Toronto Hydro posts $23.6 million profit

Unusual items bring net to $11.4 million

Toronto Star - May 25, 2002
by John Spears, business reporter

Charging city residents and businesses higher rates has helped Toronto Hydro Corp. push its profit $30.6 million higher in 2001, before unusual items.

The electricity company, 100-per-cent owned by the city, earned $23.6 million profit last year, compared with a loss of $7 million in 2000. Revenue grew to $2.101 billion from $1.932 billion, according to the annual report released yesterday.

Of the revenue increase, $111 million resulted from a surcharge imposed by the province on electricity users to pay off the debt from the former Ontario Hydro. Toronto Hydro collects the surcharge, and immediately passes it through to a provincial agency. But another $39.5 million of the revenue boost came from a rate increase pushed through by Toronto Hydro.

The company has been increasing its rates in order to pay bigger returns to its shareholder, the City of Toronto. Prior to 1998, Toronto Hydro had been a not-for-profit public utility, but the province then gave municipalities direct ownership of their electric utilities and allowed them to be incorporated as profit-making companies.

The city elected to hold about 60 per cent of its interest in Toronto Hydro in the form of a $980 million note payable to the city, on which Toronto Hydro is required to pay interest.

The Ontario Energy Board has placed temporary limits on the return the city can extract from its hydro company, but last year Toronto Hydro paid $41.9 million interest on the note, up from $33.3 million the previous year.

For 2002, the note will pay 6.8 per cent interest, which will trigger interest payments of about $67 million to the city. The city hopes to collect dividend payments in the future as well.

Toronto Hydro took a one-time hit of $22.7 million to cover the costs of terminating 271 employees under a voluntary buyout program last year. After factoring in that cost and other unusual items, the company's net profit was $11.4 million, up from a $7 million loss the year before.

Last year's performance doesn't include results from Ontario's new competitive electricity market, which opened at the start of this month. Toronto Hydro Corp. has set up a retail operation, Toronto Hydro Energy Services Inc., which sells electricity and gas contracts at fixed prices.

The company has signed contracts for more than $1 billion in gas, electricity and energy-efficient products and services over the next three years, according to the report.

Toronto Hydro Energy Services pulled its door-to-door sales force off the street last month, after the Ontario Energy Board penalized the company because its sales agents had failed to follow the board's code of conduct.

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