What is the average cost of utilities for a house in Ontario and why is it increasing?

Homes are a critical aspect of our everyday lives. They provide us with the necessary shelter so we can live comfortably, however, though shelter is a necessity, most people want to use their homes for much more than that.

In our modern world, we expect homes to come with a variety of additional functions and abilities that you may have even taken for granted. These include your utilities: electricity, plumbing, communication services, and more. There is a very good chance that you live your everyday life surrounded by these comforts while hardly acknowledging they are there.

Although, there are two times you will become most aware of these services. The first is when they are unavailable such as when the power goes out during a storm or when your furnace dies on a chilly day in the middle of winter. The other time is when you get your monthly bill detailing just how much you need to pay for the luxury of utilities. A lot goes on behind the scenes to bring these services to you and, naturally, there are some costs involved in doing so.

If you’re looking at buying a home, you’ll obviously be looking at things like how much you can afford for mortgage payments, but that isn't the only cost of homeownership. Your cost of utilities will be a constant expense in homeownership that you will need to account for when you are budgeting for a home purchase.

You may also be in the position where you already own a home and have found your utility bill is too expensive. Though the costs of utilities do go up regularly, there is a lot you can do to reduce your bill to save you money in the long run.

In this article, we will explore your home utilities, determine how much you can expect to spend based on the average household, and ways you can reduce your utility expense to save money.

What counts as a utility?

As we mentioned, there are a lot of costs involved in owning your home and utilities are only one of many. Before we can start talking about utilities, it may be worth exploring what is and isn't included under the term.

Generally, your utilities are services that your home is connected to that allow you to use certain appliances and amenities. Your utilities may include things like your water, electricity, gas, internet, cable TV, or telephone service. Not every home will have every utility hooked up so you may or may not need to pay for some of these things. For example, some homes do not use natural gas if they have an electric furnace. Others may not pay water bills if they are on a private well system. Some utilities are also purely optional like cable TV and internet.

There are also a number of regular bills that are not considered utilities. As mentioned before, your mortgage payments or monthly rent are not considered utilities. Other things like home insurance costs, property tax, or charges for city services such as trash collection are not considered under the umbrella of utilities even if you’re paying them monthly.

What is the average monthly cost of utilities?

The monthly costs of utilities can vary a lot between each home, however, utilities generally make up a significant amount of your monthly housing costs. There are a number of factors that will affect how much your utilities cost.

One factor may be the age of your home as older homes may be less energy efficient in their construction and appliances. Another may be the size of your home as larger homes will cost more to heat and probably use more electricity due to more lighting.

Another factor might be the location of your home and how much it costs for the utility companies to deliver their service to you. Finally, you can consider your own usage habits as a major factor. If you like your house to be very warm, you like to use a lot of high-energy appliances or take long showers, your utility bill will reflect this.

Due to the variability of utilities and the ever-changing costs, it can be hard to pinpoint an exact average price. According to Statistics Canada, in 2019 the average Ontario household spent about $5,400 a year on water, electricity, heating, and communications combined. This comes out to around $450 a month.

Other sources have slightly different figures. Data on numbeo.com indicates an average spend of about $220 per month in a Toronto apartment. An article on movingwaldo.com estimates about $282 a month.

A report from the Financial Accountability Office of Ontario indicated that an average home spent about $180 a month on energy alone (electricity, gas, and other fuel sources) in 2019.

Clearly, it’s not easy to say exactly how much the Ontario average cost of utilities is. In general, you could expect to pay around $200 on the low end for smaller homes with one or two people and up to $500 or more for larger homes, larger families, and those who tend to use a lot more utilities.

You may also be able to contact your local utility providers to learn more about the historical usage and utility cost data of your home or your area. They may or may not be able to supply you with a more accurate indication of what you can expect to spend.

Though the provided range is not exact, it should be enough to give you a rough idea. If you notice that your bill is far above what you’ve estimated it should be for your home size, family size, and use level, you may want to contact your utility company to find out if there has been a mistake or something like a leak causing inflated prices.

Why are utility prices rising?

