Mayor says hydro merger may help Barrie customers

Barrieexaminer.com
Sept. 25, 2015
By Bob Burton

A three-way hydro company merger, plus an acquisition, could help hold the line on Barrie bills says Mayor Jeff Lehman.

“They (savings) are not as dramatic as with the Barrie-PowerStream merger in 2009, but they are forecast at about $40 per year for the average customer,” he said.

City councillors will consider a motion Monday to approve PowerStream's merger with Enersource and Horizon, then buy Hydro One Brampton Networks. The new company would be called MergeCo.

Barrie owns 20.5% of PowerStream, with Vaughan (45.3%) and Markham (34.2%) owning the remainder. PowerStream is the second-largest municipally owned electrical distribution company in Ontario, with 350,000 customers in 15 municipalities.

Lehman says PowerStream merger has been a good deal for Barrie residents and businesses.

“As well as excellent financial returns to Barrie taxpayers, Barrie residents have seen their distribution charges actually drop by about $100 per year since the merger as a result of the savings,” he said, noting the distribution charge is the part of the bill PowerStream controls.

“Unfortunately, since we all know what has happened with the price of power in Ontario, these savings have been eaten up by much bigger increases in the price of power in the provincial part of the bill, which is about 75%,” Lehman said. “But, if not for the merger, people’s power bills would have gone up even more.”

The mayor says this new merger and acquisition could have similar savings in Barrie.

“With this new merger, the savings from economies of scale are projected to again result in lower distribution charges than we would have seen with a standalone utility,” he said. “Whether the distribution charge will actually drop in Barrie or simply go up by less than they would otherwise depends on a few things in the coming years, but regardless, our residents will see the savings as a result of the merger.

“The short version is through these mergers, we are doing what we can locally to fight high increases in the price of power.”

Lehman said an example of an economy of scale would be reducing licensing and other ongoing costs for IT systems, which are millions of dollars for each utility, with convergence to a single system from the four current systems today, resulting in substantial cost savings.

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.

Dividends to PowerStream in the MergeCo deal are expected to exceed these levels, almost $122 million from 2016-2019, a 45% increase. For Barrie, this would mean $2.6 million more annually.

“That is benefit to Barrie taxpayers on an ongoing, annual basis,” Lehman said.

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

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.

Merger talks involving PowerStream, Enersource and Horizon have taken place this past spring and summer.

If approved, PowerStream would own 46% of MergeCo, Enersource 31% and Hoizon 23%. Municipal owners would not only be Barrie, Markham and Vaughan, but Mississauga, Hamilton and St. Catharines.

“All good partners for the City of Barrie - all growing municipalities, all with a view to economic progress,” Lehman said. “I believe it will be extremely well-positioned to respond to 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.

“If successful, this company can be an example of how cities can collaborate to address technological and economic change through innovative municipal utilities.