Tag Archives: Guelph Hydro

Guthrie’s running again when the ink isn’t dry on his beloved Guelph Hydro sell-out

By Gerry Barker

January 15, 2018

Three years ago my wife and I voted for Cam Guthrie. We were not alone as he trounced the mayor without breaking a sweat. He did it by promising property tax increases linked to the Consumer’s Price Index (CPI).

He was engaging and rarely spoke of his predecessor’s record and the Urbacon debacle. His handler’s presented him as a man with a mission to reform the city by creating a “Better Guelph”, what ever that meant.

So, here we are three years later and the promises made by our Mayor were rarely kept. As a matter of fact, the opposite occurred. He ran the table handling the senior staff power grabs and failures. Of the four top managers who received those huge salary increases in December 2015, only one remains. Those increases were concocted in a closed-session meeting convened by our Mayor.

There was no indication, by the administration, of what happened that December night. Four months later, it was exposed when the provincial Sunshine List published the details of the increases.

Here’s the back-story

The first senior staffer to leave, even before the December 10 secret meeting, was former CFO Al Horsman who left in August to take a new job in Sault Ste. Marie. His final pay for seven months work was an estimated $183,000, adjusted of course, for the new level of senior management increase awarded four months later.

The second manager to defect was Derrick Thomson, Deputy Chief Administrative officer, (DCAO) of Operations for some two months. He resigned shortly after receiving a 19 per cent salary increase to take a job in the Town of Caledon, where he lives.

The third departing senior staffer was the Chief Administrative Officer, (CAO) Ann Pappert, who resigned just after the Sunshine List was published March 31, 2016. She left May 26 and received her salary of $263,000 for the full year, despite only working for five months.

The fourth beneficiary of that Dec. 10 closed-session council meeting, was DCAO Mark Amorosi who left the city February 10, 2017.

Little of this information was released by the Guthrie administration. The stonewalling has reached epic proportions as the administration, to this day, has never publicly acknowledged the meeting ever happened.

It begs the question, why did these three senior staffers resign? In the case of two of them, Pappert and Thomson, who quit after receiving huge increases commencing in 2015?

In Mr. Horsman’s case, it is safe to assume he saw the writing on the wall dealing with the new city council and chose to leave, even, perhaps, not knowing about the senior staff increases that were being planned.

The shifting sands of power

Ms. Pappert’s departure left a huge gap at the top of the staff where the CAO was in charge of more than 2.100 employees.

In June 2016, the city announced that Derrick Thomson was re-hired as CAO. Talk about the Phoenix rising from the ashes! Mr. Thomson promised to reveal his salary and eventually we were informed it was $230,000 a year for three years. It turned out that he was also paid a $9,000 taxable benefit as a personal car allowance.

Mr. Thomson has overseen two city budgets, 2017 and 2018. The property taxes in those two budgets, including the special infrastructure levy, exceeds 6 per cent.

The council appointed Mr. Thomson as co-chair of the Strategies and Options Committee (SOC), charged with disposing Guelph Hydro. No elected councillor was appointed to this committee in the 18 months of its operations..

The effect of this is that the merger proposed by the SOC between Guelph Hydro and Alectra Utilities was not only conducted solely in closed-session, but the people’s representatives, city councillors, were not participants.

As a result, the ultimate checks and balances of decisions made by an outside committee were not involved during the 18-month negotiation period by the SOC.

Horse pucky is more effective than the facts

Instead, councillors were fed a line of unadulterated horse pucky from its own staff that led to a 10-3 council approval of the proposal. In my opinion, Council abandoned its responsibilities believing their own senior city  and Hydro staff and the mayor who led the cheerleading of the proposal starting October 5.

The public promised a dose of more good-paying jobs, a green power technology centre in the Guelph Hydro Headquarters. Guelph would become the hub for Alectra’s expansion plans for Southwestern Ontario expansion, and the Guelph Hydro staff would be retained with reductions coming from attrition and relocation.

This is what Mayor Guthrie was selling along with CAO Thomson and Hydro Chair Jane Armstrong.

To add insult to injury, the public was informed that council spent $2.36 million of public money on the SOC plan to dump Guelph Hydro. Then came the announcement that Guelph Hydro, following closure of the deal would send a “special dividend” of $18.5 million to the city.

Didn’t we just lose $63 million for the Green Powered GMHI experiment?

Gee! That friends, is $20.86 million of our money spent to give away our hydro distribution system worth $300 million.

Why is it so difficult to understand? Ten councillors including the mayor voted for the unfinished merger negotiations, but voted for it anyway. Why?

To this day, I challenge any member of council to explain the final two agreements, terms and conditions of the merger. Because the night they approved it, the negotiations had not been completed. Did they not know that? Or, maybe they did.

Would someone explain to me how a council can approve a merger of a $300 million publicly-owned utility serving 55,000 customers, without knowing or understanding the final terms and conditions of this proposal?

There are words that describe what has happened. I’ll leave it to your imagination.

Our only hope is that we are told, in plain language, the details of this merger when negotiations are completed and council holds another vote to approve or walk away.

If they don’t follow this necessary step then two things will happen.

Those councillors who still support the merger will have to answer for their decision next October’s civic election. That is, those who choose re-election.

The second issue is that the Ontario Energy Board must approve the merger based on the details and evidence provided, so that the majority of Guelph citizens are either in favour, or not.

It’s an old axiom, for every action there is a reaction.

It’s our property, let’s protect it

 

 

 

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How Guthrie’s Great Wall prevents the public from knowing the people’s business

By Gerry Barker

January 8, 2018

Note – The following is the opinion of the author based on known facts and history of the administrative management of the City of Guelph.

Donald Trump is still trying to get his $18 billion wall proposed to be built between Mexico and the U.S. but Cam Guthrie has succeeded in erecting a wall to protect his council and city staff from public participation in city business.

Just ask the 22 delegates who opposed at to the open council meeting to approve the merger of Guelph Hydro and Alectra Utilities last December 10. Each delegate outlined why this was not in the best interests of the community and many requested a deferment until all the facts were known, including the final documents pertaining to the agreement.

Council, by a 10-3 majority ignored those citizen delegates. Instead they agreed with the points raised by seven Alectra delegates who offered reasons to merge.

The structure of Guthrie’s Wall of denial

We looked up how the wall was erected initially by the former administration, starting in 2008 when council appointed Amberlea Gravel, located in London, to investigate citizen’s complaints about closed-session meetings of council. The appointment was made when former Premier Dalton McGuinty’s government ordered all municipalities to appoint a closed-session investigator.

Since 2008, Amberlea Gravel, our Local Authority Services (LAS), has processed just three complaints, while being paid a retainer for nine years. The city has not revealed the cost of the retainer. Regardless, it has to be the best deal Amberlea Gravel made to bolster the privacy of council doing the public business.

A few years ago, the Ontario Ombudsman was given authority to act for municipalities. Today more than half have switched to the Ombudsman’s office for investigating closed-session council and local board meetings.

But not Guelph.

I was one of only three complainants requesting a closed-session investigation in early January 2016. I had plenty of reasons for obtaining the minutes of the December 10, 2015 closed council meeting that awarded $98,202 salary increases to the four senior managers of the city.

By now most people in the city know the decision was not revealed until publication of the 2015 Sunshine list which publoshed the salaries and taxable benefits of every city employee earning $100,000 or more.

