UPDATE: One councillor, Richard Simpson, supported Mr. Daurio’s motion (below). Deputy Mayor Dollin suggested he was making the motion for ‘his friends’ at Alectra – an accusation Mr. Daurio attributes to the fact that he relied on financial figures provided by Alectra. Dollin also suggested that a $25 million charge was made to Barrie when joining Alectra – something Mr. Daurio describes as “an opportunity for Barrie to invest in the purchase of Brampton hydro and earn an additional $5m annually in interest and dividends forever!”. Daurio contends that “Alectra had promised a 14% rate reduction, and interest and dividends and other savings of $4m annually, while InnPower promised a rate increase and little/no dividends for the next 6 years — a loss to Innisfil of $8m annually, and $48m over the next 6 years.” Under existing procedural rules, the subject will not be revisited at Council for a year.
This Wednesday, June 7, Councillor Stan Daurio is moving a motion at Innisfil Council “that the Board of InnPower be requested to explore options to sell or partner with Alectra and/or other utilities…”.
The saga of missteps at InnPower is already well known: an ill-fated attempt at joint ownership with Edmonton-owned Epcor Utilities Inc.; an overly ambitious investment in new facilities based on the assumption of leasing space to Epcor; an urgent need for alternative InnPower financing when the deal collapsed; a six year suspension of dividend payments to Innisfil; loans from the Town and Simcoe County plus an application for a rate increase to cover the cost of mandated expansion of service to newly designated urban areas.
In light of the current popular uproar over electricity rates, Councillor Daurio argues it would be more beneficial to sell our local utility to Alectra, which was formed from the merger of municipally-owned Enersource, Horizon Utilities and Powerstream plus the acquisition of Hydro One Brampton as of February of this year. Headquartered in Mississauga, Alectra’s service area encompasses 1,800 square kilometres and serves nearly a million customers in 15 communities from Alliston to St. Catharines and Hamilton to Vaughan. Alectra is now “the second largest municipally-owned electric utility by customer base in North America”.
Councillor Daurio puts the minimum value of InnPower at $40 million (2015 estimate) and expects a dividend return of 4.4 to 4.5% or $1.8 million annually. Additionally, the former Powerstream told Council in 2015 that a merger would lower electric bills in Innisfil by $23/month. This would be equivalent to savings of $4.4 million annually for 16,000 Innisfil households.
Alectra’s residential fixed charge is $18.55/month. InnPower has a residential fixed charge of $24.85/month. The distribution rate at Alectra is 0.0135/kWh compared to 0.0139/kWh at InnPower. There are several other residential fee categories that are less easily compared.
When the Alectra merger was announced, existing customers were promised an “average” saving of $40 per year ($3.33/month) over 10 years. Savings are achieved by spreading administration costs over a larger base. Prior to the formation of Alectra the average monthly bill (excluding tax) for 1,000 kwh was:
- Enersource / Mississaga $164.38
- Horizon Utilities / Mississauga $169.15
- Hydro One Brampton $163.01
- Powerstream / Barrie $161.22
- InnPower / Innisfil $182.09
In May, Alectra borrowed $675 million in the bond market at an interest rate of 2.488% with a 10 year term to “retire outstanding indebtedness under an acquisition bridge facility and to refinance an Infrastructure Ontario loan. The rest will be used for general corporate purposes”. (Financial Post, May 10, 2017)
Aside from expected financial benefits, there may be more reasons to sell or merge our electric utility. The whole concept of centralized power generation and distribution is slowly unraveling. As the price of solar technology drops, more people are opting for their own renewable power generation. This is only going to increase with coming innovations in residential wind turbine technology, as well as solar. Future battery technology will make this power more stable and reliable offering an incentive to draw power in off-peak hours. The widespread use of electric vehicles will also provide a dormant source of transient power when they are plugged into chargers.
In anticipation of this emerging new reality, software applications have already been developed that allows users to buy ‘free-range’ power from a neighbouring rooftop. It uses blockchain technology to auction power directly to nearby electricity users through their cell phones. “…now through technology, if we all have the same information, we can transact with each other and simply update everyone’s own database. This allows people to do business directly with each other”. (Cutting Edge Technology Offers a Way to Sell Electricity to Your Neighbors, Clean Technica) These digital electricity trading networks are now starting up in the United States, Germany, Australia, and Bangladesh. I don’t know what the electricity market will look like in 5 or 10 years but it will likely be very different.
Council meets in closed session at 5:15 p.m., the InnPower Annual General Meeting is scheduled for 6:00 p.m. and the regular Council meeting is at 7:00 p.m. on June 7.