December 1, 2003

Power pricing plan would reflect true cost, encourage energy conservation

Legislation introduced last week by Ontario Energy Minister Dwight Duncan aims to ensure a fair, predictable approach to electricity pricing while providing a strong incentive for energy conservation.

"Our plan will provide stable and predictable electricity prices for consumers, encourage conservation, create environmental benefits, and attract new sources of supply," Duncan said. "We are moving forward with a responsible, sustainable approach that will put an end to unaffordable taxpayer subsidies of electricity prices."

The Ontario Energy Board Amendment Act, 2003 would remove the current 4.3 cent price freeze and replace it with a pricing structure designed to better reflect the true cost of electricity in Ontario, and to offer an incentive for conserving energy.

The legislation proposes an interim pricing plan, to take effect April 1, 2004. The first 750 kilowatt hours (kWh) consumed in any month would be priced at 4.7 cents per kWh. Consumption above that level would be priced at a higher rate of 5.5 cents per kWh. Consumers who use 750 kWh per month would see less than a $5 increase on their monthly bill; users of 1,000 kWh per month would see less than a $10 increase; users of 2,000 kWh per month would see an increase of roughly $25.

"Approximately 60% of Ontario households use less than 1,000 kilowatt hours per month," Duncan said. "Since the proposed plan would not take effect until April, consumers would have a chance to take conservation measures, reduce their consumption levels, and, therefore, limit the impact of the price change on their electricity bill."

Commercial users of 50,000 kWh to 250,000 kWh a year would see an increase in their monthly electricity bill of between 15-18%. For commercial users of 150,000 kWh, this translates into an increase of approximately $180 per month.

Notice of implementation on April 1, 2004 gives consumers, small business and other low-volume consumers a chance from now until April to review their energy use, implement conservation measures, and as a result, limit the impact of the price change on their electricity bill when it occurs.

This pricing plan would stay in place until the independent regulator, the Ontario Energy Board (OEB), develops new mechanisms for setting prices in the future. If the revenue from the interim price plan exceeds the cost of the plan, all eligible consumers would receive a credit for the difference after the OEB implements its pricing mechanism.

The legislation calls for the OEB's new pricing mechanism to be in place as soon as possible, and no later than May 1, 2005. A regulation to follow the legislation will provide direction to the OEB on the development of a price-setting mechanism.

Transferring the authority to set prices is deemed essential to eliminating political influence over electricity prices. As price regulator, the OEB would protect and renew Ontario's electricity grid by ensuring reasonable charges for the delivery of electricity.

The proposed legislation is also intended to protect residential and low-volume consumers from the volatile price spikes seen under the previous government's original plan, so families, small businesses and other low-volume consumers could better manage their energy costs.

"The days of using energy as a political football are over. We are sending a clear signal that this government intends to deal with electricity issues in a practical, transparent and sensible way," said Duncan. "This plan is a significant step toward attracting new electricity supply to Ontario to sustain our future energy needs."

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