Know your options



 

Electricity consumers can choose to purchase electricity from licensed retailers

Electricity consumers can sign a contract with Ontario Energy Board (OEB) licensed electricity marketers or retailers for their electricity supply. Much like interest rates or mortgage rates, future electricity prices cannot be predicted with absolute certainty. A contract can add some certainty as it allows you to lock in your electricity costs for the term of the contract but you should learn about your options to determine if signing a contract is right for you.

Most contracts offer a fixed price over a fixed period of time but not all contracts are equal. Before you sign a contract, read it carefully so you’re aware of all the terms and conditions. Ask questions if anything is unclear, or if you are unsure.

In some cases consumers are willing to pay a premium because they want the price stability and predictability that a contract provides. Some retailers offer additional services with the contract, such as energy audits, equipment maintenance or they may support green or renewable energy sources.

 

Know What You’re Paying For – and Entitled to Receive

The contract you sign only covers the commodity cost. Delivery charges, regulatory charges, debt retirement from the former Ontario Hydro, and other charges will still apply and customers will still see these items on the bill. When choosing a retailer, remember that the prices you will compare only apply to the commodity (electricity) charge.

There are, however, a number of adjustments that affect the final price you pay. Understanding these adjustments will help you better compare contracts to make the best decision for you. (see Adjustments to Your Bill below)

 

Residential and Low-Volume Business Customers

For residential and low-volume business consumers who pay the Regulated Price Plan (RPP), price fluctuations are less noticeable. The OEB adjusts the rates twice a year to reflect the variance between the amount customers paid for power and the cost of supplying it. Even so it doesn’t offer the certainty that a long-term contract can provide.

Upon entering into a contract, low-volume customers will leave the RPP and are responsible for the RPP Variance Settlement Amount. This one-time charge (or credit) will appear as the “RPP Settlement” on your bill. (The OEB regularly calculates an RPP Variance Settlement Factor by dividing the balance in a variance account – which is administered by the Ontario Power Authority – by the total consumption of all RPP consumers over the past 12 months. This calculation determines the amount RPP customers over or underpaid for the supply costs of electricity over the same period.) The RPP Variance Settlement Amount for a specific consumer takes into consideration the amount that customer has consumed over the past 12 months. For example, if it is estimated that RPP consumers paid more than the supply costs, the RPP Variance Settlement Amount would be a credit.

Each month the OEB updates the RPP Variance Settlement Factor on their website. You can estimate the amount you owe (or are owed). The figure that applies to you is the one in effect on the date your final meter reading takes place, to ensure you pay (or receive) your share of the variance account upon leaving the RPP. Note that to date, the RPP Settlement is usually a charge.

An RPP customer can enter into a retail contract for up to five years. As an RPP customer, you can rescind the contract by giving written notice to your retailer within 10 days of signing.

 

Large-Volume Business Customers (using greater than 250,000 kWh/year)

Some large-volume business consumers who pay the wholesale price of electricity may choose to enter into a contract for all or part of their electricity use, in order to hedge against fluctuations. (Click here to learn about some factors that impact the wholesale price.) Depending on the options presented by the retailer, businesses could pay a fixed or market-indexed price for some or all of their electricity use. This could improve their business planning by allowing them to better forecast their electricity costs.

Adjustments to Your Bill

All customers in a retail contract receive the Global Adjustment, which can be a credit or charge. This adjustment accounts for differences between the market price and rates paid to Ontario Power Generation’s regulated facilities (known as OPG’s prescribed assets), and contracted generators such as Non-Utility Generators and contracted suppliers. Click here to read about the types of facilities that affect the Provincial Benefit. You will receive a credit (or charge) for the Provincial Benefit regardless of your contract because it cannot be assigned to a retailer.

Source: Independent Electricity System Operator

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