Client’s Challenging Situation:
Ontario Hydro, the Canada legacy that delivered electricity from Ontario’s Niagara hydro-electric generation for so many years, was dismantled as the 21st century arrived. Ontario Hydro was split into several companies as electricity deregulation was about to occur. Dozens of companies, “free-market” players and regulated players [including, electricity utilities], were planning and posturing for future success.
Scope of the Problem:
Many Ontario electricity utilities created “unregulated” affiliate businesses. Some electricity utilities pooled their resources to co-found energy marketing and consulting firms. In the first few years of the 21st century, these energy marketing companies struggled to gain market share, become profitable, and become sustainable. Millions of dollars of financial losses were incurred.
We learned of a utility group that had experienced financial losses, had clients, and a tax loss. Our intuition, envisioning solutions, was strong. We contacted the utility that was serving as the lead utility, speaking for the group of utilities that had invested to create the energy management company. We proposed a 3-step solution:
- Purchase of the contracts tied to the clients still served by the utility’s energy management company,
- Purchase the tax loss, and
- Build an energy business that all parties contributed to.
In summary – we illustrated that the regulated and unregulated players in Ontario’s budding deregulated electricity market could work together to create solutions that served Ontario’s industrial energy users.
The Value Delivered:
The legacy company became profitable in its first year of operation, paid all the money owed to the utilities, used up the tax loss, and is still operating profitably and employing skill energy consulting and management people today.