City of Ottawa to get minimum $20M a year from Hydro Ottawa
Change in policy to ensure power utility is well-run company, says board chair
Starting in 2017, the City of Ottawa will receive a guaranteed $20 million each year from utility company Hydro Ottawa.
For several years, the dividend policy has been that Hydro Ottawa pays the city — its only shareholder — 60 per cent of its net income or $14 million, whichever is highest.
In April, for instance, the city received $19.4 million — its payment for 2015.
But while hiking the minimum guaranteed dividend may make it easier for the city treasurer to plan how much to expect from Hydro Ottawa when she prepares budget documents, that's not the main reason behind the change in policy approved Wednesday by city council.
This is not us trying to pull a fast one on the city.- Hydro Ottawa board chair Jim Durrell
The change has more to do with Hydro Ottawa's debt-to-equity ratio — Hydro Ottawa said it borrows to pay the dividend — and concern that its credit rating could be downgraded as it heads into several years in which it hopes to borrow money.
Its five-year strategic plan, which it presented Wednesday, involves investing half a billion dollars in infrastructure like generating stations.
"We sat down with the city manager, with the treasurer. This is not us trying to pull a fast one on the city," said Hydro Ottawa board chair Jim Durrell.
Rather, the change is about making sure Hydro Ottawa is a well-run, solvent company, said Durrell, one that keeps power outages short and few while also investing in infrastructure.
For instance, Hydro Ottawa announced on Monday its plans to buy the remaining third of the Ottawa River ring dam and a hydroelectric generating station at Chaudière Falls from Hydro Québec.
Before even being asked by councillors, Durrell explained Hydro Ottawa can't simply pay a smaller dividend to the city and cut customers' electricity bills instead.
"Only about 18.1 per cent of the bill is something we can manage internally," said Durrell.
Hydro rate increase planned
Durrell added he expects customers to see annual hydro rate increases of approximately 2.6 per cent in the coming years.
Hydro Ottawa CEO Bryce Conrad said he sees big changes coming in the next five years, brought about by Ontario's new climate change strategy and by an expected uptake of electric vehicles.
While people in Ottawa have so far not bought electric vehicles in as great of numbers as expected, Conrad says the system will be able to handle it if they do.