Parker Gallant: Local distribution companies – fingers in the dike!

(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.


About parkergallant2

A retired International Banker
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4 Responses to Parker Gallant: Local distribution companies – fingers in the dike!

  1. Pingback: Rural Ontario has been screwed by huge Electrical rate increases…NOW it’s Toronto’s turn! « The Big Green Lie

  2. Great article……….one should continue researching further and find out how involved McGuinty was with David Miller endorsing Toronto Hydro’s involvement in promoting McGuinty’s Green Energy Fiasco that has basically destroyed Rural Ontario’s residents ability to pay for affordable electricity. Maybe Toronto will now question why WE are ALL being governed by “idiots”.

  3. XtraCheez says:

    Yes, it is a good article….but thebigreenlie is completely off the mark. This has NOTHING to do with energy costs, but delivery costs. All the green crap McGuinty has been forcing on us (other than the dumb “smart” meter fiasco) is in the energy cost that Toronto Hydro ratepayers pay like everybody else. What this has to do with is Mike Harris’ (that other incompetent premier) forced corporatization of munis. Now, instead of being non-profit, the utilities like Toronto Hydro fork over dividend payments to their shareholders (who by the way didn’t risk one single penny of their own capital, they basically expropriated it for free courtesy of the misguided so-called free marketeers). According to this article, Toronto Hydro has forked over half a billion. That doesn’t count the bogus above market interest rates they are paying on the debt they owe to the shareholder (that is the City). And they are paying bogus corporate taxes to the provice (called payments-in-lieu or PILS, a tough pill for ratepayers to swallow). This mess is completely due to Harris and his incompetent henchman Jim Wilson, who had the gaul to go around the province and say that privatization was going to make rates drop…until someone finally got him to shut up, and then fire him. I also remember that Energy Probe was singing the same tune at the time. How short memories are, indeed.

    • Xtra Cheez: You are partly right but Toronto Hydro and the others are also hitting up ratepayers for those saved kilowatts due to conservation (“revenue deterioration”), those coupons to replace your light bulbs with CFLs, the hooking up of all those solar panels, on school buildings, city owned properties, and the flat roofs on those abandoned industrial plants where we pay 70/80 cents a kWh to people like Ikea, the Toronto School Board, etc., not to mention that iconic windmill at Exhibition Place which Toronto Hydro partially bought. By the way McGuinty supported the privitization of electricity. Have a look at Hansard Ontario April 8, 2004 here:
      and Howard Hampton’s McGuinty quotes. I totally agree that the PILs are just another tax grab but the grab is on the ratepayers, not the taxpayers, however, electricity rates do affect all of us as the costs are built into whatever product you consume.

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