THUNDER BAY – The Ontario Energy Board has approved a merger between Thunder Bay Hydro and Kenora Hydro.
The deal, still subject to final agreement between two companies, will allow the newly created – and yet to be named – electrical company to continue to service the existing 56,300 residential, commercial and industrial customers currently serviced by both companies.
Under terms of the deal, the City of Kenora would own 9,100 common shares of the new company, with Thunder Bay Hydro Corporation owning the remaining 90,900 common shares, though that final figure is still subject to a valuation adjustment.
The merger, once finalized, would require a new electricity distribution licence, along with the cancelation of licences presently belonging to Kenora Hydro and Thunder Bay Hydro.
The deal also includes a promise to defer rate rebasing, meaning any rate adjustments for Thunder Bay Hydro customers would be made using the price cap incentive rate-selling options, while Kenora Hydro customers would have their rates adjusted using the annual incentive rate-selling index option.
A public hearing was held on July 20 to allow interested parties to file objections or express support.
The OEB also conducted what it calls the no-harm test to assess the merger that ensures customers are protected when it comes to electricity prices, as well as the adequacy, reliability and quality of electricity service. Other areas of concern include the cost effectiveness of power generation and transmission, the promotion of the use of renewable energy sources and helping to facilitate the use of a smart grid in Ontario.
The applicants stated they planned to offer hydro rates under the merger that would have been less than they would have been had the two utilities remained separate entities, cost savings coming from streamlining administration, customer service, regulatory and finance departments. The application suggests the companies could find synergies totalling $3.8 million during the five-year deferral period, with transaction and transition costs totalling $1.4 million between 2018 and 2020.
“Based on the evidence on record, OEB staff submitted that the amalgamation will not result in customers of Thunder Bay Hydro or Kenora Hydro experiencing negative price implications in the near-term,” the OEB report states.
Annual savings of about $900,000 per year is anticipated in operational, maintenance and administration costs, a figured expected to continue in perpetuity.
The report indicates service centres will remain open in both Kenora and Thunder Bay, but operations will be reviewed with regard to control of the distribution of system assets, adding there will be no change in front-line operational staff who handle outages in both communities.
“The OEB is satisfied that the way in which the applicants propose to provide service in the areas currently served by Thunder Bay Hydro and Kenora Hydro will be effective in continuing existing levels of service. Based on the information on the record, the OEB has determined that the applicants have met the no-harm test with respect to reliability and quality of electricity service,” the report states.
Under terms of the approval, the two companies must notify the OEB when the transaction is completed to allow for the issuance of the necessary licenses.
