Regulated Price Plan

1. What is the Regulated Price Plan?
2. Why is the OEB introducing a new electricity pricing plan?
3. How does the price plan differ from the pricing system in place before April 1, 2005?
4. How has the Ontario Energy Board determined the prices for the new price plan?
5. What are the prices?
6. When will the price plan take effect and how long will it be in place?
7. How does the new price plan provide stability in prices consumers pay?
8. Who is eligible for the price plan?
9. I am eligible for the price plan but already have a contract with an electricity retailer. Will I be covered by my contract or do I automatically go under the price plan?
10. Are there other changes in my electricity bill besides the new pricing plan?
11. Why are the prices under the plan for residential consumers different than prices the Government announced last month?
12. Do large commercial or industrial consumers pay more or less for electricity than eligible price plan consumers?
13. Where will I see these prices on my bill?
14. What is the purpose of seasonal threshold changes for residential consumers with conventional meters?
15. Some people need to run air conditioning and medical equipment in the summer for health reasons. Doesn’t the seasonal approach to pricing fail to recognize this?
16. What is the price plan for consumers with smart meters?
17. When will I go on the smart meter price plan?
18. Why do prices look so different for customers who have smart meters than for those with conventional meters?
19. What is the benefit of having smart meter pricing?
20. Won’t the increased demand in the off-peak period turn it into a peak period?
21. My rent/condo fees include electricity. How does the price plan apply to me?
22. What is the range of total bill impacts to consumers of the “Electricity” line change announced today and the “Delivery” line changes applied for by distributors?

1. What is the Regulated Price Plan?

The Regulated Price Plan is a new price plan designed to make sure that prices consumers pay for the electricity they use better reflect the prices paid to electricity generators, but without the volatility that exists in wholesale electricity market prices. The plan represents a stable and predictable approach to electricity pricing and encourages conservation. The prices under the plan relate to the “Electricity” line on customer bills.

2. Why is the OEB introducing a new electricity pricing plan?

The Minister of Energy asked the Ontario Energy Board to develop an electricity price plan to make sure that the price consumers pay for electricity better reflects the price paid to generators. The Minister asked for a plan that would provide stable and predictable electricity pricing and would encourage conservation.

3. How does the price plan differ from the pricing system in place before April 1, 2005?

Since April 2004, most Ontario consumers have paid a two-tiered price for the electricity they use. A similar form of two-tiered pricing is being retained for consumers with conventional electricity meters. Consumers who are eligible for the new plan will continue to pay one price for the electricity they consume each month up to a certain threshold and a higher price for any electricity consumed per month above that threshold. The prices are now being determined by the Ontario Energy Board based on specific components set by the Government and a forecast by the Board of electricity prices in the wholesale market (see question 4). In addition, under the price plan the amount of electricity that residential consumers can use at a lower price will vary by season (see question 5).

4. How has the Ontario Energy Board determined the prices for the new price plan?

The new prices have been calculated by the Ontario Energy Board using the following components:

• The Board’s forecast of the price of electricity in the spot market over the next twelve months.

• Prices set by the Government for Ontario Power Generation’s (OPG) regulated nuclear and hydroelectric generation facilities for the next 12 months.

• Prices that the Ontario government will pay under long-term power supply contracts with private generators over the next 12 months. Prices that the Ontario government will pay under any future contracts for electricity generation supply from renewable and other resources, and for demand management, will also be included in future price calculations.

• The estimated value of the difference that is expected to result from the Government’s decision to impose a 13-month revenue limit on most of the output from OPG’s unregulated assets. Since the revenue limit applies only until April 30, 2006, this component will not apply in the future.

It is important to remember that the plan is limited to prices for the electricity commodity itself. This is shown on the “Electricity” line on your bill, and is only one of a number of factors that contribute to the total price that you pay for electricity that is delivered to you.

