Ontario Extends Power Subsidy To Larger Users

The Ontario government widened its price cap on electricity to include companies that use less than 250,000 kilowatt hours of power a year.

The price cap, introduced in November, so far applied only to households and those businesses that use less than 150,000 kilowatt hours of electricity annually. "Our government took the time to listen to people from all walks of life and we were urged to strike a balance that would offer further protection to large users and allow us to maintain a viable open wholesale electricity market," said Ontario Energy Minister John Baird. The government did not say what it would cost to extend the cap. It insists that the price cap will eventually be self-financing, although analysts say the cost to Ontario could be C$1.7 billion (US$1.1 billion) in the first year alone. Ontario froze electricity prices late last year for small consumers at 4.3 Canadian cents a kilowatt hour after its experiment with a competitive power market led to soaring prices, angering consumers. The freezing of electricity prices have dampened any hopes of private investment in power generation in Ontario, Canada's richest and most populous province. The major beneficiaries of the higher cap level are expected to be large retailers and mid-size farms and industrial operations. The cost of the cap, the gap between wholesale prices paid to generators and the 4.3 Canadian cents charged to consumers, is being financed from a special fund to which all power users contribute. The average wholesale price since has been 5.81 cents per kilowatt hour since May 1, when Ontario's electricity market opened to competition -- about 30% above the cap.

"Our government took the time to listen to people from all walks of life and we were urged to strike a balance that would offer further protection to large users and allow us to maintain a viable open wholesale electricity market," said Ontario Energy Minister John Baird.

The government did not say what it would cost to extend the cap. It insists that the price cap will eventually be self-financing, although analysts say the cost to Ontario could be C$1.7 billion (US$1.1 billion) in the first year alone.

Ontario froze electricity prices late last year for small consumers at 4.3 Canadian cents a kilowatt hour after its experiment with a competitive power market led to soaring prices, angering consumers.

The freezing of electricity prices have dampened any hopes of private investment in power generation in Ontario, Canada's richest and most populous province.

The major beneficiaries of the higher cap level are expected to be large retailers and mid-size farms and industrial operations.

The cost of the cap, the gap between wholesale prices paid to generators and the 4.3 Canadian cents charged to consumers, is being financed from a special fund to which all power users contribute.

The average wholesale price since has been 5.81 cents per kilowatt hour since May 1, when Ontario's electricity market opened to competition -- about 30% above the cap.