Tag Archives: Guelph Hydro

An Open Letter to Guelph Hydro Customers

Note: The following is an unbiased assessment of the merger proposal between Guelph Hydro and Alectra Inc. It is written by Energy Lawyer Jay Shepherd whose experience and expertise of energy operations in Ontario, gives Guelph’s 55,000 Hydro customers a true picture of what’s at stake. This is a lengthy overview but the evidence is there that this proposal may not be right for Guelph. Guelphspeaks.ca, feels that it is important for all citizens to familiarize themselves with the effect to them if city council approves the proposal December 13, 2017. The piece has been lighty edited for emphasis. GB

Posted on November 5, 2017

by Jay Shepherd

Alectra Utilities and Guelph Hydro are discussing a merger, the headlines say.

Already there is a flurry of information available to local Guelph residents about those discussions, and the many benefits of joining the Alectra fold.  For the most part, that information is carefully crafted by Alectra, or other merger proponents, to show the transaction and its aftermath in a positive light.

I don’t have a view one way or another on the proposed merger.  Although in my day job (energy regulation lawyer representing customers) I have learned a great deal about both utilities, I think it’s premature to express an opinion until the details of the actual deal are known.  Even then, it is the opinion of Guelph residents that really matters. Mine, not so much.

I do, though, have a view about the information that is provided to local residents so that they can form their own opinion.  Guelph residents should have all the facts, not just a sales pitch.

To that end, this article tries to provide a dispassionate take on some of the issues that could inform local opinion.

What’s at stake?

The customer-related benefits of a merger between Guelph Hydro and Alectra             Utilities will generally be characterized as follows:

  1. Lower Rates.  There will be scale and other economies as a result of the merger that will translate into lower rates for customers.
  2. Better Service.  A larger organization will be better run, with the result that reliability, customer service, and other customer priorities will improve.
  3. It’s Inevitable.  Guelph Hydro has to merge with someone, or it will be unable to meet future regulatory requirements for local utilities.  Alectra is their natural partner.

All three benefits seem intuitive, and are cited in most utility mergers, but in each case the devil is actually in the details.  None is actually true in every merger, and it is not obvious that they will be true for Guelph Hydro customers.

Lower Rates

There are really three questions associated with the “lower rates” argument:

  • Will there be cost efficiencies?
  • When will customers get the benefit of cost efficiencies?
  • Will the cost efficiencies actually translate into lower rates for all customers?

Cost efficiencies:

The most useful data is the history of rate increases for Guelph and for the Alectra predecessors.  Two of those Alectra companies, Powerstream and Horizon, were formed from mergers.  Powerstream is made up of five companies, formed in three merger transactions.  Horizon is made up of two companies.

If you use Guelph Hydro as the baseline, residential annual distribution bills went up 20.6% from 2005 (the first year we have comparable actual rates) to 2018 (current proposed rate in their rate application).  That is an annual rate of 1.57%, or just under the rate of inflation.

Guelph Hydro small business and commercial/industrial customers did much better, showing 12-year decreases of 16.5% and 5.9% respectively.

For the Horizon residential customers, they did better than Guelph Hydro.  Customers in St. Catharines had increases of 15.6% over that period, which works out to 1.21% annually.  Customers in Hamilton had increases of 9.8% over that period – less than 1% per year.

By contrast, the Horizon small business and commercial/industrial customer did poorly.  Small business customers from both merged areas had increases of over 60%.  Commercial/industrial customers had increases of 84% in Hamilton, and 102% in St. Catharines.

The Powerstream residential customers did not fare well.  Customers in Richmond Hill and Aurora did fine, at less than 1% per year.  Customers in Barrie ended up at about 1.09% per year.  Customers in Markham, though, have done worse than Guelph – 22.8%, or 1.72% per year.   And for those residential customers in Vaughan, their rates have increased more than 49%, a rate of 3.39% per year.

By contrast, the Vaughan small business and commercial/industrial customers did a little better, with increases of 22.5% and 27.4%, but still much worse than Guelph Hydro, or inflation.  Richmond Hill and Aurora small business and commercial/industrial customers had increases of less than 1% per year, while Markham customers had increases of more than 40%, and Barrie had 33% for small business, and just about inflation for commercial/industrial.

For those who like spreadsheets (like I do), here is the table of the results:

Distribution Rate Increases 2005-2018
Utility Rate Zone Residential Small Business Comm/Ind
Guelph All 20.56% -16.51% -5.94%
Horizon Hamilton 9.78% 60.04% 83.95%
  St. Catharines 15.64% 61.95% 102.29%
Enersource All 34.90% 21.58% 8.58%
Powerstream Richmond Hill 7.58% 9.54% -1.18%
  Vaughan 49.01% 22.50% 27.44%
  Markham 22.77% 41.36% 43.81%
  Barrie 14.03% 33.27% 20.80%
  Aurora 8.70% 7.57% 6.38%
Brampton All 12.70% -0.90% 13.61%

 

The various differences are a function of initial rate levels (see below).  What the overall figures show is that, for some of the merged residential customers in the two Alectra companies with a merger history, there have been some reductions in rates, but they have not been substantial.  On a weighted average basis, Powerstream and Horizon residential customers have rates today that are $6 a month lower than they would have been on a standalone basis (that is, compared to Guelph).  That is the twelve-year impact of the mergers for those customers.  For small business and commercial/industrial customers, on the other hand, they had net increases in rates as a result of the merger activity.

Will this history translate into rate savings for Guelph Hydro customers?  It may, but Guelph will only be about 5% of the merged company.  Its impact on costs will therefore be muted.  Even if there are substantial operational cost savings, only 5% of those savings will ultimately benefit some of the Guelph customers.  The other 95% will go to the rest of the Alectra customers.

Timing of customer benefit. 

The rules of the utility merger game have recently changed.  In the past, merged distributors implemented a five year rate freeze, providing immediate benefits for customers while the cost efficiencies were being realized.  The Powerstream and Horizon transactions all happened under that rule.

The new rule, starting in 2016, is that any savings from a merger go to the shareholders of the merging companies for the first ten years.  The customers get their regular rate increases, and the merged company can ask for more, even if it doesn’t really need the money.  (Alectra expects to get extra shareholder benefits of more than $425 million over the ten years from their recent merger, over and above normal profit levels.)

Alectra has already announced that they plan to seek rate increases in excess of inflation for the next ten years.  Will that apply to Guelph customers?  They haven’t said.

If Alectra seeks rate increases in excess of inflation for Guelph customers as well, that would make them higher than Guelph Hydro rate increases have been for the last decade.  It is therefore not clear that, during this upcoming ten-year period, Guelph rates after an Alectra merger will be better than had Guelph Hydro remained independent.

