Time to make rates that work for Ontario
December 18, 2020, Niagara-on-the-Lake – The Board of Niagara-on-the-Lake Hydro (NOTL Hydro) commends the Government of Ontario on taking action to remove the excess electricity costs of the Green Energy Act from the bills of business customers. NOTL Hydro has been calling for many years to both remove these costs from all electricity ratepayers and to treat all business customers as fairly as residential customers.
NOTL Hydro recognizes that this plan does not decrease the cost of producing electricity in Ontario; it simply transfers this cost from ratepayers to taxpayers. However, this is still an important step in re-establishing an Ontario electricity industry that provides fair pricing and competitive services. NOTL Hydro hopes the Government of Ontario will continue to look at all steps to eliminate actual unnecessary costs in the electricity industry.
Residential and small business customers pay a fixed price for electricity known as the Regulated Price Plan (RPP). This can now be either Time-of-Use or Tiered rates and is reset every six months. Larger businesses pay the actual cost of electricity which is a combination of the hourly rate (HOEP) and the Global Adjustment (GA). For years the RPP was very close to the actual electricity cost of HOEP plus GA. With the Fair Hydro Plan and then the Ontario Electricity Rebate (OER) the RPP was reduced or a discount was applied to make electricity cheaper for the residential and small business customer. This benefit to not extend to larger businesses who continued to pay the actual cost.
Under this new plan, the GA will be reduced by around $260 million a month. The Government estimates this to be around 20% of the cost of the electricity supply. The $260 million will be transferred to the books of the Government of Ontario. In 2020, GA has averaged at over $1.1 billion a month.
For larger businesses, this will mean an immediate reduction in their cost of electricity as the GA will decline. As mentioned, this rate reduction is estimated at 20% of the cost of electricity supply.
Residential and small business customers are already getting the benefit of the OER so their electricity cost will not change much. However, the costs on their bill will change. RPP rates will decline as per the table below reflecting the lower GA. At the same time, the rebate will be smaller as will go from a 33.2% to a 21.2% rebate. The net effect will be a minimal change.
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