Annual Report 2014
HALDIMAND COUNTY UTILITIES INC. reliability | safety | conservation
PAGE 1
Table of Contents 2 3 5 6 7 8 9 11 13 14 15 16 17 18 19
Corporate Introduction Message from the President & CEO and the Chair Reliability Customer Experience Community Involvement Community Engagement: Grade Nine Bill Challenge Safety Capital Expenditures System Planning Green Energy and Renewables Conservation and Demand Management People Behind the Power Executive Team Board of Directors Finance and Regulatory
Our Mission Statement: To provide efficient, reliable and safe electricity distribution and other related services to customers while contributing to the development of our jurisdiction’s economy, our employees and the protection of the environment while enhancing the value of Haldimand County Utilities Inc.
Corporate Introduction Haldimand County Utilities Inc. is dedicated to providing safe, efficient and reliable electricity to the residents of Haldimand County. Haldimand County Utilities Inc. prides itself on being an excellent community partner while making a positive impact on the development of Haldimand County’s economy, its employees and the environment. Haldimand County Utilities Inc. serves more than 21,345 customers stretching across an area of 1,252 square kilometres with approximately 1,637.8 circuit kilometres of overhead and 93.4 kilometres of underground distribution
lines. Haldimand County Utilities Inc. continues to see significant customer interest and participation in renewable energy and generation projects throughout its service territory and has delivered a number of saveONenergyOM Conservation and Demand programs to its business and residential customers.
HALDIMAND COUNTY UTILITIES INC. Holding Company
HALDIMAND COUNTY HYDRO INC.
HALDIMAND COUNTY ENERGY INC.
Distribution Company
Services Company
Haldimand County Utilities Inc. is the Holding Company for the Distribution and Services Companies. The Corporation was formed in October 2000 following provincial government legislation, by amalgamating the former Hydro Electric Commissions of Dunnville, Haldimand and the east portion of Nanticoke.
Haldimand County holds 100 per cent of the shares of the Holding Company, which in turns holds 100 per cent of the shares of each of the Distribution and Services companies. *Haldimand County Generation Inc. was dissolved, effective November 4, 2014.
HALDIMAND COUNTY UTILITIES INC. ANNUAL REPORT 2014
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Message from the President & CEO and the Chair
Haldimand County Utilities Inc. is committed to providing high quality service to its customers and being a leading participant in Ontario’s electricity distribution sector.
The company is driven by the pillars of safety, efficiency, conservation and reliability while being a strong partner in the community it serves. 2014 was a successful year for Haldimand County Hydro on a variety of levels. Our Cost of Service Electricity Distribution Rate Application was approved with an 8.7 per cent decrease in the monthly delivery charge component of a typical Residential customer bill. We also implemented our first Customer Satisfaction Survey and learned that more than 90 per cent of survey respondents are satisfied with the work we are doing. Haldimand County Hydro was recognized by its peers, winning an industry award in Public Relations Excellence. We delivered our operating and capital program on time and on budget. Our mandated conservation energy target of 13.3 GWh was achieved. Proudly, our staff recorded zero lost-time injuries last year.
R. Jane Albert President & CEO
Albert Marshall Chair PAGE 3
Haldimand County Hydro implemented our 2014 Cost of Service Electricity Distribution Rate Application. The application contained numerous components that guide Haldimand County Hydro’s capital investments for the next five years. Our consolidated distribution plan, submitted as part of our rate application tells our story and outlines a strategy towards our goals of improved reliability, reduced loss factor, safety and data integrated solutions through planning with our partners. The most gratifying element of this process is we were able to provide an 8.7 per cent decrease in the monthly delivery charge component of a typical Residential customer bill and a 7.0 per cent decrease in that of a typical General Service Less Than 50 kW customer bill. In 2014, we also focused on enhancing our relationship with our customers. We undertook our first Customer Satisfaction Survey in 2014. Our customers told us they were overwhelmingly satisfied with the overall service our staff provided and more than 90 per cent of respondents were satisfied with our efforts in restoring power quickly and safely following outages. Haldimand County Utilities Inc.’s dedication to our key pillars was also echoed through our standings in the Ontario Energy Board’s Balanced Scorecard. Despite the large size of our service territory, Haldimand County Utilities met or exceeded expected service levels in all categories of the scorecard, used to benchmark all utilities across the province. These results and the ongoing commitment of staff helped us maintain our ranking as the seventh most efficient local distribution company in Ontario. As a result of this efficiency, we stayed below 23.8 per cent of predicted costs in 2014.
‘Over the past 14 years Haldimand County Hydro staff have taken great pride in serving the residents of Haldimand County and will be continuing to work to improve the electricity distribution system in Haldimand County.’
In 2014, we have met all challenges and surpassed our reliability goals. We have once again delivered our operating budget on target and have invested $6.3-million in capital expenditures. This marks a $2-million increase over the 2013 capital budget. Our recent capital commitment has improved reliability and increased Shareholder Equity from $19-million in 2000 to $39.2-million in 2014. Since incorporation in 2000, a total of $5,713,086 has been paid in dividends. In 2014, we had a net income of $3,119,252, which marked our second best year in terms of fiscal performance. We also had an opportunity to work directly with future generations of ratepayers through our Grade Nine Bill Challenge. The challenge, conducted in partnership with McKinnon Park Secondary School in Caledonia, helped improve the electricity literacy of future ratepayers, while allowing us to share knowledge and ideas with a group of Grade 9 students. The project was a tremendous success and provided great benefit for all participants. Our efforts in planning and executing the project were recognized by our fellow utilities with a Public Relations Excellence Award from the Electricity Distributor’s Association. We also continued our commitment to customer engagement through 2014’s Large Customer Engagement event in April 2014.
hampers during the holiday season. In 2014 our employees raised $2,600 to support a Breakfast Program through the Dunnville Foodbank and a program to supply school supplies and backpacks for area students through the Dunnville Salvation Army. Haldimand County Hydro and its employees believe in a Seriously Fun Safety environment where being safe is front-and-centre each and every day. Our commitment to safety is apparent as we took great pride in recording zero lost time injuries in 2014. Safety training for our staff is a top priority and all employees receive regular safety training throughout the year. Our commitment to safety extends outside our walls and job sites as we continue to educate area students through our electrical safety program in our community. In 2014, approximately 1,868 young students received hands-on lessons in electrical safety. This marked our 14th year working with students through our school education program. 2015 marks the end of an era for Haldimand County Utilities Inc. following the approval of a Sale Purchase Agreement to Hydro One Inc.. Over the past 14 years Haldimand County Hydro staff have taken great pride in serving the residents of Haldimand County and will be continuing to work to improve the electricity distribution system in Haldimand County.
2014 also marked the end of the initial four-year Conservation and Demand Management program introduced by the Ontario Ministry of Energy in 2010. Through its continued efforts promoting conservation education across our service territory, we were able to meet 100 per cent of our Energy Target of 13.3 GWh and 47 per cent of our 2.3 MW demand target. The impacts of our conservation efforts included paying a total of $793,644 in customer incentives. Conservation will continue to be an ongoing core focus for Haldimand County Hydro. In March of 2014, the Minister of Energy issued a Directive, Conservation First Framework which will continue to provide our customers with access to conservation programs between 2015-2020. We are already beginning work towards achieving our new Energy Target of 19.9GWh.
Our 2014 success is a direct reflection of the men and women of Haldimand County Hydro. Each employee is committed to delivering quality service and takes pride in providing a positive customer experience every day. On behalf of the Board of Directors and the Executive Team, we’d like to recognize and congratulate each employee for their contributions and thank them for serving the community with excellence and a safety first attitude. We’d also like to thank the Board of Directors for their efforts and leadership.
