According to financial documents provided to Toronto city council, Tony’s Hydro (AKA Toronto Hydro) ended the first three months of 2012 with a net loss of $12.8 million compared to net income of $25.5 million for the same period in 2011. This $38.3 million reversal in year-over-year performance was primarily due to $27.8 million in restructuring costs arising from the utility’s unplanned downsizing initiatives. The downsizing followed the Ontario Energy Board’s decision, issued January 5 this year, which turned down the utility’s request for a rate plan that was out of compliance with the Board’s guidelines for utilities.
Until now, the city had been expecting $48 million in dividends from Toronto Hydro in 2012, but this plan is now clearly in danger.
City council has wisely indicated interest in executive compensation at the utility, where CEO Anthony Haines is Canada’s highest paid municipal employee. “The City’s shareholder direction to Toronto Hydro Corporation is under review and amendments, including the requirement that one member of the Board’s compensation committee be a Member of Council, are to be reported to City Council in the fall.”
In related news, on June 12th the Ontario Energy Board issued a letter to Toronto Hydro seeking clarification of the regulated utility’s conflicting rate strategies. The utility has recently applied to the Board for incentive-based rates for 2012-2014. However, the utility also has a legal motion before the Board seeking a review of the Board’s January 5, 2012 decision that turned down the utility’s request for special rate treatment, and a judicial review application to the Divisional Court seeking to reverse the January 5th decision. A Board’s request for clarification has lead to an exchange of letters from the utility and lawyers for consumers groups presenting sharp differences of view as to how the regulator should proceed. The uncertainty over business and rate planning at Toronto Hydro will continue for some substantial period of time.