Power bills to drop after transmission rates reduced

TORONTO - Electricity bills across Ontario will drop by about one per cent this fall, after the province's energy board reduced transmission rates for utilities.

The reduction will benefit both business and residential customers, and is to take effect sometime after Nov. 1.

"Residential consumers may not see that right off the bat,'' warned Paul Crawford, a spokesman for the Ontario Energy Board, adding the rate reductions, which are incorporated into the delivery rate, may be phased in or staggered.

The reduction will immediately apply to 55 utilities and 65 large volume consumers, such as major industrial customers, of Hydro One's transmission network.

But due to a somewhat complex accounting process, it may take some time for the individual utilities to pass the rate change on to their residential customers, the board said.

The rate change is to apply to Ontario's other transmitters, including Great Lakes Power Limited, Five Nations Energy Inc. and Canadian Niagara Power Inc. The three other transmitters represent only three per cent of the market.

The ruling will reduce Hydro One's transmission revenue by approximately $80 to $90 million in each year for 2007 and 2008.

Hydro One had applied for a revenue requirement of $1.24 billion for 2007 and $1.28 billion for 2008.

The previously approved revenue requirement for Hydro One transmission was $1.249 billion, and therefore Hydro One's 2007 request represented a decrease of only $9 million.

The most significant decision was the reduction of Hydro One's applied-for return on equity from 10 per cent in 2007 and 10.25 per cent in 2008 to 8.35 per cent, for both years, in line with the board's return on equity formula that applies to electricity distribution companies.

According to the energy board, transmission costs, which make up about seven per cent of the average electricity bill, represent the costs to deliver electricity from generating stations to local utilities along Hydro One's transmission grid.

The transmission fee include a network service charge, which covers the cost to deliver electricity from generating stations to local utilities.

The fee also includes a line and transformation connection service charge, which represents the costs local utilities incur to connect to Hydro One's transmission lines, as well as the cost to transform electricity from the high voltages used in the bulk transmission system to the lower "distribution voltages'' used by local utilities.