NOTL Hydro is owned 100% by a holding company called Niagara-on-the-Lake Energy Inc. (NOTL Energy). NOTL Energy is owned 100% by the Town of Niagara-on-the-Lake. NOTL Energy also owns 100% of another subsidiary called Energy Services Niagara Inc. (ESNI).
NOTL Hydro is restricted by law in the activities in which it can engage. Essentially, it must restrict itself to those activities that are appropriate for an electricity distributor. Our regulator, the Ontario Energy Board (OEB), is able to assess this as they see our detailed financial records every year. If NOTL Energy wishes to invest in any other ventures or engage in any other services it does this through this sister company ESNI.
ESNI is currently has one very significant investment, one minor investment and is engaged in the provision of two services of a limited nature.
The significant investment is Niagara Regional Broadband Networks Inc. (NRBN) which is 25% owned by ESNI. The City of Niagara Falls through their hydro holding company owns the other 75%. NRBN is a successful provider of broadband services throughout Niagara. NRBN has its own management team and there is no overlap in personnel between NRBN and NOTL Hydro.
The other investment is the solar power array on the roof of the NOTL Hydro building. It has a FIT contract so generates a small positive return most years. ESNI pays NOTL Hydro rent for the use of the building roof.
ESNI previously had an investment in a water heater business but this was sold, profitably, in 2014.
The first service is water billing. Though the water bills are combined with the electricity bills on the NOTL Hydro bills, it is ESNI that provides this service. ESNI purchases the services it needs from NOTL Hydro and charges the Town a fee. ESNI does not make a profit on this service but both NOTL Hydro and the Town benefit from reduced costs.
The second service is providing locates. These are required to mark electric, water, gas and telecom services whenever there will be digging. The volume and hence the cost of these have been going up substantially in recent years. The Town and NOTL Hydro both used a third party for this service but to reduce costs ESNI now provides this service.
ESNI is not regulated by the OEB as it is not an electricity distributor. However, the OEB does monitor activities of electricity distributors with related companies to ensure they are not used to transfer earnings inappropriately. As ESNI is a sister company to NOTL Hydro and as it provides and receives services from NOTL Hydro, it is critical that all these activities be at market rates and be fair.
Part of my mandate as President is to look for opportunities for investments or new business lines for ESNI. As you can see by the investments to-date, the NOTL Energy Board is very conservative in this regard. This is appropriate given the ownership of ESNI by the Town. Opportunities for investments by ESNI may arise from the changes currently taking place in the global energy sector. These opportunities may be driven by the new technologies being introduced (electric vehicles, solar power) or by the need to fight climate change.
In evaluating opportunities there are a number of considerations:
- Any investment must generate a financial return. This is not a charity or social organization.
- It is preferable that investments benefit the residents or businesses of Niagara-on-the-Lake by providing a service or good.
- It is expected that any investment will be energy or telecom related. This is where we have expertise. Though not infeasible, straying too far from these markets risks investing without the requisite understanding of the business.
- Investments should recognize the strengths and weaknesses of NOTL Energy. ESNI is a small company so should be careful investing in businesses where we will be competing against much bigger company. Offsetting this is the strong relationship NOTL Energy has with local residents and businesses and with local governments.
ESNI will continue to evolve over time. If we are doing our job, it will also increase in value.