Electric Distributors Association Annual General Meeting

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Electric Distributors AssociationAnnual
General Meeting

• How Will IPO Affect Hydro One and the Other LDCs?
• February 25-26, 2002
• Toronto, Ontario
• Presented by
• Gary Saleba, President, EES Consulting
• A registered professional engineering corporation
  with offices in the Seattle, Chicago, Spokane,
  and Portland metropolitan areas and an affiliate
  office in Calgary
• Telephone [phone] Facsimile (425)
  452-9299

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Organization of Presentation

• Objective and Purpose of the Presentation
• How will Proposed IPO Affect Hydro One?
• How Will New Hydro One Affect Other LDCs?
• Examples
• Summary Comments/Observations

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How Will Proposed IPO Affect Hydro One?

• Characteristics of Old Hydro One
• Agency goals aligned with Provincial objectives
• Light regulation
• Generally open and frank on strategic matters
• Breakeven revenue requirement
• Operating in old wholesale market where monopoly
  power supplier still in place
• Possible Characteristics of New Hydro One
• Run by Board of Directors who answer to
  shareholders
• Regulated closely by OEB
• Strategic direction masked to maximize profits
  and not expose potential opportunities
• Maximize stock price/dividend levels key
  management goal
• May use transmission monopoly to maximize profits
  for own disco and at expense of other LDCs
• Profit motive will push Hydro One to new levels
  of innovation and customer service

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How Will This Proposed IPO Affect Other LDCs?

• Very Large, Fiercely Competitive Disco May be
  Constantly Looking for Acquisitions or
  Divestiture
• Transmission Planning May be Unduly Constrained
  and Transmission Prices Will Likely Increase
• Matching Hydro One Programs Will be Ongoing
  Challenge
• May Force More Rationalization in Order for Other
  LDCs to Keep Up
• No More Access to Hydro One Policy Through the
  Government/OEB Only Recourse

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Examples of Similar Proposals in North America in
Electric/Gas Deregulated Markets

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Summary Observations and Comments

• IPO Concept Not BadRaises Cash and Pushes
  Organization to Maximize Profits/Minimize Losses
• IPO Where Transmission and Distribution are
  Together Has Potential for Serious Mischief
• Transmission and Distribution Functions Should be
  Completely Separated if the New Market Structure
  is Going to Work Efficiently
• OEB Regulatory Forum Much More Important

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