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Your Options for Buying Electricity

• Option 1. Buying Electricity on the Regulated Price Plan
• Option 2. Buying From an Electricity Retailer
  • Making Sense of Your Bill
  • Returning to the Regulated Price Plan
  • Questions to Ask When Considering a Contract with an Electricity Retailer
• Option 3. Spot Market Pricing
• How Do I Choose?

Electricity powers our daily lives, whether it’s for lighting and heating our homes, using a computer or watching television. Using electricity is as simple as turning on a switch, but how electricity is produced, transmitted and eventually supplied to you is quite complex.

Along with most consumers in Ontario, you receive electricity from the distribution utility in your area. It charges you for delivering that electricity to your residence or business and for other costs related to operating and maintaining the hydro wires and system.

While electricity will always be delivered to you by the utility, you have the option of buying the electricity you use in one of three ways:

Option 1. Buying Electricity on the Regulated Price Plan

The OEB - the agency that regulates our province's electricity and natural gas sectors - has created a Regulated Price Plan (RPP) for consumers that sets out prices per kWh that local electricity utilities charge for electricity use.  Along with most consumers served by local utilities, you are automatically part of the Regulated Price Plan unless you choose one of the other options.

There are four key things you need to know about the Regulated Price Plan:

• The prices you pay for electricity are set by the OEB.
  Actual market prices for electricity are volatile, fluctuating up and down every hour. To smooth this pricing, and to reduce the exposure for you and other consumers from such frequent fluctuations, the OEB created the Regulated Price Plan and sets prices that your utility charges you for the electricity that you use.
  
  The current prices take effect November 1, 2009 and may be adjusted on May 1, 2010. Every six months, the OEB may adjust them as required. This is necessary because, over the long term, the prices you pay for electricity may not be the same as the actual cost of the power you use. If consumers have paid more or less than the actual cost, that difference will be blended into future prices set by the OEB. If you leave the RPP, you will need to settle your Regulated Price Plan account with your utility, since the price you've been paying may not reflect the actual cost of electricity up to that time.
  
  
• The prices you pay are based on a two-price structure.
  Under the Regulated Price Plan, the OEB sets two prices for your electricity consumption: a lower price and a higher price. What you pay depends on how much electricity you use each month. You pay the lower price (currently 5.8 cents per kWh) up to a certain level of electricity used and a higher price (currently 6.7 cents per kWh) if you consume beyond that.
  
  When does the higher price kick in? That point is called the price "threshold" which changes twice a year for residential consumers. The threshold for the summer season (May-Oct) threshold is 600 kWh per month and the winter season (Nov-Apr) is 1,000 kWh per month. This allows you to use more electricity at a lower price during the winter months when more electricity is typically needed for heating, light and indoor activities. For non-residential consumers, the price threshold is 750 kWh for all seasons.
  
  
• The Regulated Price Plan applies to only your electricity use.
  Your bill each month contains a number of charges - Electricity, Delivery, Regulatory and Debt Retirement. The Regulated Price Plan only affects the "Electricity" line of your bill - the cost of electricity supplied to you that you actually use for heating, lighting, appliances and so on.
  • How Much Electricity Do You Use?
    The average residential consumer in Ontario uses under 1,000 kWh of electricity per month. Do you know how much you consume? It’s easy to find out. Check the “Electricity” line of your electricity bill – it shows the amount of electricity you used at the lower price and, if applicable, at the higher price.
    
    
• The Regulated Price Plan covers almost all consumers.
  This includes residential consumers, small businesses and other consumers designated by the Ontario government, such as municipalities, schools, universities and hospitals. It does not, however, apply to large commercial or industrial consumers who use over 250,000 kWh per year. You don't have to do anything to "sign up" for the Regulated Price Plan - unless you have chosen another option, you automatically purchase the electricity from your utility and are charged the regulated prices.
  
  

Option 2. Buying from an Electricity Retailer

As an electricity consumer in Ontario, you don't have to remain on the Regulated Price Plan. While your electricity utility will always deliver electricity to your household - since it operates and maintains the electricity wires - you can choose to purchase your power from an electricity retailer.

There are three key things you need to know about buying from an electricity retailer:

• The price you pay is set out in your contract with the electricity retailer.
  The price you pay per kilowatt hour (kWh), as shown on the "Electricity" line of your electricity bill, will be the price stated in the contract you sign. This price is determined by the electricity retailer and is not regulated by the OEB. Usually the price is fixed for a number of years, but it may change during the term of the contract.
  
  
• Your utility will continue to bill you for other items.
  If you switch to an electricity retailer, there are items on your bill that are still charged to you by the utility. The utility will continue to deliver your electricity and charge amounts for the "Delivery", "Regulatory" and "Debt Retirement Charge" lines on your bill. Your contract with the electricity retailer only affects the "Electricity" line of your bill.
  
