The delivery charge covers the costs of delivering electricity from generating stations across Ontario to Hydro Ottawa and then to your home. It includes the costs to build and maintain transmission and distribution lines, towers and poles, and to operate provincial and local electricity systems.
A portion of these charges are fixed and do not change from month to month. The rest are variable and increase or decrease depending on the amount of electricity that you use. Our regulator, the Ontario Energy Board (OEB) has mandated that residential distribution rates be fully fixed. In 2016, Hydro Ottawa started transitioning residential customers towards fully fixed distribution rates. These rates are fully fixed since January 1, 2020.
The delivery charge also includes the costs of the electricity lost when it is distributed. It is normal for a small amount of power to be consumed or lost as heat when electricity travels over a power line. Equipment such as wires and transformers consumes power before it gets to your home. This is known as line losses.
To compensate for the small amount of electricity that is consumed as energy, more power must be generated for you than you actually use. For example, imagine walking on a hot day with a glass of lemonade. The longer you walk, the more liquid is evaporated by the heat of the sun. So the lemonade you can drink is slightly less than the lemonade you poured.
The calculation used to account for line losses is called the adjustment factor. The adjustment factor is calculated by comparing the total amount of electricity we buy on behalf of our customers to the amount of electricity we deliver to their homes and businesses. Once we compare how much electricity we purchased to the amount of electricity used by customers, we can determine how much electricity was lost during delivery. Adjustment factors are reviewed and approved by the Ontario Energy Board.
Effective January 1, 2021, the majority of residential customers are billed a delivery line loss of 3.38% for years 2021 to 2025. Hydro Ottawa collects this money and pays this amount directly to our suppliers.
The majority of business customers are billed a delivery line loss between 1.52% and 3.38% for years 2021 to 2025. Hydro Ottawa collects and pays this amount directly to our suppliers.