Friday, October 9, 2009

How Stable Are Electricity Prices?

In an article published in the October 3rd issue of The Hamilton Spectator, Hamilton Horizons was appealing to the Ontario Energy Board to increase rates by about $0.32/month to homeowners, and $0.80/month for businesses. Their reasoning: because of a revenue shortfall of more than $2.8 million due to the shutdown of US Steel Canada. So what’s a half-a-dollar between friends? Let’s go deeper…
According to Hamilton Horizon’s spokesperson Sandy Manners, the reason for the request was due to fixed costs of supplying and servicing an electrical grid. Furthermore, Horizon sets its rates based on projected revenue. To that, Manners states that while they have managed to avoid increases the past two years due to added efficiencies, there is only so far that they can go. Translation: by using (or consuming) less hydro, your rates will actually increase because the costs associated with managing the electrical grid are fixed.
Now I’m not a business major, but I would suspect that there are not a lot of businesses out there who wouldn’t set their rates based on projected revenue. If Tim Horton’s set their coffee prices based on consumption, then theoretically prices would rise every time a location closed, or a competitor opened up nearby causing a reduction in customers, therefore less cups of coffee being purchased. It just doesn’t happen that way in the private sector. Hamilton Horizon is municipally owned, and therefore holds the power (pun intended).
Adding insult to injury on this ‘because we’re getting less revenue, I have to charge you more’ debacle, the Ontario Government is pushing the Smart Meter “Time of Use” rates to be in place sometime in 2010. For my household, that actually means another increase in electrical rates. Our household does not operate on a typical 9-5 lifestyle. Doing laundry at 10 o’clock at night is not an option, and leaving it to the weekend will mean less travel and consumerism, as we’ll be at home doing all the ‘heavy-load’ electrical chores (laundry, yard work, et al) in order to get the same rates that we are receiving today. So here we are stuck in a “damned if you do, damned if you don’t” scenario. With the push on for electrifying our petroleum-dependant resources (cars, rapid-transit, et al), coupled with calls for restraining our everyday electrical-dependant resources (lights, appliances, et al); it almost appears as if there is an attempt to maintain a level demand system for electricity, all under the guise of protecting Mother Earth. With the news that there is a limit to how far one electrical grid can go to be efficient before fees increase, leaves a bit of a sour taste in ones mouth about the truth surrounding the fixed cost efficiencies of electricity versus the volatile costs of petroleum. I’m not sure they’re much different anymore.

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