Ontario Fixed-Price Electricity Deals Are Costly
Door-To-Door Sellers Charge More Than Government-Regulated Price
Apr 18, 2009
As stated in the article Fixed-Price Contracts for Electricity in Ontario, rates for electricity for residential consumers under the Regulated Price Plan (RPP) of the Ontario Energy Board (OEB) were due to be revised effective May 1. The OEB has now announced the new rates.
These are the rates consumers pay if they have not signed with a retailer for a fixed-price contract. The rates determine the amount for "Electricity Used" on the utility bill. The rate is per kiloWatt-hour (kWh); 1 kWh is 100 W for 10 hours (e.g., a 100-W light bulb), 1000 W for 1 hour, etc.
Electricity Rates From May 1
The rates are:
- 5.7 cents per kWh for consumption up to 600 kWh each month;
- 6.6 cents per kWh above 600 kWh per month.
This is an increase of one tenth of one cent or 0.1 cent per kWh:
- 1.8% increase in the rate for consumption to 600 kWh and
- 1.5% in the rate for consumption above 600 kWh.
The threshold above which the rate increases (from 5.7 to 6.6 cents currently) has been reduced from the 1000 kWh winter threshold to 600 kWh. The rates will be reviewed again in November, when the threshold will revert to 1000 kWh.
Claims Of Protection From Price Increases
Retailers of electricity offer fixed-price contracts for periods of usually 5 years. They do so, they claim, to "protect" consumers against price increases. The lowest price from those retailers that list their rates on their websites is 7.49 cents per kWh.
One retailer's web site displays a bar graph of RPP rates (the higher above-threshold rates only) over past years showing that rates have generally increased but have also declined. Overlaid on this bar graph is an arrow depicting a sharper increase than has, in fact, been the case. From this a consumer could infer that the future price increases will be higher than experience suggests.
For 2007 to 2008, the RPP rates fell by 4.8% but for November 2008 to May 1 2009 they rose by 10 and 12%.
Why Rates Fluctuate
Retailers cite several reasons why prices will rise, among which are costs of alternative sources of energy, such as wind, which can be more expensive.
The OEB lists similar reasons for the 1.5 to 1.8% increase, including:
- An expected increase in costs of nuclear power generation by Ontario Power Generation (OPG) and the Bruce Power nuclear station;
- Increased payments for power generated by OPG’s large hydro-electric stations;
- The end of rebates for coal-fired generation and small hydro plants.
However, the increase has been kept low due to factors including:
- Lower energy demand in the current economic climate, which depressed wholesale electricity market prices;
- Lower natural gas prices, which lowers the cost of gas-fired generators.
A Green Electricity Retailer
One retailer that lists a rate higher than the RPP rate is Bullfrog Power. Its rate is currently 8.9 cents per kWh, locked in for one year, which can be cancelled at any time.
All the power delivered by Bullfrog comes from clean, renewable sources:
- Wind farms;
- Low-impact hydro -- small hydro-electric generators that operate without large dams.
Some consumers choose to buy electricity from these sources to contribute to preservation of the environment.
Advice To Consumers
Because of the higher rates being offered under fixed-price contracts by retailers, consumers should be cautious:
- Do not sign any offers without checking the price being offered against the price per kWh on the electricity bill;
- Do not show your electricity bill to anyone at the door (to avoid fraudulent use of your information);
- Do not be persuaded or bullied by alarming claims of rocketing prices.
For further advice, contact The Energy Choice Is Yours, a consumer information source.
 |
 |
