Karen Howlett
Globe and Mail
November 17, 2005

Ontario’s energy regulator is sitting on $570-million in rebates it owes to electricity customers as of the end of October.

While not one cent of that money will end up in the coffers of households across the province, it will help to cushion the blow of higher rates next year.

The surplus arose because Ontario Power Generation, the province’s electricity utility, has collected revenue this year that exceeds the cap imposed by the government.

About half of the surplus funds will be reimbursed to industrial consumers that pay market prices for electricity.

The Ontario Energy Board is using the balance to offset a portion of the shortfall between what the province is paying to buy electricity on the open market and what it charges households and small-business users.

"Every single penny there is spoken for," said Tom Adams, executive director of Energy Probe, an energy watchdog.

If the government does not extend the revenue cap earlier placed on Ontario Power Generation when it is due to expire in April, electricity prices will go up "big time," Mr. Adams said.

The cap acts as a buffer against higher prices, he said.

OPG received an average price of 5.4 cents a kilowatt hour during the quarter ended Sept. 30, but it gets to keep only 4.7 cents for most of its output.

The cost of buying electricity on the open market far exceeds what the government charges consumers, who pay artificially low prices for electricity.

At the end of October, the shortfall stood at $637.3-million, Chris Cincar, a policy adviser at the energy board, said in an interview yesterday. But $276.5-million of the surplus has been used to reduce the shortfall to $360.7-million, he said.

The shortfall has risen steadily every month since the board began tracking it on May 1, the day a regulated price plan for consumers came into effect.

Under the plan, consumers pay five cents a kilowatt for the first 750 kilowatt hours of power they use each month during the summer and for the first 1,000 kilowatts during the winter. The rate rises to 5.8 cents a kilowatt hour for consumption above those thresholds.

By comparison, the province has paid 7.9 cents a kilowatt hour on average to buy power from generating companies since May 1.

Based on that discrepancy alone, consumers are already bracing for sticker shock next May when the board rolls out its new electricity rates, Mr. Adams said.

And the bad news for consumers does not end there, he said. Electricity distributors across the province have applied to the board to charge higher rates next year for delivering electricity to consumers’ homes.

Hydro One, the province’s largest distributor with 1.2 million customers, has applied for increases of up to 25 per cent, Mr. Adams said.

A Hydro One spokesman did not confirm these numbers but said the rate increases, if approved, would result in average overall increases of 6 per cent. Electricity bills consist of four separate charges: electricity, delivery, debt retirement and regulatory.

New Democratic Party Leader Howard Hampton has questioned Energy Minister Donna Cansfield repeatedly this week about whether the government would order OPG to return its excess profits to industrial customers immediately.

"What’s very clear is that the high cost of electricity is killing jobs in the forest sector," Mr. Hampton told reporters yesterday.

"That money, frankly, could be put to better use in helping some of those companies stay alive."

Ms. Cansfield told reporters yesterday that industrial customers would receive rebates next April.

Mike Kuriychuk, chairman of the Association of Major Power Consumers of Ontario, said yesterday that the cap on OPG’s revenue should be extended once it expires. OPG should earn profits sufficient to maintain its operations, he said. "Everything else should be distributed back to consumers across the board."

Electric Shock

What a 37-per-cent bill increase looks like . . .

A typical monthly bill for a high density residential customer of Hydro One, the province’s largest utility, who uses 1,000 kilowatt-hours of electricity a month under the existing regulated price plan and the bill if the same consumer paid market prices for electricity, provided Hydro One wins regulatory approval to increase delivery charges by up to 25 per cent on some utilities by May 1, 2006.

Your Electricity Charges

SOURCE: HYDRO ONE, THE INDEPENDENT ELECTRICITY SYSTEM OPERATOR AND THE ONTARIO ENERGY BOARD