By Gerry Barker
November 6, 2017
Editor’s note: The following is an analysis of what we don’t know about the proposal to dispose our ownership of Guelph Hydro and to receive an undisclosed percentage of Alectra’s profits. Also, we reproduce the content of the “energize tomorrow.ca” website that fails to report the financial details of this transaction but spells out the claimed benefits to the citizen of Guelph. Finally read the pertinent question the administration should clearly provide what’s in it for all citizens. There is a lot of material here but hopefully asks the questions involving a multi-million dollar disposal of our property.
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What the administration won’t tell you about the Great Guelph Hydro Giveaway
You know with 13 expert communicators in city hall, why are the citizens being fed a load of promises but no proof of completion? The entire Alectra Inc. proposal is being conducted on the Internet in a website starring our Mayor Cam Guthrie.
Why hasn’t the city sent a detailed written explanation of this proposal to all 55,000 Guelph Hydro customers? There are thousands of people in the city who do not own or know how to operate a computer. Maybe that’s part of the strategy to convince people to give Guelph Hydro away, but for what and how much?
Instead, we are told to check out the “energizing tomorrow.ca” website to help us understand a distribution system valued at $228.4 million hand over to a corporation. The recipient is Alectra Inc. that has only been incorporated and applying its business for less than ten months.
Or has it?
When asked about the Guelph Hydro’s distribution system, the answer was that the citizens would no longer own it. That would be the cost of joining Alectra. Poof! Gon! Gone without any explanation about the percentage of ownership we would receive from membership in Alectra. It has yet to be agreed and approved by council although a memorandum of agreement has been reached.
This is no small transaction and it is fraught with promises, but no hard numbers, about the benefits to the Guelph Hydro customers.
Oh! There’s a lot of contrived puffery in the Alectra takeover comparison site, paid by the taxpayers of Guelph through the Strategic Options Committee (SOC). It is a question that deserves an answer. We do know that the SOC hired a consultant last year to pave the way for this tainted takeover plan. As the SOC was part of GMHI that has no money, the city has to pick up the tab. And I will bet that consultant, when his bill is presented, will be a doozy. The cost of just creating this elegant P.R. production is in the thousands of dollars.
As the old lady in the Burger King said a few years ago: “Where’s the beef?”
The beef friends lies in the numbers that are absent from this glossy website.
As a public service for those who are not computer savvy, let’s review the online comparison copy with appropriate Guelph Speaks comment.
Here’s the opening statement, assumed to have been written by the Public Relations consultant hired more than a year ago, to persuade us to go along with dumping Guelph Hydro. It can only be described as a “Galaxy far, far away.”
Why is a Guelph Hydro-Alectra merger the preferred option?
Here’s how a Guelph Hydro-Alectra partnership is expected to benefit residents and businesses in Guelph and Rockwood.
“Sell the sizzle, not the steak.” It’s the same old story, promoted for years in the advertising business:
Remember that this is the second attempt by city council, led by the Mayor in 2008, to sell Guelph Hydro. This sale material and planning is more precise than nine years ago. It remains a sell-out of our reliable, well run, progressive and profitable organization.
For five years, Guelph Hydro was abused by the former administration’s asset holding company, Guelph Municipal Holdings Inc., to advance the green power environmental movement’s attempts to stop climate change. It was a costly, mismanaged attempt and this refined version is promising pretty well the same thing. As an aside, I know that Guelph has a climate change office and Alectra promises to co-operate with it.
When you lift up the rug, you never know what’s going on under there.
How many times do the citizens have to get kicked in the shins to be forced into a Guelph Hydro takeover that the greater majority don’t need and doesn’t want? The Mayor and Alectra claim that the citizens are in favour with the public reaction they have artificially generated to push this plan to completion.
I beg to differ. Let’s see the merger financial package before committing ourselves.
Let’s review the five categories contained in the “energizing tomorrow.ca” website that compares joining Alectra or Maintaining Guelph Hydro’s status quo.
Merger with Alectra
- A merger helps keeps rates lower than standing alone, with more savings expected in the years to come.
- Merging Guelph Hydro with Alectra would help keep downward pressure on rates for at least 10 years.
- After 10 years, customers would save even more when rates are aligned across Alectra’s high-density, urban, and growing customer base.
- Guelph and Rockwood customers benefit from previous merger savings and avoid typical rate increases.
Maintain Full Ownership
- No change to expected rate increases.
