Monica Wolfson
Windsor Star
August 23, 2005

Enwin Powerlines paid $5.2 million too much for a new computerized billing system that it bought for the deregulated electricity market, an accounting audit shows.

Auditors also said Enwin mismanaged the computer project with poor planning and a lack of oversight over private contractors hired to design and program the system. Managers bungled the project by not making sure the system was delivered as ordered and on time, documents said.

The allegations are made in a KPMG audit used as part of Enwin’s application to provincial regulators asking to recoup $101 per customer or $13.3 million in expenses incurred when the city-owned utility prepared to deregulate.

The Aug. 12 petition is the second application Enwin has submitted. Last summer, Enwin asked regulators for $18 million, but withdrew the filing when new management took over the utility and discovered the application was inaccurate, said Mayor Eddie Francis.

"We are not going to recover this money," said Francis, who sits on the Windsor Utilities Commission, which oversees Enwin. "There is no reason the ratepayer should pay for something they had nothing to do with."

The rate filing asks for an average rate increase of $7.39 per month, if the customer uses 1,000 kwh of electricity. If approved, the rate hike, which includes an increase in distribution costs, will take effect May 1.

Employees who managed the computer project are no longer working for Enwin, said Enwin’s acting president and CEO Maxwell Zalev.

"We believe we are getting the confidence of our board and the confidence of our ratepayers," he said.

The sophisticated computer systems, which could bill customers the actual price of electricity as it fluctuated, are now useless because the price of electricity is capped, said Keith Stewart, smog and climate change campaigner with the Toronto Environmental Alliance.

In its annual report Enwin wrote off $6 million last year in anticipation of not being able to recover the entire $11 million spent on the computer system. Consumer groups said the loss should result in the City of Windsor receiving less revenue from the utility. But Francis said the city has been guaranteed it will receive its $1-million yearly dividend.

Enwin officials could not say exactly where the money came from to pay for the project. Francis speculated Enwin might have put other projects on hold while it set aside money to pay for the computer system.

Enwin’s request for $101 per customer is still double what most utilities requested, said Tom Adams, head of Energy Probe, an environmental advocacy group.

"Even the pared down claim is still very high," Adams said. "Enwin still faces a difficult challenge in proving even the pared down claim is reasonable."

Last year Toronto Hydro sought a rate increase of $48.71 per customer, while Ottawa tried to get $21.85 and London requested $66.74.

Buried in the rate application under extraordinary events, Enwin is seeking to recover $1.1 million in costs associated with a January 2002 ice storm. While she was unable to say how the ice storm was related to electricity deregulation, Victoria Zuber, Enwin’s finance director, said it meets the "criteria." Adams said he doubts Enwin will be able to recover the ice storm costs.

Enwin is not the only utility backing away from trying to get reimbursed for all its expenses, Zalev said.

"It’s not an unusual circumstance compared to other utilities," he said.

Toronto Hydro requested $32 million despite spending $44 million to get ready for deregulation. Hydro One sought $59 million even though it incurred $105 million in expenses.

Electric utilities were duped into buying fancy computer systems because in the chaos of deregulation, electricity officials didn’t know what they wanted or needed in the new market, Stewart said.

"There probably was mismanagement in a lot of places, but they were also changing their business models," Stewart said. "They didn’t entirely understand what they were doing."

Adams said that is a poor excuse for a utility that didn’t pay attention to how it spent the public’s dollar.

"Other utilities were able to do it for a reasonable cost," Adams said. "So I don’t accept that these were high costs utilities couldn’t avoid."