How two Collingwood councils handled the utility sale process very differently
Last term, Collingwood Council went through a lengthy, open and public process to sell a portion of its electrical utility, Collus. That open process – with full discussion, community involvement, consultation and public input, and local media coverage – resulted in 50% of the utility being sold to PowerStream (an Ontario-based LDC owned by three municipalities, now merged with Alectra). The shared utility is now called Collus-PowerStream. It’s about to be sold to a private, for-profit corporation based in Alberta.
This term, our town has negotiated in secret to sell our public utility and everything has been done behind closed doors without ANY community input. Compare that to Wasaga Beach where this term’s council discussed the sale of their utility publicly many times, invited comments, conducted online and telephone surveys to get residents’ opinion, help public meetings, and in the end listened to public and chose not to sell.
Our current council has used an excessively secretive, deceptive process to avoid ALL public input so it can sell our remaining share in the utility to EPCOR. without ever once telling the public why it wanted to do so.
By comparing side by side the open process from last term and that used this term, you can see just how secretive this group has been. The closed process this term has led to several investigations, ruined reputations, bad faith, broken trust and open hostility this term (local media has not fully covered this story and the process). And make no mistake: this story is about the process, not about whether selling the utility is a good or bad decision.
But it’s not simply the sale: there has been considerable collateral damage this term, including the loss of several highly-respected and provincially decorated staff members, deteriorated staff morale, and massive expenses incurred from council and administration interference. Not to mention we lost the golden opportunity to be part of and participate in the operation of Alectra, now Ontario’s second largest and most innovative electrical utility.
Because this is a long piece, I will publish it in two posts. Let’s start at the beginning with an overview. I’ll open in early 2011, in the middle of the previous term, and compare it to January, 2015, barely a month into the current term.
Background: For many decades, our electrical utility had a successful, cost-efficient shared services agreement with the town and with our water utility to provide such services as IT and computer maintenance, engineering, billing, GIS, customer service, phone, and so on, billed only when services were rendered. But The Block on our council bought into the fiction that this was a bad deal – a claim made without actual proof.
For the first two years of the term the administration promised it was crafting a new contract, but instead, with no warning or discussion, that contract was broken – at great expense to the taxpayer and much higher costs to follow – without any public discussion or input, much less an explanation why.
2011 was the year of a provincial election when all three parties were making promises to reduce the number of electrical distribution agencies (LDCs) in the province. Under the Ontario Electricity Act, the town would have been required to pay a transfer tax of 33% (see O. Reg 110/16) if it sold its ownership interest in Collus to another entity. However, to encourage consolidation of LDCs, the province introduced an exemption (tax holiday) from the transfer tax for sales of municipally-owned utilities to entities owned by municipalities or by the province (e.g. Hydro One).
That combination of political pressure and tax relief spurred the Collus utility board to look to the future of our own LDC and consider options – they chose to be proactive rather than wait for legislation that might force them to act (see my earlier post for more comments on this).
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|Feb. 2011: In light of political party pronouncements on the future of Ontario LDCs prior to the provincial election, the Collus utility board (Councillor Mike Edwards, Dean Muncaster, Mayor Sandra Cooper, Joan A Pajunen, Doug Garbutt and David McFadden) hired world-renowned consulting firm KPMG (one of the world’s top four consulting firms in terms of employees, with offices across the globe) to comment on the value of our electrical utility as a sellable commodity, examine the options for its future, and explore opportunities in the current political climate, and return to the board with a report.||January 2015: After a council closed-door, secret discussion and no open, public discussion, town administration hired a sole-sourced two-person consulting firm (unknown to anyone I’ve ever spoken to since then) working from a basement in a suburban home to write a report on the shared services agreement.
This very negative report was made public in spring, 2015. However, it was so full of errors and omissions that the utility board its staff, and numerous respondents submitted more than 100 pages of corrections and additional data. The original report was never corrected and the utility’s or respondents’ additional submissions never made public. Despite numerous flaws, this report was later used as the basis for breaking the shared services agreement.
