Monday, October 30, 2017

Collingwood's Proposed Sale of Its Public Utility - Collus

  One of the hot buttons in the Province right now is the whole issue of hydro and the skyrocketing cost of electricity that we have seen under the current Provincial Liberals.  Closer to home, is another seemingly controversial matter involving electricity, namely the Town of Collingwood's recent decision to divest itself of its remaining 50% ownership of Collus, our local and municipally owned public utilities operator that distributes electricity not only to Collingwood but also to Thornbury, Creemore and Stayner.

  As most of you know, the Town sold 50% interest in the company back in July of 2012 to Powerstream.  Since that transaction in 2012, much criticism has been heaped on the sale with most questioning why sell 50% thus losing control?  I am sure those involved at the time had their rationale.  During the last municipal election campaign of which I was a candidate, I thought the 50% sale would be a contentious election issue.  In preparation for such I made the point of meeting with then Co-Chair of Collus, David McFadden whom I knew personally as a real estate client to discuss the sale and the thought(s) behind it.  At that time this was seen as a strategic partnership that would create a more regional provider of essential services such as hydro, water and sewer.  Powerstream compared to Ontario Hydro, the other bidder at the time was seen as the ideal partner that could bring experience, training and other benefits to a company that was essentially a small time, small town  player.

  I am not going to question the validity, the relationship, the benefits financial or otherwise or the lack thereof of the 50% join ownership that has existed between the Town and Powerstream since the 2012 sale.  The details of the agreement are seemingly known to only a few anything else is pure speculation.  I will however weigh in on what I would be considering during the decision making process to sell the remaining 50% if I was sitting at the Council table.

  As of this writing there are 70 power distributions companies across the Province of Ontario with Collus being one of them.  To me that seems like a lot of players and I know it was part of the consideration that was given when the first 50% sale of Collus was being contemplated.  Having choice is a good thing.  It typically implies there is competition and competition for the most part is good.  At the same time too many of anything often leads to redundancies and inefficiencies resulting in potentially higher costs unless there is a clear, well defined and well executed value proposition. Since the 2012 sale to Powerstream for 50% of Collus, Powerstrteam itself has purchased Hydro One Brampton from the Province. Following that acquisition Powerstream then merged with two other electrical providers Enersource and Horizon Utilities in February 2017 to create a new company Alectra, touted as "second largest municipally-owned electric utility by customer base in North America, second only to the Los Angeles Department of Water and Power."  Tell me there are not efficiencies and other improvements to be had here which can be of benefit to consumers.  Consolidation is happening in virtually every business that I know of including mine, real estate. 

  The other consideration which no one has even remotely mentioned with respect to this transaction and the future is that of technology and I am referring to the disruptive type.  In the past 10 to 15 years look at the industries that have fallen victim to sweeping changes in technologies.  Kodak ignored digital photography until it was virtually too late.  Consider the changes that have taken place in the music industry, followed by books and others.  Today the entire retail landscape is undergoing rampant change with 25% of mall space in North America expected to be vacant by 2020 all due to technology and consumer's buying/consumption habits.  Are we to believe that the electrical distribution business is immune to such change and impact?  Think again.  If I were a member of Collingwood Council the question I would be asking myself is this.  Is it wise to be in the conventional electrical distribution business long term erecting hydro poles and stringing wires or is it too going to be adversely impacted by technological change?  Notwithstanding nuclear power plants, the production and transmission of electricity is pretty old school.  Coal powered generating plants, wooden poles in the ground and wires strung everywhere.  In Puerto Rico their main electrical generating plant is run on bunker oil. Not very high tech in my books.

In the mean time, companies like Tesla are bringing out their Powerwall and roof shingles that are essentially solar panels.  Other companies are developing clear glass with solar power generating capabilities that can be incorporated into windows for your home and office allowing you to generate your own power.  Solar panels are quietly appearing on homes in our area I am willing to bet that before long we will see a developer bring forth a community that is totally off grid and buyers will be clamouring to get in.

  Don't get me wrong, we are not about to see conventional electrical distribution go away entirely any time soon but change is coming and faster than we think.  The 70 electrical distribution providers across Ontario (Collus being one) and elsewhere are going to have to change to stay relevant adapting if they can to new and better technology.  That may mean reinventing themselves, further consolidation among the current players as well as other changes and ultimately that costs money. In my opinion, this is the type of consideration that needs to be given at the Council table with respect to the Town divesting their other 50% interest in Collus and when. 

  Those that choose to rant and rave about the Town's decision to sell the reaming 50% of Collus often do so based on emotion and or out of fear that our hydro bills will rise even further.  This however is a business decision and one that needs to be made based on not what dividend payments have or haven't been over the past five years but rather what will the next five means for this company and others like it.

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