Everybody. It's great to have everybody here today at our first inaugural Investor Day. Thank you again. I see a few familiar faces and some faces that I actually don't know. For those of you who don't know me, my name is Omar Javed. I'm the Vice President of Investor Relations for Hydro One, and it is my pleasure to host you today, and I look forward to meeting you if I haven't met you already. This is a very important day for us at Hydro One. It's a chance to introduce you to a broad cross-section of our senior team, including some relatively new faces, and discuss in greater depth our new strategy. Before we start, we want to acknowledge that we are hosting today's events on Indigenous lands.
We acknowledge the land we are meeting on today is the traditional territory of the many nations, including the Mississaugas of the Credit, the Anishinaabe, the Chippewa, the Haudenosaunee, and the Huron-Wendat people, and now home to many First Nations, Inuit, and Métis people as well. More than that, while we are sitting here today, Hydro One operates across the province. 104 First Nations communities are served by Hydro One Networks and Hydro One Remote Communities' communities. We have ties with Indigenous leaders and communities across the province and are committed to building respectful and positive relationships with Indigenous communities. We firmly believe that this proactive approach will benefit all communities as well as enable growth across the province. We acknowledge all the traditional territories upon which our company operates.
As with every meeting we hold at Hydro One, I'd like to start the morning with a safety moment. The coronavirus is top of mind these days, and being safety-oriented, we urge everyone to ensure a proper handwashing routine. The National Institutes of Health estimated that proper handwashing can reduce upper respiratory illnesses by up to 44%. Given that we are in a period of heightened vigilance, we have hand sanitizers available, and I think no one over here will be offended if you do an elbow bump instead of a handshake. I want to bring your attention to the location of the exits so we make sure everyone is aware in case of an emergency. There are two marked emergency exits on this floor outside this room. One is in between the hallway and the washrooms, and the other one is behind the elevator foyer.
Both lead to the back alley, down by Bay Street. Our designated meeting spot is the Bay Adelaide Centre across the road. Let me now go over the agenda for today. This morning, you will hear presentations from our CEO, Mark Poweska, our Chief Safety Officer, Darlene Bradley, our Chief Operating Officer, David Lebeter. Following that, there will be a fireside chat hosted by our Chief Corporate Affairs and Customer Care Officer, Jason Fitzsimmons. He will have the great pleasure of talking to Peter Quiring, owner and president of NatureFresh Farms, one of the largest independent greenhouse produce growers in Canada, and former Chief Ava Hill of Six Nations of the Grand River. After a short break, our CFO, Chris Lopez, will give his presentation.
This will be followed by a Q&A session where you will have the opportunity to ask questions which undoubtedly will unfold through the day. We ask that you hold your questions till this group Q&A. That will facilitate a much easier process. We will then have a buffet lunch, will give us a chance to chat, and I encourage you to reach out and meet other Hydro One attendees and get to know them here. After lunch, we will begin our showcase, where you will have the opportunity to break into small groups and meet our vice presidents and other subject matter experts. There'll be a great chance to learn more about topics such as regulatory state of play, ESG, customer-centric organization that we're building. For those of you who are attending the showcase, your table numbers will be indicated in the back of your name tag.
Before we get into the content, I would like to refer you to our forward-looking statements, which you will see behind me on the screen. For those of you on the webcast, you will see it on the first page of the investor presentation that was posted on the website this morning. Refreshment and pastries are available in the foyer and on the tables. If you haven't had a chance to grab coffee, please do that and grab a muffin or two if you have a sweet tooth like me. In terms of washrooms, they're all the way down the hallway to the left. Thank you again for joining us on this exciting day. We hope that you will come away knowing more about Hydro One and importantly, getting to know more of our people. I know it's going to be a great day. Let's get started.
I would like to introduce you to Mark Poweska, our President and CEO. Since joining Hydro One last spring, Mark has propelled the company to new heights. Mark has deep industry knowledge and an ability to develop enduring relationships with industry partners, unions, Indigenous communities, regulators, and all levels of government. During his more than 25 years at BC Hydro, Mark has proven that he can build a strong safety culture, exceed customer expectations, and improve operational performance. Mark, by background, is an engineer with experience in all levels of the electricity industry, from frontline to executive leadership. Please join me in welcoming Mark to kick off our Investor Day.
Well, thanks, Omar, and good morning, everyone, and welcome to our first-ever Hydro One Investor Day. We're really pleased that you've joined us today, and we hope we have a very exciting day and informative day for you ahead. We've put together what we think really does provide an important and interactive day in which you will be able to gain a more in-depth understanding of our company. You will meet some of our leadership team, discussions with two of our key stakeholders who are here today, as well as an illustrative table discussion during the Hydro One showcase. We're in the business of energizing life, and our vision for this company is to provide a better and brighter future for all. Today is about delving into exactly what does that entail.
We're going to spend much of the day talking about our strategy moving forward. I wanted to ground the day in really talking about who we are as a company and giving you an overview. I'll start with that. Ontario is a province that is larger than Spain and France put together. It's about a third the size of India and over twice the size of Texas. It snows in parts of this province more than 100 days a year, and several areas have more than 10 feet of snow during our long winters. Both Ontario's GDP and population make up almost 40% of Canada's total, and we operate across this entire vast province. Our history traces back almost 100 years to the early 1900s, when what was known as Ontario Hydro was really formed.
Almost 100 years later, in 1999, Ontario Hydro was split into five companies. That's when Hydro One was created with a mandate to transmit and distribute energy across this province. Then, as you all know, a little over four years ago, we became a publicly-traded company in November of 2015. The IPO was really a watershed moment for us as a company because it really began a shift, a shift to a more customer-centric and efficient organization. Since then, we have seen tremendous progress in all facets of our business, from customer satisfaction to productivity and innovation. Today, we are Ontario's largest electrical transmission and distribution company, operating 98% of Ontario's transmission grid and serving about a quarter of the distribution clients in this province. We serve close to 1.4 million residential and business customers and supply most of the local distribution companies in this province with electricity.
We are one of the largest pure-play electric and transmission distribution companies in North America. We operate in a consistent and stable rate-regulated environment with little or no exposure to commodities or generation. We are also demonstrating leadership in environmental, social, and governance by aligning to emerging standards such as SASB, which is Sustainability Accounting Standards Board, and the Task Force on Climate-related Financial Disclosures. This will provide transparency on what we believe to be a strong commitment to ESG-related matters across the company. We have strong alignment and oversight from our board on best practices in governance, and we are making decisions for the future generations in mind. We have approximately CAD 27.1 billion in assets, a rate base of CAD 20.7 billion, and 2019 annual revenues of CAD 6.5 billion. In addition to our vast transmission and distribution assets, we also provide advanced broadband telecommunications services on a wholesale basis.
We are responsible for providing a better and brighter future for all. While doing so, we have a tremendous opportunity to grow our business right here in Ontario. Let me show you who we are.
[Presentation]
[Presentation]
I want to talk about the electric power industry overall. Overall, it is undergoing a large and profound change. The strong push for decarbonization, greater decentralization of power generation, and changing technologies are shaping how and when we provide electricity services. Ontario, as a province, is a leader in the efforts, with over 90% of the energy produced in this province being supplied by non-emitting resources. It is our job to transmit and distribute this low-carbon source of energy. Here in Ontario, we expect an increase in demand for electricity. This is in part from the electrification and decarbonization of transport, a booming agricultural sector, which you'll hear about later today, and some growth in the residential and commercial sectors.
You will hear from one of our important customers later today about how we worked with the agriculture growers to advocate for a new line to Southern Ontario, an investment which will help drive the greenhouse industry while placing downward pressure on electricity rates. We're also involved in encouraging more rapid growth and adoption of electric vehicles. Working with an industry partner, we are building one of Ontario's largest, most connected electric vehicle fast-charging networks. By the end of 2021, the Ivy Charging Network is expected to have 73 strategically located charging stations across Ontario. This will allow people to travel from Quebec to Manitoba or from Michigan to Timmins on one connected fast-charging network. This is both good for the environment, it's also good for our customers. It's not just increasing and changing demand that is affecting how we do business.
As we prepare for more frequent severe storms, we will incorporate climate change into our planning to increase resiliency and the hardening of our grid. The effects of climate change on our industry are very real and only expected to increase. To address climate change, amongst other things, we are also greening our own fleet to help with the problem. Increasing adoption of distributed energy resources such as solar, storage, and wind are also further changing our industry, with implications for Hydro One. As these energy sources are implemented, they will need to be supported by new infrastructure. Last, we released, last fall, our Ontario-focused strategy, which responds to these challenges and outlines where we see our opportunities as a company. Our strategy sets out five clear priorities for Hydro One. First is building a grid for the future. Second, being the safest and most efficient utility.
Third, being a trusted partner. Fourth, being an advocate for our customers, and finally, innovating and growing our business. This strategy reaffirms our commitment to Ontario and the provision of safe, reliable, and affordable power. These priorities are really what matters most to our stakeholders, and we know that because we asked them. We heard they want an unwavering commitment to exceptional customer safety or customer service, to safety, efficiency, and sustainability, and they want us to look out for the future of electricity for them. Through focusing on these things, I believe we will also enhance shareholder value. Allow me to elaborate on these priorities underpinning this strategy. The first, building a grid for the future. David Lebeter, the newest member of our leadership team, will speak more about this a little later, but let me touch on it here.
Building a grid for the future means making necessary investments in our grid today to ensure that we have a strong, resilient grid for the future. We need a grid that can withstand both physical and cyber threats and will incorporate climate change considerations while working to reduce our GHG emissions. We will embrace distributed energy resources to enable customer choice while delivering exceptional value to our customers through best-in-class asset management practices. Next is safety and efficiency. We will transform and improve our safety culture through robust safety analytics and a grassroots engagement of our employees. Let me speak personally for a moment here. While we are a top-performing safety organization with very low total recordable injuries, we have experienced traumatic and tragic events over the past couple of years.
You're going to hear from our Chief Safety Officer, Darlene Bradley. She will elaborate how we will eliminate serious injuries from happening in this company. Something that I've noticed during my years in the industry is when we adopt a steadfast focus on safety, a mindset of ownership takes hold, and an ownership and accountability takes hold in every part of our organization. We become a company that is more careful, more systematic, more driven by proven, repeatable processes, and this makes us a better-managed company. It also makes us a more efficient company. We have a great track record over the last few years of becoming more efficient. In 2019, Hydro One achieved productivity savings of over CAD 202 million and operating cost reductions of CAD 51 million. Expect to see more of this disciplined approach as we aim to become one of the safest and most efficient utilities.
As part of our plan, our field crews will be enabled and empowered to drive efficiency, productivity, and reliability. We will remove barriers to a productive day as our teams can spend more time doing their core jobs and less time doing administrative tasks. This priority speaks to what all our customers and key stakeholders want from us. For customers, efficiency is about affordability. For our employees, efficiency is about removing barriers. For investors, we believe it's about doing what we say we will do. You'll see us dig even deeper as we generate efficiencies in both our OM&A and in our delivery of our capital expenditures. Chris Lopez, our CFO, will be taking you through that later today. Our third priority focuses on our efforts to build and grow relationships with Indigenous Peoples, with governments, with industry partners, and with the communities that we serve.
We will proactively address community concerns and establish strong partnerships with our customers and community leaders through local investment and economic development for the benefit of Ontarians. We're committed to developing and maintaining respectful and positive relationships with Indigenous communities across this province. We own and operate transmission assets across 23 First Nations reserves in this province, and we serve 104 First Nations communities directly with electricity. Last year, we purchased over CAD 41 million worth of goods and services from Indigenous companies, the highest in Hydro One's history. We also completed the Niagara Reinforcement Line with our equity partners, the Six Nations of the Grand River Development Corporation, and the Mississaugas of the Credit First Nation. This 76-km transmission line was brought to completion by A6N, an Indigenous-owned contractor.
Our efforts earned us recognition from the Canadian Council for Aboriginal Business as an Indigenous procurement champion, and from the Canadian Electricity Association for our commitment to continuous improvement of Indigenous procurement. You will have the opportunity to hear from Jason Fitzsimmons, our Chief Corporate Affairs and Customer Care Officer, a little later when he sits down with Ava Hill, former Chief of the Six Nations of the Grand River, who is an amazing leader and visionary for her community. Let me spend a few minutes now talking about the provincial government. I would characterize our relationship as having improved substantially. I've had several meetings with key players in the provincial government. There's a great deal of support and alignment for our new strategy. We have an agreement with the province that clearly outlines the governance framework that we have. Our relationship is much more than that.
We consulted with the government on the modernization of the Ontario Energy Board, advocating for structure and program changes that will reduce red tape while improving overall transparency of the regulatory process. This led to the provincial government tabling Bill 87, which changed the governance structure of the OEB. We've also worked closely with local governments in the pursuit of new transmission lines, resolving local issues, community investment initiatives, and consolidating the fragmented distribution sector. We continue to work closely with the Ontario Energy Board and other regulators in the province, including the Independent Electricity System Operator. We hold regular meetings with various levels of the OEB staff and management and look forward to working with the new chair of the OEB, Richard DiCerni.
Mr. DiCerni chaired the OEB Modernization Review Panel, the recommendations that came out of that panel were supported by us and all in the electricity industry. Under his leadership, we hope for a period of continued constructive rate regulation in Ontario that helps efforts to support Ontario's growth and our customers' interests. The OEB, of course, sets our rates and the rates we charge. The rates allow us to recover costs associated with our distribution and transmission business and to earn a formulaic-based rate of return. We believe this method is a constructive leading process for rate regulation. Our fourth priority is to make it easier to do business with Hydro One. I spoke earlier about how our industry is changing, so too are the needs of our customers.
More of our customers are relying on mobile technology and self-service options, and we are building and enhancing our digital capabilities in response. We will help our customers make informed decisions by providing them with deeper insights, and we will leverage our position as energy experts to meet our customers' evolving energy needs. We are currently scoring very well on customer satisfaction. In 2019, our residential and small business customers with our highest in over a decade at 86%. Transmission and customers scored us even higher at 87%, and First Nations customers and telecom customers scored us at 90%. These are impressive results, but we know we can do even better. That is why we are modernizing our customer contact center and launching a dedicated web portal for our commercial and industrial customers.
