Karen Bridson
Eye magazine
June 6, 2001

The province’s failure to educate the public on the changing electricity landscape is costing homeowners a valuable rebate, says the head of an energy watchdog group.

By signing up with private utility companies, consumers have been unwittingly signing away their rights to the "market power mitigation rebate" – worth an average of $130, says Tom Adams, executive director of Energy Probe.

"This is a major transfer of wealth from consumers to marketers, and consumers are unwitting participants," he says. "The public agencies have not done their jobs to inform the public. I’m really concerned about this."

The rebate was created to offset the potential rise in power prices and the market dominance of Ontario Power Generation (OPG) when the electricity market opens up in May 2002.

Private companies – including Ontario Hydro Energy, a subsidiary of HydroOne, Direct Energy, run by Centrica, and Toronto Hydro Energy, run by Toronto Hydro – have been approaching the public door-to-door and through the mail, offering a fixed price for electricity over a set period. While the contracts state that any rebate will be handed over to the utility, the companies are not exactly pointing this out to consumers.

"The Ontario Energy Board is a public agency that shares with the ministry the responsibility for public education around the new energy market," says Adams. "I started pleading with them in November [to publicize the rebates], and they’ve ignored me."

Adams says he has no opposition to the contracts, because there is nothing fraudulent about them. "And I can imagine conditions in the market where assignment of that rebate would be a worthwhile bargaining chip – if you get something in return," he adds. What Adams objects to is the lack of public information that would allow people to make informed decisions.

Some marketers have also been using high-pressure sales tactics to encourage consumers to sign up, offering deals for a limited period of time.

Christine Staddon, spokesperson for the Ontario Energy Board, admits that her organization has not put out an advisory about the rebates, but promises that a fact sheet will be posted on the board’s Web site.

"We’ll be doing that soon," she says. "The fact sheet will point out that if [consumers] are approached by retailers, they should read the contract carefully and ask about the rebate."

Meanwhile, the Energy Ministry sent out literature about the rebate to homeowners last year, says Michael Krizanc, a spokesperson for Ontario Energy Minister Jim Wilson.

But Kevin Dove of the Independent Electricity Market Operator, which will calculate the rebates, says not enough consumers know about them. "We are making a point of getting the message out," he says. "From what we’re seeing, there is not enough awareness. We certainly encourage more information about what the new market will look like for consumers."

The rebate will be calculated according to how much electricity each customer uses. According to Staddon, a typical residential consumer using 10,000 kilowatt hours annually at an average price of 5.65 cents per kilowatt hour will get a rebate of approximately $130. Homeowners who don’t sign up with one of the marketers will automatically receive their rebate on their energy bills, but those who sign a contract for a fixed rate on electricity costs will be signing over their rebate to the utility.

Consumers worried about soaring prices in the open market are signing up, in many cases, for prices above current levels in hopes that they won’t be gouged if they rise again, says Krizanc.

The rebate was instituted because of the province’s theory that a competitive marketplace cannot be successful with one dominant player. OPG now owns 90 per cent of the power generation in the province, but the government will require it to reduce its share of the market to 35 per cent over the next 10 years.

In the meantime, OPG will have to rebate to consumers any revenue it takes in beyond 3.8 cents per kilowatt hour, according to Krizanc. "We want them to rebate a percentage of everything they take in until the market dominance is reduced," he says.

Currently, OPG is looking at selling or leasing some of its plants, and as it reduces its market share, the rebate will also shrink. "It’s an incentive to reduce so they can keep more of what they make," says Krizanc.

Don’t let me be misunderstood

Tom Adams wrote a letter to Eye magazine in response to this article, protesting several inaccuracies.

Re "Consumer rebates end up in utilities’ hands," June 7, 2001.

Your article properly warned consumers about the potential implications of signing away their entitlement to electricity rebates when dealing for energy marketers but also contained a number of glaring inaccuracies and misquotes.

Your article quoted me saying that the rebates are "worth an average of $130" – a statement I never made. The Ontario Energy Board, using a faulty calculation which is more fully explained in the recent study "Contracting for natural gas and electricity in Ontario: Energy Probe’s advice to household consumers" posted to http://www.energyprobe.org, has estimated its value at $130. Uncertainties about Ontario’s future electricity market are so significant that Energy Probe has not estimated the rebate average value and we would urge caution in accepting any estimates.

I am also quoted saying that rebate assignment represents "a major transfer of wealth from consumers to marketers" – another statement I never made. There is a major wealth transfer from consumers to municipalities going on with Ontario’s electricity restructuring but the extent, and potentially the direction, of the wealth transfer between consumers and marketers remains to be seen.

The title of the article is also factually wrong, since unregulated marketers are distinct corporate entities from regulated utilities and in some cases even have different owners.

Tom Adams
Executive Director
Energy Probe