I have a series of articles that explain some of the background of electricity cost. It is high for good reason. Cost is rising and will continue to rise for the foreseeable future.
The real issue is consumer impact and how to manage it.
This is a pre-election perspective. Everything could change with the next government.
Who gets impacted?
From my perspective as an average ratepayer in an urban area the impact is minimal. I have other expenses that are higher and rising faster than my electricity costs.
Given the lack of interest and understanding from ratepayers in general, I am guessing that electricity is generally affordable for most people.
For those with fixed or low-income or in rural areas the impact of rising bills may be significant. Of those customers, the ones that use electricity for heating will experience the most hardship.
Let’s look at what an urban and rural customer using electric heating is going to pay for electricity in 2018.
According to the Environmental Commissioner of Ontario in their 2018 Energy Conservation Progress Report, Volume One, 16% of homes in Ontario use electricity for heating. They estimate it would require 2,400 kWh per month of energy for the average residence. I find that number to be quite low, however it is an adequate benchmark to get the comparison started.
I will use the OEB Bill Calculator with their default TOU energy distribution to generate the numbers.
Toronto case – electric heating
If you were a Toronto Hydro customer using electric heating with June of 2018 rates under the Fair Cost Program your electricity cost would be:
$315.68 per month or
$3,788.16 annually for all-electric
I am not going to estimate what resistive-type heaters would cost for now, however that is a part of the total cost to a homeowner.
Suppose you didn’t use electricity for heating – what would your energy costs be?
If you were a Toronto Hydro customer and used the OEB defined average amount of electricity of 750 kWh monthly you would pay
$122.84 per month or
$1,474 annually
But this customer still has to pay for heating. The cost for natural gas heating is likely going to be in the ball park of $800 per year before you consider what the additional cost is for a gas furnace and its maintenance. If you had to finance a high-efficiency furnace and pay for a maintenance plan you can add about $120 per month or $1,440 a year to your household cost.
Add the numbers up and you get:
$3,714 annually for your home energy cost using gas/electric
With 2018 rate subsidies energy costs are similar between all-electric and gas/electric when you consider all the costs
If you are honest about the total household energy cost, the two cases are pretty close in annual cost before taking into account the cost of resistance-type electrical heaters. Resistance heaters would be much less than the cost of a high-efficiency gas furnace.
Rural Ontario case – electric heating
A rural customer in Ontario would most likely be serviced by Hydro One at their low density rate. Using electric heaters and 2,400 kWh average per month that would cost
$309.46 monthly or
$3,713.52 annually.
Note:
Delivery is $87.35 per month or $1,048.20 annually
Energy is $196.77 per month or $2,361.24 annually
Regulatory charges make up the balance of the charges
This case is pretty close to the urban case so it isn’t worth looking any deeper.
Low density customers are paying the same as urban customers in this case.
A rural customer converting to gas heating would pay more than the urban case as they would need to use propane and pay the cost of a tank and additional gas line.
A more realistic case for electric heating – 3,600 kWh average per month
I suspect that in the case of a rural customer the estimated average use of 2,400 kWh is a way too low. I have visions of old farmhouses with poor insulation and low energy efficiency. If a customer had 50% higher consumption at 3,600 kWh average use they would pay a whopping $443.80 per month or $5,320 annually for electricity using 2018 rates.
No matter how you slice it, energy is a significant chunk of any household budget.
Look back to 2006 at 2,400 kWh consumption and compare to 2018
Back in 2006 the rural Hydro One customer classified as Residential R2 would have paid:
$109.12 per month or $1,309.44 annually for delivery
$155.40 per month or $1864.80 annually for energy (two-tier rates)
Add about $120 annually for regulatory and 13% tax for a total of $3,723 annual cost in 2006 dollars.
The inflation over the same period according to the Bank of Canada Inflation Calculator is 22%.
With the current Fair Energy Plan, without any of the additional subsidies that are available we are paying less by the rate of inflation between 2006 and 2018.
The takeaway
In 2018 our after-inflation electricity cost is less than in 2006 due entirely to the increase in government subsidies.
We are not paying the actual cost, just deferring it.
Be careful who you believe before an election.
Liars can figure but figures don’t lie
Derek
