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Ontario Energy Board boosts residential and small-business electricity prices

Canadian Press - March 11, 2005
by Gary Norris

The Ontario Energy Board has announced an electricity rate increase which it says will boost the annual basic cost of power for a typical household by about 4.4 per cent.

The board said Friday that the first 750 kilowatt-hours of monthly consumption will cost five cents per kilowatt-hour as of April 1, up by 6.4 per cent from the current rate of 4.7 cents for residential and small-business consumers.

Consumption beyond 750 kilowatt-hours per month will cost 5.8 cents per kilowatt-hour, up by 5-1/2 per cent from 5.5 cents. However, there is a new price break as the board also is raising the consumption threshold that triggers the higher price from 750 to 1,000 kilowatt-hours per month between Nov. 1 and April 30, reflecting winter's higher need for electricity.

Because the typical household burns about 1,000 kilowatt-hours a month, the board said this means the increase during the November-April half of the year will be only about two per cent.

Non-residential users will continue paying the higher rate at 750 kilowatt-hours per month year-round.

The new rates are based on technical calculations of the cost of power - not any attempt to conserve energy by influencing consumption through pricing, Bill Rupert, the board's managing director of strategic planning, told a conference call.

The wholesale cost of power on the Independent Electricity System Operator market was seven cents per kilowatt-hour at noon Friday, and has averaged 6.3 cents this month. The weekly average through most of 2004 fluctuated between four and six cents. (A kilowatt-hour is the electricity consumed by 10 100-watt light bulbs, or a 1,000-watt space heater, left on for one hour.)

The new retail prices of five to 5.8 cents per kilowatt-hour are intended to remain in effect for a year, and are to be adjusted every six months after that.

Friday's announcement is "a shell game" and the board should be adjusting rates more frequently, said Tom Adams, executive director of Energy Probe, a consumer and environmental organization. He suggested that quarterly or even monthly rate-setting would give consumers a truer picture of the cost of power. The rate structure is "artificially smoothing prices - giving the impression of stability when the actual costs are really not stable at all," he said.

NDP leader Howard Hampton, meanwhile, zapped the move as another broken Liberal election promise.

"The premier guaranteed no hydro rate hikes through 2006. But now, he's raised rates twice with more on the way," Hampton said. "The McGuinty hydro rate hike is bad news for ordinary Ontario families."

Energy Minister Dwight Duncan said in an interview that the pricing is part of a green energy plan and "is designed to encourage conservation" by charging more for higher usage.

The rates announced Friday will determine the figure on the "Electricity" line of consumers' bills. In addition to this, there are delivery, regulatory and debt-reduction charges.

The board now is considering applications from the province's 90-odd local utilities for increases in delivery charges, Rupert said.

The board said later that the total impact on a typical consumer from Friday's base rates plus the increases sought by distributors would range from 0.5 to 19.9 per cent, with most between four and 10 per cent.

Announcements are to be made soon on approved distribution rates.

The board said the new basic pricing is a blend of the regulated prices for Ontario Power Generation, contract prices from non-utility generators and estimated spot-market electricity prices for the next year.

"From now on, all of the prices charged by generators will be reflected in consumer prices," Rupert said, with no more protection of home users through a government subsidy.

In addition to households, the rates announced Friday - covering about half of the province's total electricity use - apply to other consumers using less than 250,000 kilowatt-hours per year and to institutions in the municipal, education and hospital sectors.

After April 2008, the price plan will be limited largely to residential customers-and it will be supplanted entirely by variable rates as "smart meters" spread.

The government intends to have utilities install those meters - which monitor power use continuously and allow prices to change with the time of consumption - by the end of 2010 for all users.

Under the rates outlined Friday, smart-metered basic costs will range from 2.9 cents per kilowatt-hour on weekends and holidays to 9.3 cents per kilowatt-hour during peak weekday consumption periods.

Real conservation still awaits widespread use of smart meters, which "should have been put on years ago," said Mike Richmond, a lawyer with the energy group of law firm McMillan Binch. "Given that they're not in place, there's not a whole lot you can do in the meantime in terms of sending price signals or encouraging conservation or load-shifting."

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