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Energy Minister announced new
interim electricity commodity pricing.
The current price will be
on the first 750 kwh consumed in
a month and extra on consumption above 750/kwh. This
pricing plan will stay in place until the Province’s
independent regulator, the Ontario Energy Board (OEB),
develops a new pricing mechanism for setting prices in
the future. The OEB’s new pricing mechanism will be in
place as soon as possible.
The new
pricing plan, while a step in the right direction,
leaves the Provincial Government with the burden of
energy management and the responsibility for footing the
bill for any shortfall between actual prices and the new
fixed prices consumers will be paying. While the
increased prices will reduce the subsidy that taxpayers
have been paying, it is unlikely that it will be
completely eliminated unless future wholesale prices are
less than experienced in the last 12 months. The Premier
has said that consumers should pay the full cost of
power and we agree. Ultimately the industry needs to be
restructured to permit this.
In our
view, the two tiered pricing system, designed to
influence conservation, is unlikely to do much since
consumers will simply regard it as a one time increase.
Further steps need to be taken to instill meaningful
demand side management (DSM) measures. Responsibility
for these initiatives, along with proper incentives,
needs to be established. Some recognition of this need
has been made by the Energy Minister in his statement
today in directing the Municipal Utilities to invest a
portion of their commercial return to DSM initiatives
.
The OEB
has been mandated to develop a new pricing
mechanism. It would have been a significant misstep to
create another independent entity or committee to deal
with these issues as suggested by the Minister before.
The OEB’s mandate should however be
broadened to include recommendations for wider industry
restructuring. The new pricing does not deal with the
crucial issues of ensuring sufficient energy supply by
encouraging generators to invest in the province. It
also does not address the role that the Municipal
Electricity Distributors must play to ensure resource
adequacy nor does it deal with any mechanism to bring
about needed consolidation of the electricity
distribution systems. There are currently still over 90
utilities delivering energy in the province. On a
positive note the Minister has recognized the need to
restore commercial returns to these companies. We would
like to see the Minster continue to devote attention to
full industry restructuring. We have laid out our views
on the end-state for the industry in our website Exel's
Principles for Ontario Electricity Industry Restructuring section.
Overall, a
positive first step, but much more work must be done.
Toronto
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