Understanding electricity system costs

The cost components of electricity service

The cost of operating and maintaining Ontario’s electricity system, including new investments for improved reliability and building a cleaner system, are all recovered from electricity ratepayers through the electricity bill as explained here. These costs can be grouped into four major cost categories:

Generation: Electricity is generated by a diverse mix of resourcesLearn more about how generators are paid

Conservation: Conservation programs help consumers manage their energy use. Conservation includes energy efficiency, process improvement, customer-based generation and demand response, as well as programs for residential, commercial and industrial customers.Learn more about the OPA's conservation programs.

Delivery: The cost of transporting electricity from the generator to the electricity consumer. It covers the cost of the high- and low-voltage transmission and distribution lines throughout the province. The delivery costs recovered from ratepayers are reviewed and approved by the Ontario Energy Board.

Administration: These costs relate to the operating costs associated with the electricity system, plus the Debt Retirement Charge (DRC), which is a rate established by government legislation to pay for the former Ontario Hydro’s stranded debt. Find more information on the Debt Retirement Charge.

In 2011, it cost $16.3 billion to provide electricity services to Ontario consumers. The following graph shows the historical annual costs for the major cost categories described above for the 2005 to 2011 period. As illustrated, electricity costs are increasing. This is to pay for significant investments in Ontario’s electricity system to make it more reliable, modern and sustainable.

Annual costs for providing electricity serviceAnnual costs incurred for electricity service
Source: IESO, OPA, OEFC and OEB

The costs for providing electricity service are recovered in customer rates and bills. The historical tracking of a typical residential bill is provided in the figure below. The typical residential customer bill has increased but is less than projected in Ontario’s Long-Term Energy Plan (LTEP). This plan, released in November 2010, forecasted a 46 percent increase in residential electricity prices over five years.

Residential Typical Bill History
Residential Typical Bill History
Source: OPA, and Ministry of Energy’s LTEP 
The LTEP representative bill from the chart above is largely based on Toronto Hydro rates; bills for customers of other utilities will be different.

For information relating to historical bill impacts for other local distribution companies, see the following documents on the Ontario Energy Board website:

    Estimated bill impacts 2013

   Estimated bill impacts 2012

   Estimated bill impacts 2011