The Future of Tillsonburg Hydro Inc.

The electricity sector is undergoing a period of rapid change. Increasing regulatory requirements and rising energy demand are creating significant challenges for smaller utilities. Aging infrastructure, cybersecurity threats, the transition to a low-carbon economy, and growing customer expectations for reliability and innovation are all placing new pressures on local distribution companies. For smaller utilities, the scale, capital, and resources required to meet these demands are difficult to keep pace with. On the recommendation of the Board of Directors for Tillsonburg Hydro and ERTH Power Corporation, a strategic collaboration is being explored to address these challenges while maintaining local oversight and prioritizing customer needs.

For the Town of Tillsonburg
The existing Tillsonburg Transformer Station is nearing capacity and currently serves part of Southwest Oxford. To service projected industrial growth, a new transformer station is needed at an anticipated cost of $25 million. An additional $4.2 million is required to meet regulatory requirements, upgrade outdated systems and replace aging infrastructure.

For Tillsonburg Hydro Inc. to address these challenges as a stand-alone utility is likely to require an investment of at least $29 million. With only 8,600 Tillsonburg Hydro customers to absorb that cost, the fixed distribution portion of monthly utility bills could more than double, resulting in financial hardship for residents and businesses alike.

Through the proposed collaboration, administrative, regulatory, and capital costs can be shared across a larger customer base which will help stabilize rates and improve cost-efficiency. Additionally, the Town of Tillsonburg will benefit from ERTH Corporation’s diversified revenue streams.

ERTH Corporation is a diverse group of companies providing a wide range of products and services to utilities and municipalities across Ontario.

Through its regulated arm, ERTH Power delivers safe and reliable electricity to approximately 25,000 customers within its licensed boundaries.

Through its non-regulated businesses, ERTH is recognized as an industry leader in the areas of technology, metering, utility construction, high voltage electrical services, and traffic and street. ERTH’s technology division specializes in utility billing, bill print and mail, cloud computing, quality assurance, and electronic business transaction services.

ERTH Power Corporation is a 100% municipally owned local distribution company (LDC) that delivers safe and reliable electricity to approximately 25,000 customers within its licensed boundaries. Communities that ERTH Power currently serves include Aylmer, Port Stanley, Belmont, Ingersoll, Thamesford, Otterville, Norwich, Burgessville, Beachville, Embro, Tavistock, Clinton, Mitchell, Dublin, and Goderich.

Tillsonburg Hydro Inc., or THI for short, is 100% owned by the Town of Tillsonburg and operates as a regulated electricity distributor under the auspices of the Ontario Energy Board. THI serves 8,600 customers covering 24 square kilometres in the Town of Tillsonburg.

Tillsonburg Hydro and ERTH Power have similar corporate values and a proven history of working together to service their respective electricity customers throughout southwestern Ontario. Most recently, ERTH Power has been managing the operations of Tillsonburg Hydro on behalf of the Town of Tillsonburg under a management contract. The two utilities have also shared resources, supported storm response, delivered conservation initiatives, and participated jointly in community events and sponsorships.

Expanding this partnership to form a stronger, combined local utility is a natural next step in a long-standing, collaborative relationship, and a strategic move to ensure long-term viability and service reliability.

Additionally, the proximity of service territories makes the two utilities ideal partners, resulting in operational efficiencies and improved service delivery for all customers.

Customer benefits include:

• Continued local utility presence and oversight
• A lower overall risk profile — including economic, pandemic, climate, cyber, and human resources risks
• Stable distribution rates — lower than what would be expected from a stand-alone utility
• Greater capacity to adopt and deliver new technologies
• Enhanced ability to develop innovative solutions that meet evolving customer needs
• Opportunities for operational efficiencies and cost savings
• Improved customer service experience
• Ongoing commitment to a safe and reliable electricity supply
• Career advancement opportunities for staff, supporting talent attraction and retention

Experience from other utility mergers has demonstrated that proactive consolidation among like-minded local utilities can result in improved service delivery, increased operational efficiency, and long-term benefits for customers, communities, shareholders, and employees.