Guelph Speaks published several posts that decried this blackout decision by city council. For my trouble, I was at first threatened by one of the recipients of our largess and subsequently sued for defamation. That case is before the courts and I cannot comment further.

Four months following my request for the December 10, 2015 minutes, the special closed-session investigator ruled in favour of the city to deny the minutes of that meeting. That’s just one brick in the Guthrie Great Wall of denial to control the public’s business and rightful interest to suit the staff and council. It’s known as shaping the message to satisfy the administration’s interests.

The council code of conduct is the second barrier to open government

Here is an excerpt published on the city website under the title: “Council Code of Conduct/Integrity Commissioner:

The Code of Conduct was adopted by Council to:

  • establish a common basis for the ethical behaviour of Members of Council and Local Boards, and
  • increase public confidence by making a commitment to operate with integrity, justice and courtesy.

I’m sorry; but I can’t make this stuff up.

In 2011, Council appointed an Integrity Commissioner to address the application of the Code of Conduct for Members of Council and Local Boards. The Integrity Commissioner has the power to deal with requests to investigate suspected contraventions of the Code of Conduct. The record shows that all requests referred to the Integrity Commissioner originated with members of council. Council recommend the following penalties:

  • A reprimand; or
  • Suspension of the remuneration of the Council or Local Board member for a period of up to 90 days.
  • In addition to conducting formal Code of Conduct investigations, the Integrity Commissioner also serves as an advisor on appropriate conduct to individual Members of Council or Council as a whole.

The ultimate muzzle on the very people we trust to serve the public’s interests

So, now in his sixth year as Integrity Commissioner, Robert Swazey of Caledon, is judge, jury and prosecutor in cases involving elected officials who may be accused of breaking the code of conduct.

It is an implied threat to any councillor who reveals the contents of a closed-session meeting. It threatens their reputation for protecting the public interests.

In just a few words, this policy was approved by council in, we believe, another closed session. The commissioner, during since 2011 has investigated three cases. His annual retainer is $5,000 and he is paid an hourly fee conduction his investigation and preparing his report.

The one case involved then Coun. Cam Guthrie, who received none of the punishment listed above. It cost the citizens $10,000. The irony of this event is suffocating in tracking the performance of the Mayor and his council.

That was then and this is now

In the past three years of his mayoralty, Cam Guthrie has consistently demonstrated adherence to the Code of Conduct set up by the previous administration. In fact, there has been more closed-session meetings of council and it’s appointed Strategies and Option Committee (SOC) than Noah organizing the Ark.

This is an affront to every citizen of Guelph. It’s a manipulated system to dumb down the electorate and coverup mistakes from public exposure. What they don’t know won’t hurt them.

There is no shortage of information underlying doubt about this Hydro/Alectra merger,

The present council, again in closed-session, approved spending $2.36 million to sell this deal to its own citizens.

The plan was to produce the illusion that most people were in favour of the merge employing leading questions to agree with a phony outcome; sparsely attended town hall meetings and producing a phony 245-page “final agreement” document just 12 days before the meeting. And it was only available online. I charge that fewer than 250 hard copies were distributed to the public.

The communications plan did not put its case forward through Guelph Hydro’s network of 55,000 customers except at the last days prior to the meeting when a tiny resume of the deal’s advantages was inserted in the Hydro/Water bills.

So as city Communications General Manager, Tara Sprigs, described the process of informing all those Hydro customers who were being threatened with everything to lose in return for a boatload of promises.

I would like to think that at least four councillors, those with knowledge and intelligence, would change their vote under the circumstances.

Not one of them is the Mayor.

How council manipulates the Municipal Act closed-session guidelines

It’s simple really; they made up their own closed-session guidelines.

Now topping Guthrie’s Great Wall of denial are the Municipal Act policies. The following are the legal reasons under the Municipal Act to hold a closed-session council or local boards meetings:

Section 270 of the Municipal Act provides that municipalities must develop and maintain various policies regarding the accountability and transparency of municipal government and its operations.

The key words are Accountability and Transparency

The following have been adopted by Council and are regularly reviewed to ensure compliance:

  • Sale and Disposition of Land
  • Number 1: Only covers the sale and disposition of land not the acquisition of the provincially owned Jail lands
  • Hiring of Employees
  • Number 2 – Yes, hiring employees should be confidential but does not include approving salary increases to staff and then not revealong it to the public.
  • Procurement of Goods and Services
  • Number 3 – This covers a lot of areas and there is evidence it has been used to          blackball certain contractors from bidding on city jobs.
  • Public Notice
  • Number 4 – This is an oxymoron; hold a meeting in closed-session to discuss a public notice? It’s a convenient method of calling a closed-session meeting to discuss almost anything in private.
  • Accountability and Transparency
  • Number 5 – Again, why is it necessary to call a closed -ession meeting to discuss accountability and transparency? The previous administration has already paid more than $500,000 to a Toronto consultant to come up with an A&T plan.
  • Delegation of Authority
  • Number 6 – This dovetails with the administrations’ allowance such as giving $98,303 raises to four senior managers in 2015?

The key story here is that council adopted this collection of reasons to legally hold a closed-session meeting. Seems it’s self-serving giving council and the boards absolute power and control of the public’s business. It’s like turning off a tap, shutting off any information they choose for whatever reason. These reasons would include political liability and criticism, personal benefit, adherence to a political philosophy,

The two Councillors who served for four years of the GMHI board of directors, the operator of Guelph Hydro, were paid over and above their regular salaries. Councillors June Hofland and Karl Wettstein still voted in favour of the merger. They not only benefited serving on the GMHI board but in my opinion, were in a conflict of interest.

The Great Wall is intact and a barrier to the public interests

These “blocks” of the public’s business have been refined over the past 11 years to giving the administration-unfettered control of the message. It denies the public’s access to its right to know and understand the corporation’s operations on their behalf.

In future posts, GS will provide specific reforms covering a widespread grouping of issues that the electorate should consider before entering the voting booth.

The most vital reform is to make the council and administration operate openly and accountable.

This year, October 22 to be precise, we the citizens have the opportunity to return power to the people by electing councillors who understand their responsibility to the people who elected them. That means persuading civic-minded, experienced individuals possessing a universal mature backgrounds to turn this city into the jewel of Southern Ontario.

It means a sharp turn to the centre of the political spectrum, away from the left wing domination of our political management where there have been too many mistakes in judgment, losses of public money due to misguided projects that have set the city back in the past 11 years.

The time has come to elect councillors ready to reform and employ critical thinking managing the people’s business.

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Why did Council approve Guelph Hydro merging with Alectra Utilities not knowing the final terms and conditions of the deal?

By Gerry Barker

January 2, 2018

Following a marathon meeting December 10, council approved by a 10 to 3 majority, to merge Guelph Hydro with Alectra Utilities.

It was the culmination of a $2.36 million city-financed campaign that was conducted chiefly in closed-sessions by the Strategies and Options Committee (SOC) and city council. Our council approved formation of the SOC 14 months ago. It did so without the active participation of any elected members of council.

Council’s decision remains the greatest con job of a proposal in the history of Guelph. The details to this day are secret and kept far from the eyes of the 55,000 Guelph Hydro customers and owners of the utility.

How did this happen?

The night of approving the merger, there were 22 delegates appearing before council. By a three to one majority, they opposed the merger or at least request deferring the decision to allow more time for the citizens to absorb the details. Also, there was a petition containing 76 names that flatly opposed the merger.

The majority of council robotically ignored these citizens.

