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
Receive Ontario Energy Board approval and move forward with the merger