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Deciphering Your Electricity Price and Bill in Ontario – Part 1/4

Figure our the speed and distance of electricity

Electricity Bills are Complex

It can be frustrating to consistently pay for something you don’t understand. It is even more painful when your electricity bills continue to go up.

What is driving the electricity cost increase? How can you cut it?

This four part blog will help you understand of the main parts of your bill, how the electricity price is derived, and what parts of the bill you can realistically influence and control.

Eventually, you can use this knowledge to help with things like investment decisions or performance indicators for your business.

The Electricity Basics

kW versus kWh

1 kilowatt (kW) – this is a measurement of energy

1 kW is like saying your car can go 1 km/hr – think of it like speed. In the electricity world this is known as power, capacity or demand.

5 kWh is like saying your car went 5 km over a period of time – think of it like distance. In the electricity world this is called energy or consumption.

So, if you are a business with a 1,000 kW demand, you may consume, over the course of a month
1,000 kW × 30 days per month × 24 hours per day = 730,000 kWh in a month.

However, you may not always be going at a speed of 1,000 kW so to accurately measure how far you have gone, your local distribution company (LDC), also called a utility, will come and read your meter. Your electricity meter is like the odometer of your car.

Your electricity price is made up of both demand (speed) and consumption (distance) charges.

Components of Your Electricity Bill

Utilities vary how they display your information but generally, your bill is grouped into the following categories which we will talk about in the next blog posts.

Electricity Bill - Cost Structure in Ontario (Commercial)

Bill Component

Type of Charge

Electricity (includes the Global Adjustment)

Consumption

Delivery

Demand

Regulatory Charges

Consumption

Debt Retirement Charge

Consumption

HST

Consumption and Demand (based on entire bill)

 

 

The Energy Players in Ontario

Prior to deregulation, the electricity sector was essentially Ontario Hydro. However, since deregulation happened in May 2002, the sector now looks like this:

 Ontario government - Electricity Direction and policy

Government of Ontario

Overall Direction and Policy

 Ontario Energy Board - Electricity Regulator

Regulator

 Ontario Power Authority

Electricity Planner

IESO - Grid operators in Ontario

 

Independent Electricity System Operator (IESO)

Grid Operator

Hydro One - Ontario Transmitter and Distributor

Transmitter and Distributor

Hydro One is 1 of 77 utilities but is the only one that is entirely owned by the Province

OPG - Ontario Power generation

Generator

OPG (Ontario Power Generation) is one of many generators in Ontario but is the only one that is entirely owned by the Province

In the next issue we will tackle the electricity price in Ontario and identify the factors that affect it. Stay tuned.

If you have any questions or comments please share them in the comments section below.

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Download our Guide to Electricity Pricing in Ontario” to better understand and decipher the components of your electricity bill.

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