Hydro Ottawa latest distributor to say customers are fine with higher rates

(May 26, 2015) Hydro Ottawa is telling the Ontario Energy Board that its customers support its rate hike proposal.

Hydro Ottawa is the latest electricity distribution company to use self-financed customer surveys in an effort to convince the Ontario Energy Board (OEB) that ratepayers fully support its spending plans and the rate increases needed to support them.

In an application presently before the OEB, Hydro Ottawa said its “customer engagement” studies showed that as many as 70 percent of its clients had given “social permission” to the utility’s capital spending program and a distribution rate increase of nearly $10 a month over the next five years.

The utility said that while many ratepayers admit electricity costs have a “major impact” on their finances, most customers said that they still believe that investing in the distribution system through higher monthly bills is “money well spent.” It added that even though customers don’t like rate increases, they generally support a “proactive approach” to reliability.

Similar to other “customer engagement” programs by Ontario electricity distributors (see our previous story), the information given paints a picture of a distribution system on the verge of collapse. Meanwhile, vital details offering ratepayers a clear picture of what they were being asked to approve were missing.

Hydro Ottawa downplayed its rate hike request to the OEB by presenting the increase to ratepayers in terms of just a few dollars extra a month. What wasn’t made known was that the total distribution increase, in percentage terms, for residential customers over the life of the application would be 22%, or about 4.4% annually – more than double the utility’s forecast for inflation over that time period. Rate hikes for commercial customers will be even higher – 34% over five years, or 6.8% annually, in some cases.

Also not mentioned were the other increases ratepayers would see on their bills, such as the expiry of the Ontario Clean Energy Benefit (that gives consumers a 10% savings on their overall bill) and proposed increases in the cost of purchasing electricity, which would pass directly to ratepayers. All told, most ratepayers will experience 10% or more in annual increases on their hydro bill. However, Hydro Ottawa did not ask ratepayers in their survey how they felt about higher distribution costs in tandem with other bill increases.

Hydro Ottawa also used its customer surveys to highlight its aging infrastructure, which it says is burdened by assets that are “approaching or exceeded their anticipated end-of-life.” The implication is that without a massive capital spending program, customers will suffer the consequences of a distribution system in disrepair and on the verge of collapse.

Yet Hydro Ottawa didn’t tell those surveyed that the number and length of blackouts are now both lower than they were in 2011 – a year marked by severe storms. Customers have, largely, experienced the same level of reliability last year as they have in recent years.

Customers surveyed were also not aware that compensation costs have increased by 15% over the past three years, or about 5% annually – well above inflation, which has been running at 2% or less over that time. Operating expenses continue to outstrip inflation, which will grow by 20% over the next five years, or about 4% annually.

Hydro Ottawa admits that the public, when presented with a counter argument and greater debate, becomes less agreeable to the proposed spending and rate increases:

“It is worth noting that during the consultation period, there was significant local media coverage, including callers on a ‘talk radio’ program that was primarily negative in tone. Results indicate that lower levels of social permission were received after the media coverage began.”

Like other electricity utilities who have submitted their “customer engagement” analytics to the OEB, Hydro Ottawa is using its surveys as a way to push the regulator to approve its desired capital spending programs and rate increases. Again, regulators would be wise to take these surveys with a grain of salt.

Brady Yauch is an economist and Executive Director of the Consumer Policy Institute (CPI), a division of Energy Probe Research Foundation. You can reach Brady by email at: bradyyauch (at) consumerpolicyinstitute.org or by phone at (416) 964-9223 ext 236

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