Horizon Utilities Corporation

To address risks from major disruptions in weather, Horizon Utilities introduced its 20-year adaptation plan and policy in 2015. Horizon Utilities is owned by the cities of Hamilton and St. Catharines and is one of the largest municipally owned electricity distribution companies in Ontario. The company provides electricity and related utility services to 242,000 residential, commercial and industrial customers in Hamilton and St. Catharines. Horizon has seen increasing extreme weather events: strong winds, heavy rain and ice storms. And these extreme weather events may occasionally interrupt Horizon Utilities’ electricity distribution system, damaging poles and lines. Two major storms in 2013 highlighted the importance of adaptation for Horizon, but the company has been on the climate change adaptation path, via sustainable development, since about 2008.

In 2012, it developed a vulnerability assessment and initial adaptation strategy and then in 2015, it introduced its long-term adaptation plan. As a company, Horizon felt that they needed to understand the climate trends, identify their gaps, measure those trends, and put a long term plan together to reduce their risk going forward. This effort should build resilience into Horizon Utilities’ service, so that it can come through extreme weather with minimal losses. By planning ahead, the company hopes to have fewer instances where their customers are negatively impacted by climate change, both in terms of service disruptions and rate increases due to the significant damage caused by more frequent storms. Among Horizon Utilities’ diverse adaptation efforts, accountants are most centrally involved in risk management by working closely with an Enterprise Risk Management system, which includes climate adaptation considerations. Accountants at Horizon Utilities assume a leadership role in adapting the organization to climate risk. Their perspective on numbers is critically helpful with risk avoidance and risk management.

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Understanding and Assessing Impacts

Horizon Utilities sees increasing impacts from climate change. In its operating area, climate change means temperature shifts, more intense storms and increased precipitation. For example, Ontario has been experiencing erratic temperature shifts over recent years, significantly affecting Horizon Utilities’ revenues as a result of electricity consumption (for heat in the winter and air-conditioning in the summer).

Horizon Utilities sees storms occurring more frequently, occasionally causing power outages. Storms damage poles, overhead lines, transformers, substations and other distribution assets, forcing the company to invest in additional labour crews and maintenance programs. Unhappy customers also pose reputational risks. In July 2013, for example, high winds and lightning strikes felled hundreds of trees. Approximately 20,000 Horizon customers lost power at the storm’s peak; completely restoring power took several days.

Rain also affects Horizon Utilities’ infrastructure and electricity delivery. Rain results in more vegetation, said Joseph Almeida, director, Supply Chain Management. As vines and plants grow on poles, they attract animals such as squirrels and snakes; these animals travel up the poles and onto the wires, occasionally interrupting electricity distribution. Over the next 50 years, the Hamilton area can expect further changes, including:

  • warmer temperatures;
  • more extreme weather events;
  • heavy precipitation in a short time; and
  • increased total annual precipitation.

Identifying Actions

During 2012, Horizon Utilities engaged Navigant Consulting to analyze the significance of climate change for its service territory. Navigant used historic weather data and recent studies of climate change to identify:

  1.  Alternative climate change scenarios for the next 20 years
  2.  The impact of recent climate changes around Horizon Utilities’ service territory
  3.  How these changes could affect the company’s design, planning, emergency preparedness, procurement and related functions over the next 20 years
  4.  An action plan designed to meet the company’s climate change objectives.

In 2011, the company implemented a formal and comprehensive Enterprise Risk Management system. All identified risks were prioritized on the basis of a detailed matrix that considered both their likelihood and impact to the company. ‘Major disruptions due to weather’ was categorized as a hazard risk and has been assessed by management as a major risk for the organization. In 2012, Horizon Utilities extended its adaptation efforts through the development of a vulnerability assessment and initial adaptation strategy. In 2014, Horizon Utilities developed a 20-year adaptation plan and policy to be implemented in 2015.

Implementation

In response to the Climate Change Adaptation Strategy Report developed by Navigant Consulting, Horizon Utilities decided to address climate change through these actions:

  • Infrastructure planning – Horizon Utilities considers climate change adaptation as the utility locates substations and poles, for example. Flood avoidance is a particular focus. Horizon Utilities assesses whether an area is likely to experience flooding; if so, it builds infrastructure to minimize flood risk.
  • New technologies – Horizon Utilities is exploring technologies that will allow poles to flex in high winds, reducing the risk of downed lines.
  • Outage management – Horizon Utilities has improved its geographic information and outage management systems to locate and respond to outages more efficiently. For example, if they have strong winds one night that cause outages, they are now able to pinpoint down to the specific pole where the outage has occurred in real time and without necessarily waiting for a customer’s call. When an outage does occur, Horizon Utilities dispatches the ‘trouble crews,’ who are specifically trained to address outages. These crews have existed for a long time, but greater and more frequent storms have increased their role.

Regarding infrastructure planning and other operational responses to climate change adaptation, Horizon Utilities employs a financial advisor in Utility Operations who supports operations, engineering and capital planning.

Outcomes and Monitoring Progress

The first five years after the adaptation plan was completed were intended to focus on data collection and monitoring, which will support the required actions through the remainder of the plan. Collected data should also enable Horizon Utilities to develop specific key performance indicators around climate change. Among Horizon Utilities’ diverse adaptation efforts, accountants are most centrally involved in risk management. They work closely with the Enterprise Risk Management system, which includes climate adaptation considerations. Accountants at Horizon Utilities assume a leadership role in adapting the organization to climate risk. Their perspective on numbers is critically helpful with risk avoidance and risk management.

Next Steps

Looking forward, Horizon Utilities sees its accountants being closely involved in data control and analysis. Data are the key to the development of a long-term adaptation plan. Accountants will be involved in ensuring the accuracy and quality of the data collected. They will analyze it to determine the required actions, as well as monitoring the financial impact of the potential risks and benefits.

Looking at the accounting profession, Horizon Utilities’ interviewees call for more education for accountants on climate change adaptation. This education may be obtained through formal university education, professional development programs or a combination of both. In parallel, the broader business community needs to know how accountants can contribute to climate change adaptation. To increase broader awareness of accountants’ potential role in climate change adaptation, it is recommended that organizations connect accountants with employees who are working on climate change initiatives. Greater accountant training on enabling skills around collaboration and communication would facilitate this connection with those outside the accounting discipline.

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Reprinted with permission from Horizon Utilities Corporation, ©2015, by Chartered Professional Accountants of Canada. All rights reserved by copyright owner.

Using climate change projections enables better adaptation decisions. To learn how to choose, access, and understand climate data, visit ClimateData.ca’s Learning Zone.