Rising power bills give consumers nasty shock

Globe and Mail - September 24, 2002
by Richard Mackie and Luma Muhtadie, With a report from Martin Mittelstaedt

The first thing the Scott family did after getting their electricity bill this month was unplug an old fridge in the basement of their Hamilton home to see if it would make a difference.

"We can't afford to pay this much every time," said Jennifer Scott, whose bill for a small bungalow topped $300 -- nearly double what it used to average.

Ms. Scott is among many Ontario residents shocked by how much they have to pay for power they used over the summer. The issue took centre stage yesterday at the opening of the legislature. The opposition assailed Premier Ernie Eves for the government's part in opening up the market.

Ontario electricity users have faced price increases averaging 30 per cent since the province's power market was deregulated in May. But many are now getting even bigger bills because of price spikes over the summer, as hot weather pushed electricity use for air conditioning to record levels.

"I'm not an expert on the subject of privatization -- I just look at the bill and say 'ouch,' " said Taylor Barratt, a computer consultant who owns a home in Mississauga.

The utility that supplies Mr. Barratt's power, Enersource Corp., is one of many in Ontario -- including Hamilton Hydro -- that has tied bills to the market price, so consumer power prices fluctuate each month depending on what happens in the wholesale electricity market.

Recent Enersource bills charge consumers 6.749 cents per kilowatt hour of electricity, about double what the utility was charging just two months ago.

On top of the price of electricity, consumers are also paying additional amounts for the transmission and distribution of power, as well as a special levy to pay for the debts of the old Ontario Hydro.

In the legislature, New Democratic Party Leader Howard Hampton said "this summer the people of Ontario . . . opened up their hydro bills and discovered 40 per cent increases from Wawa to Hamilton to Toronto."

"Consumers are pretty angry. . . . They want to know why they should be paying substantially more for electricity."

Premier Eves argued that it was unfair for Mr. Hampton to complain about the surge in costs during July and August, as it was not the fault of the government. "We have had the warmest summer on record since 1995."

Before the Conservatives opened the market to competition, electricity cost 4.3 cents a kilowatt hour, which is the amount of juice needed to run 10 light bulbs each rated at 100 watts for an hour. The average since the market opened in May has been 5.6 cents a kwh, and there were points during the summer when prices spiked for short periods to nearly $1 per kwh, more than 20 times the precompetition level.

Even yesterday, when power demand had returned to more subdued levels, the price of electricity still rose to nearly 8 cents a kwh at midday.

Ted Gruetzner, a spokesman for the Independent Electricity Market Operator, the government agency that runs the province's wholesale power market, said power supplies in Ontario have been tight because low rainfall means there is less hydroelectric capacity available to meet market demands.

Many generating stations have also gone off line to perform maintenance. Mr. Gruetzner said about a quarter of the province's generating capacity has been idled for these reasons, further constraining supply. Some utilities have chosen not to pass along price spikes to consumers.

Not all Ontario electricity users are facing immediate price jumps.

In Toronto the local electricity distribution utility, Toronto Hydro Corp., has kept its charges at the old prederegulation rate of 4.3 cents per kwh.

Blair Peberdy, a spokesman for the municipally owned company, said it will make periodic adjustments to customer bills to reflect what happens to wholesale market prices. That means Toronto customers could have to make a huge, one-time payment if rates do not soon fall below 4.3 cents.

Chris Buckler, vice-president of Enersource Corp., the Mississauga utility, said the company has taken the approach of tying monthly bills directly to market prices because it will provide customers with immediate price signals. He said periods of high prices will encourage consumers to conserve electricity to try to save money.

He rejected the Toronto approach because it could leave consumers exposed to big, one-time adjustments. "We were leery of that because it puts the customer at risk if there is a huge amount that accrues," Mr. Buckler said.

Mr. Eves argued people should wait until next May, after a full year of deregulation of the retail prices of electricity, before judging the impact of the policy.

But Mr. Hampton replied that Mr. Eves was trying to ignore the escalation of electricity prices before May 1, when competition was introduced into the retail electricity market.

"The [Statistics Canada] figures go all the way back to May of 2001 when this government started down the road of privatization and deregulation, and we've seen a 44-per-cent increase," Mr. Hampton said.

"There was a 9-per-cent increase right off the bat. There was another 9.3-per-cent increase in March of this year. Then, as they moved more and more into deregulation, we saw the prices spike this summer.

"What matters is the price that appears on the consumer's bill," Mr. Hampton stressed, "and the consumer's bill everywhere across the province has gone up substantially."

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