As I have blogged previously, the Province of Ontario has led North America in some aspects of smart grid deployment, in replacing coal with clean energy, and in implementing a feed-in-tariff program to encourage solar PV and other types of distributed renewable energy.  In 2004 the Ontario Government legislated that all electric power customers  in the province have smart meters by 2010. In 2007, the Ontario Government committed to phasing out coal generation in the province by 2014, although coal accounts for 19 % of power generation in Ontario, a province of over 10 million people.  In 2009 the Green Energy and Green Economy Act was passed which mandated distributed generation (DG) enablement and a  feed-in-tariff (FiT) program.  Ontario’s roll-out of smart meters together with time-of-use electric power rates rates is the largest in the world.  By 2012 everyone in Ontario with be on time-of-use pricing.  I blogged about Ontario’s $2.3 billion expansion of the electric power transmission network across the province.   To put this in perspective, Ontario is twice as large as Texas.

An important question is how is this upgrading and expansion of the electric power system going to be payed for.  I blogged earlier about the province changing the policy of paying for new capital development.  In the past the amortized cost of new projects was included in electricity rates after the project was completed.  The new guidelines allow utilities to charge consumers for facilities that are under construction, but not yet in service.

The Ontario Energy Board (OEB) has also changed the formula it uses for setting the return on equity (ROE) levels for Cost of Service applications.  The previous formula resulted in an ROE of 8.39% for 2010. The new formula resets the return on equity (ROE) to 9.85%. The ROE directly determines the rates that consumers pay for electric power.

The Government of Ontario has just distributed a brochure outlining the projected cost of electricity to the consumer over the next 20 years. (There is an election Oct 6.) The peak rate for electricity is currently 9.9 cents/kWh.  The Government says that for the next five years, rates will increase by just under 8% per year, so in 2015, the peak rate will be nearly 15 cents/kWh, about 45% more than the current rate in nominal dollars.  After that it will increase by 3.5% for the next 15 years.  By 2025 the peak rate is projected to be over 20 cents/kWh, or double the current rate in nominal dollars.