News

Electricity Frequently Asked Questions (FAQ)

What is Energyshop.com?
When is electricity deregulating in Ontario?
What costs make up my electricity bill?
What choices do I have?
Why would I buy from an electricity marketer?
How do I choose the best deal?
How do I compare the utility rate with marketer's offers?
What is the Rebate? (called OPG, MPMA or MPMR)
How long does it take to transfer to a electricity marketer?
Who will the bill come from?
Is there a risk of not having electricity supply?
I've signed a contract. Can I cancel it?
How do I complain about what happened to me?
Does all of this apply to my business?
Electricity terms explained.
What is Locational Marginal Pricing?
What is the difference between a Physical contract and a Financial Contract?
Should my business have an interval meter ?

1. What is Energyshop.com?

Energyshop.com is an independent company offering consumers and businesses objective advice on buying electricity and natural gas. We are a third party broker able to connect electricity and natural gas users with virtually any supplier. The important result is for users to get the energy buying solution that suits them. Energyshop.com is not owned in whole or in part by any energy marketer or utility.

2. When is electricity deregulating in Ontario?

It has come and gone and partially deregulated again. On May 1, 2002, the entire market deregulated in Ontario. On November 11, 2002, the provincial government stopped the process pending a review of prices and the market, and capped the electricity commodity price for residential users, and a number of designated consumers. On March 24, 2003, the government reopened the market for about half the market, mainly larger business customers. They increased the capped price for designated consumers on April 1, 2004, and again on April 1, 2005.

3. What costs make up my electricity bill?

Electricity Supply	The electricity commodity that comes through the wires. The rate is set by the utility, or the electricity marketer, whoever you buy from. Electricity supply is the only part of the electricity system that is deregulating. All others will still be regulated.
Distribution	The cost of delivering the electricity within your utility, to your home or business. This pays for the construction and maintenance of the wires and systems. It is a regulated rate payable to the utility. This is now identified separately by most utilities.
Transmission	The cost that your electricity supplier has to pay to the HydroOne to get the electricity from where it is generated to you. It is also a regulated rate payable to the utility.
Debt Retirement	This is a charge to help pay down the accumulated debt of the former Ontario Hydro. They accumulated this debt building the electrical system in Ontario, and is being paid through this levy.
System Operation	The cost that your electricity supplier has to pay to HydroOne to get the electricity from where it is generated to you. It is also a regulated rate payable to the utility.
Customer / monthly charge	This is a fixed monthly charge to compensate the utility for the cost of making sure that you always have access to electricity. It pays for the cost of connecting and billing.

4. What choices do I have?

If you are a residential user in Ontario, or one of the designated consumers, you have a capped price till May 2006.

Buy your electricity from the utility.

If you are not included in any of these categories, you have some options. You can continue to buy electricity from your utility if you like. If you do this, you will continue to pay the variable electricity rate charged by the utility. This rate reflects the utility's cost of buying that electricity on the spot market, plus the utility's administrative costs in buying and supplying that electricity. The utility is not allowed to make any profit from this electricity supply. They just pass the cost through from the open market.

Buy from a electricity marketer

Marketers offer a variety of short and long term contract options. If you choose a fixed-price for your electricity over a fixed period of time, you will know your future electricity costs for that time period. If electricity prices rise above your fixed-price during the term of your contract, you save money. However, if electricity prices fall, your electricity costs may be higher than they would have been with another option.

If you choose to purchase from a marketer, your electricity will continue to be delivered to you by the utility. The utility will also continue to provide you with emergency response services. There is no risk of being without electricity.

5. Why would I buy from an electricity marketer?

You want to stabilize electricity costs so that you can budget accurately.
You need to have more even and level cash flows than are possible with widely fluctuating electricity spot market pricing.
Your clients or tenants need to know how much their utilities are going to cost
You want to protect yourself from electricity price spikes in the hot summer weather, or cold winter weather
You believe that Ontario does not have an adequate plan to build new generating capacity to supply the increasing demand

Marketers provide you with choice. You often have a choice between fixed or variable rates, short or long terms and sometimes other incentives or extras such as rebates, credits on your bill or air miles. Utilities cannot offer fixed term electricity contracts. If you choose a variable term from a electricity marketer, you will likely benefit from lower overheads and operating costs. Marketers offering a variable rate often give a guarantee of a certain percent below the utility's rate.

