Energy Probe

John Spears
Toronto Star
August 19, 2002

While you’re at it, grab a calculator, a pencil and paper and perhaps a mug of coffee, because it may take you a while to figure out whether you’re paying what you’re supposed to.

That’s because the new bills don’t tell you the rate you’re being charged for energy.

And for 50,000 households in Toronto that formerly had flat rate water heaters, the bills are doubly complex. That’s because they list the number of kilowatt hours used in two different places on the bill, without adding them into a total.

The issue came to light after a query from a Star reader.

The new bills break down the charges for electricity into separate elements. They show how much is charged for long distance electricity transmission, how much for local distribution, how much for the special charge to pay off the old Ontario Hydro debt, and so on.

The bill also shows who supplies the customer’s energy. Some customers have a fixed-price contract with a retailer; others buy through the utility at a floating market rate.

But the new bills don’t show the rate being charged.

Blair Peberdy, vice-president of Toronto Hydro, said in an interview that the Ontario Energy Board (OEB), which sets the rules for the new market, doesn’t require that information to be put on the bill.

"The OEB said: ‘These are the ‘must-haves’ on the bill,’ and the rate for the retailers was something that wasn’t mandated," he said

Peberdy said the array of rates offered by retailers made the task difficult for billing systems: One retailer has 16 rates in the marketplace.

Enersource Hydro Mississauga has also decided to keep the retailers’ energy rates off the bill for now.

Bill Hawkins of the Electricity Distributors Association, which represent local utilities, said it is up to the retailer to supply the utility with the rate information, and many supply only a final charge. No one at the OEB was available who could explain why retail rates aren’t required on bills.

Toronto Hydro blurs things one step further for 50,000 customers who used to have flat rate water heaters. Electricity for those heaters doesn’t run through the meter, so Toronto Hydro now applies a standard estimate of the power they use.

But the power used by the water heater is shown separately from the power used by the rest of the house.

So to figure what rate you’re paying, you’d have to add the two figures together, then divide that into the total charge.

Here’s how it works out on one customer’s bill:

Add 778.407 kilowatt hours (for the water heater) plus 902.712 kilowatt hours (for the rest of the house.)

The total is 1,681.119 kilowatt hours.

Then divide that total into the energy charge of $97.34.

The total is 5.79 cents a kilowatt hour.

Simple, eh?

Fred Vallance-Jones
Hamilton Spectator
September 5, 2002

Customers who signed fixed-price electricity contracts will pay less for power they used this summer than those who stuck with their local hydro utility.

But the savings for July will amount to no more than about $8 on an average Hamilton bill.

And an expert in Ontario’s new electricity market says in the longer term, those who stayed with utilities such as Hamilton Hydro will be the real winners.

Record demand driven by heat and air conditioning resulted in short-term spikes that pushed the hourly price to nearly a dollar a kilowatt hour in July and August.

Those peaks pushed the average price Hamilton Hydro will charge its residential customers for the period from July 1 to July 31 to 6.4 cents a kilowatt hour.

That’s higher than the prices in the fixed contracts with firms such as Direct Energy, but not by much. (The average Hamilton Hydro price for August isn’t yet available but based on the hourly prices that month, it may be a shade higher again).

"What we have been through in the last two months is near crisis conditions in the power markets," said Tom Adams, executive director of Energy Probe, a Toronto-based lobby and public interest group. "It was almost as bad as it gets . . . yet prices have averaged out to fairly moderate levels."

By the end of the first full year of the new market, next May 1, Adams expects that overall lower prices in spring and fall will have more than compensated for this summer’s peaks, and those expected again in the depths of winter.

A recent Hamilton Hydro bill, for power use by a Spectator reporter, shows that so far, the open market customer has indeed paid less on average. The bill covers June, a period of low prices similar to those expected this fall, and July, the first of the two peak months.

The final average price (not including the distribution charges that all customers pay) is about 5.2 cents a kilowatt hour. That’s less than the 5.6 to 5.95 cents common in the fixed price contracts.

For a typical user of 1,000 kilowatt hours a month, that difference translates to an $8 to $10 saving, savings that will only increase if the expected lower prices this fall come to pass.

It’s not the best possible news for the fixed-price marketers, whose door-to-door agents have often promised savings as an incentive to sign up.

In their press statements in recent months, the marketers have taken to promoting price stability as the key selling point for their one- to five-year contracts.

"In the long term, we don’t guarantee savings," said Ray McManus of Direct Energy, the largest of the electricity marketers.

