2010 Sustainability-Based Annual Report
The Power to Make our Communities Better
2010
Sustainability-Based Annual Report CEO and Chair Message
3
A Review of 2010
7
Global Reporting Initiative (GRI)
13
Social Performance
15
Environmental Performance
17
Economic Performance
21
Sustainability Policy
27
Corporate Governance
29
The Horizon Family of Companies
31
Acknowledgements
32
Financial Statements (Enclosed) Visit www.horizonutilities.com for: • Horizon Holdings Inc. Sustainability-Based Annual Report • Horizon Holdings Inc. Global Reporting Initiative™ (GRI) Filing • Horizon Holdings Inc. Financial Statements • Ernst & Young 2010 GRI Assurance Statement
2010 Sustainability-Based Annual Report Royal Botanical Gardens
1
A+
Horizon’s final results for the
Global Reporting Initiative (GRI) filing for 2010. Robert Dolan, Chair, and Max Cananzi, President & CEO, at Royal Botanical Gardens.
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Horizon Holdings Inc.
The Power to Make our Communities Better CEO and Chair Message Horizon Holdings Inc. (“the Corporation”) had a
customers, and adopting sustainable development
number of significant achievements in 2010.
measures – all while maintaining among the lowest
Despite the challenging local economy the
electricity rates for customers and stable dividends for shareholders.
Corporation delivered solid financial results. The Corporation achieved an “A-stable” rating from our credit rating agency, Standard & Poor’s. Our sustainability Global Reporting Initiative (GRI)
The year also marked a milestone for Horizon. We celebrated our fifth anniversary since the amalgamation of the electric utility companies of the cities of St. Catharines and Hamilton that led to the creation of Horizon.
filing for 2010 resulted in an “A+” ranking. We completed our largest capital investment program to date as we continue to renew our infrastructure. The Corporation contributed to the community through its extensive conservation programs and sustainability initiatives and for the third consecutive year, achieved exceptional customer satisfaction ratings relative to our provincial and national peers. At Horizon, we have built a company that is committed to the sustainability of the communities we serve. Our business practices are governed by our sustainability policy. In 2008, we made the bold step to move to a sustainability-based Annual Report because we felt strongly about reporting and defining our corporate performance along social, environmental, and economic dimensions. Horizon has earned the trust of its customers, its communities, and its industry peers by providing consistent leadership on several energy sector fronts and issues. Our employees are facilitating the introduction of renewable energy, participating in modernizing the electricity grid, delivering conservation programs to our
The Spirit of St. Catharines sculpture honours the athletes, coaches and volunteers of St. Catharines.
2010 Sustainability-Based Annual Report
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Hamilton and St. Catharines are undergoing an economic transformation resulting from the impact of the changing industrial manufacturing sector and new business investment growth in the community, establishing centres of excellence in research, innovation, and technology. Horizon will remain a key partner and will continue to contribute to this community transformation – investing in infrastructure, in the people who live, work and play in these communities, and in new technology and growth businesses.
Key Accomplishments In 2010, we launched Horizon Energy Solutions, a commercial business focused on sustainable energy solutions for clients interested in advancing their performance in this area and in reducing their carbon footprint.
Our
offering
includes
developing
solar
electricity generating installations for commercial roofs. Horizon has set the bar high to be the best performing company in the Ontario energy sector. We worked very hard throughout the year to maintain trust and continue to build strong meaningful relationships with all of our stakeholders – employees, customers, and municipal partners. McMaster Innovation Park in Hamilton offers state-of-the-art office and laboratory space.
At Horizon, we take our lead from our customers. We have established an organizational culture that places
Five years later, we now serve 237,000 residential and commercial customers and we do so at substantially less cost than if the two companies had not come together. Horizon’s customers have benefitted greatly by the amalgamation, resulting in approximately $5 million in annualized operating cost savings, lower customer rates and increased dividends to shareholders. In five fastpaced, eventful and challenging years, we have made great strides in our organizational goals, performance, and in advancing our corporate strategy.
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Horizon Holdings Inc.
the customer at the centre in the development of all aspects of our programs and services – how we conduct our planning and technology implementation; how we provide customers with information and education about energy conservation; and how we ensure 24/7 emergency response-readiness. Our excellent customer satisfaction survey results are among the highest in Ontario and demonstrate that at Horizon we do, in fact, “walk the talk” concerning customer service.
Our continued focus on employee engagement and our relationship with our union, the International Brotherhood of Electrical Workers (IBEW), has been a key component of our organizational success. Employees are vital to this organization and to its customers. Horizon is one of the best-performing
energy
companies
thanks
to
our
knowledgeable, well-trained, and empowered employees. Without our entire workforce fully engaged, supportive, and committed, we could not achieve all that we have been able to accomplish. At Horizon, we believe employee and customer satisfaction are directly linked.
Sustainable Community Planning Going forward, Horizon is facing an exciting challenge. We are rebuilding infrastructure to meet the needs of our communities today and into the future. The challenge is particularly acute given that the bulk of our infrastructure was installed several decades ago while the communities were experiencing rapid growth. Today our mature communities need a solution that will balance the need for this substantial and necessary infrastructure investment while keeping an eye on future customer rate impacts. As a result, conservation has become a key cornerstone
The old courthouse in St. Catharines is currently home to the Sullivan Mahoney Courthouse Theatre.
strategy for the Corporation and has been incorporated
in the power industry. We intend to take every advantage
into our long-term planning and infrastructure renewal
to incorporate these innovations which will modernize
programs.
the system to the betterment of our communities.
For cities such as Hamilton and St. Catharines, there is
By providing the required infrastructure, cost leadership,
an opportunity to better position our communities for the
conservation and renewable energy programs, and
energy future of the 21 Century through the renewal
services that customers want and value, our towns and
process of aging infrastructure. As Horizon rebuilds the
cities will indeed prosper. And, they will succeed as
electricity distribution system, it will continue to leverage
inviting, livable and sustainable communities.
st
technological innovation as part of its long-term strategy. Our network systems will become “smarter� and better able to meet the evolving requirements of the future consumer. It is only recently that these technological solutions have become affordable and widely available
Robert Dolan, Chair, Board of Directors
Max Cananzi, President & CEO
2010 Sustainability-Based Annual Report
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Horizon Utilities is one of the largest local distribution companies in Ontario with:
237,000 customers 400 employees $473 million in assets
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Horizon Holdings Inc.