No public input on the report was allowed and the corrections were not shown to the media. The utility board asked several times to be able to make a presentation to council on the report, but was denied each time.
Jan. 2015: Collus-PowerStream CEO Ed Houghton made a presentation to council outlining the utility’s strengths and public confidence in it.
This negative report from early 2015 was clearly the start of a much longer, larger attack on our utilities and their staff, which has not let up in almost three years. It has been fuelled by a conspiracy theory of chemtrail-madness proportions that beggars any reasonable use of common sense, logic or even facts.
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|In May 30, 2011: The Collus utility board presented its annual business plan to council in public session. In its public presentation, the board discussed the KPMG study and the three options the consultant had presented:
The board chair (Dean Muncaster) said the board preferred the partnership option, which was recommended in the business plan.* He also noted the board did not want to sell more than 50% of the utility because it did not want to lose control of service and rates.
Council agreed that it, too, did not want to lose control of the utility. Council approved the business plan and the preferred option in an open vote. The utility board was told to further examine partnership opportunities on the basis of the KPMG report. Local media reported on the meeting, on the KPMG report and listed the three options.
One of the strengths of our electrical utility noted during the business plan presentation was the efficient and mutually-beneficial sharing of services and staff between Collus, the town and our water utility.
|Winter-spring 2015: Council held several closed-door, secretive meetings to discuss the utility, its sale, and the shared services agreement. No public discussion or input was allowed. Neither the utility board nor utility staff nor our utility partner PowerStream were consulted or asked to participate into the discussions. The utility board’s requests to appear before council in a public session were again refused.
Town administration began badgering the utility staff and board to release confidential, personal information about staff benefits and salaries, despite these being protected by Ontario corporate law.
Council secretly and without any public discussion decided to separate the water and electrical utilities despite the efficient shared services agreement. They moved some staff and operations to another facility (requiring considerable expense to set up offices, provide phones, computers, washrooms, etc.). The cost-efficient shared services agreement between the two utilities and the town was basically torn up. The water utility board reported to council that the council’s activities and budget decisions would mean that water rates would have to be raised to meet the shortfall in revenue those actions caused. Council ignored them.
Council secretly approved removing the experienced CEO of the electrical utility from the water utility board and replacing him with the town’s own, inexperienced interim CAO. Again, no public explanation was given.
From the very start, this current council refused to discuss in public its reasons for anything, including wanting to sell the electrical utility, our airport, and our water utility; for illegally replacing members on both utility boards; or for blocking the hospital development. The utility debacle is only one of several such secret initiatives that have ravaged the town, its staff and its reputation. But as you’ll read below, everything done with regard to the share sale last term was done openly.
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|In June, 27, 2011, the Collus board openly presented its plans to council again. The board publicly received council’s approval to move forward and create a task force authorized to evaluate the KPMG report and examine the possibilities presented, and report back to council in public with its recommendations.
July 7, 20, 26, 2011: Collus board and staff met with five “strategic partners”- the LDCs identified as potential partners – to gauge their initial interest in participating if the town proceeded.
Aug. 3, 2011: The first meeting of the nine-person Strategic Partnership Task Team (SPTT). This team included Collingwood’s former CAO Wingrove; Mayor Cooper; Deputy Mayor Lloyd; John Herhalt of KPMG; Dean Muncaster, chair of the Collus board; the CEO and CFO of Collus (the latter is now Councillor Tim Fryer), David McFadden, (another former Collus/Powerstream board chair and now chair of Toronto Hydro), and Doug Garbutt, former mayor and public utility board chair. The town’s legal firm, Aird and Berlis, was asked to participate and to review and comment on the documents and process.
|Spring-summer 2015: More secret, closed-door meetings were held to discuss the utility and its sale. The utility board’s requests to speak in public before council were again denied. No public input or discussions were allowed. Instead, the administration hired a sole-sourced lawyer outside the town’s own legal firm, to secretly pursue the sale of the town’s share of the utility.
