A friend of mine received a notification in late October about electricity rates which he thought was so completely outrageous that it had to be ‘fake news’. Unfortunately, it is not fake news. On the other hand it is not as bad as it may appear at first glance.
You need to read the fine print.
The Ontario Energy Board (OEB) and Ministry of Energy, Northern Development and Mines announced on October 22, 2019 there will be increases to energy rates with a new billing format on November 1, 2019.
The Ontario Energy Board (OEB) sets Time of Use (TOU) prices twice a year for summer and winter to reflect the seasonal change in the cost of generation. It usually changes by a very small amount. Here is the seasonal price update table from the OEB announcement:
| TOU price periods | May 1, 2019 TOU prices including old bill relief
¢/kWh |
November 1, 2019 TOU prices excluding new bill relief
¢/kWh |
| Off-Peak (Weekdays 7 p.m. – 7 a.m., all day weekends and holidays) | 6.5 | 10.1 |
| Mid-Peak (Weekdays 11 a.m. –5 p.m.) | 9.4 | 14.4 |
| On-Peak (Weekdays 7 a.m. –11 a.m. and 5 p.m. – 7 p.m.) | 13.4 | 20.8 |
To save you having to do the math, that’s an increase of 55% in the energy rates taking effect on November 1, 2019. Just in time for the holiday season.
Humbug.
How is a 55% rate increase not so bad?
It’s actually not a 55% rate increase to your bill. The November rates are the actual energy rates without any of the current government subsidies applied. The rates prior to November 1st had the rebates from the Fair Hydro Plan applied, masking the true cost. Beginning November 1st, the actual rates are shown on the bill and the rebate is a separate line item. It is part of the government’s initiative to improve the transparency of charges on the ratepayer’s bill. The November TOU rates reflect the true cost of generation in Ontario.
The increase for a typical residential customer will be 1.8% or about $2 per month for a residential customer using 700kWh per month of energy.
According to the OEB, the increase is only 1.8% after rebates and only applies to the energy portion of your electricity bill
In an average residential customer bill, the energy portion is the largest category and will be approximately 60%.
Don’t forget
The other charges on the bill are also subject to increases up to the rate of inflation. Your Local Distribution Company (LDC) may have applied for a rate change at the OEB and received approval for an increase. The timing of an increase by the LDC is not tied to the seasonal adjustment of energy TOU rates and may take effect on a different date. Check with your LDC.
The names change however…
As announced by the government and OEB, ratepayers will continue to receive the 8% PST rebate and the Global Adjustment Refinancing subsidy initially defined by the Fair Hydro Plan. The Fair Hydro Plan is to be wound down and replaced by the Fixing the Hydro Mess Act which passed into law in May of 2019.
Other subsidies
There are additional subsidies to support low density customers and provide rate protection which should be shown on the new bill. The onus is on the ratepayer to ensure you receive the subsidy for which you are entitled. Check with your Local Distribution Company.
Smoke and mirrors
This is all smoke and mirrors under the guise of bill transparency as required by our government. With a new billing format, energy subsidies will appear on a separate line titled ‘Ontario Electricity Rebate’. The theory is that we benefit from knowing what the actual energy rates are and how much the government is putting out in order to make our lives more affordable (my presumption – the government hasn’t said that). These changes are part of the Fixing the Hydro Mess Act. They are reportedly based on recommendations of the Auditor General and the Independent Financial Commission of Inquiry.
The new bill graphic with explanation from the OEB is located on-line here.
End of variable charges for delivery
On a sidebar note…
Historically LDCs have been allowed to use a combination of fixed and variable delivery charges to recover their costs. The variable portion of the charge was based on the amount of energy used. Under new OEB rules most distribution companies must migrate residential customers to a fixed charge for delivery in 2019. That means you will no longer save on the delivery charges when your energy usage is low or face higher charges for periods when energy usage is high. The change is revenue neutral for LDCs, meaning some customers will see increased costs and some will see reduced costs.
Limiting increases to the rate of inflation
Limiting rate increases through government regulation is a practice which has been used by past governments to artificially maintain prices low. Unfortunately it isn’t sustainable unless the underlying drivers of rising utility costs are addressed. In Ontario that has not yet happened. At some point in the future another cost-crisis is sure to emerge that will require new and creative solutions which will inevitably involve trade-offs between cost, reliability and service levels.
The takeaway
Electricity costs are going to continue to increase, however they will be held to the rate of inflation through the regulatory process conducted by the Ontario Energy Board. Going forward, ratepayers will be able to see what the true costs are in a standardized format on bills. This is consistent with current policy and the move toward transparency in the industry.
Changes are part of the Fixing the Hydro Mess Act which passed into law in May of 2019. The names of the subsidies may change but they should remain in place for now…
It is really difficult for ratepayers to follow the changing landscape associated with electricity costs. Transparency is not synonymous with simplicity nor does it do anything to reduce costs. Electricity bills remain too complex for many ratepayers to fully understand. Nothing material has been done to address the underlying issues driving increasing costs in the industry.
