TORONTO, Jan. 5, 2012 /CNW/ - The Ontario Energy Board ("OEB") ruled today to impose the Incentive Regulation Mechanism ("IRM") framework on Toronto Hydro-Electric System Limited ("Toronto Hydro"). Due to the gravity of this decision, Toronto Hydro must now take some time to assess the effect on its operations and determine the steps necessary to comply with the OEB's order.
In today's decision, the Ontario Energy Board declined to hear Toronto Hydro's Cost of Service application, filed in August 2011. Over the past three years, the Ontario Energy Board approved Toronto Hydro's infrastructure renewal plans. However, this decision will mean Toronto Hydro will be required to dismantle the grid renewal structure that has been put in place based on past OEB-approved capital construction budget levels.
Toronto Hydro's capital spend in 2011 totalled $378 million. Today, the OEB has cut the capital budget by approximately 65 per cent. This has far reaching ramifications that will impact not only customer service, safety and reliability, but employees within the utility and other industries and suppliers.
Further, with this decision, the asset replacement cycle has been changed to approximately 97 years from the previously OEB-approved 30 years.
Toronto Hydro, in its submission, made it clear that the IRM framework will result in the reduction of its capital spending to a level that will not enable the company to adequately maintain and renew Toronto's aging distribution system. This will likely result in deteriorating service, an increase in power outages, an increased risk to public safety, slower call centre response times, as well as the likelihood of major workforce downsizing.
Toronto Hydro has made significant productivity improvements. The utility currently operates with 35 per cent fewer employees than were in place prior to the amalgamation of the former metropolitan Toronto electricity utilities.
For further information:
Blair Peberdy, Vice President
Tanya Bruckmueller, Toronto Hydro-Electric System