NOTL Hydro Rates Comparison

May 10, 2022

Every year, NOTL Hydro compares its Delivery Charge to those of the other electricity distributors (LDCs) that operate in the Niagara Region.  This analysis is done with a measure of pride as NOTL Hydro continues to have the lowest rates in the Niagara Region. 

We use the Delivery Charge as the comparator for a reason.  It is what shows up as a line item on your bill.  It captures all the elements of a customer’s bill that the LDC can influence.  We could use the total bill and the comparison would be the same.  All the remaining bill elements are the same for all customers no matter where they are:  the actual cost of electricity, regulatory charges and HST.  These are also separate line items on your bill.

There are three elements that make up the Delivery Charge:

  1. The Distribution Charge.  The green portion of the bars on the charts.  This is the revenue that is kept by the LDC and is made up of a fixed monthly charge and, in some cases, a variable charge.  There is no variable charge for Residential customers.  Small Business customers have a variable charge based on their electricity usage (kwh) while for Large Business customers it is based on their peak demand in the month (kW). NOTL Hydro has the lowest Distribution Charge for Large Business customers but Alectra (St. Catharines) is lower for Residential customers and Welland is lower for Small Business customers.  In both these later cases, NOTL Hydro has the second lowest Distribution Charge.  The Distribution Charge pays for all the labour, services, equipment and infrastructure assets used to distribute the electricity within the municipality.
  2. Transmission Charges.  The red portions of the bars.  These pay for the cost of transmitting the electricity from the provincial generation to Niagara-on-the-Lake.   We collect the charges from our customers and, in turn, we are billed by the IESO based on the peak NOTL Hydro demand each month.  There are two charges:  a Network Service Charge and a Line and Transformation Connection Service Charge.  For both charges, Residential and Small Business customers have a variable charge based on their electricity usage (kwh) while for Large Business customers it is based on their peak demand in the month (kW).  NOTL Hydro’s Line and Transformation Connection Service Charge is significantly lower than most other LDCs as NOTL Hydro does not have to pay the Transformation Connection charge.  NOTL Hydro is exempt from this charge as we own our transformers that are connected to the transmission grid.
  3. Line losses.  The blue portions of the bars.  As electricity travels over the distribution lines there is a natural loss.  This loss is estimated to be 3.73% in the NOTL Hydro service territory.  The cost of this will vary depending on the actual kwh consumption of the customer.  NOTL Hydro has the lowest line loss rate in the Niagara Region.  More information about line losses can be found in my March 30, 2022 blog.

How do we keep our rates the lowest?  One answer that we would never provide as it is not true is any suggestion that we are better at our job than any of the other LDCs in the Niagara Region.  In any part of our business, there are other Niagara LDCs that are just as competent or even more competent than us.  In fact, is some areas we rely on these other LDCs for support as they have capabilities that we do not. 

There is a reason for our lower rates:

  1. It is not just, as mentioned above, that NOTL Hydro’s transmission charges are the lowest as we own our grid-connected transformers.
  2. It is also not just, as mentioned above, that NOTL Hydro’s line loss rate is the lowest in Niagara.
  3. Rather, the real reason is that since NOTL Hydro was founded in 2000, the company has been guided by its Board to make every decision to be one that keeps rates low though without ever sacrificing safety or reliability.  Over time, all these decisions add up.  Just a few of the examples of this include:
    • The decision to own our own transformers was driven, in part, by the knowledge that it would reduce overall rates.
    • The voltage conversion program helps reduce line losses.
    • Our annual capital program is kept at a level that steadily improves our system but does not unnecessarily increase the asset base and thus drive up the needed return on assets.
    • We charge our customers 100% of customer driven changes to our system.  These customers sometimes balk at this as they expect us to pay some of this cost.  Not doing so keeps the rates down for everyone.
    • Lower rates mean lower revenues.  The approval by the NOTL Hydro Board of the annual budget reflects this.  NOTL Hydro still needs to earn a fair return; but not a maximized one.

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