We support a number of community groups and charities through our annual sponsorship of the Mayor’s Gala and provide assistance to communities across Haldimand County by assisting with the hanging of Christmas lights along municipal streets. Our staff also continued our long-standing tradition of donating food bank kits and Christmas
R. Jane Albert President & CEO
Albert Marshall Chair
HALDIMAND COUNTY UTILITIES INC. ANNUAL REPORT 2014
PAGE 4
Haldimand County Hydro’s employees are dedicated to keeping electricity running reliably through
RELIABILITY
1,644 overhead circuit kilometres of line and 90 underground circuit kilometres of line.
The largely-rural territory is the fourth-largest in Ontario. The largely rural area with low customer density presents challenges to staff daily, but proactive planning, staff dedication and cyclical equipment upgrades ensure the lights are kept on for customers.
166 47 911 205 357
Haldimand County Hydro uses a five-year tree trimming schedule to mitigate unplanned outages across the county. Each year, a new area of line is cleared of limbs and brush on a rotating schedule. In 2014, the former Township of South Cayuga and Rainham had lines cleared. Proactive inspection of lines in rural areas is an important step in maintaining a functioning distribution system. Haldimand County Hydro completes visual inspections on its rural lines every six years. Lines in urban areas are inspected every three years. In 2014, infrared scanning was completed on all areas supplied out of the Dunnville Transformer Station, including the Town of Dunnville and the former Townships of Canborough, Moulton, Sherbrooke and Dunn. Infrared scanning is completed in all areas on a three-year cycle.
NEW CONNECTIONS
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Streetlight repairs
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pole-top transformer installations
O
calls for service
2014 also saw the completion of numerous capital improvements designed 100000 to enhance the reliability of the distribution system as a whole. Planned 80000 outages can be required to complete this type of work but all efforts are 60000 made to shorten the frequency and duration of planned outages in all corners 40000of the service territory.
100000 80000
Number of Customer Interruptions
Average Number of Customer Interruptions (2008–2013)
Number of Customer Hours of Interruptions
Average Number of Customer Hours of Interruptions (2008–2013)
60000 40000 20000
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Number of Customer Interruptions
Average Number of Customer Interruptions (2008–2013)
Number of Customer Hours of Interruptions
Average Number of Customer Hours of Interruptions (2008–2013)
The adjacent chart represents Haldimand County Hydro’s reliability statistics (SAIDI (System Average Interruption Duration Index - the average forced sustained interruption duration per customer served per year (measured in hours)) and SAIFI (System Average Interruption Frequency Index -average number of forced sustained interruptions experienced per customer served per year (measured in outages)) in 2013 compared to the same stats over a five year average (20082013). The statistic measurements represent the total number of outages.
CUSTOMER EXPERIENCE
Haldimand County Hydro’s staff is dedicated to providing a positive experience for all customers at all times.
In 2014, customers were given their chance to have their say about their customer experience through Haldimand County Hydro’s Customer Satisfaction Survey. The survey revealed that 99 per cent of participating customers are satisfied with Haldimand County Hydro’s customer service efforts and 92 per cent believe Haldimand County Hydro does a good job of communicating to its customers. The results from the Customer Satisfaction Survey validate that staff efforts towards creating positive relationships with customers is having a noticeable impact and the comments and suggestions made by customers will help refine and improve the customer experience across Haldimand County Hydro’s service territory into the future. Haldimand County Hydro’s commitment to the customer experience was also apparent through the results of the Ontario Energy Board’s (“OEB”) Annual Scorecard reporting. 2014 was the first year for this new performance monitoring tool. Haldimand County Hydro was above the industry standard for measurements in service quality and customer satisfaction, reporting a billing accuracy of 99.96 per cent in 2014. Haldimand County Hydro has found new ways to improve its customer experience in 2014. Through the use of Ontario One Call (“ON1Call”) locate requests increased by more than 2,600 in 2014, to a total of 6,347. The corporate Twitter account increased by more than 500 followers and the corporate website, mobile application and eCare customer portal saw increased usage from previous years. Continuous improvement to existing tools and a dedicated commitment to customer service will ensure that Haldimand County Hydro continues to build strong relationships with customers through the coming years.
99.96% 36,419 BILLING ACCURACY
PHONE CALLS ANSWERED
717
TWITTER FOLLOWERS
2,164
written customer inquiries
6,347 LOCATE REQUESTS
HALDIMAND COUNTY UTILITIES INC. ANNUAL REPORT 2014
PAGE 6
COMMUNITY INVOLVEMENT
Haldimand County Hydro employees understand the importance of giving back to the community they serve. Most employees live and work within the service territory and take an active role in improving the lives of customers across Haldimand County.
Local children have long been the beneficiary of Haldimand County Hydro’s charitable endeavors and 2014 was no different. Staff raised $2,650 at Haldimand County Hydro’s 2014 Annual Safety Day. The money raised went to supplying healthy lunches and snacks to children during the summer months with the Dunnville Food Bank. The food bank program supports approximately 160 children each week. A portion of the money raised also went to purchasing school supplies and backpacks for children through the Dunnville Salvation Army. The Dunnville Salvation Army provides support throughout Haldimand County. In 2014, Haldimand County Hydro staff, as with many other utilities in the industry, also raised money to complete the Ice Bucket Challenge, to benefit ALS research. Haldimand County Hydro’s support of local food banks also continues throughout the year, as employees spearhead an annual holiday season food drive, with 2014 marking the eighth year for this event. Haldimand County Hydro also prides itself on being a visible member of the communities it serves. In 2014, staff participated in Santa Claus Parades and volunteered their time to participate in Home and Garden Shows where they had the opportunity to meet face-to-face with customers, answer questions and promote company programs and services. Education is also front-and-centre in Haldimand County Hydro’s community involvement efforts. Since 2004, new faces spend a day at Haldimand County Hydro during the annual Take Our Kids to Work Day events and each summer, local university/college students get a to experience working for a utility through the Summer Student Employment Program and Electrical Engineering and Powerline Technician Co-Op programs. Community involvement remains a key component of Haldimand County Hydro’s operational goals and its community-focused work will be increased further in 2015 with the introduction of the Haldimand County Hydro Care Team.
$2,650
RAISED BY STAFF FOR LOCAL FOOD BANK AND SCHOOL SUPPLIES FOR CHILDREN
PAGE 7
570
HAMPERS DONATED
Participated in Ice Bucket Challenge which raised money for
ALS
Community Engagement: Grade Nine Bill Challenge
Haldimand County Hydro does more than provide safe and reliable electricity to its customers. The utility is also focused on forging relationships with community groups and promoting electricity literacy across its service territory.
In 2014, the Grade 9 Bill Challenge was introduced to provide tomorrow’s customers with an opportunity to improve the electricity bill. Two classes of Grade 9 students at McKinnon Park Secondary School in Caledonia participated in the inaugural Grade 9 Bill Challenge. The classes were split into teams and challenged to design Haldimand County Hydro’s next electricity bill. The students were given a presentation on the components of a bill and an overview on the role of local distribution companies. The groups then presented their bill designs to a panel of judges during a wrap-up pizza party and luncheon at the program’s conclusion. Participating students gained valuable knowledge about the components of a typical electricity bill as well as improving their general electricity literacy, including smart meters and time-of-use and an overview of regulatory components of the industry. Most importantly, each student came away with knowledge of conservation and energy saving tips to share with family and friends. Haldimand County Hydro shared the bill concepts with the Independent Electricity System Operator (IESO), the Minister of Energy and the Ontario Energy Board (OEB). The concepts brought forward by the students may be considered in future bill improvements. Haldimand County Hydro was presented with the Electricity Distributors Association (EDA) Public Relations Excellence Award for its work with the Grade 9 Bill Challenge. The award was presented at the EDA’s Annual Gala in early 2015.
