Distribution Sector Panel Report Won't Maximize Savings for Electricity Customers
Panel's report aligns with industry position on voluntary consolidations but falls billions short by ignoring savings in key areas
TORONTO, Dec. 13, 2012 /CNW/ - The Electricity Distributors Association (EDA) identified nearly $4.3 billion of present value savings over the next decade that the Panel chose to ignore in its report, missing the opportunity to reduce electricity costs for customers across Ontario.
"We are extremely disappointed to see so much value left on the table that could have otherwise helped reduce electricity customers' bills going forward," says Charlie Macaluso, President and Chief Executive Officer of the EDA. "The EDA is confident that the government will seize the opportunity to take meaningful steps toward lowering the cost of electricity and we look forward to working with them to deliver the savings that the EDA has identified to customers across Ontario."
At a high level, the Panel's report is consistent with the position long held by the EDA that voluntary mergers deliver the greatest benefit to customers and communities. In its submission to the Panel, the EDA noted that Ontario's distributors have a strong track record of successful consolidations - merging into 75 utilities from more than 300 since 1998 - and recommended removing barriers that exist today that discourage further consolidation.
However the Panel's report falls short because it lacks a workable plan and the tools to reach the target number of utilities, calling into question whether the Panel's recommendations can even be implemented.
"The EDA's submission set out a structured framework and the tools to bring about voluntary mergers and amalgamations," adds Max Cananzi, Chair of the EDA, noting that the Association's submission included four consolidation models which would deliver more than $450 million in present value savings over the next 10 years. "The Panel has offered no mechanisms to remove many of the barriers standing in the way of these deals getting done and that's a glaring omission, especially considering the Panel's aggressive timeline for these transactions to happen."
Also problematic is the Panel's suggestion that the government make consolidations mandatory through legislation if they don't happen within the specified timeframe.
"A forced merger isn't based on a solid business case and could result in negative consequences in terms of cost and reliability for customers," adds Cananzi.
In the EDA's submission to the Panel, the Association identified an opportunity for distributors to add more value to the communities they serve by delivering other utility services such as water and wastewater, conservation and streetlighting.
"The EDA examined the issue closely and found the potential for more than $1.5 billion in present value savings over the next decade by expanding a utility's scope as well as its size," says Macaluso. "The Panel not only chose to ignore this efficiency opportunity, they've recommended against allowing multi-utility models even where they're delivering value today."
About the EDA
The Electricity Distributors Association (EDA) is the voice of Ontario's local electricity distributors, the publicly and privately owned companies that safely and reliably deliver electricity to more than 4.8 million Ontario homes, businesses and public institutions.
SOURCE: Electricity Distributors AssociationFor further information:
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