Ontarians paying more to use less electricity, a trend critics say won't change

There's not much point in investing in heavy blankets and wool sweaters to tame your hydro bill, because in Ontario, no matter how much electricity you conserve you'll still end up paying higher rates.

Why? Well, you have the provincial government, and its push for more green energy, to thank.

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A balmy winter created a shortfall for the province's electrical utilities, something the Ontario Energy Board will bridge with a rate hike on May 1 — a response to our collective conservation effort that's likely to happen again, critics say.

While it may seem counterintuitive to pay more in order to use less, Brady Yauch, the executive director of the Consumer Policy Institute, says the province promised high rates to several sustainable energy providers following the Green Air Act in 2009.

Fixed costs

Those rates contribute to the electricity industry's fixed costs — and that means those costs stay steady regardless of how much energy people are using.

"This is the wacky world of Ontario electricity policy," Yauch told CBC's Metro Morning. "This province has overbuilt the electricity sector significantly and it has to pass on those costs."

For the average household bill, the latest rate hike translates into a jump of $3 a month, according to the Ontario Energy Board's figures — or roughly 2.5 per cent for homes that use 750 kilowatt hours each month.

Utilities have some leeway if rate increases are connected to a drop in energy consumption, Yauch said, largely because they're operating in a framework that was first set up by provincial legislation.

"Utilities don't want to conserve, right? They want to sell you more power, that's how they make money," the economist and policy analyst for the think-tank said. "So to get them on board, if you use less power — and they can say it's because of conservation spending, then they'll recover some of that money in rates."

Ontario's consumer hydro costs have moved upward since 2012, according to figures from the energy board.

But an opposite trend has been happening in most other North American jurisdictions, Ross McKitrick, the CBE Chair in Sustainable Commerce at the University of Guelph said. Elsewhere, electricity rates have dipped to compete with natural gas, usually a cheaper heating alternative, he said.

However, Ontario guaranteed fixed rates for wind power and other smaller-scale hydro generators, which can drive up costs overall, McKitrick said.

Green Energy Act

Many of those changes came into effect with the province's 2009 Green Energy Act, which sparked the phasing out of the coal-fired power plants.

Both McKitrick and Yauch said that the province generates more electricity than it needs, the cost of which then gets downloaded to ratepayers. Roughly 80 per cent of wind power generated in Ontario gets to sold to the U.S. right now — and for a "massive loss", the University of Guelph professor said.

The Ontario Energy Board sets its rates based on the balance of costs and consumption, said Cieran Bishop, the board's manager of electricity rates and prices.

"When it comes to [rates] we need to set the costs to recover costs."