Will your bill be cheaper with electricity rates dropping in Ontario?

The price to use electricity will soon change in Ontario, with rates dropping in many cases.

The Ontario Energy Board (OEB) recently announced its annual update to its regulated price plan, with new rates taking effect on Nov. 1.

The regulated price plan applies to most homes, small businesses and farms.

The majority of electricity customers in the province have three options for billing: time-of-use and ultra-low overnight, with prices changing depending on when power is used; customers can also choose a tiered plan, with costs depending on how much electricity is used overall in a month.

Most customers in Ontario pay time-of-use rates.

Since 2022, the OEB has set prices annually on Nov. 1, with seasonal changes to when certain rates are paid, except for ultra-low overnight, still taking effect twice a year.

The latest update to the OEB’s regulated price plan shows prices have dropped in many cases.

Here is a look at the updated rates, with a comparison to those set in 2023:

As seen in the tables above, some rates have decreased compared to what they were set at on Nov. 1, 2023, while others have stayed the same. The OEB says annual prices are based on a forecast of how much it will cost to supply customers over the following year. Any variance between the forecast and actual costs in the previous year is factored into the new rates.

Rates have fluctuated over time. As an example, the graph below shows the price for time-of-use rates since 2006.

OEB

The drop in rates for the upcoming 12 months is mainly attributable to a $249 million over-collection from customers from November 2023 to October 2024, as well as a decrease in global adjustment payments to nuclear and natural gas generators, the OEB says.

The global adjustment refers to a complex and controversial fee that all customers pay and is included within regulated price plan rates, regularly making up the majority of them.

As the OEB explains, “Most electricity generating companies get a guaranteed price for the electricity that they produce. The global adjustment is the difference between that guaranteed price and the money the generators earn in the wholesale marketplace.”

It also goes towards some conservation programs.

Will your bill go down?

Mary Ellen Beninger, media relations specialist with the OEB, told INsauga.com that the drop in rates doesn’t necessarily mean that customers will experience a decrease in their bills.

“How much customers pay for their electricity depends on their choice of price plan, consumption patterns, the Ontario Electricity Rebate (OER), and the cost to deliver electricity to their home or business,” she said.

Notably, it was announced that customers will see a decrease in the Ontario Electricity Rebate, which is a pre-tax credit that is automatically applied to the subtotal of most consumers’ bills.

It’ll be changing to 13.1 per cent, which is down from 19.3 per cent from the previous year.

A residential customer who uses 700 kWh of electricity per month will see an approximate $17 reduction as a result of the rebate, which is down from $26 the previous year, the OEB’s website indicates.

So that will take a dent out of any potential savings.

As Beninger noted, customers also pay a delivery charge, which the OEB says “is the cost of delivering electricity from generating stations across the province to your home or business through high voltage (transmission) and low voltage (distribution) power lines.”

The OEB sets delivery prices for utilities in the province, some of which are fixed and others variable depending on the amount of electricity used. A customer service charge is an example of a fixed charge, while a transmission charge is an example of a variable one.

Delivery prices vary from utility to utility in the province, based on a number of factors.

Customers also pay regulatory fees, including a wholesale market service charge which includes the cost for services by the Independent Electricity System Operator to operate the market and maintain reliability of the grid. It also covers certain costs for utilities to connect to renewable power.

Delivery, regulatory charges have risen

“There are several sub-components within delivery and regulatory charges, which are typically reviewed and adjusted annually,” Beninger said.

And it appears that overall, those fees are on the rise.

“Across Ontario over the last year, on average, delivery and regulatory charges have increased by two percent for the typical residential customer who uses 700 kWh of electricity per month,” she said.

So again, that could offset any potential savings from the drop in electricity prices.

As Beninger noted, consumption patterns are also key in determining how much a customer pays.

Different costs depending on the time of year

Depending on the time of year for time-of-use and tiered customers, different regulations mean different costs.

The winter price periods for time-of-use, as well as the winter threshold for tiered customers, will be in effect from Nov. 1 until April 30. After that, summer regulations kick in.

“Summer rates differ from winter rates to reflect different consumption patterns,” Beninger said.

“For instance, in summer (May 1 to October 31), electricity usage peaks during the hottest part of the afternoon when air conditioners are running on high. As a result, on-peak hours are mid-day. In winter (November 1 to April 30), less daylight means electricity use peaks twice – once in the morning when people wake up and turn on their lights and appliances, then again when people get home from work. As a result, there are two sets of on-peak hours during the winter season,” she said for time-of-use rates.

For tiered residential customers, in the winter months they have up to 1000 kWh before they have to pay a higher rate, compared to 600 kWh in the summer months. That’s so customers can use more electricity to heat their homes at a lower cost.

The tiered threshold for small businesses is 750 kWh all year.

And ultra-low overnight plans stay the same all year as well.

Differences in billing apply for medium and large businesses, as well as customers who decide to sign a contract to purchase their electricity directly from a retailer.

Overall, there is a lot that goes into electricity bills and whether or not the upcoming drop in rates translates into a lower bill depends on a number of factors.

There are also programs and credits available for eligible customers to get help with their bills.

Beninger said customers can use the OEB’s bill calculator to estimate their bills and compare the different price plans.

More information on electricity rates can be found on the OEB’s website.