Art Leitch, head of Hamilton Hydro, likens the contracts to a fixed-rate mortgage that may not be cheaper than a variable rate loan, but offers a guaranteed rate. "You pay a premium for this peace of mind."

Adams says a great irony of this summer’s market is that connections with U.S. power grids not only kept the lights on when Ontario’s generators couldn’t meet demand, but also helped keep the price down for open-market customers.

Critics of the new market had warned that U.S. connections would drive prices up here because generating companies would start sending power southward, forcing prices to U.S. levels.

But Adams says what really happened is the power flowed in the other direction. The imports soaked up some of the unprecedented demand, preventing prices in Ontario from going even higher than they did.

Adams expects growing pressure to further harmonize the markets in Canada and the United States, allowing power to flow more easily to where it’s needed under common pricing rules.

The Independent Market Operator, the Ontario agency that oversees the competitive electricity market, has already inked an agreement with its counterparts in New York and New England to accelerate harmonization of the three markets.

Marlene Habib/Canadian Press
Toronto Star
December 18, 2002

Don’t spend your hydro rebate cheque before you receive it.

Based on calls to some hydro utilities, there’s a lot of consumer confusion about who’s getting a $75 rebate cheque and who’s not as a result of Ontario government legislation that also froze hydro prices.

In fact, Toronto Hydro, which supplies about one-quarter of the province’s electricity to businesses and residents, took out ads this week to clarify who can expect rebates and why.

"Our call centre was getting a number of calls, so we wanted to put an ad out to clarify," Laurie McFadden, a spokeswoman for Toronto Hydro, said yesterday about the ad in such publications as Toronto Metro, Toronto’s subway newspaper.

Consumers like Susan Charness said that until she read the ad, she was expecting the $75 from Toronto Hydro to show up in her mailbox.

"I didn’t know who’s supposed to get (the rebate), but I assumed I was going to get it because everything I heard made me think that," said Charness, who runs her own business out of her suburban Toronto home.

Tom Adams, executive director of Energy Probe, an industry watchdog, said the public is "legitimately confused" by the province’s hydro-kickback plan because there’s a "fundamental lack of clarity from the government as to what is going on. They don’t know who’s going to pay for these rebates or worked out the detail about how they’re going to be administered. It’s very difficult for the people who are running the power system to figure out what’s going on, so how do ordinary customers figure it out?"

Yesterday, Dan Miles, aide to Energy Minister John Baird, said it’s up to local utilities to administer the rebates and ensure they’re sent out by Dec. 31, either by mail as separate cheques or hand delivered.

Miles said "pockets of the province" – including Toronto, Chatham and Middlesex-County – consistently paid 4.3 cents a kilowatt hour under standard-supply-rate billing, so consumers shouldn’t expect a rebate.

The Toronto Hydro ads explain that whether you get a rebate comes down to whether or not your household or business has signed on with an independent retailer who signs consumers to fixed-rate plans over a period of years.

John Spears
Toronto Star
May 16, 2003

The Ontario Energy Board is using a heavy hand in an ongoing tussle with Enbridge Gas Distribution Inc. over the utility’s extensive practice of outsourcing services.

The board has issued formal notices ordering two senior executives to appear at hearings next week with an array of documents concerning Enbridge’s outsourcing practices.

At the bottom, in large type, the summons says: "IF YOU FAIL TO ATTEND . . . THE ONTARIO COURT (GENERAL DIVISION) MAY ORDER THAT A WARRANT FOR YOUR ARREST BE ISSUED . . ."

The legal bluster has raised eyebrows among those familiar with the normally staid energy board, including its recently departed chair, Floyd Laughren.

"It wasn’t used for the five years I was around," Laughren said in an interview yesterday.

Peter Budd, a lawyer for Enbridge, called the summonses "highly unusual" for the energy board: "They just don’t do it. And they don’t need to do it."

The summonses were issued to Stephen Letwin, group vice-president of Enbridge Inc., the parent company of Enbridge Gas Distribution, which is the utility that deals directly with customers; and to Dwight Willett of Accenture Business Services, which provides customer services to Enbridge Gas Distribution.

Donna Garant of the energy board says the documents are needed to help the board, which is considering Enbridge’s latest rate application, understand the costs involved in the outsourced contracts.

The issue goes back to a decision released last December, in which the board said Enbridge Gas Distribution had outsourced so many functions to companies affiliated with its parent Enbridge Inc., the board couldn’t tell who really controlled the utility.

