Toronto: Never a popular theme, it seems that an increasing number of commentators are taking the view that electricity prices are unrealistically low in Ontario. Most recently, the CD Howe Institute, a well known commentator on Canadian public policy, published a paper arguing that electricity prices should fully link the consumer price to peak-period generation costs, environmental costs and the high cost of new generation.
According to an expert analysis released January 13 by the CD Howe Institute (“The Price Isn’t Right: The Need for Reform in Consumer Electricity Pricing,”) author Donald N. Dewees says such pricing reform is required to reduce both financial and electrical stress on the system and help prepare Ontario – and other provinces – for the rising costs of new generation. According to Dewees, a University of Toronto Professor of Economics and Law, most provinces have relied on flat rates and price-freezes for electricity, that may be politically expedient in the near term but has led to over-consumption, pollution, fiscal stress and excess pressures on the generation system.
Dewees argues that Ontario should implement a pricing scheme that reduces peak-load demand by consumers, reduces strain on the generation system, and covers the cost of operation. Such a pricing plan would equate the hourly cost of electricity generation, including the environmental cost, with what consumers pay. Ontario is moving in this direction with time-of-use pricing, but should go further by fully linking the cost of operation in periods of high strain on the generation system with the price paid by consumers, he concludes.
One of the major hurdles to implementing time-of-use pricing, he points out, is measuring individual customer use in multi-unit residential buildings. This can be addressed, however, with regulations that guide condo owners and rental landlords toward decisions that reap the economic benefits, when justified, of installing smart meters.
For the study go to http://www.cdhowe.org/pdf/backgrounder_124.pdf.
See also: “The decline of the price signal,” IPPSO FACTO, June 2009 and “A green future means higher prices, experts tell Empire Club,” from the June 2009 IPPSO FACTO.
Selected Canadian Residential Electricity Rates
Location Fixed Charges, $
Vancouver BC 3.84
Calgary AB 15.65
Medicine Hat AB 6.65
Edmonton AB 17.93
Regina SK 15.31
Saskatoon SK 15.31
Winnipeg MB 6.85
Englehart ON 20.78
Kenora ON 14.78
Toronto ON 17.75
Montreal QC 12.36
Moncton NB 19.73
Saint John NB 19.73
Halifax NS 10.83
Charlottetown PE 24.57
St. John’s NL 15.56
— From The Price Isn’t Right: The Need for Reform in Consumer Electricity Pricing; CD Howe.