Exploring a Merger Opportunity to Energize Our Future

The City of Brantford, along with the City of Cambridge and the Township of North Dumfries, is exploring a potential merger of municipally-owned holding companies, and affiliates, including Brantford Power Inc and Energy+ Inc.

The electricity industry in Ontario is undergoing significant change – how power is generated, how it is used, and how energy is conserved. The energy needs and service expectations within our community and across Ontario continue to evolve and grow at a rapid pace. Please visit EnergizingOurFuture.ca to learn more about the potential merger.

Commonly Asked Questions

Where can I find out more about the potential merger, and how can I provide my feedback?

Please visit www.energizingourfuture.ca to learn more and be informed. Click on Ask a Question. Complete the form and submit your question.

You can also provide feedback on the following municipal platforms:

Engage Cambridge at engagewr.ca/cambridge
Township of North Dumfries website at northdumfries.ca
Let’s Talk Brantford at letstalkbrantford.ca.

How will customers benefit from a merger of the two utilities, Energy+ and Brantford Power?

Customer benefits include:

Stable distribution rates for the first ten years after a merger
Continued local presence and local ownership
Greater capacity to deliver advancements in technology in response to customer requests
Enhanced opportunities for innovative solutions for customers and local businesses

Increased opportunities for efficiencies
Commitment to maintain high level of customer service
Continued commitment to a safe and reliable supply of electricity

Who makes the decision to amalgamate Energy+ and Brantford Power?

The three municipalities, the City of Brantford, the City of Cambridge and the Township of North Dumfries, own the holding companies and affiliates. On the recommendation of the Boards of Directors for Brantford Energy Corporation and Cambridge North Dumfries Energy Plus Inc. and their affiliates, the respective municipalities, the Councils, will decide whether to proceed with a merger or not.

When will municipal councils be making a final decision?

After the public engagement period, the three municipalities, at individual Council Meetings, will review recommendations and staff reports, public input and determine whether or not to proceed with a decision to merge. The proposed merger will also require Ontario Energy Board approval.

Why is a merger between Brantford Power and Energy+ being explored now?

Brantford Power and Energy+ are both local distribution companies owned by their municipalities. The City of Brantford owns Brantford Power. Energy+ has two shareholders – the City of Cambridge and the Township of North Dumfries. Both organizations have a shared goal to deliver electricity and value-added services at competitive rates to meet the needs of their communities. Both companies are referred to as "poles and wires" companies because they own the infrastructure to deliver electricity across their service territories. The Ontario Energy Board regulates their distribution rates and how they operate many of their business practices.

The two companies have a long-standing, positive working relationship, have adjoining service territories, co-own a transformer station on Powerline Road in Brantford, and have Operations Teams from both utilities work out of a shared Operations garage and warehouse space in Brantford, based on a shared services agreement. Both companies are members of the GridSmartCity Cooperative, a consortium of 15 like-minded local distribution companies in Ontario whose joint initiatives and collective purchasing power help members run more innovative utilities to realize scale efficiencies.

What steps have been completed so far in the merger exploration process?

The merger exploration is a rigorous financial and due diligence process that is conducted by the Boards of Directors for Brantford Energy Corporation and Cambridge North Dumfries Energy Plus Inc. and their affiliates and the three municipalities as shareholders, together with their legal and financial advisors, over several months. More details on the merger exploration process, milestones and timing are available at www.energizingourfuture.ca

Where can I find more detailed information about the financial and legal due diligence reviews that have been completed?

The three municipal shareholders have undertaken rigorous financial and legal due diligence reviews and discoveries over the past six months. The results of the independent reviews are confidential, as outlined in the Memorandum of Understanding.

After the consultation period, the three municipalities, at respective Council Meetings, will review recommendations and staff reports and determine whether to proceed with the merger or not to merge. If approved by the Councils, the new Shareholder’s Agreement and Merger Participation Agreement will be made publicly available through the Ontario Energy Board (OEB) approval process.

What will happen to the employees if the two utilities merge?

The employees of both companies are valued and key to what makes each utility great. The joint Memorandum of Understanding that the shareholders signed clarifies that all existing employees shall be treated fairly. The independent business review must also demonstrate that a merger would create diversification of opportunities for the employees.

