Hydro One: Exploiting the Exploitable

With 25% of captive clients purchasing only 18.6% of the product sold in the market how can you increase your profits (after tax) by 135% in only 6 years, and beat your competition in gross profit by 91% in a regulated market?

For an exercise in marketing moxie and an answer to the above question one need only look at Hydro One, the Provincially owned distributor (and transmitter) of electricity in Ontario to 25% of (mainly rural) captive ratepayers. As the Sarah Vaughan song goes; “whatever Lola wants Lola gets”, except in this case it becomes whatever Laura Formosa (CEO of Hydro One) wants they get and their ratepayers pay dearly for the love that the Ontario Energy Board (OEB) has for them.

The Yearbook of Distributors for the year ended December 31, 2011 discloses the above facts and several more about Hydro One versus the other 74 municipally owned local distribution companies (LDCs) in the province. Hydro One actually pay 15.2% less for the cost of power per customer (a pass through at cost) but collect $493.00 (91%) more in gross profits and $107.00 (122%) more in after tax (payments in lieu of tax or PILT) profit per customer. The reason that extra $493.00 in Gross Profits doesn’t find its way to the bottom line is because Hydro One has much higher operations, management and administration costs (OMA) and higher amortization costs on their capital assets which are respectively $216.00 (91%) and $49.00 (73%) higher per customer.

When Hydro One apply for rate increases they inevitably use the excuse for needing higher pricing on the fact that they claim to provide service to almost all of Ontario. In their submissions to the OEB they state they provide electricity distribution to 650,000 sq km versus the 681,511 sq km encompassing the total area all distributors (including Hydro One) serve. So Hydro One claim they service 95.4% of all areas in the province that have a connection to the grid and the area is all rural!

While the above fact might be true if Hydro One were making that claim on behalf of their transmission (where they have a virtual monopoly) and distribution businesses combined, that would make sense, but this submission is only for their distribution business. In fact, putting aside their ownership of Hydro One Brampton (not included in the foregoing or below statistics or calculations) the distribution arm has many urban communities which include a number of what most would consider small cities like Belleville, Trenton, Lindsay, etc or numerous larger towns throughout Ontario. Despite that Hydro One claims all of the area they distribute to is “rural”. Many other distributors such as Oshawa Hydro, PowerStream, etc. break out the area they serve as both rural and urban. Despite the false claim by Ontario Hydro that they serve over 95% of the electrified province the OEB does not seem to challenge them on that issue and generally give them the rate increases they seek.

Yet another interesting piece of information can be gleaned with a little mathematics from the “Yearbook” relating to the percentage of “delivery” costs for the average ratepayer. For the 74 municipally owned LDCs, the delivery cost averages 20% of their ratepayers total bill (including “costs of power”) whereas the delivery cost for Hydro One ratepayers averages 36% of their ratepayers bill and they deliver an average of 580 kWh less per month. Perhaps “rural” Ontarians need to consume more power delivered by Hydro One if they want to see better economies of scale but that would mean that Hydro One would catch the ire of the OEB for not meeting their conservation targets. Is Hydro One’s conservation plan simply raise the price and they will consume less? On the latter; its not working, as the average consumption of a Hydro One customer in 2005 (1740 kWh per month) was the same as it was in 2011 (1739 kWh per month) but at that time Hydro One’s delivery costs were only 31% of their average ratepayers bill. So raising the delivery price is not achieving the desired results except for a one (1) kWh per month reduction. The OEB set the reduction target for 2011-2014 at a cumulative target that works out to 78 kWh per month for Hydro One’s average customer so we should perhaps expect to see their delivery prices rise at a faster rate over the next 2 years in the hopes they will deliver on the goal set for them.

It now appears that the Green Energy and Economy Act (Act) not only imposed giant wind turbines and acres and acres of solar panels on rural Ontario but they also got the double whammy of having all-in electricity bills that are consistently higher then the larger urban centres and likely to remain so.

So rural communities, the breadbasket of the province, not only have had their democratic voices taken away by the Act but they also pay higher prices for electricity that goes into producing the foods that people in the large urban centres consume. The next time they buy their milk, eggs or fresh produce they will hopefully blame it on the Act imposed by the Liberal Government and those Hydro One people on Bay Street in Toronto, where they whip up their rate applications to the OEB so they can impose the highest electricity costs on Ontario’s farmers.

It is time to tell Lola she won’t get what she wants and the decimation of the Liberal Party in rural Ontario in the last general election certainly conveyed part of that message.

Parker Gallant,
September 26, 2012

Comments

Anonymous
Reply

Hi there outstanding blog! Does running a blog like this require a great deal of work?
I have virtually no expertise in computer programming but I had been hoping to
start my own blog in the near future. Anyhow, if you have any suggestions
or tips for new blog owners please share. I understand this is off topic but I just wanted to ask.
Thanks a lot!

Also visit my weblog – residential property management rpm

Anonymous
Reply

Browsing reddit.com I noticed your website bookmarked as: Blogger: Wind Concerns Ontario Blog.

