Toronto, ON, Canada — (METERING.COM) — February 20, 2012 – Ontario’s electric utilities could be headed for a shakeup if the recommendations of the so-called Drummond report on the reform of the province’s public services are accepted.
The report, from a commission chaired by economist Don Drummond, recommends that Ontario’s 80 local distribution utilities be consolidated along regional lines to create economies of scale. This would reduce the $1.35 billion spent on operations, maintenance and administrative costs for the utilities, and would result in direct savings on the delivery portion of the electricity bill.
Further, it is suggested that larger regional entities might allow for economies of scope as well as scale, allowing greater participation in planning, design of conservation programs and expanding responsibilities to deliver other resources such as water.
It is not the first time that such proposals have been made and in recent reports, the Electricity Distributors Association (EDA) has recommended among others that the utilities continue to seek possibilities for improved economies of scale and scope.
“Electricity utilities have pursued scale efficiencies through mergers and amalgamations that reduced our numbers from about 350 to 75 utilities over the past decade, and consolidation continues to take place today where the benefit is clearly demonstrated,” commented Charlie Macaluso, CEO of the EDA in response to the Drummond report. “What we now need is action from government to enable electricity utilities to consider economies of scope as they look for greater efficiency in their operations.”
Other recommendations of the Drummond report aimed to reduce the long term electricity costs include eliminating the $1.1 billion Ontario Clean Energy Benefit subsidy and reviewing other energy subsidies, making wholesale electricity prices inclusive of transmission costs such as capacity limitations and congestion so that consumers located nearer to generation stations are able to benefit from lower electricity prices, and making regulated prices more reflective of wholesale prices by increasing the on-peak to off-peak price ratio of time-of-use pricing and by making critical peak pricing available on an opt-in basis.
A comprehensive, proactive electricity education strategy across sector participants should also be coordinated.