PowerStream at Vaughan Council: Utility merger a money-saver for customers
Savings expected on distribution charges

YorkRegion.com
Sept. 23, 2015
Adam Martin-Robbins  

PowerStream is projecting that its customers will wind up saving money if a proposal to bring three large, municipally owned utility companies together under one banner goes ahead.

During a presentation to Vaughan councillors Tuesday, company president and CEO Brian Bentz said projected savings for local customers on distribution charges, which make up about 20 per cent of the hydro bill, are between $40 and $50, averaged out over 25 years, due to “synergies” expected from the merger and acquisition deal.

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, at the very least, help offset any rate increase.

Of course, a reduction in distribution charges hinges on the anticipated synergies being realized.

Bentz said PowerStream’s view is “they can and will be achieved” as part of the merger and acquisition deal.

That deal would see PowerStream, jointly owned by Vaughan, Markham and Barrie, merge with Mississauga’s Enersource Corporation and Horizon Utilities Corporation, jointly owned by Hamilton and St. Catharines, to form one firm.

They would then purchase Hydro One Brampton from the province for  $607 million and bring it into the fold to create Ontario’s second largest electricity distribution company with nearly one million customers.

The new firm would be overseen by a 13-member board of directors with three representatives appointed by Vaughan officials.

The acquisition of Hydro One Brampton is projected to cost Vaughan, through its holding company known as Vaughan Holdings Inc., as much as $61.6 million - $56 million for the purchase and up to $5.6 million in closing costs.

The remaining amount of the purchase deal will be shared amongst the other partners.

To help pay for its share, Vaughan is considering selling up to 10 per cent of its equity in PowerStream, which could bring in $40 million, according to a staff report.      

Regardless, the projection is that the $61.6 million investment would be recouped within 10 to 11 years.

This year, the city is expecting to garner about $16 million from PowerStream.

If the merger goes through, it is estimated the city’s dividends will increase by $62 million in the first 10 years, according to a staff report.

Bentz pointed out that in addition to increased revenue, as a PowerStream customer the City of Vaughan is projected to see savings in the distribution charges on its hydro bills.

Mayor Maurizio Bevilacqua, who also serves as chairman of PowerStream’s board of directors, said when there’s an opportunity to provide savings to customers and increase revenues for shareholders “you’ve got the perfect deal.”

Merger discussions began several months ago after the provincial government announced it was going ahead with some of the recommendations made by the Premier’s Advisory Council on Government Assets, which included a proposal to privatize up to 60 per cent of Hydro One.

In order for the proposed merger and acquisition deal to go ahead, all of the municipalities involved, and the provincial government, must sign off on it.

That is expected to happen by mid-October.