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Merger News

OEB Approves Kenora Hydro Merger with Thunder Bay Hydro

November 16, 2018

Thunder Bay, ON – The Ontario Energy Board (OEB) has approved the merger of Kenora Hydro Electric Corporation Ltd. (Kenora Hydro) and Thunder Bay Hydro Electricity Distribution Inc. (Thunder Bay Hydro).

“Cost-efficiencies are expected and will directly benefit all customers” says Robert Mace, President and CEO of Thunder Bay Hydro, “Changes are coming in the new year, beginning with the unveiling our new brand”.

In its decision on the merger application submitted by the two local distribution companies on April 12, 2018, the OEB has made the following statements:

The OEB has determined that the Applicants have satisfied the no harm test with respect to price, cost effectiveness and economic efficiency. The evidence shows that the underlying cost structures to serve acquired customers following the proposed merger will be no higher than they otherwise would have been.
The OEB is satisfied that the way in which the Applicants propose to provide service in the areas currently served by Thunder Bay Hydro and Kenora Hydro will be effective in continuing existing levels of service.
The OEB is satisfied that the proposed amalgamation of Thunder Bay Hydro and Kenora Hydro, including the Applicants’ five year deferral rate rebasing proposal, meets the “no harm” test. A no-harm test considers whether the proposed transaction will have an adverse effect on customers.
Effective January 1, 2019, both the City of Kenora and City of Thunder Bay will proportionally own the new utility; 9 percent and 91 percent respectively. Once finalized, the municipal-owned company will continue to provide distribution services to 56,425 residential and commercial customers currently under the management of the two electricity distributors. Local services will continue to be provided in both communities by local employees.

“Customers will continue to receive a high level of service and will soon benefit from added amenities” states Dave Sinclair, President and CEO of Kenora Hydro, “The merger will create positive effects for both communities and their future”

LINK: The OEB’s full decision document

January 16, 2018

Council Approves Kenora Hydro Merger with Thunder Bay Hydro

Kenora, ON – Council, as sole Shareholder of Kenora Hydro, approved the merger of Kenora Hydro and Thunder Bay Hydro today at their regular meeting of Council.

In the last few years Kenora Hydro has had some significant challenges and as a result the Kenora Hydro Board conducted a review of the future of small utilities including all options for the utility looking forward. Through this process and SWOT analysis several business risks and challenges were identified and a number of corporate models were considered. The Board ultimately recommended that a merger with Thunder Bay Hydro was in the best interests of the utility, customers, and Shareholder.

In the past 15 months the Kenora Hydro Board has spent a considerable amount of time pursuing a potential merger by reviewing financial statements, completing due diligence on each other, and identifying benefits for the Shareholders and the customers. A public open house was held in November and there have been very few concerns or opposing viewpoints brought forward from our customers.

The merger will create a new electric distribution utility to serve the current customer bases and the City of Kenora will own approximately 9.1% of the shares of the new company based on the relative enterprise values and Kenora is entitled to a seat on the new Board of Directors.

A merger will position the new utility to adapt to the changing industry and new disruptive technologies such as distributed generation, electric vehicles, and micro-grids. It will increase the economies of scale which will lower costs and reduce the business risk ultimately putting downward pressure on rates. It will benefit customers by increasing the ability to implement new technology and new services such as outage mapping. Customers will continue to benefit from local hydro staff providing excellent customer service and accountability.

The required approval process through the Ontario Energy Board encompasses a principle of “no harm test” to the customer to protect the interests of customers with respect to pricing and the adequacy, reliability, and quality of electricity service. The benefits to the shareholder and customers will be with an emphasis on maintaining low rates, being responsible corporate citizens committed to the communities that the new utility serves, and providing local accountability and close ties to the municipal shareholder.

Kenora Hydro staff will transition over to the entity and, and reductions in staff, if required, will be primarily through attrition and Kenora will maintain a local operations center.

Kenora Hydro and Thunder Bay Hydro jointly announced in October 2016, the signing of a memorandum of understanding to authorize the exploration of a merger between the two utilities. Since then, the companies have been in a process of analyzing the potential advantage and feasibility of how their customers, municipal shareholders and other stakeholders might benefit through such a merger.

Kenora Hydro customers were invited to attend an information session on October 19, 2017 to learn more about the reasons for a merger, the benefits for Kenora Hydro, and to answer questions.   The following summarizes what was shared at the information session:

  • Kenora Hydro has 12 employees who are dedicated to the delivery of electricity to 5,600 customers within the City of Kenora, Ontario.
  • Thunder Bay Hydro has 130 employees who are dedicated to the delivery of electricity for 50,700 customers in the City of Thunder Bay, Ontario.
  • Thunder Bay Hydro and Kenora Hydro will merge into one company that serves both communities.
  • The current owners (City of Thunder Bay & City of Kenora) will retain proportional shares of the new company.
  • The electrical industry itself is evolving in giant leaps and the ability to adapt is essential. The province’s electricity industry is becoming more complex. Customer needs are increasing as technology changes create new expectations.
  • While Kenora Hydro has continued to work at becoming more efficient, we need to be better resourced to reduce the upward pressure on future distribution rate increases.
  • The Kenora Hydro Board of Directors have discussed the options to manage the changing environment for several years. They have agreed that maintaining the ‘status quo’ is no longer viable.
  • This merger was recommended as offering the best available outcomes for customers and the shareholder.
  • Customers will notice little to no change in their electricity service.
    • Local distribution rates will remain the same
    • Local ownership and accountability
    • Local workforce to service and maintain power lines and equipment
  • However, they can look forward to enjoying
    • 24/7 Control Centre
    • Online outage map
    • Access to new channels of customer communication
    • Future rates that will reflect the company’s enhanced efficiencies
  • By working together, we can achieve economies of scale and enhance our capability to serve our customers.
    • Position ourselves to enhance productivity and control costs.
    • Ability to embrace future service delivery options such as electric vehicles and solar battery storage
    • Access to specialized skills and technical resources
    • Administrative capacity to negotiate a regulatory and technical landscape
      that is growing exceedingly complex
  • Planned Time Frame
    • By end of 2017
      Engage our customers
      Continue to refine the merger plan
      Prepare recommendations for approval by shareholders
      Apply to the Ontario Energy Board
    • Early 2018
      Receive Ontario Energy Board approval and move forward with the merger