180626 Council AGDTable of Contents
Agenda 2
Tillsonburg Hydro Inc. Annual General Meeting
Tillsonburg Hydro Inc. Agenda Packet 2018-06-26 11-
00 4
By-Law 4209, To Confirm the Proceedings of the Council
Meeting of June 26, 2018.
By-law 4209 Confirming June 26, 2018 46
1
=
1.Call to Order
2. Adoption of Agenda
Proposed Resolution #1
Moved By:Seconded By:
THAT the Agenda as prepared for the Council meeting of Tuesday, June 26, 2018 , be
adopted.
3.Moment of Silence
4.Disclosures of Pecuniary Interest and the General Nature Thereof
5.Public Meetings
5.1. Tillsonburg Hydro Inc. Annual General Meeting
Tillsonburg Hydro Inc. Agenda Packet 2018-06-26 11-00
Proposed Resolution # 2
Moved By: Seconded By:
THAT Council move into the Annual General Meeting of the Shareholder of Tillsonburg
Hydro Inc.
6.Notice of Motions
7.By-Laws
By-Laws from the Meeting of Tuesday, June 26, 2018
The Corporation of the Town of Tillsonburg
COUNCIL MEETING
Tuesday, June 26, 2018
12:15 PM
Council Chambers
200 Broadway, 2nd Floor AGENDA
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180626 Council Meeting – Agenda - 2 -
7.1. By-Law 4209, To Confirm the Proceedings of the Council Meeting of June 26,
2018.
Proposed Resolution # 4
Moved By: Seconded By:
THAT By-law 4209 , To Confirm the Proceedings of the Council Meeting of June 26,
2018, be read for a first, second and third and final reading and that the Mayor and
Clerk be and are hereby authorized to sign the same, and place the corporate seal
thereunto.
8. Adjournment
Proposed Resolution # 5
Moved By: Seconded By:
THAT the Council Meeting of Tuesday, June 26, 2018 be adjourned at _____ p.m.
3
Table of Contents
Agenda 2
Minutes of the Meeting of the Tillsonburg Hydro Inc. Annual
General Meeting
170627 THI AGM MIN 5
Appointment of Directors for Tillsonburg Hydro Inc.
Board Recommend directors 2018 9
2017 Audited Financial Statements
FinancialStatements-Client 10
Scrimbeour Engagement letter 28
Scrimgeour independence letter 34
Scrimgeour Rep letter 36
Memorandum of Understanding
MOUD - Revisions- FINAL 39
14
1.Call to Order
2.Adoption of Agenda
Resolution No. 1:
THAT the agenda for the Annual General Meeting of Tillsonburg Hydro In.
on Tuesday, June 26, 2018 , be adopted.
3.Disclosures of Pecuniary Interest and the General Nature Thereof
4.Adoption of Minutes of Previous Meeting
170627 THI AGM MIN
Resolution No. 2:
THAT the Minutes of the Tillsonburg Hydro Inc. Annual General Meeting of June
27, 2017, be approved.
5.Appointments
5.1. Appointment of Directors for Tillsonburg Hydro Inc.
Board Recommend directors 2018
Resolution No. 3:
THAT the appointment of Directors for Tillsonburg Hydro Inc. for the current term
until the next Annual General Meeting shall be as follows:
Tillsonburg Hydro Inc.
ANNUAL GENERAL MEETING
Tuesday, June 26, 2018
12:15 AM
Council Chambers
200 Broadway, 2nd Floor, Tillsonburg
AGENDA
25
190626 THI AGM – Agenda - 2 -
Daniel Rasokas, John Gilvesy, Alex Urbanowicz, Ann Loker, Ernie Vidovic, Julie
Ann Snell ;
AND THAT Dave Beres (Shareholder Representative), be appointed until the
end of the term of Council, December 1, 2018.
6. Finance
6.1. Finance
6.1.1. 2017 Audited Financial Statements
FinancialStatements-Client
Scrimbeour Engagement letter
Scrimgeour independence letter
Scrimgeour Rep letter
Resolution No. 4:
THAT The auditor’s report for 2017 as presented by Christine Scrimgeour, CPA,
CA, Scrimgeour & Company, and all activities and transactions for the year
ended December 31, 2017 be approved.
6.1.2. Appointment of Auditor for the 2018 Fiscal Year
Resolution No. 5:
THAT the Shareholder appoint Christene Scrimgeour, CPA, CA, Scrimgeour &
Company, as auditor for Tillsonburg Hydro Inc. for the 2018 fiscal year.
7. Legal
7.1. Legal
7.1.1. Memorandum of Understanding
MOUD - Revisions- FINAL
Resolution No. 6:
THAT the Memorandum of Understanding between The Corporation of the
Town of Tillsonburg and Tillsonburg Hydro Inc. be approved.
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190626 THI AGM – Agenda - 3 -
7.1.2. Appointment of Legal Council for the 2018 Fiscal Year
Resolution No. 7:
THAT the Shareholder appoint Aird & Berlis, LLP as general legal counsel for
Tillsonburg Hydro Inc. for the 2018 fiscal year.
