Toronto Hydro pumps out relentless propaganda about its “aging infrastructure” and “obsolete equipment”. In 2012, the utility warned that without a dramatic increase in its rate of capital spending, public safety is at risk.
Toronto Hydro’s latest critical infrastructure renewal target: garbage cans. Price tag for the 160 replacement garbage cans?
$228,800 (not including delivery charges).
Out with the old.
In with the new (at $1430 per unit, ordered July 14, 2014, first shipment received October 9).
Comparing the before and after garbage cans, the risk that aging infrastructure poses to reliability and safety is obvious!
Toronto Hydro never misses an opportunity to complain that one-third of its electricity distribution assets are past their expected useful lives and that ratepayers must contribute more to fund replacement of aging infrastructure. As recently noted in this series, capital spending managed to keep the lights on in 2004 and 2005 with $85 million and $113 million respectively. In 2007, the utility testified to the Ontario Energy Board that there was an infrastructure deficit, but that by increasing the rate of spending to $140 million per year, the deficit could be erased. Instead, spending has been ramping up dramatically with the approval of the Ontario Energy Board. In 2013, capital spending increased by a factor of more than 4 time over the 2004 rate, to $445.7 million (applying USGAAP).
For 2014, the utility is on track to spend $589.2 million. (see OEB EB-2014-0116, Exhibit 2A, Tab 6, Schedule 2, Appendix 2-AA Capital Projects Table, Filed: 2014 Jul 31, Corrected: 2014 Sep 23)
Toronto Hydro’s current application before the Ontario Energy Board will increase rates for residential consumers for the core distribution portion of their bills by 21% in 2015, while rates for small and medium – sized businesses will rise 19 – 22%, if approved. More detail on these proposed rate increases is presented here.
Executive bonuses at Toronto Hydro are tied in part to capital spending.
Toronto Hydro’s capital spending frenzy has happened as total energy sales have declined. The utility’s sales pitch for spending increases has focused on manifold claims that more capital spending will improve reliability. The Ontario Energy Board is so enthusiastic for the plan that in its most recent rates decision (EB-2012-0064), it exempted Toronto Hydro from the normal rules designed to control capital spending applied to the rest of the province’s regulated power distributors.
How does Toronto Hydro blow through $589.2 million in capital spending in one year? Leave no garbage can unturned. One small contribution is to toss a quarter of a million dollars into gold-plated garbage cans and call it “infrastructure renewal”.