Premier Doug Ford owns this.

The three Washington state commissioners who sat in judgement of Hydro One’s proposed $5.3-billion (U.S.) takeover of Spokane-based Avista Corp. could not have been more clear on this point.

In denying the takeover application, the commissioners concluded that the utility’s directors cannot be considered independent, that the province’s role is demonstrably not that of a minority shareholder, that Hydro One remains subject to management control by the province and that the governance agreement between Hydro One and the province can’t be considered protective of Hydro One’s status as a publicly traded corporation.

All of which can be traced directly to the interference of the premier, the ousting of CEO Mayo Schmidt and the removal of the entire board of directors.

In summation: the chief architect of the deal was toast. The current Hydro One CEO is temporary, and relatively new to the company. The “compliant” board —I admire the commission’s use of language — is composed of newbies. The province — the commission’s cadence is almost Dickensian here — “has been anything but exemplary in its behaviour.” Its interference “discredits and impugns” prior testimony insisting on the corporation’s independence. The rights of shareholders have been ignored in the open-for-business province. The termination fee for failing to win regulatory approvals is a throat-clearing $103 million.

Here’s the big one: “It no longer is clear that Hydro One can be regarded as a private, publicly traded corporation.”

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So not only is this a takeover failure, it’s the failure of Hydro One to transition successfully from a Crown corporation to what it pledged it would become: North America’s leading investor-owned utility. “There appears to be nothing that would prevent this level of interference from occurring again if the government leadership becomes dissatisfied in some regard with decisions by the new board of directors or with the new CEO, or simply due to political considerations without regard to sound business practices,” concluded the state’s Utilities and Transportation Commission (UTC), deploying refreshingly frank language.

I would argue that turning Avista into a wholly-owned subsidiary of Hydro One would not have been a quantum win for Hydro. Consider the bar graph that Avista CEO and deal cheerleader Scott Morris presented to the UTC way back in the autumn of 2017. Measured by equity value the new Hydro One would move up just two spots on the scale of publicly traded North American utilities, leaving it, still, as a middle-of-the-pack contender.

The deal was less about size and more about jurisdiction, diversification — expanding its distribution and transmission assets beyond the east to, principally, Washington state, Idaho, Oregon and Montana — and proving to the markets that it was on the path to fierce growth. U.S. equity analysts may have missed such acquisitions as Haldimand Hydro or Orillia Power.

What Avista stood to get out of the deal could be seen as thin gruel, as evidenced by hearings in which Avista executives testified to how great it would be to be “part of something bigger,” that its head office would remain in Spokane, that its “brand” would be untouched. There were allusions to benefits of scale, and the usual understanding that it would take time, post takeover, to clearly define what the cost savings might be, and promises that the “culture” would remain untouched. Promised rate credits for consumers looked thinner and thinner as the credits were to be spread across 10 years and back-end loaded to pay out more in latter years.

A decade ago, all of this may have been good enough to convince the commission that the takeover wasn’t going to be one of those hollowing out exercises where the savings would be won on the backs of mass layoffs. In 2009 a new “net benefit” standard was applied, replacing the prior measure which merely decreed that the transaction do “no harm” to ratepayers. The commission now must determine — this is their language — “that customers are better off with the transaction than without it.”

But those benefits need not be financial. A new corporate structure or the tagging on of new technologies could make a company poised for growth.

So the first task was to determine that that transaction was a winning one for ratepayers. The transaction, prior to the events of last summer, could have passed on that score.

But the second was to confirm that the Ontario government wouldn’t meddle. As we know, the “developing facts …undermined more or less completely” assurances given by Hydro One executives in prior testimony that the province would keep its hands off. “The unavoidable risks of the proposed transaction associated with the province’s evident intent and ability to participate directly in the direction and management of Hydro One in ways that are harmful to the enterprise, which would include Avista, are significant,” the commission ruled.

Supplemental testimony provided after the political chaos didn’t help. The commission notes that new Hydro One board chair Tom Woods answered “No” when asked if the departure of the CEO and the board was in the best interest of either Hydro One or Avista.

Stingingly, the commission found that in the wake of the political disruption, the transaction would not have even cleared the prior lower bar of the “no harm” standard.

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The commission was still 10 days from its promised decision deadline when it came out against the deal on Wednesday. Their conclusion: the “marginal” benefits were outweighed by the political risk. The proposed transaction therefore fails to provide a net benefit, fails to protect the public interest and fails to protect against political interference.

Last May, these same commission members asked Mayo Schmidt about all the political noise north of the border. What would happen if there were a change to the government in power? “The province is a shareholder and is not a manager of the business,” Schmidt replied, parroting a line from the company’s share-issuing prospectus not all that many months before.

The province as a shareholder managed the matter differently, and that was Premier Ford’s call. To paraphrase NDP leader Andrea Horwath, who would want to do business with a government like that?

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