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Frequently Asked Questions

Who owns Peterborough Distribution Inc.?

The City of Peterborough owns City of Peterborough Holdings Inc. (CoPHI). CoPHI is a private business corporation and the City of Peterborough is its only shareholder. CoPHI has a Board of Directors made up of seven independent leaders and two elected officials. CoPHI manages several companies. One of these is Peterborough Distribution Inc. (PDI). 

PDI distributes electricity in Peterborough, Lakefield and Norwood.  It is regulated by the Ontario Energy Board (OEB). The OEB has authority over licensing, standards of conduct and services, and how rates are set.  

CoPHI recently got an offer from Hydro One to purchase PDI. As the sole shareholder, the City will have the final say whether or not PDI is sold to Hydro One. 

PDI accounts for approximately 37% of CoPHI’s electricity assets, and 26% of the combined water and electricity assets. 

Where does PDI rank among other municipal utilities in the Province?

PDI is the 24th largest utility out of 70 utilities in the province, and has about 36,000 customers.

Why is the Province forcing us to sell PDI?

The Provincial Government has publicly stated it is not forcing any kind of sale. However, in reviewing the report of the Ontario Distribution Sector Review Panel, the Government concluded that selling off some of the smaller utilities would help improve operating efficiencies and lower costs for all consumers. 

Why is CoPHI recommending the sale of PDI?

On October 31, 2016, CoPHI provided a recommendation to the Committee of the Whole that Council consider selling PDI to Hydro One. The recommendation included details of an offer from Hydro One.

While PDI is a successful company with a strong record of financial performance and customer service, CoPHI is recommending the sale because of systemic changes facing small distribution companies and factors specific to PDI that suggest a sale is worth considering at this time.

Systemic Changes

Changes in technology, customer expectations and new regulatory requirements present considerable challenges for small utilities like PDI.

According to the Ontario Distribution Sector Review Panel, these challenges are best met through larger entities that have the necessary scale and capabilities as well as a strong balance sheet. Small utilities simply lack the resources and access to capital required to address the significant changes already underway in the sector.

In fact, the Ontario Distribution Sector Review Panel determined that the optimal size of a local distribution company is at least 400,000 customers – over 10 times the size of PDI.

Factors Specific to PDI

PDI’s business is expected to have limited growth. Like all utilities, PDI’s growth is linked to increases in customers and their consumption patterns and neither is forecast to increase.

At the same time, PDI’s costs are likely to rise.  PDI requires system and infrastructure upgrades.  Over time, these upgrades will increase local electricity distribution rates and reduce the annual dividend PDI provides to the City.

With stable revenues and rising costs, PDI forecasts predict that over the next five years:

  • The local electricity distribution rates charged to consumers are expected to rise by 17.1% over the next five years;
  • The dividends paid by PDI to the City could decline 30%, from approximately $1.2 million to $700,000 or less; and,
  • The value of PDI could decline by $35 million over the next five years.

Why sell now? Why not wait?

CoPHI recommends that selling now provides the opportunity for Peterborough to capture the best value for PDI for the following reasons:

  • Ongoing industry consolidation and the scale of required system and infrastructure upgrades will likely reduce the value that a purchaser is willing to pay for PDI in the future.
  • The Province of Ontario has established a temporary reduced tax rate period to encourage the consolidation of local distribution companies, which will result in significant savings for the City.
  • The proposed transaction with Hydro One brings a unique development opportunity to the City through the establishment of the new Service Centre. This opportunity will be lost if we don’t proceed now.

Who is required to approve the sale of PDI?

The City is currently engaged in a consultation process so that the public can have a say in whether the offer should be accepted as well as any potential changes to the offer.

Peterborough City Council will make the final decision on whether to proceed with the sale.

In the event that Hydro One and the City reach a final agreement, the sale would also need to be approved by the Ontario Energy Board (OEB).

In deciding whether to approve the sale, the OEB must be satisfied that the sale does not harm PDI customers with respect to matters such as rates, reliability and quality of service.

Will the City be holding a larger style Town Hall meeting?

The City will be holding a special Committee of the Whole meeting Thursday, November 24, 2016 at 6:00 p.m. at Market Hall. The public will have an opportunity to provide comment and ask questions at this special meeting.

Why is the City only presenting ‘one-side’ of the information at the talkPDI public Open Houses?

The purpose of the talkPDI public Open Houses is to present the public with details of the Hydro One offer and allow the public to ask questions and provide their feedback on the offer.  

The information contained on the Open House display boards repeats the language contained in the offer and provides CoPHI’s rationale for recommending the offer to the City. CoPHI representatives are on hand to answer questions and explain their reasoning behind recommending the sale. Senior staff of the City are also on hand to answer questions about Council’s decision-making process and the next steps.   

There will be a special Committee of the Whole meeting on Thursday November 24, 2016 at 6:00 p.m. at Market Hall. This meeting has been planned in response to the public’s request for a larger style Town Hall meeting. It will provide an opportunity for the public to share their comments and questions with Council on the potential sale of PDI to Hydro One.

Who owns Hydro One? I thought Hydro One was for sale?

The Province of Ontario currently owns 70% of Hydro One and has announced plans to reduce its ownership stake to 40%. 

The Province of Ontario will remain Hydro One’s largest and controlling shareholder. By law, the Province is required to retain at least a 40% interest in Hydro One and no one other than the Province is permitted to own more than 10% of Hydro One. Hydro One is also prohibited by law from selling its Ontario electricity transmission and distribution businesses and is required to maintain its head office in Ontario.

The hydro rates charged by Hydro One are subject to regulation by the Ontario Energy Board (OEB).

Hydro rates cannot change without approval by the OEB. The OEB regulates investor and provincially owned distribution companies in the same way it regulates municipally owned utilities like PDI. All distribution companies are subject to the same rules and regulations related to setting rates and customer service.

Why did CoPHI not go through an RFP process?

CoPHI explored all of the alternatives, including preliminary discussions with a number of parties. The reality is that PDI is surrounded by Hydro One’s service territory and that, as a result, there are no other strategic purchasers.

Hydro One was also able to offer significant job and economic benefits, including a new Regional Operations Centre and a new Fleet Maintenance Garage. No other bidder could offer this kind of economic development benefit to Peterborough.

How will the sale of PDI to Hydro One affect my electricity bill?

Electricity distribution rates are the rates that are charged to deliver electricity to homes, businesses, schools and other institutions. The cost of electricity distribution is one part of your overall hydro bill.

As outlined in the Hydro One offer, the sale of PDI would reduce the electricity distribution portion of your hydro bill for at least 10 years:

  • In the first five years after a sale, the electricity distribution rate paid by PDI customers would be frozen at current levels, and reduced by 1%. 
  • In the following five years, any electricity distribution rate increase would be kept below the rate of inflation.
  • Savings from efficiencies achieved by Hydro One during the first five years will be used to offset Peterborough rates in years eleven onwards.

Hydro One is also considering a number of options to protect PDI customers in years eleven onwards, including the creation of a new rate class for the customers of the distributors it has purchased. This would be subject to OEB approval.