HALDIMAND COUNTY UTILITIES INC. ANNUAL REPORT 2014
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Safety is Haldimand County Hydro’s most important priority and a pivotal part of every job we do
SAFETY
Seriously Fun Safety is a notion embraced by Haldimand County
1,600 total safety training hours completed by staff and
Hydro employees at all levels of the organization and in all departments. In 2014, the organization’s 52 full-time employees recorded zero losttime injuries.
management in 2014.
The organization’s commitment to safety begins with education. All new employees receive extensive safety orientation and regular safety meetings are mandatory for all staff. Haldimand County Hydro’s Joint Health and Safety Committee perform regular inspections of the workplace and ensure that safety is always top-of-mind for staff and customers. Haldimand County Hydro’s continued focus on safety is reflected in the approximately PAGE 9
A culture of Seriously Fun Safety permeates the organization and continued safety education helps spread the safety message to those within the community.
The annual Electrical Safety Authority (“ESA”) Audit provides further confirmation of Haldimand County Hydro’s commitment to safety. In 2014 Haldimand County Hydro was again determined to be compliant after completing the audit and the dedication of employees to safety was recognized in the auditor’s remarks.
haldimand county hydro’s
commitment to safety education begins with
Haldimand County Hydro’s commitment to safety extends outside the organization and into the territory it serves. In 2014, Haldimand County Hydro continued providing electrical safety education programs to students in area schools. These sessions educate groups of students on the dangers of electrical safety. More than 1,600 students received training in 2014. Tomorrow’s leaders are also given a first-hand look at the importance of electrical safety through Haldimand County Hydro’s participation in the Take Our Kids to Work Day program.
ZERO
Lost-Time Injuries in 2014
1,600
hours of safety training
1,686 Students Attended Safety programs
HALDIMAND COUNTY UTILITIES INC. ANNUAL REPORT 2014
PAGE 10
CAPITAL EXPENDITURES Haldimand County Hydro’s capital expenditures were outlined in the approved 2014 Distribution System Plan and designed with safe, reliable and efficient distribution of service to all customers.
The 2014 capital expenditures were completed with the mindset of accommodating future growth and ongoing system improvements. 2014 was again a busy year in capital work. Numerous voltage conversion projects were completed across the county, with the goal of converting the primary voltage from 8kV to 27.6kV. These conversions projects are completed to reduce losses, improve reliability and power quality and also move existing poles and transformers to accessible locations for future repairs and maintenance. In 2014, conversions were completed on Lakeshore Rd (West of Kohler Rd), a Step Down Transformer on Fisherville Rd. and a partial conversion of a Step Down Transformer in the former Township of Oneida. Haldimand County Hydro also partnered with Haldimand County to install underground duct and infrastructure as part of the rebuilding of Talbot Street, Cayuga. This important work allows for a voltage conversion to 27.6kV for area business and downtown residents. Haldimand County Hydro also made an important investment in its service territory through the purchase of an additional breaker position at the Dunnville Transformer Station as part of a rebuild of the station by Hydro One that began in 2014. The new breaker allows for the re-configuration of feeders supplying Haldimand County Hydro customers, resulting in improved reliability and increased capacity in the Dunnville area. A significant project was completed on Haldimand Rd. 20 from South Hagersville to Cayuga. In partnership with the Grand Renewable Energy Park, 12km of distribution lines were relocated to accommodate the Park’s transmission line. These lines were designed and constructed to provide a solid distribution base for future expansions along a main corridor in the heart of Haldimand County.
$6.3-million invested in capital expenditures PAGE 11
Haldimand Rd. 20 Re-build to Accommodate Samsung Transmission
Partial Conversion of Fisherville Rd. to 27.6kV
Conversion of Lakeshore Rd. West of Kohler Rd. to 27.6kV
Conversion of Town of York & River Rd. to 27.6kV
Talbot St. Reconstruction
Dunnville Transformer Station Breaker Position
HALDIMAND COUNTY UTILITIES INC. ANNUAL REPORT 2014
PAGE 12
SYSTEM PLANNING
Insightful system planning is an important part of all aspects of Haldimand County Hydro’s operation.
System planning touches all aspects of the organization and ensures the distribution system will continue to provide consistent and reliable service to all Haldimand County Hydro’s customers. 2014 marked the continuation of important system planning that began through the Cost of Service Distribution Rate Application process. That Application, which was approved in early 2014, includes components that shape direction of future capital projects, asset management and renewable energy connections. Elements of Haldimand County Hydro’s Renewable Energy Generation Plan were implemented in 2014, including the Funding Adder for Renewable Energy Generation. This is a cost recovery mechanism for eligible investments for the purpose of connecting or enabling the connection of qualifying generation facilities. The approved Distribution System Plan shapes the next five years of Haldimand County Hydro projects. In 2014, Haldimand County Hydro began work on projects outlined in the plan and is continuing to work towards major improvements to the distribution system.
PAGE 13
GREEN ENERGY AND RENEWABLES
Bill 150, the Green Energy and Green Economy Act, 2009, was enacted on May 14, 2009.
The Green Energy Act, among other things, permits electricity distribution companies to own renewable generation facilities, obligates electricity distribution companies to provide priority connection access for renewable generation facilities and to prepare plans that identify expansion or reinforcement of the distribution system required to accommodate these connections. It also empowers the Ontario Energy Board to set conservation and demand management targets for electricity distribution companies as a condition of license. Haldimand County Hydro continues to use the Green Energy Act as its focus investments in renewables and planning. The Renewable Energy Generation Plan, approved in 2014, will steer the direction of green energy expansion and investment in coming years. Haldimand County Hydro has also seen the number of distributionconnected generators in its service territory increase since the introduction of the Ontario Power Authority’s Feed-in-Tariff (FIT) program in 2009. Overall, 234 microFITs have been connected since 2009. In 2014, 10 microFIT (less than or equal to 10 kW) were connected, 4 Small FIT (less than 500 kW) and 2 Net Metered projects were connected.
2014 Rates 234 approved including Funding Adder for Renewable Energy Generation
microFITs connected since 2009
HALDIMAND COUNTY UTILITIES INC. ANNUAL REPORT 2014
PAGE 14
CONSERVATION AND DEMAND MANAGEMENT
The end of 2014 marked a turning point in Conservation and Demand Management (“CDM”) among Ontario’s local distribution companies (“LDC”). The saveONenergyOM CDM programs completed in conjunction with the Ontario Power Authority (“OPA”), which began in 2011, ended its final year in 2014. As part of the 2011 to 2014 OPA Province-Wide Program, the Ontario Energy Board set targets for each LDC to meet in both energy savings and peak-demand reduction. Preliminary program results show Haldimand County Hydro achieving 13.3 GWh and 1.3 MW. This represents 100 per cent and 47 per cent of Energy and Demand targets respectively. (Note: Target was 13.3 GWh and 2.85 MW). In 2014, Haldimand County Hydro offered a number of important programs to its Low Income, Residential, Agricultural, Business & Industrial customers. These programs reached across Haldimand County Hydro’s full customer base and provided great benefit to customers. Over the past four years, through the suite of saveONenergy programs, Haldimand County Hydro assisted 168 Small Business lighting incentives valued at $194,182. With the help of AUDIT FUNDING, 11 facilities received a total of $9,800 for electricity surveys. Business and Agricultural customers also took advantage of the HIGH PERFORMANCE NEW CONSTRUCTION initiative with $55, 210 paid in incentives. The most successful initiative, the RETROFIT PROGRAM, totalled $279,136 in customer incentives. Over the term of 2011-2014, Residential and Low Income customers also benefited from CDM Programs. 500 customers registered for the peaksaver PLUS® program, and over 600 old, inefficient appliances were decommissioned as part of the FRIDGE & FREEZER PICKUP program free of charge. Haldimand County Hydro and the Independent Electricity System Operator are now working together to continue conservation efforts with its customers under the Conservation First Framework. The new, six-year framework is expected to achieve 7 TWh of electricity savings provincially between 2015 and 2020 through the delivery of electricity conservation programs in Ontario.