In 1994, Ontario had more than 300 local utilities. Today, that number is fewer than 60, as municipalities recognize the benefits of consolidation. Municipal Councils are responsible for thoroughly evaluating opportunities, considering legal and financial implications, staff analysis, and public input.

The government of Ontario recognizes that consolidation within the electricity sector can improve efficiency and the capacity of Municipal Electric Utilities to meet key priorities, including upgrading aging infrastructure, and that private capital can play an important role in facilitating consolidation. Consolidation could lead to reduced electricity rates and improved services for electricity customers through innovation and efficiency gains. Private sector expertise can play an important role in achieving these objectives.
To encourage consolidation and efficiency within the sector, Ontario has implemented additional time-limited incentives.

Examples of successful utility mergers include:

• ERTH Power – Established in 2000 through the merger of seven small Public Utilities Commissions serving 11 communities across Southwestern Ontario. Founding municipal shareholders included Ingersoll, Aylmer, Central Elgin, Norwich, Southwest Oxford, Zorra, and East Zorra-Tavistock. The utility continued to grow, with West Perth joining in 2011 and Goderich in 2019. Today, ERTH Power operates across a discontiguous service area spanning more than 200 kilometers “as the crow flies”, from Port Stanley on Lake Erie to Goderich on Lake Huron.
  
  
• Enova Power - Formed in 2021 through the merger of Kitchener-Wilmot Hydro and Waterloo North Hydro. The utility now serves 165,000 customers.
  
  
• GrandBridge Energy - Formed in 2021 through the merger of Brantford Hydro and Energy+. The utility now serves 115,000 customers.

Tillsonburg Hydro and ERTH Power are both well-established electricity distribution companies in Ontario with very similar scorecard results. Tillsonburg Hydro has consistently not been able to meet its regulatory return on equity targets.

Historic scorecards are publicly available on the Ontario Energy Board's website:

Tillsonburg Hydro

• 2023 Scorecard
• 2022 Scorecard
• 2021 Scorecard
• 2020 Scorecard
• 2019 Scorecard

ERTH Power

• 2023 Scorecard
• 2022 Scorecard
• 2021 Scorecard
• 2020 Scorecard
• 2019 Scorecard

The following chart outlines the guiding principles for a successful collaboration.

The table below provides a comparison if THI were to remain a stand-alone utility (status quo) or pursue a collaboration with ERTH Power.

A larger, combined utility will have access to a broader pool of skilled professionals and improved coordination, which will ensure efficient and effective emergency response.

• Tillsonburg Hydro currently has five (5) powerline technicians and nine (9) fleet vehicles
• ERTH Power currently has 14 powerline technicians and 30 fleet vehicles

A decision has not been made. The Town of Tillsonburg, along with ERTH Corporation and its shareholders, are currently exploring the opportunity before them.

Council for the Town of Tillsonburg will review public input and determine whether to proceed. ERTH Corporation will also hold a special shareholder meeting with its nine municipal shareholders to determine whether to proceed. This decision is expected to be made by the end of 2025.

The Ontario Energy Board must then conduct a detailed review of the proposed transaction and give final approval. The Ontario Energy Board Handbook to Electricity Distributor and Transmitter Consolidations outlines how the OEB evaluates these applications.

The following graphic illustrates the proposed governance structure, with the Town of Tillsonburg becoming the second largest of 10 municipal shareholders in ERTH Corporation. A board of directors representing each shareholder will provide governance and oversight.

Please visit the following dedicated web pages to learn more and be informed.

tillsonburg.ca/strongertogether

Community input is important. We invite community members to learn more and provide input through the following community engagement opportunities.

Community Engagement Session #1
September 29
3:00 p.m. – 6:00 p.m.
Tillsonburg Community Centre (Lions Den)
45 Hardy Ave
Tillsonburg, ON

Community Engagement Session #2
October 6
3:00 p.m. – 6:00 p.m.
Tillsonburg Town Centre
200 Broadway
Tillsonburg, ON

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