6. How do I choose the best deal?

Think about your budget, your risk tolerance and your goals.
Decide whether you want to wait for the lowest possible price but as a result risk having a higher price, or whether you want to know exactly what you are going to pay for your electricity.
Think about, or consult expert advice, about where electricity prices might go. If prices are likely to go up, then consider a fixed term contract.
Look at the price chart for your area.
Look at the prices and incentives offered. Decide on the best deal for you, and sign up online.

7. How do I compare the utility rate with marketer's offers?

The price of electricity supply is determined in a completely different way now. Prior to deregulation, the price was regulated by the Ontario Energy Board and determined by the cost of generation and the operation of Ontario Power Generation. Now, electricity supply price depends on the balance of supply and demand as reflected in the spot market price. This price fluctuates significantly from day to night, season to season, weekday to weekend, and there is a different price for electricity every hour of every day of the year. Residential users and designated consumers are under a price cap in Ontario until May 2005. Other users pay the spot market price directly.

One other important item in comparing prices is the Ontario Power Generation (OPG) Rebate (Now referred to as the Business Protection Plan Rebate, or the Market Power Mitigation Rebate (MPMR). This is essentially insurance against the price of electricity spiking too high. See the full explanation here

8.What is the Rebate? (called OPG, MPMA, BPPR or ONPA Rebate)

The Ontario Power Generation (OPG) Rebate is essentially partial insurance against price spikes. The original OPG rebate was changed to be the difference between the spot market rate, and a 4.7 cent/kWh OPG revenue cap, but only on some of OPG's generation (about 30%). This will be paid in one lump sum for the 13 month period from March 1/05 to April 1/06, and paid some time after May 1 2006. There is also a rebate called the Provincial Benefit that appears on electricity bills each month. That is based on the difference between the spot market price and the OPG revenue cap of 4.5 cents for OPG's nuclear and water generation (about 40% of your use). Click here for a full explanation.

Ontario Power Generation (OPG), the generation company that emerged from the break-up of Ontario Hydro, was thought to have too much market control in a deregulated market, controlling about 80% of Ontario electricity generation. The possibility of price abuse existed. In addition the government wanted to protect Ontario consumers from extreme price flucuations.

9. How long does it take to transfer to a electricity marketer?

You agree to an offer with the marketer
the marketer communicates with the utility through the EBT system, (Electronic Business Transaction)
the utility "scrubs" the names, ensuring that the names and account numbers match, that you are not under contract with another marketer, that you have paid your bill and other quality control checks
about 4 - 6 weeks later, the utility sends the results back to the marketer saying that you can switch
the utility and the marketer will then switch you at the beginning of your next billing period.

This means that the marketer won't be sure that they can have you for about 2 months, and won't switch you for about 3 months. The contracted price won't start till then either.

10. Who will the bill come from?

At present, the bill will still come from the utility. Marketers have the option of taking over the billing for their customers. Some have chosen to do so, but most have not. The marketer tells the utility how much to charge their customers, and once paid the utility forwards the money to the marketer. The name of your marketer will appear in the body of the bill, along with a contact phone number.

11. Is there a risk of not having electricity supply?

No. The utility in your area is responsible for ensuring that you have a supply of electricity, as long as you pay your bill. If the electricity marketer that you choose happens to go out of business, you will still have electricity supplied to you. You might revert to the utility's electricity supply price, or you might be required to sign with a different marketer. However, you don't have to worry about being without electricity.

