Ontario’s Ratepayers Dig Deep to Pay Up!

Just days ago the Ontario Energy Board issued their press release that raised the price of electricity for the “average” ratepayer in Ontario by 7% for the six months starting today, May 1, 2012. The press release inferred the increase was a mere 3.3% on the “total bill” however electricity only represents about 45% of the bill that ratepayers receive monthly and this same line will be reset again in October for the ensuing six months commencing November 1, 2012. This increase pushed the “electricity” line rates up 12% from May 1, 2011.

In 2011 Ontario consumed 141.5 terawatt hours (TWh) or about 141 billion kilowatt hours (kWh) and the OEB increase represents about a half a cent per kWh. That doesn’t sound like musch but it is an increase of $4.9 million per TWh. Assuming we consume 141.5 TWh again in 2012 the increase will extract close to $700 million in after tax dollars from Ontarian’s pockets. That $700 million will also mean increased HST payments of $90 million. The latter will be partially offset by that 10% OCEB (Ontario Clean Energy Benefit) which will be deducted from ratepayer bills but will add more debt for Ontario’s taxpayers. With 4.7 million ratepayers in Ontario the additional cost adds (on average) $168.00 each although the larger consumers; small and medium sized businesses and farmers will bear a higher portion. This will drive up their costs and cause them to raise their fees/charges for their services and for food the farmers produce.


The OEB also recently issued their “Guidelines for Electricity Distributor Conservation and Demand Management” or
CDM. This guideline is an endorsement of the conservation targets established by the Ontario Power Authority (OPA) under a directive issued March 31, 2010 by the Minister of Energy, Brad Duguid instructing the OPA to achieve a reduction in consumption of 6000 gigawatt hours (6 billion kWh) over the four years 2011 to 2014. That directive sought a consumption reduction of 1,330 Megawatts of capacity that would generate about 11.6 million megawatt hours and provide power to 1.2 million homes. Under the directive issued by the Minister the local distribution companies (LDC), charged with executing it, are able to obtain rate increases to recover lost revenue due to the ratepayers reduction in demand. Along with that recovery the money spent to promote (about $300 million annually) conservation is also recoverable. The delivery costs represent about 35% of ratepayers bills so the effective lost revenue by the LDCs will be about 6.3 cents per kWh or $6.26 per MWh. The monies recoverable, should the LDCs achieve their conservation targets, will be about $750 million. Couple that with the monies spent promoting conservation of $300 million (by the OPA) and ratepayers will be saddled with increased costs of $1,020 million. The $300 million will be put in the Global Adjustment (GA) pot and the $750 million will appear on the “delivery” line.

The CDM program and the recent rate increase will add $1.8 billion annually to the costs of electricity in the province and push electricity rates up a further 1.34 cents per kWh adding an average of $380.00 annually to those 4.7 million ratepayer bills. At that time Ontario’s all-in electricity rates will be on the cusp of 20 cents a kWh putting Ontario in first place for the cost of electricity in Canada.



Parker Gallant,

May 1, 2012

Comments

wgulden
Reply

Thanks, Parker, for going through these numbers. One has to wonder why the media doesn’t do this – after all, this increase directly affects everyone in the province. If an internet scam (for example) managed to steal this much money from everyone I think it would make the news. Why doesn’t this?

Farmerbill237
Reply

Nuclear and the cost of shutting down coal make up 80% of the increase! Why no discussion about them at all here?

the ‘clean energy benefit’ is ridiculous and should be scrapped, but you seem to imply that we could stop the increase in prices… how? by shutting down nuclear? that would clearly be the best way according to these numbers.

Scott Luft
Reply

What is the foundation for your claims Farmer Bill?
They are similar to ones being made by Greenpeace out of ignorance or deliberate dishonesty.
Why do you think coal is still online? Ever think maybe it’s because the GEA’s FIT program is procuring supply that can’t meet peak demand?
The coal capacity payments are primarily linked to green energy (as are gas capacity payments) – and Germany is proving that the two are destined to ‘make the beast with two backs’ for years to come.
Your nuclear figures are nonsense. The expense in nuclear is largely the capital costs – but you can’t save anything by abandoning the asset regardless (cost at Darlington are only around 3 cents/kWh, and overall the fleet receives under 6 for producing the power we pay over 7 for)

Parker
Reply

Farmerbill: In 2011 wind produced 2.6% of generator output and nuclear 56.9% whereas the contributions to the GA pot was over 6% for wind (more then twice the output) and only 45% (20% less then output) for nuclear. Nuclear–for regulated prices paid to OPG and Bruce was greater then the HOEP (wholesale price) which increased those GA payments. Because wind is intermittent and gets first to the grid rights it is effective at driving down the wholesale prices and the difference between the regulated price paid for nuclear and the wholesale price goes to the GA pot.

Without wind, wholesale prices (only clean hydro is unregulated and trades on the wholesale market) would be much higher considerably reducing what the GA pot must accumulate. OPG is also regularly forced to spill that clean hydro reducing its income that would keep prices down and help reduce the stranded debt. From the IESO report note the following:

“Bruce Power contracts: fixed-price contracts for generating unit A (at $63/MWh in 200567), and floor price contracts for unit B (a floor price of $50.18/MWh in 201168). All payments are based on actual output or, in the event of SBG conditions, foregone output.”

AND

“The vast majority of the FIT contracts to date are with wind power suppliers, who are guaranteed a fixed price of $135/MWh, and with solar power suppliers who are guaranteed fixed prices varying between approximately $400/MWh to $800/MWh, for actual output produced.”

If you are going to make an argument, present all of the facts, not just the ones that suit your kool-aid views.

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