Washington state regulators on Wednesday unanimously rejected the proposed $5.3 billion takeover of natural gas and power distributor Avista Corp. by Ontario-based utility Hydro One Ltd., saying the proposed acquisition does not serve the public interest. It was a unanimous 3-0 decision.

The companies issued a joint statement saying they’re “extremely disappointed” in the denial. and they are “reviewing the order in detail and will determine the appropriate next steps.”

Midway through the regulatory approval process, Ontario political leadership changed, and the new administration caused the resignation of the Hydro One board and retirement of its CEO. This had negative financial impacts on the quasi-private utility in which the province holds 47% of the stock.

In the wake of the upheaval, the Washington Utilities and Transportation Commission (UTC) concluded that the negative risks for Spokane, WA-based Avista customers had become too high, and the benefits were diminished. The proposed merger does not provide a net benefit to Avista customers, nor does it protect them from political or financial risk, the UTC found.

“Avista customers would be no better off with this transaction than they would be without it,” the decision signed by all three commissioners said.

“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 commissioners said.

Under the original proposal brought to the UTC last year, Avista was to become a wholly owned subsidiary of Hydro One. Last March, UTC staff reached a settlement on the proposed merger with the two companies and seven other parties, including industrial, environmental, energy and labor organizations.

The settlement would have provided $30 million in rate credits to Washington customers over a five-year period, and $11 million toward low-income customer programs, along with accelerated accounting and transition funding for Avista’s share of the coal-fired Colstrip, MT, generation facility.

Ultimately, the company did not meet the net-benefit standard required by state law.

“The financial offerings and other benefits for Avista customers promised by the transaction are inadequate to compensate for the risks Avista’s customers would face,” the commissioners said.

As part of its action, the UTC directed Avista to work with its staff to return to customers $10.4 million in tax benefits left outstanding from Avista’s last general rate case.