Company zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA The - PDF document

Company zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA The Journey from Local to Regional Distribution The Future of Corporation zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA London Hydro Inc. Weihmayr, CD O.T. [Tom) President Green Energy Dynamics 02008 Green Energy Dynamics

Table of Contents zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA BACKGROUND ......................................................................................................................... 2 ......................................................................................................................... The Province 2 Where zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA The City of London ............................................................................................................... 2 ................................................................................................................. London Hydro Inc 3 Looking Forward ...................................................................................................................... zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA ............................................................................................ How the Big Players Came to B e 6 ............................................................................................ Do W e Grow From Here? 7 .......................................................................................................................... Our Choices 7 Status Quo ............................................................................................................................ 7 Centralization ....................................................................................................................... 7 ..................................................................................................................... Regionalization B The Horizon Story .................................................................................................................. 8 .. .............................................................................................................. Current Opportunities 8 9 APPENDIX A ............................................................................................................................ 10 .. zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA ................................................................................................... Regulatory Responsibility 10 8 .............................................................................................................................. A P P E N D I X 11 ............................................................ Current Local. Distribution Companies in Ontario 1 1 ............................................................................................................................ A P P E N D I X C 14 LDC Service Areas in Ontario ............................................................................................ 14 ............................................................................................................................ D A P P E N D I X 15 Forecasts) .................................................................................. Commodity Prices (with 15 E ............................................................................................................................. A P P E N D I X 16 Ranking of 84 LDC's to determine if Economies of Scale in Cost of Service Delivery .............................................................................................................................. truly exist 16 1

The Province zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA BACKGROUND zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA Not too long ago, there were over 300 municipally-owned public utility commissions in the Province of Ontario. T h i s meant 300 individual billing systems, banking relationships, HR policies, collective agreements, vehicle fleets, maintenance contracts and Christmas parties. The issues arising out of such a fragmented delivery system for delivering essentially the same sewice are obvious: jurisdictional issues, duplication of resources and reduced economies of scale resulting in a relatively high cost for consumers. less than 10 years, the market has consolidated to 84 companies. While that is much In better, it still means that there are 84 companies who must own a billing and customer care system: 84 different people worrying about IT systems and how to bring them into the future, and how to coordinate largely mandated and certainly regulated changes to their individual business processes when changes occur; 84 different people, like some on this learned panel, worrying about cash flow and lines of credit on behalf of everyone else in the system. Additionally, we don't have - practically - a common way of describing the speaking services provided by LDC's across the province. T h e Province released a report a couple of years ago that said we have in the order of 4 8 different ways of describing electricity. The City of London Guidelines established by the City and the utility on behalf of all its stakeholders, in December 2007, strictly outline that any merger, acquisition or dilution of London Hydro and regulatory environment in Ontario over the next 10- zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA must (among other things)': * provide an opportunity for increased investment value to the City of London or reduced electricity costs for Londoners; * have a strong local presencez: and, present the best strategic objective to the City of London given the current and expected future policy 15 years. 1 London Hydro Inc. Shareholder Declaration, Schedule "2". Schedule "A". pp. 13-14. Signed 6 December 2007. 2 Owing in large part to the estimated $70MM that London Hydro's Head Office is estimated to contribute annually to the local economy. 2

In June of 2008, Board of Control recommended3 that the City adopt its Hold a public meeting to discuss the recapitalization of London Hydro. zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA Established in zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA recommendations regarding guidelines for any proposals or mergers involving London City of London. zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA Hydro, which (among other things]: - London zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA * Would see a headhegional office for a combined utility located in London; and, London Hydro Inc. Hydro Inc. is the Local Distribution Company (LDC) for the 1993, As such, London Hydro owns and operates the 2,600 kms of overhead and underground physical electricity infrastructure in the City of London. $1 4,0oO,000 to the City's economy annually5. zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA by the City and its ratepayers, it is the default company Wholly owned from which consumers purchase electricity from the Provincial grid4. London Hydro is the 7Ih largest utility in the Province by Customer Base and is without a doubt, one of the city's most valuable assets. The benefit of having its headquarters in the City of London has been estimated by some experts as contributing Board zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA 4 Commercial zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA Residential customers: 1 15,000 ($84,000,000): Registered Retailers: zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA Sharma. Bernie Watts and Mark Rosehart. zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA of Control Recommendation to Council. 18 June 20%. 3 8, Industrial customers: 13,000 ($103,000,000 in revenue); K e y Account customers: 220 ($90,000,000); 9 to a February 2004 Presentation to the OEB by Unay [Associated Customers: 25.000) according 5 T h e Special Committee of London Hydro's Board tasked with exploring the future value, quality and competitiveness of the utility retained Professor Conklin from the University o f Western Ontario to study this very issue. His calculations set the value to London's economy at around dollars over the next 5 years $70 million 3

Top 10 zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA by Qlstomers Served zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA LDCs e c a A little known added value of the utility to its shareholders and customers alike are its Conservation and Demand Management Initiatives. Natural Resources Canada regularly invites London zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA Our utility's leadership in this field is being recognized across the country. T h e Chill Out Project, where London Hydro removed 16,000 energy-guzzling refrigerators from outlets across the city, earned our utility the 2007 Energy Star Regional Utility of the Year award from the Federal Government. Hydro to present their successes at national conferences to assist other utilities in implementing these programs in their communities. Forward thinking incentive-based initiatives such a s the Great Refrigerator Roundup, Summer Sweepstakes, Small Commercial Direct Install Program, and ERIP have by all accounts enjoyed a very high uptake percentage in relation to other utilities. These initiatives are rarely addressed for what they really are: a value-added benefit to all of its OPA targets for the year: zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA both the City and the individual accounts. For example, in the first 6 months of 2008, the Electricity Retrofit Incentive Program (ERIP) has: exceeded 4