Horizon Utilities becomes Alectra creating second largest municipally-owned utility in North America

Hamiltonnews.com
Jan. 16, 2017
By Kevin Werner

The sun has set on Horizon Utilities.

Beginning on Feb. 1, 2017, Horizon Utilities Corporation will merge with Enersource and Powerstream to form Alectra, the second-largest municipally-owned utility in North America behind the Los Angeles Department of Water and Power.

The company will be bolstered when Alectra - which is Greek for “brilliant” - purchases Hydro One Brampton for $607 million at the end of February.

“This is good for the ratepayers, good for the City of Hamilton and good for our future revenue stream,” said Mayor Fred Eisenberger, who along with five other mayors, and the Ontario Minister of Energy Glenn Thibeault, attended the unveiling of the corporation’s logo at a news conference in Mississauga on Jan. 16.

The new company will service 960,000 customers stretching from Penetanguishene to St. Catharines with a total rate base of about $2.5 billion.

St. Catharines Mayor Walter Sendzik called the merger “a truly historic event.

“It will be an absolute catalyst for economic development,” he said.

The Ontario Energy Board approved the merger Dec. 8 after nearly two years of study. The merger was the first of its kind for the board that involved multiple local distribution companies.

Hamilton council, as the largest shareholder of Horizon Utilities, in a contentious debate approved the merger in a 10-4 vote in October 2015.

“This merger is a win-win-win,” said Thibeault, who has been defending the province’s plans to help people facing double-digit energy costs.

“This merger means savings on (customers) monthly bills. This will mean a lower distribution rate for residential consumers looking to manage their household expenses.”

In its 34-page decision, the energy board stated the merger “can reasonably be expected to result in cost savings and operational efficiencies.”

Horizon officials had promised Hamilton politicians last November there will be “significant” benefits to customers and the city under the merged company. It will include a six per cent cut in hydro rates over the next 25 years, resulting in savings of about $40 for the average homeowner, an increase in dividends to Hamilton from $13 million to about $16 million and net savings of about $51 million annually over 10 years.

Eisenberger said he expects Alectra to provide savings to customers, while also fulfilling its promise to boost dividends to municipalities.

“I have no doubt they will do exactly what they say,” he said.

Eisenberger has already earmarked about $3 million of the extra $5 million for needed poverty programs.

“What that means is the Alectra organization has to deliver on that dividend uptick,” he said.

Brian Bentz, president of Alectra, said based upon past utility mergers, will have no problem meeting its financial commitments.

“We are fully confident that in this scenario with the numbers available we will be able to do that,” he said. “We think we are in really good shape to deliver those scenarios.”

The merger, which will create a company with about 1,600 employees, will result in about 240 people losing their jobs, but Bentz said he doesn’t expect any layoffs. He said the jobs will be reduced through buyouts or attrition.

What Alectra will look like

• Alectra will have its headquarters in Mississauga.
• The new company's shares will be divided among Enersource, with 31 per cent, the City of Vaughan with 20 per cent, Hamilton with 18 per cent, Markham with 15.7 per cent, with Barrie 9.4 per cent and St. Catharines with 4.9 per cent.
• Alectra will have 13 board members composed mostly of mayors of the municipalities the utility will serve.
• Board members will receive higher honorariums that could reach about $35,000. It is expected each board member will receive $25,000, plus $2,500 for attending a meeting.
• Enersource will have four representatives, the City of Vaughan will have three, Markham and Hamilton will have two each - with Mayor Fred Eisenberger one of Hamilton’s representatives - and Barrie and St. Catharines one each. The directors will not be full-time positions.