Government of Ontario Announcements Regarding Energy Rates
Updated: June 5, 2020
To support families, small businesses and farms while Ontario plans for the safe and gradual reopening of the province, the Government of Ontario has introduced a new fixed electricity price of 12.8 ¢/kWh for customers that are on time-of-use (TOU) prices. Effective June 1, 2020, that price applies to electricity used at all hours of the day, seven days a week. Having the same price apply at all hours of the day is a more predictable way to pay for power at a time when Ontarians continue to work and learn from home.
Below are some Frequently Asked Questions provided by the Ontario Energy Board (OEB) about the new fixed electricity price, which the government refers to as the “COVID-19 Recovery Rate.”
COVID-19 Recovery Rate - Effective June 1, 2020 to October 31, 2020
What is the new fixed electricity price?
Effective June 1, 2020, electricity prices have changed for residential and small business customers as well as farms on TOU pricing under the Ontario Energy Board’s (OEB) Regulated Price Plan (RPP). The same, fixed price of 12.8 ¢/kWh applies to all of the electricity that they use, no matter the time of day or the day of the week.
The new price was set by the government and applies automatically – no customer action is required. It will appear on the Electricity line of customers’ bills and is only for the electricity they use. It does not include other charges like delivery. The government announced that this pricing will be in effect until October 31, 2020.
For many customers, the first bill after June 1, 2020, will have six line items – three line items at the emergency off-peak price of 10.1 ¢/kWh in effect until the end of the day on May 31, 2020, and three line items at the fixed price of 12.8 ¢/kWh for electricity consumed starting June 1, 2020.
Where does the new fixed price come from?
The new price of 12.8 ¢/kWh was announced by the government on May 30, 2020. The price is equivalent to the average cost to supply RPP customers with the electricity they are expected to use, as forecast by the OEB when it set RPP prices on November 1, 2019. This means that the new price would be expected to recover that cost of supply over the 12-month period from November 2019 to October 2020 if all of the forecast assumptions from November 1, 2019 remain the same.
The OEB expects to reset RPP prices for November 1, 2020. The OEB will do a new forecast of the cost to supply electricity to RPP customers for the November 1, 2020 to October 31, 2021 period, and will base the new RPP prices on that new forecast. Those RPP prices will also include an adjustment to account for any difference between prior prices and the actual cost of electricity supply over the previous 12 months. Under the RPP, prices are set so that, over time, RPP customers pay the actual cost of the power they use.
What impact will the new fixed price have on my bill?
The new fixed price applies instead of the RPP TOU prices that would otherwise have applied starting on June 1, 2020, when the emergency 10.1 ¢/kWh pricing introduced by the government in March expired. Those RPP TOU prices were set on November 1, 2019, and are: 10.1 ¢/kWh during off-peak hours, 14.4 ¢/kWh during mid-peak hours and 20.8 ¢/kWh during on-peak hours. On April 14, 2020, the OEB announced that it would not reset those RPP prices for May 1, 2020.
The implementation of a fixed price in all hours means your bill will be a function of how much power you use in a month, and not a function of when you use that power.
However, the bill impact of the 12.8 ¢/kWh price relative to the TOU prices that were set on November 1, 2019 does depend on how much power you use during each of the on-peak, mid-peak and off-peak hours.
For customers whose consumption matches the historical average consumption pattern for RPP TOU consumers – meaning that 64% of their consumption occurs during off-peak hours, 18% during mid-peak hours and 18% during on-peak hours – there will be little to no bill impact from the adoption of the 12.8 ¢/kWh price compared to a bill based on the TOU prices that were set on November 1, 2019.
For customers who tend to use more power in on-peak and mid-peak hours than the historical average consumption pattern for RPP TOU consumers, the 12.8 ¢/kWh price will mean a decrease in their electricity costs compared to a bill based on the TOU prices that were set on November 1, 2019.
For customers who tend to use less power in on-peak and mid-peak hours than the historical average consumption pattern for RPP TOU consumers, the 12.8 ¢/kWh price will mean an increase in their electricity costs compared to a bill based on the TOU prices that were set on November 1, 2019.
For all customers, conservation remains an important way to help manage electricity costs. The Independent Electricity System Operator offers conservation tips at SaveOnEnergy.ca.
Why was the emergency off-peak price of 10.1 ¢/kWh not extended?
The decision to offer price relief in the form of the emergency off-peak price of 10.1 ¢/kWh for electricity used at all hours of the day was made, and subsidized, by the Government of Ontario, not the OEB.
The government has indicated that it took immediate steps to help Ontarians as they did their part by staying home, and that the new fixed price will provide greater stability and predictability as Ontarians continue to work and learn from home.
Does the new fixed price apply to RPP customers who pay tiered prices?
The new price does not apply to RPP customers that pay tiered prices. The prices tiered customers have been paying since November 1, 2019 remain in effect. Those prices are 11.9 ¢/kWh for the lower tier price and 13.9 ¢/kWh for the higher tier price.
Under tiered pricing, the price does not change depending on the time when the customer uses electricity; instead, it changes depending on how much power the customer uses in a month. As announced on April 14, 2020, the OEB is keeping the winter tier threshold of 1,000 kWh in place in the summer period for residential customers, giving them an additional 400 kWh per month at the lower price.
Does the new fixed price apply to customers who have signed up with electricity retailers?
The new price does not apply to customers that have a contract with an electricity retailer or that have opted out of the RPP in favour of market-based pricing.