  
• You will have to settle your account if you leave the Regulated Price Plan.
  If you switch to an electricity retailer, you will need to settle the Regulated Price Plan account you have with your utility. Why? With the utility, you buy and pay for electricity under the Regulated Price Plan, in which you are charged a stable price (set by the OEB) for the electricity you consume. That price may not reflect what is paid to generators. Eventually the difference needs to be settled:
  • For consumers that remain on the Regulated Price Plan, the difference is tracked (in something called a variance account) and incorporated into future Regulated Price Plan prices set by the OEB.
    
    
  • Consumers that switch to an electricity retailer may either receive a credit or need to pay outstanding charges related to their electricity use while they were on the Regulated Price Plan.  You will be reimbursed if consumers on the Regulated Price Plan have been paying more for electricity than was paid to generators.  You will need to pay your utility if these consumers have been paying less than was paid to generators.
    
    This is a one-time charge or credit, called the "RPP Settlement", that will appear on your final bill as a Regulated Price Plan consumer. How can you find out how much you would pay or receive if you were required to 'settle' with your utility? The OEB posts a ¢/kWh value on its Web site. You can estimate the amount you would receive or pay by multiplying this value by your consumption over the most recent 12 months. This ¢/kWh value is called the "Final RPP Variance Settlement Factor" and is updated around the 15th of each month.
    
    

Making Sense of Your Bill
When switching to an electricity retailer, the bill you receive will look a little different. Some of the charges will look exactly the same, such as the “Delivery”, “Regulatory” and “Debt Retirement Charge” lines of your bill. Other items will be different. These include: 

• A Provincial Benefit line. What is the Provincial Benefit? It can be a credit or a charge to you, and is your share of the difference between government regulated and contract prices for electricity paid to certain generators and the market prices they would have received had they not been subject to government regulation or contracts.
  
  If you buy electricity under the Regulated Price Plan, an estimate of this amount is already reflected in the stable price for electricity set by the OEB, shown on the “Electricity” line of your bill. If you buy from an electricity retailer, the Provincial Benefit is not included in the contract price offered by the retailer, so on your bill it’s shown as a separate item. By law, the Provincial Benefit applies to you and cannot be transferred to an electricity retailer or any other party.
  
  
• An OPG Rebate. The Ontario Government placed a cap on the amount paid to certain generation facilities owned by Ontario Power Generation (OPG). Consumers will receive a rebate for any revenues from those facilities exceeding an average price of 4.7 cents/kWh in 2007-08. On May 1, 2008, the revenue cap increased to 4.8 cents/kWh for the subsequent 12 month period. An estimate of the OPG Rebate is included in the Regulated Price Plan prices. Consumers that leave the RPP and sign a retail contract will receive the OPG rebate, if any, on a quarterly basis. The total rebate amount will be calculated using only the electricity you used after you left the RPP.
  
  You are able to transfer the OPG Rebate to an electricity retailer, so you should read the contract before signing to see if you keep any OPG Rebate or if it is transferred to the retailer. As a Regulated Price Plan consumer, you do not see the OPG Rebate on your bill because an estimate of this rebate is already reflected in the stable price for electricity set by the OEB, shown on the “Electricity” line of your bill.

Returning to the Regulated Price Plan
If you sign with an electricity retailer, you are making a commitment to purchase electricity from the retailer for a certain period of time. If you terminate your contract early, you may have to pay a charge. That charge will be specified in your contract with the retailer. If you terminate your retail contract and have not signed another retail contract, you will automatically return to the Regulated Price Plan.

Questions to Ask When Considering a Contract with an Electricity Retailer 

• What is the price being offered?
• How does this compare to the RPP?
• How long is the term of the contract?
• Do you offer contracts that differ in length?
• Will implementation of time-of-use pricing have any impact on my contract?
• What other fees or charges would I be required to pay?
• Would I be transferring the “OPG Rebate” to your company if I sign?
• Would I be required to pay any charges if I leave before the contract ends?
• When would the contract take effect?
• Do you offer “green power” contracts and, if so, how does the price differ?

Option 3. Spot Market Pricing

A third way – only available for a limited number of consumers who have a special (interval) meter – is through spot market pricing, in which you pay actual wholesale market prices for electricity. These prices are volatile, fluctuating up and down every hour.

How Do I Choose?

The best choice will depend on your individual needs and preferences. Take the time to understand the different options and which will suit you best.

This information is provided as a public service. Although we endeavor to ensure that the information is as current and
accurate as possible, errors do occasionally occur. Therefore, we cannot guarantee the accuracy of the information.
Readers should where possible verify the information before acting on it. External Links Disclaimer.

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This page last updated on 2009-10-15
Copyright information: Queens Printer for Ontario, 2008