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ELECTRICITY PRICING IN ONTARIO

In Ontario's wholesale market, the price is determined by availability of supply and changes in demand. Generators and other suppliers of electricity compete to provide electricity to meet provincial demand. In addition, large consumers of energy influence demand by choosing to reduce their consumption should the price reach certain levels.

Wholesale prices — as well as the regulated prices that flow from them — are influenced by a number of factors such as demand, the weather and the types of generation available. For example, prices are generally lower on weekends and at night when demand is lowest. On a weekday, the price of electricity usually peaks in the late afternoon or early evening as people arrive home from work.

The amount of electricity that is available in the market also influences the price. Some generation may not be available because of equipment maintenance. Price also depends on what types of generation are available — some cost more to operate than others.

Weather can have a tremendous impact on demand. Extreme cold spells and heat waves often create surges in demand as people increase heating or air conditioning. For example, each degree above 16ºC creates an additional 380MW of demand.

Electricity Price Structures

In Ontario, all electricity rates reflect the wholesale price in some way. What type of rate you pay depends on what type of consumer you are. Businesses tend to pay hourly, wholesale prices, while residential consumers pay regulated rates that smooth the volatility of the wholesale price. Here's a breakdown of electricity price structures:

Residential Consumers and Small Businesses

Low-volume customers currently pay either tiered or time-of-use rates under the Regulated Price Plan (RPP), unless they have chosen to purchase electricity at a fixed rate through an electricity retailer.

RPP rates are reviewed by the Ontario Energy Board every six months, taking into account market activity, payments made to energy suppliers through contracts and other factors such as weather that influence the wholesale price.

Medium and Large Businesses

Businesses that draw more than 50 kilowatts from the system pay the hourly price. This level of demand is roughly equal to 250,000 kilowatt-hours a year or a $2,000 monthly electricity bill. If the business has an interval meter the Hourly Ontario Energy Price is charged. If the business does not have an interval meter, the consumer will pay an average rate based on consumption patterns within their local distribution company's service area.

Businesses that Join the Wholesale Market

Some large businesses participate directly in the IESO-administered market. These companies are either connected directly to the grid and buy electricity through the market; or they are looking to take advantage of the IESO's demand response programs and operating reserve market, which provides payments for providing extra supply to the system.

Public Sector

As of May 1, 2009, public sector organizations such as municipalities, schools, universities and hospitals will begin to pay the hourly price for electricity and will fall into the medium and large business consumer category.

Note that all consumers also have the option of purchasing electricity through a retail contract.

Other Electricity Charges

The commodity or electricity cost is just one component of the electricity bill. Learn more about other electricity charges for:

 

RELATED INFORMATION

Monthly Average Prices
Ontario wholesale prices since 2002.