Delivery charge puzzles small-scale manufacturer: Gerry Bugyra, surrounded by generating stations, wonders how the province can justify charging him $1,600 to deliver $400 worth of power.

Wawa -- Gerry Bugyra is at his wit's end when it comes to making sense of his power bill or trying to fathom how Ontario's electricity market works.

The Wawa businessman says he's operating his wood pellet mill on a day-to-day basis and his expansion plans to establish other plants across the North are on indefinite hold.

The operator of NorWa Manufacturing and Distributing claims his biggest struggle is not finding customers for the pellets he makes from wood waste, it's paying his electricity bill.

High electricity rates, and even higher delivery charges, have forced him to lay off five workers and run his mill himself.

"I'm struggling here. I've got no employees anymore, I'm down to family that's trying to run the business just to pay the power bill."

Those rates, the cost of fuel and insurance are destroying his business.

During one billing period from late March to late April this year, Great Lakes Power (GLP) charged Bugyra $394.26 for his actual electrical consumption. But the delivery charges amounted to $1,598.84. With regulatory and debt retirement charges tacked on, his total bill was more than $2,000.

Bugyra, who calculates he's paying more than 31 cents per kilowatt hour, calls the delivery charges "ridiculous," considering GLP operates several hydroelectric generation dams within a 25-kilometre radius of Wawa.

Three years ago, Bugyra's company was being heralded as part of a new wave of innovative value-added, eco-friendly enterprises in northeastern Ontario.

Last year, he began selling his pellets for U.S. customers for use as absorbent bedding for horses and livestock.

But the biggest demand has come from southern Ontario greenhouse growers who are converting over their natural gas-fired boilers.

"The market is still there, but it's the cost of producing the product. I can put four mills up tomorrow in Ontario and create 180 jobs," Bugyra says, based on demand for his product and interest from outside investors. "You know the biggest god-damn threat to this business? Power."

The issue came to a head last spring when Bugyra temporarily shut down operations for three months while recuperating from surgery.

He claims only once during his hiatus did he fire up his machines for routine maintenance. While his electricity demand on the bill was listed as zero, he was still charged $207.71 for power consumed and $613.27 for delivery, plus other charges.

Bugyra says he was told by a GLP customer service representative there is little the Sault Ste. Marie utility can do and attributed the blame for his delivery charges on provincial government legislation.

Tim Lavoie, Great Lakes Power's customer and finance manager, would not comment specifically on Bugyra's case, but says the proximity of a generating facility to a customer has no bearing on the delivery charge. What causes delivery charges to skyrocket, he says, is the initial large surge in electricity demand when an operator starts up his equipment.

As specified by the Ontario Energy Board, the demand charge, which is also called the delivery charge, is the highest demand or surge of electricity that a customer uses during a 15-minute interval during the month.

"That's a very typical type of charge and any utility in the province would have that type of rate for the larger consumers," says Lavoie. "It has to do with the ability for any particular customer to demand a large amount of electricity in a short period of time."

Utility customers "have to be conscious of that surge of electricity that their equipment uses."

Mothballed equipment that is fired up briefly for routine maintenance, "will form exactly the same charge from a demand perspective than it did the month before even though (he) may have operated 100 percent of the time."

He advises the best way to off-set this high delivery charges is by "staging-in" operation of heavy motors to avoid a complete surge of electricity at any one time.

Not satisfied with GLP's explanation, Bugyra says he has taken his complaints to Algoma-Manitoulin MPP Mike Brown, NDP leader and hydro critic Howard Hampton, the Ontario Energy Board (OEB), provincial cabinet ministers Rick Bartolucci and David Ramsay, as well as Thunder Bay-Superior North MP Joe Comuzzi.

He's received either no replies or been told to simply get used to paying higher prices for power.

"Everybody keeps saying, live with it. That's bullshit."

Farquhar adds Bugyra's case is not an isolated one, citing high power costs affecting Ontario's forest industry, but he refused to discuss the circumstances of Bugyra's case, attributing it to "the way he's doing his business.

"I do know some of the background and I can't comment on whether it's all power or not, or anything else."

A recent study by consumer watchdog group Energy Probe shows huge spikes in delivery charges for Ontario ratepayers by as much as 100 per cent for both residential and small business owners since 1998.

Tom Adams, Energy Probe's executive director, says consumers like Bugyra are right to protest but his beef is not with his local utility, it's with the past decisions of the regulator, the Ontario Energy Board, and the previous Conservative government which approved the delivery rate increases in 1999-2000. "That is really where the problem ultimately lies.

"The problem was Ontario Hydro, their nuclear plants and their spending habits," says Adams.

He advises small- and medium-sized business owners to strongly consider getting off grid and invest in their own generating capacity to avoid the next round of hydro rate increases expected to take effect in April 2006.

"This is not the end of it. The distribution component of the bill is going to go up," says Adams.

"I'm expecting 2006 to be quite a cheerless year for electricity consumers."

Lavoie says distribution utilities have not had a full rate review since the new electricity market opening in 2002 and utilities are faced with cost pressures like any other business. "I think from a cost inflation standpoint there will likely be some adjustment upward."

www.glp.on.ca

By IAN ROSS

Northern Ontario Business