December 12, 2002

  In early October 2002, Ontario Premier Ernie Eves made comments criticizing the Ontario Energy Board and electricity bills, ordering a review of rates. The review is being conducted by Deloitte Consulting. Concerned that rate issues are best handled through independent regulatory processes and not through politically-driven processes, Energy Probe participated in the review process with some reluctance. Attached are speaking notes for Energy Probe’s presentation to Deloitte Consulting.

Energy Probe Presentation

Electricity Billing Review

To: Salvatore Badali, George O’Neill, Deloitte Consulting

Presenter: Tom Adams, Energy Probe

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Overarching principles of rate making:

• "User pays" and cost based;
• Independently adjudicated ratemaking;
• Unbundling enhances transparency and accountability;
• LDCs should be as purely "flow through" as possible;
• Respecting the wisdom built up over 100 years of utility rate-making.

Energy Probe’s recommended enhancements to electricity bills:

• Common format (while leaving opportunities for LDCs to add additional information, promotional messages, or explanation);
• Common use of terms (i.e., a common name for items like the Wholesale Market Services Charge to ease customer education);
• Common cost-based ratio for customer charges (so that, while customer charges might vary depending on differences in LDC cost, customers would have common and consistent explanations for the charges across the province);
• Increase customer charges or fixed monthly connection fees while making corresponding cuts to volumetric delivery charges (makes rates more closely match cost, lowers utility risk and therefore the utility’s cost of capital);
• Customer should have an option to select "minimal billing information" (perhaps only usage and the bundled charge);
• Increase capacity charges for capacity related costs, whether coincident or non-coincident, while making corresponding cuts to volumetric delivery charges (enhances the opportunities for customers to benefit from interval metering, makes rates more closely match cost, lowers utility risk and therefore the cost of capital).

Retrograde steps to avoid:

• Eliminate customer charges (would increase rates and increase cross-subsidies among consumers within customer classes);
• Eliminate unbundling of bill determinants (would reduce transparency and accountability);
• Enforce vanilla bills (would reduce efficiency by eliminating opportunities for low-cost communication from LDCs to consumers).

NEWS RELEASE

2 December, 2002

EVES GOVERNMENT LAUNCHES INDEPENDENT REVIEW OF HYDRO CHARGES

Queen’s Park — The Ernie Eves government is launching a review of all the items on the electricity bills of families, small businesses and farmers across Ontario. As part of the government’s Action Plan to Lower Your Hydro Bill, Energy Minister John Baird today appointed Sal Badali, FCA, to carry out the review and make recommendations.

"It’s important to review how these charges on electricity bills are calculated and ensure they are fair and reasonable," said Baird. "Families, small business owners and farmers need to know what they are paying is appropriate and clear, and I believe Mr. Badali will help us in this effort."

Badali is a business advisor with Deloitte Consulting in Toronto. He is an experienced business advisor with a strong financial background, holding an MBA from York University and a CA from the Ontario Institute of Chartered Accountants.

Badali will review the way the charges are calculated and determine if the items are fair and clear, including the charges imposed by the Independent Electricity Market Operator and the fixed monthly customer charge imposed by local distribution companies. He will also be making recommendations on a standard, province-wide electricity bill that consumers can easily understand.

Badali will make a progress report to Minister Baird within 30 days.

"People have told me how difficult it is to figure out the different charges on their hydro bills and I, for one, agree, said Baird. "Bills vary from local utility to local utility and we must take immediate action to determine common terms that are presented in a simple straightforward manner."

For consumer information call:
1-888-668-4636

Media Contacts:

Dan Miles
Minister’s Office
(416) 327-3373
(416) 330-1731 (pager)