Is the selling of Guelph Hydro already a cooked deal?

By Gerry Barker

August 4, 2017

For those of us who were around when former Mayor Karen Farbridge attempted to persuade us to merge Guelph Hydro with electric utilities in Hamilton and St. Catharines, even members of her council caucus voted no.

So, here we go again, with a public relations campaign amply financed from public funds, to persuade us to merge our electric distribution system with another as yet unknown utility. The city website features a list of pop-up information tables at six locations around the city starting August 3 to August 22.

The title of the web address is energizingtomorrow@guelph.ca.

The city is inviting the public to ask anything about the plan to “merge” Guelph Hydro with another utility.

Here is the administration’s reason for selling off our utility with an asset value of $228 million.

“Guelph Hydro is a high-performing utility company with a solid reputation. In light of changing provincial policies and global energy technology trends, City Council appointed a Strategies and Options Committee (SOC) to review options to help ensure customers to continue receiving excellent service and value from the City-owned electric utility company.”

It should come as no surprise that the leading contender to grab Guelph Hydro and control of its 55,000-customer base is, Hydro One.

Now, you will recall Hydro One, the operator of the entire hydro power system in Ontario, is owned by a private, publicly traded corporation. The former owner of one of the world’s largest power distribution systems is keeping a minority share. It was a $9 billion gain for the provincial government. Also it was a key maneouver leading up to a pre-election provincial balanced budget eliminating the deficit just in time for the June 7, 2018 general election.

Gee, that looks a lot like we’re being bought with our own money.

But there is more. Premier Kathleen Wynne has unveiled a plan to cut electricity costs for four years by as much as 25 per cent starting in 2018. Part of that 25 per cent is already affecting hydro customers with the government reducing the HST by eight per cent. So there is another decrease coming just in time for the provincial election.

With the Premier’s personal approval rating settling in deep freeze territory, below 20 per cent, the hydro gambit is essential for her government’s survival. The fact that the Progressive Conservatives are holding a 13 per cent edge over the Liberals, portends deep trouble over the next few months for the Grits.

So, here are some questions:

  •  If and when this sale is consummated, what’s in it for the shareholders, the people of Guelph and Rockwood, who are the owners and customers of Guelph Hydro?
  • If this happens, who will service the system when repairs are needed in the event of a major weather event or power outage?
  • What recourse have citizens got to reject the sale?
  •  If Guelph Hydro is sold, what will the city do with the proceeds?  *
  • Why does the city persist describing the disposition of Guelph Hydro as a “merger” and not a sale?

This is all about a sale of the city-owned utility. The argument that the sale is provincial policy is just not true. It has been discussed and municipalities have been told that the province wants greater efficiancy of power distribution. There has never been any debate about this or any specific directive from the province to merge with another utility.

The second argument speaks of advances in “global energy technology trends.” That’s partially true but why is Guelph Hydro being put up for sale? Why indeed, following the disasterous experiment by Guelph Municipal Holdings Inc., personally administered by the former mayor and her Chief Administrative Officer, Ann Pappert? Neither of whom is no longer employed by the city.

The record shows that the loss of GMHI was more than $160 million, according to the GMHI consilidated audit costing some $2.8 million, some of the loses have already been written off.

Still glowing in the dark are the two unsecured debentures with outstanding balances of $103 million taken out by GMHI. The only clue of who provided those debenture funds came from the Chief Administrative Officer of GMHI, Pankaj Sardana, who said the debentures, came from a group of unnamed investors.

In my opinion, I believe those investors were soured through or part of Guelph Hydro.

Ask yourself, if you were owed $103 million by a city-owned corporation that is virtually bankrupt, wouldn’t the only way of recovering the capital would be to sell your organization (Guelph Hydro)? Or in this case, demand payment from the City of Guelph.

One of the most interesting items in the Guelph Hydro’s financial statement is a $94 million debt.

If Guelph Hydro is sold, then the purchaser will retire that debt and the proceeds return to the city as part of the settlement.

No purchaser in his or her right mind would want to take on a $94 million debt of a corporation with $228 million in assets. These figures are takeb from the 2016 Guelph Hydro financial report.

These are just some of the reasons why I will oppose any merger or sale of Guelph Hydro. The citizens have been excluded from the entire GMHI disaster and have paid a heavy price for an attempt to make Guelph a world-class renewable energy provider.

In my opinion, I believe that negotiations are currently underway to sell Guelph Hydro. The SOC schedule calls for the final consummation of the deal next spring before the provincial election.

Unfortunately, that deal is already baking in the oven.

Council will still have to agree on any proposal to sell Guelph Hydro. This means that as the date approaches citizens should express their opposition to members of council.

This is no frivolous attempt but a well-financed proposal, using your money, to sell Guelph Hydro.

Is this the price we pay for five years of total incompetence?

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5 Comments

Filed under Between the Lines

5 responses to “Is the selling of Guelph Hydro already a cooked deal?

  1. DAVID BIRTWISTLE

    Has the City even considered acquiring another distribution system-just asking?I’m totally leery of Hydro One acquiring Guelph Hydro now that it’s in the process of purchasing Avista which presumably owns 15% of two units of the Colstrip coal plant,located in Montana and this may lead to Avista having to cover approximately $100 Million for the $1 Billion(+) cleanup of an 800 toxic waste site.Guelph has been and continues to be,well-served by Guelph Hydro and,with the exception of the current negative financial situation brought on by questionable decisions made by previous councils/GMHI/etc.,should be retained.

  2. Guido

    The sale should be approved by the taxpayer. Add it as a referendum to next years city elections. NOTE : the biggest mistake Mikey made was sell the 407, are we in for another regret.

  3. Spend

    The 407 is a persitant silly example. The 407 is an optional expense. Use it and pay the toll. There are plenty of “free” highways subsidized through taxes.

    Hydro is a necessity of life and everyone is stuck paying the bill. No other choice unless you’re not go off the grid.

    McGuinty, Wynne, Smitherman, and Butts are the architects of this misery for generations of Ontario residents.

  4. As an energy industry insider spending many years fighting for ratepayers, I am very familiar with the ins and outs of selling or merging an electricity distributor to or with another. I have been one of those leading the fight to stop Hydro One from acquiring more distributors for years, with a small amount of success. (Google me if you think I’m making this up.)

    You’re right that selling to Hydro One is as dumb as water. On the other hand, Powerstream (now the biggest part of Alectra) has been keeping rates down for fifteen years through mergers with other utilities, and the Alectra deal may continue that for a further decade. Horizon, another Alectra partner, did the same for a decade already. Done right, consolidation can be a good strategy. Veridian has done the same.

    Guelph Hydro has the advantage that its CEO, Pankaj Sardana, is one of the smartest people in the industry. The Board of directors has some very good people as well. I don’t know anything about the city council, but at least at the utility level they have their heads on straight. That is just a fact.

    It is too early to say if a merger/sale of Guelph Hydro is a good idea. It depends on the deal, and on the guarantees and supports within the deal. For example, could a merger of Guelph, Kitchener, Cambridge and Waterloo distributors make sense? It could. Or, it could be a colossal screwup.

    Keep one other thing in mind. There are more than sixty electricity distributors in Ontario. That is too many, so sooner or later there will have to be consolidation. Guelph is not going to keep its own distributor forever. The question is, do you want to control that process, or do you want to have the result imposed on you?

    These realities mean that, instead of voicing blanket opposition to an unknown deal, it may be a better strategy if you focus on making sure that any deal being considered must have long term benefits for the customers and the people of Guelph.

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