energy management paybacks

Time-of-use pricing respite adds nominal costs

Friday, May 22, 2020

Temporary suspension of Ontario’s time-of-use pricing scheme equates to a 3 per cent sliver of the projected provincial expenditure to underwrite electricity costs in 2020-21. Newly released calculations from the arms-length Financial Accountability Office (FAO) of Ontario peg the cost of the COVID-19-relief measure at approximately $175 million for the period from March 24 to May 31.

FAO number-crunchers further estimate the flat price of 10.1 cents per kilowatt-hour (kWh) that has currently replaced the conventional three-tier rate structure will save the average residential customer about $34 over the course of the 10-week period. Farm operators and other small commercial customers that consume no more than 250,000 kWh annually are expected to realize an average saving of $98.

More punitive pricing of 20.8 cents/kWh in morning and evening peak times, or 14.4 cents/kWh in the afternoon, was suspended to recognize that Ontarians were largely confined to their homes in the effort to counter the spread of COVID-19 and had fewer options to curb or avoid electricity use during costlier periods. In contrast, nearly two-thirds of residential electricity consumption usually occurs during the off-peak hours of 7 p.m. to 7 a.m.

“Prior to the COVID-19 outbreak, ratepayers were paying 12.8 cents/kWh on average for electricity generation,” the FAO submits. However, with consumption now shifted more into daytime hours, it’s assumed that average would have climbed to 13.1 cents/kWh in the absence of relief measures.

Residential customers and approximately 400,000 farm and small commercial enterprises subject to time-of-use pricing will typically receive a more modest Ontario Electricity Rebate — amounting to a 32 per cent subsidy of all pre-tax costs for electricity and regulated distribution — during the flat rate period, reflective of their lower overall bills. Thus, the FAO factors that into the $175 million price tag for the relief measure.

“This estimate is the net cost to the Province after accounting for the interaction with the Ontario Electricity Rebate,” the FAO reports. “In total, including the suspension of TOU pricing and the Province’s existing electricity subsidy programs, the Province is projected to spend $5.8 billion in 2020-21 subsidizing electricity prices.”

Still, a further extension of what was originally announced as a 45-day initiative would have a greater impact on provincial spending heading into the months when summertime demand for cooling tends to push up electricity use. The FAO estimates it would cost an additional $316 million to enable flat rates from June 1 to August 31. The cost of a one-year respite, to March 31, 2021, is projected at $1.1 billion.

Meanwhile, residential and small consumers will get something of a price cushion even if Ontario reverts back to time-of-use pricing in June. The Ontario Energy Board (OEB) has confirmed that the colder month pricing schedule, normally applicable from November 1 to April 30, will remain in place for May 1 to October 31.

“Retaining the winter TOU price periods means that the mid-peak price, rather than the higher on-peak price, will apply weekday afternoons (11 a.m.-5 p.m.), which can be a time of high electricity use for those at home, especially in summer. By keeping the winter tier threshold (1,000 kWh) in place, customers that are on tiered pricing have an additional 400kWh/month available at the lower price,” the OEB explained upon making the announcement.

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