What’s next for the OPUC?

By Joel Wittnebel/The Oshawa Express

For months, it dominated the news surrounding the Oshawa Power and Utilities Corporation (OPUC) as controversy swirled around the potential merger of the utility with power companies from around the region. Now, the OPUC has dropped out of the talks, but questions remain.

It was a question that Ivano Labricciosa, the utilities president and his staff began considering immediately after the storm settled. The Oshawa Express had the opportunity to sit down with the CEO and get answers to the question many have been asking.

What now?

Up until now

In April of last year, it was announced that the OPUC had signed a memorandum of understanding (MOU) with the Whitby Hydro Electric Corporation and the Veridian Corporation (collectively owned by Pickering, Ajax, Clarington and Belleville). The MOU stated the trio were looking to explore the potential benefits and feasibility of a merger.

When the news broke, the Oshawa discussion was laced with worries of increased rates, as well as questions about the closed door dealings of Oshawa city council, who nearly four months earlier, had a closed education and training session with OPUC officials. Speculation swirled as to whether city council had been aware of the merger possibilities ahead of the April announcement. It was something Mayor John Henry vehemently denied.

However, following several complaints from local residents, the Ontario Ombudsman stepped in and began investigating the closed meeting in an effort to determine if the meeting was in fact legal.

Ahead of the Ombudsman’s report being released, the former president of the OPUC stepped down. Original reports stated Atul Mahajan had been fired from his position, but when reached by The Oshawa Express, he said the split was a “joint decision.”

In the months that followed, the discussion shifted toward what the possible merger would look like. The OPUC held a public open house at the Jubilee Pavilion in an attempt to open the doors on the process.

When the final Ombudsman report was made public, it was clear council was well aware of the merger talks ahead of the official announcement, and their meeting was in violation of the Municipal Act.

“Although council did not debate the proposed merger or make a decision, the information presented and the questions asked materially advanced council’s business and decision-making,” the report reads.

When the dust settled, minds turned to the final report to be delivered to councillors at the end of 2016 by the OPUC; a report that would lay out the original findings of the merger talks. However, that report was delayed.

Finally, three months later, in March of this year, the OPUC announced that their role in the possible merger was done as the company had backed out.

When the possibility of a merger was gone, Labricciosa says the reaction was exactly what they had been hoping for, and not just from the community, but the City of Oshawa as well.

“We were very pleased,” he says. “It was fully supportive of our direction and decision and so we think we got full support from the community, the ratepayers, as well as the shareholder at large.”

However, it took some time to get things back on track, as many key leaders in the organization had their responsibilities turned toward the possible merger.

“We kind of regrouped, took a big breath,” Labricciosa says. “The second thing was to sort of dust off our plans in terms of what we were doing and sort of go, ‘where do we go from here?’”

Moving forward

Stepping out of the merger mindset can be hard for today’s utilities.

Over the last three decades in Ontario, municipally-owned hydro utilities have been conglomerating. In 1989, Ontario consisted of a patchwork of 317 different municipal utilities. By 2009, that number dropped to 220, and it now sits at around 70.

And the province has been highlighting the benefits of utility consolidation to the industry, with the 2012 Ontario Distribution Sector Panel Review and a 2015 report from the Advisory Council on Government Assets both pushing the bonuses of joining together.

“At the end of the day, on paper, there’s a lot of things that can be done,” Labricciosa says. The CEO is well aware of the merger process being part of one of the largest utility mergers in Canada as a part of Toronto Hydro.

And while critics claim the government is pushing smaller utilities into merging, Labricciosa isn’t so sure.

“I don’t think the government wants to do that, I don’t think they’re in the business of breathing fear into the utility sector,” he says. “They want you to lower rates, period, and if you can do that on your own, you should, and if you can’t, you should get together with someone that’s done it.”

Of the three companies looking to merge together with the OPUC, Oshawa’s utility had the lowest rates, serving more than 57,000 homes in the city and providing a dividend to the municipality (the sole shareholder) of approximately $1.7 million annually.

With that said, the utility doesn’t plan to stop trying to find avenues for saving or expansion.

“We are definitely making sure we don’t drop that ball and continuing on that path. We’re not stopping at a cost line that we can say we’re complacent with,” Labricciosa says. “We’re constantly looking at ways to manage that. So if we can find a way to get a higher efficiency, we will.”

New horizons

For Labricciosa, the OPUC’s revenue sources are divided into two sectors. The regulated side of the coin involves the city’s electrical grid. The unregulated side includes a wide array of new projects and opportunities in the field of data generation and management and it is here the OPUC will be looking to steer the company toward in the future.

“Our objective has been to continue to build that portfolio and what that is is providing services to other clients that are not wires, or energy, or electron related within Oshawa,” Labricciosa says.

This includes managing, leasing and expanding the 96 kilometres of fibre network the OPUC operates within Oshawa. Recently, a $400 million investment was announced as the company Flashfibr looks to create a massive fibre network in Oshawa while partnering with the OPUC. And while the CEO says the company will avoid stepping into the telecom business, they have no problem working as a background player and leasing their infrastructure if it helps the city grow.

“We had to make a decision, do we light the fibre and be technology players and become a telecom company, or do we want to own the fibre…and be good at managing that and managing who uses it and how it’s used and finding ways to put it in the right places across the city and kind of develop what the city’s objective is (to) develop a smart community,” Labricciosa says.

The OPUC is also expanding into the generation business.

In 2016, the utility signed into a partnership with Japan’s New Energy and Industrial Technology Development Organization (NEDO),  that has now outfitted 30 homes in Oshawa with a groundbreaking solar system that sees captured sunlight stored for use in the home or sold back to the OPUC’s grid.

The company also helps operate a combined heat and power system at the University of Ontario Institute of Technology (UOIT) that helps save the institute money and offset its global adjustment fees and more recently the OPUC was awarded the management contract for electrical services at Regent Park in Toronto.

A bright outlook

Regardless of the company’s current success as a solo utility, the pressures to merge and the challenges with rates still exist and are not going away anytime soon. However, for Labricciosa, a lot of the existing pressures for many companies are internal.

“I think that a lot of those pressures stem from companies that are really inefficient,” he says. “The pressures are not really aimed directly as us. I think we’re one of the examples of a low-cost, low-rate company and high delivery of services. So if you’ve got that formula right, I’d say don’t give up. In fact, you’ve got a lot to offer the industry. Quite frankly, I’m surprised why people haven’t tapped us and said, ‘hey listen, how are you doing this?’”

For that reason, Labricciosa says many companies need to realize, bigger isn’t always better.

“What I see is there are some really good small companies, some really good medium companies, some really good large companies and they’re not getting enough of the attention that they’re doing the right thing in the industry. All I hear is, ‘you’re just not big enough,’ and quite frankly, that bothers me in this industry,” he says.

“If you do the right things and you do them the right way, I think you can say with a lot of pride, there’s a place for you in Ontario. I just don’t think everybody’s doing that, I think everyone is jumping to a conclusion that doesn’t exist.”