Consumers Should Pay Equitably for Power Based on Usage: C.D. Howe Institute

TORONTO , Jan. 13 /CNW/ - Electricity prices should fully link the consumer price to peak-period generation costs, environmental costs and the high cost of new generation, according to an expert analysis released today by the C.D. Howe Institute. In "The Price Isn't Right: The Need for Reform in Consumer Electricity Pricing," author Donald N. Dewees says such pricing reform is required to reduce both financial and electrical stress on the system and help prepare Ontario - and other provinces - for the rising costs of new generation.

According to Dewees, a University of Toronto Professor of Economics and Law, most provinces have relied on flat rates and price-freezes for electricity, which may be politically expedient in the near term but have led to over-consumption, pollution, fiscal stress and excess pressures on the generation system.

Dewees argues that Ontario should implement a pricing scheme that reduces peak-load demand by consumers, reduces strain on the generation system, and covers the cost of operation. Such a pricing plan would equate the hourly cost of electricity generation, including the environmental cost, with what consumers pay. Ontario is moving in this direction with time-of-use pricing, but should go further by fully linking the cost of operation in periods of high strain on the generation system with the price paid by consumers, he concludes.

One of the major hurdles to implementing time-of-use pricing, he points out, is measuring individual customer use in multi-unit residential buildings. This can be addressed, however, with regulations that guide condo owners and rental landlords toward decisions that reap the economic benefits, when justified, of installing smart meters.

For the study go to: http://www.cdhowe.org/pdf/backgrounder_124.pdf

For further information: Donald N. Dewees, Professor of Economics and Law, University of Toronto; Ben Dachis, Policy Analyst, C.D. Howe Institute, [phone]; [email protected]