Beware fixed-price hydro contracts, watchdog warns

If you sign above capped price, you'll have to pay that rate, Park says

Canadian Press, December 18, 2002
by Colin Perkel

Ontario's energy watchdog is warning consumers that a legislated rate cap on electricity prices won't apply to them if they sign or renew a fixed price contract with retailers.

Last week, the government passed a law freezing hydro prices at 4.3 cents a kilowatt-hour until 2006. But that doesn't stop retailers from selling contracts at higher rates.

"If you go out and sign a fixed-price contract, you're obligated to that price, you don't qualify or aren't eligible for the 4.3-cent price," Tom Park of the Ontario Energy Board said today.

"We just wanted consumers to understand (that)."

One of the province's largest retailers said it has put its electricity sales on hold because there's no advantage to customers.

"Customers can get 4.3 (cents), why would they sign up for a contract above that?" said Paul Massara of Direct Energy, which has faced widespread criticism for its aggressive sales pitches.

"We're not actively being involved in the marketplace at the moment until the regulations are clear exactly how the whole system is going to work."

Nevertheless, Park said there's nothing to stop retailers from trying to persuade people to sign up and some are still knocking on doors.

"There are retailers out there actively selling," Park said. "If they want to go out and sell a contract, they can still sell a contract."

Consumers who did sign a fixed-price agreement between May 1 and Nov. 30, 2002, often at substantially higher rates, are getting refunds for the price difference.

The rebate also applies to people who hadn't signed contracts but who paid more than 4.3 cents for their power.

The government has insisted that local utilities mail out initial $75 rebate cheques, which critics called a costly pre-election ploy.

Energy Minister John Baird said Wednesday he was pleased with the program, saying Hydro One had already sent out almost one million cheques at close to $1 million.

"Obviously there's a cost to doing anything," said Baird.

"We wanted to ensure rate relief got out to people as expeditiously as possible. The easiest way to do that was cheques."

The government said "the vast majority" of families and small businesses eligible to receive the rebates should have their cheques by the end of the year. The minister's office also revealed that publicly owned Ontario Power Generation was fined $1,000 after it refused to supply additional electricity on Oct. 29 as requested by the agency that regulates supply in the province.

The "low-level infraction" came about because water levels on the Niagara River did not allow it to boost its supply but it failed to let the regulator know in time, said Dan Miles, an aide to Baird.

Supply shortages lead to higher electricity prices and some generators have been accused of deliberating withholding supply to force prices up so they can make greater profits.