John Spears
Toronto Star
February 8, 2002

Greater Toronto residents can expect to pay an extra $6 to $7 a month for electricity starting March 1, according to rate applications filed yesterday by local hydro utilities.

The higher rates are the result of the Ontario government’s restructuring of the electricity market.

And more turbulence in hydro pricing is on the way, as the province plans to open a competitive electricity market May 1, which could make prices extremely volatile.

The price increases signalled by yesterday’s rate applications go into effect March 1, if they’re approved by the Ontario Energy Board. They’re independent of any further price swings produced by the competitive market set to open May 1.

The higher rates result from the province’s decision to stop treating local utilities as non-profit utilities owned by their ratepayers, and instead treat them as profit-making corporations, owned by the local municipalities.

The new municipal owners – who are free to sell the utilities or take on private partners – are also boosting rates so they can earn a return on their utilities.

The utilities must also pay the equivalent of corporate income taxes, from which they were previously exempt. Money from the new tax will be used to pay off the debt of the former Ontario Hydro.

Raising money to pay those new taxes is the principal factor driving the impending round of rate hikes, accounting for about 60 per cent of the increase.

Toronto Hydro has asked the energy board for permission to increase the rate for a typical residential customer by $6.63 a month, a hike of 7.2 per cent.

If approved, the new charges will boost the monthly bill for a typical residential customer using 1,000 kilowatt hours of electricity a month to $99.57, from $92.94.

The province slammed local utilities two years ago when many asked for large increases and leaned on the energy board to restrain the utilities’ rate hikes over a three-year period.

For Toronto Hydro, the new tax regime accounts for 59 per cent of the new rate. Other utilities reported a similar situation.

The new rates may start to change May 1 for customers who have not signed fixed price contracts, as a portion of the power bill will be set by an ongoing power auction among buyers and sellers.

Other utilities in the GTA lined up with Toronto Hydro for rate increases yesterday, the filing deadline for increases effective March 1.

Enersource Hydro Mississauga will charge a typical residential customer an extra $5.85 a month if its new rates are approved. That’s an increase of 7.3 per cent.

The 1,000 kilowatts used by a typical resident, which used to cost $87.60 a month, will cost $93.45 if the rate is approved.

Veridian Corp., which covers most municipalities between Pickering and Belleville, has applied for increases averaging 5.77 per cent for all rate classes.

But a typical residential customer in most of the utility’s service area will pay an extra 7 per cent, or $6.45 a month if approved by the energy board.

In Ajax, Pickering, Clarington and Uxbridge, the cost of 1,000 kilowatt hours of electricity will rise to $98.14 from $91.69. That covers 70 per cent of Veridian customers.

Veridian’s rates vary in other parts of its service area, as it works toward harmonizing prices across municipalities that formerly had their own hydro utilities.

Mike Richmond, a spokesperson for Ontario Energy Minister Jim Wilson, noted that much of the money for the rate increases will be devoted to paying down the debt left by the former Ontario Hydro. He said the province is trying to pay off the debt at an accelerated pace, in part with the new tax on local utilities.

The provincial auditor has told the province to retire the $21 billion “stranded debt” by 2017, Richmond said, but the province hopes to clear it from the books by 2012.