$109,750 FOR PROCESS & SYSTEMS ENGINEERING STUDIES
PAGE 15
275
participants in the HOME ASSISTANCE program with a value of $107,310 for low income families
1,295
NEW EFFICIENT HVAC UNITS UNDER THE HEATING & COOLING INCENTIVE
PEOPLE BEHIND THE POWER
“Each employee is committed to delivering quality service and takes pride in providing a positive customer experience every day,” – R. Jane Albert, President & CEO
CUSTOMER SERVICE FINANCE OPERATIONS ENGINEERING HALDIMAND COUNTY UTILITIES INC. ANNUAL REPORT 2014
PAGE 16
EXECUTIVE TEAM
Haldimand County Hydro’s dedicated executive team is committed to promoting the company’s core business strengths, with a focus on corporate responsibility and sustainability.
FRONT ROW (Left to Right): R. Jane Albert – President & CEO, Jacqueline Scott – Finance Manager BACK ROW (Left to Right): Paul Heeg – Engineering Manager, Nicole Mitchell – Executive Assistant, Dan Leake P.Eng. – Operations Manager, Sunil Bechar – Consumer Services Manager
PAGE 17
BOARD OF DIRECTORS
The Board of Directors strives to ensure the reliable, safe and cost effective delivery of electrical power to the residents and businesses of Haldimand County for today and tomorrow.
FRONT ROW (Left to Right): Councillor Tony Dalimonte – Vice Chair, Albert Marshall – Chair, Lorraine Bergstrand BACK ROW (Left to Right): Mayor Ken Hewitt, Peter Smuk, Fred Moodie, Doug Miller, Brian Snyder
HALDIMAND COUNTY UTILITIES INC. ANNUAL REPORT 2014
PAGE 18
FINANCE AND REGULATORY Electricity Consumption Haldimand County Hydro earns revenue by charging its customers for the use of the distribution system. Such electricity distribution charges are comprised of a fixed monthly service charge combined with a variable (volumetric) charge based on electricity
consumption (usage). The distribution rate charged is designed to recover the costs incurred by Haldimand County Hydro in delivering electricity to customers and a rate of return on deemed common equity, which is subject to the approval of the Ontario Energy Board.
2014 Customers, Consumption and Distribution Revenue by Rate Class RATE CLASS
NO. OF CUSTOMERS
Residential
DISTRIBUTION REVENUE ($)
%
%
18,766
170,207,650
40.6
$
8,646,677
68.0
2,341
55,013,561
13.1
$
1,921,593
15.1
160
123,567,515
29.5
$
1,438,973
11.3
8
64,767,903
15.5
$
271,934
2.1
336,582
0.1
$
118,402
0.9
2
2,352,777
0.6
$
306,181
2.4
68
375,730
0.1
$
16,255
0.1
21,345
416,621,718
100.0
$
12,720,015
100.0
General Service < 50 kW General Service 50 kW to 4999 kW Embedded Distributor Sentinel Lighting * Street Lighting * Unmetered Scattered Load * TOTAL
CONSUMPTION (kWh)
* Sentinel Lights, Street Lights and Unmetered Scattered Loads are billed based on number of â&#x20AC;&#x153;connectionsâ&#x20AC;? at 516, 2,988 and 68 respectively.
2014 Average Electricity Consumption per Customer by Rate Class
2014 Purchased Consumption
kWh PER MONTH
Residential General Service < 50 kW General Service 50 kW to 4,999 kW
kWh PER YEAR
756
9,070
1,958
23,500
64,358
772,297
84.1%
368,893,888 kWh Provincial Grid (IESO)
TOTAL 100% 15.9%
438,659,824 kWh
69,765,936 kWh Distribution-connected Generators PAGE 19
Breakdown of Electricity Bill Charges Haldimand County Hydro’s distribution rates, the portion of the electricity bill that is related to Haldimand County Hydro’s operations, represents only 27.3 per cent of the total electricity charges found on the bill, and includes a $0.79 monthly pass through charge paid directly to the IESO for costs associated with managing and maintaining the Smart Meter infrastructure. The adjacent chart shows the percentage breakdown of the related charges for a residential customer using 800 kWh a month and billed on Time-Of-Use rates effective May 1, 2014.
3.6% 3.3% Regulatory charges (eg. OEB, IESO)
11.5% Taxes HST (portion of total bill)
27.3% Distribution charges paid to and portion of the bill controlled by Haldimand County Hydro
47.7% Electricity Charges paid to generation companies (eg. OPG)
Electricity Distribution Rates Electricity distribution rates charged by a local distribution company (“LDC”) are regulated by the Ontario Energy Board (“OEB”), using a combination of annual incentive rate mechanism (“IRM”) adjustments and periodic cost of service reviews, based upon applications made by the LDC to the OEB. Currently, the ratemaking policy of the OEB requires a cost of service review every five years, which is followed by four successive years of IRM adjustments. The cost of service framework sets electricity distribution rates using a detailed examination of evidence and an assessment of costs, based on forecast test year data, including the amount of operating and capital expenses, debt and shareholder’s equity required to support an LDC’s business. The electricity distribution rates are based on a revenue requirement that provides a regulated Maximum Allowable Return on Equity (“MARE”) on the amount of the deemed equity supporting the rate base. The IRM process provides for a mechanistic and formulaic adjustment to distribution rates and charges between cost of service applications. IRM adjustments are based on the annual change in the Gross Domestic Product Inflationary Price Index for Final Domestic Demand (“GDP-IPI”) net of a productivity factor and a “stretch factor” determined by the relative efficiency of an electricity distributor. Based on 2013 annual results and benchmarking analysis performed by the OEB, Haldimand County Hydro continued to rank as the 7th most efficient LDC out of 73 LDCs in the province.
Debt retirement charges, related to the former Ontario Hydro
6.6% Transmission charges paid to Hydro One
Haldimand County Hydro files a rate application with the OEB annually. Electricity distribution rates are typically effective from May 1 to April 30 of the following year. Accordingly, for the first four months of 2014, distribution revenue was based on rates approved for the May 1, 2013 to April 30, 2014 rate year ( i.e. the “2013 rate year”), which included a price cap index adjustment of 0.48 per cent uniformly across all customer classes, and the distribution revenue for the remaining eight months of 2014 was based on rates approved for the May 1, 2014 to April 30, 2015 rate year ( i.e. the “2014 rate year”), which was based on a cost of service rate application. Haldimand County Hydro’s 2014 cost of service rate application was filed November 15, 2013 and approved by the OEB on April 16, 2014, with rates effective May 1, 2014. This approval provided for a distribution revenue requirement of $12,020,546 and a rate base of $52,337,079. This approval resulted in an 8.7 per cent decrease in the monthly delivery charge component of a typical Residential customer bill and a 7.0 per cent decrease in that of a typical General Service Less Than 50 kW customer bill. The delivery charge component includes the recovery of costs to build and maintain the distribution system as well as pass through costs for the transmission of electricity. Effective May 1, 2014, the delivery charge component also includes the line loss factor – previously included in the electricity charge component of the bill – which has been reduced to 1.0655 from 1.0680 per kWh.
