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Arthur Goes To Council: Hydro One looking to purchase PDI

The city of Peterborough has an offer on its electrical distribution service from Hydro One which priced Peterborough Distribution Inc. (PDI) at $105 million. This is the first substantive event in a saga that has been dragging on for some time. There have been town hall meetings, protests, and surveys all centered around the potential sale of PDI, all based in the realm of the hypothetical. Finally, here is something tangible for politicians and people of Peterborough alike to squabble over.

The offer from Hydro One, a Crown Corporation, may come as a shock to those who feared that a private company was going to absorb PDI and hold the city hostage to indiscriminate rate gouging. Councillor Dean Pappas was quick to point out that despite Hydro One being a crown corporation at the time of this offer, the province plans to sell off 60% of its assets in Hydro One to private shareholders, making it in effect a publicly traded private corporation.

The City Council meeting was centered on whether to have Navigant, a consultation company that the city has employed in the past, should report on and analyze the offer. Navigant was hired by the city on July 28th and in early September hosted a town hall meeting on the potential sale of PDI. Ted McWilliams, the man presenting to Council on behalf of Navigant, stressed numerous times that his company’s job is to give Council the most information possible so the city can make the best decision, and not to make the decision for the city. Councillor Therrien has criticized Navigant in the past for being far too technocratic with the public when discussing the sale of PDI.

The offer itself is trying assuage any fears associated with handing over what some would call essential services over to a private company. Its first attempt to calm fears is the giant pile of money coming the city’s way in the wake of this sale, although the city is expected to only see $50 million. The other $55 is going to go towards servicing debt and a sales tax that comes out of the city paying for PDI to switch from a municipal to a provincial taxing system. Councillor McWilliams and Mayor Bennett both waxed poetic on the potential that the $50 million could have if it was reinvested into the community.

When asked about what to do with the $50 million, the Navigant representative stated that some communities have chosen to invest the money into other infrastructure projects. He cited the province using the money from the Hydro One sale to fund investment into public transit and contrasted it with some municipalities putting the cash into an investment fund and gaining revenue from the earnings.

The sale also promises to keep all PDI employees on staff for a year, and then to offer to pay for their relocation at other electrical distribution centers across the province. Council disagreed on how the sale would affect jobs in Peterborough. Councillor Riel estimated that 100 jobs would be lost in the aftermath of the sale of PDI, which he then quadrupled based on the average family size in Peterborough which is 4, stating that close to 400 people would be displaced in the aftermath of this deal. Councillor Clarke pushed back on this, stating that all of the councillors read the same numbers in the offer but came to completely different answers.

Finally, on the subject of rates in Peterborough, Hydro One has three phases that will play out over a 15 year period. From years 1-5, the municipality will see a 1% reduction in hydro bills as well as a rate freeze. From years 6-10 prices will be unfrozen, but will increase at a rate below inflation. Also during years 6-10 there will be an earnings sharing mechanism that will share profits from PDI, which will be used to mitigate any price increases that occur from years 11-15.

The discussion about the proposed offer ranged from shining-city-on-the-hill optimism to a kale-chomping-crossfitting-healthy skepticism. Councillor Riel asked incredulously why it is Hydro One setting the price for PDI at $105 million and stated that the municipality should be the one setting the terms and tell potential buyers to kick rocks down the road if they disagreed. Mayor Bennett stated that this was the best offer that the city was going to get, which includes Hydro One footing the bill for a new regional operating center which promises to bring 30 new jobs.

Mayor Bennett continued by informing the Council and those who were in attendance that big changes were coming to the electricity provision industry, and that earnings off of PDI were expected to drop from $1.2 million a year to $700,000 in the not-so-distant future. Councillor Gary cited a City of Peterborough Holding Inc. report that stated that PDI will not be able to continue to operate in this environment; he pivoted this to the Navigant representative, asking “Why are they buying PDI? They aren’t doing this out of the goodness of their hearts—only way I see them turning a profit is if they jack up rates or lay off employees”.

In the end, Council passed the motion for Navigant to drum up a report and analysis on the offer from Hydro One. Navigant says to expect it to be completed by mid-November.

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