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Want to know more about the purchase proposal from Newmarket-Tay?
 

The Town of Midland welcomes your questions.  Enter your question in the box below and we’ll answer your question as soon as possible.

 

We will update our FAQs regularly, so please check back soon as information is posted.

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Here is a list of the questions that have been most frequently asked during this process.  

If you have a question that has not been answered below, you can SUBMIT YOUR OWN QUESTION HERE

Newmarket-Tay Power Distribution Ltd. have purchased Midland Power Utility Corp. (MPUC) - the part of our local utility that delivers power to businesses and homes.

The deal will mean stable electricity distribution rates, guaranteed service levels, lasting job security for existing workers and new economic development that will bring new, good paying jobs to the area. 
 
 
 
 

Why are we selling the Midland Power Utility Corporation (MPUC)?

 

The MPUC, like many smaller local distribution companies (LDC’s), is facing some significant challenges.   With ever increasing technological changes, increased customer expectations, numerous evolving energy options and alternatives, smaller LDC’s are being forced to examine their ability to adapt and change to meet these interesting times. 

 

The ability to expand and grow within this market space has become a challenge identified by senior government and regulators alike.  According to the Ontario Distribution Sector Review Panel, these challenges are likely best met through larger entities that have the necessary scale and capacity, including strong balance sheets. Small utilities by their very nature have limited resources and access to the capital required to address the significant changes already underway in the sector.  In fact, the Ontario Distribution Sector Review Panel suggested that the optimal size of a local distribution company is at least 400,000 customers – more than 10 times the size of MPUC.

Growth in the northern Simcoe County has been far less frenetic than the growth witnessed throughout the Greater Toronto Area and parts of Southern Simcoe County.   The limited growth Midland has experienced places certain constraints on the MPUC’s business.  Over time, regardless of growth, the MPUC’s fixed and capital costs are likely to rise in order to provide for both system and infrastructure upgrades. This investment by MPUC is necessary to ensure consistent and reliable levels of service.   

 

 

What will happen to current electricity rates after the sale?

  

The hydro rates charged by any distribution company are subject to regulation by the Ontario Energy Board (OEB).  The actual amount on your hydro bill that is directly attributed to the local distribution company is roughly 25-28% of the overall bill.  Hydro rates cannot change without a formal applicable notice to the ratepayers and subsequent approval by the OEB.  All distribution companies are subject to the same rules and regulations related to setting rates and customer service.   Newmarket-Tay Power has indicated that the rate of increase for the next 10 years following the sale of the MPUC will be at or below the prevailing rate of inflation.  After year 10 the rates will be harmonized with the existing rate base for Newmarket-Tay Power which should have a favourable outcome for local hydro users.

 

 

Aside from the financial criteria what other factors weighed into the Town’s decision regarding the sale of the MPUC to Newmarket-Tay?

 

Prior to Council seeking a Request for Proposals in relation to the sale of the MPUC, Town Council identified a number of specific conditions that any interested proponent was required to address.  The Town requested that the successful proponent disclose how they would be dealing with the following issues: 

 

Maintaining a local presence in the community.

Newmarket-Tay Power will continue to operate from 16984 Hwy 12 in Midland.   The Administrative functions will continue at the location for the next 10 years while the operations will continue at the location for a minimum of 5 years.   The Town will retain the ownership of 16984 Hwy 12 and Newmarket-Tay Power will lease the site for the foreseeable future.   Lease renewal options are included for the next 49 years.

Treatment of existing employees. 

All existing employees will be retained to provide the exact same services as they did prior to the sale.  Employees will continue at the exact same rates performing their same duties for Newmarket-Tay Power as they did with the MPUC.

 

Commitment to current Customer Service Standards.

Customer Service Standards should remain unchanged given the fact that the same employees will be delivering the services.

 

Worker Safety commitment

Newmarket-Tay Power has an excellent workplace safety record, having reported 1 incident of lost work time in +400,000 hours over the past 2 years and 2 minor incidents in the past 10 years of +840,000 hours.

 

Commitment to Innovation

Newmarket-Tay Power is committed to innovation and has undertaken several initiatives including a large scale distribution connected energy storage program.   In addition, they are currently working on municipal transit electrification in York Region along with other key stakeholders (Public and Private) under a pilot project that is with funded Federally/Provincially. Newmarket - Tay Power is also working on intelligent electricity distribution networks that focus on the creation of the intelligent fabric for electric distribution.

