Utility companies to explore merger
Though talk of a wedding is premature, negotiators for the public power distributors — Vaughan and Markham own PowerStream and Barrie owns Barrie Hydro — have been appointed to hammer out a non-binding letter of intent in pursuit of a merger.
“As a bigger utility, you have economies of scale, you have some efficiencies you can realize that helps make you even more cost efficient,” said Eric Fagen, PowerStream’s corporate communications manager. “That’s in essence why Barrie Hydro and PowerStream are looking at the benefits of a merger.”
Talks are expected to deal with the effects a merger would have on distribution rates, shareholder dividends, relative ownership, employees and operating costs, among other things.
“If the business case doesn’t show it, obviously there’s not going to be a merger,” Fagen said. “But our belief is that the business case will show it, for both parties, regardless of how much ownership each group has in the new entity.”
Any agreement must provide for one head office and at least two operation and administration centres, one of which would be located in Barrie.
The decision to talk amalgamation with Barrie Hydro comes during a provincial “transfer tax holiday”, which Fagen said is intended to promote energy utility consolidation.
“Once upon a time, there were over 300 municipal utilities in the province,” he said. “Now we’re down to just about 80 utilities in the province, local electricity distribution companies like Barrie Hydro and like PowerStream.”
The tax holiday — the third since 2000 — ends Oct. 17, Fagen said. Publicly owned utilities that submit merger deals to the Ontario Energy Board before then will be spared paying the 33 percent transfer tax.
PowerStream is Ontario’s third largest electricity distribution company with 237,000 customers in Vaughan, Markham, Richmond Hill and Aurora. Barrie Hydro is the province’s 12th largest distribution utility with more than 68,000 customers.
The potential merger would create the second largest power distributor in Ontario.
Vaughan Today Online: May 8, 2008 [link]