Will All Customers Actually Benefit?  If there are cost efficiencies, and if customers have the patience to wait the ten years, will all customers benefit.  The answer is, some will and some will not.  The main driver of that result will be the rates for customers today.

Start with residential.  The average residential distribution rates for Alectra customers are 9.9% lower than Guelph Hydro customers.  Each month a Guelph Hydro customer pays about $2.86 more than an Alectra customer with the same electricity use.  (Guelph Hydro customers actually use about 11% less electricity, so their distribution bills are about the same, but this will matter less and less over time.)

Eventually, the residential rates will have to be harmonized.  Given the small size of Guelph relative to the rest of Alectra, the average residential customer could see a reduction of up to $2.72 per month in ten years, when their rates are harmonized with other Alectra customers.

As noted above, this may be wholly or partially offset by higher spending in the meantime but it is not really possible to predict that.  What would Guelph Hydro spend in the next ten years on a standalone basis?  We have no way of knowing.

If residential customers may eventually get a small benefit after ten years, the same is not true of commercial/industrial and small business customers.

A typical commercial or industrial customer in Guelph currently pays on average about $160 a month less than an equivalent customer in Alectra (despite the substantial past rate increases for these customers in the Alectra areas).  This could be a factory, or a small plaza, or an office building, or – close to my heart – a high school.  Sooner or later, their rates have to be harmonized with the Alectra levels, and they will get an extra increase of $152 per month, or just over $1800 per year.  This is on top of all the normal increases for the next ten years.

Small business customers are in the worst position.  Guelph small businesses currently pay about 39% less than Alectra small businesses for electricity distribution.  That difference, $23.13 per month, will have to be corrected at the end of year ten.  As with commercial/industrial customers, they will bear the hit of rate harmonization, to the tune of a $264 per year permanent upward adjustment.

The simple answer, therefore, is that even if there are cost efficiencies, the proportion of those cost efficiencies that benefit Guelph Hydro, if any, will not benefit everyone.  Residential customers may have a small benefit.  Small business, commercial and industrial customers likely will not.

Rate Conclusion: Will there be lower rates for Guelph Hydro customers?  There is no clear answer.  What we do know, based on past history and current forecasts, is that any rate reductions from the merger will be limited, deferred, and available only to some customers.

Better Service

The prospect of better service for Guelph Hydro customers as a result of the merger is less complicated than the rate issue.  The Ontario Energy Board publishes scorecards for every electricity distributor, showing how they are doing on the key measurements of things important to customers, such as reliability and service quality.

We can compare scorecards.  It’s easy.  2016 Scorecards have recently been published.

Reliability.  There are two reliability metrics:  how often is the average customer interrupted (frequency), and how many minutes each year are you without power (duration)?

On frequency, Alectra customers average 1.05 interruptions per year.  This mainly measures the physical quality of the system.  Guelph Hydro customers are slightly worse, at an average of 1.34 interruptions per year.  The industry average is 1.00, so both could improve, but Guelph needs more improvement.  Guelph ranks 48th out of 65 electricity distributors in the province; Alectra ranks 37th .

The results are the opposite when it comes to duration.  This mainly measures repair response times.  Alectra customers average 47.4 minutes each year without power.  Guelph Hydro customers average 42.6 minutes per year.   The industry average is 73.2 minutes per year, so both are very good performers, but Guelph is slightly better.  In rankings, Guelph is 25th and Alectra is 28th.

Customer Service: 

On customer service, there are five metrics:  Connecting new customers, on time appointments, answering phone calls, accuracy of bills, and resolving issues with customers on the first try (called “first contact resolution”)

On connecting new customers, both Alectra and Guelph Hydro do that very well:  99.6% and 99.5% of the time, respectively, they connect customers when they say they will.  Compare that to 98.3%, which is the overall industry average.

Similarly, both are good at showing up for appointments:  99.58% for Alectra, and 99.7% for Guelph Hydro.  Once again, both above the 98.99% level for the industry.

When it comes to their call centres, though, Guelph does quite a bit better, answering 86.7% of customer phone calls within a reasonable time.  This compares to the Alectra average of 80.95%.    The industry average is 84.67%.

The difference between their telephone accessibility performance is fairly large.  To give you an idea of the impact, Guelph Hydro handles about 45,000 telephone calls per year.  At the lower Alectra performance level for call answering, an incremental 2600 customer calls each year in Guelph would not get answered within a reasonable time, i.e. about ten every business day.

Both utilities have excellent billing accuracy:  99.95% for Guelph, and 99.58% for Alectra.  The industry average is 99.41%.

Finally, on first contact resolution, Guelph Hydro has one of the best records in the province, 99.98%.  Of their 45,000 calls each year, all but ten or less have their problem resolved in that call.   The Alectra first contact resolution average is only 82.27%, which would translate in Guelph into almost 8,000 customers each year having to call back or wait for further clarification on their query.

Conclusion on “Better Service.”

The scorecard comparison, therefore, does not indicate that Alectra provides better service than Guelph Hydro.  Both provide generally excellent service, but if there’s an edge, it goes to Guelph Hydro.  The evidence doesn’t indicate that a merger will result in better service for Guelph Hydro customers.

Guelph Hydro is generally known to be a well-run utility.  It serves its customers well, it maintains and operates its system to high standards, and it delivers a very good return to its shareholder, the City of Guelph.  In fact, on that scorecard measure, Guelph Hydro does much better than Alectra.  Guelph Hydro’s most recent profit level was 10.58%; Alectra’s profit averaged 7.79%.

It’s Inevitable

Sooner or later, Guelph Hydro will probably become part of a larger electricity distributor.  It could be a small addition to a much larger entity, like Alectra or Hydro One.  It could be a main partner in a merger of similar-sized utilities.

It is not likely to stay independent forever.  The pressure in the industry is towards consolidation.

On the other hand, Guelph Hydro is not in a position where it must move quickly.  The healthy profit level allows dividends of $3 million per year to the City (at the current standard level of 50% of earnings).  By contrast, at the Alectra profit level the near term dividends would be more like $2.2 million, so there is not likely to be an immediate benefit to the City from the merger.  Of course, in the longer term growth may be greater in the other areas of Alectra, compared to Guelph, creating additional opportunities for the City to profit through growing dividends.

It is also not self-evident that Alectra is the “natural suitor” for Guelph Hydro.  The previous approach to Guelph Hydro from Horizon (before it became part of Alectra) had the advantage that there was potential for geographic consolidation over time of the area in between them.  Some of that is still the case, but the centre of gravity (and focus) of Alectra is still more north of Toronto, not west.

The more logical consolidation for Guelph has always been Cambridge, Kitchener, Waterloo, Milton, Halton Hills and Guelph.  The problem with that potential merger has for years been local personalities and demands by individual cities to have control.  While that situation may not last forever, past attempts at partnership, even on smaller aspects of the business, have not always been successful.