- Customers would be exposed to Guelph Hydro’s typical rate increases in 2021 and 2026
- Efficiencies limited to existing operations,
GS comment – Electricity rates in Ontario are set by the provincial government agency in charge of power generation. To suggest that our power rates would be lower is not in Alectra’s control. For example, The Wynne government has introduced a 25 per cent power rate reduction for five years by 2021, according to the provincial Auditor General; the rates will climb to pay for the loss of revenue in the previous five years. How can Alectra say rates will be lower than they are now? Economy of scale is their supposition. More sizzle than substance.
- Service and Reliability
Merger with Alectra
- Customer service, reliability and response times would be the same or better than they are today.
- Local crews would respond to local outages and receive support from a large, highly-skilled team during severe storms or emergencies.
- Alectra’s larger scale and focus on innovation could improve local performance and responsiveness.
Maintain Full Ownership
- Guelph Hydro would continue delivering excellent service.
- Customers in Guelph and Rockwood would continue relying on a 24/7 control room; a technical call centre and 24/7 access to customer self-service.
- The company would meet its capital investment needs for core operation and government funding for additional capital funds.
GS comment – Okay here’s a question for you. Guelph is growing and new developments are being approved and built. Now, if this sale goes through and citizens lose control of the utility, who pays for system expansion to provide power to the new developments? If, as we have been told, that the Guelph system will be turned over to Alectra, do they pay? How does this affect development growth in the city because the city must assure developers that water services and power will be provided to their site as part of the subdivision agreement. Regardless, Alectra will have to agree to the development because they are responsible to deliver those services.
- Community Planning
Merger with Alectra
- As the first utility in Southwestern Ontario to merge with Alectra, Guelph Hydro’s current headquarters would become a regional operations hub.
- Increased annual dividends mean the City would have more money to invest back into our community.
- A Guelph Hydro-Alectra merger would enhance Guelph’s ability to advocate for local interests among regulators, industry and other levels of government.
- Guelph would share decision-making authority with other municipal shareholders.
Maintain Full Ownership
- Guelph-centric innovation, community planning, and economic development strategies would continue.
- Guelph Hydro could pursue partnerships and government funding for additional capital funds.
GS Comment – It appears that Alectra’s claim that Guelph would be the ‘Hub” for Alectra’s expansion into southwestern Ontario, has no direct benefit to Guelph Hydro’s 55,000 customers. Similarly, Guelph Hydro is quite capable of dealing with regulators, industry and other levels of government, just as it has for 100 years. Again there is no tangible evidence provided by Alectra of how this so-called merger will benefit Guelph Hydro’s customers. Why? To justify completing this deal Alectra is not providing the financial details about its company. The effect of expanding the Alectra controlled Network is not addressed. What is the impact on Guelph’s alleged share of Alectra profits when additional municipal distribution companies join the Alectra consortium?
- Environment and Innovation
- Merger with Alectra
- Both Guelph Hydro and Alectra Utilities are focused on conservation, renewable energy, and environmental sustainability.
- Alectra Utilities would invest in local infrastructure and establish a Green Energy and Technology Centre (GRE&T) in Guelph; a hub for green technology development.
- Alectra would work closely with the City’s Climate Change office on local mitigation and adaptation efforts.
- Maintain Full Ownership
- Guelph Hydro would continue to focus on conservation and support for local renewable energy projects.
- Ability to invest in new technology or modern services may be limited unless City of Guelph invests further capital or allows dividends to be impacted.
GS Comment – It may come as some surprise to Alectra that the citizens of Guelph just experienced the losses caused by recent devastating miscalculation experiments in creating sustainable power by the previous administration. The zeal to try it again without any control is something you may not have noticed when carrying out the offer to merge with Guelph Hydro. The loss was in the millions and never can be recovered. In my opinion, the last thing we need right now is yet another attempt to create a connection that we don’t need. Why should we give away our distribution system to a corporation that makes similar promises to provide cheaper and better technology in electric supply and distribution?
- Local Jobs
Merger with Alectra
- Good paying jobs would stay in our community, and new jobs would be created as part of the Green Energy and Technology Centre.
- Alectra is a municipally-owned utility with a caring, respectful employee culture.
- No personnel decisions have been made. If necessary, there would be natural attrition and voluntary separation wherever possible.
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Maintain Full Ownership
- All operations would remain in Guelph.
- Some job creation would be sought through Guelph-centric innovation strategy.
