Cost of Electricity 2008-2023

May 24, 2023

The following table provides a breakdown of the cost of electricity for a residential customers with a 750 kwh load comparing 2008 and 2023.  I chose 2008 for the comparison as 15 years seems a suitable time period and the structure of the bill is largely the same as today.

Cost Element20082023$ Change% Change
Debt Retirement Charge$5.25($5.25)(100%)
Wholesale Market Charges$3.90$3.38($0.53)(13%)
Line losses$2.36$3.04$0.6829%
Rural Rate Protection$0.75$0.53($0.22)(30%)
Smart Meter Entity Charge$0.42$0.42100%
Ontario Electricity Rebate($13.80)($13.80)(100%)

Regular inflation in the time period is 38%.

It would be nice to say that the cost of electricity has risen less than inflation but that would not be correct.  The cost of electricity has been kept low due to massive subsidies ($7 billion a year) that you are still paying for through provincial income tax.  Without these the increase would be substantially more than inflation.

The following is a discussion of the individual line items:

Electricity – This is the cost of the electricity commodity.  For 2023 it has been calculated using regular time-of-use (TOU) rates that you would see on your bill.  You also have the option of being billed with tiered rates and soon with the new ultra low overnight rates.  Choosing either of these will change the cost a bit but not significantly.  The cost in 2023 would be much higher if not for half the Government of Ontario subsidy to offset the costs of the Green Energy Act.  Even with this subsidy the cost has still increased 86% and is most of the increase in the cost of your electricity bill.

Distribution – This is the part of the bill that NOTL Hydro keeps.  We have been able to keep our rate increases to half the rate of inflation which is why NOTL Hydro has the lowest rates in Niagara.  NOTL Hydro will be looking for a rate increase for 2024 and 2025 but this should not change our lowest rates in Niagara position.

Debt Retirement Charge – Remember this.  This was a charge of $0.007 per kwh and was to repay the excess debt in the old Ontario Hydro at the time they restructured the Ontario electricity market.  That debt was repaid and this charge is gone.

Transmission – These are payments to Hydro One to bring the power to Niagara-on-the-Lake from the generating plants.  They had managed these costs well for a while but lately they have been increasing quite a bit.  One of the challenges has been the declining electricity load in Ontario due to the 2008 recession.  The Hydro One costs were being spread over less electricity driving their per unit rates up.  Electricity usage is increasing again so we will have to see if that keeps the per unit costs down.

Wholesale Market Services – These are payments to the Independent Electricity System Operator (IESO) who manages the provincial grid.  The good news is that their rates fell from $0.0052 per kwh in 2008 to $0.0045 in 2023.   The bad news is their rates were only $0.0034 per kwh in 2022 so are rising.

Line Losses – Electricity is naturally lost as it moves along the NOTL Hydro distribution lines.  Your electricity usage is “grossed-up” for the electricity, transmission, wholesale market and rural rate protection charges to cover the cost of this lost electricity.  The good news is that NOTL Hydro’s line loss rate has fallen from 5.01% in 2008 to 3.73% in 2023 and is now the lowest in Niagara.  The bad news is that the increase in the cost of electricity has increased the cost of line losses.

Rural Rate Protection – Certain very remote customers have the cost of their electricity delivery subsidized by the rest of the province.  This charge pays for this subsidy.  The cost of this subsidy has fallen but mainly because much of it is now paid for from tax revenues. 

Smart Meter Entity Charge – When the province moved to smart meters they creased the Smart Meter Entity to manage all the data from the meters.  The charge has fallen from $0.79 per month in 2013 to the $0.42 in 2023.  NOTL Hydro believes it can be removed completely but that is another story.

Ontario Electricity Rebate – This is the other half of the subsidy from the Government of Ontario though this one shows up on your bill.

Leave a Reply

Your email address will not be published. Required fields are marked *