Electricity Frequently Asked Questions (FAQ)
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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. On April 1, 2004 they increased the capped price for designated consumers, and announced that this price would change again by April 30, 2005.
Most Ontario residential consumers are on the Residential Price Plan (RPP).
Components of an RPP Bill
Buy your electricity from the utility.
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 an 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.
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.
The decision is between paying the variable spot market prices, which can go up or down over time, compared with a fixed price. The direction of the fixed price depends on the balance of supply and demand 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.
A direct comparison of prices is difficult due to the RPP, time of use rates and the Global Adjustment. To roughly compare a contract with the RPP, add the contract price to the average historical Global Adjustment.
One other important item in comparing prices is the Global Adjustment. This started out as insurance against the price of electricity spiking too high, but has evolved into a surcharge due to price guarantees to generators and the additional cost of renewable energy. This adjustment is fully included in the Regulated Price Plan (RPP), the price being charged consumers who are not on a contract. Once a consumer sings a contract this becomes a separate line item. However, it is the same amount whether in a contract or on the RPP.
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.
At present, the bill will still come from the utility. Marketers have the option of taking over the billing for their customers, but none have done so to date. 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.
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.
Maybe, if you are a small consumer. Here are your opportunities, which changed substantially on January 1st, 2011 for contracts signed after that date. If you use over 250,000 kWh, these don't apply to you. See more details.
Of particular importance is automatic renewal.
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.
Most of it, yes, except for the Consumer Protection Act provisions for cancellation and reaffirmation. They only apply to small volume consumers, defined as those using less than 250,000 kWh per year. 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 250,000 kWh of electricity annually usually have very tailored contracts specific to their needs. Please contact Energyshop.com for more information.
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.
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 IMO (Independent 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.
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.