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Published byImogen Benson Modified over 9 years ago
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MERGING FOR THE FUTURE OF OUR COMMUNITY September 17 Ward 2 Public Meeting
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2 Agenda Why we need to merge Increased regulatory risk Maintaining control After the merger Now is the time Your questions
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3 Why We Need To Merge We believe now is the time This is a real and unique opportunity Conservation & Demand Management (C&DM) complements the Community Energy Plan (CEP). Team will be located in Guelph. Stronger voice in sector: influence at Ontario Energy Board and Ministry of Energy Queen’s Park seeks input from utilities representing large user bases prior to making regulatory change: we will be one of these utilities
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4 Why We Need To Merge We believe now is the time Financial strength: Horizon has an A-rating (critical for acquiring low-cost capital for infrastructure investment) Only 2 of 80 Local Distribution Companies (LDC’s) have achieved this rating Enables lower cost access to capital to support our operations
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5 Why We Need To Merge Horizon shares our vision for the future Customer Focused Conservation minded Reliable and safe provision of service Rate conscious Shareholder focused Efficient utility with dependable dividends Support of community values Regional distribution utilities
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6 Why We Need To Merge Horizon is the right partner Experience: efficiencies and annual savings of $5.4m by merging with St. Catharines Regulatory leadership: strong team of professional specialists If we don’t merge, GHESI will need to increase staff in this area
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7 Why We Need To Merge The sector is changing We believe we are now in the best position to negotiate with a like minded partner Economics and regulations are forcing consolidation OEB’s 3 rd Generation Incentive Rate Mechanism (IRM) requires utilities to justify every expense Efficiencies must be delivered Rate adjustments less than inflation are the norm (as evidenced in our current rate decision)
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8 Why We Need To Merge The sector is changing Energy costs are rising Lower distribution rates to customers cannot happen without the merger To achieve the same rate reductions on our own would require laying-off almost half of current staff
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9 Why We Need To Merge This is good for our current employees and for future recruitment Growth opportunities for staff Merging of complementary staffing strengths GHESI: Geographic Information Systems (mapping) and automation is recognized and sought after by other LDC’s
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10 Why We Need To Merge This is good for our employees Merging of complementary staffing strengths Horizon: regulatory, finance and Conservation & Demand Management (C&DM) Internal depth and expertise in regulatory submissions to Government Expertise in working with financial markets to gain low cost access to capital Recognized by industry and government in leading C&DM programs (Power Wise)
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11 Why We Need To Merge This is good for our community Substantial local presence with growth areas of the business Engineering and Operations Information Technology Geographic Information Systems Purchasing Conservation & Demand Management Emergency Operations Control Group to stay at Southgate
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12 Why We Need To Merge GHESI will have access to comprehensive business management systems that will reduce costs and improve system performance Asset Management program More efficient use of current infrastructure Better planning for future infrastructure Enterprise Resource Planning FUSION system for IT integration
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13 Why We Need To Merge This is good for our shareholder Stabilized and increased dividend stream Significant ownership of the new utility (24.25%) Significant rate reductions for all customers (approx. 20%) Encourages continued economic development Provides competitive advantage for industry Provides lower cost service to the home owner
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14 Increased Regulatory Risk Old regime: cost-based Starting point for rates based on actual costs Annual adjustments based on actual results High certainty of achieving allowed rate of return Simple process of setting rates – low level of regulatory expertise required
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15 Increased Regulatory Risk New regime: incentive based Starting point for rates based on a forecast that must be defended Annual adjustments based on complex formula: (Inflation) less (productivity factor) less (stretch factor) Forecast base and formula introduce uncertainty (risk) of not achieving allowed rate of return Complex process requires specialized in-house and external expertise – increased costs
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16 Maintaining Control This merger allows us to take control of our own future and determine what is right for us Government has provided tax holiday windows to encourage industry consolidation Our belief is it’s only a matter of time before government directs more consolidation We want to manage our own future rather than have something imposed upon us
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17 Maintaining Control The utility sector is highly regulated The Ontario Energy Board sets standards, including service, reliability and response All LDC’s must measure and report these standards quarterly and annually Utilities or their shareholders cannot make changes to the operations of the utility that would adversely affect safe delivery of service
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18 Maintaining Control OEB oversight will continue and likely grow A high level of service to our customers Customer Service AreaOEB Target Horizon 07 Guelph 07 Low Voltage Connections within 5 days90%100% High Voltage Connections within 10 days90%100% Cable locates within 5 days90%98%100% Telephone responses within 30 seconds65%82%81% Appointments kept on time90%98% Written responses within 10 days80%100% Emergency Responses within 60 min.80%97%86%
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19 Maintaining Control GHESI does not set rates The Ontario Energy Board (OEB) oversees every aspect of our business including: Operations, finance and customer service standards Holding company relationships with the LDC’s Approving all rate applications and rate changes Billing statements including items listed and reported
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20 Maintaining Control Proportional representation for Guelph on new board All three city councils will have same oversight Approval for capital significant investment over Approval of future merger and acquisitions and divestitures
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21 After The Merger From the outside, very little will change Local call for customer service and local response Support for local suppliers Local presence will be substantial Approx. 90 Guelph based employees Operations, Engineering, Conservation and Demand Management, Geographic Information Systems and Mapping, Information Technology and Procurement
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22 After The Merger Improved service 24/7 control room with experienced operators Extended customer service and inquiry hours Legal agreement secures current customer service levels Strengthened C&DM Continued local emergency response Local technical support for developers
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23 Now Is The Time Cost of meeting regulations is growing We experienced over $350k of additional expense to submit the 2008 rate application Operating margins are being negatively affected We need increased capital to build and maintain plant assets Ontario Energy Board productivity and efficiency factors will force GHESI to cut costs to protect shareholder returns These pressures challenge GHESI’s ability to meet shareholder dividend expectations
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24 Thank You We believe in this merger We are in a position to control our future with this merger It will give our community: A significant share of the new corporation Lower distribution rates A continued strong presence in Guelph Art Stokman: 519.837.4715 astokman@guelphhydro.com
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