Washington State regulators have rejected Hydro One’s proposed takeover of Avista Corp. citing political interference in the Ontario-based utility by the Doug Ford government.

The Washington Utilities and Transportation Commission (UTC) said the $6.7-billion deal was not in the public interest because it was “evident” that decisions impacting Hydro One were influenced by “political considerations” following Ford forcing the retirement of Hydro One CEO Mayo Schmidt.

The departure of Schmidt — who Ford has referred to as “the $6-million man” — was followed by the resignation of the entire board, events that were cited as evidence by state regulators that Ontario was willing to put political interests above those of shareholders.

The scuppered deal will result in Hydro One paying a $103 million kill fee.

“Our government will always stand up for the largest shareholder of Hydro One, the people of Ontario,” said Ministry of Energy spokesperson Sydney Stonier in an emailed statement to the Star.

“We are confident that the renewed leadership and direction at Hydro One will make responsible business decisions that are in the best interest of their shareholders.

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In a joint statement Wednesday night, Hydro One and Avista, which serves 400,000 electric and natural gas customers in eastern Washington, said they were “extremely disappointed” in the decision and were “reviewing the order in detail” to determine next steps.

The UTC’s order described the risk of provincial government interference in Hydro One’s affairs as “significant.”

“This, in turn, could diminish Avista’s ability to continue providing safe and reliable electrical and natural gas service to its customers in Washington,” the order reads.

The state regulator said Ford’s battle with the utility led to plummeting stock values at both Hydro One and Avista, and noted that Ontario subsequently passed a law limiting corporate compensation and providing for “ongoing involvement by the province” in the organization’s affairs.

The Ford government hailed the leadership changes at Hydro One at the time as a “great day” for the province after characterizing the company’s executive pay as exorbitant on the campaign trail and pledging to bring down costs for rate payers.

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Hydro One, which is 47 per cent owned by the Ontario government, had assured the commission in testimony on the Avista deal that the province was a passive investor that would not exert political pressure on the company.

But the U.S. regulator said the promised benefits of the deal, including rate credits, are inadequate to compensate for “political and financial” risks Avista customers would face.

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“Avista’s customers would be no better off with this transaction than they would be without it,” the commission found.

Public consultations led by the Washington state regulator on the proposed merger received 471 submissions, of which 385 were opposed to the deal.

With files from The Canadian Press

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