Are You Ready To Leave The Regulated Price Plan?

February 21, 2008

Farmers, municipalities, universities, schools and hospitals in Ontario that are on the Regulated Price Plan will likely see changes to the way their electricity is priced in the coming months.

Changes are coming this spring to the Ontario Regulated Price Plan (RPP) for electricity. Currently the plan determines electricity prices for residential consumers, small businesses consuming less than 250,000 kWh per year and designated classes of consumers who buy their electricity from a utility rather than from a retailer. The "Designated Consumers" include farmers, municipalities, universities, schools and hospitals.

When the plan was introduced in 2005, it provided that Designated Consumers would leave the plan after 3 years. That date arrives this Spring.

If you are slated to come off the RPP, you may be wondering what you should do. However, before addressing this it's worth doing a little "RPP Myth-Busting."

Myth 1: "The Regulated Price Plan is managed by the Ontario Energy Board, so it must be a good thing and I want it to continue to be on it."

For all but a few non-residential users currently on the conventional RPP, you're better off outside the RPP.

The total revenue collected from all participants in the RPP is designed to cover the true cost of all the electricity, but not all participants in the plan contribute equally to the cost. Because RPP prices are based on the amount of energy used, larger Designated Consumers pay a higher average price and effectively subsidize residential consumers.

It's like going out for some fast food with a group of people. You all order the Special for $5.40 but you and a few others have to pay $5.90 while most of the group only pays $5.20. Getting out of the RPP allows you to pay the actual Special cost of $5.40!

Myth 2: "I'm slated to stay on the RPP but energy retailers are telling me my electricity price will jump when I get a Smart Meter."

We've heard that some energy retailers are claiming that "you're paying 5.9 cents but when you get a Smart Meter most of your consumption will be at 7.0 or 8.7 cents." This is a self-serving blanket claim. The Smart Meter RPP in fact has 3 different prices, with the third being a low 3.0 cents. The average price paid will vary from consumer to consumer, depending on how and when you use electricity. Look before you leap! Some load analysis will help you to determine the true cost impact before you sign any long term commitments.

Know your risks and your options

Consumers who are leaving the RPP need to understand how electricity pricing works, including the operation of some complex price regulations that affect the net cost of power. Consumers then need to understand how movements in electricity market prices will affect their actual cost. By comparing the price risk you are exposed to and the price risk you can tolerate, you can decide what actions may be required to control electricity price risk.