Beatrice Lang
Electricity rates in Ontario have been on an upward trajectory, with the average customer facing a nearly two per cent increase in their hydro bill compared to pre-pandemic rates. This surge in electricity prices can be attributed to various factors, including the higher costs of power generation, the shift towards cleaner energy sources, and the method of setting prices for specific periods. The Ontario Energy Board, which determines rates twice a year based on cost estimates, has stated that the majority of households and small businesses will be affected by these adjustments.
| Characteristics | Values |
|---|---|
| Date of Electricity Rate Increase | November 1, 2020 |
| Average Increase in Hydro Bill | Nearly 2% |
| Reason for Increase | Higher costs from power generation and the use of cleaner energy sources |
| Off-Peak Electricity Price | 6.7 cents per kilowatt hour |
| Mid-Peak Electricity Price | 10.4 cents per kilowatt hour |
| Peak-Period Electricity Price | 12.4 cents per kilowatt hour |
| Impact on Typical Households | $3.63 or about 3% increase in monthly bill |
| Impact on Consumers with Contracts | No change |
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What You'll Learn
The Ontario Energy Board's new prices
The Ontario Energy Board (OEB) is the independent regulator of Ontario's electricity and natural gas sectors. It sets the rates that utilities charge for electricity used in homes and small businesses. The OEB sets these rates once or twice a year on November 1, depending on the latest cost estimates.
The OEB offers three different types of rates: Time-of-Use (TOU), Ultra-Low Overnight (ULO), and Tiered. With TOU and ULO, the price depends on when you use electricity, whereas with Tiered, the price depends on how much electricity you use overall in a month. For instance, with TOU, electricity used during off-peak hours is cheaper than that used during mid-peak or on-peak hours.
The OEB has announced changes to electricity prices for households, small businesses, and farms, effective November 1, 2024. The Ontario Electricity Rebate (OER) will change to 13.1%, providing a rebate on the electricity bill for residential, small business, and farm customers. Additionally, the OEB has set the TOU prices for November 1, 2024, which can be found on their website.
The OEB also regulates the Delivery rates that cover the cost of delivering electricity to residential and small business customers. Furthermore, all electricity consumers are required to pay a share of the Global Adjustment, which is included in the Time-of-Use, Ultra-Low Overnight, and Tiered prices. The Global Adjustment reflects the difference between the guaranteed price given to electricity generators and the money they earn in the wholesale market, as well as covering some conservation program costs.
The OEB provides an online bill calculator to help customers estimate their monthly bills and choose the most suitable price plan for their needs. It also offers a winter disconnection ban, preventing residential customers from being disconnected for non-payment during the winter months.
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Higher costs from power generation
In 2021, about 91% of electricity in Ontario was produced from zero-carbon sources: 55% from nuclear, 24% from hydroelectricity, 8% from wind, and 4% from solar. The remaining electricity was primarily from natural gas and some bioenergy. The Ontario Energy Board (OEB) has stated that higher costs from power generation and the use of cleaner energy sources are the main reasons for the increase in electricity rates. The board also attributes the price hike to its method of setting prices for six-month periods based on estimates of electricity generation costs during that time.
The price for off-peak electricity has increased to 6.7 cents per kilowatt-hour from the previous 6.3 cents, while mid-peak power has gone up to 10.4 cents from 9.9 cents. The rate for electricity used during peak hours, i.e., weekdays from 11 a.m. to 5 p.m., has also increased to 12.4 cents per kilowatt-hour, a jump of 0.6 cents. The OEB has stated that the higher rates will add approximately $3.63, or about 3%, to the monthly bill of a typical household, which uses nearly two-thirds of its power during off-peak hours.
The increase in electricity rates is also influenced by the higher price of natural gas, which accounts for about 15% of the province's electricity generation. Additionally, the growing share of energy from more expensive renewable sources, such as wind and solar, has contributed to the rise in costs. Tory energy critic Vic Fedeli has attributed the increase to the Liberal government's "failed energy experiments" in developing green power through subsidies provided to producers.
To address the higher costs of power generation, Ontario is taking several measures. Firstly, the refurbishment of nuclear generating stations is being undertaken, with the Pickering Nuclear Generating Station's "B" units (units 5-8) being prioritised. Secondly, Ontario is advancing the planning and licensing of Canada's first grid-scale small modular reactor (SMR) project, with a total capacity of around 1,200 MW expected to be built at the Darlington nuclear site by 2036. Thirdly, Ontario is starting pre-development work with Bruce Power to site the first large-scale nuclear build in over 30 years, aiming to meet the rising electricity demand.
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Increased costs of renewable energy sources
Ontario's electricity rates have been increasing over the years, with the average customer seeing a nearly two per cent increase in their hydro bill compared to before the pandemic. The main reasons for these increases are the higher price of natural gas, the growing share of energy from renewable sources, and the method of setting prices for six-month periods.
Ontario's electricity system has seen a significant increase in the cost of renewable energy sources, such as wind and solar power. The Ontario government's aggressive pursuit of renewables through long-term guaranteed contracts with renewable energy generators has been a major contributor to the rising electricity costs in the province. These contracts were signed at above-market rates between 2004 and 2016, and the costs are passed on to consumers. From 2008 to 2016, residential electricity prices in Ontario increased by 71 per cent, more than double the national average. This has had a significant impact on households and industries, with many struggling to pay their high electricity bills.