All of these sole-source contracts were approved by council in closed-door session without concern about the procurement bylaw or campaign promises to end sole-sourcing. By now, The Block and administration had decided to sell the town’s share of the utility.Mar. 2015: As a result of harassment and bullying by town administration and council, and the continued use of false and misleading reports, the COO of the water utility – a provincially recognized and honoured employee with many years of service here – resigned and moved to another municipality.
June, 2015: The Block illegally fired the water utility board and replaced the experienced members with five of their own members. Despite a requirement in the town bylaws for these positions to be advertised to the public, and for the position to be held for the same length as the term of council, The Block ignored the law in order to put themselves in the positions. It was done without any public discussion. None of the new members had any experience in water or serving on a utility board, three had never been on council before.
Remember the campaign promises from Brian Saunderson to stop sole sourcing? “No exceptions” he promised. And his promise to get public input on all major decisions? Well, those were both broken in the first month of his taking office. This council has given away more sole-source contracts this term than the last dozen councils combined.
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|During the summer of 2011, the SPTT met again (Aug 29), and also met with the town’s potential strategic partners again (four meetings, Sept. 12 and 19) to keep them informed. At every step of the process, every major partner was kept up to date of the goals and the discussions.
The SPTT met again Sept. 28, and on Sept. 29, they consulted with Collus staff about the progress of their discussions, and on the future direction.
Oct. 3, 2011: The SPTT provided an update to council in public session, and asked for approval to release an RFP to discover if any of the identified utilities was interested in partnering with Collus.
The task force identified five potential utility partners, but later eliminated one as too small. Working with the town staff, KPMG, and the town’s lawyers, the task force helped craft an RFP to send to each of the four large utilities they had recommended. This was sent out Oct. 4, 2011. The RFP asked for bids up to, but not more than, 50% of the utility’s value.
|Nov. 2015: The town decided to call in the $1.7 million promissory note from Collus-PowerStream, even though this note had been paying the town more than $80,000 a year in interest.
Through the winter of 2015 to the middle of 2016, town administration continued to harass Collus-PowerStream staff, often demanding reports and information they had already been provided.
Feb. 2016: Council (The Block) and the town administration openly demanded our utility turn over detailled personal and confidential information including staff salaries and benefits, as well as employee performance reviews, despite such data being protected under Ontario’s corporate and privacy laws. When the utility refused to divulge this information, the town secretly hired a separate, sole-sourced, lawyer to comment on the utility’s refusal to divulge provincially-protected personal and confidential information.
April 2016: The sole-sourced lawyer promoting the sale of the utility made a presentation to council further promoting the sale.
In June, 2016, As punishment for the board’s support of staff over the refusal to release personal and confidential information, The Block and administration bullied the town’s appointed, three-person Collus-PowerStream board members to resign. One was in hospital recovering from surgery when town officials approached him, demanding he sign a letter of resignation. These three were then replaced by three staff members (the interim CAO, the treasurer and the clerk).
In July, 2016, the town secretly asked council members to comment by email on what they wanted in an RFP. Those emails were kept secret from the public, and no public discussion permitted. A later Freedom of Information request retrieved some of these secretive conversations, but others were redacted.
July, 2016: Continued harassment and bullying by town administration and council, more demands for confidential information about staff, and the continued use of false and misleading reports led the CEO of the electrical utility – a provincially recognized and honoured employee with 39 years of experience and service here – to retire early.
July 11, 2016: Council votes 7-2 (The Block vs Mayor Cooper and Councillor Lloyd) to “explore” selling its share in Collus-PowerStream. Councillor Madigan disingenuously says, “I will assure you, no decisions have been made, we are just exploring our options with any interested parties.” He also said, “You can never be in control if you own 50% of anything,” then voted to sell 100% of the utility! Tres hypcritical.