A Review of 2010 Leadership Serving the cities of Hamilton and St. Catharines, Horizon is one of the largest local distribution companies (LDCs) in Ontario with 237,000 customers, 400 employees and $473 million in assets. Horizon is committed to helping build vibrant, sustainable communities. We deliver strong financial performance, while balancing social and environmental needs. We deliver value to all our stakeholders. The past five years have been a continuous evaluation of and investment in our people, our aging infrastructure, and our technology and systems – investments we believe are crucial to continue providing a high level of service to our customers. In part, due to the 2005 amalgamation, Horizon continues to deliver among the lowest operating
Horizon emphasizes learning and development for all employees.
costs, and the lowest residential and commercial rates in
Our workforce is also aging and requires strategic
the province, while simultaneously generating among the
renewal through short and long-term planning and
strongest returns for shareholders. This has earned Horizon
investment. Many of our employees will be eligible to
one of the highest credit ratings for an electric utility in
retire within the next five to 10 years, a problem which
Ontario by Standard & Poor’s, an “A-stable” rating.
will be particularly challenging with our skills trades employees. Our workforce labour strategy provides a
Empowering Employees
window and direction for our recruitment and training
The year 2010 was very much focused on meeting the
development strategies, including working directly with
needs of our customers today and into the future. The goal was both to strengthen and prepare for a faster changing and evolving energy sector, rising to meet or exceed increasing customer expectations, and renew our infrastructure while retaining one of the lowest rates of all Ontario LDCs. Consequently, improving the internal
efforts now and in the future. Recruitment and in-house key post-secondary institutions, are assisting us in securing the best in what has become a fiercely competitive market for these highly-skilled professionals.
A Customer Focus
operations and business processes has been critical.
At Horizon, our strategic planning approach includes
Cross-functional process improvements and integrated
measures to ensure all of our initiatives are evaluated for
organizational planning are making Horizon a more
their impact on customers.
responsive organization.
2010 Sustainability-Based Annual Report
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The redevelopment of the Juravinski Hospital in Hamilton saw the addition of 425,000 square feet to the facility and renovation of another 35,000 square feet.
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Both residential and commercial customers have become
among the lowest rates of all LDCs in Ontario, Horizon
much more sophisticated in their information and service
is helping to lower the cost of living and the cost of doing
requests, questions and expectations. People want to
business in the cities of Hamilton and St. Catharines.
know about and be able to implement energy conservation
In 2010, we launched an outreach program through the
mechanisms and manage their rising electricity costs. We
downtown Business Improvement Associations (BIAs) to
believe it is our obligation to inform and educate our
get the word out to small businesses about the Ontario
customers on the value they are receiving, and how they
Power Authority’s (OPA) Power Savings BlitzOM program,
can benefit from smart energy use.
which offers up to $1,000 for energy-efficient retrofits.
Our desire for our customers to view of us as being “easy
Through the OPA, Horizon has also helped large
to do business with” was reinforced recently by customer
commercial customers – both private and public sector
satisfaction survey results. While overall satisfaction has
– to reduce their energy costs by participating in the
been declining on average in Ontario, Horizon
OPA’s conservation programs. The best example is the
maintained its customer satisfaction scores against the
nearly $640,000 presented to Hamilton Health Sciences
general sector-wide decline. Another Ontario-specific
(HHS), the largest rebate awarded to date in Ontario.
customer satisfaction survey also ranked Horizon among
Over the next 10 years, HHS will save $48 million, and
the highest performing LDCs.
significantly reduce its carbon footprint.
Toward Sustainable Communities
Horizon continues to develop strategic alliances and
Horizon’s performance in 2010 demonstrates that a LDCs performance can be a significant contributor to the overall sustainability of its community. By having
and engineering firms to help manage what we envision
Horizon Holdings Inc.
partnerships with community organizations, contractors to be profound changes in Ontario’s energy sector and the emerging green energy industry.
Horizon reached out to the developer community and
Conservation makes economic sense. It is often cheaper
engaged this customer group to review and improve the
than building new generation capacity. Horizon has
new development connection process to ensure fairness to
developed a four-year plan to deliver conservation
all parties, while enabling growth in our communities.
programs to all our customers, with particular focus on
Among the enhancements that were introduced as a result
commercial businesses within our communities.
of the stakeholder consultation: elimination of the expansion deposit, delay in the payment of service and metering fee
LDCs are playing a vital role in building a culture of
from contract execution to energization, reduction in the
conservation in Ontario, working together to reduce the
number of financial transactions and letter of credit
demand
adjustments, and providing the option of applying the
conservation
transfer price against fee for service and metering. These
initiatives. Horizon is passionately committed to helping
refinements were developed with our customers for the
create and grow this culture of conservation. We began
benefit of our customers.
by getting our own house in order – installing energy
Golden Horseshoe Strategic Energy Alliance Working with McMaster University, Mohawk College, and our municipal partners’ economic development departments, we jointly initiated the Golden Horseshoe Strategic Energy Alliance. As it develops, its purpose is to present our combined strengths to industry and encourage them to do research and manufacturing in our communities
for
electricity and
through
demand
comprehensive
management
(CDM)
efficient lighting with timers, monitoring our heating and air conditioning systems, and operating one of the largest fleets of hybrid vehicles of any local electricity distribution company. We have also instituted an antiidling policy supported by a sophisticated Geographic Positioning System (GPS). Horizon is also continually assessing new vehicle technologies and fuel sources as they become available, as a strategic initiative to reduce emissions in the replacement of its fleet.
on solar and other clean technology industries.
