Toronto Hydro dropped by insurer
Toronto Hydro’s cries of pain that its efforts to renew aging equipment are being throttled are being heard: Its property insurance company has given notice it won’t renew its contract on June 1.
“It’s likely that the uncertainty around the capital investment is a factor in that,” said Blair Peberdy, vice-president of Toronto Hydro.
Toronto Hydro has been warning that a decision in January by the Ontario Energy Board curbing its equipment renewal program will prevent it from replacing aging equipment — leading to longer and more frequent blackouts.
Power provider warns decision to curb equipment renewal will lead to blackouts
Peberdy said the prospect of insuring less reliable equipment seems to have triggered the decision by the insurer, Factory Mutual insurance, or FM Global. Peberdy said Toronto Hydro doesn’t expect to have difficulty finding a new insurer and “we don’t expect it to have a material impact on the cost.” Factory Mutual, held Toronto Hydro’s property insurance. Liability and vehicle insurance are covered by separate policies with other firms. Toronto Hydro has been in turmoil since early January, when the energy board rejected its application for a three-year, $1.6 billion program to renew aging equipment and train new workers. Toronto Hydro is now applying under different rules, with a lower spending limit. It has also been ordered to prune $20 million in annual operating costs. That resulted in termination of contracts with firms employing hundreds of workers, plus cuts of close to 60 executive and management jobs. Buyouts have been offered to 460 unionized, non-technical staff. The company is trying to avoid laying off apprentices in skilled trades, since many of its skilled trades workers are nearing retirement. Peberdy said new rate applica- tions, prepared under the rules specified by the energy board, should be filed by the end of the month. A new budget and rates could be approved by late summer, he said.
Meanwhile, Toronto Hydro made a higher profit and paid higher dividends to the City of Toronto in 2011.
Although the company has been cutting staff and warning of difficult times ahead because of a January ruling by the Ontario Energy Board, last year’s results were unaffected.
The company, which is owned by the City of Toronto, says profit rose to $95.9 million from $66.1million a year earlier.
Revenue increased to $2.81 billion from $2.61 billion a year earlier. Lower taxes also helped boost profit.
The higher profit allowed the company to pay higher dividends to the city. Toronto Hydro paid dividends of $33 million to the city in 2011, up from $25 million the year before.
The earnings from 2011 will slide into this year’s dividends as well. Based on 2011 profits, the company will pay its usual $6 million dividend to the city later this month, plus a bonus dividend of $23 million.
Toronto Hydro continues to warn of difficult times ahead, however. It says the energy board is not allowing the company to spend the money needed to upgrade its system.