Karen Howlett
Globe and Mail
July 21, 2005

The record-shattering heat wave in Ontario has sent energy costs soaring in the province, leaving consumers facing higher bills next spring as the government moves to cover a growing deficit.

As things stand, the cost of buying electricity on the open market exceeds what the government charges consumers to run their air conditioners and televisions.

That gap is widening as this summer’s sweltering heat and high humidy drive up consumption levels, making electricity even more expensive.

The province has paid 7.9 cents a kilowatt-hour on average to buy power from generating companies so far this month, up from an average of six cents in the first half of this year.

Consumers, by comparison, are paying five cents a kilowatt for the first 750 kilowatt hours of power they use each month, and 5.8 cents for the remainder.

Contrast that to yesterday afternoon, when the price of power jumped to just over 53 cents a kilowatt-hour, a level not seen in some time but below the record of $1.02 back in September, 2002.

"Bottom line: Customers are not paying anything like the real cost of power," said Tom Adams, executive director of Energy Probe, a Toronto-based energy watchdog.

That is expected to change April 1, when the Ontario Energy Board unveils its new price plan.

The agency tracks the difference between what the province is paying for electricity and what it collects in revenue in a so-called variance account.

As of June 30, the account had accumulated a shortfall of $42-million over three months, up from $6-million in May.

Mr. Adams says the shortfall between the government’s revenue and costs could climb to $160-million by the end of the summer, a level that would allow the OEB to trigger a price increase for consumers before April.

Angie Robson, a spokeswoman for Energy Minister Dwight Duncan, said the prices set by the OEB are to cover the true cost of generating electricity and will be adjusted to reflect the unusually hot summer. She said any price increase would be partly offset by a rebate consumers will receive for last year, an amount that has not yet been determined.

Denise Harrington, an OEB spokeswoman, said she cannot say definitively that consumers will pay higher prices for electricity next year. But she acknowledged that this summer’s unrelenting heat wave is having an impact on prices.

"Definitely, the spot market prices are going to be passed on to consumers," she said. While a lot of money has been paid to power generators in June and July, the OEB does not know how the rest of the year will shape up, she said.

New Democrat Party Leader Howard Hampton said the province’s 4.5 million residences and small businesses are facing a significant rate increase next year. "If we continue on the path we’re on . . . it will be a rate increase that people will feel, especially those living on limited or fixed incomes."

While Mr. Adams said he is expecting only a modest price rise to consumers for the electricity itself, regulatory, debt retirement and delivery charges are also in every electricity bill. The OEB could also increase what is known as the wholesale market surcharge, currently 0.62 cents a kilowatt-hour, to recover guarantees and other premiums associated with importing power from neighbouring states and provinces.

As the hot weather pushes up demand for electricity, the province has had to rely more on expensive imports.

The energy-supply-shortfall problems emerged under the previous Progressive Conservative government. But they have not ended under Premier Dalton McGuinty’s Liberals, according to a recent 10-year forecast from the Independent Electricity System Operator, the agency responsible for managing the province’s electricity system.

PC Leader John Tory criticized the government for not having a plan to address the problem and leaving the province at the mercy of outside sources.

"It’s only going to get worse," he said.

"Unless there’s a lot of shovels put in the ground very soon to increase capacity for Ontario, we’re going to probably have continuing problems with supply and upward pressure on prices."