5. What are the prices?

There are prices for consumers with conventional electricity meters and prices for consumers who have “smart meters” or other meters that can record electricity use during specific periods during the day.

Consumers with conventional electricity meters

For the first seven months of the new plan, eligible consumers will pay 5.0 cents for the first 750 kWh of electricity consumed each month and 5.8 cents for electricity consumption above that during the month. Most residential consumers in Ontario consume less than 1,000 kilowatt hours per month on average.

As of November 1, 2005, the threshold for residential consumers will change twice a year. It will be 1,000 kWh per month during a winter season (November 1 to April 30) and 600 kWh per month during a summer season (May 1 to October 31). This difference recognizes the fact that consumers use more electricity for lighting and indoor activity in the winter, and that many Ontarians rely on electricity for heat.

The threshold for non-residential consumers that are eligible for the price plan will remain at 750 kilowatt hours throughout the year.

Consumers with smart meters

Many Ontario consumers will not begin to get smart meters until at least 2006 and most will not get a smart meter until 2008 – 2010.

For consumers who already have a smart meter, it is up to your utility whether it will charge you smart meter prices in the first year of the new price plan. As of the spring of 2006, each utility will be required to charge smart meter prices to everyone that has a smart meter.

Under the price plan for smart meters, the price that consumers will pay for electricity will vary based on the period during the day when electricity is used.

The periods are:

• On-peak (when demand for electricity is highest);
• Mid-peak (when demand for electricity is moderate); and
• Off-peak (when demand for electricity is lowest).

These periods will be different in the summer than they are in the winter.

Smart meter pricing chart:

6. When will the price plan take effect and how long will it be in place?

Upon adoption of a Government regulation, the new price plan will take effect on April 1, 2005. The prices will stay the same for the first year of the plan. After that, the Ontario Energy Board intends to review the prices every six months and adjust them as required.

The price plan is designed to be a long-term price framework that is stable and predictable so that consumers have an opportunity to plan for and manage their electricity costs. At the same, the plan makes sure that the price consumers pay for electricity better reflects the price paid to generators.

7. How does the new price plan provide stability in prices consumers pay?

The new price plan provides stability and predictability in three ways:

• First, the prices will stay the same for the first year;

• Second, while wholesale electricity market prices vary by hour, by day and by season, the new prices average or “smooth” that volatility over a longer period of time; and

• Third, after the first year of the plan, prices are expected to change only every six months.

8. Who is eligible for the price plan?

The Government has indicated that all consumers that were eligible for two-tiered pricing prior to April 1, 2005 will be eligible for the plan. This includes low-volume consumers, such as residential consumers and small business customers, and “designated consumers” such as municipalities, hospitals, schools, colleges and universities. This is expected to remain the case until April 1, 2008, when eligibility will be limited to residential consumers and consumers that are classified as “general service less than 50 kilowatt demand” by their utility.

Consumers that are eligible for the plan may choose not to participate. They may instead choose to enter into a contract with an electricity retailer.

Another choice open to all eligible consumers who have an interval meter that records hourly electricity use is to pay the “spot market” price.

Consumers, such as large industrial consumers, that are not eligible for the price plan will continue to have all of the options and flexibility to make supply arrangements that they have currently.

9. I am eligible for the price plan but already have a contract with an electricity retailer. Will I be covered by my contract or do I automatically go under the price plan?

The answer depends on when you entered into the contract and whether or not you have renewed it.

If you entered into or renewed a contract with a retailer on or before December 9, 2002, and did not do anything else in relation to the contract after that date, you will automatically be covered by the new price plan.

If you entered into or renewed a contract with a retailer after December 9, 2002 but before June 15, 2004, you will not be covered by the new price plan until your contract expires.

Retail contracts that were entered into or renewed by residential consumers on or after June 15, 2004 (but before a date to be determined by the Government) are subject to special rules, some of which have yet to be specified by the Government. This is intended to allow you some time to become familiar with the new price plan and to compare it with your contract price. If you decide that you want to retain the contract price, you will need to reaffirm the contract within a specific period of time. If you do not reaffirm the contract, it will cease to have effect and you will be covered by the price plan.