Aug. 2016: With no public discussion and no explanation, The Block approved sending out an RFP to a select group of utility companies, including Alberta’s EPCOR, asking them to bid on buying the town’s share in Collus-PowerStream. The town’s sole-sourced lawyer crafted and issued the RFP to undisclosed recipients. The town still won’t allow the RFP to be seen publicly to let us know what they were asking for, more than a year after it was sent out. It was sent to several unidentified LCDs, including the out-of-province, for-profit corporation, EPCOR. An RFP was not sent to our own utility partner, PowerStream even though the shareholder’s agreement gives them right of first refusal.
Aug. 2016: The Ontario Energy Board released its 2015 Benchmarking Report. in it, Collus Powerstream moved from the third tier (of five) up to second. The Block ignore it.
You can see where this is going, but continue reading please.
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|Nov. 15, 2011: the SPTT provided another update to Collus staff and asked for continued input on the process.
All four utilities responded by the Nov. 16, 2011 deadline. The names of the potential partners were not revealed to the public, although Hydro One and PowerStream were later identified in the media.
On Nov. 17, 2011 at a special meeting of council, the SPTT updated the public on the process and the RFP. Collingwood council publicly approved sending out a media release about negotiating a potential partnership with one of these respondents. Council also approved Collus hosting a public information session to explain its search for a partner, and the results of KPMG’s report, and get public input. This council meeting and the subsequent public information session were well covered in the media and the decisions publicized.
Nov. 22, 2011: Collus, Council and the SPTT held an open, public information session at the Leisure Time Centre, explaining the process, explaining what had been done to date and why, and asking for public comment and questions. The presentation included the contents and wording of the RFP sent to the potential partners, the list of choices, the reasons a partnership worked better, and the weighting of the decision process.
Nov. 23 and 28: 2011; The SPTT met again to review results and analyze the received RFPs.
|Sept. 2016: Numerous public complaints about the secretive process caused the OEB to open an investigation into the town’s actions.
An unknown number of LCDs responded to the town’s latest RFP by the October 2016 deadline, but neither council nor the administration nor the outside lawyer would say how many or what was offered. Council members continued in public to pretend to the public they were just “kicking the tires” and not selling the utility. However, secret negotiations were already underway with EPCOR, a for-profit, Alberta-based corporation.
Meanwhile the town administration hired a sole-source, out-of-town IT consultant to begin the process of taking over computer and IT services from Collus-PowerStream even though it continued to say a new shared services agreement was coming.
Again this was done without public discussion, and despite assurances from the administration for the past two years that a new shared-services agreement was being crafted. Town administration attempted to hire Collus-PowerStream staff, but when they refused, hired outsiders. The annual cost of IT services from this switch has doubled and may triple by year end.
November 2016: After several secret, closed-door meetings, Council passed a motion to appoint new directors to their half of the Collus-PowerStream utility board. No reason was given in public for illegally and unethically firing the existing board, but sources say it was because the former board acted on behalf of the utility and refused to share confidential personal information about utility staff with the council and administration. That information is protected by provincial law, but such laws don’t matter to town hall. In a letter, the former board chair, David McFadden, (now chair of Toronto Hydro) cited a “dysfunctional relationship between town administration and the company” as the problem. That relationship would only continue to worsen as The Block and the administration pursued their private agendas and vendettas.
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|Dec. 2, 2011, the SPTT met in camera with the Collus board to propose a recommendation to council.
Dec. 5, 2011; Collingwood Council and the utility board, and the board’s and town’s lawyers, plus the KPMG consultant, met in camera to discuss the responses, and to decide whether to go ahead with any of them. Bids were presented in two sealed envelopes: one for the money, the other for the service/customer relations component. The responses were weighted on 70% for the corporate culture and customer service, and 30% on the money offered.** Each part was analyzed independently and the envelopes opened separately for analysis. The two-enveloped process and the weighting was reported in the local media. This was the sole in camera meeting for council in this whole process last term.
