Ontario adopts flat electricity rate for 45 days

Ontario peak electricity price fails to shock

Tuesday, June 6, 2017

Old data colours the conclusions of a recent University of Waterloo study on the effectiveness of time-of-use (TOU) electricity pricing in Ontario’s residential sector, but energy management specialists say the research still raises some issues worth discussing. In promoting the study findings, the university highlights the relatively unremarkable reduction in demand after an electricity utility in southwestern Ontario activated smart meters for 20,000 household accounts. However, this is a snapshot from nearly five years ago.

Waterloo researchers compared consumption from nine months before and nine months after the November 2011 introduction of smart meters — finding a 2.6 per cent decrease in demand during the on-peak period and a 2.4 per cent decrease during the mid-peak period once meters were in place to enable TOU rates. Initial prices in November 2011 were 9.2 cents per kilowatt-hour (kWh) for mid-peak and 10.8 cents/kWh for on-peak power, or 30 to 40 per cent lower than they would be by 2016.

Knowledgeable practitioners of demand-side management suggest that the early results are actually somewhat impressive given the narrow timeframe for peak prices and fairly insignificant financial penalty incurred. Other jurisdictions designate 12 or more hours of the day for premium prices, while the Ontario peak electricity price doesn’t even align with highest demand in the summer months, which typically occurs around 6 p.m.

“Most TOU savings from smart meters occur with non-residential accounts where there is someone charged with controlling utility costs as part of his or her job. The vast majority of residential users don’t adjust their habits as long as the bill doesn’t noticeably jump,” observes Lindsay Audin, a U.S. based energy management consultant. “I’d say Ontario’s 11 a.m. to 5 p.m. peak price period is far too lenient to make a difference so I’m surprised any improvement was seen.”

More up-to-date and in-depth analysis sponsored by Ontario’s Independent Electricity System Operator (IESO) reveals a greater degree of load shifting in 2012 — in the range of two to five per cent — among residential accounts of four surveyed local distribution companies (LDCs). However, this rate declined in the two subsequent years, even as the survey scope broadened to eventually include more than 150,000 residential accounts under the auspices of eight LDCs.

The IESO’s contracted researchers confirm there was a “statistically significant reduction” in province-wide consumption during the hours from 1 to 7 p.m. in the months of June, July and August, which nevertheless decreased incrementally each year between 2012 and 2014. In the absence of further study, they offer “informed speculation” for this trend in residential customers’ performance.

“One possible explanation is that over time customers learned that their bill savings from engaging in load shifting was not as large as they had originally imagined (owing to the low peak-to-off-peak differential). Alternatively, enthusiasm may have waned after the initial publicity accompanying TOU rates died down,” the researchers theorize.

On the flipside, customers who are engaged enough to shift energy-intensive household tasks to off-peak hours could be helping to exceed program expectations.

“The TOU rates are designed to encourage a behaviour shift from peak to off-peak, with no contemplation of energy savings. What’s interesting is that many consumers tend to conserve energy when they shift,” says Andrew Pride, a consultant specializing in energy management and strategic conservation planning. “That’s likely due to higher awareness of energy use in their home or business, but for a deeper across-the-board savings, we would need a more pronounced price spread between on-peak and off-peak.”

Ontario’s recent electricity price adjustments have narrowed the gap between the on-peak and off-peak rates, while stretching the mid-peak to on-peak range a little farther apart. Prior to May 1, the on-peak rate was 9.3 cents/kWh greater than off-peak, but this has now shrunk to 8 cents/kWh. The previous 4 cents/kWh premium for on-peak versus mid-peak has now climbed to 4.4 cents/kWh.

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