7.1.3. Ratification of Tillsonburg Hydro Inc. Board Decisions for the 2017
Fiscal Year
Resolution No. 8:
THAT the actions and proceedings of the Board of Directors of Tillsonburg
Hydro Inc. for the 2017 fiscal year be hereby ratified and confirmed.
8. Adjournment
Resolution No. 9:
THAT the Annual General Meeting of Tillsonburg Hydro Inc. be adjourned;
AND THAT the Shareholder move back into the regular Council session at
________a.m.
47
Attendance:
Mayor Stephen Molnar
Deputy Mayor Beres Councillor Adam Councillor Esseltine Councillor Jim Hayes
Councillor Stephenson Board Members: Chair John Gilvesy Ann Loker
Daniel Rasokas
Ernie Vidovic Julie Ann Snell Regret:
Councillor Rosehart
Alex Urbanowicz 1. Call to Order
The meeting was called to order at 10:08 a.m.
2. Adoption of Agenda
Resolution No. 1:
Moved By: Councillor Hayes
Seconded By: Councillor Adam
THAT the agenda for the Annual General Meeting of Directors of Tillsonburg
Hydro In. on Tuesday, June 27, 2017, be adopted.
Carried
Tillsonburg Hydro Inc.
ANNUAL GENERAL MEETING
Tuesday, June 27, 2017
10:00 AM
Council Chambers
200 Broadway, 2nd Floor, Tillsonburg
MINUTES
58
THI Board Meeting – MINUTES - 2 -
3. Disclosures of Pecuniary Interest and the General Nature Thereof
No disclosures of pecuniary interest were declared. 4. Adoption of Minutes of Previous Meeting
160621 THI AGM Min
Resolution No. 2:
Moved By: Councillor Stephenson
Seconded By: Councillor Esseltine
THAT the Minutes of the Tillsonburg Hydro Inc. Annual General Meeting of June
21, 2016, be approved.
Carried
5. Appointments
5.1. Appointment of Directors for Tillsonburg Hydro Inc.
Resolution No. 3:
Moved By: Councillor Esseltine
Seconded By: Councillor Stephenson
THAT the appointment of Directors for Tillsonburg Hydro Inc. for the current term
until the next Annual General Meeting shall be as follows:
John Gilvesy, Daniel Rasokas, Alex Urbanowicz, Ann Loker, Ernie Vidovic, Julie
Ann Snell;
AND THAT Dave Beres (Shareholder Representative), be appointed until further
notice.
Carried
6. Finance
6.1. Finance
6.1.1. 2016 Audited Financial Statements
2016 Tillsonburg Hydro Inc. Financial Statements
THI Independence Letter
69
THI Board Meeting – MINUTES - 3 -
Rick Scrimgeour, Scrimgeour & Company provided an overview of the financial
statements.
The Shareholder was given the opportunity to ask questions.
Resolution No. 4:
Moved By: Councillor Adam
Seconded By: Councillor Hayes
THAT The auditor’s report for 2016 as presented by Rick Scrimgeour, CPA, CA,
Scrimgeour & Company, and all activities and transactions for the year ended
December 31, 2016 be approved.
Carried
6.1.2. Appointment of Auditor for the 2017 Fiscal Year
Resolution No. 5:
Moved By: Deputy Mayor Beres
Seconded By: Councillor Adam
THAT the Shareholder appoint Christene Scrimgeour, CPA, CA, Scrimgeour &
Company, as auditor for Tillsonburg Hydro Inc. for the 2017 fiscal year.
Carried
7. Legal
7.1. Appointment of Legal Council for the 2017 Fiscal Year
Resolution No. 6:
Moved By: Councillor Hayes
Seconded By: Councillor Adam
THAT the Shareholder appoint Aird & Berlis, LLP as general legal counsel for
Tillsonburg Hydro Inc. for the 2017 fiscal year.
Carried
710
THI Board Meeting – MINUTES - 4 -
7.2 Ratification of Tillsonburg Hydro Inc. Board Decisions for the 2016 Fiscal
Year
Resolution No. 7:
Moved By: Councillor Stephenson
Seconded By: Councillor Esseltine
THAT the actions and proceedings of the Board of Directors of Tillsonburg
Hydro Inc. for the 2016 fiscal year be hereby ratified and confirmed.
Carried
7.3 Round Table
The request was made by the Shareholder to meet with THI Board of Directors
regarding the MSA & MOUD documents for discussion and direction.
8. Adjournment
Resolution No. 8:
Moved By: Councillor Esseltine
Seconded By: Councillor Stephenson
THAT the Annual General Meeting of Tillsonburg Hydro Inc. be adjourned;
AND THAT the Shareholder move back into the regular Council session at
11:07a.m.
Carried
811
912
TILLSONBURG HYDRO INC.
FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2017
1013
TILLSONBURG HYDRO INC.
FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2017
-1-Independent Auditor's Report
-2-Statement of Financial Position
-3-Statement of Retained Earnings
-4-Statement of Comprehensive Income
-5-Statement of Cash Flows
-6- Notes to the Financial Statements
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INDEPENDENT AUDITOR'S REPORT
To the Shareholder and Board of Directors:
We have audited the accompanying financial statements of Tillsonburg Hydro Inc., which comprise the
Statement of Financial Position as at December 31, 2017, and the Statements of Retained Earnings,
Comprehensive Income, and Cash Flows for the year then ended, and a summary of significant accounting
policies and other explanatory information.
