Delay on hydro sale a welcome move
Late last week, in what was, to many, a shocking decision, the Ontario Energy Board (OEB) decreed it was putting the brakes -- at least temporarily -- on a proposed pact between the City of Orillia, Orillia Power and Hydro One.
First, some background. After being approached by Hydro One last year, the city agreed to sell the distribution arm of Orillia Power to the massive provincial entity for $26.35 million, which officials estimated was double its value. As part of the deal, Hydro One agreed to assume the $10 million in debt Orillia Power had amassed and said it would protect the 36 affected jobs -- for one year.
From the city's perspective, the hammer in the deal was Hydro One's commitment to open its fat wallet and purchase up to 36 acres at the Horne Business Park, where, if the deal was green-lighted, it would build an integrated systems operation centre. Two other buildings -- a warehouse and regional operations centre -- will be built there regardless of the outcome of negotiations.
In addition, Hydro One agreed to reduce distribution charges to local consumers by 1% for the next five years. It's important to note the distribution component of your hydro bill accounts for about 20% of the overall bill; rates are regulated by the OEB. It's also important to understand Orillia falls under a different rate class than rural residents, meaning we pay less for power than our rural counterparts.
Some believe the city was blinded by dollar signs. If Hydro One purchased the entire 36 acres, the city would bring in more than $6 million in revenue from the sale. More importantly, Hydro One will pay about $1 million in taxes to the city annually. The cherry on the sundae was Hydro One's claim "hundreds of jobs" could be coming to Orillia, generating an annual payroll of about $30 million.
All along, it was believed the OEB would simply rubber-stamp the deal. But on Friday, it defied many experts by issuing a procedural order that "holds the decision in abeyance" until it rules on the Hydro One distribution-rate application. "The OEB has determined that Hydro One should defend its cost allocation proposal in its distribution rate application prior to the OEB determining if the Orillia acquisition is likely to cause harm to any of its current customers," the order stated.
Essentially, the OEB is concerned the acquisition will translate into higher costs to Orillia citizens. In its order, the OEB noted when Hydro One acquired other utilities (such as Woodstock, Haldimand and Norfolk), there were "large distribution rate increases for some customers ... once the deferred rebasing period elapses."
Orillia Mayor Steve Clarke, a leading proponent of the plan, said the city took pains to negotiate a deal that would ensure that would not occur. "That's not what we negotiated and that's not what we expect," Clarke said. But he also noted the city is not in the driver seat in negotiations. "We're just passengers in the process," he said. "Hydro One is driving it."
And therein lies the problem. In a landscape-changing deal of this magnitude, it is frustrating to see an outside entity at the steering wheel, especially when that entity is the much-maligned, dysfunctional, bloated Hydro One monopoly. Kudos to the OEB for this enforced intermission. Its ruling underlines many of the concerns people have. It also gives everyone a chance to re-evaluate the playing field -- an opportunity the city should take seriously before jumping into bed with a loathsome lover that has often over-promised and under-delivered.