10. Are there other changes in my electricity bill besides the new pricing plan?

Last year, the format of electricity bills was changed so that most electricity consumers in Ontario now see the same four lines on their bill:

• Electricity: the cost of the electricity supplied to you
• Delivery: the cost of delivering electricity from generators to your utility and then to your home or business
• Regulatory: the costs of administering the wholesale electricity system and maintaining the reliability of the provincial grid
• Debt Retirement Charge: set by the Ministry of Finance to pay down the residual stranded debt of the former Ontario Hydro

You will also see changes to the “ Delivery” line of your bill as of April 1, 2005. This is because:

• Most utilities have applied to change their distribution rates, conditional on them reinvesting the equivalent of one year of these monies in conservation programs.

• Your bill may reflect an adjustment in the rate that you started paying last year to recover costs your utility was previously not able to recover from consumers.

• Utilties apply to the Ontario Energy Board for any changes to the rates they charge under the “Delivery” line of your bill. These rates vary from utility to utility and applications to change rates are reviewed by the Board through a public process to determine what costs the utilities may pass on to consumers.

You should contact your local utility for more information on the changes to the “Delivery” line of your bill.

11. Why are the prices under the plan for residential consumers different than prices the Government announced last month?

The prices announced by the Government on February 23, 2005 are the prices that will be paid to Ontario Power Generation for a large portion of the electricity it produces. These prices are components of the Board’s price plan for eligible consumers

12. Do large commercial or industrial consumers pay more or less for electricity than eligible price plan consumers?

The electricity prices paid by both eligible price plan consumers and large commercial and industrial consumers will reflect prices paid to generators. The difference is that prices under the price plan are smoothed over the course of a year but prices for the larger consumers are not.

Prices for eligible consumers under the price plan will be fixed for a year based on the Board's forecast of the prices and quantities for the various sources of supply. Differences between the Board's forecast and actual amounts paid to generators will be built into the price for the next year.

Prices paid each month by large consumers that are not covered by the price plan will be based on actual prices during the month, not on forecasts by the Board.

13. Where will I see these prices on my bill?

You will these changes on the “Electricity” line of your bill.

14. What is the purpose of seasonal threshold changes for residential consumers with conventional meters?

Consumers generally have less flexibility when it comes to electricity use in the winter when the need for heating and additional lighting makes it harder to reduce electricity use. This is a particularly important issue for consumers that rely on electricity for their heating. By contrast, there tend to be greater opportunities to conserve in the summer months. Seasonal pricing reflects these differences by allowing consumers to consume more electricity at a lower price during the winter season than during the summer season.

15. Some people need to run air conditioning and medical equipment in the summer for health reasons. Doesn’t the seasonal approach to pricing fail to recognize this?

The Ontario Energy Board understands that different consumers have different electricity needs during the year. However, for most consumers there is a greater opportunity to conserve electricity in the summer months than in the winter.

16. What is the price plan for consumers with smart meters?

Most consumers will not have smart meters when the new prices take effect. In addition, utilities are not required to charge smart meter prices to those customers who have smart meters until the spring of 2006, although they may do so if they wish.

For consumers with time-of-use, or “smart” meters, the prices are based on time of use. In other words, the price of electricity during peak use periods of the day will be higher than the price of electricity during periods of the day when electricity use is lower. The plan sets prices for three types of periods during the day: “on-peak” (highest price), “mid-peak” (middle price) and “off-peak” (lowest price). These periods will be different in the summer than they are in the winter.

17. When will I go on the smart meter price plan?

During the first year of the new price plan, utilities are not required to charge smart meter prices to customers who have smart meters, but they can do so if they wish. If you have a smart meter and your utility has decided to offer smart meter prices, you will be charged those prices. Starting in the spring of 2006, your utility will charge you smart meter prices if you have a smart meter.

