Electricity prices

Over the past 20 years, the price of water, fuel oil and cable TV have outpaced the price of electricity. Over the next 20 years, Ontario can expect stable prices that also reflect the true cost of electricity. The government will need to take a balanced and prudent approach to investment and pricing that ensures that Ontario’s children and grandchildren have a clean, reliable system.

Ontarians now pay the true cost of electricity to ensure that essential investments are made in clean energy and modern transmission. About 40 per cent of Ontario’s electricity generation is subject to price regulation, contributing significantly to predictable prices for Ontario consumers. Regulated Price Plan (RPP) rates (adjusted every six months) ensure pricing reflects the true cost of generating electricity. This helps to provide stable and predictable electricity prices for consumers.

Accomplishments

In 2003, the electricity system was in significant decline but Ontario families and businesses have invested in the creation of cleaner sources and the restoration of reliability. The cost of energy has increased in order to provide cleaner, more reliable energy for generations to come.

The government has also taken several steps to keep the cost of electricity down for Ontario families and businesses. Actions taken to prudently manage expenditures total over $1 billion, including:

• Freezing the compensation structures of all non-bargained public sector employees for two years – which include the five energy agencies.
• Limiting travel costs and other expenses for public sector workers.
• Requesting that Hydro One and Ontario Power Generation revise down their 2010 rate applications to find savings and efficiencies.
• The IESO has reduced costs by $23 million over the past seven years.
• For 2011, the OPA has reduced its overall operating budget by 4.1 percent.
• Hydro One will reduce operations costs by $170 million in 2010 and 2011. Information technology upgrades will save $235 million over the next four years.
• OPG is reducing operations costs by more than $600M over the next four years.

Ontario has taken steps to lower the hydro debt left by the previous government. In 1999, the restructuring of Ontario Hydro and the attempt to sell-off Hydro left electricity consumers with a debt of $20.9 billion. Since 2003, Ontario has decreased that stranded debt by $5.7 billion. Payments toward the debt are made through Payments in Lieu of Taxes, dedicated income from government energy enterprises, and by ratepayers through the Debt Retirement Charge.

The government has also launched a number of initiatives to help Ontario families and businesses manage electricity bill increases. Some of these include:

• The Northern Ontario Energy Credit, a new, permanent annual credit to help families and individuals in the North who face high energy costs. The yearly credit of up to $130 for a single person and up to $200 for a family would be available to over half of all northern Ontario households.
• Ontario Energy and Property Tax Credit, starting with the 2010 tax year, to low-income Ontarians who own or rent a home would receive up to $900 in tax relief, with seniors able to claim up to $1,025 in tax relief to help with both their energy costs and property tax. Overall, the proposed Ontario Energy and Property Tax Credit would provide a total of about $1.3 billion annually to 2.8 million Ontarians.

Ontario is helping low-income Ontarians with their energy costs through a province-wide strategy to help consumers better manage their energy consumption and costs, including:

• Establishing a new emergency energy financial assistance fund.
• Implementing enhanced customer service rules that will assist all customers, particularly low-income Ontarians.

Ontario is also developing a comprehensive electricity conservation program for low-income households in coordination with the natural gas utilities. Through the conservation measures, customers will be better able to manage their energy bills.

The Plan

Industrial Users

Due to investments to make the electricity system cleaner and more reliable for industry, the government projects that the industrial rate will increase by about 2.7 per cent annually over the next 20 years. The Ontario government has introduced initiatives to enhance the efficiency and competitiveness of large industrial consumers as well as protect jobs and local economies. These include:

• The Industrial Conservation Initiative will help the province’s largest industrial and manufacturers to conserve energy, save on costs and increase their competitiveness. By changing the Global Adjustment Mechanism, large industrial users can shift their usage off peak times and save on electricity costs.
• The OPA’s Industrial Accelerator Program has been launched to assist transmission-connected industrial electricity users to fast-track capital investment in major energy-efficiency projects.
• The Northern Industrial Energy Rate Program provides electricity price rebates for qualifying northern industrial consumers who commit to an energy efficiency and sustainability plan. On average, the program reduces prices by about 25 per cent for large facilities.

Helping Ontario Small Businesses and Families

In order to ensure that Ontario has a clean, modern system that increases renewables, ensures reliability and creates jobs, continued investments in the electricity system are essential.

Based on the significant investments in clean, modern energy outlined in this plan, the government projects, based on current forecasts, that electricity prices will increase. Over the next 20 years, prices for Ontario families and small businesses will be relatively predictable. The consumer rate will increase by about 3.5 percent annually over the length of the long-term plan.

Over the next five years, however, residential electricity prices are expected to rise by about 7.9 per cent annually (or 46 per cent over five years). This increase will help pay for critical improvements to the electricity capacity in nuclear and gas, transmission and distribution (accounting for about 44 per cent of the price increase) and investment in new, clean renewable energy generation (56 per cent of the increase).

Continued investments in transmission, conservation and supply are needed for a system that provides more efficient and reliable electricity to consumers whenever they need it and does not pollute Ontario’s air or negatively affect the health of citizens and future generations.

After five years, Ontario will have largely completed the transition to a cleaner more reliable system due to the replacement of coal-fired generation and new renewable generation under the GEA. Once these investments have been made, price increases are expected to level off. The investments that the entire province is making in the future of electricity will help to ensure that Ontario never finds itself in the dire straits it was in just seven years ago.

However, in the next five years, the government recognizes that the increases will have an impact on Ontario families and businesses.

The government’s 2010 Ontario Economic Outlook and Fiscal Review took action to help Ontarians who are feeling the pinch of rising costs and electricity prices. The Ontario government proposed direct relief through a new Ontario Clean Energy Benefit (OCEB).

For eligible consumers, the proposed OCEB would provide a benefit equal to 10 per cent of the total cost of electricity on their bills including tax, effective January 1, 2011. Due to the length of time required to amend bills, the price adjustments would appear on electricity bills no later than May 2011, and would be retroactive to January 1, 2011.

Every little bit of assistance helps during lean times. The proposed OCEB together with the Northern Ontario Energy Credit and the Ontario Energy and Property Tax Credit will all help mitigate electricity costs for families.

Eligible consumers would include residential, farm, small business and other small users. The proposed OCEB would help over four million residential consumers and over 400,000 small businesses, farms and other consumers with the transition to an even more reliable and cleaner system.

Benefits for Eligible Consumers

Providing the 10 per cent OCEB to Ontarians is a responsible way of helping Ontario families and businesses through the transition to a cleaner electricity system. The OCEB would help residential and small business consumers over the next five years as the grid is modernized. The government has introduced legislation to implement the proposed OCEB.

Working together to reduce electricity use at peak times makes sound economic and environmental sense. Providing consumers with the benefit of up-to-date and accurate electricity consumption readings is also critical to the creation of a culture of conservation. The government is committed to moving forward with implementation of a Time-of-Use pricing structure that balances benefits for both the consumer and the electricity system as a whole.

To help families, Ontario will move the off-peak period for electricity users to 7 p.m. which will provide customers with an additional two hours in the lowest cost period. This change will be in effect for the May 2011 Regulated Price Plan update.

This plan has outlined a new clean, modern and reliable electricity system for the people of Ontario. Instead of a system that was polluting, unreliable and in decline with unstable pricing, Ontarians will have a North American-leading clean energy system that keeps the lights on for generations to come, creates jobs for Ontario families and ensures that the air they breathe is cleaner.

Figure 16: Sample bill