Avista reorganization gets commission approval
The Idaho Public Utilities Commission has approved Avista Corporation’s application to conduct a corporate reorganization by creating a holding company to be known as AVA Formation Corp.
Under the reorganization, AVA Formation Corp. becomes the parent company of Avista Utilities, which, in northern Idaho, serves about 115,000 electric customers and 68,000 natural gas customers. The majority of the Spokane-based utility’s customers are in Washington state.
The commission agreed with findings of its staff that the reorganization should reduce financial risk for the utility and improve its credit ratings. The responsibility of the commission is 1) to determine if the transaction is in the public interest, 2) to ensure that the cost and rates for supplying service will not increase as a result of the reorganization and 3) to determine that Avista Utilities has the bona fide intent and financial ability to operate and maintain Avista’s Idaho operations.
The recent repeal of the Public Utilities Holding Company Act of 1935, often referred to as PUHCA, allows utilities that operate in multi-state jurisdictions to form holding companies. The holding company structure will provide additional protection for ratepayers by further separating the regulated utility’s operations from the operations of other Avista subsidiaries that are not regulated. The protections, referred to as “ring fencing,” are designed to ensure that ratepayers dollars are not used to subsidize unregulated subsidiaries of Avista and that ratepayers are protected from the risks of Avista operating other non-regulated businesses.
Avista stated in its application that the reorganization will not include the transfer of utility assets and that Avista customers will not see any change in the utility or its operations. Avista Utilities would continue to be subject to the Idaho Public Utilities Commission on matters impacting its Idaho customers such as rates and customer service.
Commission staff said that a number of commitments in the stipulation between staff and Avista address the need for ring-fencing around Avista Utilities, which will prevent the utility arm of the business from being pulled into a parent corporation bankruptcy proceeding. Those provisions include the maintaining of separate books and records for each Avista entity as well as granting commission staff full access to books and documents pertaining to the regulated utility side as well as those of the unregulated Avista affiliates and parent corporation. Both the parent corporation and Avista Utilities will be required to report to staff and request commission approval when certain events occur, such as procurement of loans, the spin-off of any entity, the dissolution of business activities, dividend payment arrangements and changes in the credit ratings of each agency.
Another commitment prohibits Avista Utilities from making any dividend payments to the parent corporation that would reduce Avista Utilities’ common equity capital below 25 percent of its total adjusted capital without commission approval.
A full text of the commission’s order, along with other documents related to this case, are available on the commission’s Web site at www.puc.idaho.gov. Click on “File Room” and then on “Electric Cases” and scroll down Case No. AVU-E-06-01.
The commission’s order is final, but interested parties may petition the commission for reconsideration by no later than July 21. Petitions for reconsideration must set forth specifically why the petitioner contends that the order is unreasonable, unlawful or erroneous. Petitions should include a statement of the nature and quantity of evidence the petitioner will offer if reconsideration is granted.
Petitions can be delivered to the commission at 472 W. Washington St. in Boise, mailed to P.O. Box 83720, Boise, ID, 83720-0074, or faxed to 208-334-3762.