Toronto Star/Editorial
July 4, 2002

There is a major flaw in Ontario’s new competitive electricity system.

The market offers consumers almost no incentive to heed the price signals it sends out when supply has trouble keeping up with demand.

With electricity use at record levels amidst this week’s blazing heat, soaring prices should convince consumers to cut back.

But without state-of-the-art electricity meters, they won’t save a cent by conserving energy.

The agency that runs the system, the Independent Electricity Market Operator (IMO), issued a "Power Warning" this week, asking people across the province to cut down on their consumption in a bid to ease the strain on power supplies.

Energy Minister Chris Stockwell joined the IMO in pleading for people to conserve on electricity as overloaded transformers caused power outages across the city.

But the most powerful inducement to conserve ought to be skyrocketing electricity prices. On Tuesday, the cost of electricity shot up from about 4 cents per kilowatt-hour to more than 47 cents. That massive increase was followed by multiple price spikes yesterday.

Unfortunately, even those who cut back on their electricity usage will pay dearly for those who did not.

That’s because consumers have been effectively shut out of the instantaneous electricity market.

Most don’t have meters capable of measuring electricity usage when it actually occurs. That means consumers – except the minority that signed fixed-price contracts – end up paying the average price of electricity over a two-month period. Thus, they pay for spikes like yesterday’s whether they overused the system or not.

From the consumer point of view, the whole point of having a fluctuating price is to give buyers an incentive to conserve electricity at peak times, and take advantage of low prices at non-peak hours.

If they could have avoided the sky-high prices, many consumers would have chosen to live with the heat during the day, and only turned on their air conditioners at night.

Or they would have waited until 11 p.m. to turn on their dishwashers if they could have saved money by doing so.

But there is no point in sweltering if you have to pay the same price as others who are running their air conditioners full blast.

The system is even more unfair to those who don’t have air conditioning because they have to pay the same electricity prices as those who drive the prices up.

In its attempt to sell competition in electricity to the public, the Ontario government kept emphasizing that competition would give consumers choice.

But without sophisticated meters, the only choice open to consumers is to pay for every price spike caused by others, or to pay a hefty premium for stable rates.

That choice is tantamount to heads, electricity sellers win; tails, consumers lose.

If Queen’s Park really wanted consumers to have meaningful choices – and to conserve on electricity – it would order local utilities to provide their customers with meters that measure and price electricity usage when it actually occurs.