Stuart Laidlaw
The Toronto Star
October 20, 1999

Municipal utilities are expected to take the Ontario Energy Board to court over a decision they say cuts them out of the best parts of deregulation in the electricity market.

“We got into this, supposedly, to push competition in the whole market,” said Robert Kanduth, director of the Municipal Electric Association, a lobby group for the utilities.

“This cuts the utilities out of the market.”

In a decision Monday, the board restricts utilities to being basic power distributors selling electricity at cost, and forbids them to compete in other areas of the market such as long-term contracts, bulk rates for industry and water-heater rentals.

Many utilities, including Toronto Hydro, had planned to enter the market when it is opened to competition in another year, offering homeowners a variety of pricing options and extra services, such as power-use audits.

Such services are now expected to be limited to private-sector entrants to the market, Kanduth said.

But before the utilities launch any court challenge, a couple of hurdles must be overcome, he cautioned.

First, a group of utilities from across the province will meet today, some in person and some by conference call, to pour over the decision, he said.

Toronto Hydro and Hydro Mississauga will be among those present.

If the utilities decide they can’t live with the energy board’s decision, they will likely approach the board as a group to ask it to reconsider.

If the board refuses, the utilities will then look at other options, including taking the board to court, Kanduth said.

“They will look to see what’s available to them in terms of making the changes that they are looking for,” he said.

Several industry sources have said they expect the utilities to take the matter to court, since it set the rules under which they will operate for the foreseeable future.

Tom Adams, of Energy Probe, said utilities are usually willing to live with rate-setting decisions they don’t like, hoping to do better the following year, but can be expected to put up a fight on policy matters.

But they may have a tough time even getting to court, he said.

He said the decision, written by the three members of the 10-person board, contains an “unusual” clause saying the three board members will work with the rest of the board to write a final report on how the system will operate.

`They’ve left themselves a lot of wiggle room and the lobbyists will be out in full force’

“Our lawyers think this is a way to keep it out of judicial review,” Adams said, since the board could argue that the decision can’t be challenged until it’s finalized.

“They’ve left themselves a lot of wiggle room and the lobbyists will be out in full force” trying to influence the final report, he said.

But Brian Hewson, manager of energy licencing at the Ontario Energy Board, said the utilties will not be able to lobby the board to change its policy restricting what role they can play in the market.

“That decision is final.”

He said utilities would have an advantage over new entrants to the market because of their size and because they know the power-usage patterns of their customers.

Hewson did not want to comment on the possibility of a judicial review.

One source who did not want to be named said some municipalities are also concerned that the decision could hurt the value of the utilities, since it restricts the businesses in which they can take part. Under deregulation, cities must register their utilities as corporations by next year, and can sell them to the private sector.

Monday’s decision accepted the position of the utilities that homeowners prefer to pay a fixed rate for power.

Originally, the board had favoured requiring utilties to charge a floating price for power, one that rises and falls with demand. It has now decided that homeowners will pay a fixed rate, based on the estimated average wholesale price of electricity for the year.

At the end of the year, bills will be adjusted up or down for the actual wholesale cost in what the board had called a “true-up.”

But Kanduth said many aspects of how the decision will be implemented still need to be worked out, such as how true-ups will be handled for people who move before their bills are adjusted.

Adams said renters, who tend to move more often and have tighter budgets, could be hard hit if they miss out on their own true-ups and get saddled with someone else’s.