Sticker shock

Hydro users are fuming about their confusing new bills
Ellen Roseman, Business Columnist
Oct. 20, 01:00 EDT

DON'T UNDERSTAND your new hydro bills? Join the club.

Many people are calling their local utilities to ask what's going on since Ontario's electricity market was deregulated on May 1.

Power consumption is higher than last year for most households, because of a record-breaking heat wave that lasted to the end of September.

As well, the unbundling of charges on the bills has caused confusion.

Customer calls "are considerably up from normal levels and this will continue for several more weeks more as the August and September bills are received," says Blair Peberdy, communications vice-president at Toronto Hydro-Electric System Ltd.

Norma Byrne, a widow in Toronto who tries to conserve energy, has complained to her MPP and signed a petition protesting the new hydro regime. She used $34 worth of electricity in a recent two-month period, but her bill was $107.

"What I hate are the other charges, which make up two-thirds of the total," she says.

Whether you have signed a fixed-price contract with an independent retailer or stayed with the local utility on a spot-price basis, you will be billed by the local utility.

There are 96 local utilities in Ontario, which show the unbundled charges a little differently on their bills. Moreover, they don't always use the same names for the charges.

As an aid to the perplexed, we've prepared a line-by-line guide to the new hydro bill. If that's not enough, we advise you to go to the source.

The Ontario Energy Board, which regulates customers' bills, posts an electricity distribution rate handbook at its Web site, http://www.oeb.gov.on.ca.. The place to look is Chapter 9, section 4, "billing information."

The Customer Charge, normally listed first, is a fixed dollar amount that doesn't vary from month to month, no matter how much power you consume. It reflects the utility's costs to keep you as a customer (reading your meter, maintaining your account and sending your bills).

The Distribution Charge covers the cost of moving electricity from the local utility to your home. It varies from month to month, depending on your consumption, and is quoted in cents per kilowatt hour.

The Transmission Charge pays for moving electricity from the generator to the local utility. It, too, is a variable amount.

There's a charge for the Independent Market Operator, which manages the province's wholesale electricity system. It may be called the IMO Charge or Wholesale Operations Charge or System Operation and Regulation Charge.

At the IMO's Web site, http://www.theimo.com, you can find the wholesale charges itemized in greater detail.

The IMO charge pays for higher-cost power imports when needed, plus standby power required for emergencies.

There are also subsidies for electricity in remote and rural areas of the province and payments for line losses (when power is dissipated by heat while flowing through transmission wires).

The Debt Retirement Charge is collected to pay down the debt of the former Ontario Hydro, which spent billions to build and maintain its nuclear plants.

The money goes to the Ontario Electricity Financial Corp., http://www.iefc.on.ca, a provincial agency that issues periodic reports on how well it's doing.

The corporation's annual report says the total debt outstanding this year is $29.4 billion, down $1.2 billion from the previous fiscal year.

Utilities are allowed to show the last three charges (Transmission, IMO, Debt Retirement) as a single line item, the Non-competitive Electricity Charge.

Then there's the Energy Charge, what you pay for the power that goes into your home. This is the competitive part of the bill.

If you have a fixed-price contract, you will see the name of the marketer toward the bottom of your bill.

People who sign today with an energy marketer will pay from 5.7 cents to 6.4 cents a kilowatt hour for contracts of three to five years.

You can get the latest price comparisons at http://www.energyshop.com, a Web site that acts as an intermediary when customers buy electricity.

If you haven't signed a fixed-price contract, you will be on Standard Supply Service (SSS).

This means you are paying the spot price for electricity in a deregulated market.

The SSS customers of Toronto Hydro-Electric System are an exception, since they're paying a fixed price of 4.3 cents a kilowatt hour.

The difference between the fixed price and the spot market price goes into a Purchased Power Variance Account (PPVA), which is shown on each bill but won't be cleared until May 1, 2003.

You can follow the ups and downs of the spot electricity price at the IMO's Web site. The home page shows the average price of electricity since the market opened (5.18 cents a kilowatt hour).

However, this is a straight-line or arithmetical average. It's not a weighted average, which better represents the true cost of electricity at different times of the day and night.

You have to look harder to find the weighted average at the IMO site.

On the left side of the home page, go to The Market. Click Market Summaries, then choose the latest weekly market report (Oct. 9 to 15).

On page two, you will see that the weighted average energy price based on Ontario demand since the market opened is 5.64 cents a kilowatt hour, almost 10 per cent higher than the unweighted average shown on the home page.

"We felt the weighted price could be confusing since each utility's weighting is different," explains Ken Kozlik, client support director at the IMO.

October is a shoulder season, when electricity prices traditionally fall. Air conditioners have been turned off and furnaces aren't going at full speed.

Yet the spot price of electricity is still higher than when the market opened in May, which, some analysts say, makes fixed-price contracts more attractive.

For customers buying electricity from the local utility on a spot-price basis, their bills will show the Standard Supply Service Charge, which covers the cost of maintaining and updating SSS accounts.

Finally, there's the rebate that is supposed to be paid by the provincial government after May 1, 2003. It's intended to protect customers from possible price abuse caused by the large market share of Ontario Power Generation.

The rebate, which will be calculated according to a formula, may offset some or all the higher costs paid by those who stayed on Standard Supply Service.

Energy marketers used to require fixed-price customers to give up their rebates. But a few (such as First Source and Ontario Energy Savings Corp.) now permit you to keep the rebate.