Globe and Mail
January 10, 2002
Electricity costs could soar by 20 per cent as hydro companies focus on profits
Consumers in Toronto are being warned to expect a shock in their electricity bills this year.
Residents will pay as much as 20 per cent more for their power when new bills start arriving this spring, the environmental think tank Energy Probe warned yesterday.
And those who signed contracts with private suppliers that promised savings to those who “lock in” the price they pay for power, may actually see their bills rise by between 35 and 40 per cent, said the group’s executive director Tom Adams.
Toronto Hydro, the local power distributor, will not make its new charges public until it submits them for regulatory review later this month, said Blair Peberdy, the company’s vice-president.
“We are trying to minimize the impact on consumers,” he said. He added that 20 per cent sounds high, but he would not estimate the increase because the company is still working out its request to the Ontario Energy Board.
However, based on preliminary information, the city of Toronto’s chief administrative officer Shirley Hoy said in her budget presentation yesterday that the city should expect to see its hydro costs rise 15 per cent.
The changes are part of a provincial restructuring to privatize power distribution that was approved in 1999. Hydro companies have to increase their prices because they now must act as profit-making businesses rather than public services.
Mr. Peberdy said the biggest single increase on the bills this year will be to cover corporate taxes that the power companies must make to the province. However, along with other changes that Mr. Adams calls “institutionally created confusion,” all hydro customers are destined to be stunned when they see the new bills that will begin arriving after the new rates go into effect in March.
Customers who signed contracts with independent suppliers to lock in their rates will find that they are actually locked into higher electricity costs that will substantially raise their bills.
“The Ontario Energy Board approved misleading wording on the current bill,” Mr. Adams said, because it doesn’t separate the actual hydro rate from the other costs of delivering the power.
Hydro bills now indicate that Toronto Hydro customers pay an energy rate of 6.5 cents per kilowatt hour.
That was the price the four companies who contract for bulk supplies of power highlighted to get homeowners to sign long-term contracts to buy power from them at between 5.6 and 5.95 cents per kilowatt hour.
But the actual charges for electricity are 4.2 to 4.5 cents an hour — costs that have been frozen by the province, Mr. Adams said.
The remainder of the energy rate on existing bills covers other expenses that in the spring will be broken out as separate items, Mr. Adams said.
Some of those items will increase in price, in addition to the new payments covering corporate taxes, when the changes take effect in March. However, Toronto Hydro customers will pay the increases on the 4.2 to 4.5 cents while those who locked in will have them added to the higher contract rate.
“These consumers are soon to realize they were misled,” Mr. Adams said.
Starting this spring in Toronto, the bills will be broken out into a number of separate charges reflecting the costs of privatizing the former provincial utility Ontario Hydro. The prices on some of these items will go up at the same time.
Along with the actual price of the electricity, customers will see how much they will pay as a distribution cost, which includes a fixed price for being hooked up to the system and variable fee reflecting the volume of electricity used.
Also itemized will be a transmission fee, which reflects the cost of getting the power from the generating station to the power grids.
This fee is paid to the privatized firm Hydro One that controls the high-voltage power lines that feed local distribution utilities.
Many of the local distribution companies, including Toronto Hydro, are still owned by municipalities, while others have been bought by Hydro One.
The new bills will also include a debt-reduction fee designed to pay off more than $20-billion in debts on the books of the former Ontario Hydro. Most of the debts are related to nuclear power plants, Mr. Adams said.
A final item on the bills will be something called dispatch fees, a charge for covering costs of keeping the system secure.
The local distribution companies in Ontario are on different schedules for restructuring, so the price increases and the date they will appear on bills in municipalities other than Toronto will vary.