Electricity: Ontarians now have two pricing options, but few know

The government of Doug Ford suspended during the first wave of the pandemic the regime of variable tariffs, which change according to the time of day.

A new rate schedule came into effect on November 1, restoring hourly pricing by default.

• The off-peak rate is 10.5 ¢ / kWh (weekday evenings and nights; all day at weekends).
• The rate jumps to 21.7 ¢ / kWh when demand is greatest, from 7 a.m. to 11 a.m. and from 5 p.m. to 7 p.m. on weekdays.
• The rate is 15.0 ¢ / kWh the rest of the time on weekdays, from 11 a.m. to 5 p.m.

However, according to the government’s new plan, the subscriber can also submit a request to his electricity distributor if he prefers to pay a fixed rate (called by level).

• Under the tiered rate, the residential subscriber pays a single rate of 12.6 ¢ / kWh, regardless of the time at which he consumes his electricity, up to a maximum of 1000 kWh / month (600 kWh / month in summer).
• If it exceeds this limit, which is called the second step, the rate is 14.6 ¢ / kWh.

The average consumption of an Ontario household is 700 kWh / month. So, for many households, it is more financially advantageous to opt for the fixed rate.

The problem: few subscribers seem to know that they have this option, if one relies on the requests submitted since mid-October to various electricity distributors in the province:

• Greater Sudbury Hydro: 0.6% of customers requested the tiered rate
• Hydro Kingston: less than 1% of subscribers have requested it
• Enwin (Windsor): 2.3% of subscribers have requested it
• Hydro Toronto: 3% of subscribers have requested it
• Hydro Ottawa: 5% of subscribers have requested it

The government explains that it chose the variable rate as an automatic system, because electricity distributors have based their billing system on this system for several years. Smart meters were installed under the previous Liberal government.

We want to offer a choice, because we recognize that individual electricity consumption has changed due to restrictions related to COVID-19. Some are working from home while companies have changed their hours of operation.

The Ministry adds that the Energy Commission has launched an information campaign on social media and radio, in particular, in addition to a calculator on its website. (New window) to help subscribers choose the best option for their personal circumstances.

Provincial NDP energy critic Peter Tabuns says it would have been “fairer” to let customers choose between the two options, rather than making variable rates the default option.

The variable tariff probably generates higher revenues in general for the government and that is why it is the preferred option by the province. Since this is the automatic option, it leads people in the wrong direction.

The Department of Energy maintains that both options reflect the true cost of the electricity consumed.

The Energy Commission specifies, however, that it estimated that 25% or less of subscribers would opt for the tiered rate when it set the prices for the November 1 rate schedule.

If the number of subscribers who choose the fixed rate differs from our estimates and the revenue does not cover the cost of production, we will follow up and take this into account when the rates are set next time., says the Commission. Generally, the rates change each year on November 1 and May 1.

University of Ottawa economics professor Jean-Thomas Bernard says variable pricing is preferred by economists in general. The basis for pricing at the time of consumption (TOUTime of Use) is to better reflect the costs in the use that consumers make: costs are lower when demand is low and higher when demand is higher, he notes.

Which option to choose?

The Energy Board says on its website that the variable rate can be financially advantageous for Ontarians who work away from home and come home late or those who have an electric vehicle that they charge at night when electricity costs less.

In contrast, the tiered rate might be preferable if you work from home or don’t want to wait until evenings or weekends to do laundry, the Commission adds.

Jessy Richard, managing director of the Hearst Electric Distribution Corporation, believes it could be up to 6 months before subscribers are aware of the new option.

He says his team is honing their new dual pricing system, but later promises to “go head-to-head with a layered advertising campaign” to educate customers.

I estimate that about 30% to 40% of our customers will apply and that would be beneficial for almost 60% of them.

No recommendation is made without a customer analysis, he adds. Following the analysis, we certainly recommend making the change if these can be of benefit to them.

Hydro Ottawa, for its part, launched an awareness campaign on September 22 and says its customer service agents continue to educate subscribers.

Many other electricity distributors have posted information on their websites, among others.

Bad for the environment?

Keith Brooks of the Environmental Defense group says it is difficult for Ontarians who work at home today to avoid using electricity during peak periods.

It makes sense right now to allow people to opt for a flat rate. However, this is problematic for the environment, because demand will be higher at peak times, which means that natural gas plants will have to be in service, causing more pollution.

For his part, MP Peter Tabuns points out that the Auditor General has calculated in the past that smart meters have led to a drop of only 1% in residential demand during peak periods.

He thinks it would have been better for the province to invest the hundreds of millions that smart meters have cost in programs to help their residents insulate their homes or install solar panels on their roofs, for example.