TORONTO -- Energy Minister Bob Chiarelli will not force local electricity distribution companies (LDCs) to merge.

In a speech to the Electricity Distributors Association (EDA) Gala Dinner on Monday night, Chiarelli said he would instead seek local input on how best to create the climate and incentives to drive consolidation and other efficiencies.

The Ontario Distribution Sector Review Panel made a number of recommendations last December which it argued could save $1.2 billion.

"The panel's analysis ... suggests there are substantial efficiencies to be found in the sector through consolidation of our distribution companies," the minister said, according to a written copy of his speech.

"Let me say very clearly that our government will not legislate forced consolidation."

The panel had recommended merging the province's 73 LDCs into eight to 12 regional bodies.

But the Kathleen Wynne government has promised municipalities a greater voice in regional development.

"You know your own companies and customers. You're in the best position to consider the panel's recommendations in the context of your own operations," Chiarelli said. "So we look to you to tell us about the incentives and changes you would like to see in the sector to create efficiencies, deliver savings to ratepayers and position your companies to meet the challenges that are to come."

The panel, led by former MPPs, concluded that replacing existing smaller LDCs with larger regional bodies would cut administrative costs and reduce duplication to help keep a lid on rising hydro rates.

Chiarelli said he still wants the LDCs to consider all options, including consolidation, to reduce overhead costs.

Every $100 million in reduced expenditures saves a typical Ontario family almost $7 a year, he said.