Toronto Hydro Zaps Energy Retailing Staff

Toronto Hydro Energy Services Inc., or THESI, issued layoff notices to 40 of its 85 workers, according to Blair Peberdy, vice-president of THESI's parent Toronto Hydro Corp. The layoffs take effect Dec. 13.

Toronto Hydro Corp. is owned by the City of Toronto. It decided to move aggressively into both electricity and gas marketing when the province overhauled the province's electricity sector starting in 1998.

Toronto Hydro sank $40 million into setting up THESI's retailing operation, Peberdy said in an interview. The utility embarked on an aggressive door-to-door sales campaign to sign up customers for fixed price gas and electricity contracts throughout Greater Toronto.

But now, on the THESI Web site, potential customers for both gas and electricity contracts are told: "Energy offers are temporarily unavailable."

The province cut the ground from under electricity retailers last month when it froze consumer electricity prices. That removed any incentive for householders to sign fixed rate contracts with retailers.

While THESI sells natural gas along with electricity, the bulk of its business is in electricity contracts. "We need fewer staff than we've had, so sadly we've had to reduce the staff numbers as of the 13th of December," Peberdy said.

"We're very, very concerned and saddened by what has happened. It really is stunning and a shock to us."

Peberdy said natural gas contract sales probably will be restarted "shortly," once the company reorganizes after the layoffs. But nothing is certain.

The company is in several other businesses, including water heater rentals, and an energy conservation advisory service.

Peberdy says all operations are under review.

"What we'll be doing is assessing the ongoing business opportunities for THESI," he said. "Early in the new year, probably in February, we'll make decisions as to what those are, and whether there's a viable business there."

Toronto Hydro Corp. was supposed to be a money-spinner for the city, contributing dividends both from its regulated electricity utility business and profits from its unregulated retailing operations. So far, the hopes have gone largely unfulfilled as the province first limited, and has now frozen, the rates that local utilities can charge.

The rate freeze also means the local utilities have been unable to recover the money they spent overhauling their operations to get ready for the competitive electricity market that opened May 1.

Projected dividends of about $56 million a year to the city have never materialized. The city also took back a note of $980 million on which Toronto Hydro was supposed to pay 6.8 per cent interest. But because the province has kept a lid on the utility's rates, Toronto Hydro has not been able to pay full interest. In 2001 it paid $41.9 million interest to the city. At 6.8 per cent, the note should have generated interest of $66.6 million.

Peberdy said no decision has been made whether to take a writedown on THESI.

Although Toronto Hydro is owned by the city, its finances are shrouded from the public. Apart from its published annual report, the company issues no quarterly financial statements.

Statements are sent to the city's finance department, but the finance department refuses to release them unless expressly ordered to by a vote of city council.

In last year's annual report, Toronto Hydro Corp. didn't break out THESI's performance from the over-all corporate numbers. For 2001, Toronto Hydro Corp. had net income of $11.4 million on revenue of $2.062 billion.