Community Counselling & Resource Centre

Possible hydro rate increase in Peterborough in 2019 if alternatives to Hydro One sale not found

March 13th, 2018

Without the sale of Peterborough Distribution Inc. (PDI) to Hydro One, hydro rates may need to increase to make up for the loss.

“I think in early 2019 we would need to be applying for a rate increase,” says John Stephenson, president and CEO of PDI.

On Friday (March 9) Hydro One announced it was ending negotiations that would see the company take control of the city’s hydro distribution company. The decision to sell the company was made in 2016 and was narrowly decided 6-5 by council due to a swing vote.

In a poll conducted by in 2017, 84 per cent of respondents said they did not support the sale. Many advocates in the community have publicly condemned council for its decision and have pushed for council to reconsider.

In a letter to councillors in 2016, David Bignell, chair of City of Peterborough Holdings Inc., which owns and operates PDI, said the company was losing value and the city’s dividends would continue to decrease annually.

“Historically, PDI has been able to provide the City with an annual dividend of approximately $1.2 million and the projected annual dividend will be as low as $700,000. This future dividend low point may decline further as additional regulated, industry and customer driven capital investment is required,” says the letter.

It goes on to say due to Peterborough being surrounded by areas covered by Hydro One the customer base is not expected to increase and due to infrastructure costs and regulatory requirements PDI’s costs are expected to go up.

The letter also says if unchanged PDI “will be unable to effectively operate in this changing environment due to its inability to achieve the scale necessary to reduce costs, and to access capital needed to effectively maintain existing and address future customer service and regulatory standards.”

Stephenson says while those projections haven’t been updated recently they still largely hold true. And without the five-year rate freeze promised in the deal rates may need a bump to compensate.

But he says the situation isn’t urgent and the City and PDI can plan around those projections.

“If you’re prudently planning for the future of the utility nothing has changed for the direction we should be heading.”

Though changes will need to be made and Stephenson says the city and PDI will be “continuing to explore similar alternatives, or as similar path, we discussed in 2016.”

He also says the optimal time for a sale is coming to a close, with a three-year window on a provincial transfer-tax reduction ending this year. That reduction would offer “substantial value” to the sale.

On Friday, City CAO Allan Seabrooke said he thought a deal was imminent.

"Quite honestly, we were surprised," he said. "And disappointed.... We thought any of the outstanding issues could be resolved."

Coun. Keith Riel, who was a vocal opponent to the sale and says the deal falling through is vindication for the five councillors who voted against it.

He says for PDI business should continue as usual and put this decision on the backs of citizen activists who fought against the sale.

"This is owned by the citizens of Peterborough," he says.