Electricity Price Freeze Cuts Hydro One Profit

Hydro One, the electricity grid that distributes nearly 90 per cent of the electricity in the province of Ontario, reported a slight decline in 2002 earnings and said the plan by the provincial government to freeze electricity rates until 2006 will hurt sales and profits.

While revenue rose 17 per cent to CAN$4.04 billion (US$2.7 billion) from $3.47 billion, earnings fell to $344 million from $374 million in 2001.

The company said Ontario's decision in November to cap electricity rates reduced net income significantly.

Also, Hydro One said extreme weather conditions last year led to unusually high costs for maintenance.

"The recent rate cap...means that Hydro One will continue to collect lower distribution revenues until at least 2006," the company said in a statement, but added that higher transmission and distribution revenues will partially offset this.

Last month Ontario's Conservative government scrapped its plans to sell a minority stake in the Hydro One grid. Ontario had planned to sell a 49 per cent stake in Hydro One as part of its plan of bringing competition to the province's electricity markets.