Time-of-Use Pricing for Smart Meters FAQs

What are Time-of-Use (TOU) prices ?
Why are there different prices and time periods?
How were Time-of-Use prices developed?
When will Time-of-Use (TOU) prices be effective and for whom?
What is the benefit of having Time-of-Use (TOU) pricing?
Won't the increased demand in the off-peak period turn it into a peak period?
Will the Ontario Energy Board (OEB) take into account special consumer circumstances?
What can consumers do?
Are there other options for consumers who do not want to pay Time-of-Use prices?

What are Time-of-Use (TOU) prices?

Time-of-Use prices take into account when, as well as how much, electricity is used by each consumer. These prices were developed as part of the Regulated Price Plan ( RPP) for consumers with smart meters.

Why are there different prices and time periods?

At the request of the Minister of Energy, the Ontario Energy Board developed an electricity price plan to provide stable and predictable electricity pricing, which also encourages conservation and ensures the price consumers pay for electricity better reflects the actual cost of producing the electricity they use.

Electricity prices charged per “kilowatt-hour” change throughout the day, like long distance telephone rates, to better reflect the changes in the costs to produce electricity at different times of the day. When total consumption is high, such as a hot summer afternoon, Ontario often has to rely on higher priced sources to produce the same amount of electricity. For example, natural gas generation is generally more expensive to operate than nuclear or hydro generation.

One of the Ontario Energy Board’s goals through Time-of-Use pricing is to provide an incentive for consumers to shift some of their consumption away from periods of high total consumption (called “on-peak”) to periods of low demand (called “off-peak”). Consumers who do so can save money on their bills.

The different pricing periods (“On-Peak, Mid-Peak and Off-Peak”) were set based on how the cost to produce electricity in Ontario varies by the time of day, the week and the season. For example, winter “on-peak” hours include 5pm to 8pm, when consumption levels jump as many people arrive home from work and require electricity to prepare their dinner, watch TV, etc. By contrast, “on-peak” hours in the summer occur in the afternoon (noon – 5 pm) when most air-conditioners are running full-out.

Shifting electricity use will mean the higher cost electricity generators will be needed less. All consumers will benefit from this; even those who find they are less able to change their consumption patterns. Some of those higher cost generators also create more air pollution, so relying on them less can also help benefit the environment. In the longer run, lower peak demand will mean less new generation needs to be built to serve that peak.

How were Time-of-Use (TOU) prices developed?

The current Time-of-Use pricing was arrived at following a multi-stakeholder working group process and then consultations with the public, consumer groups and industry participants. An independent consultant with expertise on electricity prices was also retained to advise the Ontario Energy Board.

When will Time-of-Use (TOU) prices be effective and for whom?

Time-of-Use electricity prices are not yet mandatory for consumers with smart meters. Various utilities across Ontario are at different stages of preparation for the installation of smart meters in their respective service territories. A couple of utilities, namely Milton Hydro and Newmarket Hydro, are currently in the process of rolling out Time-of-Use pricing to their customers.

It is anticipated that the central data management system required to read your smart meter will be in place by early-2008. Once this system has been fully tested, consumers with smart meters will begin to be phased on to time-of-use prices.

It is the OEB’s understanding that none of the other utilities have, as yet, indicated plans to implement Time-of-Use electricity prices on a large scale before it is determined to be mandatory. You will be notified in advance of when you can start to take advantage of time-of-use prices.

Click here to view Time-of-Use (TOU) Prices

What is the benefit of having Time-of-Use (TOU) pricing?

Currently, consumers have little financial incentive to manage their use of electricity over the day. Smart meter pricing sets a higher price at peak periods when prices are highest in the wholesale market. This gives consumers an incentive to reduce or shift their use to periods of lower demand (e.g. weekends or later in the evening) and away from times when electricity is most expensive.

Consumers will not be able to shift all of their electricity use away from peak demand periods, but the more they are able to do so, the more they can manage their costs and contribute to lower overall peak electricity prices for everyone.

Won't the increased demand in the off-peak period turn it into a peak period?

This has not happened in other jurisdictions where time of use pricing is in place and we don’t expect this to happen in Ontario. If consumers shift more of their use of electricity to periods when demand is lower, that can eventually reduce the prices during peak periods.

Will the Ontario Energy Board (OEB) take into account special consumer circumstances?

The OEB is aware there are circumstances where some consumers may find it difficult to shift their consumption patterns. Since provincial legislation requires that consumers pay the true cost of the electricity they consume, the OEB designed Time-of-Use electricity prices that are realistic for the majority of consumers while meeting government requirements.

What can consumers do?

Examples of some changes consumers can make include turning on the dishwasher at 10 pm on a weekday before going to bed instead of right after dinner as most of us tend to do, or doing more laundry (especially hot water washes) on weekends when the lowest (off-peak) price applies all day (24 hours).

Are there other options for consumers who do not want to pay Time-of-Use prices?

Consumers also have the option to switch to an electricity retailer. Most of these types of contracts, which are not regulated by the OEB, currently offer consumers a fixed electricity price that stays the same all day. If you decide to consider this option, we can help you with some questions that we suggest asking before signing such a contract. One question to ask is whether the contract price stays the same all day and all week. A list of other such common questions is also available in a Fact Sheet posted on our Web site. It’s called “Choosing an Electricity Retailer”:

Your Options for Buying Electricity

Time-of-Use electricity prices are currently mandatory for those consumers with smart meters of only one utility (Milton Hydro) in Ontario. Other utilities such as Newmarket Hydro and Chatham-Kent Hydro are in the process of implementing these prices.