EDA Calls for Hydro One Distribution Assets to be Transferred at Fair Value to Trusted, Local Utilities

Electricity Distributors Association

TORONTO, March 19, 2015 /CNW/ - The Electricity Distributors Association (EDA) is today calling for the transfer, at fair value, of provincially owned electricity distribution assets from Hydro One to local electrical utilities. This is consistent with recommendations from the Premier's Advisory Council on Government Assets that provincial electricity transmission and distribution assets be separated, and that the provincial government reduce its ownership interest in the latter.

The outcome envisioned by the EDA would be the most significant re-structuring within Ontario's electricity system since the breakup of Ontario Hydro in 1998. "Our association has called for the separation of transmission and distribution for a long time," says EDA CEO Charlie Macaluso. "We have also concluded that provincial participation in distribution, in its current form, is a major barrier to efficiency improvement for the benefit of consumers."

The EDA therefore welcomed the advisory council's recommendations, which aligned well with its own ongoing assessment of distribution sector re-structuring options. That assessment has resulted in a policy proposal which would facilitate the fair-value transfer of potentially all provincial distribution assets to those local electrical utilities wishing to participate in such a transaction.

"We're pleased to put forward a rigorous proposal that has strong support within our membership," says Macaluso. "It would create a much more rational distribution system and greatly benefit energy consumers. And it will better ensure the efficient and sustainable management of the assets we all rely on to power our homes and businesses."

The EDA proposal would address the fragmentation and many anomalies in the current structure of Ontario's distribution system. This includes large pockets of "embedded" customers who are served by the provincial distributor, rather than by the local electrical utility that serves most of the rest of their municipality. Large swaths of provincially serviced areas around and between urban municipalities have also been a barrier to creating more efficient and easier-to-serve service territories.

"Municipal distribution companies are built into the fabric of Ontario's communities and provide essential infrastructure," says EDA Chair Ray Tracey.  "Allowing LDCS the opportunity to unify local distribution services and remove Hydro One distribution service in a given community or region is clearly what our customers have been requesting for some time."

The proposal has attracted formal stakeholder support.

"Municipalities are the principal shareholders of the electricity distribution assets that most Ontarians rely on," notes Gary McNamara, president of the Association of Municipalities of Ontario. "We want to see these strategically important assets remain in trusted, local hands. We therefore support the EDA's proposal, which we also see as a basis for local responsiveness and other customer benefits."

Implementation of the EDA proposal would include expansion of existing local distribution service territories to municipal boundaries, and further consolidation among local utilities. Adjacent Hydro One territories, including rural areas, would be allocated to local electrical utilities. Hydro One would continue to operate the provincial transmission system, thus focusing on the side of its business where its operational performance has been stronger.

The numerous efficiencies associated with service territory rationalization would include: improved system planning, better utilization of existing infrastructure and equipment, enhanced ability to attract capital, and improved potential for innovation and implementation of new technologies. Such efficiencies would position utilities to better manage cost pressures impacting customer bills, and to improve customer service.

On the distribution side of its business, Hydro One currently incurs significantly higher administrative costs than do local distributors – a differential of nearly 25 per cent. The utility has also experienced a number of well-documented issues relating to customer service, as most recently identified by the provincial ombudsman.

"Our proposal would result in widely shared benefits," says Macaluso. "We would have more robust and better-resourced distribution companies, operating in easier-to-serve territories. But we would also retain the benefits of multiple utilities, a key to ensuring benchmark competition and innovation. Customers would ultimately be the main beneficiaries."

The EDA policy proposal has been detailed in a formal submission to the Premier's Advisory Council on Government Assets, and also presented to the government. While the provincial government has expressed general support for the advisory council's recommendations to date, the EDA now awaits a more specific indication of government intentions with respect to its distribution assets, anticipated in the spring budget.

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 millions of Ontario homes, businesses and public institutions.

SOURCE Electricity Distributors Association

Image with caption: "Electricity Distributors Association (CNW Group/Electricity Distributors Association)". Image available at: http://photos.newswire.ca/images/download/20150319_C1549_PHOTO_EN_13392.jpg

For more information and to arrange interviews please contact the EDA's Director of Corporate Affairs and Communications, Kevin Hanson, at [phone] / [phone].