Management's Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in
accordance with International Financial Reporting Standards, and for such internal control as management
determines is necessary to enable the preparation of financial statements that are free from material
misstatement, whether due to fraud or error.
Auditor's Responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We conducted
our audit in accordance with Canadian generally accepted audit standards. Those standards require that we
comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
financial statements. The procedures selected depend on the auditor's judgment, including the assessment
of the risks of material misstatement of the financial statements, whether due to fraud or error. In making
those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair
presentation of the financial statements in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal
control. An audit also includes evaluating the appropriateness of accounting policies used and the
reasonableness of accounting estimates made by management, as well as evaluating overall presentation of
the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
audit opinion.
Opinion
In our opinion, the financial statements present fairly, in all material respects, the financial position of
Tillsonburg Hydro Inc. as at December 31, 2017, and its financial performance and its cash flows for the
year then ended in accordance with International Financial Reporting Standards.
April 24, 2018
London, Canada LICENSED PUBLIC ACCOUNTANT
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TILLSONBURG HYDRO INC.
STATEMENT OF FINANCIAL POSITION
AS AT DECEMBER 31, 2017
2017 2016
ASSETS
Current
Cash and short-term investments $778,783 $343,999
Accounts receivable (note 3)4,332,792 6,208,798
Inventory 320,315 276,107
Prepaid expenses 26,247 28,644
5,458,137 6,857,548
Property, plant and equipment (note 5)
Cost 23,179,399 21,701,360
Less accumulated amortization (11,424,204)(11,275,020)
11,755,195 10,426,340
Other assets
Non-utility capital assets (note 11)59,563 74,336
59,563 74,336
TOTAL ASSETS $17,272,895 $17,358,224
LIABILITIES AND SHAREHOLDER'S EQUITY
Current
Accounts payable and accrued liabilities $2,081,151 $2,342,859
Income tax payable (note 3)8,486 3,986
Customer deposits 41,113 39,533
Current portion of long term debt (note 7)109,112 149,528
Deposits in aid of construction -11,503
Due to related parties (note 12)426,823 829,781
2,666,685 3,377,190
Long term
Customer deposits 233,256 236,440
Deferred contributions (note 8)2,546,494 2,201,188
Long term debt (note 7)500,000 109,219
3,279,750 2,546,847
Regulatory liabilities (note 6)88,049 705,974
TOTAL LIABILITIES 6,034,484 6,630,011
Shareholder's equity
Common shares (note 9)6,992,565 6,992,565
Contributed capital 990,387 990,387
Retained earnings (page 3)3,255,459 2,745,261
11,238,411 10,728,213
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY $17,272,895 $17,358,224
On behalf of the Board:_________________________________________________________
The accompanying notes are an integral part of these financial statements.
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TILLSONBURG HYDRO INC.
STATEMENT OF RETAINED EARNINGS
FOR THE YEAR ENDED DECEMBER 31, 2017
2017 2016
RETAINED EARNINGS, BEGINNING OF YEAR $2,745,261 $2,412,069
Comprehensive income for the year (page 4)660,198 483,192
Dividends (150,000) (150,000)
RETAINED EARNINGS, END OF YEAR $3,255,459 $2,745,261
The accompanying notes are an integral part of these financial statements.
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TILLSONBURG HYDRO INC.
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED DECEMBER 31, 2017
2017 2016
Electricity revenue $23,525,347 $26,053,864
Cost of power 23,525,347 26,053,864
Gross margin on power --
Distribution revenue
Distribution service (note 6)3,503,926 3,430,117
Retail service 8,541 11,580
Other 187,947 219,748
3,700,414 3,661,445
Net non-utility activities (note 11)313 39,806
Expenditures
Operating and maintenance (note 6)682,687 677,226
Billing and collecting 630,301 604,067
General administration 1,346,322 1,415,708
Regulatory (note 6)35,749 28,003
Amortization (note 3)364,128 327,998
Interest and finance charges 44,444 40,557
3,103,631 3,093,559
Net operating revenue 597,096 607,692
Provision for payment in lieu of corporate taxes (note 10)(63,102)124,500
COMPREHENSIVE INCOME FOR THE YEAR $660,198 $483,192
The accompanying notes are an integral part of these financial statements.
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TILLSONBURG HYDRO INC.
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 2017
2017 2016
OPERATING ACTIVITIES
Comprehensive income for the year (page 4)$660,198 $483,192
Changes not involving cash
Amortization 364,128 327,998
Net change in non-cash working capital
balances related to operations (A)1,164,106 (1,003,655)
2,188,432 (192,465)
INVESTING ACTIVITIES
Deferred contributions 345,306 10,034
Capital asset acquisitions (net of dispositions)(1,692,983)(840,758)
Non-utility capital asset disposals (acquisitions)14,773 14,773
(1,332,904)(815,951)
FINANCING ACTIVITIES
Regulatory assets (liabilities)(617,925)918,009
Customer deposits-long term (3,184)3,364
Debt advances (repayments)350,365 (142,910)
Dividends paid (150,000)(150,000)
(420,744)628,463
Change in cash during the year 434,784 (379,953)
CASH AND SHORT-TERM INVESTMENTS, BEGINNING
OF YEAR 343,999 723,952
CASH AND SHORT-TERM INVESTMENTS, END OF YEAR $778,783 $343,999
(A) Consists of changes in accounts receivable, inventory, prepaid expenses, accounts payable and
accrued liabilities, income taxes payable, current customer deposits, deposits in aid of construction and
due to related parties.