18. Why do prices look so different for customers who have smart meters than for those with conventional meters?

The price plan for smart meters is designed to recover the same average costs of supply as the price plan for conventional meters. The way in which it does that is, however, different.

19. What is the benefit of having smart meter pricing?

Currently, consumers have little financial incentive to manage their use of electricity over the day. Smart meter pricing sets a higher price at peak periods when prices are highest in the wholesale market. This gives consumers an incentive to reduce or shift their use to periods of lower demand (e.g. weekends or later in the evening) and away from times when electricity is most expensive.

Consumers will not be able to shift all of their electricity use away from peak demand periods, but the more they are able to do so, the more they can manage their costs and contribute to lower overall peak electricity prices for everyone.

20. Won’t the increased demand in the off-peak period turn it into a peak period?

This has not happened in other jurisdictions where time of use pricing is in place and we don’t expect this to happen in Ontario. If consumers shift more of their use of electricity to periods when demand is lower, that can eventually reduce the prices during peak periods.

21. My rent/condo fees include electricity. How does the price plan apply to me?

Special rules are in place to allow consumers who pay for electricity through rent or condo fees to have the benefit of the price plan. The rules require that your landlord or condominium corporation sign a declaration with the local utility identifying the number of units in your building. If that is done, the price plan will apply to electricity consumption within the building as a whole. Whether or not the new prices are then ultimately passed on to you depends on your arrangements with your landlord or condominium corporation.

22. What is the range of total bill impacts to consumers of the “Electricity” line change announced today and the “Delivery” line changes applied for by distributors?

The Ontario Energy Board is currently reviewing applications by electricity distribution companies for changes to distribution rates. These rates are reflected on the “Delivery” line of consumer bills. These rates are separate from the new prices announced by the Board that apply to the “Electricity” portion of consumer bills.

A total of 181 distributors have filed for distribution rate changes. These include 94 individual distributors and 87 local distributors owned by Hydro One.

Applications have been made to the Board, but no decisions have been made. For a consumer using an average of 1,000 kWh per month, the combined impact on the total bill of the new “Electricity” line prices and “Delivery” line changes applied for by distributors would range from 0.5 % (Canadian Niagara Power Inc. – Fort Erie) at the low end to 19.85% (Middlesex Centre) at the higher end. The total bill impact for the majority of distributors is in the range of 4% to 10%.

The “Delivery” line rate changes applied for vary from utility to utility and there is no average “Delivery” line impact.

No final decisions have been made in any of these applications for changes to the “Delivery” line. The rates that the Board approves could be different than the rate changes for which individual distributors have applied.

The Board will be issuing decisions shortly. The rate changes take effect on April 1, 2005.

Consumers will see changes to the “Delivery” line of their bills as of April 1, 2005. This is because:

• Most distributors have applied to change their distribution rates, conditional on them reinvesting the equivalent of one year of these monies in conservation programs.

• Consumer bills may reflect an adjustment in the rate that consumers started paying last year to recover costs their utilities were previously not able to recover from consumers.

• Utilties apply to the Ontario Energy Board for any changes to the rates they charge under the “Delivery” line of consumer bills. These rates vary from utility to utility and applications to change rates are reviewed by the Board through a public process to determine what costs the utilities may pass on to consumers.

• Consumers should contact their local utilities for more information on the changes to the “Delivery” line of their bills.

Last year, the format of electricity bills was changed so that most electricity consumers in Ontario now see the same four lines on their bill:

Electricity: the cost of the electricity supplied to you

Delivery: the cost of delivering electricity from generators to your utility and then to your home or business

Regulatory: the costs of administering the wholesale electricity system and maintaining the reliability of the provincial grid

Debt Retirement Charge: set by the Ministry of Finance to pay down the residual stranded debt of the former Ontario Hydro