John Spears
Toronto Star
June 4, 2000

CONFUSED BY the door-to-door salespeople trying to sign you up to natural gas contracts? Just wait until the electricity peddlers hit the streets.

Starting in November, you will be able to buy your electricity from independent suppliers, just the way you can buy your gas from an independent supplier instead of Enbridge Inc., the former Consumers Gas.

You will pay the supplier for the cost of the actual energy you use. A separate charge will show the cost of delivering the electricity from the generator to your community and then distributing it locally.

That much is clear.

What’s not so clear is how to make an intelligent decision about an electricity supplier, let alone how to tell after the fact whether you chose well or not.

“This damn thing is so complicated it makes your head hurt,” says Tom Adams of Energy Probe, which favours competition in principle but is unhappy with the current situation.

Until the murk clears, beware.

Retailers must abide by a code of conduct drafted with the help of the Ontario Energy Board. But lack of reliable information is a problem at the moment.

Peter Dyne, who has been tracking electricity deregulation for the Consumers’ Association of Canada (Ontario), offers this simple advice. Sign nothing until more is known about the new electricity market. Right now, there are more questions than answers.

It’s tough to compare rates.

You can keep getting your electricity from your local utility, rather than signing a long-term contract with an independent supplier. The difference is that the independent retailer will probably offer a guaranteed rate over a long term. (The independent could also offer energy conservation incentives, or Air Miles.) Your local utility’s rate may vary year to year.

Ideally, you would want to know the difference between today’s price and the long-term price the independent retailer is offering. But the starting price that local utilities can charge – to be known as the “standard supply charge” and regulated by the Ontario Energy Board – isn’t known yet.

Reliable information about the new system is difficult to come by. A call centre operated by the Ontario Energy Marketing Association to answer questions about electricity and gas marketing was shut down this spring. Yet some energy marketers are still giving out pamphlets advising customers to call the association with questions.

The Star tried several other consumer information call lines with varying degrees of success.

Some of the worst information came on a line operated by Ontario’s energy ministry after The Star asked for an explanation of the new electricity system. Part of the exchange went like this:

Call centre: “They’ve decided to open up the market to private retailers. What that means is, private retailers will be purchasing electricity from the government and selling it to the public at various rates.”

The Star: “They’re buying it from the government?”

Call centre: “They are buying from, yes, the Ontario, yeah, the government.”

The Star: “The retailers are buying it from the government? Electricity from the government?”

Call centre: “And they’re selling it to us.”

In fact, retailers will be able to buy electricity from whomever they want. The hope is that more generating companies will spring up. Although the dominant generator in the province will continue to be Ontario Power Generation, the publicly owned generating arm of the former Ontario Hydro, it is not a government department.

The call centre was also unable to tell The Star how much of the electricity bill is made up of the energy cost, which is open to competition, and how much is the delivery charge, which will be the same for everyone.

“I’ve had that question all day today,” said the call centre worker. “However, I have not been given details on the the monetary breakdown. I couldn’t tell you. Neither could I give you details on the rates. I have no idea what the rates are, what they will be.” (It seems the energy part of the bill will make up between 40 per cent and 50 per cent of total, depending on whom you ask.)

The ministry call centre ultimately referred The Star to a call centre operated by the Ontario Energy Board, which had accurate information.

The private companies have trouble telling you about their products.

Direct Energy Marketing Ltd. is already asking customers to sign five-year contracts in a plan called the “Electricity Price Protection Discount Program.” The price will be 5 per cent less than the price of electricity charged by the local utility, guaranteed for five years.

The choice is like choosing a mortgage: You can take a floating rate that will probably cost less in the beginning, or lock in for five years.

Should you want to get out of the contract, it’s expensive, as outlined in some very fine print. The company says the current price of electricity is 6.46 cents a kilowatt hour in Toronto. If you want out after, say, three years, Direct Energy would estimate how much power you would have used for the remainder of your contract and charge you 1.5 cents a kilowatt hour for that electricity. That’s the equivalent of 23 per cent of your bill.

For the average household using 12,000 kilowatt hours a year, that comes to $180 for each year remaining in the contract.

Direct Energy, too, operates a call centre. The operator there initially misinformed The Star about the price of escaping the contract. He said the customer would have to pay the full amount for the electricity remaining on the bill – a condition that applies to commercial, not residential, customers.

A customer who gets into a disagreement with a supplier can call the Ontario Energy Board, which may sort out minor disputes based on misunderstanding. For more serious disputes the board has contracted with a private firm, Consumer Expressions, to run a dispute resolution service.

Until more generators hit the market, the supply of electricity will be dominated by Ontario Power Generation, which produces about 85 per cent of Ontario’s power. If all the retailers buy from one wholesaler and pay exactly the same transmission and distribution charges, it may be hard for them to offer different packages.

Ontario’s new energy rules call for Ontario Power Generation to sell 4,000 megawatts of generating capacity – about 40 per cent – within 42 months of this Nov. 1. Within 10 years, the new company is supposed to supply no more than 35 per cent of electricity, giving retailers lots of room to wheel and deal.

But since no one knows who will buy the generating capacity and on what terms, or what new suppliers will be building generators, it’s tough to predict what will happen to wholesale prices.

Adams at Energy Probe complains that Ontario Power Generation, because it is owned by the province, will be able to borrow more cheaply than rivals can, gaining a built-in advantage. On the distribution side, some local utilities are raising their rates. Toronto Hydro has applied for a rate increase, which will offset savings consumers might get on energy supply.

Toronto Hydro vice-president Blair Peberdy acknowledges the industry has some work to do in getting reliable information to the public, especially with the Nov. 1 competition date approaching.

With so many unknowns, some critics are questioning the whole idea.

“How much effort is it worth going to, when it’s only a few dollars a month difference?” wonders John Todd, an economist and director of the Ontario Energy Marketers Association.

“Nobody’s really asking the question: How much is it costing to make the transition and what’s the benefit?”