Big power users get a price break

Sixty-four of the province’s biggest power users are getting a hydro price break, at the expense of everyone else

A handful of big power users in Ontario are getting a break on their electricity bills – at the expense of everyone else – as a result of a change in an arcane pricing formula.

The numbers look like this, according to an expert panel that monitors the province’s power markets.

Sixty-four of the biggest power users in Ontario paid about 4.8 cents a kilowatt hour for electricity in the year ended April 30, 2012, says the market surveillance panel.

Everyone else paid an average of 7.9 cents a kilowatt hour.

The panel reports to the Ontario Energy Board on how the electricity market is working.

Compared to the previous year, the big users’ price dropped by about half a cent a kilowatt hour. Every else’s price rose about 0.4 cents.

The numbers refer only to the price of electrical energy. All customers pay additional charges to build and maintain the wires that deliver power, plus administrative and other fees.

The reason why big businesses pay less comes from the complex structure of power prices in Ontario.

Some of the price comes from the open wholesale market. It averaged a little over 3 cents a kwh in the latest year. Big users on average paid slightly less because they have more ability to take advantage of market fluctuations.

But most power doesn’t trade on the open market.

Much of Ontario Power Generation’s output is sold at relatively low regulated prices.

But most privately owned generators, including Bruce Power, gas-fired generators, sell their power under contracts with the Ontario Power Authority. Wind, solar and private hydro operators also get special rates, higher than the current market.

To recover the money to pay for all those contracts, customers are charged an additional fee called the “global adjustment,” which now considerably exceeds the market price.

That’s where the difference comes in.

The big users paid a global adjustment in the latest year of about 2.7 cents a kilowatt hour. Everyone else paid about 5.6 cents a kilowatt hour, reflecting what the surveillance panel calls a “substantial increase” in the share allotted to all the smaller users.

The latest figures reflect, for the first full year, a change in the way the global adjustment is charged.

Prior to the change, the fee was divided among all customers based on their monthly power use.

The new system puts the big users on a different footing. Their share of the global adjustment depends on how much power they use during the five peak hours during the year.

Sophisticated businesses with big power bills know when the peaks are likely to occur, and can scale back their power use during those periods. That reduces the share of the global adjustment they pay – and increases the share for everyone else.

Big power consumers, who lobbied for the change, say there are benefits to all customers from the new system.

By cutting back their power use during peak periods, they reduce the need for expensive power plants that only run for short periods of the year.

That, they argue, saves money for everyone.

More on

  • Tidal splashes into crowded streaming market

    Tidal splashes into crowded streaming market

  • Condo market feels heat as house prices soar

    Condo market feels heat as house prices soar