Regional News
September 04, 2008 08:14 PM
By: Keely Grasser
A proposed merger of PowerStream and Barrie Hydro is expected to save the combined company $5 million a year, but it’s not yet known if customers will also see savings.
The merger of the two electricity distribution companies would mean savings in excess of $5 million through combining assets and better purchasing power, PowerStream spokesperson Eric Fagen said.
Combining the companies could also mean increased dividends to shareholders, including the City of Barrie for Barrie Hydro and Markham and Vaughan for PowerStream, and would help reduce the upward pressure on customer distribution rates.
An electricity bill is made up several components, Mr. Fagen said. The bulk of it is electricity charges. Customers also pay regulatory charges set out by the Ontario Energy Board and debt retirement fees, charged per kilowatt used to help pay down the former Ontario Hydro’s debt.
The remainder is delivery charges, made up of transmission and distribution fees.
That’s where any cost savings would be found, though he said they can’t be guaranteed because there are many variables.
“However, historically, if we look at other mergers in the province in the last eight years, overall, distribution rates have gone down,” Mr. Fagen said.
He added that a merger would mean the company would be better able to control costs and be more efficient and that “those savings are passed on to customers”.
PowerStream and Barrie Hydro announced in April they were looking into merging and were going to undertake a business case analysis.
The draft agreement between the companies lays out that Vaughan will retain 44 to 46 per cent of the merged company, with Markham holding 34 to 36 per cent and Barrie holding 18 to 21 per cent.
The exact distribution will be laid out in the final agreement if the merger goes forward, Mr. Fagen said.
The draft agreement also sets out a governance structure where certain decisions would need the unanimous approval of all three shareholders.
The proposed merged company would have a 13-member board of directors with six members representing Vaughan and Markham and Barrie having four representatives each.
The head office would remain in Vaughan, at the current PowerStream head office on Cityview Boulevard in Woodbridge, Mr. Fagen said. There would also be a minimum of two operations/administration centres, one of which would be in Barrie.
No management or unionized employees would be laid off as a results of the proposed merger, Mr. Fagen said.