The accompanying notes are an integral part of these financial statements.
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TILLSONBURG HYDRO INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2017
1. Reporting entity
Tillsonburg Hydro Inc. (the Corporation) was incorporated under the Business Corporations Act
(Ontario) on October 26, 2000 to distribute electrical power to the residents of the Town of
Tillsonburg in accordance with Section 144 of the Electricity Act, 1998. The Corporation is wholly
owned by the Town of Tillsonburg. The Corporation operates under a licence issued by the Ontario
Energy Board ("OEB"). The Corporation is regulated by the OEB and adjustments to the
Corporation's distribution and power rates require OEB approval. The address of the Corporation's
registered office is 200 Broadway Street, 2nd Floor, Tillsonburg, Ontario, N4G 5A7.
2.Basis of presentation
The Corporation's financial statements have been prepared in accordance with International
Financial Reporting Standards ("IFRS") as adopted by the International Accounting Standards
Board ("IASB") and interpretations as issued by the International Financial Reporting
Interpretations Committee ("IFRIC") of the IASB.
Approval of the financial statements
The financial statements were approved by the Board of Directors on April 24, 2018.
Basis of measurement
The financial statements have been prepared on the historical cost basis.
These financial statements have been prepared using the accrual basis of accounting. The accrual
basis of accounting recognizes revenue as it becomes available and measurable. Expenses are
recognized as they are incurred and measurable as a result of the receipt of goods or services and
the creation of a legal obligation to pay.
Functional and presentation currency
These financial statements are presented in Canadian dollars, which is the Corporation's functional
currency.
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TILLSONBURG HYDRO INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2017
2.Basis of presentation continued
Use of estimates
The preparation of financial statements in conformity with IFRS requires management to make
certain estimates and assumptions that affect reported amounts of assets and liabilities, disclosure of
contingent assets and liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the period. Such estimates are periodically reviewed and any
adjustments necessary are reported in earnings in the period in which they become known. Actual
results could differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting
estimates are recognized in the year in which the estimates are revised and in any future periods
affected.
In particular, information about significant areas of estimation uncertainty and critical judgments in
applying accounting policies that have the most significant effect on the amounts recognized in
these financial statements is included in the following notes:
i. Note 3 - Revenue recognition - estimate of unbilled revenue
ii.Note 3 - Accounts receivable - allowance for impairment
iii.Note 3 - Property, plant and equipment, useful lives and the identification of significant
components of property, plant and equipment
iv.Note 6 - Recognition and measurement of regulatory balances
Rate setting and industry regulation
The Ontario Energy Board Act (1998) (the Act) gave the Ontario Energy Board (OEB) powers and
responsibilities to approve or set rates for the transmission and distribution of electricity, providing
continued rate protection for electricity consumers, and ensuring that distribution companies fulfil
obligations to connect and service customers. In its capacity to approve or set rates, the OEB has
the authority to specify regulatory accounts treatment that may differ from IFRS for enterprises
operating in a non-rate regulated environment.
The Act provides for a competitive market in the sale of electricity in addition to the regulation of
the monopoly electricity delivery system in Ontario.
The OEB has regulatory authority over the electricity delivery sector. The Act sets out the Board's
powers to issue a distribution license, which must be obtained by any person owning or operating a
distribution system under the Act. The Act allows the Board to prescribe license requirements and
conditions to electricity distributors, which includes such considerations as specified accounting
records, regulatory accounting principles, separation of accounts for separate businesses and filing
requirements for rate setting purposes.
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TILLSONBURG HYDRO INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2017
2.Basis of presentation continued
Rate setting and industry regulation
With the commencement of the open market, the Corporation purchases electricity from the
Independent Electricity System Operator (IESO), at spot market rates and charges its customers
unbundled rates. The unbundled rates include the actual cost of generation and transmission of
electricity and an approved rate for electricity distribution. The cost of generation, transmission and
other charges such as connection and debt retirement are collected by Tillsonburg Hydro Inc. and
remitted to the IESO. The Corporation retains the distribution charge on the customer hydro
invoices. The OEB has the general power to include or exclude costs, revenues, losses or gains in
the rates of a specific period, resulting in a change in the timing of accounting recognition from that
which would have applied in an unregulated Corporation. Such change in timing gives rise to the
recognition of regulatory assets and liabilities. The Corporation's regulatory assets represent certain
amounts receivable from future customers and costs that have been deferred for accounting
purposes because it is probable that they will be recovered on future rates. In addition, the
Corporation has recorded regulatory liabilities, which will represent amounts for expenses incurred
in different periods than would be the case had the Corporation been unregulated. Specific
regulatory assets and liabilities are disclosed in note 6.