12. I've signed a contract. Can I cancel it?

Maybe, if you are a small consumer. Here are your options. If you use over 250,000 kWh, these don't apply to you.

a) Within 10 days of signing.
You have 10 days to cancel after signing any contract. You can notify the marketer in writing by letter or fax, and should keep a copy in your records. If you "made the effort" on your own to sign up, this is the only cancellation option you have before the end of the contract. This would cover situations in which you called into the marketer, if you responded to a direct mail offer or if you signed up on a marketer's, or Energyshop's web site.

b) If you signed through door-to-door or outbound telemarketing.
If you signed a contract with a door-to-door marketer, or as a result of a telemarketing call that you received, you have additional opportunities. In these cases the marketer must re-affirm your intent to enter a contract with them. This must be done between 10 and 60 days after your original contract signing. The re-affirmation can be by a physical signature, by electronic submission over the internet or by recorded telephone call. If you refuse to reaffirm, or if they cannot contact you, the contract will be cancelled.

c) At the end of the contract period.
You will receive a notice from your marketer about 60 - 120 days prior to the expiry of your contract. It will tell you that your contract is expiring. If you do nothing, the marketer can renew the contract for one year at a new rate. Be careful if you receive a cheque from your marketer, or any marketer. If you endorse and cash that cheque, you may be committed to another 5 year term contract.

d) If the contract was automatically renewed.
If that happens, you can cancel within 35 days of being sent the first bill after the renewed contract takes efect.

e) Termination Clauses
Most marketers have a termination clause in their contract. Read the contract carefully. These clauses include an exit fee. Calculate the fee and see if it makes sense to cancel. Compare the exit fee to what you would save over the contract term by getting a new contract at a lower rate.

13. How do I complain if I have a problem with a marketer?

First, contact the marketer. They should have to first opportunity to respond. You can get their contact number from your bill. Failing that, check the Ontario Energy Board (OEB) web site for a phone number.
Secondly, contact the Ontario Energy Board (OEB). They are responsible for the dispute resolution process to which all marketers in Ontario are required to belong.
Ontario Energy Board toll free at 1-888-632-6273 or,
in Toronto, call 416-481-1967
or fax: 416-440-7656.

14. Does this apply to my business?

Most of it, yes, except for the Consumer Protection Act provisions for cancellation and reaffirmation. All marketers of electricity need to be licensed by the Ontario Energy Board, though some aspects of the Electricity Marketers Code of Conduct apply only to consumers defined as "a person who uses, for the person's own consumption, electricity that the person did not generate". Some marketers also service businesses, but others don't. In general, once a business has signed a contract, they are committed.

However, customers that consume more that 150,000 kWh of electricity annually usually have very tailored contracts specific to their needs. Please contact Energyshop.com for more information.

15. Electricity Terms Explained.

ABM - Agent, Broker, Marketer. These are the three names for any company or individual who is in the business of selling gas or electricity to individual homeowners or businesses. Typically, they sign up customers to an energy supply term, then source that gas in one or more contracts with a gas producer. They charge you only for the commodity itself.

Agent - See ABM above.

Broker - See ABM above.

Cogeneration - This is electricity generated as a by-product of an industrial process.

Commodity - The electricity itself, a product that is essentially undifferentiated. This means that there is no difference in the product regardless of which company you buy from. The only difference is the type of generation used to produce the electricity.

Default Supply - This is your supply of electricity if you do nothing and don't choose a deregulated marketer. It will be provided by the local utility. The utility is obliged to pass along the cost of this power purchased on the spot market without marking it up, except for administrative costs.

Distribution - Electricity is delivered to your home or business through a fixed infrastructure of wires. Distribution charges pay for the construction and maintenance of those fixed links, and any costs associated with bringing the product to you.

Demand - This is the instantaneous use of electricity, measured in kilowatts.

Energy - This is the use of electricity over a period of time, measured in kilowatt-hours.

Green Power - Electricity generated using renewable or non-polluting sources. This includes generation using wind, solar, geothermal, biomass or run of river hydraulic (no resevoir created to store the water).

Kilowatt - This is a measure of electricity in an instant of time.

