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For immediate release (Sept. 4, 2018) – The Orillia Power Distribution Corporation (OPDC) and Hydro One will be refiling the Mergers, Acquisitions, Amalgamations and Divestitures (MAAD) application to the Ontario Energy Board (OEB) for the sale of OPDC to Hydro One.
Orillia Council received a report as information at a special Council meeting on Sept. 4, 2018, explaining how the refiling of the application to the OEB is part of the legally-binding agreements to conclude and close the transaction to sell OPDC as approved by Council in August 2016. The overall commercial transaction Council committed to in 2016 remains unchanged.
“The City of Orillia as the sole shareholder of OPDC is continuing down the Council-approved path to sell our local distribution company,” said Mayor Steve Clarke. “The OEB has not ruled on a key element of the deal which is a commitment from Hydro One that in year 11, after 10 years of lower distribution rates with Hydro One, Orillia customers will be no worse off than if we had retained OPDC. It is in the best interest of Orillia to pursue every avenue possible to complete a deal that offers $200 to $300 million in near-term economic impact in the community and lower distribution rates for 10-plus years.”
The April 2018 OEB decision to deny the MAAD application was based on the OEB’s uncertainty of what distribution rates in Orillia would be after 10 years with Hydro One (in year 2030.) In its decision, the OEB ruled that Hydro One and OPDC had successfully discharged other components of the traditional no harm test.
Through the motions filed by OPDC and Hydro One in May 2018 to review and revise the OEB decision, Hydro One provided a commitment that Orillia ratepayers would not be harmed in year 11 when compared to the status quo of remaining with OPDC. During the May threshold hearing to determine whether an appeal would be considered, the OEB did not adjudicate the evidence regarding rates in year 11; its decision was based on its view that OPDC and Hydro One did not meet the threshold legal test to reopen a decision.
The Orillia Power Corporation (OPC) Board of Directors and senior staff at OPC fully support the refiling of the MAAD application to the OEB.
“Electricity rate increases are expected over the next 10 years for Orillia residents, so the rate freeze offered by Hydro One is definitely a significant benefit,” said Greg Gee, Chair of the OPC Board of Directors. “We believe this deal, and the overall economic benefits to our city, is in the best interest of Orillia and that is why our Board of Directors is fully supporting it.”
If the sale of OPDC to Hydro One is successful, distribution rates (20-25 per cent of the overall electricity bill) would be reduced by 1 per cent and frozen for five years, followed by only inflationary increases for years six through 10. After year 10, Hydro One has committed to distribution rates that will be no higher than the OPDC status quo. Any adjustment rates after year 10 would need to be reviewed and approved by the OEB.
If the sale to Hydro One is not approved, OPDC will be required to file for a distribution rate increase (known as a Cost of Service rate application) with the OEB at least twice over the next 10 year period. It is estimated that distribution rates will increase by an average annual rate of 2-4% over the next 10 year period.
Over the coming weeks, OPDC will work with Hydro One to refile the MAAD application with the OEB. It is anticipated that the focus of the MAAD hearing should be limited to the year 11 evidence, since OPDC and Hydro One have already met all other component parts of the traditional “no harm test.”
Highlights of the deal:
- Advanced Technology Hub: With regulatory approvals, Hydro One plans to construct three new facilities on 36 acres of land within the Horne Business Park:
- A back-up Ontario Grid Control Centre/Integrated Systems Operation Centre (ISOC)
- Provincial Warehouse
- Regional Operations Centre
- Orillia Power Distribution Corporation (OPDC) purchased: $26.35 million cash purchase by Hydro One, which is more than twice the current book value of OPDC, and assumption of OPDC liabilities.
- Horne Business Park land sale: Upon signing of the deal, Hydro One will purchase 16.41 acres of the land required for the ISOC portion of the development for approximately $3 million – validated as fair market value by a third-party valuator.
- Orillia consumers protected: Distribution charges will be reduced by 1 per cent and guaranteed for five years. The distribution portion of a utility bill accounts for approximately 20 per cent of the overall bill and rates will continue to be regulated by the Ontario Energy Board (OEB).
- OPDC jobs protected: All OPDC employees are moving to Hydro One with comparable pay, benefits and pension, along with a one-year location guarantee.
- Orillia Power Generation Corporation: City retains complete ownership, along with annual dividend which accounts for the majority of the overall OPC annual dividend.
- Orillia Legacy Fund: City to deposit all proceeds from the deal to the Fund, which will likely generate investment income in excess of the existing OPDC portion of the annual dividend.
- Philanthropic investment: Hydro One will provide $250,000 towards a co-branded community project and has corporate programs in place to continue philanthropic support in the Orillia community.
More information is available at orillia.ca/techhub.
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Mayor Steve Clarke
City of Orillia
705-325-2447
mayor@orillia.ca
Greg Gee
Chair, Board of Directors
Orillia Power Corporation
705-326-2495 ext.224
Jennifer Ruff
Manager of Communications
705-325-8929
705-238-9209 (cell)
jruff@orillia.ca