The alternative “natural” merger for Guelph is Burlington, Oakville, Milton, Halton Hills and Guelph.  Personalities may impede that as well, but it is still a good fit from a geographic and demographic point of view.

So, is a merger with someone inevitable?  Probably the answer is yes.  Is a merger with Alectra inevitable?  The fair answer to that is probably no.

Conclusion

Guelph residents are going to hear a lot of things over the coming weeks about the proposed merger between Guelph Hydro and Alectra.  There will be pros and cons to the deal, once the terms have been finalized.

When Guelph residents are asked their opinion – as they should be – they will need to know all the facts.  This summary is intended to provide some of those facts.

  • Jay Shepherd, November 5, 2017

Note – If you feel that this merger proposal between Guelph Hydro and Alectea Utilities is not for Guelph and its citizens, send your name, address and Ward to gerrybaker76@gmail.com and your voice will be heard. You’ll be joining many citizens who have already signed the petition.

 

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We are being fed pablum and baloney concerning the Guelph Hydro proposed merger with Alectra Inc.

By Gerry Barker

November 13, 2017

The pablum is a metaphor for our innocence and naïveté. Similarly, the baloney is the shallow approach to take over Guelph Hydro leaving out the pertinent details that justifies the Alectra Inc. merger proposal.

Confused? You are not alone.

In last Tuesday’s weekly paper, guest columnist Bob Bell, (no kin to Coun. Bob Bell), identifies himself as vice-chair of the Guelph Hydro Electric Systems Inc. In it he stated the reasons why this merger with Alectra is a win-win for the 55,000 hydro customers.

In reality, this merger proposal is more like a Chinese fortune cookie. You never know what the message is inside. That folks, is what Mr. Bell, a member of the Strategic and Options Committee (SOC), is selling. Here are some samples:

He says the SOC was “tasked by Guelph City Council” to review the options for the future of Guelph Hydro. This committee was formed in October 2016 and its mandate was to consider the sale or merger of the city-owned public utility.

Here is the fortune cookie example again. Just four months on the job, the SOC membership changed leaving only CAO Derrick Thomson and Hydro vice-chair, Bob Bell as originals. In February, a few days after the incorporation of Alectra Inc. January 31, 2017, the decision was made by the revamped SOC, to take the selling of Guelph Hydro off the table and concentrate on just merging the system.

In my opinion, this proposal was already in the oven and citizens had no information or confirmation of what the SOC and Alectra were cooking. And right now we still don’t know the details of this deal.

Here’s flashback for you: It’s June 2013 and Mayor Karen Farbridge, as chair of Guelph Municipal Holdings Inc. (GMHI), releases the 2012 annual report. In it she says that a priority of GMHI was to research the potential of merging Guelph Hydro with another municipal utility. That year GMHI lost $2 million, a figure that was not included at the time but learned later.

Well, the cookie crumbled in 2014 when Cam Guthrie defeated the mayor. Since then, the financial and managerial disaster of GMHI under the leadership of Ms. Farbridge, has taken three years to unravel, well almost.

Trying to put the GMHI Humpty-Dumpty together again

A key point pressing the GMHI wrecking crew charged with putting the pieces back together, was about the money spent by the Guelph Hydro subsidiary company, Envida Community Energy. Envida was the construction company charged with building the GMHI solar panels on public buildings, District Energy pumps and the underground thermal energy system installations. The resulting debt was transferred back to Guelph Hydro that declared a $93 million long-term debt on its books in 2016.

Keep in mind that these funds are all coming out of our pockets.

The consolidated audit of GMHI by the accounting firm KPMG confirmed this debt borrowed by GMHI included two debentures totaling $93 million but also the evaporation of $63 million in shareholder equity in GMHI.

Yep! It all comes out of our pockets.

It remains possibly the worse financial meltdown in the city’s history.

Now, the mayor is pushing to join our Hydro distribution system with an organization of dubious credibility and no financial track record.

Guelph Speaks has learned that even by giving Alectra its $228.4 million in installed transmission equipment, apparently Alectra will not assume that $93 million debt.

As both parties, Alectra and Guelph city council, munch through the fortune cookies, Chairman Bob Bell spins a yarn of possibilities, promises and assumptions. Comparing this proposal is nothing but a sales pitch, not fact-based for responsible consideration.

Note: On Thursday November 16, guelphspeaks will publish the 2,600 word neutral dissection of the proposed Alectra merger. Energy lawyer Jay Shepherd, of Toronto, writes an open letter to Guelph residents. He explains details of the problems facing mergers of Ontario’s municipally-owned power distribution corporations.

It’s a factual assessment that should clarify the unknown facts about this merger deal. His conclusion is interesting.

Mr. Bell writes that Alectra will bring “reliable services maintaining local jobs, investing in the community and focusing on environmental sustainability as top priorities.”

But isn’t that what Guelph Hydro does now?

Then the Bell guest column goes on to say: ”That after careful review of all options, “the committee recommended to Guelph city council that Guelph Hydro merge with Alectra.”

That’s it? Are we out of cookies?

When the people’s business is done behind closed doors

The first thing we have to remember is that the SOC and city council meetings are conducted in closed-session. What is preventing city council or SOC to openly reveal their “careful review” of all options for supporting this merger?

Mr. Bell claims that the city will still retain ownership of Guelph Hydro. “Under the proposal, the City of Guelph will join 15 other Ontario municipalities owning a share of the electric utility (Alectra). This means that our city council will continue to have an ownership stake and receive dividends each year. Given that the City of Guelph will own a share of a larger utility, these annual returns are expected to increase.”

That sounds like another “expected” promise that is as hollow as the entire article as published.

The Alectra team is throwing the book at citizens using a fancy website, expensive brochure and phone survey. The campaign’s so-called public information sessions across the city carefully set up to not allow questions to be asked by the principals. The entire exercise to persuade citizen, read that the 13 members of council, who represent the people is a mockery and insult to the populace.

The cost that we are paying for this give away to Alectra has already been established by the city to be $2.36 million. Just to be sure of this, we are paying the promotional costs of this attempt to take-over Guelph Hydro.

Does this make any sense to you?

The Alectra campaign leaves out the thousands of residents who are not social media savvy but are dependent on electricity. This includes the elderly, disabled, the working poor and those confined in retirement and nursing homes.

Look at it this way: Guelph Hydro sends out 55,000 bills a month chiefly through snail mail. Here is an inexpensive way to inform all the customers of the details of this proposal. Nope. Instead, this Alectra sales campaign is focused on the electronic media.

The response was that the dividends that Guelph Hydro pays the city annually would finance the Alectra pitch. But didn’t that money come from the citizens who pay their hydro bill?

Alectra says the board of directors will each receive $25,000 plus $2,500 for each board meeting they attend. The company says that the directors “honourarium” is expected to increase to $35,000.

