John Spears
Toronto Star
November 26, 2003

Most Ontario households will pay $5 to $9 a month more for their electricity starting in April under a new pricing system announced by the provincial Liberals.

Energy Minister Dwight Duncan yesterday abolished the cap of 4.3 cents a kilowatt hour that the previous Tory government imposed on the energy component of the electricity price.

The Liberals had promised to keep the cap in place until 2006, but Duncan said the cost of the subsidy – about $700 million in the first year, when the market price of power averaged 6.2 cents a kilowatt hour – is too much for taxpayers to bear.

Instead, starting April 1, householders will pay 4.7 cents a kilowatt hour for the first 750 kilowatt hours of electricity they use each month. For additional electricity, they’ll be charged 5.5 cents a kilowatt hour. The energy component makes up about half the total electricity bill.

Those rates should come close to covering the full cost of power, Duncan said, as projections show the price averaging between 4.7 and 5.8 cents a kilowatt hour depending on weather and the performance of Ontario’s nuclear generators.

The rate increases won’t stop there.

Duncan said local hydro companies, which had their rates frozen by the Conservatives, will be able to recover costs they ran up preparing for the deregulated electricity market. Starting in 2005, they’ll also be permitted to earn profits, regulated by the Ontario Energy Board.

Combining the energy price increase with the local hydros’ rate increase, a household using 1,000 kilowatt hours will pay an extra $9.20 a month for electricity starting in April, a 9 per cent increase.

A household using 750 kilowatt hours would see its bill rise $4.82 a month, an increase of 6 per cent.

According to the energy ministry, 45 per cent of Ontario households use 750 kilowatt hours of power or less each month on average, and 61 per cent use 1,000 kilowatt hours or less.

Small businesses will also be hit by the new rates. A typical pizzeria may see its power bill jump $250 a month.

Duncan said the new rates will remain in effect until May 1, 2005, when the Ontario Energy Board will take over responsibility for setting the rates.

Duncan said the new rates were draining the provincial treasury, already burdened by a $5.6 billion deficit this year.

Conservative Leader Ernie Eves slammed the Liberals for breaking a promise to keep rates capped at 4.3 cents a kilowatt hour until 2006, which was still posted on the Liberal Web site yesterday.

"Mr. McGuinty campaigned against this," Eves said. "He said repeatedly when asked throughout the last year, not just the course of the election campaign, that he was going to leave the cap in place until 2006. All of a sudden it’s a whole new ballgame. He’s changed the rules after the election’s over."

Premier Dalton McGuinty said the cost of keeping the price for consumers and small businesses low while generators received the full market price was "compromising our ability to fund health care and education."

NDP Leader Howard Hampton said the measures will do nothing to curb Ontario’s growing appetite for power.

"This is not a conservation plan," he said. "This is a rate hike."

The rate hikes will be especially hard on low-income consumers, who will also be punished because the higher rates will also push up the cost of rent and food, Hampton said.

Duncan said households should be able to offset much of the rate increases through simple conservation measures.

He also tied future rate increases by local hydros to conservation. The local hydros will be allowed to increase their rates on condition that they reinvest the equivalent of a year’s rate increase in measures to help their customers conserve energy or decrease demand. That’s the equivalent of $225 million across the province, Duncan said.

He acknowledged that more needs to be done to give Ontario a secure supply of electricity at reasonable prices. "This is by no means the last word on energy policy in this province," he said. "This is one step, a beginning, an interim step."

The new pricing won cautiously favourable reviews from some observers.

Peter Love of the Canadian Energy Efficiency Alliance called the new pricing "a step in the right direction," though the new prices are probably still below full market rates.

"It’s provided a lower rate for lower consumption," Love said. "That was something we were looking for to start with."

Tom Adams, executive director of Energy Probe, called it "a small step but a good step."

Over time, he said increasing the price of power by 10 per cent leads to about a 7 per cent reduction in demand as people change their habits, buy more efficient appliances and insulate homes.

Charlie Macaluso, who heads the association representing local utilities, said the new rates will allow the utilities to recover $800 million that the utilities spent gearing up for the deregulated market, and which they haven’t been allowed to recover from their customers.