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Hydro utilities trying once again to pull off merger

Vaughan to join with Markham
Already partners in Richmond Hill

Toronto Star - February 20, 2004
by John Spears


After one stillborn attempt at merging in 2001, Hydro Vaughan Distribution Inc. and Markham Hydro Distribution Inc. will try again.

If successful, officials say, they'll become the third largest local hydro utility in the province with 190,000 customers, behind Toronto Hydro, with 671,000 customers, and Ottawa Hydro.

The plan would involve merging the local hydro operations of Vaughan and Markham along with those Richmond Hill Hydro, which Vaughan and Markham bought following their failed merger three years ago.

The three utilities have operated as separate units since then, each with its own board of directors, management, operations centre and billing system.

The new proposal will meld them into a single company with one board and a unified operating structure.

Hydro Vaughan is directly owned by the City of Vaughan, while Markham Hydro Distribution is a unit of Markham Energy Corp., which is owned by the Town of Markham.

Officials of the two towns say financial details and apportionment of share ownership in the merged utility will be worked out following valuations of the companies.

Some jobs will disappear in the merger, Markham Mayor Don Cousens said in an interview. "Over-all, we have about 400 employees right now in the three utilities," he said. "That will come down by some number."

A consultant's report said annual cost savings of $6 million to $8 million a year should be attainable in a merged operation, Cousens said, but the estimated one-time cost of severance packages could be $10 million. "We're not about to be stingy or stupid in how we do that."

The former Conservative government had hoped local hydro utilities would merge into bigger, more efficient units when it set about restructuring the electricity industry in 1998. But aside from a buying binge by provincially owned Hydro One, which snapped up nearly 90 local utilities mostly in rural areas, few mergers took place.

The Ontario Energy Board is kicking off a process encouraging utilities to think about ways of becoming more efficient.

Public meetings will be held to discuss the proposed merger in both Vaughan and Markham on March 10, said Councillor Susan Kadis, who chairs Hydro Vaughan. If those go well, a merger agreement will be signed within days, and the partners will then ask the energy board for approval.

Kadis and Cousens both said the two municipalities' experience as partners in owning Richmond Hill Hydro has produced a good working relationship.

Vaughan and Markham tried to pull off a five-way merger with Richmond Hill, Aurora and Newmarket in 2001. That fell apart when it looked as if Vaughan would emerge as the controlling shareholder with more than 50 per cent equity.


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