We also announced an investment of approximately CAD 150 million to build a state-of-the-art grid control center in Orillia, which will serve as one of our innovative technology hubs and ensure safe, reliable power to electricity delivery to our customers. Growth and innovation. We will continue to provide value to our customer and our shareholders through growing and innovating in this company. We will continue to invest responsibly in our transmission and distribution business. Much of our transmission and distribution system was built in the 1950s and 1960s and is in need of repair, replacement, or upgrades to equipment in almost every community across this province. For some assets, almost a third are at end their expected useful life.
Just last year, we invested CAD 1.7 billion in capital investments in our grid, and over the next five years, we will invest another CAD 10 billion in our transmission and distribution system to ensure a reliable grid for the future. Besides these critical investments, there is considerable fragmentation in Ontario in the energy markets. There are almost 60 LDCs in Ontario, presenting meaningful opportunity for us to be a consolidator, while helping take inefficiencies out of the overall system, which is good for our customers and for the ratepayers of the province. As I mentioned earlier, the main focus of our business will and will always be our primary regulated business. However, there is also innovative, unregulated opportunities right here in Ontario. Pursuing these opportunities diversifies our portfolio, responds to the changing needs of the market, and fosters a culture of entrepreneurship and innovation at Hydro One.
Our Hydro One Telecom subsidiary is one vehicle for these initiatives. It offers 9,000 km of fiber optic cable capacity to organizations with broadband network requirements and provides enhanced suite of cloud services, data backup tools, and secure data storage options to our clients. Chris Lopez will be going into this in more detail around our strategic growth opportunities later this morning. I hope you enjoy today, and I look forward to meeting some of the new faces in the room and catching up with some of you that I've already met, and some great discussions about the future of Hydro One. Let's dive deeper into the strategy and our company and our people. I will ask Darlene Bradley to come up first. I mentioned the importance of safety to our company and to me.
As a first step when I took on this role, I appointed and created the role of the Chief Safety Officer. I'm delighted that Darlene agreed to take on this role. She has more than 30 years experience in the utility business, starting in Hydro One in 1988 and serving in a number of roles across our company, including the Acting Chief Operating Officer and the Vice President of Planning and Growth. She knows our business, and she knows how we can make it safer. Darlene.
Thank you, everyone, for joining us today. Thank you, Mark, for providing context around our focus on safety. As Mark emphasized, safety is one of our core values, and now with the establishment of the Chief Safety Officer, a position which I'm honored to be taking on, it's at the forefront like never before. This office is a testament to our commitment to safety as a top priority, because we recognize we must do everything possible to ensure that every one of our employees goes home safely at the end of a fulfilling day of work. When our employees understand our unwavering commitment to safety, they feel supported to do their best work every day. It's important that we recognize that safety is not only the accountability of the Chief Safety Officer and my team.
It takes coordinated effort across the entire organization to ensure the safe practices and standards that we uphold are applied in the workplace. We work in partnership with our unions when it comes to safety, and our management and union oversight committees meet quarterly to focus on strengthening our safety culture and our safety performance. These partnerships with our unions create the backbone of a strong safety culture that we consistently strive for. As Mark touched on, our goals include transforming and improving our safety culture through robust safety analytics and a grassroots safety engagement. Today, I'll discuss how we're working towards achieving our safety-related goals. I'd like to start by giving you a bit of background on our safety program over the last 10 years. We work in an environment that is unforgiving. We employ staff in occupations that are statistically amongst the most dangerous.
Forestry trades, trucking, electricity line workers are working in unforgiving environments. They're unforgiving professions, but they're essential to our business. We collaborate with our peers in many industry organizations, we benchmark well. As Mark mentioned, we have top-class safety performance. No matter how well we benchmark with the type of work we do, we need to continuously focus on our safety culture and ensuring our employees are working in the safest conditions possible. In 2010, we launched our continuous improvement program called Journey to Zero. For the last decade, this has been a cornerstone of our commitment to safety and an injury-free workplace. Specifically, Journey to Zero has been about reducing the number of recordable injuries that we experience with a target of getting to less than one.
For your context, the recordable injury rate tracks the number of incidents requiring medical attention, things like stitches, twisted ankles, anything that requires a medical attention type of injury, and it captures the number of these incidents per 200,000 hours worked or for every 100 employees. In 2008 and 2009, our recordable injury rate was around five incidents for every 100 employees. In 2015, the year of our IPO, we had reduced that number to 1.71. Fast-forward to 2019, we achieved a recordable injury rate of 0.78. That's a fabulous result. That is definitely an industry-leading result, and it shows the outcomes of the continuous improvement across the company through many aspects of our safety practices, equipment standards, training, and communications. We focused on this year-over-year, you can see the improved results.
However, while Hydro One's recordable injury rates have declined in recent years and are considered industry-leading, we have seen an increase in serious injuries. Serious injuries are the subset of recordable injuries that can be life-changing events or worse. In March of last year, we tragically lost one of our colleagues who sustained a fatal injury during a forestry incident. Three years ago, we lost four of our colleagues in a helicopter incident. This is not acceptable to me. It's not acceptable to any of us. Following these incidents, we made changes to our safety policies and procedures and have a renewed commitment to eliminating serious injuries from our organization. A number of peers are experiencing the same thing. They're making progress in the reduction of recordable injuries, but they aren't seeing the corresponding reduction in serious injuries.
The great thing about the utility industry is that we're all willing to work together and learn from each other, especially when it comes to safety. We're working with many North American industries and utilities, to focus on finding ways to eliminate serious injuries and fatalities from our business. We all agree that the tragic and devastating impact to all those involved when an employee is injured and killed is something we must eliminate. As I mentioned earlier, it's the responsibility of everyone to ensure employees make it home safely after a fulfilling day of work. How do we do that? Earlier this year, we completed our safety plan, a plan to build a stronger safety culture at Hydro One with the goal of eliminating serious injuries by 2024. To achieve that goal, we were focused on three elements. First, demonstrating safety leadership through Hydro One.
The second is continuously improving and strengthening our safety management systems. Finally, focusing on listening, learning, and taking action based on input from our team and from others. With respect to safety leadership, the creation of my role on the executive leadership team was one of the first steps in this plan. It's my responsibility to have a high-performing safety organization and clear safety-related accountabilities throughout the organization. I've already started looking at our operating model and how we can enhance what we do and the impact that we have throughout the company. Communication is incredibly important. The vast territory across Ontario and the fact that the majority of our employees are working in field-type environments makes it really important that we be focused on enhancing information sharing and ensuring important safety messages get through to our teams.
The next element of my safety plan is strengthening our safety management system. Through focusing on connecting with people and making it really clear and forefront in their minds why we work safely, drives an emotional connection to safe work practices. Realizing that our people are fallible, we're all people, we all make mistakes, and helping us to identify situations that expose us to risks and employing tools and habits to minimize the likelihood of an error that results in a safety incident will help promote ownership and accountability for safety, ensuring all workers have a direct impact on the processes and procedures that they use each and every day. In the last five years, we've seen an increase in the incidents among our apprentices.
Being the mother of four boys in their early 20s, just out getting their first jobs, this one really resonates with me, it's something I'm very passionate about. Ensuring that we're looking at how we develop, how we mentor and train our apprentices, ensure we have consistent policies and procedures across the province in the programs that we have, and ensuring we use industry best practices in how we are recruiting and retaining the right talent will be all reviewed as part of this focus on apprentice safety. The final element of our plan is around listening, learning, and taking action. We can learn from listening to the experience of the people we have across the company, the people who know best about working safely. We've launched a new safety improvement team made of a diverse group of employees from across the company.
This team is going to travel to work centers across the province to hear from our employees. We all know that peer-to-peer discussions are the most open and honest, and we need to hear what they have to say. This team will also engage with other organizations, utilities, and other industries to find best-in-class safety programs that can contribute to our goal of zero serious injuries. I'm very eager to hear their recommendations later this year. Lastly, we'll implement industry-leading reporting systems, enabling us to report, learn, and benchmark across the industry and across Hydro One. If we keep a focus on near incidents and safety observations, this will enable us to do some analysis and take prompt and meaningful action. I'd like to wrap up by saying we have demonstrated we can drive continuous improvement and achieve great results.
We are tightening our focus on serious injuries and broadening our reach across the company to meaningfully move thousands of people. A big part of what we have to do is a culture shift. We need to transform our mindset around safety, and we will do this. What is a culture shift? Think about our societal cultural journey with seat belts. When I was growing up, seat belts weren't mandatory, and to this day, when I get in the car with my parents, they may or may not buckle up. I would say on the 400 series highways they do, but around town they may not.
My husband and I always buckle up. My children would never get in the car without buckling up. They would not think twice about telling other people that they need to buckle up for their safety before the car gets put in gear. That's a culture shift. They feel it's incumbent upon them to tell other people about what they need to do for their safety. We can't take generations to do that. We believe this plan will help accelerate by getting to the heart of some of the barriers, the large and small barriers that enable us to have the safest work environment, an environment where we're clear in our expectations and accountability, where we support each other, we listen and learn from daily experiences, and take action to remove barriers. We have a culture where everyone buckles up and looks out for each other.
We're creating an environment where employees feel supported and where we deliver strong bottom-line results for our shareholders. I'm proud to be the Hydro One's first Chief Safety Officer, and even more proud to be working in a company that has shown itself to be uncompromising when it comes to safety. Thank you for your commitment to Hydro One. I'll now turn the floor over to David Lebeter, our new Chief Operating Officer.
Thank you, Darlene, and good morning, everyone. Darlene, thank you for reminding us of the importance of safety in our journey to become the best utility we can become. Beyond being the right thing to do for our employees, safety, the processes, the procedures, and the culture that you create to have great safety performance are also good for the business. It's those same processes, procedures, and cultures that make you efficient, effective, and lead to a productive workforce. It's a real pleasure to be here today in my role as the Chief Operating Officer for Hydro One. In that role as Chief Operating Officer, I have the real pleasure to lead four of our key business units, transmission, distribution, system operations, and Hydro One Remotes. Collectively, these are the business units which maintain, build, and operate our electric system.
Since I haven't met many of you yet, I thought I'd just take a few minutes and give you a brief history of myself. Prior to joining Hydro One, I spent 15 years with BC Hydro. At BC Hydro, I had the roles of senior vice president of safety, vice president, transmission and distribution operations, and director of generation operations. It was at BC Hydro where I first had the pleasure to meet, and then subsequently work with Mark Poweska. Prior to joining the utility industry, I spent over 20 years in the forest industry, working in operational roles both in the field and in manufacturing. This morning, I want to speak about two of the strategic priorities that Mark touched upon earlier, plan, design, and build the grid of the future. Be safe and the most efficient utility.
I hope that by the time I conclude my remarks, you'll see why this is an exciting time for Hydro One and why I'm so excited to be here today. I came to this role with the goal of building on the great progress that's been made by Hydro One since the Hydro One's IPO. Since the IPO, Hydro One has become safer, more efficient, and more productive. As a result of that, our customers are happier. In my role, I get to lead a great team of dedicated and skilled people, some of whom you'll meet later on today as we mingle around the room. These are the people who, along with the executive team, will lead the implementation of our strategy and deliver the returns that you expect. As Mark said, we have a large footprint in the province of Ontario.
We operate approximately 30,000 circuit km of transmission line or 98% of the province's transmission capacity. Approximately 23,000 circuit km of distribution lines, over 300 transmission stations, and we serve 1.4 million residential, commercial, and industrial customers. Also, as Mark said, much of our infrastructure was built in the 1950s and 1960s, which means many of our assets are either at or are approaching the end of their useful life. On top of that, Ontario's economy is growing, which means as we reinvest to connect new customers, we also have to meet new energy needs. It's a great opportunity for Hydro One because not only are we making significant investments in replacing and maintaining our assets and electric system, we are also using these investments to build a grid of the future.
It's a great opportunity for our investors because it means we see a long-term need for Hydro One to continue to invest in our assets. Since the IPO, we have successfully invested almost CAD 7 billion into our electric system. This year, 2020, we plan to invest CAD 1.9 billion, and over the next 10 years, we will invest CAD 10 billion into our electric system. Through to 2024, this means we're going to invest CAD 1.2 billion-CAD 1.4 billion annually into our transmission system and CAD 690 million-CAD 750 million annually into our distribution system. The capital investments in our transmission and distribution system underpin our steady rate base growth and provide our transmission and distribution businesses the opportunity to earn an allowed ROE of approximately 8.52% and 9% respectively through to 2022.
Through these investments, we are building and maintaining an electric grid that will meet the needs of Ontario today, tomorrow, and in the future. I'd like to give you a sampling of some of these investments we're making so you can have a better understanding of what I'm talking about. Field transmission towers have a life expectancy of about 90 years. We use conditions assessments to determine which ones need to be replaced and which ones we can extend their life through an intervention such as coating, more commonly known as painting. Transmission circuit breakers have an expected life of 40 to 55 years. We are renewing our fleet of transmission circuit breakers with modern breakers, which are more reliable, require less maintenance, occupy less real estate, and are easier to install. In our distribution business, we are investing in wooden power poles.
You saw on an earlier slide, we have 1.6 million of them. Wooden power poles have a lifespan of approximately 60 years. Last year, we replaced thousands of them, and in future, we will continue to replace thousands. Distribution stations. Previously, when a distribution station reached the end of its life, we would replace it. Today, through innovation, we're sometimes able to replace small distribution stations with pad-mounted transformers. That reduced the cost of replacing distribution station transformer by 50%. Smart switches, reclosers, and sensors. Over the past year, couple of years, Hydro One has installed over 1,000 of these devices, bringing our total to almost 1,200. In the coming years, we will continue to deploy thousands more as they are a cost-effective way to improve reliability and improve customer service. I just want to take a minute to talk about one of those devices called reclosers.
