
Canadian Energy Protection's Market Price Plus Program Brings Wholesale Electricity Pricing to Residential and Small Business Consumers!
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How the Wholesale Electricity Price is Determined
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 Independent Electricity System Operator or IESO. 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, weather, time of day, day of the week, and 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.
Source: IESO
Setting the Hourly Ontario Electricity Price
The IESO sets the wholesale price of electricity in Ontario every five minutes based on supply and demand. This is called the Market Clearing Price ("MCP"). The Hourly Ontario Energy Price ("HOEP"), is the average of the twelve market clearing prices in each hour. The HOEP is charged to large consumers who participate in the market, as well as local distribution companies ("LDC") who in turn recover it from their market price customers.
The IESO runs a real-time market, meaning purchases of electricity are made as they are needed. There are occasions when the best-priced energy may not be available due to limitations on the transmission lines. In this case, that generator's offer is still used to help set the price, but another generator may be asked to provide the electricity.
For more information about the IESO click here.
Residential and Small Business Consumers
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 ("LDC'). The type of rate you pay depends on how much electricity you consume. Large businesses pay hourly wholesale prices ("HOEP"), while residential and small business consumers, for the most part, pay time-of-use rates, with a small minority paying two tiered pricing. As the regulator in the Province, the Ontario Energy Board ("OEB") sets the electricity prices for residential and small business consumers every May 1st and November 1st of each year.
For more information about the OEB click here.
Canadian Energy Protection's Market Price Plus Program
Market Price Plus is Canadian Energy Protection's new, variable, anytime electricity supply rate program based on the weighted average Hourly Ontario Energy Price as published by the IESO. (See chart above)
How it Works:
Weighted Average HOEP + 3¢ = Your Electricity Supply Rate!
The three cents represents our program fee which is used in part to cover the overhead and administrative costs we incur in bringing you our Electricity Market Price Plus Program. As with all electricity consumers, you will still be entitled to/responsible for the global adjustment.
What is the Global Adjustment?
The Global Adjustment (used to be called the Provincial Benefit) is a charge or credit for all electricity consumers. The global adjustment pays for the cost of conservation programs and accounts for the differences between the wholesale market price of electricity and the regulated or contract prices paid to generators for the electricity they produce. When you choose an electricity retailer like Canadian Energy Protection, the global adjustment will be shown as a separate line on your electricity bill.
What is the RPP Settlement?
The RPP settlement is a one-time charge or credit that will appear on your utility bill from your LDC when you choose a supplier like us. The price you are charged on the RPP may not reflect the actual prices paid to generators. Eventually the difference needs to be settled for all consumers on the RPP. That difference is tracked a variance account and incorporated into future RPP prices set by the OEB. For consumers that leave the RPP, that difference needs to be settled upon leaving. You will be reimbursed if consumers on the RPP have been paying more for electricity than what was paid to generators, or you will need to pay your local utility if consumers have been paying less than what was paid to generators.
(Source: Ontario Energy Board)
Want to learn more? Click here to learn about time of use and two tiered electricity rates.