The Society of Energy Professionals

The Society of Energy Professionals

December 21, 2011 15:33 ET

Energy Professionals Call OEB Toronto Hydro Decision a Ticking Timebomb

TORONTO, ONTARIO--(Marketwire - Dec. 21, 2011) - An Ontario Energy Board (OEB) decision expected to be handed down this week could plant a ticking timebomb in the City of Toronto's electrical grid, says Rod Sheppard, President of the Society of Energy Professionals. Toronto Hydro has applied to the OEB to have its' rates set through a Cost of Service (COS) rate application heard by the OEB, rather than through a hearing under the Incentive Regulation Mechanism framework.

A Cost of Service application would entail the Energy Board making a rate decision based on a full hearing of the evidence regarding the actual costs facing Toronto Hydro as it seeks to continue its crucial infrastructure renewal program. An Incentive Regulation Mechanism allows for only minor formulaic adjustments to the existing rates, regardless of the actual costs that a utility can be expected to incur.

"One of the huge problems we have with the electricity system is that everyone is dependant on it, but almost no one understands how it works", said Sheppard. "That means that decisions with huge impact on the public usually escape any public scrutiny, until it's too late and we're already feeling the impacts. This is one of those decisions".

The bulk of Toronto's electricity grid was built in the 1950's and 1960's, and is either nearing or well past it's expected end of life. As a result, Toronto Hydro customers have seen increasingly frequent power outages and service disruptions. Toronto Hydro began an infrastructure renewal program in 2005, but the reliability problem continues to worsen, and unless a more aggressive renewal program can be pursued, it is expected that the reliability impacts will increasingly impact on the day to day lives of Torontonians. In its' application to the OEB, Toronto Hydro estimated that more frequent outages will impact upwards of a quarter of a million Torontonians every six weeks due to increased feeder failures.

"The bottom line is this: Toronto's electricity grid is on the brink of a crisis. We have to address that head on and make the necessary investment to do essential work and restore the reliability Torontonians expect and deserve", said Sheppard. "If the OEB insists on using IRM, we know with fair certainty that Toronto Hydro will find itself $260 million short of the costs required for infrastructure replacement. That work just won't get done and the impacts will be huge".

Toronto Hydro's current capital expenditures for infrastructure replacement, which were set by the OEB under a Cost of Service mechanism, allow for a 30-year asset replacement cycle. Using IRM would change that to a 97-year replacement cycle, a situation which is wholly unsustainable. Mothballing its' maintenance and infrastructure renewal programs would also force Toronto Hydro to lay off as many as 1000 highly skilled employees. The ripple effect would also cost thousands of spin off jobs down through the supply chain, including in Ontario's hard hit manufacturing sector.

"IRM may be an appropriate and efficient way to set rates in a 'business as usual' situation", said Sheppard. "But the condition of Toronto's grid requires far more than a business as usual response. The OEB needs to permit a full Cost of Service proceeding, allow all the appropriate evidence to be debated and considered, and then set rates based on the reality of the demands facing us, rather than an abstract formula. It will take a bit more time and a bit more effort, but that's a small price to pay to defuse the ticking time bomb in our electricity grid".

The Society of Energy Professionals represents more than 8,500 engineers, telecommunications and information technology professionals, scientists, supervisors, and others who for generations have designed, built, operated, and helped safeguard Ontario's vast electricity system. These women and men manage our electricity system and ensure our power is there when we need it, reliably and safely. The Society's members work for Ontario Power Generation, Hydro One, Bruce Power, the IESO, the OEB, Toronto Hydro and other key electricity sector employers.

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