 

Conservation and Demand Management

In the area of conservation demand management, Newmarket-Tay Power is actively engaged with the Town of Newmarket, it also has partnerships with Greater Sudbury Utilities, North Bay Hydro Distribution, Northern Ontario Wires PUC Distribution and St. Thomas Energy etc… Newmarket-Tay has worked with these partners in the creation of Customer First, being a new company that designs and delivers conservation demand management programs.   The projects have identified a number of key process and systems upgrades that have yielded success for facilities such as North Bay General Hospital, Southlake Regional Health Centre and Laurentian University.   Georgian Bay General Hospital may be an ideal candidate to benefit from these previous efforts.

 

Commitment to Economic Development

Newmarket-Tay Power has also developed a business collaboration and partnership called Smart City Council of Newmarket  – being a community collaborative approach.   Similar opportunities will be considered.

Distribution Rate Stability

For the next 10 years, distribution rates in the MPUC service area will be adjusted using the lowest possible rate adjustment factor, namely an annual inflation rate index.  These rates will be harmonized with Newmarket-Tay Power’s customers’ distribution rates in eleven years’ time.   It is anticipated that harmonization should lower rates generally.   Currently, Midland rates are estimated to be higher than Newmarket-Tay Power’s rates for residential customers but lower for General Service customers.

Advisory Committee/Governance Model

Newmarket-Tay Power has proposed two potential options for Midland Council’s consideration.  The first option is the creation of an Advisory Committee with the Town to ensure that there is a forum to address any transitional and ongoing operational matters of mutual benefit to both the Town and Newmarket-Tay Power.   The second option proposes a board representative for an 18 month period following the transaction to provide additional insight and feedback to both the board and the Town.

 

Why sell now?  Why not wait?

 

The decision to sell any business is complex and based on a number of reasons.  Primarily the timing of selling a business is when the highest and best value for the business can be achieved.  All indications for the sale of the MPUC pointed to the fact that that window was now.  Given the fact that the industry continues to undergo significant consolidation and the associated scale that is becoming necessary to make future advances within the industry is a challenge, the timing was right for Midland to pursue the sale option.   Further, the Provincial policy direction vis a vis the electricity sector continues to reflect an ever-changing environment.  This uncertainty in policy direction is creating challenges for local distribution companies across the sector.  The smaller local distribution companies in particular have a significant challenge in such a time of uncertainty.


 

How was the value of the MPUC determined? Are we getting full value for it?
 

The Town engaged our external Legal Counsel (Borden Ladner Gervais LLP) who in turn retained the services of Dr. Larry Murphy, a leading industry financial expert. Through Dr. Murphy’s work, the Enterprise Value was determined for the MPUC.  In determining the Enterprise Value, Dr. Murphy examined the financials of the MPUC to determine both the equity value and the long term debt.  

 

Similarly, Dr. Murphy undertook the analysis and review of each of the RFP submissions to determine and make an “apples to apples” comparison using the same assumptions he made in determining the Enterprise Value of the MPUC.  He determined that synergies between the MPUC and Newmarket-Tay Power permitted Nemarket-Tay Power to make the most attractive offer of all RFP respondents and to provide Midland with a premium on the current Enterprise Value of the MPUC. 

 

The Town is confident that the RFP process has returned the highest yield possible for the sale of the MPUC.  As was suggested to the Town by our legal counsel the public sale process would yielded both a higher degree of interest as well as more robust offer than a sole source option.  

 


Is the sale now final?  What if any next steps will occur?

 

Council, as representative of the Town as the sole shareholder of the MPUC has accepted the Newmarket-Tay Power offer and executed a Share Purchase Agreement.  The process will now move forward to the Ontario Energy Board for the approval process.

 

Over the next couple of months the Share Purchase Agreement along with all of the legal documentation associated with the transaction will be submitted to the Ontario Energy Board.   Once the documents are filed the OEB process could take between 6 – 8 months before the deal is finalized.   Once the OEB approves the transaction then the deal closes shortly thereafter and the sale proceeds are delivered to the Town.

  

 

How/where will the profits from the sale be invested?

 

Council has directed the Director of Finance for the Town of Midland to deliver a report following a community consultation outlining a long term sustainable investment strategy.   A DRAFT REPORT containing key principles related to establishing such a legacy fund have can be found HERE.   Community feedback is welcomed and when the final policy is presented to Council the public will be encouraged to further comment on the ideas presented.