Ontario’s Electrical Sector Woes: High-Priced Power with 20% Price Increases to Come

The Financial Post has been running a series the last few months called “Ontario’s Power Trip”. In the series, Parker Gallant, a retired Canadian banker, explores the finances and politics behind Ontario’s power sector. With power that’s already priced 65% higher than Quebec and Manitoba, it’s about time someone explored the problems with Ontario’s power.

Gallant says,

As a former banker, I have no direct expertise in the electrical sector. I was simply curious as to why my electricity bill in Ontario went up when my consumption went down. What I found as I researched is a bewildering story of a province whose electrical sector is in trouble. Ontario is a high-price energy province and, under current policy, it is poised for a further escalation in prices. In short, Ontario is pricing itself out of the market and will not have the ability to attract any manufacturers or service sector companies that require significant energy in their daily processing.

It appears that Gallant was first inspired to write the series after examining Hydro One’s annual report. In his post on February 24th, Ontario Power Risk he notes that the annual report (deemed not newsworthy by the press) shows that while the company is handling less electricity, both their costs and debt are rising. Gallant notes that this should alarm electricity consumers and Ontario taxpayers, predicting that “many more rate increases will follow.”

In his April 14th post, Ontario’s power trip: Priced out of the market, Gallant examines the regime behind Ontario’s power sector, calling it a “complex, unproductive, costly and expanding beehive of corporate and institutional activity that produces less and less electricity at ever rising cost.” With 6 institutions making up the power structure, including parts of old Ontario Hydro and government appointed groups, here’s the breakdown he provides:

  1. Ontario Power Generation (OPG), which produces electricity.
  2. Hydro One, which manages the province-wide transmission and distribution grid.
  3. Independent Electricity System Operator (IESO), which manages the hourly power needs and also operates a trading and pricing system.
  4. Ontario Electricity Financial Corporation (OEFC), which holds the stranded debt of the old Ontario Hydro and acts as a funding arm.
  5. Ontario Energy Board (OEB) , which regulates electricity.
  6. Ontario Power Authority (OPA), which acts as the government’s policy execution vehicle.

Gallant asks “What is this conglomeration of government-controlled agencies doing? One thing is clear. They are doing much less for a lot more money than they used to…The number story is simple: Less electricity, higher costs.”

And higher costs is right. Gallant notes in his May 11th post, Ontario’s Power Trip: The 20% hydro grab, that early in May Toronto Hydro told the National Post’s editorial board that rates will be increasing by about 20% and similar increases will effect all of Ontario. With this news, Gallant takes apart his power bill to see where the costs are coming from and what he can expect in the future. This is what he finds:

Under the regulated price plan (RPP) my bill (assuming I use 2480 kwhs over two months) will increase by $61 (up 20.5%) for two months’ worth of power. Under the TOU plan [beginning on May 1 Ontario consumers with Smart Meters will be under a new Time of Use (TOU) system], it will increase by $53 (up 17.9%). That means my electricity bill will jump $366 on an annual basis under the RPP and $318 under TOU.

In order to help Ontarians understand their electricity bills, Gallant created a useful chart that breaks down all of the complicated costs.

So what can you do?

Our solution to these price increases is an electronic tap changer, the Harmonizer-AVR. It regulates energy at your building’s power source to help your building conserve 6 – 10% of its energy.

See how Ikea saved 7% on electricity with the Harmonizer-AVR.

What are some other solutions?