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OEB approves Toronto Hydro OM&A and capital investments

January 29, 2016

The Ontario Energy Board issued its decision on Toronto Hydro rates for the period May 2015 to December 2019. With an increase to operations, management and administration (OM&A) spending of 2.1% and a $2.25 billion capital spending program, the decision is reasonably positive for Society members.

The 2.1% increase to OM&A represents the OEB’s view of inflation. Toronto Hydro had requested a base OM&A of $269.5 million. The Board reduced that figure to $246 million. In doing so the OEB cited Toronto Hydro’s record of under spending areas it proposed increasing its budget — for instance, predictive maintenance. The OEB also noted that given the significant infrastructure renewal it approved there should be lower levels of maintenance required in the five-year period covered by this rate decision. In future years, Toronto Hydro will receive inflationary increases to its OM&A budget.

Given the significant infrastructure investment required by Toronto Hydro, the OEB accepted the utility’s custom application, and approved a five-year capital plan that provides an average of $448 million per year. While this represents a significant increase in capital investment, it is 10% below the amount Toronto Hydro had requested. The OEB justified the 10% cut by insisting that there are further efficiencies for Toronto Hydro to achieve. The Board didn’t specify which efficiencies Toronto Hydro should seek but found that the company’s practice of using competitive bidding for most of its capital projects was not in itself evidence of achieving the highest level of efficiency possible.

Overall, the OEB expects this decision to increase the distribution portion of hydro bills in Toronto by approximately 5%. A draft rate order has been issued but a final determination of the impact on bills is pending.

The Society raised a number of concerns with the way in which Toronto Hydro is managed, including contracting out work, staff demographics, just in time hiring, hiring of former employees, and the need for annual monitoring and reporting to drive reliability. The OEB did not address these issues in its decision. The Society’s Toronto Hydro Local recently began bargaining with the company on a new collective agreement. These, along with rumoured plans to privatize Toronto Hydro, are some of the issues that the bargaining team intends to raise as part of negotiations.

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