OEB Announces Electricity Prices and Distribution Rates



    TORONTO, April 12 /CNW/ - Today the Ontario Energy Board (the Board)
released electricity commodity prices and utility distribution rates that will
take effect May 1, 2007. The combined impact of the changes announced today
will depend on where consumers live and how much electricity they use.
    Effective May 1st, the Regulated Price Plan (RPP) prices will be 5.3
cents per kilowatt hour up to a certain amount each month and 6.2 cents per
kilowatt hour above that. The new prices represent a 0.2 cents per kilowatt
hour, or 3.3%, decrease relative to the prices that went into effect in
November 2006. Compared to May 2006, electricity commodity prices under the
price plan have decreased 8.8%. The reduction in electricity prices is
primarily due to the decline in the RPP variance account balance as a result
of milder than expected weather throughout the fall season and most of the
winter.
    The amount of electricity residential consumers can use at the lower
price has also changed from the winter threshold of 1,000 kilowatt hours per
month to the summer threshold of 600 kilowatt hours per month. Non-residential
consumers eligible for the price plan can use 750 kilowatt hours each month at
the lower price.
    These prices are reflected on the "Electricity" line of consumers' bills.
The commodity prices announced today apply to consumers who buy their
electricity through their utility. Consumers who currently buy their
electricity from a retailer and pay their contract price will continue to do
so.
    The price plan is designed to ensure consumers pay what it costs to
supply their electricity while smoothing the daily price variations that occur
in the market. When the Board sets prices, it adjusts for past differences
between what consumers have paid and what it has cost to supply them and it
forecasts for future electricity costs.
    The Board also issued decisions today on distribution rates for 70
electricity utilities that applied for distribution rate changes using the
Board's incentive regulation guideline. The guideline provided for a modest
increase due to inflation less an adjustment to encourage utilities to find
efficiencies in their operations. In some instances, the decisions also
reflect approved funding for smart meters and conservation and demand
management.
    Distribution rates cover the cost to deliver electricity from local
utilities to consumers' homes or businesses. They include the costs associated
with building and maintaining distribution lines and administration costs.
Distribution rates vary from utility to utility and are included under the
"Delivery" line of consumers' bills.
    In setting the distribution rates and electricity prices the objective of
the Board is to establish fair prices for consumers while maintaining a viable
energy sector.
    A table of the estimated combined impact of the two announcements on
residential consumers is available on the Board's website.

    The Ontario Energy Board regulates the province's electricity and natural
gas sectors in the public interest. It envisions a viable and efficient energy
sector with informed consumers served by responsive regulatory processes that
are effective, fair and transparent.

    For more information, please refer to the attached backgrounders, visit
the OEB website site at www.oeb.gov.on.ca or contact the Consumer Relations
Centre at 416-314-2455 or toll-free at 1-877-632-2727.

    
    Backgrounder
    -------------------------------------------------------------------------

    May 1, 2007 Electricity Prices Decreasing for Regulated Price Plan (RPP)
    consumers

    Highlights:

    -  Starting May 1st, prices for residential consumers who buy their
       electricity through their utility will decline by 3.3% to 5.3 cents
       per kilowatt hour for the first 600 kWh used each month and 6.2 cents
       per kilowatt hour above that.

    -  Non-residential consumers can use the first 750 kilowatt hours each
       month at the lower price.

    -  These prices are reflected on the "Electricity" line of consumers'
       bills.

    -  Consumers who currently buy their electricity through a retailer (or
       who recently signed a new contract) and are paying their contract
       price will continue to do so.

    -  The amount of electricity residential consumers can use at the lower
       price has also changed from the winter threshold of 1,000 kilowatt
       hours per month to the summer threshold of 600 kilowatt hours per
       month.

    -  The result of the price decrease and the lower summer threshold when
       compared to current prices will mean that a RPP residential consumer
       using an average of 1,000 kilowatt hours a month will see a monthly
       increase of approximately $1.60 on the "Electricity" line of their
       bills.

    -  When compared to the same time period last year when the summer
       threshold was the same at 600kWh/month, a residential consumer using
       1,000 kilowatt hours per month will see a decrease of approximately
       $5.00 monthly on the "Electricity" line of their bill.

    -  The reduction in electricity prices of 0.2 cents per kilowatt hour is
       primarily due to the decline in the RPP variance account balance. As
       of March 15, 2007, the positive net balance in the variance account
       stood around $16.3 million and is expected to be at a balance of
       $70 million by the end of April. This represents a credit of about
       0.10 cents per kWh in the RPP prices announced today.