Our Customer Services team also worked diligently on
This strategic powerhouse will combine the capabilities
of Time-of-Use rates. By end of 2010, 226,040 smart
of these research and training institutions and the economic development resources of the cities to help create and attract the energy technologies and businesses of the future. Our alliance can provide the skilled workforce this new sector will need, locally, for the benefit of all residents. As the name implies, we believe there is room in the Golden Horseshoe Strategic Energy Alliance for other communities and their LDCs to participate in the broader education and other initiatives that are possible beyond solar.
A Culture of Conservation Conservation is where the future is at – not merely as a feel good or environmental component of a company’s social responsibility agenda, but rather an essential economic tool and strategic business driver. The reality is Canada, on
the deployment of our smart meters and the implementation meters had been installed – 97.3 per cent of eligible customers. Of these, 157,143 customers were migrated to Time-of-Use billing (TOU). Horizon’s energy conservation initiatives have resulted in energy savings of more than 82 million kilowatt hours (as of 2009, the most current available data) – enough energy to power more than 9,600 homes for one year. This has diverted more than 18,000 metric tonnes of CO2 emissions from the air, the equivalent of taking
5,700 cars off the road. While CDM activity is mandated
for all LDCs, Horizon has been aggressively embracing this challenge for a number of years and strongly believes in the importance of these initiatives. We simply want our communities to continue to remain economically vibrant and livable – with a reliable supply of electricity and fewer smog days.
a per capita basis, is one of the largest users of electricity in the world. And part of that is likely due to the relatively low rates we have historically paid for electricity.
2010 Sustainability-Based Annual Report
9
Horizon Energy Solutions, one of Ontario’s first commercial solar energy generating enterprises for an LDC-affiliate
company,
takes
advantage
of
the
opportunities to generate a clean and reliable distributed energy supply through Ontario’s Green Energy and Green Economy Act. Our target market is across Southern Ontario. Initially, Horizon Energy Solutions is offering solar power generation for commercial and institutional rooftops. Businesses can convert unused rooftop space into a revenue-generating asset without the need for capital, while at the same time advancing their own green energy and sustainability objectives through the generation of renewable energy. During its first year of operation, Horizon Energy Solutions was focused on negotiating lease agreements for solar installations on commercial, institutional and industrial sites in our traditional service areas and beyond. Our goal is to deliver financial opportunities to our customers and to help them reduce their carbon footprint. Expanding the company’s offerings with energy management services and evaluating new market opportunities will continue to be priorities in 2011 and beyond. Employees from the Underground department working on a switching unit.
Solar Power – Horizon Energy Solutions
Development is sustainable when it is focused on the triple bottom line of social, environmental and economic
Renewable energy generation sources, such as solar
considerations. In the electricity business, we are
photovoltaic (PV), are growing in importance in Ontario’s
witnessing a change in customer attitudes around
generation supply mix. More and more, demand is
sustainability and energy conservation. Customers are
increasing for sources of energy that are safe, free of
increasingly making the connection between turning off
carbon emissions and domestically self-reliant. The cost
their lights and improving the environment. There is a
of solar PV technology is currently more expensive than
growing interest in renewable energy sources. Our
using fossil fuels, although the environmental cost of
customers,
carbon is not currently in the price of fossil fuels. Growing
increasingly demanding increased self-sufficiency in
demand worldwide for solar panels, however, is
energy solutions. Today, residential and commercial
increasing the number of market participants and leading
customers can generate their own power.
to improved manufacturing techniques, making solar energy an attractive investment, and an increasingly environmentally friendly and affordable technology.
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Sustainability and Energy Conservation
Horizon Holdings Inc.
both
residential
and
commercial,
are
Energy Mapping
policy-making worlds – into one. And that is what truly
Horizon is undertaking leading-edge energy mapping
of our communities.
makes them smart. This is central to the economic future
work in Hamilton and St. Catharines. We are fortunate to be working with the Canadian Urban Institute on an
In the coming years, a significant challenge for Horizon
OPA pilot project in Hamilton that brings together the
and the energy sector will be balancing the demands of
property data from the municipal sector, energy
an ever-changing regulatory environment while, at the
consumption data from Horizon and gas consumption
same time, laying the foundation for energy generation
data from Union Gas. Horizon is also working on a
and distribution needs for the coming decades. From an
similar project with Niagara Region and Enbridge for
economic perspective, it will also be challenging to
the City of St. Catharines. Currently, maps show all
continue making the needed infrastructure reinvestment
energy intensity (gas and electric) by land area. The
while maintaining affordable electricity rates.
data can also be used for detailed mapping on the design and execution of conservation programs and
Some projections suggest North America may have four
policies for energy efficiency.
million electric cars on the road by 2016. As electric vehicles increasingly become available, LDCs will face
Energy mapping also provides an important opportunity
even more challenges. Strategies will be needed to
to evaluate business decisions for implementing energy
support electric vehicles, from their impact on the grid, to
efficiency, such as the visualization of market potential of
the issue of charging depots and billing technologies to
energy strategies. The resulting energy maps and
track costs back to a person’s utility bill.
research are currently being used to support the Hamilton Community Energy Collaborative – comprised of city staff, councillors, utilities, local community groups, and others – to develop an energy efficiency action plan for infrastructure development, demand-side management programs, improved electricity reliability, and greenhouse gas reduction.
Smart Grid, Smart Growth, Smart Communities The creation of Ontario’s Greenbelt and Growth Plan has served to encourage “smart growth” by forcing our growing communities to look inward to infill brownfields redevelopment because greenfields are becoming limited, and many are now off limits. The Green Energy and Economy Act, similarly, has been a catalyst for new ways of thinking and planning between municipalities, energy utilities and developers. As innovative as the technology is becoming, “smart grid” implementation relies more on our ability to conquer the divide between energy policy decisions and municipal planning and development policy decisions. Smart grids and smart growth are only “smart” to the
A Greener Horizon … Sustainability is no longer a buzzword. For Horizon, it is the central driver for what we do and we are proud to be leading the way on this initiative in Ontario. The visionaries sounded the call for taking a closer look at what makes our communities tick, and what makes them sick. They not only gave us the diagnosis for what ails North American cities and communities, but also the prescription: we need to plan our energy needs and urban growth if we want healthy, livable, sustainable and prosperous communities. We believe the players who will succeed in the new green economy will be those who have demonstrated solid business success, as Horizon and its predecessor companies have done in over a century of existence in the electricity business. Success in the green economy, however, will also be a result of sound business investments, sustainability policies and practices, continuous customer satisfaction, and support from an empowered and well-informed workforce.
extent that we combine these two solitudes – these two
2010 Sustainability-Based Annual Report
11
Students at Brock University enjoy a break at tranquil Pond Inlet on the St. Catharines campus. Brock is undergoing a burst of physical expansion that is creating a better future for students and the communities served by the university.