These are an amazing device because they improve safety, they reduce the number of outages, they reduce the duration of outages, and they make our crews more efficient. What a recloser does, it senses a fault on a line, and when it senses a fault, it opens a circuit, breaking the flow of electrons. After a predetermined time, measured in milliseconds, it recloses. If the fault was transitory, an outage has been avoided, and that time that it is open is so short, you as a customer do not even notice it. Transitory faults will be caused by a bird strike or perhaps lines swinging in a strong wind. If it's a permanent fault, then it remains open. Here's the best part, only the customers downstream of that device are without power.
All the customers upstream of that device have power, and our control center knows that the fault is located downstream of that device, so we can send our crews to the exact location where the problem is. As if that isn't enough, we can control this device from our control room. We can open the circuits and close them if we have a need. More importantly, we can change the trip settings that determine how long that device will stay open and how quickly it trips open. That's really important because that means in the summer, we can make the settings more sensitive, which helps us avoid fires. As a direct result of investments like this in our 2019 grid modernization program, we've eliminated 5.8 million customer minutes of outages. Said another way, 4,000 customer days, or my favorite, 11 customer years of outages avoided.
One investment which contributes to both transmission and distribution reliability improvement is tree management. Over 30% of our outages are caused by trees. Two years ago, we increased the frequency of tree trimming from once every 8 to 10 years to every three years. As a result, last year, our veg crews inspected and maintained over 32,000 km of lines and treated a record number of trees. This simple change in frequency reduced the number of tree-related outages by 19%. On top of that, was well-received by our customers because the final product looks so much more natural. In February, I had the pleasure to visit our Bracebridge forestry crews when they were out working on a circuit. I expected to see a tree that obviously looked like it had been pruned.
What I saw was a tree that looked very natural and was set the appropriate distance back from the lines. That is why our customers like it, and that is why this program is so effective. As a result of all the investments and process changes Hydro One has made, our customer average interruption duration index, that's a mouthful, so we just like to call it CAIDI, a key measure of success in delivering reliable power, improved by 9.7% in 2019. That's not all. We're also investing in technology. Some examples that will bring that to life. Move to Mobile. This program replaced our paper-based system used to create work, plan work, and transmit work to the crews in the field with a digital system. Like all paper-based systems, our paper-based system was slow, inefficient, prone to errors, and limited the amount of data we could capture.
Our digital system is the exact opposite. It's more efficient, less prone to errors, it's quick, and allows us to capture valuable data that will be used to inform future decisions. This business solution alone generated CAD 16 million in savings the first fiscal year. Another example, telematics. This platform provides statistics on our vehicle fleet, statistics about vehicle usage, idling time, and efficiency. This allows us to optimize our fleet. Through this business initiative, we were able to reduce our fleet replacement budget by CAD 29 million. Cybersecurity. According to the Government of Canada, cybersecurity results in over CAD 3 billion of economic loss in Canada every year. The risk to critical infrastructure, such as the electric system like ours, is particularly acute as attacks run the risk of compromising national security and creating public safety. That's why we are investing in cybersecurity and providing defense in-depth.
As an example, we have extended our cybersecurity monitoring deep into our transmission and distribution businesses, providing 24/7 monitoring and alarming. We're also working with government agencies such as the Canadian Centre for Cyber Security and non-government agencies such as the North American Electric Reliability Corporation to share insights, trends, and defense mechanisms. Additionally, we are investing in our employees and training them. My first week at BC Hydro, I received an email, which didn't look quite right to me, but being new to the company, I thought I would click on it and open it, which I did. It immediately identified itself as an internally generated phishing email. I'd been caught. More importantly, what that did is showed me the clues I should have identified to identify it as a phishing email and not opened it.
I'm pleased to say I haven't been caught since, and I know there's been additional phishing emails sent out. I hope this gives you a sense of the investments we are making, why our investments will continue, and how these investments are contributing to safety, reliability, and productivity improvements. Prior to joining Hydro One, Mark shared with me how impressed he was with the team and the pride they take in their work. I haven't been here long, but I can clearly see that. We have a great strategy, as Mark outlined, but a great strategy is only useful if it's implemented well. Great execution requires a diverse, skilled, and empowered workforce. I have full confidence we have the right team in place to deliver that great strategy. One area we're focusing on to strengthen our Hydro One team is diversity. We all know diversity matters.
Diversity leads to a team which is more creative, more responsive, and more sensitive to the needs of our customers because it reflects the communities in which we operate and the customers we serve. We foster diversity at every level. Our board is now 50% men, 50% women, reflecting the best practices on board diversity and surpassing our Catalyst Accord commitment to maintain at least 30% female board representation. We're also encouraging diversity within the trades. A recent success occurred about two weeks ago, where our electricity group hired 11 apprentices. In partnership with the Power Workers' Union, five of those 11 apprentices were female. This is a great outcome and demonstrates the proof of what we can accomplish when we focus on an outcome. At the employee level, we support diversity through our many employee resource groups, two of which I'll mention here today.
Our longest-standing resource group, Women in Trades, Technology and Engineering. This network promotes women, encourages mentorship among women, it promotes women in non-traditional roles, and it recognizes women's accomplishments. A second group I'll highlight is Men Advocating for Real Change, or MARC, which promotes gender equity. As a testament to our success in promoting diversity, we recently received a Workplace Diversity and Inclusion award from Electricity Human Resources Canada. In 2020, for the fifth year in a row, Forbes awarded us one of Canada's best employers. Holding ourselves to high standards is one of the ways we attract and retain top talent. I hope my remarks have helped you to see why I'm so excited to be at Hydro One and why I think it's an exciting time for Hydro One in the coming years.
I am so proud of the team I get to work with and have full confidence we will deliver the results you expect. Thank you. Now I'd like to invite Jason Fitzsimmons, our Chief Corporate Affairs and Customer Care Officer, as well as Ava, former Chief Ava Hill of the Six Nations of the Grand River and one of our large customers, Peter Quiring, CEO of NatureFresh Farms. At Hydro One, we strive to build strong partnerships in our business, because whether it be the Indigenous communities or customers, we will all benefit from working together. Thank you for your attention
Good morning. We're going to switch gears a little bit and switch to a fireside chat, in case the effects of the morning caffeine are starting to wane. I am the Chief of Corporate Affairs and Customer Officer at Hydro One. In this role, I have oversight of the company's customer service, external relations, communications, marketing, sustainability, and importantly, our Indigenous relations function. Today, I'm honored to have two very important partners with us here today who will join me for a fireside chat, both Ava Hill and Peter Quiring. As you've heard in our new corporate strategy, we're focused on things that matter most to us and moving us into the future. More specifically, we're focused on being a trusted partner. This is something that is near and dear to my heart as we focus on community engagement and building positive relationships and strengthening our brand.
In recent years, we've been a lot more focused on partners and partnerships with customers, partnerships with Indigenous communities, industry, and the communities that we serve. That's why this fireside chat and this discussion is so important today. Without further ado, let me do a few introductions. Let me start by welcoming a very prominent leader and former Chief of Six Nations of the Grand River, which is the largest First Nation in Canada by population and the second largest by size. I often continue to refer to Ava as the Chief. She will always be the Chief to me. Ava is a Mohawk Wolf Clan and former elected Chief of the Six Nations of the Grand River. She has been instrumental in her advocacy and her leadership in moving industry and government in forming strong and mutually beneficial partnerships.
Six Nations of the Grand River has been a partner of ours in many ways, but most recently as an equity partner on our transmission project, as Mark mentioned earlier, the Niagara Reinforcement Line. She's active on international files, and attending the UN permanent Forum on Indigenous Issues. Ava has extensive experience working with many First Nations and Aboriginal organizations locally, regionally, and nationally, and if you'd please welcome her to the stage. It's your choice.
Okay.
Wherever you like.
Where's the fire?
I was wondering. Mark, it's kind of a fireside chat. Safety first. Good answer. I'd like to introduce a very strategic customer, Peter Quiring. Peter is the President and CEO of NatureFresh Farms. Peter Quiring is a customer that recently partnered with us to advocate for increased power supply to the Leamington area to support the booming greenhouse sector. Peter is a highly impressive entrepreneur. He is to the agriculture sector what Jonathan Goldsmith was to Dos Equis. He's the most interesting man in agriculture. Based 350 km southwest of Toronto in Leamington, Ontario, NatureFresh Farms has grown to be one of the largest independent greenhouse producers in Canada. Last September, Nature Fresh celebrated their 20-year growing milestone and began the first season at their newly completed 32-acre greenhouse.
Peter's joining us today to share a little bit more about his business, his expertise, and his experience as a Hydro One customer. Without further ado, please welcome me in joining Peter to the stage. Great. Want to sit here, Peter, so I can-
You want me here?
Yeah, if you could, please.
Sure.
See both of you. I'm not ping-ponging back and forth. Welcome. Thanks for joining us. We've talked about partnerships. I wonder if I can start with more of a broad and open question about how has our partnership at Hydro One helped in supporting the goals of your respective communities, and maybe, Ava, I could start with you.
One of the things we've done, as you mentioned, we're a First Nation, traditionally and over the years, we've always depended on the federal government, who has a fiduciary responsibility to provide funding and services to First Nations across the country. Firstly, because we're the First Peoples here. Our land was taken from us, we were never compensated for it. There's the Indian Act that came in, which legislated that they had that authority to provide services to us. I know that when I was a young person, everything, well, healthcare, for example, was provided, such as it was at that time. That was a long time ago. Over the years, what we've experienced is we've experienced cutbacks in the services and the funding that's been provided to each First Nation from the federal government, which has that responsibility.
In fact, our community now gets more money from the province than we do from the federal government. Our population continues to grow. We're getting more people, and more of our younger people want to go to post-secondary education, and we just don't have the financial resources to assist them. We decided that we needed to start generating our own revenue in our community so that we can continue to provide services to our people. One of the things that we did as a council during my time is that, I was a counselor before I was the chief, is we decided that we needed to focus more on business and partnerships.
One of the things we did is we took the business away from the elected council under their purview, then we formed the Six Nations of the Grand River Development Corporation, which has its own boards made of community members. Their main purpose was to go out and secure those businesses and start to generate our own revenue for our community. That's what we've done. It's been in business for about two or three years, and it's starting to generate revenue coming back to our community, and as partnerships like the one we have with Hydro One that has helped us to do that. What's important, it's important the partnerships that we develop are important so that we can start generating revenue to give back to our people.
The other important part about the education is the whole creating of jobs, giving jobs to our people because whenever we get into a partnership, if there's work near our community, they hire our own people. Another important part, I think, and something that I always like to say whenever I speak, particularly to a crowd of people where the majority are non-Indigenous, is that you need to take the time to learn about us as Indigenous people, as the First Peoples in this land, learn about our history, learn about our culture, and learn to understand the things that have happened to our people over the last 150, 500 years and why we continue to have so many struggles. I think when we become partners, that's what happens as well. People find out, and they learn more about who we are as the Indigenous people.
Those are the three main things I think for developing partnerships with any business.
Right. Yeah. Thank you. Peter?
Well, as you know, I'm in the greenhouse business, but I'm also in the constructing greenhouses business. My company has built for sure more than half of the greenhouses in Ontario, which is somewhere, I think I've built more than 2,500 acres over the last 25 years or so. One of the struggles that we have is that we compete with imports from Mexico and other third-world countries, and it's extremely difficult to compete in that environment because when we're in production, they're still in production. The summertime comes along, and we compete with gardens and people going on vacation and so on. In the fall, there's an overlap again. We really needed to be, any retailer will tell you that the most important thing in the world for them is to have product on the shelf.
You can't make money from no product. High prices are a problem, but no product is a much bigger problem. I think if I ask for a show of hands in this room, the amount of people that have ever gone hungry for any length of time is probably zero. Food security may not be top of mind to us, but it probably should be. Just because we have plenty now doesn't mean we can take it for granted. All of these things put together, plus people eating healthier and a lot of dynamics in the marketplace, we need year-round supply.
Yeah.
Lyla Garzouzi was very instrumental, and others at Hydro One, very instrumental in bringing the power line into Leamington. The challenge that we had in the past is that it was very difficult to talk to anybody at Hydro One. It was a bureaucratic arm of the government, basically, and it behaved that way, and that has all changed. One of the best things about dealing with Hydro One today is you really care about your customer, and you care about what the needs of the customer are, how, when, and by what method and what rates electricity is delivered. With the expansion of the lines into Leamington, I now have 45 acres. By the way, I built 45 acres of greenhouses in Ohio, where I could get the electricity was readily available.
Yeah
It was at a very affordable price, fairly reasonable price. I built over there, and some others, my competitors, did as well. I think it got the government's attention, and so maybe that was part of what inspired the line into Leamington. I now have 64 acres in Leamington with lights. I'm also in the cannabbis business at some point here, I guess. We've built, but we're waiting for licensing. It's a bit of a process. There'll be another 32 acres. I'll have over 100 acres of lights by the end of this year, and it's going really well.
Yeah.
The only problem that we have is that it's not expanding quickly enough. It's been a fantastic partnership so far.
Yeah. I think that sort of leads me to another question, and I think you touched on this just a bit. How critical is the electrical infrastructure to the greenhouse sector, and particularly your own business?
Well, I think You're asking me?
Yeah.
I think Mark touched on it earlier that we have 1950s infrastructure out there. I think that might be actually almost an overstatement. I think in some cases, more like 1930s. It definitely needs some upgrade.
Yeah.
I really like the open-mindedness of Hydro One these days. I think there's a place for the microgrid concept, but I think large generators are just a fact of life, and we need large generators as well, so we need large power lines. Like I said, I really like the open-mindedness to see what do we need and how does Hydro One service the customer. I think in the past, it was how did the customer service Hydro One.
Now it's the other way around, which is kind of how it should be.
Yeah. Sure.
I like being the customer.
We love you as a customer. Thank you dearly for that, both of you. We're talking about partnerships, and I don't mean this to sound trite at all, but partnerships are founded upon trust. Maybe we could talk about ways in which Hydro One has established trust. Peter, you touched on our focus with customer service and giving a lot more attention where it was due. I wonder if I could just start with that big question on partnerships and trust and how we've worked to establish that trust with both of you. Maybe, Ava, I could start with you.