It still looks like we have a Hydro Mess. We can just see it better.
Check with reliable sources like the OEB and your LDC for insight into changes to your rates and service costs.
Derek
Might I suggest that you use full terms for the first use in each paragraph. This is an “explained” page but the acronyms are frustrating. Time of Use (TOU), Ontario Energy Board (OEB), Local Distribution Company (LDC). I had to back-track to figure them out and I consider myself fairly knowledgeable. It would also be interesting to see a seasonal TOU cents/kWh rate comparison year-to-year (i.e. winter 2017, 2018, 2019 / summer 2017, 2018, 2019) to see how much they are increasing. Thanks for the info!
Thanks for taking the time to read the post and providing feedback Donna! I understand the frustration around the use of acronyms. The industry is full of them. In my articles I generally try to use the full term with the acronym the first time I introduce one in the article. From then on, I economize on the typing by using the shorter term. The last thing I want to do is frustrate readers! I’ve revised the article to make sure I maintain that standard. On a positive note, Ill bet you now know what TOU, OEB and LDC are!
As for the ‘real’ rates, I can estimate the increase knowing that the 2016 rates were as close to actual ‘non-subsidized’ rates that we have seen recently. After 2016 there was a rate-modifier built in because of the Fair Hydro Act. You could look at the November 2016 numbers compared to the November 2019 ones, take the average TOU (there I go again) distribution to give you an idea of what has happened. Here is what I get: November 2016 weighted average price was 11.18 cents/kWh. November 2019 weighted average price is 12.8 cents/kWh. That’s a 14 % increase for energy over 3 years. Average of 4.8 % per year.
here are some links for you:
Historical rates – https://www.oeb.ca/rates-and-your-bill/electricity-rates/historical-electricity-rates
Bill calculator – https://www.oeb.ca/consumer-protection/energy-contracts/bill-calculator
Regards
Derek
A good explanation of the changes – but it misses the real impact, and it is not a $2 or so on a bill for many people. I’m a Hydro One rural customer, electric heat user, and my November, December bills are 15% and 20% more ($50 and $65) compared to 2018. The OEB calculator says my January bill – if the same volume of KWH is used will be $100 higher. I’ve checked with some neighbours, both electricity heat users and propane/oil heaters, and they are getting similar increases – $20/$30 increases on normal use level bills and $50 and more for those using 3,000 to 4,000 kWh a month. The cause, as I’ve looked closer at the actual bills is because the much higher electricity price (up 55%) works its way into calculations for line losses and regulatory charges, neither of which is offset by the new OER. The GST portion of taxes also increases due to the higher charges, again no subsidy for that tax. The bottom line is people with 700 kWh or 1,000 kWh a month usage won’t really notice a $5 increase, but those with $20, $50 and $100 increases are going to notice when January and February usage bills come in. The current government will, I hate to tell them, join a long list of former Ontario governments who find themselves in sucked down into the quick sand of voter anger for trying to, and failing to ‘fix’ Ontario’s high electricity costs.
Thank you for providing some details on the impact on rural customers Bob. It is important to hear from someone that doesn’t fit the ‘average customer’ profile.
Regards
Derek
I still don’t understand why the OEB (regulatory charges) area percentage of your Hydro Bill. This seems to be a conflict of interest when the OEB are the ones approving the rate increases. I feel the OEB should be given a flat rate that is reviewed based their performance and answerable to our elected representatives.
Thanks for reading the article and commenting Neil.
The regulatory portion of the bill is described by the OEB here:
Understanding your bill
These charges go to various entities for purposes as described in the link.
The OEB issues decisions and orders setting the charges included in the Regulatory line item on your bill. For example, their Decision and Order EB-2018-0294 has the January 2019 Wholesale Market Services rate and the Rural or Remote Electricity Rate Protection charges, which make up the largest share of regulatory charges now. The conservation program charges were moved to the tax base. With all of the changes to recent legislation it is hard to keep track of where costs are being recovered, however the regulatory portion of the bill is shrinking and is now less than 5% of the total bill.
The OEB itself is permitted to recover its operating costs from the electricity business by legislation. It is incumbent on the government to ensure the value of its regulatory services through oversight by the OEB, it’s board and the Ministry of Energy, Northern Development and Mines. That may or may not satisfy everyone’s concern about conflict of interest, but I can’t offer up much else…
The portion of the bill associated with the operation of the OEB is very small considering the multi-billion dollar industry they regulate. I’d guess its less than 1% of the bill – but I haven’t done the math on it. Its a good question to ask the OEB directly.
Paying the OEB via a flat rate would be something your MPP should address.
Regards
Derek
Thank you very much for the valuable insight on this increase.
Thanks for reading the post and positive feedback David!