Management Approach Disclosures for each Indicator Category
Report on a minimum of 20 Performance Indicators, at least one from each of: Economic, Environmental, Human Rights, Labor, Society, Product Reponsibility.
Same as requirement for Level B
Management Approach Disclosures for each Indicator Category
Report on each core G3 and Sector Supplement* Indicator with due regard to the Materiality Principle by either: a) reporting on the Indicators or b) explaining the reason for its omission.
Report Externally Assured
OUTPUT Report on a minimum of 10 Performance Indicators, including at least one from each of: Economic, Social and Environmental.
Report on all criteria listed for Level C plus: 1.2 3.9, 3.13 4.5 - 4.13, 4.16 - 4.17
Report Externally Assured
G3 Performance Indicators & Sector Supplement Performance Indicator
Report Externally Assured
Report on: 1.1 2.1- 2.10 3.1- 3.8, 3.10 - 3.12 4.1- 4.4, 4.14 - 4.15
Not Required G3 Management Aproach Disclosures
OUTPUT
STANDARD DISCLOSURES
G3 Profile Disclosures
OUTPUT
Report Application Level
*Sector supplement in final version
We have self-declared our reporting to be Application Level A+. Ernst & Young has checked our reporting and has confirmed it to be Application Level A+.
A+
Horizon’s final results
12
Horizon Holdings Inc.
for the Global Reporting Initiative (GRI) filing.
Global Reporting Initiative (GRI) Sustainability Reporting Initiative At Horizon, our focus on aggressive CDM, energy
mean the documenting of our social, environmental and
mapping and low electricity rates is all part of our effort
economic performance in equal measure. While some
to contribute to making our communities better places to
utilities have developed their own metrics, Horizon
live, work and invest. While we have a long history of
adopted the de facto international standard, the Global
corporate social responsibility, we knew we wanted to
Reporting Initiative (GRI) framework, as the best way
do more. Over the last few years, we have been
forward. We chose to go with this framework because of
progressing on the path of sustainable development by
the public disclosure required and its general acceptance.
identifying ways we can contribute to the sustainability
The decision reflected our desire to hold ourselves
of the communities we serve.
accountable to the highest standard, to set an example for other utilities and to provide us with an organizational
In 2008, Horizon decided it needed to develop a
“roadmap” to follow.
corporate sustainability policy and begin to undertake sustainability reporting. By sustainability reporting we
Now in its third year of the GRI, Horizon has consistently improved its triple bottom-line ranking from a “B” in 2008,
GRI’s Sustainability Metrics GRI Metric
GRI Issues to be Addressed
Economic
Financial performance, market presence, economic impact
Environment
Materials, energy, water, biodiversity, emissions
Labour Practices and Decent Work
Employment, labour relations, occupational health and safety, training and education, equal opportunity
Human Rights
Investment and procurement practices, non-discrimination, collective bargaining, forced and child labour, indigenous rights
Society
Community, corruption, public policy, anti-competitive behaviours
Product Responsibility
Customer health and safety, labelling, communications, privacy
“B+” in 2009, to an “A+” ranking for 2010. Once again, Ernst & Young performed a limited assurance of 10 GRI indicators reported by Horizon in its 2010 GRI filing, and performed a third-party check of Horizon’s self-declaration of an “A+” application level report. Ernst & Young’s independent assurance statement for the 2010 filing can be found at www.horizonutilities.com. Horizon is the first local distribution company in Canada and the only electric utility company in Ontario to report under the GRI framework and the first to receive an A+ ranking validated by a third party. By making a GRI filing, our aim at Horizon is to continuously improve our business practices and bring added value to all of our stakeholders. It gives us a structure for internalizing core sustainable development values. As part of the public disclosure requirement for GRI, we have also supplemented our website publications with our sustainability policy and our GRI filing, and published all of our financial statements.
This is a sustainability-based annual report – reporting on the three main sustainability emphases – social, environmental and economic performance.
2010 Sustainability-Based Annual Report
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In 2010, Horizon Utilities held more than 60 community events, assisted 21,000 customers with conservation needs, and donated 1,000 Energy Conservation Kits
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Horizon Holdings Inc.
Social Performance Education Since 2007, Horizon has annually sponsored Generation Conservation,
an
energy
conservation
curriculum
program for Grade 5 students attending 200 schools in Hamilton and St. Catharines. Student teachers attending Brock University are also provided with workshops to prepare them for teaching Generation Conservation. In 2010, Horizon was honoured with a Hamilton Employer Champion Award, given by the Industry Education Council of Hamilton (IEC). Nominated by Mohawk College, Horizon was cited for its ongoing investment in education, beginning with programs such as: Generation Conservation, Kidz Power, Power for Tomorrow, Reality House and Play it Safe. In 2010, we held more than 60 community events, assisted 21,000 customers with conservation needs, and also donated 1,000 Energy Conservation Kits to Good Shepherd Centres in Hamilton and to Community Care of St. Catharines and Thorold.
Horizon and its employees support the United Way through a number of initiatives, including a staff barbecue.
Safety & Reliability At Horizon, we have always been committed to ensuring
2010,
is
embedding
a safe work environment. Our implementation of an
organization that health and safety is everyone’s
occupational health and safety management system
business. The more intrinsic this thought process becomes,
(OHSMS) that supports the CSA Z1000 standard takes
the more successful an organization becomes in creating
our promise one step further. This standard includes a
a health and safety culture in which everyone actively
framework for developing and implementing on OHSMS,
participates,
and encourages a systematic approach to managing
accountable.
takes
a
mindset
responsibility
throughout
and
the
becomes
occupational health and safety issues. A CSA Z1000 Steering Committee, made up of both worker and
New procedures, forms and training for identifying,
management
representatives
the
assessing and documenting workplace hazards and
organization,
has
in
risks have also been developed and implemented.
made
from
significant
across progress
implementing our new OHSMS.
