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Energy Deregulation

Overview

Published: 06/26/2012

by Giannia Warren

As we wipe from our brows the last of what was one of the hottest summers on record, it’s a good time to

 assess how the deregulated electricity market has faired, and prepare for what may be ahead. We’ve seen

 that soaring temperatures resulted in equally soaring price spikes. Record-breaking levels of demand during June and

 July prompted the Independent Electricity Market Operator (IMO), the organization that manages the operation of the electricity grid, to issue several requests to consumers to curb their power use. Since May 1, 2002, Ontario’s electricity

 market has operated under the conditions of supply and demand. Consumers now pay a regulated charge for

 the transmission and distribution of their power, but the cost of the electricity itself is subject to fluctuations.

 As demand soars on hotter days, the price of electricity generally increases as well.

The IMO posts this hourly fluctuating price of electricity, as well as the average price to date, on its website,

www.iemo.com. Although the average price has remained below the 5 cents per kilowatt hour mark, it has been trending

upwards. The highest price at press time had reached 90 cents/kWh, with more frequent spikes in the 15-20 cent range — well

above the 5-7 cent rate offered by retailers. Homeowners who have not signed a fixed-rate contract could see these spikes

reflected in their upcoming electricity bills. Fortunately, as we enter into cooler months, the demand for electricity should

naturally decrease, subsequently lowering the price of electricity. However, the relief from higher prices

will be short-lived as winter approaches. Winter may bring the same price volatility as occurs in the summer – as heating

requirements increase with colder temperatures, so does the demand for electricity and the upwards pressure on prices.

For those who were debating whether or not to consider a fixed-rate contract, it is important to note that the enrollment

process could take up to two billing cycles (four months) before you see any change in your bill.

Although the price for electricity in the upcoming months will likely be low, in order to avoid price fluctuations this winter

consumers would be wise to consider their options now. Summer may not be far from memory, but as we all know, it gets

cold much sooner than we’d like.

 

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