Power rates to soar for 5 years: manufacturers

Ontario Electricity Rate Increases forecast 6.7-10% annually as Hydro One, OEB filings, HST, time-of-use pricing, provincial benefit, and renewable energy contracts lift generation, transmission, and distribution costs across households and businesses.

If you don't like this year's jolt in electricity prices, too bad. It will only get worse, says an analysis prepared for the Canadian Manufacturers and Exporters.

The report by Aegent Energy Advisors says consumers can expect to see their Ontario hydro bills grow by 6.7 to 8 per cent annually for the next five years.

That means a household with a monthly bill of $130 today will be paying about $191 by 2015, says the report. That's an 8-per-cent annual increase, compounded.

A household with a monthly bill of $160 today will be paying about $221 by 2015, a 6.7 per cent annual increase.

Consumers can't escape the brunt of the hydro hike by signing a fixed-price contract with a retailer.

That's partly because the fixed-price contract only covers a portion of their bill. In addition, customers with retail contracts still pay a fee called the "provincial benefit" that's liable to increase. It has added 2.75 cents a kilowatt hour to their bills so far this year.

Aegent's analysis has been filed with the Ontario Energy Board as a submission relating to Hydro One's rate application, now before the board.

Electricity consumers have already been hit with a cluster of price increases this year – as rates began rising in May for many customers – many of them just showing up now on hydro bills.

Householders who don't have retail contracts have seen their rates rise, with the price of power jumping in some cases, whether they're on time of use rates or the two-tiered regulated price plan.

A provincial "special purpose charge" has edged the price higher, and the HST has added a further 8 per cent.

But more is to come.

The Ontario Power Authority has signed a series of contracts with electricity suppliers, many of them producing power from renewable sources, at prices higher than current market rates, prompting industry concern about price hikes.

In addition Hydro One, which operates the province's high-voltage transmission lines, has applied for rate increases up to 15 per cent in 2011 and 9.8 per cent in 2012. Fixed price contracts don't cover this portion of the bill. Local hydro utilities are also seeking rate increases to modernize their facilities. Retail contracts don't cover those increases, either.

Non-residential electricity users won't fare any better than householders, according to Aegent. In fact, they'll do worse. They can expect annual rate increases of 8 to 10 per cent over the next five years, with electricity costs rising 20 per cent in some scenarios, says Aegent.

The analysis is subject to challenge by Hydro One and others who may intervene in the rate application.

Both Hydro One and OPG had initially applied for even higher rate increases, but scaled them back under pressure from Energy Minister Brad Duguid.

Attending an event at Ryerson University recently, Duguid said higher rates are needed to boost investment in the power system.

"It's the cost of building new generation we need to have reliable system," he said. "It's the cost of building a cleaner system and replacing dirty coal."

Money also need to be spent to renew the wires, transformers and other equipment that carries power from generators to customers, he said.

"The cost of not making these investments, frankly would be horrific to our economy and would impact the quality of life of every Ontarian," Duguid said.

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