Green Energy Act means Ontario Hydro prices ‘going up like a rocket’

Tom Adams, Energy Consultant

Ottawa Citizen

Electricity prices in Ontario are “going up like a rocket,” fuelled in part by the Ontario government’s Green Energy Act, says a longtime observer of the province’s energy scene.

“You are going to get screwed, and it’s going to be painful,” said Tom Adams, a Toronto-based consultant and a former executive director of Energy Probe.

“We’re talking about hundreds of dollars a year out of your pocketbook that didn’t need to happen. I’m livid about it. People should be outraged.”

Hydro Ottawa customers have already been hit with a double-digit increase this year, thanks to rate hikes approved May 1 by the Ontario Energy Board (OEB) and the imposition of the harmonized sales tax July 1.

A typical consumer in Ottawa who uses 800 kilowatt hours of electricity now pays $116.82 a month, including tax, according to the OEB.

That’s 17.7 per cent more than the $99.35 a month the same residential customer was paying in April. Half the increase is due to higher rates and half because of the HST.

Adams warned that Ontarians should expect to pay at least $110 more a year by the end of 2011 for electricity. That translates into an additional nine-per-cent increase.

After that, rates will move steadily up for four or five years, he predicted.

The OEB has already received several applications for more hefty rate increases.

Hydro One, which operates most of the province’s long-distance transmission lines, has asked for a hike of 15.7 per cent in 2011 and 9.8 per cent in 2012. If approved, the increases would apply to the transmission portion of electricity bills.

Ontario Power Generation, which produces about 70 per cent of Ontario’s power, has asked for a 6.2-per-cent price increase effective next March. It scaled that back from 9.6 per cent after pressure from Energy Minister Brad Duguid.

Traditionally, Ontarians have paid less for power than Americans. But now, said Adams, “we are leaving them in our dust.”

He calculated that Ontario electricity rates passed the average U.S. price for the first time early this year, and are now nearly 15 per cent higher.

Adams assigned much of the blame for the rise in electricity rates to Ontario’s Green Energy Act, which promotes the use of solar, wind and other alternative power sources.

The Feed-in Tariff (FIT) program, which locks in generous payments for 20 years for large green energy projects, is “just outrageous,” Adams said.

The program’s rates are far in excess of current electricity prices. The FIT program, for example, offers producers between 44.3 cents and 71.3 cents per kilowatt hour for solar power, and between 13.5 and 19 cents for wind power.

By contrast, the average weighted price for electricity so far this year is 4.02 cents per kilowatt hour.

Four FIT projects are already operating commercially, as are more than 700 small-scale projects under the companion microFIT program, which offers even richer incentives.

Adams said FIT projects will drive up electricity bills as they generate more and more of Ontario’s power.

Because 20-year contracts have already been offered for FIT projects totalling more than 2,600 megawatts of power, Adams said, “it’s now too late to avoid hundreds of dollars per year of increases.”

But Tom Carpenter, a research associate at Queen’s University’s Institute for Energy and the Environment, said claims that green energy will drive up the price of electricity are “simply false.”

Over the next two or three years, Carpenter said, the impact of FIT projects on electricity rates will be negligible, because the high-priced renewable energy will only represent a tiny fraction of the province’s generating capacity.

As the program expands, he said, economies of scale will kick in and prices will come down sharply.

Another impending shift that could raise costs for residential customers is the advent of time-of-use pricing.

Unless they’ve signed electricity contracts, Ottawa residents now pay the Ontario Energy Board’s regulated price for hydro. For the first 600 hours of consumption in summer — and the first 1,000 hours in winter — they pay 6.5 cents per kilowatt hour, and then 7.5 cents for each kilowatt hour beyond that.

But smart meters, now installed at virtually all Ottawa residences, make it possible to bill customers at three variable rates, depending on when they use electricity.

The current time-of-use rates are:

  • 5.3 cents per kilowatt hour between 9 p.m. and 7 a.m.,
  • 8 cents from 7 a.m. to 11 a.m. and from 5 p.m. to 9 p.m., and
  • 9.9 cents from 11 a.m. to 5 p.m.

Hydro Ottawa plans to shift 4,750 customers to time-of-use billing in November, a further 30,000 early next year and the balance by June 2011. Those who’ve signed contracts with electricity suppliers won’t be affected.

While time-of-use pricing should be cost-neutral overall, Adams said, some people will pay more and some will pay less, depending on their consumption patterns.

Pilot projects in Toronto found many small businesses saved money while residential customers, on average, paid about eight per cent more for their electricity.

Adams said “substantial increases” are also on the horizon for electrical transmission and distribution.

One driver is an OEB decision last December that allowed local utilities to increase their allowed rate of profit. The decision bumped Hydro Ottawa’s allowed return on equity to 9.85 per cent from 8.57 per cent.

There’s some public benefit to that because the City of Ottawa is Hydro Ottawa’s sole owner, but “that is going to drive the distribution and transmission components of the bill up by more than 10 per cent just in and of itself,” Adams said.

14 thoughts on “Green Energy Act means Ontario Hydro prices ‘going up like a rocket’

  1. I’m puzzled:

    “But Tom Carpenter, a research associate at Queen’s University’s Institute for Energy and the Environment, said claims that green energy will drive up the price of electricity are “simply false.”

    Over the next two or three years, Carpenter said, the impact of FIT projects on electricity rates will be negligible, because the high-priced renewable energy will only represent a tiny fraction of the province’s generating capacity.

    As the program expands, he said, economies of scale will kick in and prices will come down sharply.”

    How can “economies of Scale” kick in if the FIT program fixes the price? His comment makes no sense unless he is aware of something that our Great Leader is not ware of.

    Is there some special Green Math that us numerically challenged types should be aware of?