The government's approach to ensuring affordability in the face of these rising costs is to leverage existing resources and implement programs to support vulnerable consumers. The Comprehensive Electricity Plan (CEP), introduced on January 1, 2021, is one such initiative that aims to reduce electricity costs for industrial and commercial businesses by funding the above-market costs of renewable energy contracts. The Industrial Conservation Initiative (ICI) is another program that helps reduce Global Adjustment costs for large manufacturers, mines, and forest product operations by encouraging reduced electricity demand during peak periods.
The government has also invested in clean storage resources to address the intermittency of renewable energy sources due to weather dependency. This will help integrate future renewable assets and support the province's growing electricity needs. However, critics argue that the government should focus on switching to a more competitive market-based system, as seen in other jurisdictions like Mexico, where market-based bidding structures have successfully driven down electricity costs from renewable sources.
The high cost of renewable energy in Ontario has also been attributed to the province's pursuit of green power through subsidies to producers. Tory energy critic Vic Fedeli stated that "expensive subsidies paid to wind and solar producers continue to drive up energy costs." Repealing existing long-term contracts and subjecting renewable generators to market competition is suggested as a way to reduce electricity prices for Ontarians.
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The end of the COVID-19 rate relief plan
The COVID-19 pandemic has had a significant impact on electricity rates in Ontario, with the government introducing various relief measures to support residents, small businesses, and farmers. One of the key initiatives was the Off-Peak Time-of-Use (TOU) program, which applied the off-peak electricity rate for customers paying TOU rates 24 hours a day, seven days a week. This measure was implemented under the Emergency and Civil Protection Act to provide rate relief during the pandemic. The Ontario Energy Board (OEB) also offered an Equal Monthly Payment Plan (EMPP) to help spread out annual electricity costs over equal monthly payments, making budgeting easier for those facing financial challenges.
The government's rate relief initiatives were crucial in stabilizing electricity prices and lessening the financial burden on Ontarians. The initial phase of the Off-Peak TOU program ran from March 24, 2020, to May 31, 2020, providing a much-needed break for eligible residential, farm, and small business customers. This was then extended to June 1, 2020, until October 31, 2020, offering continued support during the early stages of the pandemic when physical distancing measures were in place.
Additionally, the government deferred a portion of Global Adjustment (GA) charges for industrial and commercial electricity customers who did not participate in the Regulated Price Plan (RPP). This relief was in place from April to June 2020, with the possibility of extensions based on ongoing needs and approvals. The Energy Affordability Program (EAP) also played a role in providing personalized, free electricity-saving measures for eligible participants.
However, as the province shifted its focus to economic recovery, the Off-Peak TOU rate relief program came to an end. Starting November 1, 2020, customers were given the choice between time-of-use or tiered rates. This decision was made as part of the province's efforts to support businesses and employers most affected by the pandemic through initiatives like the Energy Cost Rebate and the Ontario COVID-19 Small Business Relief Grant. While the end of the Off-Peak TOU rate relief meant a return to the standard electricity rates, the government continued to prioritize supporting Ontarians through various energy assistance programs and rebates.
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The impact on average customers
The Ontario Energy Board has announced that electricity rates in the province will increase, with the average customer experiencing a nearly two per cent surge in their hydro bill compared to pre-pandemic rates. This change will affect the bulk of households and small businesses that are subject to "time-of-use" pricing, which varies by day and time of use.
The price for off-peak electricity will rise to 6.7 cents per kilowatt-hour from 6.3 cents, while mid-peak power will increase to 10.4 cents from 9.9 cents. The rate for electricity used during peak hours, i.e., weekdays from 11 a.m. to 5 p.m., will also go up to 12.4 cents per kilowatt-hour, a 0.6-cent increase. These adjustments are expected to add about $3.63, or three per cent, to the monthly bills of typical households, who generally use two-thirds of their electricity during off-peak hours.
The primary factors contributing to this price hike include the higher costs of power generation and the shift towards more expensive renewable and cleaner energy sources. Natural gas, which accounts for approximately 15% of Ontario's electricity generation, has also become more expensive. In addition, the method of setting prices for six-month periods based on cost estimates has played a role in the increase, as the estimates for earlier in the year were too high, leading to higher-than-necessary rates.
It is important to note that these changes will not impact consumers with contracts with electricity retailers. The rate adjustments serve as a reminder for consumers to review their energy plans and explore opportunities for energy conservation to mitigate the impact of rising electricity costs.
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Frequently asked questions
Yes, electricity rates in Ontario have gone up multiple times in the past decade. The latest instance was in October 2020, when electricity rates rose by nearly 2% compared to pre-pandemic rates.
The Ontario Energy Board has attributed the increase in electricity rates to higher costs from power generation and the use of cleaner energy sources. The board also sets rates twice a year based on the latest cost estimates.
The increase in electricity rates will impact most households and small businesses that are on time-of-use pricing. The higher rates will add an extra $3.63, about a 3% increase, to the monthly bill of a typical household.
