08-07-2025
Electricity scam nearly costs Toronto $2.5 million
A 2019 complaint alleges that electricity accounts for 14 city properties were switched from Toronto Hydro to two different third-party energy retailers.
A complaint received back in 2019 alleges that electricity accounts for 14 city properties were switched from Toronto Hydro to two different third-party energy retailers without the city's knowledge.
Toronto almost lost $2.5 million in an attempted electricity fraud involving a retired city worker's credentials, which were used to fraudulently sign contracts with third-party energy companies, according to the auditor general.
In a report dated June 21, the city's watchdog said it began investigating after Toronto's Corporate Real Estate Management identified 'unusual invoices' as part of their routine account review in Oct. 2019.
It was discovered that the electricity accounts for 14 City of Toronto properties had been switched from Toronto Hydro in July 2019 to two different third-party energy retailers without the city's knowledge.
The contracts held an estimated value of $4.2 million, and the report noted that $2.5 million of that total represented 'what would have been lost' had the unusual invoices not been identified.
'This estimated potential loss was based on the difference between what the City would have paid Toronto Hydro versus what would have been paid to the energy retailers over the contract term,' the AG said.
The report found that the contracts were signed after the employee retired and that they did not have the authority to sign contracts of this value.
According to the AG, the city directed the energy retailers to revert the accounts back to Toronto Hydro and the payments made to the retailers under the void contracts were returned to the city. The investigation found that over the five months when the contract was active, the city paid roughly $250,000 to the two retailers from the start of the agreement in 2019 to Jan. 2020, when it was terminated.
While all of the electricity in Toronto is physically distributed by Toronto Hydro, the report highlighted, Ontario has an energy market where consumers can purchase their electricity from the city utility or a licensed energy retailer.
'In some cases, energy retailers pay commissions to consulting firms that bring in new contracts to them. The consulting firms act as intermediaries between the energy retailers and consumers. It appears that the commissions received by the consultants was the motivation to enter the City into these contracts,' the report read. The consulting firms were not named in the report.
Following the investigation, the AG found that the retired employee did not sign the contracts, and the consulting firm owners 'appeared' to have some involvement in setting up the new contracts, although that could not be substantiated.
It also found that retired employees' credentials were fraudulently used to set up the contracts. The AG added it was unable to identify if a city employee was involved in this case.
The AG said the matter has been referred to Toronto police to assess whether criminal charges should be laid.
In the meantime, the AG is recommending that the city manager forward the investigation to other agencies in Toronto 'to encourage diligence in reviewing and approving invoices, with emphasis to those Agencies and Corporations that are responsible for reviewing their own electricity invoices.'
The report will go before the audit committee on Friday.
