Hydroelectric Markets and Contracts

Hydro

By: Dean McCabe – Vice President of Operations

From the WB Condo Connection, Volume 6, Issue 1

In some ways the electricity markets in Ontario have been stable over the past 10 years and in other ways Ontario’s condominium industry has kept a nervous eye on this sector for the past decade.

In this brief article I will attempt to answer a few of the FAQ’s.

  • What is the Rate Protection Plan? How do I tell if my Condo is on the RPP?
  • How does Time-Of-Use affect my Condo?
  • Why is my condo not in a supply contract?
  • What is the OCEB?
  • Is it time to consider a supply contract?

The vast majority of multi-unit residential condominiums that are not sub-metered or individually metered (that means condo’s where the condo maintenance fees include hydro) are billed on tiered electricity pricing commonly referred to as the Rate Protection Plan (RPP). This pricing strategy was developed following the re-regulation of the electricity markets in Ontario and allows condos to pay 8.3 cents per KWh for the first 1,000 KWh per residential unit and 9.7 cents for each additional KWh.

A quick review of your condo electricity bill will tell you if you are on the RPP. If there is no section on the bill which calculates the Global Adjustment then you are on the protected RPP. Note that the RPP rates mentioned earlier in this article are reviewed by the Ontario Energy Board twice a year and new rates are set.

The vast majority of Ontario electricity users pay time-of-use prices. There are three time-of-use price periods:

  • Off-peak, when demand for electricity is lowest. Ontario households use the majority of their electricity – nearly two thirds of it – during off-peak hours. The rate for off-peak consumption is 7.2 cents per KWh.
  • Mid-peak, when demand for electricity is moderate. These periods are during the daytime, but not the busiest times of day. The rate for mid-peak consumption is 10.9 cents per KWh.
  • On-peak, when demand is highest. The busiest time of day. Generally when people are cooking, firing up their computers and running heaters or air conditioners. The rate for on-peak consumption is 12.9 cents per KWh.

Many directors will have seen advertisements, or heard reference to electricity at 3, 4 or 5 cents per KWh. These contracts do not include the Global Adjustment and when combined with other regulated prices can result in net costs that are higher than the RPP rates set by the energy board.

For that reason, and due to the relative stability in the electricity market, WB has recommended against electricity contracts for residential condos since the introduction of the RPP. This is still a relatively safe strategy and will protect condos from large unforeseen price increases month over month.

Another advantage that has helped residential condos with bulk electricity billing is the implementation of the Ontario Clean Energy Benefit (OCEB). This rebate of 10% of the cost of residential electricity consumption was introduced in 2010. There are questions about the long term viability of the rebate given the Province’s fiscal constraints and condos should likely prepare for a possible end to the program and to budget for a 10% increase in the cost of electricity.

However, according to the 2013 Long Term Energy Plan, published by the Ministry of Energy, Ontario‘s current energy plans will result in a 42% increase in residential bills by 2018 and 68% increase by 2032. This increase will be reflected in higher prices published in the RPP, due to the increasing Global Adjustment Cost. While the best cost saving solution is to invest in conservation measures and demand reduction technologies, customers on time-of-use rates may be able to benefit from variable and fixed electricity products, provided that their usage in the peak and mid-peak hours are great than 18% respectively.

In short, there are possibilities for savings in managing the hydro market, those savings however can come with increased risk, combine that with the anticipated cost of electricity in the coming years and condos that find ways to reduce their consumption will reap the highest benefits.