Councillors here are not ready to pull the plug on discussions regarding the sale of Wellington North Power.
Wellington North owns 97% of Wellington North Power (WNP) with the Township of Southgate owning the remaining 3%. The utility provides hydro distribution service to residents and businesses in Arthur, Mount Forest and the hamlet of Holstein.
Services include hydro distribution and ongoing maintenance and replacement of the utility infrastructure. In addition, a significant source of income includes fee for calculating the water and sewer charges for Mount Forest and Arthur, and to collect those charges through monthly hydro bills.
The water and sewer charges are forward to the township, which is responsible for the operation of the water and sewer utilities.
On Monday night, council reviewed a report by Treasurer John Jeffrey which recommended the municipality continue discussions investigating the sale of the local utility.
Those discussions would be held in consultation with Southgate.
The report outlined the interest expressed by five Ontario utilities that have hopes for mergers with or the purchase of Wellington North Power.
Westario Power Inc.
Westario is a utility in south western Ontario that was formed with the merger of eight municipal utilities. Since that initial merger, it has grown to include a total of 15 communities in western Ontario and those communities are not unlike Mount Forest and Arthur. The company’s officials are interested in either an outright sale or a merger, or any combination thereof and have assured the committee that current Wellington North Power staff would be accommodated in any new structure.
Hydro One is the largest electricity distributor in Ontario and evolved from the reorganization of Ontario Hydro, which was separated into the generation of electricity and its distribution wing.
At the time Wellington North Power was created, several smaller local utilities opted to sell to Hydro One. In addition, most rural electricity in Ontario is distributed by Hydro One.
Orangeville Hydro provides distribution of electricity to the town of Orangeville and recently merged with Grand Valley Energy Inc. Wellington North Power and the Orangeville operation are familiar with each other as they are both members of an association of local utilities. The Orangeville operation would be interested in either a merger of the two utilities, an outright sale, or a combination of the two. In either scenario, Wellington North would have at least one seat on the board of directors. The company also indicated that it would absorb all of the existing WNP staff.
Horizon Utility Corporation
Horizon is a utility formed by the merger of Hamilton Utilities Corp. and St. Catharines Hydro Inc. in 2005.
They are currently finalizing a merger with Guelph Hydro. Due to the relative size of WNP Jeffrey’s report suggested that an outright sale would be more efficient for Wellington North. Horizon did not make any commitment with respect to the status of existing WNP staff in the event of a purchase.
Erie Thames Power
Erie Thames Power (ETP) is a southwestern Ontario utility which provides electricity to the communities of Ingersoll, Aylmer, Central Elgin, Norwich, East Zorra Tavistock and South West Oxford.
One aspect of Erie Thames Power that seems to be unique is its subsidiary corporation, which offers complimentary services to ETP and others in a non-regulated environment providing diversification in the revenue of the entire organization.
Erie Thames Power would entertain either a merger or sale or a combination, as well. It has also committed that there would be no job losses at WNP.
Jeffrey’s report stated that before discussions continue, there are a number of issues that need to be acknowledged and addressed.
Some of those include:
– the potential loss of local administration and operation of the utility, and how local problems would be addressed;
– the fate of the existing staff of WNP;
– rate structures after any sale or merger;
– if Wellington North would have any input on any further sales or mergers with yet an even larger utility;
– if Wellington North would participate in financial proceeds in the flipping of WNP assets to another utility;
– how that affects a response to industrial growth in Wellington North;
– what the actual value of WNP is; and.
– the relationship of any new utility with Wellington North as work is required in Mount Forest, Arthur and Holstein to accommodate township operations and the needs of local developers or businesses.
Councillor Ross Chaulk, chairman of the finance committee, has sat in on some of the initial discussions, and said there is certainly interest from those five companies – and possibly more.
However, only one company has offered a ballpark figures, but that company did not wish the amount to be made public. Shortly after, Chaulk made it clear “It is not a done deal.” But, at the same time, he said the tax incentives to sell are in place for only a limited time.
He suggested if the utility was to sell for $6-million, the township would get a 30% tax saving – roughly $1.8-million.
Ross believes the township should listen to what is being offered. But, he added now is the time to find out exactly how much those companies are ready to pay.
Councillor Bob Mason agreed.
“We know there is interest, but not the exact terms.”
Yake said he would like to see a report with more formal terms and how Wellington North’s concerns would be addressed.
Mayor Mike Broomhead who is also chairman of Wellington North Power, said he did not want to influence the decision, but suggested if the township wants to continue meetings with the companies, he would like to see a similar process be done with Wellington North Power to hear their reasoning on keeping the utility local.
“They might be able to provide a side (the municipality) has not looked at as much.”
Chaulk questioned if it would be useful to take that step before hearing what is being offered.
However, once those discussions are held, he has no issue with the involvement of WNP staff.
Broomhead commented that councillor John Matusinec, who was absent from that night’s meeting, would like to see the matter deferred.
Chaulk said the issue on the floor is not if the township should sell the utility – but rather to continue discussions.
“We know if John was here he’d vote against it.”
“You can’t speak for him,” Yake countered.
“You are right,” Chaulk agreed.
However as the issue came to a vote, Chaulk and Mason voted in favour of continuing discussions while Yake voted against.