I am assuming you book-marked it yourself and wanted to ask if social bookmarking gets you a good deal of targeted visitors?
I’ve been looking at doing some book-marking for a few of my websites but wasn’t sure if it would yield any positive results.
Many thanks.

my blog post … electric furnace troubleshooting

Anonymous
Reply

Do you mind if I quote a couple of your posts as long
as I provide credit and sources back to your webpage?
My website is in the exact same niche as yours and my users would genuinely benefit from a lot of the information you present here.
Please let me know if this ok with you. Thanks!

Also visit my web site; fashion eye center

Anonymous
Reply

Iím not that much of a online reader to be honest but your blogs really nice, keep it up!
I’ll go ahead and bookmark your site to come back later. All the best

My webpage http://thamorgroup.com/

Anonymous
Reply

I absolutely love your blog and find nearly all of your post’s to be what precisely I’m looking for.
Do you offer guest writers to write content to suit your needs?
I wouldn’t mind composing a post or elaborating on some of the subjects you write concerning here. Again, awesome website!

Also visit my page :: exercises for frozen shoulder nhs
Also see my website > exerciser baby

Anonymous
Reply

Hiya! I just discovered your internet site: Blogger:
Wind Concerns Ontario Blog when I was browsing reddit.

com. It looks as though someone enjoyed your site so much they decided to bookmark
it. I’ll definitely be returning here more often.

Here is my blog post … nike studio shoes

Anonymous
Reply

Your blog appears to be having some compatibilty issues in my
ie browser. The wording seems to be running off the page pretty bad.
If you would like you can email me at: cristina-sands@freenet.
de and I will shoot you over a screen grab of the problem.

My web site :: ryka studio shoes

Anonymous
Reply

We absolutely love your blog and find the majority of your post’s to be just what I’m looking for.
Do you offer guest writers to write content in your case?
I wouldn’t mind composing a post or elaborating on a lot of the subjects you write related to here. Again, awesome website!

Feel free to surf to my web site … yoga clothes similar to lululemon

Anonymous
Reply

Howdy just wanted to give you a quick heads up and let you know a
few of the pictures aren’t loading properly. I’m not sure why but
I think its a linking issue. I’ve tried it in two different web browsers and both show the same results.

Feel free to surf to my blog; analog synthesizer schematics

Anonymous
Reply

Hello, I think your blog might be having browser compatibility issues.
When I look at your blog site in Ie, it looks fine but when
opening in Internet Explorer, it has some overlapping. I just wanted to give you a quick heads up!
Other then that, great blog!

Also visit my website :: flash memory card reader for iphone 4

Anonymous
Reply

Hey, I think your website might be having browser compatibility
issues. When I look at your blog in Ie, it looks fine but when opening in Internet Explorer, it has some overlapping.
I just wanted to give you a quick heads up! Other then that, very good blog!

Look into my webpage; personal computer components pdf

Anonymous
Reply

Hello there! My spouse and I often write guest posts for other site
owners to help increase publicity to our work,
as well as provide wonderful articles to site owners. It truly is a
win win situation! If you are interested feel free to
e-mail me at: hellen_kidd@freenet.de so we can discuss further.
Thankyou!

Also visit my web blog flash memory summit agenda

Anonymous
Reply

Please let me know if you’re looking for a author for your site. You have some really good articles and I think I would be a good asset. If you ever want to take some of the load off, I’d love to write some
material for your blog in exchange for a link back to mine.
Please blast me an email if interested. Thank you!

my site on semiconductor pocatello

Anonymous
Reply

With havin so much content do you ever run into any problems
of plagorism or copyright infringement? My site has
a lot of completely unique content I’ve either authored myself or outsourced but it seems a lot of it is popping it up all over the internet without my permission. Do you know any ways to help prevent content from being ripped off? I’d genuinely
appreciate it.

Feel free to visit my web-site: Seattle Sonics Coming Back

Anonymous
Reply

Hmm is anyone else having problems with the pictures on
this blog loading? I’m trying to determine if its a problem on my end or if it’s the
blog. Any suggestions would be greatly appreciated.

My weblog: semiconductor industry 2013

Anonymous
Reply

Hello! This is my first visit to your blog! We are a group of volunteers and starting a new initiative in a community in the same niche.
Your blog provided us beneficial information to work on.
You have done a wonderful job!

Feel free to visit my web-site – single silicon wafer containers

Anonymous
Reply

Your style is so unique compared to other people I’ve read stuff from. Many thanks for posting when you’ve got the opportunity, Guess I will just
book mark this site.

Feel free to visit my weblog … best compact kitchen appliances

Anonymous
Reply

Thank you for every other informative blog.
The place else may I get that type of info written in such
a perfect approach? I have a project that I am just now working on, and I’ve been at the look out for such information.

Stop by my web page appliance repairs nj

Anonymous
Reply

Hello this is kinda of off topic but I was wanting to know if blogs use WYSIWYG editors or if you have to
manually code with HTML. I’m starting a blog soon but have no coding know-how so I wanted to get advice from someone with experience. Any help would be enormously appreciated!

Visit my web page: kitchen remodel photos contemporary

Leave a comment

name*

email* (not published)

website