This charge covers the cost to produce the electricity you used during the billing period. Since the price of energy changes throughout the day, consumers with smart meters may be able to save by using electricity at off-peak times.
How Your Electricity Is Measured
Electricity is measured in units called kilowatt-hours, or kWh. The number of kWh you are charged for is determined by your personal usage as read by your electricity meter.
Most customers in Ontario get their power from their Local Distribution Company or LDC (e.g. Toronto Hydro, Hydro One, Algoma Power). The price of a kilowatt-hour is the same for residential and small business customers across Ontario. Prices are set twice a year, on May 1st and November 1st, by the Ontario Energy Board (OEB). Utilities do not make a profit on the sale of electricity to consumers.
Market Price vs. Contract Price
Your LDC buys your electricity from Ontario’s electricity generators through the Independent Electricity System Operator (IESO), which operates Ontario’s wholesale electricity market. To ensure we always have a steady and reliable supply, a number of electricity generators get contracts to supply power at a fixed price. However, because power is bought and sold on a market where price varies by the hour, sometimes the market price is lower than the contract price. A charge called the Global Adjustment makes up for that gap between prices and covers other related costs of purchasing power. Unless you have a retail contract, the Global Adjustment cost is already built into the price of a kilowatt-hour that you see on your bill.
You’ll notice on your bill that the price of electricity changes throughout the day. This is called time-of-use pricing. We pay more for power when demand is highest and supply is more limited. There are three billing periods:
On-peak is the full price time period when the demand is highest. In the summer, on-peak prices apply weekdays from 11 a.m. to 5 p.m., reflecting the increase in air conditioning use. In the winter, on-peak prices apply in the morning (7 to 11 a.m.) and the evening (5 to 7 p.m.), when demand ramps up as residential electricity use increases.
Mid-peak is when the demand and cost of electricity are moderate. Mid-peak hours change between summer and winter to reflect the changes in demand.
Off-peak is the least expensive time period because the demand is lowest. Off-peak hours are always weekdays 7 p.m. to 7 a.m. and all day on weekends and holidays.
A limited number of customers are not yet on time-of-use, and a different pricing model applies for these customers.
If you buy your electricity through a retail contract, the price you pay is set by your contract with the retailer. Contact your retailer for pricing information.
The total amount of your bill includes the cost of purchasing the electricity you use, the cost of delivering it to you, and the cost of operating and sustaining Ontario’s electricity system.
Electricity is subject to the Harmonized Sales Tax (HST).
The Ontario Clean Energy Benefit
The five-year Ontario Clean Energy Benefit, which provided a 10 per cent rebate on electricity bills to eligible customers, ended on December 31, 2015 as planned.
This charge covers the cost of delivering electricity from generating stations across the province to your home or business.
How Your Delivery Charge is Calculated
A portion of the Delivery Charge is calculated at a fixed amount. Another portion increases or decreases depending on the amount of electricity you use, giving you another measure of control over your electricity costs.
Also, when electricity travels along a power line, it is normal for a small amount of power to be lost along the way. Your utility multiplies your usage by an approved percentage, known as a loss factor, to account for these losses.
The Delivery Charge on your bill is made up of:
A variable cost that is linked to how much electricity you use, which pays for the operation and maintenance of the high-voltage transmission system that carries electricity from generating stations to your local distributor.
A variable cost that is linked to how much electricity you use, which covers the cost of building and maintaining the distribution lines, poles, and transformer stations in your local area that deliver electricity to your home or business.
Customer Service Charge
A fixed charge that pays for the costs associated with billing, customer service, account maintenance, and general distribution utility operations.
This charge covers the cost of operating and sustaining the electricity system and providing certain government programs.
Ensuring Supply Meets Demand
Electricity comes from multiple sources and is sold to many different customers, including your Local Distribution Company or LDC. Electricity demand goes up and down over the course of a day and changes from season to season. Ontario has a system in place that manages the complex transactions between generators and purchasers of electricity to ensure we have enough supply available.
Two components add up to total the Regulatory Charge amount shown on your bill:
The Wholesale Market Service Charge
The cost to operate the wholesale electricity market and maintain the reliability of the power grid, including administration costs of the Independent Electricity System Operator (IESO).
Administration costs of the Ontario Power Authority and certain costs for utilities to connect renewable generation.
Rural and Remote Electricity Rate Protection offsets the higher cost of providing service to consumers in rural and remote areas of Ontario.
The Standard Supply Service Charge
Covers a portion of a utility’s administrative costs. This charge is the same for all utilities across the province.
Debt Retirement Charge
The government removed the Debt Retirement Charge (DRC) from residential users’ electricity bills for electricity consumed as of January 1, 2016, saving a typical residential user about $70 per year. The DRC will remain on all other electricity users’ bills until the end of March 2018.
With the removal of the DRC, the average household will save approximately $70 per year.
The DRC line will still appear on residential bills but the amount shown will be $0 for most residential customers.
Multi-unit residential customers may qualify for the DRC exemption for up to 1,500 kWh per month. For more information on the DRC exemption, visit the www.ontario.ca/drc. To apply for the exemption contact your electricity distributor.
The Debt Retirement Charge will remain on commercial and industrial bills after January 1, 2016. The DRC will end on April 1, 2018.