The Corporation's approved distribution rates include components for the recovery of distribution
expenses, regulatory assets and liabilities, payments in lieu of corporate income taxes, and a rate of
return on capital assets.
On November 2, 2015, the Corporation submitted a Price Cap Incentive Rate-setting application to
the OEB for 2016 Electricity Distribution Rates. On March 17, 2016, the Corporation received a
decision from the OEB that approved changes to the rates that the Corporation charges for
Electricity distribution, to be effective May 1, 2016.
On November 7, 2016, the Corporation submitted a Price Cap Incentive Rate-setting application to
the OEB for 2017 Electricity Distribution Rates. On March 30, 2017, the Corporation received a
decision from the OEB that approved changes to rates that the Corporation charges for Electricity
distribution, to be effective May 1, 2017.
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TILLSONBURG HYDRO INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2017
3. Significant accounting policies
The accounting policies set out below have been applied consistently in all years presented in these
financial statements.
Cash and cash equivalents
Cash and cash equivalents include cash in bank accounts and short-term investments with maturities
of less than one year when purchased.
Revenue recognition
Service revenue is recorded on the basis of regular meter readings and estimates of customer usage
since the last meter reading to the end of the year (unbilled revenue). Estimated customer usage
from the last billing date to the end of the year is included in revenue. The Corporation applies
judgment to the measurement of the estimated consumption and to the valuation of that
consumption. Unbilled revenue, which is included in accounts receivable, at December 31, 2017
was $2,306,973 (2016 - $2,920,683).
Accounts receivable
Accounts receivable are shown net of an allowance for doubtful accounts of $111,514 (2016 -
$96,629).
Inventory
Inventory consists of repair parts, supplies and material held for future capital expansion and
maintenance activities and is valued at the lower of cost and net realizable value, with cost being
determined on an average cost basis. Items considered major spare parts are recorded as capital
assets.
Property, plant and equipment
Property, plant and equipment are measured at cost or deemed cost established on the transition
date. Cost includes expenditures that are directly attributable to the acquisition of the asset. The
cost of self-constructed assets includes the cost of materials and direct labour and any other costs
directly attributable to bringing the asset to a working condition for its intended use.
Parts of an item of property, plant and equipment that have different useful lives are accounted for
as separate items (major components) of property, plant and equipment.
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TILLSONBURG HYDRO INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2017
3.Significant accounting policies continued
Property, plant and equipment continued
Amortization is recognized in comprehensive income on a straight-line basis over the estimated
useful life of each part or component of property, plant and equipment. Land is not amortized. The
estimated useful lives are as follows:
Distribution station equipment 40 years
Poles, towers and fixtures 50 years
Overhead conductors 60 years
Overhead devices 40 years
Underground conduit 50 years
Underground conductors and devices 30 years
Transformers 40 years
Services - overhead 50 years
Services - underground 40 years
Distribution meters 25 years
Smart meters 15 years
Computer hardware 5 years
Computer software 5 years
Amortization methods, useful lives and residual values are reviewed at each reporting date.
Impairment
Property, plant and equipment assets with finite lives are tested for recoverability whenever events
or changes in circumstances indicate a possible impairment. Any impairment is recognized in
comprehensive income when the asset's carrying value exceeds its estimated recoverable amount.
An impairment charge may be reversed only if there is objective evidence that a change in the
estimate used to determine the asset's recoverable amount since the last impairment was recognized
is warranted. A reversal of an impairment charge is recognized immediately in comprehensive
income. After such a reversal, the amortization charge, where relevant, is adjusted in future periods
on a systematic basis over the asset's remaining useful life.
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TILLSONBURG HYDRO INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2017
3.Significant accounting policies continued
Deferred contributions
Certain assets may be acquired or constructed with financial assistance in the form of contributions
from customers where the estimated revenue is less than the cost of providing service or where
special equipment is needed to supply the customers' specific requirements.
Since the contributions will provide customers with ongoing access to the supply of electricity,
these contributions are classified as deferred contributions and are amortized as revenue on a
straight-line basis over the useful life of the constructed or contributed asset.
Payment in lieu of corporate income taxes
The Corporation provides for payments in lieu of corporate income taxes using the taxes payable
method. Under the taxes payable method, no provisions are made for the future income taxes as a
result of temporary differences between the tax basis of assets and liabilities and their carrying
amounts for accounting purposes. When unrecorded future income taxes become payable, it is
expected that they will be included in the rates approved by the OEB and recovered from the
customers of Tillsonburg Hydro Inc.
Regulatory policies
Tillsonburg Hydro Inc. has adopted the following policies, as prescribed by the Ontario Energy
Board (OEB) for rate-regulated enterprises. The policies have resulted in accounting treatments
differing from International Financial Reporting Standards. IFRS 14, which will undergo a
comprehensive review by IASB in future years, allows the Corporation to continue to follow the
prescribed OEB policies to record the following assets and liabilities:
1. Various regulatory costs have been deferred in accordance with criteria set out in the OEB's
Accounting Procedures handbook. In the absence of such regulation, their costs would have
been expensed when incurred under IFRS.
