City report recommends Horizon merger

Thespec.com
Oct. 28, 2015
By Matthew Van Dongen

A city report recommends council approve a contentious merger of Horizon Utilities with three other major utilities to form the second-largest electricity distributor in Ontario.

The report, sent to councillors ahead of a pivotal Oct. 30 vote, argues a merged utility would give Hamilton higher dividend payments and - eventually - lower electricity rates.

The staff report circulated Tuesday doesn't contain nitty-gritty financial justifications for the plan, which would merge Horizon with utilities covering Mississauga, Brampton, Barrie, Markham and Vaughan.

But Horizon president Max Cananzi previously told city council the deal would save an average of $40 per year for residential hydro users.

That's not enough to win the support of Hamilton Coun. Sam Merulla, who plans to introduce a long-awaited motion Friday to quash the merger.

"The crux of my problem with this is the loss of local control," said Merulla, who argues Horizon's 242,000 customers benefit more from local oversight of electrical infrastructure and service quality.

Merger proponents can only project, not guarantee, savings and efficiencies, he said. "If we could have equal shares, I might consider it. Otherwise, the only guarantee we get out of this deal is that we lose that control."

Under the proposed new ownership structure, the Hamilton Utilities Corp. would own 18.5 per cent of the mega-utility and have two representatives on a 13-member board. By comparison, Vaughan would own 20 per cent while Mississauga would own 28 per cent.

Horizon itself was formed by a 2005 merger of utilities in Hamilton and St. Catharines. Merger proponents argue today's hydro rates are eight per cent lower than they would have been if those two utilities had remained independent.

Horizon officials say the merger would inject an average of $11 million in rate savings and dividends into Hamilton's economy every year from next year through 2039.

Council opinions have varied on the plan, with Mayor Fred Eisenberger expressing cautious optimism early - but also a desire to see a full business plan, a presentation repeatedly delayed by Horizon.

Coun. Lloyd Ferguson has said he supports the goal of saving money for ratepayers frequently hit with hikes. The Ontario Energy Board has announced a winter rate increase of approximately $4.42 for the average home as of Nov. 1.

Hamilton and Markham are the only affected cities still to approve the proposed merger.

The provincial NDP has also opposed the merger, which requires the sale of Hydro One Brampton.

The Ontario government faces widespread criticism of its larger goal to sell 60 per cent of the publicly owned transmission company over time - in part to finance an ambitious infrastructure renewal and transit program that includes Hamilton's $1-billion LRT (light rail transit).

The province has also argued in favour of more utility consolidation, pointing out the state of California has only four power distributing utilities compared to 77 in Ontario.