The board said it wants proof of the company’s claims that the outsourcing saves money and benefits customers.

Some of the Enbridge affiliate companies launched a court challenge to the board’s request for information about the outsourcing contracts.

With the new summonses, the board is continuing to pursue that information in spite of the legal challenge.

"I was somewhat surprised to see that that (court) process was not let to run its course," said Budd, who acts for Enbridge Gas Distribution. "All of this is highly unusual conduct of the board."

But Peter Fournier, president of the Industrial Gas Users Association and an intervenor in Enbridge’s rate application, said his group sees no need for the energy board to wait for the courts.

"We said: Get on with the bloody hearing," he said in an interview.

Tom Adams, executive director of Energy Probe, said the whole episode indicates a new tone at the energy board, which in the past often resembled a "gentlemen’s club."

Tom Adams

September 26, 2003

Dear Friend:

The Great Blackout of 2003 is the latest of the great blackouts that we’ve suffered, and it affected the most people – 50 million people in Canada and the U.S.. But this recent blackout is hardly the worst – the great blackout in the 1998 Ice Storm in Quebec, Ontario and the U.S. northeast, led to the loss of power for 34 days and caused far more hardship and disruption. Quebec alone suffered 30 deaths; 450 shelters needed to be established and 17,800 people were forced from their homes.

These major blackouts tell only part of the story. Throughout Canada, smaller and less publicized blackouts – lasting several minutes or several hours – continually disrupt our communities, harming our economy and inconveniencing our citizens.

The truth is stark: Our power systems have become increasingly unreliable and for one overarching reason – highly centralized power systems are inherently vulnerable. They not only are likelier to fail; when they do fail, they are more difficult to restore.

The Great Blackout of 2003 is a case in point. New York, Cleveland, and other U.S. cities all had their power restored fairly quickly. Toronto and other Canadian cities took longer to get power back, and even when they did, they remained vulnerable for days, with auto plants and many non-essential services needing to remain shut down. Why did Ontario communities suffer most in the aftermath? Because Ontario is over-reliant on nuclear plants that couldn’t be brought back into service quickly without courting danger. As Ontario Premier Ernie Eves admitted: “Every time you talk about one of these units you have to bear in mind that, with all nuclear units, as you try to get them up to speed, you could incur a problem, like a tube could leak, a tube could crack.”

Also for reasons of over-centralization, Quebec suffered far more in the 1998 Ice Storm than New York and other neighbouring jurisdictions in the U.S., which restored power between two and three weeks faster. The reason? Quebec has an excessive reliance on large but vulnerable long-distance transmission lines.

One country that has worked hard in the last decade to decentralize its power systems has been the United Kingdom, which broke up the state monopoly in 1990 and replaced it with a diverse, competitive and well regulated system. With competition, giant nuclear and coal plants have been phased out in favour of clean technologies and with wise regulation, the companies became accountable. The result, as you can see in the article by my colleague, Larry Solomon, is a dramatic decrease in interruptions, as well as an improved economy and environment.

From the time that we are children, we are told not to put too many eggs in one basket. Yet those in charge of Canada’s huge power systems seem to have forgotten that lesson. That’s why Quebec suffered more than anyone else in 1998 and why Ontario suffered more than anyone else in 2003. New Brunswick, Manitoba, Alberta, and B.C. risk a similar fate – to the economy as well as to our security – if they don’t diversify their systems to diversify their risk.

If you agree that Canada must move toward decentralized electricity systems – not more massive nuclear plants or more massive nuclear plants or more massive transmission corridors carrying power thousands of miles from remote northern locations – please send us a generous, tax-creditable donation. Like the U.K., Canada needs a sustainable energy system based on conservation, renewable energy, and other clean technologies.

With your help, someday soon we’ll achieve that goal.

Yours truly,

<!–

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Tom Adams
Executive Director

I agree! Smaller, more decentralized power systems are more economic and more reliable. To promote safe, sustainable and accountable energy systems, I would like to donate online.

Please see Holding power companies to account and compensating consumers

A record you can be proud of

• Energy Probe was the world’s first organization to recognize – in 1980 – that the electric power business is not a natural monopoly. We then developed the successful model for breaking up electricity monopolies, which the United Kingdom adopted in 1989. As we predicted, under this model, the U.K. cancelled the construction of new nuclear plants, began to shut down existing ones, and turned to advanced clean technologies such as cogeneration and renewable energy to meet its energy needs. Power rates fell for residential, commercial and industrial users.