HALDIMAND COUNTY UTILITIES INC. ANNUAL REPORT 2014
PAGE 20
Results of Operations RESULTS OF OPERATIONS For the year ended
2014
2013
Revenues
$
14,081,739
$
14,475,944
Expenses
$
10,277,216
$
10,294,850
Income before Income Taxes and Regulatory Adjustment
$
3,804,523
$
4,181,094
Income Taxes
$
685,271
$
921,589
Income before Regulatory Adjustment
$
3,119,252
$
3,259,505
Regulatory adjustment - PILs, net of tax
$
-
$
-
$
3,119,252
$
3,259,505
Net Income
REVENUES For the year ended
2014
2013
Distribution Services
$
12,720,014
$
14,583,050
Other Operating Revenue
$
1,403,752
$
1,352,078
Regulatory Adjustment - change in accounting policy
$
(42,027)
$
14,081,739
EXPENSES For the year ended
(1,459,184) $
2014
14,475,944
2013
Operating Expenses
$
7,654,818
$
7,539,997
Amortization
$
2,059,419
$
2,128,720
Interest Expense
$
562,979
$
626,133
$
10,277,216
$
10,294,850
REVENUE AND CONTROLLABLE COSTS PER CUSTOMER
Revenue per customer
PAGE 21
Controllable costs per customer
$661
$680
$740
2014
2013
2012
$359 $354 $399
2014
2013
2012
Capital Expenditures CAPITAL EXPENDITURES NET OF CAPITAL CONTRIBUTIONS For the year ended
2014
Distribution Plant Assets
$
2013
5,730,338
$
3,875,664
Tools, Shop and Transportation Equipment
$
452,691
$
298,649
General Administration Assets
$
103,693
$
159,337
Sentinel Light Rental Units
$
5,470
$
2,491
$
6,292,192
$
4,336,141
Total
Human Resources NUMBER OF EMPLOYEES For the year ended
2014
2013
Non-Union
16
16
Union
36
36
52
52
PAYROLL COSTS For the year ended
2014
2013
Salaries and wages
$
4,239,536
$
3,857,319
Company portion of source deductions
$
196,556
$
183,619
Employee health benefits
$
352,517
$
351,244
Company portion of OMERS pension
$
366,156
$
336,246
$
5,154,766
$
4,728,428
Dividends Dividends on common shares are declared at the discretion of the Board of Directors â&#x20AC;&#x201C; subject to applicable law and based on direction from the Shareholder, the Boardâ&#x20AC;&#x2122;s proposed dividend policy, and recommendations of Management - with consideration for results of operations, financial condition and future outlook, cash requirements and industry practice. During 2014 the Corporation declared and paid dividends in the amount of $814,876 (2013 - $512,549) for total dividends in the amount of $5,713,086 paid to date since 2003 to its sole Shareholder, the Municipality of Haldimand County.
At its Council meeting on December 16, 2013, the Shareholder passed a resolution approving the acceptance of an offer by Hydro One Inc. to purchase all of the issued and outstanding shares of Haldimand County Utilities Inc., which, subject to the Share Purchase Agreement entered into on June 10, 2014, contemplates the sale transaction closing during 2015. Accordingly, the Board of Directors of the Corporation did not declare any dividends to be paid in 2015 on account of the 2014 results of operations.
HALDIMAND COUNTY UTILITIES INC. ANNUAL REPORT 2014
PAGE 22
Independent Auditors’ Report To the Shareholders of Haldimand County Utilities Inc. We have audited the accompanying consolidated financial statements of Haldimand County Utilities Inc., which comprise the consolidated statement of financial position as at December 31, 2014, the consolidated statements of income, retained earnings, and cash flows for the year then ended, and notes, comprising a summary of significant accounting policies and other explanatory information.
the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.
Management’s Responsibility for the Consolidated Financial Statements
Opinion
Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with Canadian generally accepted accounting principles, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of Haldimand County Utilities as at December 31, 2014, and its consolidated results of operations and its consolidated cash flows for the year then ended in accordance with Canadian generally accepted accounting principles.
Auditors’ Responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with Canadian generally accepted auditing standards. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating
PAGE 23
Chartered Professional Accountants, Licensed Public Accountants Hamilton, Canada March 25, 2015
Consolidated Statement of Financial Position December 31, 2014, with comparative information for 2013
2014 2013
Assets Current assets Cash and bank $ 5,529,815 $ 4,953,977 Unbilled revenue 6,029,562 6,671,961 Accounts receivable 5,201,832 5,812,706 Inventory (note 3) 1,470,227 1,359,899 Due from Haldimand County 431,028 Income taxes recoverable 271,570 Prepaid expenses 280,854 427,866 19,214,888 19,226,409 Property, plant and equipment (note 5) 56,246,862 51,511,920 Future income taxes 1,041,126 1,567,468 57,287,988 53,079,388 $ 76,502,876 $ 72,305,797
Liabilities Current liabilities Accounts payable and accrued expenses $ 9,796,250 $ 10,168,857 Income taxes payable - 351,925 Current portion of long term liabilities (note 7) 5,203,103 1,299,601 Current portion of customer deposits (note 7) 73,458 90,815 15,072,811 11,911,198 Regulatory liabilities (note 6) Long term liabilities (note 7) Total liabilities
2,462,242 11,210,372 28,745,425
3,156,315 12,397,936 27,465,449
Deferred credits Contributions in aid of construction 9,857,007 9,012,184 Less: amortization to date 1,362,541 1,130,445 8,494,466 7,881,739 Shareholderâ&#x20AC;&#x2122;s equity Capital (note 8) 20,289,812 Retained earnings 18,973,173 39,262,985 $ 76,502,876 $
20,289,812 16,668,797 36,958,609 72,305,797
The accompanying notes are an integral part of these consolidated financial statements.
HALDIMAND COUNTY UTILITIES INC. ANNUAL REPORT 2014
PAGE 24
Consolidated Statement of Income
December 31, 2014, with comparative information for 2013
2014 2013 Service revenue (note9) $ 59,904,604 $ 59,299,394 Cost of power 47,184,590 44,716,344 Gross margin on service revenue 12,720,014 14,583,050 Other operating revenue (note 10) 1,403,752 1,352,078 Regulatory adjustment (42,027) (1,459,184) 14,081,739 14,475,944 Expenses Distribution, operation and maintenance (note 11) 3,684,424 3,842,685 Community relations 69,075 69,412 Billing and collecting 1,482,803 1,405,880 General administration 2,247,931 2,059,288 Directors 170,585 162,732 7,654,818 7,539,997 Amortization Less: amortization of contributions in aid of construction Income before undernoted items Interest expense Income before income taxes Income taxes - current (note 12) - future Net income $
2,291,515 232,096 2,059,419 9,714,237 4,367,502 562,979 3,804,523 624,795 60,476 685,271 3,119,252 $
The accompanying notes are an integral part of these consolidated financial statements.
PAGE 25
2,251,721 123,001 2,128,720 9,668,717 4,807,227 626,133 4,181,094 890,259 31,330 921,589 3,259,505
Consolidated Statement of Retained Earnings December 31, 2014, with comparative information for 2013
2014 2013 Retained earnings â&#x20AC;&#x201C; beginning of year:
16,668,797
13,921,841
Net income
3,119,252
3,259,505
Dividends
(814,876)
(512,549)
Retained earnings â&#x20AC;&#x201C; end of year
$
$
18,973,173
$
16,668,797
The accompanying notes are an integral part of these consolidated financial statements.
