Ontario Energy Board Approves Rate Increase

Today, the Ontario Energy Board approved a rate increase for the Regulated Price Plan (RPP).

OEB Press Releases

The increase will take effect as of May 1, 2006 and increases the electricity costs in Ontario to 5.8 and 6.7 cents per kilowatt hour. There are two rates because residential electricity pricing in Ontario has two tiers. The first 600 kWh (or 1000 kWh in the winter) used each month is charged at the lower rate and any consumption over 600 kWh (or 1000 kWh in the winter) is charged at the higher rate. The previous rates were 5.0 and 5.8 cents per kilowatt hour for the two tiers.

According to the press release, the reason for the increase is as follows:

About half the increase in RPP pricing results from the variance between the forecast price paid by consumers and the actual cost of supplying electricity over the last year. The summer of 2005 was the hottest summer experienced in Ontario in the past 30 years, which led to increased electricity demand. Lower water levels also reduced electricity output from hydroelectric plants and forced Ontario to buy electricity from more expensive sources of power. Higher than anticipated prices for natural gas, which is used to generate electricity, also contributed to the large variance.

The remaining half of the RPP price increase is the forecast cost of supplying electricity to RPP consumers over the next year. The new forecast indicates those costs are expected to increase primarily because of an increase in the price of natural gas relative to last year’s forecast for the RPP.

On average, consumers should expect an increase from 3% to 15% depending on which utility they purchase electricity from.

Realistically, this rate should probably be higher still. Ontario has a very low electricity charge compared to other provinces but some of that may be due to the fact they include a “delivery charge” which is tied to your consumption also. All of this is slowly making alternative energy sources more much inviting. Considering that rates are likely to continue to rise and capital costs for alternative energy are likely to decrease.

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