Investigation into the transparency of Hydro One’s billing practices and the timeliness and effectiveness of its process for responding to customer concerns.
June 23, 2014
This investigation involved an unprecedented number of complaints and required extraordinary efforts by personnel in every part of our office. From the Special Ombudsman Response Team staff who did the systemic work (led by Lead Investigator Grace Chau), to the dedicated teams of Investigators and Early Resolution Officers who triaged cases and referred them to Hydro One, to the Senior Counsel, managers and investigators who met regularly with Hydro One’s senior team, it was a joint effort. The entire office, including the corporate support, IT and communications teams, made this report possible.
Table of Contents
Egregious Errors and Baffling Bills
Centering on Customers
Still Looking on the Bright Side
Appendix B – Hydro One Response (PDF)
Government of Ontario
1 Large public sector corporations carrying on monopolistic commercial enterprises can sometimes forget the citizens they were created to serve. Hydro One, which distributes electricity to 1.3 million Ontario consumers, made a critical mistake when installing a new billing and account management system in May 2013. In planning for and implementing its “customer information system” to meet its business goals, Hydro One lost sight of its public interest purpose and failed to adequately consider the impact on its customers. Its overconfidence in its technical superiority fostered complacency. When glitches arose with the new system, Hydro One’s first response was to scramble for technical fixes. It forgot to consider the consequences to its customers.
2 Soon after the system changeover, more than 89,000 customers stopped receiving bills. Some were not billed under the new system for months, while others only received bills based on estimates for prolonged periods. Then, as technical glitches were being addressed, the system issued a flurry of multiple invoices and huge “catch-up” bills, leaving customers frustrated and confused. Many had large sums withdrawn automatically from their bank accounts without notice or explanation. Tens of thousands of accounts were affected by bizarre errors, as Hydro One worked frantically to clear unexpected system problems. Hydro One’s outsourced call centre and its in-house customer relations centre were left to cope with the ensuing flood of calls and complaints without proper training or adequate tools and resources. Workload pressures contributed to rude, insensitive, and substandard customer service.
3 Hydro One’s board of directors and executive managers claimed they were caught off guard and oblivious to the developing crisis. They blamed lower-level managers for presenting them with overly optimistic reports. Some Hydro One representatives deliberately kept the situation under wraps, deflecting media inquiries and even deceiving the electricity regulator, my Office and other stakeholders about the extent and nature of the company’s billing and customer service disaster.
4 Hydro One tried to contain reputational damage by dealing quietly and reactively with issues as they arose. Whenever bad publicity surfaced in the press, Hydro One adopted a dismissive and minimizing approach, claiming that only a small percentage of its customers were affected by the billing problems. Its statistics and descriptions of the issues were nebulous and shifted over time, however, it ultimately confirmed that in February 2014, 84,394 customers were either receiving multiple estimated bills or had not received a bill for more than 90 days. When one adds the thousands who experienced hardship as a result of other system errors and billing inaccuracies since May 2013, the tally of those affected by Hydro One’s bungling is likely well over 100,000.
5 Until February 2014, when I launched my investigation and Hydro One’s cover was effectively blown, the company feverishly tried to spin positive news stories. Since then, it has faced a crisis of confidence that has rocked it to its public sector core and damaged its financial bottom line. Hydro One has paid a hefty price trying to make things right, spending more than $88 million to dig its way out of controversy and restore public trust.
6 My Office received an unprecedented number of complaints in connection with this investigation – 10,565 as of the writing of this report, and counting. While the volume has dropped markedly over the last year, we continue to hear from about a dozen people a day who remain concerned about Hydro One’s billing and customer service.
7 The source of Hydro One’s mind-boggling maladministration does not lie in defective data and software programming. Rather, its fatal fault is a technocratic and inward-facing organizational culture that is completely out of step with public sector values. Even after Hydro One pledged to become more customer-centric, to do better, and to learn from its mistakes, it continued to display insensitivity and disregard for its customers. As late as February 2015, during the coldest month in Ontario’s recorded history, the company lied to and bullied customers with the threat of disconnection.
8 Hydro One’s ordeal has underscored an expensive lesson in public administration: Its customers must be considered in every aspect of its operations. Although the Chief Executive Officer and President has offered a public mea culpa and several changes have been made to improve customer service, much remains to be done to bring the company up to the standard Ontario’s citizens deserve.
