For a kiss and a promise, we may give Guelph Hydro away to Alectra Inc.

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.

*            *            *            *

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.

  1. Rates

            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.

  1. 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.

  1. 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?

  1. 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?

  1. 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.
  • *            *            *            *

            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.

 

 

 

 

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14 Comments

Filed under Between the Lines

14 responses to “For a kiss and a promise, we may give Guelph Hydro away to Alectra Inc.

  1. DAVID BIRTWISTLE

    Once it’s gone what’s to stop Alectra to go public on the TSE and some American power distribution conglomerate picks it up and just watch the financial woes that follow?Keep GUELPH Hydro in GUELPH’s municipal ownership-say I.

  2. Glen

    If the proposed merger is so great, why all the secrecy? Let’s get full financial disclosure of Alectra’s business. Would any sane person give away a valuable asset to a company that has been in business for less than a year? Is this whole caper a means to hide the tens of millions financial boondoggle of GMHI? Stop this merger process right now & keep Guelph Hydro owned by Guelph.

  3. Barry Smith

    Great stuff and I have been asking the Mayor all those questions with no reply. Hope your article goes viral but how?

    Oh and Where’s the beef was a Wendy’s commercial years ago.

    • Barry Smith: You are right. It wasn’t Burger King but Wendy’s where the lady shouted'”Where’s the Beef?” Where is she when we ask the same question about this proposal to give away Guelph Hydro. Indeed, where is the beef?

  4. Lurka

    I post for your perusal the January 2017 press release regarding the NEW utility company Alectra. Yup- it’s a newbie- no annual financial statement available, and looks like a very aggressive takeover company- to the point of promising Guelph anything just to take it over!! Just say NO!!! Take a step back and revisit next year!–Here is promised release:

    For Immediate Release
    Monday, January 16, 2017
    ‘Alectra’ Unveiled as New Electric Utility
    to Serve Nearly One Million GTHA Customers
    Enersource, Horizon Utilities, Hydro One Brampton and PowerStream to become one company
    Mississauga
    – An electric utility that will serve nearly one million customers in the Greater Toronto
    and Hamilton Area will be known as
    Alectra
    .
    The new company name
    and logo was unveiled today by Enersource, Horizon Utilities and
    PowerStream officials who will merge their respective utilities as of February 1, 2017 and purchase
    Hydro One Brampton effective February 28.
    This consolidation will create the second larges
    t municipally
    -owned electric utility by customer base
    in North America, second only to
    the
    Los Angeles Department of Water and Power.
    Alectra will operate within a 1,800 square kilometre service territory comprising 15 communities
    including Alliston, Aurora, Barrie, Beeton, Brampton, Bradford, Hamilton, Markham, Mississauga,
    Penetanguishene, Richmond Hill, St. Catharines, Thornton, Tottenham and Vaughan.
    The creation of Alectra will result in:

    Residential customers will save an average of $40 per year on
    bills as merger efficiencies are
    achieved over the next 10 years.

    Expanded ability to monitor, report on and improve reliability and power quality, resulting from
    greater resources.

    Increased investment in innovation and technologies, resulting in better c
    hoices
    for customers.
    The Ontario Energy Board approved the plan to create the new company last December

  5. Glen

    Holy crap – “residential customers will save an average of $40 per year…” So are we expected to sell our souls for a measly $40/year? That’s a fantastic 11 cents a day!! If it sounds too good to be true….

    • Lurka

      Colleen- many thanks for this link!! Fabulous information that I have printed out and saved as well. Nice to see Councillor Alt paying attention to this open letter!

      Side note- I spoke to the city reps at Stone Road Mall at the Alectra merger info booth, and mentioned that I read that Mayor Guthrie was to sit on the BOD, and was told that it was “under negotiation” and wherever I read that was mis-informed. So, I guess no matter what we say, looks like it might be a done deal unless we get many more citizens to speak up!

  6. DAVID BIRTWISTLE

    I seem to have seen that the board of directors is composed “mainly?” of mayors of municipalities whose power distribution companies are on board with Alectra;if so,I’m assuming that each of their municipal councils have a committee who seek their communities’ input which is then approved by their councils for transmission to the Alectra BOD?Let’s not overlook that these “mayoralty directors are subject to an election every 4 years which could present problems.Are all hydro technical staffs represented by the same union and has there been any discussions with them?Where will the corporate HQ be located and what is the projected numbers and positions of management and supporting staff(current and projected) and what happens to the municipality’s current management/support regime?Colleen,thanks for the very informative “jayshepherd” link!

    • Colleen

      David, The current Alectra business model has “regionalized” offices. For example, finance is run out of Mississauga, customer service is out of St. Catharines, Conservation is out of Vaughan. Staff who have been settled in and around Guelph, some for decades, will be required to drive 1-2 hours to get to work. This will account for approximately 60% of current Guelph Hydro staff. Guelph has been “guaranteed” a seat on the board, but I would expect that as Guelphs share % drops with the continued merger activity of Alectra, so too may that seat drop off. Alectra has made it clear that mergers will continue and that they want to have 1.5 million customers. They have only guaranteed a local operations centre in Guelph for 10 years. It is my hope that Council will solicit direct feedback from the residents that they represent and do their own research independent of the SOC committee and the and not count on the distilled City communications reporting, that at best is very leading. Jay Shepard plays an active role in our Guelph Hydro rate filings and acts as an intervener for the School Board during the rate filling process.

    • Colleen: Thank you for your information and the link to Jay Shepherd. While this merger proposal is complex and difficult to comprehend to the average person, it remains a serious threat to our Power distribution system. It is clear that this merger is a takeover of Guelph Hydro in which the citizens lose control of its utility.

      I understand there is a petition about to be circulated inviting citizens to oppose the Alectra proposal. Guelph Speaks supports rejecting the proposal at this time on the grounds that the financial data and organizational details are missing.

      We recommend that city council do not approve this proposal until such time that Alectra supplies the business plan involving the merger of Guelph Hydro including financial data. The current proposal has too many speculative benefits without key financial information. .

  7. Rena

    What is the rush to join/merge with an unproven company. If the mayor and council think this is such a wonderful deal be open and transparent with ALL the information to the taxpayers. Why not add it as a referendum to the next election.

  8. Guido

    The City of Waterloo after that RIM screw up by council formed a Citizens Audit Committee. A group of NON PAID citizens to audit every such endeavour. It appears to be a model that all cities in Ontario to consider. According to 570 News it has worked very well. This committee get all the details necessary to make a sound recommendation whether it’s in the best interest of the taxpayer or not. The mayor should investigate this with Waterloo as to it’s structure and success. We can all learn from others.

  9. Lurka

    Guido- what an excellent idea, but will “they” go for close scrutiny from unpaid citizens with nothing personally monitary to gain for themselves? Hmmmm– i wonder.

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