Hydro One powers up a $1 billion outsourcing deal

The largest known outsourcing agreement in North America’s energy industry should lead to better career opportunities for close to 1,000 employees, according to one expert.

Toronto-based Hydro One Networks Inc. Wednesday announced an agreement with Toronto-based Cap Gemini Ernst and Young Canada Inc. to create Inergi LP, a new division of the latter company that will manage and operate Hydro One’s business and technology services over the next 10 years.

Hydro One Networks, a subsidiary of Hydro One Inc., provides electricity transmission, distribution, telecommunications and energy services to 1.2 million customers in Ontario.

The agreement, worth an estimated $1 billion, will see more than 900 staff move from Hydro One to the newly formed Inergi at the beginning of March. Those employees will continue to provide an array of technology services, along with human resources, payroll, supply chain, customer service and accounting to Hydro One.

“What we are doing is transferring these people and their capabilities to another company and they will in turn, act as service providers to us,” Terry Young, spokesperson for Hydro One, said Wednesday. “It allows us to concentrate on our core business, the wires business.”

Meanwhile, he added, it gives the transferred employees the chance to concentrate on their core business, providing various service and technology support. “It gives them growth opportunities and allows us to stick to our core business and look to external service providers to provide the non-core business,” he said.

Steve Power, vice-president of energy and utilities at Cap Gemini Ernst and Young Canada, echoed Young’s sentiments and added that this change will give the employees a chance to expand in their respective fields of expertise.

“For the 900 or so employees joining Inergi, they have the opportunity to become the core,” he said. “Inergi will focus on the providing of IT and services. The idea of providing services is not new to these folks, because they have been doing that at Hydro One.”

Despite being one of the largest deals of its kind in North America, Jason Bremner, senior analyst, outsourcing services at IDC Canada, said he doesn’t think the processes will change dramatically as a result.

“The way Cap Gemini Ernst and Young have traditionally made these ventures with Ontario Power Generation and Hydro One are designed not to change things, but to do some process improvement,” he said, explaining that Cap Gemini Ernst and Young had also signed an earlier contract of about the same size with Ontario Power Generation.

“I think the outcome in terms of services and focus of the employees will become private-sector employees if it follows the model of Ontario Power Generation,” Bremner said. “Ultimately, yes, this is good for the employees. Public sector going to private sector relationships ultimately, in my mind, is good for the individual employee.”

Power said that until the agreement takes effect on March 1, the affected employees are involved in transition tasks.

“In the first month of the transition, we will continue to provide the services to Hydro One as we work through the plan to change the business processes to enhance the efficiencies that Hydro One expects,” he said.

Toronto-based Hydro One Networks Inc., a subsidiary of Hydro One Inc., is at http://www.HydroOne.com

Toronto-based Cap Gemini Ernst and Young is at http://www.cgey.com