9 The Ontario government has recently announced plans to significantly restructure Hydro One, including disposing of 60% of the utility, while retaining a 40% ownership interest. It has also proposed to appoint an in-house ombudsman to address customer complaints about the new privatized utility. My investigation demonstrates that Hydro One has historically not lived up to the principles of good public administration expected of Ontario’s public bodies. During the recent billing and customer service fiasco, its customer service was abysmal by any standard. A corporate ombudsman’s loyalty is ultimately to the employer it serves and is no substitute for independent investigative oversight. In introducing structural changes to Hydro One’s operations, the government of Ontario should ensure that the public interest in fair, timely and effective customer service is preserved, including the right of recourse to my Office.
10 I make 66 recommendations in this report, 65 addressed at reorienting Hydro One’s corporate persona and improving its operational practices to better serve the public interest, reflecting the public sector values of openness, transparency and accountability. Hydro One has accepted all of these recommendations. Recommendation 66 is aimed at ensuring that implementation of my recommendations continues as the Government of Ontario moves forward with the proposed restructuring of Hydro One. Regrettably, in responding to this recommendation, the Ministry of Energy has confirmed that the government’s privatization plans include abandoning independent and external oversight through my Office.
11 I will monitor Hydro One’s progress in fulfilling its commitments. I will also continue to encourage the government to retain existing accountability mechanisms, including Ombudsman oversight of Hydro One and any successor corporation. My report clearly documents Hydro One’s failure to communicate openly, honestly and proactively with its customers, its regulator, Ministry officials and my Office. I am concerned that unless accountability is assured through independent and impartial scrutiny, stakeholders may once again find themselves in the dark.
12 My Office first noticed a rising trend in Hydro One complaints in 2012-2013, when we received 328, up from 232 the previous year. In 2013-2014, that number more than doubled, reaching 647 by early February 2014. Most complaints focused on bills that were wrong, excessive, duplicated, unreasonably delayed or estimated based on unclear criteria. Our attempts to resolve customer concerns were also increasingly met by stonewalling by Hydro One officials, a frustrating experience I likened to “wrestling with a slippery pig.” We were particularly concerned about people who found themselves in vulnerable situations and facing significant financial hardship and stress because of their dealings with Hydro One.
13 Common complaints involved large “catch-up” bills issued to customers who had received estimated bills or no bills for long periods, and who were given little time to pay or explanation for the amounts billed. Many also cited long waits, for what turned out to be inadequate information from Hydro One’s customer service operations.
14 Given the rising complaint volume and our own experience with Hydro One’s delayed and reticent response to our inquiries, on February 4, 2014, I announced a systemic investigation into complaints about serious problems with billing and customer service at Hydro One. I stated that the investigation would focus on the transparency of the utility’s billing practices and the timeliness and effectiveness of its process for responding to customer concerns.
15 The investigation was assigned to the Special Ombudsman Response Team (SORT). A team of seven investigators carried out the investigation under the direction of SORT’s director and with the assistance of senior counsel.
16 My Office received more complaints about Hydro One than we have about any single organization in our 40-year history. In addition to the original 647 complaints, nearly 10,000 poured in after the investigation was announced. To deal with this unprecedented volume, my Office took a two-pronged approach: While SORT pursued the broad systemic issues, a team of 12 early resolution officers and investigators triaged Hydro One complaints, and referred complainants elsewhere if their issues were outside the scope of our authority. Another 12-member dedicated team resolved individual cases with a 10-member team that Hydro One created in February 2014 as a special “SWAT” team to deal with cases from my Office. Not all complaints to our Office required referral to or follow-up by Hydro One. However, since April 2013, 4,142 complaints have been resolved through our intervention and Hydro One’s efforts. My Office’s director of investigations and senior counsel also met regularly with senior Hydro One officials throughout the investigation.
17 I met with the Chief Executive Officer and President of Hydro One several times and addressed systemic themes that we identified. I also took a turn on the phone lines alongside my staff to hear complainants’ concerns firsthand.
18 SORT conducted 190 interviews, including with current and past Hydro One executives, outsourced agencies that perform work on behalf of Hydro One, complainants and stakeholders.
19 Our attempts to identify and interview relevant Hydro One staff were complicated by a significant degree of transition within the company’s management. During the first month of the investigation, two customer service executives left the company; one retired, the other was terminated. The same month another key official departed to join another company. At least six other executives shifted positions as the investigation proceeded, and leadership at the outsourced call centre changed.
20 SORT investigators requested briefing sessions with Hydro One at the beginning of the investigation to get an overview of its billing system and some of the technical issues relating to billing. Investigators also met with representatives from other agencies, including the Ontario Energy Board and the Independent Electricity System Operator.