The cost of most utilities is part of the overall basket that is used to measure the Canadian Consumer Price Index (CPI), which tracks the inflation of the Canadian dollar. With inflation so high these days, the cost of living has been going up, therefore, the price of utilities is no different. In the last few years, the costs of almost all utilities have seen gradual but substantial increases.

Why exactly do utility costs increase? In reality, there are a number of factors. In the past couple of years, the biggest issue has been with the supply and demand of utility services. On top of that, our population has continued to grow and many people have been spending more time at home in the last two years because of the pandemic. As a result, demand for utilities is at an all time high. At the same time, interruptions due to the pandemic have made it more difficult for utility generators and providers to work as efficiently as possible, leading to a reduced supply. With more money chasing less supply, the prices inevitably rose.

This is especially true for natural gas too which can not be generated anywhere. Electricity, however, is only extracted from certain areas. There were already shortages in the last couple of years and with the Russian invasion of Ukraine triggering sanctions against the large gas-producing country, prices have been pushed even higher. Even if we don't source our natural gas from Europe, the commodity market works on a global level, so the impact is felt here as well.

Markets will likely continue to tighten until supply issues can be remedied. Looking forward to the future, continued population growth and the reliance on non-renewable energy sources, as well as increasing energy costs because of climate change, will also put pressure on our utility systems.

How are utility bills calculated?

Electricity

In Ontario, we generate electricity from a few different sources. More than half of all of our energy comes from nuclear generation. Another major source is hydroelectric power, which is why we often refer to electricity utilities as "hydro" in Ontario. Other sources include wind, solar, and more.

Mass amounts of electricity for the province are generated at a relatively small number of facilities which are then transmitted to local utility companies. These local companies manage the distribution of electricity as well as the construction and maintenance of local power infrastructure. It is these companies that most Ontarians will pay for their electricity bill.

Generally, there is a set rate that the Ontario energy board will put in place for electricity, which is measured on a cents per kilowatt-hour basis (¢/kwh). The rate changes with time of day to react to the overall load on the grid. The current rates are set at 17¢/kwh (on-peak) 11.3¢/kwh (mid-peak) and 8.2¢/kwh (off-peak).

On top of the electricity rates, your average hydro bill will also have a distribution fee that represents the cost of getting electricity from the generation facility to your home. The cost of distribution can be a large part of your total bill but will vary from place to place.

Gas

Most natural gas in Ontario is sourced from areas outside the province, with Alberta being the largest single source. Once natural gas is extracted from the ground, it travels through interprovincial and international pipelines to storage stations at your local utility company. Like with electricity, your local utility company is responsible for storing and distributing natural gas, as well as maintaining the infrastructure required.

The rates for natural gas are once again set by the Ontario energy board which assesses the cost of the commodity four times a year. The rate of gas depends on which utility provider is operating in your area, though current rates average around 18¢/m3.

Also like electricity, there are other costs on your natural gas bill as well. The first is your customer charge which represents the cost of administering your customer account. You will pay this fee even if no natural gas is used for the billing period. The next is the delivery fee which represents the cost of transporting, storing and delivering the gas itself. This is only the cost of transport and not the cost for the actual gas you use, which is its own separate category on your bill under 'gas supply charge'. Finally, there is the federal carbon charge which reflects a charge that utilities must pay to the federal government under environmental protection laws related to the production and use of natural gas.

Water

Unlike electricity and natural gas, water is generally sourced, processed, and distributed at a local level. This means that every municipality will have its own rates and charges. Your bill will include the price of the water itself, the cost of delivery, and possibly part of the cost of maintaining facilities and infrastructure such as sewers and wastewater treatment. If you are in a rural area without municipal water, you may just get your water from a well, in which case you will not be paying a water bill at all.

As an example, in the City of Toronto, water is charged at a rate of $4.2586/m3 for consumption up to 5000/m3, and $2.9809/m3 for amounts over 5000 m/3. For reference, a cubic meter of water is 1000 litres and an average person uses somewhere in the range of 200-300 litres of water daily with bathing and toilets being one of the largest contributors of water usage.