Seven delegates representing Alectra’s interests sang the praises of a Guelph Hydro merger with Alectra. Only one of the seven, Mark Goldberg, a member of the SOC actually lives in Guelph. The seven came from Toronto, Mississauga Brampton and Barrie to praise Alectra and reassure council that this was a good marriage.

Or is it?

From at least two sources, why didn’t council not have the final agreement details, and not declare that important information before approving the merger after midnight Dec. 10?

We attended that meeting and the lawyer representing Aird and Berlis, the Toronto-based legal firm, carefully outlined the status of the negotiations between the city and Alectra, stating they were yet to be finalized.

Add the voice of Pankaj Sardana, Chief Executive Officer of Guelph Hydro, who admitted just a few days before the meeting that negotiations were not completed and would not be shared. That is, until Guelph Hydro, Guelph Municipal Holdings Inc. (GMHI) and Alectra approves the merger and documents are released to the media and the 55,000 Guelph Hydro owners, the customers.

Here’s why not to hold your breath on that happening

The question is: Why did council pass a motion to approve the merger when the final legal documents had not been negotiated, signed and sealed?

Did those ten councillors understand the final merger details when they voted to approve it? But then, why would they, negotiations were still being conducted in closed- sessions between the parties.

Why is that a surprise?

This administration conducts too much of the public’s interest behind closed doors. Since Cam Guthrie was elected mayor, there has been little attempt to open council’s business. Indeed, there has been little attempt to fix the secret workings of the public business, a hangover of the previous administration.

Once those doors are closed, the public is shut out of the proceedings. To protect itself from public disclosure, council has a hired closed session investigator at their beck and call to diffuse any right of the public to know and understand what’s going on behind those closed doors.

We know from personal experience how the closed-session investigator from London known as Amberlea Gravel functions.

I requested the minutes of the Dec. 10, 2015 closed-session council meeting, in which three months later we discovered $98,292 in base salary increases were awarded to the top four senior managers. I received my answer four months later when my request was denied.

Not allowing need-to-know our business is an inconvenience

This is nothing but a repeat of the policies of the Guthrie administration. It’s just too inconvenient to let the public know how and why council conducts our business.

In itself, it is an affront and disregard of our Canadian Democratic rights to participate in public civic affairs without the threat of retaliation.

Personally, I have experienced how our council condones retaliation against a writer, a resident and critic who legally participates and comments on public affairs for the past ten years.

Back to the business at hand, betrayal of the public trust

It really didn’t matter because councillors were well aware of the secret meetings. Council confirmed it by appointing an outside lawyer who said the merger terms and condition were still to be negotiated. Mr. Sardana knew the deal was not finalized and that’s why he said the negotiation information would not be shared.

We were informed that Aird Berlis had acted for Alectra previously in an unrelated matter.

Did council base its decision on the 245-page of manufactured dreck purported to be the final details of the agreement? This document was released to the public but was only available online December 1. Just 12 days before the Dec. 10 meeting.

This was a carefully orchestrated operation to deny the public its rights to access the details that council passed with only three members opposed, James Gordon, Bob Bell and Phil Allt. I do not often share the views of Mr. Gordon or Mr. Allt but in this case, they had the guts to do the right thing and opposed the deal.

On November 24, GS sent each councillor 46 questions regarding the merger. We only received one reply from the Mayor five days before the Dec. 10 meeting. To his credit, the Mayor gave me a previous heads-up that he needed more time to consult and research his answers.

But five days before D-Day?

The questionnaire was in response to the “energizingtomorrow.ca” website that stated, “Ask Us Anything.”

All the GS questions were based on the merger and the details as far as we were aware. As Mayor, Mr. Guthrie I would assume was speaking for all members of his council. Three of them did not vote for the merger

The most interesting answer to one of the questions asked wawhy council was giving away Guelph Hydro. He replied: “We are not giving away anything.”

Our differences lie in one simple fact: If Guelph Hydro is valued at $300 million how does that justify a $1.5 million “dividend” from Alectra a year? Further the city share is based on only receiving 60 per cent of Alectra Inc. profits. So to get control of Guelph Hydro, Alectra threw in some sweeteners.

You are the judge, how sweet are they?

They promised to establish a Green Power Technology Centre in the Guelph Hydro headquarters building that will employee ten people. Alectra also promised to make Guelph the “Hub” of its expansion into South Western Ontario. And don’t forget the $18.5 million special dividend from Guelph Hydro to the city. That’s persuading council using our money.

The downside is that an estimated 60 Guelph Hydro employees are to lose their jobs through termination, relocating or retiring. It didn’t seem to matter to the ten councillors who approved the merger.

Adding up the Guelph Hydro’s annual estimated profit after expenses, in 2016, the surplus was $7, million: in 2017 it is estimated the surplus will be $7 million; in 2018, prior to closing there will be additional net earnings of Guelph Hydro. That will possibly total $21 million over the three years.

On closing of the merger, that notorious $18.5 million special gift from Hydro to the city kicks in leaving a balance of $2.5 million remaining in the kitty.

Hold the phone! Guelph Hydro already had a cash reserve of $22 million on its 2016 books. It’s all so deliciously transparent. First, the $2.36 million the city has spent on driving this crazy deal to fruition is neatly covered by the annual $3 million dividend Guelph Hydro delivers to the city three-year surplus of $21 million.

So it would appear that city council is not going to receive a $3 million divudend when it mergers with Alectra but just $1.5 million.

Is this a great deal or what?

Still with me?

Lying in the entrails of the great give away by city council is the $22 million stash of cash Hydro had before any these merger talks ever began.

What happens to that money if this deal ever closes?

Another unanswered question. Is it remotely possible that not only Alectra will wind up with the city’s only viable, profitable subsidiary worth an estimated $300 million but a bonus of $22 million in cash? As 131,000 citizens are kept outside the decision process, the council approves the deal. We are left without clothes shivering in the dark.

Bad metaphor? Unfortunately true

In view of the facts, how can Coun. Mike Salisbury who moved the approval motion, and seconded by Coun. June Hofland, have access to the final terms and conditions that were yet to be completed? That goes for the other eight councillors who voted to approve something that they had little knowledge of, the final merger deal and documents.

And why were Councillors June Hofland and Karl Wettstein even involved in this decision? They were on the failed GMHI board of directors for four years, drawing a fee for serving and never revealing what was happening as the operation lost $63 million in shareholder value.

That was our divestment that was swallowed up by incompetence.

When does council deliver the details of this merger?

Accordingly, as one of the 55,000 Hydro owners, as a shareholder, I would be interested in knowing the final details of the merger agreements version if and when completed.

In my opinion, the council motion Dec 10 was illegal because the final details of the terms and conditions of the merger were not known at the time. Therefore, council cannot give away our $300 million Guelph Hydro without fully disclosing the final details to the public. For a change, hold an open debate on the merits and benefits as agreed to by both parties.

The Ontario Energy Board must still approve the merger. It is incumbent on the two parties that proof of public acceptance of the merge must accompany the application. This is not expected before the fall of 2018.

Will that be ham and cheese or smoked meat on rye?

There was little council enthusiasm listening to the delegates opposing the motion. This turkey was already baked in the oven. The only reason to hold a one-hour closed- session meeting before the public meeting was to eat supper and decide who would move the motion and who would support it or not.

Wilson Street Parking garage financing

Oh! In case you are wondering what the city will do with $18.5 million “special dividend,” here is the latest info: The Wilson Street $20 million five-storey parking garage across the street from city hall. Guess who benefits from that?