HALDIMAND COUNTY UTILITIES INC. ANNUAL REPORT 2014
PAGE 26
Consolidated Statement of Cash Flows
December 31, 2014, with comparative information for 2013
2014 2013 Cash flows from operating activities: Net income $ 3,119,252 $ 3,259,505 Charges (credits) to income not involving cash Amortization 2,291,515 2,251,721 Amortization of contributions in aid of capital (232,096) (123,001) (Gain) loss on disposal of property, plant and equipment 61,176 (13,492) Future income taxes 60,476 31,327 5,300,323 5,406,060 Net change in non-cash working capital balances related to operations (137,165) (627,389) 5,163,158 4,778,671 Cash flows from financing activities: Dividends (814,876) (512,549) Deposits from customers, retailers and contractors (net) (1,816) 34,696 Contributions in aid of construction 844,823 4,868,512 Long term debt 2,700,397 (1,299,602) Regulatory liabilities - 2,728,528 3,091,057 Cash flows from investing activities: Purchase of property, plant and equipment (7,136,954) (9,204,653) Proceeds on disposal of property, plant and equipment 49,318 500,915 Regulatory assets (228,212) 54,098 (7,315,848) (8,649,640) Net increase (decrease) in cash and bank
575,838
(779,912)
Cash and bank, beginning of year
4,953,977
5,733,889
Cash and bank, end of year
$
5,529,815
$
4,953,977
Income taxes paid (recovered) $ Decrease in future taxes resulting from decrease in regulatory liabilities Interest paid
1,224,180
$
(70,185)
465,862 539,419
422,248 579,468
Proceeds on issuance of long term debt
4,000,000
-
Supplemental cash flow information:
The accompanying notes are an integral part of these consolidated financial statements.
PAGE 27
Notes to Consolidated Financial Statements Year ended December 31, 2014
1. Nature of activities: Haldimand County Utilities Inc. (“the Company”) was incorporated under the Ontario Business Corporations Act on October 13, 2000. The Company acts as the holding company for the shares of Haldimand County Hydro Inc. and Haldimand County Energy Inc. By resolution dated August 27th, 2014, Haldimand County Utilities Inc., as the sole shareholder of Halidmand County Generation, authorized the voluntary dissolution of the Corporation pursuant to clause 237 of the Business Corporation Act. The sole shareholder of Haldimand County Utilities Inc. is the Municipality of Haldimand County. At its Council meeting held on December 16, 2013, the Municipality of Haldimand County passed a resolution approving the acceptance of an offer by Hydro One Inc. to purchase all of the issued and outstanding shares of Haldimand County Utilities Inc., subject to an acceptable share purchase agreement (the “Agreement”). The Agreement, entered into on June 10, 2014, contemplates the transaction closing after all conditions precedent are met and within 90 days following the Parties’ receipt of all required approvals, including Ontario Energy Board approval of the Merger, Acquisition, Amalgamation, and Divestiture (“MAAD”) Application filed on July 31, 2014, the approval for which was granted effective March 12, 2015. 2. Significant accounting policies: The Company has adopted accounting policies prescribed by the Chartered Professional Accountants of Canada (“CPA”) and therefore the financial statements are prepared in accordance with Part V of the CPA Canada Handbook and the policies set forth in the Accounting Procedures Handbook issued by the Ontario Energy Board (“OEB”). The Company has elected to defer its implementation of International Financial Reporting Standards. Significant accounting policies are as follows: (a) Basis of consolidation: The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries: Haldimand County Hydro Inc. and Haldimand County Energy Inc.
(b) Measurement uncertainty: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and note disclosures thereto. Due to inherent uncertainty in making estimates, actual results could differ from estimates recorded in preparing these financial statements, including changes as a result of future regulatory decisions. Accounts receivable, regulatory assets and liabilities are stated after evaluation of amounts expected to be collected and an appropriate allowance for recoverability. Inventory is recorded net of provisions for obsolescence. Amounts recorded for amortization of capital assets and contributions in aid of construction are based on estimates of useful service life. (c) Inventory: Inventory is stated at the lower cost or net realizable value and consists of maintenance materials and supplies. Cost is determined on a weighted average basis. (d) Property, plant and equipment and amortization: Property, plant and equipment are recorded at their historical cost. Amortization is calculated on a straight-line basis over the estimated useful service life as follows: Buildings Distribution stations Distribution lines– overhead Distribution lines– underground Distribution transformers Distribution meters Sentinel lights Rolling stock Other capital assets
50 years 45 years 45-60 years 30-50 years 35-60 years 15-25 years 10 years 8-20 years 5 – 50 years
Construction in progress assets are not amortized until the projects are complete and in service. (e) Contributions in aid of construction: Contributions in aid of construction are reported as deferred credits and amortized over the useful life of the related property, plant and equipment. Contributions prior to 2000 are included in equity as miscellaneous paid-in capital.
HALDIMAND COUNTY UTILITIES INC. ANNUAL REPORT 2014
PAGE 28
Notes to Consolidated Financial Statements Year ended December 31, 2014
2. Significant accounting policies (continued): (f) Paid in capital: Paid in capital arises from development charges received prior to January 1, 2000 which were provided or paid for by developers, and are recorded as a permanent component of shareholder’s equity. (g) Revenue recognition: Distribution revenues are based on OEB approved distribution rates and are recognized as electricity is delivered to customers and collection is reasonably assured. Distribution revenue includes an estimate of revenue based on electricity delivered but not yet invoiced to customers from the last meter reading date to the end of the year. Incentive payments to which the Company is entitled from the OPA are recognized in revenue in the period when there is reasonable assurance that program conditions have been satisfied and the incentive payments will be received. Other revenue is recognized when the services are delivered to the customer and ultimate collection is reasonably assured. (h) Impairment of long-lived assets:
The Company accounts for payments in lieu of corporate taxes using the liability method. Under the liability method, future income taxes reflect the net tax effects of temporary differences between the tax basis of assets and liabilities and their carrying amounts for accounting purposes, as well as for tax losses available to be carried forward to future years that are likely to be realized. PILs are henceforth referred to as income taxes. (j) Financial instruments: Financial instruments are initially recognized at fair value. Subsequent measurement is based on the classification of the financial instrument. The Company has adopted a policy to classify all financial instruments as follows; 1) Cash and bank are classified as Held for Trading and measured at fair value.
Generally accepted accounting principles require that an impairment loss be recognized when events or circumstances indicate that the carrying amount of the long-lived asset is not recoverable and exceeds its fair value. Any resulting impairment loss is recorded in the period in which the impairment occurs.
2) Accounts receivable, unbilled revenue, and amounts due from Haldimand County are classified as Loans and Receivables and measured at amortized cost using the effective interest rate method.
The Company has determined that there was no impairment of long-lived assets as at December 31, 2014.
3) Accounts Payable, customer deposits, and long term liabilities are classified as Other Liabilities and measured at amortized cost.
(i) Payments in lieu of income taxes (PILs): The Company is currently exempt from taxes under the Income Tax Act (Canada) (“ITA”) and the Ontario Corporations Tax Act (“OCTA”). Under the Electricity Act, 1998, the Company makes payments in lieu of corporate taxes to Ontario Electricity Financial Corporation (“OEFC”). These payments are calculated in accordance with the rules for computing taxable income and
PAGE 29
taxable capital and other relevant amounts contained in the Income Tax Act (Canada) and the corporations Tax Act (Ontario) as modified by the Electricity Act, 1998, and related regulations. Prior to October 1, 2001, the Company was not subject to income or capital taxes.