21 As well, some 25 industry insiders and whistleblowers, including current and former Hydro One staff and staff from its outsourced service providers, contacted us to express concerns about billing and customer service issues. They provided us with helpful insights into the culture of the company.
22 Site visits and interviews with staff were conducted at Hydro One’s two outsourced call centres, in Markham and London, Ont. At both locations, our investigators had an opportunity to monitor call centre agents as they handled customer calls.
23 SORT made two formal requests and several additional requests for documents when it became clear some relevant information was omitted. The bulk of the documentation reviewed was in electronic format – on 10 USB keys, equivalent to more than 23,000 pages of printed material. In addition, in response to our request for the electronic communications of 12 Hydro One staff, we received a hard drive containing 151,471 emails.
24 In addition to complaints about Hydro One billing and customer service, we received many complaints about subjects that were not the focus of this investigation – chiefly, electricity pricing and smart meters. The Ontario Energy Board approves the rates that utilities can charge customers for electricity. As for the smart metering initiative, at the time my investigation was launched, it was already under scrutiny by the Auditor General of Ontario. Her findings were reported on December 9, 2014, in her annual report, in which she also identified concerns with billing problems at Hydro One. Included among her recommendations were calls for improved tracking of inquiries and complaints, better education of ratepayers and fixing problems with the billing system.
25 SORT also reached out to other utilities to learn about best practices in Canadian and international jurisdictions. Ontario is the only province that mandates time-of-use pricing for electricity and one of a few Canadian jurisdictions to use smart meters to collect time-of-use information.
26 Given the unprecedented volume of complaints, and strong interest from complainants, Hydro One customers and public officials, I issued a brief public update on my investigation on March 11, 2015.
27 Hydro One Inc., the largest electricity transmission and distribution company in Ontario, is wholly owned by the provincial government, which appoints its board of directors. It operates in association with five subsidiaries
and has $22.6 billion in total assets. Hydro One generates significant public profits. In 2013, Hydro One’s net income was $803 million, which resulted in a $218-million dividend payment to the province.
28 The company provides direct service to 21 remote communities and some 1.3 million rural and urban distribution customers. It issues about 1 million bills a month. Since 2002, Hydro One has outsourced customer call handling, billing, credit and collections to a private operator. Initially, Hydro One retained Inergi LP to run its call centres. That company in turn subcontracted this responsibility to Vertex Customer Management (Canada) Ltd. As of March 1, 2015, Inergi LP is directly responsible for these outsourced services under a new three-year agreement.
29 In 2011, as part of a four-phase, multi-year project to refresh its information technology systems, Hydro One allocated $180 million to replace its customer information system. The existing system was operating on an old platform installed in 1998, which was no longer supported by the vendor. Hydro One predicted that the new system would improve customer service and yield up to $172 million in financial benefits over a seven-year period. The initial target date for the new system to be implemented – or “go live,” in the company’s parlance – was over the October 2012 Thanksgiving long weekend.
30 The company had successfully replaced other internal information systems as part of the project, but the last phase was the first to have, in Hydro One’s phrase, “a direct customer-facing impact.” The customer information system is used for many customer service functions, including billing and account management. It is also an important resource for call centre staff, who handle about 1.5 million customer calls and 280,000 items of correspondence each year.
31 Hydro One estimated that the new system would increase the number of calls resolved on the first contact with the call centre by 5%, while decreasing the average call handling time by 20 seconds, and the average correspondence handling time by 16 seconds.
Figure 1: Hydro One internal newsletter, May 21, 2013.
32 It was understood that with any system change, customer complaints would likely increase in the short term. Hydro One predicted that for routine matters, call volume and average handling time would increase by about 20% in the first month, but would normalize by the five-month mark. It also projected a 25% increase in the average handling time and volume for more complicated calls in the first month, but expected these to normalize within 10 months.
33 Our investigation revealed that Hydro One’s forecasts fell glaringly short of the mark. For starters, the implementation date was delayed by seven months. The new customer information system did not “go live” until the May 21, 2013 Victoria Day long weekend.
34 Still, the company cautiously celebrated the success of the new system. In an internal newsletter on the day of the launch, it declared “We did it!” and said: “There was much to celebrate this Victoria Day weekend – including the success of [customer information system] Go-Live!” The newsletter noted that “while the next few weeks are bound to be bumpy, we can all take comfort in the fact that we are live.”
35 According to internal emails we reviewed, technical glitches began to surface soon after the system went live, but officials were confident they could be resolved. Seasoned Hydro One staff also considered the situation mild in comparison to the installation of the previous system in 1998, which had triggered 200,000 delayed bills. As one put it in an internal audit report, “there was a collective relief that the problems were seemingly less than might have been expected. This might have led to a sense of complacency.”