    -  The principal contributing factor in the variance balance credit was
       milder than expected weather throughout the fall season and most of
       the winter.

    -  The new prices reflect the improvement in the variance account balance
       changing from a charge to a surplus and the forecast cost of
       electricity for the next price period.

    -  This change in electricity prices is the second consecutive reduction
       over the past year representing a total decrease of 0.2 cents per kWh
       or 3.3% since November 2006 and 0.5 cents per kWh or 8.8% since
       May 2006.
    

    Background

    The Regulated Price Plan applies to residential and small business
consumers who use under 250,000 kWh/year and who buy their electricity through
a utility. The Board set these prices based on a forecast of the expected cost
to supply RPP consumers from May 1, 2007 to April 30, 2008 and the balance in
the variance account.
    Under the two-tiered RPP pricing structure for residential consumers, the
monthly price threshold for the lower price is set at 600 kWh per month during
the summer season, from May to October and at 1,000 kWh per month for the
winter season of November to April.
    For non-residential RPP consumers, the price threshold remains at 750 kWh
per month throughout the year.
    The seasonal price thresholds for residential consumers of 600 kWh and
1000 kWh are designed to recover about the same amount in electricity
commodity charges as using a 750 kWh threshold over the full year. This is to
ensure similar treatment between residential and non-residential consumers.

    
    Electricity prices under the RPP are affected by a number of factors.
    Among them are:
    -  the amount of electricity produced by generators that are paid
       regulated or capped prices;
    -  market prices for electricity paid to other generators;
    -  natural gas prices (used as a fuel by some generators);
    -  the weather; and
    -  the variance account balance

    Time-of-use prices have also changed for all three periods:

       -  On-peak = 9.2 cents per kWh  (previously 9.7 cents)
       -  Mid-peak = 7.2 cents per kWh (previously 7.1 cents)
       -  Off-peak = 3.2 cents per kWh (previously 3.4 cents)
    

    Time-of-use prices only apply to a small subset of consumers on the
Regulated Price Plan at this time.

    Variance Account

    The variance account for the RPP is managed by the Ontario Power
Authority. It tracks the difference between what RPP consumers have paid and
what has been paid to generators to supply them.
    Since the last RPP price adjustment in November 2006, the deficit in the
variance account balance has been paid off more quickly than the Board's
forecast. The variance balance is expected to be a surplus of $70 million at
April 30th, mainly due to milder than expected weather throughout the fall
season and most of the winter. This is the primary reason for the change in
RPP prices effective May 1, 2007.

    Monthly "Electricity" Line

    The Board's website has charts that show examples of the effect of the
Regulated Price Plan (RPP) on the "Electricity" line of consumers bills based
on different monthly consumption levels.
    The examples take into account the change from the winter season
(November to April) price threshold of 1,000 kWh/month to the summer season
(May to October) price threshold of 600 kWh/month.
    The price threshold is the amount of electricity that is charged at the
lower RPP price.
    Because the price of electricity changes with the level of consumption,
some consumers will experience an increase on their electricity costs while
others will experience a decrease relative to November. Compared to May 2006,
when the price thresholds were the same, all consumers will experience a
decrease.

    
    Historical RPP Prices for Residential Consumers

    -------------------------------------------------------------------------
    Effective    Apr 1,       Nov 1,       May 1,       Nov 1,       May 1,
      Date        2005         2005         2006         2006         2007
    -------------------------------------------------------------------------
    Resident-     750         1,000         600         1,000         600
     ial        kWh/mo.      kWh/mo.      kWh/mo.      kWh/mo.      kWh/mo.
     Threshold  threshold   threshold    threshold    threshold    threshold
    -------------------------------------------------------------------------
    Lower Tier 5.0 cents    5.0 cents    5.8 cents    5.5 cents    5.3 cents
     Price      per kWh      per kWh      per kWh      per kWh      per kWh
    -------------------------------------------------------------------------
    Higher     5.8 cents    5.8 cents    6.7 cents    6.4 cents    6.2 cents
     tier       per kWh      per kWh      per kWh      per kWh      per kWh
     Price       above        above        above        above        above
    -------------------------------------------------------------------------
    

    For more information

    Details on today's announced electricity prices are available via the
Board's website at www.oeb.gov.on.ca.