Every municipality should provide information online about their water rates and associated fees so you can quickly find out what you can expect to pay.

Communication Services

Almost all homes pay for some form of communication services. Despite the changing preference for communication services, specifically the way that the internet has supplanted both the use of phones and television, the general utility of communication is still a nearly essential part of life in Canada.

Internet

The internet is unlike the previous utilities mentioned on the list as consumers have a lot more options when it comes to what they want to spend. This may sound like a good thing for consumers to have a lot of options, however, across the board, Canada tends to have more expensive internet than many other areas in the western world.

When it comes to the internet, you will generally pay based on speed and data limit, though in many places, unlimited data is becoming increasingly common. Essentially, the more you spend, the faster your connection to the network can be and the more data your provider will allow you to transmit in a given time period.

Internet speeds are generally measured in megabits per second. You will also have two listed speeds, one for download (the speed of data coming into your home) and one for upload (the speed of data leaving your home). The Government of Canada considers a basic internet speed of 50mbps downloading and 10mbps uploading as a good connection and this will be plenty enough for most general internet use. If you plan on using a lot of network-heavy applications such as HD streaming, it may be worth paying for a higher speed. The speeds available in different areas will vary greatly. Some areas, northern Ontario, may be unable to get consistent internet service at all while more developed areas in cities may be able to get gigabit (1000mbps) or higher internet speeds.

Internet plans can be had for as low as around $30 a month but can go much higher. Be especially careful if you have a data limit as your provider will charge you once you go over and these charges can add up. Your provider may also charge you additional costs for things like account startup, service installation, and network equipment such as routers and modems.

Mobile and home phone plans

Over the years, many people have begun to move away from home phones and further towards cell phones which fill the same purpose and more. Nonetheless, whether you choose to go with a cell phone or a home phone, you will need to pay for the service.

Like the internet, you have a lot of choices when it comes to how much you pay for phone service. The biggest factors are how many minutes of phone time and how many text messages your plan allows, how much mobile data you can use, whether you bring your own device or not, and more.

In 2021, the CRTC introduced a set of basic low-cost wireless plans that it requires all providers to offer. These represent some of the lowest-cost plans available. For $35 dollars a month, and provided you bring your own mobile device, you can get unlimited talk and text, the ability to send photos and other media, and 3GBs of mobile data.

Television

The final utility that you may pay for is television hookup. Though many people nowadays choose to get their content online or through streaming services, you can still buy a cable or satellite TV plan that provides you with access to numerous channels. These plans may also commonly be bundled with your phone or internet plans. Television plans can cost as low as $25 and up to over $100 depending on the plan you choose. Prices generally scale based on the types of channels you will have access to, as well as the technology used (eg. cable TV, satellite, or internet TV).

Tips to reduce your utility bill

Utility costs are rising and, unfortunately, there isn't much you can do about it. However, there are ways you can help to keep your bills low even with high costs.

The first and most obvious is being conservative with your energy usage. Simple things like turning off lights and appliances that aren't in use, relying on alternative heating and cooling solutions, or trying to use less water can all help to reduce your usage. Also, in the case of electricity, you may want to try, whenever possible, to avoid high energy usage in peak hours which can cost you a significant amount more.

Another thing you may want to consider is upgrading your home to be more energy-efficient. Energy-efficient technologies have come a long way in recent years and, especially for older homes, the way your home is built can simply be losing you money. Energy-efficient appliances, low-flow toilets, and better-insulated windows and doors can all help to reduce the amount of energy you use. Even fixing a leaky faucet can go a long way. The costs of these improvements may be more upfront, but if you plan on staying in your home for many years, the savings will be even greater.

Finally, you can try to remove some of your bills entirely. For example, many people these days do not find it necessary to use a home phone or cable television plan, thus saving them the cost. If you have an expensive internet plan but don't use it all that much, consider scaling it back to a more suitable package for your needs. Finally, many people have chosen to generate their own energy through things like solar or geothermal heating that can reduce or erase some of your energy costs.

Article in www.canadianrealestatemagazine.ca by Corben Grant