Direct Energy Marketing Ltd., Ontario's largest fixed-rate electricity retailer with more than 600,000 households on contract, hopes to lure new customers by promising they can opt out of a long-term contract after a year.

But to get that flexibility, the firm's customers will have to pay more D1 5.95 cents a kilowatt hour for its new three-year offer, compared to 5.69 cents and 5.89 cents offered in similar contracts by other retailers.

Peter Dyne, spokesperson for the Consumers' Association of Canada, said giving the public more choice is a "step in the right direction." But he urges consumers not to be spooked by recent spikes in electricity prices during the latest heat wave. Between midnight and 6 a.m. in recent days, prices have hovered at about 2 cents per kilowatt hour, climbing to an average of about 8 cents on Tuesday, he said.

Customers without fixed-rate contracts are billed on a monthly average, and Dyne said over the course of a month, prices will likely reflect a middle ground and not just the spikes in price, which are short-lived. Consumers must also factor in the average cost of electricity for the entire year D1 including months with low peak consumption D1 before they can make comparisons with any fixed-rate deal.

"No one will know the true picture until the market has been open at least a year," Dyne said.

Direct Energy president Paul Massara said this week his firm's latest deal is part of a plan to help customers cope with the "volatility" in the newly deregulated market.

Customers who don't want the new deal can still sign the firm's regular five-year deal for 5.95 cents and get a 10 per cent discount on their first year's bill, he said. But Direct customers who have already signed five-year contracts cannot convert to the new one.

First Source Energy Corp. now offers a deal letting customers keep energy rebates. The contracts are available for three and five years, at 5.89 and 5.95 cents a kilowatt hour, respectively. But customers still have the option of returning the rebate to First Source and locking in at 5.69 cents for three years if they choose. In other contracts, customers have to sign rebates over to the retailer.

Toronto Hydro Energy Services offers a three-year deal for 5.79 cents, but it keeps any rebate. It recently announced it would no longer be soliciting business door to door.

However, Ontario Energy Board spokesperson Tom Park says if the pricing system does change, consumers would be allowed to opt out of the deal rather than accept a new price.

Last week, the Ontario government passed a new energy consumers' bill of rights. Under the bill, once a long-term energy contract is signed, the consumer must reaffirm the deal in writing within 31 days.