One of the things I think is, as I mentioned earlier, getting to know who we are, learning about our history, learning about our culture, and also getting to know us individually, people that we have to work with, and developing that trust and becoming to know each other well. Also to understand the importance that we, as Indigenous people, hold for the land. We call the land as Mother Earth to us, and to ensure that the proper environmental archaeological assessments and everything that needs to be done. To include us every step of the way, right from the get-go into the beginning of any partnership. You mentioned that I go out to the UN, and one of the slogans I picked up there, which I use everywhere, is nothing about us without us. I think Hydro One has done that right from the get-go.
We've sat there. I've had some pretty heated discussions with some of your predecessors, which I'm sure they can tell you about, and with some colorful language included. That just goes to say how we have developed that trust because I've been known as a no-BS chief, telling it like it is. I think that helps to build a relationship, and I felt comfortable in being able to do that. I think the other thing is getting involved in our community, visiting our community, and taking part in events. We've got a large community. We're only an hour away from here. There's large gatherings of Indigenous people all the time, and when you can put up information booths and get to know people and talking and having questions.
The other, whenever we have a project, like when we did the Niagara Reinforcement Line, we had community engagement sessions. Now, mind you, we can't get the community to always come out, but the sessions are there. We had Hydro One officials there that were available and visible to the community members and able to answer questions and explain any risks and also outline the potentials for success. Those, I think, are so important to know that they're easily accessible and there to help us educate our own community members about the project. The other thing is I think developing that trust is a few years ago, Hydro One, I think, the very first time had a summit here in downtown Toronto with Indigenous leaders. Then they had another one, and that was the first that was held.
I found those to be very important and very helpful in helping to build that trust and that relationship. One last thing I know, and I'm shamelessly always aggressive at doing, is seeking sponsorships, as you know, Jason, for various events. We have a huge hockey tournament coming up here in Mississauga starting on March 15th. It's called the Little NHL, Little Native Hockey League. There are 230 minor hockey teams that are coming there for the young people from all over the province. They plan it year by year, and I am very glad to know that Hydro One is a huge sponsor of that. They've also been a huge sponsor of other events, like our firefighters gala. I hit you up for everything.
Yeah.
He was at our firefighters gala, and I went over to his table and said, Can I hit you up to help pay for tickets to the opening game of the Toronto Rock? He said, Yeah, but at the same time, Hydro One had a whole front row at the game. Those things are so important.
I do want one of those firefighter hats.
Those things are important to me.
I as a child.
Yeah. Those types of things are important, and I've always appreciated that, to developing that trust that's so important to have a good partnership.
Yeah. Great. Thank you. Peter?
Well, I'm not exactly sure how to answer that, except that it's relatively simple and painless. We sit down with Hydro One. We explain what our needs are, what our plans are, what our goals are. I think nobody really, or at least not very many people really understood the magnitude of growth that was going to happen.
In the past, it was kind of normal practice that government would build infrastructure and business would come and run businesses, create and run businesses. Today it's a little bit almost the other way around. Government seems to want to tell us how to run our business, but they want us to pay for the infrastructure. That makes it a lot more difficult because we're competing with jurisdictions that don't have those issues. Hydro One is very proactive in finding ways of reducing costs for us. When you're in the food business, it's a pretty frugal bunch of people, and we need to be. Farmers often get blamed for the higher prices of food. In fact, would it surprise you if 50 years ago, the farmer got, in fact, a little bit more back to the farm for tomatoes, for example, than we do today?
We actually produce far more at a lower cost than we did 50 years ago.
Yeah.
Hydro One is a key piece of that. It's not just Hydro One, it's also Enbridge. Used to be Union Gas, I guess, but it's Enbridge. We need to partner with government. We do need government at the table. It takes a little bit too long to get a permit to do something, and I think Hydro One has that pain as well, but it's getting better. The more we work together with utilities, with stakeholders, and with government, the more we can expedite some of these processes that they will always get done. To get them done quickly and efficiently, that's the key, and I think that's exactly where Hydro One's head is at these days.
Yeah, no, I verily believe that the best way to get on with things with government is actually to have industry partnering, aligned, and speaking with a single voice. That's proven to be very successful. Ava, I wonder if I can just come back to you for a moment. When you opened up, you spoke about the needs in the community, and you were speaking about a lot of basic needs like healthcare and education. I sometimes find it astonishing as I see various First Nations communities across the province, how bad things actually are. I think we're at a very good point in Canada in terms of awareness and commitment. I think there's a very long ways to go, but I think corporate Canada is waking up and paying attention to its role with Indigenous communities and Indigenous partners.
I wonder if you can just share with us for a moment. We've talked about sponsorships and the like. The things that are actually going on in the community in terms of the economics on some of the industry partnerships you have, particularly with us, how are those benefits actually being derived or realized in the communities?
What we're doing is we're trying to build our own Indigenous economy. As you know, we're one of the largest First Nations, and we're making much more progress than some of the other Indigenous communities. There are 633 communities across the country and 133 in Ontario. I was impressed when Mark said that you are dealing with 104. There's 133 just in this province alone, and most of them are in the far north, which are remote, who are still having the highest poverty rates, the highest unemployment rates still. I think it's partnerships that you need to reach out to them as well. I know we're just an hour from Toronto, which is easier to do, but we've got to find ways to reach them.
Even also, the other thing we've started doing at Six Nations, we're a little bit more progressive because of our location and our size, and because all our people there are very smart. There's a lot of small businesses too that I think need to be supported. Whenever we get into partnerships, like procurement, to use those small businesses for whatever services they can provide. We try to do that. We did a leakage study in our community a few years back and found out that most of the money was being spent in the surrounding communities. We got to start spending money in our own communities. I think when we get into partnerships, particularly I mentioned the reinforcement line that we did.
In any partnerships we do now, we say that if it's near in our community, we want a certain percentage of money spent back in our community, whether it's in restaurants, stores, or wherever to help build that economy. The other thing is when I was the Chiefs of Ontario, I sat on what was called the Wealth Creation Table, we started having more summits and trying to build economic development and partnerships. We invited businesses like Hydro One. I think when we had it, your former CEO, Mayo, was there. He attended along, they were, again, a big sponsor. It's those kinds of things that we're appreciative that Hydro One does, but everyone else needs to do.
Not too long ago, there was this whole Supreme Court decision about duty to consult and accommodate First Nations whenever you're going to do any kind of development work on our traditional territory. I think with that, we're seeing a lot more of these partnerships developing because we are being included, and we're becoming equity owners as we are in the Niagara Reinforcement Line. I think that's something that everybody should be doing with all of the First Nations so that we can help that. There are also a number of organizations, like you mentioned, the Canadian Council for Aboriginal Business, and I congratulate you on your Indigenous Procurement Award. We have our development corporation, which its sole purpose is to help build that economy and develop those partnerships. They've done tremendous work.
In the third year of operation, or second or third year, were awarded the Development Corporation of the Year award by the Canadian Council for Aboriginal Business. So far, that development corporation has generated over CAD 10 million, which goes directly back to our community to help us. It's not just handed over and given. We have to apply. Even the council had to apply for, the fire department had to apply, they didn't always get what they wanted because there's only so much money to spread around. It's a good start, it's going back into our community, I think that's something that we need to do. The other thing is the jobs. Our people want jobs. The unemployment rate, as I said, even in our community, even though it's large, is still very high. We still have poverty.
Not as bad as they do in the isolated remote communities, that's still there. If we can get jobs and training. There are Indigenous training institutes throughout the province where people can go and get trained in any number of areas. We've got an automated bay at Grand River Employment, a welding bay. They're doing horticultural training. They're always open to do new programming. If Hydro One has specific requirements in different areas, I'm sure that the partnership between them and one of our training institutes to start training people so that they can take those jobs would be something they would look at. More recruitment of Indigenous employees. I know that at the Rama Summit we had, there was the number of Hydro One employees that spoke, and how much they enjoyed their jobs there.
I think we need more, and I want to acknowledge Derek Chum, who is the Aboriginal liaison here at Hydro One. I think he's doing a fantastic job, but we need more Dereks at that level, and we need more Indigenous people at the senior levels in all corporations, not only working, but on corporate boards. I think that's something that corporate Canada should be pushing, and we should be encouraging our own, on my part, encouraging our own people to get to that level so that they can do that.
Yeah. Great. Thank you.
Those are just a few things.
Yeah. Thanks. Yeah. Maybe people don't realize when you're actually talking, from a sustainment perspective, like Six Nations has built its own fire department.
Yeah. We do because, as I mentioned, the federal government has the responsibility to provide services when we, as a First Nations community, don't rely on a tax base like municipalities do because we're not a municipality. We're tax exempt. We have to try and generate money for our own fire and police because for some stupid reason, the federal government doesn't think that fire service is an essential services for First Nations communities. That puts a different tag on how the funding flows, if it's considered an essential service. We do whatever we can, and we were lucky that one of the businesses in our community, Grand River Enterprises, which is a tobacco manufacturing company, gave us money to build a new fire hall.
We started having a firefighter gala to generate money so that our firemen could buy the expertise, the equipment, and do more training. They developed their own training academy as well, and they do training for firemen from across the province. Yeah, you're right. There's many needs, and the needs just continue to rise, and the cost continues to rise.
Yeah.
The funding from the government continues to go down. We've got to make our own.
You've done very well. Peter, something I want to talk to you've given us a sense about how your business is doing and what's going on. In 2009, in the province, there was a lot of industry that left, and that's actually contributed to electricity prices. You've got few cars traveling on the highway, so fewer people paying for the same highway. Can you give us a sense on what the future looks like for agriculture in Ontario? Are we going to continue to see growth at the pace that you've been experienced over the last few years?
Sure. Well, for example, from Leamington, and I don't think it's any different from here. In one day's truck drive, we reach about 175 million people. I think that's 13 hours right now. To be able to reach 175 million people within one day is pretty good. The food will be very fresh. This is where Mexico and other jurisdictions have a hard time competing with us because they have a much, much longer travel. People are very concerned about pesticides, and I think that's very realistic. That's very real. We should be concerned about pesticides and chemicals in our food, especially. It's another big reason why there's a big switch to greenhouse from traditional, let's say, Florida field where they broadcast airplane spray with airplanes and so on. We don't do that. We have zero herbicides.
A lot of people are getting away from meats. I personally enjoy a steak very much. I think today even I am much more balanced. I've kind of adopted that half my plate has to be produce or vegetables of some kind, and maybe the other half can be something else. All of those things. The really big shift toward greenhouse has been the inconsistency of the food supply.
Like I said earlier, the one really big problem for a food service provider, like a Wendy's or a McDonald's or any restaurant or a retail or like Loblaws, is if they just can't get stuff to put on the shelf. It's really hard to make money when there's nothing on the shelf.
Yeah.
The consumer, we've all gotten very accustomed to getting what we want, when we want it, how we want it, in the convenience that we want it. Home delivery is a big part of that. All of those things put together have really elevated the greenhouse produce popularity. Just for example, my company services Walmart USA, and we do about 15, only one-five, 15% of their green pepper business. Now, two years ago, that all came from field. When the hurricanes came through, they had no product again, and so it was a big problem for them. Walmart right now is on a path to source everything that they possibly can from greenhouse. Just that 15% lift in green pepper sales is 15 tractor trailer loads a week.
Wow.
That'd be like 200 and something in their total. That's just green peppers.
Yeah.
There's a tremendous amount of growth possible. The average cucumber consumption in Texas is 1/5 of one cucumber per person per year. In Ontario, it's like 30 or something. It's much, much more. We're much healthier than the longhorn from Texas.
Yeah
There's a tremendous opportunity in Canada, but especially in the U.S. By the way, 75%-80% of my produce goes south. We're a huge exporter of produce. Really, really important to us. We really like the exchange rate that we're seeing today. Interest rates are just incredibly good for investment today. All things are leading us to believe that there's a really long, great future in store for the greenhouse industry for all of those and probably some reasons that I can't think of right now.
Yeah.
Even food security.
Yeah.
We need to make sure we have food at some point in the future if some crazy geopolitical thing happens, like this crazy virus that's going around now. We want to have food available close to us.
Yeah.
These are all reasons why I think the future of the greenhouse industry is really, really bright, literally, in terms of lights, pun intended. The other thing I wanted to mention, we are the best customer to Hydro One or to any generator, including the ratepayer of Ontario. Why? We take power starting September. We take a lot of power, starting September to power lights. We use those lights all around. We can shut down at a moment's notice. We can be off for a couple of hours. It doesn't matter. We don't prefer it, but it really doesn't hurt us too badly. Then by mid-April, lights are off. When the power needs the province the most, which is mostly air conditioning load, we actually use the least. We don't use very much at all. Even then, we have backup generation.
We can shut down all of our power if we need to, go on backup generation for a half hour, two hours, whatever. When the peak is gone, we kick back into the regular grid. We're a pretty good customer. We're not like an auto plant, where if they shut down for one minute, it's CAD hundreds of thousands that's lost. Might be more than that, actually. Excuse me. Overall, the more power that we can consume off-peak, the better off the ratepayer is. I don't think it's a very big secret that we're still paying generators to not generate electricity. I wish somebody would pay me to not grow tomatoes or peppers. I would sign up, especially if they're going to pay me to do it.
Not a bad deal.
Yeah, it's a pretty good deal. Obviously, that's not a good situation for the ratepayers. We're exporting a ton of power still at extremely low or negative prices.
Yeah.
Still to the U.S. and to other jurisdictions. This is not good. Obviously, it's like saying that if I don't drive my car, I'll save money on car insurance. That doesn't really happen like that.
Yeah.
The more power we can consume off-peak without having to add additional load by generators or by the province, the better off everybody actually is.
Great. Question for you. I'm sure a lot of investors in the room want to know as well. Cannabis, is the gold rush over? Is it going to continue at the rates it was expected? The stocks keep yo-yoing around on the cannabis stocks.
