Hydro one just released their 3rd Quarter results and net income after taxes increased from $194 million to $241 million or 29.4%. Net income increased by only $14 million or 6.2% after adjusting the 2018 results upwards for the costs associated with the failed Avista acquisition.
Let’s look at those results by Hydro One’s client base of transmission (generators and local distribution companies or LDC) and distribution (ratepayers).
Transmission Revenue and Income Down What is interesting about their results is it shows transmission revenue decreased by $50 million (down 10.1%) as “peak demand” keeps falling. Year over year the latter fell by 1,805 GWh (gigawatt hours) or 7.9%. As a result, net income (before financing and taxes) from the transmission business dropped by $55 million or 19.2% from $287 million to $232 million.
Distribution Revenue and Income Up On the other side of their business Hydro One’s distribution revenue (net of purchased power) was up from $370 million to $403 million for a $33 million (+ 8.9%) gain and the revenue growth translated to a $33 million jump in net income (before financing and taxes). The latter increased from $120 million to $153 million (+27.5%) year over year.
The jump in distribution income occurred despite the fact Hydro One’s 1.4 million customers reduced their consumption from 6,817 GWh to 6,627 GWh for a decline 190 GWh or 2.8%. The forgoing means the average delivery cost per kWh increased from 5.43 cents/kWh to 6.08 cents/kWh year over year and amounts to a jump of 12%. The 12% increase is co-incidentally what we were promised to see as a reduction in our rates by the Ford government.
Summary While all customers are billed for both delivery and transmission costs, the latter tends to represent a very small charge whereas delivery costs represent (on average) about 30% of your monthly bill. Hydro One’s delivery costs however, are closer to 40% so it is disappointing to see that portion of the bill for their 1.4 million customers keeps climbing at rates well above inflation.
Getting rid of the $6 million man did nothing to reduce Hydro One’s delivery costs!