If that’s the case, the $18.5 million is our money only held by Guelph Hydro. So at least it may be used to create a badly needed downtown parking garage. The only problem is those having monthly parking passes will occupy the majority of available spaces.

And there are so many capital projects begging for funding.

Yep! It makes sense to give away Guelph Hydro to solve that problem.

Some Short takes

Notice the Mayor was a part owner of the Guelph Royals baseball team to save it from folding. He had to vacate his position due to a conflict of interest. Guess he got a look at the books. What? Council has a baseball team?

The changes are a’comin

There will be a number of changes coming in this year’s civic election. The provincial government has passed rules governing corporate and union donations. There remains a proposal to have a new nomination period of three months starting in May. The 445 civic councils in Ontario have Until March 31 to pass new bylaws to change the nomination dates. The last thing Premier Wynne needs is to rile up the municipalities. It’s the best we can hope for.

Mayor announces he is running in 2018

Stating: “I really enjoy being Mayor and I love being Mayor.” He then produced a list of accomplishments that were not specific including the financial details.

We do not agree with the mayor that 2018 will be the “silly season.” There will be many surprises and issues demanding the truth.

Accordingly, watch for a special “Truth Squad” report posting by GS based on the Mayor’s list of accomplishments … One Pinocchio, Two Pinocchio, Three Pinocchio!

Guelph Speaks wishes all a Happy New Year, one that is prosperous, healthy and fulfilling.

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Guelph Speaks takes some time off during the holidays

By Gerry Barker

December 22, 2017

In the waning days of 2017 we are all busy preparing and sharing the Christmas and New Year’s holiday season.

Guelph Speaks (GS) is no different and will take time for needed computer maintenance and reflective down time.

It has been quite a year being capped December 10 with the merger of Guelph Hydro and Alectra Utilities. We still maintain that is the greatest giveaway of our most valued public and profitable asset ever experienced in the long 200-year history of our city.

As far as GS is concerned, the New Year will bring some interesting insights and news about the council approved deal that could change this path of consolidated absurdity.

This will be our last post until Tuesday, January 2 when we prepare posts commenting on events during the final year of the council’s mandate. The GS archives contain 922 posts that are available at guelphspeaks.ca since 2011 for information, a history of municipal affairs and perhaps some entertainment.

That totals 1,475, 200 words. It is the equivalent of 20 75,000-word novels.

I am thinking of using the posts to write a book about the management of Guelph including the people responsible from 2006 to present day. The time to organize the material is daunting but not impossible. I intend to turn over my archives to the Guelph public library’s reference department as a source of a very exciting time in our city’s history.

It is a running account of lies, secrecy, cover-ups, accomplishment and the personalities involved.

The New Year will bring a change in our city council. With the merger possibly closing next fall, the impact on the citizens, we predict, will galvanize the voters to express their objection of council’s past actions.

My wife, Barbara and I wish everyone a happy holiday and a healthy and prosperous New Year.

A special thanks to all those GS viewers who follow the blog, the only one in Guelph that challenges the administration and digs under the veneer of city-managed information to reveal the truth and the facts.

As usual, the blog remains open for comment regardless of the content taking a small vacation.

We’re back on the job Tuesday, January 2, 2018.

Best to all,

Gerry and Barbara Barker

 

 

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Grand Theft Hydro: How ten councillors gave away your $300 million Guelph Hydro

By Gerry Barker

December 18, 2917

Here is the anatomy of a $300 million Guelph Hydro giveaway when a lobotomy was needed.

Make no mistake, from the day the Strategies and Options Committee (SOC) was formed by council in 2016, the plan was to merge Guelph Hydro not sell it. When I asked the Mayor why there were no elected councillors on the committee. He replied: “Using a skills-based team is the most appropriate way to conduct this type of asset review.” Appropriate for whom?

Wednesday night was crucial for council to approve the merger. The majority voted to approve the merger knowing there was no looking back, no second chance to reconsider. Guelph now faces losing control, sold out its Hydro employees, all for receiving 4.63 per cent of 60 per cent of Alectra’s profits.

The Ontario Energy Board (OEB) must approve the final agreement. Closing the merger is expected to follow the OEB approval and the brand, Guelph Hydro, will disappear before the end of 2018.

The citizens have the right to object to the merger before the OEB.

The approved draft agreement, supported by ten councillors out of 13, allowed the city, through its defunct Guelph Municipal Holding Inc. (GMHI), one member on the 14-member Alectra Board of Directors, but not the Mayor or acouncillor.

Not only were there no elected officials on the SOC, but also council agreed to merge with Alectra without knowing the details of the final agreement, according to the Toronto-based Aird and Berlis lawyer, representing the City of Guelph. The lawyer warned council that if they approved the merger there was no reversing the approval.

The majority of council ignored his caution.

Names of the ten councillors who voted to give Guelph Hydro away

June Hofland, Mike Salisbury, Christine Billings, Cathy Downer, Karl Wettstein, Leanne Piper, Dan Gibson, Andy Van Hellemond, Mark MacKinnon and Mayor Guthrie.

They ignored the clear evidence that this merger was being rushed. They ignored that there was no rational benefit to the 55,000 Guelph Hydro customers. They ignored the methodology of secretly conducting the investigation over almost a year, beyond any real public participation.

Those ten councillors also ignored several appeals by concerned citizens to defer the decision until the final version of the agreement was revealed and debated. They denied the demand for a referendum to be held as part of the civic election in October next year.

Just for those reasons alone, they will be remembered as the gang that couldn’t shoot straight when logic escaped their judgment.

Here are the three councillors who voted against the merger: James Gordon, Phil Allt and Bob Bell. Apparently, these three representatives of the people had the courage to see through this hazy proposal that was nothing but a sales pitch to get control of Guelph Hydro without paying for it.

That is the essence of this merger that was planned and executed only in the interests of Alectra.

Council was used and subsequently believed that the future of Guelph Hydro was more important than the reality that the utility was a jewel that had great value to make a fair agreement on its terms, not that of Alectra.

The beginning of the march toward Guelph Hydro’s Waterloo

The SOC was formed by city council October 24, 2016 composed of Derrick Thomson, the newly appointed Chief Executive Officer of the City of Guelph, Pankaj Sardana, Chief Executive Officer of Guelph Hydro, who both acted as co-chairs of the committee. Also Robert Bell, Mark Goldberg and Richard Puccini were appointed to the SOC.

According to the news release, the SOC was charged to investigate and recommend opportunities related to maintaining the status quo as a standalone municipally-owned electricity distribution system (acronym LDC), or making a change, which could include buying, selling or merging.

The SOC provided council with a timetable of four phases of their preliminary investigations that would be completed in “early 2017.”

As it turned out, February 2017 was pivotal when the SOC mandate of selling Guelph Hydro, was removed as an option.

The plot thickens

Here is a coincidental series of events that occurred. Alectra Inc. was incorporated January 31, 2017.

The SOC committee personnel changed with Mr. Puccini stepping down. Hydro Chair Jane Armstrong replaced Co-Chair Pankaj Sardana and a Mr. Ault replaced Mr. Puccini.

A council meeting was held February 15, 2017 in which a motion was passed to drop the sale of Guelph Hydro as an option to consider. The vote was 7 to 5. This cleared the deck to only consider a merger with another utility.

On what advice or basis did council at this point make the decision?

