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A state regulator in Idaho dealt another blow to Hydro One Ltd.’s proposed $4.4-billion acquisition of Avista Corp., rejecting the deal because of a “lack of independence” between the Ontario utility and the provincial government.

The decision, issued late on Thursday, follows a similar decision in early December by the regulator in Washington State. Hydro One has asked the Washington Utilities and Transportation Commission to reconsider that ruling.

In the Idaho case, the question of political influence on Hydro One was a key factor. The province owns 47 per cent of the utility and, after the Progressive Conservatives won last year’s provincial election, the chief executive of Hydro One retired and the full board resigned under pressure from Premier Doug Ford’s government. At hearings in Idaho in late November, Kristine Raper, one of three officials that considered the case for the Idaho Public Utilities Commission, spoke about Ontario making “a political game” of Hydro One.

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The issue of political interference in Ontario Hydro decisions was a prominent element of the Idaho decision.

“It is abundantly clear that the province does not have to own 51 percent of Hydro One in order to effectively control the company,” the commission said in its order. “Based on the recent events surrounding the province’s intrusions into Hydro One corporate affairs, any other conclusion would be unreasonable and ignorant in light of the uncontested facts and evidence.”

Hydro One can petition the Idaho regulator to reconsider its proposed deal within 21 days, as it did in Washington State. The regulator then has 28 days to decide whether to grant the petition. If a reconsideration proceeds, it would play out over about four months. If the petition is denied, Hydro One can take its case to the Idaho Supreme Court.

In a statement, the companies said they “are disappointed in the commission’s decision, are reviewing the order in detail and will determine the appropriate next steps.”

After Hydro One lost its case in Washington State, its stock briefly shot higher, before drifting lower through December. On Thursday, it closed at $20.22 in Toronto, up 13 cents. The Idaho decision came after the market’s close.

Avista is based in Spokane, Wash,. and operates in eastern Washington, northern Idaho and parts of Oregon. It lost about a sixth of its value after the Washington State decision. On Thursday, it closed at US$41.97 in New York, down 83 U.S. cents.

Hydro One’s market capitalization is currently about $12-billion, while Avista is worth about US$2.6-billion. Hydro One would owe Avista a deal termination fee of US$103-million if the takeover fails.

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