province of Ontario and it’s recent history regarding their electric utility policy and rates.  Under their policies, to fund ideologically inspired system conversion, electric rates have shot up 71% from 2008 to 2016, double the rate of growth in the rest of Canada and over triple the 22% average increase in the US in that period.  This has become such a contentious issue in Ontario that they recently concocted a complex borrowing scheme to drop electric bills 25%.  What drove this increase in rates was the Green Energy policy of the Ontario Government.  They eliminated coal fired plants in the province and entered into long term uneconomic energy contracts, largely with companies producing “renewable” energy.   The Government of Ontario had no problem raising rates on it’s electricity customers to fulfill it’s environmental goals, until the customers, the electorate, looked like they were going to throw out the Liberal party, then they dropped rates 25%.  The customers, the electorate, then threw out the Liberals.  This recent article in the Toronto Globe and Mail describes the situation.  https://www.theglobeandmail.com/business/article-ontarios-soaring-electricity-costs-result-of-poor-government-policies/

So, why should you be concerned by the energy policies of the Province of Ontario?  Here is a 1-1/2 minute YouTube video clip of now former Premiere Wynne making the statement of her intent to extend Ontario’s energy policy to “other jurisdictions”, Avista customers.  https://www.youtube.com/watch?v=527VJqu0PHI

The government of Ontario intended to make money from the purchase of Avista.  Also they clearly intended to export their energy policies through their control of Avista.  You don’t get to vote on these policies.

But you say “Avista and Hydro One assure us that “There will be no rate increase due to this sale.””  That is a technically true statement that leaves a false impression, so it is a lie.  It does not say “There will be no rate increase” which is the impression it gives.  The rate increases will come as a result of petitions to the UTC for rate increases based on increased capitol investment increasing their “Rate Base”.  Rate increases are already baked in with the expense of Avista’s planned switch over to smart meters.

But you say “The UTC will look out for our interests and won’t allow the rate increases”.  History suggests otherwise.

  • In 1982, AVISTA ( then WWP ) sold off its Spokane water utility companies to a French Company called Spokane Suburban Water Company, for $4.5 Million, with assurances that there would be no rate increases. Forty days after the sale was approved by the UTC, Suburban asked the UTC for a 22% rate increase, which was reduced to 13% by the UTC and granted about a year later.  Two months after being granted the increase Suburban again requested the UTC for a rate increase, this time for 45.1% and the UTC granted them 38.2%.  So, in less than 3 years after the sale the UTC had granted a 51% rate increase. Neighbors across the street on different water systems were then paying substantially less for water.  Citizens were outraged and formed Spokane County Water District #3 in 1986 and by condemnation purchased Suburban in 1988 for $7.9 Million.  Suburban charged high water rates and made a 75% profit in less than 6 years.  Kind of makes you wonder if this had not been the plan all along.
  • The UTC did not protect the interests of the Suburban Water Company customers in this case. WWP sold a water company in Clarkston with a very similar result in the same time period.

The sale must be approved by the UTC of all involved states, Washington, Idaho, Montana, Oregon and Alaska.  All of the UTCs look to be favorably inclined to the sale and we are now in a comment period soliciting comments from the customers.  The sale is scheduled to be finalized by August 18, 2018, about 90 days from now.

What can you do?  The Washington Utilities and Transportation Commission comment period from rate payers ended on May 30.  Your best avenue to possibly influence the UTC is by appealing to your elected officials.  The UTC would probably still consider their comments.

  • You can comment to the Washington Utilities and Transportation commission anyhow, after the deadline, at:
    • Use their on line form at https://www.utc.wa.gov/consumers/Pages/publicComment.aspx
    • E-mail comments@utc.wa.gov;
    • Call toll-free 1-888-333-WUTC (9882)
    • Write the UTC at: P.O Box 47250, Olympia, WA 98504-7250
      • Include a return address and a description of the filing.
    • Refer to Docket No. U-170970 – Joint application of HYDRO ONE LIMITED and AVISTA CORPORATION
  • DO IT SOON !!! The public comment period officialy ended on May 30.
  • Read the rest of this stuff.
  • Contact your elected officials and bring this to their attention. Your Mayor.  Your County Commissioner.  Your US. Representative.

There is an apt quote from C. S. Lewis that applies to the politicians that controlled the Province of Ontario before this June 7 election, and our Governor of Washington who appoints the UTC :  Of all tyrannies, a tyranny sincerely exercised for the good of its victims may be the most oppressive. It would be better to live under robber barons than under omnipotent moral busybodies. The robber baron’s cruelty may sometimes sleep, his cupidity may at some point be satiated; but those who torment us for our own good will torment us without end for they do so with the approval of their own conscience.

So, in the eyes of those politicians who controlled the Province of Ontario, when this sale was initiated, and Governor Inslee of Washington, the coming rate increases, that will be justified by the expense of smart meters and increased use of wind and solar generation are OK for they are doing it for our own good.  They are saving the earth from carbon dioxide.