PowerStream part of utilities deal

Barrieexaminer.com
March 25, 2016
By Rob Bruton

Barrie has signed on the dotted line to join a merger creating the second-largest electricity distribution company in Ontario.

PowerStream, Enersource and Horizon Utilities are merging and jointly purchasing Hydro One Brampton Networks from the Ontario government, subject to regulatory approval.

“This merger puts us in a position to respond to our community needs - everything from handling emergencies, to the growth of the tech sector, to micro-grids and local generation – by virtue of its scale and ownership,” said Barrie Mayor Jeff Lehman, also a PowerStream board member.

This merger/acquisition now requires approval from the Ontario Energy Board.

What's in this deal for PowerStream customers?

During the next 25 years, they would save $40 a year from the merger on average - $25 annually for homeowners - on the distribution portion of their hydro bills.

These savings will be eaten up by larger increases in the price of electricity, however, in the provincial part of the bill, which is about 75% of the total paid.

Since Barrie Hydro joined PowerStream, it has received $60.2 million in dividends - and used them to pay the city's share of the expanded Royal Victoria Regional Health Centre, for Barrie Molson Centre, Barrie Community Sports Complex and three PowerStream projects.

“The city actually will receive higher annual dividends with the merger,” Lehman said. “PowerStream currently pays us dividends annually; with the merger these are forecast to increase by about $2 million a year. So in addition to the savings customers will see on their power bills, they are getting some help with their property taxes.

“We will actually see higher returns on this investment than if we just stayed as PowerStream.”

Barrie needs to come up with $28.6 million to finance its share of the Hydro One Brampton sale - valued at $607 million - funds that could come from its utility partnerships.

Lehman said the new company is unprecedented because it involves the collaboration of six cities.

“We’ve proven at PowerStream that mergers work well, and this is the next step - but this will be the largest municipally owned electricity company in the country,” he said. “That will give us the ability to do things we’ve not been able to do before, in terms of alternative energy, home energy savings, electric vehicle charging, and so on.

“This industry is changing incredibly quickly and the scale of the company allows us to meet these kinds of technological challenges.”

Ontario Energy Minister Bob Chiarelli joined six Ontario mayors in Hamilton Thursday morning to make the announcement.

“This is a win-win for the electricity ratepayers involved, as well as the municipalities in each of the communities,” Chiarelli said. “It will result in the creation of an improved company that is better positioned to serve customers, an increase in dividends for municipal shareholders and customers could benefit from downward pressure on electricity rates.

“Each of the municipalities involved was able to recognize these benefits, and the value that this new company will bring to electricity consumers."

The new company's other municipal owners would be Markham, Vaughan, Mississauga, Hamilton and St. Catharines. It will have a service territory of approximately 1,800 kilometres.

Lehman says he's a big proponent of cities working together and this company shows what six medium-size cities can accomplish together if they have the same vision and a willingness to co-operate.

“Ultimately it’s all about better service and lower costs for our residents,” he said.

Subject to regulatory approval, the transaction will enable a new, larger company to use its collective resources to reduce upward pressure on distribution rates. It will also deliver more efficient services and innovative technologies for customers, while providing significant benefits for communities and shareholders.

The Ontario government has been encouraging consolidation of the electrical distribution system and, since 1999, the number of companies has dropped to 68 from 300.

The signing of legal agreements - Merger Participation Agreement and Share Purchase Agreement - is the final step before seeking regulatory approval.

Within the coming weeks, the shareholders will submit a mergers, acquisitions, amalgamations and divestitures application to the Ontario Energy Board for approval. This process is estimated to take a minimum of six months.

Thursday morning's event was attended by Chiarelli, mayors for the shareholder communities of Mississauga (Enersource), the cities of Hamilton and St. Catharines (Horizon Utilities), the cities of Barrie, Markham and Vaughan (PowerStream) and a representative for the Enersource shareholder Borealis, owned by the Ontario Municipal Employees Retirement System.