36 Internal emails circa June 2013 refer to daily crises, but also improvements. There was a sense that the worst was over – one even noted there were no “major news stories” and “no Toronto Star-worthy issues so far.” By September 2013, Hydro One’s organizational spirits were buoyed when it won, for the second time, an award from the company that designed its information system. It was praised for helping to ensure “customer care operations remain top in the industry, including reliable call center interactions and increased accuracy and timeliness in their billing process.”
37 Unfortunately, these good omens proved to be the calm before the storm. Within a matter of months, it became clear that Hydro One’s predictions about the impact of the system change on the call centre were drastically wrong. Problems associated with the changeover soon led to an unprecedented outpouring of customer confusion, frustration, and outrage, resulting in a dramatic increase in complaint volumes and average handling times. As one call centre manager told us, the original projected targets “were blown out of the water.”
38 By February 2014, when I launched my investigation, Hydro One could no longer ignore the fact that it was facing major systemic problems and widespread public distrust.
39 Hydro One installed the new customer information system to address historical issues relating to its billing and account management programs. However, the vast majority of complaints to my Office involve billing issues – customers who received incorrect bills, multiple bills, prolonged estimated bills, large “catch-up bills,” or no bills at all. We also received complaints about a host of other issues such as improper automated bank withdrawals, disconnection notices and poor customer service.
40 Some customers eventually resolved their concerns and even received some goodwill credits equal to monthly service charges, but usually this took sustained effort on their part. Many told us they made multiple calls to Hydro One’s call centre and repeatedly had their complaints escalated to managers – only to receive confusing, conflicted, delayed and inadequate responses.
41 What follows are some examples from among the thousands of stories we heard during our investigation. Where possible, we have included customers’ names with their consent, but many of those who complained to us preferred to remain anonymous for a variety of reasons, including fear of repercussions.
42 A senior from Timmins first realized there was something wrong when Hydro One stopped withdrawing automatic payments from his bank account in May 2013. Then in September 2013, his bank called to say Hydro One was trying to grab more than $10,000 from his account. He managed to stop the payment, which Hydro One acknowledged was excessive, but was told it could take a year to resolve. Then without warning, Hydro One withdrew even more money from his bank account – including a charge for late payment. Hydro One eventually returned the money, but not before this beleaguered customer ended up on the hook for overdraft charges. The situation wasn’t resolved until January 2014, when his bill was reduced to $778. He was relieved the matter was settled, but upset that he was offered no apology or clear explanation about what had happened.
43 An Inglewood man sold his property in April 2013, but spent months waiting for his final bill, which he figured was under $100. He was gobsmacked when he received a letter from a collections company in October 2013, saying he owed $18,000. He contacted Hydro One’s call centre and even managed to get through to a senior executive. In November 2013, Hydro One assured him that it was all a big mistake. Then in August 2014, a different collections company began to hound him for the money. When we intervened, we learned there was a problem during the migration of data to the new customer information system, accounting for the high usage charges. In fact, he only owed $56.35. He was bewildered by the customer service nightmare he experienced, and the cavalier attitude he encountered when he tried to correct it. He described Hydro One’s customer service as “trained deflection and not really taking on the issue at hand with any genuine effort.” As he put it:
It’s all rehearsed, it’s all scripted… It’s not the right way to do business for anyone, let alone a provincial utility.
44 Despite multiple calls to Hydro One, a Huntsville woman was getting nowhere in her efforts to find out why she received no hydro bills for nine months after April 2013 – only to receive a bill containing an excessive estimate of $1,800. She complained and received another estimated bill for $700 less, but with no explanation. She continued to demand answers and finally learned in 2014 that because of workload backlogs, Hydro One’s system had not been updated to reflect that her meter was changed in February 2013. What followed was a series of implausible meter readings that caused the system to block her bills until they could be reviewed and readjusted. Once the situation was straightened out, Hydro One credited her with nine months of service charges and put her on an interest-free repayment plan for the balance owing.
45 A Kilworthy man contacted Hydro One’s call centre after not receiving a bill for a year. He was told he owed $3,600. When he disputed the amount, the call centre agent blamed him for providing the wrong address, told him he owed late fees, and placed his account on the list for disconnection. He later learned his address had not been properly transferred to the new system. Eventually, Hydro One issued an apology, gave him 12 months’ worth of service credits, and cancelled the disconnection notice.