    Since for wind we are paying 4 to 5 times the going rate and for solar up to 20 times the going rate — and they must be taken or paid for then they have a disproportionate representation on the bill. Or maybe my Green Math is just all messed up today. So my 1200KWH usage per month if supplied by solar would be like draing 24,000KWH, (at regular prices) but, if supplied by wind power would represent 4,800KWH (at regular prices). Yes — that would please me no end! AT least the price is blended, but do recall that there is in effect a “multiplier” due to the outrageous rates paid for this ugly Green (Actually black) power.

    Now the TOU meters are supposed to encourage us to use wind power and solar power. But my graphs and numbers how that the wind usually peak in late afternoon in summer, and the solar about mid-day. Did I get that wrong too?

    Indeed the smart meters are supposed to have functions that demonstrate when Green Power is available so that we can do “discretionary” things when the “Green Power” peaks. However if that is the time of greatest cost — why would I do that?

    Additionally the “Smart Grid” and the “Smart Meters” are supposed to grab control of my appliances and reduce power consumption when there is a heavy load on the system. Does that mean my efforts to cook lunch will be foiled?

    This all seems so awfully confusing to me.

    Maybe Tom Carpenter should be invited to do an article so we can examine his “philosophy” in detail.

    I think I need to see the complete plan or I will continue to think that many energy consultants are nothing but fools on a ship of fools — and McGuinty’s the Captain.

    In the meantime I hope people see that Tom Adams seems to be a voice of reason navigating in a sea full of ships of fools.

  2. Does Tom Carpenter have difficulty breathing with his head stuck so far up his ass ? He must be a shill for the Ontario Liberals or the Wind Energy companies…

  3. Randy:

    The symptoms are consistent with Oxygen Deprivation (or so the medical type here says…) so maybe you are right.

    Alternatively it could someone elses’ a$$…

    DANGER! DANGER! Shoals ahead — the navigation of the ship of fools has broken down! (And the Captain is rowing away in a lifeboat for his very life!)

  4. Many thanks to Tom Adams for the article he has written.

    Because costs can vary according to region every consumer should calculate their own true cost per kilowatt hour. Just use total bill amount and divide by kilowatt hours used. This gives the true out of pocket costs paid per kilowatt hour and includes all charges on their bills.

    At what cost point will it be cheaper to purchase a generator and supply your own electricity? We may soon know.

  5. Well our final cost is varying from $0.17 to about $0.22 — so not long.

    About $220 a month, about 1200 KWH a month — office and shop though. The office and shop do not use that much — maybe like a few extra light bulbs.

    I suspect that fancy new smart meter is actually rather stupid — or maybe crooked…

    But Direct Energy is promising we can save at least $5 to $10 a month. They tell us we will be impressed by how it adds up!

    I would be more impressed if they got out of the Renewable Energy business!

  6. Does anyone know if it is less expensive to operate natural gas appliances now? At least you wouldn’t have peak hours pricing to deal with.

    How about hot water price for natural gas? Used to be cheaper than electricity.

  7. Barbara:

    Start here.

    Don;t just look at operating cost if you intend to replace appliances before they are “worn out”.

    That should give a rough idea.

    BTW — Enbridge is in the Green Energy Business — IWT’s — so driving you to gas does not hurt them.

  8. Thanks David,
    According to this website dryers are about the same cost to run gas or electric. Gas stoves and hot water tanks are less expensive to run than electric. Then you must take into account local costs of your gas and electric. So check this out before you buy.

    However,in Ontario you can get around the peek demand prices for electric. No peek demand for gas prices yet. Savings there.

    Most people want to cook and bathe during during the higher electric price hours.

    But as the price of electricity increases in Ontario will natural gas prices follow? We will soon know.

    If gas prices remain the same then there could be even more savings by using gas appliances.

  9. Barbara’s math on calculating cost per kW is the true approach. Total bill divided by total usage. The delivery charge is all part of this mess and to say renewables are a small portion of the mix so their higher cost per MW does not have an impact is not including the additional costs to running backup generation, power usage of the IWT’s (paid for by consumers) and of course the transmission line development needed for renewable linkage. Of the two costs, usage and delivery the larger portion fo the bill is delivery. Tom Adams: Thanks for taking this to print. It makes one wonder about the reality of Tom Carpenter and if he has ever paid an electricity bill. Expensive power does not make for cheaper electricity bills for consumers no matter what math is used.

  10. Those of us in rural Ontario got screwed again by TOU. We already were eco-conscious and “green”; most of us hang our laundry outside instead of using a dryer.

    But McGuinty’s social engineering experiment now tells me to do my laundry at night. Since I don’t care to go out in the dark to hang my laundry, I’ve started using the dryer at night.

    Way to go Dalton…by using a Toronto-centric line of reasoning, you are now encouraging rural Ontarians consume more energy. What a mess the Liberals have created.

  11. I guess that the $20 Billion or so being spent on FAKE Green Energy will get added to the delivery charge….

  12. Let me guess Anton, you are using your lights too since the cheapest TOU kicks in at 9pm when it’s dark!

  13. Ontario hydro 2.0 is going to get screwed in the end as it prices itself out of the market. I just picked up a whole bunch of cheap LED lighting that uses half as much energy as CFL. Cook on gas, charcoal or candles (charcoal and tealites are at cost parity with electricity) = zero electricity used. My bill is almost non-existant now – except for a $60 delivery fee for $15 of electricity thanks to yet another overpaid public union. I put up a few cheap solar panels in my backyard and eliminated 25% of my usage. My bills are not going up – but more solar panels are. Soon I will be off grid. It will be fun watching the monopoly come to an unremarkable end with free energy from the sun. Fit was a nice idea but poorly executed. Guess that’s what happens when you let ambulance chasers run things. Vote with your dollar. Boycott.

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