Yeah, that's a really dangerous question. You know what? I only know how to be fairly open and blunt, so I'll just tell it like it is. The gold rush was never real.
Yeah.
There was a lot of promises made, or at least indications made of huge profits with little responsibility. I don't think that was ever real. What is happening now, I absolutely expected that to happen. I just expected it in about a year from now. It's just happening more quickly than what some of us first thought. There's going to be some more big corrections in the market.
Yeah.
Many people, their costs are far too high. I think the people that will be successful in this business in the long run, people who know how to deal with large groups of labor. If you've never dealt with a large labor force, and one day you have hundreds of people.
Yeah
I think you have a very big problem. Another thing is that because somebody grew 20 plants in a basement illegally somewhere, doesn't make them a grower. It doesn't make them good at really anything, especially in a completely unregulated market. Also, the infrastructure that's built, I think there was a massive rush to get into the market quickly because a lot of people saw that it was going to be a sharp decline at some point, which is obviously what's happened. The folks that rushed into this and did a bunch of retrofits on, I've seen 60 and 70 year old greenhouses retrofitted. They could have built it new for cheaper and faster. There wasn't a lot of thinking involved. A lot of people got a lot of money really fast and felt like they had to spend it really fast. They did.
There are casualties. There will be more casualties. Hopefully I'm not one of them, but we're pretty confident. We've done this for a long time. We know how to grow plants, we know how to deal with large groups of labor. We're semi-regulated these days already with CFIA and so on. Healthcare is another whole different situation. The other thing that happened is there was a big rush to legalization, then not too many people thought about the depth. For example, we're growing enough weed right now, I think, in the Leamington area alone. I'm not kidding. Maybe it's bigger than I think. At the end of the day, where do you buy it? There's not a legal pot store until you get to London. From Windsor to London, there's not one legal pot store. I think there's only four in London.
How many in Toronto? 10 or 20? That's a joke. You should have 200.
Yeah.
In the GTA. How many LCBOs or beer stores are there? Many.
Yeah.
The way that it's all happened has been a little bit fumbling and stumbling around. The market will always figure itself out. It will weed out.
No pun intended.
Yeah. No, it's no pun intended. I do think the weak will be, no pun intended this time, weeded out, and the strong will survive, and it'll be a good business. I think it's a great business. There's obviously lots and lots of health benefits. I think another thing that should be done is lots of research should be happening, and I don't think it's happening to the extent that it should to really sustain this market in the long run. I think Canada right now is in an excellent position to supply any country that will let us supply them with good quality medicinal cannabis. Again, it happened really fast. There is a market correction going on right now. There will be more correction, and then it will figure itself out, and then it will be a great business.
Yeah.
That's my prediction.
Yeah. Very insightful. Thanks. I just want to say that these are two partnerships that we have with both of you for various reasons that have just been hugely strategically important to Hydro One and inspiring for the culture in Hydro One on working together and really making a difference in people's lives. I just want to say on behalf of the entire executive team and Mark, how much we appreciate you being here today and talking to us about partnerships. I'll leave you with any last thoughts you have on partnerships or any messages for the broader audience here today. You go first.
I just wanted to, I know we talked very briefly and Mark mentioned the Niagara Reinforcement Line and one of the big players in that construction of that was our own company, A6N, which is another partnership we have. It's the partnership between Six Nations and Aecon, hence the name A6N. It employed a lot of our own people and I think that partnership and that project has become a real model for other communities and to say, and I've often said in many meetings with government officials, if you want to get a model or a good champion of what a partnership with a corporate business can be, then look at this project. Six Nations is ready to be that champion, in referencing the Niagara Reinforcement Line, because that's what it has done.
It's not only created jobs in our community, money was spent in our community, as I said, it's built that trust. One of the things I do want to mention, I want to talk about the customer service, before I do that, I just want to say that I'm going to continue to promote economic development, I sit on another committee with the University of Victoria. It's called the National Consortium for Indigenous Economic Development. It's something I'm doing now that I'm retired, doing things that I like, which is encouraging people to get more involved in that.
I just want to acknowledge as well when Hydro One became a publicly owned company, that the Chiefs of Ontario became one of the owners and we established our own board called the Sovereign Wealth Fund, which is going to generate money for all of the First Nations in Ontario once that money starts flowing. I want to acknowledge two of the board members that are here, Ron Jamieson, who sits on the board on behalf of Six Nations, and way back in the corner is Jason Batise. I'm pointing them out so that you can talk to them after when we have a break.
Jason is the representative for Anishinabek Nation, which is a lot of the northern isolated communities up in the northern part of Ontario, and I thank them for both being here and acknowledge the work they're doing. I just want to talk a bit about customer service, because that's really how our relationship, Six Nations' relationship with Hydro One started. When I first became chief, I had people continuously banging on my door about their hydro bills. They couldn't pay their hydro bills. They were enormous. What are you going to do? Do I buy food, or do I pay my hydro bill? That's what it was for some people. People were getting cut off and not paying, so it just became a continuous problem for us and for our people.
I started researching and looking at the bills, and I think when Bob Chiarelli was still the Minister of Energy at the time, and realized that the delivery charge that was being charged to people was based on density. Well, all the First Nations communities are the least dense, so the delivery charge was higher as opposed to downtown Toronto. I remember saying that to Bob Chiarelli, and he had Hydro One there, he had OEB there, he had IESO there. They were all sitting there saying nothing while I was attacking him about this, and he was just staring at me like a deer staring into headlights, like he didn't know what the hell I was talking about. I said, Look at the bill. Figure it out.
Do your own research. I'm pretty persistent in dealing with the government officials and with you guys, too, I guess. I know. That's why I say get things done. I'm glad to see some women here. When I first got here this morning, I only seen men. I said, No offense to the men, but when women are leading things, they get done. We kept working on it. I started working with Hydro One officials on this about the delivery charge. When Glenn Thibeault first became the Minister of Energy, I remember he came into a meeting, and he said that they are directing Ontario Energy Board to come up with an Ontario First Nations rate, hydro rate, which led to community engagement sessions. We worked with OEB, Ontario Energy Board.
Rose Leclair and I became good friends. She's moved on now. Eventually, we talked about what would be the way to help people. Hydro One was so supportive in us doing that work. Mayo was supportive, Ferio, who was there before, and Warren. I know those guys have all moved on, were really supportive in figuring it. Imran, I think, was there, and he was really involved in that. He's here today. They'll all remember that. I'll never forget the day when the Ontario Fair Hydro Plan was announced by the Wynne government, and Glenn Thibeault and I met early in the morning, and he said the delivery charge is gone. We have an Ontario First Nations on-reserve rate. Every First Nations resident in Ontario who lives on a reserve does not have to pay that delivery charge now.
It was huge. That couldn't have been done without the partnership we had with Hydro One, because they helped work with us, they helped with the OEB, they helped with the community engagement sessions throughout the province, and they helped to work with their own infrastructure to make sure that that's done. Thankfully, it's still happening. Yeah. So that's one of the things I just wanted to acknowledge. Over the course of that, as I said, we've become good friends. That friendship's been passed on to yourself and Mark, the guys, and I'm still friends with those other guys, too. Now I'm dealing with Ferio at Air Canada. Those long-lasting friendships.
When you do that, when we as First Nations feel that we're being treated fairly and respectfully and that people understand our struggles and our history and our culture and how proud we are. Yeah, things can happen, and we can become models. I'm just happy to be here and be able to say that to all of you people and encourage those partnerships to continue. Yeah. Thank you for that. Thank you very much for having me. Thank you. Peter, you get the last word.
Okay. I'm pretty good at getting the last word in usually. First of all, I'd like to commend Six Nations for their efforts in investing in becoming self-sufficient. I think that's absolutely wonderful. That's the only sustainable way forward, I think. That's wonderful. Then I'd like to wrap it up by, and maybe for the people in the room that don't know much about how much power we actually use in a greenhouse. For vegetables, we use about a half a MW per acre. Just for reference, my company this year is building 271 acres for various customers around the province. So not all of them are putting in lights, in fairness. If they did, that would be automatically 130 some MW. Actually, probably more like 150 MW. A substantial amount of power that we use every year.
There would be more people hooking up lights right now if the power was available in our area.
If you're wondering why not just build somewhere else, well, there's a bunch of reasons, but the number one reason is Essex County has kind of a microclimate because of the Great Lakes surrounding us. We do have a microclimate. When all of the infrastructure is there, it's just a whole lot easier as well. I think I'd like to first of all commend Hydro One for the open-mindedness and the ability and willingness, frankly, to think outside the box. I hate that term, but it's kind of fitting in this case. Continue to look for innovative solutions. We can't wait eight years to hook up more power. The government is listening. They are listening. They are proactive. They are moving forward. Obviously, they're a big part of this. The other big part is Hydro One.
If there was 2,000 MW in the Leamington area available today. I don't know how long it would be, but it wouldn't be very long, and it would be all spoken for.
Yeah.
I think a lot of people in this room know that when the transmission station was built in Leamington, it wasn't yet turned on, it was fully subscribed. They went to phase two immediately, and before they got that even close to done, it was fully subscribed. It continues on. Unless there's some crazy geopolitical thing that happens somewhere, which is always possible, but we can't live our life in fear, I think the future, again, pun intended, is really bright, and we're going to continue to grow lots of food and export it to all of North America.
Yeah. That's great. Well, I want to thank you both today. Very, very insightful and engaging discussion. Thanks for taking time out of your busy schedules and being with us. I think we have some small tokens of appreciation.
That's why I came.
Yeah. Great. Thank you very much.
Thank you, Jason.
Thanks for joining us. Big round of applause.
Thank you. Thanks.
That's great.
Thank you. We'll be taking a 15-minute break. We'll come back at 10:30 for Chris' remarks.
Let's get started. First of all, welcome back. I hope you all found the discussion with Former Chief Hill and Mr. Quiring as enlightening as I did. Let me add my thanks to you all for joining us here today. While I get the chance to speak with many of you throughout the year, I am pleased you're getting to meet some of my talented colleagues who run important elements of our business and lead a team of about 8,800 people. I was inspired by the discussion with Mr. Quiring and Former Chief Hill. What I got out of that was balance from Mr. Quiring and getting to know each other from Former Chief Hill. I know you can read my bio online. I'm going to tell you a little about me personally. No point for guessing I'm Australian, the accent gives it away.
A little bit about my background and how my values are very well-aligned to the role I have at Hydro One and Hydro One itself. It really comes from how I was brought up from very young, so from my father and my mother. My father is from a small town in northern Spain. The town was built by the Romans, so you have the cobbled roads. He was an engineer who became a serial entrepreneur, moved across the world through France and down to Australia. What he imparted on me was he would like to teach you things, but they were always through fables and always through historical accounts. One anecdote I'd like to share with you was, he would always say this one to me, In the land of zero, one and two came.
One went to the left, became 10, two went to the right and stayed two. What that taught me was to always be creative and innovative and look to optimize the outcomes that you get. The only way you can do that is by being inclusive. That ties into getting to know each other and working as a team. From my mother, and you don't expect this from that side, but this is the way it goes. She was the Australian tapping champion, good at sports. I came from a family of five, and my sister was also the Australian tapping champion. I was the next in line. A CEO was a much better option for me. What I got out of that was, if you went to a school sports day or whatever and you came second, there was no clapping for second.
It was, Okay, so what could you have done better? What did you make a mistake on? How do you improve the next outcome? What she taught me was to be competitive and resilient. Again, those things always tie back into what I do in my role each and every day. With that said, I'll start on my formal remarks. Mark spoke in his presentation about the opportunities that lie ahead for our company. We are embarking on an important new strategy designed to support the many changing components of the electricity market right here in Ontario. David spoke to the condition of our assets and the need to continue to invest in those assets today and going forward to realize a brighter future for all. He also touched on some of the ongoing efficiency initiatives at Hydro One.
Darlene and Jason spoke to the importance and value of an effective safety culture and our relationships with customers and Indigenous peoples. I'd like to go over the results, talk about some key enablers of value for the business and, as promised, update you on the outlook. How are we performing? Following the release of our 2019 results, we are well on the way to delivering the financial and operational results that you, our shareholders, expect. We achieved a total shareholder return of 29% this past year, reflecting strong sector fundamentals and stable growth, as well as the company's ability to capture efficiencies and reduce operating costs. Some key highlights include we invested approximately CAD 1.7 billion in capital to strengthen the grid. We achieved a 49.3% increase in annual productivity savings, with about CAD 202 million saved in 2019 alone.
We reduced annual operating costs by approximately CAD 51 million, and we made substantial contributions to the Ontario economy through our procurement of local goods and services. It is a good year when we can deliver strong returns to our shareholders, invest in our assets, modernize our infrastructure, become more productive and efficient, and foster economic growth in the province. While 2019 was a good year, it's only one point in our journey to becoming more efficient, so we can deliver value to shareholders and stakeholders alike. Since our 2015 initial public offering, we have achieved an annual rate-based growth of over 5%, translating into an adjusted earnings per share compound average annual growth rate of over 7%. Our productivity push has saved almost half a billion dollars, and we see continued opportunities to boost that total through the use of technology and improved work processes.
I will now touch on the primary enablers of our financial performance, which are all guided by our strategy. Our strategy delivers value by serving the people of the province first and foremost. Ontario has a robust economy, which contributes to and has a substantial influence on Canada's economic growth. Our growth strategy is Ontario-focused, so we can capitalize on this exciting opportunity. Economic growth in Ontario will continue to fuel a demand for safe and reliable power as the economy, including traditional industries such as vehicles and transit, continue to be electrified. Our strategy also addresses a factor that had our share price performance lag some of our peers. Our relationship with the provincial government is something that investors are watching closely, and we understand.
I can say that not only is our strategy the right one for Hydro One in this environment, but our focus on Ontario and operational excellence aligns with what all stakeholders want at this time. That is, to provide a better and brighter future by delivering safe, reliable power in the cost-effective ways to help our customers. Together, we are energizing life. To accomplish this, we must continue to invest in our assets. Our predictable capital expenditures program includes plans for investments to maintain the safety, reliability, and integrity of our transmission and distribution system assets. It provides for the ongoing growth and modernization required to meet the expanding and evolving needs of our customers and the electricity market right here in Ontario.
