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PowerStream merger to take big step forward

Vaughan, Markham to be part of Ontario's second-largest electrical distribution company

Yorkregion.com
March 24, 2016
By Adam Martin-Robbins

The at-times controversial merger and acquisition deal involving PowerStream and two other municipally controlled electricity distribution companies as well as Hydro One Brampton - that sparked friction in Markham and Hamilton, but flowed smoothly in Vaughan - is taking a big step forward.

Representatives from PowerStream (jointly owned by Vaughan, Markham and Barrie), Mississauga’s Enersource Corporation, Horizon Utilities Corporation (jointly owned by Hamilton and St. Catharines) and provincially owned Hydro One Brampton were slated to meet Thursday to sign the legal agreements to create Ontario’s second largest electrical distribution company, serving nearly a million customers.

“The merger gives us the scale to provide savings to consumers, increase shareholder value and allows us to make investments in technology and innovation, which is extremely important in a changing marketplace,” Vaughan Mayor Maurizio Bevilacqua, who serves as chair of PowerStream’s board of directors, said in an interview Wednesday.

“It positions us as leaders in the province of Ontario and, from a vision point of view, it realizes the importance of consolidating the industry in a way that it can be more efficient, more flexible and provide better services to consumers.”

The merger and acquisition deal will see the three municipally owned utility companies merge into one firm then purchase Hydro One Brampton from the province for about $607 million to create a new company, being referred to as MergeCo. until a new name is forged.

The projection is that “synergies” created by the merger will lead homeowners to save $24 to $35 annually on distribution charges, which make up about 20 per cent of the hydro bill.

But those savings won’t be seen in the first five to six years.

Whether or not customers’ overall hydro bill will go down depends on what happens with electricity rates, set by the Ontario Energy Board, but lower distribution charges would help offset any rate hikes, which are expected for the next several years.

Merger discussions began in earnest early last year following an announcement by Queen’s Park that it intended to privatize up to 60 per cent of Hydro One.

In order for the merger of the municipally owned utilities to go ahead, it required a favourable vote from all the municipal councils involved and, at one point late last year, it appeared the deal might get short-circuited. 

While elected officials in Vaughan, Barrie, Mississauga and St. Catharines unanimously endorsed the deal, councils in Hamilton and Markham were divided – the final votes in those two cities were 10-4 and 7-6 respectively.

Markham Mayor Frank Scarpitti, who serves as vice-chair of the PowerStream board of directors, remains confident the deal is a good one.

“I don’t feel about it any differently today than I  did back when we voted on it,” he said. “My bottom-line was two things: was it a good investment for the City of Markham to be a shareholder within MergeCo. and, more importantly, did it save money for electricity customers in our communities? And the answer to both those questions was yes.”

Before the merger and acquisition deal is finalized, it must get regulatory approval from the Ontario Energy Board (OEB).

That could take up to six months, according to Scarpitti.

When it’s up and running, the new firm will have corporate headquarters in Mississauga, a utility head office in Hamilton and a so-called innovation head office in Vaughan as well as service centres in Markham and five other municipalities.

IMPACT ON MARKHAM

IMPACT ON VAUGHAN