John Spears
Toronto Star
February 1, 2002

Four cents and change: That’s what you’re paying for a kilowatt hour of electricity today if you’re a householder in Ontario.

And that’s the price to compare with the rates of electricity retailers, who are offering fixed rate contracts at up to 5.95 cents a kilowatt hour for a five-year deal.

The two men most closely involved with opening Ontario’s electricity market to competition agree the current cost of power is a little over 4 cents a kilowatt hour.

Floyd Laughren, who chairs the Ontario Energy Board, and Dave Goulding, chief executive of the Independent Electricity Market Operator, pegged today’s price at around 4 cents after making a joint presentation to the Toronto Board of Trade.

Floyd Laughren, former Ontario finance minister, is chair of the Ontario Energy Board, which licenses participants in Ontario’s energy market.

The energy board licenses market participants; the independent operator will run the 24-hour-a-day electricity auction when Ontario’s market is opened for competition on May 1.

A study prepared for the energy board last year predicted the Ontario price will average 4.3 cents a kilowatt hour in its first year.

Prices could be volatile during periods of peak use, however, and there’s no guarantee the forecast will hold, especially over a 5-year period.

For householders who want to lock in a rate, electricity retailers are offering rates ranging from 5.69 cents a kilowatt hour to 5.95 cents a kilowatt hour, for terms of one to five years.

At the moment, however, customers can’t look at their bills and see how much they’re paying for power alone – which is what the retailers are offering.

Toronto Hydro, for example, lists its cost of power at 6.46 cents a kilowatt hour. But that includes the rate charged by Hydro One to carry the power from generating stations to Toronto Hydro. And it includes other expenses, such as the cost of operating the system so that supply and demand are matched across the grid throughout the day.

To really compare today’s rate with the rate offered by the retailers, you’d have to subtract the transmission rate and other charges from your current bill. According to Laughren and Goulding, that will give you a rate of slightly more than 4 cents a kilowatt hour.

That’s the same figure quoted by a spokesperson for Ontario Power Generation when asked for the current cost of power.

The precise rates for all the charges currently being lumped into one line on your utility bill haven’t been fully separated, however.

And utilities aren’t required to untangle, or "unbundle," all those separate rates on electricity bills until May 1, when the competitive electricity market opens.

In the meantime, 1 million Ontario households – nearly one in four – have signed fixed term contracts with retailers.

Laughren said it was an early policy decision of the province to allow retailers to sell electricity contracts before the components on the bill were clearly calculated and unbundled.

"All of that’s just coming together now," he said.

The energy board has a code that requires electricity retailers to explain that the price they’re quoting is only a portion of the total electricity bill. In Toronto, for example, while the cost of power alone is about 4 cents a kilowatt hour, the total for all charges is 8.215 cents a kilowatt hour. Customers also pay a basic $10.20 a month.

"The retailer cannot pretend that what they’re offering is an all-in cost," said Laughren.

For the record, neither Laughren nor Goulding have signed fixed price contracts for their own homes.

Goulding says since he’s running the marketplace, he figures he should live by it.

"I have full conviction in my own business," he said yesterday. "I haven’t signed a contract with anybody and I don’t intend to. To the extent possible I’ll take whatever the marketplace goes."

Goulding says his choice should not be taken as advice to others.

"The last thing I’m here to do as the market maker is to give advice to the public as to whether they should sign contracts or shouldn’t sign contracts."

Laughren said he’s also going with the market price, but says the choice is an individual one.