Kilowatt hour - This is a measure of how much electricity is used. For example, one 100 watt light bulb used for 10 hours is 1000 watt hours, or 1 kilowatt hour.

Marketer - See ABM above.

Spot Market / Spot Price - This is a North American market for purchasing electricity. It's a commodity market where electricity trades like soy beans or pork bellies. The price is set based on supply and demand for power required immediately. The spot price is the price of electricity at one point in time on that market. The price varies extensively in times of extreme heat or cold. In 1999, this price ranged from 4 cents / kWh hour to $10 / kWh.

Standard Supply Service (SSS) - Also known as default supply. This is the price you will be charged if you continue to purchase your electricity from your utility.

Stranded Cost / Stranded Asset - These are assets, or investments that were committed to by a utility while they were a monopoly in order to serve customers over the long term. When a province or state is deregulated, and customers decide to buy electricity from someone else, the money to pay for these assets can't be collected. As a result, they are stranded. Some provision must be made to pay off these assets, or they will become the responsibility of the taxpayer.

Wheeling - Transportation of electricity through one jurisdiction or area to get to another. For example, electriciy generated in Alberta and used in Manitoba would have to be wheeled through Saskatchewan.

16. What is Locational Marginal Pricing?

Right now there is one electricity price for all of Ontario, based on generation, distribution and use across Ontario. In October 2003 or later, the organization that runs the electricity system in Ontario, the IESO (Independent Electricity Market Operator) will decide if that should change. It would involve dividing Ontario into zones. These zones will have a certain amount of generation, distribution (wires) and demand (customers). The price of electricity in each zone will depend on the balance of supply, distribution and demand in each zone. This is Locational Marginal Pricing.

The bottom line however is that it should have no impact on your decision to sign a contract, or with whom to sign. The reason is that Locational Marginal Pricing will affect you in the same way, and the same dollar amount, regardless of who supplies your electricity. Whether you stay with the utility or sign with a marketer, it will get you, if the system goes that way. Who knows, you may be in a zone where the prices drop. It could happen.

17. What's the difference between a Physical Contract and a Financial Contract?

A physical contract is one in which the supplier actually buys generation output from a generator, such as OPG or Bruce Power. In simple terms, they put it into the electricity grid and it is used by the customer. The utility bills the consumer for the amount of power they use and send the money to the supplier.

A financial contract, also known as a Contract for Differences, is a financial hedge. The supplier has no generation. The utility doesn't need to know anything about the deal. The customer signs a contract saying they will pay, let's say 6 cents for a block of power. At the end of the month, the utility bills the customer based on their price mechanism, such as the average spot market rate. The supplier calculates what the customer paid for the block of power to the utility and compares it with the contract for 6 cents. If the customer paid more than 6 cents to the utility for that block, then the supplier sends the customer a cheque for the difference. If the customer paid less than 6 cents, the customer has to send a cheque for the difference to the supplier.

18. Should my business have an interval meter ?

An interval meter is one that measures AND records electricity use each hour. A standard meter, often called a cumulative meter, needs to be read manually each month to measure consumption, and it is impossible to know when during the day or week the electricity was used.

Should your business have one? Since with a standard meter the utility can't tell when the electricity is used, they have to assume that it is used at the same time as everyone else. This is called the Net System Load Shape (NSLS) and is the aggregate usage in the utility LESS the usage by any building with an interval meter. This usage pattern is dominated by residential and small commercial use.

If your business uses electricity on a more consistent basis than the NSLS, which looks like a hill shaped curve peaking in mid afternoon, then you might benefit from an interval meter. If for example your facility operates 24 hours a day, 7 days per week, or uses more electricity overnight than during the day, you could save money by having an interval meter. These meters cost between $2,000 and 3,000 to install, so your electricity use should be at least 1 million kWh per year before considering it. If your use is peakier than the NSLS, for example if you only operate 1 daytime shift 5 days per week, an interval meter would actually result in a higher electricity cost.