PowerStream

Rise to power┬áIn just four and a half years, PowerStream has grown to become the second-largest electricity distributor in Ontario. Ben Sansom charts this upward mobility. PowerStream is a household name in the province of Ontario. Providing electricity to businesses and homes in Barrie, Vaughan, Markham, Richmond Hill and Aurora and to seven other communities in Simcoe County and York Region, it is jointly owned by the cities of Barrie and Vaughan and the town of Markham. ┬áAlthough the company only came into being in 2004, it has grown to become the second-largest municipally owned electricity distribution company in Ontario, delivering power to more than 310,000 residential and business customers.Back in 1997 a provincial government study had recommended that local communities would be better served if the power industry underwent a program of restructuring, and one of the initiatives it sought to encourage was consolidation in the fragmented electricity distribution business. By 2001 the number of distribution companies in Ontario had been reduced from 300 to 94.During this period, many discussions took place between the four municipalities in the York Region. But it wasnÔÇÖt until 2004 that PowerStream was created through the merger of three of the existing power companies, Markham Hydro, Hydro Vaughan and Richmond Hill Hydro. The business reasoning behind the merger was threefold. By bringing the companies together and consolidating their operations into one entity, overhead costs could be reduced. In addition to that, the sheer increase in operational size would strengthen the groupÔÇÖs purchasing power. Finally, by bringing together the assets, the customer base, and the skills base of these already successful companies, their overall productivity and efficiency could be improved, ultimately delivering better service and reduced costs to the customer.Full integration of the three operations was expected to take place over a 12- to 18-month period. Work progressed so well, however, that by October 2005 PowerStream filed an application with the Ontario Energy board to reduce the electricity distribution rates as of May 2006, passing on a reduction of 3.4 percent in costs to its customers through their electricity bills.ÔÇ£We promised our customers that the merger would enable us to achieve economies of scale and gain synergies that would, at the very least, help us to reduce the upward pressure on distribution rates,ÔÇØ said John Glicksman, PowerStreamÔÇÖs executive vice president and chief financial officer.The companyÔÇÖs vision was to be an innovative and socially responsible leader in power distribution and related services in Ontario, and its strategy going forward was to concentrate on its core business while promoting growth by identifying new business opportunities and targeting possible mergers or acquisitions.Early on in 2005 PowerStream made an offer to acquire Aurora Hydro Connections from the Town of Aurora, and when the $34.5 million deal was finalized in November that year, the extra 15,000 Aurora residents expanded the companyÔÇÖs customer base to 197,000 across the four municipalities in the York Region.Meanwhile, PowerStream has also taken steps to sharpen its focus on the core elements of the business. Examination of the combined operations highlighted several possible areas where the company could shed non-core operations. Among those identified was a water heater rental business that operated in the Markham area and had come to the business through the 2004 merger. In 2007 the assets of the rental business, which amounted to around 4,100 customer water heater accounts, were sold to The ConsumersÔÇÖ Waterheater, a company that already owned a portfolio of over 1.3 million installed water heaters rented to residential customers in Ontario. This was followed later that same year by the sale of the companyÔÇÖs excess fiber-optic assets to Atria Networks.Consolidation in the energy industry has continued to change the shape of the Ontario business landscape, and PowerStream is playing an important role in this. By far its biggest merger to date was finalized in January this year. Under the terms of the deal, Barrie Hydro is to merge with PowerStream, and ownership will be distributed between City of Vaughan (44 to 46 percent), the Town of Markham (34 to 36 percent), and the City of Barrie (18 to 21 percent). The merger was based on a thorough business case analysis conducted by KPMG, which came up with the impressive conclusion that by combining assets and achieving economies of scale, the merged companies could make annual savings in excess of $5 million. Not only that, but both PowerStream and Barrie Hydro expect to achieve this without making any layoffs at union or management level.It is the merger of these two utilities that has pushed PowerStream up the charts to become the second-largest local electricity company in the province, with a customer base of 310,000. Operating a company of this size across a series of administrative centers is neither cost-effective nor efficient and resulted in cramped working conditions combined with wasteful duplication of effort. As long ago as 2004, PowerStream realized that it needed a dedicated corporate head office. Planning and design work followed, and in February 2008 the company moved into a new energy-efficient building in Vaughan.┬á The 92,000-square-foot property is being targeted to achieve LEED Gold certification from the Canada Green Building Council. Some of the energy-efficient and sustainable systems the building boasts include plumbing fixtures that reduce potable water use by up to 30 percent, and the adjacent pond is designed to be used for landscape watering. Power is conserved through the use of occupancy sensors to control the lighting. External glass windows have been filled with argon gas to increase the insulation value and help retain heat during the winter, while during the summer a titanium reflective coating on the inside of the glass reflects ultraviolet rays and keeps the building cool.Finally, the company is doing its part to help local businesses during these tough times. It has just launched the Power Savings Blitz in conjunction with the Ontario Power Authority. Up to $1,000 worth of free energy assessments and upgrades are being made available to small companies in the York Region to help them reduce energy consumption and save money. ÔÇô Editorial research by Tim Conlan┬á