Sustainable Affairs: CANADA: $1.2 billion system overhaul looms as underground cables corrode, long-time workers near retirement

Toronto Hydro asks for 4% rate hike. Faced with a rapidly deteriorating network of underground hydro cables, Toronto Hydro-Electric Systems has asked the energy regulator for a 4 per cent rate hike to help fund what's expected to be a $1.2 billion system overhaul over the next decade.

Canada's largest electric utility filed its latest three-year rate application to the Ontario Energy Board yesterday. If approved, the average residential customer's monthly hydro bill will be $4.46 higher in 2010 compared with today.

Customers would pay $3.10 more a month beginning May 1, 2009 and another $1.59 a month the following year. In 2008, however, rates would actually decrease by a modest 23 cents a month. The rate hikes would also apply to small businesses in the city.

"This is needed investment. We need to invest in our system," said Pankaj Sardana, vice-president of treasury, rates and regulatory affairs at Toronto Hydro.

He said the utility anticipates having to spend slightly more than $900 million over the next three years on maintaining its fleets and facilities, finishing smart-meter deployment, hiring and training new staff and upgrading infrastructure.

Nearly one-third of Toronto Hydro's workforce will be eligible for retirement within 10 years. Before these "baby boomer" workers retire, the company said, it must train apprentices to transfer the knowledge and skills of older workers to younger employees.

But by far the largest component of the rate hike relates to rebuilding the utility's aging electrical infrastructure. Roughly a third of the equipment on Toronto Hydro's network, much of it installed during the 1950s, 1960s and 1970s, needs to be replaced.

Spokesperson Blair Peberdy said the most immediate issue relates to underground cables buried under certain pockets of the city as new communities emerged during the 1970s. The cables were buried directly in the ground, rather than in protective ducts.

"Over the years they've corroded," said Peberdy, pointing out that outages are becoming more frequent and a Band-Aid approach to repairs is proving too costly and ineffective.

He said in areas such as northeast Scarborough, where work has already begun, new trenches need to be dug to lay ducts and cabling. "We basically have to rebuild the system out in these neighbourhoods."

Officials were quick to add that none of the funding is going toward building a third transmission corridor into the city and no decision has been made related to such a project.

Large businesses would also see rate hikes if the latest application is approved. Over three years mid-sized commercial customers would see rates rise by between 1.1 per cent and 1.6 per cent, while the largest energy users – those that need more than five megawatts of power – would see a 1.5 per cent hike.

Customers can offset the proposed rate increases by participating in conservation programs offered by the utility, said Sardana.

"Our sense is that this 4 per cent over three years should be manageable," he said. "In fact, we're very confident they'll be able to lower their consumption and their bills."

Mary Todorow, a research analyst with the and the Advocacy Centre for Tenants OntarioLow-Income Energy Network, acknowledged the need to upgrade infrastructure, but said higher rates will hurt low- and fixed-income consumers.