2 016 A N N UA L R E P O R T

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1 2016 ANNUAL REPORT

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3 Protect and grow the value of our utility to our shareholder. Provide a reliable supply of electricity to the residents and businesses in Thunder Bay. Goals Ensure that the health and safety of our employees and the public is the utility s first priority. Thunder Bay Hydro Corporation Thunder Bay Hydro Corporation is wholly-owned by the Corporation of the City of Thunder Bay. It is a holding company for shares of each of three subsidiaries; namely Thunder Bay Hydro Electricity Distribution Inc., Thunder Bay Hydro Renewable Power Incorporated and Thunder Bay Hydro Utility Services Inc. Thunder Bay Hydro Electricity Distribution Inc. TBHEDI is wholly-owned by Thunder Bay Hydro Corporation. It owns, operates and manages a regulated electrical distribution system providing service to over 50,000 customers within the City of Thunder Bay via a network of over 1,300 kilometers (815 miles) of overhead and underground power lines. It is responsible for the power line system within the city limits of Thunder Bay, and for delivering electricity to homes and businesses here. It is the local, front-line customer service face of the province s electrical industry providing for the reading of customer meters, billing, and offering energy conservation advice and programs. We build, plan and maintain the local power line system and provide 24-hour emergency response. Thunder Bay Hydro Renewable Power Incorporated TBHRPI is wholly-owned by Thunder Bay Hydro Corporation. Its strategy is to develop renewable energy generation projects in the Thunder Bay area. The company owns, operates and manages the Mapleward Renewable Generating Station. Thunder Bay Hydro Utility Services Inc. TBHUSI is wholly-owned by Thunder Bay Hydro Corporation. It provides back office systems and support, IT hosted applications, underground locate services and program management that includes conservation programs to other electric utility companies in the district. Metering services are also provided to large industrial customers in the region. Thunder Bay Hydro Annual Report

4 Message from the Board Chair and President During 2016, the Board of Directors have continued their work on the evolving role of our company within the rapidly changing world of the province s electricity industry. The Board has put much thought into the future of the industry and the evolving way that customers will be able to use and interact with their electricity supplier. Our announced partnership to implement the Power.House technology in Thunder Bay is positioning us to offer expertise in such future models of electricity delivery. We invite you to learn more about this and some of the other ways that we have worked toward serving both our customers and stakeholder in this 2016 Annual Report. During the past year, the cost of electricity has been a hot topic throughout the province. Fortunately, our local customers have benefited from our position as one of the lower costing distribution companies in the province. Our local conservation activities are serving customers as well. One example, the Save on Energy Retrofit program, has provided The Board has put much thought into the future of the industry and the evolving way that customers will be able to use and interact with their electricity supplier. 4 Thunder Bay Hydro Annual Report 2016 Gary Armstrong, Board Chair Robert Mace, President & CEO

5 almost three million dollars to city businesses since it was established in Because we recognize that our customers still have concerns about the overall costs of their electricity bill, we continue to pursue operations. The exploration of a merger with Kenora Hydro is one way we might achieve this. In the fall, we announced our intention to identify ongoing as we work through a process of due diligence. We continue to prioritize the renewal of our electricity distribution infrastructure. In the past year, we have continued our aggressive investment in our system. At the same time, safety has been given precedence. We are pleased to have experienced only one* noncritical injury that resulted in lost time during the year. Of course, we must go beyond providing reliable service at the lowest possible cost by also responding to the evolving expectations of our customers. In 2016, we launched an online outage map to provide accurate, expedient communications during power outages. An extensive upgrade to our System Control Centre will aid with quick resolution to those outages. When it comes to serving our stakeholder, we are pleased to note that the City has photovoltaic facilities that the utility installed on city-owned rooftops. As we look to the future, the movement to a more connected industry will bring with it the emerging issue of cyber security and the potential for interference with the delivery of safe, reliable power to our customers. We have begun directing resources to address this. At this time, we would like to thank the entire Board of Directors for their support in our endeavours of the past year. We look forward to engaging the expertise of the challenges and opportunities that the coming years will bring Board of Directors Gary Armstrong, Chair FCPA, FCMA Art Leitch, P. Eng MBA ICD.D Vice-Chair 2 6 Mark Bentz Frank Pullia, CPA, CMA, MBA Thunder Bay Hydro Corporation 2. Thunder Bay Hydro Electricity Distribution Inc. 3. Thunder Bay Hydro Renewable Power Incorporated 4. Thunder Bay Hydro Utility Services Inc. 5. Audit Committee ( * indicates Chair) 6. Governance Committee ( * indicates Chair) Hartley Multamaki, R.P.F * Denise Carpenter, ICD.D 2 5 Ralph Falcioni, P. Eng MBA 2 5 * *Correction June 2017: Three LTI -none critical Thunder Bay Hydro Annual Report