The Company has adopted the disclosure and presentation requirements of CPA Canada Handbook Section 3861 rather than Handbook Sections 3862 and 3863.
Notes to Consolidated Financial Statements Year ended December 31, 2014
3. Inventory: The amount of inventories expensed during 2014 were $449,924 (2013 - $485,081). 4. Regulatory environment: Rate Regulation The Company is regulated by the OEB, under the authority granted by the Ontario Energy Board Act (1998). The OEB has the power and responsibility to approve or fix rates for the transmission and distribution of electricity, to provide continued rate protection for rural and remote electricity consumers, and to ensure that distribution companies fulfill obligations to connect and service customers. The OEB may also prescribe license requirements and conditions of service to electricity distributors, which may include, among other things, record keeping, regulatory accounting principles, separation of accounts for distinct businesses, and filing and process requirements for rate setting purposes. Regulatory Accounting In its capacity to approve or set rates, the OEB has the authority to specify regulatory accounting treatments that may differ from Canadian generally accepted accounting principles for enterprises operating in a non rate-regulated environment. The OEB has the general power to include or exclude costs, revenues, losses or gains in the rates of a specific period, resulting in a change in the timing of accounting recognition from that which would have applied in an unregulated company. Such change in timing involves the application of rate-regulated accounting, giving rise to the recognition of regulatory assets and liabilities. The Company’s regulatory assets represent certain amounts recoverable from customers in the future and costs that have been deferred for accounting purposes because it is probable that they will be recovered in future rates. It also includes regulatory liabilities which represent costs with respect to nondistribution market related charges and variances in recoveries that are expected to be settled in future periods.
Rate Setting: The distribution rates of the Company are based on a revenue requirement that provides a regulated Maximum Allowable Return on Equity (“MARE”) on the amount of the deemed equity component supporting the rate base. The Company files a rate application with the OEB annually. Rates are typically effective May 1 to April 30 of the following year. Accordingly, for the first four months of 2014, distribution revenue is based on the rates approved for 2013. Once every five years, the Company files a Cost of Service application where rates are rebased through a cost-of-service review. In the intervening years an Incentive Rate Mechanism application (“IRM”) is filed. A Cost of Service application is based upon a forecast of the annual amount of operating and capital expenses, debt and shareholder’s equity required to support the Company’s business. An IRM application results in a formulaic adjustment to distribution rates for the annual change in the Gross Domestic Product Implicit price Inflator for Final Domestic Demand (“GDP IPI-FDD”) net of a productivity factor and a “Stretch Factor” determined by the relative efficiency of an electricity distributor. The Company’s last Cost of Service rate application was filed November 15, 2013 and approved April 16, 2014 for rates effective May 1, 2014. The Company also files rate applications periodically to recover or settle its regulatory assets and liabilities.
HALDIMAND COUNTY UTILITIES INC. ANNUAL REPORT 2014
PAGE 30
Notes to Consolidated Financial Statements Year ended December 31, 2014
5. Property, plant and equipment: Accumulated Cost Amortization Land $ Buildings Distribution stations Distribution linesâ&#x20AC;&#x201C;overhead Distribution lines-underground Distribution transformers Distribution meters Sentinel lights Rolling stock Other capital assets Total $
127,140 $ 2,191,968 466,496 43,345,686 11,391,021 17,908,818 5,580,057 190,410 2,627,379 5,904,053 89,733,028 $
- $ 570,877 201,411 14,525,119 4,316,235 6,204,883 1,888,561 173,460 1,305,700 4,299,920 33,486,166 $
2014
2013
127,140 $ 127,140 1,621,091 1,672,654 265,085 273,116 28,820,567 25,472,125 7,074,786 6,890,012 11,703,935 10,385,019 3,691,496 4,060,111 16,950 15,075 1,321,679 1,144,939 1,604,133 1,471,729 56,246,862 $ 51,511,920
6. Regulatory assets (liabilities):
2014
2013
Retail settlement variance accounts $ (1,455,577) $ (804,111) Change in accounting policy (1,296,155) (1,459,184) Regulatory liability for future taxes (530,035) (995,898) Low voltage services (25,450) (26,343) Lost revenue adjustment mechanism 98,916 148,070 Recovery of regulatory asset balances 149,769 (538,416) Renewable energy generation 230,643 492,146 Hydro One Networks Inc. 365,647 21,165 Smart and stranded meters - 6,256 $ (2,462,242) $ (3,156,315) The Company continually assesses the likelihood of recovery of each of its regulatory assets and continues to believe that it is probable that the OEB will factor its regulatory assets and liabilities into the setting of future rates. If, at some future date, the Company judges that it is no longer probable that the OEB will include a regulatory asset or liability in future rates, the appropriate carrying amount will be reflected in results of operations in the period that the assessment is made.
PAGE 31
Notes to Consolidated Financial Statements Year ended December 31, 2013
7. Long-term liabilities:
2014
$
96,499
Ontario Infrastructure and Lands Corporation (OILC) Interest bearing debentures with semi-annual payments of principal and interest: (a) Interest at 2.92%, semi-annual payments of $96,499 plus interest, due April 2015
2013
$
289,498
(b) Interest at 3.90%, semi-annual payments of $264,418 plus interest, due April 2020
2,908,600
3,437,437
(c) Interest at 4.39%, semi-annual payments of $133,333 plus interest, due April 2025
2,800,000
3,066,667
(d) Interest at 3.77%, semi-annual payments of $120,521 plus interest, due September 2037
5,543,980
5,785,022
(e) Interest at 2.91%, semi-annual payments of $35,029 plus interest, due September 2022
560,463
630,521
Non-revolving demand capital expenditure bank credit line, Repayable at the earlier of upon demand or receipt of the Funds specific to the acquisition of Haldimand County Utilities Inc. by Hydro One Inc.
4,000,000
Customer, retailer and contractor deposits 577,391 16,486,933 Current portion 5,276,561 Long-term liabilities, end of year
$
11,210,372
-
579,207 13,788,352 1,390,416
$ 12,397,936
Based upon current repayment terms, the estimated annual principal repayments and return of customer deposits are as follows: 2015 $ 5,276,561 2016 1,155,881 2017 1,159,987 2018 1,203,748 2019 1,179,378 Thereafter 6,511,378 The OILC debentures are secured by a general security agreement on all property owned by the Company. The bank credit line is secured by a general security agreement on the assets of the company.
