Hydro One Customers Acquired in 2000-2001 have Paid over $492 million more than Necessary
Hydro One uses Acquisitions to Subsidize Existing Customer Base; Creates Rate Distortions
September 13, 2017, Niagara-on-the-Lake – An analysis prepared for the Board of Niagara-on-the-Lake Hydro (NOTL Hydro) has determined that customers of 87 local distribution companies (LDCs) acquired by Hydro One Networks Inc. (Hydro One) have paid over $492 million more than if the LDCs had sold to or merged with other local LDCs. A report on the analysis can be found HERE.
By harmonizing the distribution rates and the line loss rates of these acquired LDCs with Hydro One’s existing services, Hydro One has effectively subsidized their existing customer base. This allowed Hydro One to reduce the rate increases they would otherwise have requested. Despite this subsidy, Hydro One has still had one of the highest rate increases in Ontario with residential rates rising, depending on the rate class, between 39-70% from 2005-2016. The customers of the acquired LDCs saw rate increases that averaged over 260%. Customers of municipally owned LDCs had rate increases closer to the rate of inflation of 20% during this period.
Each step in the process of getting to this point was approved by the Ontario Energy Board and there is no indication Hydro One profited unfairly from these rate increases. However, Hydro One demonstrably structured their actions to achieve this subsidization effect. As a result, you have situations where neighbours or residents of similar municipalities have substantially different hydro rates depending on whether they are served by Hydro One or a municipal LDC.
“It seems nobody is interested in protecting the customer.” said NOTL Hydro Chair Jim Ryan. “The Government, the Ontario Energy Board and Hydro One itself all had opportunities to protect these customers but instead chose to focus on other goals. This was wrong.”
The Ontario Energy Board has recently deferred providing their approval for Hydro One to acquire the LDC in the City of Orillia while it reviews Hydro One’s recent rate application and the rate increases sought for other recent acquisitions. The analysis has estimated that, if the same process is followed in setting rates for customers of these new acquisitions, the average rate increase will be 50% and will generate over $25 million in additional revenue. The Board of NOTL Hydro supports this Ontario Energy Board decision and encourages a full review of Hydro Ones rates and rate increases.
The Board of NOTL Hydro reiterates their call for a truly independent Ontario Energy Board and for breaking up Hydro One between its transmission and distribution business and then into multiple smaller distribution companies to start correcting these rate imbalances.
DOWNLOAD Analysis of Hydro One Acquisitions
ABOUT NIAGARA-ON-THE-LAKE HYDRO
Niagara-on-the-Lake Hydro distributes power to over 9,000 customers in the Town of Niagara-on-the-Lake. We are committed to operating as a sustainable high-performance, customer-driven business and to providing the highest standard in safety, service and reliability. The Town of Niagara-on-the-Lake is the 100% shareholder of the corporation.
- NOTL Hydro Board Critiques:
- Some Hydro One Customers Overcharged $492 million
- NOTL Board Calls for a Truly Independent OEB
- Government of Ontario Should Break-up Hydro One
- Do not Defer the Cost of the Fair Hydro Plan
- Cancel $2 Billion Conservation Programs
- Reduce the Costs for Businesses
- FIT5 Should be Cancelled
- RRRP a Symptom of Bigger Problems