6 The changing face of Power.House In the autumn of 2016, Thunder Bay Hydro signed a partnership agreement with PowerStream Inc. (now Alectra Utilities) to enable access to the Power.House technology. A Power.House installation consists of rooftop solar panels, a bank of high-capacity, utility-grade batteries to store the power and a master control unit that all work together to collect solar energy during the day and convert it into electricity. The electricity is then sent to the battery backup, used in the home or forwarded to the electricity grid for credit. A software management system determines the routing depending on what is best for the homeowner. The partnership allowed Thunder Bay Hydro to set up an initial installation to determine how to offer the technology to local customers. The move is part of a forward thinking strategic direction for our company. We expect that the way customers use and interact with their electricity supplier is going to evolve and we are positioning our company to provide expertise in the field. Renewable Power Generation Thunder Bay Hydro s SEED Initiative (Sustainable Electric Energy Development) outlines plans to expand the development of renewable energy sources within the City of Thunder Bay. Thunder Bay Hydro Renewable Power Incorporated owns and operates the Mapleward Renewable Generating Station to generate electricity from local landfill gas. The 3.2 megawatt power generation plant is located on a section of land leased from the City of Thunder Bay at their Solid Waste and Recycling Facility. The plant draws methane gas to fuel two engine-driven generator sets and is designed to generate enough electricity to power 2,000 houses. The project annually converts 263 million cubic feet of methane gas that would have otherwise been released into the environment. Thunder Bay Hydro Electricity Distribution Inc. is the exclusive solar photovoltaic (Solar PV) developer to the City of Thunder Bay. The company has preferred access to Cityowned buildings (rooftops) and property for the installation of Solar PV panels. Since 2010, we have completed installations on six city-owned buildings. $150,000 Dividends Paid Out to the City of Thunder Bay in 2016 Based on 2015 Solar PV Financial Results. 6 Thunder Bay Hydro Annual Report 2016

7 the electricity system System Control Centre New SCADA * System The SCADA system is the system control operator s eyes in the field. It is a critical tool that displays valuable system information both graphically and numerically on a wall of monitors. These are utilized by the Operators for the remote operation of switches, breakers and reclosers to identify system issues and to restore customer power quickly and efficiently. The software vendor for our existing system had advised us that support for the legacy SCADA software would no longer be available after An upgrade was essential. The new SCADA system needed to maintain core system functionality without replacing all of the existing field components, meet today s hardware / communication standards and has the potential for scalability and interoperability with other system analysis software while remaining cost effective. The new system includes multiple disaster recovery upgrades and GIS integration which will allow Operators to better serve both our workers and customers. *Supervisory Control and Data Acquisition Thunder Bay Hydro Annual Report

8 Operations Our efforts to overcome historic deficits in distribution system replacement have continued. We have invested 7.2 M in infrastructure renewal in We have a multi-year plan which is reviewed regularly. In the past year, a re-evaluation of our conditions at transformer stations led us to conclude that regular maintenance can extend the life of these infrastructure components and expand the time frame needed for replacement. Reporting on the average pole age gives us an indication of the progress made in our infrastructure program. The current average pole age of years is slightly lower than the past year. Our goal is to reach an average age of 25 years over the entire system. Last year, a total of 653 poles were replaced. System renewal took place in: Victoria / James Streets and Current River. $7.2 Million Invested in Infrastructure During YEARS OLD AVERAGE POLE AGE IN YEARS OLD CURRENT AVERAGE POLE AGE OUR GOAL 25 YEARS OLD AVERAGE POLE AGE Tree Trimming The trimming and removing of trees in residential neighbourhoods can evoke emotional responses from homeowners. Education is the key to helping them understand the dangers of tree interference with power lines. Prior to a major trimming project that began in 2016, we invited residents from the impacted neighbourhood to an open house to educate them about the issue. About 70 individuals attended and feedback was very positive regarding their understanding of the issue and our willingness to discuss their concerns. 15 (4.5m) LOW ZONE 20 (6m) OR LESS MINIMUM CLEARANCES ARE DESIGNED TO REDUCE THE RISK OF CONTACT For more information, please refer to Line Clearing Operations Guide 1, Limits of Approach in Electrical Utility Safety 2, Ontario Regulation 627/05 s7 Minimum distances 3 and CSA Group (1) (2) Infrastructure Health and Safety Assocition (3) Ontario E-laws December 7, 2005 (4) Canadian Standards Association TREES CONTACT MAKING CONTACT AN WITH ELECTRICAL POWER SYSTEM LINES CREATES POSE A INCONVENIENCE & DELAYS SAFETY CONCERN Trees High winds, and the snow ground and around ice build them up and may aging become can energized place trees when onto trees powerlines. come into This contact creates with power power fluctuations, lines. outages and damage to electrical equipment. Momentary contact between the tree and energized power lines could In storm be events, multiple contacts on one line can delay fatal to anyone who is on or in the area of the tree. restoration, especially in rural areas. 8 Thunder Bay Hydro Annual Report 2016

