Martin Mittelstaedt
Globe & Mail
December 26, 2000

"Bills higher in Toronto and Mississauga, but it’s hard to see benefit for consumers."

Consumers in two of Ontario’s biggest cities are starting to get a look at what electricity deregulation means for their power bills.

But it isn’t easy to see the full picture.

On the surface, it does not look so bad. Residential electricity rates in Toronto went up about 3 per cent as of Dec. 1, while those in Mississauga were up 2.6 per cent, effective Dec. 15. Similar hikes are pending over the next two years.

But hidden from view are the effects of two little-noticed rulings from the provincial energy board that effectively grant an enormous windfall to Toronto Hydro and Enersource Hydro Mississauga.

Under provincially imposed deregulation, these former non-profit agencies are supposed to behave like private companies and earn a profit. As a result, they now can raise their prices for distribution, only one segment of a consumer bill that also includes charges for the amount of electricity used and transmission costs.

The two municipally owned utilities will pocket the entire increase paid by consumers from this month’s raised rates. For Mississauga Hydro, that’s an extra $8.3-million. The impact of the extra money will be eye-popping for the utilities because their fees account for only a fraction of the amount on electricity bills, typically between 10 per cent and 20 per cent.

Energy Probe, a non-profit public-interest group, estimates Mississauga Hydro will be increasing what it takes from residential customers by 88 per cent when the higher rates are fully in place in three years and Toronto Hydro by about 50 per cent.

Since the big increases affect only part of the final electricity bill, the overall increase seen by consumers on their final bills might work out to about 10 per cent over the next three years.

The price trend is significant because the provincial government, in its push for deregulation, presented it as an opportunity for increased market competition — and lower prices.

Instead, it appears that deregulation is leading to increases in costs.

Mississauga Hydro spokesman Ken MacDonald confirmed the utility will receive a sizable increase.

"I don’t have the actual number. It could be up there, there’s no question," he said. "More than 50 [per cent,] probably, 88 [per cent] sounds a little high. But it’s going to be a sizable number."

He said the increases are required to allow the company to operate like a private business. Until now, local utilities ran as non-profit co-operatives, charging customers only enough to cover their own costs and to have a small cash cushion available for emergencies. The government order for them to operate like private-sector businesses means they have to raise the price of their services.

Dozens of other local distribution utilities supplying customers elsewhere in the province have also applied for large rate increases, and these are pending.

Tom Adams, head of Energy Probe, says the price rises are "completely unacceptable, [they represent] outrageous contempt for the public interest."

For the public, figuring out the price implications of deregulation is a challenge. Consumers can’t tell from their bills that these power distributors, most of which are owned by their local governments, will be raking in enormously more money under the government’s plan. That’s because the items that make up consumer electricity bills have been bundled together as one sum on monthly statements. Customers are not aware of the amounts paid for the electricity used or for the delivery of the power to their homes or businesses.

The province has ordered utilities to list all the electricity, transmission and distribution costs, but until the switchover to the new format is in place, there is no way for consumers to know which component of their bill is increasing.

Currently, the average Ontario residential customer pays about $15 a month to the local distribution utility for its services, essentially the wires on local streets and power meters on homes. Consumers pay about $70 to the companies that produce the power and move it on high-voltage transmission lines to local communities.

When the new billing format is in place, electricity bills will resemble natural-gas statements. Consumers pay a pipeline company for delivering the fuel and pay a separate charge for the quantity of gas used.

The price rise at local electric utilities could be a harbinger of other increases to power bills as the province adopts competition.

One source of upward pressure on rates is the need for companies to earn profits and make tax payments for the first time. Almost the entire Ontario electricity sector had been government-owned and operating on a non-profit basis.