How do you feel every month when you open your Hydro Bill? Nauseous? Disgusted?. Helpless? Panicky?…………………. or do you feel an invisible hand digging around in your wallet or purse looking for your extra change as if an insatiable greedy little gremlin was in need of some coin to satisfy his “itch”!
That gremlin is actually the “Liberal thieves” who work so closely caressing and fondling and massaging what we all know as Hydro One!
They’ve got a good thing going on here, even though you’ll never hear about it, except until NOW!
The Libs and their inside buddies have a Golden Goose that is basically sucking the life blood out of Rural Ontario by ever increasing electrical rates all covered up as necessary increases for infrastructure upgrades. new transmission lines for the “new age” of renewables and new projects that aren’t really needed even though the never ending parade of bozo Energy Ministers like to sadly parade before an overworked public to justify their massive “grift” called Energy Supply!
Don’t read too much of this report without digesting each line as much as you can. Don’t allow your eyes to glaze over before getting to the end after reading the figures which amount to almost unbelievable amounts of YOUR money going into the pockets of a very few people.
Hydro One is definitely the Libs CASH COW and they don’t ever want you to know it!
Too bad for them as here it comes:
An article penned about Hydro One on March 15, 2013 can be found on the Wind Concerns Ontario website. That article spoke to the fact that Hydro One announced a increase in their distribution rates and the insert carrying that news included a pie chart headlined; “What does your total electricity bill pay for?” The pie chart showed 38.5% of what a Hydro One customer paid, went for the “Delivery” of electricity and included costs of Distribution and Transmission of electricity. Hydro One customers receive both of those services from Hydro One with the latter (transmission) being the monopolistic territory of Hydro One almost exclusively (96%) in the Province.
Late last year (December 13, 2013) the “Ontario Distribution Panel”, former Energy Minister, Chris Bentley had appointed, released a report titled; “Renewing Ontario’s Electricity Distribution Sector: Putting the Consumer First”. That report dealt with the 75 local distribution companies (LDC) and made recommendations to reputedly improve benefits to electricity consumers principally by reducing the cost of “delivery”. That report indicated that the “average” cost of the delivery line on our bills was 22%. That panel’s report basically ignored Ontario’s two largest LDC; being Hydro One and Toronto Hydro, as was pointed out in a subsequent article found here.
Why the “panel” ignored the two elephants is something only the members of that panel can explain but to simply ignore Hydro One whose delivery costs are almost twice the average of the other LDC is not something that should be ignored. So let’s have a look at Hydro One and perhaps we will discern why they choose to only mention them in passing and why their delivery costs are so high.
The Province owns shares totaling $3,314 million in Hydro One. That ownership came about as a result of the breakup of Ontario Hydro back at the start of the current century but it should be recognized that the Province already owned the predecessor company so it was simply a case of rearranging the form of ownership, not an actual purchase. The acquisition of that shareholding was financed by the taxpayers via the Ontario Electricity Financial Corporation (OEFC), who in turn borrowed the funds from the Ontario Financing Authority (the Province’s official borrowing vehicle who indicate current borrowings of the Province are $273.5 billion). The province must pay OEFC interest on that debt annually and OEFC must in turn pay the OFA and the province in turn looks to recover those costs which at current rates would be about $150 million.
Now the Province’s holdings in Hydro One; if measured as the private sector does, would reveal what a wonderful investment they made. In the year just ended Hydro One generated a profit of $745 million and paid dividends of $370 million to the Province earning them a ROCE (return on common equity) of 11.2% after PILT (payments in lieu of taxes). The Province also received that PILT of $121 million giving them a total cash return (ROCE) of 14.8% off the back of ratepayers. NB: By comparison the average dividend yield on the TSX is about 2.7%.
Additionally the Province received 8% of the HST which amounted to $224 million (8% of the gross revenue of $5.7 billion less the cost of power of $2.7 billion; ie; 8% of $2.8 billion) making the total cash take from Hydro One about $715 million for a ROCE of 21.5%. The net result is that the Province received in excess of $565 million over their carrying costs.
Measuring that cash take of $715 million another way (net of fuel costs), the Province extracted 25.5% of Hydro One’s net revenue if measured on a RoR (return on revenue) basis. Even taking away that amount it still left $365 million of retained earnings for Hydro One.
With returns of that magnitude the interest from the private sector to rush in and offer competition to Hydro One would be easy to muster so one is left to wonder why didn’t the “panel” give that some consideration in their recommendations or did they receive directions from the former Minister of Finance, Dwight Duncan, to stay away from Hydro One? Did he believe he had found a revenue source that the public wouldn’t notice and was Hydro One the reason we suddenly were told that the projected Provincial deficit was going to be less then forecast?
If one looks further into Hydro One’s “consolidated” financial statements, discrepancies appear that are inexplicable. The consolidated financial statements reportedly include several companies as explained under Note 2. of the 2011 annual report which on page 56 says the following:
“The Consolidated Financial Statements include the accounts of the Company and its wholly-owned subsidiaries: Hydro One Networks Inc. (Hydro One Networks), Hydro One Remote Communities Inc. (Hydro One Remote Communities), Hydro One Brampton Networks Inc. (Hydro One Brampton), Hydro One Telecom Inc., Hydro One Lake Erie Link Management Inc. and Hydro One Lake Erie Link Company Inc.”
If one then spends time at the Ontario Energy Board’s (OEB) library searching through files you are able to locate the financial statements of those above mentioned entities. Those filings appear to be different to both the segmented results that are visible on the “consolidated financial statements” (page 81) and those posted on the OEB Yearbook of Distributors (page 34). As an example the segmented results from the 2011consolidated financial statements indicate gross revenue of $4,019 million from distribution and from the OEB report it is posted as $3,538 million and from the Library at the OEB is shown as $3,398 million. Despite different levels of reported revenue both the OEB report and the OEB “Library” filings the after PILT earnings are identical. The question becomes, why doesn’t this extra $600 million in revenue generate a profit? The segmented results in the consolidated report only provide the before (finance and PILT) income indicating they were $478 million meaning those two costs were $244 million or more than 100% of the income reported in the other two reports.
The “Delivery” announcement from Hydro One uses words to reflect how they will affect your bill by saying “a typical” and “will add” 3.5%” or “3.1%” to your bill without saying the increase the OEB approved represents an annual increase to their revenue base (for the approval [distribution or transmission] they sought) of 10/12% per year. A 3.5% increase on a portion of your bill representing 38.5% of the total costs is considerably more then it would add if the portion was the 22% “average” that the other LDC’s bill for delivery charges. The increase that Hydro One were granted by the OEB for just this increase translates to an average of $25 to $50 per year per customer meaning their 1.2 million captive clients will cough up another $30 to $60 million per annum. That additional $60 million is hardly needed by Hydro One and one wonders if the OEB approves their increases to satisfy their ultimate bosses. It is worth noting that the dividends Hydro One paid to the Province in 2012 were $157 million more than 2011. Perhaps the OEB approval was meant to ensure the dividend payments could be maintained by Hydro One on the backs of their ratepayers.
The cash cow that the Liberals have discovered is bleeding rural Ontario dry and it is time for the OEB to live up to its Mission statement:
“To promote a viable, sustainable and efficient energy sector that serves the public interest and assists consumers to obtain reliable energy services at reasonable cost.”
Is it time that the OEB exercise their authority reflecting on the latter part of their Mission statement when it comes to Hydro One clients, who seem to be ignored in respect to the “reasonable cost” the OEB deigns to suggest is part of that statement – or should the Liberals simply “keep milking”?
Parker Gallant, March 20, 2013