    The Ontario Energy Board regulates the province's electricity and natural
gas sectors in the public interest. It envisions a viable and efficient energy
sector with informed consumers, and works towards this vision through
regulatory processes that are effective, fair and transparent.

    For more information please contact:

    Paul Crawford
    Ontario Energy Board
    (416) 440-7607


    
    -------------------------------------------------------------------------

    2007 Electricity Distribution Rates Backgrounder

    Highlights:

    -  The OEB announced distribution rates for 70 electricity distribution
       companies on Thursday, April 12th

    -  These electricity distribution companies serve approximately 67% of
       all electricity consumers in the province

    -  Rate changes for decisions announced April 12th take effect May 1,
       2007

    -  Distribution rates have been held to less than inflation as a result
       of the Board's incentive regulation guidelines

    -  The guideline provided for a modest increase due to inflation less an
       adjustment to encourage utilities to find efficiencies in their
       operations

    -  Most utilities will see a modest increase to their distribution rates
       of under 1%

    -  Based on average consumption of 1,000 kWh per month, the total bill
       impacts of distribution rate changes for most utilities will range
       from -0.7% to 2.0%

    -  On average, distribution rates represent approximately 25% of bills

    -  Distribution rates are set based on the individual utility costs that
       the Board deems to be prudent, and are not adjusted to obtain an
       overall provincial average

    -  Distribution rates for utilities installing smart meters in 2007
       incorporate funding for smart meters

    -  Distribution rates for utilities with no plans to install smart meters
       in 2007 incorporate a standard smart meter rate adder of between $0.24
       and $0.28 per customer per month for 2007

    -  The Board will also provide several utilities with funding for
       conservation and demand management programs on a transitional basis
       until funding through the Ontario Power Authority is available
    

    Background

    Electricity distribution rates vary from utility to utility and are
reflected on the "Delivery" line of consumer bills. They are designed to cover
the costs incurred by the utility to provide electricity services to
individual homes and businesses within its service territory. These rates
include the costs associated with designing, building and maintaining overhead
and underground distribution lines, poles, stations and local transformers,
operating local systems, reading meters, customer service, emergency response
and a regulated profit.
    Traditionally, distribution rates are set to recover the cost to deliver
electricity, and reflect an individual utility's cost of service. Factors that
contribute to the varied rates among utilities include age and condition of
assets, geographic terrain and distance, and population density. The
proportion of residential to commercial and industrial consumers can also
account for cost differences among utilities.

    Distribution rates do not cover:
    
    -  The cost to generate electricity (the electricity commodity set by the
       OEB under the Regulated Price Plan)
    -  The Debt Retirement Charge (set by the Government of Ontario to pay
       down the stranded debt of Ontario Hydro)
    -  The Regulatory Charge (the costs to administer the wholesale
       electricity system and maintain the reliability of the provincial
       grid)
    -  The cost for transmission of electricity from the generator to the
       utility
    

    2007 Process

    To assist utilities in their submissions and to ensure a consistent
approach, the Board developed incentive regulation filing guidelines for 2007
distribution rates. Distribution rates for most utilities have been kept to
less than inflation. The rates were calculated based on the utility's approved
2006 rates and used an inflationary factor, minus an efficiency factor to
encourage utilities to increase efficiency initiatives. These efficiencies
benefit ratepayers by reducing costs. Incentive regulation does not reflect
the actual costs incurred by utilities to deliver or generate electricity.
    The Board reviewed each rate application independently. Applications that
followed Board approved guidelines were approved first.

    Bill Impacts

    Distribution rates vary from utility to utility. The Board reviews each
application independently but applied a common method to adjust rates for
2007. The average increase on consumer's bills will be around 0.3% as a result
of the distribution rate changes.

    For More Information

    Details on the 2007 Electricity Distribution rates announced today are
available via the Board's Web site at www.oeb.gov.on.ca.
    The Ontario Energy Board regulates the province's electricity and natural
gas sectors in the public interest. It envisions a viable and efficient energy
sector with informed consumers served by responsive regulatory processes that
are effective, fair and transparent.

    For more information please contact:

    Vanda Wall
    Ontario Energy Board
    (416) 440-8149




For further information:

For further information: Vanda Wall, Ontario Energy Board, (416)
440-8149 or Paul Crawford, Ontario Energy Board, (416) 440-7607


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