Freeze leaves utilities in cold

Hydros make case for rate increases
By John Spears, Toronto Star
November 3, 2003

Now that the new Liberal government says it will lift the freeze on the energy portion of your electricity bill, local hydros are lobbying for equal treatment for their rates, also frozen last year.

The rate freeze has left local utilities in "difficult financial straits," Charlie Macaluso, chief executive of the Electricity Distributors Association, said in a release yesterday. The association represents local hydros, which own the wires that deliver power to most homes and businesses in Ontario.

Energy Minister Dwight Duncan has been given 30 days to review the rate freeze on the energy portion of the hydro bill. The distributors association says their rate freeze should be included in the review.

The local hydros had been granted a three-stage rate increase by the Ontario Energy Board, but the final stage was halted by former premier Ernie Eves when he froze power rates a year ago. Eves did more than just freeze the energy portion of the hydro bill at 4.3 cents a kilowatt hour for householders and small businesses. He also cancelled the scheduled rate increase for local hydros. Part of the rate is a fixed monthly charge - in Toronto it's $14.03 - and part is based on usage - in Toronto it's 1.34 cents a kilowatt hour.

A typical Toronto residential customer using 1,000 kilowatt hours of power a month pays about $94 for electricity. Of that, $43 is the soon-to-be-unfrozen energy charge, and $27.43 would go to Toronto Hydro.

The remainder of the bill goes to Hydro One to pay administrative costs and to pay down the debt left by the former Ontario Hydro.

Pierre Leduc, a spokesperson for the distributors association, said local hydros collectively spent about $650 million preparing for the overhaul of the electricity system by the old Conservative government.

With their rates frozen, they've been unable to recover that money, plus an additional $100 million in other unrecognized costs, he said.

Tom Adams, executive director of Energy Probe, said there will be pressure on the province to add further rate increases.

But the local utilities want rate increases for another reason. With the rate freeze, many have been unable to make dividend payments to shareholders, which in most cases are municipal governments.

That, in turn, has frustrated municipal councils that count on revenue from hydro utilities to avoid having to increase property taxes.