That sounds like the good jobs claim start   a at the top of the organization.

It hurts me when I laugh at irrational behaviour

The Baloney Scale 1: If city council approves the proposal, Guelph will lose control of Guelph Hydro. So at this stage, just 27 days left, citizens remain in the dark because of the secrecy associated with the negotiations. There is no recourse to exit this merger once council approves it.

Baloney Scale 2:

Guelph Hydro’s entry fee into the Alectra consortium is transferring all its assets to Alectra with no compensation. Oh! There is one caveat. Alectra will not assume Guelph Hydro’s long-term debt of $93 million.

In summary, we give away our Guelph Hydro system to Alectra and in return receive an undisclosed interest in a large corporation with a short-term financial record?

Who is negotiating this deal, Bernie Madoff?

I think I’ll toss my cookies if this cock-eyed deal is approved by city council.

 

Please Note: There is a group of concerned citizens who oppose this merger. Any resident of Guelph, 18 years or older can sign the petition to be presented to Council before the December 13 meeting to approve or reject the merger. Please send your name, address and ward in which you reside to gerrybarker76@gmail.com. Your name will be added to the petition. Volunteers willing to participate in collecting names are most welcome. As the project develops read guelphspeaks.ca for further information.

Never underestimate the power of the people.

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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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Who owns Alectra and why is it in such a hurry to scoop up Guelph Hydro??

By Gerry Barker

November 2, 2017

Corporate documents obtained from the application to invest in Alectra Inc. have been revealed through the Federal government’s Sedar site containing the information of the investors. Five of the six provinces listed in the Alectra Sedar submission are outside Ontario.

The information accompanying the application states that Alectra will become the second largest municipally owned electric distribution system in North America.

Heady stuff. Already Alectra claims it has 1 million customers in Ontario with 44 “investors or municipally owned local power distributions utilities.”

Now this is a private corporation that apparently has attracted investors, controlling power distributions In Ontario. In Guelph’s case, that’s our city council representing the 55,000 Guelph Hydro customers.

Here’s a look into some of the Alectra corporate organizations contained in its May 2017 Sedar report. It appears there is provision for distribution of profits to security holders.

The first figure is the number of participants, the second is the amount invested in Alectra Inc. according to its Sedar applications:

Ontario (44), $455,200,000

British Columbia (1), $100,000,000

Alberta (3), 8,800,000

Manitoba (3), $50,000,000

New Brunswick (1), $7,400,0004

Quebec (9), $53,600,000

That totals, $670 million. The Sedar application states that the number of securities is 675,000 each valued at $1,000.

Fat cat Alectra has eyes on mighty mouse Guelph Hydro

What do all these investors know that has been kept from us?

Apparently the merger details are still being negotiated including Guelph’s share of the profits earned by Alectra Inc. So while there is a memorandum of agreement, the devil is in the details

Is the Guthrie administration trying to force us into a deal with a private corporation with shareholders seeking a profit from their investments? Particularly, are corporate profits generated on the backs of Guelph power customers to benefit out of province Alectra Inc. investors?

This total investment for a company that has been in business for less than ten months is breathtaking in terms of organization, combining cultures of the local Power Distribution systems including Markham, Vaughan, Mississauga, Brampton, Barrie, Hamilton, and St. Catharines. You remember the last two-called Horizon that tried to persuade Guelph to join them in 2008. That didn’t work for some of the same reasons Alectra is selling today.

As of today, there are 41 days left before Guelph city council absorbs the benefits of this merger to the owners of Guelph Hydro. These details are still being negotiated and council faces a deadline on Dec. 13.

The question remains: What’s in this proposal that will benefit the citizens and their city and guarantee safe, reliable distribution of power, just like we have enjoyed for the past 100 years?

Alectra does not answer that question. We say what’s in it for Guelph citizens?

Here are some facts about Alectra that you should know:

In my opinion, if I were on council I would be wary of a group that has been in business for less than a year. The first clue is the close relationship between Powerstream, power distributors for Mississauga and Barrie. These Powerstream executives formed Alectra Utilities. The holding company is Alectra Inc. This corporation when incorporating this year already had a number of power distribution utilities in house in B.C., Alberta, Manitoba. Quebec and New Brunswick.

Ontario has the largest number of what Alectra describes as Investors, with 44 and a capitalization of $455,200,000.

The Alectra Inc. board of directors has 13 members of who five are mayors, Mississauga, Vaughan, Markham, Barrie, Hamilton (aka Horizon includes St. Catharines). The other eight are a carefully chosen directors composed of lawyers, accountants, and executives etc.

It is notable that none of the non-Ontario provincial investors has representation on the Alectra Inc. board. Alectra Inc lists them all on the Sedar application.

Another caution is the Alectra statement that claims it will have the second largest municipally owned power Distribution Company in North America.

Alectra has stated that it now has one million customers in Ontario.

I chuckle when I read this. I’m reminded of that great Naked Gun line when the Detective (Leslie Neilson) charged into this shop where a buxom young woman exclaimed: “Is this a bust?” Neilson replied: “Very impressive.”

It seems premature to agree to a merger with Alectra until at least, we see a first year audited financial statement. It seems to me that Alectra wants to close this deal before it reports its first year results. Particularly when the SOC told council last year that the investigation into merging Guelph Hydro would be complete in the spring of 2018.

Does this have anything to do with the October civic election next year?

Alectra has said it will be developing green power technology and if the deal goes through, will set up a tech hub in Guelph to work on this aspect of its promises.

Why does Alectra state that the technology of not only distributing power is rapidly advancing but that in-home/factory power storage systems will allow self-sufficiency of power to users. Collecting power during daylight and storing it overnight for use the next day.

What is the effect on Ontario’s overbuilt power generating capacity when customers generate and store their own power? Will this make the Guelph power distribution system eventually become redundant? Who picks up the tab in this eventuality? This is a situation that is at least 20 years away, if at all.

Bottom line: This is an over-hyped and irrational decision to end Guelph Hydro, as we know it. It’s like telling William Tell to miss splitting the apple on his son’s head. Okay, so political decisions are not just apples and oranges.

Fact, the technology for home power storage remains expensive with limited battery strength. For example, Tesla, the electric luxury car maker, sells a system that can store power collected from a solar array on the roof virtually taking the owner off the grid. The system must be installed by factory-trained Tesla technicians and costs in U.S. dollars some $18,000 for a basic system.

Perhaps, you might want to delay spending $25,00 C$ on stored Tesla power system in your garage until after Tesla solves its production problems with its new, low-priced model three electric car ($35K USD) a copy.

We learned this information when we visited Florida a couple of years ago. They don’t call it the Sunshine state for nothing so solar panels are producing power at an estimated 90 per cent efficiency rate. However, the northern part of the continent does not have the same amount of sunlight as the southern states so the efficiency is much lower, particularly in the winter months when the days are shorter. Especially when the days are cloudy and not sunny.

