(December 31, 2012) Plugging the budget hole of $700 million for the City of Toronto is apparently not the only hole that Torontonians face.
Toronto Hydro-Electric System Limited also claim a big budget hole and suddenly discovered they have to spend $1.5 billion over the next three years to repair their infrastructure. By infrastructure Toronto Hydro mean “investment in transformers, wire, poles –that has to be done.” according to Blair Perberdy a spokesman for Toronto Hydro.” in an article in the Toronto Sun. Mr. Perberdy went on to say, “This grid is old. Most of it was put in place in the ’50s and ’60s and about half of it is well past its life expectancy”. So one must assume that the high paid professionals working for Toronto Hydro suddenly discovered a fact that should have been obvious; much as a householder knows his furnace will need replacement at some point. How could this have happened? The Society of Energy Professionals, President, Rod Sheppard, also chimed in with his support by saying “We’ve had situations in the past where poor old dogs have stepped in puddles out walking and been electrocuted.” Did it take the electocution of “old dogs” to alert these professionals to the failing infrastructure?
The article refers to an application (EB-2011-0144) that Toronto Hydro submitted to the Ontario Energy Board (OEB) which seeks a $5.52 monthy increase ($66.20 per annum) for 2012, a further $4.20 monthly increase ($50.40 per annum) for 2013 and a $4.71 monthly increase ($56.52 per annum) for 2014. In the first year the 620,000+ Toronto Hydro residential ratepayer will have to cough up $410 million, by 2013, $723 million and by 2014 $1.067 billion. Sounds like a lot of money to cover the costs of those transformers, wires and poles! That $2.4 billion that Toronto Hydro are asking the Toronto ratepayers for is only to cover the “delivery” costs (about 29% of your Toronto Hydro bill) and have absolutely nothing to do with the price of electricity. The increase will also cover “revenue deterioration” due to our success at conserving (formally its referred to as “conservation demand management” [CDM]), advertisements in the media encouraging us to conserve, coupons for CFL light bulbs, smart meters, etc., etc. The respective increases Toronto Hydro-Electric have asked for over the next three years are 18.7% (2012), 12% (2013) and 12% (2014). For the first 3 quarters of 2011 Toronto Hydro-Electric have earned $79 million and paid out $26 million in dividends. The latter would buy a lot of wires and poles!
The conclusion one would draw from this application is that Toronto Hydro has been losing money or simply not making enough to replace that old failing infrastructure but it is worth noting that Toronto Hydro-Electric has been quite profitable. In the six (6) years from 2005 to 2010 they earned an after tax (tax being after “payments in lieu” or PIL) profit of $546 million. Those years were the Mayor David Miller’s years however and spending was a big part of that regime so Toronto Hydro-Electric were paying big dividends to their shareholder, the City of Toronto, During those six years dividends paid by Toronto Hydro-Electric to the City were $317 million or over 60% of their after PIL profits. The Miller regime used those monies to further their social causes which helped to keep the municipal tax increases lower.
Toronto Hydro-Electric isn’t the only local distribution company (LDC) that is seeking increases as Hydro Ottawa also has sought significant rate increases for similar reasons. Hydro Ottawa also has paid out 60% of their after PIL profits to their shareholder, the City of Ottawa whose council endorsed the payment of 60% or more of Hydro Ottawa’s earnings be paid to them; and over the past 6 years dividends paid were $104.8 million.
Maybe it is time that the Ontario Energy Board (OEB) rejected these rate applications and instruct the LDCs to use the profits earned to refurbish their old infrastructure rather then simply pay their earnings out as dividends. That might force municipal politicians to focus a little more attention on their municipal budgets without leaning on electricity ratepayers.