Utilities Kingston – Seeing Value in a Combined Utility Model

Utilities Kingston is an anomaly in Ontario,  and possibly, Canada. The local distribution company (LDC) is the sole utility out of 70 remaining provincial LDCs to provide more than heat, power or water to its customers. In fact, Utilities Kingston provides all – natural gas, electricity, water and waste water services to its customers.

The municipally owned utility is no neophyte, having provided Kingston with natural gas for about 100 years and electricity since the 1950s. But it was only during the 1998 wave of amalgamation among LDCs, later propelled by the provincial Electricity Competition Act, that the idea of an integrated utility gelled.

As Canada’s most populous province, Ontario had at the time 300-odd LDCs serving widely diverse communities, from hamlets to entire regions. Kingston decided to amalgamate with two neighbouring townships, and the public utilities commission for the old city, took over the utilities under one body.

“The city saw value with combining all the utilities under one roof, so we ended up with natural gas, electricity, water and waste water in the combined urban area of the two townships, and started a fiber optics network,” said Jim Keetch, president and chief executive officer of Utilities Kingston.

Tucking 30-plus years of public utilities work under his belt, Keetch has first-hand experience of the corporation’s evolution. The argument for a multi-utility could be lumped under cost savings, both for the city and for the customer, he said. The cost savings of one billing system, with one clerk, one envelope and one stamp also translates into convenience for the customer. From a customer service perspective, being able to connect with a one-stop shop means making one call when digging a fence post in your back yard, to connect services when moving into a new place, and when moving out.

Utilities Kingston provides all - natural gas, electricity, water and waste water services to its customers.

“Utilities Kingston provides all – natural gas, electricity, water and waste water services to its customers.”

 

On the city side, being able to call on staff and equipment under one utility represented significant savings, he continued. “A lot of our capital construction processes see significant cost savings – for example – we are doing repairs on a city street that is well over 100 years old, an old stone box sewer, and have one contract for all the services. Just one process for tender, one inspector for all services.”

And equipment is used across the services, such as vacuum trucks used for the water service being borrowed by the gas utility for their valve maintenance. The equipment and their operators are billed under an hourly rate to the utility that owns it, and is less expensive than contracting the services out, Keetch said.

The one thing that Kingston did differently from other LDCs was not to sell its natural gas assets to one of the larger private companies like Union Gas or Enbridge Gas Distribution.

“Keeping the natural gas assets was key for the city,” said Keech. And it remains even more so in the current environment, “Industry is concerned about greenhouse gases and reducing emissions, which natural gas address. And there are a number of applications where natural gas is the fuel of choice, including space and water heating” he said. The utility runs an appliance rental unit to promote the cleaner fuel, with proceeds from the rentals going back into the city’s environmental reserve fund.

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Ice Storm Validation

When the province introduced the Energy Competition Act in 1998, municipal utilities were required to incorporate their electricity distribution systems separate from the municipality, including staff, a move intended to reduce perceived advantages over privately owned utilities.

Utilities Kingston challenged the province to enable it to be an all-inclusive provider. The corporation put together a significant, audited study that showed significant cost savings as a result of amalgamation.

It took a natural disaster to bring home to nay-sayers the benefits of the integrated utilities.

“One of the things that really helped form us and show the province and other municipalities the real value of this model came days after the amalgamation process became final on January 8, 1998 when we had the ice storm,” Keetch said.

Freezing rain, heavy snow and adverse conditions during that week caused massive damage to trees and power lines from eastern Ontario to southern Quebec, New Brunswick and Nova Scotia, leaving millions in the dark for days and in places, weeks.

It took around 10 days to get all the power back up in Kingston, “but even then we realized the advantage of having all the people together,” Keetch recalled. “We got a lot of help from communities like Toronto, but having employees from the utilities, water, waste water and natural gas, able to help out, well, there were huge advantages to that.”

At a high level, the utilities’ electric assets are under Kingston Hydro, but all the employees are under Utilities Kingston, which has a contract with Kingston Hydro to manage, operate and maintain the electric system. Then it has a contract with the city to do the same with water, waste water and natural gas.

Currently, the LDC provides about 35,000 people with water and water services, 12,000 homes with natural gas and just under 30,000 customers with electricity. From a utility perspective, Keetch admits municipalities of 400,000 residents or more are more efficient, but said there are other ways of achieving efficiencies, including expanding scope and scale of operations.

The future of the utility in the medium term will continue to be an integrated model, Keetch said. Efficiencies and cost savings drove the utility to amalgamate its services 20 years ago, “and we still firmly believe in those drivers today,” he said.

But as the population grows and systems become more complex and expensive to operate, rising costs could push the utility in a new direction, to continue providing the service its customers need, Keetch said.

Dina O’Meara has been covering Canadian energy issues for almost 20 years.