More electricity price adjustments for Ontario

More electricity price adjustments for Ontario

Commercial customers slated to begin repaying deferred global adjustment
Thursday, January 14, 2021

Ontario’s COVID-19-triggered lockdown comes with yet more electricity price adjustments for residential and small business customers and disrupts the planned rollout of a new rate schedule on January 1. For now, customers enrolled for either time-of-use (TOU) rates or tiered pricing under the provincial regulated price plan (RPP) will be charged the off-peak TOU rate of 8.5 cents per kilowatt-hour (kWh) for all electricity consumption.

This is third flat rate and fourth price scheme presented to RPP customers since the pandemic began. The Ontario government first levelled the price at the then off-peak rate of 10.1 cents/kWh on March 24, 2020 then raised it to 12.8 cents/kWh on June 1.

November 1 saw the reinstitution of time-of-use rates and the introduction of new a tiered pricing option, featuring two fixed prices for consumption below and above the threshold of 750 kWh for residential customers or 1,000 kWh for small businesses. Next came the mid-December announcement of revised RPP rates to commence on January 1.

“It was a challenge to keep on top of the changes that were rolling through, and it’s perhaps even more challenging to reassure our clients that we are on top of the situation given the pace of change,” observes Rob Detta Colli, manager of energy and sustainability with Crossbridge Condominium Services.

The most recent electricity price adjustments arise from new policy directions unveiled in the 2020 Ontario budget last fall. That shifted an estimated $433 million in annual costs for renewable energy contracts, which had previously been embedded in electricity rates, to the general provincial account. As a result, the Ontario Energy Board (OEB) lowered electricity rates and made a corollary cut to the Ontario Electricity Rebate (OER), which RPP customers receive on pre-tax commodity and regulated transmission/distribution charges.

After receiving an OER of 33.2 per cent in November and December 2020, RPP customers will get a 21.2 per cent rebate on their 2021 hydro bills. When balanced against the rate reduction, Detta Colli calculates the overall outcome should be a 3 per cent discount from the previous RPP pricing scheme.

Once the provincial government deems it’s appropriate to return to pre-lockdown rates, the TOU rates will be: 17.6 cents/kWh for on-peak hours from 7 to 11 a.m. and 5 to 7 p.m.; 11.9 cents/kWh for mid-peak hours from 11 a.m. to 5 p.m.; and 8.5 cents/kWh for off-peak hours from 7 p.m. to 7 a.m.. Tiered rates will be: 10.1 cents/kWh for the residential customers’ first 1,000 kWh of monthly and business customers’ first 750 kWh hours of usage; and 11.8 cents/kWh for consumption surpassing those thresholds.

This is slated to be in place until spring/summer rates go into effect on May 1, 2021. In the interim, Detta Colli predicts that condominium boards and other RPP customers may struggle to decipher flip-flops on their hydro bills.

“The December 15th announcement that reduced both the commodity rates and the OER was a complete reversal of what just came into effect on November 1st when they increased the rates and the OER so it’s confusing,” he notes. “We have advised our clients that they will see changes again in the next billing period.”

A recent Ontario government backgrounder outlining a number of new regulations that came into effect on January 1 states that the new cost allocation formula “will result in electricity cost savings for industrial and large commercial consumers and hold the average residential electricity bill flat in January 2021 relative to November 2020”. Meanwhile, another new regulation establishes the framework for commercial and industrial customers to begin repaying global adjustment (GA) costs that were deferred in April, May and June last year.

At that time, the Ontario government capped the rate for the envelop of fixed costs — which include expenditures for electricity supply, nuclear facility refurbishment and conservation and demand programs — at 11.5 cents/kWh to temper the price spike that otherwise would have occurred due to the dynamics of province-wide business shutdowns. A dramatic dip in system-wide electricity demand concentrated inescapable GA costs into a diminished pool of consumption, with particularly harsh consequences for small and mid-sized commercial buildings (categorized as Class B customers) that are billed for GA on a volumetric per-kWh basis.

“The total deferred GA amount was approximately $333 million — approximately $206 million for non-RPP Class B customers and $127 million for Class A customers,” reports OEB guidance released in late December.

Both classes of customers are now expected to repay those amounts in 12 installments over the course of 2021. As the OEB has outlined, the Independent Electricity System Operator (IESO) will calculate the recovery rate to be charged in addition to the monthly GA charge, but it will be merged into one line item on hydro bills. “The OEB expects every distributor to communicate information related to the deferred GA recovery to all Class A and non-RPP Class B customers by means of a posting on its website, at a minimum,” it instructs.

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