OEB cuts Ontario Electricity Prices

The Ontario Energy Board has issued new rates under the Regulated Price Plan.  The new rates are 5 cents/kWh for the first 750 kWh of monthly usage, and 5.9 cents/kWh for usage over 750 kWh/mo.  For certain customers with time of use meters, the rates have been reduced to 8.7 cents for peak, 7 cents for near peak, and 3 cents for off peak.

Of course these prices do not include transmission, distribution, regulatory and debt recovery charges.  These will add about 3 cents/kWh, depending on where you live.  The commodity charge has been reduced by an average of 4.8%.

The Board says the price is reduced to allow the clearance of a surplus in a variance account at the OPA of almost $200 million, and to reflect lower electricity prices anticipated due to lower natural gas prices used for electricity generation.  Natural gas prices are lower in large part due to the strong Canadian dollar.

The OEB in re-setting the prices is simply following through on their legislated mandate.  They have very little choice in the matter, other than perhaps in their choice of forecasts for future electricity prices.

The economist in me says this is bad public policy.  We still have huge legacy nuclear debts that we are servicing – we would be better to pay down debt.  And of course when prices are reduced, the incentive to reduce demand is also reduced.  The decisions on investing in conservation and efficiency will be deferred, as the payback for making investments will be longer.  And so demand will stay high, more coal will be burned, and the pressure to build new nuclear will remain.  The mandate of the OEB should be changed so that price is used to reform society to a lower consumption lower impact footprint.

One of the other dangers of lowering electricity prices is that it can cause fuel switching.   In my home, for example, I have an oil furnace, and some electric baseboard heaters that remain from when the home was electrically heated.  Simply changing the setting on thermostats can move me from oil to electricity.  So I checked the math on various forms of energy.

Fuel           Price Assumption    Cents per 1000/BTU’s   Efficiency Adjustment   Net Cost

Electricity    8.9 cents/kWh               2.61                     100%                          2.61

Gas            40 cents/m3                  1.12                     95%                            1.18

Oil              66 cents/l                      1.81                     85%                            2.13
Propane      60.4 cents/l                   2.49                     95%                            2.62

The efficiency adjustment is to reflect the efficiency of various forms of energy use.  Electric heat is 100% efficient.  A high efficiency natural gas furnace is 95% efficient, and so on.  The oil furnace efficiency is for a relatively new medium efficient model.  An older model could be less efficient (as low as 50%).  I have tried to include the cost of delivery in the numbers for each fuel type, but this can vary depending on where you live and how much you use.

You can see by the above analysis, that if your prices you pay are the same as listed, you should still use your existing source, with the possible exception of propane.  But if you have an old oil furnace, electricity may be cheaper.

Do the analysis.  When the government mandate of the OEB makes electricity cost less, lets consume consume consume.  That’s what the price signal they are sending is telling us to do.

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