What Hydro One is doing to over a million ratepayers is a shame

People who know me know it’s like Christmas for me when the Ontario Energy Board (OEB) posts the Yearbook of Distributors and it’s true, the data is a big gift!  You can imagine how a banker might react when confronted with the details the OEB releases.  It gets better when you look at it in detail.
Here is my take on the information as it relates to Hydro One, only one of Ontario’s 73 LDCs (local distribution companies). Hydro One is a monopoly that services 1,221,100 customers (according to the Yearbook) in Ontario, and has exclusive rights to the transmission of energy generation.  Caution some of the fact that follow may disturb some readers.

• Total Hydro One full-time employees as at December 31, 2013 was 5,641, plus what are referred to as “non-regular” employees numbering 2,109.  In 2002 Hydro One had 3,933 regular employees, so full-time employees have grown by 1,708 (up 43.4%).

• In 2002, Hydro One had 1,219,614 customers; at year-end December 31, 2013, they reported 1,221,100 customers but they apparently needed 1,708 additional full-time employees to service those additional 1,486 customers.   (The number of “non-regular” employees for 2002 was not available.)

• Total “Purchased Power” by the 73 local distribution companies in 2013 was 125,306 million kWh and by Hydro One was 25,829 million, or 20.6% of the total. Yet Hydro One services 24.7% of all Ontario ratepayers.

• The average OMA (operations, management and administration) costs for the 73 local distribution companies was $325.00 per ratepayer, but for Hydro One’s customers it was $495.60—that’s $170.60 more, or 52.5% higher.

• If one removes the hard data for Hydro One and calculates the OMA for 2013 for the 72 LDCs the average comes to $269,  meaning Hydro One’s OMA is 84.8% higher. For 2012 it was only (I use the term lightly) 65.4% higher.

• Gross Income (net of Power Purchased) was $3.418 billion for all 73 local distribution companies but for Hydro One it was $1,323 billion or 38.7% of all the Gross Revenue from those 24.7% of ratepayers.

• Net Income, after PILT (payment in lieu of taxes) was $624.6 million for the 73 local distribution companies and $258.3 million for Hydro One—that represents 41.3% of Net Income for only 24.7 of all ratepayers.

• Average monthly kWh (kilowatt hours) consumed per customer was 2,112 for all customers of the 73 local distribution companies, but only 1,764 kWh for Hydro One’s customers. That means Hydro One’s customers consume 16.5% less kWh. But… (see the next bullet for the other shoe to drop).

• Average Power & Distribution Revenue less Cost of Power & Related Costs per customer annually for all customers for the73 local distribution customers was $691.35; for Hydro One (24.7% of all ratepayers) it was $1,084.10— a difference of $392.75 or 56.8% higher for Hydro One ratepayers.

• Average Power & Distribution Revenue less Cost of Power & Related Costs per total kWh purchased for all 73 local distribution companies was 0.027 cents/kWh; for Hydro One customers it was 0.051 cents/kWh, a difference of 0.024 cents or about 89% higher.

• Line losses, which we are all billed for, vary and those averaged 4.1% for all 73 local distribution companies; but for Hydro One they amounted to 6.8% or 69.5% more.

• If one adds the 900 employees Hydro One outsourced in 2002 to Inergi to for their customer service/billing process to the 3,291 reported to be employed in their LDC unit, and then add that number to the 10,022 employees all 73 LDCs reported, Hydro One employees represent 38.4% of all LDC employees, while servicing only 24.7% of all ratepayers.

• If one calculates the number of customers per employee of the foregoing it works out to 2,914 customers per Hydro One employee and 5,532 for the other 72 LDCs. In other words, employees of the other LDCs support 2,616 more ratepayers per employee compared to Hydro One.

• Why are Hydro One employees paid more on average if they service 47.3 % fewer ratepayers?

There are a lot more damning statistics that even a mediocre mathematician could use to demonstrate how Hydro One is the least efficient of the 73 LDCs. I believe it is obvious that there are standards applied to municipally owned LDCs that simply do not apply to Hydro One.  They are given carte blanche by the regulator, the OEB,  to run roughshod over 24.7% of all of the ratepayers of the province without consequences.
The Ontario Ombudsman’s report, expected in the fall of 2014, will highlight the mess of Hydro One’s billing system; what will the Ontario Liberal Government do to correct the blatant mistreatment of over a million ratepayers by Hydro One?
©Parker Gallant
August 27, 2014
The views expressed here are those of the author.