An expert panel set up by the Liberal government recommended the 80 local distribution companies, or LDCs, many of which are owned by municipal governments, be merged into eight-to-12 regional agencies within two years.
In a speech to the Electricity Distributors Association meeting in Toronto Monday, Chiarelli said the panel's analysis suggests there are substantial efficiencies to be found through consolidation of the distribution companies.
"Let me be very clear that our government will not legislate forced consolidation," Chiarelli said in the prepared text of his speech.
"However, as minister, I am keenly aware of the need to find savings for ratepayers, (and) that's why I'm asking you for your views about the panel's findings and recommendations."
The expert panel, made up of three former cabinet ministers — one from each party — said consolidation would make it easier and less costly for regional utilities to borrow money for much-needed investments to upgrade their distribution systems.
"Transforming and further modernizing the energy system of a province of this size requires a significant investment of resources over a long period of time," said Chiarelli.
"Our government is firmly committed to looking at every possible opportunity, large and small, to help manage electricity bills and keep increases to the lowest level possible."
It's the expected savings and efficiencies from consolidation of the local utilities that has the Liberals really interested, said Chiarelli.
"We want you to keep in mind that while we are interested in promoting consolidation on a voluntary basis in the sector, we must find ways to deliver the savings to ratepayers that the panel identified," he said.
"Our government sees this as an imperative and as a priority."
Every reduction of $100 million in overall expenditures translates into a savings of almost $7 a year for the typical Ontario family, added Chiarelli.
"We must ensure we are operating in the most efficient way, ensuring not only reliability, but reliability at prices that are affordable for industrial consumers as well as families," he said.
The panel called for only two electrical distributors in northern Ontario, but said Toronto Hydro was large enough to be considered its own region and would remain unchanged.
Hydro One, the provincially owned transmission company, bought up 88 local distribution companies in the 1990s, and would end up being the dominate player among the new regional distribution companies outside of Toronto.
Currently Hydro One has over 1.2 million customers, while the smallest LDC, Hydro 2000 in Alfred, near Ottawa, has only 1,208 customers.
The expert panel wants each regional distribution company to have about 400,000 customers, although Toronto Hydro has over 700,000 customers.