Niagara Falls Council Pockets Hydro Money

NIAGARA FALLS -- Keeping a portion of hydro customers bills in Niagara Falls is better than seeing the money lost to corporate income taxes, city council says.

Ald. Victor Pietrangelo didn't like a news article in which the leader of a citizens group questioned the arrangement that puts $1.6 million a year from Niagara Falls Hydro's service charge into city coffers.

"In actuality, we're keeping the dollars instead of sending them on to Toronto," he said.

Wayne Gates, the chairman of Niagara Falls Citizens for Democracy, complained that nobody told the public that it was happening. Cancelling the debt could result in lower electricity bills, Gates said.

The city's chief administrative officer said that impression was wrong. A report went to council in May 2000 when Niagara Falls Hydro was created.

"It was discussed at council. It was approved unanimously at that time," CAO John MacDonald said during a council meeting. "There was nothing hidden here."

Niagara Falls Hydro pays 7.25 per cent interest on the $22-million debt created when the old hydro commission's assets were transferred to the new electric utility. The payment gives about $133,000 a month to the city, collected through the $30 service charge on each hydro customer's bill.

Because the province forced Niagara Falls Hydro “and every other utility in Ontario” to incorporate as a private company, it's now subject to corporate income tax. If Niagara Falls Hydro didn't make the payment, that money would be taken out of the community through taxation, MacDonald said.

"Since we own Niagara Falls Hydro, can we just waive the debt?" Ald. Kim Craitor asked.

MacDonald said the answer "would probably be yes." But doing that would subject the money to corporate income tax, something the new electricity utilities have to contend with.

Hydro chairman Bill Haskin, agreed the new rules could allow council and hydro to eliminate the payment, but the effect would be "negligible."

Council continued to blame the provincial government for the new costs associated with electricity deregulation.

The changes in Ontario's electricity industry occurred because "the government was persistent," said Mayor Wayne Thomson. Neither the city council nor the old hydro commission wanted to deal with privatization of electricity, he said.

There are similar arrangements in almost every other municipality, where the local council opted to keep its electric utility instead of selling to the private sector.

"We're not unique. We've done what we've been mandated to do," Thomson said.

Every customer in Ontario is now forced to pay part of the $38-billion debt racked up by the former Ontario Hydro.

That puts each person in Ontario on the hook for about $3,000, Pietrangelo said.

Source: The Review