Toronto Hydro’s “creative accounting” doesn’t bode well for Toronto consumers

Posted: January 14, 2014 in Uncategorized

Similar to Ontario Liberal’s “creative accounting” methods being employed to bleed as much money out of Ontario Hydro consumers pockets, it seems Toronto Hydro has also been bitten by the gouging and screwing over of their own consumers in the Big Smoke!

After all when CEO’s and other executives are demanding 100’s of thousands of dollars for their wages per year, where else will they get that revenue other than consumers pockets?

The following is a well researched and definitive report that is not only eye-opening but should stir the “juices of discontent” inside every Toronto Hydro customer when they open their monthly inflated hydro bills!!!

Parker Gallant: Toronto Hydro: Creative accounting baffles Toronto City Council and the OEB

(January 14, 2014) Recently I stumbled upon a 2003 Toronto Hydro bill in my effort to rid the office space of paper piles.

The bill disclosed electricity costs  in 2003 were 4.3 cents a kilowatt hour (kWh) and delivery costs 2.2 cents per kWh as compared to a 2013 bill (prior to the recent rate increase) which priced electricity at an average of 8.52 cents per kWh and delivery costs at 5.73 cents per kWh. Electricity costs were almost 100% higher and delivery costs were up by 160% in 10 years.

Shocked by the latter discovery called for a visit to the Ontario Energy Board’s “Yearbook of Distributors” where one can find an abundance of information on a collective and individual basis for all  local distribution companies (LDCs) going back to 2005.  Gathering numbers for Toronto Hydro for the year end 2005 and comparing them to the 2012 report was revealing.  To start with, the average Toronto Hydro customer in 2012 consumed 5,100 fewer kWh (a 12.8% drop) than 2005.   I suspect the “brass” at Toronto Hydro would count that as “conservation” but it’s probably a reflection of condominium growth where fewer kWh are consumed and new condo owners are individually metered.

Normally when a company sells less of their product their gross margins fall along with their net income (after taxes) but in the case of Toronto Hydro their gross margin (revenue less power purchases) increased by $62.7 million or 13% and net income (after tax) jumped $18.5 million or 28.3%.

With that basic information staring you in the face one would conclude Toronto Hydro must have increased their delivery price and reduced their operating costs!

With LDCs, operating costs are defined as: “operations, maintenance and administration” (OMA) and represent the bulk of expenses.  A review of those numbers disclosed that Toronto Hydro’s OMA  jumped $96.8 million (63.7%) from 2005 to 2012 and administration costs alone were up $70.6 million or 104%.  In a normal business environment, lower sales result in shrinking administration costs not the reverse!

To put further context to the above, OMA growth from the 2006 Toronto Hydro numbers compared to 2012 indicates a growth of $83.9 million in OMA or 52.6% higher over the 6 years.  That year was the year that the current President, Anthony Haines was hired.  Since then Mr. Haines has seen his personal compensation grow by $483,000 or 107% to $935,000 which reflects itself in the growth of the “administration” part of the OMA costs.  Those increased $55.7 million or 72% in just 6 years or 12% annually.  Pre-tax income fell from $130 million in 2006 to $87 million in 2012.  Additionally in the 6 years since Haines joined Toronto Hydro, capital spending has totaled almost $2 billion ($1.989) yet Haines continues to press for more spending and insists the company’s infrastructure is past its prime  (see Tom Adams Energy), perhaps because part of his compensation is  a product of capital spending?

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