HALDIMAND COUNTY UTILITIES INC. ANNUAL REPORT 2014
PAGE 32
Notes to Consolidated Financial Statements Year ended December 31, 2014
8. Capital: 2014
2013
Capital stock Authorized â&#x20AC;&#x201C; an unlimited number of common shares Issued â&#x20AC;&#x201C; 3,001 common shares $ Miscellaneous paid-in capital
19,149,049 $ 19,149,049 1,140,763 1,140,763
$
20,289,812
$ 20,289,812
Residential $ General Retailer Embedded distributor Retail transmission and low voltage Regulatory Sentinel and street lighting Distribution services
2014
2013
15,073,097 $ 13,453,113 11,414,896 10,248,407 6,983,624 7,161,094 5,960,761 6,338,496 5,580,210 5,499,403 2,159,113 1,992,840 26,493 22,990 12,706,410 14,583,051
$
59,904,604
$ 59,299,394
Water and wastewater billings $ Collection charges Pole rentals Late payment charges Sentinel light rental Change of occupancy charges Interest earned Reconnection charges Retail service charges Profit on sale of material services Gain (loss) on disposal of property, plant and equipment Miscellaneous MicroFIT monthly service charge
2014
2013
9. Service revenue:
10. Other operating revenue:
PAGE 33
$
467,096 $ 221,669 80,613 76,330 75,661 69,480 65,973 28,210 22,093 21,432 (61,176) 321,520 14,851 1,403,752
441,606 287,221 83,239 71,439 77,173 75,180 94,389 25,530 24,318 26,248 13,492 118,846 13,397
$ 1,352,078
Notes to Consolidated Financial Statements Year ended December 31, 2014
11. Distribution, operation and maintenance: 2014
2013
Overhead distribution lines $ Distribution supervision and engineering Distribution transformers Underground distribution lines Distribution meters Distribution station equipment Sentinel light maintenance
1,971,774 $ 2,173,423 716,330 702,401 355,148 319,468 334,187 247,043 229,911 325,383 58,112 60,580 18,962 14,387
3,684,424
$ 3,842,685
2014
2013
$
12. Income taxes - current: The income tax provision was calculated based on taxable income. Taxable income is calculated as follows:
Income before income taxes $ 3,804,523 $ 4,181,094 Less regulatory adjustment - Amortization in excess of capital cost allowance (1,419,331) (1,217,471) Net change in regulatory assets (92,307) 533,538 Regulatory assets capitalized for tax purposes - (Gain) loss on disposal of assets 61,176 (13,492) Other additions and deductions (25,204) 4,238 Taxable income
$
2,328,857
Tax at 29.43% (2013 â&#x20AC;&#x201C; 25.52%)
$
685,271
$ 3,487,907 $
890,259
HALDIMAND COUNTY UTILITIES INC. ANNUAL REPORT 2014
PAGE 34
Notes to Consolidated Financial Statements Year ended December 31, 2014
13. Related party transactions: The related party of the Company is its parent Haldimand County (the â&#x20AC;&#x153;Countyâ&#x20AC;?) and its directors. Amounts payable to and receivable from related parties are non-interest bearing with no fixed terms of repayment. 2014
117,431 $ 29,938
127,310 25,187
441,133
441,607
Total charges received from related parties
588,502
$
594,104
46,022 $ 79,045 50,000
45,122 844 -
$
Charges paid to related parties: Haldimand County Hydro Inc.: Property taxes $ Other Vantage Appraisals Total charges paid to related parties
$
175,067
14. Prudential support: Haldimand County Hydro Inc. is required by the IESO, to provide security to mitigate the Companyâ&#x20AC;&#x2122;s risk of default based on its expected activity in the electricity market. The IESO could draw on this guarantee if Haldimand County Hydro Inc. fails to make a payment required by a default notice issued by the IESO. The maximum potential payment is the face value of the bank letters of credit. As at December 31, 2014, the Company provided prudential support in the form of bank letters of credit of $1,796,505. The letters of credit are secured by a general security agreement on all property owned by the Company.
PAGE 35
2013
Charges received from related parties: Haldimand County Hydro Inc.: Street lights $ Other Haldimand County Energy Inc.: Water and wastewater billing and collecting fees
$
45,966
Notes to Consolidated Financial Statements Year ended December 31, 2014
15. Capital management: The Company’s objectives when managing capital are to maintain financial stability such that it can continue to provide returns for the shareholder and benefits for other stakeholders. The Company meets its objective for managing capital by management oversight and Board monitoring of total capital. The Company’s total capital as at December 31, consists of:
2014
2013
Total long-term liabilities $ Less: cash and bank
16,486,933 $ 13,788,352 5,529,815 4,953,977
Net long-term liabilities Total shareholder’s equity
10,957,118 39,262,985
Total capital
50,220,103
$
8,834,375 36,958,609
$ 45,792,984
16. Financial instruments: Management and the Board monitor and respond as necessary to any risks arising from financial instruments. Fair value The carrying values of financial instruments such as cash and bank, accounts receivable, unbilled revenue and accounts payable and accrued liabilities approximate their fair values because of the short term maturity of these instruments. The fair value of long-term debt with Ontario Infrastructure and Lands Corporation as at December 31, 2014 is $12,570,670. The fair value of the demand credit line approximates carrying value because it bears interest at current rates. Interest rate risk The Company’s exposure to interest rate risk relates to its outstanding debentures (see Note 7). Credit risk The Company’s exposure to credit risk relates to its accounts receivable and unbilled revenue. The Company collects security deposits from customers and retailers in accordance with direction provided by the OEB. The Company held deposits of $559,891 (2013 - $561,708) at year end in order to mitigate credit risk.
HALDIMAND COUNTY UTILITIES INC. ANNUAL REPORT 2014
PAGE 36
Notes to Consolidated Financial Statements Year ended December 31, 2014
17. Contingencies: A claim has been filed against the Company related to stray voltage. At this time, it is not possible to quantify the effect, if any, of this claim on the financial statements of the Company, consequently no provision for a loss, if any, has been recorded in these financial statements. 18. Emerging accounting changes:
items on the face of the financial statements distinguished from assets, liabilities, income and expenses that are recognized in accordance with other IFRS. Extensive disclosures will be required to enable users of the financial statements to understand the features and nature of and risks associated with rate regulation and the effect of rate regulation on the entity’s financial position, performance and cash flows.
(a) Transition to International Financial Reporting Standards 19. Public liability insurance: (“IFRS”): The Company is a named insured of the Municipal Electric The Canadian Accounting Standards Board (“AcSB”) Association Reciprocal Insurance Exchange (“MEARIE”), adopted a strategic plan that would have Canadian GAAP which was created on January 1, 1987. A reciprocal insurance converge with IFRS, effective January 1, 2011 which would exchange may be defined as a group of persons formed for have required entities to restate, for comparative purposes, the purpose of exchanging reciprocal contracts of indemnity their interim and annual financial statements and their or inter-insurance with each other through the same attorney. opening financial position. MEARIE provides general liability insurance to member electric utilities in accordance with the Power Corporation Act of In October 2010, the AcSB approved a deferral of adoption Ontario; subsection 116(2), to a maximum of $24,000,000 per of IFRS for qualifying entities with activities subject to rate occurrence. regulation. Part 1 of the CPA Canada Handbook specifies that firsttime adoption is mandatory for interim and annual Insurance premiums charged to each municipal electric utility financial statements relating to annual periods beginning on consists of a levy per thousand dollars of service revenue subject or after January 1, 2015. to a credit/surcharge based on each electric utility’s claims The amendment also requires entities that do not prepare its interim and annual financial statements in accordance with Part 1 of the CPA Canada Handbook during the annual period beginning on or after January 1, 2011 to disclose that fact. (b) Accounting for rate regulated activities under IFRS: The International Accounting Standards Board (“IASB”) has issued IFRS 14 Regulatory Deferral Accounts in January 2014. This standard provides specific guidance on accounting for the effects of rate regulation and permits first-time adopters of IFRS to continue using previous GAAP to account for regulatory deferral account balances while the IASB completes its comprehensive project in this area. Adoption of this standard is optional for entities eligible to use it. Deferral account balances and movements in the balances will be required to be presented as separate line
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Haldimand County Utilities Inc. 1 Greendale Drive Caledonia, ON, N3W 2J3 Phone: (905) 765-5211 Toll Free: (1-877) 872-2570 Fax: (905) 765-8211 info@hchydro.ca haldimandcountyhydro.ca
OM Official Mark adopted and used by the Independent Electricity System Operator. Used under licence. peaksaver PLUS速 is a registered trade-mark of Toronto Hydro Corporation. Used under licence.