Several departments have started to place into the Hazard Registry all the identified workplace hazards,
A fundamental component of CSA Z1000, and where
including the risk level and the controls implemented to
we enjoyed high employee participation and success in
manage those hazards.
2010 Sustainability-Based Annual Report
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16
Horizon Holdings Inc.
Environmental Performance The St. Catharines -Thorold Chamber of Commerce recognized
Horizon
with
the
prestigious
Excellence in Business Award. Horizon was cited for its commitment to building a sustainable community, discontinuing the use of plastic water bottles in all of its facilities, and reducing its carbon footprint by introducing energy conservation measures at Horizon facilities that have reduced CO2 emissions by more than 28 tonnes per year.
The St. Catharines -Thorold Chamber of Commerce recognized Horizon with the prestigious Excellence in Business Award.
In 2010, Horizon added an Environmental Management Specialist to its employee complement. The position is responsible
for
co-ordinating
and
supporting
all
environmental management activities and performance within the organization. The initial focus has been on implementing the Environmental Management System, and positioning Horizon to become ISO 14001-certified by the end of 2011. We launched a dry cell battery recycling program, which allows our employees to dispose of all batteries. In our first year, almost 400 kilograms of batteries were redirected from landfill sites. We implemented a program to collect all empty aerosol cans so they can be properly disposed. A vehicle and equipment idling policy was developed and deployed to support the company’s commitment to reduce vehicle emissions. Horizon is also diligent in monitoring and testing emissions from its transformers. The goal of our Transformer Oil Testing Program is to have all active transformers under two parts per million (ppm) PCB levels, essentially enabling Horizon to make the claim that it is “PCB-free”. Currently, 70 per cent of our active transformers’ PCB levels are already under two ppm and none are above 50 ppm, which is the provincial requirement.
Hamilton has been called the City of Waterfalls and is home to 125 waterfalls (www.cityofwaterfalls.ca)
The proximity of St. Catharines to Lake Ontario make large ships a common sight.
2010 Sustainability-Based Annual Report
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Our ongoing efforts to promote conservation and sustainability in 2010 have resulted in 2,254 customers
Hybrids & Fleet Management
participating in the peaksaverÂŽ program, along with the
Horizon continues its commitment to the environment and
implementation
of
97 Electricity Retrofit Incentive
building a sustainable organization by focusing on
Program (ERIP) projects, 1,939 Power Savings BlitzOM
vehicle and facilities equipment emission reduction
retrofit projects, and the collection of 2,972 inefficient
efforts. By the end of 2010, 10 per cent of Horizon’s
refrigerators
Great
fleet was comprised of hybrid vehicles -- one of the largest
program (14,000 have been
hybrid fleets of any LDC in Ontario. Hybrid electric
and
appliances
Refrigerator Roundup
OM
through
The
rounded up from Horizon customers to date).
vehicles combine a conventional internal combustion engine propulsion system with an electric propulsion system to achieve better fuel economy and reduce emissions.
Hybrid
electric
vehicles
combine
a
conventional internal combustion engine propulsion system with an electric propulsion system to achieve better fuel economy and reduce emissions. OM
18
Horizon Holdings Inc.
Our ongoing efforts to promote conservation and sustainability in 2010 have resulted in:
2,254 customer sign-ups through the peaksaverÂŽ program 97 Electricity Retrofit Incentive Program (ERIP) projects 1,939 Power Savings Blitz retrofit projects 2,972 inefficient refrigerators and appliances collected OM
through The Great Refrigerator RoundupOM program (14,000 have been rounded up to date).
One of the 2010 additions was a tandem axle, single bucket hybrid electric plug-in vehicle to support our St. Catharines service centre. This is the first vehicle of its kind in Horizon’s fleet, and one of the first of its kind in Ontario. This bucket truck can operate the bucket boom, emergency warning lights, and cab heating and cooling systems for up to six hours at the job site on battery power alone. This system will eliminate the need for idling, reducing fuel consumption and emissions. In 2010, Horizon also took possession of its second conventional hybrid single bucket truck and procured two more Ford Escape hybrid SUVs to complement its overall fleet. Throughout 2011, Horizon will be monitoring the performance of its hybrid and electric vehicles and continuing to assess other technologies as they become available to support its commitment in building a more Horizon continues to introduce new tools to enhance service to our customers, such as new mobile tablet computers for our Customer Connections staff.
2010 Sustainability-Based Annual Report
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Graham Keene, owner of the Canadian Tire store on Welland Avenue in St. Catharines, has taken advantage of Conservation & Demand Management programs offered through Horizon Utilities, including significantly upgrading the lighting in his store, resulting in an annual energy savings estimated at 400,000 kWh, with a monthly peak demand savings of 92 kW.
20
Horizon Holdings Inc.
Economic Performance Controllable Costs
2007-2009 Controllable Costs Three-Year Comparison between Horizon Utilities and all LDCs
In 2005, in the first full year of the amalgamation of Hamilton and St. Catharines utilities, Horizon’s costs per customer was $165 per annum, at a time when the industry average increased to $228 per annum. In 2009 (the most current available data), Horizon’s costs per customer still stood at $165 per annum, compared to the Ontario LDC industry average of $257 per annum.
2007-2009 OM&A*/ Customer Average $500 $400
Through the economies of scale in amalgamation, and
$300
by maintaining costs and organizational efficiencies,
$200
Horizon has kept its operating costs close to 2005 levels – among the lowest in the sector.
Horizon Utilities
$100 $0
Horizon’s Customer Connections department was one of the few meter service providers in Canada to receive registration to the ISO 9001:2008 Standard. The department is also accredited to Measurement Canada’s S-A-01 Standard and certified under the Independent Electricity System Operator (IESO) as a Meter Service Provider.