Did the SOC recommend to city council to drop this option? Someone did, and the timing, two weeks after the Alectra incorporation opened the door for Alectra to craft a merger proposal that was not made public until October 18, 2017.

That was eight months after the decision not to sell Guelph Hydro.

Here is part of a report published October 25, 2016 in the Guelph Mercury that outlined the SOC’s committed task:

  • Consulting with stakeholders;
  • Investigating transaction options and approach; and
  • Reporting to Council on recommended options and seeking Council’s direction on next steps.

Let’s talk about the claim of “consulting with the stakeholders.” The SOC, to the best of my memory, held all it’s meetings in closed-session including those with city council. With Mr. Thomson as Co-Chair of the SOC and the CAO, it’s difficult to know what information he passed to his staff and council.

After the Alectra merger announcement by the Mayor October 18, the city staff recommended approving the merger. Why would they do anything different? Their boss was the SOC Co-Chair and CAO of the city?

In that position, Mr. Thomson was effectively in control of the process along with his new Co-Chair, Jane Armstrong. Did either of them convince council to remove the Hydro sale option from consideration? As CAO, Mr. Thomson, wearing two hats, was positioned to be a major influence in recommending the dropping of the sale option.

The mystery exists. Who motivated council to eliminate the sale option February 15, 2017?

Given council’s majority of ten approving the merger, it is apparent many were out of the loop in understanding the effect of that decision although five councillors voted against removing the sale option last February.

We later learned that Mr. Puccini was not happy about the move and indicated that he was in favour of a sale of Guelph Hydro. His address to council the night of the approval meeting to decide the future of Guelph Hydro, was that he offered details of the benefits of selling the utility based on empirical evidenced of similar transactions in the LDC field.

Timing the rollout to curtail opposition

In my opinion, this was a carefully planned decision to merge with Alectra and targeted only at the 13 elected members of council. They had control and any opposition was blunted by deliberate release of some of the proposed merger agreement details just 12 days before the crucial council meeting last Wednesday.

Let’s talk about the possible incentives offered to certain members of council and possibly the SOC.

Why did this campaign to influence 13 members of council to approve an agreement that contained no substance, no tangible benefits to the Guelph Hydro customers and, most of all, the exercise was mostly conducted in secret. The council held a one hour closed-session right before the public meeting. Why was that necessary?

Some 29 delegates spoke at that meeting with 22 opposed and seven recommending the merger.

Of the seven, two were Alectra senior executives; a Brampton Alectra employee extolling how fair Alectra was to its employees; a VP representing Pearson International Airport saying how well Alectra performed its maintenance of the 40 megawatts facility; a steward of the Power Worker’s of Ontario that is attempting to take over as bargaining union of Guelph Hydro, and two representatives from Barrie, the mayor and a councillor saying how well the take over by Alectra has worked well with that city.

Their job was to reinforce the message to take over Guelph Hydro and, unfortunately it worked.

Councillors were briefed November 30, the day before the public release of the 245-page agreement report. The next day it was released and was only available Online.

It was a part of a strategy to deny the 55,000 customers of Guelph Hydro their right to see the completed signed document before the December 13 approval meeting. Councillors were also briefed the two days before D-Day in closed-sessions with Hydro CEO Pankaj Sardana.

It is mindful of a George Orwell novel in which the people were tightly controlled by the authoritarian authority and only received information that favoured the controlling class.

In my opinion, this turkey was hatched long before the Hydro customers had any say.

That friends, is dictatorship not a democracy. And there is no comfort to be gained when we are told that Guelph citizens paid $2.36 million to sell this deal with the bulk of it going the lawyer and accounting firms. Those public funds financed the Alectra deal.

So why? Why would ten members of council vote for this merger that has not only cost us $2.36 million but agreeing to give a $300 million asset in return for 4.63 per cent of only 60 per cent of Alectra’s profits with no firm numbers attached?

Why not top it off with a gift of $18.5 million from Guelph Hydro?

The final insult to the citizens who own Guelph Hydro was the $18.5 million “special dividend” that Guelph Hydro will pay the city when the deal closes in a year. That’s our money taken from a $22 million surplus of Guelph Hydro.

The council members who voted to give Guelph Hydro away, Mayor Guthrie denies it, saying: “We are not giving anything away.” Perhaps the Mayor did not understand the drastic step of giving away its publicly owned utility to a private corporation for a tiny interest in that corporation in the name of progress.

We should be interested learning about the two Tesla electricity storage sytems installed in Guelph as the Mauor has stated. Who owns these two sytems and where are they located?

Even though they cannot change their decision, next October those ten councillors will be asked to explain their decision during the civic election campaign.

That is if they choose re-election.

They are the gatekeepers of the city business, providing the checks and balances to maintain the trust that the citizens have placed in them. Instead they fell for a sales pitch to dump our treasured asset for a bunch of promises that have yet to be proven.

The damage is done now.

They don’t realize that from now on, the citizens will never trust them. They were professionally sucker-punched by experts and failed in their job to protect the stakeholder’s interests.

Were they naive?

Did powerful interests seduce them into believing the proposal was the best solution for the future of Guelph Hydro?

Or are they just bad listeners?

It doesn’t matter now; they fixed it so there’s no looking back.

Our only hope is to mobilize and make a case to lobby the OEB to reject this merger.

In my opinion, those ten councillors will eventually have to apologize for the their actions.

History can be so unforgiving.

 

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The top reasons for city council to reject or defer the Guelph Hydro Merger

By Gerry Barker

December 11, 2017

With just two days before city council approves or rejects the alleged final agreement to merge Guelph Hydro with Alectra, there are some troubling aspects derived from an independent source and the mayor’s answers to the 46 questions we asked.

Yesterday, Guelph Speaks (GS) published a second unbiased and independent analysis by Toronto Lawyer Jay Shepherd, an expert on most matters concerning power and its distribution. We urge citizens to read Mr. Shepherd’s full analysis that is fair, transparent and informative. He takes no sides. The post may be reached by clicking on the title above today’s headling.

I personally want to thank him on behalf of all citizens and his reminder that the actual agreement wording is released before any final decision is made.

*            *            *            *

Muzzling the truth denying the details of the merger

GS took some of his diagnosis of benefits as outlined in the 245-page so-called final terms of the agreement as published December 1. The document was published Online, available only to citizens with a computer. GS was able to obtain a hard copy and was stunned at some of the content that was misleading and impossible to understand or be available to all 55,000 Guelph Hydro customers.

It was another deliberate tactic by the authors to use the Internet as an escape hatch to prevent full disclosure of the proposed merger.

According to Mr. Shepherd, he asked the Mayor, the Chief Administrative Officer, Guelph Hydro and Alectra for the agreements. He was referred to Pankaj Sardana, CEO of Guelph Hydro, and the designated spokesperson of all things merger. Sardana said the agreements are not final and cannot be shared. Shepherd stated that the secret final agreements have been provided to the Alectra Board of Directors, Guelph Hydro Board of directors and City Council.

But cannot be shared with the stakeholders who own Guelph Hydro.

*            *            *            *

GS Question: Are Guelph stakeholders receiving any immediate reimbursement for turning over Guelph Hydro and its assets to Alectra?

Mayor Guthrie: There are no incentives, and in my view, Guelph isn’t turning over anything. A merger would make Guelph a part owner of larger utility company. In a merged company, neither party would have complete autonomy, but Guelph would still have some ownership rights and protections set out in a shareholder agreement.

