OEB Amendment Act - Highlights
Backgrounder
Ontario Energy Board Amendment Act Highlights Of The Proposed Changes
- Starting April 1, 2004, the current price cap of 4.3 cents would be removed and an interim pricing structure would be implemented that better reflects the true price of electricity.
- Under the interim plan, the first 750 kilowatt hours (kWh) consumed in any month would be priced at 4.7 cents per kilowatt hour. Consumption above that level would be priced at a higher rate of 5.5 cents per kilowatt hour.
- This interim pricing plan would stay in place until the independent regulator, the Ontario Energy Board (OEB), develops a clear and transparent mechanism for setting prices in the future. The OEB's new pricing mechanism would be implemented as soon as possible and no later than May 1, 2005.
- If the revenue from the interim price plan exceeds the cost of the plan, all eligible consumers would receive a credit for the difference after the OEB implements its pricing mechanism.
- The legislation would be followed by a regulation providing direction to the OEB on the development of a price-setting mechanism.
- As price regulator, the OEB would protect and renew Ontario's electricity grid by ensuring reasonable charges for the delivery of electricity.
- Beginning March 1, 2004, local distribution companies (LDCs) would be allowed to recoup some of the costs that the previous government had put on hold, which has put a tremendous financial burden on the LDCs. The Ontario Energy Board would be asked to ensure that these recoveries to local distribution companies are spread over a four-year period. It is estimated that this would have a modest impact on the final price to consumers.
- As of March 1, 2005, LDCs would be allowed to achieve their full commercial return, which in many cases would result in an increase on average of approximately 0.3 cents per kilowatt-hour. This increase would be conditional on LDCs reinvesting the equivalent of one year of these monies in conservation and demand management initiatives.
The proposed legislation would restore the normal regulatory regime for transmission rates immediately, which is not anticipated to increase rates.
The 4.3 cent electricity price freeze implemented by the Tory government did not reflect the true cost of electricity, and has contributed to the $5.6 billion deficit threatening the province.
The total cost of the price freeze to November 1, 2003, has been $1.74 billion. Part of this cost has been offset by a previously planned rebate from Ontario Power Generation (OPG). The net cost to date is estimated at over $800 million.
- The 4.7 cent and 5.5 cent pricing structure better reflects the true cost of electricity.
- Electricity prices, after the removal of the 4.3 cent price cap, are still expected to be competitive with adjacent U.S. jurisdictions.
- 4.7 cents per kilowatt hour (kWh) for the first 750 kWh of consumption reflects a relatively moderate increase in the cost of electricity for the average residential electricity consumer. Consumers who use 750 kWh per month would see less than a $5 increase on their monthly bill; users of 1,000 kWh per month would see less than a $10 increase; users of 2,000 kWh per month would see an increase of roughly $25.
- For most residential consumers, well over half of their monthly consumption would be covered by the 4.7 cent price per kWh.
- Approximately 60% of homes in Ontario use less than 1,000 kWh or less per month on average. By implementing simple conservation measures, this consumption can be reduced.
- Commercial users of 50,000 kWh to 250,000 kWh a year would see an increase in their monthly electricity bill of between 15-18%. For commercial users of 150,000 kWh, this translates into an increase of approximately $180 per month.
Notice of implementation on April , 2004 gives consumers, small business and other low-volume consumers a chance from now until April to review their energy use, implement conservation measures, and as a result, limit the impact of the price change on their electricity bill when it occurs. It would also allow local distribution companies time to make required billing changes.
The proposed legislation encourages conservation and demand management programs. Valuable energy saving tips are available from the Ministry of Energy web site at www.energy.gov.on.ca.
For consumer information call 1 888 668 4636
Media Contacts:
Angie Robson
Ministers Office
(416) 327-6747
Ted Gruetzner
Communications Branch
(416)327-4334