2007-2009 OM&A*/ Customer Average $250 $200 $150 $100 $50 $0
$166
$193
Horizon Utilities
10 Largest LDCs Average
$222
$249
Golden Ontario Horseshoe LDC LDCs Average Average
Source: Ontario Energy Board (OEB) Yearbook of Electricity Distributors 2007, 2008 and 2009 (2010 not yet published). NB: Data for Horizon Utilities, rather than Horizon Holdings, is used here because only LDCs are in the OEB Yearbook. Averages are simple averages. Data excludes Hydro One Networks because of the character of its service territory compared to other distributors. Golden Horseshoe LDCs are 27 utilities around Lake Ontario from Durham to Niagara and north from the lake to Newmarket and Waterloo. *OM&A means operations, maintenance and administration.
In 2010 we made our largest capital investment to renew our infrastructure – primarily poles and wires.
2010 Sustainability-Based Annual Report
21
2010 Low and Balanced Customer Rates Small Business
Residential Customers $60
1,000 kWh/month
Horizon Utilities
$300 $250 $150
$20
$100
$10
$50
$0
$0
Manufacturing
Light Manufacturing 350 kW, 40,000 kWh/month
$35,000
$3,000
$30,000
$2,500
$25,000
$2,000 $1,500
Horizon Utilities
$200
$30
$3,500
13,000 kWh/month
$350
$50 $40
$400
Horizon Utilities
$20,000
3,500 kW, 2,000 kWh/month
Horizon Utilities
$15,000
$1,000
$10,000
$500
$5,000
$0
$0 Horizon Utilities rates compared to all other local distribution companies (LDCs) in the province of Ontario (except Hydro One Networks). These four graphs represent typical customers – one residential and three commercial – of varying size and the rates displayed here are the OEB’s approved distribution rates, including rate riders, for all Ontario distributors in 2010.
22
Horizon Holdings Inc.
2010 Direct Economic Value*
2007-2009 Return on Equity
Generated by Horizon Holdings
Three-Year Comparison between Horizon Utilities and all LDCs
Operating Expenditures
$46,576,000
Capital Expenditures
$39,193,000
10 8
Dividends to Shareholders
$8,113,000
Payments in Lieu of Taxes (PILs)
$5,745,000
Energy Incentives and Rebates (OPA funded)
$1,028,104
4
$57,528
2
Charitable Contributions (Employees and Corporate) Economic Benefit
$100,712,632
6
0
7.81%
8.58%
6.85%
Horizon Utilities
10 Largest LDCs Average
5.63%
Golden Ontario Horseshoe LDC LDCs Average Average
2009 Comparative Direct Economic Value** Generated by Distribution Utilities Only*
Horizon Horizon Utilities Utilities (Not Holdings) /Customer
Ten Largest Ten Largest LDCs LDCs Avg. Average /Customer
All 78 LDCs Average
All 78 LDCs Avg. /Customer
Revenues
$88,769,697
$378 $123,578,444
$539
$23,613,105
$505
Operating Expenditures
$38,778,645
$165
$47,532,895
$207
$10,011,645
$214
Capital Expenditures
$44,674,968
$190
$60,004,994
$261
$11,054,189
$237
Payments in Lieu (PILs)
$5,502,940
$23
$7,518,527
$33
$1,505,592
$32
*NB: See full GRI filing for additional details. Data for Operating Expenditures and PILs differ in this table from the financial statement because $305,000 of the PILs shown is for capital taxes that are included as Operating Expenditures in the financial statements. **Source: Ontario Energy Board (OEB). LDC – An LDC is a Local Distribution Company. LDCs are compared here because only their data is published by the OEB. 2009 data is used because 2010 is not yet published. Averages are simple averages. Hydro One Networks are excluded because its service territory differs so greatly from other LDCs. Charity contributions are not included because they are not published by the OEB.
2010 Sustainability-Based Annual Report
23
The new Mohawk Learning Exchange is a LEED gold certified addition to the College’s Fennell Campus in Hamilton. It is part of the largest campus renewal project in the school’s history.
2010 Capital Expenditures Horizon Utilities Invested $39.2 Million in Capital Expenditures in 2010
2010 Electricity Revenue For Horizon Holdings 3.8% 2.8%
26.8%
66.6%
Horizon Utilities 2010 Capital Expenditures ($ in thousands)
Distribution System $30,041 Smart Meters 3,086 Other 6,066
24
Horizon Holdings Inc.
Residential Commercial Large User Other
Five-Year Consolidated Summary (in thousands)
2010
As at December 31, 2010
2009
2008
2007
2006
STATEMENT OF INCOME Electricity distribution service charges
$
Other income from operations
91,217 $ 88,583 $ 88,335 $ 84,797 $ 79,610 10,763 101,980
10,369 98,952
10,090 98,425
9,792 94,589
9,837 89,447
Operating expenses
46,881
44,855
43,997
41,687
38,027
Depreciation and amortization
27,069 73,950
25,012 69,867
23,481 67,478
21,174 62,861
19,945 57,972
Income from operating activities
28,030
29,085
30,947
31,728
31,475
99
92
45
384
50
Net interest (expense) income
(9,639)
(9,185)
(9,246)
(8,942)
(8,437)
Payments in lieu of taxes
(5,782)
(6,471)
(6,641)
(8,425)
(8,170)
Gain on sale of assets
Net income
$
12,708 $ 13,521 $ 15,105 $ 14,745 $ 14,918
BALANCE SHEET Assets Current assets
$ 106,710 $ 97,872 $ 100,571 $104,061 $ 107,461
Capital assets
367,056 355,521 336,430 314,723 297,185 $ 473,766 $ 453,393 $ 437,001 $418,784 $404,646
Liabilities and shareholders’ equity Current liabilities
$
Long-term debt Other long-term liabilities Shareholders’ equity
90,692 $ 114,015 $ 96,739 $ 95,316 $ 93,433 155,554
116,000
116,000
116,000
116,000
45,125
45,578
44,923
38,465
30,504
182,395 177,800 179,339 169,003 164,709 $ 473,766 $ 453,393 $ 437,001 $ 418,784 $ 404,646
STATEMENT OF CASH FLOWS Cash provided by operating activities
$
Cash used in the purchase of capital assets
43,730 $ 27,715 $ 39,852 $ 41,306 $ 19,848 (39,193)
(44,775)
(42,045)
(39,253)
(31,425)
Cash provided by other investing activities
144
142
45
432
68
Cash provided by long-term borrowings
39,554
–
–
–
–
Cash used in financing activities
(10,556)
(11,404)
(7,903)
(7,695)
(4,504)
Net increase (decrease) in cash and cash equivalents
$
33,679 $ (28,322) $ (10,051) $ (5,210) $ (16,013)
2010 Sustainability-Based Annual Report
25
We are committed to delivering value to our shareholders by providing our customers with safe, reliable and efficient electricity and innovative energy solutions.