2. The Corporation has deferred certain retail settlement variance amounts under the provisions of
Article 490 in the OEB's Accounting Procedures handbook.
Future accounting pronouncements
A number of new standards, amendments and interpretations under IFRS are not yet effective for
the year ended December 31, 2017, and have not yet been applied in preparing these financial
statements. The Corporation continues to analyze these standards, however, it is not anticipated
these will have a material impact on its financial statements.
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TILLSONBURG HYDRO INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2017
4. Financial instruments
The fair value of cash, accounts and income taxes receivable, due from (to) related parties, accounts
payable and accrued liabilities and customer deposits is approximately equal to their carrying value
given their short-term maturity date.
Exposure to market risk, credit risk, and liquidly risk arises in the normal course of the
Corporation's business.
Market risk refers primarily to risk of loss that results from changes in commodity prices, foreign
exchange rates and interest rates. The Corporation does not have market risk due to the flow
through nature of its energy purchases and costs. The Corporation does not have foreign exchange
risk. The Corporation minimizes interest rate by issuing long-term fixed rate debt.
Financial assets create credit risk if customers fail to discharge an obligation, causing a financial
loss. The Corporation's distribution revenue is earned on a broad base of customers principally
located in Tillsonburg, with no single customer that accounts for revenue or accounts receivable
balance in excess of 10% of the respective balance.
The Corporation invests in short-term investments which are not considered a credit risk.
Liquidly risk is the risk that the Corporation will not be able to meet its financial obligations as they
become due. Short-term liquidity is expected to be sufficient to fund normal operating
requirements.
5. Property, plant and equipment
The value of property, plant and equipment as at year end are as follows:
Accumulated Net Net
Cost Amortization 2017 2016
Substation land $11,520 $-$11,520 $11,520
Substation equipment 185,698 (135,000)50,698 56,144
Distribution system 22,400,885 (10,712,947)11,687,938 10,357,800
Computer hardware 19,886 (19,886)-28
Computer software 561,410 (556,371)5,039 848
$23,179,399 $(11,424,204)$11,755,195 $10,426,340
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TILLSONBURG HYDRO INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2017
6.Regulatory assets and liabilities
The following expenses (recoveries) may be considered by the Ontario Energy Board in future rate
applications and accordingly have been deferred until such time as direction is provided by the
OEB.
2017 2016
Regulatory assets (liabilities):
Retail settlement variances $(11,713)$(841,448)
Deferred costs 33,198 33,849
Recovery of regulatory assets (109,534)101,625
Total regulatory liabilities $(88,049)$(705,974)
The retail settlement variance accounts represent the difference between the amount charged by the
IESO based on the settlement invoice and the amount billed to customers using the OEB approved
rates. The disposition of these amounts is expected to be reflected in future rate adjustments.
The balance in the recovery of regulatory assets represents the amount that the OEB has considered
final in prior applications and set a rate for recovery.
The Corporation continually assesses the likelihood of recovery of each of it's regulatory assets and
liabilities into the setting of future rates. If, at some future date, the Corporation judges that it is no
longer probable that the OEB will include a regulatory asset or liability in future rates, the
appropriate carrying amount will be reflected in results of operations in the period that the
assessment is made.
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TILLSONBURG HYDRO INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2017
7.Long term debt
The Corporation incurred long term financing for the smart meter program. The debt is a bank
loan, repayable over 10 years, bears interest at 4.53%, and has the option of a 10% prepayment
each year. The loan is secured by a general security agreement.
Principal repayments over the next year is as follows:
2018 $109,112
In addition, during 2017, the Corporation was approved to borrow $2,000,000 for capital projects at
prime rate of interest. As of December 31, 2017, the Corporation had been advanced $500,000.
The loan is to be paid back at interest only payments, .65% per annum, for one year after the draw,
which can be extended for one more year upon approved request. As a result, the $500,000 has
been reflected in the financial statements as long-term debt.
8.Deferred contributions
Deferred customer contributions in aid of construction or acquisition of property, plant and
equipment is as follows:
2017 2016
Deferred contributions received $3,596,499 $3,173,337
Less: Amount recognized as distribution revenue (1,050,005)(972,149)
Deferred contributions, end of year $2,546,494 $2,201,188
9.Share capital
The share capital of the Corporation consists of the following:
Authorized:
Unlimited common shares
Unlimited number of Class A shares - non-voting, non-cumulative redeemable
2017 2016
Issued
1 voting common share $6,992,565 $6,992,565
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TILLSONBURG HYDRO INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2017
10.Payments in lieu of corporate income taxes
As a regulated Lines Distribution Corporation, Tillsonburg Hydro Inc. is required to remit
payments in lieu of corporate income taxes as follows:
2017 2016
Income taxes - current $58,435 $124,500
Recovery of prior year taxes (121,537)-
$(63,102)$124,500
Payments in lieu of corporate income taxes are calculated on the net operating revenues, adjusted
for timing differences arising on differences between amortization of capital assets for tax
purposes. The applicable rates for the year ending December 31, 2017 are 26.5% (2016 - 26.5%)
combined federal and provincial rates.