If approved, when would the potential merger take place?

This is a lengthy process that takes several months. Once the business and financial due diligence has been completed, if the municipalities agree to approve a merger, the proposed transaction must be sanctioned by the Ontario Energy Board. If approved, the merger would take place in early 2022.

Will the municipality be seeking public input on whether or not the two utilities should merge?

Yes, the shareholders and the utilities will be conducting community engagement to inform residents about the potential merger and encourage their feedback. The outreach campaign includes: a dedicated website available at energizingourfuture.ca, a bill insert for all utility customers, online and print newspaper advertisements, a direct email campaign, social media, and information on the shareholder and utility websites. The engagement offers customers and community members convenient and easy-to-use options to provide their input and offer feedback relating to a potential merger.
There will also be an opportunity to delegate before Council prior to the Councils making a final decision.

Why should the local utilities merge?

In 1994, Ontario had some 307 local utilities. Fast forward to today, and that number is fewer than 60. The consolidation of local utilities over the last 25 years is ongoing. Municipal Councils are responsible to their ratepayers to carefully evaluate the framework, the legal and financial outcomes, and comprehensive staff reports and feedback from the public. A successful merger must be based on the partners joining together, and each contributing to create a stronger organization that is better positioned to serve their customers.

Will the City of Brantford/City of Cambridge/Township of North Dumfries have less control as a shareholder of the new utility if the merger proceeds?

The percentage of ownership of the new merged utility would be based on several factors, including the number of customers each utility brings to the new combined utility. In this case, the City of Cambridge would hold the majority of shares; however, terms in the shareholder's agreement would be structured to ensure the Township of North Dumfries and the City of Brantford have significant minority rights to protect the interests of all shareholders.

How will the new merged utility be governed?

A Board of Directors, based on proportional representation of all shareholders – the City of Brantford, City of Cambridge, and Township of North Dumfries - would provide governance and oversight of the new merged utility.

Will the utility service remain local?

Yes, a local presence will remain in each community. Trucks and crews will still be dispatched from Operations centres in each community.

Will any jobs be lost in the community as a result of the merger?

If the merger proceeds, we are committed to treating all employees fairly. It is expected that most future employment efficiencies will be gained through retirements and attrition. Current employees will be offered new job opportunities based on the larger merged utility having a greater capacity to provide new or different services or technologies to their customers.

Would the utilities amalgamate employees at some locations and close any offices if they merge?

The framework developed to support the merger of the two utilities does not contemplate amalgamating employees at any one location. The operations and administration facility in Brantford at 150 Savannah Oaks Drive, the operations facility in Cambridge at 1500 Bishop Street and an administrative office located at Southworks in Cambridge would be utilized by the newly-formed utility if the merger proceeds.

How will the merger affect the annual dividend paid to the City of Brantford/City of Cambridge/Township of North Dumfries?

At present, each of the utilities pays annual dividends to their respective shareholders. It is contemplated that the merged utility would generate a net income, and dividends would continue to be paid to each of the three shareholders. The amount of those annual dividends is not known at this time. However, the merged company will be favourably positioned to deliver higher dividends to the shareholders.

Will ratepayers have an opportunity to comment on the proposed merger?

Yes. A new website EnergizingOurFuture.ca has been created to provide information about the proposed merger and collect feedback and comments from public members in each of the communities. In addition, each of the two utilities, Energy+ Inc. and Brantford Power Inc., are sending out a bill insert to every utility customer inviting feedback. Information will also be shared on each of the municipalities’ websites, via social media, and in local newspapers.

Is the merging of utilities being considered to make more profit?

The utilities are considering joining together because it is in the best interest of their customers and shareholders. Both of the utilities operate at a high level of service when benchmarked with other utilities in Ontario and deliver positive results both financially and in terms of service delivery.

Even though utilities are responsible for only approximately 20 to 25 percent of a utility customer's total bill, a combined entity can achieve even further efficiencies and help to continue that record of performance and ensure future distribution rates remain stable on this portion of the bill.

Each utility appears to be doing well on its own. Why merge the two utilities?