St. Catharines, located in the Region of Niagara, is home to beautiful landscape and family friendly areas such as Port Dalhousie.
26
Horizon Holdings Inc.
Sustainability Policy Doing business sustainably is essential to Horizon’s success as a provider of electricity and innovative energy solutions to the communities we serve. We are committed to delivering value to our shareholders by providing our customers with safe, reliable and efficient electricity and innovative energy solutions. This policy sets forth Horizon’s commitment to protecting the health, safety, environment and well-being of our employees and contractors, the customers of our products and services, and the communities in which we operate.
Safety The safety of our employees, contractors, customers and the public is paramount. We will continually strive to meet and exceed all legal safety requirements. We will not undertake any activity without proper safety procedures and equipment being in place.
Doing Business Ethically We will meet or exceed all applicable laws and regulations relevant to our areas of business activity in the jurisdictions in which we operate. We will continue to implement and maintain ethical business practices and sound systems of corporate governance. We will not tolerate harassment or discrimination in any of our relationships, whether with employees, contractors, customers, or other stakeholders.
Our Employees Our employees are Horizon’s ambassadors to our customers and the communities we serve. We will provide employees with development opportunities in a safe, healthy and satisfying working environment. We will encourage the participation of employees in the continual improvement of our health, safety, environmental and social performance, and in the development of new and innovative energy products and services to our customers.
Environmental Responsibility
Managing Risk
We will work to minimize our impact on the environment
We will meet or exceed all health, safety, and
and seek to continually improve our environmental performance. We will work to reduce waste, emissions of greenhouse gases and other air pollutants, and undertake to manage hazardous materials in a manner that meets or exceeds all government requirements. We will work with stakeholders to resolve land use conflicts in ways that protect the environment.
environmental regulatory requirements. We will evaluate the economic, social, and environmental risks of our business and take precautionary actions to address them. We will incorporate health, safety, environmental, and social considerations into our business decisions.
Our Communities
Economic Performance
Our activities reach far and wide into the communities
Our success depends on the success of our customers
represents a major contribution to the health and well-
and communities. We will return dividends to our shareholders that are consistent with ensuring sufficient investment for the provision of ongoing innovative and cost-effective energy products and services at competitive rates to our customers in the communities we serve.
that we serve. The supply of energy products and services being of our customers and their communities. We will actively participate in the social, economic, and institutional development of the communities in which we operate. We will engage our stakeholders through open and transparent consultation and verifiable public reporting of our sustainability performance.
2010 Sustainability-Based Annual Report
27
28
Horizon Holdings Inc.
Corporate Governance Horizon Holdings Inc. is incorporated under
• Succession planning and management performance
the Ontario Business Corporations Act and,
• Employee and public safety
throughout 2010, was subject to a Shareholder
• Communications policy
Agreement with Hamilton Utilities Corporation and St. Catharines Hydro Inc., its two
The Corporate Governance Guidelines of Horizon Holdings Inc. and its subsidiaries have been established
shareholders.
with due regard to the scale, complexity and risk of the
The Shareholder Agreement requires that the Board of
has an Audit and Risk Management Committee and a
Directors observe the standards of corporate governance
Human Resources and Governance Committee, each of
which apply to publicly traded corporations to the extent
which meets in advance of every regular Board meeting.
this is practical. Although it is not a public corporation,
Horizon
Horizon Holdings Inc. recognizes the role of good
Committee to assist in the selection of new Board
governance in a successful business enterprise and
members and the appointment of Board and Committee
provides voluntary disclosure on its corporate governance
Chairs as required. Each Committee operates with a
practices, including those relating to the wholly owned
formal mandate.
subsidiaries through which it operates, namely Horizon
Horizon Energy Solutions Inc. these Committee functions
Utilities Corporation and Horizon Energy Solutions Inc.
are the responsibility of the respective Board itself.
Responsibilities of the Board of Directors
The Boards have also developed roles and responsibilities
operations of each company. Horizon Utilities therefore
comprehensive
guidelines
also
establishes
a
Nominating
Within Horizon Holdings Inc. and
for the Chair of the Board and a Chief Executive Officer’s Authority Letter for each corporation.
The Canadian Securities Administrators (CSA) has published
Utilities
for
effective
corporate governance. The guidelines cover a broad spectrum of good governance practices and elaborate specifically on a number of major areas where Boards should explicitly assume stewardship: • Development of corporate governance principles and guidelines • The integrity of senior management and staff throughout the organization • Strategic planning process and approval of a strategic plan • Risk assessment
The CSA also provides guidelines with respect to the composition of the Board of Directors, including that the majority of Directors should be independent (as defined by the CSA). With the exception of the Chair, all members of the Boards of Directors of Horizon Holdings Inc. and Horizon Energy Solutions Inc. and Horizon Utilities satisfy the requirements of independence. A Chair of the board by definition under the CSA Guidelines is not considered independent. Mr. Dolan, who is Chair of Horizon Holdings Inc., Horizon Energy Solutions and Horizon
Utilities,
is
otherwise
independent
of
management of each of those companies. The Boards meet without management in attendance for part of each Board meeting.
• Integrity of internal controls and management information systems
A beautiful waterfall in the St. Catharines area.