Guelph Hydro has detailed performance data on the public buildings in the city that have installed solar panels.

As electricity cannot be stored, the Liberal Government of Ontario has currently installed generating capacity of some 42,000 MW. The highest amount of power needed in the past ten years was 27,000 MW. As a result of poor planning, Ontario’s surplus power is sold at less than cost to neighbouring U.S. states or in some cases given away.

Power generation cannot be turned off with the flip of a switch. You cannot stop the Niagara River, or shut down a Nuclear reactor. It should be noted that 66 per cent of all power generating in Ontario is by only four nuclear energy reactors. One of which is usually down for maintenance and refurbishment.

To get rid of coal-fired generating plants, the former McGuinty government replaced the utility with turbine-wind power and solar panels using renewable energy. All this was built by private corporations who received guaranteed 20-year contracts that paid in most cases, 20 cents per KW hour. That’s about 13 cent greater than hydro and nuclear costs of generating power.

Power generated by wind and sun amounts to a paltry nine percent of all power generating sources and is the most expensive.

And you wonder why your hydropower costs are so high.

Included in the wind turbine deals located chiefly on farmland, the owners also were given bonuses in the form of lower power costs. A whole lot of sweetheart deals all around.

The Wynne Liberal government has pledged to reduce power costs by 25 per cent over five years. Part of the reduction is removal of the 13 per cent HST plus the new Carbon Tax.

The problem is that these reductions have the same effect of going deeper in debt to pay for the power rate reductions, The experts claim that by 2023 power rates will have to increase to pay for Wynne’s five year rate holiday. It appears to be a political move to achieve re-election next June. However, with the Premier’s personal approval rating at 20 per cent it will be a tough sell.

Again, we say: NO SALE

 

 

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History proves selling Guelph Hydro won’t solve the basic problems facing our city

By Gerry Barker

October 30, 2017

Our mayor, a man with perceived municipal fixes and promises, states that he voted against seven budgets over which he participated as a councillor and Mayor in the last three annual budgets. Perception is always accepted when the former administration fumbles multi-million cost overruns building the new city hall.’

In this case, the people voted with their feet and Ms. Farbridge was defeated. The defeat was exacerbated by the Larkin effect in convincing council to completely renovate the police headquarters building at a price tag of $34 million.

The original estimate by the Guelph Police Service Board was $13 million just seven months prior to council approving the former police Chief’s plan. Chief Larkin had already accepted a job as chief of the Waterloo Regional police service and morally had no skin in the game.

Instead the task of selling the new plan fell to former mayor Farbridge and her fellow councillor on the Guelph Police Services board, Leanne Piper. Council approved it in August just before all capital projects were frozen due to the upcoming civic election Oct. 27.

Former Chief Larkin publicly supported the Mayor in her re-election bid, breaking a basic rule of police officers not publicly expressing support for a political party or candidate in a civic election. The mayor was defeated anyway.

They’re breaking up that old gang of mine

But post-election, a group of Farbridge appointed senior managers who, without hesitation in November 21, 2014, after the defeat of the Farbridge universe, in the vacuum of political masters, reorganized the senior management staff. The group, headed by former Chief Administrative Officer (CAO), Ann Pappert, (resigned May 2016); current CAO Derrick Thomson, (resigned March 2016 and returned June 2016 as CAO); former DCAO Mark Amorosi, (dismissed February 2017); Director of Environmental Services, Janet Laird, (resigned November 2014); Chief Financial Officer Al Horsman, (resigned August 2015) Director of Operations, Derek McCaughan, (resigned November 2014); City Solicitor Donna Jacques, (resigned February 2017).

The senior staff re-organization promoted them a higher salary reflecting the new rank, as the scale of the newly named Deputy Chief Administrative Officers (DCAO) replacing the title, Executive Directors.

Two of the three senior managers of Emergency Services, Police Chief Larkin and Fire Chief Shawn Alexander resigned in 2014.

The city did not have a Chief Financial Officer from November 2014 until June 2017. Instead there were three general managers of finance and treasurer during that time, Katrina Power, Janice Sheehy and Tara Baker who coming off maternity leave is the current GM of finance and treasurer. During Ms. Baker’s absence, James Krauter was appointed interim GM of Finance.

And there were others including the firing of veteran Chief Building Inspector, Bruce Poole, who was rewarded by winning a $1 million lawsuit against the city for wrongful dismissal. The settlement was never revealed.

You don’t need an adding machine to figure this out

It all added up in a brief two years as chaos in high places. Most citizens were left in the dark about all this chaotic fallout that affected their daily lives. This was mostly ignored by the local media.

In my opinion, the seven councillors, who vote as a bloc, are overly protective of the senior staff and coupled with the high number of closed-session meetings conducted by council, the public is shut out, shunned and used whenever it is convenient.

It is a very serious culture of entitlement and arrogance that drives the great divide between council and the people they represent. Only we the people can change it and our opportunity comes next October.

Change not only occurred at the senior civil servant level, but also was completed before the newly elected Mayor had a chance to try out the seat in his office on December 1, 2014. It was slick and self-serving move before the new administration was officially in charge.

The question arises, was the incoming mayor and council advised of these major managerial changes and increases in pay? Did the incoming council agree to this before being sworn in?

What motivated the senior management drain?

So the new council approved a budget on March 2015 that reflected the agenda of the seven member progressive majority on council.

Newly elected Mike Salisbury initiated one of my favourite observations. He proposed taking unspent 2014 money for expanding bike lanes on Woodlawn Avenue, adding the 2015 bike lane commitment of $300,000 to spend $600,000. It sums up council’s inability and failure to understand that it is illegal to move money that is unspent in one fiscal year adding it to the current fiscal year. Council didn’t seem to care they passed it anyway.

The Woodlawn job was botched and the engineer in charge left the city.

The Mayor just received his indoctrination that he cannot depend on support of the majority of this council.

The great Salary-Gate cover-up

So, in December 10, 2915, in closed-session, during the final budget approvals, we later learned that four senior administration officials including Ann Pappert, Al Horsman, Mark Amorosi and Derrick Thomson, were awarded a total of $98,202 salary increases. The trouble is they never revealed those huge increases until the provincial Sunshine List published the details in March 2016.

That’s when Derrick Thomson resigned; he received a 19 per cent increase in that secret closed-session meeting Dec. 10. In April 2016, CAO Ann Pappert, resigned and she received a 17 per cent increase totaling $37,000 taking her salary to $263,000 plus a $6,400 taxable benefit. This increase placed Ms. Pappert as one of the highest paid CAO’s in Ontario. It is noted that while only working for five months, the Sunshine list for 2016 shows she received her full salary.

