Time to End Ontario’s Time of Use Hydro Pricing

By Roger Ellerton Phd, ISP, CMC, Renewal Technologies Inc. www.renewal.ca

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What is Time of Use Pricing?

Time of Use (TOU) pricing is suppose to reflect the cost of producing electricity at different times of day, while taking into account demand. There are three periods: on-peak, when energy demand and cost is high, mid-peak, when energy demand and cost is moderate, and off-peak, when energy demand and cost is low.

During the winter season (November 1 – April 30), on-peak is from 7am to 11am and 5pm to 7pm (highest cost for consumer), mid-peak is from 11am to 5pm, and off-peak is from 7pm to 7am (lowest cost), with off-peak prices on weekends and designated holidays.

During the summer season (May 1 – October 30), on-peak is from 11am to 5pm, mid-peak is from 7am to 11am and 5pm to 7pm, and off-peak is from 7pm to 7am, with off-peak prices on weekends and designated holidays.

TOU pricing is suppose to give you more control over your electricity bill. The intention is for you to save money by changing your activities to use less electricity when rates are high and use more electricity when rates are lower. To learn more about TOU pricing and its three periods, visit Understanding Your Electricity Bill.

A Little History

Ontario began the move to TOU around 2006 to reduce electricity consumption during peak periods and thus address a variety of issues – insufficient power generation resulting in brownouts, an aging and inadequate electricity grid and eliminate coal-fired power plants. Today, the vast majority of Ontarians pay TOU pricing.

Due to a number of missteps (primarily government generated), the cost of electricity in Ontario has skyrocketed. In addition, the province built more generating facilities than it actually needed. In 2014, according to the Auditor-General, Ontario had the capacity to produce 30,203 megawatts of power – but only needed 15,959 on an average day. (Even on the busiest day of the year, the province only required 22,774 megawatts.) As well, demand for electricity fell, due in part to a recession, a long-term upheaval in Ontario’s manufacturing sector and because of government efforts to encourage Ontarians to conserve power. See the Globe and Mail article, Why does Ontario's electricity cost so much? A reality check, which gives a very good and detailed history.

In 2017, a study by the Ontario Society of Professional Engineers (OSPE) estimated Ontario lost between $732 million and $1.25 billion over the previous two years selling surplus clean electricity to entities outside the province, at costs less than what it cost Ontario to produce it. Would it not have been better to provide this excess electricity to Ontario business and residents at this lower cost, rather than subsidizing businesses and residents outside our province?

The COVID-19 pandemic has forced many residents to work from home. Realizing the additional costs they face due to on-peak rates, the Government of Ontario issued an Emergency Order under the Emergency Management and Civil Protection Act to immediately reduce pricing for residential and small business customers to off-peak rates no matter what time of day the electricity was consumed. This order was issued on March 24, 2020 and was to remain in effect for the ensuing 45 days. The Government has now extended that rate relief until October 31, 2020.

TOU Hurts Those who Need Help Most

In its response to COVID-19, the government wisely realized that the TOU pricing hurts those who must be home during the day.

But what about when the COVID-19 restrictions are lifted or mitigated? Will Ontario return to TOU pricing?

If Ontario does return to TOU pricing, it will hurt those segments of society and business that government often speaks about needing an assist:

Small business. Small businesses provide family income and services for a large number of Ontarians:

Farmers.
Day-care.
Service providers – e.g. automotive/small engine repair.
Small manufacturers – e.g. cabinet maker.
Exporters to other provinces and countries.
Even if only the accounting is handled from home, this is a cost that a small business does not need to incur. And of course, all of these additional costs are passed onto you, the consumer.

Regular everyday people:

Seniors, especially those on fixed incomes.
Young families, where one parent stays home to look after the children.
Those on short or long-term disability.
Those who work shiftwork.
Unemployed.
Etc.

These groups must either pay for higher cost electricity to live as normal a life as possible or disrupt their normal/needed daily activities to perform high use electrical tasks at times that are often not convenient.

Who is least affected by the TOU pricing or even benefits from the low off-peak rates? The main group that comes to mind are those with regular 9 – 5 jobs. And who makes up a large part of this group? I would suggest that it is CEOs, CFOs, middle to upper management, bureaucrats (some of whom made up the TOU policy) and other well-paid professions.