The government has said that the new fixed price will be in place until October 31, 2020. What happens then?
The OEB expects to set new TOU and tiered RPP prices effective November 1, 2020.
The government has announced that it intends to enable customer choice for RPP customers on TOU pricing. This initiative would allow RPP TOU customers to opt out of the TOU prices that the OEB expects to set for November 1, 2020 and instead pay tiered prices.
The Ministry of Energy, Northern Development and Mines has indicated that the government will be looking to the OEB to develop the rules to implement the customer choice initiative, which is expected to be available on November 1, 2020. More information will be made available over the coming months.
What happens if we’re still at home due to COVID-19 after November 1, 2020?
The government has announced that that it intends to enable customer choice for RPP customers on TOU pricing. This initiative would allow RPP TOU customers to opt out of the TOU prices that the OEB expects to set for November 1, 2020 and instead pay tiered prices. This option is expected to be available to RPP TOU customers on November 1, 2020.
More information about the customer choice initiative, including how to make an informed choice about which price structure is right for you, will be made available over the coming months.
Steps have been taken to provide relief for customers and industry during the COVID-19 pandemic and we will continue to monitor the situation.
What is the COVID-19 Energy Assistance Program (CEAP)?
The Government of Ontario is providing $9 million to support residential customers who are in arrears on their energy bills as a result of COVID-19. On June 1, 2020, the OEB received a letter from the Minister of Energy, Northern Development and Mines and the Associate Minister of Energy asking for the OEB’s support to implement CEAP. That letter sets out a number of suggestions for the OEB to consider in order to ensure that CEAP will be available to help as many residential energy consumers as possible who are temporarily behind on their energy bills specifically as a result of COVID-19.
More information about eligibility and how to apply will be made available in the coming weeks. The OEB’s ban on winter disconnection protects residential and small business customers from disconnection for non-payment of energy bills until July 31, 2020. The OEB expects the CEAP program for residential consumers to be in place by the time the disconnection ban ends for this year.
What is being done to support small businesses at this time?
The Government of Ontario is also providing $8 million to support small business customers that are struggling to pay their energy bills as a result of COVID-19, through a program similar to CEAP, the COVID-19 Energy Assistance Program for Small Business (CEAP-SB). In their June 1, 2020 letter to the OEB, the Minister of Energy, Northern Development and Mines and the Associate Minister of Energy noted that suggestions for this program will be provided to the OEB at a later date. More information about this program will be made available when those details have been determined.
Small business customers are protected from disconnection for non-payment until July 31, 2020. We expect CEAP-SB to be in place later this summer.
Upcoming Rate Choice - Effective November 1, 2020
The following questions and answers have been provided by the Ministry of Energy, Northern Development and Mines, to help customers understand their option to be billed under Time-of-Use rates pricing or to switch to tiered rate electricity pricing as of November 1, 2020.
1. What is being done to support households and businesses with increased electricity usage during this COVID-19 outbreak?
On March 24, 2020, the Government of Ontario enacted emergency rate relief for time-of-use (TOU) electricity customers. Households, farms and small businesses paying TOU electricity rates were charged the lowest price, known as the off-peak electricity rate, 24 hours a day, 7 days a week. The 10.1¢/kWh rate was in effect until May 31, 2020.
Effective June 1, 2020, the government of Ontario has introduced a “COVID-19 Recovery Rate” of 12.8¢/kWh for TOU Regulated Price Plan (RPP) customers to provide stability and predictability for families, small businesses and farms. This rate is equal to the forecasted average RPP supply cost, calculated by the Ontario Energy Board last October, for the twelve months starting November 1, 2019. This rate, subject toapprovals, is intended to be in effect until October 31, 2020.
The government of Ontario will be looking to the Ontario Energy Board to develop, in consultation with distributors and other stakeholders as appropriate, the rules under which distributors will be required to offer their TOU customers the option to choose between TOU and tiered prices by November 1, 2020, so that Ontarians would be able to pick the electricity pricing approach that works best for them.
2. Will customers be able to switch rate plans before November 1, 2020?
The government recognizes that some TOU customers may prefer to revert to typical TOU pricing with peak/mid-peak/off-peak rates before November 1, 2020. However, ENDM is proposing to introduce customer choice as of November 1, 2020.
3. What’s the difference between TOU and tiered electricity rates?
TOU rates vary according to when electricity is used. They are cheapest when demand is lowest: during the evenings, on weekends and on holidays.
The TOU pricing periods are:
- Off-peak, when demand for electricity is typically lowest. Ontario households and small businesses typically use the majority of their electricity – nearly two thirds of it – during off-peak hours.
- Mid-peak, when demand for electricity is moderate. These periods are during the daytime, but not the busiest times of day.
- On-peak, when demand is generally highest. These are the busiest times of day – generally when people are cooking, starting up their computers and running heaters or air conditioners.
One of the purposes of TOU pricing is to give customers a financial incentive to reduce their electricity use during peak times. This helps to smooth out demand peaks and lowers overall system costs by reducing the need for more generation capacity.
A small percentage of customers (less than 5 per cent) are charged tiered prices. Tiered price customer either don’t have a smart electricity meter that can track the time of day electricity is used, or live in certain areas that do not have the communications infrastructure to electronically transmit consumption data.
Tiered prices are the same regardless of time of day but become more expensive if a customer’s overall electricity use goes above a set threshold. The current threshold for residential customers is 1000 kWh per month following a decision by the Ontario Energy Board on April 14th to not implement the summer threshold, which is 600kWh.