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     Ontario Minister of Energy Announces  New Electricity Pricing

        Energy Minister announced new interim electricity commodity pricing. The current price will be on the first 750 kwh consumed in a month and extra on consumption above 750/kwh. This pricing plan will stay in place until the Province’s independent regulator, the Ontario Energy Board (OEB), develops a new pricing mechanism for setting prices in the future. The OEB’s new pricing mechanism will be in place as soon as possible.  

The new pricing plan, while a step in the right direction, leaves the Provincial Government with the burden of energy management and the responsibility for footing the bill for any shortfall between actual prices and the new fixed prices consumers will be paying. While the increased prices will reduce the subsidy that taxpayers have been paying, it is unlikely that it will be completely eliminated unless future wholesale prices are less than experienced in the last 12 months. The Premier has said that consumers should pay the full cost of power and we agree. Ultimately the industry needs to be restructured to permit this.

In our  view, the two tiered pricing system, designed to influence conservation, is unlikely to do much since consumers will simply regard it as a one time increase. Further steps need to be taken to instill meaningful demand side management (DSM) measures. Responsibility for these initiatives, along with proper incentives, needs to be established. Some recognition of this need has been made by the Energy Minister in his statement today in directing the Municipal Utilities to invest a portion of their commercial return to DSM initiatives . 

 The OEB has been mandated to develop a  new pricing mechanism. It would have been a significant misstep to create another independent entity or committee to deal with these issues as suggested by the Minister before. The OEB’s mandate should however be broadened to include recommendations for wider industry restructuring. The new pricing does not deal with the crucial issues of ensuring sufficient energy supply by encouraging generators to invest in the province. It also does not address the role that the Municipal Electricity Distributors must play to ensure resource adequacy nor does it deal with any mechanism to bring about needed consolidation of the electricity distribution systems. There are currently still over 90 utilities delivering energy in the province. On a positive note the Minister has recognized the need to restore commercial returns to these companies. We would like to see the Minster continue to devote attention to full industry restructuring. We have laid out our views on the end-state for the industry in our website  Exel's Principles for Ontario Electricity Industry Restructuring section

Overall, a positive first step, but much more work must be done.  



Electricity Conservation and Supply Task Force

Exel's Principles for Ontario Electricity Industry  Restructuring

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