(January 27, 2016) Toronto Hydro will hike distribution rates by more than 20% in the coming year.
Toronto Hydro customers are set to be zapped with double-digit increases on their hydro bills.
In the midst of the holiday season, the Ontario Energy Board (OEB) approved rate increases for the province’s second largest electricity distributor that will see the distribution portion – which covers Toronto Hydro’s costs – increase by 21% for residential customers. The increase will kick in on March of this year.
The average annual increase in rates needed over the next four years to cover Toronto Hydro’s high costs will be 8.7% for the average household.
As was described in its recent rate application, Toronto Hydro’s soaring costs are a direct result of it being inefficient compared to its peers. Its cost per customer are 50% higher than the average for electricity distributors in Ontario and it currently sits third on the list of all distributors – beat only by the inefficient Hydro One and another tiny distributor in the north of the province. The utility in neighbouring Mississauga has costs that are nearly 30% lower per customer than Toronto Hydro.
In recent years, Toronto Hydro’s costs have grown faster than those of other utilities in Ontario. The cost per customer for utilities across the province increased by 1.7% between 2013 and 2014, while it jumped by more than twice that rate – 4.7% – for Toronto Hydro.
Its costs are also growing at a faster rate than comparable utilities in the United States. One expert warned in its rate application that Toronto Hydro’s costs could be as much as 72% higher than comparable U.S. utilities by 2019.
Rather than address those issues, the company asked the OEB to let it raise rates so it could spend nearly $500 million annually on its capital program. The OEB, in its decision, directed the public monopoly to cut its planned capital spending by 10% annually. Between 2006 and 2011, the company spent, on average, $300 million annual on its capital program, but since 2011, it has convinced the OEB to let it spend about $440 million per year.
Those spending plans come at a cost to ratepayers.
Brady Yauch is an economist and Executive Director of the Consumer Policy Institute (CPI). You can reach Brady by email at: bradyyauch (at) consumerpolicyinstitute.org or by phone at (416) 964-9223 ext 236.