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Hamilton water bill issue raises questions about utility governance structure that includes mayors

Hamilton water bill issue raises questions about utility governance structure that includes mayors

News that Alectra Utilities will stop looking after water billing for Hamilton and three other Ontario cities raises questions about the propriety of Ontario mayors serving on the utility’s board. Last week it was revealed that Alectra had given written notice to Hamilton, Guelph, Markham and Vaughan, that it will stop issuing water billing for the municipalities when the current contract runs out in 2024.

Members of Hamilton council said they were blindsided by the decision which was made five months ago at a meeting of the Alectra Board but only conveyed to the municipalities now. The decision was taken after Fred Eisenberger and the other mayors who serve on the Alectra board declared conflicts of interest.

The Bay Observer wanted to know why the mayors would have to declare conflicts. We directed our enquiries to the Mayor’s office and received the following answers:

Q: Why did the mayors recuse themselves on the water billing issue?

•             A:  Alectra has a Code of Conduct that deals with conflicts of interest, including the perception of conflicts of interest. Conflicts of Interest are also addressed in Alectra’s Board Charter. This requires the disclosure of any direct, perceived, or potential conflict of interest to the Corporation. In the case of Alectra, any proposed material contract or transaction with a municipal shareholder or municipal holdco would potentially constitute a conflict for any non-independent director appointed to the board of Alectra by that municipality or its holding corporation.

This raises the question of why would utilities have municipal politicians on their boards at all. Wouldn’t it make more sense to have a citizen represent Hamilton, if Mayors can so easily find themselves in conflict? Then we asked:

Q: Would the same (recusal) have been necessary if hydro rates were being considered for instance?

•             A: Alectra’s board does not consider time of use electricity rates as they are set by the Ontario Energy Board.

This is slightly misleading. The Energy Board does approve rate increases but only after they are applied for by the utilities, presumably approved by the board.

But the most critical question for Council is why, if the mayor knew in May that a change of this magnitude was coming, did he not alert council? The response was bewildering.

Q: Why this information wasn’t conveyed to Hamilton Council when the decision was taken in May?

 •            A: This is a question that concerns communications with Alectra shareholders.

Shareholders as defined in the Unanimous Shareholder Agreement (USA) include Enersource Corporation, Markham Enterprises Corporation, Barrie Hydro Holdings Inc., Vaughan Holdings Inc., Hamilton Utilities Corporation, St. Catharines Hydro Inc, Guelph Municipal Holdings Inc.

The Unanimous Shareholder Agreement provides that Shareholder communications include the Annual Financial Statements, Annual General Meeting (AGM), Quarterly Reports and participation in Shareholder AGMs. Notices and information relating to these matters are sent directly to Shareholders.

So, the answer appears to be that Hamilton Utilities Corporation is the shareholder, and apparently the only one entitled to be notified. Most Hamiltonians could be forgiven for thinking Hamilton Utilities Corporation ceased to exist when Alectra took over, but no. Hamilton Utilities has an office in the Stelco Tower, it has a Board of Directors, chaired by Mr. Laurie Tugman of Trenton who is also president of an electronics company TDL. Hamilton Councillor Sam Merulla is a member of that board as well. It is a holding company that owns Hamilton’s share in Alectra as well as the fibre optics company that the old Hamilton Hydro owned. But if Hamilton Utilities, is the only body Alectra is allowed communicate with, why did they bother to also directly notify the city at all?

None of these answers satisfy the question of why the mayor, who got $41,250 for serving on the Alectra Board in 2020, but whose primary duty presumably is to Council and the residents of Hamilton, could not simply inform council that this change was likely coming. The city was paying Alectra over $5 Million a year for its share of the billing service, so this change is a big deal.

The whole business raises the question– If service on a subsidiary board requires one not to share material information with the community one is sworn to represent—can that board role continue?

Hamilton Council may want to take a glance at this issue.

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