During this time it was odd that Mayor Guthrie stoutly defended Ms. Pappert even to the extent that he threatened legal action against a citizen who published damaging evidence of Ms. Pappert’s performance in the five years of service as head of the city staff.

His defence of Ms. Pappert is even stranger when he knows of her involvement as Chief Executive Officer of Guelph Municipal Holdings Inc. (GMHI). This multi-million dollar attempt by then mayor Farbridge as chair of GMHI has been audited by the KPMG accounting firm. The consolidated balance sheet shows the financial losses including some $63 million in shareholder equity that is worthless because GMHI has no assets or revenues.

So why is GMHI still there?

What follows is strictly an educated theory.

The Strategic Options Committee (SOC) is part of GMHI. The current chair of GMHI is Mayor Guthrie.

Last week with great fanfare, the Mayor announced that Guelph Hydro would merge with Alectra Utilities of Mississauga. A memorandum of agreement has already been signed. The mayor claims that Guelph’s 55,000 hydro customers will witness lower rates as a result of the merger. And there’s more good news, the dividend paid to the city will increase. We learned that the Mayor would be appointed to the Alectra Inc. 14-member board of directors.

First, neither the Mayor nor Alectra have any say in what hydro customers must pay for electricity across the Province. Those rates are set by a provincial agency. Perhaps the Mayor can explain why the city will receive greater dividends as a result of the merger.

What was not discussed in the press conference were the pertinent details such as how much is Alectra paying for Guelph’s Hydro system valued at $228.4 million? What is the book value of goodwill, cash flow details, servicing the customer base, staff layoffs, value of contracts and what happens to Guelph Hydro’s $93 million in long term debt?

In my opinion, that was part of the GMHI salvage job. As I understand it, that money was loaned to GMHI by a subsidiary company of Guelph Hydro. It was in the form of two debentures with no apparent security or collateral. The debt repayment was never made by GMHI and unpaid interest alone was $10 million.

It is apparent that the interest was forgiven and the GMHI debenture debt, was quietly essentially returned to the lender, Guelph Hydro, where it now sits as a long-term debt on Guelph Hydro’s books.

Birds of a feather, flock together

This all happened because the principals, the City, GMHI and Guelph Hydro are all owned by the taxpayers. It became a garden of manipulation, sloppiness and incompetence tilled by a corrupt and secretive administration.

We should not let this occur again and vote to clean up the garden of organized deception and waste of our resources.

Now you have to ask: Is this maneuver linked to the Alectra deal? Until the truth comes out describing the details of this deal, the people cannot support it. The problem is the SOC supports it, the Mayor is effusive in his support but where do the other 12 members of council fit in when they, as our representatives, vote December 13 to approve it or not?

If you believe this proposed take-over of Guelph Hydro is in the best interests of the taxpayer owners, then re-elect those members of council who voted to approve it.

We still say: NO SALE.

 

BREAKING NEWS

Evidence has just surfaced about Alectra Inc’s expansive plan to own and control the second largest community electric distribution company in North America, is about to take over Guelph Hydro. Watch Guelph Speaks for details to be revealed soon.

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Rush to judgment: How the sale of Guelph Hydro leaves a trail of deception

By Gerry Barker

October 26, 2017

Citizens have just 47 days left to mobilize and protect their ownership of Guelph Hydro before council votes to accept the Strategic Options Committee’s (SOC) recommendation. A memorandum of agreement has already been signed between Mississauga-based Alectra Utilities and the City of Guelph, owners of Guelph Hydro.

That being the case, why is the SOC recommending and Chief Administrative Officer, Derrick Thomson, agreeing to hold “Town Hall” meetings to inform the public of the details of this agreement that has been crafted behind closed doors?

Well a funny thing happened on the way to cutting this deal.

Digging into the SOC’s own document presented June 2016 to council, here’s their timetable for investigating and recommending an alleged suitable partner to take over Guelph Hydro.

Here are some excerpts from that document so you can judge for yourselves whether this is a con job or just an unvarnished lie?

Here’s what the SOC told council last year

Phase 1 (Complete)

Explore options; begin community consultation, present findings and recommendations to Guelph City Council in early 2017.

Phase 2 (March to June)

Scan the industry for potential merger partners. Consider publicly owned utility companies likely to provide value to Guelph Hydro customers, the City and the community.

(June to fall) If City Council votes to explore further: Engage specific targets, develop a preliminary business case and financial analysis, outline impact on shareholder’s rate payers, discuss governance, compare to maintaining full ownership, and make recommendation to City Council.

Phase 3 (fall to winter)

If Council decides to pursue a merger: Enter into memorandum of understanding, announce the parties involved, continue community engagement, begin exclusive negotiations, conduct financial, legal, operational and regulatory due diligence, develop merger and shareholder agreements, finalize rate impact and make recommendation to City Council.

Phase 4 (late 2017 to 2018)

If City Council approves the transaction: submit a MAADs (Merger And Acquisition Document) application to the OEB (Ontario Energy Board) for approval, develop implementation plan and establish leadership and governance of the new utility. Following OEB approval the transaction would close, the parties would enter into the shareholders’ agreement, and the merger would be given full legal effect.

Recommended Next Steps

Given the potential cost of developing complete business cases with multiple parties, the SOC recommends developing preliminary business cases with the most promising candidates and making a recommendation to Council in early fall 2017. This approach is a cost effective way to provide Council with more information while being fair and respectful to potential merger partners.

The Guelph Hydro board affirmed the recommendations made at the outset of this report at its May 29, 2017 board meeting.

*         *         *         *

GS comment: This timetable has turned out to be a myth perpetrated by not only the SOC but with the support of the chair of Guelph Municipal Holdings Inc., Mayor Guthrie. You see, the SOC was not directly linked to city council but to the failed GMHI operation. Here’s why:

SOC Recommendation

  1. THAT the Strategies and Options Committee (the “SOC”) of Guelph Municipal Holdings Inc. (“GMHI”) be directed to conduct further discussions, engage in further due diligence, and prepare preliminary business cases to assess potential mergers between Guelph Hydro Electric Systems Inc. (“Guelph Hydro”) and potential merger partners.
  2. THAT the SOC continue its communications and community engagement to inform its work.
  3. THAT the SOC report back to Council in early fall 2017 with the results of further discussions and due diligence, communications and community engagement and a preliminary business case, including recommendations regarding next steps.

The plot thickens

So the SOC lied about its timetable to dispose of Guelph Hydro.

Were the 12 potential partners that had indicated interest in merging with Guelph Hydro not considered by the SOC?

Why did the SOC speed up the decision by almost six months? Was the SOC ordered to do so and if so, by whom and why?

The SOC committee originally had five members: Co-chairs CAO Thomson and GMHI CEO Pankaj Sardana, now CEO of Guelph Hydro, plus Robert Bell, a member of the Guelph Hydro Board of Directors, and two civilian members who resigned.