Energy+ and Brantford Power are both well-established electricity distribution companies in Ontario. Both are innovative, forward-thinking and community-focused. By combining knowledge bases, resources and leveraging their size as a larger utility, collectively, they will be better positioned to implement emerging technologies to provide new and enhanced services to customers.

They both also recognize that further efficiencies must be achieved to reduce the upward pressure on local electricity distribution rates paid by their respective customers. By considering joining with each other, further efficiencies can be achieved through eliminating the duplication of services and realizing economies of scale.

Those efficiencies directly impact the customers the utilities serve and help support building a vibrant community attracting new residents and businesses.

Will service levels be affected because it will now be this single, larger utility?

Each community will continue to have local utility operations maintained and its unique requirements recognized. The newly merged company will be dedicated to maintaining or improving service reliability and customer service.

Where is my emergency electricity service located? Will I have to wait for an emergency crew to come from another service territory? How long is that going to take?

The emergency response times will not change. Maintaining or improving the level of service will continue to be necessary for the new merged utility.

Cambridge and North Dumfries customers will continue to be serviced from the operations centre at 1500 Bishop Street in Cambridge. Brantford and Brant County customers will continue to be serviced from the operations centre at 150 Savannah Oaks Drive in Brantford.

The new merged utility will be committed to maintaining and enhancing customer service in all its locations.

Where will the operations centres be located?

The two existing operations centres, one located in Cambridge and one located in Brantford, will continue to ensure the crews can quickly respond in an emergency. Having the operations fleet situated in the two locations is the most efficient. The big vehicles with booms and equipment can be dispatched quicker to their destination, located at opposite ends of the larger service territory.

Have the municipal Councils already made a decision about a merger of Energy+ and Brantford Power?

Municipal shareholders are currently reviewing the merger opportunity before them and are planning to decide in August 2021 whether to proceed with a merger or not. A final decision has not been made. The Ontario Energy Board must also conduct a detailed review of the proposed transaction and provide their approval.

Why is the County of Brant not included in this process?

In November 2014, Cambridge and North Dumfries Hydro Inc. purchased Brant County Power Inc. from the municipal shareholder, the County of Brant. Cambridge and North Dumfries Hydro Inc. amalgamated with Brant County Power Inc. and rebranded as Energy+ Inc. in 2016. Energy+ serves customers in the City of Cambridge, the Township of North Dumfries, the County of Brant and in some portions of the City of Brantford. The municipal shareholders of Energy+ are the City of Cambridge and the Township of North Dumfries.

Accordingly, the electricity customers in the County of Brant are included in the proposed merger.

Customers in the County of Brant can ask questions and submit their comments about a potential merger of Energy+ and Brantford Power at EnergizingOurFuture.ca.

How would a merger benefit the city longterm?

The three municipal shareholders have undertaken rigorous financial, legal and technical due diligence reviews including analysis of case studies from previous energy group mergers in Ontario that have resulted in longterm benefits.

The Ontario electricity distribution sector has continued the steady move towards greater consolidation ever since the industry was restructured in 2000. Prior to restructuring, Ontario had over 300 local electricity distribution commissions (these commissions were essentially an arm of its municipal government). Today Ontario has approximately 55 local distribution companies, including Brantford Power and Energy+. Most industry observers anticipate that further consolidation will continue in Ontario over the coming years.

Before a merger can proceed, it must be approved by the Ontario Energy Board. When the Board reviews merger applications its primary focus is to ensure that utility costs are likely to be reduced as a result of efficiency savings produced by the merger. These cost savings are ultimately passed along to consumers in the form of lower distribution rates when compared to the status quo (that is, if no merger had taken place and the utilities carried on business as stand-alone entities).

Where is the evidence that merger would reduce rates?

One of the benefits of the potential merger is that for ten years after the (newly merged) company is formed, the only factors impacting a rate increase would be inflation and efficiency adjustments (lower than the pace of inflation). This process is set and adjudicated by the Ontario Energy Board, as are all distribution rate changes in Ontario. Consequently, rate increases for the decade following a merger are projected to be more stable and predictable than compared to the status quo.

If the merger does not proceed, Brantford Power and Energy+ would each be scheduled to file a comprehensive “Cost of Service” rate application every five years, and their customers may be subject to greater rate instability in those years. “Cost of Service” rate applications are comprehensive applications, subject to approval and review from the Ontario Energy Board and consumer advocates, which often result in above-inflation rate adjustments.