2010 Sustainability-Based Annual Report
29
Board composition also meets the requirements of the
• Nominating Committee: constituted as required for the
Ontario Energy Board’s Affiliate Relationships Code
evaluation of Board composition and nomination to
(ARC). This code regulates the contractual arrangements
shareholders of prospective Directors of the Board as
between related parties and requires that at least one-
may be required.
third of Horizon Utilities’ Directors be independent (as Consistent with the recommendations of the CSA, the
defined in ARC) from its non-regulated affiliates.
Board approves the mandate of the Chief Executive All new Directors of Horizon Holdings Inc. and its two
Officer and annual corporate objectives.
subsidiaries receive a comprehensive orientation with respect to the role of the Board, the business of the
The permitted business activities of the Corporation are
corporations
regulatory
outlined in its Shareholder Agreement. The mandate of
environment affecting the electricity sector. All three
the Chief Executive Officer and annual corporate
Boards have adopted a Code of Business Conduct,
objectives are consistent with the Shareholder Agreement.
including a Conflict of Interest Policy. The Boards
In addition, the Board of Directors appoints the executive
undertake an annual assessment of the Board and, in the
management and, annually the Board reviews the Chief
case of Horizon Utilities Corporation, each Committee.
Executive Officer’s objectives, evaluates the Chief
and
the
legislative
and
Executive Officer’s performance, and monitors the Annually, each of the companies’ Boards requests and
succession planning process.
receives an independence letter from its Auditors. By letters dated February 24, 2011, KPMG LLP has confirmed that they are objective with respect to each of the corporations within the meaning of the Rules of Professional Conduct of the Institute of Chartered Accountants of Ontario. The Strategic and Financial Plans for the corporations are approved and monitored directly by their respective Board of Directors.
Horizon Utilities Corporation Board Committees & Mandate of Management The mandates of the three Committees of the Horizon Utilities Board are: • Audit
and
Risk
Management
Committee:
risk
management, internal controls, financial information, and annual audit; as well as the information systems activities of Horizon Utilities Corporation. • Human
Resources
Committee:
and
succession
Corporate
Governance
planning,
management
objective setting and performance, compensation, communications and safety activities of the corporation. This Committee also covers all governance issues.
30
Horizon Holdings Inc.
Horizon Utilities is responsible for more than 3,400 km of underground and overhead distribution lines.
The Horizon Family of Companies Horizon Holdings Inc. is an investment holding company owned 78.9 per cent by Hamilton Utilities Corporation and 21.1 per cent by St. Catharines Hydro Inc. Horizon Holdings Inc. owns 100 per cent of the common equity of Horizon Utilities Corporation and Horizon Energy Solutions Inc. Board of Directors Robert Dolan, Board Chair Paul Benson Robert Cary Edward Minich Margaret T. Nelligan Management and Officers Max Cananzi, President & CEO John G. Basilio, Senior Vice President & Chief Financial Officer Neil Freeman, Vice President Business Development Sarah Hughes, Vice President Finance Marjorie Richards, Vice President, Corporate Services
Horizon Utilities Corporation is a regulated local electricity distribution company serving 237,000 residential and commercial customers in Hamilton and St. Catharines, Ontario. Horizon’s more than 400 employees are committed to delivering a safe and reliable supply of electricity, providing unparalleled customer value, and helping create a culture of energy conservation in Ontario. Board of Directors Robert Dolan, Board Chair Karen Belaire Paul Benson John Bergsma Robert Cary, Chair, HR/Governance Committee Patrick Crowley Douglas J. Harrison Edward Minich, Chair, Audit and Risk Management Committee Margaret T. Nelligan Joan Weppler
Horizon Energy Solutions Inc. is dedicated to providing commercial customers across Ontario with utility grade renewable energy solutions and energy management services that generate benefits for the customer and the environment. Board of Directors Robert Dolan, Board Chair Paul Benson Robert Cary Edward Minich Margaret T. Nelligan Management and Officers Max Cananzi, President & CEO John G. Basilio, Senior Vice President & Chief Financial Officer Sarah Hughes, Vice President, Finance Scott Knapman, Vice President Marjorie Richards, Vice President, Corporate Services
Management and Officers Max Cananzi, President & CEO John G. Basilio, Senior Vice President & Chief Financial Officer Indy Butany-DeSouza, Vice President, Regulatory and Government Affairs Eileen Campbell, Vice President, Customer Services Sarah Hughes, Vice President, Finance Kathy Lerette, Vice President, Utility Operations Marjorie Richards, Vice President, Corporate Services
2010 Sustainability-Based Annual Report
31
Acknowledgements Design of this Sustainability-Based Annual Report was provided by:
Writing was provided by Quorum Communications. We would like to thank the Royal Botanical Gardens for the use of their Mediterranean Garden to photograph the CEO and Chair. Ž The registered trademarks Horizon Utilities Corporation, Horizon Energy Solutions Inc. and Horizon Holdings Inc. are owned by Horizon Holdings Inc. Global Reporting Initiative™ and all related Global Reporting Initiative materials are trademarks of the Global Reporting Initiative. Power Savings BlitzOM is an official mark of the Ontario
The Power to Make our Communities Better The colourful and playfully distinctive light switches represented on the cover remind us that every one of our customers is a unique individual. We value the contributions that each of them makes to conserve energy and they, in turn, rely on Horizon to deliver a safe and reliable supply of electricity to their homes and businesses. Together we have the power to make our communities better.
32
Horizon Holdings Inc.
Power Authority. The Great Refrigerator RoundupOM is an official mark of the Ontario Power Authority. peaksaverÂŽ is a registered trademark of Toronto Hydro Corporation. Used under license.
Contact Us: Street Address: 55 John Street North, Hamilton, ON L8R 3M8 Mailing Address: PO Box 2249 STN LCD 1, Hamilton, ON L8N 3E4 General Inquiries: Tel: 1-866-458-1236 or 905-522-6611 Fax: 905-522-6228 Email: info@horizonutilities.com or sustainability@horizonutilities.com Websites: www.horizonutilities.com www.horizonenergysolutionsinc.com