So where are the Hydro answers?
BLOG #542: City council will have its chance tonight to debate a proposed ‘partnership’ arrangement with EPCOR, the multi-billion-dollar energy company owned by the City of Edmonton. There are many unanswered questions and one source now says the deal is “as good as dead.”
Monday, Oct. 24, 2011 – London
Expect a crowd at tonight’s city council meeting for the discussion about the proposed ‘partnership’ between energy giant EPCOR and London Hydro and / or other City of London utilities.
And so there should be.
This deal, however it is structured, is characterized by EPCOR as an investment. Investors usually expect a piece of the action, a part of the company. In effect, therefore, we’d be selling a chunk of London Hydro et al.
Investors usually like to see dividends along the way, too. So any dividend London Hydro pays to an outsider, for example, means a cut in what is could be paying to the City of London, which owns 100 per cent of the power company. Here’s the rub on that: EPCOR is owned 100 per cent by the City of Edmonton, to which it pays significant annual dividends. So a chunk of London Hydro’s profits, which come from Londoners, could end up subsidizing property taxes for Edmontonians.
Some people will be in the audience tonight because they are worried any deal with EPCOR could involve our water utility. And so it could.
One of the possible ‘partnership’ arrangements would see London’s utilities – power, water, sewer, garbage collection, possibly even parking – bundled into a new corporate structure under a single operating model. EPCOR could end up owning a piece of the holding company.
Same result, though: Profits from the sale of services to Londoners could be used to subsidize the City of Edmonton. As if they needed that.
A number of council members are getting nervous about the whole idea. One council source describes it as being “as good as dead.” So it should be. The concept was clumsily presented to the finance and administration committee last week. No one could explain what benefit would accrue to Londoners.
Mayor Joe Fontana tried to ease concern by claiming everything would be fine because EPCOR’s “shareholder is very much like us. Surely that is ultimate accountability and transparency.”
Right, as if taxpayers in Edmonton give a tinkers damn about us.
The mayor argued what we’d get would be insider information in how EPCOR managed, in just less than two decades, to move from being the City of Edmonton’s power company to a corporation worth almost $5 billion doing business in Alberta, British Columbia, Arizona and New Mexico. That would be nice to know, but do we have to sell our soul to get the info?
Admittedly, there are some realities London must face. The hydro business in Ontario, at the urging of the provincial government, is converging. Must we follow? That’s not clear – and becomes less so with the continuing assurances by hydro bosses that our rates are among the lowest in the province. What do we gain by getting bigger?
If we want to grow as a city we have to find a way to stretch our financial resources. Must we grow, or at least must we grow in the old-time way?
That’s the real question in all this. It’s high time it got answered with facts rather than bombast.
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If London Hydro wants to find new sources of revenue they should partner with someone like Bombardier and develop electric train systems for Municipalities.
Wrong, for a number of reasons, including the following:
1. Joe Fontana is a key member of the Board of Directors of London Hydro;
2. Joe has been pushing not only this EPCOR "water and wires" deal, but for the "tailor-made" restructuring of London Hydro from the get-go;
3. Mayor Joe also sits on SWEA, chaired by EPCOR consultant Dan Mathieson, who just happens to be the mayor of Stratford and a member of the board of "Festival Hydro."
Joe's in this up to his eyeballs and he will never be looked at the same way again by many Londoners. We're on to him more than ever. Think back-room Joe.
Join the dots. It's not too difficult. Quit acting so naive. Wake up!
offer for us to see.
The comment implies city is operating inefficiently and good be better if operated independantly. Where is staff on this? Why hasn't issue of removing politics thus reducing number of politicians and beaurocrats been clarified>
Assets of the City of London allow us to have financial credabilty in money markets. We have a high bond rating should there be a need to borrow.
When assets are sold and the money is used to buy other capital assets, there is a significant transfer loss for the selling and buying of assets.
At the end of the sale & purchase transactions we are financially worse off.
The "gamble" is that the "new assets" will provide London with a high return. If they do not - especially in the short term, London ends up heading for a lower bond rating and higher interest rates should we have a need to borrow.
In Summary for the EPCOR "deal"
1) Higher cost of services for Londoners & Londoners end up paying to offset Edmontoner's taxes.
2) Loss of London jobs
3) London bond rating falls - London pays a higher interest rate to borrow.
EPCOR - Three Strikes you are out!
Revenues - Expenses = Profit
The "expense" part of the formula includes wages which equates to jobs in the City of London.
In the EPCOR scenario, EPCOR takes care of a portion of the wage expense and jobs move to Edmonton.
I think that Mayor Joe has been talking about bringing jobs to London versus exporting our jobs to Edmonton!
Dead?!
Why did this matter even come up?
In Mayor Joe's words "I think we have more pressing matters to spend our time on!"
Revenues: (from you & I for services of water, power, sewers, garbage & parking)
Less: expenses to operate the above.
Equals Profit.
When run as a public trust, as it is now, the object is to break-even plus have a little extra profit for a reserve.
If there is a big profit, more so than there is today, then dividends could be paid out.
Nice idea, however the "big profit" would start with higher revenues - so we all pay more for our services. It is that SIMPLE!
With EPCOR taking a slice of the profits in their share of dividends we end up paying more for our services so that EPCOR can have a share in “OUR” profit for the City of Edmonton to offset THEIR taxes.
Why would we do that?
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