GS Comment: In that case, and thanks for answering a question that was not asked, is Guelph Hydro being given to Alectra with no payment other than a share of Alectra’s profits? Who operates our publicly owned power distribution system if council passes this incomplete agreement? There is no evidence that Guelph will retain ownership rights and protections as set out in the shareholder’s agreement. It is the agreement where citizens have no knowledge.

*            *            *            *

The consequence of approving the merger Wednesday night

Mr. Shepherd: Further, under OEB rules they (the agreements) will have to be made public when OEB approval is sought, although of course by then they will be signed, and Guelph will be legally obligated to complete the deal.  Public disclosure at that point doesn’t really help anyone.

GS Comment: Wednesday night it is crucial for council to approve the merger. If the majority votes for it, then there is no looking back. Guelph has lost control, sold out its Hydro employees all for getting 4.63 per cent of 60 per cent of Alectra’s profits. The city will be allowed, through its defunct Guelph Municipal Holding Inc. (GMHI) one member on the 14-member Alectra Board of Directors (not the Mayor or councillor). That’s like playing in the minors because we are not good enough for the big show.

*            *            *            *

GS Question: Why were no elected officials appointed to the SOC?

Mayor Guthrie: Using a skills-based team is the most appropriate way to conduct this type of asset review.

GS Comment: It appears that the Mayor did not have confidence in his council to be part of the Strategies and Options Committee (SOC.) it was selected to research and investigate a sale or merger of Guelph Hydro. It is reported that the law firm Aird and Berlis of Toronto was selected to handle the legal issues concerning the merger. That firm also previously represented Alectra in an application before the Ontario Energy Board;            there is no information about the accounting firm Grant Thornton LLP and its experience in assessing mergers and acquisitions.

*            *            *            *

Mr. Shepherd: Claim #2:  “Guelph Hydro will pay the City a special dividend of $18.5 million immediately prior to closing, without adversely affecting its regular annual dividend.”

The implication is that this is a benefit from the transaction.  It is not.

Guelph Hydro is currently managed conservatively, and so is underleveraged.  It doesn’t need a merger to pay $18.5 million out to the City, thus increasing Guelph Hydro debt and decreasing equity.  It could do that today.

It is not coming from Alectra.  It is coming from Guelph Hydro’s cash on hand, which at the end of 2016 was $22 million. The City is not better off initially under this transaction.  That is just not correct.

GS Comment: This is perhaps the most damaging reason to reject this merger. It was obviously crafted during the many closed-session meetings between Alectra and the SOC, representing the council. Now we can understand why the Mayor didn’t believe his council was qualified to be part of the SOC. He may be surprised Wednesday night when some of his council understands this naked attempt to mollify the undecided members of council and vote no deal.

*            *            *            *

GS Question: Who and how many third parties expressed an interest to the SOC to buy or merge with Guelph Hydro?

Mayor Guthrie: As stated in June 2 public notice “The committee had preliminary discussions with 14 local utility companies to learn how a potential merger could affect Guelph Hydro’s operations, financial position, infrastructure, ownership structure, organizational culture, and local electricity distribution rates.”

To protect competitive information about Guelph Hydro and the 14 utilities we engaged, all parties agreed not to disclose the identity or the reasons why a business transaction was or wasn’t pursued. This is a common practice.

GS Comment: If this was widely known by the stakeholders, why are so many surprised at the Mayor’s answer. Well, don’t be, because the mayor’s major communications tool is the Internet with the odd paid advertisement in the “City News” pages in the bi-weekly paper. Those ads are paid from the public purse.

Will the Mayor explain what he means by competitive information? Does Guelph Hydro compete with Kitchener or Cambridge power distribution systems?” It may be common practice in competitive businesses but this isn’t the case with a publicly owned utility.

There is competition among those corporations seeking to consolidate Local Community Distribution systems such as Enbridge, Hydro One, EPCOR and others. It is reasonable to expect that major corporations will make high priced offers. Mr. Shepherd points out that it is not reasonable to expect that Alectra – or any distributor, merged or standalone – will remain municipally owned forever.

In view of that, perhaps Guelph Hydro, the SOC, city staff and council should defer this decision in the event the utility may attract a good offer to purchase Guelph Hydro at a fair market price.

Claim #15:  Guelph customers will experience a lengthy list of customer service and other improvements, shown at page 29-30 of Att-2, the advisors report.

This seems to be somewhat oversold.

When you go down the list of supposed benefits from the merged utility, it would appear that virtually all of them are already in place at Guelph Hydro.  It is not clear where actual improvements are being proposed.  Are there any?

As is so often the case when companies that have a business goal are trying to get the public onside, a picture is painted that is the prettiest version of the transaction.  Claims are made, rosy forecasts are delivered as if factual, small things are treated as big, and any details that could undermine the narrative are either not made public, or glossed over.

That appears to be the case here.  This may be a good deal.  There are arguments on both sides.  However, it is important that those assessing the situation start with the actual facts, not hopes and dreams and maybes.

Or sales pitches.

  • Jay Shepherd, December 9, 2017

*            *            *            *

Some final thoughts

What matters most is the will of the people to express their doubts about a possible corrupted piece of legislation. The reasons are clear why this attempt to takeover our standalone Guelph Hydro system is so flawed and contrived. It’s all about the money.

The real value of Guelph Hydro is estimated to be $300 million; the utility’s cashflow is more than $600 million annualy; council has already spent $2.36 million just orchestrating this deal; Guelph Hydro has cash reserves of $22 million.

And the council appointed Strategies and Options Committee recomends that we turn all of it over to Alectra for 4.63 per cent piec of 60 percent of its profits. Trouble is what does that mean in dividend dollars?

Only we the people can change it by influencing our elected councillors to just say: NO

Instead, save our Hydro system and its loyal employees until the right and fair agreement can be completed without the secrecy and insider influences that have made a mockery of our democratic rights.

Our last chance comes Wednesday night. By attending the meeting that starts at 6:30 p.m. at city hall, we can peacefully demonstrate that we don’t want this deal with Alectra.

Instead, council should listen to the people who have little opportunity to even discover what’s really in these agreements that are not being shared publicly.

If council approves these merger agreements, there is no recourse by the shareholders.

Not after the fact changes, no objecting and Guelph Hydro, as we know it, disappears.

Please show up and we’ll have a chance to stop it or at least defer it until the real facts are revealed. We can judge whether to approve it or start over again on the people’s terms and engagement.

Gerry Barker, Editor of Guelph Speaks

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Guelph Hydro: Fifteen Claims

Introduction

Guelph Speaks brings you the second independent analysis of the alleged Guelph Hydro/Alectra merger agreement by Toronto Energy lawyer, Jay Shepherd. Mr. Shepherd’s expertise and experience presents an unbiased and revealing overview of the controversial merger between the two corporations.

On Monday, Guelph Speaks will present a timely review prior to Wednesday’s council meeting to approve or reject the merger agreement. It will be an overview of an agreement that has yet to be finalized according to Mayor Guthrie, the Chief Administrative officer, Derrick Thomson and Alectra.

Gerry Barker, December 9, 2017

Guelph Hydro: Fifteen Claims

Posted on December 9, 2017

by Jay Shepherd

Since my article on November 5th analysing aspects of the Guelph Hydro Alectra merger, a number of readers in Guelph have asked me to look at the transaction further, particularly in light of the lengthy report tabled December 1st to Guelph City Council.

The best way to do that is to look at the actual agreements.  That way the information is clear and precise, and is not filtered by the perspectives of those providing the information.

