WATCH ABOVE: Alan Carter grills Bob Chiarelli about why the Global Adjustment costs so much.
TORONTO – Why are Ontarians paying so much for electricity?
Ontario Auditor General Bonnie Lysyk said Tuesday the province’s residents will be stuck with a $50-billion bill between 2006 and 2015 because of an extra charge on their electricity bills that fills the gap between the market price of electricity and what the province promised to pay its producers.
That cost, Lysyk wrote in her report, has increased 1,200 per cent between 2006 and 2013 and makes up almost 70 per cent of the electricity charge on the bills of smart meter users.
Energy Minister Bob Chiarelli wouldn’t say why that extra cost has gone up so much since 2006, but insisted it’s necessary.
“The global adjustment is a way of reflecting the true cost in the electricity system and that $52 billion was part of operating the system, managing the system, getting the results in the system that we wanted,” he told reporters at Queen’s Park Thursday.
“The global adjustment reflects the costs that are necessary to deliver the system that we have today. The system we have today is reliable, it’s clean and, particularly with a lot of the mitigation measures we put in, is affordable.”
READ MORE: Highlights from the Auditor General’s report
But Lysyk said that extra cost undermines time-of-use pricing, which was supposed to act “as an incentive for ratepayers to shift to off-peak.” As a result, she said, people aren’t changing their habits and peak electricity demand actually increased between 2004 and 2010.
Chiarelli said that extra $50 billion is “irrelevant” when it comes to the implementation of smart meters, however, because it would be there whether people had smart meters or not.
The Ontario government purchases most of its energy at a set price that tends to be higher than market rate. This fee covers the difference.
According to the Independent Electricity System Operator (IESO) the fee pays for:
- Regulated rates to Ontario Power Generation nuclear and baseload hydroelectric generating stations.
- Contracts with the Ontario Power Authority such as new gas-fired facilities, renewable facilities, and nuclear refurbishments.
- Contracted rates administered by the Ontario Electricity Financial Corporation paid to existing generators.
- It also includes the cost of delivering conservation programs in the province and the payments made to participants under contracts with the Ontario Power Authority.
The fee hit an unprecedented level in September 2013, when it added an additional 8.75 cents to the price of electricity per kilowatt hour, which at the time was 2.5 cents.
According to Toronto-based energy consultant Tom Adams, the fee will keep increasing.
“Ontario’s annual electricity bill is in the order of around $19 billion. But global adjustment is by far the biggest piece of that and rapidly increasing.”
Before 2011, the government’s guaranteed price was less than the market rate, which meant the province profited. But that didn’t mean lower electricity bills for Ontarians.