46 In the fall of 2013, an 84-year-old King Township woman stopped receiving electricity bills, which had averaged $200 a month. Then, inexplicably, she received three bills in the same month, covering the same time period, for $9,000 each. Distraught, she contacted Hydro One’s call centre, which assured her the situation would be resolved. In February 2014, Hydro One sent her a more reasonable bill for $640 and offered an apology, but she was never told why she had been charged so much in one month. Hydro One told my Office the mixup was due to human error, and it provided her with five months’ worth of service charge credits.
47 A Sudbury man received a bill for $19,152 in April 2014 after a long period of estimated bills. We learned that his meter was replaced in November 2013, but it took four months to update the system. When the actual readings from his meter arrived, the system then mistakenly charged him many multiples of what he owed. Once the error was corrected, his bill was reduced to $74.
48 After a prolonged period of estimated bills, a Bolton man received no bills from June to September 2013. Then, starting in October, he received a series of confusing ones, some based on estimates and some based on actual meter readings, with cancelled and corrected bills thrown in for good measure. After he complained to Hydro One, it sent him a new set of bills for a three-year period, with a balance owing of $73,385. Horrified, he disputed this and Hydro One reduced the amount by $8,489, but still could not explain why he still owed so much. After we intervened, Hydro One recalculated the charges, found that the final balance was actually $34,476.29, and offered him a three-year payment plan to pay it off.
49 In July 2013, Madeleine Fex-Tinkis, a senior from Lively, received a call from Hydro One, warning her to expect a large bill. However, she did not receive any bills until October 2013, when multiple bills totaling $2,208 arrived, along with a warning that the money would be withdrawn from her bank in two weeks’ time. She desperately tried calling Hydro One to set up a repayment plan. When she didn’t hear back, she was forced to go into her line of credit to prepare for the withdrawal. Then in January 2014, she received a set of 15 bills, based on actual meter readings, covering the same billing period and indicating that she owed an additional $540. It was only when we contacted Hydro One that it provided an explanation for its calculations. In the end, Hydro One issued her a service charge refund of $310.05 and set up a repayment plan for the balance. Not surprisingly, the unhappy customer removed herself from Hydro One’s pre-authorized payment plan.
50 A Matheson man who received no bills over the summer of 2013 was hit with six estimated bills in October that year. He called Hydro One and was assured the company would look into it, but no one did. In February 2014, without notice, it withdrew $1,959 from his bank account. When we asked Hydro One what happened, it reviewed its records and discovered he had overpaid on his billing plan. It refunded the money it had withdrawn, and gave him a service charge credit of $144.
51 William and Lise Burley of Porcupine contacted us in shock after receiving a bill for $11,638 in February 2014. They had been paying for electricity based on estimated usage for four years and were baffled by this huge bill. After we intervened, Hydro One eventually reduced their charges to $2,238.
52 Shannon Lebrun changed residences in July 2013, not long after the new customer information system was implemented. She received no bills for over a year, and then came home in November 2014 to find her electricity cut off. She had to rent a generator and, to add insult to injury, Hydro One charged her $155 in interest and $147 for disconnection and reconnection fees. She discovered that Hydro One had been mailing bills and disconnection notices to her old address and calling her old phone number. The call centre blamed her for not inquiring about the missing bills sooner. When my Office intervened, Hydro One acknowledged the call centre’s failure to update the system with Ms. Lebrun’s new contact information. She received an apology and a 14-month service credit of $233 on her account. The fees associated with the disconnection were also reversed.
53 A Schumacher man was dumbstruck in June 2014 when he received a package of bills totalling $45,000, covering a three-year period – some of which he had already paid for. He contacted Hydro One in a panic and was referred to a manager, whom he found arrogant and uninformed. In desperation, he wrote to anyone he could think of who could help, including my Office. He described how he was “left feeling anxious, without a voice, frustrated and bullied.” Eventually, Hydro One contacted him. He was astounded to learn that because of a mixed meter issue, he was being billed for electricity used by a nearby gold mine. By August 2014, his charges were reduced to $9,723.04, he was given a 34-month service credit and enrolled in a repayment plan. Then, just as things had settled, he received two more bills within days of each other, for $15,000 and $12,000. Hydro One assured him he could disregard them, but he told us he found “the whole experience was nothing short of abuse.”
54 After receiving no bills between July 2013 and March 2014, a Waterloo man coping with terminal cancer was stunned to find that he owed Hydro One more than $10,000. The company agreed to provide him with a discount, but began threatening him with disconnection at the same time. After we intervened, the disconnection notices were cancelled. At the time this report was written, Hydro One was still reviewing his account.
55 When customers write o