This is achieved through a combination of sustaining capital investments, which are required to support the continued operation of Hydro One's existing assets, and development capital investments, which involve both additions to existing assets and large-scale projects such as new transmission lines and stations. Rate-based growth is a key driver in meeting our financial targets. It is largely based on these important capital investments, which David emphasized earlier to be both prudent and necessary. Consistent with what we disclosed during our recent earnings call, our capital plan now through 2024 will see the investment of CAD 10 billion or approximately CAD 2 billion annually. While Ontario is a robust and growing economy, it is actually the investments that sustain the grid that make up the majority of our future capital expenditures. Investment here is critical. More importantly, predictable.
Over the next few years, our sustaining investments are projected to increase from CAD 1.2 billion-CAD 1.5 billion in 2024. Development investments that address Ontario's growth are projected to be in the range of CAD 400 million-CAD 500 million over the same period. Since the initial public offering, we have shown tremendous discipline with regards to executing the capital plan and placing those assets into service. We have consistently met our targets as submitted to and approved by the Ontario Energy Board. Not only have we deployed the capital according to schedule, we have deployed it more efficiently. This track record of strong and disciplined execution gives us a foundation on which we will continue to build support together with our regulator and other stakeholders for future capital investments.
As mentioned earlier, our productivity gains have saved almost CAD half a billion dollars since 2015, which includes both capital and OM&A savings. An area where we have already made significant progress and will continue to focus on is improved efficiency in our operations. Hydro One realized a 49.3% increase in annual productivity savings with CAD 202 million saved in 2019 as compared to CAD 135 million in the prior year, 2018. David spoke from an operational perspective about our efficiency initiatives. He touched on our savings of CAD 29 million from the ongoing use of technology and telematics in our vehicles. He also outlined our Move to Mobile program, which led to the realization of over CAD 16 million in savings from the introduction of more efficient and effective digital systems.
He spoke to you about the benefits we are realizing through capital planning efficiencies, like the pad mount transformers and distribution, which reduce end-of-life transformer costs by about 50%. Procurement programs are also contributing to our efficiency drives. We are seeing significant capital savings through contract bundling, payment discounts, and strategic sourcing. Spending efficiently on individual projects allows us to reallocate our capital to address the portfolio of aging assets. This will improve the reliability and resiliency of the grid, allowing Hydro One to be an efficient operator. Let me offer some details on some of our other efficiency programs that contributed to our significant savings, our corporate cost reductions, and insourcing of our call center. We had sustained reductions in corporate costs stemming from our corporate costing initiative, which began in 2019. This includes a reduction in vacancies and external consulting spend as we better leveraged in-house expertise.
In 2018, we insourced our customer call center. In 2019, we accelerated the savings from that move. We also improved customer satisfaction. Our primary focus for growth is our capital investment program, as I just outlined. While doing this, we will also pursue regulated growth opportunities, such as participating in competitive processes for new transmission lines. Completing strategic acquisitions of electric local distribution companies, or LDCs, within Ontario. Ontario has a fragmented distribution sector with almost 60 LDCs distributing electricity to more than 5 million residential, business, and industrial customers. There are substantial benefits of Hydro One being the consolidator of choice of LDCs here in Ontario. These range from reducing inefficiencies from duplication of facilities, equipment, and regulatory oversight, to providing smaller LDCs with advanced technology to enhance cybersecurity, a risk which David highlighted earlier today.
The ultimate objective of Hydro One's consolidation efforts is to reduce Ontario's hydro rates over time while improving safety and reliability for all. While we have two acquisitions, that is Orillia Power and Peterborough Distribution, for which regulatory decisions are pending, our track record in consolidation has been substantial. We have successfully integrated over 90 LDCs since the late 1990s, which added to our customer base and gave us the scale and opportunity to generate the efficiencies you see today. We await the OEB's regulatory decision for both acquisitions and hope to welcome them to the Hydro One family so they, too, may realize the benefits that we've outlined. Let me spend a moment discussing unregulated growth opportunities. The unregulated segment is a small part of what we do and will remain that way for the foreseeable future.
However, we can use existing assets to drive incremental earnings for our shareholders. One such existing asset is our Telecom business. At its core, Hydro One Telecom fills the communication needs of our transmission system and plays an important role for our grid. Beyond servicing our operational requirements, an opportunity existed to create a commercially viable business by using the existing network throughout the province. This opportunity was taken up by Hydro One Telecom with the provision of secure broadband connectivity in Ontario that leverages the existing fiber assets all across the province. Hydro One Telecom currently provides a comprehensive suite of services to enterprises and public agencies. However, pure fiber-based connectivity continues to become commoditized as the move towards cloud services intensifies. With this change, we saw a growth opportunity and have begun to pivot the company to offer value-added services and solutions to businesses.
Another opportunity that exists is energy management services, which will allow Hydro One to help commercial and industrial customers manage their energy usage to keep their costs low. These services could also help avoid uncertainty and volatility for the long-term business planning and could address reliability challenges caused by power outages, resulting in unexpected costs and business disruption. We are also exploring new and innovative partnerships that will benefit Ontario and help drive demand in electricity. Mark mentioned the Ivy Charging Network in his remarks. Let me add a few more details about it now. As announced a few weeks ago, the Ivy Charging Network will be Ontario's largest. It's a connected electric vehicle charging network that will make charging on the go easy, reliable, and seamless.
Ivy is a limited partnership with equal ownership between Hydro One and Ontario Power Generation, and it was announced several weeks ago at the Canadian International AutoShow alongside Natural Resources Canada. Ivy is a reflection of our commitment to making decisions that will benefit future generations. In this case, by further enabling a cleaner transportation sector. It's not just future generations that will benefit. Through the broader adoption of electric vehicles, it is anticipated that it could have a downward effect on electricity rates by increasing electricity usage in Ontario and spreading the system's fixed costs across more users. For context, the amount of power required for about three electric vehicles over the course of a year is roughly the same as needed by an entire household in Ontario. By entering this growing market, we will deliver greater value for customers, employees, communities, and shareholders.
These unregulated opportunities are not projected to have a material capital expenditure requirement. Whether it's regulated growth or unregulated growth, important thing to note is that there is no anticipated need to raise external equity to finance the initiatives outlined here today. We are able to rely on funds provided from operations, capital market debt issuances, and bank credit facilities, which are all supported by our healthy balance sheet. Yes, we have a strong balance sheet, and that view is supported by A-category debt ratings from all three credit rating agencies, S&P, Moody's, and DBRS, following positive rating actions by S&P and Moody's shortly after the release of our new strategy. With our debt-to-capitalization ratio of 56.3%, we are broadly in line with the targeted regulated capital structure for financing for both our transmission and distribution segments.
Hydro One currently has CAD 12.6 billion in public long-term debt outstanding under Hydro One Inc.'s medium-term note program, including the recent CAD 1.1 billion issuance. The current medium-term note program prospectus, which expires next month, will be renewed in the first half of 2020. Our long-term debt financing needs are approximately CAD 1 billion- CAD 1.5 billion annually, which we plan to use or to raise using the medium-term note program I just described. Hydro One Inc also has a CAD 2.3 billion commercial paper program, which is supported by a CAD 2.3 billion revolving bank credit facility. Our commercial paper program provides significant flexibility in accessing long-term debt markets for funding at opportune times. Apart from the debt portfolio, we also have on our balance sheet a deferred tax asset that provides a tax shield for earnings currently and for the foreseeable future.
Our strong balance sheet provides us with substantial flexibility, as I just outlined. We have one of the lowest debt costs in the utility sector. We have taken opportunities and placed highly liquid debt issues across the yield curve. Last week, we issued CAD 1.1 billion of debt in five-, 10-, and 30-year tranches. This issue was oversubscribed. The 30-year coupon rate of 2.71% and the 10-year coupon rate of 2.16% are the lowest rates ever achieved in 10- and 30-year borrowings by any corporate issuer in the Canadian debt market. This will make a difference to our ratepayers as they will see the benefit of these lower rates and lower debt costs in the longer term for years to come. This is another example of us continuing to find ways to benefit our customers while demonstrating our strong financial performance.
All of these items described today by me or the team, from a renewed focus on safety to growing our rate base, from delivering efficiencies to improving customer service, from enhancing employee engagement to a commitment to deliver some of the cleanest energy in North America, will help us deliver significant benefits for our stakeholders. For 2019, Sorry, are we good? Sorry, I almost jumped ahead with the punchline. Lucky the brain was working. For the part you've all been waiting for, the so what's the bottom line, the show me the money slide. During our last earnings call, we indicated that we would provide normalized earnings for 2019, which can be used as a waypoint for our guidance.
As most of you know, we are unique in the Canadian utility sector because we provide earnings guidance along with projected rate base guidance and targeted dividend growth estimates. This not only demonstrates our faith that we have in our ability to execute, but also the stability and predictability of earnings in this business. That said, now I can be here. For 2019, our view of normalized basic earnings per share is CAD 1.35 after adjusting for items that we view as non-recurring. The slide shows a number of one-time items that need to be normalized to get to CAD 1.35 from the CAD 1.30 basic earnings per share we reported on our Q4 call.
The adjustments include subtracting the catch-up earnings attributable to 2018 for the distribution segment of CAD 0.11, normalizing earnings to the allowed return on equity for the distribution segment of CAD 0.08, and insurance proceeds of CAD 0.02 for the transmission segment. We add back Avista costs of CAD 0.24 and Lake Superior Link costs of CAD 0.02, as these were related to the terminated transaction as well as the project write-off, which are one-time in nature and not representative of costs we expect to incur going forward. We are also updating our earnings guidance and introducing a range for basic earnings per share for the period for 2022 of CAD 1.52-CAD 1.65. This range translates into a compound annual growth rate of 4%-7% over the period 2019 through 2022 on normalized 2019 basic earnings per share.
While we are issuing this earnings guidance for 2022, the long-term projected rate base growth as well as the long-term targeted dividend growth remain unchanged at an average of 5%. We anticipate funding this growth through internally generated cash flows with no need for external equity issuance. With respect to earnings guidance, we will not provide quarterly or annual reconciliations going forward unless there are material events that impact the 2022 guidance discussed here today. We're also not providing guidance on 2020 as there is a pending rate application for the transmission segment. Due to the upcoming joint application for transmission and distribution for the period 2023 through 2027, we will not provide rolling guidance. Future guidance is expected to mirror the term of the rate filings. In closing, this is an exciting time for Hydro One. We have a strong culture of performance.
This is proven through our historical ability to deliver our predictable capital plan and our ability to realize significant operational efficiencies year-over-year. We have plans to grow our business through investment in our aging assets and in support of the growing economy of Ontario. Lastly, we have a strong balance sheet that provides stability and underpins our growth plans. With that, I'd like to turn things back to Mark for final remarks. Thank you.
Well, thank you everyone, and I hope you enjoyed those presentations this morning. I want to thank Darlene and David and Chris for the informative presentations, and I want to thank Chiefs Ava Hill and Peter Quiring for participating in our panel. I hope you found that valuable and insightful on the way Hydro One is really progressing our business forward with partners like these two. A couple clarifications I want to make from those discussions this morning based on some asks or some conversations I had during the break. Peter talked a lot about the greenhouse industry and the growth in the greenhouse industry, and I think there might have been a bit of an impression that a lot of that growth is driven by cannabis.
Just to put it in perspective, right now, and the growth of the greenhouses, about 3,500 acres are vegetables, about 200 acres of that is cannabis, and the growth is primarily driven by the vegetable economy. That was a question that was asked earlier. I hope you got some good insight into my executive team, at least some of them. There is others in the room as well that I hope you have an opportunity to talk to. I am continually impressed with the depth of leadership we have in Hydro One, and I know it is every CEO's job to say that, but I truly do believe that we do have the best team out there. I learned something new, that we have a tap dancing champion on our executive team, something I did not know before today. Thank you, Chris, and we expect you to demonstrate later.
Not just the people that you saw today and standing up here today, but as you'll see this afternoon in the sessions, which I hope you take the opportunity to meet more of the team this afternoon, you'll see that we have significant depth across the entire organization. I can't wait for you to meet some of these and to learn even more about the things we do from our subject matter experts in the room. Take the opportunity to ask those questions, to dig a little deeper and challenge our people on the things we're doing. I think you'll be pleasantly surprised to find out how innovative and driven that Hydro One is and the people in this company are. This morning, you heard about progress we've made in all aspects of our business, and you heard about our focus on operational excellence and safety.
Throughout the rest of the day, you'll have the opportunity to meet leaders in the areas such as operations, strategic growth, regulatory, government relations, sustainability, and relationship with Indigenous peoples and with our customers. Of course, finance. If I can leave you with a few final thoughts today, they would be these. We are delivering a strategy for our stakeholders and our shareholders that is focused on Ontario. Our Focus strategy sets a clear vision for Hydro One for the future based on our five priorities that we outlined this morning. Plan and design and build the grid for the future, be the safest and most efficient utility, be a trusted partner, which I hope you heard more about this morning, advocate for our customers, again, you heard about from our panel members, and help them make informed decisions and innovate and grow the business.
We will continue to focus on Ontario and on what we do best, transmission and distribution. You will witness the impact that focus has in our efficiency, in our customer service, in our safety, our reliability and sustainability. Our five priorities will strengthen and guide us and drive our strategy as we work to provide the value to our shareholders, many of you in the room. If I could ask our presenters to come back up on the stage for a Q&A session, we'll open up the floor to questions to all of you. Join, please. Do we have runners in the room or small enough room? We got runners. Okay.
You go by first because my name's here.
Thanks.
No problem.
Okay, I'll open it up to the room. Do we have a mic? Right there.
Hello. Thank you. Linda Ezergailis with TD Securities. Maybe this is a question for Chris. We're all wondering in the room with your money slide, can you talk about what might cause your CAGR to range between 4% and 7%? What the assumptions are behind that. I'm assuming there's no huge outliers in there. Can you talk about beyond weather, how that might vary?
