Since my last blog Ontario Power Prices are Rising Faster Than Inflation was published on February 4th 2020, the Ontario power market has seen significant changes in rates in reaction to the Covid-19 virus pandemic. Now seems an appropriate time to review those changes and the impacts they have had on power costs.
Review
Doug Ford's government won election on June 7, 2018 in part because of the perceived mishandling of the electricity file by the previous Liberal governments. As pointed out in my post Ontario Power Prices Have Fallen! the Liberals were successful in reducing rates by 25% but that was too little too late to win them re-election. One of the promises Ford made to help him win a majority was to lower electricity prices by an additional 12%
November 1st 2019 the government changed the way electricity is priced by increasing hourly Time-of-Use (TOU) rates significantly and introducing the Ontario Electricity Rebate (OER); a 31.8% reduction in the Total Electricity Charge before HST. From this point onward comparing rates became a mute point.
With the Covid-19 outbreak the Ontario government made some emergency orders to revise rates. On March 24th 2020 it was announced that winter TOU pricing would be suspended for a 45 day period and that residential and small commercial customers would pay a flat 10.1 cents/kWh rate equivalent to the then current off peak price. Other measures were taken to extend the winter disconnection ban and suspending collection actions until July 31st, and offering flexible payment plans to provide more time to pay balances owed.
On April 14th the Ontario Energy Board (OEB) announced they would retain the current prices instead of setting new rates on May 1st. This was followed by a new press release on May 6th the day before the initial suspension was to end announcing the Ontario government extended the emergency pricing until May 31st, 2020.
On June 1st the Ontario government decreed that TOU customers would begin paying 12.8 cents/kWh for all power consumed while customers on tiered rates would continue to pay 11.9 cents/kWh for the first 1,000 kWh per month and 13.9 cents/kWh for any additional consumption in the month.
On October 13th the OEB announced new rates to commence on November 1st 2020.
TOU rates would increase as follows:
Off peak increases from 10.1 to 10.5 cents/kWh or 4.0%
Mid-peak increases from 14.4 to 15.0 cents/kWh or 4.2%
Peak increases from 20.8 to 21.7 cents/kWh or 4.3%
Tiered prices would also increase as follows:
Tier 1 up to 1,000 kWh/month from 11.9 to 12.6 cents/kWh or 5.9%
Tier 2 in access 1,000 kWh/month from 13.9 to 14.6 cents/kWh or 5.0%
The OEB also noted two additional changes being introduced with the new rates:
RPP customers would automatically default to TOU rates on their utilities first billing cycle after November 1st. However TOU customers are allowed to chose Tiered Pricing if they make a formal declaration to their local utility; the rate changeover to take effect on the first billing cycle 10 business days after receipt of the declaration.
The OER will also increase from 31.8% to 33.2% of the Total Electricity Charge before HST starting November 1st as well.
The sum impact on consumers will vary depending on their monthly consumption, the rate chosen, and for those using TOU rates when they consume their power. The OEB estimates that for a typical consumer using 700 kWh per month of electricity their power cost will increase by $2.24 or 1.97% monthly.
Cost Impacts
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| Chart 1: Annual Electricity Consumption vs Cost |
I continue to track our power costs and consumption and then calculate the effective price of power being charged. While these are unique to our experience it is nevertheless a simple method of understanding how all the changes are impacting us.
Chart 1 shows that we have continued to reduce our annual power consumption and cost for electricity through 2020 (as previously noted in prior blogs I use a September through August annual cycle). So from September 19th 2019 through August 20th 2020 as billed by my utility Alectra Utilities, our annual consumption declined by 909 kWh or 9.5% while our cost dropped by $63 or 4.8%.
Our annual consumption of power peaked in 2011 at 21,263 kWh and cost of power a year later at $2,597. Since 2003 we have decreased consumption by 12,280 kWh or 58.7% (3.5% pa). Our cost has also declined by $628 or 33.3% (2.0% pa).
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| Chart 2: Effect Cost of Power 2003 - 2020 |
Chart 2 is a calculation of what our effective cost of power is by dividing our annual cost by the power consumed. Our effective price peaked in 2016 and began to fall as the Liberals started to enact measures to lower the price. The Conservatives took over and really own the results from 2018 onward.
Our effective rate increased by 2.22% in 2019 and a significant 5.07% in 2020 despite the emergency relief rates enacted by the government. If not for our continued diligence in conservation our costs of power would have surely increased.
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| Chart 3 Effective Power Cost by Billing Cycle |
Chart 3 provides a little more insight as to how our effective rate jumped around in the last year. The November 1st 2019 new TOU prices caused a significant increase until the first emergency rate came into effect in March. The second spike occurred during the summer after the the 12.8 cent/kWh fixed price was enacted and we had an exceptionally hot summer with greater consumption.
After more than two full years of governing by the Conservatives, there has been no reduction in power rates and in fact power prices continue to rise faster than inflation.
Once again the graph shows that under the Ford government our power prices continue to rise faster than inflation and only due to a concerted effort to lower consumption have we managed to keep our cost of power lower each year.
As a footnote our September effective price has jumped again to 14.7 cent/kWh and October to 16.3 as a result of lower consumption.
This is the perverse nature of the system - the less you consume the higher your effective rate.
I am in the process of evaluating the choices consumers face on November 1st. I have already declared our intent to change to tiered rates for the winter at least as we consume less than 1,000 kWh per month and we don't use enough of our power at the off peak price to make up for the overall lower tier 1 rate.
