The popularity of energy conservation programs is hurting Toronto Hydro's bottom line and the utility is now seeking to raise electricity rates as a result.

However, the company is urging people to continue to conserve, because otherwise there might be even larger expenses to pass on to customers. To meet extra demand, for example, it would cost more to upgrade aging infrastructure.

"It's important to the electrical grid and certainly to the province, air quality and all of that that we push this aggressively," Toronto Hydro-Electric System Ltd. spokesman Blair Peberdy said Thursday.

Toronto Hydro-Electric System Ltd. has applied for a rate increase of 6.3 per cent on May 1 to recover a $10.4-million drop in revenue.

If approved, customers using about 1,000 kilowatt hours per month would see an increase of $2.07 on their bills, the utility says.

That's about equal to the amount an average household saved thanks to conservation efforts. Peberdy says the average home cut their electricity bills by $25 a year by using less hydro.

The utility blames the revenue loss on the success of conservation programs over the past two years and the cost of buying and installing thousands of smart meters.

Peberdy said the province and regulators recognize the dilemma facing utilities: conservation is "needed desperately" but "eroding" the revenues of utilities, leaving them struggling to provide reliable electricity.

The utility says electricity loads in the city fell by 178.5 million kilowatt hours — enough to power 178,000 homes for a month — between spring 2005 and the end of 2006.