Councillor insists Hydro Ottawa planning rate hike

Exasperated CEO says increase not part of the plan

Ottawa Sun - June 3, 2002
By Derek Abma

Despite denials from Ottawa Hydro officials, Coun. Alex Cullen is confident a rate increase is coming.

You almost expect him to say "read my lips."

The Bay ward councillor says the utility is determined to reach the maximum profit rate allowed by the Ontario Energy Board, which is 9.88%. Hydro Ottawa was told it would have to ease it in over three increases. Two have come already and another is on the way, says Cullen.

"Hydro Ottawa has another rate increase to go," he says. "They had initially applied for the full-profit model, to hit that 9.88% rate return. The Ontario Energy Board told them: 'You're going to have to do it in three steps.' "

The last increase came in March and ended up being two increases rolled into one amounting to about 12%.

Utility bosses say that if things go as planned there won't be another increase next March 1, the next filing date.

Cullen says the increase will likely be delayed until after the municipal election, slated for fall 2003.

'POLITICALLY SENSITIVE'

Hydro Ottawa is a municipally owned business, but it runs independently of the city and its elected politicians. Despite Cullen's wish for a different arrangement, council has no control over rates or everyday operations at Hydro Ottawa.

"(Hydro Ottawa) knows (electricity rates are) a politically sensitive issue," he says. "They know council, if provoked, can take over the board in an instant. It is 100% owned by the City of Ottawa. The mayor does sit on the board. So they're within easy political reach of council."

This is true, despite the fact council has a tendency to "rubber stamp" everything Hydro Ottawa does, says Cullen.

He has been trying to change the for-profit nature of Hydro Ottawa and give council a veto over proposed rate increases, but hasn't been able to convince fellow councillors.

Those in favour of Hydro Ottawa being a for-profit company argue profits can be returned to city coffers for civic purposes. But Cullen argues this is the wrong way to go about raising public money.

"If I'm going to raise taxes to spend more money on public transit, there's a transparent process," he says. "The public is consulted. They can come up and tell us whether they think that's a good idea or not.

"People are paying Hydro to pay for hydro. They don't expect to pay hydro bills to pay for buses."

Ron Stewart, CEO of Hydro Ottawa, insists there are no plans to increase the rate his company charges for electricity, despite one city councillor's argument to the contrary.

"While we're required to file annually, and the next filing isn't until March next year, we're managing the finances in such a way that it will not have an impact on the customer."

Stewart says it could be the filing process that has people such as Coun. Alex Cullen assuming another rate increase is imminent. Stewart says the next filing to the Ontario Energy Board will request provisions that probably won't affect consumers.

"Coun. Cullen keeps insisting," he says. "We were in front of the environmental services committee for five hours, made a presentation, went through it in great thoroughness and great detail. But it continues to be taken to the contrary.

NO GUARANTEES

"It seems to be acceptable to everybody at the table except (Cullen)."

But Stewart falls short of guaranteeing there won't be a rate increase next year.

"Things can go wrong," he says. "There could be some type of disaster, I suppose."

He declines to elaborate.

The Ontario Energy Board, the agency that regulates Ontario's energy market, could "change the rules," says Stewart, making it necessary for the utility to raise rates in order to meet its financial objectives.

As well, consumers should realize Hydro Ottawa only has control of about a quarter of their energy bills. The rest is charged by electricity suppliers, Hydro One (owner of the province's transmission grid), the Independent Electricity Market Operator and the Ontario government, the last of which takes 8% of every bill and puts it toward the debt of the now-defunct Ontario Hydro.

Stewart says he can't predict what direction energy costs beyond the jurisdiction of Hydro Ottawa will go. He does note spot prices for generated electricity are generally lower than they were before Ontario's electricity market opened to competition May 1.

UTILITIES COMBINED

Hydro Ottawa came into being Nov. 1, 2000, a few months before the new City of Ottawa was formed by a dozen municipalities. Hydro Ottawa was created by combining the old utilities of Ottawa, Gloucester, Kanata, Goulbourn and Nepean.

In March, two rate increases took effect at once, amounting to about 12%. Part of that was an increase originally scheduled for March 2001 but delayed by the regulatory process.

So if you were paying the residential average of $63.84 a month whenHydro Ottawa first came into being, you are, on average, paying about $71.35 right now. And if Stewart is correct, you should be paying this for awhile to come.

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