TOU May Result in More Energy Use or Increase Your Costs

Fossil fuels (coal, crude oil, and natural gas) have been and are still used to generate electricity, heat our homes and power our vehicles. Thankfully, there is a major move away from fossil fuels to cleaner renewable energies such as solar, wind, hydro and nuclear power. Yes, nuclear power is considered to be a clean energy.

The Ontario Government and Hydro One are supporting a number of initiatives to reduce the use of fossil fuels. Including:

Using electric vehicles.
Installing a programmable thermostat. According to Energy Saver, the U.S. Department of Energy's (DOE) consumer resource on saving energy and using renewable energy technologies at home, you can save as much as 10% a year on heating and cooling by simply turning your thermostat back 7°-10°F (1°F is 5/9°C) for 8 hours a day from its normal setting. However, following this energy/cost saving strategy with TOU pricing may end up costing you money!
Switching from oil or propane to electricity for heating your home or water – electricity may actually be cheaper than oil or propane. But any savings gained by switching to electricity may be lost if you set your thermostat back at night, thanks to TOU pricing.

How can TOU pricing result in increased costs or energy usage? If you heat your home with electricity and turn your thermostat down at night for about 8 hours, you will save about 2% over the course of a year of each 1°C reduction. However, the heat is turned down at night when the TOU pricing rates are off-peak. If you then turn the heat up in the morning, during on-peak pricing, you will be paying 100% more for this energy. You have a choice: save energy by turning your heat down at night (and pay a lot more) or leave the temperature as is and use more energy.

For those of you who heat with natural gas, oil or propane, you may think “But I don’t heat with electricity, so it doesn’t affect me.” Think again. Your furnace has an electric blower motor to circulate warm air throughout your house and this blower motor uses a significant amount of electricity. Thus, with TOU pricing, your savings are nowhere near what you thought they would be and may well be nonexistent.

TOU May Blunt Energy Saving Initiatives

One of the best energy saving activities you can do is switch to light-emitting diode (LED) lights. Residential LEDs - especially ENERGY STAR rated products - use at least 75% less energy. But when do you most often have your lights on in your home? At night when you are charged the low off-peak rate. Hence the financial incentive to switch to LED lights is significantly reduced!

What Should be Done?

Allow Ontarians, especially those struggling to make ends meet, to enhance their quality of life by eliminating unnecessary costs and the worry about when to use electricity. Allow us to focus on energy/cost saving activities that make sense and pollute less.

On June 1, 2020, the Ontario government announced that "Starting November 1, 2020, customers will be able to choose a plan that best suits their household and lifestyle with the option of either TOU electricity rates or tiered pricing, which will provide a set rate for electricity up to a certain level of consumption."

This is a step in the right direction.

Tiered Pricing as Currently Set is NOT a Practical Alternative.

Current costs for tiered pricing are:

Up to 1,000 kWh/month: 11.9 ¢/kWh
Over 1,000 kWh/month: 13.9 ¢/kWh

For those Ontarian residents, who through no fault of their own, consistently use more than 1000 kWh in a month, there is actually little choice. TOU pricing, with all of its problems, will be the cheaper alternative. Who are the Ontarians that consistently use over 1000 kWh per month? Mainly those people that the Ontario government says it wants to help. For example:

Those on short or long-term disability, especially those who require special medical equipment that must run all day or a good part of it.
Seniors, especially those with mobility issues.
Young families, where one parent stays home to look after the children.
Small family businesses.
Those wishing to move away from or reduce their use of fossil fuels.

Proponents of electric cars.
Those who heat their homes with electricity. Ontario Hydro is encouraging those who heat their homes with oil or propane to move to electricity.

What can be done? Change the first tier to at least 1500 kWh/month and increase the cost per kWh for the second tier to encourage residents to reduce their consumption.

If you agree, please consider writing to the Premier (Doug Ford) (doug.fordco@pc.ola.org), the Minister of Energy (Greg Rickford), (greg.rickford@pc.ola.org) the Minister of Environment (Jeff Yurek) (jeff.yurek@pc.ola.org) and/or your MPP to raise this issue with him/her.

Author: Roger Ellerton is a certified management consultant, certified NLP trainer, the founder and managing partner of Renewal Technologies and the author of several books.