NOTL Hydro provides a return to the Town of NOTL in a variety of ways. Some of these are obvious; some less so. The following are some of the ways the ownership of NOTL Hydro provides these returns:
NOTL Hydro pays an annual dividend to its ultimate shareholder, the Town of NOTL. In 2021, this was $750,000. These dividends come from the profits of NOTL Hydro. The dividend paid each year can be seen as the green bar in the chart to the right.
Original Loan Repayment
Loan payments do not normally create income but in this case they do. NOTL Hydro was created in 2000 when the assets from the previous Niagara-on-the-Lake Hydro Electric Commission were transferred into this new company. At the same time, the opening equity of NOTL Hydro and a debt to the Town of NOTL were created with the same value of these assets. As the Town did not actually provide cash for this loan it is not on the Town’s books. As the loan is repaid, it becomes income for the Town. The loan repayments are the orange bars while the interest on the loan are the blue bars.
Value of NOTL Hydro
The value of NOTL Hydro increases every year as it retains some of its profits and reinvests them in its system. The book value of NOTL Hydro is shown in the chart on the right. The market value of NOTL Hydro will be much more than this. As the Town owns 100% of the shares of NOTL Hydro, the value of these shares also increases each year.
NOTL Hydro bills its customer for both electricity and water. It also collects the individual payments and provides the Town their revenue in one monthly payment. Because it is using the same system and the same bill it can bill for water for much less cost than if the Town were to bill for water on its own. ESNI, the sister company that provides this service, bills the Town $1.40 for each bill. Postage alone would cost the Town $0.90.
Higher Interest Loans
NOTL Hydro needs to borrow to fund its ongoing investments. Typically, we borrow from one of the Canadian banks. As an electric utility we get good rates. Occasionally, it makes more sense to borrow from the Town. We pay around the same rate as we would the bank (3% – 3.5%) so our costs are the same but the Town earns much more than it would from a GIC (0.60% – 2%). Currently there is around $4 million of debt with the Town.
There are a number of other smaller services that NOTL Hydro provides at no cost or reduced rates:
- ESNI provides locates services to the Town. These are provided at market rates but there is a sharing of the savings.
- Seasonal banners and other ornaments are sometimes hung on NOTL Hydro poles at no charge.
- NOTL Hydro uses local goods and services where possible and reasonable and pays local taxes. This may not be the case if NOTL was just part of the service territory of a larger utility.