Through the merger transaction, Brantford Power and Energy+ customers would avoid the impacts of these Cost of Service applications for the 10 years following the merger.

What are the economies of scale associated with the potential merger?

Experience from other utility mergers demonstrates that there are a number of opportunities to benefit customers including:

Stable distribution rates for the first ten years after the merger
Continued local presence and local ownership
Greater capacity to deliver advancements in technology in response to increasing customer requests
Enhanced opportunities for innovative solutions for customers and local businesses
Increased opportunities for efficiencies
Commitment to maintain a high level of customer service
Continued commitment to a safe and reliable supply of electricity.

Efficiencies as a result of the proposed merger of Energy+ and Brantford Power would also reduce operating costs. Distribution rates are based on the cost to operate the utility business and the investments into infrastructure to ensure reliable safe service. An important goal of a merger is to contain costs for customers for the distribution portion of their bill. Details of the forecast cost savings as a result of the merger will be included in the application to the Ontario Energy Board which must approve this transaction.

How would the merger affect service and frequency of billing?

A merger between Brantford Power and Energy+ will not affect the billing frequency. Both utilities currently bill customers monthly and the billing frequency would remain the same if the two utilities merge.

Through the merger transaction, Brantford Power and Energy+ customers would avoid the impacts of these Cost of Service applications for the 10 years following the merger.

It is stated that the merger would allow for a “greater capacity to deliver advancements in technology.”What specifically would that entail? Along those lines, would there be an increased opportunity for localized energy production with wind/solar farms or distributed rooftop solar?

A merger of Brantford Power (approximately 41,000 customers) and Energy+ (approximately 68,000 customers) would create a utility that ranks 7^th in size across the 55 utilities in Ontario. Based on the Memorandum of Understanding there is a commitment to treat employees fairly. The intent is to find employment efficiencies through retirements and attrition. However, with the joined company, there may be roles that could be realigned to focus on new technologies like battery storage, research into innovative intelligent equipment for quicker outage identification and restoration, additional opportunities for new customer communication around outages and other leading edge advancements of interest to a distribution utility for the benefit of their customers and communities. The Save on Energy programs are now being delivered provincially through the Independent Electricity System Operator (IESO). Based on the current programs, at this time there is not an increased opportunity for localized energy production with wind/solar or distributed rooftop solar.

The City of Brantford provides a number of services currently to Brantford Hydro. Will the City reduce its staff complement as a result of the merger? If not, what is the impact on the City of Brantford budget to maintain the staff complement upon the loss of the offsetting revenues from Brantford Energy?

Yes, the City of Brantford does currently provide some services to both Brantford Power and Brantford Hydro (affiliates of Brantford Energy Corporation) including Information Technology and Legal services.

If the proposed merger between Brantford Power and Energy Plus does proceed, there will not be any immediate changes to existing shared service arrangements; therefore, the City of Brantford staff complement is not expected to change. As is typical, service level requirements may be modified in the future as dictated by technology advancements and varying market conditions.

How do other options compare to the proposed merger?

Current Options Under Consideration

	Sell to another party	Status Quo	Merger of Brantford Power & Energy+
Forecast dividends	Nil	$2.6 million a year	Significantly Greater than Status Quo*
Promissory note interest over next 10 years	Nil	$955,472 a year	Nil**
Sale proceeds available to pay down municipal debt	Yes – sale proceeds would be available to pay down municipal debt	No – value of utility remains invested	No – value of utility remains invested
Growth in value of utility over next 10 years	No opportunity for growth	Opportunity for growth	Opportunity for growth
Distribution rate impact 10 years following the merger	Unknown	Cost of service rate increases above inflation	Rate increases tied to inflation for 10 years. No cost of service adjustments
Distribution rate impact from 11th year and on following the merger	Unknown	Customers receive no merger efficiencies or cost reduction benefits	Customers benefit from merger efficiencies and cost reduction benefits

*Based on independent projections from Deloitte and Grant Thornton.

**Forgone promissory note revenue will be replaced through increased forecast dividend payments.