Okay. Previously, we provided guidance that said 5% rate base equals 5% earnings, 5% dividend growth. We said the two outsides would stay the same. The variability you might see from year to year and towards that period, you've pointed out one of them. It's really those that might drive your ROE to be above or below the allowed. Below would be a negative weather year, which if it happened in the last year, potentially could have you in the lower end of that limit. 4% may be still a little low, but it could be lower than the five, if it happened in the last year. If it happened in between, that wouldn't matter. What could cause it to be at the upper end is we're in incentive rate making.
You can see on the slide that we've normalized back to the allowed ROE, so that will leave it now to the investors to make their assessment of what our performance will be going forward. You know what it's been for the last two years, so moving forward. That would be on the upside, so that would be productivity or a positive weather event. The other item that would drive our earnings would be growth in the unregulated sector. We've talked about some upside in the telecom business, and potentially in the electric charging or the energy management services. That potentially could add another half a percent or something in that range.
Andrew Kuske, Credit Suisse. Question's just on the runway of productivity capital. How long do you think that runway is to get productivity gains out in the years in the future? Obviously, it's a big transmission base. A lot of it is aged. How long is the runway, and does that give you headroom to maintain returns out into the future?
Maybe I'll start on that, and then I'll ask the team to pick it up from there. You've seen our track record of productivity improvement, and we target to continue to get those levels of incremental productivity improvement each year. We see there's good opportunity across all segments to continue to drive those productivity, whether it be in properties, whether it be in our field locations, whether it be in procurement. We see a good runway to do that, part of which is to offset some possible headwinds on that. I don't know if my team wants to weigh in on any other specifics on that.
Maybe I'll just add a little bit to that. We're a company of almost 8,800 people, and almost half of those people are field-based. Some of the examples I gave earlier today were ideas that the field rose up to management on how we can become more productive and more efficient. As we continue to invest, and we're going to have to continue to invest for a long period of time in our assets, there's ongoing opportunity to do it smarter, better, and more efficiently. We're going to leverage that workforce that we have to bring those ideas forward. I mentioned earlier on my background, I started in the forest industry. That was a highly competitive business. That was a commodity-based business. I naturally bring an instinct on how do we drive costs out of the business without compromising safety, productivity, or customer service.
Many of our employees have that same bent. I think there's a good runway.
Maybe, maybe the follow-up is when you think about that runway and you think about the mechanical formula that exists in Ontario, do you see an evolution out of that? Because we've got the 10-year below 1% now. If you had a reset again into the future, which there will be a reset period into the future, do you see a morphing away from that mechanical formula, or do you have enough headroom with the productivity savings to maintain returns where they are now?
I'll start with responding to the first part. I can't speculate where they're going to go with that, but we do like the formulaic approach to setting ROEs. We think it's transparent. We think that it gives us certainty, and we can understand it going in as well as investors can. We do have the opportunity as we see that to look into our business as how we can offset any reductions in that. We actually, when we get asked by other jurisdictions and other regulators, they ask us about the formulaic approach. We actually see it as a constructive and a positive approach to that. I can't speculate if the OEB's going to go away from that, but we actually like it.
I would echo Mark's point. I think it's fair, it's transparent. When I look at transmission this year at 8.52, that's a little lower. At the end of the day, it's still, I believe, a fair process to go through. You can look at other jurisdictions across North America. You can look to the West here in Canada. Alberta's seeing some lower ROEs, and they don't have the formulaic method. They have specialists come in and argue their points, and it just depends on the day whether they argue a good point or not. I would rather for investors to see a formula where it's transparent. You can see what it means. You can see how we've performed in the past, how we manage that. It's a much better way and transparent to manage that.
If you look down towards the U.S., you see headline numbers well above 10. They're probably dropping now because they're in the same process. You see the allowed ROEs at higher rates, but then their achieved ROEs are lower than that. Again, they're not all created equally, but I do like the system here in Ontario, and I do think we have a fair shot. It's not easy, but a fair shot at continuing the productivity process going forward. I came from the commodity side with Rio Tinto, and one of their philosophies was that the real price of commodities stays flat. That's it. You have to offset inflation or changes every year. You don't know what you're going to do five years from today. I agree with that. We have a very good sort of insight in the next two years and three years.
When you look out further, you know technology's going to change. You know something new's going to happen. It's a matter of keeping your eye out that far and finding those opportunities that you can bring forward in time for the business to take advantage of it.
Andrew, the only thing I would add to that is I don't think we can look at the formula-based ROE in isolation of the overall framework of setting rates and the incentive-based rate-making process we have here. Which we think is a great incentive, which it's supposed to be for us to really drive further to allow us to over-earn to a certain point. You put all that together, we think it's positive.
Thanks. Good morning. It's Maurice Choy from RBC. My question is on LDC consolidation. What's your view of the pace of consolidation moving forward? As a follow-up, in the guidance range for 2022, besides Orillia and Peterborough, are there any LDC acquisitions that you have in that range?
I would say that our primary focus is on our regulated T&D business and reinvesting in those assets for organic rate base growth. That is our primary focus. There is opportunity in the LDC realm. As you know, there's about CAD 9 billion worth of rate base out there. You have to have a willing seller in order to consolidate that. I think that there is interest broadly in consolidation to drive out costs of the system because it is inefficient with that many different LDCs and different players in the business. We'll continue to look for those opportunities to be that consolidator. We're one of the few companies that actually can drive the level of savings that we can, because particularly in the rural areas around Toronto and the GTA, we surround those utilities. We have all the rural customers around those local communities.
We already have assets and trucks and things like that in those areas. We can drive out immediate savings in that. If we can get those back to the ratepayers, I think that's a positive, and we'll continue to push to try and enable that to happen.
To answer the question directly, Maurice, it's not material. The two that are currently in front of the Ontario Energy Board are rate base of CAD 150 billion, somewhere there. CAD 150 million, sorry. It's a very small amount. They are in there. If we end up getting additional LDC, say, in 2021, the first year usually is break-even. It's not having a material impact on the earnings per share guidance that you're seeing there.
I guess just a follow-up. Is the biggest barrier effectively a willing seller? I guess with that, the price, or is it red tape for that matter, or is it regulatory? Is it the MAADs process? Where is the barrier?
Yeah, I would say that obviously you do have to have a willing seller. We'll continue to work with the different LDCs on the opportunity there. I talked about in my speech the OEB reform, and one of the elements of OEB reform is to look at the MAADs application process, which is the process we go through to purchase these LDCs. There's a recognition that that process right now is cumbersome and that it probably doesn't assign proper value back to the ratepayers on these types of transactions. We're hopeful and we're optimistic that that is recognized by the OEB. The fact that they're reviewing that as part of the reform, we believe is a positive.
Hi, Robert Hope, Scotiabank. Two questions. First one, just in terms of your unregulated business, how big is that right now? When you look forward, is the expectation that you can maybe grow that to offset your corporate G&A?
The numbers in front of you is primarily being driven by the regulated business. Whatever assumption you make on what our productivity is, whether it's somewhere between 0 and 100 basis points over them, that would be the offset to G&A. What I will say is that part of our corporate, I did talk about it in my comments, part of our productivity push this year was really looking at our corporate costs, and we took, and you guys can see that in the numbers, there was a significant amount of corporate costs taken out, and we will stay very vigilant there. The corporate costs had increased in the past, and that was really because the company was focused on growing in North America. To do that, you needed a broader corporate footprint. That's now been trimmed back or focused on Ontario.
The cost of doing that is significantly less, and we'll continue to stay with that discipline.
A follow-up, just on a different path. When you look at the variability, just in terms of weather, how much, whether it is in a per share or CAD 1 million of income, what is the band that do you think we could see on a hot year versus a cold year?
I think you can look back to our past results, and you can probably work it out. Something in the order of, in terms of earnings per share, something in the order of CAD 0.05 - CAD 0.07 would be sort of the outer limits. You could get a very tail-end event. If you look back over the last few years, you've seen results in there. You're either up CAD 0.05 or you're down CAD 0.05. That would account for the majority of that if you ended up with a tail-end event where it's a one in 1,000 year event or something that keeps happening these days. You could end up with something outside, but our models don't have that baked into that.
Mark Jarvi from CIBC.
Yep.
Can you hear me?
Yeah.
With a lot of the integrated electric utilities, we hear about this OpEx to CapEx or fueled asset savings. As you guys see opportunities around Move to Mobile or whatnot, where are there further opportunities? Maybe you just have to work with the OEB about getting their heads wrapped around it from moving from items you're expensing now to capitalizing and putting that in a rate base.
I'll start, and I'll hand it over. We will continue to focus on those OpEx reductions. For every CAD we save on OpEx, we can spend CAD 10 more on capital without affecting rates at all. For us, the OpEx is a really important area to really look at where we drive efficiencies out of there. I'm not going to speculate on where the regulator may go with allowing certain current OpEx costs to be capitalized. One of the big areas of debate, and I think broadly right now, are things like moving to cloud, so moving to a service-based IT service, which would become OpEx, whereas now we invest in capital assets in order to do that ourselves. Those are the areas I think that are on the edges that are open for discussion right now. I don't know if anybody wants to add.
I think broadly speaking, we are under US GAAP, and the regulatory framework follows our accounting. There are very few exceptions to that. I don't see that changing. The point that I would bring you back to is our performance on OM&A to date. Since the IPO at the end of 2018, we had reduced costs by 4%, and at the end of 2019, we reduced costs by approximately 8%. We've been very disciplined. That's in nominal terms. If you adjust for inflation, it's way more than that. We stay extremely vigilant on OM&A. As Mark said, that is a focus because that goes straight back to the ratepayer today. If we can reduce CAD 1 in OM&A, we can reinvest in the grid without any impact on the bill.
Then just going to the guidance on EPS. To get to the 7%, how much did the movement and where the debt markets have gone, where you guys issued debt, give you the confidence to put that 7% as the upper bound? Then as you think about time and going back with the distribution rate case beyond 2022, how much of that is renting earnings versus staying above the 5% rate base growth?
I don't think it's driven by our confidence in debt costs staying low. I think what you're pointing to is the Canadian Central Bank reduced interest rates by 50 basis points at the front end. We're investing across the yield curve, even on the long end. We don't see those same reductions. That's not what's driving it. That's our confidence in the actual system and process that we have. There is some natural offset when interest rates drop. We've got a lower ROE in transmission of 8.52, and there is some natural offset in lower interest rates as we refinance. Again, that all goes back to the ratepayer in the future, but that's not driving that earnings growth at all.
Yeah, Patrick Kenny, National Bank. Over and above the CAD 2 billion annual capital program, how much financial capacity do you see the company having for LDC consolidation opportunities without needing to raise equity or compromise the A credit rating?
Yes. I won't give the exact number, but the target that we go for is we want to stay at our regulated, we target the regulated leverage that we're provided. We're currently at 56, so you can make that calculation yourself. There's 4% there. The other guide policy is our FFO to debt, and we have about 100 basis points of movement in that at the moment without triggering any concerns on our debt ratings. Thinking about what's in front of the OEB today, we're talking about CAD 100 million, CAD 150 million of acquisitions. It's quite small. We have substantial dry powder in that sense.
Maybe a quick follow-up. Any opportunities to support rising exports to the U.S. or perhaps incremental imports from Quebec? Any material capital investment opportunities on the horizon?
As you know, the province already imports and exports a lot, and there's capacity on the lines that we have today to continue to do that. It's not our call to do that. It's the IESO who really makes the determination on whether we need additional assets in the province, including interconnections with the others. What I would say is there's enough capacity for the amount of trade that happens today on the system, so there's not a driver right now.
Thanks. Just two questions. One on LDC consolidation. Of the CAD 9 billion in potential rate base, how much is really in contiguous areas that you can get that 50% type of volume? In those kind of markets, do you see competition in the Alectra type models, or is this just a function of working with the seller to get those deals done?
In that CAD 9 billion, and we don't actually include Alectra in that. Toronto Hydro is the biggest one, obviously, and I think it's about CAD 4.5 billion. The remainder, another CAD 4.5 billion, is spread across the remaining quasi 56 or 57 LDCs. There's a lot of them. The range is anywhere from CAD 50 million to CAD 200 million-CAD 300 million rate base assets.
All of those, you can get those types of cost savings that you target to get your returns?
Yes. Some a little more than others. Clearly, the map was up earlier. You could see a yellow dot in the middle of far North Ontario that absolutely we're going to take a lot of cost out of that one. Ones that are closer to the south, there are others. We won't get as much. We won't get a 50% reduction. Still, we would be the consolidator of choice from a cost and efficiency perspective.
The second thing, just big picture, 10 years from now, say 2030, you're in an environment where storage plays a more important role that all the things you talked about with distributed generation, net metering, microgrids, et cetera, come into fruition. Can you just talk about how the grid changes, how the value of transition distribution assets get viewed, and how you even think of the role of lower loads maybe impacting rates and how this whole T&D industry might be impacted? Just curious on your big picture perspectives on it.
Yeah. I think there's two parts. There's the technical part on how things are going to change, and then the kind of market and the economics part on how things might change. On the technical part, we are investing in the grid for the future to both enable and foreshadow that the markets will change, and we will get more call it grid edge types of energy resources with distributed energies. We're building a new control center, which will have the capabilities to have visibility into those and to control and operate if that's a requirement in the future. As far as the economics of things and how it may work for T&D companies, as you know, we're moving towards a fixed connection cost on our distribution business.
Quite frankly, in the future, even if the generation sources move from a centralized kind of source to a grid edge, we will be on fixed connection costs. It's not going to have a big impact on that business. On the transmission side, it may reduce the peaks and things like that, but a lot of that's going on today, and we are in that business, as Chris talked about. We are working with some customers on how we can help them to reduce their costs overall. I don't want to speculate on what it might look like in the future, but I think on both the technological side and looking at what it means to the markets and to the economics, we're looking out for both of those, and we're setting ourselves up for whatever eventuality might happen.