In addition, the Corporation amended their corporate income tax returns for 2014 and 2015 taxes
for the calculation of taxable capital that resulted in a refund of $121,537.
The timing differences based on the amortization for tax purposes are not material and therefore,
deferred taxes are not recorded.
11.Net non-utility activities
Independent Electricity System Operator/Ontario Power Authority funded Conservation and
Demand Management programs are not regulated by the OEB and therefore, are classified as non-
utility activities. Consequently, these net revenues are not recognized for rate-setting purposes.
The non-utility capital assets are comprised of solar powered equipment which is not regulated by
the OEB. These assets are being amortized over their useful lives and are shown as non-utility
capital assets. The net revenue generated from these assets is recorded in the non-utility activities.
12.Related party transactions
Banking and accounting activities are administered by the Town of Tillsonburg on behalf of
Tillsonburg Hydro Inc. Amounts due from (to) related parties represent the net working capital
position between the Town and the Corporation. A Master Service Agreement, which was
updated in 2013, governs the financial relationship between the Corporation and the Town of
Tillsonburg. These financial statements reflect this Agreement. This Agreement is currently
being reviewed.
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TILLSONBURG HYDRO INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2017
13.Prudential support
Tillsonburg Hydro Inc. has posted a letter of credit with the Independent Electricity System
Operator (IESO) in the amount of $956,406 (2016 - $956,406). The IESO is responsible for
ensuring that prudential support is posted by all market participants to satisfy their prudential
support and obligation and, therefore, mitigate the impact of an event of default by a market
participant on the rest of the market.
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BETWEEN
THE CORPORATION OF THE TOWN OF TILLSONBURG (“TOWN”)
AND
TILLSONBURG HYDRO INC. (“THI”)
This Memorandum of Understanding and Direction (MOUD) is designed to identify individual and collective responsibilities that will
ultimately provide for safe, reliable and financially responsible distribution of electrical energy to identified stakeholders. The purpose
of this MOUD is to confirm the working partner relationship between the TOWN and THI (The PARTIES) that reinforces and enhances
their joint commitment to maintain a vibrant Electrical Energy Utility to the benefit of the community they serve. Therefore this
document shall set out the general expectations of the TOWN (as Sole Shareholder) and THI.
The following guiding principles will direct the deliberations of the TOWN and THI in achieving that goal. It must be further understood
that the TOWN is the Sole Shareholder of THI and that THI is a distinct and separate Corporation granted the benefits of operating
under the regulations of the Ontario Business Corporations Act.
The Board Shall;
a) Govern and provides stewardship of the business and affairs of THI. In so doing, shall adhere to all appropriate legislation and
regulations that impact the electrical distribution industry in the Province of Ontario
b) Provide that the focus of safe, reliable and financially responsible distribution is adhered to
c) Address any conflict of interest, act honestly and in good faith with a view to the best interests of THI and shall exercise the
same degree of care, diligence and skill that a reasonably prudent person would exercise in similar circumstances
d) Promote operational and strategic improvement projects that will enhance the profile of THI and the TOWN
The Town Shall;
a) Encourage and support the THI Board and staff in their endeavors
b) Receive an annual return on its’ investment in the form of a cash Dividend, subject to the conditions set out in Section 7.0--
Dividend Policy
THI may engage in any business activities as may be permitted by the Ontario Energy Board Act, 1998 (OEB Act) and the Electricity Act,
1998 (Electricity Act), and as authorized by the Board from time to time, including;
a) Distributing electricity
b) Business activities, the principal purpose of which is to use more effectively the assets of the distribution system of THI
c) Generating electricity from renewable energy sources
d) Conservation and Demand Management activities
In carrying out these business activities THI shall be guided by the following;
MEMORANDUM OF UNDERSTANDING AND DIRECTION
1.0 STATEMENT OF INTENT:
2.0 GUIDING PRINCIPLES (GOVERNANCE):
3.0 BUSINESS ACTIVITIES:
3942
a) Compliance with all applicable laws and regulations.
b) Operate in a manner that considers community values to the extent possible, Town practices and policies.
c) Act in a safe and environmentally responsible manner
d) Employ prudent business practices
e) Have regard to the fact that the TOWN is a Municipal Corporation
f) Maintain and appropriately enhance THI owned infrastructure
The Board of Directors of THI (the BOARD);
a) Shall be a number as permitted by current By-law(s) of THI
b) Shall consist of;
a. One member selected by the TOWN at large
b. A minimum of 4 (four) and a maximum of six (6) independent members, in accordance with the skills matrix as
recommended by the Board
c) Shall meet the requirement as outlined by the Ontario Energy Board (OEB) through the Affiliate Relationships Code (ARC)
d) The Chair of the Board shall be selected by Board members
e) No member of the Board shall receive any remuneration or compensation, other than as expressly stated in applicable by-
Law
The Board shall seek the approval of the TOWN in respect to each of the following matters prior to the BOARD undertaking or causing
to undertake, authorizing or approving any of the following matters with respect to THI:
a) Any changes or amendments to the share structure of THI
b) Any changes to the business activities of THI as identified in Section 3.0
c) Entering into any discussions or negotiations regarding a potential merger, amalgamation, divestiture or acquisition of THI or
another corporation.
