"If left unresolved, the financial pressures on distributors could have compromised maintenance and capital expenditures, which in turn could have jeopardized electricity reliability and Ontario's competitive advantage," said EDA Chair Ed Houghton. "Ontario's electricity distributors look forward to working with Minister Duncan as they prepare to implement these important new initiatives."

Liberals' Move to Ensure Electricity Prices Reflect True Costs Seen as Potential

November 1, 2003

Review of Electricity Price Caps Must Include Review of Local Electricity Distribution Rate Caps

North Bay - Encouraged by Premier McGuinty's announcement to review the cap on hydro rates, North Bay Hydro Distribution is calling on the provincial government to ensure that the amendments to the electricity price structure includes a re-examination of the freeze on distribution rates in order to ensure a strong, competitive economy in Ontario.

"We have been heartened by the newly elected government's recent action and look forward to working with Minister Duncan throughout this 30-day review to be part of the solution," said General Manager, Ron Ross.

"The price cap has exacerbated many of the serious problems that already existed in Ontario's electricity market and put local distributors in difficult financial straits," said Ross. "If left unresolved, the financial pressures on distributors could compromise maintenance and capital expenditures, which in turn would jeopardized electricity reliability and Ontario's competitive advantage."

"Ontario's electricity distributors have delivered electricity to our communities, homes, businesses and institutions safely, reliably and in a financially responsible manner for over 100 years," said Ed Houghton, Chair of the Electricity Distributors Association. "Only a strong electricity distribution infrastructure will ensure a strong, competitive economy for our local communities and the province of Ontario."

Backgrounder:

The financial impact of the price cap on Ontario's electricity distributors is severe. Eventually, financial pressures on distribution companies manifest themselves in terms of reduced benefits being provided to local communities. Among these benefits, the most important is the safe and reliable delivery of electricity, which itself is heavily dependent on distributors' ability to invest in maintaining and expanding distribution infrastructure.

Distributors Financially Frozen

The Progressive Conservative government's Bill 210 froze the financial position of electricity distributors until 2006. In practical terms, this means that until Bill 210's expiration date of 2006, the rates for Ontario's electricity distributors will be frozen at 2002 levels (i.e., at about two-thirds of the Ontario Energy Board's approved rate of return factored on a rate base that reflects 1999 costs). This means that until 2006, local distributors must absorb all increases in costs, such as inflation and higher labour costs, not to mention costs associated with any government imposed programs, while earning a rate of return at least one third less than originally promised by the government and the OEB. Under Bill 210, the only circumstance under which adjustments can be made to distribution rates is if they are personally approved by the Minister of Energy (whose approval is governed by strict legal criteria) and the OEB.

$750 million of Un-funded cost pressures

In addition to over $650 million in un-recovered costs - costs largely attributable to the cost of the high-priced electricity imported to cover Ontario's supply needs during the summer of 2002 and to the installation of new computer systems required to communicate with retailers and generators in the competitive electricity market - local distributors are currently bearing approximately $100 million worth of recently added costs that are not covered by their existing rates (that were frozen by Bill 210). Already, the potential and anticipated new costs to Ontario distributors that require coverage include, but are not limited to:

• the implementation of Bill 210 rebates;
• wholesale and retail settlement system changes;
• billing format changes;
• mandated connection for new, small-scale generators;
• consumer non-payments.

Currently, local distributors have no means of addressing these costs, and their ability to carry those already being incurred is limited. If left unresolved, the financial pressures on distributors could compromise maintenance and capital expenditures, which in turn would jeopardize electricity reliability and Ontario's competitive advantage. To address this issue, the electricity distributor industry is prepared to work with the provincial government to ensure that cost pressures are addressed as the provincial government prepares to adjust electricity rates.

For further information contact:
General Manager, Ron Ross
474-8100 ext 300

So Who Are Energy Brokers?

Energy brokers are independent business people who arrange supply contracts between energy buyers (electricity customers) and energy sellers (electricity generators or distributors). These brokers search for low purchase prices in a deregulated market, increase those prices to cover their own costs, then arrange deals with buyers. Some Energy Brokers may represent several interests with conversion packages. This is basically one stop shopping where you actually buy your electricity, natural gas, long distance telephone package, home security systems and more all on one contract. Be very aware of the individual costs. These contracts may reflect a lower rate for electricity but can actually cost your more because of inflated rates in one or more of the other services on the contract. Convergence packages have become very popular in the States and are destined to head this way.

Buyer Beware

• Do not show or give away your hydro bill to a marketer unless you are prepared to sign a contract with that person.
  
  
• Don't sign anything until you have read the fine print and fully understand what you are signing. When you sign an agreement with a marketer you are entering into a legal agreement that is separate from North Bay Hydro. An agreement can be binding for up to five years and may restrict your options.
  
  
• Ask the marketer how their savings are calculated and shared; what their transmission and administration costs are; and details about the duration of the agreement and terms of renewal.
  
  
• Do not give anyone a deposit... it could be money out the window.
  
  
• Consumers who sign a contract have 10 business days to change their minds and inform the company by fax, registered mail or personal delivery they are no longer interested in doing business with them.
  
  

The Electricity Pricing, Conservation and Supply Act, 2002

On December 9, 2002 the government passed legislation that sets the commodity price of electricity at 4.3 cents per kilowatt hour for low volume consumers and other designated consumers. This price is effective May 1, 2002 to May 1, 2006. This price will apply to residential consumers and most small business consumers. In addition, these consumers will be refunded for amounts they paid for electricity between May 1, 2002 and November 30, 2002 in excess of 4.3 cents per kilowatt hour.

It doesn't matter whether you had signed a contract in the past for electricty supply with an electricity retailer or not, you will be refunded for any amount paid over 4.3 cents per kilowatt hour for the electricity commodity for the period May 1 to November 30, 2002. BUT if you sign a contract for electricity supply after December 9, 2002, you will pay the contract price going forward, not the legislated price.

What About Other Rates?

The price freeze of 4.3 cents covers only the commodity portion of your electricity bill, ie. the kilowatt hours you consume. The legislation prevents electricity distributors from changing their rates for distribution and other charges unless they receive leave from the Minister of Energy to apply to the Board.

More Deregulation Information

• Ontario Energy Board
• Independent Electricity Market Operator
• Ministry of Energy
• City of North Bay
• Electrical & Utilities Safety Association