9 Safety Thunder Bay Hydro has embraced a safety management system whereby safety is the thread that runs through all that we do and is considered in all decisions. The system works to ensure that everyone goes home to their family and friends after a productive day at work. The success of this system relies first on the support from our leaders. Our board of directors and the executive team have placed safety as a top corporate priority. Secondly, our employees are very involved in the development and implementation of each of the elements that make up the safety management system. A great example of this is our yearly Committed to Safety campaign. Lastly, the utility is committed to continually improving the system. Training is ongoing, documents are regularly reviewed and updated and efforts are always being made to communicate more effectively regarding changes and updates. Thunder Bay Hydro Annual Report

10 Conservation During 2016, our conservation team delivered the first full year of programming under the provincially mandated Conservation First Framework (CFF). The CFF offers programs across the residential, commercial, industrial, and low income sectors and is designed to satisfy the energy savings target assigned to Thunder Bay Hydro by the Independent Electricity System Operator under direction from the Minister of Energy. Total Retrofits Completed 135 Total Incentives Paid $594, Total Energy (kwh) Savings Achieved 4,655,018 Retrofit Our RETROFIT Round Up event brought together local businesses, electrical distributors and contractors to demonstrate the benefits of available Save on Energy business programs. The Thunder Bay Catholic District School Board completed three major Retrofits, upgrading lighting to LED s in three school gymnasiums. The completed projects have a total energy savings of 25,860 kwh. The Landmark Hotel has completed nine retrofit projects over the past five years including interior LED lighting, exterior LED lighting, LED sign lighting, HVAC upgrades, parking lot LED lighting and overhead pool lighting, achieving energy savings of 103,987 kwh. Canada Malting Co. Limited Canada Malting Co. Limited (CMC) Thunder Bay is the last commercial malting facility in Ontario. It was CMC s highest electricity cost facility, putting the local plant s viability in question. Thunder Bay Hydro awarded a $2.4 million incentive from the IESO, to CMC, in support of its new Combined Heat and Power (Cogeneration) Plant (CHP). With the new CHP facility, CMC s electricity costs have dropped from 13 cents per KWh to 4.5 cents, saving $961,483 per year and 1,920 kilowatts of electrical demand. Jim Desaulniers, Plant Manager Canada Malting, Hon. Glenn Thibeault, Minister of Energy MPP Michael Gravelle, Minister of Northern Development & Mines, Terry young, Vice-President, Conservation & Corporate Relations, IESO, Clark Johnson, Energy Manager, Canada Malting MPP Bill Mauro, Minister of Municipal Affairs, touring the new CHP facility. 10 Thunder Bay Hydro Annual Report 2016

11 Residential Conservation Home Assistance Program In 2016, a total of 601 Thunder Bay Hydro customers have received energy efficient upgrades from the Home Assistance Program. Coupon Programs (Annual/Spring & Fall Events Combined) Coupons amounting to 1,870,276 kwh in savings were redeemed for home energy efficient products. Heating and Cooling Program The installation of ECM furnaces and A/C Units resulted in 599,916 kwh of savings. Small Business Lighting After a program re-design, Thunder Bay Hydro was 1 of 14 LDC s in the province to offer the new program and incentives. The Waterfront District BIA hosted the first Window Wonderland Competition in Twenty local businesses competed by decorating their storefronts. Red Lion Smokehouse was awarded the winning display, setting a great energy conscious example over the holiday season. Regional Energy Services Advisor To promote collaboration amongst LDC s in the region, the Regional Energy Services Advisor (RESA) position was created to implement, deliver and manage Conservation Demand Management (CDM) programs in the service territories of Atikokan Hydro Inc., Fort Frances Power Corporation, Kenora Hydro Electric Corporation Ltd., and Sioux Lookout Hydro. Efforts of the RESA will increase annual energy savings across the region, which are to be sustained over the term of the IESO s six year energy target. From left, Waterfront District BIA president Jim Comuzzi and Thunder Bay Hydro Vice-President of Customer and Information services Tim Wilson join Window Wonderland winners The Loop s Beth DeProphetis (Best Interior), Pneumaticity Hair Salon and Day Spa s Sarah Zaffino (Best Exterior), Red Lion Smokehouse s Alexandra Bono (Best Overall Display) and The Foundry s Dane Newbold (People s Choice). Thunder Bay Hydro Annual Report