The SOC committee was revamped with CAO Thomson sharing the chair’s job with Guelph Hydro Chair, Jane Armstrong. Ms. Armstrong replaced Mr. Sardana and two new civilian members were appointed, one of who was a former member of the GMHI board of directors.

This shuffle came out of the blue with no explanation as to why it was necessary.

The SOC functioned chiefly behind closed doors only reporting periodically to city council that went into closed session. Despite the SOC claims of engaging members of the community, most people had no clue of what was going on in regards to their property.

It is now apparent there is determination on the part of the Mayor to complete this deal before next year’s civic election. If he truly believes that this is a good deal for Guelph, then why won’t he release full details of the memorandum of agreement between GMHI and Alectra?

That’s all predicated on his decision to run again. He has denied that he has been approached by the Progressive Conservatives to run in the next Provincial election next June.

It is odd that the link with GMHI and the SOC even exists. Perhaps city council did not want to get its hands dirty if the bad stuff hits the fan. In my opinion, after tracking the history of all this, there is an unprecedented storm of civic discontent looming.

Note: The following is an informed comment in today’s guelphspeaks. ca written by contributor Colleen spelling out some revealing details of the Alectra proposal:

“The recently merged Alectra Company is four large provincial players – Hydro One Brampton, which was purchased by Alectra, and Powerstream, Enersource and Horizon. Remember Horizon? They are the ones that the citizens of Guelph did not want to partner with in 2007-2008. Here they are again. Guelph has been guaranteed a seat on the Alectra board, which will then have 14 board members. With a 4% share in Alectra it’s a pretty small seat. Customer service will not be local. Our general service customers already pay 37% less than the provincial average so they will not see any further savings. Residential customers thinking that they will save money are misinformed. They will not see an increase on the distribution portion of their bill only for a period of time. This amounts to about 20% of the electricity portion of their bill. So, what the “nothing but good news for Guelph” that Mr. Mayor is talking about? A bigger dividend payment to the City.”

 

Perhaps the city administration should inform the public of how much this project has cost so far. There was a consultant hired to steer this to a conclusion as evidenced by the content and words of the elected officials and the SOC members who are not elected.

At this stage, the public remains in the dark and judging from the secretive way this project has been conceived and misled the public, the responsibility lies with city council that must either approve it or just say no.

It is surprising that the Mayor was responsible for initially bringing the GMHI disaster out in the open and launching an investigation. But now, he is promoting this merger of Guelph Hydro with Alectra Utilities and the details are back in the closet.

This is the same kind of handling of important public issues that were masked by his predecessor for eight years aided and abetted by senior staff almost all of who are no longer with the city.

Mr. Mayor, please level with the people

Management on the Mayor’s level is complex and required patience, understanding, being tough and fair-minded, occasionally, being ruthless. Mayor Guthrie’s weakness is trying to be all things to all people. When he was elected in 2014, I told him to serve the people not the staff and council opponents.

This is a time for redemption and courage. Let’s hope Mayor Guthrie exercises both.

A good beginning is to level with the people and explain this agreement in detail. If the Mayor believes the deal is in the best interests of the citizens, then explain why in terms they understand. I know, it is tough to explain complicated deals but it is possible and with professional help, essential.

The evidence is mounting that’s creating doubt in the people’s minds.

In my opinion, I remain concerned about the link with GMHI and the Community Energy Initiative. Also the Alectra mission statement includes green energy technology development. Alectra’s promise is not backed up with precise information and management. This city has just experienced a costly misadventure in experiments with green power self-sufficiency. The price tag is a loss of shareholder equity in GMHI of some $63 million.

This is supposed to be an amalgamation of small to medium sized municipally owned electric distribution systems. It should not include dabbling in costly green power projects. History has shown alleged cost reductions linked to green power in the name of climate change are not achieved but instead, boost costs to the consumer.

This consolidation of local power distribution systems is a part of the Liberal government’s energy plan that so far has delivered the highest cost of electric power to Ontario consumers in the country.

Ontario’s leaders tore down gas energy generating plants in Oakvile and Mississauga to save four Liberal seats in the 2010 provincial election… it worked!

Then the Liberals awarded rich wind and solar power contracts to major corporations such TransCanada Pipelines.

In their rush to achieve green power at any cost, the Liberals sold 57 per cent of Hydro One to private enterprise allegedly to balance the books in 2017. That last one is a doozy as the privatized Hydro One just spent $4 billion to buy the electric generating and distribution system serving 375,000 Seattle and area customers. Most of its generating capability is coal-fired. That’s ironic in that we banished coal usage in Ontario some time ago.

The intention of Alectra to build a Green Power Technology Centre in Guelph is something we don’t need or want. Been there, done that.

Sorry Alectra, NO SALE

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When it comes to Mergers and Acquisitions, Guelph Hydro is a plum to be plucked

By Gerry Barker

October 23, 2017

So, 51 days from today, on December 13, city council will vote to merge Guelph Hydro with a company called Alectra Utilities Inc., or not.

Put me in the “not” side of this.

And Mr. Mayor, please stop using the term “merge” when this is a sale or perhaps a sell-out?

There have been few details of the deal to take over Guelph Hydro. In the corporate world when two corporations merge – Merger and Acquisitions – the acquirer agrees to pay for the assets of the acquired, in this case Guelph Hydro.

Turtle Alert!

But city council, like a turtle sensing danger, goes into closed-session to discuss the details far from the madding crowd.

Guelph Hydro has $228.4 million of installed assets including wire, poles, transformers, sub stations, vehicles, buildings and a trained staff to keep the power on. In addition, in 2016, Guelph Hydro earned, after expenses, more than $7 million. Hydro pays an annual dividend of $1.5 million to the City general revenues. Essentially, this is a cash business. Customers need power and must pay for it monthly along with their city water bill.

As a going concern, Guelph Hydro is a plum to be plucked. Well run, profitable, respected with a ton of goodwill, we should not let our treasure disappear into the corporate confines of an organization of which we know little about.

So, if it ain’t broke, why the rush to get rid of it? And what are the terms contained in this memorandum of agreement? How binding is it? Or is this turkey already baked in the oven?

There’s a new boy on the block

Alectra was incorporated nine months ago, January 31, 2017. It now claims it has 1 million customers both residential and businesses. Alectra’s founder was Powerstream, the Mississauga electricity distribution system. Alectra’s head office is in Mississauga.

Most important, what’s in it for the citizens of Guelph who own Guelph Hydro?

These details are essential and must be made public ASAP so that the owners of Guelph Hydro know and understand what’s at stake pending council’s final decision December 13. City council represents the owners and has a moral and fiduciary responsibility to inform their constituents of the details of this proposal.