GS Comment – To refer to Alectra as municipally-owned is a misrepresentation of the facts. The parts of this Alectra network are formerly municipally-owned but are now controlled by the Board of Directors of Alectra Inc. It is a private corporation that artfully predicts great things for Guelph, including lower power rates and good-paying jobs. Alectra promises more money to the city from its tiny share of the Alectra corporate profits, more jobs but no assurances to maintain the highly skilled staff of Guelph Hydro. Here’s one prediction. The most vulnerable is the administrative staff of Guelph Hydro, as their jobs will gradually disappear as Alectra transfers the jobs to its Mississauga headquarters on Derry Road. In view of these claims and promises, why are we prepared to give away our hydro system and receive any financial information about the company that wants our power distribution system? Does that sound like a good deal to you?
I have been around long enough to see a snow job by Alectra to takeover Guelph Hydro without paying for the $228.4 million worth of poles, wires, substations, the utility’s posh headquarters and equipment.
In return it has been suggested that Alectra will appoint Mayor Guthrie to the Board of Directors. If so, what are the financial terms of his membership?
We are being treated like small-time pawns in Alectra Inc.’s grand corporate mission to control a huge chunk of electric power distribution in Ontario. The icing on the cake with Guelph is to promise the city will be Alectra’s hub for southwestern Ontario’s expansion and, Tah Dah! Building a green power technology centre right here in river city.
This deal promises little to benefit Guelph’s 55,000 power customers. But it has the potential to be the dumbest mistake a city can make in say, five or ten years from now?
Once council approves this deal it can never by changed. That curtain is descending.
When Alectra provides audited statements of the effect of lower rates to its 44 curent clients in Ontario, then some credibility will be injected into this proposal.
Sell or Merge Guelph Hydro, or should we walk away?
The following are important questions that need answers by the administration before approving the merger of Guelph Hydro and Alectra Inc. They are based on the secrecy and reasonable duu dilligence employed by the SOC and city council in creating this project that wille force the loss of control over our power distribution asset.
* How deep did the Strategic Options Committee’s (SOC) due diligence go?
* Former SOC member Richard Puccini, writing in the local weekly, claimed there should be at least two other bidders to buy Guelph Hydro. Is this true?
* Why did the SOC’s original schedule concluding in March 2018, of investigating and negotiating potential partners, ignore its timetable as reported to council in 2016?
* Why did the SOC take consideration of all potential sale of Guelph Hydro off the table last February?
* Why is the City of Guelph agreeing to give Guelph Hydro’s $228.4 million installed assets to Alectra in return for what?
* Why should citizens agree to a merger with Alectra Inc. for a promised estimated return of four to five per cent when Guelph Hydro had a net profit last year of $7 million?
* Has the City of Guelph, through its wholly owned subsidiary, GMHI, engaged a lawyer(s) to oversee this agreement and proposal?
* Has the City of Guelph engaged its auditor KPMG to oversee the proposal and offer its opinion as to the benefits to the citizens?
* Is it true that to date, this merger proposal has cost the city $1.5 million?
* Why hasn’t the SOC told citizens of the advantages of selling the utility or merging it with a network operated by Alectra Inc?
* Did the SOC interview civic official members of the Alectra consortium to reveal their experience dealing with Alectra?
* Did the SOC receive and review financial and operational data regarding Alectra Inc? This includes corporate structure, governance, details of senior staff including compensation, Revenues and Expenses, debt, banking sources, current share breakdown? What are the liabilities, name of corporate auditor and legal advisors, and did the SOC receive a detailed copy of the Alectra Inc. business plan?
* Did the SOC receive a written proposal from Alectra Inc that outlined the legal and estimated merger details of the alleged agreement and the specific benefits to the City of Guelph? If so, why hasn’t the city revealed the proposal?
* Why hasn’t the city administration revealed the memorandum of agreement apparently signed by the Mayor and Chief Administrative Officer, Derrick Thomson, as co-chair of the SOC along with Jane Armstrong, chair of Guelph Hydro?
* What protections of the citizens of Guelph exists in the event of Alectra’s bankruptcy, unusual technical and weather related power stoppages, arbitrary changes in the agreement that are detrimental to the City of Guelph, arbitrary changes in the governance and the original business plan?
* Has Alectra offered any compensation to members of city council, the SOC or Guelph Hydro to obtain approval of this proposal?
* Truth to tell, the city administration will not answer many of these questions on the grounds that they allegedly expose private proprietary information of the Alectra Inc’s. corporate organization.
* If this excuse is used, it only reinforces the generally held belief that this is not a good deal for the citizens of Guelph, owners of Guelph Hydro.
We remain convinced that there is a lack of due diligence and this proposal should be rejected and reconsidered later when Alectra is ready to supply applicable audited financial information that backs up their proposal and its promises.