If policy makers do not want to remove these impediments to reducing rates, the author suggests a carrot-and-stick alternative which includes a temporary automatic approval process for distribution utility mergers that involve only share swaps and can guarantee customer savings. Following that, rates for all distribution utilities would be benchmarked against the most cost efficient utility in the region. During this period, the Ontario Energy Board’s existing full regulatory approval process would continue to apply for the purchase or sale of a utility, but with a new proviso that the transaction must guarantee meaningful rate reductions for customers.
Ensuring Customers Benefit When Electric Utilities Combine
“Affordable energy infrastructure underpins economic competitiveness.”
Author's Contact Information
by Don Carmichael September 2013
In “Ensuring Customers Benefit when Electric Utilities Combine” author and investment banker Don Carmichael finds that Ontario electricity customers are missing out on savings when their distribution utilities are amalgamated into larger and more efficient ones. The promise of reduced electricity rates underlies the Ontario government’s endorsement of recent recommendations by an expert panel to combine Ontario’s approximately 80 local electric utilities into some 8-12 larger regional distributors. Carmichael finds that a provincial tax on utility sales and debt-financed acquisitions by provincially-owned Hydro One are inflating acquisition process and diverting new-found efficiency savings from customers to shareholders and lenders.
If policy makers do not want to remove these impediments to reducing rates, the author suggests a carrot-and-stick alternative which includes a temporary automatic approval process for distribution utility mergers that involve only share swaps and can guarantee customer savings. Following that, rates for all distribution utilities would be benchmarked against the most cost efficient utility in the region. During this period, the Ontario Energy Board’s existing full regulatory approval process would continue to apply for the purchase or sale of a utility, but with a new proviso that the transaction must guarantee meaningful rate reductions for customers.
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