   

• The Energy Probe model has since become the dominant model for electricity restructuring around the world, successfully implemented in Australia, New Zealand, South America and elsewhere (California, regrettably, did not adopt the Energy Probe approach).

   

• Since Energy Probe opposed nuclear power, Canada’s nuclear industry has cancelled 70 Darlington-sized reactors that were scheduled to be running by 2000. The Darlington nuclear plant was begun in 1970. Since then, no new nuclear plants have been ordered and completed, anywhere in Canada.

   

• Energy Probe was the first environmental organization in Canada – and to our knowledge, the world – to oppose the construction of nuclear power plants. We recognized that nuclear power was uneconomic in 1974.

   

• In bringing about these accomplishments, Energy Probe was entirely funded by Canadian citizens and typically outspent by the nuclear industry, 1000 to 1. Our success in influencing our country’s policies was noted by the inaugural edition of The Canadian Encyclopedia, which added that "despite its low budget, Energy Probe is respected for its scrupulous research."

Ahmad Faruqui and Stephen George
The Globe and Mail
April 29, 2004

Ontario Energy Minister Dwight Duncan recently spelled out the elements of a new energy policy that he said would put the province "back on solid footing by taking a balanced approach." Included among his proposals was establishing a pricing plan for small consumers that would ensure they "can take advantage of time-of-use rates so that they would have the opportunity and incentive to shift consumption from periods of high demand and prices to periods of lower demand and prices."

Premier Dalton McGuinty indicated that the Ontario Energy Board will be charged with developing "a plan to install a smart electricity meter in 800,000 Ontario homes by 2007 . . . and in each and every Ontario home by 2010." These smart meters, "combined with more flexible pricing," would provide an economic incentive for consumers to avoid energy use during peak periods when generating costs are much higher.

By shifting electricity use to off-peak periods, many consumers can reduce their energy bills. More importantly, the collective response of many consumers can reduce the need for new power plants and transmission lines, dampen price volatility in energy markets and improve the environment.

These are good ideas, supported by a 30-year history of electricity-pricing studies that indicate without a doubt that consumers can and will shift load in response to time-varying electricity prices. The most recent example is from California, where supply shortages similar to those in Ontario have led regulators to implement the largest pricing experiment ever conducted among homeowners and small businesses to estimate the impact of time-varying prices on energy-use patterns.

The California Statewide Pricing Pilot (SPP) is testing a variety of pricing options, including traditional time-of-use rates, as well as critical-peak pricing. Critical-peak prices incorporate a dynamic component into the tariff by signalling relatively high peak-period prices to consumers only on a small number of days when market conditions are particularly dire. These days are not known until the day before they occur, at which time consumers are notified that the next day is a critical day when electricity will be more expensive than normal. Analysis of data from the first summer of the California experiment indicates that these "rifle shot" price signals can be both popular and very effective at reducing peak demand, thus dampening wholesale prices and helping to avoid the need to construct relatively inefficient peaking generators.

While evidence from the SPP (and many other pricing experiments that preceded it) supports the Ontario government’s interest in smart meters and more economically rational pricing, it also identifies a number of pitfalls that the government must avoid if the benefits are to exceed the substantial investment and operating costs associated with wide-scale deployment of the meters.

One of the most important lessons from the SPP and other pricing experiments was perhaps summed up best by Tom Adams, executive director of Energy Probe, when he was recently quoted as saying, "If we’ve got smart meters but dumb prices, we’re not going to get the benefit of these better meters."

We have found that a relatively high price signal during peak periods is generally needed to induce sufficient load reduction to offset the cost of the meters. A muted price signal offers neither sufficient opportunity for consumers to reduce energy bills, nor sufficient reduction in peak demand to defer power-plant construction.

Another critical lesson is that, if asked to volunteer for a time-varying rate, the vast majority of consumers refuse. However, if they are placed on a time-varying rate as a default and given the opportunity to choose a flat-rate option, the vast majority stay with the time-varying option, and many adjust their behaviour to take advantage of the bill-reduction opportunities that time-varying price signals provide.

In other words, the Ontario government cannot simply require that smart meters be installed in homes and small businesses and expect that enough consumers will voluntarily sign up for time-varying rate options to offset the meters’ cost. The government will need to boldly change default prices to time-varying rates, while providing consumers with the choice of a flat-rate option that fully reflects the cost of providing this option.

