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OPINION: Neal McNamara: Eye on the Bay, The Hydro Edition - Part 1

Shocking pay raises and Electrifying financials

In 2016 your monthly North Bay Hydro bill increased, the company added $22 million in debt, lost $2 million on bad investments and unpaid bills, and as a reward the executive compensation and benefits increased by over 11%. Now, do you think that’s a good value as a customer? I don’t.

Sugar before the spice.

To start off with, I think that the management and staff at North Bay Hydro do a pretty good job and the employees provide a quality service to its customers. For example, we recently replaced the aging hot water tank (HWT) rental in our home. We called North Bay Hydro and they had a technician come out the next day, the new tankless HWT was installed within a week, and they even returned the old HWT rental for free, saving us $140. This is a fine example of North Bay Hydro’s high level of commitment to service and its customers.

However, even with good service and skills, there is room to examine and reflect on the operations and direction of this city-owned company, whose the Board of Directors are comprised of the Mayor and Council.

The Financials.

I reviewed the financial statements available for years 2014 -16. Here are some of the more interesting facts from the 2016 statement:

-North Bay Hydro’s debt increased by over $22 million relating entirely to the mayor’s plan. The North Bay Taxpayers Association has estimated the loan recall will cost us ratepayers an additional $9 million in interest payments to the bank over the long term before it’s finally paid off.

-during the year North Bay Hydro lost nearly $700,000 on investments. No explanation was provided.

-upper management approved $1.26 million in write-offs on uncollectible balances. No further information was provided on what those write-offs were about or why this amount was written off.

-Employee salary increases were set at 3.3%, whereas senior management compensation increased by over 11%.

-North Bay Hydro now has over $32 million in total long-term debt, which was increased by a further $3 million this last year.

Note: our hydro utility is 100% city-owned, so objectively looking at it, it makes no difference whether it’s on hydro’s books or the city’s, because in the end, the cost is coming out of the same wallet, ours. So when we combine the city’s debt ($65 million) with North Bay Hydro’s debt ($32 million), that’s approximately $97 million of total long-term debt. Why is this noteworthy? Because it was almost 1 year ago to the day that I made a presentation to city council that North Bay’s debt was at record levels and was on its way to topping $100 million in the next year or two. Looks like I was right on the money, pun intended. See

Pay raises.

If your job involves possibly getting electrocuted, I’m not going to argue about a 3.3% raise. However, I think it’s pretty hard to justify the 11% or higher year over year raises for senior management back at the office, who are already very well compensated. 11% annual pay increases are not reasonable in our current economic climate and is a view I think is shared by the majority of North Bay citizens. There aren’t too many ratepayers that would agree to North Bay Hydro executives receiving a 50% pay raise inside of 5 years, especially when the company is sitting at over $32 million in total long-term debt and raising Hydro rates every year on its customers.

Ironically, in a recent ruling by the Ontario Energy Board against Hydro One, they found it was unreasonable for executive salaries to be paid out of ratepayer increases. Perhaps the Board of Directors might want to re-evaluate things at our own hydro utility.

Time to wrap it up.

Finally, it was recently defended by officials that North Bay Hydro is a profitable well-run revenue generating company. The problem with that, and has been stated numerous times by various groups and stakeholders in the city is that our local Hydro should not be a profit driven organization. What would work better for ratepayers (who are also the taxpayers) is a strategy of growth thru customer acquisition and expansion and a cost recovery driven model which would have the effect of limiting any future rate increases to its customers to the bare minimum.

Well, that’s enough info for one article…..Stay tuned later this week for Part II of ‘Eye on the Bay: The Hydro Edition’, where we will review together the city’s upcoming solar Microgrid at the YMCA and the controversial Hydro Loan Recall.


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Neal McNamara

About the Author: Neal McNamara

Neal McNamara is an entrepreneur, investor, and former Military Police studying business at Nipissing University
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