Martin Mittelstaedt
Globe and Mail
February 1, 2002

Nearly a million Ontario electricity consumers have recently signed expensive long-term contracts to buy power, often from high-pressure door-to-door marketers and at fixed rates more than a third higher than likely market levels. The contracts take effect when Ontario’s electricity market opens for competition on May 1 and have prompted controversy.

Marketers are selling power on the doorstep for nearly six cents a kilowatt-hour, although the Ontario Energy Board, the provincial regulator, has forecast prices will likely be around 4.3 cents a kwh when the market opens.

Based on the board’s forecast and typical residential power bills, consumers could be paying about $200-million above market for electricity each year.

Jack Gibbons, an environmentalist whose organization has posted an Internet consumer advisory on the contracts, is blunt: "They’re 35 per cent to 38 per cent higher than what the [provincial regulator] is forecasting."

Consumers mulling over a contract might also want to consider what the province’s two top electricity regulators are doing for their own household power supply.

Floyd Laughren, chairman of the energy board, said almost a million ratepayers have contracts, but he isn’t among them. "Me personally? No I haven’t" signed.

Neither has Dave Goulding, president of the Independent Electricity Market Operator, the provincial watchdog that will run the new wholesale electricity market. "I haven’t signed a contract with anybody and I don’t intend to."

Mr. Goulding and Mr. Laughren both spoke yesterday to reporters after speeches at a business event.

Marketers have generally been offering prices of 5.7 cents to 5.9 cents per kwh for up to five years. A kilowatt-hour is the amount of juice that keeps a 100-watt light bulb illuminated for 10 hours.

The energy board posted its notice of 4.3 cents a kwh last year because of concerns that the province’s four million ratepayers didn’t have enough information to deal with the doorstep sales.

Mr. Laughren said the board has had to come down hard on some of the marketers, known as retailers, who often also sell natural gas.

"There has been some problems with some of the retailers and we’ve called some of them in and taken them out to the woodshed," he said. Of the marketing going on, he said: "It’s very aggressive. It’s commission selling and so inevitably you’ll get some problems."

Mr. Goulding refused to say what he thinks electricity will cost when its price is set by market forces in May, but he did say Ontario Power Generation, the provincial utility, is getting about four cents a kwh for its coal-fired power.

Consumers signing contracts receive the stability of fixed electricity rates, much like having a fixed mortgage. They will also be protected if Ontario’s experiment in power deregulation turns into a California-type disaster.

But Mr. Goulding said Ontario has much better supplies and won’t suffer the price spikes and shortages that gave deregulation a bad name last year in California.

Although Mr. Goulding is one of the province’s savviest electricity analysts, he believes it isn’t his job at the government-owned company to help other consumers.

"The last thing I’m here to do as the market maker is give advice to the public as to whether they should sign contracts or shouldn’t sign contracts. That would be [an] absolutely and totally inappropriate thing for me to do," he said.

When competition starts, most consumers will automatically receive the price set by demand and supply at Mr. Goulding’s organization, which is known as the IMO in the industry.

But those who signed contracts will have to pay the price they pledged to pay.