I asked the Mayor, the CAO, Guelph Hydro and Alectra for the agreements, but was told by Guelph Hydro CEO Pankaj Sardana (who was apparently designated to respond on everyone’s behalf) that the agreements are not final, and so cannot be shared.  I believe they have, however, been circulated to the Guelph Hydro and Alectra boards of directors, to City Council, and others, so they can’t be that confidential (40-60 people have probably seen them by now).

Further, under OEB rules they will have to be made public when OEB approval is sought, although of course by then they will be signed, and Guelph will be legally obligated to complete the deal.  Public disclosure at that point doesn’t really help anyone.

It thus appears that the primary reason to withhold public disclosure now must be so that the public doesn’t have all of the details of the transaction.

That is unfortunate, but it is what it is.  I will have to provide my commentary based on the report to City Council.

That report comes from a specific, pro-merger perspective.  For example, the Guelph Hydro lawyers providing the legal analysis are the same firm that represented Alectra in their merger application before the Ontario Energy Board.  While I’m sure they are trying to be objective (and they are a good firm that I know well), they have an obvious point of view.  No matter how well they may eliminate their bias in fact, it is pretty difficult for them to remove the perception of non-objectivity.

The commentary below takes several of the claims in the report to City Council, fifteen in all, and assesses how they match up with the facts.

I repeat my earlier comment that I do not have an opinion on this transaction.  This article is intended to provide information and analysis, but any interpretation that suggests I think the transaction is good, or not good, would be incorrect.  I strongly believe that it is the residents of Guelph whose opinion matters.  My opinion – even if I had one – does not.

Claim #1:  A merger between Guelph Hydro and Alectra is better for Guelph residents in the long term than Guelph Hydro remaining a standalone utility.

This claim is likely to be correct.

However, it is also highly problematic, because this comparison asks the wrong question.

Guelph Hydro as a standalone utility is probably not a viable long-term option.  As the electricity distribution sector expands and becomes more complex, smaller distributors will have a hard time keeping up.  Further, they will have a hard time recruiting the best people, which will put them even more behind the curve. In these respects, the discussion of “Utility 2.0” in the report and attachments is largely accurate.  We are entering a period of change.

Guelph Hydro is big enough to be a very good utility today.  As expectations on, and challenges facing, distributors increase in the next decade or so, Guelph Hydro will probably be at a disadvantage unless it increases in size through merger or acquisition.

This means that comparing any merger proposal to the standalone option starts out stacked in favour of the merger.  Size is going to matter.  Standalone is effectively a straw man.  It is not going to happen.

The fair comparison would be a merger with Alectra vs. a merger with Cambridge or Kitchener or Waterloo or Milton or Halton Hills or Oakville or Burlington, or even several of them.  The problem is that the residents of Guelph don’t know whether those possibilities were considered and, if so, what stood in the way of reaching agreement on any of those potential merger directions.

Without that information, it is impossible to know whether the Alectra merger is better than other  viable alternatives.  The public doesn’t know what other alternatives were available, and/or considered.  (It’s a secret.  Largely for legitimate reasons, but it’s still a secret.)

The only comparison given is to an option that is not viable.  Take this deal, or die.  That is not really useful.

Claim #2:  “Guelph Hydro will pay the City a special dividend of $18.5 million immediately prior to closing, without adversely affecting its regular annual dividend.”

The implication is that this is a benefit from the transaction.  It is not.

The “special dividend” has to be paid to adjust the debt equity ratio of Guelph Hydro to roughly 60/40, the standard for Ontario distributors.  Guelph Hydro is currently managed conservatively, and so is underleveraged.  It doesn’t need a merger to pay $18.5 million out to the City, thus increasing Guelph Hydro debt and decreasing equity.  It could do that today.  The effect would in all respects be exactly the same.

It is called a dividend only because that is the legal form that is used to effect the change.  It is not like a normal annual share of profits.  It is a catch up of prior year profits that have been left in the company and accumulated as equity.  It is not coming from Alectra.  It is coming from Guelph Hydro’ cash on hand, which at the end of 2016 was $22 million.

Where the analysis by the advisors says “Guelph is better off financially under a merger with Alectra  than on a standalone basis with ~$29 in additional cash through closing adjustments and dividends”, that is just bad math.  The $18.5 million dividend is not an improvement in the City’s financial position, and the $10.1 million in extra future dividends (see below) is speculative at best.

The City is not better off initially under this transaction.  That is just not correct.

Claim #3:  “Dividends are projected to exceed dividends under the “maintain full ownership” option by $10.1 million.”

It is not possible to confirm this.

Past dividends by Guelph Hydro to the City have been $3 million per year, and there is no reason to think that would end.  Based on current estimates of Alectra combined income, a 4.63% ownership by Guelph, and 60% payout, dividends look to be about $2.2 million per year to Guelph in the short run.

Without the backup calculations for the $10.1 million figure, it is not really possible to get to anything like that on the basis of public information.

Claim #4:  “GMHI will receive one permanent seat on Alectra’s board, and will have the right to appoint an independent director.”

This is correct, but it is important to understand what it means.  It is one, not two.

Guelph will appoint one member on the 13-member Alectra board.  It cannot be a councillor or the Mayor.  It must be an independent, and it is one person.

Further, it is important to note that the Alectra board doesn’t have the same close oversight of management as is currently the case with the Guelph Hydro board.  For example, Alectra is right now before the Ontario Energy Board seeking a 2018 rate increase of 1.3% to 4.2%, depending on rate class.  That request was not approved by the Alectra board.  That decision – what rates to request – has been delegated to Alectra management.

There is no information on whether the executive management team of Alectra will include anyone from Guelph.  I suspect it will not.

Claim #5:  “There are important restrictions on transferring shares, and therefore indirectly on privatization, in the USA.”

Assuming the new USA (unanimous shareholders’ agreement) is substantially the same as the existing one, this statement is correct.  Any significant minority of shareholders can block or slow down any process of privatization of Alectra.  (Some of the details of this agreement remain confidential, even today, but for good reasons.)

It is also true that some of the municipalities that own shares of Alectra are currently opposed to selling shares to the private sector.  Alectra has a small percentage of shares already held by an investment bank, for the OMERS pension plan, and some shareholders don’t want that non-municipal ownership increased.

There will, however, be strong pressure to privatize or partially privatize in order to monetize the value of the shares of Alectra.  At some point, high priced offers will be made by companies like Enbridge, and EPCOR, and others.  It is not reasonable to expect that Alectra – or any other distributor, merged or standalone – will remain municipally-controlled forever.

Claim #6:  “Rate increases are projected to be more moderate than they would be under the “maintain full ownership” scenario.”

This is probably not true.

As I have noted in my previous article, Guelph Hydro has a better record of controlling rate increases than Alectra does, and that goes back many years.

That is likely to continue into the future.  In their merger application, Alectra filed a forecast showing expected rate increases over the ten year “sitout” period of an average 1.74% per year (Exhibit JTC1.3 in that proceeding, for those keeping score).  That included a first year increase of 2.79%.

Alectra’s actual application for their first year rate increase is now in, and it is very close to that, an average of 2.84% for the three general service classes (residential, small business, and commercial/industrial).  Some of this is based on a predetermined formula which they can’t change, and the rest is extra money they have requested for additional spending they want approved. These new rates are not yet approved, but Alectra is pressing hard.

(I have excluded Horizon, because they are required to reduce their rates in 2018 due to an agreement reached with customers in 2014).