A third issue that the government and the Ontario Energy Board must examine is how to implement the rollout of smart meters in such a way that the investment and operating costs will not exceed the benefits of the pricing options that the meters allow.

The Ontario Energy Ministry says the meters now cost $400 a unit, but it estimates the cost will be closer to $100 when more companies start producing them. We have examined the cost-effectiveness of smart meters combined with innovative pricing for several U.S. utilities, as well as for Victoria, Australia (where the government is contemplating a policy like Ontario’s), and Singapore. Based on this work, it is likely the metering costs will exceed the benefits if the cost is anywhere near $400. Done correctly, however, the cost per customer based on a mass deployment of smart meters could be closer to $150. At that price, it is much more likely benefits will exceed costs.

While substantial evidence from California and elsewhere supports the idea that pricing can instill a conservation culture, pricing options can only be offered in conjunction with smart meters. The devil is in the details: Pitfalls in implementation could easily turn a good concept into a bad investment. Very careful analysis and planning of implementation options will be required if the government’s bold vision is to produce the desired result.

Ahmad Faruqui and Stephen George, economists with the Oakland, Calif., office of Charles River Associates, were instrumental in the design and analysis of the California pricing pilot.

Gillian Livingston
Maclean’s magazine
March 31, 2005

Toronto: Flicking on the light switch in Ontario is going to cost more starting Friday, when electricity rates for residential consumers rise by as much as 10 per cent.

And consumers should expect prices to continue going up in the future, said Tom Adams, executive director of Energy Probe. "That’s quite certain," he said. "The only uncertainty is how high will it go." As of Friday, residential consumers will pay five cents per kilowatt-hour of electricity – up from 4.7 cents – for the first 750 kilowatt-hours used each month. Beyond that threshold, the cost rises to 5.8 cents per kilowatt-hour – up from 5.3 cents.

Distribution rates, the amount on the bill that goes to local electricity utilities, are also rising. Combined, the hikes mean electricity bills for residential consumers will go up between four and 10 per cent, the Ontario Energy Board said.

The rate increases come despite the Liberal government’s promise during the 2003 election campaign to keep electricity prices frozen at 4.3 cents per kilowatt-hour until 2006.

Since the Liberals have come to office, electricity prices have gone up 34 per cent, from a low of 4.3 cents per kilowatt-hour to the current high of 5.8 cents, said New Democrat Leader Howard Hampton.

"There is no conservation plan, there is no energy efficiency plan," Hampton said.

"This is simply a government going down the same road the Conservatives were going down: more reliance on very expensive private electricity, more and more Bay Street-style executive salaries."

"The ordinary person who is hard-pressed is having to pay for this on their hydro bill, and many people can’t afford it."

The rate hike is a cruel April Fool’s joke and comes without a government effort to provide people with the tools they need to reduce power consumption, said Paul Kahnert, a spokesman for the Ontario Electricity Coalition.

"This is the first of many increases," and will most hurt Ontarians on low or fixed incomes, he said.

Last summer, Energy Minister Dwight Duncan said the government would set up an Ontario Conservation Bureau by early 2005 to develop ideas to help people conserve.

That hasn’t happened yet, but Duncan said he’ll appoint a conservation officer and announce "sweeping" conservation legislation this spring.

"People can turn down their thermostats and turn off a light," Duncan said. "I’ve said all along that modest changes by consumers with or without smart meters can help them deal with what we estimate to be a six per cent increase."

With the rate hike, local utilities will be required to roll out conservation plans this year, said Allan Fogwill, director of applications for the Ontario Energy Board.

The "culture of conservation" that Duncan talked about "is not going to materialize unless you legislate aggressive conservation measures, as had been done around the world," Kahnert said.

The government should follow California’s lead and offer people additional discounts on their bills if they can cut consumption by 20 per cent, he said.

The government should also improve insulation codes for buildings, retrofit social housing, and offer rebates on energy efficient appliances, he said.

Hampton and Kahnert argued that prices are rising because the province is buying more expensive power from private producers rather than public ones.

But Adams said consumers are just seeing the actual costs for power generation, such as higher prices for coal and natural gas, debt costs and maintenance.

Other changes will come with the new price plan. Between Nov. 1 and April 30, the threshold for the lower price will rise to 1,000 kilowatt-hours a month to account for the greater need for electricity during cold months.

But between next May 1 to Oct. 31, the lower-price threshold drops to 600 kilowatt-hours per month.

This price plan is in place for one year. The Ontario Energy Board will re-examine prices next April, and every six months after that.