Ontario Premier Doug Ford is defending his government's efforts to clear out the senior leadership at Hydro One after a U.S. regulator denied its proposed takeover of Avista Corp., citing political interference in the Ontario utility by the provincial government.

In a statement issued Thursday morning, Ford said his government is focused on lowering hydro rates for Ontarians and argued the deal, arranged by Hydro One's former CEO and board, would have done nothing to help with that.

"While some critics might believe that the concerns of Ontario families, seniors and businesses should take a back seat to foreign regulators, our government remains unwavering in our commitment to the people of Ontario to reduce hydro rates and provide a reliable energy system," Ford said.

"Our government ran on a clear promise to clean up the mess at Hydro One. This included a firm commitment to renew the Hydro One senior leadership that had lost the confidence of Ontario ratepayers. The people of Ontario elected us to follow through on this promise."

On Wednesday, the Washington Utilities and Transportation Commission says it found the deal, which valued Avista at $6.7 billion, to not be in the public interest after it became clear that the Ontario government was willing to interfere in the utility.

The U.S. regulator cited the way Ford forced the retirement of the Hydro One CEO, which was followed by the resignation of the entire board, as evidence that the province was willing to put political interests above those of shareholders.

"The proposed transaction cannot be said to be consistent with the public interest when it is evident that decisions affecting Hydro One's and Avista's business operations and financial integrity are subject to political considerations," the commission stated in its order.

Political considerations may motivate provincial leaders to make decisions and take actions in the future that may cause harm instead of promoting the best interests of Avista, its customers and Hydro One's non-government shareholders, the order reads.

Ontario is Hydro One's largest shareholder

In September 2017, Avista and Hydro One filed a joint application with the commission to approve the companies' proposed merger agreement.

Under the original proposal, Avista would have become a wholly owned subsidiary of Hydro One, an electric transmission and distribution utility headquartered in Toronto.

Avista would have maintained its existing corporate headquarters in Spokane, and continued to operate in Washington under the same name, management team and employee structure.

In March, the companies, UTC staff and nine other parties reached a settlement on the proposed merger that would have provided more than $30 million in rate credits to Washington ratepayers over a five-year period, provided more than $11 million toward low-income programs, provided for accelerated depreciation of Colstrip power plants in Montana and set aside funds for economic transition efforts in Colstrip.



The parties also asserted their agreement offered financial protections for Avista customers and insulated Avista from Hydro One's largest shareholder, the province of Ontario.

In August, Ontario Premier Doug Ford said changes to the way the Hydro One board is compensated would benefit ratepayers. (Christopher Katsarov/Canadian Press)

Hydro One, which is 47 per cent owned by the Ontario government, had assured 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 risks Avista customers would face.

"Provincial government interference in Hydro One's affairs, the risk of which has been shown by events to be significant, could result in direct or indirect harm to Avista if it were acquired by Hydro One, as proposed," the commission stated in Wednesday's order.

"This, in turn, could diminish Avista's ability to continue providing safe and reliable electrical and natural gas service to its customers in Washington. Avista's customers would be no better off with this transaction than they would be without it."

The Ford government hailed the leadership changes at Hydro One at the time as a "great day" for the province after heavily criticizing the company's management while on the campaign trail.

Hydro One is Ontario's largest electricity transmission and distribution provider with more than 1.3 million customers.

In a brief email statement emailed to CBC News on Wednesday, a spokesperson for Energy Minister Greg Rickford said the government will always stand up for the largest shareholder of Hydro One, the people of Ontario.

"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," Sydney Stonier said.

Mitzie Hunter, Finance Critic for the Ontario Liberal Party says premier Ford's meddling in Hydro One continues to cost Ontarians. (CBC )

Ontario Liberal finance critic Mitzie Hunter said Ford's "reckless conduct" at Hydro One continues to damage the province's interests.

"The state of Washington blocked the sale of their utility to protect themselves from Doug Ford's political interference. The fact that this could even be a factor is a disgrace," Hunter said Wednesday.

She added that the message from this decision should be clear to the premier: Stop meddling at Hydro One.

"Doug Ford needs to understand that processes are in place for a reason; vindictiveness and cronyism are no way to run a province," Hunter said.