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Toronto Hydro 2012 CR Report

INTRODUCTION OUR SERVICES OUR WORKFORCE OUR ENVIRONMENTal Restructuring Costs In the first quarter of 2012, the Corporation’s Board of Directors approved a workforce restructuring program aimed at reducing operating expenditures. The program was approved following the decision by our regulator, the OEB, to deny our request to set electricity distribution rates for 2012, 2013 and 2014 under the Cost of Service framework. In preparing our revised application using the Incentive Regulation Mechanism framework, we concluded that significant cost reductions were necessary to manage our business within the confines of the expected allowed electricity distribution rates provided by the IRM framework. The main component of these operating cost reduction initiatives was a workforce restructuring program, which included the severance of management employees and a voluntary exit incentive program for targeted unionized positions. Restructuring costs for the year ended December 31, 2012 were $27.8 million compared to $nil for the comparable period in 2011. This balance was comprised of ongoing termination charges of $23.7 million and one-time termination incentive charges of $4.1 million, of which $12.0 million remains unpaid as at December 31, 2012. Our 2012 Rate Application In April 2013, Toronto Hydro received the OEB’s Decision and Order for our application for the 2012 and 2013 capital infrastructure plan and also for our application for a new transformer station in downtown Toronto. The OEB has strongly endorsed our capital investment program, its methodology and execution. Citing the strength of our evidence, the OEB supports the investment program which is intended to enhance safety and reliability of the distribution system for the benefit of customers and employees. The decision provides for an increase in capital spending to address aging electricity distribution infrastructure, and allows for the construction of the new transformer station in downtown Toronto to relieve existing stations and provide for future load growth in the area. The new station will be the first transformer station built in downtown Toronto in many decades. Productivity Our financial strength is a credit to the productivity and efficiency gains we have made year over year since our amalgamation in 1998. We are committed to delivering value to all of our stakeholders and financial prudence is a large part of how this is accomplished. In 2012, we commissioned research to measure our productivity and efficiency against an American peer group. TORONTO HYDRO 2012 corporate respnosibility report 91 VIDEO: Measuring our Productivity. According to the Ontario Energy Board’s productivity ranking, Toronto Hydro has room to improve our efficiencies. We are currently categorized as an inferior performing utility. Ben LaPianta, Vice President, Distribution Grid Management, explains how productivity is measured by our regulator, and why we don’t think we belong in this group. INITIATIVES OUR COMMUNITY OUTREACH OUR ECONOMIC PERFORMANCE OUR GOVERNANCE, COMPLIANCE AND BUSINESS CONDUCT


Toronto Hydro 2012 CR Report
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