THI is required to provide the TOWN with an annual Business Plan and Budget (the "Business Plan"). THI is to carry out its affairs and
carry out its business operations in accordance with the Business Plan. THI will provide the TOWN with any revision, update or
amendment of a material nature to the Business Plan.
The Business Plan will take the format as adopted by the Board of THI but shall include the following;
a) Comprehensive financial plan with significant operational projects
b) Most recent Audited Financial Statements
c) A statement of any material variances in the projected ability for THI to meet or continue to meet its strategic, financial or
development goals, including any material variances from current Business Plan
In addition to the presentation of the annual Business Plan and Budget, THI shall provide updated Financial reports, in a format as
adopted by the Board, to the TOWN on a semi-annual basis.
4.0 BOARD COMPOSITION:
5.0 TOWN APPROVAL:
6.0 REPORTING:
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Subject to the provisions herein, the Board of THI shall declare and issue an Annual Dividend to the TOWN as referenced in Section
2.0.
The payment of the Dividend shall be subject to the following;
a) No dividend shall be declared where to do so would significantly impact THI’s ability to satisfy any appropriate replacement or
improvement of assets of THI
b) No Dividend shall be declared if the Board can demonstrate to the TOWN that;
a. After any expected payment, THI would be unable to meet its financial commitments and pay its liabilities when due
b. The realizable value of THI’s assets would be less than the aggregate of its liabilities and its stated capital of all
classes
With concurrence of the THI Board and the TOWN, the Annual Dividend Policy shall be established as in accordance with Schedule 1
(attached), subject to the conditions in 7.0, and confirmed at the Board’s November board meeting, or before December 31. The
approval and the declaration of the actual Annual Dividend shall take place at the conclusion of the annual audit of THI.
A Special Dividend may be considered and approved at the discretion of the Board;
a) After the review of Annual Financial Statements, and
b) Consultation with the Town of Tillsonburg
Positive and effective communication is a cornerstone of relationship building and ultimately enhances the long-term working
relationship of the TOWN and THI. In supporting the spirit of this Agreement, the communication protocol between the parties shall
be identified as follows;
a) As to specifically identified services or general information exchange, in writing on Corporate letterhead directed to;
i. To TOWN - Clerk copied to CAO
ii. To THI – Secretary copied to Chair and Vice-Chair
b) Best efforts are expected to be used to identify and acknowledge when any issue of communication will be considered and
responded to
c) The Chair of THI will deliver at a minimum, and not counting the Annual General meeting, a semi-annual status reports to the
TOWN (Shareholder)
This document shall be reviewed at least once every two years and may be revised from time to time as circumstances may require. A
review of the MOUD can be initiated by either party subject to appropriate communication and consultation.
Date: ______________________
Acknowledged and Agreed to as of the date above
CORPORATION OF THE TOWN OF TILLSONBURG TILLSONBURG HYDRO INC.
Mayor Chair_______________
7.0 DIVIDEND POLICY:
8.0 COMMUNICATIONS PROTOCOL:
9.0 REVISIONS:
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SCHEDULE 1: DIVIDEND POLICY (Section 7.0)
With this Agreement (MOUD) the Annual Dividend Policy, subject to the terms and conditions of Section 7.0, shall be as follows;
a) $200,000 per year
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THE CORPORATION OF THE TOWN OF TILLSONBURG
BY-LAW NUMBER 4209 BEING A BY-LAW to confirm the proceedings of Council at its meetings held on the 26th day of June, 2018
WHEREAS Section 5 (1) of the Municipal Act, 2001, as amended, provides that the powers of a municipal corporation shall be exercised by its council; AND WHEREAS Section 5 (3) of the Municipal Act, 2001, as amended, provides that
municipal powers shall be exercised by by-law;
AND WHEREAS it is deemed expedient that the proceedings of the Council of the Town of Tillsonburg at this meeting be confirmed and adopted by by-law;
NOW THEREFORE THE MUNICIPAL COUNCIL OF THE CORPORATION OF THE TOWN OF TILLSONBURG ENACTS AS FOLLOWS: 1. All actions of the Council of The Corporation of the Town of Tillsonburg at its meeting
held on June 26th 2018, with respect to every report, motion, by-law, or other action passed and taken by the Council, including the exercise of natural person powers, are hereby adopted, ratified and confirmed as if all such proceedings were expressly embodied in this or a separate by-law.
2. The Mayor and Clerk are authorized and directed to do all the things necessary to give effect to the action of the Council of The Corporation of the Town of Tillsonburg referred to in the preceding section. 3. The Mayor and the Clerk are authorized and directed to execute all documents
necessary in that behalf and to affix thereto the seal of The Corporation of the Town of Tillsonburg.
4. This By-Law shall come into full force and effect on the day of passing.
READ A FIRST AND SECOND TIME THIS 26th DAY OF JUNE, 2018.
READ A THIRD AND FINAL TIME AND PASSED THIS 26th DAY OF JUNE, 2018.
_____________________________ MAYOR – Stephen Molnar
______________________________ TOWN CLERK – Donna Wilson
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