Fred Vallance-Jones
Hamilton Spectator
June 12, 2002

 The price of electricity reached unprecedented heights yesterday as unexpectedly hot and sticky weather in southern Ontario boosted demand for air conditioning. For an hour late yesterday morning, the provincial power price hit 70 cents a kilowatt hour, more than 20 times the averages seen until then.

While the spike will end up buried in the average price that consumers not on fixed price contracts pay, experts say it is an important sign of how the new Ontario power market works. When demand is up, you pay more.

In this case, the hot weather combined with losses of expected generation capacity.

Under Ontario’s pricing system, generators make offers to sell power, and the Independent Electricity Market Operator accepts them, starting with the lowest-priced offer. The IMO continues to accept offers until the demand has been satisfied. All generators are then paid the highest, or last, price accepted, no matter what price they initially offered.

The cycle repeats every five minutes and the price is averaged every hour.

Ted Gruetzner, a spokesman for the IMO, says yesterday’s spike happened after the agency temporarily exhausted its pool of reserve power.

The IMO then had to go back out into the open market, and accept some sky-high offers. They pushed the hourly average up to 70 cents a kilowatt hour between 10 and 11 a.m.

The IMO says the peak is exactly what consumers should expect when demand for air-conditioned relief starts pushing demand toward seasonal peaks. Provincewide demand peaked at a little more than 22,600 megawatts yesterday. The record peak, last August, exceeded 25,000 megawatts.

Nonetheless, the price spike became fodder for the NDP during question period at Queen’s Park.

NDP leader Howard Hampton has been warning for months of higher prices and, potentially, blackouts in the new competitive market that debuted May 1. Again yesterday he warned of business and school shutdowns, and midnight surgery, as large power consumers try to avoid daytime price peaks.

Premier Ernie Eves dismissed the criticism, pointing out that ordinary consumers pay an average price, and that Ontario Power Generation (OPG) will pay rebates on its share of generation capacity when the average price rises about 3.8 cents a kilowatt hour.

At the end of the day, the exact amount that consumers pay will depend on whether the price moves into a higher zone on a sustained basis. After yesterday’s peak, the power price settled into the six- to eight-cent range for the rest of the day, well above typical levels until then.

Tom Adams, head of the lobby and watchdog group Energy Probe, says consumers could see average prices of eight to 10 cents a kilowatt hour this summer because of continued delays in the restart of the mothballed Pickering A nuclear reactor. It’s not expected back in service until the end of the year at least, leaving a big hole in OPG’s generation capacity just when it is needed.

IMO says consumers can help themselves by switching off fans, and turning up the thermostat on their air conditioners during high demand periods.