Ontario's electricity distributors warn of power outages

Ontario's electricity distributors are concerned that a recent ruling by the Ontario Energy Board (OEB) in which it refused to consider Toronto Hydro's electricity rate application could affect all Ontario utilities' ability to make much-needed repairs to the electricity system. Delaying repairs could lead to longer and more frequent power outages for customers across the province.

"There is broad consensus within the industry that regulation in Ontario is outdated, unnecessarily burdensome and costly, and ultimately doesn't guarantee reliable service for our customers," says Jim Keech, Chair of the Electricity Distributors Association and CEO of Kingston Hydro Corporation.

The EDA has been calling on government decision-makers since last August to make changes to the way the electricity industry is regulated. The Association's August 2011 report sets out a series of recommendations that if implemented would lead to better system reliability, lower the cost of regulation and smooth out rate increases for customers.

Current regulatory rules are a significant barrier to utilities receiving approval for multi-year repair and replacement programs. Large pockets of Ontario's electricity distribution system, built in the 1950s and 1960s, have already reached the end of their useful lives.

"Regulatory change must come sooner rather than later," says Charlie Macaluso, EDA President and CEO, noting that electricity distributors aren't the only ones saying so. "Ontario's Auditor General recommended in his 2011 Annual Report that the Board work with distributors to address our concerns about the regulatory process. We're disappointed that this recommendation is not yet resulting in meaningful change."

In its decision, the OEB ruled Toronto Hydro must use another process, called the Incentive Regulation Mechanism (IRM), to apply for approval to carry out only parts of its proposed infrastructure renewal program. The Board justified its decision by noting that other utilities are working within these rules.

"In developing our recommendations for regulatory reform, our members across the province pointed to the IRM again and again as a key obstacle to continuing to deliver electricity safely and reliably to customers," says Macaluso. "The IRM process clearly needs to change, and more importantly, utilities must have access to a more flexible regulatory process, including a right to cost-of-service applications, that takes major infrastructure renewal into account."

The full EDA report, The Case for Reform: How regulatory streamlining could benefit Ontario's electricity consumers is available on the Association's website at www.eda-on.ca.

The Electricity Distributors Association (EDA) is the voice of all 78 of Ontario's local electricity distributors, the publicly and privately owned companies that deliver electricity to more than 4.7 million Ontario homes, businesses and public institutions.