Hamilton sets Oct. 30 vote on Horizon merger proposal

Hamiltonnews.com
Sept. 30, 2015
By Kevin Werner

Some Hamilton politicians remain “skeptical” that a proposed merger between Horizon Utilities and three other utilities will mean higher dividends and savings to households.

Ward 3 councillor Matthew Green said after a “fairly glossy” public presentation Sept. 30 to members of the Hamilton Utilities Shareholders on the benefits of amalgamating Horizon Utilities with Hydro One Brampton, PowerStream and Enersource, he wanted a more “balanced and informed package” of information that also provided the risks associated to entering such a “complex” arrangement.

“I’m skeptical the cost savings will go to the customer,” said Green.

Ward 4 councillor Sam Merulla, who has stated he will introduce a motion opposing the merger, says since Hamilton will lose control of the new entity to the other utilities, what does the city get in return?

Max Cananzi, chief executive officer of Horizon Utilities, told politicians the proposed merger will see on average 5.9 per cent lower average utility rates over a 25-year period; save customers on average about $40 per year over 25 years; save $355 million in operating costs within the first 10 years; provide $168 million savings in capital expenditures over a decade, and $426 million in next cash savings in the first 10 years.

It’s unclear whether customers will save on their electricity bills since it dependent upon the Ontario Electricity Board’s rate approvals. But Cananzi says any cost savings from the merger will eventually be passed onto customers.

“This merger has significant benefits for Hamilton,” said Cananzi.

For Hamilton, the benefits are helpful. Dividends are projected to jump by 29 per cent on average, said Cananzi. He said Hamilton could reap dividend increases on average from $13 million annually to $16.8 million.

The total cost of the merger is projected to be about $97 million says Cananzi.

Service centres and response times to customer calls won’t change, he said.

“The cost savings put forward are very real,” said Cananzi.

He said based upon past mergers involving Horizon, Cananzi said “savings have taken place. Those savings are realized.”

As part of the merger, Horizon will also have to pay over $100 million as its share to purchase Hydro One Brampton, which Cananzi said the utility will be able to do.

Cananzi said although he couldn’t guarantee that households will receive the savings and higher dividends for the city, as Horizon officials have projected. But, he said, the figures are based on the company’s past performance and previous mergers with St. Catharines Hydro in 2005 and the amalgamation of all hydro utilities in 2000.

Hamilton currently controls 79 per cent of Horizon Utilities, while St. Catharines controls 21 per cent. For the merged company, PowerStream would own 46 per cent of it, Enersource 31 per cent and Horizon 23 per cent. The new entity will be the second largest distribution company in the province behind Toronto Hydro.

Barrie, which owns 20.5 per cent of PowerStream, tentatively approved the merger last week. Vaughan owns 45 per cent and Markham 34 per cent. Barrie councillors will vote on the merger recommendation Oct. 5.

Mississauga became the first municipality to approve the merger with councillors voting Sept. 30 unanimously for it. Mississauga owns 90 per cent of Enersource. The other municipalities are considering the proposal over the next few weeks.

Cananzi said Hamilton’s Oct. 30 date to vote on the merger is late, but he didn’t see a problem with it.

“Hamilton has a busy schedule,” he said. “My preference is they do it sooner.”

If all municipalities approve the merger, it must then be green-lighted by the Ontario Energy Board.

Mayor Fred Eisenberger said councillors will review the proposed merger documents and vote on the merger recommendation at their Oct. 30 shareholders meeting. He said city staff will provide a report to councillors identifying the risks associated with the merger.

Paul Benson, of the Horizon Utilities board, said the company has already examined the risk assessments on possible problems with the merger.

The new merged utility will have 960,000 customers from Horizon’s current 242,000, and employ about 1,400 people. Horizon Utilities has 425 people now. The operations will stretch from St. Catharines to Barrie, Markham, Vaughan and Mississauga.

Cananzi said the merger will see 120 people lose their jobs, but he cautioned the cuts will be through voluntary severances and attrition. Cananzi said the corporate headquarters will be located in Mississauga, while the utility office will remain in Hamilton on John Street. Cananzi said the utility is planning up to $6 million in renovations on its building over the next four years.
Councillors heard a longer, more detailed presentation of the merger behind closed doors, which took about an hour.

Ancaster councillor Lloyd Ferguson said the same people who oversaw the merger of Hamilton Hydro and St. Catharines Hydro still remain with the utility.

“They have always done better than they said they would do,” said Ferguson. “I have a lot of confidence in what Horizon officials are doing.”

The Ontario government has been encouraging consolidation of electrical distribution systems since 1999, as they slowly decline from 300 to 68 across the province.