12 Customer Services Monthly Billing The Ontario Energy Board required all Local Electricity Distribution Companies in Ontario to switch to monthly billing for power used after January 1, The transition for Thunder Bay Hydro residential customers was completed by December, Small business customers were moved to calendar month billing. This means that the bill period for business statements will now cover from the first to last day of the previous month. Exceeding Industry Targets Thunder Bay Hydro continues to exceed Ontario Energy Board targets for customer services. Below are some highlights: Telephone Accessibility-Calls answered within 30 seconds Written Responses to inquiries within 10 days Scheduled Appointments met and completed Urban Emergency Response within 60 minutes Rural Emergency Response within 120 minutes Industry Target 65% 80% 90% 80% 80% Our Results 93% 100% 100% 96% 100% Online Access Visitors came for almost 100 thousand sessions of exploring the information on our website last year. In January of 2016, we publicly launched our online outage map. The outage map page saw over 30 thousand pageviews during the year. Our website is now responsive to screen size. Last year 10% of our visitors were on tablets and 37% used smartphones to access our site. 12 Thunder Bay Hydro Annual Report 2016

13 Our Staff Thunder Bay Hydro employs a variety of highly skilled employees who work together in both full and part-time positions to deliver electricity to our area. Robert Mace, MBA President and CEO Tim Wilson, MBA Vice President Customer and Information Services Andrew Covello, CHRL, CHRE Vice President Human Resources and Safety Cindy Speziale, CPA, CA Vice President Finance Don Zimak Vice President Power Systems POWER LINE 46 OPERATIONS 20 ASSET MANAGEMENT & ENGINEERING 16 CUSTOMER SERVICES AND BILLING 14 ACCOUNTING / FINANCE 9 ADMINISTRATIVE/ SUPPORT 8 PURCHASING AND STORES 5 INFORMATION SYSTEMS 5 CONSERVATION AND ENERGY SERVICES 4 REGULATORY 2 HUMAN RESOURCES, SAFETY & TRAINING 2 COMMUNICATIONS 1 RENEWABLE POWER FTE as at December 31, 2016 Thunder Bay Hydro Annual Report

14 When you paid your electricity bill in 2016, where did the money go? The cost of electricity includes charges that are collected by Thunder Bay Hydro on behalf of other organizations within the province s electricity system. In the residential example below, Thunder Bay Hydro retains $25.06 and the remaining $ would be passed on to others organizations in the province s electricity system. 6% HYDRO ONE AND OTHER TRANSMISSION /CONNECTION These companies build and maintain a system to bring power from various generation facilities across high voltage lines to three transmission stations within the city. SALES TAX When the Harmonized Sales Tax was implemented in Ontario, both Federal GST and provincial PST were applied to home power and heating. Based on 1 month Residential* Consumption 750 kwh resulting in a monthly bill of $ % GOVERNMENT AGENCIES 3% Regulatory Charges are applied to administer the provincial grid and maintain system reliability. This includes Ontario Energy Board, Independent Electricity System Operator and the Ministry of Energy. 18% 61% GENERATORS OF ELECTRICITY Those companies both large and small who are contracted to build, maintain and produce electricity. This includes Ontario Power Generation (OPG) as well as those with wind, solar, gas, and hydro contracts. THUNDER BAY HYDRO ELECTRICITY DISTRIBUTION COMPANY Customer Services billing, maintaining a call centre, technology and administration. Emergency Services 24/7/365 outage and safety response with skilled staff and highly specialized equipment. Infrastructure Ongoing operation, maintenance, design and construction of the overhead and underground electrical system servicing both urban and rural customers in our territory. * Residential Users are exempt from the Debt Retirement Charge. It is applied at a rate of 0.7 cents per kilowatt hour of electricity consumed by business class customers 14 Thunder Bay Hydro Annual Report 2016

15 Financial Picture 2016 Consolidated Financial Highlights Revenues Expenses Earnings Before Taxes Payments In Lieu of Corporate Taxes Earnings For Year $144,593,436 $142,954,603 $1,638,833 $521,988 $1,116,845 Net capital expenditures for the year: $10,468,929 Who are our Customers? RESIDENTIAL SMALL BUSINESS COMMERCIAL INDUSTRIAL 45,562 5, Thunder Bay Hydro Annual Report

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