Duane Hicks
While the province has said it will not legislate utilities to amalgamate into larger ones, forcing mergers “through heavy-handed regulation which endorses a cookie-cutter approach and ignores regional differences” remains a very real threat, the Fort Frances Power Corp. is warning.
The FFPC is prepared to fight for what its believes in, but needs politicians—most notably local MPP Sarah Campbell—to listen up.
On May 31, the FFPC sent a letter to Campbell, as well as Premier Kathleen Wynne, Energy minister Bob Chiarelli, deputy Energy minister Serge Omborgno, Progressive Conservative leader Tim Hudak, PC MPP Victor Fedeli, NDP leader Andrea Horwath, and NDP MPP Peter Tabuns, which explained its concerns.
Campbell said Friday she has received the letter, has read it, and looks forward to meeting with the FFPC’s board of directors.
“By no means am I going to allow the government to do anything that would jeopardize the [1905 historic power] agreement for Fort Frances,” she vowed.
Several months ago, Campbell met with FFPC president and CEO Joerg Ruppenstein, as well as board members Doug McCaig and Deane Cunningham, to hear their concerns.
At that time, she told them she supported them 100 percent in their efforts to ensure the FFPC doesn’t have to amalgamate with any other local distribution operators.
Campbell reiterated that as a New Democrat, she vehemently opposes privatization of essential services.
“It’s an extremely important issue—electricity and affordability, these are things I am very, very concerned about,” she stressed.
Although legislated amalgamations are now off the table, Campbell added any regulatory changes that will make it impossible for small utilities to operate on their own are something she’ll have to watch out for and this is what she will discuss with the FFPC board.
Meanwhile, McCaig, who chairs the FFPC board, received a letter Friday from Premier Wynne, stating she felt the FFPC’s views are important to her and that she would pass along the letter to Chiarelli.
The FFPC remains very concerned the Ontario Energy Board will bring in regulations that will threaten its existence as a well-run, local utility which offers the lowest rates in the province.
Last December, an OEB-appointed Electrical Sector Review Panel made recommendations to restructure the electrical distribution system in Ontario.
While Chiarelli has since rescinded a recommendation for a legislated policy to force utilities to amalgamate, Ruppenstein said there remains a political will to whittle down the number of utilities in Ontario.
One way to still accomplish this same end-goal is through imposing a regulatory burden which swamps smaller utilities with limited resources.
For example, the OEB has recommended that utilities provide “rebasing” information every five years that would cost more than $200,000.
This cost would be prohibitive to small utilities such as the FFPC, and would result in a two percent increase in rates to FFPC customers
Since the FFPC’s licensing as a utility is dependent on meeting OEB requirements, it would be forced to conform to the notion that “bigger is better”—even though McCaig said the FFPC has “sufficient information to disprove this philosophy.”
The panel report also suggested that utilities could have up to 500,000 customers, and there would be a maximum of seven-10 large utilities across the province.
What’s more, these large utilities could be financed through investments from pensions funds such as the Ontario Municipal Employees Retirement System (OMERS), which brings with it the threat of privatization, warned McCaig.
This would mean the loss of the 1905 historic power agreement in Fort Frances.
That power agreement is worth $2.2 million a year to the 3,700 electricity users in town, and losing that agreement would mean rates would go up about 30 percent for every customer.
“In our 1905 agreement, it states specifically that we cannot commercialize the electricity,” McCaig said.
“In other words, we can’t make money off it,” he explained. “That’s why we don’t have a rate of return.
“We have a zero percent rate of return.
“If we commercialize it, the whole thing can be questioned by the power authority that now holds that agreement, which is H2O Power,” McCaig added.
“And they could negate it because we’ve contravened the rules.”
The province operates on a 9.88 percent rate of return, which again would mean rates would go up still more.
Ruppenstein said the province uses rate of return as a measuring stick with which to measure success, but he disagrees.
“To me, the best measuring stick out there is customer rates,” he reasoned.
“You can get into rate of return, borrowing power, and all sorts of statistics, which are fine and dandy, but what it all boils down to is what the customer pays.”
Privatization also would mean the loss of five positions, “which are sorely needed in the community at this time,” said McCaig.
These would include three FFPC management staff and two town staff responsible for billing.
It also would mean a general increase in rates due to the restructuring. Fort Frances could become part of a utility with a geographical area covering Sault Ste. Marie to the Manitoba border.
This vast region includes areas of very low density and extremely high costs for service and delivery.
“Basically, you’re talking about number of poles per customer out there in the ‘moose pasture,’” McCaig remarked.
“In Fort Frances, you’re talking about number of customers per pole.
“We’re talking about the cost of delivery,” he reiterated. “If you look at the rates out in the district, most of it is delivery charges.
“They’re not paying any more for the power than we are—it’s for the delivery of everything.”
Amalgamation also would affect the level of customer service currently enjoyed by FFPC customers—something that cannot be calculated on a financial measuring stick, argued McCaig.
FFPC board member Larry Cousineau said the fact is the FFPC is unique and shouldn’t have to fit in with what the province thinks is best when the FFPC is a proven success story.
“We’re working on a zero rate of return, plus we’re saving $2.2 million a year,” he cited.
“And in the same breath, we’ve got a physical utility here—poles, transformers, you name it—that’s second-to-none in the province.
“Our fleet of vehicles is all up to date,” added Cousineau, noting the FFPC also has well-qualified staff.
“We’re not falling apart and yet, they’re saying, ‘This isn’t going to work for you,’” said Cousineau.
“Bigger isn’t always better,” he echoed. “We like to think we’re doing just fine.”
“We’re very proud of what we’ve accomplished, of where our utility is at,” said Ruppenstein.
“Even from a technology perspective, we truly believe we’re a front-runner.
“We’ve got fantastic systems in place that keep up with the big players, if not superior,” he noted.
The FFPC currently meets or exceeds any requirements of the OEB, and even was acknowledged as a front-runner by OEB chair and CEO Rosemarie Leclair at the annual meeting of the Electricity Distributors Association in March.
McCaig said that much like the rest of Northwestern Ontario, Fort Frances has been economically-devastated by the collapse of the forest industry. And in addition to the immediate impacts noted above, amalgamation would have long-term implications.
Fort Frances currently has the lowest rates in the province and this is an asset to help replace the lost tax base in Fort Frances.
But if the preferential rates enjoyed here jump, it would discourage future businesses from coming here and possibly prevent businesses from staying here.
“As a board for the shareholders [the Town of Fort Frances], it is not an option but imperative for us to react in a positive and responsible manner, as would any good corporate citizen that favours our community,” said McCaig.
He added the FFPC is prepared to fight for what its believes in—and needs Campbell and others to join them in that fight.
“When there’s two utilities left, there will be Ontario and Fort Frances,” vowed FFPC board member and former mayor Glenn Witherspoon.