Dec. 12, 2011: The Collus CEO made a public presentation to Clearview Council outlining the process and results of the RFP, bringing council and the local residents up to date on the process.
|In Dec. 2016, The Block again illegally replaced the utility board, putting two new puppets (a lawyer and an engineer, both of whom lived and worked out of town, one in Ottawa, although our own bylaw requires all board and committee members to be town residents) in place of the two staff members. At this point, there were no local residents on the board and none of the town’s choices were even in areas served by the utility. The positions were not advertised as the bylaw requires. This was done after the Ontario Energy Board investigated complaints about the town’s previous, secretive board manipulations.
Dec. 2016: Although not sent an RFP, PowerStream made an unsolicited offer to buy the town’s share of the utility. PowerStream (now Alectra) is the town’s partner in the utility and has a contract with the first right of refusal on any sale.
You think this term has been bad? Wait. It gets worse.
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|Jan. 23, 2012: Council made a public notice about accepting the pending sale of 50% of the Collus utility to PowerStream.
Council unanimously and publicly passed a bylaw with a recorded vote to start the process of the share sale and to enter into discussions with the OEB about the sale. The bylaw noted, “THAT the Town enter into the Share Purchase Agreement and the Unanimous Shareholders Agreement with PowerStream, once those agreements are in a form and content to the satisfaction of the Mayor.” A media release about the sale was sent out and made public online.
The meeting and the vote were covered extensively in the local media. The weighting of the responses based on the respondents’ answers (70% given to corporate culture, 30% to money) was also mentioned in the local media as the reason PowerStream was chosen.**
March 9, 2012: Lawyer Scott Stoll, working for Aird & Berlis on behalf of the town, sent a letter to the OEB outlining the proposed sale of 50% of the Collus share. PowerStream posted that letter and the complete 610-page application online for public access.
|More secret, closed door council meetings followed in winter 2016-17. It was leaked that the town was also secretly negotiating with EPCOR to privatize our water and wastewater utility services, although that was allegedly an unsolicited offer by the for-profit corporation. However, the RFP was never released to prove this claim.
Without any public or staff input, town administration granted EPCOR access to its data, to its facilities and to make presentations to staff on their own behalf, with EPCOR representatives present during staff question and answer sessions.
There was no public discussion of the sale of the water utility, or of the offer. During the presentations to staff, town administration admitted that the shared services agreement was dead. No public statement about this was made. Local media have generally ignored the story and the secretive process.
Jan. 2017: After another closed-door meeting, and with no public explanation why they did so, the Block rejected the PowerStream (Alectra) offer.
It has been a highly secretive process this term. For the rest of the story, you’ll have to wait for part two. But I’m sure even a cursory glance gives you the gist of it: last term the process was open and public; this term has been secretive, deceptive and closed. The process highlights the credibility difference between the two councils; the trust the public can have in their government is built on the processes they choose. Collingwood deserves better than this.
* The strategic partnership option was preferred because, of these factors (as noted at the public meeting on Nov. 22, 2011):
- Reduced Risk. The Town will reduce/mitigate itself from the risks of being in the electricity distribution business.
- Retains an Income Stream. The Town will earn a future dividend stream based on equity ownership in the new partner’s LDC.
- Operating Synergies with the Shareholder. The Town retains the ability to obtain operating cost synergies through the integration of support functions with the water utility and IT.
- Control. The Town retains joint-control of the utility and its decisions with respect to levels of customer service, promotion of economic development, rates, subject to OEB oversight.
- Provides Additional Funding to Town: The funds that are received as a result of this partnership transaction will allow the Municipality to reduce debt or to be available for valuable community projects.
** The weighting was based on a 100-point system:
- Investment for up to 50% of shares: 30 points
- Provision of strategic and specialized resources, support in growing the Collus business: 30 points
- Support for employees and their careers: 10 points
- Customer experience and satisfaction, supporting the interests of the communities we serve: 10 points
- Competitive distribution rate and cost structure of Collus: 10 points
- Cultural and synergistic fit: 10 points