The grid overall is a very strategic asset, especially for Ontario, and the centralized generation they have with nuclear makes it a very low-carbon grid. I'll use the word low-carbon or no carbon. What our job is to do, and you heard Mr. Quiring say it when he was up on stage, is how do we increase the value of that to ratepayers throughout Ontario and to industry? The best way we can do that is to continue to electrify the economy, to bring more and more uses to the electric side versus the carbon-based side. One is, I spoke about it in my comments, is electrifying the transport industry. The other one, as Mr. Quiring said, there's a substantial load out in Leamington that today we export that, either we send it with a check or it's free.
We would rather use that power in Ontario. It gives us the chance to spread those fixed costs over more consumers. The concern about rates gets addressed. That's really what we're focused on. The EV charging network and our interest there is driven by that, is how do we make the grid more valuable to all Ontarians.
We're here.
Okay. Right. Good.
Ron Jamieson with the Sovereign Wealth Fund. I'll direct my question to Mark. Then if he chooses to pass it to someone else, that's fine. The consolidation of the LDCs in Ontario, I think is a great strategy going forward. However, I would call it near-term strategy. I just wonder, Mark, do you not see an opportunity outside of this province to perhaps look at acquisitions elsewhere in a longer-term scenario?
When we released our strategy in November, it really was an Ontario-based strategy. What we recognized at that time, and still do, is that we have great value and opportunity for Hydro One right here in the province. Out into the future, beyond where our five-year strategy is in that, if that picture changes, we will look at that. At least for the next four or five years, we will be focused on Ontario. Again, Chris put up where the kind of growth opportunities are for us, and we think that that's good, sustainable, low-risk growth that our investors are looking for us to focus on. We will continue just to focus on that.
Hi, Mona Nazir, Laurentian Bank. Despite the highly regulated model, a good portion of time this morning was spent talking about softer touch points driven by a focus on betterment for your customers and your employees. I'm just wondering, versus your peers, where do you think you differ in your approach? I was just also wondering, from a personal point of view, if you could address the current culture and how do you think that impacts your business, whether it be turnover, attracting expertise, or productivity? Thank you.
Great questions. Maybe I'll start with the differentiator for Hydro One, and I think you heard it from one of our key customers, Peter, this morning on the experience with Hydro One recently versus in the past. We're really focused on that, and we're improving substantially.
I'll give you a bit of an anecdote, and I'm not going to name the person, but I was at the Electricity Distributors Association Awards Gala earlier this week, or last week, I guess, and one of my peer CEOs at one of the local distribution companies, one of the bigger ones, he came up to me and said, I got a bone to pick with you. I said, Okay, well, what is that? He said, I lost out on my annual performance pay this year because of you. I thought, Well, how did I affect that? Anyway, he said the customer service at Hydro One improved so much that we improved the provincial average, and he's held against his customer service against the provincial average, and because we raised the whole average so much, he lost out on his pay.
That was a good anecdote for me on a relative to our peers in the province, the improvements we're driving, and the recognition that we're getting as a company. I'll turn to the culture piece. What I would say about our culture, and you've, I think, heard it a bit today, and I hope you'll see it more from the rest of the team that you'll see, is this is really a culture of people that are proud of what they do. They're proud of the greater purpose of this company and the energizing life in this province. You see it. We're one of the top employers in the Forbes list again. Our employee engagement scores are really high. We have low turnover in our workforce.
Those are test points for me to represent that we have an engaged culture, and we have an engaged workforce.
May I just add to the comments that Mark made. Yesterday, I held an all managers meeting. There was about 160 of our field managers from across the province that attended. As part of that meeting, we handed out an 11 by 17 printout of our five pillars of our strategy. We asked everyone around the table, under each one of those pillars, identify how you and your teams contribute to that. I spent my time as well as a few others that were there, walking around checking the tables, and I was amazed how everybody was able to fill out that page without any difficulty at all. I'd expected some people to struggle.
The reason I bring that up is because it shows how aligned our employees are with our strategy and with our customers, and how they see that they can contribute to that. That's something I've never seen in any other company I've worked at, a culture that is that focused and has so little difficulty being able to identify under each one of those columns how they personally and their teams have contributed to that.
Thanks.
It's Ben Pham, BMO. Couple of comments on electrification of the grid. You've talked about that most of the morning. Can you maybe point to perhaps some market share numbers that you can share in terms of electricity as a % of energy usage or even just directionally where it's gone the last few years? It seems like energy's been talking about this for a long time, I'm curious as to has it actually moved the dial dramatically. Going forward, if you see penetration rates going up dramatically, isn't that going to be a huge cost burden for consumers that need to bear?
I'm not sure I completely understand the first part of the question, but what I would point to is the recent IESO planning outlook document. Every year, the Independent Electricity System Operator puts out their forecast document. What they do show is an increase overall in demand for electricity in this province over the next 20 years. A moderate increase, but primarily driven by the decarbonization of transport as well as the growth in agriculture and some growth in residential and commercial sectors. I'm not sure if you were asking about fuel offset between gas and electricity, but obviously, with the push to decarbonization, one of the main focus areas is on the transport, but it is also on the other side. We actually have a program in Hydro One, a fuel-switching program, where we're seeing people uptake that.
A lot of this province doesn't have natural gas either. A lot of people fuel their homes with fuel heating oil or with propane, which is more expensive than electricity. We have a program that we will help people switch over into electricity furnaces and things like that. I'm not sure if I got to the core of your question or not.
Yeah, I think to some extent, I guess when I think about a consumer, you can think about a gas utility who can burn gas or electricity.
Yep.
You have trucks that use diesel, and they can convert to electricity, right? The thing about that pie where it's, say, 1/4, and then you guys are basically trying to steal, I guess, market share from those folks over time. I guess I'm just trying to figure out has that mix really changed dramatically over time or not.
Yeah. Okay. Yeah. I think if you look at the IESO forecast, the biggest shift will be in transport, and a small shift in fuel switching from carbon-based to electric in residential type. We're also seeing in some of the energy management services we're providing is to help customers to lower their bills so they're less apt to switch the other way, off electricity onto gas. We're helping to do that through the energy management services that we're starting to provide.
Okay.
Ben, I don't have the exact numbers, but what I will say is, absolutely, if we went back a few years, when I first joined Hydro One, you could see electricity consumption in the province going down. That's no longer happening. It's stopped, and it's going up slowly. What that really means is any conservation efforts are being more than offset by either switching or economic growth. That's what's making the change. Down in the U.S. now, there is a push to now go after your heating appliances in your house, so your cooking. If you build a new house now, they want to make it that you can't use gas appliances anymore. Use electric. I was in a friend's house just recently, fairly modern one, and the heating is all electric. I was surprised, but it's very efficient. They heat water.
They pump the water through forced air through coils. Mine is all gas-heated, but that's the new world, is switching a lot of these appliances to electric. That's what I think you'll start to see. You may not see it in the next couple of years, but the push is starting to come. You're seeing it a lot more in the U.S. at the moment.
Okay. May I ask maybe another stat on 1/3 of your assets and the useful life. That's a very compelling reason to invest in a grid in your CapEx program. When you sit here, say, five years from now, is it a situation where that percentage is coming down? It's more a matter of you have older assets aging that it's about the same or maybe a little bit less than that.
Yeah. Based on our approved distribution rate case and the transmission rate case we have in front of the regulator right now, the level of investments we have in those, just keeps it at the one-third being essentially end-of-life. On the distribution side, it actually degrades a little bit being that even more of those become end-of-life. That is a long-term trajectory on that I don't see that dropping off anytime soon at the level of investments that we talked about today.
We're conscious of the effect on the bill. The reason why that's the case is we said this is absolutely what the system needs to hold it where it is today, slight degradation in distribution. That's because we're sensitive to the impact on the bill. Down in the U.S., they switched from coal to gas, and when they did that, it actually got cheaper because gas prices were so low, and they were able to reinvest and renew their grid. We've not done that here. Here, what we need to occur is either more consumption, so we're helping drive that through Leamington, trying to fuel switch in transit and so on. That will reduce the cost per unit to all ratepayers. When you do that, in theory, there'll be some bill headroom to reinvest and address some of these end-of-life assets that we've not done.
We think that beyond this rate case, you talk about 2023 to 2027, we should start to see some bill headroom that allows us to address some of those. That would mean a higher capital investment in those years out there.
Do you mind if I ask a third question?
Sure.
Everyone get hungry? M&A. I know it's a small set you're looking at now, which is great for the industry, but can you actually affect or transact on a Toronto Hydro transaction? That's been talked about for the last 10 years, 20 years, 30 years. Your M&A strategy, is it more proactive where you're reaching out and trying to consolidate industry or you're more waiting for folks to put up for sale sign?
I think there has been forever a lot of speculation around Toronto Hydro. Chris is leading our growth strategy and our LDC consolidation strategy, and we are looking at where are the optimal ones. The savings we talked about earlier are the smaller ones where we can drive that level of savings. We can drive a level of savings if we consolidated with Toronto Hydro as well. We're looking at all opportunities out there and if we have a willing seller, we would look at that. I would say that Toronto Hydro would require us to issue equity. We couldn't fund that on our balance sheet. Most of the others we could fund on our balance sheet. It is in a different realm. Yeah.
You've laid out a great path of how rate base growth should continue to at least trend at current levels, and you also talked about why you like a formula like ROE. My question is, what kind of forces you yourself to decrease your own rate base? Because is there a level of regulated ROE that you think is not economic or interesting? One of your biggest competitors is unhappy with an ROE that's maybe 200 basis points higher than where you are, I'm just kind of curious, is there a level of regulated ROE where you would purposely slow down rate base growth because it's not economical in the best interest for shareholders?
You want to take that one, Chris?
Sure.
Good thing we're all in the box.
Yeah. I think it's a good ROE. I think it's a fair ROE. Again, I won't speak to competitors, but the biggest one for those that were down at EEI last November, I think it was, Fitch put up a chart on here are all the allowed ROEs in North America. Most of them were the U.S., they're showing you 11, 13s and so on. You get this line at the top, you think, Wow, I wish I had those. You see earned ROE, which is in the basement. It's a good three to 400 basis points lower than that, which ultimately is lower than our earned ROE. It's a difficult one. Again, without going through specifics, I do believe a 9% allowed ROE and then the opportunity to earn 100 basis points over, I think that's a good return.
I think that's a fair return. Would I like to see them higher? It may attract more capital, but I don't think that's a concern that we have today. I think that Ontario is a place where the allowed ROE is achievable. It's a stretch, but it's achievable. If I compare that to the results out of the U.S., I've got to guess that more than 50% don't hit their number based on the Fitch graph that I saw down at EEI. Again, I did do M&A in the U.S. in the past, and really what happens down there is they have a lot of carve-outs. They say that yes, your allowed ROE is X, 13%, but the amount they allow you to put into rate base, and they use regulatory lag and so on, is a lot less.
Remember for us, we know exactly what our capital plan is going forward. We know exactly when it's going into service. We hit our numbers within 1%. There is no regulatory lag. Again, I think I would caution you on saying, what is the ROEs that I'm seeing in XYZ utility versus what you're seeing here? I think it's being borne out if you look at our share price. I think people are starting to recognize that, hang on, I see an ROE. The bottom line is these are the cash flows I'm seeing out of that particular investment. I don't think we'll have a concern attracting capital. If come 2023, we decide that we can tackle the one-third of assets being at end of life, so we can invest more, I'm confident that we'll be able to address that.
Excellent, David. Thank you. A question on the evolving changes in weather patterns and how that's feeding into some sort of quantifiable systemic assessment of what the likely path forward is in your process for planning and also the regulatory process, and also how the PG&E experience with wildfires has really impacted your thinking on that type of risk.
We have seen an increase in severe storms and impacts on our system, and that's part of our strategy, building the grid for the future recognizes that we have to harden our grid. David Lebeter talked about some of the technologies we're using to help harden that grid to recognize that there are more and severe storms, things like reclosers, things like fault locators. They also actually help with the fire risk because we can change the settings on those, that they don't reset when you have a fault, because that's generally when fires start, is when you close back in after a power line falls to the ground. We're investing in the future of that.
We're also improving our responses through the operations group, through our new grid control center we're building more visibility into what's going on out there, which helps us to get ready for and respond to storms and things like that, as opposed to waiting for them to happen and then getting out there. The PG&E scenario is, I think it's one that a lot of people point to. I think it's too early for me to tell on what the root underlying causes are of why they got to where they are. There's all kinds of speculation out there. I don't want to feed that fodder. What I would say is a couple things. One is our jurisdiction is quite a bit different, both from a legal perspective on liability as well as a physical perspective. You look at Ontario, it's Canadian Shield country.
If you go very far, there's a lot of water and a lot of green space here, very different than the hills of California, where you have the Santa Ana winds and the dry landscape and a lot of communities in those. We're going to continue to invest responsibly in our assets, keeping in mind that we need to harden our grid for all the reasons that I think you're raising. You can look at our reliability performance over the last couple of years. Even though the storms are getting worse, our reliability is improving because we're using technology and because we're improving our way to respond.
I'll just say one thing to that. Sorry, took a while to say it, but the peaks that we're seeing in the system, part of it's driven by the underlying demand, part of it's driven by the variability of the weather. The hotter it gets in summer or the colder it gets in winter, the peaks are becoming more pronounced. That's when your grid is worth more, 100%. Your grid's got to be able to take that on. That's when you realize the value of your grid. Over the last few years, that's exactly what we've been seeing, is that the peaks have been increasing. A little bit driven by demand, but more what I think and what we see is driven by weather events.
We have a number of cold snaps in a row, like the polar vortex, increases the value of the grid here in Ontario because it has to cope with a higher level of power consumption, a higher peak for a period of time.
Okay. Well, why don't we wrap the Q&A up there? I want to thank everybody for joining us this morning and for those great questions. I hope you learned something today. I know that I did, and I really look forward to working with all of you going forward. We do have lunch now. I hope you do all take advantage of participating in our round tables this afternoon with more of our team. I'm really proud of the team that you're going to see here today. Please stick around and get to know some of them. Thank you very much.