Commission on the Reform of Ontario's Public Services

Chapter 12: Infrastructure, Real Estate and Electricity
As the OEFC’s revenue streams directly impact the province’s fiscal plan, it is imperative for
the province to ensure that OPG and Hydro One are run efficiently in order to service and
retire the debt and liabilities of the old Ontario Hydro.
III. Options to Reduce Long-Term Electricity Costs
While the <strong>Commission</strong>’s mandate is directly linked to Ontario’s fiscal outlook, we feel that the
report’s principles as outlined in Chapter 3, Our Mandate and Approach, are transferable to
the electricity rate base as well. This is particularly significant in the context of the province’s
LTEP that projects electricity prices to increase 46 per cent over the five-year period from
2010 to 2015, prior to the application of the OCEB. There are a number of potentially large
opportunities to source efficiencies in the sector and slow down electricity rate increases.
However, the <strong>Commission</strong> also recognizes the amount of change that has occurred in the
sector since Ontario Hydro was broken into its constituent parts in 1999. A degree of normalcy
may very well be helpful for the sector to take stock and reflect on the status quo.
Consequently, the <strong>Commission</strong> has a series of recommendations that are meant to balance
the need for stability in the sector with the need to curb costs.
Recommendation 12-12: Produce an Integrated Power System Plan (IPSP) built on the
foundation of the province’s Long-Term Energy Plan.
The OPA initially filed an application for approval of the original IPSP in 2007 with the OEB,
but this process was never completed. An approved IPSP would provide producers,
consumers, utilities and other sector participants with a detailed, 20-year blueprint for the
electricity sector.
Recommendation 12-13: Consolidate Ontario’s 80 local distribution companies (LDCs) along
regional lines to create economies of scale.
Reducing the $1.35 billion spent on operations, maintenance and administrative costs for
Ontario’s LDCs 16 would result in direct savings on the delivery portion of the electricity bill.
Flexibility regarding LDC sector reform could be greatly enhanced through a co-operative
federal-provincial tax arrangement that returns to the province any federal corporate taxes
paid by newly privatized electricity utilities. This would allow the province to remove the
33 per cent transfer tax on such divestitures currently in place that goes towards stranded
debt. It would also help compensate for the future loss of the federal portion of PILs when a
publicly owned LDC is sold to the private sector. There is precedent for such co-operation as
illustrated by the previous federal Public Utilities Income Tax Transfer Act.
16 Calculation based on figures from Ontario Energy Board, 2010 Yearbook of Electricity Distributors, p. 7.
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