THUNDER BAY -- Thunder Bay Hydro's top executive says rebuilding infrastructure for the future will mean it will need to increase distribution rates.
The local utility is appealing to the Ontario Energy Board for permission to increase rates $4.71 or 1.57 per cent for the average home. If approved, the changes would take effect May 1, 2017.
"The bulk of the increase, our ask, in the rate application relates to investing in our electricity distribution infrastructure. It's the biggest strategic issue we have," said Thunder Bay Hydro president Robert Mace.
Of the $4.1 million in increased revenue the proposal would bring in, $2.8 million would be committed to infrastructure.
Mace made his case to the OEB at a public meeting on Wednesday evening, arguing system sustainability depends on having upgraded between 400 and 600 poles per year since 2012 and upgrading over 600 per year next four years.
"Historically, we were behind where we needed to be. If you go back to 2008, we were doing 200 poles. If you keep doing that, the system in 20 years, is going to fall down around your ears," he said.
"We've now gotten past that point. It's not getting older and in fact in that last few years, it's getting younger."
According to the company's self-reported scorecard, Thunder Bay Hydro's cost per customer was $635 in 2015, having risen from $577 in 2011.
The OEB sets those annual "adjustment" increases based on inflation and profitability indicies. The "rate" increase for which Thunder Bay Hydro is now applying can be perceived as the first step in the next five-year cycle.
Local distribution rates are currently listed as the fourth lowest in Ontario but they would be among the lower 20th or 25th percentile if the municipality wanted to recover the company's 5.69 per cent profitability, as the city is the company's sole shareholder.
"If we were going to provide a full rate of return to the city, they have somewhere in the neighbourhood of $26 million debt with us that we don't pay any interest or principle on," Mace said.
"If they wanted that money, we'd have to raise rates to pay for it. As a consequence of the shareholder forgoing their financial return, we have among the lowest distribution rates in Ontario for residential customers."
Only seven members of the public attended Wednesday evening's session and only two registered to speak.
Peter Kresin was among them, claiming delivery charges to his home on the city's southwest side would increase 18 per cent under Thunder Bay Hydro's proposal. He said he has been seeing 10 per cent increases to his bill per year since 2012.
"I've reduced my energy consumption but I'm getting to the point where there's a limit. You can only reduce so much and it doesn't really matter," he said.
"Whatever you reduce, because they're not collecting enough money, they can apply for rate increases to make up the difference. That's the hydro system."
OEB manager of stakeholder relations Sylvia Kovesfalvi said those opinions will be taken into account including those citizens who submit their testimonies online.
"Rarely do utilities get everything they want," she said.
"In 2015, we reviewed 12 cost of service applications and reduced the rate asks by $50 million."