It’s the second attempt to sell Guelph Hydro following the failed attempt by the former mayor in 2008. She tried to convince her council to merge with Hamilton and St. Catharines power distribution systems called Horizon. She refused to tell the public the details of the deal and her own supporters refused to allow it.

It was an example of people power influencing their councillors to vote against it.

Not again!

Here we go again. But this time it is a very sophisticated plan to remove local authority over distribution of our power and give it to a company that we know little about. Please note the absence of the words “sell or sale” in presentations and news releases. It’s an attempt to not revive the 2008 public backlash when the former mayor attempted to sell Guelph Hydro.

The citizens own and operate our power distribution system that covers some 55,000 customers in the city and Rockwood.

Apparently the city heard from 14 potential partners interested in merging with Guelph Hydro. The Strategic Operations Committee, (SOC) appointed by the city, involved a five-member committee charged with seeking potential partners to operate Guelph Hydro. During its investigations, the committee team lost three members who resigned or were replaced, a development that challenges the SOC’s credibility.

Did the committee, co-chaired by Hydro Chair, Jane Armstrong, and Chief Administrative Officer, Derrick Thomson, examine all those potential partners to determine the best deal?

Jargon Alert!

We’ll never know because they won’t tell us, claiming it was “subject to advice that was subject to solicitor-client privilege.” It was another legal reason to hold a closed session meeting.

If you can’t run, just hide

Despite the Mayor and the CAO’s promise to conduct an “open and transparent negotiation process, the shareholders remain in the dark. It should be noted that early last summer, the SOC laid out its plan to merge/sell Guelph Hydro. This fall the SOC plan was to present a consolidation of the information to Council. In early spring, it was to announce its findings and allow council to vote on the committee’s recommendation.

Once again, the public is being misled. We still have little financial and operational data on why the SOC’s selection of Alectra. We still don’t know anything about Alectra or details of the deal.

Artful Dodger Alert!

What we do know is that merging Guelph Hydro with Alectra’s family of municipally owned Local Distribution Corporations (LDC) will bring millions in cash flow to Alectra because we will start paying our service charges to them when Guelph Hydro is merged. Also Alectra’s president has already admitted that there will be staff reductions of Guelph Hydro to maximize administrative efficiencies.

Attempting to read the 2016 Powerstream financial statement on its website proved fruitless. The structure of Alectra is unknown at this time. Is it an umbrella organization? Is it publicly traded? Are there shareholders? Who are the executive officers?

Why won’t the city elected representatives tell the truth about this deal? Are citizens being reimbursed for the Guelph Hydro assets? What happens to the $93 million in debt currently carried on Guelph Hydro’s books?

Confirm or deny:

Will Mayor Guthrie be named to the board of Alectra if this deal goes through? Apparently those municipal mayors who Alectra claims have joined the organization are on the Alectra Board of Directors.

If true, does this not place the mayor in a conflict of interest? How can an elected official who signs a memorandum of agreement, then votes to approve the Alectra deal while knowing that he will benefit while serving on the board of directors?

So Mr. Alectra, what’s your bid?

The news release carefully avoided what Alectra was going to pay for the system. Instead, we learn that this is not just about electric distribution it’s about generating power through Alectra’s planned Green Energy developments. Mayor Guthrie was enthused about Alectra’s intention to build a Green Energy and Technology Centre in Guelph. The mayor says it will create jobs.

Spoiler Alert!

Didn’t we just experience a disastrous green energy experience with the Guelph Municipal Holdings Inc.’s financial failure? Didn’t the Community Energy Initiative’s failed GMHI project cost $63 million in shareholder equity losses developing green power self-sufficiency in the city?

More questions about governmnet manipulation of the numbers

Doesn’t the Wynne government recommend the merger of consolidating smaller municipal power distribution corporations? But what has that to do with researching green energy issues involving personal storage of power, electric vehicles, charging kiosks etc? This smells like the stench of the failed electricity programs of the Liberal provincial government that has been so mismanaged using phoney accounting practices.

Ontario’s independent Auditor General, Bonnie Lysk, confirmed this. She charged that the accounting of energy including electricity operations in Ontario, failed established accounting practices used by public agencies throughout Canada.

The Liberal government’s promise to reduce electricity bills by 25 percent was basically built on the premise, reduce rates now and increase them in five years to pay for it.

How does that grab you?

In view of this, be aware that the Mayor is quoted that the Alectra rates will be lower than at present, and the dividend received from Guelph Hydro will increase so that more can be invested in the community.

Mayor: You mean spending this alleged newfound cash on the downtown library that is now pegged at just under $59 million. No? Then how about the South End Recreation Centre coming in at about $66.5 million.

Wait! There’s more. Don’t forget the staff revised estimate of $400 million of neglected infrastructure maintenance and upgrades required over the next 13 years. Or paying off the $34 million police headquarters renovation.

And Mr. Mayor are you predicting that selling off our power distribution system will bring great benefits to the city?

Time to show all the cards or fold them

When you carefully explain what the immediate and future benefits are to Guelph’s hydro customers, then you might be able to convince them this is a great opportunity. I’m not holding my breath.

A good starting point would be to explain the deal in detail and not parsing it behind closed doors. The first question that needs answering is how much cash is Alectra prepared to pay for Guelph Hydro?

Further, we not only lose control of our power system but also the future of the 130 Hydro employees is uncertain.

For 2018, the city staff is proposing a $90 million capital budget of which 79 per cent or $71.1 million will be spent on infrastructure. The remaining 21 per cent will be divided with $18.9 million for unspecified growth projects and $3.6 million for city building, again not specified. Council will vote October 26 to approve the staff recommendations, or not.

Tell us where does the two per cent special property tax levy go in 2018?

With less than a month and a half before council votes on selling Guelph Hydro, it leaves little time to clarify these questions and concerns. It should be pointed out that Dec 13 is the day of council’s final approval of the 2018 budget. Coincidence? It seems like great timing to simultaneously approve the Guelph Hydro sale and its potential affect on the 2018 budget.

Here’s my take on the situation. Council wants to get this off the table before the election campaign starts. The risk lies in a public backlash against those councillors who voted to accept the Alectra deal, whatever that is. It could seriously impair their ambition to run again next year.

As for my wife and I, we are opposed to any deal involving divesture of public ownership of assets in which the details have been cloaked in secrecy. Vague promises just won’t cut it.

We say: NO SALE.

 

Important Notice

If you are interested in following more details of the Guelph Hydro proposed sale, login to guelphspeaks.ca. Your comments are welcome. Join other citizens who are currently opposed to the sale, based on the lack of “openness and transparency” as promised by the Mayor and CAO. If you don’t want to post a comment on the GS website, send your comments by email to gerrybarker76@gmail.com.

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Thanks for joining the GS family. Best, Gerry

 

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