Ontario Electricity Prices & the Wholesale Market
In Ontario, all electricity rates reflect the wholesale electricity price in some way. The wholesale price is determined by matching supply with Ontario's demand for electricity. This wholesale price is set based on the bids and offers that are settled in the electricity market operated by the IESO.
The type of rate you pay depends on how much electricity you consume. Large businesses pay hourly wholesale prices, while residential consumers and small businesses, for the most part, pay time-of-use rates.
The wholesale price of electricity is dynamic
− changing hourly based on the availability of supply and changes in demand. Factors that affect demand include:
- Consumer behaviour
- Time of day
- Day of the week
- Economic conditions
The IESO accepts the lowest-cost offers to supply electricity until sufficient megawatts are available to meet Ontario's demand. Some types of generators are more expensive to operate than others. As a result, the wholesale price of electricity rises as more expensive forms of generation are brought online to meet demand. Outages for equipment maintenance also affect the availability of generators, which in turn can affect the price.
emPOWERme is a new webpage from the Ontario Ministry of Energy that provides videos, interactive learning tools, infographics and other material to help consumers learn more about Ontario's power system and how they can reduce energy to save on their electricity bills.
How You Pay Depends on How Much You Use
Small Consumers (Residential and Small Business)
The majority of Ontario's almost five million electricity consumers are
residential and small business consumers billed for electricity usage by their local distribution company. These customers generally pay time-of-use rates, with a small minority paying tiered rates. Consumers may also choose to enter retail contracts for their purchase of electricity.
Ontario Energy Board sets prices for consumers under the Regulated Price Plan and licenses and oversees electricity
Large Consumers (Business and Public Sector)
business that uses more than 250,000 kilowatt hours (kWh) of electricity per year − equivalent to a minimum $2,000 electricity bill per month − pays the wholesale market price.
With wholesale pricing, these businesses have three options:
If a business has an interval meter, it pays the
Hourly Ontario Energy Price.
If it doesn't have an interval meter, it pays a weighted wholesale price based on the consumption pattern of its local distribution company.
These consumers may also choose to move to a fixed-price contract offered by a
Wholesale Price + Global Adjustment = Commodity Price
The wholesale price comprises only one part of the total commodity cost for electricity. The Global Adjustment covers the cost of building new electricity infrastructure in the province, as well as providing conservation and demand response programs. It covers the difference between regulated rates to nuclear and large hydroelectric generators and the market price.
For most small consumers, the Global Adjustment is incorporated into their time-of-use and tiered rates. They will not see it as a separate item on their bill.
For other consumers − including medium and large businesses as well as residential customers on retail contracts − the Global Adjustment appears as a separate line on their bill.
Large consumers pay the Global Adjustment in two different ways:
- Class A Customers (approx. 300) representing Ontario's largest electricity consumers. These customers pay based on how much their peak demand use contributes to provincial peak demand.
- Class B Customers (approx. 55,000), typically medium and large businesses, pay the Global Adjustment charge on a per kilowatt/hour basis.
Global Adjustment page for more information about the rate and how it is applied to various customer groups.
The Power of Information
The implementation of time-based billing and smart meters have paved the way for greater levels of customer control over their electricity use. According to a recent survey by
Smart Grid Canada, more than seven out of ten Ontarians said they had changed their energy use behaviour as a result of time-of-use rates, and most also said that these efforts were having an impact on their bills.
Detailed usage information is available online for time-of-use customers or through the billing from their local distribution company. By understanding their usage patterns, Ontario consumers can adjust their consumption, reduce their costs, as well as help respond to power system needs. They can either reduce consumption during peak periods or shift usage to lower demand periods − or do both.
Ontarians' access to the consumption data is growing with the roll-out of
Green Button Initiative, an IT standard that allows consumers to download their data and will lead to the development of mobile apps and other services that can help consumers gain further control over their energy use.
See how Time-of-Use rates can work to your advantage at 10 Smart Meter Lane. This interactive house allows users to input their appliance usage and see how much they can save by shifting electricity use to different times.
The type of equipment, hours of operation and even business routines all affect electricity costs. This simple
online guide shows small businesses how to make Time-of-Use prices work for them.