Guelph Hydro has also applied for 2018 rates, using the same formula.  Their average distribution rate increase will be 0.23%.  The reason is that, while they used the same formula as Alectra, they didn’t ask for any extra money.  Guelph Hydro has historically been able to live within its regular budget, without extras, and still make a good profit.

Alectra has made clear that they expect to seek extra money for additional spending each and every year during their ten year sitout period.  In total, they forecast that they will want approval for $500 million or so of incremental capital spending during that period, although that will change as circumstances dictate.

They don’t actually need the money, because they will have more than enough from the savings arising out of their merger.  Under the rules, though, they can keep the merger savings, and ask for extra rate increases to spend more as well.  There is no reason to think their tactics will change after bringing Guelph into the fold.

The graph at page 25 of the advisors’ report, which shows lower distribution revenue per customer under the merger scenario, appears to be based on inappropriate assumptions.  The basis of those assumptions has not been made public.  Where in that report at page 28 the advisors say Guelph customers can expect “Rate Increases Below Inflation”, that statement is inconsistent with the evidence of Alectra in their own merger application.

It is therefore more likely that rate increases will be higher under a merged utility than under a standalone utility, but it is really difficult to forecast the amounts with any level of accuracy.

Claim #7:  “A Southwest Operations Centre will be preserved at the location of Guelph Hydro’s current offices with a minimum commitment of 10 years.”

This is almost certainly true.

The standard approach to mergers in Ontario, which Alectra uses well, is to promise a strong presence in the acquired area for a period of time.  This reduces the feeling that the local community will be served by outsiders.  This approach has been central to every past merger application I’ve seen.

On the other hand, in the longer term it will not make sense to keep a major operations centre in every Alectra community.  Some will have to eventually lose their local operations for Alectra to operate efficiently.  Ask the City of Markham, one of the original merger partners that formed Powerstream, how many Alectra employees are still based there.

Claim #8:  “Guelph Hydro employs about 130 people. About 70 of those existing positions have been identified as needing to remain in Guelph. About half of the remaining positions would be offered relocation opportunities starting in 2019, with the majority of moves happening between 2020 and 2022. The other positions are expected to be addressed through attrition, voluntary retirement, or voluntary separation wherever possible.”

These ratios are consistent with Alectra’s past approach, and so are likely to be correct.

Of the current 130 employees, 70 (mostly tool in hand employees) will remain in Guelph, which minimizes travel time to job sites.  30 others will be offered jobs within Alectra, but only if they are willing to work in Hamilton or Mississauga or Vaughan.  The other 30 will be without a job.

Claim #9:  “Alectra will establish the GRE&T Centre in Guelph as a platform for supporting transformation in the electricity industry by accelerating integrated energy solutions. The GRE&T Centre will have eight to ten new full-time positions, with $5 million of capital spending in the first three to five years of the merger, and $3 million in annual operating spending within two years of the merger.”

This is true, but it may look better than it actually is.

First, it is a relatively small commitment, $3 million a year for a utility with +$600 million in annual revenue, i.e. under ½ of 1%.

Second, and perhaps more important, the former Powerstream Head Office was, in the Alectra merger, renamed the “Sustainability and Innovation Office”.  This large (92,000 square feet) office building near Highway 400 in Vaughan, which can house 270 people, will clearly be the centre for most sustainability and innovation activities.  Decision-making, of course, will be centralized in the Alectra Corporate Office in Mississauga, which is also a large (79,000 square feet) office building that can house 200 people or more.

There is little doubt that some initiatives will be carried out in Guelph, if for no other reason than Alectra promised that.  If Guelph thinks that it will be the centre of a major hub of innovation and other green activity, that may be wishful thinking.  The GRE&T Centre (“great”, get it?) has a very pretty (green) business plan, but its substance may be substantially less than the hype suggests.

Claim #10:  “Alectra will meet or exceed service standards and reliability for electricity distribution customers in Guelph Hydro’s current service territory.

This is also true.

As noted in my previous article, both Alectra and Guelph Hydro are well run utilities.  On both reliability and customer service, Guelph has generally been better, but both are good.  For example, Guelph currently gets about 200 phone calls on the average day, and about 5 of those have to make a second or third call to get their problem resolved.  At the Alectra service levels, about 35 would have to make that second or third call.

Claim #11:  Guelph customers will share in the $32.3 million OM&A and capital savings from the merger, as well as in the $426 million in savings from the original Alectra merger. (See Att-2, page 5).

This does not appear to be true.

Under the rules of the Ontario Energy Board, all savings for the “sitout” period go only to the shareholders.  That includes the savings for the original Alectra sitout period.  None of these savings go to the customers.  There does not appear to be any basis for saying that they will, and the report is almost certainly wrong on this point.

Claim #12:  From 2026-2041, customers will receive $73.7 million in savings from the merger. (See Att-2, p. 5).

This may or may not be true.

First, it is too far in the future to project, and second, the basis of the calculation has not been made public.

In the past, the customers of the Powerstream merger partners do not appear to have benefitted from the mergers, since their average rate increases were higher than those of Guelph, which did not have any mergers.  Horizon customers, on the other hand, did apparently benefit from the merger between Hamilton and St. Catharines.

Thus, the jury is out on this one.

Claim #13:  GMHI will benefit from greater growth in the value of its investment due to the scale of Alectra and its focus leading industry change.

There is no reason to believe this is true.

It is true that, compared to standalone, growth in value is likely to be better with a merged entity.  There is no evidence to suggest that merger with Alectra, as opposed to merger with someone else, will produce better growth in value.  Generally speaking, growth in value of a wires company is driven by demographics.  Some of Alectra has reached lower rates of customer and business growth, while Guelph and other municipalities that are not part of Alectra can look forward to quite high future growth.  Which will grow more:  Hamilton and Mississauga, or Guelph and Milton?

Whether Alectra is “leading industry change” is a matter of opinion.  Alectra is certainly active in the corridors of power, and has some influence.  Many others in the Guelph-centred region are also active and influential.  It would not be fair to say Alectra is the “leader”.  It might be fairer to say they are an important player.

Claim #14:  “All customers of a consolidated utility are expected to benefit from lower distribution rates than what they would have to pay as customers of their respective utilities.”

This is probably not true.

As I demonstrated in my previous piece, at the time rates are harmonized, the Guelph small business and commercial/industrial customers are likely to experience high rate increases, since their rates are quite low right now.  Where Alectra says that it will not harmonize rates if this is the impact, that is not consistent with their past history.

Because we can’t see the agreements, we don’t know if the City of Guelph has any veto over large increases to customers in Guelph.

Claim #15:  Guelph customers will experience a lengthy list of customer service and other improvements, shown at page 29-30 of Att-2, the advisors report.

This seems to be somewhat oversold.

When you go down the list of supposed benefits from the merged utility, it would appear that virtually all of them are already in place at Guelph Hydro.  It is not clear where actual improvements are being proposed.  Are there any?

As is so often the case when companies that have a business goal are trying to get the public onside, a picture is painted that is the prettiest version of the transaction.  Claims are made, rosy forecasts are delivered as if factual, small things are treated as big, and any details that could undermine the narrative are either not made public, or glossed over.

That appears to be the case here.  This may be a good deal.  There are arguments on both sides.  However, it is important that those assessing the situation start with the actual facts, not hopes and dreams and maybes.

Or sales pitches.

  • Jay Shepherd, December 9, 2017

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