EDITORIAL Ontario Hydro rate hike too high

Government-mandated costs in Ontario (including costs of energy, unemployment insurance, compensation assessments) represent about 20 per cent of a mine’s operating expenses, so it was not too surprising to find the mining industry dismayed and disappointed by a 5.2-per-cent direct-customer rate increase announced the other day by Ontario Hydro.

The industry in the province is a very big hydro power user, mounting an electricity consumption bill of more than $205 million in 1985, the last year for which figures are available. Inco Ltd. and Falconbridge Ltd. alone, for instance, are expected between them this year to have total power bills of around $110 million. Falconbridge in fact, now including the operations of Kidd Creek at Timmins, is the biggest single direct customer of Ontario Hydro.

Where the industry largely quarrels with Hydro’s latest rate increase is in the fact that at 5.2 per cent it exceeds the current rate of inflation, and adds about $6-7 million in costs to the industry for every one percentage point above the latter figure.

“It hits just at a time when the industry is beginning to recover, and in the process has been doing an especially good job in cost-cutting to help meet that objective,” notes Thornton Lounsbury, executive director of the Association of Major Power Consumers of Ontario. The Association had argued for a 4.1-per- cent rate hike, and believes the 5.2 per cent that eventuated is excessive. This year for instance, it will mean a jump of over $3 million in hydro costs for Falconbridge alone, a company spokesman said. Concerned as it is, though, with this added cost factor, the province’s mining industry is also keeping a close eye on a proposal by the Ontario Energy Board that Ontario Hydro move to a return on equity position, supplying power not just at cost, but at a profit. According to Lounsbury, that kind of move would automatically mean even higher rate increases for the industry. It doesn’t need that extra burden.